Form S-4

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.

If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities, and it is not soliciting to buy these securities, in any state where the offer or sale is not permitted.

On July 23, 2014, American Gateway Financial Corporation (“AGFC”), entered into an agreement and plan of reorganization (“reorganization agreement”) with Business First Bancshares, Inc. (“Business First”), and its wholly-owned subsidiary B1B Interim Corporation (“B1B”). The reorganization agreement, as amended, provides for the acquisition of AGFC by Business First by virtue of the merger of B1B with and into AGFC, with AGFC surviving the merger and becoming a wholly-owned subsidiary of Business First (the “merger”). Immediately following completion of the initial merger, Business First will cause AGFC to merge with and into Business First, with Business First surviving, and will cause American Gateway Bank to merge with and into Business First’s wholly-owned subsidiary, Business First Bank, with Business First Bank surviving. Following completion of these merger transactions, Business First Bank (now combined with American Gateway Bank) will continue as the wholly-owned subsidiary of Business First (now combined with AGFC). The reorganization agreement and the transactions contemplated by the reorganization agreement will be voted upon at a special meeting of shareholders of AGFC, to be held on [—], 2014 at [—] [—].m., local time, at 320 N. Alexander Avenue, Port Allen, Louisiana 70767.

If the reorganization agreement is approved and the merger is completed, each of the outstanding shares of AGFC common stock will be converted into the right to receive a combination of cash and shares of Business First common stock. Subject to certain adjustments, shareholders of AGFC will receive (i) an aggregate amount of cash equal to $2,179,440, or $10.00 per share, and (ii) an aggregate number of shares of Business First common stock to be determined based upon the adjusted tangible shareholders’ equity of Business First and AGFC, each as of the date that is ten days prior to the closing date of the merger. The adjusted tangible shareholders’ equity of Business First and AGFC will be calculated pursuant to formulas that are included in the reorganization agreement and that are discussed in more detail in this proxy statement/prospectus.

For illustration purposes only and disregarding certain adjustments described in more detailed elsewhere in this proxy statement/prospectus, if the merger had been completed as of June 30, 2014, shareholders of AGFC would have been entitled to receive approximately 11.73 shares of Business First common stock (plus cash in lieu of any fractional share) and $10.00 in cash in exchange for each share of AGFC common stock that they owned as of the effective time for the merger. Upon completion of the merger, it is anticipated that the shareholders of AGFC and Business First will own approximately 30.7% and 69.3%, respectively, of the total issued and outstanding shares of the combined entity.

The actual merger consideration is subject to adjustment and may be higher or lower than the consideration described in the example above. Because the per share merger consideration will be determined based upon the adjusted tangible shareholders’ equity of Business First and AGFC on the date that is ten days prior to the closing, the amount of consideration you will receive will not be known at the time you vote on the reorganization agreement. Accordingly, you should read this proxy statement/prospectus carefully to understand the value of the consideration you will receive in the merger.

The capital stock of Business First is not currently listed or traded on any securities exchange or quotation system. The capital stock of AGFC is also not listed or traded on any securities exchange or quotation system.

We cannot complete the merger unless we obtain the necessary government approvals and unless the holders of at least a majority of the shares of AGFC common stock who are present, either in person or by proxy, at the special shareholders’ meeting approve the reorganization agreement. You are being asked to consider and vote to approve the reorganization agreement at a special meeting of shareholders. Whether or not you plan to attend the special shareholders’ meeting, please take the time to vote by completing and mailing the enclosed proxy card to AGFC. If you sign, date and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote FOR the proposal to approve the reorganization agreement.

This document contains a more complete description of the special meeting and the terms of the reorganization agreement and the proposed merger. We urge you to review this entire document carefully. You may also obtain information about Business First from documents that Business First has filed with the Securities and Exchange Commission, or SEC. We enthusiastically support the merger and our board of directors recommends that you vote in favor of the reorganization agreement.

An investment in Business First common stock in connection with the merger involves risks. See “Risk Factors” beginning on page 29.

Business First is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced public company reporting requirements after this offering.

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under this proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.

The securities that Business First is offering through this document are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either of our companies, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This proxy statement/prospectus is dated [—], 2014 and is being first mailed to shareholders of American Gateway Financial Corporation on or about [—], 2014.

Business First filed a registration statement on Form S-4 to register the issuance of Business First stock to AGFC shareholders in the merger. This proxy statement/prospectus is a part of that registration statement and constitutes a prospectus of Business First and a proxy statement for AGFC’s special shareholders’ meeting. As allowed by SEC rules, this proxy statement/prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement.

This information is described on page 207 under “Where You Can Find More Information.” You can obtain free copies of this information by writing or calling:

To obtain timely delivery of the documents before the special shareholders’ meeting of AGFC, you must request the information by [—], 2014.

We have not authorized anyone to provide you with any information other than the information included in this document and the documents to which we refer you. If someone provides you with other information, please do not rely on it as being authorized by us.

This proxy statement/prospectus has been prepared as of [—], 2014. There may be changes in the affairs of AGFC or Business First since that date, which are not reflected in this document.

A special meeting of shareholders of American Gateway Financial Corporation (“AGFC”), will be held on [—], 2014 at [—] [—].m., local time, at 320 N. Alexander Avenue, Port Allen, Louisiana 70767, for the purpose of considering and voting upon the following proposals:

The reorganization agreement provides for the acquisition of AGFC by Business First by virtue of the merger of B1B with and into AGFC, with AGFC surviving the merger and becoming a wholly-owned subsidiary of Business First (the “merger”). Immediately following completion of the initial merger, Business First will cause AGFC to merge with and into Business First, with Business First surviving, and will cause American Gateway Bank to merge with and into Business First’s wholly-owned subsidiary, Business First Bank, with Business First Bank surviving. Following completion of these merger transactions, Business First Bank (now combined with American Gateway Bank) will continue as the wholly-owned subsidiary of Business First (now combined with AGFC). A copy of the reorganization agreement is included in the accompanying proxy statement/prospectus as Appendix A.

Only shareholders of record at the close of business on [—], 2014 will be entitled to notice of and to vote at the special meeting.

Dissenting shareholders who comply with the procedural requirements of the Business Corporation Law of Louisiana (“LBCL”) will be entitled to receive payment of the fair cash value of their shares if the merger is effected upon approval by less than 80% of AGFC’s total voting power. A copy of the procedural requirements for dissenting shareholders is included with the accompanying proxy statement/prospectus as Appendix C and a summary of these provisions can be found under the heading “Proposal to Approve the Reorganization Agreement—Dissenters’ Rights of AGFC Shareholders.”

The board of directors of AGFC unanimously recommends that you vote FOR the approval of the reorganization agreement. Whether or not you plan to attend the special meeting, please complete, sign, date and return the enclosed proxy in the accompanying pre-addressed postage-paid envelope.

A proxy card is enclosed. Whether or not you plan to attend the special meeting, please complete, sign and date the proxy card and promptly mail it in the enclosed envelope. You may revoke your proxy card in the manner described in the proxy statement/prospectus at any time before it is exercised. If you attend the special meeting, you may vote in person if you wish, even if you have previously returned your proxy card.

Please review the proxy statement/prospectus accompanying this notice for more complete information regarding the proposed merger and the special meeting.

The following are some questions that you may have regarding the merger and the AGFC special meeting and brief answers to those questions. We urge you to carefully read the remainder of this proxy statement/prospectus because the information in this section does not provide all the information that might be important to you with respect to the merger and the special meeting.

The shareholders of AGFC may also be asked to approve an Adjournment Proposal, which is any motion to adjourn the special meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the reorganization agreement, (ii) to provide to AGFC shareholders any supplement or amendment to the proxy statement/prospectus or (iii) to disseminate any other information which is material to the AGFC shareholders voting at the special meeting.

known at the time you vote on the reorganization agreement. Accordingly, you should read this proxy statement/prospectus carefully to understand the value of the consideration you will receive in the merger. For an explanation of how the merger consideration will be calculated, please see “Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration,” beginning on page 48.

This tax treatment may not apply to all stockholders of AGFC. Determining the actual tax consequences of the merger to you can be complicated. You should consult your own tax advisor for a full understanding of the merger’s tax consequences that are particular to you. For additional information about the expected tax consequences of the merger, please see “Proposal to Approve the Reorganization Agreement—Material U.S. Federal Income Tax Consequences of the Merger,” beginning on page 84.

It may not be necessary to hold a vote on the Adjournment Proposal at the special meeting.

A summary description of the procedural requirements of Section 131 of the LBCL are included in the section of this proxy statement/prospectus entitled, “Proposal to Approve the Reorganization Agreement—Dissenters’ Rights of AGFC Shareholders” beginning on page 89. A copy of the full text of Section 131 of the LBCL is included with this proxy statement/prospectus as Appendix C.

SUMMARY

This brief summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. We urge you to carefully read this entire document and the other documents we refer to in this document. These documents will give you a more complete description of the transactions we are proposing. For more information about Business First, see “Where You Can Find More Information” on page 207. We have included page references in this summary to direct you to other places in this proxy statement/prospectus where you can find a more complete description of the topics we have summarized.

The Companies (pages 133, 94)

BUSINESS FIRST BANCSHARES, INC.

Business First Bank Plaza

8440 Jefferson Highway, Suite 101

Baton Rouge, Louisiana 70809

(225) 248-7600

Business First Bancshares Inc., a Louisiana corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (“BHC Act”). Business First’s mission is to be the financial institution of choice for Louisiana enterprises and their owners and employees. Through its wholly-owned subsidiary, Business First Bank, Business First offers a broad range of commercial and personal banking products and services.

Business First Bank is a Louisiana state non-member bank that is headquartered in Baton Rouge, Louisiana. Business First Bank serves the state of Louisiana with banking centers located in Baton Rouge, Lafayette, the New Orleans’ Northshore, Northwest Louisiana (Shreveport/Bossier) and Southwest Louisiana (Lake Charles). Business First Bank also has a Loan Production Office in the Houma/Thibodaux Bayou region of Louisiana. In each region, Business First Bank has experienced bankers led by a local president who are all involved in the community and industry.

As of June 30, 2014, on a consolidated basis, Business First had total assets of $683.9 million, total loans of $537.4 million, total deposits of $589.0 million and shareholders’ equity of $76.1 million. As of June 30, 2014, Business First Bank had total assets of $683.1 million, total loans of $537.4 million, total deposits of $590.4 million and shareholders’ equity of $73.3 million.

On July 24, 2014, Business First announced that it had entered into a definitive agreement to acquire AGFC and American Gateway Bank. The merger has been approved by the boards of directors of Business First and AGFC and is expected to close during the first quarter of 2015, although delays may occur. The merger is subject to certain conditions, including the approval by shareholders of AGFC and customary regulatory approvals.

AMERICAN GATEWAY FINANCIAL CORPORATION

320 North Alexander Avenue

Port Allen, Louisiana 70767

(225) 387-0011

American Gateway Financial Corporation, a Louisiana corporation, is a bank holding company registered under the BHC Act and the holding company for American Gateway Bank. Through its wholly-owned subsidiary, American Gateway Bank, AGFC currently operates from ten banking offices, which are all located in the Baton Rouge, Louisiana Metropolitan Statistical Area (“MSA”). It has offices in Ascension Parish (Gonzales Branch), East Baton Rouge Parish (principal office and Florida Boulevard, Jefferson Highway, Perkins Road and Zachary Branches), Livingston Parish (Denham Springs Branch) and West Baton Rouge Parish (Brusly, Erwinville and Port Allen Branches).

As of June 30, 2014, on a consolidated basis, AGFC had total assets of $367.3 million, total loans of $173.7 million, total deposits of $264.2 million and shareholders’ equity of $43.5 million. As of June 30, 2014, American Gateway Bank had total assets of $367.5 million, total loans of $173.7 million, total deposits of $264.4 million and shareholders’ equity of $43.5 million.

The Merger (page 48)

The reorganization agreement is included with this proxy statement/prospectus as Appendix A. Please read the entire reorganization agreement. It is the legal document that governs the merger.

On July 23, 2014, AGFC entered into the reorganization agreement with Business First and its wholly-owned subsidiary B1B. The reorganization agreement provides for the acquisition of AGFC by Business First by virtue of the merger of B1B with and into AGFC, with AGFC surviving the merger and becoming a wholly-owned subsidiary of Business First. Immediately following completion of the initial merger, Business First will cause AGFC to merge with and into Business First, with Business First surviving, and will cause American Gateway Bank to merge with and into Business First’s wholly-owned subsidiary, Business First Bank, with Business First Bank surviving. Following completion of these merger transactions, Business First Bank (now combined with American Gateway Bank) will continue as the wholly-owned subsidiary of Business First (now combined with AGFC). Business First and AGFC expect to complete the merger during the first quarter of 2015, although delays could occur.

The Merger Consideration (page 48)

For an explanation of how the merger consideration will be calculated, please see “Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration,” beginning on page 48.

Pro Forma Ownership Limitation in the Combined Company (page 49)

The terms of the reorganization agreement prevent any shareholder of AGFC, or any group of AGFC shareholders that would be deemed to be “acting in concert” under applicable Federal Reserve regulations, from owning more than 3.0% of the outstanding shares of the combined company on a pro forma basis as a result of the merger. Accordingly, the amount and type of consideration deliverable to any particular shareholder of AGFC in connection with the merger will be adjusted if that shareholder’s pro forma ownership of the combined company (either individually, or collectively with a group “acting in concert”) will exceed 3.0% ownership limitation. Specifically the number of shares of Business First common stock that would otherwise be deliverable such shareholder as merger consideration will be reduced so that the shareholder’s (or, if applicable, the group of shareholders’) pro forma ownership will be no more than 3.0%. The amount of cash consideration payable to those shareholders will be increased by an amount equivalent to the value of the reduction in their stock consideration. For more information about possible adjustment to the merger consideration, please see “Proposal to Approve the Reorganization Agreement—The Merger; Structure; Consideration,” beginning on page 48.

Material U.S. Federal Income Tax Consequences (page 84)

The transaction contemplated by the reorganization agreement is intended to be treated as a reorganization within the meaning of Section 368(a) of the Code. Accordingly, upon the exchange of your shares of AGFC common stock for the per share merger consideration, you should recognize a gain, but not any loss, on the exchange to the extent of the lesser of cash received or gain realized in the exchange.

Business First and AGFC will not be obligated to complete the merger unless they each receive an opinion from legal counsel, dated the closing date, that the merger will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. If such opinion is rendered, the U.S. federal income tax treatment of the merger should be as described above. The opinion of counsel, however, does not bind the Internal Revenue Service and does not preclude the IRS or the courts from adopting a contrary position.

Opinions of Financial Advisors of AGFC (page 55)

In connection with its consideration of the merger, the AGFC board of directors received written fairness opinions from AGFC’s financial advisors, Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”), and National Capital, LLC (“National Capital”). The fairness opinions, each dated as of July 23, 2014, conclude that subject to certain terms, conditions and qualifications, as of the date of the reorganization agreement, the merger consideration to be received by the shareholders of AGFC is fair, from a financial point of view, to such shareholders.

The full text of the written opinions of Sandler O’Neill and National Capital, which set forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by each of Sandler O’Neill and National Capital in connection with rendering their respective opinions, are attached to this document as Appendix B and are incorporated herein by reference. You should read the opinions and the description beginning on page 55 carefully and in their entirety. The respective opinions of Sandler O’Neill and National Capital are addressed to the AGFC board of directors, are directed only to the consideration to be paid to the holders of shares of AGFC common stock pursuant to the reorganization agreement and do not address any other matter. The opinions do not constitute a recommendation to any shareholder as to how such shareholder should vote with respect to the merger or any other matter.

Comparative Per Share Market Price Information (page 28)

There is no established public trading market for shares of Business First, which is inactively traded in private transactions. Since January 1, 2013 to the date of this proxy statement/prospectus there have been trades of approximately 211,260 shares of Business First common stock, which was the only class of stock issued and outstanding as of [—], 2014. The per share sales price for these trades has ranged from a low of $14.00 to a high of $17.25.

There is no established public trading market for shares of AGFC stock, which is inactively traded in private transactions. Since January 1, 2013, there have been trades of approximately 13,444 shares of AGFC common stock, which is the only class of stock issued and outstanding as of [—], 2014. The per share sales price for the trades of which AGFC is aware has ranged from a low of $135.00 to a high of $170.00.

The AGFC Special Shareholders’ Meeting (page 45)

The special meeting of shareholders of AGFC will be held on [—], 2014, at [—] [—].p., local time, at 320 N. Alexander Avenue, Port Allen, Louisiana 70767. At the special meeting, you will be asked:

•

to consider and vote upon a proposal to approve the reorganization agreement and the transactions contemplated thereby, as described in this proxy statement/prospectus;

•

to approve any motion to adjourn the special meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the reorganization agreement, (ii) to provide to AGFC shareholders any supplement or amendment to the proxy statement/prospectus or (iii) to disseminate any other information which is material to the AGFC shareholders voting at the special meeting; and

•

to act on any other matters that may be properly submitted to a vote at the special meeting.

Record Date Set at [—], 2014; Vote Required to Complete the Merger (page 46)

You may vote at the special meeting of AGFC shareholders if you owned AGFC common stock as of 5:00 p.m. on [—], 2014. You may cast one vote for each share of AGFC common stock you owned at that time. As of [—], 2014, there were 217,944 shares of AGFC common stock issued and outstanding.

Approval of the reorganization agreement by AGFC shareholders requires the affirmative vote of the holders of at least a majority of the shares of AGFC common stock who are present, either in person or by proxy, at the special meeting. Approval of the Adjournment Proposal requires the affirmative vote of the holders of at least a majority of the shares of AGFC common stock who are present, either in person or by proxy, at the special meeting.

You may vote your shares of AGFC common stock by attending the special meeting and voting in person or by completing and mailing the enclosed proxy card. If you are the record holder of your shares, you can revoke your proxy at any time before the vote is taken at the special meeting by sending a written notice revoking the proxy or a later-dated proxy to the secretary of AGFC, or by voting in person at the special meeting.

AGFC’s Reasons for the Merger and Recommendations of AGFC’s Board (page 53)

Based on the reasons discussed elsewhere in this document, the board of directors of AGFC believes that the merger is fair to you and in your best interests, and unanimously recommends that you vote FOR the proposal to approve the reorganization agreement. For a discussion of the circumstances surrounding the merger and the factors considered by the AGFC board of directors in approving the reorganization agreement, see page 53.

The board of directors of AGFG also recommends that you vote FOR the Adjournment Proposal.

Members of AGFC’s Management are Expected to Vote Their Shares For Approval of the Reorganization Agreement (page 201; Exhibit A to Appendix A)

The directors and executive officers of AGFC and American Gateway Bank, who together own 9,585 shares, or approximately 4.4% of the outstanding AGFC Common Stock as of [—], 2014, have entered into a voting agreement pursuant to which they have agreed, among other things, that they will vote the shares of AGFC common stock they control in favor of approval of the reorganization agreement and the merger transactions.

Effective Time of the Merger

The merger will become effective at the date and time specified in the related certificates of merger issued by the Louisiana Secretary of State. If AGFC shareholders approve the reorganization agreement at the special meeting, and if all necessary government approvals are obtained and the other conditions to the parties’ obligations to effect the merger are met or waived by the party entitled to do so, we anticipate that the merger will be completed during the first quarter of 2015, although delays could occur.

We cannot assure you that the necessary shareholder and governmental approvals will be obtained or that the other conditions to completion of the merger can or will be satisfied.

Exchange of AGFC Stock Certificates (page 74)

As soon as practicable after the effective time of the merger, you will receive a letter and instructions from Business First Bank. The letter will contain instructions and procedures for surrendering your stock certificates representing shares of AGFC common stock in exchange for cash and stock certificates representing shares of Business First common stock that you will be entitled to receive as consideration for the merger. You must carefully review and complete these materials and return them as instructed along with your stock certificates for AGFC common stock. Please do not send AGFC or Business First any stock certificates until you receive these instructions.

Conditions to Completion of the Merger (page 79)

The completion of the merger depends on a number of conditions being satisfied. These include, among others:

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approval of the reorganization agreement by the shareholders of AGFC;

•

receipt of all required governmental approvals of the merger in a manner that does not impose any restrictions on Business First’s operations which, in Business First’s reasonable judgment would adversely impact the benefits of the merger to Business First or would be so burdensome as to render inadvisable the consummation of the merger;

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receipt of the opinion of counsel to Business First to the effect that the merger will qualify as a reorganization under Section 368(a) of the Code;

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registration of the shares of Business First common stock to be issued to shareholders of AGFC with the SEC;

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accuracy of each party’s representations and warranties contained in the reorganization agreement as of the closing date of the merger;

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performance or compliance in all material respects by each party with its respective covenants and obligations required by the reorganization agreement;

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receipt of all required consents, approvals, waivers and other assurances from non-governmental third parties;

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holders of no more than 5% of the issued and outstanding AGFC stock having demanded or being entitled to receive payment of the appraised fair value of their shares as dissenting shareholders;

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termination or cancellation of certain of AGFC’s existing phantom stock award agreements;

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AGFC having tangible shareholders’ equity, determined as required by the reorganization agreement, of at least $39,571,000 as of a date that is ten days prior the closing of the merger; and

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Business First having tangible shareholders’ equity, determined as required by the reorganization agreement, of at least $74,970,000 as of the date that is ten days prior to the closing of the merger.

Additionally, the parties’ decision to enter into the reorganization agreement was conditioned upon the execution of the following agreements, all of which have been executed:

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non-competition agreements by each director of AGFC and American Gateway Bank, which will become effective upon consummation of the merger transactions; and

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release agreements by each director and executive officer of AGFC and American Gateway Bank, to be effective upon consummation of the merger, releasing AGFC and American Gateway Bank from any claims of such director or officer, subject to certain limited exceptions.

Any condition to the completion of the merger may be waived in writing by the party to the reorganization agreement entitled to the benefit of such condition. A party to the reorganization agreement could choose to complete the merger even though a condition has not been satisfied, as long as permitted by law. We cannot be certain when or if the conditions to the merger will be satisfied or waived, or that the merger will be completed.

Regulatory Approvals Required (page 88)

We cannot complete the merger unless it is approved by the Board of Governors of the Federal Reserve System (“Federal Reserve”), or such approval is waived by the Federal Reserve. In addition, the merger of American Gateway Bank with Business First Bank requires the approval of the Federal Deposit Insurance Corporation (“FDIC”) and the Louisiana Office of Financial Institutions (“Louisiana OFI”). We expect to obtain all necessary regulatory approvals, although we cannot be certain if or when we will obtain them. On November [—], 2014, Business First Bank and American Gateway Bank filed applications with the FDIC and the Louisiana OFI to obtain approval of the bank merger.

Amendments or Waiver (page 82)

Business First and AGFC may agree in writing to amend the reorganization agreement and each party may waive its right to require the other party to adhere to any term or condition of the reorganization agreement. However, the merger consideration to be received by the shareholders of AGFC pursuant to the terms of the reorganization agreement may not be decreased after the approval of the reorganization agreement by the AGFC shareholders without further approval by the AGFC shareholders.

Termination of the Reorganization Agreement (page 82)

Business First and AGFC can mutually agree at any time to terminate the reorganization agreement without completing the merger. In addition, either Business First or AGFC may decide, without the consent of the other, to terminate the reorganization agreement if:

•

the merger has not been completed by May 1, 2015 (or such later date as Business First and AGFC may agree) unless the failure to complete the merger by that time is due to a breach of a representation or warranty or failure to comply with an obligation in the reorganization agreement by the party that seeks to terminate the reorganization agreement;

•

the merger of AGFC into Business First or the merger of American Gateway Bank into Business First Bank is not approved by the appropriate regulatory authorities, or if Business First or AGFC reasonably determine that there is a substantial likelihood that any such approval will not be obtained or will be obtained only upon conditions that make it inadvisable to proceed with the merger;

•

the other party materially breaches its representations and warranties or any covenant or agreement contained in the reorganization agreement and such breach has not been cured within 30 days after the terminating party gives written notice of such failure to the breaching party; or

•

AGFC shareholders fail to approve the reorganization agreement.

AGFC may also terminate the reorganization agreement, without the consent of Business First, if the board of directors of AGFC receives an unsolicited, bona fide alternative acquisition proposal and, under certain terms and conditions, determines that it is a superior proposal to that of the reorganization agreement and that the failure to accept such proposal would be reasonably likely to cause the board of directors to violate its fiduciary duties under applicable law. However, Business First has the right to adjust the terms and conditions of the reorganization agreement so that the superior proposal no longer constitutes a superior proposal.

Business First may also terminate the reorganization agreement if AGFC has breached its non-solicitation obligations contained in the reorganization agreement in a manner adverse to Business First, the board of AGFC resolves to accept a competing acquisition proposal or the board of AGFC changes its recommendation regarding the merger.

Termination Fee (page 83)

Upon termination of the reorganization agreement for certain specified reasons, AGFC will be obligated to pay to Business First a termination fee in the amount of $1.4 million and/or all of Business First’s expenses in connection with the proposed merger transactions in an amount not to exceed $250,000.

If the reorganization agreement is terminated by:

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Business First because AGFC materially breaches the non-solicitation obligations set forth in the reorganization agreement in a manner adverse to Business First;

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Business First because AGFC’s board of directors resolves to accept another acquisition proposal;

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Business First because AGFC’s board of directors withdraws, amends or modifies, in any manner adverse to Business First, its recommendation or approval of the reorganization agreement or the merger transactions; or

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AGFC because AGFC’s board of directors receives an unsolicited, bona fide alternative acquisition proposal and, under certain terms and conditions, determines that it is a superior proposal to that of the reorganization agreement taking into account any adjustments made by Business First to the merger consideration,

then, unless Business First is in material breach of any covenant or obligation under the reorganization agreement, AGFC will be required to pay Business First a termination fee of $1.4 million plus up to $250,000 for Business First’s expenses related to the merger.

If either Business First or AGFC terminates the reorganization agreement:

•

after May 1, 2015, and if at the time of termination, the registration statement of which this proxy statement/prospectus is a part has been declared effective for at least 25 business days prior to such termination and AGFC has failed to call, give notice of, convene and hold the AGFC special meeting by such date; or

•

without regard to timing, if AGFC’s shareholders do not approve the reorganization agreement and an acquisition proposal exists at the time of termination,

then, unless Business First is in material breach of any covenant or obligation under the reorganization agreement, AGFC will be required to pay Business First up to $250,000 for its expenses related to the merger.

If either Business First or AGFC terminates the reorganization agreement, and within 12 months of such termination AGFC enters into an acquisition agreement with a third party:

•

after May 1, 2015, and if at the time of termination, AGFC’s shareholders have not approved the reorganization agreement; or

•

without regard to timing, if AGFC’s shareholders do not approve the reorganization agreement and an acquisition proposal exists at the time of termination,

Some of the Directors and Officers of AGFC Have Financial Interests in the Merger that are Different from Your Interests (page 81)

Some of the directors and officers of AGFC have interests in the merger that are different from, or are in addition to, their interests as shareholders of AGFC. These interests include:

•

Termination of Existing Employment and Change-in-Control Agreements. The following officers of AGFC have entered into employment and/or change-in-control agreements with AGFC: Don Ayres, Ricky Sparks, Terre Bidwell and Craig Livingston. The terms of the reorganization agreement require AGFC to accrue the full amount of any payments due to the above-listed officers as a result of the merger or the termination of their employment under their respective employment and/or change-in-control agreements. As soon as practicable after the closing date and termination of employment, Business First will pay to the above-listed officers of AGFC the amounts that have been accrued by AGFC.

•

Termination of Phantom Stock Agreements. As part of its incentive compensation program, AGFC has granted phantom stock awards to two of its executive officers: Ricky Sparks and Terre Bidwell. The terms of the reorganization agreement require AGFC to terminate all of its currently outstanding phantom stock award agreements prior to closing and to accrue or pay prior to the closing the full amount of all payments that must be made to the holders of all phantom stock awards in connection such termination. As a result of the merger, therefore, the above-listed officers of AGFC will receive payments from AGFC (or from Business First if such payments are accrued by AGFC and not paid prior to closing) in connection with the termination of their phantom stock awards.

•

Insurance. Under the terms of the reorganization agreement, AGFC has agreed to purchase for a period of not less than three years after the effective time for the merger, past acts and extended reporting period insurance coverage for no less than the four-year period immediately preceding the merger under its (i) current directors and officers insurance (or comparable coverage), (ii) employment practices liability insurance, (iii) current financial institutions bond (or comparable coverage) and (iv) bankers professional liability, mortgage errors and omissions and fiduciary liability insurance for each of the directors and officers of AGFC and American Gateway Bank who are currently covered under comparable policies held by AGFC or American Gateway Bank.

•

Indemnification. Subject to certain limitations and to the extent not prohibited by applicable law, Business First has agreed that all indemnification rights in favor of any director or officer of AGFC or

American Gateway Bank that existed as of the effective time of the merger pursuant to AGFC’s or American Gateway Bank’s articles of incorporation, bylaws and other similar documents will continue indefinitely. Business First and Business First Bank, as surviving entities in the proposed merger transactions, will assume the above-described indemnification obligations for the benefit of AGFC’s and American Gateway Bank’s directors and officers.

•

Stay Pay Bonuses. The parties have agreed that certain officers of AGFC, including, among others, Terre Bidwell, Craig Livingston and Ricky Sparks, will be entitled to receive “stay-pay” bonuses if they remain employed by American Gateway Bank for a specified period of time following consummation of the merger. The aggregate amount of all “stay-pay” bonuses to be paid to all employees of AGFC will not exceed $100,000. The parties have agreed that each of Business First and AGFC will be responsible for 50.0% of the aggregate amount of these bonuses. The amount attributable to AGFC will be deducted from the AGFC Tangible Equity Capital at the closing of the merger.

Comparison of Rights of Shareholders of Business First and AGFC (page 198)

At the effective time of the merger, AGFC shareholders who receive shares of Business First stock will thereby become Business First shareholders. AGFC and Business First are both Louisiana corporations and the rights of their shareholders are governed by Louisiana law. The rights of AGFC’s shareholders are also governed by its articles of incorporation and bylaws. Upon completion of the merger, the rights of AGFC’s shareholders will still be governed by Louisiana law, but they will no longer be governed by the articles of incorporation and bylaws of AGFC. Instead, those rights will be governed by Business First’s articles of incorporation and bylaws. Business First’s articles of incorporation and bylaws will remain the same unless later altered, amended or repealed. For a more detailed discussion regarding the comparative rights of shareholders of Business First and AGFC, please see “Comparison of Rights of Shareholders of AGFC and Business First,” beginning on page 197.

AGFC Shareholders May Dissent from the Merger (page 89)

If the merger is approved by less than 80% of the total voting power of AGFC, then Louisiana law permits AGFC shareholders to dissent from the merger and to receive the fair cash value of their shares of AGFC common stock in cash. To dissent, a AGFC shareholder must follow certain procedures, including filing certain notices with AGFC and voting his or her shares against the reorganization agreement. The shares of AGFC common stock held by a dissenter will not be exchanged for stock consideration or cash consideration in the merger and a dissenter’s only right will be to receive the fair cash value of his or her shares of AGFC common stock in cash. A copy of the Louisiana statute describing these dissenters’ rights and the procedures for exercising them is attached as Appendix C to this proxy statement/prospectus. AGFC shareholders who perfect their dissenters’ rights and receive cash in exchange for their shares of AGFC common stock may recognize gain or loss for U.S. federal income tax purposes.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF BUSINESS FIRST

The following table sets forth selected historical financial data of Business First. The selected historical financial data as of and for each of the five years ended December 31, 2013 is derived from Business First’s audited financial statements. The selected historical financial data as of June 30, 2014 and 2013 and for the six-month periods then ended are derived from Business First’s unaudited interim financial statements, but Business First’s management believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations as of the dates and for the periods indicated. You should not assume that the results of operations for past periods and for any interim period indicate results for any future period.


	As of and for the Six Months Ended June 30,						As of and for the Years Ended December 31,
	2014			2013			2013			2012			2011			2010			2009
	(In thousands, except per share data)
Statements of Earnings Data:
Interest income	$	13,780		$	14,199		$	28,977		$	28,605		$	29,168		$	30,833		$	30,528
Interest expense		1,982			2,429			4,700			5,482			7,036			9,531			11,927

Net interest income		11,798			11,770			24,277			23,123			22,132			21,302			18,601
Provision for possible credit losses		300			360			751			2,349			4,618			6,205			3,025

Net interest income after provision for possible credit losses		11,498			11,410			23,526			20,774			17,514			15,097			15,576
Noninterest income		724			967			2,171			2,067			1,769			2,964			2,380
Noninterest expense		9,298			9,771			20,076			18,305			18,140			17,310			15,352

Earnings before income taxes		2,924			2,606			5,621			4,536			1,143			751			2,604
Provision for income tax expense		752			499			1,016			887			(156	)		(237	)		317

Net earnings from continuing operations		2,172			2,107			4,605			3,649			1,299			988			2,287
Net earnings (loss) from discontinued operations		0			(249	)		524			(327	)		(219	)		(7	)		0

Net earnings		2,172			1,859			5,129			3,322			1,080			981			2,287
Net earnings (loss) attributable to noncontrolling interest		0			(89	)		344			(118	)		(21	)		(2	)		0

Net earnings attributable to Business First Bancorporation, Inc .		2,172			1,947			4,785			3,440			1,101			983			2,287

Net earnings available for common shareholders	$	2,172		$	1,947		$	4,785		$	3,440		$	1,101		$	983		$	2,287

Per Share Data:
Basic earnings per common share	$	0.41		$	0.37		$	0.90		$	0.65		$	0.20		$	0.19		$	0.51
Diluted earnings per common share		0.39			0.35			0.87			0.62			0.20			0.18			0.49
Book value per common share	$	14.32		$	12.99		$	13.53		$	13.39		$	12.50		$	11.29		$	11.55
Common, fully diluted, weighted average shares		5,509,813			5,506,095			5,506,714			5,515,629			5,510,866			5,461,781			4,701,799
Common shares outstanding at end of period		5,314,925			5,302,870			5,314,925			5,302,870			5,299,870			5,273,220			5,062,541

Balance Sheet Data (at period end):
Total assets	$	683,898		$	698,621		$	684,180		$	681,062		$	652,241		$	657,142		$	666,757
Securities		76,609			165,616			102,286			173,567			159,922			218,318			199,059
Loans		537,358			479,280			536,045			460,236			441,856			404,550			428,146
Allowance for possible credit losses		(6,232	)		(5,588	)		(6,043	)		(5,885	)		(7,338	)		(8,006	)		(4,914	)
Deposits		589,026			562,998			594,176			566,328			541,613			542,233			531,478
Stockholders’ equity		76,101			68,858			71,923			71,014			66,269			59,524			58,451

Average Balance Sheet Data:
Total assets	$	688,440		$	687,840		$	687,354		$	663,586		$	658,984		$	648,892		$	574,825
Securities		84,403			183,248			162,953			163,550			196,961			198,205			190,469
Loans		531,737			464,097			483,748			452,522			421,717			399,594			360,775
Deposits		597,892			561,703			566,001			545,710			546,264			542,941			476,513
Stockholders’ equity		71,767			69,726			68,871			67,032			60,660			59,692			46,682


	As of and for the Six Months Ended June 30,						As of and for the Years Ended December 31,
	2014			2013			2013			2012			2011			2010			2009
	(In thousands, except per share data)
Performance Ratios:
Return on average assets		0.64	%		0.56	%		0.70	%		0.52	%		0.17	%		0.15	%		0.40	%
Return on average common shareholders’ equity		6.05	%		5.66	%		6.95	%		5.13	%		1.82	%		1.65	%		4.90	%
Net interest margin		3.59	%		3.61	%		3.72	%		3.66	%		3.52	%		3.12	%		3.01	%
Efficiency ratio⁽¹⁾		74.29	%		77.39	%		78.49	%		74.01	%		76.74	%		78.27	%		78.76	%

Asset Quality Ratios⁽²⁾:
Nonperforming assets to total loans and other real estate		0.76	%		1.12	%		0.70	%		1.84	%		2.87	%		4.06	%		0.69	%
Net charge-offs to average loans		0.02	%		0.14	%		0.12	%		0.84	%		1.25	%		0.78	%		0.54	%
Allowance for possible credit losses to period-end loans		1.16	%		1.17	%		1.13	%		1.28	%		1.66	%		1.98	%		1.15	%
Allowance for possible credit losses to nonperforming loans⁽³⁾		195.79	%		134.17	%		275.18	%		72.80	%		67.82	%		55.57	%		421.44	%

Capital Ratios⁽²⁾:
Leverage ratio		10.87	%		9.82	%		10.46	%		9.84	%		9.45	%		8.94	%		8.60	%
Average shareholders’ equity to average total assets		10.42	%		10.14	%		10.02	%		10.10	%		9.21	%		9.20	%		8.12	%
Tier 1 risk-based capital ratio		12.12	%		11.71	%		11.71	%		11.65	%		12.04	%		12.21	%		10.63	%
Total risk-based capital ratio		13.14	%		12.68	%		12.69	%		12.67	%		13.29	%		13.46	%		11.56	%

(1)	Calculated by dividing total noninterest expense by net interest income plus noninterest income, excluding securities gains and losses. Additionally, taxes are not part of this calculation.

(2)	At period end, except for net charge-offs to average loans and average shareholders’ equity to average total assets, which is for periods ended on such dates.

(3)	Nonperforming loans consist of nonaccrual loans, loans contractually past due 90 days or more, restructured loans and any other loan management deems to be nonperforming.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF AGFC

The following table sets forth selected historical financial data of AGFC. The selected historical financial data as of and for each of the five years ended December 31, 2013 is derived from AGFC’s audited financial statements. The selected historical financial data as of June 30, 2014 and 2013 and for the six-month periods then ended are derived from AGFC’s unaudited interim financial statements, but AGFC’s management believes that such amounts reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations as of the dates and for the periods indicated. You should not assume that the results of operations for past periods and for any interim period indicate results for any future period.


	As of and for the Six Months Ended June 30,						As of and for the Years Ended December 31,
	2014			2013			2013			2012			2011			2010			2009
	(In thousands, except per share data)
Statements of Earnings Data:
Interest income	$	6,711		$	7,727		$	14,849		$	17,085		$	19,376		$	22,098		$	24,009
Interest expense		1,248			1,674			3,072			4,513			5,565			6,352			6,984

Net interest income		5,463			6,053			11,777			12,572			13,811			15,746			17,025
Provision for loan losses		200			—			400			(250	)		3,380			4,530			2,415

Net interest income after provision for loan losses		5,263			6,053			11,377			12,822			10,431			11,216			14,610
Noninterest income		1,710			1,492			3,187			2,858			1,819			3,865			3,147
Noninterest expense		5,995			6,459			12,586			13,729			13,382			13,862			13,450

Income before income taxes		978			1,086			1,978			1,951			(1,132	)		1,219			4,307
Income tax expense (benefit)		—			71			84			36			(1,012	)		(111	)		657

Net income (loss)	$	978		$	1,015		$	1,894		$	1,915		$	(120	)	$	1,330		$	3,650

Per Share Data:
Basic earnings (loss) per common share	$	4.49		$	4.66		$	8.69		$	8.79		$	(0.55	)	$	6.10		$	16.75
Book value per common share	$	199.50		$	190.51		$	189.84		$	196.39		$	183.67		$	167.01		$	164.68
Common shares outstanding at end of period		217,944			217,944			217,944			217,944			217,944			217,943			217,943

Balance Sheet Data (at period end):
Total assets	$	367,321		$	377,469		$	383,536		$	404,154		$	448,857		$	446,692		$	476,695
Securities		120,944			113,054			121,514			127,352			144,477			115,900			108,907
Loans		173,658			194,548			173,785			207,187			235,440			279,415			314,227
Allowance for loan losses		(2,127	)		(2,860	)		(2,107	)		(3,350	)		(4,328	)		(4,939	)		(4,089	)
Deposits		264,215			265,056			275,085			276,950			314,077			301,664			321,416
Stockholders’ equity		43,480			41,521			41,376			42,802			40,030			36,400			35,891

Average Balance Sheet Data:
Total assets	$	372,966		$	393,450		$	381,245		$	408,871		$	437,150		$	449,774		$	442,116
Securities		125,123			125,005			117,898			141,970			127,273			109,843			95,686
Loans		173,631			201,962			193,548			215,715			255,803			298,535			313,285
Deposits		271,947			270,452			265,888			276,147			300,460			300,106			299,723
Stockholders’ equity		42,772			43,228			42,420			41,618			38,069			37,432			33,997

Performance Ratios:
Return on average assets		0.53	%		0.52	%		0.50	%		0.47	%		-0.03	%		0.30	%		0.83	%
Return on average common shareholders’ equity		4.61	%		4.73	%		4.46	%		4.60	%		-0.32	%		3.55	%		10.74	%
Net interest margin		3.12	%		3.33	%		3.29	%		3.31	%		3.36	%		3.70	%		4.07	%
Efficiency ratio⁽¹⁾		87.15	%		85.77	%		85.28	%		88.90	%		80.16	%		73.18	%		65.82	%

Asset Quality Ratios⁽²⁾:
Nonperforming assets to total loans and other real estate		6.12	%		10.48	%		6.21	%		9.57	%		9.02	%		8.04	%		5.96	%
Annualized Net charge-offs to average loans (excluding loans held for sale)		0.21	%		0.49	%		0.85	%		0.34	%		1.57	%		1.24	%		0.32	%
Allowance for loan losses to period-end loans (excluding loans held for sale)		1.22	%		1.47	%		1.22	%		1.64	%		1.85	%		1.78	%		1.31	%
Allowance for loan losses to nonperforming loans⁽³⁾		24.29	%		17.86	%		22.79	%		20.79	%		25.80	%		26.86	%		25.07	%

Capital Ratios⁽²⁾:
Leverage ratio		11.29	%		10.41	%		11.16	%		10.15	%		8.60	%		8.49	%		7.98	%
Average shareholders’ equity to average total assets		11.47	%		10.99	%		11.13	%		10.18	%		8.71	%		8.32	%		7.69	%
Tier 1 risk-based capital ratio		20.66	%		18.10	%		20.30	%		16.55	%		13.69	%		11.94	%		10.76	%
Total risk-based capital ratio		21.72	%		19.36	%		21.36	%		17.83	%		14.97	%		13.20	%		11.96	%

UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma combined consolidated financial information and accompanying notes show the impact on the historical financial condition and results of operations of Business First and AGFC and have been prepared to illustrate the effects of the merger under the acquisition method of accounting. See “Proposal to Approve the Reorganization Agreement—Accounting Treatment.”

The unaudited pro forma combined consolidated balance sheet as of June 30, 2014 is presented as if the merger had occurred on June 30, 2014. The unaudited pro forma combined consolidated income statements for the year ended December 31, 2013 and the six months ended June 30, 2014 are presented as if the merger had occurred on January 1, 2013. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.

The selected unaudited pro forma combined consolidated financial statements are provided for informational purposes only. The unaudited pro forma combined consolidated financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined consolidated financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma combined consolidated financial statements should be read together with:

•

the accompanying notes to the unaudited pro forma combined consolidated financial statements;

•

Business First’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2013, included beginning on page F-22 in this proxy statement/prospectus;

•

AGFC’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2013, included beginning on page F-84 elsewhere in this proxy statement/prospectus;

•

Business First’s unaudited condensed consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2014, included beginning on page F-2 in this proxy statement/prospectus;

•

AGFC’s unaudited consolidated financial statements and accompanying notes as of and for the six months ended June 30, 2014, included beginning on page F-55 in this proxy statement/prospectus; and

•

other information pertaining to Business First and AGFC included elsewhere in this proxy statement/prospectus.

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET

JUNE 30, 2014

(all amounts are in thousands, except per share data, unless otherwise indicated)


	Business First Bancshares, Inc.			American Gateway Financial Corporation			Purchase Accounting Adjustments				Pro Forma Combined 6/30/2014
	6/30/2014 (as reported)			6/30/2014 (as reported)			Purchase Accounting Adjustments				Pro Forma Combined 6/30/2014
Assets:
Cash and cash equivalents	$	15,510		$	3,404		$	(5,572	)	a	$	13,342
Interest bearing deposits in banks		31,511			52,776			—				84,287
Available-for-sale investment securities		76,609			120,944			—				197,553
Loans, net of unearned income		537,358			173,658			(9,200	)	b		701,815
Allowance for loan losses		(6,232	)		(2,127	)		2,127		c		(6,232	)

Net loans		531,126			171,531			(7,073	)			695,583
Mortgage loans held for sale		—			—							—
Premises and equipment		2,537			7,842			3,047		d		12,555
Others real estate owned		932			2,001			(412	)	e		2,521
Goodwill		—			—			7,907		f		7,907
Other intangible assets		—			—			1,400		g		1,400
Other assets		25,674			8,823			(352	)	h		35,016

Total assets		683,898			367,321			(1,055	)			1,050,164


Liabilities:
Non-interest-bearing deposits		115,425			73,763			—				189,188
Interest bearing deposits		473,601			190,452			111		i		664,164
Borrowings		15,000			54,712			2,398		j		72,110
Other liabilities		3,771			4,914			—				8,685

Total liabilities		607,797			323,841			2,509				934,147

Equity:
Preferred stock		—			—			—				—
Common stock		5,315			2,179			(2,179	)	k		5,315
Surplus		56,989			8,560			31,356		k		96,905
Retained earnings		15,087			30,700			(30,700	)	k		15,087
Treasury stock, at cost		—			—			—				—
Accumulated other comprehensive income		(1,290	)		2,041			(2,041	)	l		(1,290	)

Total shareholders’ equity		76,101			43,480			(3,564	)			116,017
Non-controlling interest		—			—			—				—

Total equity		76,101			43,480			(3,564	)			116,017

Total liabilities and shareholders’ equity	$	683,898		$	367,321		$	(1,055	)		$	1,050,164

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED INCOME STATEMENT

YEAR ENDED DECEMBER 31, 2013

(all amounts are in thousands, except per share data, unless otherwise indicated)


	Business First Bancshares, Inc. 12/31/2013 (as reported)			American Gateway Financial Corporation 12/31/2013 (as reported)		Pro Forma Combined 12/31/2013
Interest income:
Interest and fees on loans	$	25,593		$	11,341	$	36,934
Interest income on securities		3,374			3,380		6,754
Other interest income		10			128		138

Total interest income		28,977			14,849		43,826
Interest expense:
Interest expense on deposits		3,649			892		4,541
Interest expense on borrowings		1,051			2,180		3,231

Total interest expense		4,700			3,072		7,772

Net interest income		24,277			11,777		36,054
Provision for loan losses		751			400		1,151

Net interest income after provision		23,526			11,377		34,903
Non-interest income:
Service charges on deposit accounts		595			1,336		1,931
Gain on sale of securities		871			206		1,077
Other non-interest income		705			1,645		2,350

Total non-interest income		2,171			3,187		5,358
Non-interest expense:
Salaries and employee benefits		10,982			6,377		17,359
Net occupancy and depreciation expense		2,358			1,847		4,205
Amortization of intangibles		196			—		196
Other non-interest expense		6,540			4,362		10,902

Total non-interest expense		20,076			12,586		32,662

Net earnings from continuing operations		5,621			1,978		7,599
Net earnings from discontinued operations, net of taxes		524			—		524
Net earnings attributable to noncontrolling interest		(344	)		—		(344	)
Income tax expenses		1,016			84		1,100

Net income	$	4,785		$	1,894	$	6,679

Preferred stock dividends		—			—		—

Net income available to common shareholders	$	4,785		$	1,894	$	6,679

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED INCOME STATEMENT

SIX MONTHS JUNE 30, 2014

(all amounts are in thousands, except per share data, unless otherwise indicated)


	Business First Bancshares, Inc. 6/30/2014 (as reported)		American Gateway Financial Corporation 6/30/2014 (as reported)		Pro Forma Combined 6/30/2014
Interest income:
Interest and fees on loans	$	12,878	$	4,836	$	17,714
Interest income on securities		871		1,801		2,672
Other interest income		31		74		105

Total interest income		13,780		6,711		20,491
Interest expense:
Interest expense on deposits		1,829		383		2,212
Interest expense on borrowings		153		865		1,018

Total interest expense		1,982		1,248		3,230

Net interest income		11,798		5,463		17,261
Provision for loan losses		300		200		500

Net interest income after provision		11,498		5,263		16,761
Non-interest income:
Service charges on deposit accounts		292		693		985
Gain on sale of securities		6		294		300
Other non-interest income		426		723		1,149

Total non-interest income		724		1,710		2,434
Non-interest expense:
Salaries and employee benefits		5,504		3,053		8,557
Net occupancy and depreciation expense		1,240		894		2,134
Amortization of intangibles		—		—		—
Other non-interest expense		2,554		2,048		4,602

Total non-interest expense		9,298		5,995		15,293

Net earnings from continuing operations		2,924		978		3,902
Income tax expenses		752		—		752

Net income	$	2,172	$	978	$	3,150

Preferred stock dividends				—		—

Net income available to common shareholders	$	2,172	$	978	$	3,150

NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

(all amounts are in thousands, except per share data, unless otherwise indicated)

Note 1—Basis of Pro Forma Presentation

The unaudited pro forma combined consolidated balance sheet as of June 30, 2014 and the unaudited pro forma combined consolidated income statements for the year ended December 31, 2013 and six months ended June 30, 2014 are based on the historical financial statements of Business First and AGFC after giving effect to the completion of the merger and the assumptions and adjustments described in the accompanying notes. The unaudited pro forma combined consolidated balance sheet as of June 30, 2014 gives effect to the merger as if it occurred on that date. The unaudited pro forma combined consolidated income statements for the year ended December 31, 2013 and six months ended June 30, 2014 gives effect to the merger as if it occurred on January 1, 2013. Such financial statements do not reflect any cost savings or operating synergies which may occur subsequent to the merger, or the cost to achieve such cost savings or operating synergies or any anticipated disposition of assets which may result from integration of the operations of the two companies. The unaudited pro forma information is presented solely for informational purposes and is not necessarily indicative of the combined results of operation or financial position that might have been achieved for the period indicated, nor is it necessarily indicative of the future results of the combined company. Certain historical financial information has been reclassified to conform to the current presentation.

The transaction will be accounted for under the acquisition method of accounting in accordance with the Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (ASC 805). Under ASC 805, all of the assets acquired and liabilities assumed in a business combinations are recognized at their acquisition-date fair values, while transaction costs and restructuring costs associated with the business combination are expensed as incurred. The excess of the purchase price over the fair value of assets acquired and liabilities assumed, if any, net of deferred tax allocations, is recorded to goodwill.

The actual amounts recorded as of the completion of the merger may differ materially from the information presented in these unaudited pro forma combined financial statements as a result of:

•

changes in the fair values of AGFC’s assets and liabilities;

•

changes used or generated in AGFC’s operations between signing of the reorganization agreement and completion of the merger;

•

other changes in AGFC’s net assets that occur prior to completion of the merger; and

•

actual financial results of the combined company.

Note 2—Pro Forma Allocation of Purchase Price

The following table shows the pro forma allocation of purchase price to net assets acquired and the pro forma goodwill generated from the transaction:


Purchase Price:			$(000)
AGFC shares outstanding as of June 30, 2014		217,944
Gross Business First shares to be issued for AGFC shares		2,556,373
Projected Exchange Ratio	11.73
Less: Shares cashed out under terms of agreement*		200,271
Net Business First shares to be issued for AGFC shares		2,356,102
Market Value per Share		16.94
Aggregate pro forma value of Business First stock to be issued			39,916
Aggregate cash consideration at $10.00 per AGFC share			2,179
Cash paid to certain AGFC shareholders per Agreement*			3,393

Total pro forma purchase price			45,488
Net assets acquired:
Cash and cash equivalents			3,404
Interest bearing deposits in banks			52,776
Available-for-sale investment securities			120,944
Loans, net of unearned income			164,458
Mortgage loans held for sale			—
Premises and equipment			10,889
Other real estate owned			1,589
Other intangible assets			1,400
Other assets			8,471

Total assets			363,931
Non-interest bearing deposits			73,763
Interest bearing deposits			190,563
Total deposits			264,326
Borrowings			57,110
Other liabilities			4,914

Total liabilities			326,350
Net assets acquired			37,581
Goodwill			7,907

Assumes holders of approximately 200,271 shares of AGFC common stock who would otherwise be entitled to receive shares of Business First common stock as consideration in the merger will instead receive cash merger consideration in an amount equal to $16.94 per share as a result of the 3.0% pro-forma ownership limitation that is described elsewhere in this proxy statement/prospectus.

Note 3—Preliminary Unaudited Pro Form and Acquisition Accounting Adjustments

The following preliminary unaudited pro forma adjustments have been reflected in the unaudited condensed combined financial information. All adjustments are based on current valuations and assumptions which are subject to change. The descriptions related to these preliminary adjustments are as follows:

(a)

Purchase Accounting Adjustments—Adjustments to cash consist of the net cash consideration of $5.6 million.

(b)

Purchase Accounting Adjustments—Based on Business First’s initial evaluation of the acquired portfolio of loans, a fair value adjustment of $(9.2) million was recorded which includes both an

interest rate component and a credit component. The interest rate component totaled approximately $500,000 and will be amortized over the remaining estimated life of the loan portfolio.

(c)

Purchase Accounting Adjustments—The allowance for loan losses was adjusted to reflect the reversal of AGFC’s recorded allowance. Purchased loans acquired in a business combination are required to be recorded at fair value, and the recorded allowance for loan losses may not be carried over.

(d)

Purchase Accounting Adjustments—Fair value adjustment to the net book value of property held by AGFC is $3.0 million based on Business First’s initial evaluation of comparable sales and other relevant market information obtained from an independent third party.

(e)

Purchase Accounting Adjustments—Based on Business First’s initial evaluation of the acquired portfolio, a ($412,000) adjustment is recognized to AGFC’s other real estate owned.

(f)

Purchase Accounting Adjustments—Goodwill of $7.9 million was generated as a result of the total purchase price and net assets acquired.

(g)

Purchase Accounting Adjustments—Based on Business First’s initial evaluation of core deposits, the identified core deposit intangible of $1.4 million will be amortized on a straight line basis over an estimated useful life of 10 years.

(h)

Purchase Accounting Adjustments—The adjustment of ($352,000) reflects market valuation adjustments in FF&E, data processing equipment, software and the elimination of accrued prepayment penalties on FHLB advances.

(i)

Purchase Accounting Adjustments—A fair value adjustment of $111,000 is recorded to fixed-rate deposit liabilities based on current market rates for similar instruments. The adjustment will be recognized over the estimated remaining term of related deposit liabilities.

(j)

Purchase Accounting Adjustments—A fair value adjustment of $2.4 million was recorded as a decrease to AGFC’s outstanding long term debt which consists of Federal Home Loan Bank advances totaling $54.7 million. This adjustment will be recognized over the estimated expected life of the advances.

(k)

Purchase Accounting Adjustments—Common stock, surplus and retained earnings were adjusted to reverse AGFC’s historical equity balances and to reflect the stock consideration to be issued estimated at $39.9 million. See also Note 2, “Pro Forma Allocation of Purchase Price,” for the allocation of the purchase price to net assets acquired.

(l)

Purchase Accounting Adjustments—Accumulated other comprehensive income was adjusted to reverse AGFC’s historical accumulated other comprehensive income balance. The net discount of $2.0 million recorded to reflect the excess of the par value over the fair value of the acquired investment securities will be recognized over the estimated remaining life of the portfolio.

(m)

Purchase Accounting Adjustments—Basic shares outstanding were adjusted to reverse AGFC’s basic shares outstanding and to record shares of Business First stock issued to effect the transaction.

Note 4—Preliminary Unaudited Pro Forma Regulatory and Tangible Capital Ratios

The following information reflects the unaudited pro forma balances used for calculating pro forma regulatory and tangible capital ratios as of June 30, 2014 for Business First, and Business First Bank and gives effect to the merger as if it occurred on that date.


Business First Bancshares, Inc.
	6/30/2014 (as reported)⁽¹⁾			Adjustments		Pro Forma
Total equity⁽²⁾	$	76,101		$	39,916	$	116,017
Less:
Net unrealized gain on available-for-sale debt securities		(1,290	)				(1,290	)
Disallowed goodwill & intangibles⁽³⁾		—			9,307		9,307
Tier 1 capital (total tangible equity capital)		77,391			30,609		108,000
Reserve for loan losses		6,232					6,232
Unrealized gains on available-for-sale equity securities		—					—
Tier 2 capital		83,623			30,609		114,232
Total qualified capital		83,623			30,609		114,232
Risk weighted assets⁽⁴⁾		616,932			193,598		810,530
Total average assets⁽⁵⁾		687,478			363,827		1,051,305
Less: disallowed goodwill and intangibles		—			9,307		9,307
Average assets for regulatory leverage capital		687,478			354,520		1,041,998
Total assets⁽⁶⁾		683,898			366,266		1,050,164
Total tangible assets⁽⁷⁾		683,898			356,959		1,040,857
Tier 1 leverage ratio⁽⁸⁾		11.26	%				10.36	%
Tier 1 risk based capital ratio⁽⁹⁾		12.54	%				13.32	%
Total risk based capital ratio⁽¹⁰⁾		13.55	%				14.09	%
Total tangible equity capital to total tangible assets		12.23	%				10.97	%

(1)	Balances as of June 30, 2014 as reported on Business First FRY-9C filed with the Federal Reserve.

(2)	Adjustment to reflect stock consideration to effect the transaction. See also Note 2, “Pro Forma Allocation of Purchase Price.”

(3)	Adjustment to reflect preliminary estimate of goodwill and intangibles. See also Note 2, “Pro Forma Allocation of Purchase Price.”

(4)

Adjustment to reflect the risk weighted assets as reported by American Gateway Bank on the June 30, 2014 Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only—FFIEC 041 (“Call Report”) filed with the Federal Financial Institutions Examination Council on July 31, 2014 adjusted for applicable fair value adjustments. Adjustments consist of the following:


American Gateway Bank’s risk weighted assets as reported on the June 30, 2014 Call Report	$	200,515
American Gateway Financial Corporation’s risk weighted assets		—
Decrease for fair value adjustment on loans		(9,200	)
Increase for fair value adjustment of premises, equipment and other real estate owned		2,283

	$	193,598

See also Note 3, “Preliminary Unaudited Pro Forma and Acquisition Accounting Adjustments” for additional information regarding fair value adjustments.

(5)	Adjustments to total average assets include the following:


American Gateway Bank’s total average assets as reported on the June 30, 2014 Call Report	$	366,881
American Gateway Financial Corporation’s Parent-Only Assets		—
Decrease for net cash consideration		(5,572	)
Decrease for estimated transaction expenses		(2,000	)
Decrease for fair value adjustment on loans		(9,200	)
Increase for reversal of American Gateway Bank’s allowance for loan losses		2,127
Increase for preliminary estimates of goodwill		7,907
Increase for preliminary estimate of core deposit intangible		1,400
Increase for fair value adjustment of premises and equipment		2,284

Adjusted average assets	$	363,827

(6)	Adjustments to total assets consist of the following:


AGFC’s total assets as reported (unaudited) as of June 30, 2014	$	367,321
Sum or purchase accounting adjustments		(1,055	)
Adjusted total assets	$	366,266

See also Note 3, “Preliminary Unaudited Pro Forma and Acquisition Accounting Adjustments” for additional information.

(7)	Adjustment to tangible assets consists of the adjustments totaling $366.3 million in (6) above less goodwill and intangibles totaling $9.3 million.

(8)	Tier 1 leverage ratio is calculated as Tier 1 capital (total tangible equity capital) to average assets for regulatory leverage capital.

(9)	Tier 1 risk based capital ratio is calculated as Tier 1 capital (total tangible equity capital) to risk weighted assets.

(10)	Total risk based capital ratio is calculated as total qualified capital to risk weighted assets.


Business First Bank
	June 30, 2014 (as reported)⁽¹⁾			Merger Adjustments		Pro Forma
Total equity⁽²⁾	$	73,340		$	27,576	$	100,916
Less:
Net unrealized gain (loss) on available-for-sale debt securities		(1,290	)				(1,290	)
Disallowed goodwill & intangibles⁽³⁾		—			9,307		9,307
Tier 1 capital (total tangible equity capital)		74,630			18,269		92,899
Reserve for loan losses		6,232					6,232
Unrealized gains (losses) on available-for-sale equity securities		—					—
Tier 2 capital		80,862			18,269		99,131
Total qualified capital		80,862			18,269		99,131
Risk weighted assets⁽⁴⁾		615,618			193,599		809,217
Total average assets		686,375			363,492		1,049,867
Less: disallowed goodwill and intangibles		—			9,307		9,307
Average assets for regulatory leverage capital		686,375			354,185		1,040,560
Total assets		683,053			364,067		1,047,120
Total tangible assets		683,053			362,667		1,045,720
Tier 1 leverage ratio⁽⁵⁾		10.87	%				8.93	%
Tier 1 risk based capital ratio⁽⁶⁾		12.12	%				11.48	%
Total risk based capital ratio⁽⁷⁾		13.14	%				12.25	%
Total tangible equity capital to total tangible assets		11.84	%				9.48	%

(1)	Balances as of June 30, 2014 as reported on Business First Bank’s Call Report filed with the FFIEC on July 31, 2014.

(2)	Adjustments to reflect $10.0 million cash dividends from Business First Bank to Business First to be used as funding source for cash considerations to effect the transaction and the recording of American Gateway Bank’s assets at fair values.

(3)	Core Deposit Intangible

(4)	Adjustments to risk weighted assets, total average assets, total assets and total tangible assets reflect the net decrease in assets as a result of $10.0 million dividend to Business First as noted in (2) above and inclusion of American Gateway Bank’s assets at fair values.

(5)	Tier 1 leverage ratio is calculated as Tier 1 capital (total tangible equity capital) to average assets for regulatory leverage capital.

(6)	Tier 1 risk based capital ratio is calculated as Tier 1 capital (total tangible equity capital) to risk weighted assets.

(7)	Total risk based capital ratio is calculated as total qualified capital to risk weighted assets.

UNAUDITED COMPARATIVE PER SHARE DATA

The information presented below should be read together with: (i) Business First’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2013, and unaudited consolidated financial statements and accompanying notes for the six months ended June 30, 2014, both of which are included elsewhere in this proxy statement/prospectus; and (ii) AGFC’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2013, and AGFC’s unaudited consolidated financial statements and accompanying notes for the six months ended June 30, 2014, also included elsewhere in this proxy statement/prospectus. See “Index to Financial Statements.”

The unaudited pro forma adjustments are based upon available information and certain assumptions that Business First’s management believes are reasonable. The unaudited pro forma data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the impact of factors that may result as a consequence of the merger transactions or consider any potential impacts of current market conditions of the merger on revenues, expense efficiencies, asset dispositions, among other factors. As a result, unaudited pro forma data is presented for illustrative purposes only and does not represent an attempt to predict or suggest future results. Upon completion of the merger, the operating results of AGFC will be reflected in the consolidated financial statements of Business First on a prospective basis.

The following table shows: (1) the book value assigned to Business First’s common stock on June 30, 2014 and on [—], 2014, the most recent date practicable preceding the date of this proxy statement/prospectus; and (2) the equivalent pro forma book value of a share of AGFC common stock at such dates based on the book value of the consideration to be received by AGFC shareholders in the merger with respect to each share.


	Book Value Per Share Business First Common Stock⁽¹⁾			Equivalent Pro Forma Book Value Per Share of AGFC Common Stock⁽²⁾
June 30, 2014	$	14.32		$	177.95
[—], 2014		[—	]		[	—]

(1)	Represents the book value (per Selected Financial Data) per share of Business First stock as of June 30, 2014 (unaudited).

(2)

Represents the book value per share of Business First stock multiplied by the assumed exchange ratio of 11.73 and adding the per share cash consideration of $10.00, which does not reflect any adjustments. The value does not reflect cash to be paid in lieu of fractional shares and is rounded to two decimals.

The following table shows (1) the assumed market value per share of Business First’s common stock on June 30, 2014 and on [—], 2014, the most recent date practicable preceding the date of this proxy statement/prospectus; and (2) the equivalent pro forma market value of a share of AGFC common stock at such dates based on the assumed market value of the consideration to be received by AGFC shareholders in the merger with respect to each share.


	Market Value Per Share of Business First Common Stock⁽¹⁾			Equivalent Market Value Per Share of AGFC Common Stock⁽²⁾
June 30, 2014	$	16.94		$	208.73
[—], 2014		[—	]		[	—]

(1)	Represents the market value per share of Business First stock as of June 30, 2014, based on the terms of the agreement.

(2)

Represents the market value per share of Business First stock multiplied by the assumed exchange ratio of 11.73 and adding the per share cash consideration of $10.00, which does not reflect any adjustments. The value does not reflect cash to be paid in lieu of fractional shares and is rounded to two decimals.

An investment in the Business First common stock in connection with the merger involves risks. Business First describes below the material risks and uncertainties that it believes affect its business and an investment in the Business First common stock. You should carefully read and consider all of these risks and all other information contained in this proxy statement/prospectus in deciding whether to vote for approval of the reorganization agreement. If any of the risks described in this proxy statement/prospectus occur, Business First’s financial condition, results of operations and cash flows could be materially and adversely affected. If this were to happen, the value of Business First common stock could decline significantly, and you could lose all or part of your investment.

The number of shares of Business First common stock received as merger consideration may fluctuate, and shareholders of AGFC may receive more or less value, depending upon increases and decreases in the tangible shareholders’ equity of Business First and AGFC prior to closing.

The aggregate number of shares of Business First stock issued to AGFC shareholders in exchange for each share of AGFC will fluctuate based upon changes in the tangible shareholders’ equity of AGFC and Business First prior to the closing of the merger transactions. The tangible shareholders’ equity of either Business First or AGFC at the time the merger is completed may vary from the tangible shareholders’ equity of either company at the date the reorganization was executed, the date of this document and at the date of the shareholders’ meeting of AGFC. Shares of Business First stock are not traded on an exchange, and, therefore, as of the date of this proxy statement/prospectus, there is no public market for such shares. There is no assurance that shares of Business First stock can be sold at a price equal to or greater than the implied per share merger value following completion of the merger. See “Risks Associated with Business First’s Common Stock.” Because the merger consideration will not be adjusted to reflect any changes in the market value of Business First’s stock, the market value of Business First stock issued in the merger may be higher or lower than the value of such shares on earlier dates.

Changes in the value of the merger consideration may be the result of various factors, many of which are beyond the control of AGFC and Business First, including:

The merger may not be completed until a significant period of time has passed after the AGFC shareholders’ meeting. At the time of the shareholder meeting, AGFC shareholders will not know the exact number of shares or the value of the Business First stock that will be issued in connection with the merger.

Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.

The Federal Reserve System must approve, or waive approval of, the merger and the FDIC and the Louisiana OFI must approve the merger of American Gateway Bank with and into Business First Bank. The Federal Reserve, the FDIC and the Louisiana OFI will consider, among other factors, the competitive impact of the merger and the bank merger, the financial and managerial resources of our companies and our subsidiary banks and the convenience and needs of the communities to be served. As part of that consideration, we expect

that the Federal Reserve, the FDIC and the Louisiana OFI will review issues related to capital position, safety and soundness, and legal and regulatory compliance, including compliance with anti-money laundering laws. There can be no assurance as to whether this and other regulatory approvals will be received, the timing of those approvals or whether any conditions will be imposed.

AGFC will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have a material adverse effect on AGFC, and consequently, on Business First. These uncertainties may impair AGFC’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with AGFC to seek to change existing business relationships with AGFC. Retention of certain employees may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with Business First. If key employees depart, Business First’s business following the merger could be harmed. In addition, the reorganization agreement restricts AGFC from making certain acquisitions and taking other specified actions until the merger occurs without the consent of Business First. These restrictions may prevent AGFC from pursuing attractive business opportunities that may arise prior to the completion of the merger.

Combining our two companies may be more difficult, costly or time-consuming than we expect.

Business First and AGFC have operated and, until the merger is completed, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees or disruption of each company’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. As with any merger of banking institutions, there also may be business disruptions that cause us to lose customers or cause customers to take their deposits out of our banks. The success of the combined company following the merger may depend in large part on the ability to integrate the two businesses, business models and cultures. If we are not able to integrate our operations successfully and timely, the expected benefits of the merger may not be realized.

Some of the directors and officers of AGFC may have interests and arrangements that may have influenced their decisions to support or recommend that you approve the merger.

The interests of some of the directors and officers of AGFC may be different from those of the AGFC shareholders generally, and directors and officers of AGFC may be participants in arrangements that are different from, or in addition to, those of the AGFC shareholders. For example, certain members of AGFC management will receive cash payments upon termination of their employment agreements and/or change-in-control agreements with AGFC. Also, AGFC has agreed, subject to certain conditions, to continue all indemnification rights in favor of any director or officer of AGFC or American Gateway Bank that existed as of the effective time of the merger. These interests are described in more detail in the section of this proxy statement/prospectus entitled “Proposal to Approve the Reorganization Agreement—Financial Interests of Directors and Officers of AGFC in the Merger” beginning on page 81.

Although Business First estimates that it will realize cost savings from the merger when fully phased in, it is possible that the estimates of the potential cost savings could turn out to be incorrect. For example, the combined purchasing power may not be as strong as expected, and, therefore, the cost savings could be reduced. In addition, unanticipated growth in Business First’s business may require Business First to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced. The cost savings estimates also depend on an ability to combine the businesses of Business First and AGFC in a manner that permits those costs savings to be realized. If the estimates turn out to be incorrect or Business First is not able to combine the two companies successfully, the anticipated cost savings may not be fully realized or realized at all, or those benefits may take longer to realize than expected.

AGFC shareholders will have a reduced ownership and voting interest after the merger, will exercise less influence over management and no shareholder of AGFC (or group of shareholders that would be deemed to be “acting in concert”) may own more than 3.0% of the combined company as a result of the merger.

AGFC shareholders currently have the right to vote in the election of the board of directors of AGFC and on other matters affecting AGFC. The merger will transfer control of AGFC to Business First and to the shareholders of Business First. When the merger occurs, each AGFC shareholder will become a shareholder of Business First, as the combined company, with a percentage ownership of Business First much smaller than such shareholder’s percentage ownership of AGFC. In addition, the reorganization agreement prevents any shareholder of AGFC, or any group of AGFC shareholders that would be deemed to be “acting in concert” under applicable Federal Reserve regulations, from owning more than 3.0% of the outstanding shares of the combined company on a pro forma basis as a result of the merger. Accordingly, the amount and type of consideration deliverable to any particular shareholder of AGFC in connection with the merger will be adjusted if that shareholder’s pro forma ownership of the combined company (either individually, or collectively with a group “acting in concert”) will exceed 3.0% ownership limitation. As a result of the foregoing, AGFC shareholders will have less influence on the management and policies of the combined company than they now have on the management and policies of AGFC.

The fairness opinions obtained by AGFC from its financial advisors will not reflect changes in circumstances subsequent to the dates of the fairness opinions.

Sandler O’Neill and National Capital, AGFC’s financial advisors in connection with the proposed merger, have delivered to the board of directors of AGFC their opinions dated as of July 23, 2014. The opinions of each of Sandler O’Neill and National Capital stated that, as of such date and based upon and subject to the factors and assumptions set forth therein, the merger consideration was fair to the AGFC shareholders from a financial point of view. The opinions of Sandler O’Neill and National Capital do not reflect changes that may occur or may have occurred after the date of the opinion, including changes to the operations and prospects of Business First or AGFC, changes in general market and economic conditions or regulatory or other factors. Any such changes, or changes in other factors on which the opinions are based, may materially alter or affect the relative values of Business First and AGFC.

The market price of shares of Business First stock after the merger may be affected by factors different from those affecting shares of AGFC or Business First currently.

The businesses of Business First and AGFC differ in some respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s shares of stock may be affected by factors different from those currently affecting the independent results of operations of each of Business First and AGFC. For a discussion of the businesses of Business First and AGFC and of certain factors to consider in connection with those businesses, see “Business of AGFC” and “Business of Business First” beginning on pages 94 and 133, respectively.

The reorganization agreement limits AGFC’s ability to pursue an alternative transaction and requires AGFC to pay a termination fee plus expenses incurred by Business First under certain circumstances relating to alternative acquisition proposals.

The reorganization agreement prohibits AGFC from soliciting, initiating, encouraging or knowingly, facilitating certain alternative acquisition proposals with any third party, subject to exceptions set forth in the reorganization agreement. The reorganization agreement also provides for the payment by AGFC to Business First of a termination fee of $1.4 million and Business First’s expenses in connection with the merger up to $250,000 in the event that the reorganization agreement is terminated in certain circumstances, involving, among others, a breach by AGFC of its non-solicitation obligations and changes in the recommendation of AGFC’s board of directors to its shareholders with respect to the proposal to approve the merger transactions. These provisions may discourage a potential competing acquirer that might have an interest in acquiring AGFC from considering or proposing such an acquisition.

Failure to complete the merger could cause Business First’s or AGFC’s stock price to decline.

If the merger is not completed for any reason, although neither Business First nor AGFC’s stock trades on an active or liquid market, Business First’s or AGFC’s stock price may decline because costs related to the merger, such as legal, accounting and certain financial advisory fees, must be paid even if the merger is not completed. In addition, if the merger is not completed, Business First’s or AGFC’s stock price may decline to the extent that the current market price reflects a market assumption that the merger will be completed or due to questions about why (or whose “fault” it was that) the merger was not completed.

Business First may not be able to adequately measure and limit its credit risk, which could lead to unexpected losses.

The business of lending is inherently risky, including risks that the principal of or interest on any loan will not be repaid timely or at all or that the value of any collateral supporting the loan will be insufficient to cover its outstanding exposure. These risks may be affected by the strength of the borrower’s business sector and local, regional and national market and economic conditions. Business First’s risk management practices, such as monitoring the concentration of its loans within specific industries and its credit approval practices, may not adequately reduce credit risk, and its credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. Finally, many of its loans are made to small and midsized businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers. A failure to effectively measure and limit the credit risk associated with Business First’s loan portfolio could have a material adverse effect on its business, financial condition and results of operations.

Business First’s allowance for loan losses may prove to be insufficient to absorb losses inherent in its loan portfolio, which could have a material adverse effect on its financial condition and results of operations.

Business First maintains an allowance for loan losses that represents management’s judgment of probable losses and risks inherent in its loan portfolio. The level of the allowance reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral. The determination of the appropriate level of the allowance for loan losses is inherently subjective and requires Business First to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes. Inaccurate management assumptions, continuing deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of its control, may require Business First to increase its allowance for loan losses. In addition, Business First’s regulators, as an integral part of their periodic examination, review the adequacy of its allowance for loan losses and may direct Business First to make additions to the allowance based on their judgments about information available to them at the time of their examination. Further, if actual charge-offs in future periods exceed the amounts allocated to the allowance for loan losses, Business First may need additional provisions for loan losses to restore the adequacy of its allowance for loan losses. If Business First is required to materially increase its level of allowance for loan losses for any reason, such increase could have a material adverse effect on its business, financial condition and results of operations.

Business First relies heavily on its executive management team and other key employees, and an unexpected loss of their service could have a material adverse effect on Business First’s business, financial condition and results of operations.

Business First’s success depends in large part on the performance of its key personnel, as well as on its ability to attract, motivate and retain highly qualified senior and middle management and other skilled employees. Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute its business plan may be lengthy. Business First may not

be successful in retaining its key employees, and the unexpected loss of services of one or more of its key personnel could have a material adverse effect on Business First’s business given their skills, knowledge of the primary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel. If the services of any of its key personnel should become unavailable for any reason, Business First may not be able to identify and hire qualified persons on terms acceptable to it, or at all, which could have a material adverse effect on its business, financial condition and results of operations.

Business First’s ability to retain bankers and recruit additional successful bankers is critical to the success of its business strategy, and any failure to do so could have a material adverse effect on its business, financial condition and results of operations.

Business First’s ability to retain and grow its loans, deposits and fee income depends upon the business generation capabilities, reputation and relationship management skills of its bankers. If Business First were to lose the services of any of its bankers, including successful bankers employed by banks that Business First may acquire, to a new or existing competitor or otherwise, Business First may not be able to retain valuable relationships and some of its customers could choose to use the services of a competitor instead.

Business First’s growth strategy also relies on its ability to attract and retain additional profitable bankers. Business First may face difficulties in recruiting and retaining bankers of its desired caliber, including as a result of competition from other financial institutions. In particular, many of its competitors are significantly larger with greater financial resources, and may be able to offer more attractive compensation packages and broader career opportunities. Additionally, Business First may incur significant expenses and expend significant time and resources on training, integration and business development before it is able to determine whether a new banker will be profitable or effective. If Business First is unable to attract and retain successful bankers, or if its bankers fail to meet its expectations in terms of customer relationships and profitability, Business First may be unable to execute its business strategy, which could have a material adverse effect on its business, financial condition and results of operations.

Business First’s business has grown rapidly, and Business First may not be able to maintain its historical rate of growth, which could have a material adverse effect on its ability to successfully implement its business strategy.

Business First has grown rapidly since its inception in 2006. Although rapid business growth can be a favorable business condition, financial institutions that grow rapidly can experience significant difficulties as a result of rapid growth. Failure to build infrastructure sufficient to support rapid growth and suffering loan losses in excess of reserves for such losses, as well as other risks associated with rapidly growing financial institutions, could materially and adversely impact its operations.

Business First may not be able to sustain its historical rate of growth or continue to grow its business at all. Because of the uncertainty in the general economy and the government intervention in the credit markets, it may be difficult for Business First to continue its recent earnings growth as it continues to expand. Failure to grow or failure to manage its growth effectively could adversely affect Business First’s ability to successfully implement its business strategy, which could have a material adverse effect on its business, financial condition and results of operations.

Difficult market conditions and economic trends have adversely affected the banking industry and could have a material adverse effect on Business First’s business, financial condition and results of operations.

Business First is operating in a challenging and uncertain economic environment, including generally uncertain conditions nationally and locally in its industry and market. Although economic conditions have improved in recent years, financial institutions continue to be affected by volatility in the real estate market in some parts of the country and uncertain regulatory and interest rate conditions. Business First retains direct exposure to the residential and commercial real estate market in Louisiana, and is affected by these events.

Business First’s ability to assess the creditworthiness of customers and to estimate the losses inherent in its loan portfolio is made more complex by uncertain market and economic conditions. Business First’s risk management practices, such as monitoring the concentration of its loans within specific industries and its credit approval practices, may not adequately reduce credit risk, and Business First’s credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. Another national economic recession or deterioration of conditions in Business First’s market could drive losses beyond that which is provided for in its allowance for loan losses and result in the following consequences:

While economic conditions in Louisiana and the U.S. continue to show signs of recovery, there can be no assurance that these conditions will continue to improve. Although real estate markets have stabilized in portions of the U.S., a resumption of declines in real estate values, volume of home sales and financial stress on borrowers as a result of the uncertain economic environment, including job losses, could have a material adverse effect on Business First’s borrowers and/or their customers, which could have a material adverse effect on Business First’s business, financial condition and results of operations.

A large portion of Business First’s loan portfolio is comprised of commercial loans secured by equipment or other collateral, the deterioration in value of which could increase its exposure to future probable losses.

As of June 30, 2014, approximately $195.8 million, or approximately 36.4% of Business First’s total loans, before deferred loan fees, was comprised of commercial loans to businesses collateralized by general business assets including, among other things, accounts receivable, inventory and equipment. These commercial and industrial loans are typically larger in amount than loans to individual consumers and, therefore, have the potential for larger losses on an individual loan basis. Additionally, asset-based borrowers are often highly leveraged and have inconsistent historical earnings. Significant adverse changes in various industries could cause rapid declines in values and collectability associated with those business assets resulting in inadequate collateral coverage that may expose Business First to future losses. An increase in specific reserves and charge-offs related to Business First’s commercial and industrial loan portfolio could have a material adverse effect on its business, financial condition and results of operations.

The small to medium-sized businesses that Business First lends 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 Business First’s business, financial condition and results of operations.

Business First focus its business development and marketing strategy primarily on small to medium-sized businesses. Small to medium-sized businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. In addition, the success of a small and medium-sized business often depends on the management skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the markets in which Business First operates and small to medium-sized businesses are adversely affected or Business First’s borrowers are otherwise harmed by adverse business developments, this, in turn, could have a material adverse effect on its business, financial condition and results of operations.

Because a significant portion of Business First’s 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 its real estate loans and result in loan and other losses.

As of June 30, 2014, $317.1 million, or 59.0% of Business First’s total loans, was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in the state of Louisiana could increase the credit risk associated with Business First’s real estate loan portfolio. Real estate values in many Louisiana markets have experienced periods of fluctuation over the last five years. The market value of real estate can fluctuate significantly in a short period of time. Adverse changes affecting real estate values and the liquidity of real estate in one or more of Business First’s markets could increase the credit risk associated with its loan portfolio, and could result in losses that adversely affect credit quality, financial condition, and results of operations. Negative changes in the economy affecting real estate values and liquidity in Business First’s market areas could significantly impair the value of property pledged as collateral on loans and affect its ability to sell the collateral upon foreclosure without a loss or additional losses. Collateral may have to be sold for less than the outstanding balance of the loan, which could result in losses on such loans. Such declines and losses could have a adverse effect on Business First’s business, financial condition and results of operations. If real estate values decline, it is also more likely that Business First would be required to increase its allowance for loan losses, which could have a material adverse effect on its business, financial condition and results of operations.

Business First’s portfolio contains many large loans, and deterioration in the financial condition of these large loans could have a material adverse impact on its asset quality.

Business First’s growth over the past several years has been partially attributable to its ability to originate and retain relatively large loans given its asset size. As of June 30, 2014, Business First’s average loan size was approximately $412,000. Further, as of June 30, 2014, its 20 largest borrowing relationships ranged from approximately $13.3 million to $6.8 million (including unfunded commitments) and averaged approximately $9.7 million in total commitments and $7.3 million in principal balance, respectively. Along with other risks inherent in Business First’s loans, such as the deterioration of the underlying businesses or property securing these loans, the higher average size of its loans presents a risk to its lending operations. Because Business First has a large average loan size, if only a few of its largest borrowers become unable to repay their loan obligations as a result of economic or market conditions or personal circumstances, its nonperforming loans and its provision for loan losses could increase significantly, which could have a material adverse effect on its business, financial condition and results of operations.

Business First’s lending limit may restrict its growth and prevent Business First from effectively implementing its business strategy.

Business First is limited in the amount Business First can loan to a single borrower by the amount of its capital. Generally, under applicable Louisiana law, Business First may lend up to 20% of its capital stock and surplus to any one borrower on an unsecured basis and up to 50% of its capital stock and surplus on a secured basis, when aggregated with all unsecured loans to such borrower. Based upon its current capital levels, the amount Business First may lend is significantly less than that of many of its competitors and may discourage potential borrowers who have credit needs in excess of its lending limit from doing business with us. Business First accommodates larger loans by selling participations in those loans to other financial institutions, but this strategy may not always be available. If Business First is unable to compete effectively for loans from its target customers, Business First may not be able to effectively implement its business strategy, which could have a material adverse effect on its business, financial condition and results of operations.

A lack of liquidity could impair Business First’s ability to fund operations, which could have a material adverse effect on its business, financial condition and results of operations.

Liquidity is essential to Business First’s operations. Business First relies upon its ability to generate deposits and effectively manage the repayment and maturity schedules of its loans and investment securities, respectively,

to ensure that it has adequate liquidity to fund its operations. An inability to raise funds through deposits, borrowings, the sale of its investment securities, the sale of loans, and other sources could have a substantial negative effect on Business First’s liquidity. Business First’s most important source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff. If customers move money out of bank deposits and into other investments such as money market funds, Business First would lose a relatively low-cost source of funds, increasing its funding costs and reducing its net interest income and net income.

Other primary sources of funds for Business First consist of cash flows from operations, maturities and sales of investment securities. Additional liquidity is provided by the ability to borrow from the Federal Reserve Bank of Atlanta and the Federal Home Loan Bank of Dallas (“FHLB”). Business First also may borrow funds from third-party lenders, such as other financial institutions. Business First’s access to funding sources in amounts adequate to finance or capitalize its activities, or on terms that are acceptable to it, could be impaired by factors that affect Business First directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Business First’s access to funding sources could also be affected by a decrease in the level of its business activity as a result of a downturn in the economy in its primary market area or by one or more adverse regulatory actions against it.

Any decline in available funding could adversely impact Business First’s ability to originate loans, invest in securities, meet its expenses, or to fulfill obligations such as repaying its borrowings or meeting deposit withdrawal demands, any of which could have a material adverse impact on Business First’s liquidity and could, in turn, have a material adverse effect on its business, financial condition and results of operations.

Business First may need to raise additional capital in the future, and if Business First fails to maintain sufficient capital, Business First may not be able to maintain regulatory compliance, which could have a material adverse effect on its business, financial condition and results of operations.

Business First faces significant capital and other regulatory requirements as a financial institution. Business First may need to raise additional capital in the future to provide it with sufficient capital resources and liquidity to meet its commitments and business needs, which could include the possibility of financing acquisitions. In addition, Business First, on a consolidated basis, and Business First Bank, on a stand-alone basis, must meet certain regulatory capital requirements and maintain sufficient liquidity. Importantly, regulatory capital requirements could increase from current levels, which could require Business First to raise additional capital or downsize its operations. Business First’s ability to raise additional capital depends on conditions in the capital markets, economic conditions and a number of other factors, including investor perceptions regarding the banking industry, market conditions and governmental activities, and upon its financial condition and performance. Accordingly, Business First may not be able to raise additional capital if needed or on terms acceptable to it. If Business First fails to maintain capital to meet regulatory requirements, it could be subject to enforcement actions, which could have a material adverse effect on its business, financial condition and results of operations.

Interest rate shifts could reduce net interest income and otherwise have a material adverse effect on Business First’s financial condition and results of operations.

The majority of Business First’s banking assets are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, its earnings and cash flows depend to a great extent upon the level of its net interest income, or the difference between the interest income Business First earns on loans, investments and other interest-earning assets, and the interest Business First pays on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or decrease Business First’s net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than

interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. As of June 30, 2014, 52.3% of its earning assets and 47.5% of its interest-bearing liabilities are variable rate. Business First’s interest sensitivity profile was asset sensitive as of June 30, 2014, meaning that Business First estimates its net interest income would increase more from rising interest rates than from falling interest rates.

Additionally, an increase in interest rates may, among other things, reduce the demand for loans and Business First’s ability to originate loans and decrease loan repayment rates. A decrease in the general level of interest rates may affect Business First through, among other things, increased prepayments on its loan portfolio and increased competition for deposits. Accordingly, changes in the level of market interest rates affect Business First’s net yield on interest-earning assets, loan origination volume, loan portfolio and its overall results. Although its asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of Business First’s control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.

Business First faces significant competitive pressures that could impair its growth, decrease its profitability or reduce its market share.

Business First operates in the highly competitive banking industry and faces significant competition for customers from bank and non-bank competitors, particularly regional and nationwide institutions, in originating loans, attracting deposits and providing other financial services. Business First’s competitors are generally larger and may have significantly more resources, greater name recognition, and more extensive and established branch networks or geographic footprints than Business First. Because of their scale, many of these competitors can be more aggressive than Business First can on loan and deposit pricing. Also, many of its non-bank competitors have fewer regulatory constraints and may have lower cost structures. Business First expects competition to continue to intensify due to financial institution consolidation; legislative, regulatory and technological changes; and the emergence of alternative banking sources.

Business First’s ability to compete successfully will depend on a number of factors, including, among other things:

Increased competition could require Business First to increase the rates it pays on deposits or lower the rates it offers on loans, which could reduce its profitability. Business First’s failure to compete effectively in its primary markets could cause Business First to lose market share and could have a material adverse effect on its business, financial condition and results of operations.

Business First’s ability to maintain its reputation is critical to the success of its business.

Business First’s business plan emphasizes relationship banking. Business First has benefitted from strong relationships with and among its customers. As a result, Business First considers its reputation to be one of the most valuable components of its business.

Business First’s growth over the past several years has depended on attracting new customers from competing financial institutions and increasing its market share, primarily through involvement in its primary markets and word-of-mouth advertising, rather than on growth in the market for banking services in its primary markets. As such, Business First strives to enhance its reputation by recruiting, hiring and retaining employees who share its core values of being an integral part of the communities Business First serves and delivering superior service to its customers. If its reputation is negatively affected by the actions of its employees or otherwise, Business First’s existing relationships may be damaged. Business First could lose some of its existing customers, and Business First may not be successful in attracting new customers. Any of these developments could have a material adverse effect on Business First’s business, financial condition and results of operations.

The fair value of Business First’s investment securities can fluctuate due to factors outside of its control.

As of June 30, 2014, the fair value of Business First’s investment securities portfolio was approximately $76.6 million, which included an unrealized loss of approximately $2.0 million. Factors beyond Business First’s control can significantly influence the fair value of securities in its portfolio and can cause potential adverse changes to the fair value of these securities. These factors include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets. Any of these factors, among others, could cause other-than-temporary impairments and realized or unrealized losses in future periods and declines in other income, which could have a material adverse effect on Business First’s business, results of operations, financial condition and future prospects. The process for determining whether impairment of a security is other-than-temporary often requires complex, subjective judgments about whether there has been a significant deterioration in the financial condition of the issuer, whether management has the intent or ability to hold a security for a period of time sufficient to allow for any anticipated recovery in fair value, the future financial performance and liquidity of the issuer and any collateral underlying the security, and other relevant factors.

If Business First fails to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, it may not be able to accurately report its financial results or prevent fraud.

Ensuring that Business First has adequate disclosure controls and procedures, including internal control over financial reporting, in place so that it can produce accurate financial statements on a timely basis is costly and time-consuming and needs to be reevaluated frequently. Business First is in the process of documenting, reviewing and, if appropriate, improving its internal controls and procedures in anticipation of being a public company and being subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), which will require annual management assessments of the effectiveness of its internal control over financial reporting and, when Business First ceases to be an emerging growth company under the JOBS Act, a report by its independent auditors addressing these assessments. Business First’s management may conclude that its internal control over financial reporting are not effective due to its failure to cure any identified material weakness or otherwise. Moreover, even if its management concludes that its internal control over financial reporting is effective, its independent registered public accounting firm may not conclude that its internal control over financial reporting are effective. In the future, its independent registered public accounting firm may not be satisfied with Business First’s internal control over financial reporting or the level at which its controls are documented, designed, operated or reviewed, or Business First and its accounting firm may have differences in opinion regarding the applicable requirements. In addition, during the course of the evaluation, documentation and testing of its internal control over financial reporting, Business First may identify deficiencies that it may not be able to remediate in time to meet the deadline imposed by the Securities and Exchange Commission (“SEC”), for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. Any such deficiencies may also subject Business First to adverse regulatory consequences. If Business First fails to achieve and maintain the adequacy of its internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, Business First may be unable to report its financial information on a timely basis, it may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act, and Business First may suffer adverse regulatory consequences. There

could also be a decline in investor confidence as to the reliability its financial statements, which could result in a decline in the value of Business First’s capital stock.

Business First’s financial results depend on management’s selection of accounting methods and certain assumptions and estimates.

Business First’s financial condition and results of operations are based on its consolidated financial statements, which have been prepared in accordance with Generally Accounting Principles Accepted in the United States, (“GAAP”), and with general practices within the financial services industry. The preparation of financial statements in conformity with GAAP requires Business First to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities and the reported amount of related revenues and expenses. Certain accounting policies inherently are based to a greater extent on estimates, assumptions and judgments of management and, as such, have a greater possibility of producing results that could be materially different than originally reported. They require management to make subjective or complex judgments, estimates or assumptions, and changes in those estimates or assumptions could have a significant impact on Business First’s consolidated financial statements. These critical accounting policies include the allowance for loan losses, accounting for income taxes, the determination of fair value for financial instruments and accounting for stock-based compensation. Because of the uncertainty of estimates involved in these matters, Business First may be required to significantly increase its allowance for loan losses or sustain loan losses that are significantly higher than the reserve provided, significantly increase its accrued tax liability or otherwise incur charges that could have a material adverse effect on its business, financial condition and results of operations.

Business First has a continuing need for technological change, and it may not have the resources to effectively implement new technology, or Business First may experience operational challenges when implementing new technology.

The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Business First’s future success will depend, at least in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in its operations as Business First continues to grow and expand its products and service offerings. Business First may experience operational challenges as it implements these new technology enhancements or products, which could result in Business First not fully realizing the anticipated benefits from such new technology or require Business First to incur significant costs to remedy any such challenges in a timely manner.

Many of Business First’s larger competitors have substantially greater resources to invest in technological improvements. As a result, they may be able to offer additional or superior products compared to those that Business First will be able to provide, which would put Business First at a competitive disadvantage. Accordingly, Business First may lose customers seeking new technology-driven products and services to the extent Business First is unable to provide such products and services.

Business First relies on third parties to provide key components of its business infrastructure, and a failure of these parties to perform for any reason could disrupt its operations.

Third parties provide key components of Business First’s operational infrastructure such as data processing, internet connections, network access, core application processing, statement production and account analysis. Business First’s operations depends on the successful and uninterrupted functioning of its information technology and telecommunications systems and third-party servicers. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt Business First’s operations. Because its information technology and telecommunications systems interface with and depend on third-party systems, Business First could experience service denials if demand for

such services exceeds capacity or such third-party systems fail or experience interruptions. Replacing vendors or addressing other issues with its third-party service providers could entail significant delay and expense. If Business First is unable to efficiently replace ineffective service providers, or if Business First experiences a significant, sustained or repeated, system failure or service denial, it could compromise its ability to operate effectively, damage its reputation, result in a loss of customer business, and subject Business First to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on its business, financial condition and results of operations.

Business First could be subject to losses, regulatory action or reputational harm due to fraudulent and negligent acts on the part of loan applicants, its employees and vendors.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, Business First may rely on information furnished by or on behalf of clients and counterparties, including financial statements, property appraisals, title information, employment and income documentation, account information and other financial information. Business First may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. Any such misrepresentation or incorrect or incomplete information may not be detected prior to funding. In addition, one or more of Business First’s employees or vendors could cause a significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates its loan documentation, operations or systems. Any of these developments could have a material adverse effect on Business First’s business, financial condition and results of operations.

Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm Business First’s reputation, and otherwise have a material adverse effect on its business, financial condition and results of operations.

Business First necessarily collects, uses and holds personal and financial information concerning individuals and businesses with which it has a banking relationship. Threats to data security, including unauthorized access, and cyber-attacks, rapidly emerge and change, exposing Business First to additional costs for protection or remediation and competing time constraints to secure its data in accordance with customer expectations and statutory and regulatory privacy and other requirements. It is difficult or impossible to defend against every risk being posed by changing technologies, as well as criminal intent on committing cyber-crime. Increasing sophistication of cyber-criminals and terrorists make keeping up with new threats difficult and could result in a breach. Controls employed by Business First’s information technology department and its other employees and vendors could prove inadequate. Business First could also experience a breach due to intentional or negligent conduct on the part of employees or other internal sources, software bugs or other technical malfunctions, or other causes. As a result of any of these threats, Business First’s customer accounts may become vulnerable to account takeover schemes or cyber-fraud. Business First’s systems and those of its third-party vendors may also become vulnerable to damage or disruption due to circumstances beyond its or their control, such as from catastrophic events, power anomalies or outages, natural disasters, network failures, and viruses and malware.

A breach of Business First’s security that results in unauthorized access to its data could expose Business First to a disruption or challenges relating to its daily operations as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs, and reputational damage, any of which could have a material adverse effect on its business, results of operations, financial condition and future prospects.

The market in which Business First operates is susceptible to hurricanes and other natural disasters and adverse weather which could result in a disruption of its operations and increases in loan losses.

A significant portion of Business First’s business is generated from markets that have, and may continue to be, damaged by major hurricanes, floods, tropical storms and other natural disasters and adverse weather. Natural disasters can disrupt its operations, cause widespread property damage, and severely depress the local economies in which Business First operates. If the economies in its primary markets experience an overall decline as a result of a natural disaster, adverse weather, or other disaster, demand for loans and its other products and services

could be reduced. In addition, the rates of delinquencies, foreclosures, bankruptcies and losses on loan portfolios may increase substantially, as uninsured property losses or sustained job interruption or loss may materially impair the ability of borrowers to repay their loans. Moreover, the value of real estate or other collateral that secures the loans could be materially and adversely affected by such a disaster. Such a disaster could, therefore, result in decreased revenue and loan losses that could have a material adverse effect on Business First’s business, financial condition and results of operations.

If the goodwill that Business First records in connection with the merger or future business acquisitions becomes impaired, it could require charges to earnings, which could have a material adverse effect on its business, financial condition and results of operations.

Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets Business First acquired in connection with the purchase of another financial institution. Business First reviews goodwill for impairment at least annually, or more frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss must be recognized in an amount equal to that excess. Any such adjustments are reflected in its results of operations in the periods in which they become known. There can be no assurance that Business First’s future evaluations of its existing goodwill or goodwill Business First may acquire in connection with the merger or in the future will not result in findings of impairment and related write-downs, which could have a material adverse effect on its business, financial condition and results of operations.

Business First is subject to environmental liability risk associated with its lending activities.

In the course of its business, Business First may purchase real estate, or Business First may foreclose on and take title to real estate. As a result, Business First could be subject to environmental liabilities with respect to these properties. Business First may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if Business First is the owner or former owner of a contaminated site, Business First may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Any significant environmental liabilities could cause a material adverse effect on its business, financial condition and results of operations.

Business First stock is not listed or traded on any established securities market and is less liquid than most securities traded in those markets.

Business First stock is not listed or traded on any established securities exchange or market and Business First has no plans to seek to list its stock on any recognized exchange or qualify it for trading in any market. Accordingly, Business First stock has substantially fewer trades than the average securities listed on any national securities exchange. Most transactions in Business First stock are privately negotiated trades and its stock is very thinly traded. There is no dealer for Business First stock and no “market maker.” Business First’s shares do not have a trading symbol. The lack of a liquid market can produce downward pressure on Business First stock price and can reduce the marketability of Business First stock.

The obligations associated with being a public company will require significant resources and management attention.

Following registration of its common stock in connection with the merger, Business First will face increased legal, accounting, administrative and other costs and expenses that Business First has not incurred as a private

company, particularly after Business First is no longer an emerging growth company. After the completion of the merger, Business First will be subject to the reporting requirements of the Exchange Act, which requires that Business First file annual, quarterly and current reports with respect to its business and financial condition and proxy and other information statements, and the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, and the Dodd-Frank Act, each of which imposes additional reporting and other obligations on public companies.

Business First expects these rules and regulations, and changes in these laws, regulations and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, to increase legal and financial compliance costs and make some activities more time consuming and costly. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Business First’s investment in compliance with existing and evolving regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on its business, financial condition and results of operations. These increased costs could require Business First to divert a significant amount of money that Business First could otherwise use to expand its business and achieve its strategic objectives.

The rights of Business First’s common shareholders will be subordinate to the rights of any debt securities that Business First may issue and may be subordinate to the holders of any other class of preferred stock that Business First may issue in the future.

Business First’s board of directors has the authority to issue debt securities or an aggregate of up to 1,000,000 shares of preferred stock on the terms it determines without shareholder approval. Accordingly, you should assume that any shares of preferred stock that Business First may issue in the future will be senior to its common stock. Because Business First’s decision to issue debt or equity securities or incur other borrowings in the future will depend on market conditions and other factors beyond its control, the amount, timing, nature or success of its future capital raising efforts is uncertain. Thus, common shareholders bear the risk that Business First’s future issuances of debt or equity securities or its incurrence of other borrowings will negatively affect the market price of Business First’s common stock.

Business First is an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make its common stock less attractive to investors.

Business First is an “emerging growth company,” as defined in the JOBS Act. For as long as Business First continues to be an emerging growth company it is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These include, without limitation, exemption from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced financial reporting requirements, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Business First could be an emerging growth company for up to five years, although Business First could lose that status sooner if its gross revenues exceed $1.0 billion, if Business First issues more than $1.0 billion in non-convertible debt in a three year period, or if the market value of its common stock held by non-affiliates exceeds $700.0 million as of any June 30 before that time, in which case Business First would no longer be an emerging growth company as of the following December 31. Investors may find its common stock less attractive if Business First relies on the exemptions, which may decrease the price at which Business First shareholders may sell their shares.

Business First is dependent upon Business First Bank for cash flow, and the Bank’s ability to make cash distributions is restricted which could impact its ability to satisfy its obligations.

Business First’s primary asset is Business First Bank. As such, Business First depends upon Business First Bank for cash distributions through dividends on its stock to pay its operating expenses and satisfy its obligations, including debt obligations. There are numerous laws and banking regulations that limit Business First Bank’s ability to pay dividends to Business First. If Business First Bank is unable to pay dividends to Business First, Business First will not be able to satisfy its obligations. Federal and state statutes and regulations restrict the Bank’s ability to make cash distributions to Business First. These statutes and regulations require, among other things, that Business First Bank maintain certain levels of capital in order to pay a dividend. Further, federal and state banking authorities have the ability to restrict the Bank’s payment of dividends through supervisory action.

Business First has not historically paid dividends on its common stock, has no plans to pay dividends on its common stock in the foreseeable future and its ability to pay dividends is subject to regulatory limitations.

Business First has not historically paid dividends on its common stock. Following the merger, Business First may explore the merits of paying dividends to its shareholders; however, there can be no guarantee that Business First will ever pay dividends on its common stock. Any future determination relating to dividend policy will be made at the discretion of Business First’s board of directors and will depend on a number of factors, including earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, ability to service any equity or debt obligations senior to the common stock and other factors deemed relevant by the board of directors. In addition, as a bank holding company, Business First is subject to general regulatory restrictions on the payment of cash dividends. Federal bank regulatory agencies have the authority to prohibit bank holding companies from engaging in unsafe or unsound practices in conducting their business, which depending on the financial condition and liquidity of the holding company at the time, could include the payment of dividends.

Business First’s corporate governance documents, and certain corporate and banking laws applicable to Business First, could make a takeover more difficult.

Certain provisions of Business First’s articles of incorporation, bylaws and corporate and federal banking laws, could make it more difficult for a third party to acquire control of its organization or conduct a proxy contest, even if those events were perceived by many of Business First’s shareholders as beneficial to their interests. These provisions, and the corporate and banking laws and regulations applicable to us:

These provisions may discourage potential acquisition proposals and could delay or prevent a change in control of Business First, including under circumstances in which its shareholders might otherwise receive a premium over the market price of its shares.

An investment in Business First’s common stock is not an insured deposit and is subject to risk of loss.

Your investment in Business First’s common stock will not be a bank deposit and will not be insured or guaranteed by the FDIC or any other government agency. Your investment will be subject to investment risk, and you must be capable of affording the loss of your entire investment.

Certain statements contained in this proxy statement/prospectus, including statements included or incorporated by reference in this proxy statement/prospectus, that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of operations of Business First after the merger is completed as well as information about the merger. Words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “continue,” “should,” “may,” or similar expressions, or the negatives thereof, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Many possible events or factors could affect the future financial results and performance of each of our companies before the merger or Business First after the merger, and could cause those results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, but are not limited to:

For other factors, risks and uncertainties that could cause actual results to differ materially from estimates contained in forward-looking statements, please read the “Risk Factors” section of this proxy statement/prospectus.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe we have chosen these assumptions or bases in good faith and that they are reasonable. However, we caution you that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. Therefore, we caution you not to place undue reliance on our forward-looking statements. The forward-looking statements are made as of the date of this proxy statement/prospectus or the date of the applicable document incorporated by reference into this proxy statement/prospectus. We undertake no obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This document constitutes a proxy statement of AGFC and is being furnished to all record holders of AGFC common stock in connection with the solicitation of proxies by the board of directors of AGFC to be used at a special meeting of shareholders of AGFC to be held on [—], 2014. The purpose of the AGFC special meeting is to consider and vote upon a proposal to approve the reorganization agreement, dated as of July 23, 2014, as amended, among Business First, AGFC and B1B, and the transactions contemplated by the reorganization agreement. The reorganization agreement contemplates a series of immediately successive merger transactions pursuant to which AGFC and American Gateway Bank will be acquired by Business First.

This document also constitutes a prospectus relating to the Business First common stock to be issued to holders of AGFC common stock upon consummation of the merger of B1B with and into AGFC.

The special meeting of AGFC shareholders will be held on [—], 2014 at [—] [—].m., local time, at 320 N. Alexander Avenue, Port Allen, Louisiana 70767.

The purpose of the special meeting is for shareholders of AGFC to consider and vote upon the following proposals:

The reorganization agreement provides for the acquisition of AGFC by Business First by virtue of the merger of B1B with and into AGFC, with AGFC surviving the merger and becoming a wholly-owned subsidiary of Business First. Immediately following completion of the initial merger, Business First will cause AGFC to merge with and into Business First, with Business First surviving, and will cause American Gateway Bank to merge with and into Business First’s wholly-owned subsidiary, Business First Bank, with Business First Bank surviving. Following completion of these merger transactions, Business First Bank (now combined with American Gateway Bank) will continue as the wholly-owned subsidiary of Business First (now combined with AGFC). A copy of the reorganization agreement is included in the accompanying proxy statement/prospectus as Appendix A.

If any procedural matters relating to the conduct of the special meeting are presented, the persons named as proxies will vote the shares represented by properly executed proxies in accordance with their judgment with respect to those matters.

The holders of record of the outstanding shares of AGFC common stock as of 5:00 p.m. on [—], 2014 will be entitled to notice of and to vote at the special meeting. As of 5:00 p.m. on that date, there were 217,944 shares of AGFC common stock issued and outstanding and entitled to vote at the special meeting.

At the special meeting, the shareholders of AGFC will be entitled to one vote for each share of common stock owned of record on [—], 2014. The holders of a majority of the shares of AGFC common stock entitled to vote at the special meeting must be present, either in person or by proxy, to constitute a quorum at the special meeting. The affirmative vote of at least least a majority of the shares of AGFC common stock which are present, either in person or by proxy, at the special meeting is required to approve the reorganization agreement. The affirmative vote of at least a majority of the shares of AGFC common stock which are present, either in person or by proxy, at the special meeting is required to approve any Adjournment Proposal.

Abstentions and shares held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists. The proposal to approve the reorganization agreement is a “non-discretionary” item, meaning that brokers and banks who hold shares in an account for customers who are the beneficial owners of such shares may not give a proxy to vote those shares without specific instructions from their customers. Any abstentions will have the same effect as a vote against approval of the reorganization agreement. Accordingly, the board of directors of AGFC encourages you to complete, date and sign the accompanying proxy card and return it promptly in the enclosed postage-paid envelope.

The directors and certain officers of AGFC and American Gateway Bank have entered into an agreement to vote the shares of AGFC common stock they control in favor of approval of the reorganization agreement. As of the record date, 9,585 shares of AGFC common stock, or approximately 4.4% of the outstanding shares of the common stock entitled to vote at the special meeting, were bound by the voting agreement.

The board of directors of AGFC unanimously recommends that you vote FOR the proposal to approve the reorganization agreement and FOR any Adjournment Proposal.

Proxies, in the form enclosed, which are properly executed and returned to AGFC and not subsequently revoked, will be voted in accordance with the instructions indicated on the proxies. Any properly executed proxy on which voting instructions are not specified will be voted FOR the proposal to approve the reorganization agreement. The proxy also grants authority to the persons designated in the proxy to vote in accordance with their own judgment if an unscheduled matter is properly brought before the special meeting.

If you are the record holder of your shares, you may revoke any proxy given pursuant to this solicitation by the board of directors of AGFC at any time before it is voted at the special meeting by:

All written notices of revocation and other communications with respect to revocation or proxies should be sent to: American Gateway Financial Corporation, 320 N. Alexander Avenue, Port Allen, Louisiana 70767, Attention: Corporate Secretary. If you hold your shares in street name with a bank or broker, you must contact such bank or broker if you wish to revoke your proxy.

This proxy solicitation is made by the board of directors of AGFC. AGFC is responsible for its expenses incurred in preparing, assembling, printing, and mailing this proxy statement/prospectus. Proxies will be solicited through the mail. Additionally, directors and officers of AGFC intend to solicit proxies personally or by telephone or other means of communication. The directors and officers will not be additionally compensated. AGFC will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners.

The following information describes material aspects of the merger. It is not intended to be a complete description of all information relating to the merger and is qualified in its entirety by reference to more detailed information contained in the Appendices to this document, including the reorganization agreement. A copy of the reorganization agreement is included as Appendix A and is incorporated herein by reference. You are urged to read the Appendices in their entirety.

The reorganization agreement provides for the acquisition of AGFC by Business First by virtue of the merger of B1B with and into AGFC, with AGFC surviving the merger and becoming a wholly-owned subsidiary of Business First. Immediately following completion of the initial merger, Business First will cause AGFC to merge with and into Business First, with Business First surviving, and will cause American Gateway Bank to merge with and into Business First’s wholly-owned subsidiary, Business First Bank, with Business First Bank surviving. Following completion of these merger transactions, Business First Bank (now combined with American Gateway Bank) will continue as the wholly-owned subsidiary of Business First (now combined with AGFC). The existing banking centers of American Gateway Bank will become full-service banking centers of Business First Bank.

If the shareholders of AGFC approve the reorganization agreement at the special meeting, and if the required regulatory approvals are obtained and the other conditions to the parties’ obligations to effect the merger are satisfied or waived by the party entitled to do so, we anticipate that the merger will be completed during the first quarter of 2015, although delays could occur.

As a result of the merger, each of the outstanding shares of AGFC common stock will be converted into the right to receive a combination of cash and shares of Business First common stock pursuant to a formula included in the reorganization agreement and described below. Upon completion of the merger, certificates for AGFC common stock will only represent the right to receive the merger consideration pursuant to the reorganization agreement (or the fair cash value of such shares, if dissenter’s rights have been exercised), and otherwise will be null and void after completion of the merger.

Subject to the adjustments described below, the shares of AGFC common stock issued and outstanding immediately prior to the effective time of the merger (other than shares held by shareholders who have exercised their dissenters’ rights) will, by virtue of the merger, be cancelled and converted into and represent the right to receive consideration (the “Aggregate Merger Consideration”) equal to: (i) an aggregate of $2,179,440 in cash (the “Aggregate Cash Consideration”), which represents $10.00 per share of AGFC’s outstanding common stock, and (ii) an aggregate number of shares of Business First common stock (the “Aggregate Stock Consideration”) equal to the following:

The individual components of the above-described formula will be calculated as follows.

“Adjusted AGFC Tangible Equity Capital” means the difference between: (a) 1.12 times the AGFC Tangible Equity Capital (as defined below) determined as of the date that is ten days prior to the closing date of the merger, and (b) $2,179,440, which represents the value of the Aggregate Cash Consideration.

“Adjusted Business First Tangible Equity Capital Per Share” means an amount equal to 1.175 times the quotient of (a) the Business First Tangible Equity Capital (as defined below) determined as of the date that is ten days prior to the closing date of the merger, divided by (b) the number of issued and outstanding shares of Business First common stock determined as of the date that is ten days prior to the closing date of the merger.

“AGFC Tangible Equity Capital” and “Business First Tangible Equity Capital” means an amount equal the sum of the capital stock, surplus and undivided profits of the applicable company (on a consolidated basis in accordance with GAAP), and excluding any intangible assets and the effect of any unrealized gains or losses on available-for-sale securities, as calculated on a date within ten days prior to the closing date of the merger. For purposes of calculating AGFC Tangible Equity Capital or Business First Tangible Equity Capital, the applicable company will include, as applicable, deductions made for any extraordinary items related to the merger, including reductions for (a) the after-tax amount of all costs and expenses related to the merger, and (b) the after-tax amount of any fees and commissions payable to any broker, finder, financial advisor or investment banking firm in connection with the merger. The AGFC Tangible Equity Capital will be further reduced by 50% of:

However, in the event that the aggregate after-tax amount of the bulleted items above exceeds $764,000, then the AGFC Tangible Equity Capital will be reduced by 100% of the after-tax amount of such costs in excess of $764,000, in the aggregate.

In addition to the above-described adjustments, the reorganization agreement contains an ownership limitation that will prevent any shareholder of AGFC, or any group of AGFC shareholders that would be deemed to be “acting in concert” under applicable Federal Reserve regulations, from owning more than 3.0% of the outstanding shares of the combined company on a pro forma basis as a result of the merger. Accordingly, the amount and type of consideration deliverable to any particular shareholder of AGFC in connection with the merger will be adjusted if that shareholder’s pro forma ownership of the combined company (either individually, or collectively with a group “acting in concert”) will exceed the ownership limitation.

Each shareholder of AGFC whose ownership, either individually or together with a group deemed to be “acting in concert,” would exceed 3.0% of the outstanding common stock of the combined company on a pro forma basis as a result of the merger will receive a combination of Business First common stock and cash as follows.

As noted above, Business First will not issue any certificates for fractional shares of Business First common stock in connection with the merger but will instead pay cash for any fractional share interests. The amount of cash will be determined by multiplying (i) the fraction of a share of Business First common stock that such shareholder would otherwise have been entitled to receive, by (ii) the Adjusted Business First Tangible Equity Capital Per Share.

From time to time, AGFC’s board of directors has evaluated strategic options to increase shareholder value. These strategic options have included expanding organically, raising additional capital through offerings of equity or debt securities, and merging with another financial institution.

In the midst of the 2009 worldwide economic downturn, the Board of Directors of AGFC (the “AGFC Board”) began to look differently at AGFC’s growth strategy and at the risks associated with continuing the operation of American Gateway Bank as an independent bank. Historically, American Gateway Bank had relied on income growth through lending to local small businesses, property developers and other real estate based projects and from its investment portfolio. As the AGFC Board assessed strategic plans for American Gateway Bank, it identified a number of concerns:

Based primarily on these concerns, the AGFC Board reached the conclusion that American Gateway Bank either needed to quickly achieve greater scale through internal growth or as a result of some type of business combination. Alternatively, it concluded that a sale of American Gateway Bank might offer the greatest return to AGFC’s shareholders within a five year timeframe.

Throughout 2010 and 2011, as the AGFC Board dealt with maintaining the viability of American Gateway Bank’s business and reducing the risks of its loan and investment portfolios, the AGFC Board focused on key issues for internal growth—management succession, the strengths and weaknesses of American Gateway Bank’s staff, staff retention and recruitment in a competitive banking market, developing commercial and industrial loan opportunities and possible acquisitions. The AGFC Board also had informal discussions with other banking institutions about possible mergers that would increase scale and opportunities for both institutions, but the AGFC Board did not find a suitable potential merger partner. During this time period, the AGFC Board also evaluated the costs associated with raising additional capital to accelerate loan growth and to make possible acquisitions, but it concluded that AGFC could not deploy the capital fast enough to prevent value dilution to AGFC’s existing shareholders.

In 2012, as banking conditions worsened for small independent banks and as regulatory scrutiny and requirements increased, the AGFC Board became convinced that a sale or merger of AGFC was appropriate and began to informally explore the concept.

AGFC’s Board regularly discussed and reviewed the Company’s business, performance and prospects, and considered various strategic options. From time to time, AGFC through its executive officers had general discussions with other financial institutions regarding the possibility at some time in the future of a potential affiliation and have met with representatives from Sandler O’Neill + Partners, L.P. (“Sandler O’Neill”) to discuss the overall market, including the market for mergers and acquisitions.

In February 2013, Vice Chairman, President and Chief Executive Officer of AGFC, Don W. Ayres, in consultation with the AGFC Board of Directors and other executive officers, met with representatives of Sandler O’Neill to discuss the process and procedures for AGFC and the AGFC Board to explore potential strategic alternatives. The discussions also included what capital would be required to build a $1 billion asset bank either internally and/or through acquisitions. Given the then current banking complexities and the low interest rate environment, the AGFC Board believed that a much larger bank would be required to continue to be economically viable and to continue a history of dividend growth. The AGFC Board reviewed numerous models and projections in connection with these discussions. During that meeting, representatives of Sandler O’Neill provided the members of the working group an overview of the current mergers and acquisition market and Sandler O’Neill’s assessment of potential business combination partners for AGFC. As a part of those discussions, representatives of Sandler O’Neill discussed the operating environment faced by AGFC and similarly situated bank holding companies, the potential strategic alternatives available, and details of the present bank merger and acquisition environment.

At the April 18, 2013 meeting of the AGFC Board, AGFC’s Chairman was authorized to commence discussions and negotiations with Sandler O’Neill to retain it as an investment banking firm to provide independent financial advice to AGFC, survey potential partners and assist AGFC and the AGFC Board in exploring strategic alternatives. Following discussions and further review of growth opportunities and risks , it was the consensus of the AGFC Board that it would be in the best interests of AGFC and its shareholders, along with other constituencies, to solicit indications of interest from potentially interested parties to engage in a business combination with AGFC. The AGFC Board authorized Sandler O’Neill to prepare a confidential information memorandum regarding AGFC and to identify and contact potentially interested financial institutions and to seek to obtain signed non-disclosure agreements from them. AGFC retained Sandler O’Neill by letter agreement dated April 29, 2013.

Representatives from Sandler O’Neill and AGFC discussed contacting the identified financial institutions that might potentially be interested in exploring a strategic alliance with AGFC. During the weeks of June 24, 2013 and July 1, 2013, Sandler O’Neill contacted eleven potentially interested financial institutions. During the first two weeks of July 2013, seven interested parties executed non-disclosure agreements that were sent to them upon request. During the same time period, Sandler O’Neill circulated a confidential information memorandum to the seven financial institutions that executed non-disclosure agreements. These financial institutions were instructed to submit their preliminary indications of interest in a timely fashion.

By August 2013, Sandler O’Neill received four indications of interest from other regional banking institutions. On August 9, 2013, Sandler O’Neill presented to the AGFC Board a summary of the process which led to the receipt of four indications of interest and the financial and other material terms of the indications of interest. Sandler O’Neill reviewed with the AGFC Board comparable precedent transactions and detailed financial information relating to each of the financial institutions submitting the indications of interest. The AGFC Board engaged in a lengthy discussion regarding the indications of interest and decided to select the two parties with the highest indications of interest, hereafter referred to as Company A and Company B, to proceed with due diligence with AGFC by countersigning their indications of interest. At the end of September 2013, after conducting thorough due diligence processes, each of Company A and B decided against pursuing a transaction with AGFC.

In December 2013, discussions were initiated between AGFC and Business First. Dialogue continued into January 2014, at which point Business First requested non-public information with the intent of developing a proposal for AGFC. At the same time AGFC received interest in a potential transaction from another financial institution. These two additional financial institutions expressing interest in a potential transaction each executed non-disclosure agreements dated January 23, 2014. Sandler O’Neill subsequently distributed a confidential information memorandum to those two parties.

After performing further analysis, one of the two interested parties, Business First, submitted an indication of interested dated February 7, 2014 for $11.4 million in cash and 2,053,029 shares of Business First common stock. Sandler O’Neill thereafter presented to the AGFC Board a summary of the process which led to the receipt of the additional indication of interest and the financial and other material terms of the indication of interest. Sandler O’Neill reviewed with the AGFC Board comparable precedent transactions and detailed financial information relating to Business First. In addition, the AGFC Board discussed improvement of the consideration offered by Business First to AGFC’s shareholders; expanding the process to a larger group of potential merger parties or terminating the process and continuing to operate as an independent institution. The AGFC Board engaged in a lengthy discussion regarding the indication of interest from Business First as well as a detailed review of other financial organizations in the marketplace that could possibly be interested in a potential business combination with AGFC.

Following discussion and deliberation, it was the consensus of the AGFC Board that it would be in the best interests of AGFC, its shareholders and other constituencies to proceed with due diligence with Business First by countersigning its indication of interest and pursuing a combination with Business First. On February 21, 2014, after discussions by representatives of the AGFC Board with representatives of Business First, Business First

submitted a revised indication of interest, which, in addition to other customary terms and conditions, provided for a transaction with a consideration structure in which $11.4 million of the consideration would be paid in cash and stock consideration would be paid in an amount equal to 2,145,450 shares of Business First common stock. As part of its due diligence process, Business First had access to a secure on-line electronic data room which contained due diligence information about AGFC and American Gateway Bank. Business First conducted an on-site due diligence review of AGFC and American Gateway Bank in March 2014, during which Business First representatives met with AGFC’s management to discuss the business, results of operations, and business prospects. At the same time AGFC was provided with diligence information about Business First and Business First Bank through access to an on-line data room from Business First and its representatives. As part of its due diligence of Business First, a third party external review firm engaged by AGFC performed a review of Business First Bank’s loan portfolio in March 2014.

The AGFC Board also authorized and directed Mr. Ayres to retain the legal services of Kantrow Spaht Weaver & Blitzer (APLC) as legal counsel to the AGFC Board as it explored potential strategic alternatives.

From May 21, 2014 until July 23, 2014, AGFC and Business First negotiated the terms of the reorganization agreement and the ancillary documents and both parties continued their due diligence investigations of each other.

On July 23, 2014, the AGFC Board held a lengthy special meeting to consider the proposed definitive reorganization agreement and ancillary documents, which was also attended by representatives of Sandler O’Neill and National Capital, LLC, and legal counsel. Legal counsel reviewed in detail with the AGFC Board the proposed definitive reorganization agreement and all related documents, copies of which were delivered to each director to review before the meeting. During the meeting, Sandler O’Neill and National Capital, LLC each reviewed in detail with the AGFC Board the financial aspects of the proposed transaction and each delivered its opinion to the AGFC Board stating that the merger consideration as proposed was fair to AGFC’s shareholders from a financial point of view. At the meeting, the AGFC Board considered these opinions carefully, as well as Sandler O’Neill’s and National Capital, LLC’s experience and qualifications, and Sandler O’Neill’s interest in the proposed transaction, namely that Sandler O’Neill’s compensation was contingent upon the closing of the proposed transaction, as is customary of investment banks. After these presentations, executive management recommended approval of the proposed merger to the AGFC Board. Following extensive discussion, the AGFC Board approved the reorganization agreement and authorized and directed management to execute and deliver the reorganization agreement, related bank merger agreement and ancillary documents.

On July 24, 2014, American Gateway and Business First issued a joint press release announcing the approval, adoption, and execution of the reorganization agreement.

On November 10, 2014, Business First and AGFC amended the reorganization agreement to extend the time at which either party may terminate the agreement if the merger has not been consummated from February 15, 2015 to May 1, 2015. The reorganization agreement was also amended to revise the calculation of AGFC’s Tangible Equity Capital for the purposes of the merger. A complete copy of the First Amendment to the Agreement and Plan of Reorganization is included in Appendix A.

AGFC’s board of directors believes that the merger is in the best interests of AGFC and its shareholders. Accordingly, AGFC’s board of directors has approved the merger transactions and the reorganization agreement and has unanimously recommended that AGFC’s shareholders vote “FOR” the approval of the reorganization agreement.

In approving the reorganization agreement, AGFC’s board of directors consulted with its financial advisor, Sandler O’Neill, regarding the financial aspects of the merger and it engaged both Sandler O’Neill and National Capital (as an independent valuation firm) to provide opinions regarding the fairness of the merger consideration, from a financial point of view, to the holders of shares of AGFC common stock. The Board of Directors of AGFC also consulted with its outside legal counsel as to its legal duties and the terms of the reorganization agreement. In arriving at its decision to approve the reorganization agreement, AGFC’s board of directors considered a number of factors, including the following:

The above-listed considerations are not intended to be exhaustive but include the material factors considered by AGFC’s board of directors in approving the merger and the reorganization agreement. In reaching its determination, AGFC’s board of directors did not assign any relative or specific weight to different factors and individual directors may have given different weight to different factors. Based upon the reasons stated above, AGFC’s board of directors believes that the merger is in the best interests of AGFC and its shareholders, and, therefore, AGFC’s board of directors approved the reorganization agreement and the merger. Each member of AGFC’s board of directors has agreed to vote the shares of common stock of AGFC over which he or she has voting authority in favor of the reorganization agreement and the merger

AGFC’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE PROPOSAL TO APPROVE THE REORGANIZATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION AGREEMENT.

As a part of Business First’s growth strategy, it routinely evaluates opportunities to acquire financial institutions. Although Business First prioritizes organic growth, its board of directors determined that the acquisition of AGFC is consistent with its expansion strategy. Business First’s board of directors, senior management and certain other employees reviewed the business, financial condition, results of operation and prospects for AGFC, the market condition of the market area in which AGFC conducts business, the compatibility of the management and the proposed financial terms of the merger. In addition, management of Business First believes that the merger will solidify its presence in the Baton Rouge, Louisiana market, provide opportunities for future growth and provide the potential to realize cost savings. Business First’s board of directors also considered the financial condition and valuation for both AGFC and Business First as well as the financial and other effects the merger would have on Business First’s shareholders.

While management of Business First believes that revenue opportunities will be achieved and costs savings will be obtained following the merger, Business First has not quantified the amount of enhancements or projected the areas of operation in which such enhancements will occur.

In view of the variety of factors considered in connection with its evaluation of the merger, the Business First board of directors did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to factors it considered. Further, individual directors may have given differing weights to different factors. In addition, the Business First board of directors did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination. Rather, the board of directors conducted an overall analysis of the factors it considered material, including thorough discussions with, and questioning of, Business First’s management.

AGFC retained Sandler O’Neill as its financial advisor in connection with a possible merger or sale. AGFC also retained National Capital to provide an independent fairness opinion in connection with the proposed merger. At the meeting of the AGFC board of directors on July 23, 2014, each of Sandler O’Neill and National

Capital rendered their oral opinions, subsequently confirmed in writing, to the AGFC board of directors that, as of July 23, 2014 and based upon and subject to the factors, procedures, qualifications, limitations and assumptions set forth in their respective opinions, the consideration to be paid by Business First to holders of AGFC common stock pursuant to the reorganization agreement was fair, from a financial point of view, to AGFC’s shareholders.

The full text of the written opinions of Sandler O’Neill and National Capital, each dated July 23, 2014, which set forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by each of Sandler O’Neill and National Capital in connection with rendering their respective opinions, are attached to this document as Appendix B and are incorporated herein by reference. AGFC’s shareholders should read those opinions carefully and in their entirety. The written opinions of each of Sandler O’Neill and National Capital are addressed to the AGFC board of directors, are directed only to the consideration to be paid to the holders of shares of AGFC common stock pursuant to the reorganization agreement and do not address any other matter. The issuance of these opinions does not constitute a recommendation by either Sandler O’Neill or National Capital to any holder of shares of AGFC common stock as to how such shareholder should vote with respect to the merger or any other matter. The merger consideration to be paid to the holders of shares of AGFC common stock was determined in negotiations between Business First and AGFC, and the decision to approve and recommend the transactions contemplated by the reorganization agreement was made independently by the AGFC board of directors. The opinions of each of Sandler O’Neill and National Capital were among the many factors considered by the AGFC board of directors in its evaluation of the transactions contemplated by the reorganization agreement and should not be viewed as determinative of the views of the AGFC board of directors or management with respect to the merger consideration or the transactions contemplated by the reorganization agreement.

By letter dated April 29, 2013, AGFC retained Sandler O’Neill to act as financial advisor to the AGFC board of directors in connection with AGFC’s consideration of a possible business combination involving AGFC and a second party. Sandler O’Neill is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Sandler O’Neill is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions. Sandler O’Neill was also generally familiar with AGFC, having a relationship with the Chief Executive Officer for a number of years.

Sandler O’Neill acted as financial advisor to AGFC in connection with the proposed transaction and participated in certain of the negotiations leading to the execution of the reorganization agreement. At the July 23, 2014 meeting at which AGFC’ board of directors considered and approved the reorganization agreement, Sandler O’Neill delivered to the board of directors its written opinion that, as of such date, the merger consideration was fair to the holders of AGFC common stock from a financial point of view. Sandler O’Neill’s fairness opinion was approved by Sandler O’Neill’s Fairness Opinion Committee. The full text of Sandler O’Neill’s opinion is attached as Appendix B to this proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Sandler O’Neill in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the full text of the opinion. Holders of AGFC common stock are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.

Sandler O’Neill’s opinion speaks only as of the date of the opinion and was necessarily based on financial, economic, market and other conditions as they existed on, and the information made available to Sandler O’Neill as of, that date. Events occurring or information available after that date could materially affect its opinion. Sandler O’Neill has not undertaken to update, revise, reaffirm or withdraw its opinion

or otherwise comment upon events occurring after the date of its opinion. The opinion was directed to AGFC’s board and is directed only to the fairness of the merger consideration to the holders of AGFC’s common stock from a financial point of view. It does not address the underlying business decision of AGFC to engage in the merger or any other aspect of the merger and is not a recommendation to any holder of AGFC’s common stock as to how such stockholder should vote at the special meeting with respect to the merger, the form of consideration a stockholder should elect in the merger or any other matter. Sandler O’Neill did not express any opinion as to the fairness of the amount or nature of the compensation to be received in the merger by AGFC’s officers, directors or employees, or class of such persons, relative to the per share consideration to be received by AGFC’s stockholders.

In connection with rendering its opinion, Sandler O’Neill reviewed and considered, among other things:

Sandler O’Neill also discussed with certain members of the senior management of AGFC the business, financial condition, results of operations and prospects of AGFC and held similar discussions with the senior management of Business First regarding the business, financial condition, results of operations and prospects of Business First.

In performing its reviews and analyses and in rendering its opinion, Sandler O’Neill relied upon the accuracy and completeness of all of the financial and other information that was available to them from public sources, that was provided to them by AGFC and Business First or their respective representatives or that was otherwise reviewed by them and they assumed such accuracy and completeness for purposes of rendering its opinion. Sandler O’Neill further relied on the assurances of senior management of each of AGFC and Business First that they are not aware of any facts or circumstances that would make any of such information inaccurate or

misleading in any material respect. Sandler O’Neill was not asked to, and did not, undertake an independent verification of any of such information and did not assume any responsibility or liability for the accuracy or completeness thereof. Sandler O’Neill did not make an independent evaluation or appraisal of the specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of AGFC or Business First or any of their respective subsidiaries. Sandler O’Neill did not review any individual credit files of AGFC or Business First or make an independent evaluation of the adequacy of the allowance for loan losses of AGFC or Business First, and assumed, with AGFC’s consent, that the respective allowances for loan losses for both AGFC and Business First were adequate to cover any such losses.

In preparing its analyses, Sandler O’Neill used internal financial estimates for the fiscal year ending December 31, 2014 prepared by AGFC management and guidance from senior management of AGFC for the years thereafter, management having advised them that no detailed projections for periods subsequent to the fiscal year ending December 31, 2014. Senior management of AGFC confirmed that this reflected the best judgments of management of the future financial performance of AGFC. With respect to Business First, used budget information for the fiscal year ending December 31, 2014 prepared by Business First management and guidance from senior management of Business First for the years thereafter, management having advised them that no detailed projections for periods subsequent to the fiscal year ending December 31, 2014. Sandler O’Neill also received and used in its analyses certain projections of transaction costs, purchase accounting adjustments and expected cost savings which were prepared by and/or reviewed with senior management of Business First or its representatives. With respect to these projections, Sandler O’Neill assumed that they had been reasonably prepared on a basis reflecting the best available judgment of such management, and Sandler O’Neill assumed that such performance would be achieved. Sandler O’Neill expressed no opinion as to such projections or the assumptions on which they were based. Sandler O’Neill also assumed that there had been no material change in the respective assets, financial condition, results of operations, business or prospects of AGFC or Business First since the date of the most recent financial data made available to them as of the date of their opinion.

Sandler O’Neill assumed in all respects material to its analysis that AGFC and Business First will remain as going concerns for all periods relevant to its analyses, that the parties to the reorganization agreement will comply with all material terms of the reorganization agreement, that all of the representations and warranties contained in the reorganization agreement are true and correct, that each party to the reorganization agreement will perform all of the covenants required to be performed by such party under the agreement and that the conditions precedent in the reorganization agreement will not be waived, that no delay, limitation, restriction or condition will be imposed that would have an adverse effect on AGFC, Business First or the Merger, and that the Merger will be consummated in accordance with the terms of the Agreement without any waiver, modification or amendment of any material term, condition or agreement thereof and in compliance with all applicable laws and other requirements. Finally, Sandler O’Neill has also assumed in all respects material to the analysis that American Gateway and Business First would remain as a going concern for all periods relevant to its analyses. Sandler O’Neill expresses no opinion as to any of the legal, accounting and tax matters relating to the Merger and any other transactions contemplated in connection therewith.

In rendering its opinion, Sandler O’Neill performed a variety of financial analyses. The summary below is not a complete description of all the analyses underlying Sandler O’Neill’s opinion or the presentation made by Sandler O’Neill to AGFC’s board of directors, but is a summary of all material analyses performed and presented by Sandler O’Neill. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Also, no company included in Sandler O’Neill’s comparative analyses described below is identical to AGFC or Business First and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies

and other factors that could affect the public trading values or merger transaction values, as the case may be, of AGFC and Business First and the companies to which they are being compared. In arriving at its opinion, Sandler O’Neill did not attribute any particular weight to any analysis or factor that it considered. Rather, it made qualitative judgments as to the significance and relevance of each analysis and factor. Sandler O’Neill did not form an opinion as to whether any individual analysis or factor (positive or negative) considered in isolation supported or failed to support its opinions; rather, Sandler O’Neill made its determination as to the fairness of the merger consideration on the basis of its experience and professional judgment after considering the results of all its analyses taken as a whole.

In performing its analyses, Sandler O’Neill also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of AGFC, Business First and Sandler O’Neill. The analyses performed by Sandler O’Neill are not necessarily indicative of actual values or future results, both of which may be significantly more or less favorable than suggested by such analyses. Sandler O’Neill prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the AGFC’s board of directors at its July 23, 2014 meeting. Estimates on the values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Such estimates are inherently subject to uncertainty and actual values may be materially different. Accordingly, Sandler O’Neill’s analyses do not necessarily reflect the value of AGFC’s common stock or the prices at which AGFC’s or Business First’s common stock may be sold at any time. The analyses of Sandler O’Neill and its opinion were among a number of factors taken into consideration by AGFC’s board of directors in making its determination to approve the reorganization agreement and the analyses described below should not be viewed as determinative of the decision of AGFC’s board of directors or management with respect to the fairness of the merger.

Summary of Proposal. Sandler O’Neill reviewed the financial terms of the proposed transaction. As described in the reorganization agreement, AGFC stockholders will receive in exchange for each share of AGFC stock $10.00 per share in cash and a number of shares of Business First’s common stock equal to the quotient of AGFC’s Adjusted Tangible Equity Capital (as defined below) and Business First’s Adjusted Tangible Equity Capital Per Share (as defined below). AGFC’s Adjusted Tangible Equity Capital shall be an amount equal to the difference between (a) 1.12 times AGFC’s Tangible Equity Capital, and (b) $2,179,440. Business First’s Adjusted Tangible Equity Capital Per Share shall be an amount equal to (a) 1.175 times Business First’s Tangible Equity Capital, divided by (b) the number of issued and outstanding shares of Business First’s common stock on the Valuation Date (as defined below). Both parties’ Tangible Equity Capital shall equal total equity capital as of a date that is within ten days prior to the closing date (the “Valuation Date”), less any intangible assets and the effect of any unrealized gains or losses on available-for-sale securities. Both parties will also adjust for extraordinary items related to the merger, including the after-tax cost of merger expenses and professional fees. Based on 217,944 common shares outstanding, Sandler O’Neill calculated a per share consideration of $207.42 and aggregate consideration of approximately $45.2 million. Based upon financial information for AGFC as or for the six months ended June 30, 2014, Sandler O’Neill calculated the following transaction ratios:

Sandler O’Neill used publicly available information to compare selected financial information for AGFC with a group of financial institutions selected by Sandler O’Neill. The regional peer group consisted of public banks and thrifts headquartered in Alabama, Arkansas, Georgia, Tennessee, Mississippi Texas or Oklahoma with assets between $250 million and $600 million as of the date of the most recent information reported* (unless otherwise noted), excluding companies that were merger targets. The regional peer group consisted of the following companies:

The analysis compared publicly available financial information for AGFC with the comparable data for the nationwide elevated nonperformers peer group as of or for the twelve months ended March 31, 2014 (unless otherwise noted above), with pricing data as of July 17, 2014. The table below sets forth the data for AGFC and the median and mean data for the AGFC peer group.

Sandler O’Neill used publicly available information to compare selected financial information for AGFC with a second group of financial institutions selected by Sandler O’Neill. The nationwide elevated nonperformers peer group consisted of public banks and thrifts with assets between $275 million and $450 million and non-performing assets as a percentage of total loans and other real estate owned between 4.00% and 8.00% as of the date of the most recent information reported* (unless otherwise noted), excluding companies that were merger targets. The AGFC peer group consisted of the following companies:

The analysis compared publicly available financial information for AGFC with the comparable data for the nationwide elevated nonperformers peer group as of or for the twelve months ended March 31, 2014 (unless otherwise noted), with pricing data as of July 17, 2014. The table below sets forth the data for AGFC and the median and mean data for the AGFC peer group.

Sandler O’Neill used publicly available information to perform a similar analysis for Business First and a group of financial institutions as selected by Sandler O’Neill. The Business First peer group consisted of regional public banks and thrifts headquartered in Alabama, Arkansas, Georgia, Tennessee, Mississippi, Texas or Oklahoma with assets between $500 million and $1.5 billion and non-performing assets as a percentage of total assets less than 3.00%, excluding companies that were merger targets. The Business First peer group consisted of the following companies:

The analysis compared publicly available financial information for Business First with the comparable data for the regional peer group as of or for the twelve months ended March 31, 2014 (unless otherwise noted), with pricing data as of July 17, 2014. The table below sets forth the data for Business First and the median and mean data for the regional peer group.

Analysis of Selected Merger Transactions. Sandler O’Neill reviewed two groups of comparable merger and acquisition transactions. The first group consisted of 12 transactions announced in Alabama, Arkansas, Georgia, Mississippi, Tennessee, Texas or Oklahoma between January 1, 2012 and July 17, 2014 with transaction values between $150 million and $500 million and the selling institution having non-performing assets as a percentage of total assets between 2.00% and 5.00% (the “Regional Transactions”). The second group consisted of 19 transactions announced between January 1, 2012 and July 17, 2014 involving sellers with total assets between $200 million and $750 million and non-performing assets as a percentage of total assets between 4.00% and 8.00% (the “Nationwide, Elevated NPAs Transactions”).

The Nationwide, Elevated NPAs Transactions group was composed of the following transactions:

Sandler O’Neill reviewed the following multiples: transaction price to last twelve month earnings, transaction price to book value per share, transaction price to tangible book value per share and tangible book premium to core deposits. Sandler O’Neill compared the indicated transaction multiples to the median and mean multiples of the comparable transaction groups.

Net Present Value Analysis. Sandler O’Neill performed an analysis that estimated the net present value per share of AGFC common stock assuming AGFC performed in accordance with management’s budget and management guidance. The analysis also assumed that AGFC’s regular cash dividend remained at $1.00 per share annually through fiscal 2018. To approximate the terminal value of AGFC common stock at December 31, 2018, Sandler O’Neill applied price to earnings multiples ranging from 10.0x to 18.0x and multiples of tangible book value ranging from 90% to 130%. The terminal values were then discounted to present values using different discount rates ranging from 10.0% to 16.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of AGFC’s common stock. As illustrated in the following tables, the analysis indicates an imputed range of values per share of AGFC common stock of $37.51 to $82.25 when applying multiples of earnings to the applicable amounts indicated in the AGFC projections and $105.28 to $191.01 when applying multiples of tangible book value to the applicable amounts indicated in the AGFC projections.

Sandler O’Neill also considered and discussed with the board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming AGFC’s net income varied from 15% above projections to 15% below projections. Using a 20-year normalized treasury yield of 4.00%, an equity risk premium of 5.00% and a size premium of 3.87%, Sandler O’Neill calculated a 12.87% discount rate for AGFC. This analysis resulted in the following range of per share values for AGFC common stock, using the same price to earnings multiples of 10.0x to 18.0x.

Sandler O’Neill also performed an analysis that estimated the net present value per share of Business First common stock assuming that Business First performed in accordance with management’s guidance. To approximate the terminal value of Business First common stock at December 31, 2018, Sandler O’Neill applied price to earnings multiples ranging from 10.0x to 20.0x and multiples of tangible book value ranging from 110% to 135%. The terminal values were then discounted to present values using different discount rates ranging from 10.0% to 16.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of Business First’s common stock. As illustrated in the following tables, the analysis indicates an imputed range of values per share of Business First common stock of $7.12 to $18.09 when applying earnings multiples to the applicable amounts indicated in the Business First projections and $10.89 to $16.98 when applying multiples of tangible book value to the applicable amounts indicated in the Business First projections.

Sandler O’Neill also considered and discussed with the AGFC board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, Sandler O’Neill performed a similar analysis assuming Business First’s net income varied from 15% above projections to 15% below projections. This analysis resulted in the following range of per share values for Business First common stock, using the same price to earnings multiples of 10.0x to 20.0x. Using a 20-year normalized treasury yield of 4.00%, an equity risk premium of 5.00% and a size premium of 3.87%, Sandler O’Neill calculated a 12.87% discount rate for Business First.

In connection with its analyses, Sandler O’Neill considered and discussed with the AGFC board of directors how the present value analyses would be affected by changes in the underlying assumptions. Sandler O’Neill noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

Pro Forma Merger Analysis. Sandler O’Neill analyzed certain potential pro forma effects of the merger, based on the following: (i) the merger closes in the first calendar quarter of 2015; (ii) 88% of the outstanding shares of AGFC common stock are converted into Business First’s common stock at the exchange ratio of 11.9806 and 12% of the outstanding shares of AGFC common stock are converted into cash at $10.00 per share; and (iii) Business First’s common stock is valued at 112% of tangible book value. Sandler O’Neill also incorporated the following assumptions as provided by Business First’s financial advisor: (a) purchase accounting adjustments of a credit mark on loans equal to 3.8% of gross loans and a positive mark of $1.5 million on fixed assets; (b) a core deposit intangible of 1.50% of AGFC’s core deposits; amortized sum-of-the-years’ digits over 10 years; (c) cost savings equal to 25% of AGFC’s projected non-interest expense, which would be fully realized by year-end 2015; (d) pre-tax transaction costs and expenses of approximately $2.5 million; and (e) an opportunity cost of cash of 1.50%. The analysis indicated that the merger would be slightly dilutive to Business First’s earnings per share (excluding transaction expenses in 2015) and tangible book value per share for the four years ending December 31, 2018. From the perspective of an AGFC shareholder, the analysis indicated that the transaction would be accretive to AGFC’s earnings per share (excluding transaction expenses in 2015) in all four years ending December 31, 2018, and accretive to tangible book value after year two beginning in the period-ended December 31, 2017.

In connection with this analyses, Sandler O’Neill considered and discussed with the AGFC board of directors how the analysis would be affected by changes in the underlying assumptions, including the impact of final purchase accounting adjustments determined at the closing of the transaction, and noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.

Sandler O’Neill’s Relationship. Sandler O’Neill acted as the financial advisor to AGFC’s board of directors in connection with the merger and will receive a transaction fee in connection with the merger, contingent on the closing of the merger. Sandler O’Neill has also received a fee of $100,000 in connection with the delivery of its fairness opinion, which will be credited in full against the transaction fee that becomes due and payable upon the closing of the merger. AGFC has also agreed to reimburse Sandler O’Neill for its reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify Sandler O’Neill and its affiliates and their respective partners, directors, officers, employees and agents against certain expenses and liabilities, including liabilities under applicable federal or state law.

In the past, we have provided certain other investment banking services for AGFC and have received compensation for such services. In the two years prior to our retention, we received total aggregate fees of approximately $8,000 from AGFC for such services.

National Capital was engaged by the board of directors of AGFC to provide a fairness opinion on the consideration to be received under the agreement and plan of reorganization by and among Business First, AGFC and B1B Interim Corporation.

In rendering its fairness opinion, National Capital reviewed, analyzed and relied upon certain financial and other factors as it deemed appropriate under the circumstances, including, among others:

National Capital also discussed recent operating events, current corporate conditions and expectations for future performance with representatives of AGFC and Business First.

In performing its analyses, National Capital made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of National Capital, AGFC and Business First. Any estimates contained in the analyses performed by National Capital are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which those businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. The National Capital opinion was among several factors taken into consideration by our board of directors in making its determination to adopt the reorganization agreement and the related transactions. Consequently, the analyses described below should not be viewed as determinative of the decision of our board of directors, or the decision of management, with respect to the fairness of the merger consideration to our shareholders.

The summary that follows is not a complete description of the analyses underlying the National Capital opinion or the presentation made by National Capital to our board of directors, but summarizes the material analyses performed and presented in connection with its opinion. The preparation of a fairness opinion is a

complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description.

The following sections and tables present National Capital’s financial analysis, including certain adjustments not reflected in our audited financial statements. In arriving at its opinion, National Capital did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. National Capital believes that its analyses and the summary of its analyses must be considered as a whole, and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description of the financial analyses.

Asset-based approaches. Asset-based approaches presume that the value of the entity is represented by the market value of the assets owned by the entity, less the market value of any liabilities. The net asset value method, an asset-based approach, assumes that the values of all assets are realized through the course of normal business operations while the liquidation method assumes that all assets are liquidated in an orderly fashion. The net asset value method derives a value by determining the market value of the individual balance sheet components. This method typically assumes liquidation of the entity’s property on the date of appraisal with recognition of securities gains or losses, real estate appreciation or depreciation and any adjustments to the loan loss reserve, discounts to the loan portfolio or changes in the net value of other assets. National Capital did not believe that the net asset value method was appropriate to use in this transaction because the Company is a going concern and because the net asset value method is based on historical costs and varying accounting methods. Even if the assets and liabilities are adjusted to reflect prevailing prices and yields (which is often of limited accuracy because readily available data is often lacking), the net asset value method results in a liquidation value for the Company and does not take into account the values attributable to the going concern, such as the interrelationship among the Company’s assets, liabilities, customer relations, market presence, image and reputation, and staff expertise and depth. Therefore, National Capital gave no weight to the net asset value method of valuation in determining the fairness of the transaction consideration.

Market-based approaches. In market-based approaches, financial characteristics and other information for publicly-traded companies and transactions on which public information is available are utilized as a basis for determining the value of the subject company. Market-based approaches work on the financial theory of substitution or economic indifference. That is, by obtaining financial information and other data regarding public companies or transactions on which public information is available, an appraiser may analyze the subject company and make appropriate adjustments to recognize differences between the subject company and comparable companies in order to make a determination as to value. National Capital performed two analyses using the market value method.

Comparable whole bank transaction analysis. In determining a range of values for our common stock and in rendering its fairness opinion, National Capital analyzed the consideration paid in selected financial institution merger transactions. The objective of National Capital’s analysis was to determine an appropriate value by analyzing data related to actual sales transactions of similar entities and making appropriate adjustments to recognize the differences between our organization and comparable bank or bank holding companies that have recently been sold.

National Capital identified a group of 29 comparable financial institution acquisitions involving selling institutions with total assets between $250 million and $500 million announced between July 1, 2011 and June 30, 2014. Terminated transactions, distressed institution sales and transactions where material data was unavailable were excluded from the analysis. The transactions included were:

National Capital applied the transaction multiples of certain financial indicators from the comparable dataset to the related financial statistics of our organization to derive an implied value. The following table sets forth the average, trimmed mean and median transaction multiples of selected financial indicators for the comparable financial institution acquisition group identified by National Capital, along with comparative balance sheet and earnings data.

In its analysis, National Capital weighted the various financial indicators in the manner that it determined appropriate, in its professional judgment, in light of the characteristics of our organization and the comparable financial institution data set. These calculations are shown in the following table.

By applying these key valuation indicators to the relevant financial statistics of our organization, and after consideration of all appropriate valuation adjustments described below, National Capital determined a fair market value of $41,944,040 ($192.45 per share) for the common stock of AGFC.

Comparable public company analysis. Share exchange analysis is another market-based approach that assumes that a rational, publicly-traded bank or bank holding company would be willing to acquire another bank or bank holding company in a stock transaction only if the transaction would be non-or minimally dilutive to the acquirer’s pro forma per share earnings.

National Capital analyzed the earnings performance of the Bank in light of the earnings performances and market values of several peer groups of publicly traded banks and bank holding companies in the United States. By applying the price to earnings and price to deposit ratios of the comparable public company datasets, National Capital estimated a value based on the value of similarly situated publicly traded institutions. National Capital determined a fair market value of $32,469,818 ($148.98 per share) under this method using the Regional Asset-Ranged Target Comps dataset. The following tables show some of the characteristics of the various comparable datasets considered.

The following companies were included in the Regional Asset-Ranged Target Comparables dataset:

Income-based approaches. Income-based approaches measure value by capitalizing or discounting the cash flow or earnings of the enterprise. A discounted cash flow analysis measures enterprise value by discounting future cash flows to present value. This analysis considers projected levels of asset growth, required regulatory capital, earnings, dividend paying capacity and future residual or terminal value. A capitalization of historical earnings analysis measures enterprise value by capitalizing the subject company’s earnings stream. Based on its experience and the characteristics of the Bank, National Capital determined that the discounted cash flow analysis was an appropriate method for valuing our organization as a going concern.

Discounted cash flow analysis. National Capital used a discounted cash flow analysis that analyzed (i) a stream of cash flow from projected dividends over the current and next four years and (ii) a terminal value which could be derived from the Bank at the end of this period. The following tables summarize the historical financial information and financial projections utilized by National Capital in determining our projected cash flow through 2017.

The projections utilized by National Capital were developed by National Capital based on an analysis of historical results and discussions with management. The financial projections indicated for 2018 were also used in determining a terminal value based on the comparable acquisition analysis described above. The discounted cash flow analysis assumes that the projected cash flows from dividends and the terminal value are discounted back to present value at a discount rate derived using the Ibbotson Buildup Method. Following this methodology, National Capital determined that a discount rate of 17.37% is appropriate based on current market conditions and risk characteristics of our organization. Discounting the future cash flows from dividends and the terminal value to present value, National Capital determined a fair market value of $33,221,207 ($152.43 per share) for the common stock of AGFC under this method.

Capitalization of historical earnings analysis. The historical earnings method is an income-based approach that relies on historical data as a basis for valuation rather than estimates of future performance. The historical earnings method can provide a reasonable indication of value, especially in cases where the subject company has a history of stable earnings or growth and this history can reasonably be expected to continue in the foreseeable future. As a part of its analysis, National Capital reviewed our historical earnings and determined that there was not a pattern of stable earnings that could be capitalized.

Valuation adjustments. The purpose of a valuation adjustment is to reflect differences between the characteristics of the subject company and those of the comparable datasets from which the indications of value are derived. As valuations are based on the financial principle of substitution, these adjustments are an attempt to account for the varying degrees of risk associated with the subject company as measured against “comparable” similar investments.

For the value returned by the Comparable whole bank transaction analysis, National Capital applied a downward adjustment of 15% to reflect its opinion of the asset quality risks and regulatory risks associated with our institution.

Due to the nature of the subject transaction, National Capital determined that a minority discount should not be applied in reaching a determination of value.

Value of Consideration to be Received. The following table sets forth the expected cash and stock consideration to be paid by Business First to AGFC shareholders:

National Capital reviewed historical trading information on Business First’s common stock, which is not listed on any exchange. National Capital also reviewed public and confidential data related to Business First and considered the likely performance of Business First in the future. These reviews were intended to ensure the reasonableness of the $17.50 per share value reported by Business First, which was based on recent arms-length transactions.

Conclusion. Based upon its review of the empirical information described in this information statement and the fairness opinion, and all of the other relevant factors and information deemed appropriate in its professional judgment, National Capital advised AGFC’s board of directors that, in its considered opinion, the consideration to be received as set forth in the proposed transaction, is fair, from a financial point of view, to all shareholders of AGFC, including those shareholders who are not directors or executive officers of AGFC.

The summary contained in this section provides a description of the material analyses prepared by National Capital and does not purport to be a complete description of the analyses prepared by National Capital in connection with the valuation analysis and in rendering the opinion. The preparation of a valuation analysis and a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such a valuation or opinion is not necessarily susceptible to partial analysis or summary description. National

Capital believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses, without considering all analyses, or selecting part of the above summary, without considering all factors and analyses, would create an incomplete view of the processes underlying the analyses set forth in National Capital’s presentations to the board of directors and in the fairness opinion.

In its valuation and fairness opinion, National Capital made numerous assumptions with respect to industry performance, business and economic conditions and other matters. While National Capital believes that these projections and the assumptions upon which they were based were reasonable, National Capital has no control over the future occurrence of any of the events upon which the projections were based. Certain of the projections are based on factors, such as general and local economic conditions, that are beyond our control. In addition, estimates of values of other companies used in rendering the appraisal and fairness opinion do not purport to be appraisals of those companies or necessarily reflect the prices at which those companies or their securities may actually be sold. National Capital selected comparable public companies and comparable acquisitions on the basis of various factors, including the size and similarity of selected companies, their business mix and similar characteristics of the transactions; however, no company or transaction utilized as a comparison in these analyses summarized above is identical to AGFC or the transaction.

National Capital received a fee of $15,000 in connection with the delivery of its fairness opinion to AGFC. In the past, National Capital has provided certain other investment banking services for AGFC and have received compensation for such services. In the two years prior to its retention, National Capital has not received any fees from AGFC in connection with such services.

If you are a shareholder of AGFC, as soon as practicable after the effective time of the merger, Business First will mail a letter of transmittal and instructions to you for use in surrendering your AGFC stock certificates. When you properly surrender your certificates or provide other satisfactory evidence of ownership, and return the letter of transmittal duly executed and completed in accordance with its instructions, Business First will promptly cancel the surrendered stock certificates and deliver to you the number of shares of Business First common stock and the cash to which you are entitled under the reorganization agreement.

You should not send in your certificates until you receive the letter of transmittal and instructions.

At the effective time of the merger, and until surrendered as described above, each outstanding AGFC stock certificate will be deemed for all purposes to represent only the right to receive the merger consideration to be paid pursuant to the reorganization agreement. With respect to any AGFC stock certificate that has been lost, stolen or destroyed, Business First will pay the merger consideration attributable to such certificate upon receipt of a surety bond or other adequate indemnity, as required in accordance with Business First’s standard policy, and evidence reasonably satisfactory to Business First of ownership of the shares in question. After the effective time of the merger, AGFC’s transfer books will be closed and no transfer of the shares of AGFC stock outstanding immediately prior to the effective time will be made on Business First’s stock transfer books.

To the extent permitted by law, you will be entitled to vote after the effective time of the merger at any meeting of Business First’s shareholders the number of whole shares of Business First common stock into which your shares of AGFC are converted, regardless of whether you have exchanged your AGFC stock certificates for Business First stock certificates. Whenever Business First declares a dividend or other distribution on the Business First common stock which has a record date after the effective time, the declaration will include dividends or other distributions on all shares of Business First common stock issuable pursuant to the reorganization agreement. However, no dividend or other distribution payable to the holders of record of Business First common stock will be delivered to you until you surrender your AGFC stock certificates for exchange as described above. Upon surrender of your AGFC stock certificates, the certificate representing the

Business First common stock into which your shares of AGFC stock have been converted, together with your share of the cash portion of the merger consideration, any cash in lieu of any fractional share of Business First common stock to which you would otherwise be entitled and any undelivered dividends, will be delivered and paid to you, without interest.

We cannot assure you that the necessary shareholder and governmental approvals will be obtained or that the other conditions to completion of the merger can or will be satisfied.

From the date of the reorganization agreement until the effective time of the merger, except with the prior written consent of the other, each of Business First and AGFC have agreed that they will, and they will cause their respective subsidiaries to, use commercially reasonable efforts to:

From the date of the reorganization agreement and until the effective time of the merger, except (i) as expressly contemplated by the reorganization agreement, (ii) as required by applicable law, or (iii) without the prior written consent of the other party, each of Business First and American Gateway has agreed that it will not, and each will cause their respective subsidiaries not to:

For a complete description of such restrictions on the conduct of the business of AGFC, we refer you to the reorganization agreement, which is attached as Appendix A to this proxy statement/prospectus.

AGFC agreed that neither it, any of its subsidiaries, nor any of their respective directors, executive officers (as defined in the reorganization agreement), agents or representatives will directly or indirectly take any action to solicit, initiate, encourage or facilitate the making of any inquiries with respect to, or provide any information to, conduct any assessment of or negotiate with any other person with respect to any acquisition proposal.

If AGFC or any of its representatives receives an unsolicited bona fide acquisition proposal before the AGFC shareholders have approved the reorganization agreement that AGFC’s board of directors has:

then AGFC or its representatives may furnish information to and enter into discussions and negotiations with such other party.

AGFC agreed to notify Business First in writing within two (2) business days after receipt of any unsolicited acquisition proposals or inquiries regarding any acquisition proposals and provide reasonable detail as to the identity of the person making such proposal and the material terms of such acquisition proposal.

In addition to the agreements described above, each party agreed in the reorganization agreement to take certain other actions, including but not limited to:

For a complete description of all agreements of Business First and AGFC in connection with the merger, we refer you to the reorganization agreement, which is attached as Appendix A to this proxy statement/prospectus.

The completion of the merger transactions depends on a number of conditions being satisfied. These include, among others:

Additionally, the parties’ decision to enter into the reorganization agreement was conditioned upon the execution of the following agreements, all of which have been executed:

In the reorganization agreement, AGFC has made representations and warranties on behalf of it and American Gateway Bank to Business First, and Business First has made representations and warranties on behalf of it and Business First Bank to AGFC. The more significant of these relate to (among other things):

AGFC also has made additional representations and warranties to Business First with respect to (among other things):

All representations, warranties and covenants of the parties, other than the covenants in specified sections which relate to continuing matters, terminate upon the closing of the merger.

In considering the recommendation of the board of directors of AGFC to vote for the proposal to approve the reorganization agreement, you should be aware that certain directors and officers of AGFC have interests in the merger that are in addition to, or different from, their interests as shareholders of AGFC. The board of directors of AGFC was aware of these interests and considered them in approving the reorganization agreement. These interests include:

Subject to compliance with applicable law, the reorganization agreement may be amended by Business First and AGFC, by action taken or authorized by their respective boards of directors, at any time. Except as prohibited by law, Business First and AGFC may amend, extend, waive any inaccuracy, or waive compliance with the reorganization agreement only if such modification is in writing and signed by both parties.

AGFC may also terminate the reorganization agreement, without the consent of Business First, if the board of directors of AGFC receives an unsolicited, bona fide alternative acquisition proposal and, under certain terms and conditions, determines that it is a superior proposal to that of the reorganization agreement and that the failure to accept such proposal would cause the board of directors to violate its fiduciary duties under applicable law. However, Business First has the right to adjust the terms and conditions of the reorganization agreement so that the superior proposal no longer constitutes a superior proposal.

If either Business First or AGFC terminates the reorganization agreement, and within 12 months of such termination AGFC enters into an acquisition agreement with a third party:

Except with respect to the expenses related to termination discussed above, each party to the reorganization agreement will bear all expenses incurred by it in connection with the reorganization agreement and the merger transactions.

The officers and directors of each of Business First and Business First Bank immediately prior to the effective time of the merger will continue to be the officers and directors of Business First and Business First Bank, respectively, following the merger. The corporation surviving from the merger of AGFC into Business First will operate under the name “Business First Bancshares, Inc.” and will continue to engage in the same business as prior to the merger. The banking organization surviving from the merger of American Gateway Bank into Business First Bank will operate under the name “Business First Bank.” The surviving bank will continue as a wholly-owned subsidiary of Business First and will engage in the same types of banking business as it did prior to the merger.

The following is a general discussion of material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of AGFC common stock that exchange their shares of AGFC common stock for shares of Business First common stock and cash in the merger. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax nor does it address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010. This discussion is based upon the Internal Revenue Code of 1986, as amended, or the Code, the regulations promulgated under the Code and court and administrative rulings and decisions, all as in effect on the date of this proxy statement/prospectus. These authorities may change, possibly retroactively, and any change could affect the accuracy of the statements and conclusions set forth in this discussion.

This discussion addresses only those U.S. holders of AGFC common stock that hold their shares of AGFC common stock as a “capital asset” within the meaning of Section 1221 of the Code. Importantly, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of that holder’s individual circumstances or to a holder that is subject to special treatment under the U.S. federal income tax laws, including, without limitation, a holder that is:

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of AGFC common stock that is for U.S. federal income tax purposes (a) an individual citizen or resident of the United States, (b) a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) organized in or under the laws of the United States or any state thereof or the District of Columbia, (c) a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) such trust was in existence on August 20, 1996, and has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes or (d) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.

If an entity or an arrangement treated as a partnership for U.S. federal income tax purposes holds AGFC common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds AGFC common stock, and any partners in such partnership, should consult their own tax advisors.

Determining the actual tax consequences of the merger to a U.S. holder may be complex and will depend in part on the U.S. holder’s specific situation. Each U.S. holder should consult its own tax advisor as to the tax consequences of the merger in its particular circumstance, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.

In connection with the filing with the SEC of the registration statement on Form S-4 of which this proxy statement/prospectus is a part, Fenimore, Kay, Harrison & Ford LLP has rendered its tax opinion to Business First and AGFC addressing the U.S. federal income tax consequences of the merger as described below. In rendering its tax opinion, counsel relied upon representations and covenants, including those contained in certificates of officers of Business First and AGFC, reasonably satisfactory in form and substance to such counsel. The opinion represents counsel’s best legal judgment, but has no binding effect or official status of any kind, and no assurance can be given that contrary positions will not be taken by the Internal Revenue Service or a

court considering the issues. Business First has not requested nor does it intend to request a ruling from the Internal Revenue Service as to the tax consequences of the merger, and as a result there can be no assurances that the Internal Revenue Service will not disagree with or challenge any of the conclusions herein. A copy of the tax opinion is attached as Exhibit 8.1 to the registration statement on Form S-4.

The obligations of the parties to complete the merger are conditioned on, among other things, the receipt by Business First and AGFC of an updated opinion from Fenimore, Kay, Harrison & Ford LLP, dated the closing date of the merger, that for U.S. federal income tax purposes the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. The conditions relating to receipt of the updated opinion may be waived by both Business First and AGFC. Neither Business First nor AGFC currently intends to waive the conditions related to the receipt of the updated opinion. The determination by tax counsel as to whether the merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code is based on the facts and law existing as of the closing date of the merger.

U.S. Holders that Receive a Combination of Business First Common Stock and Cash

If a U.S. holder’s adjusted tax basis in the AGFC common stock surrendered is less than the sum of the fair market value of the shares of Business First common stock and the amount of cash (other than cash received in lieu of a fractional share of Business First common stock) received by the U.S. holder, then the U.S. holder will recognize gain in an amount equal to the lesser of (a) the sum of the amount of cash (other than cash received in lieu of a fractional share of Business First common stock) and the fair market value of the Business First common stock received, minus the adjusted tax basis of the AGFC shares surrendered in exchange therefor, and (b) the amount of cash received by the U.S. holder. However, if a U.S. holder’s adjusted tax basis in the AGFC shares surrendered is greater than the sum of the amount of cash (other than cash received in lieu of a fractional share of Business First common stock) and the fair market value of the Business First common stock received, the U.S. holder’s loss will not be currently allowed or recognized for U.S. federal income tax purposes.

If a U.S. holder of AGFC shares acquired different blocks of AGFC shares at different times or different prices, the U.S. holder should consult the U.S. holder’s tax advisor regarding the manner in which gain or loss should be determined. Any recognized gain generally will be long-term capital gain if, as of the effective date of the merger, the U.S. holder’s holding period with respect to the AGFC shares surrendered exceeds one year. In some cases, if the U.S. holder actually or constructively owns Business First common stock other than Business First common stock received in the transaction, the recognized gain could be treated as having the effect of the distribution of a dividend under the tests described in Section 302 of the Code, in which case such gain would be treated as dividend income. In such cases, U.S. holders that are corporations should consult their tax advisors regarding the potential applicability of the “extraordinary dividend” provisions of the Code. The aggregate tax basis of the Business First common stock received by a U.S. holder that exchanges its AGFC shares for a combination of Business First common stock and cash as a result of the merger (excluding any fractional share interests deemed received and redeemed for cash) will be the same as the aggregate tax basis of the AGFC shares surrendered in exchange therefor, reduced by the amount of cash received on the exchange plus the amount of any gain recognized upon the exchange. The holding period of the Business First common stock received (including any fractional share deemed received and redeemed) will include the holding period of the AGFC shares surrendered. A U.S. holder receiving a combination of Business First common stock and cash should consult its own tax advisor regarding the manner in which cash and Business First common stock should be allocated among the U.S. holder’s AGFC shares and the manner in which the above rules would apply in the holder’s particular circumstance.

Upon the proper exercise of dissenters’ rights, the exchange of AGFC shares solely for cash generally will result in recognition of gain or loss by the U.S. holder in an amount equal to the difference between the amount of cash received and the U.S. holder’s tax basis in the AGFC shares surrendered. The gain or loss recognized will

be long-term capital gain or loss if, as of the effective date of the merger, the U.S. holder’s holding period for the AGFC shares surrendered exceeds one year. The deductibility of capital losses is subject to limitations. In some cases, if a U.S. holder actually or constructively owns Business First common stock after the merger, the cash received could be treated as having the effect of the distribution of a dividend under the tests set forth in Section 302 of the Code, in which case such U.S. holder may have dividend income up to the amount of the cash received. In such cases, U.S. holders that are corporations should consult their tax advisors regarding the potential applicability of the “extraordinary dividend” provisions of the Code.

If a U.S. holder receives cash in lieu of a fractional share of Business First common stock, the U.S. holder will be treated as having received a fractional share of Business First common stock pursuant to the merger and then as having exchanged the fractional share of Business First common stock for cash in a redemption by Business First. As a result, the U.S. holder generally will recognize gain or loss equal to the difference between the amount of cash received and the U.S. holder’s basis in the fractional share of Business First common stock as set forth above. This gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the U.S. holder’s holding period with respect to the fractional share (including the holding period of the AGFC common stock surrendered therefor) exceeds one year.

Material U.S. Federal Income Tax Consequences if the Merger Fails to Qualify as a Reorganization

If the merger does not qualify as a “reorganization” within the meaning of Section 368(a) of the Code, then each U.S. holder of AGFC common stock will recognize capital gain or loss equal to the difference between (a) the sum of the fair market value of the shares of Business First common stock, as of the effective date of the merger, received by such U.S. holder pursuant to the merger and the amount of any cash received by such U.S. holder pursuant to the merger and (b) its adjusted tax basis in the shares of AGFC common stock surrendered in exchange therefor. Gain or loss will be computed separately with respect to each identified block of AGFC common stock exchanged in the merger.

If a U.S. holder is a non-corporate holder of AGFC common stock, the U.S. holder may be subject, under certain circumstances, to information reporting and backup withholding on any cash payments that the U.S. holder receives. A U.S. holder generally will not be subject to backup withholding, however, if the U.S. holder:

Any amounts withheld under the backup withholding rules are not an additional tax and will generally be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, if the U.S. holder timely furnishes the required information to the Internal Revenue Service.

If a U.S. holder that receives Business First common stock in the merger is considered a “significant holder,” such U.S. holder will be required (a) to file a statement with its U.S. federal income tax return providing certain facts pertinent to the merger, including such U.S. holder’s tax basis in, and the fair market value of, the AGFC common stock surrendered by such U.S. holder, and (b) to retain permanent records of these facts relating to the merger. A “significant holder” is any AGFC shareholder that, immediately before the merger, (y) owned at least 1% (by vote or value) of the outstanding stock of AGFC or (z) owned AGFC securities with a tax basis of $1.0 million or more.

This discussion of certain material U.S. federal income tax consequences is for general information only and is not tax advice. Holders of AGFC common stock are urged to consult their tax advisors with respect to the application of U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction or under any applicable tax treaty.

The merger will be accounted for under the acquisition method of accounting under accounting principles generally accepted in the United States of America. Under this method, AGFC’s assets and liabilities as of the date of the merger will be recorded at their respective fair values. Any difference between the purchase price for AGFC and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. In accordance with ASC Topic 805, “Business Combinations,” issued in July 2001, the goodwill resulting from the merger will not be amortized to expense, but instead will be reviewed for impairment at least annually and to the extent goodwill is impaired, its carrying value will be written down to its implied fair value and a charge will be made to earnings. Core deposit and other intangibles with definite useful lives recorded by Business First in connection with the merger will be amortized to expense in accordance with such rules. The consolidated financial statements of Business First issued after the merger will reflect the results attributable to the acquired operations of AGFC beginning on the date of completion of the merger.

Restrictions on Resales of Business First Common Stock Received in the Merger

The shares of Business First common stock issued in the merger will not be subject to any restrictions on transfer arising under the Securities Act of 1933, as amended, except for shares of Business First common stock issued to any AGFC shareholder who may be deemed to be an “affiliate” of Business First after completion of the merger. “Affiliates” generally are defined as persons or entities who control, are controlled by or are under common control with Business First at or after the effective time of the merger and generally include executive officers, directors and beneficial owners of 10% or more of the common stock of Business First. Former AGFC shareholders who are not affiliates of Business First after the completion of the merger may sell their shares of Business First common stock received in the merger at any time. Former AGFC shareholders who become affiliates of Business First after completion of the merger will be subject to the volume and sale limitations of Rule 144 under the Securities Act of 1933, as amended, until they are no longer affiliates of Business First. This proxy statement/prospectus does not cover resales of Business First common stock received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.

The merger of AGFC with B1B must be approved by the Federal Reserve, or the Federal Reserve must waive such approval. The merger of American Gateway Bank with and into Business First Bank requires the approval of the FDIC and the Louisiana OFI. On November [—], 2014, Business First Bank filed an application with the FDIC and the Louisiana OFI to obtain approval of the bank merger. The U.S. Department of Justice will have between 15 and 30 days following approval by the FDIC to challenge the approval on antitrust grounds. While AGFC and Business First do not know of any reason that the U.S. Department of Justice would challenge regulatory approval by the FDIC and believe that the likelihood of such action is remote, there can be no assurance that the U.S. Department of Justice will not initiate such a proceeding, or if such a proceeding is initiated, the result of any such challenge.

The merger transactions cannot proceed in the absence of these required regulatory approvals. The approval of any notice or application merely implies satisfaction of regulatory criteria for approval, and does not include review of the merger transactions from the standpoint of the adequacy of the consideration to be received by, or fairness to, shareholders. Regulatory approval does not constitute an endorsement or recommendation of the proposed merger transactions.

We cannot assure you as to whether or when the requisite regulatory approvals will be obtained, and, if obtained, we cannot assure you as to the date of receipt of any of these approvals, the terms thereof or the absence of any litigation challenging them. Likewise, we cannot assure you that the U.S. Department of Justice or a state attorney general will not attempt to challenge the merger on antitrust grounds, or, if such a challenge is made, the result of that challenge.

Business First and AGFC are not aware of any material governmental approvals or actions that are required prior to the parties’ completion of the merger other than those described in this proxy statement/prospectus. If any additional governmental approvals or actions are required, the parties presently intend to seek those approvals or actions. However, the parties cannot assure you that any of these additional approvals or actions will be obtained.

The following discussion is not a complete description of the law relating to dissenter’s rights available under Louisiana law. This description is qualified in its entirety by the full text of the relevant provision of the LBCL, which is reprinted in its entirety as Appendix C to this proxy statement/prospectus. If you desire to exercise your dissenter’s rights, you should review carefully the LBCL and are urged to consult a legal advisor before electing or attempting to exercise these rights.

As a shareholder of AGFC, if the merger is approved by the holders of less than 80% of the outstanding common stock of AGFC, you may elect to dissent from the merger by following the procedures set forth in section 131 of the LBCL and receive payment of the fair value of your shares. These provisions establish the exclusive means by which you may exercise your right to dissent from the merger. If the merger is approved by the holders of at least 80% of the outstanding common stock of AGFC, you will not be entitled to dissenters’ rights.

To dissent from the merger, you will be required to deliver to AGFC a written objection to the reorganization agreement before the AGFC shareholder vote on the reorganization agreement. Thereafter, you must vote against the proposal to approve and adopt the reorganization agreement. A vote against the proposal to approve and adopt the reorganization agreement, without submitting the written objection, is not sufficient to satisfy the notice requirement.

If the reorganization agreement is approved by the holders of less than 80% of the total outstanding common stock of AGFC, we will promptly notify in writing by mail, after the merger is completed, each shareholder who filed the written objection described above and voted against the merger. Each of these shareholders is referred to in this section as a “dissenting shareholder.” Within 20 days after we mail the notice of shareholder approval, the dissenting shareholder must file with AGFC his written demand for the fair value of his shares of stock, valued as of the day before the merger was completed. In addition to stating the value that he is demanding, the written demand must provide a post office address to which AGFC may respond.

At the same time, the dissenting shareholder will be required to deposit his stock certificates in escrow at a bank or trust company located in West Baton Rouge Parish. The certificates must be duly endorsed and transferred to AGFC upon the sole condition that we pay the dissenting shareholder the value of his shares as determined under the dissenters’ rights provisions. To verify the deposit in escrow, the dissenting shareholder will be required to deliver to AGFC the written acknowledgement of the depository bank or trust company that it holds his shares. If the dissenting shareholder fails to make and deliver the objection, written demand and acknowledgement within the prescribed time period, he will conclusively be presumed to have accepted the terms of the reorganization agreement.

Within 20 days after we have received the dissenting shareholder’s written demand and acknowledgement, we will notify the dissenting shareholder in writing if either (i) we disagree with the value demanded or (ii) we take the position that no payment is due to him. If we determine that a payment is due to him, we will state in the

notice of disagreement the price deemed by us to be the fair value of his shares. If we fail to respond timely to the dissenting shareholder’s written demand and acknowledgement, we will be liable for the amount that he has demanded.

Thereafter, if any disagreement remains with respect to the fair value of the dissenting shareholder’s shares of stock, he may file suit against AGFC in an West Baton Rouge Parish district court requesting that the court determine the fair value of his shares of stock as of the day before the merger was effected. If the dissenting shareholder is entitled to file a suit under the provisions of section 131 of the LBCL, but fails to file such suit within 60 days after he receives the notice of disagreement from AGFC, he will be deemed to have accepted (i) our statement that no payment is due if we have contended that no payment is due, or (ii) the value for his shares as fixed by us in the notice of disagreement.

The dissenting shareholder will cease to have any of the rights of a shareholder, except the rights under the dissenters’ rights provisions of section 131 of the LBCL, when he files his written demand for the fair value of his shares of stock. The dissenting shareholder will have the unconditional right to withdraw his demand to proceed under the dissenters’ rights provisions and accept the terms offered under the reorganization agreement at any time before he receives the notice of disagreement from AGFC. After he receives the notice of disagreement, he will be required to obtain our written consent before he may withdraw his demand to proceed under the dissenters’ rights provisions. If he withdraws his written demand or if he otherwise loses his right to dissent from the merger, he will receive the consideration to which he is entitled under the reorganization agreement.

If you do not follow the prescribed procedures, you will not be entitled to dissenters’ rights with respect to your shares.

Because of the complexity of the procedures necessary to exercise the rights of a dissenting shareholder, any shareholder wishing to exercise the right to dissent should consult with his or her own legal counsel.

There is no established public trading market for the common stock of Business First, and no market for Business First’s common stock is expected to develop. No registered broker/dealer makes a market in Business First’s common stock, and Business First’s common stock is not listed or quoted on any stock exchange or automated quotation system. Business First acts as its own agent and registrar for its shares of common stock. As of October 31, 2014, there were approximately 376 holders of Business First’s common stock (excluding treasury shares).

From time to time, Business First became aware of trades of shares of its common stock. The following table sets forth the high and low sales prices (to the extent known to management of Business First) for trades of Business First common stock for the periods shown:

The most recent trade of Business First’s common stock (to the extent known to management of Business First) occurred on November 6, 2014, when 3,424 shares were traded at a price of $16 per share. There have been other limited transfers of Business First’s common stock that are not reflected in the table above which were excluded because they were transferred between related parties (as gifts, by will or intestate succession, or transfers from trustees or estates). Because of limited trading, the prices described above may not be representative of the actual or fair value of Business First’s common stock.

Business First is not currently obligated to create a market for its common stock.

Business First has not historically paid any dividends on its common stock. Business First’s shareholders will be entitled to receive dividends out of legally available funds as and when declared by Business First’s board of directors, in its sole discretion. In addition, the ability of Business First to pay dividends on its common stock is restricted by Louisiana law and by certain banking laws, regulations and regulatory policies. For a more detailed discussion of restrictions on Business First’s ability to pay dividends, see the section of this proxy statement/prospectus entitled, “Business of Business First—Supervision and Regulation—Dividend Restrictions.”

There is no established public trading market for the common stock of AGFC, and no market for AGFC’s common stock is expected to develop if the merger does not occur. No registered broker/dealer makes a market in AGFC’s common stock, and AGFC’s common stock is not listed or quoted on any stock exchange or automated quotation system. AGFC acts as its own agent and registrar for its shares of common stock. As of October 31, 2014, there were approximately 460 holders of AGFC’s common stock.

From time to time, AGFC became aware of trades of shares of its common stock. The following table sets forth the high and low sales prices (to the extent known to management of AGFC) for trades of AGFC common stock for the periods shown:

The most recent trade of AGFC’s common stock occurred on October 15, 2014, when 2,582 shares were traded at a price of $160 per share. There have been other limited transfers of AGFC’s common stock that are not reflected in the table above which were excluded because they were transferred between related parties (as gifts, by will or intestate succession, or transfers from trustees or estates). Because of limited trading, the prices described above may not be representative of the actual or fair value of AGFC’s common stock.

AGFC is not currently obligated to register its common stock or, upon any registration, to create a market for its common stock.

The following table sets forth the cash dividends AGFC has paid per share of its common stock for the periods shown:

AGFC’s shareholders are entitled to receive dividends out of legally available funds as and when declared by AGFC’s board of directors, in its sole discretion. As a Louisiana corporation, AGFC is subject to certain restrictions on dividends under the Louisiana Business Corporation Law. Generally, under Louisiana law, AGFC may not pay a dividend if (i) it is insolvent or would thereby be made insolvent, or (ii) the declaration or payment thereof would be contrary to any restrictions contained in AGFC’s articles of incorporation. Also, as a bank

holding company, AGFC is required by the Federal Reserve to serve as a source of financial strength for American Gateway Bank. The Federal Reserve has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of dividends to shareholders unless its net income available has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the bank holding company’s capital needs, asset quality and overall financial condition. Finally, under the terms of the reorganization agreement, AGFC is prohibited from paying dividends in respect of the shares of its common stock, other than AGFC’s regular quarterly dividend of no more than $0.25 per share.

AGFC does not engage in separate business activities of a material nature. As a result, AGFC’s ability to pay dividends depends upon the dividends received from American Gateway Bank. As a Louisiana state bank, American Gateway Bank’s ability to pay dividends is restricted by certain laws and regulations. Under the Louisiana Banking Law, American Gateway Bank may not declare or pay cash or property dividends unless it has unimpaired surplus that equals or exceeds 50.0% of its outstanding capital stock. American Gateway Bank’s unimpaired surplus may not be reduced below 50.0% as a result of the payment of any combination of cash or property dividends, or the purchase or redemption of any shares of its capital stock. In addition, American Gateway Bank must obtain the prior approval of the Louisiana Banking Commissioner to pay dividends to AGFC if the total of all year-to-date cash or property dividends declared and paid by American Gateway Bank, when added to any amounts used by American Gateway Bank to redeem or purchase shares of its capital stock, would exceed the total of its year-to-date net income combined with its net income from the immediately preceding year, after deducting all of the following: (i) amounts paid or accrued for the payments of cash dividends, (ii) the value of all property paid in dividends, and (iii) amounts paid or accrued to redeem or purchase shares of American Gateway Bank’s capital stock over the calculation period.

In addition to Louisiana law restrictions on American Gateway Bank’s ability to pay dividends, under the Federal Deposit Insurance Corporation Improvement Act, or FDICIA, American Gateway Bank may not pay any dividend if the payment of the dividend would cause American Gateway Bank to become undercapitalized or if American Gateway Bank is “undercapitalized.” The FDIC may further restrict the payment of dividends by requiring that American Gateway Bank maintain a higher level of capital than would otherwise be required to be “adequately capitalized” for regulatory purposes. Moreover, if, in the opinion of the FDIC, American Gateway Bank is engaged in an unsound practice (which could include the payment of dividends), the FDIC may require, generally after notice and hearing, that American Gateway Bank cease such practice. The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe banking practice. Moreover, the FDIC has also issued policy statements providing that insured depository institutions generally should pay dividends only out of current operating earnings. Under regulatory capital guidelines, American Gateway Bank must maintain a Tier 1 capital to adjusted total assets ratio of at least 4.0%, a Tier 1 capital to risk weighted assets ratio of at least 4.0%, and a total risk based capital to risk weighted assets ratio of at least 8.0%. As of June, 2014, American Gateway Bank had a ratio of Tier 1 capital to adjusted total assets of 11.29%, a ratio of Tier 1 capital to risk weighted assets of 20.66% and a ratio of total risk based capital to risk-weighted assets of 21.72%.

In addition, American Gateway Bank has a current, informal agreement with the FDIC and the Louisiana OFI that it will not pay dividends without the prior written consent of the Regional Director of the FDIC, the Commissioner of the Louisiana OFI and the Federal Reserve Bank of Atlanta.

AGFC was incorporated as a Louisiana corporation in 1982 under the name “West Baton Rouge Bancshares, Inc.” AGFC was formed for the purpose of serving as a bank holding company for American Gateway Bank, which previously operated under the name “Bank of West Baton Rouge.” In 2004, after Bank of West Baton Rouge began operating under the name “American Gateway Bank,” AGFC changed its name to “AGFC.”

AGFC does not, as an entity, engage in separate business activities of a material nature apart from the activities it performs for American Gateway Bank. Its primary activities are to provide assistance in the management and coordination of American Gateway Bank’s financial resources. AGFC has no significant assets other than all of the outstanding common stock of American Gateway Bank. AGFC derives its revenues primarily from the operations of American Gateway Bank in the form of dividends received from American Gateway Bank.

American Gateway Bank was chartered as a Louisiana state bank in 1905. Since their inception, both AGFC and American Gateway Bank have generally grown organically.

As a bank holding company, AGFC is subject to supervision and regulation by the Board of Governors of the Federal Reserve System in accordance with the requirements set forth in the BHC Act and by the rules and regulations issued by the Federal Reserve.

As of June 30, 2014, AGFC had, on a consolidated basis, total assets of approximately $367.3 million, total deposits of approximately $264.2 million, total loans (net of allowance for loan losses) of approximately $171.5 million, and total shareholders’ equity of approximately $43.5 million. AGFC does not file reports with the SEC. AGFC does, however, voluntarily provide certain financial reports, including annual audited financial statements, to its shareholders.

Banking Services. American Gateway Bank is a traditional commercial bank offering a wide variety of services to satisfy the needs of its consumer and commercial customers, most of which are located in AGFC’s primary market which includes the Baton Rouge Metropolitan Statistical Area. American Gateway Bank primarily serves as a commercial lender to small and medium-sized wholesale, retail and construction-related businesses, medical practices and other businesses primarily for working capital needs and business expansions. Consumer loans, which are immaterial to American Gateway Bank in aggregate amount, include loans for the purposes of financing items such as single-family residential homes, automobiles, recreational vehicles, household goods, home improvements, education and personal investments. American Gateway Bank also provides business and personal depository products and services, including checking and savings accounts, certificates of deposit, money market accounts, debit cards, online banking, direct deposit services, business accounts and cash management services. American Gateway Bank’s business is not seasonal in any material respect.

American Gateway Bank currently operates from ten banking offices, which are located in Ascension Parish (Gonzales Branch), East Baton Rouge Parish (principal office in Baton Rouge, three Baton Rouge Branches and Zachary Branch), Livingston Parish (Denham Springs Branch) and West Baton Rouge Parish (Brusly, Erwinville and Port Allen Branches). All of American Gateway Bank’s offices are located in the Baton Rouge Metropolitan Statistical Area, or MSA.

The table below lists American Gateway Bank’s deposit market share as of June 30, 2014 for certain significant market areas (including Metropolitan Statistical Areas, or MSAs) in which American Gateway Bank provides services.

Each activity in which American Gateway Bank is engaged involves competition with other banks, as well as nonbanking financial institutions and nonfinancial enterprises. In addition to competing with other commercial banks within and outside the Baton Rouge Metropolitan Statistical Area, American Gateway Bank competes with other financial institutions engaged in the business of making loans or accepting deposits, such as savings and loan associations, credit unions, industrial loan associations, insurance companies, small loan companies, financial companies, mortgage companies, real estate investment trusts, certain governmental agencies, credit card organizations and other enterprises. American Gateway Bank also competes with suppliers of equipment in furnishing equipment financing. Banks and other financial institutions with which American Gateway Bank competes may have capital resources and legal loan limits substantially higher than those maintained by American Gateway Bank.

As of June 30, 2014, American Gateway Bank had 91 full-time equivalent employees, none of whom is covered by a collective bargaining agreement.

AGFC and its subsidiaries are defendants in various lawsuits arising in of the normal course of business. In the opinion of management, the ultimate resolution of such matters should not have a material adverse effect on AGFC’s consolidated financial condition or results of operations. Litigation is, however, inherently uncertain, and AGFC cannot make assurances that it will prevail in any of these actions, nor can it estimate with reasonable certainty the amount of damages that it might incur.

The following discussion and analysis of the financial condition and results of operations of AGFC (“AGFC”) should be read in conjunction with “Selected Consolidated Financial Data of AGFC” and AGFC’s consolidated financial statements and the accompanying notes included elsewhere in this proxy statement/prospectus. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that AGFC 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 proxy statement/prospectus, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. AGFC assumes no obligation to update any of these forward-looking statements.

AGFC is a bank holding company headquartered in Port Allen, Louisiana. Through its wholly-owned subsidiary, American Gateway Bank, a Louisiana state chartered bank, AGFC provides a broad range of financial services tailored to meet the needs of both consumers and small to medium-sized businesses and professionals. Since its inception in 1905, its priority has been and continues to be creating shareholder value through the establishment of an attractive commercial banking franchise in Louisiana. AGFC considers its primary market to include the Baton Rouge Metropolitan Statistical Area. AGFC currently operates out of its Port Allen, Louisiana headquarters, with its main loan production office at the Coursey Blvd. branch in Baton Rouge, Louisiana and with four additional branch locations in East Baton Rouge parish, two additional branch locations in West Baton Rouge parish, and one branch location in both Livingston and Ascension parishes. As of June 30, 2014, AGFC had total assets of $367.3 million, gross total loans of $173.7 million, total deposits of $264.2 million and total stockholders’ equity of $43.5 million.

As a bank holding company operating through one market segment, community banking, AGFC generates most of its revenues from interest income on loans, customer service and loan fees, and interest income from securities. AGFC incurs interest expense on deposits and borrowed funds, and noninterest expenses, such as salaries and employee benefits, occupancy expenses, and other operating expenses. AGFC analyzes its ability to maximize income generated from interest earning assets less the expense of its liabilities through its net interest margin. Net interest margin is a ratio calculated, for the applicable period, by dividing net interest income by average interest-earning assets. Net interest income, for the applicable period, 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 AGFC earns on interest-earning assets or pays on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and stockholders’ 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 AGFC’s loan portfolio are affected by, among other factors, economic and competitive conditions in the Baton Rouge Metropolitan Statistical Area, as well as developments affecting the real estate and construction industry, financial services, insurance, transportation, manufacturing and industrial sectors within its target market.

On December 21, 2011, American Gateway Bank entered into a Consent Order (“Consent Order”) with the FDIC and the Louisiana OFI. Pursuant to the Order, American Gateway Bank agreed, among other things, to 1) reduce its classified assets, 2) reduce its concentrations in commercial real estate lending, 3) improve liquidity,

contingency funding, interest rate risk, and asset liability management, 4) revise its strategic plan, and 5) maintain certain capital ratios. American Gateway Bank also agreed under the Consent Order that it would not declare or pay any cash dividends without the prior written consent of the Regional Director of the FDIC and the Commissioner of the Louisiana OFI. The Consent Order was terminated effective February 15, 2013.

American Gateway Bank has a current, informal agreement with the FDIC and the Louisiana OFI pursuant to which it has agreed to, among other things (i) reduce its classified assets, (ii) reduce its concentrations in commercial real estate lending and (iii) improve its asset/liability and interest rate risk management. In addition, the current agreement provides that American Gateway Bank will not pay dividends without the prior written consent of the Regional Director of the FDIC , the Commissioner of the Louisiana OFI and the Federal Reserve Bank of Atlanta.

AGFC’s operating results depend primarily on its 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, AGFC measures and monitors (1) yields on its loans and other interest-earning assets, (2) the costs of its deposits and other funding sources, (3) its net interest spread and (4) its net interest margin. Net interest spread is the difference between the average yield on interest-earning assets and the average rate paid on interest-bearing liabilities. Net interest margin, for the applicable period, is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and stockholders’ equity also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources. AGFC calculates average assets, liabilities, and stockholders’ equity using daily averages, and includes loan fees in the interest income computation.

For the six months ended June 30, 2014, net interest income totaled $5.5 million, and net interest margin and net interest spread were 3.12% and 2.85%, respectively. For the six months ended June 30, 2013, net interest income totaled $6.1 million and net interest margin and net interest spread were 3.33% and 3.03%, respectively. The decreases in net interest margin and net interest spread were primarily attributable to the decline in the size of the loan portfolio due to workout efforts and overall weak demand, as well as a decrease in the average yield on the loan portfolio due to the low interest rate environment and its impact on competitive loan pricing. In addition, market yields on new loan originations were generally below the average yield of amortizing or paid-off loans. Continued weak loan demand, combined with the runoff of higher yielding loan balances, will continue to pressure net interest margin and net interest spread. The decrease in the cost of interest-bearing liabilities for the six months ended June 30, 2014 compared to June 30, 2013 is primarily the result of the payoff in full of the maturing Federal Home Loan Bank (“FHLB”) advances. Reductions in rates paid on interest-bearing deposits for the six months ended June 30, 2014 and June 30, 2013 also positively impacted net interest margin for each six month period.

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 six months ended June 30, 2014 and 2013, 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 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, changes attributable to changes in interest rates, and changes in rate/volume mix.

AGFC’s provision for loan losses is a charge to income to bring its allowance for loan losses to a level considered appropriate by management and AGFC’s board of directors. For a description of the factors taken into account by AGFC’s management in determining the allowance for loan losses see “—Financial Condition—Allowance for Loan Losses.” The provision for loan losses was $200,000 for the six months ended June 30, 2014. No provision was required for the comparable six months ended June 30, 2013 due to improving loss experience rates and to reductions in the size of the loan portfolio as a result of workout efforts. The increase in the provision for loan losses for the six months ended June 30, 2014 was to replenish the allowance for loan losses for net charge-off activity.

AGFC’s primary sources of recurring noninterest income are service charges on deposit accounts, ATM and debit card activity fees, and income from bank-owned life insurance. The following table presents, for the periods indicated, the major categories of noninterest income:

Noninterest income for the six months ended June 30, 2014 increased $218,000 or 14.6% to $1.7 million compared to noninterest income of $1.5 million for the same period in 2013. The primary components of the increase were as follows:

Service charges on deposit accounts. AGFC earns fees from its customers for deposit-related services, and these fees constitute a significant and predictable component of its noninterest income. Service charges on deposit accounts were $693,000 for the six months ended June 30, 2014, an increase of $108,000 over the same period in 2013. This increase was primarily attributable to the mid-2013 restructuring of AGFC’s business and consumer deposit products.

ATM and debit card service and activity fees. AGFC earns service and activity fees based upon customer usage of various banking products such as ATM and debit cards, and represent a reliable recurring source of noninterest income. ATM and debit card service and activity fee income was $351,000 for the six months ended June 30, 2014 compared to $338,000 for the respective prior year period.

Bank-owned life insurance income. AGFC purchased bank-owned life insurance in 2002 due to its attractive nontaxable return and protection against the loss of its key employees. AGFC records income based on the growth of the cash surrender value of these policies as well as the annual yield. Income from bank-owned life insurance increased $132,000 for the six months ended June 30, 2014 compared to the same period in 2013. The increase in income was primarily attributable to the death of a retired key employee and the resulting receipt of death benefits totaling $137,000. AGFC earned a weighted average net yield on these policies of 3% as of June 30, 2014 compared to 3.1% as of June 30, 2013. The decline in yield over the period was the result of a decline in market interest rates.

Other. This category includes a variety of other income producing activities including wire transfer and official check fees, credit card fees, gain on sale of mortgage loans, and revenue from insurance subsidiary activities. Other income decreased $315,000 or 64.5% for the six months ended June 30, 2014, compared to the same period in 2013, primarily as a result of exiting the business of originating long-term fixed-rate mortgage loans for resale into the secondary market effective January 1, 2014.

Generally, noninterest expense is comprised of all employee expenses and costs associated with operating AGFC’s facilities, obtaining and retaining customer relationships, and providing bank services. The major component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational costs, such as occupancy and equipment expense, depreciation and amortization expense, legal and professional fees, regulatory assessments, data processing costs, and advertising and promotion expenses.

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

Noninterest expense for the six months ended June 30, 2014 decreased $464,000 or 7.2% to $6.0 million compared to noninterest expense of $6.5 million for the same period in 2013. The most significant components of the decrease were as follows:

Occupancy and equipment expense. Expense associated with occupancy and equipment was $547,000 for the six months ended June 30, 2014 compared to $564,000 for the same period of 2013. This decrease of $17,000 was due primarily to the 2013 closure of the Downtown branch, and a reduced level of repairs and maintenance costs.

Depreciation and amortization. Depreciation and amortization costs were $347,000 and $394,000 for the six months ended June 30, 2014 and 2013, respectively. This category includes building, leasehold, furniture, fixtures, EDP equipment and software depreciation and amortization expenses. The decrease of $47,000 was due to a lower level of capital expenditures and aged assets becoming fully depreciated.

Legal and professional fees. Legal and professional fees include legal, audit, loan review, investment advisory and management, regulatory compliance, information technology, and consulting services. These fees were $225,000 and $182,000 for the six months ended June 30, 2014 and 2013, respectively.

Loan collection costs. Loan collection costs totaled $51,000 and $104,000 for the six months ended June 30, 2014 and 2013, respectively. This 51% decline is attributed to a lower level of delinquencies and improving credit quality of the loan portfolio, as well as reduced foreclosure activity.

Net other real estate and repossession expenses. Net other real estate and repossession expenses include property holding and maintenance costs, the related property write-downs, and net losses on the sale of these assets. Expenses related to other real estate owned were $105,000 and $286,000 for the six months ended

June 30, 2014 and 2013, respectively. The decrease of $181,000 was due to a reduction in the size and number of properties comprising other real estate owned, as well as a reduction in the necessary property write-downs. AGFC sold 12 other real estate owned properties and foreclosed on 8 additional properties between June 30, 2013 and June 30, 2014, reducing the number of properties held from 23 as of June 30, 2013 to 19 as of June 30, 2014. The average size of the other real estate owned declined from $213,000 at June 30, 2013 to $105,000 at June 30, 2014. In addition, AGFC reduced the level of write-downs from $76,000 for the six months ended June 30, 2013 to $33,000 for the six months ended June 30, 2014.

Other. This category includes operating and administrative expenses including ad valorem shares taxes, armored car service, small hardware and software purchases, supplies, postage, liability and surety bond insurance premiums, recruiting costs, and business development expenses (i.e. travel and entertainment, donations and club memberships). Other noninterest expenses decreased $35,000 for the six months ended June 30, 2014 compared to the same period in 2013. The lower costs incurred in 2014 were primarily attributable to reduced surety bond premiums and lower recruiting costs.

The amount of income tax expense is influenced by the amounts of AGFC’s pre-tax income, tax-exempt income and other nondeductible expenses. Deferred tax assets and liabilities are reflected at currently enacted income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

No provision for income taxes was necessary for the six months ended June 30, 2014, compared to income tax expense of $71,000 for the same period in 2013. The decrease was primarily attributable to the increase in tax-exempt income due to the receipt of death benefits from the bank-owned life insurance, as well as an overall decrease in income before income taxes of $108,000 from $1.1 million for the six months ended June 30, 2013 to $978,000 for the same period in 2014. AGFC’s effective tax rates for the six months ended June 30, 2014 and 2013 were 0% and 6.52%, respectively. AGFC’s effective tax rates for both periods were affected primarily by tax-exempt income generated by bank-owned life insurance, municipal bond interest, and other nondeductible expenses.

For additional information on net interest income and how AGFC measures and monitors it, see “—Results of Operations for the Six Months Ended June 30, 2014 and 2013—Net Interest Income.”

2013 vs. 2012. Net interest income for 2013 was $11.8 million compared to $12.6 million for 2012, a decrease of $795,000 or 6.3%. The decrease in net interest income was primarily due to a $2.2 million or 13.1% decrease in interest income, which was partially offset by a $1.4 million or 31.9% decrease in interest expense. The decline in interest income for the year ended December 31, 2013 compared to 2012 was attributable to several factors including: 1) a $21.4 million decline in average interest-earning loans outstanding, 2) a $22.2 million decline in average interest-earning securities available for sale, and 3) a $22.0 million increase in interest-bearing deposits held at the Federal Reserve Bank. The net $22.2 million decline in interest-earning assets combined with the change in the composition of interest-earning assets resulted in a 35 basis point decrease in the yield on interest-earning assets for the year ended December 31, 2013 compared to 2012. The decline in average interest-earning loans outstanding was due to continued workout efforts and weak loan demand in the non-real estate sectors. The decrease in the average yield on the loan portfolio was also attributable to the low interest rate environment and its impact on competitive loan pricing, as well as the fact that market yields on new loan originations were below the average yield of amortizing or paid-off loans. Also,

to reduce the aggregate risk within the securities portfolio as a percentage of capital, the cash flow from the securities portfolio was reinvested in targeted shorter duration, low price risk mortgage-backed securities only to the extent necessary for collateral purposes, or the funds were held on deposit at the Federal Reserve Bank, both at significantly lower yields. Because the factors noted above continue to affect AGFC’s performance, continued interest rate pressure is expected on its total interest-earning assets. Interest income on loans was $11.3 million for 2013, a decrease of $1.4 million or 10.9% compared to 2012 due to the decline in average interest-earning loans outstanding. Interest income on securities was $3.4 million during 2013, a decrease of $905,000 over 2012 due to the continued low rate environment and allowing the runoff of portfolio cash flows.

Interest expense was $3.1 million for 2013, a decrease of $1.4 million over 2012. Average interest-bearing deposits decreased $14.3 million for 2013 compared to 2012, which was comprised of a $24.3 million reduction in the average time deposit balances that was partially offset by a $10.0 million increase in average interest bearing transaction, money market and savings account balances. For the same period, the average rate on interest-bearing deposits decreased from 0.79% to 0.46%, resulting in a $744,000 decrease in the related interest expense. Due to continuing efforts to reduce AGFC’s reliance on wholesale funding sources, maturing FHLB advances are being paid in full as they mature, which resulted in a $17.1 million reduction in average outstanding FHLB advances for 2013 compared to 2012. For the same period, the average rate on FHLB advances decreased from 3.32% to 3.13%, resulting in a $696,000 reduction in the related interest expense.

Net interest income was also favorably impacted by a $4.0 million or 5.9% increase in average noninterest-bearing deposits during 2013, which was primarily attributable to growth in customer relationships and noninterest-bearing checking accounts. Average cost of funds, including noninterest-bearing deposits, decreased 32 basis points to 0.91% for the year ended December 31, 2013 from 1.23% for the year ended December 31, 2012. Net interest margin, defined as net interest income divided by average interest-earning assets for 2013 was 3.29%, a decrease of 2 basis points compared to 3.31% for 2012.

2012 vs. 2011. Net interest income for 2012 was $12.6 million compared to $13.8 million for 2011, a decrease of $1.2 million or 9%. The decrease in net interest income was primarily due to a $2.3 million decrease in interest income which was partially offset by a corresponding $1.1 million reduction in interest expense. The decline in interest income was primarily attributable to a $41 million or 16.1% decrease in average interest-earning loans outstanding for 2012 compared to 2011, as a result of workout efforts and weak loan demand. The decline in interest income was also impacted by a decrease of 21 basis points in its yield on interest-earning assets, which resulted primarily from the decline in yield on its securities portfolio. The decrease in the average yield on the securities portfolio from 3.35% for the year ended December 31, 2011 to 3.14% for 2012 was primarily due to the low interest rate environment. Interest income on loans was $12.7 million for 2012, a decrease of $2.4 million compared to 2011. Interest income on securities was $4.3 million during 2012, an increase of $62,000 from 2011 due to a $10.5 million increase in the average interest-earning balances of the investment portfolio which was partially offset by a 21 basis point decline in average yield on the securities portfolio in 2012 compared to 2011.

The average balance of interest-bearing liabilities decreased by $34.6 million or 10.5% in 2012 compared to 2011, and the average rate on interest-bearing liabilities decreased 15 basis points, resulting in total interest expense decreasing from $5.6 million to $4.5 million for the years ended December 31, 2011 and 2012, respectively. Average interest-bearing demand deposits, money market and savings accounts increased $8.9 million for 2012 compared to 2011 due to growth in customer relationships. Average certificates and other time deposits decreased by $35.1 million or 27% in 2012 compared to 2011 due to the low rate environment and competitive pricing within the market whereby higher rate maturing CDs moved out of the bank. Overall, the average rate on interest bearing deposits decreased from 1.06% to 0.79% for the years ended December 31, 2011 and 2012, respectively.

Net interest income was also positively impacted by a $1.8 million, or 2.7% increase in average noninterest-bearing deposits during 2012, which was primarily attributable to growth in customer relationships and

noninterest-bearing checking accounts. Average cost of funds decreased 16 basis points to 1.23% for 2012 from 1.39% for 2011. Net interest margin for 2012 was 3.31%, a decrease of 5 basis points compared to 3.36% for 2011.

The following table presents, for the periods indicated, the total dollar amount of average outstanding balances, interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Average outstanding balances for each of the years presented are daily average balances. Any nonaccrual loans have been included in the table as loans carrying a zero yield.

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, changes attributable to changes in interest rates, and changes in volume/rate mix.

The provision for loan losses for the year ended December 31, 2013 was $400,000 compared to a credit of $250,000 for the year ended December 31, 2012. The increase in provision expense was the amount necessary to maintain loan loss reserves at a level consistent with AGFC policies, and to replenish the reserve from loan net charge-off activity, net of the impact by the reduction in general reserves as a result of shrinkage in the loan portfolio and declining historical loss rates. The reversal of excess loan loss reserves during the year ended December 31, 2012 was as a result of improving loss experience rates and reductions in the size of the loan portfolio. Net charge-offs for the years ended December 31, 2013 and 2012 were $1.6 million and $728,000, respectively. This increase was the result of an increase in gross charge-offs from $1.1 million for the year ended December 31, 2012 to $1.8 million for the year ended December 31, 2013 and a decrease in recoveries from $389,000 for the year ended December 31, 2012 to $138,000 for the year ended December 31, 2013. The increase in gross charge-offs was largely the result of a decline in the collateral value of a single property securing an impaired real estate loan.

For the year ended December 31, 2013, noninterest income totaled $3.2 million, an increase of $329,000 or 11.5% compared to 2012. The following table presents, for the periods indicated, the major categories of noninterest income:

Service charges on deposit accounts. Service charges on deposit accounts increased $251,000 or 23.1% in 2013 compared to 2012 primarily due to deposit product restructuring. The decrease of $152,000 or 12.3% in 2012 compared to 2011 was due primarily to a decrease in the number of deposit accounts. The number of transaction, money market and savings deposit accounts decreased by 1.8% between December 31, 2011 and December 31, 2012, and 7.2% between December 31, 2012 and December 31, 2013.

ATM and debit card service and activity fees. AGFC earns service and activity fees based upon customer usage of various banking products such as ATM and debit cards, and represent a reliable recurring source of noninterest income. ATM and debit card service and activity fee income was $695,000, $666,000 and $668,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Gain on sale of loans. Gain on sale of loans decreased $175,000 or 27% in 2013 compared to 2012 due to reduced refinancing activity because of rising rates, smaller loan sizes, and reliance on investor underwriting which exceeded lock periods. As a result of market conditions, the mortgage department operations were closed effective January 1, 2014. AGFC sold 108 loans in 2013 with an average gain on sale of $4,000 compared to 141 loans in 2012 with an average gain on sale of $5,000.

Realized gain (loss) on sale of securities. AGFC’s securities sales transactions during 2011 through 2013 were primarily to improve transactional liquidity, reduce overall interest rate risk, improve portfolio concentrations, and reduce credit exposure within the portfolio. Gain on sale of investment securities was $293,000, $93,000 and $36,000 for the years ended December 31, 2013, 2012 and 2011, respectively.

Net other than temporary impairment losses on investments. Net other than temporary impairment losses on investments were $87,000, $107,000 and $1.1 million for the years ended December 31, 2013, 2012 and 2011, respectively, which included other than temporary impairment losses on AGFC’s private-label CMOs totaling $87,000, $107,000 and $158,000 for the years then ended. All of AGFC’s private-label CMO holdings were sold as of December 31, 2013. In addition, a $942,000 other than temporary impairment loss on a municipal community development bond was recognized during the year ended December 31, 2011, and the bond was ultimately sold as of December 31, 2011.

For the year ended December 31, 2013, noninterest expense totaled $12.6 million, a decrease of $1.1 million or 8.3% compared to 2012. For the year ended December 31, 2012, noninterest expense totaled $13.7 million, an increase of $347,000 or 2.6% compared to $13.4 million for the same period in 2011. The following table presents, for the periods indicated, the major categories of and changes in noninterest expense:

Salaries and employee benefits. Salaries and employee benefits decreased by $27,000 between 2012 and 2013 primarily as a result of reduced group insurance costs. Salaries and employee benefits increased $249,000 to $6.4 million for 2012 compared to $6.2 million for 2011, primarily because of increased salaries of $119,000 and the impact of a one-time reduction in deferred compensation costs totaling $141,000 in 2011. Full-time employee counts were 99, 103, and 104 as of December 31, 2013, 2012, and 2011, respectively.

Data processing. Data processing expenses were $594,000, $679,000, and $759,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The consistent decline in data processing costs was primarily as a result of renegotiated provider contracts and continual reevaluation of vendor products and services.

Regulatory assessments. Regulatory expenses were $525,000, $960,000, and $749,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The decrease in assessments during 2013 compared to the prior year period is primarily attributable to a lower FDIC assessment rate as a result of the February 15, 2013 termination of the Consent Order. Likewise, the increase in assessments for the year ended December 31, 2012 compared to the prior year was the higher assessment rate as a result of the December 21, 2011 Consent Order, net of the impact of a smaller balance sheet.

Legal and professional fees. Legal and professional fees include legal, audit, loan review, investment advisory and management, regulatory compliance, information technology, and consulting services. These fees were $398,000, $466,000, and $452,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The non-recurring increase in fees incurred during 2012 and 2011 was directly attributable to regulatory matters as previously noted in the section “Regulatory Matters.”

Telephone expenses. Telephone expenses were $192,000, $244,000, and $251,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The decrease in costs for the year ended December 31, 2013 compared to 2012 was due to renegotiating the vendor contract with AGFC’s primary communications provider.

Loan collection costs. Loan collection costs totaled $145,000, $233,000, and $287,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The continuing decrease in annual costs is attributed to a lower level of delinquencies and improving credit quality of the loan portfolio, as well as reduced foreclosure activity.

Net other real estate and repossession expenses. Net other real estate and repossession expenses include property holding and maintenance costs, the related property write-downs, and net gains (losses) on the sale of these assets. Net expenses related to other real estate owned were $563,000, $843,000, and $677,000 for the years ended December 31, 2013, 2012, and 2011, respectively. The decrease of $280,000 in 2013 compared to the prior year period was primarily as a result of a $390,000 write-down for a single property in 2012 which was non-recurring. The increase of $166,000 in 2012 compared to 2011 was directly attributable to the aforementioned write down for a single property in 2012 as well as a higher level of property holding and maintenance costs incurred in 2012 associated with that same asset which was acquired in 2011 and sold in 2013. AGFC sold 14 other real estate owned properties and foreclosed on 11 additional properties during 2013, reducing the number of properties held from 20 as of December 31, 2012 to 17 as of December 31, 2013. The average size of the other real estate owned declined to $97,000 at December 31, 2013 from $206,000 at December 31, 2012. AGFC sold 22 other real estate owned properties and foreclosed on 16 additional properties during 2012, reducing the number of properties held from 26 as of December 31, 2011 to 20 as of December 31, 2012. The average size of the other real estate owned increased from $188,000 at December 31, 2011 to $206,000 at December 31, 2012.

Other. This category includes operating and administrative expenses including ad valorem shares taxes, armored car service, small hardware and software purchases, supplies, postage, liability and surety bond insurance premiums, recruiting costs, and business development expenses (i.e. travel and entertainment, donations and club memberships). Other noninterest expenses decreased $11,000 for the year ended December 31, 2013 compared to 2012, and $144,000 for the year ended December 31, 2012 compared to 2011. The lower costs incurred in 2012 compared to 2011 are primarily attributed to lower assessed valuations in 2012 for ad valorem shares taxes, as well as lower general and administrative expenses.

For the year ended December 31, 2013, income tax expense was $84,000 compared to $36,000 for the year ended December 31, 2012, and an income tax benefit of $1.0 million for the year ended December 31, 2011. The increase in income tax expense of $48,000 in 2013 was primarily attributable to lower tax-exempt municipal bond interest received in 2013 compared to 2012. The tax benefit recognized in 2011 was due to the receipt of $1.9 million tax-exempt municipal bond interest and the $1.1 million loss before income taxes incurred for the year then ended. AGFC’s effective income tax rates for the years ended December 31, 2013, 2012 and 2011 were 4.24%, 1.86%, and a benefit of 89.43%, respectively.

AGFC’s assets decreased $16.2 million or 4.2% from $383.5 million as of December 31, 2013 to $367.3 million as of June 30, 2014, and decreased $20.6 million or 5.1% from $404.2 million as of December 31, 2012 to $383.5 million as of December 31, 2013. AGFC’s asset shrinkage was primarily a result of focused deleveraging efforts as well as continued loan workouts and sluggish loan demand.

AGFC’s primary source of income is interest on loans to individuals, professionals, and small to medium-sized businesses and commercial companies located in the Baton Rouge Metropolitan Statistical Area. AGFC’s loan portfolio consists primarily of real estate secured loans including loans secured by commercial real estate, residential real estate, and construction and land development properties located in its primary market area. AGFC’s loan portfolio represents the highest yielding component of its earning asset base.

As of June 30, 2014, total loans were $173.7 million compared to $173.8 million as of December 31, 2013. Total loans as of December 31, 2013 represented a decrease of $33.4 million or 16.1% compared to $207.2 million as of December 31, 2012. These decreases were primarily due to sluggish loan demand in its primary market area and to continued workout efforts. Of these amounts, $716,000 and $3.0 million in loans were classified as held for sale as of December 31, 2013 and 2012, respectively. No loans were classified as held for sale as of June 30, 2014.

Total loans as a percentage of deposits were 65.7%, 63.2% and 74.8% as of June 30, 2014 and December 31, 2013 and 2012, respectively. Total loans as a percentage of assets were 47.3%, 45.3% and 51.3% as of June 30, 2014 and December 31, 2013 and 2012, respectively.

The following table summarizes the loan portfolio of AGFC by type of loan as of the dates indicated:

Construction and land. Construction and land development loans are comprised of loans to fund construction, land acquisition and land development construction. The properties securing the portfolio are located throughout the Baton Rouge Metropolitan Statistical Area and are generally diverse in terms of type and include both residential and commercial properties.

Construction and land loans as of June 30, 2014 and December 31, 2013 totaled $38.4 million and $37.9 million, respectively. Construction and land loans as of December 31, 2013 represented a decrease of $5.5 million or 12.7% from $43.4 million as of December 31, 2012. The decrease in construction and land loans during 2013 primarily resulted from focused efforts to decrease AGFC’s concentration in speculative residential construction and land loans as well as the results of workout efforts.

1-4 family residential. AGFC’s 1-4 family residential loan portfolio is comprised of loans secured by single family homes, which are both owner-occupied and investor owned. AGFC’s 1-4 family residential loans are characterized by small balances spread between many individual borrowers.

1-4 family residential loans as of June 30, 2014 compared to December 31, 2013 were $50.0 million and $50.7 million, respectively. 1-4 family residential loans as of December 31, 2013 decreased $7.1 million or 12.3% from $57.8 million as of December 31, 2012. The decrease in 1-4 family residential loans during 2013 primarily resulted from customer refinancing activity.

Nonfarm nonresidential. Nonfarm nonresidential loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate. These loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the portfolio are located throughout the Baton Rouge Metropolitan Statistical Area and are generally diverse in terms of type. This diversity helps reduce the exposure to adverse economic events that affect any single industry.

Nonfarm nonresidential loans decreased $1.4 million or 2.2% to $60.8 million as of June 30, 2014 from $62.2 million as of December 31, 2013. This slight decrease primarily resulted from weak loan demand and customer

refinancing activity. Nonfarm nonresidential loans as of December 31, 2013 represented a decrease of $17.6 million or 22.1% from $79.8 million as of December 31, 2012. The decrease in nonfarm nonresidential loans during 2013 mainly resulted from customer refinancing activity in the low interest rate environment combined with weak loan demand and the results of workout efforts.

Commercial & industrial loans. Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. These loans are primarily made based on the identified cash flows of the borrower, and secondarily, on the underlying collateral provided by the borrower. Most commercial and industrial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and generally include personal guarantees.

Commercial and industrial loans increased $2.0 million or 17.8% to $13.0 million as of June 30, 2014 from $11.0 million as of December 31, 2013. The increase in commercial and industrial lending activity resulted from focused efforts to diversify AGFC’s loan portfolio combined with the improving local economy and the addition of an experienced commercial and industrial lending officer in late 2012. Commercial and industrial loans as of December 31, 2013 increased $300,000 or 3% from $10.7 million as of December 31, 2012.

Other loan categories. Other categories of loans included in the loan portfolio include multi-family residential loans and consumer loans. Neither loan category represents a significant portion of AGFC’s total loan portfolio.

The contractual maturity ranges of loans in AGFC’s loan portfolio and the amount of such loans with fixed and floating interest rates in each maturity range as of date indicated are summarized in the following tables:

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. Generally, AGFC discontinues the accrual of interest when a loan becomes 90 days past due as to principal or interest. When placed on nonaccrual status, interest accrual is discontinued and all unpaid accrued interest is reversed. Subsequent cash receipts on nonaccrual loans are accounted for on the cost recovery method, until the loans qualify for return to accrual status. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

AGFC has several procedures in place to assist it in maintaining the overall quality of its loan portfolio. AGFC has established underwriting guidelines to be followed by its bankers, and AGFC also monitors its delinquency levels for any negative or adverse trends. There can be no assurance, however, that its loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

AGFC believes its conservative lending approach and focused management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets. AGFC had $7.7 million, $8.2 million, and $10.0 million in nonperforming assets as of June 30, 2014, December 31, 2013, and December 31, 2012, respectively. Included in nonperforming assets, AGFC had $5.7 million in nonperforming loans as of June 30, 2014 compared to $6.5 million and $5.9 million as of December 31, 2013 and 2012, respectively.

The following tables present information regarding nonperforming loans at the dates indicated:

From a credit risk standpoint, AGFC classifies loans in one of four categories: pass, special mention, substandard or doubtful. Loans classified as loss are charged-off. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. AGFC reviews the ratings on credits on an ongoing basis. Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in each credit as of each monthly reporting period. AGFC’s methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

Credits rated special mention have potential weaknesses which warrant close attention from management. If left uncorrected, these potential weaknesses may result in deterioration in credit worthiness and ability to repay. However, special mention assets are not adversely classified, and the potential weaknesses are not so pronounced as to expose AGFC to significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms, and credit exposure is not as prominent as credits with a lower rating.

Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or significant weaknesses which exist in collateral. Substandard assets exhibit a well-defined weakness or weaknesses that jeopardize the liquidation of the credit. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.

The following tables summarize AGFC’s internal ratings of its loans as of the dates indicated. AGFC had no loans rated as doubtful as of the dates indicated:

AGFC maintains an allowance for loan losses that represents management and the board of directors’ best estimate of the loan losses and risks inherent in the loan portfolio. In determining the allowance for loan losses, AGFC estimates specific reserves based on collateral values or the present value of estimated cash flows for impaired loans. The remainder of the allowance for loan losses is comprised of general reserves which are based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates. For additional discussion of AGFC’s methodology, please refer to “—Critical Accounting Policies—Allowance for loan losses.”

In connection with its review of the loan portfolio, AGFC considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements AGFC considers include:

As of June 30, 2014, the allowance for loan losses totaled $2.1 million or 1.2% of total loans held for investment. As of December 31, 2013, the allowance for loan losses totaled $2.1 million or 1.2% of total loans held for investment. As of December 31, 2012, the allowance for loan losses totaled $3.4 million or 1.6% of total loans held for investment.

The following table presents, as of and for the periods indicated, an analysis of the allowance for loan losses and other related data:

The successful execution of AGFC’s problem loan workout efforts, as well as weak loan demand, is demonstrated by the downward trend in outstanding loan balances from December 31, 2009 to June 30, 2014. Gross loans, excluding loans held for sale, decreased from $312.2 million as of December 31, 2009 to $173.7 million as of June 30, 2014. As a result of portfolio shrinkage combined with improving credit quality and lower loss rates, AGFC’s provision has accordingly decreased during the same period. Further, annualized net charge-offs as a percent of average loans have declined from a high of 1.6% as of December 31, 2011 to 0.2% as of June 30, 2014.

Although AGFC believes that it has established its allowance for loan losses in accordance with accounting principles generally accepted in the United States and that the allowance for loan losses was adequate to provide for known and inherent losses within the portfolio at all times shown above, future provisions will be subject to ongoing evaluations of the risks in its loan portfolio. If AGFC experiences economic declines or if asset quality deteriorates, material additional provisions could be required.

The following table shows the allocation of the allowance for loan losses among loan categories and certain other information as of the dates indicated. The allocation of the allowance for loan losses as shown in the table should neither be interpreted as an indication of future charge-offs, nor as an indication that charge-offs in future periods will necessarily occur in these amounts or in the indicated proportions. The total allowance is available to absorb losses from any loan category.

AGFC uses its securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements, and meet regulatory capital requirements. As of June 30, 2014, the carrying amount of investment securities totaled $120.9 million, which was slightly below the $121.5 million as of December 31, 2013. The balance in the securities portfolio as of December 31, 2013 represented a decrease of $5.8 million or 4.6% compared to $127.4 million as of December 31, 2012. The decreases in investment securities were primarily as a result of efforts to deleverage the balance sheet and to reduce the amount of aggregate price risk exposure. Securities represented 32.9%, 31.7% and 31.5% of total assets as of June 30, 2014 and December 31, 2013 and 2012, respectively.

AGFC’s investment portfolio consists entirely of securities classified as available for sale. As a result, the carrying values of its investment securities are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in stockholders’ equity. The following tables summarize the amortized cost and estimated fair value of investment securities as of the dates shown:

As of June 30, 2014 and December 31, 2013, all of AGFC’s mortgage-backed securities were agency securities. AGFC does not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in its investment portfolio. As of June 30, 2014 and December 31, 2013, the investment portfolio did not contain any securities that are directly backed by

subprime or Alt-A mortgages. However, in previous years, AGFC had purchased and held within its portfolio several private-label CMOs, the majority of which were acquired in 2007. All of AGFC’s private-label CMOs were disposed during the period June 2010 through April 2013, and AGFC will not purchase private-label CMOs in the future.

Management evaluates securities for other-than-temporary impairment, at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Consideration is given to the extent and length of time the fair value has been below cost, the reasons for the decline in value, and AGFC’s intent to sell the security or whether it is more likely than not that the security will be required to be sold before the recovery of its amortized cost. When AGFC determines a security is deemed to be other than temporarily impaired, an impairment loss is recognized. Other than temporary impairment losses were recognized on certain of AGFC’s private-label CMOs during each of the years ended December 31, 2009, 2010, 2011, 2012 and 2013. In addition, an other than temporary impairment loss was recognized mid-2011 on a municipal community development bond which was ultimately sold by year-end December 31, 2011.

The following tables set forth the fair value, maturities and approximated weighted average yield based on estimated annual income divided by the average amortized cost of the securities portfolio as of the dates indicated. The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.

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, collateralized mortgage obligations 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 pre-pay. Monthly pay downs 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 AGFC’s investment portfolio was 5.2 years with an estimated effective duration of 3.5 years as of June 30, 2014.

As of June 30, 2014 and December 31, 2013 and 2012, AGFC did not own securities of any one issuer for which aggregate adjusted cost exceeded 10% of the consolidated stockholders’ equity as of such respective dates.

The average yield of the securities portfolio was 2.97% as of June 30, 2014 and 3.08% and 3.13% as of December 31, 2013 and 2012, respectively. The decrease in average yield during 2013 compared to 2012 was primarily due to the reinvestment of funds at lower rates in 2013 and the speed of prepayments on the mortgage-backed securities and collateralized mortgage obligation portfolios. In addition, securities purchases were primarily limited to those necessary for collateral purposes or to manage portfolio liquidity, concentrations and risk, and the monthly portfolio cash flows were not reinvested in order to reduce the aggregate portfolio price risk as a percent of capital over time as well as to continue deleveraging the balance sheet. Consequently, the monthly pay down of higher yielding mortgage-backed securities or the proceeds from municipal bond maturities or calls were either not reinvested or were reinvested at lower rates which further contributed to lower portfolio average yields when compared to the prior year period.

AGFC offers a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts. AGFC relies primarily on competitive pricing policies, convenient locations and personalized service to attract and retain these deposits.

Total deposits as of June 30, 2014 were $264.2 million, a decrease of $10.9 million compared to $275.1 million as of December 31, 2013 due primarily to a $5.2 million seasonal decline in public fund account balances, as well as a $5.7 million net decline in commercial and consumer account balances; commercial and consumer account balances decreased $2.2 million in noninterest-bearing deposit accounts and $3.5 million in interest-bearing deposit accounts. Total deposits as of December 31, 2013 were $275.1 million compared to $277.0 million at December 31, 2012. The net $1.9 million decline reflected a $3.1 million decrease in commercial and consumer deposit balances, which was partially offset by a $1.4 million increase in interest-bearing public fund balances. The $3.1 million decrease in commercial and consumer deposits was comprised of a $2.0 million increase in non-interest bearing balances and a $5.1 million decrease in interest bearing balances.

Noninterest-bearing deposits as of June 30, 2014, December 31, 2013 and December 31, 2012 were $73.8 million, $76.1 million, and $74.2 million, respectively.

Interest-bearing demand deposit account balances were $72.0 million, $65.8 million, and $58.2 million as of June 30, 2014, December 31, 2013 and December 31, 2012, respectively.

The following table presents the composition and changes in deposits for the periods indicated:

Average deposits for the six months ended June 30, 2014 were $271.9 million, an increase of $6.1 million or 2.3% over the $265.9 million full year average for the year ended December 31, 2013. Average deposits declined $10.3 million or 3.7% from $276.1 million for the year ended December 31, 2012. The average rate paid on total interest-bearing deposits decreased consistently over this period from 0.79% for the year ended December 31, 2012 to 0.46% for the year ended December 31, 2013 to 0.39% for the six months ended June 30, 2014. The decreases in average rates were driven primarily by strategic reductions in deposit pricing during this time period. In addition, the continued growth of noninterest-bearing demand accounts resulted in further reductions to the cost of deposits from 0.59% for the year ended December 31, 2012 to 0.33% for the year ended December 31, 2013 and 0.28% for the six months ended June 30, 2014.

The following table presents the daily average balances and weighted average rates paid on deposits for the periods indicated:

The ratio of average noninterest-bearing deposits to average total deposits for the six months ended June 30, 2014 and the years ended December 31, 2013 and 2012 was 27.3%, 27.4% and 24.9%, respectively.

Factors affecting the cost of funding interest-bearing assets include the volume of noninterest and interest-bearing deposits, changes in market interest rates and economic conditions in AGFC’s target markets and their impact on interest paid on deposits, as well as the ongoing execution of AGFC’s balance sheet management strategy. As a result of targeted deleveraging of AGFC’s balance sheet and the low interest rate environment, AGFC was able to reduce its cost of funds even though there has been no growth in deposit balances. Cost of funds is calculated as total interest expense divided by total deposits plus total borrowings. AGFC’s cost of funds was 0.92%, 1.26% and 1.37% for the years ended December 31, 2013, 2012 and 2011, respectively.

The following table sets forth the amount of certificates of deposit that are $100,000 or greater by time remaining until maturity:

AGFC utilizes short-term and long-term borrowings to supplement deposits to fund its lending and investment activities, each of which is discussed below.

Federal Home Loan Bank (FHLB) advances. The FHLB allows AGFC to borrow on a blanket floating lien status collateralized by certain securities and loans. As of June 30, 2014 and December 31, 2013 and 2012, total borrowing capacity of $52.0 million, $41.3 million and $28.2 million, respectively, was available under this arrangement and $54.7 million, $56.5 million and $80.1 million, respectively, was outstanding with an average

interest rate of 2.86% as of June 30, 2014, 2.85% as of December 31, 2013 and 2.80% as of December 31, 2012. AGFC’s current FHLB advances mature within four years. During the last several years where AGFC has generated excess liquidity, as a result of experiencing sluggish loan demand and from not reinvesting securities portfolio cash flows in order to reduce aggregate portfolio risk, concentrated efforts have been made to retire the outstanding FHLB debt as it matures to deleverage the balance sheet and reduce reliance on wholesale funding sources. AGFC currently intends to primarily utilize future FHLB borrowings, if any, to meet liquidity needs; however, in the past AGFC has used these borrowings to also fund certain fixed rate loans in its portfolio and for longer duration security purchases.

The following table presents FHLB borrowings at the dates indicated. Other than FHLB borrowings, AGFC had no other short-term borrowings as of the dates indicated.

Throughout 2010 AGFC restructured several of its fixed rate FHLB advances by replacing them with new advances at lower fixed rates with extended maturity dates. These transactions, which were accounted for as debt modifications, resulted in capitalized prepayment penalties which are being amortized as interest expense over the life of the new advances. At June 30, 2014 and December 31, 2013 and 2012, unamortized prepayment penalties of $129,000, $199,000, and $404,000, respectively, are reflected in other assets.

Federal Reserve Bank of Atlanta. AGFC is eligible to borrow at the Federal Reserve Bank of Atlanta’s Discount Window under the Primary Credit Program on a collateralized basis. No collateral (certain loans or securities) has been pledged under this arrangement and, as a result, no borrowings were outstanding under this arrangement as of June 30, 2014 and December 31, 2013 and 2012. However, AGFC maintains this borrowing arrangement to meet liquidity needs pursuant to its contingency funding plan.

Liquidity involves AGFC’s ability to raise funds to support asset growth or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. For the six months ended June 30, 2014 and the years ended

December 31, 2013 and 2012, liquidity needs were primarily met by core deposits, security and loan maturities, and amortizing investment and loan portfolios. Although access to brokered deposits, purchased funds from correspondent banks and overnight advances from the FHLB are available and have been utilized on occasion to take advantage of investment opportunities, AGFC does not generally rely on these external funding sources. As of June 30, 2014 and December 31, 2013, AGFC maintained a line of credit with a correspondent bank which provides for extensions of unsecured credit with an availability to borrow up to an aggregate $14.5 million and $15.0 million, respectively. There were no funds outstanding under this line of credit as of June 30, 2014 and December 31, 2013. As of December 31, 2012, a $30.0 million secured line of credit was available for liquidity purposes. However, no collateral was pledged and no balances were outstanding as of December 31, 2012.

The following table illustrates, during the periods presented, the mix of AGFC’s funding sources and the average assets in which those funds are invested as a percentage of average total assets for the period indicated. Average assets totaled $373.0 million for the six months ended June 30, 2014, $381.2 million for the year ended December 31, 2013 and $408.9 million for the year ended December 31, 2012.

AGFC’s primary source of funds is deposits, and its primary use of funds is loans. AGFC does not expect a change in the primary source or use of its funds in the foreseeable future. AGFC’s average net loans decreased 13.7% for the six months ended June 30, 2014 compared to the same period in 2013 and 10% for the year ended December 31, 2013 compared to the year ended December 31, 2012. AGFC predominantly invests excess funds in overnight deposits with the Federal Reserve, securities, or other short-term liquid investments until needed to fund loan growth. AGFC’s securities portfolio had a weighted average life of 5.2 years and an effective duration of 3.5 years as of June 30, 2014 and a weighted average life of 5.2 years and an effective duration of 4.0 years as of December 31, 2013.

As of June 30, 2014, AGFC had outstanding $38.9 million in commitments to extend credit and $230,000 in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2013, AGFC had outstanding $45.7 million in commitments to extend credit and $170,000 in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

As of June 30, 2014 and December 31, 2013, AGFC had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature. As of June 30, 2014, AGFC had cash and cash equivalents of $56.2 million compared to $71.0 million as of December 31, 2013. The decrease was primarily as a result of early 2014 investment security purchases to collateralize year end 2013 public body tax collection deposits, as well as a seasonal reduction in customer deposit balances.

Total stockholders’ equity increased to $43.5 million as of June 30, 2014 compared to $41.4 million as of December 31, 2013, an increase of $2.1 million or 5.1%. This increase was primarily the result of a $1.2 million increase in Other Comprehensive Income (unrealized gain on investment securities) and $869,000 in retained earnings for the period. Total stockholders’ equity decreased to $41.4 million as of December 31, 2013 compared to $42.8 million as of December 31, 2012, a decrease of $1.4 million or 3.3%. This decrease was primarily the result of a $3.1 million decline in Other Comprehensive Income, which was partially offset by retained earnings for the period of $1.7 million. Subject to written approval from its regulatory authorities, AGFC currently pays a regular quarterly dividend on its common stock in the amount of $0.25 per share. A total dividend of $109,000 was paid during the six months ended June 30, 2014 and $218,000 for the year ended December 31, 2013.

Capital management consists of providing equity to support current and future operations. Banking regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. AGFC is subject to regulatory capital requirements at the bank holding company and bank levels. See “Regulation and Supervision—Prompt Corrective Action” for additional discussion regarding the regulatory capital requirements applicable to AGFC and American Gateway Bank. As of June 30, 2014, December 31, 2013 and 2012, AGFC and American Gateway Bank were in compliance with all applicable regulatory capital requirements, and American Gateway Bank was classified as “well capitalized,” for purposes of the prompt corrective action regulations.

The following table presents the actual capital amounts and regulatory capital ratios for American Gateway Bank as of the dates indicated. The ratios for AGFC do not differ from the ratios for American Gateway Bank as of June 30, 2014 and December 31, 2013.

The following table summarizes contractual obligations and other commitments to make future payments as of December 31, 2013 (other than deposit obligations payable on demand), which include future cash payments associated with AGFC’s contractual obligations pursuant to its FHLB advances and non-cancelable future operating leases. Payments for FHLB advances will include interest of $4.4 million that will be paid over future periods. Payments related to leases are based on actual payments specified in underlying contracts. Principal advances from the Federal Home Loan Bank totaled approximately $56.5 million and $80.1 million as of December 31, 2013 and 2012, respectively. As of December 31, 2013, the advances are collateralized by a blanket floating lien on certain securities and loans, had a weighted average rate of 2.85% and mature on various dates during 2014, 2015 and 2017. Included in the advances maturing in 2017 are three $10.0 million bullets which are callable quarterly and bear interest at 2.92%, 2.97% and 3.07%, respectively.

In the normal course of business, AGFC enters into various transactions which, in accordance with generally accepted accounting principles, or GAAP, are not included in its consolidated balance sheets. AGFC enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby and commercial letters of credit which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

AGFC’s commitments associated with outstanding standby and commercial letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

Standby and commercial letters of credit are conditional commitments issued by AGFC to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, AGFC has rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. The credit risk to AGFC in issuing letters of credit is essentially the same as that involved in extending loan facilities to its customers.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. AGFC evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by AGFC, upon extension of credit, is based on management’s credit evaluation of the customer.

As a financial institution, AGFC’s primary component of market risk is interest rate volatility. AGFC’s asset liability and funds management policy provides management with the guidelines for effective funds management, and AGFC has established a measurement system for monitoring its net interest rate sensitivity position. AGFC manages its sensitivity position within its established guidelines.

Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of AGFC’s assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

AGFC manages its exposure to interest rates by structuring its balance sheet in the ordinary course of business. AGFC does not enter into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk. Based upon the nature of its operations, AGFC is not subject to foreign exchange or commodity price risk. AGFC does not own any trading assets.

AGFC’s exposure to interest rate risk is managed in accordance with policies approved by its board of directors and by the asset-liability committee in conjunction with Vining Sparks Asset Management (VSAM), who acts in a fiduciary capacity providing investment advisory services. The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits, and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk which include an analysis of relationships between interest-earning assets and interest-bearing liabilities, and an interest rate shock simulation model.

AGFC uses interest rate risk simulation models and shock analysis to test the interest rate sensitivity of net interest income and the economic value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model as are prepayment assumptions, maturity data and call options within the investment portfolio. Average lives of non-maturity deposit accounts are based on customized decay assumptions and are incorporated into the model. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

On a quarterly basis, AGFC runs two simulation models including a static balance sheet and dynamic growth balance sheet. These models test the impact on net interest income and economic value of equity from changes in market interest rates under various scenarios. Under the static and dynamic growth models, rates are shocked instantaneously based upon a parallel yield curve shift. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Internal policy regarding interest rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net interest income at risk for the subsequent one-year period should not decline by more than 5% for a 100 basis point shift, 10% for a 200 basis point shift, 15% for a 300 basis point shift, and 20% for a 400 basis point shift. Internal policy regarding interest rate simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated economic value of equity at risk for the subsequent one-year period should not decline by more than 7.50% for a 100 basis point shift, 15% for a 200 basis point shift, 22.50% for a 300 basis point shift, and 30% for a 400 basis point shift.

Periodically, parallel and non-parallel ramped rate changes over a twelve-month horizon are used in lieu of instantaneous parallel rate shocks to depict AGFC’s exposure to changes in market rates. In addition, non-parallel rate shocks are also periodically used to measure AGFC’s exposure to changes in market rates. Non-parallel simulation involves analysis of net interest income and economic value of equity under various changes in the shape of the yield curve.

The following table summarizes the simulated change in net interest income and economic value of equity over a 12-month horizon as of the dates indicated:

The results are impacted by the behavior of demand, money market and savings deposits during such rate fluctuations as well as by the large cash balances (interest-bearing overnight deposits) held by AGFC. AGFC has found that, historically, interest rates on customer deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.

The regulatory authorities exclude the available for sale mark-to-market adjustment from regulatory capital. However, since the available for sale securities portfolio will be utilized to manage interest rate risk and liquidity needs of AGFC, the aggregate market value exposure is monitored on a monthly basis in the event the securities would need to be liquidated. Internal policy guidelines have been established specifying the maximum exposure to market price volatility for the overall portfolio assuming an instantaneous parallel change in prevailing interest rates as a percent of Tier 1 Capital whereby the shocked market value of the portfolio will not decline by more than 15% with a 100 basis point shift, 20% for a 200 basis point shift, 25% for a 300 basis point shift, and 30% for a 400 basis point shift.

The following table summarizes the simulated shocked market value gain (loss) as a percent of Tier 1 Capital as of the dates indicated:

With respect to the aggregate market risk measurement, it should be noted that while the size of AGFC’s portfolio is the primary determinant of the price exposure limits as a percent of Tier 1 Capital, this measure is also sensitive to the level of interest rates and volatility exhibited in the market. AGFC’s current strategy is to allow monthly portfolio cash flows to roll off the portfolio to gradually reduce the aggregate price risk exposure over time. As a result, trading activity is limited to transactions necessary to meet collateral requirements or to improve aggregate risk, credit risk, portfolio concentrations, and/or liquidity. As of June 30, 2014 AGFC was outside its aggregate market risk as a percent of Tier 1 Capital policy limits in the +300 and +400 basis point scenarios; however, when compared to the market risk levels measured as of December 31, 2013, the current market risk levels reflect management’s strategy to reduce the aggregate risk within the portfolio over time.

AGFC’s consolidated financial statements and related notes included elsewhere in this proxy statement/prospectus have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.

Unlike many commercial and industrial companies, substantially all of AGFC’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on its performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do reflect general levels of inflation.

AGFC’s accounting and reporting policies conform to GAAP, and the prevailing practices in the banking industry. However, AGFC also evaluates its performance based on certain additional financial measures discussed in this proxy statement/prospectus as being non-GAAP financial measures. AGFC classifies a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in its statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that AGFC discusses in this proxy statement/prospectus should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which AGFC calculates the non-GAAP financial measures that AGFC discusses in this proxy statement/prospectus may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar, or with names similar, to the non-GAAP financial measures AGFC has discussed in this proxy statement/prospectus when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value per common share is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. In general, (1) tangible common equity is stockholders’ equity less preferred stock, goodwill and core deposit intangible and other intangible assets, net of accumulated amortization, and (2) tangible book value per common share is tangible common equity divided by shares of common stock outstanding. For AGFC, tangible common equity is the same as stockholders’ equity, and tangible book value per common share is the same as stockholders’ equity divided by shares of common stock outstanding. The most directly comparable GAAP financial measure for tangible book value per common share is book value per common share.

AGFC believes that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing tangible book value.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and presents tangible book value per common share compared to book value per common share:

Tangible Common Equity to Tangible Assets. Tangible common equity to tangible assets is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. In general, tangible common equity is calculated as described above, and tangible assets is calculated as total assets less goodwill, core deposit intangible and other intangible assets, net of accumulated amortization. AGFC does not have any intangible assets. The most directly comparable GAAP financial measure for tangible common equity to tangible assets is total common stockholders’ equity to total assets.

AGFC believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing its tangible common equity or tangible assets.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets:

AGFC’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and with general practices within the financial services industry. Application of these principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. AGFC bases its estimates on historical experience and on various other assumptions AGFC believes to be reasonable under current circumstances. These assumptions form the basis for its judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. AGFC evaluates its estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

AGFC has identified the following accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of its financial statements to those judgments and assumptions, are critical to an understanding of its financial condition and results of operations. AGFC believes the judgments, estimates and assumptions used in the preparation of its financial statements are appropriate.

Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them until maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. Securities to be held for indefinite periods of time but may be sold prior to maturity are classified as available for sale and carried at fair value, with the unrealized holding gains and losses reported in other comprehensive income, net of tax. Management determines the appropriate classification of securities at the time of purchase.

Interest income includes amortization of purchase premiums and discounts. Realized gains and losses are derived from the amortized cost of the security sold. Credit related declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses, with the remaining unrealized loss recognized as a component of other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of AGFC to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans held for sale consist of certain mortgage loans originated and intended for sale in the secondary market and are carried at the lower of cost or estimated fair value on an individual loan basis. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Currently AGFC does not originate mortgage loans for sale into the secondary market. However, prior to January 2014, AGFC obtained purchase commitments from secondary market investors prior to closing the loans and did not retain the servicing obligations related to any such loans upon their sale. Gains and losses on sales of loans held for sale are based on the difference between the selling price and the carrying value of the related loan sold.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at the amount of unpaid principal, reduced by an allowance for loan losses. Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Fees associated with the originating of loans and certain direct loan origination costs are reflected in the results of operations in the period incurred, with no adjustment to yield over the life of the loan.

The accrual of interest on loans is discontinued when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed against income. Subsequent cash receipts on nonaccrual loans are accounted for on the cost recovery method, until the loans qualify for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments in accordance with the terms of the loan agreement are reasonably assured.

The allowance for loan losses is comprised of two components. The first component, the general reserve, is determined in accordance with current authoritative accounting guidance that considers historical loss rates for the last three years adjusted for qualitative factors based upon general economic conditions and other qualitative risk factors both internal and external to AGFC. Such qualitative factors include current local economic conditions and trends including unemployment, changes in lending staff, policies and procedures, changes in credit concentrations, changes in the trends and severity of problem loans, and changes in trends in volume and terms of loans. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in AGFC’s historical loss rates. For purposes of determining the general reserve, the loan portfolio, less impaired loans, is multiplied by AGFC’s adjusted historical loss rate. The second component of the allowance for loan losses, the specific reserve, is determined in accordance with current authoritative accounting guidance based on probable losses on specific classified and impaired loans.

The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries).

Delinquency statistics are updated at least monthly. Internal risk ratings are considered the most meaningful indicator of credit quality for new commercial real estate, construction, and commercial and industrial loans. Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the allowance for loan losses. Internal risk ratings are updated on a continuous basis.

Loans are considered impaired when, based on current information and events, it is probable AGFC will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows discounted at the loan’s effective interest rate or the loan’s observable market price, or based upon the fair value of the collateral if the loan is collateral dependent. If a loan is impaired, a specific valuation allowance is allocated based on collateral values or the present value of estimated cash flows. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

AGFC’s policy requires measurement of the allowance for an impaired collateral dependent loan based on the fair value of the collateral. Other loan impairments are measured based on the present value of expected future cash flows or the loan’s observable market price. At December 31, 2013 and 2012, all significant impaired loans have been determined to be collateral dependent, and the allowance for loss has been measured utilizing the estimated fair value of the collateral.

From time to time, AGFC modifies its loan agreement with a borrower. A modified loan is considered a troubled debt restructuring when two conditions are met: (i) the borrower is experiencing financial difficulty and (ii) concessions are made by AGFC that would not otherwise be considered for a borrower with similar credit risk characteristics. Modifications to loan terms may include a lower interest rate, a reduction of principal, or a longer term to maturity. Once modified in a troubled debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, AGFC evaluates the loan for a specific allowance for loan loss allocation. AGFC continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured, AGFC provides a specific allowance for loan loss allocation for the amount of the loan that exceeds the value of the related collateral.

AGFC has certain lending policies and procedures in place which are designed to maximize loan income with an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis and makes changes as appropriate. Management receives frequent reports related to loan originations, credit quality, concentrations, delinquencies, non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geography.

Real estate loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. Underwriting standards are designed to determine whether the borrower possesses sound business ethics and practices, and to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Real estate loans are primarily based on projected cash flows and, secondarily, as loans secured by real estate. The repayment of real estate loans is generally largely dependent on the successful operation of the property securing the loans or the business conducted on the property securing the loan. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing AGFC’s real estate portfolio are generally diverse in terms of type and geographic location throughout the Baton Rouge Metropolitan Statistical Area. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.

Commercial and industrial loans are also subject to the underwriting standards and processes similar to real estate loans. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial and industrial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and include personal guarantees.

AGFC utilizes methodical credit standards and analysis to supplement its policies and procedures in underwriting consumer loans. AGFC’s loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimizes risk.

ASU 2013-02, “Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-02 amended recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. The amendments included in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require AGFC to provide information about the amounts reclassified out of accumulated other comprehensive income by component. As adoption of ASU 2013-02 amends only disclosure requirements, the adoption had no impact on AGFC’s results of operations or financial position.

Business First is a registered bank holding company headquartered in Baton Rouge, Louisiana. It was incorporated on July 20, 2006 to serve as a bank holding company under the BHC Act for Business First Bank. Business First became the parent company of Business First Bank on April 1, 2007. Business First currently owns all of the outstanding shares of the capital stock of Business First Bank. As of June 30, 2014, on a consolidated basis, Business First had total assets of $683.9 million, total loans of $537.4 million, total deposits of $589.0 million and shareholders’ equity of $76.1 million.

Business First Bank is a Louisiana state non-member bank that was established in February of 2006. Business First Bank serves the state of Louisiana with banking centers in Baton Rouge, Lafayette, the New Orleans’ Northshore, Northwest Louisiana (Shreveport/Bossier) and Southwest Louisiana (Lake Charles). Business First Bank also has a Loan Production Office in the Houma/Thibodaux Bayou Region. In each region Business First Bank has experienced bankers led by a local president who are all involved in the community and industry. Business First Bank’s principal office is located in Baton Rouge, Louisiana.

Business First Bank offers a full range of banking services, including commercial and consumer banking. As of June 30, 2014, Business First Bank had total assets of $683.1 million, total loans of $537.4 million, total deposits of $590.4 million and shareholders’ equity of $73.3 million.

The principal executive office of Business First is located at Business First Bank Plaza, 8440 Jefferson Highway, Suite 101, Baton Rouge, Louisiana 70809. Business First’s telephone number is (225) 248-7600 and its website address is www.b1bank.com.

Business First’s mission is to be the financial institution of choice for Louisiana enterprises and their owners and employees. To achieve this mission Business First concentrates its resources on two fronts: convenience-enhancing technology and products and recruitment, retention and empowerment of world class employees. Business First believes a bank should be measured by the value it adds to its customer’s business processes.

The focus of Business First’s strategy has been, and continues to be, the establishment and enhancement of an attractive commercial banking franchise by maximizing long-term shareholder value through growth in its loans, investments, deposits and net income in a manner consistent with safe, sound and prudent banking practices while providing personalized customer service consistent with the needs of small- and mid-sized businesses, their owners and employees. To accomplish this goal, Business First utilizes the following business strategy:

Business First focuses on providing private banking services primarily to small businesses and professionals. Rather than attempt to compete for customers with larger financial institutions on a transaction-by-transaction basis, Business First works to build robust, lasting partnerships with its customers.

By locating in six metropolitan areas and decentralizing as much decision-making authority as sound banking practices will permit, Business First endeavors to capture both the stability of geographic diversification within Louisiana and the loyalties of a customer base that only a locally-owned community bank can provide. Each market Business First serves has a local president and a director’s loan committee comprised of community leaders who have a stake in the institution. Business First believes that one of its greatest competitive advantages is the depth of its statewide network of entrepreneurial directors.

Consistent with its focus on service, Business First has invested heavily in people and technology, not just brick and mortar infrastructure. Business First operates with a limited number of more experienced personnel, while also limiting the number of its offices, providing courier service, universal ATM and internet account access, digital deposits, and personalized, flexible, name-recognizing service.

Business First also endeavors to serve its constituent communities in unique ways—hosting non-profit board meetings, for example, or encouraging its employees to participate in financially-centered volunteer efforts, whether that be serving as board members themselves or participating in school-based educational activities. Through these activities, Business First strives to foster relationships with community leaders and a reputation of positive involvement in its communities.

Business First has historically grown organically by targeting markets in Louisiana that it believes provide attractive banking opportunities. Within these markets, Business First engages a local board of directors (some of which serve as advisory board members) and hires local management. These local boards of directors and management are given authority to build Business First’s banking franchise within their respective markets. Business First believes this structure provides many of the benefits of smaller, locally-owned banks while permitting it to serve multiple markets.

While Business First continues to prioritize organic growth, it also seeks to capitalize upon other opportunities as they arise. In particular, Business First will consider opportunities such as the proposed merger with AGFC, which it believes will enhance core deposits and provide cost savings through economies of scale. Other than the proposed merger with AGFC and some very preliminary plans regarding possible expansion into the New Orleans, Louisiana market, Business First does not have any immediate plans for expansion into new markets. It will, however, continue to evaluate growth opportunities and may add other markets to its geographic footprint as opportunities arise.

Business First is a full-service financial services company with a focus on small- to mid-sized businesses, their officers and employees. Business First satisfies its commercial and retail customers’ banking needs with an encompassing range of financial services.

Business First Bank is an independent financial institution that is engaged in substantially all of the business operations customarily conducted by financial institutions in Louisiana. It offers, among other products, checking, savings and money market accounts, certificates of deposit, commercial and consumer loans, mortgage loans, real estate loans, and other installment and term loans. In addition, Business First Bank offers its customers wealth management products, drive-through banking facilities, night depository, personalized checks, credit cards, debit cards, internet banking, electronic funds transfers through ACH services, domestic and foreign wire transfers, travelers’ checks, cash management, vault services, loan and deposit sweep accounts and lock box services.

Business First has two wholly-owned subsidiaries. Business First Bank is a direct, wholly-owned subsidiary of Business First. Business First Insurance LLC is a wholly-owned subsidiary of Business First Bank, and is, therefore, an indirect wholly-owned subsidiary of Business First. Business First Insurance LLC is currently inactive, and does not engage in any material business activities.

Business First competes with several local and regional commercial banks, thrifts, credit unions and mortgage companies for deposits, loans, and other banking-related financial services. There is intense competition in Business First’s market areas from other financial institutions as well as other “non-bank” companies that engage in similar activities. Some of Business First’s competitors are not subject to the degree of regulatory review and restrictions that apply to it. In addition, Business First must compete with much larger financial institutions that have greater financial resources than it does, and that compete aggressively for market share. These competitors attempt to gain market share through their financial product mix, pricing strategies and banking center locations. Business First also competes with insurance companies, savings banks, consumer finance companies, investment banking firms, brokerage houses, mutual fund managers, investment advisors, and credit unions. Retail establishments compete for loans by offering credit cards and retail installment contracts for the purchase of goods and merchandise.

Business First anticipates that competition from both bank and non-bank entities will continue to grow. Accordingly, Business First builds and implements strategic plans to address competitive factors in the various markets it serves. Business First has been able to compete effectively with other financial institutions by emphasizing customer service and local office decision-making, by establishing long-term customer relationships and building customer loyalty, and by providing products and services designed to address the specific needs of its customers.

As of June 30, 2014, Business First had 90.5 full-time equivalent employees; 50 of whom are officers of Business First Bank. Business First is committed to hiring and retaining high quality employees to execute its strategic plan and considers its relations with employees to be very good.

Business First and its subsidiaries are defendants in various lawsuits arising in of the normal course of business. In the opinion of management, the ultimate resolution of such matters should not have a material adverse effect on Business First’s consolidated financial condition or results of operations. Litigation is, however, inherently uncertain, and Business First cannot make assurances that it will prevail in any of these actions, nor can it estimate with reasonable certainty the amount of damages that it might incur.

Business First’s current principal offices are located 8440 Jefferson Highway, Baton Rouge, Louisiana. All of Business First’s banking offices are located in the State of Louisiana. The following table provides information about all of Business First’s locations.

Business First had no publicly announced plans or programs for purchase of stock during 2013. There were no shares of Business First common stock repurchased during the year ended December 31, 2013.

There were no unregistered sales of Business First’s common stock in 2013, 2012 or the six-month period ended June 30, 2014.

The boards of directors and executive management of each of Business First and Business First Bank will continue as the boards of directors and executive management of each of Business First and Business First Bank following the proposed merger transactions with AGFC and American Gateway Bank. Accordingly, the following discussion also provides information regarding the management of Business First and Business First Bank as the surviving entities from the proposed merger transactions.

The boards of directors of Business First and Business First Bank are each made up of the same 17 individuals. The directors of Business First are elected by its shareholders at Business First’s annual shareholders’ meeting. The elected directors hold office until the next annual meeting, or until their successors are duly elected and qualified. Business First’s executive officers are appointed by and serve at the discretion of its board of directors.

The directors of Business First Bank are elected by Business First, as the sole shareholder of Business First Bank, each year and they hold office for a term of one year or until their successors are chosen and qualified. The executive officers of Business First Bank are appointed by and serve at the discretion of its board of directors. The following table sets forth the current directors and executive officers of Business First and Business First Bank:

A brief description of the background of each of Business First’s directors and executive officers is set forth below. No director or executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or executive officer or director.

Lloyd Benny Alford. Lenny Alford serves as a director for Business First and Business First Bank. Mr. Alford owns and operates Benny’s Car Wash & Oil Change, headquartered in Baton Rouge, Louisiana. He was first employed by the car wash in 1964, and took over the operation from his father in 1970. He has since opened six locations and anticipates opening a seventh location in the near future. Mr. Alford brings to the Business First board of directors valuable knowledge and experience relating to the ownership and management of small businesses.

John Martindale Engquist. John Engquist serves as a director for Business First and Business First Bank. Mr. Engquist has served as Chief Executive Officer and as a director for H&E Equipment Services, Inc. since its formation in 2005. Mr. Engquist also previously served as President of H&E Equipment Services since its formation in September 2005 until November 2, 2012. He had served as President, Chief Executive Officer and Director of H&E LLC from its formation in June 2002 until its merger with and into the H&E Equipment Services in February 2006. He also served as President and Chief Executive Officer of Head & Engquist Equipment, LLC (“Head and Engquist”) from 1990 and director of Gulf Wide Industries, LLC (“Gulf Wide”) from 1995, both predecessor companies of H&E LLC. From 1975 to 1990, he held various operational positions at Head & Engquist, starting as a mechanic’s helper. Mr. Engquist serves as a director on the boards of a number of private companies. He also serves on the Leadership Council of St. Jude Children’s Research Hospital in Memphis, Tennessee. Mr. Engquist owns 50% of the membership interest in Old Towne Development Group, L.L.C. and serves as the Chairman of the Board of Managers. Mr. Engquist is a former board member of Baton Rouge Business Bank and Cajun Constructors, Inc. Mr. Engquist’s business experience, including with a public company and previously with another financial institution, provides him with unparalleled experience and insight that are valuable to Business First’s board.

John Graves. John Graves serves as a director for Business First and Business First Bank. Mr. Graves is President of Evans-Graves Engineers, Inc., in Baton Rouge, Louisiana, and has served as the firm’s President since 1986. Mr. Graves holds a bachelor’s degree in civil engineering from Louisiana State University. He previously represented East Baton Rouge Parish on the Regional Planning Commission for 26 years, and he presently serves as Chairman of the Civil and Environmental Engineering External Advisory Board at LSU. He also currently serves on the board of directors for Pennington Biomedical Research Foundation. Mr. Graves brings entrepreneurial and business building skills and experience to Business First’s board of directors. He also provides valuable insight and experience as a result of his service on the boards of directors for other companies and institutions.

Robert S. Greer, Jr. Mr. Greer serves as Chairman of the Board of Business First and Business First Bank. Mr. Greer previously served as President of multiple insurance companies during his career. He retired in 2013 from his position as President and Chief Executive Officer of LEMIC Insurance Company, a workers’ compensation insurer in Baton Rouge, Louisiana. Prior to his retirement, Mr. Greer served as the President and Chief Executive Officer of LEMIC Insurance Company since 2001. Mr. Greer holds a bachelor’s degree in insurance from Louisiana State University. Mr. Greer also currently serves as a director of Starmount Life Insurance and as a director of Woman’s Hospital. Mr. Greer benefits the Business First board of directors through his extensive business knowledge and experience in the insurance industry as well as with valuable insight gained through his service on other boards of directors. His commitment to Business First’s success is also demonstrated by his service as its Chairman of the Board.

Rolfe Hood McCollister, Jr. Rolfe McCollister, Jr. serves as a director for Business First and Business First Bank. Mr. McCollister is the founder of Louisiana Business, Inc., which publishes Greater Baton Rouge Business Report (started in 1982), 225 magazine, inRegister magazine, Daily Report online news, Louisiana NEXT, Welcome magazine, Baton Rouge Region Guide and other specialty publications. Louisiana Business, Inc., also produces the Baton Rouge Business Awards and Hall of Fame, Influential Women in Business, the Louisiana Business Symposium, Forty Under 40 and several other annual events. Mr. McCollister is a graduate of Louisiana State University. His business management experience and many community contacts enable him to make valuable contributions to the board of directors of Business First.

Andrew D. McLindon. Andrew McLindon serves as a director for Business First and Business First Bank. Mr. McLindon has served since 1989 as President and Chief Executive Officer of Mainspring Companies, LLC, a management firm that oversees operations for the following companies: MBD Construction, a commercial construction firm; MBD Maintenance, a commercial building maintenance company; MBD Automation, a automated equipment installation provider; Genlease, a provider of emergency power solutions; McLindon Development, a real estate development company; and 4 Real Estate Services, a property management company.

Mr. McLindon earned a bachelor’s degree in construction management from Louisiana State University. Mr. McLindon brings executive decision-making, leadership and risk assessment skills to the Business First board of directors as a result of his experience in the construction industry. His experience in real estate development and construction also benefit the Business First board of directors.

David R. Melville III. David R. “Jude” Melville, III serves as a director, president, and Chief Executive Officer of Business First and Business First Bank. Mr. Melville has served in these capacities since 2011 and has served in various management roles since the bank’s inception in 2006. Prior to serving in the banking industry, Mr. Melville served as a captain in the United States Air Force. Mr. Melville earned a bachelor’s degree in social studies from Harvard College and a Master’s of Science degree in Management from the London School of Economics. Mr. Melville is also a 2007 graduate of the Graduate School of Banking at Louisiana State University. He is active in the not for profit community, serving at various times as Treasurer of the United Way of Northwest Louisiana, Vice-Chairman of Woody’s Home for Veterans, Treasurer of Iris Women’s Domestic Violence Shelter, and as a member of the Young Presidents Organization (YPO), the Committee of 100, and on the board of Louisiana Association of Business and Industry (LABI).

Patrick E. Mockler. Patrick Molker serves as a director for Business First and Business First Bank. Mr. Mockler has served as President of Mockler Beverage Company, ALP since 2007, and has been a partner of Mockler Beverage Company, ALP since 1995. Mr. Mockler holds a bachelor’s degree in international trade and finance from Louisiana State University. He has also served as a partner of New Orleans Eagle Investments, LLC since 2009. Mr. Mockler is an active participant in his community, serving as President and Vice-President of the board of directors of the Baton Rouge Ancient Athlete Society, as a director of the Young President’s Organization and as a director of Istrouma Council of Boy Scouts. Mr. Mockler brings valuable business management skills and key relationships to the board of directors of Business First.

David A. Montgomery. David Montgomery serves as a director for Business First and Business First Bank. Mr. Montgomery has served as Vice President of Montgomery Agency, Inc., an independent insurance agency, since 1990. Mr. Montgomery is a Certified Public Accountant and he is currently a councilman at large with Bossier City, Louisiana. He also served for 12 years as the Chairman of the Budget Committee for the Bossier City Council. Since 1996, Mr. Montgomery has served on the Finance Committee for North Louisiana Volunteers of America. Mr. Montgomery also holds a bachelor’s degree in accounting from Louisiana State University. Mr. Montgomery brings extensive knowledge of the insurance and accounting industries to the Business First board of directors. He also provides valuable knowledge and insight derived from his service for civic and governmental organizations.

Nanette Noland. Nanette serves as a director for Business First and Business First Bank. Ms. Noland has served as President and Chief Executive Officer for The Powell Group, LLC since 1991. The Powell Group, LLC is a family-owned holding company consisting of thirteen diverse companies involved in businesses ranging from agriculture to communications. Ms. Noland earned a bachelor’s degree from Louisiana State University and teaches a course in entrepreneurship at the Louisiana State University, E.J. Ourso College of Business. She also served on the boards of directors of several non-profit and civic organizations. Ms. Noland benefits the Business First board of directors through her extensive skills and experience in the areas of entrepreneurship, business and executive management. She also has valuable connections within the communities served by Business First.

Arthur Price. Arthur Price serves as a director for Business First and Business First Bank. Mr. Price has served as Vice President, Finance / CFO for Badger Oil Corporation for over twenty years. Badger Oil and its affiliates participate in the exploration, drilling and production of crude oil and natural gas, with primary operations in the Louisiana Gulf Coast region and the Outer Continental Shelf of the Gulf of Mexico. Prior to joining Badger Oil, Mr. Price worked as an oil and gas accountant with a specialized firm located in Lafayette, Louisiana. As a senior member of the oil and gas community, Mr. Price is an active board member of the Louisiana Oil and Gas Association and the Louisiana Association of Business and Industry, where he is a current member of the Executive Committee. Mr. Price is also a former member of the board of The Lafayette Petroleum Club, having served as Treasurer and President.

Mr. Price received a Bachelor of Science degree in Business Administration from the University of Southwestern Louisiana (now The University of Louisiana, Lafayette) in 1989 and is a Certified Public Accountant.

Fayez K. Shamieh, M.D. Dr. Fayez Shamieh serves as a director for Business First and Business First Bank. Dr. Shamieh is a physician specializing in neurology. In 1979, Dr. Shamieh founded Neuro Associates in Lake Charles, Louisiana, and has been a senior member at the clinic since that time. Dr. Shamieh earned a degree in medicine from Ain Shams University in Cairo, Egypt. He currently serves as a councilor for Southern Medical Associates and has previously served on the board of directors for the Louisiana State Medical Society. Dr. Shamieh brings entrepreneurial and business building skills and experience to the board of directors, having successfully managed his own medical clinic for over thirty years. He also has valuable connections within the business and medical communities served by Business First.

Stewart Slack. Stewart Slack serves as a director for Business First and Business First Bank. Mr. Slack has served as Vice President of KDC Real Estate Development & Investments since 2013 and as President of Slack-Alost Development since 1998. He previously served as President of Slack-Alost Architecture, a commercial architecture firm. He has also served as a director for several other organizations and institutions. Mr. Slack served as a director for Premier Bank, later Bank One, from 1989 to 2000 and he previously served on the board of directors of the LSU Honors College, as state-wide fund raising chairman of Forever LSU. He also served on the board of directors of The One Foundation, as a director and past President of The Strand Theater Corporation and on the board of directors of the Shreveport Chamber of Commerce. Mr. Slack also served on the LSU Board of Supervisors and was Chairman from 2004 to 2005. Ms. Slack currently sits on the board of directors of the LSU Health Sciences Center Foundation. Mr. Slack obtained a degree in architecture from Louisiana State University. He has extensive business knowledge and experience in the real estate industry. That experience, combined with his service on other boards of directors, benefits Business First. Most notably, Mr. Slack brings to Business First over ten years of prior experience as a bank director.

Kenneth Smith. Kevin Smith serves as a director for Business First and Business First Bank. Mr. Smith is President and Chief Executive Officer of T. Baker Smith, LLC, a professional services firm that provides planning, environmental, surveying, engineering and construction management services. Mr. Smith has been with T. Baker Smith, LLC since 1980. He also serves as Managing Partner for the following companies: TBS Holding, LLC, a real-estate holding company; Four C’s of Houma, LLC, a personal investment company; and Mega Beast Commercial Realty, a commercial real estate company. Mr. Smith serves as President for the Louisiana Pipeliners Association, past President of South Central Industrial Association, and he currently serves as a member of the Louisiana Oil & Gas Association and Louisiana Association of Business & Industry. Mr. Smith earned a degree in civil engineering from Louisiana Tech University. He brings extensive business skills and experience to the board of directors of Business First, having successfully managed his own business for many years. Mr. Smith is also an active leader in his community and serves on the boards of many civic organizations. His many professional and community contacts benefit Business First.

Thomas Everett Stewart, Jr. Thomas Stewart serves as a director for Business First and Business First Bank. Mr. Stewart has been retired since 2009. From 1988 to 2009, he served as President of Interstate Logos, LLC, a wholly-owned subsidiary of the Lamar Advertising Company. Mr. Stewart also served as a board member of Lamar Advertising Company for several years, and he served on the board of The Business Bank of Baton Rouge for two years. Mr. Stewart earned a bachelor’s degree in business administration from Auburn University. He has extensive business knowledge and brings years of experience managing a subsidiary of a publicly-traded company to the Business First board of directors.

Steve White. Steve White serves as a director for Business First and Business First Bank. Mr. White has served as the Business Manager for the William A. Robinson Trust since January or 2009. He also serves as a member of the board of directors of Obenco IV, an oil and gas venture with development and production in an approximate four-state area. Mr. White graduated from Louisiana Tech University with a Bachelor of Science degree in petroleum engineering in 1985. Mr. White’s experience in asset management and his knowledge of the oil and gas industry are valuable to Business First’s board of directors.

Robert Yarborough. Mr. Yarborough serves as a director for Business First and Business First Bank. Mr. Yarborough is the Chief Executive Officer and co-owner of Manda Fine Meats, a meat provision distribution company headquartered in Baton Rouge, Louisiana. Mr. Yarborough has been with Manda Fine Meats since 1976. He earned a bachelor’s degree in marketing from Louisiana State University. Mr. Yarborough has served as a director for a number of non-profits and business associations, and currently serves as a board member of the LSU System Board of Supervisors. Mr. Yarborough brings leadership, business knowledge and valuable community contacts to the board of directors of Business First through his long experience in managing a business and through his service on various other boards.

Steven Champney. Steven Champney has served as the Executive Vice President and Chief Financial Officer of Business First Bank since 2008. He has worked in financial management positions within the banking industry since 1990, including four years as a consultant to Louisiana area banks for Arthur Andersen, LLP. Mr. Champney earned a bachelor’s degree in business administration and an MBA from the University of Southern Mississippi.

Robert Bond. Mr. Bond is the Executive Vice President and Capital Region Chief Executive Officer of Business First Bank. He has been with Business First Bank since 2009. Prior to joining Business First Bank, Mr. Bond worked for JP Morgan Chase Bank, NA for 14 years. He earned a bachelor’s degree in business and public administration and an MBA from Louisiana State University.

Sonya Burton. Sonya Burton has been with Business First Bank since 2007 and she currently serves as Chief Risk Officer. She also serves as Secretary of Business First. Since 2001, Ms. Burton has been in the banking industry specializing in regulatory matters and risk. Ms. Burton is a graduate of Southeastern Louisiana University and Louisiana State University holding a Bachelors of Science in Finance, a Masters of Business Administration and a Graduate degree in Banking. Ms. Burton is certified in Risk Management Assurance and is a Certified Financial Services Auditor.

Don Hingle. Don Hingle has been with Business First Bank since July 2009 and currently serves as the Executive Vice President of the Southeastern Louisiana Market, which includes Houma, Covington and future expansion into New Orleans. Prior to his promotion to Executive Vice President in February of 2014, Mr. Hingle served as the Regional President of Business First Bank’s Bayou Region (Houma Market). Mr. Hingle manages all aspects of the banking centers in the above-described markets, and all market Presidents report to him. Mr. HIngle is also responsible for managing business development and operations in the markets he oversees. Mr. Hingle holds a Bachelors Degree in Finance and a Masters of Business Administration from the University of New Orleans.

Gregory Robertson. Mr. Robertson serves as the Western Region Chief Executive Officer of Business First Bank. He has been in the banking business since 1986. Mr. Robertson worked at City Savings Bank from 1996 to 2011, where he served in many capacities, including branch manager, commercial lender, program manager for City Savings Financial Services and Senior Vice President. As Western Region Chief Executive Officer for Business First Bank, he is a leader and is involved with business development, management and production for the Lake Charles, Lafayette and Shreveport markets. Mr. Robertson also holds the title of Lake Charles Market President, Head of Mortgage and Investments.

The Audit Committee of the board of directors of Business First Bank has determined that a majority of its directors are independent, as that term is defined below. The Audit Committee has determined that Mr. Melville is not independent, because he is an employee of Business First Bank. The Audit Committee annually reviews relationships that exist between Business First and each director and his or her related interests for the purpose of determining whether the director is independent. The full board conducts this review on directors serving as members of the Audit Committee. A director is presumed to be independent unless the director (or his or her immediate family members):

The Governance Committee does not consider any additional transactions below the threshold amount of $100,000 in determining whether any director is independent.

The Compensation Committee of the board of directors of Business First Bank consists of four directors: Robert Greer (Chair), John Engquist, Robert Yarborough and Rolfe McCollister. No member of this Committee has at any time been an officer or employee of Business First, Business First Bank or any of Business First’s subsidiaries and all are considered independent based on guidelines described above. None of Business First’s executive officers serves, or in the past year served, as a member of the board of directors or Compensation Committee of any entity that has or had one or more of its executive officers serving on Business First’s board of directors or the Compensation Committee.

Business First’s named executive officers for 2014, which consist of its principal executive officer and the two other most highly compensated executive officers, are:

The following table provides information regarding the compensation of Business First’s named executive officers for the fiscal years ended December 31, 2013 and 2012. The compensation shown on the table below is paid to such employees by Business First Bank.

The following table provides information regarding outstanding equity awards held by each of Business First’s named executive officers on December 31, 2013.

Business First Bank is a party to employment agreements with certain of its named executive officers and certain of its other employees. With respect to its named executive officers, Business First Bank has entered into an employment agreement with each of David (“Jude”) Melville III and Steven Champney. A summary description of the employment agreements with each of these named executive officers is set forth below.

David Melville, III. Business First Bank has entered into an employment agreement with David (“Jude”) Melville, III regarding his service as its Chief Executive Officer. The employment agreement with Mr. Melville provides for an automatically renewing one-year term unless Business First Bank gives notice to Mr. Melville at least 90 days prior to the end of the term that the term will not be extended. The agreement, as amended, provides for Mr. Melville to receive a base salary of not less than $274,500 annually, as well as for Mr. Melville’s participation in benefit plans and incentive bonus plans offered by Business First Bank. Mr. Melville is also entitled to paid vacation, a vehicle allowance, a country club membership and health insurance.

If Mr. Melville’s employment is terminated by Business First Bank without cause (as defined in the agreement) during the term of the agreement or if Mr. Melville terminates is his employment for good reason (as defined in the agreement), he will be entitled to payment of an amount equal to two times his then current annual base salary, plus certain continued benefits to which he would otherwise be entitled in accordance with the terms and provisions of any such plans or programs. In addition, if, following a change-in-control (as defined in the agreement) of Business First or Business First Bank, Mr. Melville remains employed for a 12 month period, he will be permitted to terminate his employment for any reason within 90 days of the end of such 12 month period and receive compensation as if he had terminated his employment for good reason. Mr. Melville would also be provided with a tax “gross-up” payment if any of the payments above subject him to certain excise taxes.

Steven Champney. Business First Bank has entered into an employment agreement with Steven Champney regarding his service as its Executive Vice President and Chief Financial Officer. The employment agreement with Mr. Champney provides for a term ending August 31, 2018; provided, that the agreement renews for an additional two years at the end of the term (and each extension of the term) unless Business First Bank gives notice to Mr. Champney at least 60 days prior to the end of the term that the term will not be extended. The agreement, as amended, provides for Mr. Champney to receive a base salary of not less than $239,200 annually, as well as for Mr. Champney’s participation in benefit plans and incentive bonus plans offered by Business First Bank. Mr. Champney is also entitled to paid vacation, a vehicle allowance, membership in a country club and health insurance. The agreement further provides for the issuance of options to purchase 50,000 shares of our common stock, which options continue to vest in equal increments over a term of ten years from the date they were granted. The agreement also provides for Mr. Champney’s participation in future grants of stock options to Business First Bank’s senior executives.

Mr. Champney’s employment agreement, as amended, provides for severance equal to that of other senior executive officers of Business First Bank. Accordingly, severance benefits for Mr. Champney would be similar to the benefits described above with respect to Mr. Melville’s agreement.

Other Employment Arrangements. In addition to the employment agreements described above, Business First Bank has entered into employment and/or compensation arrangements with certain of its officers with varying terms taking into consideration the nature of the position and the particular individual’s skills and experience. Business First’s overall executive compensation program is designed to attract, motivate, reward and retain key members of its management. A major goal of Business First’s compensation program is to align the compensation structure for its executives with shareholders’ interests and current market practices.

All of Business First’s officers serve at the pleasure of its board of directors. If any of these individuals leaves his or her respective position, Business First’s business, financial condition, results of operations may suffer.

In 2006, Business First’s board of directors adopted the 2006 Stock Option Plan pursuant to which certain of its officers, directors and employees became eligible to receive options to purchase shares of Business First’s common stock. Business First’s Stock Option Plan, as amended, permits a maximum number of 1,500,000 shares to be issued upon the exercise of awards granted under the plan.

As of June 30, 2014, Business First had granted total options to purchase 914,290 shares of its common stock, of which 684,311 were vested, and an additional 585,710 shares of Business First common stock remained available for issuance under the plan. At June 30, 2014, the weighted average exercise price of the stock options issued under Business First’s Stock Option Plan was $12.29.

Business First’s Stock Option Plan is intended to provide certain of its officers, directors and employees the opportunity to acquire a proprietary interest in the success of Business First by granting stock option awards to

such individuals. Specifically, the plans are intended to advance the interests of Business First by (1) enabling it to attract and retain the best available individuals for positions of substantial responsibility; (2) providing additional incentive to such persons by affording them an opportunity for equity participation in its business; and (3) rewarding officers, directors and employees for their contributions.

Business First’s Stock Option Plan is administered by the board of directors of Business First. The board of directors has authority with respect to the plan to:

Both “Incentive Stock Options” and “Non-Qualified Options” may be granted under Business First’s Stock Option Plan from time to time. Incentive Stock Options are stock options intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended. Non-Qualified Options are stock options that do not satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended.

Under the plan, the aggregate fair market value (determined as of the date an option is granted) of the shares with respect to which Incentive Stock Options are exercisable for the first time by any optionee during any calendar year may not exceed $100,000. The option price to be paid upon exercise of an Incentive Stock Option or a Non-Qualified Option is determined by the board of directors, but in no event may such price be less than the fair market value per share of the common stock of Business First on the date of the grant.

The board of directors of Business First has the discretion to fix the period during which any option (including Incentive Stock Options and Non-Qualified Options) may be exercised, provided that no options may be exercised more than 10 years after the date of grant. Each option may be exercised upon such terms and conditions as the board of directors determines. In making any determination as to whom options shall be granted, and as to the number of shares to be covered by such options, the board of directors considers the duties of the respective officers, directors and employees, their present and potential contributions to Business First’s success, profitability and growth, and such other factors as the board deems relevant in connection with accomplishing the purposes of the Stock Option Plan.

Each of Business First’s directors who is not also an executive officer of Business First Bank receives compensation for attending various board of directors and committee meetings. Business First directors who are not executive officers of Business First Bank receive $500.00 for their attendance at each board meeting as well as a monthly retainer. Business First’s Chairman of the Board receives a monthly retainer of $1,250.00, each director receives a monthly retainer of $416.67 and each Committee Chairperson (except for the Compensation Committee Chairperson) receives an additional monthly retainer of $333.33. The additional monthly retainer for the Compensation Committee Chairperson is $208.33.

The following table sets forth compensation paid, earned or awarded during 2013 to each of Business First’s directors and the directors of Business First Bank, other than directors who are also named executive officers, whose compensation is described in the “Summary Compensation Table” above.

Directors have been and will continue to be reimbursed for travel, food, lodging and other expenses directly related to their activities as directors. Directors are also entitled to the protection provided by the indemnification provisions in our current articles of incorporation and bylaws.

In connection with its evaluation and review of Business First’s policies and practices of compensating employees, including executives and nonexecutive employees, as such policies and practices relate to risk management practices and risk-taking, the Compensation Committee of the board of directors of Business First has determined that its compensation plans and practices are not likely to have a material adverse effect on Business First.

The U.S. banking industry is highly regulated under federal and state law. Banking laws, regulations and policies affect Business First’s operations and those of its subsidiaries.

As a bank holding company, Business First is subject to inspection, examination, supervision and regulation by the Federal Reserve. Business First Bank is subject to extensive regulation and examination by the Louisiana OFI and the FDIC.

Statutes, regulations and policies limit the activities in which Business First may engage and how it conducts certain permitted activities. The system of supervision and regulation applicable to Business First and Business First’s subsidiaries establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s Deposit Insurance Fund, Business First Bank’s depositors and the public, rather than Business First’s shareholders or creditors. Further, the bank regulatory system imposes reporting and information collection obligations. Business First incurs significant costs relating to compliance

with these laws and regulations. Banking statutes, regulations and policies are continually under review by Congress and state legislatures and regulatory agencies, and a change in them, including changes in how they are interpreted or implemented, could have a material adverse effect on Business First’s business, financial condition and results of operations.

The material statutory and regulatory requirements that are applicable to Business First and Business First Bank are summarized below. This description is not intended to describe all laws and regulations applicable to Business First and its subsidiaries, and the description is qualified in its entirety by reference to the full text of the statutes, regulations, policies, interpretive letters and other written guidance that are described herein.

Business First is a bank holding company registered under the BHC Act, and Business First is subject to supervision, regulation and examination by the Federal Reserve. The BHC Act and other federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

Banking statutes, regulations and policies could restrict Business First’s ability to diversify into other areas of financial services, acquire depository institutions and make distributions or pay dividends on its equity securities. They may also require Business First to provide financial support to any bank that Business First controls, maintain capital balances in excess of those desired by management and pay higher deposit insurance premiums as a result of a general deterioration in the financial condition of Business First Bank.

Business First Bank is a commercial bank chartered under the laws of the State of Louisiana and it is not a member of the Federal Reserve. In addition, its deposits are insured to the maximum extent permitted by law by the FDIC. As such, Business First Bank is subject to extensive regulation and examination by the Louisiana OFI and the FDIC. The federal and state laws and regulations which are applicable to Business First Bank regulate, among other things, the scope of its business, its investments, its reserves against deposits, the timing of the availability of deposited funds and the nature and amount of and collateral for certain loans. In addition to the impact of such regulations, commercial banks are affected significantly by the actions of the Federal Reserve in connection with its economic policy.

A principal objective of the U.S. bank regulatory system is to protect depositors by ensuring the financial safety and soundness of banking organizations. To that end, the banking regulators have broad regulatory, examination and enforcement authority. The regulators regularly examine the operations of banking organizations. In addition, banking organizations are subject to periodic reporting requirements.

The regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of a banking organization’s operations are unsatisfactory. The regulators may also take action if they determine that the banking organization or its management is violating or has violated any law or regulation. The regulators have the power to, among other things:

The FDIC may terminate a depository institution’s deposit insurance upon a finding that the institution’s financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution’s regulatory agency. Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject Business First and its subsidiaries or their officers, directors and institution-affiliated parties to the remedies described above and other sanctions.

On July 21, 2010, the Dodd-Frank Act became law. The Dodd-Frank Act is having a broad impact on the financial services industry, and imposes significant regulatory and compliance requirements, including the designation of certain financial companies as systemically important financial companies, the changing roles of credit rating agencies, the imposition of increased capital, leverage, and liquidity requirements, and numerous other provisions designed to improve supervision and oversight of, and strengthen safety and soundness within, the financial services sector. Additionally, the Dodd-Frank Act establishes a new framework of authority to conduct systemic risk oversight within the financial system to be distributed among new and existing federal regulatory agencies.

The following items provide a brief description of certain provisions of the Dodd-Frank Act that are most relevant Business First and Business First Bank.

The requirements of the Dodd-Frank Act are in the process of being implemented over time and most will be subject to regulations implemented over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full extent of the impact such requirements will have on Business First’s operations is unclear. The changes resulting from the Dodd-Frank Act could negatively impact the profitability of Business First’s business activities, require changes to certain of its business practices, impose upon it more stringent capital, liquidity and leverage requirements or otherwise have a material adverse effect on Business First’s business, financial condition or results of operations. These changes may also require Business First to invest

significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements.

Failure to comply with the new requirements could have a material adverse effect on Business First’s business, financial condition and results of operations.

On December 10, 2013, the federal bank regulatory agencies, together with the SEC and the U.S. Commodity Futures Trading Commission, adopted a final rule, commonly known as the “Volcker Rule,” under Section 619 of the Dodd-Frank Act that generally prohibits “banking entities” from engaging in “proprietary trading” and making investments and conducting certain other activities with “private equity funds and hedge funds.” Although the final rule provides some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including Business First and Business First Bank. The final regulations became effective April 1, 2014; however, at the time the agencies released the final Volcker Rule, the Federal Reserve announced an extension of the conformance period for all banking entities until July 21, 2015.

In response to industry questions regarding the final rule, the adopting agencies issued a clarifying interim final rule on January 14, 2014, permitting banking entities to retain interests in certain collateralized debt obligations backed by trust preferred securities if the collateralized debt obligations meet certain requirements.

Business First has reviewed the scope of the Volcker Rule and has preliminarily determined that it does not have any investments that meet the requirements of the rule.

Banking laws impose notice, approval and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHC Act and the Change in Bank Control Act. Among other things, these laws require regulatory filings by a shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. The determination whether an investor “controls” a depository institution is based on all of the facts and circumstances surrounding the investment. As a general matter, a party is deemed to control a depository institution or other company if the party owns or controls 25% or more of any class of voting stock. Subject to rebuttal, a party may be presumed to control a depository institution or other company if the investor owns or controls 10% or more of any class of voting stock. Ownership by affiliated parties, or parties acting in concert, is typically aggregated for these purposes. If a party’s ownership of Business First were to exceed certain thresholds, the investor could be deemed to “control” Business First for regulatory purposes. This could subject the investor to regulatory filings or other regulatory consequences.

In addition, except under limited circumstances, bank holding companies are prohibited from acquiring, without prior approval, (1) control of any other bank or bank holding company or all or substantially all the assets thereof or (2) more than 5% of the voting shares of a bank or bank holding company which is not already a subsidiary.

Louisiana law provides that a Louisiana state bank can establish a branch anywhere in Louisiana provided that the branch is approved in advance by the Louisiana OFI. The branch also must be approved by the FDIC. When considering whether to approve the establishment of a branch, the Louisiana OFI and the FDIC consider a number of factors, including financial history, capital adequacy, earnings prospects, character of management,

needs of the community and consistency with corporate powers. The Dodd-Frank Act permits insured state banks to engage in de novo interstate branching if the laws of the state where the new branch is to be established would permit the establishment of the branch if the branching bank were chartered by such state.

Federal law restricts the amount and the terms of both credit and noncredit transactions (generally referred to as “covered transactions”) between a bank and its nonbank affiliates. Covered transactions with any single affiliate may not exceed 10% of the capital stock and surplus of a bank, and covered transactions with all affiliates may not exceed, in the aggregate, 20% of a bank’s capital stock and surplus. For a bank, capital stock and surplus refers to the bank’s Tier 1 and Tier 2 capital, as calculated under the risk-based capital guidelines, plus the balance of the allowance for credit losses excluded from Tier 2 capital. A bank’s transactions with all of its affiliates in the aggregate are limited to 20% of the foregoing capital. In addition, in connection with covered transactions that are extensions of credit, a bank may be required to hold collateral to provide added security to the bank and the types of permissible collateral may be limited. The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates, including an expansion of what types of transactions are covered transactions to include credit exposures related to derivatives, repurchase agreements and securities lending arrangements and an increase in the amount of time for which collateral requirements regarding covered transactions must be satisfied.

Sections 22(g) and (h) of the Federal Reserve Act and its implementing regulation, Regulation O, place restrictions on loans by a bank to executive officers, directors and principal shareholders. Under Section 22(h), loans to a director, an executive officer and to a greater than 10.0% shareholder of a bank and certain of their related interests or insiders and insiders of affiliates, may not exceed, together with all other outstanding loans to such person and related interests, a bank’s loans-to-one-borrower limit (generally equal to 15.0% of the institution’s unimpaired capital and surplus). Section 22(h) also requires that loans to insiders and to insiders of affiliates be made on terms substantially the same as offered in comparable transactions to other persons, unless the loans are made pursuant to a benefit or compensation program that (1) is widely available to employees of the bank and (2) does not give preference to insiders over other employees of the bank. Section 22(h) also requires prior board of directors approval for certain loans and the aggregate amount of extensions of credit by a bank to all insiders cannot exceed the institution’s unimpaired capital and surplus. Furthermore, Section 22(g) places additional restrictions on loans to executive officers.

The FDI Act provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. Therefore, if an insured depository institution like Business First Bank fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, nondeposit creditors, including Business First, with respect to any extensions of credit they have made to such insured depository institution.

As a Louisiana corporation, Business First is subject to certain restrictions on dividends under the LBCL. Generally, under Louisiana law, Business First may not pay a dividend if (i) it is insolvent or would thereby be

made insolvent, or (ii) the declaration or payment thereof would be contrary to any restrictions contained in Business First’s articles of incorporation. Also, as a bank holding company, Business First is required by the Federal Reserve to serve as a source of financial strength for Business First Bank. The Federal Reserve has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of dividends to shareholders unless its net income available has been sufficient to fully fund the dividends, and the prospective rate of earnings retention appears consistent with the bank holding company’s capital needs, asset quality and overall financial condition.

Business First does not engage in separate business activities of a material nature. As a result, Business First’s ability to pay dividends depends upon the dividends received from Business First Bank. As a Louisiana state bank, Business First Bank’s ability to pay dividends is restricted by certain laws and regulations. Under the Louisiana Banking Law, Business First Bank may not declare or pay cash or property dividends unless it has unimpaired surplus that equals or exceeds 50% of its outstanding capital stock. Business First Bank’s unimpaired surplus may not be reduced below 50% as a result of the payment of any combination of cash or property dividends, or the purchase or redemption of any shares of its capital stock. In addition, Business First Bank must obtain the prior approval of the Louisiana Banking Commissioner to pay dividends to Business First if the total of all year-to-date cash or property dividends declared and paid by Business First Bank, when added to any amounts used by Business First Bank to redeem or purchase shares of its capital stock, would exceed the total of its year-to-date net income combined with its net income from the immediately preceding year, after deducting all of the following: (i) amounts paid or accrued for the payments of cash dividends, (ii) the value of all property paid in dividends, and (iii) amounts paid or accrued to redeem or purchase shares of Business First Bank’s capital stock over the calculation period.

In addition to Louisiana law restrictions on Business First Bank’s ability to pay dividends, under FDICIA, Business First Bank may not pay any dividend if the payment of the dividend would cause Business First Bank to become undercapitalized or if Business First Bank is “undercapitalized.” The FDIC may further restrict the payment of dividends by requiring that Business First Bank maintain a higher level of capital than would otherwise be required to be “adequately capitalized” for regulatory purposes. Moreover, if, in the opinion of the FDIC, Business First Bank is engaged in an unsound practice (which could include the payment of dividends), the FDIC may require, generally after notice and hearing, that Business First Bank cease such practice. The FDIC has indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe banking practice. Moreover, the FDIC has also issued policy statements providing that insured depository institutions generally should pay dividends only out of current operating earnings. Under regulatory capital guidelines, Business First Bank must maintain a Tier 1 capital to adjusted total assets ratio of at least 4.0%, a Tier 1 capital to risk weighted assets ratio of at least 4.0%, and a total risk based capital to risk weighted assets ratio of at least 8.0%. As of June 30, 2014, Business First Bank had a ratio of Tier 1 capital to adjusted total assets of 10.9%, a ratio of Tier 1 capital to risk weighted assets of 12.1% and a ratio of total risk based capital to risk weighted assets of 13.1%.

The Dodd-Frank Act imposes, and Basel III (described below) will impose, additional restrictions on the ability of banking institutions to pay dividends.

The Federal Reserve monitors Business First’s capital adequacy, on a consolidated basis, and the FDIC and the Louisiana OFI monitor the capital adequacy of Business First Bank. The regulatory agencies use a combination of risk-based guidelines and a leverage ratio to evaluate capital adequacy and consider these capital levels when taking action on various types of applications and when conducting supervisory activities related to safety and soundness. Assets and off-balance sheet items, such as letters of credit and unfunded loan commitments, are assigned to broad risk categories, each with appropriate risk weights. Regulatory capital, in turn, is classified in one of two tiers. “Tier 1” capital includes common equity, retained earnings, qualifying non-cumulative perpetual preferred stock, and minority interests in equity accounts of consolidated subsidiaries, less

goodwill, most intangible assets and certain other assets. “Tier 2” capital includes, among other things, qualifying subordinated debt and allowances for loan and lease losses, subject to limitations. The resulting capital ratios represent capital as a percentage of total risk weighted assets and off-balance sheet items.

Federal Reserve and FDIC regulations currently require bank holding companies and state chartered banks generally to maintain three minimum capital standards: (1) a Tier 1 capital to total assets ratio, or “leverage capital ratio,” of at least 4.0%; (2) a Tier 1 capital to risk weighted assets ratio, or “Tier 1 risk-based capital ratio,” of at least 4.0%; and (3) a total risk-based capital (Tier 1 plus Tier 2) to risk weighted assets ratio, or “total risk-based capital ratio,” of at least 8.0%. In addition, the prompt corrective action standards discussed below, in effect, increase the minimum regulatory capital ratios for banking organizations. These capital requirements are minimum requirements. Higher capital levels may be required if warranted by the particular circumstances or risk profiles of individual institutions, or if required by the banking regulators due to the economic conditions impacting Business First’s primary markets. For example, Federal Reserve regulations provide that higher capital may be required to take adequate account of, among other things, interest rate risk and the risks posed by concentrations of credit, nontraditional activities or securities trading activities.

Failure to meet capital guidelines could subject Business First and Business First Bank to a variety of enforcement remedies, including issuance of a capital directive, a prohibition on accepting brokered deposits, other restrictions on Business First’s business, including the termination of Business First Bank’s deposit insurance by the FDIC.

The Dodd-Frank Act directed federal banking agencies to establish minimum leverage capital requirements and minimum risk-based capital requirements for depository institution holding companies and non-bank financial companies supervised by the Federal Reserve that are not less than the “generally applicable leverage and risk-based capital requirements” applicable to insured depository institutions, in effect applying the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies. In addition, the Dodd-Frank Act requires the federal banking agencies to adopt capital requirements that address the risks that the activities of an institution pose to the institution and the public and private stakeholders, including risks arising from certain enumerated activities.

The current risk-based capital guidelines that apply to Business First and Business First Bank are based on the 1988 capital accord, referred to as Basel I, of the International Basel Committee on Banking Supervision, or Basel Committee, a committee of central banks and bank supervisors, as implemented by federal bank regulators. In 2004, the Basel Committee published a new capital accord, Basel II. Basel II modifies risk weightings in an attempt to make capital requirements more risk sensitive and provides two approaches for setting capital standards for credit risk: an “advanced,” internal ratings-based approach tailored to individual institutions’ circumstances, and a “standardized” approach that bases risk weightings on external credit assessments to a much greater extent than permitted under existing risk-based capital guidelines. Basel II also sets capital requirements for operational risk and refines the existing capital requirements for market risk exposures. In 2007, the federal banking agencies adopted final rules implementing the advanced approaches of Basel II for “core” bank holding companies and banks having $250.0 billion or more in total consolidated assets or $10.0 billion or more of foreign exposures. These rules did not apply to Business First or Business First Bank.

On December 16, 2010, the Basel Committee released its final framework for strengthening international capital and liquidity regulation, known as Basel III. Basel III substantially revised the existing capital requirements for banking organizations. Modest revisions were made in June 2011. The Basel III standards operate in conjunction with portions of the Basel I and Basel II standards previously released by the Basel Committee. On June 7, 2012, the Federal Reserve, the OCC and the FDIC requested comment on these proposed rules that, taken together, would implement the Basel regulatory capital reforms through what are referred to herein as the “Basel III Capital Rules.”

In July 2013, the federal banking agencies published the final Basel III Capital Rules, which revised their risk-based and leverage capital requirements and their method for calculating risk weighted assets to implement, in part, agreements reached by the Basel Committee and certain provisions of the Dodd-Frank Act. While some provisions are tailored to larger institutions, the Basel III Capital Rules generally apply to all banking organizations, including Business First and Business First Bank. Among other things, the Basel III Capital Rules: (i) introduce a new capital measure known as “Common Equity Tier 1,” or CET1; (ii) specify that Tier 1 capital consists of CET1 and additional financial instruments satisfying specified requirements that permit inclusion in Tier 1 capital; (iii) define CET1 narrowly by requiring that most deductions or adjustments to regulatory capital measures be made to CET1 and not to the other components of capital; and (iv) expand the scope of the deductions or adjustments from capital as compared to the existing regulations.

Under the Basel III Capital Rules, banking organizations are provided a one-time option in their initial regulatory financial report filed after January 1, 2015 to remove certain components of accumulated other comprehensive income from the computation of common equity regulatory capital.

The Basel III Capital Rules also provide a permanent exemption from the proposed phase out of existing trust preferred securities and cumulative perpetual preferred stock from regulatory capital for banking organizations with less than $15 billion in total assets, while also implementing stricter eligibility requirements for regulatory capital instruments that should serve to disallow the inclusion of all non-exempt issuances of trust preferred securities and cumulative perpetual preferred stock from Tier 1 capital. The Basel III Capital Rules also provide additional constraints on the inclusion of minority interests, mortgage servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions in Tier 1 capital, as well as providing stricter risk weighting rules to these assets.

The Basel III Capital Rules provide for the following minimum capital to risk weighted assets ratios:

A minimum leverage ratio (Tier 1 capital as a percentage of total assets) of 4.0% is also required under the Basel III Capital Rules. The Basel III Capital Rules additionally require institutions to retain a capital conservation buffer of 2.5% above these required minimum capital ratio levels. Banking organizations that fail to maintain the minimum 2.5% capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers, with distributions and discretionary bonus payments being completely prohibited if no capital conservation buffer exists, or in the event of the following: (1) the banking organization’s capital conservation buffer was below 2.5% at the beginning of a quarter; and (2) its cumulative net income for the most recent quarterly period plus the preceding four calendar quarters is less than its cumulative capital distributions (as well as associated tax effects not already reflected in net income) during the same measurement period.

The Basel III Capital Rules also provide stricter requirements as to the risk weighting of past due and certain commercial real estate loans, as well as on some equity investment exposures, and replaces the existing credit rating approach for determining the risk weighting of securitization exposures with an alternative approach.

Finally, the Basel III Capital Rules amend the thresholds under the prompt corrective action framework applicable to Business First Bank to reflect both (1) the generally heightened requirements for regulatory capital ratios as well as (2) the introduction of the CET1 capital measure.

The enactment of the Basel III Capital Rules will increase Business First’s required capital levels and those of Business First Bank. The Basel III Capital Rules become effective as applied to Business First and Business

First Bank on January 1, 2015, with a phase in period from January 1, 2015 through January 1, 2019. Business First expects that it will meet all minimum capital requirements under the final rule when it becomes effective and as if fully phased in at the bank and bank holding company levels.

The Basel III Capital Rules did not address the proposed liquidity coverage ratio called for by the Basel Committee’s Basel III framework. On September 9, 2014, the Federal Reserve issued a final rule implementing a liquidity coverage ratio requirement in the United States for larger banking organizations. Neither Business First nor Business First Bank are subject to the liquidity coverage ratio requirement.

The FDI Act requires federal bank regulatory agencies to take “prompt corrective action” with respect to FDIC-insured depository institutions that do not meet minimum capital requirements. A depository institution’s treatment for purposes of the prompt corrective action provisions will depend upon how its capital levels compare to various capital measures and certain other factors, as established by regulation.

Under this system, the federal banking regulators have established five capital categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, in which all depository institutions are placed. The federal banking regulators have also specified by regulation the relevant capital levels for each of the other categories. Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. A depository institution that is undercapitalized is required to submit a capital restoration plan. Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies by federal bank regulatory agencies, including termination of deposit insurance by the FDIC, restrictions on certain business activities, and appointment of the FDIC as conservator or receiver. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.

With respect to Business First Bank, the Basel III Capital Rules revise the prompt corrective action regulations by: (i) introducing the CET1 ratio requirement at each prompt corrective action category (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum Tier 1 capital ratio for well-capitalized status being 8.0% (as compared to the current 6.0%); and (iii) eliminating the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3.0% leverage ratio and still be adequately capitalized. The Basel III Capital Rules do not change the total risk-based capital requirement for any prompt corrective action category.

Pursuant to regulations of the Federal Reserve, all banks are required to maintain average daily reserves at mandated ratios against their transaction accounts. In addition, reserves must be maintained on certain nonpersonal time deposits. These reserves must be maintained in the form of vault cash or in an account at a Federal Reserve Bank.

The FDI Act restricts the use of brokered deposits by certain depository institutions. Under the applicable regulations, (i) a well capitalized insured depository institution may solicit and accept, renew or roll over any brokered deposit without restriction, (ii) an adequately capitalized insured depository institution may not accept,

renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC, and (iii) an undercapitalized insured depository institution may not accept, renew or roll over any brokered deposit. The FDIC may, on a case-by-case basis and upon application by an adequately capitalized insured depository institution, waive the restriction on brokered deposits upon a finding that the acceptance of brokered deposits does not constitute an unsafe or unsound practice with respect to such institution.

The federal banking agencies, including the FDIC, have promulgated guidance governing financial institutions with concentrations in commercial real estate lending. The guidance provides that a bank has a concentration in commercial real estate lending if (1) total reported loans for construction, land development and other land represent 100% or more of total capital or (2) total reported loans secured by multifamily and nonfarm residential properties and loans for construction, land development and other land represent 300% or more of total capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. Owner occupied commercial real estate loans are excluded from this second category. If a concentration is present, management must employ heightened risk management practices that address the following key elements: including board and management oversight and strategic planning, portfolio management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing and maintenance of increased capital levels as needed to support the level of commercial real estate lending.

The FDIC periodically examines and evaluates state non-member banks. Based on such an evaluation, Business First Bank, among other things, may be required to revalue its assets and establish specific reserves to compensate for the difference between Business First Bank’s assessment and that of the FDIC. The Louisiana OFI also conducts examinations of state banks but may accept the results of a federal examination in lieu of conducting an independent examination. In addition, the FDIC and Louisiana OFI may elect to conduct a joint examination. The Louisiana OFI charges fees to recover the costs of examining Louisiana chartered banks. The FDIC assesses fees in the form of deposit insurance premiums (discussed below). The Dodd-Frank Act provides various agencies with the authority to assess additional supervision fees.

FDIC-insured banks are required to pay deposit insurance premiums to the FDIC. The FDIC has adopted a risk-based assessment system whereby FDIC-insured depository institutions pay insurance premiums at rates based on their risk classification. An institution’s risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. The FDIC recently raised assessment rates for all institutions to increase funding for its Deposit Insurance Fund, which is currently underfunded.

As discussed above, the Dodd-Frank Act requires the Deposit Insurance Fund to reach a reserve ratio of 1.35% of insured deposits by September 30, 2020. In December of 2010, the FDIC raised the minimum designated reserve ratio of Deposit Insurance Fund to 2.0%. The ratio is higher than the minimum reserve ratio of 1.35% as set by the Dodd-Frank Act. Under the Dodd-Frank Act, the FDIC is required to offset the effect of the higher reserve ratio on small insured depository institutions, which are those with consolidated assets of less than $10.0 billion.

In February of 2011, the FDIC approved a final rule on Assessments, Dividends, Assessment Base and Large Bank Pricing. The final rule, mandated by the Dodd-Frank Act, changes the deposit insurance assessment system from one that is based on domestic deposits to one that is based on average consolidated total assets minus average tangible equity. Because the new assessment base under the Dodd-Frank Act is larger than the current assessment base, the final rule’s assessment rates are lower than the current rates, which achieves the FDIC’s goal of not significantly altering the total amount of revenue collected from the industry. In addition, the final rule adopts a “scorecard” assessment scheme for larger banks and suspends dividend payments if the

Deposit Insurance Fund reserve ratio exceeds 1.5%, but provides for decreasing assessment rates when the Deposit Insurance Fund reserve ratio reaches certain thresholds. The final rule also determines how the effect of the higher reserve ratio will be offset for institutions with less than $10.0 billion of consolidated assets.

Continued action by the FDIC to replenish the Deposit Insurance Fund as well as changes contained in the Dodd-Frank Act may result in higher assessment rates. Business First Bank may be able to pass part or all of this cost on to its customers, including in the form of lower interest rates on deposits or fees to some depositors, depending on market conditions.

The BHC Act generally prohibits a financial holding company from engaging, directly or indirectly, in activities other than banking or managing or controlling banks, except for activities determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Activities that the Federal Reserve Board has found to be so closely related to banking as to be a proper incident to the business of banking include:

Provisions of the Gramm-Leach-Bliley Act expanded the permissible activities of a financial holding company that qualifies as and elects to become a financial holding company. Under the regulations implementing the Gramm-Leach-Bliley Act, a financial holding company may engage in additional activities that are “financial in nature” or incidental or complementary to financial activity. Among other things, to qualify as a financial holding company, all of the subsidiary banks controlled by the financial holding company must be and remain at all times “well-capitalized” and “well-managed.” Business First is not currently a financial holding company.

Federal law establishes a minimum federal standard of financial privacy by, among other provisions, requiring banks to adopt and disclose privacy policies with respect to consumer information and setting forth certain rules with respect to the disclosure to third parties of consumer information. Business First Bank has adopted and disseminated privacy policies pursuant to applicable law. Regulations adopted under federal law set standards for protecting the security, confidentiality and integrity of customer information, and require notice to regulators, and in some cases, to customers, in the event of security breaches. A number of states have also adopted statutes concerning financial privacy and requiring notification of security breaches.

Under federal law, including the Bank Secrecy Act and the PATRIOT Act, certain types of financial institutions, including insured depository institutions, must maintain anti-money laundering programs that include established internal policies, procedures and controls, a designated compliance officer, an ongoing employee training program and testing of the program by an independent audit function. Among other things, these laws are intended to strengthen the ability of U.S. law enforcement agencies and intelligence communities to work together to combat terrorism on a variety of fronts. Financial institutions are prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence, customer identification and recordkeeping, including in their dealings with non-U.S. financial institutions and non-U.S. customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious information maintained by financial institutions. Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution’s anti-money laundering compliance when considering regulatory applications filed by the institution, including applications for banking mergers and acquisitions. The regulatory authorities have imposed “cease and desist” orders and civil money penalty sanctions against institutions found to be violating these obligations.

Office of Foreign Asset Control (“OFAC”) is responsible for helping to insure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various executive orders by the President of the United States and acts of Congress. OFAC publishes lists of persons, organizations and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If Business First or Business First Bank finds a name on any transaction, account or wire transfer that is on an OFAC list, Business First or Business First Bank must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.

Banks and other financial institutions are subject to numerous laws and regulations intended to protect consumers in their transactions with banks. These laws include, among others, laws regarding unfair and deceptive acts and practices and usury laws, as well as the federal consumer protection statutes set forth below. Many states and local jurisdictions have consumer protection laws analogous and in addition, to those listed below. These federal, state and local laws regulate the manner in which financial institutions deal with customers when taking deposits, making loans or conducting other types of transactions. Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneys general and civil or criminal liability.

Federal Laws Applicable to Credit Transactions. The loan operations of Business First Bank are also subject to federal laws and regulations applicable to credit transactions, including, among others, the:

Federal Laws Applicable to Deposit Operations. Among other laws and regulations, the deposit operations of Business First Bank are subject to the following federal laws and their related regulations:

The Community Reinvestment Act, or the CRA, is intended to encourage banks to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The regulators examine banks and assign each bank a public CRA rating. The CRA then requires bank regulators to take into account the bank’s record in meeting the needs of its community when considering certain applications by a bank, including applications to establish a branch or to conduct certain mergers or acquisitions. The Federal Reserve is required to consider the CRA records of a bank holding company’s controlled banks when considering an application by the bank holding company to acquire a bank or to merge with another bank holding company.

When Business First applies for regulatory approval to make certain investments, the regulators will consider the CRA record of the target institution and Business First Bank. An unsatisfactory CRA record could substantially delay approval or result in denial of an application. The regulatory agency’s assessment of the institution’s record is made available to the public. The FDIC conducted its most recent CRA exam of Business First Bank in April 2014, and Business First Bank received an “Outstanding” rating.

In addition, federal law requires the disclosure of agreements reached with community groups that relate to the CRA, and contains various other provisions designed to improve the delivery of financial services to consumers while maintaining an appropriate level of safety in the financial services industry.

Business First Bank is a member of the FHLB, which is one of the 12 regional FHLB’s composing the FHLB system. Each FHLB provides a central credit facility primarily for its member institutions as well as other entities involved in home mortgage lending. Any advances from a FHLB must be secured by specified types of collateral. As a member of the FHLB of Dallas, Business First Bank is required to acquire and hold shares of capital stock in the FHLB of Dallas.

Congress and state legislatures may introduce from time to time measures or take actions that would modify the regulation of banks or bank holding companies. In addition, federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. Such changes could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks and other financial institutions, all of which could adversely affect Business First’s investment opportunities and its assessment of how attractive such opportunities may be. Business First cannot predict whether potential legislation will be enacted and, if enacted, the effect that it or any implementing regulations would have on its business, financial condition or results of operations.

The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the Federal Reserve to affect the money supply are open market operations in U.S. government securities, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, and their use may affect interest rates charged on loans or paid for deposits. Federal Reserve monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. Business First cannot predict the nature of future monetary policies and the effect of such policies on its business, financial condition or results of operations.

The following discussion and analysis of the financial condition and results of operations of Business First should be read in conjunction with “Selected Consolidated Financial Data of Business First” and Business First’s consolidated financial statements and the accompanying notes included elsewhere in this proxy statement/prospectus. 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 proxy statement/prospectus, 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.

Business First is a bank holding company headquartered in Baton Rouge, Louisiana. Through its wholly-owned subsidiary, Business First Bank, a Louisiana state chartered bank, Business First provides a broad range of financial services tailored to meet the needs of small to medium-sized businesses and professionals. Since its inception in 2006, its priority has been and continues to be creating shareholder value through the establishment of an attractive commercial banking franchise in Louisiana. Business First considers its primary market to include the State of Louisiana. Business First currently operates out of its main office, four branch locations and one loan production office, all of which are located in Louisiana. As of June 30, 2014, Business First had total assets of $683.9 million, total loans of $537.4 million, total deposits of $589.0 million and total stockholders’ equity of $76.1 million.

As a bank holding company operating through one market segment, community banking, Business First generates most of its revenues from interest income on loans, customer service and loan fees, and interest income from securities. Business First incurs interest expense on deposits and other borrowed funds and noninterest expense, such as salaries and employee benefits and occupancy expenses. Business First analyzes its ability to maximize income generated from interest earning assets and expense of its liabilities through its 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 Business First earns on interest-earning assets or pays on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and stockholders’ 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 Business First’s loan portfolio are affected by, among other factors, economic and competitive conditions in Louisiana, as well as developments affecting the real estate, technology, financial services, insurance, transportation, manufacturing and energy sectors within its target market and throughout the state of Louisiana.

Business First’s operating results depend primarily on its 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, Business First measures and monitors (1) yields on its loans and other interest-earning assets, (2) the costs of its deposits and other funding sources, (3) its net interest spread and (4) its 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 stockholders’ equity also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources. Business First calculates average assets, liabilities, and capital using a monthly average. For the six months ended June 30, 2014, net interest income totaled $11.8 million, and net interest margin and net interest spread were 3.59% and 3.41%, respectively. For the six months ended June 30, 2013, net interest income totaled $11.8 million and net interest margin and net interest spread were 3.61% and 3.38%, respectively. The slight change in net interest margin and net interest spread were primarily attributable to the change in mix in earning assets as average loan balances increased 14.6% while average securities balances decreased 53.9%. In addition, the Bank experienced a decrease in borrowing costs of 18 basis points. Business First experienced significant growth in average loan balances, but market yields on new loan originations are below the average yield of amortizing or paid-off loans. Due to the continued impact of new loan growth and the runoff of higher yielding loan balances, Business First anticipates continued pressure on its net interest margin and net interest spread.

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 six months ended June 30, 2014 and 2013, 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 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.

Business First’s provision for loan losses is a charge to income in order to bring its allowance for loan losses to a level deemed appropriate by management. For a description of the factors taken into account by Business First’s management in determining the allowance for loan losses see “—Financial Condition—Allowance for Loan Losses.” The provision for loan losses was $300,000 for the six months ended June 30, 2014, compared to $360,000 for the same period in 2013, a decrease of 16.7%. The decrease in provision expense was due to a decrease in the level of reserves needed to cover classified loans.

Business First’s primary sources of recurring noninterest income are service charges on deposit accounts, gains on the sale of securities and other real estate owned and income from bank-owned life insurance.

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

Noninterest income for the six months ended June 30, 2014 decreased $243,000 or 25.1% to $724,000 compared to noninterest income of $967,000 for the same period in 2013. The primary components of the decrease were as follows:

Service charges on deposit accounts. Business First earns fees from its customers for deposit-related services, and these fees constitute a significant and predictable component of its noninterest income. Service charges on deposit accounts were $292,000 for the six months ended June 30, 2014, a decrease of $7,000 over the same period in 2013.

Gain (Loss) on sales of other real estate owned. Gain (Loss) on sales of other real estate owned was $1,000 and $(6,000) for the six months ended June 30, 2014 and 2013, respectively.

Bank-owned life insurance income. Business First invests in bank-owned life insurance due to its attractive nontaxable return and protection against the loss of its key employees. Business First records income based on the growth of the cash surrender value of these policies as well as the annual yield. Income from bank-owned life insurance increased $34,000 for the six months ended June 30, 2014, compared to the same period in 2013. The increase in income was primarily attributable to earning a better rate of return on the assets placed with the insurance carriers.

Gain on Sale of Investment Securities. The gain on sale of investment securities decreased $105,000 for the six months ended June 30, 2014 compared to the six months ended June 2013 due primarily to lower overall transaction activity.

Other. This category includes a variety of other income producing activities, including wire transfer fees, mortgage related income, and debit card fees. Other income decreased $172,000 or 54.6% for the six months ended June 30, 2014, compared to the same period in 2013, primarily due to less emphasis on mortgage related activities.

Generally, noninterest expense is composed of all employee expenses and costs associated with operating Business First’s facilities, obtaining and retaining customer relationships and providing bank services. The major component of noninterest expense is salaries and employee benefits. Noninterest expense also includes operational expenses, such as occupancy expenses, depreciation and amortization of office equipment, professional and regulatory fees, including FDIC assessments, data processing expenses, and advertising and promotion expenses.

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

Noninterest expense for the six months ended June 30, 2014 decreased $473,000 or 4.8% to $9.3 million compared to noninterest expense of $9.8 million for the same period in 2013. The most significant components of the decrease were as follows:

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 $5.5 million for the six months ended June 30, 2014, a decrease of $136,000 or 2.4% compared to the same period in 2013. The decrease was primarily attributable to two unfilled vacancies during the first six months of 2014. As of June 30, 2014, Business First had 91 full-time equivalent employees. Salaries and employee benefits included $249,000 and $265,000 for the six months ended June 30, 2014 and 2013, respectively, in stock-based compensation expense.

Occupancy of bank premises. Expense associated with occupancy of premises was $633,000 for the six months ended June 30, 2014 and 2013. There was no measurable change in occupancy expenses from year to year.

Depreciation and amortization. Depreciation and amortization costs were $404,000 and $426,000 for the six months ended June 30, 2014 and 2013, respectively. This category includes leasehold, furniture, fixtures and equipment depreciation totaling $404,000 and $411,000 for the six months ended June 30, 2014 and 2013, respectively, as well as intangible asset amortization of $0 and $15,000 for the same periods. The decrease of $22,000 was due to primarily to an extensive organization wide upgrade of the Bank’s desktop PCs during 2013.

Data processing. Data processing expenses were $355,000 for the six months ended June 30, 2014 and $278,000 for the same period in 2013. The increase of $77,000 was attributable to incremental processing fees resulting from the growth in the volume of its deposit accounts.

FDIC assessment fees. FDIC assessment fees were $225,000 and $516,000 for the six months ended June 30, 2014 and 2013, respectively. The decrease of $291,000 or 56.4% resulted generally from lower assessment fees.

Other professional fees. Other professional fees include audit, loan review, regulatory assessments, and other consultants. These fees were $363,000 and $393,000 for the six months ended June 30, 2014 and 2013, respectively.

Other real estate owned expenses and write-downs. Expenses and writedowns related to other real estate owned were $27,000 and $71,000 for the six months ended June 30, 2014 and 2013, respectively. The decrease of $44,000 was due to a reduction in the number of properties comprising other real estate owned and in related property write-downs. Business First sold one other real estate owned property and foreclosed on two additional properties between June 30, 2013 and June 30, 2014 increasing the number of properties held by one from June 30, 2013, to June 30, 2014. In addition, Business First had no write-downs of other real estate owned for the six months ended June 30, 2014, compared to a write-down of $121,000 related to a commercial retail property for the six months ended June 30, 2013.

Other. This category includes operating and administrative expenses including business development expenses (i.e. travel and entertainment, donations and club memberships), insurance, and security expenses. Other noninterest expense remained flat at $1.4 million for the six months ended June 30, 2014 and 2013.

The amount of income tax expense is influenced by the amounts of Business First’s pre-tax income, tax-exempt income and other nondeductible expenses. Deferred tax assets and liabilities are reflected at currently enacted income tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

For the six months ended June 30, 2014, income tax expense totaled $752,000, an increase of $253,000 or 50.7% compared to $499,000 for the same period in 2013. The increase was primarily attributable to the $318,000 increase in income before income taxes from $2.6 million for the six months ended June 30, 2013 to $2.9 million for the same period in 2014. Business First’s effective tax rates for the six months ended June 30, 2014 and 2013 were 26% and 19%, respectively. Business First’s effective tax rates for both periods were affected primarily by tax-exempt income generated by municipal securities and bank-owned life insurance and by other nondeductible expenses.

For additional information on net interest income and how Business First measures and monitors it, see “—Results of Operations for the Six Months Ended June 30, 2014 and 2013—Net Interest Income.”

2013 vs. 2012. Net interest income for 2013 was $24.3 million compared to $23.1 million for 2012, an increase of $1.1 million or 5.0%. The increase in net interest income was primarily due to a $372,000 or 1.3% increase in interest income and a $783,000 or 14.3% decrease in interest expense. The growth in interest income was primarily attributable to a $31.2 million or 6.9% increase in average loans outstanding for the year ended December 31, 2013, compared to 2012, partially offset by a 9 basis point decrease in the yield on interest-earning assets. The increase in average loans outstanding was due to an increase in new borrower accounts and an increase in existing borrower balances. The decrease in the average yield on the loan portfolio was primarily due to the low interest rate environment and its impact on competitive loan pricing. While Business First experienced significant growth in average loan balances, market yields on new loan originations were below the average yield of amortizing or paid-off loans. Due to the continued impact of new loan growth and the runoff of higher yielding loan balances, Business First anticipates continued interest rate pressure on its total interest-earning assets. Interest income on loans was $25.6 million for 2013, an increase of $592,000 or 2.4% compared to 2012 due to the increase in average loans outstanding. Interest income on securities was $3.4 million during 2013, a decrease of $206,000 or 5.8% over 2012, due to the continued low rate environment. Investment portfolio purchases during 2013 were targeted short duration, low price risk mortgage-backed securities, which provided lower yields.

Interest expense was $4.7 million for 2013, a decrease of $783,000 over 2012. Average interest-bearing deposits increased $8.8 million for 2013 compared to 2012. For the same period, the average rate on interest-bearing deposits decreased from 0.96% to .80%, resulting in a $597,000 decrease in related interest expense. Average FHLB borrowings were $3.3 million more in 2013 compared to 2012 and FHLB borrowings of $25 million were paid off during the last quarter 2013, resulting in a decrease in related interest expense of $120,000.

Total cost of interest-bearing liabilities decreased 18 basis points to 0.94% for the year ended December 31, 2013 from 1.12% for the year ended December 31, 2012. Net interest margin, defined as net interest income divided by average interest-earning assets, for 2013 was 3.72%, an increase of 6 basis points compared to 3.66% for 2012.

2012 vs. 2011. Net interest income for 2012 was $23.1 million compared to $22.1 million for 2011, an increase of $1.0 million or 4.5%. The increase in net interest income was primarily due to a $1.5 million or 22.1% decrease in interest expense offset by a decrease of $563,000 in interest income. The decrease in interest expense was primarily attributable to a 35 basis point decrease in the average rate on interest-bearing deposits during the same period decreasing from 1.31% to 0.96%. The decrease in the average yield on the loan portfolio was primarily due to the low interest rate environment and its impact on competitive pricing for new loan originations compared to rates on runoff of the higher yielding loans. Interest income on loans was $25.0 million for 2012, an increase of $631,000 or 2.6% compared to 2011 due to the increase in average loans outstanding. Interest income on securities was $3.6 million during 2012, a decrease of $1.2 million from 2011, due to a decrease in average balances of the investment portfolio. Specifically, Business First sold certain low yielding securities and reinvested the proceeds of the sale in higher yielding loans.

The year-end average balance of interest-bearing liabilities decreased by $2.3 million or 0.47% in 2012 compared to 2011. The average rate on interest-bearing liabilities decreased 30 basis points in 2012 resulting in total interest expense decreasing $1.5 million year over year. The average rate on interest-bearing demand deposits, money market and certificates of deposits decreased from 1.31% to 0.96% in 2012, compared to 2011. Total cost of interest-bearing liabilities decreased 30 basis points to 1.12% for 2012 from 1.42% for 2011. Net interest margin for 2012 was 3.66%, an increase of 14 basis points compared to 3.52% for 2011.

The following table presents, for the periods indicated, the total dollar amount of average balances, interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Average balances for 2013 and 2012 are daily average balances and average balances for 2011 are monthly average balances. Any nonaccrual loans have been included in the table as loans carrying a zero yield.

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 which cannot be segregated have been allocated to rate.

The provision for loan losses for the year ended December 31, 2013 was $751,000 compared to $2.3 million for the year ended December 31, 2012. Net charge-offs for the years ended December 31, 2013 and 2012 were $593,000 and $3.8 million, respectively. This decrease of 84.4% reflected a decrease in gross charge-offs from $4.1 million for the year ended December 31, 2012 to $1.5 million for the year ended December 31, 2013 and an increase in recoveries from $288,000 for the year ended December 31, 2012 to $871,000 for the year ended December 31, 2013. The decrease in net charge-offs was largely a result of improvement in the quality of the loan portfolio.

For the year ended December 31, 2013, noninterest income totaled $2.2 million, an increase of $104,000 or 5.0% compared to 2012. The following table presents, for the periods indicated, the major categories of noninterest income:

Service charges on deposit accounts. Service charges on deposit accounts increased $70,000 or 13.3% in 2013 compared to 2012 due to a concerted effort to sale treasury products to new and existing customers. The increase of $150,000 or 40.0% in 2012 compared to 2011 was due primarily to a change in service charge fees as well as a change in the structure of the services offered. The number of deposit accounts remained flat between December 31, 2012 and December 31, 2013 decreasing by eight accounts to 3,912, and increased by 182 or 4.9% from 3,738 to 3,920 between December 31, 2011 and December 31, 2012.

Gain (Loss) on sales of other real estate owned. The decrease of $149,000 in gain (loss) on sales of other real estate owned for 2013 compared to 2012 was due to market conditions allowing for lower volume of ORE properties which resulted in a loss taken on 3 out of 3 properties sold in 2013 for a total loss of $12,000. The increase of $396,000 for 2012 compared to 2011 was due primarily to the sale of 17 lots sold at a gain of $236,000 from a residential development property held as other real estate owned during 2012, as well as 6 out of 7 sales in 2011 resulting in a loss of $259,000.

Bank-owned life insurance. Income from bank-owned life insurance increased $61,000 or 13.0% in 2013 compared to 2012 due to earning a better rate of return on the assets placed with the insurance carriers and a decrease of $52,000 or 10.0% from 2011 to 2012 due to general market conditions causing a lower rate of return on the assets.

Gain on sales of investment securities. Business First took advantage of changing market conditions during 2013, 2012, and 2011 to sell longer termed securities at a gain while restructuring the portfolio’s duration with short-term securities with lower extension risk. Gain on sale of investment securities increased $411,000 or 89.3% in 2013 compared to 2012 due to increased activity. Gain on sale of investment securities increased $197,000 from 2011 to 2012.

Other. Other noninterest income decreased $289,000 or 60.7% in 2013 compared to 2012 and decreased $392,000 from 2011 to 2012 due primarily to a decrease in mortgage related income.

For the year ended December 31, 2013, noninterest expense totaled $20.1 million, an increase of $1.8 million or 9.7% compared to 2012. For the year ended December 31, 2012, noninterest expense totaled $18.3 million, an increase of $165,000 or 0.91% compared to $18.1 million for the same period in 2011. The following table presents, for the periods indicated, the major categories of noninterest expense:

Salaries and employee benefits. Salaries and employee benefits decreased $20,000 between 2012 and 2013. This was primarily as a result of Management’s decision to restructure departments for better use of current staff. Salaries and employee benefits increased $279,000 to $11.0 million for 2012, compared to $10.7 million for 2011, primarily due to an increase in full-time employees resulting from mortgage operations. Salaries and employee benefits for the year ended December 31, 2013 included $502,000 in stock-based compensation expense compared to $447,000 and $251,000 recorded for each of the years ended December 31, 2012 and 2011, respectively.

Occupancy of bank premises. Occupancy expenses were $1.2 million, $1.3 million and $1.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decrease of $28,000 or 2.2% for 2013 compared to 2012 was due primarily to decreased rent related to the Northshore Banking Center. The increase of $34,000 or 2.8% for 2012 compared to 2011 was due primarily to the move of the Northshore Banking Center to a new location in Covington, Louisiana from Mandeville, Louisiana.

Depreciation and amortization. Depreciation and amortization costs were $1.0 million, $793,000, and $618,000 for the years ended December 31, 2013, 2012 and 2011, respectively. This category includes leasehold, furniture, fixtures and equipment depreciation totaling $843,000, $763,000, and $608,000 for the years ended December 31, 2013, 2012 and 2011, respectively, as well as intangible asset amortization of $159,000, $31,000, and $10,000 for these same periods, respectively. The increase of $209,000 or 26.4% for 2013 compared to 2012, was due to depreciation from additional furniture and technology equipment purchases required to support Business First’s expansion and to build the infrastructure needed for growth in the volume of its business. The increase of $175,000 or 28.3% for 2012 compared to 2011 was due primarily to moving the Northshore Banking Center from Mandeville, Louisiana to Covington, Louisiana and to the purchase of a new core operating system.

Data processing. Data processing expenses were $601,000, $535,000, and $539,000 for the years ended December 31, 2013, 2012, and 2011, respectively. These expenses increased $66,000 or 12.4% in 2013 due to the Bank’s conversion to a new core operating system and decreased $4,000 or 0.7% from 2011.

Other professional fees. Other professional fees, which include audit, loan review, and other consultants, were $972,000, $829,000, and $704,000 for the years ended December 31, 2013, 2012 and 2011, respectively. The increase of $143,000 or 17.2% for 2013 and the increase of $125,000 or 17.8% from 2011 compared to 2012 was due primarily to the use of outside consultants.

Other real estate owned expense and write-downs. Expenses related to other real estate owned increased $86,000 in 2013 compared to 2012 due to write-downs of $196,000 taken on three properties in 2013 and other miscellaneous expenses relating to the upkeep and maintenance of these types of properties. The decrease of $108,000 or 45.0% in 2012 compared to 2011 was due to write-downs taken on one property in 2012.

Other. Other noninterest expense increased $1.1 million or 53.1% in 2013 compared to 2012 due primarily to loan related expenses (foreclosures, legal expenses, etc.), software support and property tax accruals and decreased $23,000 or 1.1% for 2012 compared to 2011 due primarily to Management’s effort to control expenses.

For the year ended December 31, 2013, income tax expense was $1.0 million compared to $887,000 for the year ended December 31, 2012 and ($156,000) for the year ended December 31, 2011. The increase in income tax expense of $129,000 in 2013 was primarily attributable to the $1.1 million increase in income before income taxes during 2013. The increase in income tax expense of $1.0 million in 2012 was primarily attributable to the $3.4 million increase in income before income taxes in 2012. The $156,000 credit for the year ended December 31, 2011 is the result of lower income before income taxes for the year and the tax exempt income. Business First’s effective income tax rates for the years ended December 31, 2013, 2012 and 2011 were 18%, 20% and (14%), respectively, compared to the U.S. statutory rate of 34% for each year. The effective tax rates were affected by tax-exempt income generated by municipal securities and bank-owned life insurance and by other nondeductible expenses.

Business First’s assets remained flat, decreasing $282,000 from $684.2 million as of December 31, 2013 to $683.9 million as of June 30, 2014, and increased $3.1 million or 0.5% from $681.1 million as of December 31, 2012 to $684.2 million as of December 31, 2013. Business First’s asset growth was controlled during the first six months of 2014.

Business First’s primary source of income is interest on loans to individuals, professionals, small to medium-sized businesses and commercial companies located in Louisiana. Business First’s loan portfolio consists primarily of commercial loans and real estate loans secured by commercial real estate properties located in its primary market area. Business First’s loan portfolio represents the highest yielding component of its earning asset base.

As of June 30, 2014, total loans were $537.4 million, an increase of $1.4 million compared to $536.0 million as of December 31, 2013. Total loans as of December 31, 2013 represented an increase of $75.8 million or 16.5% compared to $460.2 million as of December 31, 2012. These increases were primarily due to its continued penetration in its primary market area. There were no loans held for sale as of June 30, 2014, December 31, 2013 and December 31, 2012.

Total loans as a percentage of deposits were 91.2%, 90.2% and 81.3% as of June 30, 2014 and December 31, 2013 and 2012, respectively. Total loans as a percentage of assets were 78.7%, 78.4% and 67.6% as of June 30, 2014 and December 31, 2013 and 2012, respectively.

The following table summarizes the loan portfolio of Business First by type of loan as of the dates indicated:

Commercial loans. Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. These loans are primarily made based on the identified cash flows of the borrower, and secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and generally include personal guarantees.

Commercial loans increased $10.2 million or 5.5% to $195.9 million as of June 30, 2014 from $185.7 million as of December 31, 2013. The increase in lending activity was due to the efforts of Business First’s bankers who leveraged existing bank relationships to fund expansion and growth opportunities. Commercial loans as of December 31, 2013 represented an increase of $53.4 million or 40.3% from $132.3 million as of December 31, 2012. The increase in commercial loans during 2013 was the result of a strong and experienced staff of bankers who pursued and secured new relationships as well as leveraged existing relationships.

Construction and land. Construction and land development loans are comprised of loans to fund construction, land acquisition and land development construction. The properties securing the portfolio are located throughout Louisiana and are generally diverse in terms of type.

Construction and land loans decreased $610,000 or 1.1% to $53.7 million as of June 30, 2014 from $54.3 million as of December 31, 2013. The minimal net decrease was attributable to normal, expected interim residential construction loans moving to the secondary market or to the bank’s in-house product, after completion. Construction and land loans as of December 31, 2013 represented a decrease of $7.6 million or 12.4% from $61.9 million as of December 31, 2012. The decrease in construction and land loans during 2013 primarily resulted from the effort of management and lending to target commercial and industrial loans and purposefully decrease or limit the addition of construction and development loans.

1-4 family residential. Business First’s 1-4 family residential loan portfolio is comprised of loans secured by single family homes, which are both owner-occupied and investor owned. Business First’s 1-4 family residential loans have a relatively small balance spread between many individual borrowers.

1-4 family residential loans increased $2.4 million or 7.3% to $35.6 million as of June 30, 2014 from $33.2 million as of December 31, 2013. This increase resulted from both conversion of residential construction to in-house financed owner-occupied term debt and new financings of existing 1-4 family residential. The 1-4 family residential loans as of December 31, 2013 represented an increase of $1.5 million or 4.8% from $31.6 million as of December 31, 2012. The increase in 1-4 family residential loans during 2013 primarily resulted from an increase in market demand due to an improved housing market in several of Business First’s primary market area.

Nonfarm nonresidential. Nonfarm nonresidential loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate. These loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the portfolio are located throughout Louisiana and are generally diverse in terms of type. This diversity helps reduce the exposure to adverse economic events that affect any single industry.

Nonfarm nonresidential loans decreased $10.9 million or 5.1% to $204.3 million as of June 30, 2014 from $215.2 million as of December 31, 2013. This decrease was primarily driven due to several large pay outs, which were the direct result of management’s decision to exit these credits. Nonfarm nonresidential loans as of December 31, 2013 represented an increase of $29.3 million or 15.8% from $185.9 million as of December 31, 2012. The increase in nonfarm nonresidential loans during 2013 was the result of a strong and experienced staff of bankers who pursued and secured new relationships as well as leveraged existing relationships.

Other loan categories. Other categories of loans included in its loan portfolio include farmland and agricultural loans made to farmers and ranchers relating to their operations, multi-family residential loans and consumer loans. None of these categories of loans represents a significant portion of its total loan portfolio.

The contractual maturity ranges of loans in Business First’s loan portfolio and the amount of such loans with fixed and floating interest rates in each maturity range as of date indicated are summarized in the following tables:

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Business First has several procedures in place to assist it in maintaining the overall quality of its loan portfolio. Business First has established underwriting guidelines to be followed by its bankers, and Business First also monitors its delinquency levels for any negative or adverse trends. There can be no assurance, however, that its loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general economic conditions.

Business First believes its conservative lending approach and focused management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets. Business First had $4.1 million and $3.7 million in nonperforming assets as of June 30, 2014 and December 31, 2013 and $8.5 million in nonperforming assets as of December 31, 2012. Business First had $3.2 in nonperforming loans as of June 30, 2014 compared to $2.2 million and $8.1 million as of December 31, 2013 and 2012, respectively.

The following table presents information regarding nonperforming loans at the dates indicated:

From a credit risk standpoint, Business First classifies loans in one of four categories: pass, special mention, substandard or doubtful. Loans classified as loss are charged-off. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. Business First reviews the ratings on credits monthly. Ratings are adjusted to reflect the degree of risk and loss that is believed to be inherent in each credit as of each monthly reporting period. Business First’s methodology is structured so that specific allocations are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss).

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

Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses which exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed.

The following table summarizes Business First’s internal ratings of its loans as of the dates indicated.

Business First maintains an allowance for loan losses that represents management’s best estimate of the loan losses and risks inherent in the loan portfolio. In determining the allowance for loan losses, Business First estimates losses on specific loans, or groups of loans, where the probable loss can be identified and reasonably determined. The balance of the allowance for loan losses is based on internally assigned risk classifications of loans, historical loan loss rates, changes in the nature of the loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loan loss rates. For additional discussion of Business First’s methodology, please refer to “—Critical Accounting Policies—Allowance for loan losses.”

In connection with its review of the loan portfolio, Business First considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements Business First considers include:

As of June 30, 2014, the allowance for loan losses totaled $6.2 million or 1.2% of total loans. As of December 31, 2013, the allowance for loan losses totaled $6.0 million or 1.1% of total loans. As of December 31, 2012, the allowance for loan losses totaled $5.9 million or 1.3% of total loans.

The following table presents, as of and for the periods indicated, an analysis of the allowance for loan losses and other related data:

The successful execution of Business First’s growth strategy through strategic acquisitions and organic growth is demonstrated by the upward trend in loan balances from December 31, 2009 to June 30, 2014. Loan balances increased from $428.1 million as of December 31, 2009, to $537.4 million as of June 30, 2014. In 2010 and 2011, Business First recognized concerns regarding specific relationships and, therefore increased provisions appropriately. The remaining three years and interim period, December 31, 2009, December 31, 2012, December 31, 2013 and June 30, 2014, reflect the bank’s consistent level of the allowance of 1.15%, 1.28%, 1.13% and 1.16%, respectively. Further, charge-offs have been immaterial, representing less than 1% of total loan balances during the same periods.

Although Business First believes that it has established its allowance for loan losses in accordance with accounting principles generally accepted in the United States and that the allowance for loan losses was adequate to provide for known and inherent losses in the portfolio at all times shown above, future provisions will be subject to ongoing evaluations of the risks in its loan portfolio. If Business First experiences economic declines or if asset quality deteriorates, material additional provisions could be required.

Business First uses its securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements and meet regulatory capital requirements. As of June 30, 2014, the carrying amount of investment securities totaled $76.6 million, a decrease of $25.7 million or 25.1% compared to $102.3 million as of December 31, 2013. The balance in the securities portfolio as of December 31, 2013 represented a decrease of $71.3 million or 41.1% compared to $173.6 million as of December 31, 2012. The decreases in investment securities were due to sales made to fund loan growth as well as shorten the overall duration of the portfolio. Securities represented 11.2%, 14.9% and 25.5% of total assets as of June 30, 2014 and December 31, 2013 and 2012, respectively.

Business First’s investment portfolio consists entirely of securities classified as available for sale. As a result, the carrying values of its investment securities are adjusted for unrealized gain or loss, and any gain or loss is reported on an after-tax basis as a component of other comprehensive income in stockholders’ equity. The following table summarizes the amortized cost and estimated fair value of investment securities as of the dates shown:

All of Business First’s mortgage-backed securities are agency securities. Business First does not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, structured investment vehicles, private label collateralized mortgage obligations, subprime, Alt-A, or second lien elements in its investment portfolio. As of June 30, 2014, the investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages.

Management evaluates securities for other-than-temporary impairment, at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

The following table sets forth the fair value, maturities and approximated weighted average yield based on estimated annual income divided by the average amortized cost of the securities portfolio as of the dates indicated. The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.

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 pre-pay. Monthly pay downs 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 Business First’s investment portfolio was 12.07 years with an estimated effective duration of 57.07 months as of June 30, 2014.

As of June 30, 2014 and December 31, 2013 and 2012, Business First did not own securities of any one issuer for which aggregate adjusted cost exceeded 10% of the consolidated stockholders’ equity as of such respective dates.

The average yield of the securities portfolio was 2.07% during 2013 compared to 2.19% during 2012. The decrease in average yield during 2013 compared to 2012 was primarily due to the reinvestment of funds at lower rates in 2013 and the speed of prepayments on the mortgage-backed securities.

Business First offers a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts. Business First relies primarily on competitive pricing policies, convenient locations and personalized service to attract and retain these deposits.

Total deposits as of June 30, 2014 were $589.0 million, a slight decrease of $5.2 million compared to $594.2 million as of December 31, 2013 due primarily to a seasonal decline in noninterest-bearing deposit accounts. Total deposits as of December 31, 2013 were $594.2 million, an increase of $27.8 million or 4.9% compared to December 31, 2012 due primarily to an increase of $40.4 million in time deposits over $100,000 and offset by a decline in other time deposits. Deposit growth was primarily due to Business First’s continued penetration in its primary market area along with the use of deposit listing services.

Noninterest-bearing deposits as of June 30, 2014 were $115.4 million compared to $121.1 million as of December 31, 2013, a decrease of $5.7 million or 4.7%. The December 31, 2013 balance for noninterest-bearing deposits represented an increase of $1.1 million or 0.9% compared to $120.0 million as of December 31, 2012.

Average deposits for the six months ended June 30, 2014 were $597.9 million, an increase of $31.9 million or 5.6% over the full year average for the year ended December 31, 2013 of $566.0 million. Average deposits grew $20.3 million or 3.7% from $545.7 million for the year ended December 31, 2012. The average rate paid on total interest-bearing deposits decreased consistently over this period from 0.96% for the year ended December 31, 2012 to 0.80% for the year ended December 31, 2013 to 0.75% for the six months ended June 30, 2014. The decrease in average rates were driven primarily by strategic reductions in limited access money market and certificate of deposit pricing during this time period. In addition, the continued growth of noninterest-bearing demand accounts resulted in further reductions to the cost of deposits from 0.78% for the year ended December 31, 2012 to 0.65% for the year ended December 31, 2013 and 0.62% for the six months ended June 30, 2014.

The following table presents the daily average balances and weighted average rates paid on deposits for the periods indicated:

The ratio of average noninterest-bearing deposits to average total deposits for the six months ended June 30, 2014 and the years ended December 31, 2013 and 2012 was 19.0%, 19.9% and 18.5%, respectively.

lending relationships, Business First experienced year over year organic deposit growth of 4.9% in 2013 and 4.6% in 2012 and a decrease of 0.1% in 2011, while at the same time Business First reduced its overall cost of funds. Cost of funds is calculated as total interest expense divided by total deposits plus total borrowings. Business First’s cost of funds was 0.77% in 2013, 0.90% in 2012 and 1.21% in 2011. This reduction in its cost of funds was the result of its focus on acquisition of noninterest-bearing demand deposits through organic growth. Noninterest-bearing demand deposits as a percentage of total deposits grew to 20.4% in 2013, and 21.2% in 2012, compared to 18.4% in 2011. Average rates on interest-bearing deposits were 0.80% in 2013, 0.96% in 2012 and 1.31% in 2011.

The following table sets forth the amount of certificates of deposit that are $100,000 or greater by time remaining until maturity:

Business First utilizes short-term and long-term borrowings to supplement deposits to fund its lending and investment activities, each of which is discussed below.

Federal Home Loan Bank (FHLB) advances. The FHLB allows Business First to borrow on a blanket floating lien status collateralized by certain securities and loans. As of June 30, 2014 and December 31, 2013 and 2012, total borrowing capacity of $205.2 million, $192.6 million and $196.1 million, respectively, was available under this arrangement and $15 million, $15 million and $40 million, respectively, was outstanding with a weighted average interest rate of 1.90% as of June 30, 2014, 1.90% as of December 31, 2013 and 2.84% as of December 31, 2012. Business First’s current FHLB advances mature within five years. Business First utilizes these borrowings to meet liquidity needs and to fund certain fixed rate loans in its portfolio.

The following table presents its FHLB borrowings at the dates indicated. Other than FHLB borrowings, Business First had no other short-term borrowings at the dates indicated.

Business First Bank maintains Federal Funds Purchased Relationships with the following financial institutions and limits as of June 30, 2014:

The following table represents combined Federal Funds Purchased for all relationships at the dates indicated.

Liquidity involves Business First’s ability to raise funds to support asset growth and acquisitions or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate on an ongoing basis and manage unexpected events. For the six months ended June 30, 2014 and the years ended December 31, 2013 and 2012, liquidity needs were primarily met by core deposits, security and loan maturities and amortizing investment and loan portfolios. Although access to brokered deposits, purchased funds from correspondent banks and overnight advances from the FHLB and the Federal Reserve Bank of Atlanta are available and have been utilized on occasion to take advantage of investment opportunities, Business First does not generally rely on these external funding sources. As of June 30, 2014 and December 31, 2013 and 2012, Business First maintained 5 lines of credit with commercial banks which provide for extensions of credit with an availability to borrow up to an aggregate $84.7 million as of June 30, 2014, $84.6 million as of December 31, 2013 and $78.5 million as of December 31, 2012. There were no funds under these lines of credit outstanding as of June 30, 2014 and December 31, 2013 and December 31, 2012.

The following table illustrates, during the periods presented, the mix of Business First’s funding sources and the average assets in which those funds are invested as a percentage of average total assets for the period indicated. Average assets totaled $688.4 million for the six months ended June 30, 2014, $687.4 for the year ended December 31, 2013 and $663.6 for the year ended December 31, 2012.

Business First’s primary source of funds is deposits, and its primary use of funds is loans. Business First does not expect a change in the primary source or use of its funds in the foreseeable future. Business First’s average loans increased 14.6% for the six months ended June 30, 2014 compared to the same period in 2013 and 6.9% for the year ended December 31, 2013 compared to the year ended December 31, 2012. Business First predominantly invests excess deposits in overnight deposits with the Federal Reserve, securities, interest-bearing deposits at other banks or other short-term liquid investments until needed to fund loan growth. Business First’s securities portfolio had a weighted average life of 12.07 years and an effective duration of 57.07 months as of June 30, 2014 and a weighted average life of 11.41 years and an effective duration of 58.99 months as of December 31, 2013.

As of June 30, 2014, Business First had outstanding $130.1 million in commitments to extend credit and $6.9 in commitments associated with outstanding standby and commercial letters of credit. As of December 31, 2013, Business First had outstanding $155.9 million in commitments to extend credit and $6.3 in commitments associated with outstanding standby and commercial letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements.

As of June 30, 2014 and December 31, 2013, Business First had no exposure to future cash requirements associated with known uncertainties or capital expenditures of a material nature. As of June 30, 2014, Business First had cash and cash equivalents of $33.1 million compared to $10.1 million as of December 31, 2013.

Total stockholders’ equity increased to $76.1 million as of June 30, 2014, compared to $71.9 million as of December 31, 2013, an increase of $4.2 million or 5.8%. This increase was primarily the result of $1.8 million in

the change (gain) in unrealized losses on available-for-sale securities and $2.2 million in net income. Total stockholders’ equity increased to $71.9 million as of December 31, 2013, compared to $71.0 million as of December 31, 2012, an increase of $909,000 or 1.3%. This year over year change was relatively flat due to an increase in unrealized losses on available-for-sale securities of $4.5 million and net income of $4.8 million. To date, Business First has not declared or paid dividends on its common stock.

Capital management consists of providing equity to support current and future operations. Banking regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. Business First is subject to regulatory capital requirements at the bank holding company and bank levels. See “Regulation and Supervision—Prompt Corrective Action” for additional discussion regarding the regulatory capital requirements applicable to Business First and Business First Bank. As of June 30, 2014, December 31, 2013 and 2012, Business First and Business First Bank were in compliance with all applicable regulatory capital requirements, and Business First Bank was classified as “well capitalized,” for purposes of the prompt corrective action regulations. As Business First employs its capital and continues to grow its operations, its regulatory capital levels may decrease depending on its level of earnings. However, Business First expects to monitor and control its growth in order to remain in compliance with all regulatory capital standards applicable to it.

The following table presents the actual capital amounts and regulatory capital ratios for Business First and Business First Bank as of the dates indicated.

The following table summarizes contractual obligations and other commitments to make future payments as of December 31, 2013 (other than deposit obligations), which consist of future cash payments associated with Business First’s contractual obligations pursuant to its FHLB advances and non-cancelable future operating leases. Payments for FHLB advances will include interest of $415,000 that will be paid over future periods. Payments related to leases are based on actual payments specified in underlying contracts. Advances from the Federal Home Loan Bank totaled approximately $15 million and $40 million as of December 31, 2013 and 2012, respectively. As of December 31, 2013, the advance was collateralized by a blanket floating lien on certain securities and loans, had a weighted average rate of 1.9% and matures in 2018.

In the normal course of business, Business First enters into various transactions, which, in accordance with generally accepted accounting principles, or GAAP, are not included in its consolidated balance sheets. Business First enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets.

Business First’s commitments associated with outstanding standby and commercial letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

Standby and commercial letters of credit are conditional commitments issued by Business First to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer, Business First has rights to the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. The credit risk to Business First in issuing letters of credit is essentially the same as that involved in extending loan facilities to its customers.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. Business First evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by Business First, upon extension of credit, is based on management’s credit evaluation of the customer.

As a financial institution, Business First’s primary component of market risk is interest rate volatility. Business First’s asset liability and funds management policy provides management with the guidelines for effective funds management, and Business First has established a measurement system for monitoring its net interest rate sensitivity position. Business First manages its sensitivity position within its established guidelines.

Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on most of Business First’s assets and liabilities, and the market value of all interest-earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

Business First manages its exposure to interest rates by structuring its balance sheet in the ordinary course of business. Business First does not enter into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk. Based upon the nature of its operations, Business First is not subject to foreign exchange or commodity price risk. Business First does not own any trading assets.

Business First’s exposure to interest rate risk is managed by the asset-liability committee of Business First Bank, in accordance with policies approved by its board of directors. The committee formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The committee meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the committee reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk which include an analysis of relationships between interest-earning assets and interest-bearing liabilities, and an interest rate shock simulation model.

Business First uses interest rate risk simulation models and shock analysis to test the interest rate sensitivity of net interest income and fair value of equity, and the impact of changes in interest rates on other financial metrics. Contractual maturities and re-pricing opportunities of loans are incorporated in the model as are prepayment assumptions, maturity data and call options within the investment portfolio. Average life of non-maturity deposit accounts are based on standard regulatory decay assumptions and are incorporated into the model. The assumptions used are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various management strategies.

On at least a quarterly basis, Business First runs two simulation models including a static balance sheet and dynamic growth balance sheet. These models test the impact on net interest income and fair value of equity from

changes in market interest rates under various scenarios. Under the static and dynamic growth models, rates are shocked instantaneously based upon parallel and non-parallel yield curve shifts. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Non-parallel simulation involves analysis of interest income and expense under various changes in the shape of the yield curve. Internal policy regarding internal rate risk simulations currently specifies that for instantaneous parallel shifts of the yield curve, estimated net income at risk for the subsequent one-year period should not decline by more than 5.0% for a 100 basis point shift, 10% for a 200 basis point shift, and 12.5% for a 300 basis point shift.

The following table summarizes the simulated change in net interest income and fair value of equity over a 12-month horizon as of the dates indicated:

The results are primarily due to behavior of demand, money market and savings deposits during such rate fluctuations. Business First has found that, historically, interest rates on these deposits change more slowly than changes in the discount and federal funds rates. This assumption is incorporated into the simulation model and is generally not fully reflected in a gap analysis. The assumptions incorporated into the model are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies.

Business First’s consolidated financial statements and related notes included elsewhere in this proxy statement/prospectus have been prepared in accordance with GAAP. These require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.

Unlike many industrial companies, substantially all of Business First’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on its performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do reflect general levels of inflation.

Business First’s accounting and reporting policies conform to GAAP, and the prevailing practices in the banking industry. However, Business First also evaluates its performance based on certain additional financial measures discussed in this proxy statement/prospectus as being non-GAAP financial measures. Business First classifies a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in its statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical

measures or ratios or statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.

The non-GAAP financial measures that Business First discusses in this proxy statement/prospectus should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which Business First calculates the non-GAAP financial measures that Business First discusses in this proxy statement/prospectus may differ from that of other companies reporting measures with similar names. You should understand how such other banking organizations calculate their financial measures similar or with names similar to the non-GAAP financial measures Business First has discussed in this proxy statement/prospectus when comparing such non-GAAP financial measures.

Tangible Book Value Per Common Share. Tangible book value per common share is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. Business First calculates (1) tangible common equity as stockholders’ equity less accumulated other comprehensive income, goodwill and core deposit intangible and other intangible assets, net of accumulated amortization, and (2) tangible book value per common share as tangible common equity divided by shares of common stock outstanding. The most directly comparable GAAP financial measure for tangible book value per common share is book value per common share.

Business First believes that this measure is important to many investors in the marketplace who are interested in changes from period to period in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing total book value while not increasing tangible book value.

accumulated amortization. The most directly comparable GAAP financial measure for tangible common equity to tangible assets is total common stockholders’ equity to total assets.

Business First believes that this measure is important to many investors in the marketplace who are interested in the relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of increasing both total stockholders’ equity and assets while not increasing its tangible common equity or tangible assets.

The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets:

Business First’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and with general practices within the financial services industry. Application of these principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Business First bases its estimates on historical experience and on various other assumptions that Business First believes to be reasonable under current circumstances. These assumptions form the basis for its judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. Business First evaluates its estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.

Business First has identified the following accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of its financial statements to those judgments and assumptions, are critical to an understanding of its financial condition and results of operations. Business First believes that the judgments, estimates and assumptions used in the preparation of its financial statements are appropriate.

Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them until maturity. Securities to be held for indefinite periods of time are classified as available for sale and carried at fair value, with the unrealized holding gains and losses reported in other comprehensive income, net of tax. Management determines the appropriate classification of securities at the time of purchase.

Interest income includes amortization of purchase premiums and discounts. Realized gains and losses are derived from the amortized cost of the security sold. Credit related declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses, with the remaining unrealized loss recognized as a component of other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of Business First to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans held for sale consist of certain mortgage loans originated and intended for sale in the secondary market and are carried at the lower of cost or estimated fair value on an individual loan basis. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Business First obtains purchase commitments from secondary market investors prior to closing the loans and does not retain the servicing obligations related to any such loans upon their sale. Gains and losses on sales of loans held for sale are based on the difference between the selling price and the carrying value of the related loan sold.

Loans, excluding certain purchased loans which have shown evidence of deterioration since origination as of the date of the acquisition, that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are stated at the amount of unpaid principal, reduced by unearned income and an allowance for loan losses. Interest on loans is recognized using the simple-interest method on the daily balances of the principal amounts outstanding. Fees associated with the originating of loans and certain direct loan origination costs are netted and the net amount is deferred and recognized over the life of the loan as an adjustment of yield.

The accrual of interest on loans is discontinued when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. When a loan is placed on nonaccrual status, all previously accrued and unpaid interest is reversed. Interest income is subsequently recognized on a cash basis as long as the remaining book balance of the asset is deemed to be collectible. If collectability is questionable, then cash payments are applied to principal. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured in accordance with the terms of the loan agreement.

The allowance for loan losses is an estimated amount management believes is adequate to absorb inherent losses on existing loans that may be uncollectible based upon review and evaluation of the loan portfolio. Management’s periodic evaluation of the allowance is based on general economic conditions, the financial condition of borrowers, the value and liquidity of collateral, delinquency, prior loan loss experience, and the results of periodic reviews of the portfolio.

conditions and trends including unemployment, changes in lending staff, policies and procedures, changes in credit concentrations, changes in the trends and severity of problem loans and changes in trends in volume and terms of loans. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in Business First’s historic loss factors. For purposes of determining the general reserve, the loan portfolio, less cash secured loans, government guaranteed loans and impaired loans, is multiplied by Business First’s adjusted historical loss rate. The second component of the allowance for loan losses, the specific reserve, is determined in accordance with current authoritative accounting guidance based on probable losses on specific classified loans.

The allowance for loan losses is increased by charges to income and decreased by charge-offs (net of recoveries).

Due to the growth of Business First over the past several years, a portion of the loans in its portfolio and its lending relationships are of relatively recent origin. The new loan portfolios have limited delinquency and credit loss history and have not yet exhibited an observable loss trend. The credit quality of loans in theses loan portfolios are impacted by delinquency status and debt service coverage generated by the borrowers’ business and fluctuations in the value of real estate collateral. Management considers delinquency status to be the most meaningful indicator of the credit quality of one-to-four single family residential, home equity loans and lines of credit and other consumer loans. In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process Business First refers to as “seasoning”. As a result, a portfolio of older loans will usually behave more predictably than a portfolio of newer loans. Because the majority of its portfolio is relatively new, the current level of delinquencies and defaults may not be representative of the level that will prevail when the portfolio becomes more seasoned, which may be higher than current levels. If delinquencies and defaults increase, Business First may be required to increase its provision for loan losses, which would adversely affect its results of operations and financial condition.

Delinquency statistics are updated at least monthly. Internal risk ratings are considered the most meaningful indicator of credit quality for new commercial, construction, and commercial real estate loans. Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the allowance for loan losses. Internal risk ratings are updated on a continuous basis.

Loans are considered impaired when, based on current information and events, it is probable Business First will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. If a loan is impaired, a specific valuation allowance is allocated, if necessary. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Business First’s policy requires measurement of the allowance for an impaired collateral dependent loan based on the fair value of the collateral. Other loan impairments are measured based on the present value of expected future cash flows or the loan’s observable market price. At December 31, 2013 and 2012, all significant impaired loans have been determined to be collateral dependent and the allowance for loss has been measured utilizing the estimated fair value of the collateral.

From time to time, Business First modifies its loan agreement with a borrower. A modified loan is considered a troubled debt restructuring when two conditions are met: (i) the borrower is experiencing financial difficulty and (ii) concessions are made by Business First that would not otherwise be considered for a borrower with similar credit risk characteristics. Modifications to loan terms may include a lower interest rate, a reduction of principal, or a longer term to maturity. Business First reviews each troubled debt restructured loan and determines on a case by case basis if the loan is subject to impairment and the need for a specific allowance for loan loss allocation. An allowance for loan loss allocation is based on either the present value of estimated future cash flows or the estimated fair value of the underlying collateral.

Business First has certain lending policies and procedures in place that are designed to maximize loan income with an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis and makes changes as appropriate. Management receives frequent reports related to loan originations, quality, concentrations, delinquencies, non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions, both by type of loan and geography.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and effectively. Underwriting standards are designed to determine whether the borrower possesses sound business ethics and practices and to evaluate current and projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and, secondarily, on the underlying collateral provided by the borrower. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and include personal guarantees.

Real estate loans are also subject to underwriting standards and processes similar to commercial loans. These loans are underwritten primarily based on projected cash flows and, secondarily, as loans secured by real estate. The repayment of real estate loans is generally largely dependent on the successful operation of the property securing the loans or the business conducted on the property securing the loan. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing Business First’s real estate portfolio are generally diverse in terms of type and geographic location, throughout the state of Louisiana. This diversity helps reduce the exposure to adverse economic events that affect any single market or industry.

Business First utilizes methodical credit standards and analysis to supplement its policies and procedures in underwriting consumer loans. Business First’s loan policy addresses types of consumer loans that may be originated and the collateral, if secured, which must be perfected. The relatively smaller individual dollar amounts of consumer loans that are spread over numerous individual borrowers also minimizes risk.

The JOBS Act permits an “emerging growth company” to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. However, Business First has “opted out” of this provision. As a result, Business First will comply with new or revised accounting standards to the same extent that compliance is required for non-emerging growth companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

ASU 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-02 amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective for reporting periods beginning after December 15, 2013 and is not expected to have a significant impact on Business First’s consolidated financial statements.

Business First has authorized two classes of stock: (i) 10,000,000 authorized shares of Business First common stock, par value $1.00 per share, [—] shares of which were outstanding as of [—], 2014; and (b) 1,000,000 authorized shares of preferred stock, no par value per share, none of which are issued and outstanding as of that date. The following summary is qualified in its entirety by reference to the articles of incorporation and bylaws of Business First, which are filed with the SEC as Exhibit 3.1 and Exhibit 3.2 to the registration statement on Form S-4 of which this proxy statement/prospectus is a part. We encourage you to read those documents.

Voting Rights. The holders of Business First common stock are entitled to one vote per share on all matters submitted to its shareholders, unless otherwise provided by law and subject to the rights and preferences of the holders of any outstanding shares of its preferred stock. Holders of Business First common stock are not entitled to cumulative voting in the election of directors.

Dividend Rights. Subject to certain regulatory restrictions discussed in this proxy statement/prospectus and to the rights of holders of any preferred stock that Business First may hereafter issue, all shares of Business First common stock are entitled to share equally in dividends from legally available funds, when, as, and if declared by its board of directors. For additional information, see “Business of Business First—Supervision and Regulation—Dividend Restrictions.”

No Preemptive Rights. No holder of Business First’s common stock has a right pursuant to the LBCL, its articles of incorporation or bylaws to purchase shares of its common stock in any subsequent offering.

Purchase and Redemption. The shares of Business First common stock presently outstanding are, and the shares that will be issued in connection with the merger will be, fully paid and nonassessable, except as provided by federal law. The board of directors of Business First may repurchase or redeem shares of its common stock as provided in the LBCL and other applicable laws. This authorization does not permit Business First’s board of directors to redeem its common stock without the consent of the holder.

Liquidation Rights. In the event of Business First’s liquidation, dissolution or winding up, whether voluntarily or involuntarily, the holders of its common stock will be entitled to share ratably in any of the net assets or funds which are available for distribution to shareholders, after the satisfaction of all liabilities and payment to the holders of any outstanding shares of Business First’s preferred stock of the liquidation value of that stock, plus any declared and unpaid dividends. No shares of Business First’s preferred stock are issued and outstanding as of [—], 2014.

The Business First preferred stock is available for issuance from time to time for various purposes as determined by the Business First board of directors, including making future acquisitions, raising additional equity capital and financing. The preferred stock may be issued on such terms and conditions, and at such times and in such situations, as the Business First board of directors in its sole discretion determines to be appropriate, without any further approval or action by the shareholders, unless otherwise required by laws, rules, regulations or agreements applicable to Business First.

Moreover, except as otherwise limited by applicable laws, rules or regulations, the Business First board of directors has the sole authority to determine the relative rights and preferences of the preferred stock and any

series thereof without shareholder approval. For example, the following characteristics with respect to any class of Business First preferred stock may be fixed by its board of directors:

The Business First board of directors is not required to seek shareholder approval prior to any issuance of preferred stock or any series thereof, unless otherwise required by law or the rules of any applicable securities exchange.

The preferred stock could be deemed to have an anti-takeover effect in that, if a hostile takeover situation should arise, shares of preferred stock could be issued to purchasers sympathetic with Business First’s management or others in such a way as to render more difficult or to discourage a merger, tender offer, proxy contest, the assumption of control by a holder of a large block of Business First’s securities or the removal of incumbent management.

The effects of the issuance of the preferred stock on the holders of Business First common stock could include:

Both Business First and AGFC are incorporated under Louisiana law. Upon completion of the merger, the Business First articles of incorporation in effect immediately prior to the effective time of the merger will be the articles of incorporation of the combined company. The bylaws of Business First in effect immediately prior to the effective time of the merger will be the bylaws of the combined company. Because both Business First and AGFC are organized under the laws of the State of Louisiana, differences in the rights of holders of Business First stock and the rights of holders of AGFC stock arise only from differing provisions of their respective articles of incorporation and bylaws. The material differences between the rights of holders of Business First common stock and the rights of holders of AGFC common stock resulting from any differing provisions of their governing documents (articles of incorporation and bylaws) are summarized below.

The following summary does not purport to be a complete statement of the rights of Business First shareholders and AGFC shareholders. The summary is necessarily general, and it is not intended to be a complete statement of all differences affecting the rights of shareholders of Business First or AGFC, respectively, or a complete description of the specific provisions referred to below. This summary contains a list of the material differences but is not meant to be relied upon as an exhaustive list or a detailed description of the provisions discussed, and is qualified in its entirety by reference to the LBCL and the governing documents of Business First and AGFC, to which the shareholders of AGFC are referred. Copies of the governing documents of Business First are available, without charge, to any person, including any beneficial owner of AGFC stock to whom this proxy statement/prospectus is delivered, by following the instructions listed under “Where You Can Find More Information” beginning on page 207. Business First and AGFC shareholders should consult their own legal counsel with respect to specific differences and changes in their rights as shareholders that would result from the proposed merger.

Business First. Business First’s articles of incorporation authorize it to issue 10,000,000 shares of common stock, par value $1.00 per share. Business First’s articles of incorporation also authorize it to issue 1,000,000 shares of preferred stock, no par value per share. As of [—], 2014, there were [—] shares of Business First common stock issued and outstanding and no shares of its preferred stock were issued and outstanding.

AGFC. AGFC’s articles of incorporation authorize it to issue 2,500,000 shares of common stock, par value $10.00 per share. AGFC’s articles of incorporation do not authorized it to issue preferred stock. As of [—], 2014, the record date, there were 217,944 shares of AGFC common stock issued and outstanding.

Business First. Business First’s articles of incorporation provide that Business First shareholders shall not have any preemptive or preferential right to purchase shares of any class of its capital stock.

AGFC. AGFC’s articles of incorporation similarly provide that AGFC shareholders shall not have preemptive rights.

Business First. Business First’s bylaws provide for a board of directors consisting of the number determined from time to time by its board of directors. Business First’s directors serve a one-year term and are elected by a plurality of the votes actually cast at each annual meeting Business First’s shareholders.

AGFC. AGFC’s articles of incorporation provide for a board of directors consisting of not less than seven and not more than 14 members. AGFC’s board of directors is divided into three classes, with the precise number

of directors in each class fixed by the affirmative vote of at least 80% of the total voting membership of AGFC’s board of directors. Each class of directors serves a three-year term, and directors of each class are elected by plurality vote at successive annual meetings of shareholders.

Business First. Business First’s board of directors may fill a vacancy on the board of directors by a majority vote of the board of directors in accordance with the LBCL.

AGFC. AGFC’s board of directors may fill a vacancy on the board of directors by the affirmative vote of at least 80% of the total voting membership of its board of directors.

Business First. Business First’s articles of incorporation and bylaws do not contain provisions restricting a shareholder’s right to nominate directors for election at an annual meeting. If, however, a shareholder wishes to nominate a candidate, the shareholder must submit to Business First a timely written notice including the candidate’s name and address, along with adequate information as to the candidate’s qualifications. To be considered timely, the notice must be received by Business First’s corporate secretary by the date that is not later than the close of business on the 90th day and not earlier than the 120th day prior to the first anniversary of the preceding year’s annual meeting.

AGFC. AGFC’s bylaws contain a provision requiring that nominations for election to its board of directors be approved by the affirmative vote of a majority of all directors.

Business First. A Business First director or the entire board of directors may be removed at any time, with or without cause, at any special or annual meeting of the shareholders of Business First, by the affirmative vote of a majority of the total voting power of the shareholders of Business First.

AGFC. An AGFC director may be removed from office, with or without cause, by either (i) the affirmative vote of 90% of the voting power present at a special meeting of the AGFC shareholders at which there is a special quorum (as hereinafter defined); or (ii) the affirmative vote of at least 80% of the total voting membership of AGFC’s board of directors. For purposes of the vote required to remove an AGFC director, a “special quorum” means the presence, in person or by proxy, of the holders of 80% of the total voting power of the shareholders of AGFC.

Business First. Special meetings of Business First shareholders may be called by:

Business First. Business First’s articles of incorporation do not contain any special voting requirement to approve a merger or other business combination. Business First’s articles of incorporation provide that the control shares and fair price provisions of the Louisiana Business Corporation Law shall not apply to Business First.

AGFC. AGFC’s articles of incorporation include provisions that may make takeover attempts and other acquisitions of interests in AGFC more difficult where the takeover attempt or other acquisition has not been approved by AGFC’s board of directors. These provisions include:

Business First. Business First’s articles of incorporation permit the indemnification of individuals against liabilities arising out of their status as directors, officers or employees to the fullest extent permitted by the applicable provisions of the LBCL.

AGFC. AGFC’s articles of incorporation require the indemnification of individuals against liabilities arising out of their status of officers and directors of AGFC and permit the indemnification of individuals arising out of their status as an employee or agent of AGFC, so long as such person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of AGFC and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful.

The indemnification provisions in the reorganization agreement and the respective articles of incorporation and bylaws of AGFC and Business First are limited by applicable federal statutes and regulations, including federal banking regulations and securities laws.

The following table sets forth certain information regarding the beneficial ownership of AGFC common stock as of October 31, 2014 by: (1) each person who is known by AGFC to beneficially own 5% or more of AGFC’s common stock; (2) each director of AGFC; (3) the principal executive officer, the principal financial officer and the two other most highly compensated executive officers of AGFC, or AGFC’s named executive officers; and (4) all directors and executive officers of AGFC as a group. Unless otherwise indicated, based on information furnished by such shareholders, management of AGFC believes that each person has sole voting and dispositive power over the shares indicated as owned by such person. Unless otherwise indicated below, the address for each of the listed beneficial owners is 320 N. Alexander Avenue, Port Allen, Louisiana 70767.

The following table sets forth certain information regarding the beneficial ownership of Business First common stock as of October 31, 2014, by (1) directors and named executive officers of Business First, (2) each person who is known by Business First to own beneficially 5% or more of the Business First common stock and (3) all directors and executive officers as a group. Unless otherwise indicated, based on information furnished by such shareholders, management of Business First believes that each person has sole voting and dispositive power over the shares indicated as owned by such person. Unless otherwise indicated below, the address for each of the listed beneficial owners is 8440 Jefferson Highway, Suite 101, Baton Rouge, Louisiana 70809.

AGFC shareholders are being asked to approve the Adjournment Proposal that will give the AGFC board of directors authority to adjourn the AGFC special meeting, or to postpone the AGFC special meeting, to another time or place if necessary or appropriate: (i) to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the reorganization agreement, (ii) to provide to AGFC shareholders any supplement or amendment to the proxy statement/prospectus or (iii) to disseminate any other information which is material to the AGFC shareholders voting at the special meeting.

If this proposal is approved, the AGFC special meeting could be adjourned to any date. If the AGFC special meeting is adjourned, AGFC shareholders who have already submitted their proxies will be able to revoke them at any time prior to their use. If you return a properly executed proxy and do not indicate how you wish to vote on the Adjournment Proposal your shares will be voted in favor of the Adjournment Proposal.

It may not be necessary to hold a shareholder vote on the Adjournment Proposal. If a vote is held on the Adjournment Proposal, approval of the proposal by AGFC shareholders requires the affirmative vote of the holders of a majority of the shares of AGFC common stock which are present, either in person or by proxy, at the special meeting.

The AGFC board of directors unanimously recommends that you vote “FOR” the Adjournment Proposal as it described in this proxy statement/prospectus.

If the merger is completed, those AGFC shareholders receiving Business First common stock as merger consideration will become shareholders of Business First.

Shareholder proposals submitted after the date of this proxy statement/prospectus may be included in the proxy statement for Business First’s 2015 annual meeting if submitted in accordance with the following. Shareholders who wish to nominate a candidate for election to Business First’s board of directors (other than the candidates proposed by the board of directors or its nominating committee) or propose any other business at the 2015 annual meeting must deliver written notice to Business First’s corporate secretary at the address below not earlier than January 29, 2015 nor later than February 28, 2015. Any nomination for director or other proposal by a shareholder that is not timely submitted and does not comply with these notice requirements will be disregarded, and upon the instructions of the presiding officer of the annual meeting all votes cast for each such nominee and such proposal will be disregarded.

A shareholder’s written notice submitted to Business First’s corporate secretary shall set forth: (A) as to each person whom the shareholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and Rule 14a-11 thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on Business First’s books, and of such beneficial owner, (ii) the class and number of shares of Business First which are owned beneficially and of record by such shareholder and such beneficial owner, and (iii) whether either such shareholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of Business First’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Business First’s voting shares to elect such nominee or nominees. Such notice shall be sent to the following address:

The individuals named as proxies on the proxy card for Business First’s 2015 annual meeting of shareholders will be entitled to exercise their discretionary authority in voting proxies on any shareholder proposal that is not included in Business First’s proxy statement for the 2015 annual meeting, unless Business First receives notice of the matter(s) to be proposed at the annual meeting by March 2, 2015. Even if proper notice is received within such time period, the individuals named as proxies on the proxy card for that meeting may nevertheless exercise their discretionary authority with respect to such matter(s) by advising shareholders of the proposal(s) and how the proxies intend to exercise their discretion to vote on these matter(s), unless the shareholder making the proposal(s) solicits proxies with respect to the proposal(s) to the extent required by Rule 14a-4(c)(2) under the Securities Exchange Act.

AGFC shareholders who wish to present a proposal for inclusion in the proxy materials relating to AGFC’s 2015 annual meeting of shareholders should ensure that such proposal is received by AGFC’s Corporate Secretary at 320 W. Alexander Avenue, Port Allen, Louisiana 70767.

Note that upon the effective date of the merger, if approved and then consummated prior to the date of the 2015 annual meeting of AGFC shareholders, the separate corporation existence of AGFC shall cease, and therefore there will not be a AGFC 2015 annual meeting of shareholders.

You should rely only on the information contained in this proxy statement/prospectus. Neither Business First nor AGFC has authorized anyone to provide you with different information. Therefore, if anyone gives you different or additional information, you should not rely on it. The information contained in this proxy statement/prospectus is correct as of its date. It may not continue to be correct after this date. AGFC has supplied all of the information about AGFC and American Gateway Bank contained in this proxy statement/prospectus and Business First has supplied all of the information contained in this proxy statement/prospectus about Business First and its subsidiaries. Each of us is relying on the correctness of the information supplied by the other.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.

The consolidated financial statements of Business First as of December 31, 2013 and 2012 and for the years then ended, have been included herein in reliance upon the reports of Hannis T. Bourgeois, LLP, certified public accountants, appearing elsewhere herein, and upon authority of such firm as experts in accounting and auditing.

The consolidated financial statements of AGFC as of December 31, 2013 and 2012 and for the years then ended, have been included herein in reliance upon the report of Hannis T. Bourgeois, LLP, certified public accountants, appearing elsewhere herein, and upon authority of such firm as experts in accounting and auditing.

The validity of the shares of Business First common stock to be issued by Business First in connection with the merger will be passed upon by Fenimore, Kay, Harrison & Ford LLP, Austin, Texas. Certain legal matters with respect to the merger will be passed upon for AGFC by Kantrow, Spaht, Weaver & Blitzer (APLC), Baton Rouge, Louisiana.

AGFC is not aware of any other matters to be brought before the special shareholders’ meeting. However, if any other matters are properly brought before the special meeting, the persons named on the enclosed proxy card will have discretionary authority to vote all proxies with respect to such matters in accordance with their judgment.

Business First filed a registration statement on Form S-4 to register the issuance of Business First stock to AGFC shareholders in the merger. This proxy statement/prospectus is a part of that registration statement and constitutes a prospectus of Business First and a proxy statement for AGFC’s special meeting. As allowed by SEC rules, this proxy statement/prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement.

Business First does not currently file reports with the SEC. Business First does, however, provide annual reports, including audited financial statements, as requested, to its shareholders in connection with its annual meeting. For copies of the most recent of these reports or any of Business First’s organizational documents, please send a notice to the following address:

You may inspect or copy any materials Business First files with the SEC after Business First’s registration statement on Form S-4 is declared effective at the Public Reference Room at the SEC at Room 1580, 100 F. Street, N.E., Washington, D.C. 20549. For a fee, you may also obtain copies of these materials by writing to the Public Reference Section of the Commission at 100 F. Street, N.E. Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the SEC public reference room. Any public filings Business First makes will also be available to the public from commercial document retrieval services and at the Internet website maintained by the SEC at http://www.sec.gov.

When deciding how to cast your vote, you should rely only on the information contained in this proxy statement/prospectus. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement/prospectus. This proxy statement/prospectus is dated [—], 2014. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than such date, and neither the mailing of this proxy statement/prospectus to AGFC shareholders nor the issuance of Business First common stock to AGFC shareholders shall create any implication to the contrary.

Business First has supplied all information contained in this proxy statement/prospectus relating to Business First and Business First Bank and AGFC has supplied all information contained in this proxy statement/prospectus relating to AGFC and American Gateway Bank.

You should rely only on the information which is contained in this proxy statement/prospectus or to which we have referred in this proxy statement/prospectus. We have not authorized anyone to provide you with information that is different.

Unaudited Consolidated Financial Statements of Business First Bancshares, Inc. and Subsidiaries as of and for the six months ended June 30, 2014 and June 30, 2013.

Audited Consolidated Financial Statements of Business First Bancshares, Inc. and Subsidiaries as of and for the Years Ended December 31, 2013 and 2012.

Unaudited Consolidated Financial Statements of American Gateway Financial Corporation and Subsidiary as of and for the six months ended June 30, 2014 and June 30, 2013.

Audited Consolidated Financial Statements of American Gateway Financial Corporation and Subsidiary as of and for the Years Ended December 31, 2013 and 2012.

The unaudited consolidated financial statements include the accounts of Business First Bancshares, Inc. (Bancshares) and its wholly-owned subsidiary, Business First Bank (the Bank), and its wholly-owned subsidiary, Business First Insurance, LLC. The Bank operates in five full service locations and one loan production office in Louisiana (Baton Rouge, Shreveport, Mandeville, Lafayette, Lake Charles and Houma (LPO)). As a state bank, it is subject to regulation by the Office of Financial Institutions, State of Louisiana, and the Federal Deposit Insurance Corporation and undergoes periodic examinations by these agencies. The Company is regulated by the Federal Reserve and is also subject to periodic examinations.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company’s consolidated balance sheet, statement of income, comprehensive income, changes in stockholders’ equity and cash flows 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 accounting principles generally accepted in the United State of America (“U.S. GAAP”) have been omitted or abbreviated. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes contained elsewhere in this Joint Proxy Statement-Prospectus.

Preparation of financial statement in conformity with U.S. GAAP requires management 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. Estimates are used in accounting for, among other items, the allowance for loan losses, useful lives for depreciation and amortization, fair value of financial instruments, deferred taxes, and contingencies. Estimates that are particularly susceptible to significant change for the Company include the determination of the allowance for loan losses and the assessment of deferred tax assets and liabilities, and therefore are critical accounting policies. 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 our markets, and changes in applicable banking regulations. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period presented.

Certain reclassifications have been made to conform to the classifications adopted for reporting in 2014. These reclassifications had no effect on previously reported net income.

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 warrants and stock options.

The amortized cost and fair values of securities available for sale as of June 30, 2014 and December 31, 2013 are summarized as follows:

The following table is a summary of securities with gross unrealized losses and fair values at June 30, 2014 and December 31, 2013, 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 a temporary impairment of the securities.

Management evaluates securities for other than temporary impairment when economic and market conditions warrant such evaluations. Consideration is given to the extent and length of time the fair value has been below cost, the reasons for the decline in value, and the Company’s intent to sell a security or whether it is more likely than not that the Company will be required to sell the security before the recovery of its amortized cost. The Company developed a process to identify securities that could potentially have a credit impairment that is other than temporary. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.

During the six months ending June 30, 2014 and June 30, 2013, respectively, the Company sold investment securities for proceeds of $24.4 million and $18.7 million and realized gains of $6 thousand and $111 thousand.

The amortized cost and fair values of securities available for sale as of June 30, 2014 by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Therefore, these securities are not included in the maturity categories in the following maturity summary.

Loans receivable at June 30, 2014 and December 31, 2013 are summarized as follows:

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. 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 loan 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. The following table sets forth, as of June 30, 2014 and December 31, 2013, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan 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.

Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.

As of June 30, 2014 and December 31, 2013, the credit quality indicators, disaggregated by class of loan, are as follows:

The above classifications follow regulatory guidelines and can generally be described as follows:

The following table reflects certain information with respect to the loan portfolio delinquencies by loan class and amount as of June 30, 2014 and December 31, 2013. All loans greater than 90 days past due are placed on non-accrual status.

The following is a summary of information pertaining to impaired loans as of June 30, 2014 and December 31, 2013. The interest income recognized for impaired loans was insignificant.

The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Bank makes loan modifications, primarily utilizing internal renegotiation programs via direct customer contact, that manage customers’ debt exposures held only by the Bank. Additionally, the Bank makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire unsecured debt structures. During the six months ended June 30,2014 and the year ended December 31, 2013, the

concessions granted to certain borrowers included extending the payment due dates, lowering the contractual interest rate, reducing accrued interest, and reducing the debt’s face or maturity amount.

Once modified in a troubled debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, the loan is evaluated for an asset-specific allowance for credit losses. The Bank continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured the Bank provides an allowance for credit losses for the amount of the loan that exceeds the value of the related collateral.

The following tables present informative data regarding loan modifications occurring as of June 30, 2014 and December 31, 2013.

The Company groups its financial assets and liabilities measured at fair value in three levels. Fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Fair values of investment securities available for sale were primarily measured using information from a third-party pricing service. This pricing service provides information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data from market research publications.

The following tables present the balance of assets and liabilities measured on a recurring basis as of June 30, 2014 and December 31, 2013. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a recurring basis.

The Company has segregated all financial assets and liabilities that are measured at fair value on a nonrecurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis.

The fair value of the impaired loans is measured at the fair value of the collateral for collateral- dependent loans. Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens. Repossessed assets are initially recorded at fair value less estimated cost to sell. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Bank records repossessed assets as Level 2.

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. In accordance with generally accepted accounting principles, certain financial instruments and all non- financial instruments are excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Short-Term Investments—For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities—Fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans—The fair value for loans is estimated using discounted cash flow analyses, with interest rates currently being offered for similar loans to borrowers with similar credit rates. Loans with similar classifications are aggregated for purposes of the calculations. The allowance for loan losses, which was used to measure the credit risk, is subtracted from loans.

Cash Value of Bank-Owned Life Insurance (BOLI)—The carrying amount approximates its fair value.

Deposits—The fair value of demand deposits and certain money market deposits is the amount payable at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses, with interest rates currently offered for deposits of similar remaining maturities.

Borrowings—The fair value of FHLB advances and other long-term borrowings is estimated using the rates currently offered for advances of similar maturities. The carrying amount of short-term borrowings maturing within ninety days approximates the fair value.

Commitments to Extend Credit and Standby and Commercial Letters of Credit—The fair values of commitments to extend credit and standby and commercial letters of credit do not differ significantly from the commitment amount and are therefore omitted from this disclosure.

The estimated approximate fair values of the Bank’s financial instruments as of June 30, 2014 and December 31, 2013 are as follows:

ASU 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-02 amends recent guidance related to the reporting of comprehensive income to enhance the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective for reporting periods beginning after December 15, 2013 and is not expected to have a significant impact on Business First’s consolidated financial statements.

We have audited the accompanying consolidated balance sheets of Business First Bancshares, Inc. and Subsidiaries (the Company) as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the two- year period ended December 31, 2013. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

Note 1 – Nature of Operations and Summary of Significant Accounting Policies –

The accounting principles followed by Business First Bancshares, Inc. (Bancshares) and its wholly- owned subsidiary, Business First Bank (the Bank), and its wholly-owned subsidiary, Business First Insurance, LLC, are those which are generally practiced within the banking industry. The methods of applying those principles conform with generally accepted accounting principles and have been applied on a consistent basis. The principles which significantly affect the determination of financial position, results of operations, changes in stockholders’ equity and cash flows are summarized below.

The consolidated financial statements include the accounts of Business First Bancshares, Inc. and its wholly-owned subsidiary, Business First Bank (the Bank), and the Bank’s wholly-owned subsidiary, Business First Insurance, LLC (collectively, the Company). All significant intercompany balances and transactions have been eliminated.

The Bank operates from five full service locations and one loan production office in Louisiana (Baton Rouge, Shreveport, Mandeville, Lafayette, Lake Charles and Houma (LPO)). As a state bank, it is subject to regulation by the Office of Financial Institutions, State of Louisiana, and the Federal Deposit Insurance Corporation.

In addition to the banking operations, the Bank offers insurance products through its wholly-owned subsidiary, Business First Insurance, LLC (the LLC). The LLC consummated a 75% purchase of an insurance agency during 2010 and that insurance agency then purchased 60% of another insurance agency. These insurance agencies are licensed to operate and sell commercial and personal insurance products in the Bank’s markets. As described in Note 18, the LLC sold both of these insurance agencies back to the original owners in 2013.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Bank’s loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on local economic conditions in the area.

information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Management determines the appropriate classification of debt securities (held to maturity, available for sale or trading) at the time of purchase and re-evaluates this classification periodically. Securities classified as available for sale are those debt securities that the Bank intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Bank’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities available for sale are recorded at fair value. Unrealized gains or losses are reported as a component of comprehensive income. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings.

Securities classified as held to maturity are those debt securities the Bank has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are recorded at cost adjusted for amortization of premium and accretion of discount, computed by various methods approximating the interest method over their contractual lives. The Bank has no securities classified as held to maturity at December 31, 2013 and 2012.

Securities classified as trading are those securities held for resale in anticipation of short-term market movements. These securities are recorded at market value with any market adjustments included in earnings. The Bank has no securities classified as trading at December 31, 2013 and 2012.

The Bank has invested in Federal Home Loan Bank (FHLB) stock which is reflected at cost in these financial statements. As a member of the FHLB System, the Bank is required to purchase and maintain stock in an amount determined by the FHLB. The FHLB stock is redeemable at par value at the discretion of the FHLB.

Loans are stated at principal amounts outstanding less the allowance for loan losses. Interest on commercial and individual loans is accrued daily based on the principal outstanding.

The Bank classifies loans as impaired when it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is based on the present value of the expected future cash flows discounted at the loan’s effective interest rate or the loan’s observable market price or based on the fair value of the collateral if the loan is collateral dependent.

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The allowance for loan losses is based upon management’s review and evaluation of the loan portfolio. Factors considered in the establishment of the allowance for loan losses include management’s evaluation of specific loans; the level and composition of

classified loans; historical loss experience; results of examinations by regulatory agencies; an internal asset review process; expectations of future economic conditions and their impact on particular borrowers; and other judgmental factors. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

The allowance for loan losses is based on estimates of potential future losses, and ultimate losses may vary from the current estimates. These estimates are reviewed periodically and as adjustments become necessary, the effect of the change in estimate is charged to operating expenses in the period incurred. All losses are charged to the allowance for loan losses when the loss actually occurs or when management believes that the collectability of the principal is unlikely. Recoveries are credited to the allowance at the time of recovery.

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is provided at rates based upon estimated useful service lives using the straight-line method for financial reporting and accelerated methods for tax reporting purposes.

The costs of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal and the resulting gains or losses are included in current operations. Expenditures for maintenance and repairs are charged to operations as incurred. Costs of major additions and improvements are capitalized.

Real estate properties acquired through or in lieu of loan foreclosure are initially recorded at the fair value less estimated selling cost at the date of foreclosure. Any write-downs based on the asset’s fair value at the date of acquisition are charged to the allowance for loan losses. After foreclosure, valuations are periodically performed by management and property held for sale is carried at the lower of the new cost basis or fair value less cost to sell. Impairment losses on property to be held and used are measured as the amount by which the carrying amount of a property exceeds its fair value. Costs of significant property improvements are capitalized, whereas costs relating to holding property are expensed. Valuations are periodically performed by management, and any subsequent write-downs are recorded as a charge to operations, if necessary, to reduce the carrying value of a property to the lower of its costs or fair value less cost to sell.

The provision for income taxes is based on amounts reported in the statement of income after exclusion of nontaxable income such as interest on state and municipal securities. Also, certain items of income and expenses are recognized in different time periods for financial statement purposes than for income tax purposes. Thus, provisions for deferred taxes are recorded in recognition of such temporary differences.

Deferred taxes are provided utilizing a liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the reported amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company files a consolidated federal income tax return. Consolidated income tax expense is allocated on the basis of each entity’s income adjusted for permanent differences.

The Company evaluates all significant tax positions as required by accounting principles generally accepted in the United States of America. As of December 31, 2013, the Company does not believe that it has taken any positions that would require the recording of any additional tax liability nor does it believe that there are any unrealized tax benefits that would either increase or decrease within the next year.

The Company files income tax returns in the U.S. federal jurisdiction and the state of Louisiana. With few exceptions, the Company is no longer subject to federal and state income tax examinations by tax authorities for years before 2010. Any interest and penalties assessed by income taxing authorities are not significant and are included in other expenses in these financial statements.

As described in Note 10, the Company has issued stock warrants and stock options that incorporate stock based compensation. The Company has adopted a fair value based method of accounting for these awards. The compensation cost is measured at the grant date based on the value of the award and is recognized over the required service period, which is usually the vesting period.

Basic earnings per share (EPS) represents income available to common stockholders 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 warrants and stock options. The weighted average number of shares of common stock was 5,311,826 and 5,310,682 shares to calculate basic EPS of $0.90 and $0.65 and 5,506,714 and 5,515,629 shares to calculate diluted EPS of $0.87 and $0.62 for the years ended December 31, 2013 and 2012, respectively.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand and deposits in other financial institutions.

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

The Company expenses all costs of advertising and promotion the first time the advertising or promotion takes place. For the years ended December 31, 2013 and 2012, the Company expensed costs of $258 thousand and $194 thousand, respectively.

other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. For nonpublic entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2013, with early adoption permitted. As the adoption of ASU 2013-02 amends only disclosure requirements, the adoption will have no impact on the Company’s results of operations or financial position.

Certain reclassifications have been made to the 2012 financial statements in order to conform to the classifications adopted for reporting in 2013. These reclassifications had no effect on previously reported net income.

The Bank is required to maintain reserve funds in cash or on deposit with the Federal Reserve Bank. There was no required reserve at December 31, 2013 and 2012.

The amortized cost and fair values of securities available for sale as of December 31, 2013 and 2012 are summarized as follows:

The amortized cost and fair values of securities available for sale as of December 31, 2013 by contractual maturity are shown below. Maturities may differ from contractual maturities in mortgage- backed securities because the mortgages underlying the securities may be called or repaid without any penalties. Therefore, these securities are not included in the maturity categories in the following maturity summary.

The following table is a summary of securities with gross unrealized losses and fair values at December 31, 2013 and 2012, 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 a temporary impairment of the securities.

credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.

Securities available for sale with a fair value of $52.3 million and $52.6 million, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law as of December 31, 2013 and 2012.

There were $1.2 million and $713 thousand realized gains from sales or redemptions of securities for the years ended December 31, 2013 and 2012, respectively. There were $279 thousand and $253 thousand realized losses from sales or redemptions of securities for the years ended December 31, 2013 and 2012, respectively.

The Bank has invested in the Federal Home Loan Bank of Dallas which is included in other equity securities and reflected at cost in these financial statements. The cost of these securities of $2.8 million and $2.0 million, respectively, approximates fair value at December 31, 2013 and 2012. The Bank also has investments of $100 thousand and $100 thousand in The Independent Banker’s Bank and $108 thousand and $0 in McLarty Capital Partners SBIC, L.P. at December 31, 2013 and 2012, respectively.

The performing one-to-four 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 December 31, 2013 and 2012.

The Bank is the lead lender on participations sold, without recourse, to other financial institutions which amounts are not included in the Balance Sheet. The unpaid principal balances of mortgages and other loans serviced for others were approximately $55.3 million and $32.7 million at December 31, 2013 and 2012, respectively.

In the ordinary course of business, the Bank has granted loans to directors, officers and employees and their affiliates. Such loans were made on substantially the same terms as those prevailing at the time for comparable transactions with other customers. Such loans amounted to $39.2 million and $36.0 million at December 31, 2013 and 2012, respectively.

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 loan 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. The following table sets forth, as of December 31, 2013 and 2012, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan 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.

As of December 31, 2013 and 2012, there were no loan balances outstanding more than 90 days past due and still accruing interest. As of December 31, 2013 and 2012, loan balances outstanding on non- accrual status amounted to $2.2 million and $8.1 million, respectively. The Bank considers all loans more than 90 days past due as nonperforming loans.

As of December 31, 2013 and 2012, the credit quality indicators, disaggregated by class of loan, are as follows:

The above classifications follow regulatory guidelines and can generally be described as follows:

The following table reflects certain information with respect to the loan portfolio delinquencies by loan class and amount as of December 31, 2013 and 2012:

The following is a summary of information pertaining to impaired loans as of December 31, 2013 and 2012. The interest income recognized for impaired loans was insignificant.

The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Bank makes loan modifications, primarily utilizing internal renegotiation programs via direct customer contact, that manage customers’ debt exposures held only by the Bank. Additionally, the Bank makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire unsecured debt structures. During the years ended December 31, 2013 and 2012, the concessions granted to certain borrowers included extending the payment due dates, lowering the contractual interest rate, reducing accrued interest, and reducing the debt’s face or maturity amount.

The following tables present informative data regarding loan modifications occurring during the years ended December 31, 2013 and 2012.

The Bank had no troubled debt restructurings that defaulted subsequent to the restructuring through the date the financial statements were issued.

Bank premises and equipment at December 31, 2013 and 2012 consist of the following:

The provision for depreciation and amortization charged to operating expenses was $848 thousand and $773 thousand for the years ended December 31, 2013 and 2012, respectively.

Approximately 65.6% of certificates of deposit as of December 31, 2013 have stated maturity dates during 2014 and the remaining 34.4% have stated maturity dates during 2015 and beyond. Interest expense on certificates of deposit over $100 thousand for the years ended December 31, 2013 and 2012 amounted to $1.6 million and $1.7 million, respectively.

At December 31, 2013 and 2012, total deposits for the top three customer relationships was approximately $74.1 million and $61.6 million, respectively, which represented 12.5% and 10.9% of total deposits, respectively. Brokered deposits were approximately $120.4 million and $132.8 million at December 31, 2013 and 2012, respectively. Included in these brokered deposits are public fund deposits of approximately $28.1 million and $25.4 million at December 31, 2013 and 2012, respectively. Other public fund deposits were approximately $56.7 million and $40.8 million at December 31, 2013 and 2012, respectively.

The Bank had outstanding advances from the Federal Home Loan Bank (FHLB) of $15.0 million and $40.0 million at December 31, 2013 and 2012, respectively consisting of:

One fixed rate loan of $15.0 million, at December 31, 2013 and 2012, with interest at 1.90% paid monthly. Principal is due at maturity in December 2018 with quarterly call options beginning in 2013, and

In 2012, the Bank had one fixed rate loan of $25.0 million with interest at 3.45% paid monthly and principal due at maturity in December 2028. The Bank paid off this loan in 2013.

These advances are collateralized by the Bank’s loan portfolio with an available collateral blanket of approximately $192.6 million. Total unused advances available from FHLB at December 31, 2013 were approximately $177.6 million with a pledge of the Bank’s loan portfolio.

The Bank has outstanding lines of credit with several of its correspondent banks available to assist in the management of short-term liquidity. These agreements provide for interest based upon the federal funds rate on the outstanding balance. Total available lines of credit as of December 31, 2013 and 2012 were $84.6 million and $78.5 million, respectively. There was no balance on these lines at December 31, 2013 and 2012.

The provision (credit) for federal income taxes differs from the amount computed by applying federal statutory rates to income from operations as indicated in the following analysis:

The deferred tax provision (credit) consists of the following timing differences

The net deferred tax asset at December 31, 2013 and 2012 is included in other assets. The components of the deferred tax assets (liabilities) are as follows:

Stockholders’ Equity of the Company includes the undistributed earnings of the Bank. The Company pays dividends from its assets, which are provided primarily by dividends from the Bank. Certain restrictions exist regarding the ability of the Bank to pay cash distributions. Louisiana statutes require approval to pay distributions in excess of a bank’s earnings in the current year plus retained net profits for the preceding year. There were no dividends declared or paid by the Company for the years ended December 31, 2013 and 2012.

Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines involving quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios. As detailed below, as of December 31, 2013 and 2012, the Bank met all of the capital adequacy requirements to which it is subject.

As of December 31, 2013 and 2012, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To maintain categorized as well capitalized, the Bank will have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as disclosed in the table below. There are no conditions or events since the most recent notification that management believes have changed the prompt corrective action category.

The following is a summary of the Bank’s actual capital amounts and ratios at December 31, 2013 and 2012 which approximate the amounts and ratios for the Company (consolidated) at December 31, 2013 and 2012:

In connection with the organization of the Company and the Bank, stock warrants were issued to organizers. The warrants may be exercised by the holders for the purchase of 101,000 shares of common stock of the Company at the exercise price of $10 per share (warrant). The warrants were fully vested on February 1, 2011 and will expire in 2016.

At December 31, 2013 and 2012, warrants for 89,125 and 101,000 shares, respectively, at a weighted average exercise price of $10.00 were outstanding. During the year ended December 31, 2013, 11,875 warrants were exercised. At December 31, 2013, warrants for 89,125 shares were exercisable, and there were no nonvested and no unrecognized compensation.

As provided in the warrant agreement for 3,000 shares (warrants), the holder has the option to receive cash for each warrant equal to the difference between the book value per share of common stock of the Company (as of the end of the quarter immediately preceding the date on which the exercise notice was delivered to be Company) less the exercise price. These warrants are considered liability awards and will be recorded at the intrinsic value at each reporting date. At December 31, 2013 and 2012, no expenses have been recognized for these awards.

Using the Black-Scholes pricing model for the remaining 98,000 shares (warrants) outstanding, the calculated value of $2.50 per share (warrant) was estimated on the date of grant using the following assumptions: expected dividends of 1%, expected life or term of 6.5 years, risk-free interest rate of 5.04%, and expected volatility of 13.19%. The expected volatility was estimated considering the historical volatility of an appropriate industry sector.

The Company has a stock option plan with 1,500,000 shares available to be granted as options under the plan. Under the provisions of the plan, the option price cannot be less than the fair value of the underlying common stock as of option grant date and the maximum option term cannot exceed ten years.

During the year ended December 31, 2012, total options of 62,400 were granted to officers and other key employees. The stock options granted were issued at an exercise price of $15 per share and with a vesting period of three years. There were no options granted during the year ended December 31, 2013. Compensation expense of approximately $502 thousand and $447 thousand was recognized in 2013 and 2012, respectively.

The Company uses the Black-Scholes option pricing model to estimate the calculated value of the various share-based awards with the following assumptions for the year ended December 31, 2012.

At December 31, 2013, options for 613,271 shares at a weighted average exercise price of $11.96 were vested and exercisable, and there were 306,079 nonvested options and approximately $1.0 million of unrecognized compensation costs related to these options which is expected to be recognized in the future.

The Bank has a defined contribution plan qualified under Internal Revenue Code 401(K) for those employees who meet the eligibility requirements. Contributions may be made by eligible employees subject to Internal Revenue Service limits. The Bank contributes a matching contribution up to 4% of wages which totaled $283 thousand and $296 thousand and is included in salaries and employees benefits for the years ended December 31, 2013 and 2012, respectively.

During the year ended December 31, 2009, the Company established unfunded nonqualified deferred compensation agreements for the purpose of providing deferred compensation as retirement benefits for a select group of management. At December 31, 2013 and 2012, the Company had recorded accrued liabilities of $1.4 million and $1.1 million, respectively. The expense related to the deferred compensation agreements was $250 thousand and $94 thousand for the years ended December 31, 2013 and 2012, respectively.

An analysis of Other Expenses is as follows for the years ended December 31, 2013 and 2012:

In the normal course of business, the Bank is a party to financial instruments with off-balance-sheet risk to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and commercial letters of credit which are not included in the accompanying financial statements. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and commercial letters of credit is represented by the contractual amount of those instruments. The Bank’s policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit. The Bank uses the same credit policies in making such commitments and conditional obligations as it does for instruments that are included in the Balance Sheet. In the normal course of business, the Bank has made commitments to extend credit of approximately $155.9 million and standby and commercial letters of credit of approximately $6.3 million at December 31, 2013.

The majority of the Bank’s business activities are with customers in the Bank’s market area, which consists primarily of East Baton Rouge, Bossier, Caddo, St. Tammany, Lafayette, Calcasieu, Terrebonne and adjacent parishes. The majority of such customers are depositors of the Bank. The concentrations of credit by type of loan are shown in Note 4. The Bank, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of the Bank’s legal lending limits. Most of the Bank’s credits are to individuals and businesses secured by real estate. A substantial portion of their ability to pay on their debt is dependent on the local economy and industries in the areas.

Within the loan portfolio, the Bank has a concentration of credits secured by real estate. The Bank had extended credit secured by non-farm non-residential real estate totaling approximately $215.2 million and $185.9 million, which accounted for 40.1% and 40.4% of total loans at December 31, 2013 and 2012, respectively. Additionally, the Bank had extended credit secured by construction and land development totaling approximately $54.3 million and $61.9 million, respectively; these loans represented 10.1% and 13.4% of total loans at December 31, 2013 and 2012, respectively.

The Bank maintains amounts on deposit and federal funds sold with correspondent banks which may periodically exceed the federally insured amount.

The Bank leases certain branch offices through non-cancelable operating leases with terms that range from four to five years and renewal options for certain of the leases. Rental expense under these agreements was $1.2 million and $1.3 million for the years ended December 31, 2013 and 2012, respectively.

The SBIC is a program initiated by the Small Business Administration (SBA) in 1958 to assist in the funding of small business loans. The program is a joint venture between investors with venture capital, the SBA, and small business borrowers. Investors are responsible for funding the first portion of the capital requirements with the remaining requirement being funded by the SBA. The funds are then lent to small business borrowers. The Bank has agreed to participate as an investor with McLarty Capital Partners SBIC, L.P.; details of the commitment for year ended December 31, 2013 are below.

In the normal course of business, the Bank is involved in various legal proceedings. In the opinion of management and counsel, the disposition or ultimate resolution of such proceedings would not have a material adverse effect on the Bank’s financial statements.

The following tables present the balance of assets and liabilities measured on a recurring basis as of December 31, 2013 and 2012. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a recurring basis.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Short-Term Investments—For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities—Fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Cash Value of Bank-Owned Life Insurance (BOLI)—The carrying amount approximates its fair value.

The estimated approximate fair values of the Bank’s financial instruments as of December 31, 2013 and 2012 are as follows:

The financial statements for Business First Bancshares, Inc. (Parent Company) are as follows:

On June 13, 2013 the LLC’s 75% interest in an insurance company sold its 60% ownership interest in the insurance company it owned. A summary of the discontinued operations of this insurance entity is as follows:

At December 31, 2013, there were no assets or liabilities included on the consolidated balance sheet that were related to this entity. A summary of the assets and liabilities of this insurance agency at December 31, 2012 is presented as follows:

On December 1, 2013 the LLC sold its 75% ownership interest in the insurance company it owned. A summary of the discontinued operations of this insurance entity is as follows:

During 2014, the Company entered into a definitive agreement with American Gateway Financial Corporation (AGFC), parent bank holding company for American Gateway Bank, to which the operations of AGFC will be merged with the Company. AGFC is a full service bank with 11 branches located in the Baton Rouge metro region. As part of the merger, the Company will issue common stock, as well as cash, for the outstanding shares of AGFC. The Company believes with this merger, it will not only increase its presence in the Baton Rouge region, but also in Louisiana statewide, by being able to offer more services to its customers. The Company also believes that merging with AGFC will increase its core deposits and allow the opportunity to further increase the loan portfolio. The merger is projected to take place during the first quarter of 2015 upon approval of the stockholders and regulators.

The Company evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through the date which the financial statements were available to be issued.

The accompanying notes are an integral part of these consolidated financial statements.

The consolidated balance sheet as of June 30, 2014, the consolidated statements of income for the three and six months ended June 30, 2014 and 2013 and the consolidated statements of cash flows for the six-month periods then ended have been prepared by the company without an audit. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at June 30, 2014 and for all periods presented have been made. Operating results for the reporting periods presented are not necessarily indicative of results that may be expected for the year ending December 31, 2014. For further information, refer to the audited consolidated financial statements and footnotes thereto included elsewhere in this report for the year ended December 31, 2013.

The accounting principles followed by American Gateway Financial Corporation and American Gateway Bank are those which are generally practiced within the banking industry. The methods of applying those principles conform with generally accepted accounting principles and have been applied on a consistent basis. The principles which significantly affect the determination of financial position, results of operations, changes in stockholders’ equity and cash flows are summarized below.

The consolidated financial statements include the accounts of American Gateway Financial Corporation (the Company), and its wholly-owned subsidiary, American Gateway Bank (the Bank). All significant intercompany accounts and transactions have been eliminated. Certain reclassifications to previously published financial statements have been made to comply with current reporting requirements. These reclassifications did not have an effect on previously reported net income.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Management determines the appropriate classification of debt securities (held to maturity, available for sale, or trading) at the time of purchase and re-evaluates this classification periodically. Securities classified as held to maturity are those debt securities the Bank has both the intent and ability to hold to maturity regardless of changes in market conditions, liquidity needs or changes in general economic conditions. These securities are carried at cost adjusted for amortization of premium and accretion of discount, computed by various methods approximating the interest method over their contractual lives.

Securities that may be sold prior to maturity are classified as securities available for sale. Any decision to sell a security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of the Bank’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities available for sale are carried at fair value. Unrealized gains or losses are reported as components of comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the amortized cost of specific securities sold, are included in earnings. Securities purchased for trading purposes are classified as trading securities and are carried at market value with market adjustments included in non-interest income. The Bank had no securities classified as held to maturity or trading at June 30, 2014.

Loans are stated at principal amounts outstanding, less unearned income and allowance for loan losses. Interest on commercial and individual loans is accrued daily based on the principal outstanding.

Generally, the Bank discontinues the accrual of interest income when a loan becomes 90 days past due as to principal or interest. When a loan is placed on non-accrual status, previously recognized but uncollected interest is reversed to income or charged to the allowance for loan losses. Subsequent cash receipts on non-accrual loans are accounted for on the cost recovery method, until the loans qualify for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Bank classifies loans as impaired if, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan by loan basis by either the present value of the expected future cash flows discounted at the loan’s effective interest rate or the loan’s observable market price, or based on the fair value of the collateral if the loan is collateral dependent.

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized in a valuation allowance by charges to income. Gains on sales of loans are recognized when the proceeds from the loan sales are received by the Bank.

The allowance for loan losses is maintained at a level which in management’s judgment is adequate to absorb credit losses inherent in the loan portfolio. The allowance for loan losses is based upon management’s review and evaluation of the loan portfolio. Factors considered in the establishment of the allowance for loan losses include management’s evaluation of specific loans; the level and composition of classified loans; historical loss experience; results of examinations by regulatory agencies; an internal asset review process; expectations of future economic conditions and their impact on particular borrowers; and other judgmental factors. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Although management uses available information to recognize

losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated.

Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is provided at rates based upon estimated useful service lives using the straight-line method for financial reporting purposes and accelerated methods for tax reporting purposes.

The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal, and the resulting gains or losses are included in current operations. Expenditures for maintenance and repairs are charged to operations as incurred. Costs of major additions and improvements are capitalized.

Other real estate and repossessed assets is comprised of assets acquired through foreclosure or negotiated settlement. The carrying value of these assets is lower of cost or fair value. Losses arising from the acquisition of these assets are charged against the allowance for loan losses. Any subsequent market reductions required are charged to operating expense. Revenues and expenses associated with maintaining or disposing of foreclosed assets are recorded during the period in which they are incurred.

The provision for income taxes is based on income as reported in the financial statements after interest income from state and municipal securities is excluded. Also certain items of income and expenses are recognized in different time periods for financial statement purposes than for income tax purposes. Thus provisions for deferred taxes are recorded in recognition of such timing differences.

Deferred taxes are provided utilizing a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company and its subsidiary file a consolidated federal income tax return. In addition, the Company, in accordance with state statutes, files a Louisiana state income tax return.

The Company evaluates all significant tax positions as required by accounting principles generally accepted in the United States of America. As of June 30, 2014, the Company does not believe that it has taken any positions that would require the recording of any additional tax liability nor does it believe that there are any unrealized tax benefits that would either increase or decrease within the next year.

authorities for the years before 2011. Any interest and penalties assessed by income taxing authorities are not significant and are included in general and administrative expenses in these financial statements as applicable.

The Bank expenses all costs of advertising the first time the advertising takes place. Amounts expensed as advertising are presented in Note I.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from correspondent banks.

Basic EPS is computed by dividing income applicable to common shares by the weighted average 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. At June 30, 2014, the Company had no convertible shares or other contracts to issue common stock. The weighted average number of shares of common stock used to calculate basic EPS was 217,944 for the six months ended June 30, 2014.

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The components of comprehensive income are disclosed on the Consolidated Statements of Comprehensive Income for all periods presented.

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The objective of ASU 2013-02 is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments included in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, the amendments require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. As the adoption of ASU 2013-02 amends only disclosure requirements, the adoption had no impact on the Company’s results of operations or financial position.

The Bank is required to maintain average cash reserve balances. The amounts of those reserves at June 30, 2014 and December 31, 2013, were approximately $-0- and $70 thousand, respectively.

The amortized cost and fair value of securities available for sale as of June 30, 2014 and December 31, 2013, are summarized as follows:

The amortized cost and fair value of securities available for sale as of June 30, 2014, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities on mortgage-backed securities and collateralized mortgage obligations because the mortgages underlying the securities may be called or repaid without any penalties. Therefore, these securities are not included in the following maturity categories.

The following tables reflect gross unrealized losses, fair values, and length of time in a continued unrealized loss position for all securities with fair values below amortized cost at June 30, 2014 and December 31, 2013. Because the decline in fair value is attributable to changes in interest rates and because the Bank has the ability and intent to hold these securities until a recovery of their amortized cost bases, which may be at maturity, the Bank does not consider these securities to be other than temporarily impaired at June 30, 2014 and December 31, 2013.

Management evaluates securities for other than temporary impairment when economic and market conditions warrant such evaluations. Consideration is given to the extent and length of time the fair value has been below cost, the reasons for the decline in value, and the Company’s intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost. The Company developed a process to identify securities that could potentially have a credit impairment that is other than temporary. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.

At June 30, 2014 and December 31, 2013, there were no securities held within the Company’s portfolio which are considered to be credit impaired.

Securities with carrying values of $83.9 million and $85.5 million at June 30, 2014 and December 31, 2013, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law.

The Bank has invested in the Federal Home Loan Bank, Financial Institution Service Corporation and Bankers Insurance, LLC. These securities are included in other equity securities and are reflected at cost in these financial statements. The cost of the securities approximates fair value at June 30, 2014 and December 31, 2013. The Federal Home Loan Bank stock is pledged to secure advances from the Federal Home Loan Bank and totaled $2.6 million at both June 30, 2014 and December 31, 2013.

Realized gains from sales and calls of securities available for sale were $294 thousand and $101 thousand for the six months ended June 30, 2014 and 2013, respectively. There were no realized losses from sales of securities available for sale for the six months ended June 30, 2014 and 2013.

An analysis of the loan portfolio at June 30, 2014 and December 31, 2013 is as follows:

The performing single family, multi-family, small business and farm loans are pledged, under a blanket lien, as collateral securing advances from the FHLB at June 30, 2014 and December 31, 2013.

The Bank is permitted under the laws of the State of Louisiana to make extensions of credit to its executive officers, directors and their affiliates in the ordinary course of business. An analysis of the aggregate of these loans for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

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 loan 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. The following tables set forth, as of June 30, 2014 and December 31, 2013, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan 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.

At June 30, 2014 and December 31, 2013, the credit quality indicators (performing and nonperforming loans), disaggregated by class of loan, are as follows:

Credit Quality Indicators—Credit Risk Profile Based on Payment Activity as of June 30, 2014

Credit Quality Indicators – Credit Risk Profile Based on Payment Activity as of December 31, 2013

The following tables reflect certain information with respect to the loan portfolio delinquencies by loan class and amount as of June 30, 2014 and December 31, 2013:

The Company seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Company makes loan modifications primarily utilizing internal renegotiation programs via direct customer contact that manage customer’s debt exposures held only by the company. Additionally, the Company makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire debt structures. During the six months ended June 30, 2014 and the year ended December 31, 2013, the concessions granted to certain borrowers included extending the payment due dates, lowering the contractual interest rate, increasing the amortization period, reducing accrued interest, and/or reducing the debt’s face or maturity amount.

Once modified in a troubled debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, the loan is evaluated for an asset-specific allowance for credit losses. The Company continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured, the Company provides an allowance for credit losses for the amount of the loan that exceeds the value of the related collateral.

The following tables include information about troubled debt restructuring as of June 30, 2014 and December 31, 2013. The Bank had $55 thousand and $874 thousand in troubled debt restructurings that had subsequently defaulted during the six months ended June 30, 2014 and the year ended December 31, 2013, respectively.

Bank premises and equipment costs and the related accumulated depreciation June 30, 2014 and December 31, 2013, are as follows:

The provision for depreciation charged to net occupancy and equipment expense was $347 thousand and $394 thousand for the six months ended June 30, 2014 and 2013, respectively.

Approximately 72% of time deposits as of June 30, 2014 have stated maturity dates during the next twelve months. Approximately 20% of time deposits have stated maturity dates in over one year through three years. Interest expense on time deposits over $100,000 for the six months ended June 30, 2014 and 2013 amounted to $221 thousand and $262 thousand, respectively.

Public fund deposits June 30, 2014 and December 31, 2013 were $80.5 million and $85.7 million, respectively.

regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. Louisiana statutes require approval to pay dividends in excess of a state bank’s earnings in the current year plus retained net profits for the preceding year.

The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum regulatory capital requirements can initiate certain mandatory, and possible additional discretionary actions by regulators, that if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines involving quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company and the Bank’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios. As detailed below, as of June 30, 2014 and December 31, 2013, the Company and the Bank met all the capital adequacy requirements to which they are subject. As of June 30, 2014 and December 31, 2013, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the most recent notification that management believes have changed the prompt corrective action category.

Following is a summary of capital ratios of the Bank at June 30, 2014 and December 31, 2013. The ratios presented for the Bank do not differ from ratios for the Company (consolidated) at June 30, 2014 and December 31, 2013.

Under current regulations, the Bank is limited in the amount it may loan to its Parent. Loans to the Parent may not exceed 10% of the Bank’s capital and surplus. There were no loans outstanding at June 30, 2014 or December 31, 2013.

The Bank provides a profit sharing plan for its employees and makes annual contributions at the discretion of the Board of Directors. The maximum allowable annual contribution to the plan is 15% of eligible participants’ total earnings with the allowable addition to an individual participant’s account limited to the lesser of $30 thousand or 25% of participant’s annual compensation. The Company made contributions to the plan totaling $103 thousand and $102 thousand during the six months ended June 30, 2014 and 2013, respectively.

The Bank established a deferred compensation plan during 2008 covering specific members of executive management. The liability in association with this plan included in other liabilities totaled $388 thousand and $435 thousand as of ended June 30, 2014 and December 31, 2013, respectively.

An analysis of Other Operating Expenses for the six months ended June 30, 2014 and 2013 is as follows:

The Company recognized income tax expense in the amount of $71 thousand for the six months ended June 30, 2013. There was no income tax expense incurred for the six months ended June 30, 2014. Following is a reconciliation between income tax expense based on the federal statutory tax rates and income taxes reported in the statements of income.

The deferred tax provision (credit) consists of the following timing differences:

A net deferred tax liability of $173 thousand is included in other liabilities at June 30, 2014. A net deferred tax asset of $353 thousand is included in other assets at December 31, 2013. The Bank had net operating loss carryforwards totaling approximately $2.3 million at June 30, 2014 available to offset future taxable income.

The net deferred tax asset (liability) consists of the following components at June 30, 2014 and December 31, 2013:

The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers consisting of commitments to extend credit. These commitments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets.

on-balance-sheet instruments. In the normal course of business the Bank has made commitments to extend credit of approximately $39 million and $45 million at June 30, 2014 and December 31, 2013, respectively. Commitments generally have fixed expiration dates and may expire without being drawn upon. Therefore, the total commitment amount does not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk and collateralization policy involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Bank had total unfunded letters of credit of $230 thousand and $170 thousand as of June 30, 2014 and December 31, 2013, respectively.

The Bank has entered into leasing agreements for several of its banking sites. These agreements, which are treated as operating leases, expire in various years through 2019, and contain various renewal options. Amounts charged to net occupancy and equipment expense on these leases amounted to approximately $63 thousand and $69 thousand for the six months ended June 30, 2014 and 2013, respectively.

Most of the Bank’s business activities are with customers in the Bank’s market area, which consists primarily of East and West Baton Rouge and adjacent parishes. The majority of such customers are depositors of the Bank. The concentrations of credit by type of loan are shown in Note D. Most of the Bank’s credits are to individuals and small businesses secured by real estate. The Bank, as a matter of policy, does not extend credit to any single borrower or group of related borrowers in excess of legal lending limits. Included in Cash and Cash Equivalents and Federal Funds Sold are amounts deposited in various institutions which may, periodically, exceed the federally insured amount.

The Bank maintains an open line of credit with a correspondent bank to assist in maintaining short-term liquidity. This agreement provides for interest based upon the federal funds rate on outstanding balances. The line was unfunded at June 30, 2014. Amounts available on the line totaled $14.5 million at June 30, 2014.

The Bank had outstanding advances from the Federal Home Loan Bank of Dallas. Drawings on the line at June 30, 2014 totaled $54.7 million. Drawings on the line at December 31, 2013 totaled $56.5 million.

The Federal Home Loan Bank of Dallas establishes interest rates at the time an advance is made. Interest rates on outstanding advances at June 30, 2014 range from 1.890% to 3.179%. Throughout 2010 the Bank restructured several of its fixed rate Federal Home Loan Bank advances by replacing them with new advances at lower fixed rates with extended maturity dates. These transactions, which are being accounted for as debt modifications, resulted in capitalized prepayment penalties which are being amortized as interest expense over the life of the new advances. At June 30, 2014 and December 31, 2013, respectively, unamortized prepayment penalties in the amount of approximately $129 thousand and $199 thousand are included in other assets.

The advances are collateralized by the Bank’s investment in Federal Home Loan Bank stock, securities and a blanket lien on qualifying loans. Qualifying loans consist of performing 1-4 family mortgage loans and certain small business, small farm and small agricultural loans.

At June 30, 2014 and December 31, 2013, the Bank had sold various investment securities with an agreement to repurchase these securities at various times within one year. These securities generally remain under the Bank’s control and are included in securities available for sale. These securities have coupon rates ranging from 3.00% to 3.50% and maturity dates ranging from 2030 to 2040. The related liability to repurchase these securities was $3.3 million and $1.8 million at June 30, 2014 and December 31, 2013, respectively.

In the ordinary course of business, the Company is involved in various legal proceedings. In the opinion of management and counsel, any liability resulting from such proceedings would not have a material adverse effect on the Company’s financial statements.

The fair value of the impaired loans is measured at the fair value of the collateral for collateral-dependent loans. Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens. Repossessed assets are initially recorded at fair value less estimated costs to sell. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Bank records repossessed assets as Level 2.

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. In accordance with generally accepted accounting principles, certain financial instruments and all non-financial instruments are excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Short-Term Investments—For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities—Fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Cash Value of Life Insurance—The carrying amount is a reasonable estimate of fair value.

Deposits—The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses, with interest rates currently offered for deposits of similar remaining maturities.

Borrowings—The fair value of FHLB advances is estimated using the rates currently offered for advances of similar maturities.

Commitments to Extend Credit and Standby Letters of Credit—The fair values of commitments to extend credit and standby letters of credit do not differ significantly from the commitment amount and are therefore omitted from this disclosure.

The estimated approximate fair values of the Bank’s financial instruments as of June 30, 2014 and December 31, 2013, are as follows:

On December 21, 2011, the Bank entered into a Consent Order (“Order”) with the Federal Deposit Insurance Corporation (FDIC) and the Louisiana Office of Financial Institutions (OFI). Pursuant to the Order, the Bank agreed, among other things, to 1) reduce its classified assets, 2) reduce its concentrations in commercial real estate lending, 3) improve liquidity, contingency funding, interest rate risk, and asset liability management, 4) revise its strategic plan, and 5) maintain certain capital ratios. The Bank also agreed under the Consent Order that it not declare or pay any cash dividends without the prior written consent of the Regional Director of the FDIC and the OFI. The Consent Order was terminated effective February 15, 2013.

The balance sheets and statements income for American Gateway Financial Corporation (Parent Company) are as follows:

We have audited the accompanying consolidated financial statements of American Gateway Financial Corporation and Subsidiary, which comprise the consolidated balance sheets as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Gateway Financial Corporation and Subsidiary as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

The accompanying notes are an integral part of these consolidated financial statements.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

movements in interest rates, changes in the maturity mix of the Bank’s assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Securities available for sale are carried at fair value. Unrealized gains or losses are reported as components of comprehensive income, net of the related deferred tax effect. Realized gains or losses, determined on the basis of the amortized cost of specific securities sold, are included in earnings. Securities purchased for trading purposes are classified as trading securities and are carried at market value with market adjustments included in non-interest income. The Bank had no securities classified as held to maturity or trading at December 31, 2013 or 2012.

Loans are stated at principal amounts outstanding, less unearned income and allowance for loan losses. Interest on commercial and individual loans is accrued daily based on the principal outstanding.

The cost of assets retired or otherwise disposed of and the related accumulated depreciation are eliminated from the accounts in the year of disposal and the resulting gains or losses are included in current operations. Expenditures for maintenance and repairs are charged to operations as incurred. Costs of major additions and improvements are capitalized.

Deferred taxes are provided utilizing a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company and its subsidiary file a consolidated federal income tax return. In addition, the Company, in accordance with state statutes, files a Louisiana state income tax return.

The Company evaluates all significant tax positions as required by accounting principles generally accepted in the United States of America. As of December 31, 2013 and 2012, the Company does not believe that it has taken any positions that would require the recording of any additional tax liability nor does it believe that there are any unrealized tax benefits that would either increase or decrease within the next year.

The Company files income tax returns in the U.S. federal jurisdiction and the state of Louisiana jurisdiction. With few exceptions, the Company is no longer subject to federal and state tax examinations by tax authorities for the years before 2010. Any interest and penalties assessed by income taxing authorities are not significant and are included in general and administrative expenses in these financial statements as applicable.

The Bank expenses all costs of advertising the first time the advertising takes place. Amounts expensed as advertising are presented in Note I.

For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from correspondent banks.

Basic EPS is computed by dividing income applicable to common shares by the weighted average 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. At December 31, 2013 and 2012, the Company had no convertible shares or other contracts to issue common stock. The weighted average number of shares of common stock used to calculate basic EPS was 217,944 for the years ended December 31, 2013 and 2012.

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The components of comprehensive income are disclosed on the Consolidated Statements of Comprehensive Income for all periods presented.

The Bank is required to maintain average cash reserve balances. The amounts of those reserves at December 31, 2013 and 2012, were approximately $70,000 and $34,000 respectively.

The amortized cost and fair value of securities available for sale as of December 31, 2013 and 2012 are summarized as follows:

The amortized cost and fair value of securities available for sale as of December 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities on mortgage-backed securities and collateralized mortgage obligations because the mortgages underlying the securities may be called or repaid without any penalties. Therefore, these securities are not included in the following maturity categories.

The following tables reflect gross unrealized losses, fair values, and length of time in a continued unrealized loss position for all securities with fair values below amortized cost at December 31, 2013 and 2012. Because the decline in fair value is attributable to changes in interest rates and because the Bank has the ability and intent to hold these securities until a recovery of their amortized cost bases, which may be at maturity, the Bank does not consider these securities to be other than temporarily impaired at December 31, 2013 and 2012.

Management evaluates securities for other than temporary impairment when economic and market conditions warrant such evaluations. Consideration is given to the extent and length of time the fair value has been below cost, the reasons for the decline in value, and the Company’s intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost. The Company developed a process to identify securities that could potentially have a credit impairment that is other than temporary. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.

At December 31, 2012, the Company held three mortgage-backed securities with other than temporary impairment. The amortized cost of the securities at December 31, 2012 was $2,211,837. The fair value of the securities was $1,702,837 resulting in total impairment of $509,000. Total credit impairments, in the amount of $393,627, have been recognized in the statement of income under realized losses on investment securities through December 31, 2011 on these securities. Additional credit impairment in the amount of $73,062 was recognized in the statement of income for the year ended December 31, 2012. As of December 31, 2012, the remainder of the impairment, in the amount of $42,311, was not considered other than temporary and is included net of tax in accumulated other comprehensive income. During 2013, the three private-label mortgage-backed securities mentioned above incurred additional impairment in the amount of $87,207 which was recognized in the statement of income. These bonds were sold in April 2013 at a gain of $101,649. At December 31, 2013, there were no securities held within the Company’s portfolio which are considered to be credit impaired.

Securities with carrying values of $85,503,139 and $95,501,386 at December 31, 2013 and 2012, respectively, were pledged as collateral on public deposits and for other purposes as required or permitted by law. Securities with carrying values of $0 and $6,184,767 at December 31, 2013 and 2012, were pledged to the Federal Reserve Bank of Atlanta for clearing and exchange purposes.

The Bank has invested in the Federal Home Loan Bank, Financial Institution Service Corporation and Bankers Insurance, LLC. These securities are included in other equity securities and are reflected at cost in these financial statements. The cost of the securities approximate fair value at December 31, 2013 and 2012. The Federal Home Loan Bank stock is pledged to secure advances from the Federal Home Loan Bank and totaled $2,570,600 and $3,580,500 at December 31, 2013 and 2012, respectively.

Realized gains from sales and calls of securities available for sale were $770,587 for the year ended December 31, 2013. Realized losses from sales of securities available for sale were $477,231 for the year ended December 31, 2013. Realized gains from sales and calls of securities available for sale for the year ended December 31, 2012 were $114,062. Realized losses from sales of securities available for sale for the year ended December 31, 2012 were $21,004.

The performing single family, multi-family, small business and farm loans are pledged, under a blanket lien, as collateral securing advances from the FHLB at December 31, 2013 and 2012.

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 loan 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. The following tables set forth, as of December 31, 2013 and 2012, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan 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.

At December 31, 2013 and 2012, the credit quality indicators (performing and nonperforming loans), disaggregated by class of loan, are as follows:

Credit Quality Indicators – Credit Risk Profile Based on Payment Activity as of December 31, 2013

Credit Quality Indicators – Credit Risk Profile Based on Payment Activity as of December 31, 2012

The following tables reflect certain information with respect to the loan portfolio delinquencies by loan class and amount as of December 31, 2013 and 2012:

The Company seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Company makes loan modifications primarily utilizing internal renegotiation programs via direct customer contact that manage customer’s debt exposures held only by the company. Additionally, the Company makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire debt structures. During the years ended December 31, 2013 and 2012, the concessions granted to certain borrowers included extending the payment due dates, lowering the contractual interest rate, increasing the amortization period, reducing accrued interest, and/or reducing the debt’s face or maturity amount.

Once modified in a troubled debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, the loan is evaluated for an asset-specific allowance for credit losses. The Company continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured, the Company provides an allowance for credit losses for the amount of the loan that exceeds the value of the related collateral.

The following tables include information about troubled debt restructuring as of December 31, 2013 and 2012. The Bank had $874,000 and $653,000 in troubled debt restructurings that had subsequently defaulted during the years ended December 31, 2013 and 2012, respectively.

Bank premises and equipment costs and the related accumulated depreciation at December 31, 2013 and 2012, are as follows:

The provision for depreciation charged to net occupancy and equipment expense was $758,994 and $836,480 for the years ended December 31, 2013 and 2012, respectively.

Approximately 64% of Time Deposits as of December 31, 2013 have stated maturity dates during 2014. Approximately 26% of the time deposits have stated maturity dates from 2015 through 2016.

Interest expense on time deposits over $100,000 for the years ended December 31, 2013 and 2012, amounted to $488,000 and $852,000, respectively.

Public fund deposits at December 31, 2013 and 2012, were $85,660,592 and $84,397,856, respectively.

Stockholders’ Equity of the Company includes the undistributed earnings of the Bank. Dividends are paid by the Company from its assets which are provided primarily by dividends from the Bank. Dividends are payable only out of retained earnings and current earnings of the Company. Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. Louisiana statutes require approval to pay dividends in excess of a state bank’s earnings in the current year plus retained net profits for the preceding year.

Company and the Bank met all of the capital adequacy requirements to which they are subject. As of December 31, 2013 and 2012, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the most recent notification that management believes have changed the prompt corrective action category. Following is a summary of capital ratios of the Bank at December 31, 2013 and 2012. The ratios presented for the Bank do not differ from ratios for the Company (consolidated) at December 31, 2013 and 2012.

The Bank provides a profit sharing plan for its employees and makes annual contributions at the discretion of the Board of Directors. The maximum allowable annual contribution to the plan is 15% of eligible participants’ total earnings with the allowable addition to an individual participant’s account limited to the lesser of $30,000 or 25% of participant’s annual compensation. The Company made contributions to the plan totaling $103,000 and $102,000 for the years ended December 31, 2013 and 2012, respectively.

The Bank established a deferred compensation plan during 2008 covering specific members of executive management. The liability in association with this plan included in other liabilities totaled $435,306 and $467,306 as of December 31, 2013 and 2012, respectively.

An analysis of Other Operating Expenses for the years ended December 31, 2013 and 2012 is as follows:

The Company recognized income tax expense in the amount of $83,929 and $36,263 for the years ended December 31, 2013 and 2012, respectively. Following is a reconciliation between income tax expense based on the federal statutory tax rates and income taxes reported in the statements of income.

The deferred tax provision (credit) consists of the following timing differences:

A net deferred tax asset of $352,734 is included in other assets at December 31, 2013. A net deferred tax liability of $1,162,638 is included in other liabilities at December 31, 2012. The Bank had net operating loss carryforwards totaling approximately $2.5 million at December 31, 2013 available to offset future taxable income.

The net deferred tax liability consists of the following components at December 31, 2013 and 2012:

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as they do for on-balance-sheet instruments. In the normal course of business the Bank has made commitments to extend credit of approximately $45 million and $34 million at December 31, 2013 and 2012, respectively. Commitments generally have fixed expiration dates and may expire without being drawn upon. Therefore, the total commitment amount does not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk and collateralization policy involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Bank had total unfunded letters of credit of $170,000 and $254,000 as of December 31, 2013 and 2012, respectively.

The Bank has entered into leasing agreements for several of its banking sites. These agreements, which are treated as operating leases, expire in various years through 2015, and contain various renewal options. Amounts charged to net occupancy and equipment expense on these leases amounted to approximately $132,000 and $143,000 for the years ended December 31, 2013 and 2012, respectively. Future minimum rental payments required during 2014 and 2015 under these operating leases totaled $122,593 and $55,430, respectively.

The Bank maintains an open line of credit with a correspondent bank to assist in maintaining short-term liquidity. This agreement provides for interest based upon the federal funds rate on outstanding balances. The line was unfunded at December 31, 2013. Amounts available on the line totaled $15 million at December 31, 2013.

The Bank had outstanding advances from the Federal Home Loan Bank of Dallas. Drawings on the line at December 31, 2013 totaled $56,546,915. Drawings on the line at December 31, 2012 totaled $80,143,731.

The Federal Home Loan Bank of Dallas establishes interest rates at the time an advance is made. Interest rates on outstanding advances at December 31, 2013 range from 1.890% to 3.179%. Throughout 2010 the Bank restructured several of its fixed rate Federal Home Loan Bank advances by replacing them with new advances at lower fixed rates with extended maturity dates. These transactions, which are being accounted for as debt modifications, resulted in capitalized prepayment penalties which are being amortized as interest expense over the life of the new advances. At December 31, 2013 and 2012, respectively, unamortized prepayment penalties in the amount of approximately $199,000 and $404,000 are included in other assets.

At December 31, 2013 and 2012, the Bank had sold various investment securities with an agreement to repurchase these securities at various times within one year. These securities generally remain under the Bank’s control and are included in securities available for sale. These securities have coupon rates ranging from 3.00% to 5.00% and maturity dates ranging from 2018 to 2038. The related liability to repurchase these securities was $1,816,532 and $1,529,070 at December 31, 2013 and 2012, respectively.