Note 10: Equity

Preferred Stock

The Company’s Articles of Incorporation authorize 10,000,000 shares of preferred stock with no par value, which may be issued from time to time and in one or more classes or series upon authorization of the Board of Directors.

On June 22, 2022, the Company entered into a Letter Agreement (including annexes thereto, collectively, the “Purchase Agreement”) with the U.S. Department of Treasury (the “Treasury”) under the Emergency Capital Investment Program (“ECIP”). Pursuant to the Purchase Agreement, the Company agreed to issue and sell 250,000 shares of the Company’s preferred stock designated as Senior Non-Cumulative Perpetual Preferred Stock, Series ECIP (the “Preferred Stock”) for an aggregate purchase price of $250.0 million in cash. The Preferred Stock was issued in a private placement exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Preferred Stock bore no dividend for the first two years following the issuance of the Preferred Stock. Thereafter, the annual dividend rate will be adjusted, not lower than 0.5% and not higher than 2.0%, based on our extensions of credit for qualified lending as defined in the terms of the ECIP Interim Final Rule, the Purchase Agreement and the Certificate of Designations (the “Certificate of Designations”) and the investment amount. After the tenth anniversary of the issuance of the Preferred Stock, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10 compared to the baseline qualified lending and the average investment amount. The dividends will be payable quarterly in arrears on March 15, June 15, September 15, and December 15. The Company had accrued preferred dividends payable of $139,000 at March 31, 2026 and December 31, 2025. This payable is recorded in other liabilities in the Company’s Consolidated Balance Sheets at March 31, 2026 and December 31, 2025.

The Preferred Stock may be redeemed at the option of the Company on or after September 15, 2027 (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations. The restrictions on redemption are set forth in the Certificate of Designations filed with the Mississippi Secretary of State for the purpose of amending its Articles of Incorporation to fix the designations, preferences, limitations and relative rights of the Preferred Stock as described in Item 5.03 of our Current Report on Form 8-K filed with the SEC on June 23, 2022.

On January 10, 2025, the Company entered into a Preferred Stock ECIP Securities Purchase Option Agreement (“POA”) with the Treasury pursuant to which the Company has the right but not the obligation to repurchase the Preferred Stock at a substantial discount to par value based on a pricing formula established by the Treasury. This repurchase option is not currently exercisable for BancPlus until June 22, 2032, and the repurchase option expires on June 22, 2037. The repurchase price is set in the POA as the present value of the future cash flows of the Preferred Stock, defined in the POA as the annual dividend rate divided by the cost of equity as specified in the POA at the closing date (approximately the date the option is exercised). Treasury has set the cost of equity for the ECIP repurchase option based on the risk-free rate, defined as the higher of the prevailing Kroll-recommended US normalized risk-free rate or the spot yield on 20-year U.S. treasury bonds, plus an equity risk premium (currently 5%) times a market beta of 0.5.

The POA grants BancPlus a unilateral option to repurchase the Preferred Stock from Treasury over a 15-year period. However, during the first 10 years of this period, exercise of the option is subject to BancPlus satisfying at least one of three “Threshold Conditions” that demonstrate fulfillment of community development and impact lending objectives defined under the ECIP framework. These include the “Deep Impact Lending,” “Qualified Lending,” and “Rate Reduction” thresholds. The Company does not currently meet any of the Threshold Conditions necessary to exercise the purchase option, and there can be no assurance whether and when the Threshold Conditions will be met. Additionally, the Company must comply with the ECIP agreements and rules, continue to qualify as a CDFI, and be “well-capitalized” under federal Prompt Corrective Action guidelines. The purchase option granted under the POA is a freestanding financial instrument under GAAP. The Company analyzed the fair value of the repurchase option in accordance with ASC Topic 820 "Fair Value Measurements" and determined that the purchase option value is immaterial as of January 10, 2025 and March 31, 2026.

In the Purchase Agreement, the Company also agreed to, upon the future written request of the Treasury, comply with the terms of a Registration Rights Agreement included as an annex to the Purchase Agreement and incorporated by reference therein (the “Registration Rights Agreement”), providing for certain registration rights of the Treasury. As long as the Company is not eligible to file on Form S-3, upon written request of the Treasury, the Company would be required to prepare and file a shelf registration statement covering the potential resale of the Preferred Stock as promptly as practicable. Once the Company is eligible to file on Form S-3, the Company agreed to prepare and file such shelf registration statement within 30 days. The Registration Rights Agreement also includes customary “piggyback” registration rights, suspension rights, indemnification, contribution, and assignment provisions.