BFST - Business First Bancshares Inc. Announces Financial Results for Q3 2023

BATON ROUGE, La., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Business First Bancshares, Inc. (Nasdaq: BFST) (Business First), parent company of b1BANK, today announced its unaudited results for the quarter ended September 30, 2023, including net income available to common shareholders of $19.1 million, or $0.76 per diluted common share, increases of $0.7 million and $0.03, respectively, from the linked quarter, and increases of $5.3 million and $0.15, respectively, from the quarter ended September 30, 2022. On a non-GAAP basis, core net income for the quarter ended September 30, 2023, which excludes certain income and expenses, was $18.0 million, or $0.71 per diluted common share, increases of $0.2 million and $0.01, respectively, from the linked quarter, and an increase of $1.6 million and decrease of $0.01, respectively, from the quarter ended September 30, 2022.

“In the third quarter we again delivered solid fundamental shareholder-oriented operating performance,” said b1BANK President & CEO Jude Melville. “We increased per share tangible book value and per share core earnings by exercising cost discipline, protected our margin while strengthening our core deposit base, and continued maintaining excellent asset quality. We are pleased to be in position to increase our dividend for the fifth consecutive year, rewarding shareholders for sticking with us through uncertain times.”

On October 26, 2023, Business First’s board of directors declared a quarterly preferred dividend in the amount of $18.75 per share, which is the full quarterly dividend of 1.875% based on the per annum rate of 7.50%. Additionally, the board of directors declared a quarterly common dividend based upon financial performance for the third quarter in the amount of $0.14 per share, an increase of $0.02 compared to prior quarter. The preferred and common dividends will be paid on November 30, 2023, or as soon thereafter as practicable, to the shareholders of record as of November 15, 2023.

Quarterly Highlights

• Return on Assets and Equity. Return to common shareholders on average assets and common equity, each on an annualized basis, were 1.17% and 14.16%, respectively, for the quarter ended September 30, 2023, compared to 1.18% and 13.99%, respectively, for the linked quarter. Non-GAAP core return on average assets and common equity, each on an annualized basis, were 1.10% and 13.32%, respectively, for the quarter ended September 30, 2023, compared to 1.13% and 13.50%, respectively, for the linked quarter.
• Credit Quality. Credit performance remains strong from the linked quarter. The ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets were 0.33% and 0.27%, respectively, at September 30, 2023, compared to 0.36% and 0.30% at June 30, 2023.
• Net Interest Margin. For the quarter ended September 30, 2023, net interest income totaled $55.3 million and net interest margin and net interest spread were 3.61% and 2.68%, respectively, compared to $53.3 million, 3.63% and 2.75% for the quarter ended June 30, 2023. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $2.4 million) were 3.46% and 2.53%, respectively, for the quarter ended September 30, 2023, compared to 3.49% and 2.61% (excluding loan discount accretion of $2.1 million) for the quarter ended June 30, 2023. Compared to the linked quarter, net interest margin excluding loan discount accretion declined due to the cost of excess on-balance sheet liquidity.
• Deposits . Deposits increased $176.3 million or 3.52%, 13.95% annualized, for the quarter ended September 30, 2023, compared to the linked quarter. Excluding the $16.3 million of deposits transferred in connection with the sale of the Leesville Banking Center during the quarter, deposits increased $192.6 million or 3.84%, 15.24% annualized.
• Loans. Loans held for investment increased $21.5 million or 0.44%, 1.74% annualized, from the linked quarter.
  

Statement of Financial Condition

Loans

Loans held for investment increased $21.5 million or 0.44%, 1.74% annualized, from the linked quarter. Loan growth from the linked quarter was largely attributed to net growth in the commercial and industrial (C&I) portfolio of $23.2 million and in the residential real estate portfolio of $11.5 million, offset by a $10.2 million reduction in the construction and development (C&D) portfolio. Year-to-date loan growth through September 30, 2023, was $314.1 million, 6.82% or 9.12% annualized.

Based on unpaid principal balances, Texas-based loans represent approximately 37% of the overall loan portfolio as of September 30, 2023.

Credit Quality

The ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets improved from 0.36% and 0.30%, respectively, at June 30, 2023, to 0.33% and 0.27% at September 30, 2023. The improvement was largely attributable to the resolution of two nonaccrual loans through current period charge-offs of $2.4 million. Both loans were previously assessed by management for credit losses and fully reserved. The reduction was offset by slight increases in nonaccrual relationships.

Securities

The securities portfolio decreased $28.1 million or 3.20%, from the linked quarter. The decrease was the impact of negative fair value adjustments, $16.4 million, and net security paydowns and maturities during the quarter. The securities portfolio, based on estimated fair value, represented 13.09% of total assets as of September 30, 2023.

Deposits

Deposits increased $176.3 million or 3.52%, 13.95% annualized, for the quarter ended September 30, 2023. The increase was primarily attributable to the $126.2 million growth in certificate of deposit (CD) portfolio. Excluding the $16.3 million of deposits transferred in connection with the sale of the Leesville Banking Center during the quarter, deposits increased $192.6 million or 3.84%, 15.24% annualized.

Noninterest-bearing deposits decreased $17.0 million or 1.19% and interest-bearing deposits increased $193.3 million or 5.39%, compared to the linked quarter. Transactional deposits, interest bearing deposits excluding CDs, increased $67.1 million, largely attributable to a $42.5 million increase in the financial institutions group’s (FIG) deposit portfolio.

Year-to-date deposit growth through September 30, 2023, was $370.4 million or 7.68%, or 10.27% annualized. Excluding brokered deposits of $250.4 million at December 31, 2022, and $460.4 million at September 30, 2023, and the $16.3 million of deposits transferred in connection with the Leesville banking center sale, deposit growth was $176.7 million or 3.87%, or 5.17% annualized through September 30, 2023.

Borrowings

Borrowings decreased $151.7 million, or 19.11%, from the linked quarter. Short-term Federal Home Loan Bank (FHLB) borrowings were replaced with interest bearing deposits. During the quarter, the bank extinguished the remaining $3.2 million balance of the $8.9 million subordinated debt redeemed on May 1, 2023. The extinguishment resulted in a $517,000 gain for the quarter ended September 30, 2023.

Shareholders’ Equity

Accumulated other comprehensive income (AOCI) decreased $12.9 million due to negative after-tax fair value adjustments in the securities portfolio. Book value per common share nonetheless increased to $21.01 at September 30, 2023, compared to $20.87 at June 30, 2023, due to continued earnings growth. On a non-GAAP basis, tangible book value per common share increased to $17.03 at September 30, 2023, compared to $16.87 at June 30, 2023.

Results of Operations

Net Interest Income

For the quarter ended June 30, 2023, net interest income totaled $55.3 million, compared to $53.3 million from the linked quarter. Loan and interest-earning asset yields of 6.84% and 6.10%, respectively, increased 30 basis points and 26 basis points, respectively, compared to 6.54% and 5.84% from the linked quarter. The increases were largely attributable to loan repricing and higher yields on new originations. Net interest margin and net interest spread were 3.61% and 2.68%, respectively, compared to 3.63% and 2.75%, respectively, for the linked quarter. The overall cost of funds, which include noninterest-bearing deposits, increased from 2.31% to 2.59% or 28 basis points, from the linked quarter due largely to higher cost deposits.

Non-GAAP net interest income (excluding loan discount accretion of $2.4 million) totaled $52.9 million for the quarter ended September 30, 2023, compared to $51.3 million (excluding loan discount accretion of $2.1 million) from the linked quarter. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $2.4 million) were 3.46% and 2.53%, respectively, for the quarter ended September 30, 2023, compared to 3.49% and 2.61% (excluding loan discount accretion of $2.1 million) for the linked quarter. Excluding loan discount accretion, loan yields increased 28 basis points to 6.64% from 6.37% and interest earnings asset yields increased 24 basis points to 5.94% from 5.70%, compared to the linked quarter.

Provision for Credit Losses

During the quarter ended September 30, 2023, Business First recorded a provision for credit losses of $604,000, compared to $538,000 for the linked quarter. The current quarter’s reserve increased due to qualitative adjustments related to certain commercial real estate (CRE) portfolios and industry wide concerns about the CRE sector, partially offset by lower reserves for unfunded commitments due to declines in the related unfunded balances.

Other Income

For the quarter ended September 30, 2023, other income decreased $2.1 million or 17.35%, compared to the linked quarter. The net decrease was largely attributable to a $2.8 million decrease in equity investment income compared to the linked quarter, partially offset by a $932,000 gain on sale attributable to the Leesville Banking Center sale during the quarter.

Other Expenses

For the quarter ended September 30, 2023, other expenses decreased by $1.1 million, or 2.76%, compared to the linked quarter. The net decrease was largely attributable to a $1.0 million decrease in data processing charges, attributable to $508,000 of debit/credit card expense sharing incentives received, as well as $715,000 in additional data charges incurred during the linked quarter due to a billing error identified by our data processor which did not reoccur during the current quarter.

Return on Assets and Common Equity

Return to common shareholders on average assets and common equity, each on an annualized basis, were 1.17% and 14.16%, respectively, for the quarter ended September 30, 2023, compared to 1.18% and 13.99%, respectively, for the linked quarter. Non-GAAP return to common shareholders on average assets and common equity, each on an annualized basis, were 1.10% and 13.32%, respectively, for the quarter ended September 30, 2022, compared to 1.13% and 13.50%, respectively, for the linked quarter.

Conference Call and Webcast

Executive management will host a conference call and webcast to discuss results on Thursday, October 26, at 4:30 p.m. CDT. Interested parties may attend the call by dialing toll-free 1-800-715-9871 (North America only), conference ID 4515523, or asking for the Business First Bancshares conference call. The live webcast can be found at https://edge.media-server.com/mmc/p/87me6od9. The corresponding slide presentation can be accessed the day of the presentation on b1BANK’s website at https://www.b1bank.com/shareholder-info.

About Business First Bancshares, Inc.

Business First Bancshares, Inc., (Nasdaq: BFST) through its banking subsidiary b1BANK, has $6.5 billion in assets, $6.0 billion in assets under management through b1BANK’s affiliate Smith Shellnut Wilson, LLC (SSW) (excludes $0.9 billion of b1BANK assets managed by SSW) and operates Banking Centers and Loan Production Offices in markets across Louisiana and the Dallas and Houston, Texas areas, providing commercial and personal banking products and services. Commercial banking services include commercial loans and letters of credit, working capital lines and equipment financing, and treasury management services. b1BANK was awarded #1 Best-In-State Bank, Louisiana, by Forbes and Statista, and is a multiyear winner of American Banker’s “Best Banks to Work For.” Visit b1BANK.com for more information.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures (e.g., referenced as “core” or “tangible”) intended to supplement, not substitute for, comparable GAAP measures. “Core” measures typically adjust income available to common shareholders for certain significant activities or transactions that, in management’s opinion, can distort period-to-period comparisons of Business First’s performance. Transactions that are typically excluded from non-GAAP “core” measures include realized and unrealized gains/losses on former bank premises and equipment, investment sales, acquisition-related expenses (including, but not limited to, legal costs, system conversion costs, severance and retention payments, etc.). “Tangible” measures adjust common equity by subtracting goodwill, core deposit intangibles, and customer intangibles, net of accumulated amortization. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of Business First’s core business. These non-GAAP disclosures are not necessarily comparable to non-GAAP measures that may be presented by other companies. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided at the end of the tables below.

Special Note Regarding Forward-Looking Statements

Certain statements contained in this release may not be based on historical facts and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be identified by their reference to a future period or periods or by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “may,” “might,” “will,” “would,” “could,” or “intend.” We caution you not to place undue reliance on the forward-looking statements contained in this news release, in that actual results could differ materially from those indicated in such forward-looking statements as a result of a variety of factors, including those factors specified in our Annual Report on Form 10-K and other public filings. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this news release.

Additional Information

For additional information about Business First, you may obtain Business First’s reports that are filed with the Securities and Exchange Commission (SEC) free of charge by using the SEC’s EDGAR service on the SEC’s website at www.SEC.gov or by contacting the SEC for further information at 1-800-SEC-0330. Alternatively, these documents can be obtained free of charge from Business First by directing a request to: Business First Bancshares, Inc., 500 Laurel Street, Suite 101, Baton Rouge, Louisiana 70801, Attention: Corporate Secretary.

No Offer or Solicitation

This release does not constitute or form part of any offer to sell, or a solicitation of an offer to purchase, any securities of Business First. There will be no sale of securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.