BFST - Business First Bancshares Inc. Announces Financial Results for Fiscal Year 2020 and Q4 2020

BATON ROUGE, La., Jan. 25, 2021 (GLOBE NEWSWIRE) -- Business First Bancshares, Inc. (NASDAQ: BFST) (Business First), parent company of b1BANK, Baton Rouge, Louisiana, today announced its unaudited results for the year ended December 31, 2020, including net income of $30.0 million, or $1.64 per diluted share, an increase of $6.2 million and decrease of $0.10, respectively, from prior year ended December 31, 2019. On a non-GAAP basis, core net income for the year ended December 31, 2020, which excludes certain income and expenses, was $37.5 million, or $2.05 per diluted share, an increase of $12.9 million and an increase of $0.25, respectively, from prior year ended December 31, 2019.

For the quarter ended December 31, 2020, Business First reported net income of $13.8 million, or $0.67 per diluted share, increases of $8.1 million and $0.25, respectively, from the quarter ended December 31, 2019. On a non-GAAP basis, core net income for the quarter ended December 31, 2020, which excludes certain income and expenses, was $14.1 million, or $0.68 per diluted share, an increase of $8.0 million and an increase of $0.23, respectively, from the quarter ended December 31, 2019.

“We finished the year right where we set out to last spring, though we never imagined the path we would all take to get here,” said Jude Melville, president and CEO. “b1BANK’s core earnings power reflects our increasing scale and improving efficiency, our asset quality is stable and our balance sheet is as liquid as it’s ever been.  Our people were called upon to process PPP loans, originate and close Main Street Lending Program relationships, and integrate a significant acquisition, all while being tested by COVID-19 and two hurricanes.  Not only did they respond, they responded with confidence and pride. Never before has our team been as proud to be community bankers and never before have I been as proud to be a part of their team.”

On January 25, 2021, Business First’s board of directors declared a quarterly dividend based upon financial performance for the fourth quarter in the amount of $0.10 per share, same as the prior quarter, to the common shareholders of record as of February 15, 2021. The dividend will be paid on February 28, 2021, or as soon thereafter as practicable.

Quarterly Highlights

• Main Street Lending Program. Business First continued to support its clients through the COVID-19 pandemic by electing to participate in the Main Street Lending Program established by the Federal Reserve. Business First was able to originate 45 loans with an aggregate original principal balance of $327.8 million during the third and fourth quarter of 2020, resulting in a gain on sale of $4.2 million related to the transfer of 95% of the principal loan balance, or $311.4 million. As of December 31, 2020, Business First retained $16.4 million of the loan balances with an average balance of $364,000.
• Stable Credit Quality. Ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets remained stable from 0.32% and 0.54%, respectively, at September 30, 2020, to 0.35% and 0.48% at December 31, 2020. At December 31, 2019, ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets were 0.53% and 0.58%, respectively, representing stable credit quality through the year ended December 31, 2020.
• Net Interest Margin and Spread. Net interest margin and spread increased from 4.06% and 3.81%, respectively, for the quarter ended September 30, 2020, to 4.26% and 4.03% for the quarter ended December 31, 2020. The increases were largely attributable to purchase accounting accretion (loans and deposits/borrowings), the forgiveness of SBA PPP loans, which accelerated recognition of net loan origination fees, and repricing of deposits. Excluding loan discount accretion, non-GAAP net interest margin and spread were 3.99% and 3.75%, respectively, for the quarter ended December 31, 2020, compared to 3.81% and 3.56% for the quarter ended September 30, 2020.
• Loan Growth. Total loans held for investment at December 31, 2020, were $3.0 billion, a decrease of $91.1 million compared to September 30, 2020. Loans declined (2.96) %, or (11.82) % annualized, for the quarter ended December 31, 2020. The majority of the decline was attributable to the U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP) loan forgiveness, which consisted of $82.2 million of the net decrease in the loan portfolio. Total loans declined, excluding SBA PPP loan forgiveness, for the quarter ended December 31, 2020 by (0.33) %, or (1.32) % annualized. Organic loan growth, excluding SBA PPP and acquired Pedestal Bank (Pedestal) loans from the May 1, 2020 acquisition, for the year ended December 31, 2020 was 6.29%.
• Stock Repurchase Program. Business First repurchased 45,800 shares of stock at a weighted average price per share of $17.42 during the quarter ended December 31, 2020, or 104% of tangible book value per share as of December 31, 2020. For the year ended December 31, 2020, Business First repurchased 480,581 shares of stock at a weighted average price per share of $12.06, or 72% of tangible book value per share as of December 31, 2020.
  

Financial Condition

December 31, 2020, Compared to September 30, 2020

Loans

Total loans held for investment decreased by $91.1 million compared to September 30, 2020. The decrease was largely attributable to SBA PPP forgiveness within the commercial portfolio of $79.0 million. Loans declined (2.96) %, or (11.82) % annualized, for the quarter ended December 31, 2020. Total loans declined, excluding the reduction from SBA PPP loan forgiveness, for the quarter ended December 31, 2020 by (0.33) %, or (1.32) % annualized. At December 31, 2020, SBA PPP loans with a principal balance of $315.5 million remain outstanding.

Loan growth contracted for the quarter ended December 31, 2020, due to the significant effort placed into accommodating client requests for the Main Street Lending Program. Business First was able to originate $317.2 million loans of which $301.4 million (95% of the total originated) were sold/participated to the Main Street Lending Program during the quarter ended December 31, 2020.

Business First’s unfunded commitments remained constant throughout the quarter ended December 31, 2020. Business First has not identified any unusual customer usage of unfunded commitments since the beginning of the COVID-19 pandemic in March 2020.

Borrowings

Due to b1BANK’s increased cash position/liquidity (including increased liquidity resulting from SBA PPP forgiveness), Business First elected to extinguish $74.0 million of its higher-rate, longer-term Federal Home Loan Bank (FHLB) borrowings with a weighted average rate of 2.25% during December 2020. Business First will save approximately $1.7 million in interest expense during 2021 due to the extinguishment. Business First incurred a loss on early extinguishment of debt of $2.4 million.

Credit Quality

Nonperforming loans as a percentage of total loans held for investment increased from 0.32% as of September 30, 2020, to 0.35% as of December 31, 2020. Nonperforming assets as a percentage of total assets decreased from 0.54% as of September 30, 2020, to 0.48% as of December 31, 2020. The increase in the nonperforming loan ratio was attributable to increases in nonaccrual loans and the decrease in the nonperforming asset ratio was attributable to the sale of other real estate owned properties during the quarter ended December 31, 2020.

Total Shareholders’ Equity

Book value per common share was $19.88 at December 31, 2020, compared to $19.26 at September 30, 2020. On a non-GAAP basis, tangible book value per share was $16.80 at December 31, 2020, compared to $16.18 at September 30, 2020.  Business First repurchased 45,800 shares of stock at a weighted average price per share of $17.42 during the quarter ended December 31, 2020.

December 31, 2020, Compared to December 31, 2019

Loans

Total loans held for investment increased by $1.3 billion compared to December 31, 2019, or 74.91%, due primarily to the acquisition of Pedestal and origination of SBA PPP loans. Organic loan growth, excluding SBA PPP and acquired Pedestal loans from the May 1, 2020 acquisition, for the year ended December 31, 2020 was 6.29% ¹ .

Credit Quality

Nonperforming loans as a percentage of total loans held for investment decreased from 0.53% as of December 31, 2019, to 0.35% as of December 31, 2020. Nonperforming assets as a percentage of total assets decreased from 0.58% as of December 31, 2019, to 0.48% as of December 31, 2020. The decreases were largely attributable to an increase in overall total loans held for investment and total assets from the acquisition of Pedestal during the quarter ended June 30, 2020.

Total Shareholders’ Equity

Book value per common share was $19.88 at December 31, 2020, compared to $21.47 at December 31, 2019. On a non-GAAP basis, tangible book value per share was $16.80 at December 31, 2020, compared to $17.31 at December 31, 2019. The decreases were attributable to the initial book value dilution caused by the acquisition of Pedestal during the quarter ended June 30, 2020.

Results of Operations

Fourth Quarter 2020 Compared to Third Quarter 2020

Net Income and Diluted Earnings Per Share

For the quarter ended December 31, 2020, net income was $13.8 million, or $0.67 per diluted share, compared to net income of $9.6 million, or $0.46 per diluted share, for the quarter ended September 30, 2020. The increases were largely attributable to an increase in net interest income (primarily due to the accelerated recognition of SBA PPP net loan origination fees due to forgiveness), decrease in interest-bearing deposits due to continued repricing of deposits, and an increase in gain on sale of loans due to the Main Street Lending Program, offset by an increase in other expense due to the extinguishment of FHLB borrowings.

On a non-GAAP basis, core net income, which excludes certain income and expenses, for the quarter ended December 31, 2020, was $14.1 million, or $0.68 per diluted share, compared to core net income of $11.0 million, or $0.53 per diluted share, for the quarter ended September 30, 2020. Notable noncore events impacting earnings for the quarter ended December 31, 2020, included the incurrence of $568,000 in acquisition-related expenses and $158,000 in gains attributed to former bank premises and equipment in other income, compared to the incurrence of $1.2 million in acquisition-related expenses and $635,000 in losses attributed to losses on former bank premises and equipment in other income, largely attributable to branches planned to be closed as a result of the Pedestal acquisition for the quarter ended September 30, 2020.

Interest Income

For the quarter ended December 31, 2020, net interest income totaled $39.6 million and net interest margin and net interest spread were 4.26% and 4.03%, respectively, compared to $36.9 million, 4.06% and 3.81% for the quarter ended September 30, 2020. The average yield on the loan portfolio (excluding SBA PPP loans) was 5.59% for the quarter ended December 31, 2020, compared to 5.65% for the quarter ended September 30, 2020. The average yield on total interest-earning assets was 4.78% for the quarter ended December 31, 2020, compared to 4.67% for the quarter ended September 30, 2020. The increase in interest income was largely attributable to accelerated recognition of SBA PPP net loan origination fees due to forgiveness ($3.2 million total, with approximately $1.8 million accelerated due to forgiveness) for the quarter ended December 31, 2020.

Net interest margin and net interest spread were positively impacted for the quarter ended December 31, 2020, by additional loan discount accretion, 3 basis points impact to both ratios, additional SBA PPP origination fees, 18 basis point impact to both ratios, and reduction in the overall cost of funds (which includes noninterest-bearing deposits).

The average loan yield (excluding SBA PPP loans) was impacted by the origination of loans at lower rates than payoffs during the quarter due to the decline in rates which has occurred since the COVID 19-pandemic.

Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $2.6 million) were 3.99% and 3.75%, respectively, for the quarter ended December 31, 2020, compared to 3.81% and 3.56% (excluding loan discount accretion of $2.3 million) for the quarter ended September 30, 2020.

Interest Expense

For the quarter ended December 31, 2020, overall cost of funds (which includes noninterest-bearing deposits) decreased by 10 basis points, from 0.63% to 0.53%, compared to the quarter ended September 30, 2020. The decrease in cost of funds was largely attributable to the repricing of deposits.

Other Income

For the quarter ended December 31, 2020, other income was impacted by a $4.4 million increase in gain on sale of loans primarily associated with the Main Street Lending Program, as well as a net increase of $981,000 in gains on sale of other real estate owned and disposal of assets, compared to the quarter ended September 30, 2020.

Other Expenses

For the quarter ended December 31, 2020, the increase in other expenses was largely attributed to a loss on early extinguishment of FHLB borrowings resulting in a net loss of $2.4 million (including the remaining purchase discounts) and an additional $250,000 accrual for shareholder tax within other expenses, $325,000 in advertising and promotions, offset by a $522,000 decrease in salaries and employee benefits, compared to the quarter ended September 30, 2020.

Provision for Loan Losses

During the quarter ended December 31, 2020, Business First recorded a provision for loan losses of $2.1 million, compared to $2.5 million for the quarter ended September 30, 2020. The reserve for the quarter ended December 31, 2020, was impacted by net charge-offs of $450,000 and the continued impact of the qualitative factors related to COVID-19.

Return on Assets and Equity

Return on average assets and equity, each on an annualized basis, were 1.37% and 13.86%, respectively, for the quarter ended December 31, 2020, compared to 0.98% and 9.85%, respectively, for the quarter ended September 30, 2020. Both returns were positively impacted by higher net income for the quarter ended December 31, 2020.

Fourth Quarter 2020 Compared to Fourth Quarter 2019

Net Income and Diluted Earnings Per Share

For the quarter ended December 31, 2020, net income was $13.8 million, or $0.67 per diluted share, compared to net income of $5.8 million, or $0.42 per diluted share, for the quarter ended December 31, 2019. The increases in net income and diluted earnings per share were largely attributable to the increases in net interest income and other income related to the acquisition of Pedestal on May 1, 2020, as well as the SBA PPP and Main Street Lending Program, offset by increases in the provision for loan losses associated with the COVID-19 pandemic in 2020, additional expenses associated with the acquisition of Pedestal on May 1, 2020, and loss on early extinguishment of FHLB borrowings.

On a non-GAAP basis, core net income, which excludes certain income and expenses, for the quarter ended December 31, 2020, was $14.1 million, or $0.68 per diluted share, compared to core net income of $6.1 million, or $0.45 per diluted share, for the quarter ended December 31, 2019. Notable noncore events impacting earnings for the quarter ended December 31, 2020, included the incurrence of $568,000 in acquisition-related expenses and $158,000 in gains attributed to former bank premises and equipment in other income, compared to the incurrence of $125,000 losses associated with the disposal of former bank premises and equipment in other income related to the rebranding of b1BANK and a $216,000 adjustment to estimated provision for income taxes associated with the sale of the Mangham banking center for the quarter ended December 31, 2019.

Interest Income

For the quarter ended December 31, 2020, net interest income totaled $39.6 million and net interest margin and net interest spread were 4.26% and 4.03%, respectively, compared to compared to $20.6 million, 4.08% and 3.65% for the quarter ended December 31, 2019. The average yield on the loan portfolio (excluding SBA PPP loans) was 5.59% for the quarter ended December 31, 2020, compared to 5.82% for the quarter ended December 31, 2019. The average yield on total interest-earning assets was 4.78% for the quarter ended December 31, 2020, compared to 5.28% for the quarter ended December 31, 2019. The increase in interest income was largely attributable to higher average balances due to the Pedestal acquisition and origination of SBA PPP loans during 2020.

Average loan yield (excluding SBA PPP loans), average yield on total interest-earning assets, net interest margin, and net interest spread were impacted for the quarter ended December 31, 2020, by the federal funds rate cuts of 175 basis points, which occurred during the fourth quarter of 2019 through the first quarter of 2020. The average yield on total interest-earning assets was also impacted by the lower-yielding SBA PPP loans originated.

Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $2.6 million) were 3.99% and 3.75%, respectively, for the quarter ended December 31, 2020, compared to 3.92% and 3.49% (excluding loan discount accretion of $800,000) for the quarter ended December 31, 2019.

Interest Expense

For the quarter ended December 31, 2020, overall cost of funds (which includes noninterest-bearing deposits) decreased by 74 basis points, from 1.27% to 0.53%, compared to the quarter ended December 31, 2019. The decrease in cost of funds was partially attributable to the accretion of deposit and FHLB premiums associated with the Pedestal acquisition, $780,000 or 9 basis points, but primarily attributable to an overall reduction in interest rates on deposit offerings and the lower-yielding deposit portfolio acquired from Pedestal.

Other Income

For the quarter ended December 31, 2020, the increase in other income was largely attributable to the acquisition of Pedestal during the quarter ended June 30, 2020, and $4.4 million gain on sale of loans primarily associated with the Main Street Lending Program, compared to the quarter ended December 31, 2019.

Other Expenses

For the quarter ended September 30, 2020, the increase in other expenses was largely attributable to the acquisition of Pedestal during the quarter ended June 30, 2020 and the $2.4 million loss on early extinguishment of FHLB borrowings, compared to the quarter ended December 31, 2019.

Provision for Loan Losses

During the quarter ended December 31, 2020, Business First recorded a provision for loan losses of $2.1 million compared to $192,000 for the quarter ended December 31, 2019. The reserve for the quarter ended December 31, 2020, was impacted by $450,000 in net charge-offs and the impact of the COVID-19 pandemic on the qualitative factors within the allowance for loan and lease losses.

Return on Assets and Equity

Return on average assets and return on average equity, each on an annualized basis, were 1.37% and 13.86%, respectively, for the quarter ended December 31, 2020, from 1.04% and 8.18%, respectively, for the quarter ended December 31, 2019. Both returns were positively impacted by higher net income for the quarter ended December 31, 2020.

About Business First Bancshares, Inc.
Business First Bancshares, Inc., through its banking subsidiary b1BANK operates 42 banking centers in markets across Louisiana and in the Dallas, Texas area. b1BANK provides commercial and personal banking, treasury management and wealth solutions services to small to midsize businesses and their owners and employees. Visit www.b1BANK.com for more information. Business First’s common stock is traded on the NASDAQ Global Select Market under the symbol “BFST.”

Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures (e.g., referenced as “core”) intended to supplement, not substitute for, comparable GAAP measures. These 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 measures include realized and unrealized gains/losses on former bank premises and equipment, investment sales, impaired loan sales, acquisition-related expenses (including, but not limited to, legal costs, system conversion costs, severance and retention payments, etc.). 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 the Company’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. Actual results will also be significantly impacted by the effects of the ongoing COVID-19 pandemic, including, among other effects: the impact of the public health crisis; the extent and duration of closures of businesses, including our branches, vendors and customers; the operation of financial markets; employment levels; market liquidity; the impact of various actions taken in response by the U.S. federal government, the Federal Reserve, other banking regulators, state and local governments; the adequacy of our allowance for loan losses in relation to potential losses in our loan portfolio; and the impact that all of these factors have on our borrowers, other customers, vendors and counterparties. 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 on 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 the Company. 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.

Misty Albrecht
b1BANK
225.286.7879
Misty.Albrecht@b1BANK.com

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¹ Calculated by adjusting the beginning loans, $1.7 billion, for the acquired Pedestal loans net of the purchase discount and SBA PPP loans acquired, or $807.2 million, for an adjusted beginning of $2.5 billion, and then removing the remaining SBA PPP loans at December 31, 2020, $315.5 million, from the change of the adjusted beginning to the actual ending at December 31, 2020, or $3.0 billion. This results in a net increase of $158.4 million, divided by the beginning adjusted balance of $2.5 billion, or 6.29%.