Business First Bank(US:BFST)2025-05-02 16:14PART I - FINANCIAL INFORMATION Financial Statements The company's financial statements show a slight decrease in total assets, a significant increase in net income, and growth in shareholders' equity for the period Consolidated Balance Sheets Total assets were $7.78 billion as of March 31, 2025, with a slight decrease in cash and deposits, while shareholders' equity grew to $826.3 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $7,784,728 | $7,857,090 | | Loans and Lease Receivable, Net | $5,924,056 | $5,926,559 | | Securities Available for Sale | $920,573 | $893,549 | | Total Liabilities | $6,958,416 | $7,057,624 | | Total Deposits | $6,458,181 | $6,511,331 | | Federal Home Loan Bank Borrowings | $317,352 | $355,875 | | Total Shareholders' Equity | $826,312 | $799,466 | Consolidated Statements of Income Net income for Q1 2025 rose to $20.5 million, a 51.4% year-over-year increase, driven by a significant rise in net interest income Consolidated Income Statement Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total Interest Income | $113,693 | $96,011 | | Total Interest Expense | $47,710 | $44,480 | | Net Interest Income | $65,983 | $51,531 | | Provision for Credit Losses | $2,812 | $1,186 | | Total Other Income | $13,226 | $9,386 | | Total Other Expenses | $50,578 | $42,522 | | Net Income | $20,543 | $13,570 | | Net Income Available to Common Shareholders | $19,193 | $12,220 | | Diluted EPS | $0.65 | $0.48 | Consolidated Statements of Comprehensive Income (Loss) Consolidated comprehensive income reached $30.7 million in Q1 2025, a substantial improvement from the prior year, boosted by net income and unrealized gains Comprehensive Income (Loss) (in thousands) | Description | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Consolidated Net Income | $20,543 | $13,570 | | Other Comprehensive Income (Loss) | $10,154 | $(5,049) | | Consolidated Comprehensive Income | $30,697 | $8,521 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased to $826.3 million at the end of Q1 2025, driven by net income and other comprehensive income - Shareholders' equity increased by $26.8 million during Q1 2025, from $799.5 million to $826.3 million14 - Key drivers of the equity increase were net income ($20.5 million) and other comprehensive income ($10.2 million)14 - The company declared and paid cash dividends of $1.35 million on preferred stock and $4.11 million on common stock during the quarter14 Consolidated Statements of Cash Flows Net cash from operating and investing activities was offset by cash used in financing, resulting in a net decrease in cash of $6.2 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $28,726 | $7,603 | | Net Cash Provided by (Used in) Investing Activities | $71,761 | $(162,154) | | Net Cash Provided by (Used in) Financing Activities | $(106,698) | $114,347 | | Net Decrease in Cash and Due From Banks | $(6,211) | $(40,204) | Notes to Unaudited Consolidated Financial Statements The notes detail accounting policies, the Oakwood acquisition, debt redemption, credit loss allowances, and a subsequent banking center sale - On October 1, 2024, the Company acquired Oakwood Bancshares, Inc. for a total purchase price of $103.8 million, which included issuing 3,973,134 shares of common stock and resulted in $30.2 million in goodwill2932 - The company redeemed $7.0 million of its subordinated debt during Q1 2025, resulting in a $630,000 gain on extinguishment of debt81 - Subsequent to the quarter end, on April 4, 2025, the company sold its Kaplan banking center, which included $51.2 million in deposits and $2.3 million in loans122 - The allowance for credit losses was $56.9 million for loans and $3.5 million for unfunded commitments as of March 31, 20256599 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant year-over-year growth in net income, driven by the Oakwood acquisition, alongside an increase in nonperforming assets and strong capital ratios Overview and Recent Developments The company highlights its operational scale, recent strategic acquisitions and divestitures, and the full repayment of its BTFP loan - As of March 31, 2025, the company had total assets of $7.8 billion, total loans of $6.0 billion, and total deposits of $6.5 billion131 - The company fully repaid its $300.0 million Bank Term Funding Program (BTFP) loan upon its maturity on March 22, 2024134 - Key strategic activities include the acquisition of Oakwood Bancshares (October 2024) and the post-quarter sale of the Kaplan banking center (April 2025)137138 Results of Operations Q1 2025 net income rose 57.1% year-over-year, fueled by increased net interest income from the Oakwood acquisition and higher noninterest income Key Performance Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income to Common Shareholders | $19.2M | $12.2M | | Diluted EPS | $0.65 | $0.48 | | Return on Average Assets (Annualized) | 1.00% | 0.74% | | Return on Average Equity (Annualized) | 10.48% | 8.51% | | Net Interest Margin | 3.68% | 3.32% | - The increase in net interest income was driven by a $1.02 billion increase in average interest-earning assets, primarily from the Oakwood acquisition, which contributed to a $17.0 million increase in loan interest income146150 - The provision for credit losses increased to $2.8 million in Q1 2025, primarily due to $2.3 million in reserves on two individual commercial lending relationships151 - Noninterest income rose by $3.8 million, mainly due to a $1.1 million increase in gain on sales of loans and a $630,000 gain on the extinguishment of subordinated debt153 Financial Condition Total assets remained stable at $7.8 billion, while nonperforming assets increased, and the loan loss allowance was strengthened Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Real Estate: Commercial | $2,472,121 | $2,483,223 | | Real Estate: Construction | $633,698 | $670,502 | | Real Estate: Residential | $934,357 | $884,533 | | Commercial | $1,862,176 | $1,868,675 | | Consumer and Other | $78,567 | $74,466 | | Total Loans Held for Investment | $5,980,919 | $5,981,399 | Nonperforming Assets (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total nonperforming loans | $41,550 | $25,007 | | Other real estate owned | $1,282 | $5,529 | | Total nonperforming assets | $42,832 | $30,536 | | Ratio of NPA to total assets | 0.55% | 0.39% | - The allowance for credit losses increased to $60.4 million, or 1.01% of total loans, at March 31, 2025, up from $58.5 million, or 0.98%, at December 31, 2024187 - Total deposits decreased by $53.2 million (0.8%) to $6.5 billion in Q1 2025, with noninterest-bearing deposits decreasing by $48.7 million201202 Liquidity and Capital Resources The company maintains a strong liquidity position and robust capital ratios, all well exceeding regulatory minimums - The company has significant contingent liquidity sources, including $1.6 billion in FHLB availability and $1.3 billion in Federal Reserve Discount Window availability as of March 31, 2025207 Regulatory Capital Ratios (Company) | Ratio | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Tier 1 Leverage | 9.70% | 9.53% | | Common Equity Tier 1 | 9.78% | 9.44% | | Tier 1 Risk-based | 10.90% | 10.56% | | Total Risk-based | 13.03% | 12.75% | - The Board of Directors declared a quarterly cash dividend of $0.14 per common share on April 24, 2025215 Interest Rate Sensitivity and Market Risk The company's balance sheet is asset-sensitive, with net interest income projected to increase by 3.23% in a +100 basis point rate shock scenario Interest Rate Sensitivity Analysis (as of March 31, 2025) | Change in Interest Rates (bps) | % Change in Net Interest Income | % Change in Fair Value of Equity | | :--- | :--- | :--- | | +300 | 9.23% | (1.02%) | | +200 | 6.30% | (0.51%) | | +100 | 3.23% | (0.16%) | | -100 | (2.91%) | (0.05%) | | -200 | (6.10%) | (1.86%) | Non-GAAP Financial Measures The company presents non-GAAP metrics, such as core net income and tangible book value per share, to provide additional insight into performance - Core net income available to common shareholders was $19.3 million ($0.65 per diluted share) for Q1 2025, compared to $12.8 million ($0.50 per diluted share) for Q1 2024241243 Tangible Book Value Per Common Share Reconciliation | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Book value per common share (GAAP) | $25.51 | $24.62 | | Tangible book value per common share (Non-GAAP) | $20.84 | $19.92 | Tangible Common Equity to Tangible Assets Ratio | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Common Equity to Total Assets (GAAP) | 9.7% | 9.3% | | Tangible Common Equity to Tangible Assets (Non-GAAP) | 8.1% | 7.6% | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate, credit, and liquidity, which are managed through board-approved policies - The company's principal financial market risks are identified as liquidity risk and exposures to interest rate movements251 - Risk is controlled and monitored through established policies, procedures, and oversight from management and the board, with the goal of optimizing profitability within approved limits249 Controls and Procedures Management is actively remediating a previously disclosed material weakness related to a third-party service provider's IT controls - A material weakness previously identified in a third-party service provider's IT general controls is under remediation252 - Remediation steps in Q1 2025 included an independent audit firm's agreed-upon procedures (AUP) testing, which confirmed a segregation of duty control was appropriately remediated253 - The company plans to convert to a new core system in Q2 2025, which is expected to further address the issue253 PART II - OTHER INFORMATION Legal Proceedings The company is not involved in any material legal proceedings outside the ordinary course of business - The company is party to claims and legal proceedings from time to time in the ordinary course of business, but none are currently considered material257 Risk Factors No material changes to the company's risk factors have occurred since the last annual report - No material changes have occurred in the risk factors disclosed in the Annual Report on Form 10-K for December 31, 2024258 Other Items (Items 2, 3, 4, 5) The report confirms no unregistered equity sales, defaults, mine safety issues, or new director/officer trading plans during the quarter - During Q1 2025, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading agreement263 Exhibits The report includes required exhibits such as corporate documents, officer certifications, and Inline XBRL files - Key exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act264