Business First Bank(BFST) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Unaudited consolidated financial statements for Business First Bancshares, Inc. as of June 30, 2021, including balance sheets, income statements, and comprehensive notes Consolidated Balance Sheets Total assets grew to $4.32 billion by June 30, 2021, with increased securities and deposits, while net loans decreased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $4,323,959 | $4,160,360 | | Loans and Lease Receivable, Net | $2,828,184 | $2,969,331 | | Securities Available for Sale | $882,802 | $640,605 | | Total Liabilities | $3,892,953 | $3,750,397 | | Total Deposits | $3,724,223 | $3,616,679 | | Subordinated Debt | $81,427 | $25,000 | | Total Shareholders' Equity | $431,006 | $409,963 | Consolidated Statements of Income Net income surged to $17.4 million for Q2 2021, driven by a $10.0 million gain on loan sales, alongside net interest income growth Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $37,945 | $30,919 | $78,246 | $51,130 | | Provision for Loan Losses | $2,241 | $5,443 | $5,600 | $6,810 | | Total Other Income | $17,376 | $4,996 | $22,459 | $7,800 | | Net Income | $17,428 | $2,052 | $29,757 | $6,551 | | Diluted EPS | $0.84 | $0.11 | $1.43 | $0.42 | Notes to Unaudited Consolidated Financial Statements Detailed notes explain financial statement presentation, COVID-19 impacts, mergers, loan and securities portfolios, and debt and fair value measurements - The financial statements are unaudited and should be read in conjunction with the 2020 Form 10-K, with no material COVID-19 impact observed to date[23][24] - The Company acquired Pedestal Bancshares, Inc. on May 1, 2020, issuing 7.6 million shares of common stock, with Pedestal having $1.4 billion in assets and $1.2 billion in deposits at acquisition[28] - On April 1, 2021, the Company acquired Smith Shellnut Wilson, LLC (SSW) for $7.3 million in cash and $3.9 million in subordinated debt, recording $6.5 million in goodwill and $4.3 million in customer intangibles[44] - The Company issued $52.5 million in subordinated debt on March 26, 2021, at a fixed rate of 4.25% until March 2026, and an additional $3.9 million related to the SSW acquisition at 4.75% until April 2026[101][102] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, highlighting asset, deposit, and net income growth, acquisition impacts, COVID-19 response, and key financial analyses Overview and Recent Developments The company, a community bank with $4.3 billion in assets, details recent acquisitions (Pedestal, SSW) and its COVID-19 response, including PPP - The company completed the acquisition of Pedestal Bancshares, Inc. on May 1, 2020, which had approximately $1.3 billion in total assets[140] - On April 1, 2021, the company acquired Smith Shellnut Wilson, LLC (SSW), a registered investment advisor with approximately $3.5 billion in assets under management[141] - As of June 30, 2021, 16 loans with an outstanding balance of $29.9 million remained in COVID-19 related deferral periods, significantly down from a peak of approximately 2,000 loans totaling $720.5 million[144] - In June 2021, the company sold approximately 2,000 PPP loans with an aggregate balance of $243.6 million, realizing a gain of $9.2 million[146] Results of Operations Q2 2021 net income reached $17.4 million, a 749.3% increase, driven by PPP loan sales and net interest income growth Performance Summary | Metric | Q2 2021 | Q2 2020 | Six Months 2021 | Six Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $17.4M | $2.1M | $29.8M | $6.6M | | Diluted EPS | $0.84 | $0.11 | $1.43 | $0.42 | | Return on Average Assets (Ann.) | 1.58% | 0.23% | 1.37% | 0.46% | | Return on Average Equity (Ann.) | 16.57% | 2.35% | 14.23% | 4.13% | - Net interest margin for Q2 2021 was 3.87%, a slight decrease from 3.89% in Q2 2020, with the overall cost of funds decreasing by 32 basis points year-over-year[156] - The provision for loan losses was $2.2 million for Q2 2021, down from $5.4 million in Q2 2020, primarily due to a downward adjustment of the qualitative economic factor for the COVID-19 pandemic[168] - Total noninterest income for Q2 2021 increased by $12.4 million (247.8%) year-over-year, mainly due to a $10.0 million gain on the sale of SBA PPP loans[171] Financial Condition Total assets increased to $4.3 billion, while loans decreased due to PPP sales; securities and deposits grew, and nonperforming assets decreased Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Commercial | $660,691 | $886,325 | | Nonfarm nonresidential | $1,002,707 | $971,603 | | 1-4 family residential | $459,037 | $468,650 | | Construction and land | $454,055 | $403,065 | | Other | $278,396 | $261,712 | | Total | $2,854,886 | $2,991,355 | Nonperforming Assets (in thousands) | Category | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total nonperforming loans | $11,461 | $10,586 | | Other real estate owned | $5,890 | $9,051 | | Total nonperforming assets | $18,016 | $20,039 | | Ratio of NPA to total assets | 0.42% | 0.48% | - The allowance for loan losses increased to $26.7 million, or 0.94% of total loans, at June 30, 2021, up from $22.0 million, or 0.74%, at December 31, 2020[209] - The securities portfolio increased by $242.2 million (37.8%) to $882.8 million at June 30, 2021, primarily due to the deployment of excess cash from SBA PPP forgiveness[214] Liquidity and Capital Resources Liquidity is met by deposits and asset maturities; shareholders' equity increased to $431.0 million, and the company remains well-capitalized Regulatory Capital Ratios (Business First Bancshares, Inc.) | Ratio | June 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Tier 1 Leverage | 8.23% | 8.79% (CBLR) | | Common Equity Tier 1 | 9.99% | N/A | | Tier 1 Risk-based | 10.14% | N/A | | Total Risk-based | 13.24% | N/A | - Total shareholders' equity increased by 5.1% to $431.0 million at June 30, 2021, primarily due to net income of $29.8 million, offset by dividends and other comprehensive losses[235] - The Board of Directors declared a quarterly dividend of $0.12 per share for Q2 2021[236] Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate volatility, managed via simulation models; a 100 bps rate increase would boost net interest income by 1.70% Interest Rate Sensitivity Analysis (Simulated Change over 12 Months) | Change in Interest Rates (bps) | % Change in Net Interest Income (as of June 30, 2021) | % Change in Fair Value of Equity (as of June 30, 2021) | | :--- | :--- | :--- | | +300 | 0.90% | (4.65%) | | +200 | 1.60% | (3.70%) | | +100 | 1.70% | (1.07%) | | -100 | (2.00%) | 6.20% | Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal controls - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[276] PART II. OTHER INFORMATION Legal Proceedings The company is not involved in any material pending legal proceedings beyond routine matters in the ordinary course of business - The company is party to claims and legal proceedings arising in the ordinary course of business, but management does not believe their resolution will have a material adverse effect on the financial statements[277] Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 Unregistered Sales of Equity Securities and Use of Proceeds The company's $30.0 million stock repurchase program saw 83,504 shares repurchased for $1.9 million in Q2 2021 - On October 22, 2020, the board approved a stock repurchase program for up to $30.0 million, effective until December 31, 2021[281] Share Repurchases in Q2 2021 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2021 | — | $— | | May 2021 | 5,500 | $22.91 | | June 2021 | 78,004 | $23.03 | | Total | 83,504 | $23.03 | Exhibits This section lists exhibits filed with the Form 10-Q, including certifications by principal officers and XBRL data files