Business First Bank(BFST) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Presents unaudited consolidated financial statements and management's discussion and analysis for Business First Bancshares, Inc. Item 1. Financial Statements Presents the unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes, for the periods ended September 30, 2021. Consolidated Balance Sheets Total assets increased to $4.41 billion by September 30, 2021, driven by securities growth, with deposits reaching $3.77 billion and equity at $430.2 million. Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Total Assets | $4,405,217 | $4,160,360 | | Securities Available for Sale | $1,034,491 | $640,605 | | Loans and Lease Receivable, Net | $3,038,090 | $2,969,331 | | Goodwill | $60,062 | $53,862 | | Total Liabilities | $3,974,996 | $3,750,397 | | Total Deposits | $3,768,121 | $3,616,679 | | Subordinated Debt | $81,427 | $25,000 | | Total Shareholders' Equity | $430,221 | $409,963 | Consolidated Statements of Income Net income for the nine months ended September 30, 2021, surged to $40.1 million, with diluted EPS at $1.94, primarily due to increased other income. Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $37,294 | $36,932 | $115,540 | $88,062 | | Provision for Loan Losses | $1,147 | $2,491 | $6,747 | $9,301 | | Total Other Income | $6,348 | $4,217 | $28,807 | $12,017 | | Total Other Expenses | $29,567 | $26,951 | $87,646 | $71,391 | | Net Income | $10,311 | $9,609 | $40,068 | $16,160 | | Diluted EPS | $0.50 | $0.46 | $1.94 | $0.93 | Consolidated Statements of Cash Flows Net cash and equivalents decreased by $67.8 million for the nine months ended September 30, 2021, with operating activities providing $41.8 million and investing activities using $312.8 million. Cash Flow Summary for the Nine Months Ended Sep 30 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $41,789 | $15,142 | | Net Cash Used in Investing Activities | ($312,826) | ($312,934) | | Net Cash Provided by Financing Activities | $203,267 | $312,315 | | Net (Decrease) Increase in Cash | ($67,770) | $14,523 | Notes to Unaudited Consolidated Financial Statements Detailed notes cover accounting policies, mergers (Pedestal, SSW), portfolio composition, allowance for loan losses, and subsequent events like the Texas Citizens Bancshares acquisition. - The company consummated the merger with Pedestal Bancshares, Inc. on May 1, 2020, issuing 7.6 million shares of common stock. The total purchase price was $98.7 million, resulting in $5.1 million of goodwill[27][29] - 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[43] - Subsequent to the quarter end, on October 1, 2021, the company sold its Oak Grove banking center, including $3.7 million in loans and $18.7 million in deposits. On October 20, 2021, it entered into a definitive agreement to acquire Texas Citizens Bancshares, Inc[128][129] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes financial performance, covering net interest income, loan loss provision, noninterest income and expenses, portfolio growth, and liquidity and capital positions for the periods ended September 30, 2021. Results of Operations Net income for the nine months ended September 30, 2021, reached $40.1 million, driven by a PPP loan sale gain, despite net interest margin compression to 3.93%. - Net income for the nine months ended Sep 30, 2021, was significantly impacted by a $9.2 million gain from the sale of a PPP loan portfolio in June 2021[158][152] Net Interest Margin Analysis | Period | Net Interest Income | Net Interest Margin | Net Interest Spread | | :--- | :--- | :--- | :--- | | Q3 2021 | $37.3M | 3.71% | 3.51% | | Q3 2020 | $36.9M | 4.06% | 3.81% | | YTD 2021 | $115.5M | 3.93% | 3.75% | | YTD 2020 | $88.1M | 3.97% | 3.66% | - The provision for loan losses was lower for the three and nine months ended Sep 30, 2021, compared to 2020, primarily due to improved qualitative factors related to the economy and energy sector, which offset reserves for new loan growth[176] - Total noninterest income for the nine months ended Sep 30, 2021 increased by $16.8 million (139.7%) year-over-year, driven by a $9.9 million increase in gain on sale of loans (primarily PPP loans) and a $2.8 million increase in fees and brokerage commission income from acquisitions[180] Financial Condition Total assets grew to $4.4 billion, with loans at $3.1 billion and deposits at $3.8 billion, while nonperforming assets decreased to $16.5 million. Loan Portfolio Composition (in thousands) | Loan Type | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Commercial | $723,077 | $886,325 | | Nonfarm nonresidential | $1,111,771 | $971,603 | | Construction and land | $464,808 | $403,065 | | 1-4 family residential | $464,462 | $468,650 | | Other | $302,118 | $261,712 | | Total | $3,066,236 | $2,991,355 | - The allowance for loan losses increased to $28.1 million, or 0.92% of total loans, at September 30, 2021, up from $22.0 million, or 0.74%, at December 31, 2020. The increase was partly due to the reduction of government-guaranteed SBA PPP loans[218] - The securities portfolio grew by $393.9 million (61.5%) to $1.0 billion as of September 30, 2021, primarily due to the deployment of excess cash from SBA PPP loan forgiveness and the portfolio sale[222] - Total deposits increased by $151.4 million (4.2%) to $3.8 billion as of September 30, 2021, with noninterest-bearing deposits growing by $37.7 million[230][231] Liquidity and Capital Resources The company maintains strong capital ratios, with Tier 1 Leverage at 8.34% and Total Risk-based Capital at 12.47%, supported by increased shareholders' equity and subordinated debt issuance. Regulatory Capital Ratios (Company) | Ratio | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Tier 1 Leverage | 8.34% | 8.79% (CBLR) | | Common Equity Tier 1 | 9.39% | N/A | | Tier 1 Risk-based | 9.53% | N/A | | Total Risk-based | 12.47% | N/A | - During the first quarter of 2021, the company elected to revert from the Community Bank Leverage Ratio (CBLR) framework back to risk-weighted capital ratio reporting[246] - Total shareholders' equity increased by $20.3 million (4.9%) to $430.2 million at September 30, 2021, primarily due to $40.1 million in net income, offset by $7.0 million in dividends and $4.9 million in other comprehensive losses[243] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company manages primary market risks, including interest rate, credit, and liquidity risks, through established policies and asset-liability management. - The company's principal financial market risks are identified as liquidity risk and exposure to interest rate movements[285] - Interest rate risk, credit risk, and liquidity risk are controlled and monitored through established policies, procedures, and oversight by management and the board[283] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting. - 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[286] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[287] PART II – OTHER INFORMATION This section covers other information including legal proceedings, unregistered sales of equity securities, and stock repurchase programs. Item 1. Legal Proceedings The company is not involved in any material legal proceedings beyond routine matters in the ordinary course of business. - The company states it is not a party to any material legal proceedings outside the ordinary course of business[287] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 359,747 shares for approximately $8.3 million in Q3 2021 under a $30.0 million program, with $18.3 million remaining. - On October 22, 2020, the board approved a stock repurchase program authorizing up to $30.0 million in share repurchases, effective until December 31, 2021[290] Share Repurchases in Q3 2021 (dollars in millions) | Period | Total Shares Purchased | Average Price Paid | Approx. Dollar Value Remaining | | :--- | :--- | :--- | :--- | | Jul 2021 | 224,266 | $22.88 | $21.485M | | Aug 2021 | 135,481 | $23.66 | $18.279M | | Sep 2021 | — | — | $18.279M | | Total Q3 | 359,747 | $23.18 | $18.279M |