Business First Bancshares Inc.
Business First Bancshares Inc.
25/07/2024 | Press release | Distributed by Public on 25/07/2024 19:03
Business First Bancshares, Inc., Announces Financial Results for Q2 2024
Baton Rouge, La. (July 25, 2024) - Business First Bancshares, Inc. (NASDAQ: BFST) (Business First), parent company of b1BANK, today announced its unaudited results for the quarter ended June 30, 2024, including net income available to common shareholders of $15.9 million or $0.62 per diluted common share, increases of $3.6 million and $0.14, respectively, compared to the linked quarter ended March 31, 2024. On a non-GAAP basis, core net income for the quarter ended June 30, 2024, which excludes certain income and expenses, was $16.3 million or $0.64 per diluted common share, increases of $3.5 million and $0.14, respectively, from the linked quarter.
"I am encouraged by our company's performance in the second quarter," said Jude Melville, president and CEO, "Our bankers' hard work and focus paid off in quarter-over- quarter improvement in earnings, net interest margin, noninterest income, loan and deposit mix and capital accretion. We look forward to continuing that hard work over the course of 2024."
On Thursday, July 25, 2024, 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 second quarter in the amount of $0.14 per share. The preferred and common dividends will be paid on August 31, 2024, or as soon thereafter as practicable, to the shareholders of record as of August 15, 2024.
Quarterly Highlights
• Net Interest Margin (NIM) Expansion. For the quarter ended June 30, 2024, net interest income totaled $54.0 million and net interest margin and net interest spread were 3.45% and 2.47%, respectively, compared to $51.5 million, 3.32% and 2.36% from the linked quarter. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $1.7 million) were 3.34% and 2.37%, respectively, for the quarter ended June 30, 2024, compared to 3.27% and 2.31% (excluding loan discount accretion of $0.8 million) for the linked quarter.
• Noninterest Income Investments. Noninterest income for the quarter ended June 30, 2024, increased $2.8 million or 29.73% from the linked quarter. Significant drivers for the quarter were increased loan sale activity, largely related to a $1.9 million gain on sale from a newly originated USDA loan, as well as increased origination and sale of Small Business Administration (SBA) loans, due to the first quarter acquisition of Waterstone LSP. Additionally, continued progress in the newly formed customer swap business along with improved revenue in service charge fees and debit card and ATM fees improved financial results.
• Deposits. During the quarter ended June 30, 2024, noninterest-bearing deposits increased $15.2 million or 1.17% and money market accounts increased $130.1 million or 7.26%. Deposits decreased $9.1 million or 0.16%, 0.66% annualized, for the quarter ended June 30, 2024, compared to the linked quarter. The decrease in interest-bearing deposits was attributable to strategic reductions of
$75.1 million of brokered deposits with a weighted average rate of 5.16%.
• Loan Growth. Loans held for investment increased $74.0 million or 1.45%, 5.85% annualized, from the linked quarter. Loan growth was mostly attributable to the $93.4 million increase in the commercial and industrial (C&I) portfolio. Business First continued the trend of reducing construction and development (C&D) portfolio exposure, with a decrease of $24.6 million from the linked quarter.
• Oakwood Acquisition. On April 25, 2024, Business First announced that it entered into a definitive agreement to acquire Oakwood Bancshares, Inc. (Oakwood) and its wholly-owned subsidiary, Oakwood Bank. Oakwood had approximately $839.7 million of total assets as of March 31, 2024.
Statement of Financial Condition
Loans
Loans held for investment increased $74.0 million or 1.45%, 5.85% annualized, from the linked quarter. Loan growth from the linked quarter was largely attributable to net growth in the C&I portfolio of $93.4 million, offset by a $24.6 million reduction in the C&D portfolio.
The North Louisiana region produced 59.57% of net loan growth from the linked quarter based on unpaid principal balance, while the Capital region produced 21.49% and Bayou region produced 20.93%. Based on unpaid principal balances, Texas-based loans represent approximately 36% of the overall loan portfolio as of June 30, 2024.
Credit Quality
Credit quality remained stable during the quarter ended June 30, 2024, compared to the linked quarter. The ratio of nonperforming loans compared to loans held for investment remained unchanged at 0.43% at June 30, 2024, while the ratio of nonperforming assets compared to total assets slightly increased from 0.34% to 0.36% at June 30, 2024. The increase was attributable to increases of $644,000 in other real estate owned and $730,000 in nonperforming loans.
Securities
The securities portfolio increased $2.1 million or 0.25%, from the linked quarter, impacted by $4.9 million in positive fair value adjustments. The securities portfolio, based on estimated fair value, represented 13.05% of total assets as of June 30, 2024.
Deposits
Deposits decreased $9.1 million or 0.16%, 0.66% annualized, for the quarter ended June 30, 2024, compared to the linked quarter. During the quarter ended June 30, 2024, noninterest-bearing deposits increased $15.2 million or 1.17%. The increase in noninterest bearing deposits was attributable to $39.1 million in new account originations as of June 30, 2024. The North Louisiana region produced 37.8% of the new account balances, followed by the Dallas-Fort Worth region and Southwest Louisiana region with 26.3% and 11.5%, respectively.
Interest-bearing deposits decreased $24.2 million or 0.57%, compared to the linked quarter. The decrease in interest-bearing deposits was attributable to strategic reductions of $75.1 million of brokered deposits with a weighted average rate of 5.16%.
Money market accounts increased $130.1 million or 7.26% from the linked quarter. The increase in money market balances was attributable to $138.8 million in new account originations with a weighted average rate of 4.88% as of June 30, 2024. The Southwest Louisiana region produced 44.2% of the new account balances, followed by the Texas regions and Southeast Louisiana region with 21.6% and 17.0%, respectively.
Borrowings
Borrowings decreased $1.8 million or 0.42%, from the linked quarter.
Shareholders' Equity
Accumulated other comprehensive income (AOCI) increased $3.9 million during the second quarter due to positive after-tax fair value adjustments in the securities portfolio. Book value per common share increased to $23.24 at June 30, 2024, compared to $22.64 at March 31, 2024. On a non-GAAP basis, tangible book value per common share increased from $18.61 at March 31, 2024, to $19.22 at June 30, 2024.
Results of Operations
Net Interest Income
For the quarter ended June 30, 2024, net interest income totaled $54.0 million, compared to $51.5 million from the linked quarter. Loan and interest-earning asset yields of 7.07% and 6.38%, respectively, increased 19 and 20 basis points, respectively, compared to 6.88% and 6.18% from the linked quarter. Both ratios were impacted positively by a $900,000 increase in loan discount accretion. Net interest margin and net interest spread were 3.45% and 2.47% compared to 3.32% and 2.36%, respectively, for the linked quarter. The overall cost of funds, which include noninterest- bearing deposits, increased from 3.00% to 3.07% or 7 basis points, from the linked quarter due to higher cost deposits.
Non-GAAP net interest income (excluding loan discount accretion of $1.7 million) totaled $52.3 million for the quarter ended June 30, 2024, compared to $50.7 million (excluding loan discount accretion of $0.8 million) from the linked quarter. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $1.7 million) were 3.34% and 2.37%, respectively, for the quarter ended June 30, 2024, compared to 3.27% and 2.31% (excluding loan discount accretion of $0.8 million) for the linked quarter. Excluding loan discount accretion, loan yields increased 13 basis points to 6.94% from 6.81%, and interest earnings asset yields increased 15 basis points to 6.28% from 6.13%, compared to the linked quarter.
Provision for Credit Losses
During the quarter ended June 30, 2024, Business First recorded a provision for credit losses of $1.3 million, compared to $1.2 million from the linked quarter. The current quarter's reserve was largely attributable to loan growth and net charge-offs, partially offset by reductions due to changes in the portfolio mix.
Other Income
For the quarter ended June 30, 2024, other income increased $2.8 million or 29.73%, compared to the linked quarter. The net increase was largely attributable to a $2.3 million increase in gain on sales of loans attributable to increased sales of SBA loans and a $1.9 million gain from the sale of a large USDA loan during the quarter ended June 30, 2024 compared to the linked quarter.
Other Expenses
For the quarter ended June 30, 2024, other expenses increased by $588,000 or 1.38%, compared to the linked quarter. The increase was attributable to marginal increases in several categories.
Return on Assets and Common Equity
Return to common shareholders on average assets and common equity, each on an annualized basis, were 0.95% and 10.94% for the quarter ended June 30, 2024, compared to 0.74% and 8.51%, respectively, for the linked quarter. Non-GAAP return to common shareholders on average assets and common equity, each on an annualized basis, were 0.98% and 11.22% for the quarter ended June 30, 2024, compared to 0.77% and 8.92%, respectively, for the linked quarter.
Conference Call and Webcast
Executive management will host a conference call and webcast to discuss results on Thursday, July 25, 2024, at 4:00 p.m. Central Time. Interested parties may attend the call by dialing toll-free 1-800-715-9871 (North America only), conference ID 9962250, or asking for the Business First Bancshares conference call. The live webcast can be found at https://edge.media-server.com/mmc/p/8tfqtsaw. On the day of the presentation, the corresponding slide presentation will be available to view on the b1BANK 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 $6.7 billion in assets, $6.1 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.
Additional Information and Where to Find It
This communication is being made with respect to the proposed transaction involving BFST and Oakwood. This material is not a solicitation of any vote or approval of the Oakwood shareholders and is not a substitute for the proxy statement/prospectus or any other documents that BFST and Oakwood may send to their respective shareholders in connection with the proposed transaction. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities.
In connection with the proposed transaction between BFST and Oakwood, BFST has filed with the SEC a Registration Statement on Form S-4 (the "Registration Statement"), which will include a proxy statement of Oakwood and a prospectus of BFST, as well as other relevant documents concerning the proposed transaction. Before making any voting or investment decisions, investors and shareholders are urged to read carefully the Registration Statement and the proxy statement/prospectus regarding the proposed transaction, as well as any other relevant documents filed with the SEC and any amendments or supplements to those documents, because they will contain important information. Oakwood will mail the proxy statement/prospectus to its shareholders. Shareholders are also urged to carefully review and consider BFST's public filings with the SEC, including, but not limited to, its proxy statements, its Annual Reports on Form 10-K, its Quarterly Reports on Form 10- Q, and its Current Reports on Form 8-K. Copies of the Registration Statement and proxy statement/prospectus and other filings incorporated by reference therein, as well as other filings containing information about BFST, may be obtained, free of charge, as they become available at the SEC's website at www.sec.gov. You will also be able to obtain these documents, when they are filed, free of charge, from BFST at www.b1BANK.com. Copies of the proxy statement/prospectus can also be obtained, when they become available, free of charge, by directing a request to Business First Bancshares, Inc., 500 Laurel Street, Suite 101, Baton Rouge, LA 70801, Attention: Corporate Secretary, Telephone: 225-248-7600.
Participants in the Solicitation
BFST, Oakwood and certain of their respective directors, executive officers and employees may, under the SEC's rules, be deemed to be participants in the solicitation of proxies of Oakwood's shareholders in connection with the proposed transaction.
Information about BFST's directors and executive officers is available in its definitive proxy statement relating to its 2024 annual meeting of shareholders, which was filed with the SEC on April 10, 2024, and other documents filed by BFST with the SEC. Other information regarding the persons who may, under the SEC's rules, be deemed to be participants in the solicitation of proxies of Oakwood's shareholders in connection with the proposed transaction, and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus regarding the proposed transaction and other relevant materials to be filed with the SEC when they become available. Free copies of these documents may be obtained as described in the preceding paragraph.