BUSINESS FIRST BANCSHARES, INC., ANNOUNCES FINANCIAL RESULTS FOR Q3 2019

October 23, 2019

Baton Rouge, LA (October 23, 2019) – Business First Bancshares, Inc. (NASDAQ: BFST) (Business First), parent company of b1BANK, Baton Rouge, Louisiana, today announced its unaudited results for the quarter ended September 30, 2019, including quarterly net income of $5.5 million, or $0.40 per diluted share, increases of $1.6 million and $0.07, respectively, from the quarter ended September 30, 2018. Core net income, which excludes noncore income and expenses, was $6.3 million, or $0.46 per diluted share, which reflects increases of $1.8 million and $0.09, respectively, from the quarter ended September 30, 2018.

“I am pleased with our company’s performance for the quarter as we continue to successfully navigate our way through the uncertainties of the current interest rate environment,” said Jude Melville, president and CEO. “In addition to maintaining a healthy net interest margin despite multiple reductions in the federal funds rate over the course of the quarter, we booked double-digit annualized loan growth and, most importantly, maintained sound credit quality.”

On October 17, 2019, Business First’s board of directors declared a quarterly dividend based upon financial performance for the quarter in the amount of $0.10 per share, same as the prior quarter, to the common shareholders of record as of November 15, 2019. The dividend will be paid on November 30, 2019, or as soon thereafter as practicable.

Quarterly Highlights

  • Continued, Strong Loan Growth. Total loans held for investment at September 30, 2019 were $1.7 billion, an increase of $52.2 million compared to June 30, 2019. Annualized loan growth for the quarter ended September 30, 2019, was 12.7%, compared to 14.2% loan growth for the quarter ended June 30, 2019, and 14.5% year to date.
  • Mitigated Net Interest Margin and Spread Impact. Net interest margin and spread were negatively impacted compared to prior quarter due to two 25 basis points federal funds rate cuts for the quarter ended September 30, 2019, one at the end of July and one in mid-September. Net interest margin and net interest spread were 4.10% and 3.66%, respectively, for the quarter ended September 30, 2019 compared to 4.19% and 3.75% for the quarter ended June 30, 2019. Excluding loan discount accretion, net interest margin and spread were 3.99% and 3.55%, respectively, for the quarter ended September 30, 2019, compared to 4.02% and 3.58% for the quarter ended June 30, 2019.
  • Sound Credit Quality. Ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets increased from 0.61% and 0.58%, respectively, at June 30, 2019, to 0.70% and 0.64% at September 30, 2019. The increases were largely attributable to the classification of a $1.5 million credit relationship to nonaccrual status.
  • Stock Repurchase Program. During the quarter ended September 30, 2019, Business First spent $2.4 million to repurchase 110,846 shares at an average price of $23.00 per share under its previously announced stock repurchase program. Under the terms of the stock repurchase program, Business First is authorized to spend an additional $12.6 million to repurchase shares through December 2020.
  • Richland State Bank Conversion. Business First successfully completed the data processing conversion of Richland State Bank on July 22, 2019.

Financial Condition

September 30, 2019, Compared to June 30, 2019

Balance Sheet

As of September 30, 2019, Business First had total assets of $2.2 billion, total loans of $1.7 billion, total deposits of $1.7 billion and total shareholders’ equity of $280.3 million, compared to $2.2 billion, $1.6 billion, $1.7 billion and $277.5 million, respectively, as of June 30, 2019.

Total loans held for investment increased by $52.2 million compared to June 30, 2019, or 12.7% annualized, for the quarter ended September 30, 2019, with most of the growth originating within the nonfarm nonresidential commercial real estate portfolio.

Book value per common share was $21.12 at September 30, 2019, compared to $20.77 at June 30, 2019. Tangible book value per common share was $16.96 at September 30, 2019, compared to $16.60 at June 30, 2019.

Credit Quality

Nonperforming loans as a percentage of total loans held for investment increased from 0.61% as of June 30, 2019, to 0.70% as of September 30, 2019. Nonperforming assets as a percentage of total assets increased from 0.58% as of June 30, 2019, to 0.64% as of September 30, 2019. The increase was largely attributable to the classification of a $1.5 million credit relationship to nonaccrual status.

September 30, 2019, Compared to September 30, 2018

Balance Sheet

As of September 30, 2019, Business First had total assets of $2.2 billion, total loans of $1.7 billion, total deposits of $1.7 billion and total shareholders’ equity of $280.3 million, compared to $1.7 billion, $1.3 billion, $1.4 billion and $213.0 million, respectively, as of September 30, 2018. The balance sheet increases were attributable to organic growth and to the fourth quarter 2018 acquisition of Richland State Bank.

Book value per common share was $21.12 at September 30, 2019, compared to $18.46 at September 30, 2018. Tangible book value per common share was $16.96 at September 30, 2019, compared to $15.30 at September 30, 2018.

Credit Quality

Nonperforming loans as a percentage of total loans held for investment decreased from 0.89% as of September 30, 2018, to 0.70% as of September 30, 2019. Nonperforming assets as a percentage of total assets decreased from 0.80% as of September 30, 2018, to 0.64% as of September 30, 2019. The decreases were mainly attributable to improved credit quality in relation to the size of the loan portfolio and total assets of Business First.

Results of Operations

Third Quarter 2019 Compared to Second Quarter 2019

Net Income and Diluted Earnings Per Share

For the quarter ended September 30, 2019, net income was $5.5 million, or $0.40 per diluted share, compared to net income of $6.8 million, or $0.50 per diluted share, for the quarter ended June 30, 2019.

Core net income, which excludes noncore income and expenses, for the quarter ended September 30, 2019, was $6.3 million, or $0.46 per diluted share, compared to core net income of $6.6 million, or $0.48 per diluted share, for the quarter ended June 30, 2019. Notable noncore events impacting earnings for the quarter ended September 30, 2019 included the incurrence of $594,000 in losses associated with the disposal of former bank premises and equipment in noninterest income and $288,000 associated with acquisition-related expenses in noninterest expense, compared to noninterest expenses of $436,000 associated with acquisition-related expenses and noninterest income of $593,000 related to gains from the sale of a banking center for the quarter ended June 30, 2019.

Return on Assets and Equity

Return on average assets and equity, each on an annualized basis, decreased to 1.02% and 7.93%, respectively, for the quarter ended September 30, 2019, compared to 1.30% and 10.13%, respectively, for the quarter ended June 30, 2019. The decreases were largely attributable to the $1.3 million Small Business Investment Company “SBIC” investment income and $593,000 banking center gain on sale recognized for the quarter ended June 30, 2019, and $594,000 in losses on disposal of former bank premises and equipment recognized for the quarter ended September 30, 2019, offset by a reduction in the provision for loan losses of $823,000 for the quarter ended September 30, 2019 compared to the quarter ended June 30, 2019.

As adjusted, core return on average assets and core return on average equity, each on an annualized basis, were 1.16% and 9.01%, respectively, for the quarter ended September 30, 2019, compared to 1.26% and 9.77%, respectively, for the quarter ended June 30, 2019.

Interest Income

For the quarter ended September 30, 2019, net interest income totaled $20.3 million and net interest margin and net interest spread were 4.10% and 3.66%, respectively, compared to $20.2 million, 4.19% and 3.75% for the quarter ended June 30, 2019. The decrease in net interest margin was largely attributable to lower loan discount accretion and lower yielding loans due to the two 25 basis points federal funds rate cuts, offset by an additional calendar day for the quarter ended September 30, 2019.

Net interest margin and net interest spread (excluding loan discount accretion of $544,000) were 3.99% and 3.55%, respectively, for the quarter ended September 30, 2019, compared to 4.02% and 3.58% (excluding loan discount accretion of $826,000) for the quarter ended June 30, 2019. The ratios were negatively impacted by lower yielding loans due to the two 25 basis points federal funds rate cuts, offset by an additional calendar day for the quarter ended September 30, 2019.

The average yield on the loan portfolio was 5.87% for the quarter ended September 30, 2019, compared to 5.96% for the quarter ended June 30, 2019. The average

yield on total interest-earning assets was 5.32% for the quarter ended September 30, 2019, compared to 5.37% for the quarter ended June 30, 2019.

Business First anticipates continued pressure on net interest margin in future periods based on the current yield curve.

Interest Expense

For the quarter ended September 30, 2019, overall cost of funds (which includes noninterest-bearing deposits) increased by five basis points compared to the quarter ended June 30, 2019.

Provision for Loan Losses

During the quarter ended September 30, 2019, Business First recorded a provision for loan losses of $479,000, compared to $1.3 million for the quarter ended June 30, 2019. The reserve for the quarter ended June 30, 2019 was negatively impacted by the charge-off of the remaining balance of a single, previously identified, impaired loan.

Third Quarter 2019 Compared to Third Quarter 2018

Net Income and Diluted Earnings Per Share

For the quarter ended September 30, 2019, net income was $5.5 million, or $0.40 per diluted share, compared to net income of $3.9 million, or $0.33 per diluted share, for the quarter ended September 30, 2018. The increase in net income and diluted earnings per share resulted from the overall growth and efficiency of Business First over the past 12 months, mainly attributable to growth in net interest income and partially offset by increases in noninterest expenses. Both the growth in net interest income and increase in noninterest expenses were impacted for the quarter ended September 30, 2019, by the acquisition of Richland State Bank which occurred in the fourth quarter of 2018.

Core net income, which excludes noncore income and expenses, for the quarter ended September 30, 2019, was $6.3 million, or $0.46 per diluted share, compared to core net income of $4.4 million, or $0.37 per diluted share, for the quarter ended September 30, 2018. Notable noncore events impacting earnings for the quarter ended September 30, 2019 included the incurrence of $594,000 in losses associated with the disposal of former bank premises and equipment in noninterest income and $288,000 associated with acquisition-related expenses in noninterest expense, compared to noninterest expenses of $509,000 associated with acquisition-related expenses and $139,000 of losses associated with the disposal of former bank premises and equipment in noninterest income for the quarter ended September 30, 2018.

Return on Assets and Equity

Return on average assets and return on average equity, each on an annualized basis, increased to 1.02% and 7.93%, respectively, for the quarter ended September 30, 2019, from 0.94% and 7.37%, respectively, for the quarter ended September 30, 2018.

As adjusted, core return on average assets and core return on average equity, each on an annualized basis, were 1.16% and 9.01%, respectively, for the quarter ended September 30, 2019, compared to 1.06% and 8.37%, respectively, for the quarter ended September 30, 2018.

Interest Income

For the quarter ended September 30, 2019, net interest income totaled $20.3 million and net interest margin and net interest spread were 4.10% and 3.66%, respectively, compared to $15.6 million, 4.05% and 3.70% for the quarter ended September 30, 2018.

Net interest margin and net interest spread (excluding loan discount accretion of $544,000) were 3.99% and 3.55%, respectively, for the quarter ended September 30, 2019, compared to 3.98% and 3.63% (excluding loan discount accretion of $268,000) for the quarter ended September 30, 2018.

The average yield on the loan portfolio was 5.87% for the quarter ended September 30, 2019, compared to 5.65% for the quarter ended September 30, 2018. The average

yield on total interest-earning assets was 5.32% for the quarter ended September 30, 2019, compared to 5.01% for the quarter ended September 30, 2018.

Interest Expense

For the quarter ended September 30, 2019, overall cost of funds (which includes noninterest-bearing deposits) increased by 29 basis points compared to the quarter ended September 30, 2018. The increase was largely attributable to an overall increase in interest rates over the past 12 months and the issuance of subordinated debt in December 2018.

Provision for Loan Losses

During the quarter ended September 30, 2019, Business First recorded a provision for loan losses of $479,000, compared to $503,000 for the quarter ended September 30, 2018.

About Business First Bancshares, Inc.

Business First Bancshares, Inc., through its banking subsidiary b1BANK, operates in 25 banking centers in markets across Louisiana and in Dallas, Texas. 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” or “tangible”) 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. 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, or 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.

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