Baton Rouge, La. (January 25, 2023) – Business First Bancshares, Inc. (NASDAQ: BFST) (Business First), parent company of b1BANK, today announced its unaudited results for the year ended December 31, 2022, including net income available to common shareholders of $52.9 million, or $2.32 per diluted common share, an increase of $0.8 million and decrease of $0.21, respectively, from the prior year ended December 31, 2021. On a non-GAAP basis, core net income for the year ended December 31, 2022, which excludes certain income and expenses, was $57.6 million, or $2.52 per diluted common share, an increase of $3.7 million and decrease of $0.09, respectively, from prior year ended December 31, 2021. The results for the year ended December 31, 2021, included a $9.2 million pre-tax gain on the sale of substantially all of the Small Business Administration (SBA) Paycheck Protection Program (PPP) loans. The sale increased diluted earnings per common share by $0.35 for the year.
For the quarter ended December 31, 2022, Business First reported net income available to common shareholders of $16.6 million, or $0.67 per diluted common share, increases of $2.8 million and $0.06, respectively, from the quarter ended September 30, 2022. On a non-GAAP basis, core net income for the quarter ended December 31, 2022, which excludes certain income and expenses, was $16.4 million, unchanged from the linked quarter. On a per share basis, core net income was $0.66 per diluted common share for the current quarter, a decrease of $0.06 from the quarter ended September 30, 2022. The per share decrease was largely impacted by the issuance of 2,500,000 shares of common stock in an underwritten public offering at a public offering price of $20.00 per share during October 2022. Additionally, the Company paid a $1.4 million quarterly preferred dividend during the quarter ended December 31, 2022.
““2022 was a pivotal year for b1BANK, highlighted by record financial and operational performance,” said Jude Melville, president and CEO. “Long-term investments in personnel, technology and infrastructure are producing concrete returns. Asset quality remains solid. Our balance sheet has been fortified by the raising of over $120 million in preferred and common equity. These things lead us to be optimistic about our franchise’s potential in 2023 and beyond.”
On January 25, 2023, Business First’s board of directors declared a quarterly dividend based upon financial performance for the fourth quarter in the amount of $0.12 per share, same as the prior quarter. The dividend will be paid on February 28, 2023, or as soon thereafter as practicable, to the common shareholders of record as of February 15, 2023. Additionally, the board of directors declared a quarterly 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%. The dividend will be paid on February 28, 2023, or as soon therefore as practicable, to the preferred shareholders of record as of February 15, 2023.
Quarterly Highlights
- Solid Loan Growth. Total loans held for investment at December 31, 2022, were $4.6 billion, an increase of $176.3 million compared to September 30, 2022, or 3.98% for the quarter, 15.79% annualized. Based on unpaid principal balances, 44.1% of loan growth for the quarter ended December 31, 2022, was attributable to our Dallas Fort Worth region, 31.2% to the Houston region, 19.7% to the Capital region, and 13.6% to the Greater New Orleans region. As of December 31, 2022, approximately 35% of Business First’s loan portfolio resides in Texas based on unpaid principal balance.
- Management of Net Interest Margin. For the quarter ended December 31, 2022, net interest income totaled $56.1 million and net interest margin and net interest spread were 4.06% and 3.43%, respectively, compared to $53.5 million, 4.01% and 3.65% for the quarter ended September 30, 2022. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $4.2 million) were 3.75% and 3.13%, respectively, for the quarter ended December 31, 2022, compared to 3.88% and 3.52% (excluding loan discount accretion of $1.7 million) for the quarter ended September 30, 2022. Net interest margin excluding loan discount accretion declined from the linked quarter due to a $650,000 acceleration of interest income from full repayment of a nonaccrual loan in July 2022, which accounted for approximately five basis points of the decrease, as well as increased deposit and Federal Home Loan Bank (FHLB) short-term fundings costs during the fourth quarter of 2022, which were mostly offset by increased loan offering rates, repricing, and volume.
- Solid Return on Assets and Equity. Return to common shareholders on average assets and common equity, each on an annualized basis, were 1.12% and 13.56%, respectively, for the quarter ended December 31, 2022, compared to 0.96% and 12.37%, respectively, for the quarter ended September 30, 2022. Non-GAAP core return on average assets and common equity, each on an annualized basis, were 1.10% and 13.37%, respectively, for the quarter ended December 31, 2022, compared to 1.14% and 14.68%, respectively, for the quarter ended September 30, 2022.
- Overall Credit Quality Remains Stable. Ratios of nonperforming loans to loans held for investment and nonperforming assets to total assets remained steady at 0.25% and 0.21%, respectively at December 31, 2022, and September 30, 2022.
- Common Stock Issuance. Business First completed an issuance of 2,500,000 shares of common stock in an underwritten public offering at a public offering price of $20.00 per share on October 17, 2022.
Statement of Financial Condition
Loans
Loans held for investment increased $176.3 million or 3.98%, 15.79% annualized, for the quarter ended December 31, 2022. For the year ended December 31, 2022, loans held for investment increased $1.4 billion or 44.41%. Organic loan growth, which excludes the beginning book value of the acquired Texas Citizens loan portfolio, was $1.1 billion or 33.45% for the year ended December 31, 2022.
Loan growth from the linked quarter was attributed to originations in the real estate - construction and land portfolio, $85.2 million or 48.33%, and in the commercial portfolio, $77.6 million or 44.02%. Our Dallas Fort Worth region produced 44.1% of the total growth from the linked quarter based on unpaid principal balance, while we also continued to originate growth from several of our other key strategic markets, 31.2% from the Houston region, 19.7% from the Capital region, and 13.6% from the Greater New Orleans region. As of December 31, 2022, approximately 35% of Business First’s loan portfolio resides in Texas based on unpaid principal balances.
Credit Quality
Nonperforming loans as a percentage of total loans held for investment and nonperforming assets as a percentage of total assets remained consistent with the linked quarter at 0.25% and 0.21%, respectively. Loans 90 days past due and accruing decreased $786,000 while nonaccrual loans increased $1.2 million, $900,000 of which was attributed to a single relationship for which Business First recorded a provision for loan losses of $550,000 during the quarter. We believe the credit circumstances of this relationship are isolated and not systemic to the rest of the loan portfolio.
Securities
The securities portfolio increased $5.8 million or 0.65%, from the linked quarter. The increase was the net impact of positive fair value adjustments, $13.4 million, and $23.3 million of purchases with tax equivalent yields between 4.4% and 6.7% during the quarter ended December 31, 2022, offset by security paydowns and maturities.
Deposits
Deposits increased $234.2 million or 5.11%, 20.26% annualized, for the quarter ended December 31, 2022. For the year ended December 31, 2022, deposits increased $743.1 million or 18.22%. Organic deposit growth, which excludes the deposits of the acquired Texas Citizens portfolio, was $265.8 million or 6.52% for the year ended December 31, 2022.
Noninterest-bearing deposits decreased $63.9 million or 3.96%, and interest-bearing deposits increased $298.2 million or 10.03%, compared to the linked quarter.
Borrowings
Borrowings decreased $116.9 million or 17.27%, from the linked quarter. The decrease was largely attributed to a reduction in short-term, seven-day FHLB borrowings. The linked quarter increase in deposits was the main driver of the paydown in short-term borrowings.
Shareholders’ Equity
In October 2022, Business First issued 2,500,000 shares of common stock in an underwritten public offering at a public offering price of $20.00 per share. After deducting underwriting discounts and commissions and estimated offering expenses, the Company expects the net proceeds of the offering to be approximately $46.8 million. Additionally, accumulated other comprehensive income increased $10.5 million due to favorable after-tax fair value changes in the securities portfolio. Book value per common share was $20.25 at December 31, 2022, compared to $19.29 at September 30, 2022. On a non-GAAP basis, tangible book value per common share was $16.17 at December 31, 2022, compared to $14.73 at September 30, 2022.
Results of Operations
Net Interest Income
For the quarter ended December 31, 2022, net interest income totaled $56.1 million and net interest margin and net interest spread were 4.06% and 3.43%, respectively, compared to $53.5 million, 4.01% and 3.65% for the quarter ended September 30, 2022. The quarter ended December 31, 2022, included additional loan discount accretion due to a large, acquired loan payoff and accelerated accretion from the purchased impaired portfolio. The quarter ended September 30, 2022, included additional interest income of approximately $650,000 associated with a nonaccrual loan that was paid in full during the quarter. Overall costs of funds, which includes noninterest bearing deposits, increased from 0.77% to 1.38% or 61 basis points, from the linked quarter.
Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $4.2 million) were 3.75% and 3.13%, respectively, for the quarter ended December 31, 2022, compared to 3.88% and 3.52% (excluding loan discount accretion of $1.7 million) for the quarter ended September 30, 2022. The average yield on the loan portfolio (excluding SBA PPP loans and loan discount accretion) was 5.72% compared to 5.30% from the linked quarter. The compression of both net interest margin and net interest spread were largely attributed to the continued increases in short-term rates during the quarter ended December 31, 2022, resulting in a 104 and 84 basis point increase in average cost in FHLB borrowings and interest-bearing deposits, respectively. Although increased fundings costs negatively impact our margin and spread, we were able to offset a significant amount of the compression through increased loan offering rates, repricing, and volume.
Provision for Loan Losses
During the quarter ended December 31, 2022, Business First recorded a provision for loan losses of $3.1 million, compared to $3.3 million for the quarter ended September 30, 2022. The provision for loan losses for the quarter ended December 31, 2022, was impacted by individual reserves of $1.4 million and $550,000 on two separate loan relationships. Reserves on these loans are due to individual credit circumstances which we do not believe are systemic to the remainder of our loan portfolio.
Other Income
For the quarter ended December 31, 2022, other income increased $163,000, or 2.01%, compared to the quarter ended September 30, 2022. Notable variances included a $149,000 increase in service charges, $140,000 increase in fees and brokerage commissions, offset by a $205,000 reduction in gains on sales of loans due to less activity during the quarter ended December 31, 2022.
Non-GAAP other income was $422,000 lower than GAAP due to insurance recoveries attributed to salary expense and lost revenue from storm claims, compared to $265,000 of insurance recoveries for the quarter ended September 30, 2022.
Other Expenses
For the quarter ended December 31, 2022, other expense decreased by $2.6 million, or 6.35%, compared to the quarter ended September 30, 2022. The decrease was largely attributable to a $3.1 million decrease in merger and conversion-related expenses. Salaries and employee benefits increased marginally by $299,000, advertising and promotions increased $427,000 due to deposit promotions and other advertising production costs, and other expense increased $534,000 largely attributed to loan collection costs and miscellaneous expenses.
Return on Assets and Common Equity
Return to common shareholders on average assets and common equity, each on an annualized basis, were 1.12% and 13.56%, respectively, for the quarter ended December 31, 2022, compared to 0.96% and 12.37%, respectively, for the quarter ended September 30, 2022. Non-GAAP return to common shareholders on average assets and common equity, each on an annualized basis, were 1.10% and 13.37%, respectively, for the quarter ended December 31, 2022, compared to 1.14% and 14.68%, respectively, for the quarter ended September 30, 2022.
Conference Call and Webcast
Executive management will host a conference call and webcast to discuss results on
Thursday, January 26, at 8:00 a.m. Central time. Interested parties may attend the call
by dialing toll-free 1-800-715-9871 (North America only), conference ID 4870042, or
asking for the Business First Bancshares conference call. The live webcast can be
found at https://edge.media-server.com/mmc/p/d55ub27o. The corresponding slide
presentation can be assessed the day of the presentation on b1BANK’s 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 $6.0 billion in assets, $6.5 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.
