Baton Rouge, La. (January 23, 2024) – Business First Bancshares, Inc. (NASDAQ: BFST) (Business First), parent company of b1BANK, today announced its unaudited results for the year ended December 31, 2023, including net income available to common shareholders of $65.6 million or $2.59 per diluted common share, increases of $12.7 million and $0.27, respectively, from the prior year ended December 31, 2022. On a non-GAAP basis, core net income for the year ended December 31, 2023, which excludes certain income and expenses, was $66.3 million or $2.62 per diluted common share, increases of $8.7 million and $0.10, respectively, from prior year ended December 31, 2022.
For the quarter ended December 31, 2023, Business First reported net income available to common shareholders of $14.5 million, or $0.57 per diluted common share, decreases of $4.6 million and $0.19, respectively, from the quarter ended September 30, 2023. On a non-GAAP basis, core net income for the quarter ended December 31, 2023, which excludes certain income and expenses, was $16.8 million or $0.66 per diluted common share, decreases of $1.1 million and $0.05, respectively, compared to the linked quarter.
“There have been very few years in our company’s life of which I’ve been prouder than I am of the year 2023,” said Jude Melville, president and CEO. “As our country generally, and banking specifically, faced the challenge of navigating swiftly moving economic currents, our team was a source of stability, performing consistently and well for our clients and our investors. We are a stronger organization and better bankers than we were at the beginning of the year, and I am excited to see that improvement continue over the course of 2024.”
On Tuesday, January 23, 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 fourth quarter in the amount of $0.14 per share. The preferred and common dividends will be paid on February 28, 2024, or as soon thereafter as practicable, to the shareholders of record as of February 15, 2024.
Quarterly Highlights
- Return on Assets and Equity. Return to common shareholders on average assets and common equity, each on an annualized basis, were 0.88% and 10.54% for the quarter ended December 31, 2023, compared to 1.17% and 14.16%, respectively, for the linked quarter. Non-GAAP core return on average assets and common equity, each on an annualized basis, were 1.03% and 12.27% for the quarter ended December 31, 2023, compared to 1.10% and 13.32%, respectively, for the linked quarter.
- Credit Quality. The ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets remained stable at 0.34% and 0.28% at December 31, 2023, increasing slightly from 0.33% and 0.27%, respectively, at September 30, 2023, due to an increase in nonaccrual loans.
- Security/Balance Sheet Repositioning. During the fourth quarter, Business First executed a balance sheet repositioning related to its available-for-sale (AFS) security portfolio. Business First sold $71.5 million or approximately 8.13% of the December 31, 2023, portfolio, in treasury, agency and municipal securities, with a weighted average book yield of 1.98%. Business First redeployed the proceeds into agency securities with an average book yield of 5.17%, locking in higher yields while keeping duration consistent with the overall portfolio weighted average life. The repositioning resulted in a loss of $2.5 million with an estimated earn back of 1.1 years as of December 31, 2023.
- Net Interest Margin. For the quarter ended December 31, 2023, net interest income totaled $53.8 million and net interest margin and net interest spread were 3.50% and 2.53%, respectively, compared to $55.3 million, 3.61% and 2.68% for the linked quarter. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $1.9 million) were 3.38% and 2.40%, respectively, for the quarter ended December 31, 2023, compared to 3.46% and 2.53% (excluding loan discount accretion of $2.4 million) for the linked quarter.
Statement of Financial Condition
Loans
Loans held for investment increased $72.5 million or 1.47%, 5.85% annualized, from the linked quarter. Loan growth from the linked quarter was largely attributable to net growth in the commercial and industrial (C&I) portfolio of $26.5 million and in the commercial real estate portfolio of $89.1 million, offset by a $39.0 million reduction in the construction and development (C&D) portfolio. Annual loan growth for fiscal year 2023, was $386.6 million or 8.39%.
The Dallas Fort Worth region produced 50.64% of net loan growth from the linked quarter based on unpaid principal balance, while the Greater New Orleans region produced 37.68%. Based on unpaid principal balances, Texas-based loans represent approximately 37% of the overall loan portfolio as of December 31, 2023.
Credit Quality
The ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets remained stable at 0.34% and 0.28% at December 31, 2023, increasing slightly from 0.33% and 0.27%, respectively, at September 30, 2023, due to an increase in nonaccrual loans.
Securities
The securities portfolio increased $29.9 million or 3.51%, from the linked quarter. The increase was driven by positive fair value adjustments of $35.1 million. The securities portfolio, based on estimated fair value, represented 13.36% of total assets as of December 31, 2023.
During the fourth quarter, Business First executed a balance sheet repositioning related to its available-for-sale (“AFS”) security portfolio. Business First sold $71.5 million, or approximately 8.13% of the December 31, 2023, portfolio, in treasury, agency, and municipal securities, with a weighted average book yield of 1.98%. Business First re-deployed the proceeds into agency securities with an average book yield of 5.17%, locking in higher yields while keeping duration consistent with the overall portfolio weighted average life. The repositioning resulted in a loss of $2.5 million with an estimated earn back of 1.1 years as of December 31, 2023.
Deposits
Deposits increased $58.1 million or 1.12%, 4.44% annualized, for the quarter ended December 31, 2023. Annual deposit growth for fiscal year 2023, was $428.4 million or 8.89%.
During the quarter ended December 31, 2023, noninterest-bearing deposits decreased $113.3 million or 8.02% and interest-bearing deposits increased $171.4 million or 4.54%, compared to the linked quarter, with certificate of deposit (CD) accounts declining $75.3 million or 5.47%. Money market accounts increased $160.3 million or 13.55% from the linked quarter.
Borrowings
Borrowings decreased $7.4 million or 1.16%, from the linked quarter due to a decline in repurchase agreements and repayments on a Federal Home Loan Bank (FHLB) term loan.
Shareholders’ Equity
Accumulated other comprehensive income (AOCI) improved $27.7 million during the fourth quarter due to positive after-tax fair value adjustments in the securities portfolio. Book value per common share increased to $22.58 at December 31, 2023, compared to $21.01 at September 30, 2023, due to continued earnings growth and positive securities fair value adjustments. On a non-GAAP basis, tangible book value per common share increased to $18.62 at December 31, 2023, compared to $17.03 at September 30, 2023.
Results of Operations
Net Interest Income
For the quarter ended December 31, 2023, net interest income totaled $53.8 million, compared to $55.3 million from the linked quarter. Loan and interest-earning asset yields of 6.87% and 6.17%, respectively, increased 3 basis points and 7 basis points, respectively, compared to 6.84% and 6.10% from the linked quarter. Net interest margin and net interest spread were 3.50% and 2.53% compared to 3.61% and 2.68%, respectively, for the linked quarter. The overall cost of funds, which include noninterest-bearing deposits, increased from 2.59% to 2.79% or 20 basis points, from the linked quarter due to higher cost deposits and $30.8 million less in average noninterest bearing deposits.
Non-GAAP net interest income (excluding loan discount accretion of $1.9 million) totaled $51.8 million for the quarter ended December 31, 2023, compared to $52.9 million (excluding loan discount accretion of $2.4 million) from the linked quarter. Non-GAAP net interest margin and net interest spread (excluding loan discount accretion of $1.9 million) were 3.38% and 2.40%, respectively, for the quarter ended December 31, 2023, compared to 3.46% and 2.53% (excluding loan discount accretion of $2.4 million) for the linked quarter. Excluding loan discount accretion, loan yields increased 8 basis points to 6.72% from 6.64%, and interest earnings asset yields increased 11 basis points to 6.05% from 5.94%, compared to the linked quarter.
Provision for Credit Losses
During the quarter ended December 31, 2023, Business First recorded a provision for credit losses of $119,000, compared to $604,000 for the linked quarter. The current quarter’s reserve decreased largely due to adjustments associated with various qualitative factors.
Other Income
For the quarter ended December 31, 2023, other income decreased $3.5 million or 35.11%, compared to the linked quarter. The net decrease was largely attributable to a $2.5 million loss on sale of securities due to Business First’s security repositioning initiative, a $1.0 million loss in equity investment income, and a $919,000 gain related to a branch sale which occurred during the linked quarter, partially offset by $964,000 of back-to-back customer swap fee income which occurred during the quarter.
Other Expenses
For the quarter ended December 31, 2023, other expenses increased by $1.1 million or 2.87%, compared to the linked quarter. The net increase was largely attributable to $654,000 in customer fraud/operational losses within other expense, $490,000 in other real estate owned expenses ($432,000 was related to a former bank premises), and an additional $466,000 in data processing costs compared to the linked quarter, offset by a reduction of $700,000 to the ad valorem shares tax expense.
Return on Assets and Common Equity
Return to common shareholders on average assets and common equity, each on an annualized basis, were 0.88% and 10.54% for the quarter ended December 31, 2023, compared to 1.17% and 14.16%, respectively, for the linked quarter. Non-GAAP return to common shareholders on average assets and common equity, each on an annualized basis, were 1.03% and 12.27% for the quarter ended December 31, 2023, compared to 1.10% and 13.32%, respectively, for the linked quarter.
Conference Call and Webcast
Executive management will host a conference call and webcast to discuss results on
Tuesday, January 23, 2024, at 4:30 p.m. Central time. Interested parties may attend the call by dialing toll-free 1-800-715-9871 (North America only), conference ID 4061156, or asking for the Business First Bancshares conference call. The live webcast can be found at https://edge.media-server.com/mmc/p/gctma4g8. 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 $6.6 billion in assets, $6.0 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.
