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July 29, 2020

Business First Bancshares, Inc. Announces Financial Results for Q2 2020

Baton Rouge, La. (July 29, 2020) – Business First Bancshares, Inc. (NASDAQ: BFST) (Business First), parent company of b1BANK, Baton Rouge, Louisiana, today announced its unaudited results for the quarter ended June 30, 2020, including net income of $2.1 million, or $0.11 per diluted share, decreases of $4.8 million and $0.39, respectively, from the quarter ended June30, 2019. On a non-GAAP basis, core net income for the quarter ended June 30, 2020, which excludes certain income and expenses, was $7.4 million, or $0.41 per diluted share, an increase of $748,000 and decrease of $0.07, respectively, from the quarter ended June 30,2019. Both net income and diluted earnings per share were adversely impacted for the quarter ended June 30, 2020, by additional provision for loan losses associated with the sustained pressure on the general economy caused by the COVID-19 pandemic and acquisition-related expenses.

The second quarter was simultaneously the most challenging, and in many ways, the most rewarding period we’ve experienced as a company,” said Jude Melville, president and CEO. “We stood with our clients during an economic crisis, we consummated a transformative merger during a time of market crisis, and we took care of our people in the midst of a health crisis. I could not be prouder of our team. We’ll continue to do our part as our region’s leading community bank as we recover together in the coming months.”

On July 23, 2020, Business First’s board of directors declared a quarterly dividend based upon financial performance for the second quarter in the amount of $0.10 per share, same as the prior quarter, to the common shareholders of record as of August 15, 2020. The dividend will be paid on August 31, 2020, or as soon thereafter as practicable.

Quarterly Highlights

Successful Acquisition and Conversion of Pedestal Bancshares Inc. Business First acquired Pedestal Bancshares Inc. (Pedestal), with approximately $1.4 billion in assets, $935.8 million in gross loans, and $1.2 billion in deposits, on May 1, 2020. The conversion of data processing was successfully completed during the weekend of May 23, 2020.

COVID-19 Related Matters. Business First proactively assisted, and continues to assist, customers by deferring principal and/or interest payments on approximately 2,600 loans with an outstanding balance of $938.5 million as of June 30, 2020. Approximately $223.0 million of the deferrals were interest-only as of June 30, 2020. Additionally, Business First has funded approximately 2,800 loans with an aggregate outstanding balance of $395.4 million under the Small Business Administration (SBA) Paycheck Protection Program (PPP), of which $86.1million were acquired in the Pedestal acquisition. Business First also recorded $5.4 million of provision expense, of which a significant portion was associated with the continued impact the COVID-19 pandemic caused on the general economy.

Stable Credit Quality. Ratios of nonperforming loans compared to loans held for investment and nonperforming assets compared to total assets decreased from 0.57% and 0.59%, respectively, at March 31, 2020, to 0.39% and 0.49% at June 30, 2020. The decreases were attributable to the increased size of the loan portfolio, including SBA PPP loans, and total assets associated with the acquisition of Pedestal on May 1, 2020.

Net Interest Margin and Spread. Net interest margin and spread were negatively impacted due to the full effect of the federal funds rate cuts of 150 basis points during the month of March and lower-yielding SBA PPP loans, offset by a reduction in cost of funds, increased loan discount, deposit premium, and Federal Home Loan Bank (FHLB) premium accretion, and a higher-yielding loan portfolio due to the Pedestal acquisition, compared to the quarter ended March 31, 2020. Net interest margin and net interest spread were 3.89% and 3.59%, respectively, for the quarter ended June 30, 2020, compared to 3.93% and 3.55% for the quarter ended March 31, 2020. Excluding loan discount accretion, net interest margin and spread were 3.71% and 3.41%, respectively, for the quarter ended June 30, 2020, compared to3.88% and 3.49% for the quarter ended March 31, 2020.

Loan Growth. Total loans held for investment at June 30, 2020, were $3.0 billion, an increase of $1.2 billion compared to March 31, 2020. Loan growth was significantly impacted by the acquisition of Pedestal and origination of SBA PPP loans. Net organic loan growth, excluding the 

Pedestal acquisition and SBA PPP originated loans, was 3.22% annualized for the quarter ended June 30, 2020.

Financial Condition

June 30, 2020, Compared to March 31, 2020

Loans 

Total loans held for investment increased by $1.2 billion compared to March 31, 2020. The increase was largely attributable to the $893.3 million in net loans acquired from Pedestal, including $86.1 million of SBA PPP loans, and $309.3 million of SBA PPP loans originated by Business First. Excluding the Pedestal acquisition and SBA PPP originations, net organic loan growth was $20.8 million for the quarter ended June 30, 2020, or 3.22% annualized. Consistent with the quarter ended March 31, 2020, Business First’s unfunded commitments remained constant throughout the quarter ended June 30, 2020, excluding the increase attributable to the acquisition of Pedestal. Business First has not identified any unusual customer usage of unfunded commitments since the beginning of the COVID 19-panademic in March 2020. 

Credit Quality

Nonperforming loans as a percentage of total loans held for investment decreased from 0.57%as of March 31, 2020, to 0.39% as of June 30, 2020. Nonperforming assets as a percentage of total assets decreased from 0.59% as of March 31, 2020, to 0.49% as of June 30, 2020. The decreases were attributable to an increase in overall total loans held for investment and total assets from the acquisition of Pedestal during the quarter ended June 30, 2020. 

Total Shareholders’ Equity

Book value per common share was $18.69 at June 30, 2020, compared to $21.58 at March 31,2020. The decreases were attributable to the initial book value dilution caused by the acquisition of Pedestal during the quarter ended June 30, 2020.

Results of Operations

Second Quarter 2020 Compared to First Quarter 2020

Net Income and Diluted Earnings Per Share

For the quarter ended June 30, 2020, net income was $2.1 million, or $0.11 per diluted share, compared to net income of $4.5 million, or $0.34 per diluted share, for the quarter ended March 31, 2020. The decreases were largely attributable to the increase in the provision for loan losses, due to the COVID-19 pandemic’s sustained impact on the general economy, and increase in acquisition-related expenses, offset by increases in investment income from Small Business Investment Companies (SBICs) and interest income from SBA PPP loans. 

On a non-GAAP basis, core net income, which excludes certain income and expenses, for the quarter ended June 30, 2020, was $7.4 million, or $0.41 per diluted share, compared to core net income of $5.0 million, or $0.37 per diluted share, for the quarter ended March 31, 2020. Notable events impacting earnings for the quarter ended June 30, 2020, included the incurrence of $6.6 million in acquisition-related expenses, compared to the incurrence of $1.2 million in acquisition-related expenses for the quarter ended March 31, 2020, and $530,000 reduction in income tax expense due to stock option exercises. 


Interest Income

For the quarter ended June 30, 2020, net interest income totaled $30.9 million and net interest margin and net interest spread were 3.89% and 3.59%, respectively, compared to $20.2 million, 3.93% and 3.55% for the quarter ended March 31, 2020. The average yield on the loan portfolio (excluding SBA PPP loans) was 5.61% for the quarter ended June 30, 2020, compared to 5.55% for the quarter ended March 31, 2020. The average yield on total interest-earning assets was 4.65% for the quarter ended June 30, 2020, compared to 5.06% for the quarter ended March 31, 2020.

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