UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | ||
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECUTITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2018
or
☐ |
TRANSITION REPORT PURUSANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 333-200112
BUSINESS FIRST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Louisiana |
20-5340628 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
500 Laurel Street, Suite 101 Baton Rouge, Louisiana |
70801 |
(Address of principal executive offices) |
(Zip Code) |
(225) 248-7600
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
(Do not check if a smaller reporting company) |
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Smaller reporting company |
☒ |
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Emerging growth company |
☒ |
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 10, 2018, the issuer has outstanding 11,533,171 shares of common stock, par value $1.00 per share.
BUSINESS FIRST BANCSHARES, INC.
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Item 1. |
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Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017 |
4 |
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5 | |
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6 | |
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7 | |
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Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 |
8 |
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10 | |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
32 |
Item 3. |
61 | |
Item 4. |
61 | |
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Item 1. |
62 | |
Item 1A. |
62 | |
Item 2. |
62 | |
Item 3. |
62 | |
Item 4. |
62 | |
Item 5. |
62 | |
Item 6. |
62 | |
63 |
PART I – FINANCIAL INFORMATION
Item 1. |
Financial Statements |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
June 30, 2018 |
December 31, |
|||||||
(Unaudited) |
2017 |
|||||||
ASSETS | ||||||||
Cash and Due from Banks |
$ | 45,861 | $ | 107,591 | ||||
Federal Funds Sold |
32,522 | 8,820 | ||||||
Securities Available for Sale, at Fair Values |
252,139 | 179,148 | ||||||
Mortgage Loans Held for Sale |
- | 201 | ||||||
Loans and Lease Receivable, Net of Allowance for Loan Losses of $9,756 at June 30, 2018 and $8,765 at December 31, 2017 |
1,224,275 | 966,519 | ||||||
Premises and Equipment, Net |
10,537 | 8,780 | ||||||
Accrued Interest Receivable |
5,268 | 4,110 | ||||||
Other Equity Securities |
10,064 | 8,627 | ||||||
Other Real Estate Owned |
1,273 | 227 | ||||||
Cash Value of Life Insurance |
24,275 | 23,200 | ||||||
Deferred Taxes |
3,888 | 3,005 | ||||||
Goodwill |
32,552 | 6,824 | ||||||
Core Deposit Intangible |
4,234 | 2,003 | ||||||
Other Assets |
2,319 | 2,201 | ||||||
Total Assets |
$ | 1,649,207 | $ | 1,321,256 | ||||
LIABILITIES |
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Deposits: |
||||||||
Noninterest Bearing |
$ | 305,314 | $ | 264,646 | ||||
Interest Bearing |
1,024,179 | 790,887 | ||||||
Total Deposits |
1,329,493 | 1,055,533 | ||||||
Securities Sold Under Agreements to Repurchase |
13,604 | 1,939 | ||||||
Short Term Borrowings |
862 | 862 | ||||||
Long Term Borrowings |
2,700 | 2,700 | ||||||
Federal Home Loan Bank Borrowings |
85,000 | 75,000 | ||||||
Accrued Interest Payable |
1,197 | 890 | ||||||
Other Liabilities |
5,722 | 4,397 | ||||||
Total Liabilities |
1,438,578 | 1,141,321 | ||||||
Commitments and Contingencies (See Note 7) |
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SHAREHOLDERS' EQUITY |
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Preferred Stock, No Par Value; 5,000,000 Shares Authorized |
- | - | ||||||
Common Stock, $1 Par Value; 50,000,000 Shares Authorized; 11,533,171 and 10,232,495 Shares Issued and Outstanding at June 30, 2018 and December 31, 2017, respectively |
11,533 | 10,232 | ||||||
Additional Paid-in Capital |
171,193 | 144,172 | ||||||
Retained Earnings |
32,483 | 27,175 | ||||||
Accumulated Other Comprehensive Loss |
(4,580 | ) | (1,644 | ) | ||||
Total Shareholders' Equity |
210,629 | 179,935 | ||||||
Total Liabilities and Shareholders' Equity |
$ | 1,649,207 | $ | 1,321,256 |
The accompanying notes are an integral part of these financial statements.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For The Three Months Ended June 30, |
For The Six Months Ended June 30, |
|||||||||||||||
2018 |
2017 |
2018 |
2017 |
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Interest Income: |
||||||||||||||||
Interest and Fees on Loans |
$ | 16,549 | $ | 12,398 | $ | 32,225 | $ | 23,539 | ||||||||
Interest and Dividends on Securities |
1,414 | 972 | 2,837 | 1,919 | ||||||||||||
Interest on Federal Funds Sold and Due From Banks |
128 | 30 | 255 | 47 | ||||||||||||
Total Interest Income |
18,091 | 13,400 | 35,317 | 25,505 | ||||||||||||
Interest Expense: |
||||||||||||||||
Interest on Deposits |
2,555 | 1,501 | 4,853 | 2,849 | ||||||||||||
Interest on Borrowings |
560 | 209 | 988 | 406 | ||||||||||||
Total Interest Expense |
3,115 | 1,710 | 5,841 | 3,255 | ||||||||||||
Net Interest Income |
14,976 | 11,690 | 29,476 | 22,250 | ||||||||||||
Provision for Loan Losses |
474 | 1,305 | 948 | 1,660 | ||||||||||||
Net Interest Income after Provision for Loan Losses |
14,502 | 10,385 | 28,528 | 20,590 | ||||||||||||
Other Income: |
||||||||||||||||
Service Charges on Deposit Accounts |
636 | 525 | 1,246 | 1,037 | ||||||||||||
Other Income |
1,370 | 1,075 | 2,495 | 1,867 | ||||||||||||
Total Other Income |
2,006 | 1,600 | 3,741 | 2,904 | ||||||||||||
Other Expenses: |
||||||||||||||||
Salaries and Employee Benefits |
6,524 | 5,397 | 13,228 | 10,381 | ||||||||||||
Occupancy and Equipment Expense |
1,402 | 1,191 | 2,820 | 2,359 | ||||||||||||
Other Expenses |
4,099 | 2,526 | 7,921 | 5,140 | ||||||||||||
Total Other Expenses |
12,025 | 9,114 | 23,969 | 17,880 | ||||||||||||
Income Before Income Taxes |
4,483 | 2,871 | 8,300 | 5,614 | ||||||||||||
Provision for Income Taxes |
845 | 819 | 1,554 | 1,586 | ||||||||||||
Net Income |
$ | 3,638 | $ | 2,052 | $ | 6,746 | $ | 4,028 | ||||||||
Earnings Per Share: |
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Basic |
$ | 0.34 | $ | 0.30 | $ | 0.65 | $ | 0.58 | ||||||||
Diluted |
$ | 0.33 | $ | 0.28 | $ | 0.62 | $ | 0.56 |
The accompanying notes are an integral part of these financial statements.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
For The Three Months Ended June 30, |
For The Six Months Ended June 30, |
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2018 |
2017 |
2018 |
2017 |
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Consolidated Net Income |
$ | 3,638 | $ | 2,052 | $ | 6,746 | $ | 4,028 | ||||||||
Other Comprehensive Income (Loss): |
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Unrealized Gain (Loss) on Investment Securities |
(247 | ) | 1,372 | (3,717 | ) | 3,075 | ||||||||||
Income Tax Effect |
52 | (467 | ) | 781 | (1,046 | ) | ||||||||||
Other Comprehensive Income (Loss) |
(195 | ) | 905 | (2,936 | ) | 2,029 | ||||||||||
Consolidated Comprehensive Income (Loss) |
$ | 3,443 | $ | 2,957 | $ | 3,810 | $ | 6,057 |
The accompanying notes are an integral part of these financial statements.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(Dollars in thousands, except per share data)
Accumulated |
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Additional |
Other |
Total |
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Common |
Paid-In |
Retained |
Comprehensive |
Shareholders' |
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Stock |
Capital |
Earnings |
Income (Loss) |
Equity |
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Balances at December 31, 2016 |
$ | 6,917 | $ | 85,133 | $ | 23,839 | $ | (2,330 | ) | $ | 113,559 | |||||||||
Comprehensive Income: |
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Net Income |
- | - | 4,028 | - | 4,028 | |||||||||||||||
Other Comprehensive Income (Loss) |
- | - | - | 2,029 | 2,029 | |||||||||||||||
Cash Dividends Declared, $0.11 Per Share |
- | - | (761 | ) | - | (761 | ) | |||||||||||||
Stock Based Compensation Cost |
18 | (27 | ) | - | - | (9 | ) | |||||||||||||
Stock Repurchase |
(2 | ) | (40 | ) | 9 | - | (33 | ) | ||||||||||||
Balances at June 30, 2017 |
$ | 6,933 | $ | 85,066 | $ | 27,115 | $ | (301 | ) | $ | 118,813 | |||||||||
Balances at December 31, 2017 |
$ | 10,232 | $ | 144,172 | $ | 27,175 | $ | (1,644 | ) | $ | 179,935 | |||||||||
Comprehensive Income: |
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Net Income |
- | - | 6,746 | - | 6,746 | |||||||||||||||
Other Comprehensive Income (Loss) |
- | - | - | (2,936 | ) | (2,936 | ) | |||||||||||||
Cash Dividends Declared, $0.14 Per Share |
- | - | (1,435 | ) | - | (1,435 | ) | |||||||||||||
Stock Issuance |
1,257 | 26,527 | - | - | 27,784 | |||||||||||||||
Stock Based Compensation Cost |
48 | 569 | - | - | 617 | |||||||||||||||
Surrendered Shares of Stock Based Compensation |
(4 | ) | (75 | ) | (3 | ) | - | (82 | ) | |||||||||||
Balances at June 30, 2018 |
$ | 11,533 | $ | 171,193 | $ | 32,483 | $ | (4,580 | ) | $ | 210,629 |
The accompanying notes are an integral part of these financial statements.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For The Six Months Ended June 30, |
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2018 |
2017 |
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Cash Flows From Operating Activities: |
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Consolidated Net Income |
$ | 6,746 | $ | 4,028 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: |
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Provision for Loan Losses |
948 | 1,660 | ||||||
Depreciation and Amortization |
566 | 630 | ||||||
Net Accretion of Purchase Accounting Valuations |
(464 | ) | (3,378 | ) | ||||
Noncash Compensation (Income) Expense |
535 | (9 | ) | |||||
Net Amortization of Securities |
1,085 | 917 | ||||||
Noncash Income on Other Equity Securities |
(258 | ) | (208 | ) | ||||
Gain on Sale of Other Real Estate Owned, Net of Writedowns |
(28 | ) | (4 | ) | ||||
Increase in Cash Value of Life Insurance |
(334 | ) | (309 | ) | ||||
Provision (Credit) for Deferred Income Taxes |
(146 | ) | 833 | |||||
Changes in Assets and Liabilities: |
||||||||
Increase in Accrued Interest Receivable |
(3 | ) | (190 | ) | ||||
(Increase) Decrease in Other Assets |
1,144 | (128 | ) | |||||
Increase (Decrease) in Accrued Interest Payable |
77 | (99 | ) | |||||
Increase (Decrease) in Other Liabilities |
(303 | ) | 113 | |||||
Net Cash Provided by Operating Activities |
9,565 | 3,856 | ||||||
Cash Flows From Investing Activities: |
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Purchases of Securities Available for Sale |
(2,015 | ) | (4,596 | ) | ||||
Proceeds from Maturities / Sales of Securities Available for Sale |
7,704 | 2,859 | ||||||
Proceeds from Paydowns of Securities Available for Sale |
16,385 | 10,179 | ||||||
Net Cash Paid in Merger |
(49,796 | ) | - | |||||
Purchases of Other Equity Securities |
(818 | ) | (873 | ) | ||||
Redemption of Other Equity Securities |
196 | 136 | ||||||
Net Increase in Loans |
(65,154 | ) | (61,252 | ) | ||||
Purchases of Premises and Equipment |
(694 | ) | (306 | ) | ||||
Proceeds from Sales of Other Real Estate |
123 | 13 | ||||||
Net Increase in Federal Funds Sold |
(14,202 | ) | (4,534 | ) | ||||
Net Cash Used in Investing Activities |
(108,271 | ) | (58,374 | ) |
(CONTINUED)
For The Six Months Ended June 30, |
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2018 |
2017 |
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Cash Flows From Financing Activities: |
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Net Increase in Deposits |
10,009 | 39,221 | ||||||
Net Decrease in Securities Sold Under Agreements to Repurchase |
(4,382 | ) | (187 | ) | ||||
Net Advances on Federal Home Loan Bank Borrowings |
5,000 | 19,309 | ||||||
Proceeds from Issuance of Common Stock |
27,784 | - | ||||||
Repurchase of Common Stock |
- | (33 | ) | |||||
Payment of Dividends on Common Stock |
(1,435 | ) | (761 | ) | ||||
Net Cash Provided by Financing Activities |
36,976 | 57,549 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents |
(61,730 | ) | 3,031 | |||||
Cash and Cash Equivalents at Beginning of Period |
107,591 | 42,173 | ||||||
Cash and Cash Equivalents at End of Period |
$ | 45,861 | $ | 45,204 | ||||
Supplemental Disclosures for Cash Flow Information: |
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Cash Payments for: |
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Interest on Deposits |
$ | 4,571 | $ | 2,951 | ||||
Interest on Borrowings |
$ | 963 | $ | 403 | ||||
Income Tax Payments |
$ | 1,240 | $ | 900 | ||||
Supplemental Schedule for Noncash Investing and Financing Activities: |
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Change in the Unrealized Gain (Loss) on Securities Available for Sale |
$ | (3,717 | ) | $ | 3,075 | |||
Change in Deferred Tax Effect on the Unrealized (Gain) Loss on Securities Available for Sale |
$ | 781 | $ | (1,046 | ) | |||
Transfer of Loans to Other Real Estate |
$ | 92 | $ | 215 | ||||
Transfer of Premises and Equipment to Other Real Estate |
$ | 1,049 | $ | 175 |
The accompanying notes are an integral part of these financial statements.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation –
The unaudited consolidated financial statements include the accounts of Business First Bancshares, Inc. (the “Company”) and its wholly-owned subsidiary, Business First Bank (the “Bank”), and the Bank’s wholly-owned subsidiary, Business First Insurance, LLC. The Bank operates out of branch locations in markets across Louisiana and Texas. As a state bank, it is subject to regulation by the Office of Financial Institutions, State of Louisiana, and the Federal Deposit Insurance Corporation, and undergoes periodic examinations by these agencies. The Company is also regulated by the Federal Reserve and is subject to periodic examinations.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial results for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions are eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.
These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted or abbreviated.
Preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for loan losses, useful lives for depreciation and amortization, fair value of financial instruments, deferred taxes, and contingencies. Estimates that are particularly susceptible to significant change for the Company include the determination of the allowance for loan losses and the assessment of deferred tax assets and liabilities and, therefore, are critical accounting policies. Management does not anticipate any material changes to estimates in the near term. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, economic conditions in our markets, and changes in applicable banking regulations. Actual results may ultimately differ from estimates.
Note 2 – Reclassifications –
Certain reclassifications may have been made to conform to the classifications adopted for reporting in 2018. These reclassifications have no effect on previously reported net income.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 3 – Mergers and Acquisitions –
On January 1, 2018, the Company completed the acquisition of Minden Bancorp, Inc. (MBI), and its wholly-owned subsidiary, MBL Bank, located in Minden, Louisiana, further increasing its presence in the Northwest Louisiana region. The Company paid an aggregate cash consideration equal to $56.2 million, or approximately $23.20 in exchange for each share of MBI common stock outstanding immediately prior to the effective time of the acquisition. At December 31, 2017, MBI had approximately $317.1 million in total assets, $192.7 million in net loans, $264.0 million in total deposits, and $30.2 million in total shareholders’ equity, and was the leading financial institution in Webster Parish, part of the Shreveport-Bossier City MSA, through its two banking center locations.
Cost and Allocation of Purchase Price for Minden Bancorp, Inc. (MBI): | ||||||||
(Dollars in thousands, except per share data) |
||||||||
Purchase Price: |
||||||||
MBI Shares Outstanding at December 31, 2017 |
2,407,627 | |||||||
MBI Restricted Stock Awards Outstanding at December 31, 2017 |
1,480 | |||||||
MBI Shares Cashed Out Under Terms of Merger |
2,409,107 | |||||||
Exchange Ratio |
23.20 | |||||||
Cash Paid to Shareholders for Shares of Common Stock |
$ | 55,891 | ||||||
MBI Stock Options Outstanding at December 31, 2017 |
||||||||
17,822 Shares at $31.50 Less Strike Price |
||||||||
Cash Paid on MBI Options |
296 | |||||||
Total Purchase Price |
$ | 56,187 | ||||||
Net Assets Acquired: |
||||||||
Cash and Cash Equivalents |
$ | 15,891 | ||||||
Securities Available for Sale |
99,867 | |||||||
Loans and Leases Receivable |
192,714 | |||||||
Premises and Equipment, Net |
2,678 | |||||||
Cash Value of Life Insurance |
741 | |||||||
Core Deposit Intangible |
2,494 | |||||||
Other Assets |
2,930 | |||||||
Total Assets |
317,315 | |||||||
Deposits |
263,951 | |||||||
Borrowings |
21,047 | |||||||
Other Liabilities |
1,858 | |||||||
Total Liablilites |
286,856 | |||||||
Net Assets Acquired |
30,459 | |||||||
Goodwill Resulting from Merger |
$ | 25,728 |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited supplemental pro forma information is presented to reflect estimated results assuming MBI was acquired as of January 1, 2017. These unaudited pro forma results are not necessarily indicative of the operating results that the Company would have achieved had the acquisition been completed as of January 1, 2017 and should not be considered representative of future operating results.
For The Three Months Ended June 30, |
For The Six Months Ended June 30, |
|||||||||||||||
2018 |
2017 |
2018 |
2017 |
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(Dollars in thousands) |
(Dollars in thousands) |
|||||||||||||||
(except per share data) |
(except per share data) |
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Interest Income |
$ | 18,091 | $ | 16,826 | $ | 35,317 | $ | 32,214 | ||||||||
Interest Expense |
3,115 | 2,073 | 5,841 | 3,987 | ||||||||||||
Net Interest Income |
14,976 | 14,753 | 29,476 | 28,227 | ||||||||||||
Provision for Loan Losses |
474 | 1,336 | 948 | 1,691 | ||||||||||||
Net Interest Income after Provision for Loan Losses |
14,502 | 13,417 | 28,528 | 26,536 | ||||||||||||
Noninterest Income |
2,006 | 1,797 | 3,741 | 3,299 | ||||||||||||
Noninterest Expense |
12,025 | 10,305 | 23,969 | 20,256 | ||||||||||||
Income Before Income Taxes |
4,483 | 4,909 | 8,300 | 9,579 | ||||||||||||
Income Tax Expense |
845 | 1,477 | 1,554 | 2,864 | ||||||||||||
Net Income |
$ | 3,638 | $ | 3,432 | $ | 6,746 | $ | 6,715 | ||||||||
Earnings Per Common Share |
||||||||||||||||
Basic |
$ | 0.34 | $ | 0.34 | $ | 0.65 | $ | 0.66 | ||||||||
Diluted |
$ | 0.33 | $ | 0.33 | $ | 0.62 | $ | 0.64 |
On June 1, 2018, we entered into an Agreement and Plan of Reorganization (the “Reorganization Agreement”) with Richland State Bancorp, Inc. (“RSBI”), the holding company for Richland State Bank, Richland, Louisiana. In connection with the acquisition of RSBI, on June 4, 2018 we completed an offering of 1,207,500 shares of our common stock at a public offering price of $24.00 per share. The aggregate offering price totaled $29.0 million, and the aggregate underwriting discount and commission was $1.7 million. The operating results of RSBI are not included in the above pro forma results.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Earnings per Common Share –
Basic earnings per share (“EPS”) represents income available to common shareholders divided by the weighted average number of common shares outstanding; no dilution for any potentially convertible shares is included in the calculation. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The potential common shares that may be issued by the Company relate to outstanding stock warrants and stock options.
For The Three Months Ended June 30, |
For The Six Months Ended June 30, |
|||||||||||||||
2018 |
2017 |
2018 |
2017 |
|||||||||||||
(Dollars in thousands, except per share data) |
(Dollars in thousands, except per share data) |
|||||||||||||||
Numerator: |
||||||||||||||||
Net Income Available to Common Shares |
$ | 3,638 | $ | 2,052 | $ | 6,746 | $ | 4,028 | ||||||||
Denominator: |
||||||||||||||||
Weighted Average Common Shares Outstanding |
10,607,369 | 6,932,570 | 10,421,185 | 6,923,692 | ||||||||||||
Dilutive Effect of Stock Options and Warrants |
457,269 | 271,902 | 457,269 | 271,902 | ||||||||||||
Weighted Average Dilutive Common Shares |
11,064,638 | 7,204,472 | 10,878,454 | 7,195,594 | ||||||||||||
Basic Earnings Per Common Share From Net Income Available to Common Shares |
$ | 0.34 | $ | 0.30 | $ | 0.65 | $ | 0.58 | ||||||||
Diluted Earnings Per Common Share From Net Income Available to Common Shares |
$ | 0.33 | $ | 0.28 | $ | 0.62 | $ | 0.56 |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 5 – Securities –
The amortized cost and fair values of securities available for sale as of June 30, 2018 and December 31, 2017 are summarized as follows:
June 30, 2018 |
||||||||||||||||
(Dollars in thousands) |
||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
Cost |
Gains |
Losses |
Value |
|||||||||||||
U.S. Government Agencies |
$ | 9,677 | $ | - | $ | 246 | $ | 9,431 | ||||||||
Corporate Securities |
13,063 | 113 | 143 | 13,033 | ||||||||||||
Mortgage-Backed Securities |
143,419 | 3 | 4,510 | 138,912 | ||||||||||||
Municipal Securities |
90,984 | 136 | 1,079 | 90,041 | ||||||||||||
Other Securities |
793 | - | 71 | 722 | ||||||||||||
Total Securities Available for Sale |
$ | 257,936 | $ | 252 | $ | 6,049 | $ | 252,139 |
December 31, 2017 |
||||||||||||||||
(Dollars in thousands) |
||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
Cost |
Gains |
Losses |
Value |
|||||||||||||
U.S. Government Agencies |
$ | 9,008 | $ | 13 | $ | 68 | $ | 8,953 | ||||||||
Corporate Securities |
13,074 | 59 | 92 | 13,041 | ||||||||||||
Mortgage-Backed Securities |
81,763 | 2 | 1,824 | 79,941 | ||||||||||||
Municipal Securities |
76,553 | 353 | 427 | 76,479 | ||||||||||||
Other Securities |
831 | - | 97 | 734 | ||||||||||||
Total Securities Available for Sale |
$ | 181,229 | $ | 427 | $ | 2,508 | $ | 179,148 |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following tables present a summary of securities with gross unrealized losses and fair values at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time in a continued unrealized loss position. Due to the nature of these investments and current prevailing market prices, these unrealized losses are considered a temporary impairment of the securities.
June 30, 2018 |
||||||||||||||||||||||||
Less Than 12 Months |
12 Months or Greater |
Total |
||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||
Gross |
Gross |
Gross |
||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value |
Losses |
Value |
Losses |
Value |
Losses |
|||||||||||||||||||
U.S. Government Agencies |
$ | 7,539 | $ | 177 | $ | 1,892 | $ | 69 | $ | 9,431 | $ | 246 | ||||||||||||
Corporate Securities |
2,357 | 143 | - | - | 2,357 | 143 | ||||||||||||||||||
Mortgage-Backed Securities |
74,691 | 1,753 | 63,789 | 2,757 | 138,480 | 4,510 | ||||||||||||||||||
Municipal Securities |
54,857 | 731 | 11,423 | 348 | 66,280 | 1,079 | ||||||||||||||||||
Other Securities |
- | - | 722 | 71 | 722 | 71 | ||||||||||||||||||
Total Securities Available for Sale |
$ | 139,444 | $ | 2,804 | $ | 77,826 | $ | 3,245 | $ | 217,270 | $ | 6,049 |
December 31, 2017 |
||||||||||||||||||||||||
Less Than 12 Months |
12 Months or Greater |
Total |
||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||
Gross |
Gross |
Gross |
||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value |
Losses |
Value |
Losses |
Value |
Losses |
|||||||||||||||||||
U.S. Government Agencies |
$ | 4,136 | $ | 56 | $ | 2,004 | $ | 12 | $ | 6,140 | $ | 68 | ||||||||||||
Corporate Securities |
4,448 | 69 | 2,007 | 23 | 6,455 | 92 | ||||||||||||||||||
Mortgage-Backed Securities |
8,320 | 71 | 71,182 | 1,753 | 79,502 | 1,824 | ||||||||||||||||||
Municipal Securities |
25,798 | 168 | 11,927 | 259 | 37,725 | 427 | ||||||||||||||||||
Other Securities |
- | - | 734 | 97 | 734 | 97 | ||||||||||||||||||
Total Securities Available for Sale |
$ | 42,702 | $ | 364 | $ | 87,854 | $ | 2,144 | $ | 130,556 | $ | 2,508 |
Management evaluates securities for other than temporary impairment when economic and market conditions warrant such evaluations. Consideration is given to the extent and length of time the fair value has been below cost, the reasons for the decline in value, and the Company’s intent to sell a security or whether it is more likely than not that the Company will be required to sell the security before the recovery of its amortized cost. The Company has developed a process to identify securities that could potentially have a credit impairment that is other than temporary. This process involves evaluating each security for impairment by monitoring credit performance, collateral type, collateral geography, loan-to-value ratios, credit scores, loss severity levels, pricing levels, downgrades by rating agencies, cash flow projections and other factors as indicators of potential credit issues. When the Company determines that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The amortized cost and fair values of securities available for sale as of June 30, 2018 by contractual maturity are shown below. Actual maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or repaid without any penalties.
Amortized |
Fair |
|||||||
Cost |
Value |
|||||||
(Dollars in thousands) |
||||||||
Less Than One Year |
$ | 11,522 | $ | 11,519 | ||||
One to Five Years |
52,191 | 51,890 | ||||||
Over Five to Ten Years |
108,296 | 105,150 | ||||||
Over Ten Years |
85,927 | 83,580 | ||||||
Total Securities Available for Sale |
$ | 257,936 | $ | 252,139 |
Note 6 – Loans and the Allowance for Loan Losses –
Loans receivable at June 30, 2018 and December 31, 2017 are summarized as follows:
June 30, |
December 31, |
|||||||
2018 |
2017 |
|||||||
(Dollars in thousands) |
||||||||
Real estate loans: |
||||||||
Construction and land |
$ | 204,099 | $ | 143,535 | ||||
Farmland |
15,173 | 10,480 | ||||||
1-4 family residential |
224,986 | 157,505 | ||||||
Multi-family residential |
22,511 | 20,717 | ||||||
Nonfarm nonresidential |
399,166 | 337,699 | ||||||
Commercial |
298,967 | 254,427 | ||||||
Consumer |
69,129 | 50,921 | ||||||
Total loans held for investment |
1,234,031 | 975,284 | ||||||
Less: |
||||||||
Allowance for loan losses |
(9,756 | ) | (8,765 | ) | ||||
Net loans |
$ | 1,224,275 | $ | 966,519 |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The performing 1-4 family residential, multi-family residential, commercial real estate, and commercial loans are pledged, under a blanket lien, as collateral securing advances from the FHLB at June 30, 2018 and December 31, 2017.
Net deferred loan origination fees were $1.3 million at both June 30, 2018 and December 31, 2017, respectively, and are netted in their respective loan categories above. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans, and reclassifies overdrafts as loans in its consolidated balance sheets. At June 30, 2018 and December 31, 2017, overdrafts of $451,000 and $129,000, respectively, have been reclassified to loans.
The Bank is the lead lender on participations sold, without recourse, to other financial institutions which are not included in the consolidated balance sheets. The unpaid principal balances of mortgages and other loans serviced for others were approximately $112.3 million and $82.4 million at June 30, 2018 and December 31, 2017, respectively.
The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations in markets across Louisiana and Texas. Management segregates the loan portfolio into portfolio segments which is defined as the level at which the Bank develops and documents a systematic method for determining its allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.
Loans acquired in business combinations are initially recorded at fair value, which includes an estimate of credit losses expected to be realized over the remaining lives of the loans and, therefore, no corresponding allowance for loan losses is recorded for these loans at acquisition. Methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit-impaired at acquisition are similar to originated loans; however, the estimate of loss is based on the unpaid principal balance and then compared to any remaining unaccreted purchase discount. To the extent the calculated loss is greater than the remaining unaccreted discount, an allowance is recorded for such difference.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Loans acquired in business combinations were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses.
Total loans held for investment at June 30, 2018 includes $193.5 million of loans acquired in acquisitions that were recorded at fair value as of the acquisition date. Included in the acquired balances at June 30, 2018 were acquired impaired loans accounted for under the Financial Accounting Standard Board’s (“FASB”) Accounting Standards Codification 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”) with a net carrying amount of $5.4 million and acquired performing loans not accounted for under ASC 310-30 totaling $191.0 million with a related purchase discount of $2.9 million.
Total loans held for investment at December 31, 2017 includes $46.1 million of loans acquired in an acquisition that were recorded at fair value as of the acquisition date. Included in the acquired balances at December 31, 2017 were acquired impaired loans with a net carrying amount of $696,000 and acquired performing loans totaling $47.2 million with a related purchase discount of $1.8 million.
The following tables set forth, as of June 30, 2018 and December 31, 2017, the balance of the allowance for loan losses by portfolio segment, disaggregated by impairment methodology, which is then further segregated by amounts evaluated for impairment collectively and individually. The allowance for loan losses allocated to each portfolio segment is not necessarily indicative of future losses in any particular portfolio segment and does not restrict the use of the allowance to absorb losses in other portfolio segments.
Allowance for Credit Losses and Recorded Investment in Loans Receivable
June 30, 2018 |
||||||||||||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||||||||||
Real Estate: |
Real Estate: |
Real Estate: |
Real Estate: |
|||||||||||||||||||||||||||||
Construction |
Real Estate: |
1-4 Family |
Multi-family |
Nonfarm |
||||||||||||||||||||||||||||
and Land |
Farmland |
Residential |
Residential |
Nonresidential |
Commercial |
Consumer |
Total |
|||||||||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||||||||||
Beginning Balance |
$ | 1,421 | $ | 76 | $ | 1,284 | $ | 144 | $ | 2,323 | $ | 3,147 | $ | 370 | $ | 8,765 | ||||||||||||||||
Charge-offs |
(90 | ) | - | (265 | ) | - | - | - | (65 | ) | (420 | ) | ||||||||||||||||||||
Recoveries |
398 | - | 8 | - | - | 13 | 44 | 463 | ||||||||||||||||||||||||
Provision |
24 | 1 | 435 | 11 | 24 | 363 | 90 | 948 | ||||||||||||||||||||||||
Ending Balance |
$ | 1,753 | $ | 77 | $ | 1,462 | $ | 155 | $ | 2,347 | $ | 3,523 | $ | 439 | $ | 9,756 | ||||||||||||||||
Ending Balance: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | - | $ | - | $ | 102 | $ | - | $ | 46 | $ | 227 | $ | - | $ | 375 | ||||||||||||||||
Collectively evaluated for impairment |
$ | 1,753 | $ | 77 | $ | 1,326 | $ | 155 | $ | 2,301 | $ | 3,296 | $ | 439 | $ | 9,347 | ||||||||||||||||
Purchased Credit Impaired (1) |
$ | - | $ | - | $ | 34 | $ | - | $ | - | $ | - | $ | - | $ | 34 | ||||||||||||||||
Loans receivable: |
||||||||||||||||||||||||||||||||
Ending Balance |
$ | 204,099 | $ | 15,173 | $ | 224,986 | $ | 22,511 | $ | 399,166 | $ | 298,967 | $ | 69,129 | $ | 1,234,031 | ||||||||||||||||
Ending Balance: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 9 | $ | - | $ | 2,928 | $ | - | $ | 8,329 | $ | 5,889 | $ | 333 | $ | 17,488 | ||||||||||||||||
Collectively evaluated for impairment |
$ | 204,090 | $ | 15,173 | $ | 221,854 | $ | 22,511 | $ | 385,610 | $ | 293,078 | $ | 68,796 | $ | 1,211,112 | ||||||||||||||||
Purchased Credit Impaired (1) |
$ | - | $ | - | $ | 204 | $ | - | $ | 5,227 | $ | - | $ | - | $ | 5,431 |
(1) Purchased credit impaired loans are evaluated for impairment on an individual basis. |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2017 |
||||||||||||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||||||||||
Real Estate: |
Real Estate: |
Real Estate: |
Real Estate: |
|||||||||||||||||||||||||||||
Construction |
Real Estate: |
1-4 Family |
Multi-family |
Nonfarm |
||||||||||||||||||||||||||||
and Land |
Farmland |
Residential |
Residential |
Nonresidential |
Commercial |
Consumer |
Total |
|||||||||||||||||||||||||
Allowance for credit losses: |
||||||||||||||||||||||||||||||||
Beginning balance |
$ | 933 | $ | 75 | $ | 1,228 | $ | 172 | $ | 2,314 | $ | 3,039 | $ | 401 | $ | 8,162 | ||||||||||||||||
Charge-offs |
(2 | ) | - | (184 | ) | - | (617 | ) | (2,945 | ) | (36 | ) | (3,784 | ) | ||||||||||||||||||
Recoveries |
1 | - | 48 | - | 23 | 40 | 38 | 150 | ||||||||||||||||||||||||
Provision |
489 | 1 | 192 | (28 | ) | 603 | 3,013 | (33 | ) | 4,237 | ||||||||||||||||||||||
Ending Balance |
$ | 1,421 | $ | 76 | $ | 1,284 | $ | 144 | $ | 2,323 | $ | 3,147 | $ | 370 | $ | 8,765 | ||||||||||||||||
Ending Balance: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 36 | $ | - | $ | 125 | $ | - | $ | 46 | $ | 329 | $ | - | $ | 536 | ||||||||||||||||
Collectively evaluated for impairment |
$ | 1,385 | $ | 76 | $ | 1,125 | $ | 144 | $ | 2,277 | $ | 2,818 | $ | 370 | $ | 8,195 | ||||||||||||||||
Purchased Credit Impaired (1) |
$ | - | $ | - | $ | 34 | $ | - | $ | - | $ | - | $ | - | $ | 34 | ||||||||||||||||
Loans receivable: |
||||||||||||||||||||||||||||||||
Ending Balance |
$ | 143,535 | $ | 10,480 | $ | 157,505 | $ | 20,717 | $ | 337,699 | $ | 254,427 | $ | 50,921 | $ | 975,284 | ||||||||||||||||
Ending Balance: |
||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
$ | 92 | $ | - | $ | 2,817 | $ | - | $ | 5,831 | $ | 4,268 | $ | 441 | $ | 13,449 | ||||||||||||||||
Collectively evaluated for impairment |
$ | 143,443 | $ | 10,480 | $ | 154,480 | $ | 20,717 | $ | 331,380 | $ | 250,159 | $ | 50,480 | $ | 961,139 | ||||||||||||||||
Purchased Credit Impaired (1) |
$ | - | $ | - | $ | 208 | $ | - | $ | 488 | $ | - | $ | - | $ | 696 |
(1) Purchased credit impaired loans are evaluated for impairment on an individual basis. |
Management further disaggregates the loan portfolio segments into classes of loans, which are based on the initial measurement of the loan, risk characteristics of the loan and the method for monitoring and assessing the credit risk of the loan.
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 2018 and December 31, 2017, the credit quality indicators, disaggregated by class of loan, are as follows:
Credit Quality Indicators
June 30, 2018 |
||||||||||||||||||||
Pass |
Special Mention |
Substandard |
Doubtful |
Total |
||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||
Real Estate Loans: |
||||||||||||||||||||
Construction and land |
$ | 201,360 | $ | 2,378 | $ | 352 | $ | 9 | $ | 204,099 | ||||||||||
Farmland |
15,173 | - | - | - | 15,173 | |||||||||||||||
1-4 family residential |
211,994 | 8,189 | 2,248 | 2,555 | 224,986 | |||||||||||||||
Multi-family residential |
22,472 | - | 39 | - | 22,511 | |||||||||||||||
Nonfarm nonresidential |
380,173 | 5,016 | 5,941 | 8,036 | 399,166 | |||||||||||||||
Commercial |
284,257 | 6,900 | 4,859 | 2,951 | 298,967 | |||||||||||||||
Consumer |
67,654 | 1,063 | 79 | 333 | 69,129 | |||||||||||||||
Total |
$ | 1,183,083 | $ | 23,546 | $ | 13,518 | $ | 13,884 | $ | 1,234,031 |
December 31, 2017 |
||||||||||||||||||||
Pass |
Special Mention |
Substandard |
Doubtful |
Total |
||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||
Real Estate Loans: |
||||||||||||||||||||
Construction and land |
$ | 141,128 | $ | 1,953 | $ | 362 | $ | 92 | $ | 143,535 | ||||||||||
Farmland |
10,480 | - | - | - | 10,480 | |||||||||||||||
1-4 family residential |
148,845 | 4,657 | 1,574 | 2,429 | 157,505 | |||||||||||||||
Multi-family residential |
20,677 | - | 40 | - | 20,717 | |||||||||||||||
Nonfarm nonresidential |
325,216 | 4,861 | 1,687 | 5,935 | 337,699 | |||||||||||||||
Commercial |
228,157 | 20,681 | 1,951 | 3,638 | 254,427 | |||||||||||||||
Consumer |
49,787 | 672 | 21 | 441 | 50,921 | |||||||||||||||
Total |
$ | 924,290 | $ | 32,824 | $ | 5,635 | $ | 12,535 | $ | 975,284 |
The above classifications follow regulatory guidelines and can generally be described as follows:
● |
Pass loans are of satisfactory quality. |
● |
Special mention loans have an existing weakness that could cause future impairment, including the deterioration of financial ratios, past due status, questionable management capabilities and possible reduction in the collateral values. |
● |
Substandard loans have an existing specific and well defined weakness that may include poor liquidity and deterioration of financial ratios. The loan may be past due and related deposit accounts experiencing overdrafts. Immediate corrective action is necessary. |
● |
Doubtful loans have specific weaknesses that are severe enough to make collection or liquidation in full highly questionable and improbable. |
BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following tables reflect certain information with respect to the loan portfolio delinquencies by loan class and amount as of June 30, 2018 and December 31, 2017. All loans greater than 90 days past due are generally placed on non-accrual status.
Aged Analysis of Past Due Loans Receivable
June 30, 2018 |
||||||||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||||||
Recorded |
||||||||||||||||||||||||||||
Greater |
Investment Over |
|||||||||||||||||||||||||||
30-59 Days |
60-89 Days |
Than 90 Days |
Total |
Total Loans |
90 Days Past Due |
|||||||||||||||||||||||
Past Due |
Past Due |
Past Due |
Past Due |
Current |
Receivable |
and Still Accruing |
||||||||||||||||||||||
Real Estate Loans: |
||||||||||||||||||||||||||||
Construction and land |
$ | 420 | $ | - | $ | 3 | $ | 423 | $ | 203,676 | $ | 204,099 | $ | - | ||||||||||||||
Farmland |
- | - | - | - | 15,173 | 15,173 | - | |||||||||||||||||||||
1-4 family residential |
1,091 | 363 | 1,100 | 2,554 | 222,432 | 224,986 | 37 | |||||||||||||||||||||
Multi-family residential |
- | 39 | - | 39 | 22,472 | 22,511 | - | |||||||||||||||||||||
Nonfarm nonresidential |
276 | 84 | 3,336 | 3,696 | 395,470 | 399,166 | - | |||||||||||||||||||||
Commercial |
89 | 68 | 2,620 | 2,777 | 296,190 | 298,967 | 89 | |||||||||||||||||||||
Consumer |
120 | 22 | 327 | 469 | 68,660 | 69,129 | 4 | |||||||||||||||||||||
Total |
$ | 1,996 | $ | 576 | $ | 7,386 | $ | 9,958 | $ | 1,224,073 | $ | 1,234,031 | $ | 130 |
December 31, 2017 |
||||||||||||||||||||||||||||
(Dollars in thousands) |
||||||||||||||||||||||||||||