10-Q 1 bfbi20180630_10q.htm FORM 10-Q bfbi20180630_10q.htm
 

 

Table of Contents



 

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)

       
   

Smaller reporting company

       
   

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. 

 

PART I - FINANCIAL INFORMATION

 

     

Item 1.

Financial Statements

 

     

 

Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017

4
     

 

Unaudited Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017

5
     

 

Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017

6
     

 

Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2018 and 2017

7
     

 

Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017

8
     

 

Notes to Unaudited Consolidated Financial Statements

10
     

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32
     

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

61
     

Item 4.

Controls and Procedures

61
   

PART II - OTHER INFORMATION

 

     

Item 1.

Legal Proceedings

62
     

Item 1A.

Risk Factors

62
     

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62
     

Item 3.

Defaults Upon Senior Securities

62
     

Item 4.

Mine Safety Disclosures

62
     

Item 5.

Other Information

62
     

Item 6.

Exhibits

62
   

Signatures

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

 

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)

               
                 

SHAREHOLDERS' EQUITY

 

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

 

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:

                               

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,

 
   

2018

   

2017

   

2018

   

2017

 

Consolidated Net Income

  $ 3,638     $ 2,052     $ 6,746     $ 4,028  
                                 

Other Comprehensive Income (Loss):

                               

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

         
           

Additional

           

Other

   

Total

 
   

Common

   

Paid-In

   

Retained

   

Comprehensive

   

Shareholders'

 
   

Stock

   

Capital

   

Earnings

   

Income (Loss)

   

Equity

 

Balances at December 31, 2016

  $ 6,917     $ 85,133     $ 23,839     $ (2,330 )   $ 113,559  

Comprehensive Income:

                                       

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:

                                       

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,

 
   

2018

   

2017

 

Cash Flows From Operating Activities:

               

Consolidated Net Income

  $ 6,746     $ 4,028  

Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities:

               

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:

               

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,

 
   

2018

   

2017

 

Cash Flows From Financing Activities:

               

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:

               

Cash Payments for:

               

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:

               

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 3Mergers 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

 
   

(Dollars in thousands)

   

(Dollars in thousands)

 
   

(except per share data)

   

(except per share data)

 
                                 

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)

 
                                                   

Recorded