Business First Bancshares, Inc. (Form: 10-Q, Received: 11/07/2019 13:55:04)

Note 5 – Securities –

The amortized cost and fair values of securities available for sale as of September 30, 2019 and December 31, 2018 are summarized as follows:

	September 30, 2019
	(Dollars in thousands)
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Government Agencies	$	16,695	$	439	$	5	$	17,129
Corporate Securities		22,531		90		247		22,374
Mortgage-Backed Securities		147,433		2,295		577		149,151
Municipal Securities		98,159		1,432		14		99,577
Total Securities Available for Sale	$	284,818	$	4,256	$	843	$	288,231

	December 31, 2018
	(Dollars in thousands)
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Government Agencies	$	17,529	$	54	$	144	$	17,439
Corporate Securities		13,052		76		436		12,692
Mortgage-Backed Securities		168,854		328		3,564		165,618
Municipal Securities		114,472		250		955		113,767
Total Securities Available for Sale	$	313,907	$	708	$	5,099	$	309,516

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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 September 30, 2019 and December 31, 2018, 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.

	September 30, 2019
	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	$	835	$	5	$	-	$	-	$	835	$	5
Corporate Securities		1,965		47		4,310		200		6,275		247
Mortgage-Backed Securities		549		3		48,240		574		48,789		577
Municipal Securities		5,560		7		2,325		7		7,885		14
Total Securities Available for Sale	$	8,909	$	62	$	54,875	$	781	$	63,784	$	843

	December 31, 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	$	4,399	$	28	$	4,610	$	116	$	9,009	$	144
Corporate Securities		6,274		260		2,324		176		8,598		436
Mortgage-Backed Securities		67,770		1,264		61,271		2,300		129,041		3,564
Municipal Securities		40,473		484		29,782		471		70,255		955
Total Securities Available for Sale	$	118,916	$	2,036	$	97,987	$	3,063	$	216,903	$	5,099

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.

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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 September 30, 2019 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	$	21,184	$	21,210
One to Five Years		53,754		54,333
Over Five to Ten Years		137,275		139,054
Over Ten Years		72,605		73,634
Total Securities Available for Sale	$	284,818	$	288,231

Note 6 – Loans and the Allowance for Loan Losses –

Loans receivable at September 30, 2019 and December 31, 2018 are summarized as follows:

	September 30,			December 31,
	2019			2018
	(Dollars in thousands)
Real estate loans:
Construction and land	$	220,524		$	211,054
Farmland		45,809			45,989
1-4 family residential		281,413			270,583
Multi-family residential		31,448			39,273
Nonfarm nonresidential		620,427			518,660
Commercial		415,163			363,640
Consumer		79,943			79,270
Total loans held for investment		1,694,727			1,528,469

Less:
Allowance for loan losses		(12,090	)		(11,220	)
Net loans	$	1,682,637		$	1,517,249

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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 September 30, 2019 and December 31, 2018.

Net deferred loan origination fees were $2.6 million and $1.7 million at September 30, 2019 and December 31, 2018, 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 September 30, 2019 and December 31, 2018, overdrafts of $1.5 million and $858,000, respectively, have been reclassified to loans.

The Bank is the lead lender on participations sold, without recourse, to other financial institutions which amounts are not included in the consolidated balance sheets. The unpaid principal balances of mortgages and other loans serviced for others were approximately $145.8 million and $147.0 million at September 30, 2019 and December 31, 2018, respectively.

The Bank grants loans and extensions of credit to individuals and a variety of businesses and corporations located in its general market areas throughout 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.

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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 September 30, 2019 includes $221.6 million of loans acquired in acquisitions that were recorded at fair value as of the acquisition date. Included in the acquired balances at September 30, 2019 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 $7.5 million and acquired performing loans not accounted for under ASC 310-30 totaling $216.4 million with a related purchase discount of $2.3 million.

Total loans held for investment at December 31, 2018 includes $334.8 million of loans acquired in acquisitions that were recorded at fair value as of the acquisition date. Included in the acquired balances at December 31, 2018 were acquired impaired loans with a net carrying amount of $10.7 million and acquired performing loans totaling $327.3 million with a related purchase discount of $3.2 million.

The following tables set forth, as of September 30, 2019 and December 31, 2018, 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

	September 30, 2019
	(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	$	1,590		$	104		$	1,538		$	236		$	2,715		$	4,453		$	584		$	11,220
Charge-offs		(2	)		(2	)		(54	)		-			(10	)		(1,544	)		(23	)		(1,635	)
Recoveries		-			-			12			-			-			37			42			91
Provision		(111	)		84			321			(46	)		1,299			802			65			2,414
Ending Balance	$	1,477		$	186		$	1,817		$	190		$	4,004		$	3,748		$	668		$	12,090
Ending Balance:
Individually evaluated for impairment	$	-		$	4		$	122		$	-		$	46		$	401		$	101		$	674
Collectively evaluated for impairment	$	1,477		$	182		$	1,695		$	190		$	3,958		$	3,347		$	567		$	11,416
Purchased Credit Impaired (1)	$	-		$	-		$	-		$	-		$	-		$	-		$	-		$	-
Loans receivable:
Ending Balance	$	220,524		$	45,809		$	281,413		$	31,448		$	620,427		$	415,163		$	79,943		$	1,694,727
Ending Balance:
Individually evaluated for impairment	$	399		$	186		$	2,567		$	-		$	4,078		$	4,607		$	389		$	12,226
Collectively evaluated for impairment	$	220,125		$	45,390		$	278,779		$	31,448		$	609,408		$	410,280		$	79,554		$	1,674,984
Purchased Credit Impaired (1)	$	-		$	233		$	67		$	-		$	6,941		$	276		$	-		$	7,517

(1)Purchased credit impaired loans are evaluated for impairment on an individual basis.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	December 31, 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	)		-		(294	)		-		-		-		(88	)		(472	)
Recoveries		398			-		18			-		13		28		80			537
Provision		(139	)		28		530			92		379		1,278		222			2,390
Ending Balance	$	1,590		$	104	$	1,538		$	236	$	2,715	$	4,453	$	584		$	11,220
Ending Balance:
Individually evaluated for impairment	$	-		$	-	$	96		$	-	$	47	$	1,112	$	25		$	1,280
Collectively evaluated for impairment	$	1,590		$	104	$	1,442		$	236	$	2,668	$	3,341	$	559		$	9,940
Purchased Credit Impaired (1)	$	-		$	-	$	-		$	-	$	-	$	-	$	-		$	-
Loans receivable:
Ending Balance	$	211,054		$	45,989	$	270,583		$	39,273	$	518,660	$	363,640	$	79,270		$	1,528,469
Ending Balance:
Individually evaluated for impairment	$	32		$	112	$	2,728		$	-	$	4,155	$	5,208	$	125		$	12,360
Collectively evaluated for impairment	$	211,022		$	45,713	$	267,761		$	39,273	$	507,506	$	354,985	$	79,145		$	1,505,405
Purchased Credit Impaired (1)	$	-		$	164	$	94		$	-	$	6,999	$	3,447	$	-		$	10,704

(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.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2019 and December 31, 2018, the credit quality indicators, disaggregated by class of loan, are as follows:

Credit Quality Indicators

	September 30, 2019
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Real Estate Loans:
Construction and land	$	217,772	$	1,199	$	1,154	$	399	$	220,524
Farmland		43,700		1,771		51		287		45,809
1-4 family residential		271,963		4,062		3,001		2,387		281,413
Multi-family residential		31,415		-		33		-		31,448
Nonfarm nonresidential		598,332		12,067		4,125		5,903		620,427
Commercial		396,752		9,488		6,701		2,222		415,163
Consumer		77,923		1,502		129		389		79,943
Total	$	1,637,857	$	30,089	$	15,194	$	11,587	$	1,694,727

	December 31, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands)
Real Estate Loans:
Construction and land	$	209,027	$	718	$	1,277	$	32	$	211,054
Farmland		45,563		153		161		112		45,989
1-4 family residential		260,325		4,601		2,929		2,728		270,583
Multi-family residential		39,237		-		36		-		39,273
Nonfarm nonresidential		494,698		14,421		3,510		6,031		518,660
Commercial		347,839		5,690		7,448		2,663		363,640
Consumer		77,731		1,180		234		125		79,270
Total	$	1,474,420	$	26,763	$	15,595	$	11,691	$	1,528,469

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.

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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 September 30, 2019 and December 31, 2018. All loans greater than 90 days past due are generally placed on nonaccrual status.

Aged Analysis of Past Due Loans Receivable

	September 30, 2019
	(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	$	-	$	6	$	379	$	385	$	220,139	$	220,524	$	-
Farmland		23		138		106		267		45,542		45,809		-
1-4 family residential		1,484		483		1,260		3,227		278,186		281,413		169
Multi-family residential		-		-		-		-		31,448		31,448		-
Nonfarm nonresidential		2,119		-		3,946		6,065		614,362		620,427		-
Commercial		295		104		1,780		2,179		412,984		415,163		30
Consumer		188		31		386		605		79,338		79,943		78
Total	$	4,109	$	762	$	7,857	$	12,728	$	1,681,999	$	1,694,727	$	277

	December 31, 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	$	325	$	13	$	89	$	427	$	210,627	$	211,054	$	60
Farmland		-		96		-		96		45,893		45,989		-
1-4 family residential		1,596		588		1,400		3,584		266,999		270,583		270
Multi-family residential		36		-		-		36		39,237		39,273		-
Nonfarm nonresidential		2,437		-		3,967		6,404		512,256		518,660		450
Commercial		328		287		3,241		3,856		359,784		363,640		1,038
Consumer		237		89		106		432		78,838		79,270		58
Total	$	4,959	$	1,073	$	8,803	$	14,835	$	1,513,634	$	1,528,469	$	1,876

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of information pertaining to impaired loans as of September 30, 2019 and December 31, 2018. Acquired non-impaired loans are placed on nonaccrual status and reported as impaired using the same criteria applied to the originated portfolio. Purchased impaired credits are excluded from this table. The interest income recognized for impaired loans was $217,000 and $186,000 for the nine months ending September 30, 2019 and 2018, respectively.

	September 30, 2019
	(Dollars in thousands)
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
With an allowance recorded:
Real Estate Loans:
Construction and land	$	-	$	-	$	-	$	1
Farmland		20		22		4		21
1-4 family residential		207		237		122		178
Multi-family residential		-		-		-		-
Nonfarm nonresidential		546		560		46		601
Other Loans:
Commercial		796		865		401		1,127
Consumer		175		179		101		113
Total	$	1,744	$	1,863	$	674	$	2,041

With no allowance recorded:
Real Estate Loans:
Construction and land	$	399	$	423	$	-	$	112
Farmland		166		170		-		177
1-4 family residential		2,360		3,008		-		2,562
Multi-family residential		-		-		-		-
Nonfarm nonresidential		3,533		3,800		-		3,693
Other Loans:
Commercial		3,811		4,658		-		4,373
Consumer		213		266		-		163
Total	$	10,482	$	12,325	$	-	$	11,080

Total Impaired Loans:
Real Estate Loans:
Construction and land	$	399	$	423	$	-	$	113
Farmland		186		192		4		198
1-4 family residential		2,567		3,245		122		2,740
Multi-family residential		-		-		-		-
Nonfarm nonresidential		4,079		4,360		46		4,294
Other Loans:
Commercial		4,607		5,523		401		5,500
Consumer		388		445		101		276
Total	$	12,226	$	14,188	$	674	$	13,121

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	December 31, 2018
	(Dollars in thousands)
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
With an allowance recorded:
Real Estate Loans:
Construction and land	$	-	$	-	$	-	$	22
Farmland		-		-		-		-
1-4 family residential		363		451		96		303
Multi-family residential		-		-		-		-
Nonfarm nonresidential		447		501		47		367
Other Loans:
Commercial		1,883		2,935		1,112		547
Consumer		25		25		25		2
Total	$	2,718	$	3,912	$	1,280	$	1,241

With no allowance recorded:
Real Estate Loans:
Construction and land	$	32	$	56	$	-	$	15
Farmland		112		193		-		9
1-4 family residential		2,365		3,975		-		2,708
Multi-family residential		-		-		-		-
Nonfarm nonresidential		3,708		3,833		-		5,240
Other Loans:
Commercial		3,325		4,198		-		5,350
Consumer		100		144		-		261
Total	$	9,642	$	12,399	$	-	$	13,583

Total Impaired Loans:
Real Estate Loans:
Construction and land	$	32	$	56	$	-	$	37
Farmland		112		193		-		9
1-4 family residential		2,728		4,426		96		3,011
Multi-family residential		-		-		-		-
Nonfarm nonresidential		4,155		4,334		47		5,607
Other Loans:
Commercial		5,208		7,133		1,112		5,897
Consumer		125		169		25		263
Total	$	12,360	$	16,311	$	1,280	$	14,824

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The Company elected to account for certain loans acquired in business combinations as acquired impaired loans under ASC 310-30 due to evidence of credit deterioration at acquisition and the probability that the Company will be unable to collect all contractually required payments. The expected cash flows approximated fair value as of the date of mergers.

The following table presents the changes in the carrying amount of the purchased impaired credits accounted for under ASC 310-30 for the periods presented.

	Purchased
	Impaired Credits
	(Dollars in thousands)

Carrying amount - December 31, 2017	$	696
Carrying amount of purchased impaired credits acquired in MBI acquisition		5,798
Carrying amount of purchased impaired credits acquired in RSBI acquisition		4,533
Payments received, net of discounts realized		(507	)
Purchased impaired credit participation interest sales proceeds, net of discount realized		210
Charge-offs		(26	)
Carrying amount - December 31, 2018		10,704
Payments received, net of discounts realized		(3,187	)
Carrying amount - September 30, 2019	$	7,517

The Bank seeks to assist customers that are experiencing financial difficulty by renegotiating loans within lending regulations and guidelines. The Bank makes loan modifications, primarily utilizing internal renegotiation programs via direct customer contact, that manage customers’ debt exposures held only by the Bank. Additionally, the Bank makes loan modifications with customers who have elected to work with external renegotiation agencies and these modifications provide solutions to customers’ entire unsecured debt structures. During the periods ended September 30, 2019 and December 31, 2018, the concessions granted to certain borrowers included extending the payment due dates, lowering the contractual interest rate, reducing accrued interest, and reducing the debt’s face or maturity amount.

Once modified in a troubled debt restructuring, a loan is generally considered impaired until its contractual maturity. At the time of the restructuring, the loan is evaluated for specific allowance for credit losses. The Bank continues to specifically reevaluate the loan in subsequent periods, regardless of the borrower’s performance under the modified terms. If a borrower subsequently defaults on the loan after it is restructured, the Bank provides an allowance for credit losses for the amount of the loan that exceeds the value of the related collateral.

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BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables present informative data regarding troubled debt restructurings as of September 30, 2019 and December 31, 2018. The Bank had $79,000 in troubled debt restructurings that had subsequently defaulted during the year ended December 31, 2018 and none that had subsequently defaulted during the nine months ended September 30, 2019.

Modifications as of September 30, 2019:

			Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
	(Dollars in thousands)
Troubled Debt Restructuring
Real Estate Loans:
1-4 family residential		3	$	235	$	221
Nonfarm nonresidential		3		2,411		2,103
Other Loans:
Commercial		6		5,914		2,814
Consumer		1		11		10
Total		13	$	8,571	$	5,148

Modifications as of December 31, 2018:

			Pre-Modification		Post-Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
	(Dollars in thousands)
Troubled Debt Restructuring
Real Estate Loans:
1-4 family residential		1	$	-	$	-
Nonfarm nonresidential		3		2,412		2,308
Other Loans:
Commercial		6		5,914		3,512
Total		10	$	8,326	$	5,820

Note 8 – Fair Value of Financial Instruments –

Fair Value Disclosures

The Company groups its financial assets and liabilities measured at fair value in three levels. Fair value should be based on the assumptions market participants would use when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the inputs used to develop those assumptions and measure fair value. The hierarchy requires companies to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

●

Level 1 – Includes the most reliable sources, and includes quoted prices in active markets for identical assets or liabilities.

●

Level 2 – Includes observable inputs. Observable inputs include inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates) as well as inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

●

Level 3 – Includes unobservable inputs and should be used only when observable inputs are unavailable.

Recurring Basis

Fair values of investment securities available for sale were primarily measured using information from a third-party pricing service. This pricing service provides information by utilizing evaluated pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and reference data from market research publications.

The fair values of mortgage loans held for sale are based on commitments on hand from investors within the secondary market for loans with similar characteristics.

Table of Contents

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the balance of assets and liabilities measured on a recurring basis as of September 30, 2019 and December 31, 2018. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a recurring basis.

	Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
September 30, 2019
Available for Sale:
U.S. Government Agency Securities	$	17,129	$	-	$	17,129	$	-
Corporate Securities		22,374		-		22,374		-
Mortgage-Backed Securities		149,151		-		149,151		-
Municipal Securities		99,577		-		92,990		6,587
Mortgage Loans Held for Sale		256		-		256		-
Total	$	288,487	$	-	$	281,900	$	6,587


December 31, 2018
Available for Sale:
U.S. Government Agency Securities	$	17,439	$	-	$	17,439	$	-
Corporate Securities		12,692		-		12,692		-
Mortgage-Backed Securities		165,618		-		165,618		-
Municipal Securities		113,767		-		105,383		8,384
Mortgage Loans Held for Sale		58		-		58		-
Total	$	309,574	$	-	$	301,190	$	8,384

Nonrecurring Basis

The Company has segregated all financial assets and liabilities that are measured at fair value on a nonrecurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis.

Table of Contents

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the impaired loans is measured at the fair value of the collateral for collateral-dependent loans. Impaired loans are Level 2 assets measured using appraisals from external parties of the collateral less any prior liens. Repossessed assets are initially recorded at fair value less estimated cost to sell. The fair value of repossessed assets is based on property appraisals and an analysis of similar properties available. As such, the Bank records repossessed assets as Level 2.

	Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
September 30, 2019
Assets:
Impaired Loans	$	18,635	$	-	$	18,635	$	-
Repossessed Assets		2,331		-		2,331		-
Total	$	20,966	$	-	$	20,966	$	-

December 31, 2018
Assets:
Impaired Loans	$	21,557	$	-	$	21,557	$	-
Repossessed Assets		1,920		-		1,920		-
Total	$	23,477	$	-	$	23,477	$	-

Fair Value Financial Instruments

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. In accordance with generally accepted accounting principles, certain financial instruments and all non-financial instruments are excluded from these disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Short-Term Investments – For those short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities – Fair value of securities is based on quoted market prices. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Table of Contents

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Loans – The fair value for loans is estimated using discounted cash flow analyses, with interest rates currently being offered for similar loans to borrowers with similar credit rates. Loans with similar classifications are aggregated for purposes of the calculations. The allowance for loan losses, which was used to measure the credit risk, is subtracted from loans.

Cash Value of Bank-Owned Life Insurance (“BOLI”) – The carrying amount approximates its fair value.

Other Equity Securities – The carrying amount approximates its fair value.

Deposits – The fair value of demand deposits and certain money market deposits is the amount payable at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses, with interest rates currently offered for deposits of similar remaining maturities.

Borrowings – The fair value of FHLB advances and other long-term borrowings is estimated using the rates currently offered for advances of similar maturities. The carrying amount of short-term borrowings maturing within ninety days approximates the fair value.

Commitments to Extend Credit and Standby and Commercial Letters of Credit – The fair values of commitments to extend credit and standby and commercial letters of credit do not differ significantly from the commitment amount and are therefore omitted from this disclosure.

The estimated approximate fair values of the Bank’s financial instruments as of September 30, 2019 and December 31, 2018 are as follows:

	Carrying		Total
	Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
September 30, 2019
Financial Assets:
Cash and Short-Term Investments	$	107,061	$	107,061	$	107,061	$	-	$	-
Securities		288,231		288,231		-		281,644		6,587
Mortgage Loans Held for Sale		256		256		-		256		-
Loans - Net		1,682,637		1,677,482		-		-		1,677,482
Cash Value of BOLI		32,398		32,398		-		32,398		-
Other Equity Securities		12,697		12,697		-		-		12,697
Total	$	2,123,280	$	2,118,125	$	107,061	$	314,298	$	1,696,766

Financial Liabilities:
Deposits	$	1,733,390	$	1,738,300	$	-	$	-	$	1,738,300
Borrowings		184,037		202,089		-		202,089		-
Total	$	1,917,427	$	1,940,389	$	-	$	202,089	$	1,738,300

Table of Contents

BUSINESS FIRST BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	Carrying		Total
	Amount		Fair Value		Level 1		Level 2		Level 3
	(Dollars in thousands)
December 31, 2018
Financial Assets:
Cash and Short-Term Investments	$	137,908	$	137,908	$	137,908	$	-	$	-
Securities		309,516		309,516		-		301,132		8,384
Mortgage Loans Held for Sale		58		58		-		58		-
Loans - Net		1,517,249		1,495,454		-		-		1,495,454
Cash Value of BOLI		31,882		31,882		-		31,882		-
Other Equity Securities		9,282		9,282		-		-		9,282
Total	$	2,005,895	$	1,984,100	$	137,908	$	333,072	$	1,513,120

Financial Liabilities:
Deposits	$	1,733,934	$	1,717,698	$	-	$	-	$	1,717,698
Borrowings		92,229		104,930		-		104,930		-
Total	$	1,826,163	$	1,822,628	$	-	$	104,930	$	1,717,698

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)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	BFST	NASDAQ Global Select Market

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018	3

	Unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018	4

	Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018	5

	Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2019 and 2018	6

	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018	8

	Notes to Unaudited Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59

Item 4.	Controls and Procedures	59

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	60

Item 1A.	Risk Factors	60

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 3.	Defaults Upon Senior Securities	60

Item 4.	Mine Safety Disclosures	60

Item 5.	Other Information	61

Item 6.	Exhibits	62

Signatures		63

	September 30, 2019		December 31,
	(Unaudited)		2018
ASSETS
Cash and Due from Banks	$	63,356	$	96,072
Federal Funds Sold		43,705		41,836
Securities Available for Sale, at Fair Values		288,231		309,516
Mortgage Loans Held for Sale		256		58
Loans and Lease Receivable, Net of Allowance for Loan Losses of $12,090 at September 30, 2019 and $11,220 at December 31, 2018		1,682,637		1,517,249
Premises and Equipment, Net		27,092		15,114
Accrued Interest Receivable		7,513		8,223
Other Equity Securities		12,697		9,282
Other Real Estate Owned		2,326		1,909
Cash Value of Life Insurance		32,398		31,882
Deferred Taxes		2,674		3,848
Goodwill		48,333		49,488
Core Deposit Intangible		6,916		7,885
Other Assets		2,706		2,534
Total Assets	$	2,220,840	$	2,094,896

LIABILITIES
Deposits:
Noninterest Bearing	$	406,146	$	382,354
Interest Bearing		1,327,244		1,351,580
Total Deposits		1,733,390		1,733,934
Securities Sold Under Agreements to Repurchase		31,037		12,229
Subordinated Debt		25,000		25,000
Federal Home Loan Bank Borrowings		128,000		55,000
Accrued Interest Payable		1,837		1,374
Other Liabilities		21,236		7,301
Total Liabilities		1,940,500		1,834,838

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; 13,274,823 and 13,213,280 Shares Issued and Outstanding at September 30, 2019 and December 31, 2018, respectively		13,275		13,213
Additional Paid-in Capital		212,104		212,332
Retained Earnings		52,265		37,982
Accumulated Other Comprehensive Income (Loss)		2,696		(3,469	)
Total Shareholders' Equity		280,340		260,058
Total Liabilities and Shareholders' Equity	$	2,220,840	$	2,094,896

	For The Three Months Ended September 30,				For The Nine Months Ended September 30,
	2019		2018		2019		2018
Interest Income:
Interest and Fees on Loans	$	24,408	$	17,777	$	70,701	$	50,002
Interest and Dividends on Securities		1,783		1,386		5,486		4,223
Interest on Federal Funds Sold and Due From Banks		129		162		616		417
Total Interest Income		26,320		19,325		76,803		54,642
Interest Expense:
Interest on Deposits		5,050		3,127		14,845		7,980
Interest on Borrowings		1,012		562		2,387		1,550
Total Interest Expense		6,062		3,689		17,232		9,530
Net Interest Income		20,258		15,636		59,571		45,112
Provision for Loan Losses		479		503		2,414		1,451
Net Interest Income after Provision for Loan Losses		19,779		15,133		57,157		43,661
Other Income:
Service Charges on Deposit Accounts		1,035		695		3,007		1,941
Gain (Loss) on Sales of Securities		26		-		84		-
Other Income		861		852		5,361		3,347
Total Other Income		1,922		1,547		8,452		5,288
Other Expenses:
Salaries and Employee Benefits		8,793		7,190		26,101		20,418
Occupancy and Equipment Expense		2,135		1,522		5,913		4,342
Other Expenses		3,950		3,158		11,231		11,079
Total Other Expenses		14,878		11,870		43,245		35,839
Income Before Income Taxes		6,823		4,810		22,364		13,110
Provision for Income Taxes		1,312		910		4,351		2,464
Net Income	$	5,511	$	3,900	$	18,013	$	10,646
Earnings Per Share:
Basic	$	0.41	$	0.34	$	1.35	$	0.99
Diluted	$	0.40	$	0.33	$	1.32	$	0.95

										Accumulated
				Additional						Other			Total
	Common			Paid-In			Retained			Comprehensive			Shareholders'
	Stock			Capital			Earnings			Income (Loss)			Equity
Balances at June 30, 2018	$	11,533		$	171,193		$	32,483		$	(4,580	)	$	210,629
Comprehensive Income:
Net Income		-			-			3,900			-			3,900
Other Comprehensive Income (Loss)		-			-			-			(798	)		(798	)
Cash Dividends Declared, $0.08 Per Share		-			-			(923	)		-			(923	)
Stock Issuance		-			(123	)		-			-			(123	)
Stock Based Compensation Cost		1			282			-			-			283
Surrendered Shares of Stock Based Compensation		-			(7	)		-			-			(7	)
Balances at September 30, 2018	$	11,534		$	171,345		$	35,460		$	(5,378	)	$	212,961

Balances at June 30, 2019	$	13,361		$	213,823		$	48,087		$	2,198		$	277,469
Comprehensive Income:
Net Income		-			-			5,511			-			5,511
Other Comprehensive Income (Loss)		-			-			-			498			498
Cash Dividends Declared, $0.10 Per Share		-			-			(1,333	)		-			(1,333	)
Stock Issuance		25			339			-			-			364
Stock Based Compensation Cost		-			384			-			-			384
Stock Repurchase		(111	)		(2,442	)		-			-			(2,553	)
Balances at September 30, 2019	$	13,275		$	212,104		$	52,265		$	2,696		$	280,340

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			3,055
Total Assets			317,440

Deposits			263,951
Borrowings			21,047
Other Liabilities			1,858
Total Liabilities			286,856
Net Assets Acquired			30,584
Goodwill Resulting from Merger		$	25,603

Purchase Price:
Shares Issued to RSBI Shareholders on December 1, 2018		1,679,559
Closing Stock Price on November 30, 2018		25.29
Total Purchase Price	$	42,476
Net Assets Acquired:
Cash and Cash Equivalents	$	40,648
Securities Available for Sale		63,823
Loans and Leases Receivable		190,964
Premises and Equipment, Net		5,282
Cash Value of Life Insurance		7,260
Core Deposit Intangible		3,947
Other Assets		4,668
Total Assets		316,592

Deposits		289,979
Other Liabilities		1,074
Total Liabilities		291,053
Net Assets Acquired		25,539
Goodwill Resulting from Merger	$	16,937

	(Dollars in thousands)
3 months remaining in 2019	$	514
2020		1,949
2021		1,780
2022		1,620
2023		1,506
After 2023		6,932
Total Future Minimum Lease Payments		14,301
Imputed Interest		(1,811	)
Present Value of Lease Liabilities	$	12,490

	For the Three Months Ended September 30,
	2019								2018
	Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate
	(Dollars in thousands) (Unaudited)
Assets
Interest-earning assets:
Total loans	$	1,664,283		$	24,408		5.87	%	$	1,258,060		$	17,777		5.65	%
Securities available for sale		297,121			1,783		2.40			253,902			1,386		2.18
Interest-bearing deposits in other banks		16,070			129		3.21			31,858			162		2.03
Total interest-earning assets		1,977,474			26,320		5.32			1,543,820			19,325		5.01
Allowance for loan losses		(11,783	)							(9,945	)
Noninterest-earning assets		191,068								132,242
Total assets	$	2,156,759		$	26,320				$	1,666,117		$	19,325

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,300,740		$	5,050		1.55	%	$	1,028,412		$	3,127		1.22	%
Subordinated debt		25,000			422		6.75			—			—		—
Advances from Federal Home Loan Bank (“FHLB”)		105,588			560		2.12			85,000			506		2.38
Other borrowings		23,718			30		0.51			17,484			56		1.28
Total interest-bearing liabilities		1,455,046			6,062		1.67			1,130,896			3,689		1.31

Noninterest-bearing liabilities:
Noninterest-bearing deposits		398,748								315,111
Other liabilities		24,937								8,479
Total noninterest-bearing liabilities		423,685								323,590
Shareholders’ equity		278,028								211,631
Total liabilities and shareholders’ equity	$	2,156,759							$	1,666,117

Net interest rate spread⁽¹⁾							3.66	%							3.70	%
Net interest income				$	20,258							$	15,636
Net interest margin⁽²⁾							4.10	%							4.05	%

	For the Nine Months Ended September 30,
	2019								2018
	Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate			Average Outstanding Balance			Interest Earned/ Interest Paid		Average Yield/ Rate
	(Dollars in thousands) (Unaudited)
Assets
Interest-earning assets:
Total loans	$	1,605,423		$	70,701		5.87	%	$	1,216,395		$	50,002		5.48	%
Securities available for sale		303,374			5,486		2.41			254,035			4,223		2.22
Interest-bearing deposits in other banks		26,621			616		3.09			32,899			417		1.69
Total interest-earning assets		1,935,418			76,803		5.29			1,503,329			54,642		4.85
Allowance for loan losses		(11,625	)							(9,516	)
Noninterest-earning assets		187,924								141,209
Total assets	$	2,111,717		$	76,803				$	1,635,022		$	54,642

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,323,927		$	14,845		1.50	%	$	1,022,982		$	7,980		1.04	%
Subordinated debt		25,000			1,267		6.76			—			—		—
Advances from FHLB		59,990			1,065		2.37			84,777			1,387		2.18
Other borrowings		16,863			55		0.43			18,478			163		1.18
Total interest-bearing liabilities		1,425,780			17,232		1.61			1,126,237			9,530		1.13

Noninterest-bearing liabilities:
Noninterest-bearing deposits		396,452								309,526
Other liabilities		19,105								8,604
Total noninterest-bearing liabilities		415,557								318,130
Shareholders’ equity		270,380								190,655
Total liabilities and shareholders’ equity	$	2,111,717							$	1,635,022

Net interest rate spread⁽¹⁾							3.68	%							3.72	%
Net interest income				$	59,571							$	45,112
Net interest margin⁽²⁾							4.10	%							4.00	%

	For the Three Months Ended September 30, 2019 compared to the Three Months Ended September 30, 2018
	Increase (Decrease) due to change in
	Volume			Rate			Total
	(Dollars in thousands) (Unaudited)
Interest-earning assets:
Total loans	$	5,958		$	673		$	6,631
Securities available for sale		259			138			397
Interest-earning deposits in other banks		(127	)		94			(33	)
Total increase in interest income	$	6,090		$	905		$	6,995

Interest-bearing liabilities:
Interest-bearing deposits	$	1,057		$	866		$	1,923
Subordinated debt		422			—			422
Advances from FHLB		109			(55	)		54
Other borrowings		8			(34	)		(26	)
Total increase in interest expense		1,596			777			2,373
Increase in net interest income	$	4,494		$	128		$	4,622

	For the Three Months Ended September 30,						Increase
	2019			2018			(Decrease)
	(Dollars in thousands) (Unaudited)
Noninterest income:
Service charges on deposit accounts	$	1,035		$	695		$	340
Debit card and ATM fee income		460			267			193
Bank-owned life insurance income		175			168			7
Gain on sales of investment securities		26			—			26
Brokerage commissions		15			(6	)		21
Mortgage origination income		120			77			43
Correspondent bank income		118			118			—
Rental income		159			166			(7	)
Gain on sale of banking center		(12	)		—			(12	)
Loss on sale / disposal of other assets		(650	)		(103	)		(547	)
Pass-through income from SBIC partnerships		138			—			138
Other		338			165			173
Total noninterest income	$	1,922		$	1,547		$	375

	For the Nine Months Ended September 30,						Increase
	2019			2018			(Decrease)
	(Dollars in thousands) (Unaudited)
Noninterest income:
Service charges on deposit accounts	$	3,007		$	1,941		$	1,066
Debit card and ATM fee income		1,397			772			625
Bank-owned life insurance income		517			502			15
Gain on sales of investment securities		84			—			84
Brokerage commissions		58			506			(448	)
Mortgage origination income		308			191			117
Correspondent bank income		343			280			63
Rental income		488			495			(7	)
Gain on sale of banking center		581			—			581
Loss on sale / disposal of other assets		(650	)		(56	)		(594	)
Pass-through income from SBIC partnerships		1,404			222			1,182
Other		915			435			480
Total noninterest income	$	8,452		$	5,288		$	3,164

	As of September 30, 2019 (Unaudited)					As of December 31, 2018
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Commercial	$	415,163		24.5	%	$	363,640		23.8	%
Real estate:
Construction and land		220,524		13.0			211,054		13.8
Farmland		45,809		2.7			45,989		3.0
1-4 family residential		281,413		16.6			270,583		17.7
Multi-family residential		31,448		1.9			39,273		2.6
Nonfarm nonresidential		620,427		36.6			518,660		33.9
Consumer		79,943		4.7			79,270		5.2
Total loans held for investment	$	1,694,727		100.0	%	$	1,528,469		100.0	%

	As of September 30, 2019
	One Year or Less		One Through Five Years		After Five Years		Total
	(Dollars in thousands) (Unaudited)
Commercial	$	157,238	$	198,994	$	58,931	$	415,163
Real estate:
Construction and land		108,588		100,723		11,213		220,524
Farmland		9,070		28,509		8,230		45,809
1-4 family residential		37,683		161,393		82,337		281,413
Multi-family residential		5,944		11,691		13,813		31,448
Nonfarm nonresidential		87,039		362,304		171,084		620,427
Consumer		22,798		53,740		3,405		79,943
Total loans held for investment	$	428,360	$	917,354	$	349,013	$	1,694,727
Amounts with fixed rates	$	162,439	$	688,239	$	265,075	$	1,115,753
Amounts with floating rates		265,921		229,115		83,938		578,974

	As of December 31, 2018
	One Year or Less		One Through Five Years		After Five Years		Total
	(Dollars in thousands)
Commercial	$	137,581	$	161,874	$	64,185	$	363,640
Real estate:
Construction and land		104,033		74,730		32,291		211,054
Farmland		12,340		31,755		1,894		45,989
1-4 family residential		40,613		137,617		92,353		270,583
Multi-family residential		12,253		12,945		14,075		39,273
Nonfarm nonresidential		61,561		294,683		162,416		518,660
Consumer		36,129		37,161		5,980		79,270
Total loans held for investment	$	404,510	$	750,765	$	373,194	$	1,528,469
Amounts with fixed rates	$	147,087	$	541,076	$	267,748	$	955,911
Amounts with floating rates		257,423		209,689		105,446		572,558

	As of September 30, 2019 (Unaudited)			As of December 31, 2018
	(Dollars in thousands)
Nonaccrual loans	$	11,577		$	11,691
Accruing loans 90 or more days past due		277			1,876
Total nonperforming loans		11,854			13,567
Repossessed assets		5			11
Other real estate owned:
Commercial real estate, construction, land and land development		2,071			1,568
Residential real estate		255			341
Total other real estate owned		2,326			1,909
Total nonperforming assets	$	14,185		$	15,487
Restructured loans-nonaccrual	$	2,967		$	2,900
Restructured loans-accruing		2,181			2,920
Ratio of nonperforming loans to total loans held for investment		0.70	%		0.89	%
Ratio of nonperforming assets to total assets		0.64			0.74

	As of September 30, 2019 (Unaudited)		As of December 31, 2018
	(Dollars in thousands)
Nonaccrual loans by category:
Real estate:
Construction and land	$	399	$	32
Farmland		287		112
1-4 family residential		2,387		2,728
Multi-family residential		—		—
Nonfarm nonresidential		5,903		6,031
Commercial		2,222		2,663
Consumer		379		125
Total	$	11,577	$	11,691

	As of September 30, 2019
	Pass		Special Mention		Substandard		Doubtful		Total
	(Dollars in thousands) (Unaudited)
Real estate:
Construction and land	$	217,772	$	1,199	$	1,154	$	399	$	220,524
Farmland		43,700		1,771		51		287		45,809
1-4 family residential		271,963		4,062		3,001		2,387		281,413
Multi-family residential		31,415		—		33		—		31,448
Nonfarm nonresidential		598,332		12,067		4,125		5,903		620,427
Commercial		396,752		9,488		6,701		2,222		415,163
Consumer		77,923		1,502		129		389		79,943
Total	$	1,637,857	$	30,089	$	15,194	$	11,587	$	1,694,727

	As of and For the Nine Months Ended September 30, 2019 (Unaudited)			As of and For the Year Ended December 31, 2018
	(Dollars in thousands)
Average loans outstanding⁽¹⁾	$	1,605,423		$	1,258,178
Gross loans held for investment outstanding at end of period	$	1,694,727		$	1,528,469
Allowance for loan losses at beginning of period	$	11,220		$	8,765
Provision for loan losses		2,414			2,390
Charge-offs:
Real estate:
Construction, land and farmland		4			90
Residential		54			294
Nonfarm non-residential		10			—
Commercial		1,544			—
Consumer		23			88
Total charge-offs		1,635			472
Recoveries:
Real estate:
Construction, land and farmland		—			398
Residential		12			18
Nonfarm non-residential		—			13
Commercial		37			28
Consumer		42			80
Total recoveries		91			537
Net charge-offs (recoveries)		1,544			(65	)
Allowance for loan losses at end of period	$	12,090		$	11,220
Ratio of allowance to end of period loans held for investment		0.71	%		0.73	%
Ratio of net charge-offs (recoveries) to average loans		0.10	%		—

	As of September 30, 2019 (Unaudited)					As of December 31, 2018
	Amount		Percent to Total			Amount		Percent to Total
	(Dollars in thousands)
Real estate:
Construction and land	$	1,477		12.2	%	$	1,590		14.2	%
Farmland		186		1.6			104		0.9
1-4 family residential		1,817		15.0			1,538		13.7
Multi-family residential		190		1.6			236		2.1
Nonfarm nonresidential		4,004		33.1			2,715		24.2
Total real estate		7,674		63.5			6,183		55.1
Commercial		3,748		31.0			4,453		39.7
Consumer		668		5.5			584		5.2
Total allowance for loan losses	$	12,090		100.0	%	$	11,220		100.0	%

	As of September 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in thousands) (Unaudited)
U.S. government agencies	$	16,695	$	439	$	5	$	17,129
Corporate bonds		22,531		90		247		22,374
Mortgage-backed securities		147,433		2,295		577		149,151
Municipal securities		98,159		1,432		14		99,577
Total	$	284,818	$	4,256	$	843	$	288,231

	As of September 30, 2019
	Within One Year					After One Year but Within Five Years					After Five Years but Within Ten Years					After Ten Years					Total
	Amount		Yield			Amount		Yield			Amount		Yield			Amount		Yield			Total		Yield
	(Dollars in thousands) (Unaudited)
U.S. government agencies	$	995		2.88	%	$	4,732		2.87	%	$	10,720		2.89	%	$	682		3.48	%	$	17,129		2.91	%
Corporate bonds		6,500		3.52	%		1,965		3.12	%		13,909		5.52	%		—		—	%		22,374		4.73	%
Mortgage-backed securities		42		—	%		9,640		2.42	%		76,213		2.18	%		63,256		2.71	%		149,151		2.42	%
Municipal securities		13,673		2.05	%		37,996		2.14	%		38,212		2.29	%		9,696		2.86	%		99,577		2.25	%
Total	$	21,210		2.54	%	$	54,333		2.29	%	$	139,054		2.60	%	$	73,634		2.74	%	$	288,231		2.57	%

	For the Nine Months Ended September 30, 2019 (Unaudited)					For the Year Ended December 31, 2018
	Average Balance		Average Rate			Average Balance		Average Rate
	(Dollars in thousands)
Interest-bearing demand accounts	$	35,152		1.35	%	$	37,178		0.88	%
Negotiable order of withdrawal (“NOW”) accounts		265,988		0.88	%		183,705		0.57	%
Limited access money market accounts and savings		434,653		1.02	%		356,880		0.74	%
Certificates and other time deposits > $250k		185,086		2.10	%		152,159		1.60	%
Certificates and other time deposits < $250k		403,048		2.15	%		322,010		1.67	%
Total interest-bearing deposits		1,323,927		1.50	%		1,051,932		1.12	%
Noninterest-bearing demand accounts		396,452		—			319,623		—
Total deposits	$	1,720,379		1.15	%	$	1,371,555		0.86	%

	As of September 30, 2019
	Certificates of Deposit More Than $250,000		Certificates of Deposit of $100,000 Through $250,000		Certificates of Deposit Less Than $100,000		Total
	(Dollars in thousands) (Unaudited)
1 year or less	$	99,653	$	246,810	$	70,335	$	416,798
More than 1 year but less than 3 years		60,726		89,058		36,403		186,187
3 years or more but less than 5 years		4,627		6,571		6,026		17,224
5 years or more		—		—		—		—
Total	$	165,006	$	342,439	$	112,764	$	620,209

	As of December 31, 2018
	Certificates of Deposit More Than $250,000		Certificates of Deposit of $100,000 Through $250,000		Certificates of Deposit Less Than $100,000		Total
	(Dollars in thousands)
1 year or less	$	89,045	$	214,470	$	71,097	$	374,612
More than 1 year but less than 3 years		60,161		69,613		36,438		166,212
3 years or more but less than 5 years		10,939		12,226		7,121		30,286
5 years or more		—		—		—		—
Total	$	160,145	$	296,309	$	114,656	$	571,110

	FHLB Advances
	(Dollars in Thousands)
September 30, 2019
Amount outstanding at quarter-end	$	128,000
Weighted average stated interest rate at quarter-end		2.07	%
Maximum month-end balance during the quarter	$	128,000
Average balance outstanding during the quarter	$	105,588
Weighted average interest rate during the quarter		2.12	%

December 31, 2018
Amount outstanding at year-end	$	55,000
Weighted average stated interest rate at year-end		2.47	%
Maximum month-end balance during the year	$	105,000
Average balance outstanding during the year	$	84,187
Weighted average interest rate during the year		2.20	%

	Subordinated Debt
	(Dollars in Thousands)
September 30, 2019
Amount outstanding at quarter-end	$	25,000
Weighted average stated interest rate at quarter-end		6.75	%
Maximum month-end balance during the quarter	$	25,000
Average balance outstanding during the quarter	$	25,000
Weighted average interest rate during the quarter		6.75	%

December 31, 2018
Amount outstanding at year-end	$	25,000
Weighted average stated interest rate at year-end		6.75	%
Maximum month-end balance during the year	$	25,000
Average balance outstanding during the year	$	1,027
Weighted average interest rate during the year		6.75	%

	Fed Funds Limits
	(Dollars in Thousands)
FNBB	$	35,000
Compass Bank	$	30,000
The Independent Bankers Bank	$	25,000
FTN	$	17,000
ServisFirst Bank	$	10,000
CenterState Bank	$	9,000

	Fed Funds Purchased
	(Dollars in Thousands)
September 30, 2019
Amount outstanding at quarter-end	$	—
Weighted average interest rate at quarter-end		—	%
Maximum month-end balance during the quarter	$	975
Average balance outstanding during the quarter	$	240
Weighted average interest rate during the quarter		2.02	%

December 31, 2018
Amount outstanding at year-end	$	—
Weighted average interest rate at year-end		—	%
Maximum month-end balance during the year	$	—
Average balance outstanding during the year	$	114
Weighted average interest rate during the year		2.44	%

	For the Nine Months Ended September 30, 2019			For the Year Ended December 31, 2018
	(Unaudited)
Sources of Funds:
Deposits:
Noninterest-bearing		18.8	%		19.0	%
Interest-bearing		62.7	%		62.5	%
Subordinated debt		1.2	%		0.1	%
Advances from FHLB		2.8	%		5.0	%
Other borrowings		0.8	%		1.1	%
Other liabilities		0.9	%		0.4	%
Shareholders’ equity		12.8	%		11.9	%
Total		100.0	%		100.0	%

Uses of Funds:
Loans, net of allowance for loan losses		75.5	%		74.2	%
Securities available for sale		14.4	%		15.3	%
Interest-bearing deposits in other banks		1.2	%		1.9	%
Other noninterest-earning assets		8.9	%		8.6	%
Total		100.0	%		100.0	%
Average noninterest-bearing deposits to average deposits		23.0	%		23.3	%
Average loans to average deposits		93.3	%		91.7	%

	As of September 30, 2019
	1 year or less		More than 1 year but less than 3 years		3 years or more but less than 5 years		5 years or more		Total
	(Dollars in thousands) (Unaudited)
Non-cancelable future operating leases	$	1,614	$	2,903	$	2,455	$	5,518	$	12,490
Time deposits		416,887		186,098		17,224		—		620,209
Subordinated debt		—		—		—		25,000		25,000
Advances from FHLB		45,000		30,000		53,000		—		128,000
Securities sold under agreements to repurchase		31,037		—		—		—		31,037
Standby and commercial letters of credit		10,564		12,216		—		—		22,780
Commitments to extend credit		193,356		97,223		25,190		25,281		341,050
Total	$	698,458	$	328,440	$	97,869	$	55,799	$	1,180,566