Safe and Sound

Business First Bank

Baton Rouge, LA
3
Star Rating
Founded in 2006, Business First Bank is an FDIC-insured bank headquartered in Baton Rouge, LA. The bank holds equity of $119.2 million on $1.26 billion in assets, according to December 31, 2017, regulatory filings.

U.S. bank customers have $1.06 billion on deposit at 17 offices in multiple states run by 219 full-time employees. With that footprint, the bank holds loans and leases worth $966.7 million, including $671.1 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Business First Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a breakdown of how the bank did on the three major criteria Bankrate used to evaluate American banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a bulwark against losses and provides protection for depositors during times of financial trouble for the bank. It follows then that when it comes to measuring an an institution's financial stability, capital is important. When it comes to safety and soundness, the higher the capital, the better.

On our test to measure capital adequacy, Business First Bank received a score of 8 out of a possible 30 points, below the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Business First Bank's Tier 1 capital ratio was 9.50 percent, above the 6 percent level considered adequate by regulators, but lower than the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to weather financial difficulties.

Overall, Business First Bank held equity amounting to 9.42 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to estimate the impact of troubled assets, such as unpaid mortgages, on the bank's loan loss reserves and overall capitalization.

Having a large number of these kinds of assets could eventually force a bank to use capital to absorb losses, cutting down on its buffer of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

On Bankrate's test of asset quality, Business First Bank scored 36 out of a possible 40 points, coming in below the national average of 37.49 points.

The percentage of problem assets a bank holds compared to its total assets is a widely used indicator of asset quality.As of December 31, 2017, 1.30 percent of Business First Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's above the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." Comparing the size of that reserve to the total amount of problem loans can be a helpful indicator when evaluating a bank's ability to manage problem assets. Unfortunately, the FDIC did not provide information on Business First Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its safety and soundness. Earnings may be retained by the bank, boosting its capital cushion, or be used to deal with problematic loans, likely making the bank more resilient in times of trouble. Banks that are losing money, however, have less ability to do those things.

Business First Bank fell behind the national average on Bankrate's test of earnings, achieving a score of 10 out of a possible 30.

One widely used measure of a bank's earnings is return on equity, calculated by dividing net income (essentially profit) by the total amount of equity. The most recent annualized quarterly return on equity for Business First Bank was 4.84 percent, below the national average of 8.10 percent.

The bank reported net income of $5.8 million on total equity of $119.2 million for the twelve months ended December 31, 2017. The bank had an annualized return on average assets, or ROA, of 0.49 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.