Business First Bancshares, Inc. Q4 FY2024 earnings call

Key Points - 2024 was a significant year with growth in client base, disciplined loan and deposit pricing, net interest margin expansion, and expense management. - Continued focus on diversifying the balance sheet, reducing CRE and C&D concentrations, and maintaining strong asset quality. - Successfully completed two mergers (Oakwood Bank and a nonbank transaction/SBA loan service provider) with positive earnings impact. - Non-interest income sources showed traction, including correspondent banking, SBA, and interest rate swap provisioning. - Focus on 2025 priorities: healthy diversified growth, liquidity, capital accretion, and developing robust client relationships.

Total loans held for investment increased $761.3 million or 58% annualized during the fourth quarter. Excluding acquired Oakwood loans, organic growth was $62.8 million or 4.8% annualized. Total deposits increased $870.4 million or 61.4% annualized quarter-over-quarter. Excluding acquired deposits from Oakwood, organic deposit growth was $156.8 million or 11.1% annualized. GAAP reported fourth quarter net interest margin expanded 10 basis points linked quarter from 3.51 to 3.61 while the non-GAAP core net interest margin increased 10 basis points from 3.46% to 3.56%. Fourth quarter GAAP net income was $15.1 million, and non-GAAP core net income was $19.5 million.

Guidance - Expect low to mid-single digit margin expansion per quarter in 2025. - Non-interest income target between $40 million to $50 million by year-end 2025. - Discount accretion expected to average approximately $700,000 to $800,000 per quarter moving forward. - Core expenses expected to continue increasing in the first quarter due to seasonality, with consensus outlook for core expenses in the low $50 million per quarter range.

Risks - Potential competition affecting loan pricing and margin discipline. - One-off credit events that could impact net charge-offs and provisions. - Need to stay vigilant on special assets and potential systemic issues, though no blanket degradation is seen currently.

Q: On the margin, any additional thoughts on the next few quarters?

A: Greg Robertson expects to continue low to mid-single digit margin expansion throughout 2025, depending on deposit retention and loan pricing.

Q: Thoughts on loan yields and competition?

A: Greg Robertson notes competition is present, but focus is on growing relationships and pricing the whole relationship right. Bankers have tools to be competitive with deposit relationships.

Q: Fee income growth outlook for 2025?

A: Jude Melville and Greg Robertson mention non-interest income has a positive trajectory, with targets between $40-50 million by year-end 2025, though some volatility expected. SBA and swaps are key components.

Q: C&I growth and competition in regions?

A: Greg Robertson notes reduction in C&D concentration, and Jude Melville discusses focus on C&I for robust deposit relationships. Hiring is incremental with focus on internal capacity.

Q: Borrowings and loan renewals?

A: Greg Robertson talks about opportunities to pay down FHLB and broker deposits with organic deposit growth. Loan renewals have a good shot at repricing, with focus on margin discipline.

Q: NIM guidance and rate environment?

A: Greg Robertson mentions forecasting a flat rate environment, with impact of more cuts being a shift in projection. Net charge-offs are seen as occasional outliers with no systemic issues.

Q: Credit reserves and net charge-offs?

A: Greg Robertson states reserves are at 120 of new loan production, with net charge-offs expected to plod along, and occasional one-offs, but no systemic degradation.