Business First Bancshares, Inc. Q1 FY2025 earnings call

• Profitability: Core ROAA exceeded 1%, net interest margin expanded eight basis points.
• Capital: TCE exceeded 10% and consolidated TRBC ratio exceeded 13%.
• Expense Management: Another quarter of better-than-expected expense trends, efficiency ratios moving in the right direction.
• Acquisition: Acquisition of Oakwood Bank in Dallas, Texas completed in October 2024, integration proceeding as expected with conversion set for September 2025.
• Branch Sale: Sold Kaplan, Louisiana branch on April 4, 2025, with $51 million in deposits at 8% premium.
• Credit Quality: Modest negative credit migration due to two C and I relationships, but broader portfolio credit quality still good.

First quarter GAAP net income was $19.2 million with EPS of $0.65. Total loans held for investment were relatively flat, down $480,000 due to elevated payoffs and paydowns. Total deposits decreased $53.2 million, but there was $380 million from new deposit account relationships. Core net interest margin expanded eight basis points. Interest bearing deposits cost declined 18 basis points. Noninterest expense was $50.6 million, with core noninterest expense at $49.7 million. Noninterest income was $13.2 million, with strong fee income from SBA loans and swap fees.

• Loan Growth: Expect low to mid single-digit quarterly loan growth, with pipeline healthy, aiming for lower single digits by year-end.
• Margin Expansion: Expect core margin to continue improving by low single-digit basis points per quarter.
• Fee Income: SBA fee income expected to be slightly lower in near term but optimistic for long-term upward trend.

• Credit Migration: Modest negative credit migration in first quarter due to two C and I relationships, though isolated.
• Deposit Competition: Increased competition for deposits, with some competitive offers affecting funding costs.
• Interest Rate Uncertainty: Impact on funding costs and deposit retention/attraction.

Q: Thoughts on loan growth for 2Q and back half of year?

A: Expect low to mid single-digit quarterly loan growth, pipeline healthy, aiming for lower single digits by year-end.

Q: Core margin progression?

A: Expect core margin to continue improving by low single-digit basis points per quarter.

Q: Fee income near term?

A: SBA fee income expected to be slightly lower in near term but optimistic for long-term upward trend.

Q: Branch sale impact on deposits?

A: April branch sale means Q2 deposit growth may be muted.

Q: Commercial real estate special mention?

A: Special mention loans in CRE are ~6% of CRE loans, with 57% in pass watch, stress from interest rate environment.

Q: Capital return via buyback?

A: Not yet, need more capital build before considering buyback.

Q: Louisiana and Texas market growth?

A: Focus on growing within current footprint, open to team lift outs and M&A in Louisiana and Texas.

Q: Dallas Fort Worth deposit growth?

A: Expect increased deposit growth post-Oakwood conversion in September 2025.

Q: Loan yield differentiation?

A: C&I loans ~7%, CRE loans higher in high sevens due to structure differences.

Q: Credit quality of non-accruals?

A: One SBA loan fully reserved, one C&I loan ~25% reserved, resolution ongoing.

Q: M&A expectations?

A: Pausing M&A conversations due to market uncertainty, but industry consolidation still expected within current footprint.