Business First Bancshares, Inc. Q3 FY2025 earnings call

Themes

• Incremental quality earnings improvement driven by strong expense control, with 3 quarters of flat core noninterest expenses, expecting operating leverage. Aggregate earnings, capital ratios, tangible book value, and efficiency ratio improved.
• Successful system conversions: core bank converted in Q2, Oakwood Bank converted in Q3; on track to close Progressive Bank transaction early 2026, convert in August, and show unified post-integration financials in Q4 2026.
• Momentum in correspondent banking unit: partnering with ~175 banks, expected to generate over $17M in revenue this year, contributing ~$5M to net income.

Results Review

• GAAP net income $21.5M, non-GAAP core net income $21.2M. Core ROAA 1.06%, core efficiency ratio 60.45%.
• Balance sheet: loans held for investment declined, deposits increased, FHLB borrowings decreased.
• Margin: GAAP net interest margin unchanged, non-GAAP core net interest margin declined 1 bp. Loan yields and deposit costs managed.
• Income statement: noninterest expense and income discussed, credit migration noted.

Third quarter GAAP net income was $21.5 million with EPS of $0.73 per share, and non-GAAP core net income was $21.2 million with EPS of $0.72. Total loans held for investment declined $26.6 million or 1.7% linked-quarter. Total deposits increased $87.2 million. GAAP net interest margin was 3.68% linked-quarter, non-GAAP core net interest margin was 3.63%. GAAP noninterest expense was $48.9 million, core noninterest expense was $49.3 million. Credit migration showed total loans past due 30+ days excluding nonaccruals decreased to 0.27% of total loans.

Margin

• Expect margin to expand a couple of bps in Q4 due to deposit momentum and normalized loan growth.

Acquisitions

• On track to close Progressive Bank transaction early January 2026, convert in August 2026, with unified post-integration financials in Q4 2026.

Capital Allocation

• Open to considering share repurchases as capital ratios improve and stock price is attractive, with retained earnings expected to drive further capital accretion.

SBA Sales

• Government shutdown could delay SBA loan sales, potentially delaying revenue into the first quarter.

Deposit Pricing

• Competitive deposit pricing pressures in markets, requiring nimble management.

Q: Expectations around core margin for Q4 in light of recent Fed cut and impact of additional cuts, and deposit cost commentary with respect to deposit pricing competition?

A: Greg expects margin to expand a couple of bps in Q4 due to deposit momentum and normalized loan growth; deposit cost is competitive in markets, with continued focus on evaluating competition weekly.

Q: Loan growth rebound in Q4, evidence seen?

A: Greg notes origination clip was strong, with early success in Q4 leading to expectation of low to mid-single-digit loan growth; David mentions success with unfunded line commitments in Q3 not shown in net numbers.

Q: Strategic M&A near term, share repurchases?

A: David states priority is executing on current acquisitions and organic growth, not aggressively seeking M&A; open to share repurchases as capital ratios improve and stock price is attractive.

Q: Pricing new loans as rates fall, feedback from customers?

A: Gregory states they have a pricing model valuing risk-adjusted capital; feedback from customers is more optimistic with lower rate environment; David adds customers remain active with forward planning.

Q: Expenses, hiring plans, delta in core expenses?

A: Gregory says Q3 core expenses flat, Q4 slightly increase; David mentions discipline in expense management to be poised for opportunities; Matthew adds balance sheet dynamics and timing of IT investments contributed to Q3 expenses being flat.

Q: SBA sales risk from government shutdown, impact on SBA sales?

A: Gregory says SBA sales delay income into first quarter; unknown executive notes pipeline of loans waiting for government to open.

Q: Updates on Progressive Bank, M&A application process?

A: David says Progressive is performing as expected, had positive shareholder vote; regulatory application reviewed, confident of positive outcome, on track to close early January 2026 with conversion in August 2026.