Business First Bank(BFST) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter GAAP net income was $19.2 million, with EPS of $0.65, including several non-core items [20] - Core net income, excluding non-core items, was $19.3 million, also with EPS of $0.65 [20] - Core return on average assets (ROAA) exceeded 1% [7] - The total net interest margin expanded by eight basis points from the previous quarter, reaching 3.64% on a non-GAAP basis [26] Business Line Data and Key Metrics Changes - Total loans held for investment remained flat, down $480,000, with total payoffs and paydowns totaling approximately $500 million [21] - Noninterest revenue was driven by strong swap fees and SBA loan gains, contributing significantly to profitability [10][34] - Core noninterest income for the quarter was $12.4 million, slightly better than expected [34] Market Data and Key Metrics Changes - Total deposits decreased by $53.2 million, primarily due to a reduction in noninterest-bearing deposits [23] - The company generated approximately $380 million from new deposit account relationships despite the overall decline [23] - The weighted average cost of total deposits was 2.66%, down from 2.69% in the previous quarter [28][123] Company Strategy and Development Direction - The company aims to optimize its branch network and has closed the sale of a branch in Kaplan, Louisiana, which included $51 million in deposits [12][24] - The integration of Oakwood Bank is proceeding as expected, with a conversion set for September [10] - The company is focused on maintaining profitability without relying on loan growth, emphasizing net interest margin [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertain economic environment and highlighted a strong pipeline for the second quarter [17] - The company is better capitalized and diversified than in previous years, positioning itself for growth [17] - Management expects loan growth in the low to mid-single digits for the upcoming quarters, despite macroeconomic uncertainties [42] Other Important Information - The company experienced modest negative credit migration, with nonperforming assets increasing to 0.69% [35] - Management noted that the increase in nonperforming assets was driven by two specific commercial and industrial relationships [35] Q&A Session Summary Question: Loan growth expectations for Q2 and the second half of the year - Management expects loan growth in the low to mid-single digits, with a healthy pipeline for the second quarter [42] Question: Core margin progression throughout the year - Management anticipates continued low single-digit margin improvements, influenced by interest rate uncertainties [44] Question: Expectations for deposit growth - Management indicated that the recent branch sale would impact deposit growth, making Q2 potentially muted [66] Question: Credit quality concerns regarding special mention loans - Management clarified that the increase in special mention loans is primarily related to two specific C&I credits, not commercial real estate [68] Question: Thoughts on capital return and potential buybacks - Management is considering capital return options but believes more capital build is needed before executing buybacks [72] Question: Areas of the loan portfolio under closer scrutiny - Management is not significantly downscoping any particular area but is focused on maintaining a diversified portfolio [82] Question: Future M&A activity and market expansion - Management is open to future M&A opportunities but currently prioritizes growth within existing markets in Louisiana and Texas [91][155]