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 non-core items [13] - Core net income, excluding non-core items, was $19.3 million, also with EPS of $0.65 [13] - Core return on assets (ROA) exceeded 1%, with core net interest margin expanding by eight basis points [6][17] - Total deposits decreased by $53 million, primarily due to a reduction in non-interest bearing deposits [14][15] Business Line Data and Key Metrics Changes - Total loans held for investment remained flat, down $480,000, with total paydowns and payoffs matching new loan production at approximately $500 million [14] - Real estate construction loans decreased by $36.8 million, while real estate residential loans increased by $49.8 million [14] - Non-interest revenue was driven by strong swap fees and SBA loan gains, contributing significantly to profitability [7][22] Market Data and Key Metrics Changes - Texas-based loans remained flat at approximately 41% of the overall loan portfolio [14] - The weighted average total cost of deposits for the first quarter was 2.69%, down 12 basis points from the previous quarter [19] - The company generated approximately $380 million from new deposit account relationships despite the overall decline in deposits [15] Company Strategy and Development Direction - The company is focused on optimizing its branch network and managing expenses while investing in IT and infrastructure [8][21] - The acquisition of Oakwood Bank is progressing as planned, with integration set for September [8] - The company aims to maintain profitability without relying on loan growth, emphasizing net interest margin over volume [10] 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 [11][28] - The company anticipates low to mid-single-digit loan growth for the upcoming quarters, with potential for higher growth in Q2 and Q3 [28][90] - Management noted that credit quality remains stable despite some negative migration in specific relationships [23] Other Important Information - The company completed the sale of a branch in Kaplan, Louisiana, which included approximately $51 million in deposits at an 8% premium [9][16] - The company has a contingent liquidity increase of approximately $600 million, enhancing its financial flexibility [17] Q&A Session Summary Question: Expectations for loan growth in Q2 and the second half of the year - Management expects loan growth in the low to mid-single digits, with a healthy pipeline for Q2 [28] Question: Updated thoughts on core margin progression - Management anticipates continued low single-digit basis point improvements in core margin, influenced by interest rate uncertainty [30] Question: Expectations for deposit growth and moving pieces on acquired balances - Management indicated that the recent branch sale would impact deposit growth, making Q2 potentially muted [46] Question: Areas of the loan portfolio under closer scrutiny - Management is not significantly downscoping any particular area but is focusing on maintaining a diversified portfolio [61] Question: Thoughts on capital return and potential buybacks - Management is considering capital return options but believes more capital build is needed before executing buybacks [53][55] Question: Current expectations for industry consolidation - Management noted a slowdown in M&A conversations due to recent market uncertainties but remains open to future opportunities [104]