Business First Bank(BFST) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter GAAP net income was $21.5 million, with EPS of $0.73, including non-core items [10] - Non-GAAP core net income was $21.2 million, with EPS of $0.72, indicating consistent profitability [10] - Core ROAA was 1.06%, and core efficiency ratio improved to 60.45% [10][11] - Total loans held for investment decreased by $26.6 million, a 1.7% annualized decline [11] - Total deposits increased by $87.2 million, primarily due to a net increase in interest-bearing deposits [12] Business Line Data and Key Metrics Changes - New loan production was $452 million, while scheduled and non-scheduled paydowns totaled $479 million [11] - Residential one-to-four family and construction & development loans increased by $47.6 million and $38.6 million, respectively [11] - Total commercial real estate loans decreased by $71.1 million, and total commercial and industrial loans declined by $40.2 million [11] Market Data and Key Metrics Changes - Non-interest-bearing deposits represented 21.0% of total deposits, up from 20.3% at the end of Q1 [12] - Net growth in non-interest-bearing deposits since March 31, 2025, was $58.2 million, representing approximately 9% annualized growth [12] Company Strategy and Development Direction - The company is focused on effective expense control and operational excellence, with a commitment to generating operating leverage [4][9] - Two current M&A initiatives are underway, with expectations to realize economic benefits from the Oakwood transaction by Q1 2026 and the Progressive Bank transaction in early Q1 2026 [6][9] - The correspondent banking unit is expected to generate over $17 million in revenue this year, contributing approximately $5 million to net income [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving steady profitability and tangible book value increases throughout 2026 [9] - The company anticipates a slight expansion in net interest margin in Q4 due to competitive deposit pricing and normalization of loan growth [24] - Management noted that customer sentiment is cautiously optimistic due to the potential for lower interest rates [42] Other Important Information - The quarterly common stock dividend was increased by one penny, marking the ninth consecutive year of dividend increases [11][21] - Non-performing loans as a percentage of total loans held for investment decreased from 0.82% to 0.67% [19] Q&A Session Summary Question: Expectations around core margin for Q4 - Management expects a slight increase in margin due to deposit momentum and normalization of loan growth [24] Question: Loan growth evidence in Q4 - Early success in loan originations suggests a rebound to low to mid-single-digit growth in Q4 [26] Question: Non-interest income growth in Q4 - Momentum is expected, but government shutdown may impact SBA loan sales, potentially delaying income [30] Question: Future M&A plans - The focus is on executing current acquisitions and organic growth rather than seeking new M&A opportunities [32] Question: Pricing for new loans as interest rates fall - Pricing will need to remain competitive, with expectations of a decrease in loan yields as rates decline [41]