Business First Bank(BFST) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a GAAP net income of $21.71 per share for the fourth quarter, with core net income of $23.579 per share after excluding non-core items [10][11] - The core return on assets (ROA) was 1.16% in the fourth quarter, exceeding the company's stated goal of 1% [7][10] - Earnings per share (EPS) increased by 14% year-over-year, with a 20% improvement in the fourth quarter alone [8][10] - The tangible common equity ratio increased by 90 basis points, and consolidated CET1 capital rose by 50 basis points year-over-year [6] Business Line Data and Key Metrics Changes - Total loans held for investment increased by $168.4 million, or 11.1% annualized on a linked quarter basis, driven by improved demand and reduced paydowns [11] - Total deposits rose by $191.7 million, primarily due to a net increase in interest-bearing deposits [12] - The non-interest income for the fourth quarter was approximately $13.2 million, with significant contributions from swap fee revenue [18] Market Data and Key Metrics Changes - Texas-based loans slightly declined from 39% of total loans, expected to decrease to approximately 36% following the acquisition of Progressive Bank [12] - The company experienced strong loan growth in Southwest and North Louisiana, with both regions growing over $100 million in loans and deposits each during 2025 [66] Company Strategy and Development Direction - The company plans to focus on optimizing existing systems and deepening relationships rather than pursuing new major projects in 2026 [9][42] - The management emphasized the importance of sustainable ROAA, tangible book value accretion, and enhancing EPS as key strategic goals [9][44] - The company aims to leverage its correspondent banking initiative to increase non-interest income and cross-sell products to existing clients [81] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about 2026 being even more fruitful, with a focus on daily execution and maximizing the benefits of recent system implementations [9][42] - The company acknowledged challenges in the credit environment but highlighted lessons learned regarding concentration risk and exposure management [32][34] - Management expects to maintain a neutral position on the balance sheet and achieve modest margin improvement in a slightly down rate environment [16] Other Important Information - The company began share buybacks for the first time in nearly six years and increased its common stock dividend for the seventh consecutive year [7] - The acquisition of Progressive Bank is expected to enhance the company's footprint and contribute positively to its operations [21] Q&A Session Summary Question: Insights on loan growth and outlook - Management noted that improved pipeline demand and reduced payoffs contributed to strong loan growth in the fourth quarter, with expectations of mid-single-digit growth for 2026 [24][25] Question: Details on non-performing loans - A significant commercial real estate loan in Houston was identified as non-performing, with management indicating it is one of the largest exposures on their books [30][32] Question: Focus on daily execution versus M&A - Management clarified that while they are not prioritizing new M&A opportunities, they will focus on maximizing the output from recent investments and deepening existing relationships [43][44] Question: Capital management and buyback strategy - The company plans to continue share buybacks opportunistically, with a focus on attractive pricing below $120 [46][48] Question: Opportunities for hiring in the current environment - Management indicated a willingness to hire selectively, focusing on attracting the right talent to support growth without needing to hire aggressively [52][54]