Workflow
Business First Bank(BFST) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a core net income of $17.7 million or $0.70 earnings per share, equating to a 1.13% ROA and 13.50% ROE, driven by strong noninterest income and lower loan loss provisions [19][20] - The adjusted run rate for the quarter would have been $16.2 million or diluted EPS of $0.64, with a ROA of 1.04% and ROE of 12.14% [7][17] - The company experienced a slight decrease in margin by five basis points, aligning with projections [8][9] Business Line Data and Key Metrics Changes - Loan growth for the quarter was 7.9%, primarily driven by the Dallas Group, which contributed $55 million or 59% of the total loan growth [7][19] - C&I loans accounted for $69.9 million of the growth, with $67 million migrating to owner-occupied CRE and income-producing CRE [7][19] - The company expects loan growth to stabilize in the 4% to 5% range in future quarters [16][19] Market Data and Key Metrics Changes - The company reported a deposit increase of $208 million for the quarter, with $211 million attributed to brokered deposits [41] - Noninterest-bearing deposits decreased to about 28% of the portfolio, down 3% [41] - The company anticipates a stabilization trend in deposits, with expectations of generating $5 million to $7 million in new noninterest-bearing deposits monthly [41] Company Strategy and Development Direction - The company is focused on risk management through diversification across geographical, industry, and product lines [3][16] - There is an emphasis on achieving greater efficiency and optionality through scaling, with a strategic slowdown in growth to match current economic conditions [4][16] - The management aims to prioritize earnings growth while maintaining a capital accretive position [68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current credit quality, noting no signs of stress in the portfolio despite broader industry concerns [50][51] - The company views a 1% ROA as a baseline for future performance, with potential for outperformance in favorable conditions [18][111] - Management remains cautious about the competitive landscape for deposits but sees signs of stabilization [91] Other Important Information - The company added two key hires in the back office to enhance operational efficiency [18] - The tangible book value increased by about 10% year-to-date, reflecting strong capital management [20] Q&A Session Summary Question: What does the company expect regarding NID mix stabilization? - Management anticipates the noninterest-bearing composition to bottom out around 26% by year-end [24] Question: How does the company view the competitive landscape for deposits? - Management noted that the competitive environment has calmed down somewhat, with some peers raising rates more aggressively [91] Question: What is the expected loan growth rate for the next few quarters? - Management indicated a shift towards a 4% to 6% annualized growth rate, reflecting a more strategic approach to growth [83] Question: What are the expectations for margin expansion in 2024? - Management believes there could be opportunities for margin expansion next year, even without a rate decrease [81]