Business First Bancshares, Inc. (BFST) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents mixed signals: strong loan growth and stable net interest margins are positives, but increased nonperforming loans and assets raise concerns. The Q&A reveals strategic focus on organic growth and efficiency, with some unclear responses, particularly on risk management. The lack of clear guidance and increased nonperforming loans suggest caution. Overall, the sentiment is neutral, as positives are counterbalanced by risks and uncertainties.
Key Financial Performance
Tangible Common Equity Increased by 90 basis points year-over-year.
Consolidated CET1 Capital Increased by 50 basis points year-over-year.
Tangible Book Value Grew by 17.3% year-over-year.
Return on Average Assets (ROAA) Core ROAA for the year was 1.06%, exceeding the 1% goal, and 1.16% in the fourth quarter.
Earnings Per Share (EPS) Increased by 14% over the year and 20% year-over-year in the fourth quarter.
Core Margin Grew beyond the stated goal of 3.5% to 3.63% for the year.
Efficiency Ratio Achieved a sub-60% efficiency ratio in the fourth quarter.
Loans Held for Investment Increased by $168.4 million or 11.1% annualized on a linked-quarter basis.
Total Deposits Increased by $191.7 million on a linked-quarter basis.
Net Interest Margin (GAAP) Increased by 3 basis points linked quarter to 3.71%.
Core Net Interest Margin Increased by 1 basis point from 3.63% to 3.64% for the quarter ended in December.
Noninterest Expense (Core) $50.2 million for the fourth quarter, up slightly from the prior quarter.
Noninterest Income (Core) $13.2 million for the fourth quarter, better than expected due to higher swap fee revenue.
Nonperforming Loans Ratio Increased by 42 basis points to 1.24% at December 31.
Nonperforming Assets Ratio Increased by 26 basis points to 1.09% at December 31.
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Operating Highlights
Core Conversions and Software Platforms: Conducted 2 major core conversions and implemented multiple software platforms to manage current and future scale.
Correspondent Banking Initiative: Developed into a significant part of the bank, contributing meaningful noninterest income and growing the client base to over 175 community banks.
Progressive Bank Acquisition: Acquired Progressive Bank in North Louisiana, expanding the bank's footprint and strengthening its presence in the region.
Houston Market Expansion: Recruited a new market leader and team in Houston, taking advantage of market disruptions.
Operational Efficiencies: Closed 3 banking centers and opened 1, optimizing the footprint.
Capital Ratios and Balance Sheet: Increased tangible common equity by 90 basis points and consolidated CET1 capital by 50 basis points year-over-year. Grew tangible book value by 17.3%.
Loan and Deposit Growth: Grew loans and deposits in tandem, particularly in Q4, with total loans increasing by $168.4 million and deposits by $191.7 million.
Efficiency Ratio: Achieved a sub-60% efficiency ratio in Q4, reflecting positive operating leverage.
Focus Shift for 2026: Shifted focus from major projects to daily execution, optimizing systems, and deepening the existing footprint.
Sustainable Growth Goals: Aimed for sustainable ROAA, tangible book value accretion, EPS enhancement, and improved efficiency ratios.
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Risk or Challenges
Credit Issues: The company faced credit issues for the first time in years, which required learning and adjustments to improve credit management in the future.
Nonperforming Loans and Assets: Nonperforming loans increased to 1.24% of total loans, and nonperforming assets rose to 1.09% of total assets, largely due to a $25.8 million commercial real estate relationship deterioration.
Deposit Composition: There was a net decrease in noninterest-bearing deposits of $44.5 million, which could impact the cost of funding and overall financial performance.
Interest Rate Environment: The company experienced pressure on loan pricing due to interest rate cuts, which could affect net interest margin and profitability.
Public Funds Outflow: The company anticipates a seasonal outflow of public funds in Q1, which could impact deposit levels and liquidity.
Acquisition Integration: The integration of Progressive Bank involves costs and operational challenges, with cost savings expected only after the third quarter of 2026.
Loan Portfolio Quality: The company recognized a $1 million interest income reversal for a nonaccrual loan, which negatively impacted net interest margin by 5 basis points.
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Guidance & Outlook
2026 Projections: The company anticipates 2026 to be more fruitful than 2025, focusing on optimizing systems for greater efficiencies, deepening the existing footprint rather than expanding, and emphasizing daily execution over new major projects.
Operational Focus: The company will prioritize sustainable ROAA, tangible book value accretion, EPS enhancement, noninterest revenue growth, and noninterest expense discipline to improve efficiency ratios.
Loan Growth: Loan growth is expected to continue, supported by improved demand and a slowdown in paydowns and payoffs. The company anticipates quarterly accretion in 2026 of approximately $1.8 million.
Deposit Trends: Interest-bearing deposits are expected to see some outflows in Q1 2026 due to seasonality in public funds markets. The company aims to maintain a core CD balance retention rate of about 83%.
Net Interest Margin (NIM): The company expects modest margin improvement in a slightly down rate environment, assuming no further rate cuts in 2026.
Noninterest Income: Quarterly noninterest income is projected to be in the mid- to high $13 million range, including a $1 million quarterly contribution from the Progressive Bank acquisition.
Progressive Bank Acquisition: The integration of Progressive Bank is expected to contribute approximately $1 million in quarterly noninterest income, with cost savings anticipated post-conversion in Q3 2026.
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Shareholder Return Plan
Dividend Increase: The company increased its common stock dividend for the seventh consecutive year.
Share Repurchase: The company began purchasing shares back for the first time in almost six years and positioned itself to use this tool as a viable option in the future.
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Key Q&A
Q:What factors contributed to the strong loan growth in the fourth quarter?
A:The strong loan growth in the fourth quarter was attributed to pent-up demand, a downshift in payoffs, and contributions from Southwest Louisiana and North Louisiana. The bank has been working on diversifying its footprint, which has paid off in terms of increased demand.
Q:What is the outlook for organic loan growth in the coming years?
A:The bank expects mid-single-digit loan growth throughout the balance of 2026, with a more balanced view of paydowns compared to previous years.
Q:Can you provide details about the downgraded relationship that went to nonperforming?
A:The downgraded relationship involved a commercial real estate medical facility in Houston. It was one of the largest single commercial real estate exposures for the bank. The bank has marked it down to where any further loss would be immaterial. Lessons learned include managing concentration and exposure risks.
Q:What is the focus for the bank in 2026 regarding daily execution and major projects?
A:The focus in 2026 will be on daily execution rather than major projects. The bank recently completed significant projects, including a core platform conversion and technology implementations. The goal is to maximize the output from these investments and improve decision-making, client service, and employee efficiency.
Q:What is the bank's stance on M&A opportunities in the near term?
A:The bank is not prioritizing M&A opportunities in the near term. Instead, it aims to deepen existing relationships, demonstrate the value of past investments, and focus on sustainable profitability.
Q:What is the bank's approach to share buybacks?
A:The bank executed a buyback of 150,000 shares in the fourth quarter at an average price of $24.70. It views prices below 1.2x tangible book value as attractive and will evaluate buybacks on a quarterly basis.
Q:What is the hiring strategy for the bank in the current environment?
A:The bank plans to hire opportunistically, focusing on quality over quantity. It expects to add 2-3 bankers in Houston in the coming months and believes organic growth is a more profitable use of capital than aggressive M&A.
Q:What is the outlook for noninterest-bearing deposits and fee income?
A:The bank expects some lift in noninterest-bearing deposits from the Progressive Bank partnership and plans to focus on deposit gathering in 2026. Fee income is expected to grow, with contributions from SBA lending, brokerage, and swap fees, though the trajectory may be uneven.
Q:How does the bank view growth across its geographic footprint?
A:The bank aims for balanced growth across its footprint, with Southwest Louisiana and North Louisiana showing strong performance. Dallas and Houston are expected to offer more upward growth opportunities due to their faster-growing economies.
Q:What is the outlook for the swap business in a steady-state rate environment?
A:The bank sees opportunities to grow its swap business by offering clients more options and managing interest rate risk. It also plans to expand swap services to other banks and their clients.
Q:What is the target reserve ratio and expected annualized losses?
A:The bank aims to increase its reserve ratio to 1% or higher over time. Annualized losses are expected to be in the lower to mid-teens basis points, with a focus on managing nonperforming loans.
Q:What are the efficiency goals for the bank over the next 12-18 months?
A:The bank aims to improve operating leverage and achieve an efficiency ratio in the 50s by 2027, supported by better financial performance and integration of recent acquisitions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the downgraded commercial real estate relationship in Houston, offering only general comments about concentration risk and exposure management. Additionally, while discussing the swap business, the response lacked clarity on how a steady-state rate environment might quantitatively impact swap activity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Progressive Bank
Texas loan
ability line
accomplishment
accretion basis
afternoon today
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bank premise
book value
closing Progressive
conference
contribution
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correspondent banking
deposit account
deposit increase
efficiency ratio
fund
harbor statement
income share
increase interest
line loan
loss bank
margin basis
margin interest
margin slide
payoff loan
percentage
point interest
point ratio
presentation Slide
production paydowns
project
rate environment
reversal
review
row
sale security
yield loan
BFST Transcript
Business First Bancshares, Inc. (BFST) Q4 2025 Earnings Call Transcript
Unknown1-22
The earnings call summary presents mixed signals: strong loan growth and stable net interest margins are positives, but increased nonperforming loans and assets raise concerns. The Q&A reveals strategic focus on organic growth and efficiency, with some unclear responses, particularly on risk management. The lack of clear guidance and increased nonperforming loans suggest caution. Overall, the sentiment is neutral, as positives are counterbalanced by risks and uncertainties.
Business First Bancshares, Inc. (BFST) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call summary and Q&A indicate a positive outlook. Financial performance shows improved loan yields and decreased nonperforming loans. Noninterest income is stable, with strong future growth expectations. The Progressive Bank acquisition is progressing well, and potential share repurchases are positive for shareholders. While some uncertainties exist, such as the impact of a government shutdown on SBA loan sales, overall sentiment is positive, with expectations for loan growth and operational savings. The market is likely to react positively, anticipating a 2% to 8% stock price increase.
Business First Bancshares, Inc. (BFST) Q2 2025 Earnings Call Transcript
Unknown7-28
The earnings call reveals mixed signals: while there's a positive outlook on loan growth and fee income, concerns about increased NPLs and unclear management responses on NPAs and cost savings temper optimism. The Q&A highlights potential risks and uncertainties, such as elevated FHLB borrowings and flat margins in Q3. Despite some positive elements like the successful core conversion and growth in SSW, the lack of immediate capital return plans and elevated expenses keep the sentiment neutral.
Business First Bancshares, Inc. (BFST) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call presents a mixed picture: while there are improvements in net interest margin and non-interest income, there are concerns about decreased deposits, increased non-performing assets, and lack of clarity in management responses. The absence of share repurchase or dividend announcements also tempers positive sentiment. The Q&A session reveals some optimism but also highlights uncertainties, particularly regarding loan growth and margin expansion. Overall, the sentiment is neutral, as positive aspects are balanced by potential risks and unclear guidance.
BFST Slides
BFST Report
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