Business First Bancshares Q1 Earnings Call Highlights

Business First Bancshares ((BFST)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Business First Bancshares presented a balanced sentiment, highlighting both achievements and challenges. The company reported strong profitability, effective capital management, and growth in noninterest revenue, alongside successful integration efforts. However, concerns were noted regarding balance sheet contraction, credit quality issues, and challenges in achieving loan and deposit growth.

Profitability and Core Net Interest Margin Expansion

Business First Bancshares reported consistent profitability, with the core Return on Average Assets (ROAA) exceeding 1%. The core net interest margin expanded by eight basis points for the linked quarter, showcasing the company’s ability to maintain strong financial performance.

Capital and Expense Management

The company continued to build its capital levels, with the Tangible Common Equity (TCE) ratio exceeding expectations and the Total Risk-Based Capital (TRBC) ratio over 13%. Improved expense management was also noted, with trends better than anticipated.

Noninterest Revenue Growth

Significant growth in noninterest revenue was driven by contributions from swap fees, Small Business Administration (SBA) loan gains on sales, and SPIC investments, highlighting the company’s diverse revenue streams.

Successful Integration of Oakwood Bank

The integration of Oakwood Bank is proceeding as planned, with a full conversion expected in September. The cultural fit with the Oakwood team has been positive, supporting a smooth transition.

Improvement in Funding Costs

The company reported a decline in total interest-bearing deposits costs by 18 basis points from the linked quarter. The weighted average total cost of deposits for the first quarter was 2.69%, down 12 basis points, indicating effective cost management.

Balance Sheet Contraction

Loans remained flat on a linked quarter basis, while deposits decreased by $53 million, reflecting a contraction in the balance sheet.

Credit Quality Concerns

There was modest negative credit migration due to two commercial and industrial (C&I) relationships, with Non-Performing Assets (NPAs) increasing by 27 basis points from 0.42% in Q4 to 0.69% in Q1.

Challenges in Loan Growth

Higher paydowns and payoffs, particularly from construction loans, led to flat loan balances, posing challenges in achieving loan growth.

Deposit Outflows

The company experienced net decreases in noninterest-bearing deposits of $48.7 million, primarily driven by customer withdrawals rather than full account closures.

Forward-Looking Guidance

Looking ahead, Business First Bancshares aims to continue focusing on expense management and exploring growth opportunities within its current footprint. The company maintains a strong core ROAA and net interest margin, supported by a downward trend in funding costs. Despite challenges, the company remains committed to maintaining stable credit quality and successful integration of Oakwood Bank.

In summary, the earnings call for Business First Bancshares reflected a balanced sentiment, with strong profitability and revenue growth countered by challenges in loan and deposit growth. The company remains focused on strategic management and growth opportunities, aiming to sustain its financial performance in the coming quarters.