Business First Bancshares Inc. (NASDAQ:BFST) reported its fourth-quarter 2024 earnings with a notable performance, surpassing analyst expectations. The company posted an actual earnings per share (EPS) of $0.51, beating the forecasted $0.47. Revenue also exceeded projections, coming in at $77.59 million against a forecast of $74.76 million. Following the earnings announcement, the stock surged by 8.84% in after-hours trading, closing at $27.69 from a previous $25.44. With a market capitalization of approximately $798 million and a P/E ratio of 11.8, InvestingPro analysis suggests the stock is currently trading below its Fair Value.
Key Takeaways
- Business First Bancshares exceeded both EPS and revenue forecasts for Q4 2024.
- The company's stock rose by 8.84% in after-hours trading.
- Significant growth in total loans and deposits was reported.
- Strategic acquisitions in Dallas and Houston were completed.
- The company is preparing for a potential $10 billion asset milestone.
Company Performance
Business First Bancshares demonstrated robust performance in the fourth quarter of 2024, with significant growth in both loans and deposits. The company reported a GAAP net income of $15.1 million, translating to $0.51 per share. Non-GAAP core net income was higher at $19.5 million or $0.66 per share. The increase in total loans by $761.3 million and deposits by $870.4 million underscores the company's strong financial health and strategic growth initiatives.
Financial Highlights
- Revenue: $77.59 million (above forecast of $74.76 million)
- Earnings per share: $0.51 (above forecast of $0.47)
- Total (EPA:TTEF) loans: Increased by $761.3 million (58% annualized)
- Total deposits: Increased by $870.4 million (61.4% annualized)
Earnings vs. Forecast
Business First Bancshares outperformed expectations with an EPS of $0.51 compared to the forecasted $0.47, marking an 8.5% surprise. The revenue also exceeded forecasts, reaching $77.59 million against the expected $74.76 million, reflecting strong operational execution.
Market Reaction
The positive earnings report led to a significant 8.84% increase in the company's stock price in after-hours trading. The stock closed at $27.69, up from $25.44. This movement places the stock closer to its 52-week high of $30.3, indicating strong investor confidence following the earnings beat.
Outlook & Guidance
Looking ahead, Business First Bancshares projects mid-single-digit loan growth of 5-6% and aims for net interest margin expansion in the low to mid-single digits. The company targets non-interest income of $40-50 million for 2025 and expects a core net interest margin between 3.65% and 3.75%. According to InvestingPro data, two analysts have recently revised their earnings estimates upward for the upcoming period, with consensus EPS forecasts for 2025 standing at $2.70. The company maintains a strong financial health score, suggesting solid fundamentals to support its growth targets.
Executive Commentary
Jude Melville, CEO of Business First Bancshares, remarked, "2024 was a significant year for us, one in which we not only made but numerically demonstrated material progress." He emphasized the company's commitment to strategic growth, saying, "We're always looking for good partners and certainly we'll continue to add that we'll do so when it's right and not just because we need to grow."
Risks and Challenges
- The company faces potential challenges in maintaining loan and deposit growth amid economic fluctuations.
- Interest rate volatility could impact net interest margins.
- Integration of recent acquisitions may present operational challenges.
- Competitive pressures in the banking sector could affect pricing and margins.
- Regulatory changes could impose additional compliance costs.
Q&A
During the earnings call, analysts inquired about the company's disciplined loan pricing strategy and its focus on relationship depth over volume. Management highlighted the potential for paying down Federal Home Loan Bank borrowings with organic deposit growth and discussed loan repricing opportunities with approximately $600 million in potential renewals.
Full transcript - Business First Bancshares Inc (BFST) Q4 2024:
Christa, Conference Operator: Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to Business First Bankshares 4th Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
I would now like to turn the conference over to Matt Seeley, Senior Vice President, Director of Corporate Strategy and FP and A. Matt, you may begin.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Thank you. Good morning and thank you all for joining. Earlier today, we issued our Q4 2024 earnings press release, a copy of which is available on our website, along with the slide presentation that we will reference during today's call. Please refer to Slide 3 of our presentation, which includes our Safe Harbor statements regarding forward looking statements and the use of non GAAP financial measures. For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com.
Please also note our Safe Harbor statements are available on Page 7 of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to the Safe Harbor statements in our slide presentation and earnings release. I'm joined this afternoon by Business First Bancshares' CEO and President, Jude Melville Chief Financial Officer, Greg Robertson Chief Banking Officer, Philip Durden and President of B1 Bank, Jerry Vazicue. After the presentation, we'll be happy to address any questions you may have. And with that, I'll turn the call over to you, Jude.
Jude Melville, CEO and President, Business First Bancshares: Hey, Thanks, Matt. Good afternoon, everybody. I'd like to begin by saying thank you to everyone listening in today or reading the transcripts at some future date. We know you have choices to make when it comes to allocating your attention and we appreciate your prioritizing our company. 2024 was a significant year for us, one in which we not only made but numerically demonstrated material progress towards goals that we've articulated in this forum over past quarters.
And the Q4 was a particularly nice capstone to our efforts over the course of the year. Over 2024, we grew our client base while exercising disciplined loan and deposit pricing, generating another quarter of double digit basis point expansion of our net interest margin, which topped off a nearly 30 basis point expansion since our trough in the first quarter, helping us to achieve a sustainable over 3.5 percent core NIM sooner than expected. We continued our focus on expense management leading to greater structural profitability, even while continuing to invest in key technology platforms and adding seasoned employees as we prepare internally for a responsible approach towards $10,000,000,000 in assets over the next few years. We funded our portfolio of increasingly diversified loans with even stronger core deposit growth, improving the mix of both sides of the balance sheet, reducing CRE and C and D concentrations markedly, while also maintaining strong asset quality, increasing our loan loss reserve to 0.98%, not including our remaining loan discount from previous acquisitions. Even while we diversify by type of credit asset, we also continue to diversify geographically with over 40% of our exposure now in the Dallas and Houston markets.
We demonstrated traction in our various non interest income revenue sources, including building out the infrastructure of our correspondent banking function, serving over 100 bank clients, growing income from SBA (LON:SBA) and interest rate swap provisioning. In addition to normal organic operations, over the course of the year, we successfully took advantage of opportunities to complete 2 mergers, 1 whole bank acquisition of Oakwood Bank in Dallas and 1 non bank transaction, an SBA loan service provider out of Houston. In both cases, we're either on track or ahead of forecasts on earnings impact, employee and client retention, earn back periods and minimization of tangible book value dilution. We accomplished both these acquisitions without the need of capital and finished the year with a higher TCE ratio, higher TBV per share, higher Tier 1 leverage ratio and a stable total risk based capital ratio. It was a solid and constructive quarter and a solid constructive year.
And I congratulate our team for all the work that went into it. What I'd like to emphasize in closing is that while this was a solid year, it was not a unique year in terms of our priorities, which will continue to be our points of emphasis into 2025 and beyond. Healthy diversified growth within our capacity for capital generation, a focus on liquidity and capital accretion, continued focus on developing a growing set of robustly served clients and preparation through investments, prioritization of regulatory relationships, reputation and balance sheet structuring, so that we may continue seizing opportunities as they present themselves as we're confident they will. With that, I'll turn it back over to you, Matt.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Greg, I'll give you the floor yield the floor to you to kind of go over financials in more detail.
Greg Robertson, Chief Financial Officer, Business First Bancshares: Thanks, Matt. Thanks, Jude, and good afternoon, everyone. As Jude mentioned in his remarks, the 4th quarter marked a strong end to a productive year. I'll spend a few minutes reviewing our results and we'll discuss our updated outlook before we open up for Q and A. 4th quarter GAAP net income and EPS available to time to share will be $15,100,000 and $0.51 and included 4.8 $1,000,000 one time CECL provision related to the Q4 closing in Oakwood, dollars 168,000 merger related expense, dollars 463,000 core conversion related expense and a 21,000 dollars gain on sale of securities.
Excluding these non core items, non GAAP core net income and EPS available to common holders was $19,500,000 $0.66 From our perspective, 4th quarter results were highlighted by solid core margin expansion, disciplined expense management, continued execution on non interest revenue business segments and disciplined balance sheet growth. Total loans held for investment increased $761,300,000 or 58 percent annualized during the Q4. Excluding acquired Oakwood loans during the quarter, organic growth was $62,800,000 or 4.8 percent annualized. Loan growth from the linked quarter was largely attributable to net growth in the C and I portfolio of $54,300,000 $20,800,000 in the residential 1 to 4 family portfolio, while construction loans declined by $31,900,000 linked quarter. Organic production was led by our Southwest Louisiana and Greater New Orleans region, which accounted for all of the net loan growth for the linked quarter.
Based on unpaid principal balances, Texas based loans represent approximately 41% of the overall loan portfolio as of December 31, 2024. Total deposits increased $870,400,000 or 61.4 percent annualized quarter over quarter. Excluding acquired deposits from Oakwood, organic deposit growth for the quarter was 156 $800,000 or 11.1 percent annualized. Organic deposit growth for the quarter was highlighted by increases in money market deposits of $51,800,000 $33,300,000 net growth in non interest bearing deposits with the remainder of the growth being attributed to the bank's seasonal inflow of municipality deposits. 4th quarter funding costs benefited from a full quarter impact of the Federal Reserve September rate cut and partial quarter impact of the November December rate cuts.
We are pleased with our ability to manage down our deposit rates while still generating positive deposit growth and lowering our loan to deposit ratio. Total interest bearing deposit costs declined by 29 basis points from the linked quarter, highlighted by a 44 basis point quarter over quarter reduction in overall cost of NOW accounts and a 41 basis point reduction in the overall cost of money market accounts. Notably, the weighted average total cost of deposits for the 4th quarter was 2.81%, down 13 basis points from the linked quarter, while the December weighted average cost of total deposits was 2.68%. We are encouraged this trajectory will bode well for us as we enter the New Year. Total non interest bearing deposits represent 20.8% of total deposits as of December 31, 2024, slightly down from 21.1% in the linked quarter, but remain in line with our expectations at the end of 2024 and what to end 2024 in the low 20% range.
We think the composition of non interest bearing deposits should hold relatively constant in the low 20% range for the foreseeable future. Our GAAP reported 4th quarter net interest margin expanded 10 basis points linked quarter from 3.51 to 3.61 while the non GAAP core net interest margin excluding purchase accounting accretion also increased 10 basis points during the quarter from 3.46% to 3.56%. 4th quarter net interest income and net interest margin reflect the 1st full quarter impact of Oakwood's balance sheet. Both GAAP and core margin for the quarter expanded more than we expected due to the improved funding costs previously mentioned and disciplined pricing on new loan production. I think it's worth noting that our overall deposit beta for the 4th quarter reflecting just the September rate cut was 51%.
Considering full quarter impact of the late Q4 rate cuts, we would expect deposit costs to continue to decline in the near term or will be affected by our ability to retain and attract lower cost and deposits and non interest bearing deposits. I would like to make a note of few takeaways to Slide 21 in our investor presentation including Oakwood. We continue to see 45% to 55 percent overall deposit betas as achievable. I would also like to point out overall core CD balance retention rates increased from 90% to 90% during December, up from 83% in September. This impressive statistic reflects our team's continued focus on maintaining and retaining core deposit relationships.
As you also see on Slide 22, we have approximately $2,500,000,000 floating rate loans at approximately 7.75 percent weighted average rate, but also have approximately $600,000,000 in fixed rate loans maturing over the next 12 months at a weighted average rate of 6.43%, which we would expect to reprice in the mid-seven percent range. Last thing I would add in our expectations for loan discount accretions to average approximately $700,000 to $800,000 per quarter moving forward. Moving on to the income statement. GAAP non interest expense was $49,600,000 and included $168,000 of acquisition related expense and $463,000 conversion related expense. Core non interest expense for the Q4 of $48,900,000 increased approximately $7,300,000 linked quarter due to the full impact of Oakwood's expense base and some seasonality around year end.
We would expect continued increase in our core expenses in the Q1 due to further seasonality around year end. We also think that the current consensus outlook for core expenses in the low $50,000,000 per quarter range is reasonable. I would like Howard would like to remind folks that given the late 2025 conversion of our Oakwood franchise, we do not expect material cost savings during the year. 4th quarter GAAP and core non interest income was $11,900,000 $11,800,000 respectively. GAAP results did include $21,000 gain on sale of securities.
Non interest income results for the Q3 did come in slightly better than we had expected and was driven by a contribution from our newly formed customer swap business line, which generated approximately $1,300,000 in revenue during the quarter.
Jude Melville, CEO and President, Business First Bancshares: The 4th
Greg Robertson, Chief Financial Officer, Business First Bancshares: quarter did benefit from a one off BOLI debt benefit of $300,000 as well. We do view Q3 core non interest income as a good run rate going forward as well as Q4 expect our non interest income to continue to trend with an upward trajectory that will be bumpy as we've mentioned before. That concludes my prepared remarks and I'll hand it back over to Jude.
Jude Melville, CEO and President, Business First Bancshares: We're prepared to take questions now. It's been a good solid year that we're proud of and we're as excited about 2025 as we've ever been.
Christa, Conference Operator: Thank you. We will now begin the question and answer session. Your first question comes from the line of Matt Olney with Stephens. Please go ahead.
Matt Olney, Analyst, Stephens: Hey, thanks. Good afternoon, guys. Deposit cost, competition and loan yield, it feels like this momentum can continue at least the 1st few quarters of 2025. We'd love to hear any additional thoughts you have around the margin next few quarters.
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes. Matt, thanks for the question. I think you're right. I think our plan is to continue to grind out low to mid single digit margin expansion throughout the year, Maybe a little more in the beginning of the year because we probably hadn't as I mentioned gotten the full impacts of the last rate cut, but that's the plan. The key obviously is to continue to attract and grow deposits organically.
If we can do that like we've been in full rate loan rates steady, we should see some continued expansion.
Matt Olney, Analyst, Stephens: Okay. And then I guess also looking for any kind of commentary you have around loan yields, loan pricing, just the competition out there. I would think at some point this year, we'll see some other banks get more aggressive on some of their loan pricing. Is that something you're seeing yet in any signs of that thus far?
Greg Robertson, Chief Financial Officer, Business First Bancshares: I'll talk about kind of what we've seen so far and maybe I'll let Philip or Jerry make a comment about what they're seeing with the pipeline. We are weighted average for production new and renewed for the Q4 was about 7.58. So still holding in line nicely where we think we should be. I would expect you're right. The challenge will be the competition.
Some of our competition may decide to get more aggressive and we'll have to deal with that on a one off basis. I don't think that changes our focus on growing relationships and making sure the whole relationship is priced the right way. But I'll let Jerry appeal. Yes, I would say, Matt, obviously it's always a very competitive environment and now is no different. But I do think that we have been pretty consistent over the year.
We have some new software as far as our pricing capabilities where we're able to, as Greg said, take into consideration the entire relationship. So those with significant deposit relationships, etcetera, we're able to be very competitive and retain those relationships. So our bankers do a good job of filling the line.
Jude Melville, CEO and President, Business First Bancshares: Yes. I would just add, I think this year was a good illustration of our willingness to exercise discipline when it comes to trade offs between growth and margin. And we certainly will continue growing and plan to continue growing and want to grow. But we also recognize that over the long term we'll create more value by maintaining pricing discipline even while we grow even if it's at a more moderate pace. So it's not just what will the market give us, it's also how we will allocate our capital.
And I think we are more prepared than ever both in terms of our mindset and in terms of our data availability given the technological advancements that we've made to be able to think through those choices. And so we certainly will continue to grow and plan on being a larger organization in the future, but we want to do it the right way. And I think this year has been a good transition for us mindset wise. And we'll look to continue to think through those trade offs.
Matt Olney, Analyst, Stephens: Yes. Okay. And then just lastly for me, I guess, on the fee income side. We just saw some really strong growth throughout the year from several different sources. I think you mentioned this past quarter, it was the customer swap group that contributed nicely.
I guess just kind of want to look forward to 25%. And Greg, in your commentary, I think you said that the Q3 run rate is the best quarter to kind of consider for our forecast. Did I hear that right? And then any general commentary about what drivers you expect, what different groups and teams you expect to drive that fee income growth in 2025?
Greg Robertson, Chief Financial Officer, Business First Bancshares: Matt, I think what we could expect is that I may have said Q3, but I think it's Q3 and the build to Q4, dollars 11,800,000 in Q4 is what we produced and I think that's a good run rate to think about how we're going to go forward. I think somewhere you're going to see from $40,000,000 to $50,000,000 per year end to $25,000,000 As we've mentioned, it might be bumpy getting there because there's going to be different contributors along the way as those build businesses kind of build out and continue to round out. But I think ending the year between $40,000,000 $50,000,000 maybe closer to $50,000,000 is probably what the non interest income target would be. Yes. The important thing for us
Jude Melville, CEO and President, Business First Bancshares: here is what we're trying to do is build an infrastructure that provides multiple opportunities for that growth. So that no one product set or no one function has to consistently outperform, but we can kind of work together on how we get to where we want to go. And I think the SBA platform and the swaps are a good example of maybe even different reactions to interest rate movements. As rates come down a little more and are more stable, maybe the SBA has more of an opportunity to pick up whereas when a higher rate environment that begins to limit some of your SBA opportunities. But perhaps the soft opportunities aren't as great in a more comfortable interest rate environment for everybody.
So hopefully, we're adding enough different components to our non interest income that in any given quarter we'll see continued increase. But as Greg said, it's harder to predict than interest rate margins. And so I might see a little volatility, but we feel really bullish on our opportunity when it comes to non interest income over the course of 2025.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Yes, I would add one thing.
Jerry Vazicue, President of B1 Bank, Business First Bancshares: I think our markets and our bankers out there really gathered a really good command of the shifting rate environment and a little more normalized yield curve creates new and different opportunities. So I think it's nice to have the tools we've got via SBA swaps kind of driving some opportunities for clients. So it's been nice to watch the strategy
Jude Melville, CEO and President, Business First Bancshares: kind of take hold as we prepare for a normalized rate environment. And on a similar vein with thinking about our bankers that are out there, I think this was a good year in terms of confidence building in the product set. So these are new tools and not too new to the industry, but a focus on them is new to us. And that's really been a 6, 8 quarter journey. And so I think by the end of 2024, we're beginning to see bankers think about it more often and begin to recognize that there are incentive opportunities and the ways that we can serve clients more robustly than they might have thought 2 or 3 years ago.
So partly it's the yield curve does make a difference as Jerry pointed out, but I think also our institutional knowledge and our institutional confidence will lead to more business in 2025 regardless.
Matt Olney, Analyst, Stephens: Yes. Okay, guys. I appreciate the commentary and congrats on the year. I'll step back.
Jude Melville, CEO and President, Business First Bancshares: Thanks, Matt. Thanks, Matt.
Christa, Conference Operator: Your next question comes from the line of Michael Rose with Raymond (NSE:RYMD) James. Please go ahead.
Michael Rose, Analyst, Raymond James: Hey, good afternoon, everyone. Thanks for taking my questions. Just wanted to get a little more color on this quarter's C and I growth. It was really strong on an organic basis. Just trying to understand if that was more kind of line driven or just customer growth?
And then if you can kind of shape up the pipelines for us and maybe Jude, if you can just discuss kind of competition within the different regions and if there's any hiring plans as we kind of contemplate a 2025 loan growth outlook? Thanks.
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes. I would say Greg mentioned that we had some success in
Jude Melville, CEO and President, Business First Bancshares: our Southwest and New Orleans markets. And
Greg Robertson, Chief Financial Officer, Business First Bancshares: actually, volume was a little low. If I heard your first part of your question correctly, I would say that it was a little bit of both. We had some deepening of some existing relationships on C and I, but picked up some new customers. But definitely a focus on that as we transition and down shifted more on the C and D.
Jude Melville, CEO and President, Business First Bancshares: Certainly, we'll find a bit of a
Greg Robertson, Chief Financial Officer, Business First Bancshares: larger focus on that C and I, but some really good wins in the Q4.
Jude Melville, CEO and President, Business First Bancshares: Yes. And I would just say that I don't know that our C and I has increased as much as it appears so on a relative basis, right? So what we talked about, let's say, 6 quarters ago was downshifting growth a little bit, but we felt like most of the downshifting would come through less of a focus on construction and CRE. And we felt like the C and I core business that we have would continue to perform and that's really kind of what we've seen is that that's been the case. So not necessarily an outlier quarter.
I think the whole year has been pretty representative of the fact that C and I has been relatively stable in terms of its production, but because of the shift in focus, it's taken a lot of really the pole position that we wanted we've always wanted it to. When you think about being a business bank, I think it's important that you have a robust set of offerings and not just do the real estate, although we, of course, feel very comfortable doing the real estate as well. But so excited about that and see that as a continued opportunity for us. Always we have tried to focus on C and I so that we could get the benefits of a more robust deposit relationship. And so part of our success in the deposit generation this year, in particular in the Q4, has been focused on C and I relationships, not for the types of loans, but for the holistic banking relationship.
And we still see we think we are a little bit differentiated from other community banks in our ability to conduct that type of business and not just to do it, but to do it right. We have internal auditing capabilities that we've invested in over the years. And we recognize that it has a different risk profile and just want to be sure that we're not doing it just for the sake of doing it, but doing it because we're good at it. I
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: think that's a
Jude Melville, CEO and President, Business First Bancshares: little bit of a mood again because most community banks are making those same investments. I can remember, it seems like every 3 or 4 years, we all talk about doing C and I lending, but it doesn't really change in general. But we have chosen to make some investments as the
Greg Robertson, Chief Financial Officer, Business First Bancshares: banks haven't made and I think that's paying off. Michael, I will say that one other detail that kind of highlights your question is at the end of Q1 of 2023, we were about 120% concentrated in C and D as a percentage of capital. And in real time, we finished the Q4 at about 78%. So that decline in the C and D book and the total CRE number from 275 to 254 over that same timeframe actually kind of highlights what you were saying is it I don't know that our focus is any different. It's just when you're unwinding the C and D book specifically as we noted in the quarter as well, but this is not the Q1 that that's happened.
So that's by design as well. I would say also Michael the second part
Jude Melville, CEO and President, Business First Bancshares: of your question about hiring. We don't have ambitious hiring goal this year. We feel like we have capacity internally, but we'll continue to add bankers when we think they're a good cultural fit and we'll continue to have those conversations. But we believe that our growth opportunities may fit us within our current set of bankers and with some incremental additions over the course of the year. But there was a point maybe 3 years ago where we were growing 25, 30 bankers a year and we feel like we've achieved a certain level of platform from which we're able to grow more by adding support staff and making sure that our processes and procedures are adapting as we grow.
And so we think we have more institutional capability to grow without necessarily going on a hiring spree in order to do so. But with that said, we're always looking for good partners and certainly we'll continue to add that we'll do so when it's right and not just because we need to grow.
Michael Rose, Analyst, Raymond James: I appreciate all that color. Sorry, I asked a couple of questions in one there. I think last quarter you kind of talked about a mid single digit loan growth forecast. Any reason that that would change just given some of the momentum that you mentioned?
Greg Robertson, Chief Financial Officer, Business First Bancshares: And yes, I'll just stop there. No,
Jude Melville, CEO and President, Business First Bancshares: I think you can still count on that. We again, it's one thing to be able to produce the loans, but it's also it's another thing to think about how that relates to your capital structure and how it relates to your organic core deposit growth. And we want to make sure that we maintain balance between all three components. So that's still our intention for the year.
Michael Rose, Analyst, Raymond James: Okay, great. And then maybe just one quick final one for me, just on the cost savings related to the deal.
Greg Robertson, Chief Financial Officer, Business First Bancshares: Any changes in expectations there? Or is it all kind of status quo? It's all status quo. We won't we're doing our core conversion in May and then we won't convert them till September. So we're not modeling in any cost saves, material cost saves for 2025 from the Oakwood acquisition.
That should set us up for 2026 to pull through what we had advertised at announcement.
Michael Rose, Analyst, Raymond James: Great. I'll step back. Thanks for taking my questions.
Greg Robertson, Chief Financial Officer, Business First Bancshares: Thanks, Mike.
Christa, Conference Operator: Your next question comes from the line of Sethi Strickland with Hovde Group. Please go ahead.
Sethi Strickland, Analyst, Hovde Group: Hey, good afternoon. Just wanted to start on the borrowings. I saw you reduced borrowings by about $10,300,000 this quarter.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Can you just
Sethi Strickland, Analyst, Hovde Group: talk about how you think about those going forward and whether there's any major upcoming maturities that you could potentially pay down or kind of how you want to use borrowings and wholesale funding in general over the course of the next year or so?
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes, I think there's some opportunities with I'll start with borrowings and kind of transition from there to other wholesale funding. I think we think there's an opportunity and a caveat that Feddy would as long as we continue to have success growing deposits organically like we have over the last year, I think that's going to present itself an opportunity to pay down about $50,000,000 of FHLB maturities this coming year, which would be a fairly significant improvement to margin if we execute on that. I think with broker deposits, we see that the same opportunity over the course of 2020 to 2024 maybe not with as much pickup on from the expense side of those deposits. We structured those a little bit differently where there's maturities coming due every quarter. Opportunity (SO:FTCE11B) in both FHLB and broker deposits to reprice.
I think that that's all caveated on what the current rate environment, if it continues to stay like it is and if we continue to be successful, I think if we are, then you'll see us do what we did in the 4th quarters, pay down those as the opportunity presents itself.
Sethi Strickland, Analyst, Hovde Group: Got it. Thanks for that. And just curious, I appreciate all the detail on the deck on the loans coming up for renewal. But as these come up for renewal, do you have a sense kind of broadly speaking for how much you've been keeping of the loans coming up for renewal versus kind of what's either rolled off on elsewhere? Just trying to get a sense for how much repricing opportunity there is and how much stays with the bank?
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes, I think it's a good question, Nanno. We experienced about $200,000,000 in loan maturities or renewals in the quarter, in the 4th quarter. I think that was higher than the other 3 quarters in the year. So I would say what we've done is done a good job of the relationships that we want to keep within the quarter. We've done a good job of doing that.
I think in reality there's depending down on exact number of the $600,000,000 that we would expect to renew, that'd be kind of tough because the market changes day to day almost. But we think we have a good shot at it and with the weighted average even from where we are the pickup would be nice. I know that's not a real direct answer, but that's a tough one to answer.
Jude Melville, CEO and President, Business First Bancshares: No,
Sethi Strickland, Analyst, Hovde Group: I guess I'll just
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: sorry, go
Jude Melville, CEO and President, Business First Bancshares: ahead. Well, I was going to say part of the point of the repricing opportunity is not just repricing loans that stay. It's also the opportunity to reprice with new loans. And it's really is where is that funding going? Is the funding going to maintain older relationships at a new price?
Or is the funding going to new relationships at a new price? And the new price is the important part. And certainly, it's better to keep a relationship than not. But what we want to be sure we try to do is continue to have that discipline on the margin.
Michael Rose, Analyst, Raymond James: Yes. And Fady, when I think about it
Greg Robertson, Chief Financial Officer, Business First Bancshares: from my seat to bring Jude's point home, I'm thinking about it. If we say we're going to grow 5% or 6% or whatever the number is in loans next year, I'm thinking about the net in the repricing of new and renewed. So the challenge for our bankers is just to make sure that we get to the number. Sometimes that's many different ways of how we get to the number.
Jude Melville, CEO and President, Business First Bancshares: Another way to think about that repricing opportunity and the reason we originally started looking at it was thinking through repricing cliff. Like would it were we facing in a particular quarter so much repricing and with tension with rates being higher than they were when the loans were originally built where there would be asset quality problems. And it's been interesting to see that that has not been the case that any bumps that we've had over the course of the year were really due to just normal banking credit risk as opposed to interest rate risk. And so that's the real good news there is that we've been working our way through that portfolio, whether it's maintaining the relationship and repricing it or encouraging those clients to find a home somewhere else. I think from a credit perspective and a health of the portfolio, it's been a big positive.
And then secondarily, almost you have the opportunity to reprice at a higher level for income. But really the reason we began tracking it was more just to think about the credit exposure.
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes. Fady, one other the way we also think about we're not just thinking about re pricing loans, we're thinking about the other side of the balance sheet as well on the liability side. So looking at time deposit maturities coming in the next 90 days or 120 days, I mean that's a material number that almost matches the fixed rate loans that reprice as well. So there's opportunity on that side. So it's the net of the 2 is kind of the way we think about it.
And we come out with a better relationship at a better price with an existing one. Sometimes we do and sometimes we go to try to maybe use the capital for a new relationship as well.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Teddy, one thing that I'd add is just to put in context of betas in this new down rate environment relative to the rising rate environment beta on our new loan yields. So rising rate environment when rates were moving up, we were at around an 85% beta on new and renewed loan yields. That's holding true roughly on new and renewed loan yields in kind of this declining rate environment. So and then to put that a little bit more into context,
Greg Robertson, Chief Financial Officer, Business First Bancshares: we're
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: getting closer to 100% betas on new offering rates on our interest bearing deposit account. There's still that little spread baked into just the asset liability side of this.
Sethi Strickland, Analyst, Hovde Group: But in terms of the
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: actual dollars of loans that are repricing, we're being quantified much easier on the yield side from the beta perspective, but the dollar perspective, I'd say we're close to 100% kind of pull through and renewal on the dollars.
Sethi Strickland, Analyst, Hovde Group: Got it. Thanks for the color guys. Just one last quick one. Just curious, I saw a greater share of loans came from Louisiana portion of the footprint other than Texas this quarter ex Oakwood. Should we what should we expect sort of going forward in terms of where loans are coming from the footprint?
I guess is the pipeline maybe a little heavier Louisiana than it was before? Just kind of curious on that.
Jude Melville, CEO and President, Business First Bancshares: I think each quarter you're going to see a little different mix and we have a history of that. It's one of the reasons to have a diversified geography is that not only from a credit perspective, but also from a source of production perspective and each still a size where regions having different outcomes effects our overall in different ways. And I do think the downshifting or downshifting of the focus on construction over the past few quarters logically impacts Dallas more because they had more construction than Louisiana for obvious reasons in terms of growth and development. And so it's not a surprise that there might be some rebalancing there in terms of our bookings. I think as we kind of stabilize where we want to be on construction exposure as a concentration then you then we shouldn't see as much negative impact to the downshifting away from construction.
But we're always going to rotate, I hope we do. And we're continuing to invest in Louisiana even as we invest in Texas and want robust shifting areas of growth. And you want to add anything? Yes.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: I was just going to say
Greg Robertson, Chief Financial Officer, Business First Bancshares: that the volume that we talk about is the net growth rate. So to Jude's point, those large C and D loans are paying off. We're doing we're making new loans in Dallas. It's just replace by greater rate. And then the second part is that the Oakwood acquisition, they have a great book that we'll build on as well.
Jerry Vazicue, President of B1 Bank, Business First Bancshares: Yes. When you think about it, the amount of production that it takes to offset natural amortization that occurs in that book because of that significant growth over the years, there remains a lot of activity, a lot of production now. It's just to keep a little bit moderate growth.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Yes. And I think one thing
Jude Melville, CEO and President, Business First Bancshares: we want to be sure that we do and maybe we can provide more information on this in the future. But I think it's we want to remain focused on the granularity of the relationship. And even as we get bigger in terms of our aggregate asset size, we don't want to our individual credit perspective to be in linear relationship with that overall balance sheet growth. We want to try to continue to serve in our sweet spot and that means slightly smaller loans, which hopefully will be more profitable and long term healthier from a credit perspective. But it does mean that you got to do more of them to replace the same dollar amount, right?
But one advantage of C and I is that they tend to be more profitable over time than construction given the totality of the relationship and so we're excited about that. But we'll continue to try to de risk even as we grow.
Sethi Strickland, Analyst, Hovde Group: Got it. Thanks for the color guys. I'll step back.
Jude Melville, CEO and President, Business First Bancshares: Thanks, Fady. Thanks, Fady.
Christa, Conference Operator: Your next question comes from the line of Emmanuel Anavaz with D. A. Davidson. Please go ahead.
Emmanuel Anavaz, Analyst, D.A. Davidson: Good afternoon.
Jude Melville, CEO and President, Business First Bancshares: Hey, good afternoon. Thanks for calling in.
Emmanuel Anavaz, Analyst, D.A. Davidson: I appreciate the quarterly NIM guidance of low single digits to mid single digits per quarter growth. What type of rate environment is behind that assumption?
Greg Robertson, Chief Financial Officer, Business First Bancshares: I'm sorry, I didn't hear the last part of that. Could you repeat?
Jude Melville, CEO and President, Business First Bancshares: What rate assumptions have you made in terms of further decreases in the fed funds rate?
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes. So we're forecasting a flat rate environment. We think the work we've done on our balance sheet becoming more neutral, that's the most conservative way to approach it. And what
Emmanuel Anavaz, Analyst, D.A. Davidson: would be the impact if there were more cuts? How would that shift that kind of trajectory?
Michael Rose, Analyst, Raymond James: We should
Greg Robertson, Chief Financial Officer, Business First Bancshares: approve a basis point or 2 if there were every cut going forward.
Jude Melville, CEO and President, Business First Bancshares: Okay.
Emmanuel Anavaz, Analyst, D.A. Davidson: If I take your if we stay flat, could maybe you got, let's say, 3 basis points per quarter, could you get to 3.75 NIM in Q4 of 20 25?
Greg Robertson, Chief Financial Officer, Business First Bancshares: I think that would be optimistic. I think anywhere from the 365 to 375 range would probably be somewhere where we'd be pleased with that. I think it back to my earlier statement, I think in this environment, it's going to depend on how successful we are in attracting deposits as well as pricing loans the right way. I think the yield curve movement that we've had lately, especially on the longer end, is going to make it challenging.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: Yes. Manuel, I'll give you a little bit more color. I think a $370,000,000 before by the end of the year isn't completely out of the realm of possibility. One thing that I would remind you about is our business manager factory like business that we have where those fees are they run through the margin, but they don't come with an actual balance that weighs against the earning asset base. So those, I think we mentioned last quarter, were a little elevated.
Depending on how some of those clients kind of progress over the course of the year, that could influence that core margin more so than you might think simply because of the fact that there's no actual earning assets that will weigh down on the actual margin calculation. But the $370,000,000 is not completely out of the realm of possibility.
Emmanuel Anavaz, Analyst, D.A. Davidson: And then the broker deposit and FHLB borrowing opportunity, is that assumed to happen or is that if you get the excess deposit growth, you pay those
Greg Robertson, Chief Financial Officer, Business First Bancshares: I would say, if you get the excess deposit growth, it would look a lot like what we did in the 3rd Q4 where we were able to pay those down.
Michael Rose, Analyst, Raymond James: And if
Greg Robertson, Chief Financial Officer, Business First Bancshares: not, they would reprice, but you wouldn't get the full benefit of the difference in the repricing from an organic deposit standpoint.
Emmanuel Anavaz, Analyst, D.A. Davidson: Okay. So that's not necessarily in core NIM guidance, but it is a potential positive?
Jude Melville, CEO and President, Business First Bancshares: Correct. Yes. It's an opportunity. Yes.
Emmanuel Anavaz, Analyst, D.A. Davidson: Got it. Got it. Just was trying to see what's in and what isn't. And I like that opportunity. It's a very nice one.
Stepping over to net charge offs, they stepped up a bit just this quarter. Any thoughts on how net charge offs or provision should extend across the next year? Is it just kind of a modest split and will normalize back down? What are your kind of thoughts on progression across the next year?
Greg Robertson, Chief Financial Officer, Business First Bancshares: Yes. I would say the Q4 for us was a little higher. I think it's a cleanup quarter for a few credits that we had outstanding a settlement of 1. I would call those kind of outliers. I think what we're expecting is to just continue to plot along like we have been in the past quarters.
No material decline
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: in
Greg Robertson, Chief Financial Officer, Business First Bancshares: the book at all.
Jude Melville, CEO and President, Business First Bancshares: We are big enough though that we will have an occasion one off and I always try to caveat this conversation with that that these things are going to happen. But we're not seeing any systemic issues and we're not seeing any blanket degradation. But certainly, our special assets team is on the case and active and working through situations and did over the course of 2024 successfully and anticipate continuing that. But we need to stay vigilant because there will be one off events. But I would absolutely agree with Greg that from a whole portfolio point of view, we're both as confident in 2025 as we did in 2024.
Matt Seeley, Senior VP, Director of Corporate Strategy and FP&A, Business First Bancshares: And Manuel, one thing circling back to the margin, I realized that we have failed to mention the accretion outlook. And so in 2025, it's going to be we see around $800,000 a quarter, a little over $3,000,000 for the full year, which compares to a little over $4,000,000 for 2024.
Emmanuel Anavaz, Analyst, D.A. Davidson: What was it in 2024? I'm sorry, I didn't hear that.
Greg Robertson, Chief Financial Officer, Business First Bancshares: It was a little over $4,000,000 not quite 4,500,000
Emmanuel Anavaz, Analyst, D.A. Davidson: $24,000,000 Okay. I appreciate this. I appreciate all the commentary. Just the last thing on the credit, these are really low levels, but the reserve did step up a bit. Are we likely to kind of stay at that level for now?
Greg Robertson, Chief Financial Officer, Business First Bancshares: We're going to reserve it at 120 of every new loan produced. So we think that that will at least stay at that level and maybe slightly improve. It takes to move at 1 percentage point in our size, it takes $800,000 more to end the model, so almost $1,000,000 more. So I think it's pretty big needle mover to get it to move up. But I think we're going to try.
Jude Melville, CEO and President, Business First Bancshares: Okay. We're really pleased though with the return to normality essentially of our overall loan loss provision being almost 1 there. It's been a while because of our acquisitive history. It's been a while since we've been kind of at 1 or at fear because as you all know we had the loan loss provision and then we had credit mark associated with the acquired assets that don't show up in the provision for our balance sheet. So we've always tried to make the math clear for everybody and show what the effective loan loss reserve was, but which is about 20 basis points today more than the loan loss revision is.
But we finally found something positive in the CECL accounting rules and that meant that with the Oakwood transaction we were able to actually move the reserve over to the reserve. And so we'll benefit from low normalization there, which we're excited about. But definitely want to kind of stay in that range, if not slightly above over the coming year.
Emmanuel Anavaz, Analyst, D.A. Davidson: I appreciate the commentary.
Jude Melville, CEO and President, Business First Bancshares: Thank you.
Christa, Conference Operator: We have no further questions at this time. I will now turn the call back over to Jude Melville for closing remarks.
Jude Melville, CEO and President, Business First Bancshares: Okay, good. Well, thanks everybody again for participating and thanks to our team for a great year. I think just in closing, we spend so much time particularly on this call thinking about the metrics and the numbers and they are and the models and they're certainly very important. But I do like when I can to point out that 1st and foremost we're still a relationship business. And if I think about the work that we did in 2024 and the good things that we accomplished a lot of it really has to do with the building of relationships whether that be core set of investors that we didn't know before or our analyst relationships that we've enjoyed growing over time or our regulatory relationships or our employees.
We have over 800 now, which is a lot compared to the 200 or so that we had 4, 5 years ago and to be able to manage through that and feel really good about the culture that's developing here. The relationships and all those relationships lead to relationships with clients and we have more than we've ever had. And so if I'm thinking about things we're proud of in 2024 and things that we're excited about in 2025, It really comes down to deepening and expanding those relationships and we appreciate you all being a key component of that. So thank you for your time.
Christa, Conference Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
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