Business First Bancshares ((BFST)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Business First Bancshares presented a generally positive outlook, highlighting several achievements such as improved earnings, operational successes, and increased dividends. Despite some challenges, including a decline in total loans and potential delays in SBA loan sales due to the government shutdown, the overall sentiment was positive, with highlights slightly outweighing the lowlights.
Incremental Quality Earnings Improvement
The company demonstrated incremental quality earnings improvement, primarily driven by strong expense control. This was evident as the company maintained essentially flat core noninterest expenses for three consecutive quarters, showcasing effective financial management.
Operational Excellence
Business First Bancshares successfully converted the entire core bank and Oakwood Bank to a new processor, reflecting their strong operational capabilities. This conversion is a testament to the company’s ability to manage complex transitions smoothly.
Growth in Correspondent Banking Unit
The correspondent banking unit is on track to generate over $17 million in revenue this year, contributing approximately $5 million towards net income. This growth highlights the unit’s significant role in the company’s financial performance.
Increased Dividend
The company announced an increase in the quarterly common stock dividend by $0.01, marking the ninth consecutive year of dividend increases. This decision underscores the company’s commitment to returning value to its shareholders.
Reduced FHLB Borrowings
Business First Bancshares reduced its FHLB borrowings by $125.5 million from the prior quarter. This deliberate decision reflects the company’s strategy to decrease excess borrowings and manage its balance sheet prudently.
Positive Loan Yield and Deposit Growth
The company reported a core loan yield of 6.94%, excluding loan discount accretion, and a net growth in noninterest-bearing deposits of $58.2 million since March 31, 2025. This represents approximately 9% annualized growth, indicating strong performance in these areas.
Decline in Total Loans Held for Investment
Total loans held for investment declined by $26.6 million or 1.7% annualized on a linked-quarter basis. This decline was attributed to elevated paydowns, which outpaced new loan production.
Impact of Government Shutdown on SBA Loan Sales
The potential delays in SBA loan sales due to the government shutdown could postpone revenue into the first quarter of 2026. This uncertainty presents a challenge for the company’s short-term revenue expectations.
Decreased Noninterest-Bearing Deposits
The company experienced a net decrease in noninterest-bearing deposits of $44.15 million from the prior quarter, primarily due to a large temporary deposit outflow. This decrease highlights a challenge in maintaining deposit levels.
Slight Decline in Core Net Interest Margin
The non-GAAP core net interest margin experienced a slight decline of 1 basis point, from 3.64% to 3.63% for the quarter ended September 30. This minor decline indicates a stable interest margin environment.
Forward-Looking Guidance
In the third quarter of 2025, Business First Bancshares reported a GAAP net income of $21.5 million, translating to $0.73 per share. The company achieved a core return on average assets (ROAA) of 1.06% and a core efficiency ratio of 60.45%. Despite a decrease in total loans due to elevated paydowns, deposits increased by $87.2 million. The company anticipates further efficiency gains and capital leverage, projecting a 1.2% core ROAA by the end of the fourth quarter of 2026.
In conclusion, the earnings call for Business First Bancshares reflected a positive sentiment, with achievements in earnings improvement, operational excellence, and dividend increases. While challenges such as loan declines and potential SBA loan sale delays were noted, the company’s strategic initiatives and forward-looking guidance suggest a promising outlook.