Business First Bancshares Q4 Earnings Call Highlights
by Danessa Lincoln · The Markets DailyBusiness First Bancshares (NASDAQ:BFST) executives used the company’s fourth-quarter 2025 earnings call to highlight what CEO Jude Melville described as a pivotal year for the franchise, pointing to systems upgrades, balance sheet growth, and improved profitability heading into 2026.
Management highlights 2025 initiatives and financial progress
Melville opened the call by emphasizing several operational projects completed during 2025, including two major core conversions and the implementation of multiple software platforms intended to support the bank at its current and future scale. He also cited investments in internal functions such as fraud prevention, internal loan review, and audit capabilities, which he said support safer operations and a constructive regulatory relationship.
Other 2025 developments mentioned included closing three banking centers and opening one, expanding a correspondent banking initiative to more than 175 community bank clients, and the acquisition of Progressive Bank in North Louisiana, which was announced earlier and closed at the turn of the year.
From a financial perspective, Melville said the company strengthened capital ratios over the past 12 months, with tangible common equity up 90 basis points and consolidated CET1 up 50 basis points year over year. He also said tangible book value grew 17.3%, the company began repurchasing shares for the first time in nearly six years, and it increased its common stock dividend for the seventh consecutive year.
On profitability, Melville said the company exceeded its stated return goals, delivering a 1.06% core ROAA for the year and 1.16% core ROAA in the fourth quarter. He also cited a 14% increase in EPS for the year and a 20% year-over-year improvement in the fourth quarter, along with positive operating leverage and a sub-60% efficiency ratio in the quarter.
Fourth-quarter performance: loan growth, deposits, and margin commentary
CFO Greg Robertson reviewed fourth-quarter results and noted that the quarter included several non-core items. He said GAAP net income and EPS available to common shareholders included $2.2 million in merger and core conversion-related expense, a $995,000 loss on former bank premises, and a $35,000 gain on sale of securities. Excluding those items, he said non-GAAP core net income and EPS available to common shareholders were higher.
Robertson highlighted strong linked-quarter loan growth, stating total loans held for investment increased $168.4 million, or 11.1% annualized. He attributed the higher-than-expected growth to improved demand and a slowing in paydowns and payoffs. He said the bank produced approximately $500 million in new and renewed loans during the quarter versus $332 million of scheduled and non-scheduled paydowns and payoffs.
By segment, he said owner-occupied commercial real estate loans increased $76 million (28% annualized) and non-owner-occupied CRE loans increased $77 million (23.9% annualized) on a linked-quarter basis.
Deposits also rose in the quarter. Robertson said total deposits increased $191.7 million, driven primarily by a $236.2 million increase in interest-bearing deposits, partially offset by a $44.5 million decline in non-interest-bearing deposits. He said the increase in interest-bearing deposits was largely tied to approximately $105 million in public funds and $60.8 million in commercial money market accounts, while also noting the company expects some seasonal public-funds outflows in the first quarter.
On net interest margin, Robertson said fourth-quarter GAAP NIM increased three basis points to 3.71%, and core NIM (excluding purchase accounting accretion) rose one basis point to 3.64%. He said results were aided by elevated loan discount accretion due to one large acquired loan paying off earlier than expected, with loan discount accretion totaling $1.4 million in the quarter. He said the company expects quarterly accretion in 2026 of approximately $1.8 million.
Robertson also discussed a $1 million interest income reversal related to a non-accrual loan, which he said reduced fourth-quarter NIM by roughly five basis points. Until the credit is resolved, he said the related drag could remain.
In terms of funding, he said the cost of total deposits decreased 15 basis points linked-quarter, and the weighted average rate on all new interest-bearing deposit accounts during December declined to 3.51% from 3.66% in September. He added that the company believes 45% to 55% overall deposit beta is achievable in a future rate-cut scenario, while the bank’s baseline assumption is no further rate cuts in 2026.
Non-interest income strength and expense outlook
Robertson said core non-interest expense was $50.2 million in the fourth quarter, up slightly from the prior quarter. He said the company expects core expenses to rise in the first quarter due to the Progressive acquisition closing and the timing of annual expense resets, while also noting that cost savings related to Progressive should begin to be recognized after conversion, which he said should occur in the third quarter.
On fee revenue, Robertson said core non-interest income was better than expected, driven primarily by swap fee revenue that was about $1 million higher than expected. He also said the quarter included a $312,000 gain on other real estate owned (OREO). He guided that near-term quarterly non-interest income is expected to be in the mid- to high-$13 million range, which includes approximately $1 million in quarterly contribution from Progressive.
Credit: single CRE relationship drove migration
Robertson said credit metrics weakened during the quarter, largely due to one relationship. Loans past due 30 days or more (excluding non-accruals) rose to 64 basis points of loans held for investment from 27 basis points. Non-performing loans increased to 1.24% of loans held for investment, up 42 basis points linked-quarter, and non-performing assets increased to 1.09% of total assets, up 26 basis points.
Management said the deterioration was tied to a single $25.8 million commercial real estate relationship. In the Q&A, Melville described it as a CRE medical facility in the Houston area and said the bank had been working on it throughout the year. He said the bank had moved the credit to non-performing after a resolution effort “kept dragging on,” and he added that the company believes it has marked the credit down such that any further loss would be “immaterial.” Executives also said it was among the bank’s largest single CRE exposures, noting the bank often participates out exposures when they reach the $20 million to $25 million range.
2026 priorities: execution, profitability targets, and capital flexibility
Looking ahead, Melville said 2026 would bring a shift from major implementations to optimizing systems and focusing on daily execution. He also said the company is taking advantage of disruption in the Houston market, noting the recruitment of John Heine, formerly of Veritex, as a new market leader who has already helped add bankers to the Houston team.
In response to an analyst question, Melville said the company is “not prioritizing seeking another M&A alternative now,” and reiterated a focus on deepening relationships and demonstrating improved profitability. He stated the bank intends to be “over a 1.2 ROA by the end of this year, 2026.” Robertson separately said the bank remains comfortable with mid-single-digit organic loan growth through the balance of 2026, after a fourth quarter that benefited from better pipeline conversion and less severe paydowns.
On capital management, Melville said the company repurchased about 150,000 shares in the fourth quarter at prices in the “24.70s” range and said management will continue to evaluate buybacks on a quarterly basis rather than committing to a set pace regardless of price. He also noted that Progressive’s closing is expected to create a near-term step back in tangible book value per share, which management considers when evaluating repurchases.
Executives also addressed reserve and loss expectations. Robertson said internal discussions are focused on moving the allowance toward 1% or higher over time, and he said the company is reserving at a rate of 120 basis points on every new loan it makes. Regarding net charge-offs, he said the company is thinking about “10-12 basis points of annualized losses” next year, while noting 2025 ended around 19 basis points.
About Business First Bancshares (NASDAQ:BFST)
Business First Bancshares, Inc is the bank holding company for Business First Bank, a regional community bank headquartered in Louisville, Kentucky. Through its wholly owned subsidiary, the company provides a full suite of commercial and retail banking services to small and medium-sized businesses, professionals and individual consumers. Business First Bancshares operates under a community-focused model, emphasizing personalized service, local decision-making and relationship banking.
The company’s primary business activities include commercial lending, treasury and cash management, and deposit services.