Business First Bancshares, Inc. (BFST) is a Louisiana-based financial holding company that operates through its wholly-owned subsidiary, b1BANK. Established in 2006, the company has transformed itself into a premier community banking franchise serving small and midsized businesses across Louisiana, the Dallas-Fort Worth metroplex, and Houston.
Business Overview and Growth Strategy
Over the past two decades, Business First has demonstrated a relentless focus on organic growth, strategic acquisitions, and disciplined risk management - a formula that has propelled the company to become one of the largest Louisiana-based financial institutions. As of December 31, 2024, the company boasted total assets of $7.9 billion, total loans of $6.0 billion, total deposits of $6.5 billion, and shareholders' equity of $799.5 million.
The company's success can be attributed to its unique business model, which emphasizes relationship banking, local market expertise, and a technology-enabled operating platform. Business First targets small and midsized businesses, professionals, and high-net-worth individuals in its markets, offering a comprehensive suite of commercial banking products and services. This specialized approach has allowed the company to carve out a defensible niche and generate consistent, profitable growth.
Expansion and Acquisitions
Business First's journey to become a prominent community bank began with a strong focus on building its presence in Louisiana. The company strategically expanded its footprint through a series of acquisitions, starting with American Gateway Financial Corporation in 2015, which strengthened its position in the Baton Rouge market. This was followed by the acquisitions of Minden Bancorp, Inc. and Richland State Bancorp, Inc. in 2018, which bolstered the company's presence in northwest and northeast Louisiana, respectively.
The company's expansion continued with the acquisition of Pedestal Bancshares, Inc. in 2020, extending its reach into southern Louisiana. In 2021, Business First diversified its operations by acquiring Smith Shellnut Wilson, LLC, marking its entry into the Jackson, Mississippi market. These strategic moves have allowed the company to broaden its geographic footprint and enhance its service offerings.
In 2024, Business First further expanded its presence through the acquisition of Oakwood Bancshares, Inc. in Dallas, Texas, and a non-bank transaction with an SBA loan service provider in Houston. These acquisitions have contributed to the company's growth and diversification strategy, with approximately 41% of the loan portfolio now based in Texas as of December 31, 2024.
Resilience and Risk Management
Throughout its history, Business First has demonstrated resilience in the face of economic challenges. The company successfully navigated the 2008 economic downturn and the COVID-19 pandemic in 2020, maintaining a strong focus on asset quality and disciplined growth. To support its expansion and ensure long-term sustainability, Business First has made significant investments in technology and risk management practices.
Despite its growth, Business First has maintained a strong focus on risk management and asset quality. As of December 31, 2024, the company's ratio of nonperforming loans to total loans held for investment stood at 0.42%, and its allowance for credit losses represented 0.98% of total loans held for investment. These metrics reflect the company's disciplined underwriting practices and proactive approach to credit risk management.
Financials
Financially, Business First has demonstrated consistent profitability and robust capital levels. For the year ended December 31, 2024, the company reported net income available to common shareholders of $59.7 million, or $2.26 per diluted common share. The company's capital ratios, including a Tier 1 Leverage ratio of 9.53% and a Total Risk-Based Capital ratio of 12.75%, comfortably exceed regulatory requirements and position the company for continued growth.
In the most recent quarter (Q4 2024), Business First reported revenue of $116.1 million and net income of $16.5 million. The quarter included the consummation of the Oakwood Bancshares, Inc. acquisition. GAAP net income available to common shareholders was $15.1 million, while non-GAAP core net income was $19.5 million for the quarter.
Loan Portfolio and Credit Quality
Business First's loan portfolio is disaggregated into three main segments: Real Estate, Commercial, and Consumer and Other. As of December 31, 2024, the composition of the loan portfolio was as follows:
1. Real Estate Loans: $4.04 billion (67.6% of total loans) - Commercial Real Estate: $2.48 billion - Construction: $670.5 million - Residential Real Estate: $884.5 million
2. Commercial Loans: $1.87 billion (31.2% of total loans)
3. Consumer and Other Loans: $74.5 million (1.2% of total loans)
The company's allowance for credit losses, which includes both the allowance for loan losses and reserves for unfunded commitments, totaled $58.5 million as of December 31, 2024, representing approximately 0.98% of total loans held for investment. The increase in the allowance compared to 2023 was primarily due to the Oakwood acquisition and organic loan growth.
Liquidity
Despite the challenges posed by ongoing economic uncertainty, Business First has demonstrated resilience and adaptability to navigate through various market conditions. The company's diverse revenue streams, strong liquidity, and prudent risk management practices have enabled it to deliver consistent financial performance and maintain a solid capital position.
As of December 31, 2024, Business First reported: - Cash: $319.1 million - Debt-to-Equity Ratio: 0.58 - Current Ratio: 12.02 - Quick Ratio: 12.02
The company maintains six credit lines with correspondent banks totaling $160 million in availability, with no outstanding balances as of December 31, 2024. Additionally, the Bank has two lines of credit with the Federal Reserve totaling $907.7 million, which have not been drawn upon.
Future Outlook and Guidance
Looking ahead to 2025, Business First remains well-positioned to capitalize on attractive growth opportunities within its markets. The company's focus on building deep, lasting relationships with its clients, coupled with its technology-driven operating model and disciplined approach to risk management, should continue to drive sustainable growth and value creation for its shareholders.
For 2025, Business First has provided the following guidance:
1. Net Interest Margin (NIM): The company expects to continue low to mid-single digit margin expansion throughout 2025, with potentially more expansion at the beginning of the year. Deposit costs are anticipated to continue declining in the near term, with 45% to 55% overall deposit betas considered achievable.
2. Loan Growth: Business First forecasts mid-single digit loan growth for 2025, balancing this growth with organic core deposit growth and capital structure considerations.
3. Non-Interest Income: The company targets $40 million to $50 million in non-interest income for the full year 2025, with key contributors including customer swap business, SBA lending, and other newly built revenue streams.
4. Expenses: Core expenses are expected to be in the low $50 million per quarter range, with no material cost savings anticipated in 2025 due to the late 2025 core system conversion.
5. Asset Quality: Net charge-offs are expected to continue at modest levels, with no systemic issues or blanket degradation in the portfolio. The loan loss reserve is anticipated to remain around the current level of approximately 1.0% of loans.
Conclusion
In conclusion, Business First Bancshares (BFST) is a well-run community bank that has successfully navigated the complexities of the banking industry, delivering consistent growth and shareholder value. With its focus on relationship banking, technology-enabled operations, and disciplined risk management, the company appears poised to continue its trajectory of sustainable growth and profitability in the years to come.