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    BFST
    Earnings call· Jun 2026(Q2 FY26)

    Business First Bancshares, Inc. BFST

    Jul 23, 2026 Source

    Executive summary

    Business First Bancshares Q2 FY26 — Strong Loan Production and Margin Expansion

    Business First Bancshares delivered solid Q2 FY26 results, marked by normalized loan production and significant margin expansion driven by disciplined pricing. Despite a headline deposit decline, strategic paydowns and seasonal factors were noted, with non-interest-bearing deposits showing growth. The company is well-positioned for continued profitability and asset quality improvement in the second half, supported by a strong loan pipeline and strategic investments in high-growth markets.

    Highlights

    5

    • Returned to normalized loan production, driving a healthy increase in net interest income.

    • Margin expanded by 8 basis points linked-quarter to 3.73% (GAAP) and 3.68% (core).

    • Non-performing loans reduced by about 30% in line with forecasts.

    • Financial Services Group revenue running roughly 20% ahead of last year's pace.

    • Generated a 1.05% core ROAA and a core efficiency ratio of 63.9% for the quarter.

    Concerns

    2

    • Total deposits decreased $229.4 million, though a quarter of the decline was purposeful paydown of higher-cost brokered deposits.

    • Expenses ran higher than normal due to upfront marketing spend and elevated legal fees connected to a non-performing credit resolution.

    Guidance & targets

    13
    CategoryTargetConfidence
    Loan growth
    high single-digit increase
    high materiality
    High
    Core non-interest expense
    closer to $58 million
    medium materiality
    High
    Core non-interest expense
    closer to $57 million
    medium materiality
    High
    Non-performing loans (NPLs)
    closer to $50 million or slightly below
    high materiality
    High
    Consolidated total risk-based capital
    just under 14%, around 13.9%
    high materiality
    High
    CET1 ratio
    just under 10.6%
    high materiality
    High
    Tangible Common Equity (TCE)
    likely to reach about 9%
    high materiality
    High
    Deposit beta
    45% to 55%
    medium materiality
    High
    Net interest margin (NIM)
    modest improvement
    high materiality
    Medium
    Loan loss reserves
    reserve 1.20x all new loan growth
    medium materiality
    High
    Dividend increase
    incrementally increase on an annual basis
    medium materiality
    High
    Dividend payout ratio
    about 20% of earnings
    medium materiality
    High
    Return on Average Assets (ROAA)
    1.25%
    high materiality
    Medium

    Operational metrics

    31
    Core Net Income
    $23.3 million
    Q2 FY26

    Non-GAAP core net income available to common shareholders.

    Core EPS
    $0.71
    Q2 FY26

    Non-GAAP core EPS available to common shareholders.

    GAAP Net Income
    $22.8 million
    Q2 FY26

    GAAP net income available to common shareholders.

    GAAP EPS
    $0.70
    Q2 FY26

    GAAP EPS available to common shareholders.

    Merger-related expense
    $1.2 million
    Q2 FY26

    Included in GAAP net income.

    Gain on extinguishment of debt
    $545,000
    Q2 FY26

    Included in GAAP net income.

    Loss on sale of securities
    $6,000
    Q2 FY26

    Included in GAAP net income.

    Loan discount accretion
    $1 million
    Q2 FY26

    Relatively in line with expectations for the quarter.

    Cost of deposits
    2.26%decreased 7 basis points linked-quarter
    June 2026

    Total cost of deposits for the month ended June 2026, consistent with Q2 full quarter weighted average rate.

    Core loan yields (excluding accretion)
    6.58%up 4 basis points from the prior quarter
    Q2 FY26

    Core loan yields excluding loan discount accretion.

    Weighted average new and renewed loan yield
    7.21%
    Q2 FY26

    Weighted average yield for new and renewed loans during the quarter.

    FHLB borrowings
    $181.7 millionincreased from the prior quarter
    Q2 FY26

    Increased in anticipation of upcoming loan fundings.

    Subordinated debt issuance
    $85 million
    Q2 FY26

    Completed a fully self-managed private placement.

    Subordinated debt redemption
    $52 million
    Q2 FY26

    Redemption of a callable issuance using proceeds from new subordinated debt.

    Loan sale margin impact
    4 basis points
    go-forward

    Expected go-forward impact to the margin from redeploying proceeds of a relatively sizable loan sale.

    Share repurchase valuation threshold
    $120
    ongoing

    Price point at which the company considers share repurchases opportunistic, based on valuation relative to other capital opportunities.

    CD book weighted average rate
    3.30%
    Q2 FY26

    Weighted average rate for the CD book.

    NPL resolution paydown
    $31 million
    Q2 FY26

    Portion of the $35 million NPLs resolved during Q2 that was a paydown.

    NPL resolution moved to OREO
    $4 million
    Q2 FY26

    Portion of the $35 million NPLs resolved during Q2 that moved to OREO.

    Texas-based loans
    35%unchanged from the prior quarter
    Q2 FY26

    Percentage of total loans based in Texas.

    Core CD deposit retention rate
    83%
    Q2 FY26

    Retention rate for core CD deposits.

    Financial Services Group revenue growth
    20%ahead of last year's pace
    H1 FY26

    Revenue growth for the Financial Services Group at the halfway mark of the year.

    Banks served by Financial Services Group
    over 200
    Q2 FY26

    Number of banks served through the Financial Services Group platform after adding a new partner.

    Meta data center total investment
    $50 billionup from $28 billion
    ongoing

    Total investment for Meta's data center project, expanded from initial commitment.

    Meta data center capacity
    5 gigawatts
    ongoing

    Capacity of Meta's data center project.

    Meta data center construction jobs
    7,500
    ongoing

    Expected construction jobs supported by Meta's data center expansion.

    Meta data center permanent operations jobs
    1,000
    ongoing

    Expected permanent operations positions supported by Meta's data center expansion.

    Meta related infrastructure investment
    $1 billion
    ongoing

    Investment for roads, water, and wastewater systems related to Meta's project.

    Entergy Louisiana agreement savings
    $2 billion
    over 20 years

    Projected savings for customers from a new energy agreement with Entergy Louisiana.

    Richland Parish School System teacher bonus
    $50,000
    last year

    Bonus given to teachers, made possible by taxes surrounding the data center investment.

    Louisiana announced capital investments
    $150 billion
    past 18 months

    Total announced capital investments attracted by the state.

    Industry KPIs

    12
    MetricValueDetails
    Loans$24.8 million decreaseUSD
    Deposits$229.4 million decreaseUSD
    Rotce ROE1.05%%
    Cet1 ratio50 basis pointsbps
    Capital returns$4.8 millionUSD
    Fee income lines$13.4 millionUSD
    Allowance reserves—
    Net interest income—
    Net interest margin3.73% (GAAP), 3.68% (core)%
    Net charge offs npls1.26%%
    Total operating expenses$58.4 millionUSD
    Efficiency ratio operating leverage63.9%%

    Product announcements

    1
    ProductTypeDetails
    CFO-type consulting services for community bankslaunch

    Deals & partnerships

    2
    Progressive BankPartnership and integration of operations

    On track for a successful core conversion of the Progressive Bank partnership on August 10th. This will result in the largest branch network of any community bank in Northeast Louisiana.

    University of Louisiana Monroe's athletic departmentOfficial banking partner

    Concluded an agreement to serve as the official banking partner for the University of Louisiana Monroe's athletic department, further investing in the North Louisiana region.

    Risks & headwinds

    2
    Lumpy non-interest revenueQ2 FY26

    Slower swap fee revenue in Q2 FY26

    Mitigation: Management expects swap fees to come back up closer to Q2 levels in Q3 FY26, as the business matures and becomes less lumpy over time.

    Elevated expenses from one-time itemsQ2 FY26

    Up $3.1 million QoQ in core non-interest expense to $58.4 million

    Mitigation: Increase tied to upfront marketing spend and elevated legal fees connected to the resolution of a large non-performing credit; these costs are not expected to recur at this scale in Q3 FY26.

    What to watch in Q3 FY26

    5

    NPL Reduction

    Q3 FY26
    Current1.26% of loans (June 30th)
    Target10-20% reduction in Q3, aiming for $50M or below by year-end

    Why it matters

    Continued improvement in asset quality and reduction of problem credits is crucial for financial performance and investor confidence.

    Now, you know, as we look out into Q3, I think seeing that, we ended at an $80 million point for Q2. We're working toward possibly a 10% to 20% resolution, and we think that's achievable in Q3 in NPLs and then also reduction in OREO possibly 10% to 15% of that as well. So we feel like that's achievable in Q3. We think that, that will continue to maybe slightly down from there in Q4, but we think that it's achievable to end the year closer to $50 million or slightly below.

    Q&A highlights

    7

    How will the recent loan sale and redeployment of proceeds impact margin, average earning assets, and net interest income in the second half of the year?

    The loan sale, which occurred late in Q2, is expected to add about 4 basis points to the go-forward margin. Management anticipates redeploying the liquidity from the sale into higher-earning assets, with a strong loan pipeline expected to drive high single-digit annualized loan growth in Q3 and Q4, preventing a material drag on NII.

    “First of all, the transaction happened in just the last few days of the quarter. [...] we expect to pick up about 4 basis points go-forward impact to the margin in the quarter.”

    asked by Matt Olney · answered by Gregory Robertson

    2 min read5 chapters

    Detailed Narrative

    01

    Louisiana Economic Tailwinds

    Louisiana has attracted approximately $150 billion in announced capital investments over the past 18 months, significantly boosting the state's economy. This is anchored by Meta's data center project in Richland Parish, which recently expanded to 5 gigawatts of capacity and over $50 billion in total investment, up from an initial $28 billion commitment. The expansion is expected to create 7,500 construction jobs and 1,000 permanent operations positions, along with $1 billion in related infrastructure investment.

    02

    Progressive Bank Integration Update

    The company is on track for a successful core conversion of its Progressive Bank partnership on August 10th. This integration will establish Business First Bancshares with the largest branch network of any community bank in Northeast Louisiana, positioning it to capitalize on the region's economic growth. Management expressed confidence in the positive collaboration with the Progressive teams for a smooth transition.

    03

    Strategic Balance Sheet Repositioning

    Business First Bancshares executed a relatively sizable loan sale at the end of Q2 FY26, which is expected to generate additional margin opportunity. The proceeds from this sale will be redeployed into higher-earning assets over the next two quarters. This transaction is anticipated to contribute approximately 4 basis points to the go-forward net interest margin.

    04

    Capital Raise and Management

    During the quarter, the company completed a fully self-managed private placement of $85 million in 6.5% fixed-to-floating rate subordinated debt notes due in 2036. Partial proceeds from this issuance were used to redeem a $52 million callable issuance. This capital raise had a net positive impact of 50 basis points on the Q2 FY26 consolidated total risk-based capital measure.

    05

    Financial Services Group Expansion

    The Financial Services Group expanded its offerings by partnering with Jeff Fair of American Planning Corp., which provides CFO-type consulting services to community banks. This collaboration brings the total number of banks served through the Financial Services Group platform to over 200, contributing to the group's revenue running 20% ahead of last year's pace.

    AI-generated summary of the company’s earnings call. Not investment advice.