Business First Bancshares NASDAQ: BFST reported first quarter 2026 results that management described as one of the company’s strongest first quarters, supported by the closing of its Progressive Bank acquisition, expense discipline, and an uptick in non-interest income from its financial services activities.
Management highlights acquisition, hiring, and technology initiatives
Chairman and CEO Jude Melville said the company continued to “improve earnings, strengthen capital levels, and improve quality of our liquidity posture” while completing its second “material acquisition” in the past three years. The company closed its acquisition of North Louisiana-based Progressive Bank on January 1, adding “over $700 million in assets and 9 branches,” which Melville said deepened the bank’s footprint in a market where it was already a leader.
Melville also pointed to regional economic momentum tied to the Meta Data Center project in Northlake, Louisiana, saying construction “has accelerated and been expanded,” and that the company expects “tens of billions of dollars of private investment” in a region where it believes it is well positioned.
Beyond the acquisition, Melville said the company added bankers organically, with a focus on Houston. He highlighted the hiring of Jon Heine as market president in Houston and said Heine has “attracted an additional 11 teammates, including 7 production officers,” many of whom are former Veritex Bank bankers. Melville also noted the addition of Ben Marmande to lead corporate banking activities in Texas.
In addition, Melville said Business First began a partnership with Covecta to deploy “agentic AI capabilities,” initially targeting consumer workflows where the bank has identified “over 300 policy rules for potential automation.” He said the company plans to expand use cases over time, including deposits and credit, while emphasizing “governance, validation, and human oversight.”
Earnings: GAAP and core results, efficiency, and revenue mix
Chief Financial Officer Greg Robertson reported first quarter GAAP net income available to common shareholders of $22.2 million, or $0.68 per share. The quarter included $2.2 million of merger-related expenses, a $28,000 gain on former bank premises, and an $80,000 gain on sale of securities. Excluding non-core items, Robertson said non-GAAP core net income was $24.0 million, or $0.73 per share.
Robertson said the company generated a 1.10% core return on average assets (ROAA) and posted a 62% core efficiency ratio for the quarter. He attributed the results to expense discipline and “a meaningful contribution” from the financial services correspondent banking group, which management said benefited from swap fee revenue and SBA gains on sale.
Melville said the bank has invested over the past three years to diversify revenue streams so that it can “produce consistent earnings even in quarters in which our spread income was not as strong as we hoped.” He said that diversification was tested in the first quarter as loan volumes came in below expectations due to heightened payoffs and paydowns.
Balance sheet trends: loans, deposits, and funding mix
On the balance sheet, Robertson said total loans held for investment increased $494.8 million, or 32% annualized on a linked-quarter basis. Excluding the acquired Progressive loans, he said total loans held for investment declined $102.7 million, or 6.2% annualized, with organic commercial loans down $58.6 million and organic commercial real estate loans down $23.0 million from the linked quarter.
Robertson said the lower-than-expected organic loan growth was driven by higher paydowns and payoffs. Total paydowns and payoffs were $579 million in the quarter, compared with $476 million in new and renewed loan production. In the prior quarter, the company produced $500 million of new and renewed loans while paydowns and payoffs were $332 million.
During Q&A, Robertson said paydowns were “majority” in the Texas franchise, tied in part to the bank’s growth years in 2022 and 2023 as projects came to completion, as well as decisions to exit certain relationships based on “a rate or credit.” Melville added that the company has “dramatically downshifted” its construction exposure and that it is not replacing some of the large-dollar construction projects as they roll off, as part of a broader effort to diversify the portfolio and manage concentrations.
Deposits increased $766.4 million, Robertson said, due to growth in both interest-bearing and non-interest-bearing deposits of $513.3 million and $253.0 million, respectively. The increase in interest-bearing deposits was driven largely by approximately $325 million in commercial money market accounts and $185 million in personal money market accounts. Excluding Progressive deposits, Robertson said organic deposit growth was $81.5 million, or 4.4% annualized on a linked-quarter basis.
With improved liquidity from softer net loan growth, Robertson said the company reduced wholesale funding: FHLB borrowings declined $170.4 million and brokered deposits were reduced by $112.5 million from the linked quarter.
Margin, expenses, credit, and outlook
Robertson said the company’s GAAP net interest margin decreased 6 basis points linked-quarter to 3.65%. Core net interest margin (excluding purchase accounting accretion) decreased 4 basis points to 3.60%. Robertson said loan discount accretion was lower than expected at $1.1 million, driven by “lower actual rate marks” from the Progressive acquisition, and he expects accretion to remain in the “low $1 million range” per quarter for the balance of 2026.
On a linked-quarter basis, the cost of deposits decreased 18 basis points while total loan yields decreased 27 basis points. Core loan yields (excluding discount accretion) were 6.54%, down 24 basis points from the prior quarter. Robertson said the weighted average yield on new and renewed loan production was 7.20% and said the bank was “pleased” it could “hold the line” on new loan yields. Management also noted an 81% core CD balance retention rate in the quarter and said it views 45% to 55% deposit betas as achievable if future rate cuts occur, while maintaining a baseline assumption of no further rate cuts in 2026.
During a follow-up question on margin “noise,” Robertson said the quarter included about $1.2 million in interest reversals tied to loans moving to nonaccrual status, which he said likely reduced margin by “six or seven basis points.” He said the timing of returning those assets to earning status is “a little bit unpredictable,” but the bank sees “some opportunity on the horizon.”
On expenses, Robertson reported GAAP non-interest expense of $57.5 million, including $2.2 million of acquisition-related expense. Core non-interest expense was $55.2 million, up $5.0 million from the prior quarter and reflecting a full quarter of Progressive’s expense base. Robertson said core expenses were lower than expected due to the timing of certain investments and marketing spend. Looking ahead, he said the company expects expenses in the “mid to upper 50s” in the second quarter, trending “slightly” higher through the year. Melville said management remains confident in Progressive-related cost savings, and indicated the company expects to achieve about $11 million of cost savings on an annualized basis out of Progressive’s approximately $21 million run rate, with benefits “primarily in fourth quarter” following a planned late third-quarter systems conversion.
On credit, Robertson said loans past due 30 days or more (excluding non-accruals) declined to 0.42% of loans held for investment from 0.64% at quarter end, while the ratio of nonperforming loans rose 29 basis points to 1.53% and nonperforming assets rose 29 basis points to 1.38% of total assets. In Q&A, Robertson said most of the quarter’s increase in nonperformers was tied to “one client” with about $16 million of exposure, contributing to a roughly $25 million increase in nonperforming loans during the quarter. He said he expects about 30% of the current nonperforming asset list to reach resolution in the second quarter, with additional resolution over the remainder of the year, potentially leaving “only a few pieces hanging over past year-end.” On potential losses, Robertson said the bank expects reserves and loss recognition to remain “pretty consistent with what the street has forecast.”
On outlook, Melville said the company reiterated full-year loan guidance and continues to forecast a 1.25% ROA end-of-year run rate. Robertson said the bank expects “low- to mid-single-digit” net interest margin expansion going forward. On loan growth, Robertson said the company expects payoffs to “slightly reduce” as it moves further away from the impacts of earlier-period origination vintages, and said the bank is thinking about “high single digits to 10%” loan growth in the second and third quarters to offset the slow first quarter, resulting in mid-single-digit full-year growth. Management also discussed construction exposure, with Robertson saying he expects that category to settle in a “high single digits-10% range” as a comfortable level.
Melville also discussed capital deployment priorities, stating that the company would consider share repurchases when it believes the market undervalues the franchise, but said the bank has no “mandatory buybacks.” He added that repurchases would be “a higher priority than seeking out M&A opportunities in the near term.”
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.
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