Business First Bancshares' Q4 2024: Navigating Contradictions in Loan Pricing, NIM Expansion, and Margin Expectations

Net Interest Margin Expansion:
- Business First Bancshares' GAAP reported net interest margin increased from 3.51% in Q3 to 3.61% in Q4, while the non-GAAP core net interest margin rose from 3.46% to 3.56%.
- The expansion was due to improved funding costs, disciplined pricing on new loan production, and the full impact of the Oakwood balance sheet.

Deposit Growth and Cost Reduction:
- Total deposits increased by 870.4 million, or 61.4% annualized quarter-over-quarter, driven by a 11.1% annualized organic growth in deposits.
- The company managed to reduce total interest-bearing deposit costs by 29 basis points from the linked quarter, benefiting from a full quarter impact of September's Fed rate cut and partial impacts of November and December cuts.

Loan Growth and Diversification:
- Total loans held for investment increased by $761.3 million, or 58% annualized during Q4, excluding acquired Oakwood loans.
- The growth was led by C&I loans and residential 1-4 family loans, with Texas-based loans representing roughly 41% of the overall portfolio, reflecting a diversification strategy.

Noninterest Income and Fee Revenue:
- Noninterest income for Q4 was $11.9 million, with $1.3 million contributed by a newly formed customer swap business line, and a one-off benefit of $300,000.
- The company aims to achieve noninterest income between 40 to 50 million for fiscal year 2025, driven by infrastructure development and multiple revenue sources.

Expense Management and Capital Accretion:
- Core noninterest expense increased to $48.9 million, primarily due to the full impact of Oakwood's expense base and seasonal year-end expenses.
- Despite this, the bank continued to focus on capital accretion and liquidity, maintaining a stable total risk-based capital ratio while achieving a higher TCE ratio and TBV per share.