Business First Bancshares, Inc.

Thank you for standing by. My name is Mandeep, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Business First Band Shares Q1 2024 Earnings Call. All lines will be placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press star one again. Thank you. I would now like to turn the conference over to Matt Seeley, SVP, Director of Corporate Strategy and FP&A. You may begin.

Thank you. Good afternoon and thank you all for joining. Earlier today, we issued our first quarter 2024 earnings press release. a copy of which is available on our website, along with a slide presentation that we'll reference to on today's call. Please refer to slide three of our presentation, which includes the safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures. For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com. Please also note our safe harbor statements are available on page seven of our earnings press release that was filed with the SEC today. All comments made during today's call are subject to the Safe Harbor Statements in our slide presentation and earnings release. I'm joined this afternoon by Business First Bank Shares President and CEO Jude Melville, Chief Financial Officer Greg Robertson, Chief Banking Officer Philip Jordan, and Chief Administrative Officer Jerry Vaskeku. After the presentation, we'll be happy to address any questions you may have. And with that, I'll turn the call over to you, Jude.

Great. Thanks, Matt. Thanks, everyone, for making us a priority this afternoon. We know you have a lot on your plate. We appreciate your interest. We have a lot to discuss today and want to leave time for questions, so I'll jump right in. To begin, we were disappointed by the headline profitability for the quarter. First quarter of the year tends to be our softest, but it was a little softer than normal this year because of greater than anticipated margin pressure and some expense timing. Core ROAA is 0.77%. Core ROAE is 8.9%. Core EPS is 50 cents. Greg will provide more detailed specifics, but big picture, I would say, there wasn't one single quarter moving event that occurred. It was more an accumulation of small impacts. We've been fortunate in that many quarters, a number of small things have added up to outperformance. Sometimes the opposite occurs, and that was the case here. We've already taken a number of steps to remedy these relatively small things, and anticipate a relative flattening of both margin and expenses over the remainder of the year, leading to improved profitability, which remains a priority. Margin movement in particular was positive in March, which leads us to believe some of the adjustments are working. Again, I'll ask Greg to get into further detail in a bit, but first I will take a moment to survey a few of the things that I consider most important about the quarter, not all of which will be reflected in the short-term results. First, a significant part of the margin miss was due to outside success in raising liquidity. As you know, we've been working in particular over the past seven or eight quarters to transition from a company whose priority was loan growth to one that is more balanced and robust in its production expectations. We grew loans by approximately 8% annualized, a healthy rate of growth, and that growth was led by C&I relationships and growth in relationships in Texas. By comparison, we grew deposits by an annualized rate of 24%, a positive sign that the work we've undertaken to shift our focus is undoubtedly taking hold. While we grew MMA accounts significantly, we also stemmed the tide for the first time in seven quarters of outflow of non-interest-bearing accounts, remaining essentially flat and experiencing an uptick the last half of the quarter. Quantity counts showed its composition of the deposit base, and we're pleased with improvement in the mix of funding sources. In present circumstances, if we're going to miss, my preference is to miss by gathering too much liquidity rather than too little, particularly given some of the opportunities we have on the horizon to continue putting those funds to work. and the fact that these deposits are relational. We conducted successful funding campaigns over the quarter, but the upside surprise was primarily the result of increases within existing accounts as we continue to grow with our clients. Second, another of our priorities in coming years and quarters is to increase non-interest income. This quarter, we were able to consummate the acquisition of Waterstone, a loan service provider of SBA products. This partnership gives us more internal capability for generation of SBA opportunities. We're already beginning to see an uptick in the pipeline for SBA-eligible credits. Waterstone also serves other banks, and we look forward to incorporating their work into our nascent correspondent banking function, along with investment portfolio management, loan participation and deposit collections, and an internal swaps desk. We've shifted some management positions around to be certain we're giving the opportunity proper attention. I look forward to seeing this portion of our revenue stream grow over the coming quarters. The acquisition had an unprojected impact this quarter on tangible capital and earnings, and we're excited about that investment. Finally, we're pleased to announce the acquisition of Oakwood Bank in Dallas, Texas. It's an in-market transaction of approximately $830 million in assets and of similar culture and client focus. We believe the partnership to be a very logical next step in the continued development of our now meaningful presence in the North Texas market, bringing our total credit exposure in Texas to 44% of our loan book, and 31 percent of our deposit base. More important than the immediate impact, we believe it positions us well for accelerated future growth in one of America's strongest markets, both through physical presence and through the addition of substantial talent bolstering our commercial banking leadership in the market. This acquisition fits in squarely with the longer-term plans we've discussed with you on previous calls, efficiency through scale, risk mitigation through diversity of the portfolio, and increased profitability through accretive growth. I'm honored that the Oakwood team would agree to partner with us and would note the terms of the deal, leave our teams and our shareholders in linked arm alignment as we work together to continue development of our potential-filled franchise. It was a meaningful and positive quarter for B1 Bank, and I thank our team for all the effort that went into it. With that, I'll turn it over to Greg for further details for our Q&A period.