Business First Bancshares, Inc. (BFST) stock intrinsic value fair value estimate & owner earnings analysis

Business First Bancshares is the holding company for b1BANK, a commercial bank serving small and mid-sized businesses and higher-net-worth individuals across Louisiana and Texas. It earns most of its money from the gap between what it charges on loans (about $6.2 billion at the end of 2025) and what it pays on deposits: net interest income was $273 million in 2025, up from $227 million in 2024 and $215 million in 2023. The company has grown by acquisition, most recently Waterstone (Katy, Texas, January 2024), Oakwood Bancshares (Dallas, October 2024, about $864 million of assets, 3.97 million shares issued) and Progressive Bancorp (2025), and by steady organic loan growth of roughly $230 to $380 million a year in 2023 to 2025. How we measured earnings. We start from cash generated by operations, remove swings in receivables and payables, and subtract stock compensation as a real cost. Capital spending is tiny for a bank. Owner earnings per diluted share were $0.86 in 2016, $1.48 in 2018, $2.02 in 2020, $2.47 in 2022, $2.27 in 2023, $2.69 in 2024 and $3.21 in 2025. Because the share count roughly quadrupled over that time through acquisitions, per-share growth (about 12% a year since 2018) is much slower than total earnings growth. Two judgements matter. First, the cash-flow method adds back the provision for credit losses, but loan losses are a genuine recurring cost for a lender. Net charge-offs (loans actually written off) averaged about $7.2 million a year in 2023 to 2025 ($5.4 million, $4.5 million and $11.7 million), or about $0.24 per share, so we deduct that. Second, the company pays about $5.4 million a year of preferred dividends, about $0.18 per share, which belongs to other holders, so we deduct that too. We measure the current business from 2023 to 2025, the years after the Louisiana and Texas franchise reached its present scale, and take the middle year, $2.69, giving about $2.27 per share after those two deductions. That is below 2025's $3.21, which we do not use as the base level. Growth. In 2025, owner earnings per share grew about 19% ($3.21 versus $2.69), but that year benefited from a full year of Oakwood and we do not assume it repeats. The base case assumes 4% a year for five years and 3% for the next five, roughly the pace of loan growth that the bank has funded from its own earnings and deposits every year, at or below the roughly 4 to 7% organic loan growth of 2023 to 2025. We credit no further acquisitions, market gains or margin expansion, since none is signed or otherwise secured. After year ten the base case holds earnings flat rather than growing, on the strength of the deposit and lending franchise that already exists. Bear case, about $32 per share. Credit quality is the named risk. Loans not accruing interest rose sharply in 2025: the allowance for credit losses covered only about 78% of them at year-end 2025, versus about 242% a year earlier, and net charge-offs jumped to $11.7 million (0.19% of loans) from $4.5 million. We assume charge-offs run at roughly 0.5% of loans (about $31 million a year) for three years, cutting earnings to about $1.60 per share, and then a settled level of about $2.00 per share, with no growth. Base case, about $50 per share. Earnings of $2.27 per share growing 4% and then 3% as described, discounted at 6%, with flat earnings continuing beyond year ten. Bull case, about $69 per share. Earnings start from the higher 2025 level (about $2.78 per share after the same deductions) and grow 6% for five years and 4% for five more, in line with the organic loan growth and per-share record of the past several years, then continue flat. Margin-of-safety price. The margin-of-safety price is about $28 per share. That is below the bear case, reflecting a bank with a lending book concentrated in Louisiana and Texas, a rising level of troubled loans, a habit of acquiring other banks, and a preferred stock ahead of common shareholders. Note that a large part of every case's value comes from earnings continuing beyond year ten, so the estimates are sensitive to how durable the franchise proves to be. What could make this wrong. Losses on the troubled loans could exceed what we assume; interest-rate moves could compress the gap between loan and deposit rates; and the 2025 jump in troubled loans could prove larger than the year-end reserve suggests. Conversely, if credit losses stay near 2023 to 2025 norms, the bear case is too pessimistic. We could not fully reconcile every non-cash line in the cash flow statement for years before 2023 and the loan growth funding needs of a bank (capital to support new loans) are not deducted from owner earnings; we judged this acceptable because roughly $82 million of after-cost earnings in 2025 compares with only about $17 million of common dividends.