The First Bancshares, Inc. Reports Results for Fourth Quarter ended December 31, 2023; Increases Quarterly Dividend 4%

The First Bancshares, Inc. Reports Results for Fourth Quarter ended December 31, 2023; Increases Quarterly Dividend 4%

HATTIESBURG, Miss.–(BUSINESS WIRE)–The First Bancshares, Inc. (“FBMS” or “the Company”) (NASDAQ: FBMS), holding company for The First Bank, (www.thefirstbank.com) reported today financial results for the quarter ended December 31, 2023.


Highlights for the quarter:

  • Net income available to common shareholders totaled $11.0 million for the quarter ended December 31, 2023, representing a decrease of 54.7% when compared to $24.4 million for the quarter ended September 30, 2023. Several one-time items are detailed in the tables located in the appendix of this release.
  • Excluding one-time items detailed in the tables located in the appendix of this release, net earnings available to common shareholders, operating (non-GAAP) decreased $5.3 million, or 22.1% to $18.7 million for the quarter ended December 31, 2023 as compared to $24.0 million for the quarter ended September 30, 2023.
  • For the quarter ended December 31, 2023, total loans increased $80.2 million, or 6.3%, on an annualized basis, as compared to the quarter ended September 30, 2023.
  • During the fourth quarter of 2023, The First Bank (the “First”) sold $123.0 million in available-for-sale securities with a weighted average book yield of 1.12% and average remaining life of 3 years. The First recognized a pre-tax loss of $9.7 million. The First reinvested the proceeds of the sale in available-for-sale bonds in the amount of $92.0 million with a weighted average life of 6 years and an average book yield of 5.33%. The balance sheet repositioning is expected to result in increases in net interest margin of 8 basis points, and net interest income of $4.7 million, and earnings per share of $0.11 with an estimated earn back period of 2.1 years. The First also used $30.0 million of the proceeds to repay borrowings from the Federal Reserve Bank under the Bank Term Funding Program.
  • Net interest margin decreased 19 basis points during the quarter ended December 31, 2023 from 3.47% to 3.28%.
  • Core net interest margin (non-GAAP) decreased 13 basis points during the quarter ended December 31, 2023 from 3.27% to 3.14%.
  • Cost of deposits averaged 154 basis points for the fourth quarter of 2023 compared to 121 basis points for the third quarter 2023.
  • Annualized quarter-to-date net charge-offs and recoveries to total loans were $783 thousand, or 0.061% for the quarter ended December 31, 2023, compared to $49 thousand, or 0.004% for the quarter ended September 30, 2023, and compared to $39 thousand, or 0.004% for the quarter ended December 31, 2022.
  • Nonperforming assets of $20.2 million to total assets was 0.25% for the quarter ended December 31, 2023, compared to $22.4 million, or 0.28% for the quarter ended September 30, 2023, and $17.7 million, 0.27% for the quarter ended December 31, 2022.

Highlights for the year:

  • In the year-over-year comparison, net income available to common shareholders increased $12.5 million, or 19.9%, from $62.9 million for the year ended December 31, 2022 to $75.5 million for the same period ended December 31, 2023.
  • Excluding one-time items detailed in the tables located in the appendix of this release, net earnings available to common shareholders, operating (non-GAAP) increased $28.4 million, or 41.6% to $96.7 million for the year ended December 31, 2023 as compared to $68.3 million for the same period ended December 31, 2022.
  • Excluding the loans acquired from the Heritage Southeast Bank (“Heritage Bank”) acquisition of $1.159 billion, total loans increased $236.9 million for the year ended December 31, 2023, representing net growth of 6.3%, as compared to the same period ended December 31, 2022.
  • Past due loans of $11.7 million to total loans was 0.23% for the year ended December 31, 2023, compared to $6.1 million, or 0.16% for the same period ended December 31, 2022.
  • Cost of deposits averaged 109 basis points for the year ended December 31, 2023, compared to 26 basis points for the same period ended December 31, 2022.
  • Fully tax equivalent (“FTE”) net interest margin (non-GAAP) increased 40 basis points to 3.59% for the year ended December 31, 2023, compared to 3.19% for the same period ended December 31, 2022.
  • For additional information, see the investor presentation filed and available under presentations and press releases included in the investor relations section of the Company’s website: www.thefirstbank.com.

M. Ray “Hoppy” Cole, Jr., President, and Chief Executive Officer, commented, “We continued to experience margin compression during the fourth quarter as non-GAAP core net interest margin decreased 13 basis points due to increased interest costs and the seasonality of our deposit portfolio. Loan growth and credit remained strong with $80 million of net loan growth for the quarter, or 6.3% on an annualized basis. Non-performing assets decreased for the quarter and past dues were low at 23 basis points.

“For the full year of 2023, the Company produced strong results as average assets grew 22.5% from $6.5 billion to $7.9 billion, non-GAAP operating earnings grew $28.4 million to $96.7 million, a 41.6% increase, and dividends to common shareholders increased 21.6% to $0.90 per share.

“Our team members performed extremely well in 2023, in a very difficult operating environment and we remain focused on increasing the returns to our shareholders.”

Quarterly Earnings

Net income available to common shareholders totaled $11.0 million for the quarter ended December 31, 2023, a decrease of $13.3 million, or 54.7%, when compared to $24.4 million for the quarter ended September 30, 2023. This decrease was partially attributable to the pre-tax loss of $9.7 million on the sale of $123.0 million in available-for-sale securities and other one-time items detailed in the tables included with this press release.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) decreased $5.3 million, or 22.1%, to $18.7 million for quarter ended December 31, 2023 as compared to $24.0 million for the quarter ended September 30, 2023. This decrease was partially attributable to a decrease in accretion income of $1.0 million and an increase in borrowing costs of $0.9 million, as well as increased deposit costs of $5.2 million, each for the quarter ended December 31, 2023.

The Company recorded a provision for credit losses of $1.3 million for the quarter ended December 31, 2023 and $1.0 million for the quarter ended September 30, 2023.

Earnings Per Share

For the fourth quarter of 2023, diluted earnings per share were $0.35 compared to $0.77 for the third quarter of 2023 and $0.67 for the fourth quarter of 2022.

Diluted earnings per share, operating (non-GAAP) were $0.59 for the fourth quarter of 2023 compared to $0.76 for the third quarter of 2023 and $0.71 for the fourth quarter of 2022.

Effective January 1, 2023, the Company issued 6,920,422 shares of its common stock in conjunction with the closing of the acquisition of Heritage Bank.

Balance Sheet

Consolidated assets increased $115.1 million to $7.999 billion at December 31, 2023 from $7.884 billion at September 30, 2023. Loans increased $80.2 million and cash increased $157.5 million for the quarterly comparison.

Total loans were $5.170 billion for the quarter ended December 31, 2023, as compared to $5.090 billion for the quarter ended September 30, 2023, and $3.774 billion for the quarter ended December 31, 2022, representing an increase of $80.2 million, or 1.6%, for the sequential quarter comparison, and increase of $1.396 billion, or 37.0%, for the prior year quarterly comparison. During January 2023, loans totaling $1.159 billion, net of purchase accounting adjustments, were recorded from the Heritage Bank acquisition.

Total loans increased $80.2 million, or 1.6% as compared to the quarter ended September 30, 2023, or 6.3% on an annualized basis.

Excluding the acquired Heritage Bank loans, total loans increased $236.9 million, or 6.3% compared to the quarter ended December 31, 2022.

Total deposits were $6.463 billion for the quarter ended December 31, 2023, as compared to $6.480 billion for the quarter ended September 30, 2023, and $5.494 billion for the quarter ended December 31, 2022, representing a decrease of $17.2 million, or 0.3%, for the sequential quarter comparison, and an increase of $968.5 million, or 17.6%, for the prior year quarterly comparison. During January 2023, deposits totaling $1.392 billion, net of purchase accounting adjustments, were acquired in the Heritage Bank acquisition.

Deposits decreased $17.2 million, or 0.3% for the prior quarter comparison. Public funds account for $14.9 million of the decrease in deposits.

Book value per share increased to $30.22 at December 31, 2023 from $28.57 at September 30, 2023.

Tangible book value per share (non-GAAP) increased $1.73 to $19.35 at December 31, 2023 from $17.62 at September 30, 2023. The balance in accumulated other comprehensive loss decreased $47.6 million to $117.6 million at December 31, 2023 from $165.2 million at September 30, 2023.

Asset Quality

Nonperforming assets totaled $20.2 million at December 31, 2023, a decrease of $2.2 million compared to $22.4 million at September 30, 2023 and an increase of $2.5 million compared to $17.7 million at December 31, 2022.

Nonaccrual loans totaled $10.7 million, a decrease of $6.7 million as compared to September 30, 2023 and a decrease of $1.9 million as compared to December 31, 2022.

The ratio of the allowance for credit losses (ACL) to total loans was 1.05% at December 31, 2023, 1.05% at September 30, 2023 and 1.03% at December 31, 2022. The ratio of annualized net charge-offs (recoveries) to total loans was 0.061% for the quarter ended December 31, 2023 compared to 0.004% for the quarter ended September 30, 2023 and 0.004% for the quarter ended December 31, 2022.

Fourth Quarter 2023 vs Third Quarter 2023 Earnings Comparison

Net income available to common shareholders for the fourth quarter of 2023 decreased $13.3 million to $11.0 million compared to $24.4 million for the third quarter of 2023. This decrease was partially attributable to the pre-tax loss of $9.7 million on the sale of $123.0 million in available-for-sale securities and other one-time items detailed in the tables included with this press release.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) decreased $5.3 million, or 22.1%, to $18.7 million for quarter ended December 31, 2023 as compared to $24.0 million for the quarter ended September 30, 2023. This decrease was partially attributable to a decrease in accretion income of $1.0 million and an increase in borrowing costs of $0.9 million, as well as increased deposit costs of $5.2 million, each for the quarter ended December 31, 2023.

Net interest income for the fourth quarter of 2023 was $57.7 million as compared to $60.7 million for the third quarter of 2023, a decrease of $3.0 million. The decrease was largely due to the decrease in accretion of purchase accounting adjustments of $1.0 million as well as increased interest expense of $6.1 million partially offset by an increase in loan interest income of $4.0 million.

Fourth quarter 2023 net interest margin of 3.28% included 19 basis points related to purchase accounting adjustments compared to 3.47% for the third quarter in 2023, which included 25 basis points related to purchase accounting adjustments.

Core net interest margin (non-GAAP) decreased 13 basis points to 3.14% for the fourth quarter of 2023 from 3.27% for the third quarter of 2023.

Investment securities totaled $1.735 billion, or 21.7% of total assets at December 31, 2023, compared to $1.836 billion, or 23.3% of total assets at September 30, 2023. The average balance of investment securities decreased $60.6 million in sequential-quarter comparison. The average tax equivalent yield on investment securities (non-GAAP) increased 11 basis points to 2.37% from 2.26% in sequential-quarter comparison. The investment portfolio had a net unrealized loss of $121.9 million at December 31, 2023 as compared to a net unrealized loss of $184.9 million at September 30, 2023.

The FTE average yield on all earning assets (non-GAAP) increased in sequential-quarter comparison from 4.95% to 5.10%. Interest expense on average interest bearing liabilities increased 42 basis points from 2.05% for the third quarter of 2023 to 2.47% for the fourth quarter of 2023.

Cost of all deposits averaged 154 basis points for the fourth quarter of 2023 compared to 121 basis points for the third quarter of 2023. This increase was a result of rising interest rates and increased competition for deposits.

Non-interest income decreased $17.0 million from $19.3 million in the third quarter of 2023 to $2.3 million in the fourth quarter of 2023, primarily attributable to a U.S. Treasury award of $6.2 million recorded in the third quarter of 2023 and a loss on sales of available for sale investment securities of $9.7 million recorded in the fourth quarter of 2023.

Non-interest expense for the fourth quarter of 2023 was $44.4 million compared to $47.7 million for the third quarter of 2023, a decrease of $3.3 million. Excluding the $5.2 million related to the U.S. Treasury award recorded in the third quarter of 2023, expenses increased $1.9 million in the fourth quarter of 2023. $0.9 million of non-interest expense for the fourth quarter of 2023 was related to salary accruals for year end, and $0.08 million of non-interest expense for the fourth quarter of 2023 was related to professional services.

Fourth Quarter 2023 vs. Fourth Quarter 2022 Earnings Comparison

Net income available to common shareholders for the fourth quarter of 2023 totaled $11.0 million compared to $16.3 million for the fourth quarter of 2022, a decrease of $5.2 million or 32.2%. This decrease was partially attributable to the pre-tax loss of $9.7 million on the sale of $123.0 million in available-for-sale securities and other one-time items detailed in the tables included with this press release.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) increased $1.6 million, or 9.06%, to $18.7 million for the quarter ended December 31, 2023, as compared to $17.2 million for the quarter ended December 31, 2022.

Net interest income for the fourth quarter of 2023 was $57.7 million, an increase of $9.7 million or 20.3% when compared to the fourth quarter of 2022. FTE net interest income (non-GAAP) totaled $58.7 million and $48.9 million for the fourth quarter of 2023 and 2022, respectively. Purchase accounting adjustments increased $1.7 million for the fourth quarter comparisons. The increase was largely due to increased interest rates as well as the acquisition of Heritage Bank.

Fourth quarter of 2023 net interest margin was 3.28%, which included 19 basis points related to purchase accounting adjustments compared to 3.31% for the same quarter in 2022, which included 8 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin (non-GAAP) decreased 14 basis points in prior year quarterly comparison primarily due to an increase in rates on interest bearing liabilities.

Non-interest income decreased $5.8 million for the fourth quarter of 2023 as compared to the fourth quarter of 2022. This decrease was attributed to the loss on sales of available for sale investment securities of $9.7 million partially offset by increases of $2.7 million in service charges and interchange fee income.

Fourth quarter 2023 non-interest expense was $44.4 million, an increase of $9.4 million, or 26.8% as compared to the fourth quarter of 2022. This increase was attributed to an increase of $4.9 million in charges related to the ongoing operations of Beach Bank and Heritage Bank, increased FDIC premiums of $0.7 million, and increased amortization of core deposit intangibles of $1.1 million.

Investment securities totaled $1.735 billion, or 21.7% of total assets at December 31, 2023, compared to $1.983 billion, or 30.7% of total assets at December 31, 2022. For the fourth quarter of 2023 compared to the fourth quarter of 2022, the average balance of investment securities decreased $154.6 million. The average tax equivalent yield on investment securities (non-GAAP) increased 9 basis points to 2.37% from 2.28% in the prior year quarterly comparison. The investment portfolio had a net unrealized loss of $121.9 million at December 31, 2023 as compared to a net unrealized loss of $161.2 million at December 31, 2022.

The average yield on all earning assets increased 104 basis points in prior year quarterly comparison, from 4.00% for the fourth quarter of 2022 to 5.04% for the fourth quarter of 2023. Interest expense on average interest bearing liabilities increased 148 basis points from 0.99% for the fourth quarter of 2022 to 2.47% for the fourth quarter of 2023.

Cost of all deposits averaged 154 basis points for the fourth quarter of 2023 compared to 51 basis points for the fourth quarter of 2022.

Year-to-Date Earnings Comparison

In the year-over-year comparison, net income available to common shareholders increased $12.5 million, or 19.9%, from $62.9 million for the year ended December 31, 2022, to $75.5 million for the same period ended December 31, 2023.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) increased $28.4 million, or 41.6%, to $96.7 million for the year ended December 31, 2023 as compared to $68.3 million for the same period ended December 31, 2022.

Net interest income was $249.3 million for the twelve months ended December 31, 2023, an increase of $71.5 million as compared to the same period ended December 31, 2022, primarily due to interest income earned on a higher volume of loans (including loans acquired from Heritage Bank and Beach Bank).

Non-interest income was $46.7 million for the year ended December 31, 2023, an increase of $9.7 million as compared to the same period ended December 31, 2022. Service charges on deposit accounts and interchange fee income accounted for $11.7 million of the increase.

Non-interest expense was $184.7 million for the year ended December 31, 2023, an increase of $54.2 million as compared to the same period ended December 31, 2022. The increase was partially attributable to $2.7 million in acquisition and charter conversion charges and $32.1 million in increased operating expenses related to the acquisitions of Beach Bank and Heritage Bank as well as $5.2 million in expenses associated with the U.S. Treasury awards and increases in FDIC premiums of $1.7 million and a $4.9 million increase in core deposit amortization for the year ended December 31, 2023.

Declaration of Cash Dividend

The Company announced that its Board of Directors declared a cash dividend of $0.25 per share, a 4% increase over previous quarter, per share to be paid on its common stock on February 23, 2024 to shareholders of record as of the close of business on February 7, 2024.

Conference Call

The Company will host a conference call for analysts and investors to discuss the Company’s financial results at 10:00 a.m. Central Time on Thursday, January 25, 2024. Investors and analysts may participate by clicking on the Participant Conference Link: https://register.vevent.com/register/BIf4b652d4e9ff4cd5a10ec44d884e1480. An audio archive of the conference call along with the transcript will be available within 24-48 hours after the call and placed in the Investor Relations section of our website.

About The First Bancshares, Inc.

The First Bancshares, Inc., headquartered in Hattiesburg, Mississippi, is the parent company of The First Bank (“The First”). Founded in 1996, The First has operations in Mississippi, Louisiana, Alabama, Florida, and Georgia. The Company’s stock is traded on the NASDAQ Global Market under the symbol FBMS. Information is available on the Company’s website: www.thefirstbank.com.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. This press release includes pre-tax, pre-provision operating earnings, FTE net interest income, FTE net interest margin, core net interest margin, FTE average yield on investment securities, FTE average yield on all earning assets, total tangible common equity, tangible book value per common share, net earnings available to common shareholders, operating, diluted earnings per share, operating, efficiency ratio, operating and certain ratios derived from these non-GAAP financial measures. The Company believes that the non-GAAP financial measures included in this press release allow management and investors to understand and compare results in a more consistent manner for the periods presented in this press release. Non-GAAP financial measures should be considered supplemental and not a substitute for the Company’s results reported in accordance with GAAP for the periods presented, and other bank holding companies may define or calculate these measures differently. These non-GAAP financial measures should not be considered in isolation and do not purport to be an alternative to net income, earnings per share, net interest income, book value, net interest margin, common equity, net earnings available to common shareholders, diluted earnings per share, efficiency ratio, average yield on investment securities, average yield on all earning assets, or other GAAP financial measures as a measure of operating performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is provided in this press release following the Condensed Consolidated Financial Information (unaudited).

Forward Looking Statements

This news release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute “forward looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential,” “positioned” and other similar words and expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risk and uncertainties which may cause the actual results, performance, or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties.

Contacts

M. Ray “Hoppy” Cole

Chief Executive Officer

Dee Dee Lowery

Chief Financial Officer

(601) 268-8998

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