The First Bancshares, Inc. (NASDAQ:FBMS) has demonstrated its resilience and adaptability in the ever-changing banking industry. With a strong presence across the Southeast, the company has consistently delivered solid financial results, navigating the challenges of the current economic environment with prudence and strategic foresight.
Financials
For the fiscal year 2023, The First Bancshares reported annual net income of $75.5 million and annual revenue of $381.4 million. The company's annual operating cash flow stood at $108.2 million, while its annual free cash flow reached $104.6 million. These figures underscore the company's ability to generate sustainable earnings and maintain a healthy financial position.
In the latest quarter, the company reported net income of $19.7 million, or $0.62 per diluted share. This represents a slight decrease from the previous quarter's $20.6 million, primarily due to a $1.7 million provision for credit losses associated with the quarter's loan growth. However, the company's pre-tax, pre-provision operating earnings increased by 2.9% to $27.4 million, highlighting its underlying profitability.
Loan Portfolio Growth
The First Bancshares' loan portfolio continued to demonstrate robust growth, with a net increase of $111 million, or an annualized rate of 8.6%, during the second quarter. This growth was driven by strong originations of $450 million, up from $253 million in the previous quarter. The company's regional diversification was evident, with the Mississippi team accounting for 35% of the bank's total production and Georgia contributing a quarter of new originations.
Net Interest Margin
The company's net interest margin (NIM) expanded by 6 basis points to 3.26% in the second quarter, while the core NIM (excluding purchase accounting adjustments) increased by 9 basis points to 3.19%. This margin expansion was achieved through a combination of higher yields on earning assets and a modest decrease in the cost of interest-bearing liabilities.
Liquidity
The First Bancshares' deposit base saw a decrease of $84.2 million, or 1.3%, during the quarter, primarily driven by a $38.3 million reduction in public funds. The company's management expects this trend to continue throughout the remainder of the year as public fund deposits continue to run off. Despite this, the company's liquidity position remains strong, with a loan-to-deposit ratio of 79% and ample borrowing capacity from the Federal Home Loan Bank.
Credit Quality
Credit quality remained a bright spot for The First Bancshares, with net charge-offs at a low 4 basis points and nonperforming assets ticking up slightly to 26 basis points. The company's allowance for credit losses stood at 1.05% of total loans, reflecting its prudent approach to risk management.
Business Overview
The First Bancshares' geographic diversification is a key strength, with a balanced loan portfolio across its markets in Alabama, Florida, Georgia, Louisiana, and Mississippi. The company's commercial real estate (CRE) exposure is well-diversified, with owner-occupied CRE at 24% and non-owner-occupied CRE at 22% of the total loan portfolio. The company's CRE concentrations remain within regulatory guidelines, and it continues to monitor the portfolio closely for any potential risks.
Outlook
Looking ahead, The First Bancshares' management provided a cautiously optimistic outlook for the remainder of the year. The company expects loan growth to remain in the mid-single-digit range, with the potential for some margin stability as deposit costs appear to have stabilized. The management team remains vigilant in managing the company's expense base, guiding to a full-year operating expense target of $176-$177 million.
Conclusion
The First Bancshares' strong financial performance, prudent risk management, and strategic positioning within its markets have positioned the company well to navigate the evolving banking landscape. As the company continues to execute on its growth initiatives and maintain its disciplined approach to operations, investors can look forward to The First Bancshares' continued success in the quarters and years ahead.