Business Overview
The First Bancshares, Inc. (FBMS) is a community-focused financial institution that has been serving its customers in the southeastern United States for over two decades. Headquartered in Hattiesburg, Mississippi, the company has grown steadily through strategic acquisitions and organic expansion, establishing a strong presence across Mississippi, Louisiana, Alabama, Florida, and Georgia.
The First Bancshares, Inc. was incorporated on June 23, 1995, to serve as a bank holding company for The First Bank, formerly known as The First, A National Banking Association. The company began operations on August 5, 1996, from its main office in the Oak Grove community, which is now incorporated within the city of Hattiesburg. Over the years, The First has grown to 116 locations across Mississippi, Alabama, Florida, Georgia, and Louisiana, focusing on providing community-focused financial services to individuals, businesses, municipal entities, and nonprofit organizations in the communities it serves.
The company offers a full range of commercial and consumer loans, deposit accounts, and other banking services. The First has historically maintained strong asset quality metrics compared to many of its peers, which the company believes illustrates its disciplined underwriting and credit culture. This has allowed The First to take advantage of growth opportunities when other banks were unable to do so. The company has also focused on growing earnings per share and increasing its tangible common equity and tangible book value per share over time.
Today, The First Bancshares operates 116 locations and offers a full range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. The company's core business areas include commercial banking, consumer banking, and mortgage banking. This diversified revenue stream has allowed The First Bancshares to navigate through various economic cycles and maintain a relatively stable financial performance.
Financial Performance
The First Bancshares has demonstrated consistent financial growth over the past few years. In the fiscal year 2024, the company reported net income of $77.2 million, up from $75.5 million in 2023 and $62.9 million in 2022. This translates to earnings per share (EPS) of $2.44 in 2024, compared to $2.39 in 2023 and $2.84 in 2022.
The company's revenue has also been on an upward trajectory, with total revenue reaching $277.0 million in 2024, up from $290.2 million in 2023 and $210.7 million in 2022. The First Bancshares' net interest income, the primary driver of its revenue, has remained strong, totaling $234.3 million in 2024 compared to $249.3 million in 2023 and $177.8 million in 2022.
One of the key strengths of The First Bancshares is its efficient operations, as evidenced by its consistently low efficiency ratio. In 2024, the company's efficiency ratio stood at 65.9%, compared to 63.7% in 2023 and 61.9% in 2022, indicating effective cost management and operational discipline.
In the most recent quarter (Q4 2024), The First Bancshares reported revenue of $64.42 million and net income of $18.30 million. Both revenue and net income decreased slightly compared to Q4 2023, reflecting the challenging economic environment.
Asset Quality and Liquidity
The First Bancshares has maintained a robust asset quality profile, with non-performing assets (NPAs) representing only 0.38% of total assets as of December 31, 2024, up from 0.21% at the end of 2023 and 0.33% at the end of 2022. The company's allowance for credit losses stood at $56.2 million, or 1.10% of total loans, as of December 31, 2024, providing a strong cushion against potential loan losses.
The company's liquidity position is also solid, with a loan-to-deposit ratio of 81.9% as of December 31, 2024, compared to 80.0% at the end of 2023 and 68.7% at the end of 2022. The First Bancshares' cash and cash equivalents totaled $220.4 million at the end of 2024, providing ample liquidity to meet its funding needs. Additionally, the company had $2.55 billion in available advances from the Federal Home Loan Bank, of which $355 million had been drawn as of December 31, 2024.
Business Segments
The First Bancshares operates through three main business segments: Commercial/Retail Bank, Mortgage Banking Division, and Holding Company.
The Commercial/Retail Bank segment is the primary driver of the company's operations, generating the majority of its revenue and net income. As of December 31, 2024, the commercial loan portfolio totaled $740.19 million, comprising 13.7% of the total loan portfolio. The commercial real estate loan portfolio was $3.32 billion, or 61.5% of total loans. The consumer real estate loan portfolio stood at $1.30 billion, or 24.0% of the total. The consumer installment loan portfolio was $44.38 million, or 0.8% of the total loan portfolio.
The Mortgage Banking Division originates and sells residential mortgage loans in the secondary market. For the year ended December 31, 2024, this segment generated $3.35 million in secondary market mortgage income, up from $2.87 million in 2023. Loans held for sale totaled $3.69 million at the end of 2024, compared to $2.91 million a year earlier.
The Holding Company segment consists primarily of the parent company, The First Bancshares, Inc., and other non-bank subsidiaries. This segment recorded a net loss of $13.73 million for 2024, compared to a net loss of $6.35 million in 2023. The increased net loss was primarily due to higher interest expense on the company's subordinated debt and other holding company-level expenses.
Expansion and Growth Initiatives
The First Bancshares has a proven track record of strategic acquisitions that have contributed to its geographic expansion and enhanced its product offerings. The 2023 acquisition of Heritage Southeast Bank, for example, strengthened the company's presence in Georgia and the Florida panhandle, while the 2022 acquisition of Beach Bancorp allowed it to enter the Tampa market.
In addition to these acquisitions, The First Bancshares has also focused on organic growth, leveraging its strong relationships with existing clients and creating new relationships to drive loan and deposit growth. The company's loan portfolio, excluding mortgage loans held for sale, grew by 4.6% in 2024 to $5.41 billion, while total deposits increased by 2.2% to $6.61 billion during the same period.
Looking ahead, The First Bancshares' growth strategy remains centered on a combination of strategic acquisitions and organic expansion. The company's recent announcement of a merger with Renasant Corporation, expected to close in the first half of 2025, is a testament to its commitment to enhancing shareholder value through strategic initiatives.
On May 17, 2024, The First Bancshares voluntarily transferred the listing of its common stock from the Nasdaq to the New York Stock Exchange (NYSE), where it now trades under the symbol "FBMS". This move is expected to provide enhanced visibility and liquidity for the company's shareholders.
Human Capital
As of December 31, 2024, The First Bancshares employed 1,050 full-time employees spanning five states and 116 locations. The company recognizes the importance of its workforce in driving its success and is committed to fostering a diverse and inclusive culture reflective of the communities it serves.
In 2024, The First Bancshares employees demonstrated their commitment to community engagement by donating over 4,700 volunteer hours to more than 500 organizations. They also delivered financial education to over 29,300 community members and students, highlighting the company's dedication to improving financial literacy in its service areas.
The First Bancshares offers competitive compensation and benefits programs, including a 401(k) plan, healthcare, and continuing education opportunities, to help attract and maintain highly skilled and experienced employees. These initiatives are crucial in ensuring the company can continue to provide high-quality services to its customers and drive long-term growth.
Risks and Challenges
Like any financial institution, The First Bancshares faces a range of risks and challenges that could impact its future performance. These include:
1. Interest Rate Risk: The company's net interest margin and profitability are susceptible to changes in market interest rates, which can affect the yields on its interest-earning assets and the costs of its interest-bearing liabilities. In 2024, the bank's net interest margin was 3.35%, a decrease from 3.59% in the prior year, primarily due to an increase in deposit costs.
2. Credit Risk: The First Bancshares is exposed to the risk of borrower default, especially in its commercial and real estate loan portfolios, which could lead to increased loan loss provisions and charge-offs. However, the company has maintained strong asset quality metrics, with nonaccrual loans at 0.38% of total loans as of December 31, 2024.
3. Regulatory Compliance: As a heavily regulated industry, the banking sector is subject to a constantly evolving landscape of rules and regulations, which could increase the company's compliance costs and operational complexity.
4. Competition: The First Bancshares operates in a highly competitive environment, facing fierce rivalry from both traditional banks and emerging financial technology (fintech) companies, which could put pressure on its market share and pricing power.
5. Integration Risks: The successful integration of acquired institutions, such as Heritage Southeast Bank and Beach Bancorp, is crucial to realizing the expected synergies and benefits of these transactions. Any challenges in the integration process could negatively impact the company's financial performance.
6. Holding Company Performance: The Holding Company segment has been a drag on profitability, recording a net loss of $13.73 million in 2024. Management will likely need to focus on improving this segment's performance to enhance overall company results.
Conclusion
The First Bancshares, Inc. (FBMS) is a well-established community bank that has demonstrated resilience and adaptability in the face of various economic and industry challenges. With a solid financial foundation, a diversified revenue stream, and a proven strategy of strategic acquisitions and organic growth, the company is well-positioned to continue delivering value to its shareholders in the years to come.
The company's strong performance in its core commercial and retail banking operations, highlighted by loan growth, stable asset quality, and a relatively strong net interest margin, provides a solid foundation for future growth. The mortgage banking division has also contributed positively to the company's results, although the holding company segment remains an area for potential improvement.
As The First Bancshares moves forward with its merger with Renasant Corporation, it will be crucial for the company to successfully navigate the integration process and capitalize on the potential synergies. The company must also remain vigilant in managing its exposure to interest rate risk, credit risk, and regulatory changes, while also navigating the competitive landscape.
By leveraging its strengths, addressing challenges proactively, and maintaining its commitment to community engagement and employee development, The First Bancshares is poised to build on its impressive track record and further solidify its position as a leading community bank in the southeastern United States. The upcoming merger with Renasant Corporation represents a significant milestone in the company's history and could potentially open up new opportunities for growth and expansion in the coming years.