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FIRST BANCSHARES INC /MS/ (FBMS)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 delivered diluted EPS of $0.65, up from $0.35 in Q4 2023 and $0.52 in Q1 2023; operating diluted EPS was $0.65 versus $0.59 in Q4, with net income of $20.6M driven by lower non-interest expense (-$1.0M QoQ) and zero provision (down $1.3M QoQ), while NIM compressed 8 bps to 3.20% and core NIM fell 4 bps .
  • Deposits rose $247.5M (+3.8% QoQ) to $6.710B, largely from $256.9M in public funds; excluding public funds, deposits fell $9.4M (-0.2%), and noninterest-bearing deposits declined to 27.4% of total .
  • Loans decreased $30.1M (-0.6% QoQ) to $5.140B, reflecting $23.1M SBA loan sales and end-of-quarter payoffs; management highlighted a ~50% increase in pipelines and stable credit with NPAs/total assets at 0.23% and net charge-offs at 0.01% .
  • Near-term margin headwinds persist given deposit competition; catalysts include remixing ~$210M securities cash flows (1.80% yield) into higher-yield assets, expense discipline ($44M/quarter), and potential additional securities restructuring .

What Went Well and What Went Wrong

  • What Went Well

    • Operating earnings increased 10.1% QoQ to $20.6M as non-interest expense fell $1.0M and provision dropped $1.3M; CEO: “Operating income increased 10% quarter over quarter due to reduced operating expenses and some stabilization in the margin.” .
    • Deposit base expanded by $247.5M (+3.8% QoQ), bolstered by public funds inflows; CFO detailed public fund seasonality and noted liquidity remains strong with ample borrowing capacity .
    • Credit metrics remained robust: NPAs/total assets improved to 0.23% and annualized net charge-offs were 0.01%; Chief Credit Officer: “NPAs declined…almost 9%…loan recoveries exceeded loan charge-offs by $106,000.” .

  • What Went Wrong

    • Margin compression continued: NIM down 8 bps to 3.20% and core NIM down 4 bps, with cost of deposits rising 24 bps QoQ to 1.78% amid competitive pricing pressures .
    • Loan balances fell $30.1M QoQ due to SBA loan sales and several large payoffs late in the quarter; average loans rose but period-end balances were lower .
    • Noninterest-bearing deposits % dipped to 27.4% from 28.6% prior quarter due to interest-bearing public fund inflows, marginally increasing funding costs .

Financial Results

MetricQ1 2023Q4 2023Q1 2024
Net Income Available to Common ($USD Millions)$16.27 $11.05 $20.63
Diluted EPS ($)$0.52 $0.35 $0.65
Diluted EPS, Operating ($)$0.86 $0.59 $0.65
Income MixQ1 2023Q4 2023Q1 2024
Net Interest Income ($000)$64,926 $57,665 $57,341
Non-interest Income ($000)$12,612 $2,346 $12,679
Adjusted Operating Revenue ($000)$78,536 $70,705 $71,018
Margins & EfficiencyQ1 2023Q4 2023Q1 2024
FTE Net Interest Margin %3.69% 3.33% 3.26%
Core Net Interest Margin %3.47% 3.14% 3.10%
Efficiency Ratio, Operating %53.32% 62.00% 61.14%
Cost of Deposits %0.72% 1.54% 1.78%
Yield on Earning Assets % (FTE)4.55% 5.10% 5.18%
Cost of Interest-Bearing Liabilities %1.24% 2.47% 2.65%
KPIsQ1 2023Q4 2023Q1 2024
Total Deposits ($USD Billions)$6.668 $6.463 $6.710
Total Loans ($USD Billions)$4.970 $5.170 $5.140
NPAs / Total Assets %0.28% 0.25% 0.23%
Annualized Net Charge-offs %0.01% 0.06% 0.01%
ACL / Total Loans %1.06% 1.05% 1.05%
TCE / TA %7.2% 7.9% 8.1%

Segment breakdown (balances):

Loan Composition ($000)Mar 31, 2023Dec 31, 2023Mar 31, 2024
Commercial, Financial & Agricultural$750,371 $765,422 $737,511
Real Estate – Construction$691,285 $629,660 $633,804
Real Estate – Commercial$2,181,384 $2,377,864 $2,356,552
Real Estate – Residential$1,262,244 $1,311,395 $1,330,589
Consumer$50,784 $55,094 $51,161
Obligations of States & Subdivisions$31,652 $29,316 $28,541
Loans Held for Sale$4,073 $2,914 $4,241
Total Loans$4,973,849 $5,172,957 $5,144,193
Deposit Composition ($000)Mar 31, 2023Dec 31, 2023Mar 31, 2024
Non-interest Bearing$2,082,441 $1,849,013 $1,836,952
NOW & Other$2,095,599 $1,914,792 $2,135,343
Money Market/Savings$1,678,609 $1,623,311 $1,656,688
Time < $250K$562,240 $813,877 $816,153
Time ≥ $250K$249,067 $261,879 $265,219
Total Deposits$6,667,956 $6,462,872 $6,710,355

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (FTE/Core)FY 2024Modeling showed ~+8 bps expansion in 2024 without assumed rate cuts (Q4 call) Slight further compression in Q2 (few bps) with stabilization midyear; model now shows high-single-digit increase with two cuts embedded (July/Nov) Near-term lowered; longer-term expansion maintained
Expense Run-RateFY 2024~$170–$171M for FY 2024 discussed on Q4 call Consensus ~$178M; management targeting ~$44M per quarter Raised
Loan GrowthFY 2024Not explicitly guided (Q4); loan growth +6.3% annualized in Q4 Budget mid-single-digit loan growth; pipelines up ~50% exiting Q1 Initiated explicit mid-single-digit guide
DividendQuarterly$0.24 per share (Q4 2023 declaration) $0.25 per share declared for Q1 (payable May 23, 2024) Raised
Securities StrategyNear-termCompleted $123M restructuring in Q4 (earn-back 2.1 yrs; NIM +8 bps; NII +$4.7M) Evaluating similar trade this quarter; running numbers now Considering additional restructuring
Borrowings2024FRB BTFP borrowings $390M at 12/31/23 Borrowings reduced by $280M in Q1; $110M BTFP remains, expiring December Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Deposit Competition & PricingDeposit specials (5.25% 6-mo CD, 5% MM) to offset public funds runoff; cost of deposits rose; deposit beta moved to 31% (Q3) Competitors still running 5–5.25% CDs; cost of deposits up to 1.78% (↑24 bps QoQ); deposit beta 43% Pressure persists; pace easing vs Q4
NIM TrajectoryExpected compression in back half 2023; core NIM fell 16–13 bps Q3/Q4; modeling +8 bps in 2024 from repricing Core NIM down 4 bps QoQ; slight further compression expected in Q2 with midyear stabilization Moderating compression; potential stabilization
Loan Growth & Pipeline+$78.9M QoQ (Q3); originations strong; yields trending higher (7.98% Sept) Period-end loans down $30.1M (SBA sales/payoffs); average loans ↑$12.8M; pipelines up ~50%; new production 8.12% blended yield Healthy pipeline; elevated yields; timing effects
Securities Portfolio RemixQ4 restructuring ($123M sold @1.12%, reinvest @5.33%); earn-back 2.1 years ~$210M cash flows over next four quarters at ~1.80% to redeploy; considering similar trade this quarter Continued remix opportunity
Office CRE ExposureLow-rise, granular; substandard office ~4.4%; ~15% maturities through 2025 (Q3) Substandard office unchanged at 4.2%; 12.7% of portfolio matures through 2025; delinquencies <1 bp Stable risk profile
Credit QualityNPAs down; criticized/classified down; NCOs 0.06% (Q4) NPAs/total assets 0.23%; NCOs 0.01%; past dues ~26 bps Strong and steady

Management Commentary

  • “We are pleased with our overall results for the quarter… Credit quality remains stable with low past dues and low non-performing assets. All in all, a solid quarter and good start to the year.” — M. Ray “Hoppy” Cole, CEO .
  • “Earnings did increase $1.9 million… driven by a decrease in our noninterest expenses by $1 million… no provision needed this quarter… ACL reserve of 1.05%.” — Donna “Dee Dee” Lowery, CFO .
  • “SBA division had a record quarter… about $23 million [sold] in the secondary market… pipelines were up almost 50%.” — JJ Fletcher, Chief Lending Officer .
  • “NPAs declined by almost $1.9 million… NPA as a percentage of total loans and OREO remain leveled at 40 bps… loan recoveries exceeded loan charge-offs by $106,000.” — George Noonan, Chief Credit Officer .

Q&A Highlights

  • Deposits: DDA levels show seasonality; NOW growth largely reflects ~$256M public fund inflows; noninterest-bearing % dipped due to interest-bearing inflows .
  • Loan growth: Budget mid-single-digit for FY 2024; pipelines up ~50% across footprint; loan yields moderated to 8.12% given competitive pricing in mid-7s .
  • Expenses: Management targets ~$44M per quarter; consensus ~$178M for FY; Q4 elevated by year-end accruals and sold vacation .
  • Margin outlook: Slight further compression in Q2, stabilization midyear; April deposit costs trending in line with March; continued pickup expected from loan repricing and securities cash flows .
  • Capital actions: Buyback authorization renewed; activity is price sensitive—more attractive in low-$20s; dividend at $0.25 quarterly .

Estimates Context

  • S&P Global consensus estimates could not be retrieved for FBMS (ticker mapping unavailable in our SPGI/CIQ integration). As a result, estimate comparisons (EPS and revenue) for Q1 2024 are not provided. Future comparisons will be added once data access is restored.

Key Takeaways for Investors

  • Earnings quality improved: operating EPS rose to $0.65 with no provision and lower opex; core margin compression narrowed to 4 bps QoQ, signaling stabilization potential .
  • Funding mix is the swing factor: public funds drove headline deposit growth; excluding public funds, deposits were flat-to-down, and deposit costs rose 24 bps—ongoing competitive repricing remains the key headwind .
  • Pipeline strength offsets period-end loan decline: SBA sales/payoffs reduced balances, but average loans rose and pipelines expanded ~50%, supporting mid-single-digit FY loan growth .
  • Securities cash flows and potential restructuring can aid NIM: ~$210M principal cash flows (~1.80% yield) and evaluation of a new restructuring trade provide levers to remix into higher-yield assets .
  • Credit remains a differentiator: NPAs at 0.23%, NCOs at 0.01%, ACL at 1.05% with cautious monitoring of insurance cost pressures in CRE; office exposure remains granular and low-rise .
  • Expense discipline supports earnings durability: management signaling ~$44M quarterly opex run-rate; watch for execution vs. consensus $178M FY target .
  • Near-term trading lens: monitor monthly deposit cost trends and any announced security restructuring; confirmation of margin stabilization and pipeline conversion should be constructive, while any re-acceleration in funding costs would be the key risk .

Notes on sources and documents:

  • Q1 2024 earnings press release and investor presentation (Form 8-K Items 2.02 and 7.01) -.
  • Q1 2024 earnings call transcript -.
  • Prior quarter Q4 2023 earnings press release, investor presentation, and call transcript - -.
  • Q3 2023 earnings call transcript for trend context -.

No additional standalone press releases were found for Q1 2024 beyond the 8-K exhibits [ListDocuments: press-release none; 8-K 8.01 dividend included in Q1 filing] .