The First Bancshares, Inc. (FBMS) Q2 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. Financial performance shows some growth in loans and core margin, but net income is down, and deposits are decreasing. The lack of a share repurchase program and potential regulatory scrutiny on CRE loans are concerns. The Q&A session reveals stable loan growth expectations and easing deposit cost pressures, but vague responses on M&A and public funds impact create uncertainty. These factors balance each other out, leading to a neutral sentiment rating for the stock price over the next two weeks.
Key Financial Performance
Loans Growth $111 million, up 8.6% year-over-year due to ample growth opportunities in the market.
Net Income $19.7 million, down $900,000 from the first quarter due to a $1.7 million provision expense this quarter compared to zero last quarter.
Pre-tax Pre-provision Operating Earnings $27.4 million, up 2.9% from $26.6 million in the previous quarter.
Core Margin 3.19%, increased by 9 basis points.
Cost of Deposits 1.78%, remained the same.
Interest-bearing Deposit Cost 2.46%, increased by 1 basis point.
Deposits $84.2 million decrease, about 1.3%, primarily due to $38.3 million related to public funds.
Loan Deposit Ratio 79%, indicating a strong liquidity position.
Return on Average Assets (ROAA) 1.01%.
Return on Average Tangible Common Equity 12.76%.
Efficiency Ratio 60.65%.
Tangible Common Equity (TCE) Ratio 8.3%, increased from last quarter.
Leverage Ratio 10%, consistent with last quarter.
Total Risk-Based Capital Ratio 15.3%, in line with last quarter.
Average Yield on Earning Assets 7.99% year-to-date, slightly contracted from 8.12% to 7.92% for the quarter.
Net Charge-offs 4 basis points, indicating strong credit quality.
Non-performing Assets (NPAs) 26 basis points, up 4 basis points, but still manageable.
Provision for Loan Losses $1.7 million, maintaining the Allowance for Credit Losses (ACL) at 1.05%.
Operating Highlights
Loan Growth: Loans grew by $111 million, up about 8.6% on an annualized basis.
Loan Originations: Originations were robust at about $450 million, up from about $253 million in the first quarter.
Regional Performance: Mississippi team had 35% of the entire Bank's production; Georgia had their strongest showing, accounting for about a quarter of all new originations.
Core Margin: Core margin increased by 9 basis points to 3.19%.
Liquidity Position: Liquidity ratios are well above limits; loan deposit ratio is 79%.
Cash Flows: $266 million in cash flows expected from the securities book over the next four quarters.
Centralized Consumer Platform: Migrated legacy branches into a centralized consumer platform.
Small Business Platform Expansion: Continuing to refine the small business platform, with 1071 implementation planned by year-end.
Risk or Challenges
Loan Growth Risks: The company anticipates a decrease in deposits throughout the rest of the year due to the public fund portfolio, which could impact liquidity and loan growth.
Credit Quality Risks: There has been a slight uptick in 30-day past dues and non-accrual loans, indicating potential credit quality challenges.
Economic Factors: Insurance cost escalations are putting pressure on operational expenses for some borrowers, which could affect their ability to repay loans.
Regulatory Risks: Concentration in commercial real estate (CRE) loans is at 215% of risk-based capital (RBC), which is above the 300% interagency guidance level, indicating potential regulatory scrutiny.
Market Competition: The company faces competitive pressures in loan originations, particularly in the construction lending sector, which may affect margins.
Guidance & Outlook
Loan Growth: Loans grew by $111 million, up about 8.6% on an annualized basis.
Margin Expansion: Core margin increased by 9 basis points to 3.19%.
Loan Originations: Originations were robust at about $450 million, up from $253 million in the first quarter.
Centralized Consumer Platform: Operationally migrated legacy branches into a centralized consumer platform.
Small Business Platform: Continuing to refine the small business platform with 1071 implementation planned by year-end.
Deposit Decrease: Expected decrease in deposits throughout the rest of the year due to public fund portfolio.
Cash Flows: Approximately $266 million in cash flows expected from the securities book over the next four quarters.
Credit Quality Outlook: Expect similar outcomes for credit quality for the balance of the year and into 2025.
Shareholder Return Plan
Share Repurchase Program: The company has not announced any share repurchase program during the call.
Key Q&A
Earnings Word Cloud
FBMS Transcript
The earnings call presents a mixed picture. Financial performance shows some growth in loans and core margin, but net income is down, and deposits are decreasing. The lack of a share repurchase program and potential regulatory scrutiny on CRE loans are concerns. The Q&A session reveals stable loan growth expectations and easing deposit cost pressures, but vague responses on M&A and public funds impact create uncertainty. These factors balance each other out, leading to a neutral sentiment rating for the stock price over the next two weeks.
FBMS Report
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