First Bancshares, Inc. Reports Results for Fourth Quarter ended December 31, 2021; Increases Quarterly Dividend 6%
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 net income available to common shareholders for the quarter ended December 31, 2021.
Highlights:
- On December 3, 2021, the Company closed its acquisition of seven branches from Cadence Bank (“Cadence”) which included $40.5 million in loans and $410.2 million in deposits. The Company recorded a bargain purchase gain of $1.3 million related to this acquisition.
- Average loans, excluding Paycheck Protection Program (”PPP”) loans and acquired Cadence loans, increased $17.9 million, or 0.63%, as compared to the quarter ended September 30, 2021, or 2.5% on an annualized basis.
- Net income available to common shareholders totaled $15.8 million for the quarter ended December 31, 2021, representing a decrease of $0.3 million, or 2.1%, compared to $16.1 million for the quarter ended September 30, 2021. During the quarter, various one-time items contributed to the decrease.
- Net interest income, excluding accretion income and PPP fee income increased $0.2 million, or 0.45%, when comparing quarter end December 31, 2021 to quarter end September 30, 2021.
- In year-over-year comparison, net income available to common shareholders increased $11.7 million, or 22.2%, from $52.5 million for the year ended December 31, 2020 to $64.2 million for the year ended December 31, 2021.
- In year-over-year comparison, net interest income, excluding accretion income and PPP fee income increased $2.7 million, or 1.8%.
- Provision for credit losses totaled a negative $1.1 million for the quarter as compared to $0 for the sequential quarter comparison and $3.5 million for the fourth quarter of 2020.
- On December 14, 2021 the U.S. Department of Treasury informed the Company of their eligibility to receive $175 million of non-dilutive Tier 1 perpetual preferred capital under the Emergency Capital Investment Program.
- Subsequent to quarter end, the Company converted from a national banking association to a Mississippi state-charted bank and a member bank of the Federal Reserve System.
- For information related to the effects of COVID-19, 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.
- During the first quarter of 2021, the Company adopted the Current Expected Credit Losses (“CECL”) methodology for estimating credit losses, effective January 1, 2021.
M. Ray “Hoppy” Cole, President and Chief Executive Officer, commented, “2021 was a very special year for our Company in which we celebrated our 25th anniversary and achieved a number of significant milestones. We produced another record year of performance with net income available to common shareholders increasing 22.2% to $64.2 million.
In December, we closed on our branch acquisition from Cadence which provided approximately $400 million in deposits and 7 branches in the Starkville, Mississippi area. The closing of this transaction along with organic growth pushed our total assets to over $6 billion making us the 5th largest bank headquartered in Mississippi.
In addition to record financial performance, we also completed several strategic initiatives to help support continued growth of our franchise in terms of software platforms, processes and procedures and converting our charter from a national bank to a State Chartered, Federal Reserve member bank. We were notified in the 4th quarter by the U.S. Treasury that our Company was eligible to receive $175 million under the ECIP program to further our mission as a CDFI.
2021 was a great year for our Company and we feel well positioned to continue our strategic plan of building a high performing community bank across the South.”
Quarterly Earnings
Net income available to common shareholders totaled $15.8 million for the quarter ended December 31, 2021, a decrease of $0.3 million, or 2.1%, compared to $16.1 million for the quarter ended September 30, 2021. The Company recognized $0.1 million less in PPP loan fee income during the fourth quarter 2021 as compared to the third quarter 2021 and recorded $0.3 million less in accretion of purchase accounting adjustments.
Pre-tax, Pre-provision Operating Earnings
Pre-tax, pre-provision Operating earnings decreased $1.7 million for the quarter ended December 31, 2021 as compared to the quarter ended September 30, 2021. One-time charges in salaries and employee benefits related to restricted stock expense, incentive accruals and sold vacation accounted for $1.1 million and charges related to professional services accounted for $0.3 million.
Net income available to common shareholders totaled $15.8 million for the quarter ended December 31, 2021, an increase of $0.5 million, or 3.0%, compared to $15.3 million for the quarter ended December 31, 2020.
The Company recorded a negative provision for credit losses of $1.1 million for the quarter ended December 31, 2021 and $0 for the quarter ended September 30, 2021, a decrease of $4.6 million, or $3.5 million net of tax, as compared to the fourth quarter of 2020.
Earnings Per Share
For the fourth quarter of 2021, fully diluted earnings per share were $0.75 compared to $0.76 for the third quarter of 2021 and $0.72 for the fourth quarter of 2020.
Diluted earnings per share operating (non-GAAP) increased $0.11 from $0.65 for fourth quarter of 2020 to $0.76 for fourth quarter of 2021 due to the increase in operating net earnings available to shareholders (non-GAAP) of $2.2 million for the same period.
Fully diluted earnings per share include the purchase by the Company of 165,623 shares during the first quarter of 2021 and 289,302 shares during the fourth quarter of 2020.
Balance Sheet
Consolidated assets increased $565.5 million to $6.077 billion at December 31, 2021 from $5.512 billion at September 30, 2021. The Cadence branch acquisition contributed $400 million to the increase.
PPP loans at December 31, 2021 were $41.1 million, a decrease of $46.0 million from September 30, 2021, due to loan forgiveness under the PPP program.
Total average loans were $2.957 billion for the quarter ended December 31, 2021, as compared to $2.984 billion for the quarter ended September 30, 2021, and $3.154 billion for the quarter ended December 31, 2020, representing a decrease of $27.1 million, or 0.9%, for the sequential quarter comparison, and a decrease of $196.9 million, or 6.2%, for the prior year quarterly comparison. PPP loans averaged $55.8 million for the quarter ended December 31, 2021, $112.3 million for the quarter ended September 30, 2021, and $250.5 million for the quarter ended December 31, 2020. The acquired Cadence branch loan portfolio averaged $11.5 million for the quarter ended December 31, 2021.
Excluding the PPP and acquired Cadence loans, average loans increased $17.9 million, or 0.63% as compared to the quarter ended September 30, 2021.
Total average deposits were $4.815 billion for the quarter ended December 31, 2021, as compared to $4.666 billion for the quarter ended September 30, 2021, and $4.195 billion for the quarter ended December 31, 2020, representing an increase of $149.0 million, or 3.2%, for the sequential quarter comparison, and an increase of $619.5 million, or 14.8%, for the prior year quarterly comparison. The acquired Cadence branch deposit portfolio averaged $114.2 million for the quarter ended December 31, 2021.
Average deposits increased $149.0 million, or 3.2% as compared to the quarter ended September 30, 2021 of which $114.2 million was attributable to the acquired Cadence deposit portfolio.
The Company implemented Deposit Reclassification at the beginning of 2020. This program reclassifies noninterest bearing deposits and NOW deposit balances to money market accounts. This program reduces our reserve balance required at the Federal Reserve Bank of Atlanta which provides additional funds for liquidity and lending. At December 31, 2021, $794.3 million in noninterest deposit balances and $1.032 billion in NOW deposit accounts were reclassified as money market accounts.
Asset Quality
Nonperforming assets totaled $30.6 million at December 31, 2021, an increase of $2.6 million compared to $28.0 million at September 30, 2021 and a decrease of $11.6 million compared to $42.3 million at December 31, 2020. Nonaccrual loans increased $3.0 million as compared to September 30, 2021 and decreased $5.8 million as compared to December 31, 2020.
The ratio of the allowance for credit losses (ACL) to total loans was 1.04% at December 31, 2021 and 1.09% at September 30, 2021. The ratio of allowance for loan losses to total loans under the incurred loss model was 1.15% at December 31, 2020. The ratio of annualized net charge-offs (recoveries) to total loans was 0.03% for the quarter ended December 31, 2021 compared to 0.005% for the quarter ended September 30, 2021 and 0.25% for the quarter ended December 31, 2020.
Effective January 1, 2021, the Company adopted the CECL methodology for estimating credit losses. This adoption resulted in a net $0.4 million increase to the ACL and an unfunded commitment reserve of $0.7 million.
Fourth Quarter 2021 vs. Fourth Quarter 2020 Earnings Comparison
Net income available to common shareholders for the fourth quarter of 2021 totaled $15.8 million compared to $15.3 million for the fourth quarter of 2020, an increase of $0.5 million or 3.0%. Provision for credit losses totaled a negative $1.1 million for the quarter ended December 31, 2021, a decrease of $4.6 million, or $3.5 million net of tax, as compared to $3.5 million for the fourth quarter of 2020.
Net interest income for the fourth quarter of 2021 was $39.8 million, an increase of $0.3 million or 0.7% when compared to the fourth quarter of 2020. Fully tax equivalent (“FTE”) net interest income (non-GAAP) totaled $40.4 million and $40.1 million for the fourth quarter of 2021 and 2020, respectively. Purchase accounting adjustments decreased $0.8 million for the fourth quarter comparisons. Fourth quarter of 2021 FTE net interest margin (non-GAAP) was 3.14% which included 7 basis points related to purchase accounting adjustments compared to 3.51% for the same quarter in 2020, which included 16 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin (non-GAAP) decreased 28 basis points in prior year quarterly comparison.
Non-interest income decreased $1.3 million for the fourth quarter of 2021 as compared to the fourth quarter of 2020. This decrease is attributed to a decrease in mortgage income of $1.7 million.
Fourth quarter 2021 non-interest expense was $30.8 million, an increase of $2.9 million, or 10.4% as compared to the fourth quarter of 2020. Charges related to the acquisition of the Cadence branches and charter conversion accounted for $1.6 million. Charges related to the ongoing operations of the Cadence branches totaled $0.2 million for the fourth quarter of 2021.
Investment securities totaled $1.774 billion, or 29.2% of total assets at December 31, 2021, compared to $1.050 billion, or 20.4% of total assets at December 31, 2020. For the fourth quarter of 2021 compared to the fourth quarter of 2020, the average balance of investment securities increased $543.6 million. The average tax equivalent yield on investment securities (non-GAAP) decreased 48 basis points to 1.97% from 2.45% in the prior year quarterly comparison. The investment portfolio had a net unrealized gain of $10.7 million at December 31, 2021 as compared to a net unrealized gain of $34.6 million at December 31, 2020.
The FTE average yield on all earning assets (non-GAAP) decreased 58 basis points in prior year quarterly comparison, from 4.04% for the fourth quarter of 2020 to 3.46% for the fourth quarter of 2021. Interest expense on average interest bearing liabilities decreased 23 basis points from 0.58% for the fourth quarter of 2020 to 0.35% for the fourth quarter of 2021. Cost of all deposits averaged 19 basis points for the fourth quarter of 2021 compared to 39 basis points for the fourth quarter of 2020.
Fourth Quarter 2021 vs Third Quarter 2021 Earnings Comparison
Net income available to common shareholders for the fourth quarter of 2021 decreased $0.3 million to $15.8 million compared to $16.1 million for the third quarter of 2021.
Net interest income for the fourth quarter of 2021 was $39.8 million as compared to $40.0 million for the third quarter of 2021, a decrease of $0.3 million which is attributed to a decrease in accretion of purchase accounting adjustments. FTE net interest income (non-GAAP) decreased $0.3 million to $40.4 million from $40.7 million in sequential-quarter comparison. Fourth quarter 2021 FTE net interest margin (non-GAAP) of 3.14% included 7 basis points related to purchase accounting adjustments compared to 3.25% for the third quarter in 2021, which included 10 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin (non-GAAP) decreased 8 basis points in sequential quarter comparison primarily due to the excess liquidity associated with the Cadence branch acquisition late in the 4th quarter of 2021.
Investment securities totaled $1.774 billion, or 29.2% of total assets at December 31, 2021, compared to $1.485 billion, or 27.0% of total assets at September 30, 2021. The average balance of investment securities increased $200.4 million in sequential-quarter comparison. The average tax equivalent yield on investment securities (non-GAAP) decreased 25 basis points to 1.97% from 2.22% in sequential-quarter comparison. The investment portfolio had a net unrealized gain of $10.7 million at December 31, 2021 as compared to a net unrealized gain of $18.2 million at September 30, 2021.
The FTE average yield on all earning assets (non-GAAP) decreased in sequential-quarter comparison from 3.60% to 3.46%. Interest expense on average interest bearing liabilities decreased 4 basis points from 0.39% for the third quarter of 2021 to 0.35% for the fourth quarter of 2021. Cost of all deposits averaged 19 basis points for the fourth quarter of 2021 compared to 22 basis points for the third quarter of 2021.
Non-interest income remained flat in sequential-quarter comparison.
Non-interest expense for the fourth quarter of 2021 was $30.8 million compared to $29.1 million for the third quarter of 2021, an increase of $1.7 million, largely attributed to the $1.6 million in acquisition charges and charter conversion expenses.
Year-to-Date Earnings Comparison
In the year-over-year comparison, net income available to common shareholders increased $11.7 million, or 22.2%, from $52.5 million for the year ended December 31, 2020 to $64.2 million for the year ended December 31, 2021. The change in provision expense in the year over year comparison accounted for $19.6 million, net of tax of the change.
The Company recorded bargain purchase and sale of land gains of $8.3 million, net of tax, along with a provision expense of $18.8 million, net of tax, during the year end December 31, 2020.
The Company recorded bargain purchase gain and loss on sale of land of $0.7 million, net of tax, along with a negative provision expense of $0.8 million, net of tax, during the year end December 31, 2021.
Net interest income increased $4.4 million in the year-over-year comparison, primarily due to interest income earned on a higher volume of securities and a reduction in interest expense due to changes in rates.
Non-interest income increased $2.3 million in the year-over-year comparison excluding the gains and grants detailed in the following tables. Interchange fee income increased $2.1 million in the year-over-year comparison.
Non-interest expense was $114.6 million for the year ended December 31, 2021 an increase of $8.2 million as compared to the same period ended December 31, 2020. An increase of $4.6 million in salaries and employee benefits and an increase of $1.7 million in occupancy expense contributed to the increase.
Declaration of Cash Dividend
The Company announced that its Board of Directors declared a cash dividend of $0.17, a 6% increase over previous quarter, per share to be paid on its common stock on February 25, 2022 to shareholders of record as of the close of business on February 10, 2022.
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 operating efficiency ratio, pre-tax, pre-provision operating earnings, diluted operating earnings per common share, operating net earnings available to shareholders, fully tax equivalent net interest income, fully tax equivalent net interest margin, core net interest margin, average tax equivalent yield on investment securities, fully tax equivalent average yield on all earning assets, total tangible common equity, tangible book value per common share 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 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. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: (1) competitive pressures among financial institutions increasing significantly; (2) changes in economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations; (3) interest rate risk; (4) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19 and related variants; (5) risks related to the Company’s recently completed acquisitions, including that the anticipated benefits from the recently completed acquisitions are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions or other unexpected factors or events; (6) changes in management’s plans for the future; (7) credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values, or competition; (8) changes in accounting principles, policies, or guidelines; (9) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company’s participation in and execution of government programs related to the COVID-19 pandemic and related variants; (10) the impact of the COVID-19 pandemic and related variants on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (11) potential increases in the provision for loan losses resulting from the COVID-19 pandemic and related variants; and (12) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K and in other filings we make with the Securities and Exchange Commission (“SEC”), which are available on the SEC’s website, http://www.sec.gov. Undue reliance should not be placed on forward-looking statements. The Company disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
Statements about the potential effects of the COVID-19 pandemic and related variants on the Company’s assets, business, liquidity, financial condition, prospects, and results of operations may constitute forward-looking statements and are subject to the risks that the actual effects may differ, possibly materially, from what is reflected in these forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the depth, dispersion and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, employees, third parties and the Company.
| FIRST BANCSHARES, INC and SUBSIDIARIES Condensed Consolidated Financial Information (unaudited) (Dollars in thousands except per share data) | |||||
| EARNINGS DATA | Quarter | Quarter | Quarter | Quarter | Quarter |
| Total Interest Income | $ 43,885 | $ 44,435 | $ 43,238 | $ 45,187 | $ 45,613 |
| Total Interest Expense | 4,128 | 4,407 | 5,188 | 5,958 | 6,147 |
| Net Interest Income | 39,757 | 40,028 | 38,050 | 39,229 | 39,466 |
| FTE net interest income* | 40,425 | 40,673 | 38,696 | 39,884 | 40,119 |
| Provision for credit losses** | (1,104) | – | – | – | 3,523 |
| Non-interest income | 9,593 | 9,586 | 8,822 | 9,472 | 10,928 |
| Non-interest expense | 30,789 | 29,053 | 27,452 | 27,264 | 27,897 |
| Earnings before income taxes | 19,665 | 20,561 | 19,420 | 21,437 | 18,974 |
| Income tax expense | 3,874 | 4,429 | 3,820 | 4,793 | 3,639 |
| Net income available to common shareholders | $ 15,791 | $ 16,132 | $ 15,600 | $ 16,644 | $ 15,335 |
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| PER COMMON SHARE DATA |
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| Basic earnings per share | $ 0.75 | $ 0.77 | $ 0.74 | $ 0.79 | $ 0.72 |
| Diluted earnings per share | 0.75 | 0.76 | 0.74 | 0.79 | 0.72 |
| Diluted earnings per share, operating* | 0.76 | 0.76 | 0.74 | 0.79 | 0.65 |
| Quarterly dividends per share | .16 | .15 | .14 | .13 | .12 |
| Book value per common share at end of period | 32.17 | 31.81 | 31.40 | 30.64 | 30.54 |
| Tangible book value per common share at period end* | 23.31 | 23.03 | 22.57 | 21.76 | 21.65 |
| Market price at end of period | 38.62 | 38.78 | 37.43 | 36.61 | 30.88 |
| Shares outstanding at period end | 21,019,037 | 21,019,897 | 21,020,723 | 21,018,744 | 21,115,009 |
| Weighted average shares outstanding: |
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| Basic | 21,020,768 | 21,020,128 | 21,018,772 | 21,009,088 | 21,308,838 |
| Diluted | 21,175,323 | 21,211,716 | 21,207,660 | 21,200,558 | 21,421,367 |
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| AVERAGE BALANCE SHEET DATA |
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| Total assets | $5,664,336 | $5,504,107 | $5,458,531 | $5,337,264 | $5,136,136 |
| Loans and leases | 2,956,657 | 2,983,771 | 3,042,785 | 3,097,145 | 3,153,543 |
| Total deposits | 4,814,945 | 4,665,914 | 4,629,176 | 4,410,288 | 4,195,492 |
| Total common equity | 672,121 | 664,594 | 647,850 | 644,923 | 640,828 |
| Total tangible common equity* | 500,639 | 479,540 | 461,743 | 457,775 | 451,011 |
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| SELECTED RATIOS |
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| Annualized return on avg assets (ROA) | 1.12% | 1.17% | 1.14% | 1.25% | 1.19% |
| Annualized return on avg assets, operating* | 1.13% | 1.17% | 1.14% | 1.25% | 1.08% |
| Annualized pre-tax, pre-provision, operating* | 1.33% | 1.49% | 1.42% | 1.61% | 1.62% |
| Annualized return on avg common equity, operating* | 9.53% | 9.70% | 9.63% | 10.32% | 8.63% |
| Annualized return on avg tangible common equity, oper* | 12.80% | 13.44% | 13.51% | 14.54% | 12.27% |
| Average loans to average deposits | 61.41% | 63.95% | 65.73% | 70.23% | 75.17% |
| FTE Net Interest Margin* | 3.14% | 3.25% | 3.14% | 3.34% | 3.51% |
| Efficiency Ratio | 61.56% | 57.81% | 57.77% | 55.24% | 54.65% |
| Efficiency Ratio, operating* | 59.91% | 56.62% | 57.77% | 55.24% | 56.54% |
| *See reconciliation of Non-GAAP financial measures |
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| CREDIT QUALITY |
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| Allowance for credit losses (ACL) as a % of total loans** | 1.04% | 1.09% | 1.07% | 1.07% | 1.15% |
| Nonperforming assets to tangible equity + ACL | 5.88% | 5.43% | 7.30% | 7.52% | 8.57% |
| Nonperforming assets to total loans + OREO | 1.03% | 0.95% | 1.22% | 1.20% | 1.35% |
| Annualized QTD net charge-offs (recoveries) to total loans | 0.03% | 0.005% | 0.03% | 0.47% | 0.25% |
| **Beginning January 1, 2021, calculation is based on CECL methodology. Prior to January 1, 2021 calculation was based upon incurred loss methodology |
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Contacts
M. Ray “Hoppy” Cole
Chief Executive Officer
Dee Dee Lowery
Chief Financial Officer
(601) 268-8998
