The First Bancshares(US:FBMS)2025-03-03 20:20Merger and Acquisition - The Renasant Merger is subject to customary conditions that must be fulfilled, and failure to complete it could negatively affect the company's stock price and future financial results[110]. - Shareholders will receive 1.00 share of Renasant common stock for each share of the company common stock, but the value of this consideration may fluctuate based on market conditions[112]. - Regulatory approvals for the Renasant Merger may be delayed or not obtained, which could impose additional costs or limitations on the combined company[114]. - The company may incur significant transaction and merger-related costs associated with recent acquisitions, affecting its financial results[155]. - The company may not realize anticipated cost savings and financial benefits from recent acquisitions within the expected timeframe[154]. - The Company completed the acquisition of Heritage Southeast Bank on January 1, 2023, for a total consideration of $221.5 million, which included 6,920,422 shares of common stock and $16 thousand in cash[469]. - Approximately $91.9 million of goodwill was recorded from the HSBI acquisition, with $3.2 million allocated for estimated losses on acquired PCD loans and $43.7 million as core deposit intangible[470]. - The finalized fair value of total assets acquired from HSBI was $1,565.3 million, with total liabilities of $1,435.7 million, resulting in net assets acquired of $129.6 million[473]. - The Company completed the acquisition of Beach Bancorp, Inc. on August 1, 2022, for approximately $101.5 million, including 3,498,936 shares of common stock and $1 thousand in cash[474]. - Approximately $23.7 million of goodwill and $9.8 million of core deposit intangible were recorded from the BBI acquisition, with the core deposit intangible amortized over 10 years[475]. - The Company incurred expenses of $388 thousand and $4.9 million related to the HSBI acquisition for the three months and twelve months ended December 31, 2023, respectively[471]. - Expenses associated with the BBI acquisition were $4 thousand and $1.4 million for the three months and twelve months ended December 31, 2023, respectively[476]. Financial Performance - Total assets increased to $8,004,778 thousand in 2024 from $7,999,345 thousand in 2023, reflecting a slight growth in the company's financial position[373]. - The company's total deposits rose to $6,604,856 thousand in 2024, up from $6,462,872 thousand in 2023, indicating a positive trend in customer deposits[373]. - The retained earnings increased to $346,182 thousand in 2024 from $300,150 thousand in 2023, showcasing improved profitability[373]. - The total stockholders' equity reached $1,005,431 thousand in 2024, compared to $949,034 thousand in 2023, reflecting a solid capital position[373]. - The company reported a decrease in interest payable from $22,702 thousand in 2023 to $13,856 thousand in 2024, indicating better management of interest expenses[373]. - Total interest income for 2024 reached $369,835 thousand, an increase of 8.8% from $340,933 thousand in 2023[375]. - Net interest income after provision for credit losses was $230,479 thousand in 2024, slightly down from $234,825 thousand in 2023[375]. - Non-interest income increased to $49,762 thousand in 2024, up from $46,705 thousand in 2023, representing a growth of 4.4%[377]. - Total non-interest expense decreased to $182,276 thousand in 2024 from $184,726 thousand in 2023, a reduction of 0.8%[377]. - Net income available to common stockholders for 2024 was $77,194 thousand, compared to $75,457 thousand in 2023, reflecting a growth of 2.3%[377]. - Earnings per share (EPS) for 2024 was $2.45, a slight increase from $2.41 in 2023[377]. - The company reported a comprehensive income of $85,212 thousand in 2024, down from $106,838 thousand in 2023[380]. - The provision for credit losses for loans held for investment (LHFI) was $3,758 thousand in 2024, significantly lower than $13,750 thousand in 2023[375]. - Interest on deposits increased to $117,850 thousand in 2024, up from $71,359 thousand in 2023, indicating a rise of 65%[375]. - Net income for 2024 increased to $77,194 thousand, up from $75,457 thousand in 2023, representing a growth of 2.3%[385]. Risk Factors - Economic downturns in the markets served, such as Mississippi, Louisiana, Alabama, Florida, or Georgia, could adversely affect the company's financial results and liquidity[115]. - The company is exposed to credit risk, particularly in its real estate and construction loan portfolio, which could increase if real estate values decline[117]. - Changes in interest rates can significantly impact the company's profitability, as net interest income is largely dependent on these rates[124]. - Elevated interest rates may reduce the demand for loans and adversely affect borrowers' ability to repay, leading to an increase in non-performing assets[128]. - Inflation could increase operating costs at a faster pace than revenue growth, impacting overall profitability[129]. - The evaluation of investment securities for impairment involves subjective determinations that could materially affect the company's financial condition[130]. - The FDIC increased deposit insurance premiums by two basis points starting in Q1 2023, which could negatively impact profitability[136]. - The company faces intense competition from larger financial institutions and non-bank competitors, which may affect its market share and profitability[137]. - The company is subject to extensive regulation by various federal and state entities, which may impact its business operations[134]. - The company is exposed to fraud risks from customers and employees, which could lead to unexpected loan losses[148]. - The company may struggle to attract and retain skilled personnel, which could adversely impact its operations[149]. - The company is susceptible to natural disasters and public health emergencies, which could disrupt operations and negatively affect local economies[146]. - Negative developments in the banking industry could erode customer confidence, impacting liquidity and capital[152]. - The company may incur additional unanticipated significant costs related to acquisitions, which could adversely impact financial results[156]. Interest Rate Risk - The company's estimated net interest income at risk shows a potential decline of $1.7 million, or 0.7%, if interest rates increase by 200 basis points[353]. - The company's one-year cumulative GAP ratio was approximately 144.0% at December 31, 2024, indicating it is considered "asset-sensitive"[354]. - The company utilizes modeling software to perform earnings simulations and assess market value under varying interest rate scenarios every month[351]. - If interest rates were to decrease by 200 basis points, net interest income would likely increase by approximately $2.5 million, or 1.0%[352]. - The economic value of equity (EVE) will vary under different interest rate scenarios, indicating the company's longer-term exposure to interest rate risk[357]. - The company has established policies to monitor and limit earnings and balance sheet exposure to changes in interest rates[350]. - The market value of equity as of December 31, 2024, under different interest rate scenarios showed a decrease of $98,730 thousand (5.8%) in a -200 bp scenario compared to the base case[358]. - The market value of equity in a +100 bp scenario was $1,728,106 thousand, showing a positive change of $31,717 thousand (1.9%) from the base case[358]. Credit Losses and Allowance - The estimated allowance for credit losses (ACL) on loans held for investment was $56.2 million as of December 31, 2024, representing an expected loss estimate within a loan portfolio totaling $5.41 billion[366]. - The company’s unfunded loan commitments totaled $863 million, with an ACL of $2.1 million, indicating a cautious approach to potential credit losses[366]. - The Company utilizes a 24-month forecasted probability of default (PD) based on a regression model correlated with unemployment rates, which significantly impacts estimated loan losses[422]. - The allowance for credit losses (ACL) is estimated using historical credit loss experience and adjusted for current risk characteristics, with expected losses calculated over the contractual term of the loans[418]. - Loans are placed on nonaccrual status when principal or interest payments are 90 days past due, with accrued interest reversed against interest income[412]. - The Company adopted ASU No. 2022-02 effective January 1, 2023, eliminating TDR recognition and enhancing disclosures for loan modifications[426]. - The loss given default (LGD) calculation is based on actual losses experienced over the lookback period, aggregated by loan segment[423]. Securities and Investments - As of December 31, 2024, the total available-for-sale securities amounted to $1,003,303 thousand, with gross unrealized losses of $116,155 thousand[480]. - The held-to-maturity securities totaled $537,275 thousand, with gross unrealized losses of $49,032 thousand[480]. - The company reported no credit losses on available-for-sale securities as of December 31, 2024[483]. - The potential credit loss exposure for held-to-maturity securities was $201 thousand, deemed immaterial, resulting in no reserve recorded[486]. - Accrued interest receivable for available-for-sale securities was $5.0 million at December 31, 2024[484]. - The company had no past due securities held-to-maturity as of December 31, 2024[488]. - Interest income on investments includes amortization of purchase premiums or discounts, with gains and losses recorded on the trade date[411]. - The Company carries equity securities at fair value, with changes reported in net income, while those without readily determinable fair values are carried at cost[408]. Regulatory and Compliance - The evolving regulatory environment regarding AI technology may increase compliance costs and risks for the company[144]. - The Company had no uncertain tax positions that qualify for recognition or disclosure in the financial statements as of December 31, 2024[442]. - The Company is expected to adopt ASU 2023-09 for annual periods beginning after December 15, 2024, which will require additional disclosures about income taxes paid[465]. - The Company adopted ASU 2023-01 and ASU 2023-02 effective January 1, 2024, which did not have a material impact on the consolidated financial statements[461][462]. Business Operations - The Company operates three principal business segments: Commercial/Retail Bank, Mortgage Banking Division, and Holding Company, with performance evaluated using income before income taxes[459]. - The Company invested $4.4 million in a limited partnership for low-income housing, with a carrying value of $739 thousand at the end of 2024, down from $1.2 million in 2023[456]. - The Bank received $6.2 million from the CDFI Equitable Recovery Program to expand lending and investment activities in low- or moderate-income communities[457]. - The Bank also received $280 thousand from the BEA Program to support community development financing in economically distressed areas[458]. - Advertising expenses were $445 thousand in 2024, a decrease from $833 thousand in 2023[443]. - The company plans to continue its market expansion and product development strategies to enhance future growth[376]. - The company plans to transfer its common stock listing from Nasdaq to NYSE, effective May 30, 2024[392].