The First Bancshares(FBMS) - 2023 Q2 - Quarterly Report

Financial Performance - The company reported net income available to common shareholders of $23.8 million for Q2 2023, an increase of 50.9% from $15.8 million in Q2 2022[162]. - Operating net earnings for Q2 2023 totaled $26.8 million, up 62.7% from $16.5 million in Q2 2022, excluding merger-related costs[163]. - Net interest income for Q2 2023 was $66.0 million, a 56.8% increase from $42.1 million in Q2 2022, driven by higher interest rates and acquisitions[164]. - Non-interest income for Q2 2023 was $12.4 million, a 43.4% increase from $8.7 million in Q2 2022, primarily due to higher service charges and fees[166]. - Pre-tax, pre-provision operating earnings increased 71.3% to $35.7 million in Q2 2023 compared to $20.8 million in Q2 2022[167]. - Net income for the six months ended June 30, 2023, was $46.7 million, compared to $35.5 million for the same period in 2022[180]. - Operating net earnings for the six months ended June 30, 2023, were $54.0 million, up from $31.5 million in the same period of 2022, reflecting a growth of 71.3%[266]. Interest Income and Margin - The net interest margin for Q2 2023 was 3.76%, compared to 3.02% in Q2 2022, reflecting a core net interest margin increase of 41 basis points[165]. - The average yield on all earning assets increased from 3.29% in Q2 2022 to 4.91% in Q2 2023[170]. - The cost of all deposits averaged 91 basis points in Q2 2023, up from 14 basis points in Q2 2022, due to rising interest rates and increased competition[171]. - Total interest income for Q2 2023 was $86,194,000, compared to $45,847,000 in Q2 2022, reflecting an increase of 88.0%[270]. - The yield on average earning assets increased to 4.97% in Q2 2023 from 3.36% in Q2 2022[270]. Non-Interest Income and Expenses - Non-interest expense for Q2 2023 was $46.9 million, an increase of 51.5% from the same period in 2022, including $10.0 million related to ongoing operations of recent acquisitions[168]. - Non-interest income increased to $25.0 million for the six months ended June 30, 2023, reflecting a rise of $5.2 million or 26.3% from $19.8 million in the same period in 2022[176]. - Total non-interest income for the three months ended June 30, 2023, was $12.423 million, up from $8.664 million in the same period in 2022[189]. - Total non-interest expense for the three months ended June 30, 2023, was $46.899 million, compared to $30.955 million for the same period in 2022[189]. Assets and Loans - Total assets increased to $7.852 billion at June 30, 2023, up from $6.462 billion at December 31, 2022, a rise of $1.390 billion[179]. - Loans increased by $1.239 billion to $5.018 billion, or 32.8%, during the first six months of 2023[179]. - Loans Held for Investment (LHFI) increased to $4.958 billion at June 30, 2023, representing a 32.7% growth from $3.735 billion at December 31, 2022, primarily due to the HSBI acquisition[202]. Credit Losses and Provisions - The provision for credit losses was $12.3 million for the six months ended June 30, 2023, compared to $600 thousand for the same period in 2022, with $10.7 million related to the HSBI merger[177]. - The allowance for credit losses (ACL) was $52.6 million, or 1.0% of LHFI, reflecting a 35.2% increase from $38.9 million at December 31, 2022[214]. - The Company recorded a provision for credit losses of $1.0 million for the three months ended June 30, 2023, and $11.5 million for the six months ended June 30, 2023, compared to $450 thousand for the same periods in 2022[216]. Deposits and Equity - As of June 30, 2023, total deposits increased by $1.230 billion, or 22.7%, to $6.658 billion from $5.428 billion at December 31, 2022[233]. - Total shareholders' equity increased by $252.8 million, or 39.1%, to $899.4 million at June 30, 2023, primarily due to the HSBI acquisition[242]. Interest Rate Risk Management - The company's net interest income at risk shows a potential decrease of 4.2% if interest rates drop by 200 basis points, equating to a $10.3 million reduction[273]. - If interest rates increase by 200 basis points, net interest income could improve by $3.1 million, or 1.3%[274]. - The company's one-year cumulative GAP ratio is approximately 169.0%, indicating a higher amount of assets repricing than liabilities within the first year[276]. - The market value of equity (EVE) is projected to decrease by 9.1% if interest rates drop by 200 basis points, with a change in EVE from base of $(138,469,000)[280]. - The company employs seven standard interest rate scenarios for net interest income simulations, including upward shocks of 100 to 400 basis points and downward shocks of 100 to 200 basis points[273]. Acquisitions and Investments - The investment portfolio decreased by $84.2 million, or 4.2%, to $1.898 billion at June 30, 2023, primarily due to maturing securities[199]. - The company sold approximately $171.2 million in securities acquired in the HSBI acquisition, impacting the overall investment strategy[199]. - Goodwill rose by $92.3 million to $272.5 million as of June 30, 2023, with approximately $92.1 million attributed to the HSBI acquisition[222].