8-K: The First Bancshares, Inc. Announces Third Quarter 2024 Results and Merger Agreement with Renasant Corporation

The First Bancshares, Inc. reported a net income of $18.6 million for the third quarter of 2024, alongside announcing a merger agreement with Renasant Corporation.

Summary

• The First Bancshares, Inc. reported a net income available to common shareholders of $18.6 million for the third quarter of 2024, a decrease of 5.7% compared to the previous quarter.
• Excluding one-time items, operating net earnings increased by 2.7% to $20.5 million.
• Total loans increased by $67.7 million, representing an annualized increase of 5.2%.
• The annualized net interest margin increased by 7 basis points to 3.33%.
• The company announced a merger agreement with Renasant Corporation, expected to close in the first half of 2025.
• A quarterly cash dividend of $0.25 per share was declared, payable on November 22, 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to the merger announcement and operating earnings growth, but tempered by the decrease in net income and increased expenses. The merger is a positive long term move but the short term results are mixed.

Positives

• Operating net earnings increased by 2.7% quarter-over-quarter, indicating improved performance when excluding one-time items.
• Total loans saw a solid increase of $67.7 million, reflecting growth in lending activities.
• The net interest margin increased by 7 basis points, showing improved profitability from lending and investment activities.
• The merger with Renasant Corporation is expected to create a high-performing southeastern franchise.

Negatives

• Net income available to common shareholders decreased by 5.7% compared to the previous quarter.
• Non-interest income decreased by $1.1 million, primarily due to a decrease in interchange fee income and other charges.
• Non-interest expense increased by $2.3 million due to expenses related to the pending merger.
• Net income available to common shareholders decreased by $5.8 million or 23.8% when compared to the third quarter of 2023.
• The company recorded a $1.0 million provision for credit losses for the quarter ended September 30, 2024.

Risks

• The merger with Renasant Corporation is subject to customary closing conditions, including regulatory approvals, which may not be obtained.
• The company faces risks related to combining businesses, expenses related to the merger, and potential litigation.
• The company is exposed to competitive pressures, economic and political conditions, and interest rate risk.
• There are risks associated with credit quality, loan demand, and changes in accounting principles.
• The company is exposed to potential impacts of adverse developments in the banking industry, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response.

Future Outlook

The merger with Renasant Corporation is expected to close in the first half of 2025, subject to regulatory approvals and other customary closing conditions. The combined entity aims to create a high-performing southeastern franchise.

Management Comments

• M. Ray Hoppy Cole, Jr., President and Chief Executive Officer, stated that they were excited to announce the potential merger with Renasant Bank.
• He also noted the strong performance in terms of profitability and growth during the quarter.
• Management looks forward to the opportunities that lie ahead and the value they hope to create for shareholders through the strategic partnership with Renasant.

Industry Context

The merger announcement reflects a trend of consolidation within the banking industry, as institutions seek to enhance their market presence and operational efficiencies. The focus on a community bank model and relationship building aligns with a broader industry emphasis on customer-centric strategies.

Comparison to Industry Standards

• The First Bancshares' net interest margin of 3.33% is within the range of regional banks, but specific comparisons would require analysis of peer institutions like Hancock Whitney Corporation (HBHC) and Cadence Bank (CADE).
• Loan growth of 5.2% annualized is a positive sign, but needs to be compared to the average loan growth of similar sized banks in the Southeast region.
• The increase in nonperforming assets to 0.31% of total assets is a metric that needs to be monitored closely and compared to the industry average, which is currently around 0.5% for US banks.
• The cost of deposits at 183 basis points is higher than some larger national banks, but is typical for regional banks in the current interest rate environment.

Stakeholder Impact

• Shareholders will receive 1.00 share of Renasant common stock for each share of The First Bancshares common stock upon completion of the merger.
• Employees may experience changes as a result of the merger with Renasant Corporation.
• Customers will likely see changes in services and branding as the merger progresses.
• Suppliers and creditors may be impacted by the merger, but specific details are not provided.

Next Steps

• The company will work towards completing the merger with Renasant Corporation in the first half of 2025.
• The company will continue to operate as usual until the merger is complete.
• The company will pay the declared cash dividend on November 22, 2024.

Key Dates

Keywords

Merger, Net Income, Loans, Net Interest Margin, Dividend, Financial Results, Banking, Renasant Corporation, The First Bancshares, FBMS