8-K: The First Bancshares Reports Mixed Q4 2024 Results Amidst Renasant Merger

The First Bancshares, Inc. reports a slight decrease in net income for Q4 2024, alongside strong loan growth and an increasing net interest margin, while preparing for its merger with Renasant Corporation.

Summary

• The First Bancshares, Inc. (FBMS) reported net income available to common shareholders of $18.3 million for the quarter ended December 31, 2024, a 1.5% decrease compared to the previous quarter.
• Excluding one-time items, operating net earnings decreased by 1.1% to $20.3 million.
• Total loans increased by $88.6 million, or 6.7% on an annualized basis, compared to the previous quarter.
• The annualized net interest margin increased by 4 basis points to 3.37%.
• Core net interest margin (non-GAAP) increased 7 basis points to 3.33%.
• Past due loans to total loans were 0.40%, and annualized net charge-offs and recoveries to total loans were 0.04%.
• Nonperforming assets to total assets were 0.37%.
• The company entered a merger agreement with Renasant Corporation, expected to close in the first half of 2025, pending regulatory approvals.
• For the year, net income available to common shareholders increased 2.3% to $77.2 million.
• Total loans increased by $237.2 million, or 4.6%, for the year.
• Total deposits increased by $142.0 million, or 2.2%, for the year.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While net income decreased slightly, loan growth and net interest margin expansion are positive indicators. The upcoming merger is presented as a strategic opportunity, but also introduces uncertainty.

Positives

• Strong loan growth was reported, with a $88.6 million increase in Q4 2024.
• The net interest margin increased by 4 basis points to 3.37%.
• Core net interest margin increased by 7 basis points to 3.33%.
• Total deposits increased $142.0 million, or 2.2%, from the year ended December 31, 2023.
• The company is set to merge with Renasant Corporation, which management believes will build value for stakeholders.

Negatives

• Net income available to common shareholders decreased by 1.5% in Q4 2024 compared to the previous quarter.
• Nonperforming assets increased to $29.9 million, representing 0.37% of total assets.
• Book value per share decreased to $31.95 at December 31, 2024 from $32.11 at September 30, 2024.
• Tangible book value per share (non-GAAP) decreased $0.09 to $21.41 at December 31, 2024 from $21.50 at September 30, 2024.

Risks

• The merger with Renasant is subject to regulatory approvals and customary closing conditions.
• The company faces interest rate risk and competitive pressures.
• There are risks associated with integrating the businesses post-merger.
• Nonperforming assets have increased, which could impact future profitability.
• The company acknowledges potential impacts from adverse developments in the banking industry.

Future Outlook

The company expects to complete its merger with Renasant Corporation in the first half of 2025, subject to regulatory approvals and other customary closing conditions.

Management Comments

• M. Ray Hoppy Cole, Jr., President, and Chief Executive Officer, commented, We are pleased with our fourth quarter performance, which was characterized by strong loan growth, core net interest margin expansion and in line operating results.
• Two thousand twenty-four was a pivotal year in the history of our company with the announcement of the Merger.
• We are excited about this strategic partnership and the opportunities it presents for us to continue to build value for all our stakeholders.

Industry Context

The banking industry is currently facing increased competitive pressures, interest rate volatility, and potential impacts from adverse developments, including recent bank failures. This merger reflects a trend of consolidation in the regional banking sector to achieve greater scale and efficiency.

Comparison to Industry Standards

• Comparing The First Bancshares to regional peers like Hancock Whitney Corporation and Cadence Bank, its net interest margin of 3.37% is competitive.
• Loan growth of 6.7% annualized is strong compared to the industry average, which has seen slower growth due to economic uncertainty.
• The nonperforming assets ratio of 0.37% is relatively low, indicating sound asset quality compared to some peers with higher ratios.

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 face potential changes and integration into the Renasant organization.
• Customers may experience changes in services and products as a result of the merger.
• The merger aims to build value for all stakeholders, including shareholders, employees, and customers.

Next Steps

• The company will focus on obtaining regulatory approvals and satisfying closing conditions for the merger with Renasant Corporation.
• Management will continue to manage asset quality and monitor economic conditions.
• The company will pay a cash dividend of $0.25 per share on February 26, 2025.

Key Dates