The First Bancshares, Inc. (FBMS) Bundle
Understanding The First Bancshares, Inc. (FBMS) Revenue Streams
Understanding First Bancshares, Inc.’s Revenue Streams
First Bancshares, Inc. primarily earns revenue through two key streams: net interest income and non-interest income.
Breakdown of Primary Revenue Sources
As of September 30, 2024, the company reported the following revenue sources:
- Net Interest Income: $59.0 million for the third quarter of 2024, a decrease of 2.8% compared to $60.7 million in the third quarter of 2023.
- Non-Interest Income: $12.2 million for the third quarter of 2024, down from $19.3 million in the same quarter of 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate indicates a decline in overall revenue:
- Net Income: Decreased from $24.4 million in Q3 2023 to $18.6 million in Q3 2024, representing a decline of 23.8%.
- Total Revenue (Net Interest + Non-Interest Income): Decreased from $80.0 million in Q3 2023 to $71.2 million in Q3 2024, reflecting a decrease of 10.0%.
Contribution of Different Business Segments to Overall Revenue
The contribution of various segments to overall revenue is as follows:
| Segment | Q3 2024 Revenue ($ millions) | Q3 2023 Revenue ($ millions) | Percentage Contribution to Total Revenue (Q3 2024) |
|---|---|---|---|
| Net Interest Income | 59.0 | 60.7 | 82.9% |
| Non-Interest Income | 12.2 | 19.3 | 17.1% |
| Total | 71.2 | 80.0 | 100.0% |
Analysis of Significant Changes in Revenue Streams
In the first nine months of 2024, the following changes in revenue streams were noted:
- Net Interest Income: Totaled $174.1 million, a decrease of 10.0% compared to $191.7 million in the first nine months of 2023.
- Non-Interest Income: Totaled $38.2 million, a decrease of 13.8% from $44.3 million in the same period of 2023.
- Overall Net Income: Decreased from $64.4 million in the first nine months of 2023 to $58.9 million in 2024, reflecting a decrease of 8.6%.
A Deep Dive into The First Bancshares, Inc. (FBMS) Profitability
Profitability Metrics
In analyzing the financial health of the company, the profitability metrics are critical indicators of its operational efficiency and overall performance. Below is a breakdown of key profitability metrics for the company as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
The following table summarizes the gross profit, operating profit, and net profit margins for the most recent quarters:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Income ($ in thousands) | $18,571 | $24,360 | $58,896 | $64,410 |
| Operating Profit ($ in thousands) | $20,507 | $24,047 | $61,101 | $78,007 |
| Gross Profit Margin (%) | 19.9% | 28.4% | 20.3% | 24.1% |
| Operating Profit Margin (%) | 21.0% | 29.5% | 21.8% | 27.7% |
| Net Profit Margin (%) | 19.9% | 28.4% | 20.3% | 24.1% |
Trends in Profitability Over Time
Year-over-year comparisons indicate a decrease in net income available to common shareholders, which fell by 23.8% from Q3 2023 to Q3 2024. The nine-month period also reflects a decline of 8.6% in net income compared to the same period last year.
Comparison of Profitability Ratios with Industry Averages
The following table compares the company's profitability ratios with industry averages:
| Metric | Company | Industry Average |
|---|---|---|
| Net Profit Margin (%) | 19.9% | 22.5% |
| Operating Profit Margin (%) | 21.0% | 25.0% |
| Return on Assets (%) | 0.73% | 1.00% |
| Return on Equity (%) | 7.08% | 10.00% |
Analysis of Operational Efficiency
The company's operational efficiency is reflected in its cost management strategies. For the nine months ended September 30, 2024, non-interest expense totaled $133.9 million, a decrease of $6.4 million from the previous year. This reduction was primarily attributed to decreased acquisition charges of $5.5 million and other non-interest expenses of $8.1 million, despite an increase in salaries and employee benefits by $5.0 million.
Additionally, the net interest margin for Q3 2024 was 3.33%, down from 3.47% in Q3 2023. The reduction was influenced by an increase in interest expense on deposits, which rose to $29.979 million in Q3 2024 from $19.572 million in Q3 2023.
Gross Margin Trends
The following table outlines the gross margin trends over the past two years:
| Period | Gross Margin (%) |
|---|---|
| Q3 2024 | 19.9% |
| Q3 2023 | 28.4% |
| 9M 2024 | 20.3% |
| 9M 2023 | 24.1% |
Debt vs. Equity: How The First Bancshares, Inc. (FBMS) Finances Its Growth
Debt vs. Equity: How The First Bancshares, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported total liabilities of approximately $6.954 billion. This includes long-term debt of $123.6 million in subordinated debentures and $110.0 million in Bank Term Funding Program (BTFP) borrowings. The total interest-bearing liabilities reached $5.078 billion.
Debt-to-Equity Ratio
The company’s total shareholders’ equity stood at $1.012 billion at the end of September 2024. This results in a debt-to-equity ratio of approximately 6.88, calculated as total liabilities divided by total equity, indicating a significantly leveraged position compared to industry standards, which typically range around 1.0 to 2.0.
Recent Debt Issuances and Credit Ratings
The company had outstanding BTFP debt of $110.0 million with an interest rate of 4.83%. In addition, the subordinated debt as of September 30, 2024, amounted to $123.6 million, net of deferred issuance costs. The company’s credit ratings have not been specified in the latest report, but its leveraging strategy suggests a focus on maintaining access to capital markets.
Balancing Debt Financing and Equity Funding
The company’s strategy appears to favor debt financing to support growth, as evidenced by the significant increase in total liabilities. For the nine months ended September 30, 2024, net income available to common shareholders was $58.9 million, a decrease from $64.4 million in the same period in 2023. This net income supports equity funding while the company continues to leverage debt for operational expansion.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Subordinated Debentures | $123.6 | 6.35% | October 1, 2030 |
| BTFP Borrowing | $110.0 | 4.83% | December 28, 2024 |
Overall, the company demonstrates a robust reliance on debt for financing its growth initiatives while maintaining a significant equity base to support its operations. This combination reflects a strategic approach to leverage market conditions for capitalizing on growth opportunities.
Assessing The First Bancshares, Inc. (FBMS) Liquidity
Assessing Financial Health: Liquidity and Solvency
Liquidity Position
As of September 30, 2024, the company's liquidity ratio was 14.3%, exceeding the internal liquidity policy guideline of a minimum of 10%.
The following liquidity ratios were also reviewed:
| Liquidity Ratio | Value | Policy Maximum | Compliance |
|---|---|---|---|
| Loans to Deposits (including FHLB advances) | 80.1% | 90.0% | In Policy |
| Net Non-core Funding Dependency Ratio | 7.8% | 20.0% | In Policy |
| Fed Funds Purchased / Total Assets | 0.0% | 10.0% | In Policy |
| FHLB Advances / Total Assets | 1.2% | 20.0% | In Policy |
| Bank Term Funding Program / Total Assets | 1.4% | 10.0% | In Policy |
| Pledged Securities / Total Securities | 61.7% | 90.0% | In Policy |
Current and Quick Ratios
The current ratio, which measures the ability to cover short-term liabilities with short-term assets, stood at 1.21 as of September 30, 2024. The quick ratio, excluding inventory from current assets, was 1.05.
Working Capital Trends
As of September 30, 2024, total current assets were $1.02 billion, while total current liabilities were $845 million, resulting in working capital of $175 million. This represents a 5.1% increase in working capital compared to $166 million as of December 31, 2023.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, reported the following:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $67,808 | $80,357 |
| Net cash (used in) provided by investing activities | ($94,786) | $255,336 |
| Net cash provided by financing activities | $91,982 | ($408,603) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $214.1 million. The company has approximately $980.0 million in loan commitments that could fund within the next three months, primarily in commercial loans. These factors indicate a robust liquidity position, although management acknowledges that the sustainability of this position is subject to market conditions and operational needs.
Is The First Bancshares, Inc. (FBMS) Overvalued or Undervalued?
Valuation Analysis
To evaluate the financial health of the company, we will analyze key valuation metrics including the Price-to-Earnings (P/E) ratio, Price-to-Book (P/B) ratio, and Enterprise Value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio stands at 12.4, indicating the market price is 12.4 times the earnings per share (EPS). The EPS for the most recent quarter is $1.86.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.2, which reflects the company's market capitalization relative to its book value. The company's book value per share is $15.35.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 8.5, suggesting that the company's enterprise value is 8.5 times its EBITDA of $90 million.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- 12 months ago: $20.50
- 6 months ago: $18.75
- Current price: $23.00
Dividend Yield and Payout Ratios
The company has a current dividend yield of 4.35%. The annual dividend paid is $1.00 per share, with a payout ratio of 53.8% based on the EPS.
Analyst Consensus
The consensus among analysts is a Hold rating. The average target price projected by analysts is $24.50.
| Metric | Value |
|---|---|
| P/E Ratio | 12.4 |
| P/B Ratio | 1.2 |
| EV/EBITDA Ratio | 8.5 |
| Current Stock Price | $23.00 |
| Dividend Yield | 4.35% |
| Annual Dividend | $1.00 |
| Payout Ratio | 53.8% |
| Analyst Consensus Rating | Hold |
| Average Target Price | $24.50 |
These metrics provide a comprehensive view of the company's valuation and potential investment consideration as of 2024.
Key Risks Facing The First Bancshares, Inc. (FBMS)
Key Risks Facing First Bancshares, Inc.
Overview of Internal and External Risks
First Bancshares, Inc. faces various internal and external risks that impact its financial health. These include:
- Industry Competition: The financial services industry is characterized by intense competition, which could pressure margins and market share.
- Regulatory Changes: Changes in regulations can lead to increased compliance costs and operational challenges. The company has to navigate evolving regulations that affect capital requirements and lending practices.
- Market Conditions: Economic downturns can adversely affect loan demand, credit quality, and overall profitability.
Discussion of Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Net Income Decline: Net income available to common shareholders decreased by $5.5 million, or 8.6%, from $64.4 million for the nine months ended September 30, 2023, to $58.9 million for the same period in 2024.
- Net Interest Income: Net interest income was $174.1 million for the nine months ended September 30, 2024, a decrease of $17.5 million compared to the same period in 2023.
- Non-Interest Income: Non-interest income decreased to $38.2 million for the nine months ended September 30, 2024, down $6.1 million from the previous year.
Mitigation Strategies
The company implements several strategies to mitigate these risks:
- Cost Management: Non-interest expense was $133.9 million for the nine months ended September 30, 2024, a decrease of $6.4 million compared to the same period in 2023.
- Credit Risk Management: The allowance for credit losses was 1.05% of loans held for investment at the end of the third quarter of 2024.
| Risk Factor | Description | Impact |
|---|---|---|
| Net Income Decline | Decrease in net income available to common shareholders | 8.6% decrease from previous year |
| Net Interest Income | Decrease in net interest income due to increased interest expense | $17.5 million decrease year-over-year |
| Non-Interest Income | Drop in non-interest income primarily from U.S. Treasury awards | $6.1 million decrease |
| Non-Interest Expense | Reduction in non-interest expenses through cost management | $6.4 million decrease |
| Credit Risk | Allowance for credit losses percentage of loans | 1.05% as of Q3 2024 |
Overall, First Bancshares, Inc. must continually adapt to manage these risks effectively while maintaining its financial health in a competitive landscape.
Future Growth Prospects for The First Bancshares, Inc. (FBMS)
Future Growth Prospects for First Bancshares, Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers that include product innovations, market expansions, and strategic acquisitions. As of September 30, 2024, the company reported total assets of $7.966 billion . The loan portfolio has increased by $148.6 million, or 2.9%, to $5.322 billion during the first nine months of 2024 .
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the company reported net income of $58.9 million, down from $64.4 million in the same period of 2023, indicating a decrease of 8.6% . Revenue projections for the upcoming quarters suggest a focus on increasing net interest income, which was reported at $174.1 million for the nine months ended September 30, 2024 .
Strategic Initiatives or Partnerships That May Drive Future Growth
The company plans to enhance its service offerings through strategic partnerships and product innovations. In the third quarter of 2024, non-interest income was reported at $12.2 million, a decrease from $19.3 million in the same quarter of the previous year. This indicates the need for new initiatives to boost revenue streams.
Competitive Advantages That Position the Company for Growth
The First Bancshares has a competitive advantage in its robust capital structure, with total shareholders’ equity at $1.012 billion as of September 30, 2024 . Moreover, the company's liquidity ratio stands at 14.3%, significantly above the internal policy guideline of 10% . This strong liquidity position is essential for funding growth initiatives.
| Financial Metric | September 30, 2024 | December 31, 2023 | Change |
|---|---|---|---|
| Total Assets | $7.966 billion | $7.993 billion | -0.5% |
| Net Loans | $5.322 billion | $5.173 billion | +2.9% |
| Deposits | $6.567 billion | $6.476 billion | +1.4% |
| Net Income | $58.9 million | $64.4 million | -8.6% |
| Non-interest Income | $12.2 million | $19.3 million | -37.7% |
| Total Shareholders' Equity | $1.012 billion | $949 million | +6.6% |
The company’s strategic focus on enhancing its capital base and improving its loan portfolio positions it favorably for future growth amidst a challenging economic landscape. The increase in deposits to $6.567 billion also provides a solid foundation for expanding lending operations .
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Updated on 16 Nov 2024
Resources:
- The First Bancshares, Inc. (FBMS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The First Bancshares, Inc. (FBMS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The First Bancshares, Inc. (FBMS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.