The First Bancshares, Inc.

Good day and thank you for standing by and welcome to the review of the first quarter 2024 financial results conference call. At this time, all participants are on a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Hoppy Cole, Chairman and CEO.

Good morning, everyone, and welcome to our first quarter earnings call. We've got several of our team members with us today. We have D.D. Lowery, our CFO, J.J. Fletcher, our Chief Lending Officer, and George Nooner, our Chief Credit Officer. And each of those will give us some color on their respective areas after I cover a few highlights for the quarter. Let's go ahead and dive right in. I thought it was a great quarter and a really good start to the year, a strong beginning point for 2024. Operating earnings were up 10% quarter over quarter to $20.6 million, and that was due to reduced operating expenses and reduced provision expense, and we did see some stabilization in the margin. Our core margin was only down four basis points compared to 19 basis points last quarter. Loan balances at quarter end decreased, but actually average balances were up for the quarter. We got some unexpected payoffs on a few large loans right at the end of the quarter. We also had some SBA loan sales, but pipelines grew pretty substantially, and JJ will give us a lot more in-depth color on that in his report. Credit quality remains strong, continuing to help with low past dues at 26 basis points. We had an improvement in MTAs and charge-offs were low at one basis point. So credit quality, remember, continues to perform extremely well. We grew our potential book value during the quarter by 35 cents or 2% for a quarterly basis. We increased our quarterly dividend by a penny a share to 25 cents per share per quarter or a dollar per year, which has been an internal goal for quite some time. So all in all, we thought it was a really strong start to the year. Pleased with where we are and pleased with what the progress looks like for the rest of the year. So, DeeDee, would you like to give us an update on the financial performance for the quarter?

Sure. Thanks, Hoppy. Obviously, as Hoppy mentioned, a great quarter and first time in several, several quarters that we had really no non-operating items. So very few thousand dollars. So it's great to not have all that noise in there for y'all to have to go through and explain. But on an operating basis, I do have to do that because the last quarter we had several things. But Earnings did increase 1.9 million, which was six cents per diluted share up to 20 million, 20.6 million from 18.7 million. So very pleased with that. And as Hoppy mentioned, most of that was driven by a decrease in our non-interest expenses by a million dollars. And then the no provision needed this quarter. So provision expense was down 1.3 million and we're still at an ACL reserve of 105. So So those two were the big drivers. Our net interest income was basically flat down about right at $300,000 for the quarter. Our cost of deposits increased 24 basis points for the quarter to 178 basis points. Still a really good number based on our granularity and our deposit portfolio. Our interest-bearing deposit costs increased 27 basis points to 245, and that drove our beta up. to 43 from 38 last quarter, so about five basis points. Our yield on our earning assets increased eight basis points, but we also had an increase, obviously, in our interest-bearing liabilities of 18 basis points. And so, as Hoppy mentioned, that we did have a decrease in our core margin of four basis points, which um is obviously less than we had last quarter and kind of what we um kind of led to for this quarter that we would see compression this quarter and then into the next quarter hopefully mid-year maybe um stabilizing this was pretty good four basis points is is It's pretty good, say, and stable. I think we'll still see a little more compression into the second quarter. But, you know, we're talking about here a few basis points. So I think it's, you know, depending on a few factors could go either way on that. But, you know, if no change in rates from the Fed, I think, you know, we're still going to see our cost of deposits go up some this next quarter just from the competition we're still facing. With the Fed not cutting, we're still having to reprice and we're still having to match competition. And our specials, you know, we had in the fourth quarter, um expired at the end of the year but we're still offering you know higher rates close to what we were for those specials because of what's out there in the competition so we're still having to have increased costs so um until we see a cut on that i think our deposit costs are still going to be um you know increasing a little bit as we go but but hopefully can start bringing that down some um Our loans, as Happy mentioned, did decrease $30.1 million, but our average loans actually increased $12.8 million. So that was great on average for the quarter. JJ will give some more information on that. Deposits increased $247.5 million for the quarter. And that was 256 million of that was public funds. So if you exclude the public funds, we were down about 9 million, which really is basically flat for the quarter overall, a small decrease. If you recall, this is our public fund season where we're increasing our public funds for a large amount, as we've talked about in the past, anywhere from $200 million to $300 million, and then we'll see that spend out through the remaining part of the year. So be expecting that as we go forward. We also pay down our borrowings during the quarter by $280 million, and so we're down to $110 million still at the bank term funding program. that will expire in December. And then also I want to talk a little bit about our non-interest-bearing deposit portfolio. You notice that decreased this quarter. It was 28.6 last quarter, and it was 27.4% of total deposits this quarter, so down just a little over 1%. But a big piece of that, almost all of that, is because the increase in deposits was from public funds, which is interest-bearing. If we had just remained the same, basically without all the influx of interest-bearing, our non-interest-bearing would have been about the same. On our liquidity, our liquidity position still remains strong. Our ratios are well above our limits. Our loan-deposit ratio is 77%. We have a borrowing capacity at the home loan bank of $2.5 billion. And then we have about 28% of our securities are in pledged, which is about 480 million. Over the next four quarters, our securities portfolio estimated cash flows coming out of that is about 210 million. And that's coming out at about 180 basis points. So, you know, part of it kind of we've been talking about the last really several quarters is just kind of the restructuring of the balance sheet. I think we'll continue to see that this year as these cash flows come off. at that 180, it'll go in fed funds or loans. And so we'll definitely see pickup and some yield from that. but still kind of remixing the balance sheet this year is the plan. Our ratios for the quarter, ROA was 103, and our return on average tangible common was 1348, and then our efficiency ratio was 61. All of our capital ratios were in line from last quarter, 8.1 TCE, a leverage ratio of 9.7, and a total risk base of 15.2. All of that was last quarter, and overall, very pleased with where we're sitting today. That's all from me, Hoppy.