First Bancshares, Inc. Announces Securities Portfolio Repositioning and 2023 Fourth Quarter Earnings Call Information
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Insights
The strategic repositioning of The First Bancshares' securities portfolio signifies a tactical move to optimize earnings in a changing interest rate environment. By offloading securities with a low yield of 1.12% and reallocating funds to higher-yielding bonds at 5.33%, the institution is aiming to capitalize on higher interest rates post-2023.
This maneuver is expected to bolster the net interest margin by 8 basis points, which, despite appearing minimal, can have a significant impact on profitability given the scale of banking operations. Moreover, the projected increase in net interest income by $4.7 million and an enhancement in earnings per share by $0.11, assuming other factors remain constant, could be appealing to investors seeking financial growth.
However, the $9.7 million pre-tax loss from the sale is not to be overlooked. It's imperative to consider the earn back period of 2.1 years, which indicates the time frame for the benefits to outweigh the costs. Investors should weigh the immediate negative impact against the potential for increased income over the medium term.
The decision to repay $30 million in borrowings from the Federal Reserve Bank's Bank Term Funding Program is a prudent step towards reducing debt obligations, especially when the borrowing rate stands at 4.82%. This move not only improves the company's debt profile but also reflects a strategic approach to capital management amid fluctuating interest rates.
From a market perspective, the reinvestment in bonds with a longer average life of 6 years suggests a confidence in the stability of the interest rate environment and a commitment to long-term planning. This could be interpreted positively by the market, as it demonstrates a proactive and strategic approach to asset management.
An economist's view would note that the balance sheet repositioning of The First Bancshares comes at a time when financial institutions are navigating the complexities of a potentially shifting monetary policy landscape. The Federal Reserve's interest rate decisions have a profound impact on banks' net interest margins and overall profitability.
By locking in higher yields for a longer period, the bank is hedging against the risk of falling interest rates in the future. However, should interest rates rise further, the bank may find itself with assets yielding less than the market rate, which could lead to opportunity costs. This repositioning reflects a careful balancing act between risk and reward in the bank's asset management strategy.
Securities Portfolio Repositioning
In December 2023, The First sold
The balance sheet repositioning is expected to result in increases in net interest margin of 8 basis points, net interest income of
Fourth Quarter 2023 Earnings Call Information
The First Bancshares will announce 2023 fourth quarter results following the NASDAQ’s closing on Wednesday, January 24, 2024. The Company will hold executive management’s quarterly conference call on Thursday, January 25, 2024 at 11:00 AM Eastern Time (10:00 Central Time).
The webcast is accessible by clicking on the following link:
https://register.vevent.com/register/BIf4b652d4e9ff4cd5a10ec44d884e1480
The webcast will be archived on www.thefirstbank.com after the call.
About The First Bancshares, Inc.
The First Bancshares, Inc., headquartered in
Forward Looking Statements
This news release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute “forward looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact are forward-looking statements. Such statements can generally be identified by such words as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential,” “positioned” and other similar words and expressions of the future or otherwise regarding the outlook for the Company’s future business and financial performance and/or the performance of the banking industry and economy in general. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risk and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. Factors that might cause such differences include, but are not limited to: (1) competitive pressures among financial institutions increasing significantly; (2) prevailing, or changes in, economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations, including the effects of declines in the real estate market, high unemployment rates, inflationary pressure, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; (3) interest rate risk, including the effects of rising interest rates; (4) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; (5) changes in applicable laws, rules, or regulations; (6) risks related to the Company’s recently completed acquisitions, including that the anticipated benefits from the recently completed acquisitions are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions or other unexpected factors or events; (7) changes in management’s plans for the future; (8) credit risk associated with our lending activities; (9) changes in loan demand, real estate values, or competition; (10) changes in accounting principles, policies, or guidelines; (11) adverse results from current or future litigation, regulatory examinations or other legal and/or regulatory actions, including as a result of the Company's participation in and execution of government programs related to the COVID-19 pandemic and related variants; (12) higher inflation and its impacts; (13) significant turbulence or disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; (14) potential impacts of the adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; (15) the effects of war or other conflicts including the impacts relating to or resulting from
These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K and in other filings we make with the SEC, which are available on the SEC’s website, http://www.sec.gov. Undue reliance should not be placed on forward-looking statements. The Company disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240116973141/en/
M. Ray “Hoppy” Cole
Chief Executive Officer
Dee Dee Lowery
Chief Financial Officer
(601) 268-8998
Source: The First Bancshares, Inc.
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