fbms burkenroad report 2016
TRANSCRIPT
March 29th, 2016
THE FIRST BANCSHARES INCORPORATED FBMS/NASDAQ
Continuing Coverage: Big Bank Products, Small Bank Feel Investment Rating: Market Outperform PRICE: $ 15.62 S&P 500: 2,055.01 DJIA: 17,633.11 RUSSELL 2000: 1,109.08
Only a small percentage of loans tied to oil industry
Loan to deposit ratio begins to stabilize
Smart acquisitions target the growing southeast U.S.
Increasing return on assets remains management focus
Our 12‐month target price is $24.00.
Valuation 2015 A 2016 E 2017 E
EPS* $ 1.64 $ 1.92 $ 2.03
P/E 9.5x 8.1x 7.7x
CFPS $ 2.11 $ 2.96 $ 3.13
P/CFPS 7.4x 5.3x 5.0x
* Excluding non‐recurring i tems
Market Capitalization Stock Data
Equity Market Cap (MM): $ 84 52‐Week Range: $15.32 ‐ $19.32
Enterprise Value (MM): $ 126 12‐Month Stock Performance: ‐2.98%
Shares Outstanding (MM): 5.40 Dividend Yield: 0.96%
Estimated Float (MM): 4.60 Book Value Per Share: $ 19.14
6‐Mo. Avg. Daily Volume: 6,909 Beta: 0.34
Company Quick View:
Smart, growth‐minded bankers in the heart of Dixie. First Bancshares, a Hattiesburg, Mississippi based bank, has 32 locations throughout Mississippi, Alabama, and Louisiana. The bank offers investment accounts, interest and non‐interest bearing checking and saving accounts, and credit and debit card service. In addition, the Company provides commercial and consumer lending. First Bancshares specializes in loans to individuals for mortgages. Company: www.thefirstbank.com
Analysts: Investment Research Manager: Brigid Doherty Jianrui Zhao Chris Sullivan Ian Levy Joe Bonner Scott Merritt
The BURKENROAD REPORTS are produced solely as a part of an educational program of Tulane University's Freeman School of Business. The reports are not investment advice and you should not and may not rely on them in making any investment decision. You should consult an investment professional and/or conduct your own primary research regarding any potential investment.
Wall Street's Farm Team
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The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
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Figure 1: Five‐year Stock Price Performance
Source: Yahoo! Finance March 29, 2016
INVESTMENT SUMMARY
We give The First Bancshares, Inc. a rating of Market Outperform with a 12‐month target price of $24.00 per share. To derive this target price, we used an analysis of the Company’s historical price to book value ratio, discounted cash flow for banks analysis, and a price to earnings analyses.
The First Bancshares is a publicly traded bank holding company for The First, A National Banking Association. The First, headquartered in Hattiesburg, Mississippi, has 32 locations across Mississippi, Alabama, and Louisiana. A map of the Company’s operations can be seen in Figure 2. The Company strives to provide its customers with the breadth of products and services comparable to those offered by large regional banks, while maintaining the quick response and personal service of a locally owned and managed bank. As such, the Company provides commercial and retail financial services to small to medium‐sized businesses and individuals. Loans for construction and land development, commercial and industrial use, and residential families are the largest predictors of future performance. As of December 31, 2015, the Company reported roughly $1.13 billion in assets, a 4% increase from 2014.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
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Figure 2: Map of Current Locations
Source: FBMS Management March 31, 2016
Though the Company strives for 5‐7% organic growth annually, it expands its customer base primarily through acquisitions of other banks. From 2009 to 2014, the Company enacted a five‐year expansion plan which grew the bank from 9 to 32 locations across southern Mississippi, southern Alabama, and southeastern Louisiana. As the Company continues to expand, acquisitions become easier as smaller banks begin to suffer from changes in the regulatory environment. Though the Company has an advantage over the smaller banks, it is not immune to changes in the regulatory environment such as the potential for negative interest rates. In order to maintain a competitive advantage, the Company must continue to acquire smaller banks and expand.
Table 1: Historical Burkenroad Ratings and Prices
Date Price Rating Price Target
4/2/15 $16.00 Market Perform $17.00
INVESTMENT THESIS
We established a 12‐month target price of $24.00 and a rating of Market Outperform. The First Bancshares, Inc. has both steady organic growth and growth by acquisitions of other small banks. With the rapid decline of the energy industry, we expect the next acquisition to be further away from areas closely tied to energy. The First Bancshares had a successful five year plan beginning in 2009 that resulted in assets increasing from $478 million to $1.145 billion and return on assets increasing from 0.30% to 0.79%. Looking forward, management’s goal is to achieve $2.5 billion in assets by 2021.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
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Figure 3: Total Assets in Millions of Dollars
Source: Bloomberg March 29, 2016
Only a small percentage of loans tied to oil industry
Currently, the Company only has about $20 million, or less than 3% of its loan portfolio, directly tied to falling oil prices. Furthermore, the overwhelming majority of the $20 million is in two major loans to large players in the oil industry. Due to the small exposure to oil, the drop in prices has not affected the Company and management does not see it becoming a problem in the future.
The small amount invested into the oil industry can prove to be a competitive advantage for First Bancshares. While some of its peers may have to increase their allowance for bad debt, the management at the Company does not currently see this need.
Loan to deposit ratio begins to stabilize
The loan to deposit ratio (LTD) compares money received by a bank with money being paid out. Too high of a ratio may mean the bank does not have enough cash, while too low a ratio may show that the bank can be earning more. Over the past few years, First Bancshares has budgeted for a LTD ratio of 85%. At the beginning of 2016, the Company had a LTD ratio that had grown to 84%. After years of steady LTD growth, the LTD ratio is expected to level off close to where it is now. If this ratio is maintained, future interest revenue is expected to grow at a similar rate to deposits (see Figure 4).
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Figure 4: Loan to Deposit Ratio
Source: Bloomberg March 29, 2016
Smart acquisitions target the growing southeastern U.S.
Throughout the past five years, the Company has expanded throughout the Gulf South through acquisitions. The Company picked acquisition targets carefully by examining fundamentals of the business and the economies in which the businesses operate. First Bancshares buys‐out companies based in cities that have a fast growing population and economic growth. So, with population levels in the southeast growing, the Company expects to see deposits grow at a similar or even better rate than the Company has previously experienced.
However, for the first time in three years, First Bancshares went through 2015 without an acquisition. Consequently, the Company is eager to make an acquisition and expand in 2016. Specifically, management is constantly looking for new acquisition targets with less than $500 million in assets in Mississippi, Alabama, Louisiana, and western Florida.
Increasing return on assets remains management focus
Over the past few years, management has received criticism for a return on assets (ROA) below its Company peers. However, the low ROA has partially been due to the Company’s acquisition expenses over the last couple of years.
Management is aware of this concern and has an attractive ROA target for the end of 2016 and 2017. With a current ROA of .79%, the Company plans to increase ROA to .85% in 2016 and above the peer average to .90% in 2017. Figure 5 shows ROA growth and the upward trend over the last six years.
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The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
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Figure 5: Return on Assets
Source: Bloomberg March 29, 2016
VALUATION
We determined our 12‐month target price of $24.00 by calculating the average of three price valuation methods: discounted cash flow (DCF) for Banks, price to earnings value (P/E) ratio analysis, and price to tangible book value (P/TBV) ratio analysis. We determined this target price by equally weighing the values we calculated for these three valuation methods. When calculating our multiples, we decided to exclude MidSouth Bancorp because, unlike the First and other companies in the peer group, this company has a large stake in the oil industry.
Relative Multiple Method: P/E
We decided to include the relative multiple valuation of P/E in our 12‐month target price projection because P/E ratio is one of the most popular valuation measures used by investors and analysts. The ratio denotes the multiple of the volume at which a stock is trading by each dollar of earnings per share (EPS). In Table 1, the peer average is 13.82x, which is higher than FBMS’ value of 11.35x. We then multiplied the peer average ratio by our predicted EPS for the next four periods of $1.96, which yielded a 12‐month target price of $27.15.
Relative Multiple Method: P/TBV
In our second analysis, we applied the relative multiple valuation of the P/TBV model. This model has been proven to be reliable, as the P/TBV ratio consists of the price of the security over the total book value of a company’s assets. The P/TBV ratio represents the amount of money per share the debtholders and shareholders would receive if a company were to liquidate its physical assets. After calculating FBMS’ P/TBV multiple, we compared this value to the peer average. The peer average and Company ratios are both 1.08x, meaning the price is 1.08 times the earnings. This valuation method yielded a 12‐month target price of $22.19.
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Discounted Cash Flow
The last valuation method that we used was a DCF analysis. We decided to include this method because DCF attempts to measure the value created by a business directly and precisely, for the value of a firm is ultimately derived from the inherent value of its future cash flows to its stakeholders. DCF analysis allowed us to calculate the present value of our projected five‐year net incomes, which we discounted by the Company’s weighted average cost of capital (WACC). To derive the Company’s WACC of 8.20%, we utilized a 2.50% 20‐year Treasury rate as risk‐free rate, a 5.70% market risk premium, and a beta of 1. The DCF analysis resulted in a 12‐month target price of $21.76.
Figure 6:Valuation Results and Target Price
Source: Yahoo! Finance March 29, 2016
After conducting the three valuation methods, we equally weighed each valuation result and set our 12‐month target price at $24.00. Figure 6 reveals that a gap exists between the current share price and the projected prices stemming from these three valuation methods. We consider the 12‐month target price to be set reasonably higher than the current price. Finally, considering the Company’s historic reliance on acquisitions, we predict that FBMS will have at least one acquisition in the upcoming year.
INDUSTRY ANALYSIS
The U.S. banking industry consists of institutions that primarily earn revenue through interest on loans. These financial institutions earn profit primarily by the interest spread, or the difference between the interest rate the banks receive on loans made and the interest rate banks pay out on deposits. Banks also earn revenue through the trading of securities, charging transaction fees on deposits, and potentially issuing its’ own securities.
Banks are organized in three categories: national, regional, or community banks. A national bank is generally headquartered in a major financial city in the U.S. and engaged in a variety of activities including commercial lending, auto loans, credit cards, international lending, and foreign currency operations. Community banks tend to operate more locally but can still operate across a few states. Community banks are generally differentiated through a deep understanding of the financial needs of community members and strong local connections.
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Position in the Banking Industry
The First Bancshares, Inc. operates as a community bank in the Southeastern U.S. The Company extends into three states, with 31 locations throughout Mississippi, Alabama, and Louisiana. As of September 30, 2015, the Company reported total assets of $1.1 billion and deposits totaling $964 million.
Drivers of the Community Banking Industry
The success of the Company is largely dependent on the regional economy. Gulf South state economies depend largely on manufacturing, oil and gas, agriculture, and tourism. Low oil prices affect the Louisiana economy, and have a negative impact on the Louisiana branches. On a broad scale, the entire banking industry is impacted by actions of the Federal Reserve. However, due to the rising interest rates, First Bank’s branches should see an increase in revenue.
Regulations in the Banking Industry
At the federal level, banks are regulated by the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency, and the Federal Reserve Board. On the state level, state regulated charters monitor banks. The federal and state regulators work to eliminate the banks’ right to privacy and the likelihood of fraud. Furthermore, the recent passing of the Dodd‐Frank Act in 2010 increases banks’ transparency by requiring the disclosure of public statements.
Threat of Entry
New entrants into First Bancshares’ market face two threats: 1) New, regional banks opening in the southeast; and 2) Nation‐wide, major banks expanding into these areas.
Bank startups face many regulatory and capital requirements. Due to licensure laws, capital requirements, access to financing, regulatory compliance, and security concerns, the present threat of new entrants is relatively low. According to the FDIC, an average of 215 new banks opened each year between 1977 and 2002. Due to mergers and bank failures, however, the average number of total banks has decreased by roughly 253 a year in the same timeframe.
Because the industry deals with customers’ wealth and financial information, new banks find it very difficult to enter the industry. Due to the nature of the industry, people are more willing to place their money in major, well known banks that are considered trustworthy. The banking industry also has gone through a transformation in which major banks seek to serve all of a customer’s needs in the same location. Since a customer is more likely to allow one bank to hold all of their accounts and fulfill their financial needs, this consolidation furthers the role of trust as a barrier to entry. As a regional bank located only in the southeast, the Company places a large emphasis on maintaining close, personal relationships with its customers.
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While it is nearly impossible for new banks to enter the industry, it is also difficult for smaller banks to open on a regional level. Considering the large number of major banks as well as community banks available in the southeast, a new bank would have a hard time gaining market share in this region.
Bargaining Power of Suppliers
The bargaining power of suppliers in the banking industry is relatively high. There are four major suppliers of capital for banks: customer deposits, mortgages and loans, mortgage‐backed securities, and loans from other institutions. By utilizing these four major suppliers, the bank can have the necessary resources required to service the customers’ borrowing needs while maintaining enough capital to meet withdrawal expectations. The power of the suppliers is largely based on the markets and fluctuates. While capital might not pose a big threat, the threat of suppliers luring away capital does. First Bancshares must consistently maintain enough capital to serve its customers’ broad needs.
Bargaining Power of Buyers
Similarly, buyers have a great deal of bargaining power. Individual customers do not pose much of a threat to the banking industry. One major factor affecting the power of buyers is the relatively high cost of switching banks. If a person has one bank that services their banking needs, mortgage, saving, checking, etc., it can be time consuming and expensive for an individual to switch to another bank. In an attempt to lure customers from competitors, banks will lower switching cost. However, the internet has greatly increased the power of the customer in the banking industry by giving consumers the power to compare rates offered by numerous banks.
On the other hand, large corporate clients have high bargaining power in the banking industry. By offering better exchange rates, more services, and exposure to foreign capital markets, financial institutions work extremely hard to lure and maintain high‐margin corporate clients.
Availability of Substitutes
While the threat of substitutes are high within the banking industry, the largest threat of substitution is among non‐financial competitors. Insurances, mutual funds, and fixed income securities are some of the many financial services that are also offered by non‐banking companies. Additionally, on the lending side of business, banks are seeing competition from unconventional companies. Big name electronics, jewelers, car dealers, etc. tend to offer preferred financing on “big ticket” items. These non‐banking companies offer lower interest rates on payments than the customer would otherwise get from a traditional banking loan.
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Competitive Rivals
Competition among banks is often a race to determine which bank can offer both the most attractive and efficient services. However, this often causes banks to experience a lower ROA (return on assets). Given the nature of the industry, it is more likely to see further consolidation because major banks tend to prefer to acquire or merge with other banks than to spend money marketing and advertising.
Though First Bancshares has many competitors, the Company is differentiated in the banking industry by targeting individuals and medium sized businesses looking for a close, personal banking relationship. The Company intentionally avoids competing with many larger institutions operating in the states in which it operates. The First Bancshares’ unique target market lessens the competition facing the company in the banking industry.
ABOUT FIRST BANCSHARES
First Bancshares, Inc. (FBMS/NASDAQ) was incorporated on June 23, 1995, and serves as a bank holding company for The First, A National Banking Association (“The First”). Located in Hattiesburg, Mississippi, The First began operations on August 5, 1996 and began selling stock on August 30, 1995. Since then, The First has aggressively expanded with the following acquisitions: First National Bank of Wiggins, 2006; eight Whitney Bank branches, 2011; the de novo expansion into Ocean Springs, 2013; First National Bank of Baldwin County, 2013; the acquisition of Bay Bank in Mobile, Alabama, 2014; and the most recent acquisition of The Mortgage Connection, LLC in December 2015. With 32 locations in South Mississippi, South Alabama, and Louisiana, the Company engages in general commercial and retail banking characterized by personalized service and local decision‐making, emphasizing the banking needs of small and medium‐sized businesses, professional concerns, and individuals.
Products
First Bancshares provides commercial and retail banking services for small to medium sized businesses and individuals. These services include checking accounts, savings accounts, time deposits, and individual retirement accounts. The Company serves as a direct distributor that offers commercial secured and unsecured loans for working capital, business expansion, purchases of equipment, and the refinancing of mortgages. Loans for car payments, personal investing, education, real estate construction and acquisition, and home improvement are also available. The Company provides an online banking service that allows clients to stay up to date on their accounts and loans.
Competition
First Bancshares competes with both local and national banks. Direct competitors are regional banks in the southeast. The three biggest direct competitors are Home Bancorp (HBCP), Bancorp South, Inc. (BXS), and Auburn National (AUBN). Among these banks, First Bancshares is the smallest, with a market capitalization of $87.2 million.
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Competitive Advantage
The First prides itself on customer service. Because it is a small, local bank, The First is able to give each client more attention than larger banks and ensure that the proper products and services are provided.
Corporate Strategy
The strategy of First Bancshares has remained relatively constant throughout the last five years. With a short term goal to increase net income and build value for investors, The First has a long term goal of expanding to cities within the region that have had an increase in population and average wages over the last ten years. The Company will continue to look for potential expansion locations with similar demographics, as acquisition targets are still plentiful. In 2015, The First identified over 100 possible acquisition targets in states in which it operates.
Latest Developments
In recent years, First Bancshares has had many major developments. In 2009, the Company enacted the beginning of its “Tri‐State Expansion Strategy Five Year Plan.” The Company began branch expansion in growing areas of Mississippi, Alabama, and Louisiana, and ended 2009 with less than $500 million in assets. In 2010, when Whitney Bank merged with Hancock Bank, and in 2011, the Company acquired eight Whitney Bank branches in Mississippi, totaling $179 million in deposits. In 2013, the Company had a successful private placement and sold securities totaling $20 million. Additionally, in 2013, the Company acquired First National Bank of Baldwin County, which brought in $187 million in assets. First Bancshares acquired BCB Holding Co. of Mobile (Bay Bank) and secured four locations to total ten locations and $250 million in deposits in “Mobile MSA.” Furthermore, in 2014, the Company opened loan production offices in Baton Rouge and Slidell, Louisiana. By 2014, the Company ended its second quarter with over $1 billion in assets operating in only three states. In December 2015 the Company acquired The Mortgage Connection, LLC with two locations in Brandon, Mississippi and Madison, Mississippi.
Recent Stock Performance
Since 2010, First Bancshares’ stock has surged due to a recovering economy. Over the last six years, the stock has gone up over 140% to $15.62 (see Figure 7).
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
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Figure 7: Return Compared to Major Indexes
Source: First Bancshares 2016 10‐K March 30, 2016
PEER ANALYSIS
While First Bancshares has many competitors, three main factors were considered in selecting the Company’s main peers: products, market capitalization, and area of operation. First, the Company’s main source of revenue comes from loan interest and commercial banking services. Second, First Bancshares main peers operate in the southeast U.S. Thus, the peer group consists of five of the main small to mid‐sized competitors: Renasant Corporation, MidSouth Bancorp, Home Bancorp, Citizens Holding, and Auburn National, as seen in Table 2.
Table 2: Peer Analysis
Company Market Cap. P/E P/BV NIM Div. Yield ROE ROA
The First Bancshares
87.2 M 11.35x 1.08x 3.75% 0.87% 8.69% 0.77%
Renasant Corp 1240 M 16.43x 1.22x 4.37% 2.14% 7.75% 0.99%MidSouth Bancorp 89.19 M 7.43x .53x 4.26% 4.68% 6.12% 0.66%
Home Bancorp 184.33 M 14.22x 1.11x 4.44% 1.41% 7.86% 0.91%
Citizens Holding 111.15 M 14.64x 1.32x 3.14% 4.15% 9.12% 0.78%
Auburn National 98.01 M 12.47x 1.22x 3.03% 3.24% 10.11% 0.94%
Peer Average 345 M 12.75x 1.08x 3.85% 3.12% 8.19% 0.86%
Source: Yahoo! Finance and bankregdata.com March 29, 2016
Renasant Corp (RSNT/Nasdaq)
Based in Tupelo, Mississippi, Renasant Corp. specializes in banking, insurance, and wealth management. Renasant has over $5.8 billion in assets and operates in Misssissippi, Tennessee, Alabama, and Georgia. Most recently, Renasant made changes to management by electing a new president.
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FBMS NASDAQ Composite NASDAQ Bank Index
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MidSouth Bancorp (MSL/NYSE)
MidSouth Bancorp has over 60 branches throughout Louisiana and Texas. The company offers commercial banking and investment opportunities to its customers. In addition, MidSouth offers loans to individuals and to businesses including real estate and industrial sectors. In the third quarter of 2015, MidSouth had almost $2 billion in assets.
Home Bancorp, Inc (HBCP/Nasdaq)
With the acquisition of Louisiana Bancorp in September of 2015, Home Bancorp finished the fiscal year with over $1.5 billion in assets. Headquartered in Lafayette, Louisiana, the company has 22 branches located throughout Louisiana.
Citizens Holding Company (CIZN/Nasdaq)
With 23 locations throughout Mississippi, Citizens Holding Company has $960 million in assets. It is the parent company to The Citizens Bank, which is also headquartered in Philadelphia, Mississippi. In November of 2015, Citizens Holding increased the cash dividend to $0.24 per share.
Auburn National Bancorporation, Inc. (AUBN/Nasdaq)
Auburn National was found in 1907 as a holding company to AuburnBank, located in Auburn, Alabama. Auburn National’s main source of revenue comes from interest on loans given to individuals and small to mid‐sized businesses. In September of 2015, Auburn had $817 million in total assets. Auburn National currently has ten branches all located within the state of Alabama.
MANAGEMENT PERFORMANCE AND BACKGROUND
First Bancshares’ management team will play a key role in the Company’s continued success. In 2009, M. Ray “Hoppy” Cole was named Chief Executive Office (CEO) of The First, A National Banking Association and First Bancshares. Mr. Cole was named CEO by Board Chairman David E. Johnson. Mr. Johnson continued as Chairman of the Board and carried‐out newly‐expanded responsibilities of that office. When commenting on the transition, Mr. Johnson stated that market conditions and growth within the bank brought about the need to separate the critical duties of the CEO and Chairman of the Board to ensure protection to the Company’s shareholders. E. Ricky Gibson is currently the independent Chairman of the Board and Dee Dee Lowery was appointed to Chief Financial Officer, Executive Vice President of the Company in 2014. The Company continues to rapidly expand, but the management team still encourages developing intimate relationships with all of its customers.
Return on Invested Capital
Return on invested capital (ROIC) measures operating performance against available capital resources. ROIC is often used to evaluate management’s ability to generate returns for shareholders. Though ROIC is a good indicator of a management’s performance, other industry specific metrics offer a more comprehensive view of a company’s performance.
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E. Ricky Gibson, 58 Chairman of the Board
E. Ricky Gibson is an independent Chairman of the Board of The First Bancshares, Inc. Mr. Gibson serve as Chairman of the Board and has been a Director of the Company since 1995. He has also served as President and Owner of N&H Electronics, Inc., a wholesale electronics distributor since 1988 and of Mid‐South Electronics, a wholesale consumer distributor since 1993.
M. Ray “Hoppy” Cole, Jr., 54 President, CEO
M. Ray Cole is President, Chief Executive Officer, and Director of The First Bancshares, Inc. Prior to joining the bank in September 2002, Mr. Cole was Secretary/Treasurer and Chief Financial Officer of the Headrick Companies, Inc. for 11 years. Mr. Cole began his career with the First National Bank of Commerce in New Orleans, Louisiana and held the position of Corporate Banking Officer from 1985 to 1988. In December of 1988, Mr. Cole joined Sunburst Bank in Laurel, Mississippi serving as Senior Lender and later as President of the Laurel office. He served as director of the Company twice from 1998 to 1999, and then from 2001 through the present. He also served as a Director of the Company’s Laurel bank prior to consolidation and currently serves on the board of the bank.
Dee Dee Lowery, 49 Executive VP, CFO
Dee Dee T. Lowery, CPA, is Chief Financial Officer, Executive Vice President of the Company. Prior to joining the bank in February 2005, Mrs. Lowery was Vice President and Investment Portfolio Manager of Hancock Holding Company for four years. Mrs. Lowery was appointed CFO in 2005.
Other Executives
The First has several other top executives, each with at least 14 years of experience.
Ion Mixon‐ Senior Vice President, Risk Manager
Chris Ryals‐ Executive Vice President, Chief Operating Officer
Carol Daniel‐ Executive Vice President, Credit Administrator
Hayden Mitchell‐ Executive Vice President, Chief Retail Banking Office
David Bush‐ Executive Vice President, Private Banking Manager
Ray Wesson‐ President, Southern Region
Eric Waldron‐ President, Northern Region
Wade Neth‐ President, Alabama Region
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SHAREHOLDER ANALYSIS
First Bancshares, Inc. had 5.40 million shares outstanding with a market capitalization of $84 million as of March 29th, 2016. The majority, or 35%, of the Company’s shareholders are institutional investors, while insiders own 11% of the Company’s shares. The largest non‐industrial shareholder is a David Bomboy with 2.04% of shares outstanding. The Company’s largest shareholder is The Banc Funds Company, L.L.C. with 8.44% of shares outstanding (as seen in Tables 3 and 4).
Table 3: Largest Shareholders ‐ Individuals
Holder Name Shares % Outstanding
Bomboy, David W 110,995 2.04%
Gibson, E. Ricky 93,244 1.72%
McMurry, Fred A. 83,885 1.54%
Seidenburg, J. Douglas 82,656 1.52%
Parker, Ted E. 70,813 1.30%
Chancellor, Michael 67,300 1.24%
Cole, M. Ray Jr. 62,620 1.19%
Source: Bloomberg March 29, 2016
Table 4: Largest Shareholders ‐ Companies
Holder Name Shares % Outstanding
Banc Funds Company, L.L.C. (The) 458,730 8.44%
Mendon Capital Advisor 353,031 6.50%
Burnham Asset Management 304,385 5.60%
JCSD Capital, LLC 290,395 5.36%
Stieven Capital Advisors, L.P. 235,041 4.33%
Manulife Asset Management 210,000 3.87%
Basswood Capital Management 184,953 3.40%
RMB Capital Management, LLC 139,254 2.56%
Vanguard Group, Inc. (The) 62,250 1.15%
Pinnacle Holdings, LLC 55,666 1.02%
Source: Bloomberg March 29, 2016
The large amount of institutional holdings makes the Company’s stock considerably less liquid. However, the large number of companies with shares shows that investors see long, stable growth in the Company’s future.
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RISK ANALYSIS AND INVESTMENT CAVEATS
First Bancshares (The First) faces several risks that may have a potentially negative effect on business. Some of these risks apply to the broader banking industry, while other risks are unique to First Bancshares and the niche markets in which it operates.
Vulnerability to Certain Sectors of the Economy
A significant portion of First Bancshares loan portfolio is secured by real estate and energy. If real estate values decline and oil prices continue to stay at record lows, The First could suffer greatly. If the real estate values depreciate beyond a certain point, the collateral value of the portfolio and the revenue stream from those loans could come under stress and possibly require additional loan loss accruals, negatively impacting the Company’s earnings.
Difficult Market Conditions
Dramatic housing market declines in recent years have caused home prices to fall and have increased foreclosures, unemployment, and under‐employment. If these events occur again, it would negatively impact First Bancshares’ credit performance of its mortgage loans and would result in significant write‐downs of asset values. Since many lenders are still wary about the stability of financial markets, lenders have reduced funding capital, including to other financial institutions. Further market turmoil and tightening of credit could lead to a lack of consumer confidence and a widespread reduction of business activity.
General Economic Condition in the Areas of Operations
A sudden or severe downturn in the economies of Mississippi, Louisiana, or Alabama may affect the ability of customers to meet loan payment obligations on a timely basis. The local economic conditions in these areas have a direct impact on the Company’s commercial, real estate, and construction loans. In addition, the local economy has an effect on both the ability of the borrowers to pay back these loans as well as the value of the collateral securing these loans. Further, adverse economic conditions in these states could cause customers to withdraw their deposit balances, which would cause a strain on the bank’s liquidity.
Interest‐Rate Risk
First Bancshares’ assets and liabilities are primarily monetary, and as a result, the Company is subject to significant risks connected to changes in interest rates. The bank’s profitability is largely dependent upon net interest rate. Net interest rate is the spread between the cost of borrowing and the interest rate a bank can earn on its’ money. Unexpected movements in interest rates could cause net interest margins to decrease, subsequently decreasing net interest income. Such changes could also adversely affect the valuation of the bank’s assets and liabilities. The Company’s current one‐year interest rate sensitivity position is slightly asset sensitive, but a gradual increase in interest rates during the next 12 months should not have a significant impact on net interest income during that period.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
17
The difference between interest rates charged on interest‐earning assets and interest rates paid on interest‐bearing liabilities may be affected by changes in the market interest rate. Changes in relationships between interest rate indices, and/or changes in the relationships between long‐term and short‐term market interest rates may be a factor as well. A change in this difference might result in an increase in interest expense relative to interest income, or a decrease in the Company’s interest rate spread.
Changes in Monetary Policies
First Bancshares’ operations are affected by credit policies of monetary authorities, particularly the Board of Governors of the Federal Reserve System. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks, unrest in Eastern Europe, and the current military operations in the middle east, the Company cannot predict possible future changes in interest rates, deposit levels, loan demand or the Company’s business and earnings. The response of the U.S. to developing global conflict may result in currency fluctuations, exchange controls, market disruptions, or other adverse effects.
Risk of Natural Disasters
First Bancshares’ market areas are susceptible to natural disasters such as hurricanes and tornados. Natural disasters can disrupt operations, result in damage to properties that may be securing loan assets, and can negatively affect the local economies in which the bank operates. The Company cannot predict the impact of possible disasters on operations or economies. But, such events could cause a decline in loan originations, a decline in the value or destruction of property securing the loans, and an increase in the risk of delinquencies, foreclosures, or loan losses.
Subject to various Federal and State Entities
The Company and The First are subject to the regulations of the Securities and Exchange Commission (SEC), the Consumer Financial Bureau, the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Options Clearing Corporation (OCC). New regulations issued by these agencies may adversely affect the bank’s ability to carry on its business activities. The Company and the First are also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes in accounting rules could adversely affect the reported financial statements or results of operations of the Company. In addition, new regulations may also require extraordinary efforts or additional costs to implement.
Reliance on Financial Markets
The Company’s common stock is listed and traded on the NASDAQ stock market. Although the Company anticipates that its capital resources will be adequate for the foreseeable future to meet its capital requirements, at times it may depend on the liquidity of the NASDAQ stock market to raise equity capital. If the market should fail to operate, or if conditions in the capital markets are adverse, the Company may be constrained in raising capital.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
18
The Dodd‐Frank Wall Street Reform and Consumer Protection Act
The Dodd‐Frank Act was signed into law in 2010. It implements financial regulatory reforms impacting most aspects of the financial services industry. The Act created the Financial Stability Oversight Council to oversee and coordinate the efforts of the U.S. financial regulatory agencies to stabilize the financial industry. It also decreased banks’ profits by increasing compliance costs. In particular, the Act regulates many consumer rights and increases the security of financial information. Finally, Dodd‐Frank gave the FDIC more power in managing the Deposit Insurance Fund and raised the minimum reserve ratio that a bank must have to 1.35%.
Risk of Greater Loan Loss
The Company is exposed to the risk that its customers will be unable to repay their loans in accordance with their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. FBMS has many loans involving real estate and construction and if the economy goes into a recession, the credit worthiness of the companies with these loans may decrease. The value of the real estate serving as security for repayment of the loan would also decrease in this scenario.
Acquisitions of other Companies
First Bancshares has grown primarily through acquisitions over the past few years. Investors could potentially perceive acquisitions of companies as a poor investment. Acquisitions can increase turnover with both customers and employees, and thus, increase the cost of operating the new business. Difficulty with integrating new businesses may make profitability hard to achieve.
Industry Competition
The Company operates in an industry with fierce competition. Many of the competitors are much larger and may have more resources available. FBMS faces competition from commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries. Additionally, some of the Company’s competitors are not banks and are not subject to the same regulatory rules as the Company.
Changes in Technology
New technology‐driven products and services are rapidly being introduced in the financial service industry. The Company will need to use technology competitively in the future to ensure it is not left behind.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
19
FINANCIAL PERFORMANCE AND PROJECTIONS
Since 2012, First Bancshares has rapidly grown through acquisitions. Due to the lack of involvement in the oil industry, the Company has managed to maintain steady growth, unlike other banks in the Gulf South.
By excluding quarters that involved an acquisition, we were able to determine a growth rate to predict future revenue. In order to keep revenue from growing to unattainable amounts, the growth rate used declines over time and begins to level off around 4%. In addition, we used a historical correlation analysis to determine not only the driving factor in loans but also the percentage of each type of loan. We decided to keep these historic percentages constant throughout our projections and divide up the loans accordingly.
After speaking with management, we accounted for some of the Company’s long‐term goals in our financial projections. First, over the past few years, the loan to deposit ratio has grown at a steady rate. However, even though management budgets for loans to equal 85% of deposits, we project it to remain somewhat constant near the current level of 79%. Secondly, we took into account management’s intention to achieve a return on asset (ROA) ratio of over 1%.
While calculating our projections we made a few assumptions. The biggest assumption is that the Gulf South will continue to see a growing population. This growing population signals an improving economy and will provide the Company with new potential customers. Our second assumption relates to acquisitions and future growth. Even though the Company has gone through many acquisitions in the past five years, we cannot assume: 1) continued acquisitions; or, 2) the size of future acquisitions.
Investing and Financing Activities
Acquisitions comprise the primary investing activity of the Company. Since 2011, the Company has gone through multiple acquisitions, increasing its presence in Mississippi, Alabama, and Louisiana. To finance the acquisitions, the Company has taken two steps. First, the Company has reinvested excess cash; second, the Company has issued new stock.
SITE VISIT
On February 12, 2016 our analyst team traveled to Hattiesburg, Mississippi, a little over two hours northeast of New Orleans, to meet with the executives of The First Bancshares. After arriving, we were shown to the Company’s board room where we met Chief Financial Officer (CFO) Donna “Dee Dee” T. Lowery. President and Chief Executive Officer (CEO) M. Ray “Hoppy” Cole entered the board room about 15 minutes later after concluding his meeting with Blake Wilson, the President and CEO of the Mississippi Economic Council.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
20
After a brief discussion with Ms. Lowery, Mr. Cole explained how the Company has changed since 2009. In 2009 the Company had assets $478 million and nine locations. Mr. Cole explained that many of the members of the Board of Directors (including himself) wanted to increase the value of the Company because many of the members were the original investors in the Company. According to Mr. Cole, the Company considered going private, but the advantages to being a public firm were too great. These advantages, according to Mr. Cole, include access to capital and constant pressure to perform.
The First Bancshares has grown significantly since 2009, through both organic growth and acquisitions. The Company targets an organic growth rate of 5‐7% annually and believes this is achievable in its largest markets. The Company has also been active with acquisitions. Both Mr. Cole and Ms. Lowery implied that an acquisition in the next year is more than likely. They also indicated that the ideal size of an acquisition for the Company is less than $500 million in assets.
Even though the Company doubled in size in the last five years, Mr. Cole and Ms. Lowery believe that growing the Company to $2‐2.5 billion in the next five years is a reasonable goal. Acquiring smaller banks is a smart strategy for the Company because, as Mr. Cole explained, acquiring a bank around $250 million in assets increases the Company’s assets by 20‐25%.
A key area of focus for the Company is maintaining its small bank feel. The Company believes that growing the bank allows it to achieve efficiencies of scale. Still, the Company also hopes to remain nimble, poised, and responsive enough to move with the market.
With a little over $1 billion in assets, the Company is still a relatively small bank. Mr. Cole stressed that the growth through acquisition has allowed the Company to have price and product offerings competitive to Bancorp South and Whitney. Mr. Cole also said that The First is small enough that normal customers can still call him with specific questions.
The biggest risks to the Company moving forward are millennials and mobile platforms. At this time the Company believes that the convenience of individual branches is still important in the markets where the Company operates. Executives believe the Company’s target customers want to personally know the people where they deposit their money. Mr. Cole also stated that the Company’s customers like to come in to open their accounts but then generally use the online banking features afterwards.
The Company considers oil prices going down as a net benefit. According to Mr. Cole the drivers of the bank are education, healthcare, tourism, and gambling. He believes, in particular, that lower fuel prices will lead to increased expendable income and help the Company.
Ms. Lowery attributes the high increase in net income to two things. First, the Company went a full year without acquisitions, decreasing expenses. Second, the Company benefitted from the successful Bay Bank acquisition.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
21
Mr. Cole believes the future of banking points to more industry consolidation with banks under $500 million in assets. He also believes that technology levels the playing field between mid‐size and large banks and will continue to do so in the future.
Site Visit Photo
INDEPENDENT OUTSIDE RESEARCH
While conducting our research, we spoke to two analysts following First Bancshares. The analysts reinforced information given to us by Mr. Cole and Ms. Lowery during our site visit. In their professional opinion, it is strategic to be a bank in the Gulf South with a small stake in energy. We learned from one of the analysts that falling gas prices may even mean more revenue for the Company. Southern Mississippi has a market for tourism and cheaper road travel has the potential to bring more people to the state on vacation. If this market continues to grow, the population in the Gulf South could rise supplying the Company with more possible clients. Additionally, the analysts reinforced that it is important for a bank as small as First Bancshares to continue growing in order to keep up with local competitors and rising compliance costs.
Additionally, we utilized several online resources. Information from the Federal Deposit Insurance Corporation gave us well‐organized, concise outlines of the Company’s basic financials. We used the Federal Financial Institutions Examination Council’s website to identify the Company’s Tier I and Tier II Basel liquidity ratios (11.04% and 11.81%, respectively), and to compare the Company to similar competitors. We also used applications such as Yahoo! Finance to track the Company’s stock history. Other online resources used were Bloomberg, Google Finance, BankRegData.com, and the SEC filings from the Company’s website.
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
22
ANOTHER WAY TO LOOK AT IT
ALTMAN Z‐SCORE
Edward Altman created the Z‐score analysis in 1968 in order to measure the insolvency of companies. While it has been proven to be fairly accurate, it is not applicable to banks.
PETER LYNCH EARNINGS MULTIPLE VALUATION
Peter Lynch, the author of One Up on Wall Street, introduces the earning multiple valuation technique to help simplify the investment decision process. The method helps tell if a stock is over or under priced by comparing the stock price to a line that is equal to the 12‐month trailing earnings per share (EPS) times 15. At any given time, if the stock price is greater than the value of the line, then the stock is overvalued. Similarly, if the price is less than the value of the line, the stock is undervalued.
First Bancshares currently has a stock price of $15.62 and a 12‐month trailing EPS of $21.60. Since the trailing EPS is greater than the stock price, Peter Lynch would say the stock is undervalued.
Figure 8 shows the historical values of the Company’s 12‐month trailing EPS and the stock price. In the last seven years, there have been periods over time where the stock has been overvalued as well as undervalued.
Figure 8: Earnings Multiple Valuation
Source: Yahoo! Finance March 14, 2016
0
5
10
15
20
25
30
35
1‐Apr‐09 1‐Apr‐10 1‐Apr‐11 1‐Apr‐12 1‐Apr‐13 1‐Apr‐14 1‐Apr‐15
12‐Month Trailing EPS Stock Price
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
23
WWBD? What Would Ben (Graham) Do?
Benjamin Graham, the author of The Intelligent Investor, is considered to be the “father of value investing.” The Ben Graham Analysis is used to analyze the value of a company, past growth performance, and future growth potential.
The analysis consists of eight different “hurdles” created by Graham. If a company overcomes four hurdles, it is considered an attractive investment. Six of the hurdles measure value and two measure growth.
Based on 2015 numbers, First Bancshares passed five hurdles, including three value hurdles and two growth hurdles. If Graham were given the opportunity to invest in the Company today, he would.
Figure 9: Ben Graham Dial
The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016
24
Earnings per share (ttm) 1.60$ Price: 15.62$
Earnings to Price Yield 10.27%
10 Year Treasury (2X) 3.62%
P/E ratio as of 2011 7.7
P/E ratio as of 2012 7.4
P/E ratio as of 2013 13.8
P/E ratio as of 2014 11.7
P/E ratio as of 2015 11.4
Current P/E Ratio 9.7
Dividends per share (ttm) 0.15$ Price: 15.62$
Dividend Yield 0.96%
1/2 Yield on 10 Year Treasury 0.91%
Stock Price 15.62$
Book Value per share as of 12/31/15 19.14$
150% of book Value per share as of 12/31/15 28.72$
Interest‐bearing debt as of 12/31/15 120,631$
Book value as of 12/31/15 103,436$
Current assets as of 12/31/15 ‐$
Current liabilities as of 12/31/15 ‐$
Current ratio as of 12/31/15 #DIV/0!
EPS for year ended 2015 1.62$
EPS for year ended 2014 1.25$
EPS for year ended 2013 1.06$
EPS for year ended 2012 1.29$
EPS for year ended 2011 0.93$
EPS for year ended 2015 1.62$ 30%
EPS for year ended 2014 1.25$ 18%
EPS for year ended 2013 1.06$ ‐18%
EPS for year ended 2012 1.29$ 39%
EPS for year ended 2011 0.93$
Stock price data as of M arch 29th, 2016
Yes
Hurdle # 3: A Dividend Yield of 1/2 the Yield on 10 Year Treasury
Yes
Hurdle # 4: A Stock Price less than 1.5 BV
Yes
Hurdle # 5: Total Debt less than Book Value
No
Hurdle # 6: Current Ratio of Two or More
N/A
Hurdle # 7: Earnings Growth of 7% or Higher over past 5 years
Yes
Hurdle # 8: Stability in Growth of Earnings
No
The First Bancshares, Inc (FBMS)
Ben Graham Analysis
Hurdle # 1: An Earnings to Price Yield of 2X the Yield on 10 Year Treasury
Yes
Hurdle # 2: A P/E Ratio Down to 1/2 of the Stocks Highest in 5 Yrs
The First Ban
cshares Inc. (FB
MS)
BURKEN
ROAD REP
ORTS (www.burken
road
.org)
March 29, 2016
25
The First Bancshares, Inc (FBMS)
Quarterly and Annual Earnings
In thousands
For the period ended
2013 A
2014 A
2015 A
31‐M
ar‐16 E
30‐Jun‐16 E
30‐Sep‐16 E
31‐Dec‐16 E
2016 E
1‐Apr‐17 E
1‐Jul‐17 E
1‐Oct‐17 E
1‐Jan‐18 E
2017 E
Interest Income:
Loans, included fees
25,736
$
30,276
$
34,242
$
8,907
$
9,019
$
9,131
$
9,245
$
36,302
$
9,361
$
9,478
$
9,596
$
9,716
$
38,152
$
Securites:
Taxable
3,279
3,884
3,948
995
1,042
1,053
1,099
4,188
1,012
1,060
1,072
1,118
4,262
Tax exempt
2,140
2,072
1,854
637
667
675
704
2,683
648
679
687
716
2,730
Federal funds sold
62
53
63
13
13
13
13
53
13
13
14
14
54
Interest on deposits in banks
100
85
93
91
91
98
98
Total interest income
31,318
36,371
40,201
10,552
10,741
10,873
11,152
43,318
11,035
11,230
11,368
11,662
45,295
Interest expense:
Deposits
2,300
520
762
546
553
560
567
2,226
574
581
588
596
2,340
Other borrowings
1,849
1,800
Interest on borrowed funds
618
603
645
156
156
156
156
623
156
156
156
156
623
Total interest expense
2,917
2,973
3,207
702
709
716
723
2,849
730
737
744
752
2,962
Net interest income
28,401
33,398
36,994
9,850
10,032
10,157
10,430
40,469
10,305
10,493
10,624
10,910
42,333
Provision for loan losses
1,076
1,418
410
465
301
414
419
1,598
424
430
435
440
1,729
Net interest income after provision for loan losses
27,325
31,980
36,584
9,386
9,731
9,743
10,011
38,871
9,881
10,064
10,189
10,470
40,603
Noninterest income:
Service charges on deposit accounts
3,979
4,262
5,014
1,114
1,117
1,120
1,123
4,473
1,128
1,134
1,139
1,145
4,546
Other service charges, commissions and fees
2,187
2,163
1,546
684
749
594
81
2,108
684
749
594
81
2,108
Gain on sale of investm
ent securities
Bank owned life insurance
income
152
370
409
409
409
409
409
Gain on sale of premises
133
Gain(loss) on other real estate
(77)
(85)
(247)
Other
841
1,094
734
1,200
1,200
1,200
1,200
Total noninterest income
7,083
7,803
7,589
1,798
1,866
1,714
2,812
8,189
1,812
1,883
1,734
2,834
8,263
Noninterest expenses:
Salaries and employee benefits
14,855
17,462
15,089
4,920
4,920
4,920
4,920
19,681
5,117
5,117
5,117
5,117
20,468
Employee benefits
3,447
Occupancy and equipment expense
3,919
4,526
4,621
1,153
1,153
1,153
1,153
4,610
1,176
1,176
1,176
1,176
4,703
Supplies and printing
455
498
300
498
498
498
498
Professional and consulting fees
2,433
1,618
1,332
1,656
1,656
1,656
1,656
Marekting and public relations
451
445
497
395
395
395
395
FDIC and OCC assessments
767
938
966
799
799
799
799
ATM expense
763
Telephone
631
Other
5,285
5,246
4,515
1,776
1,827
2,094
(1,049)
4,649
1,776
1,827
2,094
(1,049)
4,649
Total noninterest expense
28,165
30,734
32,161
7,849
7,900
8,167
8,372
32,288
8,069
8,120
8,387
8,592
33,167
Income before income taxes
6,243
9,050
12,011
3,335
3,697
3,290
4,450
14,772
3,624
3,826
3,536
4,712
15,699
Income tax expense (benefit)
1,604
2,436
3,213
893
991
882
1,192
3,958
971
1,025
947
1,262
4,206
Net income (loss)
4,639
6,614
8,798
2,441
2,707
2,409
3,258
10,815
2,653
2,801
2,589
3,450
11,493
Preferred dividends
424
363
342
86
86
86
86
342
86
86
86
86
342
Net income applicable to common stock
4,215
$
6,251
$
8,456
$
2,356
$
2,621
$
2,323
$
3,172
$
10,472
$
2,567
$
2,716
$
2,503
$
3,364
$
11,150
$
Net income (loss) per common share:
Basic
Net income (loss)
1.07
$
1.27
$
1.64
$
0.44
$
0.48
$
0.43
$
0.58
$
1.92
$
0.47
$
0.50
$
0.46
$
0.61
$
2.03
$
Diluted
Net income (loss)
1.06
$
1.25
$
1.62
$
0.43
$
0.48
$
0.42
$
0.58
$
1.91
$
0.47
$
0.49
$
0.45
$
0.61
$
2.02
$
15.37%
12.55%
Dividends per common share
0.15
$
0.15
$
0.0375
$
0.0375
$
0.0375
$
0.0375
$
0.0375
$
0.1500
$
0.0400
$
0.0400
$
0.0400
$
0.0400
$
0.1600
$
Weighted average shares outstanding:
Basic
4,319
5,228
5,403
5,414
5,424
5,434
5,444
5,444
5,454
5,463
5,473
5,482
5,482
Diluted
4,373
5,271
5,442
5,462
5,472
5,482
5,492
5,492
5,502
5,511
5,521
5,530
5,530
2017 E
2016 E
The First Ban
cshares Inc. (FB
MS)
BURKEN
ROAD REP
ORTS (www.burken
road
.org)
March 29, 2016
26
The First Bancshares, Inc (FBMS)
Quarterly and Annual Earnings For the period ended
2013 A
2014 A
2015 A
31‐M
ar‐16 E
30‐Jun‐16 E
30‐Sep‐16 E
31‐Dec‐16 E
2016 E
1‐Apr‐17 E
1‐Jul‐17 E
1‐Oct‐17 E
1‐Jan‐18 E
2017 E
SELECTED COMMON‐SIZE AMOUNTS (as %
or assets)
Loans, included fees
2.74%
2.77%
2.99%
0.77%
0.77%
0.77%
0.77%
3.02%
0.77%
0.77%
0.77%
0.77%
3.02%
Taxable
0.35%
0.36%
0.34%
0.09%
0.09%
0.09%
0.09%
0.35%
0.08%
0.09%
0.09%
0.09%
0.34%
Tax exempt
0.23%
0.19%
0.16%
0.06%
0.06%
0.06%
0.06%
0.22%
0.05%
0.06%
0.06%
0.06%
0.22%
Total interest i ncome
3.33%
3.33%
3.51%
0.91%
0.92%
0.92%
0.93%
3.61%
0.91%
0.91%
0.91%
0.92%
3.58%
Deposits
0.24%
0.05%
0.07%
0.05%
0.05%
0.05%
0.05%
0.19%
0.05%
0.05%
0.05%
0.05%
0.19%
Total interest expense
0.31%
0.27%
0.28%
0.06%
0.06%
0.06%
0.06%
0.24%
0.06%
0.06%
0.06%
0.06%
0.23%
Net interest income
3.02%
3.05%
3.23%
0.85%
0.86%
0.86%
0.87%
3.37%
0.85%
0.85%
0.85%
0.86%
3.35%
Provision for loan losses
0.11%
0.13%
0.04%
0.04%
0.03%
0.03%
0.03%
0.13%
0.03%
0.03%
0.03%
0.03%
0.14%
Net interest income after provision for loan losses
2.90%
2.92%
3.19%
0.81%
0.83%
0.82%
0.83%
3.24%
0.81%
0.82%
0.82%
0.83%
3.21%
Service charges on deposit accounts
0.42%
0.39%
0.44%
0.10%
0.10%
0.09%
0.09%
0.37%
0.09%
0.09%
0.09%
0.09%
0.36%
Other service charges, commissions and fees
0.23%
0.20%
0.14%
0.06%
0.06%
0.05%
0.01%
0.18%
0.06%
0.06%
0.05%
0.01%
0.17%
Total noninterest income
0.75%
0.71%
0.66%
0.16%
0.16%
0.14%
0.23%
0.68%
0.15%
0.15%
0.14%
0.22%
0.65%
Salaries and employee benefits
1.58%
1.60%
1.32%
0.43%
0.42%
0.42%
0.41%
1.64%
0.42%
0.42%
0.41%
0.40%
1.62%
Occupancy and equipment expense
0.42%
0.41%
0.40%
0.10%
0.10%
0.10%
0.10%
0.38%
0.10%
0.10%
0.09%
0.09%
0.37%
Total noninterest expense
2.99%
2.81%
2.81%
0.68%
0.67%
0.69%
0.70%
2.69%
0.66%
0.66%
0.67%
0.68%
2.62%
YEAR TO YEAR CHANGE
Loans, included fees
20.19%
17.64%
13.10%
9.32%
5.70%
5.82%
3.50%
6.02%
5.09%
5.09%
5.09%
5.09%
5.09%
Total interest income
18.94%
16.13%
10.53%
8.98%
7.17%
7.87%
7.06%
7.75%
4.57%
4.56%
4.56%
4.57%
4.56%
Deposits
118.98%
‐77.37%
46.46%
‐13.58%
‐15.94%
‐13.31%
N/A
192.11%
5.10%
5.09%
5.09%
5.09%
5.09%
Interest on borrowed funds
‐42.27%
‐2.30%
6.92%
‐9.49%
5.19%
5.91%
‐12.64%
‐3.48%
0.00%
0.00%
0.00%
0.00%
0.00%
Total interest expense
‐29.48%
1.90%
7.89%
‐12.70%
‐12.06%
‐9.75%
‐10.17%
‐11.18%
3.97%
3.97%
3.98%
3.99%
3.98%
Net interest income
27.96%
17.60%
10.77%
10.94%
8.85%
9.37%
8.51%
9.39%
4.62%
4.60%
4.60%
4.61%
4.60%
Provision for loan losses
‐12.38%
31.81%
‐71.09%
209.70%
N/A
65.57%
4062.22%
289.72%
‐8.66%
42.96%
5.09%
5.09%
8.22%
Net interest income after provision for loan losses
30.33%
17.04%
14.40%
7.53%
5.59%
7.81%
4.25%
6.25%
5.27%
3.41%
4.58%
4.59%
4.46%
Service charges on deposit accounts
15.96%
7.10%
17.65%
6.01%
1.82%
‐27.39%
‐15.22%
‐10.78%
1.26%
1.51%
1.76%
2.02%
1.64%
Total noninterest income
12.01%
10.17%
‐2.75%
‐2.82%
0.64%
‐13.52%
47.78%
7.92%
0.78%
0.90%
1.15%
0.80%
0.89%
Salaries and employee benefits
23.78%
17.55%
‐13.59%
6.36%
6.66%
6.31%
302.59%
30.43%
4.00%
4.00%
4.00%
4.00%
4.00%
Occupancy and equipment expense
21.24%
15.49%
2.09%
3.93%
1.37%
1.37%
‐6.90%
‐0.23%
2.00%
2.00%
2.00%
2.00%
2.00%
2016 E
2017 E
The First Ban
cshares Inc. (FB
MS)
BURKEN
ROAD REP
ORTS (www.burken
road
.org)
March 29, 2016
27
The First Bancshares, Inc (FBMS)
Quarterly and Annual Balance Sheets
In thousands
As of
31‐Dec‐13 A
31‐Dec‐14 A
31‐Dec‐15 A
31‐M
ar‐16 E
30‐Jun‐16 E
30‐Sep‐16 E
31‐Dec‐16 E
31‐Dec‐16 E
1‐Apr‐17 E
1‐Jul‐17 E
1‐Oct‐17 E
1‐Jan‐18 E
31‐Dec‐17 E
Cash and due from banks
24,080
$
30,333
$
23,635
$
52,077
$
57,862
$
62,949
$
69,084
$
69,084
$
74,369
$
80,345
$
85,722
$
92,169
$
92,169
$
Interest‐bearing deposits with banks
14,205
13,899
17,303
17,303
17,303
17,303
17,303
17,303
17,303
17,303
17,303
17,303
17,303
Federal funds sold
967
386
321
321
321
321
321
321
321
321
321
321
321
Total cash and cash equivalents
39,252
44,618
41,259
69,701
75,487
80,573
86,709
86,709
91,994
97,970
103,347
109,793
109,793
Securities held‐to‐m
aturity, at amortized cost
8,438
8,193
7,092
7,092
7,092
7,092
7,092
7,092
7,092
7,092
7,092
7,092
7,092
Securities available‐for‐sale, at fair value
244,051
254,746
239,732
239,732
239,732
239,732
239,732
239,732
239,732
239,732
239,732
239,732
239,732
Other securities
5,534
7,234
8,135
8,135
8,135
8,135
8,135
8,135
8,135
8,135
8,135
8,135
8,135
Total securities
258,023
270,174
254,959
254,959
254,959
254,959
254,959
254,959
254,959
254,959
254,959
254,959
254,959
Loans held for sale
3,680
2,103
3,974
1,058
1,058
1,058
1,058
1,058
1,058
1,058
1,058
1,058
1,058
Loans
579,623
704,531
772,515
757,810
767,283
776,874
786,585
786,585
796,417
806,372
816,452
826,658
826,658
Allowance
for loan losses
(5,728)
(6,095)
(6,747)
(6,886)
(6,863)
(6,949)
(7,036)
(7,036)
(7,124)
(7,213)
(7,303)
(7,394)
(7,394)
Loans, Net
573,895
700,540
769,742
751,982
761,478
770,983
780,607
780,607
790,352
800,218
810,207
820,322
820,322
Premises and equipment
32,072
34,810
33,623
33,563
33,546
33,528
33,509
33,509
33,490
33,471
33,451
33,431
33,431
Interest receivable
3,292
3,659
3,953
4,295
4,057
4,224
4,228
4,228
4,492
4,242
4,416
4,421
4,421
Cash surrender value
6,593
14,463
14,872
14,872
14,872
14,872
14,872
14,872
14,872
14,872
14,872
14,872
14,872
Other real estate
3,083
3,083
3,083
3,083
3,083
3,083
3,083
3,083
3,083
3,083
3,083
Goodwill
10,621
12,276
13,776
13,776
13,776
13,776
13,776
13,776
13,776
13,776
13,776
13,776
13,776
Other assets
13,463
13,229
9,864
9,768
9,672
9,576
9,481
9,481
9,398
9,315
9,232
9,150
9,150
Total assets
940,890
$
1,093,768
$
1,145,131
$
1,155,999
$
1,170,930
$
1,185,574
$
1,201,224
$
1,201,224
$
1,216,415
$
1,231,906
$
1,247,344
$
1,263,807
$
1,263,807
$
Current liabilities:
Deposits
Noninterest‐bearing
173,794
$
201,362
$
189,445
$
196,327
$
198,806
$
201,288
$
203,801
$
203,801
$
206,345
$
208,920
$
211,529
$
214,169
$
214,169
$
Interest‐bearing
606,177
691,413
727,250
780,273
790,126
799,989
809,975
809,975
820,086
830,323
840,689
851,183
851,183
Total Deposits
779,971
892,775
916,695
976,600
988,932
1,001,277
1,013,776
1,013,776
1,026,431
1,039,244
1,052,217
1,065,353
1,065,353
Interest payable
400
316
246
212
213
213
216
216
223
224
224
227
227
Borrowed funds
52,000
89,450
110,321
58,986
58,986
58,986
58,986
58,986
58,986
58,986
58,986
58,986
58,986
Subrodinated debentrues
10,310
10,310
10,310
10,310
10,310
10,310
10,310
10,310
10,310
10,310
10,310
10,310
10,310
Other liabilities
13,101
4,701
4,123
4,123
4,123
4,123
4,123
4,123
4,123
4,123
4,123
4,123
4,123
Total liabilities
855,782
997,552
1,041,695
1,050,231
1,062,564
1,074,908
1,087,410
1,087,410
1,100,072
1,112,886
1,125,860
1,138,998
1,138,998
Stockholders' equity:
Preferred stock
17,103
17,123
17,123
17,123
17,123
17,123
17,123
17,123
17,123
17,123
17,123
17,123
17,123
Common stock, $1 par value:
5,123
5,343
5,403
5,403
5,403
5,403
5,403
5,403
5,403
5,403
5,403
5,403
5,403
Additional paid in capital
42,086
44,420
44,650
44,830
45,010
45,190
45,370
45,370
45,550
45,730
45,910
46,090
46,090
Retained earnings
22,509
27,975
35,625
37,777
40,195
42,314
45,282
45,282
47,632
50,129
52,413
55,558
55,558
Accumulated other comprehensive income
(1,249)
1,818
1,099
1,099
1,099
1,099
1,099
1,099
1,099
1,099
1,099
1,099
1,099
Treasury stock
(464)
(464)
(464)
(464)
(464)
(464)
(464)
(464)
(464)
(464)
(464)
(464)
(464)
Total stockholders' equity
85,108
96,216
103,436
105,768
108,366
110,665
113,813
113,813
116,343
119,020
121,484
124,809
124,809
Total liabilities and stockholders' equity
940,890
$
1,093,768
$
1,145,131
$
1,155,999
$
1,170,930
$
1,185,574
$
1,201,223
$
1,201,223
$
1,216,415
$
1,231,906
$
1,247,344
$
1,263,807
$
1,263,807
$
2017 E
2016 E
The First Ban
cshares Inc. (FB
MS)
BURKEN
ROAD REP
ORTS (www.burken
road
.org)
March 29, 2016
28
The First Bancshares, Inc (FBMS)
Quarterly and Annual Balance Sheets
For the period ended
31‐Dec‐13 A
31‐Dec‐14 A
31‐Dec‐15 A
31‐M
ar‐16 E
30‐Jun‐16 E
30‐Sep‐16 E
31‐Dec‐16 E
31‐Dec‐16 E
1‐Apr‐17 E
1‐Jul‐17 E
1‐Oct‐17 E
1‐Jan‐18 E
31‐Dec‐17 E
SELECTED COMMON SIZE BALANCE SHEET AMOUNTS (% assets)
Cash and due from banks
2.56%
2.77%
2.06%
4.50%
4.94%
5.31%
5.75%
5.75%
6.11%
6.52%
6.87%
7.29%
7.29%
Interest‐bearing deposits with banks
1.51%
1.27%
1.51%
1.50%
1.48%
1.46%
1.44%
1.44%
1.42%
1.40%
1.39%
1.37%
1.37%
Federal funds sold
0.10%
0.04%
0.03%
0.03%
0.03%
0.03%
0.03%
0.03%
0.03%
0.03%
0.03%
0.03%
0.03%
Total cash and cash equivalents
4.17%
4.08%
3.60%
6.03%
6.45%
6.80%
7.22%
7.22%
7.56%
7.95%
8.29%
8.69%
8.69%
Securities available‐for‐sale, at fair value
25.94%
23.29%
20.93%
20.74%
20.47%
20.22%
19.96%
19.96%
19.71%
19.46%
19.22%
18.97%
18.97%
Total securities
27.42%
24.70%
22.26%
22.06%
21.77%
21.51%
21.22%
21.22%
20.96%
20.70%
20.44%
20.17%
20.17%
Loans held for sale
0.39%
0.19%
0.35%
0.09%
0.09%
0.09%
0.09%
0.09%
0.09%
0.09%
0.08%
0.08%
0.08%
Loans
61.60%
64.41%
67.46%
65.55%
65.53%
65.53%
65.48%
65.48%
65.47%
65.46%
65.46%
65.41%
65.41%
Allowance
for loan losses
‐0.61%
‐0.56%
‐0.59%
‐0.60%
‐0.59%
‐0.59%
‐0.59%
‐0.59%
‐0.59%
‐0.59%
‐0.59%
‐0.59%
‐0.59%
Loans, Net
60.99%
64.05%
67.22%
65.05%
65.03%
65.03%
64.98%
64.98%
64.97%
64.96%
64.95%
64.91%
64.91%
Interest receivable
0.35%
0.33%
0.35%
0.37%
0.35%
0.36%
0.35%
0.35%
0.37%
0.34%
0.35%
0.35%
0.35%
Goodwill
1.13%
1.12%
1.20%
1.19%
1.18%
1.16%
1.15%
1.15%
1.13%
1.12%
1.10%
1.09%
1.09%
Noninterest‐bearing
18.47%
18.41%
16.54%
16.98%
16.98%
16.98%
16.97%
16.97%
16.96%
16.96%
16.96%
16.95%
16.95%
Interest‐bearing
64.43%
63.21%
63.51%
67.50%
67.48%
67.48%
67.43%
67.43%
67.42%
67.40%
67.40%
67.35%
67.35%
Total Deposits
82.90%
81.62%
80.05%
84.48%
84.46%
84.46%
84.40%
84.40%
84.38%
84.36%
84.36%
84.30%
84.30%
Borrowed funds
5.53%
8.18%
9.63%
5.10%
5.04%
4.98%
4.91%
4.91%
4.85%
4.79%
4.73%
4.67%
4.67%
Subrodinated debentrues
1.10%
0.94%
0.90%
0.89%
0.88%
0.87%
0.86%
0.86%
0.85%
0.84%
0.83%
0.82%
0.82%
Other liabilities
1.39%
0.43%
0.36%
0.36%
0.35%
0.35%
0.34%
0.34%
0.34%
0.33%
0.33%
0.33%
0.33%
Total liabilities
90.95%
91.20%
90.97%
90.85%
90.75%
90.67%
90.53%
90.53%
90.44%
90.34%
90.26%
90.12%
90.12%
Additional paid in capital
4.47%
4.06%
3.90%
3.88%
3.84%
3.81%
3.78%
3.78%
3.74%
3.71%
3.68%
3.65%
3.65%
Retained earnings
2.39%
2.56%
3.11%
3.27%
3.43%
3.57%
3.77%
3.77%
3.92%
4.07%
4.20%
4.40%
4.40%
Accumulated other comprehensive income
‐0.13%
0.17%
0.10%
0.10%
0.09%
0.09%
0.09%
0.09%
0.09%
0.09%
0.09%
0.09%
0.09%
Total stockholders' equity
9.05%
8.80%
9.03%
9.15%
9.25%
9.33%
9.47%
9.47%
9.56%
9.66%
9.74%
9.88%
9.88%
SELECTED QUARTER TO QUARTER CHANGES
Total cash and cash equivalents
120.34%
11.11%
8.79%
9.75%
7.65%
8.04%
6.69%
7.52%
33.42%
Loans, Net
‐2.31%
1.26%
1.25%
1.25%
1.25%
1.25%
1.25%
1.25%
5.09%
Noninterest‐bearing
3.63%
1.26%
1.25%
1.25%
1.25%
1.25%
1.25%
1.25%
5.09%
Interest‐bearing
7.29%
1.26%
1.25%
1.25%
1.25%
1.25%
1.25%
1.25%
5.09%
SELECTED YEAR OVER YEAR CHANGES
Total cash and cash equivalents
27.12%
13.67%
‐7.53%
‐26.22%
21.71%
23.52%
110.16%
110.16%
31.98%
29.78%
28.26%
26.62%
26.62%
Loans, Net
42.27%
22.07%
9.88%
5.60%
4.82%
4.06%
1.41%
1.41%
5.10%
5.09%
5.09%
5.09%
9.09%
Noninterest‐bearing
58.54%
15.86%
‐5.92%
‐3.65%
2.58%
7.33%
7.58%
7.58%
5.10%
5.09%
5.09%
5.09%
9.09%
Interest‐bearing
24.47%
14.06%
5.18%
‐0.08%
2.84%
3.05%
11.37%
11.37%
5.10%
5.09%
5.09%
5.09%
9.09%
2016 E
2017 E
The First Ban
cshares Inc. (FB
MS)
BURKEN
ROAD REP
ORTS (www.burken
road
.org)
March 29, 2016
29
The First Bancshares, Inc (FBMS)
Quarterly and Annual Statements of Cash Flows
In thousands
For the period ended
2013 A
2014 A
2015 A
31‐M
ar‐16 E
30‐Jun‐16 E
30‐Sep‐16 E
31‐Dec‐16 E
2016 E
1‐Apr‐17 E
1‐Jul‐17 E
1‐Oct‐17 E
1‐Jan‐18 E
2017 E
Cash Flow From Operations:
Net income:
4,639
$
6,614
$
8,799
$
2,441
$
2,707
$
2,409
$
3,258
$
10,815
$
2,653
$
2,801
$
2,589
$
3,450
$
11,493
$
Adjustm
ents:
Depreciation and amortization
1,915
2,183
2,297
930
947
965
984
3,826
989
1,009
1,028
1,048
4,075
FHLB
stock dividends
(4)
(6)
(9)
Provision for loan losses
1,076
1,418
410
465
301
414
419
1,598
424
430
435
440
1,729
Gain on sale/call of securities
(237)
Gain on sale of land
(111)
Deferred income taxes
1,707
331
256
Restricted stock expense
392
618
721
180
180
180
180
720
180
180
180
180
720
Increase in cash value of life insurance
(152)
(370)
(409)
Securities, amortization and acccretion, net
(107)
901
922
Writedown of bank property
193
(133)
(Gain) loss on sale/w
ritedown of ORE
350
395
387
Changes in:
Interest receivable
(55)
(152)
(294)
(342)
238
(166)
(4)
(275)
(264)
249
(174)
(5)
(193)
Loans held for sale
2,672
1,660
(1,868)
2,916
2,916
Interest payable
(153)
(109)
(70)
(33)
0
0
3
(30)
8
0
0
3
11
Other, net
5,522
(6,078)
(1,271)
(325)
( 324)
(328)
(332)
(1,310)
(336)
(341)
(345)
(349)
(1,371)
Net cash provided by (used in) operating activities
17,995
7,057
9,738
6,231
4,049
3,474
4,507
18,260
3,654
4,329
3,714
4,767
16,464
Cash flows from investing activities
Purchases of other securities
(892)
Maturities and calls of securities available‐for‐sale
52,238
42,970
1,100
Purchases of securities available‐for‐sale, net
(83,416)
(27,550)
12,998
Net (increase) decrease in loans
(50,100)
(89,190)
(68,588)
14,705
(9,473)
(9,591)
(9,711)
(14,070)
(9,832)
(9,955)
(10,080)
(10,206)
(40,073)
Purchase of bank owned life insurance
(7,500)
Proceeds from sale of land
76
950
Purchases of premises and equipment
(747)
(989)
(1,231)
(774)
(834)
(851)
(869)
(3,329)
(888)
(907)
(926)
(946)
(3,666)
Cash received in from acquisition
43,150
4,273
(844)
Increase in other securities
(1,992)
(782)
Net cash used in investing activities
(40,867)
(78,692)
(56,507)
13,931
(10,307)
(10,442)
(10,580)
(17,399)
(10,720)
(10,862)
(11,006)
(11,151)
(43,739)
Cash flows from financing activities
Increase in deposits
(1,971)
53,846
24,091
59,904
12,333
12,344
12,499
97, 080
12,655
12,813
12,973
13,136
51,577
Net change in borrowed funds
15,229
24,346
20,871
(51,335)
(51,335)
Dividend paid on common stock
(600)
(763)
(778)
(203)
(203)
(204)
(204)
(814)
(218)
(219)
(219)
(219)
(875)
Dividend paid on preferred stock
(342)
(342)
(342)
(86)
(86)
(86)
(86)
(342)
(86)
(86)
(86)
(86)
(342)
Repurchase of restricted stock for paym
ent of taxes
(27)
(86)
(92)
Repurchase of shares issued in BCB aquiusition
(36)
Repurchase of warrants
(302)
Issuance
of common shares
18,958
Net cash provided by (used in) financing activities
31,247
77,001
43,410
8,281
12,044
12,055
12,209
44,588
12,351
12,509
12,669
12,831
50,360
Increase (decrease) in cash and cash equivalents
8,375
5,366
(3,359)
28,443
5,785
5,086
6,135
45,450
5,285
5,976
5,377
6,447
23,085
Cash and cash equivalents at beginning of year
30,877
39,252
44,618
41,259
69,701
75,487
80,573
41,259
86,709
91,994
97,970
103,347
86,709
Cash and cash equivalents at end of year
39,252
44,618
41,259
69,701
75,487
80,573
86,709
86,709
91,994
97,970
103,347
109,793
109,793
Operating cash flow per share
excluding changes in working capital
1.74
$
1.94
$
2.11
$
0.70
$
0.72
$
0.69
$
0.85
$
2.96
$
0.74
$
0.77
$
0.73
$
0.89
$
3.13
$
Operating cash flow per share
including changes in working capital
4.12
$
1.34
$
1.79
$
1.14
$
0.74
$
0.63
$
0.82
$
3.32
$
0.66
$
0.79
$
0.67
$
0.86
$
2.98
$
2017 E
2016 E
The First Ban
cshares Inc. (FB
MS)
BURKEN
ROAD REP
ORTS (www.burken
road
.org)
March 29, 2016
30
The First Bancshares, Inc (FBMS)
Ratios For the period ended
2013 A
2014 A
2015 A
31‐M
ar‐16 E
30‐Jun‐16 E
30‐Sep‐16 E
31‐Dec‐16 E
2016 E
1‐Apr‐17 E
1‐Jul‐17 E
1‐Oct‐17 E
1‐Jan‐18 E
2017 E
Perform
ance
Measurements
Gross interest margin
4.09%
3.86%
3.86%
0.99%
0.99%
0.99%
1.00%
3.96%
0.98%
0.98%
0.98%
0.99%
3.93%
Net interest margin
3.71%
3.54%
3.55%
0.92%
0.93%
0.92%
0.94%
3.70%
0.91%
0.92%
0.92%
0.93%
3.67%
Loan interest margin
3.36%
3.21%
3.29%
0.83%
0.83%
0.83%
0.83%
3.32%
0.83%
0.83%
0.83%
0.83%
3.31%
0.38%
0.08%
0.10%
0.07%
0.07%
0.07%
0.07%
0.27%
0.07%
0.07%
0.07%
0.07%
0.28%
Return on Average Assets
0.45%
0.57%
0.74%
0.82%
0.90%
0.79%
1.06%
0.87%
0.85%
0.89%
0.81%
1.07%
0.90%
Return on Average Equity
4.95%
6.50%
8.17%
9.01%
9.79%
8.49%
11.31%
9.20%
8.92%
9.23%
8.33%
10.93%
9.35%
Return on Average Tangible Equity
6.91%
8.84%
10.60%
11.63%
12.54%
10.79%
14.27%
11.56%
11.18%
11.49%
10.30%
13.43%
11.59%
Efficiency Ratio
90%
85%
80%
74%
74%
75%
75%
75%
73%
72%
74%
74%
73%
Provision for loan losses ratio
0.19%
0.20%
0.05%
0.06%
0.04%
0.05%
0.05%
0.20%
0.05%
0.05%
0.05%
0.05%
0.22%
Loans to Deposits ratio
74%
78%
84%
77%
77%
77%
77%
77%
77%
77%
77%
77%
77%
Earning assets to interest‐bearing liabilities
135%
138%
139%
127%
127%
127%
126%
126%
126%
126%
125%
125%
125%
Non‐interest expense to average assets
3.12%
2.93%
2.91%
0.72%
0.72%
0.74%
0.75%
2.90%
0.72%
0.72%
0.74%
0.75%
2.92%
Non‐interest revenue to total revenue
18.45%
17.67%
15.88%
14.56%
14.80%
13.62%
20.13%
15.90%
14.10%
14.36%
13.23%
19.55%
15.43%
Equity to Assets Ratio
9.05%
8.80%
9.03%
9.05%
9.14%
9.24%
9.34%
9.47%
9.46%
9.55%
9.64%
9.74%
9.44%
Financial Risk (Leverage) Ratios
Total debt/equity ratio
9.90
10.32
10.03
9.89
9.77
9.67
9.52
9.52
9.42
9.31
9.23
9.09
9.09
Total LT debt/equity ratio
89.08%
108.90%
120.85%
69.62%
67.95%
66.54%
64.70%
64.70%
63.30%
61.87%
60.62%
59.01%
59.01%
Tier 1 Leverage Ratio
9.23%
8.67%
8.98%
9.09%
9.20%
9.28%
9.42%
9.42%
9.51%
9.61%
9.69%
9.83%
9.83%
Total debt ratio
91%
91%
91%
91%
91%
91%
91%
91%
90%
90%
90%
90%
90%
Net Carge‐offs/average loans
‐0.218%
‐0.221%
‐0.172%
‐0.043%
‐0.043%
‐0.043%
‐0.043%
‐0.168%
‐0.043%
‐0.043%
‐0.043%
‐0.043%
‐0.170%
Loan Loss Provision / Net Charge offs
‐1.00
‐1.00
‐0.32
‐1.43
‐0.93
‐1.26
‐1.26
‐1.22
‐1.26
‐1.26
‐1.26
‐1.26
‐1.26
Reserves / Average loans
1.16%
0.95%
0.91%
0.90%
0.90%
0.90%
0.90%
0.90%
0.90%
0.90%
0.90%
0.90%
0.92%
Return on assets
3.42%
3.28%
3.30%
0.86%
0.86%
0.86%
0.87%
3.45%
0.85%
0.86%
0.86%
0.87%
3.43%
Return on equity
38%
37%
37%
9%
9%
9%
9%
37%
9%
9%
9%
9%
35%
2017 E
Interest expense on deposits as a %
of deposits
2016 E
BURKENROAD REPORTS RATING SYSTEM
MARKET OUTPERFORM: This rating indicates that we believe forces are in place that would enable this company's stock to produce returns in excess of the stock market averages over the next 12 months.
MARKET PERFORM: This rating indicates that we believe the investment returns from this company's stock will be in line with those produced by the stock market averages over the next 12 months.
MARKET UNDERPERFORM: This rating indicates that while this investment may have positive attributes, we believe an investment in this company will produce subpar returns over the next 12 months. BURKENROAD REPORTS CALCULATIONS
CPFS is calculated using operating cash flows excluding working capital changes.
All amounts are as of the date of the report as reported by Bloomberg or Yahoo Finance unless otherwise noted. Betas are collected from Bloomberg.
Enterprise value is based on the equity market cap as of the report date, adjusted for long‐term debt, cash, & short‐term investments reported on the most recent quarterly report date.
12‐month Stock Performance is calculated using an ending price as of the report date. The stock performance includes the 12‐month dividend yield.
2015‐2016 COVERAGE UNIVERSE Amerisafe Inc. (AMSF) Bristow Group Inc. (BRS) CalIon Petroleum Company (CPE) Cal‐Maine Foods Inc. (CALM) Carbo Ceramics Inc. (CRR) Cash America International Inc. (CSH) Conn's Inc. (CONN) Crown Crafts Inc. (CRWS) Denbury Resources Inc. (DNR) EastGroup Properties Inc. (EGP) Era Group Inc. (ERA) Evolution Petroleum Corp. (EPM) The First Bancshares (FBMS) Globalstar (GSAT) Gulf Island Fabrication Inc. (GIFI) Hibbett Sports (HIBB) Hornbeck Offshore Services Inc. (HOS) IBERIABANK Corp. (IBKC) ION Geophysical Corp. (IO) Key Energy Services (KEG)
Marine Products Corp. (MPX) MidSouth Bancorp Inc. (MSL) Newpark Resources Inc. (NR) PetroQuest Energy Inc. (PQ) Pool Corporation (POOL) Powell Industries Inc. (POWL) Rollins Incorporated (ROL) RPC Incorporated (RES) Ruth’s Hospitality Group Inc. (RUTH) Sanderson Farms Inc. (SAFM) SEACOR Holdings Inc. (CKH) Sharps Compliance Inc. (SMED) Spark Energy Inc. (SPKE) Stone Energy Corp. (SGY) Sunoco LP (SUN) Superior Energy Services Inc. (SPN) Superior Uniform Group Inc. (SGC) Team Incorporated (TISI) Vaalco Energy Inc. (EGY) Willbros Group Inc. (WG)
PETER RICCHIUTI Director of Research Founder of Burkenroad Reports [email protected] ANTHONY WOOD Senior Director of Accounting [email protected]
DANIEL BROWNFIELD GRACE CAMMACK ALAN POSNER RUBEN FLORES DELGADO Associate Directors of Research
BURKENROAD REPORTS Tulane University New Orleans, LA 70118‐5669 (504) 862‐8489 (504) 865‐5430 Fax
To receive complete reports on any of the companies we follow, contact:Peter Ricchiuti, Founder & Director of Research
Tulane UniversityFreeman School of BusinessBURKENROAD REPORTS
Phone: (504) 862-8489Fax: (504) 865-5430
E-mail: [email protected] visit our web site at www.BURKENROAD.org
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Named in honor of William B. Burkenroad Jr., an alumnus and a longtime supporter of Tulane’s business school, and funded through contributions from his family and friends, BURKENROAD REPORTS is a nationally recognized program, publishing objective, investment research reports on public companies in our region. Students at Tulane University’s Freeman School of Business prepare these reports.Alumni of the BURKENROAD REPORTS program are employed at a number of highly respected financial institutions including:ABN AMRO Bank · Aegis Value Fund · Invesco/AIM Capital Management · Alpha Omega Capital Partners · American General Investment Management · Ameriprise Financial · Atlas Capital · Banc of America Securities · Bank of Montreal · Bancomer · Barclays Capital · Barings PLC · Bearing Point · Bessemer Trust · Black Gold Capital· Bloomberg · Brookfield Asset Management · Brown Brothers Harriman Capital · Blackrock Financial Management · Boston Consulting Group · Buckingham Research · California Board of Regents · Cambridge Associates· Canaccord Genuity · Cantor Fitzgerald · Chaffe & Associates · Citadel Investment Group · Citibank · Citigroup Private Bank · City National Bank · Cornerstone Resources · Credit Suisse · D. A. Davidson & Co. · Deutsche Banc · Duquesne Capital Management · Equitas Capital Advisors· Factset Research · Financial Models · First Albany · Fiduciary Trust · Fitch Investors Services · Forex Trading · Franklin Templeton · Friedman Billings Ramsay · Fulcrum Global Partners · Gintel Asset Management · Global Hunter Securities · Goldman Sachs · Grosever Funds · Gruntal & Co. · Guggenheim Securities , LLC · Hancock Investment Services · Healthcare Markets Group · Capital One Southcoast · Howard Weil Labouisse Friedrichs · IBERIABANK Capital Markets · J.P. Morgan Securities · Janney Montgomery Scott · Jefferies & Co. · Johnson Rice & Co. · KBC Financial · KDI Capital Partners · Key Investments · Keystone Investments · Legacy Capital · Liberty Mutual · Lowenhaupt Global Advisors · Mackay Shields · Manulife/John Hancock Investments · Marsh & McLennan · Mercer Partners · Merrill Lynch · Miramar Asset Management · Moodys Investor Services · Morgan Keegan · Morgan Stanley · New York Stock Exchange · Perkins Wolf McDonnell · Piper Jaffray & Co. · Professional Advisory Services · Quarterdeck Investment Services · RBC · Raymond James · Restoration Capital · Rice Voelker, LLC · Royal Bank of Scotland· Sandler O'Neill & Partners · Sanford Bernstein & Co. · Scotia Capital · Scottrade · Second City Trading LLC · Sequent Energy · Sidoti & Co · Simmons & Co. · Southwest Securities · Stephens & Co. · Sterne Agee · Stewart Capital LLC · Stifel Nicolaus · Sun-Trust Capital Markets · Susquehanna Investment Group · Thomas Weisel Partners · TD Waterhouse Securities · Texas Employee Retirement System · Texas Teachers Retirement System · ThirtyNorth Investments · Thornburg Investment Management · Tivoli Partners · Tudor Pickering & Co. · Tulane University Endowment Fund · Turner Investment Partners · UBS · Value Line Investments · Vaughan Nelson Investment Management · Wells Fargo Capital Management · Whitney National Bank · William Blair & Co. · Zephyr Management