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FBMS > SEC Filings for FBMS > Form 10-Q on 10-May-2013All Recent SEC Filings

Show all filings for FIRST BANCSHARES INC /MS/ | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for FIRST BANCSHARES INC /MS/


10-May-2013

Quarterly Report


ITEM NO. 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL CONDITION

The following discussion contains "forward-looking statements" relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. The words "expect," "estimate," "anticipate," and "believe," as well as similar expressions, are intended to identify forward-looking statements. The Company's actual results may differ materially from the results discussed in the forward-looking statements, and the Company's operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in the Company's filings with the Securities and Exchange Commission, including the "Risk Factors" section in the Company's most recently filed Form 10-K.

The First represents the primary asset of the Company. The First reported total assets of $788.0 million at March 31, 2013, compared to $720.0 million at December 31, 2012. Loans increased $11.7 million, or 2.8%, during the first three months of 2013. Deposits at March 31, 2013, totaled $683.3 million compared to $596.7 million at December 31, 2012. For the three month period ended March 31, 2013, The First reported net income of $1.6 million compared to $1.1 million for the three months ended March 31, 2012.

NONPERFORMING ASSETS AND RISK ELEMENTS. Diversification within the loan portfolio is an important means of reducing inherent lending risks. At March 31, 2013, The First had no concentrations of ten percent or more of total loans in any single industry or any geographical area outside its immediate market areas.

At March 31, 2013, The First had loans past due as follows:

($ In Thousands)

Past due 30 through 89 days $ 3,459 Past due 90 days or more and still accruing 161

The accrual of interest is discontinued on loans which become ninety days past due (principal and/or interest), unless the loans are adequately secured and in the process of collection. Nonaccrual loans totaled $3.1 million at March 31, 2013, a decrease of $.3 million from December 31, 2012. Any other real estate owned is carried at fair value, determined by an appraisal, less estimated costs to sell. Other real estate owned totaled $6.7 million at March 31, 2013. A loan is classified as a restructured loan when the following two conditions are present: First, the borrower is experiencing financial difficulty and second, the creditor grants a concession it would not otherwise consider but for the borrower's financial difficulties. At March 31, 2013, the Bank had $177,000 in loans that were modified as troubled debt restructurings.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is adequate with cash and cash equivalents of $91.5 million as of March 31, 2013. In addition, loans and investment securities repricing or maturing within one year or less exceeded $165.9 million at March 31, 2013. Approximately $68.6 million in loan commitments could fund within the next three months and other commitments, primarily standby letters of credit, totaled $.7 million at March 31, 2013.

There are no known trends or any known commitments or uncertainties that will result in The First's liquidity increasing or decreasing in a significant way.

Total consolidated equity capital at March 31, 2013, was $87.1 million, or approximately 11.0% of total assets. The Company currently has adequate capital positions to meet the minimum capital requirements for all regulatory agencies. The Company's capital ratios as of March 31, 2013, were as follows:

                           Tier 1 leverage       11.24 %
                           Tier 1 risk-based     16.73 %
                           Total risk-based      17.73 %

On June 30, 2006, The Company issued $4,124,000 of floating rate junior subordinated deferrable interest debentures to The First Bancshares Statutory Trust 2 in which the Company owns all of the common equity. The debentures are the sole asset of the Trust. The Trust issued $4,000,000 of Trust Preferred Securities (TPSs) to investors. The Company's obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the Trust's obligations under the preferred securities. The preferred securities are redeemable by the Company at its option. The preferred securities must be redeemed upon maturity of the debentures in 2036. Interest on the preferred securities is the three month London Interbank Offer Rate (LIBOR) plus 1.65% and is payable quarterly. The terms of the subordinated debentures are identical to those of the preferred securities. On July 27, 2007, The Company issued $6,186,000 of floating rate junior subordinated deferrable interest debentures to The First Bancshares Statutory Trust 3 in which the Company owns all of the common equity. The debentures are the sole asset of Trust 3. The Trust issued $6,000,000 of Trust Preferred Securities (TPSs) to investors. The Company's obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the Trust's obligations under the preferred securities. The preferred securities are redeemable by the Company in 2013 or later, at its option. The preferred securities must be redeemed upon maturity of the debentures in 2037. Interest on the preferred securities is the three month LIBOR plus 1.40% and is payable quarterly. The terms of the subordinated debentures are identical to those of the preferred securities. In accordance with the authoritative guidance, the trusts are not included in the consolidated financial statements.

RESULTS OF OPERATIONS

The Company had a consolidated net income of $1,225,000 for the three months ended March 31, 2013, compared with consolidated net income of $971,000 for the same period last year.

Net interest income increased to $5.9 million from $5.5 million for the three months ended March 31, 2013, or an increase of 7.4% as compared to the same period in 2012. Earning assets through March 31, 2013, increased $56.0 million, or 8.5% and interest-bearing liabilities also increased $40.6 million or 7.5% when compared to March 31, 2012.

Noninterest income for the three months ended March 31, 2013, was $1,930,000 compared to $1,475,000 for the same period in 2012, reflecting an increase of $455,000 or 30.8%. The majority of the increase, $415,000, was from an award granted to our Company by the Community Development Institutions Fund due to our increased level of community development products and services throughout the markets we serve.

The provision for loan losses was $311,000 for the three months ended March 31, 2013, compared with $152,000 for the same period in 2012. The allowance for loan losses of $4.9 million at March 31, 2013 (approximately 1.16% of total loans and 1.21% of loans excluding those booked at fair value due to a business combination) is considered by management to be adequate to cover losses inherent in the loan portfolio. The level of this allowance is dependent upon a number of factors, including the total amount of past due loans, general economic conditions, and management's assessment of potential losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant change. Ultimately, losses may vary from current estimates and future additions to the allowance may be necessary.

Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required. Management evaluates the adequacy of the allowance for loan losses quarterly and makes provisions for loan losses based on this evaluation.

Noninterest expense increased by $457,000 or 8.3% for the three months ended March 31, 2013, when compared with the same period in 2012. This increase is primarily related to costs associated with the acquisition of First National Bank of Baldwin County in the amount of $341,000, as well as an increase in salaries and employee benefits associated with the start of our Private Banking Division.

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