Business Wire | Jul 27, 2020 06:00PM EDT

The First Bancshares, Inc. Reports Results for Second Quarter ended June 30, 2020; Declares Quarterly Dividend

Jul. 27, 2020

HATTIESBURG, Miss.--(BUSINESS WIRE)--Jul. 27, 2020--The First Bancshares, Inc. ("FBMS" or "the Company") (NASDAQ: FBMS), holding company for The First, A National Banking Association, (www.thefirstbank.com) reported today an increase of 41.4% in net income available to common shareholders for the quarter ended June 30, 2020 as compared to same quarter 2019.

Highlights for the Quarter:

* On April 3, 2020, the Company closed its acquisition with Southwest Georgia Financial Corporation ("SGB"), parent company of Southwest Georgia Bank, headquartered in Moultrie, GA. SGB added 8 locations servicing the areas of Moultrie, Valdosta, Albany and Tifton, Georgia and completion of system integration occurred during the quarter. * The Company recorded a bargain purchase gain of $7.0 million on the acquisition of SGB. * Excluding acquired SGB loans and Payroll Protection Program ("PPP") loans, average loans increased $5.3 million, or 0.2% for the sequential quarter comparison. * Excluding acquired SGB deposits, average deposits increased $381.0 million, or 12.0% on an annualized basis for the sequential quarter comparison. * Provision for loan losses totaled $7.6 million for the quarter of which $6.6 million was related to COVID-19 as compared to $7.1 million for the sequential quarter comparison and $0.8 million for the second quarter of 2019. * Pre-tax, pre-provision operating earnings which excludes acquisition charges, treasury awards, gains from bargain purchase of SGB and sale of land increased 28.5% to $21.4 million for the quarter ended June 30, 2020 as compared to $16.7 million for the second quarter of 2019. * Pre-tax, pre-provision operating earnings which excludes acquisition charges, treasury awards, gains from bargain purchase of SGB and sale of land increased 20.2% to $21.4 million for the quarter ended June 30, 2020 as compared $17.8 million for the first quarter of 2020. * Due to the current economic environment, the allowance for loan losses increased 35% to $28.1 million or 0.88% of total loans at June 30, 2020 as compared to $20.8 million or 0.80% of total loans at March 31, 2020. The Company also has $11.5 million in credit marks associated with acquired loan portfolios. * As of July 24, 2020, total COVID related modifications were $196 million, representing 6% of the loan portfolio and down from a peak of $676 million or 21% of the loan portfolio. For additional details related to our response and potential effects of COVID-19, see investor presentation to be filed and available under presentations and press releases included in the investor relations section of the company's website: www.thefirstbank.com. * During the first quarter of 2020, the Company elected to delay the adoption of the Current Expected Credit Losses ("CECL") afforded through the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

M. Ray "Hoppy" Cole, President and Chief Executive Officer, commented, "Although there is a great deal of uncertainty surrounding the economic impact of the COVID-19 pandemic, our company had a strong quarter. Our team's ability to perform at a high level, deliver outstanding service, and continue to execute on our strategic vision in a very difficult operating environment is exceptional.

During the quarter, we completed the merger and system integration of Southwest Georgia Bank adding 8 locations and approximately $550 million in assets in the markets of Moultrie, Valdosta and Tifton, Ga. Southwest Georgia Bank is a 100 year old institution, with excellent market share and a group of high performing community bankers. We are thrilled to have them join our team!

Our team also processed over 3,200 PPP loans totaling more than $260 million to help support our clients during this unprecedented time. Our clients have been very complimentary of the service provided which underscored the importance of our community bank model and its focus on the client. Our team members' extra effort produced substantial growth in loans, deposits, and a 20% increase in pre-tax, pre-provision income as compared to the first quarter of 2020.

I am confident that our company is well positioned to navigate this uncertain environment with our current strong core earnings, strong capital and excellent liquidity. Our focus will continue to be on the needs of our clients and the safety and welfare of our team members."

Quarterly Earnings

Net income available to common shareholders totaled $16.9 million for the quarter ended June 30, 2020, an increase of $5.0 million, or 41.4%, compared to $12.0 million for the quarter ended June 30, 2019.

Net income available to common shareholders totaled $16.9 million for the quarter ended June 30, 2020, an increase of $8.6 million, or 103.9%, compared to $8.3 million for the quarter ended March 31, 2020. The Company recorded a $7.0 million bargain purchase gain on the acquisition of SGB for the quarter ended June 30, 2020.

Pre-tax, pre-provision operating earnings, which exclude acquisition charges, treasury awards, and gains increased 28.5% to $21.4 million for the quarter ended June 30, 2020 as compared to $16.7 million for the second quarter of 2019 and increased 20.2% to $21.4 million for the quarter ended June 30, 2020 as compared $17.8 million for the first quarter of 2020.

Provision for loan losses totaled $7.6 million for the quarter ended June 30, 2020, an increase of $6.8 million, or 862% as compared to $0.8 million for the second quarter of 2019 and an increase of $0.5 million, or 7.1% as compared to $7.1 million for the first quarter of 2020. $6.6 million of the $7.6 million provision for loan loss expense for the quarter ended June 30, 2020 was related to the anticipated economic effects of COVID-19.

Earnings Per Share

For the second quarter of 2020, fully diluted earnings per share were $0.79, compared to $0.69 for the second quarter of 2019. The additional provision for loan losses expense of $6.6 million, or $5.1 million net of tax, for the quarter ended June 30, 2020, which is primarily attributable to the COVID-19 pandemic, accounted for $0.24 in fully diluted earnings per share. The bargain purchase and sale of land gains for the quarter ended June 30, 2020 accounted for $0.35 in fully diluted earnings per share.

For the second quarter of 2020, fully diluted earnings per share were $0.79, compared to $0.44 for the first quarter of 2020. The bargain purchase and sale of land gains for the quarter ended June 30, 2020 accounted for $0.35 in fully diluted earnings per share.

Fully diluted earnings per share for the quarter ended June 30, 2020 include the issuance of 2,546,967 shares of our common stock during the second quarter of 2020 in association with the acquisition of SGB and the issuance of 1,682,889 shares of our common stock during the fourth quarter of 2019 in association with the acquisition of First Florida Bancorp, Inc. ("FFB"). Fully diluted earnings per share for the first and second quarters of 2020 include the purchase by the Company of 168,188 shares throughout the calendar year of 2019.

Fully diluted earnings per share for the quarter ended June 30, 2019 include the issuance of 2,377,501 shares of our common stock during the first quarter of 2019 in association with the acquisition of FPB Financial Corp ("FPB").

Balance Sheet

Consolidated assets increased $1.023 billion to $5.085 billion at June 30, 2020 from $4.062 billion at March 31, 2020. Excluding the acquisition of SGB, assets increased $486.2 million. Assets include $259.3 million in PPP loans.

Total average loans were $3.157 billion for the quarter ended June 30, 2020, as compared to $2.602 billion for the quarter ended March 31, 2020, and $2.338 billion for the quarter ended June 30, 2019, representing an increase of $554.2 million, or 21.3%, for the sequential quarter comparison, and an increase of $818.9 million, or 35.0%, in prior year quarterly comparison. The acquisitions of FFB and SGB accounted for $665.5 million, net of fair value marks, of the total increase in average loans as compared to the second quarter of 2019. The acquisition of SGB accounted for $419.3 million, net of fair value marks, of the total increase in average loans as compared to the first quarter of 2020.

Excluding the acquired loans and PPP loans, average loans increased $5.3 million, or 0.2% for the sequential quarter comparison. Excluding the acquired loans and PPP loans, average loans increased $23.8 million, or 1.0% as compared to the quarter ended June 30, 2019.

Total average deposits were $4.069 billion for the quarter ended June 30, 2020, as compared to $3.187 billion for the quarter ended March 31, 2020, and $2.863 billion for the quarter ended June 30, 2019, representing an increase of $882.2 million, or 27.7%, for the sequential quarter comparison, and an increase of $1.207 billion, or 42.1%, in prior year quarterly comparison. The acquisitions of FFB and SGB accounted for $856.9 million of the total increase in average deposits as compared to the second quarter of 2019. The acquisition of SGB accounted for $501.3 million, net of fair value marks, of the total increase in average deposits as compared to the first quarter of 2020.

Excluding the acquired deposits, average deposits increased $381.0 million, or 12.0% for the sequential quarter comparison. Excluding the acquired deposits, average deposits increased $349.7 million, or 12.2% as compared to the quarter ended June 30, 2019.

The Company implemented Deposit Reclassification at the beginning of 2020. This program reclassifies noninterest bearing deposits and NOW deposit balances to money market accounts. This program reduces our reserve balance required at the Federal Reserve Bank of Atlanta which provides additional funds for liquidity and lending. At quarter end June 30, 2020, $703.7 million in noninterest deposit balances and $746.1 million in NOW deposit accounts were reclassified as money market accounts.

Asset Quality

Nonperforming assets totaled $45.7 million at June 30, 2020, a decrease of $1.4 million compared to $47.1 million at March 31, 2020 and an increase of $7.7 million compared to $38.0 million at June 30, 2019. Nonaccrual loans increased $1.5 million as compared to March 31, 2020 and increased $13.6 million as compared to June 30, 2019. Other real estate decreased $1.5 million as compared to March 31, 2020 and decreased $5.7 million as compared to June 30, 2019.

The ratio of the allowance for loan and leases losses (ALLL) to total loans was 0.88% at June 30, 2020, 0.80% at March 31, 2020 and 0.51% at June 30, 2019. The ratio of annualized net charge-offs (recoveries) to total loans was 0.04% for the quarter ended June 30, 2020 compared to 0.03% for the quarter ended March 31, 2020 and (0.01%) for the quarter ended June 30, 2019.

Second Quarter 2020 vs. Second Quarter 2019 Earnings Comparison

Net income available to common shareholders for the second quarter of 2020 totaled $16.9 million compared to $12.0 million for the second quarter of 2019, an increase of $5.0 million or 41.4%. The Company recorded a $7.0 million bargain purchase gain on the acquisition of SGB for the quarter ended June 30, 2020. In comparing the quarters, an increased provision for loan losses in the amount of $6.8 million was expensed during the second quarter of 2020 as compared to the second quarter of 2019.

Net interest income for the second quarter of 2020 was $39.2 million, an increase of $8.4 million when compared to the second quarter of 2019. The increase was due to interest income earned on a higher volume of loans. Fully tax equivalent ("FTE") net interest income totaled $39.8 million and $31.0 million for the second quarter of 2020 and 2019, respectively. FTE net interest income increased $8.7 million in the prior year quarterly comparison due to increased loan volume. Purchase accounting adjustments accounted for $0.6 million of the difference in net interest income for the second quarter comparisons. Second quarter 2020 FTE net interest margin of 3.63% included 21 basis points related to purchase accounting adjustments compared to 4.07% for the same quarter in 2019, which included 23 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin decreased 42 basis points in prior year quarterly comparison.

Non-interest income increased $1.0 million for the second quarter of 2020 as compared to the second quarter of 2019 excluding the gains mentioned above. Mortgage income increased $1.1 million in prior year quarterly comparison.

Second quarter 2020 non-interest expense was $28.1 million, an increase of $7.2 million, or 34.4% as compared to the second quarter of 2019. Excluding the net increase in acquisition charges of $2.2 million for the quarterly comparison, non-interest expense increased $5.0 million in the second quarter of 2020, of which $3.9 million was attributable to the operations of FFB and SGB, as compared to second quarter of 2019.

Investment securities totaled $953.3 million, or 18.7% of total assets at June 30, 2020, versus $622.8 million, or 17.9% of total assets at June 30, 2019. The average balance of investment securities increased $284.2 million in prior year quarterly comparison, primarily as a result of the acquisitions. The average tax equivalent yield on investment securities decreased 85 basis points to 2.55% from 3.40% in prior year quarterly comparison. The investment portfolio had a net unrealized gain of $32.9 million at June 30, 2020 as compared to a net unrealized gain of $12.6 million at June 30, 2019.

The FTE average yield on all earning assets decreased 73 basis points in prior year quarterly comparison, from 4.96% for the second quarter of 2019 to 4.23% for the second quarter of 2020. Average interest expense decreased 49 basis points from 1.16% for the second quarter of 2019 to 0.67% for the second quarter of 2020. Cost of all deposits averaged 52 basis points for the second quarter of 2020 compared to 77 basis points for the second quarter of 2019.

Second Quarter 2020 vs First Quarter 2020 Earnings Comparison

Net income available to common shareholders for the second quarter of 2020 increased $8.6 million to $16.9 million compared to $8.3 million for the first quarter of 2020. As previously discussed, the bargain purchase and sale of land gains accounted for $7.5 million, net of tax of the $8.6 million increase in sequential quarter comparison.

Net interest income for the second quarter of 2020 was $39.2 million as compared to $34.1 million for the first quarter of 2020, an increase of $5.1 million. FTE net interest income increased $5.2 million to $39.8 million from $34.5 million in sequential-quarter comparison. Second quarter 2020 FTE net interest margin of 3.63% included 21 basis points related to purchase accounting adjustments compared to 3.93% for the first quarter in 2020, which included 28 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin decreased 23 basis points in sequential quarter comparison.

Investment securities totaled $953.3 million, or 18.7% of total assets at June 30, 2020, versus $788.9 million, or 19.4% of total assets at March 31, 2020. The average balance of investment securities increased $121.7 million in sequential-quarter comparison, primarily as a result of the acquisition of SGB. The average tax equivalent yield on investment securities decreased 39 basis points to 2.55% from 2.94% in sequential-quarter comparison. The investment portfolio had a net unrealized gain of $32.9 million at June 30, 2020 as compared to a net unrealized gain of $21.4 million at March 31, 2020.

The FTE average yield on all earning assets decreased in sequential-quarter comparison from 4.78% to 4.23%. Average interest expense decreased 25 basis points from 0.92% for the first quarter of 2020 to 0.67% for the second quarter of 2020. Cost of all deposits averaged 52 basis points for the second quarter of 2020 compared to 76 basis points for the first quarter of 2020.

Excluding the bargain purchase and sale of land gains, non-interest income increased $1.6 million in sequential-quarter comparison resulting from increased mortgage income in the amount of $1.1 million.

Non-interest expense for the second quarter of 2020 was $28.1 million compared to $23.4 million for the first quarter of 2020. Excluding acquisition charges for each quarter, non-interest expense increased $3.1 million of which $2.3 million is attributable to operating expenses association with SGB.

Year-to-Date Earnings Comparison

In year-over-year comparison, net income available to common shareholders increased $5.6 million, or 28.7%, from $19.6 million for the six months ended June 30, 2019 to $25.3 million for the same period ended June 30, 2020. Excluding the bargain purchase and sale of land gains of $7.5 million, net of tax, and the increased provision expense of $5.2 million, net of tax, net income available to common shareholders increased $3.3 million in year-over-year comparison.

Net interest income increased $15.3 million in year-over-year comparison, primarily due to interest income earned on a higher volume of loans and securities.

Non-interest income increased $2.5 million in year-over-year comparison excluding the grants and gains mentioned above. Mortgage income increased $1.7 million and interchange fee income increased $0.7 million in the year-over-year comparison.

Non-interest expense was $51.5 million for the six months ended June 30, 2020 an increase of $8.7 million as compared to the same period ended June 30, 2019. $5.8 million of the increase is related to the operations of FFB and SGB.

Declaration of Cash Dividend

The Company announced that its Board of Directors declared a cash dividend of $0.10 per share to be paid on its common stock on August 24, 2020 to shareholders of record as of the close of business on August 10, 2020.

About The First Bancshares, Inc.

The First Bancshares, Inc., headquartered in Hattiesburg, Mississippi, is the parent company of The First, A National Banking Association ("The First"). Founded in 1996, The First has operations in Mississippi, Louisiana, Alabama, Florida and Georgia. The Company's stock is traded on the NASDAQ Global Market under the symbol FBMS. Information is available on the Company's website: www.thefirstbank.com.

Non-GAAP Financial Measures

Our accounting and reporting policies conform to generally accepted accounting principles ("GAAP") in the United States and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of our performance. This press release includes operating net earnings, operating efficiency ratio, pre-tax, pre-provision operating earnings, operating earnings per share, fully tax equivalent net interest income, total tangible common equity, tangible book value per common share and certain ratios derived from these non-GAAP financial measures. The Company believes that the non-GAAP financial measures included in this press release allow management and investors to understand and compare results in a more consistent manner for the periods presented in this press release. Non-GAAP financial measures should be considered supplemental and not a substitute for the Company's results reported in accordance with GAAP for the periods presented, and other bank holding companies may define or calculate these measures differently. These non-GAAP financial measures should not be considered in isolation and do not purport to be an alternative to net income, earnings per share, net interest income, book value or other GAAP financial measures as a measure of operating performance. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is provided in this press release following the Condensed Consolidated Financial Information (unaudited).

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) changes in economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations; (3) interest rate risk; (4) changes in applicable laws, rules, or regulations, including changes to statutes, regulations or regulatory policies or practices as a result of, or in response to COVID-19; (5) 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; (6) changes in management's plans for the future; (7) credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values, or competition; (8) changes in accounting principles, policies, or guidelines; (9) 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; (10) the impact of the COVID-19 pandemic on the Company's assets, business, cash flows, financial condition, liquidity, prospects and results of operations; (11) potential increases in the provision for loan losses resulting from the COVID-19 pandemic; and (12) other general competitive, economic, political, and market factors, including those affecting our business, operations, pricing, products, or services. 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 Securities and Exchange Commission, 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.

Statements about the potential effects of the COVID-19 pandemic on the Company's assets, business, liquidity, financial condition, prospects, and results of operations may constitute forward-looking statements and are subject to the risks that the actual effects may differ, possible materially, from what is reflected in these forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the depth, dispersion and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on customers, employees, third parties and the Company.

FIRST BANCSHARES, INC and SUBSIDIARIES

Condensed Consolidated Financial Information (unaudited)

(in thousands except per share data)

Quarter Quarter Quarter Quarter QuarterEARNINGS DATA Ended Ended Ended Ended Ended 6/30/20 3/31/20 12/31/19 9/30/19 6/30/19

Total Interest Income $ 45,799 $ 41,598 $ 40,444 $ 37,241 $ 37,571

Total Interest Expense 6,619 7,533 7,000 6,782 6,799

Net Interest Income 39,180 34,065 33,444 30,459 30,772

FTE net interest income* 39,772 34,526 33,847 30,739 31,040

Provision for loan 7,606 7,102 850 974 791losses

Non-interest income 15,680 6,474 7,574 7,103 6,716

Non-interest expense 28,070 23,439 24,960 20,825 20,891

Earnings before income 19,184 9,998 15,208 15,763 15,806taxes

Income tax expense 2,241 1,687 3,353 3,491 3,823

Net income available to $ 16,943 $ 8,311 $ 11,855 $ 12,272 $ 11,983common shareholders





PER COMMON SHARE DATA

Basic earnings per share $ 0.79 $ 0.44 $ 0.65 $ 0.72 $ 0.70

Diluted earnings per 0.79 0.44 0.64 0.71 0.69share

Diluted earnings per 0.52 0.47 0.72 0.74 0.70share, operating*

Quarterly dividends per .10 .10 .08 .08 .08share

Book value per common 29.34 29.49 28.91 27.92 27.22share at end of period

Tangible book value percommon share at period 20.40 19.52 18.87 19.39 18.72end*

Market price at end of 22.50 19.07 35.52 32.30 30.34period

Shares outstanding at 21,395,258 18,851,955 18,802,266 17,123,625 17,129,915period end

Weighted average shares outstanding:

Basic 21,341,913 18,818,115 18,241,244 17,131,080 17,182,049

Diluted 21,437,180 18,942,129 18,398,609 17,267,953 17,311,626





AVERAGE BALANCE SHEET DATA

Total assets $4,913,620 $3,990,493 $3,767,587 $3,439,202 $3,460,394

Loans and leases 3,156,524 2,602,340 2,512,524 2,343,392 2,337,583

Total deposits 4,069,239 3,186,943 2,963,603 2,765,816 2,862,653

Total common equity 607,127 547,309 518,070 470,024 454,965

Total tangible common 423,966 358,889 346,742 324,619 308,303equity*





SELECTED RATIOS

Annualized return on avg 1.38% 0.83% 1.26% 1.43% 1.39%assets (ROA)

Annualized return on avg 0.91% 0.89% 1.40% 1.49% 1.39%assets, operating*

Annualized pre-tax,pre-provision, 1.75% 1.79% 1.87% 2.03% 1.93%operating*

Annualized return on avgcommon equity, 7.40% 6.50% 10.16% 10.91% 10.60%operating*

Annualized return on avgtangible common equity, 10.60% 9.91% 15.18% 15.80% 15.64%operating*

Average loans to average 77.57% 81.66% 84.78% 84.73% 81.66%deposits

FTE Net Interest Margin* 3.63% 3.93% 4.06% 4.05% 4.07%

Efficiency Ratio 50.62% 57.17% 60.26% 55.03% 55.33%

Efficiency Ratio, 53.91% 55.36% 55.67% 53.17% 55.09%operating*

*See reconciliation ofNon-GAAP financial measures

CREDIT QUALITY

Allowance for loanlosses (ALLL) as a % of 0.88% 0.80% 0.53% 0.56% 0.51%total loans

Nonperforming assets to 9.84% 12.12% 13.13% 13.71% 11.42%tangible equity + ALLL

Nonperforming assets to 1.44% 1.81% 1.86% 2.00% 1.61%total loans + OREO

Annualized QTD netcharge-offs (recoveries) 0.04% 0.03% (0.002%) 0.0041% (0.01%)to total loans

FIRST BANCSHARES, INC and SUBSIDIARIES

Condensed Consolidated Financial Information (unaudited)

(in thousands)

BALANCE SHEET June 30, Mar 31, Dec 31, Sept 30, June 30, 2020 2020 2019 2019 2019

Assets

Cash and cash $ 539,125 $ 286,759 $ 168,864 $ 159,990 $ 165,984equivalents

Securities 927,205 762,977 765,087 612,002 598,607available-for-sale

Securities - - - 6,328 6,396held-to-maturity

Other investments 26,059 25,911 26,690 22,517 17.819

Total investment 953,264 788,888 791,777 640,847 622,822securities

Loans held for sale 18,632 13,288 10,810 11,104 8,597

Total loans 3,171,535 2,602,288 2,600,358 2,349,986 2,351,998

Allowance for loan (28,064) (20,804) (13,908) (13,043) (12,091)losses

Loans, net 3,143,471 2,581,484 2,586,450 2,336,943 2,339,907

Premises and equipment 125,053 108,013 104,980 96,726 97,115

Other Real Estate Owned 5,471 6,974 7,299 9,974 11,205

Goodwill and other 191,431 187,927 188,865 146,091 145,649intangibles

Other assets 108,458 88,468 82,818 80,256 81,305

Total assets $5,084,905 $4,061,801 $3,941,863 $3,481,931 $3,472,584



Liabilities and Shareholders' Equity

Non-interest bearing $ 486,039 $ 340,606 $ 723,208 $ 642,054 $ 645,838deposits^

Interest-bearing 3,730,851 2,937,188 2,353,325 2,119,181 2,185,362deposits

Total deposits 4,216,890 3,277,794 3,076,533 2,761,345 2,831,200

Borrowings 116,005 116,180 214,319 136,250 71,250

Subordinated debentures 80,756 80,717 80,678 80,639 80,600

Other liabilities 43,459 31,184 26,675 25,609 23,253

Total liabilities 4,457,110 3,505,875 3,398,205 3,003,843 3,006,303

Total shareholders' 627,795 555,926 543,658 478,088 466,281equity

Total liabilities and $5,084,905 $4,061,801 $3,941,863 $3,481,931 $3,472,584shareholders' equity

^Reclassified $703,727 to interest-bearing deposits

FIRST BANCSHARES, INC and SUBSIDIARIES

Condensed Consolidated Financial Information (unaudited)

(in thousands except per share data)

Three Months EndedEARNINGS STATEMENT 6/30/20 3/31/20 12/30/ 9/30/19 6/30/19 19

Interest Income:

Loans, including fees $ $ $ $ $ 39,184 34,290 33,556 31,279 30,912

Investment securities 5,187 5,304 5,298 4,752 5,017

Accretion of purchase accounting 1,409 1,715 1,553 1,201 1,552adjustments

Other interest income 19 289 37 9 90

Total interest income 45,799 41,598 40,444 37,241 37,571

Interest Expense:

Deposits 5,967 6,034 5,489 5,156 5,377

Borrowings 224 917 771 451 288

Subordinated debentures 1,176 1,203 1,213 1,270 1,188

Accretion of purchase accounting (748) (621) (473) (95) (54)adjustments

Total interest expense 6,619 7,533 7,000 6,782 6,799

Net interest income 39,180 34,065 33,444 30,459 30,772

Provision for loan losses 7,606 7,102 850 974 791

Net interest income after provision for 31,574 26,963 32,594 29,485 29,981loan losses



Non-interest Income:

Service charges on deposit accounts 1,597 1,914 2,110 1,979 1,918

Mortgage Income 2,646 1,567 1,720 1,800 1,559

Interchange Fee Income 2,395 1,986 2,075 2,252 2,045

Gain (loss) on securities, net 73 174 (9) 57 36

Financial Assistance Award/Bank - - 714 - -Enterprise Award

Bargain Purchase Gain and Gain on Sale of 7,643 - - - -Land

Other charges and fees 1,326 833 964 1,015 1,158

Total non-interest income 15,680 6,474 7,574 7,103 6,716



Non-interest expense:

Salaries and employee benefits 15,866 13,228 13,092 11,612 11,615

Occupancy expense 3,200 2,918 3,190 2,632 2,532

FDIC/OCC premiums 237 147 147 111 426

Marketing 25 213 248 62 160

Amortization of core deposit intangibles 1,052 938 907 796 796

Other professional services 984 874 951 1,140 980

Acquisition charges 2,295 740 2,300 705 91

Other non-interest expense 4,411 4,381 4,125 3,767 4,291

Total Non-interest expense 28,070 23,439 24,960 20,825 20,891

Earnings before income taxes 19,184 9,998 15,208 15,763 15,806

Income tax expense 2,241 1,687 3,353 3,491 3,823

Net income available to common $ $ 8,311 $ $ $shareholders 16,943 11,855 12,272 11,983





Diluted earnings per common share $ 0.79 $ 0.44 $ 0.64 $ 0.71 $ 0.69

Diluted earnings per common share, $ 0.52 $ 0.47 $ 0.72 $ 0.74 $ 0.70operating*

*See reconciliation of Non-GAAP financial measures

FIRST BANCSHARES, INC and SUBSIDIARIES

Condensed Consolidated Financial Information (unaudited)

(in thousands except per share data)

Year to DateEARNINGS STATEMENT 2020 2019

Interest Income:

Loans, including fees $ 73,474 $ 58,482

Investment securities 10,491 9,356

Accretion of purchase accounting adjustments 3,124 2,787

Other interest income 308 220

Total interest income 87,397 70,845

Interest Expense:

Deposits 12,001 9,652

Borrowings 1,141 834

Subordinated debentures 2,379 2,421

Amortization of purchase accounting adjustments (1,369) 34

Total interest expense 14,152 12,941

Net interest income 73,245 57,904

Provision for loan losses 14,708 1,913

Net interest income after provision for loan losses 58,537 55,991



Non-interest Income:

Service charges on deposit accounts 3,511 3,750

Mortgage Income 4,213 2,469

Interchange Fee Income 4,381 3,697

Gain (loss) on securities, net 247 74

Financial Assistance Award/Bank Enterprise Award - 233

Bargain Purchase Gain and Gain on Sale of Land 7,643 -

Other charges and fees 2,161 2,047

Total non-interest income 22,154 12,270



Non-interest expense:

Salaries and employee benefits 29,094 22,312

Occupancy expense 6,118 4,974

FDIC/OCC premiums 384 374

Marketing 239 335

Amortization of core deposit intangibles 1,990 1,513

Other professional services 1,858 1,900

Acquisition charges 3,035 3,270

Other non-interest expense 8,790 8,108

Total Non-interest expense 51,508 42,786

Earnings before income taxes 29,183 25,475

Income tax expense 3,929 5,857

Net income available to common shareholders $ 25,254 $ 19,618





Diluted earnings per common share $ 1.25 $ 1.19

Diluted earnings per common share, operating* $ 1.00 $ 1.33

*See reconciliation of Non-GAAP financial measures

FIRST BANCSHARES, INC and SUBSIDIARIES

Condensed Consolidated Financial Information (unaudited)

(in thousands)

COMPOSITION OF June 30, Percent Mar 31, Dec 31, Sept 30, June 30, PercentLOANS 2020 of 2020 2019 2019 2019 of Total Total

Commercial,financial and $ 629,497 19.7% $ 327,979 $ 332,600 $ 338,584 $ 342,535 14.5%agricultural

Real estate - 337,337 10.6% 334,707 359,195 284,103 352,826 14.9%construction

Real estate - 1,163,897 36.5% 1,048,854 1,028,012 943,218 881,831 37.4%commercial

Real estate - 978,372 30.7% 828,378 814,282 724,860 713,350 30.2%residential

Lease Financing 2,811 0.1% 3,526 3,095 3,239 3,616 0.2%Receivable

Obligations ofStates & 17,010 0.5% 18,218 20,716 16,545 17,192 0.7%subdivisions

Consumer 42,611 1.3% 40,626 42,458 39,437 40,648 1.7%

Loans held for 18,632 0.6% 13,288 10,810 11,104 8,597 0.4%sale

Total loans $3,190,167 100% $2,615,576 $2,611,168 $2,361,090 $2,360,595 100%



COMPOSITION OF June 30, Percent Mar 31, Dec 31, Sept 30, June 30, PercentDEPOSITS 2020 of 2020 2019 2019 2019 of Total Total

Noninterest $486,039 11.5% $340,606 $723,208 $642,054 $645,838 22.8%bearing^

NOW and other^ 601,195 14.3% 478,526 941,598 926,704 999,881 35.3%

Money Market/ 2,451,991 58.1% 1,826,973 750,010 651,539 645,611 22.8%Savings^

Time Deposits ofless than 499,406 11.8% 462,808 479,386 401,549 408,164 14.4%$250,000

Time Deposits of 178,259 4.3% 168,881 182,331 139,489 131,706 4.7%$250,000 or more

Total Deposits $4,216,890 100% $3,277,794 $3,076,533 $2,761,345 $2,831,200 100%



Deposits Without June 30, Percent Mar 31,Reclassification 2020 of 2020 ^ Total

Noninterest $1,189,766 28.2% $749,939 bearing

Now and other 1,347,324 32.0% 1,122,027

Money Market/ 1,002,135 23.8% 774,139 Savings

Time Deposits ofless than 499,406 11.8% 462,808 $250,000

Time Deposits of 178,259 4.2% 168,881 $250,000 or more

Total Deposits $4,216,890 100% $3,277,794



ASSET QUALITY June 30, Mar 31, Dec 31, Sept 30, June 30, DATA 2020 2020 2019 2019 2019

Nonaccrual loans $ 39,201 $ 37,751 $ 38,393 $ 35,175 $ 25,608

Loans past due 1,009 2,393 2,715 2,116 989 90 days and over

Totalnonperforming 40,210 40,144 41,108 37,291 26,597 loans

Other real 5,471 6,974 7,299 9,974 11,205 estate owned

Nonaccrual - - - 52 208 securities

Totalnonperforming $ 45,681 $47,118 $48,407 $47,317 $ 38,010 assets



Nonperformingassets to total 0.90% 1.16% 1.23% 1.36% 1.09% assets

Nonperformingassets to total 1.44% 1.81% 1.86% 2.00% 1.61% loans + OREO

ALLL tononperforming 69.79% 51.82% 33.83% 34.98% 45.46% loans

ALLL to total 0.88% 0.80% 0.53% 0.56% 0.51% loans



Qtr-to-date netcharge-offs $ 346 $ 205 $ (15) $ 23 $ (65) (recoveries)

Annualized QTDnet chg-offs 0.04% 0.03% (0.002%) 0.004% (0.01%) (recs) to loans

FIRST BANCSHARES, INC and SUBSIDIARIESCondensed Consolidated Financial Information (unaudited)(in thousands) Yield Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months EndedAnalysis June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 Tax Tax Tax Tax Tax Avg Equivalent Yield Avg Equivalent Yield Avg Equivalent Yield Avg Equivalent Yield Avg Equivalent Yield / / / / / Balance interest Rate Balance interest Rate Balance interest Rate Balance interest Rate Balance interest Rate Taxable $ 605,626 $ 3,439 2.27% $ 560,613 $ 3,944 2.81% $ 556,004 $ 4,108 2.96% $ 494,184 $ 3,926 3.18% $ 497,988 $ 4,227 3.40%securitiesTax-exempt 300,922 2,340 3.11% 224,212 1,821 3.25% 188,709 1,593 3.38% 127,750 1,108 3.47% 124,367 1,058 3.40%securitiesTotal investmentsecurities 906,548 5,779 2.55% 784,825 5,765 2.94% 744,713 5,701 3.06% 621,934 5,034 3.24% 622,355 5,285 3.40%

in other banks 321,559 19 0.02% 129,978 289 0.89% 80,612 37 0.18% 71,165 7 0.04% 89,936 90 0.40%

Loans 3,156,524 40,593 5.14% 2,602,340 36,005 5.53% 2,512,524 35,109 5.59% 2,343,392 32,480 5.54% 2,337,583 32,464 5.56%

Total Interestearning assets 4,384,631 46,391 4.23% 3,517,143 42,059 4.78% 3,337,849 40,847 4.90% 3,036,491 37,521 4.94% 3,049,874 37,839 4.96%

Other assets 528,989 473,350 429,738 402,711 410,520

$ $ $ $ $Total assets 4,913,620 3,990,493 3,767,587 3,439,202 3,460,394

Interest-bearingliabilities: $ $ 5,219 0.56% $ $ 5,413 0.71% $ $ 5,016 0.89% $ $ 5,061 0.95% $ $ 5,323 0.95%Deposits 3,746,535 3,042,529 2,263,299 2,140,419 2,231,462

Borrowed Funds 116,270 224 0.77% 145,267 917 2.53% 174,475 771 1.77% 95,241 451 1.89% 37,760 288 3.05%

Subordinateddebentures 80,736 1,176 5.83% 80,697 1,203 5.96% 80,658 1,213 6.02% 80,619 1,270 6.30% 80,579 1,188 5.90%

Total interestbearing 3,943,541 6,619 0.67% 3,268,493 7,533 0.92% 2,518,432 7,000 1.11% 2,316,279 6,782 1.17% 2,349,801 6,799 1.16%liabilitiesOther liabilities 362,952 174,691 731,085 652,899 655,628

Shareholders' 607,127 547,309 518,070 470,024 454,965equityTotal liabilitiesandshareholders' $ $ $ $ $equity 4,913,620 3,990,493 3,767,587 3,439,202 3,460,394

Net interestincome (FTE)* $ 39,772 3.56% $ 34,526 3.86% $ 33,847 3.78% $ 30,739 3.77% $ 31,040 3.81%

Net interest margin (FTE)* 3.63% 3.93% 4.06% 4.05% 4.07%

Core net interestmargin* 3.42% 3.65% 3.80% 3.86% 3.84%

*See reconciliation for Non-GAAP financial measures

FIRST BANCSHARES, INC and SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (unaudited)

(in thousands except per share data)

Three Months Ended

June Mar 31, Dec Sept June 30, 2020 31, 30, 30,Per Common Share Data 2020 2019 2019 2019

Book value per common share $ $ 29.49 $ $ $ 29.34 28.91 27.92 27.22

Effect of intangible assets per share 8.94 9.97 10.04 8.53 8.50

Tangible book value per common share $ $ 19.52 $ $ $ 20.40 18.87 19.39 18.72



Diluted earnings per share $ 0.79 $ 0.44 $ 0.64 $ 0.71 $ 0.69

Effect of acquisition charges 0.11 0.04 0.14 0.04 0.01

Tax on acquisition charges (0.03) (0.01) (0.03) (0.01) -

Effect of bargain purchase gain and gain on (0.36) - - - -sale of land

Tax on gain on sale of land 0.01 - - - -

Effect of Treasury awards - - (0.04) - -

Tax on Treasury awards - - 0.01 - -

Diluted earnings per share, operating $ 0.52 $ 0.47 $ 0.72 $ 0.74 $ 0.70





Year to Date 2020 2019

Diluted earnings per share $ 1.25 $ 1.19

Effect of acquisition charges 0.15 0.19

Tax on acquisition charges (0.03) (0.04)

Effect of bargain purchase gain and gain on (0.38) - sale of land

Tax on gain on sale of land .01 -

Effect of Treasury awards - (0.01)

Tax on Treasury awards - -

Diluted earnings per share, operating $ 1.00 $ 1.33





Year to Date 2020 2019

Net income available to common shareholders $ $ 25,254 19,618

Acquisition charges 3,035 3,270

Tax on acquisition charges (683) (735)

Bargain purchase gain and gain on sale of (7,643) - land

Tax on gain on sale of land 157 -

Treasury awards - (233)

Tax on Treasury awards - 59

Net earnings available to common $ $ shareholders, operating 20,120 21,979

Three Months Ended

Average Balance Sheet June 30, Mar 31, Dec 31, Sept 30, June 30,Data 2020 2020 2019 2019 2019

Total average assets A $4,913,620 $3,990,493 $3,767,587 $3,439,202 $3,460,394

Total average earning 4,384,631 $3,517,143 $3,337,849 $3,036,492 $3,049,874assets B

'

Common Equity C $ 607,127 $ 547,309 $ 518,070 $ 470,024 $ 454,965

Less intangible assets 183,161 188,420 171,328 145,405 146,662

Tangible common equity D $ 423,966 $ 358,889 $ 346,742 $ 324,619 $ 308,303



Three Months Ended

Net Interest Income June 30, Mar 31, Dec 31, Sept 30, June 30,Fully Tax Equivalent 2020 2020 2019 2019 2019

Net interest income E $ 39,180 $ 34,065 $ 33,444 $ 30,459 $ 30,772

Tax-exempt investment (1,748) (1,360) (1,190) (828) (790)income

Taxable investment 2,340 1,821 1,593 1,108 1,058income

Net Interest Income $ 39,772 $ 34,526 $ 33,847 $ 30,739 $ 31,040Fully Tax Equivalent F



Annualized Net EInterest Margin / 3.57% 3.87% 4.01% 4.01% 4.04% B

Annualized Net FInterest Margin, Fully / 3.63% 3.93% 4.06% 4.05% 4.07%Tax Equivalent B



Three Months Ended

Core Net Interest June 30, Mar 31, Dec 31, Sept 30, June 30,Margin 2020 2020 2019 2019 2019

Net interest income $ 39,772 $ 34,526 $ 33,847 $ 30,739 $ 31,040(FTE)

Less purchase 2,157 2,336 2,026 1,296 1,607accounting adjustments

Net interest income,net of purchase G $ 37,615 $ 32,190 $ 31,821 $ 29,443 $ 29,433accounting adj



Total average earning $4,384,631 $3,517,143 $3,337,849 $3,036,492 $3,049,874assets

Add average balance ofloan valuation 10,651 12,237 12,252 13,679 15.265discount

Avg earning assets,excluding loan H $4,395,282 $3,529,380 $3,350,101 $3,050,171 $3,065,139valuation discount



Core net interest Gmargin / 3.42% 3.65% 3.80% 3.86% 3.84% H



Three Months Ended

Efficiency Ratio June 30, Mar 31, Dec 31, Sept 30, June 30, 2020 2020 2019 2019 2019

Operating Expense

Total non-interest $ 28,070 $ 23,439 $ 24,960 $ 20,825 $ 20,891expense

Pre-tax non-operating (2,295) (740) (2,300) (705) (91)expenses

Adjusted Operating $ 25,775 $ 22,699 $ 22,660 $ 20,120 $ 20,800Expense I



Operating Revenue

Net interest income, $ 39,772 $ 34,526 $ 33,847 $ 30,739 $ 31,040FTE

Total non-interest 15,680 6,474 7,574 7,103 6,716income

Pre-tax non-operating (7,643) - (714) - -items

Adjusted Operating $ 47,809 $ 41,000 $ 40,707 $ 37,842 $ 37,756Revenue J



Efficiency Ratio, Ioperating / 53.91% 55.36% 55.67% 53.17% 55.09% J

Three Months Ended

June Mar Dec Sept JuneReturn Ratios 30, 31, 31, 30, 30, 2020 2020 2019 2019 2019

Net income available to common $ $ $ $ $shareholders K 16,943 8,311 11,855 12,272 11,983

Acquisition charges 2,295 740 2,300 705 91

Tax on acquisition charges (518) (164) (461) (152) (23)

Bargain purchase gain and gain on sale of (7,643) - - - -land

Tax on gain on sale of land 157 - - - -

Treasury awards - - (714) - -

Tax on Treasury awards - - 181 - -

Net earnings available to common $ $ $ $ $shareholders, operating L 11,234 8,887 13,161 12,825 12,051



Pre-Tax Pre-Provision Operating Earnings

Earnings before income taxes $ $ $ $ $ L 19,184 9,998 15,208 15,763 15,806

Acquisition charges 2,295 740 2,300 705 91

Provision for loan losses 7,606 7,102 850 974 791

Treasury Awards and Gains (7,643) - (714) - -

Pre-Tax, Pre-Provision Operating Earnings $ $ $ $ $ M 21,442 17,840 17,644 17,442 16,688





Annualized return on avg assets K/ 1.38% 0.83% 1.26% 1.43% 1.39% A

Annualized return on avg assets, oper L/ 0.91% 0.89% 1.40% 1.49% 1.39% A

Annualized pre-tax, pre-provision, oper M/ 1.75% 1.79% 1.87% 2.03% 1.93% A

Annualized return on avg common equity, L/ 7.40% 6.50% 10.16% 10.91% 10.60%oper C

Annualized return on avg tangible common L/ 10.60% 9.91% 15.18% 15.80% 15.63%equity, operating D



Mortgage Department

Net Interest Income after provision for $ 127 $ 119 $ 59 $ 200 $ 194loan losses

Loan fee income 2,646 1,567 1,720 1,800 1,559

Salaries and employee benefits 1,246 1,077 975 986 941

Other non-interest expense 99 152 164 134 140

Earnings before income taxes $ 1,428 $ 457 $ 640 $ 880 $ 672

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CONTACT: M. Ray "Hoppy" Cole Chief Executive Officer Dee Dee Lowery Chief Financial Officer (601) 268-8998