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The First Bancshares, Inc. Reports a 9.5% Increase in Net Income Available to Common Shareholders and a 72.8% Increase in Operating Net Earnings for the Third Quarter Ended September 30, 2018; Declares Quarterly Dividend of $0.05

The First Bancshares, Inc. (NASDAQ: FBMS), holding company for The First, A National Banking Association, (www.thefirstbank.com) reported today net income available to common shareholders of $5.2 million for the third quarter of 2018, an increase of $0.4 million or 9.5%, compared to $4.7 million for the third quarter of 2017. Operating net earnings increased 72.8% ($3.5 million) for the third quarter comparison, totaling $8.2 million for the third quarter of 2018 as compared to $4.7 million for the third quarter of 2017. Operating net earnings excludes merger-related costs of $3.0 million for the third quarter of 2018, net of tax.

For the third quarter of 2018, fully diluted earnings per share were $0.39, compared to $0.51 for the third quarter of 2017. Excluding the impact of the merger-related costs described above, fully diluted operating earnings per share for the third quarter of 2018 were $0.62 as compared to $0.51 for the third quarter of 2017. Fully diluted earnings per share for 2018 include the issuance of 2,012,500 shares of our common stock during the fourth quarter of 2017, 1,134,010 shares issued in connection with the acquisition of Southwest during the first quarter of 2018 and 726,461 shares issued in connection with the acquisition of Sunshine during the second quarter of 2018.

Highlights for the Quarter:

  • On July 23, 2018, the Company announced the signing of an Agreement and Plan of Merger with FMB Banking Corporation (“FMB”), parent company of Farmers & Merchants Bank, headquartered in Monticello, FL. Upon completion, the acquisition will add 6 locations servicing Jefferson and Leon counties in Florida and Thomas County, Georgia and is expected to close during the fourth quarter of 2018 subject to FMB shareholder approval and customary closing conditions.
  • During the quarter, systems integration was completed for Sunshine Community Bank, which closed on April 1, 2018.
  • Loans increased $38.2 million or 2.2% during the third quarter of 2018.
  • During the quarter, the Company received a $0.2 million Bank Enterprise Award from the Community Development Financial Institutions Fund of the U. S. Department of the Treasury as a result of our designation as a Community Development Financial Institution.

M. Ray “Hoppy” Cole, President & Chief Executive Officer, commented, “We are pleased with our strong performance during the third quarter characterized by continued increases in operating net earnings, on an annual and linked quarter basis. Our improvement in operating net earnings is being driven by our recent acquisitions as well as solid organic growth. During the quarter, we were excited to announce the pending merger with FMB Banking Corporation headquartered in Monticello, FL. FMB is a well-run community bank and we believe our partnership will enhance the financial position of the overall company as well as provide additional management resources to increase our presence throughout Florida and Georgia.”

Balance Sheet

Consolidated assets increased $30.1 million to $2.512 billion at September 30, 2018 from $2.482 billion at June 30, 2018.

Total loans were $1.748 billion at September 30, 2018, as compared to $1.710 billion at June 30, 2018, and $1.198 billion at September 30, 2017, representing increases of $38.2 million or 2.2%, and $550.3 million or 45.9%, respectively. The acquisitions of First Community Bank and Sunshine Community Bank accounted for $437.1 million, net of fair value marks, of the total increase in loans as compared to the third quarter of 2017.

Total deposits were $2.046 billion at September 30, 2018, as compared to $2.097 billion at June 30, 2018, and $1.508 billion at September 30, 2017, representing a decrease of $50.8 million or 2.4%, and representing an increase of $538.5 million or 35.7%, respectively. The acquisitions of First Community Bank and Sunshine Community Bank accounted for $463.9 million of the total increase in deposits as compared to the third quarter of 2017. The decrease in deposits during the sequential quarter was largely due to a decrease in NOW accounts of $25.8 million, which is attributable to the seasonality of the public fund deposits.

Asset Quality

Nonperforming assets totaled $23.4 million at September 30, 2018, an increase of $5.6 million compared to $17.9 million at June 30, 2018 and an increase of $8.9 million compared to September 30, 2017. The majority of the increase in both quarterly comparisons was related to acquired loans. The ratio of the allowance for loan and leases losses (ALLL) to total loans was 0.56% at September 30, 2018 and June 30, 2018. The ratio of annualized net charge-offs (recoveries) to total loans was 0.03% for the quarter ended September 30, 2018 compared to 0.003% for the quarter ended June 30, 2018.

Third Quarter 2018 vs. Third Quarter 2017 Earnings Comparison

Net income available to common shareholders for the third quarter of 2018 totaled $5.2 million compared to $4.7 million for the third quarter of 2017, an increase of $0.4 million or 9.5%.

Operating net earnings for the third quarter of 2018 totaled $8.2 million compared to $4.7 million for the third quarter of 2017, an increase of $3.5 million or 72.8%. The calculation of operating net earnings excludes the merger-related costs discussed above.

Net interest income for the third quarter of 2018 was $21.7 million, an increase of $6.7 million when compared to the third quarter of 2017. The increase was due to interest income earned on a higher volume of loans as well as increased interest rates.

Non-interest income increased $1.4 million for the third quarter of 2018 as compared to the third quarter of 2017 due to increased service charges and interchange fee income of $0.9 million on an increased deposit base due to the acquisitions. The Company also received a Bank Enterprise Award of $0.2 million from the U.S. Department of the Treasury during the third quarter of 2018 as a result of our designation as a Community Development Financial Institution.

Third quarter 2018 non-interest expense was $19.8 million, an increase of $7.9 million, or 66.4% as compared to the third quarter of 2017. Excluding acquisition charges of $4.1 million for third quarter of 2018, non-interest expense increased $3.8 million in the third quarter of 2018 as compared to third quarter of 2017, of which $2.7 million is attributable to First Community Bank and Sunshine Community Bank.

Net interest income was $21.7 million for the third quarter of 2018 as compared to $14.9 million for the third quarter of 2017. Fully tax equivalent (“FTE”) net interest income totaled $21.9 million and $15.2 million for the third quarter of 2018 and 2017, respectively. FTE net interest income increased $6.7 million in the prior year quarterly comparison due to increased loan volume as well as increased interest rates. Purchase accounting adjustments accounted for $0.4 million of the difference in net interest income for the third quarter comparisons. Third quarter 2018 FTE net interest margin of 3.97% includes 11 basis points related to purchase accounting adjustments compared to 3.81% for the same quarter in 2017, which included 3 basis points related to purchase accounting adjustments.

Investment securities totaled $444.0 million, or 17.7% of total assets at September 30, 2018, versus $368.6 million, or 20.6% of total assets at September 30, 2017. The average balance of investment securities increased $73.7 million in prior year quarterly comparison, primarily as a result of the acquisitions. The average tax equivalent yield on investment securities increased 37 basis points to 3.02% from 2.65% in prior year quarterly comparison. The investment portfolio had a net unrealized loss of $8.4 million at September 30, 2018 as compared to a net unrealized gain of $2.7 million at September 30, 2017.

The FTE average yield on all earning assets increased 43 basis points in prior year quarterly comparison, from 4.25% for the third quarter of 2017 to 4.68% for the third quarter of 2018. Average interest expense increased 37 basis points from 0.55% for the third quarter of 2017 to 0.92% for the third quarter of 2018 due primarily to increased deposit accounts as well as the issuance of subordinated debt in the second quarter of 2018 and rising interest rates. Cost of all deposits averaged 53 basis points for the third quarter of 2018 compared to 36 basis points for the third quarter of 2017. Public funds increased $95.7 million when comparing September 30, 2018 to September 30, 2017.

Third Quarter 2018 vs Second Quarter 2018 Earnings Comparison

Net income available to common shareholders for the third quarter of 2018 remained consistent at $5.2 million compared to the second quarter of 2018.

Operating net earnings for the third quarter of 2018 compared to the second quarter of 2018 increased $0.1 million or 0.7% from $8.1 million for the second quarter of 2018 to $8.2 million for the third quarter of 2018. Operating net earnings exclude the merger-related costs discussed above.

Net interest income for the third quarter of 2018 was $21.7 million as compared to $21.6 million for the second quarter of 2018, an increase of $0.1 million. FTE net interest income increased $0.1 million to $21.9 million from $21.8 million in sequential-quarter comparison. The increase was due to increased loan volume as well as increased interest rates on both sides of the balance sheet. Interest income from purchase accounting adjustments were stable in sequential quarter comparison. Third quarter 2018 FTE net interest margin of 3.97% includes 11 basis points related to purchase accounting adjustments compared to 3.92% for the second quarter in 2018, which included 10 basis points related to purchase accounting adjustments.

Investment securities totaled $444.0 million, or 17.7% of total assets at September 30, 2018, versus $453.3 million, or 18.3% of total assets at June 30, 2018. The average balance of investment securities increased $1.1 million in sequential-quarter comparison. The average tax equivalent yield on investment securities decreased six basis points to 3.02% from 3.08% in sequential-quarter comparison. The investment portfolio had a net unrealized loss of $8.4 million at September 30, 2018 as compared to a net unrealized loss of $6.0 million at June 30, 2018.

The FTE average yield on all earning assets increased in sequential-quarter comparison from 4.54% to 4.68%. Average interest expense increased 13 basis points from 0.79% for the second quarter of 2018 to 0.92% for the third quarter of 2018 due primarily to increased deposit rates as well as the issuance of subordinated debt during the second quarter. Cost of all deposits averaged 53 basis points for the third quarter of 2018 compared to 49 basis points for the second quarter of 2018. Public funds decreased $30.0 million when comparing September 30, 2018 to June 30, 2018.

Non-interest income decreased $0.6 million in sequential-quarter comparison resulting from decreased interchange fee income of $0.3 million. Non-interest income for the second quarter of 2018 included the Financial Assistance Award received from the U. S. Department of the Treasury for $0.9 million, and for the third quarter included the Bank Enterprise Award received from the U. S. Department of the Treasury for $0.2 million, which resulted in a net decrease in non-interest income of $0.7 million for the quarterly comparison.

Non-interest expense for the third quarter of 2018 was $19.8 million compared to $19.7 million for the second quarter of 2018. Excluding acquisition charges, non-interest expense decreased $0.1 million in sequential-quarter comparison, which reflects increases and decreases spread throughout all categories.

Year to Date Earnings Comparison

In year-over-year comparison, net income available to common shareholders increased $6.2 million, or 75.1%, from $8.2 million at September 30, 2017 to $14.4 million at September 30, 2018. Operating net earnings increased $9.6 million or 78.7% from $12.1 million at September 30, 2017 to $21.7 million at September 30, 2018. Operating net earnings excludes merger-related costs of $7.3 million, net of tax, for the year to date period ending September 30, 2018 and $3.9 million, net of tax, for the year to date period ending September 30, 2017.

Net interest income increased $15.7 million, or 35.7% in year-over-year comparison, primarily due to interest income earned on a higher volume of loans as well as increased rates.

Non-interest income was $14.2 million at September 30, 2018, an increase of $3.4 million, or 31.1% in year-over-year comparison consisting of increases in service charges on deposit accounts, interchange fee income, other charges and fees as well as the receipt of the Financial Assistance Award received and the Bank Enterprise Award discussed above.

Non-interest expense was $54.1 million at September 30, 2018, an increase of $11.0 million, or 25.6% in year-over-year comparison primarily resulting from increases in salaries and benefits of $4.0 million related to the acquisitions of First Community Bank and Sunshine Bank and increased acquisition charges of $3.3 million. Increases in occupancy, FDIC premiums, amortization of core deposit intangibles and other non-interest expense for the year-to-date period of 2018 were also attributable to the acquisitions.

Declaration of Cash Dividend

The Company announced that its Board of Directors declared a cash dividend in the amount of $0.05 per share, to be paid on its common stock on November 23, 2018 to shareholders of record as of the close of business on November 7, 2018.

About The First Bancshares, Inc.

The First Bancshares, Inc., headquartered in Hattiesburg, Mississippi, is the parent company of The First, A National Banking Association. Founded in 1996, The First has operations in Mississippi, Louisiana, Alabama and Florida. 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 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 contains statements regarding the projected performance of The First Bancshares, Inc. and its subsidiary. These statements constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act. Actual results may differ materially from the projections provided in this release since such projections involve significant known and unknown risks and uncertainties. Factors that might cause such differences include, but are not limited to: competitive pressures among financial institutions increasing significantly; economic conditions, either nationally or locally, in areas in which the Company conducts operations being less favorable than expected; interest rate risk; legislation or regulatory changes which adversely affect the ability of the consolidated Company to conduct business combinations or new operations; and risks related to the proposed acquisition of FMB and the acquisitions of Southwest Banc Shares, Inc. (“Southwest”) and Sunshine Financial, Inc., (“Sunshine”), including the risk that the proposed acquisition of FMB does not close when expected or at all because of required shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, the terms of the proposed transactions with FMB may need to be modified to satisfy such approvals or conditions, and that anticipated benefits from the transactions with FMB, Sunshine and Southwest 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. 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. 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.

FIRST BANCSHARES, INC and SUBSIDIARIES
Condensed Consolidated Financial Information (unaudited)
(in thousands except per share data)
QuarterQuarterQuarterQuarterQuarter
EARNINGS DATAEndedEndedEndedEndedEnded
9/30/186/30/183/31/1812/31/179/30/17
Total Interest Income $ 25,628 $ 25,037 $ 18,758 $ 17,143 $ 16,708
Total Interest Expense

3,959

3,468

2,378

1,922

1,773

Net Interest Income

21,669

21,569

16,380

15,221

14,935

FTE net interest income*

21,925

21,826

16,609

15,523

15,232

Provision for loan losses 412 857 277 122 90
Non-interest income 5,074 5,632 3,459 3,556 3,658
Non-interest expense

19,786

19,680

14,597

12,390

11,888

Earnings before income taxes 6,545 6,664 4,965 6,265 6,615
Income tax expense

1,383

1,419

1,008

3,851

1,901

Net income available to common shareholders $

5,162

$

5,245

$

3,957

$

2,414

$

4,714

PER COMMON SHARE DATA
Basic earnings per share $ 0.39 $ 0.40 $ 0.34 $ 0.23 $ 0.52
Diluted earnings per share 0.39 0.40 0.34 0.23 0.51
Diluted earnings per share, operating* 0.62 0.62 0.46 0.45 0.51
Quarterly dividends per share .05 .05 .05 .0375 .0375
Book value per common share at end of period 22.09 21.88 20.95 19.92 18.24
Tangible common book value at period end* 17.10 16.82 16.39 17.71 15.48
Market price at end of period 39.05 36.80 32.25 34.20 30.15
Shares outstanding at period end 13,074,516 13,065,953 12,339,492 11,165,907 9,153,407
Weighted average shares outstanding:
Basic 13,072,455 13,065,953 11,556,968 10,521,236 9,152,674
Diluted 13,192,207 13,167,969 11,652,959 10,598,036 9,224,481
AVERAGE BALANCE SHEET DATA
Total assets $ 2,470,607 $ 2,443,176 $ 1,986,150 $ 1,810,252 $ 1,772,402
Loans and leases 1,720,884 1,696,737 1,325,272 1,215,962 1,185,493
Total deposits 2,069,910 2,115,661 1,683,999 1,475,628 1,512,616
Total common equity 284,839 274,535 230,255 205,580 164,455
Total tangible common equity* 219,077 217,092 196,326 180,322 139,013
SELECTED RATIOS
Annualized return on avg assets 0.84 % 0.86 % 0.80 % 0.53 % 1.06 %
Annualized return on avg assets, operating* 1.33 % 1.33 % 1.08 % 1.05 % 1.07 %
Annualized return on avg common equity, operating* 11.51 % 11.85 % 9.31 % 9.21 % 11.54 %
Annualized return on avg tangible common equity, oper* 14.96 % 14.99 % 10.92 % 10.49 % 13.65 %
Average loans to average deposits 83.14 % 80.20 % 78.70 % 82.40 % 78.37 %
FTE Net Interest Margin* 3.97 % 3.92 % 3.67 % 3.79 % 3.81 %
Efficiency Ratio 73.28 % 71.67 % 72.74 % 64.94 % 62.93 %
Efficiency Ratio, operating* 58.25 % 57.70 % 63.98 % 62.93 % 62.68 %
CREDIT QUALITY
Allowance for loan losses (ALLL) as a % of total loans 0.56 % 0.56 % 0.57 % 0.68 % 0.68 %
Nonperforming assets to tangible equity + ALLL 10.05 % 7.88 % 6.99 % 6.56 % 9.71 %
Nonperforming assets to total loans + ORE 1.33 % 1.04 % 0.97 % 1.10 % 1.21 %
Annualized QTD net charge-offs (recoveries) to total loans 0.03 % 0.003 % (0.02 %) 0.003 % (0.005 %)

*See reconciliation of Non-GAAP financial measures

FIRST BANCSHARES, INC and SUBSIDIARIES
Condensed Consolidated Financial Information (unaudited)
(in thousands)
Sept 30,June 30,Mar 31,Dec 31,Sept 30,
BALANCE SHEET20182018201820172017
Assets
Cash and cash equivalents $ 122,371 $ 120,425 $ 162,521 $ 91,922 $ 93,317
Securities available-for-sale 424,940 437,011 425,529 356,893 353,035
Securities held-to-maturity 6,000 6,000 6,000 6,000 6,000
Other investments

13,104

10,320

10,399

9,969

9,556

Total investment securities 444,044 453,331 441,928 372,862 368,591
Loans held for sale 4,269 5,914 2,538 4,790 4,588
Total loans 1,748,483 1,710,271 1,516,579 1,225,306 1,198,193
Allowance for loan losses

(9,765

)

(9,512

)

(8,659

)

(8,288

)

(8,175

)

Loans, net 1,738,718 1,700,759 1,507,920 1,217,018 1,190,018
Premises and equipment 62,342 62,289 57,430 46,426 46,203
Other Real Estate 8,453 7,890 7,357 7,158 7,855
Goodwill and other intangibles 65,238 66,105 56,343 24,670 25,325
Other assets

66,355

64,976

63,376

48,392

52,079

Total assets

$

2,511,790

$

2,481,689

$

2,299,413

$

1,813,238

$

1,787,976

Liabilities and Shareholders’ Equity
Non-interest bearing deposits $ 430,430 $ 459,402 $ 414,142 $ 301,989 $ 308,050
Interest-bearing deposits

1,616,016

1,637,833

1,577,502

1,168,576

1,199,941

Total deposits 2,046,446 2,097,235 1,991,644 1,470,565 1,507,991
Borrowings 85,508 10,516 29,034 104,072 94,321
Subordinated debentures 75,117 75,192 10,310 10,310 10,310
Other liabilities

15,921

12,920

9,886

5,823

8,374

Total liabilities 2,222,992 2,195,863 2,040,874 1,590,770 1,620,996
Total shareholders’ equity

288,798

285,826

258,539

222,468

166,980

Total liabilities and shareholders’ equity

$

2,511,790

$

2,481,689

$

2,299,413

$

1,813,238

$

1,787,976

FIRST BANCSHARES, INC and SUBSIDIARIES
Condensed Consolidated Financial Information (unaudited)
(in thousands except per share data)
EARNINGS STATEMENTThree Months Ended
9/30/186/30/183/31/1812/31/179/30/17
Interest Income:
Loans, including fees $ 21,824 $ 21,155 $ 15,926 $ 14,687 $ 14,357
Investment securities 3,126 3,181 2,661 2,346 2,180
Accretion of purchase accounting adjustments 583 559 59 57 55
Other interest income

95

142

112

53

116

Total interest income 25,628 25,037 18,758 17,143 16,708
Interest Expense:
Deposits 2,740 2,498 1,840 1,455 1,436
Borrowings 52 147 460 392 357
Subordinated debentures 1,125 774 78 105 41
Accretion of purchase accounting adjustments

42

49

-

(30

)

(61

)

Total interest expense

3,959

3,468

2,378

1,922

1,773

Net interest income 21,669 21,569 16,380 15,221 14,935
Provision for loan losses

412

857

277

122

90

Net interest income after provision for loan losses 21,257 20,712 16,103 15,099 14,845
Non-interest Income:
Service charges on deposit accounts 1,538 1,341 1,027 908 902
Mortgage Income 1,066 1,213 800 1,102 1,276
Interchange Fee Income 1,180 1,500 1,040 961 935
Gain (loss) on securities, net - (5 ) - 3 (10 )
Gain on sale of premises and equipment - - - - -
Financial Assistance Award/Bank Enterprise Award 233 917 - - -
Other charges and fees

1,057

666

592

582

555

Total non-interest income 5,074 5,632 3,459 3,556 3,658
Non-interest expense:
Salaries and employee benefits 9,266 9,502 7,789 7,478 7,327
Occupancy expense 2,163 2,034 1,647 1,427 1,390
FDIC premiums 278 368 367 365 355
Marketing 60 70 80 118 50
Amortization of core deposit intangibles 349 356 201 173 160
Other professional services 847 438 189 194 367
Acquisition charges 4,059 3,838 1,758 384 -
Other non-interest expense

2,764

3,074

2,566

2,251

2,239

Total Non-interest expense

19,786

19,680

14,597

12,390

11,888

Earnings before income taxes 6,545 6,664 4,965 6,265 6,615
Income tax expense

1,383

1,419

1,008

3,851

1,901

Net income available to common shareholders

$

5,162

$

5,245

$

3,957

$

2,414

$

4,714

Diluted earnings per common share

$

0.39

$

0.40

$

0.34

$

0.23

$

0.51

Diluted earnings per common share, operating*

$

0.62

$

0.62

$

0.46

$

0.45

$

0.51

*See reconciliation of Non-GAAP financial measures

FIRST BANCSHARES, INC and SUBSIDIARIES
Condensed Consolidated Financial Information (unaudited)
(in thousands except per share data)
EARNINGS STATEMENT

Year to Date

20182017
Interest Income:
Loans, including fees $

58,905

$ 41,915
Investment securities 8,968 6,506
Accretion of purchase accounting adjustments 1,201 167
Other interest income

348

337

Total interest income 69,422 48,926
Interest Expense:
Deposits 7,076 3,998
Borrowings 659 980
Subordinated debentures 1,977 171
Amortization (Accretion) of purchase accounting adjustments

91

(162

)

Total interest expense

9,803

4,987

Net interest income 59,619 43,939
Provision for loan losses

1,546

384

Net interest income after provision for loan losses 58,073 43,555
Non-interest Income:
Service charges on deposit accounts 3,906 2,692
Mortgage Income 3,079 3,400
Interchange Fee Income 3,720 2,797
Gain (loss) on securities, net (5 ) (19 )
Gain on sale of premises and equipment - -
Financial Assistance Award/Bank Enterprise Award 1,150 -
Other charges and fees

2,314

1,937

Total non-interest income 14,164 10,807
Non-interest expense:
Salaries and employee benefits 26,557 22,574
Occupancy expense 5,844 4,108
FDIC premiums 1,013 887
Marketing 210 218
Amortization of core deposit intangibles 906 491
Other professional services 1,474 1,201
Acquisition charges 9,655 6,327
Other non-interest expense

8,405

7,250

Total Non-interest expense 54,064 43,056
Earnings before income taxes 18,173 11,306
Income tax expense

3,809

3,104

Net income available to common shareholders

$

14,364

$

8,202

Diluted earnings per common share

$

1.13

$

0.89

Diluted earnings per common share, operating*

$

1.71

$

1.32

*See reconciliation of Non-GAAP financial measures

FIRST BANCSHARES, INC and SUBSIDIARIES
Condensed Consolidated Financial Information (unaudited)
(in thousands)
Sept 30,PercentJune 30,Mar 31,Dec 31,Sept 30,Percent
COMPOSITION OF LOANS2018of Total2018201820172017of Total
Commercial, financial and agricultural $ 246,401 14.1 % $ 228,643 $ 213,118 $ 165,780 $ 164,577 13.7 %
Real estate – construction 251,240 14.3 % 229,164 213,712 183,328 171,609 14.3 %
Real estate – commercial 654,040 37.3 % 658,096 561,153 467,484 456,110 37.9 %
Real estate – residential 529,515 30.2 % 546,120 475,868 385,099 377,308 31.4 %
Lease Financing Receivable 2,659 0.2 % 2,476 2,433 2,450 2,008 0.2 %
Obligations of States & subdivisions 16,374 0.9 % 10,627 15,861 3,109 5,892 0.5 %
Consumer 48,254 2.8 % 35,145 34,434 18,056 20,689 1.7 %
Loans held for sale

4,269

0.2

%

5,914

2,538

4,790

4,588

0.3

%

Total loans

$

1,752,752

100

%

$

1,716,185

$

1,519,117

$

1,230,096

$

1,202,781

100

%

Sept 30,PercentJune 30,Mar 31,Dec 31,Sept 30,Percent
COMPOSITION OF DEPOSITS2018of Total2018201820172017of Total
Noninterest bearing $ 430,430 21.0 % $ 459,402 $ 414,142 $ 301,989 $ 308,050 20.4 %
NOW and other 705,851 34.5 % 731,617 761,318 601,694 639,802 42.4 %
Money Market/Savings 503,772 24.6 % 519,516 434,569 283,579 292,592 19.4 %
Time Deposits of less than $250,000 321,619 15.7 % 308,086 295,317 220,951 209,714 13.9 %
Time Deposits of $250,000 or more

84,774

4.2

%

78,614

86,298

62,352

57,833

3.9

%

Total Deposits

$

2,046,446

100

%

$

2,097,235

$

1,991,644

$

1,470,565

$

1,507,991

100

%

Sept 30,June 30,Mar 31,Dec 31,Sept 30,
ASSET QUALITY DATA20182018201820172017
Nonaccrual loans $ 13,572 $ 8,440 $ 5,746 $ 5,674 $ 4,852
Loans past due 90 days and over

805

940

1,096

285

1,436

Total nonperforming loans 14,377 9,380 6,842 5,959 6,288
Other real estate 8,453 7,890 7,357 7,158 7,855
Nonaccrual securities

616

616

616

408

408

Total nonperforming assets

$

23,446

$

17,886

$

14,815

$

13,525

$

14,551

Nonperforming assets to total assets 0.93 % 0.72 % 0.64 % 0.75 % 0.81 %
Nonperforming assets to total loans + ORE 1.33 % 1.04 % 0.97 % 1.10 % 1.21 %
ALLL to nonperforming loans 67.92 % 101.41 % 128.13 % 139.08 % 130.01 %
ALLL to total loans 0.56 % 0.56 % 0.57 % 0.68 % 0.68 %
Quarter-to-date net charge-offs (recs) $ 151 $ 12 $ (94 ) $ 9 $ (15 )
Annualized QTD net chg/offs (recs) to loans 0.03 % 0.003 % (0.02 %) 0.003 % (0.005 %)

FIRST BANCSHARES, INC and SUBSIDIARIES
Condensed Consolidated Financial Information (unaudited)
(in thousands)
YieldThree Months EndedThree Months EndedThree Months EndedThree Months EndedThree Months Ended
AnalysisSeptember 30, 2018June 30, 2018March 31, 2018December 31, 2017September 30, 2017
TaxTaxTaxTaxTax
AvgEquivalentYield/AvgEquivalentYield/AvgEquivalentYield/AvgEquivalentYield/AvgEquivalentYield/
BalanceinterestRateBalanceinterestRateBalanceinterestRateBalanceinterestRateBalanceinterestRate
Taxable securities $ 331,601 $ 2,369 2.86 % $ 328,898 $ 2,423 2.95 % $ 274,595 $ 1,986 2.89 % $ 271,459 $ 1,760 2.59 % $ 280,441 $ 1,601 2.28 %

Tax-exempt securities

116,235 1,013 3.49 % 117,875 1,015 3.44 % 106,161 904 3.41 % 93,645 888 3.79 % 93,716 876 3.74 %

Total investment securities

447,836 3,382 3.02 % 446,773 3,438 3.08 % 380,756 2,890 3.04 % 365,104 2,648 2.90 % 374,157 2,477 2.65 %
Fed funds sold 355 5 5.63 % 17,242 61 1.42 % 11,368 35 1.23 % 54,640 46 0.34 % 36,591 113 1.24 %

Int bearing deposits in other banks

41,819 90 0.86 % 68,079 81 0.48 % 94,321 77 0.33 % 4,544 6 0.53 % 3,463 3 0.35 %
Loans 1,720,884 22,407 5.21 % 1,696,737 21,714 5.12 % 1,325,272 15,985 4.82 % 1,215,962 14,745 4.85 % 1,185,493 14,412 4.86 %

Total Interest earning assets

2,210,894 25,884 4.68 % 2,228,831 25,294 4.54 % 1,811,717 18,987 4.19 % 1,640,250 17,445 4.25 % 1,599,704 17,005 4.25 %
Other assets 259,713214,345174,433170,002172,698
Total assets $2,470,607$2,443,176$1,986,150$1,810,252$1,772,402

Interest-bearing liabilities:

Deposits $ 1,629,195 $ 2,782 0.68 % $ 1,676,110 $ 2,547 0.61 % $ 1,330,925 $ 1,840 0.55 % $ 1,173,386 $ 1,425 0.49 % $ 1,204,614 $ 1,375 0.46 %
Repo - - 0.00 % - - 0.00 % - - 0.00 % - - 0.00 % 4,891 38 3.11 %
Fed funds purchased 1,893 27 5.71 % 1,382 9 2.60 % 202 1 1.98 % 2,543 11 1.73 % 3,816 19 1.99 %
FHLB & FTN 22,469 25 0.45 % 22,959 138 2.40 % 71,944 459 2.55 % 103,421 381 1.47 % 68,041 300 1.76 %

Subordinated debentures

75,124 1,125 5.99 % 54,036 774 5.73 % 10,310 78 3.03 % 10,310 105 4.07 % 10,310 41 1.59 %

Total interest bearing liabilities

1,728,681 3,959 0.92 % 1,754,487 3,468 0.79 % 1,413,381 2,378 0.67 % 1,289,660 1,922 0.60 % 1,291,672 1,773 0.55 %
Other liabilities 457,087 414,154 342,514 315,012 316,275
Shareholders' equity 284,839 274,535 230,255 205,580 164,455

Total liabilities and shareholders' equity

$2,470,607$2,443,176$1,989,150$1,810,252$1,772,402

Net interest income (FTE)*

$21,925 3.77 % $21,826 3.75 % $16,609 3.52 % $15,523 3.66 % $15,232 3.70 %
Net interest margin (FTE)* 3.97 % 3.92 % 3.67 % 3.79 % 3.81 %

Core net interest margin*

3.86 % 3.82 % 3.65 % 3.76 % 3.78 %

FIRST BANCSHARES, INC and SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (unaudited)
(in thousands except per share data)

Three Months Ended

Sept 30,June 30,Mar 31,Dec 31,Sept 30,

Per Common Share Data

20182018201820172017
Book value per common share $ 22.09 $ 21.88 $ 20.95 $ 19.92 $ 18.24
Effect of intangible assets per share

4.99

5.06

4.56

2.21

2.76

Tangible book value per common share

$

17.10

$

16.82

$

16.39

$

17.71

$

15.48

Diluted earnings per share $ 0.39 $ 0.40 $ 0.34 $ 0.23 $ 0.51
Effect of acquisition charges 0.31 0.29 0.15 0.04 -
Taxes on acquisition charges (0.08 ) (0.07 ) (0.03 ) (0.01 ) -
Charge related to reduction in deferred tax asset ---0.19-
Diluted earnings per share, operating

$

0.62

$

0.62

$

0.46

$

0.45

$

0.51

Year to Date

20182017
Diluted earnings per share $ 1.13 $ 0.89
Effect of acquisition charges 0.76 0.68
Tax (0.18 ) (0.25 )
Diluted earnings per share, operating

$

1.71

$

1.32

Year to Date

20182017
Net income available to common shareholders $ 14,364 $ 8,202
Effect of acquisition charges 9,655 6,327
Tax (2,330 ) (2,390 )
Net earnings available to common shareholders, operating

$

21,689

$

12,139

Three Months Ended

Sept 30,June 30,Mar 31,Dec 31,Sept 30,
Average Balance Sheet Data20182018201820172017

Total average assets

A

$ 2,470,607 $ 2,443,176 $ 1,986,150 $ 1,810,252 $ 1,772,402

Total average earning assets

B

$ 2,210,894 $ 2,228,831 $ 1,811,717 $ 1,640,250 $ 1,599,704

Common Equity

C

$ 284,839 $ 274,535 $ 230,255 $ 205,580 $ 164,455
Less intangible assets

65,762

57,443

33,929

25,258

25,442

Tangible common equity

D

$

219,077

$

217,092

$

196,326

$

180,322

$

139,013

Three Months Ended
Sept 30,June 30,Mar 31,Dec 31,Sept 30,
Net Interest Income Fully Tax Equivalent20182018201820172017

Net interest income

E

$ 21,669 $ 21,569 $ 16,380 $ 15,221 $ 14,935
Tax-exempt investment income (757 ) (758 ) (675 ) (586 ) (579 )
Taxable investment income

1,013

1,015

904

888

876

Net Interest Income Fully Tax Equivalent

F

$

21,925

$

21,826

$

16,609

$

15,523

$

15,232

Annualized Net Interest Margin

E/B

3.92 % 3.87 % 3.62 % 3.71 % 3.73 %

Annualized Net Interest Margin, Fully Tax Equivalent

F/B

3.97 % 3.92 % 3.67 % 3.79 % 3.81 %
Three Months Ended
Sept 30,June 30,Mar 31,Dec 31,Sept 30,
Core Net Interest Margin20182018201820172017
Net interest income (FTE) $ 21,925 $ 21,826 $ 16,609 $ 15,523 $ 15,232
Less purchase accounting adjustments

541

510

59

87

116

Net interest income, net of purchase accounting adj

G

$

21,384

$

21,316

$

16,550

$

15,436

$

15,116

Total average earning assets $ 2,210,894 $ 2,228,831 $ 1,811,717 $ 1,640,250 $ 1,599,704
Add average balance of loan valuation discount

6,836

6,046

1,578

1,558

1,640

Avg earning assets, excluding loan valuation discount

H

$

2,217,730

$

2,234,877

$

1,813,295

$

1,641,808

$

1,601,344

Core net interest margin

G/H

3.86

%

3.82

%

3.65

%

3.76

%

3.78

%

Three Months Ended
Sept 30,June 30,Mar 31,Dec 31,Sept 30,
Efficiency Ratio20182018201820172017
Operating Expense
Total non-interest expense $ 19,786 $ 19,680 $ 14,598 $ 12,390 $ 11,888
Pre-tax non-operating expenses

(4,059

)

(3,838

)

(1,758

)

(384

)

(47

)

Adjusted Operating Expense

I

$

15,727

$

15,842

$

12,840

$

12,006

$

11,841

Operating Revenue
Net interest income, FTE $ 21,925 $ 21,826 $ 16,609 $ 15,523 $ 15,232
Total non-interest income 5,074 5,632 3,459 3,556 3,658
Pre-tax non-operating items -----

Adjusted Operating Revenue

J

$

26,999

$

27,458

$

20,068

$

19,079

$

18,890

Efficiency Ratio, operating

I/J

58.25 % 57.70 % 63.98 % 62.93 % 62.68 %
Three Months Ended
Sept 30,June 30,Mar 31,Dec 31,Sept 30,
Return Ratios20182018201820172017

Net income available to common shareholders

K

$ 5,162 $ 5,245 $ 3,957 $ 2,414 $ 4,714
Acquisition charges 4,059 3,838 1,758 384 47
Tax on acquisition charges (1,027 ) (948 ) (355 ) (148 ) (18 )
Charge related to reduction in deferred tax asset ---2,081-

Net earnings available to common shareholders, oper

L

$

8,194

$

8,135

$

5,360

$

4,731

$

4,743

Annualized return on avg assets

K/A

0.84 % 0.86 % 0.80 % 0.53 % 1.06 %

Annualized return on avg assets, oper

L/A

1.33 % 1.33 % 1.08 % 1.05 % 1.07 %

Annualized return on avg common equity, oper

L/C

11.51 % 11.85 % 9.31 % 9.21 % 11.54 %

Annualized return on avg tangible common equity, oper

L/D

14.96 % 14.99 % 10.92 % 10.49 % 13.65 %
Mortgage Department
Net Interest Income after provision for loan losses $ 154 $ 214 $ 189 $ 272 $ 249
Loan fee income 1,066 1,213 800 1,102 1,276
Salaries and employee benefits 855 903 849 806 882
Other non-interest expense

136

127

97

101

102

Earnings before income taxes

$

229

$

397

$

43

$

467

$

541

Contacts:

The First Bancshares, Inc.
M. Ray “Hoppy” Cole, 601-268-8998
Chief Executive Officer
or
Dee Dee Lowery, 601-268-8998
Chief Financial Officer

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