The First Bancshares, Inc. Reports a 45% Increase in Operating Net Earnings and Declares Quarterly Dividends

The First Bancshares, Inc. Reports a 45% Increase in Operating Net Earnings and Declares Quarterly Dividends

The First Bancshares, Inc. (NASDAQ: FBMS), holding company for The First, A National Banking Association, (www.thefirstbank.com) reported today a 45% increase ($1.1 million) in operating net earnings (net income available to common shareholders adjusted for merger related costs) for the first quarter of 2017 compared to the first quarter of 2016. Operating net earnings available to common shareholders totaled $3.4 million for first quarter 2017 as compared to $2.3 million for first quarter 2016. Operating net earnings available to common shareholders excludes tax effected merger related expenses of $2.3 million in the first quarter of 2017. A one-time gain of $0.2 million occurred in the first quarter of 2016.

Fully diluted earnings per share for the first quarter of 2017 were $0.12 as compared to $0.46 for the first quarter of 2016. Fully diluted earnings per share for the first quarter of 2017 includes one-time merger related costs of $0.25 and also includes the issuance of 3,563,380 in new common shares during the fourth quarter of 2016 related to the capital raise in October 2016.

Highlights for the Quarter:

• The acquisitions of Iberville Bank and Gulf Coast Community Bank closed as planned on January 1, 2017.
• Acquisitions added loans of $239.6 million and deposits of $355.7 million (loan and deposit figures are net of credit and rate marks).
• Excluding acquisitions, loans increased $33.3 million during the first quarter of 2017.
• Excluding acquisitions, deposits increased $173.6 million during the first quarter of 2017.
• Operating net earnings were $3.4 million for the first quarter of 2017 as compared to $2.4 million for the fourth quarter of 2016 and as compared to $2.3 million for the first quarter of 2016.

M. Ray “Hoppy” Cole, President & Chief Executive Officer, commented, “We are very pleased with first quarter results especially given the complexities of closing two mergers at once. We welcome our new clients and team members associated with Gulf Coast Community Bank and Iberville Bank. We are thrilled to have them on board.”

Balance Sheet

Total assets increased $505.8 million or 39.6% to $1,783.2 billion for the quarter ended March 31, 2017 of which approximately $390 million of asset growth was associated with the closing of the two acquisitions.

Total loans were $1,140.0 billion at March 31, 2017 as compared to $867.1 million at December 31, 2016 and as compared to $797.8 million at March 31, 2016 representing increases of $272.9 million, or 31.5% for the quarter ended March 31, 2017 and $342.2 million, or 42.9% as compared to first quarter 2016. The acquisitions accounted for $239.6 million of the total increase in loans during the quarter. Organic loan growth was $33.3 million or 3.8% for the quarter.

Total deposits increased $529.3 million or 50.9% for the quarter ended March 31, 2017, of which $355.7 million was a result of the acquisition. The balance of the increase was $173.6 million of which $151.2 million is due to season fluctuations in public deposit accounts.

Asset Quality

Nonperforming assets totaled $13.3 million at March 31, 2017, an increase of $3.4 million compared to $9.9 million at December 31, 2016 and an increase of $2.0 million compared to March 31, 2016. The majority of the increase is the result of acquired assets with associated fair value marks. The ALLL/total loans ratio was 0.69% at March 31, 2017 and 0.87% at December 31, 2016. Including valuation accounting adjustments on acquired loans, the total valuation plus ALLL was 1.24% of loans at March 31, 2017. The ratio of annualized net charge-offs (recoveries) to total loans was (0.10)% for the quarter ended March 31, 2017 compared to 0.03% for the quarter ended December 31, 2016. As noted in our first quarter 2015 10-Q, the Company had been notified that a recovery of $941,000 was more likely than not expected during 2015. We received the first installment during the second quarter of 2015 which totaled $481,000 and the second installment during the third quarter of 2015 which totaled $241,000. The remaining balance of $219,000 was received during the fourth quarter of 2016.

Energy Loans

At March 31, 2017 the company had direct energy related loans of $19.7 million, representing 1.7% of the total loan portfolio. A majority of the outstanding are secured by marine assets that operate in the Gulf of Mexico, which are under term contracts to major operators tied primarily to oil and gas production.

First Quarter 2017 vs. First Quarter 2016 Earnings Comparison

First quarter 2017 net earnings available to common shareholders (including merger related costs) totaled $1.1 million compared to $2.5 million for the first quarter of 2016.

Revenues from consolidated operations increased $6.1 million in quarterly comparison. Net interest income increased $4.5 million in quarterly comparison as interest income earned on a higher volume of loans attributed to this overall increase. Noninterest income increased $0.9 million in quarterly comparison for the first quarter of 2017 as compared to the first quarter of 2016 with increases spread over service charges, mortgage income and interchange fee income.

First quarter 2017 noninterest expense increased $7.7 million, or 91.7% as compared to first quarter 2016. The largest increases in noninterest expense were related to salaries and benefits of $2.8 million of which $2.2 million is associated with increased number of employees associated with the acquisitions and other professional services and other noninterest expenses included $3.6 million in before-tax merger costs.

Fully taxable-equivalent (“FTE”) net interest income totaled $14.5 million and $9.9 million for the first quarter of 2017 and 2016, respectively. The FTE net interest income increased $4.6 million in prior year quarterly comparison primarily due to an increase in interest earned on loans. Purchase accounting adjustments accounted for $74,000 of the difference in net interest income for the first quarter comparisons. First quarter 2017 net interest margin of 3.85% includes 3 bps related to purchase accounting adjustments.

Investment securities totaled $366.5 million, or 20.6% of total assets at March 31, 2017, versus $269.5 million, or 21.7% of total assets at March 31, 2016. The average volume of investment securities increased $65.9 million in prior year quarterly comparison primarily the result of the acquisitions. The average tax equivalent yield on investment securities increased 30 bps to 2.93%. The investment portfolio had a net unrealized gain of $0.6 million at March 31, 2017 as compared to a net unrealized gain of $3.7 million at March 31, 2016.

The average yield on all earnings assets increased 25 basis points in prior year quarterly comparison, from 4.02% for the first quarter of 2016 to 4.27% for the first quarter of 2017. This increase was offset partially by an increase in average interest expense of 10 basis points from 0.41% for the first quarter of 2016 to 0.51% for the first quarter of 2017.

First Quarter 2017 vs Fourth Quarter 2016 Earnings Comparison

In sequential-quarter comparison, net earnings available to common shareholders decreased $1.0 million to $1.1 million which included after-tax one-time acquisition charges of $2.3 million.

FTE net interest income increased $3.6 million to $14.5 million from $10.9 million in sequential-quarter comparison. The increase was due primarily to increased loan volume. Interest income from purchase accounting adjustments decreased $0.3 million in quarterly comparison.

The average yield on all earnings assets increased 10 basis points in sequential-quarter comparison, from 4.17% for the fourth quarter of 2016 to 4.27% for the first quarter of 2017.

Noninterest income increased $0.7 million in sequential-quarter comparison consisting of increases in service charges and interchange fee income and a decrease in mortgage income of $0.3 million.

Noninterest expense increased $5.9 million in sequential-quarter comparison which includes an increase in salaries and benefits of $2.1 million. The majority of this increase was associated with the acquisitions. Merger related costs were $3.6 million and included in other professional services and other noninterest expenses.

Other Events

The Company will make a presentation at the 21^st Annual Burkenroad Reports Investment Conference at The Sheraton New Orleans Hotel in New Orleans, Louisiana, Friday, April 28, 2017 at 9:30 a.m. central time. This will be an interactive session between management and those attending the conference. The presentation will be available at the company’s internet site (www.thefirstbank.com) under the Investor Relations tab.

Dividends

The Board of Directors of The First Bancshares, Inc. announced a cash dividend was declared in the amount of $0.0375 per share to be paid on its common stock on May 24, 2017 to shareholders of record as of the close of business on May 3, 2017.

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 NASDAQ Global Market under the symbol FBMS. Information is available on the Company’s website: www.thefirstbank.com.

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; and legislation or regulatory changes which adversely affect the ability of the combined Company to conduct business combinations or new operations. 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. Further information on The First Bancshares, Inc. is available in its filings with the Securities and Exchange Commission, available at the SEC’s website, http://www.sec.gov.