The First Bancshares, Inc. (“FBMS” or “the Company”) (NASDAQ: FBMS), holding company for The First Bank, (www.thefirstbank.com) reported today financial results for the quarter ended September 30, 2023.

Highlights for the Quarter:

• Net income available to common shareholders totaled $24.4 million for the quarter ended September 30, 2023, representing an increase of 2.4% when compared to $23.8 million for the quarter ended June 30, 2023. Several one-time items are detailed in the tables located in the appendix of this release.

• Excluding one-time items detailed in the tables located in the appendix of this release, net earnings available to common shareholders, operating (non-GAAP) decreased $2.8 million, or 10.4% to $24.0 million for the quarter ended September 30, 2023 as compared to $26.8 million for the quarter ended June 30, 2023.

• Total loans increased $78.9 million for the quarter ended September 30, 2023, representing net growth of 6.3% on an annualized basis, as compared to the quarter ended June 30, 2023.

• Annualized net interest margin decreased 29 basis points to 3.47% for the quarter ended September 30, 2023 from 3.76% for the quarter ended June 30, 2023 due to the reduction of accretion income as well as increased deposit cost.

• Core net interest margin decreased 16 basis points during the quarter ended September 30, 2023 from 3.43% to 3.27%.

• Cost of deposits averaged 121 basis points for the third quarter of 2023 compared to 91 basis points for the second quarter 2023.

• During the quarter ended September 30, 2023, the Company received a $6.2 million award from the U.S. Treasury Equitable Recovery Program.

• Past dues loans to total loans were $15.7 million or 0.31% for the quarter ending September 30, 2023, compared to $12.6 million, or 0.25% for the quarter ending June 30, 2023, and $11.6 million, or 0.31% for the quarter ending September 30, 2022.

• Annualized quarter-to-date net charge-offs and recoveries to total loans were $49 thousand, or 0.004% for the quarter ending September 30, 2023, compared to $837 thousand, or 0.07% for the quarter ending June 30, 2023 and a net recovery of $353 thousand, or (0.04%) for the quarter ending September 30, 2022.

• Nonperforming assets to total assets were $22.4 million, or 0.28% for the quarter ending September 30, 2023, compared to $21.6 million, or 0.28% for the quarter ending June 30, 2023, and $26.7 million, 0.41% for the quarter ending September 30, 2022.

• For additional information, see the investor presentation filed and available under presentations and press releases included in the investor relations section of the Company's website: www.thefirstbank.com.

M. Ray “Hoppy” Cole, Jr., President and Chief Executive Officer, commented, “The third quarter results demonstrated another solid performance in a difficult operating environment. We were pleased to see positive loan growth of 6.3%, on an annualized basis, for the quarter. Credit metrics remained strong with low past dues and charge-offs with no material increase in non-performing assets. Deposit costs accelerated a bit, increasing 30 basis points to 1.21% but on a relative basis remain well contained with a cycle to date interest bearing beta of 31%."

Quarterly Earnings

Net income available to common shareholders totaled $24.4 million for the quarter ended September 30, 2023, an increase of $0.6 million, or 2.4%, when compared to $23.8 million for the quarter ended June 30, 2023.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) decreased $2.8 million, or 10.4%, to $24.0 million for quarter ended September 30, 2023 as compared to $26.8 million for the quarter ended June 30, 2023. Accretion income decreased $2.3 million as well as increased deposit costs of $4.7 million contributed to the decrease.

The Company recorded a provision for credit losses of $1.0 million for the quarter ended September 30, 2023 and $1.3 million for the quarter ended June 30, 2023.

Earnings Per Share

For the third quarter of 2023, diluted earnings per share were $0.77 compared to $0.75 for the second quarter of 2023 and $0.61 for the third quarter of 2022.

Diluted earnings per share, operating (non-GAAP) were $0.76 for the third quarter of 2023 compared to $0.85 for the second quarter of 2023 and $0.85 for the third quarter of 2022.

Effective January 1, 2023, the Company issued 6,920,422 shares of its common stock in conjunction with the closing of the acquisition of Heritage Southeast Bank ("Heritage Bank"). Effective August 1, 2022, the Company issued 3,498,936 shares of its common stock in conjunction with the closing of the acquisition of Beach Bancorp, Inc. ("Beach Bank").

Balance Sheet

Consolidated assets increased $22.2 million to $7.884 billion at September 30, 2023 from $7.862 billion at June 30, 2023. Loans increased $78.9 million, or 1.6%, for the quarterly comparison.

Total loans were $5.090 billion for the quarter ended September 30, 2023, as compared to $5.011 billion for the quarter ended June 30, 2023, and $3.719 billion for the quarter ended September 30, 2022, representing an increase of $78.9 million, or 1.6%, for the sequential quarter comparison, and an increase of $1.370 billion, or 36.8%, for the prior year quarterly comparison. During January 2023, loans totaling $1.159 billion, net of purchase accounting adjustments, were recorded from the Heritage Bank acquisition.

Total loans increased $78.9 million, or 1.6% as compared to the quarter ended June 30, 2023, or 6.3% on an annualized basis.

Excluding the acquired Heritage Bank loans, total loans increased $211.4 million, or 5.7% compared to the quarter ended September 30, 2022.

Total deposits were $6.480 billion for the quarter ended September 30, 2023, as compared to $6.492 billion for the quarter ended June 30, 2023, and $5.551 billion for the quarter ended September 30, 2022, representing a decrease of $12.2 million, or 0.2%, for the sequential quarter comparison, and an increase of $928.7 million, or 16.7%, for the prior year quarterly comparison. During January 2023, deposits totaling $1.392 billion, net of purchase accounting adjustments, were acquired in the Heritage Bank acquisition.

Deposits decreased $12.2 million, or 0.2% for the prior quarter comparison. Excluding an increase in brokered deposits of $110.0 million, deposits decreased $122.2 million, or 1.9% for the prior quarter comparison. Seasonal fluctuations and public funds account for $51.7 million of the decrease in deposits.

Book value per share decreased to $28.57 at September 30, 2023 from $28.64 at June 30, 2023.

Tangible book value per share (non-GAAP) remained unchanged at $17.62 at September 30, 2023 and at June 30, 2023. The balance in accumulated other comprehensive income (loss) increased $20.0 million to $165.2 million at September 30, 2023 from $145.2 million at June 30, 2023.

Asset Quality

Nonperforming assets totaled $22.4 million at September 30, 2023, an increase of $0.8 million compared to $21.6 million at June 30, 2023 and a decrease of $4.3 million compared to $26.7 million at September 30, 2022.

Nonaccrual loans totaled $17.4 million, an increase of $1.4 million as compared to June 30, 2023 and an increase of $1.6 million as compared to September 30, 2022.

The ratio of the allowance for credit losses (ACL) to total loans was 1.05% at September 30, 2023, 1.05% at June 30, 2023 and 1.03% at September 30, 2022. The ratio of annualized net charge-offs (recoveries) to total loans was 0.004% for the quarter ended September 30, 2023 compared to 0.07% for the quarter ended June 30, 2023 and (0.04%) for the quarter ended September 30, 2022.

Third Quarter 2023 vs Second Quarter 2023 Earnings Comparison

Net income available to common shareholders for the third quarter of 2023 increased $0.6 million to $24.4 million compared to $23.8 million for the second quarter of 2023.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) decreased $2.8 million, or 10.4%, to $24.0 million for quarter ended September 30, 2023 as compared to $26.8 million for the quarter ended June 30, 2023. Accretion income decreased $2.3 million as well as increased deposit costs of $4.7 million contributed to the decrease.

Net interest income for the third quarter of 2023 was $60.7 million as compared to $66.0 million for the second quarter of 2023, a decrease of $5.3 million. The decrease was largely due to the decrease in accretion of purchase accounting adjustments of $2.3 million as well as increased interest expense of $4.8 million partially offset by an increase in interest income of $1.7 million.

Third quarter 2023 net interest margin of 3.47% included 25 basis points related to purchase accounting adjustments compared to 3.76% for the second quarter in 2023, which included 37 basis points related to purchase accounting adjustments.

Core net interest margin decreased 16 basis points to 3.27% for the third quarter of 2023 from 3.43% for the second quarter of 2023.

Investment securities totaled $1.836 billion, or 23.3% of total assets at September 30, 2023, compared to $1.898 billion, or 24.1% of total assets at June 30, 2023. The average balance of investment securities decreased $61.2 million in sequential-quarter comparison. The average tax equivalent yield on investment securities (non-GAAP) increased 3 basis points to 2.26% from 2.23% in sequential-quarter comparison. The investment portfolio had a net unrealized loss of $184.9 million at September 30, 2023 as compared to a net unrealized loss of $157.6 million at June 30, 2023.

The FTE average yield on all earning assets (non-GAAP) decreased in sequential-quarter comparison from 4.91% to 4.90%. Interest expense on average interest bearing liabilities increased 40 basis points from 1.65% for the second quarter of 2023 to 2.05% for the third quarter of 2023.

Cost of all deposits averaged 121 basis points for the third quarter of 2023 compared to 91 basis points for the second quarter of 2023. This increase was a result of rising interest rates and increased competition for deposits.

Non-interest income increased $6.9 million from $12.4 million in the second quarter of 2023 to $19.3 million in the third quarter of 2023, primarily attributable to a U.S. Treasury award of $6.2 million.

Non-interest expense for the third quarter of 2023 was $47.7 million compared to $46.9 million for the second quarter of 2023, an increase of $0.8 million, attributed to the expenses of $5.2 million related to the U.S. Treasury awards and was partially offset by a decrease in acquisition charges of $3.5 million.

Third Quarter 2023 vs. Third Quarter 2022 Earnings Comparison

Net income available to common shareholders for the third quarter of 2023 totaled $24.4 million compared to $14.0 million for the third quarter of 2022, an increase of $10.3 million or 73.5%.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) increased $4.4 million, or 22.4%, to $24.0 million for quarter ended September 30, 2023, as compared to $19.6 million for the quarter ended September 30, 2022. This increase is attributable to net income associated from the acquisitions of Heritage Bank and Beach Bank.

Net interest income for the third quarter of 2023 was $60.7 million, an increase of $11.6 million or 23.5% when compared to the third quarter of 2022. Fully tax equivalent (“FTE”) net interest income (non-GAAP) totaled $61.7 million and $50.1 million for the third quarter of 2023 and 2022, respectively. Purchase accounting adjustments increased $3.1 million for the third quarter comparisons. The increase was largely due to increased interest rates as well as the acquisitions of Beach Bank and Heritage Bank.

Third quarter of 2023 net interest margin was 3.47%, which included 25 basis points related to purchase accounting adjustments compared to 3.43% for the same quarter in 2022, which included 5 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin (non-GAAP) decreased 16 basis points in prior year quarterly comparison primarily due to an increase in rates on interest bearing liabilities.

Non-interest income increased $10.3 million for the third quarter of 2023 as compared to the third quarter of 2022. This increase was attributed to increases in service charges on deposit accounts and interchange fee income of $3.4 million as well as the $6.2 million award from the U.S. Treasury.

Third quarter 2023 non-interest expense was $47.7 million, an increase of $11.8 million, or 32.9% as compared to the third quarter of 2022. This increase was attributed to an increase of $6.3 million in charges related to the ongoing operations of Beach Bank and Heritage Bank, increased FDIC premiums of $0.7 million, increased amortization of core deposit intangibles of $1.2 million, and $5.2 million related to the U.S. Treasury awards.

Investment securities totaled $1.836 billion, or 23.3% of total assets at September 30, 2023, compared to $2.004 billion, or 31.0% of total assets at September 30, 2022. For the third quarter of 2023 compared to the third quarter of 2022, the average balance of investment securities decreased $208.6 million. The average tax equivalent yield on investment securities (non-GAAP) increased 4 basis points to 2.26% from 2.22% in the prior year quarterly comparison. The investment portfolio had a net unrealized loss of $184.9 million at September 30, 2023 as compared to a net unrealized loss of $216.9 million at September 30, 2022.

The average yield on all earning assets increased 114 basis points in prior year quarterly comparison, from 3.76% for the third quarter of 2022 to 4.90% for the third quarter of 2023. Interest expense on average interest bearing liabilities increased 157 basis points from 0.48% for the third quarter of 2022 to 2.05% for the third quarter of 2023.

Cost of all deposits averaged 121 basis points for the third quarter of 2023 compared to 19 basis points for the third quarter of 2022.

Year-to-Date Earnings Comparison

In the year-over-year comparison, net income available to common shareholders increased $17.8 million, or 38.1%, from $46.6 million for the nine months ended September 30, 2022, to $64.4 million for the same period ended September 30, 2023.

Net interest income was $191.7 million for the nine months ended September 30, 2023, an increase of $61.8 million as compared to the same period ended September 30, 2022, primarily due to interest income earned on a higher volume of loans (including loans acquired from Heritage Bank and Beach Bank).

Non-interest income was $44.4 million for the nine months ended September 30, 2023, an increase of $15.5 million as compared to the same period ended September 30, 2022. Service charges on deposit accounts accounted for $4.4 million of the increase as well as $4.7 million in interchange fee income and $5.3 million increase in awards from the U.S. Treasury.

Non-interest expense was $140.3 million for the nine months ended September 30, 2023, an increase of $44.8 million as compared to the same period ended September 30, 2022. The increase was partially attributable to $3.3 million in acquisition and charter conversion charges and $27.2 million in increased operating expenses related to the acquisitions of Beach Bank and Heritage Bank as well as $5.2 million in expenses associated with the U.S. Treasury awards and increases in FDIC premiums of $1.0 million and a $3.8 million increase in core deposit amortization for the nine months ended September 30, 2023.

Declaration of Cash Dividend

The Company announced that its Board of Directors declared a cash dividend of $0.24 per share, a 4% increase over previous quarter, per share to be paid on its common stock on November 24, 2023 to shareholders of record as of the close of business on November 8, 2023.

Conference Call

The Company will host a conference call for analysts and investors to discuss the Company’s financial results at 9:00 a.m. Central Time on Thursday, October 26, 2023. Investors and analysts may participate by clicking on the Participant Conference Link: https://register.vevent.com/register/BI68bf3aa848aa45e49109eb1ad52aff4f. An audio archive of the conference call along with the transcript will be available within 24-48 hours after the call and placed in the Investor Relations section of our website.

About The First Bancshares, Inc.

The First Bancshares, Inc., headquartered in Hattiesburg, Mississippi, is the parent company of The First Bank (“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 pre-tax, pre-provision operating earnings, FTE net interest income, FTE net interest margin, core net interest margin, FTE average yield on investment securities, FTE average yield on all earning assets, total tangible common equity, tangible book value per common share, net earnings available to common shareholders, operating, diluted earnings per share, operating, efficiency ratio, operating 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, net interest margin, common equity, net earnings available to common shareholders, diluted earnings per share, efficiency ratio, average yield on investment securities, average yield on all earning assets, 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) prevailing, or changes in, economic or political conditions, either nationally or locally, particularly in areas in which the Company conducts operations, including the effects of declines in the real estate market, high unemployment rates, inflationary pressure, elevated interest rates and slowdowns in economic growth, as well as the financial stress on borrowers as a result of the foregoing; (3) interest rate risk, including the effects of rising interest rates; (4) developments in our mortgage banking business, including loan modifications, general demand, and the effects of judicial or regulatory requirements or guidance; (5) changes in applicable laws, rules, or regulations; (6) 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; (7) changes in management’s plans for the future; (8) credit risk associated with our lending activities; (9) changes in loan demand, real estate values, or competition; (10) changes in accounting principles, policies, or guidelines; (11) 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 and related variants; (12) higher inflation and its impacts; (13) significant turbulence or disruption in the capital or financial markets and the effect of a fall in stock market prices on our investment securities; (14) potential impacts of the adverse developments in the banking industry highlighted by high-profile bank failures, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; (15) the effects of war or other conflicts including the impacts relating to or resulting from Russia's military action in Ukraine or the conflict in Israel and surrounding areas, and (16) 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 SEC, 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.