The First Bancshares, Inc. Reports a 93% Increase in Net Income Available to Common Shareholders; Increases Quarterly Dividend by 14%

The First Bancshares, Inc. FBMS, holding company for The First, A National Banking Association, (www.thefirstbank.com) reported today net income available to common shareholders of $7.6 million for the quarter ended March 31, 2019, an increase of $3.7 million or 92.9%, compared to $4.0 million for the quarter ended March 31, 2018, and an increase of $0.8 million, or 11.3%, compared to $6.9 million for the fourth quarter of 2018. Operating net earnings increased 85.2%, or $4.6 million, for the quarter ended March 31, 2019, totaling $9.9 million for the first quarter of 2019 as compared to $5.4 million for the first quarter of 2018, and increased $0.8 million, or 8.6%, as compared to $9.1 million for the fourth quarter of 2018. Operating net earnings for the first quarter of 2019 excludes merger-related costs of $2.5 million, net of tax and income in the form of an award from the U. S. Department of the Treasury of $0.2 million, net of tax. Operating net earnings for the first quarter of 2018 excludes merger-related costs of $1.4 million, net of tax. Operating net earnings for the fourth quarter of 2018 exclude merger-related costs of $3.2 million, net of tax as well as $0.3 million, net of tax related to the sale of investment securities and $0.7 million net of tax in awards from the U. S. Department of Treasury.

For the first quarter of 2019, fully diluted earnings per share were $0.48, compared to $0.34 for the first quarter of 2018 and $0.48 for the fourth quarter of 2018. Excluding the impact of the merger-related costs and income described above, fully diluted operating earnings per share for the first quarter of 2019 were $0.63 as compared to $0.46 for the first quarter of 2018, and $0.64 for the fourth quarter of 2018. Fully diluted earnings per share for first quarter of 2019 include the issuance of 2,377,501 shares of our common stock in connection with the acquisition of FPB Financial Corp ("FPB"). Fully diluted earnings per share for first quarter of 2018 include the issuance of 1,134,010 shares of our common stock in connection with the acquisition of Southwest Bancshares, Inc. ("Southwest").

Highlights for the Quarter:

• On March 2, 2019, the Company closed as planned the acquisition of FPB and its wholly-owned subsidiary, Florida Parishes Bank, which added 7 locations servicing the Hammond and New Orleans areas in Louisiana. System integration for this acquisition was completed in March as well.
• On March 28, 2019, the Company announced that its Board of Directors authorized a share repurchase program allowing the Company to purchase up to an aggregate of $20 million in shares of the Company's issued and outstanding common stock.
• During the quarter, the Company received a $0.23 million Financial Assistance 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.
• Excluding the acquisition of FPB, loans increased $33.3 million, or 1.6% during the first quarter of 2019.
• Excluding the acquisition of FPB, deposits increased $146.0 million, or 5.9% during the first quarter of 2019.
• The Company's Board of Directors increased the quarterly dividend by $0.01 to $0.08 per share, a 14% increase.

M. Ray "Hoppy" Cole, President and Chief Executive Officer, commented, "We continue to see increasing profitability and strong overall performance of our Company as a result of our regional expansion plan. In addition to a 93% increase in net income year over year, we posted solid organic growth in loans and deposits across our five-state operating area. We also closed our merger and completed the operating system integration of Florida Parishes Bank during the quarter. We are excited to have Florida Parishes' clients and team member become part of The First. They are an experienced, well respected group of bankers that will further our growth in Louisiana."

Balance Sheet

Consolidated assets increased $529.0 million to $3.533 billion at March 31, 2019 from $3.004 billion at December 31, 2018. The acquisition of FPB accounted for $436.1 million of the increase.

Total loans were $2.335 billion at March 31, 2019, as compared to $2.060 billion at December 31, 2018, and $1.517 billion at March 31, 2018, representing increases of $274.9 million or 13.3%, and $818.8 million or 54.0%, respectively. The acquisition of FPB accounted for $241.6 million, net of fair value marks, of the total increase in loans as compared to the fourth quarter of 2018. The acquisitions of Sunshine Financial, Inc., ("Sunshine"), FMB Banking Corporation ("FMB") and FPB accounted for $705.1 million, net of fair value marks, of the total increase in loans as compared to the first quarter of 2018. The increase in loans, net of acquired loans, during the sequential quarter amounted to $33.3 million.

Total deposits were $2.914 billion at March 31, 2019, as compared to $2.457 billion at December 31, 2018, and $1.992 billion at March 31, 2018, representing increases of $456.9 million or 18.6%, and $922.7 million or 46.3%, respectively. The acquisition of FPB accounted for $314.4 million of the total increase in deposits as compared to December 31, 2018. The acquisitions of Southwest, Sunshine and FMB accounted for $866.0 million of the total increase in deposits as compared to March 31, 2018. The increase in deposits of $146.0 million, net of acquired, during the first quarter of 2019 was largely due to increases in NOW accounts of $131.6 million, of which $129.1 million is attributable to the seasonality of the public fund deposits.

Asset Quality

Nonperforming assets totaled $39.2 million at March 31, 2019, an increase of $4.9 million compared to $34.3 million at December 31, 2018 and an increase of $24.4 million compared to March 31, 2018. The majority of the increases in both quarterly comparisons was related to acquired loans. The ratio of the allowance for loan and leases losses (ALLL) to total loans was 0.48% at March 31, 2019, 0.49% at December 31, 2018 and 0.57% at March 31, 2018. The ratio of annualized net charge-offs (recoveries) to total loans was (0.008%) for the quarter ended March 31, 2019 compared to 0.02% for the quarter ended December 31, 2018 and (0.02%) for the quarter ended March 31, 2018.

First Quarter 2019 vs. First Quarter 2018 Earnings Comparison

Net income available to common shareholders for the first quarter of 2019 totaled $7.6 million compared to $4.0 million for the first quarter of 2018, an increase of $3.7 million or 92.9%.

Operating net earnings for the first quarter of 2019 totaled $9.9 million compared to $5.4 million for the first quarter of 2018, an increase of $4.6 million or 85.2%. The calculation of operating net earnings excludes the merger-related costs and non-recurring income for each quarter as discussed above.

Net interest income for the first quarter of 2019 was $27.1 million, an increase of $10.8 million when compared to the first quarter of 2018. The increase was due to interest income earned on a higher volume of loans as well as increased interest rates. Fully tax equivalent ("FTE") net interest income totaled $27.4 million and $16.6 million for the first quarter of 2019 and 2018, respectively. FTE net interest income increased $10.8 million in the prior year quarterly comparison due to increased loan volume as well as increased interest rates. Purchase accounting adjustments accounted for $1.1 million of the difference in net interest income for the first quarter comparisons. First quarter 2019 FTE net interest margin of 3.89% included 18 basis points related to purchase accounting adjustments compared to 3.67% for the same quarter in 2018, which included 2 basis points related to purchase accounting adjustments.

Non-interest income increased $2.1 million for the first quarter of 2019 as compared to the first quarter of 2018 due to increased service charges and interchange fee income of $1.4 million primarily based on the increased deposit base due to the acquisitions. Non-interest income also included the Financial Assistance Award of $0.23 million from the U.S. Department of the Treasury received during the first quarter of 2019 as a result of our designation as a Community Development Financial Institution.

First quarter 2019 non-interest expense was $21.9 million, an increase of $7.3 million, or 50.0% as compared to the first quarter of 2018. Excluding the increase in acquisition charges of $1.4 million for first quarter of 2019, non-interest expense increased $5.9 million in the first quarter of 2019, of which $3.8 million was attributable to the operations of Southwest, Sunshine, FMB and FPB, as compared to first quarter of 2018.

Investment securities totaled $620.5 million, or 17.6% of total assets at March 31, 2019, versus $441.9 million, or 19.2% of total assets at March 31, 2018. The average balance of investment securities increased $172.7 million in prior year quarterly comparison, primarily as a result of the acquisitions. The average tax equivalent yield on investment securities increased 28 basis points to 3.32% from 3.04% in prior year quarterly comparison. The investment portfolio had a net unrealized gain of $5.5 million at March 31, 2019 as compared to a net unrealized loss of $5.1 million at March 31, 2018.

The FTE average yield on all earning assets increased 57 basis points in prior year quarterly comparison, from 4.19% for the first quarter of 2018 to 4.76% for the first quarter of 2019. Average interest expense increased 45 basis points from 0.67% for the first quarter of 2018 to 1.12% for the first quarter of 2019 due primarily to increased interest-bearing 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 67 basis points for the first quarter of 2019 compared to 44 basis points for the first quarter of 2018. Public funds increased $120.5 million when comparing March 31, 2019 to March 31, 2018.

First Quarter 2019 vs Fourth Quarter 2018 Earnings Comparison

Net income available to common shareholders for the first quarter of 2019 increased $0.8 million, or 11.3% to $7.6 million compared to $6.9 million for the fourth quarter of 2018. For the first quarter of 2019, fully diluted earnings per share were $0.48, compared to $0.48 for the fourth quarter of 2018.

Operating net earnings for the first quarter of 2019 compared to the fourth quarter of 2018 increased $0.8 million or 8.6% from $9.1 million to $9.9 million. Operating net earnings exclude the merger-related costs and other excluded items for the first quarter of 2019 as discussed above. Operating net earnings for the fourth quarter of 2018 exclude merger-related costs of $3.2 million, net of tax as well as $0.3 million, net of tax related to the gain on sale of investment securities and $0.7 million, net of tax in awards from the U. S. Department of Treasury. Excluding the impact of the merger-related costs and other items described above, fully diluted operating earnings per share for the first quarter of 2019 were $0.63 as compared to $0.64 for the fourth quarter of 2018.

Net interest income for the first quarter of 2019 was $27.1 million as compared to $25.3 million for the fourth quarter of 2018, an increase of $1.9 million. FTE net interest income increased $1.9 million to $27.4 million from $25.5 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 decreased $0.3 million in sequential quarter comparison. First quarter 2019 FTE net interest margin of 3.89% included 18 basis points related to purchase accounting adjustments compared to 4.08% for the fourth quarter in 2018, which included 24 basis points related to purchase accounting adjustments.

Investment securities totaled $620.5 million, or 17.6% of total assets at March 31, 2019, versus $514.9 million, or 17.1% of total assets at December 31, 2018. The average balance of investment securities increased $69.5 million in sequential-quarter comparison, primarily as a result of the acquisition of FPB. The average tax equivalent yield on investment securities increased 17 basis points to 3.32% from 3.15% in sequential-quarter comparison. The investment portfolio had a net unrealized gain of $5.5 million at March 31, 2019 as compared to a net unrealized loss of $2.5 million at December 31, 2018.

The FTE average yield on all earning assets decreased in sequential-quarter comparison from 4.93% to 4.76%. Average interest expense increased 3 basis points from 1.09% for the fourth quarter of 2018 to 1.12% for the first quarter of 2019 due primarily to increased rates as well as an increase in borrowings. Cost of all deposits averaged 67 basis points for the first quarter of 2019 compared to 61 basis points for the fourth quarter of 2018. Public funds increased $129.1 million when comparing March 31, 2019 to December 31, 2018, excluding the acquisition of FPB.

Non-interest income excluding the awards from the U. S. Department of the Treasury and gain on sales of securities, increased $0.2 million in sequential-quarter comparison resulting from increased interchange fee income. Non-interest income for the first quarter of 2019 included the Bank Enterprise Award received from the U. S. Department of the Treasury for $0.23 million, and for the fourth quarter included the Financial Assistance Award received from the U. S. Department of the Treasury for $0.95 million, which resulted in a net decrease in non-interest income of $0.7 million for the quarterly comparison.

Non-interest expense for the first quarter of 2019 was $21.9 million compared to $22.2 million for the fourth quarter of 2018. Excluding acquisition charges for each quarter, non-interest expense increased $0.6 million in sequential-quarter comparison, which is largely attributable to the operations of FPB acquired in the first quarter.

Declaration of Cash Dividend

The Company announced that its Board of Directors declared a cash dividend of $0.08 per share, an increase of $0.01 per share, or 14% to be paid on its common stock on May 24, 2019 to shareholders of record as of the close of business on May 10, 2019.

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, 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 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 that the anticipated benefits from the transactions with Southwest, Sunshine, FMB and FPB 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.