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)
		Quarter				Quarter				Quarter				Quarter				Quarter
EARNINGS DATA		Ended				Ended				Ended				Ended				Ended
		9/30/18				6/30/18				3/31/18				12/31/17				9/30/17
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 SHEET		2018				2018				2018				2017				2017
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 STATEMENT		Three Months Ended
		9/30/18			6/30/18				3/31/18			12/31/17				9/30/17
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
		2018				2017
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,				Percent			June 30,				Mar 31,				Dec 31,				Sept 30,				Percent
COMPOSITION OF LOANS		2018				of Total			2018				2018				2017				2017				of 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,				Percent			June 30,				Mar 31,				Dec 31,				Sept 30,				Percent
COMPOSITION OF DEPOSITS		2018				of Total			2018				2018				2017				2017				of 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 DATA		2018							2018				2018				2017				2017
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)
Yield		Three Months Ended									Three Months Ended									Three Months Ended									Three Months Ended									Three Months Ended
Analysis		September 30, 2018									June 30, 2018									March 31, 2018									December 31, 2017									September 30, 2017
					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 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			259,713									214,345									174,433									170,002									172,698
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			2018				2018				2018				2017				2017
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
							2018								2017
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
							2018								2017
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 Data			2018				2018				2018				2017				2017
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 Equivalent			2018				2018				2018				2017				2017
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 Margin			2018				2018				2018				2017				2017
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 Ratio			2018				2018				2018				2017				2017
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 Ratios			2018				2018				2018				2017				2017
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

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