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M. Ray "Hoppy" Cole, Jr., President and Chief Executive Officer, commented, "We were excited to announce our potential merger with Renasant Bank during the quarter. Together we create a high performing southeastern franchise with a simple community bank model, focused on building relationships and growing our business.

In addition to our merger announcement, the quarter was characterized by continued strong performance in terms of profitability and growth. Loans increased by 5.0% on an annualized basis, core operating earnings increased 2.7% quarter over quarter and our margin expanded six basis points.

We look forward to the opportunities that lie ahead and the value we hope to create for our shareholders through this strategic partnership with Renasant."

Quarterly Earnings

Net income available to common shareholders totaled $18.6 million for the quarter ended September 30, 2024, a decrease of $1.1 million, or 5.7%, when compared to $19.7 million for the quarter ended June 30, 2024.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) increased $0.5 million, or 2.7%, to $20.5 million for quarter ended September 30, 2024 as compared to $20.0 million for the quarter ended June 30, 2024.

The Company recorded $1.0 million provision for credit losses for the quarter ended September 30, 2024 and $1.7 million provision for credit losses for the quarter ended June 30, 2024.

Earnings Per Share

For the third quarter of 2024, diluted earnings per share were $0.59 compared to $0.62 for the second quarter of 2024 and $0.77 for the third quarter of 2023.

Diluted earnings per share, operating (non-GAAP) were $0.65 for the third quarter of 2024 compared to $0.63 for the second quarter of 2024 and $0.76 for the third quarter of 2023.

Balance Sheet

Consolidated assets increased $0.7 million to $7.966 billion at September 30, 2024 from $7.966 billion at June 30, 2024. Loans increased $67.7 million, or 1.3%, for the quarterly comparison and deposits decreased $65.4 million, or 1.0% for the quarterly comparison.

Total loans were $5.319 billion for the quarter ended September 30, 2024, as compared to $5.251 billion for the quarter ended June 30, 2024, and $5.090 billion for the quarter ended September 30, 2023, representing an increase of $67.7 million, or 1.3%, for the sequential quarter comparison, and an increase of $228.8 million, or 4.5%, for the prior year quarterly comparison.

Total deposits were $6.561 billion for the quarter ended September 30, 2024, as compared to $6.626 billion for the quarter ended June 30, 2024, and $6.480 billion for the quarter ended September 30, 2023, representing a decrease of $65.4 million, or 1.0%, for the sequential quarter comparison, and an increase of $80.7 million, or 1.2%, for the prior year quarterly comparison. Excluding a decrease in public funds of $39.8 million, deposits decreased $25.6 million, or 0.4% for the sequential quarter comparison. Non-interest bearing deposits as a percentage of total deposits decreased to 27.4% for the quarter ended September 30, 2024 compared to 28.2% for June 30, 2024.

Asset Quality

Nonperforming assets totaled $25.1 million at September 30, 2024, an increase of $4.0 million compared to $21.1 million at June 30, 2024 and an increase of $2.7 million compared to $22.4 million at September 30, 2023.

Nonaccrual loans totaled $16.3 million, an increase of $2.7 million as compared to June 30, 2024 and a decrease of $1.1 million as compared to September 30, 2023.

The ratio of the allowance for credit losses (ACL) to total loans was 1.05% at September 30, 2024, 1.05% at June 30, 2024 and 1.05% at September 30, 2023. The ratio of annualized net charge-offs to total loans was 0.03% for the quarter ended September 30, 2024 compared to 0.04% for the quarter ended June 30, 2024 and 0.004% for the quarter ended September 30, 2023.

Third Quarter 2024 vs. Second Quarter 2024 Earnings Comparison

Net income available to common shareholders for the third quarter of 2024 decreased $1.1 million to $18.6 million compared to $19.7 million for the second quarter of 2024. The Company recorded a $1.0 million provision for credit losses for the quarter ended September 30, 2024 and $1.7 million for the quarter ended June 30, 2024.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) increased $0.5 million, or 2.7%, to $20.5 million for quarter ended September 30, 2024 as compared to $20.0 million for the quarter ended June 30, 2024.

Net interest income for the third quarter of 2024 was $59.0 million as compared to $57.8 million for the second quarter of 2024, an increase of $1.2 million. The increase was largely due to an increase in interest income on loans and partially offset by an increase in interest expense of $1.3 million.

Third quarter 2024 net interest margin of 3.33% included 11 basis points related to purchase accounting adjustments compared to 3.26% for the second quarter in 2024, which included 12 basis points related to purchase accounting adjustments.

Core net interest margin (non-GAAP) increased 7 basis points to 3.26% for the third quarter of 2024 from 3.19% for the second quarter of 2024.

Investment securities decreased $56.5 million to $1.715 billion, or 21.5% of total assets at September 30, 2024, compared to $1.771 billion, or 22.2% of total assets at June 30, 2024. The average balance of investment securities decreased $73.1 million in sequential-quarter comparison. The average yield on investment securities decreased 9 basis points to 2.56% from 2.65% in sequential-quarter comparison. The investment portfolio had a net unrealized loss of $91.6 million at September 30, 2024 as compared to a net unrealized loss of $129.0 million at June 30, 2024.

The average yield on all earning assets increased in sequential-quarter comparison from 5.14% to 5.27%. Interest expense on average interest bearing liabilities increased 10 basis points from 2.62% for the second quarter of 2024 to 2.72% for the third quarter of 2024.

Cost of all deposits averaged 183 basis points and 178 basis points for the third and second quarter of 2024, respectively.

Non-interest income decreased $1.1 million from $13.3 million in the second quarter of 2024 to $12.2 million in the third quarter of 2024, primarily attributable to a decrease in interchange fee income of $0.4 million and decrease of $0.7 million in other charges and fees.

Non-interest expense for the third quarter of 2024 was $46.4 million compared to $44.1 million for the second quarter of 2024, an increase of $2.3 million, attributable to expenses relating to the pending merger with Renasant.

Third Quarter 2024 vs. Third Quarter 2023 Earnings Comparison

Net income available to common shareholders for the third quarter of 2024 totaled $18.6 million compared to $24.4 million for the third quarter of 2023, a decrease of $5.8 million or 23.8%. This decrease is largely attributable to a decrease in a U.S. Treasury award of $6.2 million and a decrease in other non-interest expense of $5.2 million, offset by a decrease in net interest income of $1.7 million and increases in salaries and acquisition charges of $2.3 million and $2.0 million, respectively.

Excluding one-time items detailed in the tables included with this press release, net earnings available to common shareholders, operating (non-GAAP) decreased $3.5 million, or 14.7%, to $20.5 million for quarter ended September 30, 2024, as compared to $24.0 million for the quarter ended September 30, 2023. This decrease is largely attributable to a decrease in a U.S. Treasury award of $6.2 million and a decrease in other non-interest expense of $5.2 million, offset by a decrease in net interest income of $1.7 million and increases in salaries of $2.3 million.

Net interest income for the third quarter of 2024 was $59.0 million, a decrease of $1.7 million or 2.8% when compared to the third quarter of 2023. Fully tax equivalent ("FTE") net interest income (non-GAAP) totaled $60.0 million and $61.7 million for the third quarter of 2024 and 2023, respectively. The decrease was largely due to a decrease in purchase accounting adjustments of $2.3 million for the third quarter comparisons.

Third quarter of 2024 net interest margin was 3.33%, which included 11 basis points related to purchase accounting adjustments compared to 3.47% for the same quarter in 2023, which included 25 basis points related to purchase accounting adjustments. Excluding the purchase accounting adjustments, the core net interest margin (non-GAAP) increased 11 basis points in prior year quarterly comparison primarily due to an increase in rates on loans, partially offset by a corresponding increase in rates on interest bearing liabilities.

Non-interest income decreased $7.1 million for the third quarter of 2024 as compared to the third quarter of 2023. A decrease in U.S. Treasury awards of $6.2 million accounted for a majority of the change.

Third quarter 2024 non-interest expense was $46.4 million, a decrease of $1.3 million, or 2.8% as compared to the third quarter of 2023. Excluding acquisition charges, non-interest expense decreased $3.3 million of which salaries and employee benefits increased $2.3 million offset by a decrease in other expenses of $5.2 million.

Investment securities totaled $1.715 billion, or 21.5% of total assets at September 30, 2024, compared to $1.836 billion, or 23.3% of total assets at September 30, 2023. For the third quarter of 2024 compared to the third quarter of 2023, the average balance of investment securities decreased $168.2 million. The average yield on investment securities increased 30 basis points to 2.56% from 2.26% in the prior year quarterly comparison. The investment portfolio had a net unrealized loss of $91.6 million at September 30, 2024 as compared to a net unrealized loss of $184.9 million at September 30, 2023.

The average yield on all earning assets increased 37 basis points in prior year quarterly comparison, from 4.90% for the third quarter of 2023 to 5.27% for the third quarter of 2024. Interest expense on average interest bearing liabilities increased 67 basis points from 2.05% for the third quarter of 2023 to 2.72% for the third quarter of 2024.

Cost of all deposits averaged 183 basis points for the third quarter of 2024 compared to 121 basis points for the third quarter of 2023.

Year-to-Date Earnings Comparison

In the year-over-year comparison, net income available to common shareholders decreased $5.5 million, or 8.6%, from $64.4 million for the nine months ended September 30, 2023, to $58.9 million for the same period ended September 30, 2024.

Net interest income was $174.1 million for the nine months ended September 30, 2024, a decrease of $17.5 million as compared to the same period ended September 30, 2023, primarily due to an increase in interest expense on deposits partially offset by an increase in loan interest income.

Non-interest income was $38.2 million for the nine months ended September 30, 2024, a decrease of $6.1 million as compared to the same period ended September 30, 2023. A decrease in U.S. Treasury awards of $6.2 million accounted for the change.

Non-interest expense was $133.9 million for the nine months ended September 30, 2024, a decrease of $6.4 million as compared to the same period ended September 30, 2023. The decrease was primarily due to decreased acquisition charges of $5.5 million and other non-interest expense of $8.1 million, partially offset by an increase in salaries and employee benefits of $5.0 million.

Declaration of Cash Dividend

The Company announced that its Board of Directors declared a cash dividend of $0.25 per share to be paid on its common stock on November 22, 2024 to shareholders of record as of the close of business on November 8, 2024.

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 New York Stock Exchange 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. Fully-tax equivalent, or "FTE", financial metrics are measures used by management to evaluate the corresponding GAAP financial metrics in a manner that takes into account the tax benefits associated with income sources that are exempt from state or federal taxes. Core net interest margin is used by management to measure the net return on earnings assets, which includes investment securities, loans, and leases but excludes certain income and expense items that the Company's management considers to be non-core/adjusted in nature. Similarly, "operating" financial metrics, including operating efficiency ratio and operating earnings per share, are used by management to evaluate operating results exclusive of items that are not indicative of ongoing operations and impact period-to-period comparisons. Management uses "tangible" financial metrics, including tangible common equity and tangible book value, to measure the value of the Company's assets net of intangible assets, such as goodwill. 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 elevated 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, and risks related to the Merger, including the fluctuations of the market value of the consideration to be paid to the Company's shareholders in the Merger, the risks related to combining our businesses, expenses related to the Merger and integration of the combined entity, the risks that the Merger may not occur, and the risk of litigation related to the Merger; (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.