HATTIESBURG, Miss.--(BUSINESS WIRE)-- The First Bancshares, Inc. (NASDAQ: FBMS), holding company for The First, A National Banking Association, (www.thefirstbank.com) reported today a 56.6% increase ($1.5 million) in operating net earnings (net income available to common shareholders adjusted for merger related costs) for the second quarter of 2017 compared to the second quarter of 2016. Operating net earnings available to common shareholders totaled $4.0 million for second quarter 2017 as compared to $2.6 million for second quarter 2016. Operating net earnings available to common shareholders excludes tax affected merger related expenses of $1.6 million in the second quarter of 2017.

Fully diluted earnings per share for the second quarter of 2017 were $0.26 as compared to $0.47 for the second quarter of 2016. Fully diluted earnings per share for the second quarter of 2017 includes one-time merger related charges of $0.18 and also includes the issuance of 3,563,380 in new common shares during the fourth quarter of 2016 related to the capital raise in October 2016.

Highlights for the Quarter:

• Operating net earnings (net income available to common shareholders adjusted for merger related costs) for the second quarter were $4.0 million compared to $3.4 million for the first quarter of 2017, an 18.6% increase.
• System integration for both acquisitions, which closed in the first quarter, was completed.
• Total loans increased 4.2% or $48 million during the quarter.
• The Company’s common stock was included in the Russell 2000 Index for the first time.
• Acquisitions added loans of $239.6 million and deposits of $355.7 million (loan and deposit figures are net of credit and rate marks) during the first quarter of 2017.

M. Ray “Hoppy” Cole, President & Chief Executive Officer, commented, “We are pleased with the performance of the company during the second quarter. The two acquisitions closed in the first quarter have been fully integrated and core operating results are beginning to reflect significantly improved performance as a result of those acquisitions. We are also pleased with our organic growth across our entire footprint exhibited by $48 million of net loan growth for the quarter. I commend our team members on an outstanding quarter especially given the complexities and challenge of integrating two acquisitions at once.”

Balance Sheet

Total assets increased $6.4 million or 0.4% to $1.789 billion for the quarter ended June 30, 2017.

Total loans were $1.187 billion at June 30, 2017 as compared to $1.140 billion at March 31, 2017 and as compared to $824.1 million at June 30, 2016 representing increases of $47.9 million, or 4.2% for the quarter ended June 30, 2017 and $363.9 million, or 44.2% as compared to second quarter 2016. Increased loan volume of $47.9 million for the second quarter was distributed between commercial and all real estate categories. The acquisitions accounted for $239.6 million of the total increase in loans as compared to the same quarter in 2016.

Total deposits decreased $17.7 million or 1.1% for the quarter ended June 30, 2017. $10.1 million of the decrease was in the certificate of deposit portfolio of which a majority of this decrease was in the certificate of deposit portfolios that were acquired.

Asset Quality

Nonperforming assets totaled $13.2 million at June 30, 2017, a decrease of $0.1 million compared to $13.3 million at March 31, 2017 and an increase of $2.1 million compared to June 30, 2016. The majority of the increase is the result of acquired assets with associated fair value marks. The ALLL/total loans ratio was 0.68% at June 30, 2017 and 0.69% at March 31, 2017. Including valuation accounting adjustments on acquired loans, the total valuation plus ALLL was 1.18% of loans at June 30, 2017. The ratio of annualized net charge-offs (recoveries) to total loans was (0.003)% for the quarter ended June 30, 2017 compared to (0.09)% for the quarter ended March 31, 2017.

Second Quarter 2017 vs. Second Quarter 2016 Earnings Comparison

Operating net earnings for the second quarter totaled $4.0 million compared to $2.6 million for the second quarter of 2016, an increase of $1.5 million or 56.6%.

Second quarter 2017 net earnings available to common shareholders (including merger related costs) totaled $2.4 million compared to $2.6 million for the second quarter of 2016.

Revenues from consolidated operations increased $6.4 million in quarterly comparison. Net interest income increased $4.9 million in quarterly comparison as interest income earned on a higher volume of loans attributed to this overall increase. Noninterest income increased $0.8 million in quarterly comparison for the second quarter of 2017 as compared to the second quarter of 2016 with increases spread over service charges and interchange fee income.

Second quarter 2017 noninterest expense increased $6.1 million, or 68.9% as compared to second quarter 2016. The majority of the increase is due to higher compensation expense and one-time charges associated with the acquisitions. Salaries increased $2.4 million of which $1.7 million is the result of increased employment numbers as a result of the acquisitions. Other professional services and other noninterest expenses included $2.7 million of before-tax merger related expenses associated with the acquisitions.

Fully taxable-equivalent (“FTE”) net interest income totaled $15.1 million and $10.1 million for the second quarter of 2017 and 2016, respectively. The FTE net interest income increased $5.0 million in prior year quarterly comparison primarily due to an increase in interest earned on loans. Purchase accounting adjustments accounted for $97,000 of the difference in net interest income for the second quarter comparisons. Second quarter 2017 net interest margin of 3.84% includes 3 bps related to purchase accounting adjustments.

Investment securities totaled $382.0 million, or 21.3% of total assets at June 30, 2017, versus $258.5 million, or 21.1% of total assets at June 30, 2016. The average volume of investment securities increased $112.6 million in prior year quarterly comparison primarily the result of the acquisitions. The average tax equivalent yield on investment securities remained constant at 2.65%. The investment portfolio had a net unrealized gain of $3.6 million at June 30, 2017 as compared to $4.5 million at June 30, 2016.

The average yield on all earnings assets increased 20 basis points in prior year quarterly comparison, from 4.05% for the second quarter of 2016 to 4.25% for the second quarter of 2017. This increase was offset partially by an increase in average interest expense of 6 basis points from 0.45% for the second quarter of 2016 to 0.51% for the second quarter of 2017.

Second Quarter 2017 vs First Quarter 2017 Earnings Comparison

Operating net earnings for the second quarter totaled $4.0 million compared to $3.4 million for the first quarter of 2017, an increase of $0.6 million or 18.6%.

In sequential-quarter comparison, net earnings available to common shareholders increased $1.2 million to $2.4 million which included after-tax one-time acquisition charges of $1.6 million.

FTE net interest income increased $0.6 million to $15.1 million from $14.5 million in sequential-quarter comparison. The increase was due primarily to increased loan volume. Interest income from purchase accounting adjustments increased $21,000 in quarterly comparison.

The average yield on all earnings assets decreased 2 basis points in sequential-quarter comparison, from 4.27% for the first quarter of 2017 to 4.25% for the second quarter of 2017.

Noninterest income increased $0.4 million in sequential-quarter comparison consisting of increases in service charges, interchange fee income and mortgage income.

Noninterest expense decreased $1.0 million in sequential-quarter comparison which includes decreases in other professional services and other non-interest expense. Merger related costs were $2.7 million and included in other professional services and other noninterest expenses as compared to $3.6 million for the first quarter of 2017.

Year to Date Earnings Comparison

Operating net earnings for the first half of 2017 totaled $7.4 million compared to $4.9 million for the first half of 2016, an increase of$2.5 million or 51.2%.

In year-over-year comparison, net earnings available to common shareholders decreased $1.5 million, or 31.4%, from $5.1 million at June 30, 2016 to $3.5 million at June 30, 2017 which included one-time merger related charges of $6.3 million. Net interest income increased $9.5 million in year-over-year comparison as interest income earned on a higher volume of loans attributed to this overall increase.

Noninterest income increased $1.7 million in year-over-year comparison mainly consisting of increases in mortgage income of $0.3 million, service charges of $0.5 million and interchange fee income of $0.5 million.

Noninterest expenses increased $13.8 million in year-over-year comparison consisting of increases in salaries and benefits of $5.2 million of which $4.0 million relates to the acquisitions as well as $6.3 million in one-time merger related charges.

Other Events

The Company will make a presentation at the KBW 2017 Community Bank Investor Conference at The New York Hilton in New York, New York, Tuesday, August 1, 2017 at 2:30 p.m. central time. This will be an interactive session between management and those attending the conference. The presentation will be available at the company’s internet site (www.thefirstbank.com) under the Investor Relations tab.

Dividends

The Board of Directors of The First Bancshares, Inc. announced a cash dividend was declared in the amount of $0.0375 per share to be paid on its common stock on August 24, 2017 to shareholders of record as of the close of business on August 4, 2017.

About The First Bancshares, Inc.

The First Bancshares, Inc., headquartered in Hattiesburg, Mississippi, is the parent company of The First, A National Banking Association. Founded in 1996, the First has operations in Mississippi, Louisiana, Alabama and Florida. The Company’s stock is traded on NASDAQ Global Market under the symbol FBMS. Information is available on the Company’s website: www.thefirstbank.com.

Forward Looking Statements

This news release contains statements regarding the projected performance of The First Bancshares, Inc. and its subsidiary. These statements constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act. Actual results may differ materially from the projections provided in this release since such projections involve significant known and unknown risks and uncertainties. Factors that might cause such differences include, but are not limited to: competitive pressures among financial institutions increasing significantly; economic conditions, either nationally or locally, in areas in which the Company conducts operations being less favorable than expected; and legislation or regulatory changes which adversely affect the ability of the combined Company to conduct business combinations or new operations. The Company disclaims any obligation to update such factors or to publicly announce the results of any revisions to any of the forward-looking statements included herein to reflect future events or developments. Further information on The First Bancshares, Inc. is available in its filings with the Securities and Exchange Commission, available at the SEC’s website, http://www.sec.gov.