10-Q 1 fbms-20240630.htm 10-Q fbms-20240630
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number: 001-42107
Logo Holding (002).jpg
THE FIRST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Mississippi64-0862173
(State of Incorporation)(IRS Employer Identification No)
6480 U.S. Highway 98 West, Suite A, Hattiesburg, Mississippi
39402
(Address of principal executive offices)(Zip Code)
(601) 268-8998
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00
FBMSThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ    No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ    No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller Reporting Company
☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock, $1.00 par value, 32,454,301 shares issued and 31,204,694 outstanding as of August 2, 2024.
Auditor Firm PCAOB ID: 686Auditor Name: Forvis Mazars, LLPAuditor Location: Jackson, MS

The First Bancshares, Inc.
Form 10-Q
Quarter Ended June 30, 2024
Index
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE FIRST BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited)
June 30,
2024		December 31,
2023
ASSETS
Cash and due from banks$116,668 $224,199 
Interest-bearing deposits with banks90,938 130,948 
Total cash and cash equivalents207,606 355,147 
Securities available-for-sale, at fair value (amortized cost: $1,253,465 - 2024; $1,164,227 - 2023; allowance for credit losses: $0)
1,124,462 1,042,365 
Securities held to maturity, net of allowance for credit losses of $0 (fair value: $560,747 - 2024; $615,944 - 2023)
607,502 654,539 
Other securities39,293 37,754 
Total securities1,771,257 1,734,658 
Loans held for sale5,892 2,914 
Loans held for investment5,250,893 5,170,042 
Allowance for credit losses(55,133)(54,032)
Net loans held for investment5,195,760 5,116,010 
Interest receivable35,439 33,300 
Premises and equipment171,768 174,309 
Operating lease right-of-use assets6,287 6,387 
Finance lease right-of-use assets1,234 1,466 
Cash surrender value of bank-owned life insurance135,684 134,249 
Goodwill272,520 272,520 
Other real estate owned6,356 8,320 
Other assets155,997 160,065 
Total assets$7,965,800 $7,999,345 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Liabilities:
Deposits:  
Noninterest-bearing$1,870,305 $1,849,013 
Interest-bearing4,755,812 4,613,859 
Total deposits6,626,117 6,462,872 
Interest payable15,400 22,702 
Borrowed funds182,400 390,000 
Subordinated debentures123,558 123,386 
Operating lease liabilities6,452 6,550 
Finance lease liabilities1,648 1,739 
Allowance for credit losses on off-balance sheet credit exposures2,075 2,075 
Other liabilities36,265 40,987 
Total liabilities6,993,915 7,050,311 
Shareholders’ equity:  
Common stock, par value $1 per share, 80,000,000 shares authorized; 32,464,412 shares issued at June 30, 2024, and par value $1 per share, 80,000,000 shares authorized; 32,338,983 shares issued at December 31, 2023
32,464 32,339 
Additional paid-in capital776,098 775,232 
Retained earnings324,899 300,150 
Accumulated other comprehensive (loss)(120,465)(117,576)
Treasury stock, at cost, 1,249,607 shares at June 30, 2024 and at December 31, 2023
(41,111)(41,111)
Total shareholders’ equity971,885 949,034 
Total liabilities and shareholders’ equity$7,965,800 $7,999,345 
See Notes to Consolidated Financial Statements
3
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except earnings and dividends per share)
(Unaudited)(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Interest and dividend income:
Interest and fees on loans$78,336 $74,590 $157,135 $142,324 
Interest and dividends on securities:
Taxable interest and dividends8,868 7,867 17,170 16,626 
Tax exempt interest2,965 2,948 5,911 5,896 
Interest on federal funds sold and interest-bearing deposits in other banks 858 789 2,474 1,686 
Total interest income91,027 86,194 182,690 166,532 
Interest expense:
Interest on deposits29,463 14,762 58,876 27,039 
Interest on borrowed funds3,770 5,402 8,679 8,537 
Total interest expense33,233 20,164 67,555 35,576 
Net interest income57,794 66,030 115,135 130,956 
Provision for credit losses, LHFI1,650 1,000 1,650 11,500 
Provision for credit losses, OBSC exposures— 250 — 750 
Net interest income after provision for credit losses56,144 64,780 113,485 118,706 
Non-interest income:
Service charges on deposit accounts3,334 3,425 6,701 7,082 
Gain (loss) on securities14 (48)(34)(48)
Gain on sale of premises and equipment163 — 163 663 
Other9,808 9,046 19,168 17,338 
Total non-interest income13,319 12,423 25,998 25,035 
Non-interest expense:
Salaries and employee benefits25,045 23,315 49,553 46,888 
Occupancy and equipment5,490 5,041 11,204 10,337 
Acquisition expense352 4,101 360 7,894 
Other13,202 14,442 26,397 27,450 
Total non-interest expense44,089 46,899 87,514 92,569 
Income before income taxes 25,374 30,304 51,969 51,172 
Income tax expense5,677 6,525 11,644 11,122 
Net income$19,697 $23,779 $40,325 $40,050 
Basic earnings per share$0.62 $0.76 $1.28 $1.28 
Diluted earnings per share0.62 0.75 1.27 $1.27 
See Notes to Consolidated Financial Statements
4
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
($ in thousands)
(Unaudited)(Unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2024202320242023
Net income$19,697 $23,779 $40,325 $40,050 
Other comprehensive (loss) income:  
Unrealized holding (losses) gains arising during the period on available-for-sale securities(852)(19,504)(4,089)4,745 
Reclassification adjustment for (accretion) amortization of unrealized holdings gain/(loss) included in accumulated other comprehensive income from the transfer of securities available-for-sale to held-to-maturity94 92 188 184 
Reclassification adjustment for (gains) losses included in net income(14)48 34 48 
Unrealized holding (losses) gains arising during the period on available-for-sale securities(772)(19,364)(3,867)4,977 
Income tax benefit (expense)195 4,899 978 (1,259)
Other comprehensive (loss) income(577)(14,465)(2,889)3,718 
Comprehensive income$19,120 $9,314 $37,436 $43,768 
See Notes to Consolidated Financial Statements
5
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
($ in thousands except per share data, unaudited)

Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury StockTotal
SharesAmountSharesAmount
Balance, January 1, 202325,275,369 $25,275 $558,833 $252,623 $(148,957)(1,249,607)$(41,111)$646,663 
Net income— — — 16,271 — — — 16,271 
Other comprehensive income— — — — 18,183 — — 18,183 
Dividends on common stock, $0.21 per share
— — — (6,498)— — — (6,498)
Issuance of common shares for HSBI acquisition6,920,422 6,920 214,602 — — — — 221,522 
Issuance of restricted stock grants 118,689 119 (119)— — — — — 
Restricted stock grants forfeited(500)(1)1 — — — — — 
Repurchase of restricted stock for payment of taxes(9,827)(9)(298)— — — — (307)
    Compensation expense — — 593 — — — — 593 
Balance, March 31, 202332,304,153 32,304 773,612 262,396 (130,774)(1,249,607)(41,111)896,427 
Net income— — — 23,779 — — — 23,779 
Other comprehensive loss— — — — (14,465)— — (14,465)
Dividends on common stock, $0.22 per share
— — — (6,825)— — — (6,825)
Issuance of restricted stock grants45,773 46 (46)— — — — — 
Restricted stock grants forfeited(4,526)(5)5 — — — — — 
    Compensation expense— — 530 — — — — 530 
Balance, June 30, 202332,345,400 $32,345 $774,101 $279,350 $(145,239)(1,249,607)$(41,111)$899,446 
6
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY CONTINUED
($ in thousands except per share data, unaudited)
Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury StockTotal
SharesAmountSharesAmount
Balance, January 1, 202432,338,983 $32,339 $775,232 $300,150 $(117,576)(1,249,607)$(41,111)$949,034 
Net income— — — 20,628 — — — 20,628 
Other comprehensive loss— — — — (2,312)— — (2,312)
Dividends on common stock, $0.25 per share
— — — (7,777)— — — (7,777)
Issuance of restricted stock grants141,457 141 (141)— — — — — 
Repurchase of restricted stock for payment of taxes(12,512)(12)(302)— — — — (314)
    Compensation expense— — 653 — — — — 653 
Balance, March 31, 202432,467,928 32,468 775,442 313,001 (119,888)(1,249,607)(41,111)959,912 
Net income— — — 19,697 — — — 19,697 
Other comprehensive loss— — — — (577)— — (577)
Dividends on common stock, $0.25 per share
— — — (7,799)— — — (7,799)
Issuance of restricted stock grants2,847 3 (3)— — — — — 
Restricted stock grants forfeited(5,768)(6)6 — — — — — 
Repurchase of restricted stock for payment of taxes(595)(1)(14)— — — — (15)
Compensation expense— — 667 — — — — 667 
Balance, June 30, 202432,464,412 $32,464 $776,098 $324,899 $(120,465)(1,249,607)$(41,111)$971,885 
See Notes to Consolidated Financial Statements
7
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
Six Months Ended
June 30,
20242023
Cash flows from operating activities:
Net income$40,325 $40,050 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion8,474 2,321 
Provision for credit loss1,650 12,250 
Loss on sale or write-down of ORE168 533 
Securities loss34 48 
(Gain) loss on disposal of premises and equipment(163)(663)
Restricted stock expense1,320 1,123 
Increase in cash value of life insurance(1,894)(1,587)
Federal Home Loan Bank stock dividends(207)(222)
Residential loans originated and held for sale(45,809)(50,376)
Proceeds from sale of residential loans held for sale42,831 48,217 
Changes in:
Interest receivable(2,139)1,235 
Interest payable(7,302)4,644 
Operating lease liability(98)(1,457)
Other, net(1,423)(17,370)
Net cash provided by operating activities35,767 38,746 
Cash flows from investing activities:  
Available-for-sale securities:
Sales— 171,150 
Maturities, prepayments, and calls110,770 59,142 
Purchases(200,826)— 
Held-to-maturity securities:
Maturities, prepayments, and calls46,849 30,155 
Purchases of other securities(5,101)(9,473)
Proceeds from other securities3,769 8,741 
Net increase in loans(75,864)(70,124)
Net changes in premises and equipment(1,330)(2,916)
Proceeds from sale of other real estate owned954 587 
Proceeds from the sale of premises and equipment424 731 
Benefits received on bank owned life insurance policies459 — 
Cash received in excess of cash paid for acquisitions— 106,973 
Net cash (used in) provided by investing activities(119,896)294,966 
Cash flows from financing activities:  
Increase (decrease) in deposits159,934 (395,323)
Proceeds from borrowed funds1,099,700 2,138,141 
Repayments of borrowed funds(1,307,300)(1,988,241)
Principal payments on finance lease liabilities(91)(89)
Dividends paid on common stock(15,325)(13,158)
Called/repayment of subordinated debt— (26,000)
Repurchase of restricted stock for payment of taxes(330)(307)
Net cash used in financing activities(63,412)(284,977)
Net change in cash and cash equivalents(147,541)48,735 
Beginning cash and cash equivalents355,147 145,315 
Ending cash and cash equivalents$207,606 $194,050 
8
Table of Contents             
THE FIRST BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
($ in thousands)


(Unaudited)
Six Months Ended
June 30,
20242023
Supplemental disclosures:  
Cash paid during the year for:
Interest$66,803 $20,126 
Income taxes, (net of refunds)9,263 4,222 
Non-cash activities:
Loans transferred to other real estate842 1,267 
Issuance of restricted stock grants144 165 
Dividends on restricted stock grants251 165 
Stock issued in connection with HSBI acquisition— 221,522 
Lease liabilities arising from obtaining right-of-use assets482 — 
Lease liabilities arising from HSBI acquisition— 184 
See Notes to Consolidated Financial Statements
9
THE FIRST BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2024
NOTE 1 – BASIS OF PRESENTATION
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and the instructions to Form 10-Q of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2023.
NOTE 2 – SUMMARY OF ORGANIZATION
The First Bancshares, Inc., Hattiesburg, Mississippi (the “Company”), was incorporated June 23, 1995, under the laws of the State of Mississippi for the purpose of operating as a bank holding company. The Company’s primary asset is its interest in its wholly-owned subsidiary, The First Bank (the “Bank” or “The First”).
On May 17, 2024, the Company, acting pursuant to authorization from its Board of Directors, provided written notice to The Nasdaq Stock Market LLC ("Nasdaq") of its determination to voluntarily withdraw the principal listing of the Company's voting common stock, $1.00 par value per share (the "Common Stock"), from Nasdaq and transfer the listing to the New York Stock Exchange ("NYSE"). The listing and trading of the Common Stock on Nasdaq ended at market close on May 29, 2024, and trading commenced on the NYSE at market open on May 30, 2024. The Common Stock is traded on the NYSE under the symbol "FBMS."
At June 30, 2024, the Company had approximately $7.966 billion in assets, $5.196 billion in net loans held for investment (“LHFI”), $6.626 billion in deposits, and $971.9 million in shareholders' equity. For the six months ended June 30, 2024, the Company reported net income of $40.3 million.
On February 23, 2024, the Company paid a cash dividend in the amount of $0.25 per share to shareholders of record as of the close of business on February 7, 2024. On April 24, 2024, the Company paid a cash dividend in the amount of $0.25 per share to shareholders of record as of the close of business on May 7, 2024. On July 25, 2024, 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 August 23, 2024 to shareholders of record as of the close of business on August 8, 2024.
NOTE 3 – ACCOUNTING STANDARDS
Effect of Recently Adopted Accounting Standards
In March 2023, FASB issued ASU No. 2023-01, Leases (Topic 842) - "Common Control Arrangements." This ASU requires entities to determine whether a related party arrangement between entities under common control is a lease. If the arrangement is determined to be a lease, an entity must classify and account for the lease on the same basis as an arrangement with a related party. The ASU requires all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group. This guidance is effective for the Company January 1, 2024, and did not have a material impact on the Company's consolidated financial statements.
In March 2023, FASB issued ASU No. 2023-02, Investments - Equity Method and Joint Venture (Topic 323): "Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method." These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization
10
method, regardless of the program giving rise to the related income tax credits. This guidance is effective for the Company January 1, 2024, and did not have a material impact on the Company's consolidated financial statements.
New Accounting Standards That Have Not Yet Been Adopted
In October 2023, FASB issued ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-K becomes effective, with early adoption prohibited. This guidance is not expected to have a material impact on the Company's consolidated financial statements.
In November 2023, FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This ASU amends the ASC to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The key amendments: 1. Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss. 2. Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss. 3. Require that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by FASB ASU Topic 280, Segment Reporting, in interim periods. 4. Clarify that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements. 5. Require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. 6. Require that a public entity has a single reportable segment provide all the disclosures required by the amendments in the ASU and all existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. This guidance is not expected to have a material impact on the Company's consolidated financial statements.
In December 2023, FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This ASU amendments require that a public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities disclose on an annual basis the following information about income taxes paid: 1. The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes. 2. The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: 1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign. 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. This guidance is not expected to have a material impact on the Company's consolidated financial statements.
In March 2024, FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements: This ASU amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and not required to understand or apply the guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. This ASU is effective for annual periods beginning after December 15, 2024. This guidance is not expected to have a material impact on the Company's consolidated financial statements.
11
NOTE 4 – BUSINESS COMBINATIONS
Acquisitions
Heritage Southeast Bank
On January 1, 2023, the Company completed its acquisition of Heritage Southeast Bancorporation, Inc. ("HSBI"), pursuant to an Agreement and Plan of Merger dated July 27, 2022, by and between the Company and HSBI (the "HSBI Merger Agreement"). Upon the completion of the merger of HSBI with and into the Company, Heritage Southeast Bank ("Heritage Bank"), HSBI's wholly-owned subsidiary, was merged with and into The First Bank. Under the terms of the HSBI Merger Agreement, each share of HSBI common stock was converted into the right to receive 0.965 of a share of Company common stock. The Company paid a total consideration of $221.5 million to the former HSBI shareholders as consideration in the acquisition, which included 6,920,422 shares of the Company's common stock, and $16 thousand in cash in lieu of fractional shares. The HSBI acquisition provided the opportunity for the Company to expand its operations in Georgia and the Florida panhandle.
In connection with the acquisition of HSBI, the Company recorded $91.9 million of goodwill, of which $3.2 million funded the ACL for estimated losses on the acquired PCD loans, and $43.7 million core deposit intangible. Goodwill is not deductible for income taxes. The core deposit intangible will be amortized to expense over 10 years.
The following table summarizes the finalized fair values of the assets acquired and liabilities assumed including the goodwill generated from the transaction on January 1, 2023, along with valuation adjustments that have been made since initially reported.
($ in thousands)As Initially
Reported		Measurement
Period
Adjustments		As Adjusted
Identifiable assets:
Cash and due from banks$106,973 $(180)$106,793 
Investments172,775 — 172,775 
Loans1,155,712 — 1,155,712 
Core deposit intangible43,739 — 43,739 
Personal and real property35,963 — 35,963 
Other real estate owned857 332 1,189 
Bank owned life insurance35,579 — 35,579 
Deferred taxes6,761 (632)6,129 
Interest receivable4,349 — 4,349 
Other assets3,103 — 3,103 
Total assets1,565,811 (480)1,565,331 
Liabilities and equity:
Deposits1,392,432 — 1,392,432 
Trust Preferred9,015 — 9,015 
Other liabilities34,271 — 34,271 
Total liabilities1,435,718 — 1,435,718 
Net assets acquired130,093 (480)129,613 
Consideration paid221,538 — 221,538 
Goodwill$91,445 $480 $91,925 
During the fourth quarter of 2023, the Company finalized its analysis and valuation adjustments have been made to cash and due from banks, other real estate owned, and deferred taxes since initially reported.
12
Beach Bancorp, Inc.
On August 1, 2022, the Company completed its acquisition of Beach Bancorp, Inc. ("BBI"), pursuant to an Agreement and Plan of Merger dated April 26, 2022, by and between the Company and BBI (the "BBI Merger Agreement"). Upon the completion of the merger of BBI with and into the Company, Beach Bank, BBI's wholly-owned subsidiary, was merged with and into The First Bank. Under the terms of the BBI Merger Agreement, each share of BBI common stock and each share of BBI preferred stock was converted into the right to receive 0.1711 of a share of Company common stock (the "BBI Exchange Ratio"), and all stock options awarded under the BBI equity plans were converted automatically into an option to purchase shares of Company common stock on the same terms and conditions as applicable to each such BBI option as in effect immediately prior to the effective time, with the number of shares underlying each such option and the applicable exercise price adjusted based on the BBI Exchange Ratio. The BBI merger provides the opportunity for the Company to expand its operations in the Florida panhandle and enter the Tampa market. The Company paid consideration of $101.5 million to the former BBI shareholders including 3,498,936 shares of the Company's common stock and $1 thousand in cash in lieu of fractional shares, and also assumed options entitling the owners thereof to purchase an additional 310,427 shares of the Company's common stock.
In connection with the acquisition of BBI, the Company recorded $23.7 million of goodwill, of which $1.3 million funded the ACL for estimated losses on the acquired PCD loans, and $9.8 million core deposit intangible. Goodwill is not deductible for income taxes. The core deposit intangible will be amortized to expense over 10 years.
The following table summarizes the finalized fair values of the assets acquired and liabilities assumed including the goodwill generated from the transaction on August 1, 2022, along with valuation adjustments that have been made since initially reported.
($ in thousands)As Initially ReportedMeasurement Period AdjustmentsAs Adjusted
Purchase price:
Cash and stock$101,470 $— $101,470 
Total purchase price101,470 — 101,470 
Identifiable assets:
Cash$23,939 $— $23,939 
Investments22,907 (264)22,643 
Loans482,903 2,268 485,171 
Other real estate8,797 (580)8,217 
Bank owned life insurance10,092 — 10,092 
Core deposit intangible9,791 — 9,791 
Personal and real property13,825 (1,868)11,957 
Deferred tax asset28,105 (970)27,135 
Other assets9,649 (414)9,235 
Total assets610,008 (1,828)608,180 
Liabilities and equity:
Deposits490,588 3 490,591 
Borrowings25,000 — 25,000 
Other liabilities14,772 — 14,772 
Total liabilities530,360 3 530,363 
Net assets acquired79,648 (1,831)77,817 
Goodwill$21,822 $1,831 $23,653 
During the third quarter of 2023, the Company finalized its analysis and valuation adjustments that have been made to investments, loans, other real estate, personal and real property, deferred tax asset, other assets, and deposits.
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NOTE 5 – EARNINGS APPLICABLE TO COMMON SHAREHOLDERS
Basic per share data is calculated based on the weighted-average number of common shares outstanding during the reporting period. Diluted per share data includes any dilution from potential common stock outstanding, such as restricted stock grants. There were no anti-dilutive common stock equivalents excluded in the calculations.
The following tables disclose the reconciliation of the numerators and denominators of the basic and diluted computations applicable to common shareholders.
($ in thousands, except per share amount)Three Months Ended
June 30, 2024		Three Months Ended
June 30, 2023
Net Income
(Numerator)		Shares
(Denominator)		Per
Share Data		Net Income
(Numerator)		Shares
(Denominator)		Per
Share Data
Basic earnings per share$19,697 31,527,592 $0.62 $23,779 31,378,364 $0.76 
Effect of dilutive shares:
Restricted stock grants 152,235 213,301 
Diluted earnings per share$19,697 31,679,827 $0.62 $23,779 31,591,665 $0.75 
($ in thousands, except per share amount)For the Six Months Ended
June 30, 2024		For the Six Months Ended
June 30, 2023
Net Income
(Numerator)		Shares
(Denominator)		Per
Share Data		Net Income
(Numerator)		Shares
(Denominator)		Per
Share Data
Basic earnings per share$40,325 31,501,423 $1.28 $40,050 31,343,911 $1.28 
Effect of dilutive shares:
Restricted stock grants158,075 205,828 
Diluted earnings per share$40,325 31,659,498 $1.27 $40,050 31,549,739 $1.27 
The Company granted 141,457 shares and 118,689 shares of restricted stock in the first quarter of 2024 and 2023, respectively. The Company granted 2,847 shares and 45,773 shares of restricted stock in the second quarter of 2024 and 2023, respectively.
NOTE 6 – COMPREHENSIVE INCOME
As presented in the Consolidated Statements of Comprehensive Income (Loss), comprehensive income includes net income and other comprehensive income. The Company’s sources of other comprehensive income are unrealized gains and losses on available-for-sale securities, which are also recognized as separate components of equity.
NOTE 7 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. At June 30, 2024, and December 31, 2023, these financial instruments consisted of the following:
($ in thousands)June 30, 2024December 31, 2023
Fixed Rate
Variable RateFixed RateVariable Rate
Commitments to make loans$35,644 $106,442 $34,380 $50,226 
Unused lines of credit149,066 1,472,793 231,335 605,646 
Standby letters of credit14,149 14,814 15,573 13,114 
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Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 0.0% to 18.0% and maturities ranging from approximately 1 year to 30 years.
ALLOWANCE FOR CREDIT LOSSES (“ACL”) ON OFF BALANCE SHEET CREDIT (“OBSC”) EXPOSURES
The Company maintains a separate ACL on OBSC exposures, including unfunded commitments and letters of credit, which is included on the accompanying consolidated balance sheet as of June 30, 2024 and December 31, 2023. The ACL on OBSC exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life.
Changes in the ACL on OBSC exposures were as follows for the presented periods:
($ in thousands)Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Balance at beginning of period$2,075$1,825$2,075 $1,325 
Credit loss expense related to OBSC exposures—250— 750 
Balance at end of period$2,075$2,075$2,075 $2,075 
Adjustments to the ACL on OBSC exposures are recorded to provision for credit losses related to OBSC exposures. The Company recorded no ACL provision for the three months period ended June 30, 2024 and $250 thousand for the same period in 2023. For the six months period ended June 30, 2024, the Company recorded no provision to the ACL on OBSC exposures compared to $750 thousand for the same period in 2023. The ACL on OBSC exposures for the six months ended June 30, 2023 includes the day one provision for unfunded commitments related to the HSBI acquisition and an increase in unfunded commitments.
No credit loss estimate is reported for OBSC exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation on the arrangement.
NOTE 8 – FAIR VALUE DISCLOSURES AND REPORTING, THE FAIR VALUE OPTION AND FAIR VALUE MEASUREMENTS
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the assets or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability.
The following methods and assumptions were used by the Company to estimate its financial instrument fair values disclosed at June 30, 2024 and December 31, 2023:
•Investment Securities: The fair value for investment securities is determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing is a mathematical technique commonly used to price debt securities that are not actively traded, valuing debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).
15
•Loans Held for Sale - Loans held for sale are carried at fair value in the aggregate as determined by the outstanding commitments from investors. As such, we classify those loans subjected to recurring fair value adjustments as Level 2 of the fair value hierarchy.
•Collateral Dependent Loans: Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Such adjustments, if any, result in a Level 3 classification of the inputs for determining fair value. The Company generally adjusts the appraisal down by approximately 10 percent to account for cost associated with litigation and collection. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment.
•Other Real Estate Owned: Other real estate owned consists of properties obtained through foreclosure. The adjustment at the time of foreclosure is recorded through the allowance for credit losses. Fair value of other real estate owned is based on current independent appraisals of the collateral less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals, which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments, if any, result in a Level 3 classification of the inputs for determining fair value. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in market conditions from the time of valuation and anticipated sales values considering plans for disposition, which could result in an adjustment to lower the collateral value estimates indicated in the appraisals. The Company generally adjusts the appraisal down by approximately 10 percent to account for carrying costs. Periodic revaluations are classified as Level 3 in the fair value hierarchy since assumptions are used that may not be observable in the market. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the other real estate owned or foreclosed asset could differ from the original estimate. If it is determined the fair value declines subsequent to foreclosure, a valuation allowance is recorded through other non-interest income. Operating costs associated with the assets after acquisition are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and recorded in other non-interest income. Other real estate owned is classified within Level 3 of the fair value hierarchy.
•Interest Rate Swaps: The Company offers interest rate swaps to certain commercial loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable to fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing the contract or fixed interest payments for the customer. In addition, the Company will enter into risk participation agreements ("RPA"). Under an RPA-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower, for a fee received from the other bank. Under an RPA-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. RPAs are derivative financial instruments recorded at fair value. Although we have determined that a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit assumptions associated with our risk participation agreements utilize Level 3 inputs.
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Estimated fair values for the Company’s financial instruments are as follows, as of the dates noted:
June 30, 2024Carrying
Amount		Estimated
Fair Value		Fair Value Measurements
($ in thousands)
Quoted Prices
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial Instruments:
Assets:
Cash and cash equivalents$207,606 $207,606 $207,606 $— $— 
Securities available-for-sale1,124,462 1,124,462 64,886 1,034,236 25,340 
Securities held-to-maturity607,502 560,747 — 560,747 — 
Loans held for sale5,892 5,892 — 5,892 — 
Loans, net5,195,760 4,952,117 — — 4,952,117 
Accrued interest receivable35,439 35,440 — 8,530 26,910 
  Interest rate swaps11,682 11,682 — 11,655 27 
Liabilities:
Noninterest-bearing deposits$1,870,305 $1,870,305 $— $1,870,305 $— 
Interest-bearing deposits4,755,812 4,568,909 — 4,568,909 — 
Subordinated debentures123,558 109,449 — — 109,449 
FHLB and other borrowings182,400 182,400 — 182,400 — 
Accrued interest payable15,400 15,400 — 15,400 — 
  Interest rate swaps11,682 11,682 — 11,655 27 
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December 31, 2023Carrying
Amount		Estimated
Fair Value		Fair Value Measurements
($ in thousands)
Quoted
Prices
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial Instruments:
Assets:
Cash and cash equivalents$355,147 $355,147 $355,147 $— $— 
Securities available-for-sale1,042,365 1,042,365 16,675 1,007,477 18,213 
Securities held-to-maturity654,539 615,944 — 615,944 — 
Loans held for sale2,914 2,914 — 2,914 — 
Loans, net5,116,010 4,877,935 — — 4,877,935 
Accrued interest receivable33,300 33,300 — 8,632 24,668 
Interest rate swaps12,170 12,170 — 12,129 41 
Liabilities:
Non-interest-bearing deposits$1,849,013 $1,849,013 $— $1,849,013 $— 
Interest-bearing deposits4,613,859 4,430,227 — 4,430,227 — 
Subordinated debentures123,386 109,426 — — 109,426 
FHLB and other borrowings390,000 390,000 — 390,000 — 
Accrued interest payable22,702 22,702 — 22,702 — 
Interest rate swaps12,175 12,175 — 12,129 46 
Assets measured at fair value on a recurring basis are summarized below:
June 30, 2024
($ in thousands)Fair ValueFair Value Measurements Using
Quoted Prices in
Active Markets
For
Identical Assets
(Level 1)		Significant Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Assets:
Available-for-sale
U.S. Treasury$64,886 $64,886 $— $— 
Obligations of U.S. Government agencies and sponsored entities100,054 — 100,054 — 
Municipal securities420,348 — 395,038 25,310 
Mortgage-backed securities500,608 — 500,608 — 
Corporate obligations32,965 — 32,935 30 
Other5,601 — 5,601 — 
Total available-for-sale$1,124,462 $64,886 $1,034,236 $25,340 
Loans held for sale$5,892 $— $5,892 $— 
Interest rate swaps$11,682 $— $11,655 $27 
Liabilities:
Interest rate swaps$11,682 $— $11,655 $27 
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