10-Q 1 fbms-20220331x10q.htm 10-Q
0000947559--12-312022Q1falseFIRST BANCSHARES INC /MS/0000947559us-gaap:TreasuryStockMember2022-01-012022-03-310000947559us-gaap:TreasuryStockMember2021-01-012021-03-310000947559us-gaap:RetainedEarningsMember2022-03-310000947559us-gaap:AdditionalPaidInCapitalMember2022-03-310000947559us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310000947559us-gaap:RetainedEarningsMember2021-12-310000947559us-gaap:AdditionalPaidInCapitalMember2021-12-310000947559us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000947559us-gaap:RetainedEarningsMember2021-03-310000947559us-gaap:AdditionalPaidInCapitalMember2021-03-310000947559us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310000947559us-gaap:RetainedEarningsMember2020-12-310000947559us-gaap:AdditionalPaidInCapitalMember2020-12-310000947559us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000947559us-gaap:TreasuryStockMember2022-03-310000947559us-gaap:CommonStockMember2022-03-310000947559us-gaap:TreasuryStockMember2021-12-310000947559us-gaap:CommonStockMember2021-12-310000947559us-gaap:TreasuryStockMember2021-03-310000947559us-gaap:CommonStockMember2021-03-310000947559us-gaap:TreasuryStockMember2020-12-310000947559us-gaap:CommonStockMember2020-12-310000947559us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310000947559us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310000947559us-gaap:AccountingStandardsUpdate201613Member2021-03-310000947559fbms:TroubledDebtRestructuringsMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:ConsumerRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:ConsumerInstallmentMemberus-gaap:FinancialAssetNotPastDueMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:CommercialFinancialAndAgriculturalLoansMemberus-gaap:FinancialAssetNotPastDueMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberus-gaap:FinancialAssetNotPastDueMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberus-gaap:CommercialRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310000947559fbms:TroubledDebtRestructuringsMemberfbms:CommercialFinancialAndAgriculturalLoansMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310000947559fbms:TroubledDebtRestructuringsMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310000947559fbms:ResidentialMortgageLoansHeldForSaleMember2022-03-310000947559fbms:ResidentialMortgageLoansHeldForSaleMember2021-12-310000947559fbms:TroubledDebtRestructuringsMemberfbms:ConsumerInstallmentMember2022-03-310000947559us-gaap:CommercialRealEstateMember2022-03-310000947559fbms:ConsumerRealEstateMember2022-03-310000947559fbms:ConsumerInstallmentLoansMember2022-03-310000947559fbms:CommercialFinancialAndAgriculturalFinancingReceivableMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:ConsumerInstallmentMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310000947559us-gaap:CommercialRealEstateMember2021-12-310000947559fbms:ConsumerRealEstateMember2021-12-310000947559fbms:ConsumerInstallmentLoansMember2021-12-310000947559fbms:CommercialFinancialAndAgriculturalFinancingReceivableMember2021-12-310000947559us-gaap:CommercialRealEstateMember2021-03-310000947559fbms:ConsumerRealEstateMember2021-03-310000947559fbms:ConsumerInstallmentMember2021-03-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2021-03-310000947559us-gaap:CommercialRealEstateMember2020-12-310000947559fbms:ConsumerRealEstateMember2020-12-310000947559fbms:ConsumerInstallmentMember2020-12-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2020-12-310000947559fbms:VariableInterestRateMember2022-03-310000947559fbms:FixedInterestRateMember2022-03-310000947559fbms:VariableInterestRateMember2021-12-310000947559fbms:FixedInterestRateMember2021-12-310000947559us-gaap:SubstandardMemberfbms:ConsumerRealEstateMember2022-01-012022-03-310000947559us-gaap:SubstandardMemberfbms:CommercialFinancialAndAgriculturalLoansMember2022-01-012022-03-310000947559us-gaap:PassMemberus-gaap:CommercialRealEstateMember2022-01-012022-03-310000947559us-gaap:PassMemberfbms:ConsumerRealEstateMember2022-01-012022-03-310000947559us-gaap:PassMemberfbms:ConsumerInstallmentMember2022-01-012022-03-310000947559us-gaap:PassMemberfbms:CommercialFinancialAndAgriculturalLoansMember2022-01-012022-03-310000947559us-gaap:SubstandardMember2022-01-012022-03-310000947559us-gaap:PassMember2022-01-012022-03-310000947559fbms:TroubledDebtRestructuringsMemberus-gaap:CommercialRealEstateMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:ConsumerRealEstateMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559fbms:TroubledDebtRestructuringsMember2022-03-310000947559fbms:TroubledDebtRestructuringsMemberfbms:ConsumerRealEstateMemberus-gaap:FinancialAssetNotPastDueMember2021-12-310000947559fbms:TroubledDebtRestructuringsMemberus-gaap:CommercialRealEstateMember2021-12-310000947559fbms:TroubledDebtRestructuringsMemberfbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559fbms:TroubledDebtRestructuringsMember2021-12-310000947559us-gaap:SubstandardMemberus-gaap:CommercialRealEstateMember2022-03-310000947559us-gaap:SubstandardMemberfbms:ConsumerRealEstateMember2022-03-310000947559us-gaap:SubstandardMemberfbms:ConsumerInstallmentMember2022-03-310000947559us-gaap:SubstandardMemberfbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559us-gaap:SpecialMentionMemberus-gaap:CommercialRealEstateMember2022-03-310000947559us-gaap:SpecialMentionMemberfbms:ConsumerRealEstateMember2022-03-310000947559us-gaap:SpecialMentionMemberfbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559us-gaap:PassMemberus-gaap:CommercialRealEstateMember2022-03-310000947559us-gaap:PassMemberfbms:ConsumerRealEstateMember2022-03-310000947559us-gaap:PassMemberfbms:ConsumerInstallmentMember2022-03-310000947559us-gaap:PassMemberfbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559us-gaap:SubstandardMember2022-03-310000947559us-gaap:SpecialMentionMember2022-03-310000947559us-gaap:PassMember2022-03-310000947559us-gaap:CommercialRealEstateMember2022-03-310000947559fbms:ConsumerRealEstateMember2022-03-310000947559fbms:ConsumerInstallmentMember2022-03-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559us-gaap:CommercialRealEstateMember2022-03-310000947559fbms:InstallmentAndOtherMember2022-03-310000947559fbms:ConsumerRealEstateMember2022-03-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559us-gaap:CommercialRealEstateMember2021-12-310000947559fbms:InstallmentAndOtherMember2021-12-310000947559fbms:ConsumerRealEstateMember2021-12-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559fbms:TrustPreferredSecuritiesMember2022-03-310000947559fbms:TrustPreferredSecuritiesMember2021-12-310000947559us-gaap:MunicipalBondsMember2022-03-310000947559us-gaap:BanksTrustAndInsuranceEquitiesMember2022-03-310000947559us-gaap:MunicipalBondsMember2021-12-310000947559us-gaap:BanksTrustAndInsuranceEquitiesMember2021-12-310000947559us-gaap:MunicipalBondsMember2021-03-310000947559us-gaap:BanksTrustAndInsuranceEquitiesMember2021-03-310000947559us-gaap:MunicipalBondsMember2020-12-310000947559us-gaap:BanksTrustAndInsuranceEquitiesMember2020-12-310000947559us-gaap:MunicipalBondsMember2022-01-012022-03-310000947559us-gaap:MunicipalBondsMember2021-01-012021-03-310000947559us-gaap:BanksTrustAndInsuranceEquitiesMember2021-01-012021-03-310000947559us-gaap:RetainedEarningsMember2022-01-012022-03-310000947559us-gaap:RetainedEarningsMember2021-01-012021-03-310000947559srt:MoodysAaaRatingMember2022-03-310000947559srt:MoodysAa1RatingMember2022-03-310000947559srt:MoodysA2RatingMember2022-03-310000947559fbms:NotRatedMember2022-03-310000947559us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-03-310000947559us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310000947559us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-03-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310000947559us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel3Member2022-03-310000947559us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel2Member2022-03-310000947559us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel1Member2022-03-310000947559us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-03-310000947559us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310000947559us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310000947559us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel3Member2022-03-310000947559us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-03-310000947559us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310000947559us-gaap:USTreasurySecuritiesMember2022-03-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMember2022-03-310000947559us-gaap:MunicipalBondsMember2022-03-310000947559us-gaap:MortgageBackedSecuritiesMember2022-03-310000947559us-gaap:CorporateBondSecuritiesMember2022-03-310000947559us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000947559us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310000947559us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310000947559us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel3Member2021-12-310000947559us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel2Member2021-12-310000947559us-gaap:MunicipalBondsMemberus-gaap:FairValueInputsLevel1Member2021-12-310000947559us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000947559us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310000947559us-gaap:MortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310000947559us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel3Member2021-12-310000947559us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel2Member2021-12-310000947559us-gaap:CorporateBondSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310000947559us-gaap:USTreasurySecuritiesMember2021-12-310000947559us-gaap:USGovernmentAgenciesDebtSecuritiesMember2021-12-310000947559us-gaap:MunicipalBondsMember2021-12-310000947559us-gaap:MortgageBackedSecuritiesMember2021-12-310000947559us-gaap:CorporateBondSecuritiesMember2021-12-310000947559us-gaap:USTreasurySecuritiesMember2022-03-310000947559us-gaap:USStatesAndPoliticalSubdivisionsMember2022-03-310000947559us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember2022-03-310000947559us-gaap:ResidentialMortgageBackedSecuritiesMember2022-03-310000947559us-gaap:CommercialMortgageBackedSecuritiesMember2022-03-310000947559fbms:CorporateDebtObligationsMember2022-03-310000947559us-gaap:USTreasurySecuritiesMember2021-12-310000947559us-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-310000947559us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember2021-12-310000947559us-gaap:ResidentialMortgageBackedSecuritiesMember2021-12-310000947559us-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310000947559fbms:CorporateDebtObligationsMember2021-12-310000947559srt:MinimumMemberfbms:OffBalanceSheetRiskMember2022-01-012022-03-310000947559srt:MaximumMemberfbms:OffBalanceSheetRiskMember2022-01-012022-03-310000947559srt:MinimumMemberfbms:OffBalanceSheetRiskMember2022-03-310000947559srt:MaximumMemberfbms:OffBalanceSheetRiskMember2022-03-3100009475592022-02-252022-02-250000947559fbms:SouthwestGeorgiaFinancialCorporationMember2020-12-3100009475592021-03-3100009475592020-12-310000947559fbms:BeachBancorpInc.BbiMember2022-03-310000947559fbms:BeachBancorpInc.BbiMemberus-gaap:SubsequentEventMember2022-04-262022-04-260000947559fbms:CadenceBankN.a.Member2021-12-032021-12-030000947559fbms:SouthwestGeorgiaFinancialCorporationMember2022-01-012022-03-310000947559fbms:CadenceBankN.a.Member2022-01-012022-03-310000947559us-gaap:InterestIncomeMember2022-01-012022-03-310000947559fbms:NonInterestIncomeMember2022-01-012022-03-310000947559us-gaap:InterestIncomeMember2021-01-012021-03-310000947559fbms:NonInterestIncomeMember2021-01-012021-03-310000947559fbms:SouthwestGeorgiaFinancialCorporationMember2020-04-032020-04-030000947559us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember2022-01-012022-03-310000947559us-gaap:USTreasurySecuritiesMember2021-01-012021-12-310000947559us-gaap:USStatesAndPoliticalSubdivisionsMember2021-01-012021-12-310000947559us-gaap:USGovernmentSponsoredEnterprisesDebtSecuritiesMember2021-01-012021-12-310000947559us-gaap:ResidentialMortgageBackedSecuritiesMember2021-01-012021-12-310000947559us-gaap:CommercialMortgageBackedSecuritiesMember2021-01-012021-12-310000947559fbms:CorporateDebtObligationsMember2021-01-012021-12-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueMeasurementsNonrecurringMember2022-03-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:OtherRealEstateOwnedMemberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:CollateralDependentLoansMemberus-gaap:FairValueMeasurementsNonrecurringMember2021-12-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2022-01-012022-03-310000947559fbms:CadenceBankN.a.Memberus-gaap:CoreDepositsMember2021-12-032021-12-030000947559fbms:SouthwestGeorgiaFinancialCorporationMemberus-gaap:CoreDepositsMember2020-04-032020-04-030000947559fbms:TroubleDebtRestructuringMember2021-01-012021-12-310000947559us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310000947559us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310000947559us-gaap:CommonStockMember2022-01-012022-03-310000947559us-gaap:CommonStockMember2021-01-012021-03-310000947559us-gaap:CommercialRealEstateMemberfbms:TroubleDebtRestructuringMemberus-gaap:CommercialRealEstateMember2022-01-012022-03-310000947559fbms:ConsumerRealEstateMemberfbms:TroubleDebtRestructuringMemberfbms:ConsumerRealEstateMember2022-01-012022-03-310000947559fbms:TroubleDebtRestructuringMember2022-01-012022-03-310000947559us-gaap:CommercialRealEstateMemberfbms:TroubleDebtRestructuringMemberus-gaap:CommercialRealEstateMember2021-01-012021-03-310000947559fbms:TroubleDebtRestructuringMember2021-01-012021-03-310000947559us-gaap:CommercialRealEstateMemberfbms:RealPropertyMember2022-01-012022-03-310000947559fbms:ConsumerRealEstateMemberfbms:RealPropertyMember2022-01-012022-03-310000947559fbms:ConsumerInstallmentMemberfbms:MiscellaneousMember2022-01-012022-03-310000947559us-gaap:CommercialRealEstateMember2022-01-012022-03-310000947559fbms:RealPropertyMember2022-01-012022-03-310000947559fbms:MiscellaneousMember2022-01-012022-03-310000947559fbms:ConsumerRealEstateMember2022-01-012022-03-310000947559fbms:ConsumerInstallmentMember2022-01-012022-03-310000947559us-gaap:CommercialRealEstateMemberfbms:RealPropertyMember2021-01-012021-12-310000947559fbms:ConsumerRealEstateMemberfbms:RealPropertyMember2021-01-012021-12-310000947559us-gaap:CommercialRealEstateMember2021-01-012021-12-310000947559fbms:RealPropertyMember2021-01-012021-12-310000947559fbms:ConsumerRealEstateMember2021-01-012021-12-3100009475592021-01-012021-12-310000947559us-gaap:CommercialRealEstateMember2021-01-012021-03-310000947559fbms:ConsumerRealEstateMember2021-01-012021-03-310000947559fbms:ConsumerInstallmentMember2021-01-012021-03-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2021-01-012021-03-310000947559us-gaap:MeasurementInputDiscountRateMember2022-03-310000947559us-gaap:SubstandardMemberus-gaap:CommercialRealEstateMember2021-12-310000947559us-gaap:SubstandardMemberfbms:ConsumerRealEstateMember2021-12-310000947559us-gaap:SubstandardMemberfbms:ConsumerInstallmentMember2021-12-310000947559us-gaap:SubstandardMemberfbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559us-gaap:SpecialMentionMemberus-gaap:CommercialRealEstateMember2021-12-310000947559us-gaap:SpecialMentionMemberfbms:ConsumerRealEstateMember2021-12-310000947559us-gaap:SpecialMentionMemberfbms:ConsumerInstallmentMember2021-12-310000947559us-gaap:SpecialMentionMemberfbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559us-gaap:PassMemberus-gaap:CommercialRealEstateMember2021-12-310000947559us-gaap:PassMemberfbms:ConsumerRealEstateMember2021-12-310000947559us-gaap:PassMemberfbms:ConsumerInstallmentMember2021-12-310000947559us-gaap:PassMemberfbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559us-gaap:SubstandardMember2021-12-310000947559us-gaap:SpecialMentionMember2021-12-310000947559us-gaap:PassMember2021-12-310000947559us-gaap:CommercialRealEstateMember2021-12-310000947559fbms:ConsumerRealEstateMember2021-12-310000947559fbms:ConsumerInstallmentMember2021-12-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2022-03-310000947559fbms:ConsumerInstallmentMember2021-12-310000947559fbms:CommercialFinancialAndAgriculturalLoansMember2021-12-310000947559us-gaap:CommercialRealEstateMember2022-03-310000947559fbms:ConsumerRealEstateMember2022-03-310000947559fbms:ConsumerInstallmentMember2022-03-310000947559us-gaap:CommercialRealEstateMember2021-12-310000947559fbms:ConsumerRealEstateMember2021-12-310000947559us-gaap:CommercialRealEstateMember2022-01-012022-03-310000947559us-gaap:FinancialAssetNotPastDueMember2022-03-310000947559us-gaap:FinancialAssetNotPastDueMember2021-12-310000947559us-gaap:MunicipalBondsMember2022-01-012022-03-310000947559fbms:TrustPreferredSecuritiesMember2022-01-012022-03-310000947559us-gaap:MunicipalBondsMember2021-01-012021-12-310000947559fbms:TrustPreferredSecuritiesMember2021-01-012021-12-3100009475592021-01-012021-03-310000947559us-gaap:USTreasurySecuritiesMember2022-01-012022-03-310000947559us-gaap:USStatesAndPoliticalSubdivisionsMember2022-01-012022-03-310000947559us-gaap:ResidentialMortgageBackedSecuritiesMember2022-01-012022-03-310000947559us-gaap:CommercialMortgageBackedSecuritiesMember2022-01-012022-03-310000947559fbms:CorporateDebtObligationsMember2022-01-012022-03-310000947559fbms:AfsSecuritiesMember2022-01-012022-03-310000947559fbms:AfsSecuritiesMember2021-01-012021-12-310000947559fbms:CadenceBankN.a.Member2021-12-030000947559fbms:SouthwestGeorgiaFinancialCorporationMember2020-04-030000947559us-gaap:PortionAtFairValueFairValueDisclosureMember2022-03-310000947559us-gaap:FairValueInputsLevel3Member2022-03-310000947559us-gaap:FairValueInputsLevel2Member2022-03-310000947559us-gaap:FairValueInputsLevel1Member2022-03-310000947559us-gaap:PortionAtFairValueFairValueDisclosureMember2021-12-310000947559us-gaap:FairValueInputsLevel3Member2021-12-310000947559us-gaap:FairValueInputsLevel2Member2021-12-310000947559us-gaap:FairValueInputsLevel1Member2021-12-3100009475592021-12-3100009475592022-03-310000947559fbms:TroubleDebtRestructuringMember2022-03-310000947559fbms:TroubleDebtRestructuringMember2021-03-3100009475592022-05-0300009475592022-01-012022-03-31xbrli:sharesiso4217:USDxbrli:purefbms:loaniso4217:USDxbrli:sharesfbms:itemfbms:security

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number: 000-22507

THE FIRST BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Mississippi

64-0862173

(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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00

FBMS

The Nasdaq Stock Market

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                  No  

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                  No  

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.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes                   No  

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, 21,736,437 shares issued and 20,486,830 outstanding as of May 3, 2022.

Auditor Firm PCAOB ID: 686

Auditor Name:  BKD, LLP

Auditor Location:  Jackson, MS

The First Bancshares, Inc.

Form 10-Q

Quarter Ended March 31, 2022

Index

Part I. Financial Information

 

 

 

Item 1.

Financial Statements

3

Consolidated Balance Sheets—Unaudited at March 31, 2022

3

Consolidated Statements of Income—Unaudited

4

Consolidated Statements of Comprehensive Income—Unaudited

5

Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

6

Consolidated Statements of Cash Flows—Unaudited

7

Notes to Consolidated Financial Statements—Unaudited

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

48

Item 4.

Controls and Procedures

50

 

 

 

Part II. Other Information

 

 

 

Item 1.

Legal Proceedings

51

Item 1A. 

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 3.

Defaults Upon Senior Securities

51

Item 4.

Mine Safety Disclosures

51

Item 5.

Other Information

51

Item 6.

Exhibits

52

Signatures

53

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE FIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands)

(Unaudited)

March 31,

December 31, 

    

2022

    

2021

ASSETS

Cash and due from banks

$

125,709

$

115,232

Interest-bearing deposits with banks

 

676,904

 

804,481

Total cash and cash equivalents

 

802,613

 

919,713

Securities available-for-sale, at fair value (amortized cost: $1,683,844 2022; $1,741,153; allowance for credit losses: $0)

 

1,591,677

 

1,751,832

Securities held to maturity, net of allowance for credit losses of $0 (fair value:  $358,395 - 2022; $0 – 2021)

 

372,062

Other securities

 

22,226

 

22,226

Total securities

 

1,985,965

 

1,774,058

Loans held for sale

 

8,213

 

7,678

Loans held for investment

 

2,970,246

 

2,959,553

Allowance for credit losses

(31,620)

(30,742)

Net loans held for investment

2,938,626

2,928,811

Interest receivable

 

23,234

 

23,256

Premises and equipment

 

125,756

 

125,959

Operating lease right-of-use assets

 

3,779

 

4,095

Finance lease right-of-use assets

 

2,278

 

2,394

Cash surrender value of bank-owned life insurance

 

84,357

 

87,420

Goodwill

 

156,659

 

156,663

Other real estate owned

2,835

2,565

Other assets

61,780

44,802

Total assets

$

6,196,095

$

6,077,414

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

Liabilities:

Deposits:

 

 

Noninterest-bearing

 

$

810,723

$

756,118

Interest-bearing

 

4,627,015

 

4,470,666

Total deposits

 

5,437,738

 

5,226,784

Interest payable

 

1,306

 

1,711

Subordinated debentures

 

144,801

 

144,726

Operating lease liabilities

3,876

4,192

Finance lease liabilities

2,050

2,094

Allowance for credit losses on off-balance sheet credit exposures

1,070

1,070

Other liabilities

 

14,814

 

20,665

Total liabilities

 

5,605,655

5,401,242

Shareholders’ equity:

 

  

 

  

Common stock, par value $1 per share, 40,000,000 shares authorized; 21,734,437 shares issued at March 31, 2022, and 21,668,644 shares issued at December 31, 2021, respectively

 

21,734

 

21,669

Additional paid-in capital

 

459,075

 

459,228

Retained earnings

 

219,589

 

206,228

Accumulated other comprehensive (loss) income

 

(68,847)

 

7,978

Treasury stock, at cost, 1,249,607 shares at March 31, 2022 and 649,607 shares at December 31, 2021

 

(41,111)

 

(18,931)

Total shareholders’ equity

 

590,440

 

676,172

Total liabilities and shareholders’ equity

$

6,196,095

$

6,077,414

See Notes to Consolidated Financial Statements

3

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except earnings and dividends per share)

(Unaudited)

Three Months Ended

March 31, 

    

2022

    

2021

Interest and dividend income:

Interest and fees on loans

$

34,154

$

39,613

Interest and dividends on securities:

 

 

Taxable interest and dividends

 

6,152

 

3,591

Tax exempt interest

 

2,422

 

1,935

Interest on federal funds sold and interest-bearing deposits in other banks

13

48

Total interest income

 

42,741

 

45,187

Interest expense:

 

  

 

  

Interest on deposits

 

2,283

 

3,849

Interest on borrowed funds

 

1,819

 

2,109

Total interest expense

 

4,102

 

5,958

Net interest income

 

38,639

 

39,229

Provision for credit losses, LHFI

Provision for credit losses, OBSC exposures

Net interest income after provision for credit losses

 

38,639

 

39,229

Non-interest income:

 

 

  

Service charges on deposit accounts

 

2,040

 

1,761

(Loss) gain on securities

(3)

20

Government awards/grants

702

BOLI death proceeds

1,630

Gain (loss) on sale of premises and equipment

2

(4)

Other

 

6,786

 

7,695

Total non-interest income

 

11,157

 

9,472

Non-interest expense:

 

  

 

  

Salaries and employee benefits

16,799

16,054

Occupancy and equipment

3,876

3,879

Acquisition expense/charter conversion

408

Other

 

7,507

 

7,331

Total non-interest expense

28,590

27,264

Income before income taxes

21,206

21,437

Income tax expense

4,377

4,793

Net income

$

16,829

$

16,644

Basic earnings per share

$

0.81

$

0.79

Diluted earnings per share

0.81

0.79

See Notes to Consolidated Financial Statements

4

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

($ in thousands)

(Unaudited)

Three Months Ended

March 31, 

2022

2021

Net income

$

16,829

$

16,644

Other comprehensive income:

 

 

Unrealized holding losses arising during the period on available-for-sale securities

 

(102,849)

 

(12,852)

Reclassification adjustment for losses (gains) included in net income

 

3

 

(20)

Unrealized holding losses arising during the period on available-for-sale securities

 

(102,846)

 

(12,872)

Income tax benefit

 

26,021

 

3,257

Other comprehensive loss

 

(76,825)

 

(9,615)

Comprehensive (loss) income

$

(59,996)

$

7,029

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)

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Treasury Stock

    

Shares

Amount

    

Capital

    

Earnings

    

Income (Loss)

    

Shares

    

Amount

    

Total

Balance, January 1, 2021

21,598,993

$

21,599

$

456,919

$

154,241

$

25,816

(483,984)

$

(13,760)

$

644,815

Net income

16,644

16,644

Common Stock repurchased

(165,623)

(5,171)

(5,171)

Other comprehensive loss

(9,615)

(9,615)

Dividends on common stock, $0.13 per share

(2,723)

(2,723)

Issuance of restricted stock grants

84,578

85

(85)

Restricted stock grants forfeited

(500)

(1)

1

Repurchase of restricted stock for payment of taxes

(14,720)

(15)

(426)

(441)

Compensation expense

440

440

Balance, March 31, 2021

21,668,351

$

21,668

$

456,849

$

168,162

$

16,201

(649,607)

$

(18,931)

$

643,949

Balance, January 1, 2022

21,668,644

$

21,669

$

459,228

$

206,228

$

7,978

(649,607)

$

(18,931)

$

676,172

Net income

16,829

16,829

Common stock repurchased

(600,000)

(22,180)

(22,180)

Other comprehensive loss

(76,825)

(76,825)

Dividends on common stock, $0.17 per share

(3,468)

(3,468)

Issuance of restricted stock grants

82,123

82

(82)

Restricted stock grants forfeited

(1,000)

(1)

1

Repurchase of restricted stock for payment of taxes

(15,330)

(16)

(538)

(554)

Compensation expense

466

466

Balance, March 31, 2022

21,734,437

$

21,734

$

459,075

$

219,589

$

(68,847)

(1,249,607)

$

(41,111)

$

590,440

See Notes to Consolidated Financial Statements

6

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

(Unaudited)

Three Months Ended

March 31, 

2022

    

2021

Cash flows from operating activities:

Net income

$

16,829

$

16,644

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation, amortization and accretion

 

3,569

 

3,318

Gain on sale or writedown of ORE

(46)

(75)

Securities loss (gain)

3

(20)

(Gain) loss on disposal of premises and equipment

(2)

4

Restricted stock expense

 

466

 

440

Increase in cash value of life insurance

 

(574)

 

(482)

Federal Home Loan Bank stock dividends

-

(14)

Residential loans originated and held for sale

(38,783)

(79,365)

Proceeds from sale of residential loans held for sale

38,248

85,678

Changes in:

 

 

  

Interest receivable

 

22

 

1,658

Interest payable

 

(405)

 

(532)

Operating lease liability

(316)

(398)

Other, net

 

4,093

 

5,351

Net cash provided by operating activities

 

23,104

 

32,207

Cash flows from investing activities:

 

  

 

Maturities, calls and paydowns of available-for-sale and held-to-maturity securities

56,465

53,570

Purchases of available-for-sale and held-to-maturity securities

 

(372,629)

 

(180,948)

Redemptions of other securities, net

 

 

5,352

Net (increase) decrease in loans

 

(9,510)

 

65,731

Net changes in premises and equipment

 

(1,183)

 

(283)

Proceeds from sale of other real estate owned

 

271

 

831

Bank-owned life insurance – death proceeds

1,630

Purchase of bank-owned life insurance

(12,248)

Net cash used in investing activities

 

(324,956)

 

(67,995)

Cash flows from financing activities:

 

  

 

  

Increase in deposits

 

210,953

 

405,078

Net decrease in borrowed funds

 

 

(110,181)

Principal payments on finance lease liabilities

(44)

(47)

Dividends paid on common stock

 

(3,423)

 

(2,688)

Cash paid to repurchase common stock

(22,180)

(5,171)

Payment of subordinated debt issuance costs

 

 

(59)

Repurchase of restricted stock for payment of taxes

 

(554)

 

(441)

Net cash provided by financing activities

 

184,752

 

286,491

Net change in cash and cash equivalents

 

(117,100)

 

250,703

Beginning cash and cash equivalents

 

919,713

 

562,554

Ending cash and cash equivalents

$

802,613

$

813,257

 

  

 

  

Supplemental disclosures:

 

  

 

  

Loans transferred to other real estate

 

493

 

723

Issuance of restricted stock grants

 

82

 

85

Dividends on restricted stock grants

45

35

See Notes to Consolidated Financial Statements

7

THE FIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2022

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 three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021.

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 January 15, 2022, the Bank, then named The First, A National Banking Association, converted from a national banking association to a Mississippi state-chartered bank and changed its name to The First Bank. The First Bank is a member of the Federal Reserve System through the Federal Reserve Bank of Atlanta. The charter conversion and name change are expected to have only a minimal impact on the Bank’s clients, and deposits will continue to be insured by the Federal Deposit Insurance Corporation up to the applicable limits.

At March 31, 2022, the Company had approximately $6.196 billion in assets, $2.939 billion in net loans held for investment (“LHFI”), $5.438 billion in deposits, and $590.4 million in shareholders' equity. For the three months ended March 31, 2022, the Company reported net income of $16.8 million.

On February 25, 2022, the Company paid a cash dividend in the amount of $0.17 per share to shareholders of record as of the close of business on February 10, 2022.

NOTE 3 – ACCOUNTING STANDARDS

Effect of Recently Adopted Accounting Standards

In November 2021, FASB issued Accounting Standard Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): “Disclosures by Business Entities about Government Assistance.” These amendments are expected to increase transparency in financial reporting by requiring business entities to disclose information about certain types of government assistance they receive. The Company adopted ASU 2021-10 effective January 1, 2022. Adoption of ASU 2021-10 did not have a material impact to the Company’s consolidated financial statements.

New Accounting Standards That Have Not Yet Been Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (ASC 848): “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is assessing ASU 2020-04 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments.

8

In October 2021, FASB issued ASU No. 2021-08, Business Combination (Topic 805): “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.  The amendment improves comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination.  This ASU is effective for the Company after December 15, 2022.  The Company is assessing ASU 2021-08 and its impact on the Company’s consolidated financial statements.

In March 2022, FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” These amendments eliminate the TDR recognition and measurement guidance and instead require that an entity evaluate whether the modification represents a new loan or a continuation of an existing loan.  The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.  For public business entities, these amendments require that an entity disclose current period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20.  Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.  This ASU is effective for the Company after December 15, 2022.  The Company is assessing ASU 2022-02 and its impact on the Company’s consolidated financial statements.

NOTE 4 – BUSINESS COMBINATIONS

Acquisitions

Cadence Bank Branches

On December 3, 2021, The First completed its acquisition of seven Cadence Bank, N.A. (“Cadence”) branches in Northeast Mississippi (the “Cadence Branches”). In connection with the acquisition of the Cadence Branches, The First assumed $410.2 million in deposits, acquired $40.3 million in loans at fair value, acquired certain assets associated with the Cadence Branches at their book value, and paid a deposit premium of $1.0 million to Cadence.  As a result of the acquisition, the Company will have an opportunity to increase its deposit base and reduce transaction costs.  The Company also expects to reduce costs through economies of scale.

In connection with the acquisition of the Cadence Branches, the Company recorded a $1.3 million bargain purchase gain and $2.9 million core deposit intangible.  The bargain purchase gain was generated as a result of the estimated fair value of net assets acquired exceeding the merger consideration, based on provisional fair values.  The bargain purchase gain is considered non-taxable for income taxes purposes.  The core deposit intangible will be amortized to expense over 10 years. The Company also incurred $370 thousand of provision for credit losses on credit marks from the loans acquired.

Expenses associated with the branch acquisition of the Cadence Branches were $230 thousand for the three months ended March 31, 2022. These costs included charges associated with legal and consulting expenses, which have been expensed as incurred.

The assets acquired and liabilities assumed and consideration paid in the acquisition of the Cadence Branches were recorded at their estimated fair values based on management’s best estimates using information available at the date of the acquisition and are subject to adjustment for up to one year after the closing date of the acquisition.  While the fair values are not expected to be materially different from the estimates, accounting guidance provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period, which will run through December 3, 2022 in respect of the Cadence Branches, in the measurement period in which the adjustment amounts are determined.  The acquirer must record in the financial statements, the effect on earnings of changes in depreciation, amortization or other income effects, if any, as a result of changes to the provisional amounts, calculated as if the accounting had been completed at the acquisition date.  The items most susceptible to adjustment are the credit fair value adjustments on loans, core deposit intangible and the deferred income tax assets resulting from the acquisition.

9

The following table summarizes the provisional fair values of the assets acquired and liabilities assumed and the goodwill (bargain purchase gain) generated from the transaction ($ in thousands):

Purchase price:

    

  

Cash

$

1,000

Total purchase price

 

1,000

Identifiable assets:

 

  

Cash

$

359,916

Loans

 

40,262

Core deposit intangible

 

2,890

Personal and real property

 

9,675

Other assets

 

135

Total assets

 

412,878

Liabilities and equity:

 

  

Deposits

 

410,171

Other liabilities

 

407

Total liabilities

 

410,578

Net assets acquired

 

2,300

Bargain purchase gain

$

(1,300)

Southwest Georgia Financial Corporation

On April 3, 2020, the Company completed its acquisition of Southwest Georgia Financial Corporation (“SWG”), and immediately thereafter merged its wholly-owned subsidiary, Southwest Georgia Bank with and into The First.  The Company paid a total consideration of $47.9 million to the SWG shareholders as consideration in the merger, which included 2,546,967 shares of Company common stock and approximately $2 thousand in cash. As a result of the acquisition, the Company was able to increase its loan and deposit base and reduce costs through economies of scale.  The merger strengthened the Company’s market share and brought forth additional opportunities by adding a new market area in the Company’s footprint.

In connection with the acquisition, the Company recorded a $7.8 million bargain purchase gain and $4.6 million core deposit intangible.  The bargain purchase gain was generated as a result of the estimated fair value of net assets acquired exceeding the merger consideration, based on fair values, which is reflected as an adjustment to retained earnings.  The bargain purchase gain is considered non-taxable for income taxes purposes.  The core deposit intangible will be amortized to expense over 10 years.

The Company acquired the $394.6 million loan portfolio at an estimated fair value discount of $2.3 million.  The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments.

Expenses associated with the SWG acquisition were $0 for the three months ended March 31, 2022. These costs included system conversion and integrating operations charges and legal and consulting expenses, which have been expensed as incurred.

The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet at December 31, 2020, are as follows ($ in thousands):

    

December 31, 2020

Outstanding principal balance

$

297,528

Carrying amount

 

295,772

10

Supplemental Pro Forma Information

The following table presents certain supplemental pro forma information, for illustrative purposes only, for the three months ended March 31, 2022 and 2021 as if the SWG and Cadence Branches acquisitions had occurred on January 1, 2021.  The pro forma financial information is not necessarily indicative of the results of operations had the acquisitions been effective as of this date.

($in thousands)

    

Pro-Forma

    

Pro-Forma

Three months ended

Three months ended

March 31, 2022

March 31, 2021

(unaudited)

(unaudited)

Net interest income

$

38,639

$

39,229

Non-interest income

 

11,157

 

9,472

Total revenue

 

49,796

 

48,701

Income before income taxes

 

21,461

 

21,437

Supplemental pro-forma earnings were adjusted to exclude acquisition costs incurred.  The Company’s operating results for the three months ended March 31, 2022, include the operating results of the acquired assets and assumed liabilities of the Cadence Branches subsequent to the acquisition date.  Due to the timing of the data conversion and the integration of operations of the branches onto the Company’s existing operations, historical reporting of the acquired branches is impracticable, and therefore, disclosure of the amounts of revenue and expenses attributable to the acquired branches since the acquisition date are not available.

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):

For the Three Months Ended

 

For the Three Months Ended

March 31, 2022

 

March 31, 2021

Net Income

Shares

Per

 

Net Income

Shares

Per

    

(Numerator)

    

(Denominator)

    

Share Data

    

(Numerator)

    

(Denominator)

    

Share Data

Basic earnings per share

$

16,829

 

20,697,946

$

0.81

$

16,644

21,009,088

$

0.79

Effect of dilutive shares:

 

 

 

Restricted stock grants

 

 

149,051

 

191,470

Diluted earnings per share

$

16,829

 

20,846,997

$

0.81

$

16,644

21,200,558

$

0.79

The Company granted 82,123 shares and 84,578 shares of restricted stock in the first quarter of 2022 and 2021, respectively.

NOTE 6 – COMPREHENSIVE INCOME

As presented in the Consolidated Statements of Comprehensive Income, 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.

11

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 March 31, 2022, and December 31, 2021 these financial instruments consisted of the following:

($ in thousands)

March 31, 2022

December 31, 2021

    

Fixed Rate

    

Variable Rate

    

Fixed Rate

    

Variable Rate

Commitments to make loans

$

123,092

$

15,086

$

80,760

$

23,946

Unused lines of credit

221,457

314,120

213,332

309,791

Standby letters of credit

 

2,692

9,164

2,586

 

9,737

Commitments to make loans are generally made for periods of 90 days or less.  The fixed rate loan commitments have interest rates ranging from 1.0% 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 March 31, 2022 and December 31, 2021.  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

    

Three Months Ended

March 31, 2022

March 31, 2021

Balance at beginning of period

$

1,070

$

Adoption of ASU 326

 

 

718

Credit loss expense related to OBSC exposures

 

 

Balance at end of period

$

1,070

$

718

Adjustments to the ACL on OBSC exposures are recorded to provision for credit losses OBSC exposures.

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.

12

The following methods and assumptions were used by the Company to estimate its financial instrument fair values disclosed at March 31, 2022 and December 31, 2021:

Investment Securities: The fair value for investment securities are 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).
Loans Held for Sale: Since loans designated by the Company as available-for-sale are typically sold shortly after making the decision to sell them, realized gains or losses are usually recognized within the same period and fluctuations in fair values are not relevant for reporting purposes. If available-for-sale loans are held on our books for an extended period of time, the fair value of those loans is determined using quoted secondary-market prices.
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.

13

Estimated fair values for the Company’s financial instruments are as follows, as of the dates noted:

March 31, 2022

Fair Value Measurements

($ in thousands)

    

    

    

    

Significant

    

Other

Significant

Observable

Unobservable

Carrying

Estimated

Quoted Prices

Inputs

Inputs

    

Amount

    

Fair Value

    

(Level 1)

    

(Level 2)

    

(Level 3)

Financial Instruments:

Assets:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

$

802,613

$

802,613

$

802,613

$

$

Securities available-for-sale:

 

U.S. Treasury

128,993

128,993

128,993

Obligations of U.S. government agencies and sponsored entities

 

164,582

 

164,582

 

 

164,582

 

Municipal securities

 

639,253

 

639,253

 

 

619,625

 

19,628

Mortgage-backed securities

 

623,117

 

623,117

 

 

623,117

 

Corporate obligations

 

35,732

 

35,732

 

 

35,689

 

43

Securities held- to-maturity

 

372,062

 

358,395

 

 

358,395

 

Loans, net

 

2,938,626

 

2,967,573

 

 

 

2,967,573

Accrued interest receivable

 

23,234

 

23,234

 

 

7,542

 

15,692

Liabilities: