U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

 

FORM 10-Q

 

xQUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED: June 30, 2014          

 

OR

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

 

COMMISSION FILE NUMBER:    33-94288                     

  

THE FIRST BANCSHARES, INC.

 

(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)

 

MISSISSIPPI 64-0862173
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)

 

6480 U.S. HIGHWAY 98 WEST    
HATTIESBURG, MISSISSIPPI   39402
(ADDRESS OF PRINCIPAL   (ZIP CODE)
EXECUTIVE OFFICES)    

 

(601) 268-8998

 

(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

 

NONE

 

(FORMER NAME, ADDRESS AND FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

 

INDICATE BY CHECK MARK WHETHER THE ISSUER: (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 x  NO ¨

  

INDIATE BY CHECK MARK WHETHER THE REGISTRANT HAS SUBMITTED ELECTRONICALLY AND POSTED ON ITS CORPORATE WEB SITE, IF ANY, EVERY INTERACTIVE DATA FILE REQUIRED TO BE SUBMITTED AND POSTED PURSUANT TO RULE 405 OF REGULATION S-T (§232.405 OF THIS CHAPTER) DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT HE REGISTRANT WAS REQUIRED TO SUBMIT AND POST SUCH FILES).

YES x  NO ¨

 

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER, OR A SMALLER REPORTING COMPANY. SEE THE DEFINITIONS OF “LARGE ACCELERATED FILER,” “ACCELERATED FILER,” “NON-ACCELERATED FILER” AND “SMALLER REPORTING COMPANY” IN RULE 12B-2 OF THE EXCHANGE ACT.

 

LARGE ACCELERATED FILER ¨ ACCELERATED FILER ¨
       
NON-ACCELERATED FILER x SMALLER REPORTING COMPANY ¨

 

ON June 30, 2014, 5,153,793 SHARES OF THE ISSUER'S COMMON STOCK, PAR VALUE $1.00 PER SHARE WERE ISSUED AND OUTSTANDING.

 

TRANSITIONAL DISCLOSURE FORMAT (CHECK ONE): 

YES ¨  NO x

  

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT):

YES ¨  NO x

  

 
 

 

PART I - FINANCIAL INFORMATION

 

ITEM NO. 1. FINANCIAL STATEMENTS

 

THE FIRST BANCSHARES, INC.

 

CONSOLIDATED BALANCE SHEETS

 

($ amounts in thousands)

 

   (Unaudited)     
   June 30,   December 31, 
   2014   2013 
ASSETS          
           
Cash and due from banks  $25,677   $24,080 
Interest-bearing deposits with banks   27,289    14,205 
Federal funds sold   2,477    967 
           
Total cash and cash equivalents   55,443    39,252 
           
Securities held-to-maturity, at amortized cost   8,421    8,438 
Securities available-for-sale, at fair value   263,653    244,051 
Other securities   4,025    5,534 
           
Total securities   276,099    258,023 
           
Loans held for sale   3,220    3,680 
Loans   606,812    579,623 
Allowance for loan losses   (5,999)   (5,728)
           
Loans, net   604,033    577,575 
           
Premises and equipment   31,339    32,072 
Interest receivable   3,374    3,292 
Cash surrender value of life insurance   14,251    6,593 
Goodwill   10,621    10,621 
Other assets   9,254    8,992 
Other real estate owned   4,875    4,470 
           
TOTAL ASSETS  $1,009,289   $940,890 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
LIABILITIES:          
Deposits:          
Noninterest-bearing  $183,226   $173,794 
Interest-bearing   700,646    606,177 
           
TOTAL DEPOSITS   883,872    779,971 
           
Interest payable   297    400 
Borrowed funds   13,500    52,000 
Subordinated debentures   10,310    10,310 
Other liabilities   11,533    13,101 
           
TOTAL LIABILITIES   919,512    855,782 
           
STOCKHOLDERS’ EQUITY:          
Preferred stock, no par value, $1,000 per share liquidation, 10,000,000 shares authorized; 17,123 issued and outstanding at June 30, 2014 and December 31, 2013, respectively   17,123    17,103 
Common stock, par value $1 per share, 10,000,000 shares authorized; 5,180,287 shares issued at June 30, 2014 and 5,122,941 at December 31, 2013, Respectively   5,180    5,123 
Additional paid-in capital   42,239    42,086 
Retained earnings   24,972    22,509 
Accumulated other comprehensive income (loss)   727    (1,249)
Treasury stock, at cost, 26,494 shares at June 30, 2014 and at December 31, 2013   (464)   (464)
           
TOTAL STOCKHOLDERS’ EQUITY   89,777    85,108 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $1,009,289   $940,890 

 

1
 

 

THE FIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF INCOME

 

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

 

   (Unaudited)   (Unaudited) 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2014   2013   2014   2013 
                 
INTEREST INCOME:                    
Interest and fees on loans  $7,091   $6,318   $14,095   $11,549 
Interest and dividends on securities:                    
Taxable interest and dividends   956    740    1,859    1,643 
Tax exempt interest   497    529    1,026    1,033 
Interest on federal funds sold   30    22    41    34 
                     
TOTAL INTEREST INCOME   8,574    7,609    17,021    14,259 
                     
INTEREST EXPENSE:                    
Interest on deposits   584    666    1,050    1,284 
Interest on borrowed funds   142    157    299    298 
                     
TOTAL INTEREST EXPENSE   726    823    1,349    1,582 
                     
NET INTEREST INCOME   7,848    6,786    15,672    12,677 
                     
PROVISION FOR LOAN LOSSES   277    349    635    660 
                     
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   7,571    6,437    15,037    12,017 
                     
OTHER INCOME:                    
Service charges on deposit accounts   1,053    1,010    2,037    1,854 
Other service charges and fees   1,002    880    1,690    1,966 
TOTAL OTHER INCOME   2,055    1,890    3,727    3,820 
                     
OTHER EXPENSES:                    
Salaries and employee benefits   4,260    3,729    8,357    6,912 
Occupancy and equipment   1,242    1,104    2,462    2,060 
Other   1,882    2,412    3,792    4,252 
                     
TOTAL OTHER EXPENSES   7,384    7,245    14,611    13,224 
                     
INCOME BEFORE INCOME TAXES   2,242    1,082    4,153    2,613 
                     
INCOME TAXES   629    270    1,113    576 
                     
NET INCOME   1,613    812    3,040    2,037 
                     
PREFERRED STOCK ACCRETION AND DIVIDENDS   86    106    192    212 
                     
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS  $1,527   $706   $2,848   $1,825 
                     
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS:                    
BASIC  $.30   $.18   $.55   $.52 
DILUTED   .29    .18    .55    .51 
DIVIDENDS PER SHARE – COMMON   .0375    .0375    .075    .075 

 

2
 

 

THE FIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

($ amounts in thousands)

 

   (Unaudited)   (Unaudited) 
   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2014   2013   2014   2013 
                 
Net income per consolidated statements of income  $1,613   $812   $3,040   $2,037 
Other comprehensive income:                    
Unrealized holding gains (losses) arising during the period on available-for-sale securities   1,144    (6,174)   2,893    (6,068)
Unrealized holding gains (losses) on loans held for sale   56    (123)   101    (105)
Income tax benefit (expense)   (390)   2,140    (1,018)   2,099 
Other Comprehensive Income (Loss)   810    (4,157)   1,976    (4,074)
                     
Comprehensive Income (Loss)  $2,423   $(3,345)  $5,016   $(2,037)

 

3
 

 

THE FIRST BANCSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

 

($ in thousands)                                
  

 

 

Common

Stock

  

 

 

Preferred

Stock

  

 

 

Stock

Warrants

  

 

 

Additional

Paid-in

Capital

  

 

 

Retained

Earnings

  

Accumulated

Other

Compre-

hensive

Income(Loss)

  

 

 

Treasury

Stock

  

 

 

Total

 
Balance, January 1, 2013  $3,134   $17,021   $284   $23,427   $19,951   $2,533   $(464)  $65,886 
Net income   -    -    -    -    2,037    -    -    2,037 
Other compre- hensive income(loss)   -    -    -    -    -    (4,074)   -    (4,074)
Accretion and dividends on preferred stock   -    41    -    -    (212)   -    -    (171)
Dividends on common stock, $.075 per share   -    -    -    -    (235)   -    -    (235)
Issuance of 1,951,220 common shares   1,951    -    -    18,049    (1,003)   -    -    18,997 
Restricted stock grant   35    -    -    (35)   -    -    -    - 
Compensation expense   -    -    -    177    -    -    -    177 
Balance, June 30, 2013  $5,120   $17,062   $284   $41,618   $20,538   $(1,541)  $(464)  $82,617 
                                         
Balance, January 1, 2014  $5,123   $17,103   $284   $41,802   $22,509   $(1,249)  $(464)  $85,108 
Net income   -    -    -    -    3,040    -    -    3,040 
Other compre- hensive income   -    -    -    -    -    1,976    -    1,976 
Accretion and dividends on preferred stock   -    20    -    -    (191)   -    -    (171)
Dividends on common stock, $0.0375 per share   -    -    -    -    (386)   -    -    (386)
Repurchase of restricted stock for payment of taxes   (6)   -    -    (79)   -    -    -    (85)
Restricted stock grant   63    -    -    (63)   -    -    -    - 
Compensation expense   -    -    -    295    -    -    -    295 
Balance, June 30, 2014  $5,180   $17,123   $284   $41,955   $24,972   $727   $(464)  $89,777 

 

4
 

 

THE FIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

($ Amounts in Thousands)

 

   (Unaudited) 
   Six Months Ended 
   June 30, 
   2014   2013 
CASH FLOWS FROM OPERATING ACTIVITIES:          
NET INCOME  $3,040   $2,037 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation, amortization and accretion   1,096    1,038 
Provision for loan losses   635    660 
Loss on sale/writedown of ORE   195    122 
Restricted stock expense   295    177 
Increase in cash value of life insurance   (158)   (72)
Federal Home Loan Bank stock dividends   (2)   (2)
Changes in:          
Interest receivable   (82)   (26)
Loans held for sale, net   566    3,584 
Interest payable   (103)   (83)
Other, net   (1,505)   1,900 
NET CASH PROVIDED BY OPERATING ACTIVITIES   3,977    9,335 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Cash received in excess of cash paid for acquisition   -    43,150 
Maturities and calls of securities available- for-sale   19,633    38,146 
Purchases of securities available-for-sale and held-to-maturity   (37,452)   (73,521)
Net redemptions (purchases) of other securities   1,409    (208)
Net increase in loans   (28,912)   (24,662)
Purchase of bank owned life insurance   (7,500)   - 
Net increase in premises and equipment   (17)   (432)
NET CASH USED IN INVESTING ACTIVITIES   (52,839)   (17,527)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Increase in deposits   104,185    60,827 
Net decrease in borrowed funds   (38,500)   (20,271)
Dividends paid on common stock   (376)   (226)
Dividends paid on preferred stock   (171)   (171)
Repurchase of restricted stock for payment of taxes   (85)   - 
Issuance of 1,951,220 common shares, net   -    18,997 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   65,053    59,156 
           
NET INCREASE IN CASH   16,191    50,964 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   39,252    30,877 
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $55,443   $81,841 
           
SUPPLEMENTAL DISCLOSURES:          
           
CASH PAYMENTS FOR INTEREST   926   $1,324 
CASH PAYMENTS FOR INCOME TAXES   275    980 
LOANS TRANSFERRED TO OTHER REAL ESTATE   1,354    1,437 
ISSUANCE OF RESTRICTED STOCK GRANTS   63    35 

 

5
 

 

THE FIRST BANCSHARES, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

NOTE A — BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with 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, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2013.

 

NOTE B — 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, A National Banking Association (the “Bank”).

 

At June 30, 2014, the Company had approximately $1.0 billion in assets, $604.0 million in net loans, $883.9 million in deposits, and $89.8 million in stockholders' equity. For the six months ended June 30, 2014, the Company reported net income of $3.0 million ($2.8 million applicable to common stockholders).

 

In the first quarter and second quarter of 2014, the Company declared and paid a dividend of $.0375 per common share.

 

6
 

 

NOTE C – BUSINESS COMBINATION

 

BCB Holding Company, Inc.

 

On March 3, 2014, the Company entered into an Agreement and Plan of Merger (the “Agreement”) with BCB Holding Company, Inc., an Alabama corporation (“BCB”) and parent of Bay Bank, Mobile, Alabama. The Agreement provides that, upon the terms and subject to the conditions set forth in the Agreement, BCB will merge with and into the Company (the “Merger”) and Bay Bank will merge with and into The First, A National Banking Association (“Bank Merger”). Subject to the terms and conditions of the Agreement, which has been approved by the Boards of Directors of the Company and BCB, each outstanding share of BCB common stock, other than shares held by the Company or BCB, or, shares with respect to which the holders thereof have perfected dissenters’ rights, will receive (i) for the BCB common stock that was outstanding prior to August 1, 2013, $3.60 per share which may be received in cash or the Company common stock provided that at least 30% of the aggregate consideration paid to such shareholders is in the Company common stock and one non-transferable contingent value right (“CVR”) of the CVR Consideration, and (ii) for the BCB common stock that was issued on August 1, 2013, $2.25 per share in cash. Each CVR is eligible to receive a cash payment equal to up to $0.40, with the exact amount based on the resolution of certain identified BCB loans over a three-year period following the closing of the transaction. Payout of the CVR will be overseen by a special committee of the Company’s Board of Directors. The Company will also either assume or redeem in full a note payable by BCB to Alostar Bank, as well as the preferred stock issued under the U.S. Treasury’s Capital Purchase Program. The total consideration to be paid in connection with the acquisition will range between approximately $6.2 million and $6.6 million depending upon the payout of the CVR, as well as the price of the Company common stock on the closing of the transaction, which is subject to a cap and a collar regarding its price.

 

The transaction closed on July 1, 2014. Accounting for the business combination and the determination of historical information have not been completed, but will be included in the September 30, 2014 Form 10Q.

 

Concurrently, the Company and BCB entered into an agreement and plan of merger pursuant to which BCB’s wholly-owned subsidiary, Bay Bank, was merged with and into the Company’s wholly-owned subsidiary, the Bank.

 

NOTE D – PREFERRED STOCK AND WARRANT

 

Pursuant to the terms of the letter agreement between the Company and the United States Department of the Treasury (“Treasury”), the Company issued 17,123 CDCI Preferred Shares.

 

The Letter Agreement contains limitations on the payment of dividends on the common stock to no more than 100% of the aggregate per share dividend and distributions for the immediate prior fiscal year (dividends of $0.15 per share were declared and paid in 2011, 2012, and 2013) and on the Company’s ability to repurchase its common stock, and continues to subject the Company to certain of the executive compensation limitations included in the Emergency Economic Stabilization Act of 2008 (EESA), as previously disclosed by the Company. The CDCI Preferred Shares entitle the holder to an annual dividend of 2% for 8 years of the liquidation value of the shares, payable quarterly in arrears.

 

NOTE E — EARNINGS APPLICABLE TO COMMON STOCKHOLDERS

 

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 stock options.

 

7
 

 

   For the Three Months Ended 
   June 30, 2014 
   Net Income   Shares   Per 
   (Numerator)   (Denominator)   Share Data 
             
Basic per share  $1,527,000    5,152,784   $.30 
                
Effect of dilutive shares:               
Restricted stock grants        37,792      
                
Diluted per share  $1,527,000    5,190,576   $.29 

 

   For the Six Months Ended 
   June 30, 2014 
   Net Income   Shares   Per 
   (Numerator)   (Denominator)   Share Data 
             
Basic per share  $2,848,000    5,142,227   $.55 
                
Effect of dilutive shares:               
Restricted stock grants        37,792      
                
Diluted per share  $2,848,000    5,180,019   $.55 

 

   For the Three Months Ended 
   June 30, 2013 
   Net Income   Shares   Per 
   (Numerator)   (Denominator)   Share Data 
             
Basic per share  $706,000    3,955,243   $.18 
                
Effect of dilutive shares:               
Restricted stock grants        46,238      
                
Diluted per share  $706,000    4,001,481   $.18 

 

   For the Six Months Ended 
   June 30, 2013 
   Net Income   Shares   Per 
   (Numerator)   (Denominator)   Share Data 
             
Basic per share  $1,825,000    3,536,362   $.52 
                
Effect of dilutive shares:               
Restricted stock grants        46,238      
                
Diluted per share  $1,825,000    3,582,600   $.51 

 

The Company granted 6,000 shares of restricted stock in the second quarter of 2014, and 57,327 shares of restricted stock in the first quarter of 2014.

  

8
 

 

NOTE F — FAIR VALUE OF ASSETS AND LIABILITIES

  

The Company groups its financial assets measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value. These levels are:

 

Level 1: Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
   
Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities which use observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities
   
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying balance sheets.

 

Available-for-Sale Securities

 

The fair value of available-for-sale securities is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1. If quoted market prices are not available, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. Level 2 securities include U.S. Treasury securities, obligations of U.S. government corporations and agencies, obligations of states and political subdivisions, mortgage-backed securities and collateralized mortgage obligations. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

 

The following table presents the Company’s assets that are measured at fair value on a recurring basis and the level within the hierarchy in which the fair value measurements fell as of June 30, 2014 and December 31, 2013 (in thousands):

 

June 30, 2014

 

(Dollars in thousands)  Fair Value Measurements Using 
       Quoted Prices
in
Active
Markets
For
Identical
Assets
   Significant
Other
Observable
Inputs
   Significant
Unobservable
Inputs
 
   Fair Value   (Level 1)   (Level 2)   (Level 3) 
                 
Obligations of U. S. Government Agencies  $36,701   $-   $36,701   $- 
Municipal securities   109,451    -    109,451    - 
Mortgage-backed securities   87,273    -    87,273    - 
Corporate obligations   29,259    -    26,460    2,799 
Other   969    969    -    - 
Total  $263,653   $969   $259,885   $2,799 

 

9
 

 

December 31, 2013

 

       Fair Value Measurements Using 
       Quoted Prices
in
Active
Markets
For
Identical
Assets
   Significant
Other
Observable
Inputs
   Significant
Unobservable
Inputs
 
   Fair Value   (Level 1)   (Level 2)   (Level 3) 
                 
Obligations of U. S. Government Agencies  $29,962   $-   $29,962   $- 
Municipal securities   108,078    -    108,078    - 
Mortgage-backed securities   78,187    -    78,187    - 
Corporate obligations   26,852    -    24,054    2,798 
Other   972    972    -    - 
Total  $244,051   $972   $240,281   $2,798 

 

The following is a reconciliation of activity for assets measured at fair value based on significant unobservable (non-market) information.

 

   Bank-Issued 
   Trust 
   Preferred 
(Dollars in thousands)  Securities 
   2014   2013 
Balance, January 1  $2,798   $2,668 
Transfers into Level 3   -    - 
Transfers out of Level 3   -    - 
Other-than-temporary impairment loss included in earnings   -    - 
Unrealized gain included in comprehensive income   1    130 
Balance at June 30, 2014 and December 31, 2013  $2,799   $2,798 

 

The following table presents quantitative information about recurring Level 3 fair value measurements (in thousands):

 

Trust Preferred
Securities
  Fair
Value
   Valuation
Technique
  Significant
Unobservable
Inputs
  Range of
Inputs
              
June 30, 2014  $2,799   Discounted cash flow  Probability of default  0 – 100%
               
December 31, 2013   2,798   Discounted cash flow  Probability of default  0 – 100%

 

Following is a description of the valuation methodologies used for assets measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

 

10
 

 

Impaired 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. Allowable methods for estimating fair value include using the fair value of the collateral for collateral dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.

 

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 and applying a discount factor to the value. If the impaired loan is determined not to be collateral dependent, then the discounted cash flow method is used. This method requires the impaired loan to be recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate. The effective interest rate of a loan is the contractual interest rate adjusted for any net deferred loan fees or costs, or premium or discount existing at origination or acquisition of the loan. Impaired loans are classified within Level 2 of the fair value hierarchy.

 

Other Real Estate Owned

 

Other real estate owned acquired through loan foreclosure is initially recorded at fair value less estimated costs to sell, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing the fair value, 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 non-interest expense. Operating costs associated with the assets are also recorded as non-interest expense. Gains and losses on the disposition of other real estate owned and foreclosed assets are netted and posted to other non-interest expense. Other real estate owned measured at fair value on a non-recurring basis at June 30, 2014, amounted to $4.9 million. Other real estate owned is classified within Level 2 of the fair value hierarchy.

 

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fell at June 30, 2014 and December 31, 2013.

 

($ in thousands)

 

June 30, 2014

       Fair Value Measurements Using 
       Quoted
Prices in
Active
Markets
For
Identical
Assets
   Significant
Other
Observable
Inputs
   Significant
Unobservable
Inputs
 
   Fair Value   (Level 1)   (Level 2)   (Level 3) 
                 
Impaired loans  $8,193   $-   $8,193   $- 
                     
Other real estate owned   4,875    -    4,875    - 

 

 
 

 

December 31, 2013

       Fair Value Measurements Using 
       Quoted
Prices in
Active
Markets
For
Identical
Assets
   Significant
Other
Observable
Inputs
   Significant
Unobservable
Inputs
 
   Fair Value   (Level 1)   (Level 2)   (Level 3) 
                 
Impaired loans  $4,830   $-   $4,830   $- 
                     
Other real estate owned   4,470    -    4,470    - 

 

The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:

 

Cash and Cash Equivalents – For such short-term instruments, the carrying amount is a reasonable estimate of fair value.

 

Investment in securities available-for-sale and held-to-maturity – The fair value measurement for securities available-for-sale was discussed earlier. The same measurement approach was used for securities held-to-maturity.

 

Loans – The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

 

Bank-Owned Life Insurance– The fair value of bank-owned life insurance approximates the carrying amount, because upon liquidation of these investments, the Company would receive the cash surrender value which equals the carrying amount.

 

Deposits – The fair values of demand deposits are, as required by ASC Topic 825, equal to the carrying value of such deposits. Demand deposits include noninterest-bearing demand deposits, savings accounts, NOW accounts, and money market demand accounts. The fair value of variable rate term deposits, those repricing within six months or less, approximates the carrying value of these deposits. Discounted cash flows have been used to value fixed rate term deposits and variable rate term deposits repricing after six months. The discount rate used is based on interest rates currently being offered on comparable deposits as to amount and term.

 

Short-Term Borrowings – The carrying value of any federal funds purchased and other short-term borrowings approximates their fair values.

 

FHLB and Other Borrowings – The fair value of the fixed rate borrowings are estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of any variable rate borrowing approximates its fair value.

 

Subordinated Debentures – The subordinated debentures bear interest at a variable rate and the carrying value approximates the fair value.

 

11
 

 

Off-Balance Sheet Instruments – Fair values of off-balance sheet financial instruments are based on fees charged to enter into similar agreements. However, commitments to extend credit do not represent a significant value until such commitments are funded or closed. Management has determined that these instruments do not have a distinguishable fair value and no fair value has been assigned.

 

As of June 30, 2014      Fair Value Measurements 
  

 

 

Carrying

Amount

  

 

 

Estimated

Fair
Value

  

 

 

Quoted
Prices

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

 

Significant

Unobservable

Inputs

(Level 3)

 
                     
Financial Instruments:                         
Assets:                         
Cash and cash equivalents  $55,443   $55,443   $55,443   $-   $- 
Securities available-for- sale   263,653    263,653    969    259,885    2,799 
Securities held- to-maturity   8,421    9,813    -    9,813    - 
Other securities   4,025    4,025    -    4,025    - 
Loans, net   604,033    617,920    -    -    617,920 
Bank-owned life insurance   14,251    14,251    -    14,251    - 
                          
Liabilities:                         
Noninterest- bearing deposits  $183,226   $183,226   $-   $183,226   $- 
Interest-bearing deposits   700,646    699,953    -    699,953    - 
Subordinated debentures   10,310    10,310    -    -    10,310 
FHLB and other borrowings   13,500    13,500    -    13,500    - 

 

As of December 31, 2013  Fair Value Measurements 
  

 

 

Carrying

Amount

  

 

 

Estimated

Fair
Value

  

 

 

Quoted
Prices

(Level 1)

  

Significant

Other

Observable

Inputs

(Level 2)

  

 

Significant

Unobservable

Inputs

(Level 3)

 
                     
Financial Instruments:                         
Assets:                         
Cash and cash equivalents  $39,252   $39,252   $39,252   $-   $- 
Securities available-for- sale   244,051    244,051    972    240,281    2,798 
Securities held- to-maturity   8,438    9,624    -    9,624    - 
Other securities   5,534    5,534    -    5,534    - 
Loans, net   577,575    590,866    -    -    590,866 
Bank-owned life insurance   6,593    6,593    -    6,593    - 
                          
Liabilities:                         
Noninterest- bearing deposits  $173,794   $173,794   $-   $173,794   $- 
Interest-bearing deposits   606,177    605,737    -    605,737    - 
Subordinated debentures   10,310    10,310    -    -    10,310 
FHLB and other borrowings   52,000    52,000    -    52,000    - 

 

12
 

 

NOTE G — LOANS

 

Loans typically provide higher yields than the other types of earning assets, and, thus, one of the Company's goals is for loans to be the largest category of the Company's earning assets. At June 30, 2014 and December 31, 2013, average loans accounted for 65.2% and 67.1% of average earning assets, respectively. The Company controls and mitigates the inherent credit and liquidity risks through the composition of its loan portfolio.

 

The following table shows the composition of the loan portfolio by category:

 

   June 30, 2014   December 31, 2013 
       Percent       Percent 
       of       of 
   Amount   Total   Amount   Total 
   (Dollars in thousands) 
                 
Mortgage loans held for sale  $3,220    0.5%  $3,680    0.6%
Commercial, financial and agricultural   81,958    13.4    81,792    14.0 
Real Estate:                    
Mortgage-commercial   204,101    33.5    202,343    34.7 
Mortgage-residential   230,310    37.7    212,388    36.4 
Construction   74,105    12.1    67,287    11.5 
Consumer and other   16,338    2.8    15,813    2.8 
Total loans   610,032    100%   583,303    100%
Allowance for loan losses   (5,999)        (5,728)     
Net loans  $604,033        $577,575      

 

In the context of this discussion, a "real estate mortgage loan" is defined as any loan, other than a loan for construction purposes, secured by real estate, regardless of the purpose of the loan. The Company follows the common practice of financial institutions in the Company’s market area of obtaining a security interest in real estate whenever possible, in addition to any other available collateral. This collateral is taken to reinforce the likelihood of the ultimate repayment of the loan and tends to increase the magnitude of the real estate loan portfolio component. Generally, the Company limits its loan-to-value ratio to 80%. Management attempts to maintain a conservative philosophy regarding its underwriting guidelines and believes it will reduce the risk elements of its loan portfolio through strategies that diversify the lending mix.

 

Loans held for sale consist of mortgage loans originated by the Bank and sold into the secondary market. Commitments from investors to purchase the loans are obtained upon origination.

 

13
 

 

Activity in the allowance for loan losses for the period was as follows:

 

(In thousands)

 

   Three Months   Six Months 
   Ended   Ended 
   June 30, 2014   June 30, 2014 
         
Balance at beginning of period  $5,811   $5,728 
Loans charged-off:          
Real Estate   (449)   (749)
Installment and Other   (16)   (59)
Commercial, Financial and Agriculture   (-)   (-)
Total   (465)   (808)
Recoveries on loans previously charged-off:          
Real Estate   357    400 
Installment and Other   15    36 
Commercial, Financial and Agriculture   4    8 
Total   376    444 
Net recoveries   (89)   (364)
Provision for Loan Losses   277    635 
Balance at end of period  $5,999   $5,999 

 

The following tables represent how the allowance for loan losses is allocated to a particular loan type, as well as the percentage of the category to total loans at June 30, 2014 and December 31, 2013.

 

Allocation of the Allowance for Loan Losses
 
   June 30, 2014 
   (Dollars in thousands) 
   Amount   % of loans
in each category
to total loans
 
         
Commercial Non Real Estate  $563    13.8%
Commercial Real Estate   3,669    57.0 
Consumer Real Estate   1,525    25.6 
Consumer   149    3.6 
Unallocated   93    - 
Total  $5,999    100%

 

   December 31, 2013 
   (Dollars in thousands) 
   Amount   % of loans
in each category
to total loans
 
         
Commercial Non Real Estate  $582    14.0%
Commercial Real Estate   3,384    57.2 
Consumer Real Estate   1,427    25.4 
Consumer   173    3.4 
Unallocated   162    - 
Total  $5,728    100%

 

14
 

 

The following table represents the Company’s impaired loans at June 30, 2014, and December 31, 2013.

 

   June 30,   December 31, 
   2014   2013 
   (In thousands) 
Impaired Loans:          
Impaired loans without a valuation allowance  $3,902   $701 
Impaired loans with a valuation allowance   4,291    4,001 
Total impaired loans  $8,193   $4,702 
Allowance for loan losses on impaired loans at period end   772    849 
           
Total nonaccrual loans   6,063    3,181 
           
Past due 90 days or more and still accruing   447    159 
Average investment in impaired loans   5,722    4,007 

 

The following table is a summary of interest recognized and cash-basis interest earned on impaired loans:

 

   Three Months
Ended
June 30, 2014
   Six Months
Ended
June 30, 2014
 
         
Average of individually impaired loans during period  $6,168   $5,722 
Interest income recognized during impairment   -    - 
Cash-basis interest income recognized   57    159 

 

The gross interest income that would have been recorded in the period that ended if the nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the three months and six month ended June 30, 2014, was $64,000 and $97,000, respectively. The Company had no loan commitments to borrowers in non-accrual status at June 30, 2014 and December 31, 2013.

 

The following tables provide the ending balances in the Company's loans (excluding mortgage loans held for sale) and allowance for loan losses, broken down by portfolio segment as of June 30, 2014 and December 31, 2013. The tables also provide additional detail as to the amount of our loans and allowance that correspond to individual versus collective impairment evaluation. The impairment evaluation corresponds to the Company's systematic methodology for estimating its Allowance for Loan Losses.

 

June 30, 2014

           Commercial,     
       Installment   Financial     
   Real Estate  

and

Other

   and
Agriculture
   Total 
   (In thousands) 
Loans                    
Individually evaluated  $7,836   $44   $313   $8,193 
Collectively evaluated   493,426    21,891    83,302    598,619 
Total  $501,262   $21,935   $83,615   $606,812 
                     
Allowance for Loan Losses                    
Individually evaluated  $750   $2   $20   $772 
Collectively evaluated   4,444    240    543    5,227 
Total  $5,194   $242   $563   $5,999 

 

 
 

 

December 31, 2013

           Commercial,     
       Installment   Financial     
   Real Estate  

and

Other

   and
Agriculture
   Total 
   (In thousands) 
Loans                    
Individually evaluated  $4,709   $39   $82   $4,830 
Collectively evaluated   473,832    19,725    81,236    574,793 
Total  $478,541   $19,764   $81,318   $579,623 
                     
Allowance for Loan Losses                    
Individually evaluated  $804   $35   $10   $849 
Collectively evaluated   4,007    300    572    4,879 
Total  $4,811   $335   $582   $5,728 

 

The following tables provide additional detail of impaired loans broken out according to class as of June 30, 2014 and December 31, 2013. The recorded investment included in the following table represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. As nearly all of our impaired loans at June 30, 2014, are on nonaccrual status, recorded investment excludes any insignificant amount of accrued interest receivable on loans 90-days or more past due and still accruing. The unpaid balance represents the recorded balance prior to any partial charge-offs.

 

June 30, 2014                
                     
               Average   Interest 
               Recorded   Income 
   Recorded   Unpaid   Related   Investment   Recognized 
   Investment   Balance   Allowance   YTD   YTD 
   (In thousands) 
Impaired loans with no related allowance:                         
Commercial installment  $2   $2   $-   $122   $- 
Commercial real estate   3,678    3,736    -    1,995    72 
Consumer real estate   212    212    -    127    3 
Consumer installment   10    10    -    10    - 
Total  $3,902   $3,960   $-   $2,254   $75 
                          
Impaired loans with a related allowance:                         
Commercial installment  $311   $311   $20   $193   $11 
Commercial real estate   2,367    2,437    341    2,132    60 
Consumer real estate   1,579    1,579    409    1,554    12 
Consumer installment   34    34    2    35    1 
Total  $4,291   $4,361   $772   $3,914   $84 
                          
Total Impaired Loans:                         
Commercial installment  $313   $313   $20   $315   $11 
Commercial real estate   6,045    6,173    341    4,127    132 
Consumer real estate   1,791    1,791    409    1,681    15 
Consumer installment   44    44    2    45    1 
Total Impaired Loans  $8,193   $8,321   $772   $6,168   $159 

 

 
 

 

December 31, 2013                    
               Average   Interest 
               Recorded   Income 
   Recorded   Unpaid   Related   Investment   Recognized 
   Investment   Balance   Allowance   YTD   YTD 
   (In thousands) 
Impaired loans with  no related allowance:                         
Commercial installment  $3   $3   $-   $45   $- 
Commercial real estate   353    353    -    1,035    8 
Consumer real estate   341    399    -    262    9 
Consumer installment   4    4    -    5    - 
Total  $701   $759   $-   $1,347   $17 
                          
Impaired loans with a related allowance:                         
Commercial installment  $79   $79   $10   $42   $6 
Commercial real estate   2,685    2,685    400    2,147    100 
Consumer real estate   1,202    1,272    404    1,019    21 
Consumer installment   35    35    35    36    4 
Total  $4,001   $4,071   $849   $3,244   $131 
                          
Total Impaired Loans:                         
Commercial installment  $82   $82   $10   $87   $6 
Commercial real estate   3,038    3,038    400    3,182    108 
Consumer real estate   1,543    1,671    404    1,281    30 
Consumer installment   39    39    35    41    4 
Total Impaired Loans  $4,702   $4,830   $849   $4,591   $148 

 

15
 

 

The following tables provide additional detail of troubled debt restructurings at June 30, 2014.

 

For the Three Months Ending June 30, 2014
                 
       Outstanding         
   Outstanding   Recorded         
   Recorded   Investment       Interest 
   Investment   Post-   Number of   Income 
   Pre-Modification   Modification   Loans   Recognized 
         
Commercial installment  $-   $-    -   $- 
Commercial real estate   325    325    1    3 
Consumer real estate   -    -    -    - 
Consumer installment   -    -    -    - 
Total  $325   $325    1   $3 

 

For the Six Months Ending June 30, 2014
                 
       Outstanding         
   Outstanding   Recorded         
   Recorded   Investment       Interest 
   Investment   Post-   Number of   Income 
   Pre-Modification   Modification   Loans   Recognized 
         
Commercial installment  $239   $239    1   $8 
Commercial real estate   325    325    1    7 
Consumer real estate   -    -    -    - 
Consumer installment   -    -    -    - 
Total  $564   $564    2   $15 

 

The recorded investment in receivables for which the allowance for credit losses was previously measured under a general allowance for credit losses methodology and are now impaired under Section 310-10-35 was $3.3 million. The allowance for credit losses associated with those receivables on the basis of a current evaluation of loss was $28,000. All loans were performing as agreed with modified terms.

 

During the three and six month period ending June 30, 2014, there were 2 loans modified as TDR, and are considered non-performing.

 

The following tables summarize by class our loans classified as past due in excess of 30 days or more in addition to those loans classified as non-accrual:

 

16
 

 

   June 30, 2014 
   (In thousands) 
  

 

 

Past Due

30 to 89
Days

  

Past Due

90 Days
or More
and Still

Accruing

  

 

 

Non-
Accrual

  

 Total

Past Due
and

Non-
Accrual

  

 

 

Total

Loans

 
                     
Real Estate-construction  $235   $92   $3,030   $3,357   $74,105 
Real Estate-mortgage   3,555    355    2,092    6,002    204,101 
Real Estate-non farm non residential   172    -    924    1,096    230,310 
Commercial   286    -    7    293    81,958 
Consumer   74    -    10    84    16,338 
Total  $4,322   $447   $6,063   $10,832   $606,812 

 

   December 31, 2013 
   (In thousands) 
  

 

 

Past Due

30 to 89
Days

  

Past Due
90 Days
or More
and Still
Accruing

  

 

 

Non-
Accrual

  

Total

Past Due
and

Non-
Accrual

  

 

 

Total

Loans

 
                     
Real Estate-construction  $478   $-   $212   $690   $67,287 
Real Estate-mortgage   4,696    143    2,453    7,292    202,343 
Real Estate-non farm non residential   252    -    507    759    212,388 
Commercial   12    -    9    21    81,792 
Consumer   115    16    -    131    15,813 
Total  $5,553   $159   $3,181   $8,893   $579,623 

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience credit documentation, public information, and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance:

 

Special Mention.       Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

 

Substandard.       Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Doubtful.       Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

 

17
 

 

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

 

As of June 30, 2014 and December 31, 2013, and based on the most recent analysis performed, the risk categories of loans by class of loans (excluding mortgage loans held for sale) were as follows:

 

($ in thousands)
June 30, 2014

 

               Commercial,     
  

Real Estate

Commercial

  

Real
Estate

Mortgage

  

Installment
and

Other

  

Financial
and

Agriculture

   Total 
Pass  $333,981   $153,781   $21,870   $83,012   $592,644 
Special Mention   371    116    -    399    886 
Substandard   11,487    1,818    66    222    13,593 
Doubtful   -    -    -    -    - 
Subtotal   345,839    155,715    21,936    83,633    607,123 
Less:                         
Unearned discount   196    96    -    19    311 
Loans, net of Uunearned discount  $345,643   $155,619   $21,936   $83,614   $606,812 

 

December 31, 2013

               Commercial,     
  

Real Estate

Commercial

  

Real

Estate

Mortgage

  

Installment

and

Other

  

Financial

and

Agriculture

   Total 
                          
Pass  $316,573   $145,787   $19,725   $80,087   $562,172 
Special Mention   4,084    32    -    1,033    5,149 
Substandard   10,972    1,426    39    225    12,662 
Doubtful   -    -    -    -    - 
Subtotal   331,629    147,245    19,764    81,345    579,983 
Less:                         
Unearned discount   236    97    -    27    360 
Loans, net of  unearned discount  $331,393   $147,148   $19,764   $81,318   $579,623 

 

18
 

 

NOTE H — SECURITIES

 

The following disclosure of the estimated fair value of financial instruments is made in accordance with authoritative guidance. The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

 

A summary of the amortized cost and estimated fair value of available-for-sale securities and held-to-maturity securities at June 30, 2014, follows:

($ in thousands)

 

   June 30, 2014 
       Gross   Gross     
   Amortized   Unrealized   Unrealized   Estimated 
   Cost   Gains   Losses   Fair Value 
Available-for-sale securities:                    
Obligations of U.S. Government Agencies  $36,666   $113   $78   $36,701 
Tax-exempt and taxable obligations of states and municipal subdivisions   107,532    2,525    606    109,451 
Mortgage-backed securities   86,850    1,122    699    87,273 
Corporate obligations   30,282    288    1,311    29,259 
Other   1,255    -    286    969 
Total  $262,585   $4,048   $2,980   $263,653 
Held-to-maturity securities:                    
Mortgage-backed securities  $2,421   $-   $10   $2,411 
Taxable obligations of states and municipal subdivisions   6,000    1,402    -    7,402 
Total  $8,421   $1,402   $10   $9,813 

 

NOTE I — ALLOWANCE FOR LOAN LOSSES

 

The Company has developed policies and procedures for evaluating the overall quality of its credit portfolio and the timely identification of potential problem loans. Management’s judgment as to the adequacy of the allowance is based upon a number of assumptions which it believes to be reasonable, but which may not prove to be accurate, particularly given the Company’s growth and the economy. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required.

 

The Company’s allowance consists of two parts. The first part is determined in accordance with authoritative guidance regarding contingencies. The Company’s determination of this part of the allowance is based upon quantitative and qualitative factors. A loan loss history based upon the three year quarterly moving average is utilized in determining the appropriate allowance. Historical loss factors are determined by graded and ungraded loans by loan type. These historical loss factors are applied to the loans by loan type to determine an indicated allowance. The loss factors of peer groups are considered in the determination of the allowance and are used to assist in the establishment of a long-term loss history for areas in which this data is unavailable and incorporated into the qualitative factors to be considered. The historical loss factors may also be modified based upon other qualitative factors including but not limited to local and national economic conditions, trends of delinquent loans, changes in lending policies and underwriting standards, concentrations, and management’s knowledge of the loan portfolio. These factors require judgment upon the part of management and are based upon state and national economic reports received from various institutions and agencies including the Federal Reserve Bank, United States Bureau of Economic Analysis, Bureau of Labor Statistics, meetings with the Company’s loan officers and loan committee, and data and guidance received or obtained from the Company’s regulatory authorities.

 

19
 

 

The second part of the allowance is determined in accordance with authoritative guidance regarding loan impairment. Impaired loans are determined based upon a review by internal loan review and senior loan officers.

 

The sum of the two parts constitutes management’s best estimate of an appropriate allowance for loan losses. When the estimated allowance is determined, it is presented to the Company’s audit committee for review and approval on a quarterly basis.

 

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

 

Impairment is measured on a loan by loan basis, and a specific allowance is assigned to each loan determined to be impaired. Impaired loans not deemed collateral dependent are analyzed according to the ultimate repayment source, whether that is cash flow from the borrower, guarantor or some other source of repayment. Impaired loans are deemed collateral dependent if, in the Company’s opinion, the ultimate source of repayment will be generated from the liquidation of collateral.

 

The Company discontinues accrual of interest on loans when management believes, after considering economic and business conditions and collection efforts, that a borrower’s financial condition is such that the collection of interest is doubtful. Generally, the Company will place a delinquent loan in nonaccrual status when the loan becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest which has been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain.

 

NOTE J – SUBSEQUENT EVENTS

 

Subsequent events have been evaluated by management through the date the financial statements were issued.

 

20
 

 

NOTE K – RECLASSIFICATION

 

Certain amounts in the 2013 financial statements have been reclassified for comparative purposes to conform to the current period financial statement presentation.

 

ITEM NO. 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

FINANCIAL CONDITION

 

The following discussion contains "forward-looking statements" relating to, without limitation, future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. The words "expect," "estimate," "anticipate," and "believe," as well as similar expressions, are intended to identify forward-looking statements. The Company's actual results may differ materially from the results discussed in the forward-looking statements, and the Company's operating performance each quarter is subject to various risks and uncertainties that are discussed in detail in the Company's filings with the Securities and Exchange Commission, including the "Risk Factors" section in the Company's most recently filed Form 10-K.

 

The First represents the primary asset of the Company. The First reported total assets of $1.0 billion at June 30, 2014, compared to $941.0 million at December 31, 2013. Loans increased $26.7 million, or 4.6%, during the first six months of 2014. Deposits at June 30, 2014, totaled $884.2 million compared to $780 million at December 31, 2013. For the six month period ended June 30, 2014, The First reported net income of $3.3 million compared to $2.8 million for the six months ended June 30, 2013.

 

NONPERFORMING ASSETS AND RISK ELEMENTS. Diversification within the loan portfolio is an important means of reducing inherent lending risks. At June 30, 2014, The First had no concentrations of ten percent or more of total loans in any single industry or any geographical area outside its immediate market areas.

 

At June 30, 2014, The First had loans past due as follows:

 

   ($ In Thousands) 
     
Past due 30 through 89 days  $4,322 
Past due 90 days or more and still accruing   447 

 

The accrual of interest is discontinued on loans which become ninety days past due (principal and/or interest), unless the loans are adequately secured and in the process of collection. Nonaccrual loans totaled $6.1 million at June 30, 2014, an increase of $2.9 million from December 31, 2013. Any other real estate owned is carried at fair value, determined by an appraisal, less estimated costs to sell. Other real estate owned totaled $4.9 million at June 30, 2014. A loan is classified as a restructured loan when the following two conditions are present: First, the borrower is experiencing financial difficulty and second, the creditor grants a concession it would not otherwise consider but for the borrower’s financial difficulties. At June 30, 2014, the Bank had $5.5 million in loans that were modified as troubled debt restructurings, of which $2.0 million were performing as agreed with modified terms.

 

21
 

 

LIQUIDITY AND CAPITAL RESOURCES

 

Liquidity is adequate with cash and cash equivalents of $55.4 million as of June 30,2014. In addition, loans and investment securities repricing or maturing within one year or less exceeded $204.4 million at June 30, 2014. Approximately $124.5 million in loan commitments could fund within the next six months and other commitments, primarily standby letters of credit, totaled $.6 million at June 30, 2014.

 

There are no known trends or any known commitments or uncertainties that will result in The First’s liquidity increasing or decreasing in a significant way.

 

Total consolidated equity capital at June 30, 2014, was $89.8 million, or approximately 8.9% of total assets. The Company currently has adequate capital positions to meet the minimum capital requirements for all regulatory agencies. The Company’s capital ratios as of June 30, 2014, were as follows:

 

Tier 1 leverage   8.54%
Tier 1 risk-based   12.50%
Total risk-based   13.38%

 

On June 30, 2006, The Company issued $4,124,000 of floating rate junior subordinated deferrable interest debentures to The First Bancshares Statutory Trust 2 in which the Company owns all of the common equity. The debentures are the sole asset of the Trust. The Trust issued $4,000,000 of Trust Preferred Securities (TPSs) to investors. The Company’s obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the Trust’s obligations under the preferred securities. The preferred securities are redeemable by the Company at its option. The preferred securities must be redeemed upon maturity of the debentures in 2036. Interest on the preferred securities is the three month London Interbank Offer Rate (LIBOR) plus 1.65% and is payable quarterly. The terms of the subordinated debentures are identical to those of the preferred securities. On July 27, 2007, The Company issued $6,186,000 of floating rate junior subordinated deferrable interest debentures to The First Bancshares Statutory Trust 3 in which the Company owns all of the common equity. The debentures are the sole asset of Trust 3. The Trust issued $6,000,000 of Trust Preferred Securities (TPSs) to investors. The Company’s obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the Trust’s obligations under the preferred securities. The preferred securities are redeemable by the Company in 2013 or later, at its option. The preferred securities must be redeemed upon maturity of the debentures in 2037. Interest on the preferred securities is the three month LIBOR plus 1.40% and is payable quarterly. The terms of the subordinated debentures are identical to those of the preferred securities. In accordance with the authoritative guidance, the trusts are not included in the consolidated financial statements.

 

RESULTS OF OPERATIONS - QUARTERLY

 

The Company had a consolidated net income of $1,613,000 for the three months ended June 30, 2014, compared with consolidated net income of $812,000 for the same period last year.

 

Net interest income increased to $7.8 million from $6.8 million for the three months ended June 30, 2014, or an increase of 15.6% as compared to the same period in 2013. Average earning assets through June 30, 2014, increased $137.3 million, or 18.1% and average interest-bearing liabilities also increased $79.2 million or 12.4% when compared to June 30, 2013.

 

Noninterest income for the three months ended June 30, 2014, was $2,055,000 compared to $1,890,000 for the same period in 2013, reflecting an increase of $165,000 or 8.7%. The increase for the quarter ended June 30, 2014, is attributed primarily to a gain of $254,000 from the sale of other investments.

 

22
 

 

The provision for loan losses was $277,000 for the three months ended June 30, 2014, compared with $349,000 for the same period in 2013. The allowance for loan losses of $6.0 million at June 30, 2014 (approximately .98% of total loans and 1.16% of loans excluding those booked at fair value due to the business combination) is considered by management to be adequate to cover losses inherent in the loan portfolio. The level of this allowance is dependent upon a number of factors, including the total amount of past due loans, general economic conditions, and management’s assessment of potential losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant change. Ultimately, losses may vary from current estimates and future additions to the allowance may be necessary.

 

Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required. Management evaluates the adequacy of the allowance for loan losses quarterly and makes provisions for loan losses based on this evaluation.

 

Noninterest expense increased by $139,000 or 1.9% for the three months ended June 30, 2014, when compared with the same period in 2013. This increase is primarily related to increases in operating costs associated with the acquisition of First National Bank of Baldwin County, operating costs associated with expansion into Baton Rouge, LA, and acquisition costs associated with the acquisition of Bay Bank. One-time acquisition costs, mainly related to Bay Bank, expensed during the second quarter of 2014 amounted to $128,000 and one-time acquisition costs, related to Baldwin County, expensed during the second quarter of 2013 amounted to $447,000.

 

RESULTS OF OPERATIONS – YEAR TO DATE

 

The Company had a consolidated net income of $3,040,000 for the six months ended June 30, 2014, compared with consolidated net income of $2,037,000 for the same period last year.

 

Net interest income increased to $15.7 million from $12.7 million for the six months ended June 30, 2014, or an increase of 23.6% as compared to the same period in 2013. This increase was primarily a result of increased loan volume.

 

Noninterest income for the six months ended June 30, 2014, was $3,727,000 compared to $3,820,000 for the same period in 2013, reflecting a decrease of $93,000 or 2.4%. Included in noninterest income is service charges on deposit accounts, which for the six months ended June 30, 2014, totaled $2,037,000 compared to $1,854,000 for the same period in 2013. An increase in fee income associated with higher loan and deposit volumes attributed to this income. The overall decrease for the six months is attributed to a one-time BEA award of $415,000 awarded in 2013 versus a one-time gain on sale of an investment of $254,000.

 

The provision for loan losses was $635,000 for the six months ended June 30, 2014, compared with $660,000 for the same period in 2013. The allowance for loan losses of $6.0 million at June 30, 2014 (approximately .98% of total loans and 1.16% of loans excluding those booked at fair value due to the business combination) is considered by management to be adequate to cover losses inherent in the loan portfolio. The level of this allowance is dependent upon a number of factors, including the total amount of past due loans, general economic conditions, and management’s assessment of potential losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant change. Ultimately, losses may vary from current estimates and future additions to the allowance may be necessary.

 

23
 

 

Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the loan loss allowance will not be required. Management evaluates the adequacy of the allowance for loan losses quarterly and makes provisions for loan losses based on this evaluation.

 

Noninterest expense increased by $1.4 million or 10.5% for the six months ended June 30, 2014, when compared with the same period in 2013. This increase is primarily related to an increase in operating costs associated with the acquisition of First National Bank of Baldwin County, as well as an increase in salaries and employee benefits associated with the expansion into Baton Rouge, LA, as well as costs associated with the acquisition of Bay Bank.

 

ITEM NO. 3. CONTROLS AND PROCEDURES

 

As of June 30, 2014, (the “Evaluation Date”), we carried out an evaluation, under the supervision of and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

 

There have been no changes, significant or otherwise, in our internal controls over financial reporting that occurred during the quarter ended June 30, 2014, that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

 

ITEM NO. 4. RECENT ACCOUNTING PRONOUNCEMENTS

 

In January 2014, the FASB issued ASU No. 2014-01, Investments—Equity Method and Joint Ventures (Topic 323), “Accounting for Investments in Qualified Affordable Housing Projects,” which permits reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). For those investments in qualified affordable housing projects not accounted for using the proportional method, the investment should be accounted for as an equity method investment or a cost method investment. The decision to apply the proportional amortization method of accounting is an accounting policy decision that should be applied consistently to all qualifying affordable housing project investments rather than a decision to be applied to individual investments. This amendment should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. ASU 2014-01 is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those annual periods. The Company is evaluating the possible effects of this guidance on its financial statements.

 

24
 

 

In January 2014, the FASB issued ASU 2014-04, “Receivables – Troubled Debt Restructurings by Creditors”, which will eliminate diversity in practice regarding the timing of derecognition for residential mortgage loans when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. Under ASU 2014-04, physical possession of residential real estate property is achieved when either the creditor obtains legal title to the residential real estate property upon completion of a foreclosure or the borrower conveys all interest in the residential real estate property through completion of a deed in lieu or foreclosure in order to satisfy the loan. Once physical possession has been achieved, the loan is derecognized and the property recorded within other assets at the lower of cost or fair value (less estimated costs to sell). In addition, the guidance requires both interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. The additional disclosure requirements are effective for annual reporting periods beginning on or after December 15, 2014, and interim periods within those annual periods with retrospective disclosure necessary for all comparative periods presented. The adoption of this standard will result in additional disclosures but is not expected to have any impact on the Company’s financial statements or results of operations.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), “Revenue from Contracts with Customers,” which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the ASU is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The ASU defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The new accounting guidance, which does not apply to financial instruments, is effective on a retrospective basis beginning on January 1, 2017, and early adoption is prohibited. The Company does not expect the new guidance to have a material impact on its consolidated financial position or results of operation.

 

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860), “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.” The FASB issued ASU 2014-11 to change the accounting for repurchase-to-maturity transactions and linked repurchase financials to secured borrowing accounting, which is consistent with the accounting for other repurchase agreements. The amendments also require two new disclosures. The first disclosure requires an entity to disclose information on transfers accounted for as sales in transactions that are economically similar to repurchase agreements. The second disclosure provides increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The new guidance is effective beginning on January 1, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial position or results of operation.

 

In June 2014, the FASB issued ASU No. 2014-12, Compensation-Stock Compensation (Topic 718), “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” The new guidance requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company's current accounting treatment of performance conditions for employees who are or become retirement eligible prior to the achievement of the performance target are consistent with ASU 2014-12, and as such does not expect the new guidance to have a material effect on the Corporation’s financial condition and results of operations. The Company expects to prospectively adopt ASU 2014-12 in the first quarter 2015.

 

25
 

 

PART II — OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

None

 

ITEM 1A.RISK FACTORS

 

There are no material changes in the Company’s risk factors since December 31, 2013. Please refer to the Annual Report on Form 10-K of The First Bancshares, Inc., filed with the Securities and Exchange Commission on March 31, 2014.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITY AND USE OF PROCEEDS

 

On March 20, 2013, The First Bancshares, Inc., a Mississippi corporation (the "Company") entered into Securities Purchase Agreements with a limited number of institutional and other accredited investors, including certain directors and executive officers of the Company (collectively, the "Purchasers') to sell a total of 1,951,220 shares of mandatorily convertible non-cumulative, non-voting, perpetual Preferred Stock, Series D, $1.00 par value (the "Series D Preferred Stock") at a price of $10.25 per share, for an aggregate gross purchase price of $20,000,005 (the "Private Placement"). The Private Placement closed on March 22, 2013, after the Company issued an aggregate of 1,951,220 shares of Series D Preferred Stock against receipt of $20,000,005 in cash from the Purchasers. The Private Placement was not registered under the Securities Act of 1933, as amended (the "Act"), in reliance on Section 4(2) of the Act and Rule 506 of Regulation D promulgated thereunder.

 

The Series D Preferred Stock automatically converted into a like number of shares of the Company's common stock after the Company received shareholder approval of such conversion at a meeting of shareholders held on May 23, 2013. Upon conversion of the Series D Preferred Stock, each share of Series D Preferred Stock was automatically converted into one share of the Company’s common stock par value of one U.S. dollar ($1.00) per share (“Common Stock”). The holders of record of Series D Preferred Stock were entitled to receive as, when, and if declared by the Company’s board of directors, dividends on each share of Series D Preferred Stock equal to the per share amount paid on a share of Common Stock (the “Preferred Dividend”), and no dividends were payable on the Common Stock or any other class or series of capital stock ranking with respect to dividends pari passu with the Common Stock unless a Preferred Dividend was payable at the same time on the Series D Preferred Stock; provided, however, in the event the shareholders of the Company did not approve the conversion of the Series D Preferred Stock to Common Stock within six (6) months of issuance, the holders of record of Series D Preferred Stock would have been entitled to receive as, when, and if declared by the board of directors of the Company, dividends on each share of Series D Preferred Stock equal to six (6) percent of liquidation value per annum or $0.62 per share (the “Fixed Preferred Dividend”) and no dividends would have been payable on the Common Stock or any other class or series of capital stock ranking with respect to dividends pari passu with the Common Stock unless a Preferred Dividend was payable at the time on the Series D Preferred Stock. Such Fixed Preferred Dividends would have been payable semi-annually in arrears on June 30 and December 31, beginning on December 31, 2013, until the shareholders of the Company approved the conversion of the Series D Preferred Shares into the Common Stock. The Series D Preferred Stock was not redeemable by the Company or by the holders. Complete details concerning the Series D Preferred Stock are contained in the Certificate of Designation filed with the Mississippi Secretary of State on March 20, 2013, a copy of which was attached as Exhibit 4.1 to the Form 8-K filed by the Company on March 25, 2013 and incorporated herein by reference.

 

26
 

 

In accordance with Section 4.11 of the Securities Purchase Agreement, the Company called a meeting of the Company shareholders to vote on proposals to approve the conversion of shares of Series D Preferred Stock into shares of Common Stock for purposes of compliance with NASDAQ Stock Market Rule 5635. The board of directors of the Company unanimously recommended shareholder approval of this proposal.

 

Also on March 20, 2013, pursuant to the Securities Purchase Agreements, the Company entered into a Registration Rights Agreement with each of the Purchasers. Pursuant to the Registration Rights Agreement, the Company filed a registration statement with the Securities and Exchange Commission to register for resale the Common Stock to be issued upon conversion of the Series D Preferred Stock, within 90 calendar days after the closing of the Private Placement, and to used commercially reasonable efforts to cause such registration statement to be declared effective upon the earlier of (i) the 120th calendar day following March 22, 2013 (or the 150th calendar day following March 22, 2013 in the event that such registration statement is subject to review by the Securities and Exchange Commission) and (ii) the 5th trading day (as defined in the Registration Rights Agreement) after the date the Company is notified (orally or in writing, whichever is earlier) by the Securities and Exchange Commission that such registration statement will not be “reviewed” or will not be subject to further review. Failure to meet these deadlines and certain other events could have resulted in the Company's payment of liquidated damages to the holders of the rights, monthly in the amount of 0.5% of the aggregate purchase price of each holder of the converted Common Stock.

 

Copies of the form of Securities Purchase Agreements and the form of Registration Rights Agreements were attached to the Company’s Form 8-K filed on March 25, 2013 as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by reference. The foregoing descriptions of the Securities Purchase Agreements, the Registration Rights Agreements and the Certificate of Designation do not purport to be complete and are qualified in their entirety by reference to the full text of the Securities Purchase Agreements, the Registration Rights Agreements and the Certificate of Designation filed as exhibits to this report.

 

Pursuant to shareholder approval obtained at the Annual Meeting held on May 23, 2013, the Series D Nonvoting Convertible Preferred Stock has been converted to common stock.

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

Not Applicable

 

27
 

 

ITEM 4.REMOVED AND RESERVED

 

ITEM 5.OTHER INFORMATION

 

Not Applicable

 

ITEM 6.EXHIBITS

 

(a)Exhibits

 

 Exhibit No. 

 

2.1Agreement and Plan of merger, dated as of March 2, 2014, between The First Bancshares, Inc. and BCB Holding Company, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on 3-7-2014)

 

2.1Acquisition Agreement, dated as of January 31, 2013, between The First Bancshares, Inc. and First Baldwin Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on 2-1-13) and First Amendment to Acquisition Agreement, dated as of March 15, 2013, between First Bancshares, Inc. and First Baldwin Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on 3-20-13)

 

3.1Articles of Amendment and Certificate of Designation, Preferences and Rights of Series D Nonvoting Convertible Preferred Stock dated as of March 18,2013(incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on 3-21-13).

 

3.2Restated Articles of Incorporation dated as of March 21, 2013 (incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed on 3-21-13).

 

4.1Certificate of Designation of Series D Nonvoting Convertible Preferred Stock, as filed with the Mississippi Secretary of State on March 20, 2013 (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on March 25, 2013).

 

10.1Form of Securities Purchase Agreement between the Company and each of the Purchasers, dated as of March 20, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 25, 2013)

 

10.2Form of Registration Rights Agreement between the Company and each of the Purchasers, dated as of March 20, 2013 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on March 25, 2013)

 

28
 

 

31.1Certification of principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2Certification of principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

32.1Certification of principal executive officer pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2Certification of principal financial officer pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

   

101.INS**XBRL Instance Document

 

101.SCH**XBRL Taxonomy Extension Schema

 

101.CAL**XBRL Taxonomy Extension Calculation Linkbase

 

101.DEF**XBRL Taxonomy Extension Definition Linkbase

 

101.LAB**XBRL Taxonomy Extension Label Linkbase

 

101.PRE**XBRL Taxonomy Extension Presentation Linkbase

 

______________

 

**Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

(b)The Company filed five reports on Form 8-K during the quarter ended June 30, 2014

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      THE FIRST BANCSHARES, INC.
       
      (Registrant)
       
    /s/ M. RAY (HOPPY)COLE, JR.
August 14, 2014     M. Ray (Hoppy) Cole, Jr.
(Date)     Chief Executive Officer
       
    /s/ DEEDEE LOWERY
Augsut  14, 2014     DeeDee Lowery, Executive
(Date)     Vice President and Chief Financial Officer

 

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