The Bank Holding Company Act requires every

The Federal Reserve has adopted capital adequacy guidelines for use in its examination and regulation of bank holding companies and financial holding companies. The regulatory capitalvoting stock of a bank holding company or financial holding company under applicablea bank that a person may acquire without the prior approval of banking regulators. Under the federal capital adequacy guidelines is particularly importantChange in Bank Control Act and the regulations thereunder, a person or group must give advance notice to the Federal Reserve’s evaluationReserve before acquiring control of the overall safety and soundness of theany bank holding company, such as the Company, or financial holding company and are important factors considered bybefore acquiring control of any state member bank, such as The First. Upon receipt of such notice, the Federal Reserve may approve or disapprove the acquisition. The Change in evaluating any applications made by suchBank Control Act creates a rebuttable presumption of control if a member or group acquires a certain percentage or more of a bank holding companycompany’s or bank’s voting stock. As a result, a person or entity generally must provide prior notice to the Federal Reserve. If regulatory capital falls below minimum guideline levels,Reserve before acquiring the power to vote 10% or more of our outstanding common stock. The overall effect of such laws is to make it more difficult to acquire a financial holding company may lose its status as a financialbank holding company and a bank holding companyby tender offer or banksimilar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the Company may be denied approvalless likely to benefit from the rapid increases in stock prices that may result from tender offers or similar efforts to acquire or establish additional banks or non-bank businesses orcontrol of other companies. Investors should be aware of these requirements when acquiring shares of our stock.

A financial holding company that becomes aware that it or a subsidiary bank has ceased to be well capitalized or well managed must notify the Federal Reserve and enter into an agreement to cure the identified deficiency. If the deficiency is not cured timely, the Federal Reserve may order the financial holding company to divest its banking operations. Alternatively, to avoid divestiture, a financial holding company may cease to engage in the financial holding company activities that are unrelated to banking or otherwise impermissible for a bank holding company. See “Capital Requirements” below for more information.

The Gramm-Leach-Bliley Act of 1999 established a comprehensive framework that permits affiliations among qualified bank holding companies, commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the Bank Holding Company Act framework to permit a holding company to engage in a full range of financial activities through a financial holding company.

Federal Reserve Oversight

The Company is required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the Company’s consolidated net worth. The Federal Reserve may disapprove such a transaction if it determines that the proposed redemption or stock purchase would constitute an unsafe or unsound practice, would violate any law, regulation, Federal Reserve order or directive or any condition imposed by, or written agreement with, the Federal Reserve.

The Federal Reserve has issued its “Policy Statement on Cash Dividends Not Fully Covered by Earnings” (the “Policy Statement”) which sets forth various guidelines that the Federal Reserve believes a bank holding company should follow in establishing its dividend policy. In general, the Federal Reserve stated that bank holding companies should pay dividends only out of current earnings. The Federal Reserve also stated that dividends should not be paid unless the prospective rate of earnings retention by the holding company appears consistent with its capital needs, asset quality and overall financial condition.

The Company is required to file annual and quarterly reports with the Federal Reserve, and such additional information as the Federal Reserve may require pursuant to the Bank Holding Company Act. The Federal Reserve may examine a bank holding company or any of its subsidiaries.

Source of Strength Doctrine

Under the Dodd-Frank Act, bank holding companies must be well-capitalized and well-managed to engage in interstate transactions. In the past, only the subsidiary banks were required to meet those standards. The Federal Reserve Board’s “source of strength doctrine” has now been codified, mandating that bank holding companies such as the Company serve as a source of strength for their subsidiary banks, such that the bank holding company must be able to provide financial assistance in the event the subsidiary bank experiences financial distress.

Capital Requirements

Federal banking regulators have adopted a system using risk-based capital guidelines to evaluate the capital adequacy of banks and bank holding companies that is based upon the 1988 capital accord of the Bank for International Settlements’ Basel Committee on Banking Supervision (the “Basel Committee”), a committee of central banks and bank regulators from the major industrialized countries that coordinates international standards for bank regulation. Under the guidelines, specific categories of assets and off-balance-sheet activities such as letters of credit are assigned risk weights, based generally on the perceived credit or other risks associated with the asset. Off-balance-sheet activities are assigned a credit conversion factor based on the perceived likelihood that they will become on-balance-sheet assets. These risk weights are multiplied by corresponding asset balances to determine a “risk weighted” asset base which is then measured against various measures of capital to produce capital ratios.

An organization’s capital is classified in one of two tiers, Core Capital, or Tier 1, and Supplementary Capital, or Tier 2. Tier 1 capital includes common stock, retained earnings, qualifying non-cumulative perpetual preferred stock, minority interests in the equity of consolidated subsidiaries, a limited amount of qualifying trust preferred securities and qualifying cumulative perpetual preferred stock at the holding company level, less goodwill and most intangible assets. Tier 2 capital includes perpetual preferred stock and trust preferred securities not meeting the Tier 1 definition, mandatory convertible debt securities, subordinated debt, and allowances for loan and lease losses. Each category is subject to a number of regulatory definitional and qualifying requirements.

The Basel Committee in 2010 released a set of international recommendations for strengthening the regulation, supervision and risk management of banking organizations, known as Basel III. In July 2013, the Federal Reserve published final rules for the adoption of the Basel III regulatory capital framework (the “Basel III Capital Rules”). The Basel III Capital Rules became effective for us on January 1, 2015, with certain transition provisions phasing in over a period ending on January 1, 2019. The Basel III Capital Rules established a new category of capital measure, Common Equity Tier 1 capital, which includes a limited number of capital instruments from the existing definition of Tier 1 Capital, as well as raised minimum thresholds for Tier 1 Leverage capital (100 basis points), and Tier 1 Risk-based capital (200 basis points).

The Basel III Capital Rules established the following minimum capital ratios: 4.5 percent CET1 to risk-weighted assets; 6.0 percent Tier 1 capital to risk-weighted assets; 8.0 percent total capital to risk-weighted assets; and 4.0 percent Tier 1 leverage ratio to average consolidated assets. In addition, the Basel III Capital Rules also introduced a minimum “capital conservation buffer” equal to 2.5% of an organization’s total risk-weighted assets, which exists in addition to these new required minimum CET1, Tier 1, and total capital ratios. The “capital conservation buffer,” which must consist entirely of CET1, is designed to absorb losses during periods of economic stress. The Basel III Capital Rules provide for a number of deductions from and adjustments to CET1, which include the requirement that mortgage servicing rights, deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.

The Company and The First elected in 2015 to exclude the effects of accumulated other comprehensive income items included in stockholders’ equity from the determination of regulatory capital under the Basel III Capital Rules. Based on estimated capital ratios using Basel III definitions, the Company and The First currently exceed all capital requirements of the new rule, including the fully phased-in conservation buffer.

Certain regulatory capital ratios of the Company and The First, as of December 31, 2017, are shown in the following table:

The essential difference between the leverage capital ratio and the risk-based capital ratios is that the latter identify and weight both balance sheet and off-balance sheet risks. Tier 1 capital generally includes common equity, retained earnings, qualifying minority interests (issued by consolidated depository institutions or foreign bank subsidiaries), accounts of consolidated subsidiaries and an amount of qualifying perpetual preferred stock, limited to 50% of Tier 1 capital. In calculating Tier 1 capital, goodwill and other disallowed intangibles and disallowed deferred tax assets and certain other assets are excluded. Tier 2 capital is a secondary component of risk-based capital, consisting primarily of perpetual preferred stock that may not be included as Tier 1 capital, mandatory convertible securities, certain types of subordinated debt and an amount of the allowance for loan losses (limited to 1.25% of risk weighted assets).

The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to take into account off-balance sheet exposure and to minimize disincentives for holding liquid assets. Under the risk-based capital guidelines, assets are assigned to one of four risk categories: 0%, 20%, 50% and 100%. For example, U.S. Treasury securities are assigned to the 0% risk category while most categories of loans are assigned to the 100% risk category. Off-balance sheet exposures such as standby letters of credit are risk-weighted and all or a portion thereof are included in risk-weighted assets based on an assessment of the relative risks that they present. The risk-weighted asset base is equal to the sum of the aggregate dollar values of assets and off-balance sheet items in each risk category, multiplied by the weight assigned to that category.

Prompt Corrective Action and Undercapitalization

The FDICIA established a system of prompt corrective action regulations and policies to resolve the problems of undercapitalized insured depository institutions. Under this system, insured depository institutions are ranked in one of five capital categories as described below. Regulators are required to take mandatory supervisory actions and are authorized to take other discretionary actions of increasing severity with respect to insured depository institutions in the three undercapitalized categories. The five capital categories for insured depository institutions under the prompt corrective action regulations consist of:

The prompt corrective action regulations provide that an institution may be downgraded to the next lower category if its regulator determines, after notice and opportunity for hearing or response, that the institution is in an unsafe or unsound condition or has received and not corrected a less-than-satisfactory rating for any of the categories of asset quality, management, earnings or liquidity in its most recent examination.

Federal bank regulatory agencies are required to implement arrangements for prompt corrective action for institutions failing to meet minimum requirements to be at least adequately capitalized. FDICIA imposes an increasingly stringent array of restrictions, requirements and prohibitions as an organization’s capital levels deteriorate. A bank rated "adequately capitalized" may not accept, renew or roll over brokered deposits. A "significantly undercapitalized" institution is subject to mandated capital raising activities, restrictions on interest rates paid and transactions with affiliates, removal of management and other restrictions. The OCC has only very limited discretion in dealing with a "critically undercapitalized" institution and generally must appoint a receiver or conservator (the FDIC) if the capital deficiency is not corrected promptly.

Under the Federal Deposit Insurance Act (“FDIA”), “critically undercapitalized” banks may not, beginning 60 days after becoming critically undercapitalized, make any payment of principal or interest on their subordinated debt (subject to certain limited exceptions). In addition, under Section 18(i) of the FDIA, banks are required to obtain the advance consent of the FDIC to retire any part of their subordinated notes. Under the FDIA, a bank may not pay interest on its subordinated notes if such interest is required to be paid only out of net profits, or distribute any of its capital assets, while it remains in default on any assessment due to the FDIC.

Federal bank regulators may set capital requirements for a particular banking organization that are higher than the minimum ratios when circumstances warrant. Federal Reserve and OCC guidelines provide that banking organizations experiencing significant growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. Concentration of credit risks, interest rate risk (imbalances in rates, maturities or sensitivities) and risks arising from non-traditional activities, as well as an institution’s ability to manage these risks, are important factors taken into account by regulatory agencies in assessing an organization’s overall capital adequacy.

The OCC and the Federal Reserve also use a leverage ratio as an additional tool to evaluate the capital adequacy of banking organizations. The leverage ratio is a company’s Tier 1 capital divided by its average total consolidated assets. A minimum leverage ratio of 3.0% is required for banks and bank holding companies that either have the highest supervisory rating or have implemented the appropriate federal regulatory authority’s risk-adjusted measure for market risk. All other banks and bank holding companies are required to maintain a minimum leverage ratio of 4.0%, unless a different minimum is specified by an appropriate regulatory authority. In order to be considered well capitalized the leverage ratio must be at least 5.0%.

Our Bank’s leverage ratio was 11.4% at December 31, 2017 and, as a result, it is currently classified as “well capitalized” for purposes of the OCC’s prompt corrective action regulations.

The risk-based and leverage capital ratios established by federal banking regulators are minimum supervisory ratios generally applicable to banking organizations that meet specified criteria, assuming that they otherwise have received the highest regulatory ratings in their most recent examinations. Banking organizations not meeting these criteria are expected to operate with capital positions in excess of the minimum ratios. Regulators can, from time to time, change their policies or interpretations of banking practices to require changes in risk weights assigned to our Bank's assets or changes in the factors considered in order to evaluate capital adequacy, which may require our Bank to obtain additional capital to support existing asset levels or future growth or reduce asset balances in order to meet minimum acceptable capital ratios.

Additional Regulatory Issues

In June 2010, the Federal Reserve, the OCC and the FDIC issued joint guidance on executive compensation designed to help ensure that a banking organization’s incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act required those agencies, along with the SEC, to adopt rules to require reporting of incentive compensation and to prohibit certain compensation arrangements. The objective of the guidance is to assure that incentive compensation arrangements (i) provide incentives that do notthe agencies determine to encourage excessive risk-taking, (ii) are compatible with effective internal controls and risk management and (iii) are supported by strong corporate governance, including oversightinappropriate risks by the board of directors.institution. The banking agencies issued proposed rules in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the Federal Reserve and the FDICbanking agencies also proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2017,2023, these rules have not been implemented.

We have undertaken efforts to ensure that our incentive compensation plans do not encourage inappropriate risks, consistent with three key principles-that incentive compensation arrangements should appropriately balance risk and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance.

Stress Testing

The Dodd-Frank Act requires stress testing of certain bank holding companies and banks that have more than $10 billion but less than $50 billion of consolidated assets (“medium-sized companies”). Additional stress testing is required for banking organizations having $50 billion or more of assets. Becauseregulatory minimums plus the consolidated assets of the Companyapplicable capital conservation buffer.

Company Participation in Legislative and Regulatory Initiatives

The Congress, Treasury Department and the federal banking regulators, including the FDIC, have taken broad action since early September 2008 to address volatility in the U.S. banking system. In October 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was enacted. The EESA authorized the Treasury Department to purchase from financialFederal Reserve has indicated that depository institutions and their holding companies upshould generally pay dividends only out of current operating earnings. Further, under Mississippi law, The First must obtain the non-objection of the Commissioner of the Mississippi Department of Banking and Consumer Finance prior to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”).  The purpose of TARP was to restore confidence and stabilitypaying any dividend to the U.S. banking systemCompany.

On February 6, 2009, as partregulation by the Mississippi Department of Banking and Consumer Finance. As a member bank of the CPP, the Company entered into a Letter Agreement and Securities Purchase Agreement (collectively, the “Purchase Agreement”) with the Treasury Department, pursuant to which the Company sold (i) 5,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series UST (the “CPP Preferred Stock”) and (ii) a warrant (the “Warrant”) to purchase 54,705 shares of the Company’s Common Stock for an exercise price of $13.71 per share. On September 29, 2010, after successfully obtaining CDFI certification, the Company exited the CPP by refinancing its CPP funding into lower-cost CDCI funding and also accepted additional CDCI funding. In connection with this transaction, the Company retired its CPP Preferred Stock and issued to the Treasury Department 17,123 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series CD (the “CDCI Preferred Stock”). Including refinanced funding and newly obtained funding, the Company’s total CDCI funding was $17,123,000.

The America Reinvestment and Recovery Act of 2009 (“ARRA”) contained expansive new restrictions on executive compensation for financial institutions and other companies participating in the TARP. As long as the Treasury continued to hold equity interests in the Company issued under the TARP, the Company monitored its compensation arrangements, modified such compensation arrangements, agreed to limit and limit its compensation deductions, and took such other actions as were necessary to comply with the standards discussed below. On December 6, 2016, the Company repurchased all 17,123 shares of its CDCI Preferred Shares from Treasury at fair market value. Therefore, as of December 6, 2016, the Company no longer had any obligations under TARP or the ARRA. However, as part of its repurchase obligations with the Treasury, the Company agreed to maintain its CDFI certification status for a period of two years. The eligibility requirements provide that the Company must:

• Have a primary mission of promoting community development;

• Provide both financial and educational services;

• Serve and maintain accountability to one or more defined target markets;

• Maintain accountability to a defined market; and

• Be a legal, non-governmental entity at the time of application (with the exception of Tribal governmental entities)

The First, A National Banking Association

OCC Regulation. The First operates as a national banking association incorporated under the laws of the United States and subject to supervision, inspection and examination by the OCC. The OCC regulates or monitors virtually all areas of The First’s operations, including security devices and procedures, adequacy of capitalization and loan loss reserves, loans, investments, borrowings, deposits, mergers, issuances of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training to carry on safe lending and deposit gathering practices. The OCC imposes limitations on The First’s aggregate investment in real estate, bank premises, and furniture and fixtures.Federal Reserve System, The First is required by the OCC to prepare quarterly reports onhold stock in its financial condition anddistrict Federal Reserve Bank in an amount equal to conduct an annual audit6% of its financial affairs in compliancecapital stock and surplus (half paid to acquire stock with minimum standards and procedures prescribed by the OCC.

Safe and Sound Banking Practices; Enforcementremainder held as a cash reserve). Banks and bank holding companies are prohibited from engaging in unsafe and unsound banking practices. Bank regulatorsMember banks do not have broad authority to prohibit and penalize activities of bank holding companies and their subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws, regulations or written directives of or agreements with regulators. Regulators have considerable discretion in identifying what they deem to be unsafe and unsound practices and in pursuing enforcement actions in response to them.

Under FDICIA, all insured institutions must undergo regular on-site examinations by their appropriate banking agency. The cost of examinations of insured depository institutions and any affiliates may be assessed by the appropriate agency against each institution or affiliate as it deems necessary or appropriate. Insured institutions are required to submit annual reports to the FDIC and the appropriate agency. FDICIA also directs the FDIC to develop with other appropriate agencies a method for insured depository institutions to provide supplemental disclosure of the estimated fair market value of assets and liabilities, to the extent feasible and practicable, in any balance sheet, financial statement, report of condition, or any other report of any insured depository institution. FDICIA also requires the federal banking regulatory agencies to prescribe, by regulation, standards for all insured depository institutions and depository institution holding companies relating, among other things, to: (i) internal controls, information systems, and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset quality.

National banks and their holding companies which have been chartered or registered or undergone a change in control within the past two years or which have been deemed by the OCC orover the Federal Reserve Board, respectively, toSystem as a result of owning the stock and the stock cannot be troubled institutions must give the OCCsold or the Federal Reserve Board, respectively, thirty days prior noticetraded.

Deposit Insurance.The FDIC establishes rates for the payment of premiums by federally insured banks and thrifts for deposit insurance. Deposits in The First are insured by the FDIC up to a maximum amount (generally $250,000 per depositor, subject to aggregation rules). The DIF is maintained by the FDIC for commercial banksapplicable limits, and, thrifts and funded with insurance premiums from the industry that are used to offset losses from insurance payouts when banks and thrifts fail. Since 1993, insured depository institutions like The First have paid for deposit insurance under a risk-based premium system. Assessments are calculated based on the depository institution’s average consolidated total assets, less its average amount of tangible equity.

Transactions With Affiliates and Insiders.The First is subject to Section 23A of the Federal Reserve Act, which places limits on the amount of loans to, and certain other transactions with, affiliates, as well as on the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited in amount, as to any one affiliate, to 10% of The First's capital and surplus and, as to all affiliates combined, to 20% of The First's capital and surplus. Furthermore, within the foregoing limitations as to amount, each covered transaction must meet specified collateral requirements.

accordingly, The First is also subject to Section 23Bcertain FDIC regulations and the FDIC has backup examination authority and some enforcement powers over The First.

Change in ControlWith certain limited exceptions, the BHCAspecified amounts. In addition, any transaction between The First and the Change in Bank Control Act, together with regulations promulgated thereunder, prohibit a personCompany or company or a group of persons deemedany affiliate are required to be “acting in concert” from, directly or indirectly, acquiring more than 10% (5% if the acquirer is a bank holding company) of any class of our voting stock or obtaining the ability to control in any manner the election of a majority of our directors or otherwise direct the management or policies of our company without prior notice or application to and the approval of the Federal Reserve.

Dividends.The principal source of funds from which we pay cash dividends are the dividends received from our bank subsidiary, The First. Federal banking laws also place similar restrictions on certain extensions of credit by insured banks, such as The First, to their directors, executive officers and regulations restrictprincipal shareholders.

Interstate Branching and Acquisitions.National banks are required by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located. Formerly, under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, a bank’s ability to branch into a particular state was largely dependent upon whether the state “opted in” to de novo interstate branching. Under the Dodd-Frank Act, de novo interstate branching by national banks is permitted if, under the laws of the state where the branch is to be located, a state bank chartered in that state would be permitted to establish a branch. Further, a bank headquartered in one state is authorized to merge with a bank headquartered in another state, as long as neither of the states have opted out of such interstate merger authority, and subject to any state requirement that the target bank shall have been in existence and operating for a minimum period of time, not to exceed five years and certain deposit market-share limitations. Under current Mississippi, Alabama, Louisiana and Florida law, The First may open branches or acquire existing banking operations throughout these states with the prior approval of the OCC. The Dodd-Frank Act permits out of state acquisitions by bank holding companies (subject to veto by new state law), interstate branching by banks if allowed by state law, interstate merging by banks, and de novo branching by national banks if allowed by state law. All branching in which The First may engage remains subject to regulatory approval and adherence to applicable legal and regulatory requirements.

Community Reinvestment Act.The Community Reinvestment Act (the “CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the Community Reinvestment Act, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. Depository institutions are periodically examined for compliance with the CRA and are assigned ratings. In order for a financial holding company to commence new activity permitted by the BHCA, each insured depository institution, subsidiarythe claims of depositors of the financialinstitution, including the claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general unsecured claims against the institution, including those of the parent bank holding company mustcompany.

USA Patriot Act. In 2001,soundness compliance plans.

Office of Foreign Assets Control.

There may also be additional unanticipated significant costs in connection with the acquisitions that we may not recoup. These costs and expenses could reduce the realization of efficiencies, strategic benefits and additional income we expect to achieve from the acquisition.acquisitions. Although we expect that these benefits will offset the transaction expenses and implementation costs over time, the net benefit may not be achieved in the near term or at all.

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all, which could have a material adverse impact on our financial results.

We may incur impairment to goodwill.

With

We review our goodwill at least annually. Significant negative industry or economic trends, reduced estimates of future cash flows or disruptions to our business, could indicate that goodwill might be impaired. Our valuation methodology for assessing impairment requires management to make judgements and assumptions based on historical experience and to rely on projections of future operating performance. We operate in a competitive environment and projections of future operating results and cash flows may vary significantly from actual results. In addition, if our analysis results in an impairment to our goodwill, we would be required to record a non-cash charge to earnings in our financial statements during the completion of the acquisitions of First Community Bank and Sunshine Community Bank, the market price ofperiod in which such impairment is determined to exist. Any such charge could have a material adverse effect on our common stock may be affected by factors different from those historically affecting our independent operations through The First.

The historic businesses of each of The First, First Community Bank, and Sunshine Community Bank differ in important respects, and accordingly, the results of operationsoperations.

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Table of the combined company and the market price of the combined company’s shares of common stock may be affected by factors different from those historically affecting the independent results of operations of The First, First Community Bank, and Sunshine Community Bank.

Contents

Risks Relating to Our Securities

The price of our common stock may fluctuate significantly, which may make it difficult for investors to resell shares of common stock at a time or price they find attractive.

Our stock price may fluctuate significantly as a result of a variety of factors, many of which are beyond our control. In addition to those described in “Special Cautionary Notice Regarding Forward-Looking Statements,” these factors include, among others:

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actual or anticipated quarterly fluctuations in our operating results, financial condition or asset quality;

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changes in financial estimates or the publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions;

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failure to declare dividends on our common stock from time to time;

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failure to meet analysts’ revenue or earnings estimates;

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failure to integrate acquisitions or realize anticipated benefits from acquisitions;

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strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;

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fluctuations in the stock price and operating results of our competitors or other companies that investors deem comparable to us;

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future sales of our common stock or other securities;

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proposed or final regulatory changes or developments;

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anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us;

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reports in the press or investment community generally relating to our reputation or the financial services industry;

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domestic and international economic and political factors unrelated to our performance;

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general market conditions and, in particular, developments related to market conditions for the financial services industry;

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•actual or anticipated quarterly fluctuations in our operating results, financial condition or asset quality;

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adverse weather conditions, including floods, tornadoes and hurricanes; and

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geopolitical conditions such as acts or threats of terrorism or military conflicts.

•changes in financial estimates or the publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions;

•failure to declare dividends on our common stock from time to time;

•failure to meet analysts’ revenue or earnings estimates;

•failure to integrate acquisitions or realize anticipated benefits from acquisitions;

•strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;

•fluctuations in the stock price and operating results of our competitors or other companies that investors deem comparable to us;

•future sales of our common stock or other securities;

•proposed or final regulatory changes or developments;

•anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us;

•reports in the press or investment community generally relating to our reputation or the financial services industry;

•domestic and international economic and political factors unrelated to our performance;

•general market conditions and, in particular, developments related to market conditions for the financial services industry;

•adverse weather conditions, including floods, tornadoes and hurricanes;

•public health emergencies, including disease pandemics; and

•disruptions to the financial markets as a result of the current or anticipated impact of military conflict, including the ongoing military conflicts in Ukraine and the Middle East, terrorism or other geopolitical events.

In addition, in recent years, the stock market in general has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies, including for reasons unrelated to their operating performance. These broad market fluctuations may adversely affect our stock price, notwithstanding our operating results. We expect that the market price of our common stock will continue to fluctuate and there can be no assurances about the levels of the market prices for our common stock.

General market fluctuations, industry factors and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause our stock price to decrease regardless of operating results.

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Table of Contents

We may need to rely on the financial markets to provide needed capital.

Our common stock is listed and traded on the Nasdaq stock market. Although we anticipate that our capital resources will be adequate for the foreseeable future to meet our capital requirements, at times we may depend on the liquidity of the capital markets to raise additional capital. Our historical ability to raise capital through the sale of capital stock and debt securities may be affected by economic and market conditions or regulatory changes that are beyond our control. Adverse changes in our operating performance or financial condition could make raising additional capital difficult or more expensive or limit our access to customary sources of funding. If the market should fail to operate, or if conditions in the capital markets are adverse, our efforts to raise capital could require the issuance of securities at times and with maturities, conditions and rates that are disadvantageous, and which could have a dilutive impact on our current stockholders. Should these risks materialize, the ability to further expand our operations through organic or acquisitive growth may be limited.

Securities issued by the Company, including the Company’s common stock, are not FDIC insured.

Securities issued by the Company, including the Company’s common stock, are not savings or deposit accounts or other obligations of any bank and are not insured by the FDIC, the Deposit Insurance Fund,DIF, or any other governmental agency or instrumentality, or any private insurer, and are subject to investment risk, including the possible loss of principal.

Anti-takeover laws and certain agreements and charter provisions may adversely affect share value.

the price of our common stock.

Certain provisions of state and federal law and our articles of incorporation may make it more difficult for someone to acquire control of the Company. Under federal law, subject to certain exemptions, a person, entity, or group must notify the federal banking agencies before acquiring 10% or more of the outstanding voting stock of a bank holding company, including the Company’s shares. Banking agencies review the acquisition to determine if it will result in a change of control. The banking agencies have 60 days to act on the notice, and take into account several factors, including the resources of the acquiror and the antitrust effects of the acquisition. There also are Mississippi statutory provisions and provisions in our articles of incorporation that may be used to delay or block a takeover attempt. As a result, these statutory provisions and provisions in our articles of incorporation could result in the Company being less attractive to a potential acquiror.

The trading volume in our common stock is less than that of other larger financial services companies.

Although our common stock is listed for trading on the Nasdaq Global Market, the trading volume for our common stock is low relative to other larger financial services companies, and you are not assured liquidity with respect to transactions in our common stock. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which we have no control. Given the lower trading volume of our common stock, significant sales of our common stock, or the expectation of these sales, could cause our stock price to fall.

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You may not receive dividends on our common stock.

Although we have historically declared quarterly cash dividends on our common stock, we are not required to do so and may reduce or cease to pay common stock dividends in the future. If we reduce or cease to pay common stock dividends, the market price of our common stock could be adversely affected.

The principal source of funds from which we pay cash dividends are the dividends received from The First. Federal and state banking laws and regulations and state corporate laws restrict the amount of dividends we may declare and loans a bank may make to its parent company. Under certain conditions, dividends paid to us bypay from The First are subject to approval by the OCC. A national bank may not pay dividends from its capital. All dividends must be paid out of undivided profits then on hand, after deducting expenses, including reservesFirst. See “Item 1. Business – Regulation and Supervision” included herein for losses and bad debts. In addition, a national bank is prohibited from declaring a dividend on its shares of common stock until its surplus equals its stated capital, unless the bank has transferred to surplus no less than one-tenth of its net profits of the preceding two consecutive half-year periods (in the case of an annual dividend). The approval of the OCC is required if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus. In addition, under The Federal Deposit Insurance Corporation Improvement Act of 1991, the banks may not pay a dividend if, after paying the dividend, the bank would be undercapitalized.

more information.

If we fail to pay dividends, capital appreciation, if any, of our common stock may be the sole opportunity for gains on an investment in our common stock. In addition, in the event The First becomes unable to pay dividends to us, we may not be able to service our debt or pay our other obligations or pay dividends on our common stock and preferred stock. Accordingly, our inability to receive dividends from The First could also have a material adverse effect on our business, financial condition and results of operations and the value of your investment in our common stock.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM2.

PROPERTIES

ITEM 1C. CYBERSECURITY

The Company’s information security program is designed to protect the security of our computer systems, networks, software and information assets, including customer information. The program is comprised of technical controls, policies, guidelines, and procedures. These technical controls, policies, guidelines, and procedures are intended to align with regulatory guidance, and common industry standard security practices.

The board of directors and our executives appreciate the severity of cybersecurity-related risks and support the continuous development of and investment in the information security program.

Commitment to Security and Confidentiality

At the Company, we expect each associate to be responsible for the security and confidentiality of customer information. We communicate this responsibility to associates during on-boarding and throughout their employment. Annually, training courses are assigned to each associate to complete on how to protect the confidentiality of customer information at the time of hire and during each year of employment.

We regularly provide associates with information security awareness training, including the recognition and appropriate handling of potential phishing emails, which can introduce malware to a bank’s network, result in the theft of user credentials and, ultimately, place customer information at risk.We regularly use phishing campaigns to train associates to determine their ability to recognize phishing emails. For associates who fail a phishing campaign, the associates are assigned additional training courses.

Associates must also follow established procedures for the safe storage and handling and secure disposal of customer information. Old or obsolete computer assets are subject to defined procedures and processes to ensure safe destruction of information contained on those devices. For paper-based information or documents, we dispose of paper using shred bins for destruction.

Cybersecurity Incident Response Plan

As part of our information security program, we have adopted an Information Security Incident Response Plan (Incident Response Plan), which is administered by the Company’s Chief Information Security Officer (CISO).The Incident Response Plan describes the Company’s processes, procedures, and responsibilities for responding to incidents including security and cybersecurity. The Incident Response Plan is intended to be followed in the event of a cybersecurity incident, including implementation of (i) forensic and containment, eradication, and remediation actions by information technology and security personnel and (ii) operational response actions by business units, communications, legal, and risk personnel. The Incident Response Plan includes an annual tabletop exercise to simulate responses to cybersecurity events. If applicable, each exercise may result in postmortem and discuss lessons learned to evaluate any improvements to the Incident Response Plan.

The Incident Response Plan includes processes for escalation and reporting of cybersecurity incidents to the Incident Response Team.

Network and Device Security

The Company employs a constantly evolving, defense-in-depth methodology to cybersecurity. Robust high-availability firewalls are in place at the perimeter.Remote workers are supported through the Company’s secure VPN and uses multifactor authentication. The Company has a vulnerability management program in place that includes a managed detect and response platform to ensure monitoring of the Company’s network, ensures the timely installation of software patches, and provides a risk-based approach to addresses vulnerabilities across the network.Network security controls are in place to prevent unauthorized access to the network or the Company’s IT resources. The Company employs controls over its managed workstations, servers, and other endpoints to prevent inappropriate access or damage to physical, virtual, or data assets.Data loss prevention programs are in place to prevent the inappropriate transmission or exposure of sensitive data assets or customer information.

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Cybersecurity training is provided to all employees as part of the overall cybersecurity program. The Company contracts with third party vendors to conduct internal and external penetration tests against the Company’s networks and IT assets to ensure controls are operating in an appropriate manner.

Impacts of Cybersecurity Incidents

To date, the Company has not experienced a cybersecurity incident that has materially impacted our business strategy, results of operations, or financial condition. Addressing cybersecurity risks is a priority for the Company, and the Company is committed to enhancing its systems of internal controls and business continuity and disaster recovery plans.

Third-Party Vendor Controls

Before engaging third-party service providers, the Company carries out a due diligence process. This process is led by the Enterprise Risk Management team and Information Security performs due diligence through the process. Risk assessments are reviewed using Service Organization Controls (SOC) reports, self- attestation questionnaires, and other tools.

Any third-party service provider or vendor utilized as part of the Company’s cybersecurity framework is required to comply with the Company’s policies regarding non-public personal information and information security. Third parties processing sensitive customer data are contractually required to meet all legal and regulatory obligations to protect customer data against security threats or unauthorized access. After contract executions, vendors undergo ongoing monitoring to ensure they continue to meet their security obligations.

Our company’sBoard of Directors’ Role in Oversight of Cybersecurity Threats

Our Board of Directors is responsible for overseeing the Company’s business and affairs, including risks associated with cybersecurity threats. The Board oversees the Company’s corporate risk governance processes primarily through its committees, and oversight of cybersecurity threats is delegated primarily to our Board Risk Committee.

The Board Risk Committee has primary responsibility for overseeing the Company’s comprehensive Enterprise Risk Management program. The Enterprise Risk Management program assists senior management in identifying, assessing, monitoring, and managing risk, including cybersecurity risk, in a rapidly changing environment. Cybersecurity matters and assessments are regularly included in Board Risk Committee meetings.

The Board’s oversight of cybersecurity risk is supported by our CISO and Cybersecurity Manager. The CISO and the Cybersecurity Manager attend Board Risk Committee meetings, periodically provides cybersecurity and other information security updates to the Board Risk Committee. The CISO also provides an annual information security program summary report to the Board, outlining the overall status of our information security program and the Company’s compliance with regulatory guidelines.

Our Management’s Role in Assessing and Managing Cybersecurity Matters

The Company’s CISO directs the Company’s information security program and our information technology risk management.The CISO and Cybersecurity Manager along with a team of dedicated security personnel examines risks to the Company’s information systems and assets, designs and implements security solutions, monitors the environment, and provides immediate responses to threats.

Role of the Chief Information Security Officer and Cybersecurity Manager

Our CISO is responsible for the Company’s information security program. In this role, the CISO manages the Company’s information security Program.

The CISO has experience with FDIC regulated financial institutions and holds the certification as a Certified Banking Chief Information Security Officer (CBISO) and participates in various Information Security peer groups and serves on the Mississippi Bankers Associations - Information Security Committee.

The Company’s Cybersecurity Manager oversees the day-to-day cybersecurity operations.

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The CISO and Cybersecurity Manager support the information security risk oversight responsibilities of the Board and its committees. The CISO reports to our Chief Information Officer, who in turn reports to our Chief Executive Officer and President. The Cybersecurity Manager reports to the Information Technology Director, who in turn reports to the Chief Information Officer.

Our Cybersecurity Manager has experience spanning multiple OCC and FDIC regulated financial institutions across the nation. He holds various cybersecurity related certifications and is currently registered with the International Information Systems Security Certification Consortium as a Certified Information Systems Security Professional (CISSP) member in good standing.

Role of the Enterprise Risk Manager

Our Enterprise Risk Manager is responsible for oversight of the Company’s information technology governance and risk program. In this role, the Enterprise Risk Manager provides independent oversight of information technology risk, promotes effective challenge to the Company’s information technology systems, and ensures that high level risks receive appropriate attention. The Enterprise Risk Manager is a member of the Company’s Risk Management Group and reports to the Chief Risk Officer, who in turn reports to the Board Risk Committee.

Role of the IT Risk Governance Subcommittee

Governance of the information security program begins with the IT Risk Governance Subcommittee, a management level subcommittee, whose objective is to protect the integrity, security, safety and resiliency of corporate information systems and assets. Together, our CISO leads the Company’s IT Risk Governance Committee. The IT Risk Governance Committee meets regularly to review the development of the program and develop recommendations and provides regular reports to management, and, ultimately, the Board Risk Committee through the CISO.

Role of Enterprise Risk Management

Enterprise Risk Management (ERM) is a holistic process to identify, assess/measure, mitigate/control, and aggregate/escalate/report organizational risks, both internal and external, in order to make decisions aimed at maximizing shareholder value and achieving strategic goals.The overarching ERM program shapes information security strategy and development. ERM works with information security management to facilitate performance of Risk Assessments, the results of which are used to identify opportunities to strengthen the program.

ITEM 2. PROPERTIES

Our Company’s main office, which is the holding company headquarters, is located at 6480 U.S. HwyHighway 98 West in Hattiesburg, Mississippi. As of year-end, we had 43110 full service banking and financial servicesservice offices, and one motor bank facility as well as fourand five loan production offices. We lease the Hardy Court Branch, the Gulfport Downtown Branch, the Pascagoula Branch, the Ocean Springs Branch, the Fairhope Branch, the Bayley’s Corner Branch, the Theodore Branch, the Dauphin Island Branch, the Baton Rouge Branch,offices across Mississippi, Alabama, Florida, Georgia and the Pensacola Downtown Branch, which comprise ten of our full services banking and financial services offices. We also lease the Brandon, the Madison, the Ocean Springs and the Slidell loan production offices.Louisiana. Management ensures that all properties, whether owned or leased, are maintained in suitable condition.

The following table sets forth banking office locations that are leased by the Company.

Alabama			ITEM 3.Georgia
•Theodore - Bayley’s Corner			LEGAL PROCEEDINGS •Eagles Landing
•Dauphin Island			•Jonesboro
•Fairhope			Mississippi
•Spanish Fort			•Columbus - Loan Production Office
Florida			•Gulfport - Hardy Court
•Pensacola - Garden Street			•Pascagoula
•St. Petersburg - Loan Production Office			•Petal
•Tallahassee – Apalachee Parkway
•Tallahassee – Thomasville Road
•Tampa - Westshore

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ITEM 3. LEGAL PROCEEDINGS

From time to time the Company and/or The First may be named as defendants in various lawsuits arising out of the normal course of business. At present, with the exception of the matter described below, the Company is not aware of any legal proceedings that it anticipates may materially adversely affect its business.

ITEM 4.

MINE SAFETY DISCLOSURES

Nancy Hall, et al. v. The First Bancshares, Inc., Case No. 2:23-cv-192, United States District Court, Southern District of Mississippi.

On December 7, 2023, Nancy Hall, individually and on behalf of all others similarly situated ("Plaintiff"), sued The First Bancshares, Inc., as successor in interest to Heritage Southeast Bank, in a putative class action complaint in federal district court for the Southern District of Mississippi. Plaintiff asserts claims based on the alleged improper assessment and collection of overdraft fees. Specifically, Plaintiff's claims relate to overdraft fees resulting from alleged "authorized positive, settle negative" or APSN debit card transactions. The complaint asserts causes of action of breach of contract, including the covenant of good faith and fair dealing, and unjust enrichment. The complaint also asserts a claim for alleged violations of Regulation E of the Electronic Funds Transfer Act. The complaint seeks an unspecified amount of damages, restitution, costs, attorney's fees, and interest, as well as injunctive relief.

On February 1, 2024, the Company filed its Answer and Affirmative Defenses, and the proceedings remain ongoing. At this stage of the proceedings, it is not feasible to predict the outcome or a range of loss, should a loss occur, from this proceeding. Accordingly, no accrual has been made and no estimated range of potential loss can be determined at this time.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our

Shares of our common stock tradesare traded on the Nasdaq Global Marketglobal market under the ticker symbol “FBMS”. The following table sets forth the high and low sales price of the Company’s common stock as reported on the NASDAQ Global Market. These prices do not reflect retail mark-ups, mark-downs or commissions.

												Cash
				High				Low				Dividends
				Sale				Sale				Paid
2017		4th quarter		$	34.35			$	29.95			$	0.0375
		3rd quarter			30.35				26.35				0.0375
		2nd quarter			28.65				27.225				0.0375
		1st quarter			30.60				27.125				0.0375
2016		4th quarter		$	28.50			$	17.10			$	0.0375
		3rd quarter			19.55				16.99				0.0375
		2nd quarter			17.72				15.50				0.0375
		1st quarter			18.50				15.32				0.0375

“FBMS.”

There were approximately 1,9614,618 record holders of the Company’s common stock at March 13, 2018February 21, 2024 and 12,339,49231,227,881 shares outstanding.

Payment

Subject to the approval of Dividends

the Board of Directors and applicable regulatory requirements, the Company expects to continue its policy of paying regular cash dividends on a quarterly basis. A discussion of certain limitations on the ability of The principal sourcesFirsts to pay dividends to the Company and the ability of funds to the Company to pay dividends are the dividends received from The First, National Banking Association, Hattiesburg, Mississippi. Consequently, dividends are dependent upon The First’s earnings, capital needs, regulatory policies, as well as statutoryon its common stock is set forth in Part 1 – Item 1. Business – Supervision and regulatory limitations. Federal and state banking laws and regulations restrict the amountRegulation of dividends and loans a bank may make to its parent company. Approval by the Company’s regulators is required if the total of all dividends declared in any calendar year exceed the total of its net income for that year combined with its retained net income of the preceding two years.

this report.

Issuer Purchases of Equity Securities

The following table sets forth shares of our common stock we repurchased during the periodquarter ended December 31, 2017.

2023.

Period						Total Number of Shares Purchased									Average Price Paid Per Share						Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs						Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (a)
October						—									$	—					—						$	50,000
November						—									—						—						50,000
December						856									26.91						—						50,000
Total						856			(b)						$	26.91					—

										Current Program
Period		Total Number of Shares Purchased				Average Price Paid Per Share				Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs				Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
1st Quarter 2017			10,403			$	27.65				-				-
2nd Quarter 2017			1,464				28.65				-				-
3rd Quarter 2017			-				-				-				-
4th Quarter 2017			-				-				-				-
Total			11,867	(a)		$	28.15				-				-

(a)

Represents shares withheld by the Company in order to satisfy employee tax obligations for vesting of restricted stock awards.

26

(a)On February 28, 2023, the Company announced that its Board of Directors authorized a new share repurchase program (the "2023 Repurchase Program"), pursuant to which the Company may purchase up to an aggregate of $50.0 million in shares of the Company's issued and outstanding common stock. The 2023 Repurchase Program expired on December 31, 2023.

(b)The 856 shares purchased in the fourth quarter were withheld by the Company in order to satisfy employee tax obligations for vesting of restricted stock awards.

Stock Performance Graph

The following performance graph and related information are neither “soliciting material” nor “filed’ with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent the Company specifically incorporates it by reference to such filing.

The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an investment of $100 on December 31, 20112018 and the reinvestment of dividends thereafter, to that of the common stocks of United States companies reported in the Nasdaq Composite-Total Returns Index and the common stocks of the Nasdaq OMX Banks Index. The Nasdaq OMX Banks Index contains securities of Nasdaq- listedNasdaq-listed companies classified according to the Industry Classification Benchmark as Banks.banks. They include banks pro-vidingproviding a broad range of financial services, including retail banking, loans and money transmissions.

 

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ITEM 6.

SELECTED FINANCIAL DATA

The following unaudited consolidated financial data is derived from The First Bancshares’ audited consolidated financial statements as

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Table of and for the five years ended December 31, 2017.

SELECTED CONSOLIDATEDContents

Legend
			Symbol						Total Returns Index For:						2018						2019						2020						2021						2022						2023
									First Bancshares, Inc.						100.00						118.55						104.82						133.07						112.80						106.66
									NASDAQ Composite-Total Returns						100.00						136.69						198.10						242.03						163.28						236.17
									NASDAQ OMX Banks Index						100.00						124.38						115.04						164.41						137.65						132.91
			Notes:
			A.						The lines represent monthly index levels derived from compounded daily returns that include all dividends.
			B.						The indexes are reweighted daily, using the market capitalization on the previous trading day.
			C.						If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
			D.						The index level for all series was set to $100.00 on 12/31/2018.

ITEM 6. RESERVED

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL HIGHLIGHTS

(Dollars In Thousands, Except Per Share Data)

		December 31,
		2017				2016				2015				2014				2013
Earnings:
Net interest income		$	59,160			$	40,289			$	36,994			$	33,398			$	28,401
Provision for loan Losses			506				625				410				1,418				1,076
Non-interest income			14,363				11,247				7,588				7,803				7,083
Non-interest expense			55,446				36,862				32,161				30,734				28,165
Net income			10,616				10,119				8,799				6,614				4,639
Net income applicable to common Stockholders			10,616				9,666				8,456				6,251				4,215
Per  common share data:
Basic net income per Share		$	1.12			$	1.78			$	1.57			$	1.20			$	.98
Diluted net income per Share			1.11				1.57				1.55				1.19				.96
Per share data:
Basic net income per share		$	1.12			$	1.86			$	1.64			$	1.27			$	1.07
Diluted net income per share			1.11				1.64				1.62				1.25				1.06
Selected Year End Balances:
Total assets		$	1,813,238			$	1,277,367			$	1,145,131			$	1,093,768			$	940,890
Securities			372,862				255,799				254,959				270,174				258,023
Loans, net of allowance			1,221,808				865,424				769,742				700,540				577,574
Deposits			1,470,565				1,039,191				916,695				892,775				779,971
Stockholders’ equity			222,468				154,527				103,436				96,216				85,108

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CONDITION AND RESULTS OF OPERATIONS

ITEM7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following provides a narrative discussion and analysis of The First Bancshares’ financial condition as of December 31, 2023 and 2022 and results of operations for the years ended December 31, 2017, 2016,2023, 2022, and 2015.2021. This discussion should be read in conjunction with the consolidated financial statements and the supplemental financial data included in Part II. Item 8.-Financial8. Financial Statements and Supplementary Data – included elsewhere in this report.

Critical Accounting Policies

In the preparation

Management’s Discussion and Analysis of the Company'sFinancial Condition and Results of Operations is based on our consolidated financial statements, certain significantwhich have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgements that affect the reported amounts are based upon judgmentof assets, liabilities, revenues and expenses. While we base estimates on historical experience, current information and other factors deemed to be relevant, actual results could differ from those estimates. Accounting policies considered critical to our financial results include the allowance for credit losses and related provision, business combinations and goodwill. The most critical of these is the accounting policy related to the allowance for loancredit losses.

The allowance is based in large measure upon management's evaluation of borrowers' abilities to make loan payments, local and national economic conditions, and other subjective factors. If any of these factors were to deteriorate, management would update its estimates and judgments which may require additional loss provisions.

Companies are required Effective January 1, 2021, the Company adopted ASU 2016-13, Financial Instruments – Measurement of Current Expected Credit Losses on Financial Instruments (“CECL”), which modified the accounting for the allowance for loan losses from an incurred loss model to perform periodic reviewsan expected loss model, as discussed more fully under Part II – Item 8. Financial Statements and Supplementary Data – Note B – Summary of individual securities in their investment portfolios to determine whether decline in the valueSignificant Accounting Policies of this report.

Assets acquired and liabilities assumed as part of a security is other than temporary. A reviewbusiness combination are generally recorded at their fair value at the date of other-than-temporary impairment requires companies to make certain judgments regarding the materialityacquisition. The excess of the decline, its effect on the financial statements and the probability, extent and timing of a valuation recovery and the company’s intent and ability to hold the security. Pursuant to these requirements, Management assesses valuation declines to determine the extent to which such changes are attributable to fundamental factors specific to the issuer, such as financial condition, business prospects or other factors or market-related factors, such as interest rates. Declines inpurchase price over the fair value of securities below their cost thatassets acquired and liabilities assumed is recorded as goodwill. Determining the fair value of identifiable assets, particularly intangibles, and liabilities acquired also require management to make estimates, which are deemedbased on all available information and in some cases assumptions with respect to be other-than-temporarythe timing and amount of future revenues and expenses associated with an asset. Business combinations are recorded in earnings as realized losses.

discussed more fully under Part II - Item 8. Financial Statements and Supplementary Data - Note B - Summary of Significant Accounting Policies and Note C Business Combinations of this report.

Goodwill is assessed for impairment both annually and when events or circumstances occur that make it more likely than not that impairment has occurred. As part of its testing, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines the fair value of a reporting unit is less than its carrying amount using these qualitative factors, the Company then compares the fair value of goodwill with its carrying amount, and then measures impaired loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill. Other intangibles are also assessed for impairment, both annually and when events or circumstances occur, that make it more likely than not that impairment has occurred. No impairment was indicated when the annual test was performed in December, 2017.

Goodwill is discussed more fully under Part II - Item 8. Financial Statements and Supplementary Data - Note B - Summary of Significant Accounting Policies of this report.

Overview

The First Bancshares, Inc. (the Company)Company was incorporated on June 23, 1995, and serves as a bank holding company for The First, formerly known as The First, A National Banking Association, (“The First”), located in Hattiesburg, Mississippi. The First began operations on August 5, 1996, from its main office in the Oak Grove community, which is now incorporated within the city of Hattiesburg. Currently, the First has 57116 locations in Mississippi, Louisiana, Alabama, Florida, Georgia and Florida.Louisiana. The Company and The First engage in a general commercial and retail banking business characterized by personalized service and local decision-making, emphasizing the banking needs of small to medium-sized businesses, professional concerns, and individuals.

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The Company’s primary source of revenue is interest income and fees, which it earns by lending and investing the funds which are held on deposit. Because loans generally earn higher rates of interest than investments, the Company seeks to employ as much of its deposit funds as possible in the form of loans to individuals, businesses, and other organizations. To ensure sufficient liquidity, the Company also maintains a portion of its deposits in cash, government securities, deposits with other financial institutions, and overnight loans of excess reserves (known as “Federal Funds Sold”) to correspondent banks. The revenue which the Company earns (prior to deducting its overhead expenses) is essentially a function of the amount of the Company’s loans and deposits, as well as the profit margin (“interest spread”) and fee income which can be generated on these amounts.

Highlights for the year:

•In the year-over-year comparison, net income available to common shareholders increased $12.5 million, or 19.9%, from $62.9 million for the year ended December 31, 2017 include:

·

On October 24, 2017, the Company announced the signing of an Agreement and Plan of Merger with Southwest Banc Shares, Inc. (“Southwest”), parent company of First Community Bank, headquartered in Chatom, Alabama. This acquisition closed March 1, 2018, and added 9 locations servicing southwest Alabama.

·

On October 31, 2017, the Company completed a sale of an aggregate of 2,012,500 shares of its common stock in a public offering. Net proceeds after underwriting discounts and estimated expenses were approximately $55.2 million.

·

On December 6, 2017, the Company announced the signing of an Agreement and Plan of Merger with Sunshine Financial, Inc. (“Sunshine”), parent company of Sunshine Community Bank, headquartered in Tallahassee, Florida. Upon completion, the acquisition will add 5 locations servicing Tallahassee and is expected to close during the second quarter of 2018 subject to Sunshine shareholder approval and customary closing conditions. Regulatory approval was received February 27, 2018.

2022 to $75.5 million for the same period ended December 31, 2023.

•Excluding the loans acquired from the Heritage Bank acquisition of $1.159 billion, total loans increased $236.9 million for the year ended December 31, 2023, representing net growth of 6.3%, as compared to the same period ended December 31, 2022.

•Past due loans of $11.7 million to total loans was 0.23% for the year ended December 31, 2023, compared to $6.1 million, or 0.16% for the same period ended December 31, 2022.

•Cost of deposits averaged 109 basis points for the year ended December 31, 2023, compared to 26 basis points for the same period ended December 31, 2022.

At December 31, 2017,2023, the Company had approximately $1.8$7.999 billion in total assets, an increase of $0.5$1.538 billion

compared to $1.3$6.462 billion at December 31, 2016.2022. Loans, including mortgage loans held for sale and net of the allowance for loancredit losses, increased to $1,221.8$5.119 billion at December 31, 2023 from $3.740 billion at December 31, 2022. Deposits increased to $6.463 billion at December 31, 2023 from $5.494 billion at December 31, 2022. Stockholders’ equity increased to $949.0 million at December 31, 20172023 from $865.4$646.7 million at December 31, 2016. Deposits increased to $1,470.6 million2022. The acquisition of Heritage Bank during 2023 contributed, at December 31, 2017 from $1,039.2 million at December 31, 2106. Stockholders’ equity increased to $222.5 million at December 31, 2017 from approximately $154.5 million at December 31, 2016. The acquisitionsacquisition, $1.565 billion, $1.159 billion, net of Iberville Bankpurchase accounting adjustments, and Gulf Coast Community Bank, which were completed on January 1, 2017, contributed $402.6 million, $237.3 million and $355.6 million$1.392 billion, net of purchase accounting adjustments, in assets, loans, and deposits, respectively.

The First (Bank only) reported net income of $12.6$81.8 million, $11.6$72.6 million and $9.6$73.9 million for the years ended December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively. For the years ended December 31, 2017, 20162023, 2022 and 2015,2021, the Company reported consolidated net income applicableavailable to common stockholders of $10.6$75.5 million, $9.7$62.9 million and $8.5$64.2 million, respectively. The following discussion should be read in conjunction with the “Selected Consolidated Financial Data” and the Company's consolidated financial statements and the Notes thereto and the other financial data included elsewhere.

Results of Operations

The following is a summary of the results of operations byfor The First for(Bank only) the years ended December 31, 2017, 2016,2023, 2022, and 2015.

		2017				2016				2015
		(In thousands)
Interest income		$	66,061			$	44,535			$	40,196
Interest expense			6,049				4,094				3,022
Net interest income			60,012				40,441				37,174
Provision for loan losses			506				625				410
Net interest income after provision for loan losses			59,506				39,816				36,764
Other income			14,312				10,540				7,589
Other expense			52,999				33,941				31,032
Income tax expense			8,177				4,766				3,701
Net income		$	12,642			$	11,649			$	9,620

30

2021.

($ in thousands)			2023						2022						2021
Interest income			$	340,897					$	200,375					$	176,735
Interest expense			83,638						15,085						12,306
Net interest income			257,259						185,290						164,429
Provision for credit losses			14,500						5,605						(1,104)
Net interest income after provision for loan losses			242,759						179,685						165,533
Non-interest income			39,722						34,288						37,362
Non-interest expense			177,324						122,373						108,791
Income tax expense			23,352						19,033						20,210
Net income			$	81,805					$	72,567					$	73,894

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The following reconciles the above table to the amounts reflected in the consolidated financial statements of the Company at December 31, 2017, 2016,2023, 2022, and 2015:

		2017				2016				2015
		(In thousands)
Net interest income:
Net interest income of The First		$	60,012			$	40,441			$	37,174
Intercompany eliminations			(852	)			(152	)			(180	)
		$	59,160			$	40,289			$	36,994
Net income applicable to common stockholders:
Net income of  The First		$	12,642			$	11,649			$	9,620
Net loss of the Company, excluding intercompany accounts			(2,026	)			(1,983	)			(1,164	)
		$	10,616			$	9,666			$	8,456

2021.

($ in thousands)			2023						2022						2021
Net interest income:
Net interest income of The First			$	257,259					$	185,290					$	164,429
Interest expense			7,934						7,474						7,365
			$	249,325					$	177,816					$	157,064
Net income available to common shareholders:
Net income of The First			$	81,805					$	72,567					$	73,894
Net loss of the Company			(6,348)						(9,648)						(9,727)
			$	75,457					$	62,919					$	64,167

Consolidated Net Income

The Company reported consolidated net income applicableavailable to common stockholders of $10.6$75.5 million for the year ended December 31, 2017,2023, compared to a consolidated net income of $9.7$62.9 million for the year ended December 31, 2016,2022.

Net interest income was $249.3 million for the twelve months ended December 31, 2023, an increase of $71.5 million in year-over-year comparison, primarily due to interest income earned on a higher volume of loans (including loans acquired from Heritage Bank and consolidated netBeach Bank).

Non-interest income of $8.5was $46.7 million for the year ended December 31, 2015.2023, an increase of $9.7 million as compared to the same period ended December 31, 2022. Service charges on deposit accounts and interchange fee income accounted for $11.7 million of the increase.

Non-interest expense was $184.7 million for the year ended December 31, 2023, an increase of $54.2 million as compared to the same period ended December 31, 2022. The increase in income was partially attributable to an$2.7 million in acquisition and charter conversion charges and $32.1 million in increased operating expenses related to the acquisitions of Beach Bank and Heritage Bank as well as $5.2 million in expenses associated with the U.S. Treasury awards and increases in FDIC premiums of $1.7 million and a $4.9 million increase in core deposit amortization for the year ended December 31, 2023.

The Company reported consolidated net income available to common stockholders of $62.9 million for the year ended December 31, 2022, compared to a consolidated net income of $64.2 million for the year ended December 31, 2021. In the year-over-year comparison, Paycheck Protection Program ("PPP") loans fee income decreased $9.8 million.

Net interest income increased $14.0 million for the year ended December 31, 2022 compared to the same time period in 2021, primarily due to interest income earned on a higher volume of $18.9 million or 46.8%, an increasesecurities and loans and increased interest rates.

Non-interest income decreased $512 thousand for the year ended December 31, 2022 compared to the same time period in other2021. Increased service charges on deposit accounts and interchange fee income of $3.1$2.5 million or 27.7%, which was offset by a decrease in mortgage income of $4.5 million.

Non-interest expense was $130.5 million for the year ended December 31, 2022, an increase of $15.9 million as compared to the same period ended December 31, 2021. An increase of $4.8 million in other expenses of $18.6 million or 50.4%. The increase in other expense was primarily due to a charge of $6.7acquisition and charter conversion charges and $3.3 million related to the acquisitions completed in 2017ongoing operations of the Cadence Bank branches and a $2.1$5.1 million charge to income tax expense related to a reductionthe Beach Bank branch operations accounted for the increase in our deferred tax asset resulting from the change in tax rate under the Tax Cuts and Jobs Act enacted in December of 2017.

non-interest expense.

See Note C – Business Combinations in the accompanying notes to the consolidated financial statements included elsewhere in this report for more information on how the Company accounts for business combinations.

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Consolidated Net Interest Income

The largest component of net income for the Company is net interest income, which is the difference between the income earned on assets and interest paid on deposits and borrowings used to support such assets. Net interest income is determined by the rates earned on the Company’s interest-earning assets and the rates paid on its interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, and the degree of mismatch and the maturity and repricing characteristics of its interest-earning assets and interest-bearing liabilities.

Consolidated net interest income was approximately $59.2$249.3 million for the year ended December 31, 2017,2023, as compared to $40.3$177.8 million for the year ended December 31, 2016. This increase was the direct result2022, primarily due to interest income earned on a higher volume of increased loan volumes during 2017 as compared to 2016.loans (including loans acquired from Heritage Bank and Beach Bank). Average interest-bearing liabilities for the year 20172023 were $1,247.8 million$4.935 billion compared to $911.0 million$3.944 billion for the year 2016. At December 31, 2017, the net interest spread, which is the difference between the yield on earning assets and the rates paid on interest-bearing liabilities, was 3.72% compared to 3.63% at December 31, 2016. The net2022. Net interest margin, which is net interest income divided by average earning assets, was 3.83%3.59% for the year 20172023 compared to 3.71%3.19% for the year 2016.2022. Rates paid on average interest-bearing liabilities increased to 0.55%1.86% for the year 20172023 compared to 0.47%0.57% for the year 2016.2022. Interest earned on assets and interest accrued on liabilities is significantly influenced by market factors, specifically interest rates as set by Federalfederal agencies. Average loans comprised 74.1%71.4% of average earnings assets for the year 20172023 compared to 73.9%58.0% for the year 2016.

31

2022.

Consolidated net interest income was approximately $40.3$177.8 million for the year ended December 31, 2016,2022, as compared to $37.0$157.1 million for the year ended December 31, 2015.2021. This increase was the direct result of higher volume of securities and loans and increased loan volumesinterest rates during 20162022 as compared to 2015.2021. Average interest-bearing liabilities for the year ended December 31, 20162022 were $911.0 million$3.944 billion compared to $822.7 million$3.435 billion for the year ended December 31, 2015. At December 31, 2016, the2021. Net interest margin, which is net interest spreadincome divided by average earning assets, was 3.63% compared to 3.65% at December 31, 2015. The net interest margin was 3.71%3.19% for the year 20162022 compared to 3.72%3.21% for the year 2015.2021. Rates paid on average interest-bearing liabilities increased to 0.47%was 0.57% for the year 2016 compared to 0.39%2022 and remained unchanged for the year 2015.ended 2021. Interest earned on assets and interest accrued on liabilities is significantly influenced by market factors, specifically interest rates as set by federal agencies. Average loans comprised 73.9%58.0% of average earnings assets for the year 20162022 compared to 71.7%60.8% for the year 2015.

2021.

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Average Balances, Income and Expenses, and Rates. The following tables depict, for the periods indicated, certain information related to the average balance sheet and average yields on assets and average costs of liabilities. Such yields are derived by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been derived from daily averages.

Average Balances, Income and Expenses, and Rates

						Years Ended December 31,
						2023																		2022																		2021
($ in thousands)						Average Balance						Income/ Expenses						Yield/ Rate						Average Balance						Income/ Expenses						Yield/ Rate						Average Balance						Income/ Expenses						Yield/ Rate
Assets
Earning Assets
Loans (1)(2)						$	5,036,021					$	294,541					5.85		%				$	3,302,265					$	157,761					4.78		%				$	3,019,605					$	151,203					5.01		%
Securities (4)						1,918,575						47,913						2.50		%				2,023,214						46,305						2.29		%				1,305,262						28,035						2.15		%
Federal funds sold and interest bearing deposits with other banks (3)						97,183						2,453						2.52		%				366,465						50						0.01		%				642,042						121						0.02		%
Total earning assets						7,051,779						344,907						4.89		%				5,691,944						204,116						3.59		%				4,966,909						179,359						3.61		%
Other						866,869																		584,164																		526,877
Total assets						$	7,918,648																	$	6,276,108																	$	5,493,786
Liabilities
Interest-bearing liabilities						$	4,934,875					$	91,608					1.86		%				$	3,943,531					$	22,577					0.57		%				$	3,434,964					$	19,681					0.57		%
Demand deposits						2,012,129																		1,660,696																		1,366,529
Other liabilities						77,252																		45,065																		34,827
Stockholders’ equity						894,392																		626,816																		657,466
Total liabilities and stockholders’ equity						$	7,918,648																	$	6,276,108																	$	5,493,786
Net interest spread																		3.03		%																3.02		%																3.04		%
Net yield on interest-earning assets												$	253,299					3.59		%										$	181,539					3.19		%										$	159,678					3.21		%

		Years Ended December 31,
		2017												2016												2015
		Average Balance				Income/ Expenses				Yield/ Rate				Average Balance				Income/ Expenses				Yield/ Rate				Average Balance				Income/ Expenses				Yield/ Rate
		(Dollars in thousands)
Assets
Earning Assets
Loans (1)(2)		$	1,168,882			$	56,827				4.86	%		$	820,881			$	38,497				4.69	%		$	730,326			$	34,242				4.69	%
Securities (4)			359,195				9,956				2.77	%			261,508				6,885				2.63	%			256,462				6,759				2.64	%
Federal funds sold (3)			47,534				390				.82	%			18,806				127				.68	%			24,582				64				.26	%
Other			2,515				163				.64	%			10,029				59				.59	%			7,585				93				1.23	%
Total earning assets			1,578,126				67,336				4.27	%			1,111,224				45,568				4.10	%			1,018,955				41,158				4.04	%
Other			185,277												117,735												103,237
Total assets		$	1,763,403											$	1,228,959											$	1,122,192
Liabilities
Interest-bearing liabilities		$	1,247,823			$	6,909				.55	%		$	911,037			$	4,316				.47	%		$	822,708			$	3,208				.39	%
Demand deposits (1)			318,339												191,998												196,284
Other liabilities			26,404												5,601												4,594
Stockholders’ equity			170,837												120,323												98,606
Total liabilities and stockholders’ equity		$	1,763,403											$	1,228,959											$	1,122,192
Net interest spread											3.72	%											3.63	%											3.65	%
Net yield on interest-earning assets						$	60,427				3.83	%						$	41,252				3.71	%						$	37,950				3.72	%

_________________

(1)

All loans and deposits were made to borrowers in the United States. Includes non-accrual loans of $5,674, $3,265, and $7,368, for the years ended December 31, 2017, 2016, and 2015, respectively. Loans include held for sale loans.

(2)

Includes loan fees of $1,333, $857, and $692, for the years ended December 31, 2017, 2016, and 2016, respectively.

(3)

Includes Excess Balance Account-Mississippi National Banker’s Bank and Federal Reserve – New Orleans.

(4)

Tax equivalent yield assuming a 35% tax rate.

32

(1)Includes nonaccrual loans of $10,690, $12,591, and $28,013 for the years ended December 31, 2023, 2022, and 2021, respectively. Loans include held for sale loans.

(2)Includes loan fees of $7,665, $7,453, and $17,138 for the years ended December 31, 2023, 2022, and 2021, respectively.

(3)Includes Excess Balance Account-First National Banker’s Bank.

(4)Fully tax equivalent yield assuming a 25.3% tax rate.

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Analysis of Changes in Net Interest Income. The following table presents the consolidated dollar amount of changes in interest income and interest expense attributable to changes in volume and to changes in rate. The combined effect in both volume and rate which cannot be separately identified has been allocated proportionately to the change due to volume and due to rate.

Analysis of Changes in Consolidated Net Interest Income

						Year Ended December 31, 2023 versus 2022 Increase (decrease) due to																		Year Ended December 31, 2022 versus 2021 Increase (decrease) due to
($ in thousands)						Volume						Rate						Net						Volume						Rate						Net
Earning Assets
Loans						$	82,887					$	53,893					$	136,780					$	14,176					$	(7,595)					$	6,581
Securities (1)						(2,405)						4,013						1,608						15,436						2,832						18,268
Federal funds sold and interest bearing deposits with other banks						(28)						2,431						2,403						(55)						(37)						(92)
Total interest income						80,454						60,337						140,791						29,557						(4,800)						24,757
Interest-Bearing Liabilities
Interest-bearing transaction accounts						903						19,659						20,562						1,278						(745)						533
Money market accounts and savings						491						16,071						16,562						226						819						1,045
Time deposits						2,078						18,160						20,238						294						(52)						242
Borrowed funds						10,642						1,027						11,669						241						835						1,076
Total interest expense						14,114						54,917						69,031						2,039						857						2,896
Net interest income						$	66,340					$	5,420					$	71,760					$	27,518					$	(5,657)					$	21,861

		Year Ended December 31,												Year Ended December 31,
		2017 versus 2016 Increase (decrease) due to												2016 versus 2015 Increase (decrease) due to
		Volume				Rate				Net				Volume				Rate				Net
		(In thousands)
Earning Assets
Loans		$	18,630			$	(300	)		$	18,330			$	3,807			$	448			$	4,255
Securities			2,461				610				3,071				174				(48	)			126
Federal funds sold			65				198				263				(63	)			126				63
Other short-term investments			57				47				104				4				(38	)			(34	)
Total interest income			21,213				555				21,768				3,922				488				4,410
Interest-Bearing Liabilities
Interest-bearing transaction accounts			609				562				1,171				207				215				422
Money market accounts and savings			155				(12	)			143				(15	)			54				39
Time deposits			448				55				503				108				313				421
Borrowed funds			(87	)			863				776				77				149				226
Total interest expense			1,125				1,468				2,593				377				731				1,108
Net interest income		$	20,088			$	(913	)		$	19,175			$	3,545			$	(243	)		$	3,302

(1)Fully tax equivalent yield assuming a 25.3% tax rate.

Interest Sensitivity. The Company monitors and manages the pricing and maturity of its assets and liabilities in order to diminish the potential adverse impact that changes in interest rates could have on its net interest income. A monitoring technique employed by the Company is the measurement of the Company'sCompany’s interest sensitivity "gap," which is the positive or negative dollar difference between assets and liabilities that are subject to interest rate repricing within a given period of time. The Company also performs asset/liability modeling to assess the impact varying interest rates and balance sheet mix assumptions will have on net interest income. Interest rate sensitivity can be managed by repricing assets or liabilities, selling securities available-for-sale, replacing an asset or liability at maturity, or adjusting the interest rate during the life of an asset or liability. Managing the amount of assets and liabilities repricing in the same time interval helps to hedge the risk and minimize the impact on net interest income of rising or falling interest rates. The Company evaluates interest sensitivity risk and then formulates guidelines regarding asset generation and repricing, funding sources and pricing, and off-balance sheet commitments in order to decrease interest rate sensitivity risk.

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In the third quarter of 2022, the Company ceased the Deposit Reclassification program it implemented at the beginning of 2020. The program reclassified non-interest bearing and NOW deposit balances to money market accounts. The following tables illustrate the Company'sCompany’s consolidated interest rate sensitivity and consolidated cumulative gap position by maturity at December 31, 2017, 2016,2023, 2022, and 2015.

		December 31, 2017
		Within Three Months				After Three Through Twelve Months				Within One Year				Greater Than One Year or Nonsensitive				Total
		(In thousands)
Assets
Earning Assets:
Loans		$	214,687			$	119,492			$	334,179			$	895,917			$	1,230,096
Securities (2)			24,716				17,823				42,539				330,323				372,862
Funds sold and other			475				48,466				48,941				-				48,941
Total earning assets		$	239,878			$	185,781			$	425,659			$	1,226,240			$	1,651,899
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts (1)		$	-			$	601,694			$	601,694			$	-			$	601,694
Money market accounts			149,715				-				149,715				-				149,715
Savings deposits (1)			-				133,864				133,864				-				133,864
Time deposits			43,171				109,100				152,271				131,032				283,303
Total interest-bearing deposits			192,886				844,658				1,037,544				131,032				1,168,576
Borrowed funds (3)			75,000				18,572				93,572				10,500				104,072
Total interest-bearing liabilities			267,886				863,230				1,131,116				141,532				1,272,648
Interest-sensitivity gap per period		$	(28,008	)		$	(677,449	)		$	(705,457	)		$	1,084,708			$	379,251
Cumulative gap at December 31, 2017		$	(28,008	)		$	(705,457	)		$	(705,457	)		$	379,251			$	379,251
Ratio of cumulative gap to total earning assets at December 31, 2017			(1.7	)%			(42.7	)%			(42.7	)%			23.0	%

2021. Deposits at December 31, 2021 are shown without reclassification for consistency with the current period presentation.

$ in thousands			December 31, 2023
			Within Three Months						After Three Through Twelve Months						Within One Year						Greater Than One Year or Nonsensitive						Total
Assets
Earning assets:
Loans			$	262,916					$	406,261					$	669,177					$	4,503,779					$	5,172,956
Securities (2)			51,735						35,679						87,414						1,609,490						1,696,904
Funds sold and other			—						130,948						130,948						—						130,948
Total earning assets			$	314,651					$	572,888					$	887,539					$	6,113,269					$	7,000,808
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts (1)			$	—					$	1,914,792					$	1,914,792					$	—					$	1,914,792
Money market accounts			1,090,484						—						1,090,484						—						1,090,484
Savings deposits (1)			—						532,827						532,827						—						532,827
Time deposits			361,342						618,134						979,476						96,280						1,075,756
Total interest-bearing deposits			1,451,826						3,065,753						4,517,579						96,280						$	4,613,859
Borrowed funds (3)			250,000						140,000						390,000						—						390,000
Total interest-bearing liabilities			1,701,826						3,205,753						4,907,579						96,280						5,003,859
Interest-sensitivity gap per period			$	(1,387,175)					$	(2,492,865)					$	(4,020,040)					$	6,016,989					$	1,996,949
Cumulative gap at December 31, 2023			$	(1,387,175)					$	(3,880,040)					$	(4,020,040)					$	1,996,949					$	1,996,949
Ratio of cumulative gap to total earning assets at December 31, 2023			(19.8)		%				(55.4)		%				(57.4)		%				28.5		%

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$ in thousands			December 31, 2022
			Within Three Months						After Three Through Twelve Months						Within One Year						Greater Than One Year or Nonsensitive						Total
Assets
Earning assets:
Loans			$	180,128					$	247,781					$	427,909					$	3,350,693					$	3,778,602
Securities (2)			13,565						58,431						71,996						1,876,589						1,948,585
Funds sold and other			—						78,139						78,139						—						78,139
Total earning assets			$	193,693					$	384,351					$	578,044					$	5,227,282					$	5,805,326
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts (1)			$	—					$	1,769,699					$	1,769,699					$	—					$	1,769,699
Money market accounts			825,813						—						825,813						—						825,813
Savings deposits (1)			—						542,296						542,296						—						542,296
Time deposits			118,108						440,087						558,195						168,200						726,395
Total interest-bearing deposits			943,921						2,752,082						3,696,003						168,200						$	3,864,203
Borrowed funds (3)			130,100						—						130,100						—						130,100
Total interest-bearing liabilities			1,074,021						2,752,082						3,826,103						168,200						3,994,303
Interest-sensitivity gap per period			$	(880,328)					$	(2,367,731)					$	(3,248,059)					$	5,059,082					$	1,811,023
Cumulative gap at December 31, 2022			$	(880,328)					$	(3,248,059)					$	(3,248,059)					$	1,811,023					$	1,811,023
Ratio of cumulative gap to total earning assets at December 31, 2022			(15.2)		%				(55.9)		%				(55.9)		%				31.2		%

$ in thousand			December 31, 2021
			Within Three Months						After Three Through Twelve Months						Within One Year						Greater Than One Year or Nonsensitive						Total
Assets
Earning assets:
Loans			$	147,728					$	256,450					$	404,178					$	2,563,053					$	2,967,231
Securities (2)			8,959						51,457						60,416						1,713,642						1,774,058
Funds sold and other			—						804,481						804,481						—						804,481
Total earning assets			$	156,687					$	1,112,388					$	1,269,075					$	4,276,695					$	5,545,770
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts (1)			$	—					$	1,771,510					$	1,771,510					$	—					$	1,771,510
Money market accounts			817,476						—						817,476						—						817,476
Savings deposits (1)			—						502,808						502,808						—						502,808
Time deposits			132,025						312,958						444,983						139,626						584,609
Total interest-bearing deposits			949,501						2,587,276						3,536,777						139,626						3,676,403
Total interest-bearing liabilities			949,501						2,587,276						3,536,777						139,626						3,676,403
Interest-sensitivity gap per period			$	(792,814)					$	(1,474,888)					$	(2,267,702)					$	4,137,069					$	1,869,367
Cumulative gap at December 31, 2021			$	(792,814)					$	(2,267,702)					$	(2,267,702)					$	1,869,367					$	1,869,367
Ratio of cumulative gap to total earning assets at December 31, 2021			(14.3)		%				(40.9)		%				(40.9)		%				33.7		%

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		December 31, 2016
		Within Three Months				After Three Through Twelve Months				Within One Year				Greater Than One Year or Nonsensitive				Total
		(In thousands)
Assets
Earning Assets:
Loans		$	121,391			$	88,433			$	209,824			$	663,110			$	872,934
Securities (2)			10,092				21,376				31,468				224,331				255,799
Funds sold and other			425				29,975				30,400				-				30,400
Total earning assets		$	131,908			$	139,784			$	271,692			$	887,441			$	1,159,133
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts (1)		$	-			$	430,903			$	430,903			$	-		��	$	430,903
Money market accounts			113,253				-				113,253				-				113,253
Savings deposits (1)			-				69,540				69,540				-				69,540
Time deposits			31,273				93,456				124,729				98,288				223,017
Total interest-bearing deposits			144,526				593,899				738,425				98,288				836,713
Borrowed funds (3)			30,000				26,000				56,000				13,000				69,000
Total interest-bearing liabilities			174,526				619,899				794,425				111,288				905,713
Interest-sensitivity gap per period		$	(42,618	)		$	(480,115	)		$	(522,733	)		$	776,153			$	253,420
Cumulative gap at December 31, 2016		$	(42,618	)		$	(522,733	)		$	(522,733	)		$	253,420			$	253,420
Ratio of cumulative gap to total earning assets at December 31, 2016			(3.7	)%			(45.1	)%			(45.1	)%			21.9	%

34

(1)NOW and savings accounts are subject to immediate withdrawal and repricing. These deposits do not tend to immediately react to changes in interest rates and the Company believes these deposits are fairly stable. Therefore, these deposits are included in the repricing period that management believes most closely matches the periods in which they are likely to reprice rather than the period in which the funds can be withdrawn contractually.

(2)Securities include mortgage backed and other installment paying obligations based upon stated maturity dates.

		December 31, 2015
		Within Three Months				After Three Through Twelve Months				Within One Year				Greater Than One Year or Nonsensitive				Total
		(In thousands)
Assets
Earning Assets:
Loans		$	101,160			$	76,996			$	178,156			$	598,333			$	776,489
Securities (2)			14,831				18,100				32,931				222,028				254,959
Funds sold and other			321				17,303				17,624				-				17,624
Total earning assets		$	116,312			$	112,399			$	228,711			$	820,361			$	1,049,072
Liabilities
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts (1)		$	-			$	373,686			$	373,686			$	-			$	373,686
Money market accounts			105,434				-				105,434				-				105,434
Savings deposits (1)			-				68,657				68,657				-				68,657
Time deposits			37,222				83,549				120,771				58,702				179,473
Total interest-bearing deposits			142,656				525,892				668,548				58,702				727,250
Borrowed funds (3)			81,130				21,191				102,321				8,000				110,321
Total interest-bearing liabilities			223,786				547,083				770,869				66,702				837,571
Interest-sensitivity gap per period		$	(107,474	)		$	(434,684	)		$	(542,158	)		$	753,659			$	211,501
Cumulative gap at December 31, 2015		$	(107,474	)		$	(542,158	)		$	(542,158	)		$	211,501			$	211,501
Ratio of cumulative gap to total earning assets at December 31, 2015			(10.2	)%			(51.7	)%			(51.7	)%			20.2	%

(1)

NOW and savings accounts are subject to immediate withdrawal and repricing. These deposits do not tend to immediately react to changes in interest rates and the Company believes these deposits are fairly stable. Therefore, these deposits are included in the repricing period that management believes most closely matches the periods in which they are likely to reprice rather than the period in which the funds can be withdrawn contractually.

(2)

Securities include mortgage backed and other installment paying obligations based upon stated maturity dates.

(3)

Does not include subordinated debentures of $10,310,000.

(3)Does not include subordinated debentures of $123,386, $145,027, $144,592 for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company generally would benefit from increasing market rates of interest when it has an asset-sensitive gap and generally from decreasing market rates of interest when it is liability sensitive. The Company currently is asset sensitive within the one-year time frame.frame based on effective GAP which uses behavioral assumptions that model the rate sensitivity of non-maturity deposits by looking at the deposits’ behavior rather than their contractual ability to reprice. The cash flows used in the analysis are the projected dollars of assets and liabilities that “reprice” (including maturities, repricing, likely calls, prepayments, etc.). However, the Company's gap analysis is not a precise indicator of its interest sensitivity position. The analysis presents only a static view of the timing of maturities and repricing opportunities, without taking into consideration that changes in interest rates do not affect all assets and liabilities equally. For example, rates paid on a substantial portion of core deposits may change contractually within a relatively short time frame, but those rates are viewed by management as significantly less interest-sensitive than market-based rates such as those paid on non-core deposits. Accordingly, management believes a liabilityan asset sensitive-position within one year would not be as indicative of the Company’s true interest sensitivity as it would be for an organization which depends to a greater extent on purchased funds to support earning assets. Net interest income is also affected by other significant factors, including changes in the volume and mix of earning assets and interest-bearing liabilities.

35

The following tables depict, for the periods indicated, certain information related to interest rate sensitivity in net interest income and market value of equity.

December 31, 2017
		Net Interest Income at Risk								Market Value of Equity
Change in Interest Rates		% Change from Base				Bank Policy Limit				% Change from Base				Bank Policy Limit
Up 400 bps			7.7	%			-20.0	%			40.3	%			-40.0	%
Up 300 bps			7.7	%			-15.0	%			36.4	%			-30.0	%
Up 200 bps			6.3	%			-10.0	%			28.8	%			-20.0	%
Up 100 bps			3.8	%			-5.0	%			17.0	%			-10.0	%
Down 100 bps			-6.2	%			-5.0	%			-21.2	%			-10.0	%
Down 200 bps			-9.2	%			-10.0	%			-14.3	%			-20.0	%

December 31, 2016
		Net Interest Income at Risk								Market Value of Equity
Change in Interest Rates		% Change from Base				Policy Limit				% Change from Base				Policy Limit
Up 400 bps			15.4	%			-20.0	%			22.9	%			-40.0	%
Up 300 bps			11.8	%			-15.0	%			18.8	%			-30.0	%
Up 200 bps			8.0	%			-10.0	%			13.7	%			-20.0	%
Up 100 bps			4.0	%			-5.0	%			7.6	%			-10.0	%
Down 100 bps			-4.8	%			-5.0	%			-9.5	%			-10.0	%
Down 200 bps			-6.6	%			-10.0	%			-11.6	%			-20.0	%

December 31, 2015
		Net Interest Income at Risk								Market Value of Equity
Change in Interest Rates		% Change from Base				Policy Limit				% Change from Base				Policy Limit
Up 400 bps			11.2	%			-20.0	%			34.3	%			-40.0	%
Up 300 bps			8.6	%			-15.0	%			27.7	%			-30.0	%
Up 200 bps			5.8	%			-10.0	%			20.0	%			-20.0	%
Up 100 bps			2.9	%			-5.0	%			10.8	%			-10.0	%
Down 100 bps			-2.7	%			-5.0	%			-11.5	%			-10.0	%
Down 200 bps			-4.7	%			-10.0	%			-10.0	%			-20.0	%

equity:

December 31, 2023
						Net Interest Income at Risk												Market Value of Equity
Change in Interest Rates						% Change from Base						Bank Policy Limit						% Change from Base						Bank Policy Limit
Up 400 bps						(19.0)		%				(20.0)		%				(12.4)		%				(40.0)		%
Up 300 bps						(9.1)		%				(15.0)		%				(6.7)		%				(30.0)		%
Up 200 bps						(2.3)		%				(10.0)		%				(2.0)		%				(20.0)		%
Up 100 bps						0.7		%				(5.0)		%				0.6		%				(10.0)		%
Down 100 bps						0.5		%				(5.0)		%				(2.4)		%				(10.0)		%
Down 200 bps						2.3		%				(10.0)		%				(5.0)		%				(20.0)		%

December 31, 2022
						Net Interest Income at Risk												Market Value of Equity
Change in Interest Rates						% Change from Base						Bank Policy Limit						% Change from Base						Bank Policy Limit
Up 400 bps						(11.3)		%				(20.0)		%				(16.6)		%				(40.0)		%
Up 300 bps						(6.4)		%				(15.0)		%				(10.6)		%				(30.0)		%
Up 200 bps						(2.9)		%				(10.0)		%				(5.8)		%				(20.0)		%
Up 100 bps						(0.9)		%				(5.0)		%				(2.2)		%				(10.0)		%
Down 100 bps						1.1		%				(5.0)		%				0.9		%				(10.0)		%
Down 200 bps						(0.7)		%				(10.0)		%				(2.2)		%				(20.0)		%

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December 31, 2021
						Net Interest Income at Risk												Market Value of Equity
Change in Interest Rates						% Change from Base						Bank Policy Limit						% Change from Base						Bank Policy Limit
Up 400 bps						11.3%						(20.0)		%				20.0%						(40.0)		%
Up 300 bps						10.2%						(15.0)		%				18.9%						(30.0)		%
Up 200 bps						8.1%						(10.0)		%				15.5%						(20.0)		%
Up 100 bps						4.7%						(5.0)		%				9.4%						(10.0)		%
Down 100 bps						(3.3)		%				(5.0)		%				(15.0)		%				(10.0)		%
Down 200 bps						(4.6)		%				(10.0)		%				(34.2)		%				(20.0)		%

Allowance and Provision for Credit Losses

The ACL is a valuation account that is deducted from loans’ amortized cost basis to present the net amount expected to be collected on the loans. It is comprised of a general allowance for loans that are collectively assessed in pools with similar risk characteristics and Allowancea specific allowance for Loan Losses

individually assessed loans. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The Company has developed policiesallowance is continuously monitored by management to maintain a level adequate to absorb expected credit losses in the loan portfolio.

Management estimates the allowance balance using relevant available information, from internal and proceduresexternal sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for evaluating the overall qualityestimation of itsexpected credit losses. Adjustments to historical loss information are made for differences in current risk characteristics such as differences in underwriting standards, portfolio andmix, delinquency level, or term as well as for changes in environment conditions, such as changes in unemployment rates, property values, or other relevant factors. Management may selectively apply external market data to subjectively adjust the timely identification of potential problem loans. Management’s judgment as toCompany’s own loss history including index or peer data. Management evaluates the adequacy of the allowanceACL quarterly and makes provisions for credit losses based on this evaluation. See Note B – Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report for a complete description of the Company’s methodology and the quantitative and qualitative factors included in the calculation.

At December 31, 2023, the ACL was $54.0 million, or 1.1% of LHFI, an increase of $15.1 million, or 38.8% when compared to December 31, 2022. The 2023 increase is attributable to loan growth and the acquisition of HSBI in January 2023. The Bank acquired loans totaling $1.159 billion, net of purchase accounting adjustments, and recorded initial ACL on PCD loans of $3.2 million related to the HSBI acquisition. In addition, the 2023 provision for credit losses is based upon a number of assumptions about future events which it believes to be reasonable, but which may not prove to be accurate. Thus, there can be no assurance that charge-offsincludes $10.7 million associated with day one post-merger accounting provision recorded for non-PCD loans and unfunded commitments acquired in future periods will not exceedthe HSBI acquisition. At December 31, 2022, the allowance for loancredit losses orwas approximately $38.9 million, which was 1.0% of LHFI. The Company maintains the allowance at a level that additional increasesmanagement believes is adequate to absorb expected credit losses in the loan lossportfolio. The 2022 provision for credit losses includes $3.9 million associated with a day one post-merger accounting provision recorded for non-PCD loans, unfunded commitments. A $1.3 million initial allowance will not be required.

36

The Company’s allowance consists of two parts. The first part is determinedwas recorded on PCD loans acquired in accordance with authoritative guidance issued by the FASB regardingBBI merger. Specifically, identifiable and quantifiable losses are immediately charged-off against the allowance.The Company’s determination of this part of the allowance is based upon quantitative and qualitative factors. The Company uses a loan loss history based upon the prior nine years to determine the appropriate allowance. Historical loss factorsallowance; recoveries are determined by criticized and uncriticized loans by loan type. These historical loss factorsgenerally recorded only when sufficient cash payments are appliedreceived subsequent 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 on 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 committees, and data and guidance received or obtained from the Company’s regulatory authorities.

The second part of the allowance is determined in accordance with guidance issued by the FASB regarding impaired loans. Impaired loans are determined based upon a review by internal loan review and senior loan officers. Impaired loans are loans for which the Bank does not expect to receive contractual interest and/or principal by the due date. A specific allowance is assigned to each loan determined to be impaired based upon the value of the loan’s underlying collateral. Appraisals are used by management to determine the value of the collateral.

The sum of the two parts constitutes management’s best estimate of an adequate 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.

Our allowance for loan losses model is focused on establishing a loss history within the Bank and relies on specific impairment to determine credits that the Bank feels the ultimate repayment source will be liquidation of the subject collateral.  Our model takes into account other factors such as local and national economic factors, portfolio trends, non performing asset, charge off, and delinquency trends as well as underwriting standards and the experience of branch management and lending staff.   These trends are measured in the following ways:

Local Trends: (Updated quarterly usually the month following quarter end)

Local Unemployment Rate

Insurance Issues (Windpool Areas)

Bankruptcy Rates (Increasing/Declining)

Local Commercial R/E Vacancy Rates

Established Market/New Market

Hurricane Threat

National Trends: (Updated quarterly usually the month following quarter end)

Gross Domestic Product (GDP)

Home Sales

Consumer Price Index (CPI)

Interest Rate Environment (Increasing/Steady/Declining)

Single Family Construction Starts

Inflation Rate

Retail Sales

37

charge-off.

Portfolio Trends: (Updated monthly as the allowance for loan loss is calculated)

Second Mortgages

Single Pay Loans

Non-Recourse Loans

Limited Guaranty Loans

Loan to Value Exceptions

Secured by Non-Owner Occupied Property

Raw Land Loans

Unsecured Loans

Measurable Bank Trends: (Updated quarterly)

Delinquency Trends

Non-Accrual Trends

Net Charge Offs

Loan Volume Trends

Non-Performing Assets

Underwriting Standards/Lending Policies

Experience/Depth of Bank Lending

Management

The bank wide information and metrics, along with the local and national economic trends listed above, are all measured quarterly. Typically, this review is performed during the second month of every quarter to facilitate the release of economic data from the reporting agencies. As of December 31, 2017, most economic indicators pointed to a stable and improving economy thus most factors were assigned a neutral or decreasing allocation factor. In contrast, bank wide factors including the acquisition of new loan portfolios and lending staff through mergers, increased loan production volume causing healthy organic loan portfolio growth, and increasing concentrations in loan types considered to carry higher risk by banking standards, resulted in an increase to the assigned allocation factors related to these areas.

At December 31, 2017, the consolidated allowance for loan losses was approximately $8.3 million, or 0.68% of outstanding loans excluding loans held for sale. Including valuation accounting adjustments on acquired loans, the total valuation plus allowance for loan losses was 1.11% of loans at December 31, 2017. At December 31, 2016, the allowance for loan losses amounted to approximately $7.5 million, which was 0.87% of outstanding loans. The provision for loancredit losses is a charge to earnings to maintain the allowance for loancredit losses at a level consistent with management’s assessment of the collectability of the loan portfolio in light of current economic conditions and market trends. The Company’s provision for loancredit losses was $506,000a $13.8 million for the year ended December 31, 2017, $625,0002023 and $5.4 million for the year ended December 31, 2016,2022, and $410,000a negative $1.5 million for the year ended December 31, 2015.2021. A majority of the 2023 and 2022 increase in the Company's provision for credit losses is attributed to the HSBI and BBI acquisitions detailed herein. The overall allowancenegative provision for loan losses results from consistent application of our loan loss reserve methodology as described above. 2021 is attributed to the improved macroeconomic outlook and the Company’s ACL calculation under ASC 326.

At December 31, 2017,2023, management believes the allowance is appropriate and has been derived from consistent application of our methodology. Should any of the factors considered by management in evaluating the appropriateness of the allowance for loancredit losses change, management’s estimate of inherentexpected credit losses in the portfolio could also change, which would affect the level of future provisions for loancredit losses.

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Allowance for Credit Losses on Off Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on off-balance sheet credit (“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. 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. The Company's provision for credit losses on OBSC exposures was $750 thousand for the year end December 31, 2023, $255 thousand for the year ended December 31, 2022, and $352 thousand for the year ended December 31, 2021. The increase in the ACL on OBSC exposures for the year ended December 31, 2023 compared to the same period in 2022 was due to the day one provision for unfunded commitments related to the HSBI acquisition and an increase in unfunded commitments.

Non-Performing Assets

A loan is reviewed for impairmentplaced on nonaccrual and the accrual of interest discontinued, when based on all available information and events, it displays characteristics causing management to determine that the probabilitycollection of collecting all principal, interest, and other related fees due according to the contractual terms of the loan agreement.agreement is not probable. Also at this time, the accrual of interest is discontinued. Alongidentified along with these loans in non-accrualnonaccrual status, allas well as loans determined by management to be labelled as “troubled debt restructure” based on regulatory guidance are reviewed for impairment. Loans that are identified as criticized90 days or classified based on unsatisfactory repayment performance, or other evidence of deteriorating credit quality, are not reviewed until being placed in non-accrual status or when considered to be troubled debt restructure.

greater past due and still accruing interest.

Once these loans are identified, they are analyzedevaluated to determine whether the ultimate repayment source will be liquidation of collateral or some future source of cash flow. If the only source of repayment will come from the liquidation of collateral, impairment worksheetsthey are preparedanalyzed and documented as to document the amount ofwhether any impairment that exists. This method takes into accountconsiders collateral exposure, as well as all expected expenses related to the disposal of the collateral. SpecificIf there is any impairment, specific allowances for these loans are then accounted for on a per loan basis.

38

Loans that are identified as criticized or classified based on unsatisfactory repayment performance, or other evidence of deteriorating credit quality, are not reviewed until they meet one of the three criteria described above.

The following tables illustrate the Company’s past due and non-accrualTotal nonaccrual loans at December 31, 2017, 2016 and 2015.

		December 31, 2017
		(In thousands)
		Past Due 30 to 89 Days				Past Due 90 days or more and still accruing				Non-Accrual
Real Estate-construction		$	192			$	27			$	92
Real Estate-mortgage			2,656				177				2,691
Real Estate-nonfarm nonresidential			1,487				82				1,724
Commercial			393				-				1,120
Consumer			57				-				46
Total		$	4,785			$	286			$	5,673

		December 31, 2016
		(In thousands)
		Past Due 30 to 89 Days				Past Due 90 days or more and still accruing				Non-Accrual
Real Estate-construction		$	204			$	96			$	658
Real Estate-mortgage			2,745				102				1,662
Real Estate-nonfarm nonresidential			269				-				909
Commercial			9				-				2
Consumer			22				-				33
Total		$	3,249			$	198			$	3,264

		December 31, 2015
		(In thousands)
		Past Due 30 to  89 Days				Past Due 90 days or more and still accruing				Non-Accrual
Real Estate-construction		$	311			$	-			$	2,956
Real Estate-mortgage			3,339				29				2,055
Real Estate-nonfarm nonresidential			736				-				2,225
Commercial			97				-				100
Consumer			70				-				32
Total		$	4,553			$	29			$	7,368

Total non-accrual loans at December 31, 2017,2023, were $5.7$10.7 million, an increasea decrease of $2.4$1.9 million compared to $3.3$12.6 million at December 31, 2016. The majority of the increase was the result of loans acquired from Iberville Bank and Gulf Coast Community Bank. Total non-accrual loans at December 31, 2016 decreased $4.1 million from $7.4 million at December 31, 2015. The majority of the decrease was the result of loans moving to Other Real Estate Owned.2022. Management believes these relationships were adequately reserved at December 31, 2017. Restructured loans not reported as past due or non-accrual at December 31, 2017, amounted to $4.7 million.2023. See Note E – Loans in the accompanying notes to the consolidated financial statements included elsewhere in this report for a description of restructuredmodified loans.

A potential problem loan is one in which management has serious doubts about the borrower’s future performance under the terms of the loan contract and dodoes not includemeet the categorystandard of special mention.a non-performing asset as outlined by regulatory guidance. These loans aremay or may not be current as to principal and interest and, accordingly,repayment, but they still possess some asset quality characteristics that give management a reason to believe that repayment in full under the contractual terms of the agreement are not included in nonperforming asset categories.possible. The level of potential problem loans is one factor used in the determination of the adequacy of the allowance for loancredit losses. At December 31, 2017, 20162023 and December 31, 2015,2022, The First had potential problem loans of $18,206,000, $12,297,000$107.1 million and $16,943,000,$108.1 million, respectively.

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Summary of Credit Loss Experience

Consolidated Allowance for Credit Losses

						Years Ended December 31,
($ in thousands)						2023						2022						2021 (1)
Average LHFI outstanding						$	5,036,021					$	3,302,265					$	3,019,605
Loans outstanding at year end, including LHFS						$	5,172,956					$	3,778,630					$	2,967,231
Total nonaccrual loans						$	10,690					$	12,591					$	28,013
Beginning balance of allowance						$	38,917					$	30,742					$	35,820
Impact of ASC 326 adoption on non-PCD loans						—						—						(718)
Impact of ASC 326 adoption on PCD loans						—						—						1,115
Initial allowance on acquired PCD loans						3,176						1,303						—
Loans charged-off						(3,092)						(1,218)						(6,213)
Total recoveries						1,281						2,740						2,194
Net loans (charged-off) recoveries						(1,811)						1,522						(4,019)
Provision for credit losses (2)						13,750						5,350						(1,456)
Balance at year end						$	54,032					$	38,917					$	30,742
Net charge-offs to average loans						(0.04)%						0.05%						0.13%
Allowance as percent of total loans						1.04%						1.03%						1.04%
Nonaccrual loans as a percentage of total loans						0.21%						0.33%						0.94%
Allowance as a multiple of nonaccrual loans						5.05X						3.10X						1.10 X

(1)Effective January 1, 2021, The increaseCompany adopted ASC 326 using the modified retrospective approach.

(2)The negative provision of $5.9$1.5 million during 2017 was largely attributable tofor credit losses on the classifiedconsolidated statements of income is net of a $370 thousand provision for credit marks in the Cadence Bank Branches loans acquired infor the Iberville Bank and Gulf Coast Community Bank transactions.

39

year ended December 31, 2022.

Summary of Loan Loss Experience

Consolidated Allowance For Loan Losses

(In thousands)

		Years Ended December 31,
		2017				2016				2015				2014				2013
Average loans outstanding		$	1,168,882			$	820,881			$	730,326			$	632,049			$	583,200
Loans outstanding at year end		$	1,230,096			$	872,934			$	776,489			$	706,635			$	583,302
Total non-accrual loans		$	5,673			$	3,264			$	7,368			$	6,056			$	3,181
Beginning balance of allowance		$	7,510			$	6,747			$	6,095			$	5,728			$	4,727
Loans charged-off			(405	)			(771	)			(843	)			(1,459	)			(759	)
Total loans charged-off			(405	)			(771	)			(843	)			(1,459	)			(759	)
Total recoveries			677				909				1,085				408				684
Net loans (charged-off) recoveries			272				138				242				(1,051	)			(75	)
Provision for loan losses			506				625				410				1,418				1,076
Balance at year end		$	8,288			$	7,510			$	6,747			$	6,095			$	5,728
Net charge-offs (recoveries) to average loans			(.02	)%			(.02	)%			(.03	)%			.17	%			.01	%
Allowance as percent of total loans			.67	%			.86	%			.87	%			.86	%			.98	%
Nonperforming loans as a percentage of total loans			.46	%			.37	%			.95	%			.86	%			.55	%
Allowance as a multiple of non-accrual loans			1.5	X			2.3	X			.92	X			1.0	X			1.8	X

At December 31, 2017,2023, allowance as of percent of total loans increased 0.01% to 1.04% when compared to 1.03% at December 31, 2022. The increase is attributed to the increase in loan volume related to the HSBI acquisition and organic loan growth in 2023. At December 31, 2023, nonaccrual loans as a percentage of total loans decreased 0.12% to 0.21% when compared to 0.33% at December 31, 2022. The decrease is attributed to a $1.9 million decrease in nonaccrual loans mentioned above.

At December 31, 2022, allowance as of percent of total loans decreased 0.01% to 1.03% when compared to 1.04% at December 31, 2021. The decrease is attributed to the increase in loan volume related to the BBI acquisition and organic loan growth in 2022. At December 31, 2022, nonaccrual loans as a percentage of total loans decreased 0.61% to 0.33% when compared to 0.94% at December 31, 2021. The decrease is attributed to a $15.4 million decrease in nonaccrual loans mentioned above.

The following table represents the components of the allowanceACL for loan losses consisted of the following:

		Allowance
		(In thousands)
Allocated:
Impaired loans		$	661
Graded loans			7,627
		$	8,288

Graded loansyears 2023, 2022, and 2021.

($ in thousands)			Allowance for Credit Losses
Allocated:			2023						2022						2021
Collateral dependent loans			$	408					$	5					$	6
Loans collectively evaluated			53,624						38,912						30,736
Total			$	54,032					$	38,917					$	30,742

Loans collectively evaluated are those loans or pools of loans assigned a grade by internal loan review.

40

46

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Table of Contents

The following table represents the activity of the allowance for loancredit losses for the years 2017, 2016, 2015, 2014,2023, 2022, and 2013.2021.

($ in thousands)			Analysis of the Allowance for Credit Losses
			2023						2022						2021 (1)
Balance at beginning of period			$	38,917					$	30,742					$	35,820
Impact of ASC 326 adoption on non-PCD loans			—						—						(718)
Impact of ASC 326 adoption on PCD loans			—						—						1,115
Initial allowance on acquired PCD loans			3,176						1,303						—
Loans charged-off:
Commercial, financial and agriculture			(745)						(259)						(1,662)
Commercial real estate			(250)						(72)						(3,523)
Consumer real estate			(49)						(204)						(473)
Consumer installment			(2,048)						(683)						(555)
Total			(3,092)						(1,218)						(6,213)
Recoveries on loans previously charged-off:
Commercial, financial and agriculture			349						433						433
Commercial real estate			116						591						888
Consumer real estate			249						1,015						311
Consumer installment			567						701						562
Total			1,281						2,740						2,194
Net (charge-offs) recoveries			(1,811)						1,522						(4,019)
Provision:
Initial provision for acquired non-PCD loans			10,719						3,855						—
Provision for credit losses charged to expense (2)			3,031						1,495						(1,456)
Balance at end of period			$	54,032					$	38,917					$	30,742

Analysis

(1)Effective January 1, 2021, The Company adopted ASC 326 using the modified retrospective approach.

(2)The negative provision of $1.5 million for credit losses on the Allowanceconsolidated statements of income is net of a $370 thousand provision for Loan Losses

		Years Ended December 31,
		2017				2016				2015				2014				2013
		(In thousands)
Balance at beginning of year		$	7,510			$	6,747			$	6,095			$	5,728			$	4,727
Charge-offs:
Real Estate-construction			(143	)			(274	)			(162	)			(47	)			(305	)
Real Estate-mortgage			(119	)			(353	)			(372	)			(1,156	)			(152	)
Real Estate-nonfarm nonresidential			(-)				(-)				(-)				(-)				(-)
Commercial			(62	)			(71	)			(183	)			(89	)			(105	)
Consumer			(81	)			(73	)			(126	)			(167	)			(197	)
Total			(405	)			(771	)			(843	)			(1,459	)			(759	)
Recoveries:
Real Estate-construction			280				229				63				96				133
Real Estate-mortgage			228				519				827				212				393
Real Estate-nonfarm nonresidential			14				7				15				17				74
Commercial			50				84				99				15				18
Consumer			105				70				81				68				66
Total			677				909				1,085				408				684
Net (Charge-offs) Recoveries			272				138				242				(1,051	)			(75	)
Provision for Loan Losses			506				625				410				1,418				1,076
Balance at end of year		$	8,288			$	7,510			$	6,747			$	6,095			$	5,728

credit marks in the Cadence Bank Branches loans acquired for the year ended December 31, 2022.

47

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Table of Contents

The following tables representrepresents how the allowance for loan lossesACL is allocated to a particular loan type as well as the percentage of the category to total gross loans at December 31, 2017, 20162023 and 2015.

2022.

Allocation of the Allowance for LoanCredit Losses

		December 31, 2017
		(Dollars in thousands)
		Amount				% of loans in each category  to total loans
Commercial Non Real Estate		$	1,608				14.0	%
Commercial Real Estate			4,644				64.8	%
Consumer Real Estate			1,499				18.9	%
Consumer			173				2.3	%
Unallocated			364				-
Total		$	8,288				100	%

		December 31, 2016
		(Dollars in thousands)
		Amount				% of loans in each category  to total loans
Commercial Non Real Estate		$	1,118				15.6	%
Commercial Real Estate			4,071				61.6	%
Consumer Real Estate			1,589				20.3	%

41

($ in thousands)			December 31, 2023												December 31, 2022												December 31, 2021
			Amount						% of loans in each category to total gross loans						Amount						% of loans in each category to total gross loans						Amount						% of loans in each category to total gross loans
Commercial, financial and agriculture			$	8,844					15.5		%				$	6,349					14.2		%				$	4,873					13.4		%
Commercial real estate			29,125						59.2		%				20,389						56.5		%				17,552						57.0		%
Consumer real estate			15,260						24.2		%				11,599						28.1		%				7,889						28.3		%
Consumer installment			803						1.1		%				580						1.2		%				428						1.3		%
Total loans			$	54,032					100		%				$	38,917					100		%				$	30,742					100		%

Continued:

		Amount				% of loans in each category to total loans
Consumer			155				2.4	%
Unallocated			577				0.1	%
Total		$	7,510				100	%

		December 31, 2015
		(Dollars in thousands)
		Amount				% of loans in each category to total loans
Commercial Non Real Estate		$	895				17.1	%
Commercial Real Estate			3,018				58.4	%
Consumer Real Estate			1,477				21.9	%
Consumer			141				2.5	%
Unallocated			1,216				0.1	%
Total		$	6,747				100	%

Non-interest Income and Expense

Non-interest Income.

The Company’sCompany's primary sources of noninterestnon-interest income are mortgage banking operations as well asand service charges on deposit accounts. Other sources of non-interest income include bankcard fees, commissions on check sales, safe deposit box rent, wire transfer fees, official check fees and bank owned life insurance income.

Non-interest income was $14.4$46.7 million at December 31, 2017,2023, an increase of $3.1$9.7 million or 27.7%26.4% compared to December 31, 2016, primarily consisting of increases2022. This increase was partially attributable to $11.7 million in service charges on deposit accounts and interchange fee income, and other charges and fees.a $5.3 million increase associated with the U.S. Treasury awards, offset by a $9.8 million loss on the sale of available-for-sale securities. Non-interest income increased $3.7was $37.0 million or 48.2% for the year endedat December 31, 20162022, a decrease of $512 thousand or 1.4% compared to $7.6December 31, 2021. Increased service charges on deposit accounts and interchange fee income of $2.5 million was offset by a decrease in mortgage income of $4.5 million.

Non-interest Expense

Non-interest expense was $184.7 million for the year ended December 31, 2015. Deposit activity fees were $7.4 million for 2017 compared to $5.1 million for 2016 and $5.0 million for 2015. Other service charges increased by $0.12023, an increase of $54.2 million, or 17.4%41.6% in year-over-year comparison. The increase was partially attributable to $2.7 million in acquisition and charter conversion charges and $32.1 million in increased operating expenses related to the acquisitions of Beach Bank and Heritage Bank as well as $5.2 million in expenses associated with the U.S. Treasury awards and increases in FDIC premiums of $1.7 million and a $4.9 million increase in core deposit amortization for the year ended 2017 to $0.6 million from $0.5December 31, 2023. Non-interest expense was $130.5 million for the year ended December 31, 2016 and other service charges increased $0.1 million or 12.8% for the year ended December 31, 2016, compared to $0.5 million for the year ended December 31, 2015. Mortgage income increased $3.4 million during 2016 due to increased volume from the acquisition of The Mortgage Connection, LLC in December, 2015.

Non-interest expense was $55.4 million at December 31, 2017,2022, an increase of $18.6$15.9 million compared to December 31, 2021. An increase of $4.8 million in year-over-year comparison primarily resulting from increases in salariesacquisition and benefits of $8.4charter conversion charges and $3.3 million of which $6.7 million relatesrelated to the acquisitionsongoing operations of Gulf Coast Communitythe Cadence Bank branches and Iberville Bank. Increases in professional services and other non-interest expense increased $7.0$5.1 million which includes $6.7 million in merger-related costs. Non-interest expense increasedrelated to $36.9 millionthe Beach Bank branch operations accounted for the year ended December 31, 2016, from $32.2 million for the year ended December 31, 2015. The Company experienced slight increasesincrease in most expense categories. Salaries and employee benefits increased $3.6 million in 2016 as compared to 2015, due in part to a full yearnon-interest expense.

48

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Table of the addition of the Mortgage Connection and the lending teams in Mobile, Alabama and Jackson, Mississippi.

42

Contents

The following table sets forth the primary components of non-interest expense for the periods indicated:

indicated.

Non-interest Expense

		Years ended December 31,
		2017				2016				2015
		(In thousands)
Salaries and employee benefits		$	30,548			$	22,137			$	18,537
Occupancy			4,828				3,459				3,422
Equipment			1,225				1,262				1,199
Marketing and public relations			406				465				497
Data processing			1,039				535				150
Supplies and printing			640				287				300
Bank communications			1,296				782				631
Deposit and other insurance			1,252				1,020				1,051
Professional and consulting fees			6,757				1,805				1,332
Postage			546				396				400
ATM expense			1,188				883				763
Other			5,721				3,831				3,879
Total		$	55,446			$	36,862			$	32,161

($ in thousands)			Years ended December 31,
			2023						2022						2021
Salaries and employee benefits			$	93,412					$	73,077					$	65,856
Occupancy			17,381						12,854						12,713
Furniture and equipment			3,987						2,981						2,848
Supplies and printing			1,240						967						903
Professional and consulting fees			6,446						3,558						4,035
Marketing and public relations			833						393						615
FDIC and OCC assessments			3,849						2,122						2,074
ATM expense			5,821						3,873						3,623
Bank communications			3,579						1,904						1,754
Data processing			2,771						2,211						1,578
Acquisition expense/charter conversion			9,075						6,410						1,607
Other			36,332						20,133						16,953
Total			$	184,726					$	130,483					$	114,559

Income Tax Expense

Income tax expense consists of two components. The first is the current tax expense which represents the

expected income tax to be paid to taxing authorities. The Company also recognizes deferred tax for future income/deductible amounts resulting from differences in the financial statement and tax bases of assets and liabilities.

On Income tax expense was $21.3 million for the year ended December 22, 2017,31, 2023, $15.8 million for theTax Cuts year ended December 31, 2022 and Jobs Act was enacted into law. This federal income tax reform, among other things, reduces$16.9 million for the federal corporateyear ended December 31, 2021. The Company’s effective income tax rate from 35%was 22.1%, 20.0% and 20.9% for the years ended December 31, 2023, 2022 and 2021, respectively. The effective tax rate differs each year primarily due to 21%, effective January 1, 2018. As a result, the Company revalued its deferred tax assets which was recorded as additional income tax expense of $2.1our investments in bank-qualified municipal securities, bank-owned life insurance, and certain merger related expenses. Income taxes are discussed more fully under Note K – Income Tax in the Company’s statement of operationsaccompanying notes to the consolidated financial statements included elsewhere in the fourth quarter of 2017.

this report.

Analysis of Financial Condition

Earning Assets

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 December 31, 2017, 20162023, 2022, and 2015,2021, respectively, average loans accounted for 74.1%71.4%, 73.9%58.0% and 71.7%60.8% of average earning assets. Management attempts to control and counterbalance the inherent credit and liquidity risks associated with the higher loan yields without sacrificing asset quality to achieve its asset mix goals. Loans, excluding mortgage loans held for sale, averaged $1,168.9 million$5.036 billion during 20172023 and $820.9 million$3.302 billion during 2016,2022, as compared to $730.3 million$3.020 billion during 2015.

43

2021.

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

Composition of Loan Portfolio

		December 31,
		2017								2016								2015
		Amount				Percent Of Total				Amount				Percent of Total				Amount				Percent Of Total
		(Dollars in thousands)
Mortgage loans held for sale		$	4,790				0.3	%		$	5,880				0.6	%		$	3,974				0.5	%
Commercial, financial and agricultural			165,780				13.5	%			129,423				14.8	%			129,197				16.6	%
Real Estate:
Mortgage-commercial			467,484				38.0	%			314,359				36.0	%			253,309				32.6	%
Mortgage-residential			385,099				31.3	%			289,640				33.2	%			272,180				35.1	%
Construction			183,328				14.9	%			109,394				12.5	%			99,161				12.8	%
Lease Financing Receivable			2,450				0.2	%			2,204				0.3	%			2,650				0.3	%
Obligations of states and subdivisions			3,109				0.3	%			6,698				0.8	%			969				0.1	%
Consumer and other			18,056				1.5	%			15,336				1.8	%			15,049				2.0	%
Total loans			1,230,096				100	%			872,934				100	%			776,489				100	%
Allowance for loan losses			(8,288	)							(7,510	)							(6,747	)
Net loans		$	1,221,808							$	865,424							$	769,742

In the context of this discussion, a "real estate mortgage loan" is defined as any loan, other than loans 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.

49

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Table of Contents

The following table sets forth the Company's commercial and construction real estate loansCompany’s loan portfolio maturing within specified intervals at December 31, 2017.

2023.

Loan Maturity Schedule and Sensitivity to Changes in Interest Rates

		December 31, 2017
Type		One Year or Less				Over One Year Through Five Years				Over Five Years				Total
		(In thousands)
Commercial, financial and agricultural		$	42,780			$	98,452			$	24,241			$	165,473
Real estate – construction			78,917				79,460				24,951				183,328
		$	121,697			$	177,912			$	49,192			$	348,801
Loans maturing after one year with:
Fixed interest rates														$	198,541
Floating interest rates															28,563
														$	227,104

($ in thousands)						Due in One Year or Less						After One, but Within Five Years						After Five but Within Fifteen Years						After Fifteen Years						Total
Commercial, financial and agricultural						$	209,690					$	392,382					$	191,341					$	6,911					$	800,324
Commercial real estate						314,080						1,414,550						1,168,566						161,959						3,059,155
Consumer real estate						129,208						365,095						187,040						571,452						1,252,795
Consumer installment						13,285						39,110						5,125						248						57,768
Total						$	666,263					$	2,211,137					$	1,552,072					$	740,570					$	5,170,042
Loans with fixed interest rates:
Commercial, financial and agricultural						$	130,524					$	275,836					$	126,964					$	5,436					$	538,760
Commercial real estate						231,270						1,215,711						717,414						19,742						2,184,137
Consumer real estate						68,229						267,122						104,973						89,254						529,578
Consumer installment						11,987						36,252						4,386						239						52,864
Total						$	442,010					$	1,794,921					$	953,737					$	114,671					$	3,305,339
Loans with floating interest rates:
Commercial, financial and agricultural						$	79,166					$	116,546					$	64,377					$	1,475					$	261,564
Commercial real estate						82,810						198,839						451,152						142,217						875,018
Consumer real estate						60,979						97,973						82,067						482,198						723,217
Consumer installment						1,298						2,858						739						9						4,904
Total						$	224,253					$	416,216					$	598,335					$	625,899					$	1,864,703

The information presented in the above table is based on the contractual maturities of the individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon their maturity.

44

Investment Securities. The investment securities portfolio is a significant component of the Company'sCompany’s total earning assets. Total securities averaged $359.2 million$1.919 billion in 2017,2023, as compared to $261.5 million$2.023 billion in 2016,2022, and $256.5 million$1.305 billion in 2015.2021. This represents 22.8%27.2%, 23.5%35.5%, and 25.2%26.3% of the average earning assets for the years ended December 31, 2017, 20162023, 2022 and 2015,2021, respectively. At December 31, 2017,2023, investment securities, including equity securities, were $372.9 million$1.735 billion and represented 22.6%28.5% of earning assets. The Company attempts to maintain a portfolio of high quality, highly liquid investments with returns competitive with short-term U.S. Treasury or agency obligations. This objective is particularly important as the Company focuses on growing its loan portfolio. The Company primarily invests in securities of U.S. Treasury, U.S. Government agencies, municipals, and corporate obligations with maturities up to fiveten years.

The following table summarizesdetails the carrying valueweighted-average yield for each range of maturities of securities forheld-to-maturity using the dates indicated.

Securities Portfolio

		December 31,
		2017				2016				2015
		(In thousands)
Available-for-sale
U. S. Government agencies and Mortgage-backed Securities		$	201,570			$	123,334			$	118,536
States and municipal subdivisions			138,584				98,822				97,889
Corporate obligations			15,819				20,110				22,346
Mutual finds			920				940				961
Total available-for-sale			356,893				243,206				239,732
Held-to-maturity
U.S. Government agencies			-				-				1,092
States and municipal subdivisions			6,000				6,000				6,000
Total held-to-maturity			6,000				6,000				7,092
Total		$	362,893			$	249,206			$	246,824

The following table shows, at carrying value, the scheduled maturities and average yields of securities heldamortized cost at December 31, 2017.

Investment Securities Maturity Distribution and Yields (1)

		December 31, 2017
										After One But								After Five But
		Within One Year								Within Five Years								Within Ten Years								After Ten Years
(Dollars in thousands)		Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield
Held-to-maturity:
States and municipal subdivisions		$	-				-			$	-				-			$	6,000,000				.93	%		$	-				-
Total investment securities held-to-maturity		$	-				-				-				-			$	6,000,000							$	-				-
Available-for-sale:
U.S. Government agencies (2)			2,995,755				1.05	%			1,996,380				1.86	%			-				-				-				-
States and municipal subdivisions.			11,065,790				3.22	%			47,779,208				3.27	%			47,360,399				3.96	%			32,378,641				3.96	%
Corporate obligations and other			-								-								11,228,195				2.63	%			4,590,713				3.05	%
Total investment securities available-for-sale		$	14,061,545							$	49,775,588							$	58,588,594							$	36,969,354

2023 (tax equivalent basis):

50

(1) Investments with a call feature

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Table of Contents

						Within One Year						After One, But Within Five Years						Maturing After Five But Within Ten Years						After Ten Years						Total
Securities held-to-maturity
U.S. Treasury						1.48		%				1.67		%				—		%				—		%				1.60		%
Obligations of U.S. government agencies and sponsored entities						—		%				3.49		%				3.30		%				—		%				3.34		%
Tax-exempt and taxable obligations of states and municipal subdivisions						1.91		%				2.04		%				3.96		%				4.83		%				4.57		%
Mortgage-backed securities - residential						—		%				—		%				1.61		%				2.45		%				2.34		%
Mortgage-backed securities - commercial						—		%				2.12		%				3.40		%				3.86		%				3.57		%
Corporate obligations						—		%				—		%				—		%				3.13		%				3.13		%
Total held-to-maturity						1.62		%				2.00		%				3.71		%				4.57		%				4.18		%

Mortgage-backed securities are shown as of the contractualincluded in maturity categories based on their stated maturity date.

(2) Excludes mortgage-backed securities totaling $196.6 million with a yield of 2.47% and mutual funds of $0.9 million.

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

Short-Term Investments. Short-term investments, consisting of Federal Funds Sold, funds due from banks and interest-bearing deposits with banks, averaged $47.5$97.2 million in 2017, $18.82023, $366.5 million in 2016,2022, and $24.6$642.0 million in 2015. At2021. There were no federal funds sold at December 31, 2017, 2016,2023, 2022, and December 31, 2015, short-term investments totaled $475,000, $425,000 and $321,000, respectively.2021. These funds are a primary source of the Company's liquidity and are generally invested in an earning capacity on an overnight basis.

45

Deposits

Deposits

Deposits. Average total deposits at December 31, 20172023 were $1,494.1 million,$6.555 billion, an increase of $473.0 million,$1.127 billion, or 46.3%20.8% compared to 2016.2022. Average total deposits at December 31, 20162022 were $1,021.1 million,$5.428 billion, an increase of $69.5$796.9 million, or 7.3%17.2% compared to $951.6 million$4.631 billion in 2015. 2021.

At December 31, 2017,2023, total deposits were $1,470.6 million,$6.463 billion, compared to $1,039.2 million$5.494 billion at December 31, 2016,2022, an increase of $431.4$968.5 million, or 41.5%17.6%, and $916.7 million$5.227 billion at December 31, 2015. Deposits2021. During January 2023, deposits totaling $1.392 billion, net of $355.6purchase accounting adjustments, were acquired in the Heritage Bank acquisition. During August 2022, deposits totaling $490.6 million were acquired in 2017the BBI acquisition. During December 2021, deposits totaling $410.2 million were acquired in the Cadence Bank branches acquisition.

As of December 31, 2023 and 2022, the Company had estimated uninsured deposits of $2.145 billion and $2.076 billion, respectively. These estimates were derived using the same methodologies and assumptions used for the Bank's regulatory reporting.

In the third quarter of 2022, the Company ceased the Deposit Reclassification program it implemented at the beginning of 2020. The program reclassified non-interest bearing and NOW deposit balances to money market accounts. A distribution of the Company’s deposits showing the year-to-date average balance of deposits by type and weighted-average is presented for the noted periods in the following table. Deposits at December 31, 2021 are shown without reclassification for consistency with the acquisitionscurrent period presentation.

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			December 31,
($ in thousands)			2023												2022												2021
			Average Balance						Average Rate Paid						Average Balance						Average Rate Paid						Average Balance						Average Rate Paid
Non-interest-bearing accounts			$	2,012,935											$	1,660,301											$	1,366,529
Interest bearing deposits:
NOW accounts and other			2,017,154						1.41		%				1,810,575						0.44		%				1,529,293						0.48		%
Money market accounts			1,013,701						1.79		%				831,463						0.29		%				756,951						0.20		%
Savings accounts			606,421						0.18		%				535,449						0.04		%				440,977						0.03		%
Time deposits			904,629						2.61		%				590,385						0.58		%				537,538						0.59		%
Total interest-bearing deposits			4,541,905						1.57		%				3,767,872						0.37		%				3,264,759						0.37		%
Total deposits			$	6,554,840					1.09		%				$	5,428,173					0.26		%				$	4,631,288					0.26		%

The most significant growth during 2023 compared to 2022 was in time deposits. The average cost of interest-bearing deposits and Gulf Coast Community Bank.

total deposits was 1.57% and 1.09% during 2023 compared to 0.37% and 0.26% in 2022. Average cost of interest bearing deposits increased 120 basis points to 1.57% at December 31, 2023 compared to 0.37% during the same time period in 2022. Average cost of total deposits increased 83 basis points to 1.09% at December 31, 2023 compared to 0.26% during the same time period in 2022. The following table sets forthincrease in the average cost of deposits paid on our interest-bearing deposit products in 2023 compared to 2022, is a result of the Company by category for the period indicated.

		Deposits
		December 31,
		2017								2016								2015
						Percent of								Percent of								Percent of
(Dollars in thousands)		Amount				Deposits				Amount				Deposits				Amount				Deposits
Non-interest-bearing accounts		$	301,989				20.5	%		$	202,478				19.5	%		$	189,445				20.6	%
NOW accounts			601,694				40.9	%			430,903				41.5	%			373,686				40.8	%
Money market accounts			149,715				10.2	%			113,253				10.9	%			105,434				11.5	%
Savings accounts			133,864				9.1	%			69,540				6.7	%			68,657				7.5	%
Time deposits less than $100,000			104,648				7.1	%			77,893				7.5	%			73,868				8.1	%
Time deposits of $100,000 or over			178,655				12.2	%			145,124				13.9	%			105,605				11.5	%
Total deposits		$	1,470,565				100	%		$	1,039,191				100	%		$	916,695				100	%

higher average market interest rates. Average cost of interest-bearing deposits and total deposits remained unchanged at December 31, 2022 compared to 2021.

The Company’s loan-to-deposit ratio, which excludes mortgage loans held for sale, was 83.3%80.0% at December 31, 2017, 83.4%2023, 68.7% at December 31, 20162022 and 84.3%56.6% at December 31, 2015.2021. The loan-to-deposit ratio averaged 78.2%76.8% during 2017.2023. Core deposits, which exclude time deposits of $100,000$250,000 or more, provide a relatively stable funding source for the Company's loan portfolio and other earning assets. The Company's core deposits were $1,291.9 million$6.084 billion at December 31, 2017, $894.1 million2023, $5.198 billion at December 31, 2016,2022, and $811.1 million$4.504 billion at December 31, 2015. 2021.

Management anticipates that a stable base of deposits will be the Company's primary source of funding to meet both its short-term and long-term liquidity needs in the future. The Company has purchased brokered deposits from time to time to help fund loan growth. Brokered deposits and jumbo certificates of deposit generally carry a higher interest rate than traditional core deposits. Further, brokered deposit customers typically do not have loan or other relationships with the Company. The Company has adopted a policy not to permit brokered deposits to represent more than 10% of all of the Company’s deposits.

The Company's brokered deposits were 1.8% of deposits at December 31, 2023.

Maturities of Certificates of Deposit

of $100,000$250,000 or More

						After Three
		Within Three				Through				After Twelve
(In thousands)		Months				Twelve Months				Months				Total
December 31, 2017		$	24,473			$	67,469			$	86,713			$	178,655

($ in thousands)						Within Three Months						After Three Through Six Months						After Six Through Twelve Months						After Twelve Months						Total
December 31, 2023						$	103,032					$	122,629					$	44,767					$	22,443					$	292,871

Borrowed Funds

Borrowed funds consist of advances from the Federal Home Loan Bank of Dallas (“FHLB”), loans from First Horizon Bank, loans from the Federal Reserve Bank, federal funds purchased and reverse repurchase agreements. At December 31, 2017,2023, advances from the FHLB totaled $88.1 million$0 compared to $48.0$130.1 million at December 31, 20162022 and $100.0 million$0 at December 31, 2015.2021. The advances are collateralized by a blanket lien on the first mortgage loans in the amount of the outstanding borrowings, FHLB capital stock, and amounts on deposit with the FHLB. There were $0, $0 and $5.3 million inno federal funds purchased at December 31, 2017, 2016,2023, 2022, and 2015,2021, respectively.

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We hadOn March 12, 2023, the Federal Reserve Board announced the Bank Term Funding Program ("BTFP"), which offers loans to banks with a term up to one reverse repurchase agreementyear. The loans are secured by pledging the banks' U.S. treasuries, agency securities, agency mortgage-backed securities, and any other qualifying asset. These pledged securities will be valued at

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par for collateral purposes. The BTFP offers up to one year fixed-rate term borrowings that are prepayable without penalty.

In 2023, the Bank participated in the amountBTFP and had outstanding debt of $5,000,000. The agreement was secured by$390.0 million and pledged securities with a fair value of $5,470,105$362.4 million at December 31, 20162023. The securities pledged have a par value of $398.1 million. The Bank's BTFP borrowings, which were drawn between March 15, 2023 and $5,501,503 at December 31, 2015. On September 25, 2017, the underlying securities were repurchased28, 2023, bear interest rates ranging from 4.69% to 4.83% and the agreement was terminated.

are set to mature one year from their issuance date.

Subordinated Debentures

In

On June 30, 2006, the Company issued $4.1 million of floating rate junior subordinated deferrable interest debentures of $4,124,000 to The First Bancshares Inc. Statutory Trust 2 (“Trust 2”). The debentures are the sole asset of Trust 2, and the Company is the sole owner of the common equity of Trust 2. Trust 2 issued $4.0 million of Trust Preferred Securities 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 2.2’s obligations under the preferred securities. The Trust 2 issued $4,000,000 of preferred securities to investors.are redeemable by the Company at its option. The Company makes interest payments and will make principal payments onpreferred securities must be redeemed upon maturity of the debentures to the Trust 2. These payments will be the source of funds used to retirein 2036. Interest on the preferred securities whichis the three-month term Secured Overnight Financing Rate ("SOFR") plus 1.65% plus a tenor spread adjustment of 0.026161% and is payable quarterly. The terms of the subordinated debentures are redeemable at any time beginning in 2011 and thereafter, and mature in 2036. The Company entered into this arrangementidentical to provide funding for expected growth.

Inthose of the preferred securities.

On July 27, 2007, the Company issued $6.2 million of floating rate junior subordinated deferrable interest debentures of $6,186,000 to The First Bancshares Inc. Statutory Trust 3 (“Trust 3”). The Company owns all of the common equity of Trust 3, and the debentures are the sole asset of Trust 3. Trust 3 issued $6.0 million of Trust Preferred Securities 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 3’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 2037. Interest on the preferred securities is the three-month term SOFR plus 1.40% plus a tenor spread adjustment of 0.026161% and is payable quarterly. The terms of the subordinated debentures are identical to those of the preferred securities.

In 2018, as a result of the acquisition of FMB Banking Corporation ("FMB"), the Company became the successor to FMB's obligations in respect of $6.2 million of floating rate junior subordinated debentures issued to FMB Capital Trust 1 ("FMB Trust"). The debentures are the sole asset of FMB Trust, and the Company is the sole owner of the common equity of FMB Trust. FMB Trust issued $6.0 million of Trust Preferred Securities to investors. The Company’s obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of FMB Trust's obligations under the preferred securities. The preferred securities issued by the FMB Trust 3.are redeemable by the Company at its option. The preferred securities must be redeemed upon maturity of the debentures in 2033. Interest on the preferred securities is the three-month term SOFR plus 2.85% plus a tenor spread adjustment of 0.026161% and is payable quarterly.

On January 1, 2023, as a result of the acquisition of HSBI, the Company became the successor to HSBI's obligations in respect of $10.3 million of subordinated debentures issued to Liberty Shares Statutory Trust 3II ("Liberty Trust"). The debentures are the sole asset of Liberty Trust, and the Company is the sole owner of the common equity of Liberty Trust. Liberty Trust issued $6,000,000$10.0 million of preferred securities to investors.an investor. The Company makes interest payments and will make principal payments onCompany's obligations under the debentures toand related documents, taken together, constitute a full and unconditional guarantee by the Company of Liberty Trust's obligations under the preferred securities. The preferred securities issued by the Liberty Trust 3. These payments willare redeemable by the Company at its option. The preferred securities must be redeemed upon maturity of the source of funds used to retiredebentures in 2036. Interest on the preferred securities whichis the three-month term SOFR plus 1.48% plus a tenor spread adjustment of 0.026161% and is payable quarterly.

In accordance with the provisions of ASC Topic 810, Consolidation, the Trust 2, Trust 3, FMB Trust, and Liberty Trust are redeemable at any time beginningnot included in 2012 and thereafter, and mature in 2037.the consolidated financial statements.

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Subordinated Notes

On April 30, 2018, The Company entered into this arrangementtwo Subordinated Note Purchase Agreements pursuant to provide fundingwhich the Company sold and issued $24.0 million in aggregate principal amount of 5.875% fixed-to-floating rate subordinated notes due 2028 (the "Notes due 2028") and $42.0 million in aggregate principal amount of 6.40% fixed-to-floating rate subordinated notes due 2033 (the “Notes due 2033”). In May of 2023, the Company redeemed all $24.0 million of the outstanding 5.875% fixed-to-floating rate subordinated notes due 2028.

The Notes due 2033 are not convertible into or exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Notes due 2033 are not subject to redemption at the option of the holder. Principal and interest on the Notes due 2033 are subject to acceleration only in limited circumstances. The Notes due 2033 are unsecured, subordinated obligations of the Company and rank junior in right to payment to the Company’s current and future senior indebtedness, and each Note is pari passu in right to payment with respect to the other Notes. The Notes due 2033 have a fifteen year term, maturing May 1, 2033, and will bear interest at a fixed annual rate of 6.40%, payable quarterly in arrears, for the first ten years of the term. Thereafter, the interest rate will re-set quarterly to an interest rate per annum equal to a benchmark rate (which is expected growth.

to be three-month term SOFR plus 3.39% plus a tenor spread adjustment of 0.026161%), payable quarterly in arrears. As provided in the Notes due 2033, under specified conditions the interest rate on the Notes due 2033 during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Company is entitled to redeem the Notes due 2033, in whole or in part, on any interest payment date on or after May 1, 2028, and to redeem the Notes due 2033 at any time in whole upon certain other specified events.

On September 25, 2020, The Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers pursuant to which the Company sold and issued $65.0 million in aggregate principal amount of its 4.25% Fixed to Floating Rate Subordinated Notes due 2030 (the "Notes due 2030"). The Notes due 2030 are unsecured and have a ten-year term, maturing October 1, 2030, and will bear interest at a fixed annual rate of 4.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be the Three-Month Term SOFR plus 412.6 basis points), payable quarterly in arrears. As provided in the Notes due 2030, under specified conditions the interest rate on the Notes due 2030 during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Company is entitled to redeem the Notes due 2030, in whole or in part, on any interest payment date on or after October 1, 2025, and to redeem the Notes due 2030 at any time in whole upon certain other specified events.

The Company had $123.4 million of subordinated debt, net of deferred issuance costs $1.6 million and unamortized fair value mark $2.1 million, at December 31, 2023, compared to $145.0 million, net of deferred issuance costs $1.9 million and unamortized fair value mark $593 thousand, at December 31, 2022. The decrease in subordinated debt was attributable to the Company's redemption of $24.0 million of its Notes due 2028 and the Company's repayment of $2.0 million of its Notes due 2030 in May of 2023, which resulted in the Company recording a $217 thousand gain on the repurchased debt. The decrease in subordinated debt was partially offset by the addition of $9.0 million, net purchase accounting adjustments, of subordinated debt that the Company acquired as part of the HSBI acquisition.

Capital

The Federal Reserve Board and bank regulatory agencies require bank holding companies and financial institutions to maintain capital at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% for U.S government and agency securities, to 600%. for certain equity exposures. In November 2019, the federal banking agencies adopted a rule revising the scope of commercial real estate mortgages subject to a 150% risk weight. Under the risk-based standard, capital is classified into two tiers. Tier 1 capital consists of common stockholders'stockholders’ equity, excluding the unrealized gain (loss) on available-for-sale securities, minus certain intangible assets. Tier 2 capital consists of the general reserve for loan losses, subject to certain limitations. An institution’s total risk-based capital for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital. The risk-based regulatory minimum requirements are 6% for Tier 1 and 8% for total risk-based capital.

Bank holding companies and banks are also required to maintain capital at a minimum level based on total assets, which is known as the leverage ratio. The minimum requirement for the leverage ratio is 4%. All but the highest rated institutions are required to maintain ratios 100 to 200 basis points above the minimum. The Company and The First exceeded their minimum regulatory capital ratios as of December 31, 2017, 20162023, 2022 and 2015.

2021.

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The Federal Reserve and the Federal Deposit Insurance Corporation approved final capital rules in July 2013, that substantially amended the existing capital rules for banks. These new rules reflect, in part, certain standards initially adopted by the Basel Committee on Banking Supervision in December 2010 (which standards are commonly referred to as “Basel III”) as well as requirements contemplated by the Dodd-Frank Act.

Under the Basel III capital rules, the Company is required to meet certain minimum capital requirements that differ from past capital requirements. The rules implement a new capital ratio of common equity Tier 1 capital to risk-weighted assets. Common equity Tier 1 capital generally consists of retained earnings and common stock (subject to certain adjustments) as well as accumulated other comprehensive income (“AOCI”), however, the Company exercised a one-time irrevocable option to exclude certain components of AOCI as of March 31, 2015. The Company will also beis required to establish a “conservation buffer,” consisting of a common equity Tier 1 capital amount equal to 2.5% of risk-weighted assets to be phased in byeffective January 2019. An institution that does not meet the conservation buffer will be subject to restrictions on certain activities including payment of dividends, stock repurchases, and discretionary bonuses to executive officers.

47

The prompt corrective action rules have been modified to include the common equity Tier 1 capital ratio and to increase the Tier 1 capital ratio requirements for the various thresholds. For example, the requirements for the Company to be considered well-capitalized under the rules include a 5.0% leverage ratio, a 6.5% common equity Tier 1capital1 capital ratio, an 8.0% Tier 1 capital ratio, and a 10.0% total capital ratio. To be adequately capitalized, those ratios are 4.0%, 4.5%, 6.0%, and 8.0%, respectively.

The rules modify the manner in which certain capital elements are determined. The rules make changes to the methods of calculating the risk-weighting of certain assets, which in turn affects the calculation of the risk-weighted capital ratios. Higher risk weights are assigned to various categories of assets, including commercial real estate loans, credit facilities that finance the acquisition, development or construction of real property, certain exposures or credit that are 90 days past due or are non-accrual,nonaccrual, securitization exposures, and in certain cases mortgage servicing rights and deferred tax assets.

The Company was required to comply with the new capital rules on January 1, 2015, with a measurement date of March 31, 2015. The conservation buffer will bewas phased-in beginning in 2016, and will taketook full effect on January 1, 2019. Certain calculations under the rules will also have phase-in periods.

Under this guidance banking institutions with a CETI, Tier 1 Capital Ratio and Total Risk Based Capital above the minimum regulatory adequate capital ratios but below the capital conservation buffer will face constraints on their ability to pay dividends, repurchase equity and pay discretionary bonuses to executive officers, based on the amount of the shortfall.

Analysis of Capital

										The Company												The First
		Adequately				Well				December 31,												December 31,
Capital Ratios		Capitalized				Capitalized				2017				2016				2015				2017				2016				2015
Leverage			4.0	%			5.0	%			11.7	%			11.9	%			8.7	%			11.4	%			13.1	%			8.6	%
Risk-based capital:
Common equity Tier 1			4.5	%			6.5	%			14.2	%			13.8	%			8.1	%			14.5	%			16.2	%			11.0	%
Tier 1			6.0	%			8.0	%			14.9	%			14.7	%			11.1	%			14.5	%			16.2	%			11.0	%
Total			8.0	%			10.0	%			15.5	%			15.5	%			11.9	%			15.1	%			17.0	%			11.8	%

Ratios

		2017				2016				2015
Return on assets (net income applicable  to common stockholders divided by  average total assets)			.60	%			.79	%			.75	%
Return on equity (net income applicable  to common stockholders divided by  average equity)			6.2	%			8.0	%			8.6	%
Dividend payout ratio (dividends per   share divided by net income per   common share)			13.5	%			9.6	%			9.7	%
Equity to asset ratio (average equity  divided by average total assets)			9.7	%			9.8	%			8.8	%

Capital Ratios						Adequately Capitalized						Well Capitalized						Minimum Capital Required Basel III Fully Phased In						The Company December 31,																		The First December 31,
																								2023						2022						2021						2023						2022						2021
Leverage						4.0		%				5.0		%				7.0		%				9.7		%				9.3		%				9.2		%				10.7		%				11.1		%				10.8		%
Risk-based capital:
Common equity Tier 1						4.5		%				6.5		%				7.0		%				12.1		%				12.7		%				13.7		%				13.8		%				15.6		%				16.6		%
Tier 1						6.0		%				8.0		%				8.5		%				12.5		%				13.0		%				14.1		%				13.8		%				15.6		%				16.6		%
Total						8.0		%				10.0		%				10.5		%				15.0		%				16.7		%				18.6		%				14.8		%				16.4		%				17.4		%

Liquidity and Market Risk Management

Capital Resources

Liquidity management involves monitoring the Company'sCompany’s sources and uses of funds in order to meet its day-to-day cash flow requirements while maximizing profits. Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of the investment portfolio is very predictable and subject to a high degree of control at the time investment decisions are made; however, net deposit inflows and outflows are far less

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predictable and are not subject to the same degree of control. Asset liquidity is provided by cash and assets which are readily marketable, which can be pledged, or which will mature in the near future. Liability liquidity is provided by access to core funding sources, principally the ability to generate customer deposits in the Company’s market area.

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The Company'sCompany’s federal funds sold position, which includes funds due from banks and interest-bearing deposits with banks, is typically its primary source of liquidity. Federal funds sold averaged $50.0$97.2 million during the year ended December 31, 20172023 and totaled $48.9averaged $366.5 million at December 31, 2017. Also,2022. In addition, the Company has available advances from the Federal Home Loan Bank.FHLB. Advances available are generally based upon the amount of qualified first mortgage loans which can be used for collateral. At December 31, 2017,2023, advances available totaled approximately $556.4 million$2.051 billion, of which $110.6$355.2 million had been drawn, or used for letters of credit.

As of December 31, 2017,2023, the market value of unpledged debt securities plus pledged securities in excess of current pledging requirements comprised $95.5$661.8 million of the Company’s investment balances, compared to $100.2 million$1.066 billion at December 31, 2016. The increase in unpledged debt from December 2017 compared to December 2016 is primarily due to an increase in unpledged investments and letters of credit utilized for pledging purposes.2022. Other forms of balance sheet liquidity include but are not necessarily limited to any outstanding federal funds sold and vault cash. The Company has a higher level of actual balance sheet liquidity than might otherwise be the case, since we utilize a letter of credit from the FHLB rather than investment securities for certain pledging requirements. That letter of credit, which is backed by loans that are pledged to the FHLB by the Company, totaled $17.5 million at December 31, 2017. Management is of the opinionbelieves that available investments and other potentially liquid assets, along with the standby funding sources it has arranged, are more than sufficient to meet the Company’s current and anticipated short-term liquidity needs.

The Company’s liquidity ratio as of December 31, 20172023 was 12.8%17.6%, as compared to internal liquidity policy guidelines of 10% minimum. Other liquidity ratios reviewed include the following along with policy guidelines for the periods indicated:

		December 31, 2017				Policy Maximum
Loans to Deposits (including FHLB advances)			71.1	%			90.0	%		In Policy
Net Non-core Funding Dependency Ratio			5.8	%			20.0	%		In Policy
Fed Funds Purchased / Total Assets			0.0	%			10.0	%		In Policy
FHLB Advances / Total Assets			4.9	%			20.0	%		In Policy
FRB Advances / Total Assets			0.0	%			10.0	%		In Policy
Pledged Securities to Total Securities			77.6	%			90.0	%		In Policy

		December 31, 2016				Policy Maximum
Loans to Deposits (including FHLB advances)			79.1	%			90.0	%		In Policy
Net Non-core Funding Dependency Ratio			8.3	%			30.0	%		In Policy
Fed Funds Purchased / Total Assets			0.4	%			10.0	%		In Policy
FHLB Advances / Total Assets			3.9	%			20.0	%		In Policy
FRB Advances / Total Assets			0.0	%			10.0	%		In Policy
Pledged Securities to Total Securities			66.6	%			90.0	%		In Policy

		December 31, 2015				Policy Maximum
Loans to Deposits (including FHLB advances)			75.4	%			90.0	%		In Policy
Net Non-core Funding Dependency Ratio			13.8	%			30.0	%		In Policy
Fed Funds Purchased / Total Assets			0.9	%			10.0	%		In Policy
FHLB Advances / Total Assets			8.9	%			20.0	%		In Policy
FRB Advances / Total Assets			0.0	%			10.0	%		In Policy
Pledged Securities to Total Securities			84.7	%			90.0	%		In Policy

Continued growth in core deposits and relatively high levels of potentially liquid investments have had a positive impact on our liquidity position in recent periods, but no assurance can be provided that our liquidity will continue at current robust levels.

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			December 31, 2023						Policy Maximum
Loans to Deposits (including FHLB advances)			79.3		%				90.0		%				In Policy
Net Non-core Funding Dependency Ratio			8.3		%				20.0		%				In Policy
Fed Funds Purchased / Total Assets			0.0		%				10.0		%				In Policy
FHLB Advances / Total Assets			0.0		%				20.0		%				In Policy
FRB Advances / Total Assets			5.0		%				10.0		%				In Policy
Pledged Securities to Total Securities			58.6		%				90.0		%				In Policy
			December 31, 2022						Policy Maximum
Loans to Deposits (including FHLB advances)			67.9		%				90.0		%				In Policy
Net Non-core Funding Dependency Ratio			4.4		%				20.0		%				In Policy
Fed Funds Purchased / Total Assets			0.0		%				10.0		%				In Policy
FHLB Advances / Total Assets			2.0		%				20.0		%				In Policy
FRB Advances / Total Assets			0.0		%				10.0		%				In Policy
Pledged Securities to Total Securities			46.9		%				90.0		%				In Policy
			December 31, 2021						Policy Maximum
Loans to Deposits (including FHLB advances)			55.8		%				90.0		%				In Policy
Net Non-core Funding Dependency Ratio			(14.6)		%				20.0		%				In Policy
Fed Funds Purchased / Total Assets			0.0		%				10.0		%				In Policy
FHLB Advances / Total Assets			0.0		%				20.0		%				In Policy
FRB Advances / Total Assets			0.0		%				10.0		%				In Policy
Pledged Securities to Total Securities			48.5		%				90.0		%				In Policy

The holding company’s primary uses of funds are ordinary operating expenses and stockholder dividends, and its primary source of funds is dividends from the Bank since the holding company does not conduct regular banking operations. Management anticipates that the Bank will have sufficient earnings to provide dividends to the holding company to meet its funding requirements for the foreseeable future.

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Management regularly reviews the liquidity position of the Company and has implemented internal policies which establish guidelines for sources of asset-based liquidity and limit the total amount of purchased funds used to support the balance sheet and funding from non-core sources.

As of December 31, 2023, the target federal funds rate was 5.25% to 5.50%.

On February 8, 2022, the Company announced the renewal of the 2021 Repurchase Program that previously expired on December 31, 2021. Under the renewed 2021 Repurchase Program, the Company could repurchase up to an aggregate of $30.0 million of the Company’s issued and outstanding common stock in any manner determined appropriate by the Company’s management, less the amount of prior purchases under the program during the 2021 calendar year. The renewed 2021 Repurchase Program was completed in February 2022 when the Company’s repurchases under the program approached the maximum authorized amount. The Company repurchased 600,000 shares under the 2021 Repurchase Program in the first quarter of 2022.

On March 9, 2022, the Company announced that its Board of Directors authorized a new share repurchase program (the “2022 Repurchase Program”), pursuant to which the Company could purchase up to an aggregate of $30.0 million in shares of the Company’s issued and outstanding common stock during the 2022 calendar year. Under the program, the Company could, but was not required to, from time to time repurchase up $30.0 million of shares of its own common stock in any manner determined appropriate by the Company’s management. The actual timing and method of any purchases, the target number of shares and the maximum price (or range of prices) under the program, was determined by management at is discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The 2022 Repurchase Program expired on December 31, 2022.

The Inflation Reduction Act of 2022 signed into law in August 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax is effective beginning in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not expect a material impact to our statement of condition or result of operations.

On February 28, 2023, the Company announced that its Board of Directors has authorized a new share repurchase program (the "2023 Repurchase Program"), pursuant to which the Company may purchase up to an aggregate of $50.0 million in shares of the Company's issued and outstanding common stock during the 2023 calendar year. Under the program, the Company may, but is not required to, from time to time repurchase up $50.0 million of shares of its own common stock in any manner determined appropriate by the Company’s management. The actual timing and method of any purchases, the target number of shares and the maximum price (or range of prices) under the program, will be determined by management at is discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The 2023 Repurchase Program expired on December 31, 2023.

On February 28, 2024, the Company announced that its Board of Directors has authorized a new share repurchase program (the "2024 Repurchase Program"), pursuant to which the Company may purchase up to an aggregate of $50.0 million in shares of the Company's issued and outstanding common stock during the 2024 calendar year. Under the program, the Company may, but is not required to, from time to time repurchase up $50.0 million of shares of its own common stock in any manner determined appropriate by the Company’s management. The actual timing and method of any purchases, the target number of shares and the maximum price (or range of prices) under the program, will be determined by management at is discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The 2024 Repurchase Program will expire on December 31, 2024.

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Commitments and Contractual Obligations

The following table presents, as of December 31, 2017,2023, fixed and determinable contractual obligations to third parties by payment date. Amounts in the table do not include accrued or accruing interest. Payments related to leases are based on actual payments specified in the underlying contracts. Further discussion of the nature of each obligation is included in the referenced note to the consolidated financial statements included elsewhere in this Form 10-K.

(In thousands)		Note Reference		Within One Year				After One But Within Three Years				After Three But Within Five Years				After Five Years				Total
Deposits without a stated maturity		G		$	1,187,289			$	-			$	-			$	-			$	1,187,289
Time deposits		G			152,550				105,098				25,628				-				283,276
Borrowings		H			93,572				10,500				-				-				104,072
Operating lease obligations		I			586				257				343				312				1,498
Capital lease obligations		I			275				466				175				-				916
Trust preferred subordinated debentures		N			-				-				-				10,310				10,310
Total Contractual obligations				$	1,434,272			$	116,321			$	26,146			$	10,622			$	1,587,361

($ in thousands)						Note Reference						Within One Year						After One But Within Three Years						After Three But Within Five Years						After Five Years						Total
Deposits without a stated maturity						G						$	5,387,116					$	—					$	—					$	—					$	5,387,116
Time deposits						G						971,259						73,460						22,510						8,527						1,075,756
Borrowings						H						390,000						—						—						—						390,000
Lease obligations						I						1,240						2,225						1,825						2,999						8,289
Trust preferred subordinated debentures						N						—						—						—						25,016						25,016
Subordinated note purchase agreement						N						—						—						—						98,370						98,370
Total Contractual obligations												$	6,749,615					$	75,685					$	24,335					$	134,912					$	6,984,547

Subprime Assets

The Bank does not engage in subprime lending activities targeted towards borrowers in high risk categories.

Accounting Matters

Information on new accounting matters is set forth in Note B – Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included elsewhere in this report. This information is incorporated herein by reference.

Impact of Inflation

Unlike most industrial companies, the assets and liabilities of financial institutions such as the Company are primarily monetary in nature. Therefore, interest rates have a more significant effect on the Company's performance than do the effects of changes in the general rate of inflation and change in prices. In addition, interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. As discussed previously, management seeks to manage the relationships between interest sensitive assets and liabilities in order to protect against wide interest rate fluctuations, including those resulting from inflation.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

Market risk arises from changes in interest rates, exchange rates, commodity prices and equity prices. The Company does not engage in the trading of financial instruments, nor does it have exposure to currency exchange rates. Our market risk exposure is primarily that of interest rate risk, and we have established policies and procedures to monitor and limit our earnings and balance sheet exposure to changes in interest rates. The principal objective of interest rate risk management is to manage the financial components of the Company’s balance sheet in a manner that will optimize the risk/reward equation for earnings and capital under a variety of interest rate scenarios.

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To identify areas of potential exposure to interest rate changes, we utilize commercially available modeling software to perform earnings simulations and calculate the Company’s market value of portfolio equity under varying interest rate scenarios every month. The model imports relevant information for the Company’s financial instruments and incorporates Management’smanagement’s assumptions on pricing, duration, and optionality for anticipated new volumes. Various rate scenarios consisting of key rate and yield curve projections are then applied in order to calculate the expected effect of a given interest rate change on interest income, interest expense, and the value of the Company’s financial instruments. The rate projections can be shocked (an immediate and parallel change in all base rates, up or down), ramped (an incremental increase or decrease in rates over a specified time period), economic (based on current trends and econometric models) or stable (unchanged from current actual levels).

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We use seven standard interest rate scenarios in conducting our 12-month net interest income simulations: “static,” upward shocks of 100, 200, 300 and 400 basis points, and downward shocks of 100, and 200 basis points. Pursuant to policy guidelines, we typically attempt to limit the projected decline in net interest income relative to the stable rate scenario to no more than 5% for a 100 basis100-basis point (bp) interest rate shock, 10% for a 200 bp shock, 15% for a 300 bp shock, and 20% for a 400 bp shock. As of December 31, 2017,2023, the Company had the following estimated net interest income, sensitivity profiles, without factoring in any potential negative impact on spreads resulting from competitive pressures or credit quality deterioration:

December 31, 2017		Net Interest Income at Risk – Sensitivity Year 1
($ In Thousands)		-200 bp				-100 bp				STATIC				+100 bp				+200 bp				+300 bp				+400 bp
Net Interest Income			54,702				56,491				60,023				61,041				60,588				58,764				55,384
Dollar Change			-5,321				-3,532								1,018				565				-1,259				-4,639
NII @ Risk - Sensitivity Y1			-8.9	%			-5.9	%							1.7	%			0.9	%			-2.1	%			-7.7	%

December 31, 2023						Net Interest Income at Risk – Sensitivity Year 1
($ in thousands)						-200 bp						-100 bp						STATIC						+100 bp						+200 bp						+300 bp						+400 bp
Net Interest Income						236,936						232,589						231,521						233,208						226,151						210,556						187,595
Dollar Change						5,415						1,068												1,687						(5,370)						(20,965)						(43,926)
NII @ Risk - Sensitivity Year 1						2.3		%				0.5		%										0.7		%				(2.3)		%				(9.1)		%				(19.0)		%

If there were an immediate and sustained downward adjustment of 200 basis points in interest rates, all else being equal, net interest income over the next twelve months would likely be approximately $5.3$5.4 million lowerhigher than in a stable interest rate scenario, for a negative variance of 8.9%2.3%. The unfavorable variance increases if rates were to drop below 200 basis points, due to the fact that certain deposit rates are already relatively low (on NOW accounts and savings accounts, for example), and will hit a natural floor of close to zero while non-floored variable-rate loan yields continue to drop. This effect is exacerbated by accelerated prepayments on fixed-rate loans and mortgage-backed securities when rates decline, although rate floors on some of our variable-rate loans partially offset other negative pressures. While we view further interest rate reductions as highly unlikely, the potential percentage drop in net interest income exceeds our internal policy guidelines in declining interest rate scenarios and we will continue to monitor our interest rate risk profile and take corrective action as deemed appropriate.

Net interest income would likely improvedecrease by $0.5$5.4 million, or 0.9%(2.3)%, if interest rates were to increase by 200 basis points relative to a stable interest rate scenario, with the favorable variance expanding the higher interest rates rise.scenario. The initial increase in rising rate scenarios will be limited to some extent by the fact that some of our variable-rate loans are currently at rate floors, resulting in a re-pricing lag while base rates are increasing to floored levels, but we believe the Company still would benefit from a material upward shift in the yield curve.

The Company’s one yearone-year cumulative GAP ratio was approximately 221.83%118.0% at December 31, 2017 and 199.4%2023, 180.0% at December 31, 2016,2022 and 164.5% at December 31, 2021. The Company is considered “asset-sensitive” which means that there are more assets repricing than liabilities within the first year. The Company is “asset-sensitive.” The Company’s one year cumulative GAP ratio was approximately 168.3% at December 31, 2015, which meant that there were more liabilities repricing than assets within the first year. These results are based on cash flows from assumptions of assets and liabilities that reprice (maturities, likely calls, prepayments, etc.) Typically, the net interest income of asset-sensitive companies should improve with rising rates and decrease with declining rates.

In addition to the net interest income simulations shown above, we run stress scenarios modeling the possibility of no balance sheet growth, the potential runoff of “surge” core deposits which flowed into the Company in the most recent economic cycle, and potential unfavorable movement in deposit rates relative to yields on earning assets. Even though net interest income will naturally be lower with no balance sheet growth, the rate-driven variances projected for net interest income in a static growth environment are similar to the changes noted above for our standard projections. When a greater level of non-maturity deposit runoff is assumed or unfavorable deposit rate changes are factored into the model, projected net interest income in declining rate and flat rate scenarios does not change materially relative to standard growth projections. However, the benefit we would otherwise experience in rising rate scenarios is minimized and net interest income remains relatively flat.

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The economic value (or “fair value”) of financial instruments on the Company’s balance sheet will also vary under the interest rate scenarios previously discussed. The difference between the projected fair value of the Company’s financial assets and the fair value of its financial liabilities is referred to as the economic value of equity (“EVE”), and changes in EVE under different interest rate scenarios are effectively a gauge of the Company’s longer-term exposure to interest rate risk. Fair values for financial instruments are estimated by discounting projected cash flows (principal and interest) at projected replacement interest rates for each account type, while the fair value of non-financial accounts is assumed to equal their book value for all rate scenarios. An economic value simulation is a static measure utilizing balance sheet accounts at a given point in time, and the measurement can change substantially over time as the characteristics of the Company’s balance sheet evolve and interest rate and yield curve assumptions are updated.

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The change in economic value under different interest rate scenarios depends on the characteristics of each class of financial instrument, including stated interest rates or spreads relative to current or projected market-level interest rates or spreads, the likelihood of principal prepayments, whether contractual interest rates are fixed or floating, and the average remaining time to maturity. As a general rule, fixed-rate financial assets become more valuable in declining rate scenarios and less valuable in rising rate scenarios, while fixed-rate financial liabilities gain in value as interest rates rise and lose value as interest rates decline. The longer the duration of the financial instrument, the greater the impact a rate change will have on its value. In our economic value simulations, estimated prepayments are factored in for financial instruments with stated maturity dates, and decay rates for non-maturity deposits are projected based on historical patterns and Management’smanagement’s best estimates. The table below shows estimated changes in the Company’s EVE as of the periods indicated under different interest rate scenarios relative to a base case of current interest rates:

		December 31, 2017 - Balance Sheet Shock
(Dollars in thousands)		-200 bp				-100 bp				STATIC (Base)				+100 bp				+200 bp				+300 bp				+400 bp
Market Value of Equity			274,743				252,585				320,631				375,144				412,957				437,500				449,926
Change in EVE from base			-45,888				-68,046								54,513				92,326				116,896				129,295
% Change			-14.3	%			-21.2	%							17.0	%			28.8	%			36.5	%			40.3	%
Policy Limits			-20.0	%			-10.0	%							-10.0	%			-20.0	%			-30.0	%			-40.0	%

		December 31, 2016 - Balance Sheet Shock
(Dollars in thousands)		-200 bp				-100 bp				STATIC (Base)				+100 bp				+200 bp				+300 bp				+400 bp
Market Value of Equity			315,609				323,038				356,983				384,268				406,044				424,054				438,668
Change in EVE from base			-41,374				-33,945								27,285				49,061				67,071				81,685
% Change			-11.6	%			-9.5	%							7.6	%			13.7	%			18.8	%			22.9	%
Policy Limits			-20.00	%			-10.00	%							-10.00	%			-20.00	%			-30.00	%			-40.00	%

The tables show that our EVE will generally deteriorate in declining rate scenarios, but should benefit from a parallel shift upward in the yield curve. As noted previously, however, Management is of the opinion that the potential for a significant rate decline is low.

						December 31, 2023 - Balance Sheet Shock
($ in thousands)						-200 bp						-100 bp						STATIC (Base)						+100 bp						+200 bp						+300 bp						+400 bp
Market Value of Equity						1,286,790						1,321,286						1,354,363						1,362,597						1,327,813						1,263,361						1,187,080
Change in EVE from base						(67,573)						(33,077)												8,234						(26,550)						(91,002)						(167,283)
% Change						(5.0)		%				(2.4)		%										0.6		%				(2.0)		%				(6.7)		%				(12.4)		%
Policy Limits						(20.0)		%				(10.0)		%										(10.0)		%				(20.0)		%				(30.0)		%				(40.0)		%

						December 31, 2022 - Balance Sheet Shock
($ in thousands)						-200 bp						-100 bp						STATIC (Base)						+100 bp						+200 bp						+300 bp						+400 bp
Market Value of Equity						1,366,982						1,410,341						1,397,164						1,366,639						1,316,226						1,248,624						1,165,069
Change in EVE from base						(30,182)						13,177												(30,525)						(80,938)						(148,540)						(232,095)
% Change						(2.2)		%				0.9		%										(2.2)		%				(5.8)		%				(10.6)		%				(16.6)		%
Policy Limits						(20.0)		%				(10.0)		%										(10.0)		%				(20.0)		%				(30.0)		%				(40.0)		%

We also run stress scenarios for EVE to simulate the possibility of higher loan prepayment rates, unfavorable changes in deposit rates, and higher deposit decay rates. Model results are highly sensitive to changes in assumed decay rates for non-maturity deposits, in particular.

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ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

To the Stockholders, Board of Directors and Shareholders of

Audit Committee

The First Bancshares, Inc.

Hattiesburg, Mississippi

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The First Bancshares, Inc. and subsidiary (the "Company"“Company”) as of December 31, 20172023 and 2016,2022, the related consolidated statements of income, comprehensive income changes in(loss), stockholders’ equity and cash flows for each of the three years in the three-year period ended December 31, 2017,2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the three years in the three-year period ended December 31, 2017,2023, in conformity with theaccounting principles generally accepted accounting principles in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control-IntegratedControl – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)(COSO) and our report dated March 16, 2018,February 29, 2024, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures includedinclude examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/T.E. Lott & Company

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Allowance for Credit Losses

The Company’s loan portfolio totaled $5.17 billion as of December 31, 2023, and the allowance for credit losses on loans was $54 million. The Company’s unfunded loan commitments totaled $866 million, with an allowance for credit loss of $2.1 million. Together these amounts represent the allowance for credit losses (“ACL”).

As more fully described in Notes B, E and Q to the Company’s consolidated financial statements, the Company estimates its exposure to expected credit losses as of the balance sheet date, for existing financial instruments held at amortized cost, and off-balance sheet exposures, such as unfunded loan commitments, letters of credit and other financial guarantees that are not unconditionally cancellable by the Company.

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The determination of the ACL requires management to exercise significant judgment and consider numerous subjective factors, including determining qualitative factors utilized to adjust historical loss rates, loan credit risk grading and identifying loans requiring individual evaluation among others. As disclosed by management, different assumptions and conditions could result in a materially different amount for the estimate of the ACL.

We identified the valuation of the ACL as a critical audit matter. Auditing the ACL involved a high degree of subjectivity in evaluating management’s estimates, such as evaluating management's identification of credit quality indicators, grouping of loans determined to be similar into pools, estimating the remaining life of loans in a pool, assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with individually evaluated loans and assessing the appropriateness of loan credit risk grades.

The primary procedures we performed as of December 31, 2023, to address this critical audit matter included:

•Testing the design and operating effectiveness of controls, including those related to technology, over the allowance for credit losses including:

◦loan data completeness and accuracy,

◦classifications of loans by loan segment,

◦verification of historical net loss data and calculated net loss rates,

◦the establishment of qualitative adjustments,

◦credit ratings and risk classification of loans,

◦establishment of specific reserves on individually evaluated loans,

◦and management’s review and disclosure controls over the allowance for credit losses;

•Testing of completeness and accuracy of the information utilized in the allowance for credit losses;

•Testing the allowance for credit losses model’s computational accuracy;

•Evaluating the qualitative adjustments, including assessing the basis for the adjustments and the reasonableness of the significant assumptions;

•Testing the loan review function and evaluating the accuracy of loan credit ratings;

•Evaluating the reasonableness of specific allowances on individually evaluated loans;

•Evaluating the overall reasonableness of assumptions used by management considering the past performance of the Company;

•Evaluating the disclosures in the consolidated financial statements.

Acquisition

As described in Note C to the Company’s consolidated financial statements, the Company consummated the acquisition of Heritage Southeast Bancorporation, Inc. and its wholly-owned subsidiary, Heritage Bank, resulting in goodwill of approximately $91.9 million being recognized on the Company’s consolidated balance sheet. As part of the acquisition, management assessed that the acquisition qualified as a business combination and all identifiable assets and liabilities acquired were valued at fair value as part of the purchase price allocation as of the acquisition date. The identification and valuation of such acquired assets and assumed liabilities requires management to exercise significant judgment. Management utilized outside vendors to assist with estimating the fair value.

We identified the consummated acquisition and the valuation of acquired assets and assumed liabilities as a critical audit matter. Auditing the acquired assets and assumed liabilities and other acquisition-related considerations involved a high degree of subjectivity in evaluating management’s fair value estimates and purchase price allocations.

The primary procedures we performed to address this critical audit matter included:

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•Obtained and read the executed Agreement and Plan of Merger documents to gain an understanding of the underlying terms of the consummated acquisition;

•Testing the design and operating effectiveness of controls including:

◦Evaluating the significant assumptions used for valuing significant assets and liabilities assumed;

•Assessed management’s application of accounting guidance related to the business combination and management’s determination of whether the transaction was an acquisition of a business as defined within the ASC 805, Business Combinations, framework;

•Assessed the completeness and accuracy of management’s purchase accounting model, including the balance sheet acquired and related fair value purchase price allocations made to identified assets acquired and liabilities assumed;

•Obtained and evaluated significant outside vendor valuation estimates, and challenging management’s review of the appropriateness of the valuations including but not limited to, testing critical inputs, assumptions applied and valuation models utilized by the outside vendors;

•Utilized internal valuation specialists to assist with testing the related fair value estimates;

•Tested the completeness and accuracy of management’s calculation of total consideration paid;

•Tested the accuracy of the goodwill calculation resulting from the acquisition, which was the difference between the total consideration paid and the fair value of the net assets acquired;

•Read and evaluated the adequacy of the disclosures made in the notes to the Company’s consolidated financial statements.

/s/ FORVIS, LLP

We have served as the Company’s auditorsauditor since 1996.

Columbus,2021.

Jackson, Mississippi

March 16, 2018

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February 29, 2024

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THE FIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 20172023 AND 2016

		2017				2016
ASSETS
Cash and due from banks		$	42,980,353			$	31,719,187
Interest-bearing deposits with banks			48,466,424				29,974,698
Federal funds sold			475,000				425,000
Total cash and cash equivalents			91,921,777				62,118,885
Held-to-maturity securities (fair value of $7,397,966 in 2017 and $7,393,828 in 2016)			6,000,000				6,000,000
Available-for-sale securities			356,893,081				243,205,963
Other securities			9,969,200				6,592,750
Total securities			372,862,281				255,798,713
Loans held for sale			4,790,049				5,879,884
Loans, net of allowance for loan losses of $8,288,009 in 2017 and $7,510,314 in 2016			1,217,017,663				859,543,789
Interest receivable			6,704,915				4,358,098
Premises and equipment			46,426,031				34,624,352
Cash surrender value of life insurance			27,053,909				21,250,476
Goodwill			19,959,849				13,776,040
Other real estate owned			7,158,409				6,007,621
Other assets			19,343,560				14,009,388
Total assets		$	1,813,238,443			$	1,277,367,246
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest-bearing		$	301,988,781			$	202,478,442
Interest-bearing			1,168,575,736				836,712,820
Total deposits			1,470,564,517				1,039,191,262
Interest payable			353,143				306,080
Borrowed funds			104,072,294				69,000,000
Subordinated debentures			10,310,000				10,310,000
Other liabilities			5,470,569				4,033,197
Total liabilities			1,590,770,523				1,122,840,539
Stockholders’ Equity:
Common stock, par value $1 per share: 20,000,000 shares authorized; 11,192,401 shares issued in 2017, and 9,017,891 shares issued in 2016, respectively			11,192,401				9,017,891
Additional paid-in capital			158,455,979				102,574,159
Retained earnings			53,720,927				44,476,386
Accumulated other comprehensive income (loss)			(437,742	)			(1,078,084	)
Treasury stock, at cost			(463,645	)			(463,645	)
Total stockholders’ equity			222,467,920				154,526,707
Total liabilities and stockholders’ equity		$	1,813,238,443			$	1,277,367,246

2022

($ in thousands except per share data)

			2023						2022
ASSETS
Cash and due from banks			$	224,199					$	67,176
Interest-bearing deposits with banks			130,948						78,139
Total cash and cash equivalents			355,147						145,315
Securities available-for-sale, at fair value (amortized cost: $1,164,227 in 2023; $1,418,337 in 2022; allowance for credit losses: $0 in both 2023 and 2022)			1,042,365						1,257,101
Securities held to maturity, net of allowance for credit losses of $0 (fair value: $615,944 - 2023; $642,097 - 2022)			654,539						691,484
Other securities			37,754						33,944
Total securities			1,734,658						1,982,529
Loans held for sale			2,914						4,443
Loans, net of ACL of $54,032 in 2023 and $38,917 in 2022			5,116,010						3,735,240
Interest receivable			33,300						27,723
Premises and equipment			174,309						143,518
Operating lease right-of-use assets			6,387						7,620
Finance lease right-of-use assets			1,466						1,930
Cash surrender value of life insurance			134,249						95,571
Goodwill			272,520						180,254
Other real estate owned			8,320						4,832
Other assets			160,065						132,742
Total assets			$	7,999,345					$	6,461,717
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest-bearing			$	1,849,013					$	1,630,203
Interest-bearing			4,613,859						3,864,201
Total deposits			6,462,872						5,494,404
Interest payable			22,702						3,324
Borrowed funds			390,000						130,100
Subordinated debentures			123,386						145,027
Operating lease liabilities			6,550						7,810
Finance lease liabilities			1,739						1,918
Allowance for credit losses on off-balance sheet credit exposures			2,075						1,325
Other liabilities			40,987						31,146
Total liabilities			7,050,311						5,815,054
Stockholders’ Equity:
Common stock, par value $1 per share: 80,000,000 shares authorized; 32,338,983 shares issued in 2023, 40,000,000 shares authorized, and 25,275,369 shares issued in 2022, respectively			32,339						25,275
Additional paid-in capital			775,232						558,833
Retained earnings			300,150						252,623
Accumulated other comprehensive (loss) income			(117,576)						(148,957)
Treasury stock, at cost (1,249,607 shares - 2023; 1,249,607 shares - 2022)			(41,111)						(41,111)
Total stockholders' equity			949,034						646,663
Total liabilities and stockholders' equity			$	7,999,345					$	6,461,717

The accompanying notes are an integral part of these statements.

55

64

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2017, 2016,2023, 2022, AND 2015

		2017				2016				2015
INTEREST INCOME
Interest and fees on loans		$	56,826,566			$	38,495,909			$	34,242,067
Interest and dividends on securities:
Taxable interest and dividends			6,340,610				4,052,162				3,948,459
Tax-exempt interest			2,349,889				1,869,644				1,854,213
Interest on federal funds sold			389,881				126,833				63,841
Interest on deposits in banks			162,467				59,449				93,276
Total interest income			66,069,413				44,603,997				40,201,856
INTEREST EXPENSE
Interest on deposits			5,261,318				3,443,812				2,562,241
Interest on borrowed funds			1,647,933				871,523				645,207
Total interest expense			6,909,251				4,315,335				3,207,448
Net interest income			59,160,162				40,288,662				36,994,408
Provision for loan losses			505,653				625,271				410,069
Net interest income after provision for loan losses			58,654,509				39,663,391				36,584,339
OTHER INCOME
Service charges on deposit accounts			7,358,531				5,125,846				5,013,983
Other service charges and fees			623,706				531,162				470,842
Secondary market mortgage income			4,501,618				4,432,705				1,075,118
Bank owned life insurance income			738,659				528,734				408,535
Gain (Loss) on sale of premises			(22,123	)			(51,838	)			133,339
Securities gains (losses)			(15,889	)			126,286				-
Loss on sale of other real estate			(198,296	)			(113,755	)			(246,859	)
Other			1,376,906				668,194				733,574
Total other income			14,363,112				11,247,334				7,588,532
OTHER EXPENSE
Salaries			25,828,269				17,880,844				15,089,136
Employee benefits			4,719,821				4,255,690				3,447,367
Occupancy			4,827,711				3,459,206				3,422,116
Furniture and equipment			1,224,655				1,261,506				1,198,930
Supplies and printing			640,171				286,880				300,022
Professional and consulting fees			6,756,847				1,805,420				1,331,928
Marketing and public relations			405,552				465,344				496,638
FDIC and OCC assessments			1,252,434				1,019,668				965,642
ATM expense			1,187,614				882,657				763,248
Bank communications			1,295,932				782,024				631,261
Data processing			1,039,210				534,648				150,394
Other			6,268,117				4,227,812				4,364,440
Total other expense			55,446,333				36,861,699				32,161,122

56

2021

($ in thousands, except per share amount)

			2023						2022						2021
INTEREST INCOME
Interest and fees on loans			$	294,541					$	157,768					$	151,203
Interest and dividends on securities:
Taxable interest and dividends			32,202						29,656						16,685
Tax-exempt interest			11,737						11,017						7,721
Interest on deposits in banks			2,453						1,952						1,136
Total interest income			340,933						200,393						176,745
INTEREST EXPENSE
Interest on deposits			71,359						13,978						12,062
Interest on borrowed funds			20,249						8,599						7,619
Total interest expense			91,608						22,577						19,681
Net interest income			249,325						177,816						157,064
Provision for credit losses, LHFI			13,750						5,350						(1,456)
Provision for credit losses, OBSC exposures			750						255						352
Net interest income after provision for credit losses			234,825						172,211						158,168
NON-INTEREST INCOME
Service charges on deposit accounts			14,175						8,668						7,264
Other service charges and fees			3,177						1,833						1,508
Interchange fees			18,914						12,702						11,562
Secondary market mortgage income			2,866						4,303						8,823
Bank owned life insurance income			3,319						2,101						1,955
BOLI death proceeds			—						1,630						—
Gain (loss) on sale of premises			35						(116)						(264)
Securities (loss) gain			(9,716)						(82)						143
Gain (loss) on sale of other real estate			6						214						(300)
Government awards/grants			6,197						873						1,826
Bargain purchase gain			—						281						1,300
Other			7,732						4,554						3,656
Total non-interest income			46,705						36,961						37,473
NON-INTEREST EXPENSE
Salaries			76,609						57,903						53,371
Employee benefits			16,803						15,174						12,485
Occupancy			17,381						12,854						12,713
Furniture and equipment			3,987						2,981						2,848
Supplies and printing			1,240						967						903
Professional and consulting fees			6,446						3,558						4,035
Marketing and public relations			833						393						615
FDIC and OCC assessments			3,849						2,122						2,074
ATM expense			5,821						3,873						3,623
Bank communications			3,579						1,904						1,754
Data processing			2,771						2,211						1,578
Acquisition expense/charter conversion			9,075						6,410						1,607
Other			36,332						20,133						16,953
Total non-interest expense			184,726						130,483						114,559

65

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2017, 2016,2023, 2022, AND 2015

Continued:		2017				2016				2015
Income before income taxes		$	17,571,288			$	14,049,026			$	12,011,749
Income taxes			6,954,812				3,930,339				3,213,047
Net income			10,616,476				10,118,687				8,798,702
Preferred dividends and stock accretion			-				452,305				342,460
Net income applicable to common stockholders		$	10.616,476			$	9,666,382			$	8,456,242
Net income per share:
Basic		$	1.12			$	1.86			$	1.64
Diluted			1.11				1.64				1.62
Net income applicable to common stockholders:
Basic		$	1.12			$	1.78			$	1.57
Diluted			1.11				1.57				1.55

2021

($ in thousands, except per share amount)

Continued:
			2023						2022						2021
Income before income taxes			$	96,804					$	78,689					$	81,082
Income taxes			21,347						15,770						16,915
Net income available to common stockholders			$	75,457					$	62,919					$	64,167
Earnings per share:
Basic			$	2.41					$	2.86					$	3.05
Diluted			2.39						2.84						3.03

The accompanying notes are an integral part of these statements.

57

66

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(LOSS)

YEARS ENDED DECEMBER 31, 2017, 2016,2023, 2022, AND 2015

		2017				2016				2015
Net income		$	10,616,476			$	10,118,687			$	8,798,702
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding gains (losses) arising during the period on available-for-sale securities			1,080,344				(3,315,089	)			(1,093,182	)
Reclassification adjustment for (gains) losses included net income			15,889				(126,286	)			-
Unrealized holding gains (losses) arising during the period on available-for-sale securities			1,096,233				(3,441,375	)			(1,093,182	)
Unrealized holding gains (losses) on loans held for Sale			79,759				(99,283	)			2,753
Income tax benefit (expense)			(459,522	)			1,363,987				370,655
Other comprehensive income (loss)			716,470				(2,176,671	)			(719,774	)
Comprehensive income		$	11,332,946			$	7,942,016			$	8,078,928

2021

($ in thousands)			2023						2022						2021
Net income			$	75,457					$	62,919					$	64,167
Other comprehensive income (loss):
Unrealized holding gain/(loss) arising during the period on available-for-sale securities			31,921						(173,428)						(23,738)
Net unrealized loss at time of transfer on securities available-for-sale transferred to held-to-maturity			—						(36,838)						—
Reclassification adjustment for (accretion) amortization of unrealized holdings gain/(loss) included in accumulated other comprehensive income from the transfer of securities available-for-sale to held-to-maturity			372						97						—
Reclassification adjustment for loss/(gains) included in net income			9,716						82						(143)
Unrealized holding gain/(loss) arising during the period on available-for-sale securities			42,009						(210,087)						(23,881)
Income tax (expense) benefit			(10,628)						53,152						6,043
Other comprehensive income (loss)			31,381						(156,935)						(17,838)
Comprehensive income (loss)			$	106,838					$	(94,016)					$	46,329

The accompanying notes are an integral part of these statements.

58

67

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'STOCKHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2017, 2016,2021, 2022 AND 2015

		Common Stock				Preferred Stock				Stock Warrants				Additional Paid-in Capital				Retained Earnings				Accum- ulated Other Compre- hensive Income (Loss)				Treasury Stock				Total
Balance, January 1, 2015		$	5,342,670			$	17,123,000			$	283,738			$	44,136,411			$	27,975,049			$	1,818,361			$	(463,645	)		$	96,215,584
Net income 2015			-				-				-				-				8,798,702				-				-				8,798,702
Other comprehensive loss			-				-				-				-				-				(719,774	)			-				(719,774	)
Dividends on preferred stock			-				-				-				-				(342,460	)			-				-				(342,460	)
Cash dividend declared, $.15 per common share			-				-				-				-				(806,576	)			-				-				(806,576	)
Grant of restricted stock			69,327				-				-				(69,327	)			-				-				-				-
Compensation cost on restricted stock			-				-				-				721,124				-				-				-				721,124
Repurchase of restricted stock for payment of taxes			(6,324	)			-				-				(86,066	)			-				-				-				(92,390	)
Adjustment to consideration issued in BCB Holding acquisition			(2,514	)			-				-				(33,196	)			-				-				-				(35,710	)
Repurchase warrants			-				-				(283,738	)			(18,672	)			-				-				-				(302,410	)
Balance, December 31, 2015		$	5,403,159			$	17,123,000			$	-			$	44,650,274			$	35,624,715			$	1,098,587			$	(463,645	)		$	103,436,090
Net income 2016			-				-				-				-				10,118,687				-				-				10,118,687
Other comprehensive loss			-				-				-				-				-				(2,176,671	)			-				(2,176,671	)

59

2023

($ in thousands except per share amount)

			Common Stock												Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Treasury Stock												Total
			Shares						Amount																								Shares						Amount
Balance, January 1, 2021			21,598,993						$	21,599					$	456,919					$	154,241					$	25,816					(483,984)						$	(13,760)					$	644,815
Net income, 2021			—						—						—						64,167						—																		64,167
Common stock repurchased			—						—						—						—						—						(165,623)						(5,171)						(5,171)
Other comprehensive loss			—						—						—						—						(17,838)						—						—						(17,838)
Dividend on common stock, $.58 per common share			—						—						—						(12,180)						—						—						—						(12,180)
Issuance restricted stock grant			93,578						94						(94)						—						—						—						—						—
Restricted stock grant forfeited			(2,021)						(2)						2						—						—						—						—						—
Compensation expense			—						—						3,100						—						—						—						—						3,100
Repurchase of restricted stock for payment of taxes			(21,906)						(22)						(699)						—						—						—						—						(721)
Balance, December 31, 2021			21,668,644						$	21,669					$	459,228					$	206,228					$	7,978					(649,607)						$	(18,931)					$	676,172
Net income, 2022			—						—						—						62,919						—						—						—						62,919
Common stock repurchased			—						—						—						—						—						(600,000)						(22,180)						(22,180)
Other comprehensive loss			—						—						—						—						(156,935)						—						—						(156,935)
Dividend on common stock, $.74 per common share			—						—						—						(16,524)						—						—						—						(16,524)
Issuance of common shares for BBI acquisition			3,498,936						3,499						97,970						—						—						—						—						101,469
Issuance restricted stock grant			129,950						130						(130)						—						—						—						—						—
Restricted stock grant forfeited			(2,500)						(3)						3						—						—						—						—						—
Compensation expense			—						—						2,425						—						—						—						—						2,425
Repurchase of restricted stock for payment of taxes			(19,661)						(20)						(663)						—						—						—						—						(683)
Balance, December 31, 2022			25,275,369						$	25,275					$	558,833					$	252,623					$	(148,957)					(1,249,607)						$	(41,111)					$	646,663
Net income, 2023			—						—						—						75,457						—						—						—						75,457
Other comprehensive income			—						—						—						—						31,381						—						—						31,381
Dividend on common stock, $.90 per common share			—						—						—						(27,930)						—						—						—						(27,930)
Issuance of common shares for HSBI acquisition			6,920,422						6,920						214,602						—						—						—						—						221,522
Issuance restricted stock grant			167,173						167						(167)						—						—						—						—						—
Restricted stock grant forfeited			(12,194)						(12)						12						—						—						—						—						—
Compensation expense			—						—						2,302						—						—						—						—						2,302
Repurchase of restricted stock for payment of taxes			(11,787)						(11)						(350)						—						—						—						—						(361)
Balance, December 31, 2023			32,338,983						$	32,339					$	775,232					$	300,150					$	(117,576)					(1,249,607)						$	(41,111)					$	949,034

See Notes to Consolidated Financial Statements

68

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

CASH FLOWS

YEARS ENDED DECEMBER 31, 2017, 2016,2023, 2022 AND 2015

Continued:
		Common Stock				Preferred Stock				Stock Warrants				Additional Paid-in Capital				Retained Earnings				Accum- ulated Other Compre- hensive Income (Loss)				Treasury Stock				Total
Dividends on preferred stock			-				-				-				-				(452,305	)			-				-				(452,305	)
Cash dividend declared, $.15 per common share			-				-				-				-				(814,711	)			-				-				(814,711	)
Grant of restricted stock			61,247				-				-				(61,247	)			-				-				-				-
Compensation cost on restricted stock			-				-				-				772,311				-				-				-				772,311
Repurchase of restricted stock for payment of taxes			(9,895	)			-				-				(166,217	)			-				-				-				(176,112	)
Repayment of CDCI preferred shares			-				(17,123,000	)			-				1,198,000				-				-				-				(15,925,000	)
Issuance of Preferred Stock, Series E			-				63,249,996				-				-				-				-				-				63,249,996
Conversion of Preferred, Series E to common			3,563,380				(63,249,996	)			-				59,686,616				-				-				-				-
Costs associated with capital raise			-				-				-				(3,505,578	)			-				-				-				(3,505,578	)
Balance, December 31, 2016		$	9,017,891			$	-			$	-			$	102,574,159			$	44,476,386			$	(1,078,084	)		$	(463,645	)		$	154,526,707
Net income, 2017			-				-				-				-				10,616,476				-				-				10,616,476
Other comprehensive Income			-				-				-				-				-				716,470				-				716,470

60

2021

($ in thousands)			2023						2022						2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income			$	75,457					$	62,919					$	64,167
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			12,099						12,173						13,792
FHLB stock dividends			(355)						(28)						(27)
Provision for credit losses			14,500						5,605						(1,104)
Deferred income taxes			7,006						940						1,739
Restricted stock expense			2,302						2,425						3,100
Increase in cash value of life insurance			(3,319)						(2,101)						(1,955)
Amortization and accretion, net, related to acquisitions			(4,432)						1,706						(30)
Bank premises and equipment loss/(gain)			(35)						116						264
Acquisition gain			—						(281)						(1,300)
Securities loss (gain)			9,716						82						(143)
Loss on sale/writedown of other real estate			774						159						815
Residential loans originated and held for sale			(91,786)						(152,776)						(230,456)
Proceeds from sale of residential loans held for sale			93,315						156,011						244,210
Changes in:
Interest receivable			(1,228)						(2,987)						3,218
Other assets			16,086						(45,692)						(1,056)
Interest payable			19,378						1,613						(463)
Operating lease liability			(1,260)						(1,306)						(1,839)
Other liabilities			(39,710)						51,449						2,783
Net cash provided by operating activities			108,508						90,027						95,715
CASH FLOWS FROM INVESTING ACTIVITIES
Available-for-sale securities:
Sales			285,793						21,069						—
Maturities, prepayments, and calls			132,919						197,417						229,091
Purchases			(8,473)						(6,500)						(988,536)
Held-to-maturity securities:
Maturities, prepayments, and calls			40,469						474						—
Purchases			—						(602,718)						—
Purchases of other securities			(17,094)						(11,444)						—
Proceeds from redemption of other securities			14,466						1,237						5,276
Net (increase)/decrease in loans			(227,896)						(326,113)						202,194
Net changes to premises and equipment			(3,688)						(15,522)						(7,125)
Bank-owned life insurance - death proceeds			221						1,630						—
Purchase of bank owned life insurance			—						—						(11,733)
Proceeds from sale of other real estate owned			3,069						8,930						4,562
Proceeds from sale of land			1,416						712						—
Cash received in excess of cash paid for acquisition			106,793						23,939						358,916
Net cash provided by (used in) investing activities			327,995						(706,889)						(207,355)

69

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

CASH FLOWS

YEARS ENDED DECEMBER 31, 2017, 2016, and 2015

Continued:
		Common Stock				Preferred Stock				Stock Warrants				Additional Paid-in Capital				Retained Earnings				Accum- ulated Other Compre- hensive Income (Loss)				Treasury Stock				Total
Reclassification of accumulated other comprehensive income due to statutory tax changes			-				-				-				-				76,128				(76,128	)			-				-
Cash dividend declared, $.15 per common share			-				-				-				-				(1,448,063	)			-				-				(1,448,063	)
Issuance of common shares			2,012,500				-				-				56,350,000				-				-				-				58,362,500
Costs associated with capital raise			-				-				-				(3,091,875	)			-				-				-				(3,091,875	)
Repurchase of restricted stock for payment of taxes			(11,867	)			-				-				(317,720	)			-				-				-				(329,587	)
Grant of restricted stock			84,286				-				-				(84,286	)			-				-				-				-
Compensation cost on restricted stock			-				-				-				866,558				-				-				-				866,558
Issuance of shares for GCCB acquisition			89,591				-				-				2,159,143				-				-				-				2,248,734
Balance, December 31, 2017		$	11,192,401			$	-			$	-			$	158,455,979			$	53,720,927			$	(437,742	)		$	(463,645	)		$	222,467,920

2023, 2022 AND 2021

Continued:
			2023						2022						2021
CASH FLOWS FROM FINANCING ACTIVITIES
Increase/(decrease) in deposits			(427,481)						(223,322)						601,575
Proceeds from borrowed funds			7,600,043						2,055,401						—
Repayment of borrowed funds			(7,340,143)						(1,950,301)						(114,647)
Dividends paid on common stock			(27,550)						(16,275)						(11,991)
Cash paid to repurchase common stock			—						(22,180)						(5,171)
Repurchase of restricted stock for payment of taxes			(361)						(683)						(721)
Principal payment on finance lease liabilities			(179)						(176)						(187)
Payment on subordinated debt issuance costs			—						—						(59)
Called/repayment of subordinated debt			(31,000)						—						—
Net cash (used in) provided by financing activities			(226,671)						(157,536)						468,799
Net change in cash and cash equivalents			209,832						(774,398)						357,159
Cash and cash equivalents at beginning of year			145,315						919,713						562,554
Cash and cash equivalents at end of year			$	355,147					$	145,315					$	919,713
Supplemental disclosures:
Cash paid during the year for:
Interest			$	51,101					$	16,932					$	16,368
Income taxes, net of refunds			16,084						7,194						15,717
Non-cash activities:
Transfers of loans to other real estate			6,602						2,560						2,143
Transfer of securities available-for-sale to held-to-maturity			—						139,598						—
Issuance of restricted stock grants			168						130						94
Stock issued in connection with BBI acquisition			—						101,469						—
Stock issued in connection with HSBI acquisition			221,522						—						—
Dividends on restricted stock grants			380						249						189
Right-of-use assets obtained in exchange for operating lease liabilities			817						2,698						168
Lease liabilities arising from BBI acquisition			—						3,390						—
Lease liabilities arising from HSBI acquisition			184						—						—

The accompanying notes are an integral part of these statements.

61

70

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THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

		2017				2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	10,616,476			$	10,118,687			$	8,798,702
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,902,328				2,302,163				2,296,985
FHLB Stock dividends			(54,400	)			(37,700	)			(8,600	)
Provision for loan losses			505,653				625,271				410,069
Deferred income taxes			6,445,865				(10,352	)			255,638
Restricted stock expense			866,558				772,311				721,124
Increase in cash value of life insurance			(738,659	)			(528,734	)			(408,535	)
Amortization and accretion, net, related to acquisitions			1,736,818				629,304				921,853
Loss/ (Gain) on sale of land/bank premises/ equipment			22,123				51,838				(133,339	)
Securities gains (losses)			15,889				(126,286	)			-
Loss on sale/writedown of other real estate			891,617				244,466				386,590
Changes in:
Loans held for sale			1,169,594				(2,005,402	)			(1,867,661	)
Interest receivable			(714,501	)			(404,760	)			(294,332	)
Other assets			1,837,728				(3,553,728	)			(2,055,005	)
Interest payable			29,826				60,348				(70,112	)
Other liabilities			(3,934,866	)			(121,118	)			(1,406,347	)
Net cash provided by operating activities			21,598,049				8,016,308				7,547,030
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities			(89,196,412	)			(53,403,251	)			(29,571,287	)
Purchases of other securities			(2,890,850	)			(1,433,100	)			(4,079,400	)
Proceeds from maturities and calls of available- for-sale securities			57,995,529				45,296,821				42,569,677
Proceeds from maturities and calls of held-to- maturity securities			-				1,094,138				1,099,898
Proceeds from sales of securities available-for- sale			7,731,444				250,000				-
Proceeds from redemption of other securities			682,100				3,012,900				3,187,500
Increase in loans			(121,437,376	)			(98,560,749	)			(68,588,377	)
Net additions to premises and equipment			(4,675,400	)			(2,706,842	)			(1,230,531	)
Purchase of bank owned life insurance			(468,834	)			(5,850,000	)			-
Proceeds from sale of land/bank premises			-				-				949,516
Proceeds from sale of other real estate owned			6,945,936				1,560,773				2,190,625
Cash received (paid) in excess of cash paid for acquisition			3,910,489				-				(843,895	)
Net cash used in investing activities			(141,403,374	)			(110,739,310	)			(54,316,274	)

The accompanying notes are an integral part of these statements.

62

THE FIRST BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

Continued:
		2017				2016				2015
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits			75,916,176				122,496,150				24,090,591
Proceeds from borrowed funds			198,800,000				252,000,000				194,340,000
Repayment of borrowed funds			(173,633,473	)			(293,321,245	)			(173,468,821	)
Dividends paid on common stock			(1,415,524	)			(782,936	)			(778,428	)
Dividends paid on preferred stock			-				(452,305	)			(342,460	)
Repurchase of shares issued in BCB acquisition			-				-				(35,710	)
Net proceeds from issuance of stock			55,270,625				59,744,418				-
Repayment of CDCI Preferred shares			-				(15,925,000	)			-
Repurchase of warrants			-				-				(302,410	)
Repurchase of restricted stock for payment of taxes			(329,587	)			(176,112	)			(92,390	)
Repayment of repurchase agreement			(5,000,000	)			-				-
Net cash provided by financing activities			149,608,217				123,582,970				43,410,372
Net increase (decrease) in cash and cash equivalents			29,802,892				20,859,968				(3,358,872	)
Cash and cash equivalents at beginning of year			62,118,885				41,258,917				44,617,789
Cash and cash equivalents at end of year		$	91,921,777			$	62,118,885			$	41,258,917
Supplemental disclosures:
Cash paid during the year for:
Interest		$	7,053,879			$	4,254,987			$	3,448,525
Income taxes, net of refunds			354,200				4,725,814				4,152,050
Non-cash activities:
Transfers of loans to other real estate			999,502				4,722,529				1,050,342
Issuance of restricted stock grants			84,286				61,247				69,327
Stock issued in connection with Gulf Coast Community Bank			2,248,734				-				-

The accompanying notes are an integral part of these statements.

63

THE FIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - NATURE OF BUSINESS

The First Bancshares, Inc. (the “Company”) is a bank holding company whose business is primarily conducted by its wholly-owned subsidiary, The First Bank (the “Bank”), formerly known as The First, A National Banking Association (the “Bank”).Association. The Bank provides a full range of banking services in its primary market area of Mississippi, Louisiana, Alabama, Florida, and Florida.Georgia. The Company is regulated by the Federal Reserve Bank. Its subsidiary bank is currently subject to the regulation of the OfficeFederal Reserve Bank and the Mississippi Department of Banking and Consumer Finance, and was previously subject to the regulation of the ComptrollerOCC.

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 Currency (OCC).

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.

The principal products produced, and services rendered by the Company and are as follows:

Commercial Banking - The Company provides a full range of commercial banking services to corporations and other business customers. Loans are provided for a variety of general corporate purposes, including financing for commercial and industrial projects, income producing commercial real estate, owner-occupied real estate and construction and land development. The Company also provides deposit services, including checking, savings and money market accounts and certificate of deposit as well as treasury management services.

Consumer Banking - The Company provides banking services to consumers, including checking, savings, and money market accounts as well as certificate of deposit and individual retirement accounts. In addition, the Company provides consumers with installment and real estate loans and lines of credit.

Mortgage Banking - The Company provides residential mortgage banking services, including construction financing, for conventional and government insured home loans to be sold in the secondary market.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company and the Bank follow accounting principles generally accepted in the United States of America including, where applicable, general practices within the banking industry.

1.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated.

2.

Estimates

eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loancredit losses, acquisition accounting, intangible assets, and deferred tax assets.

3.

Cash and Due From Banks

Includedassets, and fair value of financial instruments.

Debt Securities

Investments in cash and due from banks are legal reserve requirements which must be maintained on an average basis in the form of cash and balances due from the Federal Reserve. The reserve balance varies depending upon the types and amounts of deposits. At December 31, 2017, the required reserve balance on deposit with the Federal Reserve Bank was approximately $29.7 million.

4.

Securities

Investments indebt securities are accounted for as follows:

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Available-for-Sale Securities

Securities

Debt securities classified as available-for-sale ("AFS") are those securities that are intended to be held for an indefinite period of time, but not necessarily to maturity. Any decision to sell a security classified as available-for-sale would be based on various factors, including movements in interest rates, liquidity needs, security risk assessments, changes in the mix of assets and liabilities and other similar factors. These securities are carried at their estimated fair value, and the net unrealized gain or loss is reported net of tax, as a component of accumulated other comprehensive income (loss), net of tax, in stockholders'stockholders’ equity, until realized. Premiums and discounts are recognized in interest income using the interest method. The Company evaluates all securities quarterly to determine if any securities in a loss position require a provision for credit losses in accordance with ASC 326, Measurement of Credit Losses on Financial Instruments. Gains and losses on the sale of available-for-sale securities are determined using the adjusted cost of the specific security sold.

AFS securities are placed on nonaccrual status at the time any principal to interest payments become 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to AFS securities reversed against interest income for the years ended December 31, 2023, 2022, and 2021.

Allowance for Credit Losses – Available-for-Sale Securities

For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell or is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet these criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance when management believes the uncollectability of a security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable is excluded from the estimate of credit losses for securities AFS.

Securities to be Held-to-Maturity

Securities

Debt securities classified as held-to-maturity ("HTM") are those securities for which there is a positive intent and ability to hold to maturity. These securities are carried at cost adjusted for amortization of premiums and accretion of discounts, computed by the interest method.

Gain and losses on the sales are determined using the adjusted cost of the specific security sold. HTM securities are placed on nonaccrual status at the time any principal to interest payments become 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a security placed on nonaccrual is reversed against interest income. There was no accrued interest related to HTM securities reversed against interest income for the years ended December 31, 2023, 2022, and 2021.

Allowance for Credit Losses – Held-to-Maturity Securities

Management measures expected credit losses on HTM debt securities on a pooled basis. That is, for pools of such securities with common risk characteristics, the historical lifetime probability of default and severity of loss in the event of default is derived or obtained from external sources and adjusted for the expected effects of reasonable and supportable forecasts over the expected lives of the securities.

Expected credit losses on each security in the HTM portfolio that does not share common risk characteristics with any of the identified pools of debt securities are individually measured based on net realizable value, of the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the recorded amortized cost basis of the security.

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Loss forecasts for HTM debt securities utilize Moody's municipal and corporate database, based on a scenario-conditioned probability of default and loss rate platform. The core of the stressed default probabilities and loss rates is based on the methodological relationship between key macroeconomic risk factors and historical defaults over nearly 50 years. Loss forecasts for structured HTM securities utilize VeriBanc's Estimated CAMELS Rating and the Modified Texas Ratio for each piece of underlying collateral and are applied to Intex models for the underlying assets cashflow resulting in collateral cashflow forecasts. These securities are assumed not to share similar risk characteristics due to the heterogeneous nature of the underlying collateral. As a result of this evaluation, management determined that the expected credit losses associated with these securities is not significant for financial reporting purposes and therefore, no allowance for credit losses has been recognized during the years ended December 31, 2023 and 2022.

Accrued interest receivable is excluded from the estimate of credit losses for securities HTM.

Trading Account Securities

Trading account securities are those securities which are held for the purpose of selling them at a profit. There were no trading account securities on hand at December 31, 20172023 and 2016.

64

2022.

Equity Securities

Equity securities are carried at fair value, with changes in fair value reported in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment. There were no equity securities at December 31, 2023 and 2022.

Other Securities

Other securities are carried at cost and are restricted in marketability. Other securities consist of investments in the Federal Home Loan Bank (FHLB),FHLB, Federal Reserve Bank and First National Bankers’ Bankshares, Inc. Management reviews for impairment based on the ultimate recoverability of the cost basis.

Other-than-Temporary Impairment

Management evaluates

Shares of FHLB, Federal Reserve Bank and First National Bankers’ Bankshares, Inc. common stock are equity securities that do not have a readily determinable fair value because their ownership is restricted and lacks marketability. The common stock is carried at cost and evaluated for impairment. The Company’s investment in member bank stock is included in other securities for other-than-temporary impairment on a quarterly basis. A decline in the fair valueaccompanying consolidated balance sheets. Management reviews for impairment based on the ultimate recoverability of available-for-salethe cost basis. No impairment was noted for the years ended December 31, 2023, 2022 and held-to-maturity2021.

Interest Income

Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities below cost thatare amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

A debt security is deemed other-than-temporary is charged to earningsplaced on nonaccrual status at the time any principal or interest payments become 90 days past due. Interest accrued but not received for a declinesecurity placed in value deemed to be credit related and a new cost basisnonaccrual is reversed against interest income.

Loans Held for the security is established. The decline in value attributed to non-credit related factors is recognized in accumulated other comprehensive income (loss).

5.

Loans held for sale

Sale (LHFS)

The Bank originates fixed rate single family, residential first mortgage loans on a presold basis. The Bank issues a rate lock commitment to a customer and concurrently “locks in” with a secondary market investor under a best efforts delivery mechanism. Such loans are sold without the mortgage servicing rights being retained by the Bank. The terms of the loan are dictated by the secondary investors and are transferred within several weeks of the Bank initially funding the loan. The Bank recognizes certain origination fees and service release fees upon the sale, which are included in other income on loans in the consolidated statements of income. Between the initial funding of the loans by the Bank and the subsequent purchase by the investor, the Bank carries the loans held for sale at the lower of cost or fair value in the aggregate as determined by the outstanding commitments from investors.

6.

Loans

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Loans Held for Investment (LHFI)

LHFI that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are carried at the principal amount outstanding, net of the allowance for loan losses.credit losses, unearned income, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income on loans is recognized based on the principal balance outstanding and the stated rate of the loan.loan and is excluded from the estimate of credit losses. Interest income is accrued in the unpaid principal balance. Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment of the related loan yield using the interest method.

A loan is considered impaired, in accordance with Premiums and discounts on purchased loans not deemed purchase credit deteriorated are deferred and amortized as a level yield adjustment over the impairment accounting guidance of Accounting Standards Codification (ASC) Section 310-10-35,Receivables, Subsequent Measurement, when, based upon current events and information, it is probable that the scheduled payments of principal and interest will not be collected in accordance with the contractual termsrespective term of the loan.

Under ASC 326-20-30-2, if the Bank determines that a loan agreement.does not share risk characteristics with its other financial assets, the Bank shall evaluate the financial asset for expected credit losses on an individual basis. Factors considered by management in determining impairment include payment status, collateral values, and the probability of collecting scheduled payments of principal and interest when due. Generally, impairment is measured on a loan by loan basis using the fair value of the supporting collateral.

Loans are generally placed on a non-accrualnonaccrual status, and the accrual of interest on such loan is discontinued, when principal or interest is past due ninety90 days or when specifically determined to be impaired.impaired unless the loan is well-secured and in the process of collection. When a loan is placed on non-accrualnonaccrual status, interest accrued but not received is generally reversed against interest income. If collectibilitycollectability is in doubt, cash receipts on non-accrualnonaccrual loans are used to reduce principal rather than recorded in interest income. Past due status is determined based upon contractual terms.

7.

Loans are returned to accrual status when the obligation is brought current or has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Allowance for Credit Losses (ACL) The ACL represents the estimated losses for Loan Losses

For financial reporting purposes,assets accounted for on an amortized cost basis. Expected losses are calculated using relevant information, from internal and external sources, about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the provisioncollectability of the reported amount. Historical credit loss experience provides the basis for loan losses charged to operations is based upon management'sthe estimation of expected credit losses. Adjustments to historical loss information are made for differences in current risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environment conditions, such as changes in unemployment rates, property values, or other relevant factors. Management may selectively apply external market data to subjectively adjust the amount necessary to maintainCompany’s own loss history including index or peer data. Expected losses are estimated over the allowance at an adequate level. Allowancescontractual term of the loans, adjusted for any impaired loansexpected prepayments. The contractual term excludes expected extensions, renewals, and modifications. Loans are generally determined based on collateral values. A charge is takencharged-off against the allowance for loan losses when management believes the collectibilityuncollectibility of a loan balance is confirmed and recoveries are credited to the allowance when received. Expected recoveries amounts may not exceed the aggregate of amounts previously charged-off.

The ACL is measured on a collective basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call code (segments). Segmenting loans by call code will group loans that contain similar types of collateral, purposes, and are usually structured with similar terms making each loan’s risk profile very similar to the rest in that segment. Each of these segments then flows up into one of the four bands (bands), Commercial, Financial, and Agriculture, Commercial Real Estate, Consumer Real Estate, and Consumer Installment. In accordance with the guidance in ASC 326, the Company redefined its LHFI portfolio segments and related loan principalclasses based on the level at which risk is unlikely.

Management evaluatesmonitored within the adequacyACL methodology. Construction loans for 1-4 family residential properties with a call code 1A1, and other construction, all land development and other land loans with a call code 1A2 were previously separated between the Commercial Real Estate or Consumer Real Estate bands based on loan type code. Under our ASC 326 methodology 1A1 loans are all defined as part of the Consumer Real Estate band and 1A2 loans are all defined as part of the Commercial Real Estate Band.

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The probability of default (“PD”) calculation analyzes the historical loan portfolio over the given lookback period to identify, by segment, loans that have defaulted. A default is defined as a loan that has moved to past due 90 days and greater, nonaccrual status, or experienced a charge-off during the period. The model observes loans over a 12-month window, detecting any events previously defined. This information is then used by the model to calculate annual iterative count-based PD rates for each segment. This process is then repeated for all dates within the historical data range. These averaged PDs are used for an immediate reversion back to the historical mean. The historical data used to calculate this input was captured by the Company from 2009 through the most recent quarter end.

The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the ACL on loans. The model’s calculation also includes a 24-month forecasted PD based on a regression model that calculated a comparison of the Company’s historical loan data to various national economic metrics during the same periods. The results showed the Company’s past losses having a high rate of correlation to unemployment, both regionally and nationally. Using this information, along with the most recently published Wall Street Journal survey of sixty economists’ forecasts predicting unemployment rates out over the next eight quarters, a corresponding future PD can be calculated for the forward-looking 24-month period. This data can also be used to predict loan losses at different levels of stress, including a baseline, adverse and severely adverse economic condition. After the forecast period, PD rates revert to the historical mean of the entire data set.

The loss given default (“LGD”) calculation is based on actual losses (charge-offs, net recoveries) at a loan level experienced over the entire lookback period aggregated to get a total for each segment of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. Defaults occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event. If there is not a minimum of five past defaults in a loan segment, or less than 15.0% calculated LGD rate, or the total balance at default is less than 1% of the balance in the respective call code as of the model run date, a proxy index is used. This index is proprietary to the Company’s ACL modeling vendor derived from loss data of other client institutions similar in organization structure to the Company. The vendor also provides a “crisis” index derived from loss data between the post-recessionary years of 2008-2013 that the Company uses.

The model then uses these inputs in a non-discounted version of discounted cash flow (“DCF”) methodology to calculate the quantitative portion of estimated losses. The model creates loan level amortization schedules that detail out the expected monthly payments for a loan including estimated prepayments and payoffs. These expected cash flows are discounted back to present value using the loan’s coupon rate instead of the effective interest rate. On a quarterly basis, the Company uses internal credit portfolio data, such as changes in portfolio volume and composition, underwriting practices, and levels of past due loans, nonaccruals and classified assets along with other external information not used in the quantitative calculation to determine if any subjective qualitative adjustments are required so that all significant risks are incorporated to form a sufficient basis to estimate credit losses.

ASC 326 requires that a loan be evaluated for losses individually and reserved for separately, if the loan does not share similar risk characteristics to any other loan segments. The Company’s process for determining which loans require specific evaluation follows the standard and is two-fold. All non-performing loans, including nonaccrual loans and loans considered to be purchased credit deteriorated (“PCD”), are evaluated to determine if they meet the definition of collateral dependent under the new standard. These are loans where no more payments are expected from the borrower, and foreclosure or some other collection action is probable. Secondly, all non-performing loans that are not considered to be collateral dependent but are 90 days or greater past due and/or have a balance of $500 thousand or greater, will be individually reviewed to determine if the loan displays similar risk characteristic to substandard loans in the related segment.

The Company adopted ASU No. 2022-02 effective January 1, 2023. These amendments eliminate the TDR recognition and measurement guidance and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

Prior to the adoption of ASU 2022-02, TDRs are loans for which the contractual terms on the loan have been modified and both of the following conditions exist: (1) the borrower is experiencing financial difficulty and (2) the restructuring constitutes a concession. Concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The Company assesses all loan modifications to determine whether they constitute a TDR.

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Purchased Credit Deteriorated Loans

The Company purchases individual loans and groups of loans, some of which have shown evidence of credit deterioration since origination. These PCD loans are recorded at the amount paid. It is the Company’s policy that a loan meets this definition if it is adversely risk rated as Non-Pass (Special Mention, Substandard, Doubtful or Loss) including nonaccrual. An allowance for loancredit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a regular basis. These evaluations are based upon a periodic reviewcollective basis is allocated to individual loans. The sum of the collectibility considering historical experience,loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the natureinitial amortized cost basis and the par value of the loan portfolio, underlying collateral values, internal and independent loan reviews, and prevailing economic conditions. In addition,is a noncredit discount or premium, which is amortized into interest income over the OCC, as a partlife of the regulatory examination process, reviews the loan portfolio andloan. Subsequent changes to the allowance for credit losses are recorded through provision expense.

The Company continues to maintain segments of loans that were previously accounted for under ASC 310-30 Accounting for Purchased Loans with Deteriorated Credit Quality and will continue to account for these segments as a unit of account unless the loan losses and may require changes inis collateral dependent. PCD loans that are collateral dependent will be assessed individually. Loans are only removed from the existing segments if they are written off, paid off, or sold. Upon adoption of ASC 326, the allowance based upon information available atfor credit losses was determined for each segment and added to the timeband’s carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the examination. The allowance consists of two components: allocatedsegment and unallocated. The components represent an estimation performed pursuant to either ASC Topic 450,Contingencies,the new amortized cost basis is the noncredit premium or ASC Subtopic 310-10,Receivables. The allocated componentdiscount, which will be amortized into interest income over the remaining life of the allowance reflects expected losses resulting from an analysis developed through specific credit allocations for individual loans, including any impaired loans, and historical loan loss history. The analysis is performed quarterly and loss factors are updated regularly.

The unallocated portion ofsegment. Changes to the allowance reflects management’s estimate of probable inherent but undetectedfor credit losses within the portfolio due to uncertainties in economic conditions, changes in collateral values, unfavorable information about a borrower’s financial condition,after adoption are recorded through provision expense.

Premises and other risk factors that have not yet manifested themselves. In addition, the unallocated allowance includes a component that explicitly accounts for the inherent imprecision in the loan loss analysis.

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Equipment

8.

Premises and Equipment

Premises and equipment are stated at cost, less accumulated depreciation. The depreciation policy is to provide for depreciation over the estimated useful lives of the assets using the straight-line method. Repairs and maintenance expenditures are charged to operating expenses; major expenditures for renewals and betterments are capitalized and depreciated over their estimated useful lives. Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts, and any gains or losses are included in operations.

9.

Other Real Estate Owned

Building and related components are depreciated using the straight-line method with useful lives ranging from 10 to 39 years. Furniture, fixtures, and equipment are depreciated using the straight-line (or accelerated) method with useful lives ranging from 3 to 10 years.

Other Real Estate Owned

Other real estate owned consists of properties acquired through foreclosure and as held for sale property, isare initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through similar legal agreement. These assets are subsequently accounted for at lower of the outstanding loan balancecost or current appraisalfair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operation costs after acquisition are expensed. Any write-down to fair value required at the time of foreclosure is charged to the allowance for loancredit losses. Subsequent gains or losses on other real estate are reported in other operating income or expenses. At December 31, 20172023 and 2016,2022, other real estate owned totaled $7,158,409,$8.3 million and $6,007,621,$4.8 million, respectively.

10.

Goodwill and Other Intangible Assets

Goodwill totaled $19,959,849 and $13,776,040Other Intangible Assets

Goodwill arises from business combinations and is determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of any net assets acquired and liabilities assumed as of the acquisition date. Goodwill and intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized but tested for impairment at least annually or more frequently if events and circumstances exists that indicate that a goodwill impairment test should be performed. The Company will perform a qualitative assessment to determine whether the years ended December 31, 2017, and 2016, respectively.

existence of events or circumstances leads to a determination that is more likely than not the fair value is less than the carrying amount, including goodwill. If, based on the evaluation, it is determined to be more likely than not that the fair value is less than the carrying value, then goodwill is tested further for impairment. The goodwill impairment loss, if any, is measured as the amount by which the carrying amount of the reporting unit, including goodwill, exceeds its fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements. The Commercial/Retail Bank segment of the Company is the only reporting unit for

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which the goodwill analysis is prepared. Intangible assets with a finite useful lives are amortized over their estimated useful lives to their estimated residual values. Goodwill totaling $6,183,810 was recordedis the only intangible assets with an indefinite life on our balance sheet.

The change in goodwill during the year ended December 31, 2017, was a result of the acquisitions of Iberville Bank and Gulf Coast Community Bank. See Note C – Business Combinations to these consolidated financial statements for additional information on the acquisitions during 2017.

The Company performed the required annual impairment tests of goodwill and other intangiblesis as of December 1, 2017. The Company’s annual impairment test did not indicate impairment as of the testing date, and subsequent to that date, management is not aware of any events or changes in circumstances since the impairment test that would indicate that goodwill or other intangibles might be impaired.

The Company’s acquisition method recognizedfollows:

($ in thousands)			2023						2022						2021
Beginning of year			$	180,254					$	156,663					$	156,944
Acquired goodwill and provisional adjustments			92,266						23,591						(281)
End of year			$	272,520					$	180,254					$	156,663

Other intangible assets which are subject to amortization, and included in other assets in the accompanying consolidated balance sheets, areconsist of core deposit intangibles,and acquired customer relationship intangible assets arising from whole bank and branch acquisitions and are amortized on a straight-line basis over a 10 year10-year average life. Such assets are periodically evaluated as to the recoverability of carrying values. The definite-lived intangible assets had the following carrying values at December 31, 20172023 and 2016:

		2017
(In thousands)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Core deposit intangibles		$	7,640			$	(2,930	)		$	4,710

		2016
(In thousands)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Core deposit intangibles		$	4,000			$	(2,268	)		$	1,732

2022:

($ in thousands)
2023						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Core deposit intangibles						$	99,071					$	(30,259)					$	68,812
2022
Core deposit intangibles						$	55,332					$	(20,696)					$	34,636

The related amortization expense of business combination related intangible assets is as follows:

(In thousands)
		Amount
Aggregate amortization expense for the year ended December 31:
2015		$	399
2016			383
2017			664

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($ in thousands)			Amount
Aggregate amortization expense for the year ended December 31:
2021			$	4,137
2022			4,664
2023			9,563

Continued:
		Amount
Estimated amortization expense for the year ending December 31:
2018		$	695
2019			695
2020			695
2021			625
2022			455
Thereafter			1,545
		$	4,710

11.

Other Assets and Amount Estimated amortization expense for the year ending December 31: 2024 $ 9,533  2025 9,518  2026 9,518  2027 9,185  2028 8,193  Thereafter 22,865  Total amortization expense $ 68,812  Cash Surrender Value

Financing costs related to the issuance of junior subordinated debentures are being amortized over the life of the instruments and are included in other assets. Life Insurance

The Company invests in bank owned life insurance (BOLI)(“BOLI”). BOLI involves the purchase of life insurance by the Company on a chosen group of employees. The Company is the owner of the policies and, accordingly, the cash surrender value of the policies is reported as an asset, and increases in cash surrender values are reported as income.

12.

Restricted Stock

Deferred Financing Costs

Financing costs related to the issuance of junior subordinated debentures are being amortized over the life of the instruments and are included in other liabilities.

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Restricted Stock

The Company accounts for stock basedstock-based compensation in accordance with ASC Topic 718,Compensation - Stock Compensation. Compensation cost is recognized for all restricted stock granted based on the weighted average fair value stock price at the grant date.

13.

Income Taxes

Treasury Stock

Common stock shares repurchased are recorded at cost. Cost of shares retired or reissued is determined using the first-in, first-out method.

Income Taxes

The Company and its subsidiary file consolidated income tax returns. The subsidiary provides for income taxes on a separate return basis and remits to the Company amounts determined to be payable.

Income taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently payable plus deferred taxes related primarily to differences between the bases of assets and liabilities as measured by income tax laws and their bases as reported in the financial statements. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

ASC Topic 740,Income Taxes,provides guidance on financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. ASC Topic 740 requires an evaluation of tax positions to determine if the tax positions will more likely than not be sustainable upon examination by the appropriate taxing authority. The Company, at December 31, 20172023 and 2016,2022, had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements.

14.

Advertising Costs

Advertising Costs

Advertising costs are expensed in the period in which they are incurred. Advertising expense for the years ended December 31, 2017, 20162023, 2022 and 2015,2021, was $336,450, $401,751,$833 thousand, $393 thousand, and $437,085,$391 thousand, respectively.

15.

Statements of Cash Flows

For purposes of reporting cash flows, cashCash Flows

Cash and cash equivalents include cash, amounts due from banks, interest-bearing deposits with banksother financial institutions with maturities fewer than 90 days, federal funds sold, and collateral identified as "restricted cash" related to the Company's back-to-back SWAP transactions. Net cash flows are reported for customer loan and deposit transactions, interest bearing deposits in other financial institutions, and federal funds sold. Generally, federal funds are sold for a one to seven day period.

16.

Off-Balance Sheet Financial Instruments

purchased and repurchase agreements.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the subsidiary bank enters into off-balance sheet financial instruments consisting of commitments to extend credit, credit card lines and standby letters of credit. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded in the financial statements when they are exercised.

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funded.

ACL on Off-Balance Sheet Credit (OBSC) Exposures

17.

Earnings Applicable to Common Stockholders

Under ASC 326, the Company is required to estimate expected credit losses for OBSC which are not unconditionally cancellable. The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. 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. Expected credit losses related to OBSC exposures are presented as a liability.

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Earnings Available to Common Stockholders

Per share amounts are presented in accordance with ASC Topic 260,Earnings Per Share. Under ASC Topic 260, two per share amounts are considered and presented, if applicable. 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 securities that may be converted into common stock, such as outstanding restricted stock.

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 applicableavailable to common stockholders:

For the Year Ended December 31, 2017
		Net Income (Numerator)				Shares (Denominator)				Per Share Amount
Basic per common Share		$	10,616,476				9,484,460			$	1.12
Effect of dilutive shares:
Restricted Stock							76,800
		$	10,616,476				9,561,260			$	1.11

For the Year Ended December 31, 2016
		Net Income (Numerator)				Shares (Denominator)				Per Share Amount
Basic per common Share		$	9,666,382				5,435,088			$	1.78
Convertible Preferred Dividend			133,627
Effect of dilutive shares:
Convertible Preferred, Series E							742,371
Restricted Stock							81,874
		$	9,800,009				6,259,333			$	1.57

For the Year Ended December 31, 2015
		Net Income (Numerator)				Shares (Denominator)				Per Share Amount
Basic per common share		$	8,456,242				5,371,111			$	1.57
Effect of dilutive shares:
Restricted Stock							70,939
		$	8,456,242				5,442,050			$	1.55

stockholders.

($ in thousands, except per share amount)
December 31, 2023						Net Income (Numerator)						Weighted Average Shares (Denominator)						Per Share Amount
Basic per common share						$	75,457					31,373,718						$	2.41
Effect of dilutive shares:
Restricted Stock						—						192,073
						$	75,457					31,565,791						$	2.39
December 31, 2022
Basic per common share						$	62,919					22,023,595						$	2.86
Effect of dilutive shares:
Restricted Stock						—						141,930
						$	62,919					22,165,525						$	2.84
December 31, 2021
Basic per common share						$	64,167					21,017,189						$	3.05
Effect of dilutive shares:
Restricted Stock						—						149,520
						$	64,167					21,166,709						$	3.03

The diluted per share amounts were computed by applying the treasury stock method.

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Mergers and Acquisitions

18.

Mergers and Acquisitions

Business combinations are accounted for under ASC 805, “Business Combinations”, using the acquisition method of accounting. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed at the acquisition date measured at their fair values as of that date. To determine the fair values, the Company relies on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. Under the acquisition method of accounting, the Company identifies the acquirer and the closing date and applies applicable recognition principles and conditions. Acquisition-related costs are costs the Company incurs to effectaffect a business combination. Those costs include advisory, legal, accounting, valuation, and other professional or consulting fees. Some other examples of costs to the Company include systems conversion, integration planning consultants and advertising costs. The Company accounts for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities is recognized in accordance with other applicable GAAP. These acquisition-related costs have been and will be included within the Consolidated Statements of Income classified within the non-interest expense caption.

19.

Investment in Limited Partnership

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Derivative Financial Instruments

The Company enters into interest rate swap agreements primarily to facilitate the risk management strategies of certain commercial customers. The interest rate swap agreements entered into by the Company are all entered into under what is referred to as a back-to-back interest rate swap, as such, the net positions are offsetting assets and liabilities, as well as income and expenses. All derivative instruments are recorded in the consolidated statement of financial condition at their respective fair values, as components of other assets and other liabilities. Under a back-to-back interest rate swap program, the Company enters into an interest rate swap with the customer and another offsetting swap with a counterparty. The result is two mirrored interest rate swaps, absent a credit event, which will offset in the financial statements. These swaps are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities. The change in fair value is recognized in the income statement as other income and fees.

In addition, the Company will enter into risk participation agreements that are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recorded directly through earnings at each reporting period. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower, for a fee received from the other bank.

Entering into derivative contracts potentially exposes the Company to the risk of counterparties' failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. The Company assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials.

The Company records the fair value of its interest rate swap contracts separately within other assets and other liabilities as current accounting rules do not permit the netting of customer and counterparty fair value amounts in the consolidated statement of financial condition.

Investment in Limited Partnership

The Company invested $4.4 million in a limited partner in a partnership that provides low-income housing. The Company is not the general partner and does not have controlling ownership. The carrying value of the Company’s investment in the limited partnership was $3,837,468$1.2 million at December 31, 20172023 and $4,058,801$1.6 million at December 31, 2016,2022, net of amortization, using the proportional method and is reported in other assets on the Consolidated Balance Sheets. The Company’s maximum exposure to loss is limited to the carrying value of its investment. The Company received $481,325$481 thousand in low-income housing tax credits during 2017, $160,442 in 20162023, 2022 and $0 in 2015.

20.

Reclassifications

2021.

Reclassifications

Certain reclassifications have been made to the 20162022 and 20152021 financial statements to conform with the classifications used in 2017.2023. These reclassifications did not impact the Company'sCompany’s consolidated financial condition or results of operations.

21.

Accounting Pronouncements

Accounting Standards

Effect of Recently Adopted Accounting Standards

In February, 2018,March 2020, the FASBFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2018-02,(“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 London Interbank Offer Rate ("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 Company adopted ASU 2020-04 effective January 1, 2023. Adoption of ASU 2020-04 did not have a material impact on the Company's consolidated financial statements.

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In October 2021, the 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. The Company adopted ASU 2021-08 effective January 1, 2023. Adoption of ASU 2021-08 did not have a material 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. The Company adopted ASU 2022-02 effective January 1, 2023. Adoption of ASU 2022-02 did not have a material impact on the Company's consolidated financial statements.

In July 2023, FASB issued ASU No. 2023-03, "Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): ReclassificationAmendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force ("EITF") Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Certain Tax Effects from Accumulated Other ComprehensiveRegulation S-X: Income. ASU No. 2018-02 allows for the reclassification from other comprehensive income or Loss Applicable to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the Act). The ASU also allows an accounting policy election to reclassify other stranded tax effects that relate to the Act but not directly related to the change in federal tax rate. Common Stock." This ASU is effective in the first quarter of 2019. Early adoption is permitted for reporting periods for which financial statements have not yet been issued. The Company adopted this ASU in the fourth quarter of 2017 by retrospective application. Upon adoption, the Company made a policy election to reclassify stranded tax effects of approximately $76 thousand from Accumulated Other Comprehensive Income to retained earnings using the specific identification method.

In May 2017,amends the FASB issued ASUAccounting Standards Codification for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No. 2017-09,Stock Compensation, Scope120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Modification Accounting. ASU 2017-09 clarifies when changesRegulation S-X: Income or Loss Applicable to the terms of conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification accounting guidance if any change in the value, vesting conditions or classification of the award occurs. The new guidance should reduce diversity in practiceCommon Stock. These updates were effective immediately and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to awards without accounting for them as modifications. It doesdid not change the accounting for modifications. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017; early adoption is permitted. ASU 2017-09 is not expected to have a material impact on the Company’s Consolidated Financial Statements.

Company's consolidated financial statements.

New Accounting Standards That Have Not Yet Been Adopted

In March 2017, the2023, FASB issued ASU No. 2017-08,Premium Amortization on Purchased Callable Debt Securities.2023-01, Leases (Topic 842) - "Common Control Arrangements." This ASU 2017-08 shortensrequires entities to determine whether a related party arrangement between entities under common control is a lease. If the amortization periodarrangement is determined to be a lease, an entity must classify and account for the premiumlease on certain purchased callable debt securitiesthe same basis as an arrangement with a related party. The ASU requires all entities to amortize leasehold improvements associated with common control leases over the useful life to the earliest call date. Currently, entities generally amortize the premium as an adjustment of yield over the contractual life of the security. The ASU does not change the accounting for purchased callable debt securities held at a discount as the discount will continue to be accreted to maturity. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018; early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which ASU 2017-08 is adopted. The Company is currently evaluating the provisions of ASU 2017-08 to determine the potential impact the new standard will have on its Consolidated Financial Statements.

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In January 2017, the FASB issued ASU No. 2017-04,Simplifying the Test for Goodwill Impairment.ASU 2017- 04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the amended guidance, a goodwill impairment charge will now be recognized for the amount by which the carrying value of a reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill.common control group. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for any impairment tests performed afterthe Company January 1, 2017. The Company is currently assessing the impact of ASU 2017-04 on its Consolidated Financial Statements.

In August 2016, the FASB issued ASU No. 2016-15,Classification of Certain Cash Receipts2024, and Cash Payments. Current GAAP is unclear or does not include specific guidance on how to classify certain transactions in the statement of cash flows. ASU 2016-15 is intended to reduce diversity in practice in how eight particular transactions are classified in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. Entities will be required to apply the guidance retrospectively. If it is impracticable to apply the guidance retrospectively for an issue, the amendments related to that issue would be applied prospectively. As this guidance only affects the classification within the statement of cash flows, ASU 2016-15 is not expected to have a material impact on the Company's Consolidated Financial Statements.

consolidated financial statements.

In June 2016, the Financial Accounting Standards Board (FASB)March 2023, FASB issued ASU No. 2016-13,Financial Instruments2023-02, Investments - Equity Method and Joint Venture (Topic 323): "Accounting for Investments in Tax Credit Losses (Topic 326): MeasurementStructures Using the Proportional Amortization Method." These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of Credit Losses on Financial Instruments(ASU 2016-13). ASU 2016-13 requires a new impairment model known as the current expected credit loss (“CECL”) which significantly changesprogram giving rise to the way impairment of financial instrumentsrelated income tax credits. This guidance is recognized by requiring immediate recognition of estimated credit losseseffective for the Company January 1, 2024, and is not expected to occur overhave a material impact on the remaining lifeCompany's consolidated financial statements.

In October 2023, FASB issued ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative." This ASU amends the ASC to incorporate certain disclosure requirements from SEC Release No. 33-10532 - Disclosure Update and Simplification that was issued in 2018. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-K becomes effective, with early adoption prohibited. This guidance is not expected to have a material impact on the Company's consolidated financial instruments.statements.

In November 2023, FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This ASU amends the ASC to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The main provisionskey amendments: 1. Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss. 2. Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the

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significant expenses disclosed and each reported measure of segment profit or loss. 3. Require that a public entity provide all annual disclosures about a reportable segment's profit or loss and assets currently required by FASB ASU 2016-13 include (1) replacingTopic 280, Segment Reporting, in interim periods. 4. Clarify that if the “incurred loss” approach under current GAAPCODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. However, at least one the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with an “expected loss” model for instruments measured at amortized cost, (2) requiring entities to record an allowance for credit losses related to available-for-sale debt securities rather thanthe measurement principles used in measuring the corresponding amounts in the public entity's consolidated financial statements. 5. Require that a direct write-downpublic entity disclose the title and position of the carrying amountCODM and an explanation of how the investments, as isCODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. 6. Require that a public entity has a single reportable segment provide all the disclosures required by the other-than- temporary-impairment model under current GAAP,amendments in the ASU and (3) a simplified accounting model for purchased credit-impaired debt securities and loans.all existing segment disclosures in Topic 280. This ASU 2016-13 is effective for interim and annual reporting periodsfiscal years beginning after December 15, 2019, although early adoption2023, and interim periods within fiscal years beginning after December 15, 2024. This guidance is permitted. The Company is currently assessingnot expected to have a material impact on the impact of the adoption of ASU 2016-13 on its Consolidated Financial Statements.

Company's consolidated financial statements.

In March 2016, theDecember 2023, FASB issued ASU 2016-09,Compensation – Stock CompensationNo. 2023-09, "Income Taxes (Topic 718)740): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspectsIncome Tax Disclosures." This ASU amendments require that a public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the accounting for employee share-based payment transactions for both public and nonpublicamount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The amendments require that all entities includingdisclose on an annual basis the accounting forfollowing information about income taxes forfeitures,paid: 1. The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and statutoryforeign taxes. 2. The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments also require that all entities disclose the following information: 1. Income (or loss) from continuing operations before income tax withholding requirements, as well as classification in the statement of cash flows.expense (or benefit) disaggregated between domestic and foreign. 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. This ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the amendments effective January 1, 2017. The Company has a stock-based compensation plan for which the ASU 2016-092024. This guidance results in the associated excess tax benefits or deficiencies being recognized as tax expense or benefit in the income statement instead of the previous accounting treatment, which requires excess tax benefits to be recognized as an adjustment to additional paid-in capital and excess tax deficiencies to be recognized as either an offset to accumulated excess tax benefits, if any, or to the income statement. In addition, such amounts are now classified as an operating activity in the statement of cash flows instead of the current accounting treatment, which required it to be classified as both an operating and a financing activity. The Company’s stock based compensation plan has not historically generated material amounts of excess tax benefits or deficiencies and, therefore, the Company has not experienced a material change in the Company’s financial position or results of operation as a result of the adoption and implementation of ASU 2016-09.

In February 2016, the FASB issued ASU NO. 2016-02Leases (Topic 842).ASU 2016-02 establishes a right of use model that requires a lessee to record a right of use asset and a lease liability for all leases with terms longer than 12 months. Leases will be classified as either finance or operating with classification affecting the pattern of expense recognition in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. A lease will be treated as a sale if it transfers all of the risks and rewards, as well as control of the underlying asset, to the lessee. If risks and rewards are conveyed without the transfer of control, the lease is treated as a financing. If neither risks and rewards nor control is conveyed, an operating lease results. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements, with certain practical expedients available. Early adoption is permitted. The Company is assessing the impact of ASU 2016-02 on its accounting and disclosures.

In September of 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 modifies the guidance used to recognize revenue from contracts with customers for transfers of goods and services and transfers of nonfinancial assets, unless those contracts are within the scope of other guidance. The guidance also requires new qualitative and quantitative disclosures about contract balances and performance obligations. The Company will adopt ASU 2014-09 in the first quarter of 2018 under the modified retrospective method where the cumulative effect is recognized at the date of initial application. Based upon an evaluation under the current guidance, the Company estimates that substantially all of its interest income and non-interest income will not be impacted by the adoption of this ASU because either the revenue from those contracts with customers is covered by other guidance in U.S. GAAP or the revenue recognition outcomes anticipated with the adoption of this ASU will likely be similar to the Company’s current revenue recognition practices. The adoption of this ASU is not expected to have a material effectimpact on the Company's consolidated financial statements.

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NOTE C –- BUSINESS COMBINATIONS

The Company accounts for its business combinations using the acquisition method. Acquisition accounting requires the total purchase price to be allocated to the estimated fair values of assets acquired and liabilities assumed, including certain intangible assets that must be recognized. Typically, this allocation results in the purchase price exceeding the fair value of net assets acquired, which is recorded as goodwill. Core deposit intangibles are a measure of the value of checking, money market and savings deposits acquired in business combinations accounted for under the acquisition method. Core deposit intangibles and other identified intangibles with finite useful lives are amortized using the straight-line method over their estimated useful lives of up to ten10 years.

Financial assets acquired in a business combination after January 1, 2021, are recorded in accordance with ASC 326. Loans that the Company acquires in connection with acquisitions are recorded at fair value with no carryover of the related allowance for credit losses. FairPCD loans that have experienced more than insignificant credit deterioration since origination are recorded at the amount paid. The ACL is determined on a collective basis and is allocated to the individual loans. The sum of the loan’s purchase price and ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows atloan is a market rate of interest. The excess or deficit of cash flows expected at acquisition over the estimated fair value is referred to as the accretablenoncredit discount or amortizable premium, andwhich is recognizedamortized into interest income over the remaining life of the loan.

Non-PCD loans are acquired that have experienced no or insignificant deterioration in credit quality since origination. The difference between the fair value and outstanding balance of the non-PCD loans is recognized as an adjustment to interest income over the lives of the loan.

Acquisitions

Iberville

Heritage Southeast Bank

On January 1, 2017,2023, the Company completed its acquisition of 100%HSBI, pursuant to an Agreement and Plan of Merger dated July 27, 2022, by and between the Company and HSBI (the "HSBI Merger Agreement"). Upon the completion of the common stockmerger of IbervilleHSBI with and into the Company, Heritage Bank, Plaquemine, Louisiana, from A. Wilbert’s Sons Lumber and Shingle Co. (“Iberville Parent”), and immediately thereafter merged Iberville Bank (“Iberville”), theHSBI's wholly-owned subsidiary, of Iberville Parent,was merged with and into The First.First Bank. Under the terms of the HSBI Merger Agreement, each share of HSBI common stock was converted into the right to receive 0.965 of share of Company common stock. The Company paid a total consideration of $31.1$221.5 million to the former HSBI shareholders as consideration in cash. Approximately $2.5 millionthe acquisition, which included 6,920,422 shares of the purchase price was heldCompany's common stock, and $16 thousand in escrow as contingencycash in lieu of fractional shares. The HSBI acquisition provided the opportunity for flood-related lossesthe Company to expand its operations in Georgia and the loan portfolio incurred due to flooding in Iberville’s market area in the fall of 2016.  The Company expects to receive $498,207 from the escrow for settlement of flood-related loans. Goodwill at December 31, 2017, reflects the escrow settlement.

Florida panhandle.

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In connection with the acquisition of HSBI, the Company recorded approximately $5.1$91.9 million of goodwill, of which $3.2 million funded the ACL for estimated losses on the acquired PCD loans, and $2.7$43.7 million of core deposit intangible. Goodwill is not deductible for income taxes. The core deposit intangible is towill be amortized to expense over 10 years.

The Company acquired Iberville’s $149.4 million loan portfolio at an estimated fair value discount of $0.8 million. The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments.

Expenses associated with the HSBI acquisition were $0$388 thousand and $3.6$4.9 million for the three months and twelve monthmonths period ended December 31, 2017,2023, respectively. These costs included system conversion and integrating operations charges as well asassociated with legal and consulting expenses, which have been expensed as incurred.

The following table summarizes the finalized fair values of the assets acquired and liabilities assumed including the goodwill generated from the transaction on January 1, 2017:

(In Thousands)
						Measurement
		As Initially				Period
		Reported				Adjustments				As Adjusted
Identifiable assets:
Cash and due from banks		$	28,789			$	-			$	28,789
Investments			78,650				(37	)			78,613
Loans			148,516				-				148,516
Core deposit intangible			3,186				(498	)			2,688
Personal and real property			4,443				498				4,941
Other assets			9,330				1,140				10,470
Total assets			272,914				1,103				274,017

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2023, along with valuation adjustments that have been made since initially reported.

($ in thousands)			As Initially Reported						Measurement Period Adjustments						As Adjusted
Identifiable assets:
Cash and due from banks			$	106,973					$	(180)					$	106,793
Investments			172,775						—						172,775
Loans			1,155,712						—						1,155,712
Core deposit intangible			43,739						—						43,739
Personal and real property			35,963						—						35,963
Other real estate owned			857						332						1,189
Bank owned life insurance			35,579						—						35,579
Deferred taxes			6,761						(632)						6,129
Interest receivable			4,349						—						4,349
Other assets			3,103						—						3,103
Total assets			1,565,811						(480)						1,565,331
Liabilities and equity:
Deposits			1,392,432						—						1,392,432
Trust Preferred			9,015						—						9,015
Other liabilities			34,271						—						34,271
Total liabilities			1,435,718						—						1,435,718
Net assets acquired			130,093						(480)						129,613
Consideration paid			221,538						—						221,538
Goodwill			$	91,445					$	480					$	91,925

Continued:						Measurement
		As Initially				Period
		Reported				Adjustments				As Adjusted
Liabilities and equity:
Deposits			243,656				-				243,656
Borrowed funds			456				-				456
Other liabilities			2,928				1,478				4,406
Total liabilities			247,040				1,478				248,518
Net assets acquired			25,874				(375	)			25,499
Consideration paid			31,100				(498	)			30,602
Goodwill resulting from Acquisition		$	5,226			$	(123	)		$	5,103

Valuation

During the fourth quarter of 2023, the Company finalized its analysis and valuation adjustments have been made to securities, personalcash and due from banks, other real property,estate owned, and core deposit intangibledeferred taxes since initially reported.

The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheet at December 31, 2017, are as follows:

Outstanding principal balance		$	123,325,609
Carrying amount			122,621,607

There were no purchased credit impaired loans at December 31, 2017.

Gulf Coast Community Bank

Also on January

Beach Bancorp, Inc.

On August 1, 2017,2022, the Company completed its acquisition of BBI, pursuant to an Agreement and Plan of Merger dated April 26, 2022 by and between the Company and BBI (the "BBI Merger Agreement"). Upon the completion of the merger of Gulf Coast CommunityBBI with and into the Company, Beach Bank, (“GCCB”), Pensacola, Florida,BBI's wholly-owned subsidiary, was merged with and into The First.First Bank. Under the terms of the BBI Merger Agreement, each share of BBI common stock and each share of BBI preferred stock was converted into the right to receive 0.1711 of a share of Company common stock (the "BBI Exchange Ratio"), and all stock options awarded under the BBI equity plans were converted automatically into an option to purchase shares of Company common stock on the same terms and conditions as applicable to each such BBI option as in effect immediately prior to the effective time, with the number of shares underlying each such option and the applicable exercise price adjusted based on the BBI Exchange Ratio. The BBI merger provides the opportunity for the Company to expand its operations in the Florida panhandle and enter the Tampa market. The Company issuedpaid consideration of approximately $101.5 million to GCCB’sthe former BBI shareholders including 3,498,936 shares of the Company’sCompany's common stock which, for purposesand

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approximately $1 thousand in cash in lieu of fractional shares, and also assumed options entitling the owners thereof to purchase an additional 310,427 shares of the GCCB acquisition, were valued through averaging the trading price of the Company’sCompany's common stock price over a 30 day trading period ending on the fifth business day prior to the closing of the acquisition. Fractional shares were acquired with cash. The consideration totaled approximately $2.3 million.

stock.

In connection with the acquisition of BBI, the Company recorded approximately $1.1$23.7 million of goodwill and $1.0$9.8 million of core deposit intangible. Goodwill is not deductible for income taxes. The core deposit intangible is towill be amortized to expense over 10 years.

The Company acquired GCCB’s $91.0also incurred $1.3 million loan portfolio at a fair value discount of approximately $2.2 million. The discount represents expectedprovision for credit losses adjusted for market interest rates and liquidity adjustments.

on credit marks from the loans acquired from Beach Bank.

Expenses associated with the BBI acquisition were $0$4.0 thousand and $2.8$1.4 million for the three monthmonths and twelve monthmonths period ended December 31, 2017,2023, respectively. These costs included systems conversion and integrating operations charges as well asassociated with legal and consulting expenses, which have been expensed as incurred.

The following table summarizes the finalized fair values of the assets acquired and liabilities assumed including the goodwill generated from the transaction on JanuaryAugust 1, 2017:

(In Thousands)
						Measurement
		As Initially				Period
		Reported				Adjustments				As Adjusted
Identifiable assets:
Cash and due from banks		$	6,047			$	(314	)		$	5,733
Investments			13,833				(28	)			13,805
Loans			88,801				-				88,801
Core deposit intangible			787				166				953
Personal and real property			4,739				-				4,739
Other real estate			7,057				336				7,393
Deferred tax asset			6,693				(15	)			6,678
Other assets			490				(22	)			468
Total assets			128,447				123				128,570

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Continued:						Measurement
		As Initially				Period
		Reported				Adjustments				As Adjusted
Liabilities and equity:
Deposits			111,993				-				111,993
Borrowed funds			14,450				-				14,450
Other liabilities			950				-				950
Total liabilities			127,393				-				127,393
Net assets acquired			1,054				123				1,177
Consideration paid			2,258				-				2,258
Goodwill resulting from Acquisition		$	1,204			$	(123	)		$	1,081

Valuation2022, along with valuation adjustments that have been made since initially reported.

($ in thousands)			As Initially Reported						Measurement Period Adjustments						As Adjusted
Purchase price:
Cash and stock			$	101,470					$	—					$	101,470
Total purchase price			101,470						—						101,470
Identifiable assets:
Cash			$	23,939					$	—					$	23,939
Investments			22,907						(264)						22,643
Loans			482,903						2,268						485,171
Other real estate			8,797						(580)						8,217
Bank owned life insurance			10,092						—						10,092
Core deposit intangible			9,791						—						9,791
Personal and real property			13,825						(1,868)						11,957
Deferred tax asset			28,105						(970)						27,135
Other assets			9,649						(414)						9,235
Total assets			610,008						(1,828)						608,180
Liabilities and equity:
Deposits			490,588						3						490,591
Borrowings			25,000						—						25,000
Other liabilities			14,772						—						14,772
Total liabilities			530,360						3						530,363
Net assets acquired			79,648						(1,831)						77,817
Goodwill			$	21,822					$	1,831					$	23,653

During the third quarter of 2023, the Company finalized its analysis and valuation adjustments that were made to securities, core deposit intangible, andinvestments, loans, other real estate, since initially reported. Also, certain amounts have been reclassified to conform to the classificationspersonal and real property, deferred tax asset, other assets, and deposits.

Cadence Bank Branches

On December 03, 2021, The First completed its acquisition of the Company.

On March 3, 2017, $5.0 million of loans acquiredseven Cadence Bank, N.A. (“Cadence”) branches in the acquisition were sold.Northeast Mississippi (the “Cadence Branches”). In connection with the sale,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, were sold. 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.

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In connection with the sale,acquisition of the Cadence Branches, the Company recorded a $1.6 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.

Expenses associated with the branch acquisition of the Cadence Branches were $81 thousand and $189 thousand for the three months and twelve months period ended December 31, 2023. These costs included charges associated with due diligence as well as legal and consulting expenses, which have been expensed as incurred. The Company also incurred $370 thousand of provision for credit mark was decreased by $2.2 million,losses on credit marks from the amountloans acquired.

The following table summarizes the provisional fair values of which was included in the credit mark at acquisition.

The outstanding principal balanceassets acquired and liabilities assumed and the carrying amountgoodwill (bargain purchase gain) generated from the transaction:

($ in thousands)			As Initially Reported						Measurement Period Adjustments						As Adjusted
Identifiable assets:
Cash and due from banks			$	359,916					$	—					$	359,916
Loans			40,262						—						40,262
Core deposit intangible			2,890						—						2,890
Personal and real property			9,675						—						9,675
Other assets			135						—						135
Total assets			412,878						—						412,878
Liabilities and equity:
Deposits			410,171						—						410,171
Other liabilities			407						(281)						126
Total liabilities			410,578						(281)						410,297
Net assets acquired			2,300						281						2,581
Consideration paid			1,000						—						1,000
Bargain purchase gain			$	(1,300)					$	(281)					$	(1,581)

During the fourth quarter of these loans included in2022, the consolidated balance sheetCompany finalized its analysis and valuation adjustments were made to other liabilities since initially reported.

Supplemental Pro Forma Information

The following table presents certain supplemental pro forma information, for illustrative purposes only, for the years December 31, 2023 and 2022 as if the BBI and HSBI acquisitions had occurred on January 1, 2022. 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 for the Year Ended December 31,
			2023						2022
			(unaudited)						(unaudited)
Net interest income			$	249,325					$	248,639
Non-interest income			46,705						58,645
Total revenue			296,030						307,284
Income before income taxes			105,879						118,465

Supplemental pro-forma earnings were adjusted to exclude acquisition costs incurred.

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NOTE D - SECURITIES

The following table summarizes the amortized cost, gross unrealized gains, and losses, and estimated fair values of AFS securities and securities HTM at December 31, 2017,2023 and 2022:

($ in thousands)			December 31, 2023
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Available-for-sale:
U.S. Treasury			$	16,985					$	—					$	310					$	16,675
Obligations of U.S. government agencies and sponsored entities			119,868						1						14,946						104,923
Tax-exempt and taxable obligations of states and municipal subdivisions			486,293						449						48,276						438,466
Mortgage-backed securities - residential			297,735						11						34,430						263,316
Mortgage-backed securities - commercial			198,944						76						20,675						178,345
Corporate obligations			41,347						—						3,750						37,597
Other			3,055						—						12						3,043
Total available-for-sale			$	1,164,227					$	537					$	122,399					$	1,042,365
Held-to-maturity:
U.S. Treasury			$	89,688					$	—					$	2,804					$	86,884
Obligations of U.S. government agencies and sponsored entities			33,659						—						1,803						31,856
Tax-exempt and taxable obligations of states and municipal subdivisions			246,908						9,566						14,697						241,777
Mortgage-backed securities - residential			141,573						—						14,237						127,336
Mortgage-backed securities - commercial			132,711						—						12,334						120,377
Corporate obligations			10,000						—						2,286						7,714
Total held-to-maturity			$	654,539					$	9,566					$	48,161					$	615,944

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($ in thousands)			December 31, 2022
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
Available-for-sale:
U.S. Treasury			$	135,752					$	—					$	11,898					$	123,854
Obligations of U.S. government agencies and sponsored entities			163,054						3						18,688						144,369
Tax-exempt and taxable obligations of states and municipal subdivisions			519,190						598						61,931						457,857
Mortgage-backed securities - residential			341,272						11						42,041						299,242
Mortgage-backed securities - commercial			215,200						60						24,363						190,897
Corporate obligations			43,869						—						2,987						40,882
Total available-for-sale			$	1,418,337					$	672					$	161,908					$	1,257,101
Held-to-maturity:
U.S. Treasury			$	109,631					$	—					$	5,175					$	104,456
Obligations of U.S. government agencies and sponsored entities			33,789						—						2,153						31,636
Tax-exempt and taxable obligations of states and municipal subdivisions			247,467						4,525						13,699						238,293
Mortgage-backed securities - residential			156,119						—						17,479						138,640
Mortgage-backed securities - commercial			134,478						7						13,798						120,687
Corporate obligations			10,000						—						1,615						8,385
Total held-to-maturity			$	691,484					$	4,532					$	53,919					$	642,097

The Company reassessed classification of certain investments and effective October 2022, the Company transferred $863 thousand of obligations of U.S. government agencies and sponsored entities, $1.2 million of mortgage -backed securities - commercial, and $137.5 million of tax-exempt and taxable obligations of states and municipal subdivisions from AFS to HTM securities. The securities were transferred at their amortized costs basis, net of any remaining unrealized gain or loss reported in accumulated other comprehensive income. The related unrealized loss of $36.8 million included in other comprehensive income remained in other comprehensive income, to be amortized out of other comprehensive income with an offsetting entry to interest income as a yield adjustment through earnings over the remaining term of the securities. There was no allowance for credit loss associated with the AFS securities that were transferred to HTM.

ACL on Securities

Securities Available-for-Sale

Quarterly, the Company evaluates if a security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, the Company performs further analysis as follows:

Outstanding principal balance		$	60,223,959
Carrying amount			60,320,605

Loans acquired inoutlined below:

•Review the two acquisitions were accounted for in accordance with ASC 310-20,Receivables-

Nonrefundable Fees and Other Costs. No loans were identified as purchased credit impaired loans.

Recent Acquisitions

See Note T – Subsequent Events for more information onextent to which the acquisitions of Southwest Banc Shares, Inc. and Sunshine Financial, Inc. that are scheduled to close in 2018.

NOTE D – SECURITIES

A summary offair value is less than the amortized cost and estimateddetermine if the decline is indicative of credit loss or other factors.

•The securities that violate the credit loss trigger above would be subjected to additional analysis.

•If the Company determines that a credit loss exists, the credit portion of the allowance will be measured using the DCF analysis using the effective interest rate. The amount of credit loss the Company records will be limited to the amount by which the amortized cost exceeds the fair value. The allowance for the calculated credit loss will be monitored going forward for further credit deterioration or improvement.

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At December 31, 2023 and 2022, the results of the analysis did not identify any securities where the decline was indicative of credit loss factors; therefore, no DCF analysis was performed, and no credit loss was recognized on any of the securities AFS.

Accrued interest receivable is excluded from the estimate of credit losses for securities AFS. Accrued interest receivable totaled $5.2 million and $6.2 million at December 31, 2023 and 2022, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

All AFS securities were current with no securities past due or on nonaccrual as of December 31, 2023.

Securities Held to Maturity

At December 31, 2023, the potential credit loss exposure totaled $205 thousand and $242 thousand at December 31, 2023 and 2022, respectively and consisted of tax-exempt and taxable obligations of states and municipal subdivisions and corporate obligations securities. After applying appropriate probability of default (“PD”) and loss given default (“LGD”) assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded for the years ended December 31, 2023 and 2022.

Accrued interest receivable is excluded from the estimate of credit losses for securities held-to-maturity. Accrued interest receivable totaled $3.4 million and $3.6 million at December 31, 2023 and 2022, respectively and was reported in interest receivable on the accompanying Consolidated Balance Sheet.

At December 31, 2023, the Company had no securities held-to-maturity that were past due 30 days or more as to principal or interest payments. The Company had no securities held-to-maturity classified as nonaccrual for the years ended December 31, 2023 and 2022.

The Company monitors the credit quality of the debt securities held-to-maturity through the use of credit ratings. The Company monitors the credit ratings on a quarterly basis. The following table summarizes the amortized cost of debt securities held-to-maturity at December 31, 2023, aggregated by credit quality indicators.

($ in thousands)						December 31, 2023						December 31, 2022
Aaa						$	431,527					$	467,736
Aa1/Aa2/Aa3						129,751						110,854
A1/A2						13,902						13,757
BBB						10,000						10,000
Not rated						69,359						89,137
Total						$	654,539					$	691,484

88

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The amortized cost and fair value of available-for-saledebt securities and held-to-maturity securities at December 31, 2017 and 2016 follows:

		December 31, 2017
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
Available-for-sale securities:
Obligations of U.S. Government Agencies		$	4,996,142			$	-			$	4,007			$	4,992,135
Tax-exempt and taxable obligations of states and municipal subdivisions			137,281,213				2,027,575				724,750				138,584,038
Mortgage-backed securities			197,346,171				785,321				1,553,516				196,577,976
Corporate obligations			16,599,433				20,901				801,426				15,818,908
Other			1,255,483				-				335,459				920,024
		$	357,478,442			$	2,833,797			$	3,419,158			$	356,893,081

73

Continued:		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
Held-to-maturity securities:
Taxable obligations of states and municipal subdivisions		$	6,000,000			$	1,397,966			$	-			$	7,397,966

		December 31, 2016
		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value
Available-for-sale securities:
Obligations of U.S. Government Agencies		$	9,023,293			$	27,718			$	6,341			$	9,044,670
Tax-exempt and taxable obligations of states and municipal subdivisions			98,327,829				1,677,764				1,183,186				98,822,407
Mortgage-backed securities			114,990,863				602,179				1,304,090				114,288,952
Corporate obligations			21,274,200				66,477				1,230,566				20,110,111
Other			1,255,483				-				315,660				939,823
		$	244,871,668			$	2,374,138			$	4,039,843			$	243,205,963
Held-to-maturity securities:
Taxable obligations of states and municipal subdivisions		$	6,000,000			$	1,393,828			$	-			$	7,393,828

The scheduledare shown by contractual maturity. Expected maturities of securities at December 31, 2017, were as follows:

		Available-for-Sale								Held-to-Maturity
		Amortized Cost				Estimated Fair Value				Amortized Cost				Estimated Fair Value
Due less than one year		$	14,048,332			$	14,061,545			$	-			$	-
Due after one year through five years			49,518,696				49,775,588				-				-
Due after five years through ten years			57,713,034				58,588,594				6,000,000				7,397,966
Due greater than ten years			38,852,209				37,889,378				-				-
Mortgage-backed securities			197,346,171				196,577,976				-				-
		$	357,478,442			$	356,893,081			$	6,000,000			$	7,397,966

Actual maturities canmay differ from contractual maturities becauseif borrowers have the obligations may be calledright to call or prepaidprepay obligations with or without call or prepayment penalties.

In 2017, there was a net loss of $15,889 realized on

($ in thousands)						December 31, 2023
Available-for-Sale						Amortized Cost						Fair Value
Within one year						$	45,559					$	45,246
One to five years						150,165						143,592
Five to ten years						306,927						270,342
Beyond ten years						164,897						141,524
Mortgage-backed securities: residential						297,735						263,316
Mortgage-backed securities: commercial						198,944						178,345
Total						$	1,164,227					$	1,042,365
Held-to-maturity
Within one year						$	39,082					$	38,725
One to five years						72,333						69,387
Five to ten years						54,428						49,697
Beyond ten years						214,412						210,422
Mortgage-backed securities: residential						141,573						127,336
Mortgage-backed securities: commercial						132,711						120,377
Total						$	654,539					$	615,944

The proceeds from sales and calls of available-for-sale securities consistingand the associated gains and losses are listed below:

($ in thousands)			2023						2022						2021
Gross gains			$	65					$	82					$	202
Gross losses			9,781						164						59
Realized net (loss) gain			$	(9,716)					$	(82)					$	143

The amortized costs of a pre-tax gain of $4,384 and a pre-tax loss of $20,273. There was a net gain of $126,286 realized in 2016 and no gain or loss realized in 2015. No other-than-temporary impairment losses were recognized for each of the three years ended December 31, 2017.

Securities with a carrying value of $289,001,490 and $170,593,273 at December 31, 2017 and 2016, respectively, weresecurities pledged as collateral, to secure public deposits repurchase agreements, and for other purposes, as required or permitted by law.

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The details concerning securities classified as available-for-sale with unrealized losses as of December 31, 2017was $1.095 billion and 2016, were as follows:

		2017
		Losses < 12 Months								Losses 12 Months or >								Total
		Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses
Obligations of U.S. government agencies		$	4,992,134			$	4,007			$	-			$	-			$	4,992,134			$	4,007
Tax-exempt and tax- able obligations of states and Municipal subdivisions			40,559,417				500,884				8,722,641				223,866				49,282,058				724,750
Mortgage-backed Securities			89,312,836				806,774				33,286,648				746,742				122,599,484				1,553,516
Corporate obligations			5,665,770				9,832				3,156,365				791,594				8,822,135				801,426
Other			-				-				920,024				335,459				920,024				335,459
		$	140,530,157			$	1,321,497			$	46,085,678			$	2,097,661			$	186,615,835			$	3,419,158

		2016
		Losses < 12 Months								Losses 12 Months or >								Total
		Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses
Obligations of U.S. government Agencies		$	2,989,255			$	6,341			$	-			$	-			$	2,989,255			$	6,341
Tax-exempt and tax- able obligations of states and municipal subdivisions			48,199,634				1,183,186				-				-				48,199,634				1,183,186
Mortgage-backed Securities			78,467,029				1,294,942				1,905,698				9,148				80,372,727				1,304,090
Corporate obligations			5,075,850				17,932				2,828,766				1,212,634				7,904,616				1,230,566
Other			-				-				939,823				315,660				939,823				315,660
		$	134,731,768			$	2,502,401			$	5,674,287			$	1,537,442			$	140,406,055			$	4,039,843

Approximately 38.0% of the number of securities in the investment portfolio$1.031 billion at December 31, 2017, reflected2023 and 2022, respectively.

89

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The following table summarizes securities in an unrealized loss. Management islosses position for which an allowance for credit losses has not been recorded at December 31, 2023 and 2022. The securities are aggregated by major security type and length of time in a continuous unrealized loss position:

			2023
($ in thousands)			Less than 12 Months												12 Months or Longer												Total
			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Available-for-sale:
U.S. Treasury			$	—					$	—					$	16,675					$	310					$	16,675					$	310
Obligations of U.S. government agencies and sponsored entities			123						—						104,495						14,946						104,618						14,946
Tax-exempt and taxable obligations of states and municipal subdivisions			20,879						1,479						389,113						46,797						409,992						48,276
Mortgage-backed securities - residential			222						2						262,012						34,428						262,234						34,430
Mortgage-backed securities - commercial			2,896						52						170,256						20,623						173,152						20,675
Corporate obligations			—						—						37,597						3,750						37,597						3,750
Other			3,055						12						—						—						3,055						12
Total available-for-sale			$	27,175					$	1,545					$	980,148					$	120,854					$	1,007,323					$	122,399
Held-to-maturity:
U.S. Treasury			$	—					$	—					$	86,884					$	2,804					$	86,884					$	2,804
Obligations of U.S. government agencies and sponsored entities			747						5						31,109						1,798						31,856						1,803
Tax-exempt and taxable obligations of states and municipal subdivisions			10,472						3,949						91,480						10,748						101,952						14,697
Mortgage-backed securities - residential			—						—						127,336						14,237						127,336						14,237
Mortgage-backed securities - commercial			920						2						119,457						12,332						120,377						12,334
Corporate obligations			—						—						7,714						2,286						7,714						2,286
Total held-to-maturity			$	12,139					$	3,956					$	463,980					$	44,205					$	476,119					$	48,161

90

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			2022
			Less than 12 Months												12 Months or Longer												Total
($ in thousands)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
Available-for-sale:
U.S. Treasury			$	4,563					$	419					$	119,292					$	11,479					$	123,855					$	11,898
Obligations of U.S. government agencies and sponsored entities			34,254						2,293						109,431						16,395						143,685						18,688
Tax-exempt and taxable obligations of states and municipal subdivisions			275,202						31,152						159,508						30,779						434,710						61,931
Mortgage-backed securities: residential			76,125						4,970						222,274						37,071						298,399						42,041
Mortgage-backed securities: commercial			50,193						3,025						136,062						21,338						186,255						24,363
Corporate obligations			35,142						1,995						5,739						992						40,881						2,987
Total available-for-sale			$	475,479					$	43,854					$	752,306					$	118,054					$	1,227,785					$	161,908
Held-to-maturity:
U.S. Treasury			$	104,457					$	5,175					$	—					$	—					$	104,457					$	5,175
Obligations of U.S. government agencies and sponsored entities			31,636						2,153						—						—						31,636						2,153
Tax-exempt and taxable obligations of states and municipal subdivisions			127,628						13,583						15,303						116						142,931						13,699
Mortgage-backed securities - residential			138,639						17,479						—						—						138,639						17,479
Mortgage-backed securities - commercial			119,758						13,798						—						—						119,758						13,798
Corporate obligations			8,385						1,615						—						—						8,385						1,615
Total held-to-maturity			$	530,503					$	53,803					$	15,303					$	116					$	545,806					$	53,919

At December 31, 2023 and December 31, 2022, the Company’s securities portfolio consisted of 1,125 and 1,265 securities, respectively, which were in an unrealized loss position. AFS securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the opinionunderlying securities and not credit quality. The Company does not intend to sell these securities and it is more likely than not that the Company haswill not be required to sell the ability to hold these securities until such time as the value recoversinvestments before recovery of their amortized cost basis. No allowance for credit losses was needed at December 31, 2023 or the securities mature. Management also believes the deterioration in value is attributable to changes in market interest rates and lack of liquidity in the credit markets. We have determined that these securities are not other-than-temporarily impaired based upon anticipated cash flows.

2022.

NOTE E - LOANS

Loans typically provide higher yields than

The Company uses four different categories to classify loans in its portfolio based on the underlying collateral securing each loan. The loans grouped together in each category have been determined to share similar risk characteristics with respect to credit quality. Those four categories are commercial, financial and agriculture, commercial real estate, consumer real estate, consumer installment;

Commercial, financial and agriculture - Commercial, financial and agriculture loans include loans to business entities issued for commercial, industrial, or other typesbusiness purposes. This type of earning assets, and thus onecommercial loan shares a similar risk characteristic in that unlike commercial real estate loans, repayment is largely dependent on cash flow generated from the operation of the Company's goalsbusiness.

Commercial real estate - Commercial real estate loans are grouped as such because repayment is for loans to bemainly dependent upon either the largest categorysale of the Company's earning assets. At December 31, 2017real estate, operation of the business occupying the real estate, or refinance of the debt obligation. This includes both owner-occupied and 2016, respectively,non-owner occupied CRE secured loans, accountedbecause they share similar risk characteristics related to these variables.

91

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Consumer real estate - Consumer real estate loans consist primarily of loans secured by 1-4 family residential properties and/or residential lots. This includes loans for 74.5%the purpose of constructing improvements on the residential property, as well as home equity lines of credit.

Consumer installment - Installment and 75.3%other loans are all loans issued to individuals that are not for any purpose related to operation of earning assets. The Company controlsa business, and mitigates the inherent credit and liquidity risks through the composition of its loan portfolio.

75

not secured by real estate. Repayment on these loans is mostly dependent on personal income, which may be impacted by general economic conditions.

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

(In thousands)		December 31, 2017								December 31, 2016
		Amount				Percent of Total				Amount				Percent of Total
Mortgage loans held for sale		$	4,790				0.3	%		$	5,880				0.6	%
Commercial, financial and agricultural			165,780				13.5				129,423				14.8
Real Estate:
Mortgage-commercial			467,484				38.0				314,359				36.0
Mortgage-residential			385,099				31.3				289,640				33.2
Construction			183,328				14.9				109,394				12.5
Lease financing receivable			2,450				0.2				2,204				0.3
Obligations of states and subdivisions			3,109				0.3				6,698				0.8
Consumer and other			18,056				1.5				15,336				1.8
Total loans			1,230,096				100	%			872,934				100	%
Allowance for loan losses			(8,288	)							(7,510	)
Net loans		$	1,221.808							$	865,424

In the contextas of this discussion, a "real estate mortgage loan"December 31, 2023 and December 31, 2022, is definedsummarized below:

($ in thousands)			December 31, 2023						December 31, 2022
Loans held for sale
Mortgage loans held for sale			$	2,914					$	4,443
Total LHFS			$	2,914					$	4,443
Loans held for investment
Commercial, financial, and agriculture (1)			$	800,324					$	536,192
Commercial real estate			3,059,155						2,135,263
Consumer real estate			1,252,795						1,058,999
Consumer installment			57,768						43,703
Total loans			5,170,042						3,774,157
Less allowance for credit losses			(54,032)						(38,917)
Net LHFI			$	5,116,010					$	3,735,240

(1)Loan balance includes $386 thousand and $710 thousand in PPP loans 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 loanDecember 31, 2023 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.

2022, respectively.

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.

Activity

Accrued interest receivable is not included in the allowance for loan losses foramortized cost basis of the Company’s LHFI. At December 31, 2017, 20162023 and 20152022, accrued interest receivable for LHFI totaled $24.7 million and $18.0 million, respectively, with no related ACL and was reported in interest receivable on the accompanying consolidated balance sheet.

Nonaccrual and Past Due LHFI

Past due LHFI are loans contractually past due 30 days or more as follows:

(In thousands)

		2017				2016				2015
Balance at beginning of period		$	7,510			$	6,747			$	6,095
Loans charged-off:
Real Estate			(262	)			(627	)			(534	)
Installment and Other			(81	)			(73	)			(126	)
Commercial, Financial and Agriculture			(62	)			(71	)			(183	)
Total			(405	)			(771	)			(843	)
Recoveries on loans previously charged-off:
Real Estate			522				755				905
Installment and Other			105				70				81
Commercial, Financial and Agriculture			50				84				99
Total			677				909				1,085
Net (Charge-offs) Recoveries			272				138				242
Provision for Loan Losses			506				625				410
Balance at end of period		$	8,288			$	7,510			$	6,747

76

to principal or interest payments. 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.

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The following tables represent howpresents the allowance for loan losses is allocated to a particular loan type as well as the percentageaging of the categoryamortized cost basis in past due loans in addition to totalthose loans at December 31, 2017 and 2016.classified as nonaccrual including PCD loans:

			December 31, 2023
($ in thousands)			Past Due 30 to 89 Days						Past Due 90 Days or More and Still Accruing						Nonaccrual						PCD						Total Past Due, Nonaccrual and PCD						Total LHFI						Nonaccrual and PCD with No ACL
Commercial, financial, and agriculture (1)			$	2,043					$	313					$	353					$	965					$	3,674					$	800,324					$	465
Commercial real estate			1,698						630						3,790						647						6,765						3,059,155						410
Consumer real estate			3,992						220						1,806						3,098						9,116						1,252,795						680
Consumer installment			180						—						31						—						211						57,768						—
Total			$	7,913					$	1,163					$	5,980					$	4,710					$	19,766					$	5,170,042					$	1,555

Allocation of the Allowance for Loan Losses

		December 31, 2017
		(Dollars in thousands)
		Amount				% of loans in each category to total loans
Commercial Non Real Estate		$	1,608				14.0	%
Commercial Real Estate			4,644				64.8
Consumer Real Estate			1,499				18.9
Consumer			173				2.3
Unallocated			364				-
Total		$	8,288				100	%

		December 31, 2016
		(Dollars in thousands)
		Amount				% of loans in each category to total loans
Commercial Non Real Estate		$	1,118				15.6	%
Commercial Real Estate			4,071				61.6
Consumer Real Estate			1,589				20.3
Consumer			155				2.4
Unallocated			577				0.1
Total		$	7,510				100	%

The following table represents the Company’s impaired loans at December 31, 2017 and 2016. This table

(1)Total loan balance includes performing troubled debt restructurings.

		December 31,				December 31,
		2017				2016
		(In thousands)
Impaired Loans:
Impaired loans without a valuation allowance		$	6,559			$	2,667
Impaired loans with a valuation allowance			4,015				3,461
Total impaired loans		$	10,574			$	6,128
Allowance for loan losses on impaired loans at period End			661				682
Total non-accrual loans			5,674				3,264
Past due 90 days or more and still accruing			285				198
Average investment in impaired loans			9,041				8,509

The following table is a summary of interest recognized and cash-basis interest earned on impaired$386 thousand in PPP loans for the years ended December 31, 2017, 2016 and 2015:

		2017				2016				2015
Interest income recognized during  impairment			-				-				-
Cash-basis interest income   recognized			326				188				211

The gross interest income that would have been recorded in the period that ended if the non-accrual 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 twelve months for the years ended December 31, 2017, 2016 and 2015, was $342,000, $389,000 and $437,000, respectively. The Company had no loan commitments to borrowers in non-accrual status at December 31, 2017 and 2016.

77

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 December 31, 2017 and 2016. The tables also provide additional detail as to the amount of our2023.

			December 31, 2022
($ in thousands)			Past Due 30 to 89 Days						Past Due 90 Days or More and Still Accruing						Nonaccrual						PCD						Total Past Due, Nonaccrual and PCD						Total LHFI						Nonaccrual and PCD with No ACL
Commercial, financial, and agriculture (1)			$	220					$	—					$	19					$	—					$	239					$	536,192					$	—
Commercial real estate			1,984						—						7,445						1,129						10,558						2,135,263						4,560
Consumer real estate			3,386						289						2,965						1,032						7,672						1,058,999						791
Consumer installment			173						—						1						—						174						43,703						—
Total			$	5,763					$	289					$	10,430					$	2,161					$	18,643					$	3,774,157					$	5,351

(1)Total loan balance includes $710 thousand in PPP 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.

December 31, 2017						Installment				Commercial,
		Real Estate				and Other				Financial and Agriculture				Total
		(In thousands)
Loans
Individually evaluated		$	9,402			$	52			$	1,120			$	10,574
Collectively evaluated			1,015,934				28,511				170,287				1,214,732
Total		$	1,025,336			$	28,563			$	171,407			$	1,225,306
Allowance for Loan Losses
Individually evaluated		$	371			$	23			$	267			$	661
Collectively evaluated			5,952				334				1,341				7,627
Total		$	6,323			$	357			$	1,608			$	8,288

December 31, 2016						Installment				Commercial,
		Real Estate				and Other				Financial and  Agriculture				Total
		(In thousands)
Loans
Individually evaluated		$	5,935			$	40			$	153			$	6,128
Collectively evaluated			704,923				21,317				134,686				860,926
Total		$	710,858			$	21,357			$	134,839			$	867,054
Allowance for Loan Losses
Individually evaluated		$	651			$	21			$	10			$	682
Collectively evaluated			5,009				711				1,108				6,828
Total		$	5,660			$	732			$	1,118			$	7,510

The following tables provide additional detail of impaired loans broken out according to class as of December 31, 2017, 20162022.

Acquired Loans

In connection with the acquisitions of BBI and 2015. The recorded investment included inHSBI, the following table represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. 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.

78

December 31, 2017														Average				Interest
														Recorded				Income
		Recorded				Unpaid				Related				Investment				Recognized
		Investment				Balance				Allowance				YTD				YTD
		(In thousands)
Impaired loans with no related allowance:
Commercial installment		$	270			$	270			$	-			$	90			$	1
Commercial real estate			4,080				4,176				-				3,502				101
Consumer real estate			2,180				2,424				-				1,897				83
Consumer installment			29				29				-				17				-
Total		$	6,559			$	6,899			$	-			$	5,506			$	185
Impaired loans with a related allowance:
Commercial installment		$	850			$	850			$	267			$	262			$	14
Commercial real estate			2,638				2,638				234				2,756				112
Consumer real estate			504				504				137				493				15
Consumer installment			23				23				23				24				-
Total		$	4,015			$	4,015			$	661			$	3,535			$	141
Total Impaired Loans:
Commercial installment		$	1,120			$	1,120			$	267			$	352			$	15
Commercial real estate			6,718				6,814				234				6,258				213
Consumer real estate			2,684				2,928				137				2,390				98
Consumer installment			52				52				23				41				-
Total Impaired Loans		$	10,574			$	10,914			$	661			$	9,041			$	326

December 31, 2016														Average				Interest
														Recorded				Income
		Recorded				Unpaid				Related				Investment				Recognized
		Investment				Balance				Allowance				YTD				YTD
		(In thousands)
Impaired loans with no related allowance:
Commercial installment		$	-			$	-			$	-			$	-			$	-
Commercial real estate			2,324				2,570				-				4,368				37
Consumer real estate			329				329				-				291				1
Consumer installment			14				14				-				9				-
Total		$	2,667			$	2,913			$	-			$	4,668			$	38

79

Continued:

														Average				Interest
														Recorded				Income
		Recorded				Unpaid				Related				Investment				Recognized
		Investment				Balance				Allowance				YTD				YTD
Impaired loans with a related allowance:
Commercial installment		$	153			$	153			$	10			$	244			$	9
Commercial real estate			2,726				2,726				343				2,832				127
Consumer real estate			556				669				308				733				14
Consumer installment			26				27				21				32				-
Total		$	3,461			$	3,575			$	682			$	3,841			$	150
Total Impaired Loans:
Commercial installment		$	153			$	153			$	10			$	244			$	9
Commercial real estate			5,050				5,296				343				7,200				164
Consumer real estate			885				998				308				1,024				15
Consumer installment			40				41				21				41				-
Total Impaired Loans		$	6,128			$	6,488			$	682			$	8,509			$	188

December 31, 2015														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			$	-
Commercial real estate			5,790				5,828				-				5,099				50
Consumer real estate			223				223				-				205				-
Consumer installment			7				7				-				8				-
Total		$	6,020			$	6,058			$	-			$	5,314			$	50
Impaired loans with a related allowance:
Commercial installment		$	306			$	306			$	50			$	264			$	14
Commercial real estate			2,927				2,927				444				2,891				132
Consumer real estate			842				842				438				1,152				15
Consumer installment			32				32				25				31				-
Total		$	4,107			$	4,107			$	957			$	4,338			$	161
Total Impaired Loans:
Commercial installment		$	306			$	306			$	50			$	266			$	14
Commercial real estate			8,717				8,755				444				7,990				182
Consumer real estate			1,065				1,065				438				1,357				15
Consumer installment			39				39				25				39				-
Total Impaired Loans		$	10,127			$	10,165			$	957			$	9,652			$	211

80

WeCompany acquired loans both with deterioratedand without evidence of credit quality in a 2014 acquisition. Thesedeterioration since origination. Acquired loans wereare recorded at estimatedtheir fair value at the time of acquisition date with no carryover offrom the relatedacquired institution's previously recorded allowance for loancredit losses. The acquired loans were segregated as of the acquisition date between those considered to be performing (acquired non-impaired loans) and those with evidence of credit deterioration (acquired impaired loans). Acquired loans are considered impaired if thereaccounted for under ASC 326, Financial Instruments - Credit Losses.

The fair value for acquired loans recorded at the time of acquisition is evidencebased upon several factors including the timing and payment of expected cash flows, as adjusted for estimated credit deteriorationlosses and ifprepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of premium or discount to the unpaid principal balance of each acquired loan. As it relates to acquired PCD loans, the net premium or net discount is probable,adjusted to reflect the Company's allowance for credit losses ("ACL") recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the loan. As it relates to acquired loans not classified as PCD ("non-PCD") loans, the credit loss and yield components of the fair value adjustments are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the average remaining life of those loans. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.

The estimated fair value of the non-PCD loans acquired in the BBI acquisition was $460.0 million, which is net of a $8.8 million discount. The gross contractual amounts receivable of the acquired non-PCD loans at acquisition all contractually required payments willwas approximately $468.8 million, of which $6.4 million is the amount of contractual cash flows not expected to be collected.

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The estimated fair value of the non-PCD acquired in the HSBI acquisition was $1.091 billion, which is net of a $33.7 million discount. The gross contractual amounts receivable of the acquired non-PCD loans at acquisition was approximately $1.125 billion, of which $16.5 million is the amount of contractual cash flows not expected to be collected.

The following table presents information regardingshows the contractually required payments receivable, cash flows expected to be collected and the estimated fair valuecarrying amount of loans acquired in the BBI and HSBI acquisition as of July 1, 2014,transaction for which there was, at the closing date of the transaction: 

		July 1, 2014
		(In thousands)
		Commercial, financial and agricultural				Mortgage- Commercial				Mortgage- Residential				Commercial and other				Total
Contractually required payments		$	1,519			$	29,648			$	7,933			$	976			$	40,076
Cash flows expected to be collected			1,570				37,869				9,697				1,032				50,168
Fair value of loans acquired			1,513				28,875				7,048				957				38,393

Total outstanding acquired impaired loans were $2,020,769 asacquisition, more than insignificant deterioration of December 31, 2017. The outstanding balance of these loans is the undiscounted sum of all amounts, including amounts deemed principal, interest, fees, penalties, and other under the loans, owed at the reporting date, whether or not currently due and whether or not any such amounts have been charged off.

Changes in the carrying amount and accretable yield for acquired impaired loans were as follows for the year ended December 31, 2017 (In thousands):

		Accretable Yield				Carrying Amount of Loans
Balance at beginning of period		$	894			$	1,305
Accretion			(58	)			58
Payments received, net			-				(178	)
Balance at end of period		$	836			$	1,185

The following tables provide additional detail of troubled debt restructurings (TDRs) during the twelve months ended December 31, 2017, 2016 and 2015.

		December 31, 2017
		Outstanding Recorded				Outstanding Recorded								Interest
		Investment Pre-Modification				Investment Post-Modification				Number of Loans				Income Recognized
		(In thousands except number of loans)
Commercial installment		$	-			$	-				-			$	-
Commercial real estate			526				494				4				17
Consumer real estate			66				64				1				4
Consumer installment			-				-				-				-
Total		$	592			$	558				5			$	21

		December 31, 2016
		Outstanding Recorded				Outstanding Recorded								Interest
		Investment Pre-Modification				Investment Post-Modification				Number of Loans				Income Recognized
		(In thousands except number of loans)
Commercial installment		$	-			$	-				-			$	-
Commercial real estate			296				269				1				13
Consumer real estate			-				-				-				-
Consumer installment			-				-				-				-
Total		$	296			$	269				1			$	13

81

credit quality since origination:

($ in thousands)			BBI						HSBI
Purchase price of loans at acquisition			$	27,669					$	52,356
Allowance for credit losses at acquisition			1,303						3,176
Non-credit discount (premium) at acquisition			530						2,325
Par value of acquired loans at acquisition			$	29,502					$	57,857

		December 31, 2015
		Outstanding Recorded				Outstanding Recorded								Interest
		Investment Pre-Modification				Investment Post-Modification				Number of Loans				Income Recognized
		(In thousands except number of loans)
Commercial installment		$	-			$	-				-			$	-
Commercial real estate			499				492				2				10
Consumer real estate			45				40				1				-
Consumer installment			-				-				-				-
Total		$	544			$	532				3			$	10

The TDRs presented above increased the allowance for loan losses and resulted in charge-offs of $0, $208,000 and $0 for the years ended December 31, 2017, 2016 and 2015, respectively.

The balance of troubled debt restructurings at December 31, 2017, 2016 and 2015, was $6.9 million, $4.1 million and $6.9 million, respectively, calculated for regulatory reporting purpose.

As of December 31, 2017,2023 and 2022, the amortized cost of the Company’s PCD loans totaled $57.8 million and $24.0 million, respectively, which had an estimated ACL of $3.7 million and $1.7 million, respectively.

Loan Modifications

The Company adopted ASU No. 2022-02 effective January 1, 2023. These amendments eliminate the TDR recognition and measurement guidance and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, and other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified during 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:

($ in thousands)						Term Extension						Percentage of Total Loans Held for Investment
Commercial real estate						$	581					0.02		%
Total						$	581					0.02		%

The Company has not committed to lend additional amounts to the borrowers included in the previous table.

Debt Restructurings Prior to the Adoption of ASU 2022-02

If the Company grants a concession to a borrower for economic or legal reasons related to a borrower’s financial difficulties that it would not otherwise consider, the loan is classified as TDRs.

As of December 31, 2022 and 2021 the Company had TDRs totaling $21.8 million and $24.2 million, respectively. As of December 31, 2022, the Company had no additional amount committed on any loan classified as troubled debt restructuring.

DuringTDR. As of December 31, 2022 and 2021 TDRs had a related ACL of $841 thousand and $4.3 million, respectively.

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The following table presents LHFI by class modified as TDRs that occurred during the twelve month periodsmonths ended December 31, 2017, 20162022 and 2015,2021.

($ in thousands, except for number of loans)
December 31, 2022						Number of Loans						Outstanding Recorded Investment Pre-Modification						Outstanding Recorded Investment Post-Modification						Interest Income Recognized
Consumer real estate						1						$	134					$	135					$	7
Total						1						$	134					$	135					$	7

December 31, 2021
Commercial, financial, and agriculture						1						$	38					$	37					$	4
Commercial real estate						5						5,151						4,890						230
Consumer real estate						4						222						187						5
Consumer installment						1						13						1						—
Total						11						$	5,424					$	5,115					$	239

The TDRs presented above increased the terms of 5, 1ACL $22 thousand and 3$1.6 million and resulted in no charge-offs for the years ended December 31, 2022, and 2021, respectively.

The following table presents loans respectively, wereby class modified as TDRs. TDRs for which there was a payment default within twelve months following the modification during the year ending December 31, 2022 and 2021.

($ in thousands, except for number of loans)						2022												2021
Troubled Debt Restructurings That Subsequently Defaulted:						Number of Loans						Recorded Investment						Number of Loans						Recorded Investment
Commercial real estate						—						$	—					—						$	—
Consumer real estate						1						134						2						55
Total						1						$	134					2						$	55

The modifications described above included one of the following or a combination of the following: maturity date extensions, interest only payments, amortizations were extended beyond what would be available on similar type loans, and payment waiver. No interest rate concessions were given on these loans nor were any of these loans written down.

		December 31, 2017
		Current Loans				Past Due 30-89				Past Due 90 days and still accruing				Non-Accrual				Total
Commercial installment		$	-			$	-			$	-			$	-			$	-
Commercial real estate			3,701,710				91,734				-				1,024,442				4,817,886
Consumer real estate			1,012,396				89,476				-				986,803				2,088,675
Consumer installment			-				-				5,188				18,319				23,507
Total		$	4,714,106			$	181,210			$	5,188			$	2,029,564			$	6,930,068
Allowance for loan losses		$	99,695			$	21,610			$	5,188			$	27,241			$	153,734

		December 31, 2016
		Current  Loans				Past Due 30-89				Past Due 90 days and still accruing				Non-Accrual				Total
Commercial installment		$	150,509			$	-			$	-			$	-			$	150,509
Commercial real estate			2,463,484				-				-				1,101,279				3,564,763
Consumer real estate			153,695				89,996				-				122,450				366,141
Consumer installment			5,898				-				-				23,594				29,492
Total		$	2,773,586			$	89,996			$	-			$	1,247,323			$	4,110,905
Allowance for loan losses		$	124,484			$	-			$	-			$	40,165			$	164,649

82

A loan is considered to be in a payment default once it is 30 days contractually past due under the modified terms. The TDRs presented above increased the ACL $22 thousand and $21 thousand resulted in no charge-offs for the years ended December 31, 2022, and 2021, respectively.

		December 31, 2015
		Current  Loans				Past Due 30-89				Past Due 90 days and still accruing				Non-Accrual				Total
Commercial installment		$	206,237			$	-			$	-			$	50,221			$	256,458
Commercial real estate			1,823,217				-				-				2,933,287				4,756,504
Consumer real estate			721,110				-				-				1,134,816				1,855,926
Consumer installment			7,894				-				-				29,435				37,329
Total		$	2,758,458			$	-			$	-			$	4,147,759			$	6,906,217
Allowance for loan losses		$	106,028			$	-			$	-			$	197,338			$	303,366

The following tables summarizerepresents the Company’s TDRs at December 31, 2022:

December 31, 2022
($ in thousands)						Current Loans						Past Due 30-89						Past Due 90 days and still accruing						Nonaccrual						Total
Commercial, financial, and agriculture						$	49					$	—					$	—					$	—					$	49
Commercial real estate						13,561						—						—						6,121						19,682
Consumer real estate						1,077						—						—						929						2,006
Consumer installment						14						—						—						—						14
Total						$	14,701					$	—					$	—					$	7,050					$	21,751
Allowance for credit losses						$	350					$	—					$	—					$	491					$	841

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Collateral Dependent Loans

The following table presents the amortized cost basis of collateral dependent individually evaluated loans by class ourof loans classified as past dueof December 31, 2023 and 2022:

December 31, 2023
($ in thousands)			Real Property						Equipment						Miscellaneous						Total
Commercial financial, and agriculture			$	—					$	496					$	918					$	1,414
Commercial real estate			710						—						—						710
Consumer real estate			778						—						—						778
Total			$	1,488					$	496					$	918					$	2,902

December 31, 2022
($ in thousands)			Real Property						Total
Commercial real estate			$	4,560					$	4,560
Consumer real estate			998						998
Total			$	5,558					$	5,558

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The following provides a qualitative description by class of loan of the collateral that secures the Company’s collateral dependent LHFI:

•Commercial, financial and agriculture – Loans within these loan classes are secured by equipment, inventory accounts, and other non-real estate collateral.

•Commercial real estate – Loans within these loan classes are secured by commercial real property.

•Consumer real estate - Loans within these loan classes are secured by consumer real property.

•Consumer installment - Loans within these loan classes are secured by consumer goods, equipment, and non-real estate collateral.

There have been no significant changes to the collateral that secures these financial assets during the period.

Loan Participations

The Company has loan participations, which qualify as participating interest, with other financial institutions. As of December 31, 2023, these loans totaled $304.0 million, of which $165.9 million had been sold to other financial institutions and $138.1 million was purchased by the Company. As of December 31, 2022, these loans totaled $202.6 million, of which $100.1 million had been sold to other financial institutions and $102.5 million was purchased by the company. The loan participations convey proportionate ownership rights with equal priority to each participating interest holder; involving no recourse (other than ordinary representations and warranties) to, or subordination by, any participating interest holder; all cash flows are divided among the participating interest holders in excessproportion to each holder’s share of 30 days or more in additionownership; and no holder has the right to those loans classified as non-accrual:

		December 31, 2017
		(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		$	192			$	27			$	92			$	311			$	183,328
Real Estate-mortgage			2,656				176				2,692				5,524				385,099
Real Estate-nonfarm nonresidential			1,487				82				1,724				3,293				467,484
Commercial			393				-				1,120				1,513				165,780
Lease financing receivable			-				-				-				-				2,450
Obligations of states and
subdivisions			-				-				-				-				3,109
Consumer			57				-				46				103				18,056
Total		$	4,785			$	285			$	5,674			$	10,744			$	1,225,306

		December 31, 2016
		(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		$	204			$	96			$	658			$	958			$	109,394
Real Estate-mortgage			2,745				102				1,662				4,509				289,640
Real Estate- nonfarm nonresidential			269				-				909				1,178				314,359
Commercial			9				-				2				11				129,423
Lease finance receivable			-				-				-				-				2,204
Obligations of states and
subdivisions			-				-				-				-				6,698
Consumer			22				-				33				55				15,336
Total		$	3,249			$	198			$	3,264			$	6,711			$	867,054

83

pledge the entire financial asset unless all participating interest holders agree.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as:as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings, whichratings:

Pass: Loan classified as pass are consistent with the definitions used in supervisory guidance:

deemed to possess average to superior credit quality, requiring no more than normal attention.

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Special Mention.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.

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 Companyinstitution will sustain some loss if the deficiencies are not corrected.

Doubtful.

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.

Loans not meeting

These above classifications were the criteria above that are analyzed individuallymost current available as part of the above described process are considered to be pass rated loans.

As of December 31, 20172023, and 2016,were generally updated within the prior year.

The tables below present the amortized cost basis of loans by credit quality indicator and class of loans based on the most recent analysis performed at year ends December 31, 2023 and 2022. Revolving loans converted to term as of year ended December 31, 2023 and 2022 were not material to the total loan portfolio.

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($ in thousands)						Term Loans Amortized Cost Basis by Origination Year
As of December 31, 2023						2023						2022						2021						2020						2019						Prior						Revolving Loans						Total
Commercial, financial and agriculture:
Risk Rating
Pass						$	102,263					$	150,420					$	113,487					$	47,313					$	36,065					$	64,020					$	281,646					$	795,214
Special mention						—						—						—						141						797						3						10						951
Substandard						451						330						121						185						550						1,894						628						4,159
Doubtful						—						—						—						—						—						—						—						—
Total commercial, financial and agriculture						$	102,714					$	150,750					$	113,608					$	47,639					$	37,412					$	65,917					$	282,284					$	800,324
Current period gross write offs						$	14					$	51					$	225					$	139					$	206					$	110					$	—					$	745
Commercial real estate:
Risk Rating
Pass						$	385,954					$	825,505					$	558,742					$	377,085					$	253,746					$	569,428					$	6,397					$	2,976,857
Special mention						—						660						6,118						3,111						9,545						22,648						—						42,082
Substandard						136						7,293						393						566						5,427						26,401						—						40,216
Doubtful						—						—						—						—						—						—						—						—
Total commercial real estate						$	386,090					$	833,458					$	565,253					$	380,762					$	268,718					$	618,477					$	6,397					$	3,059,155
Current period gross write offs						$	—					$	—					$	193					$	—					$	—					$	57					$	—					$	250
Consumer real estate:
Risk Rating
Pass						$	176,144					$	334,056					$	219,071					$	127,539					$	59,615					$	163,464					$	153,821					$	1,233,710
Special mention						—						1,081						—						—						643						3,246						412						5,382
Substandard						502						404						511						1,559						514						6,988						3,225						13,703
Doubtful						—						—						—						—						—						—						—						—
Total consumer real estate						$	176,646					$	335,541					$	219,582					$	129,098					$	60,772					$	173,698					$	157,458					$	1,252,795
Current period gross write offs						$	5					$	19					$	—					$	—					$	—					$	25					$	—					$	49
Consumer installment:
Risk Rating
Pass						$	24,482					$	12,408					$	7,316					$	2,919					$	1,213					$	1,195					$	8,156					$	57,689
Special mention						—						—						—						—						—						—						—						—
Substandard						—						8						17						42						11						—						1						79
Doubtful						—						—						—						—						—						—						—						—
Total consumer installment						$	24,482					$	12,416					$	7,333					$	2,961					$	1,224					$	1,195					$	8,157					$	57,768
Current period gross write offs						$	226					$	567					$	223					$	179					$	156					$	576					$	121					$	2,048
Total
Pass						$	688,843					$	1,322,389					$	898,616					$	554,856					$	350,639					$	798,107					$	450,020					$	5,063,470
Special mention						—						1,741						6,118						3,252						10,985						25,897						422						48,415
Substandard						1,089						8,035						1,042						2,352						6,502						35,283						3,854						58,157
Doubtful						—						—						—						—						—						—						—						—
Total						$	689,932					$	1,332,165					$	905,776					$	560,460					$	368,126					$	859,287					$	454,296					$	5,170,042
Current period gross write offs						$	245					$	637					$	641					$	318					$	362					$	768					$	121					$	3,092

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($ in thousands)						Term Loans Amortized Cost Basis by Origination Year
As of December 31, 2022						2022						2021						2020						2019						2018						Prior						Revolving Loans						Total
Commercial, financial and agriculture:
Risk Rating
Pass						$	181,761					$	141,174					$	55,690					$	53,954					$	43,441					$	52,038					$	181					$	528,239
Special mention						380						5,188						1,664						—						—						412						—						7,644
Substandard						50						—						—						34						33						192						—						309
Doubtful						—						—						—						—						—						—						—						—
Total commercial, financial and agriculture						$	182,191					$	146,362					$	57,354					$	53,988					$	43,474					$	52,642					$	181					$	536,192
Commercial real estate:
Risk Rating
Pass						$	582,895					$	436,661					$	305,140					$	217,626					$	140,682					$	368,185					$	1,765					$	2,052,954
Special mention						672						1,345						3,938						11,643						9,885						16,612						—						44,095
Substandard						50						2,830						908						1,694						4,797						27,935						—						38,214
Doubtful						—						—						—						—						—						—						—						—
Total commercial real estate						$	583,617					$	440,836					$	309,986					$	230,963					$	155,364					$	412,732					$	1,765					$	2,135,263
Consumer real estate:
Risk Rating
Pass						$	325,853					$	226,355					$	136,052					$	59,376					$	51,515					$	129,923					$	112,278					$	1,041,352
Special mention						—						—						—						—						823						3,846						—						4,669
Substandard						519						554						1,481						648						1,706						6,894						1,176						12,978
Doubtful						—						—						—						—						—						—						—						—
Total consumer real estate						$	326,372					$	226,909					$	137,533					$	60,024					$	54,044					$	140,663					$	113,454					$	1,058,999
Consumer installment:
Risk Rating
Pass						$	18,925					$	11,618					$	5,031					$	2,078					$	832					$	1,445					$	3,725					$	43,654
Special mention						—						—						—						—						—						—						—						—
Substandard						4						13						24						—						3						5						—						49
Doubtful						—						—						—						—						—						—						—						—
Total consumer installment						$	18,929					$	11,631					$	5,055					$	2,078					$	835					$	1,450					$	3,725					$	43,703
Total
Pass						$	1,109,434					$	815,808					$	501,913					$	333,034					$	236,470					$	551,591					$	117,949					$	3,666,199
Special mention						1,052						6,533						5,602						11,643						10,708						20,870						—						56,408
Substandard						623						3,397						2,413						2,376						6,539						35,026						1,176						51,550
Doubtful						—						—						—						—						—						—						—						—
Total						$	1,111,109					$	825,738					$	509,928					$	347,053					$	253,717					$	607,487					$	119,125					$	3,774,157

Allowance for Credit Losses (ACL)

The ACL is a valuation account that is deducted from loans’ amortized cost basis to present the net amount expected to be collected on the loans. It is comprised of a general allowance for loans that are collectively assessed in pools with similar risk categorycharacteristics and a specific allowance for individually assessed loans. The allowance is continuously monitored by management to maintain a level adequate to absorb expected credit losses in the loan portfolio.

The ACL represents the estimated losses for financial assets accounted for on an amortized cost basis. Expected losses are calculated using relevant information, from internal and external sources, about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environment conditions, such as changes in unemployment rates, property values, or other relevant factors. Management may selectively apply external market data to subjectively adjust the Company’s own loss history including index or peer data. Expected losses are estimated over the contractual term of the loans, adjusted for expected prepayments. The contractual term excludes

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expected extensions, renewals, and modifications. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed and recoveries are credited to the allowance when received. Expected recovery amounts may not exceed the aggregate of amounts previously charged-off.

The ACL is measured on a collective basis when similar risk characteristics exist. Generally, collectively assessed loans are grouped by call code (segments). Segmenting loans by classcall code will group loans that contain similar types of collateral, purposes, and are usually structured with similar terms making each loan’s risk profile very similar to the rest in that segment. Each of these segments then flows up into one of the four bands (bands), Commercial, Financial, and Agriculture, Commercial Real Estate, Consumer Real Estate, and Consumer Installment. In accordance with the guidance in ASC 326, the Company redefined its LHFI portfolio segments and related loan classes based on the level at which risk is monitored within the ACL methodology. Construction loans (excluding mortgagefor 1-4 family residential properties with a call code 1A1, and other construction, all land development and other land loans heldwith a call code 1A2 were previously separated between the Commercial Real Estate or Consumer Real Estate bands based on loan type code. Under our ASC 326 methodology 1A1 loans are all defined as part of the Consumer Real Estate band and 1A2 loans are all defined as part of the Commercial Real Estate Band.

The PD calculation analyzes the historical loan portfolio over the given lookback period to identify, by segment, loans that have defaulted. A default is defined as a loan that has moved to past due 90 days and greater, nonaccrual status, or experienced a charge-off during the period. The model observes loans over a 12-month window, detecting any events previously defined. This information is then used by the model to calculate annual iterative count-based PD rates for sale)each segment. This process is then repeated for all dates within the historical data range. These averaged PDs are used for an immediate reversion back to the historical mean. The historical data used to calculate this input was captured by the Company from 2009 through the most recent quarter end.

The Company utilizes reasonable and supportable forecasts of future economic conditions when estimating the ACL on loans. The model’s calculation also includes a 24-month forecasted PD based on a regression model that calculated a comparison of the Company’s historical loan data to various national economic metrics during the same periods. The results showed the Company’s past losses having a high rate of correlation to unemployment, both regionally and nationally. Using this information, along with the most recently published Wall Street Journal survey of sixty economists’ forecasts predicting unemployment rates out over the next eight quarters, a corresponding future PD can be calculated for the forward-looking 24-month period. This data can also be used to predict loan losses at different levels of stress, including a baseline, adverse and severely adverse economic condition. After the forecast period, PD rates revert to the historical mean of the entire data set.

The LGD calculation is based on actual losses (charge-offs, net recoveries) at a loan level experienced over the entire lookback period aggregated to get a total for each segment of loans. The aggregate loss amount is divided by the exposure at default to determine an LGD rate. Defaults occurring during the lookback period are included in the denominator, whether a loss occurred or not and exposure at default is determined by the loan balance immediately preceding the default event. If there is not a minimum of five past defaults in a loan segment, or less than 15.0% calculated LGD rate, or the total balance at default is less than 1.0% of the balance in the respective call code as follows:

														Commercial,
(In thousands) December 31, 2017		Real Estate Commercial				Real Estate Mortgage				Installment and Other				Financial and Agriculture				Total
Pass		$	763,572			$	226,178			$	28,482			$	166,819			$	1,185,051
Special Mention			15,987				680				-				2,908				19,575
Substandard			14,979				4,622				80				1,905				21,586
Doubtful			94				-				-				23				117
Subtotal			794,632				231,480				28,562				171,655				1,226,329
Less:
Unearned Discount			710				65				-				248				1,023
Loans, net of unearned discount		$	793,922			$	231,415			$	28,562			$	171,407			$	1,225,306

														Commercial,
December 31, 2016		Real Estate Commercial				Real Estate Mortgage				Installment and Other				Financial and  Agriculture				Total
Pass		$	522,949			$	174,325			$	21,278			$	134,235			$	852,787
Special Mention			376				237				-				618				1,231
Substandard			11,873				1,336				79				208				13,496
Doubtful			-				200				-				40				240
Subtotal			535,198				176,098				21,357				135,101				867,754
Less:
Unearned Discount			378				60				-				262				700
Loans, net of unearned discount		$	534,820			$	176,038			$	21,357			$	134,839			$	867,054

of the model run date, a proxy index is used. This index is proprietary to the Company’s ACL modeling vendor derived from loss data of other client institutions similar in organization structure to the Company. The vendor also provides a “crisis” index derived from loss data between the post-recessionary years of 2008-2013 that the Company uses.

The model then uses these inputs in a non-discounted version of DCF methodology to calculate the quantitative portion of estimated losses. The model creates loan level amortization schedules that detail out the expected monthly payments for a loan including estimated prepayments and payoffs. These expected cash flows are discounted back to present value using the loan’s coupon rate instead of the effective interest rate. On a quarterly basis, the Company uses internal credit portfolio data, such as changes in portfolio volume and composition, underwriting practices, and levels of past due loans, nonaccruals and classified assets along with other external information not used in the quantitative calculation to determine if any subjective qualitative adjustments are required so that all significant risks are incorporated to form a sufficient basis to estimate credit losses.

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The following table presents the activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2023, 2022, and 2021.

			December 31, 2023
($ in thousands)			Commercial, Financial and Agriculture						Commercial Real Estate						Consumer Real Estate						Consumer Installment						Total
Allowance for credit losses:
Beginning balance			$	6,349					$	20,389					$	11,599					$	580					$	38,917
Initial allowance on PCD loans			727						2,260						182						7						3,176
Provision for credit losses			2,164						6,610						3,279						1,697						13,750
Loans charged-off			(745)						(250)						(49)						(2,048)						(3,092)
Recoveries			349						116						249						567						1,281
Total ending allowance balance			$	8,844					$	29,125					$	15,260					$	803					$	54,032

			December 31, 2022
($ in thousands)			Commercial, Financial and Agriculture						Commercial Real Estate						Consumer Real Estate						Consumer Installment						Total
Allowance for credit losses:
Beginning balance			$	4,873					$	17,552					$	7,889					$	428					$	30,742
Initial allowance on PCD loans			614						576						113						—						1,303
Provision for credit losses			688						1,742						2,786						134						5,350
Loans charged-off			(259)						(72)						(204)						(683)						(1,218)
Recoveries			433						591						1,015						701						2,740
Total ending allowance balance			$	6,349					$	20,389					$	11,599					$	580					$	38,917

			December 31, 2021
($ in thousands)			Commercial, Financial and Agriculture						Commercial Real Estate						Consumer Real Estate						Consumer Installment						Total
Allowance for credit losses:
Beginning balance			$	6,214					$	24,319					$	4,736					$	551					$	35,820
Impact of ASC 326 adoption on
non-PCD loans			(1,319)						(4,607)						5,257						(49)						(718)
Impact of ASC 326 adoption on
PCD loans			166						575						372						2						1,115
Provision for credit losses (1)			1,041						(100)						(2,314)						(83)						(1,456)
Loans charged-off			(1,662)						(3,523)						(473)						(555)						(6,213)
Recoveries			433						888						311						562						2,194
Total ending allowance balance			$	4,873					$	17,552					$	7,889					$	428					$	30,742

(1)			84			The negative provision of $1.5 million for credit losses on the consolidated statements of income is net of a $370 thousand provision for credit marks in the Cadence Bank Branches loans acquired for the year ended December 31, 2022.

The Company recorded a $13.8 million, provision for credit losses for the year ended December 31, 2023, compared to $5.4 million for the year ended December 31, 2022. The 2023 provision for credit losses increase is attributable to loan growth and the acquisition of HSBI in January 2023. Total loans were $5.116 billion at December 31, 2023, compared to $3.735 billion at December 31, 2022, representing an increase of $1.381 billion, or 37.0%. During January 2023, loans totaling $1.159 billion, net of purchase accounting adjustments, were acquired as part of the HSBI

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acquisition. The initial ACL on PCD loans recorded in March 2023, of $3.2 million was related to the HSBI acquisition. In addition, the 2023 provision for credit losses includes $10.7 million associated with day one post-merger accounting provision recorded for non-PCD loans and unfunded commitments acquired in the HSBI acquisition. The 2022 provision includes $3.9 million associated with day one post-merger accounting provision recorded for non-PCD loans and unfunded commitments and a $1.3 million initial allowance recorded on PCD loans acquired as part of the BBI merger.

The Company recorded a $5.4 million, provision for credit losses for the year ended December 31, 2022, compared to $1.5 million, negative provision for credit losses for the year ended December 31, 2021. The 2022 provision for credit losses includes $3.9 million associated with day one post-merger accounting provision recorded for non-PCD loans and unfunded commitments. A $1.3 million initial allowance was recorded on PCD loans acquired in the BBI merger. The negative provision for 2021 was composed of a $1.5 million decrease in the ACL for LHFI, net of $370 thousand provision for credit marks on the Cadence Bank Branches loans acquired. The negative provision for credit losses in 2021 was primarily due to the improved macroeconomic outlook for 2021.

The following table provides the ending balance in the Company’s LHFI and the ACL, broken down by portfolio segment as of December 31, 2023 and 2022. The table also provides additional detail as to the amount of our loans and allowance that correspond to individual versus collective impairment evaluation.

($ in thousands)						Commercial, Financial and Agriculture						Commercial Real Estate						Consumer Real Estate						Consumer Installment						Total
December 31, 2023
LHFI
Individually evaluated						$	1,414					$	710					$	778					$	—					$	2,902
Collectively evaluated						798,910						3,058,445						1,252,017						57,768						5,167,140
Total						$	800,324					$	3,059,155					$	1,252,795					$	57,768					$	5,170,042
Allowance for Credit Losses
Individually evaluated						$	408					$	—					$	—					$	—					$	408
Collectively evaluated						8,436						29,125						15,260						803						53,624
Total						$	8,844					$	29,125					$	15,260					$	803					$	54,032

($ in thousands)						Commercial, Financial and Agriculture						Commercial Real Estate						Consumer Real Estate						Consumer Installment						Total
December 31, 2022
LHFI
Individually evaluated						$	—					$	4,560					$	998					$	—					$	5,558
Collectively evaluated						536,192						2,130,703						1,058,001						43,703						3,768,599
Total						$	536,192					$	2,135,263					$	1,058,999					$	43,703					$	3,774,157
Allowance for Credit Losses
Individually evaluated						$	—					$	—					$	5					$	—					$	5
Collectively evaluated						6,349						20,389						11,594						580						38,912
Total						$	6,349					$	20,389					$	11,599					$	580					$	38,917

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NOTE F - PREMISES AND EQUIPMENT

Premises and equipment owned and utilized in the operations of the Company are stated at cost, less accumulated depreciation and amortization as follows:

		2017				2016
Premises:
Land		$	17,242,999			$	10,566,139
Buildings and improvements			31,931,767				27,463,504
Equipment			12,546,553				10,436,712
Construction in progress			1,070,775				779,833
			62,792,094				49,246,188
Less accumulated depreciation and amortization			16,366,063				14,621,836
		$	46,426,031			$	34,624,352

($ in thousands)			2023						2022
Premises:
Land			$	48,460					$	40,846
Buildings and improvements			126,013						100,830
Equipment			41,788						32,486
Construction in progress			1,808						6,447
			218,069						180,609
Less accumulated depreciation and amortization			43,760						37,091
Total			$	174,309					$	143,518

The amounts charged to operating expense for depreciation were $2,046,005, $1,653,663$7.4 million, $5.7 million, and $1,645,081$5.4 million in 2017, 20162023, 2022 and 2015,2021, respectively.

NOTE G - DEPOSITS

The aggregate amount of time

Time deposits in denominationsthat meet or exceed the FDIC Insurance limit of $250,000 or more as ofat December 31, 2017,2023 and as of December 31, 2016, was $71,596,0932022, were $292.9 million and $60,219,749$146.6 million, respectively.

At December 31, 2017,2023, the scheduled maturities of time deposits included in interest-bearing deposits were as follows (In thousands):

Year		Amount
2018		$	152,550
2019			89,431
2020			15,667
2021			9,212
2022			16,416
Thereafter			-
		$	283,276

follows:

($ in thousands)
Year						Amount
2024						$	971,259
2025						59,867
2026						13,593
2027						7,575
2028						14,935
Thereafter						8,527
Total						$	1,075,756

NOTE H - BORROWED FUNDS

Borrowed

At December 31, 2023 and 2022, borrowed funds consisted of the following:

		2017				2016
Reverse Repurchase Agreement		$	-			$	5,000,000
FHLB advances			88,072,294				48,000,000
First Tennessee Bank			16,000,000				16,000,000
		$	104,072,294			$	69,000,000

85

($ in thousands)			2023						2022
Bank Term Funding Program			$	390,000					$	—
FHLB advances			—						130,100
Total			$	390,000					$	130,100

Advances

On March 12, 2023, the Federal Reserve Board announced the Bank Term Funding Program ("BTFP"), which offers loans to banks with a term up to one year. The loans are secured by pledging the banks' U.S. treasuries, agency securities, agency securities, agency mortgage-backed securities, and any other qualifying asset. These pledged securities will be valued at par for collateral purposes. The BTFP offers up to one year fixed-rate term borrowings that are prepayable without penalty.

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In 2023, the Bank participated in the BTFP and had outstanding debt of $390.0 million, pledged securities totaling a fair value for $362.4 million at December 31, 2023. The securities pledged have a par value of $398.1 million. The Bank's BTFP borrowings, which were drawn between March 15, 2023 and December 28, 2023, bear interest rates ranging from 4.69% to 4.83% and are set to mature one year from their issuance date.

In 2022, each advance from the FHLB havewas payable at its maturity dates ranging from January 2018 through June 2019.date, with a prepayment penalty for fixed rate advances. Interest iswas payable monthly at rates ranging from .95%4.55% to 4.72%4.58%. Advances due to the FHLB are collateralized by a blanket lien on first mortgage loans in the amount of the outstanding borrowings, FHLB capital stock, and amounts on deposit with the FHLB. At December 31, 2017,In 2022, advances due to the FHLB advances availablewere collateralized by $3.651 billion in loans. Based on this collateral and unused totaled $445,799,187.

Future annual principal repayment requirements onholdings of FHLB stock, the borrowings from the FHLBCompany is eligible to borrow up to a total of $2.051 billion and $1.679 billion at December 31, 2017, were2023 and 2022, respectively.

Payments over the next five years are as follows:

Year		Amount
2018		$	77,572,294
2019			10,500,000
2020			-
2021			-
Total		$	88,072,294

As of December 31, 2016, reverse repurchase agreements consisted of one $5,000,000 agreement. The agreement was secured by securities with a fair value of $5,470,105 at December 31, 2016. On September 25, 2017, the underlying securities were repurchased and the agreement was terminated.

The Company entered into a loan agreement with First Tennessee Bank for a $20 million revolving line of credit. The maturity date is December 5, 2018. The interest rate will be at a rate of 2.50% over the LIBOR Rate. The Company executed a negative pledge agreement to which it agreed not to pledge any capital stock of the Bank so long as any indebtedness is outstanding under the line of credit. The loan agreement includes covenants that require the Company to maintain key financial ratios above or below a stated benchmark level and prohibit the Company from incurring loans other than those permitted by the loan agreement without prior written consent of the lender.

($ in thousands)
2024			$	390,000
2025			—
2026			—
2027			—
2028			—

NOTE I – LEASE OBLIGATIONS

The Company enters into leases in the normal course of business primarily for financial centers, back-office operations locations and business development offices. The Company’s leases have remaining terms ranging from 1 to 8 years.

The Company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is committed under several long-termreasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company’s balance sheet.

Leases are classified as operating or finance leases at the lease commencement date. Lease expense for operating leases which provideand short-term leases is recognized on a straight-line basis over the lease term and is recorded in net occupancy and equipment expense in the consolidated statements of income and other comprehensive income. Right-of-use assets represent our right to use an underlying asset for minimumthe lease payments. Certain leases contain options for renewal. Total rental expense under these operating leases amountedterm and lease liabilities represent our obligation to $602,000, $577,000make lease payments arising from the lease. Right-of-use assets and $530,000 aslease liabilities are recognized at the lease commencement date and based on the estimated present value of December 31, 2017, 2016 and 2015, respectively.

lease payments over the lease term.

The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is also committed under two long-term capitalnot known. The Company’s incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease agreements. One capitalterm and other factors.

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The following table details balance sheet information, as well as weighted-average lease agreement had an outstanding balance of $708,000terms and $879,000 at December 31, 2017 and 2016, respectively (included in other liabilities). This lease has a remaining term of 4 years at December 31, 2017. Assetsdiscount rates, related to the capital lease are included in premises and the cost consists of $2,675,000 less accumulated depreciation of approximately $1,651,000 and $1,390,000 at December 31, 2017 and 2016, respectively. The second capital lease agreement had an outstanding balance of $161,000 at December 31, 2017. This lease has a remaining term of two years at December 31, 2017. Assets related to the capital lease are included in premises and the cost consists of $266,000 less accumulated depreciation of approximately $22,000, and $12,000 at December 31, 2017 and 2016, respectively.

Minimum future lease payments for the operating and capital leases at December 31, 2017, were as follows:

		Operating Leases				Capital Leases
		(In thousands)
2018			536				275
2019			440				275
2020			317				191
2021			197				175
2022			146				-
Thereafter			312				-
Total Minimum Lease Payments		$	1,948			$	916
Less: Amount representing interest							(47	)
Present value of minimum lease payments						$	869

86

2023 and 2022.

($ in thousands)			December 31, 2023						December 31, 2022
Right-of-use assets:
Operating leases			$	6,387					$	7,620
Finance leases, net of accumulated depreciation			1,466						1,930
Total right-of-use assets			$	7,853					$	9,550
Lease liabilities:
Operating lease			$	6,550					$	7,810
Finance lease			1,739						1,918
Total lease liabilities			$	8,289					$	9,728
Weighted average remaining lease term
Operating leases			7.2 years						7.5 years
Finance leases			7.9 years						8.9 years
Weighted average discount rate
Operating leases			2.0%						1.8%
Finance leases			2.2%						2.2%

The table below summarizes our net lease costs.

($ in thousands)			December 31,
			2023						2022						2021
Operating lease cost			$	1,504					$	1,464					$	1,657
Finance lease cost:
Interest on lease liabilities			40						44						7
Amortization of right-of-use			464						464						263
Net lease cost			$	2,008					$	1,972					$	1,927

The table below summarizes the maturity of remaining lease liabilities at December 31, 2023.

($ in thousands)			December 31, 2023
			Operating Leases						Finance Leases
2024			$	1,144					$	220
2025			1,043						220
2026			945						222
2027			777						252
2028			691						252
Thereafter			2,439						735
Total lease payments			7,039						1,901
Less: Interest			(489)						(162)
Present value of lease liabilities			$	6,550					$	1,739

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NOTE J - REGULATORY MATTERS

On January 15, 2022, The First, A National Banking Association, a subsidiary of the Company, 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 Company and its subsidiary bank are subject to regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and its subsidiary bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgment by regulators about components, risk weightings, and other related factors.

To ensure capital adequacy, quantitative measures have been established by regulators, and these require the Company and its subsidiary bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I1 capital (as defined) to risk-weighted assets (as defined), Tier I1 capital to adjusted total assets (leverage) and common equity Tier 1.

Management believes, as of December 31, 2017,2023, that the Company and its subsidiary bank exceededmet all capital adequacy requirements.

In 2013, the Federal Reserve votedrequirements to adopt final capital rules implementing Basel III requirements for U.S. Banking organizations. Under the final rule, minimum requirements increased for both the quantity and quality of capital held by banking organizations. The final rule includes a new minimum ratio of common equity Tier 1 capital (Tier 1 Common) to risk-weighted assets and a Tier 1 Common capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of Tier 1 capital to risk-weighted assets and includes a minimum leverage ratio of 4% for all banking organizations. These new minimum capital ratios were effective on January 1, 2015, and will be fully phased in on January 1, 2019.

At December 31, 2017 and 2016, the subsidiary bank was categorized by regulators as well-capitalized under the regulatory framework for prompt corrective action.which they are subject. Under Basel III requirements, a financial institution is considered to be well-capitalized if it has a total risk-based capital ratio of 10% or more, has a Tier I1 risk-based capital ratio of 8% or more, has a common equity Tier 1 of 6.5%, and has a Tier I1 leverage capital ratio of 5% or more. There are no conditions or anticipated events that, in the opinion of management, would change the categorization.

The actual capital amounts and ratios, excluding unrealized losses, at December 31, 20172023 and 20162022 are presented in the following table. No amount was deducted from capital for interest-rate risk exposure.

(Dollars in thousands)		Company								Subsidiary
		(Consolidated)								The First
		Amount				Ratio				Amount				Ratio
December 31, 2017
Total risk-based		$	217,157				15.5	%		$	211,338				15.1	%
Common equity Tier 1			199,170				14.2	%			203,050				14.5	%
Tier I risk-based			208,869				14.9	%			203,050				14.5	%
Tier I leverage			208,869				11.7	%			203,050				11.4	%
December 31, 2016
Total risk-based		$	157,557				15.5	%		$	172,572				17.0	%
Common equity Tier 1			140,747				13.8	%			165,062				16.2	%
Tier I risk-based			150,047				14.7	%			165,062				16.2	%
Tier I leverage			150,047				11.9	%			165,062				13.1	%

87

($ in thousands)
December 31, 2023						Company (Consolidated)												Subsidiary The First
						Amount						Ratio						Amount						Ratio
Total risk-based						$	892,310					15.0		%				$	875,071					14.8		%
Common equity Tier 1						715,858						12.1		%				821,246						13.8		%
Tier 1 risk-based						740,113						12.5		%				821,246						13.8		%
Tier 1 leverage						740,113						9.7		%				821,246						10.7		%
December 31, 2022						Amount						Ratio						Amount						Ratio
Total risk-based						$	753,708					16.7		%				$	739,616					16.4		%
Common equity Tier 1						570,660						12.7		%				701,099						15.6		%
Tier 1 risk-based						586,068						13.0		%				701,099						15.6		%
Tier 1 leverage						586,068						9.3		%				701,099						11.1		%

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The minimum amounts of capital and ratios, not including Accumulated Other Comprehensive Income, as established by banking regulators at December 31,2017,31, 2023, and 2016,2022, were as follows: (Dollars in thousands)

		Company								Subsidiary
		(Consolidated)								The First
		Amount				Ratio				Amount				Ratio
December 31, 2017
Total risk-based		$	111,933				8.0	%		$	111,789				8.0	%
Common equity Tier 1			62,962				4.5	%			62,882				4.5	%
Tier I risk-based			83,949				6.0	%			83,842				6.0	%
Tier I leverage			71,362				4.0	%			71,290				4.0	%
December 31, 2016
Total risk-based		$	81,504				8.0	%		$	81,391				8.0	%
Common equity Tier 1			45,846				4.5	%			45,782				4.5	%
Tier I risk-based			61,128				6.0	%			61,043				6.0	%
Tier I leverage			50,412				4.0	%			50,364				4.0	%

($ in thousands)
December 31, 2023						Company (Consolidated)												Subsidiary The First
						Amount						Ratio						Amount						Ratio
Total risk-based						$	475,183					8.0		%				$	474,679					8.0		%
Common equity Tier 1						267,291						4.5		%				267,007						4.5		%
Tier 1 risk-based						356,387						6.0		%				356,009						6.0		%
Tier 1 leverage						237,592						4.0		%				237,339						4.0		%

December 31, 2022						Amount						Ratio						Amount						Ratio
Total risk-based						$	360,597					8.0		%				$	360,071					8.0		%
Common equity Tier 1						202,836						4.5		%				202,540						4.5		%
Tier 1 risk-based						270,447						6.0		%				270,053						6.0		%
Tier 1 leverage						180,298						4.0		%				180,035						4.0		%

The Company’sprincipal sources of funds to the Company to pay dividends if any, are expected to be made fromthe dividends received from the Bank. Consequently, dividends are dependent upon The First’s earnings, capital needs, regulatory policies, as well as statutory and regulatory limitations. Federal Reserve regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if the Company’s regulatory capital is below the level of regulatory minimums plus the applicable capital conservation buffer. Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its subsidiary bank. The OCC limitsparent company. Approval by the Company’s regulators is required if the total of all dividends of a national bankdeclared in any calendar year toexceed the total of its net profits ofincome for that year combined with theits retained net profits forincome of the preceding two preceding years.

In 2023, the Bank had available $147.3 million to pay dividends.

NOTE K - INCOME TAXES

The components of income tax expense are as follows:

		Years Ended December 31,
		2017				2016				2015
Current:
Federal		$	408,086			$	3,363,290			$	2,484,372
State			100,861				577,401				473,037
Deferred (In 2017, includes $2,080,747 due to			6,445,865				(10,352	)			255,638
Tax Cut and Jobs Act)		$	6,954,812			$	3,930,339			$	3,213,047

($ in thousands)			Years Ended December 31,
			2023						2022						2021
Current:
Federal			$	11,754					$	12,071					$	12,546
State			2,587						2,759						2,630
Deferred			7,006						940						1,739
Total income tax expense			$	21,347					$	15,770					$	16,915

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The Company's income tax expense differs from the amounts computed by applying the federal income tax statutory rates to income before income taxes. A reconciliation of the differences is as follows:

		Years Ended December 31,
		2017								2016								2015
		Amount				%				Amount				%				Amount				%
Income taxes at statutory rate		$	6,149,951				35	%		$	4,917,159				35	%		$	4,083,995				34	%
Tax-exempt income			(1,154,595	)			(6	)%			(927,506	)			(7	)%			(831,141	)			(7	)%
Nondeductible expenses			233,925				1	%			130,609				1	%			161,176				1	%
State income tax, net of federal tax effect			65,560				-				375,311				3	%			307,951				3	%
Tax credits, net			(331,080	)			(2	)%			(308,684	)			(2	)%			(295,800	)			(2	)%
Deferred tax adjustment due to Tax Cuts and Job Act			2,080,747				12	%			-				-				-				-
Other, net			(89,696	)			-				(256,550	)			(2	)%			(213,134	)			(2	)%
		$	6,954,812				40	%		$	3,930,339				28	%		$	3,213,047				27	%

On December 22, 2017, the Tax Cuts and Jobs Act was enacted which permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S corporate income tax rate, the Company reevaluated its ending net deferred tax asset as of December 31,2017 and recognized a tax expense of approximately $2.1 million.

88

($ in thousands)			Years Ended December 31,
			2023												2022												2021
			Amount						%						Amount						%						Amount						%
Income taxes at statutory rate			$	20,289					21		%				$	16,525					21		%				$	17,027					21		%
Tax-exempt income, net			(1,696)						(2)		%				(2,369)						(3)		%				(1,692)						(2)		%
Nondeductible expenses			144						—		%				391						—		%				29						—		%
State income tax, net of federal tax effect			3,064						4		%				2,251						3		%				2,299						3		%
Federal tax credits, net			(715)						(1)		%				(715)						(1)		%				(715)						(1)		%
Other, net			261						—		%				(313)						—		%				(33)						—		%
			$	21,347					22		%				$	15,770					20		%				$	16,915					21		%

The components of deferred income taxes included in the consolidated financial statements were as follows:

		December 31,
		2017				2016
Deferred tax assets:
Allowance for loan losses		$	2,096,866			$	2,897,479
Net operating loss carryover			1,500,867				2,315,140
Non-accrual loan interest			344,187				35,208
Other real estate			842,797				272,598
Unrealized loss on available-for-sale securities			150,298				642,629
Other			965,766				1,184,474
			5,900,781				7,347,528
Deferred tax liabilities:
Securities			(43,400	)			(115,737	)
Premises and equipment			(315,550	)			(449,136	)
Core deposit intangible			(204,103	)			(231,845	)
Goodwill			(989,011	)			(1,228,960	)
			(1,552,064	)			(2,025,678	)
Net deferred tax asset, included in other assets		$	4,348,717			$	5,321,850

($ in thousands)			December 31,
			2023						2022
Deferred tax assets:
Allowance for credit losses			$	13,276					$	9,581
Net operating loss carryover			27,256						24,531
Nonaccrual loan interest			826						600
Other real estate			1,092						894
Deferred compensation			1,161						1,205
Loan purchase accounting			6,438						2,554
Unrealized loss on available-for-sale securities			38,776						48,738
Lease liability			2,037						2,395
Other			5,014						3,299
			95,876						93,797
Deferred tax liabilities:
Securities			(560)						(627)
Premises and equipment			(9,017)						(6,588)
Core deposit intangible			(16,094)						(7,628)
Goodwill			(2,651)						(2,388)
Right-of-use asset			(1,929)						(2,517)
Other			(1,461)						(596)
			(31,712)						(20,344)
Net deferred tax asset/(liability), included in other assets/(liabilities)			$	64,164					$	73,453

With the acquisition of Wiggins in 2006, Baldwin Bancshares, Inc. in 2013, BayBCB Holding Company, Inc. in 2014, and Gulf Coast Community Bank in 2017, Sunshine Financial, Inc. in 2018, and FPB Financial Corp. in 2019, SWG in 2020, BBI in 2022, and HSBI in 2023, the Company assumed federal tax net operating loss carryovers. These$228.9 million of net operating losses areremain available to the Company and begin to expire as follows :

Years		Amounts
2018		$	551,818
2019			396,985
2020-2032			4,464,304
2033			281,800
2034			147,617
2035-2036			92,114
		$	5,934,638

in 2026. The Company expects to fully utilize the net operating losses.

The Company follows the guidance of ASC Topic 740,Income Taxes,which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. As of December 31, 2017,2023, the Company had no uncertain tax

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positions that it believes should be recognized in the financial statements. The tax years still subject to examination by taxing authorities are years subsequent to 2014. In February 2017, the Company was notified that its federal income tax return for 2014 was to be examined by the Internal Revenue Service. The examination was completed during 2017 with no findings.

2019.

NOTE L - EMPLOYEE BENEFITS

The Company and the Bank provide a deferred compensation arrangement (401(k)(401k plan) whereby employees contribute a percentage of their compensation. For employee contributions of six percent or less, the Company and its subsidiary bank provide a 50% matching contribution. Contributions totaled $512,800$1.5 million in 2017, $339,2002023, $1.2 million in 20162022, and $287,055$1.1 million in 2015.

2021.

The Company sponsors an Employee Stock Ownership Plan (ESOP) for employees who have completed one year of service for the Company and attained age 21. Employees become fully vested after five years of service. Contributions to the plan are at the discretion of the Board of Directors. At December 31, 2017,2023, the ESOP held 5,728 shares valued at $168 thousand of Company common stock and had no debt obligation. All shares held by the plan were considered outstanding for net income per share purposes. Total ESOP expense was $3,675$24 thousand for 2017, $5,3462023, $33 thousand for 20162022, and $25,506$3 thousand for 2015.

2021.

In 2014, the Company established a Supplemental Executive Retirement Plan (“SERP”) for three active key executives. During 2016, the Company established a SERP for eight additional active key executives. Pursuant to the SERP, these officers are entitled to receive 180 equal monthly payments commencing at the later of obtaining age 65 or separation from service. The costs of such benefits, assuming a retirement date at age 65, will beare accrued by the Company and included in other liabilities in the Consolidated Balance Sheets. The SERP balance at such retirement date.December 31, 2023 and 2022 was $4.6 million and $3.7 million, respectively. The Company accrued to expense $241,937$951 thousand for 20172023, $945 thousand for 2022, and $194,164$945 thousand for 2016 and $88,992 for 20152021 for future benefits payable under the SERP. The SERP is an unfunded plan and is considered a general contractual obligation of the Company.

89

Upon the acquisition of Iberville Bank, Southwest Banc Shares, Inc., FMB Banking Corporation, and SWG, the Bank assumed deferred compensation agreements with directors and employees. At December 31, 2017,2023, the total liability of the deferred compensation agreements was $1,189,456.$763 thousand, $1.1 million, $2.6 million, and $273 thousand, respectively. Deferred compensation expense totaled $31,309$24 thousand, $152 thousand, $112 thousand, and $19 thousand, respectively for 2017.

2023.

NOTE M - STOCK PLANS

In 2007, the Company adopted the 2007 Stock Incentive Plan. The 2007 Plan provided for the issuance of up to 315,000 shares of Company Common Stock, $1.00 par value per share. In 2015, the Company adopted an amendment to the 2007 Stock Incentive Plan which provided for the issuance of an additional 300,000 shares of Company Common Stock, $1.00 par value per share, for a total of 615,000 shares. In 2021, the Company adopted an amendment to the 2007 Stock Incentive Plan which provided for the issuance of an additional 500,000 shares of Company Common Stock, $1.00 par value per share, for a total of 1,115,000 shares. Shares issued under the 2007 Plan may consist in whole or in part of authorized but unissued shares or treasury shares. DuringTotal shares issuable under the plan are 239,964 at year-end 2023, and 167,173 and 129,950 shares were issued in 2023 and 2022, respectively.

A summary of changes in the Company’s nonvested shares for the year endedfollows:

Nonvested shares						Shares						Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2023						364,056						$	31.88
Granted						167,173
Vested						(54,094)
Forfeited						(12,194)
Nonvested at December 31, 2023						464,941						$	31.08

As of December 31, 2015, 69,327 restricted stock awards were2023, there was $8.5 million of total unrecognized compensation cost related to nonvested shares granted under the Plan. DuringThe costs are expected to be recognized over the yearremaining term of the vesting period

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(approximately 5 years). The total fair value of shares vested during the years ended December 31, 2016, 61,247 restricted stock awards were granted under the Plan. During the year ended December 31, 2017, 84,286 restricted stock awards were granted under the Plan2023, 2022 and no stock awards were forfeited due to separation. During 2017, 11,867 shares were repurchased for payment of taxes. During 2016, 9,895 shares were repurchased2021 was $1.7 million, $2.5 million, and during 2015, 6,324 shares were repurchased for payment of taxes. The weighted average grant-date fair value for these shares was $27.71 per share. $3.2 million.

Compensation costscost in the amount of $866,558$2.3 million was recognized for the year ended December 31, 2017, $772,3112023, $2.4 million was recognized for the year ended December 31, 20162022 and $721,124$3.1 million for the year ended December 31, 2015.2021. Shares of restricted stock granted to employees under this stock plan are subject to restrictions as to the vesting period. The restricted stock award becomes 100% vested on the earliest of 1) the three or five year vesting period provided the Grantee has not incurred a termination of employment prior to that date, 2) the Grantee’s retirement, or 3) the Grantee’s death. During this period, the holder is entitled to full voting rights and dividends. The dividends which are held untilby the Company and only paid if and when the grants are vested. The 2007 Plan also contains a double trigger change-in-control provision pursuant to which unvested shares of stock granted through the plan will be accelerated upon a change in control if the executive is terminated without cause as a result of the transaction (as long as the shares granted remain part of the Company or are transferred into the shares of the new company). As

In 2022, as part of December 31, 2017, there was approximately $3,012,598the BBI acquisition, the Company assumed outstanding options previously granted by BBI under the BBI 2018 Stock Option Plan ("legacy BBI options"). In connection with the assumption of unrecognized compensation expense related to this Plan. The expense is expectedthe legacy BBI options, the Company reserved for issuance 310,427 shares of common stock to be recognized over the remaining termissued upon exercise of the vesting period (approximately 4 years).

such options. These options had a weighted average exercise price of $29.23 and were fully vested upon acquisition.

NOTE N - SUBORDINATED DEBENTURES

DEBT

Debentures

On June 30, 2006, the Company issued $4,124,000$4.1 million 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.(“Trust 2”). The debentures are the sole asset of Trust 2, and the Trust. TheCompany is the sole owner of the common equity of Trust 2. Trust 2 issued $4,000,000$4.0 million of Trust Preferred Securities 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’sTrust 2’s obligations under the preferred securities. The preferred securities wereare 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 Offerthree-month term Secured Overnight Financing Rate (LIBOR)("SOFR") plus 1.65% plus a tenor spread adjustment of 0.026161% 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$6.2 million of floating rate junior subordinated deferrable interest debentures to The First Bancshares Statutory Trust 3 in which the(“Trust 3”). The Company owns all of the common equity. Theequity of Trust 3, and the debentures are the sole asset of Trust 3. The Trust 3 issued $6,000,000$6.0 million of Trust Preferred Securities 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’sTrust 3’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 2037. Interest on the preferred securities is the three month LIBORthree-month term SOFR plus 1.40% plus a tenor spread adjustment of 0.026161% and is payable quarterly. The terms of the subordinated debentures are identical to those of the preferred securities.

In 2018, as a result of the acquisition of FMB Banking Corporation ("FMB"), the Company became the successor to FMB's obligations in respect of $6.2 million of floating rate junior subordinated debentures issued to FMB Capital Trust 1 ("FMB Trust"). The debentures are the sole asset of FMB Trust, and the Company is the sole owner of the common equity of FMB Trust. FMB Trust issued $6.0 million of Trust Preferred Securities to investors. The Company’s obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of FMB Trust's obligations under the preferred securities. The preferred securities issued by the FMB Trust are redeemable by the Company at its option. The preferred securities must be redeemed upon maturity of the debentures in 2033. Interest on the preferred securities is the three-month term SOFR plus 2.85% plus a tenor spread adjustment of 0.026161% and is payable quarterly.

On January 1, 2023, as a result of the acquisition of HSBI, the Company became the successor to HSBI's obligations in respect of $10.3 million of subordinated debentures issued to Liberty Shares Statutory Trust II ("Liberty Trust"). The debentures are the sole asset of Liberty Trust, and the Company is the sole owner of the common equity of Liberty Trust. Liberty Trust issued $10.0 million of preferred securities to an investor. The Company's obligations under the debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of

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Liberty Trust's obligations under the preferred securities. The preferred securities issued by the Liberty Trust 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 term SOFR plus 1.48% plus a tenor spread adjustment of 0.026161% and is payable quarterly.

In accordance with the provisions of ASC Topic 810,Consolidation,the trustsTrust 2, Trust 3, FMB Trust, and Liberty Trust are not included in the consolidated financial statements.

Notes

On April 30, 2018, The Company entered into two Subordinated Note Purchase Agreements pursuant to which the Company sold and issued $24.0 million in aggregate principal amount of 5.875% fixed-to-floating rate subordinated notes due 2028 (the "Notes due 2028") and $42.0 million in aggregate principal amount of 6.40% fixed-to-floating rate subordinated notes due 2033 (the “Notes due 2033”). In May of 2023, the Company redeemed all $24.0 million of the outstanding 5.875% fixed-to-floating rate subordinated notes due 2028.

The Notes due 2033 are not convertible into or exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Notes due 2033 are not subject to redemption at the option of the holder. Principal and interest on the Notes due 2033 are subject to acceleration only in limited circumstances. The Notes due 2033 are unsecured, subordinated obligations of the Company and rank junior in right to payment to the Company’s current and future senior indebtedness, and each Note is pari passu in right to payment with respect to the other Notes. The Notes due 2033 have a fifteen year term, maturing May 1, 2033, and will bear interest at a fixed annual rate of 6.40%, payable quarterly in arrears, for the first ten years of the term. Thereafter, the interest rate will re-set quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be three-month term SOFR plus 3.39% plus a tenor spread adjustment of 0.026161%), payable quarterly in arrears. As provided in the Notes due 2033, under specified conditions the interest rate on the Notes due 2033 during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Company is entitled to redeem the Notes due 2033, in whole or in part, on any interest payment date on or after May 1, 2028, and to redeem the Notes due 2033 at any time in whole upon certain other specified events.

On September 25, 2020, The Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers pursuant to which the Company sold and issued $65.0 million in aggregate principal amount of its 4.25% Fixed to Floating Rate Subordinated Notes due 2030 (the "Notes due 2030"). The Notes due 2030 are unsecured and have a ten-year term, maturing October 1, 2030, and will bear interest at a fixed annual rate of 4.25%, payable semi-annually in arrears, for the first five years of the term. Thereafter, the interest rate will reset quarterly to an interest rate per annum equal to a benchmark rate (which is expected to be the Three-Month Term SOFR plus 412.6 basis points), payable quarterly in arrears. As provided in the Notes due 2030, under specified conditions the interest rate on the Notes due 2030 during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Company is entitled to redeem the Notes due 2030, in whole or in part, on any interest payment date on or after October 1, 2025, and to redeem the Notes due 2030 at any time in whole upon certain other specified events.

The Company had $123.4 million of subordinated debt, net of deferred issuance costs $1.6 million and unamortized fair value mark $2.1 million, at December 31, 2023, compared to $145.0 million, net of deferred issuance costs $1.9 million and unamortized fair value mark $593 thousand, at December 31, 2022. The decrease in subordinated debt was attributable to the Company's redemption of $24.0 million of its Notes due 2028 and the Company's repayment of $2.0 million of its Notes due 2030 in May of 2023, which resulted in the Company recording a $217 thousand gain on the repurchased debt. The decrease in subordinated debt was partially offset by the addition of $9.0 million, net purchase accounting adjustments, of subordinated debt that the Company acquired as part of the HSBI acquisition.

NOTE O - TREASURY STOCK

Shares held in treasury totaled 26,4941,249,607 at December 31, 2017, 2016,2023, 1,249,607 at December 31, 2022 and 2015.

649,607 at December 31, 2021.

On February 8, 2022, the Company announced the renewal of the 2021 Repurchase Program that previously expired on December 31, 2021. Under the renewed 2021 Repurchase Program, the Company could repurchase up to an aggregate of $30.0 million of the Company’s issued and outstanding common stock in any manner determined appropriate by the Company’s management, less the amount of prior purchases under the program during the 2021 calendar year. The renewed 2021 Repurchase Program was completed in February 2022 when the Company’s repurchases under the program

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approached the maximum authorized amount. The Company repurchased 600,000 shares under the 2021 Repurchase Program in the first quarter of 2022.

On March 9, 2022, the Company announced that its Board of Directors authorized a new share repurchase program (the “2022 Repurchase Program”), pursuant to which the Company could purchase up to an aggregate of $30.0 million in shares of the Company’s issued and outstanding common stock during the 2022 calendar year. Under the program, the Company could, but was not required to, from time to time repurchase up $30.0 million of shares of its own common stock in any manner determined appropriate by the Company’s management. The actual timing and method of any purchases, the target number of shares and the maximum price (or range of prices) under the program, was determined by management at is discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The 2022 Repurchase Program expired on December 31, 2022.

The Inflation Reduction Act of 2022 signed into law in August 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax is effective beginning in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not expect a material impact to our statement of condition or result of operations.

On February 28, 2023, the Company announced that its Board of Directors has authorized a new share repurchase program (the "2023 Repurchase Program"), pursuant to which the Company may purchase up to an aggregate of $50.0 million in shares of the Company's issued and outstanding common stock during the 2023 calendar year. Under the program, the Company may, but is not required to, from time to time repurchase up $50.0 million of shares of its own common stock in any manner determined appropriate by the Company’s management. The actual timing and method of any purchases, the target number of shares and the maximum price (or range of prices) under the program, will be determined by management at is discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The 2023 Repurchase Program expired on December 31, 2023.

On February 28, 2024, the Company announced that its Board of Directors has authorized a new share repurchase program (the "2024 Repurchase Program"), pursuant to which the Company may purchase up to an aggregate of $50.0 million in shares of the Company's issued and outstanding common stock during the 2024 calendar year. Under the program, the Company may, but is not required to, from time to time repurchase up $50.0 million of shares of its own common stock in any manner determined appropriate by the Company’s management. The actual timing and method of any purchases, the target number of shares and the maximum price (or range of prices) under the program, will be determined by management at is discretion and will depend on a number of factors, including the market price of the Company’s common stock, general market and economic conditions, and applicable legal and regulatory requirements. The 2024 Repurchase Program will expire on December 31, 2024.

NOTE P - RELATED PARTY TRANSACTIONS

In the normal course of business, the Bank makes loans to its directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices, and are within applicable regulatory and lending limitations. Such loans amounted to approximately $15,137,000$23.7 million and $15,788,000$28.3 million at December 31, 20172023 and 2016,2022, respectively. The activity in loans to current directors, executive officers, and their affiliates during the year ended December 31, 2017,2023, is summarized as follows (in thousands):

follows:

($ in thousands)			90
Loans outstanding at beginning of year			$	28,338
Advances/new loans			725
Removed/payments			(5,383)
Loans outstanding at end of year			$	23,680

Deposits from principal officers, directors, and their affiliates at year-end 2023 and 2022 were $15.6 million and $16.8 million.

Loans outstanding at beginning of year		$	15,788
New loans			250
Repayments			(901	)
Loans outstanding at end of year		$	15,137

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NOTE Q - COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS OF CREDIT RISK

In the normal course of business, there are outstanding various commitments and contingent liabilities, such as guaranties, commitments to extend credit, overdraft protection, etc., which are not reflected in the accompanying financial statements. The subsidiary bank had outstanding letters of credit of $8,207,000 and $1,742,000 at December 31, 2017 and 2016, respectively, and had made loan commitments of approximately $281,381,000 and $220,252,000 at December 31, 2017 and 2016, respectively.

Commitments to extend credit and letters of credit include some exposure to credit loss in the event of nonperformance of the customer. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit policies and procedures for such commitments are the same as those used for lending activities. Because these instruments have fixed maturity dates and because a number expire without being drawn upon, they generally do not present any significant liquidity risk. No significant losses on commitments were incurred during the two years ended December 31, 2017,2023 and 2022, nor are any significant losses as a result of these transactions anticipated.

The primary market areas servedcontractual amounts of financial instruments with off-balance-sheet risk at year-end were as follows:

			2023												2022
($ in thousands)			Fixed Rate						Variable Rate						Fixed Rate						Variable Rate
Commitments to make loans			$	34,380					$	50,226					$	43,227					$	15,758
Unused lines of credit			231,335						605,646						243,043						404,025
Standby letters of credit			15,573						13,114						4,260						9,909

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 1 year to 30 years.

ALLOWANCE FOR CREDIT LOSSES (“ACL”) ON OFF BALANCE SHEET CREDIT (“OBSC”) Exposures

The Company adopted ASC 326, effective January 1, 2021, which requires the Company to estimate expected credit losses for OBSC exposures which are not unconditionally cancellable. 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 for the years ended December 31, 2023 and 2022. 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)			2023						2022						2021
Balance at beginning of period			$	1,325					$	1,070					$	—
Adoption of ASU 326			—						—						718
Credit loss expense related to OBSC exposures			750						255						352
Balance at end of period			$	2,075					$	1,325					$	1,070

Adjustments to the ACL on OBSC exposures are recorded to provision for credit losses OBSC exposures. The Company recorded $750 thousand, $255 thousand, and $352 thousand to the provision for credit losses OBSC exposures for the years ended December 31, 2023, 2022, and 2021 respectively. The increase in the ACL on OBSC exposures for the year ended December 31, 2023 compared to the same period in 2022 was due to the day one provision for unfunded commitments related to the HSBI acquisition and an increase in unfunded commitments.

No credit loss estimate is reported for OBSC exposures that are unconditionally cancellable by the Bank are Forrest, Lamar, Jones, Pearl River, Jackson, Hancock, Stone, Harrison Counties within SouthCompany or for undrawn amounts under such arrangements that may be drawn prior to the cancellation on the arrangement.

The Company currently has 110 full-service banking and financial service offices, one motor bank facility and five loan production offices across Mississippi, Madison County in Central Mississippi, as well as Washington Parish, St. Tammany Parish, Plaquemine ParishAlabama, Florida, Georgia, and East Baton Rouge Parish in Louisiana, Baldwin and Mobile Counties in South Alabama, and Escambia County in Northwestern Florida.Louisiana. Management closely monitors its credit concentrations and attempts to diversify the portfolio within its primary market area. As of December 31, 2017,2023, management does not consider there to be any significant credit concentrations within the loan portfolio. Although the

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Bank’s loan portfolio, as well as existing commitments, reflects the diversity of its primary market area, a substantial portion of a borrower's ability to repay a loan is dependent upon the economic stability of the area.

In the normal course of business, the Company and its subsidiary are subject to pending and threatened legal actions. Although the Company is not able to predict the outcome of such actions, after reviewing pending and threatened actions with counsel, management believes that based on the information currently available the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial statements.

NOTE R - FAIR VALUES OF ASSETS AND LIABILITIES

The Company follows the guidance of ASC Topic 820,Fair Value Measurements and Disclosures, that which establishes a framework for measuring fair value and expands disclosures about fair value measurements.

The guidance defines the fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

In accordance with the guidance, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities 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.

91

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.

Following

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:Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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 descriptionreasonable estimate of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets.

Available-for-Salevalue.

Debt 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. Level 1 securities include mutual funds. 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 available-for-sale For securities thatwhere quoted prices or market prices of similar securities are measured atnot available, fair value on a recurring basis and the level within the hierarchy in which the fair value measurements fell as of December 31, 2017 and 2016 (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)
December 31, 2017
Obligations of U.S. Government agencies		$	4,992			$	-			$	4,992			$	-
Municipal securities			138,584				-				138,584				-
Mortgage-backed securities			196,578				-				196,578				-
Corporate obligations			15,819				-				13,250				2,569
Other			920				920				-				-
Total		$	356,893			$	920			$	353,404			$	2,569

						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)
December 31, 2016
Obligations of U.S. Government agencies		$	9,045			$	-			$	9,045			$	-
Municipal securities			98,822				-				98,822				-
Mortgage-backed  securities			114,289				-				114,289				-
Corporate obligations			20,110				-				17,869				2,241
Other			940				940				-				-
Total		$	243,206			$	940			$	240,025			$	2,241

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

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(In thousands)		Bank-Issued Trust Trust Preferred Securities
		2017				2016				2015
Balance of recurring Level 3 assets at January 1		$	2,241			$	2,557			$	2,801
Transfers into Level 3			-				-				-
Transfers out of Level 3			-				-				-
Unrealized income (loss) included in comprehensive Income			328				(316	)			(244	)
Balance of recurring Level 3 assets at December 31		$	2,569			$	2,241			$	2,557

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
December 31, 2017		$	2,569			Discounted cash flow		Discount rate		2.07% - 3.77%
December 31, 2016		$	2,241			Discounted cash flow		Discount rate		1.50% - 3.34%
December 31, 2015		$	2,557			Discounted cash flow		Discount rate		1.08% - 2.77%

Following is a description of the valuation methodologies used for assets and liabilities 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 and liabilities pursuant to the valuation hierarchy.

Impaired Loans

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual termsvalues 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,calculated 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, premiums or discounts 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 consists of properties obtained through foreclosure. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Fair value of other real estate owned is based on current independent appraisals. 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 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 income. Other real estate owned measured at fair value on a non-recurring basis at December 31, 2017, amounted to $7,158,409. Other real estate owned is classified within Level 2 of the fair value hierarchy.

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fell at December 31, 2017 and 2016 (In thousands)market indicators (Level 3).

93

						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)
December 31, 2017
Impaired loans		$	10,574			$	-			$	10,574			$	-
Other real estate owned			7,158				-				7,158				-
December 31, 2016
Impaired loans		$	6,128			$	-			$	6,128			$	-
Other real estate owned			6,007				-				6,007				-

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 and other securities.

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

Bank-owned Life Insurance– Thematurities, in accordance with the exit price notion as defined by FASB ASC 820, Fair Value Measurement ("ASC 820"). Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments and as a result of the adoption of ASU 2016-01, which also included credit risk and other market factors to calculate the exit price fair value in accordance with ASC 820.

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Loans Held for Sale - Loans held for sale are carried at fair value in the aggregate as determined by the outstanding commitments from investors. As, such we classify those loans subjected to nonrecurring fair value adjustments as Level 2 of bank-owned life insurance approximates the fair value hierarchy.

Interest Rate Swaps - The Company offers interest rate swaps to certain commercial loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable to fixed interest rate swap with the customer. The Company also enters into an offsetting swap with a correspondent bank. These back-to-back agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing the contract or fixed interest payments for the customer. In addition, the Company will enter into risk participation agreements ("RPA"). Under an RPA-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower, for a fee received from the other bank. Under an RPA-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. RPAs are derivative financial instruments recorded at fair value. Although we have determined that a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit assumptions associated with our risk participation agreements utilize Level 3 inputs.

Accrued Interest Receivable – The carrying amount because upon liquidation of theseaccrued interest receivable approximates fair value and is classified as level 2 for accrued interest receivable related to investments the Company would receive the cash surrender value which equals the carrying amount.

securities and Level 3 for accrued interest receivable related to loans.

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 non-interest-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 areis 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 –Fair values are determined based on the current market value of like instruments of a similar maturity and structure.

Accrued Interest Payable – The subordinated debentures bearcarrying amount of accrued interest atpayable approximates fair value resulting in a variable rate and the carrying value approximates the fair value.

Level 2 classification.

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.

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The following table presents the Company’s securities 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 December 31, 2023 and 2022:

December 31, 2023						Fair Value Measurements
($ in thousands)						Fair Value						Quoted Prices in Active Markets For Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale
U.S. Treasury						$	16,675					$	16,675					$	—					$	—
Obligations of U.S. government agencies and sponsored entities						104,923						—						104,923						—
Municipal securities						438,466						—						420,283						18,183
Mortgage-backed Securities						441,661						—						441,661						—
Corporate obligations						37,597						—						37,567						30
Other						3,043						—						3,043						—
Total investment securities available-for-sale						$	1,042,365					$	16,675					$	1,007,477					$	18,213
Loans held for sale						2,914						—						2,914						—
Interest rate swaps						$	12,170					$	—					$	12,129					$	41
Liabilities:
Interest rate swaps						$	12,175					$	—					$	12,129					$	46

December 31, 2022						Fair Value Measurements
($ in thousands)						Fair Value						Quoted Prices in Active Markets For Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale
U.S. Treasury						$	123,854					$	123,854					$	—					$	—
Obligations of U.S. government agencies and sponsored entities						144,369						—						144,369						—
Municipal securities						457,857						—						442,740						15,117
Mortgage-backed securities						490,139						—						490,139						—
Corporate obligations						40,882						—						40,851						31
Total investment securities available-for-sale						$	1,257,101					$	123,854					$	1,118,099					$	15,148
Loans held for sale						$	4,443					$	—					$	4,443					$	—
Interest rate swaps						$	12,825					$	—					$	12,825					$	—
Liabilities:
Interest rate swaps						$	12,825					$	—					$	12,825					$	—

The following is a reconciliation of activity for assets measured at fair value based on significant unobservable (Level 3) information:

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						Bank-Issued Trust Preferred Securities
($ in thousands)						2023						2022
Balance, January 1						$	31					$	43
Paydowns						(1)						(12)
Balance, December 31						$	30					$	31

						Municipal Securities
($ in thousands)						2023						2022
Balance, January 1						$	15,117					$	20,123
Maturities, calls and paydowns						(2,639)						(2,328)
Transfer from level 2 to level 3						6,085						—
Unrealized (loss) gain included in comprehensive income						(380)						(2,678)
Balance, December 31						$	18,183					$	15,117

						Interest Rate Swaps - Risk Participations
($ in thousands)			94			2023
Balance, January 1						$	—
RPA-in						(46)
RPA-out						41
Balance at December 31						$	(5)

The following methods and assumptions were used to estimate the fair values of the Company’s assets measured at fair value on a recurring basis at December 31, 2023 and 2022. The following tables present quantitative information about recurring Level 3 fair value measurements:

($ in thousands)

Bank-Issued Trust Preferred Securities

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range of Inputs

December 31, 2023

$

30

Discounted cash flow

Discount rate

7.81% - 7.89%

December 31, 2022

$

31

Discounted cash flow

Discount rate

6.98% - 7.19%

Municipal Securities

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range of Inputs

December 31, 2023

$

18,183

Discounted cash flow

Discount rate

2.34% - 5.50%

December 31, 2022

$

15,117

Discounted cash flow

Discount rate

3.00% - 4.00%

As of December 31, 2017										Fair Value Measurements
(In thousands)		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		$	91,922			$	91,922			$	91,922			$	-			$	-
Securities available-for-sale			356,893				356,893				920				353,404				2,569
Securities held-to-maturity			6,000				7,398				-				7,398				-
Other securities			9,969				9,969				-				9,969				-
Loans, net			1,221,808				1,238,525				-				-				1,238,525
Bank-owned life insurance			27,054				27,054				-				27,054				-
Liabilities:
Non-interest-bearing deposits		$	301,989			$	301,989			$	-			$	301,989			$	-
Interest-bearing deposits			1,168,576				1,165,682				-				1,165,682				-
Subordinated debentures			10,310				10,310				-				-				10,310
FHLB and other borrowings			104,072				104,072				-				104,072				-

As of December 31, 2017										Fair Value Measurements
(In thousands)		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		$	62,119			$	62,119			$	62,119			$	-			$	-
Securities available-for-sale			243,206				243,206				940				240,025				2,241
Securities held-to-maturity			6,000				7,394				-				7,394				-
Other securities			6,593				6,593				-				6,593				-
Loans, net			865,424				883,161				-				-				883,161
Bank-owned life insurance			21,250				21,250				-				21,250				-
Liabilities:
Non-interest-bearing deposits		$	202,478			$	202,478			$	-			$	202,478			$	-
Interest-bearing deposits			836,713				835,658				-				835,658				-
Subordinated debentures			10,310				10,310				-				-				10,310
FHLB and other borrowings			69,000				69,000				-				69,000				-

Interest Rate Swaps - Risk Participations

Fair Value

Valuation Technique

Significant Unobservable Inputs

Range of Inputs

December 31, 2023

$

(5)

Credit Value Adjustment

Credit Spread

225 bps - 300 bps

Recovery Rate

70%

Following is a description of the valuation methodologies used for assets and liabilities 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 and liabilities pursuant to the valuation hierarchy.

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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 the independent appraisers to adjust for differences between the comparable sales and income date 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 adjusts the appraisal for cost associated with litigation and collections. 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 costs 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 adjust the appraisal 10 percent 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 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 income. Other real estate measured at fair value on a non-recurring basis at December 31, 2023, amounted to $8.3 million. Other real estate owned is classified within Level 3 of the fair value hierarchy.

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements were reported at December 31, 2023 and 2022:

						Fair Value Measurements Using
($ in thousands)						Fair Value						Quoted Prices in Active Markets For Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
December 31, 2023
Collateral dependent loans						$	2,494					$	—					$	—					$	2,494
Other real estate owned						8,320						—						—						8,320
December 31, 2022
Collateral dependent loans						$	5,552					$	—					$	—					$	5,552
Other real estate owned						4,832						—						—						4,832

118

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

						Fair Value Measurements
December 31, 2023						Carrying Amount						Estimated Fair Value						Quoted Prices (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
($ in thousands)
Financial Instruments:
Assets:
Cash and cash equivalents						$	355,147					$	355,147					$	355,147					$	—					$	—
Securities available-for-sale						1,042,365						1,042,365						16,675						1,007,477						18,213
Securities held-to-maturity						654,539						615,944						—						615,944						—
Loans held for sale						2,914						2,914						—						2,914						—
Loans, net						5,116,010						4,877,935						—						—						4,877,935
Accrued interest receivable						33,300						33,300						—						8,632						24,668
Interest rate swaps						12,170						12,170						—						12,129						41
Liabilities:
Non-interest-bearing deposits						$	1,849,013					$	1,849,013					$	—					$	1,849,013					$	—
Interest-bearing deposits						4,613,859						4,430,227						—						4,430,227						—
Subordinated debentures						123,386						109,426						—						—						109,426
FHLB and other borrowings						390,000						390,000						—						390,000						—
Accrued interest payable						22,702						22,702						—						22,702						—
Interest rate swaps						12,175						12,175						—						12,129						46

						Fair Value Measurements
December 31, 2022						Carrying Amount						Estimated Fair Value						Quoted Prices (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
($ in thousands)
Financial Instruments:
Assets:
Cash and cash equivalents						$	145,315					$	145,315					$	145,315					$	—					$	—
Securities available-for-sale						1,257,101						1,257,101						123,854						1,118,099						15,148
Securities held-to-maturity						691,484						642,097						—						642,097						—
Loans held for sale						4,443						4,443						—						4,443						—
Loans, net						3,735,240						3,681,313						—						—						3,681,313
Accrued interest receivable						27,723						27,723						—						9,757						17,966
Interest rate swaps						12,825						12,825						—						12,825						—
Liabilities:
Non-interest-bearing deposits						$	1,630,203					$	1,630,203					$	—					$	1,630,203					$	—
Interest-bearing deposits						3,864,201						3,505,990						—						3,505,990						—
Subordinated debentures						145,027						133,816						—						—						133,816
FHLB and other borrowings						130,100						130,100						—						130,100						—
Accrued interest payable						3,324						3,324						—						3,324						—
Interest rate swaps						12,825						12,825						—						12,825						—

119

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NOTE S - PREFERRED STOCK

PursuantREVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized within non-interest income. The guidance does not apply to revenue associated with financial instruments, including loans and investment securities that are accounted for under other GAAP, which comprise a significant portion of our revenue stream. A description of the termsCompany’s revenue streams accounted for under ASC 606 is as follows:

Service Charges on Deposit Accounts: The Company earns fees from deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed at the point in the time the Company fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a letter agreement betweenmonth, representing the Company and the United States Department of the Treasury (“Treasury”), the Company issued 17,123 CDCI Preferred Shares.

95

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 were declared and paid in 2011 through 2016) and on the Company’s ability to repurchase its common stock in the event of a non-payment of our dividend, 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.

On May 13, 2015, The First Bancshares, Inc. (the “Company”) entered into a Letter Agreement (the “Letter Agreement”), with the United States Department of the Treasury (“Treasury”), pursuant toperiod over which the Company redeemedsatisfies the Warrantperformance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Interchange Income: The Company earns interchange fees from debit and credit card holder transaction conducted through various payment networks. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided by the cardholder.

Gains/Losses on Sales of OREO: The Company records a gain or loss from the sale of OREO when control of the property transfers to purchase upthe buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to 54,705 sharesthe buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether the collectability of the transaction prices is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present.

All of the Company’s common stock, no par value per share (the “Common Stock”) issued to Treasury on February 6, 2009 underrevenue from contracts with customers in the Capital Purchase Program. In connection with this redemption, on May 13, 2015,scope of ASC 606 is recognized within non-interest income. The following table presents the Company paid Treasury an aggregate redemption priceCompany’s sources of $302,410.

On December 6, 2016, the Company repurchased all 17,123 shares of its CDCI Preferred Shares at fair market value of $15,925,000, which equated to a discount of 7% to par, or $1,198,000.

On October 14, 2016, the Company issued 3,563,380 shares of Series E Convertible Preferred Stock at $17.75 per share in a private placement offering and received approximately $59,744,000 in net proceeds after offering expenses of $3,506,000. The net proceeds from this private placement were used to finance the Iberville Bank acquisition and pay related expenses, to support our capital ratios in connection with the Iberville Bank acquisition and Gulf Coast Community Bank acquisition, andnon-interest income for general corporate purposes. All 3,563,380 shares of the Series E Convertible Preferred Stock were converted into 3,563,380 shares of common stock on January 4, 2017, following shareholder approval. Dividends were declared and paid on the Series E Convertible Preferred Stock.

NOTE T – SUBSEQUENT EVENTS

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

On March 1, 2018, the Company completed its acquisition of Southwest Banc Shares, Inc., (“Southwest”), and immediately thereafter merged First Community Bank with and into The First. The Company paid a total consideration of approximately $60.0 million in stock and cash. At December 31, 2017, First Community Bank had $400.6 million in total assets.

2023, 2022, and 2021. Items outside the scope of ASC 606 are noted as such.

($ in thousands)			Year Ended December 31, 2023
			Commercial/ Retail Bank						Mortgage Banking Division						Holding Company						Total
Revenue by Operating Segments
Non-interest income
Service charges on deposits
Overdraft fees			$	8,154					$	—					$	—					$	8,154
Other			6,021						—						—						6,021
Interchange income			18,914						—						—						18,914
Investment brokerage fees			1,623						—						—						1,623
Net gains on OREO			6						—						—						6
Net losses on sales of securities (1)			(9,716)						—						—						(9,716)
Gain on premises and equipment			35						—						—						35
Gain on sale of loans			1,512						—						—						1,512
Other			10,307						2,866						6,983						20,156
Total non-interest income			$	36,856					$	2,866					$	6,983					$	46,705

120

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($ in thousands)			Year Ended December 31, 2022
			Commercial/ Retail Bank						Mortgage Banking Division						Holding Company						Total
Revenue by Operating Segments
Non-interest income
Service charges on deposits
Overdraft fees			$	4,023					$	93					$	—					$	4,116
Other			8,679						—						—						8,679
Interchange income			12,702						—						—						12,702
Investment brokerage fees			1,566						—						—						1,566
Net gains on OREO			214						—						—						214
Net losses on sales of securities (1)			(82)						—						—						(82)
Gain on acquisition (1)			281						—						—						281
Loss on premises and equipment			(116)						—						—						(116)
Other			2,724						4,210						2,667						9,601
Total non-interest income			$	29,991					$	4,303					$	2,667					$	36,961

($ in thousands)			Year Ended December 31, 2021
			Commercial/ Retail Bank						Mortgage Banking Division						Holding Company						Total
Revenue by Operating Segments
Non-interest income
Service charges on deposits
Overdraft fees			$	3,122					$	—					$	—					$	3,122
Other			4,140						2						—						4,142
Interchange income			11,562						—						—						11,562
Investment brokerage fees			1,349						—						—						1,349
Net (losses) on OREO			(300)						—						—						(300)
Net gains on sales of securities (1)			143						—						—						143
Gain on acquisition (1)			1,300						—						—						1,300
Loss on premises and equipment			(264)						—						—						(264)
Other			7,487						8,821						111						16,419
Total non-interest income			$	28,539					$	8,823					$	111					$	37,473

In connection with the acquisition, preliminarily, the Company expects to record approximately $26.3 million

(1)Not within scope of goodwill and $3.3 million of core deposit intangible. The core deposit intangible is to be expensed over 10 years.

The Company acquired the $278 million loan portfolio at an estimated fair value discount of $4.4 million. The discount represents expected credit losses, adjusted for market interest rates and liquidity adjustments.

Expenses associated with the acquisition were $3.6 million for the twelve month period ended December 31, 2017. These costs included charges associated with due diligence as well as legal and consulting expenses, which have been expensed as incurred.

The following unaudited pro-forma financial information for the year ended December 31, 2017, gives effect to the acquisition as if the acquisition had occurred on January 1, 2017. The pro-forma financial information is not necessarily indicative of the results of operations had the acquisition been effective as of this date.

(In thousands)		Pro-Forma
		December 31, 2017
		(unaudited)
Net interest income		$	73,250
Non-interest income			17,481
Total revenue			90,731
Income before income taxes		$	17,930

Supplemental pro-forma earnings for 2017 were adjusted to exclude acquisition costs incurred during 2017.

To fund the cash portion of the purchase price for the Company’s announced acquisition of Southwest, to fund other potential future acquisitions, and for general corporate purposes, including the repayment of debt and to support organic growth, the Company completed a sale in October, 2017, of an aggregate of 2,012,500 shares of its common stock in a public offering. Net proceeds after underwriting discounts and estimated expenses were approximately $55.2 million.

96

ASC 606.

121

On December 6, 2017, the Company entered into an Agreement and Plan of Merger with Sunshine Financial, Inc. (“Sunshine”), parent company of Sunshine Community Bank, whereby Sunshine will be merged with and into the Company (the “Sunshine Merger”). Sunshine’s wholly owned subsidiary bank, Sunshine Community Bank, (“Sunshine Community Bank”) will be merged with and into The First immediately following the Sunshine Merger. At December 31, 2017, Sunshine Community Bank had total assets of approximately $200.7 million. This transaction is expected to close in the second quarter of 2018, subject to shareholder approval. Regulatory approval was received February 27, 2018.

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NOTE UT - PARENT COMPANY FINANCIAL INFORMATION

The balance sheets, statements of income and cash flows for The First Bancshares, Inc. (parent company only) follow.

follows:

Condensed Balance Sheets

		December 31,
		2017				2016
Assets:
Cash and cash equivalents		$	20,435,721			$	69,158
Investment in subsidiary bank			226,648,005				179,541,693
Investments in statutory trusts			310,000				310,000
Other			1,480,791				1,112,514
		$	248,874,517			$	181,033,365
Liabilities and Stockholders’ Equity:
Subordinated debentures		$	10,310,000			$	10,310,000
Advances from First Tennessee Bank			16,000,000				16,000,000
Other			96,597				196,658
Stockholders’ equity			222,467,920				154,526,707
		$	248,874,517			$	181,033,365

			December 31,
($ in thousands)			2023						2022
Assets:
Cash and cash equivalents			$	13,485					$	9,843
Investment in subsidiary bank			1,056,369						778,885
Investments in statutory trusts			806						496
Bank owned life insurance			348						333
Other			3,275						3,962
			$	1,074,283					$	793,519
Liabilities and Stockholders’ Equity:
Subordinated debentures			$	123,386					$	145,027
Other			1,863						1,830
Stockholders’ equity			949,034						646,663
			$	1,074,283					$	793,519

Condensed Statements of Income

		Years Ended December 31,
		2017				2016				2015
Income:
Interest and dividends		$	8,296			$	6,680			$	5,573
Dividend income			3,675,000				2,875,000				1,650,000
Other			51,030				-				-
			3,734,326				2,881,680				1,655,573
Expenses:
Interest on borrowed funds			859,823				222,152				185,351
Legal and professional			1,097,590				910,214				295,637
Other			1,349,143				1,240,863				833,502
			3,306,556				2,373,229				1,314,490
Income before income taxes and equity in undistributed income of subsidiary			427,770				508,451				341,083
Income tax benefit			1,222,012				835,757				487,853
Income before equity in undistributed income of Subsidiary			1,649,782				1,344,208				828,936
Equity in undistributed income of subsidiary			8,966,694				8,774,479				7,969,766
Net income		$	10,616,476			$	10,118,687			$	8,798,702

97

			Years Ended December 31,
($ in thousands)			2023						2022						2021
Income:
Interest and dividends			$	36					$	17					$	10
Dividend income			65,000						16,000						—
Other			6,983						2,667						111
			72,019						18,684						121
Expenses:
Interest on borrowed funds			7,970						7,492						7,375
Legal and professional			1,136						593						941
Other			6,266						7,498						4,828
			15,372						15,583						13,144
Income (loss) before income taxes and equity in undistributed income of subsidiary			56,647						3,101						(13,023)
Income tax benefit			2,005						3,263						3,295
Income (loss) before equity in undistributed income of subsidiary			58,652						6,364						(9,728)
Equity in undistributed income of subsidiary			16,805						56,555						73,895
Net income			$	75,457					$	62,919					$	64,167

122

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Condensed Statements of Cash Flows

		Years Ended December 31,
		2017				2016				2015
Cash flows from operating activities:
Net income		$	10,616,476			$	10,118,687			$	8,798,702
Adjustments to reconcile net income to net cash used in operating activities:
Equity in undistributed income of Subsidiary			(8,966,694	)			(8,774,479	)			(7,969,766	)
Restricted stock expense			866,558				772,311				721,124
Gain on disposition of CVR			(51,030	)			-				-
Other, net			(624,261	)			(669,047	)			151,251
Net cash provided by operating activities			1,841,049				1,447,472				1,701,311
Cash flows from investing activities:
Investment in subsidiary bank			(35,000,000	)			(60,000,000	)			-
Outlays for acquisitions			-				-				(35,709	)
Net cash used in investing activities			(35,000,000	)			(60,000,000	)			(35,709	)
Cash flows from financing activities:
Dividends paid on common stock			(1,415,524	)			(782,936	)			(778,428	)
Dividends paid on preferred stock			-				(452,305	)			(342,460	)
Repurchase of restricted stock for payment of Taxes			(329,587	)			(176,112	)			(92,390	)
Repurchase of warrants			-				-				(302,410	)
Net proceeds from issuance of 3,563,380 shares			-				59,744,418				-
Net proceeds from issuance of 2,012,500 shares			55,270,625
Repayment of CDCI Preferred Shares			-				(15,925,000	)			-
Proceeds of borrowed funds			-				16,000,000				-
Net cash provided by (used in) financing Activities			53,525,514				58,408,065				(1,515,688	)
Net increase (decrease) in cash and cash Equivalents			20,366,563				(144,463	)			149,914
Cash and cash equivalents at beginning of year			69,158				213,621				63,707
Cash and cash equivalents at end of year		$	20,435,721			$	69,158			$	213,621

98

			Years Ended December 31,
($ in thousands)			2023						2022						2021
Cash flows from operating activities:
Net income			$	75,457					$	62,919					$	64,167
Adjustments to reconcile net income to net cash used in operating activities:
Equity in undistributed income of Subsidiary			(16,805)						(56,555)						(73,895)
Restricted stock expense			2,302						2,425						3,100
Other, net			9,263						6,255						(3,343)
Net cash provided by (used in) operating activities			70,217						15,044						(9,970)
Cash flows from investing activities:
Investment in bank			—						(1,300)						—
Other, net			—						290						—
Net cash (used in) investing activities			—						(1,010)						—
Cash flows from financing activities:
Dividends paid on common stock			(27,550)						(16,275)						(11,991)
Repurchase of restricted stock for payment of taxes			(361)						(683)						(721)
Common stock repurchased			—						(22,180)						(5,171)
Repayment of borrowed funds			—						—						(4,647)
Called/repayment of subordinated debt			(31,000)						—						—
Other, net			(7,664)						216						—
Net cash (used in) financing activities			(66,575)						(38,922)						(22,530)
Net increase (decrease) in cash and cash equivalents			3,642						(24,888)						(32,500)
Cash and cash equivalents at beginning of year			9,843						34,731						67,231
Cash and cash equivalents at end of year			$	13,485					$	9,843					$	34,731

123

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NOTE VU - OPERATING SEGMENTS

The Company is considered to have three principal business segments in 2017, 2016,2023, 2022, and 2015,2021, the Commercial/Retail Bank, the Mortgage Banking Division, and the Holding Company. (In thousands)

		Year Ended December 31, 2017
		Commercial/				Mortgage
		Retail				Banking				Holding
		Bank				Division				Company				Total
Interest income		$	65,118			$	943			$	8			$	66,069
Interest expense			6,048				1				860				6,909
Net interest income (loss)			59,070				942				(852	)			59,160
Provision (credit) for loan losses			475				31				-				506
Net interest income (loss) after provision for loan losses			58,595				911				(852	)			58,654
Non-interest income			9,807				4,505				51				14,363
Non-interest expense			49,143				3,857				2,446				55,446
Income (loss) before income taxes			19,259				1,559				(3,247	)			17,571
Income tax (benefit) expense			7,740				437				(1,222	)			6,955
Net income (loss)		$	11,519			$	1,122			$	(2,025	)		$	10,616
Total Assets		$	1,758,778			$	32,234			$	22,226			$	1,813,238
Net Loans			1,196,365				25,443				-				1,221,808

		Year Ended December 31, 2016
		Commercial/				Mortgage
		Retail				Banking				Holding
		Bank				Division				Company				Total
Interest income		$	43,785			$	812			$	7			$	44,604
Interest expense			3,679				414				222				4,315
Net interest income (loss)			40,106				398				(215	)			40,289
Provision (credit) for loan   losses			667				(42	)			-				625
Net interest income (loss)  after provision  for loan losses			39,439				440				(215	)			39,664
Non-interest income			6,989				4,258				-				11,247
Non-interest expense			31,369				3,342				2,151				36,862
Income (loss) before income  taxes			15,059				1,356				(2,366	)			14,049
Income tax (benefit) expense			4,386				380				(836	)			3,930
Net income (loss)		$	10,673			$	976			$	(1,530	)		$	10,119
Total Assets		$	1,254,476			$	21,400			$	1,491			$	1,277,367
Net Loans			851,947				13,477				-				865,424

		Year Ended December 31, 2015
		Commercial/				Mortgage
		Retail				Banking				Holding
		Bank				Division				Company				Total
Interest income		$	39,422			$	774			$	6			$	40,202
Interest expense			2,727				296				185				3,208
Net interest income (loss)			36,695				478				(179	)			36,994
Provision for loan losses			410				-				-				410
Net interest income (loss)  after provision  for loan losses			36,285				478				(179	)			36,584
Non-interest income			6,513				1,075				-				7,588
Non-interest expense			29,786				1,245				1,129				32,160
Income (loss) before income  taxes			13,012				308				(1,308	)			12,012
Income tax (benefit) expense			3,618			��	82				(487	)			3,213
Net income (loss)		$	9,394			$	226			$	(821	)		$	8,799
Total Assets		$	1,123,240			$	20,681			$	1,210			$	1,145,131
Net Loans			755,077				14,665				-				769,742

99

($ in thousands)			Year Ended December 31, 2023
			Commercial/ Retail Bank						Mortgage Banking Division						Holding Company						Total
Interest income			$	340,566					$	331					$	36					$	340,933
Interest expense			83,497						141						7,970						91,608
Net interest income (loss)			257,069						190						(7,934)						249,325
Provision (credit) for credit losses			14,500						—						—						14,500
Net interest income (loss) after provision for loan losses			242,569						190						(7,934)						234,825
Non-interest income			36,856						2,866						6,983						46,705
Non-interest expense			172,133						5,191						7,402						184,726
Income (loss) before income taxes			107,292						(2,135)						(8,353)						96,804
Income tax (benefit) expense			23,892						(540)						(2,005)						21,347
Net income (loss)			$	83,400					$	(1,595)					$	(6,348)					$	75,457
Total Assets			$	7,971,373					$	10,058					$	17,914					$	7,999,345
Net Loans			5,114,434						4,490						—						5,118,924

($ in thousands)			Year Ended December 31, 2022
			Commercial/ Retail Bank						Mortgage Banking Division						Holding Company						Total
Interest income			$	199,937					$	439					$	17					$	200,393
Interest expense			14,979						106						7,492						22,577
Net interest income (loss)			184,958						333						(7,475)						177,816
Provision (credit) for loan losses			5,605						—						—						5,605
Net interest income (loss) after provision for loan losses			179,353						333						(7,475)						172,211
Non-interest income			29,991						4,303						2,667						36,961
Non-interest expense			116,899						5,493						8,091						130,483
Income (loss) before income taxes			92,445						(857)						(12,899)						78,689
Income tax (benefit) expense			19,250						(217)						(3,263)						15,770
Net income (loss)			$	73,195					$	(640)					$	(9,636)					$	62,919
Total Assets			$	6,428,889					$	18,194					$	14,634					$	6,461,717
Net Loans			3,734,659						5,024						—						3,739,683

124

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($ in thousands)			Year Ended December 31, 2021
			Commercial/ Retail Bank						Mortgage Banking Division						Holding Company						Total
Interest income			$	176,153					$	582					$	10					$	176,745
Interest expense			12,166						140						7,375						19,681
Net interest income (loss)			163,987						442						(7,365)						157,064
Provision (credit) for loan losses			(1,104)						—						—						(1,104)
Net interest income (loss) after provision for loan losses			165,091						442						(7,365)						158,168
Non-interest income			28,539						8,823						111						37,473
Non-interest expense			103,430						5,361						5,768						114,559
Income (loss) before income taxes			90,200						3,904						(13,022)						81,082
Income tax (benefit) expense			19,222						988						(3,295)						16,915
Net income (loss)			$	70,978					$	2,916					$	(9,727)					$	64,167
Total Assets			$	6,015,664					$	16,519					$	45,231					$	6,077,414
Net Loans			2,929,995						6,494						—						2,936,489

125

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NOTE WV - SUMMARY OF QUARTERLY RESULTS OF OPERATIONS AND PER SHARE AMOUNTS (UNAUDITED)

		Three Months Ended
		March 31				June 30				Sept. 30				Dec. 31
		(In thousands, except per share amounts)
2017
Total interest income		$	15,753			$	16,464			$	16,708			$	17,143
Total interest expense			1,585				1,629				1,773				1,922
Net interest income			14,168				14,835				14,935				15,221
Provision for loan losses			46				248				90				122
Net interest income after provision for loan losses			14,122				14,587				14,845				15,099
Total non-interest income			3,391				3,757				3,658				3,556
Total non-interest expense			16,095				15,070				11,888				12,390
Income tax expense			296				908				1,901				3,851
Net income applicable to common Stockholders		$	1,122			$	2,366			$	4,714			$	2,414
Per common share:
Net income, basic		$	.12			$	.26			$	.52			$	.23
Net income, diluted			.12				.26				.51				.23
Cash dividends declared			.0375				.0375				.0375				.0375
2016
Total interest income		$	10,596			$	10,871			$	11,269			$	11,868
Total interest expense			922				1,016				1,202				1,176
Net interest income			9,674				9,855				10,067				10,692
Provision for loan losses			190				204				143				88
Net interest income after provision for loan losses			9,484				9,651				9,924				10,604
Total non-interest income			2,484				2,961				3,099				2,705
Total non-interest expense			8,395				8,921				9,416				10,132
Income tax expense			969				1,042				1,049				870
Net income			2,604				2,649				2,558				2,307
Preferred dividends			85				86				86				195
Net income applicable to common Stockholders		$	2,519			$	2,563			$	2,472			$	2,112
Per common share:
Net income, basic		$	.47			$	.47			$	.46			$	.39
Net income, diluted			.46				.47				.45				.26
Cash dividends declared			.0375				.0375				.0375				.0375

100

($ in thousands, except per share amounts)						March 31						June 30						Sept. 30						Dec. 31
2023
Total interest income						$	80,338					$	86,194					$	85,681					$	88,720
Total interest expense						15,412						20,164						24,977						31,055
Net interest income						$	64,926					$	66,030					$	60,704					$	57,665
Provision for credit losses						11,000						1,250						1,000						1,250
Net interest income after provision for credit losses						53,926						64,780						59,704						56,415
Total non-interest income						12,612						12,423						19,324						2,346
Total non-interest expense						45,670						46,899						47,724						44,433
Income tax expense						4,597						6,525						6,944						3,281
Net income available to common stockholders						$	16,271					$	23,779					$	24,360					$	11,047
Per common share:
Net income, basic						$	0.52					$	0.76					$	0.78					$	0.35
Net income, diluted						0.52						0.75						0.77						0.35
Cash dividends declared						0.21						0.22						0.23						0.24
2022
Total interest income						$	42,741					$	45,847					$	53,874					$	57,931
Total interest expense						4,102						3,746						4,726						10,003
Net interest income						$	38,639					$	42,101					$	49,148					$	47,928
Provision for credit losses						—						600						4,300						705
Net interest income after provision for credit losses						38,639						41,501						44,848						47,223
Total non-interest income						11,157						8,664						9,022						8,118
Total non-interest expense						28,590						30,955						35,903						35,035
Income tax expense						4,377						3,457						3,924						4,012
Net income available to common stockholders						$	16,829					$	15,753					$	14,043					$	16,294
Per common share:
Net income, basic						$	0.81					$	0.77					$	0.61					$	0.68
Net income, diluted						0.81						0.76						0.61						0.67
Cash dividends declared						0.17						0.18						0.19						0.20
2021
Total interest income						$	45,187					$	43,238					$	44,435					$	43,885
Total interest expense						5,958						5,188						4,407						4,128
Net interest income						$	39,229					$	38,050					$	40,028					$	39,757
Provision for loan losses						—						—						—						(1,104)
Net interest income after provision for loan losses						39,229						38,050						40,028						40,861
Total non-interest income						9,472						8,822						9,586						9,593
Total non-interest expense						27,264						27,452						29,053						30,790
Income tax expense						4,793						3,820						4,429						3,873
Net income available to common stockholders						$	16,644					$	15,600					$	16,132					$	15,791
Per common share:
Net income, basic						$	0.79					$	0.74					$	0.77					$	0.75
Net income, diluted						0.79						0.74						0.76						0.75
Cash dividends declared						0.13						0.14						0.15						0.16

2015
Total interest income		$	9,683			$	10,022			$	10,080			$	10,417
Total interest expense			804				806				793				804
Net interest income			8,879				9,216				9,287				9,613
Provision for loan losses			150				-				250				10
Net interest income after provision for loan losses			8,729				9,216				9,037				9,603
Total non-interest income			1,850				1,854				1,982				1,903
Total non-interest expense			7,818				8,092				7,977				8,275
Income tax expense			732				793				815				873
Net income			2,029				2,185				2,227				2,358
Preferred dividends and stock accretion			85				86				86				85
Net income applicable to common Stockholders		$	1,944			$	2,099			$	2,141			$	2,273
Per common share:
Net income, basic		$	.36			$	.39			$	.40			$	.42
Net income, diluted			.36				.39				.39				.42
Cash dividends declared			.0375				.0375				.0375				.0375

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

126

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NOTE W - DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into interest rate swap agreements primarily to facilitate the risk management strategies of certain commercial customers. The interest rate swap agreements entered into by the Company are all entered into under what is referred to as a back-to-back interest rate swap, as such, the net positions are offsetting assets and liabilities, as well as income and expenses and risk participation. All derivative instruments are recorded in the consolidated statement of financial condition at their respective fair values, as components of other assets and other liabilities.

Under a back-to-back interest rate swap program, the Company enters into an interest rate swap with the customer and another offsetting swap with a counterparty. The result is two mirrored interest rate swaps, absent a credit event, which will offset in the financial statements. These swaps are not designated as hedging instruments and are recorded at fair value in other assets and other liabilities. The change in fair value is recognized in the income statement as other income and fees.

Risk participation agreements are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recorded directly through earnings at each reporting period. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower, for a fee received from the other bank. The Company has two risk participation-in swaps and one risk participation-out swap at December 31, 2023.

The following table provides outstanding interest rate swaps at December 31, 2023 and December 31, 2022.

($ in thousands)			December 31, 2023						December 31, 2022
Notional amount			$	493,290					$	328,756
Weighted average pay rate			5.2		%				4.6		%
Weighted average receive rate			5.2		%				4.3		%
Weighted average maturity in years			5.39						6.11

The following table provides the fair value of interest rate swap contracts at December 31, 2023 and December 31, 2022 included in other assets and other liabilities.

($ in thousands)

December 31, 2023

December 31, 2022

Derivative Assets

Derivative Liabilities

Derivative Assets

Derivative Liabilities

Interest rate swap contracts

$

12,170

12,175

12,825

12,825

The Company also enters into a collateral agreement with the counterparty requiring the Company to post cash or

cash equivalent collateral to mitigate the credit risk in the transaction. At December 31, 2023 and December 31, 2022, the Company had $500 thousand of collateral posted with its counterparties, which is included in the consolidated statement of financial condition as cash and cash equivalents as "restricted cash". The Company also receives a swap spread to compensate it for the credit exposure it takes on the customer-facing portion of the transaction and this upfront cash payment from the counterparty is recorded in other income, net of any transaction execution expenses, in the consolidated statement of operations. For the year ended December 31, 2023 and December 31, 2022, net swap spread income included in other income was $1.3 million and $193 thousand, respectively.

Entering into derivative contracts potentially exposes the Company to the risk of counterparties' failure to fulfill their legal obligations, including, but not limited to, potential amounts due or payable under each derivative contract. Notional principal amounts are often used to express the volume of these transactions, but the amounts potentially subject to credit risk are much smaller. The Company assesses the credit risk of its dealer counterparties by regularly monitoring publicly available credit rating information, evaluating other market indicators, and periodically reviewing detailed financials.

The Company records the fair value of its interest rate swap contracts separately within other assets and other liabilities as current accounting rules do not permit the netting of customer and counterparty fair value amounts in the consolidated statement of financial condition.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officermanagement, under the supervision of and principal financial officer have concluded, based upon theirwith the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company’s “disclosuredisclosure controls and procedures” (asprocedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2017, that the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2023. Disclosure controls and were effective in ensuringprocedures are controls and procedures designed to ensure that information required to be disclosed by us in the reports that we filefiled or submitsubmitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company'sour management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

During Based on that evaluation, the quarter ended December 31, 2017, noChief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. No changes have occurred inwere made to the Company’s internal controlcontrols over financial reporting (as defined in Rules 13a-15(e) and 15d-15(f)Rule 13a-15(f) under the Securities Exchange Act)Act of 1934) during the last fiscal quarter that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The First Bancshares, Inc.

Management’s Report on Internal Control Overover Financial Reporting

Management of the Company is responsible for establishing and maintaining effective “internalinternal control over financial reporting”reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934).Act. Internal control over financial reporting is a process designed under the supervision of the Chief Executive Officer and the Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Under

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management, under the supervision of and with the participation of management, including the principal executive officerChief Executive Officer and principal financial officer, the CompanyChief Financial Officer, conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2023 based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). This assessment included controls over the preparation of the schedules equivalent to the basic financial statements(COSO) in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act.Internal Control-Integrated Framework (2013). Based on this evaluation,that assessment, our management of the Company has concluded the Company maintained effective internal control over financial reporting, as such term is defined in Securities Exchange Act of 1934 Rule 13a-15(f),believes that, as of December 31, 2017.

101

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. These inherent limitations, however, are known features of the financial reporting process. It is possible, therefore, to design into the process safeguards to reduce, though not eliminate, this risk.

T. E. Lott & Company, an independent registered public accounting firm, which audited the Company’s consolidated financial statements included in this Form 10-K, has issued an attestation report on2023, the Company’s internal control over financial reporting which is included herein.

/s/ M. Ray (Hoppy) Cole, Jr.		/s/ Dee Dee Lowery
CEO and President		Executive VP and Chief Financial Officer
March 16, 2018		March 16, 2018

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

Towas effective based on those criteria.

As permitted by SEC guidance, management has excluded the Boardoperations of Directors and Shareholdersthe HSBI acquisition from the scope of

The First Bancshares, Inc.

Hattiesburg, Mississippi

Opinion management’s report on Internal Controlinternal control over Financial Reporting

We have auditedfinancial reporting. HSBI was acquired during the year ended December 31, 2023. For the year ended December 31, 2023, HSBI represented approximately 19.6% of total consolidated assets.

This Annual Report on Form 10-K contains an audit report of FORVIS, LLP, our independent registered public accounting firm, regarding internal control over financial reporting for the fiscal year ended December 31, 2023 pursuant to the rules of the SEC. Their report appears in the section captioned “Report of Independent Registered Public Accounting Firm” included in Part II. Item 8 – Financial Statements and Supplementary Data of this report.

128

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Report of Independent Registered Public Accounting Firm

To the Stockholders, Board of Directors and Audit Committee

The First Bancshares, Inc. and subsidiary

Hattiesburg, Mississippi

Opinion on the Internal Control over Financial Reporting

We have audited The First Bancshares, Inc.’s (the "Company"“Company”) internal control over financial reporting as of December 31, 2017,2023, based on criteria established inInternal Control ̶– Integrated FrameworkFramework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because management's assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management's assessment and our audit of the Company's internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established inInternal Control ̶– Integrated FrameworkFramework: (2013)issued by COSO.

We also have not examined and, accordingly, we do not express an opinion or any other form of assurance on management's statement referring to compliance with laws and regulations.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB)(“PCAOB”), the consolidated financial statements of the Company as of December 31, 2023 and 2022 and for each of the yearyears in the three-year period ended December 31, 2017, of the Company2023, and our report dated March 16, 2018,February 29, 2024 expressed an unqualified opinion on those consolidated financial statements.

102

Basis for Opinion

The Company'sCompany’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management'sManagement’s Report on Internal Control Over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company'sCompany’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, andrisk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

103

To

As described in Management’s Annual Report on Internal Control over Financial Reporting, the Boardscope of Directorsmanagement’s assessment of internal control over financial reporting as of December 31, 2023, has excluded Heritage Southeast Bancorporation, Inc. which was acquired during the year ended December 31, 2023. We have also excluded Heritage Southeast Bancorporation, Inc. from the scope of our audit of internal control over financial reporting. Heritage Southeast Bancorporation, Inc. represented approximately 22.4 percent of consolidated revenues for the year ended December 31, 2023, and Shareholdersapproximately 19.6 percent of

The First Bancshares, Inc.

Page 2

Definition consolidated total assets as of December 31, 2023.

Definitions and Limitations of Internal Control over Financial Reporting

A company'scompany’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A company'scompany’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company'scompany’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

	/s/ T. E. Lott & Company
Columbus, Mississippi
March 16, 2018

/s/ FORVIS, LLP

Jackson, Mississippi

February 29, 2024

129

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ITEM 9B. OTHER INFORMATION

Not applicable.

SERP Amendments

On November 16, 2023, the Board approved amendments to the Supplemental Executive Retirement Plan Agreement dated January 1, 2020 with M. Ray (Hoppy) Cole, Jr. (the "Cole 2020 SERP Amendment") and the Supplemental Executive Retirement Plan Agreement dated January 1, 2021 with Donna T. (Dee Dee) Lowery (the "2021 Lowery SERP Amendment"). The 2020 Cole SERP Amendment and the 2021 Lowery SERP Amendment were executed on February 26, 2024. The material terms of the agreements are summarized below.

Mr. Cole's 2020 SERP, as amended. Mr. Cole's 2020 SERP, as amended, provides for a lifetime benefit equal to 50% of "compensation" (as defined in the 2020 SERP), less any amounts payable under his 2014 SERP, which will be payable in equal monthly installments upon Mr. Cole's separation from service following attainment of age 65 while in the employment of the Bank (except in the case of Mr. Cole's death, in which case the death benefit will be paid in a lump sum).

•If Mr. Cole separates from service prior to age 65, other than by reason of his death or a termination for cause other than in connection with a change in control, then he will receive an annual benefit equal to the "early termination benefit" (as defined in the 2020 SERP).

•If Mr. Cole separates from service following a change in control prior to age 65, then he will receive 100% of the "change in control benefit" (as defined in the 2020 SERP).

•In the event of Mr. Cole's death, his beneficiary will receive a lump sum payment equal to 50% of Mr. Cole's compensation multiplied by a factor of 17, less any amounts already paid under the 2021 or 2014 SERPs, plus an additional lump sum death benefit payment determined by Mr. Cole's age at death.

Ms. Lowery's 2021 SERP. Ms. Lowery's 2021 SERP, as amended, provides for a lifetime benefit equal to 50% of "compensation" (as defined in the 2021 SERP), less any amounts payable under her 2014 SERP, which will be payable in equal monthly installments upon Ms. Lowery's separation from service following attainment of age 65 while in the employment of the Bank (except in the case of Ms. Lowery's death, in which case the death will be paid in a lump sum).

•If Ms. Lowery separates from service prior to age 65, other than by reason of her death or a termination for cause other than in connection with a change in control, then she will receive an annual benefit equal to the "early termination benefit" (as defined in the 2021 SERP).

•If Ms. Lowery separates from service following a change in control prior to age 65, then she will receive 100% of the "change in control benefit" (as defined in the 2021 SERP).

•In the event of Ms. Lowery's death, her beneficiary will receive a lump sum payment equal to 50% of Ms. Lowery's compensation multiplied by a factor of 21, less any amounts already paid under the 2021 or 2014 SERPs.

On November 16, 2023, the Board also approved amendments to the Supplemental Executive Retirement Plan Agreement dated May 15, 2014 with Mr. Cole (the "2014 Cole SERP Amendment") and the Supplemental Executive Retirement Plan Agreement dated May 19, 2014 with Ms. Lowery (the "2014 Lowery SERP Amendment"), to remove the death benefit provided under each agreement. The 2014 Cole SERP Amendment and the 2014 Lowery SERP Amendment were executed on February 26, 2024.

The summary provided herein is qualified in its entirety by reference to the full text of the 2020 Cole SERP Amendment, the 2021 Lowery SERP Amendment, the 2014 Cole SERP Amendment and the 2014 Lowery SERP Amendment, which are attached hereto as Exhibits 10.13, 10.17, 10.11 and 10.15, respectively.

Rule 10b5-1 Trading Arrangements

During the quarter ended December 31, 2023, none of the Company's directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-(c) or any "non-Rule 10b5-1 trading arrangement.

130

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICER,OFFICERS, AND CORPORATE GOVERNANCE

Information required by this item is set forth in our definitive proxy materials regarding our Annual Meeting of Shareholders to be held May 24, 2018,23, 2024, which proxy materials will be filed with the SEC on or about April 11, 2018.

104

10, 2024.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is set forth in our definitive proxy materials regarding our Annual Meeting of Shareholders to be held May 24, 2018,23, 2024, which proxy materials will be filed with the SEC on or about April 11, 2018.

10, 2024.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this item is set forth in our definitive proxy materials regarding our annual meeting of stockholders to be held May 24, 2018, which proxy materials will be filed with the SEC on or about April 11, 2018.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information required by this item is set forth in our definitive proxy materials regarding our Annual Meeting of Shareholders to be held May 24, 2018,23, 2024, which proxy materials will be filed with the SEC on or about April 11, 2018.

10, 2024.

ITEM 14. PRINCIPAL ACCOUNTANT FEES13. CERTAIN RELATIONSHIPS AND SERVICES

RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information required by this item is set forth in our definitive proxy materials regarding our Annual Meeting of Shareholders to be held May 24, 2018,23, 2024, which proxy materials will be filed with the SEC on or about April 11, 2018.

105

10, 2024.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item is set forth in our definitive proxy materials regarding our Annual Meeting of Shareholders to be held May 23, 2024, which proxy materials will be filed with the SEC on or about April 10, 2024.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)The following documents are filed as part of this Report:

1.The following consolidated financial statements of The First Bancshares, Inc. and subsidiaries are incorporated as part of this Report under Item 8 – Financial Statements and Supplementary Data.

Consolidated balance sheets – December 31, 2023 and 2022
(a)
The following documents are filed as part Consolidated statements of this Report:income – Years ended December 31, 2023, 2022, and 2021

Consolidated statements of other comprehensive income (loss) – Years ended December 31, 2023, 2022, and 2021

1.

Consolidated statements of changes in stockholders’ equity– Years ended December 31, 2023, 2022 and 2021

The following

Consolidated statements of cash flows –Years ended December 31, 2023, 2022, and 2021

Notes to consolidated financial statements of The First Bancshares, Inc.– December 31, 2023, 2022, and subsidiaries are incorporated as part of this Report under Item 8 – Financial Statements and Supplementary Data.2021

2.Consolidated balance sheets – December 31, 2017 and 2016 

Consolidated statements of income – Years ended December 31, 2017, 2016, and 2015

Consolidated statements of other comprehensive income – Years ended December 31, 2017, 2016, and 2015

Consolidated statements of changes in stockholders’ equity– Years ended December 31, 2017, 2016 and 2015

Consolidated statements of cash flows –Years ended December 31, 2017, 2016, and 2015

Notes to consolidated financial statements – December 31, 2017, 2016, and 2015

2.

Consolidated Financial Statement Schedules:

Financial Statement Schedules:

All schedules have been omitted, as the required information is either inapplicable or included in the Notes to Consolidated Financial Statements.

3.

Exhibits required to be filed by Item 601 of Regulation S-K, by Item 15(b) are listed below.

(b)

Exhibits:

3.Exhibits required to be filed by Item 601 of Regulation S-K, by Item 15(b) are listed below.

(b)Exhibits:

All other financial statements and schedules are omitted as the required information is inapplicable or the required information is presented in the consolidated financial statements or related notes.

(a)3. Exhibits:

Exhibits:

Exhibit No.						Description of Exhibit
2.1						Agreement and Plan of Merger, dated October 12, 2016, by and among The First Bancshares, Inc., The First, A National Banking Association, and Gulf Coast Community Bank (incorporated herein by reference to Exhibit 1.2 to the First Bancshares’Company’s Current Report on Form 8-K filed on October 14, 2016).
2.2						Stock Purchase Agreement, dated October 12, 2016, by and between The First Bancshares, Inc. and A. Wilbert’s Sons Lumber and Shingle Co. (incorporated herein by reference to Exhibit 1.1 to the First Bancshares’ Current Report on Form 8-K filed on October 14, 2016).
2.3		Agreement and Plan of Merger by and between The First Bancshares, Inc. and Southwest Banc Shares, Inc., dated October 24, 2017(incorporated2017 (incorporated herein by reference to Exhibit 10.1 to the First Bancshares’Company’s Quarterly Report on Form 10-Q filed on November 9, 2017).
2.42.3						Agreement and Plan of Merger by and between The First Bancshares, Inc. and Sunshine Financial, Inc., dated December 6, 2017.*2017 (incorporated herein by reference to Exhibit 2.4 to the Company’s Annual Report on Form 10-K filed on March 16, 2018).
2.4						Agreement and Plan of Merger by and between The First Bancshares, Inc. and FMB Banking Corporation, dated July 23, 2018 (incorporated by reference to Exhibit 2.1 of the Company’s Registration Statement on Form S-4 filed on September 13, 2018).
3.1
2.5			Agreement and Plan of Merger by and between The First Bancshares, Inc. and FPB Financial Corp., dated November 6, 2018 (incorporated herein by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q filed on November 6, 2018).
2.6			Agreement and Plan of Merger by and between The First Bancshares, Inc. and Southwest Georgia Financial Corp., dated December 18, 2019 (incorporated herein by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 8-K filed on December 18, 2019).

132

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2.7			Agreement and Plan of Merger, dated as of April 26, 2022, by and between The First Bancshares, Inc. and Beach Bancorp, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed on May 2, 2022).
2.8			Agreement and Plan of Merger, dated as of July 27, 2022, by and between The First Bancshares, Inc. and Heritage Southeast Bancorporation, Inc. (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K filed on August 1, 2022).
3.1			Amended and Restated Articles of Incorporation of The First Bancshares, Inc. (incorporated herein by reference to Exhibit 3.1 to the First Bancshares’Company’s Current Report on Form 8-K filed on July 28,29, 2016).
3.2						Amendment to Amended and Restated Articles of Incorporation of The First Bancshares, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 10-Q filed on August 9, 2018).
3.2
3.3			Amendment to Amended and Restated Articles of Incorporation of The First Bancshares, Inc. (incorporated herein by reference to 3.1 to the Company's Current Report on Form 8-K filed on May 26, 2023.
3.4			Amended and Restated Bylaws of The First Bancshares, Inc., effective as of March 17, 2016 (incorporated herein by reference to Exhibit 3.2 to the First Bancshares’Company’s Current Report on Form 8-K filed on March 18, 2016).

3.5			106

4.1		Provisions inAmendment No. 1 to the Company’s ArticlesAmended and Restated Bylaws of Incorporation and Bylaws defining the rightsThe First Bancshares, Inc. effective as of holders of the Company’s Common StockMay 7, 2020 (incorporated herein by reference to Exhibit 3.13.4 to The First Bancshares’ Currentthe Company’s Quarterly Report on Form 8-K10-Q filed on July 28, 2016 and to Exhibit 3.2 to The First Bancshares’ Current Report on Form 8-K filed on March 18, 2016)May 11, 2020).
4.24.1						Form of Certificate of Common Stock (incorporated by reference to Exhibit 4.3 to the Company’s Registration Statement No. 333-220491 on Form S-3 filed on September 15, 2017).
4.2						Form of Global Subordinated Note for The First Bancshares, Inc. 5.875% Fixed-to-Floating Rate Subordinated Notes Due 2028 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 1, 2018).
10.1
4.3			Form of Global Subordinated Note for The First Bancshares, Inc. 6.4% Fixed-to-Floating Rate Subordinated Notes Due 2023 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on May 1, 2018).
4.4			Indenture by and between The First Bancshares, Inc. and U.S. Bank National Association, dated September 25, 2020 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on September 25, 2020).
4.5			Form of Global Subordinated Note for The First Bancshares, Inc. 4.25% Fixed-to-Floating Rate Subordinated Notes Due 2030 (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on September 25, 2020).
4.6			Description of Securities.
10.1			Note Purchase Agreement between the Company and the Purchasers provided therein,several purchasers of the Subordinated Notes, dated October 12, 2016April 30, 2018 (incorporated herein by reference to Exhibit 1.310.1 to The First Bancshares’Company’s Current Report on Form 8-K filed on October 14, 2016)May 1, 2018).
10.2						Registration RightsSubordinated Note Purchase Agreement between the Company and the Purchasers provided therein,several purchasers of the Subordinated Notes, dated October 12, 2016April 30, 2018 (incorporated herein by reference to Exhibit 1.410.2 to the First Bancshares’The Company’s Current Report on Form 8-K filed on October 14, 2016)May 1, 2018).
10.3						Securities Purchase Agreement, dated as of December 6, 2016, by and between the United States Department of the Treasury and the Company. (incorporated herein by reference to Exhibit 10.3 to the Registration Statement No. 333-215157 on Form S-1 filed on December 16, 2016).
10.4		Employment Agreement dated May 31, 2011, between The First, A National Banking Association, and M. Ray Cole, Jr. (incorporated herein by reference to Exhibit 10.5 of The First Bancshares' Annual Report on Form 10-K filed on March 29, 2012)
10.5		Change in Control Agreement dated as of February 1, 2017 between the Company and Dee Dee Lowery (incorporated herein by reference to Exhibit 10.1 of The First Bancshares’ Current Report on Form 8-K filed on February 6, 2017).+
10.6		The First Bancshares, Inc. 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit 4.3 to The First Bancshares’ Registration Statement No. 333-171996 on Form S-8 filed on February 1, 2011).+
10.7		Amendment to 2007 Stock Incentive Plan effective May 28, 2015 (incorporated herein by reference to Exhibit 10.6 to The First Bancshares Annual Report on Form 10-K filed on March 30, 2016).+
10.8		Loan Agreement, dated as of December 5, 2016, by and between the Company, as Borrower, and First Tennessee Bank National Association, as Lender (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 9, 2016).
10.4						Employment Agreement dated May 31, 2011, between The First, A National Banking Association, and M. Ray Cole, Jr. (incorporated herein by reference to Exhibit 10.5 of The First Bancshares’ Annual Report on Form 10-K filed on March 29, 2012).+
10.9

133

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10.5			Amendment to Employment Agreement dated January 16, 2020, between The First, A National Banking Association, and M. Ray Cole, Jr. (incorporated herein by reference to Exhibit 10.3 to The First Bancshares Quarterly Report on Form 10-Q filed on May 11, 2020).+
10.6			Employment Agreement, dated as of October 17, 2019, by and between The First, A National Banking Association and Donna T. (Dee Dee) Lowery (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 21, 2019).+
10.7			Amendment to Employment Agreement dated January 16, 2020, between The First, A National Banking Association, and Donna T. (Dee Dee) Lowery (incorporated herein by reference to Exhibit 10.3 to The First Bancshares Quarterly Report on Form 10-Q filed on May 11, 2020).+
10.8			The First Bancshares, Inc. 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit 4.3 to The First Bancshares’ Registration Statement No. 333-171996 on Form S-8 filed on February 1, 2011).+
10.9			Amendment to 2007 Stock Incentive Plan effective May 28, 2015 (incorporated herein by reference to Exhibit 10.6 to The First Bancshares Annual Report on Form 10-K filed on March 30, 2016).+
10.10			Supplemental Executive Retirement Agreement between The First, A National Banking Association and M. Ray (Hoppy) Cole, Jr., as amended (incorporated herein by reference to Exhibit 10.9 to The First Bancshares Annual Report on Form 10-K filed on March 16, 2017).+
10.11						Amendment to Supplemental Executive Retirement Agreement dated February 26, 2024 between The First Bank and Milton R. Cole, Jr.*
10.10
10.12			Supplemental Executive Retirement Agreement effective January 1, 2020 between The First, A National Banking Association and Milton R. Cole, Jr. (incorporated herein by reference to Exhibit 10.3 to The First Bancshares Quarterly Report on Form 10-Q filed on May 11, 2020).+
10.13			Amendment to Supplemental Executive Retirement Agreement dated February 26, 2024 between The First Bank and Milton R. Cole, Jr.*
10.14			Supplemental Executive Retirement Agreement between The First, A National Banking Association and Donna T. Lowery, as amended (incorporated herein by reference to Exhibit 10.10 to The First Bancshares Annual Report on Form 10-K filed on March 16, 2017).+
10.15						Amendment to Supplemental Executive Retirement Agreement dated February 26, 2024 between The First Bank and Donna T. Lowery*
10.11
10.16			Supplemental Executive Retirement Agreement between The First, A National Banking Association and Donna T. Lowery (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report in Form 10-K filed in March 12,2021).+
10.17			Amendment to Supplemental Executive Retirement Agreement dated February 26, 2024 between The First Bank and Donna T. Lowery*
10.18			Form of Supplemental Executive Retirement Agreements for Executives of The First, A National Banking Association (incorporated herein by reference to Exhibit 10.11 to The First Bancshares Annual Report on Form 10-K filed on March 16, 2017).+
10.1210.19						Form of Stock Incentive Agreement for Restricted Stock Award pursuant to The First Bancshares, Inc. 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed on March 16, 2018).+
10.20						Amendment to Stock Incentive Agreement for Outstanding Shares of Restricted Stock, dated as of October 15, 2019 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on October 21, 2019). +
21.1
10.21			Subordinated Note Purchase Agreement between The First Bancshares, Inc. and the several purchasers of the Subordinated Notes, dated September 25, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 25, 2020).

134

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10.22			Registration Rights Agreement between The First Bancshares, Inc. and the several purchasers of the Subordinated Notes, dated September 25, 2020 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on September 25, 2020).
10.23			Beach Community Bank 2018 Stock Option Plan (incorporated by reference to Exhibit 99.1 of The First Bancshares' Registration Statement No. 333-266436 on Form S-8 filed on August 1, 2022).
21.1			Subsidiaries of The First Bancshares, Inc.*
23.1						Consent of T.E. Lott & Company.FORVIS, LLP.*
31.1						Rule 13a-14(a)/15d-14(a) Certification of M. Ray (Hoppy) Cole, Jr.the Chief Executive Officer.*
31.2						Rule 13a-14(a)/15d-14(a) Certification of Dee Dee Lowery.the Chief Financial Officer.*
32.1						Section 1350 Certifications.**

97.1			Clawback Policy.*
101.INS			XBRL Instance Document

101.SCH			101.SCH			XBRL Taxonomy Extension Schema Document.

101.CAL			101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF			101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB			101.LAB			XBRL Taxonomy Extension Label Linkbase Document.

101.PRE			101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

________________________

*Filed herewith.

**Furnished herewith.

+ Denotes management contract or compensatory plan or arrangement.

107

ITEM 16. FORM 10-K SUMMARY

None.

135

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

						THE FIRST BANCSHARES, INC.
Date: March 16, 2018February 29, 2024			By:			/s/ M. Ray (Hoppy) Cole, Jr.
						M. Ray (Hoppy) Cole, Jr.
						Chief Executive Officer and President (Principal Executive Officer), Chairman of the Board
Date: March 16, 2018February 29, 2024			By:			/s//s/ Dee Dee Lowery
						Dee Dee Lowery
						Executive VP and Chief Financial Officer
		(Principal Financial and Principal Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints M. Ray (Hoppy) Cole, Jr. and Donna T. (Dee Dee) Lowery, with full power to act without the other, his or her true and lawful attorney-in-fact and agent, with full and several powers of substitution and resubsititution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully as to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURES

CAPACITIES

CAPACITIES

DATE

/s/ E. Ricky Gibson

Director

Director and Chairman of the Board

March 16, 2018February 29, 2024

/s/ Rodney D. Bennett

Director

March 16, 2018

/s/ David W. Bomboy

Director

Director

March 16, 2018February 29, 2024

/s/ Jonathan A. Levy

Director

February 29, 2024

/s/ Charles R. Lightsey

Director

Director

March 16, 2018February 29, 2024

/s/ Fred McMurry

Director

Director

March 16, 2018February 29, 2024

/s/ Thomas E. Mitchell

Director

Director

March 16, 2018February 29, 2024

/s/ Renee Moore

Director

February 29, 2024

/s/ Ted E. Parker

Lead Director

Director

March 16, 2018February 29, 2024

/s/ J. Douglas Seidenburg

Director

Director

March 16, 2018February 29, 2024

/s/ Andrew D. Stetelman

Director

Director

March 16, 2018February 29, 2024

/s/ Valencia M. Williamson

Director

February 29, 2024

/s/ M. Ray (Hoppy) Cole, Jr.

CEO, President, Director, and DirectorChairman of

March 16, 2018February 29, 2024

(Principalthe Board (Principal Executive Officer)

/s/ Donna T. (Dee Dee) Lowery

Executive VP & Chief Financial Officer

March 16, 2018February 29, 2024

(Principal Financial and Accounting Officer)

108

136