Financial Data and Key Metrics Changes - Fourth quarter 2023 operating earnings were $18.7 million or $0.59 per share, down from $24 million or $0.76 per share in the previous quarter, a decrease of about $5.3 million [12][29] - Interest income increased by $3 million for the quarter, while interest expense rose by $6.1 million, leading to a core margin decrease of 13 basis points to 3.14% [12][34] - For the full year 2023, operating income increased by 41.6% to $96 million, with a return on assets (ROA) of 1.22% and a return on tangible common equity of 17.5% [29][32] Business Line Data and Key Metrics Changes - The company experienced $80 million in net loan growth, maintaining a 6.3% annualized growth rate consistent with the previous quarter [2][36] - Noninterest income was flat, down $1 million, primarily due to a decrease in interchange fee income, which was elevated in the previous quarter [13][109] - The cost of deposits increased by 33 basis points for the quarter, reflecting competitive pressures in the market [34][25] Market Data and Key Metrics Changes - The company reported a flat deposit base when excluding public funds, with a slight decrease of $17 million overall [31] - Louisiana market showed strong performance with $38 million in net loan growth for the quarter, while Tampa and Private Bank also performed well [40][46] - The competition for deposits remains intense, with some banks offering rates as high as 5.5% for CDs [18][98] Company Strategy and Development Direction - The company plans to focus internally in the first half of the year, with potential for acquisitions in the latter half [115] - A bond restructure was executed to reposition a portion of the portfolio to improve yield and earnings per share [28][35] - The company aims to stabilize margins in the second quarter of 2024 after anticipated compression in the first quarter [26][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about loan production in the second half of the year, with December showing strong origination numbers [36][39] - Credit quality metrics remained strong, with improvements in nonaccrual loans and charge-offs [48][49] - The company anticipates continued competition for deposits, particularly in rural markets catching up to metro markets [98][117] Other Important Information - The company reported a $9.7 million loss on the sale of securities, which was part of the bond restructure [35] - The liquidity position remains strong, with a loan-to-deposit ratio of 80% and significant borrowing capacity [35][38] Q&A Session Summary Question: How will the margin react over the course of the year with potential rate cuts? - Management indicated that margin compression was greater than expected, but they anticipate some expansion later in the year, potentially reaching 3.60% [57][72] Question: What is the outlook for operating expenses in 2024? - Management expects operating expenses to average around $44 million per quarter for 2024, slightly higher than previous estimates [101][102] Question: What is the company's M&A outlook? - Management noted that while the industry has been slow, they remain open to potential deals in the latter half of the year [115][108] Question: How is the competition for deposits evolving? - Management highlighted that competition remains intense across various markets, with both local banks and larger regional banks participating [98][117]

Financial Performance - The company's net interest income after provision for credit losses was $47216 thousand for December 31, 2022, increasing to $56415 thousand for December 31, 2023[3] - Pre-tax pre provision income operating was $22202 thousand for December 31, 2022, increasing to $25879 thousand for December 31, 2023[3] - The company's total assets grew from $6462 million in 2022 to $7999 million in 2023[73] - Net income increased from $629 million in 2022 to $755 million in 2023[73] Key Ratios and Metrics - The company's operating return on average assets (ROAA) was 122% in 2023[73] - The company's operating return on average tangible common equity (ROATCE) was 175% in 2023[73] - The company's net interest margin (FTE) was 359% in 2023[73] - The company's efficiency ratio was 616% in 2023[73] - The company's common equity tier 1 (CET1) ratio was 121% as of December 31, 2023[11] - The company's total risk-based capital ratio was 150% as of December 31, 2023[11] Deposit and Loan Portfolio - 29% of the company's deposits are demand deposits[11] - The average deposit size is approximately $23 thousand[11] - The loan portfolio is granular, with an average loan size of approximately $215 thousand[53] - The top 20 loans represent approximately 7% of the total loan portfolio[53]

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Commission file number: 000-22507 THE FIRST BANCSHARES, INC. Yes þ No o (Exact name of registrant as specified in its charter ...

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q OR (Mark One) o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 (Registrant's telephone number, including area code) Commission file number: 000-22507 THE FIRST BANCSHARES, INC. (Exact name of r ...

Table of Contents For the quarterly period ended March 31, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Commission file number: 000-22507 THE FIRST BANCSHARES, INC. (Exact name of registrant as specified in its charter) U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (601) 268-899 ...

Interest Rate Risks - The company has approximately $140.7 million, or 3.8% of outstanding loans, indexed to LIBOR rates as of December 31, 2022[128]. - Rising interest rates have led to increased competitive pressures on deposit costs, potentially reducing net interest income[123]. - The transition from LIBOR to alternative reference rates may incur additional costs and risks for the company[126]. - The company is subject to significant risks from changes in interest rates, which could impact net interest margins and overall profitability[121]. - The company has established policies to monitor and limit earnings and balance sheet exposure to changes in interest rates, primarily focusing on interest rate risk management[310]. - As of December 31, 2022, the Company's one-year cumulative GAP ratio was approximately 180.0%, indicating a liability-sensitive position[315]. - If interest rates were to increase by 200 basis points, net interest income would likely decrease by $5.8 million, or 2.9%, relative to a stable interest rate scenario[314]. - In a scenario of an immediate and sustained downward adjustment of 200 basis points in interest rates, net interest income over the next twelve months would likely be approximately $1.5 million lower than in a stable interest rate scenario, reflecting a negative variance of 0.7%[313]. - The economic value of equity (EVE) is projected to deteriorate in declining rate scenarios, with a potential change of (2.2)% under a -200 basis points shock as of December 31, 2022[319]. Economic and Market Conditions - Economic downturns in key markets such as Mississippi, Louisiana, Alabama, Florida, and Georgia could adversely affect loan repayment capabilities[113]. - Continued inflation could increase operating costs faster than revenue growth, impacting profitability[131]. - The company operates in a highly competitive financial services environment, facing competition from larger institutions with more resources and broader geographic markets[142]. - Recent technology advances have allowed consumers to complete financial transactions without banks, increasing competition for deposits and loans[144]. - The company relies on the financial markets for capital, and adverse market conditions could limit access to funding and expansion opportunities[163]. Credit Losses and Allowances - The company must maintain an appropriate allowance for credit losses to mitigate risks associated with borrower defaults[118]. - The allowance for credit losses (ACL) increased to $38,917 thousand in 2022 from $30,742 thousand in 2021, indicating a rise of 26.6%[345]. - The provision for credit losses for loans held for investment (LHFI) was $5,350 thousand in 2022, compared to a negative provision of $(1,456) thousand in 2021[346]. - The Company recorded expected credit losses for off-balance sheet credit exposures, which are presented as a liability[417]. - The Allowance for Credit Losses (ACL) is estimated based on historical experience, current conditions, and reasonable forecasts, with adjustments for risk characteristics and environmental changes[389]. - The probability of default (PD) is calculated using historical loan data from 2009 to the most recent quarter, with a focus on loans that have defaulted, defined as being past due 90 days or more[392]. - The ACL model incorporates a 24-month forecasted PD based on regression analysis correlating historical loan data with national economic metrics, particularly unemployment rates[393]. - The loss given default (LGD) is calculated based on actual losses at the loan level, with a minimum of five past defaults required for accurate calculation; otherwise, a proxy index is used[394]. Regulatory and Compliance Issues - The company is subject to extensive regulation, which may affect its business operations and financial results[136]. - Changes in tax laws, including the Inflation Reduction Act, could significantly impact the company's financial condition and tax expenses[138]. - The company may face increased FDIC insurance premiums due to the permanent increase in coverage limits to $250,000, which could negatively impact earnings[141]. - Anti-takeover laws and certain provisions may make it more difficult for potential acquirers to gain control of the company, potentially affecting stock price[165]. Acquisitions and Mergers - The company completed the acquisition of Beach Bancorp, Inc. on August 1, 2022, and Heritage Southeast Bank on January 1, 2023, with integration challenges potentially impacting expected benefits[155]. - The company may incur significant transaction and merger-related costs associated with recent acquisitions, which could reduce anticipated efficiencies and strategic benefits[156]. - The company recognized goodwill of approximately $23.3 million from the acquisition of Beach Bancorp, Inc. on August 1, 2022[334]. - The Company completed the acquisition of Beach Bancorp, Inc. on August 1, 2022, for approximately $101.5 million, which included 3,498,936 shares of common stock and cash for fractional shares[434]. - The acquisition of Beach Bancorp resulted in the recognition of approximately $23.3 million in goodwill and a $9.8 million core deposit intangible, which will be amortized over 10 years[435]. - Expenses associated with the Beach Bancorp acquisition totaled $3.6 million for the twelve months ended December 31, 2022, primarily related to legal and consulting fees[436]. - The total purchase price for the acquisition of Cadence Branches was $101,470,000, with identifiable assets totaling $608,517,000 and liabilities of $530,363,000[438]. - The company assumed $410.2 million in deposits and acquired $40.3 million in loans at fair value from the Cadence Branches[440]. - A bargain purchase gain of $1.3 million was recorded, indicating that the fair value of net assets acquired exceeded the merger consideration[441]. - Expenses related to the branch acquisition amounted to $608,000 for the year ended December 31, 2022, compared to $1.4 million for 2021[442]. Financial Performance - Total assets increased to $6,461,717 thousand in 2022 from $6,077,414 thousand in 2021, representing a growth of 6.3%[345]. - Net interest income for 2022 was $177,816 thousand, up from $157,064 thousand in 2021, reflecting a year-over-year increase of 13.2%[346]. - Total deposits rose to $5,494,404 thousand in 2022, compared to $5,226,784 thousand in 2021, marking an increase of 5.1%[345]. - Non-interest income for 2022 was $36,961 thousand, slightly down from $37,473 thousand in 2021, a decrease of 1.4%[346]. - The company reported total liabilities of $5,815,054 thousand in 2022, an increase from $5,401,242 thousand in 2021, which is a growth of 7.7%[345]. - The total stockholders' equity decreased to $646,663 thousand in 2022 from $676,172 thousand in 2021, a decline of 4.4%[345]. - The company’s interest expense increased to $22,577 thousand in 2022 from $19,681 thousand in 2021, reflecting an increase of 9.6%[346]. - Net income for 2022 was $62,919,000, a decrease of 1.94% from $64,167,000 in 2021[351]. - Total non-interest expense increased to $130,483,000 in 2022, up 13.9% from $114,559,000 in 2021[348]. - Earnings per share (EPS) for 2022 was $2.86, down from $3.05 in 2021, reflecting a decrease of 6.23%[348]. - Comprehensive loss for 2022 was $(94,016,000), compared to a comprehensive income of $46,329,000 in 2021[351]. - Cash flows from operating activities for 2022 were $90,027,000, a decrease from $95,715,000 in 2021[356]. - The company reported a provision for credit losses of $5,605,000 in 2022, compared to a reversal of $1,104,000 in 2021[356]. - The company repurchased 600,000 shares of common stock in 2022, costing $22,180,000[354]. - The company issued 3,498,936 shares for the BBI acquisition, totaling $101,469,000[354]. - Unrealized holding losses on available-for-sale securities amounted to $(210,087,000) in 2022, compared to $(23,881,000) in 2021[351]. - Net cash used in investing activities was $(706,889,000) in 2022, significantly higher than $(207,355,000) in 2021[356]. - Net cash provided by financing activities decreased to $(157.536) million in 2022 from $468.799 million in 2021, reflecting a significant decline[358]. - Cash and cash equivalents at the end of 2022 were $145.315 million, down from $919.713 million at the end of 2021, indicating a cash outflow of $774.398 million during the year[358]. - Dividends paid on common stock increased to $(16.275) million in 2022, compared to $(11.991) million in 2021, representing a 35.4% increase[358]. - The net change in borrowed funds was $105.1 million in 2022, a reversal from $(114.647) million in 2021, indicating a positive shift in borrowing activities[358]. - Interest paid during the year was $16.932 million in 2022, slightly up from $16.368 million in 2021, showing a 3.4% increase[358]. - The company reported a transfer of securities available-for-sale to held-to-maturity amounting to $139.598 million in 2022, indicating a strategic shift in asset management[358]. - The company issued stock in connection with the BBI acquisition valued at $101.469 million in 2022, reflecting ongoing growth through acquisitions[358]. - The allowance for credit losses on held-to-maturity securities was not recognized during the year ended December 31, 2022, indicating a stable credit environment[376]. Other Financial Information - The company’s mortgage banking services include construction financing for conventional and government-insured home loans, contributing to its diversified revenue streams[364]. - The First Bancshares, Inc. operates primarily in Mississippi, Louisiana, Alabama, Florida, and Georgia, focusing on expanding its market presence in these regions[361]. - The Company invests in bank-owned life insurance (BOLI), with increases in cash surrender values reported as income[406]. - The Company had no uncertain tax positions that qualify for recognition or disclosure in the financial statements as of December 31, 2022, and 2021[412]. - Advertising expenses for the years ended December 31, 2022, 2021, and 2020 were $393 thousand, $391 thousand, and $333 thousand, respectively, indicating a slight increase in advertising costs[413]. - Basic earnings per common share for December 31, 2022, was $2.86, down from $3.05 in 2021, while diluted earnings per share decreased from $3.03 in 2021 to $2.84 in 2022[419]. - Goodwill increased from $156.663 million in 2021 to $180.254 million in 2022, with acquired goodwill of $23.591 million during the year[404]. - Other real estate owned totaled $4.8 million and $2.6 million at December 31, 2022, and 2021, respectively[401]. - Core deposit intangibles had a carrying amount of $34.636 million as of December 31, 2022, up from $29.509 million in 2021[405]. - The aggregate amortization expense for business combination-related intangible assets was $4.664 million for the year ended December 31, 2022[405]. - The Company adopted ASU 2021-10 effective January 1, 2022, which did not materially impact its consolidated financial statements[426]. - The Company is evaluating the impact of several new accounting standards, including ASU 2022-02, which addresses credit losses and requires enhanced disclosures[430]. - The total available-for-sale securities amounted to $1,418,337,000, with gross unrealized losses of $161,908,000[448]. - The total held-to-maturity securities were valued at $691,484,000, with gross unrealized losses of $53,919,000[448]. - The net assets acquired from the Cadence Branches were valued at $78,154,000, with goodwill generated from the transaction amounting to $23,316,000[438].

Financial Performance - Net income for the three months ended September 30, 2022, was $14,043 thousand, a decrease of 13.0% from $16,132 thousand in the same period of 2021[13]. - Basic earnings per share decreased to $0.61 for the three months ended September 30, 2022, down from $0.77 in the prior year, a decline of 20.8%[13]. - Comprehensive loss for the three months ended September 30, 2022, was $(36,593) thousand, compared to a comprehensive income of $10,667 thousand in the same period of 2021[15]. - For the nine months ended September 30, 2022, the company reported a net income of $46.6 million, a decrease from $48.4 million in 2021, representing a decline of approximately 3.6%[32]. - Operating net earnings for Q3 2022 totaled $19.6 million, an increase of $3.5 million or 21.9% from $16.1 million in Q3 2021[185]. Asset and Loan Growth - Total assets increased to $6,454,848 thousand as of September 30, 2022, compared to $6,077,414 thousand at December 31, 2021, representing a growth of 6.2%[9]. - Net loans held for investment rose to $3,681,032 thousand, up from $2,928,811 thousand, marking an increase of 25.6% year-over-year[9]. - The loan portfolio totaled $3.719 billion as of September 30, 2022, an increase of approximately 25.7% from $2.960 billion at December 31, 2021[113]. - Loans increased by $754.4 million or 25.4% to $3.722 billion during the first nine months of 2022[200]. Deposits and Equity - Total deposits increased to $5,551,298 thousand, up from $5,226,784 thousand, indicating a rise of 6.2%[9]. - As of September 30, 2022, total shareholders' equity was $621,471,000, reflecting the impact of acquisitions and stock issuances[20]. Interest Income and Expenses - Net interest income after provision for credit losses was $44,848 thousand for the three months ended September 30, 2022, compared to $40,028 thousand for the same period in 2021, reflecting a growth of 19.5%[13]. - Non-interest expense increased to $35,903 thousand for the three months ended September 30, 2022, compared to $29,053 thousand in the same period of 2021, an increase of 23.4%[13]. - Net interest income for Q3 2022 was $49.1 million, an increase of $9.1 million or 22.8% compared to $40.0 million in Q3 2021[187]. Credit Losses and Provisions - The allowance for credit losses on loans held for investment increased to $38,356 thousand from $30,742 thousand, reflecting a rise of 24.0%[9]. - The provision for credit losses for the three months ended September 30, 2022, was $4,300,000, compared to no provision for the same period in 2021, indicating a significant increase due to the BBI acquisition[158]. - The Company reported a total ending allowance balance for credit losses of $38,356,000 as of September 30, 2022, compared to $32,418,000 as of September 30, 2021, reflecting an increase of approximately 18.5% year-over-year[156]. Acquisitions - The company completed the acquisition of Beach Bancorp, Inc. for approximately $101.5 million, which included 3,498,936 shares of common stock and cash for fractional shares[41]. - The acquisition of Beach Bancorp resulted in the recognition of approximately $21.8 million in goodwill and $9.8 million in core deposit intangible assets[42]. - The Company entered into a merger agreement with Heritage Southeast Bancorporation, Inc. for approximately $207.0 million, with HSBI having $1.7 billion in assets[170]. Securities and Investments - The total available-for-sale securities amounted to $1,379,410,000 as of September 30, 2022, with gross unrealized losses of $217,516,000[86]. - The total held-to-maturity securities were valued at $532,688,000 as of September 30, 2022, with gross unrealized losses of $60,865,000[86]. - The company performed a quarterly evaluation of securities to assess any declines in fair value, with no credit loss factors identified[91]. Loan Quality and Risk Assessment - The company categorizes loans into risk categories, with "Pass" loans indicating average to superior credit quality, requiring no more than normal attention[137]. - "Substandard" loans increased to $167,000 from $6,183,000 in 2021[143]. - The total allowance for credit losses (ACL) is continuously monitored to ensure it is adequate to absorb expected losses inherent in the loan portfolio[146]. Cash Flow and Operating Activities - Net cash provided by operating activities was $68.4 million, down from $76.9 million in the same period of 2021, indicating a decrease of about 11%[32]. - The company incurred $2.9 million in expenses related to the BBI acquisition for the nine months ended September 30, 2022[43].

Table of Contents U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Commission file number: 000-22507 THE FIRST BANCSHARES, INC. (Exact name of registrant as specified in its charter) Mississippi 64 ...

COVID-19 Impact - As of September 30, 2020, the company's aggregate outstanding exposure in adversely impacted industries due to COVID-19 was $452.5 million, representing 14.3% of total loans[169]. - The provision for loan and lease losses as of September 30, 2020 totaled $21.6 million, with $18.0 million specifically related to anticipated economic effects of COVID-19[169]. - Approximately 1,610 loans, totaling $709.6 million, were modified due to COVID-19, with 1,386 loans for $564.0 million deferring monthly principal and interest payments[171]. - The company has approximately 3,230 loans approved through the SBA for $260.2 million under the Paycheck Protection Program[171]. - The pandemic has resulted in significant disruptions in financial markets and a rapid increase in unemployment, impacting the company's operations[166]. - The company has implemented measures to protect employee health and assist customers affected by the pandemic[168]. - The company is actively working to adapt to the changing environment caused by COVID-19, including loan modifications and payment deferral programs[168]. - The provision for loan losses for the nine months ended September 30, 2020, was $21.6 million, significantly higher than $3.7 million for the year ended December 31, 2019[237]. Financial Performance - Net income available to common shareholders for Q3 2020 was $11.9 million, a decrease of 2.9% from $12.3 million in Q3 2019[175]. - Fully diluted earnings per share for Q3 2020 were $0.55, down from $0.71 in Q3 2019, primarily due to a $5.9 million provision for loan losses related to COVID-19[175]. - Net interest income increased to $40.0 million in Q3 2020, representing a 31.2% increase from $30.5 million in Q3 2019, driven by higher loan volumes[177]. - Non-interest income for Q3 2020 was $8.8 million, an increase of 23.8% from $7.1 million in Q3 2019, with mortgage income contributing significantly[178]. - Non-interest expense for Q3 2020 was $26.9 million, a 29.3% increase from $20.8 million in Q3 2019, with a significant portion attributed to acquisitions[181]. - Total assets increased to $5.155 billion as of September 30, 2020, up from $3.935 billion at December 31, 2019, reflecting a growth of $1.220 billion[190]. - Loans increased by $546.9 million, or 21.1%, to $3.144 billion during the first nine months of 2020[190]. - Non-interest income for the nine months ended September 30, 2020, was $30.9 million, a 59.7% increase from $19.4 million in the same period of 2019[187]. Loan Loss Provisions and Allowances - The allowance for loan losses was $34.3 million at September 30, 2020, representing approximately 1.09% of total loans, deemed adequate by management[188]. - The ALLL/total loans ratio was 1.09% at September 30, 2020, up from 0.53% at December 31, 2019, due to concerns about the economic effects of COVID-19[224]. - The average investment in impaired loans was $29.711 million for Q3 2020, compared to $26.195 million for Q4 2019[225]. - The allowance for loan losses is allocated as follows: $5.8 million (18.6%) for commercial, financial and agriculture; $23.1 million (62.3%) for commercial real estate; and $4.8 million (17.6%) for consumer real estate as of September 30, 2020[243]. - The Company maintains the allowance at a level deemed adequate to absorb probable incurred losses inherent in the loan portfolio[237]. Capital and Liquidity - Total deposits increased by $1.153 billion, or 37.5%, to $4.229 billion as of September 30, 2020, from $3.077 billion at December 31, 2019, with the SWG acquisition accounting for approximately $476.1 million, or 41.3% of the increase[263]. - The Company's liquidity ratio was 24.9% as of September 30, 2020, exceeding the internal liquidity policy guideline of a minimum of 10%[256]. - Total consolidated equity capital was $638.4 million, representing approximately 12.4% of total assets as of September 30, 2020, indicating adequate capital to meet regulatory requirements[276]. - The Company believes it met all capital adequacy requirements as of September 30, 2020, and does not foresee any circumstances that would cause it to be less than well capitalized[275]. Interest Rate Risk - The company expects a potential increase in net interest income of $13.5 million, or 10.0%, if interest rates rise by 200 basis points[302]. - Under a 200 basis point downward adjustment in interest rates, net interest income is projected to decrease by approximately $4.6 million, or 3.4%[301]. - The estimated changes in net interest income at risk show a 16.6% increase with a 400 basis point rise in interest rates[298]. - The economic value of equity (EVE) will vary under different interest rate scenarios, reflecting the company's longer-term exposure to interest rate risk[306]. - The average remaining time to maturity is considered in the assessment of financial instruments' value changes due to interest rate fluctuations[309]. Regulatory Compliance - The Company has opted to delay the adoption of ASU 2016-13 until the national emergency related to COVID-19 is terminated or December 31, 2020, whichever occurs first[274]. - The capital conservation buffer under Basel III rules was fully phased-in at 2.5% as of January 1, 2019, impacting the Company's ability to pay dividends and bonuses if capital ratios fall below certain thresholds[273]. - The Company has utilized a five-year transition period for the estimated impact of CECL on regulatory capital, following the interim final rule issued by U.S. federal regulatory authorities[274].

Financial Performance - The company reported net income available to common shareholders of $8.3 million for Q1 2020, up from $7.6 million in Q1 2019[150]. - Operating net earnings for Q1 2020 were $8.9 million, a decrease of 10.5% from $9.9 million in Q1 2019[151]. - Non-interest income rose to $6.5 million in Q1 2020, reflecting a 16.6% increase from $5.6 million in Q1 2019[153]. - The provision for income taxes was $1.7 million, or 16.9% of earnings before income taxes for Q1 2020, down from $2.0 million or 21.0% in Q1 2019[173]. - Total stockholders' equity increased by $12.3 million, or 2.3%, to $555.9 million as of March 31, 2020, driven by net earnings of $8.3 million and an increase in accumulated comprehensive income[227]. Interest Income and Margin - Net interest income increased by 25.6% to $34.1 million in Q1 2020, compared to $27.1 million in Q1 2019, driven by higher loan volumes[152]. - The net interest margin improved to 3.87% in Q1 2020 from 3.85% in Q1 2019[166]. - The Company reported net interest income fully tax equivalent of $34,526,000 for the three months ended March 31, 2020, up from $27,388,000 in the same period of 2019, representing a growth of 26.2%[247]. - The net interest margin fully tax equivalent for Q1 2020 was 3.93%, slightly up from 3.89% in Q1 2019[247]. Loan and Asset Management - Total assets increased to $4.054 billion at March 31, 2020, up from $3.935 billion at December 31, 2019[157]. - Loans increased slightly by 0.1% to $2.602 billion during the first three months of 2020[157]. - The Company's gross loans and leases totaled $2.616 billion at March 31, 2020, an increase of $4.4 million, or 0.2%, from December 31, 2019, attributed to organic loan growth[180]. - The loan portfolio composition includes real estate - commercial at $1.048 billion (40.1%), real estate - residential at $828.4 million (31.7%), and real estate - construction at $334.7 million (12.8%) as of March 31, 2020[181]. - Average gross loans and leases outstanding during the quarter were $2.6 billion, an increase from $2.2 billion in the same period last year[200]. Provision for Loan Losses - Provision for loan losses totaled $7.1 million in Q1 2020, a significant increase of 532% from $1.1 million in Q1 2019, largely due to anticipated economic effects of COVID-19[155]. - The total allowance for loan losses increased by $6.9 million from December 31, 2019, reflecting a proactive approach to potential credit losses due to the COVID-19 pandemic[200]. - The allowance for loan losses (ALLL) to total loans ratio increased to 0.80% at March 31, 2020, from 0.53% at December 31, 2019, primarily due to concerns regarding the economic effects of COVID-19[188]. - The provision for loan losses was $7.1 million for the quarter ended March 31, 2020, compared to $3.7 million at December 31, 2019, and $1.1 million at March 31, 2019[198]. Deposits and Liquidity - Deposits grew to $3.280 billion at March 31, 2020, compared to $3.082 billion at December 31, 2019[157]. - The Company’s total deposits reached $3.28 billion as of March 31, 2020, with a notable increase in money market accounts, which comprised 46.7% of total deposits[222]. - The Company has $1.093 billion available on lines of credit from the FHLB as of March 31, 2020, providing significant liquidity support[215]. - Approximately $363.4 million in loan commitments could be funded within the next three months, indicating strong future lending capacity[218]. Economic Impact and Future Outlook - The company anticipates that the COVID-19 pandemic may lead to a decline in demand for banking products and services, impacting future financial conditions[160]. - The Company increased its allowance for loan and lease losses in response to the economic impacts of the COVID-19 pandemic[161]. - The Company has many non-branch personnel working remotely while all branches remain open with limited access by appointment only[161]. Non-Interest Income and Expenses - Non-interest expense was $23.4 million for Q1 2020, an increase of 7.1% compared to the same period in 2019[156]. - Total non-interest expense for Q1 2020 was $23.439 million, up from $21.893 million in Q1 2019, with salaries and employee benefits accounting for $13.228 million[169]. - Non-interest income for Q1 2020 was $6.474 million, an increase from $5.554 million in Q1 2019, with service charges on deposit accounts contributing $1.914 million[168]. Asset Quality - Non-performing assets decreased to $44.7 million at March 31, 2020, from $46.1 million at December 31, 2019, a reduction of $1.4 million[188]. - Total nonaccrual loans as a percentage of total loans and leases net of unearned income was 1.45% at March 31, 2020, compared to 1.49% at December 31, 2019[188]. - The Company had $31.1 million in troubled debt restructurings (TDRs) at March 31, 2020, with $6.2 million performing as agreed with modified terms[186]. - Nonaccrual loans, including PCI loans, totaled $37.8 million at March 31, 2020, a decrease of $1.0 million from December 31, 2019[184]. Interest Rate Sensitivity - The Company's one year cumulative GAP ratio is approximately 156.0%, indicating an asset-sensitive position[253]. - If interest rates were to increase by 200 basis points, net interest income would likely improve by $2.7 million, or 2.3%[252]. - The economic value of equity (EVE) is sensitive to interest rate changes, with a projected decline in EVE under decreasing rate scenarios[258]. - A 200 bp decrease in interest rates would result in a -2.3% change in EVE, while a 400 bp increase would yield a 30.3% increase[260].