FBMS Burkenroad Report

March 29th, 2016

THE FIRST BANCSHARES INCORPORATED FBMS/NASDAQ

Continuing Coverage: Big Bank Products, Small Bank Feel Investment Rating: Market Outperform PRICE: $ 15.62 S&P 500: 2,055.01 DJIA: 17,633.11 RUSSELL 2000: 1,109.08

Only a small percentage of loans tied to oil industry

Loan to deposit ratio begins to stabilize

Smart acquisitions target the growing southeast U.S.

Increasing return on assets remains management focus

Our 12‐month target price is $24.00.

Valuation 2015 A 2016 E 2017 E

EPS* $ 1.64 $ 1.92 $ 2.03

P/E 9.5x 8.1x 7.7x

CFPS $ 2.11 $ 2.96 $ 3.13

P/CFPS 7.4x 5.3x 5.0x

* Excluding non‐recurring i tems

Market Capitalization Stock Data

Equity Market Cap (MM): $ 84 52‐Week Range: $15.32 ‐ $19.32

Enterprise Value (MM): $ 126 12‐Month Stock Performance: ‐2.98%

Shares Outstanding (MM): 5.40 Dividend Yield: 0.96%

Estimated Float (MM): 4.60 Book Value Per Share: $ 19.14

6‐Mo. Avg. Daily Volume: 6,909 Beta: 0.34

Company Quick View:

Smart, growth‐minded bankers in the heart of Dixie. First Bancshares, a Hattiesburg, Mississippi based bank, has 32 locations throughout Mississippi, Alabama, and Louisiana. The bank offers investment accounts, interest and non‐interest bearing checking and saving accounts, and credit and debit card service. In addition, the Company provides commercial and consumer lending. First Bancshares specializes in loans to individuals for mortgages. Company: www.thefirstbank.com

Analysts: Investment Research Manager: Brigid Doherty Jianrui Zhao Chris Sullivan Ian Levy Joe Bonner Scott Merritt

The BURKENROAD REPORTS are produced solely as a part of an educational program of Tulane University's Freeman School of Business. The reports are not investment advice and you should not and may not rely on them in making any investment decision. You should consult an investment professional and/or conduct your own primary research regarding any potential investment.

Wall Street's Farm Team

BURK

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4/1/13 4:47 PM

The First Bancshares Inc. (FBMS) BURKENROAD REPORTS (www.burkenroad.org) March 29, 2016

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Figure 1: Five‐year Stock Price Performance

Source: Yahoo! Finance March 29, 2016

INVESTMENT SUMMARY

We give The First Bancshares, Inc. a rating of Market Outperform with a 12‐month target price of $24.00 per share. To derive this target price, we used an analysis of the Company’s historical price to book value ratio, discounted cash flow for banks analysis, and a price to earnings analyses.

The First Bancshares is a publicly traded bank holding company for The First, A National Banking Association. The First, headquartered in Hattiesburg, Mississippi, has 32 locations across Mississippi, Alabama, and Louisiana. A map of the Company’s operations can be seen in Figure 2. The Company strives to provide its customers with the breadth of products and services comparable to those offered by large regional banks, while maintaining the quick response and personal service of a locally owned and managed bank. As such, the Company provides commercial and retail financial services to small to medium‐sized businesses and individuals. Loans for construction and land development, commercial and industrial use, and residential families are the largest predictors of future performance. As of December 31, 2015, the Company reported roughly $1.13 billion in assets, a 4% increase from 2014.


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Figure 2: Map of Current Locations

Source: FBMS Management March 31, 2016

Though the Company strives for 5‐7% organic growth annually, it expands its customer base primarily through acquisitions of other banks. From 2009 to 2014, the Company enacted a five‐year expansion plan which grew the bank from 9 to 32 locations across southern Mississippi, southern Alabama, and southeastern Louisiana. As the Company continues to expand, acquisitions become easier as smaller banks begin to suffer from changes in the regulatory environment. Though the Company has an advantage over the smaller banks, it is not immune to changes in the regulatory environment such as the potential for negative interest rates. In order to maintain a competitive advantage, the Company must continue to acquire smaller banks and expand.

Table 1: Historical Burkenroad Ratings and Prices

Date Price Rating Price Target

4/2/15 $16.00 Market Perform $17.00

INVESTMENT THESIS

We established a 12‐month target price of $24.00 and a rating of Market Outperform. The First Bancshares, Inc. has both steady organic growth and growth by acquisitions of other small banks. With the rapid decline of the energy industry, we expect the next acquisition to be further away from areas closely tied to energy. The First Bancshares had a successful five year plan beginning in 2009 that resulted in assets increasing from $478 million to $1.145 billion and return on assets increasing from 0.30% to 0.79%. Looking forward, management’s goal is to achieve $2.5 billion in assets by 2021.


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Figure 3: Total Assets in Millions of Dollars

Source: Bloomberg March 29, 2016

Only a small percentage of loans tied to oil industry

Currently, the Company only has about $20 million, or less than 3% of its loan portfolio, directly tied to falling oil prices. Furthermore, the overwhelming majority of the $20 million is in two major loans to large players in the oil industry. Due to the small exposure to oil, the drop in prices has not affected the Company and management does not see it becoming a problem in the future.

The small amount invested into the oil industry can prove to be a competitive advantage for First Bancshares. While some of its peers may have to increase their allowance for bad debt, the management at the Company does not currently see this need.

Loan to deposit ratio begins to stabilize

The loan to deposit ratio (LTD) compares money received by a bank with money being paid out. Too high of a ratio may mean the bank does not have enough cash, while too low a ratio may show that the bank can be earning more. Over the past few years, First Bancshares has budgeted for a LTD ratio of 85%. At the beginning of 2016, the Company had a LTD ratio that had grown to 84%. After years of steady LTD growth, the LTD ratio is expected to level off close to where it is now. If this ratio is maintained, future interest revenue is expected to grow at a similar rate to deposits (see Figure 4).

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Figure 4: Loan to Deposit Ratio


Smart acquisitions target the growing southeastern U.S.

Throughout the past five years, the Company has expanded throughout the Gulf South through acquisitions. The Company picked acquisition targets carefully by examining fundamentals of the business and the economies in which the businesses operate. First Bancshares buys‐out companies based in cities that have a fast growing population and economic growth. So, with population levels in the southeast growing, the Company expects to see deposits grow at a similar or even better rate than the Company has previously experienced.

However, for the first time in three years, First Bancshares went through 2015 without an acquisition. Consequently, the Company is eager to make an acquisition and expand in 2016. Specifically, management is constantly looking for new acquisition targets with less than $500 million in assets in Mississippi, Alabama, Louisiana, and western Florida.

Increasing return on assets remains management focus

Over the past few years, management has received criticism for a return on assets (ROA) below its Company peers. However, the low ROA has partially been due to the Company’s acquisition expenses over the last couple of years.

Management is aware of this concern and has an attractive ROA target for the end of 2016 and 2017. With a current ROA of .79%, the Company plans to increase ROA to .85% in 2016 and above the peer average to .90% in 2017. Figure 5 shows ROA growth and the upward trend over the last six years.

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Figure 5: Return on Assets


VALUATION

We determined our 12‐month target price of $24.00 by calculating the average of three price valuation methods: discounted cash flow (DCF) for Banks, price to earnings value (P/E) ratio analysis, and price to tangible book value (P/TBV) ratio analysis. We determined this target price by equally weighing the values we calculated for these three valuation methods. When calculating our multiples, we decided to exclude MidSouth Bancorp because, unlike the First and other companies in the peer group, this company has a large stake in the oil industry.

Relative Multiple Method: P/E

We decided to include the relative multiple valuation of P/E in our 12‐month target price projection because P/E ratio is one of the most popular valuation measures used by investors and analysts. The ratio denotes the multiple of the volume at which a stock is trading by each dollar of earnings per share (EPS). In Table 1, the peer average is 13.82x, which is higher than FBMS’ value of 11.35x. We then multiplied the peer average ratio by our predicted EPS for the next four periods of $1.96, which yielded a 12‐month target price of $27.15.

Relative Multiple Method: P/TBV

In our second analysis, we applied the relative multiple valuation of the P/TBV model. This model has been proven to be reliable, as the P/TBV ratio consists of the price of the security over the total book value of a company’s assets. The P/TBV ratio represents the amount of money per share the debtholders and shareholders would receive if a company were to liquidate its physical assets. After calculating FBMS’ P/TBV multiple, we compared this value to the peer average. The peer average and Company ratios are both 1.08x, meaning the price is 1.08 times the earnings. This valuation method yielded a 12‐month target price of $22.19.

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Discounted Cash Flow

The last valuation method that we used was a DCF analysis. We decided to include this method because DCF attempts to measure the value created by a business directly and precisely, for the value of a firm is ultimately derived from the inherent value of its future cash flows to its stakeholders. DCF analysis allowed us to calculate the present value of our projected five‐year net incomes, which we discounted by the Company’s weighted average cost of capital (WACC). To derive the Company’s WACC of 8.20%, we utilized a 2.50% 20‐year Treasury rate as risk‐free rate, a 5.70% market risk premium, and a beta of 1. The DCF analysis resulted in a 12‐month target price of $21.76.

Figure 6:Valuation Results and Target Price


After conducting the three valuation methods, we equally weighed each valuation result and set our 12‐month target price at $24.00. Figure 6 reveals that a gap exists between the current share price and the projected prices stemming from these three valuation methods. We consider the 12‐month target price to be set reasonably higher than the current price. Finally, considering the Company’s historic reliance on acquisitions, we predict that FBMS will have at least one acquisition in the upcoming year.

INDUSTRY ANALYSIS

The U.S. banking industry consists of institutions that primarily earn revenue through interest on loans. These financial institutions earn profit primarily by the interest spread, or the difference between the interest rate the banks receive on loans made and the interest rate banks pay out on deposits. Banks also earn revenue through the trading of securities, charging transaction fees on deposits, and potentially issuing its’ own securities.

Banks are organized in three categories: national, regional, or community banks. A national bank is generally headquartered in a major financial city in the U.S. and engaged in a variety of activities including commercial lending, auto loans, credit cards, international lending, and foreign currency operations. Community banks tend to operate more locally but can still operate across a few states. Community banks are generally differentiated through a deep understanding of the financial needs of community members and strong local connections.


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Position in the Banking Industry

The First Bancshares, Inc. operates as a community bank in the Southeastern U.S. The Company extends into three states, with 31 locations throughout Mississippi, Alabama, and Louisiana. As of September 30, 2015, the Company reported total assets of $1.1 billion and deposits totaling $964 million.

Drivers of the Community Banking Industry

The success of the Company is largely dependent on the regional economy. Gulf South state economies depend largely on manufacturing, oil and gas, agriculture, and tourism. Low oil prices affect the Louisiana economy, and have a negative impact on the Louisiana branches. On a broad scale, the entire banking industry is impacted by actions of the Federal Reserve. However, due to the rising interest rates, First Bank’s branches should see an increase in revenue.

Regulations in the Banking Industry

At the federal level, banks are regulated by the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency, and the Federal Reserve Board. On the state level, state regulated charters monitor banks. The federal and state regulators work to eliminate the banks’ right to privacy and the likelihood of fraud. Furthermore, the recent passing of the Dodd‐Frank Act in 2010 increases banks’ transparency by requiring the disclosure of public statements.

Threat of Entry

New entrants into First Bancshares’ market face two threats: 1) New, regional banks opening in the southeast; and 2) Nation‐wide, major banks expanding into these areas.

Bank startups face many regulatory and capital requirements. Due to licensure laws, capital requirements, access to financing, regulatory compliance, and security concerns, the present threat of new entrants is relatively low. According to the FDIC, an average of 215 new banks opened each year between 1977 and 2002. Due to mergers and bank failures, however, the average number of total banks has decreased by roughly 253 a year in the same timeframe.

Because the industry deals with customers’ wealth and financial information, new banks find it very difficult to enter the industry. Due to the nature of the industry, people are more willing to place their money in major, well known banks that are considered trustworthy. The banking industry also has gone through a transformation in which major banks seek to serve all of a customer’s needs in the same location. Since a customer is more likely to allow one bank to hold all of their accounts and fulfill their financial needs, this consolidation furthers the role of trust as a barrier to entry. As a regional bank located only in the southeast, the Company places a large emphasis on maintaining close, personal relationships with its customers.


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While it is nearly impossible for new banks to enter the industry, it is also difficult for smaller banks to open on a regional level. Considering the large number of major banks as well as community banks available in the southeast, a new bank would have a hard time gaining market share in this region.

Bargaining Power of Suppliers

The bargaining power of suppliers in the banking industry is relatively high. There are four major suppliers of capital for banks: customer deposits, mortgages and loans, mortgage‐backed securities, and loans from other institutions. By utilizing these four major suppliers, the bank can have the necessary resources required to service the customers’ borrowing needs while maintaining enough capital to meet withdrawal expectations. The power of the suppliers is largely based on the markets and fluctuates. While capital might not pose a big threat, the threat of suppliers luring away capital does. First Bancshares must consistently maintain enough capital to serve its customers’ broad needs.

Bargaining Power of Buyers

Similarly, buyers have a great deal of bargaining power. Individual customers do not pose much of a threat to the banking industry. One major factor affecting the power of buyers is the relatively high cost of switching banks. If a person has one bank that services their banking needs, mortgage, saving, checking, etc., it can be time consuming and expensive for an individual to switch to another bank. In an attempt to lure customers from competitors, banks will lower switching cost. However, the internet has greatly increased the power of the customer in the banking industry by giving consumers the power to compare rates offered by numerous banks.

On the other hand, large corporate clients have high bargaining power in the banking industry. By offering better exchange rates, more services, and exposure to foreign capital markets, financial institutions work extremely hard to lure and maintain high‐margin corporate clients.

Availability of Substitutes

While the threat of substitutes are high within the banking industry, the largest threat of substitution is among non‐financial competitors. Insurances, mutual funds, and fixed income securities are some of the many financial services that are also offered by non‐banking companies. Additionally, on the lending side of business, banks are seeing competition from unconventional companies. Big name electronics, jewelers, car dealers, etc. tend to offer preferred financing on “big ticket” items. These non‐banking companies offer lower interest rates on payments than the customer would otherwise get from a traditional banking loan.


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Competitive Rivals

Competition among banks is often a race to determine which bank can offer both the most attractive and efficient services. However, this often causes banks to experience a lower ROA (return on assets). Given the nature of the industry, it is more likely to see further consolidation because major banks tend to prefer to acquire or merge with other banks than to spend money marketing and advertising.

Though First Bancshares has many competitors, the Company is differentiated in the banking industry by targeting individuals and medium sized businesses looking for a close, personal banking relationship. The Company intentionally avoids competing with many larger institutions operating in the states in which it operates. The First Bancshares’ unique target market lessens the competition facing the company in the banking industry.

ABOUT FIRST BANCSHARES

First Bancshares, Inc. (FBMS/NASDAQ) was incorporated on June 23, 1995, and serves as a bank holding company for The First, A National Banking Association (“The First”). Located in Hattiesburg, Mississippi, The First began operations on August 5, 1996 and began selling stock on August 30, 1995. Since then, The First has aggressively expanded with the following acquisitions: First National Bank of Wiggins, 2006; eight Whitney Bank branches, 2011; the de novo expansion into Ocean Springs, 2013; First National Bank of Baldwin County, 2013; the acquisition of Bay Bank in Mobile, Alabama, 2014; and the most recent acquisition of The Mortgage Connection, LLC in December 2015. With 32 locations in South Mississippi, South Alabama, and Louisiana, the Company engages in general commercial and retail banking characterized by personalized service and local decision‐making, emphasizing the banking needs of small and medium‐sized businesses, professional concerns, and individuals.

Products

First Bancshares provides commercial and retail banking services for small to medium sized businesses and individuals. These services include checking accounts, savings accounts, time deposits, and individual retirement accounts. The Company serves as a direct distributor that offers commercial secured and unsecured loans for working capital, business expansion, purchases of equipment, and the refinancing of mortgages. Loans for car payments, personal investing, education, real estate construction and acquisition, and home improvement are also available. The Company provides an online banking service that allows clients to stay up to date on their accounts and loans.

Competition

First Bancshares competes with both local and national banks. Direct competitors are regional banks in the southeast. The three biggest direct competitors are Home Bancorp (HBCP), Bancorp South, Inc. (BXS), and Auburn National (AUBN). Among these banks, First Bancshares is the smallest, with a market capitalization of $87.2 million.


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Competitive Advantage

The First prides itself on customer service. Because it is a small, local bank, The First is able to give each client more attention than larger banks and ensure that the proper products and services are provided.

Corporate Strategy

The strategy of First Bancshares has remained relatively constant throughout the last five years. With a short term goal to increase net income and build value for investors, The First has a long term goal of expanding to cities within the region that have had an increase in population and average wages over the last ten years. The Company will continue to look for potential expansion locations with similar demographics, as acquisition targets are still plentiful. In 2015, The First identified over 100 possible acquisition targets in states in which it operates.

Latest Developments

In recent years, First Bancshares has had many major developments. In 2009, the Company enacted the beginning of its “Tri‐State Expansion Strategy Five Year Plan.” The Company began branch expansion in growing areas of Mississippi, Alabama, and Louisiana, and ended 2009 with less than $500 million in assets. In 2010, when Whitney Bank merged with Hancock Bank, and in 2011, the Company acquired eight Whitney Bank branches in Mississippi, totaling $179 million in deposits. In 2013, the Company had a successful private placement and sold securities totaling $20 million. Additionally, in 2013, the Company acquired First National Bank of Baldwin County, which brought in $187 million in assets. First Bancshares acquired BCB Holding Co. of Mobile (Bay Bank) and secured four locations to total ten locations and $250 million in deposits in “Mobile MSA.” Furthermore, in 2014, the Company opened loan production offices in Baton Rouge and Slidell, Louisiana. By 2014, the Company ended its second quarter with over $1 billion in assets operating in only three states. In December 2015 the Company acquired The Mortgage Connection, LLC with two locations in Brandon, Mississippi and Madison, Mississippi.

Recent Stock Performance

Since 2010, First Bancshares’ stock has surged due to a recovering economy. Over the last six years, the stock has gone up over 140% to $15.62 (see Figure 7).


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Figure 7: Return Compared to Major Indexes

Source: First Bancshares 2016 10‐K March 30, 2016

PEER ANALYSIS

While First Bancshares has many competitors, three main factors were considered in selecting the Company’s main peers: products, market capitalization, and area of operation. First, the Company’s main source of revenue comes from loan interest and commercial banking services. Second, First Bancshares main peers operate in the southeast U.S. Thus, the peer group consists of five of the main small to mid‐sized competitors: Renasant Corporation, MidSouth Bancorp, Home Bancorp, Citizens Holding, and Auburn National, as seen in Table 2.

Table 2: Peer Analysis

Company Market Cap. P/E P/BV NIM Div. Yield ROE ROA

The First Bancshares

87.2 M 11.35x 1.08x 3.75% 0.87% 8.69% 0.77%

Renasant Corp 1240 M 16.43x 1.22x 4.37% 2.14% 7.75% 0.99%MidSouth Bancorp 89.19 M 7.43x .53x 4.26% 4.68% 6.12% 0.66%

Home Bancorp 184.33 M 14.22x 1.11x 4.44% 1.41% 7.86% 0.91%

Citizens Holding 111.15 M 14.64x 1.32x 3.14% 4.15% 9.12% 0.78%

Auburn National 98.01 M 12.47x 1.22x 3.03% 3.24% 10.11% 0.94%

Peer Average 345 M 12.75x 1.08x 3.85% 3.12% 8.19% 0.86%

Source: Yahoo! Finance and bankregdata.com March 29, 2016

Renasant Corp (RSNT/Nasdaq)

Based in Tupelo, Mississippi, Renasant Corp. specializes in banking, insurance, and wealth management. Renasant has over $5.8 billion in assets and operates in Misssissippi, Tennessee, Alabama, and Georgia. Most recently, Renasant made changes to management by electing a new president.

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FBMS NASDAQ Composite NASDAQ Bank Index


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MidSouth Bancorp (MSL/NYSE)

MidSouth Bancorp has over 60 branches throughout Louisiana and Texas. The company offers commercial banking and investment opportunities to its customers. In addition, MidSouth offers loans to individuals and to businesses including real estate and industrial sectors. In the third quarter of 2015, MidSouth had almost $2 billion in assets.

Home Bancorp, Inc (HBCP/Nasdaq)

With the acquisition of Louisiana Bancorp in September of 2015, Home Bancorp finished the fiscal year with over $1.5 billion in assets. Headquartered in Lafayette, Louisiana, the company has 22 branches located throughout Louisiana.

Citizens Holding Company (CIZN/Nasdaq)

With 23 locations throughout Mississippi, Citizens Holding Company has $960 million in assets. It is the parent company to The Citizens Bank, which is also headquartered in Philadelphia, Mississippi. In November of 2015, Citizens Holding increased the cash dividend to $0.24 per share.

Auburn National Bancorporation, Inc. (AUBN/Nasdaq)

Auburn National was found in 1907 as a holding company to AuburnBank, located in Auburn, Alabama. Auburn National’s main source of revenue comes from interest on loans given to individuals and small to mid‐sized businesses. In September of 2015, Auburn had $817 million in total assets. Auburn National currently has ten branches all located within the state of Alabama.

MANAGEMENT PERFORMANCE AND BACKGROUND

First Bancshares’ management team will play a key role in the Company’s continued success. In 2009, M. Ray “Hoppy” Cole was named Chief Executive Office (CEO) of The First, A National Banking Association and First Bancshares. Mr. Cole was named CEO by Board Chairman David E. Johnson. Mr. Johnson continued as Chairman of the Board and carried‐out newly‐expanded responsibilities of that office. When commenting on the transition, Mr. Johnson stated that market conditions and growth within the bank brought about the need to separate the critical duties of the CEO and Chairman of the Board to ensure protection to the Company’s shareholders. E. Ricky Gibson is currently the independent Chairman of the Board and Dee Dee Lowery was appointed to Chief Financial Officer, Executive Vice President of the Company in 2014. The Company continues to rapidly expand, but the management team still encourages developing intimate relationships with all of its customers.

Return on Invested Capital

Return on invested capital (ROIC) measures operating performance against available capital resources. ROIC is often used to evaluate management’s ability to generate returns for shareholders. Though ROIC is a good indicator of a management’s performance, other industry specific metrics offer a more comprehensive view of a company’s performance.


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E. Ricky Gibson, 58 Chairman of the Board

E. Ricky Gibson is an independent Chairman of the Board of The First Bancshares, Inc. Mr. Gibson serve as Chairman of the Board and has been a Director of the Company since 1995. He has also served as President and Owner of N&H Electronics, Inc., a wholesale electronics distributor since 1988 and of Mid‐South Electronics, a wholesale consumer distributor since 1993.

M. Ray “Hoppy” Cole, Jr., 54 President, CEO

M. Ray Cole is President, Chief Executive Officer, and Director of The First Bancshares, Inc. Prior to joining the bank in September 2002, Mr. Cole was Secretary/Treasurer and Chief Financial Officer of the Headrick Companies, Inc. for 11 years. Mr. Cole began his career with the First National Bank of Commerce in New Orleans, Louisiana and held the position of Corporate Banking Officer from 1985 to 1988. In December of 1988, Mr. Cole joined Sunburst Bank in Laurel, Mississippi serving as Senior Lender and later as President of the Laurel office. He served as director of the Company twice from 1998 to 1999, and then from 2001 through the present. He also served as a Director of the Company’s Laurel bank prior to consolidation and currently serves on the board of the bank.

Dee Dee Lowery, 49 Executive VP, CFO

Dee Dee T. Lowery, CPA, is Chief Financial Officer, Executive Vice President of the Company. Prior to joining the bank in February 2005, Mrs. Lowery was Vice President and Investment Portfolio Manager of Hancock Holding Company for four years. Mrs. Lowery was appointed CFO in 2005.

Other Executives

The First has several other top executives, each with at least 14 years of experience.

Ion Mixon‐ Senior Vice President, Risk Manager

Chris Ryals‐ Executive Vice President, Chief Operating Officer

Carol Daniel‐ Executive Vice President, Credit Administrator

Hayden Mitchell‐ Executive Vice President, Chief Retail Banking Office

David Bush‐ Executive Vice President, Private Banking Manager

Ray Wesson‐ President, Southern Region

Eric Waldron‐ President, Northern Region

Wade Neth‐ President, Alabama Region


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SHAREHOLDER ANALYSIS

First Bancshares, Inc. had 5.40 million shares outstanding with a market capitalization of $84 million as of March 29th, 2016. The majority, or 35%, of the Company’s shareholders are institutional investors, while insiders own 11% of the Company’s shares. The largest non‐industrial shareholder is a David Bomboy with 2.04% of shares outstanding. The Company’s largest shareholder is The Banc Funds Company, L.L.C. with 8.44% of shares outstanding (as seen in Tables 3 and 4).

Table 3: Largest Shareholders ‐ Individuals

Holder Name Shares % Outstanding

Bomboy, David W 110,995 2.04%

Gibson, E. Ricky 93,244 1.72%

McMurry, Fred A. 83,885 1.54%

Seidenburg, J. Douglas 82,656 1.52%

Parker, Ted E. 70,813 1.30%

Chancellor, Michael 67,300 1.24%

Cole, M. Ray Jr. 62,620 1.19%


Table 4: Largest Shareholders ‐ Companies

Holder Name Shares % Outstanding

Banc Funds Company, L.L.C. (The) 458,730 8.44%

Mendon Capital Advisor 353,031 6.50%

Burnham Asset Management 304,385 5.60%

JCSD Capital, LLC 290,395 5.36%

Stieven Capital Advisors, L.P. 235,041 4.33%

Manulife Asset Management 210,000 3.87%

Basswood Capital Management 184,953 3.40%

RMB Capital Management, LLC 139,254 2.56%

Vanguard Group, Inc. (The) 62,250 1.15%

Pinnacle Holdings, LLC 55,666 1.02%


The large amount of institutional holdings makes the Company’s stock considerably less liquid. However, the large number of companies with shares shows that investors see long, stable growth in the Company’s future.


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RISK ANALYSIS AND INVESTMENT CAVEATS

First Bancshares (The First) faces several risks that may have a potentially negative effect on business. Some of these risks apply to the broader banking industry, while other risks are unique to First Bancshares and the niche markets in which it operates.

Vulnerability to Certain Sectors of the Economy

A significant portion of First Bancshares loan portfolio is secured by real estate and energy. If real estate values decline and oil prices continue to stay at record lows, The First could suffer greatly. If the real estate values depreciate beyond a certain point, the collateral value of the portfolio and the revenue stream from those loans could come under stress and possibly require additional loan loss accruals, negatively impacting the Company’s earnings.

Difficult Market Conditions

Dramatic housing market declines in recent years have caused home prices to fall and have increased foreclosures, unemployment, and under‐employment. If these events occur again, it would negatively impact First Bancshares’ credit performance of its mortgage loans and would result in significant write‐downs of asset values. Since many lenders are still wary about the stability of financial markets, lenders have reduced funding capital, including to other financial institutions. Further market turmoil and tightening of credit could lead to a lack of consumer confidence and a widespread reduction of business activity.

General Economic Condition in the Areas of Operations

A sudden or severe downturn in the economies of Mississippi, Louisiana, or Alabama may affect the ability of customers to meet loan payment obligations on a timely basis. The local economic conditions in these areas have a direct impact on the Company’s commercial, real estate, and construction loans. In addition, the local economy has an effect on both the ability of the borrowers to pay back these loans as well as the value of the collateral securing these loans. Further, adverse economic conditions in these states could cause customers to withdraw their deposit balances, which would cause a strain on the bank’s liquidity.

Interest‐Rate Risk

First Bancshares’ assets and liabilities are primarily monetary, and as a result, the Company is subject to significant risks connected to changes in interest rates. The bank’s profitability is largely dependent upon net interest rate. Net interest rate is the spread between the cost of borrowing and the interest rate a bank can earn on its’ money. Unexpected movements in interest rates could cause net interest margins to decrease, subsequently decreasing net interest income. Such changes could also adversely affect the valuation of the bank’s assets and liabilities. The Company’s current one‐year interest rate sensitivity position is slightly asset sensitive, but a gradual increase in interest rates during the next 12 months should not have a significant impact on net interest income during that period.


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The difference between interest rates charged on interest‐earning assets and interest rates paid on interest‐bearing liabilities may be affected by changes in the market interest rate. Changes in relationships between interest rate indices, and/or changes in the relationships between long‐term and short‐term market interest rates may be a factor as well. A change in this difference might result in an increase in interest expense relative to interest income, or a decrease in the Company’s interest rate spread.

Changes in Monetary Policies

First Bancshares’ operations are affected by credit policies of monetary authorities, particularly the Board of Governors of the Federal Reserve System. In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks, unrest in Eastern Europe, and the current military operations in the middle east, the Company cannot predict possible future changes in interest rates, deposit levels, loan demand or the Company’s business and earnings. The response of the U.S. to developing global conflict may result in currency fluctuations, exchange controls, market disruptions, or other adverse effects.

Risk of Natural Disasters

First Bancshares’ market areas are susceptible to natural disasters such as hurricanes and tornados. Natural disasters can disrupt operations, result in damage to properties that may be securing loan assets, and can negatively affect the local economies in which the bank operates. The Company cannot predict the impact of possible disasters on operations or economies. But, such events could cause a decline in loan originations, a decline in the value or destruction of property securing the loans, and an increase in the risk of delinquencies, foreclosures, or loan losses.

Subject to various Federal and State Entities

The Company and The First are subject to the regulations of the Securities and Exchange Commission (SEC), the Consumer Financial Bureau, the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Options Clearing Corporation (OCC). New regulations issued by these agencies may adversely affect the bank’s ability to carry on its business activities. The Company and the First are also subject to the accounting rules and regulations of the SEC and the Financial Accounting Standards Board. Changes in accounting rules could adversely affect the reported financial statements or results of operations of the Company. In addition, new regulations may also require extraordinary efforts or additional costs to implement.

Reliance on Financial Markets

The Company’s common stock is listed and traded on the NASDAQ stock market. Although the Company anticipates that its capital resources will be adequate for the foreseeable future to meet its capital requirements, at times it may depend on the liquidity of the NASDAQ stock market to raise equity capital. If the market should fail to operate, or if conditions in the capital markets are adverse, the Company may be constrained in raising capital.


18

The Dodd‐Frank Wall Street Reform and Consumer Protection Act

The Dodd‐Frank Act was signed into law in 2010. It implements financial regulatory reforms impacting most aspects of the financial services industry. The Act created the Financial Stability Oversight Council to oversee and coordinate the efforts of the U.S. financial regulatory agencies to stabilize the financial industry. It also decreased banks’ profits by increasing compliance costs. In particular, the Act regulates many consumer rights and increases the security of financial information. Finally, Dodd‐Frank gave the FDIC more power in managing the Deposit Insurance Fund and raised the minimum reserve ratio that a bank must have to 1.35%.

Risk of Greater Loan Loss

The Company is exposed to the risk that its customers will be unable to repay their loans in accordance with their terms and that any collateral securing the payment of their loans may not be sufficient to assure repayment. FBMS has many loans involving real estate and construction and if the economy goes into a recession, the credit worthiness of the companies with these loans may decrease. The value of the real estate serving as security for repayment of the loan would also decrease in this scenario.

Acquisitions of other Companies

First Bancshares has grown primarily through acquisitions over the past few years. Investors could potentially perceive acquisitions of companies as a poor investment. Acquisitions can increase turnover with both customers and employees, and thus, increase the cost of operating the new business. Difficulty with integrating new businesses may make profitability hard to achieve.

Industry Competition

The Company operates in an industry with fierce competition. Many of the competitors are much larger and may have more resources available. FBMS faces competition from commercial banks, savings and loan associations, credit unions, internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and other financial intermediaries. Additionally, some of the Company’s competitors are not banks and are not subject to the same regulatory rules as the Company.

Changes in Technology

New technology‐driven products and services are rapidly being introduced in the financial service industry. The Company will need to use technology competitively in the future to ensure it is not left behind.


19

FINANCIAL PERFORMANCE AND PROJECTIONS

Since 2012, First Bancshares has rapidly grown through acquisitions. Due to the lack of involvement in the oil industry, the Company has managed to maintain steady growth, unlike other banks in the Gulf South.

By excluding quarters that involved an acquisition, we were able to determine a growth rate to predict future revenue. In order to keep revenue from growing to unattainable amounts, the growth rate used declines over time and begins to level off around 4%. In addition, we used a historical correlation analysis to determine not only the driving factor in loans but also the percentage of each type of loan. We decided to keep these historic percentages constant throughout our projections and divide up the loans accordingly.

After speaking with management, we accounted for some of the Company’s long‐term goals in our financial projections. First, over the past few years, the loan to deposit ratio has grown at a steady rate. However, even though management budgets for loans to equal 85% of deposits, we project it to remain somewhat constant near the current level of 79%. Secondly, we took into account management’s intention to achieve a return on asset (ROA) ratio of over 1%.

While calculating our projections we made a few assumptions. The biggest assumption is that the Gulf South will continue to see a growing population. This growing population signals an improving economy and will provide the Company with new potential customers. Our second assumption relates to acquisitions and future growth. Even though the Company has gone through many acquisitions in the past five years, we cannot assume: 1) continued acquisitions; or, 2) the size of future acquisitions.

Investing and Financing Activities

Acquisitions comprise the primary investing activity of the Company. Since 2011, the Company has gone through multiple acquisitions, increasing its presence in Mississippi, Alabama, and Louisiana. To finance the acquisitions, the Company has taken two steps. First, the Company has reinvested excess cash; second, the Company has issued new stock.

SITE VISIT

On February 12, 2016 our analyst team traveled to Hattiesburg, Mississippi, a little over two hours northeast of New Orleans, to meet with the executives of The First Bancshares. After arriving, we were shown to the Company’s board room where we met Chief Financial Officer (CFO) Donna “Dee Dee” T. Lowery. President and Chief Executive Officer (CEO) M. Ray “Hoppy” Cole entered the board room about 15 minutes later after concluding his meeting with Blake Wilson, the President and CEO of the Mississippi Economic Council.


20

After a brief discussion with Ms. Lowery, Mr. Cole explained how the Company has changed since 2009. In 2009 the Company had assets $478 million and nine locations. Mr. Cole explained that many of the members of the Board of Directors (including himself) wanted to increase the value of the Company because many of the members were the original investors in the Company. According to Mr. Cole, the Company considered going private, but the advantages to being a public firm were too great. These advantages, according to Mr. Cole, include access to capital and constant pressure to perform.

The First Bancshares has grown significantly since 2009, through both organic growth and acquisitions. The Company targets an organic growth rate of 5‐7% annually and believes this is achievable in its largest markets. The Company has also been active with acquisitions. Both Mr. Cole and Ms. Lowery implied that an acquisition in the next year is more than likely. They also indicated that the ideal size of an acquisition for the Company is less than $500 million in assets.

Even though the Company doubled in size in the last five years, Mr. Cole and Ms. Lowery believe that growing the Company to $2‐2.5 billion in the next five years is a reasonable goal. Acquiring smaller banks is a smart strategy for the Company because, as Mr. Cole explained, acquiring a bank around $250 million in assets increases the Company’s assets by 20‐25%.

A key area of focus for the Company is maintaining its small bank feel. The Company believes that growing the bank allows it to achieve efficiencies of scale. Still, the Company also hopes to remain nimble, poised, and responsive enough to move with the market.

With a little over $1 billion in assets, the Company is still a relatively small bank. Mr. Cole stressed that the growth through acquisition has allowed the Company to have price and product offerings competitive to Bancorp South and Whitney. Mr. Cole also said that The First is small enough that normal customers can still call him with specific questions.

The biggest risks to the Company moving forward are millennials and mobile platforms. At this time the Company believes that the convenience of individual branches is still important in the markets where the Company operates. Executives believe the Company’s target customers want to personally know the people where they deposit their money. Mr. Cole also stated that the Company’s customers like to come in to open their accounts but then generally use the online banking features afterwards.

The Company considers oil prices going down as a net benefit. According to Mr. Cole the drivers of the bank are education, healthcare, tourism, and gambling. He believes, in particular, that lower fuel prices will lead to increased expendable income and help the Company.

Ms. Lowery attributes the high increase in net income to two things. First, the Company went a full year without acquisitions, decreasing expenses. Second, the Company benefitted from the successful Bay Bank acquisition.


21

Mr. Cole believes the future of banking points to more industry consolidation with banks under $500 million in assets. He also believes that technology levels the playing field between mid‐size and large banks and will continue to do so in the future.

Site Visit Photo

INDEPENDENT OUTSIDE RESEARCH

While conducting our research, we spoke to two analysts following First Bancshares. The analysts reinforced information given to us by Mr. Cole and Ms. Lowery during our site visit. In their professional opinion, it is strategic to be a bank in the Gulf South with a small stake in energy. We learned from one of the analysts that falling gas prices may even mean more revenue for the Company. Southern Mississippi has a market for tourism and cheaper road travel has the potential to bring more people to the state on vacation. If this market continues to grow, the population in the Gulf South could rise supplying the Company with more possible clients. Additionally, the analysts reinforced that it is important for a bank as small as First Bancshares to continue growing in order to keep up with local competitors and rising compliance costs.

Additionally, we utilized several online resources. Information from the Federal Deposit Insurance Corporation gave us well‐organized, concise outlines of the Company’s basic financials. We used the Federal Financial Institutions Examination Council’s website to identify the Company’s Tier I and Tier II Basel liquidity ratios (11.04% and 11.81%, respectively), and to compare the Company to similar competitors. We also used applications such as Yahoo! Finance to track the Company’s stock history. Other online resources used were Bloomberg, Google Finance, BankRegData.com, and the SEC filings from the Company’s website.


22

ANOTHER WAY TO LOOK AT IT

ALTMAN Z‐SCORE

Edward Altman created the Z‐score analysis in 1968 in order to measure the insolvency of companies. While it has been proven to be fairly accurate, it is not applicable to banks.

PETER LYNCH EARNINGS MULTIPLE VALUATION

Peter Lynch, the author of One Up on Wall Street, introduces the earning multiple valuation technique to help simplify the investment decision process. The method helps tell if a stock is over or under priced by comparing the stock price to a line that is equal to the 12‐month trailing earnings per share (EPS) times 15. At any given time, if the stock price is greater than the value of the line, then the stock is overvalued. Similarly, if the price is less than the value of the line, the stock is undervalued.

First Bancshares currently has a stock price of $15.62 and a 12‐month trailing EPS of $21.60. Since the trailing EPS is greater than the stock price, Peter Lynch would say the stock is undervalued.

Figure 8 shows the historical values of the Company’s 12‐month trailing EPS and the stock price. In the last seven years, there have been periods over time where the stock has been overvalued as well as undervalued.

Figure 8: Earnings Multiple Valuation


0

5

10

15

20

25

30

35

1‐Apr‐09 1‐Apr‐10 1‐Apr‐11 1‐Apr‐12 1‐Apr‐13 1‐Apr‐14 1‐Apr‐15

12‐Month Trailing EPS Stock Price


23

WWBD? What Would Ben (Graham) Do?

Benjamin Graham, the author of The Intelligent Investor, is considered to be the “father of value investing.” The Ben Graham Analysis is used to analyze the value of a company, past growth performance, and future growth potential.

The analysis consists of eight different “hurdles” created by Graham. If a company overcomes four hurdles, it is considered an attractive investment. Six of the hurdles measure value and two measure growth.

Based on 2015 numbers, First Bancshares passed five hurdles, including three value hurdles and two growth hurdles. If Graham were given the opportunity to invest in the Company today, he would.

Figure 9: Ben Graham Dial


24

Earnings per share (ttm) 1.60$ Price: 15.62$

Earnings to Price Yield 10.27%

10 Year Treasury (2X) 3.62%

P/E ratio as of 2011 7.7





Current P/E Ratio 9.7

Dividends per share (ttm) 0.15$ Price: 15.62$

Dividend Yield 0.96%

1/2 Yield on 10 Year Treasury 0.91%

Stock Price 15.62$

Book Value per share as of 12/31/15 19.14$

150% of book Value per share as of 12/31/15 28.72$

Interest‐bearing debt as of 12/31/15 120,631$

Book value as of 12/31/15 103,436$

Current assets as of 12/31/15 ‐$

Current liabilities as of 12/31/15 ‐$

Current ratio as of 12/31/15 #DIV/0!

EPS for year ended 2015 1.62$





EPS for year ended 2015 1.62$ 30%


EPS for year ended 2013 1.06$ ‐18%



Stock price data as of M arch 29th, 2016

Yes

Hurdle # 3: A Dividend Yield of 1/2 the Yield on 10 Year Treasury

Yes

Hurdle # 4: A Stock Price less than 1.5 BV

Yes

Hurdle # 5: Total Debt less than Book Value

No

Hurdle # 6: Current Ratio of Two or More

N/A

Hurdle # 7: Earnings Growth of 7% or Higher over past 5 years

Yes

Hurdle # 8: Stability in Growth of Earnings

No

The First Bancshares, Inc (FBMS)

Ben Graham Analysis

Hurdle # 1: An Earnings to Price Yield of 2X the Yield on 10 Year Treasury

Yes

Hurdle # 2: A P/E Ratio Down to 1/2 of the Stocks Highest in 5 Yrs

The First Ban

cshares Inc. (FB

MS)

BURKEN

ROAD REP

ORTS (www.burken

road

.org)

March 29, 2016

25


Quarterly and Annual Earnings

In thousands

For the period ended

2013 A

2014 A

2015 A

31‐M

ar‐16 E

30‐Jun‐16 E

30‐Sep‐16 E

31‐Dec‐16 E

2016 E

1‐Apr‐17 E

1‐Jul‐17 E

1‐Oct‐17 E

1‐Jan‐18 E

2017 E

Interest Income:

Loans, included fees

25,736

$

30,276

$

34,242

$

8,907

$

9,019

$

9,131

$

9,245

$

36,302

$

9,361

$

9,478

$

9,596

$

9,716

$

38,152

$

Securites:

Taxable

3,279

3,884

3,948

995

1,042

1,053

1,099

4,188

1,012

1,060

1,072

1,118

4,262

Tax exempt

2,140

2,072

1,854

637

667

675

704

2,683

648

679

687

716

2,730

Federal funds sold

62

53

63

13

13

13

13

53

13

13

14

14

54

Interest on deposits in banks

100

85

93

91

91

98

98

Total interest income

31,318

36,371

40,201

10,552

10,741

10,873

11,152

43,318

11,035

11,230

11,368

11,662

45,295

Interest expense:

Deposits

2,300

520

762

546

553

560

567

2,226

574

581

588

596

2,340

Other borrowings

1,849

1,800

Interest on borrowed funds

618

603

645

156

156

156

156

623

156

156

156

156

623

Total interest expense

2,917

2,973

3,207

702

709

716

723

2,849

730

737

744

752

2,962

Net interest income

28,401

33,398

36,994

9,850

10,032

10,157

10,430

40,469

10,305

10,493

10,624

10,910

42,333

Provision for loan losses

1,076

1,418

410

465

301

414

419

1,598

424

430

435

440

1,729

Net interest income after provision for loan losses

27,325

31,980

36,584

9,386

9,731

9,743

10,011

38,871

9,881

10,064

10,189

10,470

40,603

Noninterest income:

Service charges on deposit accounts

3,979

4,262

5,014

1,114

1,117

1,120

1,123

4,473

1,128

1,134

1,139

1,145

4,546

Other service charges, commissions and fees

2,187

2,163

1,546

684

749

594

81

2,108

684

749

594

81

2,108

Gain on sale of investm

ent securities

Bank owned life insurance

income

152

370

409

409

409

409

409

Gain on sale of premises

133

Gain(loss) on other real estate

(77)

(85)

(247)

Other

841

1,094

734

1,200

1,200

1,200

1,200

Total noninterest income

7,083

7,803

7,589

1,798

1,866

1,714

2,812

8,189

1,812

1,883

1,734

2,834

8,263

Noninterest expenses:

Salaries and employee benefits

14,855

17,462

15,089

4,920

4,920

4,920

4,920

19,681

5,117

5,117

5,117

5,117

20,468

Employee benefits

3,447

Occupancy and equipment expense

3,919

4,526

4,621

1,153

1,153

1,153

1,153

4,610

1,176

1,176

1,176

1,176

4,703

Supplies and printing

455

498

300

498

498

498

498

Professional and consulting fees

2,433

1,618

1,332

1,656

1,656

1,656

1,656

Marekting and public relations

451

445

497

395

395

395

395

FDIC and OCC assessments

767

938

966

799

799

799

799

ATM expense

763

Telephone

631

Other

5,285

5,246

4,515

1,776

1,827

2,094

(1,049)

4,649

1,776

1,827

2,094

(1,049)

4,649

Total noninterest expense

28,165

30,734

32,161

7,849

7,900

8,167

8,372

32,288

8,069

8,120

8,387

8,592

33,167

Income before income taxes

6,243

9,050

12,011

3,335

3,697

3,290

4,450

14,772

3,624

3,826

3,536

4,712

15,699

Income tax expense (benefit)

1,604

2,436

3,213

893

991

882

1,192

3,958

971

1,025

947

1,262

4,206

Net income (loss)

4,639

6,614

8,798

2,441

2,707

2,409

3,258

10,815

2,653

2,801

2,589

3,450

11,493

Preferred dividends

424

363

342

86

86

86

86

342

86

86

86

86

342

Net income applicable to common stock

4,215

$

6,251

$

8,456

$

2,356

$

2,621

$

2,323

$

3,172

$

10,472

$

2,567

$

2,716

$

2,503

$

3,364

$

11,150

$

Net income (loss) per common share:

Basic

Net income (loss)

1.07

$

1.27

$

1.64

$

0.44

$

0.48

$

0.43

$

0.58

$

1.92

$

0.47

$

0.50

$

0.46

$

0.61

$

2.03

$

Diluted

Net income (loss)

1.06

$

1.25

$

1.62

$

0.43

$

0.48

$

0.42

$

0.58

$

1.91

$

0.47

$

0.49

$

0.45

$

0.61

$

2.02

$

15.37%

12.55%

Dividends per common share

0.15

$

0.15

$

0.0375

$

0.0375

$

0.0375

$

0.0375

$

0.0375

$

0.1500

$

0.0400

$

0.0400

$

0.0400

$

0.0400

$

0.1600

$

Weighted average shares outstanding:

Basic

4,319

5,228

5,403

5,414

5,424

5,434

5,444

5,444

5,454

5,463

5,473

5,482

5,482

Diluted

4,373

5,271

5,442

5,462

5,472

5,482

5,492

5,492

5,502

5,511

5,521

5,530

5,530

2017 E

2016 E

The First Ban

cshares Inc. (FB

MS)

BURKEN

ROAD REP

ORTS (www.burken

road

.org)

March 29, 2016

26


Quarterly and Annual Earnings For the period ended

2013 A

2014 A

2015 A

31‐M

ar‐16 E

30‐Jun‐16 E

30‐Sep‐16 E

31‐Dec‐16 E

2016 E

1‐Apr‐17 E

1‐Jul‐17 E

1‐Oct‐17 E

1‐Jan‐18 E

2017 E

SELECTED COMMON‐SIZE AMOUNTS (as %

or assets)


2.74%

2.77%

2.99%

0.77%

0.77%

0.77%

0.77%

3.02%

0.77%

0.77%

0.77%

0.77%

3.02%

Taxable

0.35%

0.36%

0.34%

0.09%

0.09%

0.09%

0.09%

0.35%

0.08%

0.09%

0.09%

0.09%

0.34%

Tax exempt

0.23%

0.19%

0.16%

0.06%

0.06%

0.06%

0.06%

0.22%

0.05%

0.06%

0.06%

0.06%

0.22%

Total interest i ncome

3.33%

3.33%

3.51%

0.91%

0.92%

0.92%

0.93%

3.61%

0.91%

0.91%

0.91%

0.92%

3.58%

Deposits

0.24%

0.05%

0.07%

0.05%

0.05%

0.05%

0.05%

0.19%

0.05%

0.05%

0.05%

0.05%

0.19%


0.31%

0.27%

0.28%

0.06%

0.06%

0.06%

0.06%

0.24%

0.06%

0.06%

0.06%

0.06%

0.23%

Net interest income

3.02%

3.05%

3.23%

0.85%

0.86%

0.86%

0.87%

3.37%

0.85%

0.85%

0.85%

0.86%

3.35%


0.11%

0.13%

0.04%

0.04%

0.03%

0.03%

0.03%

0.13%

0.03%

0.03%

0.03%

0.03%

0.14%


2.90%

2.92%

3.19%

0.81%

0.83%

0.82%

0.83%

3.24%

0.81%

0.82%

0.82%

0.83%

3.21%


0.42%

0.39%

0.44%

0.10%

0.10%

0.09%

0.09%

0.37%

0.09%

0.09%

0.09%

0.09%

0.36%

Other service charges, commissions and fees

0.23%

0.20%

0.14%

0.06%

0.06%

0.05%

0.01%

0.18%

0.06%

0.06%

0.05%

0.01%

0.17%


0.75%

0.71%

0.66%

0.16%

0.16%

0.14%

0.23%

0.68%

0.15%

0.15%

0.14%

0.22%

0.65%


1.58%

1.60%

1.32%

0.43%

0.42%

0.42%

0.41%

1.64%

0.42%

0.42%

0.41%

0.40%

1.62%


0.42%

0.41%

0.40%

0.10%

0.10%

0.10%

0.10%

0.38%

0.10%

0.10%

0.09%

0.09%

0.37%

Total noninterest expense

2.99%

2.81%

2.81%

0.68%

0.67%

0.69%

0.70%

2.69%

0.66%

0.66%

0.67%

0.68%

2.62%

YEAR TO YEAR CHANGE


20.19%

17.64%

13.10%

9.32%

5.70%

5.82%

3.50%

6.02%

5.09%

5.09%

5.09%

5.09%

5.09%

Total interest income

18.94%

16.13%

10.53%

8.98%

7.17%

7.87%

7.06%

7.75%

4.57%

4.56%

4.56%

4.57%

4.56%

Deposits

118.98%

‐77.37%

46.46%

‐13.58%

‐15.94%

‐13.31%

N/A

192.11%

5.10%

5.09%

5.09%

5.09%

5.09%

Interest on borrowed funds

‐42.27%

‐2.30%

6.92%

‐9.49%

5.19%

5.91%

‐12.64%

‐3.48%

0.00%

0.00%

0.00%

0.00%

0.00%


‐29.48%

1.90%

7.89%

‐12.70%

‐12.06%

‐9.75%

‐10.17%

‐11.18%

3.97%

3.97%

3.98%

3.99%

3.98%

Net interest income

27.96%

17.60%

10.77%

10.94%

8.85%

9.37%

8.51%

9.39%

4.62%

4.60%

4.60%

4.61%

4.60%


‐12.38%

31.81%

‐71.09%

209.70%

N/A

65.57%

4062.22%

289.72%

‐8.66%

42.96%

5.09%

5.09%

8.22%


30.33%

17.04%

14.40%

7.53%

5.59%

7.81%

4.25%

6.25%

5.27%

3.41%

4.58%

4.59%

4.46%


15.96%

7.10%

17.65%

6.01%

1.82%

‐27.39%

‐15.22%

‐10.78%

1.26%

1.51%

1.76%

2.02%

1.64%


12.01%

10.17%

‐2.75%

‐2.82%

0.64%

‐13.52%

47.78%

7.92%

0.78%

0.90%

1.15%

0.80%

0.89%


23.78%

17.55%

‐13.59%

6.36%

6.66%

6.31%

302.59%

30.43%

4.00%

4.00%

4.00%

4.00%

4.00%


21.24%

15.49%

2.09%

3.93%

1.37%

1.37%

‐6.90%

‐0.23%

2.00%

2.00%

2.00%

2.00%

2.00%

2016 E

2017 E

The First Ban

cshares Inc. (FB

MS)

BURKEN

ROAD REP

ORTS (www.burken

road

.org)

March 29, 2016

27


Quarterly and Annual Balance Sheets

In thousands

As of

31‐Dec‐13 A

31‐Dec‐14 A

31‐Dec‐15 A

31‐M

ar‐16 E

30‐Jun‐16 E

30‐Sep‐16 E

31‐Dec‐16 E

31‐Dec‐16 E

1‐Apr‐17 E

1‐Jul‐17 E

1‐Oct‐17 E

1‐Jan‐18 E

31‐Dec‐17 E

Cash and due from banks

24,080

$

30,333

$

23,635

$

52,077

$

57,862

$

62,949

$

69,084

$

69,084

$

74,369

$

80,345

$

85,722

$

92,169

$

92,169

$

Interest‐bearing deposits with banks

14,205

13,899

17,303

17,303

17,303

17,303

17,303

17,303

17,303

17,303

17,303

17,303

17,303

Federal funds sold

967

386

321

321

321

321

321

321

321

321

321

321

321

Total cash and cash equivalents

39,252

44,618

41,259

69,701

75,487

80,573

86,709

86,709

91,994

97,970

103,347

109,793

109,793

Securities held‐to‐m

aturity, at amortized cost

8,438

8,193

7,092

7,092

7,092

7,092

7,092

7,092

7,092

7,092

7,092

7,092

7,092

Securities available‐for‐sale, at fair value

244,051

254,746

239,732

239,732

239,732

239,732

239,732

239,732

239,732

239,732

239,732

239,732

239,732

Other securities

5,534

7,234

8,135

8,135

8,135

8,135

8,135

8,135

8,135

8,135

8,135

8,135

8,135

Total securities

258,023

270,174

254,959

254,959

254,959

254,959

254,959

254,959

254,959

254,959

254,959

254,959

254,959

Loans held for sale

3,680

2,103

3,974

1,058

1,058

1,058

1,058

1,058

1,058

1,058

1,058

1,058

1,058

Loans

579,623

704,531

772,515

757,810

767,283

776,874

786,585

786,585

796,417

806,372

816,452

826,658

826,658

Allowance

for loan losses

(5,728)

(6,095)

(6,747)

(6,886)

(6,863)

(6,949)

(7,036)

(7,036)

(7,124)

(7,213)

(7,303)

(7,394)

(7,394)

Loans, Net

573,895

700,540

769,742

751,982

761,478

770,983

780,607

780,607

790,352

800,218

810,207

820,322

820,322

Premises and equipment

32,072

34,810

33,623

33,563

33,546

33,528

33,509

33,509

33,490

33,471

33,451

33,431

33,431

Interest receivable

3,292

3,659

3,953

4,295

4,057

4,224

4,228

4,228

4,492

4,242

4,416

4,421

4,421

Cash surrender value

6,593

14,463

14,872

14,872

14,872

14,872

14,872

14,872

14,872

14,872

14,872

14,872

14,872

Other real estate

3,083

3,083

3,083

3,083

3,083

3,083

3,083

3,083

3,083

3,083

3,083

Goodwill

10,621

12,276

13,776

13,776

13,776

13,776

13,776

13,776

13,776

13,776

13,776

13,776

13,776

Other assets

13,463

13,229

9,864

9,768

9,672

9,576

9,481

9,481

9,398

9,315

9,232

9,150

9,150

Total assets

940,890

$

1,093,768

$

1,145,131

$

1,155,999

$

1,170,930

$

1,185,574

$

1,201,224

$

1,201,224

$

1,216,415

$

1,231,906

$

1,247,344

$

1,263,807

$

1,263,807

$

Current liabilities:

Deposits

Noninterest‐bearing

173,794

$

201,362

$

189,445

$

196,327

$

198,806

$

201,288

$

203,801

$

203,801

$

206,345

$

208,920

$

211,529

$

214,169

$

214,169

$

Interest‐bearing

606,177

691,413

727,250

780,273

790,126

799,989

809,975

809,975

820,086

830,323

840,689

851,183

851,183

Total Deposits

779,971

892,775

916,695

976,600

988,932

1,001,277

1,013,776

1,013,776

1,026,431

1,039,244

1,052,217

1,065,353

1,065,353

Interest payable

400

316

246

212

213

213

216

216

223

224

224

227

227

Borrowed funds

52,000

89,450

110,321

58,986

58,986

58,986

58,986

58,986

58,986

58,986

58,986

58,986

58,986

Subrodinated debentrues

10,310

10,310

10,310

10,310

10,310

10,310

10,310

10,310

10,310

10,310

10,310

10,310

10,310

Other liabilities

13,101

4,701

4,123

4,123

4,123

4,123

4,123

4,123

4,123

4,123

4,123

4,123

4,123

Total liabilities

855,782

997,552

1,041,695

1,050,231

1,062,564

1,074,908

1,087,410

1,087,410

1,100,072

1,112,886

1,125,860

1,138,998

1,138,998

Stockholders' equity:

Preferred stock

17,103

17,123

17,123

17,123

17,123

17,123

17,123

17,123

17,123

17,123

17,123

17,123

17,123

Common stock, $1 par value:

5,123

5,343

5,403

5,403

5,403

5,403

5,403

5,403

5,403

5,403

5,403

5,403

5,403

Additional paid in capital

42,086

44,420

44,650

44,830

45,010

45,190

45,370

45,370

45,550

45,730

45,910

46,090

46,090

Retained earnings

22,509

27,975

35,625

37,777

40,195

42,314

45,282

45,282

47,632

50,129

52,413

55,558

55,558

Accumulated other comprehensive income

(1,249)

1,818

1,099

1,099

1,099

1,099

1,099

1,099

1,099

1,099

1,099

1,099

1,099

Treasury stock

(464)

(464)

(464)

(464)

(464)

(464)

(464)

(464)

(464)

(464)

(464)

(464)

(464)

Total stockholders' equity

85,108

96,216

103,436

105,768

108,366

110,665

113,813

113,813

116,343

119,020

121,484

124,809

124,809

Total liabilities and stockholders' equity

940,890

$

1,093,768

$

1,145,131

$

1,155,999

$

1,170,930

$

1,185,574

$

1,201,223

$

1,201,223

$

1,216,415

$

1,231,906

$

1,247,344

$

1,263,807

$

1,263,807

$

2017 E

2016 E

The First Ban

cshares Inc. (FB

MS)

BURKEN

ROAD REP

ORTS (www.burken

road

.org)

March 29, 2016

28


Quarterly and Annual Balance Sheets


31‐Dec‐13 A

31‐Dec‐14 A

31‐Dec‐15 A

31‐M

ar‐16 E

30‐Jun‐16 E

30‐Sep‐16 E

31‐Dec‐16 E

31‐Dec‐16 E

1‐Apr‐17 E

1‐Jul‐17 E

1‐Oct‐17 E

1‐Jan‐18 E

31‐Dec‐17 E

SELECTED COMMON SIZE BALANCE SHEET AMOUNTS (% assets)

Cash and due from banks

2.56%

2.77%

2.06%

4.50%

4.94%

5.31%

5.75%

5.75%

6.11%

6.52%

6.87%

7.29%

7.29%

Interest‐bearing deposits with banks

1.51%

1.27%

1.51%

1.50%

1.48%

1.46%

1.44%

1.44%

1.42%

1.40%

1.39%

1.37%

1.37%

Federal funds sold

0.10%

0.04%

0.03%

0.03%

0.03%

0.03%

0.03%

0.03%

0.03%

0.03%

0.03%

0.03%

0.03%


4.17%

4.08%

3.60%

6.03%

6.45%

6.80%

7.22%

7.22%

7.56%

7.95%

8.29%

8.69%

8.69%

Securities available‐for‐sale, at fair value

25.94%

23.29%

20.93%

20.74%

20.47%

20.22%

19.96%

19.96%

19.71%

19.46%

19.22%

18.97%

18.97%

Total securities

27.42%

24.70%

22.26%

22.06%

21.77%

21.51%

21.22%

21.22%

20.96%

20.70%

20.44%

20.17%

20.17%

Loans held for sale

0.39%

0.19%

0.35%

0.09%

0.09%

0.09%

0.09%

0.09%

0.09%

0.09%

0.08%

0.08%

0.08%

Loans

61.60%

64.41%

67.46%

65.55%

65.53%

65.53%

65.48%

65.48%

65.47%

65.46%

65.46%

65.41%

65.41%

Allowance

for loan losses

‐0.61%

‐0.56%

‐0.59%

‐0.60%

‐0.59%

‐0.59%

‐0.59%

‐0.59%

‐0.59%

‐0.59%

‐0.59%

‐0.59%

‐0.59%

Loans, Net

60.99%

64.05%

67.22%

65.05%

65.03%

65.03%

64.98%

64.98%

64.97%

64.96%

64.95%

64.91%

64.91%

Interest receivable

0.35%

0.33%

0.35%

0.37%

0.35%

0.36%

0.35%

0.35%

0.37%

0.34%

0.35%

0.35%

0.35%

Goodwill

1.13%

1.12%

1.20%

1.19%

1.18%

1.16%

1.15%

1.15%

1.13%

1.12%

1.10%

1.09%

1.09%


18.47%

18.41%

16.54%

16.98%

16.98%

16.98%

16.97%

16.97%

16.96%

16.96%

16.96%

16.95%

16.95%

Interest‐bearing

64.43%

63.21%

63.51%

67.50%

67.48%

67.48%

67.43%

67.43%

67.42%

67.40%

67.40%

67.35%

67.35%

Total Deposits

82.90%

81.62%

80.05%

84.48%

84.46%

84.46%

84.40%

84.40%

84.38%

84.36%

84.36%

84.30%

84.30%

Borrowed funds

5.53%

8.18%

9.63%

5.10%

5.04%

4.98%

4.91%

4.91%

4.85%

4.79%

4.73%

4.67%

4.67%

Subrodinated debentrues

1.10%

0.94%

0.90%

0.89%

0.88%

0.87%

0.86%

0.86%

0.85%

0.84%

0.83%

0.82%

0.82%

Other liabilities

1.39%

0.43%

0.36%

0.36%

0.35%

0.35%

0.34%

0.34%

0.34%

0.33%

0.33%

0.33%

0.33%

Total liabilities

90.95%

91.20%

90.97%

90.85%

90.75%

90.67%

90.53%

90.53%

90.44%

90.34%

90.26%

90.12%

90.12%

Additional paid in capital

4.47%

4.06%

3.90%

3.88%

3.84%

3.81%

3.78%

3.78%

3.74%

3.71%

3.68%

3.65%

3.65%

Retained earnings

2.39%

2.56%

3.11%

3.27%

3.43%

3.57%

3.77%

3.77%

3.92%

4.07%

4.20%

4.40%

4.40%

Accumulated other comprehensive income

‐0.13%

0.17%

0.10%

0.10%

0.09%

0.09%

0.09%

0.09%

0.09%

0.09%

0.09%

0.09%

0.09%

Total stockholders' equity

9.05%

8.80%

9.03%

9.15%

9.25%

9.33%

9.47%

9.47%

9.56%

9.66%

9.74%

9.88%

9.88%

SELECTED QUARTER TO QUARTER CHANGES


120.34%

11.11%

8.79%

9.75%

7.65%

8.04%

6.69%

7.52%

33.42%

Loans, Net

‐2.31%

1.26%

1.25%

1.25%

1.25%

1.25%

1.25%

1.25%

5.09%


3.63%

1.26%

1.25%

1.25%

1.25%

1.25%

1.25%

1.25%

5.09%

Interest‐bearing

7.29%

1.26%

1.25%

1.25%

1.25%

1.25%

1.25%

1.25%

5.09%

SELECTED YEAR OVER YEAR CHANGES


27.12%

13.67%

‐7.53%

‐26.22%

21.71%

23.52%

110.16%

110.16%

31.98%

29.78%

28.26%

26.62%

26.62%

Loans, Net

42.27%

22.07%

9.88%

5.60%

4.82%

4.06%

1.41%

1.41%

5.10%

5.09%

5.09%

5.09%

9.09%


58.54%

15.86%

‐5.92%

‐3.65%

2.58%

7.33%

7.58%

7.58%

5.10%

5.09%

5.09%

5.09%

9.09%

Interest‐bearing

24.47%

14.06%

5.18%

‐0.08%

2.84%

3.05%

11.37%

11.37%

5.10%

5.09%

5.09%

5.09%

9.09%

2016 E

2017 E

The First Ban

cshares Inc. (FB

MS)

BURKEN

ROAD REP

ORTS (www.burken

road

.org)

March 29, 2016

29


Quarterly and Annual Statements of Cash Flows

In thousands


2013 A

2014 A

2015 A

31‐M

ar‐16 E

30‐Jun‐16 E

30‐Sep‐16 E

31‐Dec‐16 E

2016 E

1‐Apr‐17 E

1‐Jul‐17 E

1‐Oct‐17 E

1‐Jan‐18 E

2017 E

Cash Flow From Operations:

Net income:

4,639

$

6,614

$

8,799

$

2,441

$

2,707

$

2,409

$

3,258

$

10,815

$

2,653

$

2,801

$

2,589

$

3,450

$

11,493

$

Adjustm

ents:

Depreciation and amortization

1,915

2,183

2,297

930

947

965

984

3,826

989

1,009

1,028

1,048

4,075

FHLB

stock dividends

(4)

(6)

(9)


1,076

1,418

410

465

301

414

419

1,598

424

430

435

440

1,729

Gain on sale/call of securities

(237)

Gain on sale of land

(111)

Deferred income taxes

1,707

331

256

Restricted stock expense

392

618

721

180

180

180

180

720

180

180

180

180

720

Increase in cash value of life insurance

(152)

(370)

(409)

Securities, amortization and acccretion, net

(107)

901

922

Writedown of bank property

193

(133)

(Gain) loss on sale/w

ritedown of ORE

350

395

387

Changes in:

Interest receivable

(55)

(152)

(294)

(342)

238

(166)

(4)

(275)

(264)

249

(174)

(5)

(193)

Loans held for sale

2,672

1,660

(1,868)

2,916

2,916

Interest payable

(153)

(109)

(70)

(33)

0

0

3

(30)

8

0

0

3

11

Other, net

5,522

(6,078)

(1,271)

(325)

( 324)

(328)

(332)

(1,310)

(336)

(341)

(345)

(349)

(1,371)

Net cash provided by (used in) operating activities

17,995

7,057

9,738

6,231

4,049

3,474

4,507

18,260

3,654

4,329

3,714

4,767

16,464

Cash flows from investing activities

Purchases of other securities

(892)

Maturities and calls of securities available‐for‐sale

52,238

42,970

1,100

Purchases of securities available‐for‐sale, net

(83,416)

(27,550)

12,998

Net (increase) decrease in loans

(50,100)

(89,190)

(68,588)

14,705

(9,473)

(9,591)

(9,711)

(14,070)

(9,832)

(9,955)

(10,080)

(10,206)

(40,073)

Purchase of bank owned life insurance

(7,500)

Proceeds from sale of land

76

950

Purchases of premises and equipment

(747)

(989)

(1,231)

(774)

(834)

(851)

(869)

(3,329)

(888)

(907)

(926)

(946)

(3,666)

Cash received in from acquisition

43,150

4,273

(844)

Increase in other securities

(1,992)

(782)

Net cash used in investing activities

(40,867)

(78,692)

(56,507)

13,931

(10,307)

(10,442)

(10,580)

(17,399)

(10,720)

(10,862)

(11,006)

(11,151)

(43,739)

Cash flows from financing activities

Increase in deposits

(1,971)

53,846

24,091

59,904

12,333

12,344

12,499

97, 080

12,655

12,813

12,973

13,136

51,577

Net change in borrowed funds

15,229

24,346

20,871

(51,335)

(51,335)

Dividend paid on common stock

(600)

(763)

(778)

(203)

(203)

(204)

(204)

(814)

(218)

(219)

(219)

(219)

(875)

Dividend paid on preferred stock

(342)

(342)

(342)

(86)

(86)

(86)

(86)

(342)

(86)

(86)

(86)

(86)

(342)

Repurchase of restricted stock for paym

ent of taxes

(27)

(86)

(92)

Repurchase of shares issued in BCB aquiusition

(36)

Repurchase of warrants

(302)

Issuance

of common shares

18,958

Net cash provided by (used in) financing activities

31,247

77,001

43,410

8,281

12,044

12,055

12,209

44,588

12,351

12,509

12,669

12,831

50,360

Increase (decrease) in cash and cash equivalents

8,375

5,366

(3,359)

28,443

5,785

5,086

6,135

45,450

5,285

5,976

5,377

6,447

23,085

Cash and cash equivalents at beginning of year

30,877

39,252

44,618

41,259

69,701

75,487

80,573

41,259

86,709

91,994

97,970

103,347

86,709

Cash and cash equivalents at end of year

39,252

44,618

41,259

69,701

75,487

80,573

86,709

86,709

91,994

97,970

103,347

109,793

109,793

Operating cash flow per share

excluding changes in working capital

1.74

$

1.94

$

2.11

$

0.70

$

0.72

$

0.69

$

0.85

$

2.96

$

0.74

$

0.77

$

0.73

$

0.89

$

3.13

$

Operating cash flow per share

including changes in working capital

4.12

$

1.34

$

1.79

$

1.14

$

0.74

$

0.63

$

0.82

$

3.32

$

0.66

$

0.79

$

0.67

$

0.86

$

2.98

$

2017 E

2016 E

The First Ban

cshares Inc. (FB

MS)

BURKEN

ROAD REP

ORTS (www.burken

road

.org)

March 29, 2016

30


Ratios For the period ended

2013 A

2014 A

2015 A

31‐M

ar‐16 E

30‐Jun‐16 E

30‐Sep‐16 E

31‐Dec‐16 E

2016 E

1‐Apr‐17 E

1‐Jul‐17 E

1‐Oct‐17 E

1‐Jan‐18 E

2017 E

Perform

ance

Measurements

Gross interest margin

4.09%

3.86%

3.86%

0.99%

0.99%

0.99%

1.00%

3.96%

0.98%

0.98%

0.98%

0.99%

3.93%

Net interest margin

3.71%

3.54%

3.55%

0.92%

0.93%

0.92%

0.94%

3.70%

0.91%

0.92%

0.92%

0.93%

3.67%

Loan interest margin

3.36%

3.21%

3.29%

0.83%

0.83%

0.83%

0.83%

3.32%

0.83%

0.83%

0.83%

0.83%

3.31%

0.38%

0.08%

0.10%

0.07%

0.07%

0.07%

0.07%

0.27%

0.07%

0.07%

0.07%

0.07%

0.28%

Return on Average Assets

0.45%

0.57%

0.74%

0.82%

0.90%

0.79%

1.06%

0.87%

0.85%

0.89%

0.81%

1.07%

0.90%

Return on Average Equity

4.95%

6.50%

8.17%

9.01%

9.79%

8.49%

11.31%

9.20%

8.92%

9.23%

8.33%

10.93%

9.35%

Return on Average Tangible Equity

6.91%

8.84%

10.60%

11.63%

12.54%

10.79%

14.27%

11.56%

11.18%

11.49%

10.30%

13.43%

11.59%

Efficiency Ratio

90%

85%

80%

74%

74%

75%

75%

75%

73%

72%

74%

74%

73%

Provision for loan losses ratio

0.19%

0.20%

0.05%

0.06%

0.04%

0.05%

0.05%

0.20%

0.05%

0.05%

0.05%

0.05%

0.22%

Loans to Deposits ratio

74%

78%

84%

77%

77%

77%

77%

77%

77%

77%

77%

77%

77%

Earning assets to interest‐bearing liabilities

135%

138%

139%

127%

127%

127%

126%

126%

126%

126%

125%

125%

125%

Non‐interest expense to average assets

3.12%

2.93%

2.91%

0.72%

0.72%

0.74%

0.75%

2.90%

0.72%

0.72%

0.74%

0.75%

2.92%

Non‐interest revenue to total revenue

18.45%

17.67%

15.88%

14.56%

14.80%

13.62%

20.13%

15.90%

14.10%

14.36%

13.23%

19.55%

15.43%

Equity to Assets Ratio

9.05%

8.80%

9.03%

9.05%

9.14%

9.24%

9.34%

9.47%

9.46%

9.55%

9.64%

9.74%

9.44%

Financial Risk (Leverage) Ratios

Total debt/equity ratio

9.90

10.32

10.03

9.89

9.77

9.67

9.52

9.52

9.42

9.31

9.23

9.09

9.09

Total LT debt/equity ratio

89.08%

108.90%

120.85%

69.62%

67.95%

66.54%

64.70%

64.70%

63.30%

61.87%

60.62%

59.01%

59.01%

Tier 1 Leverage Ratio

9.23%

8.67%

8.98%

9.09%

9.20%

9.28%

9.42%

9.42%

9.51%

9.61%

9.69%

9.83%

9.83%

Total debt ratio

91%

91%

91%

91%

91%

91%

91%

91%

90%

90%

90%

90%

90%

Net Carge‐offs/average loans

‐0.218%

‐0.221%

‐0.172%

‐0.043%

‐0.043%

‐0.043%

‐0.043%

‐0.168%

‐0.043%

‐0.043%

‐0.043%

‐0.043%

‐0.170%

Loan Loss Provision / Net Charge offs

‐1.00

‐1.00

‐0.32

‐1.43

‐0.93

‐1.26

‐1.26

‐1.22

‐1.26

‐1.26

‐1.26

‐1.26

‐1.26

Reserves / Average loans

1.16%

0.95%

0.91%

0.90%

0.90%

0.90%

0.90%

0.90%

0.90%

0.90%

0.90%

0.90%

0.92%

Return on assets

3.42%

3.28%

3.30%

0.86%

0.86%

0.86%

0.87%

3.45%

0.85%

0.86%

0.86%

0.87%

3.43%

Return on equity

38%

37%

37%

9%

9%

9%

9%

37%

9%

9%

9%

9%

35%

2017 E

Interest expense on deposits as a %

of deposits

2016 E

BURKENROAD REPORTS RATING SYSTEM

MARKET OUTPERFORM: This rating indicates that we believe forces are in place that would enable this company's stock to produce returns in excess of the stock market averages over the next 12 months.

MARKET PERFORM: This rating indicates that we believe the investment returns from this company's stock will be in line with those produced by the stock market averages over the next 12 months.

MARKET UNDERPERFORM: This rating indicates that while this investment may have positive attributes, we believe an investment in this company will produce subpar returns over the next 12 months. BURKENROAD REPORTS CALCULATIONS

CPFS is calculated using operating cash flows excluding working capital changes.

All amounts are as of the date of the report as reported by Bloomberg or Yahoo Finance unless otherwise noted. Betas are collected from Bloomberg.

Enterprise value is based on the equity market cap as of the report date, adjusted for long‐term debt, cash, & short‐term investments reported on the most recent quarterly report date.

12‐month Stock Performance is calculated using an ending price as of the report date. The stock performance includes the 12‐month dividend yield.

2015‐2016 COVERAGE UNIVERSE Amerisafe Inc. (AMSF) Bristow Group Inc. (BRS) CalIon Petroleum Company (CPE) Cal‐Maine Foods Inc. (CALM) Carbo Ceramics Inc. (CRR) Cash America International Inc. (CSH) Conn's Inc. (CONN) Crown Crafts Inc. (CRWS) Denbury Resources Inc. (DNR) EastGroup Properties Inc. (EGP) Era Group Inc. (ERA) Evolution Petroleum Corp. (EPM) The First Bancshares (FBMS) Globalstar (GSAT) Gulf Island Fabrication Inc. (GIFI) Hibbett Sports (HIBB) Hornbeck Offshore Services Inc. (HOS) IBERIABANK Corp. (IBKC) ION Geophysical Corp. (IO) Key Energy Services (KEG)

Marine Products Corp. (MPX) MidSouth Bancorp Inc. (MSL) Newpark Resources Inc. (NR) PetroQuest Energy Inc. (PQ) Pool Corporation (POOL) Powell Industries Inc. (POWL) Rollins Incorporated (ROL) RPC Incorporated (RES) Ruth’s Hospitality Group Inc. (RUTH) Sanderson Farms Inc. (SAFM) SEACOR Holdings Inc. (CKH) Sharps Compliance Inc. (SMED) Spark Energy Inc. (SPKE) Stone Energy Corp. (SGY) Sunoco LP (SUN) Superior Energy Services Inc. (SPN) Superior Uniform Group Inc. (SGC) Team Incorporated (TISI) Vaalco Energy Inc. (EGY) Willbros Group Inc. (WG)

PETER RICCHIUTI Director of Research Founder of Burkenroad Reports [email protected] ANTHONY WOOD Senior Director of Accounting [email protected]

DANIEL BROWNFIELD GRACE CAMMACK ALAN POSNER RUBEN FLORES DELGADO Associate Directors of Research

BURKENROAD REPORTS Tulane University New Orleans, LA 70118‐5669 (504) 862‐8489 (504) 865‐5430 Fax

To receive complete reports on any of the companies we follow, contact:Peter Ricchiuti, Founder & Director of Research

Tulane UniversityFreeman School of BusinessBURKENROAD REPORTS

Phone: (504) 862-8489Fax: (504) 865-5430

E-mail: [email protected] visit our web site at www.BURKENROAD.org

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Named in honor of William B. Burkenroad Jr., an alumnus and a longtime supporter of Tulane’s business school, and funded through contributions from his family and friends, BURKENROAD REPORTS is a nationally recognized program, publishing objective, investment research reports on public companies in our region. Students at Tulane University’s Freeman School of Business prepare these reports.Alumni of the BURKENROAD REPORTS program are employed at a number of highly respected financial institutions including:ABN AMRO Bank · Aegis Value Fund · Invesco/AIM Capital Management · Alpha Omega Capital Partners · American General Investment Management · Ameriprise Financial · Atlas Capital · Banc of America Securities · Bank of Montreal · Bancomer · Barclays Capital · Barings PLC · Bearing Point · Bessemer Trust · Black Gold Capital· Bloomberg · Brookfield Asset Management · Brown Brothers Harriman Capital · Blackrock Financial Management · Boston Consulting Group · Buckingham Research · California Board of Regents · Cambridge Associates· Canaccord Genuity · Cantor Fitzgerald · Chaffe & Associates · Citadel Investment Group · Citibank · Citigroup Private Bank · City National Bank · Cornerstone Resources · Credit Suisse · D. A. Davidson & Co. · Deutsche Banc · Duquesne Capital Management · Equitas Capital Advisors· Factset Research · Financial Models · First Albany · Fiduciary Trust · Fitch Investors Services · Forex Trading · Franklin Templeton · Friedman Billings Ramsay · Fulcrum Global Partners · Gintel Asset Management · Global Hunter Securities · Goldman Sachs · Grosever Funds · Gruntal & Co. · Guggenheim Securities , LLC · Hancock Investment Services · Healthcare Markets Group · Capital One Southcoast · Howard Weil Labouisse Friedrichs · IBERIABANK Capital Markets · J.P. Morgan Securities · Janney Montgomery Scott · Jefferies & Co. · Johnson Rice & Co. · KBC Financial · KDI Capital Partners · Key Investments · Keystone Investments · Legacy Capital · Liberty Mutual · Lowenhaupt Global Advisors · Mackay Shields · Manulife/John Hancock Investments · Marsh & McLennan · Mercer Partners · Merrill Lynch · Miramar Asset Management · Moodys Investor Services · Morgan Keegan · Morgan Stanley · New York Stock Exchange · Perkins Wolf McDonnell · Piper Jaffray & Co. · Professional Advisory Services · Quarterdeck Investment Services · RBC · Raymond James · Restoration Capital · Rice Voelker, LLC · Royal Bank of Scotland· Sandler O'Neill & Partners · Sanford Bernstein & Co. · Scotia Capital · Scottrade · Second City Trading LLC · Sequent Energy · Sidoti & Co · Simmons & Co. · Southwest Securities · Stephens & Co. · Sterne Agee · Stewart Capital LLC · Stifel Nicolaus · Sun-Trust Capital Markets · Susquehanna Investment Group · Thomas Weisel Partners · TD Waterhouse Securities · Texas Employee Retirement System · Texas Teachers Retirement System · ThirtyNorth Investments · Thornburg Investment Management · Tivoli Partners · Tudor Pickering & Co. · Tulane University Endowment Fund · Turner Investment Partners · UBS · Value Line Investments · Vaughan Nelson Investment Management · Wells Fargo Capital Management · Whitney National Bank · William Blair & Co. · Zephyr Management

Documents

FBMS Burkenroad Report