U. S.
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D. C. 20549




FORM
10-Q





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





FOR THE
QUARTERLY PERIOD ENDED: MARCH 31, 2010





OR




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





COMMISSION
FILE NUMBER:    33-94288









THE
FIRST BANCSHARES, INC.


(EXACT
NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)




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




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


(601)
268-8998


(ISSUER'S
TELEPHONE NUMBER, INCLUDING AREA CODE)





NONE


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





INDICATE
BY CHECK MARK WHETHER THE ISSUER: (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED
BY SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED
TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.


YES  xNO o




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





LARGE
ACCELERATED FILER oACCELERATED FILER oNON-ACCELERATED FILER x




ON MARCH
31, 2010, 3,019,869 SHARES OF THE ISSUER'S COMMON STOCK, PAR VALUE
$1.00 PER SHARE, WERE ISSUED AND OUTSTANDING.





TRANSITIONAL
DISCLOSURE FORMAT (CHECK ONE):





YES oNO  x




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









PART I -
FINANCIAL INFORMATION





ITEM NO.
1. FINANCIAL STATEMENTS




THE FIRST
BANCSHARES, INC.





CONSOLIDATED
BALANCE SHEETS


($
amounts in thousands)


(Unaudited)March
      31,
              2010
            
            
            December
      31,
              2009ASSETSCash
      and due from banks
            
            $
            4,026
            
            
            $
            8,120Interest-bearing
      deposits with banks
            
            
            371
            
            
            
            296Federal
      funds sold
            
            
            34,198
            
            
            
            7,575Total
      cash and cash equivalents
            
            
            38,595
            
            
            
            15,991Securities
      held-to-maturity, at amortized cost
            
            
            3
            
            
            
            3Securities
      available-for-sale, at fair value
            
            
            109,863
            
            
            
            112,231Other
      securities
            
            
            2,384
            
            
            
            2,384Total
      securities
            
            
            112,250
            
            
            
            114,618Loans
      held for sale
            
            
            1,296
            
            
            
            3,692Loans
            
            
            330,055
            
            
            
            315,103Allowance
      for loan losses
            
            
            (4,504
            )
            
            
            (4,762
            )Loans,
      net
            
            
            326,847
            
            
            
            314,033Premises
      and equipment
            
            
            14,326
            
            
            
            14,279Interest
      receivable
            
            
            2,239
            
            
            
            2,318Cash
      surrender value of life insurance
            
            
            5,934
            
            
            
            5,857Goodwill
            
            
            702
            
            
            
            702Other
      assets
            
            
            10,421
            
            
            
            9,754$
            511,314
            
            
            $
            477,552LIABILITIES
      AND STOCKHOLDERS’
      EQUITYLIABILITIES:Deposits:Noninterest-bearing
            
            $
            47,693
            
            
            $
            48,527Interest-bearing
            
            
            371,382
            
            
            
            335,227TOTAL
      DEPOSITS
            
            
            419,075
            
            
            
            383,754Interest
      payable
            
            
            499
            
            
            
            672Borrowed
      funds
            
            
            32,011
            
            
            
            32,037Subordinated
      debentures
            
            
            10,310
            
            
            
            10,310Other
      liabilities
            
            
            5,093
            
            
            
            7,163TOTAL
      LIABILITIES
            
            
            466,988
            
            
            
            433,936




STOCKHOLDERS’
      EQUITY:Preferred
      stock, no par value, $1,000 per
            
            
            4,787
            
            
            
            4,773share
      liquidation, 10,000,000 sharesauthorized;
      5,000 shares issued andoutstanding
      at March 31, 2010 and atDecember
      31, 2009Common
      stock, $1 par value authorized
            
            
            3,046
            
            
            
            3,04610,000,000
      shares; 3,046,363shares
      issued at March 31, 2010 andat
      December 31, 2009Additional
      paid-in capital
            
            
            23,418
            
            
            
            23,418Retained
      earnings
            
            
            13,178
            
            
            
            12,944Accumulated
      other comprehensive income(loss)
            
            
            361
            
            
            
            (101
            )Treasury
      stock, at cost, 26,494 shares atMarch
      31, 2010 and at December 31, 2009
            
            
            (464
            )
            
            
            (464
            )TOTAL
      STOCKHOLDERS' EQUITY
            
            
            44,326
            
            
            
            43,616$
            511,314
            
            
            $
            477,552




2




THE FIRST
BANCSHARES, INC.





CONSOLIDATED
STATEMENTS OF INCOME


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




(Unaudited)
                Three
      Months Ended
                March
      31,2010
              
              
              2009INTEREST
      INCOME:Interest
      and fees on loans
              
              $
              5,010
              
              
              $
              5,183Interest
      and dividends on securities:Taxable
      interest and dividends
              
              
              568
              
              
              
              821Tax
      exempt interest
              
              
              301
              
              
              
              214Interest
      on federal funds sold
              
              
              5
              
              
              
              35TOTAL
      INTEREST INCOME
              
              
              5,884
              
              
              
              6,253INTEREST
      EXPENSE:Interest
      on deposits
              
              
              1,727
              
              
              
              2,248Interest
      on borrowed funds
              
              
              367
              
              
              
              564TOTAL
      INTEREST EXPENSE
              
              
              2,094
              
              
              
              2,812NET
      INTEREST INCOME
              
              
              3,790
              
              
              
              3,441PROVISION
      FOR LOAN LOSSES
              
              
              165
              
              
              
              628NET
      INTEREST INCOME AFTER PROVISIONFOR
      LOAN LOSSES
              
              
              3,625
              
              
              
              2,813




OTHER
      INCOME:Service
      charges on deposit accounts
              
              
              577
              
              
              
              593Other
      service charges and fees
              
              
              371
              
              
              
              504Impairment
      loss on securities:Total
      other-than-temporary impairment loss
              
              
              (755
              )
              
              
              -Less:
      Portion of loss recognized in othercomprehensive
      income
              
              
              648
              
              
              
              -Net
      impairment loss recognized in earnings
              
              
              (107
              )
              
              
              -TOTAL
      OTHER INCOME
              
              
              841
              
              
              
              1,097OTHER
      EXPENSES:Salaries
      and employee benefits
              
              
              2,103
              
              
              
              2,128Occupancy
      and equipment
              
              
              517
              
              
              
              516Other
              
              
              1,078
              
              
              
              1,014TOTAL
      OTHER EXPENSES
              
              
              3,698
              
              
              
              3,658INCOME
      BEFORE INCOME TAXES
              
              
              768
              
              
              
              252INCOME
      TAXES
              
              
              232
              
              
              
              61NET
      INCOME
              
              
              536
              
              
              
              191PREFERRED
      DIVIDENDS
              
              
              62
              
              
              
              38PREFERRED
      STOCK ACCRETION
              
              
              14
              
              
              
              14NET
      INCOME APPLICABLE TO COMMONSTOCKHOLDERS
              
              $
              460
              
              
              $
              139NET
      INCOME APPLICABLE TO COMMON STOCKHOLDERS:BASIC
              
              $
              .15
              
              
              $
              .05DILUTED
              
              
              .15
              
              
              
              .05DIVIDENDS
      PER SHARE - COMMON
              
              
              .075
              
              
              
              -




3




THE FIRST
BANCSHARES, INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY




Common
                Stock
              
              
              Preferred
                Stock
              
              
              Additional
                Paid-in
                Capital
              
              
              Retained
                Earnings
              
              
              Accumulated
                Other
                Comprehensive
                Income(Loss)
              
              
              Treasury
                Stock
              
              
              TotalBalance,January
      1, 2009
              
              $
              3,017
              
              
              $
              -
              
              
              $
              22,942
              
              
              $
              11,482
              
              
              $
              (409
              )
              
              $
              (464
              )
              
              $
              36,568Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              191
              
              
              
              -
              
              
              
              -
              
              
              
              191Net
      change in unrealized gain (loss) on
      available- for-sale securities, net of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              495
              
              
              
              -
              
              
              
              495Issuance
      of preferred stock and warrant
              
              
              -
              
              
              
              4,716
              
              
              
              284
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5,000Exercise
      of stock options
              
              
              3
              
              
              
              -
              
              
              
              23
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              26Accretion
      of preferred stock discount
              
              
              -
              
              
              
              14
              
              
              
              -
              
              
              
              (14
              )
              
              
              -
              
              
              
              -
              
              
              
              -Dividends
      on preferred stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (38
              )
              
              
              -
              
              
              
              -
              
              
              
              (38
              )Balance, March
      31, 2009
              
              $
              3,020
              
              
              $
              4,730
              
              
              $
              23,249
              
              
              $
              11,621
              
              
              $
              86
              
              
              $
              (464
              )
              
              $
              42,242Balance,January
      1, 2010
              
              $
              3,046
              
              
              $
              4,773
              
              
              $
              23,418
              
              
              $
              12,944
              
              
              $
              (101
              )
              
              $
              (464
              )
              
              $
              43,616Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              536
              
              
              
              -
              
              
              
              -
              
              
              
              536Net
      change in unrealized gain (loss) on
      available- for-sale securities, net of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              461
              
              
              
              -
              
              
              
              461Net
      change in unrealized loss on loans held for sale, net
      of tax
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1
              
              
              
              -
              
              
              
              1Accretion
      of preferred stock discount
              
              
              -
              
              
              
              14
              
              
              
              -
              
              
              
              (14
              )
              
              
              -
              
              
              
              -
              
              
              
              -Dividends
      on preferred stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (62
              )
              
              
              -
              
              
              
              -
              
              
              
              (62
              )Dividends
      on common stock, $.075 per share
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (226
              )
              
              
              -
              
              
              
              -
              
              
              
              (226
              )Balance, March
      31, 2010
              
              $
              3,046
              
              
              $
              4,787
              
              
              $
              23,418
              
              
              $
              13,178
              
              
              $
              361
              
              
              $
              (464
              )
              
              $
              44,326




4





THE FIRST
BANCSHARES, INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS


($
Amounts in Thousands)




Three
      Months Ended
                March
      31,2010
              
              
              2009CASH
      FLOWS FROM OPERATING ACTIVITIES:NET
      INCOME
              
              $
              536
              
              
              $
              191Adjustments
      to reconcile net income to net cash provided by
      operating activities:Depreciation,
      amortization and accretion
              
              
              321
              
              
              
              287Impairment
      loss on securities
              
              
              107
              
              
              
              -Provision
      for loan losses
              
              
              165
              
              
              
              628Loss
      on sale/writedown of ORE
              
              
              40
              
              
              
              101Increase
      in cash value of life insurance
              
              
              (77
              )
              
              
              (52
              )Federal
      Home Loan Bank stock dividends
              
              
              (1
              )
              
              
              (10
              )Changes
      in:Interest
      receivable
              
              
              79
              
              
              
              274Loans
      held for sale
              
              
              2,396
              
              
              
              (1,061
              )Interest
      payable
              
              
              (173
              )
              
              
              (172
              )Other,
      net
              
              
              (1,479
              )
              
              
              857NET
      CASH PROVIDED BYOPERATING
      ACTIVITIES
              
              
              1,914
              
              
              
              1,043CASH
      FLOWS FROM INVESTING ACTIVITIES:Maturities
      and calls of securitiesavailable-for-sale
              
              
              14,874
              
              
              
              15,795Purchases
      of securities available-for-sale
              
              
              (12,250
              )
              
              
              (10,798
              )Net
      (increase) decrease in loans
              
              
              (16,728
              )
              
              
              4,800Purchases
      of premises and equipment
              
              
              (213
              )
              
              
              (77
              )NET
      CASH PROVIDED BY (USED IN)INVESTING
      ACTIVITIES
              
              
              (14,317
              )
              
              
              9,720CASH
      FLOWS FROM FINANCING ACTIVITIES:Increase
      in deposits
              
              
              35,321
              
              
              
              12,709Net
      decrease in borrowed funds
              
              
              (26
              )
              
              
              (10,519
              )Dividends
      paid on common stock
              
              
              (226
              )
              
              
              -Dividends
      paid on preferred stock
              
              
              (62
              )
              
              
              -Proceeds
      from issuance of preferred stockand
      warrants
              
              
              -
              
              
              
              5,000Exercise
      of stock options
              
              
              -
              
              
              
              26NET
      CASH PROVIDED BYFINANCING
      ACTIVITIES
              
              
              35,007
              
              
              
              7,216NET
      INCREASE IN CASH
              
              
              22,604
              
              
              
              17,979CASH
      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
              
              
              15,991
              
              
              
              25,008CASH
      AND CASH EQUIVALENTS AT END OF PERIOD
              
              $
              38,595
              
              
              $
              42,987




5





THE FIRST
BANCSHARES, INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





NOTE A --
BASIS OF PRESENTATION





The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and with the instructions to Form 10-Q of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  However, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.  Operating results for the
three months ended March 31, 2010, are not necessarily indicative of the results
that may be expected for the year ending December 31, 2010.  For
further information, please refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-K for the year ended
December 31, 2009.





NOTE B --
SUMMARY OF ORGANIZATION





The First
Bancshares, Inc., Hattiesburg, Mississippi (the "Company"), was incorporated
June 23, 1995, under the laws of the State of Mississippi for the purpose of
operating as a bank holding company. The Company’s primary asset is its interest
in its wholly-owned subsidiary, The First, A National Banking Association (the
Bank).





At March
31, 2010, the Company had approximately $511.3 million in assets, $331.4 million
in loans,$419.1 million in deposits, and $44.3 million in stockholders'
equity.  For the three months ended March 31, 2010, the Company
reported a net income of $536,000 ($460,000 applicable to common
stockholders).





No
dividend was paid on common shares during 2009.





In the
first quarter of 2010, the Company declared and paid a special dividend of $.05
and a quarterly dividend for the fourth quarter, 2009 of $.025 for a total
dividend of $.075 per common share.





NOTE C –
PREFERRED STOCK AND WARRANT





On
February 6, 2009, as part of the U.S. Department of Treasury’s (“Treasury”)
Capital Purchase Program (“CPP”), the Company received a $5.0 million equity
investment by issuing 5 thousand shares of Series A, no par value preferred
stock to the Treasury pursuant to a Letter Agreement and Securities Purchase
Agreement that was previously disclosed by the Company.  The Company
also issued a warrant to the Treasury allowing it to purchase 54,705 shares of
the Company’s common stock at an exercise price of $13.71.  The
warrant can be exercised immediately and has a term of 10 years.





The
non-voting Series A preferred shares issued, with a liquidation preference of $1
thousand per share, will pay a cumulative cash dividend quarterly at 5% per
annum during the first five years the preferred shares are outstanding,
resetting to 9% thereafter if not redeemed.  The CPP also includes
certain restrictions on dividend payments of the Company’s lower ranking equity
and the ability to purchase its outstanding common shares.




6





The
Company allocated the proceeds received from the Treasury, net of transaction
costs, on a pro rata basis to the Series A preferred stock and the warrant based
on their relative fair values.  The Company assigned $.3 million and
$4.7 million to the warrant and the Series A preferred stock,
respectively.  The resulting discount on the Series A preferred stock
is being accreted up to the $5.0 million liquidation amount over the five year
expected life of the Series A preferred stock.





NOTE D --
EARNINGS APPLICABLE TO COMMON STOCKHOLDERS





Basic per
share data is calculated based on the weighted-average number of common shares
outstanding during the reporting period.  Diluted per share data
includes any dilution from potential common stock outstanding, such as exercise
of stock options.





For
      the Three Months Ended
                March
      31, 2010Net
      Income
              
              
              Shares
              
              
              Per
      Share(Numerator)
              
              
              (Denominator)
              
              
              DataBasic
      per share
              
              $
              460,000
              
              
              
              3,019,869
              
              
              $
              .15Effect
      of dilutive shares:Stock
      options
              
              
              -
              
              
              
              -Diluted
      per share
              
              $
              460,000
              
              
              
              3,019,869
              
              
              $
              .15
 For
      the Three Months EndedMarch
      31, 2009Net
      Income
                
                
                Shares
                
                
                Per
      Share(Numerator)
                
                
                (Denominator)
                
                
                DataBasic
      per share
                
                $
                139,000
                
                
                
                2,990,487
                
                
                $
                .05Effect
      of dilutive shares:Stock
      options
                
                
                -
                
                
                
                13,646Diluted
      per share
                
                $
                139,000
                
                
                
                3,004,133
                
                
                $
                .05


No stock
options were granted during the three months ended March 31, 2010.





7




NOTE E --
COMPREHENSIVE INCOME





The
following table discloses Comprehensive Income for the periods reported in the
Consolidated Statements of Income:


(In
thousands)


Quarter
      Ended
                March
      31,2010
              
              
              2009Net
      Income
              
              $
              536
      $
              
              
              
              191Other
      Comprehensive Income, net of tax:Unrealized
      holding gains on securitiesduring
      the period
              
              
              461
              
              
              
              495Unrealized
      gain on loans held for sale carried atfair
      value during the period
              
              
              1
              
              
              
              -Comprehensive
      Income
              
              $
              998
              
              
              $
              686Unrealized
      holding gains on securitiesduring
      the period
              
              $
              461
      $
              
              
              
              495Unrealized
      gain on loans held for sale carried atfair
      value during the period
              
              
              1
              
              
              
              -Accumulated
      Other Comprehensive Income (Loss),beginning
      of period
              
              
              (101
              )
              
              
              (409
              )Accumulated
      Other Comprehensive Income,end
      of period
              
              $
              361
              
              
              $
              86


NOTE F --
FAIR VALUE OF ASSETS AND LIABILITIES




Effective
January 1, 2008, the Company adopted authoritative guidance that established a
framework for measuring fair value and expanded disclosures about fair value
measurements.




The
guidance defines the fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. It also established a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value.




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




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





8




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




Available-for-Sale
Securities




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




The
following table presents the Company’s assets that are measured at fair value on
a recurring basis and the level within the hierarchy in which the fair value
measurements fall as of March 31, 2010 and December 31, 2009 (in
thousands):





March 31,
2010


Fair
      Value Measurements UsingFair
      Value
            
            Quoted
      Prices in
              Active
      Markets for
              Identical
      Assets
              (Level
      1)
            
            Significant
      Other
              Observable
      Inputs
              (Level
      2)
            
            Significant
              Unobservable
              Inputs
              (Level
      3)Available-for-sale
      securities
            
            $
            109,863
            
            
            $
            903
            
            
            $
            105,416
            
            
            $
            3,544





9




December 31,
2009




Fair
      Value Measurements UsingFair
      Value
            
            Quoted
      Prices in
              Active
      Markets for
              Identical
      Assets
              (Level
      1)
            
            Significant
      Other
              Observable
      Inputs
              (Level
      2)
            
            Significant
              Unobservable
              Inputs
              (Level
      3)Available-for-sale
      securities
            
            $
            112,231
            
            
            $
            958
            
            
            $
            108,040
            
            
            $
            3,233





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





(Dollars in
      thousands)
            
            Bank-Issued
              Trust
              Preferred
              Securities2010
            
            
            2009Balance,
      January 1
            
            $
            3,233
            
            
            $
            -Transfers
      into Level 3
            
            
            -
            
            
            
            5,338Transfers
      out of Level 3
            
            
            -
            
            
            
            -Other-than-temporary
      impairment loss includedin
      earnings
            
            
            (42
            )
            
            
            (111
            )Unrealized
      gain(loss) included in comprehensive income
            
            
            353
            
            
            
            (1,994
            )Balance
      at March 31, 2010 and December 31, 2009
            
            $
            3,544
            
            
            $
            3,233





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




Impaired
Loans




Loans for
which it is probable that the Company will not collect all principal and
interest due according to contractual terms are measured for impairment in
accordance with the provisions of applicable authoritative guidance. Allowable
methods for estimating fair value include using the fair value of the collateral
for collateral dependent loans or, where a loan is determined not to be
collateral dependent, using the discounted cash flow method.




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




10




Other
Real Estate Owned




Other
real estate owned acquired through loan foreclosure is initially recorded at
fair value less costs to sell when acquired, establishing a new cost basis. The
adjustment at the time of foreclosure is recorded through the allowance for loan
losses. Due to the subjective nature of establishing the fair value when the
asset is acquired, the actual fair value of the other real estate owned or
foreclosed asset could differ from the original estimate. If it is determined
the fair value declines subsequent to foreclosure, a valuation allowance is
recorded through non-interest expense. Operating costs associated with the
assets after acquisition are also recorded as non-interest expense. Gains and
losses on the disposition of other real estate owned and foreclosed assets are
netted and posted to other non-interest expense. Other real estate owned
measured at fair value on a non-recurring basis at March 31, 2010, amounted to
$4.2 million.




The
following table presents the fair value measurement of assets measured at fair
value on a nonrecurring basis and the level within the fair value hierarchy in
which the fair value measurements fall at March 31, 2010 and December 31,
2009.




March 31,
      2010




Fair
      Value Measurements UsingFair
      Value
            
            
            Quoted
      Prices in
              Active
      Markets for
              Identical
      Assets
              (Level
      1)
            
            
            Significant
      Other
              Observable
      Inputs
              (Level
      2)
            
            
            Significant
              Unobservable
              Inputs
              (Level
      3)Impaired
      loans
            
            $
            18,808
            
            
            $
            -
            
            
            $
            18,808
            
            
            $
            -Other
      real estate owned
            
            $
            4,174
            
            
            $
            -
            
            
            $
            4,174
            
            
            $
            -




December 31,
      2009




Fair
      Value Measurements UsingFair
      Value
            
            
            Quoted
      Prices in
              Active
      Markets for
              Identical
      Assets
              (Level
      1)
            
            
            Significant
      Other
              Observable
      Inputs
              (Level
      2)
            
            
            Significant
              Unobservable
              Inputs
              (Level
      3)Impaired
      loans
            
            $
            20,609
            
            
            $
            -
            
            
            $
            20,609
            
            
            $
            -Other
      real estate owned
            
            $
            2,903
            
            
            $
            -
            
            
            $
            2,903
            
            
            $
            -





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





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




11





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





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





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





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





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





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





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





As
      of  March 31, 2010
            
            
            As
      ofDecember 31, 2009Carrying
              Amount
            
            
            Estimated
              Fair
      Value
            
            
            Carrying
              Amount
            
            
            Estimated
              Fair
      Value(In
      thousands)Financial
      Instruments:Assets:Cash and cash
      equivalents
            
            $
            38,595
            
            
            $
            38,595
            
            
            $
            15,991
            
            
            $
            15,991Securities
      available-for-sale
            
            
            109,863
            
            
            
            109,863
            
            
            
            112,231
            
            
            
            112,231Securities
      held-to-maturity
            
            
            3
            
            
            
            3
            
            
            
            3
            
            
            
            3Other
securities
            
            
            2,384
            
            
            
            2,384
            
            
            
            2,384
            
            
            
            2,384Loans, net
            
            
            326,847
            
            
            
            339,198
            
            
            
            314,033
            
            
            
            326,271Liabilities:Noninterest-bearingDeposits
            
            $
            47,693
            
            
            $
            47,693
            
            
            $
            48,527
            
            
            $
            48,527Interest-bearing
      deposits
            
            
            371,382
            
            
            
            372,868
            
            
            
            335,227
            
            
            
            337,238Subordinated
      debentures
            
            
            10,310
            
            
            
            10,310
            
            
            
            10,310
            
            
            
            10,310FHLB and other
      borrowings
            
            
            32,011
            
            
            
            32,011
            
            
            
            32,037
            
            
            
            32,037




12




NOTE G --
LOANS





Loans
typically provide higher yields than the other types of earning assets, and thus
one of the Company's goals is for loans to be the largest category of the
Company's earning assets.  At March 31, 2010 and December 31, 2009,
respectively, loans accounted for 69.3% and 72.2% of earning assets. Management
attempts to control and counterbalance the inherent credit and liquidity risks
associated with the higher loan yields without sacrificing asset quality to
achieve its asset mix goals.





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




Composition
      of Loan PortfolioMarch
      31,
            
            
            December
      31,2010
            
            
            2009Amount
            
            
            Percent
      of
              Total
            
            
            Amount
            
            
            Percent
              ofTotal(Dollars
      in thousands)Mortgage
      loans held for sale
            
            $
            1,296
            
            
            
            0.4
            %
            
            $
            3,692
            
            
            
            1.2
            %Commercial,
      financial and agricultural
            
            
            52,361
            
            
            
            15.8
            
            
            
            43,229
            
            
            
            13.6Real
      Estate:
              Mortgage-commercial 9
            
            
            98,755
            
            
            
            29.8
            
            
            
            87,492
            
            
            
            27.4Mortgage-residential
            
            
            102,111
            
            
            
            30.8
            
            
            
            102,738
            
            
            
            32.2Construction
            
            
            65,530
            
            
            
            19.8
            
            
            
            68,695
            
            
            
            21.5Consumer
      and other
            
            
            11,298
            
            
            
            3.4
            
            
            
            12,949
            
            
            
            4.1Total
      loans
            
            
            331,351
            
            
            
            100
            
            
            
            318,795
            
            
            
            100Allowance
      for loan losses
            
            
            (4,504
            )
            
            
            
            
            
            
            (4,762
            )Net
      loans
            
            $
            326,847
            
            
            
            
            
            
            $
            314,033





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




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





The
following tables represent how the allowance for loan losses is allocated to a
particular loan type as well as the percentage of the category to total loans at
December 31, 2009 and March 31, 2010.





13





Allocation
      of the Allowance for Loan LossesMarch
      31, 2010(Dollars
      in thousands)Amount
            
            
            %
      of loans
              in
      each category to total
      loansCommercial
      Non Real Estate
            
            $
            981
            
            
            
            15.5
            %Commercial
      Real Estate
            
            
            2,568
            
            
            
            61.6Consumer
      Real Estate
            
            
            729
            
            
            
            17.5Consumer
            
            
            161
            
            
            
            3.3Unallocated
            
            
            65
            
            
            
            2.1Total
            
            $
            4,504
            
            
            
            100December
      31, 2009(Dollars
      in thousands)Amount
            
            
            %
      of loans
              in
      each category to total
      loansCommercial
      Non Real Estate
            
            $
            1,015
            
            
            
            13.9
            %Commercial
      Real Estate
            
            
            2,564
            
            
            
            62.2Consumer
      Real Estate
            
            
            687
            
            
            
            17.8Consumer
            
            
            317
            
            
            
            3.9Unallocated
            
            
            179
            
            
            
            2.2Total
            
            $
            4,762
            
            
            
            100




The
following table represents the Company’s impaired loans at December 31, 2009 and
March 31, 2010.  This table excludes performing troubled debt
restructurings.





March
              2010
            
            
            December
              2009(In
      thousands)Impaired
      Loans:Impaired
      loans without a valuation allowance
            
            $
            13,775
            
            
            $
            12,295Impaired
      loans with a valuation allowance
            
            
            5,033
            
            
            
            8,314Total
      impaired loans
            
            $
            18,808
            
            
            $
            20,609Allowance
      for loan losses on impaired loans at periodEnd
            
            $
            1,616
            
            
            $
            2,004Total
      nonaccrual loans
            
            
            3,857
            
            
            
            4,367Past
      due 90 days or more and still accruing
            
            
            571
            
            
            
            1,447Average
      investment in impaired loans
            
            
            19,709
            
            
            
            19,114Interest
      paid on impaired loans for the period endedMarch
      31, 2010 and year ended December 31, 2009
            
            
            351
            
            
            
            1,297





NOTE H --
SECURITIES





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




14





A summary
of the amortized cost and estimated fair value of available-for-sale securities
and held-to-maturity securities at March 31, 2010, follows:





March
      31, 2010Gross
            
            
            GrossAmortized
            
            
            Unrealized
            
            
            Unrealized
            
            
            EstimatedCost
            
            
            Gains
            
            
            Losses
            
            
            Fair ValueAvailable-for-sale
      securities:Obligations
      of U.S.Government
      Agencies
            
            $
            27,997
            
            
            $
            296
            
            
            $
            40
            
            
            $
            28,253Tax-exempt
      and taxableobligations
      of statesand
      municipalsubdivisions
            
            
            42,373
            
            
            
            1,318
            
            
            
            25
            
            
            
            43,666Mortgage-backedsecurities
            
            
            26,051
            
            
            
            897
            
            
            
            84
            
            
            
            26,864Corporate
      obligations
            
            
            11,687
            
            
            
            55
            
            
            
            1,565
            
            
            
            10,177Other
            
            
            1,190
            
            
            
            -
            
            
            
            287
            
            
            
            903Total
            
            $
            109,298
            
            
            $
            2,566
            
            
            $
            2,001
            
            
            $
            109,863Held-to-maturity
      securities:Mortgage-backed
      securities
            
            $
            3
            
            
            $
            0
            
            
            $
            0
            
            
            $
            3





NOTE I --
ALLOWANCE FOR LOAN LOSSES





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





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





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




15





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





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





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





NOTE J –
SUBSEQUENT EVENTS





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





NOTE K –
RECLASSIFICATION





Certain
amounts in the 2009 financial statements have been reclassified for comparative
purposes to conform to the current period financial statement
presentation.





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





FINANCIAL
CONDITION





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




16





The First
represents the primary asset of the Company.  The First reported total
assets of $510.4 million at March 31, 2010, compared to $476.6 million at
December 31, 2009.  Loans increased $12.6 million, or 3.9%, during the
first three months of 2010.  Deposits at March 31, 2010, totaled
$419.5 million compared to $384.0 million at December 31, 2009. For the three
month period ended March 31, 2010, The First reported net income of $598,000
compared to $284,000 for the three months ended March 31, 2009.


NONPERFORMING
ASSETS AND RISK ELEMENTS. Diversification within the loan portfolio is an
important means of reducing inherent lending risks. At March 31, 2010, The First
had no concentrations of ten percent or more of total loans in any single
industry or any geographical area outside its immediate market
areas.
 
 At March
31, 2010, The First had loans past due as follows:
 
 ($
      In Thousands)Past
      due 30 through 89 days
                
                $
                8,213Past
      due 90 days or more and still accruing
                
                
                571
 The
accrual of interest is discontinued on loans which become ninety days past due
(principal and/or interest), unless the loans are adequately secured and in the
process of collection. Nonaccrual loans totaled $3.9 million at March 31, 2010,
a decrease of $.5 million from December 31, 2009.  Any other real
estate owned is carried at fair value, determined by an appraisal. Other real
estate owned totaled $4.2 million at March 31, 2010.  A loan is
classified as a restructured loan when the interest rate is materially reduced
or the term is extended beyond the original maturity date because of the
inability of the borrower to service the debt under the original terms. At March
31, 2010, the Bank had $2.2 million in commercial loans and $.6 million in
consumer loans that were modified as troubled debt restructurings.  Of
these amounts considered as troubled debt restructurings $.4 million was 1-4
family performing in accordance with the modified terms and $.4 million was
commercial loans performing in accordance with modified terms.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Liquidity
is adequate with cash and cash equivalents of $38.6 million as of March 31,
2010. In addition, loans and investment securities repricing or maturing within
one year or less exceeded $155.3 million at  March 31,
2010.  Approximately $36.8 million in loan commitments could fund
within the next six months and other commitments, primarily standby letters of
credit, totaled $.9 million at March 31, 2010.
 
 There are
no known trends or any known commitments or uncertainties that will result in
The First’s liquidity increasing or decreasing in a material way.
 
 Total
consolidated equity capital at March 31, 2010, was $44.3 million,
or  approximately 8.7% of total assets. The Company currently has
adequate capital positions to meet the minimum capital requirements for all
regulatory agencies. The Company’s capital ratios as of March 31, 2010, were as
follows:
  17
 
  Tier
      1 leverage
                
                
                9.59
                %Tier
      1 risk-based
                
                
                14.56
                %Total
      risk-based
                
                
                15.78
                %
  On June
30, 2006, The Company issued $4,124,000 of floating rate junior subordinated
deferrable interest debentures to The First Bancshares Statutory Trust 2 in
which the Company owns all of the common equity.  The debentures are
the sole asset of the Trust.  The Trust issued $4,000,000 of Trust
Preferred Securities (TPSs) to investors.  The Company’s obligations
under the debentures and related documents, taken together, constitute a full
and unconditional guarantee by the Company of the Trust’s obligations under the
preferred securities.  The preferred securities are redeemable by the
Company in 2011, or earlier in the event the deduction of related interest for
federal income taxes is prohibited, treatment as Tier 1 capital is no longer
permitted, or certain other contingencies arise.  The preferred
securities must be redeemed upon maturity of the debentures in
2036.  Interest on the preferred securities is the three month London
Interbank Offer Rate (LIBOR) plus 1.65% and is payable quarterly.  The
terms of the subordinated debentures are identical to those of the preferred
securities.   On July 27, 2007, The Company issued $6,186,000 of
floating rate junior subordinated deferrable  interest debentures to
The First Bancshares Statutory Trust 3 in which the Company owns all of the
common equity.  The debentures are the sole asset of Trust
3.  The Trust issued $6,000,000 of Trust Preferred Securities (TPSs)
to investors.  The Company’s obligations under the debentures and
related documents, taken together, constitute a full and unconditional guarantee
by the Company of the Trust’s obligations under the preferred
securities.  The preferred securities are redeemable by the Company in
2012, or earlier in the event the deduction of related interest for federal
income taxes is prohibited, treatment as Tier 1 capital is no longer permitted,
or certain other contingencies arise.  The preferred securities must
be redeemed upon maturity of the debentures in 2037.  Interest on the
preferred securities is the three month LIBOR plus 1.40% and is payable
quarterly.  The terms of the subordinated debentures are identical to
those of the preferred securities.   In accordance with the
authoritative guidance, the trusts are not included in the consolidated
financial statements.
 
 RESULTS
OF OPERATIONS
 
 The
Company had a net income of $536,000 for the three months ended March 31, 2010,
compared with net income of $191,000 for the same period in 2009.
 
 Net
interest income increased to $3,790,000 from $3,441,000 for the three months
ended March 31, 2010, or an increase of 10.1% as compared to the same period in
2009.  Earning assets through March 31, 2010, increased $28.6 million
and  interest-bearing liabilities also increased $27.7 million when
compared to March 31, 2009, reflecting an increase of 6.4% and 7.2%,
respectively.
 
 Noninterest
income for the three months ended March 31, 2010, was  $841,000
compared to $1,097,000 for the same period in 2009, reflecting a decrease of
$256,000, or 23.3%. Included in noninterest income is service charges on deposit
accounts, which for the three months ended March 31, 2010, totaled $577,000
compared to $593,000 for the same period in 2009.
 
 The
provision for loan losses was $165,000 in the first three months of 2010
compared with $628,000 for the same period in 2009. The allowance for loan
losses of $4.5 million at March 31, 2010 (approximately 1.4%  of
loans) is considered by management to be adequate to cover
losses  inherent in the loan portfolio.  The level of this
allowance is dependent  upon a number of factors, including the total
amount of past due loans,  general economic conditions, and
management's assessment of potential losses.   This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant change.  Ultimately, losses may vary from current
estimates and future additions to the allowance may be
necessary.  Thus, there can be no assurance that charge-offs in future
periods will  not exceed the allowance for loan losses or that
additional increases in  the loan loss allowance will not be
required.  Management evaluates the adequacy of the allowance for loan
losses quarterly and makes provisions for loan losses based on this
evaluation.
  18
 
 Noninterest
expenses remained flat at $3.7 million for the three months ended
March 31, 2010, when compared with the same period in 2009.  This
reflected an ongoing effort to reduce expenses while maintaining our excellent
level of customer service.
 
 ITEM NO.
3.  CONTROLS AND PROCEDURES
 
 As of
March 31, 2010, (the “Evaluation Date”), we carried out an evaluation, under the
supervision of and with the participation of our Chief Executive Officer and our
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as
amended.  Based on this evaluation, our Chief Executive Officer and
our Chief Financial Officer concluded that our disclosure controls and
procedures are effective to ensure that information we are required to disclose
in reports that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in SEC rules and
forms.
 
 There
have been no changes, significant or otherwise, in our internal controls over
financial reporting  that occurred during the quarter ended March 31,
2010, that have materially affected, or are reasonably likely to affect, our
internal control over financial reporting.
 
 ITEM NO.
4.  RECENT ACCOUNTING PRONOUNCEMENTS
 
 In
January, 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06,
Fair Value Measurements and
Disclosures, Topic 820: Improving Disclosures about Fair Value
Measurements.This ASU requires fair value disclosures to be
disaggregated below line items in the balance sheets.  It clarifies
that fair value disclosures should include a description of the inputs and
valuation techniques used for both recurring and nonrecurring Level 2 and Level
3 estimates.  It also required entities to disclose any significant
transfers between Levels 1, 2 and 3 during a reporting period and the reasons
the transfers were made.  These disclosures, if applicable, were
included in this quarterly report on Form 10-Q, as required.
 
 On
January 1, 2010, ASU No. 2009-16, Transfers and Servicing, Topic 860:
Accounting for Transfers of Financial Assetsbecame
effective.  This ASU removed the concept of a qualifying
special-purpose entity from generally accepted accounting principles and changed
the requirements for derecognizing financial assets.  Upon adoption of
the ASU, the Company had no change in its balance sheet or required capital
since the Company has not used off-balance sheet financing.
 
 PART II
-- OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 
 On
October 8, 2007 The First Bancshares, Inc. (the "Company") and
its     subsidiary, The First, A National Banking
Association (the "Bank") were formally named as defendants and served with a
First Amended Complaint in litigation styled Nick D. Welch v. Oak Grove Land
Company, Inc., Fred McMurry, David E. Johnson, J. Douglas Seidenburg, The First,
a National Banking Association, The First Bancshares, Inc., and John Does 1
through 10, Civil Action No. 2006-236-CV4, pending in the Circuit Court of Jones
County, Mississippi, Second Judicial District (the "First Amended
Complaint").
  19
 
 The
allegations by Welch against the Company and the Bank include counts of 1)
Intentional Misrepresentation and Omission; 2) Negligent Misrepresentation
and/or Omission; 3) Breach of Fiduciary Duty; 4) Breach of Duty of Good Faith
and Fair Dealing; and 5) Civil Conspiracy.  The First
Amended   Complaint served by Welch on October 8, 2007 added the
Company and the Bank as defendants in this ongoing litigation.  The
Plaintiff seeks damages from all the defendants, including $2,957,385.00, annual
dividends for the year 2006 in the amount of $.30 per share, punitive damages,
and attorneys' fees and costs, and is more fully described in Form 8-K filed by
the Company on October 10, 2007.  The Company and the Bank both deny
any liability to Welch, and they intend to defend vigorously against this
lawsuit.
 
 The
Defendants removed the case to the United States District Court for the Southern
District of Mississippi, Hattiesburg Division, on March 12, 2008 based upon the
Court's federal question jurisdiction.  On April 11, 2008, the Plaintiff
filed a Motion to Remand the case to the Circuit Court of Jones County,
Mississippi.  The Motion to Remand was granted, and the case is
currently pending in the Circuit Court of Jones County, Mississippi, Second
Judicial District.  The case is set for trial on June 14, 2010 in the
Circuit Court of Jones County, Mississippi.
 
 ITEM 1A.
RISK FACTORS
 
 There are
no material changes in the Company’s risk factors since December 31,
2009.  Please refer to the Annual Report on Form 10-K of The First
Bancshares, Inc., filed with the Securities and Exchange Commission on March 30,
2010.
 
 ITEM
2.  UNREGISTERED SALES OF EQUITY SECURITY AND USE OF
PROCEEDS
 
 Not
Applicable
 
 ITEM
3.  DEFAULTS UPON SENIOR SECURITIES
 
 Not
Applicable
 
 ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 Not
Applicable
 
 ITEM
5.  OTHER INFORMATION
 
 Not
Applicable
 
 20
 
 ITEM
6.  EXHIBITS
 
 (a)  Exhibits
 
 Exhibit
      No.31.1
                
                Certification
      of principal executive officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
                
                Certification
      of principal financial officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                
                Certification
      of principal executive officer pursuant to 18 U. S. C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2
                
                Certification
      of principal financial officer pursuant to 18 U. S. C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 b)   The
Company filed two reports on Form 8-K during the quarter
ended March 31, 2010.
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
  THE
      FIRST BANCSHARES, INC.(Registrant)May
      17, 2010
                
                /s/ M.
      RAY (HOPPY) COLE, JR.(Date)
                
                M.
      Ray (Hoppy) Cole, Jr.Chief
      Executive Officer
  May
      17, 2010
                  
                  /s/ DEEDEE
      LOWERY(Date)
                  
                  DeeDee
      Lowery, ExecutiveVice
      President and ChiefFinancial
      Officer
  21