U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K



x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the fiscal year ended December 31, 2012



OR



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



For the transition period from ____ to ____



Commission file no. 33-94288



|THE FIRST BANCSHARES, INC.                            
|------------------------------------------------------
|(Exact name of registrant as specified in its charter)



|Mississippi                     |  | 64-0862173                             
|------------------------------- |  | ---------------------------------------
|(State or Other Jurisdiction of |  | (I.R.S. Employer Identification Number)
|Incorporation or Organization)  |  |                                        



|6480 U.S. Hwy. 98 West                   |  |           
|---------------------------------------- |  | ----------
|Hattiesburg, Mississippi                 |  | 39402     
|(Address of principal executive offices) |  | (Zip Code)



|Issuer's telephone number: | (601) 268-8998
|-------------------------- | --------------



Securities registered under Section 12(b) of the Exchange Act:



|                              |  | Name of Each Exchange on   
|----------------------------- |  | ---------------------------
|Title of Each Class           |  | Which Registered           
|                              |  |                            
|Common Stock, $1.00 par value |  | The NASDAQ Stock Market LLC



Securities registered pursuant to Section 12(g) of the Act:
None



Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in rule 405 of the Securities Act.



Yes  ̈	 No
x



Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d)

of the Act.



Yes  ̈ No x



Note – Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.



Yes x No  ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).



Yes x No  ̈



Indicate by check mark if disclosure of delinquent filers in
response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment
to this

Form 10-K x



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes  ̈ No x



Indicate by check mark whether the registrant is a large accelerated
file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check
one):



Large accelerated filer  ̈
Accelerated filer  ̈ Non-accelerated filer x
Smaller reporting company  ̈



Based on the price at which the registrant’s
Common Stock was last sold on March 21, 2013, at that date, the aggregate market value of the registrant’s Common Stock held
by non-affiliates of the registrant (assuming solely for the purposes of this calculation that all directors and executive officers
of the registrant are “affiliates”) was $30,527,159.



State the number of shares outstanding of
each of the registrant’s classes of common stock, as of the latest practicable date 3,142,235 on March 21, 2013.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the following documents are
incorporated by reference to Parts II and III of the Form 10-K report: Proxy Statement dated April 23, 2013, and the Annual Report
to the Stockholders for the year ended December 31, 2012.









Explanatory Note





Amendment filed to reflect changes to Item 5 and Item 12.











THE FIRST BANCSHARES, INC.

FORM 10-K

TABLE OF CONTENTS



|         |                                                                                                              | Page
|-------- | ------------------------------------------------------------------------------------------------------------ | ----
|         | PART I                                                                                                       |     
|         |                                                                                                              |     
|ITEM 1.  | BUSINESS                                                                                                     | 1   
|ITEM 1A. | RISK FACTORS                                                                                                 | 14  
|ITEM 1B. | UNRESOLVED STAFF COMMENTS                                                                                    | 20  
|ITEM 2.  | PROPERTIES                                                                                                   | 20  
|ITEM 3.  | LEGAL PROCEEDINGS                                                                                            | 20  
|ITEM 4.  | MINE SAFETY DISCLOSURES                                                                                      | 20  
|         |                                                                                                              |     
|         | PART II                                                                                                      |     
|         |                                                                                                              |     
|ITEM 5.  | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 21  
|ITEM 6.  | SELECTED FINANCIAL DATA                                                                                      | 23  
|ITEM 7.  | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        | 23  
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   | 23  
|ITEM 8.  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                  | 23  
|ITEM 9.  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         | 23  
|ITEM 9A. | CONTROLS AND PROCEDURES                                                                                      | 23  
|ITEM 9B. | OTHER INFORMATION                                                                                            | 24  
|         |                                                                                                              |     
|         | PART III                                                                                                     |     
|         |                                                                                                              |     
|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                       | 24  
|ITEM 11. | EXECUTIVE COMPENSATION                                                                                       | 25  
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               | 25  
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                     | 25  
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       | 25  
|         |                                                                                                              |     
|         | PART IV                                                                                                      |     
|         |                                                                                                              |     
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                   | 26  











THE FIRST BANCSHARES, INC.

FORM 10-K



PART I



This Report contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These statements appear in a number of places in this Report and include all statements regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to, among other things: (i) the Company's financing plans;
(ii) trends affecting the Company's financial condition or results of operations; (iii) the Company's growth strategy and operating
strategy; and (iv) the declaration and payment of dividends. Investors are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors discussed herein and those factors discussed in detail
in the Company's filings with the Securities and Exchange Commission.



ITEM 1. BUSINESS

BUSINESS OF THE COMPANY

General



The First Bancshares, Inc. (the "Company")
was incorporated on June 23, 1995 to serve as a bank holding company for The First, A National Banking Association ("The First"
or the “Bank”) located in Hattiesburg, Mississippi. The First began operations on August 5, 1996 from its main office
in the Oak Grove community, which was on theoutskirts of Hattiesburg but now is included in the
city of Hattiesburg. The First currently operates its main office and two branches in Hattiesburg, one in Laurel, one in Purvis,
one in Picayune, one in Pascagoula, one in Bay St. Louis, one in Wiggins, four in Gulfport, one in Biloxi, one in Long Beach and
one in Diamondhead, Mississippi, as well as one branch in Bogalusa, Louisiana. See Note C of Notes to Consolidated Financial Statements
for information regarding branch acquisition. The Company and its subsidiary bank engage in a general commercial and retail banking
business characterized by personalized service and local decision-making, emphasizing the banking needs of small to medium-sized
businesses, professional concerns and individuals. The First is a wholly-owned subsidiary bank of the Company.



Location and Service Area



The First serves the cities of Hattiesburg,
Laurel, Purvis, Picayune,Pascagoula, Bay St. Louis, Wiggins, Gulfport, Biloxi, Long Beach, Diamondhead,
Mississippi and Bogalusa, Louisiana, and the surrounding areas of Lamar, Forrest, Jones, Pearl River ,Jackson, Hancock, Stone and
Harrison Counties in Mississippi and Washington Parish in Louisiana. The First has a main office located in the city of Hattiesburg,
Mississippi, in Lamar County. The First has a branch office located on Highway 589 in the city of Purvis, Mississippi, also in
Lamar County, a third office located at the intersection of Lincoln Road and South 28th Avenue in Hattiesburg, a fourth location
at 110 S. 40th Ave. in Hattiesburg, a fifth location on Hwy 15 North in Laurel, a sixth location on Hwy 43 South in
Picayune, a seventh location on Jackson Avenue in Pascagoula, an eighth location on Hwy 90 in Bay St. Louis, a ninth location on
Border Ave. in Wiggins a tenth location at Hwy 49 and O’Neal Rd in Gulfport, Mississippi, and eleventh location and a motorbank
on 25th Ave in Gulfport, Mississippi, a twelfth location on Courthouse Road in Gulfport, MS, a thirteenth location on
Hwy 49 in Gulfport, Mississippi, a fourteenth location on Pass Road in Biloxi, Mississippi, a fifteenth location on Klondyke Road
in Biloxi, Mississippi, a sixteenth location on Kalani Drive in Diamondhead, Mississippi, and a seventeenth location on Columbia
Street in Bogalusa, Louisiana. On February 18, 2013, The First opened a branch in Ocean Springs in Jackson County at 1517 Bienville
Blvd, Ocean Springs, MS.



1







The main office primarily serves the area
in and around the northern portion of Lamar County. The Purvis office primarily serves the area in and around Purvis, Mississippi,
which is in the east-central part of Lamar County and is the county seat. Lamar County is located in the southeastern section of
Mississippi. Hattiesburg, one of the largest cities in Mississippi, is located in Forrest and Lamar Counties. The Laurel office
serves the city of Laurel and the surrounding area of Jones County, Mississippi. The Picayune office primarily serves the area
in and around Picayune, Mississippi, including areas of north Hancock County and Pearl River, LA and Slidell, LA. Picayune is located
in the southern part of Pearl River County. Pearl River County is located in the southern section of Mississippi. The Pascagoula
office primarily serves the area in and around Pascagoula, Mississippi, including areas of Jackson County. Hattiesburg can be reached
via U.S. Highways 98 and 49 and Interstate 59. Major employers located in the Lamar and Forrest County areas include Forrest General
Hospital, the University of Southern Mississippi, Wesley Medical Center, Camp Shelby, the Hattiesburg Public Schools, the Hattiesburg
Clinic, the City of Hattiesburg, and Marshall Durbin Poultry. The principal components of the economy of the Lamar and Forrest
County areas include service industries, wholesale and retail trade, manufacturing, and transportation and public utilities. The
Laurel branch is located at 1945 Highway 15 North, Laurel, MS, with the majority of its retail business coming from the local area
and the remaining business coming from other areas of Jones County, as well as portions of Jasper County, Wayne County, Smith County,
and Covington County. Major employers in the Jones County area include Howard Industries, Sanderson Farms, Inc., and South Central
Regional Medical Center. Majoremployers in the Pearl River County area include Stennis Space Center,
Chevron, Texaco, Arizona Chemical, American Crescent Elevator Co., City of Picayune, Crosby Memorial Hospital and the public schools.
The principal components of the economy of the Pearl River County area include timber, service industries, wholesale and retail
trade, manufacturing, and transportation and public utilities. Major employers in the Jackson County area include Northrop Grumman,
Singing River Hospital, and Shell Oil Company. The Bay St. Louis and Diamondhead offices serve the city of Bay St. Louis, Diamondhead
and the surrounding area of Hancock County, Mississippi. Bay St. Louis and Diamondhead can be reached via U.S. Highway 90. Major
employers in the Hancock area include the City of Bay St. Louis, Hancock County, and Stennis Space Center. The Wiggins office serves
the city of Wiggins and the surrounding area of Stone County, Mississippi. Stone County is south of Forrest County and north of
Harrison County. Wiggins can be reached via U. S. Highway 49. The Gulfport, Biloxi, and Long Beach offices serve the city of Gulfport
and the surrounding area of Harrison County, Mississippi. Gulfport can be reached via U.S. Highway 49. Major employers in the Harrison
County area include Keesler Air Force Base and a vast array of casinos. The Bogalusa office serves the city of Bogalusa and the
surrounding area of Washington Parish, Louisiana. The major employers in the Washington Parish area include Temple-Inland, the
Bogalusa School System, and LSU-Washington/St. Tammany Regional Medical Center.



Banking Services



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. In addition to offering a full range of deposit services and commercial
and personal loans, The First offers products such as mortgage loan originations. The following is a description of the products
and services offered or planned to be offered by the Bank.



| | ! | Deposit Services.The Bank offers a full range of deposit services that are typically available in most banks and savings
and loan associations, including checking accounts, NOW accounts, savings accounts, and other time deposits of various types, ranging
from daily money market accounts to longer-term certificates of deposit. The transaction accounts and time certificates are tailored
to the Bank's principal market area at rates competitive to those offered by other banks in the area. In addition, the Bank offers
certain retirement account services, such as Individual Retirement Accounts (IRAs). All deposit accounts are insured by the Federal
Deposit Insurance Corporation (the "FDIC") up to the maximum amount allowed by law. The Bank solicits these accounts
from individuals, businesses, associations and organizations, and governmental authorities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ! | Loan Products.The Bank offers a full range of commercial and personal loans. Commercial loans include both secured
and unsecured loans for working capital (including loans secured by inventory and accounts receivable), business expansion (including
acquisition of real estate and improvements), and purchase of equipment and machinery. Consumer loans include equity lines of credit
and secured and unsecured loans for financing automobiles, home improvements, education, and personal investments. The Bank also
makes real estate construction and acquisition loans. The Bank’s lending activities are subject to a variety of lending limits
imposed by federal law. While differing limits apply in certain circumstances based on the type of loan or the nature of the borrower
(including the borrower's relationship to the Bank), in general the Bank is subject to a loans-to-one-borrower limit of an amount
equal to 15% of the Bank's unimpaired capital and surplus. The Bank may not make any loans to any director, executive officer,
or 10% shareholder unless the loan is approved by the Board of Directors of the Bank and is made on terms not more favorable to
such a person than would be available to a person not affiliated with the Bank.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



2







| | ! | Mortgage Loan Divisions.The Bank has mortgage loan divisions which originate loans to purchase existing or construct
new homes and to refinance existing mortgages.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ! | Other Services.Other Bank services include on-line internet banking services, voice response telephone inquiry service,
commercial sweep accounts, cash management services, safe deposit boxes, travelers checks, direct deposit of payroll and social
security checks, and automatic drafts for various accounts. The Bank is associated with the Interlink, Plus, Pulse, Star, and Community
Cash networks of automated teller machines that may be used by the Bank’s customers throughout Mississippi and other regions.
The Bank also offers VISA and MasterCard credit card services through a correspondent bank.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Competition



The Bank generally competes with other financial
institutions through the selection of banking products and services offered, the pricing of services, the level of service provided,
the convenience and availability of services, and the degree of expertise and the personal manner in which services are offered.
Mississippi law permits statewide branching by banks and savings institutions, and many financial institutions in the state have
branch networks. Consequently, commercial banking in Mississippi is highly competitive. Many large banking organizations currently
operate in the Company's market area, several of which are controlled by out-of-state ownership. In addition, competition between
commercial banks and thrift institutions (savings institutions and credit unions) has been intensified significantly by the elimination
of many previous distinctions between the various types of financial institutions and the expanded powers and increased activity
of thrift institutions in areas of banking which previously had been the sole domain of commercial banks. Federal legislation,
together with other regulatory changes by the primary regulators of the various financial institutions, has resulted in the almost
total elimination of practical distinctions between a commercial bank and a thrift institution. Consequently, competition among
financial institutions of all types is largely unlimited with respect to legal ability and authority to provide most financial
services.



The Company faces increased competition
from both federally-chartered and state-chartered financial and thrift institutions, as well as credit unions, consumer finance
companies, insurance companies, and other institutions in the Company's market area. Some of these competitors are not subject
to the same degree of regulation and restriction imposed upon the Company. Many of these competitors also have broader geographic
markets and substantially greater resources and lending limits than the Company and offer certain services such as trust banking
that the Company does not currently provide. In addition, many of these competitors have numerous branch offices located throughout
the extended market areas of the Company that may provide these competitors with an advantage in geographic convenience that the
Company does not have at present.



Currently there are numerous other commercial
banks, savings institutions, and credit unions operating in The First's primary service area.



Employees



As of March 21, 2013 the Company had 206
full-time employees and 6 part-time employees.



SUPERVISION AND REGULATION



The Company and the Bank are subject to
state and federal banking laws and regulations which impose specific requirements or restrictions on and provide for general regulatory
oversight with respect to virtually all aspects of operations. These laws and regulations are generally intended to protect depositors,
not shareholders. To the extent that the following summary describes statutory or regulatory provisions, it is qualified in its
entirety by reference to the particular statutory and regulatory provisions. Any change in applicable laws or regulations may have
a material effect on the business and prospects of the Company. Beginning with the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") and following with the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"), and now most recently the sweeping Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (the “Dodd-Frank Act”), numerous additional regulatory requirements have been placed on the banking industry
in the past several years, and additional changes have been proposed. The operations of the Company and the Bank may be affected
by legislative changes and the policies of various regulatory authorities. The Company is unable to predict the nature or the extent
of the effect on its business and earnings that fiscal or monetary policies, economic control, or new federal or state legislation
may have in the future.



3







Legislative and Regulatory Initiatives to Address Financial
and Economic Crises



The Congress, Treasury Department and the
federal banking regulators, including the FDIC, have taken broad action since early September 2008 to address volatility in the
U.S. banking system.



Emergency Economic Stabilization Act
of 2008: Troubled Asset Relief Program.In October 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) was
enacted. The EESA authorized the Treasury Department to purchase from financial institutions and their holding companies up
to $700 billion in mortgage loans, mortgage-related securities and certain other financial instruments, including debt and equity
securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”).  The
purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase
their lending to customers and to each other.  The Treasury Department allocated $250 billion towards the TARP Capital
Purchase Program (“CPP”), pursuant to which the Treasury Department purchased debt or equity securities from participating
institutions.  The TARP also includes the Community Development Capital Initiative (“CDCI”), which was made
available only to certified Community Development Financial Institutions (“CDFIs”) and imposed a lower dividend or
interest rate, as applicable, than the CPP funding. Participants in the TARP are subject to executive compensation limits and are
encouraged to expand their lending and mortgage loan modifications.



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



The CDCI Preferred Stock qualifies as Tier
1 capital and, provided that the Company maintains its CDFI eligibility and certification, is entitled to cumulative dividends
at a rate of 2% per annum until 2018, and 9% per annum thereafter. The Warrant has a 10-year term and is immediately exercisable
upon its issuance, and its exercise price is subject to anti-dilution adjustments.



In order to benefit from the lower dividend
rate associated with the CDCI Preferred Stock, the Company is required to maintain compliance with the eligibility requirements
of the CDFI Program. These eligibility requirements include the following:



| | · | The Company must have a primary mission of promoting community development, based on criteria set forth in 12 C.F.R. 1805.201(b)(1);
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company must provide Financial Products, Development Services, and/or other similar financing as a predominant business
activity in arm’s-length transactions, as provided in 12 C.F.R. 1805.201(b)(2);
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company must serve a Target Market by serving one or more Investment Areas and/or Targeted Populations, substantially in
the manner set forth in 12 C.F.R. 1805.201(b)(3);
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



4







| | · | The Company must provide Development Services in conjunction with its Financial Products, either directly, through an Affiliate,
or through a contract with a third-party provider, as provided in 12 C.F.R. 1805.201(b)(4);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company must maintain accountability to residents of the applicable Investment Area(s) and/or Targeted Population(s) through
representation on its governing Board of Directors or otherwise, as provided in 12 C.F.R. 1805.201(b)(5); and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company must remain a non-governmental entity which is not an agency or instrumentality of the United States of America,
or any State or political subdivision thereof, as described in 12 C.F.R. 1805.201(b)(6) and within the meaning of any supplemental
regulations or interpretations of 12 C.F.R. 1805.201(b)(6) or such supplemental regulations published by the Fund.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As used in the discussion above, the terms “Affiliate,”
“Financial Products,” “Development Services,” “Target Market,” “Investment Area(s),”
and “Targeted Population(s)” have the meanings ascribed to such terms in 12 C.F.R. 1805.104.



EESA also temporarily increased FDIC deposit
insurance on most accounts from $100,000 to $250,000.  However, with the passage of the Dodd-Frank Act, this increase
in the basic coverage limit has been made permanent.



Following a systemic risk determination,
the FDIC established a Temporary Liquidity Guarantee Program (“TLGP”) on October 14, 2008.  The TLGP included
the Transaction Account Guarantee Program (“TAGP”), which provided unlimited deposit insurance coverage for noninterest-bearing
transaction accounts (typically business checking accounts) and certain funds swept into noninterest-bearing savings accounts.  Institutions
participating in the TAGP paid a 10 basis points fee (annualized) on the balance of each covered account in excess of $250,000
while the extra deposit insurance was in place. The TAGP was set to expire on December 31, 2010. However, with the passage of the
Dodd-Frank Act, the insurance coverage provided under the Transaction Account Guarantee Program was extended until December 31,
2012, with some changes.



American Reinvestment and Recovery Act
of 2009. On February 17, 2009, President Obama signed into law the America Reinvestment and Recovery Act of 2009 (“ARRA”).
ARRA contained expansive new restrictions on executive compensation for financial institutions and other companies participating
in the TARP. These restrictions apply to us and are further detailed in implementing regulations found at 31 CFR Part 30. (Any
reference to “ARRA” herein includes a reference to the implementing regulations.)



ARRA prohibits bonus and similar payments
to the most highly compensated employee of the Company. The prohibition does not apply to bonuses payable pursuant to “employment
agreements” in effect prior to February 11, 2009. “Long-term” restricted stock is excluded from ARRA’s
bonus prohibition, but only to the extent the value of the stock does not exceed one-third of the total amount of annual compensation
of the employee receiving the stock, the stock does not “fully vest” until after all TARP-related obligations have
been satisfied, and any other conditions which the Treasury may specify have been met.



ARRA prohibits any payment to the principal
executive officer, the principal financial officer, and any of the next eight most highly compensated employees upon departure
from the Company for any reason for as long as any TARP-related obligations remain outstanding.



Under ARRA TARP-participating companies
are required to recover any bonus or other incentive payment paid to the principal executive officer, the principal financial officer,
or any of the next 23 most highly compensated employees on the basis of materially inaccurate financial or other performance criteria.



ARRA prohibits TARP participants from implementing
any compensation plan that would encourage manipulation of the reported earnings of the Company in order to enhance the compensation
of any of its employees.



5







ARRA requires the principal executive officer
and the principal financial officer of any publicly-traded TARP-participating company to provide a written certification of compliance
with the executive compensation restrictions in ARRA in the Company’s annual filings with the SEC beginning in 2010.



ARRA requires each TARP-participating company
to implement a company-wide policy regarding excessive or luxury expenditures, including excessive expenditures on entertainment
or events, office and facility renovations, aviation or other transportation services.



ARRA directs the Treasury to review bonuses,
retention awards, and other compensation paid to the principal executive officer and the next four other highest paid executive
officer of the Company and the next 20 most highly compensated employees of each company receiving TARP assistance before ARRA
was enacted, and to “seek to negotiate” with the TARP recipient and affected employees for reimbursement if it finds
any such payments were inconsistent with TARP or otherwise in conflict with the public interest.



ARRA also prohibits the payment of tax gross-ups;
required disclosures related to perquisite payments and the engagement, if any, by the TARP participant of a compensation consultant;
and prohibits the deduction for tax purposes of executive compensation in excess of $500,000 for each applicable senior executive.



These standards could change based on subsequent
guidance issued by the Treasury or the Internal Revenue Service. As long as the Treasury continues to hold equity interests in
the Company issued under the TARP, the Company will monitor its compensation arrangements and modify such compensation arrangements,
agree to limit and limit its compensation deductions, and take such other actions as may be necessary to comply with the standards
discussed above, as they may be modified from time to time. The Company does not anticipate that any material changes to its existing
executive compensation structure will be required to comply with the executive compensation standards included in the TARP.



Dodd-Frank Act. The enactment during
2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has resulted in increased
regulation of the financial services industry. Provisions affecting the activities of the Company and the Bank include, without
limitation, the following:



| | · | Asset-based deposit insurance assessments. FDIC deposit insurance premium assessments will be based on bank assets rather
than domestic deposits.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Deposit insurance limit increase. The deposit insurance coverage limit has been permanently increased from $100,000
to $250,000.
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | · | Extension of Transaction Account Guarantee Program. Unlimited deposit insurance coverage was extended for non-interest-bearing
transaction accounts and certain other accounts until December 31, 2012.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Establishment of the Consumer Financial Protection Bureau (CFPB). The CFPB is housed within the Federal Reserve and,
in consultation with the Federal banking agencies, makes rules relating to consumer protection. The CFPB has the authority, should
it wish to do so, to rewrite virtually all of the consumer protection regulations governing banks, including those implementing
the Truth in Lending Act, the Real Estate Settlement Procedures Act (or RESPA), the Truth in Savings Act, the Electronic Funds
Transfer Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act, the S.A.F.E. Mortgage Licensing Act, the Fair
Credit Reporting Act (except Sections 615(e) and 628), the Fair Debt Collection Practices Act, and the Gramm-Leach-Bliley Act (sections
502 through 509 relating to privacy), among others.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Risk-retention rule. Banks originating loans for sale on the secondary market or securitization must retain 5 percent
of any loan they sell or securitize, except for mortgages that meet low-risk standards to be developed by regulators.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Limitation on federal preemption. Limitations have been imposed on the ability of national bank regulators to preempt
state law. Formerly, the national bank and federal thrift regulators possessed preemption powers with regard to transactions, operating
subsidiaries and attorney general civil enforcement authority. These preemption requirements have been limited by the Dodd-Frank
Act, which will likely impact state banks by affecting activities previously permitted through parity with national banks.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



6







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



| | · | Executive compensation limitations. The Dodd-Frank Act codified executive compensation limitations similar to those
previously imposed on TARP recipients.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



Summary. The foregoing is a brief
summary of certain statutes, rules and regulations affecting the Company and the Bank. It is not intended to be an exhaustive discussion
of all the statutes and regulations having an impact on the operations of such entities. Additional bills may be introduced in
the future in the United States Congress and state legislatures to alter the structure, regulation and competitive relationships
of financial institutions. It cannot be predicted whether and what form any of these proposals will be adopted or the extent to
which the business of the Company and the Bank may be affected thereby.



The Company



Because it owns the outstanding capital
stock of the Bank, the Company is a bank holding company within the meaning of the Federal Bank Holding Company Act of 1956 (the
"BHCA").



The BHCA.Under the BHCA, the Company
is subject to periodic examination by the Federal Reserve and is required to file periodic reports of its operations and such additional
information as the Federal Reserve may require. The Company's and the Bank’s activities are limited to banking, managing
or controlling banks, furnishing services to or performing services for its subsidiaries, and engaging in other activities that
the Federal Reserve determines to be so closely related to banking or managing or controlling banks as to be a proper incident
thereto.



The Dodd-Frank Act has removed many limitations
on the Federal Reserve Board’s authority to make examinations of banks that are subsidiaries of bank holding companies. Under
the Dodd-Frank Act, the Federal Reserve Board will generally be permitted to examine bank holding companies and their subsidiaries,
provided that the Federal Reserve Board must rely on reports submitted directly by the institution and examination reports of the
appropriate regulators (such as the OCC) to the fullest extent possible; must provide reasonable notice to, and consult with, the
appropriate regulators before commencing an examination of a bank holding company subsidiary; and, to the fullest extent possible,
must avoid duplication of examination activities, reporting requirements, and requests for information.



Investments, Control, and Activities.With certain limited exceptions, the BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve
before (i) acquiring substantially all the assets of any bank, (ii) acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or control more than 5% of the voting shares of such bank (unless it
already owns or controls the majority of such shares), or (iii) merging or consolidating with another bank holding company.



In addition, and subject to certain exceptions,
the BHCA and the Change in Bank Control Act, together with regulations thereunder, require Federal Reserve approval (or, depending
on the circumstances, no notice of disapproval) prior to any person or company acquiring "control" of a bank holding
company, such as the Company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any
class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person acquires 10% or more
but less than 25% of any class of voting securities and either the Company has registered securities under Section 12 of the Exchange
Act (which the Company has done) or no other person owns a greater percentage of that class of voting securities immediately after
the transaction. The regulations provide a procedure for challenge of the rebuttable control presumption.



7







Under the BHCA, a bank holding company is
generally prohibited from engaging in, or acquiring direct or indirect control of more than 5% of the voting shares of any company
engaged in nonbanking activities, unless the Federal Reserve Board, by order or regulation, has found those activities to be so
closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the activities that the
Federal Reserve Board has determined by regulation to be proper incidents to the business of a bank holding company include making
or servicing loans and certain types of leases, engaging in certain insurance and discount brokerage activities, performing certain
data processing services, acting in certain circumstances as a fiduciary or investment or financial adviser, owning savings associations,
and making investments in certain corporations or projects designed primarily to promote community welfare.



The Federal Reserve Board has imposed certain
capital requirements on the Company under the BHCA, including a minimum leverage ratio and a minimum ratio of "qualifying"
capital to risk-weighted assets. These requirements are described below under "Capital Regulations." Subject to its capital
requirements and certain other restrictions, the Company may borrow money to make a capital contribution to the Bank, and such
loans may be repaid from dividends paid from the Bank to the Company (although the ability of the Bank to pay dividends is subject
to regulatory restrictions as described below in "The Bank - Dividends"). The Company is also able to raise capital for
contribution to the Bank by issuing securities without having to receive regulatory approval, subject to compliance with federal
and state securities laws.



Source of Strength; Cross-Guarantee.In accordance with Federal Reserve Board policy, the Company is expected to act as a source of financial strength to the Bank
and to commit resources to support the Bank in circumstances in which the Company might not otherwise do so. Under the BHCA, the
Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary
(other than a nonbank subsidiary of a bank) upon the Federal Reserve Board's determination that such activity or control constitutes
a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further,
federal bank regulatory authorities have additional discretion to require a bank holding company to divest itself of any bank or
nonbank subsidiary if the agency determines that divestiture may aid the depository institution's financial condition.



The Bank



The Bank operates as a national banking
association incorporated under the laws of the United States and subject to examination by the Office of Comptroller of the Currency
("OCC"). Deposits in the Bank are insured by the FDIC up to a maximum amount (generally $250,000
per depositor, subject to aggregation rules). The OCC and the FDIC regulate or monitor virtually all areas of the Bank’s
operations, including security devices and procedures, adequacy of capitalization and loan loss reserves, loans, investments, borrowings,
deposits, mergers, issuances of securities, payment of dividends, interest rates payable on deposits, interest rates or fees chargeable
on loans, establishment of branches, corporate reorganizations, maintenance of books and records, and adequacy of staff training
to carry on safe lending and deposit gathering practices. The OCC requires the Bank to maintain certain capital ratios and imposes
limitations on the Bank’s aggregate investment in real estate, bank premises, and furniture and fixtures. The Bank is required
by the OCC to prepare quarterly reports on their financial condition and to conduct an annual audit of their financial affairs
in compliance with minimum standards and procedures prescribed by the OCC.



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



8







National banks and their holding companies
which have been chartered or registered or undergone a change in control within the past two years or which have been deemed by
the OCC or the Federal Reserve Board, respectively, to be troubled institutions must give the OCC or the Federal Reserve Board,
respectively, thirty days prior notice of the appointment of any senior executive officer or director. Within the thirty day period,
the OCC or the Federal Reserve Board, as the case may be, may approve or disapprove any such appointment.



Deposit Insurance.The FDIC establishes
rates for the payment of premiums by federally insured banks and thrifts for deposit insurance. A Deposit Insurance Fund ("DIF")
is maintained for commercial banks and thrifts, with insurance premiums from the industry used to offset losses from insurance
payouts when banks and thrifts fail. Since 1993, insured depository institutions like the Bank have paid for deposit insurance
under a risk-based premium system.



The Dodd-Frank Act has changed the method
of calculation for FDIC insurance assessments. Under the current system, the assessment base is domestic deposits minus a few allowable
exclusions, such as pass-through reserve balances. Under the Dodd-Frank Act, assessments are to be calculated based on the depository
institution’s average consolidated total assets, less its average amount of tangible equity. On February 9, 2011, the FDIC
published final regulations implementing these changes. In addition to providing for the required change in assessment base, the
FDIC has modified or eliminated the assessment adjustments based on unsecured debt, secured liabilities, and brokered deposits;
added a new adjustment for holding unsecured debt issued by another insured depository institution; and lowered the initial base
assessment rate schedule in order to collect approximately the same amount of revenue under the new base as under the old base,
among other changes. Due to the expanded assessment base the new initial base assessment rates have been lowered from prior levels.



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



The Bank is also subject to Section 23B
of the Federal Reserve Act, which prohibits an institution from engaging in certain transactions with affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such institution, as those prevailing at the time for comparable
transactions with nonaffiliated companies. The Bank is subject to certain restrictions on extensions of credit to executive officers,
directors, certain principal shareholders, and their related interests. Such extensions of credit (i) must be made on substantially
the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third
parties and (ii) must not involve more than the normal risk of repayment or present other unfavorable features.



Dividends.A national bank may not
pay dividends from its capital. All dividends must be paid out of undivided profits then on hand, after deducting expenses, including
reserves for losses and bad debts. In addition, a national bank is prohibited from declaring a dividend on its shares of common
stock until its surplus equals its stated capital, unless the bank has transferred to surplus no less than one-tenth of its net
profits of the preceding two consecutive half-year periods (in the case of an annual dividend). The approval of the OCC is required
if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits for that year
combined with its retained net profits for the preceding two years, less any required transfers to surplus. In addition, under
FDICIA, the banks may not pay a dividend if, after paying the dividend, the bank would be undercapitalized. See "Capital Regulations"
below.



9







Branching.National banks are required
by the National Bank Act to adhere to branch office banking laws applicable to state banks in the states in which they are located.
Under current Mississippi law, banks may open branches throughout Mississippi with the prior approval of the OCC. In addition,
with prior regulatory approval, banks are able to acquire existing banking operations in Mississippi. Furthermore, federal legislation
has recently been passed which permits interstate branching. The new law permits out of state acquisitions by bank holding companies
(subject to veto by new state law), interstate branching by banks if allowed by state law, interstate merging by banks, and de
novo branching by national banks if allowed by state law. See "Recent Legislative Developments."



Community Reinvestment Act.The Community
Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions,
the Federal Reserve, the FDIC, the OCC, or the Office of Thrift Supervision shall evaluate the record of the financial institutions
in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe
and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions, and applications
to open a branch or facility.



Other Regulations.Interest and certain
other charges collected or contracted for by the Bank are subject to state usury laws and certain federal laws concerning interest
rates. The Bank’s loan operations are subject to certain federal laws applicable to credit transactions, such as the federal
Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; the Home Mortgage Disclosure Act of 1975, requiring
financial institutions to provide information to enable the public and public officials to determine whether a financial institution
is fulfilling its obligation to help meet the housing needs community it serves; the Equal Credit Opportunity Act, prohibiting
discrimination on the basis of creed or other prohibited factors in extending credit; the Fair Credit Reporting Act of 1978, governing
the use and provision of information to credit reporting agencies; the Fair Debt Collection Act, concerning the manner in which
consumer debts may be collected by collection agencies; and the rules and regulations of the various federal agencies charged with
the responsibility of implementing such federal laws. The deposit operations of the Bank also are subject to the Right to Financial
Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying
with administrative subpoenas of financial records, and the Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve Board to implement that Act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights
and liabilities arising from the use of automated teller machines and other electronic banking services.



Capital Regulations.The federal
bank regulatory authorities have adopted risk-based capital guidelines for banks and bank holding companies that are designed to
make regulatory capital requirements more sensitive to differences in risk profile among banks and bank holding companies, account
for off-balance sheet exposure, and minimize disincentives for holding liquid assets. The resulting capital ratios represent qualifying
capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating significant expansion programs should not allow expansion
to diminish their capital ratios and should maintain ratios well in excess of the minimums. The current guidelines require all
bank holding companies and federally-regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which
at least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders' equity, qualifying perpetual preferred stock,
and minority interests in equity accounts of consolidated subsidiaries, but excludes goodwill and most other intangibles and excludes
the allowance for loan and lease losses. Tier 2 capital includes the excess of any preferred stock not included in Tier 1 capital,
mandatory convertible securities, hybrid capital instruments, subordinated debt and intermediate term-preferred stock, and general
reserves for loan and lease losses up to 1.25% of risk-weighted assets.



Under the guidelines, banks' and bank holding
companies' assets are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain off-balance sheet items are given credit
conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are assigned to the 100% risk category, except for first mortgage loans fully
secured by residential property and, under certain circumstances, residential construction loans, both of which carry a 50% rating.
Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds, which have a 50% rating,
and direct obligations of or obligations guaranteed by the United States Treasury or United States Government agencies, which have
a 0% rating.



10







The federal bank regulatory authorities
have also implemented a leverage ratio, which is Tier 1 capital as a percentage of average total assets less intangibles, to be
used as a supplement to the risk-based guidelines. The principal objective of the leverage ratio is to place a constraint on the
maximum degree to which a bank holding company may leverage its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an additional cushion of at least 100 to 200 basis points.



FDICIA established a capital-based regulatory
scheme designed to promote early intervention for troubled banks and requires the FDIC to choose the least expensive resolution
of bank failures. The capital-based regulatory framework contains five categories of compliance with regulatory capital requirements,
including "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized." To qualify as a "well capitalized" institution, a bank must have a leverage
ratio of no less than 5%, a Tier 1 risk-based ratio of no less than 6%, and a total risk-based capital ratio of no less than 10%,
and the Bank must not be under any order or directive from the appropriate regulatory agency to meet and maintain a specific capital
level. As of December 31, 2012, the Company and The First, were qualified as "well capitalized."



Under the FDICIA regulations, the applicable
agency can treat an institution as if it were in the next lower category if the agency determines (after notice and an opportunity
for hearing) that the institution is in an unsafe or unsound condition or is engaging in an unsafe or unsound practice. The degree
of regulatory scrutiny of a financial institution will increase, and the permissible activities of the institution will decrease,
as it moves downward through the capital categories. Institutions that fall into one of the three undercapitalized categories may
be required to (i) submit a capital restoration plan; (ii) raise additional capital; (iii) restrict their growth, deposit interest
rates, and other activities; (iv) improve their management; (v) eliminate management fees; or (vi) divest themselves of all or
part of their operations. Bank holding companies controlling financial institutions can be called upon to boost the institutions'
capital and to partially guarantee the institutions' performance under their capital restoration plans.



These capital guidelines can affect the
Company in several ways. If the Company continues to grow at a rapid pace, a premature "squeeze" on capital could occur
making a capital infusion necessary. The requirements could impact the Company's ability to pay dividends. The Company's present
capital levels are more than adequate; however, rapid growth, poor loan portfolio performance, or poor earnings performance could
change the Company's capital position in a relatively short period of time.



Failure to meet these capital requirements
would mean that a bank would be required to develop and file a plan with its primary federal banking regulator describing the means
and a schedule for achieving the minimum capital requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy, such as a branch or merger application, unless
the Bank could demonstrate a reasonable plan to meet the capital requirement within a reasonable period of time.



Enforcement Powers. FIRREA expanded
and increased civil and criminal penalties available for use by the federal regulatory agencies against depository institutions
and certain "institution-affiliated parties" (primarily including management, employees, and agents of a financial institution,
independent contractors such as attorneys and accountants, and others who participate in the conduct of the financial institution's
affairs). These practices can include the failure of an institution to timely file required reports; the filing of false or misleading
information; or the submission of inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations. Criminal
penalties for some financial institution crimes have been increased to twenty years. In addition, regulators are provided with
greater flexibility to commence enforcement actions against institutions and institution-affiliated parties. Possible enforcement
actions include the termination of deposit insurance. Furthermore, FIRREA expanded the appropriate banking agencies' power to issue
cease and desist orders that may, among other things, require affirmative action to correct any harm resulting from a violation
or practice, including restitution, reimbursement, indemnifications, or guarantees against loss. A financial institution may also
be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts, or take other actions as determined
by the ordering agency to be appropriate.



11







Effect of Governmental Monetary Policies.The earnings of the Bank are affected by domestic economic conditions and the monetary and fiscal policies of the United States
government and its agencies. The Federal Reserve Board's monetary policies have had, and are likely to continue to have, an important
impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other
things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the
levels of bank loans, investments, and deposits through its open market operations in United States government securities and through
its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It
is not possible to predict the nature or impact of future changes in monetary and fiscal policies.



Significant Legislative Developments.On September 29, 1994, the federal government enacted the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Interstate Banking Act"). This Act became effective on September 29, 1995, and permits eligible bank holding companies
in any state, with regulatory approval, to acquire banking organizations in any other state. Since June 1, 1997, the Interstate
Banking Act has allowed banks with different home states to merge, unless a particular state opts out of the statute. In addition,
beginning June 1, 1997, the Interstate Banking Act has permitted national and state banks to establish de novo branches in another
state if there is a law in that state which applies equally to all banks and expressly permits all out-of-state banks to establish
de novo branches.



On November 12, 1999, the Gramm- Leach-Bliley
Act of 1999 (the "Financial Services Modernization Act") was signed into law. The Financial Services Modernization Act
repeals the two affiliation provisions of the Glass-Steagall Act: Section 20, which restricted the affiliation of Federal Reserve
Member Banks with firms "engaged principally" in specified securities activities; and Section 32, which restricts officer,
director, or employee interlocks between a member bank and any company or person "primarily engaged" in specified securities
activities. In addition, the Financial Services Modernization Act also contains provisions that expressly preempt any state law
restricting the establishment of financial affiliations, primarily related to insurance. The general effect of the law is to establish
a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial
service providers by revising and expanding the BHCA framework to permit a holding company system to engage in a full range of
financial activities through a new entity known as a Financial Holding Company. "Financial activities" is broadly defined
to include not only banking, insurance, and securities activities, but also merchant banking and additional activities that the
Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial
activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions
or the financial system generally.



Generally, the Financial Services Modernization
Act:



| | ! | Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among banks, securities
firms, insurance companies, and other financial service providers;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ! | Provides a uniform framework for the functional regulation of the activities of banks, savings institutions, and their holding
companies;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | ! | Broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their
financial subsidiaries;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------



| | ! | Provides an enhanced framework for protecting the privacy of consumer information;
| | - | ----------------------------------------------------------------------------------



| | ! | Adopts a number of provisions related to the capitalization, membership, corporate governance, and other measures designed
to modernize the Federal Home Loan Bank system;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ! | Modifies the laws governing the implementation of the Community Reinvestment Act ("CRA"); and
| | - | ---------------------------------------------------------------------------------------------



| | ! | Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial
institutions.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



12







In order for a bank holding company to take
advantage of the ability to affiliate with other financial services providers, that company must become a "Financial Holding
Company" as permitted under an amendment to the BHCA. To become a Financial Holding Company, a company would file a declaration
with the Federal Reserve, electing to engage in activities permissible for Financial Holding Companies and certifying that it is
eligible to do so because all of its insured depository institution subsidiaries are well-capitalized and well-managed. In addition,
the Federal Reserve must also determine that each insured depository institution subsidiary of a company has at least a "satisfactory"
CRA rating.



The Financial Services Modernization Act
also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A national bank may
have a subsidiary engaged in any activity authorized for national banks directly or any financial activity, except for insurance
underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through
a subsidiary of a Financial Holding Company. Financial activities include all activities permitted under new sections of the BHCA
or permitted by regulation.



A national bank seeking to have a financial
subsidiary, and each of its depository institution affiliates, must be "well-capitalized" and "well-managed."
The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank's total assets, or $50 billion. A national
bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The
assets of the subsidiary may not be consolidated with the bank's assets. The bank must also have policies and procedures to assess
financial subsidiary risk and protect the bank from such risks and potential liabilities.



The Financial Services Modernization Act
also includes a new section of the Federal Deposit Insurance Act governing subsidiaries of state banks that engage in "activities
as principal that would only be permissible" for a national bank to conduct in a financial subsidiary. It expressly preserves
the ability of a state bank to retain all existing subsidiaries. Because Mississippi permits commercial banks chartered by the
state to engage in any activity permissible for national banks, the state bank competitors of The First will be permitted to form
subsidiaries to engage in the activities authorized by the Financial Services Modernization Act, to the same extent as The First.
In order to form a financial subsidiary, a state bank must be well-capitalized, and the state bank would be subject to the same
capital deduction, risk management and affiliate transaction rules as applicable to national banks.



The Company and the Bank do not believe
that the Financial Services Modernization Act will have a material adverse effect on operations in the near-term. However, to the
extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience
further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter
of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing
the amount of competition that the Company and the Bank face from larger institutions and other types of companies offering financial
products, many of which may have substantially more financial resources than the Company and the Bank.



In
2001, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (USA Patriot Act) was signed into law. The USA Patriot Act broadened the application of anti-money laundering regulations
to apply to additional types of financial institutions, such as broker-dealers, and strengthened the ability of the U.S. Government
to detect and prosecute international money laundering and the financing of terrorism. The principal provisions of Title III of
the USA Patriot Act require that regulated financial institutions, including state member banks: (i) establish an anti-money
laundering program that includes training and audit components; (ii) comply with regulations regarding the verification of
the identity of any person seeking to open an account; (iii) take additional required precautions with non-U.S. owned accounts;
and (iv) perform certain verification and certification of money laundering risk for their foreign correspondent banking
relationships. The USA Patriot Act also expanded the conditions under which funds in a U.S. interbank account may be subject to
forfeiture and increased the penalties for violation of anti-money laundering regulations. Failure of a financial institution
to comply with the USA Patriot Act’s requirements could have serious legal and reputational consequences for the institution.
The Bank has adopted policies, procedures and controls to address compliance with the requirements of the USA Patriot Act under
the existing regulations and will continue to revise and update its policies, procedures and controls to reflect changes required
by the USA Patriot Act and implementing regulations.



13







In July 2002, Congress enacted the Sarbanes-Oxley
Act of 2002, which addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced
and timely disclosure of corporate information. Section 404 of the Sarbanes-Oxley Act, and regulations adopted by the SEC require
the Company to include in its Annual Report, a report stating management’s responsibility to establish and maintain adequate
internal controls over financial reporting and management’s conclusion on the effectiveness of the internal controls at year
end. Additionally, the Company’s independent registered public accounting firm is required to attest to and report on management’s
evaluation of internal control over financial reporting.



From time to time, various bills are introduced
in the United States Congress with respect to the regulation of financial institutions. Certain of these proposals, if adopted,
could significantly change the regulation of banks

and the financial services industry. The Company cannot predict
whether any of these proposals will be adopted or, if adopted, how these proposals would affect the Company.



Recent Legislative and Regulatory Initiatives
to Address Financial and Economic Crises.The Congress, Treasury Department and the federal banking regulators have
taken broad action since early September, 2008 to address volatility in the U.S. banking system, including the passage of legislation,
the provision of other direct and indirect assistance to financial institutions, assistance by the banking authorities in arranging
acquisitions of weakened banks and broker-dealers, implementation of programs by the Federal Reserve Board to provide liquidity
to the commercial paper markets and expansion of deposit insurance coverage. See “Legislative and Regulatory Initiatives
to Address Financial and Economic Crises” above.



ITEM 1A. RISK FACTORS



Making or continuing an investment in securities,
including the Company’s Common Stock, involves certain risks that you should carefully consider. The risks and uncertainties
described below are not the only risks that may have a material adverse effect on the Company. Additional risks and uncertainties
also could adversely affect the Company’s business and results of operations. If any of the following risks actually occur,
our business, financial condition or results of operations could be affected, the market price for your securities could decline,
and you could lose all or a part of your investment. Further, to the extent that any of the information contained in this Annual
Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying
important factors that could cause the Company’s actual results to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company.



We may be vulnerable to certain sectors of the economy



A portion of the loan portfolio is secured
by real estate. If the economy deteriorates further and real estate values depress 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.
Our ability to dispose of foreclosed real estate at prices above the respective carrying values could also be impinged, causing
additional losses.



Difficult market conditions have adversely affected the industry
in which we operate



The capital and credit markets have been
experiencing volatility and disruption for more than two years, causing volatility and disruption to reach unprecedented levels.
Dramatic declines in the housing market over the past year, with falling home prices and increasing foreclosures, unemployment
and under-employment, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs
of asset values by financial institutions, including government-sponsored entities as well as major commercial and investment banks.
Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders have
reduced or ceased providing funding to borrowers, including to other financial institutions. This market turmoil and tightening
of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence and widespread reduction
of business activity generally. A worsening of these conditions would likely exacerbate the adverse effects of these difficult
market conditions on us and others in the financial institution industry. Also, the economic downturn could exacerbate our exposure
to credit risk, particularly in our real estate markets, as lower home prices and increased foreclosures may result in higher charge-offs
and delinquencies.



14







General economic conditions in the areas where our operations
or loans are concentrated may adversely affect our customers’ ability to meet their obligations



A sudden or severe downturn in the economy
in the geographic markets we serve in the state of Mississippi may affect the ability of our customers to meet loan payments obligations
on a timely basis. The local economic conditions in these areas have a significant impact on our commercial, real estate, and construction
loans, the ability of borrowers to repay these loans and the value of the collateral securing such loans. Changes resulting in
adverse economic conditions of our market areas could negatively impact the financial results of the Company’s banking operations
and its profitability.



Additionally, adverse economic changes may
cause customers to withdraw deposit balances, thereby causing a strain on our liquidity.



We are subject to a risk of rapid and significant changes
in market interest rates



Our assets and liabilities are primarily
monetary in nature, and as a result we are subject to significant risks tied to changes in interest rates. Our ability to operate
profitably is largely dependent upon net interest income. Unexpected movement in interest rates markedly changing the slope of
the current yield curve could cause net interest margins to decrease, subsequently decreasing net interest income. In addition,
such changes could adversely affect the valuation of our assets and liabilities.



At present the Company’s one-year
interest rate sensitivity position is slightly asset sensitive, but a gradual increase in interest rates during the next twelve
months should not have a significant impact on net interest income during that period. However, as with most financial institutions,
the Company’s results of operations are affected by changes in interest rates and the Company’s ability to manage this
risk. The difference between interest rates charged on interest-earning assets and interest rates paid on interest-bearing liabilities
may be affected by changes in market interest rates, changes in relationships between interest rate indices, and/or changes in
the relationships between long-term and short-term market interest rates. 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.



Certain changes in interest rates, inflation, or the financial
markets could affect demand for our products and our ability to deliver products efficiently



Loan originations, and potentially loan
revenues, could be adversely impacted by sharply rising interest rates. Conversely, sharply falling rates could increase prepayments
within our securities portfolio lowering interest earnings from those investments. An unanticipated increase in inflation could
cause operating costs related to salaries and benefits, technology, and supplies to increase at a faster pace than revenues.



The fair market value of the securities
portfolio and the investment income from these securities also fluctuate depending on general economic and market conditions. In
addition, actual net investment income and/or cash flows from investments that carry prepayment risk, such as mortgage-backed and
other asset-backed securities, may differ from those anticipated at the time of investment as a result of interest rate fluctuations.



Changes in the policies of monetary authorities and other
government action could adversely affect profitability



The results of operations of the Company
are affected by credit policies of monetary authorities, particularly the Federal Reserve Board. The instruments of monetary policy
employed by the Federal Reserve Board include open market operations in U.S. government securities, changes in the discount rate
or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits. In view of changing conditions
in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks and the current
military operations in the Middle East, we cannot predict possible future changes in interest rates, deposit levels, loan demand
or the Company’s business and earnings. Furthermore, the actions of the United States government and other governments in
responding to such terrorist attacks or the military operations in the Middle East may result in currency fluctuations, exchange
controls, market disruption and other adverse effects.



15







Natural disasters could affect our ability to operate



Our market areas are susceptible to natural
disasters such as hurricanes. Natural disasters can disrupt operations, result in damage to properties and negatively affect the
local economies in which we operate. The Company cannot predict whether or to what extent damage caused by future hurricanes or
other natural disasters will affect operations or the economies in our market areas, but such weather events could cause a decline
in loan originations, a decline in the value or destruction of properties securing the loans and an increase in the risk of delinquencies,
foreclosures or loan losses.



Greater loan losses than expected may adversely affect our
earnings



The Bank as lender 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. Credit losses are inherent in the business of making loans and could
have a material adverse effect on operating results. Credit risk with respect to its real estate and construction loan portfolio
will relate principally to the creditworthiness of corporations and the value of the real estate serving as security for the repayment
of loans. Credit risk with respect to its commercial and consumer loan portfolio will relate principally to the general creditworthiness
of businesses and individuals within our local markets.



The Bank makes various assumptions and judgments
about the collectability of its loan portfolio and provides an allowance for estimated loan losses based on a number of factors.
The Bank believes that its current allowance for loan losses is adequate. However, if our assumptions or judgments prove to be
incorrect, the allowance for loan losses may not be sufficient to cover actual loan losses. We may have to increase the allowance
in the future in response to the request of one of its primary banking regulators, to adjust for changing conditions and assumptions,
or as a result of any deterioration in the quality of the loan portfolio. The actual amount of future provisions for loan losses
cannot be determined at this time and may vary from the amounts of past provisions.



The Company may need to rely on the financial markets to
provide needed capital



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 we 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. Should these risks materialize, the ability to further expand its operations through internal growth may be limited.



We are subject to regulation by various Federal and State
entities



The Company is subject to the regulations
of the Securities and Exchange Commission (“SEC”), the Federal Reserve Board, the Federal Deposit Insurance Corporation,
and the OCC. New regulations issued by these agencies may adversely affect the Company’s ability to carry on its business
activities. The Company is subject to various Federal and state laws and certain changes in these laws and regulations may adversely
affect operations.



The Company is 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 First Bancshares and may also require extraordinary efforts or additional
costs to implement. Any of these laws or regulations may be modified or changed from time to time, and we cannot be assured that
such modifications or changes will not adversely affect the Company.



We engage in acquisitions of other businesses from time to
time



On occasion, the Company will engage in
acquisitions of other businesses. Acquisitions may result in customer and employee turnover, thus increasing the cost of operating
the new businesses. The acquired companies may also have legal contingencies, beyond those that the Company is aware of, that could
result in unexpected costs.



16







We are subject to industry competition which may have an
impact upon its success



The profitability of the Company depends
on its ability to compete successfully. We operate in a highly competitive financial services environment. Certain competitors
are larger and may have more resources than we do. We face competition in our regional market areas from other 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 that offer similar services. Some of the nonbank competitors
are not subject to the same extensive regulations that govern the Company or the Bank and may have greater flexibility in competing
for business.



Another competitive factor is that the
financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven
products and services. Our future success may depend, in part, on our ability to use technology competitively to provide products
and services that provide convenience to customers and create additional efficiencies in operations.



Future issuances of additional securities could result in
dilution of shareholders’ ownership



The Company may determine from time to
time to issue additional securities to raise additional capital, support growth, or to make acquisitions. Further, the Company
may issue stock options or other stock grants to retain and motivate our employees. Such issuances of Company securities will
dilute the ownership interests of the Company’s shareholders.



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



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



Securities issued by the Company, including the Company’s
Common Stock, are not FDIC insured



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



There can be no assurance that recently enacted legislation
will stabilize the U.S. financial system



On October 3, 2008, President Bush signed
into law the EESA. The legislation was the result of a proposal by the Treasury in response to the financial crises affecting
the banking system and financial markets and threats to investment banks and other financial institutions. Pursuant to the EESA,
the Treasury was given the authority to, among other things, purchase up to $700 billion of mortgages, mortgage-backed securities
and certain other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to
the U.S. financial markets. In 2008, the Treasury announced the Capital Purchase Program, which was followed by the Community
Development Capital Initiative in 2010. In 2008, the FDIC adopted a Final rule with respect to its Temporary Liquidity Guarantee
Program pursuant to which the FDIC guaranteed certain “newly-issued unsecured debt” of banks and certain holding companies
and also temporarily guaranteed, on an unlimited basis, noninterest-bearing bank transaction accounts; the unlimited guarantee
of noninterest-bearing transaction accounts has now been extended through 2012 by the Dodd-Frank Act. On February 17, 2009, President
Obama signed into law the ARRA. The purposes of the legislation are to preserve and create jobs, to assist those most impacted
by the recession, to provide investments to increase economic efficiency in health services, to invest in transportation, environmental
protection and other infrastructure, and to stabilize local and state governments.



17







Each of these programs was implemented
to help stabilize our economy and financial system. There can be no assurance, however, as to the actual impact that the EESA
and its implementing regulations, the Capital Purchase Program, the FDIC programs, or any other governmental program will have
on the financial markets. The failure of the EESA, the ARRA or the U.S. government to stabilize the financial markets and a continuation
or worsening of current financial market conditions could materially and adversely affect the Company’s business, financial
condition, and results of operations, access to credit or the trading price of the Company’s common stock.



The failure of other financial institutions could adversely
affect the Company



The Company’s ability to engage in
routine funding transactions could be adversely affected by the actions and potential failures of other financial institutions.
Financial institutions are interrelated as a result of trading, clearing, counterparty and other relationships. As a result, defaults
by, or even rumors or concerns about, one or more financial institutions or the financial services industry generally have led
to market-wide liquidity problems and could lead to losses or defaults by the Company or by other institutions.



Concern by customers over deposit insurance may cause a
decrease in deposits and changes in the mix of funding sources available to the Company



With recent increased concerns about bank
failures, customers increasingly are concerned about the extent to which their deposits are insured by the FDIC. Customers may
withdraw deposits in an effort to ensure that the amount they have on deposit with their bank is fully insured and some may seek
deposit products or other bank savings and investment products that are collateralized. Decreases in deposits and changes in the
mix of funding sources may adversely affect the Company’s funding costs and net income.



Evaluation of investment securities for other-than-temporary
impairment involves subjective determinations and could materially impact the Company’s results of operations and financial
condition



The evaluation of impairments is a quantitative
and qualitative process, which is subject to risks and uncertainties, and is intended to determine whether declines in the fair
value of investment should be recognized in current period earnings. The risks and uncertainties include changes in general economic
conditions, the issuers’ financial condition or future recovery prospects, the effects of changes in interest rates or credit
spreads and the expected recovery period. Estimating future cash flows involves incorporating information received from third-party
sources and making internal assumptions and judgments regarding the future performance of the underlying collateral and assessing
the probability that an adverse change in future cash flows has occurred. The determination of the amount of other-than-temporary
impairments is based upon the Company’s quarterly evaluation and assessment of known and inherent risks associated with
the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.



Additionally, the Company’s management
considers a wide range of factors about the security issuer and uses its reasonable judgment in evaluating the cause of the decline
in the estimated fair value of the security and in assessing the prospects for recovery. Inherent in management’s evaluation
of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Impairments
to the carrying value of our investment securities may need to be taken in the future, which would have a material adverse effect
on our results of operations and financial condition.



The Company may be required to pay additional insurance
premiums to the FDIC, which could negatively impact earnings



Recent insured institution failures, as
well as deterioration in banking and economic conditions generally, have significantly increased FDIC loss provisions, resulting
in a decline in the designated reserve ratio to historical lows. The FDIC expects a higher rate of insured institution failures
in the next few years compared to recent years; thus, the reserve ratio may continue to decline. In addition, pursuant to the
Dodd-Frank Act, the limit on FDIC coverage has been permanently increased to $250,000. These developments have caused the premiums
assessed to the Bank by the FDIC to increase.



18







Further, depending upon any future losses
that the FDIC insurance fund may suffer, there can be no assurance that there will not be additional premium increases in order
to replenish the fund. The FDIC may need to set a higher base rate schedule or impose special assessments due to future financial
institution failures and updated failure and loss projections. Potentially higher FDIC assessment rates than those currently projected
could have an adverse impact on the Company’s results of operations.



The Company participates in the U.S. Treasury’s Troubled
Asset Relief Program



| | · | The Company
                                                                                                               received $5,000,000
                                                                                                               in funding under
                                                                                                               the Capital Purchase
                                                                                                               Program (“CPP”)
                                                                                                               in exchange for
                                                                                                               preferred stock
                                                                                                               and common stock
                                                                                                               warrants during
                                                                                                               2009, which funding
                                                                                                               was refinanced
                                                                                                               into lower-cost
                                                                                                               Community Development
                                                                                                               Capital Initiative
                                                                                                               (“CDCI”)
                                                                                                               funding on September
                                                                                                               29, 2010. In addition,
                                                                                                               on September 29,
                                                                                                               2010, the Company
                                                                                                               also accepted $12,123,000
                                                                                                               in additional CDCI
                                                                                                               funding, for a
                                                                                                               total of $17,123,000
                                                                                                               in CDCI funding.
                                                                                                               Participation in
                                                                                                               this program constrains
                                                                                                               the Company’s
                                                                                                               ability to raise
                                                                                                               dividends and also
                                                                                                               places certain
                                                                                                               constraints on
                                                                                                               executive compensation
                                                                                                               arrangements. The
                                                                                                               increased funding
                                                                                                               provides assurance
                                                                                                               that the Company
                                                                                                               can maintain its
                                                                                                               minimum regulatory
                                                                                                               capital ratios
                                                                                                               in the face of
                                                                                                               future large real
                                                                                                               estate-related
                                                                                                               losses. The Company
                                                                                                               will have to repay
                                                                                                               these funds, possibly
                                                                                                               by raising capital
                                                                                                               within the next
                                                                                                               seven to eight
                                                                                                               years to keep its
                                                                                                               dividend costs
                                                                                                               from increasing
                                                                                                               to 9% per annum.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Both the CPP
                                                                                                               and the CDCI are
                                                                                                               part of the Troubled
                                                                                                               Asset Relief Program
                                                                                                               (“TARP”).
                                                                                                               The rules that
                                                                                                               govern the TARP
                                                                                                               include restrictions
                                                                                                               on certain compensation
                                                                                                               to executive officers
                                                                                                               and a number of
                                                                                                               others in the Company.
                                                                                                               Among other things,
                                                                                                               these rules include
                                                                                                               a prohibition on
                                                                                                               golden parachute
                                                                                                               payments, a prohibition
                                                                                                               on providing tax
                                                                                                               gross-ups, a bonus
                                                                                                               claw-back provision,
                                                                                                               and a prohibition
                                                                                                               on paying any bonus
                                                                                                               payment to the
                                                                                                               Company’s
                                                                                                               most highly compensated
                                                                                                               employees. It is
                                                                                                               possible that compensation
                                                                                                               restrictions imposed
                                                                                                               on TARP participants
                                                                                                               could impede our
                                                                                                               ability to attract
                                                                                                               and retain qualified
                                                                                                               executive officers.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Our participation
                                                                                                               in the TARP limits
                                                                                                               our annual dividend
                                                                                                               payments to no
                                                                                                               more than $0.15
                                                                                                               per share. Our
                                                                                                               ability to repurchase
                                                                                                               our common stock
                                                                                                               would also be restricted
                                                                                                               in the event that
                                                                                                               we failed to make
                                                                                                               our dividend payments.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Since the TARP
                                                                                                               was part of legislation
                                                                                                               that has the reputation
                                                                                                               of being passed
                                                                                                               as a bailout of
                                                                                                               the financial industry,
                                                                                                               participation in
                                                                                                               the program could
                                                                                                               also create some
                                                                                                               reputational risk.
                                                                                                               This reputation
                                                                                                               of the program
                                                                                                               could impede the
                                                                                                               Company’s
                                                                                                               ability to attract
                                                                                                               business in competition
                                                                                                               with other financial
                                                                                                               institutions that
                                                                                                               did not participate.
                                                                                                               This reputational
                                                                                                               risk could also
                                                                                                               impede the Company’s
                                                                                                               ability to attract
                                                                                                               and retain qualified
                                                                                                               executive officers.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company recently executed an Acquisition Agreement to
purchase First National Bank of Baldwin County



On January 31, 2013, the Company entered into an Acquisition
Agreement (the “Agreement”) with First Baldwin Bancshares, Inc., an Alabama corporation (“Baldwin”). The
Agreement provides that, upon the terms and subject to the conditions set forth in the Agreement, the Company will acquire all
of the outstanding shares (the “Acquisition”) of Baldwin’s wholly-owned subsidiary, First National Bank of Baldwin
County, a national banking association (“FNB”). Subject to the terms and conditions of the Agreement, which has been
approved by the Boards of Directors of the Company and Baldwin, Baldwin intends to file a voluntary bankruptcy petition under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court (“Bankruptcy Court”) and to seek Bankruptcy
Court approval of the Agreement and the Acquisition through a Chapter 11 plan. Upon approval by the Bankruptcy Court and consummation
of the Acquisition, all outstanding FNB common stock will be sold to the Company for cash consideration not to exceed $3,300,000
(the “Purchase Price”). Each outstanding share of FNB common stock will remain outstanding and be unaffected by the
Acquisition.



19







The Agreement contains customary representations and warranties
from both the Company and Baldwin and each have agreed to customary covenants, including, among others, covenants relating to
(1) the conduct of the Company and Baldwin’s businesses during the interim period between the execution of the Agreement
and the completion of the Acquisition, (2) certificates of approval from the respective officers of the parties regarding approval
by the Boards of Directors of the Company, Baldwin and FNB of the Acquisition, the Agreement and the transactions contemplated
thereby. Baldwin has also agreed, subject to certain exceptions, not to (1) solicit proposals relating to alternative business
combination transactions or (2) enter into any discussions, or enter into any agreement, concerning, or provide confidential information
in connection with, any proposals for alternative business combination transactions.



Completion of the Acquisition is subject to certain customary
conditions, including, among others, (1) receipt of all required regulatory and bankruptcy court approvals and (2) the absence
of any law or order prohibiting the completion of the Acquisition. Each party’s obligation to complete the Acquisition is
also subject to certain additional customary conditions, including (1) subject to certain exceptions, the accuracy of the representations
and warranties of the other party, (2) performance in all material respects by the other party of its obligations under the Agreement,
and (3) certain elections under applicable provisions of the Internal Revenue Service code and Treasury regulations.



If any of the representation or warranties are breached, or
if any of the conditions or covenants are not fulfilled, the Acquisition could be delayed or not completed, which could have a
material adverse effect on our results of operations and financial condition.



| | ITEM 1B. | UNRESOLVED
                                                                                                STAFF COMMENTS
| | -------- | -------------------------------------------------------------------------------------------------------------------------



None



| | ITEM 2. | PROPERTIES
| | ------- | ----------



The Company’s main office, which
is the holding company headquarters, is located at 6480 U.S. Hwy 98 West in Hattiesburg, Mississippi. The Company operates 17
full service banking and financial services offices and one motor bank facility. Management ensures that all properties, whether
owned or leased, are maintained in suitable condition.



| | ITEM 3. | LEGAL
                                                                                               PROCEEDINGS
| | ------- | ----------------------------------------------------------------------------------------------------------------



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



| | ITEM 4. | MINE
                                                                                               SAFETY DISCLOSURES
| | ------- | ----------------------------------------------------------------------------------------------------------------------



Not applicable.



20







PART II



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



Market
Information



The Company's common stock trades on the NASDAQ Global
Market under the ticker symbol "FBMS". The following table sets forth the high and low sale prices of the Company's
common stock as reported on the NASDAQ Global Market. These prices do not reflect retail mark-ups, mark-downs or commissions.



|     |             |  |        |       | Cash     
|---- | ----------- |  | ------ | ----- | ---------
|     |             |  | High   | Low   | Dividends
|     |             |  | Sale   | Sale  | Paid     
|2012 |             |  |        |       |          
|     | 4th quarter |  | $10.96 | $9.13 | $0.0375  
|     | 3rd quarter |  | 10.52  | 8.99  | 0.0375   
|     | 2nd quarter |  | 9.25   | 8.54  | 0.0375   
|     | 1st quarter |  | 11.02  | 7.10  | 0.0375   
|     |             |  |        |       |          
|2011 |             |  |        |       |          
|     | 4th quarter |  | $8.89  | $6.95 | $0.0375  
|     | 3rd quarter |  | 10.00  | 8.03  | 0.0375   
|     | 2nd quarter |  | 11.07  | 8.29  | 0.0375   
|     | 1st quarter |  | 9.89   | 8.10  | 0.0375   



There were 1,160 registered shareholders and approximately
374 beneficial holders of the Company's common stock at April 1, 2013 and 3,142,355 shares outstanding. On April 1, 2013, the high
and low sale prices of the Company's common stock as reported on the NASDAQ Global Market was $11.99 and $11.67, respectively.



The principal sources of funds to the Company to
pay dividends are the dividends received from The First, A National Banking Association, Hattiesburg, Mississippi. Consequently,
dividends are dependent upon the Banks' earnings, capital needs, regulatory policies as well as statutory and regulatory limitations.
Federal and state banking laws and regulations restrict the amount of dividends and loans a bank may make to its parent company.
Approval by The First Bancshares, Inc.'s regulators is required if the total of all dividends declared in any calendar year exceed
the total of Its net income for that year combined with its retained net income of the preceding two years.



Stock Performance Graph



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





21









The performance graph compares the cumulative five-year
shareholder return on the Company's common stock, assuming an investment of $100 on December 31, 2007 and the reinvestment of dividends
thereafter, to that of the common stocks of United States companies reported in the NASDAQ Composite-Total Returns Index and the
common stocks of the NASDAQ OMX Banks Index. The NASDAQ OMX Banks Index contains securities of NASDAQ-listed companies classified
according to the Industry Classification Benchmark as Banks. They include banks providing a broad range of financial services,
including retail banking, loans and money transmissions.







Legend



|Symbol | Total Returns Index For:       | 2007   | 2008  | 2009  | 2010   | 2011   | 2012  
|------ | ------------------------------ | ------ | ----- | ----- | ------ | ------ | ------
|u      | First Bancshares, Inc.         | 100.00 | 42.62 | 33.09 | 40.85  | 37.31  | 46.90 
|3⁄4      | NASDAQ Composite-Total Returns | 100.00 | 60.02 | 87.25 | 103.09 | 102.27 | 120.40
|p      | NASDAQ OMX Banks Index         | 100.00 | 78.47 | 65.68 | 74.99  | 67.12  | 79.65 



|Notes: | 
|------ | 



| | A. | The lines represent monthly index levels derived from compounded daily returns that include all dividends.
| | -- | ----------------------------------------------------------------------------------------------------------

| | B. | The indexes are reweighted daily, using the market capitalization on the previous trading day.
| | -- | ----------------------------------------------------------------------------------------------

| | C. | If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
| | -- | ---------------------------------------------------------------------------------------------------------------

| | D. | The index level for all series was set to $100.0 on 12/31/2007.
| | -- | ---------------------------------------------------------------











22







| | ITEM 6. | SELECTED
                                                                                               FINANCIAL DATA
| | ------- | ----------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained on pages 7 and 8 of the Company’s Annual Report to Shareholders for the year ended December 31, 2012, is incorporated
herein by reference.



| | ITEM 7. | MANAGEMENT’S
                                                                                               DISCUSSION AND ANALYSIS OF FINANCIAL
                                                                                               CONDITION AND RESULTS OF OPERATIONS
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained on pages 6 through 27 of the Company's Annual Report to Shareholders for the year ended December 31, 2012, is incorporated
herein by reference.



| | ITEM 7A. | QUANTITATIVE
                                                                                                AND QUALITATIVE DISCLOSURES ABOUT
                                                                                                MARKET RISK
| | -------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Not applicable.



| | ITEM 8. | FINANCIAL
                                                                                               STATEMENTS AND SUPPLEMENTARY DATA
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained on pages 29 through 69 of the Company's Annual Report to Shareholders for the year ended December 31, 2012 is incorporated
herein by reference.



| | ITEM 9. | CHANGES
                                                                                               IN AND DISAGREEMENTS WITH ACCOUNTANTS
                                                                                               ON ACCOUNTING AND FINANCIAL DISCLOSURE
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Not applicable.



| | ITEM 9A. | CONTROLS
                                                                                                AND PROCEDURES
| | -------- | -----------------------------------------------------------------------------------------------------------------------



The Company’s principal executive
officer and principal financial officer have concluded, based upon their evaluation of the Company’s disclosure controls
and procedures as of December 31, 2012 that the Company’s disclosure controls and procedures were effective. During the
quarter ended December 31, 2012, no changes have occurred in the Company’s internal control over financial reporting that
have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.



The First Bancshares, Inc.

Management’s Report on Internal
Control Over Financial Reporting



Management of the “Company is responsible
for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally accepted accounting principles.



Under the supervision and with the participation
of management, including the principal executive officer and principal financial officer, the Company conducted an evaluation
of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management
of the Company has concluded the Company maintained effective internal control over financial reporting, as such term is defined
in Securities Exchange Act of 1934 Rules 12a-15(f), as of December 31, 2012.





23







Internal control over financial reporting
cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control
over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely
basis by internal control over financial reporting. These inherent limitations, however, are known features of the financial reporting
process. It is possible, therefore, to design into the process safeguards to reduce, though not eliminate, this risk.





This annual report does not include an
attestation report of the Company’s independent registered public accounting firm regarding internal control over financial
reporting. The Company’s registered public accounting firm was not required to issue an attestation report on internal controls
over financial reporting pursuant to temporary rules of the Securities and Exchange Commission.



|/s/ M. Ray
    (Hoppy) Cole, Jr. |  | /s/  Dee
    Dee Lowery                 
|-------------------------------- |  | ----------------------------------------
|CEO and President                |  | Executive VP and Chief Financial Officer
|March 21, 2013                   |  | March 21, 2013                          





| | ITEM 9B. | OTHER
                                                                                           INFORMATION
| | -------- | ------------------------------------------------------------------------------------------------------------



Not applicable.



PART III



| | ITEM 10. | DIRECTORS, EXECUTIVE OFFICER, AND CORPORATE GOVERNANCE
| | -------- | ------------------------------------------------------



In response to this Item, the information
contained under the captions, “Election of Directors” and “Additional Information Concerning Directors and Officers”
of the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on May 23, 2013, is incorporated herein by
reference.



Code of Ethics



The Company's Board of Directors hasadopted a Code of Ethics that applies to the Company's principal executive officer, principal financial officer, principal
accounting officer, or persons performing similar functions. A copy of this Code of Ethics can be found at the Company's internet
website at www.thefirstbank.com. The Company intends to disclose any amendments to its Code of Ethics, and any waiver from
a provision of the Code of Ethics granted to the Company's principal executive officer, principal financial officer, principal
accounting officer, or persons performing similar functions, on the Company's internet website within five business days following
such amendment or waiver. The information contained on or connected to the Company's internet website is not incorporated by reference
into this Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.



Audit Committee



The information contained under the caption
“Committees of the Board of Directors” of the Company's Proxy Statement for the Annual Meeting of Shareholders to
be held on May 23, 2013, is incorporated herein by reference. The Board of Directors has determined that there is at least one
independent audit committee financial expert, J. Douglas Seidenburg,serving on the Audit Committee,
as the terms independent and audit committee financial expert are used in pertinent NASDAQ listing standards and Securities and
Exchange Commission

regulations.



24







Corporate Governance



The information contained under the caption
“Additional Information Concerning Directors and Officers” of the Company’s Proxy Statement for the Annual Meeting
of Shareholders to be held on May 23, 2013, is incorporated herein by reference.



As a TARP recipient the Company is required
to have an Excessive Expenditure Policy. Such a policy was adopted by the Company’s Board of Directors on July 23, 2009,
and is posted on the Bank’s website at www.thefirstbank.com.



| | ITEM 11. | EXECUTIVE
                                                                                                COMPENSATION
| | -------- | ----------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained under the caption “Compensation Discussion and Analysis” of the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held on May 23, 2013, is incorporated herein by reference.



| | ITEM 12. | SECURITY
                                                                                                OWNERSHIP OF CERTAIN BENEFICIAL
                                                                                                OWNERS AND MANAGEMENTAND RELATED
                                                                                                STOCKHOLDER MATTERS
| | -------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained under the caption “Security Ownership of Certain Beneficial Owners and Management” of the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on May 23, 2013, is incorporated herein by reference.





|Equity Compensation Plan Information                      
|----------------------------------------------------------
|Plan category                                             
|Equity compensation plans approved by security holders    
|Equity compensation plans not approved by security holders
|Total                                                     






1As of December 31, 2012 a total of 88,998 restricted stock awards
have been granted under the Company’s 2007 Stock Incentive Plan (“2007 Plan”). A total of 226,002 shares remained
available for issuance as awards under the 2007 Plan. The restricted stock awards are issuable subject to vesting requirements.
No other awards have been made under the 2007 Plan.



| | ITEM 13. | CERTAIN
                                                                                                RELATIONSHIPS AND RELATED TRANSACTIONS
                                                                                                AND DIRECTOR INDEPENDENCE
| | -------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained under the caption “Certain Relationships and Related Transactions” of the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on May 23, 2013, is incorporated herein by reference.



| | ITEM 14. | PRINCIPAL
                                                                                                ACCOUNTANT FEES AND SERVICES
| | -------- | --------------------------------------------------------------------------------------------------------------------------------------



In response to this Item, the information
contained under the caption “Principal Accountant Fees and Services” of the Company’s Proxy Statement for the
Annual meeting of Shareholders to be held on May 23, 2013, is incorporated herein by reference.





25







PART IV



| | ITEM 15. | EXHIBITS
                                                                                                AND FINANCIAL STATEMENT SCHEDULES
| | -------- | ------------------------------------------------------------------------------------------------------------------------------------------



The following exhibits are furnished (or
incorporated by reference):



|Exhibit
    Number |  | Description                                                                                                                                                                                                                                   
|------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                   |  |                                                                                                                                                                                                                                               
|3.1                |  | Restated Articles of Incorporation (incorporated by reference to Exhibit 3.2 filed with Form 8-K with the Commission on March
21, 2013).                                                                                                      
|                   |  |                                                                                                                                                                                                                                               
|3.2                |  | Bylaws (incorporated by reference to Exhibit 3.2 to the Company's
    Registration Statement No. 33-94288 on Form S-1).                                                                                                                       
|                   |  |                                                                                                                                                                                                                                               
|3.3                |  | Articles of Amendment Containing Certificate of Designations
    for the Fixed Rate Cumulative Perpetual Preferred Stock, Series CD (incorporated by reference to Exhibit 3.1 filed with Form
    8-K with the Commission on October 4, 2010).
|                   |  |                                                                                                                                                                                                                                               

|4.1  |  | Provisions in the Company's Articles of Incorporation
    and Bylaws defining the rights of holders of the Company's Common Stock (incorporated by reference to Exhibit 4.1 to the Company's
    Registration Statement No. 33-94288 on Form S-1).                                                                            
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                               
|4.2  |  | Form of Certificate of Common Stock (incorporated by reference
    to Exhibit 4.2 to the Company's Registration Statement No. 33-94288 on Form S-1).                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                                                                               
|10.1 |  | Purchase Letter Agreement dated February 6, 2009 between The First Bancshares and the United States Department of the Treasury,
including the Standard Terms, with respect to the issuance of the CPP Preferred Stock. (incorporated by reference to Exhibit
10.1 filed with Form 8-K with the Commission on October 4, 2010).



|10.2 |  | Exchange Letter Agreement dated September 29, 2010 between The First Bancshares and the United States Department of the Treasury,
including the Standard Terms, with respect to the exchange of the CDCI Preferred Stock. (incorporated by reference to Exhibit
10.2 filed with Form 8-K with the Commission on October 4, 2010).
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                  
|10.5 |  | Employment Agreement dated May 31, 2011, between The First, A National Banking Association and M. Ray Cole, Jr. (incorporated
by reference to Exhibit 10.5 of the Company's Form 10-K for the fiscal year ended December 31, 2011, filed on March 29, 2012,
File No. 000-22507).                                                 
|     |  |                                                                                                                                                                                                                                                                                                                                  
|10.6 |  | First Bancshares, Inc. 1997 Stock Option Plan as of March
    18, 1997 (incorporated by reference to Exhibit 10.7 of the Company's Form 10-KSB for the fiscal year ended December 31, 1996,
    File No. 33-94288).                                                                                                              
|     |  |                                                                                                                                                                                                                                                                                                                                  
|10.7 |  | Agreement to Repurchase Stock by and among The First Bancshares,
    Inc., Nick Welch and David Johnson  (incorporated by reference to Exhibit 10.9 to the Company's Registration Statement
    No. 333-102908 on Form S-2).                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                  
|10.8 |  | The First Bancshares, Inc. 2007 Stock Incentive Plan (incorporated  by
    reference to Exhibit 4.3 to the Company’s Registration Statement No. 171996 on Form S-8)                                                                                                                                                              
|     |  |                                                                                                                                                                                                                                                                                                                                  
|13   |  | The Company's 2012 Annual Report                                                                                                                                                                                                                                                                                                 
|     |  |                                                                                                                                                                                                                                                                                                                                  
|21   |  | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                  
|23   |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                         
|     |  |                                                                                                                                                                                                                                                                                                                                  
|31   |  | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                                                                                                                          
|     |  |                                                                                                                                                                                                                                                                                                                                  
|32   |  | Section 1350 Certifications                                                                                                                                                                                                                                                                                                      
|     |  |                                                                                                                                                                                                                                                                                                                                  
|99.1 |  | EESA Certification of CEO                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                  
|99.2 |  | EESA Certification of CFO                                                                                                                                                                                                                                                                                                        



26







SIGNATURES



In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                   |  |     | THE FIRST BANCSHARES, INC.                                             
|------------------ |  | --- | -----------------------------------------------------------------------
|                   |  |     |                                                                        
|Date: May 23, 2013 |  | By: | /s/
    M. Ray (Hoppy) Cole, Jr.                                       
|                   |  |     | M. Ray (Hoppy) Cole, Jr.                                               
|                   |  |     | Chief Executive Officer and President
    (Principal Executive Officer)
|                   |  |     |                                                                        
|Date: May 23, 2013 |  | By: | /s/
    Dee Dee Lowery                                                 
|                   |  |     | Dee Dee Lowery                                                         
|                   |  |     | Executive VP and Chief Financial Officer                               
|                   |  |     | (Principal Financial and Principal
    Accounting Officer)             



In accordance with the Exchange Act, this
report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|SIGNATURES                   |  | CAPACITIES                             |  | DATE        
|---------------------------- |  | -------------------------------------- |  | ------------
|                             |  |                                        |  |             
|/s/
    E. Ricky Gibson      |  | Director and Chairman of the Board     |  | May 23, 2013
|/s/ Charles R. Lightsey      |  | Director                               |  | May 23, 2013
|/s/ J. Douglas Seidenburg    |  | Director                               |  | May 23, 2013
|/s/ Andy Stetelman           |  | Director                               |  | May 23, 2013
|/s/ David W. Bomboy          |  | Director                               |  | May 23, 2013
|/s/ Ted E. Parker            |  | Director                               |  | May 23, 2013
|/s/ Michael W. Chancellor    |  | Director                               |  | May 23, 2013
|/s/ Fred McMurry             |  | Director                               |  | May 23, 2013
|/s/ Gregory Mitchell         |  | Director                               |  | May 23, 2013
|/s/ M. Ray (Hoppy) Cole,
Jr. |  | CEO, President and Director            |  | May 23, 2013
|                             |  | (Principal Executive Officer)          |  |             
|/s/ Dee Dee Lowery           |  | Executive VP & Chief Financial Officer |  |             
|                             |  | (Principal Financial and               |  |             
|                             |  | Accounting Officer)                    |  | May 23, 2013



27