2015 ANNUAL REPORT
Strength & Earnings Power
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www.fgb.net
Our Mission
The mission of First Guaranty Bank and First Guaranty Bancshares, Inc.
is to increase shareholder value while providing financial services for and
contributing to the growth and welfare of the communities we serve.
First Guaranty Bank
Banking Centers
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Our Values & Goals
Customers. We believe that every customer is our most important customer.
We endeavor to provide levels of service that exceed their expectations.
Employees. We believe that our employees are our greatest asset as
demonstrated in their professionalism and dedication. We encourage open
communication and strive to cultivate an entrepreneurial environment
in which our employees feel highly responsible for the performance of the
Company. We believe in an environment where they will contribute new
ideas and innovations that will help both us and them excel.
Shareholders. We seek to enhance shareholder value by continually
improving the quality of assets, growth in earnings, return on equity and
dividend payout.
Community. We strive to be a socially responsible corporate citizen by
supporting community activities and encouraging employees to be actively
involved in our communities. We are committed to the success of the
communities that we serve, the same communities our employees call home.
Our goals is to participate in making our communities better places in which
to live, work and play.
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1. Vivian
2. Oil City
3. Benton
4. Haynesville
5. Homer
6. Dubach
7. Jennings
8. Abbeville
9. Greensburg
10. Montpelier
11. Watson
12. Denham Springs
13. Walker
14. Kentwood West
15. Kentwood
16. Amite
17. Independence
18. Main Office
19. Guaranty West
20. Ponchatoula
21. Berryland
Service 24 ATM Locations
SOUTH LOUISIANA
Abbeville, LA
799 West Summers Drive
Amite, LA
100 East Oak Street
1014 West Oak Street
Denham Springs, LA
2231 South Range Avenue
Greensburg
6151 Hwy. 10
Hammond, LA
1201 West University Avenue
2111 West Thomas Street
400 East Thomas
North Oaks Medical Center –
4 Medical Center Drive
North Oaks Rehabilitation Center –
1900 South Morrison Boulevard
105 Berryland Shopping Center
Independence, LA
455 Railroad Avenue
Jennings, LA
500 North Cary
Kentwood, LA
723 Avenue G
Livingston, LA
(LPMC) Livingston Parish
Medical Center
17199 Spring Ranch Rd.
Loranger, LA
19518 Highway 40
Montpelier
35651 Hwy. 16
Ponchatoula, LA*
500 W. Pine St.
Robert, LA
Robert’s Supermarket -
22628 Highway 190
Walker, LA
29815 Walker Road South
Watson
33818 Hwy. 16
NORTH LOUISIANA
Benton, LA
189 Burt Boulevard
Dubach, LA
117 East Hico Street
Haynesville, LA
10065 Highway 79
Homer, LA
Homer Memorial Hospital
401 North 2nd Street
Oil City, LA
126 South Highway 1
Vivian, LA
102 East Louisiana Avenue
*The Ponchatoula branch at 195 N.
6th St. closed on March 7, 2016 and
is relocated at 500 West Pine Street,
Ponchatoula, LA 70454.
1049205512
Table of Contents
Our Mission and Our Goals ........................................................................................................ Inside Front Cover
Financial Snapshot ......................................................................................................................................................2
Strength & Earnings Power ........................................................................................................................................3
Letter from the Chairman, Marshall T. Reynolds ....................................................................................................5
Letter from the Chief Executive Officer & President, Alton B. Lewis ...................................................................6
Report from the Chief Financial Officer, Eric J. Dosch ...........................................................................................7
Report from Senior Vice President, Glenn A. Duhon, Sr. ......................................................................................8
First Guaranty Board of Directors .............................................................................................................................9
First Guaranty Advisory Board ................................................................................................................................10
First Guaranty Bank Officers ....................................................................................................................................11
Performance Graphs ..................................................................................................................................................12
First Guaranty Bank Banking Centers Total Deposits ..........................................................................................15
Ponchatoula Banking Center Grand Opening .......................................................................................................16
First Guaranty Bank Banking Centers .....................................................................................................................18
Community Commitment ........................................................................................................................................36
Strength & Earnings Power .......................................................................................................................................45
Banks Headquartered in Louisiana ..........................................................................................................................46
Financial Table of Contents........................................................................................................................................47
Market for Registrant's Common Equity ..............................................................................................................113
Corporate Information ............................................................................................................................................114
First Guaranty Bank Banking Centers Map and Service 24 ATM Locations ........................... Inside Back Cover
Visit www.fgb.net for additional information.
Follow us on Facebook, Twitter and LinkedIn.
www.facebook.com/FirstGuarantyBank
twitter.com/FGBank
www.linkedin.com/in/firstguarantybank/en
1
2015 ANNUAL REPORT Financial Snapshot
Book Value Growth Per One 1993 Share[1]
(per common share)
Cash Dividends on Common Stock
(In thousands)
40
35
30
25
20
15
10
5
0
5000
4000
3000
2000
1000
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1993
1994
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1998
1999
2000
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2002
2003
2004
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2006
2007
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2009
2010
2011
2012
2013
2014
2015
Book Value per one 1993 share has increased
from $4.49 to $37.61 since 1993.
First Guaranty has paid $56.8 million in
Cash Dividends to common shareholders since 1993.
Dividends Per One 1993 Common Share [2]
First Guaranty Bancshares, Inc.
As of December 31, 2015, total assets were $1.5
billion, net income was $14.5 million, earnings per
common share were $2.01 and tangible book value
per share was $15.10. Return on average assets was
0.97% and return average common equity was
12.98% for 2015. In November 2015, the Company
completed a public offering of 626,560 shares of
its common stock, par value $1.00 per share, at a
public offering price of $18.50 per share for net
proceeds of $9.3 million. Concurrent with the
completion of the offering, the Company's shares
began to trade on the Nasdaq Global Market.
Following the completion of the offering, the
Company declared a 10% stock dividend. First
Guaranty Bancshares, Inc. also paid a quarterly
dividend for 90 consecutive quarters at December
31, 2015. Our commitment to customer service,
combined with the hard work of our employees,
is the foundation of our strength and earnings
power. The Company emphasizes value to best
serve the interests of our shareholders, customers,
communities we serve and employees.
2
2.0
1.5
1.0
0.5
0.0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2007
2008
2009
2010
2011
2012
2013
2014
2015
[1] Book value has been adjusted for cumulative stock splits and dividend of 2.42 times since 1993.
[2] Cash dividends from the perspective of one original share of common stock from 1993 to present, this considers
the impact of stock splits and stock dividends
Profile
First Guaranty Bancshares, Inc. is the holding company of First Guaranty
Bank, which it wholly owns. The Bank is a full-service financial institution
with a major presence throughout Louisiana and serves customers from its
21 banking center locations. Headquartered in Hammond, Louisiana, the
Company had 277 employees as of December 31, 2015.
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. STRENGTH & EARNINGS POWER
❝The real source of strength in any type of enterprise is
the people. First Guaranty Bank is blessed with a Board of
Directors that are committed, knowledgeable, and diverse.
The staff of First Guaranty Bank are good people who are
loyal, competent, and committed to working together for
success. The shareholders, customers, and citizens of First
Guaranty Bank communities are solid, hardworking people
trying to improve their lives and the lives of those around
them. All of these people, together, are the source of the
strength which will make First Guaranty Bank continue to
be profitable and successful.❞
– President and CEO, Alton B. Lewis
FIRST GUARANTY BANCSHARES, INC. gained strength
and earnings power in 2015. We increased our capital, grew
the loan portfolio to a record level, improved our products and
services, and expanded our infrastructure. We continued our
focus on controlling expenses and efficiently delivering quality
customer service. This increased strength translated into 2015
earnings that were 30% higher than 2014.
The effort to increase the bank’s strength and earnings power
can be found in many areas of the bank. Each day our employees
work hard to strengthen relationships with customers and co-
workers, to strengthen their knowledge, and to strengthen the
brand of the bank. By streamlining processes and being more
efficient with time, employees continue to contribute to the
overall success of First Guaranty.
The board room is another area where strength can be found.
Covered with banners, the First Guaranty board room walls tell
the tale of our bank’s performance. At every meeting, members
of the board and management are reminded of where First
Guaranty stands in relation to key metrics such as book value
per share, deposit market data, asset quality, net interest margin,
efficiency and profitability. Maximizing these ratios is key to
achieving our goal of strengthening the bank and increasing our
earnings power.
2015 Accomplishments and Highlights
1. Total 2015 Earnings to Common Shareholders of
$14.1 million. Increase of 30% from $10.8 million
in 2014.
2. Completed our capital raise. First Guaranty is now
traded on the NASDAQ exchange under the
symbol FGBI.
3. Redeemed $39.4 million in preferred stock issued to
the U.S. Treasury under the SBLF program.
4. Declared a 10% common stock dividend.
5. Paid our 90th consecutive quarterly cash dividend.
$56.8 million in dividends to common shareholders
have been paid since 1993.
6. First Guaranty contributed $429,000 to our local
communities in 2015.
7. Created the Access Account which allows
more customers the financial freedom of a
checking account.
8. Rolled out our first live Interactive Banker Machine in
our Main Office branch.
9. Set a record in our lending portfolio of $842 million
in loans outstanding at year end.
3
2015 ANNUAL REPORT We Are Strength & Earnings Power
FGBI
For First Guaranty Bancshares, Inc., our capital raise and public listing on NASDAQ represents an opportunity for investment, new
investors, expanded name recognition and increased liquidity in our stock.
A public listing on NASDAQ in November was a milestone for
First Guaranty.
Lending didn't slow up in 2015 – we expanded our portfolio and
hit record highs.
Progress with technology was evident in 2015 as we rolled out our
first ever Live Interactive Banker, MiBY. Met MiBY?
The Access Account was introduced in 2015. This account has been
a success as it allows more customers the opportunity to have a
checking account.
In 2015, First Guaranty continued to give back to the community
with our new initiative FGB Gives Back.
4
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Marshall T. Reynolds
Chairman of the Board
Letter from the Chairman
FIRST GUARANTY BANCSHARES, INC.
Dear Fellow Shareholder:
If you have read our President’s letter, you are aware of a multiplicity of good
things that inured to our benefit during 2015. I would like to expand on two of
those items.
FGBI made $14.1 million during the year. We paid $4.2 million in dividends
and increased retained earnings by $9.9 million. This $9.9 million represents
approximately a 10% addition to core capital. If we earn 10% return on equity,
that should push next year’s earnings up about 10% or an additional million
dollars. I believe you can see the spiraling effect of these types of results.
First and foremost, I want to address the human (people) side of the bank.
President Lewis has been in this position for about seven years. During this
time we have made tremendous progress addressing our legacy problems.
He has built a strong management organization with several excellent young
managers and loan officers.
Inside ownership and individual involvement have increased tremendously
during the last two years. Longtime directors Hood and Smith have stepped
up and bought significant numbers of shares. I mean three and four times
what they previously owned and they were substantial then. These are two very
astute business men in my opinion. Could you go wrong following their lead?
Probably not! In addition, I want all of my fellow shareholders to know that
I have never sold one share of stock. Like Misters Hood and Smith, I believe
this bank has a great future with this management team. Other board members
have also stepped up and bought additional stock.
Sincerely,
Marshall T. Reynolds
Chairman of the Board
FIRST GUARANTY BANCSHARES, INC.
Chairman of the Board
FIRST GUARANTY BANK
5
2015 ANNUAL REPORT Letter from the Chief Executive Office & President
In 2015, we successfully transitioned out of the US Treasury
Small Business Loan Fund while maintaining our capital levels
at First Guaranty Bank.
In 2015, we significantly enhanced our management structure
with the addition of a highly qualified Chief Information
Officer.
In 2015, we constructed our new Ponchatoula branch
incorporating leading edge technology in the form of
Interactive Teller machines with conventional customer
service and teller service so that we satisfy the needs of our
entire spectrum of customers.
The best part of 2015 is how it positioned us for the future.
We have increased our strength so that we will be able
to continue to move forward and grow and expand. Our
lending corp has grown stronger and better trained and has
outstanding leadership so that we can continue to grow our
loan portfolio. Our Board and Management team are stronger.
We can continue our growth and expansion while increasing
profitability.
We have come a long way; however, we have not achieved our
ultimate goals. We will continue to strive to maximize our
shareholder value.
Thank you for your investment in First Guaranty Bancshares,
Inc. and for your continued support.
If you have any questions about our financial position or any
of the information presented in this report, please contact me
directly at (985) 375-0350.
Sincerely,
Alton B. Lewis
Vice Chairman of the Board and Chief Executive Officer/President
FIRST GUARANTY BANCSHARES, INC.
Vice Chairman of the Board and Chief Executive Officer/President
FIRST GUARANTY BANK
Alton B. Lewis
Chief Executive Officer & President
Dear Shareholders,
Earnings translate into capital. Capital is strength. In 2015,
First Guaranty Bancshares, Inc. accomplished many significant
objectives. Perhaps the most significant was the 30.4% increase
in income available to common shareholders to $14,121,000 for
the year ending December 31, 2015 compared to $10,830,000
for the year ending December 31, 2014. Of the $14,121,000
in income available to common shareholders, $4,247,000 was
paid to our shareholders as dividends and $9,874,000 remained
in First Guaranty Bancshares, Inc. as capital. Our shareholders
benefited both through direct income to them as shareholders
and increased value in their investment in First Guaranty
Bancshares, Inc. as Book value as of December 31, 2015 rose
to $15.54 from $14.47 as of December 31, 2014 and tangible
bank value was $15.10 as of December 31, 2015 compared to
$13.95 on December 31, 2014. This increase in earnings and
capital was a result of increase in interest income due to a
$51 million increase in our loan portfolio plus a decrease in
interest expense, plus an increase in non-interest income due
primarily to significant gains on securities, and a decrease in
non-interest expense. Very simply, we increased our income
and reduced our expenses.
In 2015, we successfully completed our initial public offering and
became listed on the NASDAQ exchange. The public offering
increased our capital by a net of approximately $10 million.
6
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Report from the Chief Financial Officer
Total common shareholder’s equity increased $18.1 million
from $100.1 million in 2014 to $118.2 million in 2015. The
increase in common shareholder’s equity was driven by
an increase in retained earnings and an increase in capital
from the common stock offering. First Guaranty raised $9.3
million in net capital from the common stock offering and
issued 626,560 new shares. Retained earnings increased $8.5
million from $41.4 million in 2014 to $49.9 million in 2015.
Our tangible common equity ratio improved from 6.37% at
December 31, 2014 to 7.89% at December 31, 2015. The loan
loss reserve increased from $9.1 million at 2014 to $9.4 million
at 2015.
Earnings per common share increased 28% from $1.57 in 2014
to $2.01 for 2015. Tangible book value per share increased 8.2%
from $13.95 at December 31, 2014 to $15.10 at December 31,
2015. Return on average assets was 0.97% for 2015 compared
to 0.77% for 2014. The efficiency ratio improved from 62.9% in
2014 to 55.1% in 2015. Return on average common equity was
12.98% in 2015 compared to 11.40% for 2014.
First Guaranty Bancshares paid a total of $4,247,000 in cash
dividends to common shareholders in 2015. The Company has
paid 90 consecutive quarters of dividends as of 12/31/2015.
First Guaranty continues to build strength for the future. Our
common stock is now listed on a national exchange. We have
increased our common capital. First Guaranty continues to
maintain a leading deposit market share in the communities
that we serve. Our continuing investment in the education of
our employees and our planning and reporting systems has
increased productivity. We believe that the combination of
these efforts will lead to a strong and profitable future for First
Guaranty Bancshares, Inc.
Sincerely,
Eric J. Dosch
Chief Financial Officer
FIRST GUARANTY BANCSHARES, INC.
Chief Financial Officer
FIRST GUARANTY BANK
7
Eric J. Dosch
Chief Financial Officer
First Guaranty Bancshares, Inc. continued to gain strength in
2015. We continued our momentum from 2014 as we expanded
our loan portfolio, lowered deposit costs, reduced non-interest
expense and increased earnings. First Guaranty completed a
capital raise and listed our common shares on NASDAQ. We
paid a 10% common stock dividend in December 2015. First
Guaranty also redeemed the $39.4 million of preferred stock
issued to the U.S. Treasury Department for the Small Business
Lending Fund (SBLF) program. We used proceeds from an
attractively priced senior loan and subordinated debt offering
to refinance SBLF. The SBLF preferred stock was scheduled
to increase to a pre-tax rate of over 13.0% in 2016 that was
much higher than the rates we will pay on the senior loan and
subordinated debt.
Loans grew by 6.5% or $51.3 million from $790.3 million in
2014 to $841.6 million in 2015. First Guaranty increased loan
interest income $2.7 million while lowering interest expense
by $0.6 million in 2015. We have continued to execute our plan
of growing loans as a percentage of our balance sheet which
has increased earnings and improved our net interest margin.
Our loan portfolio finished December 31, 2015 at 58% of total
assets, an increase from 52% of total assets at December 31,
2014. Our average loan yield has remained consistently above
5.0% during the last two years. The average loan yield was
5.21% for 2015 compared to 5.47% for 2014. The net interest
margin increased from 3.11% in 2014 to 3.26% in 2015.
2015 ANNUAL REPORT Report from the Senior Vice President
Southwest Louisiana Banking Centers gained “Strength and
Earnings Power” in 2015. Both locations increased in loan
volume, while keeping delinquency at an acceptable level.
Our Jennings office concluded the year with $41.2 million
in deposits compared to $40 million in deposits in 2014.
That location also doubled loan volume, ending 2015 with
$16.8 million as compared to $8 million in 2014. Deposits
decreased at our Abbeville office to $127.7 million as
compared to $145.9 million in 2014, however, loan volume
increased by $22.1 million, ending 2015 with $77.6 million
in total loan volume.
Combined, both locations completed 2015 with $168.9
million in deposits and $94.4 million in loan volume.
The continued success of this region is the result of a
combination of customer loyalty, efficient management,
board of director support and the dedication and tireless
work ethic of our employees.
Sincerely,
Glenn A. Duhon, Sr.
Senior Vice President and Southwest Louisiana Division Manager
FIRST GUARANTY BANK
Glenn A. Duhon, Sr.
Senior Vice President
Southwest Louisiana Division Manager
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Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. First Guaranty Bank
BOARD OF DIRECTORS
Back Row, Left to Right: Dr. Phillip E. Fincher, Robert H. Gabriel, Nancy C. Ribas, Gloria M. Dykes, Marshall T. Reynolds, Edgar R. Smith III, William K.
Hood, Ann A. Smith
Front Row, Left to Right: Anthony J. Berner, Jr., Andrew Gasaway, Jr., Richard W. “Dickie” Sitman, Alton B. Lewis, Edwin L. Hoover, Jr., Charles Brister
Left to Right: Dr. Glenda B. Glover; Daniel F. Packer, Jr. and Morgan S. Nalty
ANTHONY J. BERNER, JR.
President, Pon Food Corporation
EDWIN L. HOOVER, JR.
President, Encore Development Corporation
CHARLES BRISTER
President, Brister’s Consulting and Rentals
GLORIA M. DYKES
Owner, Dykes Beef Farm and
Part Owner, Dykes Feed & Fertilizer, Inc.
DR. PHILLIP E. FINCHER
Retired Economics/Finance Professor
North Louisiana Advisory Board
ROBERT H. GABRIEL
President, Gabriel Building Supply Company
ANDREW GASAWAY, JR.
Secretary to the Board
President, Gasaway-Gasaway-Bankston
Architects
DR. GLENDA B. GLOVER, PH.D., JD, CPA
Chairman, Audit Committee of First Guaranty
Bancshares, Inc.
President, Tennessee State University
WILLIAM K. HOOD
Chairman, Directors Loan Committee and Audit
Committee of First Guaranty Bank
President, Hood Automotive Group
ALTON B. LEWIS
Vice Chairman of the Board and
Chief Executive Officer/President,
First Guaranty Bancshares, Inc.
Vice Chairman of the Board and
Chief Executive Officer/President,
First Guaranty Bank
MORGAN S. NALTY
Investment Banking Executive & Partner,
Johnson, Rice & Company, LLC
DANIEL F. PACKER, JR.
President and Chief Executive Officer,
American Ethane, LLC and
President and Chief Executive Officer,
Urban Dimensions, LLC
MARSHALL T. REYNOLDS
Chairman of the Board,
First Guaranty Bancshares, Inc.
Chairman of the Board,
First Guaranty Bank
Chairman of the Board and Chief Executive
Officer, Champion Industries
NANCY C. RIBAS
Owner/Manager, World Trend Properties
And University Motors
RICHARD W. “DICKIE” SITMAN
Board President Dixie Electric Membership
Corp., (Baton Rouge, Louisiana)
Board Member CoBank ACB, (Denver Colorado)
ANN A. SMITH
Tangipahoa Parish School Board Member
(Former President and Finance Chair)
Board of Supervisors of Southern
University System
EDGAR R. SMITH, III
Chairman and Chief Executive Officer,
Smitty’s Supply, Inc.
Directors Emeritus:
ROBERT H. BEYMER
ROBERT L. SHELL, JR.
9
2015 ANNUAL REPORT First Guaranty Bank
ADVISORY BOARD
Above photo:
Thomas “Tommy” D. Crump, Jr., Gil Dowies, III,
Dr. Phillip E. Fincher, John D. Gladney, M.D.,
Inset photo:
Britt L. Synco
The members of the First Guaranty Bank Advisory
Board include: Thomas D. “Tommy” Crump, Jr.,
Carrell G. “Gil” Dowies, III, Dr. Phillip E. Fincher,
John D. Gladney, M.D. and Britt L. Synco.
These adept gentlemen assist the bank
in
moving forward by sharing their breadth of
experience and providing critical insight into
essential business interests including oil and gas
production, agriculture and forestry. The Advisory
Board works with the Board of Directors and
management to develop lending and marketing
philosophies to best affect First Guaranty Bank.
With wholesale and retail expertise throughout
north Louisiana, this group examines financial
and civic activities.
10
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. First Guaranty
BANK OFFICERS
FIRST GUARANTY BANK
OFFICERS
EXECUTIVE
ALTON B. LEWIS*
President and CEO
Guaranty Square
ERIC J. DOSCH *
Chief Financial Officer
Guaranty Square
Senior Vice Presidents
GLENN A. DUHON, SR.
Regional Manager, Abbeville
MICHAEL F. LOFASO
Regional Manager, Ponchatoula
J. RICHARD STARK
Operations
CHRISTY L. WELLS
Regional Manager
Hammond
Controller
ERIC M. FULLER
*Officers of both First Guaranty Bank
and First Guaranty Bancshares, Inc.
Vice Presidents
Assistant Vice Presidents
EDWARD P. BERTONIERE
JAMES M. BAXTER
THOMAS F. BROTHERS
CHERYL Q. BRUMFIELD
LANCE S. DAVIS
TERI L. DUNCAN
KIMBERLY D. CAMAILLE
HARRISON R. GILL
ROBERT E. DOUCETTE, CIO
JOYCE N. GLASS
COLLEEN B. EBARB
LUDRICK P. HIDALGO
RONALD W. EDMONDS
SHIRLEY P. JONES
DENISE D. FLETCHER
MICHAEL D. KNIGHTEN
RONALD R. FOSHEE
ADAM J. JOHNSTON
MIKKI M. KELLEY
BERNADETTE Z. KEMP
RONALD C. PITTMAN
SCOTT B. SCHILLING
DESIREE B. SIMMONS
EVAN M. SINGER, BSA Officer
RANDY S. VICKNAIR, Chief
Credit Officer
CHRISTOPHER W. MCGHEE
ROBERT M. MIZELL
MICHAEL A. MOSBEY
D. LYNN TALLEY
KRISTINA E. TERRY
Officers
REBECCA G. BROWN
LAURYN H. COBURN
VANESSA R. DREW
JEANNETTE N. ERNST
DIANE PATTERSON
CRAIG E. SCELFO
KRISTIN M. WILLIAMS
11
2015 ANNUAL REPORT Tangible Common Equity [3]
(in thousands)
Tangible Common Equity
(in thousands)
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$ 9,005
$10,071
$11,477
$13,485
$15,414
$17,376
$21,564
$26,786
$35,709
$37,964
$43,557
$50,095
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$53,671
$59,060
$62,061
$61,429
$70,273
$73,424
$82,560
$90,490
$80,033
$96,531
$114,927
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Tangible Common Equity has increased
$105.9 million since 1993.
Total Assets
(in thousands)
Total Assets
(in millions)
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$159
$168
$184
$198
$224
$245
$522
$475
$431
$435
$485
$607
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$714
$715
$808
$871
$931
$1,133
$1,354
$1,407
$1,436
$1,519
$1,460
First Guaranty Assets
have increased
818% since 1993.
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
120000
100000
80000
60000
40000
20000
0
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
12
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Net Income
(in millions)
Net Income
(in millions)
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$2.1
$1.7
$2.1
$3.3
$3.4
$3.7
$2.9
$4.4
$6.0
$3.5
$7.0
$8.6
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$6.0
$8.4
$9.8
$5.5
$7.6
$10.0
$8.0
$12.1
$9.1
$11.2
$14.5
15
12
9
6
3
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Total Deposits
(in millions)
Total Deposits
(in millions)
1500
1200
900
600
300
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$149
$154
$168
$179
$223
$257
$461
$410
$358
$361
$376
$481
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$633
$626
$723
$780
$800
$1,007
$1,207
$1,252
$1,303
$1,372
$1,296
13
2015 ANNUAL REPORT Loans, Net of Unearned Income [4]
(in millions)
Loans, net of unearned income
(in millions)
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$105
$114
$118
$126
$155
$177
$263
$309
$340
$354
$381
$456
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$492
$507
$575
$606
$590
$576
$573
$630
$703
$790
$842
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Investments [5]
(in millions)
Investments
(in millions)
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
$30
$32
$35
$50
$67
$73
$212
$117
$57
$35
$59
$107
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$175
$158
$142
$139
$262
$482
$633
$659
$635
$642
$546
1000
800
600
400
200
0
800
700
600
500
400
300
200
100
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
[3]Tangible common equity as total shareholders’ equity less preferred stock, goodwill and acquisition
intangibles, principally core deposit intangibles, net of accumulated amortization.
[4] Includes loans held for sale
[5] Available for sale securities at fair value, held to maturity at amortized cost
14
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. 11
2
3
4
5
6
7
8
*Kentwood West is included in the
Kentwood data and Berryland is
included with Ponchatoula data.
Total Deposits
In millions
1. Vivian
2. Oil City
3. Benton
4. Haynesville
5. Homer
6. Dubach
7. Jennings
8. Abbeville
9. Greensburg
10. Montpelier
11. Watson
2015
2014
$ 43
$42
19
25
102
101
17
19
52
62
30
30
41
40
128
146
45
43
7
6
6
6
12. Denham Springs
117
126
13. Walker
14. Kentwood*
15. Amite
86
88
33
37
122
125
16. Independence
25
27
17. Main Office
324
331
18. Guaranty West
34
34
19. Ponchatoula*
82
84
TOTAL
$1,313 $1,372
14
15
16
17
18
9
10
11
12 13
19
15
2015 ANNUAL REPORT 1049205512
Ponchatoula Banking Center
GROUND BREAKING
Alton B. Lewis and Mayor Robert “Bob” Zabbia of
Ponchatoula breaking ground on First Guaranty
Bank’s newest Banking Center.
Director Ed Hoover shares his enthusiasm
during the groundbreaking.
First Guaranty Directors at Ponchatoula Banking
Center Groundbreaking
Left to right: William K. Hood, Andrew Gasaway,
Jr., Nancy C. Ribas, Edwin L. Hoover, Jr., Alton
B. Lewis, Richard W. “Dickie” Sitman, Anthony J.
Berner, Jr., Robert H. Gabriel
Mike Lofaso and Denise Fletcher participate in
the groundbreaking.
16
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Ponchatoula Banking Center
G RAND OPENING CELEBRATIO N
Back Row, Left to Right: Chris Bankston, Kim Zabbia, Michelle Juneau, Chuck Brister, Ed Hoover, Alton B. Lewis,
Joseph Cross, Eric Dosch, Kathleen Elstrott, Chief of Police Bry Laryrisson
Front Row, Left to Right: Bob Gabriel, Andew Gasaway, Jeanette Gasaway, Mayor Bob Zabbia, Mike Lofaso,
Denise Fletcher, Judge Grace Gasaway, Lauren Fannaly, Tony Sparacello
17
2015 ANNUAL REPORT Abbeville Banking Center
(337) 893-1777
799 West Summers Drive
Abbeville, LA 70510
Back Row, Left to Right: Gretchen Meaux, Diane Frederick, Glenn Duhon
Middle Row, Left to Right: April Frederick, Tanya Menard, Lisa Kritzer
Front Row, Left to Right: Amy Broussard, Charisse Stevens
Amite Banking Center
(985) 748-5111
100 East Oak Street
Amite, LA 70422
Back Row, Left to Right: Shakayla Moore, Suzette Brooks, Susie Smith, Mindy Fitch,
Jenny Sue Weedman, Betty Jo Whiddon, Stephanie Campo
Middle Row, Left to Right: Tamara Neil, Scott Schilling, Lacey Venable
Front Row, Left to Right: Brittani Ragusa, Marsha Spring
18
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Benton Banking Center
(318) 965-2221
189 Burt Boulevard
Benton, LA 71006
Back Row: Adam Johnston
Middle Row, Left to Right: Rhonda Beavers, Joedi Snipes
Front Row, Left to Right: Marcus Rounds, Colette Morehead, Donna Cummings
Not Pictured: Ellen Buskey, Monique Pruitt, Davena McMillian, Anthony Hughes
Denham Springs Banking Center
(225) 791-7964
2231 South Range Avenue
Denham Springs, LA 70726
Back Row, Left to Right: Ronnie Foshee, Lisa Thompson, Kevin Foster, Sharon Moore,
Ludrick Hidalgo
Front Row, Left to Right: Kendra Fairburn, Michelle Gehling, Danna Jo Erwin,
Meghan Alonzo, Kathie Alimia
19
2015 ANNUAL REPORT
Dubach Banking Center
(318) 777-3461
117 East Hico Street
Dubach, LA 71235
Greensburg Banking Center
(225) 222-6101
6151 Highway 10
Greensburg, LA 70441
Left to Right: Mic Baxter, Laurie Traylor, Lynnell Kimble, Sue Yates, Josie Tubbs,
Heather Croxton
Not Pictured: Amber Urrey, Diane Shoemaker, Kristy Puckett
Back Row, Left to Right: Evan Singer, Phylicia Vernon, April Morrison, Paula McNabb,
Michelle Brasseaux
Front Row, Left to Right: Terbo Posey, Kaycee Bridges, Harrison Gill, Rhonda Miller
Not Pictured: Melissa Smith
20
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC.
Guaranty Square
(985) 375-0300 / (985) 345-7685
(888) 375-3093
400 East Thomas Street
Hammond, LA 70401
APPRAISAL REVIEW
Back Row: Kristina Terry
Front Row, Left to Right: Shannon Smith, Steven Wood
HUMAN RESOURCES
Back Row, Left to Right: Shelley Taylor, Chantelle Starkey, Mandi Bankston
Front Row, Left to Right: Landa Domangue, Mikki Kelley
21
2015 ANNUAL REPORT COLLATERAL
CUSTOMER SUPPORT CENTER
Back Row, Left to Right: Cate Sirghi, TJ Songy, Lauryn Coburn
Front Row, Left to Right: LaQuita Johnson, Jeannette Ernst,
Sharon Compton
Back Row, Left to Right: Moises Rodriguez, Melanie Dalmado,
Danyelle Green, Olivia Pevey
Front Row, Left to Right: Sharon Rogers, Davon Mitchell,
Sharmaine Robertson
Not Pictured: Christina Foster, Pamela Stafford
CASH MANAGEMENT
Vikki Dupaquier
Miranda Derveloy
Hannah Winget
DEPOSIT OPERATIONS
Back Row, Left to Right: Amy Neal, Kimberley Fletcher, Lori Lloyd, Shirley Jones
Front Row, Left to Right: Divetta Stallworth, Sandra Edwards, Tammy Graves
22
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC.
FINANCE
Back Row, Left to Right: Eric Fuller, Eric Dosch, Anna Cusick, Tarez Cowsar, Michael Moye
Front Row, Left to Right: Karen Gregory, Diane Patterson, Diane Lanier, Donna Scamardo, Philip Qualls, Katherine Campbell
CREDIT
Back Row, Left to Right: Brandon Daniels, Randy Vicknair, Louis Cusimano, Abiola Oke, Monica Crane,
Colton McDaniel
Front Row, Left to Right: Dev Patel, Jessica Hrenyk, Silvia Rodriguez, Emily Creech, Suraj Pathak,
Ellen Wang, Melanie Gottschalck
23
2015 ANNUAL REPORT INFORMATION TECHNOLOGY
Back Row, Left to Right: Dameon Bickham, Keith
Mills, Gary Bouffard, Tom Hibbs, Kyle Herndon
Middle Row, Left to Right: David Couvillon,
John Farrell, Hector Garcia
Front Row, Left to Right: Craig Rachel, Bob
Doucette, Star Lala
COMMUNITY RELATIONS
Bernadette Kemp
24
LENDING
Back Row, Left to Right: Craig Scelfo, Jane Wear, Christy Wells, Michael Knighten
Front Row, Left to Right: Tracy Nelson, Catherine Egnew, Vickie Jenkins
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. LOAN OPERATIONS
Back Row, Left to Right: Laura Ard, Bonnie Garcia, Amanda Rodriguez, Lynn Talley, Amy Fabre, Stacy Penalber
Front Row, Left to Right: Audrey Carter, Star Spriggs, Steven Hathorn, Donna Hodges, Kellie Weisler
PURCHASING & DOCUMENT SECURITY
Back Row, Left to Right: Robert Mizell, Joseph Ernest
Front Row: Teresa Wempren
MORTGAGE
Back Row, Left to Right: Kimberly Duckworth Camaille, Tonya Messa, Tanja Wadsworth,
Ryan Starns
Front Row, Left to Right: Amy Hopson, Mandy Lee, Michele Graham, Lisa Holmes
25
2015 ANNUAL REPORT MAIN OFFICE BANKING CENTER STAFF
Back Row, Left to Right: BreAnna Sadowsky, Chandra McKinney, Shelbi Rayborn, Shawnta Henderson
Front Row, Left to Right: Glenda Saucier, Linda Miller, Ashleigh Duroncelet
Not Pictured: Giselle Leonard, Nydoria Jones, Latoya Williams, Molly Ducote, Lashabria Reed-Dantzler
OPERATIONS
Back Row, Left to Right: Brittany Harness, Christe Feimster, Elisa Costanza,
Desiree Theall, Tracey Robertson
MARKETING
Back Row, Left to Right: April Alford, Desiree Simmons
Front Row, Left to Right: Richard Stark, Carla McManus, Teri Duncan
Front Row: Kelly Field
Not Pictured: Lucille Conner, Deborah Dubuisson
26
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. COMPLIANCE
Back Row: Colleen Ebarb
Front Row, Left to Right: Debbie Penton, Becky Brown
BSA/FRAUD
Back Row: Evan Singer
Front Row, Left to Right: JoEllen Juhasz, Casey Turner
TRAINING
Back Row, Left to Right: Shanon Dunn, Danielle Willie
Front Row, Left to Right: Danyelle Horton, Vikki Dupaquier
AUDIT
Back Row, Left to Right: Michael Mosbey, Thomas Brothers, Jason McKenzie
Front Row, Left to Right: Jordan Cormier, Nancy Rodriguez, Michelle Dionne,
Lana Quinn
27
2015 ANNUAL REPORT LOAN REVIEW
Left to Right: Bill Worthy, Chris McGhee
SPECIAL ASSETS
Back Row, Left to Right: Luke Hammonds, Ronnie Pittman
Front Row, Left to Right: Kriss Patterson, LeeAnn Silbey
EXECUTIVE
Back Row: Alton B. Lewis
Front Row, Left to Right: Casie Navarre, Kristin Williams, Vanessa Drew
28
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Hammond – Guaranty West Banking Center
(985) 375-0371
2111 West Thomas Street
Hammond, LA 70401
Back Row, Left to Right: Tyjia Ard, Arielle Adkins, Tae Anderson, Nicole Conger,
Jerika Williams
Front Row, Left to Right: Lindsey Wright, Shari Wheeler, Stacy Williams, Connie Miller,
Briana Johnson
Haynesville Banking Center
(318) 624-1171
10065 Highway 79
Haynesville, LA 70138
Left to Right: Aleshia Lee, Elaine Atencio, Carla Goode
Not Pictured: Tammy Burley
29
2015 ANNUAL REPORT Homer Banking Center
(318) 927-3000
401 North 2nd Street
Homer, LA 71040
Independence Banking Center
(985) 878-6777
455 West Railroad Avenue
Independence, LA 70443
Back Row, Left to Right: Candie White, Ron Edmonds, Tracy Perry
Front Row, Left to Right: Dot Frazier, Hannah Winget, Jamie Williams, Tina Dickerson,
Sara Pennington, Kitsha Ridley
Not Pictured: Chelsea Kleinman
Back Row, Left to Right: Carmella Coslan, Megan Mackles, Ashley Addison, Karen Paille,
Pamela Brazil
Front Row, Left to Right: Andrea James, Richard Hamilton, Cheryl Brumfield
30
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Jennings Banking Center
(337) 824-1712
500 North Cary
Jennings, LA 70546
Kentwood Banking Center
(985) 229-3361
301 Avenue F
Kentwood, LA 70444
Left to Right: Gwendolyn Pete, Mona Fontenot, Darrell Bruchhaus, Amber Dupre,
Trisha Patterson
Back Row, Left to Right: Lindsey George, Angie Lott, Kelly Wall, Lisa Rushing, Connie Butler,
Lance Davis
Front Row, Left to Right: M’Kayla Saizan, Patsy Meyer, Alma Thomas, Tammy Carraway
31
2015 ANNUAL REPORT Kentwood West
(985) 229-6101
723 Avenue G
Kentwood, LA 70444
Montpelier Banking Center
(225) 777-4304
35651 Highway 16
Montpelier, LA 70422
Left to Right: Megan Roberts, Brittany Graham, Ruby Carter
Left to Right: Trella Page, Betsy Ehret, Elizabeth Zito
32
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Oil City Banking Center
(318) 995-6682
126 South Highway 1
Oil City, LA 71061
Ponchatoula Banking Center
(985) 386-2000
500 West Pine Street
Ponchatoula, LA 70454
Back Row, Left to Right: Adam Johnston, Terri Brown
Front Row, Left to Right: Serita Wright, Andie Bruno, Latoya McFarland, Mary Casey
Not Pictured: Toni Harris
Back Row, Left to Right: Kristy Petit, Amiee Gervais, Brandon Wear
Middle Row, Left to Right: Mike Lofaso, Renee Rhody, Kay Crocken
Front Row, Left to Right: Katherine Aylor, Denise Fletcher
Not Pictured: Holly Mulkey
33
2015 ANNUAL REPORT Ponchatoula-Berryland Banking Center
(985) 386-5430
105 Berryland Shopping Center
Ponchatoula, LA 70454
Vivian Banking Center
(318) 375-3202
102 East Louisiana Avenue
Vivian, LA 71082
Left to Right: Ashley Hart, Cassandra Brumfield
Not Pictured: Tyvon Adams
Back Row, Left to Right: Frances Thompson, Amber Smith, Teresa Hasha, Bobbie Clark
Front Row, Left to Right: Tina Gay, Stacy Thompson
Not Pictured: Brandy Moon, Joyce Glass
34
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Walker Banking Center
(225) 664-5549
29815 South Walker Drive
Walker, LA 70785
Watson Banking Center
(225) 665-0400
33818 Highway 16
Denham Springs, LA 70706
Left to Right: Brandi Steffek, Sheila Lofton, Clint Trant, Robin Bonfanti, Sylvia Moore
Not Pictured: Kendra Fairburn
Back Row: Ludrick Hidalgo
Front Row, Left to Right: Carrie Jarreau, Megan Braden
Not pictured: Judy Hughes, Edward Bertoniere
35
2015 ANNUAL REPORT Community Commitment
Community contributions are a priority budget item for First Guaranty Bank.
Listed are the institutions, organizations and associations that we have assisted
with contributions and sponsorships during 2015.
At First Guaranty Bank, our goal is to help improve the communities we serve.
In addition to monetary contributions, our employees dedicated time, energy
and effort to many of these worthy causes.
Adam Johnston presented a contribution
to Mary M. Cobb, Director of Events
and Donor Relations of the LSU
Health Shreveport Foundation. The
contribution supports the Foundation’s
2015 Evening for Healers event.
Adam Johnston presented a contribution to Piggly Wiggly Steak
Cook-off. Pictured from left to right are Renee Jones, Karen
Taylor, Adam Johnston, Crystal Lewis, Randy Smith, Piggly
Wiggly Springhill, Store Manager and Bobby Vidrine.
Melissa Smith presented a contribution to
Ann Huff, CFO at the Greensburg
Sheriff ’s office.
Adam Johnston presented a contribution
to Lion John Zielinski with the Bossier
City Lions Club.
Diane Shoemaker and Josie Tubbs presented a contribution to
Judy Mabry, the principal at Dubach School.
First Guaranty Bank contributions for community support were
$429,000 in 2015 which is 23.4% more than in 2014.
Mr. Harrison presented a contribution to
SHPE representative Mr. James Miller.
36
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Community Commitment
Mr. Harrison presented a contribution to Charles Hutchinson
with the LSU Extension Dairy Specialist and Daryl Robertson,
a dairy farmer.
Tracy Perry presented a contribution to Coach Elaine
Gilbert of the Homer High School Track Team.
Elaine Atencio (right) presented a contribution
to the Coordinator, Babs Maddox (left) at the
Wee Care Committee Golf Tournament.
Niekitsha Jenkins and Hannah Winget presented a
contribution to Sgt. Van McDaniel with the Homer
Police Department for the Child Safety program.
Cheryl Brumfield presented a contribution
to Linda Wisinger, Principal of Mater
Dolorosa Catholic School for their Annual
Steak Dinner.
Cheryl Brumfield presented a contribution
to the Independence Middle Magnet School.
In the photo from left to right are: Coach
Tyronee Williams, Cheryl Brumfield and Ms.
Alexa Hookfin, Principal.
A
Albany High School – Football Program
Sponsor and Lady Hornet Fundraiser
American Cancer Society – Relay for Life
in Vermilion and Tangipahoa Parishes and
Relay for Life Bronze Sponsor
American Legion Auxiliary #47 – Boys State
and Girls State
American Legion Post #141 (Vivian) – Boys
State
Amite High School – Stadium Sign & Senior
Breakfast
Amite Oyster Festival – Sponsor
Ancient Order of Hibernians – Help the Needy
B
Bossier City Lions Club
Bossier Restoration Foundation
Boy Scouts of America
C
Champ Cooper Junior High School – Athletic
Program
Christmas on Caddo
Claiborne Academy
Claiborne Chamber of Commerce
Claiborne Charity Inc. – Golf Tournament
Sponsor
Claiborne Christmas Committee
Claiborne 4-H Livestock Club
37
2015 ANNUAL REPORT Community Commitment
Cheryl Brumfield presented a contribution to the Lallie Kemp
Foundation. Included in the photo are Cheryl Brumfield and
Sherre Pack-Hookfin, Chief Executive Officer of LSU Lallie Kemp
Medical Center.
Darrell Bruchhaus presented a contribution to Cynthia Hoffpauir, the CEO of
the Jefferson Davis Chamber of Commerce.
Cheryl Brumfield and Lance Davis presented a contribution to the Town of
Kentwood and Southeast Community Health Systems to purchase school supplies
for the 9th Annual School Supplies Giveaway. Shown from left are: Dr. Alecia
Cyprian, Southeast Community Health Systems, First Guaranty Bank Manager
(Independence Branch) Cheryl Brumfield, First Guaranty Bank Manager (Kentwood
Branch) Lance Davis, Town of Kentwood Mayor Irma Gordon and Town of
Kentwood Office Clerk Donnisha Alexander.
Mona Fontenot presented a contribution to Jessica Kopnicky
and Lakyn Kopnicky with the Melissa Doise Hope for the
Miracle 5K committee.
Claiborne Scholastic Banquet
City of Hammond – Hope Summer Camp
City of Ponchatoula – Wellness Plaza
City of Walker – Challengers Field
Communication Expo Inc.
Council for a Better Louisiana
Crimestoppers of Tangipahoa
D
Dubach School – Adopt-A-School
Dubach Police Department
Dubach Restoration and Beautification
Organization – Chicken Festival Sponsor
Cards
E
Elton High School – FFA Community Day
Sponsor
Elton Elementary School – Positive
Behavior Program
F
First Baptist Church – Wee Care
First Baptist Church Greensburg – Golf
Tournament
Florida Parishes Arena Rodeo
Herbert S. Ford Memorial Museum
38
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Community Commitment
Darrell Bruchhaus presented a contribution to
Kevin Bruchhaus, Sports writer for Jennings
Daily News. The Award was given to Morgan
Woods from Lake Arthur High School.
Brooks Hebert presented a contribution to Trudy
Marceaux, the Coordinator of Leadership Excel.
Brooks Hebert presented a contribution to
Jasey Broussard, 2015-2016 Lake Arthur High
School Cheerleaders.
Darrell Bruchhaus became a Premier Member
of the Southwest Louisiana Economic
Development Alliance. In the photo are Mike
Mitchell - Sales representative and Paula
Ramsey - VP Chamber membership.
Eric Dosch and Alton B. Lewis of First Guaranty Bank presented
a contribution to Patricia Westmoreland and Donna Taylor for
the Richard Murphy Hospice Gala.
First Guaranty Bank presented a contribution to the Loranger
High School Softball team. The Head Coach is Anna Bankston and
Assistant Head Coach is Steven Culberston. Standing left to right:
Brenliegh Bankston, Macy Harrison, Jayla Robertson, Kaylin Lee,
Jamie Lynn Rogers, Ashley Sharp, Anna Cusick, FGB Employee,
Head Coach Anna Bankston, Cassie Bennett, Assistant Head Coach
Steven Colbertson and Racheal Wyllie. Kneeling left to right: Avery
Taylor, Sierra Cusick and Kaley Uter.
G
Greater St. James Missionary Church –
Spring Tea
H
Hammond Blues & BBQ Sponsor
Hammond Chamber of Commerce
Hammond Firefighters Association
Hammond High Magnet School – Baseball and
Slam Dunk Renewal, Wish List
Hammond Police Union Local 345
Hammond Regional Arts Center
Hathaway High School – Prom Lock, Football
Championship and SAFE
Haynesville Beautification Committee
Haynesville High School
Haynesville Lions Club
Haynesville Quarterback Club
Homer Golf Club – Tee Box Sign and Golf
Tournament Sponsor
Homer High School – Baseball, Softball and
Track Sponsors
Homer Pelican Quarterback Club
I
Independence High School – Senior Awards,
Independence Middle School –Football
Sponsor
Independence Sicilian Heritage Festival
39
2015 ANNUAL REPORT Community Commitment
Trevor Bergeron, Luke Hammonds and Melanie Gottschalck presented a contribution
to Hammond Rotary representatives, Daryl Ferrara and Jenni O’Neil.
Randy Vicknair presented a contribution to
Lauren Williams, Coordinator of Chefs Evening.
April Alford presented a contribution to Randy
Stegall and Linda Stegall of Tangi Humane
Society for their 2015 Pet Expo.
Ronnie Pittman presented a contribution to
Brian Shirey with Hammond Blues and BBQ.
Melanie Gottschalck presented a contribution to
Megan Roberts for 4H.
Eric Dosch presented a contribution to John
Poteet and Jaclyn Rice for Options.
Danielle Willie presented a contribution on
behalf of FGB Main Office Employees to Bonnie
Garcia and Casie Navarre for the Cystic Fibrosis
Foundation. The contribution will benefit the
Hammond Great Strides Walk.
Independence Summer Baseball Team Sponsor
International Red Cross
Italian Festival
J
Rogers C. Jackson Memorial – Golf
Tournament
Jeff Davis Chamber of Commerce
Jennings Daily News – Malcolm Connolly
Sponsor
Jennings High School – Operation Graduation
K
Kentwood Baseball/Softball Association
Kentwood Garden Club
Kentwood High School – State Championship
Tournament
Kentwood Rotary Club
Kiwanis Club of Denham Springs
Kiwanis Club of Hammond
Kiwanis Club of Ponchatoula
Knights of Columbus
L
Lafayette Housing Authority
Lake Arthur High School – T-Shirt Sponsor
Lake Claiborne Inc. – 4th of July Fireworks
Sponsor
Lallie Kemp Foundation
Land Trust for Southeast Louisiana –
Conservation Cup Sponsor
Charlie Landry Memorial Golf Tournament
Leadership Excel
Little Angels Foundation
40
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Community Commitment
Danyelle Sanders Horton presented a
contribution to Sheryl Baham-Francis of Greater
St. James Missionary Baptist Church for their 9th
Annual Ladies’ Spring Tea.
Phillip Qualls presented a contribution
to Jonathan Kemp of the Louisiana State
Troopers Association for their 2nd Annual
Sporting Clays Tournament.
Desiree Simmons presented a contribution to
Anette Kriylo, Executive Director of Louisiana
Children’s Discovery Center for their Jazz Brunch.
Danielle Willie presented a contribution
for the Southeastern Foundation to Lynn
Horgan, Director of Individual, Corporate and
Foundation Relations.
Jason McKenzie and Abit Tiwari presented a contribution to Chris Nuebel of the
American Red Cross of Louisiana for the earthquake victims in Nepal.
Anna Cusick presented a contribution to
Loranger Volleyball Head Coach, Tyra Starkey.
Livingston Board of Realtors - Gold Forecast
Sponsor
Livingston Parish School Board – Holiday
Luncheon
Loranger High School – Softball, Volleyball and
Baseball Programs Sponsor
Louisiana Bankers Association
Louisiana Children’s Discovery Center – Jazz
Brunch and Quiet Santa Event
Louisiana 4-H Foundation – Annual Fund
Louisiana State Troopers Association –
Sporting Clays Tournament Sponsor
LSU Ag Center – Educational Program
Sponsor
LSU Health Shreveport Foundation
M
Mater Dolorosa Catholic School – Baseball
Sign and Steak Dinner Fundraiser
Melissa Doise Hope for the Miracle Race
Fundraiser (to benefit cancer patients)
Monterey Country Club – Golf Tournament
Sponsor
Richard Murphy Hospice Foundation
Casie Navarre presented a contribution to
Charley Vance with the Tangipahoa Parish
School of Performing Arts.
N
National Child Safety Council
New Horizons Youth Service Bureau
North Caddo Magnet High School – Basketball
Program
North Caddo Medical Center Foundation –
Gold Buckle Sponsor
North Tangi Support Group – Mardi Gras
Parade Sponsor
41
2015 ANNUAL REPORT Community Commitment
Ragan Rodriguez presented a contribution to C.
Roy Blackwood, the Executive Director of the
Columbia Theatre.
Bernadette Kemp presented a contribution to
Kathy Pittman, Director of Southeastern Louisiana
University Alumni, for the Convocation picnic.
Bernadette Kemp presented a contribution to
Katherine Marquette, Executive Director of
the Hammond Regional Arts Center, for the
Brews Arts Festival.
Desiree Simmons presented a contribution to Kayla
Johnson, President of Livingston Board of Realtors.
Donna Hodges presented a contribution to
Captain Derwin Miley and Captain Terry
Stewart with the Hammond Firefighters
Association for the annual MDA fundraiser.
Kristin Williams presented a contribution
to Pascal Dean, treasurer for the South
Tangipahoa Relay for Life.
Anette Kirylo, Executive Director of the
Louisiana Children’s Discovery Center
presented Alton B. Lewis with a plaque
for contributing to Louisiana Children’s
Discovery Center for five years.
O
Oak Forest Academy – Fall Carnival
Oak Grove Church of Christ – Food Festival
Options, Inc.
P
Ponchatoula Area Recreation
Ponchatoula Chamber of Commerce
Ponchatoula Football Boosters
Ponchatoula High School – Lady Wave
Basketball, Project Graduation and Senior
Breakfast
42
Ponchatoula High School Band Boosters
Ponchatoula High School Grand Slam Boosters
Ponchatoula Junior High – Volleyball Program
Ponchatoula Lions Club
Ponchatoula Youth Baseball – Team Sponsor
Layton Ricks Campaign Fundraiser
R
Rotary Club of Amite
Rotary Club of Hammond
S
St. Helena Advocacy for Parish Enrichment
(Christmas in the Pines Celebration)
St. Helena Forestry Association
St. Helena Sheriff ’s Department
St. Helena/Tangipahoa Dairy Days
St. Joseph Catholic School – Spring Fair
Sponsor
St. Jude Fundraiser
Senior Center – Bingo
Shreveport Bossier African American Chamber
of Commerce
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Community Commitment
Kristin Williams presented Lacie Randall and
Coach Stacy Darouse with a contribution to the
Albany High School Ladies’ Basketball team.
Lois Freeman presented a contribution to John
“Bones” Kraft for Ponchatoula High School
Baseball’s Grand Slam Booster Club.
Vanessa Drew presented a contribution to
Director Leon Philpot and Playologist, Sam, from
the Louisiana Children’s Discovery for the Quiet
Santa Event.
Randy Vicknair presented Dr. Antoinette Phillips
with a contribution for Southeastern Louisiana
University’s Business Week.
Mike Lofaso presented a contribution to Dr.
Beth Moulds, Interim Principal Hammond
High Magnet School. The funds will be used to
purchase a variety of materials and equipment
needed by students and faculty.
Desiree Simmons presented a contribution to
Austin Sanders with Southeastern Louisiana
University for the event Last Roar.
Society of St. Vincent de Paul
Southeast Community Health System – Back to
School Expos
Southeastern Louisiana University Alumni
Association – Felion Dinner, Salute the Lions,
Fundraiser and Convocation Picnic Sponsors
Southeastern Louisiana University Athletic
Association – Corporate Sponsor, Lion Nation
and Sports Package
Southeastern Louisiana University
Foundation –Chef ’s Evening Sponsor, SLU
Channel Programming, Green Pig Sponsor,
Community Music School Sponsorship,
Partner, Columbia Theater for the Arts
Sponsor, Last Roar Event and Business
Perspectives Week
Southern Band – Mardi Gras Trip
Southwest Louisiana Veterans Home –
Crawfish Boil Sponsor
Special Olympics Louisiana – Trivia Night
Sponsor
Summerfield High School
T
Tangi Humane Society
Tangi Professional Women’s Organization
Tangipahoa Parish 4-H – Belt Buckle Award
and Pet Parade
Tangipahoa Parish School System – Talented
Theatre
Tangipahoa Parish Sheriff 's Office – Mounted
Division Fundraiser
Tangipahoa African American Heritage
Museum & Veterans Archive – Black Tie
Event
Tangipahoa Voluntary Council on Aging –
Purchased computers for Hammond Senior
Center
Town of Benton Festival Fund
43
2015 ANNUAL REPORT Community Commitment
Alexis Drude and Denise Fletcher presented a
contribution for the PHS Senior Breakfast to Mary
Beth Crovetto, PHS Assistant Principal.
Denise Fletcher presented a contribution to
Addie Eggers for the Ponchatoula Junior High
Volleyball team.
Denise Fletcher presented a contribution to
Latasha Banks, Administrator for Family Night
at Westminster Place.
Tracey McNemar presented a contribution to Mr. James Square, Band
Director and Band Booster Members for the PHS Band Boosters.
Alton B. Lewis presented a contribution for the Ponchatoula
Wellness Plaza to Mayor Robert “Bob” Zabbia and Rhonda
Sheridan, Executive Assistant.
Katherine Aylor presented
a contribution to the
Tangipahoa Parish 4H
Pet Parade which is co-
sponsored by LSU Ag Center.
Accepting the check from
Katherine Aylor, (Universal
Banker) are Ms. Rita
Hoover (Tangipahoa 4 H)
and Ms. JoAnna T Pesson
(LSU Ag Center Extension
Agent/Parish Chair for
Tangipahoa).
Town of Independence – Land Purchase/
Donation
Town of Kentwood – Southeast Community
Health
Town of Vivian – Litter Campaign and
Summer Youth Camp
U
United Way of Southeast Louisiana –
Corporate Match Contribution
University Montessori School
V
Vivian Athletic Association
W
Walker High School – Banzai Program
Westminster Place Family Day
Z
Zachary Taylor Parkway Association
44
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. STRENGTH & EARNINGS POWER!
Earnings
Total Common
Dividends Paid
Cumulative Retained
Earnings (Deficit)*
Notable Events
$2.1 million
$ 200,000
$(4,984,000)
■■ Investors purchased $3.6 million of common stock
$1.7 million
$ 601,000
$(3,879,070)
$2.1 million
$ 815,000
$(2,796,000)
■■ Investors purchased $337,000 of common stock
$3.3 million
$1,020,000
$ (774,000)
■■ Three-for-two stock split
$3.4 million
$1,223,000
$3.4 million
$1,223,000
$ 1,205,000
$ 3,482,000
$3.4 million
$1,316,000
$ 4,473,000
■■ Investors purchased $9.6 million of common stock
■■ Acquired 13 branches from Bank One of Louisiana
■■ Acquired First Southwest Bank
1993
1994
1995
1996
1997
1998
1999
2000
$5.0 million
$1,530,000
$ 5,027,000
■■ Gains from sale of acquired branches net of tax
2001
$6.0 million
$1,668,000
$ 8,638,000
totaling $2.8 million
■■ Acquired Woodlands Bancorp
■■ Gains from sale of acquired branches net of tax
totaling $1.3 million
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
$3.5 million
$1,751,000
$7.0 million
$2,086,000
$8.6 million
$2,752,000
$10,426,000
$13,967,000
$19,771,000
$6.0 million
$3,173,000
$23,351,000
■■ Four-for-three stock split
$8.4 million
$3,335,000
$28,402,000
$9.8 million
$3,503,000
$34,671,000
■■ Acquired Homestead Bancorp
$5.5 million
$3,558,000
$7.6 million
$3,558,000
$10.0 million
$3,558,000
$36,626,000
$40,069,000
$45,203,000
$8.0 million
$3,610,000
$47,650,000
■■ Acquired Greensburg Bancshares
2012
$12.1 million
$4,035,000
$53,702,000
2013
$9.1 million
$4,027,000
$58,102,000
2014
$11.2 million
$4,027,000
$64,905,000
2015
$14.5 million
$4,247,000
$73,445,000
■■ 2,895 treasury shares purchased at $18.59 per share
■■ 10% common stock dividend
■■ Dividend rate per share remains $0.16 per quarter
■■ Total loans exceeded $700 million
■■ 82 consecutive quarterly dividends paid
■■ Retained earnings grew by $6.8 million
■■ Total loans reached $790 million
■■ 10% common stock dividend
■■ Dividend rate per share remains $0.16 per quarter
■■ 90th consecutive quarterly dividend
■■ Listed in NASDAQ
■■ Redeemed SBLF Preferred Stock
$151.7 million
$56,816,000
* Retained earnings has not been adjusted to consider stock splits or stock dividends. This better reflects earnings that have been retained as capital. Retained
earnings is the product of Company earnings less common and preferred dividends. The accumulated deficits in 1993 through 1996 were due to losses incurred
prior to 1993.
45
2015 ANNUAL REPORT Banks Headquartered in Louisiana Ranked by Asset Size as of December 31, 2015
1 Iberiabank
2 First NBC Bank
3 Origin Bank
4 MidSouth Bank, National Association
5 Home Bank
6 Red River Bank
7 First Guaranty Bank
8 Gulf Coast Bank and Trust Company
9 Business First Bank
10 Crescent Bank & Trust
11 Investar Bank
12 First American Bank and Trust
13 Citizens National Bank, N.A.
14 Sabine State Bank and Trust Company
15 First National Banker’s Bank
16 Fidelity Bank
17 JD Bank
18 First Federal Bank of Louisiana
19 First Bank and Trust
20 Ouachita Independent Bank
21 Liberty Bank and Trust Company
22 The Evangeline Bank and Trust Company
23 Resource Bank
24 St. Martin Bank and Trust Company
25 United Community Bank
26 Progressive Bank
27 Concordia Bank & Trust Company
28 Synergy Bank
29 South Louisiana Bank, Houma, Louisiana
30 Community Bank of Louisiana
31 Coastal Commerce Bank
32 Merchants & Farmers Bank & Trust Company
33 Fifth District Savings Bank
34 Gibsland Bank & Trust Company
35 Gulf Coast Bank
36 Rayne State Bank & Trust Company
37 Metairie Bank & Trust Company
38 Home Federal Bank
39 Bank of Commerce & Trust Co.
40 First National Bank of Louisiana
41 M C Bank & Trust Company
42 Cottonport Bank
43 Community First Bank
44 MBL Bank
45 Cross Keys Bank
46 City Savings Bank & Trust Company
47 Farmers-Merchant Bank & Trust Company
48 Richland State Bank
49 Southern Heritage Bank
50 St. Landry Bank and Trust Company
51 Iberville Bank
52 Patterson State Bank
53 Citizens Bank & Trust Company
54 City Bank & Trust Co.
55 The Union Bank
56 Delta Bank
57 Citizen’s Bank
58 First National Bank in Deridder
59 Florida Parishes Bank
60 The First National Bank of Jeanerette
61 Bank of Montgomery
62 First National Bank
63 St. Landry Homestead Federal Savings Bank
64 Peoples Bank and Trust Company of Pointe Coupee Parish
65 Bank of Ruston
66 The Bank
Lafayette
New Orleans
Choudrant
Lafayette
Lafayette
Alexandria
Hammond
New Orleans
Baton Rouge
New Orleans
Baton Rouge
Vacherie
Bossier City
Many
Baton Rouge
New Orleans
Jennings
Lake Charles
New Orleans
Monroe
New Orleans
Ville Platte
Covington
Saint Martinville
Gonzales
Monroe
Vidalia
Houma
Houma
Mansfield
Houma
Leesville
New Orleans
Gibsland
Abbeville
Rayne
Metairie
Shreveport
Crowley
Crowley
Morgan City
Cottonport
New Iberia
Minden
Saint Joseph
Deridder
Breaux Bridge
Rayville
Jonesville
Opelousas
Plaquemine
Patterson
Plaquemine
Natchitoches
Marksville
Vidalia
Ville Platte
Deridder
Hammond
Jeanerette
Montgomery
Arcadia
Opelousas
New Roads
Ruston
Jennings
46
Coushatta
Eunice
Bogalusa
Zachary
Delhi
Jonesboro
New Roads
Opelousas
Jonesville
Abbeville
Columbia
Columbia
Marion
Larose
Winnsboro
Washington
Lake Charles
Newellton
Plaquemine
Winnfield
Vivian
Plaquemine
Jackson
Golden Meadow
Winnsboro
Kaplan
Boutte
Sunset
67 Bank of Coushatta
68 Tri-Parish Bank
69 Citizens Savings Bank
70 Bank of Zachary
71 Guaranty Bank & Trust Company of Delhi, Louisiana
72 Jonesboro State Bank
73 Guaranty Bank and Trust Company
74 American Bank & Trust Company
75 Catahoula - LaSalle Bank
76 Bank of Abbeville & Trust Company
77 Homeland Federal Savings Bank
78 Caldwell Bank & Trust Company
79 Marion State Bank
80 South Lafourche Bank & Trust Company
81 Franklin State Bank & Trust Company
82 Washington State Bank
83 Lakeside Bank
84 Tensas State Bank
85 Plaquemine Bank & Trust Company
86 Bank of Winnfield & Trust Company
87 Citizens Bank & Trust Company
88 Anthem Bank & Trust
89 The Highlands Bank
90 State Bank & Trust Company
91 Winnsboro State Bank & Trust Company
92 Vermilion Bank & Trust Company
93 First National Bank USA
94 Bank of Sunset and Trust Company
95 Exhange Bank and Trust Company, Natchitoches, Louisiana Natchitoches
96 Citizens Progressive Bank
97 Mississippi River Bank
98 Bank of St. Francisville
99 Citizens Bank & Trust Company
100 Hibernia Bank
101 American Bank & Trust Company
102 Feliciana Bank & Trust Company
103 Landmark Bank
104 Teche Bank & Trust Co.
105 Farmers State Bank & Trust Co.
106 Colfax Banking Company
107 Bank of Erath
108 Heritage Bank of St. Tammany
109 Eureka Homestead
110 Kaplan State Bank
111 Jackson Parish Bank
112 Bank of Gueydan
113 Commercial Capital Bank
114 Bank of Louisiana
115 Simmesport State Bank
116 Union Savings and Loan Association
117 The Bank of Commerce
118 Hodge Bank & Trust Company
119 Abbevile Building & Loan (A State-Chartered Savings Bank) Abbeville
120 Rayne Building and Loan Association
121 Beauregard FSB
122 Commerce Community Bank
123 First National Bank of Benton
124 Bank of Ringgold
125 Basile State Bank
126 Bank of Oak Ridge
127 Peoples Bank
128 Sicily Island State Bank
129 Mutual Savings and Loan Association
130 The Mer Rouge State Bank
131 Progressive National Bank of DeSoto Parish
132 Tri-State Bank and Trust
Winnsboro
Belle Chasse
Saint Francisville
Covington
New Orleans
Covington
Clinton
Clinton
Saint Martinville
Church Point
Colfax
Erath
Covington
Metairie
Kaplan
Jonesboro
Gueydan
Delhi
New Orleans
Simmesport
New Orleans
White Castle
Hodge
Rayne
Deridder
Oak Grove
Benton
Ringgold
Basile
Oak Ridge
Chatham
Sicily Island
Metairie
Mer Rouge
Mansfield
Haughton
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Financial Table of Contents
Selected Financial Data ..............................................................................................48
Management’s Discussion and Analysis
of Financial Condition and Results of Operation ...............................................52
Report of Independent Registered Accounting Firm .........................................80
Consolidated Balance Sheets ..................................................................................81
Consolidated Statements of Income .....................................................................82
Consolidated Statements of Comprehensive Income (Loss) ................................83
Consolidated Statements of Shareholders’ Equity ..................................................83
Consolidated Statements of Cash Flows ..................................................................84
Notes to Consolidated Financial Statements ..........................................................85
47
2015 ANNUAL REPORT Selected Financial Data
The following table presents consolidated selected financial data for First Guaranty. It does not purport to be complete and is qualified in its entirety
by more detailed financial information and the audited Consolidated Financial Statements contained elsewhere in this Annual Report.
Year End Balance Sheet Data:
Investment securities
Federal funds sold
Loans, net of unearned income
Allowance for loan losses
Total assets
Total deposits
Borrowings
Shareholders' equity
Common shareholders' equity
Performance Ratios and Other Data:
Return on average assets
Return on average common equity
Return on average tangible assets
Return on average tangible common equity
Net interest margin
Average loans to average deposits
Efficiency ratio(1)
Efficiency ratio (excluding amortization of intangibles and
securities transactions)(1)
Full time equivalent employees (year end)
Capital Ratios:
Average shareholders' equity to average assets
Average tangible equity to average tangible assets
Common shareholders' equity to total assets
Tier 1 leverage capital consolidated
Tier 1 capital consolidated
Total risk-based capital consolidated
Common equity tier one capital consolidated
Tangible common equity to tangible assets(2)
At or For the Years Ended December 31,
2015
2014
2013
2012
2011
(in thousands except for % and share data)
$ 546,121
$ 641,603
$ 634,504
$ 659,243
$ 633,163
$
582
$
210
$
665
$
2,891
$
68,630
$ 841,583
$ 790,321
$ 703,166
$ 629,500
$ 573,100
$
9,415
$
9,105
$
10,355
$
10,342
$
8,879
$ 1,459,753
$ 1,518,876
$1,436,441
$ 1,407,303
$ 1,353,866
$ 1,295,870
$ 1,371,839
$1,303,099
$ 1,252,612
$ 1,207,302
$
42,221
$
3,255
$
6,288
$
15,846
$
15,423
$ 118,224
$ 139,583
$ 123,405
$ 134,181
$ 126,602
$ 118,224
$ 100,148
$
83,970
$
94,746
$
87,167
0.97%
12.98%
0.99%
13.60%
3.26%
61.31%
55.11%
57.74%
277
9.88%
9.67%
8.10%
8.17%
10.85%
13.13%
10.85%
7.89%
0.77%
11.40%
0.79%
12.10%
3.11%
55.72%
62.85%
62.58%
271
9.24%
9.00%
6.59%
9.33%
13.16%
14.05%
N/A
6.37%
0.65%
9.31%
0.67%
9.99%
2.92%
53.58%
65.61%
0.89%
10.90%
0.91%
11.70%
3.20%
49.04%
58.56%
0.65%
7.37%
0.67%
7.97%
3.31%
52.79%
56.77%
67.17%
63.73%
60.29%
278
274
269
9.28%
9.02%
5.85%
9.14%
13.61%
14.71%
N/A
5.59%
9.72%
9.43%
6.73%
9.24%
14.13%
15.31%
N/A
6.45%
8.80%
8.52%
6.44%
9.03%
13.71%
14.75%
N/A
6.12%
48
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Income Data:
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income (excluding securities transactions)
Securities gains
Noninterest expense
Earnings before income taxes
Net income
Net income available to common shareholders
Per Common Share Data: (4)
Net earnings
Cash dividends paid
Book value
Tangible book value (3)
Dividend payout ratio
$
$
$
$
$
$
$
$
$
$
$
$
$
$
56,079
8,608
47,471
3,864
5,656
3,300
31,095
21,468
14,505
14,121
2.01
0.60
15.54
15.10
$
$
$
$
$
$
$
$
$
$
$
$
$
$
53,297
9,202
44,095
1,962
5,882
295
31,594
16,716
11,224
10,830
1.57
0.58
14.47
13.95
$
$
$
$
$
$
$
$
$
$
$
$
$
$
50,886
11,134
39,752
2,520
5,907
1,571
30,987
13,723
9,146
8,433
1.22
0.58
12.13
11.57
$
$
$
$
$
$
$
$
$
$
$
$
$
$
55,195
13,120
42,075
4,134
6,272
4,868
31,161
17,920
12,059
10,087
1.46
0.58
13.69
13.08
$
$
$
$
$
$
$
$
$
$
$
$
$
$
54,609
15,118
39,491
10,187
7,742
3,531
28,821
11,756
8,033
6,057
0.89
0.52
12.59
11.93
30.07%
37.18%
47.75%
40.00%
59.60%
Weighted average number of shares outstanding
7,013,869
6,920,022
6,920,022
6,921,696
6,825,779
Number of shares outstanding
7,609,194
6,920,022
6,920,022
6,920,022
6,923,205
Asset Quality Ratios:
Non-performing assets to total assets
Non-performing assets to total loans
Non-performing loans to total loans
Loan loss reserve to non-performing assets
Net charge-offs to average loans
Provision for loan loss to average loans
Allowance for loan loss to total loans
1.51%
2.62%
2.43%
0.99%
1.90%
1.62%
1.27%
2.60%
2.12%
1.67%
3.74%
3.36%
2.13%
5.04%
4.05%
42.74%
60.74%
56.72%
43.94%
30.73%
0.44%
0.47%
1.12%
0.45%
0.27%
1.15%
0.38%
0.38%
1.47%
0.45%
0.70%
1.64%
1.65%
1.75%
1.55%
(1) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income. We calculate both a GAAP and a non-GAAP
efficiency ratio. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income. See below for our reconciliation
of non-GAAP financial measures to their most directly comparable GAAP financial measures under the caption “Selected Financial Data—Non-GAAP Financial
Measures.”
(2) We calculate tangible common equity as total shareholders’ equity less preferred stock, goodwill and acquisition intangibles, principally core deposit intangibles,
net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and core deposit intangibles. Tangible common equity to tangible
assets is a non-GAAP financial measure, and, as we calculate tangible common equity to tangible assets, the most directly comparable GAAP financial measure is
total shareholders’ equity to total assets. See below for our reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures
under the caption “Selected Historical Consolidated Financial and Other Data—Non-GAAP Financial Measures.”
(3) We calculate tangible book value per common share as total shareholders’ equity less preferred stock, goodwill and acquisition intangibles, principally core
deposit intangibles, net of accumulated amortization at the end of the relevant period, divided by the outstanding number of shares of our common stock at the end
of the relevant period. Tangible book value per common share is a non-GAAP financial measure, and, as we calculate tangible book value per common share, the
most directly comparable GAAP financial measure is book value per common share. See below for our reconciliation of non-GAAP financial measures to their most
directly comparable GAAP financial measures under the caption “Selected Financial Data—Non-GAAP Financial Measures.”
(4) Historical share and per share amounts have been adjusted to reflect the ten percent stock dividend paid December 17, 2015 to shareholders of record as of
December 10, 2015.
49
2015 ANNUAL REPORT Non-GAAP Financial Measures
Our accounting and reporting policies conform to accounting
principles generally accepted in the United States, or GAAP, and the
prevailing practices in the banking industry. However, we also evaluate
our performance based on certain additional metrics. Tangible book
value per share and the ratio of tangible equity to tangible assets are
not financial measures recognized under GAAP and, therefore, are
considered non-GAAP financial measures.
typically stem from the use of the purchase accounting method of
accounting for mergers and acquisitions. Tangible equity, tangible
assets, tangible book value per share or related measures should not be
considered in isolation or as a substitute for total shareholders’ equity,
total assets, book value per share or any other measure calculated in
accordance with GAAP. Moreover, the manner in which we calculate
tangible equity, tangible assets, tangible book value per share and
any other related measures may differ from that of other companies
reporting measures with similar names.
Our Management, banking regulators, many financial analysts and
other investors use these non-GAAP financial measures to compare
the capital adequacy of banking organizations with significant amounts
of preferred equity and/or goodwill or other intangible assets, which
The following table reconciles, as of the dates set forth below,
shareholders’ equity (on a GAAP basis) to tangible equity and total
assets (on a GAAP basis) to tangible assets and calculates our tangible
book value per share.
Tangible Common Equity
Total shareholders' equity
Adjustments:
Preferred
Goodwill
Acquisition intangibles
Tangible common equity
Common shares outstanding
Book value per common share
Tangible book value per common share
Tangible Assets
Total Assets
Adjustments:
Goodwill
Acquisition intangibles
Tangible Assets
At December 31,
2015
2014
2013
2012
2011
(in thousands except for share data and %)
$ 118,224
$ 139,583
$ 123,405
$ 134,181
$ 126,602
-
1,999
1,298
39,435
1,999
1,618
39,435
1,999
1,938
39,435
1,999
2,257
39,435
1,999
2,608
$ 114,927
$
96,531
$
80,033
$
90,490
$
82,560
7,609,194
6,920,022
6,920,022
6,920,022
6,923,205
$
$
15.54
15.10
$
$
14.47
13.95
$
$
12.13
11.57
$
$
13.69
13.08
$
$
12.59
11.93
$ 1,459,753
$ 1,518,876
$ 1,436,441
$ 1,407,303
$ 1,353,866
1,999
1,298
1,999
1,618
1,999
1,938
1,999
2,257
1,999
2,608
$ 1,456,456
$1,515,259
$1,432,504
$1,403,047
$1,349,259
Tangible common equity to tangible assets
7.89%
6.37%
5.59%
6.45%
6.12%
50
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. The efficiency ratio is a non-GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We
calculate the efficiency ratio by dividing noninterest expense by the sum of net interest income and noninterest income, excluding amortizations
of intangibles and securities transactions. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest
income.
The following table reconciles, as of the dates set forth below, our efficiency ratio to the GAAP-based efficiency ratio:
GAAP-based efficiency ratio
Noninterest expense
Amortization of intangibles
Noninterest expense, excluding amortization
Net interest income
Noninterest income
Adjustments:
Securities transactions
Noninterest income, excluding securities transactions
Efficiency ratio
For the Year Ended December 31,
2015
2014
2013
2012
2011
(in thousands except for share data and %)
55.11%
62.85%
65.61%
58.56%
56.77%
$31,095
$31,594
$30,987
$31,161
$28,821
320
320
320
350
286
30,775
47,471
8,956
31,274
44,095
6,177
30,667
39,752
7,478
30,811
42,075
11,140
28,535
39,491
11,273
3,125
295
1,571
4,868
3,434
$ 5,831
$ 5,882
$ 5,907
$ 6,272
$ 7,839
57.74%
62.58%
67.17%
63.73%
60.29%
51
2015 ANNUAL REPORT Management’s Discussion and Analysis
of Financial Condition and Results of
Operations
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with “Selected
Financial Data” and our Consolidated Financial Statements. This
discussion and analysis contains forward-looking statements that
are subject to certain risks and uncertainties and are based on
certain assumptions that we believe are reasonable but may prove
to be inaccurate. Certain risks, uncertainties and other factors,
including those set forth under “Forward-Looking Statements,” and
“Risk Factors,” may cause actual results to differ materially from
those projected results discussed in the forward-looking statements
appearing in this discussion and analysis. We assume no obligation to
update any of these forward-looking statements.
Special Note Regarding Forward-Looking Statements
Congress passed the Private Securities Litigation Act of 1995 in an
effort to encourage corporations to provide information about a
Company’s anticipated future financial performance. This act provides
a safe harbor for such disclosure, which protects us from unwarranted
litigation, if actual results are different from Management expectations.
This discussion and analysis contains forward-looking statements and
reflects Management’s current views and estimates of future economic
circumstances, industry conditions, company performance and
financial results. The words “may,” “should,” “expect,” “anticipate,”
“intend,” “plan,” “continue,” “believe,” “seek,” “estimate” and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are subject to a number of factors and
uncertainties, including, changes in general economic conditions,
either nationally or in our market areas, that are worse than expected;
competition among depository and other financial institutions; inflation
and changes in the interest rate environment that reduce our margins
or reduce the fair value of financial instruments; adverse changes in
the securities markets; changes in laws or government regulations or
policies affecting financial institutions, including changes in regulatory
fees and capital requirements; our ability to enter new markets
successfully and capitalize on growth opportunities; our ability to
successfully integrate acquired entities, if any; changes in consumer
spending, borrowing and savings habits; changes in accounting policies
and practices, as may be adopted by the bank regulatory agencies, the
Financial Accounting Standards Board, the Securities and Exchange
Commission and the Public Company Accounting Oversight Board;
changes in our organization, compensation and benefit plans; changes
in our financial condition or results of operations that reduce capital
available to pay dividends; and changes in the financial condition or
future prospects of issuers of securities that we own, which could cause
our actual results and experience to differ from the anticipated results
and expectations, expressed in such forward-looking statements.
Overview
First Guaranty Bancshares is a Louisiana corporation and a bank
holding company headquartered in Hammond, Louisiana. Our
wholly-owned subsidiary, First Guaranty Bank, a Louisiana-chartered
commercial bank, provides personalized commercial banking services
primarily to Louisiana customers through 21 banking facilities primarily
located in the MSAs of Hammond, Baton Rouge, Lafayette and
Shreveport-Bossier City. We emphasize personal relationships and
localized decision making to ensure that products and services are
matched to customer needs. We compete for business principally on
the basis of personal service to customers, customer access to officers
and directors and competitive interest rates and fees.
Total assets were $1.5 billion at December 31, 2015 and December
31, 2014. Total deposits were $1.3 billion at December 31, 2015 and
52
$1.4 billion at December 31, 2014. Total loans were $841.6 million
at December 31, 2015, an increase of $51.3 million, or 6.5%,
compared with December 31, 2014. Common shareholders’ equity
was $118.2 million and $100.1 million at December 31, 2015 and
December 31, 2014, respectively.
Net income was $14.5 million, $11.2 million and $9.1 million for
the years ended December 31, 2015, 2014 and 2013, respectively.
We generate most of our revenues from interest income on loans,
interest income on securities, sales of securities and service charges,
commissions and fees. We incur interest expense on deposits and other
borrowed funds and noninterest expense such as salaries and employee
benefits and occupancy and equipment expenses. Net interest income
is the difference between interest income earned on interest-earning
assets such as loans and securities and interest expense paid on
interest-bearing liabilities such as deposits and borrowings which are
used to fund those assets. Net interest income is our largest source of
revenue. To evaluate net interest income, we measure and monitor:
(1) yields on our loans and other interest-earning assets; (2) the costs
of our deposits and other funding sources; (3) our net interest spread;
and (4) our net interest margin. Net interest spread is the difference
between rates earned on interest-earning assets and rates paid on
interest-bearing liabilities. Net interest margin is calculated as net
interest income divided by average interest-earning assets. Because
noninterest-bearing sources of funds, such as noninterest-bearing
deposits also fund interest-earning assets, net interest margin includes
the benefit of these noninterest-bearing sources.
Changes in market interest rates and interest rates we earn on
interest-earning assets or pay on interest-bearing liabilities, as well
as the volume and types of interest-earning assets, interest-bearing
and noninterest-bearing liabilities are usually the largest drivers of
periodic changes in net interest spread, net interest margin and net
interest income. Fluctuations in market interest rates are driven by
many factors, including governmental monetary policies, inflation,
deflation, macroeconomic developments, changes in unemployment,
the money supply, political and international conditions and conditions
in domestic and foreign financial markets. Periodic changes in the
volume and types of loans in our loan portfolio are affected by, among
other factors, economic and competitive conditions in Louisiana and
our other out-of-state market areas. During the extended period of
historically low interest rates, we continue to evaluate our investments
in interest-earning assets in relation to the impact such investments
have on our financial condition, results of operations and shareholders’
equity if interest rates were to suddenly increase as they did in the
second and third quarters of 2013.
Financial highlights for 2015 and 2014:
• Total assets at December 31, 2015 decreased $59.1 million, or
3.9%, to $1.5 billion when compared to December 31, 2014. Total
loans at December 31, 2015 were $841.6 million, an increase
of $51.3 million, or 6.5%, compared with December 31, 2014.
Common shareholders' equity was $118.2 million and $100.1
million at December 31, 2015 and 2014, respectively.
• Net income for the years ended December 31, 2015 and 2014 was
$14.5 million and $11.2 million, respectively. The increase in net
income for 2015 was the result of higher loan interest income and
non-interest income and lower interest expense compared to 2014.
In addition, First Guaranty liquidated an equity security during 2015
at a gain of $2.7 million.
• Net income available to common shareholders after preferred stock
dividends was $14.1 million and $10.8 million for the years ended
December 31, 2015 and 2014, respectively. Dividends on preferred
stock were $0.4 million in 2015 and 2014.
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. • Earnings per common share were $2.01 and $1.57 for the years
ended December 31, 2015 and 2014, respectively.
• First Guaranty completed its common stock offering on November
12, 2015 that raised $9.3 million in capital. First Guaranty's common
stock is traded on NASDAQ under the symbol FGBI.
• First Guaranty declared a 10% common stock dividend on November
19, 2015 that was paid on December 17, 2015 to shareholders of
record as of December 10, 2015.
• First Guaranty used proceeds from a $25.0 million senior secured
loan and a $15.0 million subordinated debt offering to redeem all
$39.4 million of its Series C preferred stock from the U.S. Treasury
Department Small Business Lending Fund on December 22, 2015.
• Net interest income for 2015 was $47.5 million compared to $44.1
million for 2014.
• The provision for loan losses totaled $3.9 million for 2015 compared
to $2.0 million in 2014. The increase in provision was due to growth
in the loan portfolio and due to charge-offs of $4.2 million associated
primarily with five loan relationships.
• The net interest margin for 2015 was 3.26%, which was an increase
of fifteen basis points from the net interest margin of 3.11% for
2014. First Guaranty attributed the improvement in the net interest
margin to the continued shift in interest earning asset balances from
securities to loans and the continued reduction in interest expense
over the last year.
• Investment securities totaled $546.1 million at December 31,
2015, a decrease of $95.5 million when compared to $641.6 million
at December 31, 2014. At December 31, 2015, available for sale
securities, at fair value, totaled $376.4 million; a decrease of $123.4
million when compared to $499.8 million at December 31, 2014.
At December 31, 2015, held to maturity securities, at amortized
cost, totaled $169.8 million; an increase of $28.0 million when
compared to $141.8 million at December 31, 2014. Mortgage-
backed securities, backed by U.S. Government agencies or
enterprises, made up $92.4 million of the $169.8 million of the held
to maturity securities at December 31, 2015.
• Total loans net of unearned income were $841.6 million at December
31, 2015 compared to $790.3 million at December 31, 2014. The
net loan portfolio at December 31, 2015 totaled $832.2 million,
a net increase of $51.0 million from $781.2 million at December
31, 2014. Total loans net of unearned income are reduced by the
allowance for loan losses which totaled $9.4 million at December 31,
2015 and $9.1 million at December 31, 2014.
• Total impaired loans decreased $3.7 million to $25.8 million at
December 31, 2015 compared to $29.5 million at December 31,
2014.
• Nonaccrual loans increased $7.8 million to $20.0 million at
December 31, 2015 compared to $12.2 million at December 31,
2014.
• Common stock increased 0.7 million shares to 7.6 million shares
at December 31, 2015 when compared to 6.9 million shares at
December 31, 2014. This was due to the completion of the public
offering in the fourth quarter of 2015.
• Retained earnings increased $8.5 million to $49.9 million at
December 31, 2015 when compared to $41.4 million at December
31, 2014.
• Return on average assets for the year end December 31, 2015 and
December 31, 2014 was 0.97% and 0.77%, respectively. Return
on average common equity was 12.98% and 11.40% for 2015
and 2014, respectively. Return on average assets is calculated by
dividing net income before preferred dividends by average assets.
Return on average common equity is calculated by dividing net
income to common shareholders by average common equity.
• Book value per common share was $15.54 as of December 31,
2015 compared to $14.47 as of December 31, 2014. Tangible book
value per common share was $15.10 as of December 31, 2015
compared to $13.95 as of December 31, 2014.
• The increase in book value was principally due to an increase in
common shareholders' equity of $18.1 million to $118.2 million at
December 31, 2015. Surplus increased $9.9 million to $61.6 million
at December 31, 2015. Retained earnings increased $8.5 million to
$49.9 million at December 31, 2015. These increases were offset
by a change in accumulated other comprehensive income (loss)
from an unrealized gain of $0.2 million at December 31, 2014 to an
unrealized loss of $0.9 million at December 31, 2015.
• First Guaranty's Board of Directors declared and First Guaranty paid
cash dividends of $0.60 and $0.58 per common share in 2015 and
2014.
Application of Critical Accounting Policies
Our accounting and reporting policies conform to generally accepted
accounting principles in the United States and to predominant
accounting practices within the banking industry. Certain critical
accounting policies require judgment and estimates which are used in
the preparation of the financial statements.
Allowance for Loan Losses.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance
for loan losses when management believes that the collectability of the
principal is unlikely. The allowance, which is based on evaluation of the
collectability of loans and prior loan loss experience, is an amount that,
in the opinion of management, reflects the risks inherent in the existing
loan portfolio and exists at the reporting date. The evaluations take
into consideration a number of subjective factors including changes
in the nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, current economic conditions that
may affect a borrower’s ability to pay, adequacy of loan collateral and
other relevant factors. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the estimated
losses on loans. Such agencies may require additional recognition of
losses based on their judgments about information available to them at
the time of their examination.
The following are general credit risk factors that affect our loan portfolio
segments. These factors do not encompass all risks associated with
each loan category. Construction and land development loans have
risks associated with interim construction prior to permanent financing
and repayment risks due to the future sale of developed property.
Farmland and agricultural loans have risks such as weather, government
agricultural policies, fuel and fertilizer costs, and market price volatility.
One- to four-family residential, multi-family and consumer credits
are strongly influenced by employment levels, consumer debt loads
and the general economy. Non-farm non-residential loans include
both owner-occupied real estate and non-owner occupied real
estate. Common risks associated with these properties is the ability to
maintain tenant leases and keep lease income at a level able to service
required debt and operating expenses. Commercial and industrial
loans generally have non-real estate secured collateral which requires
closer monitoring than real estate collateral.
Although Management uses available information to recognize losses
on loans, because of uncertainties associated with local economic
conditions, collateral values and future cash flows on impaired loans,
it is reasonably possible that a material change could occur in the
allowance for loan losses in the near term. However, the amount of
the change that is reasonably possible cannot be estimated. The
evaluation of the adequacy of loan collateral is often based upon
estimates and appraisals. Because of changing economic conditions,
53
2015 ANNUAL REPORT the valuations determined from such estimates and appraisals may
also change. Accordingly, we may ultimately incur losses that vary from
Management’s current estimates. Adjustments to the allowance for
loan losses will be reported in the period such adjustments become
known or can be reasonably estimated. All loan losses are charged to
the allowance for loan losses when the loss actually occurs or when the
collectability of the principal is unlikely. Recoveries are credited to the
allowance at the time of recovery.
The allowance consists of specific, general and unallocated components.
The specific component relates to loans that are classified as doubtful,
substandard and impaired. For such loans that are also classified as
impaired, an allowance is established when the discounted cash flows
(or collateral value or observable market price) of the impaired loan is
lower than the carrying value of that loan. Also, a specific reserve is
allocated for our syndicated loans. The general component covers non-
classified loans and special mention loans and is based on historical loss
experience adjusted for qualitative factors. An unallocated component
is maintained to cover uncertainties that could affect the estimate of
probable losses.
The allowance for loan losses is reviewed on a monthly basis. The
monitoring of credit risk also extends to unfunded credit commitments,
such as unused commercial credit lines and letters of credit. A reserve
is established as needed for estimates of probable losses on such
commitments.
Other-Than-Temporary Impairment of Investment Securities.
Management evaluates securities for other-than-temporary impairment
("OTTI") at least on a quarterly basis, and more frequently when
economic or market conditions warrant such an evaluation. Declines in
the fair value of securities below their cost that are other-than-temporary
are reflected as realized losses. In estimating other-than-temporary
losses, Management considers the length of time and extent that fair
value has been less than cost and the financial condition and near
term prospects of the issuer. Management also assesses whether it
intends to sell, or it is more likely than not that it will be required to sell,
a security in an unrealized loss position before recovery of its amortized
cost basis. If either of the criteria regarding intent or requirement to sell
is met, the entire difference between amortized cost and fair value is
recognized as impairment through earnings. For debt securities that
do not meet the aforementioned criteria, the amount of impairment
is split into two components as follows: 1) OTTI related to credit loss,
which must be recognized in the income statement and 2) OTTI related
to other factors, which is recognized in other comprehensive income.
The credit loss is defined as the difference between the present value
of the cash flows expected to be collected and the amortized cost basis.
For equity securities, the entire amount of impairment is recognized
through earnings.
Valuation of Goodwill, Intangible Assets and Other Purchase Accounting
Adjustments.
Intangible assets are comprised of goodwill, core deposit intangibles
and mortgage servicing rights. Goodwill and intangible assets deemed
to have indefinite lives are no longer amortized, but are subject to
annual impairment tests. Our goodwill is tested for impairment on
an annual basis, or more often if events or circumstances indicate
impairment may exist. Adverse changes in the economic environment,
declining operations or other factors could result in a decline in the
implied fair value of goodwill. If the implied fair value is less than the
carrying amount, a loss would be recognized in other noninterest
expense to reduce the carrying amount to implied fair value of goodwill.
Our goodwill impairment test includes two steps that are preceded by a
“step zero” qualitative test. The qualitative test allows management to
assess whether qualitative factors indicate that it is more likely than not
that impairment exists. If it is not more likely than not that impairment
exists, then the two step quantitative test would not be necessary. These
54
qualitative indicators include factors such as earnings, share price,
market conditions, etc. If the qualitative factors indicate that it is more
likely than not that impairment exists, then the two step quantitative test
would be necessary. Step one is used to identify potential impairment
and compares the estimated fair value of a reporting unit with its
carrying amount, including goodwill. If the estimated fair value of a
reporting unit exceeds its carrying amount, goodwill of the reporting
unit is considered not impaired. If the carrying amount of a reporting
unit exceeds its estimated fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment
loss, if any. Step two of the goodwill impairment test compares the
implied estimated fair value of reporting unit goodwill with the carrying
amount of that goodwill. If the carrying amount of goodwill for that
reporting unit exceeds the implied fair value of that unit’s goodwill, an
impairment loss is recognized in an amount equal to the excess.
Identifiable intangible assets are acquired assets that lack physical
substance but can be distinguished from goodwill because of
contractual or legal rights or because the assets are capable of being
sold or exchanged either on their own or in combination with related
contract, asset or liability. Our intangible assets primarily relate to
core deposits. Management periodically evaluates whether events or
circumstances have occurred that would result in impairment of value.
Financial Condition
Assets.
Our total assets were $1.5 billion at December 31, 2015, a decrease
of $59.1 million, or 3.9%, from total assets at December 31, 2014,
primarily due to the decrease of our investment securities portfolio of
$95.5 million and cash and cash equivalents of $7.3 million, partially
offset by growth of $51.0 million in our loan portfolio.
Loans.
Net loans increased $51.0 million, or 6.5%, to $832.2 million at
December 31, 2015 from $781.2 million at December 31, 2014. Net
loans increased during 2015 primarily due to a $27.9 million increase
in commercial and industrial loans, a $11.4 million increase in one- to
four-family residential loans, a $11.2 million increase in consumer and
other loans, a $4.1 million increase in farmland loans and a $4.0 million
increase in construction and land development loans. Commercial and
industrial loans increased primarily due to an increase in our small
business lending as a result of our participation in the SBLF. Syndicated
loans declined during 2015 from $129.0 million at December 31, 2014
to $105.9 million at December 31, 2015. One- to four-family residential
loans increased due to an increase in our loan originations and the
decision to retain one-to four-family residential loans in our portfolio
rather than sell them in the secondary market. Consumer and other
loans increased due to the continued growth in our commercial lease
originations and due to increased funding associated with an existing
credit facility to a financial institution. The increase in farmland
loans was primarily the result of the increase in the disbursement of
our farmland loan commitments due to the seasonality of farming
operations during the year ended December 31, 2015. The increase in
construction and land development loans was due to increased draws
on lines of credit. There are no significant concentrations of credit to
any individual borrower.
As of December 31, 2015, 63.9% of our loan portfolio was secured
primarily or secondarily by real estate. The largest portion of our
loan portfolio, at 38.3% at December 31, 2015, was non-farm non-
residential loans secured by real estate. Approximately 39.8% of
the loan portfolio is based on a floating rate tied to the prime rate or
London InterBank Offered Rate, or LIBOR, at December 31, 2015.
Approximately 82.6% of the loan portfolio is scheduled to mature within
5 years from December 31, 2015.
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Loan Portfolio Composition.
The tables below sets forth the balance of loans, excluding loans held for sale, outstanding by loan type as of the dates presented, and the percent-
age of each loan type to total loans.
At December 31,
2015
2014
2013
2012
2011
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
(in thousands except for %)
Real Estate:
Construction & land
development
Farmland
1- 4-Family
Multi-family
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total Loans Before Unearned
Income
Less: Unearned income
Total Loans Net Of Unearned
Income
$ 56,132
6.6% $ 52,094
6.6% $ 47,550
6.7% $ 44,856
7.1% $ 78,614
17,672
129,610
12,629
323,363
539,406
25,838
224,201
54,163
2.1%
13,539
1.7%
9,826
15.4%
118,181
14.9%
103,764
1.5%
14,323
1.8%
13,771
1.4%
14.7%
2.0%
11,182
87,473
14,855
1.8%
13.8%
2.4%
11,577
89,202
16,914
38.3%
328,400
41.5%
336,071
47.7%
312,716
49.6%
268,618
63.9% 526,537
66.5% 510,982
72.5% 471,082
74.7% 464,925
3.1%
26,278
3.3%
21,749
3.1%
18,476
26.6%
196,339
24.8%
151,087
21.4%
117,425
6.4%
42,991
5.4%
20,917
3.0%
23,758
2.9%
18.6%
3.8%
17,338
68,025
23,455
304,202
36.1% 265,608
33.5% 193,753
27.5% 159,659
25.3% 108,818
13.7%
2.0%
15.6%
2.9%
46.8%
81.0%
3.0%
11.9%
4.1%
19.0%
843,608
100.0% 792,145
100.0% 704,735
100.0% 630,741
100.0% 573,743
100.0%
(2,025)
(1,824)
(1,569)
(1,241)
(643)
$841,583
$790,321
$703,166
$629,500
$573,100
TOTAL ASSETS
In Billions
TOTAL LOANS
In Millions
1.5
1.2
0.9
0.6
0.3
0.0
2011
2012
2013
2014
2015
1000
800
600
400
200
0
2011
2012
2013
2014
2015
55
2015 ANNUAL REPORT Loan Portfolio Maturities.
The following tables summarize the scheduled repayments of our loan portfolio at December 31, 2015 and 2014. Demand loans, loans having
no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Maturities are based on the final
contractual payment date and do not reflect the effect of prepayments and scheduled principal amortization.
December 31, 2015
More Than
One Year
Through
Five Years
One Year
or Less
After Five
Years
Total
(in thousands)
Real Estate:
Construction & land development
$ 6,450
$ 39,133
$ 10,549
$ 56,132
Farmland
1 – 4-family
Multi-family
Non-farm non-residential
Total Real Estate
Non-real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
4,080
15,543
4,386
9,115
44,109
7,055
4,477
17,672
69,958
129,610
1,188
12,629
63,145
237,223
22,995
323,363
93,604
336,635
109,167
539,406
10,364
28,261
11,834
3,704
11,770
25,838
188,732
41,965
7,208
224,201
364
54,163
50,459
234,401
19,342
304,202
Total Loans Before Unearned Income
$144,063
$571,036
$128,509
843,608
Less: unearned income
Total Loans Net Of Unearned Income
(2,025)
$841,583
December 31, 2014
More Than
One Year
Through
Five Years
One Year
or Less
After Five
Years
Total
(in thousands)
Real Estate:
Construction & land development
$ 19,747
$ 30,376
$
1,971
$ 52,094
Farmland
1 – 4-family
Multi-family
Non-farm non-residential
Total Real Estate
Non-real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
1,084
20,869
5,437
9,135
32,048
7,686
3,320
13,539
65,264
118,181
1,200
14,323
69,575
222,648
36,177
328,400
116,712
301,893
107,932
526,537
12,190
32,140
6,642
3,214
147,005
30,660
10,874
17,194
5,689
26,278
196,339
42,991
50,972
180,879
33,757
265,608
Total Loans Before Unearned Income
$167,684
$482,772
$141,689
Less: unearned income
Total Loans Net Of Unearned Income
792,145
(1,824)
$790,321
56
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. The following table sets forth the scheduled repayments of fixed and
adjustable-rate loans at December 31, 2015 that are contractually due
after December 31, 2016.
One to five years
Five to 15 years
Over 15 years
Subtotal
Nonaccrual loans
Total
Due After December 31, 2015
(in thousands)
Fixed
Floating
Total
$315,685
$246,374
$562,059
49,197
36,438
31,456
9,333
80,653
45,771
$401,320
$287,163
$688,483
20,039
$668,444
As of December 31, 2015, $132.9 million of floating rate loans were
at their interest rate floor. At December 31, 2014, $195.7 million of
floating rate loans were at the floor rate. Nonaccrual loans have been
excluded from these totals.
Non-performing Assets.
Non-performing assets consist of non-performing loans and other real-
estate owned. Non-performing loans (including nonaccruing troubled
debt restructurings described below) are those on which the accrual
of interest has stopped or loans which are contractually 90 days past
due on which interest continues to accrue. Loans are ordinarily placed
on nonaccrual status when principal and interest is delinquent for
90 days or more. However, management may elect to continue the
accrual when the estimated net available value of collateral is sufficient
to cover the principal balance and accrued interest. It is our policy
to discontinue the accrual of interest income on any loan for which
we have reasonable doubt as to the payment of interest or principal.
When a loan is placed on nonaccrual status, unpaid interest credited
to income is reversed. Nonaccrual loans are returned to accrual
status when the financial position of the borrower indicates there is no
longer any reasonable doubt as to the payment of principal or interest.
Other real estate owned consists of property acquired through formal
foreclosure, in-substance foreclosure or by deed in lieu of foreclosure.
57
2015 ANNUAL REPORT The following table shows the principal amounts and categories of our non-performing assets at December 31, 2015, 2014, 2013, 2012 and 2011.
Nonaccrual loans:
Real Estate:
Construction and land development
Farmland
1 – 4-family residential
Multi-family
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total nonaccrual loans
Loans 90 days and greater delinquent & still accruing:
Real Estate:
Construction and land development
Farmland
1 - 4-family residential
Multi-family
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total loans 90 days and greater delinquent & still accruing
Total non-performing loans
Other real estate owned and foreclosed assets:
Real Estate:
Construction and land development
Farmland
1 – 4-family residential
Multi-family
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total other real estate owned and foreclosed assets
Total non-performing assets
Non-performing assets to total loans
Non-performing assets to total assets
Non-performing loans to total loans
58
2015
2014
December 31,
2013
(in thousands)
2012
2011
$ 558
117
4,538
9,045
2,934
17,192
2,628
48
171
2,847
20,039
$
486
153
3,819
-
4,993
9,451
832
1,907
4
2,743
12,194
$
73
130
4,248
-
7,539
11,990
526
1,946
23
2,495
14,485
-
19
391
-
-
410
-
-
-
-
410
20,449
25
-
880
-
672
1,577
-
-
599
-
-
599
-
-
-
-
599
12,793
127
-
1,121
-
950
2,198
-
-
414
-
-
414
-
-
-
-
414
14,899
754
-
1,803
-
800
3,357
-
-
-
-
1,577
$22,026
-
-
-
-
2,198
$14,991
-
-
-
-
3,357
$18,256
$
854
312
4,603
-
11,571
17,340
512
2,831
5
3,348
20,688
-
-
455
-
-
455
-
-
-
-
455
21,143
1,083
-
1,186
-
125
2,394
-
-
-
-
2,394
$23,537
$ 1,520
562
5,647
-
12,400
20,129
315
1,986
20
2,321
22,450
-
-
309
-
419
728
-
-
8
8
736
23,186
1,161
-
1,342
-
3,206
5,709
-
-
-
-
5,709
$28,895
2.62%
1.51%
2.43%
1.90%
0.99%
1.62%
2.60%
1.27%
2.12%
3.74%
1.67%
3.36%
5.04%
2.13%
4.05%
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. For the years ended December 31, 2015 and 2014, gross interest
income which would have been recorded had the non-performing
loans been current in accordance with their original terms amounted
to $1.1 million and $0.9 million, respectively. We recognized $0.1
million and $0.4 million of interest income on such loans during the
years ended December 31, 2015 and 2014, respectively. For the years
ended December 31, 2015 and 2014, gross interest income which
would have been recorded had the troubled debt restructured loans
been current in accordance with their original terms amounted to $0.3
million and $0.2 million, respectively. We recognized $0.2 million and
$0.1 million of interest income on such loans during the years ended
December 31, 2015 and 2014, respectively.
Non-performing assets were $22.0 million, or 1.51%, of total assets
at December 31, 2015, compared to $15.0 million, or 0.99%, of total
assets at December 31, 2014, which represented an increase in non-
performing assets of $7.0 million. The increase in non-performing
assets occurred primarily as a result of an increase in non-accrual
loans from $12.2 million at December 31, 2014 to $20.0 million at
December 31, 2015. The increase in non-performing assets was
concentrated in multi-family real estate loans. This increase was
partially offset by a decrease in other real estate owned of $0.6 million
to $1.6 million at December 31, 2015. Non-performing assets includes
$2.1 million, or 9.5% in loans with a government guarantee. These are
structured as net loss guarantees in which up to 90% of loss exposure
is covered.
At December 31, 2015, our largest non-performing assets were
comprised of the following nonaccrual loans: (1) a multi-family real
estate loan with a balance of $5.3 million secured by commercial
property; (2) a multi-family real estate loan with a balance of $2.9
million secured by commercial property; (3) a non-farm non-residential
loan with a balance of $1.8 million secured by commercial property;
and (4) a lending relationship with three one- to four-family residential
loans that in aggregate total $1.7 million.
Troubled Debt Restructuring.
Another category of assets which contribute to our credit risk is troubled
debt restructurings (“TDRs”). A TDR is a loan for which a concession
has been granted to the borrower due to a deterioration of the borrower’s
financial condition. Such concessions may include reduction in interest
rates, deferral of interest or principal payments, principal forgiveness
and other actions intended to minimize the economic loss and to
avoid foreclosure or repossession of the collateral. We strive to identify
borrowers in financial difficulty early and work with them to modify to
more affordable terms before such loan reaches nonaccrual status. In
evaluating whether to restructure a loan, Management analyzes the
long-term financial condition of the borrower, including guarantor and
collateral support, to determine whether the proposed concessions will
increase the likelihood of repayment of principal and interest. TDRs
that are not performing in accordance with their restructured terms
and are either contractually 90 days past due or placed on nonaccrual
status are reported as non-performing loans. Our policy provides
that nonaccrual TDRs are returned to accrual status after a period
of satisfactory and reasonable future payment performance under
the terms of the restructuring. Satisfactory payment performance is
generally no less than six consecutive months of timely payments and
demonstrated ability to continue to repay.
The following is a summary of loans restructured as TDRs at December
31, 2015, 2014 and 2013:
At December 31,
2015
2014
2013
(in thousands)
TDRs:
In Compliance with Modified Terms
$3,431
$2,998
$3,006
Past Due 30 through 89 days and still
accruing
Past Due 90 days and greater and
still accruing
Nonaccrual
Restructured Loans that subsequently
defaulted
Total TDR
-
-
368
2,204
-
-
-
-
-
1,908
230
230
$5,707
$5,432
$3,236
At December 31, 2015, the outstanding balance of our troubled
debt restructurings, was $5.7 million as compared to $5.4 million at
December 31, 2014. At December 31, 2015, we had five outstanding
TDRs: (1) a $2.9 million non-farm non-residential loan secured by
commercial real estate, which is performing in accordance with its
modified terms; (2) a $1.7 million relationship with three individual
loans secured by one-to four-family residential properties that
subsequently defaulted and is on non-accrual; (3) a $0.4 million
construction and land development loan secured by raw land that is on
non-accrual; (4) a $0.4 million non-farm non-residential loan secured
by commercial real estate, which is performing in accordance with its
modified terms; and (5) a $0.2 million loan secured by commercial real
estate that subsequently defaulted and is on non-accrual. Relationship
number three was a new troubled debt restructuring in 2015. The
other relationships were from prior years. The restructuring of these
loans were related to interest rate or amortization concessions.
Classified Assets.
Federal regulations provide for the classification of loans and other
assets, such as debt and equity securities considered by the FDIC to
be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is
considered “substandard” if it is inadequately protected by the current
net worth and paying capacity of the obligor or of the collateral pledged, if
any. “Substandard” assets include those characterized by the “distinct
possibility” that the insured institution will sustain “some loss” if the
deficiencies are not corrected. Assets classified as “doubtful” have all
of the weaknesses inherent in those classified as “substandard,” with
the added characteristic that the weaknesses present make “collection
or liquidation in full,” on the basis of currently existing facts, conditions,
and values, “highly questionable and improbable.” Assets classified
as “loss” are those considered “uncollectible” and of such little value
that their continuance as assets without the establishment of a specific
allowance for loan losses is not warranted. Assets that do not currently
expose the insured institution to sufficient risk to warrant classification
in one of the aforementioned categories but possess weaknesses are
designated as “special mention” by our management.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances in
an amount deemed prudent by management to cover losses that
were both probable and reasonable to estimate. General allowances
represent allowances which have been established to cover accrued
losses associated with lending activities that were both probable and
reasonable to estimate, but which, unlike specific allowances, have
not been allocated to particular problem assets. When an insured
59
2015 ANNUAL REPORT institution classifies problem assets as “loss,” it is required either to
establish a specific allowance for losses equal to 100% of that portion
of the asset so classified or to charge-off such amount. An institution’s
determination as to the classification of its assets and the amount of its
valuation allowances is subject to review by the regulatory authorities,
which may require the establishment of additional general or specific
allowances.
In connection with the filing of our periodic regulatory reports and in
accordance with our classification of assets policy, we continuously
assess the quality of our loan portfolio and we regularly review the
problem loans in our loan portfolio to determine whether any loans
require classification in accordance with applicable regulations.
Loans are listed on the “watch list” initially because of emerging
financial weaknesses even though the loan is currently performing as
agreed, or delinquency status, or if the loan possesses weaknesses
although currently performing. Management reviews the status of our
loan portfolio delinquencies, by product types, with the full board of
directors on a monthly basis. Individual classified loan relationships
are discussed as warranted. If a loan deteriorates in asset quality,
the classification is changed to “special mention,” “substandard,”
“doubtful” or “loss” depending on the circumstances and the
evaluation. Generally, loans 90 days or more past due are placed on
nonaccrual status and classified “substandard.”
We also employ a risk grading system for our loans to help assure that
we are not taking unnecessary and/or unmanageable risk. The primary
objective of the loan risk grading system is to establish a method of
assessing credit risk to further enable Management to measure loan
portfolio quality and the adequacy of the allowance for loan losses.
Further, we contract with an external loan review firm to complete
a credit risk assessment of the loan portfolio on a regular basis to
help determine the current level and direction of our credit risk. The
external loan review firm communicates the results of their findings
to the Bank’s audit committee. Any material issues discovered in an
external loan review are also communicated to us immediately.
The following table sets forth our amounts of classified loans and loans
designated as special mention at December 31, 2015, 2014 and
2013. Classified assets totaled $58.7 million at December 31, 2015,
and included $20.4 million of non-performing loans.
Classification of Loans:
Substandard
Doubtful
Total Classified Assets
Special Mention
At December 31,
2015
2014
2013
(in thousands)
$58,654
$44,752
$ 39,856
-
-
-
$58,654
$44,752
$39,856
$10,752
$28,702
$21,327
The increase in classified assets at December 31, 2015 as compared
to December 31, 2014 was due to a $13.9 million increase in
substandard loans. The increase in classified assets came primarily
from assets previously designated as special mention that were moved
to substandard. Substandard loans at December 31, 2015 consisted of
$23.4 million in non-farm non-residential, $9.5 million in commercial
and industrial, $9.0 million in multi-family, $7.3 million in one- to four-
family residential, $5.0 million in agricultural and the remaining $4.4
million comprised of farmland, construction and land development
and consumer and other loans. Substandard loans included one
syndicated loan with a principal balance of $7.9 million that provides
services for the oil and gas industry.
60
Allowance for Loan Losses.
The allowance for loan losses is maintained to absorb potential losses
in the loan portfolio. The allowance is increased by the provision for
loan losses offset by recoveries of previously charged off loans and is
decreased by loan charge-offs. The provision is a charge to current
expense to provide for current loan losses and to maintain the allowance
commensurate with Management’s evaluation of the risks inherent in
the loan portfolio. Various factors are taken into consideration when
determining the amount of the provision and the adequacy of the
allowance. These factors include but are not limited to:
• past due and non-performing assets;
• specific internal analysis of loans requiring special attention;
• the current level of regulatory classified and criticized assets and the
associated risk factors with each;
• changes in underwriting standards or lending procedures and
policies;
• charge-off and recovery practices;
• national and local economic and business conditions;
• nature and volume of loans;
• overall portfolio quality;
• adequacy of loan collateral;
• quality of loan review system and degree of oversight by our board
of directors;
• competition and legal and regulatory requirements on borrowers;
• examinations of the loan portfolio by federal and state regulatory
agencies and examinations; and
• review by our internal loan review department and independent
accountants.
The data collected from all sources in determining the adequacy of
the allowance is evaluated on a regular basis by Management with
regard to current national and local economic trends, prior loss
history, underlying collateral values, credit concentrations and industry
risks. An estimate of potential loss on specific loans is developed in
conjunction with an overall risk evaluation of the total loan portfolio.
This evaluation is inherently subjective as it requires estimates that
are susceptible to significant revision as new information becomes
available.
The allowance consists of specific, general and unallocated
components. The specific component relates to loans that are
classified as doubtful, substandard and impaired. For such loans that
are also classified as impaired, an allowance is established when the
discounted cash flows (or collateral value or observable market price)
of the impaired loan is lower than the carrying value of that loan. Also, a
specific reserve is allocated for our syndicated loans, including shared
national credits. The general component covers non-classified loans
and special mention loans and is based on historical loss experience
for the past three years adjusted for qualitative factors described
above. An unallocated component is maintained to cover uncertainties
that could affect the estimate of probable losses.
The allowance for losses was $9.4 million at December 31, 2015
compared to $9.1 million at December 31, 2014.
The balance in the allowance for loan losses is principally influenced by
the provision for loan losses and by net loan loss experience. Additions
to the allowance are charged to the provision for loan losses. Losses
are charged to the allowance as incurred and recoveries on losses
previously charged to the allowance are credited to the allowance at
the time recovery is collected.
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. The table below reflects the activity in the allowance for loan losses for the years indicated.
Balance at beginning of year
$9,105
$ 10,355
$ 10,342
$ 8,879
$ 8,317
At or For the Years Ended December 31,
2015
2014
2013
2012
2011
(dollars in thousands)
Charge-offs:
Real Estate:
Construction and land development
(559)
(1,032)
Farmland
1 – 4-family residentiall
Multi-family
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial loans
Consumer and other
Total Non-Real Estate
Total charge-offs
Recoveries:
Real Estate:
Construction and land development
Farmland
1 – 4-family residential
Multi-family
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial loans
Consumer and other
Total Non-Real Estate
Total recoveries
Net (charge-offs) recoveries
Provision for loan losses
Balance at end of year
Ratios:
-
(410)
(947)
(233)
(31)
(65)
(1,093)
-
(144)
-
(589)
(220)
(1,409)
(1,613)
-
-
(1,137)
(1,515)
(1,148)
(187)
(459)
-
(5,193)
(3,053)
(3,136)
(1,632)
(2,120)
(8,043)
(491)
(79)
(550)
(1,120)
(4,173)
(2)
(266)
(289)
(557)
(41)
(1,098)
(262)
(49)
(809)
(473)
(23)
(1,638)
(653)
(1,401)
(1,331)
(2,314)
(3,693)
(3,033)
(3,451)
(10,357)
5
-
94
46
5
150
3
315
151
469
619
6
-
99
49
9
163
1
118
199
318
481
10
140
49
-
8
207
5
71
243
319
526
15
1
35
-
116
167
1
329
283
613
780
1
-
118
-
13
132
2
371
227
600
732
(3,554)
(3,212)
(2,507)
(2,671)
(9,625)
3,864
1,962
2,520
4,134
10,187
$9,415
$9,105
$10,355
$ 10,342
$ 8,879
Net loan charge-offs to average loans
Net loan charge-offs to loans at end of year
Allowance for loan losses to loans at end of year
Net loan charge-offs to allowance for loan losses
Net loan charge-offs to provision charged to expense
0.44%
0.42%
1.12%
0.45%
0.41%
1.15%
0.38%
0.36%
1.47%
0.45%
0.42%
1.64%
1.65%
1.68%
1.55%
37.75%
35.28%
24.21%
25.83%
108.40%
91.98%
163.71%
99.48%
64.61%
94.48%
61
2015 ANNUAL REPORT A provision for loan losses of $3.9 million was made during the year
ended December 31, 2015 as compared to $2.0 million for 2014. The
provisions made in 2015 were taken to provide for current loan losses
as a result of increased charge-offs and to maintain the allowance
proportionate to risks inherent in the loan portfolio.
Total charge-offs were $4.2 million during the year ended December
31, 2015 as compared to $3.7 million for 2014. Recoveries totaled
$0.6 million for the year ended December 31, 2015 and $0.5 million
during 2014. Comparing the year ended December 31, 2015 to the
year ended December 31, 2014, the increase in the allowance was
attributed to growth in the loan portfolio. The primary change to the
credit quality of the loan portfolio was associated with the downgrades
of loans. Special mention loans decreased principally due to the
downgrade of loans from special mention to substandard.
The charged-off loan balances for the year ended December 31,
2015 were concentrated in five loan relationships which totaled
$2.5 million, or 61.4%, of the total charged-off amount. The details of
the $4.2 million in charged-off loans were as follows:
• First Guaranty recorded a partial charge-off of $0.8 million on a non-
farm non-residential loan. The loan had a balance of $1.8 million at
December 31, 2015.
• First Guaranty recorded a partial charge-off of $0.5 million on a multi-
family loan. The loan had a balance of $0.9 million at December 31,
2015.
• First Guaranty recorded a partial charge-off of $0.5 million on a multi-
family loan. The loan had a balance of $5.3 million at December 31,
2015.
• First Guaranty recorded a partial charge-off of $0.4 million
on a construction and
loan relationship.
The relationship had a balance of $0.4 million at December 31,
2015.
land development
• First Guaranty charged off a $0.3 million agriculture loan.
• The remaining $1.7 million of charge-offs for 2015 were comprised
of smaller loans and overdrawn deposit accounts.
Allocation of Allowance for Loan Losses.
The following tables set forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at
the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category
and does not restrict the use of the allowance for losses in other categories.
At December 31,
2015
2014
Allowance
for Loan
Losses
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Allowance
for Loan
Losses
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of Loans in
Each Category to
Total Loans
Real Estate:
Construction and land development
$
Farmland
1 - 4-family residential
Multi-family
Non-farm non-residential
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
962
54
1,771
557
3,298
16
2,527
230
10.2%
0.6%
18.8%
5.9%
35.0%
0.2%
26.9%
2.4%
(dollars in thousands)
6.6%
2.1%
15.4%
1.5%
38.3%
3.1%
26.6%
6.4%
$
702
21
2,131
813
2,713
293
1,797
371
7.7%
0.2%
23.4%
8.9%
29.8%
3.2%
19.8%
4.1%
6.6%
1.7%
14.9%
1.8%
41.5%
3.3%
24.8%
5.4%
-
-%
-%
264
2.9%
-%
Total Allowance
$ 9,415
100.0%
100.0%
$ 9,105
100.0%
100.0%
62
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC.
At December 31,
2013
2012
Allowance
for Loan
Losses
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Allowance
for Loan
Losses
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of
Loans in Each
Category to
Total Loans
(dollars in thousands)
Real Estate:
Construction and land development
$ 1,530
Farmland
1 - 4-family residential
Multi-family
Non-farm non-residential
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
17
1,974
376
3,607
46
2,176
208
421
14.8%
0.2%
19.1%
3.6%
34.8%
0.4%
21.0%
2.0%
6.7%
1.4%
14.7%
2.0%
47.7%
3.1%
21.4%
3.0%
4.1%
-%
$ 1,098
50
2,239
284
3,666
64
2,488
233
220
10.6%
0.5%
21.7%
2.7%
35.4%
0.6%
24.1%
2.3%
7.1%
1.8%
13.8%
2.4%
49.6%
2.9%
18.6%
3.8%
2.1%
-%
Total Allowance
$10,355
100.0%
100.0%
$10,342
100.0%
100.0%
Real Estate:
Construction and land development
Farmland
1 - 4-family residential
Multi-family
Non-farm non-residential
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
Total Allowance
At December 31,
2011
Allowance
for Loan
Losses
Percent of
Allowance to Total
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
(dollars in thousands)
$ 1,002
65
1,917
780
2,980
125
1,407
314
289
11.3%
0.7%
21.6%
8.8%
33.6%
1.4%
15.8%
3.5%
3.3%
13.7%
2.0%
15.6%
2.9%
46.8%
3.0%
11.9%
4.1%
-%
$ 8,879
100.0%
100.0%
63
2015 ANNUAL REPORT
Investment Securities.
Investment securities at December 31, 2015 totaled $546.1 million,
a decrease of $95.5 million, or 14.9%, compared to $641.6 million
at December 31, 2014. The decrease was primarily attributed to the
sale of short-term U.S. government agencies and corporate bonds.
Our investment securities portfolio is comprised of both available-for-
sale securities and securities that we intend to hold to maturity. We
purchase securities for our investment portfolio to provide a source of
liquidity, to provide an appropriate return on funds invested, to manage
interest rate risk and meet pledging requirements for public funds and
borrowings. In particular, our held-to-maturity securities portfolio is
used as collateral for our public funds deposits.
The securities portfolio consisted principally of U.S. Government and
Government agency securities, agency mortgage-backed securities,
corporate debt securities and municipal bonds. U.S. government
agencies consist of FHLB, Federal Farm Credit Bank (“FFCB”), Freddie
Mac and Fannie Mae obligations. Mortgage backed securities that we
purchase are issued by Freddie Mac and Fannie Mae. Management
monitors the securities portfolio for both credit and interest rate risk.
We generally limit the purchase of corporate securities to individual
issuers to manage concentration and credit risk. Corporate securities
generally have a maturity of 10 years or less. U.S. Government
securities consist of U.S. Treasury bills that have maturities of less than
30 days. Government agency securities generally have maturities of
15 years or less. Agency mortgage backed securities have stated final
maturities of 15 to 20 years.
At December 31, 2015, the U.S Government and Government agency
securities and municipal bonds qualified as securities available to
collateralize public funds. Securities pledged totaled $427.4 million at
December 31, 2015 and $516.5 million at December 31, 2014. Our
public funds deposits have a seasonal increase due to tax collections
at the end of the year and the first quarter. We typically collateralize the
seasonal public fund increases with short-term instruments such as
U.S. Treasuries or other agency backed securities.
The following table sets forth the amortized cost and fair values of our
securities portfolio at the dates indicated.
2015
At December 31,
2014
(in thousands)
2013
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$ 29,999
$ 29,999
$ 36,000
$ 36,000
$ 36,000
$ 36,000
165,364
163,811
295,620
291,495
302,816
286,699
105,680
105,136
126,654
130,063
142,580
144,481
580
47,339
28,891
582
48,233
28,608
570
574
564
556
40,599
41,676
16,091
16,475
-
-
-
-
$377,853
$376,369
$499,443
$499,808
$498,051
$484,211
$ 77,343
$ 76,622
$ 84,479
$ 82,529
$ 86,927
$ 80,956
92,409
91,526
57,316
57,159
63,366
60,686
$169,752
$168,148
$141,795
$139,688
$150,293
$141,642
Available-for-sale:
U.S Treasuries
U.S. Government Agencies
Corporate debt securities
Mutual funds or other equity securities
Municipal bonds
Mortgage-backed securities
Total available-for-sale securities
Held-to-maturity:
U.S. Government Agencies
Mortgage-backed securities
Total held-to-maturity securities
Our available-for-sale securities portfolio totaled $376.4 million at
December 31, 2015, a decrease of $123.4 million, or 24.7%, compared
to $499.8 million at December 31, 2014. The decrease was due to the
transfer of securities classified as available-for-sale to held-to-maturity
along with the sale and maturities of short-term US government
agencies and corporate bonds. The securities transferred to held-
to-maturity were $51.8 million of government agency securities with
unrealized losses of $128,000. These securities are primarily used for
the collateralization of public funds deposits. These securities have a
contractual maturity of five to ten years. First Guaranty completed its
liquidation of the common stock from a converted preferred security in
the third quarter of 2015 that generated a gain on sale of $2.7 million.
During 2015, First Guaranty deemed two corporate debt securities to
be other-than-temporarily impaired. Credit related impairment in the
amount of $0.2 million was charged to earnings. Non-credit related
other-than-temporary impairment of $0.4 million was recorded in other
comprehensive income. No other declines in fair value were deemed
other-than-temporary. During 2014 and 2013 there were no other-than-
temporary charges recorded on First Guaranty's investment portfolio.
Our held-to-maturity securities portfolio had an amortized cost of $169.8
million at December 31, 2015, an increase of $28.0 million, or 19.7%,
compared to $141.8 million at December 31, 2014. The increase was
due to the transfer of securities classified as available-for-sale to held-to-
maturity of $51.8 million, and the purchase of $48.3 million of securities
classified as held-to-maturity that was partially offset by early payoffs of
$64.1 million of government agencies and the continued amortization of
our mortgage-backed securities.
64
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. The following table sets forth the stated maturities and weighted average yields of our investment securities at December 31, 2015 and 2014.
At December 31, 2015
One Year or Less
Carrying
Value
Weighted
Average
Yield
More than One Year
through Five Years
More than Five Years
through Ten Years
More than Ten Years
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
(in thousands except for %)
Available-for-sale:
U.S Treasuries
U.S. Government Agencies
Corporate and other debt securities
Mutual funds or other equity securities
Municipal bonds
Mortgage-backed securities
$ 29,999
0.1%
$
-
-
-%
7,656
3.5%
-
-%
86,856
47,586
-
-%
1.6%
4.1%
-%
$
-
-%
$
-
-%
67,173
2.4%
47,895
3.8%
-
-%
9,782
3.0%
1,999
4.4%
582
-%
1,250
1.7%
4,482
2.1%
7,638
2.8%
34,863
2.7%
-
-%
-
-%
-
-%
28,608
2.6%
Total available-for-sale securities
$ 38,905
0.8%
$ 138,924
2.5%
$ 122,706
3.0%
$ 75,834 2.8%
Held-to-maturity:
U.S. Government Agencies
Mortgage-backed securities
Corporate and other debt securities
Total held-to-maturity securities
$
$
-
-
-
-
-%
-%
-%
-%
$ 21,803
1.6%
$ 55,540
2.2%
$
-
-%
-
-
-%
-%
-
-
-%
-%
92,409
2.4%
-
-%
$ 21,803
1.6%
$ 55,540
2.2%
$92,409 2.4%
December 31, 2014
One Year or Less
Carrying
Value
Weighted
Average
Yield
More than One Year
through Five Years
More than Five Years
through Ten Years
More than Ten Years
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
(in thousands except for %)
Available-for-sale:
U.S Treasuries
U.S. Government Agencies
Corporate debt securities
Mutual funds or other equity securities
Municipal bonds
Mortgage-backed securities
$ 36,000
15,029
18,834
-
0.0%
0.3%
1.7%
-%
$
-
-%
$
-
-%
$
-
-%
160,611
1.0%
94,787
1.9%
21,068
3.0%
53,797
3.8%
53,748
3.9%
3,684
4.7%
-
-%
-
-%
574
0.0%
1,802
2.0%
5,377
1.9%
8,996
3.2%
25,501
3.0%
-
-%
-
-%
-
-%
-
-%
Total available-for-sale securities
$ 71,665
0.6%
$ 219,785
1.7%
$ 157,531 2.7%
$ 50,827
3.1%
Held-to-maturity:
U.S. Government Agencies
Mortgage-backed securities
Corporate and other debt securities
Total held-to-maturity securities
$
$
-
-
-
-
-%
-%
-%
-%
$ 24,999
1.2%
$ 59,480
1.9%
$
-
-%
-
-
-%
-%
-
-
-%
-%
57,316
2.2%
-
-%
$ 24,999
1.2%
$ 59,480 1.9%
$57,316
2.2%
65
2015 ANNUAL REPORT At December 31, 2015, $38.9 million, or 7.1%, of the securities portfolio
was scheduled to mature in less than one year. Securities, not including
mortgage-backed securities, with contractual maturity dates over 10
years totaled $47.2 million, or 8.7%, of the total portfolio at December
31, 2015. We closely monitor the investment portfolio’s yield, duration
and maturity to ensure a satisfactory return. The average maturity of
the securities portfolio is affected by call options that may be exercised
by the issuer of the securities and are influenced by market interest
rates. Prepayments of mortgages that collateralize mortgage-backed
securities also affect the maturity of the securities portfolio. Based on
internal forecasts at December 31, 2015, we believe that the securities
portfolio has a forecasted weighted average life of approximately 5.3
years based on the current interest rate environment. A parallel interest
rate shock of 400 basis points is forecasted to increase the weighted
average life of the portfolio to approximately 5.7 years.
At December 31, 2015, the following table identifies the issuers, and
the aggregate amortized cost and aggregate fair value of the securities
of such issuers that exceeded 10% of our total shareholders’ equity:
U.S. Treasuries
FHLB
Freddie Mac
Fannie Mae
Federal Farm Credit Bank
Total
At December 31, 2015
Amortized
Cost
Fair Value
(in thousands)
$ 29,999 $ 29,999
85,507
66,271
84,689
65,589
127,504
126,294
84,726
83,996
$394,007 $390,567
1500
1200
900
600
300
0
TOTAL DEPOSITS
In Millions
2011
2012
2013
2014
2015
Deposits
Managing the mix and pricing the maturities of deposit liabilities is
an important factor affecting our ability to maximize our net interest
margin. The strategies used to manage interest-bearing deposit
liabilities are designed to adjust as the interest rate environment
changes. We regularly assess our funding needs, deposit pricing and
interest rate outlooks. From December 31, 2014 to December 31,
2015, total deposits decreased $76.0 million, or 5.5%, to $1.3 billion.
Time deposits decreased $65.0 million, or 9.9%, to $592.0 million at
December 31, 2015 compared to $657.0 million at December 31,
2014. The majority of the decrease in time deposits was associated
with the maturity of higher priced individual and business time deposits
that did not renew. Noninterest-bearing demand deposits increased
$5.2 million from December 31, 2014 to December 31, 2015. Interest-
bearing demand deposits decreased $23.1 million from December 31,
2014 to December 31, 2015. First Guaranty had $26.7 million in
brokered deposits at December 31, 2015.
As we seek to strengthen our net interest margin and improve our
earnings, attracting core noninterest-bearing deposits will be a primary
emphasis. Management will continue to evaluate and update our
product mix in its efforts to attract additional core customers. We
currently offer a number of noninterest-bearing deposit products that
are competitively priced and designed to attract and retain customers
with primary emphasis on core deposits.
66
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. The following table sets forth the distribution of deposit accounts, by account type, for the dates indicated.
Total Deposits
2015
2014
2013
For the Years Ended December 31,
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
(in thousands except for %)
Noninterest-bearing Demand
$ 211,584
15.9%
0.0% $ 200,127
15.3%
0.0% $ 196,589
15.8%
Interest-bearing Demand
Savings
Time
Total Deposits
401,617
30.2%
77,726
5.8%
640,134
48.1%
0.4%
0.0%
1.1%
386,363
29.6%
69,719
5.4%
649,165
49.7%
0.3%
0.0%
1.2%
334,573
26.8%
64,639
5.2%
650,540
52.2%
$1,331,061 100.0%
0.6% $1,305,374
100.0%
0.8%
$1,246,341 100.0%
0.0%
0.4%
0.1%
1.5%
0.9%
Individual and Business Deposits
2015
2014
2013
For the Years Ended December 31,
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
(in thousands except for %)
Noninterest-bearing Demand
$ 207,334
0.0% $ 197,332
0.0% $ 193,773
27.6%
15.0%
8.7%
112,864
65,775
25.3%
13.5%
7.9%
105,569
61,288
0.2%
0.1%
1.4%
24.6%
10.9%
7.3%
85,384
57,819
0.0%
0.3%
0.1%
1.8%
0.2%
0.0%
1.4%
366,244
48.7%
414,975
53.3%
450,178
57.2%
Interest-bearing Demand
Savings
Time
Total Individual and Business
Deposits
$ 752,217
100.0%
0.7% $ 779,164
100.0%
0.8% $ 787,154
100.0%
1.1%
Public Fund Deposits
2015
2014
2013
For the Years Ended December 31,
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
Average
Balance
Percent
Weighted
Average
Rate
(in thousands except for %)
Noninterest-bearing Demand
$
4,250
0.7%
Interest-bearing Demand
Savings
Time
288,753
49.9%
11,951
2.1%
273,890
47.3%
0.0%
0.4%
0.0%
0.7%
$
2,795
0.5%
0.0% $ 2,816
0.6%
280,794
53.4%
0.4% 249,189
54.3%
8,431
1.6%
0.0%
6,820
1.5%
234,190
44.5%
0.7% 200,362
43.6%
Total Public Funds
$578,844 100.0%
0.5%
$ 526,210
100.0%
0.5% $459,187
100.0%
0.0%
0.4%
0.1%
0.8%
0.6%
At December 31, 2015, public funds deposits totaled $568.7
million compared to $601.5 million at December 31, 2014. We have
developed a program for the retention and management of public
funds deposits. Since the end of 2012, we have maintained public
funds deposits in excess of $400.0 million. These deposits are from
public entities such as school districts, hospital districts, sheriff
departments and municipalities. $462.9 million of these accounts at
December 31, 2015 are under contracts with terms of three years or
less. Three of these relationships account for 42.5% of our contract
public funds deposits, each of which is currently under contract with
us. These deposits generally have stable balances as we maintain both
operating accounts and time deposits for these entities. There is a
seasonal component to public deposit levels associated with annual tax
collections. Public funds deposits will increase at the end of the year
and the first quarter. Public funds deposit accounts are collateralized
by FHLB letters of credit, by Louisiana municipal bonds and eligible
government and government agency securities such as those issued
by the FHLB, FFCB, Fannie Mae and Freddie Mac. We invest the
majority of these public deposits in our investment portfolio, but have
increasingly invested more public funds into loans during the last three
years.
67
2015 ANNUAL REPORT The following table sets forth our public funds as a percent of total deposits.
Public Funds:
Noninterest-bearing Demand
Interest-bearing Demand
Savings
Time
Total Public Funds
Total Deposits
At December 31,
2015
2014
2013
2012
(in thousands except for %)
$
4,906
$
3,241
$
3,016
$
3,735
296,416
14,667
252,688
321,382
10,142
266,743
296,739
7,209
208,614
265,296
6,415
195,052
$ 568,677
$ 601,508
$ 515,578
$ 470,498
$1,295,870
$1,371,839
$1,303,099
$1,252,612
Total Public Funds as a percent of Total Deposits
43.9%
43.9%
39.6%
37.6%
First Guaranty Bancshares had senior long-term debt totaling $25.8
million at December 31, 2015, an increase of $24.4 million, as
compared to $1.5 million at December 31, 2014. The increase in long-
term senior debt was due to the new term loan with a balance of $25.0
million at December 31, 2015 which was used to assist in repaying
SBLF in December 2015.
First Guaranty also had junior subordinated debentures totaling $14.6
million at December 31, 2015 which were used to assist in repaying
the preferred stock issued in connection with the SBLF program in
December 2015.
Shareholders’ Equity
Total shareholders’ equity decreased to $118.2 million at December
31, 2015 from $139.6 million at December 31, 2014. The decrease in
total shareholders’ equity was principally the result of the redemption of
the Series C Preferred Stock for $39.4 million in December 2015 from
the U.S. Treasury in order to exit the SBLF program. The decrease was
partially offset by the net proceeds of $9.3 million from the issuance of
common stock in a public offering which closed in the fourth quarter
of 2015. Total shareholders' equity also increased due to net income
of $14.5 million during the year ended December 31, 2015, partially
offset by $4.2 million in cash dividends paid on our common stock
and $0.4 million in dividends paid on our preferred stock. The change
in the balance of the accumulated other comprehensive income from
a $0.2 million gain at December 31, 2014 to a $0.9 million loss at
December 31, 2015 also reduced shareholders' equity. The reduction
was due to a $1.6 million reduction in the gross unrealized mark to
market gains on available-for-sale securities (before taxes).
At December 31, 2015, the aggregate amount of outstanding
certificates of deposit in amounts greater than or equal to $100,000 was
approximately $426.1 million. At December 31, 2015, approximately
$114.2 million of our certificates of deposit greater than or equal to
$100,000 had a remaining term greater than one year.
The following table sets forth the maturity of the total certificates of
deposit greater than or equal to $100,000 at December 31, 2015.
Due in one year or less
Due after one year through three years
Due after three years
Total certificates of deposit greater than or
equal to $100,000
December 31,
2015
(in thousands)
$ 311,868
88,315
25,885
$ 426,068
Borrowings.
We maintain borrowing relationships with other financial institutions
as well as the FHLB on a short and long-term basis to meet liquidity
needs. Short-term borrowings totaled $1.8 million at December 31,
2015 and 2014. The short-term borrowings at December 31, 2015
were comprised of a line of credit of $2.5 million, with an outstanding
balance of $1.8 million.
At December 31, 2015, we had $195.0 million in FHLB letters of credit
outstanding obtained solely for collateralizing public deposits.
The following table sets forth information concerning balances and
interest rates on our short-term borrowings at the dates and for the
years indicated.
At or For the Years Ended
December 31,
2015
2014
2013
(in thousands except for %)
$ 1,800
$ 1,800
$ 5,788
$13,800
$ 4,217
$ 22,356
$ 6,960
$57,302
$21,387
2.12%
4.50%
1.08%
4.50%
0.98%
1.51%
Balance at end of year
Maximum month-end
outstanding
Average daily outstanding
Total Weighted average rate
during the year
Average rate during year
68
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Results of Operations
Performance Summary
Year ended December 31, 2015 compared with year ended December
31, 2014. Net income for the year ended December 31, 2015 was
$14.5 million, an increase of $3.3 million, or 29.2%, from $11.2
million for the year ended December 31, 2014. Net income available
to common shareholders for the year ended December 31, 2015 was
$14.1 million which was an increase of $3.3 million from $10.8 million
for 2014. The increase in net income for the year ended December
31, 2015 was primarily the result of increased loan interest income,
increased noninterest income and lower interest expense. Net gains
on securities for the years ended December 31, 2015 and 2014 were
$3.3 million and $0.3 million, respectively. Earnings per common share
for the year ended December 31, 2015 was $2.01 per common share,
an increase of 28.0% or $0.44 per common share from $1.57 per
common share for the year ended December 31, 2014 (as adjusted for
the 10% stock dividend in December 2015).
Year ended December 31, 2014 compared with year ended December
31, 2013. Net income for the year ended December 31, 2014 was
$11.2 million, an increase of $2.1 million, or 22.7%, from $9.1 million
for the year ended December 31, 2013. Net income available to
common shareholders for the year ended December 31, 2014 was
$10.8 million which was an increase of $2.4 million from $8.4 million
for 2013. The increase in net income for the year ended December 31,
2014 was primarily the result of increased loan interest income, lower
interest expense and a lower provision expense. Net gains on securities
for the years ended December 31, 2014 and 2013 were $0.3 million
and $1.6 million, respectively. Earnings per common share for the year
ended December 31, 2014 was $1.57 per common share, an increase
of 28.7% or $0.35 per common share from $1.22 per common share
for the year ended December 31, 2013 (as adjusted for the 10% stock
dividend in December 2015).
Net Interest Income
Our operating results depend primarily on our net interest income, which
is the difference between interest income earned on interest-earning
assets, including loans and securities, and interest expense incurred
on interest-bearing liabilities, including deposits and other borrowed
funds. Interest rate fluctuations, as well as changes in the amount and
type of interest-earning assets and interest-bearing liabilities, combine
to affect net interest income. Our net interest income is affected by
changes in the amount and mix of interest-earning assets and interest-
bearing liabilities. It is also affected by changes in yields earned on
interest-earning assets and rates paid on interest-bearing deposits and
other borrowed funds.
A financial institution’s asset and liability structure is substantially
different from that of a non-financial company, in that virtually all
assets and liabilities are monetary in nature. Accordingly, changes in
interest rates may have a significant impact on a financial institution’s
performance. The impact of interest rate changes depends on the
sensitivity to the change of our interest-earning assets and interest-
bearing liabilities. The effects of the low interest rate environment in
recent years and our interest sensitivity position is discussed below.
TOTAL NET INCOME
In Millions
TOTAL COMMON SHAREHOLDERS' EQUITY
In Millions
15
12
9
6
3
0
2011
2012
2013
2014
2015
120
100
80
60
40
20
0
2011
2012
2013
2014
2015
69
2015 ANNUAL REPORT of which were one-to four-family residential loans, a purchased pool of
performing commercial leases, the origination of commercial leases
and commercial and industrial loans. Partially offsetting the increase in
interest income on loans was a decrease in the average yield on loans
(excluding loans held for sale), which decreased by 26 basis points to
5.21% for the year ended December 31, 2015 compared to 5.47% for
the year ended December 31, 2014 due to pay-offs of higher-yielding
existing loans in the current low interest rate environment.
Interest income on securities increased $76,000, or 0.6%, to
$13.5 million for the year ended December 31, 2015 as a result of
the increase in the average yield on securities, which was partially
offset by a decrease in the average balance of securities. The average
yield on securities increased by 13 basis points to 2.21% for the year
ended December 31, 2015 compared to 2.08% for the year ended
December 31, 2014 due to the sale of lower yielding securities,
which were reinvested in shorter duration higher yielding securities.
The average balance of securities decreased $35.2 million to $609.3
million for the year ended December 31, 2015 from $644.6 million for
the year ended December 31, 2014 due to the decrease in the average
balance of our municipal and short-term agency securities.
Year ended December 31, 2014 compared with the year ended December
31, 2013. Interest income increased $2.4 million, or 4.7%, to $53.3
million for the year ended December 31, 2014 from $50.9 million for
the year ended December 31, 2013 primarily as a result of a $2.5
million increase in interest income on loans. The increase in interest
income resulted primarily from a $55.0 million increase in the average
balance of our interest-earnings assets to $1.4 billion for the year ended
December 31, 2014. The average yield on our interest-earning assets
increased by 3 basis points to 3.76% for the year ended December
31, 2014 compared to 3.73% for the year ended December 31, 2013.
Interest income on loans increased $2.5 million, or 6.7%, to $39.8
million for the year ended December 31, 2014 as a result of an
increase in the average balance of loans, partially offset by a decrease
in the average yield on loans. The average balance of loans (excluding
loans held for sale) increased by $59.6 million to $727.4 million for
the year ended December 31, 2014 from $667.8 million for the year
ended December 31, 2013 as a result of new loan originations, the
majority of which were owner-occupied non-farm non-residential loans
and commercial and industrial loans associated with syndicated loans,
including shared national credits. Partially offsetting the increase in
interest income on loans was a decrease in the average yield on loans
(excluding loans held for sale), which decreased by 11 basis points to
5.47% for the year ended December 31, 2014 compared to 5.58% for
the year ended December 31, 2013 due to pay-offs of higher-yielding
existing loans in the current low interest rate environment.
Interest income on securities decreased $44,000, or 0.3%, to $13.4
million for the year ended December 31, 2014 as a result of the
decrease in the average yield on securities, which was partially offset
by an increase in the average balance of securities. The average
balance of securities increased $14.0 million to $644.6 million for
the year ended December 31, 2014 from $630.6 million for the year
ended December 31, 2013 due to the increase in the average balance
of our municipal and short-term agency securities. The average yield
on securities decreased by 5 basis points to 2.08% for the year ended
December 31, 2014 compared to 2.13% for the year ended December
31, 2013 due to payoffs of higher yielding securities, which were
reinvested in shorter duration lower yielding securities.
Year ended December 31, 2015 compared with the year ended December 31,
2014. Net interest income for the year ended December 31, 2015 and
2014 was $47.5 million and $44.1 million, respectively. The increase
in net interest income for the year ended December 31, 2015 was
primarily due to the increase in the average balance of our total interest-
earning assets and a decrease in the average rate of our total interest-
bearing liabilities. The average balance of total interest-earning assets
increased by $37.5 million to $1.5 billion for the year ended December
31, 2015 as compared to the year ended December 31, 2014. The
average yield on our total interest-earning assets increased nine basis
points to 3.85% for the year ended December 31, 2015 compared
to 3.76% for the year ended December 31, 2014. The average rate
of our total interest-bearing liabilities decreased by seven basis points
to 0.76% for the year ended December 31, 2015 compared to 0.83%
for the year ended December 31, 2014, which was partially offset by
the increase in the average balance of total interest-bearing liabilities
by $10.5 million to $1.1 billion for the year ended December 31, 2015
as compared to the year ended December 31, 2014. As a result, our
net interest rate spread increased 16 basis points to 3.09% for the year
ended December 31, 2015 from 2.93% for the year ended December
31, 2014, and our net interest margin increased 15 basis points to
3.26% for the year ended December 31, 2015 from 3.11% for the year
ended December 31, 2014.
Year ended December 31, 2014 compared with the year ended December 31,
2013. Net interest income for the year ended December 31, 2014 and
2013 was $44.1 million and $39.8 million, respectively. The increase
in net interest income for the year ended December 31, 2014 was
primarily due to the increase in the average balance of our total interest-
earning assets and a decrease in the average rate of our total interest-
bearing liabilities. The average balance of total interest-earning assets
increased by $55.0 million to $1.4 billion for the year ended December
31, 2014 as compared to the year ended December 31, 2013. The
average yield on our total interest-earning assets increased 3 basis
points to 3.76% for the year ended December 31, 2014 compared
to 3.73% for the year ended December 31, 2013. The average rate
of our total interest-bearing liabilities decreased by 21 basis points to
0.83% for the year ended December 31, 2014 compared to 1.04% for
the year ended December 31, 2013, which was partially offset by the
increase in the average balance of total interest-bearing liabilities by
$46.3 million to $1.1 billion for the year ended December 31, 2014 as
compared to the year ended December 31, 2013. As a result, our net
interest rate spread increased 24 basis points to 2.93% for the year
ended December 31, 2014 from 2.69% for the year ended December
31, 2013, and our net interest margin increased 19 basis points to
3.11% for the year ended December 31, 2014 from 2.92% for the year
ended December 31, 2013.
Interest Income
Year ended December 31, 2015 compared with the year ended December
31, 2014. Interest income increased $2.8 million, or 5.2%, to $56.1
million for the year ended December 31, 2015 from $53.3 million for
the year ended December 31, 2014 primarily as a result of a $2.7
million increase in interest income on loans. The increase in interest
income resulted primarily from a $37.5 million increase in the average
balance of our interest-earnings assets to $1.5 billion for the year ended
December 31, 2015. The average yield on our interest-earning assets
increased by nine basis points to 3.85% for the year ended December
31, 2015 compared to 3.76% for the year ended December 31, 2014.
Interest income on loans increased $2.7 million, or 6.9%, to $42.5
million for the year ended December 31, 2015 as a result of an increase
in the average balance of loans, partially offset by a decrease in the
average yield on loans. The average balance of loans (excluding loans
held for sale) increased by $88.6 million to $816.0 million for the year
ended December 31, 2015 from $727.4 million for the year ended
December 31, 2014 as a result of new loan originations, the majority
70
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Interest Expense
Year ended December 31, 2015 compared with the year ended December 31,
2014. Interest expense decreased $0.6 million, or 6.5%, to $8.6 million
for the year ended December 31, 2015 from $9.2 million for the year
ended December 31, 2014 due primarily to a decrease in the average
rate on time deposits. The average rate of time deposits decreased
by 10 basis points during the year ended December 31, 2015 to 1.09%,
reflecting downward repricing of our time deposits in the continued
low interest rate environment. The average balance of interest-bearing
deposits increased by $14.2 million during the year ended December
31, 2015 to $1.1 billion as a result of a $15.3 million increase in the
average balance of interest- bearing demand deposits, which was
partially offset by a $9.0 million decrease in the average balance of
time deposits.
Year ended December 31, 2014 compared with the year ended December
31, 2013. Interest expense decreased $1.9 million, or 17.4%, to $9.2
million for the year ended December 31, 2014 from $11.1 million for
the year ended December 31, 2013 due primarily to a decrease in
the average rate on time deposits. The average rate of time deposits
decreased by 30 basis points during the year ended December 31,
2014 to 1.19%, reflecting downward repricing of our time deposits
in the continued low interest rate environment. The average balance
of interest-bearing deposits increased by $55.5 million during
the year ended December 31, 2014 to $1.1 billion as a result of a
$51.8 million increase in the average balance of interest-bearing
demand deposits, which was partially offset by a $1.4 million decrease
in the average balance of time deposits.
During the year ended December 31, 2014 and the year ended
December 31, 2013, the lower cost of our deposits and the change in
the mix of our deposits were primarily due to the repricing of our time
deposits that were offered to customers through our local marketing
campaign in 2010 to diversify our deposit base. These time deposits
primarily matured in 2012, which allowed us to lower the costs of our
time deposits by repricing our time deposits to lower interest rates
which continued in 2014.
Average Balances and Yields.
The following table sets forth average balance sheet balances, average
yields and costs, and certain other information for the years indicated.
No tax-equivalent yield adjustments were made, as the effect thereof
was not material. All average balances are daily average balances.
Nonaccrual loans were included in the computation of average
balances, but have been reflected in the table as loans carrying a zero
yield. Loans, net of unearned income, include loans held for sale. The
yields set forth below include the effect of deferred fees, discounts
and premiums that are amortized or accreted to interest income or
expense.
The net interest income yield presented below is calculated by dividing
net interest income by average interest-earning assets and is a measure
of the efficiency of the earnings from the balance sheet activities. It
is affected by changes in the difference between interest on interest-
earning assets and interest-bearing liabilities and the percentage of
interest-earning assets funded by interest-bearing liabilities.
71
2015 ANNUAL REPORT December 31, 2015
December 31, 2014
December 31, 2013
Average
Outstanding
Balance
Interest
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Average
Yield/
Rate
Average
Outstanding
Balance
Interest
Average
Yield/
Rate
(in thousands except for %)
Assets
Interest-earning assets:
Interest-earning deposits with
banks(1)
Securities (including FHLB stock)
Federal funds sold
Loans held for sale
Loans, net of unearned income
Total interest-earning assets
$
30,485 $
609,348
312
-
816,027
1,456,172
72
13,471
-
-
42,536
56,079
0.24%
2.21%
-%
-%
5.21%
3.85%
Noninterest-earning assets:
Cash and due from banks
Premises and equipment, net
Other assets
Total assets
7,191
20,300
5,870
$1,489,533
$
46,455 $
644,561
304
10
727,385
1,418,715
115
13,395
-
-
39,787
53,297
0.25%
2.08%
-%
-%
5.47%
3.76%
$
63,417 $
630,586
1,738
119
667,814
1,363,674
157
13,439
1
-
37,289
50,886
0.25%
2.13%
0.06%
-%
5.58%
3.73%
9,219
19,681
8,216
$1,400,790
$401,617
77,726
640,134
6,320
1,125,797
1,419
38
6,985
166
8,608
0.35%
0.05%
1.09%
2.62%
0.76%
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Demand deposits
Savings deposits
Time deposits
Borrowings
Total interest-bearing liabilities
Noninterest-bearing liabilities:
Demand deposits
Other
Total Liabilities
Shareholders' equity
Total liabilities and shareholders'
equity
Net interest income
Net interest rate spread(2)
Net interest-earning assets(3)
Net interest margin(4)(5)
Average interest-earning assets to
interest-bearing liabilities
211,584
5,010
1,342,391
147,142
$1,489,533
$ 330,375
9,030
19,738
7,528
$1,455,011
$386,363
69,719
649,165
10,083
1,115,330
200,127
5,157
1,320,614
134,397
1,312
33
7,716
141
9,202
0.34%
0.05%
1.19%
1.40%
0.83%
$334,573
64,639
650,540
19,286
1,069,038
1,262
41
9,682
149
11,134
0.38%
0.06%
1.49%
0.77%
1.04%
196,589
5,110
1,270,737
130,053
$47,471
$44,095
$39,752
$1,455,011
$1,400,790
3.09%
3.26%
$ 303,385
2.93%
3.11%
$ 294,636
2.69%
2.92%
129.35%
127.20%
127.56%
(1) Includes Federal Reserve balances reported in cash and due from banks on the Consolidated Balance Sheets.
(2) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) The tax adjusted net interest margin was 3.29%, 3.13% and 2.93% for the years ended December 31, 2015, 2014 and 2013. A 35% tax rate was used to
calculate the effect on securities income from tax exempt securities.
72
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC.
Volume/Rate Analysis.
The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets
and interest-bearing liabilities for the years indicated. The table distinguishes between: (1) changes attributable to volume (changes in volume
multiplied by the prior year’s rate); (2) changes attributable to rate (change in rate multiplied by the prior year’s volume); and (3) total increase
(decrease) (the sum of the previous columns). Changes attributable to both volume and rate are allocated ratably between the volume and rate
categories.
For the Years Ended
December 31, 2015 vs. 2014
For the Years Ended
December 31, 2014 vs. 2013
Increase (Decrease) Due To
Increase (Decrease) Due To
Volume
Rate
Increase/
Decrease
Volume
Rate
Increase/
Decrease
(in thousands except for %)
Interest earned on:
Interest-earning deposits with banks
$
(38) $
(5)
$ (43)
$
(42) $
-
$ (42)
Securities (including FHLB stock)
(754)
830
76
294
(338)
Federal funds sold
Loans held for sale
-
-
-
-
-
-
-
-
(1)
-
(44)
(1)
-
Loans, net of unearned income
Total interest income
4,684
(1,935)
3,892
(1,110)
2,749
2,782
3,271
3,523
(773)
2,498
(1,112)
2,411
Interest paid on:
Demand deposits
Savings deposits
Time deposits
Borrowings
53
4
54
1
107
5
(106)
(625)
(731)
(66)
91
25
184
3
(20)
(92)
(134)
(11)
50
(8)
(1,946)
(1,966)
84
(8)
Total interest expense
(115)
(479)
(594)
75
(2,007)
(1,932)
Change in net interest income
$4,007
$ (631)
$3,376
$3,448
$ 895
$4,343
Provision for Loan Losses
current expected net charge-offs and non-performing asset levels.
A provision for loan losses is a charge to income in an amount that
management believes is necessary to maintain an adequate allowance
for loan losses. The provision is based on management’s regular
evaluation of current economic conditions in our specific markets as
well as regionally and nationally, changes in the character and size
of the loan portfolio, underlying collateral values securing loans, and
other factors which deserve recognition in estimating loan losses.
This evaluation is inherently subjective as it requires estimates that
are susceptible to significant revision as more information becomes
available or as future events change.
We recorded a $3.9 million provision for loan losses for the year
ended December 31, 2015 compared to $2.0 million for 2014. The
allowance for loan losses at December 31, 2015 was $9.4 million or
1.12% of total loans, compared to $9.1 million or 1.15% of total loans
at December 31, 2014. The increase in the provision was attributed to
growth in the loan portfolio and a $0.3 million increase in net charge-
offs. The primary change to the credit quality of the loan portfolio
was associated with the downgrades of loans. Substandard loans
increased $13.9 million to $58.7 million at December 31, 2015 from
$44.8 million at December 31, 2014. The impaired loan portfolio did
not suffer additional declines in estimated fair value requiring further
provisions. We believe that the allowance is adequate to cover potential
losses in the loan portfolio given the current economic conditions, and
For the year ended December 31, 2014, the provision for loan losses
was $2.0 million, a decrease of $0.6 million from $2.5 million for
2013. The allowance for loan losses was $9.1 million and $10.4
million at December 31, 2014 and 2013, respectively. The decline in
the provision was attributed to charge-offs related to impaired loans
that had existing specific reserves, as well as improvement in the credit
quality of the loan portfolio. The impaired loan portfolio did not suffer
additional declines in estimated fair value requiring further provisions.
The decline was also due to an improvement in our historical charge-
off trends.
Noninterest Income
Our primary sources of recurring noninterest income are customer
service fees, loan fees, gains on the sale of loans and available-for-sale
securities and other service fees. Noninterest income does not include
loan origination fees which are recognized over the life of the related
loan as an adjustment to yield using the interest method.
Noninterest income totaled $9.0 million for the year ended December
31, 2015, an increase of $2.8 million when compared to $6.2 million
for 2014. The majority of the increase was due to higher gains on
securities sales. Net securities gains were $3.3 million for the year
ended December 31, 2015 and $0.3 million for 2014. The gains on
securities sales occurred as First Guaranty sold investment securities
73
2015 ANNUAL REPORT in order to fund loan growth and liquidated its shares in a preferred
security that converted to common stock in 2015 for a gain of $2.7
million. Service charges, commissions and fees totaled $2.7 million for
the year ended December 31, 2015 and $2.8 million for 2014. ATM and
debit card fees totaled $1.8 million for the year ended December 31,
2015 and $1.7 million for 2014. Other noninterest income decreased
by $0.3 million to $1.1 million for the year ended December 31, 2015
compared to $1.5 million for 2014. The $0.3 million decrease in other
noninterest income was partially caused by a $0.2 million other-than-
temporary impairment charge on an investment security.
Noninterest income totaled $6.2 million in 2014 which was a decrease
of $1.3 million compared to $7.5 million in 2013. The decrease in
noninterest income was primarily due to a decrease in gains from
the sale of investment securities of $1.3 million. Service charges,
commissions and fees totaled $2.8 million for 2014 and $3.0 million
for 2013. Other noninterest income increased $0.1 million to $1.5
million in 2014 from $1.3 million in 2013.
Noninterest Expense
includes salaries and employee benefits,
Noninterest expense
occupancy and equipment expense and other
types of
expenses. Noninterest expense decreased $0.5 million to $31.1 million
for the year ended December 31, 2015 compared to 2014. Salaries
and benefits expense totaled $15.5 million for 2015 and $15.8 million
for 2014. Occupancy and equipment expense totaled $3.8 million for
2015 and $3.9 million for 2014. Other noninterest expense decreased
by $0.1 million to $11.8 million for the year ended December 31, 2015.
Noninterest expense totaled $31.6 million in 2014 and $31.0 million
in 2013. Salaries and benefits expense increased $1.5 million to $15.8
million for 2014 compared to $14.4 million in 2013. The increase
in salaries and benefits expense was due primarily to increased
costs associated with our employee health insurance plan. First
Guaranty terminated the plan in 2014 and enrolled in a fully insured
plan from a third party national provider of health insurance. Occupancy
and equipment expense totaled $3.9 million for 2014 and 2013. Other
noninterest expense totaled $11.8 million in 2014, a decrease of $0.8
million, or 6.7%, when compared to $12.7 million in 2013.
The following table presents, for the years indicated, the major categories of other noninterest expense:
December 31, 2015
December 31, 2014
December 31, 2013
Other noninterest expense:
Legal and professional fees
Data processing
Marketing and public relations
Taxes - sales, capital and franchise
Operating supplies
Travel and lodging
Telephone
Amortization of core deposits
Donations
Net costs from other real estate and
repossessions
Regulatory assessment
Other
Total other expense
$ 2,019
1,184
848
717
414
818
172
320
332
493
1,111
3,326
$11,754
(in thousands)
$ 1,982
1,153
700
605
410
566
242
320
150
1,374
1,181
3,143
$11,826
$ 2,347
1,269
638
584
487
563
206
320
294
941
1,784
3,237
$12,670
74
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. We maintained a net borrowing capacity at the FHLB totaling $116.7
million and $156.4 million at December 31, 2015 and December 31,
2014, respectively with no borrowings outstanding at either date. At
December 31, 2015, we have outstanding letters of credit from the
FHLB in the amount of $195.0 million that were used to collateralize
public funds deposits. We also have a discount window line with the
Federal Reserve Bank of $18.2 million, with no outstanding balance at
December 31, 2015. We also maintain federal funds lines of credit at
various correspondent banks with borrowing capacity of $70.5 million
at December 31, 2015. We have a revolving line of credit for $2.5
million, with an outstanding balance of $1.8 million at December 31,
2015 secured by a pledge of the Bank's common stock. Management
believes there is sufficient liquidity to satisfy current operating needs.
Capital Resources
Our capital position is reflected in total shareholders’ equity, subject to
certain adjustments for regulatory purposes. Further, our capital base
allows us to take advantage of business opportunities while maintaining
the level of resources we deem appropriate to address business risks
inherent in daily operations.
Total shareholders’ equity decreased to $118.2 million at December
31, 2015 from $139.6 million at December 31, 2014. The decrease in
total shareholders’ equity was principally the result of the redemption of
the Series C Preferred Stock for $39.4 million in December 2015 from
the U.S. Treasury in order to exit the SBLF program. The decrease was
partially offset by the net proceeds of $9.3 million from the issuance of
common stock in a public offering which closed in the fourth quarter
of 2015. Total shareholders' equity also increased due to net income
of $14.5 million during the year ended December 31, 2015, partially
offset by $4.2 million in cash dividends paid on our common stock
and $0.4 million in dividends paid on our preferred stock. The change
in the balance of the accumulated other comprehensive income from
a $0.2 million gain at December 31, 2014 to a $0.9 million loss at
December 31, 2015 also reduced shareholders' equity. The reduction
was due to a $1.6 million reduction in the gross unrealized mark to
market gains on available-for-sale securities (before taxes).
Capital Management
We manage our capital to comply with our internal planning targets
and regulatory capital standards administered by the Federal Reserve
and the FDIC. We review capital levels on a monthly basis. We evaluate
a number of capital ratios, including Tier 1 capital to total adjusted
assets (the leverage ratio) and Tier 1 capital to risk-weighted assets.
At December 31, 2015, First Guaranty Bancshares and First Guaranty
Bank were classified as well-capitalized.
Income Taxes.
The amount of income expense is influenced by the amount of pre-tax
income, the amount of tax-exempt income and the amount of other
non-deductible expenses. The provision for income taxes for the years
ended December 31, 2015, 2014 and 2013 was $7.0 million, $5.5
million and $4.6 million, respectively. The provision for income taxes
increased in 2015 as compared to 2014 due to the increase in income
before taxes. Our statutory tax rate was 35.0% for 2015, 2014 and
2013.
Impact of Inflation
Our Consolidated Financial Statements and related notes included
elsewhere in this Annual Report have been prepared in accordance
with GAAP. These require the measurement of financial position and
operating results in terms of historical dollars, without considering
changes in the relative value of money over time due to inflation or
recession.
Unlike many industrial companies, substantially all of our assets and
liabilities are monetary in nature. As a result, interest rates have a
more significant impact on our performance than the effects of general
levels of inflation. Interest rates may not necessarily move in the same
direction or in the same magnitude as the prices of goods and services.
However, other operating expenses do reflect general levels of inflation.
Liquidity and Capital Resources
Liquidity
Liquidity refers to the ability or flexibility to manage future cash flows
to meet the needs of depositors and borrowers and fund operations.
Maintaining appropriate levels of liquidity allows us to have sufficient
funds available to meet customer demand for loans, withdrawal of
deposit balances and maturities of deposits and other liabilities.
Liquid assets include cash and due from banks, interest-earning
demand deposits with banks, federal funds sold and available-for-sale
investment securities.
Loans maturing within one year or less at December 31, 2015
totaled $135.1 million. At December 31, 2015, time deposits
maturing within one year or less totaled $401.5 million. Our held-
to-maturity investment securities portfolio at December 31, 2015
was $169.8 million or 31.1% of the investment portfolio compared
to $141.8 million or 22.1% at December 31, 2014. The securities in
the held-to-maturity portfolio are used to collateralize public funds
deposits and may also be used to secure borrowings with the FHLB or
Federal Reserve Bank. The agency securities in the held-to-maturity
portfolio have maturities of 10 years or less. The mortgage backed
securities have stated final maturities of 15 to 20 years at December
31, 2015. The held-to-maturity portfolio had a forecasted weighted
average life of approximately 5.6 years based on current interest rates
at December 31, 2015. Management regularly monitors the size and
composition of the held-to-maturity portfolio to evaluate its effect on
our liquidity. Our available-for-sale portfolio was $376.4 million, or
68.9% of the investment portfolio at December 31, 2015 compared
to $499.8 million, or 77.9% at December 31, 2014. The majority of
the available-for-sale portfolio was comprised of U.S. Treasuries, U.S.
Government Agencies, mortgage backed securities, municipal bonds
and investment grade corporate bonds. We believe these securities are
readily marketable and enhance our liquidity.
75
2015 ANNUAL REPORT The following table presents our capital ratios as of the indicated dates.
"Well Capitalized
Minimums"
At December 31, 2015
"Well Capitalized
Minimums"
At December 31, 2014
(in thousands except for %)
Tier 1 Leverage Ratio:
Consolidated
Bank
Tier 1 Risk-based Capital Ratio:
Consolidated
Bank
Total Risk-based Capital Ratio:
Consolidated
Bank
Common Equity Tier One Capital:
Consolidated
Bank
N/A
5.00%
N/A
8.00%
N/A
10.00%
N/A
6.50%
8.17%
9.74%
10.85%
12.98%
13.13%
13.86%
10.85%
12.98%
5.00%
5.00%
6.00%
6.00%
10.00%
10.00%
N/A
N/A
9.33%
9.26%
13.16%
13.08%
14.05%
13.96%
N/A
N/A
Off-balance sheet commitments
We are a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend
credit and standby and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in our Consolidated Balance Sheets.
The contract or notional amounts of those instruments reflect the
extent of the involvement in particular classes of financial instruments.
The exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend
credit and standby and commercial letters of credit is represented by
the contractual notional amount of those instruments. The same credit
policies are used in making commitments and conditional obligations
as it does for on-balance sheet instruments. Unless otherwise
noted, collateral or other security is not required to support financial
instruments with credit risk.
The notional amounts of the financial instruments with off-balance sheet risk at December 31, 2015, 2014 and 2013 are as follows:
Contract Amount
December 31, 2015
December 31, 2014
December 31, 2013
Commitments to Extend Credit
Unfunded Commitments under lines of credit
Commercial and Standby letters of credit
$ 88,081
$107,581
$ 7,486
(in thousands)
$ 59,675
$111,247
$ 7,743
$ 30,516
$115,311
$ 7,695
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since commitments may
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Each customer’s
creditworthiness is evaluated on a case-by-case basis. The amount
of collateral obtained, if deemed necessary upon extension of credit,
is based on our credit evaluation of the counterpart. Collateral
requirements vary but may include accounts receivable, inventory,
property, plant and equipment, residential real estate and commercial
properties.
Unfunded commitments under lines of credit are contractually
obligated by us as long as the borrower is in compliance with the terms
of the loan relationship. Unfunded lines of credit are typically operating
lines of credit that adjust on a regular basis as a customer requires
funding. There may be seasonal variations to the usage of these
lines. At December 31, 2015, the largest concentration of unfunded
commitments were lines of credit associated with commercial and
industrial loans.
Commercial and standby letters of credit are conditional commitments
to guarantee the performance of a customer to a third party. These
guarantees are primarily issued to support public and private borrowing
76
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. arrangements, including commercial paper, bond financing and
similar transactions. The majority of these guarantees are short-term
(one year or less); however, some guarantees extend for up to three
years. The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.
Collateral requirements are the same as on-balance sheet instruments
and commitments to extend credit.
There were no losses incurred on any commitments during the years
ended December 31, 2015, 2014 and 2013.
Contractual Obligations
The following table summarizes our fixed and determinable contractual
obligations and other funding needs by payment date at December 31,
2015. The payment amounts represent those amounts due to the
recipient and do not include any unamortized premiums or discounts
or other similar carrying amount adjustments.
and meets as needed to review our asset liability policies and interest
rate risk position. The board ALCO investment committee is comprised
of certain members of the board of directors of the Bank and meets
monthly. The management asset liability committee provides a monthly
report to the board ALCO investment committee.
The need for interest sensitivity gap management is most critical in
times of rapid changes in overall interest rates. We generally seek to
limit our exposure to interest rate fluctuations by maintaining a relatively
balanced mix of rate sensitive assets and liabilities on a one-year
time horizon and greater than one-year time horizon. Because of the
significant impact on net interest margin from mismatches in repricing
opportunities, we monitor the asset-liability mix periodically depending
upon the management asset liability committee’s assessment of
current business conditions and the interest rate outlook. We maintain
exposure to interest rate fluctuations within prudent levels using varying
investment strategies. These strategies include, but are not limited to,
frequent internal modeling of asset and liability values and behavior
due to changes in interest rates. We monitor cash flow forecasts closely
Payments Due by Period:
December 31, 2015
Less Than One Year
One to Three Years
Over Three Years
Total
(in thousands)
Operating leases
Software contracts
Time deposits
Short-term borrowings
Senior long-term debt
Junior subordinated debentures
Total contractual obligations
$ 32
1,105
401,535
1,800
3,100
-
$407,572
$ 61
1,696
137,037
-
7,755
-
$146,549
$ 57
608
53,438
-
15,000
15,000
$84,103
$ 150
3,409
592,010
1,800
25,855
15,000
$638,224
Item 7A – Quantitative and Qualitative Disclosures about
Market Risk
Asset/Liability Management and Market Risk
Asset/Liability Management.
Our asset/liability management process consists of quantifying,
analyzing and controlling interest rate risk to maintain reasonably stable
net interest income levels under various interest rate environments.
The principal objective of asset/liability management is to maximize net
interest income while operating within acceptable limits established for
interest rate risk and to maintain adequate levels of liquidity.
The majority of our assets and liabilities are monetary in nature.
Consequently, one of our most significant forms of market risk is interest
rate risk, which is inherent in our lending and deposit-taking activities.
Our assets, consisting primarily of loans secured by real estate and fixed
rate securities in our investment portfolio, have longer maturities than
our liabilities, consisting primarily of deposits. As a result, a principal
part of our business strategy is to manage interest rate risk and reduce
the exposure of our net interest income to changes in market interest
rates. The board of directors of First Guaranty Bank has established two
committees, the management asset liability committee and the board
investment committee, to oversee the interest rate risk inherent in our
assets and liabilities, for determining the level of risk that is appropriate
given our business strategy, operating environment, capital, liquidity
and performance objectives and for managing this risk consistent with
the guidelines approved by the board of directors. The management
asset liability committee is comprised of senior officers of the Bank
and evaluate the impact of both prepayments and extension risk.
The following interest sensitivity analysis is one measurement of
interest rate risk. This analysis, which we prepare monthly, reflects the
contractual maturity characteristics of assets and liabilities over various
time periods. This analysis does not factor in prepayments or interest
rate floors on loans which may significantly change the report. This
table includes nonaccrual loans in their respective maturity periods.
The gap indicates whether more assets or liabilities are subject to
repricing over a given time period. The interest sensitivity analysis
at December 31, 2015 illustrated below reflects a liability-sensitive
position with a negative cumulative gap on a one-year basis.
77
2015 ANNUAL REPORT December 31, 2015
Interest Sensitivity Within
Over 3
Months
thru 12
Months
3 Months
Or Less
Total One
Year
Over One
Year
Total
(in thousands)
$358,994
$ 58,193
$417,187
$ 424,396
$841,583
33,694
582
38,467
6,146
39,840
507,216
547,056
-
-
582
38,467
-
-
582
38,467
$431,737
$ 64,339
$496,076
$ 931,612
$1,427,688
$409,209
$
81,448
-
-
$409,209
$
81,448
-
-
143,708
257,827
401,535
190,475
-
1,800
25,824
-
-
-
-
-
1,800
25,824
-
-
-
-
14,597
302,800
$409,209
81,448
592,010
1,800
25,824
14,597
302,800
$660,189
$ 259,627
$919,816
$ 507,872
$1,427,688
$(228,452)
$ (195,288)
$(423,740)
$ 423,740
$(228,452)
$ (423,740)
$(423,740)
$
-
Earning Assets:
Loans (including loans held for sale)
Securities (including FHLB stock)
Federal Funds Sold
Other earning assets
Total earning assets
Source of Funds:
Interest-bearing accounts:
Demand deposits
Savings deposits
Time deposits
Short-term borrowings
Senior long-term debt
Junior subordinated debt
Noninterest-bearing, net
Total source of funds
Period gap
Cumulative gap
Cumulative gap as a percent of earning assets
-16.0%
-29.7%
-29.7%
78
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. These scenarios above are both instantaneous and gradual shocks that
assume balance sheet management will mirror the base case. Even
if interest rates change in the designated amounts, there can be no
assurance that our assets and liabilities would perform as anticipated.
Additionally, a change in the U.S. Treasury rates in the designated
amounts accompanied by a change in the shape of the U.S. Treasury
yield curve would cause significantly different changes to net interest
income than indicated above. Strategic management of our balance
sheet would be adjusted to accommodate these movements. As with
any method of measuring interest rate risk, certain shortcomings are
inherent in the methods of analysis presented above. For example,
although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in
market interest rates. Also, the interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in
market rates. Also, the ability of many borrowers to service their debt
may decrease in the event of an interest rate increase. We consider all
of these factors in monitoring exposure to interest rate risk.
We are pursuing a strategy that began in 2012 to reduce long-term
interest rate risk. The contractual maturity of the investment portfolio
was shortened and mortgage backed securities were purchased to
enhance cash flow. We were able to grow our loan portfolio while
reducing the size of the investment portfolio. New loans originated
generally were either floating rate or were fixed rate with maturities
that did not exceed five years. Securities as a percentage of average
interest-earning assets decreased from 45.4% in 2014 to 37.5% in
2015. Deposit maturities were extended and generally priced lower.
We believe that the addition of short-term securities and deploying our
capital to grow our loan portfolio will help to lower interest rate risk.
Net Interest Income at Risk.
Net interest income at risk measures the risk of a decline in earnings
due to changes in interest rates. The first table below presents an
analysis of our interest rate risk as measured by the estimated changes
in net interest income resulting from an instantaneous and sustained
parallel shift in the yield curve over a 12-month horizon at December
31, 2015. The second table below presents an analysis of our interest
rate risk as measured by the estimated changes in net interest income
resulting from a gradual shift in the yield curve over a 12-month period.
Shifts are measured in 100 basis point increments (+400 through -100
basis points) from base case. We do not present shifts less than 100
basis points because of the current low interest rate environment. The
base case scenario encompasses key assumptions for asset/liability
mix, loan and deposit growth, pricing, prepayment speeds, deposit
decay rates, securities portfolio cash flows and reinvestment strategy
and the market value of certain assets under the various interest rate
scenarios. The base case scenario assumes that the current interest
rate environment is held constant throughout the forecast period for
a static balance sheet and the instantaneous and gradual shocks are
performed against that yield curve.
December 31, 2015
Instantaneous Changes in Interest
Rates (basis points)
Percent Change in Net Interest
Income
+400
+300
+200
+100
Base
-100
(18.38%)
(10.29%)
(5.69%)
(2.29%)
-%
(2.83%)
Gradual Changes in Interest Rates
(basis points)
Percent Change in Net Interest
Income
+400
+300
+200
+100
Base
-100
(5.35%)
(3.28%)
(1.76%)
(0.71%)
-%
(0.04%)
79
2015 ANNUAL REPORT
Samuel R. Lolan, CPA
Lori D. Percle, CPA
Debbie B. Taylor, CPA
Katherine H. Armentor, CPA
Robin G. Freyou, CPA
Samuel R. Lolan, CPA
Lori D. Percle, CPA
Debbie B. Taylor, CPA
Katherine H. Armentor, CPA
Robin G. Freyou, CPA
Shalee M. Landry, CPA
Shalee M. Landry, CPA
Charles E. Castaing, CPA, Retired
Charles E. Castaing, CPA, Retired
Roger E. Hussey, CPA, Retired
Roger E. Hussey, CPA, Retired
Report of Castaing, Hussey & Lolan, LLC
Independent Registered Accounting Firm
To the Shareholders and Board of Directors
First Guaranty Bancshares, Inc.
We have audited the accompanying consolidated balance sheets of First Guaranty Bancshares, Inc. as of December
31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, changes in
shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2015. First
Guaranty's management is responsible for these financial statements. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by Management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of First Guaranty Bancshares, Inc. as of December 31, 2015 and 2014, and the consolidated
results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2015
in conformity with accounting principles generally accepted in the United States of America.
We also audited, in accordance with the standards of the American Institute of Certified Public Accountants, First
Guaranty Bancshares, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) and our report dated March 28, 2016 expressed an unqualified opinion
thereon.
Castaing, Hussey & Lolan, LLC
New Iberia, Louisiana
March 28, 2016
80
5 2 5 W e e k s S t r e e t • P. O . B o x 1 4 2 4 0 • N e w I b e r i a , L o u i s i a n a
7 0 5 6 2 - 4 2 4 0
P h . : 3 3 7 - 3 6 4 - 7 2 2 1 • F a x : 3 3 7 - 3 6 4 - 7 2 3 5 • e m a i l :
i n f o @ c h l c p a . c o m
Members of American Institute of Certified Public Accountants • Society of Louisiana Certified Public Accountants
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
Assets
Cash and cash equivalents:
Cash and due from banks
Federal funds sold
Cash and cash equivalents
Interest-earning time deposits with banks
Investment securities:
Available-for-sale, at fair value
Held to maturity, at cost (estimated fair value of $168,148 and $139,688, respectively)
Investment securities
Federal Home Loan Bank stock, at cost
Loans, net of unearned income
Less: allowance for loan losses
Net loans
Premises and equipment, net
Goodwill
Intangible assets, net
Other real estate, net
Accrued interest receivable
Other assets
Total Assets
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing demand
Interest-bearing demand
Savings
Time
Total deposits
Short-term borrowings
Accrued interest payable
Senior long-term debt
Junior subordinated debentures
Other liabilities
Total Liabilities
December 31,
2015
December 31,
2014
(in thousands,
except share data)
$
36,690
582
37,272
997
$
44,365
210
44,575
10,247
376,369
169,752
546,121
499,808
141,795
641,603
935
1,621
841,583
9,415
832,168
22,019
1,999
1,394
1,577
6,015
9,256
$1,459,753
$213,203
409,209
81,448
592,010
1,295,870
1,800
1,707
25,824
14,597
1,731
1,341,529
790,321
9,105
781,216
19,211
1,999
1,733
2,198
6,384
8,089
$1,518,876
$207,969
432,294
74,550
657,026
1,371,839
1,800
1,997
1,455
-
2,202
1,379,293
Shareholders' Equity
Preferred stock:
Series C - $1,000 par value - authorized 39,435 shares; issued and outstanding 0 and 39,435
Common stock1:
$1 par value - authorized 100,600,000 shares; issued 7,609,194 and 6,923,206 shares
Surplus
Treasury stock, at cost, 0 and 3,184 shares
Retained earnings
Accumulated other comprehensive income (loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
See Notes to the Consolidated Financial Statements.
-
39,435
7,609
61,584
-
49,932
(901)
118,224
$1,459,753
6,923
51,646
(54)
41,392
241
139,583
$1,518,876
1 2014 and 2015 share amounts reflect the ten percent stock dividend paid December 17, 2015 to shareholders of record as of December 10, 2015.
81
2015 ANNUAL REPORT FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
2014
2015
2013
Interest Income:
Loans (including fees)
Deposits with other banks
Securities (including FHLB stock)
Federal funds sold
Total Interest Income
Interest Expense:
Demand deposits
Savings deposits
Time deposits
Borrowings
Total Interest Expense
Net Interest Income
Less: Provision for loan losses
Net Interest Income after Provision for Loan Losses
Noninterest Income:
Service charges, commissions and fees
ATM and debit card fees
Net gains on securities
Net gain (loss) on sale of loans
Other
Total Noninterest Income
Noninterest Expense:
Salaries and employee benefits
Occupancy and equipment expense
Other
Total Noninterest Expense
Income Before Income Taxes
Less: Provision for income taxes
Net Income
Preferred stock dividends
Income Available to Common Shareholders
Per Common Share1:
Earnings
Cash dividends paid
Weighted Average Common Shares Outstanding
See Notes to Consolidated Financial Statements
(in thousands, except share data)
$42,536
72
13,471
-
56,079
1,419
38
6,985
166
8,608
47,471
3,864
43,607
2,736
1,779
3,300
4
1,137
8,956
15,496
3,845
11,754
31,095
21,468
6,963
14,505
(384)
$14,121
$39,787
115
13,395
-
53,297
1,312
33
7,716
141
9,202
44,095
1,962
42,133
2,767
1,671
295
(12)
1,456
6,177
15,840
3,928
11,826
31,594
16,716
5,492
11,224
(394)
$10,830
$37,289
157
13,439
1
50,886
1,262
41
9,682
149
11,134
39,752
2,520
37,232
3,006
1,634
1,571
(70)
1,337
7,478
14,368
3,949
12,670
30,987
13,723
4,577
9,146
(713)
$8,433
$ 2.01
$ 0.60
$ 1.57
$ 0.58
$ 1.22
$ 0.58
7,013,869
6,920,022
6,920,022
1 All share and per share amounts reflect the ten percent stock dividend paid December 17, 2015 to shareholders of
record as of December 10, 2015.
82
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31,
2014
2013
2015
Net Income
Other comprehensive income (loss):
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period
Reclassification adjustments for net gains included in net income
Reclassification of OTTI losses included in net income
Change in unrealized gains (losses) on securities
Tax impact
Other comprehensive income (loss)
Comprehensive Income (Loss)
See Notes to Consolidated Financial Statements
(in thousands)
$14,505
$ 11,224
$ 9,146
1,394
(3,300)
175
(1,731)
589
(1,142)
$13,363
14,499
(295)
-
14,204
(4,829)
9,375
$ 20,599
(21,432)
(1,571)
-
(23,003)
7,821
(15,182)
$ (6,036)
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Series C
Preferred
Stock
$1,000 Par
Common
Stock
$1 Par
Surplus
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total
Balance December 31, 2012
Net income
Other comprehensive income
Cash dividends on common stock ($0.58 per
share)
Preferred stock dividends
Balance December 31, 2013
Net income
Other comprehensive income
Cash dividends on common stock ($0.58 per
share)
Preferred stock dividends
Balance December 31, 2014
Net income
Reclassification of treasury stock under the
LCBA (1)
Other comprehensive income
Preferred stock redeemed, Series C
Common stock issued in initial public
offering, 689,172 shares(2)
Cash dividends on common stock ($0.60 per
share)
Preferred stock dividends
Balance December 31, 2015
See Notes to Consolidated Financial Statements
(in thousands, except share data)
$39,435
-
-
$6,923
-
-
$51,646
-
-
$ (54) $30,183
9,146
-
-
-
-
-
$39,435
-
-
-
-
$39,435
-
-
-
$6,923
-
-
-
-
$6,923
-
-
-
$51,646
-
-
-
-
$51,646
-
-
-
(39,435 )
(3)
-
-
-
-
-
-
689
9,938
-
-
(4,027)
(713)
$ (54) $34,589
11,224
-
-
-
-
-
(4,027)
(394)
$ (54) $41,392
14,505
-
(51)
-
-
54
-
-
-
-
-
-
$6,048
-
(15,182)
$134,181
9,146
(15,182)
-
-
$(9,134)
-
9,375
-
-
$ 241
-
(4,027)
(713)
$123,405
11,224
9,375
(4,027)
(394)
$139,583
14,505
-
(1,142)
-
-
(1,142)
(39,435)
-
-
$ -
-
-
$7,609
-
-
$61,584
$
(1,283)
-
9,344
(4,247)
(384)
$49,932
-
-
$ (901)
(4,247)
(384)
$118,224
(1) Effective January 1, 2015, companies incorporated under Louisiana law became subject to the Louisiana Business Corporation Act (which
replaces the Louisiana Business Corporation Law). Provisions of the Louisiana Business Corporation Act eliminate the concept of treasury stock
and provide that shares reacquired by a company are to be treated as authorized but unissued shares. As a result of this change in law, shares
previously classified as treasury stock were reclassified as a reduction to issued shares of common stock in the consolidated financial statements
as of June 30, 2015, reducing the stated value of common stock and retained earnings.
(2) All share and per share amounts reflect the ten percent stock dividend paid December 17, 2015 to shareholders of record as of December
10, 2015.
83
2015 ANNUAL REPORT FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
2015
Years Ended December 31,
2014
(in thousands)
2013
Cash Flows From Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses
Depreciation and amortization
Amortization/Accretion of investments
Gain on sale/call of securities
Other than temporary impairment charge on securities
Loss (gain) on sale of assets
ORE and repossessed property writedowns and loss on disposition
FHLB stock dividends
Net decrease in loans held for sale
Change in other assets and liabilities, net
Net cash provided by operating activities
Cash Flows From Investing Activities:
Funds invested in certificates of deposit
Proceeds from maturities and calls of certificates of deposit
Proceeds from maturities and calls of HTM securities
Proceeds from maturities, calls and sales of AFS securities
Funds invested in HTM securities
Funds Invested in AFS securities
Proceeds from sale/redemption of Federal Home Loan Bank stock
Funds invested in Federal Home Loan Bank stock
Net increase in loans
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Proceeds from sales of other real estate owned
Net cash provided by (used in) investing activities
Cash Flows From Financing Activities:
Net (decrease) increase in deposits
Net decrease in federal funds purchased and short-term borrowings
Proceeds from long-term borrowings, net of costs
Repayment of long-term borrowings
Proceeds from junior subordinated debentures, net of costs
Issuance of common stock, net of costs
Redemption of preferred stock
Dividends paid
Net cash (used in) provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Noncash activities:
Loans transferred to foreclosed assets
Cash paid during the period:
Interest on deposits and borrowed funds
Income taxes
See Notes to the Consolidated Financial Statements
84
$ 14,505
$11,224
$ 9,146
3,864
1,995
2,036
(3,300)
175
(6)
411
(4)
-
(2,461)
17,215
-
9,250
72,036
723,249
(48,318)
(650,698)
3,554
(2,864)
(56,000)
(4,400)
4
1,394
47,207
(75,969)
-
24,969
(600)
14,597
9,344
(39,435)
(4,631)
(71,725)
1,962
2,143
2,164
(295)
-
(17)
665
(4)
88
(1,140)
16,790
(10,000)
500
8,279
535,167
-
(538,209)
4,169
(3,950)
(92,697)
(1,668)
375
3,049
(94,985)
68,740
(3,988)
1,555
(600)
-
-
-
(4,421)
61,286
2,520
2,111
2,141
(1,571)
-
61
335
(4)
469
1,958
17,166
-
-
16,184
626,433
(107,616)
(533,320)
3,268
(3,825)
(78,777)
(1,757)
-
1,306
(78,104)
50,487
(8,958)
-
(600)
-
-
-
(4,740)
36,189
(7,303)
44,575
$ 37,272
(16,909)
61,484
$44,575
(24,749)
86,233
$61,484
$ 1,184
$ 2,330
$ 2,604
$ 8,898
$ 8,400
$ 9,569
$ 4,500
$ 11,610
$ 2,850
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. Business and Summary of Significant Accounting
Policies
Business
First Guaranty Bancshares, Inc. ("First Guaranty" or the “Company”)
is a Louisiana corporation headquartered in Hammond, LA. First
Guaranty owns all of the outstanding shares of common stock of
First Guaranty Bank. First Guaranty Bank (the “Bank”) is a Louisiana
state-chartered commercial bank that provides a diversified range of
financial services to consumers and businesses in the communities in
which it operates. These services include consumer and commercial
lending, mortgage loan origination, the issuance of credit cards and
retail banking services. The Bank also maintains an investment
portfolio comprised of government, government agency, corporate
and municipal securities. The Bank has twenty-one banking offices,
including one drive-up banking facility, and twenty-seven automated
teller machines (ATMs) in Southeast, Southwest and North Louisiana.
Summary of significant accounting policies
The accounting and reporting policies of First Guaranty conform
to generally accepted accounting principles and to predominant
accounting practices within the banking industry. The more significant
accounting and reporting policies are as follows:
Consolidation
The consolidated financial statements include the accounts of First
Guaranty Bancshares, Inc., and its wholly owned subsidiary, First
Guaranty Bank. All significant intercompany balances and transactions
have been eliminated in consolidation.
Acquisition Accounting
Acquisitions are accounted for under the purchase method of
accounting. Purchased assets, including identifiable intangibles
and assumed liabilities are recorded at their respective acquisition
date fair values. If the fair value of net assets purchased exceeds
the consideration given, a gain on acquisition is recognized. If the
consideration given exceeds the fair value of the net assets received,
goodwill is recognized. Fair values are subject to refinement for up
to one year after the closing date of an acquisition as information
relative to closing date fair values becomes available. Purchased loans
acquired in a business combination are recorded at estimated fair
value on their purchase date with no carryover of the related allowance
for loan losses. See Acquired Loans section below for accounting policy
regarding loans acquired in a business combination.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenue
and expense during the reporting periods. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near-term relate to the
determination of the allowance for loan losses, the valuation of real
estate acquired in connection with foreclosures or in satisfaction of
loans and the valuation of investment securities. In connection with
the determination of the allowance for loan losses and real estate
owned, First Guaranty obtains independent appraisals for significant
properties.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents are
defined as cash, due from banks, interest-bearing demand deposits
with banks and federal funds sold with maturities of three months or
less.
Securities
First Guaranty reviews its financial position, liquidity and future plans
in evaluating the criteria for classifying investment securities. Debt
securities that Management has the ability and intent to hold to
maturity are classified as held to maturity and carried at cost, adjusted
for amortization of premiums and accretion of discounts using
methods approximating the interest method. Securities available for
sale are stated at fair value. The unrealized difference, if any, between
amortized cost and fair value of these AFS securities is excluded from
income and is reported, net of deferred taxes, in accumulated other
comprehensive income as a part of shareholders’ equity. Details of other
comprehensive income are reported in the consolidated statements
of comprehensive icome. Realized gains and losses on securities are
computed based on the specific identification method and are reported
as a separate component of other income. Amortization of premiums
and discounts is included in interest income. Discounts and premiums
related to debt securities are amortized using the effective interest rate
method.
Management evaluates securities for other-than-temporary impairment
("OTTI") at least on a quarterly basis, and more frequently when
economic or market conditions warrant such an evaluation. In
estimating other-than-temporary losses, management considers the
length of time and extent that fair value has been less than cost and the
financial condition and near term prospects of the issuer. Management
also assesses whether it intends to sell, or it is more likely than not that
it will be required to sell, a security in an unrealized loss position before
recovery of its amortized cost basis. If either of the criteria regarding
intent or requirement to sell is met, the entire difference between
amortized cost and fair value is recognized as impairment through
earnings. For debt securities that do not meet the aforementioned
criteria, the amount of impairment is split into two components as
follows: 1) OTTI related to credit loss, which must be recognized in
the income statement and 2) OTTI related to other factors, which is
recognized in other comprehensive income. The credit loss is defined
as the difference between the present value of the cash flows expected
to be collected and the amortized cost basis. For equity securities, the
entire amount of impairment is recognized through earnings.
Loans held for sale
Mortgage loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated fair value in the
aggregate. Net unrealized losses, if any, are recognized through a
valuation allowance by charges to income. Loans held for sale have
primarily been fixed rate single-family residential mortgage loans
under contract to be sold in the secondary market. In most cases,
loans in this category are sold within thirty days. Buyers generally have
recourse to return a purchased loan under limited circumstances.
Recourse conditions may include early payment default, breach
of representations or warranties and documentation deficiencies.
Mortgage loans held for sale are generally sold with the mortgage
servicing rights released. Gains or losses on sales of mortgage loans
are recognized based on the differences between the selling price and
the carrying value of the related mortgage loans sold.
Loans
Loans are stated at the principal amounts outstanding, net of unearned
income and deferred loan fees. In addition to loans issued in the
85
2015 ANNUAL REPORT normal course of business, overdrafts on customer deposit accounts
are considered to be loans and reclassified as such. Interest income
on all classifications of loans is calculated using the simple interest
method on daily balances of the principal amount outstanding.
Accrual of interest is discontinued on a loan when Management
believes, after considering economic and business conditions and
collection efforts, the borrower’s financial condition is such that
reasonable doubt exists as to the full and timely collection of principal
and interest. This evaluation is made for all loans that are 90 days
or more contractually past due. When a loan is placed in nonaccrual
status, all interest previously accrued but not collected is reversed
against current period interest income. Income on such loans is then
recognized only to the extent that cash is received and where the future
collection of interest and principal is probable. Loans are returned to
accrual status when, in the judgment of Management, all principal
and interest amounts contractually due are reasonably assured to
be collected within a reasonable time frame and when the borrower
has demonstrated payment performance of cash or cash equivalents;
generally for a period of six months. All loans, except mortgage loans,
are considered past due if they are past due 30 days. Mortgage loans
are considered past due when two consecutive payments have been
missed. Loans that are past due 90-120 days and deemed uncollectible
are charged-off. The loan charge off is a reduction of the allowance for
loan losses.
Troubled Debt Restructurings (TDRs)
TDRs are loans in which the borrower is experiencing financial difficulty
at the time of restructuring, and the Bank has granted a concession to
the borrower. TDRs are undertaken in order to improve the likelihood
of recovery on the loan and may take the form of modifications made
with the stated interest rate lower than the current market rate for new
debt with similar risk, other modifications to the structure of the loan
that fall outside of normal underwriting policies and procedures, or in
limited circumstances forgiveness of principal and / or interest. TDRs
can involve loans remaining on non-accrual, moving to non-accrual or
continuing on accrual status, depending on the individual facts and
circumstances of the borrower. TDRs are subject to policies governing
accrual and non-accrual evaluation consistent with all other loans
as discussed in the “Loans” section above. All loans with the TDR
designation are considered to be impaired, even if they are accruing.
First Guaranty's policy is to evaluate TDRs that have subsequently
been restructured and returned to market terms after 12 months of
performance. The evaluation includes a review of the loan file and
analysis of the credit to assess the loan terms, including interest rate
to insure such terms are consistent with market terms. The loan
terms are compared to a sampling of loans with similar terms and risk
characteristics, including loans originated by First Guaranty and loans
lost to a competitor. The sample provides a guide to determine market
terms pursuant to ASC 310-40-50-2. The loan is also evaluated at that
time for impairment A loan determined to be restructured to market
terms and not considered impaired will no longer be disclosed as a
TDR in the years following the restructuring. These loans will continue
to be individually evaluated for impairment. A loan determined to
either be restructured to below market terms or to be impaired will
remain a TDR.
Credit Quality
First Guaranty's credit quality indicators are pass, special mention,
substandard and doubtful.
Loans included in the pass category are performing loans with
satisfactory debt coverage ratios, collateral, payment history and
documentation requirements.
86
Special mention loans have potential weaknesses that deserve close
attention. If left uncorrected, these potential weaknesses may result
in deterioration of the repayment prospects. Borrowers may be
experiencing adverse operating trends (declining revenues or margins)
or an ill proportioned balance sheet (e.g., increasing inventory without
an increase in sales, high leverage, tight liquidity). Adverse economic or
market conditions, such as interest rate increases or the entry of a new
competitor, may also support a special mention rating. Nonfinancial
reasons
litigation, an
ineffective loan agreement or other material structural weakness and
any other significant deviation from prudent lending practices.
include management problems, pending
A substandard loan is inadequately protected by the paying capacity
of the obligor or of the collateral pledged, if any. Loans classified as
substandard have a well-defined weakness. They are characterized
by the distinct possibility that First Guaranty will sustain some loss if
the deficiencies are not corrected. These loans require more intensive
supervision. Substandard loans are generally characterized by current
or expected unprofitable operations, inadequate debt service coverage,
inadequate liquidity or marginal capitalization. Repayment may depend
on collateral or other credit risk mitigates. For some substandard loans,
the likelihood of full collection of interest and principal may be in doubt
and interest is no longer accrued. Consumer loans that are 90 days
or more past due or that are nonaccrual are considered substandard.
Doubtful loans have the weaknesses of substandard loans with the
additional characteristic that the weaknesses make collection or
liquidation in full questionable and there is a high probability of loss
based on currently existing facts, conditions and values.
A loan is considered impaired when, based on current information
and events, it is probable that First Guaranty will be unable to collect
the scheduled payments of principal or interest when due according
to the contractual terms of the loan agreement. Factors considered
by Management in determining impairment include payment status,
collateral value and the probability of collecting scheduled principal
and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not classified
as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the
borrower, including the length of the delay, the reasons for the delay,
the borrower’s prior payment record and the amount of the shortfall in
relation to the principal and interest owed. Impairment is measured
on a loan-by-loan basis for commercial and construction loans by
either the present value of expected future cash flows discounted at
the loan’s effective interest rate, the loan’s obtainable market price or
the fair value of the collateral if the loan is collateral dependent. This
process is only applied to impaired loans or relationships in excess of
$250,000. Large groups of smaller balance homogeneous loans are
collectively evaluated for impairment. Accordingly, individual consumer
and residential loans are not separately identified for impairment
disclosures, unless such loans are the subject of a restructuring
agreement. Loans that have been restructured in a troubled debt
restructuring will continue to be evaluated individually for impairment,
including those no longer requiring disclosure.
Acquired Loans
Loans are recorded at estimated fair value on their purchase date with
no carryover of the related allowance for loan losses. Acquired loans are
segregated between those with deteriorated credit quality at acquisition
and those deemed as performing. To make this determination,
Management considers such factors as past due status, nonaccrual
status, credit risk ratings, interest rates and collateral position. The
fair value of acquired loans deemed performing is determined by
discounting cash flows, both principal and interest, for each pool at
prevailing market interest rates as well as consideration of inherent
potential losses. The difference between the fair value and principal
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. balances due at acquisition date, the fair value discount, is accreted
into income over the estimated life of each loan pool.
Loans acquired in a business combination are recorded at their
estimated fair value on their purchase date with no carryover of the
related allowance for loan losses. Performing acquired loans are
subsequently evaluated for any required allowance at each reporting
date. An allowance for loan losses is calculated using a similar
methodology for originated loans.
Loan fees and costs
Nonrefundable loan origination and commitment fees and direct costs
associated with originating loans are deferred and recognized over the
lives of the related loans as an adjustment to the loans' yield using the
level yield method.
Allowance for loan losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance
for loan losses when Management believes that the collectability of the
principal is unlikely. The allowance, which is based on evaluation of the
collectability of loans and prior loan loss experience, is an amount that,
in the opinion of Management, reflects the risks inherent in the existing
loan portfolio and exists at the reporting date. The evaluations take
into consideration a number of subjective factors including changes
in the nature and volume of the loan portfolio, historical losses, overall
portfolio quality, review of specific problem loans, current economic
conditions that may affect a borrower’s ability to pay, adequacy of loan
collateral and other relevant factors. In addition, regulatory agencies,
as an integral part of their examination process, periodically review
the estimated losses on loans. Such agencies may require additional
recognition of losses based on their judgments about information
available to them at the time of their examination.
The following are general credit risk factors that affect First Guaranty's
loan portfolio segments. These factors do not encompass all
risks associated with each loan category. Construction and land
development loans have risks associated with interim construction prior
to permanent financing and repayment risks due to the future sale of
developed property. Farmland and agricultural loans have risks such
as weather, government agricultural policies, fuel and fertilizer costs
and market price volatility. 1-4 family, multi-family, and consumer
credits are strongly influenced by employment levels, consumer debt
loads and the general economy. Non-farm non-residential loans
include both owner occupied real estate and non-owner occupied real
estate. Common risks associated with these properties is the ability to
maintain tenant leases and keep lease income at a level able to service
required debt and operating expenses. Commercial and industrial
loans generally have non-real estate secured collateral which requires
closer monitoring than real estate collateral.
Although Management uses available information to recognize losses
on loans, because of uncertainties associated with local economic
conditions, collateral values and future cash flows on impaired loans,
it is reasonably possible that a material change could occur in the
allowance for loan losses in the near term. However, the amount of the
change that is reasonably possible cannot be estimated. The evaluation
of the adequacy of loan collateral is often based upon estimates and
appraisals. Because of changing economic conditions, the valuations
determined from such estimates and appraisals may also change.
Accordingly, First Guaranty may ultimately incur losses that vary from
Management's current estimates. Adjustments to the allowance for
loan losses will be reported in the period such adjustments become
known or can be reasonably estimated. All loan losses are charged to
the allowance for loan losses when the loss actually occurs or when the
collectability of the principal is unlikely. Recoveries are credited to the
allowance at the time of recovery.
The allowance consists of specific, general, and unallocated
components. The specific component relates to loans that are
classified as doubtful, substandard, and impaired. For such loans
that are also classified as impaired, an allowance is established when
the discounted cash flows (or collateral value or observable market
price) of the impaired loan is lower than the carrying value of that loan.
Also, a specific reserve is allocated for syndicated loans. The general
component covers non-classified loans and special mention loans and
is based on historical loss experience adjusted for qualitative factors.
An unallocated component is maintained to cover uncertainties that
could affect the estimate of probable losses.
The allowance for loan losses is reviewed on a monthly basis. The
monitoring of credit risk also extends to unfunded credit commitments,
such as unused commercial credit lines and letters of credit. A reserve
is established as needed for estimates of probable losses on such
commitments.
Goodwill and intangible assets
Goodwill and intangible assets deemed to have indefinite lives
are subject to annual impairment tests. First Guaranty's goodwill is
tested for impairment on an annual basis, or more often if events
or circumstances indicate that there may be impairment. Adverse
changes in the economic environment, declining operations, or other
factors could result in a decline in the implied fair value of goodwill. If
the implied fair value is less than the carrying amount, a loss would
be recognized in other non-interest expense to reduce the carrying
amount to implied fair value of goodwill. The goodwill impairment test
includes two steps that are preceded by a, “step zero”, qualitative test.
The qualitative test allows Management to assess whether qualitative
factors indicate that it is more likely than not that impairment exists. If it
is not more likely than not that impairment exists, then no impairment
exists and the two step quantitative test would not be necessary. These
qualitative indicators include factors such as earnings, share price,
market conditions, etc. If the qualitative factors indicate that it is more
likely than not that impairment exists, then the two step quantitative test
would be necessary. Step one is used to identify potential impairment
and compares the estimated fair value of a reporting unit with its
carrying amount, including goodwill. If the estimated fair value of a
reporting unit exceeds its carrying amount, goodwill of the reporting
unit is not considered impaired. If the carrying amount of a reporting
unit exceeds its estimated fair value, the second step of the goodwill
impairment test is performed to measure the amount of impairment
loss, if any. Step two of the goodwill impairment test compares the
implied estimated fair value of reporting unit goodwill with the carrying
amount of that goodwill. If the carrying amount of goodwill for that
reporting unit exceeds the implied fair value of that unit’s goodwill, an
impairment loss is recognized in an amount equal to that excess.
Identifiable intangible assets are acquired assets that lack physical
substance but can be distinguished from goodwill because of
contractual or legal rights or because the assets are capable of being
sold or exchanged either on their own or in combination with the
related contract, asset or liability. First Guaranty's intangible assets
primarily relate to core deposits. These core deposit intangibles are
amortized on a straight-line basis over terms ranging from seven to
fifteen years. Management periodically evaluates whether events
or circumstances have occurred that impair this deposit intangible.
Premises and equipment
Premises and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed for financial reporting purposes
using the straight-line method over the estimated useful lives of the
respective assets as follows:
Buildings and improvements 10-40 years
Equipment, fixtures and automobiles 3-10 years
87
2015 ANNUAL REPORT Expenditures for renewals and betterments are capitalized and
depreciated over their estimated useful lives. Repairs, maintenance
and minor improvements are charged to operating expense as incurred.
Gains or losses on disposition, if any, are recorded as a separate line
item in noninterest income on the Statements of Income.
Other real estate
Other real estate includes properties acquired through foreclosure
or acceptance of deeds in lieu of foreclosure. These properties are
recorded at the lower of the recorded investment in the property or
its fair value less the estimated cost of disposition. Any valuation
adjustments required prior to foreclosure are charged to the allowance
for loan losses. Subsequent to foreclosure, losses on the periodic
revaluation of the property are charged to current period earnings
as other real estate expense. Costs of operating and maintaining the
properties are charged to other real estate expense as incurred. Any
subsequent gains or losses on dispositions are credited or charged to
income in the period of disposition.
participants would use in pricing the asset or liability. They may be
observable or unobservable. First Guaranty uses a fair value hierarchy
for valuation inputs that gives the highest priority to quoted prices in
active markets for identical assets or liabilities and the lowest priority
to unobservable inputs. See Note 21 for a detailed description of fair
value measurements.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control
over the assets has been surrendered. Control over transferred
assets is deemed to be surrendered when (i) the assets have been
isolated from First Guaranty, (ii) the transferee obtains the right (free
of conditions that constrain it from taking advantage of that right) to
pledge or exchange the transferred assets and (iii) First Guaranty does
not maintain effective control over the transferred assets through an
agreement to repurchase them before their maturity.
Earnings per common share
Off-balance sheet financial instruments
In the ordinary course of business, First Guaranty has entered into
commitments to extend credit, including commitments under credit
card arrangements, commitments to fund commercial real estate,
construction and land development loans secured by real estate and
performance standby letters of credit. Such financial instruments are
recorded when they are funded.
income available
Earnings per share represents
to common
shareholders divided by the weighted average number of common
shares outstanding during the period. In December of 2015, First
Guaranty issued a pro rata, 10% common stock dividend. The shares
issued for the stock dividend have been retrospectively factored into
the calculation of earnings per share as well as cash dividends paid on
common stock and represented on the face of the financial statements.
No convertible shares of First Guaranty's stock are outstanding.
Income taxes
Operating Segments
First Guaranty and its subsidiary file a consolidated federal income
tax return on a calendar year basis. In lieu of Louisiana state income
tax, the Bank is subject to the Louisiana bank shares tax, which is
included in noninterest expense in First Guaranty's consolidated
financial statements. With few exceptions, First Guaranty is no longer
subject to U.S. federal, state or local income tax examinations for years
before 2012. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which the deferred tax assets or liabilities are expected
to be settled or realized. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
utilized.
Comprehensive income
Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. Although certain
changes in assets and liabilities, such as unrealized gains and losses
on available for sale securities, are reported as a separate component
of the equity section of the balance sheet, such items along with net
income, are components of comprehensive income. The components
of other comprehensive income and related tax effects are presented
in the Statements of Comprehensive Income.
Fair Value Measurements
The fair value of a financial instrument is the current amount that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. A fair value measurement
assumes that the transaction to sell the asset or transfer the liability
occurs in the principal market for the asset or liability or, in the absence
of a principal market, the most advantageous market for the asset or
liability. Valuation techniques use certain inputs to arrive at fair value.
Inputs to valuation techniques are the assumptions that market
88
All of First Guaranty's operations are considered by management to
be aggregated into one reportable operating segment. While the chief
decision-makers monitor the revenue streams of the various products
and services, the identifiable segments are not material. Operations
are managed and financial performance is evaluated on a Company-
wide basis.
Reclassifications
Certain reclassifications have been made to prior year end financial
statements in order to conform to the classification adopted for reporting
in 2015.
Note 2. Recent Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") No. 2015-03, "Interest -
Imputation of Interest (Subtopic 835-30): Simplifying the Presentation
of Debt Issuance Costs." The amendments in this guidance require that
debt issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The recognition and
measurement guidance for debt issuance costs are not affected by the
amendments in this ASU.
This guidance is effective for interim and annual reporting periods
beginning after December 15, 2015, with early adoption permitted.
This guidance must be adopted retrospectively, wherein the balance
sheet of each period presented should be adjusted to reflect the new
guidance. First Guaranty has elected early adoption of this guidance
in 2015. The adoption of this guidance did not have a material impact
upon First Guaranty's financial statements. No adjustments to prior
year information was necessary upon the adoption of the guidance.
In September 2015, the FASB issued ASU 2015-16, "Simplifying the
Accounting for Measurement-Period Adjustments". The guidance
eliminates the requirement that an acquirer in a business combination
account for measurement-period adjustments retrospectively. The
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. ASU is effective for annual and interim periods beginning after
December 15, 2015. The adoption of this ASU is not expected to have
a material effect on First Guaranty's Consolidated Financial Statements.
In January 2016, the FASB issued ASU 2016-01, "Recognition and
Measurement of Financial Assets and Financial Liabilities". The ASU
amendments include changes related to how certain equity investments
are measured, recognize changes in the fair value of financial certain
liabilities measured under the fair value option and disclose and
present financial assets and liabilities on First Guaranty's consolidated
financial statements. Additionally, the ASU will also require entities to
present financial assets and financial liabilities separately, grouped by
measurement category and form of financial asset in the statement
of financial position or in the accompanying notes to the financial
statements. Entities will also no longer have to disclose the methods
and significant assumptions for financial instruments measured at
amortized cost, but will be required to measure such instruments under
the "exit price" notion for disclosure purposes. The ASU is effective for
annual and interim periods beginning after December 15, 2017. The
adoption of this ASU is not expected to have a material effect on First
Guaranty's Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, "Conforming
Amendments Related to Leases". This ASU amends the codification
regarding leases in order to increase transparency and comparability.
The ASU requires companies to recognize lease assets and liabilities
on the statement of condition and disclose key information about
leasing arrangements. A lessee would recognize a liability to make
lease payments and a right-of-use asset representing its right to use
the leased asset for the lease term. The ASU is effective for annual
and interim periods beginning after December 15, 2018. The
adoption of this ASU is not expected to have a material effect on First
Guaranty's Consolidated Financial Statements.
Note 3. Cash and Due from Banks
Certain reserves are required to be maintained at the Federal Reserve
Bank. There was no reserve requirement as of December 31, 2015
and 2014. At December 31, 2015 First Guaranty had only one
account at correspondent banks, excluding the Federal Reserve Bank,
that exceeded the FDIC insurable limit of $250,000. This account
was over the insurable limit by $2,000. At December 31, 2014 First
Guaranty had only one account at correspondent banks, excluding
the Federal Reserve Bank, that exceeded the FDIC insurable limit of
$250,000. This account was over the insurable limit by $1,000.
Note 4. Securities
A summary comparison of securities by type at December 31, 2015 and 2014 is shown below.
December 31, 2015
December 31, 2014
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(in thousands)
Available-for-sale:
U.S Treasuries
U.S. Government Agencies
Corporate debt securities
Mutual funds or other equity securities
Municipal bonds
Mortgage-backed securities
$ 29,999
$ -
$ -
$ 29,999
$ 36,000
$ -
$ -
$ 36,000
165,364
105,680
580
47,339
28,891
-
(1,553 )
163,811
295,620
30
(4,155)
291,495
2,259
(2,803 )
105,136
126,654
4,415
(1,006)
130,063
2
899
-
-
(5)
582
570
4
48,233
40,599
1,077
(283 )
28,608
-
-
-
-
-
574
41,676
-
Total available-for-sale securities
$ 377,853
$3,160
$(4,644) $ 376,369
$ 499,443
$5,526
$(5,161) $ 499,808
Held to maturity:
U.S. Government Agencies
Mortgage-backed securities
$ 77,343
$ -
$ (721) $ 76,622
$ 84,479
$ -
$(1,950) $ 82,529
92,409
9
(892)
91,526
57,316
57
(214)
57,159
Total held to maturity securities
$169,752
$ 9
$(1,613)
$168,148
$141,795
$ 57
$(2,164) $139,688
89
2015 ANNUAL REPORT The scheduled maturities of securities at December 31, 2015, by contractual maturity, are shown below. Actual maturities may differ from
contractual maturities due to call or prepayments. Mortgage-backed securities are not due at a single maturity because of amortization and
potential prepayment of the underlying mortgages. For this reason they are presented separately in the maturity table below.
Available-for-sale:
Due in one year or less
Due after one year through five years
Due after five years through 10 years
Over 10 years
Subtotal
Mortgage-backed Securities
Total available-for-sale securities
Held to maturity:
Due in one year or less
Due after one year through five years
Due after five years through 10 years
Over 10 years
Subtotal
Mortgage-backed Securities
Total held to maturity securities
December 31, 2015
Amortized
Cost
Fair Value
(in thousands )
$ 38,847
$ 38,905
138,704
124,736
46,675
348,962
28,891
138,924
122,706
47,226
347,761
28,608
$377,853
$376,369
$
-
21,803
55,540
-
77,343
92,409
$
-
$ 21,545
55,077
-
76,622
91,526
$169,752
$168,148
The following is a summary of the fair value of securities with gross unrealized losses and an aging of those gross unrealized losses as of the dates
indicated:
At December 31, 2015
Less Than 12 Months
12 Months or More
Total
Number of
Securities Fair Value
Gross
Unrealized
Losses
Number of
Securities Fair Value
Gross
Unrealized
Losses
Number of
Securities Fair Value
Gross
Unrealized
Losses
(in thousands except for %)
Available-for-sale:
U.S. Treasuries
U.S. Government agencies
Corporate debt securities
Mutual funds or other equity
securities
Municipal bonds
Mortgage-backed securities
Total available-for-sale securities
2
49
112
-
2
14
179
$
-
$ -
(632)
(1,294)
139
$ 9,999
$ -
116,473
(921)
31,414
(1,509)
-
679
-
(5)
28,608
(283)
-
11
27
-
-
-
47,338
5,344
-
-
-
-
-
-
$ 187,173
$ (2,718)
38
$52,682
$ (1,926)
Held to maturity:
U.S. Government agencies
Mortgage-backed securities
Total held to maturity securities
90
16
39
55
$ 51,865
$
(404)
82,863
(892)
$134,728
$(1,296)
7
-
7
$23,852
$
(317)
-
-
$23,852
$ (317)
2
60
-
2
14
217
23
39
62
$ 9,999
$ -
163,811
36,758
(1,553)
(2,803)
-
679
-
(5)
28,608
(283)
$ 239,855
$ (4,644)
$ 75,717
$
(721)
82,863
(892)
$ 158,580
$(1,613)
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. At December 31, 2014
Less Than 12 Months
12 Months or More
Total
Number of
Securities
Fair
Value
Gross
Unrealized
Losses
Number of
Securities
Gross
Unrealized
Losses
Number of
Securities
Fair
Value
Gross
Unrealized
Losses
Fair Value
(in thousands)
Available-for-sale:
U.S. Treasuries
U.S. Government Agencies
Corporate debt securities
Mutual funds or other equity
securities
Municipal bonds
4
4
37
-
-
$ 24,000
$ -
43,983
15,395
-
-
(17)
(238)
-
-
-
66
50
-
-
$ -
$ -
232,482
(4,138)
15,397
(768)
-
-
-
-
4
70
87
-
-
$24,000
$ -
276,465
(4,155)
30,792
(1,006)
-
-
-
-
Total available-for-sale securities
45
$ 83,378
$(255)
116
$247,879
$(4,906)
161
$331,257
$(5,161)
Held to maturity:
U.S. Government agencies
Mortgage-backed securities
Total held to maturity securities
1
7
8
$ 4,993
$ (7)
12,008
(13)
$17,001
$ (20)
19
12
31
$ 77,536
$(1,943)
29,415
(201)
$106,951
$(2,144)
20
19
39
$ 82,529
$ (1,950)
41,423
(214)
$123,952
$(2,164)
As of December 31, 2015, 279 of First Guaranty's debt securities had
unrealized losses totaling 1.5% of the individual securities’ amortized
cost basis and 1.1% of First Guaranty's total amortized cost basis of
the investment securities portfolio. 45 of the 279 securities had been
in a continuous loss position for over 12 months at such date. The 45
securities had an aggregate amortized cost basis of $78.8 million and
an unrealized loss of $2.2 million at December 31, 2015. Management
has the intent and ability to hold these debt securities until maturity or
until anticipated recovery.
Securities are evaluated for other-than-temporary impairment ("OTTI")
at least quarterly and more frequently when economic or market
conditions warrant. Consideration is given to (i) the length of time
and the extent to which the fair value has been less than cost, (ii)
the financial condition and near-term prospects of the issuer, (iii) the
recovery of contractual principal and interest and (iv) the intent and
ability of First Guaranty to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in fair value.
Investment securities issued by the U.S. Government and Government
sponsored agencies with unrealized losses and the amount of
unrealized losses on those investment securities are the result of
changes in market interest rates. First Guaranty has the ability and
intent to hold these securities until recovery, which may not be until
maturity.
Corporate debt securities in a loss position consist primarily of
corporate bonds issued by businesses in the financial, insurance,
utility, manufacturing, industrial, consumer products and oil and gas
industries. Two issuers were determined during 2015 to have other-
than-temporary impairment losses. First Guaranty believes that the
remaining issuers will be able to fulfill the obligations of these securities
based on evaluations described above. First Guaranty has the ability
and intent to hold these securities until they recover, which could be at
their maturity dates.
91
2015 ANNUAL REPORT Non-credit related other-than-temporary impairment losses recognized
in other comprehensive income totaled $0.4 million in 2015 and zero
in 2014. The impairment losses were related to two available for
sale corporate bond securities, described above, which had original
amortized cost of $0.8 million.
At December 31, 2015 and 2014 the carrying value of pledged securities
totaled $427.4 million and $516.5 million, respectively. First Guaranty
completed its liquidation of the common stock from a converted
preferred security in the third quarter of 2015. The total gains realized
on the security were $2.7 million. Gross realized gains on sales of
securities were $3.3 million (including the sale of the converted
preferred security), $0.2 million and $1.4 million for the years ended
December 31, 2015, 2014 and 2013, respectively. Gross realized
losses were $0.4 million, $0.2 million and $0 for the years ended
December 31, 2015, 2014 and 2013. The tax applicable to these
transactions amounted to $1.2 million, $0 million and $0.5 million for
2015, 2014 and 2013, respectively. Proceeds from sales of securities
classified as available-for-sale amounted to $290.0 million, $109.8
million and $18.6 million for the years ended December 31, 2015,
2014 and 2013, respectively.
Net unrealized losses on available-for-sale securities included in
accumulated other comprehensive income (loss) ("AOCI"), net of
applicable income taxes, totaled $0.9 million at December 31, 2015.
At December 31, 2014 net unrealized gains included in AOCI, net
of applicable income taxes, totaled $0.2 million. During 2015 and
2014 gains, net of tax, reclassified out of AOCI into earnings totaled
$2.1 million and $0.2 million, respectively.
During the years ended December 31, 2015, First Guaranty recorded
OTTI losses on available-for-sale securities as follows:
Total OTTI charge realized and unrealized
OTTI recognized in other comprehensive income
(non-credit component)
Net impairment losses recognized in earnings (credit
component)
Year Ended
December 31,
2015
(in thousands)
$ 571
396
$ 175
There were no other-than-temporary impairment losses recognized on
securities in 2014 or 2013.
The following table presents a roll-forward of the amount of credit
losses on debt securities held by First Guaranty for which a portion of
OTTI was recognized in other comprehensive income for the year end
year ended December 31, 2015:
(in thousands)
Beginning balance of credit losses at December 31,
2014
Other-than-temporary impairment credit losses on
securities not previously OTTI
Increases for additional credit losses on securities
previously determined to be OTTI
Reduction for increases in cash flows
Reduction due to credit impaired securities sold or
fully settled
Ending balance of cumulative credit losses recognized
in earnings at December 31, 2015
$ -
175
-
-
-
$175
In 2015 there were no other-than-temporary impairment credit losses
on securities for which we had previously recognized OTTI. The amount
related to losses on securities with no previous losses amounted to $0.2
million at December 31, 2015. For securities that have indications of
credit related impairment, management analyzes future expected cash
flows to determine if any credit related impairment is evident. Estimated
cash flows are determined using Management's best estimate of future
cash flows based on specific assumptions. The assumptions used
to determine the cash flows were based on estimates of loss severity
and credit default probabilities. Management reviews reports from
credit rating agencies and public filings of issuers. The credit related
impairment was related to one corporate debt security with a book
balance of $0.5 million that experienced declines in its financial
performance associated with the mining industry. This corporate debt
security had a non-credit related impairment of $0.3 million. A second
corporate debt security had a non-credit related impairment of $0.1
million due to the fact that the issuer went private and liquidity in its
debt securities was reduced. Management anticipates receipt of all
scheduled cash flows for this security.
92
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. At December 31, 2015, First Guaranty's exposure to investment
securities issuers that exceeded 10% of shareholders’ equity as follows:
Note 5. Loans
The following table summarizes the components of First Guaranty's
loan portfolio as of the dates indicated:
At December 31, 2015
Amortized
Cost
Fair Value
(in thousands)
$ 29,999
$ 29,999
U.S. Treasuries
Federal Home Loan Bank (FHLB)
85,507
84,689
Federal Home Loan Mortgage
Corporation (Freddie Mac-FHLMC)
Federal National Mortgage
Association (Fannie Mae-FNMA)
Federal Farm Credit Bank (FFCB)
Total
66,271
65,589
127,504
126,294
84,726
83,996
$394,007
$390,567
December 31,
2015
2014
Balance
As % of
Category
Balance
As % of
Category
(in thousands except for %)
$ 56,132
17,672
6.6%
2.1%
$ 52,094
13,539
6.6%
1.7%
129,610
15.4%
118,181
14.9%
12,629
1.5%
14,323
1.8%
323,363
38.3%
328,400
41.5%
539,406
63.9%
526,537
66.5%
25,838
3.1%
26,278
3.3%
224,201
26.6%
196,339
24.8%
Real Estate:
Construction & land
development
Farmland
1-4 Family
Multifamily
Non-farm non-
residential
Total Real Estate
Non-real Estate:
Agricultural
Commercial and
industrial
Consumer and other
54,163
6.4%
42,991
5.4%
Total Non-real Estate
304,202
36.1%
265,608
33.5%
Total Loans Before
Unearned Income
Unearned income
Total Loans Net of
Unearned Income
843,608
100.0%
792,145
100.0%
(2,025)
(1,824)
$841,583
$790,321
The following table summarizes fixed and floating rate loans by contractual maturity, excluding nonaccrual loans, as of December 31, 2015 and
December 31, 2014 unadjusted for scheduled principal payments, prepayments, or repricing opportunities. The average life of the loan portfolio
may be substantially less than the contractual terms when these adjustments are considered.
One year or less
One to five years
Five to 15 years
Over 15 years
Subtotal
Nonaccrual loans
Total Loans Before Unearned Income
Unearned income
Total Loans Net of Unearned Income
2015
December 31,
(in thousands)
2014
Fixed
Floating
Total
Fixed
Floating
Total
$ 86,975
$ 48,111
$ 135,086
$ 88,686
$ 72,250
$ 160,936
315,685
246,374
562,059
253,306
225,655
49,197
36,438
31,456
9,333
80,653
45,771
67,012
25,304
39,634
8,104
478,961
106,646
33,408
$488,295
$335,274
823,569
$434,308
$345,643
779,951
20,039
843,608
(2,025)
$841,583
12,194
792,145
(1,824)
$790,321
93
2015 ANNUAL REPORT As of December 31, 2015, $132.9 million of floating rate loans were at their interest rate floor. At December 31, 2014, $195.7 million of floating
rate loans were at the floor rate. Nonaccrual loans have been excluded from these totals.
The following tables present the age analysis of past due loans for the periods indicated:
As of December 31, 2015
30-89 Days
Past Due
90 Days or
Greater Past Due
Total Past
Due
Current
(in thousands)
Total
Loans
Recorded
Investment 90
Days Accruing
Real Estate:
Construction & land development
$
12
$
Farmland
1 - 4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total Loans Before Unearned Income
Unearned income
Total Loans Net of Unearned Income
-
2,546
-
1,994
4,552
2,346
314
965
3,625
$8,177
558
136
4,929
9,045
2,934
$
570
136
7,475
9,045
4,928
$ 55,562
$ 56,132
$
-
17,536
17,672
122,135
129,610
3,584
12,629
318,435
323,363
19
391
-
-
17,602
22,154
517,252
539,406
410
2,628
48
171
2,847
4,974
362
1,136
6,472
20,864
25,838
223,839
224,201
53,027
54,163
297,730
304,202
-
-
-
-
$20,449
$28,626
$814,982
843,608
$410
As of December 31, 2014
30-89 Days
Past Due
90 Days or
Greater Past Due
Total Past
Due
Current
(in thousands)
(2,025)
$841,583
Total
Loans
Recorded
Investment 90
Days Accruing
Real Estate:
Construction & land development
$ 338
$
486
$
824
$ 51,270
$ 52,094
$
Farmland
1 - 4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
10
2,924
2,990
1,509
7,771
-
1,241
105
1,346
-
-
153
163
13,376
13,539
4,418
7,342
110,839
118,181
599
-
2,990
11,333
14,323
4,993
6,502
321,898
328,400
-
-
10,050
17,821
508,716
526,537
599
832
832
25,446
26,278
1,907
3,148
193,191
196,339
4
109
42,882
42,991
2,743
4,089
261,519
265,608
-
-
-
-
Total Loans Before Unearned Income
$9,117
$12,793
$21,910
$770,235
792,145
$599
Unearned income
Total Loans Net of Unearned Income
(1,824)
$790,321
The tables above include $20.0 million and $12.2 million of nonaccrual loans for December 31, 2015 and 2014, respectively.
94
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. See the tables below for more detail on nonaccrual loans.
The following is a summary of nonaccrual loans by class for the periods indicated:
As of December 31,
2015
2014
(in thousands)
Real Estate:
Construction & land development
$
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total Nonaccrual Loans
558
117
4,538
9,045
2,934
17,192
2,628
48
171
2,847
$
486
153
3,819
-
4,993
9,451
832
1,907
4
2,743
$20,039
$12,194
The following table identifies the credit exposure of the loan portfolio by specific credit ratings for the periods indicated:
As of December 31, 2015
As of December 31, 2014
Pass
Special
Mention
Sub-
standard Doubtful
Total
Pass
Special
Mention
Sub-
standard Doubtful
Total
(in thousands)
Real Estate:
Construction & land development
$ 51,681
$
386 $ 4,065
$
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
17,554
115,878
3,584
-
6,425
-
118
7,307
9,045
296,682
3,288
23,393
485,379
10,099
43,928
20,860
214,184
53,779
4
471
178
653
4,974
9,546
206
14,726
$10,752
$58,654
$
Total Non-Real Estate
288,823
Total Loans Before Unearned Income $ 774,202
Unearned income
Total Loans Net of Unearned Income
-
-
-
-
-
-
-
-
-
-
-
$56,132 $ 46,451
$
559
$ 5,084
$
17,672
13,299
129,610
103,582
12,629
3,581
323,363
300,319
87
6,113
6,414
6,788
153
8,486
4,328
21,293
539,406
467,232
19,961
39,344
25,838
22,789
224,201
185,839
54,163
42,831
7
8,611
123
3,482
1,889
37
304,202
251,459
8,741
5,408
843,608 $ 718,691
$28,702
$ 44,752
$
(2,025)
$841,583
-
-
-
-
-
-
-
-
-
-
-
$52,094
13,539
118,181
14,323
328,400
526,537
26,278
196,339
42,991
265,608
792,145
(1,824)
$790,321
95
2015 ANNUAL REPORT Note 6. Allowance for Loan Losses
A summary of changes in the allowance for loan losses, by loan type, for the years ended December 31, 2015, 2014 and 2013 are as follows:
As of December 31,
2015
2014
Beginning
Allowance
(12/31/14)
Charge-
Offs
Recoveries Provision
Ending
Allowance
(12/31/15)
Beginning
Allowance
(12/31/13)
Charge-
Offs
Recoveries
Provi-
sion
Ending
Allowance
(12/31/14)
(in thousands)
Real Estate:
Construction & land
development
Farmland
1-4 family
Multifamily
Non-farm non-
residential
Total Real Estate
Non-Real Estate:
Agricultural
$ 702
$(559)
$ 5
$ 814
$ 962
$ 1,530
$(1,032)
$ 6
$ 198
$ 702
21
2,131
813
-
(410)
(947)
2,713
(1,137)
6,380
(3,053)
-
94
46
5
150
33
(44)
645
1,717
3,165
54
1,771
557
3,298
6,642
17
1,974
376
-
(589)
-
3,607
(1,515)
-
99
49
9
4
647
388
612
7,504
(3,136)
163
1,849
21
2,131
813
2,713
6,380
293
(491)
3
211
16
46
(2)
1
248
293
Commercial and
industrial
Consumer and other
Unallocated
1,797
371
264
(79)
(550)
-
Total Non-Real Estate
2,725
(1,120)
315
151
-
469
494
258
(264)
699
Total
$ 9,105 $(4,173)
$619
$3,864
2,527
230
-
2,773
$9,415
2,176
208
421
(266)
(289)
-
2,851
(557)
118
199
-
318
(231 )
253
(157 )
113
$10,355
$(3,693)
$481
$1,962
1,797
371
264
2,725
$9,105
As of December 31,
2013
Beginning
Allowance
(12/31/12)
Charge-
Offs
Ending
Allowance
(12/31/13)
Recoveries
Provision
(in thousands)
Real Estate:
Construction & land development
$ 1,098 $ (233)
$ 10
$ 655
$ 1,530
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
Total Non-Real Estate
Total
50
2,239
284
(31)
(220)
-
3,666
(1,148)
7,337
(1,632)
64
(41)
2,488
(1,098)
233
220
(262)
-
3,005
(1,401)
$ 10,342 $(3,033)
140
49
-
8
207
5
71
243
-
319
$ 526
(142)
(94)
92
1,081
1,592
18
715
(6)
201
928
17
1,974
376
3,607
7,504
46
2,176
208
421
2,851
$2,520
$10,355
96
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Negative provisions are caused by changes in the composition and credit quality of the loan portfolio. The result is an allocation of the loan loss
reserve from one category to another.
A summary of the allowance and loans individually and collectively evaluated for impairment are as follows:
As of December 31, 2015
Allowance
Individually
Evaluated for
Impairment
Allowance
Collectively
Evaluated for
Impairment
Total
Allowance
for Credit
Losses
Loans
Individually
Evaluated for
Impairment
Loans
Collectively
Evaluated for
Impairment
Total Loans
before
Unearned
Income
(in thousands)
Real Estate:
Construction & land development
$ -
$ 962
$ 962
$ 368
$ 55,764
$ 56,132
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
Total Non-Real Estate
Total
Unearned Income
Total Loans Net of Unearned Income
-
611
454
1,298
2,363
-
-
-
-
-
54
1,160
103
2,000
4,279
16
2,527
230
-
54
1,771
557
3,298
6,642
16
2,527
230
-
-
3,049
9,045
13,646
26,108
17,672
17,672
126,561
129,610
3,584
12,629
309,717
323,363
513,298
539,406
4,863
20,975
25,838
-
171
-
224,201
224,201
53,992
54,163
-
-
2,773
2,773
5,034
299,168
304,202
$2,363
$7,052
$9,415
$31,142
$812,466
843,608
(2,025)
$841,583
As of December 31, 2014
Allowance
Individually
Evaluated for
Impairment
Allowance
Collectively
Evaluated for
Impairment
Total
Allowance
for Credit
Losses
Loans
Individually
Evaluated for
Impairment
Loans
Collectively
Evaluated for
Impairment
Total Loans
before
Unearned
Income
(in thousands)
Real Estate:
Construction & land development
$ 126
$ 576
$ 702
$ 4,150
$ 47,944
$ 52,094
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
Total Non-Real Estate
Total
Unearned Income
Total Loans Net Of Unearned Income
-
598
437
468
1,629
262
19
-
-
281
$1,910
21
1,533
376
2,245
4,751
31
1,778
371
264
2,444
$7,195
21
2,131
813
2,713
6,380
293
1,797
371
264
2,725
$9,105
-
3,420
7,201
13,539
13,539
114,761
118,181
7,122
14,323
16,287
312,113
328,400
31,058
495,479
526,537
2,650
1,664
-
-
23,628
26,278
194,675
196,339
42,991
42,991
-
-
4,314
261,294
265,608
$35,372
$756,773
792,145
(1,824)
$790,321
97
2015 ANNUAL REPORT As of December 31, 2015, 2014 and 2013, First Guaranty had loans
totaling $20.0 million, $12.2 million and $14.5 million, respectively,
not accruing interest. As of December 31, 2015, 2014 and 2013, First
Guaranty had loans past due 90 days or more and still accruing interest
totaling $0.4 million, $0.6 million and $0.4 million, respectively. The
average outstanding balance of nonaccrual loans in 2015 was $14.9
million compared to $13.8 million in 2014 and $17.3 million in 2013.
Included in the above table is a loan for $5.3 million and $5.9 million
at December 31, 2015 and 2014, respectively, that is no longer
considered impaired but is still individually evaluated for impairment
since it was formally a restructured credit that subsequently return to
market terms.
As of December 31, 2015, First Guaranty has no outstanding
commitments to advance additional funds in connection with impaired
loans.
The following is a summary of impaired loans by class at December
31, 2015:
As of December 31, 2015
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
Interest
Income
Cash Basis
(in thousands)
Impaired Loans with no related allowance:
Real Estate:
Construction & land development
$
368
$
823
$ -
$
825
$ 41
$ 44
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total Impaired Loans with no related allowance
Impaired Loans with an allowance recorded:
Real estate:
Construction & land development
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
-
1,054
3,728
3,637
-
1,358
4,240
4,116
8,787
10,537
4,863
5,019
-
171
-
317
5,034
5,336
13,821
15,873
-
-
-
-
1,995
2,144
-
-
10,009
10,841
12,004
12,985
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
611
-
1,298
1,909
-
-
-
-
-
1,354
4,305
4,124
10,608
5,036
-
335
5,371
15,979
-
-
2,079
-
11,035
13,114
-
-
-
-
-
79
254
165
539
300
-
27
327
866
-
-
103
-
566
669
-
-
-
-
-
84
72
147
347
300
-
20
320
667
-
-
125
-
569
694
-
-
-
-
Total Impaired Loans with an allowance recorded
12,004
12,985
1,909
13,114
669
694
Total Impaired Loans
$25,825
$28,858
$1,909
$29,093
$1,535
$1,361
98
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. The following is a summary of impaired loans by class at December 31, 2014:
As of December 31, 2014
Recorded
Investment
Unpaid
Principal
Balance
Related
Allowance
Average
Recorded
Investment
Interest
Income
Recognized
Interest
Income
Cash Basis
(in thousands)
Impaired Loans with no related allowance:
Real Estate:
Construction & land development
$ 3,308
$ 4,359
$ -
$ 3,479
$ 217
$ 224
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Non-Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
-
-
1,368
1,656
-
-
7,439
9,008
12,115
15,023
-
-
-
-
-
-
-
-
Total Impaired Loans with no related allowance
12,115
15,023
-
-
-
-
-
-
-
-
-
-
-
397
148
8,694
12,718
-
-
-
-
-
72
31
422
742
-
-
-
-
-
43
34
275
576
-
-
-
-
12,718
742
576
Impaired Loans with an allowance recorded:
Real Estate:
Construction & land development
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
842
-
2,052
1,338
8,848
842
-
2,068
1,337
8,913
126
-
598
398
468
829
-
2,062
1,340
8,948
13,080
13,160
1,590
13,179
2,650
1,664
-
2,650
1,854
-
4,314
4,504
262
19
-
281
-
-
-
-
48
-
97
60
317
522
-
-
-
-
43
-
87
55
327
512
-
-
-
-
Total Impaired Loans with an allowance recorded
17,394
17,664
1,871
13,179
522
512
Total Impaired Loans
$29,509
$32,687
$1,871
$25,897
$1,264
$1,088
99
2015 ANNUAL REPORT Troubled Debt Restructurings
A Troubled Debt Restructuring ("TDR") is a debt restructuring in which
the creditor for economic or legal reasons related to the debtor's
financial difficulties grants a concession to the debtor that it would
not otherwise consider. The modifications to First Guaranty's TDRs
were concessions on the interest rate charged. The effect of the
modifications to First Guaranty was a reduction in interest income.
These loans were evaluated in First Guaranty's reserve for loan
losses. In 2015, there was one credit relationship in the amount of
$0.4 million that was restructured in a troubled debt restructuring. The
relationship was secured by raw land. The relationship was placed on
interest only with a reduction in scheduled amortization payments and
contractual interest rate. In 2014, there was one credit relationship in
the amount of $2.2 million that was restructured in a troubled debt
restructuring. The relationship was secured by 1- 4 family real estate
and a non-farm non-residential real estate property. The relationship
was placed on interest only with a reduction in scheduled amortization
payments and contractual interest rate.
The following table is an age analysis of TDRs as of December 31, 2015 and December 31, 2014:
Troubled Debt Restructurings
December 31, 2015
December 31, 2014
Accruing Loans
30-89
Days Past
Due
Current
Nonaccrual
Total
TDRs
Accruing Loans
30-89
Days
Current
Past Due Nonaccrual
Total
TDRs
Real Estate:
Construction & land development
$
Farmland
1-4 Family
Multifamily
Non-farm non residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total
(in thousands)
$ 368
$ 368
$
-
-
1,702
1,702
-
206
2,276
-
-
-
-
-
3,637
5,707
-
-
-
-
-
-
-
-
2,998
2,998
$
-
-
1,752
-
452
2,204
-
-
-
-
-
-
-
-
$2,276
$5,707
$2,998
$ 2,204
-
-
-
-
-
-
-
-
-
-
-
-
$ -
$
-
-
-
230
230
-
-
-
-
$230
-
-
1,752
-
3,680
5,432
-
-
-
-
$5,432
$
-
-
-
-
3,431
3,431
-
-
-
-
$3,431
$
The following table discloses TDR activity for the twelve months ended December 31, 2015.
Trouble Debt Restructured Loans Activity
Twelve Months Ended December 31, 2015
Beginning
balance
(December
31, 2014)
Charge-Offs
post-
modification
New
TDRs
Transferred
to ORE
Paydowns
(in thousands)
Construction
to permanent
financing
Restructured
to market
terms
Ending
balance
(December
31, 2015)
Real Estate:
Construction & land development
$ - $ 368
$ -
$ -
-
1,752
-
3,680
5,432
-
-
-
-
-
-
-
-
368
-
-
-
-
-
-
-
(29)
(29)
-
-
-
-
-
-
-
-
-
-
-
-
-
$ -
-
(50)
-
(14)
(64)
-
-
-
-
$ -
$ -
$ 368
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,702
-
3,637
5,707
-
-
-
-
$5,432 $ 368
$(29)
$ -
$(64)
$ -
$ -
$5,707
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Total Non-Real Estate
Total Impaired Loans with no related
allowance
1 00
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. There were no commitments to lend additional funds to debtors whose terms have been modified in a troubled debt restructuring at December
31, 2015.
Note 7. Premises and Equipment
The components of premises and equipment at December 31, 2015 and 2014 are as follows:
Land
Bank premises
Furniture and equipment
Construction in progress
Acquired value
Less: accumulated depreciation
December 31,
2015
2014
(in thousands)
$ 7,227
$ 6,933
18,914
21,060
2,667
49,868
27,849
18,324
19,995
254
45,506
26,295
Net book value
$22,019
$19,211
Depreciation expense amounted to $1.6 million, $1.7 million and $1.7 million for 2015, 2014 and 2013, respectively.
Note 8. Goodwill and Other Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but are subject to impairment testing. Other intangible
assets continue to be amortized over their useful lives. Goodwill represents the purchase price over the fair value of net assets acquired from the
Homestead Bancorp in 2007. No impairment charges have been recognized since acquisition. Goodwill totaled $2.0 million at December 31,
2015 and 2014.
The following table summarizes intangible assets subject to amortization.
December 31,
2015
2014
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
(in thousands)
Core deposit intangibles
Mortgage servicing rights
Total
$9,350
267
$9,617
$ 8,052
171
$ 8,223
$1,298
96
$1,394
$9,350
267
$9,617
$7,732
152
$7,884
$1,618
115
$1,733
The core deposits intangible reflect the value of deposit relationships,
including the beneficial rates, which arose from acquisitions. The
weighted-average amortization period remaining for the core deposit
intangibles is 4.4 years.
Amortization expense relating to purchase accounting intangibles
totaled $0.3 million, $0.3 million and $0.3 million for the year ended
December 31, 2015, 2014 and 2013, respectively.
Amortization expense of the core deposit intangible assets for the
next five years is as follows:
For the Years Ended
Estimated Amortization Expense
December 31, 2016
December 31, 2017
December 31, 2018
December 31, 2019
December 31, 2020
(in thousands)
$ 320
$ 320
$ 320
$135
$135
101
2015 ANNUAL REPORT Note 9. Other Real Estate
Other real estate owned consists of the following:
The following schedule provides certain information about First
Guaranty's short-term borrowings for the periods indicated:
Real Estate Owned Acquired by
Foreclosure:
Residential
Construction & land development
Non-farm non-residential
Total Other Real Estate Owned and
Foreclosed Property
December 31,
2015
2014
(in thousands)
$880
$1,121
25
127
672
950
$1,577
$2,198
Note 10. Deposits
A schedule of maturities of all time deposits are as follows:
December 31,
2015
(in thousands)
$401,535
118,340
18,697
28,209
25,229
$592,010
2016
2017
2018
2019
2020 and thereafter
Total
The table above includes, for December 31, 2015, brokered deposits
totaling $26.7 million. The aggregate amount of jumbo time deposits,
each with a minimum denomination of $250,000 totaled $305.1 million
and $323.7 million at December 31, 2015 and 2014, respectively.
Note 11. Borrowings
Short-term borrowings are summarized as follows:
December 31,
2015
December 31,
2014
(in thousands)
Securities sold under
agreements to repurchase
Line of credit
Total short-term borrowings
$ -
1,800
$1,800
$ -
1,800
$1,800
Securities sold under agreements to repurchase, which are classified
as secured borrowings, generally mature daily. Interest rates on
repurchase agreements are set by Management and are generally
based on the 91-day Treasury bill rate. First Guaranty no longer offered
repurchase agreements beginning in April 2014.
Available lines of credit totaled $206.2 million at December 31, 2015
and $266.7 million at December 31, 2014.
December 31,
2015
2014
2013
(in thousands except for %)
Outstanding at year end
$ 1,800
$ 1,800
$ 5,788
Maximum month-end
outstanding
Average daily outstanding
Weighted average rate
during the year
Average rate at year end
$13,800
$ 4,217
$22,356
$ 6,960
$57,302
$21,387
2.12%
4.50%
1.08%
4.50%
0.98%
1.51%
Long-term debt is summarized as follows:
Senior long-term debt with a commercial bank, priced at Wall Street
Journal Prime plus 75 basis points (4.00%), totaled $0.9 million at
December 31, 2015 and $1.5 million at December 31, 2014. First
Guaranty pays $50,000 principal plus interest monthly. This loan has
a contractual maturity date of May 12, 2017. This long-term debt is
secured by a pledge of 13.2% (735,745 shares) of First Guaranty's
interest in First Guaranty Bank (a wholly owned subsidiary).
Senior long-term debt with a commercial bank, priced at floating
3-month LIBOR plus 250 basis points, totaled $25.0 million at
December 31, 2015. First Guaranty pays $625,000 principal plus
interest quarterly. This loan was originated in December 2015 and has
a contractual maturity date of December 22, 2020. This long-term debt
is secured by a pledge of 85% (4,823,899 shares) of First Guaranty's
interest in First Guaranty Bank (a wholly owned subsidiary).
Junior subordinated debt, priced at Wall Street Journal Prime plus 75
basis points (4.00%), totaled $14.6 million at December 31, 2015.
First Guaranty pays interest semi-annually for the Fixed Interest
Rate Period and quarterly for the Floating Interest Rate Period. The
Note is unsecured and ranks junior in right of payment to any senior
indebtedness and obligations to general and secured creditors. The
Note was originated in December 2015 is scheduled to mature on
December 21, 2025. Subject to limited exceptions, First Guaranty
cannot repay the Note until after December 21, 2020. The Note
qualifies for treatment as Tier 2 capital for regulatory capital purposes.
First Guaranty maintains a revolving line of credit for $2.5 million with
an availability of $0.7 million at December 31, 2015. This line of credit
is secured by the same collateral as the senior term loan and is priced
at 4.50%.
At December 31, 2015, letters of credit issued by the FHLB totaling
$195.0 million were outstanding and carried as off-balance sheet
items, all of which expire in 2016. At December 31, 2014, letters of
credit issued by the FHLB totaling $150.0 million were outstanding
and carried as off-balance sheet items, all of which expired in 2015.
The letters of credit are solely used for pledging towards public fund
deposits. The FHLB has a blanket lien on substantially all of the
loans in First Guaranty's portfolio which is used to secure borrowing
availability from the FHLB. First Guaranty has obtained a subordination
agreement from the FHLB on First Guaranty's farmland, agricultural
and commercial and industrial loans. These loans are available to be
pledged for additional reserve liquidity.
1 02
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. As of December 31, 2015 obligations on senior long-term debt and
junior subordinated debentures totalled $40.4 million. The scheduled
maturities are as follows:
Senior
Long-term
Debt
Junior
Subordinated
Debentures
(in thousands)
$ 3,100
$
2016
2017
2018
2019
2020
2021 and thereafter
Subtotal
Debt issuance costs
Total
2,755
2,500
2,500
2,500
12,500
$25,855
(31)
$25,824
-
-
-
-
-
15,000
$15,000
(403)
$14,597
Note 12. Preferred Stock
On September 22, 2011, On September 22, 2011, First Guaranty
received $39.4 million in funds from the U.S. Treasury's Small
Business Lending Fund program. $21.1 million of the funds were used
to redeem First Guaranty's Series A and B Preferred Stock issued to
the U.S. Treasury under the Capital Purchase Program. The Preferred
Series C shares received quarterly dividends and the initial dividend
rate was 5.00%. The dividend rate was based on qualified loan growth
two quarters in arrears. During 2014 First Guaranty achieved the
growth in qualified loans required to achieve the 1.0% dividend rate.
The 1.0% rate was locked in until December 31, 2015. During 2015
First Guaranty paid $0.4 million in preferred stock dividends compared
to $0.4 million in 2014 and $0.7 million in 2013.
On December 22, 2015, First Guaranty redeemed all of the 39,435
shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series
C, that had been issued to the United States Department of Treasury
pursuant to the Small Business Lending Fund (the "SBLF"). The
shares were redeemed at their liquidation value of $1,000 per share
plus accrued and unpaid dividends to, but excluding December 22,
2015, for a total redemption price of $39.5 million. The redemption
was approved by the Federal Reserve Bank of Atlanta and the United
States Department of Treasury. The redemption terminated First
Guaranty's participation in the SBLF.
Note 13.Capital Requirements
First Guaranty and the Bank are subject to various regulatory capital
requirements administered by federal and state banking agencies.
Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions that, if
undertaken, could have a direct material effect on First Guaranty's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, First Guaranty and
the Bank must meet specific capital guidelines that involve quantitative
measures of their assets, liabilities and certain off-balance sheet items
as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative judgments
by the regulators about components, risk weightings and other factors.
Prompt corrective action provisions are not applicable to bank holding
companies.
Quantitative measures established by regulation to ensure capital
adequacy require First Guaranty and the Bank to maintain minimum
amounts and ratios of total and Tier 1 capital to risk-weighted assets
and of Tier 1 capital to average assets. Management believes, as of
December 31, 2015 and 2014, that First Guaranty and the Bank met
all capital adequacy requirements.
As of December 31, 2015, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, an institution must maintain minimum
total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set
forth in the following table. There are no conditions or events since
the notification that Management believes have changed the Bank’s
category.
103
2015 ANNUAL REPORT First Guaranty's and the Bank’s actual capital amounts and ratios as of December 31, 2015 and 2014 are presented in the following table.
Minimum
Capital
Requirements
Minimum to be
Well Capitalized
Under Action
Provisions
Actual
Amount Ratio
Amount Ratio
Amount Ratio
(in thousands except for %)
$141,022 13.13% $ 85,952 8.00%
N/A N/A
$148,316 13.86% $ 85,632 8.00% $107,040 10.00%
$116,607 10.85% $ 64,464 6.00%
N/A N/A
$138,901 12.98% $ 64,224 6.00% $ 85,632
8.00%
$116,607
8.17% $ 57,121 4.00%
N/A N/A
$138,901
9.74% $ 57,062 4.00% $ 71,328
5.00%
$116,607 10.85% $ 48,348 4.50%
N/A N/A
$138,901 12.98% $ 48,168 4.50% $ 69,576
6.50%
$144,834 14.05% $ 82,486 8.00%
N/A N/A
$143,426 13.96% $ 82,170 8.00% $102,712 10.00%
$135,727 13.16% $ 41,243 4.00%
N/A N/A
$134,319 13.08% $ 41,085 4.00% $ 61,627
6.00%
$135,737
9.33% $ 58,173 4.00%
N/A N/A
$134,319
9.26% $ 58,025 4.00% $ 72,532
5.00%
N/A N/A
N/A N/A
N/A N/A
N/A N/A
N/A N/A
N/A N/A
December 31, 2015
Total Risk-Based Capital:
Consolidated
Bank
Tier 1 Capital:
Consolidated
Bank
Tier 1 Leverage Capital:
Consolidated
Bank
Common Equity Tier One Capital:
Consolidated
Bank
December 31, 2014
Total Risk-Based Capital:
Consolidated
Bank
Tier 1 Capital:
Consolidated
Bank
Tier 1 Leverage Capital:
Consolidated
Bank
Common Equity Tier One Capital:
Consolidated
Bank
Note 14. Dividend Restrictions
The Federal Reserve Bank ("FRB") has stated that, generally, a
bank holding company should not maintain a rate of distributions
to shareholders unless its available net income has been sufficient
to fully fund the distributions, and the prospective rate of earnings
retention appears consistent with the bank holding company’s capital
needs, asset quality and overall financial condition. As a Louisiana
corporation, First Guaranty is restricted under the Louisiana corporate
law from paying dividends under certain conditions.
First Guaranty Bank may not pay dividends or distribute capital assets
if it is in default on any assessment due to the FDIC. First Guaranty
Bank is also subject to regulations that impose minimum regulatory
capital and minimum state law earnings requirements that affect
the amount of cash available for distribution. In addition, under the
Louisiana Banking Law, dividends may not be paid if it would reduce
the unimpaired surplus below 50% of outstanding capital stock in any
year.
The Bank is restricted under applicable laws in the payment of dividends
to an amount equal to current year earnings plus undistributed
earnings for the immediately preceding year, unless prior permission is
received from the Commissioner of Financial Institutions for the State of
Louisiana. Dividends payable by the Bank in 2016 without permission
1 04
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. will be limited to 2016 earnings plus the undistributed earnings of $3.5
million from 2015.
Note 17. Other Expenses
Accordingly, at January 1, 2016, $137.0 million of First Guaranty's
equity in the net assets of the Bank was restricted. In addition,
dividends paid by the Bank to First Guaranty would be prohibited if
the effect thereof would cause the Bank’s capital to be reduced below
applicable minimum capital requirements.
Note 15. Related Party Transactions
In the normal course of business, First Guaranty and its subsidiary,
First Guaranty Bank, have loans, deposits and other transactions with
its executive officers, directors and certain business organizations and
individuals with which such persons are associated. These transactions
are completed with terms no less favorable than current market rates.
An analysis of the activity of loans made to such borrowers during the
year ended December 31, 2015 and 2014 follows:
December 31,
2015
2014
(in thousands)
$53,808
$49,951
4,008
3,857
$57,816
$53,808
Balance, beginning of year
Net Increase
Balance, end of year
Unfunded commitments to First Guaranty and Bank directors and
executive officers totaled $31.6 million and $19.7 million at December
31, 2015 and 2014, respectively. At December 31, 2015 First
Guaranty and the Bank had deposits from directors and executives
totaling $22.7 million. There were no participations in loans purchased
from affiliated financial institutions included in First Guaranty's loan
portfolio in 2015 or 2014.
During the years ended 2015, 2014 and 2013, First Guaranty paid
approximately $0.2 million, $0.2 million and $0.5 million, respectively,
for printing services and supplies and office furniture and equipment
to Champion Industries, Inc., of which Mr. Marshall T. Reynolds, the
Chairman of First Guaranty's Board of Directors, is President, Chief
Executive Officer, Chairman of the Board of Directors and a major
shareholder of Champion.
First Guaranty paid insurance expenses of $0, $2.3 million and $2.4
million for 2015, 2014 and 2013, respectively for participation in an
employee medical benefit plan in which several entities under common
ownership of First Guaranty's Chairman participate. First Guaranty
terminated the plan in 2014 and enrolled in a fully insured plan from a
third party national provider of health insurance.
First Guaranty paid travel expenses to Sabre Transportation, Inc. of
$0, $0 and $49,000 for 2015, 2014 and 2013, respectively. These
expenses include the utilization of an aircraft, fuel, air crew and ramp
fees. The Harrah and Reynolds Corporation, of which Mr. Reynolds
is President and Chief Executive Officer and sole shareholder, has
controlling interest in Sabre Transportation, Inc.
Note 16. Employee Benefit Plans
First Guaranty has an employee savings plan to which employees,
who meet certain service requirements, may defer 1% to 20% of their
base salaries, 6% of which may be matched up to 100%, at its sole
discretion. Contributions to the savings plan were $86,000, $87,000
and $81,000 in 2015, 2014 and 2013, respectively. First Guaranty
has an Employee Stock Ownership Plan (“ESOP”) which was frozen
in 2010. No contributions were made to the ESOP for the years 2015,
2014 or 2013. As of December 31, 2015, the ESOP held 14,653
shares. First Guaranty does not plan to make future contributions to
this plan.
The following is a summary of the significant components of other
noninterest expense:
Other noninterest expense:
Legal and professional fees
Data processing
Marketing and public relations
Taxes - sales, capital and franchise
Operating supplies
Travel and lodging
Telephone
Amortization of core deposits
Donations
Net costs from other real estate and
repossessions
Regulatory assessment
Other
December 31,
2015
2014
2013
(in thousands)
$2,019
$ 1,982
$ 2,347
1,184
1,153
1,269
848
717
414
818
172
320
332
700
605
410
566
242
320
150
638
584
487
563
206
320
294
493
1,111
3,326
1,374
1,181
3,143
941
1,784
3,237
Total other noninterest expense
$11,754
$11,826
$12,670
First Guaranty does not capitalize advertising costs. They are expensed
as incurred and are included in other noninterest expense on the
Consolidated Statements of Income. Advertising expense was $0.6
million, $0.4 million and $0.4 million for 2015, 2014 and 2013,
respectively.
Note 18. Income Taxes
The following is a summary of the provision for income taxes included
in the Consolidated Statements of Income:
December 31,
2015
2014
2013
(in thousands)
Current
Deferred
Total
$7,347
$4,898
$4,748
(384)
594
(171)
$6,963
$5,492
$4,577
The difference between income taxes computed by applying the
statutory federal income tax rate and the provision for income taxes in
the financial statements is reconciled as follows:
December 31,
2015
2014
2013
(in thousands except for %)
Statutory tax rate
35.0%
35.0%
35.0%
Federal income taxes at statutory
rate
Tax exempt municipal income
Other
Total
$7,514
$5,851
$4,803
(436)
(115)
(284)
(75)
(133)
(93)
$6,963
$5,492
$4,577
105
2015 ANNUAL REPORT Deferred taxes are recorded based upon differences between the
financial statement and tax basis of assets and liabilities, and available
tax credit carryforwards. Temporary differences between the financial
statement and tax values of assets and liabilities give rise to deferred
taxes. The significant components of deferred taxes classified in First
Guaranty's Consolidated Balance Sheets at December 31, 2015 and
2014 are as follows:
Deferred tax assets:
Allowance for loan losses
Other real estate owned
Unrealized losses on available for sale
securities
Other
Gross deferred tax assets
December 31,
2015
2014
(in thousands)
$3,201
$3,096
127
148
445
541
-
407
4,314
3,651
Deferred tax liabilities:
Depreciation and amortization
Core deposit intangibles
Unrealized gains on available for sale
securities
Other
Gross deferred tax liabilities
(1,588)
(1,779)
(441)
(550)
-
(373)
(124)
(359)
(2,402)
(2,812)
Net deferred tax assets
$ 1,912
$ 839
As of December 31, 2015 and 2014, there were no net operating loss
carryforwards for income tax purposes.
ASC 740-10, Income Taxes, clarifies the accounting for uncertainty in
income taxes and prescribes a recognition threshold and measurement
attribute for the consolidated financial statements recognition and
measurement of a tax position taken or expected to be taken in a
tax return. First Guaranty does not believe it has any unrecognized
tax benefits included in its consolidated financial statements. First
Guaranty has not had any settlements in the current period with taxing
authorities, nor has it recognized tax benefits as a result of a lapse
of the applicable statute of limitations. First Guaranty recognizes
interest and penalties accrued related to unrecognized tax benefits, if
applicable, in noninterest expense. During the years ended December
31, 2015, 2014 and 2013, First Guaranty did not recognize any
interest or penalties in its consolidated financial statements, nor has it
recorded an accrued liability for interest or penalty payments.
Note 19. Commitments and Contingencies
Off-balance sheet commitments
First Guaranty is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend
credit and standby and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the Consolidated Balance Sheets.
The contract or notional amounts of those instruments reflect the
extent of the involvement in particular classes of financial instruments.
The exposure to credit loss in the event of nonperformance by the
1 06
other party to the financial instrument for commitments to extend credit
and standby and commercial letters of credit is represented by the
contractual notional amount of those instruments. Unless otherwise
noted, collateral or other security is not required to support financial
instruments with credit risk.
Set forth below is a summary of the notional amounts of the financial
instruments with off-balance sheet risk at December 31, 2015 and
December 31, 2014.
December 31,
2015
2014
(in thousands)
Contract Amount
Commitments to Extend Credit
$ 88,081
$ 59,675
Unfunded Commitments under lines of
credit
$ 107,581
$ 111,247
Commercial and Standby letters of credit $
7,486
$ 7,743
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since commitments may
expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Each customer's
creditworthiness is evaluated on a case-by-case basis. The amount of
collateral obtained, if deemed necessary upon extension of credit, is
based on Management's credit evaluation of the counterpart. Collateral
requirements vary but may include accounts receivable, inventory,
property, plant and equipment, residential real estate and commercial
properties.
Standby and commercial letters of credit are conditional commitments
to guarantee the performance of a customer to a third party. These
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing and similar
transactions. The majority of these guarantees are short-term, one year
or less; however, some guarantees extend for up to three years. The
credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities. Collateral requirements
are the same as on-balance sheet instruments and commitments to
extend credit.
There were no losses incurred on off-balance sheet commitments in
2015, 2014 or 2013.
Note 20. Fair Value Measurements
The fair value of a financial instrument is the current amount that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. A fair value measurement
assumes that the transaction to sell the asset or transfer the liability
occurs in the principal market for the asset or liability or, in the absence
of a principal market, the most advantageous market for the asset or
liability. Valuation techniques use certain inputs to arrive at fair value.
Inputs to valuation techniques are the assumptions that market
participants would use in pricing the asset or liability. They may be
observable or unobservable. First Guaranty uses a fair value hierarchy
for valuation inputs that gives the highest priority to quoted prices in
active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs – Unadjusted quoted market prices in active markets
for identical assets or liabilities that the reporting entity has the
ability to access at the measurement date.
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Level 2 Inputs – Inputs other than quoted prices included in Level
1 that are observable for the asset or liability, either directly or
indirectly. These might include quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability (such
as interest rates, volatilities, prepayment speeds or credit risks) or
inputs that are derived principally from or corroborated by market
data by correlation or other means.
Level 3 Inputs – Unobservable inputs for determining the fair values
of assets or liabilities that reflect an entity’s own assumptions about
the assumptions that market participants would use in pricing the
assets or liabilities.
A description of the valuation methodologies used for instruments
measured at fair value follows, as well as the classification of such
instruments within the valuation hierarchy.
Securities available for sale. Securities are classified within Level 1 where
quoted market prices are available in an active market. Inputs include
securities that have quoted prices in active markets for identical
assets. If quoted market prices are unavailable, fair value is estimated
using quoted prices of securities with similar characteristics, at which
point the securities would be classified within Level 2 of the hierarchy.
Securities classified Level 3 as of December 31, 2015 include
municipal bonds and an equity security.
Impaired loans. Loans are measured for impairment using the methods
permitted by ASC Topic 310. Fair value of impaired loans is measured
by either the fair value of the collateral if the loan is collateral dependent
(Level 2 or Level 3), or the present value of expected future cash flows,
discounted at the loan's effective interest rate (Level 3). Fair value of
the collateral is determined by appraisals or by independent valuation.
Other real estate owned. Properties are recorded at the balance of the
loan or at estimated fair value less estimated selling costs, whichever
is less, at the date acquired. Fair values of other real estate owned
("OREO") at December 31, 2015 and 2014 are determined by sales
agreement or appraisal, and costs to sell are based on estimation per
the terms and conditions of the sales agreement or amounts commonly
used in real estate transactions. Inputs include appraisal values or
recent sales activity for similar assets in the property’s market; thus
OREO measured at fair value would be classified within either Level 2
or Level 3 of the hierarchy.
Certain non-financial assets and non-financial liabilities are measured
at fair value on a non-recurring basis including assets and liabilities
related to reporting units measured at fair value in the testing of goodwill
impairment, as well as intangible assets and other non-financial long-
lived assets measured at fair value for impairment assessment.
The following table summarizes financial assets measured at fair value
on a recurring basis as of December 31, 2015 and 2014, segregated
by the level of the valuation inputs within the fair value hierarchy
utilized to measure fair value:
December 31,
2015
2014
(in thousands)
First Guaranty's valuation methodologies may produce a fair value
calculation that may not be indicative of net realizable value or reflective
of future fair values. While Management believes the methodologies
used are appropriate and consistent with other market participants,
the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different
estimate of fair value.
The change in Level 1 securities available for sale from December
31, 2014 was due to a reduction in Treasury bills of $6.0 million. The
change in Level 2 securities available for sale from December 31, 2014
was due principally to the sale of short-term agency securities.
The following table reconciles assets measured at fair value on a
recurring basis using unobservable inputs (Level 3):
Level 3 Changes
December 31,
2015
2014
(in thousands)
$8,780
$5,834
-
-
-
-
(1,079)
2,946
-
-
$7,701
$8,780
Balance, beginning of year
Total gains or losses (realized/unrealized):
Included in earnings
Included in other comprehensive income
Purchases, sales, issuances and
settlements, net
Transfers in and/or out of Level 3
Balance as of end of year
There were no gains or losses for the period included in earnings
attributable to the change in unrealized gains or losses relating to
assets still held as of December 31, 2015.
The following table measures financial assets and financial liabilities
measured at fair value on a non-recurring basis as of December 31,
2015, segregated by the level of valuation inputs within the fair value
hierarchy utilized to measure fair value:
Fair Value Measurements Using: Impaired
Loans
Level 1: Quoted Prices in Active Markets
For Identical Assets
Level 2: Significant Other Observable
Inputs
Level 3: Significant Unobservable Inputs
December 31,
2015
2014
(in thousands)
$
-
$
-
293
16,401
5,244
15,618
Impaired loans measured at fair value
$16,694
$20,862
Available for Sale Securities Fair Value
Measurements Using:
Level 1: Quoted Prices in Active Markets
For Identical Assets
Level 2: Significant Other Observable
Inputs
Fair Value Measurements Using: Other
Real Estate Owned
Level 1: Quoted Prices in Active Markets
For Identical Assets
$ 30,501
$ 36,504
Level 2: Significant Other Observable
Inputs
338,167
454,524
Level 3: Significant Unobservable Inputs
$
-
$
-
1,104
473
1,847
351
Level 3: Significant Unobservable Inputs
7,701
8,780
Securities available for sale measured at
fair value
$376,369
$499,808
Other real estate owned measured at fair
value
$ 1,577
$ 2,198
107
2015 ANNUAL REPORT ASC 825-10 provides First Guaranty with an option to report selected
financial assets and liabilities at fair value. The fair value option
established by this statement permits First Guaranty to choose to
measure eligible items at fair value at specified election dates and
report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each reporting date subsequent
to implementation.
First Guaranty has chosen not to elect the fair value option for any
items that are not already required to be measured at fair value in
accordance with accounting principles generally accepted in the
United States.
Note 21. Financial Instruments
Fair value estimates are generally subjective in nature and are
dependent upon a number of significant assumptions associated
with each instrument or group of similar instruments, including
estimates of discount rates, risks associated with specific financial
instruments, estimates of future cash flows and relevant available
market information. Fair value information is intended to represent
an estimate of an amount at which a financial instrument could be
exchanged in a current transaction between a willing buyer and seller
engaging in an exchange transaction. However, since there are no
established trading markets for a significant portion of First Guaranty's
financial instruments, First Guaranty may not be able to immediately
settle financial instruments; as such, the fair values are not necessarily
indicative of the amounts that could be realized through immediate
settlement. In addition, the majority of the financial instruments, such
as loans and deposits, are held to maturity and are realized or paid
according to the contractual agreement with the customer.
Quoted market prices are used to estimate fair values when available.
However, due to the nature of the financial instruments, in many
instances quoted market prices are not available. Accordingly,
estimated fair values have been estimated based on other valuation
techniques, such as discounting estimated future cash flows using
a rate commensurate with the risks involved or other acceptable
methods. Fair values are estimated without regard to any premium or
discount that may result from concentrations of ownership of financial
instruments, possible income tax ramifications or estimated transaction
costs. The fair value estimates are subjective in nature and involve
matters of significant judgment and, therefore, cannot be determined
with precision. Fair values are also estimated at a specific point in time
and are based on interest rates and other assumptions at that date. As
events change the assumptions underlying these estimates, the fair
values of financial instruments will change.
Disclosure of fair values is not required for certain items such as lease
financing, investments accounted for under the equity method of
accounting, obligations of pension and other postretirement benefits,
premises and equipment, other real estate, prepaid expenses, the value
of long-term relationships with depositors (core deposit intangibles)
and other customer relationships, other intangible assets and income
tax assets and liabilities. Fair value estimates are presented for existing
on- and off-balance sheet financial instruments without attempting to
estimate the value of anticipated future business and the value of assets
and liabilities that are not considered financial instruments. In addition,
the tax ramifications related to the realization of the unrealized gains
and losses have not been considered in the estimates. Accordingly, the
aggregate fair value amounts presented do not purport to represent
and should not be considered representative of the underlying market
or franchise value of First Guaranty.
Because the standard permits many alternative calculation techniques
and because numerous assumptions have been used to estimate the
fair values, reasonable comparison of the fair value information with
other financial institutions' fair value information cannot necessarily be
1 08
made. The methods and assumptions used to estimate the fair values
of financial instruments are as follows:
Cash and due from banks, interest-bearing deposits with banks, federal
funds sold and federal funds purchased.
These items are generally short-term and the carrying amounts reported
in the consolidated balance sheets are a reasonable estimation of the
fair values.
Investment Securities.
Fair values are principally based on quoted market prices. If quoted
market prices are not available, fair values are based on quoted market
prices of comparable instruments or the use of discounted cash flow
analyses.
Loans Held for Sale.
Fair values of mortgage loans held for sale are based on commitments
on hand from investors or prevailing market prices. These loans are
classified within level 3 of the fair value hierarchy.
Loans, net.
Market values are computed present values using net present value
formulas. The present value is the sum of the present value of all
projected cash flows on an item at a specified discount rate. The
discount rate is set as an appropriate rate index, plus or minus an
appropriate spread. These loans are classified within level 3 of the fair
value hierarchy.
Impaired loans
Fair value of impaired loans is measured by either the fair value of
the collateral if the loan is collateral dependent (Level 2 or Level 3),
or the present value of expected future cash flows, discounted at the
loan's effective interest rate (Level 3). Fair value of the collateral is
determined by appraisals or by independent valuation.
Accrued interest receivable.
The carrying amount of accrued interest receivable approximates its
fair value.
Deposits.
Market values are actually computed present values using net present
value formulas. The present value is the sum of the present value of
all projected cash flows on an item at a specified discount rate. The
discount rate is set as an appropriate rate index, plus or minus an
appropriate spread. Deposits are classified within level 3 of the fair
value hierarchy.
Accrued interest payable.
The carrying amount of accrued interest payable approximates its fair
value.
Borrowings.
The carrying amount of federal funds purchased and other short-
term borrowings approximate their fair values. The fair value of First
Guaranty's long-term borrowings is computed using net present
value formulas. The present value is the sum of the present value of
all projected cash flows on an item at a specified discount rate. The
discount rate is set as an appropriate rate index, plus or minus an
appropriate spread. Borrowings are classified within level 3 of the fair
value hierarchy.
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Other Unrecognized Financial Instruments.
The fair value of commitments to extend credit is estimated using the
fees charged to enter into similar legally binding agreements, taking into
account the remaining terms of the agreements and customers' credit
ratings. For fixed-rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed
rates. Noninterest-bearing deposits are held at cost. The fair values of
letters of credit are based on fees charged for similar agreements or
on estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date. At December 31, 2015
and 2014 the fair value of guarantees under commercial and standby
letters of credit was not material.
The estimated fair values and carrying values of the financial instruments at December 31, 2015 and 2014 are presented in the following table:
December 31,
2015
2014
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
(in thousands)
$
37,272 $
37,272 $
44,575 $
44,575
$ 376,369 $ 376,369 $ 499,808 $ 499,808
$ 169,752 $ 168,148 $ 141,795 $ 139,688
Assets
Cash and cash equivalents
Securities, available for sale
Securities, held to maturity
Federal Home Loan Bank stock
$
935 $
935 $
1,621 $
1,621
Loans, net
$ 832,168 $ 831,731 $ 781,216 $ 780,470
Accrued interest receivable
$
6,015 $
6,015 $
6,384 $
6,384
Liabilities
Deposits
Borrowings
Junior subordinated debentures
Accrued interest payable
$ 1,295,870 $ 1,296,468 $1,371,839 $1,373,537
$
$
$
27,624 $
27,624 $
3,255 $
3,255
14,597 $
14,597
-
-
1,707 $
1,707 $
1,997 $
1,997
There is no material difference between the contract amount and the estimated fair value of off-balance sheet items that are primarily comprised
of short-term unfunded loan commitments that are generally at market prices.
Note 22. Concentrations of Credit and Other Risks
First Guaranty monitors loan portfolio concentrations by region,
collateral type, loan type and industry on a monthly basis and has
established maximum thresholds as a percentage of its capital to
ensure that the desired mix and diversification of its loan portfolio is
achieved. First Guaranty is compliant with the established thresholds
as of December 31, 2015. Personal, commercial and residential
loans are granted to customers, most of who reside in northern and
southern areas of Louisiana. Although First Guaranty has a diversified
loan portfolio, significant portions of the loans are collateralized by
real estate located in Tangipahoa Parish and surrounding parishes in
Southeast Louisiana. Declines in the Louisiana economy could result
in lower real estate values which could, under certain circumstances,
result in losses to First Guaranty.
The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Commercial and standby letters of
credit were granted primarily to commercial borrowers. Generally,
credit is not extended in excess of $10.0 million to any single borrower
or group of related borrowers.
Approximately 43.9% of First Guaranty's deposits are derived from local
governmental agencies at December 31, 2015. These governmental
depositing authorities are generally long-term customers. A number of
the depositing authorities are under contractual obligation to maintain
their operating funds exclusively with First Guaranty. In most cases,
First Guaranty is required to pledge securities or letters of credit
issued by the Federal Home Loan Bank to the depositing authorities
to collateralize their deposits. Under certain circumstances, the
withdrawal of all of, or a significant portion of, the deposits of one or
more of the depositing authorities may result in a temporary reduction
in liquidity, depending primarily on the maturities and/or classifications
of the securities pledged against such deposits and the ability to
replace such deposits with either new deposits or other borrowings.
Public fund deposits totaled $568.7 million at December 31, 2015.
109
2015 ANNUAL REPORT Note 23. Litigation
Note 24. Condensed Parent Company Information
First Guaranty is subject to various legal proceedings in the normal
course of its business. It is Management’s belief that the ultimate
resolution of such claims will not have a material adverse effect on
First Guaranty's financial position or results of operations.
The following condensed financial information reflects the accounts
and transactions of First Guaranty Bancshares, Inc. for the dates
indicated:
First Guaranty Bancshares, Inc.
Condensed Balance Sheets
Assets
Cash
Investment in bank subsidiary
Investment Securities (available-for-sale, at
fair value)
Other assets
Total Assets
Liabilities and Shareholders' Equity
Short-term debt
Senior long-term debt
Junior subordinated debentures
Other liabilities
Total Liabilities
December 31,
2015
2014
(in thousands)
$ 16,862
$
723
140,518
138,176
80
3,233
70
5,129
$ 160,693
$144,098
$ 1,800
$
1,800
25,824
14,597
248
2,439
-
276
42,469
4,515
Shareholders' Equity
118,224
Total Liabilities and Shareholders' Equity $160,693
139,583
$ 144,098
1 10
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. First Guaranty Bancshares, Inc.
Condensed Statements of Income
Operating Income
Dividends received from bank subsidiary
Net gains on securities
Other income
Total operating income
Operating Expenses
Interest expense
Salaries & Benefits
Other expenses
Total operating expenses
Income before income tax benefit and increase in equity in undistributed
earnings of subsidiary
Income tax benefit
Income before increase in equity in undistributed earnings of subsidiary
Increase in equity in undistributed earnings of subsidiary
Net Income
Less preferred stock dividends
Net income available to common shareholders
December 31,
2015
2014
2013
(in thousands)
$ 9,843
$ 6,448
$4,669
2,652
261
-
162
-
90
12,756
6,610
4,759
192
172
766
1,130
11,626
(605)
11,021
3,484
130
140
464
734
5,876
229
6,105
5,119
14,505
11,224
115
88
449
652
4,107
212
4,319
4,827
9,146
(384)
(394)
(713)
$14,121
$10,830
$8,433
111
2015 ANNUAL REPORT First Guaranty Bancshares, Inc.
Condensed Statements of Cash Flow
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Increase in equity in undistributed earnings of subsidiary
Gain on sale of securities
Net change in other liabilities
Net change in other assets
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from maturities, calls and sales of AFS securities
Funds Invested in AFS securities
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from long-term debt, net of costs
Repayment of long-term debt
Proceeds from junior subordinated debentures, net of costs
Issuance of common stock, net of costs
Redemption of preferred stock
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
December 31,
2015
2014
2013
(in thousands)
$14,505
$11,224
$9,146
(3,484)
(2,652)
(28)
396
(5,119)
(4,827)
-
55
-
2
(3,383)
161
8,737
2,777
4,482
4,152
(10)
4,142
24,969
(1,584)
14,597
9,344
(39,435)
-
(5)
(5)
2,555
(616)
-
-
-
-
-
-
-
(600)
-
-
-
(4,631)
(4,421)
(4,740)
3,260
(2,482)
(5,340)
16,139
723
290
433
(858)
1,291
$16,862
$ 723
$ 433
1 12
Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. Item 5 - Market for Registrant’s Common Equity, Related
Shareholder Matters and Issuer Purchases of Equity
Securities
Shares of our common stock are traded on the NASDAQ Global
Marketplace as of November 5, 2015, under the symbol "FGBI".
Prior to November 5, 2015 our shares were quoted on the OTC
Pink Marketplace. As of December 31, 2015, there were approximately
1,800 holders of record of our common stock.
The following table sets forth the quarterly high and low reported sales
prices for our common stock for the years ended December 31, 2015
and 2014. These reported sales prices represent trades that were
either quoted on the NASDAQ, OTC Pink or reported to First Guaranty’s
stock transfer agent, and prior to November 5, 2015, do not include
retail markups, markdowns or commissions, and do not necessarily
reflect actual transactions.
2015
2014
Quarter Ended:* High
Low
Dividend High
Low
Dividend
March 31,
$ 19.00 $16.70 $
0.16 $ 19.60 $13.77 $
June 30,
$ 21.00 $15.00 $
September 30, $ 20.74 $15.00 $
December 31, $ 21.73 $14.60 $
0.16 $ 19.81 $13.50 $
0.16 $ 19.81 $12.00 $
0.16 $ 20.50 $15.39 $
0.16
0.16
0.16
0.16
* Data above has not been adjusted to reflect the ten percent stock
dividend paid December 17, 2015 to shareholders of record as of
December 10, 2015.
Our shareholders are entitled to receive dividends when, and if,
declared by the Board of Directors, out of funds legally available for
dividends. We have paid consecutive quarterly cash dividends on our
common stock for each of the last 90 quarters dating back to the third
quarter of 1993. The board of directors intends to continue to pay
regular quarterly cash dividends. The ability to pay dividends in the
future will depend on earnings and financial condition, liquidity and
capital requirements, regulatory restrictions, the general economic and
regulatory climate and ability to service any equity or debt obligations
senior to common stock. There are legal restrictions on the ability of First
Guaranty Bank to pay cash dividends to First Guaranty Bancshares,
Inc. Under federal and state law, we are required to maintain certain
surplus and capital levels and may not distribute dividends in cash
or in kind, if after such distribution we would fall below such levels.
Specifically, an insured depository institution is prohibited from making
any capital distribution to its shareholders, including by way of dividend,
if after making such distribution, the depository institution fails to meet
the required minimum level for any relevant capital measure including
the risk-based capital adequacy and leverage standards.
Additionally, under the Louisiana Business Corporation Act, First
Guaranty Bancshares, Inc. is prohibited from paying any cash dividends
to shareholders if, after the payment of such dividend First Guaranty
Bancshares would not be able to pay its debts as they became due in
the usual course of business or its total assets would be less than its
total liabilities or where net assets are less than the liquidation value
of shares that have a preferential right to participate in First Guaranty
Bancshares, Inc.’s assets in the event First Guaranty Bancshares, Inc.
were to be liquidated.
On November 19, 2015, First Guaranty sold an additional 26,560
shares of its common stock, $1.00 par value per share, pursuant to the
partial exercise of the over-allotment option granted to the underwriter
in connection with its public offering, at a public offering price of
$18.50 per share. The partial exercise of the underwriter's over-
allotment option generated additional gross proceeds of $491,360.
The total number of shares sold in the offering was 626,560, resulting
in net proceeds of approximately $9.3 million. The shares were issued
pursuant to an effective Registration Statement on Form S-1 (File
No. 333-199602) declared effective as of November 5, 2015 by the
Securities and Exchange Commission.
113
2015 ANNUAL REPORT Corporate Information
Annual Meeting
The Annual Meeting of Shareholders will convene at
2:00 p.m. Central Daylight Saving Time (CDT) on
Thursday, May 19, 2016 in the Auditorium,
First Guaranty Square, 400 East Thomas Street,
Hammond, Louisiana.
Corporate Headquarters
First Guaranty Square
400 East Thomas Street
Hammond, Louisiana 70401-3320
Telephone: (985) 345-7685
Shareholder Services
First Guaranty Bank
Post Office Box 2009
Hammond, Louisiana 70404-2009
Contact: Vanessa R. Drew
Telephone: (985) 375-0343
Email: drewvan@fgb.net
Certified Public Accountants
Castaing, Hussey & Lolan, LLC
New Iberia, Louisiana
Financial and General Information
Persons seeking financial or other information about the
Company are invited to contact:
Eric J. Dosch
Chief Financial Officer, Treasurer and Secretary
First Guaranty Bancshares, Inc.
Post Office Box 2009
Hammond, Louisiana 70404-2009
Telephone (985) 375-0308
Notice to Shareholders
A copy of the First Guaranty Bancshares, Inc. Annual Report
filed on Form 10-K with the U.S. Securities and Exchange
Commission can be accessed through the Company’s website at
www.fgb.net or is available without charge by writing.
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Strength & Earnings Power FIRST GUARANTY BANCSHARES, INC. www.fgb.net
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2015 ANNUAL REPORT Our Mission
The mission of First Guaranty Bank and First Guaranty Bancshares, Inc.
is to increase shareholder value while providing financial services for and
contributing to the growth and welfare of the communities we serve.
First Guaranty Bank
Banking Centers
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Our Values & Goals
Customers. We believe that every customer is our most important customer.
We endeavor to provide levels of service that exceed their expectations.
Employees. We believe that our employees are our greatest asset as
demonstrated in their professionalism and dedication. We encourage open
communication and strive to cultivate an entrepreneurial environment
in which our employees feel highly responsible for the performance of the
Company. We believe in an environment where they will contribute new
ideas and innovations that will help both us and them excel.
Shareholders. We seek to enhance shareholder value by continually
improving the quality of assets, growth in earnings, return on equity and
dividend payout.
Community. We strive to be a socially responsible corporate citizen by
supporting community activities and encouraging employees to be actively
involved in our communities. We are committed to the success of the
communities that we serve, the same communities our employees call home.
Our goals is to participate in making our communities better places in which
to live, work and play.
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1. Vivian
2. Oil City
3. Benton
4. Haynesville
5. Homer
6. Dubach
7. Jennings
8. Abbeville
9. Greensburg
10. Montpelier
11. Watson
12. Denham Springs
13. Walker
14. Kentwood West
15. Kentwood
16. Amite
17. Independence
18. Main Office
19. Guaranty West
20. Ponchatoula
21. Berryland
Service 24 ATM Locations
SOUTH LOUISIANA
Abbeville, LA
799 West Summers Drive
Amite, LA
100 East Oak Street
1014 West Oak Street
Denham Springs, LA
2231 South Range Avenue
Greensburg
6151 Hwy. 10
Hammond, LA
1201 West University Avenue
2111 West Thomas Street
400 East Thomas
North Oaks Medical Center –
4 Medical Center Drive
North Oaks Rehabilitation Center –
1900 South Morrison Boulevard
Independence, LA
455 Railroad Avenue
Jennings, LA
500 North Cary
Kentwood, LA
723 Avenue G
Livingston, LA
(LPMC) Livingston Parish
Medical Center
17199 Spring Ranch Rd.
Loranger, LA
19518 Highway 40
Montpelier
35651 Hwy. 16
Ponchatoula, LA*
500 W. Pine St.
105 Berryland Shopping Center
Robert, LA
Robert’s Supermarket -
22628 Highway 190
Walker, LA
29815 Walker Road South
Watson
33818 Hwy. 16
NORTH LOUISIANA
Benton, LA
189 Burt Boulevard
Dubach, LA
117 East Hico Street
Haynesville, LA
10065 Highway 79
Homer, LA
Homer Memorial Hospital
401 North 2nd Street
Oil City, LA
126 South Highway 1
Vivian, LA
102 East Louisiana Avenue
*The Ponchatoula branch at 195 N.
6th St. closed on March 7, 2016 and
is relocated at 500 West Pine Street,
Ponchatoula, LA 70454.
1049205512
2015 ANNUAL REPORT
Strength & Earnings Power
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www.fgb.net