Fortress Banking • Tangible Common Equity •
Book Value • Assets • Common Dividends • Earni
Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
2
0
1
6
F
I
R
S
T
G
U
A
R
A
N
T
Y
B
A
N
C
S
H
A
R
E
S
,
I
N
C
.
A
N
N
U
A
L
R
E
P
O
R
T
1
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
www.fgb.net
ANNUAL REPORT 2016
2016 ANNUAL REPORT
1
Defining FGBROA = 1.08%ROE* = 13.89%
Financial Snapshot
PERFORMANCE GRAPHS
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
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
Book Value per one 1993 share has increased
from $3.70 to $39.54 since 1993.
First Guaranty has paid $61.7 million in
Cash Dividends to common shareholders since 1993.
First Guaranty Bancshares, Inc.
At December 31, 2016, total assets were $1.5
billion, net income was $14.1 million, earnings
per common share was $1.85. Return on average
assets was 0.97% and return on average common
equity was 11.18%. The company’s shares trade
on the Nasdaq Global Market. First Guaranty
Bancshares, Inc. paid a quarterly dividend for 94
consecutive quarters at December 31, 2016. Our
commitment to customer service, combined
with the hard work of our employees are among
the attributes that define FGB.
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 has 293
employees as of December 31, 2016.
Dividends Per One 1993 Common Share [2]
2.0
1.5
1.0
0.5
0.0
1993
1998
2003
2008
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
[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
*Footnote from front cover ROE: This is the return on average equity adjusted for the effect of prior capital injections
made by the holding company into the bank subsidiary.
1
2016 ANNUAL REPORT DEFINING FGB Table of Contents
Financial Snapshot ................................................................................................................................. 1
Table of Contents .................................................................................................................................... 2
Defining FGB .......................................................................................................................................... 3
FGBI ......................................................................................................................................................... 6
Letter from the Chairman, Marshall T. Reynolds .............................................................................. 7
Letter from the Chief Executive Officer & President, Alton B. Lewis ............................................. 8
Report from the Chief Financial Officer, Eric J. Dosch ..................................................................... 9
Report from Senior Vice President, Glenn A. Duhon, Sr. .............................................................. 10
First Guaranty Bank Board of Directors ........................................................................................... 11
First Guaranty Bank Advisory Board ................................................................................................ 12
First Guaranty Bank Officers .............................................................................................................. 13
Performance Graphs ............................................................................................................................ 14
Remembering Josie Tubbs ................................................................................................................... 17
First Guaranty Bank Banking Centers Map and Service 24 ATM Locations ............................... 18
First Guaranty Bank Banking Centers
Main Office, Guaranty Square (Headquarters), Hammond ................................................. 19
Amite & Abbeville ....................................................................................................................... 27
Denham Springs & Benton ....................................................................................................... 28
Ponchatoula & Berryland .......................................................................................................... 29
Homer & Walker ......................................................................................................................... 30
Greensburg & Vivian ................................................................................................................. 31
Kentwood & Kentwood West .................................................................................................... 32
Jennings & Guaranty West ........................................................................................................ 33
Dubach & Independence ........................................................................................................... 34
Oil City & Haynesville ............................................................................................................... 35
Watson & Montpelier .................................................................................................................. 36
Bossier City – New Office .......................................................................................................... 37
Community Impact .............................................................................................................................. 38
Defining FGB – Earnings & Dividends ............................................................................................. 50
Banks Headquartered in Louisiana .................................................................................................... 51
Our Mission and Our Values & Goals ............................................................................................... 52
Financial Table of Contents ................................................................................................................. 53
Market for Registrants Common Equity ..........................................................................................119
Corporate Information .......................................................................................................................120
Visit www.fgb.net for additional information.
Stock Ticker Symbol: FGBI
Follow us on Facebook, Twitter and LinkedIn.
www.facebook.com/FirstGuarantyBank
twitter.com/FGBank
www.linkedin.com/in/firstguarantybank/en
2
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. FORTRESS BANKING
DEFINING FGB
Fortress Banking • Tangible Common Equity •
Book Value • Assets • Common Dividends • Earni
Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
1
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
www.fgb.net
2
0
1
6
F
I
R
S
T
G
U
A
R
A
N
T
Y
B
A
N
C
S
H
A
R
E
S
ANNUAL REPORT 2016
2016 ANNUAL REPORT
A
N
N
U
A
L
R
E
P
O
R
T
I
N
C
1
.
,
FIRST GUARANTY BANCSHARES, INC., AND ITS WHOLLY-
OWNED SUBSIDIARY FIRST GUARANTY BANK, continues
to grow and thrive. Return on Assets at 2016 year end for First
Guaranty Bank is 1.08% with Return on Adjusted Equity at 13.89%*.
This outstanding performance is the result of many factors, all of
which are key in defining FGB.
The cornerstone of this well-run financial institution is leadership’s
unrelenting focus on fortress banking. Fortress banking requires
analysis and decision-making based on strengthening the core and
protecting against obstacles. Whether in banking or daily life, we
know problems will arise – it is the manner in which we address those
challenges that defines us and illustrates our strength of character.
To build a fortress balance sheet, the bank must maintain good
credit ratings, monitor risk and create a strong balance sheet able
to withstand shock. Employee benefits, capital spending and other
cost control measures are imperative. When defining FGB, one will
realize an emphasis on cash, as well as on earnings.
*Footnote: This is the return on average equity adjusted for the
effect of prior capital injections made by the holding company
into the bank subsidiary.
accomplish
əˈkämpliSH/Submit
verb
achieve or complete successfully.
synonyms: fulfill, achieve,
succeed in, realize, attain,
manage, bring about/off, carry
out/through, execute, effect,
perform, do, discharge, complete,
finish, consummate, conclude
To become a strong, rock
solid bank and achieve
such results as the 2016
ROA, ROE, book value
and strong balance sheet,
First Guaranty maintains
essential vision, insight and
determination. Fortress
banking requires attention,
effort
strength.
Fortress banking creates
a fit company, capable of handling new, more stringent federal
regulations with the flexibility to adapt.
and
Your team of First Guaranty Bancshares, Inc. Board of Directors and
Advisory Board members are among the most dedicated. Add the
Bank’s management and group of devoted employees throughout
the state, and you will see strength, intelligence, concern and
compassion. The business of successfully attracting customers and
loans is competitive while often, it is the personal relationship that
makes the difference.
3
Defining FGBROA = 1.08%ROE* = 13.89% 2016 ANNUAL REPORT DEFINING FGB
FORTRESS BANKING
DEFINING FGB
Fortress banking includes recognizing opportunities
for additional banking
centers, mergers and
acquisitions and other strategic moves to solidify
market position and fulfilling our service mission with
customers. With the new, forthcoming Bossier City
Banking Center and acquisition of Synergy Bank in
Texas, First Guaranty has once again strengthened its
core and grown to serve additional markets. Defining
FGB and its fortress banking philosophy compels us to
strengthen our internal operations to set the stage for
external business development.
vi·sion
/ˈviZHən/
noun
The ability to
think about or
plan the future
with imagination
or wisdom
insists we
Defining FGB
examine
shareholder value
and the bank’s strong capital
base. Tangible common equity,
book value, assets, earnings
and common dividends also
serve as criteria to measure
achievement, value and success.
Defining First Guaranty requires resiliency to propel
us through difficult times, be it economic or natural
disasters. From tornadoes and floods to hurricanes,
Louisiana, First Guaranty, its employees and customers
have shown their power of resiliency. The 2016 floods
impacted many employees, customers and physical First
4
Guaranty locations, all of whom required rock solid
commitment and determination to overcome obstacles.
Working together in a compassionate manner each day
and during crises helps define FGB.
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. FORTRESS BANKING
DEFINING FGB
Yet another aspect of defining FGB is strong core growth,
facilitated by the diversity of industries and companies
we are privileged to name as customers. We also enjoy
the strength of diversity throughout our geographic
locations, board members, employees and customers.
Increased profitability, a keen eye on expense reduction
and balance sheet growth are goals of any prosperous
company, particularly First Guaranty.
Fortress banking, Tangible Common Equity, Book Value,
assets, common dividends, earnings, achievement, rock
solid, strong, compassionate, insight, resilient, vision,
diverse and focus are all words defining FGB.
The Great Flood of 2016
resilient
rəˈzilyənt/
adjective
able to withstand or
recover quickly from
difficult conditions.
synonyms: strong,
tough, hardy
approximately
48
During
hours, 6.9 trillion gallons of
rain fell on an area roughly 50
miles wide and 30 miles long.
Some communities within
this zone received 31 inches
of rain in less than three days!
– (equivalent to six months of
rain within two days.)
In the Great Flood of 2016, areas 20 to 30 feet above sea level
flooded. Carefully designed rainwater drainage systems which
performed flawlessly for 40 years began running backwards,
causing areas to flood that have not been beneath water in
recorded history. ¹
First responders rescued thousands of people with high-water
vehicles, boats and helicopters. Thousands were also delivered
to safety by all-volunteer members of the self-described Cajun
Navy, hundreds of boat owners who searched for survivors and
abandoned pets. Experts say more than 110,000 homes were
damaged, with an estimated 70,000 totally destroyed.²
First Guaranty and the members of the First Guaranty Bank
team, stood together to overcome overwhelming adversity by:
●● assisting flood victims with clean-up and rebuilding;
●● helping with the distribution of free meals to flood victims;
●● granting 90 day extensions to loan customers in the flooded
areas (with the 90 days added to the back of the loan);
●● offering low interest loans to employees; and
●● contributing to an employee relief fund.
Many First Guaranty Bank customers along with a significant
number of bank employees experienced flooding in their homes
and businesses, as did two First Guaranty Banking Centers –
the Watson and Denham Springs branches were devastated by
flood waters. The flood of March 2016 ravaged both north and
south Louisiana and the flood of August 2016 brought great
destruction all across south Louisiana.
These efforts achieved during extremely difficult times define
First Guaranty and First Guaranty team members’ commitment
to the welfare and success of our communities.
¹https://www.straighttalkla.com/the-great-flood-of-2016-history-is-reset/
By Michael Bertaut
²Jarrett S. Flood, M.D., President & CEO – Flood International Consulting Agency
https://floodconsulting.com/news-posts/louisiana-great-flood-2016/
5
2016 ANNUAL REPORT DEFINING FGB 2016 Accomplishments and Highlights
Front row, from left, student Joseph
Edwards, FGB Chief Credit Officer
Randy Vicknair and Chief Financial
Officer Eric Dosch; second row, from
left, FGB Chief Executive Officer
Alton Lewis, students Andrea
Villarreal, Nick Byrd, Tarez Cowsar
and Southeastern Faculty Advisor
Danielle Lewis.
Community Bank Project
A team of Finance students from Southeastern Louisiana
University won the national Community Bank Case Study
competition. The team, led by Dr. Danielle Lewis, competed
against 22 other teams/colleges from across the country. They
prepared a 25 page report and 10 minute video regarding
the bank's small business lending efforts. The competition
required the students to address three areas: an assessment of
the impact of the institution's small business lending efforts on
the community, an analysis of how the bank's small business
lending affects financial performance, and an evaluation of the
institution's management of small business lending.
A great example of our continued support of the communities
we serve, we were honored to partner with Southeastern for
the competition.
2016 Accomplishments
and Highlights
1. Total 2016 Earnings to Common
Shareholders of $14.1 million.
2. Paid our 94th consecutive quarterly
cash dividend. $61.7 million
in
dividends to common shareholders
have been paid since 1993.
3. First Guaranty contributed $415,000
to our local communities in 2016.
4. Set a record in our lending portfolio of
$948.9 million in loans outstanding at
year end.
6
FGBI – Nasdaq Trading Price by Quarter
Stock Ticker Symbol: FGBI
25
20
15
$23.93
$18.75
$18.75
$16.00
$16.25
$15.50
11/5/15
12/31/15
3/31/16
6/30/16
9/30/16
12/31/16
First Guaranty Bancshares, Inc. is traded on NASDAQ
exchange at ticker symbol FGBI with a record of strength. Past
performance is not indicative of future performance.
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Marshall T. Reynolds
Chairman of the Board
Letter from the Chairman
FIRST GUARANTY BANCSHARES, INC.
Dear Fellow Shareholder:
At First Guaranty Bancshares, Inc. we are all pleased and very proud of the results for
2016. This makes back to back fourteen million dollar net profit years. After a generous
and continuous (ninety four quarters) of dividends, we added millions to the company’s
retained earnings moving us further along the path to a fortress balance sheet while our
recent Texas commitment has a real chance of catapulting the Bank significantly forward.
These continuing results begs the question; Why? The answer seems to be two fold. One,
President Lewis has recruited a young and ambitious staff that has now gained experience
and savvy—the results show.
Secondly, this is probably the most involved Board of Directors in America. A few
examples are as follows:
1. The Directors Loan Committee meets every Thursday. There are nine of them and
the meetings sometime last up to three hours. Bill Hood has been Chairman of this
committee since I can remember. They are highly engaged, experienced, and committed
to doing it right for the customer and the Bank. They have made a great contribution.
2. Two of our directors have added enormously to their stock holdings thus telling
the outside world of public shareholders that we believe in ourselves and what we
are creating.
3. Several directors have enhanced their holdings as well.
4. We are opening our branch in Bossier City in May. This is a beautiful building created
by Director Andrew Gasaway. We are most fortunate to have his talent on the board.
5. Three of our directors (Messrs. Hood, Smith and Gabriel) went to Texas to personally
see what the Bank was acquiring.
All said, it gets down to people and talent. It appears that our cup is running over with
Management and Directors who seem to have plenty of talent and they all care.
Sincerely,
in·sight
/ˈinˌsīt/
noun
An accurate and deep
understanding
Marshall T. Reynolds
Chairman of the Board
FIRST GUARANTY BANCSHARES, INC.
Chairman of the Board
FIRST GUARANTY BANK
7
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB Letter from the Chief Executive Officer & President
Dear Shareholders,
becomes
each passing
clearer
year,
With
it
and
clearer that First Guaranty
Bancshares, Inc. is a strong
financial institution with great
earnings power which will
allow First Guaranty to become
stronger as time passes. 2016
was a continuation of this
strengthening toward a fortress
balance sheet as First Guaranty
totaled earnings for the year
ending December 31, 2016
of $14,093,000 compared to
$14,121,000 as of December 31, 2015. The strong income
was in spite of flood related expenses which totaled $275,000
pre-tax, $178,750 after tax and in spite of the interest expense
related to the debt originated for the redemption of Small
Business Lending Fund Preferred Stock in December 2015.
This interest expense totaled $1,404,000 for the 12 months
ending on December 31, 2016.
Chief Executive Officer & President
Alton B. Lewis
Earnings strengthened the balance sheet by adding $9.2
million to retained earnings for the year. As of December
31, 2016, retained earnings were $59,155,000 compared
to $49,932,000 as of December 31, 2015. That increase in
retained earnings was net of dividends paid shareholders of
$4,870,000, or $0.64 per share. In 2016 we paid dividends
of $0.16 per share for each quarter bringing our total
consecutive quarters of dividends paid in by First Guaranty
Bancshares, Inc. to 94.
Strong earnings and the building of capital were driven
by continued strong loan growth. Our loan portfolio grew
by $107.3 million during 2016, totaling $949 million as of
December 31, 2016. Loan interest for the year increased to
$45.5 million compared to $42.5 million for the year ending
December 31, 2015. Net interest margin for the year ended
at 3.39% compared to 3.26% for the year 2015.
In March 2016, we celebrated the opening of our new
branch office in Ponchatoula. During 2016, we also began
construction of our new branch located in Bossier City.
Completion of that branch is anticipated in May 2017 and
will bring our branches in Northwest Louisiana to a total
number of 7 and our total branch network to a total of
22. To reach these achievements, we had to overcome the
8
flood of March 2016 which ravaged both North and South
Louisiana and the flood of August 2016 which brought great
destruction all across South Louisiana. First Guaranty and
the members of the First Guaranty Bank team, stepped up
to meet this adversity by assisting flood victims with clean
up and rebuilding, by helping with the distribution of free
meals to flood victims, by granting 90 day extensions to loan
customers in the flooded areas (with the 90 days added to the
back of the loan), by offering low interest loans to employees
and by contributing to an employee relief fund. These efforts
demonstrated the commitment of First Guaranty and First
Guaranty team members to our communities and to the
welfare of our communities.
The First Guaranty system itself was damaged as the Watson
and Denham Springs branches were devastated by the flood
waters. Although the Watson branch returned to service at
Thanksgiving, the Denham Springs branch rehabilitation
continues and will not return to service until June 2017.
First Guaranty rose to the challenge. 2016 was another
year of building toward a solid fortress balance sheet and
enhancing shareholder value. It is the intention of the Board
of Directors, Management and the entire First Guaranty
Bank team to work together to achieve our goals. The
results achieved in 2016 were the result of everyone in the
organization working together toward common goals.
Looking forward, in January 2017, we entered into an
agreement to purchase Premier Bancshares, Inc., and its
wholly owned subsidiary Synergy Bank, headquartered in
McKinney, Texas, with branches in Garland, Denton, Fort
Worth and Waco. This acquisition will move First Guaranty
beyond the borders of Louisiana and, hopefully, launch us
on a new path to greatness and enhance shareholder value.
for your
investment
Thank you
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
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Report from the Chief Financial Officer
Total common shareholder’s equity increased $6.1 million
from $118.2 million in 2015 to $124.3 million in 2016.
Retained earnings increased $9.2 million from $49.9 million
in 2015 to $59.1 million in 2016. Our tangible common
equity ratio improved from 7.89% at December 31, 2015 to
8.10% at December 31, 2016. The loan loss reserve increased
from $9.4 million at 2015 to $11.1 million at 2016.
Earnings per common share were $1.85 in 2016. Tangible
book value per share increased 5.6% from $15.10 at
December 31, 2015 to $15.95 at December 31, 2016. Return
on average assets was 0.97% for 2016. The efficiency ratio
was 56.8% in 2016. Return on average common equity was
11.18% in 2016.
First Guaranty Bancshares paid a total of $4,870,000 in
cash dividends to common shareholders in 2016. The
Company has paid 94 consecutive quarters of dividends as
of 12/31/2016.
First Guaranty continues to build strength for the future.
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
Eric J. Dosch
Chief Financial Officer
First Guaranty Bancshares, Inc. continued to gain strength
in 2016. We continued our momentum from 2015 as we
expanded our loan portfolio, grew our net interest margin,
and decreased our securities portfolio.
Loans grew by 12.8% or $107.3 million from $841.6
million in 2015 to $948.9 million in 2016. First Guaranty
increased loan interest income $2.9 million in 2016. 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, 2016 at 63% of total assets,
an increase from 58% of total assets at December 31, 2015.
Our average loan yield has remained consistently above
5.0% during the last two years. The average loan yield was
5.16% for 2016 compared to 5.21% for 2015. The net interest
margin increased from 3.26% in 2015 to 3.39% in 2016.
9
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB Report from the Senior Vice President
Glenn A. Duhon, Sr.
Senior Vice President
Southwest Louisiana Division Manager
The Southwest Louisiana Division of First Guaranty Bank
continued to grow and flourish in 2016, notwithstanding
an unprecedented climatic event, which caused extensive
property damage and loss to our customers and employees.
When faced with unrelenting rain, rising flood waters and
extreme adversity, our customers turned to First Guaranty
Bank for strength and resilience, and we delivered.
As most of you are aware, the prolonged rainfall during
August of 2016 resulted in catastrophic flooding, which
submerged thousands of homes, farms and businesses.
Due to this flood damage, our agricultural customers
realized lower yields for their rice, soybean, sugarcane and
other growing crops. In some instances, growing crops
were completely destroyed which required replanting.
Furthermore, increased labor, seed, fuel and other expenses
necessitated upward adjustments in loan amounts and
credit lines.
Our commercial hospitality customers sustained damage
to their establishments, which caused loss of income and
significant cost increases for remedial demolition and
construction. Our residential customers experienced
damage to their homes, displacing many whose dwellings
were rendered uninhabitable; this required the additional
expense and
inconvenience of alternate housing.
Consequently, loan extensions, modifications and new
construction loans immediately became necessary.
10
Through all of the hardship, our First Guaranty Bank team
remained ready, able and willing to support our customers
by tending to their financial needs, with compassion and
understanding, in the midst of these most trying times.
With an additional effort to support the public, First
Guaranty Bank provided 1,800 meals to flood victims in
our Abbeville Banking Center parking lot.
Mother Nature’s siege of water was no match for our
fortress. The Jennings Banking Center ended 2016 with
$36.1 million in deposits and $18.9 million in loan volume
– an increase of $2.1 million in loans from 2015. The
Abbeville Banking Center closed out the year with $118.9
million in deposits and $99.9 million in loan volume – an
increase of $22.3 million in loans from 2015.
The endurance and continued success of our institution
is borne from the dedication and professionalism of our
employees, the guidance of our board of directors and
the loyalty of our valued customers. This collective, and
continuing, commitment to trust and success has resulted
in another year for First Guaranty Bank that can only be
defined as triumphant.
Sincerely,
Glenn A. Duhon, Sr.
Senior Vice President and Southwest Louisiana Division Manager
FIRST GUARANTY BANK
di·verse
/dəˈvərs,dīˈvərs/
adjective
Made up of distinct characteristics,
qualities, or elements.
Relating to or containing people
from different ethnicities and social
backgrounds.
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. First Guaranty Bank
BOARD OF DIRECTORS
Front row, left to right: Gloria M. Dykes and Nancy C. Ribas
Middle row, left to right: Edwin L. Hoover, Robert H. Gabriel, Marshall T. Reynolds, Anthony J. Berner, Jr.,
Dr. Phillip E. Fincher, Edgar R. Smith, III.
Back row, left to right: Morgan S. Nalty, William K. Hood, Richard W. “Dickie” Sitman, Ann A. Smith,
Alton B. Lewis, Andrew Gasaway, Jr. and Charles Brister.
Dr. Glenda B. Glover
ANTHONY J. BERNER, JR.
President, Pon Food 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
EDWIN L. HOOVER, JR.
President, Encore Development Corporation
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
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, Chairwoman
Louisiana Office of Student Financial Advising
Board (LOSFA), Chairwoman,
EDGAR R. SMITH, III
Chairman and Chief Executive Officer,
Smitty’s Supply, Inc.
11
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB First Guaranty Bank
ADVISORY BOARD
Above photo:
Thomas “Tommy” D. Crump, Jr., Gil Dowies, III,
Dr. Phillip E. Fincher, John D. Gladney, M.D.,
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.
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.
12
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. First Guaranty Bank
OFFICERS
Vice Presidents
Assistant Vice Presidents
THOMAS F. BROTHERS
CHERYL Q. BRUMFIELD
KIMBERLY D. CAMAILLE
COLLEEN B. EBARB
RONALD W. EDMONDS
DENISE D. FLETCHER
RONALD R. FOSHEE
ADAM J. JOHNSTON
MIKKI M. KELLEY
BERNADETTE Z. KEMP
MICHAEL A. MOSBEY
RONALD C. PITTMAN
SCOTT B. SCHILLING
DESIREE B. SIMMONS
EVAN M. SINGER
BSA Officer
RANDY S. VICKNAIR
Chief Credit Officer
JAMES M. BAXTER
LANCE S. DAVIS
TERI L. DUNCAN
HARRISON R. GILL
LUDRICK P. HIDALGO
SHIRLEY P. JONES
MICHAEL D. KNIGHTEN
JENNIFER J. LAPEYROUSE
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
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.
team·work
ˈtēmˌwərk/Submit
noun
the combined action of a
group of people, especially
when effective and efficient.
13
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB PERFORMANCE GRAPHS
Tangible Common Equity [3]
(in thousands)
Tangible Common Equity
(in thousands)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
$ 9,005
$17,376
$43,557
$61,429
$70,273
$73,424
$82,560
$90,490
$80,033
$96,531
$114,927
2016
$121,372
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
Tangible Common Equity has increased
$121.4 million since 1993.
Total Assets
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
Total Assets
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
$159
$245
$485
$871
$931
$1,133
$1,354
$1,407
$1,436
$1,519
$1,460
$1,501
First Guaranty Assets
have increased
843% since 1993.
150000
120000
90000
60000
30000
0
1600000
1400000
1200000
1000000
800000
600000
400000
200000
0
14
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. PERFORMANCE GRAPHS
Net Income
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
Total Deposits
(in millions)
15
12
9
6
3
0
1500
1200
900
600
300
0
Net Income
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
$2.1
$3.7
$7.0
$5.5
$7.6
$10.0
$8.0
$12.1
$9.1
$11.2
$14.5
$14.1
Total Deposits
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
$149
$257
$376
$780
$800
$1,007
$1,207
$1,253
$1,303
$1,372
$1,296
$1,326
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
15
2016 ANNUAL REPORT DEFINING FGB PERFORMANCE GRAPHS
Loans, Net of Unearned Income [4]
(in millions)
Loans, net of unearned income
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
$105
$177
$381
$606
$590
$576
$573
$630
$703
$790
$842
$949
Investments
(in millions)
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
$30
$73
$59
$139
$262
$482
$633
$659
$635
$642
$546
$499
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
Investments [5]
(in millions)
1000
800
600
400
200
0
800
700
600
500
400
300
200
100
0
1993
1998
2003
2008
2009
2010
2011
2012
2013
2014
2015
2016
[3]Total equity less preferred equity, 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
16
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Remembering Josie Tubbs
First Guaranty, Banking in Louisiana, and all the
members in the Communities in the Bernice/Dubach
area suffered a great loss on November 13, 2016 with
the sudden and unexpected passing of Josie Tubbs.
Josie had a long and distinguished career in banking.
In 2015, Josie was honored by the Louisiana Bankers
Association for 54 years of banking experience. Josie
saw and adapted to incredible changes in banking
over that 54 year period. Her ability to do so is a
testament to Josie’s unique intelligence and unique
ability to adjust to any situation.
But Josie was more than just a banker. Josie was
the epitome of First Guaranty’s vision of what a
community banker should be. Josie was deeply
involved in many activities in all of her communities.
Josie selflessly gave of her time and energy to
support and participate in activities throughout her
communities. Josie motivated First Guaranty Bank
to be involved in and support the activities of her
communities. What was very evident if you knew
Josie was Josie wasn’t just a professional banker
Josie sincerely and deeply cared about all of her
communities and the members of her communities,
her family and First Guaranty Bank.
Some losses are worse than others. The loss of Josie
Tubbs is an incredible loss to Banking, First Guaranty
Bank, and to all of the communities of the Bernice/
Dubach area. Heaven is now a better place.
a·chieve·ment
/əˈCHēvmənt/
noun
A thing done successfully with
effort, skill, or courage
17
2016 ANNUAL REPORT DEFINING FGB 9
18
6
19
4
13
3
15
1
12
7
First Guaranty Bank
BANKING CENTERS
110
16
17
8
5
20
Bossier City
NEW LOCATION
14
11
2
FIRST GUARANTY BANK
Banking Center order by
Total Core Deposits for 2016
1. Main Office $400
119
2. Abbeville
120
3. Amite
105
4. Denham Springs
100
5. Benton
54
6. Walker
98
7. Ponchatoula
55
8. Homer
48
9. Greensburg
42
10. Vivian
36
11. Jennings
31
12. Guaranty West
34
13. Kentwood
29
14. Dubach
24
15. Independence
18
16. Oil City
14
17. Haynesville
7
18. Montpelier
8
19. Watson
Total Deposits $1,342
(In millions)
20. Bossier City (New Location)
18
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
Bossier City, LA
(New Location – Opening June, 2017)
4221 Airline Drive
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
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. 1049205512
First Guaranty Bank
BANKING CENTERS
Banking Center placement is based on 2016 Total Core Deposits, from highest to lowest.
Ponchatoula and Kentwood data each include both Banking Center locations. Homer Banking Center
is placed before Ponchatoula to allow both Ponchatoula locations to appear on the same page.
GUARANTY SQUARE
(985) 375-0300 / (985) 345-7685
(888) 375-3093
400 East Thomas Street
Hammond, LA 70401
APPRAISAL REVIEW
Left to right: Shannon Smith, Kristina Terry, Starr Bernier
HUMAN RESOURCES
Back row: Mikki Kelley
COLLATERAL
Middle row, left to right: Landa Domangue, Shelley Taylor
Backrow, left to right: Cate Mathes, TJ Songy, Lauryn Coburn
Front row: Chantelle Starkey
Not pictured: Mandi Aguillard
Front row, left to right: LaQuita Johnson, Kelli Jordan, Jeannette Ernst
19
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB CUSTOMER SUPPORT CENTER
Back row, left to right: Alexander Gondolfi, Kyle Reeves, Chantal Jarrell, Davon Mitchell
Front row, left to right: Jessica Spears, Sharon Rogers, Laquinta Jackson, Danyelle Green, Moises Rodriguez
Not pictured: Pamela Stafford, Trinitrius Brown
CASH MANAGEMENT
Vikki Dupaquier
Miranda Derveloy
Hannah Winget
DEPOSIT OPERATIONS
Back row, left to right: Kim Fletcher, Sandra Edwards, Glenda Saucier, Shirley Jones,
Tammy Graves
Front row, left to right: Divetta Stallworth, Tae Anderson, Lori Lloyd
20
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. FINANCE
Back row, left to right: Philip Qualls, Donna Scamardo, Katherine Campbell, Anna Cusick, Diane Patterson, Diane Lanier, Michael Moye
Front row, left to right: Eric Dosch, Tarez Cowsar, Heather Lee, Eric Fuller
Not pictured: Karen Gregory
CREDIT
Back row, left to right: Colton McDaniel, Silvia Rodriguez, Jakayla Brown, Emily Creech, Nick Byrd, Jessica Hrenyk, Melanie Gottschalck,
Louis Cusimano
Front row, left to right: Alex Becnel, Randy Vicknair, Monica Crane, Brandon Daniels
21
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB INFORMATION TECHNOLOGY
Back row, left to right: John Farrell, Thomas Hibbs, Allen Daussin, Kyle Herndon, Keith Mills
Front row, left to right: David Couvillon, Star Lala, Craig Rachel, Hector Garcia
COMMUNITY RELATIONS
Bernadette Kemp
22
LENDING
Back row, left to right: Tracy Nelson, Craig Scelfo, Christy Wells, Mike Knighten
Front row, left to right: Catherine Egnew, Vickie Jenkins
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. LOAN OPERATIONS
Back row, left to right: Audrey Carter, Kellie Weisler, Bonnie Garcia, Donna Hodges, Lynn Talley, Ariele Davis, Amanda Rodriguez, Amy Fabre
Front row, left to right: Steve Hathorn, Star Spriggs, Natasha Montgomery, Luke Lavergne
PURCHASING & DOCUMENT SECURITY
Back row, left to right: Joseph Ernest, David Wright
Front row: Teresa Wempren
MORTGAGE
Back row, left to right: Amy Hopson, Kimberly Duckworth Camaille, Mandy Lee
Front row, left to right: Susan Fitzgerald, Melissa Duchmann, Laci Farkas
23
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB FRONT LINE
Back row, left to right: Shawnta Henderson, Latoya Williams
Middle row, left to right: Ashleigh Duroncelet, Chandra McKinney
Front row, left to right: Megan Braden, Linda Miller
Not Pictured: Elizabeth Fenters, April Hodges, Timothy Thibodaux
OPERATIONS
Back row, left to right: Kendra Fairburn,
Debbie Dubuisson, Carla Cook, Teri Duncan,
Shane Hughes, Elisa Constanza, Kerri Gladney
Front row, left to right: Desiree Theall,
Brittany Harness, Tracey Robertson, Christe Feimster
Not Pictured: Elaine Connor
24
MARKETING
Richard Stark
Back row, left to right: Mackenzie Russell, April Alford
Front row, left to right: Jane Wear, Desiree Simmons
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
COMPLIANCE
Left to right: Colleen Ebarb, Becky Brown
BSA/FRAUD
Back row, left to right: JoEllen Juhasz, Evan Singer
Front row, left to right: Casey Turner, Sharmaine Robertson
TRAINING
Back row, left to right: Shanon Dunn, Danyelle Horton,
Danielle Willie
Front row: Vikki Dupaquier
fo·cus
/ˈfōkəs/
noun
pay particular attention to.
Concentrate.
AUDIT
Back row, left to right: Michael Mosbey, Thomas Brothers, Jason McKenzie
Front row, left to right: Michelle Dionne, Nancy Rodriguez, Lana Quinn
25
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB SPECIAL ASSETS
LOAN REVIEW
Back row, left to right: Ronnie Pittman, Lucus Hammonds
Left to Right: Jennifer Lapeyrouse, Bill Worthy
Front row, left to right: Kriss Patterson, Lee Ann Sibley
strong
/strôNG/
adjective
Able to perform a specified
action well and powerfully
26
EXECUTIVE
Back row: Alton Lewis
Middle row, left to right: Kristin Williams, Casie Navarre
Front row: Vanessa Drew
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Back row, left to right: Stephanie Campo, Marsha Spring, Scott Schilling, Suzette Brooks,
Tamara Neil
Front row, left to right: Brianna Scott, Miranda Ordoyne, Betty Jo Whiddon,
Jenny Sue Weedman, Brittani Erdey
Not pictured: Susie Smith
Back row, left to right: Amy Broussard, Lisa Kritzer, Glenn Duhon, Tanya Menard ,
April Frederick
Front row, left to right: Charisse Cormier, Diane Frederick
Not pictured: Gretchen Meaux
AMITE BANKING CENTER
(985) 748-5111
100 East Oak Street
Amite, LA 70422
ABBEVILLE BANKING CENTER
(337) 893-1777 / (800) 306-3276
799 West Summers Drive
Abbeville, LA 70510
27
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB
DENHAM SPRINGS
BANKING CENTER
(225) 791-7964
2231 South Range Avenue
Denham Springs, LA 70726
Back row, left to right: Ludrick Hildago, Lisa Thompson,
Danna Jo Erwin, Sharon Moore, Kevin Foster
Front row, left to right: Kathie Alimia, Courtney Ortego,
Kandace Sparacino, Michelle Gehling
Ronald Foshee
BENTON BANKING CENTER
(318) 965-2221
189 Burt Boulevard
Benton, LA 71006
Back row, left to right: Marcus Rounds, Rhonda Beavers,
Donna Cummings, Joedi Snipes, Terboris Posey
Middle row, left to right: Jocelyn Cato, Colette Morehead
Front row: Alisha Blakenship
Adam Johnston
28
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Back row, left to right: Donna Turnage, Denise Fletcher, Mike Lofaso, Brandon Wear,
Amanda Klumpp (Floater)
Front row, left to right: Amiee Gervais, Renee Rhody, Tyvon Adams, Kristy Petit, Katie Aylor
Left to right: Tammy Carraway, Kelly Wall (Floater), Victoria Welch
PONCHATOULA
BANKING CENTER
(985) 386-2000
500 West Pine Street
Ponchatoula, LA 70454
PONCHATOULA-BERRYLAND
BANKING CENTER
(985) 386-5430
105 Berryland Shopping Center
Ponchatoula, LA 70454
29
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB HOMER BANKING CENTER
(318) 927-3000
401 North 2nd Street
Homer, LA 71040
WALKER BANKING CENTER
(225) 664-5549
29815 South Walker Drive
Walker, LA 70785
Back row, left to right: Elaine Atencio, Shirley White, Debbie Spigener
Middle row, left to right: Kitsha Ridley, Caroline Arnold, Candie White, Hannah Winget,
Caree Bailey, Courtney Williams
Front row, left to right: Dot Frazier, Ron Edmonds, Tracy Perry, Jamie Williams
Back row, left to right: Sylvia Moore, Betty Boney,
Brandi Steffek (Floater)
Front row, left to right: Sheila Lofton, Robin Bonfanti
Clint Trant
30
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. GREENSBURG
BANKING CENTER
(225) 222-6101 / (800) 227-6101
6151 Highway 10
Greensburg, LA 70441
VIVIAN BANKING CENTER
(318) 375-3202
102 East Louisiana Avenue
Vivian, LA 71082
Back row, left to right: Evan Singer, Rhonda Miller, Kaycee Bridges, Paula McNabb,
Harrison Gill
Front row, left to right: Melissa Smith, Michelle Brasseaux
Not pictured: April Slayter, Phylicia Vernon
Back row, left to right: Bri Perkins, Amber Smith, Stacy Thompson, Frances Thompson,
Tina Gay
Front row, left to right: Brandy Moon, Bobbie Clark, Teresa Hasha
31
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB KENTWOOD BANKING CENTER
(985) 229-3361
301 Avenue F
Kentwood, LA 70444
KENTWOOD WEST
(985) 229-6101
723 Avenue G
Kentwood, LA 70444
rock sol·id
adjective
unlikely to change,
fail, or collapse
32
Back row, left to right: Lindsey George, Angela Lott, Lisa Rushing, Ashlyne' Richard,
Lance Davis
Front row, left to right: Connie Butler, Patsy Meyer, Alma Sims
Back row: Brittany Graham
Front row, left to right: Ruby Carter, Mary Roberts
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. JENNINGS BANKING CENTER
(337) 824-1712
500 North Cary
Jennings, LA 70546
Back row, left to right: Rahul Patel, Gwendolyn Pete, Trisha Patterson, DD Bruchhaus
Front row, left to right: Vanessa O'Quinn, Mona Fontenot, Amber Dupre
HAMMOND – GUARANTY
WEST BANKING CENTER
(985) 375-0371
2111 West Thomas Street
Hammond, LA 70401
Back row, left to right: Connie Miller, Arielle Adkins, Jerika Williams, Shari Wheeler,
Lindsey Wright
Front row, left to right: Tania Wren, Stacy Williams, Tyjia Ard
33
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB DUBACH BANKING CENTER
(318) 777-3461
117 East Hico Street
Dubach, LA 71235
INDEPENDENCE
BANKING CENTER
(985) 878-6777
455 West Railroad Avenue
Independence, LA 70443
34
Back row, left to right: Kristy Puckett, Diane Shoemaker, Laurie Traylor
Front row, left to right: Heather Croxton, Mic Baxter
Not pictured: Sue Yates
Back row, left to right: Devona Matthews, Carmella Coslan, Richard Hamilton,
Cheryl Brumfield, Ashley James
Front row, left to right: Karen Paille, Pam Brazil
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. OIL CITY BANKING CENTER
(318) 995-6682
126 South Highway 1
Oil City, LA 71061
Back row, left to right: Shannon Jackson, Emma Rolling,
Glenda Graham, Mary Casey, Andie Bruno
Front row, left to right: Glynda Bounds, Toni Harris
Adam Johnston
HAYNESVILLE
BANKING CENTER
(318) 624-1171
10065 Highway 79
Haynesville, LA 70138
Back row: Ron Edmonds
Front row, left to right: Jamie Williams, Tracy Perry, Carla Goode, Sara Pennington (Floater),
Aleshia Lee
Not pictured: Tammy Burley
35
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB WATSON BANKING CENTER
(225) 665-0400
33818 Highway 16
Denham Springs, LA 70706
Back row, left to right: Ludrick Hildago, Carrie Jarreau, Dev Patel, Judy Hughes
MONTPELIER BANKING CENTER
(225) 777-4304
35651 Highway 16
Montpelier, LA 70422
Left to Right: Betsy Ehret, Trella Page, Elizabeth Zito
36
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common DividendsFORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. N ew Location ~ Coming Soon in June 2 0 1
7
Back row, left to right: Daniel Loe, Joedi Snipes, Erika Taylor, Adam Johnston
Front row, left to right: Nikio Reese, Irvin Williams, Angelena Warren, Ellen Buskey,
Hannah Winget, Terboris Posey
BOSSIER CITY
4221 Airline Drive
Bossier City, LA 71111
Our newest Bossier City Banking Center location
is currently under construction and expected to
open in June, 2017. This First Guaranty branch
location on Airline Drive is centrally located in the
Shreveport MSA, with easy access to I-20.
Bossier City was selected as an ideal location for
First Guaranty due to strong market demographics
and solid loan growth opportunities. Part of the
Shreveport, Louisiana MSA, Bossier City offers
a diversified economy
including government,
education and wholesale/retail trade. Barksdale Air
Force Base is the largest area employer with 10,284
employees. Projected income growth of 4.20% is
predicted over the next five years. Bossier City has
a population of 67,472; median household income
of $47,103; a median age of 31.8 years; and is one
of the fastest growing school districts in Louisiana.
With a strong financial presence in Bossier City,
First Guaranty will increase its deposit and loan
market share.
This beautiful new building (designed by the firm
of Gasaway, Gasaway, Bankston Architects) will
be a functional and efficient building, as well as
beautiful. Completion of this new Banking Center
will bring our branches in Northwest Louisiana to
a total number of seven and our branch network to
a total of 22.
37
Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earni Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends • Earnings • Fortress Banking • Tangible Common Equity • Book Value • Assets • Common Dividends 2016 ANNUAL REPORT DEFINING FGB COMMUNITY IMPACT
Community contributions are a priority budget item for First Guaranty Bank.
Listed are the institutions, organizations and associations that have been
assisted through contributions and sponsorship during 2016.
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.
Scott Schilling presented a contribution
to Carol Brooke, Chairman of the Amite
Oyster Festival.
Rhonda Beavers presented a contribution to the
Mayor of Benton Mr. Wayne Cathcart and Ellen
Cathcart for the Benton Farmer’s Market.
Joedi Snipes presented a contribution to Chad Yates,
President of Bossier Little League, for the Bossier Little
League.
Mona Fontenot presented a contribution to
Chanyon Robinson, Treasurer for CADA for the
Taste N Tell event.
First Guaranty Bank presented a contribution to Courtney Christian School for the 2016 Fall Fest.
Left to right: Stacy Hoover, Sue Courtney, April Alford, Mackenzie Russell and Amanda Lightfoot.
First Guaranty Bank contributions for community
support were $415,000 in 2016 .
38
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Community Impact
Ronnie Foshee presented a contribution to Denham Springs
Kiwanis President, Jan Fairchild, for the Platinum Sponsorship
at the annual Kiwanis Golf Tournament. The proceeds help
children in our community.
Josie Tubbs and Diane Shoemaker presented a contribution to Gail Colvin, President
of DRABO, for the Louisiana Chicken Festival.
Josie Tubbs presented a contribution and snacks for the after school tutoring class at
Dubach School. Left to right: Stanley Lewis, Assistant Principal at Dubach School, Josie
Tubbs, First Guaranty Bank, Assistant Branch Manager, Pam Pruden, Principal, Dubach
School and Diane Shoemaker, First Guaranty Bank, Operations Manager.
Harrison Gill presented a contribution to Mr. Bobby Belser
representing First Baptist Church of Greensburg. He is
chairman of their fund raising committee. The benefit golf
tournament is to raise money for their Youth Ministry.
Lee Ann Sibley presented a contribution to Kelly Wells for the CRA
finals held at the Florida Parishes Arena.
Adam Johnston presented a contribution to Dr. Timothy J. Magner, the
President of the Greater Shreveport Chamber of Commerce for the 40 under
40 Awards Gala.
39
2016 ANNUAL REPORT DEFINING FGB Community Impact
Ronnie Pittman presented a contribution to Brian Shirey, Hammond
Chamber of Commerce, for the Blues and BBQ event.
Alton Lewis presented a contribution to Guy Recotta, City of Hammond, and
Melissa Bordelon, Hammond Chamber, for the LHSAA Ladies’ Top 28 State
Basketball Tournament. Mr. Lewis was also presented a framed Ladies Top
28 poster.
Bernadette Kemp presented a contribution to
Brian Shirey and Melissa Bordelon with the
Hammond Chamber, for the Chillin’ with the
Chamber event.
Donna Hodges presented a contribution to Derwin K.
Miley, President of the Hammond Fire Fighters
Association Local 2361 for the Memorial Run
sponsorship.
Jeannette Ernst presented a contribution to
Kris LaBruzzo, Principal, and Amy Dunn,
Teacher and Renaissance Foundation
Chairperson, both of Hammond High Magnet
School for the Excellent Academic Awards.
Randy Vicknair presented a contribution to Sgt. Charlie
Deliberto with the Hammond Police Union Local 345
for the Policeman’s Ball.
Desiree Simmons and Colleen Ebarb, presented a contribution to Chris Mouswaswa, Recreation
Supervisor, Desiree Dotey, Recreation Director and Mayor Pete Panepinto for the City of
Hammond’s rec park camp.
40
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Community Impact
Joellen Juhasz presented a contribution to the City
of Hammond Recreation Department. Left to right:
Desiree Dotey, Director, Demarquis Burise, Sports
Coordinator, Joellen Juhasz, First Guaranty Bank and
Silvia Hymel, Senior Activity Coordinator.
Back to School Bash! Left to right: Alex Richardson of the TPSO, Amanda Kay Bennett with
the Hammond Rotary, Hope Foster with the TPSO, Lance Kern representing TARC, Mayor
Pete Panepinto, Lindsey Palmer with Stirling Properties-Hammond Square Mall, Bernadette
Kemp with First Guaranty Bank, Donna Miller owner of PJ’s, Judy Couvillion of Hammond
Kiwanis and Judge Grace Bennett Gasaway from the City Court of Hammond.
Mona Fontenot presented a check to Darlene Guidry,
After Prom committee chairman with Hathaway High.
Elaine Atencio presented a contribution to
Timothy Crittendon, Vice Principal of the
Haynesville JR High/High School.
Elaine Atencio presented a contribution for the
Haynesville High school Quarterback Club to
Gayla Camp, Secretary of the Haynesville High
school Quarterback Club.
Elaine Atencio presented a contribution for the
Haynesville Lions Club Golf Tournament to Hugh Miller,
member of the Haynesville Lions Club.
Cheryl Brumfield presented a contribution for
the Independence Chamber of Commerce. Left to
right: Mayor Michael Ragusa, Cheryl Brumfield
and Heather Howell, Independence Chamber of
Commerce President.
Pam Brazil presented a contribution to
Coach Latonia Phillips, the Independence
High School Ladies Basketball & Track and
Field Coach.
41
2016 ANNUAL REPORT DEFINING FGB Community Impact
Cheryl Brumfield presented a contribution
to Chasity Collier, Independence High School
Principal for the Senior Awards Brunch.
Cheryl Brumfield presented a contribution to
Colby McDonald, Independence High School
Baseball Coach.
Ambre Dupre presented a contribution to
Geraldine Segura with Jeff Davis Parish School
family reading program.
Mona Fontenot presented a contribution to Robin
Touchet with The Jennings Festival Association.
Vanessa O’Quinn presented a contribution for
the Jennings High School Jazzers, to Layna
Touchet, Co-Captain.
Denise Fletcher presented a contribution
to Anthony J Berner Sr., Kiwanis Club of
Ponchatoula member, for the golf tournament.
Cheryl Brumfield presented a contribution to
Sherre Pack Hookfin, Hospital Administrator
for the Lallie Kemp Foundation Board for
the Annual Gala.
Anna Cusick presented a contribution to Loranger High
School Principal Joseph Torrence and Head Football
Coach Sam Messina for a Loranger High School Football
sponsorship.
Jeannette Ernst presented a contribution
for the Knights of Columbus to Sir Knight
Charles H. Cochran.
42
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Community Impact
Shelbi Rayborn, Alton Lewis and April Alford presented a contribution to the
Louisiana Children’s Discovery Museum Jazz Brunch event to the Board of
Directors from the Children’s Discovery Museum, Mrs. Alexis Ducorbier and
Mrs. Kathy Montecino. Also in the photograph are Director Mr. Leon Philpot,
Event Coordinator, Keely Schneider and Playologist/Pawologist, Sam.
Vanessa Drew presented a contribution to Peggy Hoover, Board
member, Leon Philpot, Director and Lauren Williams, Coordinator of
Development of the Louisiana Children’s Discovery Museum.
The Independence Branch recently served as a corporate partner of the Mater Dolorosa
Catholic School Thanksgiving Food Drive in Independence. The branch also served as a
collection site. Left to right: Cheryl Brumfield, Linda Wisinger, Mater Dolorosa Catholic
School Principal, and Karen Paille.
Cheryl Brumfield presented a contribution to Linda Wisinger,
Principal of Mater Dolorosa Catholic School for the Mater
Dolorosa Annual Steak Dinner.
Trella Page presented a contribution to Morgan Chapel. Left to right:
Geraldine Moore, Trella Page, Bruce Wheeler and Rev. Vons Henry, Sr.
Alton Lewis presented a contribution to Guy Recotta and Patricia
Westmoreland for the Richard Murphy Hospice Gala.
43
2016 ANNUAL REPORT DEFINING FGB Community Impact
Cheryl Brumfield presented a check to the New
Horizons Youth Service Bureau. Left to right:
Cheryl Brumfield, Cindy Martens - Executive
Director, Greta Hammel - Assistant Executive
Director and Stacy Williams.
Cheryl Brumfield presented a contribution to
Independence Magnet School. Left to right: Tyronee
Williams, Acting Interim Assistant Principal, Cheryl
Brumfield, Donnis Casanave, Acting Principal.
Adam Johnston presented a contribution
to Scott Martinez, NLEP President, for the
North Louisiana Economic Partnership.
Jennifer O’Neil and Jaclyn Rice, both of Options, Inc. accepted the collected Christmas gifts for
their community home participants from Emily Creech and Ashleigh Duroncelet, both of First
Guaranty Bank.
Katherine Aylor presented a contribution to Ms. Jeannie
Cutrer for the PHS Project Graduation event.
Denise Fletcher presented a contribution to Mr.
James Square, Ponchatoula High School Band
Director, for a free concert presenting the US Air
Force Band, the Premier Jazz Ensemble.
Denise Fletcher presented a contribution
to Heather Miller, Ponchatoula Band
Boosters - Secretary/Treasurer, for the
Ponchatoula Band Boosters to assist
with the purchase of new percussion
instruments.
Katie Aylor presented a contribution to Ms.
Melissa Waddell with the PHS Lady Wave
Basketball.
44
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Community Impact
Denise Fletcher presented a contribution to Mr. Ronald
Rocquin, Director of Ponchatoula Area Recreation
Department for the Ponchatoula Area Recreation
Department.
Harrison Gill presents a contribution to Jim Rob at the St. Helena
Council on Aging.
com·mu·ni·ty
kəˈmyo͞ onədē/
noun
1. a group of people living in the
same place or having a particular
characteristic in common.
2. a feeling of fellowship with others,
as a result of sharing common
attitudes, interests and goals.
Adam Johnston presented a contribution for the Piggly Wiggly Steak Cook-off in Springhill,
LA. Proceeds from the event benefit St. Jude’s Children’s Hospital in Memphis, TN. Left
to right: Renee Jones - Marketing/Property Management, Kenyan Enterprises, Adam
Johnston - VP, First Guaranty Bank, Mark Lowery - Director, Piggly Wiggly and David
Scruggs - Controller, Kenyan Companies.
Cheryl Brumfield presented a contribution to Anthony Catalano, Festival
Chairman, and Evelyn Mitchell, Poster Committee Chairperson, for the Sicilian
Heritage Festival.
Cheryl Brumfield presented a contribution to Dr. Alecia Cyprian, Chief
Executive Officer of Southeast Louisiana Community Health Systems.
45
2016 ANNUAL REPORT DEFINING FGB Community Impact
Randy Vicknair presented a contribution to Lynn
Horgan for the Southeastern Louisiana University
Chef ’s Evening event.
Alton Lewis presented a contribution to Lynn Horgan, Director of Individual, Corporate and
Foundation Relations, and Lauryn Williams at Southeastern Louisiana University. Also pictured
are a few employees from First Guaranty Bank that are alumnus of Southeastern, Desiree Simmons,
Kristin Williams, Lucas Hammonds and Kristina Terry.
Danielle Willie and Jane Wear presented a contribution for the Community Music School
sponsorship to Lynn Horgan, Director of Individual, Corporate and Foundation Relations
and Jivka Duke, Director of Community Music School with Southeastern Louisiana
University.
Vanessa Drew presented a contribution to C. Roy
Blackwood, the Executive Director of the Columbia Theatre
and Lynn Horgan, Director of Individual, Corporate and
Foundation Relations at Southeastern Louisiana University.
im·pact
verb
imˈpakt/
have a strong effect on
someone or something.
synonyms: affect, influence,
have an effect on, make an
impression on;
Alton Lewis presented a contribution to Jay Artigues,
Athletic Director of Southeastern Louisiana University.
Bernadette Kemp presented a contribution
to Julie Perise with the Southeastern Alumni
Association for the SLU Convocation Picnic.
46
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Community Impact
April Alford presented a contribution to Linda Stegall, Randy Stegall and Debbie
DePhillips with the Tangi Humane Society.
Kristin Williams presented a contribution to Pascal Dean
for South Tangi Relay for Life.
Cheryl Brumfield, Vice President, Independence Branch Lending
Manager and Stacy Williams, Branch Operations Manager, Guaranty
West Branch presented a contribution to Delmas Dunn, President of
the Tangipahoa African American Heritage Museum and Veterans
Archives for the Black Tie Affair event.
Lee Ann Sibley and Vickie Jenkins presented a contribution to Jill Hutcheson and
James Sparacello with the Tangipahoa Parish Sheriff ’s Office for the Mounted
Division Rodeo.
Ronnie Pittman presented a contribution to Jodie
Rohner for the Nite Out 5K sponsorship.
Cheryl Brumfield presented a contribution to Toys for Tots. Left to right: Mira Sharpe,
Heather Howell, Greg Gray, Cheryl Brumfield and Brent Pizzolato.
47
2016 ANNUAL REPORT DEFINING FGB Community Impact
A
American Cancer Society – Relay
for Life Sponsors
American Legion Auxiliary Post
#47 – Boys State and Girls State
Program Sponsors
Amite Chamber of Commerce –
Bon Appetit Food Fest
Amite High School – Baseball Sign
and Amite Job Fair
Amite Oyster Festival – Pearl
Sponsor
Jason Ard Campaign
B
Banzai Inc. – Walker School
Sponsor
Benton (Town of) Farmers Market
– Garden Sponsor
Benton (Town of) Festival
– Christmas on the Square
Foundation
Bossier Chamber of Commerce
Bossier Little League – Baseball/
Softball Programs Sponsors
Boy Scouts of America
C
CADA
Child Advocacy Services
Christmas on Caddo – Fireworks
Sponsor
City of Hammond – Back2School
Bash
City of Hammond Recreation
Department – North Oak
Playground, HOPE Summer
Camp, Sports Programs
Claiborne Academy – Football
Sign
Claiborne Chamber of Commerce
– Diamond Sponsor Annual
Banquet
Claiborne Charity Inc. – Golf
Tournament Sponsor
Claiborne Christmas Committee –
Christmas Lights Sponsor
Claiborne Parish Sheriff – 12 Body
Cameras
Claiborne Scholastic Banquet
Courtney Christian School – Fall
Fest Sponsor
Crimestoppers of Tangipahoa –
Light the Night and Clay Shoot
Fundraiser Sponsors
D
Delta Tau Delta – Feeding
Community Flood Victims
Drago’s Foundation – Feeding
Community Flood Victims
Dubach Restoration and
Beautification Organization –
Chicken Fest Sponsor
Dubach School – Tutoring
E
Elton Elementary – Positive
Behavior Program
F
First Baptist Church of Greensburg
– Golf Tournament Sponsor, Fish
Fry Fundraiser
Florida Parishes Arena – Gold
Sponsor Rodeo
Herbert S. Ford Memorial Museum
Full of Grace Inc. – Parking Lot St.
Helena Catholic Church
G
Greater St. James Missionary –
Ladies Tea Ministry
Greater Shreveport Chamber of
Commerce – YPI Forum Sponsor
48
Gujarati Samaj of Mississippi –
Annual Banquet
Gusher Days – Festival Sponsor
H
Hammond BBQ Inc. – Blues &
BBQ Sponsor
Hammond Chamber of Commerce
– Installation Banquet Sponsor,
Slam Dunk Sponsor, Chillin’ With
the Chamber, Ladies Top 28
Hammond Firefighters Association
– MDA Fundraiser 5K Sponsor
Hammond High - Baseball
Booster, Renaissance Foundation,
Jr. High Football Equipment
Hammond Police Union Local
345 – Policeman’s Ball Platinum
Sponsor
Hammond Regional Arts Center –
Brews Arts Fest Sponsor
Hathaway High School – Prom
Lock-in
Haynesville Beautification
Committee – Pot Luck Fair
Haynesville Jr. High School –
Picnic Tables
Haynesville Lions Club – Golf
Tournament Sponsor
Haynesville Quarterback Club
Hearts and Paws United
Homer Golf Club – T Box Sign
and North Louisiana Golf
Tournament
Homer High School – Baseball and
Football Signs
HUB Urban Ministry
I
ICBA
Independence High School –
Grand Slam Tiger Baseball
Sponsor, Basketball/Track Teams,
Senior Awards Ceremony
Independence Middle Magnet
School – Football Program
Independence Sicilian Heritage –
Padrino Festival Sponsor
Italian Festival Inc.
J
Jeff Davis Chamber of Commerce
– Golf Tournament Sponsor and
Fundraiser
Jeff Davis Rice Growers
Association – SWLA Rice/
Soybean Clinic Meal
Jeff Davis Title Parent Center –
Family Reading Time
Jennings Festival Association
Jennings High School Jazzers
K
Kentwood Alumni Association –
Golf Tournament
Kentwood Baseball/Softball
Association – Sign and Golf
Tournament Sponsor
Kentwood Rotary Club
Kentwood (Town of) – School
Supply Giveaway
Kiwanis Club of Denham Springs
– Golf Tournament & Christmas
Parade
Kiwanis Club of Hammond
Kiwanis Club of Ponchatoula –
Golf Tournament Sponsors and
Poinsettias
Knights of Columbus – Le Jour De
CaJun, Steak Dinner Fundraiser
L
Lake Claiborne Inc. – July 4th
Fireworks
Lallie Kemp Foundation –
Christmas in July Gala
Land Trust for Southeast Louisiana
– Polo Match Sponsor
Leadership Excel
Lincoln Parish Sheriff – Senior
Citizen Expo Sponsor
Lions Charity Golf
Livingston Parish School Board
Livingston Parks & Recreation –
Little League Baseball Sponsor
Loranger High School – Softball,
Football, Basketball and
Volleyball Program Sponsors
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Louisiana Bankers Association
Louisiana Bankers Education
Foundation
Louisiana Children’s Discovery
Center – Jazz Brunch & Annual
Sponsorship
Louisiana Marathon
LSU Ag Center (Homer) – 4-H
Livestock Auction
M
Mater Dolorosa Catholic School
– Steak Dinner Fundraiser, Door
Prize
Minden Athletics – Minden All
Stars Team
Mission International Church –
Leadercast 2016
Monterey Country Club – Golf
Tournament
Morgan Chapel AME Church –
Annual Picnic
Richard Murphy Hospice
Foundation – Gala Sponsorships
N
New Horizons Youth Service
Bureau
North Caddo Magnet High School
– Basketball Team Playoffs
North Caddo Medical Center
Foundation – Denim Derby
Fundraiser
Northshore Area Board – Crawfish
Boil Sponsor
O
Oak Forest Academy – Fall Festival
Oak Grove Church of Christ –
Food Fest and Gold Key Advocate
Options, Inc.
P
PHS Band Boosters Inc. – Green
Wave Band
PHS Grand Slam Boosters –
Baseball Sign
PHS Lady Wave Basketball
Ponchatoula High School – Project
Graduation, Air Force Band
Sponsor, Senior Breakfast, Lady
Wave Volleyball Sponsor, FFA
Chapter National Convention
Ponchatoula Lions Club – Hot Rod
Show, Raffle
Ponchatoula Youth Baseball –
Softball Team
R
Rosaryville Spirit Life Center – 5K
Sponsor
Rotary Club of Amite – Golf
Tournament Sponsor
Rotary Club of Hammond –
Shamrock Run Sponsor
S
St. Helena Catholic Church
St. Helena Forestry Association –
Annual Meeting Sponsor
St. Helena Nursing Home
St. Helena Parish Hospital – Health
Fair
St. Helena Sheriff ’s Office – Santa’s
Helper Fundraiser
St. Helena/Tangipahoa Dairy Day
Community Impact
Summerfield High School –
Championship Rings, Softball and
Baseball Signs, T-Shirts
T
Tangi Academy – Golf Tournament
Tangi Humane Society – Pet Expo
Sponsor
Tangi Professional Women’s
Organization – Conference
Sponsor
Tangipahoa African American
Heritage Museum & Veterans
Archive – Black Tie Affair
Sponsor
Tangipahoa Parish School System
– Talented Theatre
Tangipahoa Parish Sheriff ’s Office
– Mounted Division Rodeo
Sponsor, Angels in the Dark
Tiger Athletic Foundation – LSU
Baseball
Toys for Tots Foundation
U
United Way of Southeast Louisiana
V
Vermilion Parish School Board -
Band Room Cabinetry
W
Walker High School – Gym Sign
Westminster Homes Inc.
Woodland Park Magnet School –
PE Equipment
St. Jude Fundraiser
Shreveport Regional Arts Council
– Tea Party
Southeastern Louisiana University
Alumni Association – Salute
the Lions Evening, Annual
Convocation Picnic, Felions
Champagne Bingo
Southeastern Louisiana University
Athletic Association
SLU Columbia Theatre for the Arts
SLU Foundation – Chefs Evening,
SLU Channel Sponsor, Partner,
Community Music School
Sponsor, College of Business
Southeast Community Health
System – Back2School Health
Expos
Special Olympics Louisiana –
Trivia Night Sponsor
2016 FGB Volunteer Results
Total Employee Community
Service Hours Completed
2,183
O
r
g
T
a
o
t
n
a
i
z
l
a
N
t
i
u
1
o
m
n
b
2
s
e
r
R
4
e
o
a
f
c
h
e
d
mployee Volunteers
Total Number of
5
4
2
E
49
2016 ANNUAL REPORT DEFINING FGB
DEFINING FGB – EARNINGS & DIVIDENDS
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
●■ 10% common stock dividend
●■ Dividend rate per share remains $0.16 per quarter
2013
$9.1 million
$4,027,000
$58,102,000
●■ Total loans exceeded $700 million
2014
$11.2 million
$4,027,000
$64,905,000
2015
$14.5 million
$4,247,000
$73,445,000
2016 $14.1 million
$4,870,000
$82,668,000
$165.8 million
$61,686,000
●■ Retained earnings grew by $6.8 million
●■ Total loans reached $790 million
●■ 10% common stock dividend
●■ Listed in NASDAQ
●■ Redeemed SBLF Preferred Stock
●■ Loans totaled $949 million
●■ 94th consecutive quarterly dividend
* 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.
50
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Banks Headquartered in Louisiana Ranked by Asset Size as of December 31, 2016
Iberiabank
First NBC Bank
Origin Bank
MidSouth Bank, National Association
Red River Bank
Home Bank
Gulf Coast Bank and Trust Company
First Guaranty Bank
Investar Bank
Business First Bank
Crescent Bank & Trust
Citizens National Bank, N.A.
First National Banker's Bank
First American Bank and Trust
Sabine State Bank and Trust Company
JD Bank
First Federal Bank of Louisiana
First Bank and Trust
Fidelity Bank
Ouachita Independent Bank
Liberty Bank and Trust Company
Resource Bank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23 The Evangeline Bank and Trust Company
St. Martin Bank and Trust Company
24
United Community Bank
25
Progressive Bank
26
Concordia Bank & Trust Company
27
Synergy Bank
28
South Louisiana Bank, Houma, Louisiana
29
Community Bank of Louisiana
30
Coastal Commerce Bank
31
32
Fifth District Savings Bank
33 Home Federal Bank
34 Merchants & Farmers Bank & Trust Company
35
36 Metairie Bank & Trust Company
Gibsland Bank & Trust Company
37
Rayne State Bank & Trust Company
38
First National Bank of Louisiana
39
Cross Keys Bank
40
41
Bank of Commerce & Trust Co.
42 M C Bank & Trust Company
43
44
45
46 MBL Bank
47
48
49
50
51
52
53 Delta Bank
54
55 The Union Bank
56
57
58
59
60
61
62
63
64 The Bank
65
Bank of Montgomery
Richland State Bank
St. Landry Bank and Trust Company
Farmers-Merchant Bank & Trust Company
Southern Heritage Bank
Florida Parishes Bank
Cottonport Bank
Community First Bank
City Savings Bank & Trust Company
Citizens Bank & Trust Company
Gulf Coast Bank
Tri-Parish Bank
Citizen's Bank
First National Bank
Jonesboro State Bank
Bank of Zachary
Bank of Ruston
City Bank & Trust Co.
St. Landry Homestead Federal Savings Bank
Peoples Bank and Trust Company of Pointe Coupee Parish
Lafayette
New Orleans
Choudrant
Lafayette
Alexandria
Lafayette
New Orleans
Hammond
Baton Rouge
Baton Rouge
New Orleans
Bossier City
Baton Rouge
Vacherie
Many
Jennings
Lake Charles
New Orleans
New Orleans
Monroe
New Orleans
Covington
Ville Platte
Saint Martinville
Gonzales
Monroe
Vidalia
Houma
Houma
Mansfield
Houma
New Orleans
Shreveport
Leesville
Abbeville
Metairie
Gibsland
Rayne
Crowley
Saint Joseph
Crowley
Morgan City
Cottonport
New Iberia
Deridder
Minden
Montgomery
Rayville
Opelousas
Breaux Bridge
Jonesville
Hammond
Vidalia
Plaquemine
Marksville
Ville Platte
Arcadia
Jonesboro
Zachary
Ruston
Natchitoches
Opelousas
New Roads
Jennings
Eunice
Patterson State Bank
Citizens Progressive Bank
Bank of Sunset and Trust Company
Citizens Bank & Trust Company
Guaranty Bank & Trust Company of Delhi, Louisiana
Citizens Savings Bank
Lakeside Bank
Franklin State Bank & Trust Company
South Lafourche Bank & Trust Company
Tensas State Bank
Bank of Coushatta
Guaranty Bank and Trust Company
Caldwell Bank & Trust Company
Catahoula - LaSalle Bank
Bank of Abbeville & Trust Company
American Bank & Trust Company
Bank of Winnfield & Trust Company
Plaquemine Bank & Trust Company
Citizen's Bank & Trust Company of Vivian, Louisiana
Anthem Bank & Trust
First National Bank USA
State Bank & Trust Company
Exhange Bank and Trust Company, Natchitoches, Louisiana
Patterson
66
Jeanerette
67 The First National Bank of Jeanerette
Delhi
68
Bogalusa
69
Columbia
70 Homeland Federal Savings Bank
Coushatta
71
New Roads
72
Columbia
73
Jonesville
74
Abbeville
75
Opelousas
76
Marion
77 Marion State Bank
Winnsboro
78
Washington
79 Washington State Bank
Lake Charles
80
Winnsboro
81
Larose
82
Newellton
83
Winnsboro
84 Winnsboro State Bank & Trust Company
Jackson
85 The Highlands Bank
Winnfield
86
Plaquemine
87
Vivian
88
Plaquemine
89
Boutte
90
Golden Meadow
91
Natchitoches
92
New Orleans
93 Hibernia Bank
Sunset
94
Covington
95
Belle Chasse
96 Mississippi River Bank
Covington
American Bank & Trust Company
97
Clinton
Landmark Bank
98
Clinton
99
Feliciana Bank & Trust Company
Kaplan
100 Vermilion Bank & Trust Company
Saint Francisville
101 Bank of St. Francisville
Delhi
102 Commercial Capital Bank
Church Point
103 Farmers State Bank & Trust Co.
Colfax
104 Colfax Banking Company
Saint Martinville
105 Teche Bank & Trust Co.
Erath
106 Bank of Erath
Covington
107 Heritage Bank of St. Tammany
Metairie
108 Eureka Homestead
Kaplan
109 Kaplan State Bank
Gueydan
110 Bank of Gueydan
New Orleans
111 Union Savings and Loan Association
New Orleans
112 Bank of Louisiana
Simmesport
113 Simmesport State Bank
114 Jackson Parish Bank
Jonesboro
115 Abbevile Building & Loan (A State-Chartered Savings Bank) Abbeville
116 Hodge Bank & Trust Company
117 Peoples Bank
118 Rayne Building and Loan Association
119 Commerce Community Bank
120 Beauregard FSB
121 The Bank of Commerce
122 First National Bank of Benton
123 Sicily Island State Bank
124 Basile State Bank
125 Bank of Oak Ridge
126 Mutual Savings and Loan Association
127 Progressive National Bank of DeSoto Parish
128 The Mer Rouge State Bank
129 Progressive National Bank of DeSoto Parish
Hodge
Chatham
Rayne
Oak Grove
Deridder
White Castle
Benton
Sicily Island
Basile
Oak Ridge
Metairie
Mansfield
Mer Rouge
Mansfield
51
2016 ANNUAL REPORT DEFINING FGB Our Mission
The mission of First Guaranty Bank and First Guaranty Bancshares is
to increase shareholder value while providing financial services for and
contributing to the growth and welfare of the communities we serve.
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.
52
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Financial Table of Contents
Selected Financial Data ..............................................................................................54
Management’s Discussion and Analysis
of Financial Condition and Results of Operation ...................................................58
Report of Independent Registered Accounting Firm .............................................86
Consolidated Balance Sheets .....................................................................................87
Consolidated Statements of Income .........................................................................88
Consolidated Statements of Comprehensive Income (Loss) .................................89
Consolidated Statements of Shareholders’ Equity ...................................................89
Consolidated Statements of Cash Flows...................................................................90
Notes to Consolidated Financial Statements ...........................................................91
53
2016 ANNUAL REPORT DEFINING FGB 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.
At or For the Years Ended December 31,
2016
2015
2014
2013
2012
(in thousands except for % and share data)
$
$
$ 499,336
271
$ 948,921
11,114
$ 1,500,946
$ 1,326,181
43,230
$ 124,349
$ 124,349
$
$
$
$ 546,121
582
$ 841,583
9,415
$ 1,459,753
$ 1,295,870
42,221
$ 118,224
$
$ 641,603
$ 634,504
$ 659,243
$
210
$
665
$
2,891
$ 790,321
$ 703,166
$ 629,500
$
9,105
$
10,355
$
10,342
$1,518,876
$ 1,436,441
$ 1,407,303
$1,371,839
$ 1,303,099
$ 1,252,612
$
3,255
$
6,288
$
15,846
$ 139,583
$ 123,405
$ 134,181
$ 118,224
$ 100,148
$
83,970
$
94,746
0.97%
11.18%
0.98%
11.64%
3.39%
68.57%
56.85%
60.19%
293
8.63%
8.44%
8.28%
8.68%
10.59%
12.79%
10.59%
8.10%
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%
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%
62.58%
67.17%
63.73%
271
278
274
9.24%
9.00%
6.59%
9.33%
13.16%
14.05%
N/A
6.37%
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%
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)
54
FORTRESS BANKING 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
Weighted average number of shares outstanding
Number of shares outstanding
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
$
$
$
$
$
$
$
$
$
$
$
$
$
$
58,532
10,140
48,392
3,705
5,656
3,799
32,885
21,257
14,093
14,093
1.85
0.64
16.34
15.95
$
$
$
$
$
$
$
$
$
$
$
$
$
$
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
34.56%
30.07%
37.18%
47.75%
40.00%
7,609,194
7,609,194
7,013,869
6,920,022
6,920,022
6,921,696
7,609,194
6,920,022
6,920,022
6,920,022
1.48%
2.34%
2.30%
50.04%
0.23%
0.42%
1.17%
1.51%
2.62%
2.43%
0.99%
1.90%
1.62%
1.27%
2.60%
2.12%
1.67%
3.74%
3.36%
42.74%
60.74%
56.72%
43.94%
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) 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.
55
2016 ANNUAL REPORT DEFINING FGB 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,
2016
2015
2014
2013
2012
(in thousands except for share data and %)
$
124,349
$ 118,224
$ 139,583
$ 123,405
$ 134,181
-
1,999
978
-
1,999
1,298
39,435
1,999
1,618
39,435
1,999
1,938
39,435
1,999
2,257
$ 121,372
$ 114,927
$
96,531
$
80,033
$
90,490
7,609,194
7,609,194
6,920,022
6,920,022
6,920,022
$
$
16.34
15.95
$
$
15.54
15.10
$
$
14.47
13.95
$
$
12.13
11.57
$
$
13.69
13.08
$ 1,500,946
$ 1,459,753
$ 1,518,876
$ 1,436,441
$ 1,407,303
1,999
978
1,999
1,298
1,999
1,618
1,999
1,938
1,999
2,257
$ 1,497,969
$ 1,456,456
$1,515,259
$1,432,504
$1,403,047
Tangible common equity to tangible assets
8.10%
7.89%
6.37%
5.59%
6.45%
56
FORTRESS BANKING 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,
2016
2015
2014
2013
2012
(in thousands except for share data and %)
56.85%
55.11%
62.85%
65.61%
58.56%
$32,885
$31,095
$31,594
$30,987
$31,161
320
320
320
320
350
32,565
48,392
9,455
30,775
47,471
8,956
31,274
44,095
6,177
30,667
39,752
7,478
30,811
42,075
11,140
3,739
3,125
295
1,571
4,868
$ 5,716
$ 5,831
$ 5,882
$ 5,907
$ 6,272
60.19%
57.74%
62.58%
67.17%
63.73%
57
2016 ANNUAL REPORT DEFINING FGB 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 Item
6, "Selected Financial Data" and our audited consolidated financial
statements and the accompanying notes included elsewhere in this
Annual Report. 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," "Risk
Factors" and elsewhere in this Annual Report, 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.
58
Total assets were $1.5 billion at December 31, 2016 and December
31, 2015. Total deposits were $1.3 billion at December 31, 2016 and
December 31, 2015. Total loans were $948.9 million at December
31, 2016, an increase of $107.3 million, or 12.8%, compared with
December 31, 2015. Common shareholders' equity was $124.3
million and $118.2 million at December 31, 2016 and December 31,
2015, respectively.
Net income was $14.1 million, $14.5 million and $11.2 million for
the years ended December 31, 2016, 2015 and 2014, 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.
Financial highlights for 2016 and 2015:
• Total assets at December 31, 2016 increased $41.2 million, or 2.8%,
to $1.5 billion when compared to December 31, 2015. Total loans
at December 31, 2016 were $948.9 million, an increase of $107.3
million, or 12.8%, compared with December 31, 2015. Common
shareholders' equity was $124.3 million and $118.2 million at
December 31, 2016 and 2015, respectively.
• Net income for the years ended December 31, 2016 and 2015 was
$14.1 million and $14.5 million, respectively.
• Net income available to common shareholders after preferred stock
dividends was $14.1 million for the years ended December 31,
2016 and 2015. Due to the redemption on December 22, 2015 of
First Guaranty's Series C preferred stock issued to the U.S. Treasury
Department Small Business Lending Fund, preferred dividends
were discontinued.
• Earnings per common share were $1.85 and $2.01 for the years
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. ended December 31, 2016 and 2015, respectively. Total shares
outstanding were 7,609,194 at December 31, 2016 compared to
7,013,869 at December 31, 2015. The increase in shares was due
to the completion of First Guaranty's common stock offering and
10% common stock dividend in December 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. As of December 31, 2016 the senior secured loan had an
outstanding principal balance of $22.1 million.
• Net interest income for 2016 was $48.4 million compared to $47.5
million for 2015.
• The provision for loan losses totaled $3.7 million for 2016 compared
to $3.9 million in 2015.
• The net interest margin for 2016 was 3.39%, which was an increase
of 13 basis points from the net interest margin of 3.26% for 2015.
First Guaranty attributed the improvement in the net interest margin
to the continued shift in interest-earning asset balances from lower
yielding securities to higher yielding loans.
• Investment securities totaled $499.3 million at December 31, 2016,
a decrease of $46.8 million when compared to $546.1 million at
December 31, 2015. At December 31, 2016, available for sale
securities, at fair value, totaled $397.5 million, an increase of $21.1
million when compared to $376.4 million at December 31, 2015.
At December 31, 2016, held to maturity securities, at amortized
cost, totaled $101.9 million, a decrease of $67.9 million when
compared to $169.8 million at December 31, 2015. The decrease
in investment securities was primarily associated with early payoffs
of government agency securities and the decision to sell corporate
bonds and municipal securities to fund loan growth.
• Total loans net of unearned income were $948.9 million at December
31, 2016 compared to $841.6 million at December 31, 2015. The
net loan portfolio at December 31, 2016 totaled $937.8 million, a
net increase of $105.6 million from $832.2 million at December
31, 2015. Total loans net of unearned income are reduced by the
allowance for loan losses which totaled $11.1 million at December
31, 2016 and $9.4 million at December 31, 2015.
• Total impaired loans increased $3.0 million to $28.8 million at
December 31, 2016 compared to $25.8 million at December 31,
2015.
• Nonaccrual loans increased $1.6 million to $21.7 million at
December 31, 2016 compared to $20.0 million at December 31,
2015.
• Return on average assets for the years ended December 31, 2016
and December 31, 2015 was 0.97%. Return on average common
equity was 11.18% and 12.98% for 2016 and 2015, 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 $16.34 as of December 31,
2016 compared to $15.54 as of December 31, 2015. Tangible book
value per common share was $15.95 as of December 31, 2016
compared to $15.10 as of December 31, 2015.
• The increase in book value was principally due to an increase in
common shareholders' equity of $6.1 million to $124.3 million at
December 31, 2016. Retained earnings increased $9.2 million to
$59.2 million at December 31, 2016. These increases were offset
by changes in accumulated other comprehensive income (loss)
("AOCI") of $3.1 million from an unrealized loss of $0.9 million
at December 31, 2015 to an unrealized loss of $4.0 million at
December 31, 2016.
• First Guaranty's Board of Directors declared and First Guaranty paid
cash dividends of $0.64 and $0.60 per common share in 2016 and
2015. First Guaranty has paid 94 consecutive quarterly dividends as
of December 31, 2016.
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,
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.
59
2016 ANNUAL REPORT DEFINING FGB 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
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
60
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, 2016, an increase
of $41.2 million, or 2.8%, from total assets at December 31, 2015,
primarily due to the growth in our loan portfolio of $105.6 million,
partially offset by a decrease of our investment securities portfolio of
$46.8 million and cash and cash equivalents of $19.2 million.
Loans.
Net loans increased $105.6 million, or 12.7%, to $937.8 million at
December 31, 2016 from $832.2 million at December 31, 2015. Net
loans increased during 2016 primarily due to a $93.7 million increase in
non-farm non-residential loans, a $28.1 million increase in construction
and land development loans, an $8.8 million increase in consumer and
other loans, a $5.6 million increase in one- to four-family residential
loans and a $3.5 million increase in farmland loans, partially offset by a
$30.2 million decrease in commercial and industrial loans and a $2.1
million decrease in agricultural loans. Non-farm non-residential loans
increased due to an increase in local originations and the purchase of
commercial real estate loans. Construction and land development loans
increased principally due to the funding of unfunded commitments on
various construction projects. Consumer and other loans increased due
to the continued growth in our commercial lease originations. One- to
four-family residential loans increased primarily due to the continued
growth in local loan originations and the purchase of conforming
one-to four-family residential loans. Farmland loans increased due to
seasonal funding on agricultural loan commitments. Commercial and
industrial loans decreased primarily due to pay downs in our small
business loans and syndicated loans. Agricultural loans decreased due
to seasonal fluctuations. Syndicated loans declined during 2016 from
$105.9 million at December 31, 2015 to $82.8 million at December
31, 2016. First Guaranty had approximately 2.8% of funded and 0.4%
of unfunded commitments in our loan portfolio to businesses engaged
in support or service activities for oil and gas operations. There are no
significant concentrations of credit to any individual borrower.
As of December 31, 2016, 70.5% of our loan portfolio was secured
primarily or secondarily by real estate. The largest portion of our loan
portfolio, at 43.9% at December 31, 2016, was non-farm non-residential
loans secured by real estate. Approximately 32.7% 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, 2016. Approximately 74.6%
of the loan portfolio is scheduled to mature within five years from
December 31, 2016.
FORTRESS BANKING 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,
2016
2015
2014
2013
2012
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
$ 84,239
8.9% $ 56,132
6.6% $ 52,094
6.6% $ 47,550
6.7% $ 44,856
21,138
135,211
12,450
417,014
670,052
23,783
193,969
63,011
2.2%
17,672
2.1%
13,539
1.7%
9,826
14.2%
129,610
15.4%
118,181
14.9%
103,764
1.3%
12,629
1.5%
14,323
1.8%
13,771
1.4%
14.7%
2.0%
11,182
87,473
14,855
43.9%
323,363
38.3%
328,400
41.5%
336,071
47.7%
312,716
70.5% 539,406
63.9% 526,537
66.5% 510,982
72.5% 471,082
2.5%
25,838
3.1%
26,278
3.3%
21,749
3.1%
18,476
20.4%
224,201
26.6%
196,339
24.8%
151,087
21.4%
117,425
6.6%
54,163
6.4%
42,991
5.4%
20,917
3.0%
23,758
280,763
29.5% 304,202
36.1% 265,608
33.5% 193,753
27.5% 159,659
7.1%
1.8%
13.8%
2.4%
49.6%
74.7%
2.9%
18.6%
3.8%
25.3%
950,815
100.0% 843,608
100.0% 792,145
100.0% 704,735
100.0% 630,741
100.0%
(1,894)
(2,025)
(1,824)
(1,569)
(1,241)
$948,921
$841,583
$790,321
$703,166
$629,500
TOTAL ASSETS
In Billions
TOTAL LOANS
In Millions
1.5
1.2
0.9
0.6
0.3
0.0
2012
2013
2014
2015
2016
1000
800
600
400
200
0
2012
2013
2014
2015
2016
61
2016 ANNUAL REPORT DEFINING FGB Loan Portfolio Maturities.
The following tables summarize the scheduled repayments of our loan portfolio at December 31, 2016 and 2015. 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, 2016
More Than
One Year
Through
Five Years
One Year
or Less
After Five
Years
Total
(in thousands)
Real Estate:
Construction & land development
$ 25,096
$ 49,820
$
9,323
$ 84,239
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
8,833
4,584
13,476
42,778
642
8,629
7,721
78,957
3,179
21,138
135,211
12,450
53,408
258,300
105,306
417,014
101,455
364,111
204,486
670,052
9,964
22,667
19,446
4,340
163,802
43,202
9,479
7,500
363
23,783
193,969
63,011
52,077
211,344
17,342
280,763
Total Loans Before Unearned Income
$153,532
$575,455
$221,828
Less: unearned income
Total Loans Net Of Unearned Income
950,815
(1,894)
$948,921
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
Less: unearned income
Total Loans Net Of Unearned Income
843,608
(2,025)
$841,583
62
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. The following table sets forth the scheduled repayments of fixed and
adjustable-rate loans at December 31, 2016 that are contractually due
after December 31, 2017.
One to five years
Five to 15 years
Over 15 years
Subtotal
Nonaccrual loans
Total
Due After December 31, 2016
(in thousands)
Fixed
Floating
Total
$352,000
$206,676
$558,676
115,691
46,116
161,807
53,150
5,830
58,980
$520,841
$258,622
$779,463
21,674
$757,789
As of December 31, 2016, $127.7 million of floating rate loans were
at their interest rate floor. At December 31, 2015, $132.9 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.
63
2016 ANNUAL REPORT DEFINING FGB The following table shows the principal amounts and categories of our non-performing assets at December 31, 2016, 2015, 2014, 2013 and 2012.
2016
2015
December 31,
2014
(in thousands)
2013
2012
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
64
$ 551
$ 558
$
105
2,242
5,014
2,753
10,665
1,958
8,070
981
11,009
21,674
34
-
145
-
-
179
-
-
-
-
179
21,853
-
-
71
-
288
359
117
4,538
9,045
2,934
17,192
2,628
48
171
2,847
20,039
-
19
391
-
-
410
-
-
-
-
410
20,449
25
-
880
-
672
1,577
486
153
3,819
-
4,993
9,451
832
1,907
4
2,743
12,194
-
-
599
-
-
599
-
-
-
-
599
12,793
127
-
1,121
-
950
2,198
$
73
130
$
854
312
4,248
-
7,539
11,990
526
1,946
23
2,495
14,485
-
-
414
-
-
414
-
-
-
-
414
14,899
4,603
-
11,571
17,340
512
2,831
5
3,348
20,688
-
-
455
-
-
455
-
-
-
-
455
21,143
754
-
1,803
-
800
3,357
-
-
-
-
3,357
$18,256
1,083
-
1,186
-
125
2,394
-
-
-
-
2,394
$23,537
-
-
-
-
359
$22,212
-
-
-
-
1,577
$22,026
-
-
-
-
2,198
$14,991
2.34%
1.48%
2.30%
2.62%
1.51%
2.43%
1.90%
0.99%
1.62%
2.60%
1.27%
2.12%
3.74%
1.67%
3.36%
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. For the years ended December 31, 2016 and 2015, gross interest
income which would have been recorded had the non-performing
loans been current in accordance with their original terms amounted
to $1.5 million and $1.1 million, respectively. We recognized $0.1
million and $0.1 million of interest income on such loans during the
years ended December 31, 2016 and 2015, respectively. For the years
ended December 31, 2016 and 2015, gross interest income which
would have been recorded had the troubled debt restructured loans
been current in accordance with their original terms amounted to $0.1
million and $0.3 million, respectively. We recognized $0.3 million and
$0.2 million of interest income on such loans during the years ended
December 31, 2016 and 2015, respectively.
Non-performing assets were $22.2 million, or 1.48%, of total assets
at December 31, 2016, compared to $22.0 million, or 1.51%, of total
assets at December 31, 2015, which represented an increase in non-
performing assets of $0.2 million. The increase in non-performing
assets occurred primarily as a result of an increase in non-accrual loans
from $20.0 million at December 31, 2015 to $21.7 million at December
31, 2016. The increase in non-accrual loans was concentrated in
commercial and industrial loans and consumer and other loans. This
increase was partially offset by a decrease in other real estate owned
of $1.2 million to $0.4 million at December 31, 2016. Non-performing
assets included $1.6 million, or 7.4% of non-performing assets are
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, 2016 nonaccrual loans totaled $21.7 million,
an increase of $1.6 million, or 8.2%, compared to nonaccrual loans
of $20.0 million at December 31, 2015. The increase in non-accrual
loans was primarily associated with the decision to transfer a $7.9
million syndicate loan that provides services to the oil and gas industry
to non-accrual status during the first quarter of 2016. The loan was
further downgraded to doubtful status as of third quarter of 2016. The
current balance on this loan was $7.7 million at December 31, 2016
and it has a specific reserve of $2.3 million. Management continues
to evaluate the potential for loss associated with this credit. Additional
future reserves or charge-offs may occur with this credit as new
information is evaluated. In addition, approximately $1.0 million of
commercial leases were transferred to non-accrual status in the second
quarter of 2016. These increases to non-accrual loans were partially
offset by the return to accrual status of a $2.8 million loan secured by a
multi-family real estate property; a payoff of a $0.9 million non-accrual
multi-family loan; and the sale of a $1.8 million non-accrual loan
secured by a hotel property. These reductions in non-accrual loans
occurred during the first quarter of 2016. During the second quarter
of 2016, the primary reduction in non-accrual loans occurred due
to principal reductions on government guaranteed agricultural loans
due to the receipt of guarantee proceeds. During the third quarter of
2016, the primary reduction in non-accrual loans occurred due to a
$1.6 million one- to four-family lending relationship that was returned
to accrual status. During the fourth quarter of 2016, a $1.2 million
non-farm non-residential loan was transferred to non-accrual status.
This increase to non-accrual loans was partially offset by the payoff of
a $0.4 million agricultural loan. Nonaccrual loans were concentrated
in three loan relationships that totaled $14.0 million or 64.6% of
nonaccrual loans at December 31, 2016.
At December 31, 2016 loans 90 days or greater delinquent and still
accruing totaled $0.2 million, a decrease of $0.2 million, or 56.3%,
compared to $0.4 million at December 31, 2015.
Other real estate owned at December 31, 2016 totaled $0.4 million,
a decrease of $1.2 million from $1.6 million at December 31, 2015.
The decrease in other real estate owned was due to write-downs of
$0.3 million and sales of $1.1 million, primarily related to residential
properties.
At December 31, 2016, our largest non-performing assets were
comprised of the following non-accrual loans: (1) a commercial and
industrial loan that totaled $7.7 million that is a shared national credit
involved in oil and gas support and service activity; (2) a multi-family
real estate loan with a balance of $5.0 million secured by an apartment
complex; and (3) a non-farm non-residential loan that totaled $1.2
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, 2016, 2015 and 2014:
At December 31,
2016
2015
2014
(in thousands)
TDRs:
In Compliance with Modified Terms
$2,987
$3,431
$2,998
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
-
-
-
-
361
368
2,204
-
-
100
1,908
230
$3,448
$5,707
$5,432
At December 31, 2016, the outstanding balance of our troubled
debt restructurings, was $3.4 million as compared to $5.7 million at
December 31, 2015. At December 31, 2016, we had three outstanding
TDRs: (1) a $2.9 million non-farm non-residential loan secured by
commercial real estate, which was performing in accordance with
its modified terms; (2) a $0.4 million construction and land development
loan secured by raw land that is on non-accrual; (3) a $0.1 million loan
secured by commercial real estate that subsequently defaulted and is
on non-accrual. The restructuring of these loans was related to interest
rate or amortization concessions. The decline in TDRs occurred due
to two credit relationships in the aggregate amount of $2.1 million
that had returned to market terms and been in compliance with their
modified terms for 12 months.
65
2016 ANNUAL REPORT DEFINING FGB 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 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, 2016, 2015 and 2014.
Classified assets totaled $49.7 million at December 31, 2016, and included
$21.9 million of non-performing loans.
At December 31,
2016
2015
2014
(in thousands)
$41,992
$58,654
$44,752
7,730
-
-
$49,722
$58,654
$44,752
$17,705
$10,752
$28,702
Classification of Loans:
Substandard
Doubtful
Total Classified Assets
Special Mention
66
The decrease in classified assets at December 31, 2016 as compared to
December 31, 2015 was due to a $16.7 million decrease in substandard
loans, offset by an increase in doubtful loans of $7.7 million. The decrease
in substandard loans was due primarily to payoffs and sales of loans along
with the decision to transfer one loan to doubtful status. Substandard
loans at December 31, 2016 consisted of $18.3 million in non-farm non-
residential, $7.0 million in multifamily, $6.6 million in one- to four-family
residential, $4.0 million in construction and land development, $3.0
million in commercial and industrial, $2.0 million in agricultural and the
remaining $1.1 million comprised of farmland and consumer and other
loans. Doubtful loans increased by $7.7 million due to the transfer of the
previously mentioned $7.7 million commercial and industrial loan from
substandard to doubtful status. Special mention loans increased by $7.0
million due primarily to the upgrade of loans from substandard status.
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 $11.1 million at December 31, 2016
compared to $9.4 million at December 31, 2015.
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. 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. The table below reflects the activity in the allowance for
loan losses for the years indicated.
Balance at beginning of year
$ 9,415
$ 9,105
$ 10,355
$ 10,342
$ 8,879
At or For the Years Ended December 31,
2016
2015
2014
2013
2012
(dollars in thousands)
Charge-offs:
Real Estate:
Construction and land development
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
-
-
(244)
-
(559)
(1,032)
-
(410)
(947)
-
(589)
-
(233)
(31)
(220)
-
(1,373)
(1,137)
(1,515)
(1,148)
(65)
-
(1,409)
(187
(459)
(1,617)
(3,053)
(3,136)
(1,632)
(2,120)
(83)
(579)
(635)
(1,297)
(2,914)
(491)
(79)
(550)
(1,120)
(4,173)
(2)
(266)
(289)
(557)
(41)
(1,098)
(262)
(1,401)
(3,693)
(3,033)
(49)
(809)
(473)
(1,331)
(3,451)
4
-
45
401
16
466
113
146
183
442
908
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
(2,006)
(3,554)
(3,212)
(2,507)
(2,671)
3,705
3,864
1,962
2,520
4,134
Balance at end of year
$11,114
$ 9,415
$ 9,105
$10,355
$10,342
Ratios:
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
0.23%
0.21%
1.17%
18.05%
54.14%
0.44%
0.42%
1.12%
0.45%
0.41%
1.15%
0.38%
0.36%
1.47%
37.75%
35.28%
24.21%
91.98%
163.71%
99.48%
0.45%
0.42%
1.64%
25.83%
64.61%
67
2016 ANNUAL REPORT DEFINING FGB A provision for loan losses of $3.7 million was made during the year
ended December 31, 2016 as compared to $3.9 million for 2015. The
provisions made in 2016 were taken to provide for current loan and
deposit losses and to maintain the allowance proportionate to risks
inherent in the loan portfolio.
Total charge-offs were $2.9 million during the year ended December
31, 2016 as compared to $4.2 million for 2015. Recoveries totaled
$0.9 million for the year ended December 31, 2016 and $0.6 million
during 2015. Comparing the year ended December 31, 2016 to the
year ended December 31, 2015, the increase in the allowance was
primarily attributed to growth in the loan portfolio. The primary change
was an increase in the balance associated with commercial and
industrial loans. The reason for this change was due to the $7.7 million
commercial and industrial loan mentioned above that was determined
to be impaired.
The charged-off loan balances for the year ended December 31, 2016
were concentrated in five loan relationships which totaled $1.4 million,
or 48.0%, of the total charged-off amount. The details of the $1.4
million in charged-off loans were as follows:
• First Guaranty charged off $0.6 million on a non-farm non-residential
real estate loan in the first quarter of 2016. This loan which had a
remaining balance of $1.2 million was subsequently sold in the first
quarter of 2016.
• First Guaranty charged off $0.2 million on a commercial and
industrial loan in the first quarter of 2016 and had no remaining
principal balance at December 31, 2016.
• First Guaranty charged off $0.2 million on a commercial and
industrial loan in the second quarter of 2016 and had no remaining
principal balance at December 31, 2016.
• First Guaranty charged off $0.2 million on a non-farm non-residential
real estate loan in the second quarter of 2016 and had no remaining
principal balance at December 31, 2016.
• First Guaranty charged off $0.2 million on a non-farm non-residential
real estate loan in the third quarter of 2016 and had a remaining
principal balance of $0.1 million at December 31, 2016.
• $1.5 million of charge-offs for 2016 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,
2016
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
(dollars in thousands)
2015
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of Loans in
Each Category to
Total Loans
$ 1,232
19
1,204
591
3,451
74
3,543
972
28
11.1%
0.2%
10.8%
5.3%
31.0%
0.7%
31.9%
8.7%
0.3%
8.9%
2.2%
14.2%
1.3%
43.9%
2.5%
20.4%
6.6%
$ 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%
6.6%
2.1%
15.4%
1.5%
38.3%
3.1%
26.6%
6.4%
-%
-
-%
-%
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
$11,114
100.0%
100.0%
$ 9,415
100.0%
100.0%
68
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
At December 31,
2014
2013
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)
$
702
21
7.7%
0.2%
2,131
23.4%
813
8.9%
2,713
29.8%
293
3.2%
1,797
19.8%
371
4.1%
6.6%
1.7%
14.9%
1.8%
41.5%
3.3%
24.8%
5.4%
264
2.9%
-%
$ 1,530
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%
-%
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
$ 9,105
100.0%
100.0%
$10,355
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,
2012
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)
$ 1,098
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%
2.1%
7.1%
1.8%
13.8%
2.4%
49.6%
2.9%
18.6%
3.8%
-%
$10,342
100.0%
100.0%
69
2016 ANNUAL REPORT DEFINING FGB
Investment Securities.
Investment securities at December 31, 2016 totaled $499.3 million,
a decrease of $46.8 million, or 8.6%, compared to $546.1 million at
December 31, 2015. The decrease was primarily attributed to First
Guaranty's continuing strategy to transition assets from securities to
the loan portfolio. 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, 2016, the U.S Government and Government agency
securities and municipal bonds qualified as securities available to
collateralize public funds. Securities pledged totaled $368.2 million at
December 31, 2016 and $427.4 million at December 31, 2015. 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.
2016
At December 31,
2015
(in thousands)
2014
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$ 29,994
$ 29,994
$ 29,999
$ 29,999
$ 36,000
$ 36,000
183,152
178,332
165,364
163,811
295,620
291,495
132,448
131,972
105,680
105,136
126,654
130,063
580
573
28,177
27,957
29,181
28,645
580
47,339
28,891
582
48,233
28,608
570
574
40,599
41,676
-
-
$403,532
$397,473
$377,853
$376,369
$499,443
$499,808
$ 18,167
$ 17,512
$ 77,343
$ 76,622
$ 84,479
$ 82,529
83,696
82,394
92,409
91,526
57,316
57,159
$101,863
$99,906
$169,752
$168,148
$141,795
$139,688
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 $397.5 million at
December 31, 2016, an increase of $21.1 million, or 5.6%, compared
to $376.4 million at December 31, 2015. The increase was primarily
due to the purchase of U.S. Government agency securities used to
collateralize public funds deposits and the purchase of corporate debt
securities. Partially offsetting this increase was the sale of $15.1 million
in municipal and corporate securities in the second and third quarters
of 2016 for which the proceeds were used to fund loan growth. At
December 31, 2016, First Guaranty had two corporate debt securities
with other-than-temporary impairment. Credit related impairment in
the amount of $0.1 million was charged to earnings. Non-credit related
other-than-temporary impairment of $6,000 was recorded in other
comprehensive income. No other declines in fair value were deemed
other-than-temporary. There were $0.2 million other-than-temporary
charges recognized in earnings on securities in 2015 and no other-than-
temporary losses recognized on securities in 2014.
Our held-to-maturity securities portfolio had an amortized cost of $101.9
million at December 31, 2016, a decrease of $67.9 million, or 40.0%,
compared to $169.8 million at December 31, 2015. The decrease was
due to the early payoffs of existing securities, the continued amortization
of our mortgage-backed securities and the decision to keep a higher
level of securities in our available-for-sale portfolio in order to manage
liquidity and fund loan growth.
70
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. The following table sets forth the stated maturities and weighted average yields of our investment securities at December 31, 2016 and 2015.
At December 31, 2016
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
$ 29,994
0.4%
$
-
U.S. Government Agencies
Corporate and other debt securities
Mutual funds or other equity securities
-
-%
6,454
3.8%
-
-%
44,401
41,909
-
-%
1.0%
4.0%
-%
$
-
-%
$
-
-%
116,602
2.3%
17,329
2.8%
82,472
3.6%
1,137
5.4%
-
-%
573
-%
Municipal bonds
Mortgage-backed securities
3,324
2.1%
6,301
2.7%
10,896
2.9%
7,436
2.9%
-
-%
-
-%
-
-%
28,645
2.0%
Total available-for-sale securities
$ 39,772
1.1%
$ 92,611
2.5%
$ 209,970
2.8%
$ 55,120 2.5%
Held-to-maturity:
U.S. Government Agencies
Mortgage-backed securities
Total held-to-maturity securities
$
$
-
-
-
-%
-%
-%
$
4,998
1.5%
$ 13,169
2.0%
$
-
-%
-
-%
-
-%
83,696
2.1%
$ 4,998
1.5%
$ 13,169
2.0%
$83,696 2.1%
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
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%
71
2016 ANNUAL REPORT DEFINING FGB At December 31, 2016, $39.8 million, or 8.0%, 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 $26.5 million, or 5.3%, of the total portfolio at December
31, 2016. 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, 2016, we believe that the securities
portfolio has a forecasted weighted average life of approximately 5.9
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 6.2 years.
At December 31, 2016, 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, 2016
Amortized
Cost
Fair Value
(in thousands)
$ 29,994 $ 29,994
53,342
53,422
52,113
52,734
109,095
106,474
98,337
95,562
$344,190 $336,877
1500
1200
900
600
300
0
TOTAL DEPOSITS
In Millions
2012
2013
2014
2015
2016
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 interestbearing 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, 2015 to December 31, 2016, total
deposits increased $30.3 million, or 2.3%, to $1.3 billion. Noninterest-
bearing demand deposits increased $17.9 million to $231.1 million
at December 31, 2016. Interest-bearing demand deposits increased
$70.6 million to $479.8 million at December 31, 2016. Time deposits
decreased $74.0 million, or 12.5%, to $518.0 million at December
31, 2016 compared to $592.0 million at December 31, 2015. First
Guaranty had $91.1 million in brokered deposits at December 31,
2016.
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.
72
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. The following table sets forth the distribution of deposit accounts, by account type, for the dates indicated.
Total Deposits
2016
2015
2014
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
$ 221,634
17.2%
-% $ 211,584
15.9%
-% $ 200,127
15.3%
Interest-bearing Demand
Savings
Time
Total Deposits
415,410
32.3%
89,279
7.0%
558,982
43.5%
0.6%
0.1%
1.1%
401,617
30.2%
77,726
5.8%
640,134
48.1%
0.4%
-%
1.1%
386,363
29.6%
69,719
5.4%
649,165
49.7%
$1,285,305 100.0%
0.7% $1,331,061 100.0%
0.6% $1,305,374 100.0%
-%
0.3%
-%
1.2%
0.8%
Individual and Business Deposits
2016
2015
2014
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
$ 217,245
30.1%
-% $ 207,334
27.6%
-% $ 197,332
25.3%
Interest-bearing Demand
Savings
117,221
16.2%
72,647
10.0%
Time
43.7%
Total Individual and Business Deposits $ 723,304 100.0%
316,191
0.3%
0.1%
1.3%
112,864
15.0%
65,775
8.7%
366,244
48.7%
0.2%
0.1%
1.4%
105,569
13.5%
61,288
7.9%
414,975
53.3%
0.6% $ 752,217 100.0%
0.7% $ 779,164 100.0%
-%
0.2%
-%
1.4%
0.8%
Public Fund Deposits
2016
2015
2014
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
$
4,389
0.8%
-% $
4,250
0.7%
-% $
2,795
0.5%
Interest-bearing Demand
Savings
Time
298,189
53.0%
16,632
3.0%
242,791
43.2%
0.8%
0.3%
0.8%
288,753
49.9%
11,951
2.1%
273,890
47.3%
0.4%
-%
0.7%
280,794
53.4%
8,431
1.6%
234,190
44.5%
Total Public Fund Deposits
$ 562,001 100.0%
0.8% $ 578,844 100.0%
0.5% $ 526,210 100.0%
-%
0.4%
-%
0.7%
0.5%
At December 31, 2016, public funds deposits totaled $556.9 million
compared to $568.7 million at December 31, 2015. 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. $453.6 million of these accounts at December 31,
2016 are under fiscal agency agreements with terms of three years
or less. Deposits under fiscal agency agreements are generally stable
but public entities may maintain the ability to negotiate term deposits
on a specific basis including with other financial institutions. Three of
these relationships account for 48.2% of public fund deposits that are
under fiscal agency agreements. 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.
73
2016 ANNUAL REPORT DEFINING FGB 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,
2016
2015
2014
(in thousands except for %)
$
4,114
$
4,906
$
3,241
324,356
20,116
208,330
296,416
14,667
252,688
321,382
10,142
266,743
$ 556,916
$ 568,677
$ 601,508
$1,326,181
$1,295,870
$1,371,839
Total Public Funds as a percent of Total Deposits
42.0%
43.9%
43.9%
At December 31, 2016, the aggregate amount of outstanding
certificates of deposit in amounts greater than or equal to $100,000 was
approximately $367.9 million. At December 31, 2016, approximately
$82.1 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, 2016.
December 31,
2016
(in thousands)
$ 285,838
63,763
18,333
$ 367,934
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
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 $6.5 million at December 31, 2016 and
$1.8 million at December 31, 2015. The short-term borrowings at
December 31, 2016 were comprised of a line of credit of $2.5 million,
with no outstanding balance and collateralized short-term borrowings
from the Federal Home Loan Bank totaling $6.5 million.
At December 31, 2016, we had $226.1 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,
2016
2015
2014
(in thousands except for %)
$ 6,500
$ 1,800
$ 1,800
$25,000
$ 8,775
$ 13,800
$ 4,217
$22,356
$ 6,960
0.85%
0.65%
2.12%
4.50%
1.08%
4.50%
Balance at end of year
Maximum month-end
outstanding
Average daily outstanding
Total Weighted average rate
during the year
Average rate during year
First Guaranty Bancshares had senior long-term debt totaling $22.1
million at December 31, 2016 and $25.8 million at December 31,
2015.
First Guaranty also had junior subordinated debentures totaling $14.6
million at December 31, 2016 and December 31, 2015.
Shareholders’ Equity
Total shareholders' equity increased to $124.3 million at December
31, 2016 from $118.2 million at December 31, 2015. The increase
in shareholders' equity was principally the result of a $9.2 million
increase in retained earnings, offset by an increase of $3.1 million in
accumulated other comprehensive loss. The increase in accumulated
other comprehensive loss was primarily attributed to the increase in
unrealized losses on available-for-sale securities during the year. The
$9.2 million increase in retained earnings was due to net income of
$14.1 million during the year ended December 31, 2016, partially
offset by $4.9 million in cash dividends paid on our common stock.
compassionate
74
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Results of Operations
Performance Summary
Year ended December 31, 2016 compared with year ended December 31,
2015. Net income for the year ended December 31, 2016 was $14.1
million, a decrease of $0.4 million, or 2.8%, from $14.5 million for the
year ended December 31, 2015. Net income available to common
shareholders for the year ended December 31, 2016 was $14.1 million
which was a decrease of $28,000. The decrease in net income of $0.4
million for the year ended December 31, 2016 was primarily the result
of increased interest expense and increased noninterest expense,
partially offset by an increase in interest income and noninterest income.
Net gains on securities sales for the years ended December 31, 2016
and 2015 were $3.8 million and $3.3 million, respectively. Earnings
per common share for the year ended December 31, 2016 was $1.85
per common share, a decrease of 8.0% or $0.16 per common share
from $2.01 per common share for the year ended December 31, 2015
(as adjusted for the 10% stock dividend in December 2015).
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
sales 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).
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
2012
2013
2014
2015
2016
150
120
90
60
30
0
2012
2013
2014
2015
2016
75
2016 ANNUAL REPORT DEFINING FGB Year ended December 31, 2016 compared with year ended December 31,
2015. Net interest income for the year ended December 31, 2016 and
2015 was $48.4 million and $47.5 million, respectively. The increase
in net interest income for the year ended December 31, 2016 was
primarily due to a decrease in the average balance of our total interest-
bearing liabilities and an increase in the average yield of our total
interest-earnings assets partially offset by the increase in the average
rate of our total interest-bearing liabilities and a decrease in the average
balance of our total interest-earning assets. The average balance of
total interest-bearing liabilities decreased by $18.7 million to $1.1
billion for the year ended December 31, 2016 as compared to the year
ended December 31, 2015. The average yield on our total interest-
earning assets increased 25 basis points to 4.10% for the year ended
December 31, 2016 compared to 3.85% for the year ended December
31, 2015. The average rate of our total interest-bearing liabilities
increased by 16 basis points to 0.92% for the year ended December
31, 2016 compared to 0.76% for the year ended December 31, 2015.
The average balance of total interest-earning assets decreased by
$30.2 million to $1.4 billion for the year ended December 31, 2016 as
compared to the year ended December 31, 2015. As a result, our net
interest rate spread increased nine basis points to 3.18% for the year
ended December 31, 2016 from 3.09% for the year ended December
31, 2015, and our net interest margin increased 13 basis points to
3.39% for the year ended December 31, 2016 from 3.26% for the year
ended December 31, 2015.
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 sixteen 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 fifteen
basis points to 3.26% for the year ended December 31, 2015 from
3.11% for the year ended December 31, 2014.
Interest Income
Year ended December 31, 2016 compared with year ended December 31,
2015. First Guaranty continues to transition assets from lower yielding
securities to higher yielding loans in order to increase interest income.
Interest income increased $2.5 million, or 4.4%, to $58.5 million for the
year ended December 31, 2016 from $56.1 million for the year ended
December 31, 2015 primarily as a result of a $3.0 million increase
in interest income on loans. The increase in interest income resulted
primarily from an increase in the average yield of interest-earning
assets by 25 basis points to 4.10% for the year ended December 31,
2016 compared to 3.85% for the year ended December 31, 2015.
This increase was partially offset by a $30.2 million decrease in the
average balance of our interest-earnings assets to $1.4 billion for the
year ended December 31, 2016 as compared to the prior year.
Interest income on securities decreased $0.5 million, or 3.7%, to
$13.0 million for the year ended December 31, 2016 as a result of the
decrease in the average balance of securities, which was partially offset
by an increase in the average yield on securities. The average balance
of securities decreased $85.9 million to $523.4 million for the year
ended December 31, 2016 from $609.3 million for the year ended
December 31, 2015 as a result of First Guaranty's plan to transition
assets from securities into loans. The average yield on securities
increased by 27 basis points to 2.48% for the year ended December
31, 2016 compared to 2.21% for the year ended December 31, 2015.
Interest income on loans increased $3.0 million, or 7.0%, to $45.5
million for the year ended December 31, 2016 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 increased by
$65.4 million to $881.4 million for the year ended December 31, 2016
from $816.0 million for the year ended December 31, 2015 as a result
of new loan originations, the majority of which were one- to four-family
residential loans, the origination of commercial leases, commercial real
estate loans and commercial and industrial loans. Partially offsetting
the increase in interest income on loans was a decrease in the average
yield on loans, which decreased by five basis points to 5.16% for the
year ended December 31, 2016 compared to 5.21% for the year ended
December 31, 2015 as a result of the low interest rate environment in
2016.
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
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.
76
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Interest Expense
Year ended December 31, 2016 compared with year ended December 31,
2015. Interest expense increased $1.5 million, or 17.8%, to $10.1
million for the year ended December 31, 2016 from $8.6 million for
the year ended December 31, 2015 due to an increase in the average
rate on deposits partially offset by the decrease in the average balance
of deposits. Interest expense also increased due to the origination of
a senior secured loan and the issuance of junior subordinated debt
used to redeem the SBLF preferred stock at the end of 2015. The
approximate increase in interest expense due to these borrowings was
$1.4 million for the year ended December 31, 2016. The average rate
of time deposits decreased by two basis points during the year ended
December 31, 2016 to 1.07%, reflecting downward repricing of our time
deposits in the continued low interest rate environment. The decrease
was offset by an increase in the average rate of interest-bearing demand
deposits of 28 basis points during the year ended December 31, 2016
to 0.63%. The average balance of interest-bearing deposits decreased
by $55.8 million during the year ended December 31, 2016 to $1.1
billion as a result of a $81.2 million decrease in the average balance
of time deposits that was partially offset by a $25.3 million increase in
the average balance of interest-bearing demand deposits and savings
deposits.
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.
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.
77
2016 ANNUAL REPORT DEFINING FGB December 31, 2016
December 31, 2015
December 31, 2014
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 %)
69
12,968
-
-
45,495
58,532
$
20,857 $
523,438
256
-
881,387
1,425,938
7,915
22,306
3,800
$1,459,959
0.33%
2.48%
-%
-%
5.16%
4.10%
$
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%
$
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%
7,191
20,300
5,870
$1,489,533
9,030
19,738
7,528
$1,455,011
$ 415,410
89,279
558,982
43,474
1,107,145
2,633
80
5,954
1,473
10,140
0.63%
0.09%
1.07%
3.39%
0.92%
$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%
$386,363
69,719
649,165
10,083
1,115,330
1,312
33
7,716
141
9,202
0.34%
0.05%
1.19%
1.40%
0.83%
221,634
5,144
1,333,923
126,036
$1,459,959
$ 318,793
211,584
5,010
1,342,391
147,142
$1,489,533
200,127
5,157
1,320,614
134,397
$1,455,011
$48,392
$47,471
$44,095
3.18%
3.39%
$ 330,375
3.09%
3.26%
$ 303,385
2.93%
3.11%
128.79%
129.35%
127.20%
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
Noninterest-earning assets:
Cash and due from banks
Premises and equipment, net
Other assets
Total assets
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
(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 3.42%, 3.29% and 3.13% for the years ended December 31, 2016, 2015 and 2014. A 35% tax rate was used to
calculate the effect on securities income from tax exempt securities.
78
FORTRESS BANKING 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, 2016 vs. 2015
For the Years Ended
December 31, 2015 vs. 2014
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
$ (27) $ 24
$
(3)
$
(38) $
(5)
$
(43)
Securities (including FHLB stock)
(2,023)
1,520
(503)
(754)
830
Federal funds sold
Loans held for sale
-
-
-
-
-
-
-
-
-
-
76
-
-
Loans, net of unearned income
Total interest income
3,377
(418)
1,327
1,126
2,959
2,453
4,684
(1,935)
3,892
(1,110)
2,749
2,782
Interest paid on:
Demand deposits
Savings deposits
Time deposits
Borrowings
Total interest expense
50
1,164
1,214
7
35
42
53
4
54
1
107
5
(868)
(163)
(1,031)
(106)
(625)
(731)
1,245
62
434
1,098
1,307
1,532
(66)
91
25
(115)
(479)
(594)
Change in net interest income
$ 893
$ 28
$ 921
$4,007
$ (631)
$3,376
Provision for Loan Losses
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 $3.7 million provision for loan losses for the year ended
December 31, 2016 compared to $3.9 million for 2015. The allowance
for loan losses at December 31, 2016 was $11.1 million or 1.17%
of total loans, compared to $9.4 million or 1.12% of total loans at
December 31, 2015. The decrease in the provision was attributed to
the improvement in credit quality of the loan portfolio. The primary
change to the credit quality of the loan portfolio was associated with
the upgrades of loans. Substandard loans decreased $16.7 million to
$42.0 million at December 31, 2016 from $58.7 million at December
31, 2015, partially offset by an increase in doubtful loans of $7.7
million. We believe that the allowance is adequate to cover potential
losses in the loan portfolio given the current economic conditions, and
current expected net charge-offs and non-performing asset levels.
For the year ended December 31, 2015, the provision for loan
losses was $3.9 million, an increase of $1.9 million from $2.0 million
for 2014. The allowance for loan losses was $9.4 million and $9.1
million at December 31, 2015 and 2014, respectively. The primary
change to the credit quality of the loan portfolio was associated with
the downgrades of loans. The impaired loan portfolio did not suffer
additional declines in estimated fair value requiring further provisions
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 $9.5 million for the year ended December
31, 2016, an increase of $0.5 million when compared to $9.0
million for 2015. The increase was primarily due to higher gains on
securities sales. Net securities gains were $3.8 million for the year
ended December 31, 2016 and $3.3 million for 2015. The gains on
securities sales occurred as First Guaranty sold investment securities
in order to fund loan growth. We also continued to have gains from
bonds that were called and paid off before their contractual maturity.
Service charges, commissions and fees totaled $2.4 million for the
year ended December 31, 2016 and $2.7 million for 2015. ATM and
debit card fees totaled $1.9 million for the year ended December 31,
79
2016 ANNUAL REPORT DEFINING FGB 2016 and $1.8 million for 2015. Other noninterest income increased
by $0.3 million to $1.4 million for the year ended December 31,
2016 compared to $1.1 million for 2015. Other noninterest income
included a $0.1 million other-than-temporary impairment charge on
an investment security.
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
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 Expense
Noninterest expense
includes salaries and employee benefits,
occupancy and equipment expense and other types of expenses.
Noninterest expense increased $1.8 million to $32.9 million for the
year ended December 31, 2016 compared to $31.1 million in 2015.
Salaries and employee benefits expense totaled $16.6 million for 2016
and $15.5 million for 2015. Occupancy and equipment expense totaled
$4.2 million for 2016 and $3.8 million for 2015. Other noninterest
expense increased by $0.3 million to $12.1 million for the year ended
December 31, 2016 as compared to 2015. Included in noninterest
expense were flood related expenses of approximately $0.3 million that
occurred during the year ended December 31, 2016.
Noninterest expense decreased $0.5 million to $31.1 million for
the year ended December 31, 2015 compared to 2014. Salaries
and employee 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.
The following table presents, for the years indicated, the major categories of other noninterest expense:
December 31, 2016
December 31, 2015
December 31, 2014
(in thousands)
Other noninterest expense:
Legal and professional fees
Data processing
ATM fees
Marketing and public relations
Taxes - sales, capital and franchise
Operating supplies
Software expense and amortization
Travel and lodging
Telephone
Amortization of core deposits
Donations
Net costs from other real estate and
repossessions
Regulatory assessment
Other
Total other expense
$ 2,185
1,259
1,044
878
787
471
835
710
177
320
298
498
1,005
1,599
$12,066
$ 2,019
1,184
1,022
848
717
414
612
818
172
320
332
493
1,111
1,692
$11,754
$ 1,982
1,153
1,122
700
605
410
499
566
242
320
150
1,374
1,181
1,522
$11,826
80
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. We maintained a net borrowing capacity at the FHLB totaling $45.8
million and $116.7 million at December 31, 2016 and December 31,
2015, respectively with $6.5 million in FHLB advances outstanding at
December 31, 2016 and no borrowings outstanding at December 31,
2015. At December 31, 2016, we had outstanding letters of credit from
the FHLB in the amount of $226.1 million that were used to collateralize
public funds deposits. We also have a discount window line with the
Federal Reserve Bank of $14.9 million, with no outstanding balance at
December 31, 2016. We also maintain federal funds lines of credit at
various correspondent banks with borrowing capacity of $70.5 million
at December 31, 2016. We have a revolving line of credit for $2.5
million, with no outstanding balance at December 31, 2016 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 increased to $124.3 million at December
31, 2016 from $118.2 million at December 31, 2015. The increase in
total shareholders' equity was principally the result of the increase in
retained earnings of $9.2 million offset by a decrease in the balance
of accumulated other comprehensive income of $3.1 million to a
$4.0 million loss at December 31, 2016. The $9.2 million increase in
retained earnings was due to net income of $14.1 million during the
year ended December 31, 2016, partially offset by $4.9 million in cash
dividends paid on our common stock.
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, 2016, First Guaranty Bancshares and First Guaranty
Bank were classified as well-capitalized. First Guaranty Bancshares,
Inc. capital conservation buffer was 4.59% at December 31, 2016. First
Guaranty Bank's capital conservation buffer was 4.99% at December
31, 2016.
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, 2016, 2015 and 2014 was $7.2 million, $7.0
million and $5.5 million, respectively. The provision for income taxes
decreased in 2016 as compared to 2015. Our statutory tax rate was
35.0% for 2016, 2015 and 2014.
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, 2016 totaled
$149.7 million. At December 31, 2016, time deposits maturing within
one year or less totaled $359.9 million. Our held-to-maturity investment
securities portfolio at December 31, 2016 was $101.9 million or 20.4%
of the investment portfolio compared to $169.8 million or 31.1% at
December 31, 2015. 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, 2016. The held-to-maturity portfolio had
a forecasted weighted average life of approximately 5.7 years based on
current interest rates at December 31, 2016. 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
$397.5 million, or 79.6% of the investment portfolio at December 31,
2016 compared to $376.4 million, or 68.9% at December 31, 2015.
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.
81
2016 ANNUAL REPORT DEFINING FGB The following table presents our capital ratios as of the indicated dates.
"Well Capitalized
Minimums"
At December 31, 2016
"Well Capitalized
Minimums"
At December 31, 2015
(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%
8.68%
9.88%
10.59%
12.05%
12.79%
12.99%
10.59%
12.05%
N/A
5.00%
N/A
8.00%
N/A
10.00%
N/A
0.065
8.17%
9.74%
10.85%
12.98%
13.13%
13.86%
10.85%
12.98%
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, 2016, 2015 and 2014 are as follows:
Contract Amount
December 31, 2016
December 31, 2015
December 31, 2014
Commitments to Extend Credit
Unfunded Commitments under lines of credit
Commercial and Standby letters of credit
$ 56,910
$128,428
$ 6,602
(in thousands)
$ 88,081
$107,581
$ 7,486
$ 59,675
$111,247
$ 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 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, 2016, 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
82
FORTRESS BANKING 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, 2016, 2015 and 2014.
Contractual Obligations
The following table summarizes our fixed and determinable contractual
obligations and other funding needs by payment date at December
31, 2016. 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
and evaluate the impact of both prepayments and extension risk.
Payments Due by Period:
December 31, 2016
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
$ 33
1,114
359,943
6,500
2,125
-
$369,715
$ 61
1,682
120,015
-
5,000
-
$126,758
$ 37
-
38,039
-
15,000
15,000
$68,076
$ 131
2,796
517,997
6,500
22,125
15,000
$564,549
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, 2016 illustrated on the next page reflects a liability-
sensitive position with a negative cumulative gap on a one-year basis.
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
83
2016 ANNUAL REPORT DEFINING FGB December 31, 2016
Interest Sensitivity Within
Over 3
Months
thru 12
Months
3 Months
Or Less
Total One
Year
Over One
Year
Total
(in thousands)
$ 365,395
$ 53,796
$419,191
$529,730
$ 948,921
35,351
271
9,427
6,237
-
-
41,588
271
9,427
459,564
501,152
-
-
271
9,427
$ 410,444
$ 60,033
$470,477
$989,294
$1,459,771
$479,810
$
97,280
-
-
$479,810
$
97,280
-
-
$479,810
97,280
154,773
205,170
359,943
158,054
517,997
6,500
21,850
-
-
-
250
-
-
6,500
22,100
-
-
-
-
14,630
6,500
22,100
14,630
321,454
321,454
$ 760,213
$205,420
$965,633
$494,138
$1,459,771
$(349,769)
$(145,387)
$(495,156)
$495,156
$(349,769)
$(495,156)
$(495,156)
$
-
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
-24.0%
-33.9%
-33.9%
84
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. 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, 2016. 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, 2016
Instantaneous Changes in Interest
Rates (basis points)
Percent Change in Net Interest
Income
+400
+300
+200
+100
Base
-100
(14.10%)
(10.44%)
(6.76%)
(3.21%)
-%
(1.59%)
Gradual Changes in Interest Rates
(basis points)
Percent Change in Net Interest
Income
+400
+300
+200
+100
Base
-100
(7.29%)
(5.38%)
(3.51%)
(1.59%)
-%
2.55%
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 37.5% in 2015 to 35.0% in
2016. 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.
balance Sheet
A statement of financial condition at a given date
A balance sheet also known as the statement of
financial position tells about the assets, liabilities
and equity of a business at a specific point of
time. It is a snapshot of a business.
A balance sheet is an extended form of the
accounting equation. An accounting equation is:
Assets = Liabilities + Equity
Assets are the resources controlled by a
business, equity is the obligation of the company
to its owners and liabilities are the obligations of
parties other than owners.
A balance sheet is named so because it lists all
resources owned by the company and shows
that it is equal to the sum of all liabilities and the
equity balance.
http://accountingexplained.com/financial/
statements/balance-sheet
85
2016 ANNUAL REPORT DEFINING FGB Samuel R. Lolan, CPA
Lori D. Percle, CPA
Debbie B. Taylor, CPA
Katherine H. Armentor, CPA
Robin G. Freyou, CPA
Shalee M. Landry, CPA
Trenton R. Hardy, CPA
Brittany S. Guidry, CPA
Charles E. Castaing, 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. and subsidiary
as of December 31, 2016 and 2015, 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,
2016. 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. and subsidiary as of December 31, 2016 and 2015, and
the consolidated results of its operations and its cash flows for each of the years in the three-year period ended
December 31, 2016 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. and subsidiary's internal control over financial reporting as of December 31,
2016, 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 30, 2017 expressed
an unqualified opinion thereon.
Castaing, Hussey & Lolan, LLC
New Iberia, Louisiana
March 30, 2017
86
FORTRESS BANKING 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 $99,906 and $168,148, 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
Shareholders' Equity
Common stock1:
$1 par value - authorized 100,600,000 shares; issued 7,609,194 shares
Surplus
Retained earnings
Accumulated other comprehensive (loss) income
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
December 31,
2016
December 31,
2015
(in thousands,
except share data)
$
17,840
271
18,111
$
36,690
582
37,272
-
997
397,473
101,863
499,336
376,369
169,752
546,121
1,816
935
948,921
11,114
937,807
23,519
1,999
1,056
359
7,039
9,904
$1,500,946
$231,094
479,810
97,280
517,997
1,326,181
6,500
1,931
22,100
14,630
5,255
1,376,597
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
7,609
61,584
59,155
(3,999)
124,349
$1,500,946
7,609
61,584
49,932
(901)
118,224
$1,459,753
See Notes to the Consolidated Financial Statements.
1 All share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2015 to shareholders of record as of December
10, 2015.
87
2016 ANNUAL REPORT DEFINING FGB FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
2015
2016
2014
Interest Income:
Loans (including fees)
Deposits with other banks
Securities (including FHLB stock)
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)
$ 45,495
69
12,968
58,532
2,633
80
5,954
1,473
10,140
48,392
3,705
44,687
2,388
1,859
3,799
14
1,395
9,455
16,577
4,242
12,066
32,885
$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
$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
21,257
7,164
14,093
-
$ 14,093
21,468
6,963
14,505
(384)
$ 14,121
16,716
5,492
11,224
(394)
$ 10,830
$
$
1.85
0.64
$
$
2.01
0.60
$
$
1.57
0.58
7,609,194
7,013,869
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.
88
FORTRESS BANKING 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
See Notes to Consolidated Financial Statements
(in thousands)
$14,093
$14,505
$11,224
(955)
(3,799)
60
(4,694)
1,596
(3,098)
$10,995
1,394
(3,300)
175
(1,731)
589
(1,142)
$13,363
14,499
(295)
-
14,204
(4,829)
9,375
$20,599
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
(Loss) Income
Total
(in thousands, except share data)
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
Net income
Other comprehensive income
Cash dividends on common stock ($0.64 per
share)
Balance December 31, 2016
See Notes to Consolidated Financial Statements
$39,435
-
-
-
-
$39,435
-
$6,923
-
-
-
-
$6,923
-
$51,646
-
-
-
-
$51,646
-
-
-
(39,435 )
(3)
-
-
-
-
-
-
689
9,938
-
-
$ -
-
-
-
-
$7,609
-
-
-
-
$61,584
-
-
-
$ -
-
$7,609
-
$61,584
$ (54) $34,589
11,224
-
-
-
$(9,134)
-
9,375
$123,405
11,224
9,375
-
-
(4,027)
(394)
$ (54) $41,392
14,505
-
54
-
-
-
-
-
-
-
-
-
-
$
$
(51)
-
-
(1,283)
(4,247)
(384)
$49,932
14,093
-
(4,870)
$59,155
-
-
$ 241
-
(4,027)
(394)
$139,583
14,505
-
(1,142)
-
-
(1,142)
(39,435)
-
9,344
-
-
$ (901)
-
(3,098)
(4,247)
(384)
$118,224
14,093
(3,098)
-
$ (3,999)
(4,870)
$124,349
(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.
89
2016 ANNUAL REPORT DEFINING FGB FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
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
Gain on sale of assets
Repossessed asset 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 (used in) provided by investing activities
Cash Flows From Financing Activities:
Net increase (decrease) in deposits
Net increase (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 provided by (used in) 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
90
Years Ended December 31,
2016
2015
2014
(in thousands)
$
14,093
$ 14,505
$11,224
3,705
2,190
2,239
(3,799)
60
(76)
243
(6)
-
3,563
22,212
-
1,001
85,875
1,000,905
(18,563)
(1,024,632)
-
(875)
(109,467)
(4,109)
983
1,098
(67,784)
30,311
4,700
-
(3,730)
-
-
-
(4,870)
26,411
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
(19,161)
37,272
$ 18,111
(7,303)
44,575
$ 37,272
(16,909)
61,484
$44,575
$
123
$ 1,184
$ 2,330
$
$
9,916
3,000
$ 8,898
$ 8,400
$ 9,569
$ 4,500
FORTRESS BANKING 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 income. 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
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.
91
2016 ANNUAL REPORT DEFINING FGB 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.
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
92
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
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
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. 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.
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.
93
2016 ANNUAL REPORT DEFINING FGB Other real estate
Transfers of Financial Assets
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.
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 taxes
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 2013. 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
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.
94
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
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.
Operating Segments
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 2016.
Note 2. Recent Accounting Pronouncements
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.
In June 2016, the FASB issued ASU 2016-13, "Measurement of
Credit Losses on Financial Instruments". This ASU amends guidance
on reporting credit losses for assets held at amortized cost basis and
available for sale debt securities. The ASU amendments require the
measurement of all expected credit losses for financial assets held
at the reporting date be based on historical experience, current
conditions, and reasonable and supportable forecasts. The ASU
requires assets held at cost basis to reflect the Company's current
estimate of all expected credit losses. For available for sale debt
securities, credit losses should be presented as an allowance rather
than as a write-down. In addition, this ASU amends the accounting
for purchased financial assets with credit deterioration. This ASU is
effective for annual and interim periods beginning after December 15,
2019. We are currently evaluating the impact of the adoption of this
guidance on the Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-04, "Intangibles -
Goodwill and Other: Simplifying the Test for Goodwill Impairment". This
ASU amends the guidance on impairment testing. The ASU eliminates
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Step 2 from the goodwill impairment test. The annual, or interim,
goodwill impairment test is performed by comparing the fair value of a
reporting unit with its carrying amount. An impairment charge should
be recognized for the amount by which the carrying amount exceeds
the reporting unit's fair value; however, the loss recognized should
not exceed the total amount of goodwill allocated to that reporting
unit. In addition, income tax effects from any tax deductible goodwill
on the carrying amount of the reporting unit should be considered
when measuring the goodwill impairment loss, if applicable. The ASU
also eliminates the requirements for any reporting unit with a zero or
negative carrying amount to perform a qualitative assessment and, if it
fails that qualitative test, to perform Step 2 of the goodwill impairment
test. An entity still has the option to perform the qualitative assessment
for a reporting unit to determine if the quantitative impairment test
is necessary. This ASU is effective for annual and interim periods
beginning after December 15, 2019. We are currently evaluating the
impact of the adoption of this guidance on the Consolidated Financial
Statements.
In January 2017, the FASB issued ASU 2017-01, "Business
Combinations: Clarifying the Definition of a Business". This ASU clarifies
the definition of a business. The amendments affect all companies
and other reporting organizations that must determine whether they
have acquired or sold a business. The definition of a business affects
many areas of accounting including acquisitions, disposals, goodwill,
and consolidation. This ASU is intended to help companies and other
organizations evaluate whether transactions should be accounted
for as acquisitions (or disposals) of assets or businesses. This ASU
is effective for annual and interim periods beginning December 15,
2017. The adoption of this ASU is not expected to have a material
effect on the 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, 2016
and 2015. At December 31, 2016 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 $4,000. 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.
Note 4. Securities
A summary comparison of securities by type at December 31, 2016 and 2015 is shown below.
December 31, 2016
December 31, 2015
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
(in thousands)
$ 29,994
$ -
$ -
$ 29,994
$ 29,999
$ -
$ -
$ 29,999
183,152
-
(4,820)
178,332
165,364
-
(1,553)
163,811
132,448
1,624
(2,100)
131,972
105,680
2,259
(2,803)
105,136
Available-for-sale:
U.S Treasuries
U.S. Government Agencies
Corporate debt securities
Mutual funds or other equity securities
Municipal bonds
Mortgage-backed securities
580
28,177
29,181
-
100
-
(7)
(320)
(536)
573
27,957
28,645
580
47,339
28,891
2
899
-
-
(5)
582
48,233
(283)
28,608
Total available-for-sale securities
$ 403,532
$1,724
$(7,783)
$397,473
$377,853
$3,160
$(4,644) $376,369
Held to maturity:
U.S. Government Agencies
Mortgage-backed securities
$ 18,167
$ -
$ (655) $ 17,512
$ 77,343
$ -
$ (721) $ 76,622
83,696
-
(1,302)
82,394
92,409
9
(892)
91,526
Total held to maturity securities
$101,863
$ -
$(1,957)
$99,906
$169,752
$ 9
$(1,613) $168,148
95
2016 ANNUAL REPORT DEFINING FGB The scheduled maturities of securities at December 31, 2016, 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, 2016
Amortized
Cost
Fair Value
(in thousands )
$ 39,711
$ 39,772
91,818
215,615
27,207
374,351
29,181
92,611
209,970
26,475
368,828
28,645
$403,532
$397,473
$
-
$
-
4,998
13,169
-
18,167
83,696
4,953
12,559
-
17,512
82,394
$101,863
$ 99,906
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, 2016
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 %)
3
54
$ 10,997
$ -
178,331
(4,820)
-
-
$
-
-
$
-
-
3
54
$ 10,997
$ -
178,331
(4,820)
185
61,669
(1,613)
26
6,440
(487)
211
68,109
(2,100)
1
14
16
493
10,210
28,645
(7)
(320)
(536)
-
-
-
-
-
-
-
-
-
1
14
16
493
10,210
28,645
(7)
(320)
(536)
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
273
$ 290,345
$(7,296)
26
$6,440
$ (487)
299
$ 296,785
$ (7,783)
Held-to-maturity:
U.S. Government agencies
Mortgage-backed securities
Total held-to-maturity securities
96
10
48
58
$ 17,512
$
(655)
82,394
(1,302)
$ 99,906
$(1,957)
-
-
-
$
$
-
-
-
$
$
-
-
-
10
48
58
$ 17,512
$
(655)
82,394
(1,302)
$ 99,906
$(1,957)
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
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
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)
As of December 31, 2016, 357 of First Guaranty's debt securities had
unrealized losses totaling 2.4% of the individual securities' amortized
cost basis and 1.9% of First Guaranty's total amortized cost basis of
the investment securities portfolio. 26 of the 357 securities had been
in a continuous loss position for over 12 months at such date. The 26
securities had an aggregate amortized cost basis of $6.9 million and
an unrealized loss of $0.5 million at December 31, 2016. 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 have other-than-temporary impairment losses
at December 31, 2016. 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 date.
97
2016 ANNUAL REPORT DEFINING FGB During the years ended December 31, 2016 and 2015, First Guaranty
recorded OTTI losses on available-for-sale securities as follows:
Year Ended
December 31,
2016
Year Ended
December 31,
2015
(in thousands)
(in thousands)
Total OTTI charge realized and
unrealized
OTTI recognized in other
comprehensive income (non-credit
component)
Net impairment losses recognized in
earnings (credit component)
$66
$571
6
$60
396
$175
There were $0.1 million, $0.2 million, and $0 other-than-temporary
impairment losses recognized on securities in 2016, 2015 and 2014,
respectively.
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
ended December 31, 2016 and 2015:
(in thousands) (in thousands)
Beginning balance of credit losses at
beginning of year
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 end
of year
$175
$
-
60
175
-
-
(175)
-
-
-
$ 60
$175
In 2016 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 $0.1
million at December 31, 2016. 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 $0.1 million that experienced declines in its financial
performance associated with the utilities industry. This corporate debt
security had a non-credit related impairment of approximately $6,000.
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. 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. This security was sold in 2016. 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.
Non-credit related other-than-temporary impairment losses recognized
in other comprehensive income totaled $6,000 in 2016, $0.4 million in
2015, and zero in 2014. The impairment losses in 2016 were related to
one available for sale corporate bond security, described above, which
had original amortized cost of $0.1 million. The impairment losses in
2015 were related to two available for sale corporate bond securities,
described above, which had original amortized cost of $0.8 million.
At December 31, 2016 and 2015 the carrying value of pledged
securities totaled $368.2 million and $427.4 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 $3.6 million, $3.3 million (including the
sale of the converted preferred security) and $0.2 million for the years
ended December 31, 2016, 2015 and 2014, respectively. Gross
realized losses were $53,000, $0.4 million and $0.2 million for the
years ended December 31, 2016, 2015 and 2014. The tax applicable
to these transactions amounted to $1.3 million, $1.2 million, and $0
million for 2016, 2015 and 2014, respectively. Proceeds from sales of
securities classified as available-for-sale amounted to $191.0 million,
$290.0 million and $109.8 million for the years ended December 31,
2016, 2015 and 2014, respectively.
Net unrealized losses on available-for-sale securities included in
accumulated other comprehensive income (loss) ("AOCI"), net of
applicable income taxes, totaled $4.0 million at December 31, 2016.
At December 31, 2015 net unrealized losses included in AOCI, net of
applicable income taxes, totaled $0.9 million. During 2016 and 2015
net gains, net of tax, reclassified out of AOCI into earnings totaled $2.5
million and $2.1 million, respectively.
98
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. At December 31, 2016, 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, 2016
Amortized
Cost
Fair Value
(in thousands)
$ 29,994
$ 29,994
U.S. Treasuries
Federal Home Loan Bank (FHLB)
53,342
52,113
Federal Home Loan Mortgage
Corporation (Freddie Mac-FHLMC)
Federal National Mortgage
Association (Fannie Mae-FNMA)
Federal Farm Credit Bank (FFCB)
Total
53,422
52,734
109,095
106,474
98,337
95,562
$344,190
$336,877
December 31,
2016
2015
Balance
As % of
Category
Balance
As % of
Category
(in thousands except for %)
$ 84,239
21,138
8.9%
2.2%
$ 56,132
17,672
6.6%
2.1%
135,211
14.2%
129,610
15.4%
12,450
1.3%
12,629
1.5%
417,014
43.9%
323,363
38.3%
670,052
70.5%
539,406
63.9%
23,783
2.5%
25,838
3.1%
193,969
20.4%
224,201
26.6%
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
63,011
6.6%
54,163
6.4%
Total Non-real Estate
280,763
29.5%
304,202
36.1%
Total Loans Before
Unearned Income
950,815
100.0%
843,608
100.0%
Unearned income
(1,894)
(2,025)
Total Loans Net of
Unearned Income
$948,921
$841,583
The following table summarizes fixed and floating rate loans by contractual maturity, excluding nonaccrual loans, as of December 31, 2016 and
December 31, 2015 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
2016
December 31,
(in thousands)
2015
Fixed
Floating
Total
Fixed
Floating
Total
$ 97,713
$ 51,965
$149,678
$ 86,975
$ 48,111
$135,086
352,000
115,691
53,150
$618,554
206,676
558,676
46,116
161,807
315,685
49,197
246,374
31,456
562,059
80,653
5,830
$310,587
58,980
36,438
9,333
45,771
929,141
$488,295
$335,274
823,569
21,674
950,815
(1,894)
$948,921
20,039
843,608
(2,025)
$841,583
As of December 31, 2016, $127.7 million of floating rate loans were at their interest rate floor. At December 31, 2015, $132.9 million of floating
rate loans were at the floor rate. Nonaccrual loans have been excluded from these totals.
99
2016 ANNUAL REPORT DEFINING FGB The following tables present the age analysis of past due loans for the periods indicated:
As of December 31, 2016
30-89 Days
Past Due
90 Days or
Greater Past Due
Total Past
Due
Current
(in thousands)
Total
Loans
Recorded
Investment 90
Days Accruing
$ 173
234
1,108
-
1,618
3,133
64
552
182
798
$
585
$
758
$ 83,481
$ 84,239
$ 34
105
2,387
5,014
2,753
339
3,495
5,014
4,371
20,799
21,138
131,716
135,211
7,436
12,450
412,643
417,014
-
145
-
-
10,844
13,977
656,075
670,052
179
1,958
8,070
981
2,022
8,622
1,163
21,761
23,783
185,347
193,969
61,848
63,011
11,009
11,807
268,956
280,763
-
-
-
-
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 Loans Before Unearned Income
$3,931
$21,853
$25,784
$925,031
950,815
$179
Unearned income
Total Loans Net of Unearned Income
As of December 31, 2015
30-89 Days
Past Due
90 Days or
Greater Past Due
Total Past
Due
Current
(in thousands)
(1,894)
$948,921
Total
Loans
Recorded
Investment 90
Days Accruing
Real Estate:
Construction & land development
$
12
$
558
$
570
$ 55,562
$ 56,132
$ -
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
136
136
17,536
17,672
4,929
7,475
122,135
129,610
9,045
9,045
3,584
12,629
2,934
4,928
318,435
323,363
19
391
-
-
17,602
22,154
517,252
539,406
410
2,628
4,974
20,864
25,838
48
171
362
223,839
224,201
1,136
53,027
54,163
2,847
6,472
297,730
304,202
-
-
-
-
$20,449
$28,626
$814,982
843,608
$410
(2,025)
$841,583
The tables above include $21.7 million and $20.0 million of nonaccrual loans for December 31, 2016 and 2015, respectively. See the tables below
for more detail on nonaccrual loans.
100
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
The following is a summary of nonaccrual loans by class for the periods indicated:
As of December 31,
2016
2015
(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
551
105
2,242
5,014
2,753
$
558
117
4,538
9,045
2,934
10,665
17,192
1,958
8,070
981
2,628
48
171
11,009
2,847
$21,674
$20,039
The following table identifies the credit exposure of the loan portfolio by specific credit ratings for the periods indicated:
As of December 31, 2016
As of December 31, 2015
Pass
Special
Mention
Sub-
standard Doubtful
Total
Pass
Special
Mention
Sub-
standard Doubtful
Total
Real Estate:
Construction & land development
$ 79,069
$ 1,162 $ 4,008
$
20,652
123,191
4,268
381
5,460
1,132
105
6,560
7,050
392,355
6,406
18,253
619,535
14,541
35,976
Farmland
1-4 family
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
(in thousands)
$84,239 $ 51,681
$
386
$ 4,065
$
21,138
17,554
-
135,211
115,878
6,425
12,450
3,584
-
118
7,307
9,045
417,014
296,682
3,288
23,393
670,052
485,379
10,099
43,928
-
-
-
-
-
-
-
Total Non-Real Estate
263,853
Total Loans Before Unearned Income $ 883,388
Unearned income
Total Loans Net of Unearned Income
20,890
182,381
920
850
1,973
23,783
20,860
3,008
7,730
193,969
214,184
60,582
1,394
1,035
-
63,011
53,779
3,164
6,016
7,730
280,763
288,823
4
471
178
653
4,974
9,546
206
14,726
$ 17,705
$41,992
$7,730
950,815 $ 774,202
$10,752
$58,654
$
(1,894)
$948,921
-
-
-
-
-
-
-
-
-
-
-
$56,132
17,672
129,610
12,629
323,363
539,406
25,838
224,201
54,163
304,202
843,608
(2,025)
$841,583
101
2016 ANNUAL REPORT DEFINING FGB
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, 2016, 2015 and 2014 are as follows:
As of December 31,
2016
2015
Beginning
Allowance
(12/31/15)
Charge-
Offs
Recoveries Provision
Ending Al-
lowance
(12/31/16)
Beginning
Allowance
(12/31/14)
Charge-
Offs
Recoveries
Provi-
sion
Ending
Allowance
(12/31/15)
(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
Unallocated
$ 4
$ 266
$ 1,232
$
702
$(559)
$ 5
$ 814
$ 962
$ 962 $
54
-
-
1,771
(244)
557
-
-
45
401
(35)
(368)
(367)
3,298
(1,373)
16
1,510
6,642
(1,617)
466
1,006
19
1,204
591
3,451
6,497
21
2,131
813
-
(410)
(947)
-
94
46
33
(44)
645
2,713
(1,137)
6,380
(3,053)
5
150
1,717
3,165
54
1,771
557
3,298
6,642
16
(83)
113
28
74
293
(491)
3
211
16
315
151
-
469
494
258
(264)
699
2,527
230
-
2,773
$9,415
2,527
(579)
230
(635)
-
-
146
183
-
1,449
1,194
28
3,543
972
28
1,797
371
264
(79)
(550)
-
Total Non-Real Estate
2,773
(1,297)
442
2,699
4,617
2,725
(1,120)
Total
$ 9,415 $(2,914)
$908
$3,705
$11,114
$ 9,105
$(4,173)
$619
$3,864
As of December 31,
2014
Beginning
Allowance
(12/31/13)
Charge-
Offs
Ending
Allowance
(12/31/14)
Recoveries
Provision
(in thousands)
Real Estate:
Construction & land development
$ 1,530 $(1,032)
$ 6
$ 198
$
702
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
17
-
1,974
(589)
376
-
3,607
(1,515)
-
99
49
9
4
647
388
612
7,504
(3,136)
163
1,849
46
2,176
208
421
(2)
(266)
(289)
-
2,851
(557)
$10,355 $(3,693)
1
118
199
-
318
$481
248
(231)
253
(157)
113
$1,962
21
2,131
813
2,713
6,380
293
1,797
371
264
2,725
$9,105
102
FORTRESS BANKING 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, 2016
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
$ -
$1,232
$1,232
$ 361
$ 83,878
$ 84,239
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
-
8
164
247
419
11
2,375
193
-
2,579
$2,998
19
1,196
427
3,204
6,078
19
1,204
591
3,451
6,497
63
74
1,168
3,543
779
28
972
28
-
21,138
21,138
1,130
5,014
10,803
17,308
1,614
8,965
924
-
134,081
135,211
7,436
12,450
406,211
417,014
652,744
670,052
22,169
23,783
185,004
193,969
62,087
63,011
-
-
2,038
4,617
11,503
269,260
280,763
$8,116
$11,114
$28,811
$922,004
950,815
(1,894)
$948,921
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
-
-
-
-
-
$2,363
54
1,160
103
2,000
4,279
16
2,527
230
-
2,773
$7,052
54
1,771
557
3,298
6,642
16
2,527
230
-
2,773
$9,415
-
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
-
-
5,034
299,168
304,202
$31,142
$812,466
843,608
(2,025)
$841,583
103
2016 ANNUAL REPORT DEFINING FGB
As of December 31, 2016, 2015 and 2014, First Guaranty had loans
totaling $21.7 million, $20.0 million and $12.2 million, respectively,
not accruing interest. As of December 31, 2016, 2015 and 2014, First
Guaranty had loans past due 90 days or more and still accruing interest
totaling $0.2 million, $0.4 million and $0.6 million, respectively. The
average outstanding balance of nonaccrual loans in 2016 was $22.5
million compared to $14.9 million in 2015 and $13.8 million in 2014.
Included in the above table is a loan for $5.3 million at December
31, 2015, that was not considered impaired but was still individually
evaluated for impairment since it was formally a restructured credit that
subsequently return to market terms.
As of December 31, 2016, 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, 2016:
As of December 31, 2016
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
$
361
$
823
$ -
$
363
$
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
-
-
863
1,196
-
-
8,501
9,430
9,725
11,449
1,603
1,742
-
686
-
685
2,289
2,427
12,014
13,876
-
-
-
-
-
-
-
-
-
-
-
1,044
-
8,949
10,356
1,377
-
724
2,101
12,457
-
-
267
5,014
2,302
-
-
303
5,305
2,296
7,583
7,904
-
-
8
164
247
419
-
-
279
5,169
2,334
7,782
11
11
11
11
8,965
9,117
2,375
9,379
238
244
193
289
9,214
9,372
2,579
9,679
-
-
49
-
196
245
30
-
18
48
293
-
-
-
-
119
119
-
72
8
80
$
-
-
48
-
175
223
-
-
12
12
235
-
-
-
-
113
113
-
72
7
79
Total Impaired Loans with an allowance recorded
16,797
17,276
2,998
17,461
199
192
Total Impaired Loans
$28,811
$31,152
$2,998
$29,918
$ 492
$ 427
104
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
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 Non-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
105
2016 ANNUAL REPORT DEFINING FGB 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 2016, there
were no credit relationships that were restructured in a troubled debt
restructuring. 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.
The following table is an age analysis of TDRs as of December 31, 2016 and December 31, 2015:
Troubled Debt Restructurings
December 31, 2016
December 31, 2015
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)
$361
$ 361
$
-
-
-
-
-
-
$
-
-
-
-
100
461
3,087
3,448
3,431
3,431
-
-
-
-
-
-
-
-
-
-
-
-
$461
$3,448
$3,431
$
-
-
-
-
-
-
-
-
-
-
-
$ 368
$ 368
-
-
1,702
1,702
-
-
206
3,637
2,276
5,707
-
-
-
-
-
-
-
-
$2,276
$5,707
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
2,987
2,987
-
-
-
-
$2,987
$
The following table discloses TDR activity for the twelve months ended December 31, 2016.
Trouble Debt Restructured Loans Activity
Twelve Months Ended December 31, 2016
Beginning
balance
(December
31, 2015)
Charge-Offs
post-
modification
New
TDRs
Transferred
to ORE
Paydowns
Construction
to permanent
financing
Restructured
to market
terms
Other
adjustments
Ending
balance
(December
31, 2016)
(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 Impaired Loans with no
related allowance
106
$ 368 $ -
$ -
$ -
-
1,702
-
3,637
5,707
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(111)
(111)
-
-
-
-
-
-
-
-
-
-
-
-
-
$(6)
-
(32)
-
(3)
(41)
-
-
-
-
$ -
$ -
$(1)
$ 361
-
-
-
-
-
-
-
-
-
-
(1,670)
-
(441)
(2,111)
-
-
-
-
-
-
-
5
4
-
-
-
-
-
-
-
3,087
3,448
-
-
-
-
$5,707 $ -
$(111)
$ -
$(41)
$ -
$(2,111)
$ 4
$3,448
FORTRESS BANKING 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, 2016.
Note 7. Premises and Equipment
The components of premises and equipment at December 31, 2016 and 2015 are as follows:
December 31,
2016
2015
(in thousands)
Land
Bank premises
Furniture and equipment
Construction in progress
Acquired value
Less: accumulated depreciation
$ 7,185
21,229
21,689
2,106
52,209
28,690
$ 7,227
18,914
21,060
2,667
49,868
27,849
Net book value
$23,519
$22,019
Depreciation expense amounted to $1.7 million, $1.6 million and $1.7 million for 2016, 2015 and 2014, 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,
2016 and 2015.
The following table summarizes intangible assets subject to amortization.
December 31,
2016
2015
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
$ 8,372
189
$ 8,561
$978
78
$1,056
$9,350
267
$9,617
$ 8,052
171
$ 8,223
$1,298
96
$1,394
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 3.6 years.
Amortization expense relating to purchase accounting intangibles
totaled $0.3 million, $0.3 million, and $0.3 million for the years ended
December 31, 2016, 2015, and 2014, 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, 2017
December 31, 2018
December 31, 2019
December 31, 2020
December 31, 2021
(in thousands)
$320
$320
$135
$135
$ 68
107
2016 ANNUAL REPORT DEFINING FGB 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,
2016
2015
(in thousands)
$ 71
$880
-
25
288
672
$359
$1,577
Note 10. Deposits
A schedule of maturities of all time deposits are as follows:
December 31,
2016
(in thousands)
$359,943
78,927
41,088
23,318
14,721
$517,997
2017
2018
2019
2020
2021 and thereafter
Total
The table above includes, for December 31, 2016, brokered deposits
totaling $20.8 million. The aggregate amount of jumbo time deposits,
each with a minimum denomination of $250,000 totaled $241.4 million
and $305.1 million at December 31, 2016 and 2015, respectively.
Note 11. Borrowings
Short-term borrowings are summarized as follows:
December 31,
2016
December 31,
2015
(in thousands)
Federal Home Loan Bank
advances
Line of credit
Total short-term borrowings
$6,500
-
$6,500
$ -
1,800
$1,800
First Guaranty maintains borrowing relationships with other financial
institutions as well as the Federal Home Loan Bank on a short and
long-term basis to meet liquidity needs. Short-term borrowings totaled
$6.5 million at December 31, 2016 and $1.8 million at December 31,
2015. Short-term borrowing consisted of a line of credit of $2.5 million,
with no outstanding balance at December 31, 2016 and collateralized
short-term borrowings from the Federal Home Loan Bank totaling $6.5
million at December 31, 2016.
Available lines of credit totaled $133.7 million at December 31, 2016
and $206.2 million at December 31, 2015.
108
December 31,
2016
2015
2014
(in thousands except for %)
Outstanding at year end
$ 6,500
$ 1,800
$ 1,800
Maximum month-end
outstanding
Average daily outstanding
Weighted average rate
during the year
Average rate at year end
$25,000
$ 8,775
$13,800
$ 4,217
$22,356
$ 6,960
0.85%
0.65%
2.12%
4.50%
1.08%
4.50%
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 (4.50%), totaled $0.3 million at
December 31, 2016 and $0.9 million at December 31, 2015. 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 (3.37%), totaled $21.8 million
at December 31, 2016 and $25.0 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, 2016 and
$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 and 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 $2.5 million at December 31, 2016. This line of credit
is secured by the same collateral as the senior term loan and is priced
at 4.75%.
At December 31, 2016, letters of credit issued by the FHLB totaling
$226.1 million were outstanding and carried as off-balance sheet
items, all of which expire in 2017. 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 expired in 2016.
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.
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. As of December 31, 2016 obligations on senior long-term debt and
junior subordinated debentures totaled $36.7 million. The scheduled
maturities are as follows:
Senior
Long-term
Debt
Junior
Subordinated
Debentures
(in thousands)
$ 2,125
$
2017
2018
2019
2020
2021
2022 and thereafter
Subtotal
Debt issuance costs
Total
2,500
2,500
2,500
2,500
10,000
$22,125
(25)
$22,100
-
-
-
-
-
15,000
$15,000
(370)
$14,630
Note 12. Preferred Stock
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 2016 First Guaranty paid no preferred
stock dividends compared to $0.4 million in 2015 and $0.4 million in
2014.
On December 22, 2015, First Guaranty redeemed all of the 39,435
shares of its Senior Non-Cumulative Perpetual Preferred Stock, Series
C, which 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, 2016 and 2015, that First Guaranty and the Bank met
all capital adequacy requirements.
the minimum
to establishing
In addition
regulatory capital
requirements, the regulations limit capital distributions and certain
discretionary bonus payments to management if the institution does
not hold a "capital conservation buffer" consisting of 2.5% of common
equity Tier 1 capital to risk-weighted asset above the amount necessary
to meet its minimum risk-based capital requirements. The capital
conservation buffer requirement is being phased in beginning January
1, 2016 at 0.625% of risk-weighted assets and increasing each year
until fully implemented at 2.5% on January 1, 2019. For 2017, the
capital conservation buffer will be 1.25% of risk-weighted assets. First
Guaranty Bancshares, Inc. capital conservation buffer was 4.59% at
December 31, 2016. First Guaranty Bank's capital conservation buffer
was 4.99% at December 31, 2016.
As of December 31, 2016, 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. First Guaranty's and the Bank's actual capital amounts
and ratios as of December 31, 2016 and 2015 are presented in the
following table.
109
2016 ANNUAL REPORT DEFINING FGB First Guaranty's and the Bank's actual capital amounts and ratios as of December 31, 2016 and 2015 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 %)
$151,877 12.79% $ 94,982 8.00%
N/A N/A
$153,768 12.99% $ 94,717 8.00% $118,396 10.00%
$125,763 10.59% $ 71,236 6.00%
N/A N/A
$142,654 12.05% $ 71,038 6.00% $ 94,717
8.00%
$125,763
8.68% $ 57,930 4.00%
N/A N/A
$142,654
9.88% $ 57,771 4.00% $ 72,214
5.00%
$125,763 10.59% $ 53,427 4.50%
N/A N/A
$142,654 12.05% $ 53,278 4.50% $ 76,958
6.50%
$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%
December 31, 2016
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, 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
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
110
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 2017 without permission
will be limited to 2017 earnings plus the undistributed earnings of $3.8
million from 2016.
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
Accordingly, at January 1, 2017, $137.4 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, 2016 and 2015 follows:
December 31,
2016
2015
(in thousands)
Balance, beginning of year
$57,816
$53,808
Net Increase
Balance, end of year
463
4,008
$58,279
$57,816
Unfunded commitments to First Guaranty and Bank directors and
executive officers totaled $24.9 million and $31.6 million at December
31, 2016 and 2015, respectively. At December 31, 2016 First
Guaranty and the Bank had deposits from directors and executives
totaling $28.7 million. There were no participations in loans purchased
from affiliated financial institutions included in First Guaranty's loan
portfolio in 2016 or 2015.
During the years ended 2016, 2015 and 2014, First Guaranty paid
approximately $0.3 million, $0.2 million and $0.2 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, $0 and $2.3 million for
2016, 2015 and 2014, 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.
On December 21, 2015, First Guaranty issued a $15.0 million
subordinated note (the "Note") to Edgar Ray Smith III, a director of
First Guaranty. The Note is for a ten-year term (non-callable for first
five years) and will bear interest at a fixed annual rate of 4.0% for the
first five years of the term and then adjust to a floating rate based on
the Prime Rate as reported by the Wall Street Journal plus 75 basis
points for the period of time after the fifth year until redemption or
maturity. First Guaranty paid interest of $0.6 million in 2016 for this
note.
During the years ended 2016, 2015 and 2014, First Guaranty paid
approximately $0.3 million, $0.2 million and $25,000, respectively, for
architectural services in relation to bank branches to Gasaway Gasaway
Bankston Architects, of which bank subsidiary board member Andrew
B. Gasaway is part owner.
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 $191,000, $86,000
and $87,000 in 2016, 2015 and 2014, 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 2016, 2015 or
2014. As of December 31, 2016, the ESOP held 15,159 shares. First
Guaranty does not plan to make future contributions to this plan.
Note 17. Other Expenses
The following is a summary of the significant components of other
noninterest expense:
Other noninterest expense:
Legal and professional fees
Data processing
ATM Fees
Marketing and public relations
Taxes - sales, capital and franchise
Operating supplies
Software expense and amortization
Travel and lodging
Telephone
Amortization of core deposits
Donations
Net costs from other real estate and
repossessions
Regulatory assessment
Other
December 31,
2016
2015
2014
(in thousands)
$ 2,185
$ 2,019
$ 1,982
1,259
1,044
1,184
1,022
1,153
1,122
878
787
471
835
710
177
320
298
848
717
414
612
818
172
320
332
700
605
410
499
566
242
320
150
498
1,005
1,599
493
1,111
1,692
1,374
1,181
1,522
Total other noninterest expense
$12,066
$11,754
$11,826
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, $0.6 million and $0.4 million for 2016, 2015 and 2014,
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,
2016
2015
2014
(in thousands)
Current
Deferred
Total
$8,168
$7,347
$4,898
(1,004)
(384)
594
$7,164
$6,963
$5,492
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,
2016
2015
2014
(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
$7,440
$7,514
$5,851
(283)
7
(436)
(115)
(284)
(75)
$7,164
$6,963
$5,492
111
2016 ANNUAL REPORT DEFINING FGB 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,
2016
2015
(in thousands)
$3,890
$3,201
60
127
2,060
449
445
541
6,459
4,314
Deferred tax liabilities:
Depreciation and amortization
Core deposit intangibles
Unrealized gains on available for sale
securities
Other
Gross deferred tax liabilities
(1,480)
(1,588)
(342)
(441)
-
-
(376)
(373)
(2,198)
(2,402)
Net deferred tax assets
$ 4,261
$ 1,912
As of December 31, 2016 and 2015, 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, 2016,
2015 and 2014, 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.
112
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. 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, 2016 and
December 31, 2015.
December 31,
2016
2015
(in thousands)
Contract Amount
Commitments to Extend Credit
$ 56,910
$ 88,081
Unfunded Commitments under lines of
credit
$ 128,428
$ 107,581
Commercial and Standby letters of credit $
6,602
$ 7,486
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
2016, 2015 or 2014.
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.
FORTRESS BANKING 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, 2016 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, 2016 and 2015 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, 2016 and 2015, segregated
by the level of the valuation inputs within the fair value hierarchy
utilized to measure fair value:
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 2 securities available for sale from December 31,
2015 was due principally to the purchase of corporate bond securities.
The change in Level 3 securities available for sale from December 31,
2015 was due to the purchase of $8.5 million in municipal securities
and $4.5 million of subordinated debt securities offset by the maturity
of $1.3 million in municipal securities.
The following table reconciles assets measured at fair value on a
recurring basis using unobservable inputs (Level 3):
Level 3 Changes
December 31,
2016
2015
(in thousands)
$ 7,701
$8,780
-
-
-
-
11,699
(1,079)
-
-
$19,400
$7,701
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, 2016.
The following table measures financial assets and financial liabilities
measured at fair value on a non-recurring basis as of December 31,
2016, 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
December 31,
2016
2015
(in thousands)
$
-
$
-
259
293
December 31,
Level 3: Significant Unobservable Inputs
18,559
16,401
2016
2015
Impaired loans measured at fair value
$18,818
$16,694
(in thousands)
Available for Sale Securities Fair Value
Measurements Using:
Level 1: Quoted Prices in Active Markets
Fair Value Measurements Using: Other
Real Estate Owned
Level 1: Quoted Prices in Active Markets
For Identical Assets
$ 30,487
$ 30,501
For Identical Assets
$
-
$
-
Level 2: Significant Other Observable
Inputs
347,586
338,167
Inputs
Level 2: Significant Other Observable
Level 3: Significant Unobservable Inputs
19,400
7,701
Level 3: Significant Unobservable Inputs
226
133
1,104
473
Securities available for sale measured at
fair value
$397,473
$376,369
Other real estate owned measured at fair
value
$
359
$ 1,577
113
2016 ANNUAL REPORT DEFINING FGB 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
114
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.
FORTRESS BANKING 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, 2016
and 2015 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, 2016 and 2015 are presented in the following table:
December 31,
2016
2015
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
(in thousands)
$
18,111 $
18,111 $
37,272 $
37,272
$ 397,473 $ 397,473 $ 376,369 $ 376,369
$ 101,863 $
99,906 $ 169,752 $ 168,148
Assets
Cash and cash equivalents
Securities, available for sale
Securities, held to maturity
Federal Home Loan Bank stock
$
1,816 $
1,816 $
935 $
935
Loans, net
$ 937,807 $ 937,495 $ 832,168 $ 831,731
Accrued interest receivable
$
7,039 $
7,039 $
6,015 $
6,015
Liabilities
Deposits
Borrowings
Junior subordinated debentures
Accrued interest payable
$ 1,326,181 $ 1,325,972 $1,295,870 $1,296,468
$
$
$
28,600 $
28,625 $
27,624 $
27,624
14,630 $
13,909
14,597
14,597
1,931 $
1,931 $
1,707 $
1,707
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, 2016. 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 42.0% of First Guaranty's deposits are derived from local
governmental agencies at December 31, 2016. 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 $556.9 million at December 31, 2016.
115
2016 ANNUAL REPORT DEFINING FGB Note 23. Litigation
Note 25. 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,
2016
2015
(in thousands)
$ 16,088
$ 16,862
141,241
140,518
80
4,197
80
3,233
161,606
$ 160,693
-
$
1,800
22,100
14,630
527
25,824
14,597
248
37,257
42,469
Shareholders' Equity
124,349
Total Liabilities and Shareholders' Equity $161,606
118,224
$160,693
Note 24. Subsequent Events
On January 30, 2017, First Guaranty entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Premier Bancshares,
Inc., a Texas corporation ("Premier"), pursuant to which Premier will
merge with and into First Guaranty (the "Merger"). Following the
consummation of the Merger, and following the consummation of
a merger of Premier's wholly-owned subsidiary, Premier Delaware
Bancshares, Inc. ("Premier Delaware"), with and into First Guaranty,
Synergy Bank, S.S.B., a Texas-state chartered savings bank and
wholly-owned subsidiary of Premier ("Synergy Bank"), will merge with
and into First Guaranty Bank with First Guaranty Bank continuing
as the surviving entity. The Merger Agreement was unanimously
approved by the Board of Directors of each of First Guaranty and
Premier.
The aggregate purchase price of the transaction is approximately $21.0
million. Under the terms of the Merger Agreement, each outstanding
share of Premier common stock will be converted into the right to
receive (i) an amount in cash, equal to the Premier book value as of
December 31, 2016 as reflected on the audited financial statements
of Premier plus $1.5 million (the "Gross Consideration"), divided by
the total number of shares of Premier common stock outstanding as
of the business day immediately prior to the closing date, multiplied
by 50%; and (ii) that number of shares of First Guaranty common
stock equal to the Gross Consideration divided by the total number of
shares of Premier common stock outstanding as of the business day
immediately prior to the closing date, multiplied by 50%, divided by
the Average Closing Price of First Guaranty common stock. Average
Closing Price means the average of the closing prices of First Guaranty
common stock as reported on the NASDAQ Global Market for the 20
consecutive trading days ending on the fifth business day immediately
prior to the closing date. The Gross Consideration will be comprised of
50% First Guaranty common stock and 50% cash.
At December 31, 2016, Premier Bancshares had total assets of
approximately $154 million, including loans of $114 million. Total
deposits were $129 million.
The Merger Agreement includes customary representations and
warranties made by First Guaranty and Premier, each with respect
to its and its subsidiaries' businesses. Each party has also agreed
to customary covenants, including, among others, covenants relating
to the conduct of its business during the interim period between the
execution of the Merger Agreement and the consummation of the
Merger.
The Merger is subject to approval by Premier's stockholders as well
as regulatory approval and other customary closing conditions. The
Merger Agreement provides certain termination rights for both First
Guaranty and Premier and further provides that a termination fee
of $500,000 will be payable by Premier to First Guaranty or by First
Guaranty to Premier, as applicable, upon termination of the Merger
Agreement under certain circumstances.
The Merger is expected to close either late in the second quarter or
early in the third quarter of 2017 following receipt of all regulatory and
shareholder approvals.
116
FORTRESS BANKING 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 (expense)
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,
2016
2015
2014
(in thousands)
$11,858
$ 9,843
$ 6,448
-
160
2,652
261
-
162
12,018
12,756
6,610
1,444
200
948
192
172
766
2,592
1,130
9,426
11,626
846
(605)
10,272
11,021
3,821
3,484
130
140
464
734
5,876
229
6,105
5,119
14,093
14,505
11,224
-
(384)
(394)
$14,093
$14,121
$10,830
117
2016 ANNUAL REPORT DEFINING FGB First Guaranty Bancshares, Inc.
Condensed Statements of Cash Flows
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
Depreciation and amortization
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:
Net decrease in short-term borrowings
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 (used in) provided by financing activities
Net (decrease) increase 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,
2016
2015
2014
(in thousands)
$14,093
$14,505
$11,224
(3,821)
(3,484)
(5,119)
7
-
318
(971)
-
(2,652)
(28)
396
9,626
8,737
-
-
55
(3,383)
2,777
-
-
-
4,152
(10)
4,142
(1,800)
-
-
24,969
(3,730)
(1,584)
-
-
-
14,597
9,344
(39,435)
-
(5)
(5)
-
2,555
(616)
-
-
-
(4,870)
(4,631)
(10,400)
3,260
(4,421)
(2,482)
(774)
16,139
16,862
723
290
433
$16,088
$16,862
$ 723
118
FORTRESS BANKING 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 beginning on 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, 2016, 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, 2016
and 2015. 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.
2016
2015
Quarter Ended*: High
Low Dividend High
Low Dividend
March 31,
$ 16.83 $15.50
$ 0.16 $ 19.00 $16.70
$ 0.16
June 30,
$ 16.15 $15.95
September 30, $ 16.41 $16.17
December 31, $ 23.93 $23.32
$ 0.16 $ 21.00 $15.00
$ 0.16
$ 0.16 $ 20.74 $15.00
$ 0.16
$ 0.16 $ 21.73 $14.60
$ 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 94 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.
www.fgb.net
119
2016 ANNUAL REPORT DEFINING FGB Corporate Information
Annual Meeting
The Annual Meeting of Shareholders will convene at
2:00 p.m. Central Daylight Saving Time (CDT) on
Thursday, May 18, 2017 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.
120
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC. Fortress Banking • Tangible Common Equity •
Book Value • Assets • Common Dividends • Earni
Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
• Earnings • Fortress Banking • Tangible Common
Equity • Book Value • Assets • Common Dividends
2
0
1
6
F
I
R
S
T
G
U
A
R
A
N
T
Y
B
A
N
C
S
H
A
R
E
S
,
I
N
C
.
A
N
N
U
A
L
R
E
P
O
R
T
ANNUAL REPORT 2016
2016 ANNUAL REPORT
1
FORTRESS BANKING FIRST GUARANTY BANCSHARES, INC.
www.fgb.net
1