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#1
Best Small Bank
in the U.S.
A NN UA L REPO RT 2020
BEST SMALL BANK
FGB Named #1 Best Small Bank 2021
In Newsweek’s first ranking of the financial institutions that best serve
their customers’ needs in today’s challenging times, First Guaranty
Bank was named the No. 1 BEST SMALL BANK IN THE U.S.! And
when compared to all other banks in the state of Louisiana, we
were named the No. 1 BEST SMALL BANK IN LOUISIANA, too! This
recognition is amazing and a true testament to the hard work of the
entire team. We hold this title with pride and commit to continuing to
be the best small bank in the U.S. for all time.
"This is a totally unexpected and overwhelming honor. It is a tribute to each
and every one of our First Guaranty Bank members and to our dedication
and determination to be a true community bank providing the best service
possible to our communities and customers. This is the goal of all of us
from the Board of Directors throughout the entire Bank."
- Alton B. Lewis, President & CEO
"It is truly a great honor to be the #1 Bank in the country and the best small
bank in Louisiana. This is a testament to the efforts and contributions of every
team member at FGB. Although we have known it for a while, I’m excited that
the rest of the country will get to learn about the great team at FGB!"
- Randy Vicknair CRC, Chief Lending Officer
First Guaranty Bank
Table of Contents
Financial Snapshot .....................................................................................Page 2
2020 Snapshot ...........................................................................................Page 3
#1 Best Small Bank in the U.S.! .................................................................Page 4
Our Mission ................................................................................................Page 12
Letter from the Chairman, Marshall T. Reynolds ........................................Page 13
Letter from the Chief Executive Officer & President, Alton B. Lewis ..........Page 14
Report from the Chief Financial Officer, Eric J. Dosch ...............................Page 15
Report from the Chief Lending Officer, Randy S. Vicknair .........................Page 16
Report from the Central Louisiana President, Darrel D. Ryland .................Page 17
Report from the Texas President, Jordan M. Lewis ...................................Page 18
Report from the Senior Vice President, Glenn A. Duhon, Sr. .....................Page 19
Memorial – Charles “Chuck” Brister, Director ............................................Page 20
First Guaranty Bank Board of Directors .....................................................Page 21
First Guaranty Bank Advisory Board ..........................................................Page 22
First Guaranty Bank Officers ......................................................................Page 23
Performance Graphs ..................................................................................Page 24
The FGB Center .........................................................................................Page 27
Accomplishments & Highlights ..................................................................Page 28
Earnings & Dividends .................................................................................Page 29
Central Louisiana Open Houses .................................................................Page 30
First Guaranty Bank Branch & ATM/ITM Locations ....................................Page 32
First Guaranty Bank Departments & Branches
Departments & Main Office – Hammond ............................................Page 34
Abbeville & Alexandria .........................................................................Page 47
Amite & Benton ...................................................................................Page 48
Bossier City & Bunkie ..........................................................................Page 49
Denham Springs & Denton ..................................................................Page 50
Dubach & Fort Worth ...........................................................................Page 51
Garland & Greensburg .........................................................................Page 52
Hammond – Guaranty West & Haynesville ..........................................Page 53
Hessmer & Homer ...............................................................................Page 54
Independence & Jennings ...................................................................Page 55
Kentwood and remembering Lance Davis ..........................................Page 56
Kentwood West & Lake Charles ...........................................................Page 57
Marksville & Marksville Tunica .............................................................Page 58
McKinney & Montpelier ........................................................................Page 59
Moreauville & Oil City ...........................................................................Page 60
Pineville & Ponchatoula ........................................................................Page 61
Vivian & Waco ......................................................................................Page 62
Walker & Watson ..................................................................................Page 63
FGB Gives Back .........................................................................................Page 64
Banks Headquartered in LA .......................................................................Page 76
Financial Table of Contents .........................................................................Page 77
Corporate Information .................................................................................Page 152
Visit www.fgb.net for additional
information.
NASDAQ Stock Ticker Symbol: FGBI
1
#1 Best Small Bank in the U.S. First Guaranty Bancshares, Inc.
Financial Snapshot
First Guaranty Bancshares, Inc.
2020 Snapshot
First Guaranty Bancshares, Inc.
At December 31, 2020, total assets were $2.47 billion,
net income was $20.3 million and earnings per common
share were $2.09. Return on average assets was 0.87%
and return on average common equity was 11.36%. First
Guaranty Bancshares, Inc. shares traded at the NASDAQ
Global Market Exchange and has paid quarterly
dividends for 110 consecutive quarters at December 31,
2020. First Guaranty Bancshares, Inc. is committed to
customer service and shareholder value. #1 Best Small
Bank in the U.S.!
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 in northeast Texas,
serving customers from 33 branch locations and one
loan production office. Headquartered in Hammond,
Louisiana, the Company had 422 employees as of
December 31, 2020.
PERFORMANCE GRAPHS
Book Value Growth Per One 1993 Share [1]
(per common share)
Dividends Per One 1993 Common Share [2]
Book Value per one 1993 share has increased
from $3.70 to $53.71 since 1993.
[1] Book value has been adjusted for cumulative stock splits and dividends of 2.93
times since 1993
[2] Cash dividends from the perspective of one original common stock from 1993 to
present, this considers the impact of stock splits and stock dividends.
Cash
Dividends
on Common
Stock
(In thousands)
First Guaranty
has paid
$84,569,000
in Cash
Dividends
to common
shareholders
since 1993.
Branches
33
ATMs
46
Total Assets
Deposits
$2.5 Billion
$2.2 Billion
Total Loans
$1.84 Billion
$20.3 Million
2020 Earnings
110
(and counting)
Consecutive
Dividends Paid
86
Years in
Banking
2
3
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT First Guaranty Bancshares, Inc.
#1 Best Small Bank in the U.S.
Contained in his December letter to Shareholders, Alton B. Lewis,
President and CEO of First Guaranty Bancshares, Inc. and First
Guaranty Bank shared outstanding news regarding a strong fourth
quarter performance, which closed a robust 2020.
The fourth quarter began with First Guaranty Bank being named
America’s Best Small Bank for 2021 by Newsweek/Lending Tree.
This positive news was followed by continued strong loan growth in the
Fourth Quarter. First Guaranty grew the loan portfolio to $1.8 billion.
First Guaranty also increased the loan loss reserve in order to manage
for continued economic uncertainty associated with COVID-19.
Fourth quarter and year-end results demonstrate strong operational
profits with significant progress toward enhancing shareholder value
and strengthening a decade’s long dedication to a fortress balance
sheet. Shareholders received their 110th consecutive quarterly dividend
payment from First Guaranty Bancshares, Inc.!
With impressive profitability and reliable dividends,
2020 marked another successful year, especially amid
the COVID-19 worldwide pandemic, the strongest
hurricane season on record and a presidential election.
Earthquakes, floods, wildfires and unemployment were
all on the minds of customers, employees and fellow
Americans.
In addition to a strong balance sheet and
financial performance, why was First Guaranty
Bank named #1 Best Small bank? At First
Guaranty Bank, people care about each other,
customers, shareholders and community. The Bank’s
culture of financial responsibility, coupled with its
culture of caring contributes to this distinction.
New Product
2020 brought a new
Online Banking system
and mobile app
with state-of-the-art
banking functionality,
convenience and
security.
Download the new and
improved MyFGB App
from your app store!
Outstanding Employees
and Teamwork
First Guaranty Bank acted
swiftly, responsibly and with
an adaptable emergency plan
to effectively manage health
and safety issues. Concern for
customers, employees and the
community were paramount and considered first above
all else. Employee morale and health, customer service
and safety, combined with community involvement
were all vital elements addressed and rank among
the many reasons First Guaranty Bank is named The
Best Small Bank in the U.S.! First Guaranty steadfastly
maintains a culture of caring. Although many in-person
events were cancelled, FGB continued to give. (Please
see pages 8 for COVID-19 details and 64 for FGB Gives
Back featuring organizations and charities we support.)
Banks were designated
essential businesses and
remained open. FGB Front
Line teams were literally
on the front lines serving
customers, and remain so
today, providing important
financial services.
Those employees located
within any one department
at headquarters were divided
among other locations to
ensure an entire department
did not contract COVID,
thus allowing continuity of
customer service and greater
health.
Wearing masks, cleaning
counters, staying behind
plexiglass and urging
everyone stay six feet apart
were all key components of our safety procedures.
Masks are required for customers to enter the bank
and employees wear them when they are not in
their separate offices. Leslie, a First Guaranty Bank
employee in Texas, made creative mustache masks,
making it a bit more fun to wear! Hats off to Leslie!
Focus on Small Businesses
get these loans through the system quickly! ” A
sincere desire to help our customers is fundamental
to FGB being named #1 Small Bank. This degree of
care and concern also fuels employee motivation and
satisfaction.
Commitment
First Guaranty Bank's
training and education
continued while
communication was
enhanced. We offered
a myriad of ways for
customers to easily
complete all of their
banking needs including
mobile pay, online
banking and ATMs/ITMs. Many people simply call
their local branch for personal assistance. To ensure
all customers were properly served, the Customer
Support Center began Saturday hours.
Additionally, in order to help customers, particularly
those who could not work or experienced layoffs,
ALL NSF and overdraft fees were waived through
April 15th.
Beyond the Front Line at each location, First Guaranty
Bank assisted 917 small businesses through the SBA’s
Paycheck Protection Program (PPP) with $111.1 million
in loans. First Guaranty Bank was quick to facilitate
PPP loans for small business owners and implemented
a plan named Team Midnight. Team Midnight should be
commended for their amazing efforts as they worked
around the clock to complete their tasks. The Bank
received over 1,000 telephone calls per day, twice the
normal volume.
This hard work was recognized during the annual
shareholders meeting and shared on the First Guaranty
Bank website and social media. “Helping customers
is always our top priority and we couldn't do it without
our employees! A special thanks to our ENTIRE lending
and support teams. They have worked tirelessly to
From a business involvement standpoint, Randy Vicknair
was named one of Independent Banker’s 40 Under 40.
In addition, other employees completed continuing
Banking education classes, such as Leadership Banking
School, while others served on various committees in
their local areas.
4
5
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT First Guaranty Bancshares, Inc.
#1 Best Small Bank in Louisiana and the U.S.
Eventful
Celebrations and
giving continued, albeit
remotely. Many events
and galas were not
held, yet fundraising
continued to serve
the needs of the
many organizations
throughout the
communities and service areas of all 34 FGB locations.
Innovative ways to
meet, donate and
be involved with the
community included
Zoom classroom
sessions with Denham
Springs students for
Junior Achievement.
Similar to FGB
employee morale
efforts, First Guaranty
strived to involve
customers and community too. For the annual
Independence Sicilian Heritage Festival, which First
Guaranty supports each year, the poster contest winner
Three employees celebrated their 30th anniversaries
with the bank including Jeanette Ernst, Elisa Costanza
and Dot Frazier. Vanessa Drew was also honored with
an event and cake recognizing her 40th anniversary.
Congratulations and thank you to these dedicated
team members!
First Guaranty Bank celebrated its 86th anniversary,
complete with cake and an Apple Pack giveaway for
customers.
was the youngest ever. It just so happened that Gracie,
the selected artist, is also the daughter of an employee,
Casie Qualls! Now that’s a wonderful way to involve the
Bank, family and community!
St. Thomas Aquinas girls basketball
The focus in 2020 resides in
our commitment to customer
service. First Guaranty
invested in facilities and
enjoyed Central Louisiana
Open Houses. (Please see the
article on page 30.)
First Guaranty Bank is thrilled, honored and
humbled to be named #1 Small Bank in Louisiana
and the U.S.! Please see the Newsweek/Lending
Tree article on pages 10 and 11. We will continue on
our established path to continue to earn this title.
As mentioned in the 2019 annual report, resilience,
knowledge and passion with an overarching desire
to be valuable to other individuals and businesses is
fundamental to First Guaranty’s success. First Guaranty
Bancshares, Inc. is committed to customer service and
shareholder value. We take this opportunity to thank
all of our customers, employees, officers, Board of
Directors and shareholders.
Employee morale boosting events and other team building endeavors were enjoyed during 2020. Christmas branch
and door decorating, a Santa Mask coloring contest and employee events during Thanksgiving and Halloween are
several examples during fourth quarter.
Holden High School softball champions
2020 was a year of achievement, success and
championships, particularly for Holden High School
softball who earned the state championship! St.
Thomas Aquinas girls basketball team was crowned
state champions when they won the 2020 Allstate
Sugar Bowl/LHSAA tournament. Congratulations to
ALL of our local teams!
6
7
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT First Guaranty Bancshares, Inc.
Covid-19 & Hurricane Response
BANKING & COVID-19
When the pandemic started, we knew
this was going to be something never
experienced before in our lives. Thinking
quickly to keep operations open and
everyone safe were at the forefront of
our minds. We acted decisively and thoughtfully to
put measures in place to ensure we were as close to
business as usual while keeping everyone as safe as
possible. The following highlights the messaging we put
out to our employees and customers.
Banking may look a little different these days. Whether
you're utilizing mobile pay, online banking, or our ATMs/
ITMs—First Guaranty Bank offers banking alternatives
at your local branch. Don't forget: our lobbies are
appointment only, but you can still visit us via the drive
thru or make an appointment at your local branch.
Additional information and links are available online
at www.fgb.net.
Q Online Banking. View your account balances and
detailed transaction history, transfer money between
accounts, and pay bills online, It's fast, free, and easy
to sign up!
Q Mobile Banking. Take fanatical banking wherever you
go with the convenience of the MyFGB app. Bank
on the go with easy mobile check deposit, seamless
money transfers and convenient bill pay – all in palm
of your hand.
Q Call us. Our Customer Support Center is here to help
you with any of your banking needs! You can also use
Telephone Banking 24/7 for basic account information
like account balances and a list of recent transactions.
Q Mobile Check Deposit. Sign, snap, and deposit
Q Mobile Pay. Pay for things you need right from your
smartphone, smartwatch or tablet – no need to handle
cash. It's password protected by the security of the
app and your phone.
Q ATMs.
Q ITMs. Our Interactive Teller Machines, also known
as MiBYs, are unique state-of-the-art, face-to-face
experiences that provide faster service and extended
drive-thru banking hours. Use an ITM for the following
transactions: make deposits, withdraw cash, check
balances, transfer funds, make loan payments, and
cash checks.
For the latest bank updates, visit our website:
www.fgb.net/covid-19.
We are following federal guidelines to keep you
and our employees safe.
Q Prior to entering, masks should be lowered for
identification purposes, but may be worn after
identification has been established
Q Markers will be applied every six feet on our lobby
floors and at our entrances. Please adhere to social
distancing guidelines.
Q Shields are placed at each teller counter
checks without ever leaving home.
Q Customer flow will be limited in our lobbies
!
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Q Public restrooms will not be available at this time
Q If you have a fever or have tested positive for
COVID-19 within the last 14 days, please use our drive
thru.
First Guaranty Bank management meets frequently to
update and improve plans for this unprecedented time.
Updates can be found online at www.fgb.net or on
social media.
What We're Doing
When visiting one of our 34 locations, know that we
have ramped up cleaning in common areas, follow CDC
guidelines and provide CDC-approved hand-sanitizer.
2020 HURRICANE SEASON
Emerging Stronger
Living and working in Louisiana, Texas and the Gulf
Coast region requires hurricane season preparation.
With sufficient experience and respect for natural
disasters, 2020 delivered the added challenge of
hurricane season during a pandemic. Hurricane
Laura devastated Lake Charles, Louisiana and it was
followed shortly thereafter by Hurricane Zeta. The FGB
Loan Production Office in Lake Charles assisted the
community with loans, including PPP loans. Hurricanes
Delta and Zeta required FGB to reschedule central
Louisiana Open Houses. In October alone, FGB closed
offices early in advance of the storms in more than
half of the branch locations. Safety remained the most
important factor in all decisions.
Because Hurricanes Katrina and Rita
devastated Louisiana in 2005 and the
Great Flood of 2016 impacted both the
Bank and its customers, hurricane season
remains on the FGBI radar.
The extremely active 2020 Atlantic hurricane season had
a record-breaking 30 named storms and 12 landfalling
storms in the continental United States.
NOAA’s seasonal hurricane outlooks accurately
predicted a high likelihood of an above-normal season
with a strong possibility of it being extremely active.
In total, the 2020 season produced 30 named storms
(top winds of 39 mph or greater), of which 13 became
hurricanes (top winds of 74 mph or greater), including
six major hurricanes (top winds of 111 mph or greater).
This is the most storms on record, surpassing the
28 from 2005, and the second-highest number of
hurricanes on record.
The 2020 season got off to an early and rapid pace with
a record nine named storms from May through July, and
then quickly exhausted the 21-name Atlantic list when
Tropical Storm Wilfred formed on September 18. For
only the second time in history, the Greek alphabet was
used for the remainder of the season, extending through
the 9th name in the list, Iota.
This historic hurricane season saw record water levels
in several locations, including the Gulf Coast where
Hurricane Sally brought the highest observed water levels
since Hurricane Katrina in 2005 to Pensacola, Florida.
Because First Guaranty had already incorporated
technology and guidelines to make banking easier, more
convenient and safer for COVID-19, many of those same
measures served both customers and employees well
during hurricanes. Online and mobile banking advances,
an enhanced telephone system and availability of ITMs
reduced the necessity for in-person banking.
Through these challenges, First Guaranty Bank emerged
stronger and better equipped to best fulfill its mission.
The mindset and ability to adapt, change and grow
allows First Guaranty to continue emerging stronger.
https://www.noaa.gov/media-release/record-breaking-atlantic-
hurricane-season-draws-to-end
9
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Data sources for the project included DepositAccounts.com,
information published by each bank, quarterly call reports
filed with the FDIC, Consumer Financial Protection Bureau
complaints and mobile app reviews. All together, 55 separate
factors were assessed, covering a wide variety of fees, current
and historical interest rates, account terms, consumer service
features, mobile app satisfaction and bank profile.
Among the specific data collected: the average service
charges collected on deposit accounts during the second
quarter of 2020; average interest paid on deposit accounts
during the second quarter of 2020; the number of complaints
submitted to the Consumer Financial Protection Bureau
and how quickly the bank responded, the kinds of loan and
account products offered; mobile app scores; and, depending
on the best bank accolade, branch presence.
For best bank state winners, the best big bank in each state
needed to have at least one branch per 100,000 residents and
at least $10 billion in assets, while the best small bank in each
state had less than $10 billion in assets and had to be among
the five banks with the most branches in the state. A bank
couldn't have more than one branch to be considered for best
online bank, with factors like mobile app score carrying greater
weight in this ranking.
For best customer service, a bank had to have responded to at
least 97 percent of complaints filed with the CFPB in a timely
fashion to be considered; other features such as languages
provided on the bank's website and app as well as banking
and credit card service lines were also evaluated.
Individual best bank account winners were selected based
on different criteria, including: current interest rate; average
interest rate over the past year; minimum deposit required to
open an account, the monthly service fee changed to maintain
the account, fees charged for nonsufficient funds, overdraft,
or/and overdraft protection; amount charged to use an out-
of-network ATM; amount refunded for out-of-network ATM
usage; cost to replace debit card; and the bank's average
mobile app score.
To be considered for best online savings or online checking
accounts, a bank had to have fewer than 100 branches, while
banks needed more than 100 branches to win for either the
best checking or best savings account award.
The weighting given to each factor varied depending on
the best bank accolade; Newsweek exercised final editorial
judgment when selecting winners. Current interest rate
information is accurate as of September 24, 2020 and
represents the highest possible rate a customer could earn,
if all qualifications are met (common qualifications include
having direct deposit tied to the account, having more than
one account with the bank or making a certain minimum
number of debit-card transactions a month). The complete
data set was last updated by LendingTree on September 10,
2020.
www.newsweek.com/americas-best-banks-2021/best-
small-banks-state
BY NEWSWEEK – SHARE
Introducing Newsweek's first ranking of the financial
institutions that best serve their customers' needs in
today's challenging times
Like virtually every other aspect of our lives—work,
school, shopping, dating, entertainment, you name
it—the pandemic is changing the way Americans bank.
And those changes, in turn, are creating a new set of
challenges and opportunities when it comes to picking
the financial institution that best suits our banking needs.
For one thing, we have a newfound need and
affection for savings accounts, evidenced by a more-
than-doubling of the personal savings rate over the
past several months, as the idea of building a solid
emergency fund morphed from being an aspiration to
an economic imperative. "The savings growth has been
record-breaking," says Ken Tumin, founder of the bank
comparison site DepositAccounts.com. But it's tougher
than ever to find a suitable account to house those
savings—one that doesn't actually cost you money after
factoring in fees, given that the average savings rate is
now near zero due to the Federal Reserve's efforts to
stimulate the economy via low interest rates.
Meanwhile, lockdown mode is pushing many of us to
finally embrace online banking in a major way. Traffic at
local banks is down substantially compared to last year,
with about half of customers who previously relied on
physical branches and ATMs saying they've increased
their use of mobile apps and 35 percent making more
use of their bank's website, according to a recent survey
by Kearney, a management consulting group. Experts
believe the shift is likely to stick. "Once you get used
to the technology and how easy and convenient it is to
bank this way, it's hard to go back," says Tumin.
Customer service is also becoming a more important
consideration, as complaints about financial services
providers have surged during the pandemic, up 50
10
percent from March through July compared with the
same time period in 2019, according to the consumer
advocacy group U.S. PIRG. "The record level of
consumer complaints is a blaring red light signaling
the huge challenges consumers are facing during the
COVID-19 pandemic," says Gideon Weissman of Frontier
Group, who co-authored the organization's report.
To help you navigate this new financial landscape
and find the institution that best serves your needs,
Newsweek has partnered with LendingTree, the online
loan marketplace and comparison site for financial
services, for our first-ever Best Banks rankings. From a
universe of more than 2,500 FDIC-insured institutions,
we assessed U.S. banks and the savings and checking
accounts they offer based on 55 separate factors to
come up with a best-in-class option in 19 categories—
including the best big and small bank in every state,
because banking in many ways remains a local
endeavor. One or more of these winning banks may be
the perfect choice for your family.
—Diane Harris, Deputy Editor in Chief.
STATE
WINNER
Louisiana
First Guaranty Bank
Methodology
To identify America's Best Banks, LendingTree in consultation
with Newsweek culled candidates from an initial universe of
more than 2,500 FDIC-insured financial institutions (credit
unions were excluded from consideration).
LendingTree then applied a series of filters to create a short
list of eligible candidates in each category, based on the most
salient features for each bank type or account; LendingTree
supplied the data and made recommendations for a
proprietary scoring system developed by Newsweek, based
on the factors that would be most important to consumers for
that type of bank or account.
11
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Letter from the
Chairman
Our Mission
The mission of First Guaranty Bank and First Guaranty Bancshares is to increase
the shareholder value while providing financial services for and contributing to
the growth and welfare of the communities we serve.
We believe that each customer is our most important customer and
should be treated as such. We endeavor to provide levels of service that
exceed the expectations of all our customers.
Marshall T. Reynolds
Chairman of the Board
We believe that our employees are our greatest asset as demonstrated
in their professionalism and dedication. We encourage open
communications and strive to cultivate an entrepreneurial environment
in which our employees feel highly responsible for the performance of
the bank, and an environment where they will contribute new ideas and
innovations that will help us excel.
We seek to enhance stockholder value by continually improving
the quality of earnings, growth in earnings, return on equity and
dividend payout.
We strive to be a socially responsible corporate citizen by supporting
community activities and encouraging our 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 goal is to participate in making our communities better places
in which to live, work and play.
FIRST GUARANTY BANCSHARES, INC.
Dear Shareholders,
The year 2020 was quite a year for our bank. Not only for the excellent results but also for the
positioning for the coming year.
First Guaranty Bank made twenty million dollars for the year 2020. This compares to a
fourteen million dollar year in 2019. That was a forty-three percent increase in profitability.
Also, the bank made a substantial contribution to loan loss reserve during 2020 bringing our
total LLR to 1.33% – that is what I call “Building a Fortress Balance Sheet.”
As you are aware loans are probably the most important part of banking. During 2019 we
ended the year with $1,525,000 in loans. By the end of 2020 we were at $1,844,000 in loans
outstanding. This is a whopping $319,000,000 dollar increase. Randy Vicknair (Chief Lending
Officer) and Jordan Lewis (Texas Area President) did an outstanding job, as did Bill Hood and
the Directors Loan Committee who vetted every loan. But the good news is yet to come. We
will have growth in loans both in the first and second quarter as the pipeline is full.
I wholeheartedly commend these admirable results from the Board of Directors, Management
and All of the Employees I want to say, “Thank You.”
MARSHALL T. REYNOLDS
Chairman of the Board
FIRST GUARANTY BANCSHARES, INC.
Chairman of the Board
FIRST GUARANTY BANK
12
#1 Best Small Bank in the U.S.
13
FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Letter from the
Chief Executive Officer & President
Report from the
Chief Financial Officer
Alton B. Lewis
Chief Executive Officer
& President
#1 Best Small Bank in Louisiana and the U.S.
Dear Shareholders,
Being named the Best Small Bank in The United States and Louisiana by Newsweek
Magazine and Lending Tree is certainly a great indicator that we did something right
in 2020. Recording record earnings for the year is another indicator that we did
some things right in 2020. Recording record earnings for the year while also adding
approximately $14 million to the loan loss reserve in recognition of continued COVID
uncertainty is another strong indicator that we did some things right in 2020. Increasing
our loan portfolio by approximately 20% during the Covid pandemic is another
indicator that we have done some things right in 2020.
There is no doubt that 2020 was an outstanding year for First Guaranty Bancshares,
Inc.. With the leadership of the Board of Directors, strategies were developed, and
actions were taken to quickly and effectively deal with the adversities presented and to
succeed in spite of those adversities. We should enjoy our success.
But 2020 is now history. It is our goal at First Guaranty Bancshares, Inc. to simply
use 2020 as a stepping stone toward greater success, toward better banking, toward
increased growth, toward increased earnings, toward enhanced shareholder value, and
toward a fortress balance sheet.
Thank you for your support. Please do not hesitate to contact me if you have any
questions.
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
#1 Best Small Bank in the U.S.
First Guaranty Bancshares, Inc. continued its consistent track record of loan growth, dividend
payments, and capital growth in 2020 while managing through the COVID-19 pandemic. First
Guaranty took decisive action at the beginning of the COVID-19 crisis to protect the bank, our
employees and help our customers. The actions taken reflect First Guaranty’s business philosophy
provided by the Board of Directors. It is not surprising that Newsweek and Lending Tree ranked First
Guaranty Bank as the number one small bank in the United States. We are honored by this tribute and
will continue to make our bank better every day.
Eric J. Dosch
First Guaranty’s COVID-19 response included the following notable actions. We increased on balance
sheet liquidity by $100 million through FHLB borrowings and brokered deposits. These funds were
profitably invested in corporate securities that provided both liquidity and earnings during 2020. First
Guaranty provided relief loans to employees and customers prior to participation in the SBA Paycheck
Protection Program (PPP). We provided loan payment deferments to over 1,000 loans that totaled
$590 million. First Guaranty waived or suspended several fees during the onset of the crisis. 901 SBA
PPP loans were originated that totaled $111.1 million before SBA forgiveness payments reduced balances at the end of 2020.
Our employees worked countless extra hours ensuring that our branches remained open and that our customers received their
essential banking services during the COVID-19 pandemic.
Chief Financial Officer
First Guaranty continued to execute its plan to grow loans as a percentage of our balance sheet despite the significant
economic headwinds associated with the pandemic. Loans grew by 20.9% or $318.6 million from $1.53 billion in 2019 to
$1.84 billion in 2020. Included in this growth were $92.3 million in SBA PPP loans. First Guaranty continued to expand its
commercial lease lending program which is included in total loans. Commercial leases grew $34.0 million to $104.1 million
in 2020. We increased loan interest income by $11.9 million in 2020. The loan portfolio finished December 31, 2020 at 75%
of total assets. Five years ago, the loan portfolio was only 58% of assets at December 31, 2015. The loan to deposit ratio
was 85.1% at December 31, 2020 which still leaves us room to grow. Our average loan yield has remained consistently
above 5.0% during the last several years. The average loan yield averaged 5.46% for 2020 even though market interest rates
declined significantly during 2020.
FPO
The Texas loan portfolio grew to $244.9 million at December 31, 2020 which is a $40.4 million increase from $204.5 million at
December 31, 2019. Texas loans have grown a total of $116.9 million from $128.0 million at the acquisition date in June 2017.
Texas deposits grew to $275.2 million at December 31, 2020 from $230.5 million at December 31, 2019. Texas deposits have
grown a total of $148.0 million from $127.2 million at June 2017.
First Guaranty improved the composition and cost of its deposit portfolio during 2020. Total interest expense declined $3.9
million in 2020. First Guaranty increased non-interest bearing deposits $85.5 million or 26% during 2020. Total cost of interest
bearing liabilities declined to 1.48% for 2020 compared to 2.06% for 2019. The net interest margin was 3.35% for 2020. Total
common shareholder’s equity increased $12.6 million from $166.0 million in 2019 to $178.6 million in 2020. Retained earnings
increased $14.1 million from $43.3 million in 2019 to $57.4 million in 2020. The loan loss reserve increased to $24.5 million at
the end of 2020 compared to $10.9 million at the end of 2019. First Guaranty increased the loan loss reserve to manage for
uncertainty related to COVID-19 and to accommodate the strong loan growth in the latter half of 2020. Earnings per common
share were $2.09 in 2020 compared to $1.47 in 2019. Tangible book value per share increased from $15.05 at December 31,
2019 to $16.41 at December 31, 2020. Return on average assets was 0.87% for 2020. Return on average common equity
was 11.36% in 2020. First Guaranty Bancshares, Inc. paid a total of $6,234,400 in cash dividends to common shareholders in
2020. The Company has paid 110 consecutive quarters of dividends as of December 31, 2020.
First Guaranty continues to build strength for the future. We increased loans and capital in 2020 despite the challenges due to
COVID-19. First Guaranty continues to maintain a leading deposit market share in the communities that we serve in Louisiana.
We continue to expand our business in Texas. 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
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15
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Report from the
Chief Lending Officer
Report from the
Central Louisiana Area President
Randy S. Vicknair
Senior Vice President/
Chief Lending Officer
2020 was a great year for First Guaranty Bank!
We were successful in assisting our customers and the community with relief programs
related to COVID19 and multiple hurricanes, providing PPP loans to our customers
and non-customers, implementing multiple new software platforms to improve our
efficiency, growing our loan portfolio by 21%, and achieving a ranking of #1 bank in
the country! All of this was accomplished while working through the economic/staffing
challenges created by the COVID19 virus and government mandated shutdowns. This
accomplishment is a direct result of the guidance of our Board of Directors combined
with the focus, determination, and collaboration of our team.
In 2020, the total loan portfolio grew to $1.844 billion which was a $319 million
increase over the previous year end of $1.525 billion. Our strong growth is due to the
contributions of multiple lines of business including commercial real estate loans,
commercial and industrial loans, mortgage loans, and commercial leases. We were
able to maintain loan yields despite significant reductions in interest rate indexes and
competition creating downward pressure on loan pricing. Loan yields were 5.46% in
2020 as compared to 5.99% in 2019. This is only a 0.53% year-over-year decrease
while our major index, Wall Street Journal Prime, decreased by 1.50%. Additionally,
loan interest income was $90.8 million in 2020 compared to $78.9 million in 2019, an
increase of $11.9 million or 15%. This was achieved primarily from our loan growth.
The focus of First Guaranty Bank continues to be our local markets and customers.
We added six new Financial Relationship Manager positions in 2020, with at least one
position in each of our regions. These new team members will enable us to better
service our existing client base while pursuing additional new client relationships.
Additionally, we created two new positions to focus on the training and development
of our Financial Relationship Managers and Loan Assistants. This new initiative will
continue to build on the growth of our teams, our markets, and our customer service.
The bank’s markets remained strong in 2020, with significant contributions from our
Texas, North Louisiana, and Southeast Louisiana regions. Our Southwest Louisiana
region had a great first half of 2020 with hurricanes slowing their progress for the 2nd
half of 2020.
It takes focus, commitment, and teamwork to be #1. In 2020, our team showed
what we are capable of accomplishing and we are ready to deliver another great
performance in 2021!
Sincerely,
Randy S. Vicknair
Senior Vice President/Chief Lending Officer
FIRST GUARANTY BANK
Darrel D. Ryland
Director/Central
Louisiana Area President
When we first met last year in January, little did we know how interesting 2020 would
be. It is easy to lament the unfortunate events of the year; at the same we must
celebrate the personal and professional achievements of the First Guaranty Bank
officers and staff.
Of course, I am referring to the recognition of First Guaranty Bank as the Best Small
Bank in America, and the preeminent bank in the Central Louisiana market. Over
2,500 FDIC insured financial institutions were eligible candidates for this honor. First
Guaranty Bank was ranked number one not only for financial metrics, but for offering its
customers the best banking experience in the State of Louisiana. PERIOD.
Financial customers in Central Louisiana, we call this area CENLA, now have access
to state-of-the-art online banking options which are being utilized now more than ever.
Even technologically reluctant customers comment about the ease of online banking
at First Guaranty Bank. This in turn increases customer satisfaction to an all time high.
This was our highest goal.
Finally, as our state and national economies improve, the need for loans will increase.
First Guaranty Bank stands ready to approve qualified borrowers much faster than our
markets competitors.
Shareholders can rest assured that their investments will grow; depositors can rest
assured that their assets are safe and secure; and borrowers can rest assured that First
Guaranty Bank will accommodate their every need.
Yes, 2020 was an interesting year. Here at First Guaranty Bank, we are resolved to
make 2021 even better for our customers, employees, and shareholders.
Sincerely,
Darrel D. Ryland
Director
FIRST GUARANTY BANCSHARES, INC.
Central Louisiana Area President
FIRST GUARANTY BANK
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#1 Best Small Bank in the U.S.
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FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Report from the
Texas Area President
Best Small Bank
Report from the
Senior Vice President
The perfect may be the enemy of the good, but a champion never accepts what is
good enough when it really matters.
In 2020, First Guaranty Bank showed it is a champion: that it had the heart of a
champion in serving its communities in times of crisis, and that it had the focus of a
champion in improving every aspect of its customer experience despite tremendous
challenges throughout the year. Nowhere was the bank’s grit, determination to prevail,
and strength of character more on display in 2020 than in Texas.
JORDAN M. LEWIS
Texas Area President
The 2020 numbers tell part of the story: not including PPP loans, First Guaranty Bank
increased its Texas loan new money production by 34% (+$138 million), almost tripled
its total loans originated, and grew its loan portfolio by 20% (+$40.4 million). Deposits
increased 20% across its five branches to $275 million. Profitability grew and cost of
funds dropped.
Glenn A. Duhon, Sr.
Senior Vice President/
Regional Manager
But that part of the story seems inconsequential to the real story: countless hours of
communicating, planning, and collaborating by leaders from departments across the
bank working out how to keep local economies rolling while keeping team members
and their families safe; schedules constantly disrupted and plans changed on a dime
due to an ever-changing and dangerous environment. Team members who moved
quickly and willingly to fill gaps in personnel chains with incredible attitudes despite
significant personal sacrifice. A unified force working to make sure our customers were
never let down – not even for a second – during a national emergency.
Dedicated employees of First Guaranty Bank across Texas and Louisiana in 2020
showed what it means to be the best: to care, to do one’s best, and to go the extra
effort even when the situation is at its worst. Their heart and focus demonstrated that
they were champions of what banking should be. They showed that they are prepared
for anything, and that the future is in good hands.
Ever onward,
Jordan M. Lewis
Texas Area President
FIRST GUARANTY BANK
The Southwest Louisiana Region of First Guaranty Bank continues to be persistent and
treat customers as they would like to be treated. Surely, this has helped the bank to be
named #1 Best Small Bank in the United States.
Our hotel/motel owners survived 2020 with the help of PPP loans, extensions and
deferments. Their room rentals seem to be getting better and should fully recover after
most people receive the coronavirus vaccine. Other commercial business customers
have also taken advantage of available federal aid and should be able to survive.
Our agriculture business was also affected by coronavirus, especially crawfish farmers.
They had a decent year in catching but were not able to sell the product due to so
many restaurants either closing or serving to-go only, and the demand for crawfish
fell. Demand was also affected by the many company, friend and family crawfish boils
cancelled due to the disease. Rice and sugarcane yields were good with stable prices,
and the majority of farmers were able to meet their financial obligations.
Jennings deposits ended the year with $38.6 million compared to $40.6 million from
the previous year, resulting in a decrease of $2 million. Abbeville deposits ended
with $142.2 million compared to $137.3 million from the previous year, or $4.9 million
above one year ago. Combined deposits for this region ended at $2.9 million above a
year ago. Jennings loan volume ended at $11.4 million compared to $14.3 million the
previous year, a $2.9 million decrease. Abbeville loan volume ended with $74.5 million
compared to $73.1 million the previous year, or a $1.4 million increase. Lake Charles
loan production office ended with $18.9 million in loans compared to $17.9 from the
previous year, or an increase of $1 million. Combined loan volume was $104.8 million
compared to last year of $105.3 million, a decrease of $500,000.
With the continued support of our loyal customers, dedicated employees, management
and our Board of Directors, we should be able to increase loan volume, deposits and
our customer base.
Sincerely,
Glenn A. Duhon, Sr.
Senior Vice President/Regional Manager
FIRST GUARANTY BANK
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FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
#1 Best Small Bank in the U.S.
19
Memorial
Charles "Chuck" Brister, Director
First Guaranty Bank
BOARD OF DIRECTORS
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S e p t e m b e r
2020 was a challenging year in many ways and we mourned the loss of Chuck Brister on
November 23rd, while honoring his 25 years of service to First Guaranty Bank and the
Board of Directors.
Born in Independence, Louisiana on September 26, 1951 to J.H. and Betty Brister of
Roseland, Chuck Brister graduated from Amite High School. He was a resident of Amite and
a member of First Baptist Church.
He is survived by his wife of 51 years, Mary Ellen Brister and two daughters and sons-in-
law, four grandchildren, a sister, brother-in-law and one niece.
Chuck began his business in November 1972 as Chuck’s Glass & Radiator Works in
Roseland. In 1975, he moved to Amite and started Amite Glass & Radiator Works. In 1985,
they sold Amite Glass Works and Chuck took over his father’s manufacturing business of
Go Karts, known as Brister’s Thunder Karts. Under his leadership, Thunder Karts earned
national recognition and developed utility vehicles named the Chuck Wagon.
Chuck lived life fully and enjoyed boating, flying, car shows, traveling and his many friends.
His greatest enjoyment was spending time with his wife, children and grandchildren and
being involved in their activities. He served as the 2008 Amite Oyster King and was a board
member of Smitty’s Supply.
Chuck Brister was always committed to First Guaranty Bank and served as a board member
since May, 1996. He sat on the Directors Loan Committee and the IT Steering Committee.
The Board of Directors of First Guaranty Bank are proud to have had the pleasure of serving
with Mr. Charles “Chuck” Brister and will cherish the wisdom, guidance and joy he provided.
20
Front Row (left to right): Edgar R. Smith III, Nancy C. Ribas, Gloria M. Dykes, Dr. Phillip E. Fincher. Middle Row (left to right): Andrew
Gasaway, Jr., Bruce McAnally, Marshall T. Reynolds, Ann A. Smith, William K. Hood, Jack Rossi, Robert H. Gabriel. Back Row (left to
right): Jack M. Reynolds, Richard W. “Dickie” Sitman, Alton B. Lewis, Edwin L. Hoover, Jr., Anthony J. Berner, Morgan S. Nalty
Not Pictured: Darrel D. Ryland (Photo taken pre-Covid 19)
ANTHONY J. BERNER, JR.
Consultant, Gold Star Food Group.
Former President of Pon Food Corporation
of Ponchatoula.
GLORIA M. DYKES
Owner of Dykes Beef Farm and Part
Owner of Dykes Feed & Fertilizer Inc. and
Bluff Creeks Properties.
DR. PHILLIP E. FINCHER
North Louisiana Advisory Board.
Retired Economics/Finance Professor of
Louisiana Tech University.
Board member of Claiborne Electric
Cooperative.
Owner of C & B Ranch since 1969.
ROBERT H. GABRIEL
President of Gabriel Building Supply
Company of Ponchatoula and Amite.
ANDREW GASAWAY, JR.
Secretary, Board of Directors of First
Guaranty Bank.
President of Gasaway-Gasaway-Bankston
Architects.
WILLIAM K. HOOD
Chairman of the Audit Committee,
Directors’ Loan Committee.
President, Hood Automotive Group.
EDWIN L. HOOVER, JR.
President of Encore Development
Corporation.
ALTON LEWIS
Vice Chairman of the Board,
Chief Executive Officer/President of First
Guaranty Bank and Vice Chairman of the
Board, Chief Executive Officer/President of
First Guaranty Bancshares.
BRUCE MCANALLY
Registered pharmacist, Director of Paragon
HealthCare in Dallas, RxPreferred Benefits in
Nashville and Best Value Pharmacies in Ft.
Worth.
MORGAN S. NALTY
Investment Banking Executive and Partner in
the firm of Johnson Rice & Company, LLC.
JACK M. REYNOLDS
Vice President of Trifecta Productions,
Vice President of Pritchard Electric and
Secretary, ADJ Corporation.
Board member of Energy Services of
America, The Harrah and Reynolds
Corporation and Citizens Deposit Bank.
MARSHALL T. REYNOLDS
Chairman of the Board of First Guaranty
Bancshares, Inc. and Chairman of the Board
of First Guaranty Bank.
Chairman of Champion Industries, Inc.
NANCY C. RIBAS
Owner of Ribas Holdings LLC and
University Motors.
JACK ROSSI
Chairman of First Guaranty Bancshares Audit
Committee.
Certified Public Accountant in West Virginia and
Vice President Business Development at Summit
Community Bank in West Virginia and Virginia, on
the Board of Trustees of the West Virginia Investment
Management Board, a member of the Charleston
Area Alliance Board and the Treasurer and Past
Chairman and the Charleston Regional Chamber
Of Commerce Board and West Virginia University
Business Economics Visiting Committee.
DARREL RYLAND
First Guaranty Bank Central Louisiana Area President.
Darrel D. Ryland, LLC, attorney and owns Red River
Ranch, a cattle operation.
RICHARD W. “DICKIE” SITMAN
Director of Dixie Electric Membership Corporation.
Board President of Dixie Business Center.
Past owner of Jos. M. Sitman, Inc. He is a past board
member of CoBank ABC and Bank of Greensburg.
ANN A. SMITH
Member of the Southern University Board of
Supervisors, Southern University Chairwoman
Emeritus, former member of Louisiana Office of
Student Financial Assistance Advisory Board
(LOSFA).
Retired member of the Tangipahoa Parish School
Board.
EDGAR R. SMITH, III
Chairman and CEO of Smitty’s Supply, Inc.
Chairman and CEO of Latch Oil, Cam2 International,
Big 4 Trucking and Big 4 Investments.
21
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT First Guaranty Bank
ADVISORY BOARD
Left to Right: Britt L. Synco, Thomas “Tommy” D. Crump, Gil Dowies, III, Dr. Philip E. Fincher
Not pictured: John D. Gladney, M.D.
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 five men who make up the North Louisiana
Advisory Board were all born and reared in Claiborne
Parish and have deep roots in the communities and
business affairs of this area. In the period where big
banks began to buy up small and medium size banks
across the country, it became apparent to us that the
banking needs of individuals and small businesses
were not being met by these megabanks in our area
of Northwest Louisiana. These concerns led the
Advisory Group to join with others to form a new
community bank for Claiborne Parish. Shortly after the
formation of this bank, the group had the opportunity
to join with FIRST GUARANTY BANK to create a
stronger and better institution to meet the banking
needs of a much larger community of individuals
and businesses across the whole area of Northwest
Louisiana. As First Guaranty has grown in size and
strength, it has never failed to fulfill its mission to
function as a true, community-oriented bank–like all
those which had preceded it in our rural communities.
The ranking of First Guaranty as the best small
bank in the U.S. by a national publication only
confirms what the Advisory Group has known for a
long time—our bank is one of the best things that
has happened in our area in the last 20 years!
First Guaranty Bank
OFFICERS
Chairman
MARSHALL T. REYNOLDS*
Chairman of the Board
Executive Officers
ALTON B. LEWIS*
President and CEO
ERIC J. DOSCH*
Chief Financial Officer
Senior Vice Presidents
THOMAS F. BROTHERS
Director of Internal Audit
SCHELIA M.DAVIS
Operations Officer
MARK J. DUCOING
Chief Deposit Officer
GLENN A. DUHON, SR.
Regional Manager
Abbeville
RONALD R. FOSHEE
Director of Lending Development
KEVIN J. FOSTER
Regional Manager
Denham Springs
ADAM J. JOHNSTON
Regional Manager
North Louisiana
MIKKI M. KELLEY
Human Resources Department
Manager
JORDAN M. LEWIS
Texas Area President
GREGORY P. PRUDHOMME
Regional Manager
Central Louisiana
DARREL D. RYLAND
Central LA Area President
CRAIG E. SCELFO
Regional Manager
Ponchatoula & St. Tammany
DESIREE B. SIMMONS
Loan Administration, Marketing &
Training
EVAN M. SINGER
Director of Mergers & Acquisitions
Regional Manager
Greensburg
JASON D. NORMAND
STEVEN F. OSMAN
SCOTT B. SCHILLING
AMBER L. SMITH
LISA K. STOKER
JOHN A. SYNCO
J. RICHARD STARK
Operations
RANDY S. VICKNAIR
Chief Lending Officer
CHRISTY L. WELLS
Regional Manager
Hammond
MATTHEW B. WISE
Chief Credit Officer
Vice Presidents
CHARLES L. BAGGS
ASHLEY N. BELL
BETTY A. BONEY
BRENDA A. BRISCOE
CHERYL Q. BRUMFIELD
KATHERINE K. CAMPBELL,
Controller
CHRISTINA M. CARTER
TIMOTHY L. CHESNEY
ROBERT W. CLIFTON,
Chief ISO
LOUIS J. CUSIMANO
VIKKI W. DUPAQUIER
RONALD W. EDMONDS
DENISE D. FLETCHER
SHIRLEY P. JONES
JOELLEN K. JUHASZ,
BSA Officer
MICHAEL D. KNIGHTEN
TERRIE E. MCCARTNEY
COLTON C. MCDANIEL
Assistant Vice Presidents
CONRAD H. ARRAMBIDE
EVAN A. BARANOSKY
DARRYL P. BOUDREAUX
LAURYN H. COBURN
MIRANDA M. DERVELOY
SUSAN M. DESOTO
LANDA G. DOMANGUE
VANESSA R. DREW
CHRISTY L. FRIERSON
HARRISON R. GILL
BONNIE J. GRIENER
LUDRICK P. HIDALGO
LESLIE A. HINZMAN
A. SHANE HUGHES
KEITH T. KLEIN
PAMELA R. NORMAND
DEV M. PATEL
RAHUL R. PATEL
NIEKITSHA S. RIDLEY
MELINA V. WEST
Officers
REBECCA G. BROWN
CALVIN P. DUCOTE
JEANNETTE N. ERNST
KRISTIN M. WILLIAMS
*Officers of both First Guaranty Bank and First Guaranty Bancshares, Inc.
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.
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23
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
First Guaranty Bank
PERFORMANCE GRAPHS
First Guaranty Bank
PERFORMANCE GRAPHS
Tangible Common Equity [3]
(in thousands)
Tangible Common Equity
(in thousands)
Net Income
(in millions)
Total Assets
(in millions)
1993
1998
2003
2008
2013
2016
2017
2018
2019
2020
$9,005
$17,376
$43,557
$61,429
$80,033
$121,372
$137,262
$141,108
$146,566
$159,876
Tangible Common Equity
has increased
$150.9 million since 1993.
Total Assets
(in millions)
1993
1998
2003
2008
2013
2016
2017
2018
2019
2020
$159
$245
$485
$871
$1,436
$1,501
$1,750
$1,817
$2,117
$2,473
First Guaranty Assets
have increased
1,455% since 1993.
Total Deposits
(in millions)
Net Income
(in millions)
1993
1998
2003
2008
2013
2016
2017
2018
2019
2020
$2.1
$3.7
$7.0
$5.5
$9.1
$14.1
$11.8
$14.2
$14.2
$20.3
Total Deposits
(in millions)
1993
1998
2003
2008
2013
2016
2017
2018
2019
2020
$149
$257
$376
$780
$1,303
$1,326
$1,549
$1,630
$1,853
$2,166
[3]Total equity less preferred equity, goodwill and acquisition intangibles, principally core deposit
intangibles, net of accumulated amortization.
[4] Available for sale securities at fair value, held to maturity at amortized cost
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25
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT First Guaranty Bank
PERFORMANCE GRAPHS
First Guaranty Bank
The FGB Center
Loans, Net of Unearned Income
(in millions)
Loans, Net of Unearned Income
(in millions)
1993
1998
2003
2008
2013
2016
2017
2018
2019
2020
$105
$177
$381
$606
$703
$949
$1,149
$1,225
$1,525
$1,844
Investments
(in millions)
1993
1998
2003
2008
2013
2016
2017
2018
2019
2020
$30
$73
$59
$139
$635
$499
$502
$405
$427
$239
Investments [4]
(in millions)
Photo courtesy of Phillip Colwart
The FGB Center is officially complete and we couldn’t be more
excited! This beautiful 3-story building sits in the heart of
Hammond, LA, (right across the street from our main operations
center) and houses our IT, Customer Support Center, ITM Agents
and Learning & Development Departments. With our future in mind,
we have additional space available for growth.
To round out this beautiful center, we have two new training rooms
and a large auditorium. All rooms are equipped with state-of-the-
art audio/visual equipment to enhance learning, collaboration and
networking. Already, the training rooms are being used not only by
the L&D Department, but also other departments to continue their
education outside of their offices. The auditorium will be used for
larger internal gatherings such as our Annual Shareholders meetings,
Chamber After Hours events, and internal conferences.
Our Customer Support Center, along with our ITM
Agents, have settled in nicely as they have room to
spread out and room for growth. Our IT Department
has also officially settled in and enjoying the space
for all the servers and security functions that keep the
bank running without skipping a beat.
We are so proud of this new building; we will take
any opportunity to show it off. That’s why it was
the location for our main office photo shoot for this
year’s annual report and was also the location for our
newest TV commercials.
We look forward to continuous growth and filling this
building to capacity in the near future.
26
27
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT First Guaranty Bank
2020 Accomplishments and Highlights
EARNINGS & DIVIDENDS
Celebrated open houses in Central Louisiana branches
t
n
1 0 0 % C ommitme
110TH
CONSECUTIVE
DIVIDEND PAID
100% of the T i m e
Earnings increased by $6.1 million from $14.2 million in 2019 to
for 2020
Provided
to small businesses for a total of $111.1 million
STRONG Growth: The allowance for loan losses increased from $10.9 million at December 31,
2019 to
at December 31, 2020
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
$ 1,205,000
$3.4 million
$1,223,000
$ 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
$5.0 million
$1,530,000
$ 5,027,000
■ Gains from sale of acquired branches net of tax totaling $2.8 million
$6.0 million
$1,668,000
$ 8,638,000
■ Acquired Woodlands Bancorp
■ Gains from sale of acquired branches net of tax totaling $1.3 million
$3.5 million
$1,751,000
$10,426,000
$7.0 million
$2,086,000
$13,967,000
$8.6 million
$2,752,000
$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
$36,626,000
$7.6 million
$3,558,000
$40,069,000
$10.0 million
$3,558,000
$45,203,000
$8.0 million
$3,610,000
$47,650,000
■ Acquired Greensburg Bancshares
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Opened the FGB Center
Completed acquisition of The Union Bank
Technology Updates: FGB has
Amite
Denham Springs
Guaranty West (Hammond)
Hammond Main Office
Ponchatoula
Bossier City
Kentwood
Updated MyFGB app
Initiated Customer Surveys
Upgraded Telephone System (FGB experienced high call volume due to PPP and more
customers utilizing banking by phone.)
FGBI STOCK WATCH NEWS:
April 2020 Zacks Equity Research named First Guaranty Bancshares (FGBI) as a “company to
watch” with a Zack’s Rank of #2 (Buy) and an A for Value. Zack’s evaluated and commended
FGBI’s equity, book value, stock price and operating cash flow. Zack’s concluded FGBI stock
was undervalued and had a strong earnings outlook.
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
(ITMs) in:
2014
$11.2 million
$4,027,000
$64,905,000
2015
$14.5 million
$4,247,000
$73,445,000
■ Retained earnings grew by $6.8 million
■ Total loans reached $790 million
■ 10% common stock dividend
■ Listed in NASDAQ
■ Redeemed SBLF Preferred Stock
2016
$14.1 million
$4,870,000
$82,668,000
■ Loans totaled $949 million
2017
$11.8 million
$5,210,000
$89,209,000
2018
$14.2 million
$5,636,000
$97,786,00
2019
$14.2 million
$5,803,000
$106,244,000
2020
$20.3 million
$6,234,000
$120,328,000
$226.3 million
$84,569,000
■ Grand openings of Bossier City, LA Banking Center
■ Acquisition of Synergy Bank and addition of five new Texas locations
■ 50% ownership in Centurion Insurance Services allowing First
Guaranty to sell insurance products
■ Grand opening of Lake Charles, LA Loan Production Office
■ Total loans surpassed $1.2 billion
■ Acquisition of Union Bank and addition of seven new Louisiana
locations
■ 110th consecutive quarterly dividend
■ Named the No. 1 BEST SMALL BANK IN THE U.S.!
■ Assisted 917 Small Businesses through PPP with $111.1 million
in loans.
■ Retained earnings of $57.4 million
■ Strengthened loan loss reserve and strong loan growth
* 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.
28
FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
29
#1 Best Small Bank in the U.S.
First Guaranty Bank
Central Louisiana Open Houses
Our Open House events allow
customers, employees and the
surrounding communities to come
together and get to know us through an
afternoon of food and fun. During these
events, we also highlight local charities
and give back with donations.
This year, each Central Louisiana
branch hosted their own Open House
event with the purpose of introducing
FGB, better banking and the people
behind that promise to the community.
After dodging hurricanes and planning
through a pandemic, we were able to
host the events safely, albeit slightly
different from those of years past.
Beneficiaries included:
• Food Bank of Central Louisiana
• Open Hands
• Avoyelles Council on Aging, Inc.
• Save CENLA
• Children’s Advocacy Network
• Rotary Club of Bunkie
• Boudreaux’s Animal Rescue Krewe
127
24
6
7
12
14
10
26
4
21
20
23
8
13
25
16
19
3
17
18
5
15
1
2
11
22
28
9 29
26
30
33
31
32
34
Come see what better banking
is all about at our...
Open
HOUSE
It’s a Party!
Better Banking is more than just a
catchy phrase, it’s our commitment to
always finding ways to improve — for you!
Our open house event is a great way for you to get
to know the people behind the commitment. Join
us for food, fun and some great music!
New Date!
TUESDAY,
NOVEMBER 17TH
3PM — 5PM
1701 Metro Drive
Alexandria, LA 71301
Masks are required
At FGB, we aren’t just a bank — we’re real people that work, live
and play in your community. Come by our open house to see how!
Come see what better banking
is all about at our...
Open
HOUSE
It ’s a Par ty!
Bet ter Banking is more than just a
catchy phrase, it’s our commitment to
always finding ways to improve — for you!
Our open house event is a great way for you to get
to know the people behind the commitment. Join
us for food, fun and some great music!
2 E VENTS
WEDNESDAY, OCTOBER 7TH
TUNICA BRANCH
11AM — 1PM
211 East Tunica Drive
Marksville, L A 71351
&
MARKSVILLE BRANCH
3PM — 5PM
305 Nor th Main Street
Marksville, L A 71351
At FGB, we aren’t just a bank — we’re real people that work ,
live and play in your community. Come by our open house to
see how!
30
31
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT 1049205512 First Guaranty Bank
BANKING BRANCHES
First Guaranty Bank
BRANCHES AND ATM/ITM LOCATIONS
30
33
31
32
34
127
24
6
7
12
14
10
Texas
Louisiana
25
4
21
20
13
23
8
16
19
3
17
18
5
15
11
22
28
9 29
12
26
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BRANCHES
1 Main Office Hammond, LA –
Guaranty Square
2 Hammond, LA – Guaranty
West
3 Abbeville, LA
4 Alexandria, LA
5 Amite, LA
6 Benton, LA
7 Bossier City, LA
8 Bunkie, LA
9 Denham Springs, LA
10 Dubach, LA
11 Greensburg, LA
12 Haynesville, LA
13 Hessmer, LA
14 Homer, LA
Independence, LA
15
16 Jennings, LA
17 Kentwood, LA
18 Kentwood, LA – West
19 Lake Charles, LA – Loan
Production Office
20 Marksville, LA – Main Street
21 Marksville, LA – Tunica
22 Montpelier, LA
23 Moreauville, LA
24 Oil City
25 Pineville, LA
26 Ponchatoula, LA
27 Vivian, LA
28 Walker, LA
29 Watson, LA
30 Denton, TX
31 Fort Worth, TX
32 Garland, TX
33 McKinney, TX
34 Waco, TX
CENTRAL
LOUISIANA
ALEXANDRIA, LA
1701 Metro Drive
6201 Coliseum
Boulevard
BUNKIE, LA
1110 Shirley Road
HESSMER, LA
2705 Main Street
MARKSVILLE, LA
211 East Tunica Drive
711 Paragon Place
(Paragon Casino &
Resort)
MOREAUVILLE, LA
10710 Highway 1
PINEVILLE, LA
40 Pinecrest Drive
TEXAS
FORT WORTH, TX**
2001 North Handley
Ederville Road
WACO, TX*
7600 Woodway Drive
ATM LOCATIONS
SOUTH LOUISIANA
ABBEVILLE, LA
799 West Summers Drive
AMITE, LA
100 East Oak Street
1014 West Oak Street
BEDICO, LA
Bedico Supermarket,
28473 Highway 22
DENHAM SPRINGS, LA
2231 South Range Avenue
GREENSBURG, LA
6151 Highway 10
HAMMOND, LA
1201 West University
Avenue
2111 West Thomas Street
400 East Thomas Street
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 Avenue
KENTWOOD, LA
723 Avenue G
LIVINGSTON, LA
(LPMC) Livingston Parish
Medical Center:
17199 Spring Ranch Road
LORANGER, LA*
19518 Highway 40
MONTPELIER, LA
35651 Highway 16
PONCHATOULA, LA
500 West Pine Street
ROBERT, LA
Robert’s Supermarket -
22628 Highway 190
WALKER, LA
29815 Walker Road
South
WATSON, LA
33818 Highway 16
NORTH
LOUISIANA
BENTON, LA
189 Burt Boulevard
BOSSIER CITY, LA
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
ITM LOCATIONS*
All MiBY hours are
Monday-Friday: 7:00 AM to 6:00 PM
Saturday: 7:00 AM to 3:00 PM
AMITE, LA*
632 West Oak Street
BOSSIER CITY, LA*
4221 Airline Drive
HAMMOND MAIN OFFICE*
400 East Thomas Street
KENTWOOD*
723 Avenue G
DENHAM SPRINGS, LA*
2231 South Range Avenue
PONCHATOULA, LA*
500 West Pine Street
GUARANTY WEST*
2111 West Thomas Street
*Deposit Enabled
**Coming Soon
33
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT 1049205512 First Guaranty Bank
DEPARTMENTS & BRANCHES
FGB employees are a team. This year’s photographs utilized social distancing
and some departments were divided into smaller groups for safety.
Guaranty Square
(985) 345-7685
(888) 375-3093
400 East Thomas Street
Hammond, LA 70401
BSA WALKER
Kendra Fairburn
BSA MARKSVILLE
Front: Lucinda Jacobs
Back: Cathy Butter
APPRAISAL REVIEW
Front: Bailey Janke
Middle: Starr Bernier
Back: Luke Orlando
Not Pictured: Aaron Flores, Emma Willman
BSA MAIN
Front (Left to Right): Sharmaine Robertson, Linda Miller, Taylor Barnard
Middle (Left to Right): JoEllen Juhasz, Jonathan Fandal
Back: Christe Feimster
34
COLLATERAL
Front (Left to Right): Sarah Sheridan,
Heather Coslan, Emily McIntyre,
Lauryn Coburn
Middle (Left to Right): Tylishia
Randell, Krystal Gregory, Sarah
Jenkins
Back (Left to Right): Cate Mathes,
Paul Lee
COMPLIANCE MARKSVILLE
Pamela Landry
COMPLIANCE MAIN
Front (Left to Right): Christina Carter,
Sara Schaffer
Back (Left to Right): Becky Brown,
Ann Morgan
35
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT CREDIT CARD DEPARTMENT:
Front: Debbie Dubuisson
CREDIT MCKINNEY
Front (Left to Right): Ben Golane, Michael Wiggins
Back (Left to Right): Jason Wilson, Derhonda Gaines
Back (Left to Right): Stacy Dutcher
Not Pictured: Keith Klein, Adam Smith
DEPOSIT MANAGEMENT AND PUBLIC FUNDS
Front (Left to Right): Holly Tamburello, Brandi Steffek
Middle (Left to Right): Mark Ducoing, Mary Mayo, Steve Osman
Not Pictured: Areeb Rashid
CREDIT MAIN
Row 1 (Left to Right): Matthew Wise, Madison Amos, Benjamin Lopez, Brittanie Wallace
Row 2 (Left to Right): Corey Hayden, Louis Cusimano, Lana Quinn, Colton McDaniel
Row 3 (Left to Right): Joshua Madere, Claire Roberts, Megan Elkins, Jakayla Brown
Row 4 (Left to Right): Ethan Hunt, Davon Mitchell, Heidi Romefanger
DEPOSIT MANAGEMENT
NORTH LOUISIANA
Daniel Loe
DEPOSIT MANAGEMENT
FORT WORTH:
Le’Triche Miller
DEPOSIT OPERATIONS
Front (Left to Right): Lori Lloyd,
Shirley Jones
Middle (Left to Right): Glenda Saucier,
Maya Loving, Amanda Johnson
Back (Left to Right): Letitia Cox,
Megan Nelson
36
CUSTOMER SUPPORT CENTER:
Front (Left to Right): Destiny Brumfield, Tasha Jackson,
Leila Spears, Danyelle Green
Back (Left to Right): Eboni Jackson, Victoria Boren
DEPOSIT OPERATIONS REMOTE
Divetta Stallworth, Tammy Graves and Sandra Edwards
37
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT EXECUTIVE
Front (Left to Right): Alton Lewis,
Kristin Williams
Back (Left to Right): Vanessa Drew
FINANCE MAIN
Front (Left to Right):
Wendy Caillouet,
Katherine Campbell,
Karli Montero,
Donna Scamardo
Middle (Left to Right):
Pemba Sherpa, Eric
Dosch, Rhesha Lamonte,
Chandra McKinney
Back (Left to Right):
Chuck Lyles, Brody
McDaniel, Lauren Bush,
Michael Moye
FRONTLINE MAIN:
Front (Left to Right): Emma McDonald, Breanna Bankston
Middle (Left to Right): Vickie Vanlandingham, Ashley Oliver, Jessica Merriman
Back (Left to Right): Latonia Cotton, Jeannette Ernst
Not pictured: Kyleen Tulion, Laura Day, Brittany Gill
FINANCE MARKSVILLE
FINANCE TEXAS
Calvin Ducote
Charles Baggs
FINANCE MAIN REMOTE
Front (Left to Right): Eric Fuller, Jessica West
Back (Left to Right): Diane Lanier, Laquita Johnson
38
HUMAN RESOURCES MAIN
Front: Mikki Kelly
Back (Left to Right): Casey Waters, Mandi Aguillard, Danielle Willie
HUMAN RESOURCES
MARKSVILLE
Jason Normand
HUMAN RESOURCES MAIN
REMOTE
Landa Domangue
39
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
INFORMATION TECHNOLOGY MAIN
Front (Left to Right): Mark Montalbano, Michelle Saucier, David Couvillon, Samantha Petracek
Middle (Left to Right): Joshua Valladares, Averi Dickerson, Moises Rodriguez, Star Lala, Austin Grant, Keith Mills
Back (Left to Right): Julian Oseng, Tim Chesney, Nick Schmitt
Not Pictured: Joshua Elliott, Christopher Hoffman, Keldrick Allums, Merrill Magday
INTERACTIVE BANKERS:
Front (Left to Right): Tierra Parker, Danyelle Green, Stevie Bourg
Middle (Left to Right): James Lewis, Brittany Berryhill, Ethan Sansoni
Back (Left to Right): Cassandra Brumfield, Chasity Williams, Leila Spears
Not Pictured: Laura Ard, Elizabeth Roy
INFORMATION
TECHNOLOGY WACO
Federico Guerrero
INFORMATION TECHNOLOGY
MARKSVILLE
Front: Juan Bautista
Back: Tyler Roy
40
INTERNAL AUDIT, LOAN REVIEW, & INFORMATION SECURITY MAIN
Front (Left to Right): Tae Anderson, Hannah Primes
Middle (Left to Right): Travis Hester, Michelle Dionne, Cristen Williams
Back (Left to Right): Tom Brothers, Bill Worthy
Not Pictured: Rob Clifton
AUDIT FORT WORTH
Nancy Rodriguez
INFORMATION SECURITY
WACO
Kenny Wilson
41
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT LENDING MAIN
Front (Left to Right): Catherine Egnew, Christy Wells, Jane Wear
Middle (Left to Right): Vickie Jenkins, Michael Knighten
Back: Daryl Ferrara
Not Pictured: Dev Patel
LENDING MAIN
Front: Randy Vicknair
Back: Melanie Gottschalck
LEARNING AND DEVELOPMENT:
Top (Left to Right): Amber Smith,
Casie Qualls, Kendra Phipps
Middle (Left to Right): Kristen Bell,
Miranda Derveloy
Bottom (Left to Right): Sue Tillman,
Vikki Dupaquier
LOAN OPERATIONS MAIN
Front (Left to Right): Kellie DeMarco, Allison Duke, Leah Hunter, Destiny Bankston
Middle (Left to Right): Bonnie Griener, Audrey Carter, Luke Lavergne, Laura LaCoste, Donna Hodges
Back (Left to Right): Sharon Rogers, Christy Frierson, Julie Carmo
Not Pictured: Darlene Albert, Clifton Fincher
LOAN OPERATIONS MARKSVILLE
Front (Left to Right): Brittany Dauzat,
Stephanie Moses
Back (Left to Right): Carolyn
Bordelon, Melissa Small
Not Pictured: Christy Marcotte
LOAN OPERATIONS
MCKINNEY:
Top to Bottom:
Lisa Stoker
Carmen Murphy
Jenny Bae
Not Pictured: Jan Brownd
43
42
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT MARKETING
Front (Left to Right): Desiree Simmons, Lauren Lee, April Alford
Middle (Left to Right): Allison Ryan, Brian Friel
Back: Carl Duplessis
MERGERS & ACQUISITIONS
Front: Evan Singer
Back: Jake Schembre
OPERATIONS MAIN
Front (Left to Right):
Betty Boney, Carla
Cook, Denise Rehage
Middle (Left to Right):
Jessica Spears,
Scheila Davis
Back (Left to Right):
Julie Nevels, Richard
Stark, Elisa Costanza
Not Pictured: Susan
Kimmerling
MORTGAGE TX
Angela Moore
OPERATIONS MAIN REMOTE
Front: Pam Stafford
Back: Tracey Robertson
MORTGAGE MAIN
Front (Left to Right): Melissa Duchmann, Christine Zeringue
Middle (Left to Right): Anna Borgstede, Megan Braden, Theresa Steward
Back (Left to Right): Joshua Wooley, Brandon Wear
Not pictured: Lisa Armstrong, Nikki Hall
44
OPERATIONS TEXAS:
Ashley Bell
OPERATIONS CENTRAL
LOUISIANA:
OPERATIONS SOUTHEAST
LOUISIANA:
OPERATIONS NORTH
LOUISIANA:
Chanyon Robertson
Marsha Spring
Shane Hughes
45
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Abbeville Branch
(337) 893-1777 / (800) 306-3276
799 West Summers Drive
Abbeville, LA 70510
PURCHASING MARKSVILLE
Front: Stravis St. Romain
Back: Armenio Magday
Sitting (Left to Right): Amy Broussard, Gretchen Meaux, Tanya Menard
Standing (Left to Right): Lisa Kritzer, Melina West, Ruth Cuevas, Glenn Duhon,
Diane Frederick
Not Pictured: Cody Gil, Terry Fendley
PURCHASING
Front: Donna Turnage
Middle: Darryl Boudreaux
Back: Joseph Ernest
Alexandria Branch
(318) 443-8994
1701 Metro Drive
Alexandria, LA 70301
SPECIAL ASSETS
Front (Left to Right): Kriss Patterson, Lee Ann Sibley
Back (Left to Right): Ronnie Pittman, Luke Hammonds
SPECIAL ASSETS MARKSVILLE
(Left to Right): Benjamin Wood,
Joann Moreau
Front (Left to Right): Jeanette Brown, Jajuanna Pardue
Back (Left to Right): Lani Thompson, Rachel Hazelton
Not Pictured: Pam Normand, Becki Normand
46
47
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Front (Left to Right): Jenny Sue Weedman, Nicole D Brown, Suzette Brooks,
Roxane Williams
Middle (Left to Right): Miranda Rainey, Tammy Chavers, Shana Wells,
Stephanie Campo, Saleatha Gordon
Back (Left to Right): Wiletha Brown, Scott Schilling
Amite Branch
(985) 748-5111
632 West Oak Street
Amite, LA 70422
Benton Branch
(318) 965-2221
189 Burt Boulevard
Benton, LA 71006
Front (Left to Right): Jordan Colvin, Courtney Tramiel
Back (Left to Right): Benita Douglas, Erika Taylor,
Lynn Henry
Not Pictured: Matthew Hudnall, Stephanie Medford
Dempsey
Adam Johnston
Bossier City Branch
(318) 383-5234
4221 Airline Drive
Bossier City, LA 71111
Bunkie Branch
(318) 346-4981
1110 Shirley Road
Bunkie, LA 71322
Front (Left to Right): Donna Cummings, Alisha Blankenship
Back (Left to Right): Larry Ross, Monique Rochelle, Karen Varilek,
Linda Blankenship
Not Pictured: Stephanie Bracken
Front (Left to Right): Rebekah Turner, Rikki Deaville
Back (Left to Right): Cheri Moses, Dominique Wilson
Not Pictured: Erica O’Neal, Kim Ferguson
48
49
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Denham Springs Branch
(225) 791-7964
2231 South Range Avenue
Denham Springs, LA 70726
Dubach Branch
(318) 777-3461
117 East Hico Street
Dubach, LA 71235
Front: Courtney Lachney, Brittanie Wallace
Middle (Left to Right): Jennifer Rizzi, Clint Trant, Ludrick
Hidalgo, Sharon Moore
Back (Left to Right): Michelle O’Quin, Kathie Alimia,
Robyn Giacone
Not Pictured: Kevin Foster
Ronnie Foshee
Front (Left to Right): Judy Wilkerrson, Sue Yates
Middle (Left to Right): Diane Shoemaker, Kemberlin Locks
Back (Left to Right): Christine Harrel, Kristy Puckett
Denton Branch
(940) 383-0700
2209 West University Drive
Denton, TX 76201
Fort Worth Branch
(817) 502-6611
2001 North Handley Ederville Road
Fort Worth, TX 76118
Front (Left to Right): Evan Baranosky, Leslie Hinzman
Back (Left to Right): Sandra Whittington, Daniel Prince, Karen Stevenson
Front (Left to Right): Indra Pant, Alyssa Al Sabi, Briana Eilert
Not Pictured: Amanda Arizpe, Dot Frazier, Briana Ochoa, Maty Sanchez
50
51
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Garland Branch
(214) 227-4550
603 Main Street #101
Garland, TX 75040
Hammond – Guaranty West Branch
(985) 375-0371
2111 West Thomas Street
Hammond, LA 70401
Front (Left to Right): Callistus Amajoyi, Corinne Forbes, Jennifer Petty
Back (Left to Right): Angelia Simmers, Brenda Briscoe, Sara Wayne
Not Pictured: Amy Turner, Perla Alvizo
Front (Left to Right): Chris Martin, Latoria Burnett, Christina Lacara
Back (Left to Right): Keema Muse, Brittany Morgan
Greensburg Branch
(225) 222-6101 / (800) 227-6101
6151 Highway 10
Greensburg, LA 70441
Haynesville Branch
(318) 624-1171
10065 Highway 79
Haynesville, LA 70138
Front (Left to Right): Trella Page, Melissa Smith
Back (Left to Right): Paige Rushing, Harrison Gill, Deionna Frank
Not Pictured: Kelsey Travis
Front (Left to Right): Hailee Ray, Tammy Burley
Back: Julia Tabor
Not Pictured: Jane Cleveland
52
53
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Hessmer Branch
(318) 563-4583
2705 Main Street
Hessmer, LA 71341
Homer Branch
(318) 927-3000
401 North 2nd Street
Homer, LA 71040
Independence Branch
(985) 878-6777
455 West Railroad Avenue
Independence, LA 70443
Front: Katherine Ponthieux
Back (Left to Right): Courtney Lacombe, Lakin Lemoine
Front (Left to Right): Caitlyn Doty, Peggy Garon, Karen Paille
Back (Left to Right): Sonja Johnson, Chelsey Weedman, Cheryl Brumfield
Jennings Branch
(337) 824-1712
500 North Cary Avenue
Jennings, LA 70546
Front (Left to Right): Chanyon Robinson, Gwendolyn Pete
Back (Left to Right): Keisha Miller, Amanda Crochet
Sitting (Left to Right): Ranelle Stovall, C’nya
Anderson, Candie White, Ashley Bailey
Standing (Left to Right): Debra Spigener,
Caree Bailey, Aleshia Lee, Laura Pair
Homer Lending
Front: Tristan Lowe
Back: John Synco
Not Pictured: Ron Edmonds,
Jamie Williams, Kitsha Ridley
54
55
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Kentwood Branch
(888) 375-3093
301 Avenue F
Kentwood, LA 70444
Kentwood West Branch
(985) 229-6101
723 Avenue G
Kentwood, LA 70444
Left to Right: Ruby Carter, Allison Keating
Not Pictured: Cara Garner
Front (Left to Right): Lindsey George, Connie Butler, Karen Griffin
Back (Left to Right): Christopher Geraci, Kelsey Travis, Jhameilla McCray Anderson
Not Pictured: Lisa Rushing
respectful, genuine and compassionate. When
a person possesses these virtues, they are
appreciated and, thus, remembered. In addition to
his thoughtful and kind ways, Lance was known
for a few quotes and quips. When asked how he
was, he would enthusiastically reply, “Just living the
dream!” He would sometimes reply, “Just another
day in paradise!”
Harrison Gill shared
a special, touching
experience shortly
after Lance Davis
passed. On a Toledo
Bend fishing trip,
his guide service
was named “Just
Living the Dream!” and their catch was bountiful! His
buddy was looking out for him and letting him know
he is indeed Living the Dream.
Lance Davis joked a lot and was kind to all. What
a fine legacy to leave to customers, coworkers and
his son, Noah, whom he loved more than anything.
Lance is spoken of affectionately and missed daily.
Customers tell his coworkers that they have big
shoes to fill. It is an honor to have known Lance and
to strive to be like him. God Bless America and God
Bless Lance Davis.
¹ https://goodmenproject.com/featured-content/how-to-be-
remembered-after-your-death-hlg/
Re m e m b e
g L a n c
i n
1 9 7 1 - 2 0 2 0
r
e D a v i s
Just living the dream!
The greatness of all truly great human beings, lies
not so much in their specific accomplishments
as in the way they lived. People who enrich their
environment have one thing in common: they
consciously commit the full measure of their talents
to serving a need beyond their personal desires.
Whatever the goal, choosing to dedicate their lives
to something larger than themselves enlarges the
scope of their influence.¹
Lance Davis is remembered by customers and
fellow team members who adored him and his
easy-going ways. Lance was generous, helpful,
Lake Charles - Loan
Production Office
(337) 824-1712
4740 Nelson Road, #320
Lake Charles, LA 70605
Lobby Hours: By Appointment
Rahul Patel
56
57
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Marksville Branch
(318) 253-4531
305 North Main Street
Marksville, LA 71351
Marksville Front Line
Front (Left to Right): Liz Lemoine, Lakin Lemoine
Middle (Left to Right): Sheila Smith, Ronald
Chatelain, Ariel Jueschke
Back (Left to Right): Colleen McGehee, Ronny Green,
Ann Tassin
Marksville Main Lending
Front (Left to Right) Greg Prudhomme,
Samantha Lachney
Back (left to Right) Jana Joshua, Josiah Blood
McKinney Branch
(972) 562-1400
8951 Synergy Drive, #100
McKinney, TX 75070
McKinney Front Line
Front (Left to Right): Deborah King, Linda Kolosey
Back: Rebecca McKenna
Jordan Lewis
McKinney Lending
Front: Krista Peterson
Back: Conrad Arrambide
Montpelier Branch
(225) 777-4304
35651 Highway 16
Montpelier, LA 70422
Front (Left to Right): Nickie Dauzat, Tammy Washington
Back (Left to Right): Claire Lacombe, Cynthia Wyatt, Elizabeth Bordelon
Not Pictured: Casey Brouillette, Katherine Scallan
Front (Left to Right): Trella Page, Betsy Ehret
Back (Left to Right): Heather Burrell, Elizabeth Zito
Not Pictured: Christina Lacara
Marksville - Tunica Branch
(318) 253-9835
211 East Tunica Drive
Marksville, LA 71351
Tunica- Tag and Title
Front: Minnie Deshotel
Back: Kenneth Ducote
58
59
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Moreauville Branch
(318) 985-2299
10710 Highway 1
Moreauville, LA 71355
Oil City Branch
(318) 995-6682
126 South Highway 1
Oil City, LA 71061
Pineville Branch
(318) 641-7564
40 Pinecrest Drive
Pineville, LA 71360
Front (Left to Right): Laura Dufore, Susan Desoto
Back (Left to Right): Steve Osman, Melinda Kidder, Chanyon Robinson
Front (Left to Right): Chaston Price, Lynn James
Middle (Left to Right): Evelyn Pickney, Jajuanna Pardue
Back (Left to Right): Austin Mathews, Luis Juneau
Ponchatoula Branch
(888) 375-3093
500 West Pine Street
Ponchatoula, LA 70454
Front (Left to Right): Emma Rolling, Dollie Ogletree
Middle (Left to Right): Tina Gay, Qanisha Thomas
Back (Left to Right): Elaine Bounds, Lacie Walton
Not Pictured: Glenda Graham
Front (Left to Right): Renee Stewart, Amiee Gervais
Middle (Left to Right): Laura Perez, Denise Fletcher, Misty Chauvin
Back (Left to Right): Craig Scelfo, Philip Jeanfreau, III, Ashton Wilson
60
61
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Vivian Branch
(318) 375-3202
102 East Louisiana Avenue
Vivian, LA 71082
Walker Branch
(225) 664-5549
29815 Walker Road South
Walker, LA 70785
Front (Left to Right): Caroline Caldwell, Heather Webb, Nancy Garsee
Middle (Left to Right): Glenda Sepulveda, Brandy Moon
Back (Left to Right): Megan Hall, Stacy Thompson
Not Pictured: Lisa Milligan, Shawn Hall
Front: Angela Wales, Sheila Lofton
Back (Left to Right): Sylvia Moore, Maryan Jillo, Nicole Mouton
Waco Branch
(254) 399-0700
7600 Woodway Drive
Waco, TX 76712
Watson Branch
(225) 665-0400
33818 Highway 16
Denham Springs, LA 70706
Front: Pam Lambert
Middle (Left to Right) Russell Daniel, Christopher Henderson
Back (Left to Right): Amy Dennis, Terrie McCartney
Not Pictured: Angelia Simmers
Front: Bill Smith
Back (Left to Right): Judy Hughes, Emily Galviano
Not Pictured: Krystal Dunaway
Ludrick Hidalgo
62
63
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Community contributions are a priority budget item
for First Guaranty Bank. Listed are the institutions,
organizations and associations that we have assisted
with contributions and sponsorships during 2020.
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.
FGB Gives Back
First Guaranty Bank contributions for community support exceeded $281,306 in 2020.
A contribution was presented to Ponchatoula High School
Lady Wave Basketball. Left to right: Amiee Gervais, Amaya
Gervais, PHS Lady Wave Basketball Player and Keema
Muse.
Vanessa Drew presented a contribution to Pastor Dennis Hebert for the
Beacon Light Academy program.
Steve Osman presented a contribution to John Barbry, Director of
Development & Programming for the Tunica- Biloxi Tribe of Louisiana.
Catherine Egnew presented a contribution to Coach Blanchard
for the Springfield High School Baseball team.
Vanessa Drew presented a contribution to Patti Roubique,
Executive Director of Louisiana Children’s Discovery Center.
A contribution was presented to Christmas on Caddo. Left to right, Emma
Rolling, Tina Gay, Cassie Hartley, Christmas On Caddo Vice President and
Glenda Graham.
Jason Wilson presented a contribution to Hammond – Ponchatoula Sunrisers
Rotary for the Hammond – Ponchatoula Chili Cookoff. Left to right, are John Daniel
Guerin, Jason Wilson and Deek Deblieux.
Melina West presented a contribution to Samantha,
School Secretary, for the Safe and Sober program
following prom for Hathaway High School.
64
65
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT FGB Gives Back
FGB Gives Back
Kelsey Travis and Jhameilla Anderson presented a contribution to Yolanda
Callahan of the Town of Kentwood.
Adam Johnston presented a contribution to Ashley
Busada, VP Government Relations & Business
Development for the North Louisiana Economic
Partnership.
A contribution was presented to Southeastern Louisiana University. Left to right are CEO Alton Lewis, Jay Artigues, Athletic Director, Allie
Crain, Assistant to the Athletic Director, Kristin Williams and Desiree Simmons.
Kristin Williams presented a contribution to Heather Poole,
Development Manager & Marketing Director, of Our Daily Bread.
Jason Wilson presented a contribution for Geaux Yoga to Erica
Kelt, Director of Development of Mary Bird Perkins Cancer
Center of Hammond.
JoEllen Juhasz presented a contribution to Rob Carlisle,
Chief Executive Officer and Lauren Reynolds, Community
Outreach Director, of Child Advocacy Services, for the
Threading Hope “Social Media-Thon” event.
Jason Wilson presented a contribution to Ryan Barker, Director of
Chappapeela Sports park for an annual sponsorship.
66
67
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT FGB Gives Back
FGB Gives Back
Desiree Simmons presented a contribution to Michelle Gallo, CEO/Executive Director
of Crime Stoppers of Tangipahoa, Inc. for the Drive In Concert event.
Courtney Tramiel presented a contribution
to Eddie Hamilton for the Airline High school
basketball team.
Casie Qualls presented a contribution to Charlie Vance for the Talented Theatre program.
Evan Singer presented a contribution to Chesteron Frye, Band Director and Brandon Dorsey, Assistant Band Director for the St. Helena
Marching Band.
Alton Lewis presented a contribution to Pastor Dennis Hebert for the Beacon Light
Academy program.
A contribution was made to Independence
High School. In the photo is Principal Collier.
68
69
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT FGB Gives Back
FGB Gives Back
Melanie Gottschalck presented a contribution to LT. Calvin Miller
and Chief Edwin Bergeron, for the Hammond Union of Police
for the Annual Policeman’s Ball.
Vanessa Drew presented a contribution to Debi Fleming, Executive
Director of Tangipahoa Council on Aging.
A contribution was presented to the Independence Volunteer Fire Department. In the photo, left to right are: Assistant Fire Chief Eric
Anthony, Firefighter Daniel Yonker and Captain Tommie Spencer.
Evan Singer presented a contribution to Brandon Fontenot,
principal of St. Helena’s College and Career Academy for
Lena’s Closet.
70
Jason Wilson and Daryl Ferrara presented a contribution to John Hair,
Executive Director of Our Daily Bread.
Courtney Tramiel, Tristan Lowe, and Joedi Snipes presented a contribution to Jessica Milan Miller, Executive Director and other members
of the Gingerbread House Organization.
71
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT FGB Gives Back
FGB Gives Back
Cody Gil presented a contribution to the Officers of the Abbeville Police Department.
A contribution was made to the Independence Magnet High School Baseball
Program. In this photo are Chasity Collier, Independence High Magnet
School Principal and Vernon Willie, Head Baseball Coach
Courtney Tramiel presented a contribution to Gwendolyn
Hamilton, Executive Director for AMI Kids Caddo.
Courtney Tramiel presented a contribution to Coach J.A. Anglin,
Head Men's Basketball Coach of Bossier Parish Community
College.
Adam Johnston and Joedi Snipes presented a contribution to the
Bossier High School Boys Basketball. In the photo, left to right:
Coach Marlon, Joedi Snipes, Coach Bo and Adam Johnston.
72
We contributed to the Springhill Piggly Wiggly St. Jude Steak Cook Off.
Left to right: Lowell Kenyan, Mark Lowery, Dollie Ogletree, Bobby Vidrine.
73
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT FGB Gives Back
A contribution was made to the Independence Magnet High
School Basketball Program. In this photo are Chasity Collier,
Independence High Magnet School Principal and Desmond
Hunter, Head Basketball Coach.
A
Abbeville Police Department
Albany High School – softball
team sign
American Legion Auxillary #47
– Girls State Program
AMI Kids – Caddo
Amite Oyster Festival
Amy’s Friends dba New
Friends New Life
Avoyelles High School-
Baseball and Lady Mustangs
Avoyelles Parish School Board
D
Denton Parks Foundation
– Senior Center Dances
Sponsor
Doyle High School – Girls
Basketball Championship
Rings
Dubach Restoration and
Beautification Organization –
Chicken Festival
Dubach School – Adopt-A-
School
Town of Dubach – Santa Run
Sponsor
B
Baton Rouge Little League
Beacon Light Baptist Church
Bossier Chamber of Commerce
– Pack the Bus School
Supplies
Bossier High School – Boys
Basketball Championship
Rings
Boy Scouts of America –
Istrouma Area Council
Bunkie High School – Panther
Club and Shootout Sponsor
C
Cajun Navy 2016 – Rescue
Supplies
CASA of Collin County Inc.
Cavalier Athletic Association –
Basketball contribution
Child Advocacy Services
Child Advocacy Center of
Collin County – Back to
School Fair
Children’s Advocacy Network –
Hessmer Open House
Christmas on Caddo –
Fireworks Festival
Claiborne Academy - Billboard
Claiborne Chamber of
Commerce – Platinum
Sponsor
Claiborne Charity Inc.
Claiborne Parish School Board
– Teacher Token Program and
Bicycle Award
Claiborne Scholars Committee
– Scholastic Banquet
Crimestoppers of Tangipahoa –
Drive In Concert Sponsor and
Deputy Duck Derby
Crying Eagle Brewing
Company – Concert
Supporter
F
Fairhaven Denton – Grand
Opening
Fifth Ward Community Center –
Bingo Fundraiser
Herbert S. Ford Memorial
Museum
Fuzzy Friends Rescue – 2020
Barkin’ Ball
G
Gingerbread House Bossier/
Caddo
Greenville Park Leadership
Academy – Teachers
Appreciation Week
Sponsorship
H
City of Hammond – Back to
School Bash
Hammond Area Recreation
District 1 – Chappapeela
Sports Park and Coloring
Contest Sponsors
Hammond High Magnet School
– Girls Soccer Booster Club
Hammond Police Union
Local 345 – Policeman’s Ball
Sponsor
Hathaway High School – Safe
and Sober Prom
Haynesville High School –
Teacher Token Program
Homer Country Club
Homer Golf Club – Tee Box
Sign
Homer High School – Pelican
Quarterback Club
FGB Gives Back
I
Independence High School –
Graduation, Tiger Basketball
Club Sponsor, Baseball
Sponsor
Independence Sicilian Heritage
Independence Summer
Baseball
Independence Volunteer
Fire – Smokin’ on the Tracks
Sponsor
J
Jeff Davis Sheriff’s Office – Golf
Tournament Sponsor
Jennings Festival Association
Jennings High School –
Operation Graduation and Key
Club
Jennings High School Jazzers
K
Kedron Baptist Church – Hole
Sponsor
Kentwood Baseball/Softball
Association – Baseball Sign
Kentwood High Magnet School
Kentwood Rotary Club
Town of Kentwood – School
Supply Giveaway
Knights of Columbus – Le Jour
de Cajun Fundraiser
Knights of Columbus Marksville
Council 1217 – Bass Fishing
Tournament Sponsor
L
LA Childrens Discovery Center
– Bubble Zone Exhibit
Lake Arthur High School – Safe
and Sober Event
Lallie Kemp Foundation – Gala
Sponsor
Lincoln Parish Sheriff
Loranger High School –
Football Sponsor
Louisiana Corn Festival
LSU Ag Center – 5 Grand
Champion Buckles
LSU Ag Center – Vermilion
Parish – Rice Education
M
Main Street Homer – Golf
Tournament
City of Marksville – Doll and
Toy Fund
Marksville High/Avoyelles
Parish School Board – Tiger
Touchdown Club
Mary Bird Perkins Cancer
Center – Geaux Yoga
Sponsorship
Monterey Country Club –
Curing Carrie Benefit and Golf
Tournament
Moreauville Volunteer Fire
Department – Back to School
Bash
Richard Murphy Hospice
Foundation – Hospice Gala
Sponsor
N
N Stitches Customer
Monogramming
NAACP – 2020 Scholarships
New Beginnings Outreach
Ministries – Outreach Program
North Tangi Support Group
Inc. – Mardi Gras Parade Gold
Sponsor
O
Oak Forest Academy – Golf
Tournament
Oak Grove Church of Christ –
Annual Food Fest
Open Hands Sharing God’s
Love – Moreauville Open
House
Options, Inc.
Our Daily Bread of Tangipahoa
– Food Bank
P
Pancreatic Cancer Action
Network Inc. – Purple Stride
5K Walk/Run
Petra Foundation - Fundraiser
Piggly Wiggly – St. Jude's
Steak Cook Off
Ponchatoula Chamber of
Commerce
Ponchatoula High School –
Teacher Appreciation, Lady
Wave Basketball, Project
Graduation and Cheerleader
Sponsorship
T
Tangi Professional Women’s
Organization – Women Mean
Business Conference
Tangipahoa Parish School
System – Tangipahoa Schools
Talented Theatre Program and
Streamliner Project
Tangipahoa Parish Sheriff’s
Office – Mounted Division
Rodeo Sponsor
Village of Tangipahoa – Bike
Drive
Tangipahoa Voluntary Council
on Aging
The Mission Church Hammond
Inc. – Christmas Ministry
The Riff Ridgel Crawfish
Cookoff
Troop 2020
Tunica-Biloxi Indians Political
Action Committee – Golf
Tournament and BBQ Cookoff
Tunica-Biloxi Tribe of Louisiana
– Pow Wow Sponsor
W
Westminster Homes Inc.
Westminster Place – Meal
Delivery Contribution
R
Rotary Club of Denton, Texas –
Flag Program
Rotary Club of Hammond –
Chili Cookoff and Shamrock
Run
Rotary Club of Oil City –
Auction Sponsor
Rotary Club of Ponchatoula –
Scholarship Fund
Rusheon Middle School –
Football Uniforms
S
St. Genevieve Ladies Altar
Society – Catfish Dinner
St. Helena Marching Bank
St. Helena School Board –
Lena’s Closet
St. Thomas Aquinas High
School – Boys and Girls State
Championship Rings
Southeastern Louisiana
University Athletic Association
Southeastern Louisiana
University Columbia Theatre
for the Arts
SLU Foundation – College of
Business, Columbia Theatre,
Community Music School,
SLU Partner Sponsor, Chefs
Evening Platinum Sponsor
and Channel Sponsorship
Special Olympics Louisiana –
Trivia Night
Springfield High School –
Baseball Sponsor
Summerfield High School –
Softball Team
74
75
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Banks Headquartered in Louisiana Ranked by Asset Size as of December 31, 2020
Origin Bank
b1Bank
Red River Bank
Home Bank, National Association
First Guaranty Bank
Investar Bank, National Association
Gulf Coast Bank and Trust Company
JD Bank
Citizens National Bank, N.A.
First Bank and Trust
First Federal Bank of Louisiana
Sabine State Bank and Trust Company
First American Bank and Trust
First National Banker's Bank
Fidelity Bank
Resource Bank
Crescent Bank & Trust
Liberty Bank and Trust Company
The Evangeline Bank and Trust Company
Progressive Bank
Synergy Bank
BOM Bank
Community Bank of Louisiana
United Community Bank
Concordia Bank & Trust Company
South Louisiana Bank, Houma, Louisiana
First National Bank of Louisiana
Home Federal Bank
Century Next Bank
Community First Bank
Metairie Bank & Trust Company
Gulf Coast Bank
Gibsland Bank & Trust Company
Fifth District Savings Bank
Cross Keys Bank
Rayne State Bank & Trust Company
Jonesboro State Bank
Merchants & Farmers Bank & Trust Company
Cottonport Bank
Bank of Commerce & Trust Co.
Homeland Federal Savings Bank
Delta Bank
First National Bank in DeRidder
Citizens Bank & Trust Company
Farmers-Merchant Bank & Trust Company
Choudrant
Baton Rouge
Alexandria
Lafayette
Hammond
Baton Rouge
New Orleans
Jennings
Bossier City
New Orleans
Lake Charles
Many
Vacherie
Baton Rouge
New Orleans
Covington
New Orleans
New Orleans
Ville Platte
Monroe
Houma
Natchitoches
Mansfield
Raceland
Vidalia
Houma
Crowley
Shreveport
Ruston
New Iberia
Metairie
Abbeville
Gibsland
New Orleans
Saint Joseph
Rayne
Jonesboro
Leesville
Cottonport
Crowley
Columbia
Vidalia
DeRidder
Plaquemine
Breaux Bridge
Peoples Bank and Trust Company of Pointe Coupee Parish
New Roads
Southern Heritage Bank
The First National Bank of Jeanerette
St. Landry Bank and Trust Company
Lakeside Bank
M C Bank & Trust Company
Guaranty Bank & Trust Company of Delhi, Louisiana
The Bank
Patterson State Bank
City Bank & Trust Co.
Bank of Zachary
First National Bank
Winnsboro State Bank & Trust Company
Jonesville
Jeanerette
Opelousas
Lake Charles
Morgan City
Delhi
Jennings
Patterson
Natchitoches
Zachary
Arcadia
Winnsboro
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
76
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
Bank of Coushatta
Citizens Savings Bank
Guaranty Bank and Trust Company
Washington State Bank
Commercial Capital Bank
American Bank & Trust Company
St. Landry Homestead Federal Savings Bank
CLB The Community Bank
Hibernia Bank
Franklin State Bank & Trust Company
Caldwell Bank & Trust Company
Marion State Bank
Bank of Abbeville & Trust Company
Citizens Progressive Bank
Bank of St. Francisville
American Bank & Trust Company
Plaquemine Bank & Trust Company
Tensas State Bank
Bank of Sunset and Trust Company
Anthem Bank & Trust
Citizen's Bank & Trust Company of Vivian, Louisiana
Landmark Bank
First National Bank USA
Vermilion Bank & Trust Company
Coushatta
Bogalusa
New Roads
Washington
Delhi
Opelousas
Opelousas
Jonesville
New Orleans
Winnsboro
Columbia
Marion
Abbeville
Winnsboro
Saint
Francisville
Covington
Plaquemine
Newellton
Sunset
Plaquemine
Vivian
Clinton
Boutte
Kaplan
Exchange Bank and Trust Company, Natchitoches, Louisiana
Natchitoches
Bank of Winnfield & Trust Company
Citizens Bank & Trust Company
South Lafourche Bank & Trust Company
Heritage Bank of St. Tammany
Farmers State Bank & Trust Co.
Feliciana Bank & Trust Company
Colfax Banking Company
Simmesport State Bank
State Bank & Trust Company
Mississippi River Bank
Bank of Erath
Eureka Homestead
Progressive National Bank of DeSoto Parish
Jackson Parish Bank
Bank of Louisiana
Peoples Bank
100 Hodge Bank & Trust Company
101 Bank of Gueydan
102 Beauregard FSB
103
104
The Bank of Commerce
First National Bank of Benton
105 Commerce Community Bank
106 Basile State Bank
107 Sicily Island State Bank
108 Bank of Oak Ridge
109 Rayne Building and Loan Association
Winnfield
Covington
Larose
Covington
Church Point
Clinton
Colfax
Simmesport
Golden
Meadow
Belle Chasse
Erath
Metairie
Mansfield
Jonesboro
New Orleans
Chatham
Hodge
Gueydan
Deridder
White Castle
Benton
Oak Grove
Basile
Sicily Island
Oak Ridge
Rayne
110 Abbeville Building & Loan (A State-Chartered Savings Bank)
Abbeville
111
The Mer Rouge State Bank
112 Mutual Savings and Loan Association
Mer Rouge
Metairie
Financial Table of Contents
Selected Financial Data ............................................................................................... 78
Management’s Discussion and Analysis
of Financial Condition and Results of Operation .................................................. 82
Report of Independent Registered Public Accounting Firm ................................114
Consolidated Balance Sheets ....................................................................................116
Consolidated Statements of Income ........................................................................ 117
Consolidated Statements of Comprehensive Income (Loss) ................................ 118
Consolidated Statements of Changes in Shareholders’ Equity ............................. 118
Consolidated Statements of Cash Flows ................................................................. 119
Notes to Consolidated Financial Statements ......................................................... 120
77
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Selected Financial Data
The following table presents consolidated selected financial data for First Guaranty. It does not purport to be complete and is qualified in its entirety by
more detailed financial information and the audited consolidated financial statements contained elsewhere in this annual report.
Year End Balance Sheet Data:
Investment securities
Federal funds sold
Loans, net of unearned income
Allowance for loan losses
Total assets
Total deposits
Borrowings
Shareholders' equity
Common shareholders' equity
At or For the Years Ended December 31,
2020
2019
2018
2017
2016
(in thousands, except for % and share data)
$ 238,548
$ 426,516
$ 405,303
$ 501,656
$ 499,336
$
702
$
914
$
549
$
823
$
271
$ 1,844,135
$ 1,525,490
$1,225,268
$1,149,014
$ 948,921
$
24,518
$
10,929
$
10,776
$
9,225
$
11,114
$ 2,473,078
$ 2,117,216
$1,817,211
$1,750,430
$1,500,946
$ 2,166,318
$ 1,853,013
$1,629,622
$1,549,286
$1,326,181
$ 116,630
$
86,747
$
34,538
$
52,938
$
43,230
$ 178,591
$ 166,035
$ 147,284
$ 143,983
$ 124,349
$ 178,591
$ 166,035
$ 147,284
$ 143,983
$ 124,349
Performance Ratios and Other Data:
Return on average assets
Return on average common equity
Return on average tangible assets (1)
Return on average tangible common equity (1)
Net interest margin
Average loans to average deposits
Efficiency ratio (2)
Efficiency ratio (excluding amortization of intangibles and
securities transactions) (2)
Full time equivalent employees (year end)
Capital Ratios:
Average shareholders' equity to average assets
Average tangible equity to average tangible assets (3)
Common shareholders' equity to total assets
Tangible common equity to tangible assets (3)
0.87 %
11.36 %
0.90 %
13.08 %
3.35 %
81.25 %
58.95 %
68.44 %
429
7.62%
6.86%
7.22%
6.51%
0.76%
8.99%
0.78%
9.68%
3.41%
78.59%
67.48%
66.77%
431
8.42%
8.02%
7.84%
6.99%
0.82%
9.98%
0.85%
10.77%
3.41%
75.39%
69.46%
66.63%
346
8.20%
7.86%
8.10%
7.79%
0.71%
8.59%
0.73%
9.15%
3.33%
72.23%
62.64%
63.38%
338
8.31%
8.01%
8.23%
7.87%
0.97%
11.18%
0.98%
11.64%
3.39%
68.57%
56.85%
60.19%
293
8.63%
8.44%
8.28%
8.10%
t
n
1 0 0 % C ommitme
110TH
CONSECUTIVE
DIVIDEND PAID
100% of the T i m e
Income Data:
Interest income
Interest expense
Net interest income
Provision for loan losses
Noninterest income (excluding securities transactions)
Securities (gains) losses
Noninterest expense
Earnings before income taxes
Net income
Net income available to common shareholders
Per Common Share Data:
Net earnings
Cash dividends paid
Book value
Tangible book value (4)
Dividend payout ratio
$ 100,684
$
$
$
$
$
$
$
$
$
$
$
$
$
26,017
74,667
14,877
8,989
14,791
58,033
25,537
20,318
20,318
2.09
0.64
18.33
16.41
$
$
$
$
$
$
$
$
$
$
$
$
$
$
91,643
29,966
61,677
4,860
8,456
(157)
47,219
17,897
14,241
14,241
1.47
0.60
17.04
15.05
$
$
$
$
$
$
$
$
$
$
$
$
$
$
78,390
21,366
57,024
1,354
7,110
(1,830)
43,275
17,675
14,213
14,213
1.47
0.58
15.20
14.57
$
$
$
$
$
$
$
$
$
$
$
$
$
$
67,546
14,393
53,153
3,822
6,943
1,397
38,521
19,150
11,751
11,751
1.24
0.54
14.86
14.17
$
$
$
$
$
$
$
$
$
$
$
$
$
$
58,532
10,140
48,392
3,705
5,656
3,799
32,885
21,257
14,093
14,093
1.53
0.53
13.51
13.18
30.68 %
40.74%
39.65%
44.34%
34.56%
Weighted average number of shares outstanding
9,741,253
9,695,131
9,687,123
9,468,145
9,205,635
Number of shares outstanding
9,741,253
9,741,253
9,687,123
9,687,123
9,205,635
Asset Quality Ratios:
Non-performing assets to total assets
Non-performing assets to total loans
Non-performing loans to total loans
Loan loss reserve to non-performing assets
Net charge-offs to average loans
Provision for loan loss to average loans
Allowance for loan loss to total loans
1.25 %
1.68 %
1.55 %
1.04%
1.44%
1.12%
0.55%
0.82%
0.73%
0.84%
1.28%
1.17%
1.48%
2.34%
2.30%
79.33 %
49.86%
107.48%
62.88%
50.04%
0.08 %
0.89 %
1.33 %
0.36%
0.37%
0.72%
(0.02)%
0.12%
0.88%
0.54%
0.36%
0.80%
0.23%
0.42%
1.17%
1.
2.
Tangible calculation eliminates goodwill and acquisition intangibles, principally core deposit intangibles, net of accumulated amortization, net of tax. 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."
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."
3. 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."
4. 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."
78
79
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Non-GAAP Financial Measures
Our accounting and reporting policies conform to accounting
principles generally accepted in the United States, or GAAP, and the
prevailing practices in the banking industry. However, we also evaluate
our performance based on certain additional metrics. Tangible book
value per share and the ratio of tangible equity to tangible assets are
not financial measures recognized under GAAP and, therefore, are
considered non-GAAP financial measures.
which 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,
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
At December 31,
2020
2019
2018
2017
2016
(in thousands, except for share data and %)
$ 178,591
$
166,035
$
147,284
$
143,983
$
124,349
-
-
-
-
-
12,900
12,942
3,472
3,472
1,999
5,815
6,527
2,704
3,249
978
$ 159,876
$ 146,566
$ 141,108
$ 137,262
$ 121,372
9,741,253
9,741,253
9,687,123
9,687,123
9,205,635
Book value per common share
Tangible book value per common share
$ 18.33
$ 17.04
$ 15.20
$ 16.41
$ 15.05
$ 14.57
$
$
14.86
14.17
$
$
13.51
13.18
Tangible Assets
Total Assets
Adjustments:
Goodwill
Acquisition intangibles
Tangible Assets
$ 2,473,078
$ 2,117,216
$ 1,817,211
$ 1,750,430
$ 1,500,946
12,900
12,942
3,472
3,472
1,999
5,815
6,527
2,704
3,249
978
$ 2,454,363
$ 2,097,747
$ 1,811,035
$ 1,743,709
$ 1,497,969
Tangible common equity to tangible assets
6.51%
6.99%
7.79%
7.87%
8.10%
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,
2020
2019
2018
2017
2016
(in thousands, except for share data and %)
58.95%
67.48%
69.46%
62.64%
56.85%
$58,033
$47,219
$43,275
$38,521
$32,885
711
390
545
432
320
57,322
74,667
23,780
46,829
61,677
8,299
42,730
57,024
5,280
38,089
32,565
53,153
48,392
8,340
9,455
14,691
(157)
(1,830)
1,397
3,739
$ 9,089
$ 8,456
$ 7,110
$ 6,943
$ 5,716
68.44%
66.77%
66.63%
63.38%
60.19%
80
81
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Management’s Discussion and Analysis
of Financial Condition and Results of
Operations
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with 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, but not limited to, changes in general
economic conditions, either nationally or in our market areas, that
are worse than expected; the impact of the COVID-19 pandemic;
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 financial
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 and Texas customers through 34 banking
facilities primarily located in the MSAs of Hammond, Baton Rouge,
Lafayette, Shreveport-Bossier City, Lake Charles and Alexandria,
Louisiana and Dallas-Fort Worth-Arlington and Waco, Texas. We
emphasize personal relationships and localized decision making to
82
ensure that products and services are matched to customer needs.
We compete for business principally on the basis of personal service to
customers, customer access to officers and directors and competitive
interest rates and fees.
Total assets were $2.5 billion at December 31, 2020 and $2.1 billion at
December 31, 2019. Total deposits were $2.2 billion at December 31,
2020 and $1.9 billion at December 31, 2019. Total loans were $1.8
billion at December 31, 2020, an increase of $318.6 million, or 20.9%,
compared with $1.5 billion at December 31, 2019. Total shareholders'
equity was $178.6 million and $166.0 million at December 31, 2020
and December 31, 2019, respectively.
Net income was $20.3 million, $14.2 million and $14.2 million for
the years ended December 31, 2020, 2019 and 2018, respectively.
We generate most of our revenues from interest income on loans,
interest income on securities, sales of securities, ATM and debit card
fees 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, conditions in domestic
and foreign financial markets and in 2020 the economic and social
effects of the COVID-19 pandemic. 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, Texas 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 2020 and 2019:
• Total assets at December 31, 2020 increased $355.9 million, or
16.8%, to $2.5 billion when compared with December 31, 2019.
Total loans at December 31, 2020 were $1.8 billion, an increase
of $318.6 million, or 20.9%, compared with December 31, 2019.
Total deposits were $2.2 billion at December 31, 2020, an increase
of $313.3 million, or 16.9% compared with December 31, 2019.
Retained earnings were $57.4 million at December 31, 2020, an
increase of $14.1 million compared to $43.3 million at December
31, 2019. Shareholders' equity was $178.6 million and $166.0
million at December 31, 2020 and December 31, 2019, respectively.
• Net income for each of the years ended December 31, 2020 and
2019 was $20.3 million and $14.2 million, respectively.
• Earnings per common share were $2.09 for the year ended
December 31, 2020 and $1.47 for the year ended December 31,
2019. Total weighted average shares outstanding were 9,741,253 at
December 31, 2020 compared to 9,695,131 at December 31, 2019.
The increase in shares was due to the issuance of 54,130 shares of
stock in a private placement in November 2019.
• The allowance for loan losses was 1.33% of loans at December 31,
2020 compared to 0.72% at December 31, 2019. First Guaranty
attributes the increase in the allowance to provisions made for the
COVID-19 pandemic, for growth in the loan portfolio and other
identified risks. Loan discounts related to acquisition accounting from
the Union transaction was approximately $1.8 million at December
31, 2020. First Guaranty had $92.3 million at December 31, 2020 of
SBA guaranteed PPP loans (as defined below) that have no related
allowance due to the 100% government guarantee in accordance
with regulatory guidance.
• The provision for loan losses totaled $14.9 million for 2020 compared
to $4.9 million in 2019. The impact of the COVID-19 pandemic,
growth in the loan portfolio and other identified risks were the main
factors that resulted in an increased provision for 2020 compared to
2019.
• First Guaranty undertook several COVID-19 related actions during
2020 that began in the first quarter of 2020. First Guaranty increased
on-balance sheet liquidity by approximately $100 million prior to
March 31, 2020 through borrowings with the FHLB and brokered
deposits. These borrowings remained at December 31, 2020. First
Guaranty is participating in the SBA Paycheck Protection Program
("PPP") under the Coronavirus Aid, Relief, and Economic Security
Act ("CARES Act"). The CARES Act authorized the SBA to guarantee
loans under a new 7(a) loan program known as the PPP. As a
qualified SBA lender, we were automatically authorized to originate
PPP loans. The SBA will guarantee 100% of the PPP loans made
to eligible borrowers. First Guaranty funded over 900 loans under
the SBA PPP program that totaled approximately $111.1 million at
the peak of the program. Fees generated by the SBA PPP program
were $3.4 million. $2.2 million in fees were recognized in 2020.
$1.2 million in fees were deferred as of December 31, 2020. First
Guaranty has processed forgiveness applications for PPP loans with
payoffs of $19.0 million in the fourth quarter of 2020. First Guaranty
also waived service related charges and other fees for several weeks
following the onset of the COVID-19 crisis.
• First Guaranty originally granted loan deferments to over 1,000
loans that totaled approximately $590 million as part of its COVID-19
related actions during 2020. These deferments were typically for 90
days. As of December 31, 2020, approximately $18.3 million of these
loans remain on deferral status.
• First Guaranty, in furtherance of the strategy adopted in March 2020,
initiated a plan to manage for economic uncertainty by converting
unrealized gains in the securities portfolio to realized gains in the
fourth quarter of 2020. First Guaranty sold approximately $140
million in mortgage-backed securities and $150 million in corporate
securities in October 2020. First Guaranty generated $12.1 million in
pre-tax gains from the sales. First Guaranty has proceeded to reinvest
the proceeds in securities and loans and subsequently reduced
FHLB borrowings by $50.0 million in February 2021.
• Net interest income for 2020 was $74.7 million compared to $61.7
million for 2019.
• Noninterest income for 2020 was $23.8 million compared to $8.3
million for 2019.
• The net interest margin was 3.35% for 2020 and 3.41% for 2019.
First Guaranty attributed the decrease in the net interest margin to
the significant actions related to COVID-19 that impacted balance
sheet composition for both assets and liabilities along with decreased
rates on assets and liabilities. Loans as a percentage of average
interest earning assets increased to 74.7% at December 31, 2020
compared to 72.7% at December 31, 2019.
• Investment securities totaled $238.5 million at December 31, 2020,
a decrease of $188.0 million when compared to $426.5 million at
December 31, 2019. Gains on the sale of securities were $14.8
million for 2020 as compared to losses of $0.2 million for 2019.
At December 31, 2020, available for sale securities, at fair value,
totaled $238.5 million, a decrease of $101.4 million when compared
to $339.9 million at December 31, 2019. At December 31, 2020,
held to maturity securities, at amortized cost, totaled $0, a decrease
of $86.6 million when compared December 31, 2019. First Guaranty
terminated its held to maturity securities portfolio in the first quarter
of 2020 following the sale of certain securities previously designated
as held to maturity.
• Total loans net of unearned income were $1.8 billion at December
31, 2020 compared to $1.5 billion at December 31, 2019. Total
loans net of unearned income are reduced by the allowance for loan
losses which totaled $24.5 million at December 31, 2020 and $10.9
million at December 31, 2019.
• Total impaired loans decreased $4.8 million to $15.9 million at
December 31, 2020 compared to $20.7 million at December 31,
2019.
• Nonaccrual loans increased $1.2 million to $15.6 million at December
31, 2020 compared to $14.4 million at December 31, 2019.
• Return on average assets was 0.87% and 0.76% for the years ended
December 31, 2020 and 2019, respectively. Return on average
common equity was 11.36% and 8.99% for 2020 and 2019,
respectively. Return on average assets is calculated by dividing net
income by average assets. Return on average common equity is
calculated by dividing net income by average common equity.
• Book value per common share was $18.33 as of December 31, 2020
compared to $17.04 as of December 31, 2019. Tangible book value
per common share was $16.41 as of December 31, 2020 compared
to $15.05 as of December 31, 2019. The increase in book value
was due primarily to an increase in retained earnings, offset by a
decrease in accumulated other comprehensive income ("AOCI").
AOCI is comprised of unrealized gains and losses on available for
sale securities.
• First Guaranty's Board of Directors declared cash dividends of $0.64
per common share in 2020. First Guaranty also declared cash
dividends of $0.64 in 2019, which was the equivalent of $0.60 per
common share after adjusting for the 10% common stock dividend
paid in December 2019. First Guaranty has paid 110 consecutive
quarterly dividends as of December 31, 2020.
• First Guaranty terminated its At-The-Market Equity Offering program
("ATM Offering"). First Guaranty did not sell any shares of common
stock under the ATM Offering during 2020 or 2019. First Guaranty
renewed its shelf registration in the fourth quarter of 2020.
• First Guaranty completed the data conversion with the Union
Bancshares, Incorporated acquisition. Total one-time merger related
costs were $0.5 million for 2020. The data conversion was completed
on March 27, 2020.
• First Guaranty currently has one new facility under construction in
order to facilitate future expansion. This construction commitment
totals $11.4 million with $11.1 million incurred as of December 31,
2020.
83
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT 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, multifamily, 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.
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-
84
classified loans and special mention loans and is based on historical
loss experience adjusted for qualitative factors. Qualitative factors
include analysis of levels and trends in delinquencies, nonaccrual
loans, charge-offs and recoveries, loan risk ratings, trends in volume
and terms of loans, changes in lending policy, credit concentrations,
portfolio stress test results, national and local economic trends including
the impact of COVID-19, industry conditions, and other relevant 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.
First Guaranty accounts for acquisitions in accordance with ASC
Topic No. 805, Business Combinations, which requires the use of the
acquisition method of accounting. Under this method, First Guaranty is
required to record the assets acquired, including identified intangible
assets, and liabilities assumed, at their respective fair values, which
in many instances involves estimates based on third party valuations,
such as appraisals, or internal valuations based on discounted cash flow
analyses or other valuation techniques. The determination of the useful
lives of intangible assets is subjective, as is the appropriate amortization
method for such intangible assets. In addition, business combinations
typically result in recording goodwill.
Intangible assets are comprised of goodwill, core deposit intangibles
and loan servicing assets. 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 reporting unit fair value is less than the carrying
amount, a loss would be recognized in other noninterest expense to
reduce the carrying amount. The qualitative test allows management
to assess whether qualitative factors indicate that it is more likely than
not that impairment exists. 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 quantitative assessment would be necessary. The step one test
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 goodwill for that reporting unit
exceeds the estimated fair value of that unit's goodwill, an impairment
loss is recognized in an amount equal to the excess. First Guaranty
concluded goodwill was not impaired as of October 1, 2020. Further,
no events or changes in circumstances between October 1, 2020 and
December 31, 2020 indicated that it was more likely than not the fair
value of any reporting unit had been reduced below its carrying value.
Goodwill impairment evaluations require management to utilize
significant judgments and assumptions including, but not limited to,
the general economic environment and banking industry, reporting
unit future performance (i.e., forecasts), events or circumstances
affecting a respective reporting unit (e.g., interest rate environment),
and changes in First Guaranty's stock price, amongst other relevant
factors. Management's judgments and assumptions are based on the
best information available at the time. Results could vary in subsequent
reporting periods if conditions differ substantially from the assumptions
utilized in completing the evaluations.
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 and loan servicing assets related to the SBA loan portfolio.
Management periodically evaluates whether events or circumstances
have occurred that would result in impairment of value.
Financial Condition
Assets.
Our total assets were $2.5 billion at December 31, 2020, an increase of
$355.9 million, or 16.8%, from total assets of $2.1 billion at December
31, 2019. Assets increased primarily due to increases in cash and
cash equivalents of $232.2 million and net loans of $305.1 million,
partially offset by a decrease in investment securities of $188.0 million
at December 31, 2020 compared to December 31, 2019.
Loans.
Net loans increased $305.1 million, or 20.1%, to $1.8 billion at
December 31, 2020 from $1.5 billion at December 31, 2019. Non-farm
non-residential loan balances increased $207.6 million primarily due to
new originations and the transition of construction and land development
loans to permanent financing in the first quarter of 2020. Included in the
new loan originations were the purchase of approximately $95.0 million
in performing commercial real estate secured loans the majority of which
were located outside of First Guaranty's Louisiana and Texas markets.
The average size of these loans was $0.7 million with the largest credit
totaling $4.9 million. These loans provide additional diversification to
First Guaranty's portfolio. Commercial and industrial loans increased
$84.8 million primarily due to new originations associated with the SBA
PPP lending program that occurred in the second and third quarters
of 2020. SBA PPP loans totaled $111.1 million at the end of the third
quarter in 2020 which decreased to $92.3 million at December 31, 2020
as loans were subsequently processed for forgiveness and paid off by
the SBA. Consumer and other loans increased $39.9 million primarily
due to new originations in First Guaranty's commercial lease program.
First Guaranty has continued to expand its commercial lease portfolio
which generally have higher yields than commercial real estate loans
but shorter average lives. First Guaranty's lease portfolio totaled $104.1
million at December 31, 2020 compared to $70.1 million at December
31, 2019. Multifamily loans increased $22.0 million primarily due to
the conversion of existing construction loans to permanent financing.
Farmland loans increased $4.1 million due to increases on agricultural
loan commitments. Agricultural loans increased $1.6 million primarily
due to seasonal activity. Construction and land development loans
decreased $21.4 million principally due to paydowns and the conversion
of interim construction loans to permanent financing that occurred in
the first quarter of 2020. One-to four-family loans decreased $18.4
million primarily due to paydowns. First Guaranty had approximately
5.7% of funded and 2.5% of unfunded commitments in our loan
portfolio to businesses engaged in support or service activities for oil and
gas operations. First Guaranty's hotel and hospitality portfolio totaled
$120.1 million at December 31, 2020. As part of the management of
risks in our loan portfolio, First Guaranty had previously established an
internal guidance limit of approximately $160.0 million for its hotel and
hospitality portfolio. First Guaranty had $244.9 million in loans related
to our Texas markets at December 31, 2020 which was an increase of
$40.4 million or 19.8% from $204.5 million at December 31, 2019.
First Guaranty continues to have significant loan growth associated with
its Texas branches. We anticipate additional growth opportunities in
Texas as it contains four major cities in Austin, Dallas, Houston, and
San Antonio, plus the continued growth and development of these
areas is exceeding that of other areas of the country. Syndicated loans
at December 31, 2020 were $75.2 million, of which $29.3 million were
shared national credits. Syndicated loans increased $35.3 million from
$39.9 million at December 31, 2019.
As of December 31, 2020, 71.4% of our loan portfolio was secured
by real estate. The largest portion of our loan portfolio, at 44.6% as of
December 31, 2020, was non-farm non-residential loans secured by
real estate. Approximately 34.2% of the loan portfolio was based on a
floating rate tied to the prime rate or LIBOR as of December 31, 2020.
74.5% of the loan portfolio is scheduled to mature within five years from
December 31, 2020.
85
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Loan Portfolio Composition.
Loan Portfolio Maturities.
The table below sets forth the balance of loans, excluding loans held for sale, outstanding by loan type as of the dates presented, and the
percentage of each loan type to total loans.
The following tables summarize the scheduled repayments of our loan portfolio at December 31, 2020 and 2019. 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.
At December 31,
2020
2019
2018
2017
2016
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
Amount
Percent
(in thousands, except for %)
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
Less: Unearned income
Total Loans Net Of Unearned
Income
$ 150,841
8.2% $ 172,247
11.3% $ 124,644
10.1 % $ 112,603
9.8% $ 84,239
26,880
271,236
45,932
824,137
1,319,026
28,335
353,028
148,783
530,146
1.4%
14.7%
2.5%
44.6%
71.4%
1.5%
19.1%
8.0%
28.6%
22,741
289,635
23,973
616,536
1,125,132
26,710
268,256
108,868
403,834
1.5%
18.9%
1.6%
40.3%
73.6%
1.8%
17.5%
7.1%
26.4%
18,401
1.5 %
25,691
2.2%
21,138
172,760
14.1 %
158,733
13.8% 135,211
42,918
586,263
944,986
3.5 %
47.7 %
76.9 %
16,840
1.4%
12,450
530,293
46.1% 417,014
844,160
73.3% 670,052
23,108
1.9 %
21,514
1.9%
23,783
200,877
16.4 %
230,638
20.0% 193,969
59,443
4.8 %
55,185
4.8%
63,011
283,428
23.1 %
307,337
26.7% 280,763
8.9%
2.2%
14.2%
1.3%
43.9%
70.5%
2.5%
20.4%
6.6%
29.5%
1,849,172
100.0%
1,528,966
100.0% 1,228,414
100.0 % 1,151,497
100.0% 950,815
100.0%
(5,037)
(3,476)
(3,146)
(2,483)
(1,894)
$1,844,135
$1,525,490
$1,225,268
$1,149,014
$948,921
December 31, 2020
More Than
One Year
Through
Five Years
One Year
or Less
After Five
Years
Total
(in thousands)
Real Estate:
Construction & land development
$ 23,276
$ 111,615
$ 15,950
$ 150,841
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
6,078
37,604
5,030
105,623
177,611
12,356
40,484
37,866
90,706
12,147
65,011
29,127
8,655
168,621
11,775
494,690
223,824
26,880
271,236
45,932
824,137
712,590
428,825
1,319,026
5,795
293,984
103,315
403,094
10,184
18,560
7,602
36,346
28,335
353,028
148,783
530,146
$ 1,849,172
(5,037)
$ 1,844,135
Total Loans Before Unearned Income
$ 268,317
$ 1,115,684
$ 465,171
Less: unearned income
Total Loans Net Of Unearned Income
December 31, 2019
More Than
One Year
Through
Five Years
One Year
or Less
After Five
Years
Total
(in thousands)
Real Estate:
Construction & land development
$ 35,393
$ 124,715
$ 12,139
$ 172,247
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
8,348
43,155
1,385
10,283
93,457
12,028
124,905
316,767
4,110
153,023
10,560
174,864
22,741
289,635
23,973
616,536
213,186
557,250
354,696
1,125,132
13,290
71,508
15,454
5,087
149,667
90,029
100,252
244,783
8,333
47,081
3,385
58,799
26,710
268,256
108,868
403,834
Total Loans Before Unearned Income
$ 313,438
$ 802,033
$ 413,495
$ 1,528,966
Less: unearned income
Total Loans Net Of Unearned Income
(3,476)
$ 1,525,490
86
87
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
The following table sets forth the scheduled repayments of fixed and
adjustable-rate loans at December 31, 2020 that are contractually due
after December 31, 2021.
TOTAL ASSETS
In Billions
Due After December 31, 2021
(in thousands)
Fixed
Floating
Total
One to five years
740,358
368,259
1,108,617
Over five to 15 years
128,860
91,032
219,892
Over 15 years
Subtotal
Nonaccrual loans
Total
146,830
92,325
239,155
$ 1,016,048 $ 551,616 $ 1,567,664
15,576
$ 1,583,240
As of December 31, 2020, $305.0 million of floating rate loans were
at their interest rate floor. At December 31, 2019, $153.3 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.
TOTAL LOANS
In Millions
88
The following table shows the principal amounts and categories of our non-performing assets at December 31, 2020, 2019, 2018, 2017 and 2016.
Nonaccrual loans:
Real Estate:
Construction and 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
Loans 90 days and greater delinquent & still accruing:
Real Estate:
Construction and 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 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
Multifamily
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
December 31,
2020
2019
2018
2017
2016
(in thousands)
$ 621
$ 381
$ 311
$ 371
$ 551
857
2,227
-
7,449
11,154
3,472
701
249
4,422
15,576
1,000
-
4,980
366
4,699
11,045
1,274
2,759
-
4,646
9,060
4,800
327
216
5,343
14,403
48
-
923
-
1,603
2,574
1,293
2,246
-
864
4,714
3,651
317
61
4,029
8,743
-
-
26
-
-
26
65
1,953
-
3,758
6,147
1,496
4,826
81
6,403
12,550
-
-
-
-
-
-
105
2,242
5,014
2,753
10,665
1,958
8,070
981
11,009
21,674
34
-
145
-
-
179
67
1,856
123
2,046
13,091
$28,667
-
15
50
65
2,639
$17,042
-
53
66
119
145
$ 8,888
41
798
-
839
839
$13,389
-
-
-
-
179
$21,853
311
-
131
-
1,798
2,240
669
-
559
-
3,651
4,879
241
-
120
-
777
1,138
-
-
-
-
2,240
$30,907
-
-
-
-
4,879
$21,921
-
-
-
-
1,138
$10,026
304
-
23
-
954
1,281
-
-
-
-
1,281
$14,670
-
-
71
-
288
359
-
-
-
-
359
$22,212
1.68%
1.25%
1.55%
1.44%
1.04%
1.12%
0.82%
0.55%
0.73%
1.28%
0.84%
1.17%
2.34%
1.48%
2.30%
89
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT For the years ended December 31, 2020 and 2019, gross interest
income which would have been recorded had the non-performing
loans been current in accordance with their original terms amounted
to $0.6 million and $0.9 million, respectively. We recognized $22,000
and $69,000 of interest income on such loans during the years ended
December 31, 2020 and 2019, respectively. For the years ended
December 31, 2020 and 2019, 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, respectively. We recognized $11,000 and $0 of interest
income on such loans during the years ended December 31, 2020 and
2019, respectively.
Non-performing assets were $30.9 million, or 1.25%, of total assets
at December 31, 2020, compared to $21.9 million, or 1.04%, of total
assets at December 31, 2019, which represented an increase in non-
performing assets of $9.0 million. The increase in non-performing
assets occurred as a result of several factors.
Nonaccrual loans increased from $14.4 million at December 31, 2019
to $15.6 million at December 31, 2020. The increase in nonaccrual
loans was concentrated primarily in non-farm non-residential loans.
Non-performing assets included $3.6 million in loans with a government
guarantee, or 11.8% of non-performing assets. These are structured
as net loss guarantees in which up to 90% of loss exposure is covered.
At December 31, 2020 loans 90 days and greater delinquent and
still accruing totaled $13.1 million, an increase of $10.5 million from
$2.6 million at December 31, 2019. The increase in loans 90 days
or greater delinquent and still accruing was concentrated primarily
in one-to four-family residential loans, non-farm non-residential loans
and commercial and industrial loans. One-to four-family loans in the
90 day category included loans acquired from the Union acquisition
that have contractually matured but have not been renewed due to
operations issues following the acquisition. First Guaranty expects to
satisfactorily renew the majority of these acquired loans and return
them to performing status.
Other real estate owned at December 31, 2020 totaled $2.2 million, a
decrease of $2.6 million from $4.9 million at December 31, 2019. The
largest piece of property in other real estate owned is a former retail
shopping center that totals $2.0 million. First Guaranty established a
reserve for other real estate owned losses in the third quarter of 2020.
This reserve totaled $0.4 million at December 31, 2020. Total write-
downs and or reserves related to other real estate owned were $1.4
million in 2020 compared to $0.2 million in 2019. These expenses
were included in other non-interest expense.
At December 31, 2020, our largest non-performing assets were
comprised of the following nonaccrual loans, 90 day plus and still
accruing loans and other real estate owned: (1) a non-farm non-
residential loan secured by a hotel that totaled $3.6 million that is
classified as a troubled debt restructured loan or TDR; (2) a $2.0
million non-farm non-residential property included in other real estate
owned; (3) a non-farm non-residential loan for $2.4 million secured
by commercial real estate that has contractually matured and was
90 days past due and still accruing; (4) a non-farm non-residential
loan secured by a hotel that totaled $1.8 million; (5) a non-farm non-
residential loan secured by a sports facility that totaled $1.3 million
which has a partial government guarantee; (6) a non-farm non-
residential loan for $1.1 million secured by commercial real estate that
has contractually matured and was 90 days past due and still accruing;
(7) an agricultural/ farmland loan relationship that totaled $1.1 million;
(8) an agricultural loan relationship that totaled $1.0 million; and (9) an
agricultural loan relationship that totaled $1.0 million. The agricultural
loans are partially guaranteed by the USDA Farm Service Agency.
Troubled Debt Restructuring.
Classified Assets.
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.
Under section 4013 of the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”), which was signed into law on March 27,
2020 and subsequently modified by later legislation, financial institutions
have the option to temporarily suspend certain requirements under
U.S. generally accepted accounting principles related to troubled debt
restructurings for a limited period of time to account for the effects of
COVID-19. This provision allows a financial institution the option to not
apply the guidance on accounting for troubled debt restructurings to
loan modifications, such as extensions or deferrals, related to COVID-19
made between March 1, 2020 and the earlier of (i) January 1, 2022
or (ii) 60 days after the end of the COVID-19 national emergency. The
relief can only be applied to modifications for borrowers that were not
more than 30 days past due as of December 31, 2019. First Guaranty
elected to adopt these provisions of the CARES Act.
The following is a summary of loans restructured as TDRs at December
31, 2020, 2019 and 2018:
At December 31,
2020
2019
2018
(in thousands)
TDRs:
In Compliance with Modified
Terms
Past Due 30 through 89 days
and still accruing
Past Due 90 days and greater
and still accruing
Nonaccrual
Restructured Loans that
subsequently defaulted
$ - $ - $ 1,288
-
-
3,591
-
-
-
-
-
-
-
304
-
Total TDR
$ 3,591
$ -
$ 1,592
At December 31, 2020, First Guaranty had one outstanding TDR
which was a $3.6 million non-farm non-residential loan secured by
commercial real estate that is on nonaccrual. The restructuring of this
loan was related to interest rate and amortization concessions. The
loan is secured by a hotel facility. This loan was not eligible for a CARES
act modification.
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, 2020, 2019 and
2018. Classified assets totaled $50.1 million at December 31, 2020,
and included $28.7 million of non-performing loans.
At December 31,
2020
2019
2018
(in thousands)
$50,062
$53,072
$46,792
-
-
523
$50,062
$53,072
$47,315
$99,201
$24,083
$26,413
Classification of Loans:
Substandard
Doubtful
Total Classified Assets
Special Mention
The decrease in classified assets at December 31, 2020 as compared
to December 31, 2019 was due to a $3.0 million decrease in
substandard loans. The decrease in substandard loans during 2020
was primarily due to paydowns of impaired loans. Substandard loans
at December 31, 2020 consisted of $16.0 million in non-farm non-
residential, $12.7 million in one- to four-family residential, $7.9 million
in multifamily, $4.1 million in agricultural, $3.7 million in commercial
and industrial, $1.0 million in construction and land development,
$4.0 million in farmland, and the remaining $0.6 million comprised of
consumer and other loans. Special mention loans increased by $75.1
million in 2020 primarily due to the downgrade of loans in the portfolio.
The increase in special mention loans was primarily the result of loan
relationships that were downgraded due to the COVID-19 pandemic
or relationship specific issues. Special mention loans at December
31, 2020 were concentrated in the following at risk industries affected
by the COVID-19 pandemic. Approximately $27.6 million in loans
were associated with oil and gas related industries; $29.3 million
were associated with hotels or hospitality industries, and $5.8 million
were loans associated with childcare related services. These loan
relationships accounted for $62.7 million or 63% of special mention
loans at December 31, 2020.
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 including the
COVID-19 pandemic;
• nature and volume of loans;
• overall portfolio quality and portfolio stress test results;
90
91
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT • 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 $24.5 million at December 31, 2020
compared to $10.9 million at December 31, 2019.
Our allowance level was significantly impacted by the continuing
effects of the COVID-19 pandemic.
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
$
10,929
$ 10,776
$ 9,225
$ 11,114
$ 9,415
At or For the Years Ended December 31,
2020
2019
2018
2017
2016
(dollars in thousands)
Charge-offs:
Real Estate:
Construction and land development
Farmland
1- 4 family
Multifamily
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
Multifamily
Non-farm non-residential
Total Real Estate
Non-Real Estate:
Agricultural
Commercial and industrial loans
Consumer and other
Total Non-Real Estate
Total recoveries
Net (charge-offs) recoveries
Provision for loan losses
Balance at end of year
Ratios:
(265)
-
(154)
-
(550)
(969)
(110)
(265)
(1,083)
(1,458)
(2,427)
-
-
39
-
178
217
70
128
724
922
1,139
(1,288)
14,877
-
-
(552)
-
(2,603)
(3,155)
(40)
(879)
(1,190)
(2,109)
(5,264)
-
-
39
-
5
44
-
267
246
513
557
(4,707)
4,860
-
-
(99)
-
(404)
(503)
(300)
(179)
(907)
(1,386)
(1,889)
3
-
90
20
89
202
26
1,642
216
1,884
2,086
197
1,354
-
-
(33)
-
(1,291)
(1,324)
(162)
(3,629)
(1,247)
(5,038)
(6,362)
-
-
(244)
-
(1,373)
(1,617)
(83)
(579)
(635)
(1,297)
(2,914)
43
-
92
40
85
260
138
30
223
391
651
4
-
45
401
16
466
113
146
183
442
908
(5,711)
(2,006)
3,822
3,705
$ 24,518
$ 10,929
$ 10,776
$
9,225
$ 11,114
92
93
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
0.08%
0.07%
1.33%
5.25%
8.66%
0.36%
0.31%
0.72%
(0.02)%
(0.02)%
0.88%
0.54%
0.50%
0.80%
43.07%
(1.83)%
61.91%
96.85%
(14.55)%
149.42%
0.23%
0.21%
1.17%
18.05%
54.14%
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT • Non-farm non-residential loans increased during 2020 with the
largest increases during the third and fourth quarters. The growth
in this portfolio contributed to the increased provision associated
with this category along with the provisions previously noted for
hospitality and hotel related loans.
• Commercial and industrial loans increased during 2020. The
majority of the increase was associated with SBA guaranteed PPP
loans which do not have an allowance balance associated with them.
The provision increase related to this portfolio in 2020 compared
to 2019 was related to changes in the qualitative analysis of the
portfolio related to COVID-19.
• Consumer and other loans increased during 2020. The increase in
the balance was concentrated in commercial leases. The provision
made in 2020 was primarily related to qualitative analysis of the
consumer portfolio related to COVID-19.
• First Guaranty continues to monitor the acquired loans from the
Union acquisition on November 7, 2019. Discounts on the acquired
Union loans were approximately $1.8 million at December 31, 2020.
First Guaranty charged off $2.4 million in loan balances during the
year ended December 31, 2020 as compared to $5.3 million for 2019.
Recoveries totaled $1.1 million for the year ended December 31, 2020
and $0.6 million during 2019. The charged-off loan balances were
concentrated in five loan relationships which totaled $1.0 million or
40.7% of the total charged off amount during the year ended December
31, 2020. The details of the $1.0 million in charged off loans were as
follows:
• First Guaranty charged off $0.1 million on a purchased consumer
loan pool during 2020. This pool had a remaining principal balance
of $0.7 million at December 31, 2020.
• First Guaranty charged off $0.3 million on a non-farm non-residential
loan relationship during the third quarter of 2020. This relationship
had no remaining principal balance at December 31, 2020.
• First Guaranty charged off $0.3 million on a construction and land
development loan during the third quarter of 2020. This loan had a
remaining principal balance of $0.3 million at December 31, 2020.
• First Guaranty charged off $0.2 million on a non-farm non-residential
loan during the third quarter of 2020. This loan had a remaining
principal balance of $0.1 million at December 31, 2020.
• First Guaranty charged off $0.1 million on a one- to four-family
residential loan during the third quarter of 2020. This loan had no
remaining principal balance at December 31, 2020.
• Smaller loans and overdrawn deposit accounts comprised the
remaining $1.4 million of charge-offs for 2020.
A provision for loan losses of $14.9 million was made during the year
ended December 31, 2020 as compared to $4.9 million for 2019.
The provisions made in 2020 were taken to provide for current loan
losses and to maintain the allowance proportionate to risks inherent
in the loan portfolio. First Guaranty’s loan loss calculation method
incorporates risk factors in the loan portfolio and the composition of
the loan portfolio affects the final allowance calculation. The primary
reason for the increase in the provison in 2020 compared to 2019 was
due to the impact of the COVID-19 pandemic and due to growth in
First Guaranty's loan portfolio and other identified risks.
First Guaranty made provisions to the allowance during the year of
$14.9 million with $4.6 million incurred during the first three quarters
of the year and $10.3 million incurred in the final quarter of 2020.
First Guaranty made adjustments to its allowance provisions as facts
and circumstances evolved due to COVID-19. The actions taken at
the onset of the pandemic such as loan payment deferrals under
the CARES Act along with SBA PPP relief loans were considered to
improve the financial capacity of First Guaranty loan customers. There
was, however, significant uncertainty as to the duration of the relief.
Economic conditions began to improve by the middle part of the third
quarter as loan customers ended their payment deferral periods and
resumed normal payments. Both Louisiana and Texas lifted or reduced
several COVID-19 restrictions. First Guaranty also experienced strong
loan growth.
During the latter part of 2020, First Guaranty continued to experience
strong loan growth but COVID-19 cases significantly increased
that resulted in new economic uncertainty. Louisiana reinstituted
restrictions that had previously been lifted. The qualitative and
quantitative analysis of the loan portfolio resulted in an increased
provision to the allowance as of a result of the new COVID-19 related
economic uncertainty along with the increased loan growth.
First Guaranty's qualitative and quantitative factors accounted for the
changes in economic conditions driven by the COVID-19 pandemic.
The key factors included the following: industry specific conditions,
changes in loan risk ratings, lending policy, and national and local
economic trends. First Guaranty continued to update its analysis of
these factors throughout 2020.
The loan portfolio factors in 2020 that primarily affected the allocation
of the allowance included the following:
• The loan portfolio risks that changed and affected the allocation of
the allowance were due to the adjustments of certain qualitative
factors to take into account the possible impact of COVID-19 and
related economic conditions on borrowers' ability to repay loans and
for allocations to impaired loans within their respective categories.
First Guaranty increased allocations within its qualitative and
quantitative factors to account for possible COVID-19 related losses.
The largest provision allocation was associated with non-farm non-
residential loans primarily those associated with the hospitality and
hotel industries.
• Construction and land development loans declined during 2020
as several loans transitioned to permanent financing. The majority
of these loans are now included in the non-farm non-residential
category as of December 31, 2020. The increase in the provision
related to this portfolio in 2020 compared to 2019 was primarily
related to changes in the qualitative analysis of the portfolio related
to COVID-19.
• One- to four-family residential loans decreased moderately in 2020.
The provision increase related to this portfolio in 2020 compared
to 2019 was related to changes in the qualitative analysis of the
portfolio related to COVID-19.
94
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,
2020
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)
2019
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of Loans in
Each Category to
Total Loans
$ 1,029
462
2,510
978
15,064
181
2,802
1,490
4.2%
1.9%
10.2%
4.0%
61.5%
0.7%
11.4%
6.1%
8.2%
1.4%
14.7%
2.5%
44.6%
1.5%
19.1%
8.0%
$ 423
50
1,027
1,038
5,277
95
1,909
1,110
3.9%
0.4%
9.4%
9.5%
48.3%
0.9%
17.5%
10.1%
11.3%
1.5%
18.9%
1.6%
40.3%
1.8%
17.5%
7.1%
2
-%
-%
-
-%
-%
Real Estate:
Construction and land development
Farmland
1- 4 family
Multifamily
Non-farm non-residential
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
Total Allowance
$ 24,518
100.0%
100.0%
$ 10,929
100.0%
100.0%
At December 31,
2018
2017
Allowance
for Loan
Losses
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Allowance
for Loan
Losses
Percent of
Allowance to
Total Allowance
for Loan Losses
Percent of
Loans in Each
Category to
Total Loans
Real Estate:
Construction and land development
$ 581
Farmland
1- 4 family
Multifamily
Non-farm non-residential
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
(dollars in thousands)
10.1%
1.5%
14.1%
3.5%
47.7%
1.9%
16.4%
4.8%
$ 628
5
1,078
994
2,811
187
2,377
1,125
6.8%
0.1%
11.7%
10.8%
30.4%
2.0%
25.8%
12.2%
5.4%
0.4%
8.5%
12.2%
44.3%
3.1%
17.7%
8.3%
41
911
1,318
4,771
339
1,909
891
15
0.1%
-%
20
0.2%
9.8%
2.2%
13.8%
1.4%
46.1%
1.9%
20.0%
4.8%
-%
Total Allowance
$ 10,776
100.0%
100.0%
$ 9,225
100.0%
100.0%
95
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Real Estate:
Construction and land development
Farmland
1- 4 family
Multifamily
Non-farm non-residential
Non-Real Estate:
Agricultural
Commercial and industrial
Consumer and other
Unallocated
Total Allowance
At December 31,
2016
Percent of
Allowance to Total
Allowance for
Loan Losses
Percent of
Loans in Each
Category to
Total Loans
(dollars in thousands)
11.1%
0.2%
10.8%
5.3%
31.0%
0.7%
31.9%
8.7%
8.9%
2.2%
14.2%
1.3%
43.9%
2.5%
20.4%
6.6%
Allowance for
Loan Losses
$ 1,232
19
1,204
591
3,451
74
3,543
972
28
0.3%
-%
$ 11,114
100.0%
100.0%
Investment Securities.
Investment securities at December 31, 2020 totaled $238.5 million,
a decrease of $188.0 million, or 44.1%, compared to $426.5 million
at December 31, 2019. The entire investment portfolio consisted of
available for sale securities at December 31, 2020. First Guaranty
terminated its held to maturity portfolio in the first quarter of 2020
following the sale of certain securities previously designated as held
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.
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, 2020, the U.S. Government and Government agency
securities and municipal bonds qualified as securities available to
collateralize public funds. Securities pledged as collateral totaled
$184.0 million at December 31, 2020 and $212.8 million at December
31, 2019. 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.
2020
At December 31,
2019
(in thousands)
2018
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
Amortized
Cost
Fair Value
$ 3,000
$ 3,000
$ -
$ -
$ -
$ -
169,986
169,658
36,153
27,381
-
36,489
28,162
-
16,380
94,561
30,297
16,400
16,393
95,369
32,153
16,397
146,911
141,389
76,310
32,956
918
72,878
33,901
904
1,208
1,239
179,546
179,625
48,434
47,422
$ 237,728
$238,548
$337,184
$339,937
$305,529
$296,494
-
-
-
-
-
-
18,175
5,107
63,297
18,143
5,289
63,385
28,172
5,227
74,927
27,091
5,126
72,623
$ -
$ -
$ 86,579
$ 86,817
$108,326
$104,840
Available for sale:
U.S. Treasuries
U.S. Government Agencies
Corporate debt securities
Municipal bonds
Collateralized mortgage obligations
Mortgage-backed securities
Total available for sale securities
Held to maturity:
U.S. Government Agencies
Municipal bonds
Mortgage-backed securities
Total held to maturity securities
Our available for sale securities portfolio totaled $238.5 million at
December 31, 2020, a decrease of $101.4 million, or 29.8%, compared
to $339.9 million at December 31, 2019. The decrease was primarily
due to the sale of securities and called bonds. First Guaranty had
securities sales of $187.9 million in mortgage-backed securities, $168.9
million in corporate securities, $4.2 million in municipal securities and
$2.2 million in U.S. Government agency securities. First Guaranty plans
to reinvest the proceeds in securities and loans and reduce borrowings.
First Guaranty had $14.1 million in U.S. Government agency securities
and $15.4 million of corporate securities called during 2020 due to the
decrease in interest rates.
Our held to maturity securities portfolio had an amortized cost of $0 at
December 31, 2020, a decrease of $86.6 million, or 100.0%, compared
to December 31, 2019. First Guaranty terminated its held to maturity
portfolio in the first quarter of 2020 following the sale of certain securities
previously designated as held to maturity.
96
97
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT At December 31, 2020, $9.7 million, or 4.1%, of the securities portfolio
was scheduled to mature in less than one year. Securities, not including
mortgage-backed securities and collateralized mortgage obligations,
with contractual maturity dates over 10 years totaled $152.2 million, or
63.8%, of the total portfolio at December 31, 2020. 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.
First Guaranty, in furtherance of the strategy adopted in March 2020,
initiated a plan to manage for economic uncertainty caused by the
COVID-19 pandemic by converting unrealized gains in the securities
portfolio to realized gains in the fourth quarter of 2020. First Guaranty
sold approximately $140 million in mortgage-backed securities and
$150 million in corporate securities in October 2020. First Guaranty
generated $12.1 million in pre-tax gains from the sales. First Guaranty
has proceeded to reinvest the proceeds in securities and loans and
subsequently reduced FHLB borrowings by $50.0 million in February
2021.
At December 31, 2020, 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:
Freddie Mac
Federal Farm Credit Bank
Total
At December 31, 2020
Amortized Cost
Fair Value
(in thousands)
110,177
54,263
109,856
54,279
$ 164,440
$
164,135
Deposits.
Managing the mix and pricing the maturities of deposit liabilities is
an important factor affecting our ability to maximize our net interest
margin. The strategies used to manage interest-bearing deposit
liabilities are designed to adjust as the interest rate environment
changes. We regularly assess our funding needs, deposit pricing
and interest rate outlooks. From December 31, 2019 to December
31, 2020, total deposits increased $313.3 million, or 16.9%, to $2.2
billion. Noninterest-bearing demand deposits increased $85.5 million,
or 26.2% to $411.4 million at December 31, 2020. The increase in
noninterest-bearing demand deposits was primarily due to economic
conditions associated with the CARES Act and the SBA PPP program.
First Guaranty consumer and business customers have increased
their deposits due to the receipt of stimulus funds and proceeds from
SBA PPP program loans. Interest-bearing demand deposits increased
$224.5 million, or 35.3%, to $860.4 million at December 31, 2020.
The increase in interest-bearing demand deposits was primarily
concentrated in individual, business, and public funds interest-bearing
demand deposits. Savings deposits increased $33.7 million, or 25.0%,
to $168.9 million at December 31, 2020, primarily related to increases
in individual savings deposits. Time deposits decreased $30.4 million,
or 4.0%, to $725.6 million at December 31, 2020, primarily due to
decreases in business deposits.
As we seek to strengthen our net interest margin and improve our
earnings, attracting noninterest-bearing or lower cost deposits will be a
primary emphasis. Management will continue to evaluate and update
our product mix in its efforts to attract additional customers. We currently
offer a number of deposit products that are competitively priced and
designed to attract and retain customers with primary emphasis on
noninterest-bearing deposits and other lower cost deposits.
TOTAL DEPOSITS
In Millions
The following tables set forth the stated maturities and weighted average yields of our investment securities at December 31, 2020 and 2019.
One Year or Less
Carrying
Value
Weighted
Average
Yield
At December 31, 2020
More than One Year
through Five Years
More than Five Years
through Ten Years
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
(in thousands, except for %)
More than Ten Years
Carrying
Value
Weighted
Average
Yield
$ 3,000
-
-%
-%
$ -
-
-%
-%
$
-
-%
$
-
-%
29,958
1.2%
139,700
2.0%
5,633
3.5%
1,037
4.1%
-
2.0%
-
-%
2,038
4.3%
27,762
4.9%
1,056
5.5%
4,956
3.9%
10,692
3.9%
11,477
3.2%
-
3
-%
0.9%
-
3
-%
2.0%
-
-%
1,233
1.0%
Available for sale:
U.S. Treasuries
U.S. Government Agencies
Corporate and other debt securities
Municipal bonds
Collateralized mortgage obligations
Mortgage-backed securities
Total available for sale securities
$ 9,670
2.5%
$ 6,997
4.0%
$ 68,415
3.1%
$ 153,466 2.1%
One Year or Less
Carrying
Value
Weighted
Average
Yield
At December 31, 2019
More than One Year
through Five Years
More than Five Years
through Ten Years
Carrying
Value
Weighted
Average
Yield
Carrying
Value
Weighted
Average
Yield
(in thousands, except for %)
More than Ten Years
Carrying
Value
Weighted
Average
Yield
$ -
-%
$ -
-%
$
-
-%
$
-
-%
Available for sale:
U.S. Treasuries
U.S. Government Agencies
2,096
1.8%
4,647
2.2%
149
2.0%
Corporate and other debt securities
640
3.4%
24,860
3.1%
68,129
3.6%
9,501
2.9%
1,740
4.7%
Municipal bonds
1,785
4.1%
9,221
3.8%
9,665
3.8%
11,482
3.5%
Collateralized mortgage obligations
Mortgage-backed securities
-
-
-%
-%
55
2.1%
5,567
2.2%
10,775
2.2%
416
2.0%
1,393
2.2%
177,816
2.5%
Total available for sale securities
$ 4,521
2.9%
$ 39,199
3.1%
$ 84,903
3.5%
$ 211,314 2.6%
Held to maturity:
U.S. Government Agencies
Municipal bonds
Mortgage-backed securities
$ 5,000
1.5%
$ 7,177
2.0%
$
5,998
2.1%
$
-
-%
50
1.6%
150
2.1%
1,498
2.6%
3,409
2.7%
-
-%
-
-%
11,628
2.0%
51,669
2.3%
Total held to maturity securities
$ 5,050
1.5%
$ 7,327
2.0%
$ 19,124
2.1%
$ 55,078 2.4%
98
99
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT The following table sets forth the distribution of deposit accounts, by account type, for the dates indicated.
The following table sets forth public funds as a percent of total deposits.
Total Deposits
2020
2019
2018
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
$ 393,734
19.2%
-% $ 262,379
15.7%
-% $ 252,531
16.3%
Interest-bearing Demand
Savings
Time
Total Deposits
722,433
35.3%
163,332
8.0%
767,075
37.5%
0.8%
0.2%
2.2%
592,113
35.4%
115,682
6.9%
703,685
42.0%
1.8%
0.4%
2.4%
556,528
35.9%
111,134
7.2%
628,457
40.6%
$2,046,574 100.0%
1.1% $1,673,859 100.0%
1.7% $ 1,548,650 100.0%
1.3%
Individual and Business Deposits
2020
2019
2018
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
$ 382,940
27.5%
-% $ 256,099
23.7%
-% $ 246,550
26.7%
Interest-bearing Demand
Savings
Time
Total Individual and Business
Deposits
280,587
20.1%
127,804
9.2%
600,887
43.2%
1.0%
0.1%
2.5%
241,290
22.3%
86,972
8.0%
498,521
46.0%
1.4%
0.1%
2.6%
204,405
22.1%
84,844
9.2%
388,623
42.0%
$1,392,218 100.0%
1.3% $1,082,882 100.0%
1.5% $ 924,422 100.0%
1.0%
-%
1.5%
0.4%
1.7%
-%
1.1%
0.1%
1.7%
Public Fund Deposits
2020
2019
2018
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
$ 10,794
1.7%
-% $ 6,280
1.1%
-% $
5,981
1.0%
Interest-bearing Demand
Savings
Time
441,846
67.5%
35,528
5.4%
166,188
25.4%
0.7%
0.4%
1.1%
350,823
59.3%
28,710
4.9%
205,164
34.7%
2.0%
1.6%
2.1%
352,123
56.4%
26,290
4.2%
239,834
38.4%
-%
1.8%
1.4%
1.7%
Total Public Fund Deposits
$ 654,356 100.0%
0.8% $ 590,977 100.0%
1.9% $ 624,228 100.0%
1.7%
At December 31, 2020, public funds deposits totaled $715.3 million
compared to $610.7 million at December 31, 2019. Public funds time
deposits totaled $158.9 million at December 31, 2020 compared to
$146.4 million at December 31, 2019. Public funds deposits increased
due to seasonal fluctuations. 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. The majority
of these funds 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.
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 will increase at the end of the year and
during the first quarter. In addition to seasonal fluctuations, there are
monthly fluctuations associated with internal payroll and short-term
tax collection accounts for our public funds deposit accounts. Public
funds deposit accounts are collateralized by FHLB letters of credit, by
reciprocal deposit insurance programs, by Louisiana municipal bonds
and by eligible government and government agency securities such as
those issued by the FHLB, FFCB, Fannie Mae, and Freddie Mac. First
Guaranty has been growing the proportion of its public funds portfolio
that is collateralized by reciprocal deposit insurance as an alternative
to pledging securities or utilizing FHLB letters of credit. First Guaranty
initiated this strategy to more efficiently invest these deposits in higher
yielding loans to improve the net interest margin and earnings. Total
public funds collateralized by reciprocal deposit insurance programs
increased to $217.7 million at December 31, 2020 compared to $86.1
million at December 31, 2019.
Public Funds:
Noninterest-bearing Demand
Interest-bearing Demand
Savings
Time
Total Public Funds
Total Deposits
At December 31,
2020
2019
2018
(in thousands except for %)
$
5,109
$
9,944
$
6,930
514,416
36,862
158,925
424,732
29,570
146,420
364,692
26,903
247,004
$ 715,312
$ 610,666
$ 645,529
$2,166,318
$1,853,013
$1,629,622
Total Public Funds as a percent of Total Deposits
33.0%
33.0%
39.6%
At December 31, 2020, the aggregate amount of outstanding
certificates of deposit in amounts greater than or equal to $100,000 was
approximately $505.5 million. At December 31, 2020, approximately
$234.5 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, 2020.
The following table sets forth information concerning balances and
interest rates on our short-term borrowings at the dates and for the
years indicated.
Due in one year or less
Due after one year through three years
Due after three years
Total certificates of deposit greater than or
equal to $100,000
December 31,
2020
(in thousands)
$ 270,939
143,159
91,378
$ 505,476
Balance at end of year
Maximum month-end
outstanding
Average daily outstanding
Total weighted average rate
during the year
Weighted average rate
at the end of the year
At or For the Years Ended
December 31,
2020
2019
2018
(in thousands, except for %)
$56,121
$19,919
$
-
$57,048
$48,277
$19,919
$ 3,320
$37,000
$ 7,119
0.95%
2.00%
2.21%
0.89%
2.00%
-%
Borrowings.
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. First Guaranty had $56.1 million in
short-term borrowings outstanding at December 31, 2020 compared
to $19.9 million outstanding at December 31, 2019. The short-term
borrowings at December 31, 2020 were comprised of Federal Home
Loan Bank advances of $50.0 million and repurchase agreements of
$6.1 million. The $50.0 million short term Federal Home Loan Bank
advance was the result of First Guaranty's COVID-19 related liquidity
actions taken in the first quarter of 2020. Subsequent to December 31,
2020, First Guaranty redeemed this $50.0 million short term advance
in February 2021. The long term Federal Home Loan Bank advance of
$3.4 million and the repurchase agreements were assumed as a result
of the Union acquisition in November 2019. First Guaranty has a line
of credit for $6.5 million, with no outstanding balance at December
31, 2020.
At December 31, 2020, we had $365.8 million in FHLB letters of credit
outstanding obtained primarily for collateralizing public deposits.
First Guaranty had senior long-term debt totaling $42.4 million at
December 31, 2020 and $48.6 million at December 31, 2019.
First Guaranty also had junior subordinated debentures totaling $14.8
million at December 31, 2020 and $14.7 million at December 31,
2019.
Shareholders' Equity
Total shareholders' equity increased to $178.6 million at December
31, 2020 from $166.0 million at December 31, 2019. The increase
in shareholders' equity was principally the result of an increase of
$14.1 million in retained earnings offset by a decrease of $1.5 million
in accumulated other comprehensive income. The decrease in
accumulated other comprehensive income was primarily attributed to
the decrease in unrealized gains on available for sale securities during
the year ended December 31, 2020. The $14.1 million increase in
retained earnings was due to net income of $20.3 million during the
year ended December 31, 2020, partially offset by $6.2 million in cash
dividends paid on shares of our common stock.
100
10 1
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT TOTAL COMMON SHAREHOLDERS' EQUITY
In Millions
Results of Operations
Performance Summary
Year ended December 31, 2020 compared with year ended December
31, 2019. Net income for the year ended December 31, 2020 was
$20.3 million, an increase of $6.1 million, or 42.7%, as compared to
$14.2 million for the year ended December 31, 2019. The increase in
net income of $6.1 million for the year ended December 31, 2020 was
the result of several factors. First Guaranty experienced an increase in
interest income associated with loans, increased noninterest income
due to increased securities sales and lower interest expense. This
was partially offset by an increase in the provision for loan losses and
increased noninterest expense. Loan interest income increased due
to the growth in First Guaranty's loan portfolio, including the loans
acquired in the fourth quarter of 2019 in the Union acquisition and
loan fees recognized as an adjustment to yield from the origination
of the SBA guaranteed PPP loans. Noninterest income increased
due to larger securities gains on sales for the year ended December
31, 2020 compared to losses on securities sales for the year ended
December 31, 2019. Interest expense declined due to declines in
market interest rates and First Guaranty's strategy to reduce interest
expense. Interest expense declined during 2020 even after factoring in
the additional deposit balances acquired from the Union acquisition,
an increase in deposit balances associated with SBA PPP loans and
stimulus payments, and additional borrowings associated with our
COVID-19 contingency plans. Factors that partially offset income
include increased noninterest expense primarily associated with the
Union acquisition including one-time merger related expenses of $0.5
million paid in 2020 for the data conversion. The provision for loan
losses increased to provide for current loan losses and to maintain the
allowance proportionate to risks inherent in the loan portfolio, including
risks emerging from the COVID-19 pandemic and portfolio growth.
Earnings per common share for the years ended December 31, 2020
was $2.09 per common share, an increase of 42.2% or $0.62 per
common share from $1.47 per common share for the year ended
December 31, 2019. Earnings per share was affected by the increase
in earnings.
Year ended December 31, 2019 compared with year ended December
31, 2018. Net income for the year ended December 31, 2019 was
$14.2 million, an increase of $28,000, or 0.2%, as compared to the year
ended December 31, 2018. The increase in net income of $28,000 for
the year ended December 31, 2019 was the result of several factors.
First Guaranty experienced an increase in interest income associated
with loans and increased noninterest income, partially offset by an
102
increase in the provision for loan losses, increased interest expense
and increased noninterest expense. Loan interest income increased
due to the continued growth in First Guaranty's loan portfolio,
an increase in the average yield on loans and due to the acquired
loans from the Union acquisition. Noninterest income increased
primarily as a result of gains on the sale of the guaranteed portion
of SBA and USDA loans. Factors that partially offset this increase in
income include increased interest expense and noninterest expense.
The increase in interest expense was due to the rising interest rate
environment, increased competition and due to the acquired deposits
from the Union acquisition. Noninterest expense increased primarily
due to expenses associated with the Union acquisition that included
approximately $0.3 million in one-time merger related expenses, as
well as expenses associated with additional compensation, occupancy
and other operating expenses for the branch offices acquired in the
Union acquisition. The provision for loan losses increased to provide
for current loan losses and to maintain the allowance proportionate to
risks inherent in the loan portfolio. Earnings per common share for the
years ended December 31, 2019 and December 31, 2018 was $1.47
per common share.
TOTAL NET INCOME
In Millions
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.
Year ended December 31, 2020 compared with year ended December
31, 2019. Net interest income for the years ended December 31,
2020 and 2019 was $74.7 million and $61.7 million, respectively. The
increase in net interest income for the year ended December 31, 2020
as compared to the prior year was primarily due to an increase in the
average balance of our total interest-earning assets and a decrease
in the average rate of our total interest-bearing liabilities, partially
offset by a decrease in the average yield of our total interest-earning
assets and by an increase in the average balance of our total interest-
bearing liabilities. For the year ended December 31, 2020, the average
balance of our total interest-earning assets increased by $417.3
million to $2.2 billion due to the assets acquired from the Union
acquisition, COVID-19 related lending activities, including SBA PPP
loans and loan growth. The average yield of our interest-earning assets
decreased by 54 basis points to 4.52% from 5.06% for the year ended
December 31, 2019 due to the general decline in market interest rates
that affect the pricing of our assets and due to the increased lower
yielding average cash balances on the balance sheet. For the year
ended December 31, 2020, the average balance of our total interest-
bearing liabilities increased by $310.9 million to $1.8 billion as our
average deposits and average borrowings increased due to COVID-19
related contingency planning and government relief programs, and the
average rate of our total interest-bearing liabilities decreased by 58
basis points to 1.48% from 2.06% for the year ended December 31,
2019 due to the decrease in market rates. As a result, our net interest
rate spread increased four basis points to 3.04% for the year ended
December 31, 2020 from 3.00% for the year ended December 31,
2019. Our net interest margin decreased six basis points to 3.35% for
the year ended December 31, 2020 from 3.41% for the year ended
December 31, 2019.
Year ended December 31, 2019 compared with year ended December
31, 2018. Net interest income for the years ended December 31,
2019 and 2018 was $61.7 million and $57.0 million, respectively. The
increase in net interest income for the year ended December 31, 2019
as compared to the prior year was primarily due to an increase in the
average balance of our total interest-earning assets and an increase
in the average yield of our total interest-earning assets, partially offset
by the increase in the average balance of our total interest-bearing
liabilities and an increase in the average rate of our total interest-
bearing liabilities. For the year ended December 31, 2019, the average
balance of our total interest-earning assets increased by $136.3
million to $1.8 billion, and the average yield of our interest-earning
assets increased by 38 basis points to 5.06% from 4.68% for the year
ended December 31, 2018. For the year ended December 31, 2019,
the average balance of our total interest-bearing liabilities increased by
$117.0 million to $1.5 billion, and the average rate of our total interest-
bearing liabilities increased by 46 basis points to 2.06% from 1.60%
for the year ended December 31, 2018. As a result, our net interest
rate spread decreased eight basis points to 3.00% for the year ended
December 31, 2019 from 3.08% for the years ended December 31,
2018. Our net interest margin remained stable at 3.41% for the year
ended December 31, 2019 and 2018.
Interest Income
Year ended December 31, 2020 compared with year ended December
31, 2019. Interest income increased $9.0 million, or 9.9%, to $100.7
million for the year ended December 31, 2020 as compared to the prior
year. First Guaranty's loan portfolio expanded during 2020 due to growth
associated with the SBA PPP lending program and our other loan
originations such as commercial leases and non-farm non-residential
loans. These factors contributed to the increase in interest income as
the average balance of our total interest-earning assets, both loans
and securities, including assets from the Union acquisition increased,
partially offset by a decrease in the average yield of interest-earning
assets due to the decline in market interest rates. The average balance
of our interest-earning assets increased $417.3 million to $2.2 billion for
the year ended December 31, 2020 as compared to the prior year. The
average yield of interest-earning assets decreased by 54 basis points to
4.52% for the year ended December 31, 2020 compared to 5.06% for
the year ended December 31, 2019.
Interest income on securities decreased $0.3 million to $9.5 million
for the year ended December 31, 2020 as compared to the prior year
primarily as a result of a decrease in the average yield on securities. The
average balance of securities increased $31.7 million to $381.0 million
for the year ended December 31, 2020 from $349.2 million for the year
ended December 31, 2019 due to an increase in balances, particularly
corporate securities, as part of First Guaranty's strategy initiated at the
end of the first quarter in 2020 to provide earnings and liquidity during
the COVID-19 pandemic. The average yield on securities decreased by
32 basis points to 2.49% for the year ended December 31, 2020 from
2.81% for the year ended December 31, 2019 due to the decrease in
market interest rates.
Interest income on loans increased $11.9 million, or 15.1%, to $90.8
million for the year ended December 31, 2020 as a result of an increase
in the average balance of loans. The average balance of loans (excluding
loans held for sale) increased by $347.4 million to $1.7 billion for the
year ended December 31, 2020 from $1.3 billion for the year ended
December 31, 2019 as a result of new loan originations, primarily SBA
PPP loans, commercial leases, non-farm non-residential loans, and
acquired loans from the Union acquisition. The average yield on loans
(excluding loans held for sale) decreased by 53 basis points to 5.46%
for the year ended December 31, 2020 from 5.99% for the year ended
December 31, 2019 due to the decrease in market interest rates and the
impact of SBA PPP loans which have a 1.0% interest rate.
Year ended December 31, 2019 compared with year ended December
31, 2018. Interest income increased $13.3 million, or 16.9%, to $91.6
million for the year ended December 31, 2019 as compared to the prior
year. First Guaranty continues to transition assets from lower yielding
securities and interest-earning bank balances to higher yielding loans
in order to increase interest income. The increase in interest income
resulted primarily from an increase in the average balance of our total
interest-earning assets principally as a result of the Union acquisition
along with an increase in the average yield of interest-earning assets. The
average balance of our interest-earning assets increased $136.3 million
to $1.8 billion for the year ended December 31, 2019 as compared
to the prior year. The average yield of interest-earning assets increased
by 38 basis points to 5.06% for the year ended December 31, 2019
compared to 4.68% for the year ended December 31, 2018.
Interest income on securities decreased $3.1 million to $9.8 million
for the year ended December 31, 2019 as compared to the prior year
primarily as a result of a decrease in the average balance of securities.
The average balance of securities decreased $116.2 million to $349.2
million for the year ended December 31, 2019 from $465.4 million for
the year ended December 31, 2018 due to a decrease in the average
balance of our agency, mortgage-backed, corporate and municipal
securities as a result of securities sales, calls and maturities. The average
yield on securities increased by three basis points to 2.81% for the year
ended December 31, 2019 from 2.78% for the year ended December
31, 2018 due to the rising interest rate environment for the majority of
2019.
Interest income on loans increased $14.1 million, or 21.7%, to $78.9
million for the year ended December 31, 2019 as a result of an increase
in the average balance of loans along with an increase in the average
yield on loans. The average balance of loans (excluding loans held for
sale) increased by $148.1 million to $1.3 billion for the year ended
December 31, 2019 from $1.2 billion for the year ended December
31, 2018 as a result of new loan originations, purchased loans and
loans acquired from the Union acquisition. The average yield on loans
(excluding loans held for sale) increased by 44 basis points to 5.99%
for the year ended December 31, 2019 from 5.55% for the year ended
December 31, 2018 as a result of the rising interest rate environment for
the majority of 2019.
10 3
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Interest Expense
Year ended December 31, 2020 compared with year ended December
31, 2019. Interest expense decreased $3.9 million, or 13.2%, to
$26.0 million for the year ended December 31, 2020 from $30.0
million for the year ended December 31, 2019 due primarily to a
decrease in market interest rates partially offset by an increase in
the average balance of interest-bearing liabilities. The average rate of
interest-bearing demand deposits decreased by 92 basis points during
the year ended December 31, 2020 to 0.84% as compared to 1.76%
for the prior year. The decrease in the average rate on interest-bearing
demand deposits was due to those deposits, primarily public funds
NOW and DDA accounts and brokered money market deposits, whose
rates are contractually tied to national index rates such as the U.S.
Federal Funds rate or short-term U.S. Treasury rates that declined
sharply beginning in the first quarter of 2020. The average rate of time
deposits decreased 24 basis points during the year ended December
31, 2020 to 2.20% as compared to 2.44% for the prior year. The
decrease in the average rate of time deposits was due to First Guaranty's
strategy to reduce deposit costs by expanding non-interest bearing and
lower cost interest bearing deposits that has provided an alternative
to higher cost time deposits and has helped First Guaranty maintain
liquidity while lowering rates on time deposits. Partially offsetting the
decrease in interest expense was an increase in the average balance
of interest-bearing liabilities, which increased $310.9 million during
the year ended December 31, 2020 to $1.8 billion as compared to
the prior year as a result of a $130.3 million increase in the average
balance of interest-bearing demand deposits, a $69.5 million increase
in the average balance of borrowings, a $63.4 million increase in the
average balance of time deposits and a $47.7 million increase in the
average balance of savings deposits.
Year ended December 31, 2019 compared with year ended December
31, 2018. Interest expense increased $8.6 million, or 40.3%, to $30.0
million for the year ended December 31, 2019 from $21.4 million for
the year ended December 31, 2018 due primarily to an increase in the
average balance of interest-bearing deposits along with an increase
in the average rate paid on interest-bearing deposits. The average
balance of interest-bearing deposits increased by $115.4 million
during the year ended December 31, 2019 to $1.4 billion as a result
of a $75.2 million increase in the average balance of time deposits,
a $35.6 million increase in the average balance of interest-bearing
demand deposits and a $4.5 million increase in the average balance of
savings deposits. The average rate of interest-bearing demand deposits
increased by 23 basis points during the year ended December 31,
2019 to 1.76% as compared to the prior year. The increase in the
average rate on interest-bearing demand deposits was due to those
deposits, primarily public funds accounts and brokered money market
deposits, whose rates are contractually tied to national index rates
such as the U.S. Federal Funds rate or short term U.S. Treasury rates.
The average rate of time deposits increased 74 basis points during the
year ended December 31, 2019 to 2.44% as compared to the prior
year. The increase in the average rate and average balance of time
deposits was due to changes in market rates and the initiation of a
deposit campaign by First Guaranty in order to fund future loan growth
and diversify the deposit portfolio. First Guaranty initiated a deposit
campaign in 2018 to grow time deposits generally with terms greater
than two years. This strategy was designed to fund loan growth and
increase long term funding for the Bank.
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.
December 31, 2020
December 31, 2019
December 31, 2018
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
(in thousands, except for %)
$ 182,339 $
380,991
678
377
1,662,875
2,227,260
404
9,471
1
21
90,787
100,684
0.22%
2.49%
0.08%
5.56%
5.46%
4.52%
$ 144,298 $ 2,956
9,800
1
24
78,862
91,643
349,247
592
324
1,315,524
1,809,985
2.05%
2.81%
0.25%
7.41%
5.99%
5.06%
$ 39,005 $
465,399
531
1,330
1,167,458
1,673,723
612
12,941
1
84
64,752
78,390
1.57%
2.78%
0.23%
6.32%
5.55%
4.68%
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
12,955
58,411
49,859
$2,348,485
11,951
45,037
15,256
$1,882,229
10,013
38,502
13,805
$1,736,043
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
$ 722,433
163,332
767,075
110,292
1,763,132
6,089
268
16,908
2,752
26,017
0.84%
0.16%
2.20%
2.50%
1.48%
$ 592,113
115,682
703,685
40,766
1,452,246
10,447
527
17,141
1,851
29,966
1.76%
0.46%
2.44%
4.54%
2.06%
$ 556,528
111,134
628,457
39,150
1,335,269
8,531
407
10,690
1,738
21,366
1.53%
0.37%
1.70%
4.44%
1.60%
393,734
12,714
2,169,580
178,905
$2,348,485
$ 464,128
262,379
9,204
1,723,829
158,400
$1,882,229
252,531
5,870
1,593,670
142,373
$1,736,043
$74,667
$61,677
$57,024
3.04%
3.35%
$ 357,739
3.00%
3.41%
$ 338,454
3.08%
3.41%
126.32%
124.63%
125.35%
(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 3.36%, 3.42% and 3.42% for the years ended December 31, 2020, 2019 and 2018. A 21% tax rate was used
to calculate the effect on securities income from tax exempt securities for the years ended December 31, 2020, 2019 and 2018.
104
10 5
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Volume/Rate Analysis
Noninterest Income
Noninterest Expense
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, 2020 vs. 2019
For the Years Ended
December 31, 2019 vs. 2018
Increase (Decrease) Due To
Increase (Decrease) Due To
Volume
Rate
Increase/
Decrease
Volume
Rate
Increase/
Decrease
(in thousands, except, for %)
$ 621
$ (3,173)
$ (2,552)
$ 2,105
$ 239
$ 2,344
846
(1,175)
(329)
(3,259)
-
4
-
(7)
19,433
20,904
(7,508)
(11,863)
1,943
163
1,473
2,032
5,611
(6,301)
(422)
(1,706)
(1,131)
(9,560)
-
(3)
11,925
9,041
(4,358)
(259)
(233)
901
(3,949)
-
(72)
8,618
7,392
570
18
1,400
73
2,061
118
-
12
5,492
5,861
1,346
102
5,051
40
6,539
(3,141)
-
(60)
14,110
13,253
1,916
120
6,451
113
8,600
Interest earned on:
Interest-earning deposits with banks
Securities (including FHLB stock)
Federal funds sold
Loans held for sale
Loans, net of unearned income
Total interest income
Interest paid on:
Demand deposits
Savings deposits
Time deposits
Borrowings
Total interest expense
Change in net interest income
$ 15,293
$ (2,303)
$ 12,990
$ 5,331
$ (678)
$ 4,653
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 $14.9 million provision for loan losses for the year
ended December 31, 2020 compared to $4.9 million for 2019. The
allowance for loan losses at December 31, 2020 was $24.5 million or
1.33% of total loans, compared to $10.9 million or 0.72% of total loans
at December 31, 2019. The increase in the provision was attributable
to the increase in the loan portfolio, the effects of the COVID-19
pandemic and charge-offs not previously provided for. Total charge-offs
were $2.4 million for year ended December 31, 2020 and $5.3 million
for 2019. We believe that the allowance is adequate to cover potential
losses in the loan portfolio given the current economic conditions that
are significantly influenced by the COVID-19 pandemic, and current
expected net charge-offs and non-performing asset levels. We expect
economic uncertainty to continue which may result in additional
increases to the allowance for loan losses in future periods.
106
For the year ended December 31, 2019, the provision for loan losses
was $4.9 million compared to $1.4 million for 2018. The allowance
for loan losses at December 31, 2019 was $10.9 million or 0.72%
of total loans, compared to $10.8 million or 0.88% of total loans at
December 31, 2018. The increase in the provision was attributed to
additional provisions on loans evaluated individually for impairment.
First Guaranty also received a $3.6 million negotiated payment in
settlement of a commercial and industrial non-accrual loan on May 9,
2018. The payment resulted in a recovery of $1.6 million. The recovery
impacted the allowance for loan losses and the end result was a negative
provision for loan losses in the second quarter of 2018. The increase in
the provision was also attributable to the increase in the balance of the
loan portfolio and charge-offs not previously provided for. Substandard
loans increased $6.3 million to $53.1 million at December 31, 2019
from $46.8 million at December 31, 2018. Doubtful loans decreased
$0.5 million to $0 at December 31, 2019 from $0.5 million at December
31, 2018. The impaired loan portfolio did not suffer additional declines
in estimated fair value requiring further provisions. We believe that the
allowance is adequate to cover potential losses in the loan portfolio
given the current economic conditions, and current expected net
charge-offs and non-performing asset levels.
Our primary sources of recurring noninterest income are customer
service fees, ATM and debit card 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 $23.8 million for the year ended December
31, 2020, an increase of $15.5 million from $8.3 million for the year
ended December 31, 2019. The increase was primarily due to gains
on the sale of securities. Net securities gains were $14.8 million for the
year ended December 31, 2020 as compared to net securities losses
of $0.2 million for 2019. The gains on securities sales occurred as
First Guaranty sold investment securities in order to fund loan growth
and convert unrealized gains into realized earnings as previously noted
as part of First Guaranty's plan to manage for economic uncertainty.
Service charges, commissions and fees totaled $2.6 million for the
year ended December 31, 2020 as compared to $2.8 million for 2019.
The decline in these fees for 2020 compared to 2019 was the result
of waivers initially provided for during the beginning of the COVID-19
pandemic. ATM and debit card fees totaled $3.0 million for the year
ended December 31, 2020 and $2.3 million for 2019. The increase in
these fees can be attributed to growth from the Union acquisition and to
changes in customer behavior associated with the COVID-19 pandemic
as customers used their debit cards as an alternative to cash. Net gains
on the sale of loans were $1.1 million for the year ended December 31,
2020 and $1.4 million for 2019. Other noninterest income totaled $2.3
million and $2.0 million for the years ended December 31, 2020 and
2019, respectively.
Noninterest income totaled $8.3 million for the year ended December
31, 2019, an increase of $3.0 million from $5.3 million for the year
ended December 31, 2018. The increase was primarily due to increased
gains on the sale of the guaranteed portion of SBA and USDA loans
along with lower losses on the sale of securities. Net securities losses
were $0.2 million for the year ended December 31, 2019 as compared
to net securities losses of $1.8 million for 2018. The losses on securities
sales occurred as First Guaranty sold investment securities in order to
fund loan growth. Service charges, commissions and fees totaled $2.8
million for the year ended December 31, 2019 as compared to $3.0
million for 2018. ATM and debit card fees totaled $2.3 million for the
year ended December 31, 2019 and $2.1 million for 2018. Net gains
on the sale of loans were $1.4 million for the year ended December 31,
2019 and $0.3 million for 2018. Other noninterest income totaled $2.0
million and $1.7 million for the years ended December 31, 2019 and
2018, respectively.
Noninterest expense
includes salaries and employee benefits,
occupancy and equipment expense and other types of expenses.
Noninterest expense totaled $58.0 million for the year ended December
31, 2020 and $47.2 million for the year ended December 31, 2019.
Salaries and benefits expense totaled $29.6 million for the year ended
December 31, 2020 and $25.0 million for the year ended December
31, 2019. The increase in salaries and benefits expense was primarily
due to the increase in personnel expense from the Union acquisition,
new hires and expenses associated with COVID-19. Occupancy and
equipment expense increased to $7.7 million for the year ended
December 31, 2020 from $6.1 million for the year ended December
31, 2019 due to the new offices acquired in the Union acquisition.
Other noninterest expense totaled $20.7 million for the year ended
December 31, 2020 and $16.1 million for 2019. The following are
notable changes occurred within noninterest expense. Marketing and
public relations expense declined $0.4 million during 2020 primarily
due to the impacts of COVID-19. Software expense and amortization
increased $1.0 million in 2020 compared to 2019 due to the Union
acquisition and the continued development of First Guaranty's loan
and deposit platforms. The amortization of core deposits increased
$0.3 million due to the Union acquisition. Net costs from other real
estate owned and repossessions increased by $1.2 million as First
Guaranty established a reserve for other real estate expense and
wrote down other real estate properties. First Guaranty's regulatory
assessment increased by $1.0 million in 2020 compared to 2019
due to the Union acquisition and the substantial growth in deposits
associated with COVID-19.
Noninterest expense
includes salaries and employee benefits,
occupancy and equipment expense and other types of expenses.
Noninterest expense totaled $47.2 million for the year ended December
31, 2019 and $43.3 million for the year ended December 31, 2018.
Salaries and benefits expense totaled $25.0 million for the year ended
December 31, 2019 and $22.9 million for the year ended December
31, 2018. The increase in salaries and benefits expense was primarily
due to the increase in personnel expense from the Union acquisition
and new hires. Occupancy and equipment expense increased to $6.1
million for the year ended December 31, 2019 from $5.6 million for
the year ended December 31, 2018 due to the new offices acquired in
the Union acquisition. Other noninterest expense totaled $16.1 million
for the year ended December 31, 2019 and $14.8 million for 2018.
The following are notable changes within noninterest expense. Legal
and professional fees increased approximately $0.3 million in 2019
compared to 2018 principally due to the Union acquisition. Data
processing increased approximately $0.3 million principally due to the
Union acquisition.
10 7
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT The following table presents, for the years indicated, the major categories 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
Total other expense
December 31, 2020
December 31, 2019
December 31, 2018
(in thousands)
$ 2,919
$ 2,648
$ 2,362
2,465
1,332
1,046
1,251
921
2,354
726
256
712
393
1,653
1,716
2,980
1,972
1,217
1,456
1,094
674
1,308
908
193
390
603
422
683
2,536
1,692
1,214
1,329
1,066
562
1,119
978
208
545
380
186
941
2,204
$ 20,724
$ 16,104
$ 14,786
Income Taxes
The amount of income tax 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, 2020, 2019 and 2018 was $5.2 million, $3.7 million
and $3.5 million, respectively. The provision for income taxes in 2020 increased as compared to 2019 due to the increase in income before income
taxes. First Guaranty's statutory tax rate was 21.0% for the years ended December 31, 2020, 2019 and 2018.
Impact of Inflation
Our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K 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
We maintained a net borrowing capacity at the FHLB totaling $161.2 million and $170.3 million at December 31, 2020 and December 31, 2019,
respectively with $53.4 million and $16.6 million in FHLB advances outstanding at December 31, 2020 and December 31, 2019, respectively. At
December 31, 2020, we had outstanding letters of credit from the FHLB in the amount of $365.8 million that were primarily used to collateralize
public funds deposits. We also have a discount window line with the Federal Reserve Bank that totaled $29.0 million at December 31, 2020. First
Guaranty had loans eligible to be pledged under the Federal Reserve's PPP lending facility that totaled $92.3 million at December 31, 2020.
First Guaranty did not have any advances under this facility at December 31, 2020. We also maintain federal funds lines of credit at various
correspondent banks with borrowing capacity of $100.5 million at December 31, 2020. We have a revolving line of credit for $6.5 million, with no
outstanding balance at December 31, 2020 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 $178.6 million at December 31, 2020 from $166.0 million at December 31, 2019. The increase in
shareholders' equity was principally the result of an increase of $14.1 million in retained earnings offset by a decrease of $1.5 million in
accumulated other comprehensive income. The $14.1 million increase in retained earnings was due to net income of $20.3 million during the
year ended December 31, 2020, partially offset by $6.2 million in cash dividends paid on our common stock. The decrease in accumulated
other comprehensive income was primarily attributed to the decrease in unrealized gains on available for sale securities during the year ended
December 31, 2020.
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, 2020, First Guaranty Bank was classified as well-capitalized. First
Guaranty Bank's capital conservation buffer was 4.22% at December 31, 2020.
The following table presents First Guaranty Bank's capital ratios as of the indicated dates.
"Well Capitalized
Minimums"
At December 31, 2020
"Well Capitalized
Minimums"
At December 31, 2019
Tier 1 Leverage Ratio
5.00%
Tier 1 Risk-based Capital Ratio
Total Risk-based Capital Ratio
Common Equity Tier One Capital
8.00%
10.00%
6.50%
8.58%
10.97%
12.22%
10.97%
5.00%
8.00%
10.00%
6.50%
10.44%
11.96%
12.61%
11.96%
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 our customers
and to reduce our 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.
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.
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 we do for on-balance sheet instruments. Unless otherwise noted, collateral or other
security is not required to support financial instruments with credit risk.
First Guaranty's cash and cash equivalents totaled $299.6 million at December 31, 2020 compared to $67.4 million at December 31, 2019. Loans
maturing within one year or less at December 31, 2020 totaled $265.9 million. At December 31, 2020, time deposits maturing within one year or
less totaled $355.1 million. Time deposits maturing after one year through three years totaled $234.1 million at December 31, 2020 compared
to $167.9 million at December 31, 2019. Time deposits maturing after three years totaled $136.5 million at December 31, 2020 compared to
$243.4 million at December 31, 2019. First Guaranty increased interest-bearing deposits associated with brokered money market funds in order
to increase on-balance sheet liquidity. Approximately $50.0 million of additional brokered money market funds were acquired in order to manage
uncertainty associated with the COVID-19 crisis. First Guaranty's held to maturity ("HTM") investment securities portfolio at December 31, 2020
was $0 compared to $86.6 million or 20.3% of the investment portfolio at December 31, 2019. First Guaranty's available for sale ("AFS") portfolio
was $238.5 million, or 100.0% of the investment portfolio at December 31, 2020 compared to $339.9 million, or 79.7% at December 31, 2019.
The majority of the AFS 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.
The notional amounts of the financial instruments with off-balance sheet risk at December 31, 2020, 2019 and 2018 are as follows:
Contract Amount
December 31, 2020
December 31, 2019
December 31, 2018
Commitments to Extend Credit
Unfunded Commitments under lines of credit
Commercial and Standby letters of credit
$ 154,047
$ 169,151
$ 11,728
(in thousands)
$ 117,826
$ 148,127
$ 11,258
$ 108,348
$ 122,212
$ 6,912
108
10 9
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
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, 2020, the largest concentrations of unfunded commitments were lines of
credit associated with construction and land development loans and 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 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, 2020, 2019 and 2018.
Contractual Obligations
The following table summarizes our fixed and determinable contractual obligations and other funding needs by payment date at December 31,
2020. 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.
Payments Due by Period:
December 31, 2020
Operating leases
Software contracts
Time deposits
Short-term advances from
Federal Home Loan Bank
Repurchase agreements
Long-term advances from
Federal Home Loan Bank
Senior long-term debt
Junior subordinated debentures
Total contractual obligations
Less Than One Year
One to Three Years
Over Three Years
Total
(in thousands)
$ 141
$ 150
$ -
$ 291
2,717
355,093
50,000
1,406
-
4,531
-
4,903
234,058
-
1,993
-
12,082
-
1,165
136,478
-
2,722
3,366
25,795
15,000
8,785
725,629
50,000
6,121
3,366
42,408
15,000
$ 413,888
$ 253,186
$ 184,526
$ 851,600
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.
The following interest sensitivity analysis is one measurement of
interest rate risk. This analysis, which we prepare quarterly, 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, 2020 illustrated below 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
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
110
11 1
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT December 31, 2020
Interest Sensitivity Within
3 Months Or
Less
Over 3
Months
thru 12
Months
Total One
Year
Over One
Year
Total
(in thousands)
$ 562,022
$ 195,966
$ 757,988
$ 1,086,147
$ 1,844,135
11,019
702
287,744
2,002
-
-
13,021
702
287,744
228,878
241,899
-
-
702
287,744
$ 861,487
$ 197,968
$1,059,455
$ 1,315,025
$ 2,374,480
$ 860,394
$ -
$ 860,394
$ -
$ 860,394
168,879
196,861
50,000
42,366
-
-
-
158,137
-
-
-
-
168,879
354,998
50,000
42,366
-
-
-
370,631
5,902
3,366
14,777
503,167
168,879
725,629
55,902
45,732
14,777
503,167
$ 1,318,500
$ 158,137
$ 1,476,637
$ 897,843
$ 2,374,480
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, 2020. 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 -25
basis points) from base case. We do not present shifts less than 25
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, 2020
Instantaneous Changes in
Interest Rates (basis points)
Percent Change in
Net Interest Income
+400
+300
+200
+100
Base
-25
(7.18)%
(7.08)%
(6.99)%
(2.71)%
0%
2.84%
$ (457,013)
$ 39,831
$ (417,182)
$ 417,182
$ (457,013)
$ (417,182)
$ (417,182)
$ -
Gradual Changes in
Interest Rates (basis points)
Percent Change in
Net Interest Income
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
First Guaranty continues to pursue its strategy to increase loans as a
percentage of average assets compared to securities. First Guaranty
has also been collateralizing more of its public funds deposits with
either FHLB letters of credit or with reciprocal deposit insurance
programs. This facilitates the investment of our deposits in higher
yielding loans rather than lower yielding securities that generally have
higher interest rate risk. This strategy is designed to reduce interest
rate risk and improve net interest income. New loans that are originated
generally are either floating rate or were fixed rate with maturities that
did not exceed five years. Loans as a percentage of average interest-
earning assets increased to 74.7% in 2020 compared to 72.7% in
2019. Securities as a percentage of average interest-earning assets
decreased from 19.3% in 2019 to 17.1% in 2020.
Cumulative gap as a percent of earning assets
(19.2)%
(17.6)%
(17.6)%
FGB hosted Chamber After Hours Mardi Gras event!
+400
+300
+200
+100
Base
-25
(5.96)%
(4.96)%
(3.43)%
(1.32)%
0%
2.40%
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.
112
11 3
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
First Guaranty Bancshares, Inc.
Opinion on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying balance sheets of First Guaranty Bancshares, Inc. and Subsidiary (First Guaranty) as of December 31,
2020 and 2019, and the related statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in
the three-year period ended December 31, 2020, and the related notes collectively referred to as the financial statements. We also have
audited First Guaranty's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of First Guaranty as of
December 31, 2020 and 2019 and the results of its operations and its cash flows for each of the years in the three-year period ended December
31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, First Guaranty
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established
in Internal Control—Integrated Framework (2013) issued by COSO.
Basis for Opinion
First Guaranty’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on First Guaranty’s financial statements and
an opinion on First Guaranty’s internal control over financial reporting based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to First Guaranty
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and
whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Loan Losses
As described in Notes 1, 6 and 7 to the financial statements, at December 31, 2020 First Guaranty’s total loans were $1.8 billion and the
associated allowance for loan losses balance was $24.5 million. The allowance for loan losses is management’s best estimate of probable
losses inherent in its loan portfolio and is based on historical loss experience by loan segment and class with adjustments for current events
and conditions. These factors include, among others, loan loss experience, current loan portfolio quality, present economic, political and
regulatory conditions, specific credit risks, industry concentrations, and unidentified losses inherent in the current loan portfolio.
We identified management’s asset quality ratings of loans and determination of qualitative factors, which is based on general economic
conditions and other qualitative risk factors both internal and external to First Guaranty, both of which are used in the allowance for loan
losses calculation, as a critical audit matter. First Guaranty uses asset quality risk ratings to monitor portfolio performance and trends and
to adjust historical loss percentages for classified loans. First Guaranty stratifies loans into pools based on collateral and type of loan, based
on regulatory guidelines, and estimates inherent loss rates for each of the loan pools, which are used in the calculation of the allowance for
loan losses. The general valuation allowance portion of the allowance for loan losses is used to estimate losses and is based on management’s
evaluation of various factors that are not captured in the historical credit loss factors or on the specific impairment component. Auditing
management’s judgments regarding the determination of the quantitative and qualitative portion of the allowance for loan losses involved
a high degree of subjectivity.
The primary procedures we performed to address the critical audit matters included:
• Testing the design, implementation, and operating effectiveness of controls relating to management’s calculation of the allowance for loan
losses, including controls over the accuracy of asset quality ratings of loans, the loan pools based on collateral type, and the determination
of the qualitative and quantitative factors of the allowance for loan losses.
• Testing a risk-based targeted selection of loans to gain substantive evidence that First Guaranty is appropriately rating these loans in
accordance with its policies, and that the asset quality ratings for the loans are reasonable.
• Obtaining management’s analysis and supporting documentation related to the qualitative factors and testing whether the qualitative risk
factors both internal and external to First Guaranty used in the calculation of the allowance for loan losses are supported by the analysis
provided by management.
• Testing of loans excluded from the qualitative general reserve calculations.
• Testing the appropriateness of the methodology and assumptions used in the calculation of the allowance for loan losses, and testing the
calculation itself, including completeness and accuracy of the data used in the calculation, application of the qualitative factors determined
by management and used in the calculation, and recalculation of the allowance for loan losses balance.
We have served as First Guaranty's auditor since 2001.
Castaing, Hussey & Lolan, LLC
New Iberia, Louisiana
March 16, 2021
114
11 5
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY - CONSOLIDATED BALANCE SHEETS
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Assets
Cash and cash equivalents:
Cash and due from banks
Federal funds sold
Cash and cash equivalents
Investment securities:
Available for sale, at fair value
Held to maturity, at cost (estimated fair value of $0 and $86,817, respectively)
Investment securities
Federal Home Loan Bank stock, at cost
Loans held for sale
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 advances from Federal Home Loan Bank
Repurchase agreements
Accrued interest payable
Long-term advances from Federal Home Loan Bank
Senior long-term debt
Junior subordinated debentures
Other liabilities
Total Liabilities
Shareholders' Equity
Common stock:
$1 par value - authorized 100,600,000 shares; issued 9,741,253 shares
Surplus
Retained earnings
Accumulated other comprehensive income (loss)
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
See Notes to the Consolidated Financial Statements.
December 31, 2020
December 31, 2019
(in thousands, except share data)
$ 298,903
702
299,605
$ 66,511
914
67,425
238,548
-
238,548
3,351
-
1,844,135
24,518
1,819,617
339,937
86,579
426,516
3,308
-
1,525,490
10,929
1,514,561
59,892
12,900
6,587
2,240
11,933
18,405
$ 2,473,078
56,464
12,942
7,166
4,879
8,412
15,543
$ 2,117,216
$ 411,416
860,394
168,879
725,629
2,166,318
$ 325,888
635,942
135,156
756,027
1,853,013
50,000
6,121
5,292
3,366
42,366
14,777
6,247
2,294,487
13,079
6,840
6,047
3,533
48,558
14,737
5,374
1,951,181
9,741
110,836
57,367
647
178,591
$ 2,473,078
9,741
110,836
43,283
2,175
166,035
$ 2,117,216
Interest Income:
Loans (including fees)
Deposits with other banks
Securities (including FHLB stock)
Federal funds sold
Total Interest Income
Interest Expense:
Demand deposits
Savings deposits
Time deposits
Borrowings
Total Interest Expense
Net Interest Income
Less: Provision for loan losses
Net Interest Income after Provision for Loan Losses
Noninterest Income:
Service charges, commissions and fees
ATM and debit card fees
Net gains (losses) on securities
Net gains 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
Per Common Share:
Earnings
Cash dividends paid
Years Ended December 31,
2019
2020
2018
(in thousands, except share data)
$ 90,808
404
9,471
1
100,684
6,089
268
16,908
2,752
26,017
74,667
14,877
59,790
2,571
3,022
14,791
1,054
2,342
23,780
29,600
7,709
20,724
58,033
25,537
5,219
$ 20,318
$ 78,886
2,956
9,800
1
91,643
$ 64,836
612
12,941
1
78,390
10,447
527
17,141
1,851
29,966
61,677
4,860
56,817
2,808
2,254
(157)
1,376
2,018
8,299
25,019
6,096
16,104
47,219
8,531
407
10,690
1,738
21,366
57,024
1,354
55,670
2,988
2,122
(1,830)
278
1,722
5,280
22,888
5,601
14,786
43,275
17,897
3,656
$ 14,241
17,675
3,462
$ 14,213
$ 2.09
$ 0.64
$ 1.47
$ 0.60
$
$
1.47
0.58
Weighted Average Common Shares Outstanding
9,741,253
9,695,131
9,687,123
See Notes to Consolidated Financial Statements
116
11 7
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
2019
2018
2020
Net Income
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period
Reclassification adjustments for gains (losses) 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)
$ 20,318
$ 14,241
$ 14,213
12,757
(14,791)
100
(1,934)
406
(1,528)
11,435
353
-
11,788
(2,475)
9,313
(8,508)
1,830
-
(6,678)
1,402
(5,276)
$ 18,790
$ 23,554
$ 8,937
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Common
Stock
$1 Par
Surplus
Retained
Earnings
Accumulated
Other
Comprehensive
Income/(Loss)
Total
(in thousands, except share data)
$ 9,687
$ 109,788
$26,064
$ (1,556) $ 143,983
-
-
-
-
$ 9,687
-
54
-
-
$ 9,741
-
-
-
$ 9,741
-
-
-
-
$ 109,788
-
1,048
-
-
$ 110,836
-
-
-
$ 110,836
306
14,213
-
(5,636)
$ 34,947
14,241
(102)
-
(5,803)
$ 43,283
20,318
-
(6,234)
$ 57,367
(306)
-
(5,276)
-
-
14,213
(5,276)
(5,636)
$ (7,138) $ 147,284
14,241
-
-
9,313
-
$ 2,175
-
(1,528)
-
$ 647
1,000
9,313
(5,803)
$ 166,035
20,318
(1,528)
(6,234)
$ 178,591
Balance December 31, 2017
Reclassification of stranded tax effects in accumulated
other comprehensive income
Net income
Other comprehensive income (loss)
Cash dividends on common stock ($0.58 per share)
Balance December 31, 2018
Net income
Common stock issued in private placement, 54,130 shares
Other comprehensive income (loss)
Cash dividends on common stock ($0.60 per share)
Balance December 31, 2019
Net income
Other comprehensive income
Cash dividends on common stock ($0.64 per share)
Balance December 31, 2020
See Notes to Consolidated Financial Statements
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 (loss) on sale/call of securities
Other than temporary impairment charge on securities
Gain on sale of assets
Repossessed asset writedowns, gains and losses on dispositions
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:
Proceeds from maturities and calls of HTM securities
Proceeds from maturities, calls and sales of AFS securities
Funds Invested in AFS securities
Net increase in loans
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Proceeds from sales of other real estate owned
Cash paid in excess of cash received in acquisition
Net Cash (Used In) Provided By Investing Activities
Cash Flows From Financing Activities:
Net increase 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
Common stock issued in private placement
Dividends paid
Net Cash Provided By Financing Activities
Years Ended December 31,
2020
2019
2018
(in thousands)
$ 20,318
$ 14,241
$ 14,213
14,877
3,781
2,594
(14,791)
100
(1,054)
1,245
(43)
-
(3,268)
23,759
34,022
1,242,559
(1,078,450)
(322,745)
(6,313)
127
2,345
-
(128,455)
313,210
36,202
-
(6,302)
-
(6,234)
336,876
4,860
3,057
1,347
157
-
(1,304)
90
(63)
344
6,349
29,078
21,190
279,590
(274,437)
(123,553)
(11,933)
12
550
(23,325)
(131,906)
18,408
(28)
32,465
(3,754)
1,000
(5,803)
42,288
1,354
3,289
1,445
1,830
-
(301)
(47)
(42)
964
4,184
26,889
11,197
384,549
(309,346)
(76,354)
(3,787)
46
484
-
6,789
80,336
(15,500)
-
(2,941)
-
(5,636)
56,259
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at the Beginning of the Period
Cash and Cash Equivalents at the End of the Period
232,180
67,425
$ 299,605
(60,540)
127,965
$ 67,425
89,937
38,028
$ 127,965
Noncash Activities:
Acquisition of real estate in settlement of loans
Transfer of securities from HTM to AFS
Cash Paid During the Period:
Interest on deposits and borrowed funds
Federal income taxes
State income taxes
See Notes to the Consolidated Financial Statements.
$ 951
$ 52,553
$ 2,789
$ -
$ 297
$ -
$ 26,772
$ 27,871
$ 19,902
$ 4,800
$ 25
$ 3,250
$ 23
$ 2,400
$ -
118
11 9
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Note 1. Business and Summary of Significant Accounting
Policies
Business
First Guaranty Bancshares, Inc. ("First Guaranty") 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 thirty-four banking offices, including one drive-up
banking facility, and forty-six automated teller machines (ATMs) in
Southeast Louisiana, Southwest Louisiana, Central Louisiana, North
Louisiana and North Central Texas.
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
120
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.
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.
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 6 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 6 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
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
$500,000. 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
12 1
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT 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.
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.
Loans acquired in a business combination are recorded at their
estimated fair value on their purchase date with no carryover of the
related allowance for loan losses. Performing acquired loans are
subsequently evaluated for any required allowance at each reporting
date. An allowance for loan losses is calculated using a similar
methodology for originated loans.
Loan fees and costs
Nonrefundable loan origination and commitment fees and direct
costs associated with originating loans are deferred and recognized
over the lives of the related loans as an adjustment to the loans' yield
using the level yield method.
Allowance for loan losses
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance
for loan losses when Management believes that the collectability of the
principal is unlikely. The allowance, which is based on evaluation of the
collectability of loans and prior loan loss experience, is an amount that,
in the opinion of Management, reflects the risks inherent in the existing
loan portfolio and exists at the reporting date. The evaluations take
into consideration a number of subjective factors including changes
in the nature and volume of the loan portfolio, historical losses, overall
portfolio quality, review of specific problem loans, current economic
conditions that may affect a borrower's ability to pay including the
impact of the COVID-19 pandemic, 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.
122
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. Qualitative factors include analysis of levels and trends in
delinquencies,non-accrual loans, charge-offs and recoveries, loan
risk ratings, trends in volume and terms of loans, changes in lending
policy, credit concentrations, portfolio stress test results, national and
local economic trends including the impact of COVID-19, industry
conditions, and other relevant 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. Goodwill represents the excess
of the purchase price over the fair value of the net identifiable assets
acquired in an acquisition. 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 in accordance with ASC Topic
350.
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 and loan servicing assets related to the SBA
portfolio. 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.
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 or to the allowance for other real estate. 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 instrument
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 2017. 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 20 for a detailed description of fair
value measurements.
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 2019, 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 2020.
Note 2. Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-
Credit Losses: 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.
On October 16, 2019, the FASB approved an effective date delay
applicable to smaller reporting companies until fiscal years beginning
after December 15, 2022, including interim periods within those fiscal
years. First Guaranty is a smaller reporting company and has delayed
the adoption of ASU 2016-13.
In December 2019, the FASB issued ASU 2019-12, "Simplifying the
Accounting for Income Taxes (Topic 740)." The amendments in this
ASU simplify the accounting for income taxes by removing certain
exceptions to the general principles in the Topic 740. The amendments
also improve the consistent application of and simplify GAAP for other
areas of Topic 740 by clarifying and amending existing guidance.
The amendments in the ASU are effective for fiscal years and interim
periods beginning after December 15, 2020. First Guaranty is currently
assessing the impact of adoption of this guidance.
12 3
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT Note 4. 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, 2020
and 2019. At December 31, 2020 First Guaranty had no accounts
at correspondent banks, excluding the Federal Reserve Bank, that
exceeded the FDIC insurable limit of $250,000. At December 31,
2019 First Guaranty had only two 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 $5.7
million.
Note 3. Merger Transaction
Effective at the close of business on November 7, 2019, First Guaranty
completed its acquisition of 100% of the outstanding shares of Union
Bancshares, Incorporated, a Louisiana corporation ("Union"), a single
bank holding company headquartered in Marksville, Louisiana and
its wholly owned subsidiary, Union Bank for $43.4 million in cash.
This acquisition allowed First Guaranty to expand its presence into
the Central Louisiana market area. The purchase price resulted in
approximately $9.4 million in goodwill and $4.2 million in core deposit
intangible, none of which is deductible for tax purposes.
First Guaranty accounts for business combinations under the
acquisition method in accordance with ASC Topic 805, Business
Combinations. Accordingly, for each transaction, the purchase price is
allocated to the fair value of the assets acquired and liabilities assumed
as of the date of the acquisition. In conjunction with the adoption of
ASU 2015-16, upon receipt of final fair value estimates during the
measurement period, which must be within one year of the acquisition
dates, First Guaranty records any adjustments to the preliminary fair
value estimates in the reporting period in which the adjustments are
determined. First Guaranty finalized the purchase price allocations
related to the Union acquisition during the fourth quarter of 2020.
Based on management's valuation of tangible and intangible assets
acquired and liabilities assumed, the purchase price for the Union
acquisition is allocated in the table below.
Cash and due from banks
Securities available for sale
Loans
Premises and equipment
Goodwill
Intangible assets
Other real estate
Other assets
Union Bancshares,
Incorporated
(in thousands)
$ 20,063
38,813
184,344
7,223
9,428
4,213
1,595
9,480
Total assets acquired
$ 275,159
Deposits
FHLB borrowings
Repurchase agreements
Other liabilities
Total liabilities assumed
Net assets acquired
205,078
16,617
6,863
3,218
$ 231,776
$ 43,383
Note 5. Securities
A summary comparison of securities by type at December 31, 2020 and 2019 is shown below.
December 31, 2020
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
December 31, 2019
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Fair Value
Amortized
Cost
(in thousands)
Available for sale:
U.S. Treasuries
U.S. Government Agencies
Corporate debt securities
Municipal bonds
Collateralized mortgage obligations
Mortgage-backed securities
$ 3,000
$ -
$ -
$ 3,000
$ -
$ -
$ -
$ -
169,986
36,153
27,381
-
1,208
77
604
781
-
31
(405)
(268)
-
-
169,658
36,489
28,162
-
16,380
94,561
30,297
16,400
-
1,239
179,546
15
1,110
1,870
40
317
(2)
(302)
(14)
(43)
16,393
95,369
32,153
16,397
(238)
179,625
Total available for sale securities
$ 237,728
$ 1,493
$ (673) $ 238,548
$ 337,184
$ 3,352
$ (599) $ 339,937
Held to maturity:
U.S. Government Agencies
Municipal bonds
Mortgage-backed securities
.
$ -
$ -
$ - $ -
$ 18,175
$ -
$ (32) $ 18,143
-
-
-
-
-
-
-
-
5,107
63,297
182
200
-
(112)
5,289
63,385
Total held to maturity securities
$ -
$ -
$ -
$ -
$ 86,579
$ 382
$ (144) $ 86,817
The scheduled maturities of securities at December 31, 2020, 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
December 31, 2020
Amortized Cost
Fair Value
(in thousands )
$ 9,635
$ 9,670
6,994
67,675
152,216
236,520
1,208
6,995
68,412
152,232
237,309
1,239
$ 237,728
$ 238,548
124
12 5
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
The following is a summary of the fair value of securities with gross unrealized losses and an aging of those gross unrealized losses at December
31, 2020.
Less Than 12 Months
12 Months or More
At December 31, 2020
Number
of
Securities
Fair
Value
Gross
Unrealized
Losses
Number
of
Securities
Fair
Value
Gross
Unrealized
Losses
Number
of
Securities
Total
Fair
Value
Gross
Unrealized
Losses
(in thousands)
Available for sale:
U.S. Treasuries
U.S. Government Agencies
Corporate debt securities
Municipal bonds
Mortgage-backed securities
Total available for sale securities
-
12
17
1
-
30
$ -
$ -
-
$ -
$ -
131,455
10,286
66
-
(405)
(144)
-
-
-
4
-
6
-
-
1,254
(124)
-
11
-
-
$141,807
$ (549)
10
$ 1,265
$ (124)
-
12
21
1
6
40
$ -
$ -
131,455
11,540
66
11
(405)
(268)
-
-
$143,072
$ (673)
The following is a summary of the fair value of securities with gross unrealized losses and an aging of those gross unrealized losses at December
31, 2019.
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 enterprises with unrealized losses and the amount of unrealized
losses on those investment securities that are the result of changes in market interest rates will not be other-than-temporarily impaired. 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. There was one security with an other-than-temporary impairment loss at
December 31, 2020. First Guaranty believes that the remaining issuers will be able to fulfill the obligations of these securities based on evaluations
described above. First Guaranty has the ability and intent to hold these securities until they recover, which could be at their maturity dates.
There was one other-than-temporary impairment loss of $100,000 recognized on securities during the years ended December 31, 2020. The
security had an original book value of $0.1 million and was in default. First Guaranty's analysis of the company and the current market value of
the security resulted in the determination that a write down was warranted. There were no other-than-temporary impairment losses recognized on
securities during the years ended December 31, 2019, and 2018.
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, 2020, 2019, and 2018:
Year Ended
December 31,
2020
Year Ended
December 31,
2019
(in thousands)
Year Ended
December 31,
2018
At December 31, 2019
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)
Beginning balance of credit losses at beginning of year
$ -
$ 60
$ 60
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
100
-
-
-
Ending balance of cumulative credit losses recognized in earnings at end of year
$
100
$
-
-
-
(60)
-
-
-
-
-
$
60
Available for sale:
U.S. Treasuries
U.S. Government Agencies
Corporate debt securities
Municipal bonds
Collateralized mortgage
obligations
Mortgage-backed securities
Total available for sale
securities
-
1
42
9
12
57
$ -
$ -
4,398
21,269
4,285
10,022
91,753
-
1
(1)
(174)
12
(14)
(43)
(186)
-
-
9
$ -
$ -
149
3,184
-
-
(1)
(128)
-
-
12,121
(52)
-
2
54
9
12
66
$ -
$ -
4,547
24,453
4,285
10,022
103,874
(2)
(302)
(14)
(43)
(238)
121
$ 131,727
$ (418)
22
$15,454
$ (181)
143
$147,181
$ (599)
Held to maturity:
U.S. Government Agencies
Municipal bonds
Mortgage-backed securities
Total held to maturity
securities
2
-
7
9
$ 2,177
$ (2)
-
8,880
-
(58)
8
1
10
$15,965
$ (30)
50
11,343
-
(54)
10
1
17
$ 18,142
$ (32)
50
-
20,223
(112)
$ 11,057
$ (60)
19
$27,358
$ (84)
28
$ 38,415
$ (144)
As of December 31, 2020, 40 of First Guaranty's debt securities had unrealized losses totaling 0.5% of the individual securities' amortized cost
basis and 0.3% of First Guaranty's total amortized cost basis of the investment securities portfolio. 10 of the 40 securities had been in a continuous
loss position for over 12 months at such date. The 10 securities had an aggregate amortized cost basis of $1.4 million and an unrealized loss of
$0.1 million at December 31, 2020. 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 at least quarterly and more frequently when economic or market conditions warrant
such evaluation. 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
gains, net of tax, reclassified out of AOCI into earnings totaled $11.7
million. During 2019 net losses, net of tax, reclassified out of AOCI into
earnings totaled $0.3 million.
At December 31, 2020, First Guaranty's exposure to investment
securities issuers that exceeded 10% of shareholders' equity was as
follows:
December 31, 2020
Amortized
Cost
Fair Value
(in thousands)
110,177
54,263
109,856
54,279
$ 164,440
$ 164,135
Federal Home Loan Mortgage
Corporation (Freddie Mac-FHLMC)
Federal Farm Credit Bank (FFCB)
Total
In 2020, 2019 and 2018 there were no other-than-temporary
impairment credit losses on securities for which First Guaranty had
previously recognized OTTI. 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.
At December 31, 2020 and 2019 the carrying value of pledged
securities totaled $184.0 million and $212.8 million, respectively.
Gross realized gains on sales of securities were $14.7 million, $0.8
million and $0.1 million for the years ended December 31, 2020,
2019 and 2018, respectively. Gross realized losses were $0.1 million,
$1.1 million and $1.9 million for the years ended December 31, 2020,
2019 and 2018. The tax applicable to these transactions amounted to
$3.1 million, $(79,000), and $(0.4) million for 2020, 2019 and 2018,
respectively. Proceeds from sales of securities classified as available
for sale amounted to $394.9 million, $90.5 million and $114.5 million
for the years ended December 31, 2020, 2019 and 2018, respectively.
Net unrealized gains on available for sale securities included in
accumulated other comprehensive income (loss) ("AOCI"), net of
applicable income taxes, totaled $0.6 million at December 31, 2020.
At December 31, 2019 net unrealized gains included in AOCI, net
of applicable income taxes, totaled $2.2 million. During 2020 net
126
12 7
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Note 6. Loans
The following table summarizes the components of First Guaranty's loan portfolio as of December 31, 2020 and December 31, 2019:
The following tables present the age analysis of past due loans at December 31, 2020 and December 31, 2019:
December 31,
2020
2019
Balance
As % of
Category
Balance
As % of
Category
(in thousands, except for %)
Real Estate:
As of December 31, 2020
30-89 Days
Past Due
90 Days or
Greater Past
Due
Total
Past Due
Current
Total Loans
Recorded
Investment 90
Days Accruing
(in thousands)
Real Estate:
Construction & land development
$ 150,841
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
26,880
271,236
45,932
824,137
1,319,026
28,335
353,028
148,783
530,146
1,849,172
(5,037)
8.2%
1.4 %
14.7%
2.5%
44.6%
71.4%
1.5%
19.1%
8.0%
28.6%
100.0%
$ 172,247
22,741
289,635
23,973
616,536
1,125,132
26,710
268,256
108,868
403,834
1,528,966
(3,476)
11.3%
1.5%
18.9%
1.6%
40.3%
73.6%
1.8%
17.5%
7.1%
26.4%
100.0%
Total Loans Net of Unearned Income
$ 1,844,135
$ 1,525,490
The following table summarizes fixed and floating rate loans by contractual maturity, excluding nonaccrual loans, as of December 31, 2020 and
December 31, 2019 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.
2020
December 31,
(in thousands)
2019
Fixed
Floating
Total
Fixed
Floating
Total
$ 186,252
$ 79,680
$ 265,932
$ 205,596
$ 104,859
$ 310,455
740,358
128,860
146,830
368,259
1,108,617
91,032
92,325
219,892
239,155
509,455
147,502
143,695
286,131
65,713
51,612
795,586
213,215
195,307
$ 1,202,300
$ 631,296
1,833,596
$1,006,248
$ 508,315
1,514,563
15,576
1,849,172
(5,037)
$ 1,844,135
14,403
1,528,966
(3,476)
$ 1,525,490
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
Construction & land development
$ 8,088
$ 1,621
$ 9,709
$ 141,132
$ 150,841
$ 1,000
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
227
6,050
190
15,792
30,347
143
663
1,176
1,982
857
1,084
25,796
26,880
7,207
13,257
257,979
271,236
366
556
45,376
45,932
12,148
27,940
796,197
824,137
—
4,980
366
4,699
22,199
52,546
1,266,480
1,319,026
11,045
3,539
2,557
372
6,468
3,682
3,220
1,548
8,450
24,653
349,808
147,235
28,335
353,028
148,783
521,696
530,146
67
1,856
123
2,046
Total Loans Before Unearned Income
$ 32,329
$28,667
$60,996
$1,788,176
1,849,172
$13,091
Unearned income
Total Loans Net of Unearned Income
(5,037)
$ 1,844,135
As of December 31, 2019
30-89 Days
Past Due
90 Days or
Greater Past
Due
Total
Past Due
Current
Total Loans
Recorded
Investment 90
Days Accruing
(in thousands)
Real Estate:
Construction & land development
$ 760
$ 429
$ 1,189
$ 171,058
$ 172,247
$ 48
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
6
8,521
-
11,279
20,566
310
2,801
794
3,905
1,274
3,682
-
1,280
12,203
—
6,249
17,528
21,461
277,432
23,973
599,008
22,741
289,635
23,973
616,536
11,634
32,200
1,092,932
1,125,132
4,800
342
266
5,408
5,110
3,143
1,060
9,313
21,600
265,113
107,808
394,521
26,710
268,256
108,868
403,834
-
923
-
1,603
2,574
-
15
50
65
Total Loans Before Unearned Income
$ 24,471
$17,042
$41,513
$1,487,453
1,528,966
$ 2,639
Unearned income
Total Loans Net of Unearned Income
(3,476)
$ 1,525,490
As of December 31, 2020, $305.0 million of floating rate loans were at their interest rate floor. At December 31, 2019, $153.3 million of floating
rate loans were at their interest rate floor. Nonaccrual loans have been excluded from these totals.
The tables above include $15.6 million and $14.4 million of nonaccrual loans for December 31, 2020 and 2019, respectively. See the tables below
for more detail on nonaccrual loans.
128
12 9
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
The following is a summary of nonaccrual loans by class at the dates indicated:
Purchased Impaired Loans
As of December 31,
2020
2019
(in thousands)
Real Estate:
Construction & land development
$ 621
$ 381
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
857
2,227
-
7,449
11,154
3,472
701
249
4,422
1,274
2,759
-
4,646
9,060
4,800
327
216
5,343
$ 15,576
$ 14,403
The following table identifies the credit exposure of the loan portfolio, including loans acquired with deteriorated credit quality, by specific credit
ratings as of the dates indicated:
Non-farm non-residential
756,760
51,355
16,022
As of December 31, 2020
As of December 31, 2019
Pass
Special
Mention
Sub-
standard Doubtful
Total
Pass
Special
Mention
Sub-
standard Doubtful
Total
(in thousands)
$ 139,032 $ 10,785 $ 1,024
$ - $ 150,841 $ 163,808
$ 6,180 $ 2,259
$ - $ 172,247
22,822
46
4,012
251,315
7,252
12,669
36,146
1,841
7,945
1,206,075
71,279
41,672
24,180
92
321,957
27,388
147,697
442
4,063
3,683
644
493,834
27,922
8,390
-
-
-
-
-
-
-
-
-
26,880
18,223
3,177
1,341
271,236
271,392
4,751
13,492
45,932
16,025
805
7,143
824,137
589,800
7,743
18,993
1,319,026
1,059,248
22,656
43,228
28,335
21,529
353,028
262,416
148,783
108,618
48
1,199
180
5,133
4,641
70
530,146
392,563
1,427
9,844
-
-
-
-
-
-
-
-
-
22,741
289,635
23,973
616,536
1,125,132
26,710
268,256
108,868
403,834
$ 1,699,909 $ 99,201 $ 50,062 $ - $ 1,849,172 $1,451,811
$ 24,083 $53,072 $ -
1,528,966
(5,037)
$ 1,844,135
(3,476)
$1,525,490
Real Estate:
Construction & land
development
Farmland
1- 4 family
Multifamily
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
130
As part of the acquisition of Union Bancshares, Inc. on November 7, 2019 and Premier Bancshares, Inc. on June 16, 2017, First Guaranty
purchased credit impaired loans for which there was, at acquisition, evidence of deterioration of credit quality since their origination and it was
probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is as follows at
December 31, 2020 and 2019.
As of December 31, 2020
As of December 31, 2019
(in thousands)
Real Estate:
Construction & land development
$ 397
$ 526
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
-
4,102
900
2,396
7,795
343
1,017
-
1,360
-
6,402
-
2,294
9,222
-
1,198
-
1,198
$ 9,155
$ 10,420
For those purchased loans disclosed above, there was no allowance for
loan losses at December 31, 2020 or December 31, 2019.
Where First Guaranty can reasonably estimate the cash flows expected
to be collected on the loans, a portion of the purchase discount is
allocated to an accretable yield adjustment based upon the present
value of the future estimated cash flows versus the current carrying
value of the loan and the accretable yield portion is being recognized
as interest income over the remaining life of the loan.
Where First Guaranty cannot reasonably estimate the cash flows
expected to be collected on the loans, it has decided to account for
those loans using the cost recovery method of income recognition.
As such, no portion of a purchase discount adjustment has been
determined to meet the definition of an accretable yield adjustment
on those loans accounted for using the cost recovery method. If,
in the future, cash flows from the borrower(s) can be reasonably
estimated, a portion of the purchase discount would be allocated to an
accretable yield adjustment based upon the present value of the future
estimated cash flows versus the current carrying value of the loan and
the accretable yield portion would be recognized as interest income
over the remaining life of the loan. Until such accretable yield can
be calculated, under the cost recovery method of income recognition,
all payments will be used to reduce the carrying value of the loan and
no income will be recognized on the loan until the carrying value is
reduced to zero.
The accretable yield, or income expected to be collected, on the purchased loans above is as follows for the years ended December 31, 2020 and
2019.
Year Ended
December 31, 2020
Year Ended
December 31, 2019
Balance, beginning of period
Acquisition accretable yield
Accretion
Net transfers from nonaccretable difference to accretable yield
(in thousands)
$ 3,647
$
30
(785)
-
Balance, end of period
$ 2,892
$
613
3,367
(831)
498
3,647
13 1
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Note 7. Allowance for Loan Losses
A summary of changes in the allowance for loan losses, by loan type, for the years ended December 31, 2020, 2019 and 2018 are as follows:
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.
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
Total Non-Real
Estate
Total
As of December 31,
2020
2019
Beginning
Allowance
(12/31/19)
Charge-
Offs
Recoveries Provision
Ending
Allowance
(12/31/20)
Beginning
Allowance
(12/31/18)
Charge-
Offs
(in thousands)
Recoveries
Provision
Ending
Allowance
(12/31/19)
$ 423 $ (265
)
$ -
$ 871
$ 1,029
$ 581 $ -
$ -
$ (158)
$ 423
50
1,027
1,038
5,277
7,815
-
(154)
-
(550)
(969)
-
39
-
412
1,598
(60)
462
2,510
978
178
217
10,159
12,980
15,064
20,043
41
911
1,318
4,771
7,622
-
(552)
-
(2,603)
(3,155)
-
39
-
5
44
9
629
(280)
3,104
3,304
50
1,027
1,038
5,277
7,815
95
(110)
70
126
181
339
(40)
-
(204)
95
1,909
(265)
128
1,030
2,802
1,909
(879)
1,110
(1,083)
-
-
724
-
739
2
1,490
2
891
15
(1,190)
-
267
246
-
612
1,909
1,163
1,110
(15)
-
3,114
(1,458)
922
1,897
4,475
3,154
(2,109)
513
1,556
3,114
$10,929 $ (2,427)
$1,139
$14,877
$24,518
$ 10,776
$ (5,264)
$ 557
$ 4,860
$10,929
As of December 31,
2018
Beginning Allowance
(12/31/17)
Charge-Offs
Recoveries
Provision
Ending Allowance
(12/31/18)
(in thousands)
Real Estate:
Construction & land development
$ 628
$ -
$ 3
$ (50)
$
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
132
5
1,078
994
2,811
5,516
187
2,377
1,125
20
3,709
-
(99)
-
(404)
(503)
(300)
(179)
(907)
-
-
90
20
89
202
26
1,642
216
-
36
(158)
304
2,275
2,407
426
(1,931)
457
(5)
(1,386)
1,884
(1,053)
581
41
911
1,318
4,771
7,622
339
1,909
891
15
3,154
$ 9,225
$ (1,889)
$ 2,086
$ 1,354
$ 10,776
A summary of the allowance and loans, including loans acquired with deteriorated credit quality, individually and collectively evaluated for
impairment are as follows:
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
Total Non-Real Estate
Total
Unearned Income
Total Loans Net of
Unearned Income
As of December 31, 2020
Allowance
Individually
Evaluated
for
Purchased
Credit-
Impairment
Allowance
Individually
Evaluated
for
Impairment
Allowance
Collectively
Evaluated
for Impairment
Total
Allowance
for Credit
Losses
Loans
Individually
Evaluated
for
Purchased
Credit-
Impairment
Loans
Individually
Evaluated
for
Impairment
Loans
Collectively
Evaluated
for
Impairment
Total
Loans
before
Unearned
Income
(in thousands)
$ -
$ -
$ 1,029 $ 1,029
$ - $ 397
$ 150,444
$ 150,841
-
266
-
2,280
2,546
-
97
-
-
97
-
-
-
-
-
-
-
-
-
-
462
2,244
978
12,784
17,497
462
2,510
978
15,064
20,043
543
1,480
-
9,800
11,823
-
26,337
26,880
4,102
900
2,396
7,795
265,654
271,236
45,032
45,932
811,941
824,137
1,299,408
1,319,026
181
181
2,531
343
25,461
28,335
2,705
1,490
2
4,378
2,802
1,490
2
4,475
1,544
1,017
-
-
-
-
350,467
148,783
-
353,028
148,783
-
4,075
1,360
524,711
530,146
$ 2,643
$ -
$ 21,875
$ 24,518
$ 15,898 $ 9,155
$ 1,824,119
$ 1,849,172
(5,037)
$ 1,844,135
13 3
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
As of December 31, 2019
Allowance
Individually
Evaluated
for
Purchased
Credit-
Impairment
Allowance
Individually
Evaluated
for
Impairment
Allowance
Collectively
Evaluated
for Impairment
Total
Allowance
for Credit
Losses
Loans
Individually
Evaluated
for
Purchased
Credit-
Impairment
Loans
Individually
Evaluated
for
Impairment
Loans
Collectively
Evaluated
for
Impairment
Total
Loans
before
Unearned
Income
(in thousands)
The following is a summary of impaired loans, excluding loans acquired with deteriorated credit quality, by class at December 31, 2020:
As of December 31, 2020
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:
$ -
$ -
$ 423 $ 423
$ - $ 526
$ 171,721
$ 172,247
Construction & land development
$ -
$ -
$ -
$ -
$ -
$ -
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
Total Non-Real Estate
Total
Unearned Income
Total Loans Net of
Unearned Income
-
34
-
1,879
1,913
-
111
-
-
111
-
-
-
-
-
-
-
-
-
-
50
993
1,038
3,398
5,902
50
1,027
1,038
5,277
7,815
543
1,058
-
12,120
13,721
-
6,402
-
2,294
9,222
22,198
282,175
23,973
22,741
289,635
23,973
602,122
616,536
1,102,189
1,125,132
95
95
4,030
-
22,680
26,710
1,798
1,110
-
3,003
1,909
1,110
-
3,114
2,981
1,198
-
-
-
-
264,077
108,868
-
268,256
108,868
-
7,011
1,198
395,625
403,834
$ 2,024
$ -
$ 8,905
$ 10,929
$ 20,732 $ 10,420
$ 1,497,814
$ 1,528,966
(3,476)
$ 1,525,490
As of December 31, 2020, 2019 and 2018, First Guaranty had loans totaling $15.6 million, $14.4 million and $8.7 million, respectively, not
accruing interest. As of December 31, 2020, 2019 and 2018, First Guaranty had loans past due 90 days or more and still accruing interest
totaling $13.1 million, $2.6 million and $0.1 million, respectively. The average outstanding balance of nonaccrual loans in 2020 was $19.8 million
compared to $12.0 million in 2019 and $8.9 million in 2018.
As of December 31, 2020, First Guaranty has no outstanding commitments to advance additional funds in connection with impaired loans.
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
543
511
-
1,227
2,281
552
534
-
1,227
2,313
2,531
2,661
601
-
3,132
5,413
601
-
3,262
5,575
-
-
969
-
8,573
9,542
-
943
-
943
-
-
969
-
8,619
9,588
-
943
-
943
-
-
-
-
-
-
-
-
-
-
-
-
266
-
2,280
2,546
-
97
-
97
543
527
-
1,218
2,288
2,594
821
-
3,415
5,703
-
-
969
-
7,550
8,519
-
981
-
981
-
-
-
80
80
-
48
-
48
-
-
-
72
72
-
47
-
47
128
119
-
-
5
-
60
65
-
79
-
79
-
-
5
-
80
85
-
57
-
57
Total Impaired Loans with an allowance recorded
10,485
10,531
2,643
9,500
144
142
Total Impaired Loans
$15,898
$16,106
$ 2,643
$15,203
$ 272
$ 261
134
13 5
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
The following is a summary of impaired loans, excluding loans acquired with deteriorated credit quality, by class at December 31, 2019:
As of December 31, 2019
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
$ -
$ -
$ -
$ -
$ -
$ -
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
Total Impaired Loans with an allowance recorded
543
541
-
8,307
9,391
4,030
1,962
552
541
-
8,307
9,400
4,186
1,962
5,992
15,383
6,148
15,548
-
-
517
-
3,813
4,330
-
-
517
-
4,162
4,679
-
-
1,019
1,019
-
1,019
5,349
-
1,019
5,698
-
-
-
-
-
-
-
-
-
-
-
-
34
-
1,879
1,913
-
111
-
111
2,024
550
544
-
9,940
11,034
4,031
1,788
5,819
16,853
-
-
522
-
4,134
4,656
-
1,039
-
1,039
5,695
-
27
-
673
700
12
81
93
793
-
-
-
-
194
194
-
81
-
81
275
-
22
-
688
710
-
67
67
777
-
-
-
-
212
212
-
77
-
77
289
Total Impaired Loans
$ 20,732
$ 21,246
$ 2,024
$ 22,548
$ 1,068
$ 1,066
Troubled Debt Restructurings
A Troubled Debt Restructuring ("TDR") is considered such if the lender 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 either the
interest rate charged or the amortization. The effect of the modifications to First Guaranty was a reduction in interest income. These loans have
an allocated reserve in First Guaranty's allowance for loan losses. First Guaranty restructured one loan that is considered TDR in the years ended
December 31, 2020 and 2019. At December 31, 2020, First Guaranty had one outstanding TDR.
Under section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020,
financial institutions have the option to temporarily suspend certain requirements under U.S. generally accepted accounting principles related to
troubled debt restructurings for a limited period of time to account for the effects of COVID-19. This provision allows a financial institution the option
to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19
made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19 national emergency. The relief
can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. First Guaranty elected to
adopt these provisions of the CARES Act.
The following table is an age analysis of TDRs as of December 31, 2020 and December 31, 2019:
December 31, 2020
December 31, 2019
Accruing Loans
30-89
Days Past
Due
Current
Nonaccrual
Total
TDRs
Accruing Loans
30-89
Days
Current
Past Due Nonaccrual
$
(in thousands)
$
-
-
-
-
$
-
-
-
-
3,591
3,591
3,591
3,591
-
-
-
-
-
-
-
-
$ 3,591
$ 3,591
-
-
-
-
-
-
-
-
-
-
-
$
$
-
-
-
-
-
-
-
-
-
-
-
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
$ -
$
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
The following table discloses TDR activity for the twelve months ended December 31, 2020.
Trouble Debt Restructured Loans Activity
Twelve Months Ended December 31, 2020
Beginning
balance
(December
31, 2019)
Charge-Offs
post-
modification
Transferred
to
ORE
New
TDRs
Paydowns
Construction
to
permanent
financing
Restructured
to market
terms
Other
adjustments
Ending balance
(December 31,
2020)
(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
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
$ -
-
-
-
-
-
-
-
-
-
-
-
-
3,613
3,613
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(22)
(22)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,591
3,591
-
-
-
-
$ - $ 3,613
$ -
$ -
$ (22)
$ -
$ -
$ -
$ $3,591
There were no commitments to lend additional funds to debtors whose terms have been modified in a troubled debt restructuring at December 31, 2020.
136
13 7
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Note 8. Premises and Equipment
The components of premises and equipment at December 31, 2020 and 2019 are as follows:
Note 11. Deposits
A schedule of maturities of all time deposits are as follows:
Land
Bank premises
Furniture and equipment
Construction in progress
Acquired value
Less: accumulated depreciation
December 31,
2020
2019
(in thousands)
$ 15,180
$ 15,180
40,906
28,511
13,562
98,159
38,267
40,536
27,255
9,534
92,505
36,041
Net book value
$ 59,892
$ 56,464
Depreciation expense amounted to $2.8 million, $2.3 million and $2.1 million for 2020, 2019 and 2018, respectively. Interest cost capitalized as
a construction cost was $55,000, $91,000 and $54,000 for 2020, 2019 and 2018.
Note 9. 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, Premier Bancshares, Inc. in 2017 and Union Bancshares, Incorporated in 2019. No impairment charges have been
recognized since acquisition. Goodwill totaled $12.9 million at December 31, 2020 and 2019, respectively.
The following table summarizes intangible assets subject to amortization.
December 31,
2020
2019
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
(in thousands)
Core deposit intangibles
$ 16,266
$ 10,451
Loan servicing assets
Total
1,826
1,054
$ 18,092
$ 11,505
$ 5,815
772
$ 6,587
$ 16,266
$ 9,739
1,558
$ 17,824
919
$ 10,658
$ 6,527
639
$ 7,166
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 10.0 years.
Amortization expense relating to purchase accounting intangibles
totaled $0.7 million, $0.4 million, and $0.5 million for the years ended
December 31, 2020, 2019, and 2018, 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, 2021
December 31, 2022
December 31, 2023
December 31, 2024
December 31, 2025
138
(in thousands)
$644
$576
$576
$576
$576
Note 10. Other Real Estate
Other real estate owned consists of the following at the dates indicated:
Real Estate Owned Acquired by
Foreclosure:
Residential
Construction & land development
Non-farm non-residential
Total Other Real Estate Owned and
Foreclosed Property
Allowance for Other Real Estate
Owned losses
Net Other Real Estate Owned and
Foreclosed Property
December 31,
2020
2019
(in thousands)
$ 131
$ 559
311
2,203
669
3,651
2,645
4,879
(405)
-
$ 2,240
$ 4,879
2021
2022
2023
2024
2025 and thereafter
December 31, 2020
(in thousands)
$ 355,093
125,678
108,380
113,745
22,733
Total
$ 725,629
The table above includes $3.4 million in brokered deposits for
December 31, 2020. The aggregate amount of jumbo time deposits,
each with a minimum denomination of $250,000 totaled $248.8 million
and $290.3 million at December 31, 2020 and 2019, respectively.
Note 12. Borrowings
Short-term borrowings are summarized as follows:
December 31,
2020
December 31,
2019
(in thousands)
Federal Home Loan Bank
advances
$ 50,000
$ 13,079
Repurchase agreements
6,121
6,840
Line of credit
-
-
Total short-term borrowings
$ 56,121
$ 19,919
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. First Guaranty had $56.1 million in
short-term borrowings outstanding at December 31, 2020 compared
to $19.9 million outstanding at December 31, 2019. First Guaranty has
an available line of credit of $6.5 million, with no outstanding balance
at December 31, 2020.
Available lines of credit totaled $297.2 million at December 31, 2020
and $278.8 million at December 31, 2019.
The following schedule provides certain information about First
Guaranty's short-term borrowings for the periods indicated:
December 31,
2020
2019
2018
(in thousands, except for %)
Outstanding at year end
$56,121
$ 19,919
$
-
Maximum month-end
outstanding
$57,048
$19,919
Average daily outstanding
$48,277
$ 3,320
$37,000
$ 7,119
Weighted average rate
during the year
Weighted average rate at
year end
0.95 %
2.00%
2.21%
0.89 %
2.00%
-%
Long-term debt is summarized as follows:
Long-term Federal Home Loan Bank advance, fixed at 2.12%, totaled
$3.4 million at December 31, 2020 and $3.5 million at December 31,
2019. This advance was acquired in the Union acquisition and has a
contractual maturity date of September 1, 2037.
Senior long-term debt with a commercial bank, priced at floating Wall
Street Journal Prime less 25 basis points (3.00%), totaled $14.0 million
at December 31, 2020. First Guaranty pays $697,715 principal plus
interest quarterly. This loan was renewed in December 2020 and has a
contractual maturity date of December 22, 2025. 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). This senior
long-term debt was priced at floating 3-month LIBOR plus 250 basis
points (4.61%), totaled $16.9 million at December 31, 2019. This loan
was originated in December 2015.
Senior long-term debt with a commercial bank, priced at floating Wall
Street Journal Prime less 70 basis points (3.00%), totaled $28.4 million
at December 31, 2020 and $31.7 million at December 31, 2019. First
Guaranty pays $812,500 principal plus interest quarterly. This loan
was renewed in November 2019 and has a contractual maturity date
of November 7, 2024. 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 $14.8 million at December 31, 2020
and $14.7 million at December 31, 2019. 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 $6.5 million with
an availability of $6.5 million at December 31, 2020. This line of credit
is secured by a pledge of 13.2% (735,745 shares) of First Guaranty's
interest in First Guaranty Bank (a wholly owned subsidiary) and is
priced at 4.25%.
At December 31, 2020, letters of credit issued by the FHLB totaling
$365.8 million were outstanding and carried as off-balance sheet
items, all of which expire by 2024. At December 31, 2019, letters of
credit issued by the FHLB totaling $355.2 million were outstanding
and carried as off-balance sheet items, all of which expire by 2024.
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.
13 9
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT As of December 31, 2020 obligations on long-term advances from FHLB, senior long-term debt and junior subordinated debentures totaled $60.5
million. The scheduled payments are as follows:
First Guaranty Bank's actual capital amounts and ratios as of December 31, 2020 and 2019 are presented in the following table.
2021
2022
2023
2024
2025
2026 and thereafter
Subtotal
Debt issuance costs
Total
Long-term
Advances
from FHLB
Senior
Long-term
Debts
(in thousands)
Junior
Subordinated
Debentures
$ -
$ 4,531
$ -
-
-
-
-
3,366
6,041
6,041
22,291
3,504
-
-
-
-
15,000
-
$ 3,366
$ 42,408
$ 15,000
-
(42)
(223)
$ 3,366
$ 42,366
$ 14,777
Note 13. Capital Requirements
First Guaranty Bank is 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, 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.
Quantitative measures established by regulation to ensure capital adequacy require 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, 2020 and 2019, that
the Bank met all capital adequacy requirements.
In addition to establishing the minimum 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. First Guaranty Bank's capital conservation
buffer was 4.22% at December 31, 2020.
In addition, as a result of the legislation, the federal banking agencies have developed a "Community Bank Leverage Ratio" (the ratio of a bank's
Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A "qualifying community bank"
that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to
be considered "well capitalized" under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution's risk
profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set
the new Community Bank Leverage Ratio at 9%. Pursuant to the CARES Act, the federal banking agencies set the Community Bank Leverage Ratio
at 8% beginning in the second quarter of 2020 through the end of 2020. Beginning in 2021, the Community Bank Leverage Ratio will increase
to 8.5% for the calendar year. Community banks will have until Jan. 1, 2022, before the Community Bank Leverage Ratio requirement will return
to 9%. A financial institution can elect to be subject to this new definition. The new rule took effect on January 1, 2020. The Bank did not elect to
follow the Community Bank Leverage Ratio.
As of December 31, 2020, 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.
140
Actual
Minimum Capital
Requirements
Minimum to be Well
Capitalized Under
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(in thousands, except for %)
December 31, 2020
Total Risk-Based Capital:
Tier 1 Capital:
Tier 1 Leverage Capital:
$ 233,391
12.22 % $ 152,805
$ 209,507
10.97 % $ 114,604
$ 209,507
8.58 % $ 97,683
Common Equity Tier One Capital:
$ 209,507
10.97 % $ 85,953
December 31, 2019
Total Risk-Based Capital:
Tier 1 Capital:
Tier 1 Leverage Capital:
$ 213,962
12.61% $ 135,697
$ 203,034
11.96% $ 101,773
$ 203,034
10.44% $ 77,771
Common Equity Tier One Capital:
$ 203,034
11.96% $ 76,329
8.00 %
6.00 %
4.00 %
4.50 %
8.00%
6.00%
4.00%
4.50%
$ 191,006
10.00 %
$ 152,805
$ 122,104
$ 124,154
8.00 %
5.00 %
6.50 %
$ 169,621
10.00%
$ 135,697
$ 97,214
$ 110,254
8.00%
5.00%
6.50%
Note 14. Dividend Restrictions
The Federal Reserve Bank ("FRB") has stated that, generally, a
bank holding company should not maintain a rate of distributions
to shareholders unless its available net income has been sufficient
to fully fund the distributions, and the prospective rate of earnings
retention appears consistent with the bank holding company's capital
needs, asset quality and overall financial condition. As a Louisiana
corporation, First Guaranty is restricted under the Louisiana corporate
law from paying dividends under certain conditions.
First Guaranty Bank may not pay dividends or distribute capital assets
if it is in default on any assessment due to the FDIC. First Guaranty
Bank is also subject to regulations that impose minimum regulatory
capital and minimum state law earnings requirements that affect
the amount of cash available for distribution. In addition, under the
Louisiana Banking Law, dividends may not be paid if it would reduce
the unimpaired surplus below 50% of outstanding capital stock in any
year.
The Bank is restricted under applicable laws in the payment of dividends
to an amount equal to current year earnings plus undistributed
earnings for the immediately preceding year, unless prior permission is
received from the Commissioner of Financial Institutions for the State of
Louisiana. Dividends payable by the Bank in 2021 without permission
will be limited to 2021 earnings plus the undistributed earnings of $5.7
million from 2020.
Accordingly, at January 1, 2021, $223.1 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, affiliates 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, 2020 and 2019
follows:
December 31,
2020
2019
(in thousands)
Balance, beginning of year
$ 61,820
$ 63,907
Net Increase (Decrease)
Balance, end of year
17,579
(2,087)
$ 79,399
$ 61,820
Unfunded commitments to First Guaranty and Bank directors and
executive officers totaled $40.8 million and $21.6 million at December
31, 2020 and 2019, respectively. At December 31, 2020 First
Guaranty and the Bank had deposits from directors and executives
totaling $50.3 million. There were no participations in loans purchased
from affiliated financial institutions included in First Guaranty's loan
portfolio in 2020 or 2019.
During the years ended 2020, 2019 and 2018, First Guaranty paid
approximately $0.5 million, $0.5 million and $0.3 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 Chairman of the
Board of Directors and a major shareholder of Champion.
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 2020, 2019 and 2018
for this note.
During the years ended 2020, 2019 and 2018, First Guaranty paid
approximately $27,000, $0.1 million and $0.2 million, respectively,
for the purchase and maintenance of First Guaranty's automobiles to
14 1
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
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 $0.4
million, $0.8 million and $0.9 million for 2020, 2019 and 2018,
respectively.
Note 18. Income Taxes
The Tax Cuts and Jobs Act ("TCJA") signed into law on December 22,
2017, makes broad and complex changes to the U.S. tax code that
affected income tax expense in 2017. The TCJA reduced the U.S.
federal corporate income tax rate from 35% to 21% beginning January
1, 2018 and also established new tax laws that affect 2018.
The following is a summary of the provision for income taxes included
in the Consolidated Statements of Income:
December 31,
2020
2019
2018
(in thousands, except for %)
$ 8,964
$ 3,770
$ 3,929
(3,745)
(114)
(467)
$ 5,219
$ 3,656
$ 3,462
Current
Deferred
Total
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,
2020
2019
2018
(in thousands, except for %)
21.0%
21.0%
21.0%
$ 5,363
$ 3,758
$ 3,712
(124)
(20)
(140)
38
(166)
(84)
$ 5,219
$ 3,656
$ 3,462
Statutory tax rate
Federal income taxes at
statutory rate
Tax exempt municipal income
Other
Total
subsidiaries of Hood Automotive Group, of which William K. Hood, a
director of First Guaranty, is President.
During the years ended 2020, 2019 and 2018, First Guaranty paid
approximately $0.1 million, $69,000 and $0.7 million, 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.
During the years ended 2020, 2019 and 2018, First Guaranty paid
approximately $0.5 million, $0.3 million and $0.2 million to Centurion
Insurance, an insurance brokerage agency, to bind coverage at
market terms for property casualty insurance and health insurance.
First Guaranty owns a 40% interest in Centurion and accounts for this
investment under the equity method.
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 $173,000, $149,000
and $292,000 in 2020, 2019 and 2018, 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 2020,
2019 or 2018. As of December 31, 2020, the ESOP held 2,770 shares.
First Guaranty is in the process of terminating the plan.
Note 17. Other Expenses
The following is a summary of the significant components of other
noninterest expense:
December 31,
2020
2019
2018
(in thousands)
Other noninterest expense:
Legal and professional fees
$ 2,919
$ 2,648
$ 2,362
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
2,465
1,332
1,046
1,972
1,217
1,456
1,251
1,094
921
674
1,692
1,214
1,329
1,066
562
2,354
1,308
1,119
726
256
712
393
1,653
1,716
2,980
908
193
390
603
422
683
978
208
545
380
186
941
2,536
2,204
Total other noninterest expense
$20,724
$16,104
$14,786
142
Deferred taxes are recorded based upon differences between the
financial statement and tax basis of assets and liabilities, and available
tax credit carry forwards. 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, 2020 and
2019 are as follows:
Deferred tax assets:
Allowance for loan losses
Other real estate owned
Unrealized losses on available for sale
securities
Net operating loss
Other
Gross deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Core deposit intangibles
Unrealized gains on available for sale
securities
Discount on purchased loans
Other
December 31,
2020
2019
(in thousands)
$ 4,748
$ 1,720
239
257
-
1,190
581
6,758
-
1,282
508
3,767
(1,952)
(2,010)
(1,214)
(1,359)
(172)
(161)
(625)
(578)
(267)
(670)
Gross deferred tax liabilities
(4,124)
(4,884)
Net deferred tax assets (liabilities)
$ 2,634
$ (1,117)
First Guaranty determined that the net deferred tax asset at
December 31, 2020 was more likely than not to be realized based
on an assessment of all available positive and negative evidence, and
therefore no valuation allowance was recorded.
Net operating loss carryforwards for income tax purposes were $5.7
million as of December 31, 2020 and $6.1 million in 2019. The
carryforwards were acquired in 2017 in the Premier acquisition and
expire from 2027 to 2034, and will be utilized subject to annual Internal
Revenue Code Section 382 limitations.
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, 2020,
2019 and 2018, First Guaranty did not recognize any interest or
penalties in its consolidated financial statements, nor has it recorded
an accrued liability for interest or penalty payments.
Note 19. Commitments and Contingencies
Off-balance sheet commitments.
First Guaranty is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in interest
rates. These financial instruments include commitments to extend
credit and standby and commercial letters of credit. Those instruments
involve, to varying degrees, elements of credit and interest rate risk in
excess of the amount recognized in the Consolidated Balance Sheets.
The contract or notional amounts of those instruments reflect the
extent of the involvement in particular classes of financial instruments.
The exposure to credit loss in the event of nonperformance by the
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, 2020 and
December 31, 2019.
December 31,
2020
2019
(in thousands)
Contract Amount
Commitments to Extend Credit
$ 154,047
$ 117,826
Unfunded Commitments under lines of
credit
169,151
$ 148,127
Commercial and Standby letters of credit
$ 11,728
$ 11,258
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
2020, 2019 or 2018.
First Guaranty currently has one new facility under construction with
total construction commitment of $11.4 million of which $11.1 million
has been incurred as of December 31, 2020.
14 3
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
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.
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, 2020 includes corporate debt and
municipal securities.
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, 2020 and 2019 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
144
fair value would be classified within either Level 2 or Level 3 of the
hierarchy.
The following table reconciles assets measured at fair value on a
recurring basis using unobservable inputs (Level 3):
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, 2020 and 2019, segregated
by the level of the valuation inputs within the fair value hierarchy
utilized to measure fair value:
December 31,
2020
2019
(in thousands)
Available for Sale Securities Fair Value
Measurements Using:
Level 1: Quoted Prices in Active Markets
For Identical Assets
Level 2: Significant Other Observable
Inputs
$ 3,000
$ -
209,359
330,539
Level 3: Significant Unobservable Inputs
26,189
9,398
Securities available for sale measured at
fair value
$ 238,548
$ 339,937
First Guaranty's valuation methodologies may produce a fair value
calculation that may not be indicative of net realizable value or reflective
of future fair values. While Management believes the methodologies
used are appropriate and consistent with other market participants,
the use of different methodologies or assumptions to determine the
fair value of certain financial instruments could result in a different
estimate of fair value.
The change in Level 1 securities available for sale from December
31, 2019 was due principally to a net increase in Treasury bills of
$3.0 million. The change in Level 2 securities available for sale from
December 31, 2019 was due principally to the transfer of mortgage-
backed and municipal securities from the held for sale to available for
sale portfolio and the transfer of securities between Level 2 and 3. $6.8
million in corporate securities and $1.4 million in municipal securities
were transferred from Level 3 to Level 2 from December 31, 2019 to
December 31, 2020. There were no transfers between Level 1 and 2
securities available for sale from December 31, 2019 to December 31,
2020.
Level 3 Changes
December 31,
2020
2019
(in thousands)
Balance, beginning of year
$ 9,398
$ 4,761
Total gains or losses (realized/unrealized):
Included in earnings
Included in other comprehensive income
-
256
-
146
Purchases, sales, issuances and
settlements, net
Transfers in and/or out of Level 3
Balance as of end of year
5,361
4,491
11,174
-
$ 26,189
$ 9,398
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, 2020.
The following table measures financial assets and financial liabilities
measured at fair value on a non-recurring basis as of December 31,
2020 and December 31, 2019, segregated by the level of valuation
inputs within the fair value hierarchy utilized to measure fair value:
December 31,
2020
2019
(in thousands)
Fair Value Measurements Using: Impaired
Loans
Level 1: Quoted Prices in Active Markets
For Identical Assets
$
Level 2: Significant Other Observable
Inputs
$
-
-
-
-
Level 3: Significant Unobservable Inputs
7,842
4,046
Impaired loans measured at fair value
$ 7,842
$ 4,046
Fair Value Measurements Using: Other
Real Estate Owned
Level 1: Quoted Prices in Active Markets
For Identical Assets
Level 2: Significant Other Observable
Inputs
Level 3: Significant Unobservable Inputs
Other real estate owned measured at fair
value
$
-
$
-
363
1,877
4,158
721
$
2,240
$ 4,879
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
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.
14 5
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
Investment Securities.
Accrued interest payable.
The carrying amounts and estimated fair values of financial instruments at December 31, 2020 were as follows:
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.
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, 2020
and 2019 the fair value of guarantees under commercial and standby
letters of credit was not material.
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.
Cash Surrender of BOLI.
The cash surrender value of BOLI approximates fair value.
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.
Assets
Cash and due from banks
Federal funds sold
Securities, available for sale
Loans held for sale
Loans, net
Cash surrender value of BOLI
Accrued interest receivable
Liabilities
Deposits
Short-term advances from Federal Home Loan Bank
Repurchase agreements
Accrued interest payable
Long-Term advances from Federal Loan Bank
Senior long-term debt
Junior subordinated debentures
50,000
6,121
5,292
3,366
42,366
14,777
Fair Value Measurements at December 31, 2020 Using
Carrying
Value
Level 1
Level 2
Level 3
Total
(in thousands)
$
298,903
$ 298,903
$
702
238,548
-
1,819,617
5,427
11,933
$ 2,166,318
$
$
-
-
-
-
$
298,903
702
209,359
26,189
238,548
-
-
-
-
-
-
-
-
-
-
-
-
-
1,846,738
1,846,738
5,427
11,933
5,427
11,933
$ 2,179,004
$ 2,179,004
50,000
50,000
6,154
5,292
3,366
42,408
14,452
6,154
5,292
3,366
42,408
14,452
702
3,000
-
-
-
-
-
-
-
-
-
-
-
$
146
14 7
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT The carrying amounts and estimated fair values of financial instruments at December 31, 2019 were as follows:
Note 24. Condensed Parent Company Information
The following condensed financial information reflects the accounts and transactions of First Guaranty Bancshares, Inc. for the dates indicated:
Assets
Cash and due from banks
Federal funds sold
Securities, available for sale
Loans held for sale
Loans, net
Cash surrender value of BOLI
Accrued interest receivable
Liabilities
Deposits
Short-term advances from Federal Home Loan Bank
Repurchase agreements
Accrued interest payable
Long-Term advances from Federal Loan Bank
Senior long-term debt
Junior subordinated debentures
13,079
6,840
6,047
3,533
48,558
14,737
Fair Value Measurements at December 31, 2019 Using
Carrying
Value
Level 1
Level 2
Level 3
Total
(in thousands)
$
66,511
$
66,511
$
914
914
$
-
-
-
-
$
66,511
914
339,937
86,579
1,514,561
5,288
8,412
$ 1,853,013
$
-
-
-
-
-
-
-
-
-
-
-
-
$
330,539
86,817
9,398
339,937
-
86,817
-
-
-
-
-
-
-
-
-
-
1,515,277
1,515,277
5,288
8,412
5,288
8,412
$ 1,863,179
$ 1,863,179
13,079
13,079
6,840
6,047
3,533
48,599
14,762
6,840
6,047
3,533
48,599
14,762
First Guaranty Bancshares, Inc.
Condensed Balance Sheets
Assets
Cash
Investment in bank subsidiary
Other assets
Total Assets
Liabilities and Shareholders' Equity
Senior long-term debt
Junior subordinated debentures
Other liabilities
Total Liabilities
Shareholders' Equity
December 31,
2020
2019
(in thousands)
$ 1,796
$ 633
228,869
5,665
224,677
4,427
$236,330
$229,737
$ 42,366
$ 48,558
14,777
596
57,739
178,591
14,738
406
63,702
166,035
Total Liabilities and Shareholders' Equity
$236,330
$229,737
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.
First Guaranty Bancshares, Inc.
Condensed Statements of Income
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, 2020. 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.
Approximately 33.0% of First Guaranty's deposits are derived from local
governmental agencies at December 31, 2020. 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
148
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 $715.3 million at December 31, 2020.
Note 23. Litigation
First Guaranty is subject to various legal proceedings in the normal
course of its business. First Guaranty assesses its liabilities and
contingencies in connection with outstanding legal proceedings. Where
it is probable that First Guaranty will incur a loss and the amount of the
loss can be reasonably estimated, First Guaranty records a liability in
its consolidated financial statements. First Guaranty does not record a
loss if the loss is not probable or the amount of the loss is not estimable.
First Guaranty is a defendant in a lawsuit alleging overpayment of
interest on a loan with a possible loss range of $0.0 million to $0.5
million. Judgment has been rendered against First Guaranty for the
full amount, but First Guaranty is exercising its appeal rights. First
Guaranty had an accrued liability of $0.1 million at December 31,
2020 related to this lawsuit. First Guaranty is also a defendant in a
lawsuit alleging fault for a loss of funds by a customer with a possible
loss range of $0.0 million to $1.5 million. No accrued liability has been
recorded related to this lawsuit.
Operating Income
Dividends received from bank subsidiary
Net gains on sale of equity 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
13,878
11,646
Income tax benefit
Income before increase in equity in undistributed earnings of subsidiary
Increase in equity in undistributed earnings of subsidiary
720
14,598
5,720
494
12,140
2,101
Net Income
$ 20,318
$ 14,241
$14,213
14 9
December 31,
2020
2019
2018
(in thousands)
$ 17,100
$ 13,982
$11,788
-
332
196
424
-
289
17,432
14,602
12,077
2,197
132
1,225
3,554
1,795
208
953
2,956
1,675
133
916
2,724
9,353
540
9,893
4,320
#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
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 sales of equity securities
Purchases of premises and equipment
Cash paid in acquisition
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt, net of costs
Repayment of long-term debt
Common stock issued in private placement
Dividends paid
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
December 31,
2020
2019
2018
(in thousands)
$ 20,318
$ 14,241
$ 14,213
(5,720)
(2,101)
(4,320)
92
-
189
(1,301)
80
(196)
(444)
(601)
43
-
136
1,360
13,578
10,979
11,432
10
1,196
-
-
(136)
(43,383)
10
(42,323)
-
32,465
-
-
-
-
-
(6,191)
(3,754)
(2,941)
—
1,000
(6,234)
(5,803)
(12,425)
23,908
-
(5,636)
(8,577)
1,163
633
(7,436)
8,069
2,855
5,214
$ 1,796
$ 633
$ 8,069
Item 9B - Other Information
None
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 Market
under the symbol "FGBI". As of December 31, 2020, there were
approximately 1,600 holders of record of our common stock.
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 110 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 our 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.
First Guaranty Bancshares, Inc. did not repurchase any of its shares of
common stock during 2020.
Item 9 - Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
There were no changes in or disagreements with accountants on
accounting and financial disclosures for the year ended December 31,
2020.
Item 9A - Contracts and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was
carried out under the supervision and with the participation of First
Guaranty's management, including its Chief Executive Officer (Principal
Executive Officer) and its Chief Financial Officer (Principal Financial
Officer), of the effectiveness of its disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Securities Exchange Act of
1934). Based on that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that these disclosure controls and
procedures were effective.
For further information, see "Management's annual report on internal
control over financial reporting" below. There was no change in First
Guaranty's internal control over financial reporting (as defined in Rule
13a-15(f) under the Securities Exchange Act of 1934) that occurred
during the quarter ended December 31, 2020, that has materially
affected, or is reasonably likely to materially affect, First Guaranty's
internal control over financial reporting.
Management's Annual Report on Internal Control over Financial Reporting
The Management of First Guaranty Bancshares, Inc. has prepared the
consolidated financial statements and other information in our Annual
Report in accordance with accounting principles generally accepted
in the United States of America and is responsible for its accuracy.
The financial statements necessarily include amounts that are based
on Management's best estimates and judgments. In meeting its
responsibility, Management relies on internal accounting and related
control systems. The internal control systems are designed to ensure
that transactions are properly authorized and recorded in our financial
records and to safeguard our assets from material loss or misuse. Such
assurance cannot be absolute because of inherent limitations in any
internal control system.
Management is responsible for establishing and maintaining the
adequate internal control over financial reporting, as such term is
defined in the Exchange Act Rules 13 – 15(f). Under the supervision
and with the participation of Management, including our principal
executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of internal control over financial reporting
based on the framework in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission. This section relates to Management's
evaluation of internal control over financial reporting including controls
over the preparation of the schedules equivalent to the basic financial
statements and compliance with laws and regulations. Our evaluation
included a review of the documentation of controls, evaluations of the
design of the internal control system and tests of the effectiveness of
internal controls.
Based on our evaluation under the framework in Internal Control –
Integrated Framework, Management concluded that internal control
over financial reporting was effective as of December 31, 2020.
First Guaranty's independent registered public accounting firm has
also issued an attestation report, which expresses an unqualified
opinion on the effectiveness of First Guaranty's internal control over
financial reporting as of December 31, 2020.
150
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#1 Best Small Bank in the U.S.FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT
First Guaranty Bank
CORPORATE INFORMATION
ANNUAL MEETING
The Annual Meeting of Shareholders will convene at
2:00 PM Central Daylight Saving Time (CDT) on
Thursday, May 20, 2021 in the FGB Center,
206 S. Orange Street, Hammond, LA 70403
CORPORATE HEADQUARTERS
First Guaranty Square
400 East Thomas Street
Hammond, Louisiana 70401-3320
Telephone: (888) 375-3093
SHAREHOLDER SERVICES
First Guaranty Bank
Post Office Box 2009
Hammond, Louisiana 70404-2009
Contact: Vanessa R. Drew
Telephone: (985) 375-0343
Email: investorrelations@fgb.net
CERTIFIED PUBLIC ACCOUNTANTS
Castaing, Hussey & Lolan, LLC
New Iberia, Louisiana
FINANCIAL AND GENERAL INFORMATION
Persons seeking financial or other information about the Company
are invited to contact:
Eric J. Dosch
Chief Financial Officer, Treasurer and Secretary
First Guaranty Bancshares, Inc.
Post Office Box 2009
Hammond, Louisiana 70404-2009
Telephone: (985) 375-0308
NOTICE TO SHAREHOLDERS
A copy of the First Guaranty Bancshares, Inc. Annual Report filed
on Form 10-K with the U.S. Securities and Exchange Commission
can be accessed through the Company’s website at www.fgb.net
or is available without charge by writing.
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FIRST GUARANTY BANCSHARES, INC. 2020 ANNUAL REPORT