What changed in this filing

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Item 1. Business

2022-03-16 compared with 2021-03-16 · 120 added, 127 removed, 863 unchanged (22% of the section changed)

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("First Guaranty") is a Louisiana-chartered bank holding company headquartered in Hammond, Louisiana.

Our wholly owned subsidiary, First Guaranty Bank (the "Bank"), a Louisiana-chartered commercial bank, provides personalized commercial banking services mainly to Louisiana and Texas customers through 34 banking facilities primarily located in the Market Services Areas ("MSAs"), of Hammond, Baton Rouge, Lafayette, Shreveport-Bossier City, Lake Charles, Alexandria, Dallas-Fort Worth-Arlington, and Waco.

Our wholly owned subsidiary, First Guaranty Bank (the "Bank"), a Louisiana-chartered commercial bank, provides personalized commercial banking services mainly to Louisiana and Texas customers through 36 banking facilities primarily located in the Market Services Areas ("MSAs"), of Hammond, Baton Rouge, Lafayette, Shreveport-Bossier City, Lake Charles, Alexandria, Dallas-Fort Worth-Arlington, Waco, Texas.

First Guaranty expanded into Kentucky and West Virginia, our Mideast markets, in 2021 with loan and deposit production offices in Vanceburg, Kentucky and Bridgeport, West Virginia.

Our principal business consists of attracting deposits from the general public and local municipalities in our market areas and investing those deposits.

It also includes generating funds from operations and borrowings in lending and in securities activities to serve the credit needs of our customer base, including commercial real estate loans, commercial and industrial loans, commercial leases, one- to four-family residential real estate loans, construction and land development loans, agricultural and farmland loans, and to a lesser extent, consumer and multi-family loans.

We also participate in certain syndicated loans, including shared national credits, with other financial institutions.

We offer a variety of deposit accounts to consumers, small businesses and municipalities, including personal and business checking and savings accounts, time deposits, money market accounts and demand accounts.

In addition, we offer a broad range of consumer services, including personal and commercial credit cards, remote deposit capture, safe deposit boxes, official checks, online and mobile banking, automated teller machines, and online bill pay.

For our business customers we are pleased to offer additional solutions such as merchant services, remote deposit capture, and lockbox services.

We offer a variety of deposit accounts to consumers, small businesses and municipalities, including personal and business checking and savings accounts, time deposits and money market accounts.

In addition, we offer a broad range of consumer services, including credit cards, mobile deposit capture, safe deposit boxes, official checks and automated teller machines.

For our business customers we are pleased to offer additional solutions such as credit cards, merchant services, remote deposit capture, ACH origination, and lockbox services.

First Guaranty continues to expand our digital services through an enhanced online banking system (including mobile app) which includes bill pay, budgeting tools, Biller Direct, Credit Aware powered by Savvy Money, and Card Swap.

For our micro and small businesses, we offer Autobooks via our online banking channel.

We remain committed to embracing new technology and strive to offer our customers new digital offerings as they are developed.

We invest a portion of our assets in securities issued by the United States Government and its agencies, state and municipal obligations, corporate debt securities, mutual funds, and equity securities.

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Reynolds, our Chairman, invested $3.6 million in First Guaranty Bank as part of a recapitalization plan with the objective of building a community-focused commercial bank in our Louisiana markets.

Since the implementation of that recapitalization plan, we have grown from six branches and $159 million in assets at the end of 1993 to 34 branches and $2.5 billion in assets at December 31, 2020.

Since the implementation of that recapitalization plan, we have grown from six branches and $159 million in assets at the end of 1993 to 36 locations and $2.9 billion in assets at December 31, 2021.

We have also paid a quarterly dividend for 114 consecutive quarters as of December 31, 2021.

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We have a loan production office in Lake Charles, Louisiana.

In 2021, First Guaranty expanded into Kentucky and West Virginia.

We have loan and deposit production offices in Vanceburg, Kentucky and Bridgeport, West Virginia that are not in MSAs.

We refer to this region as our Mideast market.

We are headquartered in Hammond, Louisiana and approximately 38% of our deposits are in the Hammond MSA, our largest deposit concentration market.

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Hammond hosts numerous warehouses and distribution centers, and is a major distribution point for Wal-Mart and Winn Dixie.

Medline began construction of a $45 million facility in Hammond in 2021 and Intralox announced a $60 million expansion of its existing Hammond facility in 2021.

Baton Rouge MSA.

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Lake Charles has been the fastest growing MSA in Louisiana.

Lake Charles has received approximately $111 billion in industrial announcements since 2012 with approximately $54 billion either completed or underway.

Alexandria MSA.

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Waco is the home of Baylor University with approximately 17,000 students.

Mideast Market .

First Guaranty's office in Vanceburg, Kentucky is located approximately 90 miles from Cincinnati, Ohio and 95 miles from Lexington, Kentucky.

First Guaranty's office in Bridgeport, West Virginia is located approximately 35 miles from Morgantown, West Virginia and 105 miles from Pittsburgh, Pennsylvania.

Our mission is to increase shareholder value while providing services for and contributing to the growth and welfare of the communities that we serve.

As home to "Fanatical Banking" our mission is to become the bank of choice for small business and consumer customers who are located in both metropolitan and rural markets.

We desire to grow our market share along Louisiana's key interstate corridors of major interstates I-12, I-55, I-10, I-49 and I-20 along with our Texas markets in Dallas Fort-Worth-Arlington and Waco both organically and through strategic acquisitions.

We desire to grow our market share along Louisiana's key interstate corridors of major interstates I-12, I-55, I-10, I-49 and I-20.

We plan to continue expanding our Texas markets in Dallas Fort-Worth-Arlington and Waco both organically and through strategic acquisitions.

We opened loan and deposit production offices in Vanceburg, Kentucky and Bridgeport, West Virginia.

This mission involves not only expanding our geographical footprint but also evolving as an institution and staying relevant while offering new ways of banking.

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We have invested in the internal development of our lending department along with the select addition of experienced lenders.

We are currently upgrading our technology to efficiently handle both our loan and deposit customers with the implementation of the nCino loan and deposit platform.

We intend to continue to grow our loan portfolio organically by targeting small and medium-sized businesses engaged in manufacturing, agriculture, petrochemicals, healthcare and other professional services.

As a former participant in the SBLF, we developed and executed a sustained loan growth campaign focused on these target loan areas beginning in 2011 that far exceeded our original goals of the program.

We are continuing this campaign even after we redeemed our SBLF preferred stock in December 2015.

Our gross loan portfolio has increased by $1.3 billion, or 221.8%, to $1.8 billion at December 31, 2020 from $573.1 million at December 31, 2011.

Our commercial lending team is organized around our regional market areas of Louisiana and Texas.

We continue to upgrade our technology to efficiently handle both our loan and deposit customers.

First Guaranty uses the nCino loan platform and a suite of online banking products delivered by Q2.

We intend to continue to grow our loan portfolio organically by targeting small and medium-sized businesses engaged in manufacturing, agriculture, petrochemicals, real estate, healthcare and other professional services.

The recent expansion into the Mideast markets located in Kentucky and West Virginia should help us accelerate our loan portfolio growth.

Our commercial lending team is organized around our regional market areas of Louisiana, Texas, and the new Mideast markets in Kentucky and West Virginia.

A senior experienced lender leads each market team and ensures that our lenders deliver timely service to customers, meet and exceed expectations of loan approval time, and broaden customer relationships through referrals.

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We will continue to be a leading agricultural lender and grow our Farm Service Agency lending.

Over the last thirteen years, we have pursued a focused program to participate in syndicated loans (loans made by a group of lenders, including us, who share or participate in a specific loan, which is typically secured by business assets or equipment, and also commercial real estate) with a larger regional financial institution as the lead lender.

Over the last fourteen years, we have pursued a focused program to participate in syndicated loans (loans made by a group of lenders, including us, who share or participate in a specific loan, which is typically secured by business assets or equipment, and also commercial real estate) with a larger regional financial institution as the lead lender.

Our focus has been to finance middle market companies whose borrowing needs typically range from $25 million to $75 million.

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First Guaranty has taken pro-active measures to address the challenging operating environment that began following the onset of the COVID-19 pandemic.

First Guaranty provided various loan relief measures as provided by the CARES Act such as loan payment deferrals.

First Guaranty funded over $111.1 million in SBA Paycheck Protection loans (PPP) in 2020 that were designed to assist business customers.

First Guaranty is also participating the second round of the PPP loan program that was initiated in early 2021.

First Guaranty provided various loan relief measures as provided by the CARES Act such as loan payment deferrals and SBA Paycheck Protection loans (PPP) that were designed to assist business customers.

First Guaranty continues to monitor its loan portfolio given the ongoing economic uncertainty.

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We intend to pursue opportunities that will be accretive to earnings, result in a tangible book value earn back of approximately three years, strengthen our franchise, and ultimately enhance shareholder value.

We also believe the listing of our shares on NASDAQ in November 2015 provides us with a more marketable and liquid stock currency that will be attractive to potential targets.

Seek Innovative Partnerships.

We are committed to staying on top of the industry trends and continuing to educate ourselves in the way our customers want to do business.

We are committed to staying on top of the industry trends and continue to educate ourselves in the ways our customers want to do business.

Creating partnerships with innovative companies will allow us to stay relevant and meet the needs of our current and new customers.

We use the nCino platform to improve the management of our loan process.

The expansion of our Q2 online banking platform has given us numerous opportunities to increase our offering of digital banking services to both consumer and commercial clients through strategic partners already aligned with this service.

Lending Activities

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non-farm, non-residential loans secured by real estate, commercial and industrial loans, one- to four-family residential loans, construction and land development loans, agricultural loans, farmland loans, commercial leases, consumer and other loans, and multifamily loans.

All loan decisions are locally made which can allow for a faster approval process than many of our larger regional and nationwide bank competitors.

Non-Farm Non-Residential Loans .

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All non-farm non-residential loans are appraised by outside independent appraisers approved by the board of directors.

Our non-farm non-residential loans are diversified by borrower and industry group, and generally secured by improved property such as hotels, office buildings, retail stores, gaming facilities, warehouses, church buildings and other non-residential buildings.

Our non-farm non-residential loans are diversified by borrower and industry group, and generally secured by improved property such as hotels, office buildings, retail stores, gaming facilities, warehouses, manufacturing facilities, church buildings and other non-residential buildings.

Non-farm non-residential loans are generally made at rates that adjust above the prime rate as reported in the Wall Street Journal , that mature in three to five years and with principal amortization for a period of up to 20 years.

We will also originate fixed-rate, non-farm non-residential loans that mature in three to five years with principal amortization of up to 20 years.

We have also recently developed a fully amortizing loan product that will have periodic interest rate price resets.

Our largest concentration of non-farm non-residential loans is secured by hotels, and such loans are generally made only to hotel operators known to management.

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We also participate in government programs which guarantee portions of commercial and industrial loans such as the SBA and USDA.

During 2020, First Guaranty participated in the Paycheck Protection Program or PPP loan program.

First Guaranty continues to participate in this program in 2021.

During 2020 and 2021, First Guaranty participated in the Paycheck Protection Program or PPP loan program.

In most cases, we require collateral of equipment, accounts receivable, inventory, chattel or other assets before making a commercial business loan.

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Our commercial lines of credit totaled $166.6 million at December 31, 2021, or 41.8% of total commercial and industrial loans.

Typically, our commercial lines of credit are adjustable rate lines, indexed to the prime interest rate, which generally mature yearly.

Typically, our commercial lines of credit are adjustable rate lines, indexed to the prime interest rate, which generally mature yearly or within three years.

Our underwriting standards for commercial and industrial loans include a review of the applicant's tax returns, financial statements, credit history, the underlying collateral and an assessment of the applicant's ability to meet existing obligations and payments on the proposed loan based on cash flow generated by the applicant's business.

We generally obtain personal guarantees from the borrower or a third party as a condition to originating commercial and industrial loans.

Over the last thirteen years, we pursued a focused program to participate in syndicated loans (loans made by a group of lenders, including us, who share or participate in a specific loan) with a larger regional financial institution as the lead lender.

Over the last fourteen years, we pursued a focused program to participate in syndicated loans (loans made by a group of lenders, including us, who share or participate in a specific loan) with a larger regional financial institution as the lead lender.

Syndicated loans are typically made to large businesses (which are referred to as shared national credits) or middle market companies (which do not meet the regulatory definition of shared national credits), both of which are secured by business assets or equipment, and also commercial real estate.

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We generally originate loans in amounts up to 95% of the lesser of the appraised value or purchase price of the mortgaged property.

We currently offer one- to four-family residential real estate loans with terms up to 30 years that are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as "conforming loans." We generally originate fixed-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which at December 31, 2020 was $510,401 for single-family homes in our market area.

We generally originate fixed-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which at December 31, 2021 was $548,250 for single-family homes in our market area.

At December 31, 2021, we held $29.1 million in jumbo loans that are greater than the conforming loan limit.

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We do not offer one- to four-family residential real estate loans specifically designed for borrowers with sub-prime credit scores, including interest-only, negative amortization or payment option adjustable-rate mortgage loans.

We have diversified our one- to four-family residential real estate loans with the select purchase of conforming mortgage loans that are located outside Louisiana and Texas.

Our purchased loans are generally serviced by other financial institutions.

At December 31, 2020, $17.4 million of our one- to four-family residential real estate loans, or 6.4% of our one- to four-family residential real estate loans, were purchased loans secured by property located outside our market area.

The majority of our out of state purchased one- to four-family residential real estate loans are located in West Virginia, Virginia, Pennsylvania and the District of Columbia.

Our purchased one- to four-family residential real estate loans must meet our internal underwriting criteria.

While we intend to continue to purchase one- to four-family residential real estate loans from time-to-time, our strategic emphasis for future periods is to increase the volume of our internal originations of such loans.

Our one- to four-family loans also include home equity lines of credit that have second mortgages.

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Agricultural loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default since their repayment is generally dependent on the successful operation of the borrower's business.

Substantially all of our originated agricultural loans are guaranteed by the U.S.

A large number of our originated agricultural loans are guaranteed by the U.S.

Farm Service Agency.

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At December 31, 2021, farmland loans totaled $31.8 million, or 1.5% of our total loan portfolio.

Such loans are generally fixed-rate loans at a margin over the prime rate with terms up to five years and amortization schedules of up to 20 years (40 years if secured by a guarantee from the U.

Farm Service Agency).

Such loans are generally fixed-rate loans at a margin over the prime rate with terms up to five years and amortization schedules of up to 40 years.

Loans secured by farmland may be made in amounts up to 80% of the value of the farm.

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Generally, we obtain personal guarantees of the borrower on all loans secured by farmland.

Commercial Leases.

We have a commercial lease program that we have operated for seven years.

We work with third parties to facilitate the sourcing of lease financing opportunities.

Commercial leases generally have higher yields and shorter average lives than real estate secured loans.

The average size of our commercial leases was approximately $16.0 million at December 31, 2021.

Commercial leases totaled $246.0 million, or 11.4% of our total loan portfolio at December 31, 2021.

Consumer and Other Loans.

We make various types of secured consumer loans that are collateralized by deposits, boats and automobiles as well as unsecured consumer loans.

We also have a commercial lease program with the loan balances included in other loans.

Commercial leases generally have higher yields and shorter average lives than real estate secured loans.

Commercial leases totaled $104.1 million and consumer and other loans totaled $44.6 million at December 31, 2020.

These loans totaled $48.1 million in aggregate, or 2.2% of our total loan portfolio at December 31, 2021.

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We had $88.2 million in purchased loans, primarily secured by real estate, at December 31, 2021.

First Guaranty acquired approximately $59.7 million in loans associated with our Mideast market at December 31, 2021.

At December 31, 2021, we had $47.4 million in syndicated loans, of which $17.6 million were shared national credits.

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We establish various lending limits for executive management and also maintain a loan committee comprised of our directors and management.

Generally, loan officers have authority to approve secured loan relationships in amounts up to $100,000 and unsecured loan relationships in amounts up to $25,000.

For loans exceeding a loan officer's approval authority, we utilize two methods for approvals:

(1) credit officers and (2) the Bank's loan committee.

Generally, loan officers have authority to approve secured loan relationships in amounts up to $150,000 and unsecured loan relationships in amounts up to $25,000, while Regional Managers and Presidents have secured loan approval authority up to $500,000 and unsecured approval authority up to $100,000.

For loans exceeding a loan officer's approval authority, we utilize three methods for approvals:

(1) credit officers, (2) Management Loan Committee, and (3) the Bank's director loan committee.

Loan relationships between $500,000 and $1,500,000 are approved by a combination of credit officers and executive management.

The loan committee approves loan relationships of between $1,000,000 and up to $10.0 million.

The management loan committee approves new money loans between $1,500,001 - $2,500,000.

The director loan committee approves loan relationships of between $2,500,001 and up to $20.0 million.

Any loan relationship exceeding $20.0 million requires the approval of the board of directors.

Syndicated loans are approved by the Bank's syndicate loan committee in amounts up to $10.0 million.

Syndicated loans and Commercial Leases are approved by the Bank's Syndicate/Lease committee in amounts up to $20.0 million .

Our lending activities are also subject to Louisiana statutes and internal guidelines limiting the amount we can lend to any one borrower.

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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 clients received funds associated with the CARES Act during 2021 and we anticipate that public funds will receive further CARES Act funds in 2022.

Public funds deposit accounts are collateralized by FHLB letters of credit, reciprocal deposit insurance programs, Louisiana municipal bonds and eligible government and government agency securities such as those issued by the FHLB, FFCB, Fannie Mae, and Freddie Mac.

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Interest rates are determined based on our liquidity requirements, interest rates paid by our competitors, and our growth goals and applicable regulatory restrictions and requirements.

At December 31, 2020, we had $58.8 million in brokered deposits.

At December 31, 2021, we had $43.9 million in brokered deposits the majority of which were in reciprocal deposit programs.

Our investment policy is to provide a source of liquidity, to provide an appropriate return on funds invested, to manage interest rate risk and to meet pledging requirements for our public funds and other borrowings.

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(6) mutual funds and other equity securities and (7) municipal bonds.

Government agency securities comprise the largest share of our investment securities, having a fair value of $169.7 million, which were classified as available for sale, at December 31, 2020.

Government agency securities comprise the largest share of our investment securities, having a fair value of $266.7 million, of which $116.1 million were classified as available for sale and $150.6 million as held to maturity, at December 31, 2021.

The Bank's management asset liability committee and board investment committee are responsible for regular review of our investment activities and the review and approval of our investment policy.

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During the last five years, our securities portfolio has generated $68.7 million of pre-tax income.

For the year ended December 31, 2020, we had one security with an other than temporary impairment recognized.

For the year ended December 31, 2021, we had no security with an other than temporary impairment recognized.

We face intense competition both in making loans and attracting deposits.

Our market areas in Louisiana and Texas have a high concentration of financial institutions, many of which are branches of large money center, super-regional and regional banks that have resulted from consolidation of the banking industry in Louisiana and Texas.

Our market areas in Louisiana, Texas, Kentucky and West Virginia have a high concentration of financial institutions, many of which are branches of large money center, super-regional and regional banks that have resulted from consolidation of the banking industry in Louisiana, Texas, Kentucky and West Virginia.

Many of these competitors have greater resources than we do and may offer services that we do not provide, including more attractive pricing than we offer and more extensive branch networks for which they can offer their financial products.

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These factors could affect our business prospects.

Human Capital Resources

At December 31, 2021, we had 463 full-time and 27 part-time employees.

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Supervision and Regulation

First Guaranty Bank is a Louisiana-chartered commercial bank and is the wholly-owned subsidiary of First Guaranty Bancshares, a Louisiana-chartered banking holding company.

First Guaranty Bank is a Louisiana-chartered commercial bank and is the wholly-owned subsidiary of First Guaranty Bancshares, a Louisiana-chartered bank holding company.

First Guaranty Bank's deposits are insured up to applicable limits by the FDIC.

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The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit "unfair, deceptive or abusive" acts and practices.

The CFPB also has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets.

Banks and savings institutions with $10 billion or less in assets, such as First Guaranty Bank, will continue to be examined by their applicable federal bank regulators.

The Dodd-Frank Act also gave state attorneys general the ability to enforce applicable federal consumer protection laws.

The Dodd-Frank Act broadened the base for FDIC assessments for deposit insurance, permanently increasing the maximum amount of deposit insurance to $250,000 per depositor.

The Dodd-Frank Act also, among other things, requires originators of certain securitized loans to retain a portion of the credit risk, stipulates regulatory rate-setting for certain debit card interchange fees, repeals restrictions on the payment of interest on commercial demand deposits and contains a number of reforms related to mortgage originations.

The Dodd-Frank Act increased the ability of shareholders to influence boards of directors by requiring companies to give shareholders a non-binding vote on executive compensation and so-called "golden parachute" payments.

The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018

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• Temporarily reducing the community bank leverage ratio alternative available to institutions of less than $10 billion of assets to 8%.

The ratio increased to 8.5% for 2021 and reverts to 9% thereafter;

• The establishment of the Paycheck Protection Program (the “PPP”), a specialized low-interest forgivable loan program funded by the U.S.

Treasury Department and administered through the SBA’s 7(a) loan guaranty program to support businesses affected by the COVID-19 pandemic, which was subsequently extended by the Consolidated Appropriations Act;

Treasury Department and administered through the SBA’s 7(a) loan guaranty program to support businesses affected by the COVID-19 pandemic.

In May 2021, the SBA announced that PPP funding has been exhausted and the SBA stopped accepting new PPP loan applications;

• The ability of a borrower of a federally-backed mortgage loan (VA, FHA, USDA, Freddie Mac and Fannie Mae) experiencing financial hardship due, directly or indirectly, to the COVID-19 pandemic, to request forbearance from paying their mortgage by submitting a request to the borrower’s servicer affirming their financial hardship during the COVID-19 emergency.

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During that time, no fees, penalties or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the mortgage contract could accrue on the borrower’s account.

Except for vacant or abandoned property, the servicer of a federally-backed mortgage was prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020, extended by federal mortgage-backing agencies to at least June 30, 2021.

Except for vacant or abandoned property, the servicer of a federally-backed mortgage was prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020, which period has subsequently been extended several times by federal mortgage-backing agencies.

Louisiana Bank Regulation

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In assessing an institution's capital adequacy, the FDIC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary.

Notwithstanding the foregoing, pursuant to the EGRRCPA, the FDIC finalized a rule that established a community bank leverage ratio (tier 1 capital to average consolidated assets) at 9% for institutions under $10 billion in assets that such institutions may elect to utilize in lieu of the general applicable risk-based capital requirements under Basel III.

Notwithstanding the foregoing, pursuant to the EGRRCPA, the FDIC finalized a rule, effective January 1, 2020, that established a community bank leverage ratio (tier 1 capital to average consolidated assets) at 9% for institutions under $10 billion in assets that such institutions may elect to utilize in lieu of the general applicable risk-based capital requirements under Basel III.

Such institutions that meet the community bank leverage ratio and certain other qualifying criteria will automatically be deemed to be well-capitalized.

The final rule established a two quarter grace period for community banks, whose leverage ratio falls below 9% or fails to meet other qualifying criteria so long as the bank maintains a leverage ratio of 8% or greater.

The new rule took effect on January 1, 2020.

Section 4012 of the CARES Act required that the community bank leverage ratio be temporarily lowered to 8%.

The CARES Act required that the community bank leverage ratio be temporarily lowered to 8%.

The federal regulators issued a rule making the reduced ratio effective for the second quarter of 2020.

The rule also established a two quarter grace period for a qualifying community bank whose leverage ratio falls below the 8% community bank leverage ratio requirement, or fails to meet other qualifying criteria, so long as the bank maintains a leverage ratio of 7% or greater.

Another rule was issued to transition back to the 9% community bank leverage ratio by increasing the ratio to 8.5% for calendar year 2021 and to 9% thereafter.

First Guaranty Bank did not elect to follow the community bank leverage ratio.

At December 31, 2020, First Guaranty Bank was well-capitalized based on FDIC guidelines.

Eligible institutions may opt into and out of the community bank ratio framework on their quarterly call report.

First Guaranty Bank did not elect to follow the community bank leverage ratio as of December 31, 2021.

At December 31, 2021, First Guaranty Bank exceeded all regulatory capital requirements and was considered to be well-capitalized based on FDIC guidelines.

Standards for Safety and Soundness.

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If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard.

Concentrated Commercial Real Estate Lending Regulations.

The federal banking agencies have promulgated guidance governing financial institutions with concentrations in commercial real estate lending, which outlines their expectations for managing concentration risks.

The guidance provides that an institution has a concentration in commercial real estate lending if (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multi-family and non-farm residential properties and loans for construction, land development, and other land represent 300% or more of total capital and the outstanding balance of such loans has increased 50% or more during the prior 36 months.

If a concentration is present, management must employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing and increasing capital requirements.

First Guaranty Bank is subject to these regulations.

Business and Investment Activities.

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"Critically undercapitalized" institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

As of December 31, 2021, First Guaranty Bank was considered well-capitalized.

Transactions with Related Parties.

Transactions between a bank (and, generally, its subsidiaries) and its related parties or affiliates are limited by Sections 23A and 23B of the Federal Reserve Act.

Transactions between a bank and its affiliates are limited by Sections 23A and 23B of the Federal Reserve Act, applicable to FDIC-insured state nonmember banks by Section 18(j) of the Federal Deposit Insurance Act, and its implementing regulations.

An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.

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The term "covered transaction" includes the making of loans, purchase of assets, issuance of a guarantee and similar transactions.

In addition, loans or other extensions of credit by the institution to

the affiliate are required to be collateralized in accordance with specified requirements.

In addition, loans or other extensions of credit by the institution to the affiliate are required to be collateralized in accordance with specified requirements.

The law also requires that affiliate transactions be on terms and conditions that are substantially the same, or at least as favorable to the institution, as those provided to non-affiliates.

First Guaranty Bank's authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act, applicable to FDIC-insured state nonmember banks by Section 18(j) of the Federal Deposit Insurance Act, and Regulation O of the Federal Reserve Board, generally applicable to FDIC-supervised institutions by Section 337.3 of the FDIC Rules and Regulations.

Among other things, these provisions generally require that extensions of credit to insiders:

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The maximum amount of deposit insurance for banks, savings institutions and credit unions is $250,000 per depositor.

Assessments for most institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years.

The assessment range (inclusive of possible adjustments) was for most banks and savings associations 1.5 basis points to 30 basis points.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits.

The FDIC was required to seek to achieve the 1.35% ratio by September 30, 2020.

The FDIC indicated that the 1.35% ratio was exceeded in November 2018.

Insured institutions of less than $10 billion of assets received credits for the portion of their assessments that contributed to the reserve ratio between 1.15% and 1.35%.

The credits were exhausted as of September 30, 2020.

The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the FDIC, and the FDIC has exercised that discretion by establishing a long-range fund ratio of 2%.

Assessments for most insured depository institutions are now based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of failure within three years.

The assessment range (inclusive of possible adjustments) is for institutions of First Guaranty Bank’s size 1.5 basis points to 30 basis points.

The FDIC has authority to increase insurance assessments.

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Community Reinvestment Act.

Under the CRA, a bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low and moderate income neighborhoods.

Under the Community Reinvestment Act (“CRA”), a bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.

The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community.

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The Federal Reserve Board has indicated that it has no plans to re-impose reserve requirements, but may do so in the future if conditions warrant.

First Guaranty Bank is a member of the FHLB System, which consists of twelve regional FHLBs.

First Guaranty Bank is a member of the FHLB System, which consists of eleven regional FHLBs.

The FHLB System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending.

As a member of the FHLB, First Guaranty Bank is required to acquire and hold a specified amount of shares of capital stock in the FHLB.

As of December 31, 2020, First Guaranty Bank complies with this requirement.

As a member of the FHLB of Dallas, First Guaranty Bank is required to acquire and hold a specified amount of shares of capital stock in the FHLB.

As of December 31, 2021, First Guaranty Bank was in compliance with this requirement.

Other Regulations

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First Guaranty has elected "financial holding company" status.

The Dodd-Frank Act required the Federal Reserve Board to revise its consolidated capital requirements for holding companies so that they are no less stringent, both quantitatively and in terms of components of capital, than those applicable to the subsidiary banks.

This eliminated certain instruments from tier 1 capital, such as trust preferred securities that were previously includable for bank holding companies.

With the enactment of EGRRCPA, we are no longer subject to the Federal Reserve Board's consolidated capital adequacy guidelines for bank holding companies as we do not have more than $3.0 billion in total assets.

Bank holding companies with greater than $3 billion in total consolidated assets are subject to consolidated regulatory capital requirements.

We are not subject to the Federal Reserve Board's consolidated capital adequacy guidelines for bank holding companies as we do not have more than $3.0 billion in total assets.

A bank holding company is generally required to give the Federal Reserve Board prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company's consolidated net worth.

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Under the prompt corrective action laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

Federal Reserve Board guidance provides for consultation with and supervisory review by the Federal Reserve Board prior to the payment of dividends or stock repurchases under certain circumstances.

These regulatory policies could affect our ability to pay dividends or otherwise engage in capital distributions.

The Federal Deposit Insurance Act makes depository institutions liable to the FDIC for losses suffered or anticipated by the insurance fund in connection with the default of a commonly controlled depository institution or any assistance provided by the FDIC to such an institution in danger of default.

That law would have potential applicability if we ever held as a separate subsidiary a depository institution in addition to the Bank.

Federal Reserve Board guidance provides for consultation with and supervisory review by the Federal Reserve Board prior to the payment of dividends or stock redemptions or repurchases under certain circumstances.

These regulatory policies could affect our ability to pay dividends, repurchase shares of our common stock or otherwise engage in capital distributions.

We are affected by the monetary and fiscal policies of various agencies of the United States Government, including the Federal Reserve System.

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Federal Securities Laws

First Guaranty's common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

First Guaranty's common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

First Guaranty is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

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As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer are required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact.

The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that:

they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting;

they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting;

and they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.

We have prepared policies, procedures and systems designed to ensure compliance with these regulations.

Concentrated Commercial Real Estate Lending Regulations.

The Federal Reserve Board and FDIC have promulgated guidance governing financial institutions with concentrations in commercial real estate lending.

The guidance provides that a company has a concentration in commercial real estate lending if (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by multi-family and non-farm residential properties and loans for construction, land development, and other land represent 300% or more of total capital and the outstanding balance of such loans has increased 50% or more during the prior 36 months.

If a concentration is present, Management must employ heightened risk management practices including board and Management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing, and increasing capital requirements.

First Guaranty is subject to these regulations.

We have policies, procedures and systems designed to ensure compliance with these regulations.

– Risk Factors

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• collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

• our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

• our allowance for loan and lease losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

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Risks Related to Our Lending

Adverse events in Louisiana and North Central Texas, where our business is concentrated, could adversely affect our results of operations and future growth.

Adverse events in Louisiana and Texas, where our business is concentrated, along with our new Mideast markets in Kentucky and West Virginia could adversely affect our results of operations and future growth.

Our business, the location of our branches and the real estate used as collateral on our real estate loans are primarily concentrated in Louisiana and North Central Texas.

We anticipate future loan growth in our new Mideast markets located in Kentucky and West Virginia.

At December 31, 2021, approximately 69.3% of the secured loans in our loan portfolio were secured by real estate and other collateral located in our market area.

As a result, we are exposed to risks associated with a lack of geographic diversification.

The occurrence of an economic downturn in Louisiana and North Central Texas, or adverse changes in laws or regulations in Louisiana and North Central Texas could impact the credit quality of our assets, the businesses of our customers and our ability to expand our business.

The occurrence of an economic downturn in Louisiana and North Central Texas, or adverse changes in laws or regulations in Louisiana and Texas could impact the credit quality of our assets, the businesses of our customers and our ability to expand our business.

The COVID-19 pandemic has caused a severe economic downturn in our market area.

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First Guaranty may participate in or purchase real estate loans located outside of our traditional markets which may be affected by national or other localized market trends.

This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

This could require increasing our allowance for loan and lease losses to address the decrease in the value of the real estate securing our loans which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Our loan portfolio consists of a high percentage of loans secured by non-farm non-residential real estate.

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Syndicated loans may have a higher risk of loss than other loans we originate because we are not the lead lender and we have limited control over credit monitoring.

Over the last thirteen years, we have pursued a focused program to participate in select syndicated loans (loans made by a group of lenders, including us, who share or participate in a specific loan) with a larger regional financial institution as the lead lender.

Over the last fourteen years, we have pursued a focused program to participate in select syndicated loans (loans made by a group of lenders, including us, who share or participate in a specific loan) with a larger regional financial institution as the lead lender.

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If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations.

If the allowance for loan losses is not sufficient to cover actual loan losses, earnings could decrease.

If the allowance for loan and lease losses is not sufficient to cover actual loan losses, earnings could decrease.

Loan customers may not repay their loans according to the terms of their loans, and the collateral securing the payment of their loans may be insufficient to assure repayment.

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Various assumptions and judgments about the collectability of the loan portfolio are made, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of many loans.

In determining the amount of the allowance for loan losses, management reviews the loans and the loss and delinquency experience and evaluates economic conditions.

At December 31, 2020, our allowance for loan losses as a percentage of total loans, net of unearned income, was 1.33% and as a percentage of total non-performing loans was 85.53%.

In determining the amount of the allowance for loan and lease losses, management reviews the loans and the loss and delinquency experience and evaluates economic conditions.

At December 31, 2021, our allowance for loan and lease losses as a percentage of total loans, net of unearned income, was 1.11% and as a percentage of total non-performing loans was 133.79%.

The determination of the appropriate level of allowance is subject to judgment and requires us to make significant estimates of current credit risks and future trends, all of which are subject to material changes.

If assumptions prove to be incorrect, the allowance for loan losses may not cover inherent losses in the loan portfolio at the date of the financial statements.

If assumptions prove to be incorrect, the allowance for loan and lease losses may not cover inherent losses in the loan portfolio at the date of the financial statements.

Significant additions to the allowance would materially decrease net income.

Non-performing loans may increase and non-performing or delinquent loans may adversely affect future performance.

Any future credit deterioration, including as a result of COVID-19, could require us to increase our allowance for loan losses in the future.

In addition, federal and state regulators periodically review the allowance for loan losses and may require an increase in the allowance for loan losses or recognize further loan charge-offs.

Any significant increase in our allowance for loan losses or loan charge-offs as required by these regulatory agencies could have a material adverse effect on our results of operations and financial condition.

Any future credit deterioration, including as a result of COVID-19, could require us to increase our allowance for loan and lease losses in the future.

In addition, federal and state regulators periodically review the allowance for loan and lease losses and may require an increase in the allowance for loan and lease losses or recognize further loan charge-offs.

Any significant increase in our allowance for loan and lease losses or loan charge-offs as required by these regulatory agencies could have a material adverse effect on our results of operations and financial condition.

Emphasis on the origination of short-term loans could expose us to increased lending risks.

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The CARES Act included the PPP as a loan program administered through the SBA.

Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to detailed qualifications and eligibility criteria.

Under the PPP, small businesses and other entities and individuals applied for loans from existing SBA lenders and other approved regulated lenders that enrolled in the program, subject to detailed qualifications and eligibility criteria.

Because of the short timeframe between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to PPP were issued after lenders began processing PPP applications.

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A significant portion of our noninterest revenue is derived from service charge income.

During the year ended December 31, 2020, service charges, commissions and fees represented $2.6 million, or 10.8% of our total noninterest income.

During the year ended December 31, 2019, service charges, commissions and fees represented $2.8 million, or 33.8% of our total noninterest income.

During the year ended December 31, 2021, service charges, commissions and fees represented $2.7 million, or 26.9% of our total noninterest income excluding gains on securities.

During the year ended December 31, 2020, service charges, commissions and fees represented $2.6 million, or 28.6% of our total noninterest income excluding gains on securities.

The largest component of this service charge income is overdraft-related fees.

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These transactions, as well as the information technology services we provide to clients, often must adhere to client-specific guidelines, as well as legal and regulatory standards.

Due to the breadth of our client base and following the Premier merger, our geographical reach, developing and maintaining our operational systems and infrastructure is challenging, particularly as a result of rapidly evolving legal and regulatory requirements and technological shifts.

Due to the breadth of our client base and following the Premier and Union mergers, our geographical reach, developing and maintaining our operational systems and infrastructure is challenging, particularly as a result of rapidly evolving legal and regulatory requirements and technological shifts.

Our financial, accounting, data processing or other operating systems and facilities may fail to operate properly or become disabled as a result of events that are wholly or partially beyond our control, such as a spike in transaction volume, cyber-attack or other unforeseen catastrophic events, which may adversely affect our ability to process these transactions or provide services.

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Although we take protective measures to maintain the confidentiality, integrity and availability of information across all geographic and product lines, and endeavor to modify these protective measures as circumstances warrant, the nature of the threats continues to evolve.

As a result, our computer systems, software and networks may be vulnerable to unauthorized access, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber-attacks and other events that could have an adverse security impact.

As a result, our computer systems, software and networks may be vulnerable to unauthorized access such as a business email compromise, loss or destruction of data (including confidential client information), account takeovers, unavailability of service, computer viruses or other malicious code, cyber-attacks and other events that could have an adverse security impact.

Despite the defensive measures we take to manage our internal technological and operational infrastructure, these threats may originate externally from third parties such as foreign governments, organized crime and other hackers, and outsourced or infrastructure-support providers and application developers, or may originate internally from within our organization.

Given the increasingly high volume of our transactions, certain errors may be repeated or compounded before they can be discovered and rectified.

Such incidents may result in required notifications to customers and or regulators resulting in reduced reputation and liability to legal proceedings.

Risks Related to Accounting

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The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer and any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security.

At December 31, 2020, First Guaranty had one corporate debt security with other-than-temporary impairment.

In 2020, $100,000 in credit related impairment was charged to earnings and no non-credit related other-than-temporary impairment was recorded in other comprehensive income.

At December 31, 2021, First Guaranty had no corporate debt securities with other-than-temporary impairment.

Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our business, financial condition and results of operations.

Other General Business Risks

Hurricanes or other adverse weather conditions in Louisiana can have an adverse impact on our market area.

Our market area in Southeast Louisiana is close to New Orleans and the Gulf of Mexico, areas which are susceptible to hurricanes, tropical storms and other natural disasters and adverse weather conditions which could result in a disruption of our operations and increases in loan losses.

In August 2016, Louisiana experienced severe flooding which affected several of our markets.

Hurricanes or other adverse weather conditions can have an adverse impact on our market areas.

Our market area in Southeast Louisiana is close to New Orleans and the Gulf of Mexico, areas which are susceptible to hurricanes, tropical storms, flooding and other natural disasters and adverse weather conditions which could result in a disruption of our operations and increases in loan losses.

In August 2021, Hurricane Ida affected several of our markets in Southeast Louisiana.

Similar future events could potentially cause widespread property damage, require the relocation of an unprecedented number of residents and business operations, and severely disrupt normal economic activity in our market areas, which may have an adverse effect on our operations, loan originations and deposit base.

Our Texas market was impacted by an ice storm in February 2021.

Moreover, our ability to compete effectively with financial institutions whose operations are not concentrated in areas affected by hurricanes or other adverse weather conditions or whose resources are greater than ours will depend primarily on our ability to continue normal business operations following such event.

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dollar reference interest rate, it is too early to predict the financial impact this rate index replacement may have, if at all.

First Guaranty had approximately $53.6 million in loans indexed to LIBOR at December 31, 2021.

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

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government securities, changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits.

In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks, the current military operations in the Middle East or the outbreak of the Coronovirus, we cannot predict possible future changes in interest rates, deposit levels, loan demand or our business and earnings.

Furthermore, the actions of the United States government and other governments in responding to such terrorist attacks, the military operations in the Middle East or the outbreak of the Coronovirus may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

In view of changing conditions in the national economy and in the money markets, particularly in light of the continuing threat of terrorist attacks, the current military operations in the Middle East, COVID-19, changes in rates of inflation, and uncertainty with the recent conflict in Eastern Europe, we cannot predict possible future changes in interest rates, deposit levels, loan demand or our business and earnings.

Furthermore, the actions of the United States government and other governments in responding to such terrorist attacks, the military operations in the Middle East, COVID-19, or uncertainty in Eastern Europe, may result in currency fluctuations, exchange controls, market disruption and other adverse effects.

Curtailment of government guaranteed loan programs could affect a segment of our business, and government agencies may not honor their guarantees if we do not originate loans in compliance with their guidelines.

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Risk Associated with an Investment in our Common Stock

An active, liquid market for our common stock may not develop or be sustained.

An active, liquid market for our common stock may not be sustained.

Our shares of common stock began trading on the NASDAQ Global Market in November 2015.

However, an active trading market for shares of our common stock may never develop on NASDAQ or be sustained.

If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all.

An active trading market for shares of our common stock may not be sustained on NASDAQ due to our existing float and trading volume.

An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration in an acquisition.

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Holders of our common stock are entitled to receive only such cash dividends as our board of directors may declare out of funds legally available for the payment of dividends.

First Guaranty is obligated to make payments on its senior debt and subordinated debt before making dividend payments to common shareholders.

First Guaranty is obligated to make payments on its senior debt, subordinated debt and preferred stock before making dividend payments to common shareholders.

Although First Guaranty Bancshares, Inc.

and First Guaranty Bank prior to the Share Exchange, have paid a quarterly dividend to our shareholders for 110 consecutive quarters as of December 31, 2020, we have no obligation to continue paying dividends, and we may change our dividend policy at any time without prior notice to our shareholders.

and First Guaranty Bank prior to the Share Exchange, have paid a quarterly dividend to our shareholders for 114 consecutive quarters as of December 31, 2021, we have no obligation to continue paying dividends, and we may change our dividend policy at any time without prior notice to our common shareholders.

In addition, our ability to pay dividends will continue to be subject, among other things, to certain regulatory guidance and/or restrictions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business