What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-03-16 compared with 2021-03-16 · 158 added, 149 removed, 1337 unchanged (19% of the section changed)

34 unchanged sentences

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.

Allowance for Loan and Lease Losses

As described in Notes 1, 5 and 6 to the financial statements, at December 31, 2021 First Guaranty’s total loans were $2.1 billion and the associated allowance for loan and lease losses balance was $24.0 million.

The allowance for loan and lease losses is management’s best estimate of probable incurred 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 general valuation allowance portion of the allowance for loan and lease 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 and lease 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 the design, implementation, and operating effectiveness of controls relating to management’s calculation of the allowance for loan and lease 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 and lease 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.

/s/ Castaing, Hussey & Lolan, LLC

• 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 and lease losses are supported by the analysis provided by management.

• Testing the appropriateness of the methodology and assumptions used in the calculation of the allowance for loan and lease 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 and lease losses balance.

We have served as First Guaranty's auditor since 2001.

17 unchanged sentences

Loans, net of unearned income 2,159,359 1,844,135

allowance for loan losses 24,518 10,929

allowance for loan and lease losses 24,029 24,518

Net loans 2,135,330 1,819,617

21 unchanged sentences

Shareholders' Equity

Common stock:

$ 1 par value - authorized 100,600,000 shares;

issued 9,741,253 shares

Preferred stock, Series A - $ 1,000 par value - 100,000 shares authorized

Non-cumulative perpetual;

34,500 and 0 shares issued and outstanding, respectively

Common stock, $ 1 par value - 100,600,000 shares authorized and 10,716,796 shares issued 1

10,717 10,717

Surplus 130,093 130,093

Retained earnings 56,654 37,134

Accumulated other comprehensive income (loss) 647 2,175

Accumulated other comprehensive (loss) income ( 6,633 ) 647

Total Shareholders' Equity 223,889 178,591

1 unchanged sentence

See Notes to Consolidated Financial Statements.

1 All share and per share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2021 to shareholders of record as of December 15, 2021.

FIRST GUARANTY BANCSHARES, INC.

33 unchanged sentences

Net Income 27,297 20,318 14,241

Preferred stock dividends 1,384 — —

Net Income Available to Common Shareholders $ 25,913 $ 20,318 $ 14,241

Per Common Share:

3 unchanged sentences

See Notes to Consolidated Financial Statements

1 All share and per share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2021 to shareholders of record as of December 15, 2021.

FIRST GUARANTY BANCSHARES, INC.

5 unchanged sentences

Other comprehensive income:

Unrealized gains (losses) on securities:

Unrealized holding gains (losses) arising during the period 12,757 11,435 ( 8,508 )

Unrealized (losses) gains on securities:

Unrealized holding (losses) gains arising during the period ( 8,501 ) 12,757 11,435

Reclassification adjustments for (gains) losses included in net income ( 714 ) ( 14,791 ) 353

Reclassification of OTTI losses included in net income — 100 —

Change in unrealized gains (losses) on securities ( 1,934 ) 11,788 ( 6,678 )

Change in unrealized (losses) gains on securities ( 9,215 ) ( 1,934 ) 11,788

Tax impact 1,935 406 ( 2,475 )

Other comprehensive income (loss) ( 1,528 ) 9,313 ( 5,276 )

Other comprehensive (loss) income ( 7,280 ) ( 1,528 ) 9,313

Comprehensive Income $ 20,017 $ 18,790 $ 23,554

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

$1 Par Surplus Retained

Preferred Stock $ 1,000 Par

Surplus Retained

Earnings Accumulated

2 unchanged sentences

Balance December 31, 2018 $ — $ 10,657 $ 128,938 $ 14,827 $ ( 7,138 ) $ 147,284

Reclassification of stranded tax effects in accumulated other comprehensive income — — 306 ( 306 ) —

Net income — — — 14,241 — 14,241

Other comprehensive income (loss) — — — ( 5,276 ) ( 5,276 )

Common stock issued in private placement, 59,551 shares 1

— 60 1,155 ( 215 ) — 1,000

Other comprehensive income — — — — 9,313 9,313

Cash dividends on common stock ($ 0.54 per share) 1

2 unchanged sentences

Net income — — — 20,318 — 20,318

Common stock issued in private placement, 54,130 shares

54 1,048 ( 102 ) — 1,000

Other comprehensive income — — — 9,313 9,313

Other comprehensive income (loss) — — — — ( 1,528 ) ( 1,528 )

Cash dividends on common stock ($ 0.58 per share) 1

2 unchanged sentences

Net income — — — 27,297 — 27,297

Preferred stock issued, 34,500 shares, net of costs

33,058 — — — — 33,058

Other comprehensive income (loss) — — — — ( 7,280 ) ( 7,280 )

Preferred stock dividends — ( 1,384 ) ( 1,384 )

Cash dividends on common stock ($ 0.60 per share) 1

2 unchanged sentences

See Notes to Consolidated Financial Statements

1 All share and per share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2021 to shareholders of record as of December 15, 2021.

FIRST GUARANTY BANCSHARES, INC.

12 unchanged sentences

Gain on sale of assets ( 965 ) ( 1,054 ) ( 1,304 )

Repossessed asset write downs, gain and losses on dispositions 1,245 90 ( 47 )

Repossessed asset write downs, gains and losses on dispositions 536 1,245 90

FHLB stock dividends ( 13 ) ( 43 ) ( 63 )

3 unchanged sentences

Cash Flows From Investing Activities:

Proceeds from maturities and calls of HTM securities 34,022 21,190 11,197

Proceeds from maturities, calls and sales of HTM securities — 34,022 21,190

Proceeds from maturities, calls and sales of AFS securities 417,557 1,242,559 279,590

Funds invested in AFS securities ( 551,563 ) ( 1,078,450 ) ( 274,437 )

Funds invested in preferred securities ( 1,000 ) — —

Proceeds from redemption of preferred securities 1,500 — —

Proceeds from sale/redemption of Federal Home Loan Bank stock 2,160 — —

Funds invested in Federal Home Loan Bank stock ( 155 ) — —

Net increase in loans ( 320,347 ) ( 322,745 ) ( 123,553 )

3 unchanged sentences

Cash paid in excess of cash received in acquisition — — ( 23,325 )

Net Cash (Used In) Provided By Investing Activities ( 128,455 ) ( 131,906 ) 6,789

Net Cash Used In Investing Activities ( 452,645 ) ( 128,455 ) ( 131,906 )

Cash Flows From Financing Activities:

Net increase in deposits 430,174 313,210 18,408

Net increase (decrease) in federal funds purchased and short-term borrowings 36,202 ( 28 ) ( 15,500 )

Net (decrease) increase in federal funds purchased and short-term borrowings ( 49,682 ) 36,202 ( 28 )

Proceeds from long-term borrowings, net of costs — — 32,465

Repayment of long-term borrowings ( 17,321 ) ( 6,302 ) ( 3,754 )

Net proceeds from issuance of preferred stock 33,058 — —

Common stock issued in private placement — — 1,000

Dividends paid ( 6,234 ) ( 5,803 ) ( 5,636 )

Dividends paid on preferred stock ( 1,384 ) — —

Dividends paid on common stock ( 6,393 ) ( 6,234 ) ( 5,803 )

Net Cash Provided By Financing Activities 388,452 336,876 42,288

Net Increase (Decrease) In Cash and Cash Equivalents 232,180 ( 60,540 ) 89,937

Net (Decrease)Increase In Cash and Cash Equivalents ( 37,673 ) 232,180 ( 60,540 )

Cash and Cash Equivalents at the Beginning of the Period 299,605 67,425 127,965

3 unchanged sentences

Transfer of securities from HTM to AFS $ — $ 52,553 $ —

Transfer of securities from AFS to HTM $ 160,014 $ — $ —

Cash Paid During the Period:

6 unchanged sentences

First Guaranty Bancshares, Inc.

("First Guaranty") is a Louisiana corporation headquartered in Hammond, LA.

("First Guaranty") is a Louisiana corporation and a financial holding company 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.

First Guaranty Bank (the "Bank") is a Louisiana state-chartered commercial bank that offers a wide range of financial services and focuses on building client relationships and providing exceptional customer service.

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.

The Bank has thirty-six banking facilities and forty-nine automated teller machines (ATMs) in Southeast, Southwest, Central and North Louisiana, North Central Texas, Kentucky and West Virginia.

Summary of significant accounting policies

4 unchanged sentences

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

1 unchanged sentence

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, and the valuation of investment securities.

In connection with the determination of the allowance for loan losses and real estate owned, First Guaranty obtains independent appraisals for significant properties.

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan and lease 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 and lease losses and real estate owned, First Guaranty obtains independent appraisals for significant properties.

Cash and cash equivalents

36 unchanged sentences

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.

The loan charge off is a reduction of the allowance for loan and lease losses.

Troubled Debt Restructurings (TDRs)

39 unchanged sentences

Acquired Loans

Loans are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses.

Loans are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan and lease losses.

Acquired loans are segregated between those with deteriorated credit quality at acquisition and those deemed as performing.

2 unchanged sentences

The difference between the fair value and principal balances due at acquisition date, the fair value discount, is accreted into income over the estimated life of each loan pool.

Loans acquired in a business combination are recorded at their estimated fair value on their purchase date with no carryover of the related allowance for loan losses.

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 and lease 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.

An allowance for loan and lease 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.

Allowance for loan and lease losses

The allowance for loan and lease losses is established through a provision for loan losses charged to expense.

Loans are charged against the allowance for loan and lease 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.

6 unchanged sentences

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.

2 unchanged sentences

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.

Adjustments to the allowance for loan and lease 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 and lease 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.

6 unchanged sentences

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 allowance for loan and lease 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.

19 unchanged sentences

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.

Any valuation adjustments required prior to foreclosure are charged to the allowance for loan and lease 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.

47 unchanged sentences

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.

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, no ne 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.

(in thousands) Union Bancshares, Incorporated

Cash and Due from Banks

Securities available for sale 38,813

Loans 184,344

Premises and equipment 7,223

Goodwill 9,428

Intangible assets 4,213

Other real estate 1,595

Other assets 9,480

Total assets acquired $ 275,159

Deposits 205,078

FHLB borrowings 16,617

Repurchase agreements 6,863

Other liabilities 3,218

Total liabilities assumed $ 231,776

Net assets acquired $ 43,383

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, 2021 and 2020.

At December 31, 2021 First Guaranty had three accounts at correspondent banks, excluding the Federal Reserve Bank, that exceeded the FDIC insurable limit of $250,000.

These accounts were over the insurable limit by $ 2.0 million.

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.

A summary comparison of securities by type at December 31, 2021 and 2020 is shown below.

10 unchanged sentences

Municipal bonds 15,543 156 — 15,699 27,381 781 — 28,162

Collateralized mortgage obligations — — — — 16,400 40 ( 43 ) 16,397

Mortgage-backed securities 576 10 — 586 1,208 31 — 1,239

2 unchanged sentences

Government Agencies $ 153,536 $ — $ ( 2,951 ) $ 150,585 $ — $ — $ — $ —

Municipal bonds — — — — 5,107 182 — 5,289

Mortgage-backed securities — — — — 63,297 200 ( 112 ) 63,385

Total held to maturity securities $ 153,536 $ — $ ( 2,951 ) $ 150,585 $ — $ — $ — $ —

First Guaranty designated available for sale U.S.

Government Agency securities with an amortized cost of $ 160.0 million and a corresponding fair value of $ 152.9 million for held to maturity status in the first quarter of 2021.

The net unrealized loss net of taxes at the date of transfer was $ 5.7 million.

This was done following the review of guidance for held to maturity portfolios in light of the COVID-19 pandemic.

First Guaranty had terminated its held to maturity portfolio in the first quarter of 2020 due to the economic conditions associated with COVID-19.

ASC 320-10-25 provides an exemption for events that are isolated, nonrecurring, and unusual for the reporting entity.

The termination of the held to maturity portfolio in the first quarter of 2020 did not taint the portfolio under this guidance.

The securities designated as held to maturity are agency securities that are part of First Guaranty’s investment strategy and public funds collateralization program.

The fair value of the held to maturity securities at the date of transfer becomes the securities' new cost basis.

The unrealized holding loss at the time of transfer continues to be reported in accumulated other comprehensive income, net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield.

The amortization of the unamortized holding loss reported in accumulated other comprehensive income will directly offset the effect on interest income from the accretion of the reduced amortized cost for the transferred securities.

Because of this transfer, the total losses less than 12 months and greater than 12 months reported in the table below will not agree to the unrealized losses reported in the inventory of held to maturity securities.

The inventory table reports unrealized gains and losses based upon the transferred securities adjusted cost basis and current fair value.

The reporting of losses less than 12 months and greater than 12 months represents that actual period of time that these securities have been in an unrealized loss position and the securities amortized cost basis as if the transfer did not occur.

The scheduled maturities of securities at December 31, 2021, by contractual maturity, are shown below.

12 unchanged sentences

Total available for sale securities $ 212,196 $ 210,620

Held to maturity:

Due in one year or less $ — $ —

Due after one year through five years — —

Due after five years through 10 years 19,445 19,122

Over 10 years 134,091 131,463

Total held to maturity securities $ 153,536 $ 150,585

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, 2021.

15 unchanged sentences

Total available for sale securities 75 $ 177,727 $ ( 2,300 ) 8 $ 454 $ ( 174 ) 83 $ 178,181 $ ( 2,474 )

Held to maturity:

Government Agencies 16 $ 150,585 ( 2,951 ) — $ — $ — 16 $ 150,585 $ ( 2,951 )

Total held to maturity securities 16 $ 150,585 $ ( 2,951 ) — $ — $ — 16 $ 150,585 $ ( 2,951 )

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.

13 unchanged sentences

Municipal bonds 1 66 — — — — 1 66 —

Collateralized mortgage obligations 12 10,022 ( 43 ) — — — 12 10,022 ( 43 )

Mortgage-backed securities — — — 6 11 — 6 11 —

Total available for sale securities 30 $ 141,807 $ ( 549 ) 10 $ 1,265 $ ( 124 ) 40 $ 143,072 $ ( 673 )

Held to maturity:

Government Agencies 2 $ 2,177 $ ( 2 ) 8 $ 15,965 $ ( 30 ) 10 $ 18,142 $ ( 32 )

Municipal bonds — — — 1 50 — 1 50 —

Mortgage-backed securities 7 8,880 ( 58 ) 10 11,343 ( 54 ) 17 20,223 ( 112 )

Total held to maturity securities 9 $ 11,057 $ ( 60 ) 19 $ 27,358 $ ( 84 ) 28 $ 38,415 $ ( 144 )

As of December 31, 2021, 99 of First Guaranty's debt securities had unrealized losses totaling 1.6 % of the individual securities' amortized cost basis and 1.5 % 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.

Eight of the 99 securities had been in a continuous loss position for over 12 months at such date.

The 8 securities had an aggregate amortized cost basis of $ 0.6 million and an unrealized loss of $ 0.2 million at December 31, 2021.

6 unchanged sentences

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.

There were no securities with an other-than-temporary impairment loss at December 31, 2021.

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.

There were no other-than-temporary impairment losses recognized on securities during the year ended December 31, 2021.

There was one other-than-temporary impairment loss of $ 100,000 recognized on securities during the year 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.

There were no other-than-temporary impairment losses recognized on securities during the year December 31, 2019.

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, 2021, 2020, and 2019:

14 unchanged sentences

Gross realized losses were $ 0.4 million, $ 0.1 million and $ 1.1 million for the years ended December 31, 2021, 2020 and 2019.

The tax applicable to these transactions amounted to $ 3.1 million, $( 79,000 ), and $( 0.4 ) million for 2020, 2019 and 2018, respectively.

The tax applicable to these transactions amounted to $ 0.1 million, $ 3.1 million, and $( 79,000 ) for 2021, 2020 and 2019, respectively.

Proceeds from sales of securities classified as available for sale amounted to $ 49.7 million, $ 394.9 million and $ 90.5 million for the years ended December 31, 2021, 2020 and 2019, 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.

Net unrealized losses on available for sale securities included in accumulated other comprehensive income (loss) ("AOCI"), net of applicable income taxes, totaled $ 6.6 million at December 31, 2021.

At December 31, 2020 net unrealized gains included in AOCI, net of applicable income taxes, totaled $ 0.6 million.

During 2021 net gains, net of tax, reclassified out of AOCI into earnings totaled $ 0.6 million.

During 2019 net losses, net of tax, reclassified out of AOCI into earnings totaled $ 0.3 million.

During 2020 net gains, net of tax, reclassified out of AOCI into earnings totaled $ 11.7 million.

At December 31, 2021, First Guaranty's exposure to investment securities issuers that exceeded 10% of shareholders' equity was as follows:

1 unchanged sentence

(in thousands) Amortized Cost Fair Value

Federal Home Loan Bank (FHLB) $ 33,333 $ 33,071

Federal Home Loan Mortgage Corporation (Freddie Mac-FHLMC) 95,230 93,401

13 unchanged sentences

Commercial and industrial 398,391 18.4 % 353,028 19.1 %

Commercial leases 246,022 11.4 % 104,141 5.6 %

Consumer and other (1)

48,142 2.2 % 44,642 2.4 %

Total Non-Real Estate 719,302 33.2 % 530,146 28.6 %

2 unchanged sentences

Total Loans Net of Unearned Income $ 2,159,359 $ 1,844,135

(1) Includes PPP loans fully guaranteed by the SBA of $ 35.4 million and $ 92.3 million at December 31, 2021 and December 31, 2020, respectively.

The following table summarizes fixed and floating rate loans by contractual maturity, excluding nonaccrual loans, as of December 31, 2021 and December 31, 2020 unadjusted for scheduled principal payments, prepayments, or repricing opportunities.

28 unchanged sentences

Commercial and industrial 1,233 722 1,955 396,436 398,391 23

Commercial leases — — — 246,022 246,022 —

Consumer and other 920 822 1,742 46,400 48,142 19

16 unchanged sentences

Commercial and industrial 663 2,557 3,220 349,808 353,028 1,856

Commercial leases 180 — 180 103,961 104,141 —

Consumer and other 996 372 1,368 43,274 44,642 123

17 unchanged sentences

Commercial and industrial 699 701

Commercial leases — —

Consumer and other 803 249

13 unchanged sentences

Commercial and industrial 355,407 34,220 8,764 — 398,391 321,957 27,388 3,683 — 353,028

Commercial leases 245,869 — 153 — 246,022 103,961 — 180 — 104,141

Consumer and other 46,804 374 964 — 48,142 43,736 442 464 — 44,642

17 unchanged sentences

Commercial and industrial 798 1,017

Commercial leases — —

Consumer and other — —

1 unchanged sentence

Total $ 5,143 $ 9,155

For those purchased loans disclosed above, there was no allowance for loan losses at December 31, 2020 or December 31, 2019.

For those purchased loans disclosed above, there was an allowance for loan and lease losses of $ 0.7 million at December 31, 2021 and $ 0.5 million at December 31, 2020.

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.

10 unchanged sentences

Balance, end of period $ 2,378 $ 2,892

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:

Allowance for Loan and Lease Losses

A summary of changes in the allowance for loan and lease losses, by loan type, for the years ended December 31, 2021, 2020 and 2019 are as follows:

As of December 31,

9 unchanged sentences

Commercial and industrial 2,802 ( 89 ) 96 ( 446 ) 2,363 1,909 ( 265 ) 128 1,030 2,802

Commercial leases 583 — 4 1,899 2,486 568 — 388 ( 373 ) 583

Consumer and other 907 ( 1,494 ) 320 1,638 1,371 542 ( 1,083 ) 336 1,112 907

13 unchanged sentences

Commercial and industrial 1,909 ( 879 ) 267 612 1,909

Commercial leases 262 — — 306 568

Consumer and other 629 ( 1,190 ) 246 857 542

4 unchanged sentences

The result is an allocation of the loan loss reserve from one category to another.

A summary of the allowance and loans, including loans acquired with deteriorated credit quality, individually and collectively evaluated for impairment are as follows:

A summary of the allowance along with loans and leases, including loans acquired with deteriorated credit quality, individually and collectively evaluated for impairment are as follows:

As of December 31, 2021

16 unchanged sentences

Commercial and industrial 72 216 2,075 2,363 1,286 798 396,307 398,391

Commercial leases — — 2,486 2,486 — — 246,022 246,022

Consumer and other — — 1,371 1,371 — — 48,142 48,142

21 unchanged sentences

Commercial and industrial 97 142 2,563 2,802 1,544 1,017 350,467 353,028

Commercial leases — — 583 583 — — 104,141 104,141

Consumer and other — — 907 907 — — 44,642 44,642

26 unchanged sentences

Commercial and industrial 470 470 — 479 30 33

Commercial leases — — — — — —

Consumer and other — — — — — —

11 unchanged sentences

Commercial and industrial 816 816 72 875 28 52

Commercial leases — — — — — —

Consumer and other — — — — — —

20 unchanged sentences

Commercial and industrial 601 601 — 821 48 47

Commercial leases — — — — — —

Consumer and other — — — — — —

11 unchanged sentences

Commercial and industrial 943 943 97 981 79 57

Commercial leases — — — — — —

Consumer and other — — — — — —

6 unchanged sentences

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.

These loans have an allocated reserve in First Guaranty's allowance for loan and lease losses.

First Guaranty has not restructured any loans that are considered TDRs in the year ended December 31, 2021.

First Guaranty restructured one loan that is considered TDR in the year ended December 31, 2020.

At December 31, 2021, First Guaranty had one outstanding TDR.

17 unchanged sentences

Commercial and industrial — — — — — — — —

Commercial leases — — — — — — — —

Consumer and other — — — — — — — —

1 unchanged sentence

Total $ — $ — $ 3,382 $ 3,382 $ — $ — $ 3,591 $ 3,591

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

The following table discloses TDR activity for the year ended December 31, 2021.

Troubled Debt Restructured Loans Activity Year Ended December 31, 2021

(in thousands) Beginning balance (December 31, 2020) New TDRs Charge-offs

12 unchanged sentences

Commercial and industrial — — — — — — — — —

Commercial leases — — — — — — — — —

Consumer and other — — — — — — — — —

13 unchanged sentences

Depreciation expense amounted to $ 3.4 million, $ 2.8 million and $ 2.3 million for 2021, 2020 and 2019, respectively.

Interest cost capitalized as a construction cost was $ 55,000 , $ 91,000 and $ 54,000 for 2020, 2019 and 2018.

Interest cost capitalized as a construction cost was $ 61,000 , $ 55,000 , and $ 91,000 for 2021, 2020, and 2019, respectively.

Goodwill and Other Intangible Assets

49 unchanged sentences

Repurchase agreements 6,439 6,121

Line of credit — —

Total short-term borrowings $ 6,439 $ 56,121

1 unchanged sentence

First Guaranty had $ 6.4 million in short-term borrowings outstanding at December 31, 2021 compared to $ 56.1 million outstanding at December 31, 2020.

First Guaranty has an available line of credit of $ 6.5 million, with no outstanding balance at December 31, 2020.

First Guaranty has available lines of credit of $ 26.5 million, with no outstanding balance at December 31, 2021.

Available lines of credit totaled $ 597.6 million at December 31, 2021 and $ 297.2 million at December 31, 2020.

9 unchanged sentences

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 25 basis points ( 3.00 %), totaled $ 0 at December 31, 2021 and $ 14.0 million at December 31, 2020.

First Guaranty paid off this loan using proceeds from its preferred stock capital offering during the second quarter of 2021.

This long-term debt was secured by a pledge of 85 % ( 4,823,899 shares) of First Guaranty's interest in First Guaranty Bank (a wholly owned subsidiary).

Senior long-term debt with a commercial bank, priced at floating Wall Street Journal Prime less 70 basis points ( 3.00 %), totaled $ 25.2 million at December 31, 2021 and $ 28.4 million at December 31, 2020.

2 unchanged sentences

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.

Junior subordinated debt, priced at Wall Street Journal Prime plus 75 basis points ( 4.00 %), totaled $ 14.8 million at December 31, 2021 and 2020.

First Guaranty pays interest semi-annually for the Fixed Interest Rate Period and quarterly for the Floating Interest Rate Period.

1 unchanged sentence

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.

First Guaranty maintains two revolving lines of credit.

A $ 6.5 million line of credit with an availability of $ 6.5 million at December 31, 2021.

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 %.

A $ 20.0 million line of credit with an availability of $ 20.0 million at December 31, 2021.

This line of credit is secured by a pledge of 85 % ( 4,823,899 shares) of First Guaranty's interest in First Guaranty Bank (a wholly owned subsidiary) and is priced at 3.00 %.

At December 31, 2021, letters of credit issued by the FHLB totaling $ 250.7 million were outstanding and carried as off-balance sheet items, all of which expire by 2024.

13 unchanged sentences

2025 — — 15,000

2025 — 3,504 15,000

2026 and thereafter 3,208 — —

9 unchanged sentences

Management believes, as of December 31, 2021 and 2020, 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.

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 assets above the amount necessary to meet its minimum risk-based capital requirements.

First Guaranty Bank's capital conservation buffer was 3.22 % at December 31, 2021.

4 unchanged sentences

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.

Beginning in 2021, the Community Bank Leverage Ratio increased to 8.5 % for the calendar year.

Community banks will have until Jan.

53 unchanged sentences

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 2021, 2020 and 2019, First Guaranty paid interest of $ 0.8 million, $ 0.6 million and $ 0.6 million, respectively, for this note.

During the years ended 2021, 2020 and 2019, First Guaranty paid approximately $ 0.1 million, $ 27,000 and $ 0.1 million, respectively, for the purchase and maintenance of First Guaranty's automobiles to 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.

During the years ended 2021, 2020 and 2019, First Guaranty paid approximately $ 0 , $ 0.1 million and $ 69,000 , respectively, for architectural services in relation to bank branches to Gasaway Gasaway Bankston Architects, of which bank subsidiary board member Andrew B.

Gasaway is part owner.

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.

During the years ended 2021, 2020 and 2019, First Guaranty paid approximately $ 0.6 million, $ 0.5 million and $ 0.3 million, respectively, to Centurion Insurance, an insurance brokerage agency, to bind coverage at market terms for property casualty insurance and health insurance.

First Guaranty owns a 50 % interest in Centurion and accounts for this investment under the equity method.

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.

First Guaranty has an employee savings plan to which employees, who meet certain service requirements, may defer 1 % up to the IRS legal limit of their base salaries, 6 % of which may be matched up to 100 %, at its sole discretion.

Contributions to the savings plan were $ 396,000 , $ 173,000 and $ 149,000 in 2021, 2020 and 2019, respectively.

25 unchanged sentences

Advertising expense was $ 1.0 million, $ 0.4 million and $ 0.8 million for 2021, 2020 and 2019, respectively.

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:

15 unchanged sentences

Deferred tax assets:

Allowance for loan losses $ 4,748 $ 1,720

Allowance for loan and lease losses $ 4,817 $ 4,748

Other real estate owned 219 239

11 unchanged sentences

Net deferred tax assets (liabilities) $ 3,419 $ 2,634

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.

First Guaranty determined that the net deferred tax asset at December 31, 2021 and 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 $ 5.2 million as of December 31, 2021 and $ 5.7 million in 2020.

12 unchanged sentences

The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and commercial letters of credit is represented by the contractual notional amount of those instruments.

The same credit policies are used in making commitments and conditional obligations as it does for balance sheet instruments.

Unless otherwise noted, collateral or other security is not required to support financial instruments with credit risk.

18 unchanged sentences

There were no losses incurred on off-balance sheet commitments in 2021, 2020 or 2019.

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.

Fair Value Measurements

35 unchanged sentences

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.

The change in Level 1 securities available for sale from December 31, 2020 was due to a net decrease in Treasury bills of $ 3.0 million.

The change in Level 2 securities available for sale from December 31, 2020 was due to the increase in corporate securities offset by the transfer of $ 152.9 million in U.S.

Government agency securities from the available for sale to the held to maturity portfolio.

$ 1.8 million in corporate securities and $ 3.1 million in municipal securities were transferred from Level 3 to Level 2 from December 31, 2020 to December 31, 2021.

66 unchanged sentences

The carrying amount of accrued interest receivable approximates its fair value.

Market values are actually computed present values using net present value formulas.

The fair value of customer deposits, excluding certificates of deposit, is the amount payable on demand.

Market values of certificates of deposit 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.

11 unchanged sentences

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.

6 unchanged sentences

Securities, available for sale 210,620 — 198,315 12,305 210,620

Loans held for sale — — — — —

Securities, held for maturity 153,536 — 150,585 — 150,585

Loans, net 2,135,330 — — 2,152,590 2,152,590

49 unchanged sentences

No accrued liability has been recorded related to this lawsuit.

First Guaranty settled a case in the third quarter of 2021 for $ 1.1 million.

A receivable for $ 0.9 million has been recorded for recovery through First Guaranty's insurance coverage.

Condensed Parent Company Information

47 unchanged sentences

Proceeds from sales of equity securities 1,500 10 1,196

Funds invested in equity securities ( 1,000 ) — —

Funds invested in bank subsidiary ( 25,000 ) — —

Purchases of premises and equipment — — ( 136 )

Cash paid in acquisition — — ( 43,383 )

Net cash used in investing activities 10 ( 42,323 ) —

Net cash (used in) provided by investing activities ( 24,500 ) 10 ( 42,323 )

Cash flows from financing activities:

1 unchanged sentence

Repayment of long-term debt ( 17,221 ) ( 6,191 ) ( 3,754 )

Net proceeds from issuance of preferred stock 33,058 — —

Common stock issued in private placement — — 1,000

Dividends paid ( 7,777 ) ( 6,234 ) ( 5,803 )

Net cash (used in) provided by financing activities ( 12,425 ) 23,908 ( 8,577 )

Net cash provided by (used in) financing activities 8,060 ( 12,425 ) 23,908

Net increase (decrease) in cash and cash equivalents 3,347 1,163 ( 7,436 )

4 unchanged sentences

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 8. Financial Statements and Supplementary Data