What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-17 compared with 2024-03-15 · 192 added, 192 removed, 794 unchanged (33% of the section changed)

11 unchanged sentences

Total deposits were $3.5 billion at December 31, 2024 and $3.0 billion at December 31, 2023.

Total loans were $2.7 billion at December 31, 2023, an increase of $229.6 million, or 9.1%, compared with $2.5 billion at December 31, 2022.

Total loans were $2.7 billion at December 31, 2024, a decrease of $54.9 million, or 2.0%, compared with $2.7 billion at December 31, 2023.

Total shareholders' equity was $255.0 million and $249.6 million at December 31, 2024 and December 31, 2023, respectively.

11 unchanged sentences

Because noninterest-bearing sources of funds, such as noninterest-bearing deposits also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources.

The decrease in net income was caused principally by a decrease in net interest income of $15.3 million and an increase in noninterest expense of $8.7 million, partially offset by a decrease in income tax expense of $4.8 million.

The increase in net income was caused principally by an increase in net interest income of $3.7 million, an increase in noninterest income of $14.2 million, and a decrease in noninterest expense of $2.5 million, partially offset by an increase in provision for credit losses of $16.3 million.

Changes in market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income.

2 unchanged sentences

As the economy transitioned from an extended period of historically low interest rates to a period of higher interest rates in 2022-2023, we continue to evaluate our investments in interest-earning assets in relation to the impact such investments have on our financial condition, results of operations and shareholders' equity.

Financial highlights for 2023 and 2022:

Financial highlights for the fourth quarter and years ended December 31, 2024 and 2023:

• Total assets increased $420.0 million, or 11.8%, to $4.0 billion at December 31, 2024 when compared with December 31, 2023.

Total loans at December 31, 2023 were $2.7 billion, an increase of $229.6 million, or 9.1%, compared with December 31, 2022.

Total loans at December 31, 2024 were $2.7 billion, a decrease of $54.9 million, or 2.0%, compared with December 31, 2023.

Total deposits were $3.5 billion at December 31, 2024, an increase of $467.2 million, or 15.5% compared with December 31, 2023.

Retained earnings were $68.0 million at December 31, 2023, a decrease of $8.4 million compared to $76.4 million at December 31, 2022.

Retained earnings were $73.0 million at December 31, 2024, an increase of $5.0 million compared to $68.0 million at December 31, 2023.

Shareholders' equity was $255.0 million and $249.6 million at December 31, 2024 and December 31, 2023, respectively.

2 unchanged sentences

Total weighted average common shares outstanding were 12,501,035 and 11,165,303 at December 31, 2024 and December 31, 2023, respectively.

• First Guaranty participated in the SBA Paycheck Protection Program ("PPP") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

The CARES Act authorized the SBA to guarantee loans under a new 7(a) loan program known as the PPP.

As a qualified SBA lender, we were automatically authorized to originate PPP loans.

The SBA will guarantee 100% of the PPP loans made to eligible borrowers and will forgive such loans.

The program has been conducted in two phases which First Guaranty classifies as Round 1 loans (originated in 2020) and Round 2 loans (originated in 2021).

As of December 31, 2023, First Guaranty had remaining Round 1 PPP loans of $0.1 million and Round 2 PPP loans of $2.8 million.

$16,000 in PPP fees were recognized during 2023 compared to $1.3 million in PPP fees recognized in 2022.

• The allowance for credit losses was 1.29% of total loans at December 31, 2024 compared to 1.13% at December 31, 2023.

The adoption of the CECL model under ASC 326 was the main component of the increase.

• The provision for credit losses totaled $3.7 million for 2023 and 2022.

• The provision for credit losses totaled $20.0 million for 2024 and $3.7 million in 2023.

• Net interest income for 2024 was $88.4 million compared to $84.7 million for 2023.

1 unchanged sentence

• The net interest margin was 2.47% for 2024 and 2.69% for 2023.

First Guaranty attributed the decrease in the net interest margin to the increase in market interest rates that began in 2022 and continued through the third quarter of 2023 that increased the cost of liabilities.

Loans as a percentage of average interest earning assets increased to 82.8% at December 31, 2023 compared to 79.8% at December 31, 2022.

• Investment securities totaled $404.1 million at December 31, 2023, a decrease of $47.4 million when compared to $451.5 million at December 31, 2022.

Losses on the sale of securities were $0 for 2023 as compared to $17,000 for 2022.

At December 31, 2023, available for sale securities, at fair value, totaled $83.5 million, a decrease of $48.0 million when compared to $131.5 million at December 31, 2022.

Loans as a percentage of average interest earning assets decreased to 77.4% at December 31, 2024 compared to 82.8% at December 31, 2023.

• Investment securities totaled $602.7 million at December 31, 2024, an increase of $198.6 million when compared to $404.1 million at December 31, 2023.

At December 31, 2024, available for sale securities, at fair value, totaled $281.1 million, an increase of $197.6 million when compared to $83.5 million at December 31, 2023.

At December 31, 2024, held to maturity securities, at amortized cost and net of the allowance for credit losses, totaled $321.6 million as compared to $320.6 million at December 31, 2023.

A provision for credit losses on HTM securities of $0.1 million was recorded in the third quarter of 2023, and the allowance for credit losses for HTM securities was $0.1 million at December 31, 2023.

• Total loans net of unearned income were $2.7 billion at December 31, 2023 compared to $2.5 billion at December 31, 2022.

The allowance for credit losses for HTM securities was $0.2 million at December 31, 2024, an increase of $0.1 million when compared to $0.1 million at December 31, 2023.

• Total loans net of unearned income were $2.7 billion at December 31, 2024 a net decrease of $54.9 million from December 31, 2023.

Total loans net of unearned income are reduced by the allowance for credit losses which totaled $34.8 million at December 31, 2024 and $30.9 million at December 31, 2023.

1 unchanged sentence

• Nonaccrual loans increased $83.3 million to $108.5 million at December 31, 2024 compared to $25.2 million at December 31, 2023.

• First Guaranty adopted ASU 2016-13, "Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments." (CECL) effective January 1, 2023.

The total adjustment for CECL was $10.0 million which includes $7.0 million for the ACL, $0.1 million for HTM securities, and $2.9 million for unfunded loan commitments.

The $2.9 million for unfunded loan commitments is recorded in other liabilities.

The increase in total nonaccrual loans was concentrated primarily in non-farm non-residential and multifamily loans.

• Return on average assets was 0.34% and 0.28% for the years ended December 31, 2024 and 2023, respectively.

4 unchanged sentences

Tangible book value per common share was $16.48 as of December 31, 2024 compared to $16.03 as of December 31, 2023.

The decrease was due primarily to a decrease in retained earnings associated with the adoption of CECL, the recent issuances of new shares, and changes in accumulated other comprehensive income ("AOCI").

AOCI is comprised of unrealized gains and losses on available for sale securities, including unrealized losses on available for sale securities at the time of transfer to held to maturity.

• First Guaranty's Board of Directors declared cash dividends of $0.64 per common share in 2023 and 2022.

• First Guaranty's Board of Directors declared cash dividends of $0.41 per common share in 2024 and $0.64 per common share in 2023.

First Guaranty has paid 126 consecutive quarterly dividends on its common stock as of December 31, 2024.

• First Guaranty paid preferred cash dividends of $2.3 million during 2024 and 2023.

• First Guaranty issued $20.0 million of common stock through two separate private placements during 2023.

• First Guaranty was a defendant in a lawsuit alleging overpayment on a loan related to a disputed interest rate.

First Guaranty settled this lawsuit in February of 2023 for $0.6 million.

• On January 6, 2023, we entered into a definitive agreement to acquire Lone Star Bank, a Texas state-chartered bank with its main office in Houston, Texas.

On July 10, 2023, First Guaranty, First Guaranty Bank, and Lone Star entered into a Mutual Termination Agreement and Release pursuant to which the parties mutually agreed to terminate the Merger Agreement.

First Guaranty estimates that total costs associated with the Lone Star acquisition was approximately $0.5 million through December 31, 2023.

• On October 5, 2023, we entered into a Loan Agreement (the “Loan Agreement”) with Summit Community Bank, Inc.

(“Lender”) pursuant to which Lender made (i) a term loan in the principal amount of $40.3 million (the “Term Loan”), and (ii) a revolving line of credit in the maximum principal amount of up to $20.0 million (the “Line of Credit,” and, together with the Term Loan, the “Loans”).

The principal sum outstanding under the Term Loan will bear interest at a rate equal to the Prime Index Rate as published by the Wall Street Journal, reset quarterly, minus 0.50% per annum, with a floor of 4.49% per annum.

The principal sum outstanding under the Line of Credit will bear interest at a rate equal to the Prime Index Rate as published by the Wall Street Journal, reset monthly, with a floor of 4.49% per annum.

The principal amount due and payable under the Term Loan will be amortized over a period of forty (40) quarters and will be in quarterly installments of principal, plus accrued interest, with the final payment equal to the then-outstanding principal balance and all accrued and unpaid interest, penalties and fees due thereon due at maturity of October 5, 2033.

Any outstanding amounts under the Line of Credit will be repaid with monthly installments of interest only, followed by a final payment equal to the then-outstanding principal balance and all accrued and unpaid interest, penalties and fees due thereon at maturity on October 5, 2024, unless renewed.

The proceeds of the Term Loan were used to repay in full all outstanding amounts under the existing indebtedness from First Horizon Bank (formerly known as First Tennessee Bank National Association).

• As previously announced, on March 28, 2024, First Guaranty issued a $30.0 million subordinate note in a private placement.

• As previously announced, on June 28, 2024, the Bank consummated a sale-leaseback transaction relating to two stand-alone branches and a portion of the headquarters building which also contains a branch (collectively, the “Properties”).

The aggregate cash purchase price was $14.7 million.

The sale-leaseback transaction resulted in a pre-tax gain of approximately $13.3 million, or $10.5 million after tax.

Aggregate first full year of rent expense under the Lease Agreements will be approximately $1.3 million pre-tax, or $1.0 million after tax.

Recent Developments

• In the first quarter of 2025, First Guaranty closed three branches and consolidated two existing branches into one location on March 7, 2025.

These branches were located in Louisiana.

The impact of the branch closures and consolidation is not expected to materially affect operations.

Critical Accounting Estimates

3 unchanged sentences

Allowance for Credit Losses.

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

The allowance for credit losses is established through a provision for credit losses charged to expense.

Loans are charged against the allowance for credit losses when management believes that the collectability of the principal is unlikely.

3 unchanged sentences

Management estimates the allowance balance using available information such as past events, current conditions and reasonable forecasts.

Adjustments to historical information are made using qualitative and qualitative factors developed by management.

Adjustments to historical information are made using quantitative and qualitative factors developed by management.

The following are general credit risk factors that affect our loan portfolio segments.

18 unchanged sentences

Our total assets were $4.0 billion at December 31, 2024, an increase of $420.0 million, or 11.8%, from total assets of $3.6 billion at December 31, 2023.

Assets increased primarily due to increases in net loans of $222.2 million and cash and cash equivalents of $203.2 million, partially offset by a decrease in investment securities of $47.4 million at December 31, 2023 compared to December 31, 2022.

Net loans increased $222.2 million, or 8.9%, to $2.7 billion at December 31, 2023 from $2.5 billion at December 31, 2022.

Construction and land development loans increased $166.3 million principally due to advances on existing construction lines and new originations that was partially offset by the conversion of loans to permanent financing.

Non-farm non-residential loan balances increased $52.9 million primarily due to new originations.

One-to four-family loans increased $78.5 million primarily due to new originations.

Farmland loans increased $7.7 million due to increases on agricultural loan commitments.

Consumer and other loans increased $6.6 million primarily due to new originations.

Agricultural loans increased $2.0 million primarily due to seasonal activity.

Multifamily loans decreased $0.9 million primarily due to pay downs on the existing multifamily loan portfolio.

Commercial lease loan balances decreased $32.2 million primarily due to pay downs on the existing lease portfolio.

Assets increased primarily due to increases in cash and cash equivalents of $277.8 million and investment securities of $198.6 million, partially offset by a decrease in net loans of $58.8 million at December 31, 2024 compared to December 31, 2023.

Net loans decreased $58.8 million, or 2.2%, to $2.7 billion at December 31, 2024 from December 31, 2023.

Commercial and industrial loans decreased $77.5 million primarily due to paydowns.

Construction and land development loans decreased $69.4 million principally due to the conversion of existing loans to permanent financing.

Commercial lease loan balances decreased $65.2 million primarily due to paydowns on the existing lease portfolio.

First Guaranty's commercial lease portfolio generally has higher yields than commercial real estate loans but shorter average lives.

Commercial and industrial loans decreased $50.3 million primarily due to payoffs.

SBA PPP loans totaled $2.8 million at December 31, 2023 compared to $5.9 million at December 31, 2022.

These totals are included in commercial and industrial loans.

Round 1 SBA PPP loans decreased from $2.0 million at December 31, 2022 to $0.1 million at December 31, 2023 due to SBA loan forgiveness and payments received.

Round 2 SBA PPP loans decreased from $3.9 million at December 31, 2022 to $2.8 million at December 31, 2023 due to SBA loan forgiveness and payments received.

Consumer and other loans decreased $12.2 million primarily due to paydowns.

Agricultural loans decreased $0.3 million primarily due to seasonal activity.

Farmland loans increased $3.5 million due to seasonal activity.

One-to four-family loans increased $5.5 million primarily due to new originations.

Multifamily loans increased $46.2 million primarily due to the conversion of existing construction loans to permanent financing and the origination of new loans.

Non-farm non-residential loan balances increased $114.0 million primarily due to new originations and the conversion of construction and land development loans to permanent financing.

First Guaranty had approximately 3.0% of funded and 1.7% of unfunded commitments in our loan portfolio to businesses engaged in support or service activities for oil and gas operations.

2 unchanged sentences

First Guaranty had $407.1 million in loans related to our Texas markets at December 31, 2024 which was an increase of $31.4 million or 8.4% from $375.7 million at December 31, 2023.

First Guaranty anticipates additional growth opportunities in Texas.

First Guaranty had $335.5 million in loans related to our new Mideast markets in Kentucky and West Virginia at December 31, 2024 which was an increase of $57.5 million or 20.7% from $278.1 million at December 31, 2023.

3 unchanged sentences

The largest portion of our loan portfolio, at 42.9% as of December 31, 2024, was non-farm non-residential loans secured by real estate.

As of December 31, 2023, approximately 45.8% of the loan portfolio was based on a floating rate tied to the prime rate, the Secured Overnight Financing Rate ("SOFR") or Treasury rates.

As of December 31, 2024, approximately 53.1% of the loan portfolio was based on a floating rate tied to the prime rate, SOFR or Treasury rates.

46.2% of the loan portfolio is scheduled to mature within five years from December 31, 2024.

3 unchanged sentences

First Guaranty Bank’s credit department conducts an annual stress test for CRE related loans that is presented to the Bank’s board of directors.

The stress test analyses the impact of changes in interest rates and cash flow on loan customers with credit exposures of $2.5 million or greater.

The stress test analyzes the impact of changes in interest rates and cash flow on loan customers with credit exposures of $2.5 million or greater.

First Guaranty generally requires personal guarantees on CRE loans.

1 unchanged sentence

First Guaranty also generally requires for construction related CRE loans that the borrower provides their equity contribution upfront before loan funds are advanced.

First Guaranty modified its business strategy in 2024 to reduce exposure to commercial real estate related loans, particularly loans secured by non-owner occupied properties and construction loans for commercial real estate.

First Guaranty has diversified its CRE portfolio across both industries and geographic location.

4 unchanged sentences

The largest CRE loan secured by an apartment complex totaled $26.0 million and is located in Texas.

The largest healthcare related loan is a $17.7 million property secured by an assisted living center located in Louisiana.

The largest healthcare related loan is a $32.9 million property secured by an assisted living center located in Alabama.

The largest CRE loan under construction totaled $40.4 million for an apartment complex and is secured by a property located in Louisiana.

35 unchanged sentences

Non-performing assets consist of non-performing loans and other real-estate owned.

Non-performing loans (including nonaccruing troubled debt restructurings described below) are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue.

Non-performing loans are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue.

Loans are ordinarily placed on nonaccrual status when principal and interest is delinquent for 90 days or more.

52 unchanged sentences

Nonaccrual loans to total loans 4.03 % 0.92 %

Allowance for loan and lease losses to nonaccrual loans 122.79 % 173.36 %

For the years ended December 31, 2023 and 2022, gross interest income which would have been recorded had the non-performing loans been current in accordance with their original terms amounted to $1.2 million and $0.5 million, respectively.

We recognized $0.3 million and $0.2 million of interest income on such loans during the years ended December 31, 2023 and 2022, respectively.

For the years ended December 31, 2023 and 2022, gross interest income which would have been recorded had the troubled debt restructured loans been current in accordance with their original terms amounted to $0.1 million and $0.1 million, respectively.

We recognized $0.1 million and $0.1 million of interest income on such loans during the years ended December 31, 2023 and 2022, respectively.

Allowance for credit losses to nonaccrual loans 32.08 % 122.79 %

Non-performing assets were $120.4 million, or 3.03%, of total assets at December 31, 2024, compared to $41.7 million, or 1.17%, of total assets at December 31, 2023, which represented an increase in non-performing assets of $78.6 million.

The increase in non-performing assets occurred primarily due to an increase in nonaccrual loans, 90 days or greater delinquent and still accruing, and other real estate owned.

The increase in non-performing assets occurred primarily due to an increase in nonaccrual loans, partially offset by a decrease in loans 90 days greater delinquent and still accruing and other real estate owned.

Nonperforming loans included loans previously classified as purchase credit deteriorated following the adoption of CECL.

Nonaccrual loans increased from $25.2 million at December 31, 2023 to $108.5 million at December 31, 2024.

The increase in nonaccrual loans was concentrated primarily in non-farm non-residential, one- to four-family, commercial and industrial, and consumer and other loans.

The increase in total nonaccrual loans was concentrated primarily in non-farm non-residential and multifamily loans.

Non-performing assets included $3.9 million in loans with a government guarantee, or 3.24% of non-performing assets.

These are structured as net loss guarantees in which up to 90% of loss exposure is covered.

At December 31, 2023 loans 90 days and greater delinquent and still accruing totaled $15.3 million, an increase of $14.1 million or 1238.6% from $1.1 million at December 31, 2022.

The increase in loans 90 days or greater delinquent and still accruing was concentrated primarily in non-farm non-residential, commercial and industrial, and agricultural loans.

Other real estate owned at December 31, 2023 totaled $1.3 million, an increase of $1.1 million from $0.1 million at December 31, 2022.

The increase was primarily due to the addition of a $0.8 million non-farm non-residential property during the first quarter of 2023.

This property was related to a loan that was on nonaccrual status at December 31, 2022.

At December 31, 2023, our largest non-performing assets were comprised of the following nonaccrual loans and 90 days or greater delinquent and still accruing loans:

(1) a non-farm non-residential loan that totaled $13.6 million;

(2) a non-farm non-residential loan that totaled $4.7 million;

(3) a $2.1 million loan relationship that is classified as purchased credit deteriorated;

(4) a commercial lease loan that totaled $1.8 million;

(5) a non-farm non-residential loan secured by a mobile home facility that totaled $1.3 million.

At December 31, 2024 loans 90 days and greater delinquent and still accruing totaled $11.5 million, a decrease of $3.8 million or 24.8% from $15.3 million at December 31, 2023.

The decrease in loans 90 days or greater delinquent and still accruing was concentrated primarily in non-farm non-residential loans.

Other real estate owned at December 31, 2024 totaled $0.3 million, a decrease of $0.9 million from $1.3 million at December 31, 2023.

At December 31, 2024, the largest 6 non-performing loan relationships comprise 76% of total non-performing loans.

Additional details on the non-performing relationships are as follows:

A $28.7 million loan relationship secured by an assisted living center located in Louisiana;

the loan was placed on nonaccrual in the fourth quarter of 2024.

A $26.0 million loan relationship secured by a multifamily apartment complex located in Texas;

the loan was placed on nonaccrual in the fourth quarter of 2024.

A $23.0 million loan relationship was placed on nonaccrual at June 30, 2024.

The loan relationship originally totaled $37.0 million and was secured by five retail shopping center properties located in the Midwest.

First Guaranty initiated liquidation of the collateral with two properties sold in the fourth quarter of 2024.

The proceeds, net of charge-offs, reduced the balance to $23.0 million.

First Guaranty anticipates continued reduction in this loan relationship through additional sales of properties in 2025.

A $7.4 million loan relationship contractually matured at the end of the third quarter of 2024 and was greater than 90 days at December 31, 2024.

The loan is secured by land located in Texas.

A $4.0 million loan relationship contractually matured at the end of the third quarter of 2024 and was greater than 90 days at December 31, 2024.

The loan is secured by a hotel located in Louisiana.

First Guaranty and the borrower satisfactorily renewed the relationship in January 2025.

It was removed from the nonperforming category and moved to performing in January of 2025.

A $2.0 million loan relationship secured by a one- to four- family residential property located in West Virginia;

the loan was placed on nonaccrual at June 30, 2024.

Classified Assets .

1 unchanged sentence

"Substandard" assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected.

Assets classified as "doubtful" have all of the weaknesses inherent in those classified as "substandard," with the added characteristic that the weaknesses present make "collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their continuance as assets without the establishment of a specific allowance for loan and lease losses is not warranted.

Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as "special mention" by our management.

10 unchanged sentences

We also employ a risk grading system for our loans to help assure that we are not taking unnecessary and/or unmanageable risk.

The primary objective of the loan risk grading system is to establish a method of assessing credit risk to further enable management to measure loan portfolio quality and the adequacy of the allowance for loan and lease losses.

Further, we contract with an external loan review firm to complete a credit risk assessment of the loan portfolio on a regular basis to help determine the current level and direction of our credit risk.

1 unchanged sentence

Any material issues discovered in an external loan review are also communicated to us immediately.

The increase in classified assets at December 31, 2023 as compared to December 31, 2022 was due to a $45.6 million increase in substandard loans and a $1.6 million increase in doubtful loans.

The increase in substandard loans was primarily the result of the downgrade of one real estate secured loan relationship in the second quarter of 2023 with an aggregate principal balance of $36.5 million as of December 31, 2023.

The loans are secured by shopping centers.

While the loans are over collateralized based upon recent appraisals totaling $47.4 million, there is no certainty that the Bank will receive full repayment upon liquidation should that become necessary.

The increase in doubtful loans was primarily the result of the downgrade of several loan relationships from substandard to doubtful.

The increase in classified assets at December 31, 2024 as compared to December 31, 2023 was due to a $96.8 million increase in substandard loans offset by a $1.1 million decrease in doubtful loans.

The increase in substandard loans was primarily the result of downgrades during the second quarter of 2024 of two related commercial loan relationships, with balances of $22.3 million and $16.9 million, from pass to substandard status, and one commercial loan relationship totaling $28.7 million downgraded during the third quarter of 2024, from special mention to substandard status, and one multifamily loan totaling $26.0 million downgraded during the fourth quarter of 2024, from special mention to substandard status.

The $28.7 million commercial loan relationship was pass status at December 31, 2023.

The decrease in doubtful loans was primarily the result of the payoff of a $0.4 million one-to-four family loan classified as doubtful during the first quarter of 2024.

Special mention loans increased by $66.9 million in 2024.

The increase in special mention loans was primarily the result of the downgrade of one commercial real estate loan from pass status to special mention totaling $15.0 million and the downgrade of one commercial lease loan relationship from pass status to special mention totaling $13.0 million.

The increase in special mention loans was primarily the result of downgrade during the third quarter of 2024 of one commercial lease loan relationship totaling $18.1 million, and one downgrade during the fourth quarter of 2024 of one real estate loan relationship totaling $16.0 million, from pass to special mention status.

Allowance for Credit Losses

6 unchanged sentences

Under prior GAAP losses were not recognized until the occurrence of the loss was probable.

See Recent Accounting Pronouncements for more information on the adoption of ASC 326.

The allowance for credit losses on loans is maintained to absorb expected losses over the life of the loans in the loan portfolio.

The allowance is increased by the provision for loan losses, offset by recoveries of previously charged-off loans and is decreased by loan charge-offs.

The allowance is increased by the provision for credit losses, offset by recoveries of previously charged-off loans and is decreased by loan charge-offs.

The provision is a charge to current expense to provide for current expected loan losses and to maintain the allowance commensurate with management's evaluation of the risks inherent in the loan portfolio.

22 unchanged sentences

An unallocated component is maintained to cover uncertainties that could affect the estimate of probable losses.

The balance in the allowance for credit losses is principally influenced by the provision for loan losses, recoveries, and by net loan loss experience.

The balance in the allowance for credit losses is principally influenced by the provision for credit losses, recoveries, and by net loan loss experience.

Additions to the allowance are charged to the provision for credit losses.

1 unchanged sentence

The allowance for credit losses was $34.8 million at December 31, 2024 compared to $30.9 million at December 31, 2023.

The balance in the allowance for credit losses is principally influenced by the provision for loan losses and by net loan loss experience.

The balance in the allowance for credit losses is principally influenced by the provision for credit losses and by net loan loss experience.

Additions to the allowance are charged to the provision for credit losses.

1 unchanged sentence

The table below reflects the activity in the allowance for credit losses for the years indicated.

As previously disclosed, the adoption of the CECL model in ASC 326 was the cause of most of the increase in the allowance.

As previously disclosed, the adoption of the CECL model in ASC 326 was the cause of most of the increase in the allowance in 2023.

At or For the Years Ended December 31,

3 unchanged sentences

Construction and land development (39) —

Farmland (258) —

1- 4 family (1,034) (964)

21 unchanged sentences

Total recoveries 912 1,375

Net (charge-offs) recoveries (4,396) (4,167)

Provision for loan losses 3,684 3,656

Net charge-offs (17,679) (4,396)

Provision for credit losses 21,564 3,684

Balance at end of year $ 34,811 $ 30,926

1 unchanged sentence

Net loan charge-offs to loans at end of year 0.66 % 0.16 %

Allowance for loan and lease losses to loans at end of year 1.13 % 0.93 %

Net loan charge-offs to allowance for loan and lease losses 14.21 % 17.72 %

Allowance for credit losses to loans at end of year 1.29 % 1.13 %

Net loan charge-offs to allowance for credit losses 50.79 % 14.21 %

Net loan charge-offs to provision charged to expense 81.98 % 119.33 %

A provision for credit losses of $3.7 million was made during each of the years ended December 31, 2023 and 2022.

A provision for credit losses of $20.0 million was made during the year ended December 31, 2024 and $3.7 million for the same period in 2023.

The provisions made in 2024 included a $1.6 million negative provision for credit losses related to unfunded commitments and a $0.1 million provision for credit losses on HTM securities.

1 unchanged sentence

The loan portfolio factors in 2024 that primarily affected the allocation of the allowance included the following:

• The adoption of the CECL methodology under ASU 2016-13 was the largest contributor to changes in both the size and allocation of the allowance for credit losses.

First Guaranty also made adjustments of certain qualitative factors to take into account the current estimated impact of COVID-19, changes in other market conditions, loan concentrations including those related to commercial real estate and loan relationships and related economic conditions on borrowers' ability to repay loans and for allocations to individually evaluated for impairment loans within their respective categories.

• Construction and land development loans increased during 2023 due to advances on existing construction lines of credit and new loan originations.

Several loans previously in this category moved to permanent financing and are now included in the multifamily loan category as of December 31, 2023.

The allowance increase related to this portfolio was due to growth in the portfolio along with changes in the qualitative analysis of the portfolio and the adoption of CECL.

• One-to-four family residential loans increased during 2023.

The allowance increase related to this portfolio was due to changes in the qualitative analysis of the portfolio, portfolio growth, and also the adoption of CECL.

• Multifamily loans decreased during 2023.

The allowance related to this portfolio increased due primarily to the adoption of CECL.

• Non-farm non-residential loans increased during 2023.

The allowance increase related to this portfolio was due primarily to growth in the portfolio and also to the adoption of CECL.

• Construction and land development loans decreased during 2024 due to loans converted to permanent financing.

The allowance decrease related to this portfolio was due to a decline in the portfolio along with changes in the qualitative analysis of the portfolio related to economic conditions.

• One-to-four family residential loans increased $5.5 million during 2024.

The allowance increase related to this portfolio was due to growth in the portfolio.

• Multifamily loans increased during 2024.

The allowance increase related to this portfolio was due to growth in the portfolio and changes in the qualitative analysis of the portfolio.

• Non-farm non-residential loans increased by $114.0 million during 2024.

The allowance increase related to this portfolio was due to growth, charge-offs and changes in the qualitative analysis of the portfolio related to economic conditions.

• Commercial and industrial loans decreased during 2024.

The allowance increase related to this portfolio was due to the adoption of the CECL methodology.

• Commercial leases decreased during 2023.

The allowance decrease related to this portfolio was due to the reduction in this portfolio and due to changes in the qualitative analysis of the portfolio.

Commercial leases declined during 2023 from $317.6 million at December 31, 2022 to $285.4 million at December 31, 2023.

• Consumer and other loans increased during 2023.

The decrease in the related loan loss allowance balance was due primarily to qualitative analysis, charge-offs on consumer loans and the adoption of the CECL methodology.

The allowance decrease related to this portfolio was due to charge-offs and changes in the qualitative analysis of the portfolio.

• Commercial leases decreased during 2024 from $285.4 million at December 31, 2023 to $220.2 million at December 31, 2024.

The allowance decrease related to this portfolio was due a decline in the portfolio along with changes in the qualitative analysis of the portfolio.

• Consumer and other loans decreased during 2024.

The decrease in the related loan loss allowance balance was due primarily to charge-offs and qualitative analysis of the portfolio.

First Guaranty charged off $18.6 million in loan balances during the year ended December 31, 2024 as compared to $5.8 million for 2023.

1 unchanged sentence

The details of the $18.6 million in charged-off loans were as follows:

First Guaranty charged off $0.3 million in consumer loans related to Hurricane Ida relief loans during 2023.

These loans were originated in the Fall of 2021 following Hurricane Ida that impacted Southeast Louisiana on August 29, 2021.

First Guaranty charged off $0.8 million on a real estate secured loan in the fourth quarter of 2023.

First Guaranty charged off $3.2 million in consumer loans during 2024.

The consumer loan charge offs included $0.2 million in credit card loans, $1.3 million of loans secured by automobiles or equipment and $1.7 million in unsecured loans.

First Guaranty charged off $0.2 million on a commercial and industrial SBA loan relationship during the first quarter of 2024.

This relationship had no remaining principal balance at December 31, 2024.

First Guaranty charged off $3.8 million on a loan relationship associated with a restaurant supply business located in Louisiana during the second quarter of 2024.

This loan was secured by real estate, equipment, and inventory.

This loan had a previous specific reserve of $2.5 million as of March 31, 2024.

This loan had no remaining principal balance at December 31, 2024.

This loan was previously acquired in the 2019 Union Bancshares acquisition.

First Guaranty charged off $0.3 million on a commercial and industrial loan during the fourth quarter of 2023.

First Guaranty charged off a $1.8 million commercial and industrial loan that was originated under the Main Street Lending Program during the second quarter of 2024.

The $1.8 million was the unguaranteed retained portion of the loan.

This loan had a previous allocation in the reserve of $1.8 million at March 31, 2024.

This loan had no remaining principal balance at December 31, 2024.

First Guaranty charged off $0.6 million on a real estate secured loan located in Louisiana during 2024.

This was an acquired loan from the Union Bank acquisition and was secured by rental properties.

This loan had no remaining principal balance at December 31, 2024.

First Guaranty charged off $0.4 million on a commercial and industrial SBA loan relationship during the second quarter of 2024.

This relationship had a remaining principal balance of $0.6 million at December 31, 2024.

First Guaranty charged off $0.3 million on a real estate secured SBA loan during the second quarter of 2024.

This loan had a remaining principal balance of $0.9 million at December 31, 2024.

First Guaranty charged off $1.0 million on a loan relationship that is classified as purchased credit deteriorated during the third quarter of 2024.

This relationship had remaining principal balance of $1.3 million at December 31, 2024.

First Guaranty charged off $3.9 million on a non-farm non-residential loan relationship during the fourth quarter of 2024.

This relationship had remaining principal balance of $23.0 million at December 31, 2024.

Smaller loans and overdrawn deposit accounts comprised the remaining $3.4 million of charge-offs for 2024.

These charge offs were concentrated in equipment, vehicle, and unsecured loans.

Allocation of Allowance for Loan and Lease Losses.

The following tables set forth the allowance for loan and lease losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated.

The allowance for loan and lease losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance for losses in other categories.

Allocation of Allowance for Credit Losses.

The following tables set forth the allowance for credit losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated.

The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance for losses in other categories.

At December 31,

(dollars in thousands) Allowance for Loan and Lease Losses Percent of Allowance

(dollars in thousands) Allowance for Credit Losses Percent of Allowance

to Total Allowance

for Loan and Lease Losses Percent of Loans

for Credit Losses Percent of Loans

in Each Category

to Total Loans Allowance for Loan and Lease Losses Percent of Allowance

to Total Loans Allowance for Credit Losses Percent of Allowance

to Total Allowance

for Loan and Lease Losses Percent of Loans

for Credit Losses Percent of Loans

in Each Category

31 unchanged sentences

Investment Securities

Investment securities at December 31, 2023 totaled $404.1 million, a decrease of $47.4 million, or 10.5%, compared to $451.5 million at December 31, 2022.

Investment securities at December 31, 2024 totaled $602.7 million, an increase of $198.6 million, or 49.1%, compared to $404.1 million at December 31, 2023.

The portfolio consists of both available for sale (AFS) and held to maturity securities (HTM).

18 unchanged sentences

Treasuries or other agency backed securities.

Our available for sale securities portfolio totaled $83.5 million at December 31, 2023, a decrease of $48.0 million, or 36.5%, compared to $131.5 million at December 31, 2022.

The decrease was primarily due to the maturity of U.S.

Treasury securities.

Our available for sale securities portfolio totaled $281.1 million at December 31, 2024, an increase of $197.6 million, or 236.7%, compared to $83.5 million at December 31, 2023.

The increase was primarily due to the purchase of U.S.

Treasury securities, collateralized mortgage obligations, and mortgage-backed securities.

Our held to maturity securities portfolio had an amortized cost of $321.6 million, net of allowance at December 31, 2024, compared to $320.6 million at December 31, 2023.

There were no credit related impairment of available for sale securities during 2024.

An allowance for credit losses of $0.1 million for held to maturity securities was recorded upon the adoption of ASC 326.

There was one charge-off, net of recovery of $0.1 million recognized on a corporate security classed as held to maturity during 2023.

There was a provision of $0.1 million was recorded in the third quarter of 2023.

There were no charge-offs recorded during 2024.

There was a provision of $0.1 million recorded in the fourth quarter of 2024.

The allowance for credit losses for held to maturity securities was $0.2 million at December 31, 2024.

14 unchanged sentences

Municipal bonds 6,056 5.7 % 4,494 4.1 % 8,402 4.1 % 2,602 3.5 %

Collateralized mortgage obligations — — % — — % 4,132 4.6 % 27,486 4.3 %

Mortgage-backed securities — — % 1 5.3 % 3 6.4 % 68,495 4.4 %

14 unchanged sentences

Noninterest-bearing demand deposits decreased $38.7 million, or 8.7% to $404.1 million at December 31, 2024.

The decrease in noninterest-bearing demand deposits was primarily due to increased competition in the marketplace for interest bearing deposits.

Interest-bearing demand deposits increased $66.4 million, or 4.5%, to $1.5 billion at December 31, 2023.

The increase in interest-bearing demand deposits was primarily concentrated in public funds interest-bearing demand deposits.

The decrease in noninterest-bearing demand deposits was primarily concentrated in individual and business noninterest-bearing demand deposits.

Interest-bearing demand deposits decreased $139.6 million, or 9.1%, to $1.4 billion at December 31, 2024.

The decrease in interest-bearing demand deposits was primarily concentrated in public funds interest-bearing demand deposits.

Savings deposits increased $15.5 million, or 7.1%, to $234.4 million at December 31, 2024, primarily related to increases in business and individual savings deposits.

Time deposits increased $287.4 million, or 53.9%, to $820.7 million at December 31, 2023, primarily due to increases in consumer and business time deposits along with increased brokered time deposits of approximately $175.6 million.

These new brokered time deposits had maturities of two and three years.

Time deposits increased $630.0 million, or 76.8%, to $1.5 billion at December 31, 2024, primarily due to increases in consumer and business time deposits along with increased brokered time deposits of approximately $481.7 million.

These new brokered time deposits have maturities of two and three years.

The proceeds from the new deposits were used to reduce short-term FHLB borrowings.

3 unchanged sentences

Public funds time deposits totaled $78.4 million at December 31, 2024 compared to $50.9 million at December 31, 2023.

Public funds deposits increased due to new balances from existing customers that was primarily attributed to seasonal fluctuations.

Public funds deposits decreased due to decreased balances from existing customers that was primarily attributed to seasonal fluctuations.

First Guaranty has developed a program for the retention and management of public funds deposits.

37 unchanged sentences

First Guaranty had $7.0 million in short-term borrowings outstanding at December 31, 2024 compared to $66.3 million outstanding at December 31, 2023.

The short-term borrowings at December 31, 2023 were comprised of short-term Federal Home Loan Bank advances of $50.0 million, a line of credit of $20.0 million with an outstanding balance of $10.0 million and repurchase agreements of $6.3 million.

The short-term borrowings outstanding at December 31, 2022 were comprised of $120.0 million of short-term Federal Home Loan Bank advances of $120.0 million, a line of credit of $20.0 million with an outstanding balance of $20.0 million and repurchase agreements of $6.4 million.

First Guaranty had available lines of credit of $20.0 million, with $10.0 million outstanding at December 31, 2023.

A net availability of $10.0 million remained.

The short-term borrowings at December 31, 2024 were comprised of repurchase agreements of $7.0 million.

The short-term borrowings outstanding at December 31, 2023 were comprised of short-term Federal Home Loan Bank advances of $50.0 million, a line of credit of $20.0 million with an outstanding balance of $10.0 million and repurchase agreements of $6.3 million.

First Guaranty had long-term borrowings from the FHLB that totaled $135.0 million at December 31, 2024.

First Guaranty converted previous short-term floating rate borrowings from the FHLB into long-term lower fixed rate borrowings in order to reduce interest expense.

First Guaranty has a $20.0 million FHLB advance that matures in the first quarter of 2025, a $100.0 million FHLB advance that matures in the second quarter of 2027, and $35.0 million FHLB advance that matures in the third quarter of 2027.

First Guaranty has a $100.0 million FHLB advance that matures in the second quarter of 2027, and a $35.0 million FHLB advance that matures in the third quarter of 2027.

At December 31, 2024, we had $455.7 million in FHLB letters of credit outstanding obtained primarily for collateralizing public deposits compared to $513.3 million at December 31, 2023.

First Guaranty had senior long-term debt totaling $15.2 million at December 31, 2024 and $39.1 million at December 31, 2023.

The change in senior long-term debt occurred when First Guaranty refinanced its outstanding balance on a revolving line of credit into a long term credit facility in October 2023.

The change in senior long-term debt occurred when First Guaranty paid down $30.0 million of long term senior debt with the issuance of subordinated debt in March 2024.

First Guaranty also had subordinated debt totaling $44.7 million at December 31, 2024 and $15.0 million at December 31, 2023.

1 unchanged sentence

Total shareholders' equity increased to $255.0 million at December 31, 2024 from $249.6 million at December 31, 2023.

The increase in shareholders' equity was principally the result of an increase of $19.0 million in surplus and a $2.3 million decrease in accumulated other comprehensive loss, partially offset by a decrease of $8.4 million in retained earnings.

The $19.0 million increase in surplus was due to common stock issued in private placements and common stock issued under the Equity Bonus Plan during 2023.

The increase in shareholders' equity was principally the result of an increase of $5.0 million in retained earnings, $0.3 million in surplus and a $0.1 million decrease in accumulated other comprehensive loss.

The $5.0 million increase in retained earnings was primarily due to net income of $12.4 million during the year ended December 31, 2024, partially offset by $5.1 million in cash dividends paid on shares of our common stock and $2.3 million in cash dividends paid on shares of our preferred stock.

The $0.3 million increase in surplus was due to common stock issued under the Equity Bonus Plan during the first quarter of 2024.

The decrease in accumulated other comprehensive loss was primarily attributed to the decrease in unrealized losses on available for sale securities during the year ended December 31, 2024.

The $8.4 million decrease in retained earnings was primarily due to the adoption of CECL which had a $7.9 million after tax reduction to retained earnings, $7.4 million in cash dividends paid on shares of our common stock and $2.3 million in cash dividends paid on shares of our preferred stock, partially offset by net income of $9.2 million during the year ended December 31, 2023.

Results of Operations

3 unchanged sentences

Year ended December 31, 2024 compared with year ended December 31, 2023.

Net income for the year ended December 31, 2023 was $9.2 million, a decrease of $19.7 million, or 68.1%, as compared to $28.9 million for the year ended December 31, 2022.

The decrease in net income of $19.7 million for the year ended December 31, 2023 was the result of several factors.

First Guaranty experienced an increase in interest income.

This increased income was offset by an increase in interest expense, an increase in the provision for credit losses, a decrease in noninterest income, and an increase in noninterest expense.

Net income for the year ended December 31, 2024 was $12.4 million, an increase of $3.2 million, or 35.0%, as compared to $9.2 million for the year ended December 31, 2023.

The increase in net income of $3.2 million for the year ended December 31, 2024 was the result of several factors.

First Guaranty experienced an increase in interest income, an increase in noninterest income, and a decrease in noninterest expense.

This increased income was partially offset by an increase in interest expense and an increase in the provision for credit losses.

Loan interest income increased due to the growth in First Guaranty's loan portfolio and repricing of existing loans to higher market rates, including loan fees recognized as an adjustment to yield.

Securities interest income increased due to an increase in the average yield of the investment portfolio.

Factors that offset the increase in net income included an increase in interest expense due to increases in volume and market interest rates.

The increase in the provision was related to changes within the portfolio.

Noninterest income decreased primarily due a decrease on the sale of loans.

Noninterest expense increased primarily due to increased personnel expenses, legal and professional fees, software expense, regulatory assessment, and data processing expenses.

Earnings per common share for the years ended December 31, 2023 was $0.62 per common share, a decrease of 75.0% or $1.86 per common share from $2.48 per common share for the year ended December 31, 2022.

Noninterest income increased primarily due to the net gain on sale of assets related to the sale-leaseback transaction and an increase on gains on the sale of loans.

Noninterest expense decreased primarily due to decreased legal and professional fees, marketing, travel and lodging, operating supplies, and data processing.

Factors that partially offset the increase in net income included an increase in interest expense that was due to increases in volume of interest-bearing liabilities and market interest rates.

The increase in the provision was related to changes within the portfolio and charge-offs experienced in 2024.

Earnings per common share for the years ended December 31, 2024 was $0.81 per common share, an increase of 30.6% or $0.19 per common share from $0.62 per common share for the year ended December 31, 2023.

Net Interest Income

13 unchanged sentences

Net interest income for the years ended December 31, 2024 and 2023 was $88.4 million and $84.7 million, respectively.

The decrease in net interest income for the year ended December 31, 2023 as compared to the prior year was primarily due to an increase in the average balance of our total interest-bearing liabilities and an increase in the average rate of our total interest-bearing liabilities, partially offset by an increase in the average balance of our total interest-earning assets and an increase in the average yield of our total interest-earning assets.

The increase in net interest income for the year ended December 31, 2024 as compared to the prior year was primarily due to an increase in the average balance of our total interest-earning assets and an increase in the average yield of our total interest-earning assets, partially offset by an increase in the average balance of our total interest-bearing liabilities and an increase in the average rate of our total interest-bearing liabilities.

For the year ended December 31, 2024, the average balance of our total interest-earning assets increased by $438.4 million to $3.6 billion due to strong growth in our loan portfolio and an increase in interest-earning deposits with banks.

The average yield of our interest-earning assets increased by 37 basis points to 6.18% from 5.81% for the year ended December 31, 2023 due to an improved mix of higher yielding assets.

For the year ended December 31, 2024, the average balance of our total interest-bearing liabilities increased by $495.7 million to $3.0 billion due to growth in interest-bearing deposits and borrowings.

1 unchanged sentence

The rise in market interest rates, particularly associated with Treasury rates, contributed to the increase in our liabilities cost.

The primary source of the increase in liabilities cost was associated with interest bearing demand deposits for public funds that are primarily indexed to Treasury rates.

For the year ended December 31, 2023, the average balance of our total interest-earning assets increased by $267.2 million to $3.1 billion due to an improved mix of higher yielding assets.

The average yield of our interest-earning assets increased by 107 basis points to 5.81% from 4.74% for the year ended December 31, 2022 due to an improved mix of higher yielding assets.

The primary source of the increase in liabilities cost was associated with the repricing of maturing time deposits to higher market rates along with interest bearing demand deposits for public funds that are primarily indexed to Treasury rates.

As a result, our net interest rate spread decreased 15 basis points to 1.76% for the year ended December 31, 2024 from 1.91% for the year ended December 31, 2023.

7 unchanged sentences

The average yield of interest-earning assets increased by 37 basis points to 6.18% for the year ended December 31, 2024 compared to 5.81% for the year ended December 31, 2023.

Interest income on securities increased $0.4 million to $9.6 million for the year ended December 31, 2023 as compared to the prior year primarily as a result of an increase in average yield of securities.

Interest income on securities increased $4.3 million to $13.9 million for the year ended December 31, 2024 as compared to the prior year primarily as a result of an increase in average yield and average balance of securities.

The average yield on securities increased by 65 basis points to 2.96% for the year ended December 31, 2024 from 2.31% for the year ended December 31, 2023 due to the decrease in lower yielding Treasury securities that matured in 2023.

The average balance of securities decreased $36.7 million to $415.5 million for the year ended December 31, 2023 from $452.2 million for the year ended December 31, 2022 primarily due to a decrease in the average balance of our U.S.

Treasuries securities portfolio compared to the prior year.

The average balance of securities increased $54.2 million to $469.7 million for the year ended December 31, 2024 from $415.5 million for the year ended December 31, 2023 primarily due to an increase in the average balance of our U.S.

Treasuries securities, collateralized mortgage obligations, and mortgage -backed securities portfolios compared to the prior year.

Interest income on loans increased $23.2 million, or 13.9%, to $190.4 million for the year ended December 31, 2024 as a result of an increase in the average balance and average yield of loans.

1 unchanged sentence

The average yield on loans (excluding loans held for sale) increased by 45 basis points to 6.86% for the year ended December 31, 2024 from 6.41% for the year ended December 31, 2023 due to the improved mix of loans along with an increase in market interest rates.

Interest income on interest-earning deposits with banks increased $11.1 million to $17.4 million for the year ended December 31, 2024 as compared to the prior year period as a result of an increase in the average balance of interest-bearing deposits with banks.

The average balance of interest-bearing deposits with banks increased $213.3 million to $338.7 million for the year ended December 31, 2024 from $125.4 million for the year ended December 31, 2023.

Interest Expense

7 unchanged sentences

The average rate of time deposits increased 111 basis points during the year ended December 31, 2024 to 4.69% as compared to 3.58% for the prior year.

The increase in the average rate of time deposits was due to changes in market rates.

The increase in the average rate of time deposits was due to changes in market rates as existing time deposits repriced to higher market rates.

The average balance of interest-bearing liabilities increased by $495.7 million during the year ended December 31, 2024 to $3.0 billion.

48 unchanged sentences

(6) Includes loan fees of $7.1 million and $6.0 million for the years ended December 31, 2024 and 2023.

PPP loan fee income of $16,000 and $1.3 million was recognized for the years ended December 31, 2023 and 2022, respectively.

Volume/Rate Analysis .

30 unchanged sentences

Total charge-offs were $18.6 million for year ended December 31, 2024 and $5.8 million for 2023.

Charge-offs for 2023 were concentrated in consumer relief loans associated with Hurricane Ida, a non-farm non-residential loan, and a commercial and industrial loan.

Hurricane Ida consumer relief loans charge-offs totaled $0.3 million during 2023.

Charge-offs for 2024 were concentrated in consumer auto and equipment secured loans, unsecured consumer loans, a loan relationship that is classified as purchased credit deteriorated, a loan relationship associated with a restaurant supply business located in Louisiana secured by real estate, equipment and inventory, and a commercial and industrial loan associated with the Main Street Lending Program.

Partially offsetting these charge-offs were recoveries that totaled $0.9 million for the year ended December 31, 2024 and $1.4 million for the same period in 2023.

4 unchanged sentences

Noninterest income does not include loan origination fees which are recognized over the life of the related loan as an adjustment to yield using the interest method.

Noninterest income totaled $10.6 million for the year ended December 31, 2023, a decrease of $0.4 million from $11.0 million for the year ended December 31, 2022.

The decrease was primarily due to reduced gains on the sale of loans.

Noninterest income totaled $24.7 million for the year ended December 31, 2024, an increase of $14.2 million from $10.6 million for the year ended December 31, 2023.

The increase was primarily due to increased gains on sale of assets associated with the sale-leaseback transaction during the second quarter of 2024.

Net securities losses were $0 for the year ended December 31, 2024 as compared to net securities losses of $0 for 2023.

1 unchanged sentence

ATM and debit card fees totaled $3.1 million for the year ended December 31, 2024 and $3.2 million for 2023.

Net gains on the sale of loans were $12,000 for the year ended December 31, 2023 and $1.8 million for 2022.

Net gains on the sale of loans were $1.5 million for the year ended December 31, 2024 and $12,000 for 2023.

Other noninterest income totaled $3.6 million and $3.9 million for the years ended December 31, 2024 and 2023, respectively.

3 unchanged sentences

Salaries and benefits expense totaled $38.3 million for the year ended December 31, 2024 and $40.4 million for the year ended December 31, 2023.

The increase was primarily due to the increase in personnel expense from new hires.

Occupancy and equipment expense totaled $10.2 million for the year ended December 31, 2024 and $9.0 million for the year ended December 31, 2023.

Other noninterest expense totaled $28.6 million for the year ended December 31, 2024 and $30.2 million for 2023.

The largest increase in other noninterest expense was a $1.5 million increase in legal fees, which incluced a $0.6 million settlement payment to the SEC and legal fees related to the propesed merger with Lone Star Bank.

Regulatory assessments increased $1.1 million to $3.1 million in 2023, compared to $2.0 million in 2022.

The following table presents, for the years indicated, the major categories of other noninterest expense:

18 unchanged sentences

The provision for income taxes for the years ended December 31, 2024 and 2023 was $3.6 million and $2.7 million, respectively.

The provision for income taxes in 2023 decreased as compared to 2022 due to the decrease in income before income taxes.

The provision for income taxes in 2024 increased as compared to 2023 due to the increase in income before income taxes.

First Guaranty's statutory tax rate was 21.0% for the years ended December 31, 2024 and 2023.

17 unchanged sentences

Loans, net of unearned income $ 2,693,780 $ 2,748,708 $ 2,519,077 $ 2,159,359 $ 1,844,135

Allowance for loan and lease losses $ 30,926 $ 23,518 $ 24,029 $ 24,518 $ 10,929

Allowance for credit losses $ 34,811 $ 30,926 $ 23,518 $ 24,029 $ 24,518

Total assets $ 3,972,728 $ 3,552,772 $ 3,151,347 $ 2,878,120 $ 2,473,078

24 unchanged sentences

Net interest income $ 88,438 $ 84,705 $ 100,042 $ 89,618 $ 74,667

Provision for loan losses $ 3,714 $ 3,656 $ 2,055 $ 14,877 $ 4,860

Provision for credit losses $ 20,034 $ 3,714 $ 3,656 $ 2,055 $ 14,877

Noninterest income (excluding securities transactions) $ 24,739 $ 10,577 $ 11,026 $ 10,046 $ 8,989

18 unchanged sentences

Net charge-offs to average loans 0.64 % 0.17 % 0.18 % 0.13 % 0.08 %

Provision for loan and lease loss to average loans 0.14 % 0.16 % 0.10 % 0.89 % 0.37 %

Allowance for loan and lease loss to total loans 1.13 % 0.93 % 1.11 % 1.33 % 0.72 %

Provision for credit losses to average loans 0.72 % 0.14 % 0.16 % 0.10 % 0.89 %

Allowance for credit losses to total loans 1.29 % 1.13 % 0.93 % 1.11 % 1.33 %

(1) Tangible calculation eliminates goodwill and acquisition intangibles, principally core deposit intangibles, net of accumulated amortization, net of tax.

40 unchanged sentences

The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income.

Noninterest income in 2024 included the gain from the sale-leaseback transaction.

The following table reconciles, as of the dates set forth below, our efficiency ratio to the GAAP-based efficiency ratio:

23 unchanged sentences

Treasuries, U.S.

Government Agencies, mortgage-backed securities, municipal bonds and investment grade corporate bonds.

Government Agencies, collateralized mortgage obligations, mortgage-backed securities, municipal bonds and investment grade corporate bonds.

We believe these securities are readily marketable and enhance our liquidity.

We maintained a net borrowing capacity at the FHLB totaling $339.2 million and $259.6 million at December 31, 2024 and December 31, 2023, respectively with $135.0 million and $205.0 million in FHLB advances outstanding at December 31, 2024 and December 31, 2023, respectively.

The advances outstanding at December 31, 2023 were comprised of three long term advances totaling $155.0 million and two short-term advances that totaled $50.0 million.

The advances outstanding at December 31, 2024 were comprised of two long term advances totaling $135.0 million.

The change in borrowing capacity with the Federal Home Loan Bank was due to changes in the value that First Guaranty receives on pledged collateral and due to First Guaranty's usage of the line.

1 unchanged sentence

At December 31, 2024, we had outstanding letters of credit from the FHLB in the amount of $455.7 million that were primarily used to collateralize public funds deposits.

We also maintain federal funds lines of credit at various correspondent banks with borrowing capacity of $100.5 million and one revolving line of credit totaling $20.0 million secured by a pledge of the Bank's common stock, with a $10.0 million outstanding balance at December 31, 2023.

We also maintain federal funds lines of credit at various correspondent banks with borrowing capacity of $93.0 million at December 31, 2024.

We also have a discount window line with the Federal Reserve Bank that totaled $250.4 million at December 31, 2024.

4 unchanged sentences

Total shareholders' equity increased to $255.0 million at December 31, 2024 from $249.6 million at December 31, 2023.

The $19.0 million increase in surplus was due to common stock issued in private placements and common stock issued under the Equity Bonus Plan during 2023.

The $0.3 million increase in surplus was due to common stock issued under the Equity Bonus Plan during the first quarter of 2024.

The decrease in accumulated other comprehensive loss was primarily attributed to the decrease in unrealized losses on available for sale securities during the year ended December 31, 2024.

Capital Management

2 unchanged sentences

We evaluate a number of capital ratios, including Tier 1 capital to total adjusted assets (the leverage ratio) and Tier 1 capital to risk-weighted assets.

At December 31, 2023, First Guaranty Bank was classified as well-capitalized.

First Guaranty Bank's capital conservation buffer was 3.20% at December 31, 2023.

The following table presents First Guaranty Bank's capital ratios as of the indicated dates.

At December 31, 2024, First Guaranty and the Bank was classified as well-capitalized.

First Guaranty's capital conservation buffer was 3.04% at December 31, 2024.

The Bank's capital conservation buffer was 4.11% at December 31, 2024.

The following table presents First Guaranty and the Bank's capital ratios as of the indicated dates.

"Well Capitalized Minimums" At December 31, 2024 "Well Capitalized Minimums" At December 31, 2023

Tier 1 Leverage Ratio

Bank 5.00 % 7.82 % 5.00 % 8.94 %

Consolidated 5.00 % 6.42 % N/A N/A

Tier 1 Risk-based Capital Ratio

Bank 8.00 % 11.00 % 8.00 % 10.31 %

Consolidated 8.00 % 9.04 % N/A N/A

Total Risk-based Capital Ratio

Bank 10.00 % 12.11 % 10.00 % 11.20 %

Consolidated 10.00 % 11.73 % N/A N/A

Common Equity Tier One Capital

Bank 6.50 % 11.00 % 6.50 % 10.31 %

Consolidated 6.50 % 7.87 % N/A N/A

Off-balance sheet commitments

26 unchanged sentences

however, some guarantees extend for up to three years.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

The credit risk involved in issuing letters of

credit is essentially the same as that involved in extending loan facilities to customers.

Collateral requirements are the same as on-balance sheet instruments and commitments to extend credit.

2 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 7. Management’s Discussion and Analysis