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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2020

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

For the transition period from __________ to __________

Commission File Number: 001-37621

fgbi-20200630_g1.jpg

FIRST GUARANTY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
 
Louisiana26-0513559
(State or other jurisdiction incorporation or organization)(I.R.S. Employer Identification Number)
  
400 East Thomas Street 
Hammond,Louisiana70401
(Address of principal executive offices)(Zip Code)
  
(985)345-7685
(Registrant's telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 par valueFGBIThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes  ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filers," "accelerated filers," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐     Accelerated filer  ☒   Non-accelerated filer ☐
Smaller reporting company
Emerging growth company





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No ☒

As of August 7, 2020 the registrant had 9,741,253 shares of $1 par value common stock outstanding.




Table of Contents

  Page
 4
   
   
 
   
 
   
 
 
   
 
   
 
   
   
   
   
   
   
   
  

-3-


PART I. FINANCIAL INFORMATION
Item 1.  Consolidated Financial Statements
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (unaudited) 

(in thousands, except share data)June 30, 2020December 31, 2019
Assets  
Cash and cash equivalents:  
Cash and due from banks$236,365  $66,511  
Federal funds sold778  914  
Cash and cash equivalents237,143  67,425  
Investment securities:  
Available for sale, at fair value450,538  339,937  
Held to maturity, at cost (estimated fair value of $0 and $86,817 respectively)
  86,579  
Investment securities450,538  426,516  
Federal Home Loan Bank stock, at cost3,336  3,308  
Loans held for sale280    
Loans, net of unearned income1,640,723  1,525,490  
Less: allowance for loan losses14,017  10,929  
Net loans1,626,706  1,514,561  
Premises and equipment, net58,680  56,464  
Goodwill13,072  12,942  
Intangible assets, net6,934  7,166  
Other real estate, net4,194  4,879  
Accrued interest receivable16,339  8,412  
Other assets19,403  15,543  
Total Assets$2,436,625  $2,117,216  
Liabilities and Shareholders' Equity  
Deposits:  
Noninterest-bearing demand$434,306  $325,888  
Interest-bearing demand722,301  635,942  
Savings169,862  135,156  
Time794,529  756,027  
Total deposits2,120,998  1,853,013  
Short-term advances from Federal Home Loan Bank50,000  13,079  
Repurchase agreements6,569  6,840  
Accrued interest payable5,377  6,047  
Long-term advances from Federal Home Loan Bank3,443  3,533  
Senior long-term debt45,470  48,558  
Junior subordinated debentures14,757  14,737  
Other liabilities10,085  5,374  
Total Liabilities2,256,699  1,951,181  
Shareholders' Equity  
Common stock:  
$1 par value - authorized 100,600,000 shares; issued 9,741,253 shares
9,741  9,741  
Surplus110,836  110,836  
Retained earnings49,175  43,283  
Accumulated other comprehensive income10,174  2,175  
Total Shareholders' Equity179,926  166,035  
Total Liabilities and Shareholders' Equity$2,436,625  $2,117,216  
See Notes to Consolidated Financial Statements
-4-


FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited) 

 Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except share data)2020201920202019
Interest Income:    
Loans (including fees)$22,441  $19,920  $44,901  $38,402  
Deposits with other banks62  953  297  1,589  
Securities (including FHLB stock)2,814  2,565  5,557  5,422  
Federal funds sold  1    1  
Total Interest Income25,317  23,439  50,755  45,414  
Interest Expense:    
Demand deposits1,243  2,831  3,354  5,642  
Savings deposits32  142  148  280  
Time deposits4,439  4,356  8,998  8,363  
Borrowings763  408  1,492  834  
Total Interest Expense6,477  7,737  13,992  15,119  
Net Interest Income18,840  15,702  36,763  30,295  
Less: Provision for loan losses1,836  1,634  3,081  2,421  
Net Interest Income after Provision for Loan Losses17,004  14,068  33,682  27,874  
Noninterest Income:    
Service charges, commissions and fees471  613  1,200  1,221  
ATM and debit card fees806  579  1,415  1,107  
Net gains (losses) on securities1,351  (14) 1,843  (416) 
Net gains on sale of loans278  53  295  64  
Other420  415  999  971  
Total Noninterest Income3,326  1,646  5,752  2,947  
Noninterest Expense:    
Salaries and employee benefits7,536  6,146  14,935  12,108  
Occupancy and equipment expense1,865  1,530  3,694  3,015  
Other4,397  3,986  9,464  7,707  
Total Noninterest Expense13,798  11,662  28,093  22,830  
Income Before Income Taxes6,532  4,052  11,341  7,991  
Less: Provision for income taxes1,348  839  2,332  1,646  
Net Income$5,184  $3,213  $9,009  $6,345  
Per Common Share: (1)
    
Earnings$0.53  $0.33  $0.92  $0.65  
Cash dividends paid$0.16  $0.15  $0.32  $0.29  
Weighted Average Common Shares Outstanding9,741,253  9,687,123  9,741,253  9,687,123  
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 16, 2019 to shareholders of record as of December 9, 2019.
-5-


FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

 Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2020201920202019
Net Income$5,184  $3,213  $9,009  $6,345  
Other comprehensive income:    
Unrealized gains on securities:    
Unrealized holding gains arising during the period10,511  3,470  11,930  10,125  
Reclassification adjustments for (gains) losses included in net income(1,355) 14  (1,855) 416  
Reclassification of OTTI losses included in net income50    50    
Change in unrealized gains on securities9,206  3,484  10,125  10,541  
Tax impact(1,933) (732) (2,126) (2,214) 
Other comprehensive income7,273  2,752  7,999  8,327  
Comprehensive Income$12,457  $5,965  $17,008  $14,672  
 See Notes to Consolidated Financial Statements
-6-


FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) 

 
Common Stock
$1 Par
SurplusRetained
Earnings
Accumulated
Other Comprehensive
Income/(Loss)
Total
(in thousands, except per share data)
     
Balance December 31, 2018 (1)
$9,687  $109,788  $34,947  $(7,138) $147,284  
Net income—  —  6,345  —  6,345  
Other comprehensive income—  —  —  8,327  8,327  
Cash dividends on common stock ($0.29 per share)(1)
—  —  (2,818) —  (2,818) 
Balance June 30, 2019 (unaudited)$9,687  $109,788  $38,474  $1,189  $159,138  
Balance December 31, 2019$9,741  $110,836  $43,283  $2,175  $166,035  
Net income—  —  9,009  —  9,009  
Other comprehensive income—  —  —  7,999  7,999  
Cash dividends on common stock ($0.32 per share)
—  —  (3,117) —  (3,117) 
Balance June 30, 2020 (unaudited)$9,741  $110,836  $49,175  $10,174  $179,926  
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 16, 2019 to shareholders of record as of December 9, 2019.

-7-


FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) 

 Six Months Ended June 30,
(in thousands)20202019
Cash Flows From Operating Activities  
Net income$9,009  $6,345  
Adjustments to reconcile net income to net cash provided by operating activities:  
Provision for loan losses3,081  2,421  
Depreciation and amortization1,755  1,544  
Amortization/Accretion of investments1,373  589  
(Gain) loss on sale/call of securities(1,843) 416  
Other Than Temporary Impairment Charge on Securities50    
(Gain) loss on sale of assets(287) 2  
Repossessed asset write downs, gains and losses on dispositions125  106  
FHLB stock dividends(28) (29) 
Net (increase) decrease in loans held for sale(280) 344  
Change in other assets and liabilities, net(5,185) 1,871  
Net Cash Provided By Operating Activities7,770  13,609  
Cash Flows From Investing Activities  
Proceeds from maturities, calls and sales of HTM securities34,022  4,885  
Proceeds from maturities, calls and sales of AFS securities257,620  117,174  
Funds Invested in AFS securities(305,119) (46,177) 
Net increase in loans(120,281) (81,536) 
Purchase of premises and equipment(3,564) (4,790) 
Proceeds from sales of premises and equipment27  5  
Proceeds from sales of other real estate owned879    
Net Cash Used In Investing Activities(136,416) (10,439) 
Cash Flows From Financing Activities  
Net increase in deposits267,989  43,321  
Net increase in federal funds purchased and short-term borrowings36,650    
Repayment of long-term borrowings(3,158) (1,471) 
Dividends paid(3,117) (2,818) 
Net Cash Provided By Financing Activities298,364  39,032  
Net Increase In Cash and Cash Equivalents169,718  42,202  
Cash and Cash Equivalents at the Beginning of the Period67,425  127,965  
Cash and Cash Equivalents at the End of the Period$237,143  $170,167  
Noncash Activities:  
Acquisition of real estate in settlement of loans$319  $2,704  
Transfer of securities from HTM to AFS$52,553  $  
Cash Paid During The Period:  
Interest on deposits and borrowed funds$14,662  $14,471  
Federal income taxes$  $2,023  
State income taxes$  $  
 
See Notes to the Consolidated Financial Statements.
-8-


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation
 
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. The consolidated financial statements and the footnotes of First Guaranty Bancshares, Inc. ("First Guaranty") thereto should be read in conjunction with the audited consolidated financial statements and note disclosures for First Guaranty previously filed with the Securities and Exchange Commission in First Guaranty's Annual Report on Form 10-K for the year ended December 31, 2019.
 
The consolidated financial statements include the accounts of First Guaranty Bancshares, Inc. and its wholly owned subsidiary First Guaranty Bank (the "Bank"). All significant intercompany balances and transactions have been eliminated in consolidation.
 
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the consolidated financial statements. Those adjustments are of a normal recurring nature. The results of operations at June 30, 2020 and for the three and six month periods ended June 30, 2020 and 2019 are not necessarily indicative of the results expected for the full year or any other interim period. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. 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.
-9-


Note 2. Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments- Credit Losses: Measurement of Credit Losses on Financial Instruments". This ASU amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. The ASU amendments require the measurement of all expected credit losses for financial assets held at the reporting date be based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU requires assets held at cost basis to reflect the company's current estimate of all expected credit losses. For available for sale debt securities, credit losses should be presented as an allowance rather than as a write-down. In addition, this ASU amends the accounting for purchased financial assets with credit deterioration. On October 16, 2019, the FASB approved an effective date delay applicable to smaller reporting companies until fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. First Guaranty is a smaller reporting company and has delayed the adoption of ASU 2016-13.




-10-


Note 3. Merger Transaction

Effective at the close of business on November 7, 2019, First Guaranty completed its acquisition of 100% of the outstanding shares of Union Bancshares, Incorporated, a Louisiana corporation ("Union"), a single bank holding company headquartered in Marksville, Louisiana and its wholly owned subsidiary, Union Bank for $43.4 million in cash. This acquisition allowed First Guaranty to expand its presence into the Central Louisiana market area. The purchase price resulted in approximately $9.6 million in goodwill and $4.2 million in core deposit intangible, none of which is deductible for tax purposes.

First Guaranty accounts for business combinations under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, for each transaction, the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of the acquisition. In conjunction with the adoption of ASU 2015-16, upon receipt of final fair value estimates during the measurement period, which must be within one year of the acquisition date, First Guaranty records any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. First Guaranty is continuing to finalize the purchase price allocations related to the Union acquisition. Based on management's preliminary valuation of tangible and intangible assets acquired and liabilities assumed, the purchase price for the Union acquisition is allocated in the table below. These allocations are subject to change.

(in thousands)Union Bancshares, Incorporated
Cash and due from banks$20,058  
Securities available for sale38,813  
Loans 184,025  
Premises and equipment7,223  
Goodwill 9,599  
Intangible assets4,213  
Other real estate1,595  
Other assets9,486  
      Total assets acquired
$275,012  
Deposits204,979  
FHLB borrowings16,617  
Repurchase agreements6,863  
Other liabilities3,170  
      Total liabilities assumed$231,629  
        Net assets acquired$43,383  



-11-


Note 4. Securities
 
A summary comparison of securities by type at June 30, 2020 and December 31, 2019 is shown below. 

 June 30, 2020December 31, 2019
(in thousands)Amortized CostGross
Unrealized Gains
Gross
Unrealized Losses
Fair ValueAmortized CostGross Unrealized GainsGross
Unrealized Losses
Fair Value
Available for sale:        
U.S. Treasuries$47,700  $  $  $47,700  $  $  $  $  
U.S. Government Agencies45      45  16,380  15  (2) 16,393  
Corporate debt securities196,750  8,131  (1,685) 203,196  94,561  1,110  (302) 95,369  
Municipal bonds31,762  1,860    33,622  30,297  1,870  (14) 32,153  
Collateralized mortgage obligations6,508  146  (7) 6,647  16,400  40  (43) 16,397  
Mortgage-backed securities154,896  4,435  (3) 159,328  179,546  317  (238) 179,625  
Total available for sale securities$437,661  $14,572  $(1,695) $450,538  $337,184  $3,352  $(599) $339,937  
Held to maturity:        
U.S. Government Agencies$  $  $  $  $18,175  $  $(32) $18,143  
Municipal bonds        5,107  182    5,289  
Mortgage-backed securities        63,297  200  (112) 63,385  
Total held to maturity securities$  $  $  $  $