First Guaranty Bancshares, Inc.

First Guaranty Bancshares, Inc. ("First Guaranty" or "First Guaranty Bancshares") operates as a financial holding company, with its wholly-owned subsidiary, First Guaranty Bank (the "Bank"), providing commercial banking services. The Bank operates through 30 banking facilities primarily located in the metropolitan/micropolitan statistical areas ("MSAs") of Hammond, Baton Rouge, Lafayette, Shreveport-Bossier City, and Alexandria, Louisiana; Dallas-Fort Worth-Arlington and Waco, Texas; Vanceburg, Kentucky; and Bridgeport, West Virginia ¹. The company's principal business involves attracting deposits from the general public and local municipalities and investing these funds, alongside generating funds from operations and borrowings, into lending and securities ¹.

The core business model of First Guaranty involves attracting deposits and then deploying these funds into a diverse loan portfolio and investment securities. Revenue is primarily generated from interest income on loans and securities, as well as noninterest income sources such as ATM and debit card fees and service charges ². The company serves a broad customer base including consumers, small businesses, and municipalities, offering various deposit accounts and a range of consumer and business services, including credit cards, mobile banking, merchant services, and remote deposit capture ¹. A significant portion of deposits comes from public funds, which are actively sought and managed through contractual terms and collateralization programs ³.

The company's lending activities are segmented into several major categories. Non-farm non-residential loans, secured by commercial real estate, constitute the largest portion of the loan portfolio at $0.9 billion ⁴, representing 45.7% of total loans at December 31, 2025 ⁵. These loans are diversified by borrower and industry, with a concentration in hotels, and are generally made at adjustable rates with three to five-year maturities and up to 20-year amortization ⁶. Commercial and industrial loans totaled $228.7 million ⁷, or 11.0% of the total loan portfolio ⁸, and include participation in government programs like the U.S. Small Business Administration ("SBA") and United States Department of Agriculture ("USDA") ⁹.

One-to-four-family residential real estate loans amounted to $428.8 million ¹⁰, or 20.7% of the total loan portfolio ¹¹, primarily secured by residential property in Louisiana and Texas, with terms up to 30 years ¹². Multifamily loans totaled $144.2 million ¹³, or 6.9% of the total loan portfolio ¹⁴. Construction and land development loans were $149.5 million ¹⁵, or 7.2% of the total loan portfolio ¹⁶, and are considered to involve a higher degree of risk ¹⁷. Agricultural loans, primarily in Southwest Louisiana, totaled $35.2 million ¹⁸, or 1.7% of the total loan portfolio ¹⁹, often guaranteed by the U.S. Farm Service Agency ²⁰. Farmland loans were $32.2 million ²¹, or 1.5% of the total loan portfolio ²². Commercial leases, which generally carry higher yields and shorter lives, totaled $75.6 million ²³, or 3.7% of the total loan portfolio ²⁴. Consumer and other loans, including secured and unsecured types, aggregated $33.0 million ²⁵, or 1.6% of the total loan portfolio ²⁶.

For the fiscal year ended December 31, 2025, First Guaranty reported a net loss of $(56.0) million ²⁷, a significant decrease from the net income of $12.4 million ²⁸ in 2024. Total assets increased by $105.6 million ²⁹, or 2.7% ³⁰, to $4.1 billion ³¹ at December 31, 2025, from $4.0 billion ³² at December 31, 2024. Total deposits increased by $156.6 million ³³, or 4.5% ³⁴, to $3.6 billion ³⁵ at December 31, 2025, from $3.5 billion ³⁶ at December 31, 2024. Total loans, net of unearned income, decreased by $624.0 million ³⁷, or 23.2% ³⁸, to $2.1 billion ³⁹ at December 31, 2025, from $2.7 billion ⁴⁰ at December 31, 2024. Shareholders' equity was $226.2 million ⁴¹ at December 31, 2025, down from $255.0 million ⁴² at December 31, 2024. Diluted earnings per common share was $(4.17) ⁴³ for 2025, compared to $0.81 ⁴⁴ for 2024. The net interest margin was 2.28% ⁴⁵ for 2025, a decrease from 2.47% ⁴⁶ in 2024. The allowance for credit losses was 1.97% of total loans ⁴⁷ at December 31, 2025, up from 1.29% ⁴⁸ at December 31, 2024.

The decrease in net income for 2025 was primarily driven by an increase of $61.7 million ⁴⁹ in the provision to the credit allowance and a $12.9 million goodwill impairment charge ⁵⁰. Net interest income decreased by $1.5 million ⁵¹ to $86.9 million ⁵² in 2025 from $88.4 million ⁵³ in 2024. The provision for credit losses totaled $81.7 million ⁵⁴ for 2025, a significant increase from $20.0 million ⁵⁵ in 2024, with $43.4 million ⁵⁶ of the 2025 provision associated with one commercial lease relationship ⁵⁷. Net charge-offs were $77.2 million ⁵⁸ for 2025, compared to $18.6 million ⁵⁹ for 2024. Noninterest income decreased by $16.3 million ⁶⁰ to $8.5 million ⁶¹ in 2025 from $24.7 million ⁶² in 2024, largely due to decreased gains on the sale of assets from a prior year sale-leaseback transaction ⁶³. Noninterest expense increased to $82.2 million ⁶⁴ in 2025 from $77.1 million ⁶⁵ in 2024, primarily due to the goodwill impairment charge ⁶⁶.

Significant operational developments during 2025 included a reduction in the loan portfolio by $624.0 million ³⁷ as part of a revised business strategy focusing on controlled asset growth and enhanced credit risk management ⁶⁷. The company reduced staffing by 21% ⁶⁸, from 399 full-time equivalent employees at the end of 2024 to 330 at the end of 2025 ⁶⁹. Furthermore, First Guaranty entered into an agreement on March 10, 2026, to sell its Texas operations, comprising five branches, approximately $270 million in deposits, and $110 million in loans, to Armstrong Bank ⁷⁰. The company also transferred $4.4 million ⁷¹ of existing bank-owned properties to other real estate owned, with plans to sell these properties ⁷².

First Guaranty's management has modified its business strategy in mid-2024, which continued through 2025, and is expected to persist in 2026. This revised strategy emphasizes controlled asset growth, measured expense reductions, expanded balance sheet risk management, and enhanced credit risk management ⁶⁷.

A major growth area involves a strategic exit from certain markets and a focus on others. As part of its revised business strategy, First Guaranty has entered into an agreement to sell its Texas operations in Dallas-Fort Worth-Arlington and Waco ⁷⁰. This transaction, expected to close on March 10, 2026, involves approximately $270 million in deposits and $110 million in loans ⁷⁰. Concurrently, the company aims to expand its market share along Louisiana's key interstate corridors, including I-12, I-55, I-10, I-49, and I-20, and strengthen relationships in Kentucky and West Virginia ⁷³. The company will continue to pursue residential mortgage lending, consumer lending, owner-occupied commercial real estate, commercial and industrial loans, and guaranteed lending, with a focus on smaller loan and lease originations to achieve greater diversification ⁷⁴.

Operationally, the company is focused on margin trajectory and cost structure evolution. First Guaranty reduced staffing by 21% ⁶⁸ from 399 full-time equivalent employees at the end of 2024 to 330 at the end of 2025 ⁶⁹, and implemented reductions in discretionary expenses such as travel, training, advertising, and director fees, while also modifying its health care plan ⁷⁵. The company is working to replace external third-party service providers with lower-cost alternatives or internal solutions and is evaluating internal functions for efficiency improvements and redundancy reduction ⁷⁶. The balance sheet risk management strategy involves increasing on-balance sheet liquidity to lower the loan-to-deposit ratio and improve sensitivity to interest rate changes, moving towards a more market-neutral position over time ⁷⁷. The deposit strategy will continue to focus on expanding individual and business deposit bases and maintaining the public funds deposit program, leveraging market share dominance in areas like the Hammond MSA where it held a 52.3% deposit market share at June 30, 2025 ⁷⁸.

Planned capital allocation includes continued efforts to increase risk-weighted capital ratios, primarily by reducing total loan balances, including commitments for construction loans ⁷⁹. The allowance for credit losses was 1.97% of total loans ⁴⁷ at December 31, 2025, and the company plans to continue its strategy of enhanced credit risk management in 2026 ⁷⁹.

Management has explicitly flagged economic uncertainty as a factor that may result in additional increases to the allowance for credit losses in future periods ⁸⁰. The company's business is concentrated in Louisiana, Texas, Kentucky, and West Virginia, making it susceptible to adverse events or economic downturns in these markets ⁸¹. Material fluctuations in oil and gas prices could also adversely affect the business, as approximately $69.2 million ⁸², or 3.3% ⁸³, of the total loan portfolio at December 31, 2025, was comprised of loans to businesses in support or service activities for oil and gas operations ⁸⁴. The company also has a concentration in commercial real estate lending, with total reported loans secured by multifamily and non-owner occupied, non-farm, non-residential properties, and construction, land acquisition and development loans representing 302% of total bank capital at December 31, 2025 ⁸⁵, which subjects it to additional regulatory scrutiny ⁸⁶.

First Guaranty faces several material risks, including an increase in nonperforming assets, which stood at $95.5 million ⁸⁷, or 2.34% of total assets ⁸⁸, at December 31, 2025. This level is significantly above historical levels and that of many peers, adversely affecting net income through reduced interest income, increased provision for credit losses, and higher noninterest expenses related to problem asset resolution ⁸⁹. The company's business is concentrated in Louisiana, Texas, Kentucky, and West Virginia, with approximately 88.4% of secured loans backed by real estate and other collateral in these market areas at December 31, 2025 ⁹⁰, exposing it to risks from regional economic downturns or adverse changes in local laws and regulations ⁹¹. A significant portion of the loan portfolio, 82.0% ⁹² at December 31, 2025, is secured by real estate, making the company vulnerable to downturns in the local or national real estate market ⁹³. Furthermore, the company has concentrations in certain industries and borrowing relationships, with its twenty largest borrower relationships representing approximately 29.6% of the Bank's loan portfolio at December 31, 2025 ⁹⁴. Interest rate shifts pose a significant market risk, as the company's earnings and cash flows are highly dependent on net interest income, and rapid changes in interest rates, as experienced in 2022 and 2023, can reduce net interest income and increase unrealized losses in the investment securities portfolio, which were approximately $55.8 million ⁹⁵ as of December 31, 2025 ⁹⁶. A lack of liquidity, particularly if public funds deposits decrease, could adversely affect operations, as public funds deposits totaled $0.9 billion ⁹⁷, or 25.5% of total deposits ⁹⁸, at December 31, 2025 ⁹⁹. The company's strategy of pursuing acquisitions exposes it to financial, execution, and operational risks, including the challenge of finding suitable candidates and integrating acquired businesses ¹⁰⁰. Operational and technological infrastructure risks, including those related to artificial intelligence, could impair liquidity, disrupt businesses, and lead to financial losses ¹⁰¹. The company is also subject to extensive federal and state banking regulations, and failure to comply could lead to material penalties ¹⁰².

Management's message to shareholders conveys a clear strategic shift and a commitment to strengthening the company's financial position. The overall tone emphasizes proactive risk management, efficiency, and a focused approach to market presence. Management explicitly states that the revised business strategy, initiated in mid-2024 and continuing through 2025 and into 2026, focuses on controlled asset growth, measured expense reductions, expanded balance sheet risk management, and enhanced credit risk management ⁶⁷. A key strategic priority is the exit from the Dallas-Fort Worth-Arlington and Waco, Texas markets, with an agreement to sell these operations, including approximately $270 million in deposits and $110 million in loans ⁷⁰. Another priority is to reduce exposure to commercial real estate loans, particularly construction loans and non-owner-occupied loans, while pursuing residential mortgage lending, consumer lending, owner-occupied commercial real estate, commercial and industrial loans, and guaranteed lending ⁷⁴. Management also highlights cost reduction measures, including a 21% reduction in staffing from 399 full-time equivalent employees at the end of 2024 to 330 at the end of 2025 ⁶⁹, and efforts to replace external service providers with lower-cost alternatives ⁷⁶.