Financial Position - As of December 31, 2023, First Guaranty Bancshares had consolidated total assets of $3.6 billion, total deposits of $3.0 billion, and total shareholders' equity of $249.6 million[18]. - Total deposits held by the company were $3.0 billion as of December 31, 2023[73]. - Public funds deposits amounted to $1.2 billion, primarily from local government entities[74]. - As of December 31, 2023, First Guaranty Bank exceeded all regulatory capital requirements and was considered well-capitalized based on FDIC guidelines[100]. - The community bank leverage ratio was temporarily lowered to 8% effective for the second quarter of 2020, transitioning back to 9% in the first quarter of 2022[99]. - Federal regulations require a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, and a total capital to risk-based assets of 8%[92]. - The maximum amount of deposit insurance for banks is $250,000 per depositor[111]. - First Guaranty Bank's ability to pay dividends is subject to restrictions under Louisiana law, requiring unimpaired surplus equal to 50% of outstanding capital stock[91]. - The bank's compliance with capital requirements is assessed not only on numeric factors but also on qualitative factors, allowing for higher capital requirements if deemed necessary[96]. - As of December 31, 2023, First Guaranty had an aggregate of $54.1 million of senior and subordinated indebtedness outstanding, which ranks senior to common and preferred stock[206]. Loan Portfolio - The loan to deposit ratio was 91.3% as of December 31, 2023, indicating a strong focus on increasing total loans as a percentage of assets[36]. - Non-farm non-residential loans totaled $1.0 billion, representing 37.9% of the total loan portfolio as of December 31, 2023[49]. - Commercial and industrial loans amounted to $335.0 million, or 12.1% of the total loan portfolio at December 31, 2023[52]. - One- to four-family residential real estate loans reached $444.9 million, accounting for 16.1% of the total loan portfolio as of December 31, 2023[55]. - Construction and land development loans comprised $399.4 million, or 14.5% of the total loan portfolio at December 31, 2023[61]. - Agricultural loans totaled $41.0 million, representing 1.5% of the total loan portfolio as of December 31, 2023[63]. - Farmland loans amounted to $32.5 million, or 1.2% of the total loan portfolio as of December 31, 2023[65]. - Commercial leases reached $285.4 million, accounting for 10.4% of the total loan portfolio as of December 31, 2023[66]. - Consumer and other loans totaled $54.5 million, or 2.0% of the total loan portfolio as of December 31, 2023[67]. - The company’s commercial term loans totaled $130.7 million, representing 39.0% of total commercial and industrial loans at December 31, 2023[52]. - As of December 31, 2023, approximately 78.8% of the secured loans in First Guaranty Bank's loan portfolio were secured by real estate and other collateral located in its market area[132]. - At December 31, 2023, First Guaranty Bank had $77.3 million, or 2.8% of its total loan portfolio, comprised of loans to businesses engaged in support or service activities for oil and gas operations[133]. - First Guaranty Bank had $55.0 million in unfunded loan commitments related to businesses in the oil and gas sector as of December 31, 2023[133]. - The allowance for credit losses is 1.13% of total loans and 76.41% of total non-performing loans, indicating potential future credit deterioration risks[144]. Growth Strategy - First Guaranty has expanded its geographic footprint through four acquisitions, enhancing stable deposits and funding for its lending business[21]. - The company opened a new branch in Vanceburg, Kentucky in January 2023, furthering its expansion into the Mideast markets[36]. - First Guaranty plans to grow its loan portfolio by targeting small and medium-sized businesses in sectors such as manufacturing, agriculture, and healthcare[37]. - The company aims for acquisitions that will be accretive to earnings and strengthen its franchise, targeting a tangible book value earn back of approximately three years[45]. - The company intends to pursue acquisitions as part of its growth strategy, which involves risks such as finding suitable candidates and maintaining asset quality[161]. - The competitive landscape for acquisition targets is challenging, potentially hindering the company's growth strategy if suitable candidates are not found[162]. Digital Services and Technology - First Guaranty continues to enhance its digital services, including an improved online banking system and mobile app, to better serve its customers[16]. - The company utilizes the nCino platform to enhance loan process management and expand digital banking services through strategic partnerships[46]. Regulatory Environment - First Guaranty Bank is subject to concentrated commercial real estate lending regulations, which require heightened risk management practices if certain concentration thresholds are met[102]. - The CARES Act provided over $2 trillion to combat COVID-19, including provisions relevant to financial institutions[91]. - The Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 eased regulations for banks with less than $10 billion in assets, including exemptions from certain requirements[90]. - The FDIC finalized a rule establishing a community bank leverage ratio at 9% for institutions under $10 billion in assets, effective January 1, 2020[99]. - First Guaranty Bank is required to maintain specified ratios of capital to risk-weighted assets once it is no longer classified as a "small bank holding company" after March 31, 2024[124]. - The company is subject to extensive regulation, and any changes in laws or regulations could materially affect its financial condition and operations[182]. Legal Matters - First Guaranty settled a lawsuit in Q1 2023 for $0.6 million related to overpayment on a loan[213]. - The bank is currently involved in a lawsuit with a possible loss range of $0.0 million to $1.5 million, which it intends to vigorously defend[213]. - No accrued liability has been recorded for the ongoing lawsuit, which is still in early stages[213]. - A receivable of $0.9 million has been recorded for recovery from a claim against First Guaranty's insurer[213]. - First Guaranty believes that current legal proceedings will not have a material adverse effect on its consolidated results of operations[213]. - Management acknowledges that unfavorable outcomes in legal claims could materially affect the company during the resolution period[213]. - Legal matters are costly and may divert management's attention, potentially harming the company's reputation[213]. Income and Profitability - For the year ended December 31, 2023, net interest income totaled $84.7 million, significantly higher than the total noninterest income of $10.6 million, indicating a strong dependence on net interest income for earnings[164]. - Service charges, commissions, and fees contributed $3.4 million, or 32.2% of total noninterest income for the year ended December 31, 2023, up from $3.2 million, or 28.7% in the previous year[165]. - The company may face increased FDIC deposit insurance assessments due to special assessments imposed in 2023, which could reduce profitability[187]. Risk Factors - The company faces risks related to interest rates, as significant increases in rates during 2022 and 2023 could reduce loan demand and increase delinquencies[154]. - Liquidity is critical, with the company relying heavily on deposits; a decrease in deposit balances could adversely affect liquidity and increase funding costs[156]. - Operational risks are present, including potential failures in technology systems that could disrupt business and impair liquidity[169]. - Changes in accounting standards could materially affect how the company reports its financial condition and results of operations, posing additional risks[173]. - The company operates in a market area susceptible to hurricanes and adverse weather conditions, which could disrupt operations and increase loan losses[180]. - The rapid rise in interest rates during 2022 has led to a reduction in the fair value of securities portfolios, contributing to current market volatility[186]. Shareholder Matters - The principal shareholders own approximately 44% of the outstanding common stock as of December 31, 2023, which may lead to voting outcomes not aligned with other shareholders[194]. - The ability to declare and pay dividends is limited and subject to regulatory guidance and restrictions[195]. - Future dividends will depend on capital levels and liquidity, with the board of directors having discretion over declarations[196]. - Federal regulations require capital levels to exceed certain thresholds before dividends can be paid, particularly under Basel III guidelines[197]. - The Series A Preferred Stock dividends are non-cumulative and discretionary, meaning undeclared dividends do not accrue[202]. - The Series A Preferred Stock ranks junior to all existing and future indebtedness, impacting the payment of dividends[199]. - The Series A Preferred Stock holders have limited voting rights unless dividends are in arrears for six quarterly periods[204].
FIRST GTY BANCSH(FGBIP) - 2023 Q4 - Annual Report