FGBI

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How FGBI rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Item 1A Risk Factors for additional risks relating to our ability to pay dividends.
Additionally, under the Louisiana Business Corporation Act, First Guaranty Bancshares, Inc. is prohibited from paying any cash dividends to shareholders if, after the payment of such dividend First Guaranty Bancshares would not be able to pay its debts as they became due in the usual course of business or its total assets would be less than its total liabilities or where net assets are less than the liquidation value of shares that have a preferential right to participate in First Guaranty Bancshares, Inc.'s assets in the event First Guaranty Bancshares, Inc. were to be liquidated.
First Guaranty Bancshares, Inc. did not repurchase any of its shares of common stock during 2025.
Item 6 - [Reserved] -39- Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.
A discussion regarding significant changes in our financial condition from December 31, 2023 to December 31, 2024 and our results of operations for the year ended December 31, 2023 can be found under "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 17, 2025, which is available on the SEC's website at www.sec.gov and First Guaranty's website, www.fgb.net This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may prove to be inaccurate.
Certain risks, uncertainties and other factors, including those set forth under "Forward-Looking Statements," "Risk Factors" and elsewhere in this Annual Report on Form 10-K, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis.
We assume no obligation to update any of these forward-looking statements.
Overview First Guaranty Bancshares is a Louisiana corporation and a financial holding company headquartered in Hammond, Louisiana.
Our wholly-owned subsidiary, First Guaranty Bank, a Louisiana-chartered commercial bank, provides personalized commercial banking services primarily to Louisiana and Texas customers through 30 banking facilities primarily located in the MSAs of Hammond, Baton Rouge, Lafayette, Shreveport-Bossier City, and Alexandria, Louisiana and Dallas-Fort Worth-Arlington, Waco, Texas and Mideast markets in Kentucky and West Virginia.
We emphasize personal relationships and localized decision making to ensure that products and services are matched to customer needs.
We compete for business principally on the basis of personal service to customers, customer access to officers and directors and competitive interest rates and fees.
Total assets were $4.1 billion at December 31, 2025 and $4.0 billion at December 31, 2024.
Total deposits were $3.6 billion at December 31, 2025 and $3.5 billion at December 31, 2024.
Total loans were $2.1 billion at December 31, 2025, a decrease of $624.0 million, or 23.2%, compared with $2.7 billion at December 31, 2024.
Total shareholders' equity was $226.2 million and $255.0 million at December 31, 2025 and December 31, 2024, respectively.
Net (loss) income was $(56.0) million and $12.4 million for the years ended December 31, 2025 and 2024, respectively.
We generate most of our revenues from interest income on loans, interest income on securities, sales of securities, ATM and debit card fees and service charges, commissions and fees.
We incur interest expense on deposits and other borrowed funds and noninterest expense such as salaries and employee benefits and occupancy and equipment expenses.
Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowings which are used to fund those assets.
Net interest income is our largest source of revenue.
To evaluate net interest income, we measure and monitor: (1) yields on our loans and other interest-earning assets; (2) the costs of our deposits and other funding sources; (3) our net interest spread and (4) our net interest margin.
Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities.
Net interest margin is calculated as net interest income divided by average interest-earning assets.
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 the result of a decrease in net interest income of $1.5 million, an increase of $61.7 million in the provision to the credit allowance, a decrease in noninterest income of $16.3 million, and an increase in noninterest expense of $5.1 million, which was attributable to a goodwill impairment charge of $12.9 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.
Fluctuations in market interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international conditions, conditions in domestic and foreign financial markets.
Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in Louisiana, Texas and our other out-of-state market areas.
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. -40- Financial highlights for the fourth quarter and years ended December 31, 2025 and 2024: • Net (loss) income for each of the years ended December 31, 2025 and 2024 was $(56.0) million and $12.4 million, respectively, a decrease of $68.5 million.
The loss in 2025 was primarily driven by the provision for credit losses and a $12.9 million goodwill impairment charge. • Total assets increased $105.6 million, or 2.7%, to $4.1 billion at December 31, 2025 when compared with December 31, 2024.
Total loans at December 31, 2025 were $2.1 billion, a decrease of $624.0 million, or 23.2%, compared with December 31, 2024.
Total deposits were $3.6 billion at December 31, 2025, an increase of $156.6 million, or 4.5% compared with December 31, 2024.
Retained earnings were $14.1 million at December 31, 2025, a decrease of $58.9 million compared to $73.0 million at December 31, 2024.
Shareholders' equity was $226.2 million and $255.0 million at December 31, 2025 and December 31, 2024, respectively. • (Loss) earnings per common share were $(4.17) for the year ended December 31, 2025 and $0.81 for the year ended December 31, 2024.
Total weighted average common shares outstanding were 13,985,460 and 12,501,035 at December 31, 2025 and December 31, 2024, respectively. • The allowance for credit losses was 1.97% of total loans at December 31, 2025 compared to 1.29% at December 31, 2024. • Net interest income for 2025 was $86.9 million compared to $88.4 million for 2024. • The provision for credit losses totaled $81.7 million for 2025 and $20.0 million in 2024. • Charge-offs were $77.2 million for 2025 and $18.6 million for the same period in 2024.
Recoveries totaled $0.9 million for 2025 and 2024. • Net gains on the sale of loans for the year ended December 31, 2025 was $0 compared to $1.5 million for the year ended December 31, 2024. • Noninterest expense totaled $82.2 million for the year ended December 31, 2025 (including $12.9 million of goodwill impairment) compared to $77.1 million for the year ended December 31, 2024. • First Guaranty had $35.1 million of other real estate owned as of December 31, 2025 compared to $0.3 million at December 31, 2024.
The largest component of OREO consists of a $23.3 million property that was foreclosed upon in the fourth quarter of 2025.
As part of the foreclosure, the bank purchased the first mortgage from a senior lender, which resulted in a net book balance of $23.3 million.
First Guaranty subsequently sold a $7.0 million OREO property in January 2026. • The net interest margin was 2.28% for 2025 and 2.47% for 2024.

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Item 1A. – Risk Factors An investment in shares of our common stock involves substantial risks.
You should carefully consider, among other matters, the factors set forth below as well as the other information included in this Annual Report on Form 10-K.
If any of the risks described herein develop into actual events, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected, the market price of our common stock could decline and you may lose all or part of your investment.
Risks Related to Our Lending We have recently experienced an increase in nonperforming assets.
At December 31, 2024, our non-performing assets, which consist of non-performing loans and other real estate owned, were $120.4 million, or 3.03% of total assets, an increase of 188.4% from December 31, 2023.
Our non-performing assets adversely affect our net income in various ways: • we record interest income only on the cash basis or cost-recovery method for nonaccrual loans and we do not record interest income for other real estate owned; • we must provide for probable loan losses through a current period charge to the provision for credit losses; • noninterest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; • there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and • the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
Our efforts to resolve our existing and future non-performing assets may not be successful, and we may not be able to realize the current carrying value of such assets.
If additional borrowers become delinquent and do not pay their loans and we are unable to successfully manage our non-performing assets, our losses and troubled assets could increase significantly, which could have a material adverse effect on our financial condition and results of operations.
Adverse events in Louisiana and Texas, where our business is concentrated, along with our new Mideast markets in Kentucky and West Virginia could adversely affect our results of operations and future growth.
Our business, the location of our branches and the real estate used as collateral on our real estate loans are primarily concentrated in Louisiana and North Central Texas.
Additionally, we anticipate continued future loan growth in our Mideast markets located in Kentucky and West Virginia.
At December 31, 2024, approximately 86.3% of the secured loans in our loan portfolio were secured by real estate and other collateral located in our market areas.
As a result, we are exposed to risks associated with a lack of geographic diversification.
The occurrence of an economic downturn in our markets, or adverse changes in laws or regulations in these markets could impact the credit quality of our assets, the businesses of our customers and our ability to expand our business.
Our success significantly depends upon the growth in population, income levels, deposits and housing in our market area.
If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may be negatively affected.
Material fluctuations in the price of oil and gas could adversely affect our business.
At December 31, 2024, approximately $79.9 million, or 3.0% of our total loan portfolio was comprised of loans to businesses engaged in support or service activities for oil and gas operations.
At December 31, 2024 we had $46.9 million in unfunded loan commitments related to these businesses.
In addition, the market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions.
Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio.
In addition, substantially all of our loans are to individuals and businesses in Louisiana and North Central Texas.
Our business customers may not have customer bases that are as diverse as businesses serving regional or national markets.
Consequently, any decline in the economy of our market area could have an adverse impact on our revenues and financial condition.
In particular, we may experience increased loan delinquencies, which could result in a higher provision for credit losses and increased charge-offs.
Any sustained period of increased non-payment, delinquencies, foreclosures or losses caused by adverse market or economic conditions in our market area could adversely affect the value of our assets, revenues, results of operations and financial condition.
We have a significant number of loans secured by real estate, and a downturn in the local or national real estate market could negatively impact our profitability.
At December 31, 2024, approximately 79.2% of our total loan portfolio was secured by real estate, most of which is located in Louisiana and North Central Texas.
Future declines in the real estate values in our Louisiana and North Central Texas markets could significantly impair the value of the particular collateral securing our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower's obligations to us.
First Guaranty may participate in or purchase real estate loans located outside of our traditional markets which may be affected by national or other localized market trends.
This could require increasing our allowance for credit losses to address the decrease in the value of the real estate securing our loans which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. -20- Our loan portfolio consists of a high percentage of loans secured by non-farm non-residential real estate.
These loans carry a greater credit risk than loans secured by one- to four-family properties.
Our loan portfolio includes non-farm non-residential real estate loans, primarily loans secured by commercial real estate such as office buildings, hotels and retail facilities.
At December 31, 2024, our non-farm non-residential loans totaled $1.2 billion, or 42.9% of our total loan portfolio.
Commercial real estate values have decreased in recent quarters in response to higher interest rates and a number of other factors; in response, bank regulators have been increasing scrutiny on banks’ exposure to commercial real estate.
Our non-farm non-residential real estate loans expose us to greater risk of nonpayment and loss than one- to four-family family residential mortgage loans because repayment of the loans often depends on the successful operation and income stream of the borrowers.
If we foreclose on these loans, our holding period for the collateral typically is longer than for a one- to four-family residential property because there are fewer potential purchasers of the collateral.
In addition, non-farm non-residential real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one- to four-family residential loans.
Accordingly, charge-offs on non-farm non-residential loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
An unexpected adverse development on one or more of these types of loans can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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