NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Business and Summary of Significant Accounting Policies
Business
First Guaranty Bancshares, Inc. ("First Guaranty") is a Louisiana corporation headquartered in Hammond, LA. First Guaranty owns all of the outstanding shares of common stock of First Guaranty Bank. First Guaranty Bank (the "Bank") is a Louisiana state-chartered commercial bank that provides a diversified range of financial services to consumers and businesses in the communities in which it operates. These services include consumer and commercial lending, mortgage loan origination, the issuance of credit cards and retail banking services. The Bank also maintains an investment portfolio comprised of government, government agency, corporate, and municipal securities. The Bank has thirty-four banking offices, including one drive-up banking facility, and forty-six automated teller machines (ATMs) in Southeast Louisiana, Southwest Louisiana, Central Louisiana, North Louisiana and North Central Texas.
Summary of significant accounting policies
The accounting and reporting policies of First Guaranty conform to generally accepted accounting principles and to predominant accounting practices within the banking industry. The more significant accounting and reporting policies are as follows:
Consolidation
The consolidated financial statements include the accounts of First Guaranty Bancshares, Inc., and its wholly owned subsidiary, First Guaranty Bank. All significant intercompany balances and transactions have been eliminated in consolidation.
Acquisition Accounting
Acquisitions are accounted for under the purchase method of accounting. Purchased assets, including identifiable intangibles, and assumed liabilities are recorded at their respective acquisition date fair values. If the fair value of net assets purchased exceeds the consideration given, a gain on acquisition is recognized. If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. See Acquired Loans section below for accounting policy regarding loans acquired in a business combination.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expense during the reporting periods. 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. In connection with the determination of the allowance for loan losses and real estate owned, First Guaranty obtains independent appraisals for significant properties.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents are defined as cash, due from banks, interest-bearing demand deposits with banks and federal funds sold with maturities of three months or less.
Securities
First Guaranty reviews its financial position, liquidity and future plans in evaluating the criteria for classifying investment securities. Debt securities that Management has the ability and intent to hold to maturity are classified as held to maturity and carried at cost, adjusted for amortization of premiums and accretion of discounts using methods approximating the interest method. Securities available for sale are stated at fair value. The unrealized difference, if any, between amortized cost and fair value of these AFS securities is excluded from income and is reported, net of deferred taxes, in accumulated other comprehensive income as a part of shareholders' equity. Details of other comprehensive income are reported in the consolidated statements of comprehensive income. Realized gains and losses on securities are computed based on the specific identification method and are reported as a separate component of other income. Amortization of premiums and discounts is included in interest income. Discounts and premiums related to debt securities are amortized using the effective interest rate method.
Management evaluates securities for other-than-temporary impairment ("OTTI") at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. In estimating other-than-temporary losses, management considers the length of time and extent that fair value has been less than cost and the financial condition and near term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.
Loans held for sale
Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Loans held for sale have primarily been fixed rate single-family residential mortgage loans under contract to be sold in the secondary market. In most cases, loans in this category are sold within thirty days. Buyers generally have recourse to return a purchased loan under limited circumstances. Recourse conditions may include early payment default, breach of representations or warranties and documentation deficiencies. Mortgage loans held for sale are generally sold with the mortgage servicing rights released. Gains or losses on sales of mortgage loans are recognized based on the differences between the selling price and the carrying value of the related mortgage loans sold.
Loans
Loans are stated at the principal amounts outstanding, net of unearned income and deferred loan fees. In addition to loans issued in the normal course of business, overdrafts on customer deposit accounts are considered to be loans and reclassified as such. Interest income on all classifications of loans is calculated using the simple interest method on daily balances of the principal amount outstanding.
Accrual of interest is discontinued on a loan when Management believes, after considering economic and business conditions and collection efforts, the borrower's financial condition is such that reasonable doubt exists as to the full and timely collection of principal and interest. This evaluation is made for all loans that are 90 days or more contractually past due. When a loan is placed in nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of interest and principal is probable. Loans are returned to accrual status when, in the judgment of Management, all principal and interest amounts contractually due are reasonably assured to be collected within a reasonable time frame and when the borrower has demonstrated payment performance of cash or cash equivalents; generally for a period of 6 months. All loans, except mortgage loans, are considered past due if they are past due 30 days. Mortgage loans are considered past due when two consecutive payments have been missed. Loans that are past due 90-120 days and deemed uncollectible are charged-off. The loan charge off is a reduction of the allowance for loan losses.
Troubled Debt Restructurings (TDRs)
TDRs are loans in which the borrower is experiencing financial difficulty at the time of restructuring, and the Bank has granted a concession to the borrower. TDRs are undertaken in order to improve the likelihood of recovery on the loan and may take the form of modifications made with the stated interest rate lower than the current market rate for new debt with similar risk, other modifications to the structure of the loan that fall outside of normal underwriting policies and procedures, or in limited circumstances forgiveness of principal and / or interest. TDRs can involve loans remaining on non-accrual, moving to non-accrual, or continuing on accrual status, depending on the individual facts and circumstances of the borrower. TDRs are subject to policies governing accrual and non-accrual evaluation consistent with all other loans as discussed in the "Loans" section above. All loans with the TDR designation are considered to be impaired, even if they are accruing.
First Guaranty's policy is to evaluate TDRs that have subsequently been restructured and returned to market terms after 6 months of performance. The evaluation includes a review of the loan file and analysis of the credit to assess the loan terms, including interest rate to insure such terms are consistent with market terms. The loan terms are compared to a sampling of loans with similar terms and risk characteristics, including loans originated by First Guaranty and loans lost to a competitor. The sample provides a guide to determine market terms pursuant to ASC 310-40-50-2. The loan is also evaluated at that time for impairment. A loan determined to be restructured to market terms and not considered impaired will no longer be disclosed as a TDR in the years following the restructuring. These loans will continue to be individually evaluated for impairment. A loan determined to either be restructured to below market terms or to be impaired will remain a TDR.
Credit Quality
First Guaranty's credit quality indicators are pass, special mention, substandard, and doubtful.
Loans included in the pass category are performing loans with satisfactory debt coverage ratios, collateral, payment history, and documentation requirements.
Special mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects. Borrowers may be experiencing adverse operating trends (declining revenues or margins) or an ill proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, tight liquidity). Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a special mention rating. Nonfinancial reasons include management problems, pending litigation, an ineffective loan agreement or other material structural weakness, and any other significant deviation from prudent lending practices.
A substandard loan is inadequately protected by the paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness. They are characterized by the distinct possibility that First Guaranty will sustain some loss if the deficiencies are not corrected. These loans require more intensive supervision. Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigates. For some substandard loans, the likelihood of full collection of interest and principal may be in doubt and interest is no longer accrued. Consumer loans that are 90 days or more past due or that are nonaccrual are considered substandard.
Doubtful loans have the weaknesses of substandard loans with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values.
A loan is considered impaired when, based on current information and events, it is probable that First Guaranty will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by Management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price or the fair value of the collateral if the loan is collateral dependent. This process is only applied to impaired loans or relationships in excess of $500,000. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, individual consumer and residential loans are not separately identified for impairment disclosures, unless such loans are the subject of a restructuring agreement. Loans that have been restructured in a troubled debt restructuring will continue to be evaluated individually for impairment, including those no longer requiring disclosure.
Acquired Loans
Loans are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. Acquired loans are segregated between those with deteriorated credit quality at acquisition and those deemed as performing. To make this determination, Management considers such factors as past due status, nonaccrual status, credit risk ratings, interest rates and collateral position. The fair value of acquired loans deemed performing is determined by discounting cash flows, both principal and interest, for each pool at prevailing market interest rates as well as consideration of inherent potential losses. The difference between the fair value and principal balances due at acquisition date, the fair value discount, is accreted into income over the estimated life of each loan pool.
Loans acquired in a business combination are recorded at their estimated fair value on their purchase date with no carryover of the related allowance for loan losses. Performing acquired loans are subsequently evaluated for any required allowance at each reporting date. An allowance for loan losses is calculated using a similar methodology for originated loans.
Loan fees and costs
Nonrefundable loan origination and commitment fees and direct costs associated with originating loans are deferred and recognized over the lives of the related loans as an adjustment to the loans' yield using the level yield method.
Allowance for loan losses
The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when Management believes that the collectability of the principal is unlikely. The allowance, which is based on evaluation of the collectability of loans and prior loan loss experience, is an amount that, in the opinion of Management, reflects the risks inherent in the existing loan portfolio and exists at the reporting date. The evaluations take into consideration a number of subjective factors including changes in the nature and volume of the loan portfolio, historical losses, overall portfolio quality, review of specific problem loans, current economic conditions that may affect a borrower's ability to pay including the impact of the COVID-19 pandemic, adequacy of loan collateral and other relevant factors. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require additional recognition of losses based on their judgments about information available to them at the time of their examination.
The following are general credit risk factors that affect First Guaranty's loan portfolio segments. These factors do not encompass all risks associated with each loan category. Construction and land development loans have risks associated with interim construction prior to permanent financing and repayment risks due to the future sale of developed property. Farmland and agricultural loans have risks such as weather, government agricultural policies, fuel and fertilizer costs, and market price volatility. 1-4 family, multi-family, and consumer credits are strongly influenced by employment levels, consumer debt loads and the general economy. Non-farm non-residential loans include both owner occupied real estate and non-owner occupied real estate. Common risks associated with these properties is the ability to maintain tenant leases and keep lease income at a level able to service required debt and operating expenses. Commercial and industrial loans generally have non-real estate secured collateral which requires closer monitoring than real estate collateral.
Although Management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated. The evaluation of the adequacy of loan collateral is often based upon estimates and appraisals. Because of changing economic conditions, the valuations determined from such estimates and appraisals may also change.
Accordingly, First Guaranty may ultimately incur losses that vary from Management's current estimates. Adjustments to the allowance for loan losses will be reported in the period such adjustments become known or can be reasonably estimated. All loan losses are charged to the allowance for loan losses when the loss actually occurs or when the collectability of the principal is unlikely. Recoveries are credited to the allowance at the time of recovery.
The allowance consists of specific, general, and unallocated components. The specific component relates to loans that are classified as doubtful, substandard, and impaired. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Also, a specific reserve is allocated for syndicated loans. The general component covers non-classified loans and special mention loans and is based on historical loss experience adjusted for qualitative factors. Qualitative factors include analysis of levels and trends in delinquencies,non-accrual loans, charge-offs and recoveries, loan risk ratings, trends in volume and terms of loans, changes in lending policy, credit concentrations, portfolio stress test results, national and local economic trends including the impact of COVID-19, industry conditions, and other relevant factors. An unallocated component is maintained to cover uncertainties that could affect the estimate of probable losses.
The allowance for loan losses is reviewed on a monthly basis. The monitoring of credit risk also extends to unfunded credit commitments, such as unused commercial credit lines and letters of credit. A reserve is established as needed for estimates of probable losses on such commitments.
Goodwill and intangible assets
Goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests. Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in an acquisition. First Guaranty's goodwill is tested for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment in accordance with ASC Topic 350.
Identifiable intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or legal rights or because the assets are capable of being sold or exchanged either on their own or in combination with the related contract, asset or liability. First Guaranty's intangible assets primarily relate to core deposits and loan servicing assets related to the SBA portfolio. These core deposit intangibles are amortized on a straight-line basis over terms ranging from seven to fifteen years. Management periodically evaluates whether events or circumstances have occurred that impair this deposit intangible.
Premises and equipment
Premises and equipment are stated at cost, less accumulated depreciation. Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the respective assets as follows:
Buildings and improvements 10-40 years
Equipment, fixtures and automobiles 3-10 years
Expenditures for renewals and betterments are capitalized and depreciated over their estimated useful lives. Repairs, maintenance and minor improvements are charged to operating expense as incurred. Gains or losses on disposition, if any, are recorded as a separate line item in noninterest income on the Statements of Income .
Other real estate
Other real estate includes properties acquired through foreclosure or acceptance of deeds in lieu of foreclosure. These properties are recorded at the lower of the recorded investment in the property or its fair value less the estimated cost of disposition. Any valuation adjustments required prior to foreclosure are charged to the allowance for loan losses. Subsequent to foreclosure, losses on the periodic revaluation of the property are charged to current period earnings as other real estate expense or to the allowance for other real estate. Costs of operating and maintaining the properties are charged to other real estate expense as incurred. Any subsequent gains or losses on dispositions are credited or charged to income in the period of disposition.
Off-balance sheet financial instruments
In the ordinary course of business, First Guaranty has entered into commitments to extend credit, including commitments under credit card arrangements, commitments to fund commercial real estate, construction and land development loans secured by real estate, and performance standby letters of credit. Such financial instruments are recorded when they are funded.
Income taxes
First Guaranty and its subsidiary file a consolidated federal income tax return on a calendar year basis. In lieu of Louisiana state income tax, the Bank is subject to the Louisiana bank shares tax, which is included in noninterest expense in First Guaranty's consolidated financial statements. With few exceptions, First Guaranty is no longer subject to U.S. federal, state or local income tax examinations for years before 2017. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the deferred tax assets or liabilities are expected to be settled or realized. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be utilized.
Comprehensive income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items along with net income, are components of comprehensive income. The components of other comprehensive income and related tax effects are presented in the Statements of Comprehensive Income.
Fair Value Measurements
The fair value of a financial instrument is the current amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Valuation techniques use certain inputs to arrive at fair value. Inputs to valuation techniques are the assumptions that market participants would use in pricing the asset or liability. They may be observable or unobservable. First Guaranty uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. See Note 20 for a detailed description of fair value measurements.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from First Guaranty, (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) First Guaranty does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.
Earnings per common share
Earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. In December of 2019, First Guaranty issued a pro rata, 10% common stock dividend. The shares issued for the stock dividend have been retrospectively factored into the calculation of earnings per share as well as cash dividends paid on common stock and represented on the face of the financial statements. No convertible shares of First Guaranty's stock are outstanding.
Operating Segments
All of First Guaranty's operations are considered by management to be aggregated into one reportable operating segment. While the chief decision-makers monitor the revenue streams of the various products and services, the identifiable segments are not material. Operations are managed and financial performance is evaluated on a Company-wide basis.
Reclassifications
Certain reclassifications have been made to prior year end financial statements in order to conform to the classification adopted for reporting in 2020.
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.
In December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)." The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in the Topic 740. The amendments also improve the consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in the ASU are effective for fiscal years and interim periods beginning after December 15, 2020. First Guaranty is currently assessing the impact of adoption of this guidance.
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 $9.4 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 dates, First Guaranty records any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. First Guaranty finalized the purchase price allocations related to the Union acquisition during the fourth quarter of 2020. Based on management's valuation of tangible and intangible assets acquired and liabilities assumed, the purchase price for the Union acquisition is allocated in the table below.
|
|
|
|
|
|
(in thousands)
|
Union Bancshares, Incorporated
|
|
|
Cash and due from banks
|
$
|
20,063
|
|
Securities available for sale
|
38,813
|
|
Loans
|
184,344
|
|
Premises and equipment
|
7,223
|
|
Goodwill
|
9,428
|
|
Intangible assets
|
4,213
|
|
Other real estate
|
1,595
|
|
Other assets
|
9,480
|
|
Total assets acquired
|
$
|
275,159
|
|
|
|
Deposits
|
205,078
|
|
FHLB borrowings
|
16,617
|
|
Repurchase agreements
|
6,863
|
|
Other liabilities
|
3,218
|
|
Total liabilities assumed
|
$
|
231,776
|
|
Net assets acquired
|
$
|
43,383
|
|
Note 4. Cash and Due from Banks
Certain reserves are required to be maintained at the Federal Reserve Bank. There was no reserve requirement as of December 31, 2020 and 2019. At December 31, 2020 First Guaranty had no accounts at correspondent banks, excluding the Federal Reserve Bank, that exceeded the FDIC insurable limit of $250,000. At December 31, 2019 First Guaranty had only two account at correspondent banks, excluding the Federal Reserve Bank, that exceeded the FDIC insurable limit of $250,000. This account was over the insurable limit by $5.7 million.
Note 5. Securities
A summary comparison of securities by type at December 31, 2020 and 2019 is shown below.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
(in thousands)
|
Amortized Cost
|
|
Gross
Unrealized Gains
|
|
Gross
Unrealized Losses
|
|
Fair Value
|
|
Amortized Cost
|
|
Gross
Unrealized Gains
|
|
Gross
Unrealized Losses
|
|
Fair Value
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasuries
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. Government Agencies
|
169,986
|
|
|
77
|
|
|
(405)
|
|
|
169,658
|
|
|
16,380
|
|
|
15
|
|
|
(2)
|
|
|
16,393
|
|
Corporate debt securities
|
36,153
|
|
|
604
|
|
|
(268)
|
|
|
36,489
|
|
|
94,561
|
|
|
1,110
|
|
|
(302)
|
|
|
95,369
|
|
Municipal bonds
|
27,381
|
|
|
781
|
|
|
—
|
|
|
28,162
|
|
|
30,297
|
|
|
1,870
|
|
|
(14)
|
|
|
32,153
|
|
Collateralized mortgage obligations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,400
|
|
|
40
|
|
|
(43)
|
|
|
16,397
|
|
Mortgage-backed securities
|
1,208
|
|
|
31
|
|
|
—
|
|
|
1,239
|
|
|
179,546
|
|
|
317
|
|
|
(238)
|
|
|
179,625
|
|
Total available for sale securities
|
$
|
237,728
|
|
|
$
|
1,493
|
|
|
$
|
(673)
|
|
|
$
|
238,548
|
|
|
$
|
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
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86,579
|
|
|
$
|
382
|
|
|
$
|
(144)
|
|
|
$
|
86,817
|
|
The scheduled maturities of securities at December 31, 2020, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities due to call or prepayments. Mortgage-backed securities are not due at a single maturity because of amortization and potential prepayment of the underlying mortgages. For this reason they are presented separately in the maturity table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Available for sale:
|
|
|
|
Due in one year or less
|
$
|
9,635
|
|
|
$
|
9,670
|
|
Due after one year through five years
|
6,994
|
|
|
6,995
|
|
Due after five years through 10 years
|
67,675
|
|
|
68,412
|
|
Over 10 years
|
152,216
|
|
|
152,232
|
|
Subtotal
|
236,520
|
|
|
237,309
|
|
Mortgage-backed Securities
|
1,208
|
|
|
1,239
|
|
Total available for sale securities
|
$
|
237,728
|
|
|
$
|
238,548
|
|
The following is a summary of the fair value of securities with gross unrealized losses and an aging of those gross unrealized losses at December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
(in thousands)
|
Number
of Securities
|
|
Fair Value
|
|
Gross
Unrealized Losses
|
|
Number
of Securities
|
|
Fair Value
|
|
Gross
Unrealized Losses
|
|
Number
of Securities
|
|
Fair Value
|
|
Gross
Unrealized Losses
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasuries
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. Government Agencies
|
12
|
|
|
131,455
|
|
|
(405)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
131,455
|
|
|
(405)
|
|
Corporate debt securities
|
17
|
|
|
10,286
|
|
|
(144)
|
|
|
4
|
|
|
1,254
|
|
|
(124)
|
|
|
21
|
|
|
11,540
|
|
|
(268)
|
|
Municipal bonds
|
1
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
66
|
|
|
—
|
|
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
11
|
|
|
—
|
|
|
6
|
|
|
11
|
|
|
—
|
|
Total available for sale securities
|
30
|
|
|
$
|
141,807
|
|
|
$
|
(549)
|
|
|
10
|
|
|
$
|
1,265
|
|
|
$
|
(124)
|
|
|
40
|
|
|
$
|
143,072
|
|
|
$
|
(673)
|
|
The following is a summary of the fair value of securities with gross unrealized losses and an aging of those gross unrealized losses at December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
(in thousands)
|
Number
of Securities
|
|
Fair Value
|
|
Gross
Unrealized Losses
|
|
Number
of Securities
|
|
Fair Value
|
|
Gross
Unrealized Losses
|
|
Number
of Securities
|
|
Fair Value
|
|
Gross
Unrealized Losses
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasuries
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. Government Agencies
|
1
|
|
|
4,398
|
|
|
(1)
|
|
|
1
|
|
|
149
|
|
|
(1)
|
|
|
2
|
|
|
4,547
|
|
|
(2)
|
|
Corporate debt securities
|
42
|
|
|
21,269
|
|
|
(174)
|
|
|
12
|
|
|
3,184
|
|
|
(128)
|
|
|
54
|
|
|
24,453
|
|
|
(302)
|
|
Municipal bonds
|
9
|
|
|
4,285
|
|
|
(14)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
4,285
|
|
|
(14)
|
|
Collateralized mortgage obligations
|
12
|
|
|
10,022
|
|
|
(43)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
10,022
|
|
|
(43)
|
|
Mortgage-backed securities
|
57
|
|
|
91,753
|
|
|
(186)
|
|
|
9
|
|
|
12,121
|
|
|
(52)
|
|
|
66
|
|
|
103,874
|
|
|
(238)
|
|
Total available for sale securities
|
121
|
|
|
$
|
131,727
|
|
|
$
|
(418)
|
|
|
22
|
|
|
$
|
15,454
|
|
|
$
|
(181)
|
|
|
143
|
|
|
$
|
147,181
|
|
|
$
|
(599)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
2
|
|
|
$
|
2,177
|
|
|
$
|
(2)
|
|
|
8
|
|
|
$
|
15,965
|
|
|
$
|
(30)
|
|
|
10
|
|
|
$
|
18,142
|
|
|
$
|
(32)
|
|
Municipal bonds
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
50
|
|
|
—
|
|
|
1
|
|
|
50
|
|
|
—
|
|
Mortgage-backed securities
|
7
|
|
|
8,880
|
|
|
(58)
|
|
|
10
|
|
|
11,343
|
|
|
(54)
|
|
|
17
|
|
|
20,223
|
|
|
(112)
|
|
Total held to maturity securities
|
9
|
|
|
$
|
11,057
|
|
|
$
|
(60)
|
|
|
19
|
|
|
$
|
27,358
|
|
|
$
|
(84)
|
|
|
28
|
|
|
$
|
38,415
|
|
|
$
|
(144)
|
|
As of December 31, 2020, 40 of First Guaranty's debt securities had unrealized losses totaling 0.5% of the individual securities' amortized cost basis and 0.3% of First Guaranty's total amortized cost basis of the investment securities portfolio. 10 of the 40 securities had been in a continuous loss position for over 12 months at such date. The 10 securities had an aggregate amortized cost basis of $1.4 million and an unrealized loss of $0.1 million at December 31, 2020. Management has the intent and ability to hold these debt securities until maturity or until anticipated recovery.
Securities are evaluated for other-than-temporary impairment at least quarterly and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, (iii) the recovery of contractual principal and interest and (iv) the intent and ability of First Guaranty to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Investment securities issued by the U.S. Government and Government sponsored enterprises with unrealized losses and the amount of unrealized losses on those investment securities that are the result of changes in market interest rates will not be other-than-temporarily impaired. First Guaranty has the ability and intent to hold these securities until recovery, which may not be until maturity.
Corporate debt securities in a loss position consist primarily of corporate bonds issued by businesses in the financial, insurance, utility, manufacturing, industrial, consumer products and oil and gas industries. There was one security with an other-than-temporary impairment loss at December 31, 2020. First Guaranty believes that the remaining issuers will be able to fulfill the obligations of these securities based on evaluations described above. First Guaranty has the ability and intent to hold these securities until they recover, which could be at their maturity dates.
There was one other-than-temporary impairment loss of $100,000 recognized on securities during the years ended December 31, 2020. The security had an original book value of $0.1 million and was in default. First Guaranty's analysis of the company and the current market value of the security resulted in the determination that a write down was warranted. There were no other-than-temporary impairment losses recognized on securities during the years ended December 31, 2019, and 2018.
The following table presents a roll-forward of the amount of credit losses on debt securities held by First Guaranty for which a portion of OTTI was recognized in other comprehensive income for the year ended December 31, 2020, 2019, and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
|
Year Ended December 31, 2018
|
Beginning balance of credit losses at beginning of year
|
$
|
—
|
|
|
$
|
60
|
|
|
$
|
60
|
|
Other-than-temporary impairment credit losses on securities not previously OTTI
|
100
|
|
|
—
|
|
|
—
|
|
Increases for additional credit losses on securities previously determined to be OTTI
|
—
|
|
|
—
|
|
|
—
|
|
Reduction for increases in cash flows
|
—
|
|
|
—
|
|
|
—
|
|
Reduction due to credit impaired securities sold or fully settled
|
—
|
|
|
(60)
|
|
|
—
|
|
Ending balance of cumulative credit losses recognized in earnings at end of year
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
60
|
|
In 2020, 2019 and 2018 there were no other-than-temporary impairment credit losses on securities for which First Guaranty had previously recognized OTTI. For securities that have indications of credit related impairment, management analyzes future expected cash flows to determine if any credit related impairment is evident. Estimated cash flows are determined using management's best estimate of future cash flows based on specific assumptions. The assumptions used to determine the cash flows were based on estimates of loss severity and credit default probabilities. Management reviews reports from credit rating agencies and public filings of issuers.
At December 31, 2020 and 2019 the carrying value of pledged securities totaled $184.0 million and $212.8 million, respectively.
Gross realized gains on sales of securities were $14.7 million, $0.8 million and $0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. Gross realized losses were $0.1 million, $1.1 million and $1.9 million for the years ended December 31, 2020, 2019 and 2018. The tax applicable to these transactions amounted to $3.1 million, $(79,000), and $(0.4) million for 2020, 2019 and 2018, respectively. Proceeds from sales of securities classified as available for sale amounted to $394.9 million, $90.5 million and $114.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Net unrealized gains on available for sale securities included in accumulated other comprehensive income (loss) ("AOCI"), net of applicable income taxes, totaled $0.6 million at December 31, 2020. At December 31, 2019 net unrealized gains included in AOCI, net of applicable income taxes, totaled $2.2 million. During 2020 net gains, net of tax, reclassified out of AOCI into earnings totaled $11.7 million. During 2019 net losses, net of tax, reclassified out of AOCI into earnings totaled $0.3 million.
At December 31, 2020, First Guaranty's exposure to investment securities issuers that exceeded 10% of shareholders' equity was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Federal Home Loan Mortgage Corporation (Freddie Mac-FHLMC)
|
110,177
|
|
|
109,856
|
|
Federal Farm Credit Bank (FFCB)
|
54,263
|
|
|
54,279
|
|
Total
|
$
|
164,440
|
|
|
$
|
164,135
|
|
Note 6. Loans
The following table summarizes the components of First Guaranty's loan portfolio as of December 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
(in thousands except for %)
|
Balance
|
|
As % of Category
|
|
Balance
|
|
As % of Category
|
Real Estate:
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
150,841
|
|
|
8.2
|
%
|
|
$
|
172,247
|
|
|
11.3
|
%
|
Farmland
|
26,880
|
|
|
1.4
|
%
|
|
22,741
|
|
|
1.5
|
%
|
1- 4 Family
|
271,236
|
|
|
14.7
|
%
|
|
289,635
|
|
|
18.9
|
%
|
Multifamily
|
45,932
|
|
|
2.5
|
%
|
|
23,973
|
|
|
1.6
|
%
|
Non-farm non-residential
|
824,137
|
|
|
44.6
|
%
|
|
616,536
|
|
|
40.3
|
%
|
Total Real Estate
|
1,319,026
|
|
|
71.4
|
%
|
|
1,125,132
|
|
|
73.6
|
%
|
Non-Real Estate:
|
|
|
|
|
|
|
|
Agricultural
|
28,335
|
|
|
1.5
|
%
|
|
26,710
|
|
|
1.8
|
%
|
Commercial and industrial
|
353,028
|
|
|
19.1
|
%
|
|
268,256
|
|
|
17.5
|
%
|
Consumer and other
|
148,783
|
|
|
8.0
|
%
|
|
108,868
|
|
|
7.1
|
%
|
Total Non-Real Estate
|
530,146
|
|
|
28.6
|
%
|
|
403,834
|
|
|
26.4
|
%
|
Total Loans Before Unearned Income
|
1,849,172
|
|
|
100.0
|
%
|
|
1,528,966
|
|
|
100.0
|
%
|
Unearned income
|
(5,037)
|
|
|
|
|
(3,476)
|
|
|
|
Total Loans Net of Unearned Income
|
$
|
1,844,135
|
|
|
|
|
$
|
1,525,490
|
|
|
|
The following table summarizes fixed and floating rate loans by contractual maturity, excluding nonaccrual loans, as of December 31, 2020 and December 31, 2019 unadjusted for scheduled principal payments, prepayments, or repricing opportunities. The average life of the loan portfolio may be substantially less than the contractual terms when these adjustments are considered.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
(in thousands)
|
Fixed
|
|
Floating
|
|
Total
|
|
Fixed
|
|
Floating
|
|
Total
|
One year or less
|
$
|
186,252
|
|
|
$
|
79,680
|
|
|
$
|
265,932
|
|
|
$
|
205,596
|
|
|
$
|
104,859
|
|
|
$
|
310,455
|
|
One to five years
|
740,358
|
|
|
368,259
|
|
|
1,108,617
|
|
|
509,455
|
|
|
286,131
|
|
|
795,586
|
|
Five to 15 years
|
128,860
|
|
|
91,032
|
|
|
219,892
|
|
|
147,502
|
|
|
65,713
|
|
|
213,215
|
|
Over 15 years
|
146,830
|
|
|
92,325
|
|
|
239,155
|
|
|
143,695
|
|
|
51,612
|
|
|
195,307
|
|
Subtotal
|
$
|
1,202,300
|
|
|
$
|
631,296
|
|
|
1,833,596
|
|
|
$
|
1,006,248
|
|
|
$
|
508,315
|
|
|
1,514,563
|
|
Nonaccrual loans
|
|
|
|
|
15,576
|
|
|
|
|
|
|
14,403
|
|
Total Loans Before Unearned Income
|
|
|
|
|
1,849,172
|
|
|
|
|
|
|
1,528,966
|
|
Unearned income
|
|
|
|
|
(5,037)
|
|
|
|
|
|
|
(3,476)
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
$
|
1,844,135
|
|
|
|
|
|
|
$
|
1,525,490
|
|
As of December 31, 2020, $305.0 million of floating rate loans were at their interest rate floor. At December 31, 2019, $153.3 million of floating rate loans were at their interest rate floor. Nonaccrual loans have been excluded from these totals.
The following tables present the age analysis of past due loans at December 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
(in thousands)
|
30-89 Days Past Due
|
|
90 Days or
Greater Past Due
|
|
Total Past Due
|
|
Current
|
|
Total Loans
|
|
Recorded Investment
90 Days Accruing
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
8,088
|
|
|
$
|
1,621
|
|
|
$
|
9,709
|
|
|
$
|
141,132
|
|
|
$
|
150,841
|
|
|
$
|
1,000
|
|
Farmland
|
227
|
|
|
857
|
|
|
1,084
|
|
|
25,796
|
|
|
26,880
|
|
|
—
|
|
1- 4 family
|
6,050
|
|
|
7,207
|
|
|
13,257
|
|
|
257,979
|
|
|
271,236
|
|
|
4,980
|
|
Multifamily
|
190
|
|
|
366
|
|
|
556
|
|
|
45,376
|
|
|
45,932
|
|
|
366
|
|
Non-farm non-residential
|
15,792
|
|
|
12,148
|
|
|
27,940
|
|
|
796,197
|
|
|
824,137
|
|
|
4,699
|
|
Total Real Estate
|
30,347
|
|
|
22,199
|
|
|
52,546
|
|
|
1,266,480
|
|
|
1,319,026
|
|
|
11,045
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
143
|
|
|
3,539
|
|
|
3,682
|
|
|
24,653
|
|
|
28,335
|
|
|
67
|
|
Commercial and industrial
|
663
|
|
|
2,557
|
|
|
3,220
|
|
|
349,808
|
|
|
353,028
|
|
|
1,856
|
|
Consumer and other
|
1,176
|
|
|
372
|
|
|
1,548
|
|
|
147,235
|
|
|
148,783
|
|
|
123
|
|
Total Non-Real Estate
|
1,982
|
|
|
6,468
|
|
|
8,450
|
|
|
521,696
|
|
|
530,146
|
|
|
2,046
|
|
Total Loans Before Unearned Income
|
$
|
32,329
|
|
|
$
|
28,667
|
|
|
$
|
60,996
|
|
|
$
|
1,788,176
|
|
|
1,849,172
|
|
|
$
|
13,091
|
|
Unearned income
|
|
|
|
|
|
|
|
|
(5,037)
|
|
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
$
|
1,844,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
(in thousands)
|
30-89 Days Past Due
|
|
90 Days or
Greater Past Due
|
|
Total Past Due
|
|
Current
|
|
Total Loans
|
|
Recorded Investment
90 Days Accruing
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
760
|
|
|
$
|
429
|
|
|
$
|
1,189
|
|
|
$
|
171,058
|
|
|
$
|
172,247
|
|
|
$
|
48
|
|
Farmland
|
6
|
|
|
1,274
|
|
|
1,280
|
|
|
21,461
|
|
|
22,741
|
|
|
—
|
|
1- 4 family
|
8,521
|
|
|
3,682
|
|
|
12,203
|
|
|
277,432
|
|
|
289,635
|
|
|
923
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
23,973
|
|
|
23,973
|
|
|
—
|
|
Non-farm non-residential
|
11,279
|
|
|
6,249
|
|
|
17,528
|
|
|
599,008
|
|
|
616,536
|
|
|
1,603
|
|
Total Real Estate
|
20,566
|
|
|
11,634
|
|
|
32,200
|
|
|
1,092,932
|
|
|
1,125,132
|
|
|
2,574
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
310
|
|
|
4,800
|
|
|
5,110
|
|
|
21,600
|
|
|
26,710
|
|
|
—
|
|
Commercial and industrial
|
2,801
|
|
|
342
|
|
|
3,143
|
|
|
265,113
|
|
|
268,256
|
|
|
15
|
|
Consumer and other
|
794
|
|
|
266
|
|
|
1,060
|
|
|
107,808
|
|
|
108,868
|
|
|
50
|
|
Total Non-Real Estate
|
3,905
|
|
|
5,408
|
|
|
9,313
|
|
|
394,521
|
|
|
403,834
|
|
|
65
|
|
Total Loans Before Unearned Income
|
$
|
24,471
|
|
|
$
|
17,042
|
|
|
$
|
41,513
|
|
|
$
|
1,487,453
|
|
|
1,528,966
|
|
|
$
|
2,639
|
|
Unearned income
|
|
|
|
|
|
|
|
|
(3,476)
|
|
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
$
|
1,525,490
|
|
|
|
The tables above include $15.6 million and $14.4 million of nonaccrual loans for December 31, 2020 and 2019, respectively. See the tables below for more detail on nonaccrual loans.
The following is a summary of nonaccrual loans by class at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
(in thousands)
|
2020
|
|
2019
|
Real Estate:
|
|
|
|
Construction & land development
|
$
|
621
|
|
|
$
|
381
|
|
Farmland
|
857
|
|
|
1,274
|
|
1- 4 family
|
2,227
|
|
|
2,759
|
|
Multifamily
|
—
|
|
|
—
|
|
Non-farm non-residential
|
7,449
|
|
|
4,646
|
|
Total Real Estate
|
11,154
|
|
|
9,060
|
|
Non-Real Estate:
|
|
|
|
Agricultural
|
3,472
|
|
|
4,800
|
|
Commercial and industrial
|
701
|
|
|
327
|
|
Consumer and other
|
249
|
|
|
216
|
|
Total Non-Real Estate
|
4,422
|
|
|
5,343
|
|
Total Nonaccrual Loans
|
$
|
15,576
|
|
|
$
|
14,403
|
|
The following table identifies the credit exposure of the loan portfolio, including loans acquired with deteriorated credit quality, by specific credit ratings as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
As of December 31, 2019
|
(in thousands)
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
139,032
|
|
|
$
|
10,785
|
|
|
$
|
1,024
|
|
|
$
|
—
|
|
|
$
|
150,841
|
|
|
$
|
163,808
|
|
|
$
|
6,180
|
|
|
$
|
2,259
|
|
|
$
|
—
|
|
|
$
|
172,247
|
|
Farmland
|
22,822
|
|
|
46
|
|
|
4,012
|
|
|
—
|
|
|
26,880
|
|
|
18,223
|
|
|
3,177
|
|
|
1,341
|
|
|
—
|
|
|
22,741
|
|
1- 4 family
|
251,315
|
|
|
7,252
|
|
|
12,669
|
|
|
—
|
|
|
271,236
|
|
|
271,392
|
|
|
4,751
|
|
|
13,492
|
|
|
—
|
|
|
289,635
|
|
Multifamily
|
36,146
|
|
|
1,841
|
|
|
7,945
|
|
|
—
|
|
|
45,932
|
|
|
16,025
|
|
|
805
|
|
|
7,143
|
|
|
—
|
|
|
23,973
|
|
Non-farm non-residential
|
756,760
|
|
|
51,355
|
|
|
16,022
|
|
|
—
|
|
|
824,137
|
|
|
589,800
|
|
|
7,743
|
|
|
18,993
|
|
|
—
|
|
|
616,536
|
|
Total Real Estate
|
1,206,075
|
|
|
71,279
|
|
|
41,672
|
|
|
—
|
|
|
1,319,026
|
|
|
1,059,248
|
|
|
22,656
|
|
|
43,228
|
|
|
—
|
|
|
1,125,132
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
24,180
|
|
|
92
|
|
|
4,063
|
|
|
—
|
|
|
28,335
|
|
|
21,529
|
|
|
48
|
|
|
5,133
|
|
|
—
|
|
|
26,710
|
|
Commercial and industrial
|
321,957
|
|
|
27,388
|
|
|
3,683
|
|
|
—
|
|
|
353,028
|
|
|
262,416
|
|
|
1,199
|
|
|
4,641
|
|
|
—
|
|
|
268,256
|
|
Consumer and other
|
147,697
|
|
|
442
|
|
|
644
|
|
|
—
|
|
|
148,783
|
|
|
108,618
|
|
|
180
|
|
|
70
|
|
|
—
|
|
|
108,868
|
|
Total Non-Real Estate
|
493,834
|
|
|
27,922
|
|
|
8,390
|
|
|
—
|
|
|
530,146
|
|
|
392,563
|
|
|
1,427
|
|
|
9,844
|
|
|
—
|
|
|
403,834
|
|
Total Loans Before Unearned Income
|
$
|
1,699,909
|
|
|
$
|
99,201
|
|
|
$
|
50,062
|
|
|
$
|
—
|
|
|
1,849,172
|
|
|
$
|
1,451,811
|
|
|
$
|
24,083
|
|
|
$
|
53,072
|
|
|
$
|
—
|
|
|
1,528,966
|
|
Unearned income
|
|
|
|
|
|
|
|
|
(5,037)
|
|
|
|
|
|
|
|
|
|
|
(3,476)
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
$
|
1,844,135
|
|
|
|
|
|
|
|
|
|
|
$
|
1,525,490
|
|
Purchased Impaired Loans
As part of the acquisition of Union Bancshares, Inc. on November 7, 2019 and Premier Bancshares, Inc. on June 16, 2017, First Guaranty purchased credit impaired loans for which there was, at acquisition, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is as follows at December 31, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
As of December 31, 2020
|
|
As of December 31, 2019
|
Real Estate:
|
|
|
|
Construction & land development
|
$
|
397
|
|
|
$
|
526
|
|
Farmland
|
—
|
|
|
—
|
|
1- 4 family
|
4,102
|
|
|
6,402
|
|
Multifamily
|
900
|
|
|
—
|
|
Non-farm non-residential
|
2,396
|
|
|
2,294
|
|
Total Real Estate
|
7,795
|
|
|
9,222
|
|
Non-Real Estate:
|
|
|
|
Agricultural
|
343
|
|
|
—
|
|
Commercial and industrial
|
1,017
|
|
|
1,198
|
|
Consumer and other
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
1,360
|
|
|
1,198
|
|
Total
|
$
|
9,155
|
|
|
$
|
10,420
|
|
For those purchased loans disclosed above, there was no allowance for loan losses at December 31, 2020 or December 31, 2019.
Where First Guaranty can reasonably estimate the cash flows expected to be collected on the loans, a portion of the purchase discount is allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion is being recognized as interest income over the remaining life of the loan.
Where First Guaranty cannot reasonably estimate the cash flows expected to be collected on the loans, it has decided to account for those loans using the cost recovery method of income recognition. As such, no portion of a purchase discount adjustment has been determined to meet the definition of an accretable yield adjustment on those loans accounted for using the cost recovery method. If, in the future, cash flows from the borrower(s) can be reasonably estimated, a portion of the purchase discount would be allocated to an accretable yield adjustment based upon the present value of the future estimated cash flows versus the current carrying value of the loan and the accretable yield portion would be recognized as interest income over the remaining life of the loan. Until such accretable yield can be calculated, under the cost recovery method of income recognition, all payments will be used to reduce the carrying value of the loan and no income will be recognized on the loan until the carrying value is reduced to zero.
The accretable yield, or income expected to be collected, on the purchased loans above is as follows for the years ended December 31, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Year Ended December 31, 2020
|
|
Year Ended December 31, 2019
|
Balance, beginning of period
|
$
|
3,647
|
|
|
$
|
613
|
|
Acquisition accretable yield
|
30
|
|
|
3,367
|
|
Accretion
|
(785)
|
|
|
(831)
|
|
Net transfers from nonaccretable difference to accretable yield
|
—
|
|
|
498
|
|
Balance, end of period
|
$
|
2,892
|
|
|
$
|
3,647
|
|
Note 7. Allowance for Loan Losses
A summary of changes in the allowance for loan losses, by loan type, for the years ended December 31, 2020, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
(in thousands)
|
Beginning Allowance (12/31/19)
|
|
Charge-offs
|
|
Recoveries
|
|
Provision
|
|
Ending Allowance (12/31/20)
|
|
Beginning Allowance (12/31/18)
|
|
Charge-offs
|
|
Recoveries
|
|
Provision
|
|
Ending Allowance (12/31/19)
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
423
|
|
|
$
|
(265)
|
|
|
$
|
—
|
|
|
$
|
871
|
|
|
$
|
1,029
|
|
|
$
|
581
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(158)
|
|
|
$
|
423
|
|
Farmland
|
50
|
|
|
—
|
|
|
—
|
|
|
412
|
|
|
462
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
50
|
|
1- 4 family
|
1,027
|
|
|
(154)
|
|
|
39
|
|
|
1,598
|
|
|
2,510
|
|
|
911
|
|
|
(552)
|
|
|
39
|
|
|
629
|
|
|
1,027
|
|
Multifamily
|
1,038
|
|
|
—
|
|
|
—
|
|
|
(60)
|
|
|
978
|
|
|
1,318
|
|
|
—
|
|
|
—
|
|
|
(280)
|
|
|
1,038
|
|
Non-farm non-residential
|
5,277
|
|
|
(550)
|
|
|
178
|
|
|
10,159
|
|
|
15,064
|
|
|
4,771
|
|
|
(2,603)
|
|
|
5
|
|
|
3,104
|
|
|
5,277
|
|
Total Real Estate
|
7,815
|
|
|
(969)
|
|
|
217
|
|
|
12,980
|
|
|
20,043
|
|
|
7,622
|
|
|
(3,155)
|
|
|
44
|
|
|
3,304
|
|
|
7,815
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
95
|
|
|
(110)
|
|
|
70
|
|
|
126
|
|
|
181
|
|
|
339
|
|
|
(40)
|
|
|
—
|
|
|
(204)
|
|
|
95
|
|
Commercial and industrial
|
1,909
|
|
|
(265)
|
|
|
128
|
|
|
1,030
|
|
|
2,802
|
|
|
1,909
|
|
|
(879)
|
|
|
267
|
|
|
612
|
|
|
1,909
|
|
Consumer and other
|
1,110
|
|
|
(1,083)
|
|
|
724
|
|
|
739
|
|
|
1,490
|
|
|
891
|
|
|
(1,190)
|
|
|
246
|
|
|
1,163
|
|
|
1,110
|
|
Unallocated
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
|
—
|
|
Total Non-Real Estate
|
3,114
|
|
|
(1,458)
|
|
|
922
|
|
|
1,897
|
|
|
4,475
|
|
|
3,154
|
|
|
(2,109)
|
|
|
513
|
|
|
1,556
|
|
|
3,114
|
|
Total
|
$
|
10,929
|
|
|
$
|
(2,427)
|
|
|
$
|
1,139
|
|
|
$
|
14,877
|
|
|
$
|
24,518
|
|
|
$
|
10,776
|
|
|
$
|
(5,264)
|
|
|
$
|
557
|
|
|
$
|
4,860
|
|
|
$
|
10,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2018
|
(in thousands)
|
Beginning Allowance (12/31/17)
|
|
Charge-offs
|
|
Recoveries
|
|
Provision
|
|
Ending Allowance (12/31/18)
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
628
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
(50)
|
|
|
$
|
581
|
|
Farmland
|
5
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|
41
|
|
1- 4 family
|
1,078
|
|
|
(99)
|
|
|
90
|
|
|
(158)
|
|
|
911
|
|
Multifamily
|
994
|
|
|
—
|
|
|
20
|
|
|
304
|
|
|
1,318
|
|
Non-farm non-residential
|
2,811
|
|
|
(404)
|
|
|
89
|
|
|
2,275
|
|
|
4,771
|
|
Total Real Estate
|
5,516
|
|
|
(503)
|
|
|
202
|
|
|
2,407
|
|
|
7,622
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
Agricultural
|
187
|
|
|
(300)
|
|
|
26
|
|
|
426
|
|
|
339
|
|
Commercial and industrial
|
2,377
|
|
|
(179)
|
|
|
1,642
|
|
|
(1,931)
|
|
|
1,909
|
|
Consumer and other
|
1,125
|
|
|
(907)
|
|
|
216
|
|
|
457
|
|
|
891
|
|
Unallocated
|
20
|
|
|
—
|
|
|
—
|
|
|
(5)
|
|
|
15
|
|
Total Non-Real Estate
|
3,709
|
|
|
(1,386)
|
|
|
1,884
|
|
|
(1,053)
|
|
|
3,154
|
|
Total
|
$
|
9,225
|
|
|
$
|
(1,889)
|
|
|
$
|
2,086
|
|
|
$
|
1,354
|
|
|
$
|
10,776
|
|
Negative provisions are caused by changes in the composition and credit quality of the loan portfolio. The result is an allocation of the loan loss reserve from one category to another.
A summary of the allowance and loans, including loans acquired with deteriorated credit quality, individually and collectively evaluated for impairment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
(in thousands)
|
Allowance
Individually
Evaluated
for Impairment
|
|
Allowance Individually Evaluated for Purchased Credit-Impairment
|
|
Allowance
Collectively Evaluated
for Impairment
|
|
Total Allowance
for Credit Losses
|
|
Loans
Individually
Evaluated
for Impairment
|
|
Loans Individually Evaluated for Purchased Credit-Impairment
|
|
Loans
Collectively
Evaluated
for Impairment
|
|
Total Loans
before
Unearned Income
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,029
|
|
|
$
|
1,029
|
|
|
$
|
—
|
|
|
$
|
397
|
|
|
$
|
150,444
|
|
|
$
|
150,841
|
|
Farmland
|
—
|
|
|
—
|
|
|
462
|
|
|
462
|
|
|
543
|
|
|
—
|
|
|
26,337
|
|
|
26,880
|
|
1- 4 family
|
266
|
|
|
—
|
|
|
2,244
|
|
|
2,510
|
|
|
1,480
|
|
|
4,102
|
|
|
265,654
|
|
|
271,236
|
|
Multifamily
|
—
|
|
|
—
|
|
|
978
|
|
|
978
|
|
|
—
|
|
|
900
|
|
|
45,032
|
|
|
45,932
|
|
Non-farm non-residential
|
2,280
|
|
|
—
|
|
|
12,784
|
|
|
15,064
|
|
|
9,800
|
|
|
2,396
|
|
|
811,941
|
|
|
824,137
|
|
Total Real Estate
|
2,546
|
|
|
—
|
|
|
17,497
|
|
|
20,043
|
|
|
11,823
|
|
|
7,795
|
|
|
1,299,408
|
|
|
1,319,026
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
181
|
|
|
181
|
|
|
2,531
|
|
|
343
|
|
|
25,461
|
|
|
28,335
|
|
Commercial and industrial
|
97
|
|
|
—
|
|
|
2,705
|
|
|
2,802
|
|
|
1,544
|
|
|
1,017
|
|
|
350,467
|
|
|
353,028
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
1,490
|
|
|
1,490
|
|
|
—
|
|
|
—
|
|
|
148,783
|
|
|
148,783
|
|
Unallocated
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
97
|
|
|
—
|
|
|
4,378
|
|
|
4,475
|
|
|
4,075
|
|
|
1,360
|
|
|
524,711
|
|
|
530,146
|
|
Total
|
$
|
2,643
|
|
|
$
|
—
|
|
|
$
|
21,875
|
|
|
$
|
24,518
|
|
|
$
|
15,898
|
|
|
$
|
9,155
|
|
|
$
|
1,824,119
|
|
|
$
|
1,849,172
|
|
Unearned Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,037)
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,844,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
(in thousands)
|
Allowance
Individually
Evaluated
for Impairment
|
|
Allowance Individually Evaluated for Purchased Credit-Impairment
|
|
Allowance
Collectively
Evaluated
for Impairment
|
|
Total Allowance
for Credit Losses
|
|
Loans
Individually
Evaluated
for Impairment
|
|
Loans Individually Evaluated for Purchased Credit-Impairment
|
|
Loans
Collectively
Evaluated
for Impairment
|
|
Total Loans
before
Unearned Income
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
423
|
|
|
$
|
423
|
|
|
$
|
—
|
|
|
$
|
526
|
|
|
$
|
171,721
|
|
|
$
|
172,247
|
|
Farmland
|
—
|
|
|
—
|
|
|
50
|
|
|
50
|
|
|
543
|
|
|
—
|
|
|
22,198
|
|
|
22,741
|
|
1- 4 family
|
34
|
|
|
—
|
|
|
993
|
|
|
1,027
|
|
|
1,058
|
|
|
6,402
|
|
|
282,175
|
|
|
289,635
|
|
Multifamily
|
—
|
|
|
—
|
|
|
1,038
|
|
|
1,038
|
|
|
—
|
|
|
—
|
|
|
23,973
|
|
|
23,973
|
|
Non-farm non-residential
|
1,879
|
|
|
—
|
|
|
3,398
|
|
|
5,277
|
|
|
12,120
|
|
|
2,294
|
|
|
602,122
|
|
|
616,536
|
|
Total Real Estate
|
1,913
|
|
|
—
|
|
|
5,902
|
|
|
7,815
|
|
|
13,721
|
|
|
9,222
|
|
|
1,102,189
|
|
|
1,125,132
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
95
|
|
|
95
|
|
|
4,030
|
|
|
—
|
|
|
22,680
|
|
|
26,710
|
|
Commercial and industrial
|
111
|
|
|
—
|
|
|
1,798
|
|
|
1,909
|
|
|
2,981
|
|
|
1,198
|
|
|
264,077
|
|
|
268,256
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
1,110
|
|
|
1,110
|
|
|
—
|
|
|
—
|
|
|
108,868
|
|
|
108,868
|
|
Unallocated
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
111
|
|
|
—
|
|
|
3,003
|
|
|
3,114
|
|
|
7,011
|
|
|
1,198
|
|
|
395,625
|
|
|
403,834
|
|
Total
|
$
|
2,024
|
|
|
$
|
—
|
|
|
$
|
8,905
|
|
|
$
|
10,929
|
|
|
$
|
20,732
|
|
|
$
|
10,420
|
|
|
$
|
1,497,814
|
|
|
$
|
1,528,966
|
|
Unearned Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,476)
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,525,490
|
|
As of December 31, 2020, 2019 and 2018, First Guaranty had loans totaling $15.6 million, $14.4 million and $8.7 million, respectively, not accruing interest. As of December 31, 2020, 2019 and 2018, First Guaranty had loans past due 90 days or more and still accruing interest totaling $13.1 million, $2.6 million and $0.1 million, respectively. The average outstanding balance of nonaccrual loans in 2020 was $19.8 million compared to $12.0 million in 2019 and $8.9 million in 2018.
As of December 31, 2020, First Guaranty has no outstanding commitments to advance additional funds in connection with impaired loans.
The following is a summary of impaired loans, excluding loans acquired with deteriorated credit quality, by class at December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
(in thousands)
|
Recorded
Investment
|
|
Unpaid
Principal Balance
|
|
Related
Allowance
|
|
Average
Recorded Investment
|
|
Interest Income
Recognized
|
|
Interest Income
Cash Basis
|
Impaired Loans with no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Farmland
|
543
|
|
|
552
|
|
|
—
|
|
|
543
|
|
|
—
|
|
|
—
|
|
1- 4 family
|
511
|
|
|
534
|
|
|
—
|
|
|
527
|
|
|
—
|
|
|
—
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-farm non-residential
|
1,227
|
|
|
1,227
|
|
|
—
|
|
|
1,218
|
|
|
80
|
|
|
72
|
|
Total Real Estate
|
2,281
|
|
|
2,313
|
|
|
—
|
|
|
2,288
|
|
|
80
|
|
|
72
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
2,531
|
|
|
2,661
|
|
|
—
|
|
|
2,594
|
|
|
—
|
|
|
—
|
|
Commercial and industrial
|
601
|
|
|
601
|
|
|
—
|
|
|
821
|
|
|
48
|
|
|
47
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
3,132
|
|
|
3,262
|
|
|
—
|
|
|
3,415
|
|
|
48
|
|
|
47
|
|
Total Impaired Loans with no related allowance
|
5,413
|
|
|
5,575
|
|
|
—
|
|
|
5,703
|
|
|
128
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Farmland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1- 4 family
|
969
|
|
|
969
|
|
|
266
|
|
|
969
|
|
|
5
|
|
|
5
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-farm non-residential
|
8,573
|
|
|
8,619
|
|
|
2,280
|
|
|
7,550
|
|
|
60
|
|
|
80
|
|
Total Real Estate
|
9,542
|
|
|
9,588
|
|
|
2,546
|
|
|
8,519
|
|
|
65
|
|
|
85
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial and industrial
|
943
|
|
|
943
|
|
|
97
|
|
|
981
|
|
|
79
|
|
|
57
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
943
|
|
|
943
|
|
|
97
|
|
|
981
|
|
|
79
|
|
|
57
|
|
Total Impaired Loans with an allowance recorded
|
10,485
|
|
|
10,531
|
|
|
2,643
|
|
|
9,500
|
|
|
144
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans
|
$
|
15,898
|
|
|
$
|
16,106
|
|
|
$
|
2,643
|
|
|
$
|
15,203
|
|
|
$
|
272
|
|
|
$
|
261
|
|
The following is a summary of impaired loans, excluding loans acquired with deteriorated credit quality, by class at December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
(in thousands)
|
Recorded
Investment
|
|
Unpaid
Principal Balance
|
|
Related
Allowance
|
|
Average
Recorded Investment
|
|
Interest Income
Recognized
|
|
Interest Income
Cash Basis
|
Impaired Loans with no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Farmland
|
543
|
|
|
552
|
|
|
—
|
|
|
550
|
|
|
—
|
|
|
—
|
|
1- 4 family
|
541
|
|
|
541
|
|
|
—
|
|
|
544
|
|
|
27
|
|
|
22
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-farm non-residential
|
8,307
|
|
|
8,307
|
|
|
—
|
|
|
9,940
|
|
|
673
|
|
|
688
|
|
Total Real Estate
|
9,391
|
|
|
9,400
|
|
|
—
|
|
|
11,034
|
|
|
700
|
|
|
710
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
4,030
|
|
|
4,186
|
|
|
—
|
|
|
4,031
|
|
|
12
|
|
|
—
|
|
Commercial and industrial
|
1,962
|
|
|
1,962
|
|
|
—
|
|
|
1,788
|
|
|
81
|
|
|
67
|
|
Consumer and other
|
|
|
|
|
—
|
|
|
|
|
|
|
|
Total Non-Real Estate
|
5,992
|
|
|
6,148
|
|
|
—
|
|
|
5,819
|
|
|
93
|
|
|
67
|
|
Total Impaired Loans with no related allowance
|
15,383
|
|
|
15,548
|
|
|
—
|
|
|
16,853
|
|
|
793
|
|
|
777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Farmland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1- 4 family
|
517
|
|
|
517
|
|
|
34
|
|
|
522
|
|
|
—
|
|
|
—
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-farm non-residential
|
3,813
|
|
|
4,162
|
|
|
1,879
|
|
|
4,134
|
|
|
194
|
|
|
212
|
|
Total Real Estate
|
4,330
|
|
|
4,679
|
|
|
1,913
|
|
|
4,656
|
|
|
194
|
|
|
212
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial and industrial
|
1,019
|
|
|
1,019
|
|
|
111
|
|
|
1,039
|
|
|
81
|
|
|
77
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
1,019
|
|
|
1,019
|
|
|
111
|
|
|
1,039
|
|
|
81
|
|
|
77
|
|
Total Impaired Loans with an allowance recorded
|
5,349
|
|
|
5,698
|
|
|
2,024
|
|
|
5,695
|
|
|
275
|
|
|
289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans
|
$
|
20,732
|
|
|
$
|
21,246
|
|
|
$
|
2,024
|
|
|
$
|
22,548
|
|
|
$
|
1,068
|
|
|
$
|
1,066
|
|
Troubled Debt Restructurings
A Troubled Debt Restructuring ("TDR") is considered such if the lender for economic or legal reasons related to the debtor's financial difficulties grants a concession to the debtor that it would not otherwise consider. The modifications to First Guaranty's TDRs were concessions on either the interest rate charged or the amortization. The effect of the modifications to First Guaranty was a reduction in interest income. These loans have an allocated reserve in First Guaranty's allowance for loan losses. First Guaranty restructured one loan that is considered TDR in the years ended December 31, 2020 and 2019. At December 31, 2020, First Guaranty had one outstanding TDR.
Under section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020, financial institutions have the option to temporarily suspend certain requirements under U.S. generally accepted accounting principles related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. This provision allows a financial institution the option to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. First Guaranty elected to adopt these provisions of the CARES Act.
The following table is an age analysis of TDRs as of December 31, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Accruing Loans
|
|
|
|
|
|
Accruing Loans
|
|
|
|
|
(in thousands)
|
Current
|
|
30-89 Days Past Due
|
|
Nonaccrual
|
|
Total TDRs
|
|
Current
|
|
30-89 Days Past Due
|
|
Nonaccrual
|
|
Total TDRs
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Farmland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1- 4 family
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-farm non-residential
|
—
|
|
|
—
|
|
|
3,591
|
|
|
3,591
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Real Estate
|
—
|
|
|
—
|
|
|
3,591
|
|
|
3,591
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial and industrial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,591
|
|
|
$
|
3,591
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following table discloses TDR activity for the twelve months ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trouble Debt Restructured Loans Activity
Twelve Months Ended December 31, 2020
|
(in thousands)
|
Beginning balance (December 31, 2019)
|
|
New TDRs
|
|
Charge-offs
post-modification
|
|
Transferred
to ORE
|
|
Paydowns
|
|
Construction to
permanent financing
|
|
Restructured
to market terms
|
|
Other adjustments
|
|
Ending balance (December 31, 2020)
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Farmland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1- 4 family
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-farm non-residential
|
—
|
|
|
3,613
|
|
|
—
|
|
|
—
|
|
|
(22)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,591
|
|
Total Real Estate
|
—
|
|
|
3,613
|
|
|
—
|
|
|
—
|
|
|
(22)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,591
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Commercial and industrial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Non-Real Estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Impaired Loans with no related allowance
|
$
|
—
|
|
|
$
|
3,613
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(22)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,591
|
|
There were no commitments to lend additional funds to debtors whose terms have been modified in a troubled debt restructuring at December 31, 2020.
Note 8. Premises and Equipment
The components of premises and equipment at December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
Land
|
$
|
15,180
|
|
|
$
|
15,180
|
|
Bank premises
|
40,906
|
|
|
40,536
|
|
Furniture and equipment
|
28,511
|
|
|
27,255
|
|
Construction in progress
|
13,562
|
|
|
9,534
|
|
Acquired value
|
98,159
|
|
|
92,505
|
|
Less: accumulated depreciation
|
38,267
|
|
|
36,041
|
|
Net book value
|
$
|
59,892
|
|
|
$
|
56,464
|
|
Depreciation expense amounted to $2.8 million, $2.3 million and $2.1 million for 2020, 2019 and 2018, respectively. Interest cost capitalized as a construction cost was $55,000, $91,000 and $54,000 for 2020, 2019 and 2018.
Note 9. Goodwill and Other Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but are subject to impairment testing. Other intangible assets continue to be amortized over their useful lives. Goodwill represents the purchase price over the fair value of net assets acquired from the Homestead Bancorp in 2007, Premier Bancshares, Inc. in 2017 and Union Bancshares, Incorporated in 2019. No impairment charges have been recognized since acquisition. Goodwill totaled $12.9 million at December 31, 2020 and 2019, respectively.
The following table summarizes intangible assets subject to amortization.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
(in thousands)
|
Gross
Carrying Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying Amount
|
|
Gross
Carrying Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying Amount
|
Core deposit intangibles
|
$
|
16,266
|
|
|
$
|
10,451
|
|
|
$
|
5,815
|
|
|
$
|
16,266
|
|
|
$
|
9,739
|
|
|
$
|
6,527
|
|
Loan servicing assets
|
1,826
|
|
|
1,054
|
|
|
772
|
|
|
1,558
|
|
|
919
|
|
|
639
|
|
Total
|
$
|
18,092
|
|
|
$
|
11,505
|
|
|
$
|
6,587
|
|
|
$
|
17,824
|
|
|
$
|
10,658
|
|
|
$
|
7,166
|
|
The core deposits intangible reflect the value of deposit relationships, including the beneficial rates, which arose from acquisitions. The weighted-average amortization period remaining for the core deposit intangibles is 10.0 years.
Amortization expense relating to purchase accounting intangibles totaled $0.7 million, $0.4 million, and $0.5 million for the years ended December 31, 2020, 2019, and 2018, respectively.
Amortization expense of the core deposit intangible assets for the next five years is as follows:
|
|
|
|
|
|
For the Years Ended
|
Estimated Amortization Expense
(in thousands)
|
December 31, 2021
|
$
|
644
|
|
December 31, 2022
|
$
|
576
|
|
December 31, 2023
|
$
|
576
|
|
December 31, 2024
|
$
|
576
|
|
December 31, 2025
|
$
|
576
|
|
Note 10. Other Real Estate
Other real estate owned consists of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
Real Estate Owned Acquired by Foreclosure:
|
|
|
|
Residential
|
$
|
131
|
|
|
$
|
559
|
|
Construction & land development
|
311
|
|
|
669
|
|
Non-farm non-residential
|
2,203
|
|
|
3,651
|
|
Total Other Real Estate Owned and Foreclosed Property
|
2,645
|
|
|
4,879
|
|
Allowance for Other Real Estate Owned losses
|
(405)
|
|
|
—
|
|
Net Other Real Estate Owned and Foreclosed Property
|
$
|
2,240
|
|
|
$
|
4,879
|
|
Note 11. Deposits
A schedule of maturities of all time deposits are as follows:
|
|
|
|
|
|
(in thousands)
|
December 31, 2020
|
2021
|
$
|
355,093
|
|
2022
|
125,678
|
|
2023
|
108,380
|
|
2024
|
113,745
|
|
2025 and thereafter
|
22,733
|
|
Total
|
$
|
725,629
|
|
The table above includes $3.4 million in brokered deposits for December 31, 2020. The aggregate amount of jumbo time deposits, each with a minimum denomination of $250,000 totaled $248.8 million and $290.3 million at December 31, 2020 and 2019, respectively.
Note 12. Borrowings
Short-term borrowings are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
Federal Home Loan Bank advances
|
$
|
50,000
|
|
|
$
|
13,079
|
|
Repurchase agreements
|
6,121
|
|
|
6,840
|
|
Line of credit
|
—
|
|
|
—
|
|
Total short-term borrowings
|
$
|
56,121
|
|
|
$
|
19,919
|
|
First Guaranty maintains borrowing relationships with other financial institutions as well as the Federal Home Loan Bank on a short and long-term basis to meet liquidity needs. First Guaranty had $56.1 million in short-term borrowings outstanding at December 31, 2020 compared to $19.9 million outstanding at December 31, 2019. First Guaranty has an available line of credit of $6.5 million, with no outstanding balance at December 31, 2020.
Available lines of credit totaled $297.2 million at December 31, 2020 and $278.8 million at December 31, 2019.
The following schedule provides certain information about First Guaranty's short-term borrowings for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands except for %)
|
2020
|
|
2019
|
|
2018
|
Outstanding at year end
|
$
|
56,121
|
|
|
$
|
19,919
|
|
|
$
|
—
|
|
Maximum month-end outstanding
|
$
|
57,048
|
|
|
$
|
19,919
|
|
|
$
|
37,000
|
|
Average daily outstanding
|
$
|
48,277
|
|
|
$
|
3,320
|
|
|
$
|
7,119
|
|
Weighted average rate during the year
|
0.95
|
%
|
|
2.00
|
%
|
|
2.21
|
%
|
Weighted average rate at year end
|
0.89
|
%
|
|
2.00
|
%
|
|
—
|
%
|
Long-term debt is summarized as follows:
Long-term Federal Home Loan Bank advance, fixed at 2.12%, totaled $3.4 million at December 31, 2020 and $3.5 million at December 31, 2019. This advance was acquired in the Union acquisition and has a contractual maturity date of September 1, 2037.
Senior long-term debt with a commercial bank, priced at floating Wall Street Journal Prime less 25 basis points (3.00%), totaled $14.0 million at December 31, 2020. First Guaranty pays $697,715 principal plus interest quarterly. This loan was renewed in December 2020 and has a contractual maturity date of December 22, 2025. This long-term debt is secured by a pledge of 85% (4,823,899 shares) of First Guaranty's interest in First Guaranty Bank (a wholly owned subsidiary). This senior long-term debt was priced at floating 3-month LIBOR plus 250 basis points (4.61%), totaled $16.9 million at December 31, 2019. This loan was originated in December 2015.
Senior long-term debt with a commercial bank, priced at floating Wall Street Journal Prime less 70 basis points (3.00%), totaled $28.4 million at December 31, 2020 and $31.7 million at December 31, 2019. First Guaranty pays $812,500 principal plus interest quarterly. This loan was renewed in November 2019 and has a contractual maturity date of November 7, 2024. This long-term debt is secured by a pledge of 85% (4,823,899 shares) of First Guaranty's interest in First Guaranty Bank (a wholly owned subsidiary).
Junior subordinated debt, priced at Wall Street Journal Prime plus 75 basis points (4.00%), totaled $14.8 million at December 31, 2020 and $14.7 million at December 31, 2019. First Guaranty pays interest semi-annually for the Fixed Interest Rate Period and quarterly for the Floating Interest Rate Period. The Note is unsecured and ranks junior in right of payment to any senior indebtedness and obligations to general and secured creditors. The Note was originated in December 2015 and is scheduled to mature on December 21, 2025. Subject to limited exceptions, First Guaranty cannot repay the Note until after December 21, 2020. The Note qualifies for treatment as Tier 2 capital for regulatory capital purposes.
First Guaranty maintains a revolving line of credit for $6.5 million with an availability of $6.5 million at December 31, 2020. This line of credit is secured by a pledge of 13.2% (735,745 shares) of First Guaranty's interest in First Guaranty Bank (a wholly owned subsidiary) and is priced at 4.25%.
At December 31, 2020, letters of credit issued by the FHLB totaling $365.8 million were outstanding and carried as off-balance sheet items, all of which expire by 2024. At December 31, 2019, letters of credit issued by the FHLB totaling $355.2 million were outstanding and carried as off-balance sheet items, all of which expire by 2024. The letters of credit are solely used for pledging towards public fund deposits. The FHLB has a blanket lien on substantially all of the loans in First Guaranty's portfolio which is used to secure borrowing availability from the FHLB. First Guaranty has obtained a subordination agreement from the FHLB on First Guaranty's farmland, agricultural, and commercial and industrial loans. These loans are available to be pledged for additional reserve liquidity.
As of December 31, 2020 obligations on long-term advances from FHLB, senior long-term debt and junior subordinated debentures totaled $60.5 million. The scheduled payments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Long-term Advances from FHLB
|
|
Senior
Long-term Debt
|
|
Junior
Subordinated Debentures
|
2021
|
$
|
—
|
|
|
$
|
4,531
|
|
|
$
|
—
|
|
2022
|
—
|
|
|
6,041
|
|
|
—
|
|
2023
|
—
|
|
|
6,041
|
|
|
—
|
|
2024
|
—
|
|
|
22,291
|
|
|
—
|
|
2025
|
—
|
|
|
3,504
|
|
|
15,000
|
|
2026 and thereafter
|
3,366
|
|
|
—
|
|
|
—
|
|
Subtotal
|
$
|
3,366
|
|
$
|
3,366
|
|
$
|
42,408
|
|
|
$
|
15,000
|
|
Debt issuance costs
|
—
|
|
|
(42)
|
|
|
(223)
|
|
Total
|
$
|
3,366
|
|
|
$
|
42,366
|
|
|
$
|
14,777
|
|
Note 13. Capital Requirements
First Guaranty Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions that, if undertaken, could have a direct material effect on First Guaranty's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2020 and 2019, that the Bank met all capital adequacy requirements.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a "capital conservation buffer" consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. First Guaranty Bank's capital conservation buffer was 4.22% at December 31, 2020.
In addition, as a result of the legislation, the federal banking agencies have developed a "Community Bank Leverage Ratio" (the ratio of a bank's Tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A "qualifying community bank" that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered "well capitalized" under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution's risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies set the new Community Bank Leverage Ratio at 9%. Pursuant to the CARES Act, the federal banking agencies set the Community Bank Leverage Ratio at 8% beginning in the second quarter of 2020 through the end of 2020. Beginning in 2021, the Community Bank Leverage Ratio will increase to 8.5% for the calendar year. Community banks will have until Jan. 1, 2022, before the Community Bank Leverage Ratio requirement will return to 9%. A financial institution can elect to be subject to this new definition. The new rule took effect on January 1, 2020. The Bank did not elect to follow the Community Bank Leverage Ratio.
As of December 31, 2020, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that Management believes have changed the Bank's category. First Guaranty Bank's actual capital amounts and ratios as of December 31, 2020 and 2019 are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
Minimum Capital Requirements
|
|
Minimum to be Well Capitalized
Under Action Provisions
|
(in thousands except for %)
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Total Risk-based Capital:
|
$
|
233,391
|
|
|
12.22
|
%
|
|
$
|
152,805
|
|
|
8.00
|
%
|
|
$
|
191,006
|
|
|
10.00
|
%
|
Tier 1 Capital:
|
$
|
209,507
|
|
|
10.97
|
%
|
|
$
|
114,604
|
|
|
6.00
|
%
|
|
$
|
152,805
|
|
|
8.00
|
%
|
Tier 1 Leverage Capital:
|
$
|
209,507
|
|
|
8.58
|
%
|
|
$
|
97,683
|
|
|
4.00
|
%
|
|
$
|
122,104
|
|
|
5.00
|
%
|
Common Equity Tier One Capital:
|
$
|
209,507
|
|
|
10.97
|
%
|
|
$
|
85,953
|
|
|
4.50
|
%
|
|
$
|
124,154
|
|
|
6.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
Total Risk-based Capital:
|
$
|
213,962
|
|
|
12.61
|
%
|
|
$
|
135,697
|
|
|
8.00
|
%
|
|
$
|
169,621
|
|
|
10.00
|
%
|
Tier 1 Capital:
|
$
|
203,034
|
|
|
11.96
|
%
|
|
$
|
101,773
|
|
|
6.00
|
%
|
|
$
|
135,697
|
|
|
8.00
|
%
|
Tier 1 Leverage Capital:
|
$
|
203,034
|
|
|
10.44
|
%
|
|
$
|
77,771
|
|
|
4.00
|
%
|
|
$
|
97,214
|
|
|
5.00
|
%
|
Common Equity Tier One Capital:
|
$
|
203,034
|
|
|
11.96
|
%
|
|
$
|
76,329
|
|
|
4.50
|
%
|
|
$
|
110,254
|
|
|
6.50
|
%
|
Note 14. Dividend Restrictions
The Federal Reserve Bank ("FRB") has stated that, generally, a bank holding company should not maintain a rate of distributions to shareholders unless its available net income has been sufficient to fully fund the distributions, and the prospective rate of earnings retention appears consistent with the bank holding company's capital needs, asset quality and overall financial condition. As a Louisiana corporation, First Guaranty is restricted under the Louisiana corporate law from paying dividends under certain conditions.
First Guaranty Bank may not pay dividends or distribute capital assets if it is in default on any assessment due to the FDIC. First Guaranty Bank is also subject to regulations that impose minimum regulatory capital and minimum state law earnings requirements that affect the amount of cash available for distribution. In addition, under the Louisiana Banking Law, dividends may not be paid if it would reduce the unimpaired surplus below 50% of outstanding capital stock in any year.
The Bank is restricted under applicable laws in the payment of dividends to an amount equal to current year earnings plus undistributed earnings for the immediately preceding year, unless prior permission is received from the Commissioner of Financial Institutions for the State of Louisiana. Dividends payable by the Bank in 2021 without permission will be limited to 2021 earnings plus the undistributed earnings of $5.7 million from 2020.
Accordingly, at January 1, 2021, $223.1 million of First Guaranty's equity in the net assets of the Bank was restricted. In addition, dividends paid by the Bank to First Guaranty would be prohibited if the effect thereof would cause the Bank's capital to be reduced below applicable minimum capital requirements.
Note 15. Related Party Transactions
In the normal course of business, First Guaranty and its subsidiary, First Guaranty Bank, have loans, deposits and other transactions with its executive officers, directors, affiliates and certain business organizations and individuals with which such persons are associated. These transactions are completed with terms no less favorable than current market rates. An analysis of the activity of loans made to such borrowers during the year ended December 31, 2020 and 2019 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
Balance, beginning of year
|
$
|
61,820
|
|
|
$
|
63,907
|
|
Net (Decrease) Increase
|
17,579
|
|
|
(2,087)
|
|
Balance, end of year
|
$
|
79,399
|
|
|
$
|
61,820
|
|
Unfunded commitments to First Guaranty and Bank directors and executive officers totaled $40.8 million and $21.6 million at December 31, 2020 and 2019, respectively. At December 31, 2020 First Guaranty and the Bank had deposits from directors and executives totaling $50.3 million. There were no participations in loans purchased from affiliated financial institutions included in First Guaranty's loan portfolio in 2020 or 2019.
During the years ended 2020, 2019 and 2018, First Guaranty paid approximately $0.5 million, $0.5 million and $0.3 million, respectively, for printing services and supplies and office furniture and equipment to Champion Industries, Inc., of which Mr. Marshall T. Reynolds, the Chairman of First Guaranty's Board of Directors, is President, Chief Executive Officer, Chairman of the Board of Directors and a major shareholder of Champion.
On December 21, 2015, First Guaranty issued a $15.0 million subordinated note (the "Note") to Edgar Ray Smith III, a director of First Guaranty. The Note is for a ten-year term (non-callable for first five years) and will bear interest at a fixed annual rate of 4.0% for the first five years of the term and then adjust to a floating rate based on the Prime Rate as reported by the Wall Street Journal plus 75 basis points for the period of time after the fifth year until redemption or maturity. First Guaranty paid interest of $0.6 million in 2020, 2019 and 2018 for this note.
During the years ended 2020, 2019 and 2018, First Guaranty paid approximately $27,000, $0.1 million and $0.2 million, respectively, for the purchase and maintenance of First Guaranty's automobiles to subsidiaries of Hood Automotive Group, of which William K. Hood, a director of First Guaranty, is President.
During the years ended 2020, 2019 and 2018, First Guaranty paid approximately $0.1 million, $69,000 and $0.7 million, respectively, for architectural services in relation to bank branches to Gasaway Gasaway Bankston Architects, of which bank subsidiary board member Andrew B. Gasaway is part owner.
During the years ended 2020, 2019 and 2018, First Guaranty paid approximately $0.5 million, $0.3 million and $0.2 million to Centurion Insurance, an insurance brokerage agency, to bind coverage at market terms for property casualty insurance and health insurance. First Guaranty owns a 40% interest in Centurion and accounts for this investment under the equity method.
Note 16. Employee Benefit Plans
First Guaranty has an employee savings plan to which employees, who meet certain service requirements, may defer 1% to 20% of their base salaries, 6% of which may be matched up to 100%, at its sole discretion. Contributions to the savings plan were $173,000, $149,000 and $292,000 in 2020, 2019 and 2018, respectively. First Guaranty has an Employee Stock Ownership Plan ("ESOP") which was frozen in 2010. No contributions were made to the ESOP for the years 2020, 2019 or 2018. As of December 31, 2020, the ESOP held 2,770 shares. First Guaranty is in the process of terminating the plan.
Note 17. Other Expenses
The following is a summary of the significant components of other noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
|
2018
|
Other noninterest expense:
|
|
|
|
|
|
Legal and professional fees
|
$
|
2,919
|
|
|
$
|
2,648
|
|
|
$
|
2,362
|
|
Data processing
|
2,465
|
|
|
1,972
|
|
|
1,692
|
|
ATM Fees
|
1,332
|
|
|
1,217
|
|
|
1,214
|
|
Marketing and public relations
|
1,046
|
|
|
1,456
|
|
|
1,329
|
|
Taxes - sales, capital and franchise
|
1,251
|
|
|
1,094
|
|
|
1,066
|
|
Operating supplies
|
921
|
|
|
674
|
|
|
562
|
|
Software expense and amortization
|
2,354
|
|
|
1,308
|
|
|
1,119
|
|
Travel and lodging
|
726
|
|
|
908
|
|
|
978
|
|
Telephone
|
256
|
|
|
193
|
|
|
208
|
|
Amortization of core deposits
|
712
|
|
|
390
|
|
|
545
|
|
Donations
|
393
|
|
|
603
|
|
|
380
|
|
Net costs from other real estate and repossessions
|
1,653
|
|
|
422
|
|
|
186
|
|
Regulatory assessment
|
1,716
|
|
|
683
|
|
|
941
|
|
Other
|
2,980
|
|
|
2,536
|
|
|
2,204
|
|
Total other noninterest expense
|
$
|
20,724
|
|
|
$
|
16,104
|
|
|
$
|
14,786
|
|
First Guaranty does not capitalize advertising costs. They are expensed as incurred and are included in other noninterest expense on the Consolidated Statements of Income. Advertising expense was $0.4 million, $0.8 million and $0.9 million for 2020, 2019 and 2018, respectively.
Note 18. Income Taxes
The Tax Cuts and Jobs Act ("TCJA") signed into law on December 22, 2017, makes broad and complex changes to the U.S. tax code that affected income tax expense in 2017. The TCJA reduced the U.S. federal corporate income tax rate from 35% to 21% beginning January 1, 2018 and also established new tax laws that affect 2018.
The following is a summary of the provision for income taxes included in the Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
|
2018
|
Current
|
$
|
8,964
|
|
|
$
|
3,770
|
|
|
$
|
3,929
|
|
Deferred
|
(3,745)
|
|
|
(114)
|
|
|
(467)
|
|
Total
|
$
|
5,219
|
|
|
$
|
3,656
|
|
|
$
|
3,462
|
|
The difference between income taxes computed by applying the statutory federal income tax rate and the provision for income taxes in the financial statements is reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands except for %)
|
2020
|
|
2019
|
|
2018
|
Statutory tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
Federal income taxes at statutory rate
|
$
|
5,363
|
|
|
$
|
3,758
|
|
|
$
|
3,712
|
|
Tax exempt municipal income
|
(124)
|
|
|
(140)
|
|
|
(166)
|
|
Other
|
(20)
|
|
|
38
|
|
|
(84)
|
|
Total
|
$
|
5,219
|
|
|
$
|
3,656
|
|
|
$
|
3,462
|
|
Deferred taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities, and available tax credit carry forwards. Temporary differences between the financial statement and tax values of assets and liabilities give rise to deferred taxes. The significant components of deferred taxes classified in First Guaranty's Consolidated Balance Sheets at December 31, 2020 and 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
Deferred tax assets:
|
|
|
|
Allowance for loan losses
|
$
|
4,748
|
|
|
$
|
1,720
|
|
Other real estate owned
|
239
|
|
|
257
|
|
Unrealized losses on available for sale securities
|
—
|
|
|
—
|
|
Net operating loss
|
1,190
|
|
|
1,282
|
|
Other
|
581
|
|
|
508
|
|
Gross deferred tax assets
|
6,758
|
|
|
3,767
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Depreciation and amortization
|
(1,952)
|
|
|
(2,010)
|
|
Core deposit intangibles
|
(1,214)
|
|
|
(1,359)
|
|
Unrealized gains on available for sale securities
|
(172)
|
|
|
(578)
|
|
Discount on purchased loans
|
(161)
|
|
|
(267)
|
|
Other
|
(625)
|
|
|
(670)
|
|
Gross deferred tax liabilities
|
(4,124)
|
|
|
(4,884)
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
$
|
2,634
|
|
|
$
|
(1,117)
|
|
First Guaranty determined that the net deferred tax asset at December 31, 2020 was more likely than not to be realized based on an assessment of all available positive and negative evidence, and therefore no valuation allowance was recorded.
Net operating loss carryforwards for income tax purposes were $5.7 million as of December 31, 2020 and $6.1 million in 2019. The carryforwards were acquired in 2017 in the Premier acquisition and expire from 2027 to 2034, and will be utilized subject to annual Internal Revenue Code Section 382 limitations.
ASC 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attribute for the consolidated financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. First Guaranty does not believe it has any unrecognized tax benefits included in its consolidated financial statements. First Guaranty has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations. First Guaranty recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in noninterest expense. During the years ended December 31, 2020, 2019 and 2018, First Guaranty did not recognize any interest or penalties in its consolidated financial statements, nor has it recorded an accrued liability for interest or penalty payments.
Note 19. Commitments and Contingencies
Off-balance sheet commitments
First Guaranty is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby and commercial letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract or notional amounts of those instruments reflect the extent of the involvement in particular classes of financial instruments.
The exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and commercial letters of credit is represented by the contractual notional amount of those instruments. Unless otherwise noted, collateral or other security is not required to support financial instruments with credit risk.
Set forth below is a summary of the notional amounts of the financial instruments with off-balance sheet risk at December 31, 2020 and December 31, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
Contract Amount
|
December 31, 2020
|
|
December 31, 2019
|
(in thousands)
|
|
|
|
Commitments to Extend Credit
|
$
|
154,047
|
|
|
$
|
117,826
|
|
Unfunded Commitments under lines of credit
|
$
|
169,151
|
|
|
$
|
148,127
|
|
Commercial and Standby letters of credit
|
$
|
11,728
|
|
|
$
|
11,258
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on Management's credit evaluation of the counterpart. Collateral requirements vary but may include accounts receivable, inventory, property, plant and equipment, residential real estate and commercial properties.
Standby and commercial letters of credit are conditional commitments to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The majority of these guarantees are short-term, one year or less; 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. Collateral requirements are the same as on-balance sheet instruments and commitments to extend credit.
There were no losses incurred on off-balance sheet commitments in 2020, 2019 or 2018.
First Guaranty currently has one new facility under construction with total construction commitment of $11.4 million of which $11.1 million has been incurred as of December 31, 2020.
Note 20. Fair Value Measurements
The fair value of a financial instrument is the current amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Valuation techniques use certain inputs to arrive at fair value. Inputs to valuation techniques are the assumptions that market participants would use in pricing the asset or liability. They may be observable or unobservable. First Guaranty uses a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs – Unadjusted quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds or credit risks) or inputs that are derived principally from or corroborated by market data by correlation or other means.
Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
A description of the valuation methodologies used for instruments measured at fair value follows, as well as the classification of such instruments within the valuation hierarchy.
Securities available for sale. Securities are classified within Level 1 where quoted market prices are available in an active market. Inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are unavailable, fair value is estimated using quoted prices of securities with similar characteristics, at which point the securities would be classified within Level 2 of the hierarchy. Securities classified Level 3 as of December 31, 2020 includes corporate debt and municipal securities.
Impaired loans . Loans are measured for impairment using the methods permitted by ASC Topic 310. Fair value of impaired loans is measured by either the fair value of the collateral if the loan is collateral dependent (Level 2 or Level 3), or the present value of expected future cash flows, discounted at the loan's effective interest rate (Level 3). Fair value of the collateral is determined by appraisals or by independent valuation.
Other real estate owned. Properties are recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Fair values of other real estate owned ("OREO") at December 31, 2020 and 2019 are determined by sales agreement or appraisal, and costs to sell are based on estimation per the terms and conditions of the sales agreement or amounts commonly used in real estate transactions. Inputs include appraisal values or recent sales activity for similar assets in the property's market; thus OREO measured at fair value would be classified within either Level 2 or Level 3 of the hierarchy.
Certain non-financial assets and non-financial liabilities are measured at fair value on a non-recurring basis including assets and liabilities related to reporting units measured at fair value in the testing of goodwill impairment, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.
The following table summarizes financial assets measured at fair value on a recurring basis as of December 31, 2020 and 2019, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
Available for Sale Securities Fair Value Measurements Using:
|
|
|
|
Level 1: Quoted Prices in Active Markets For Identical Assets
|
$
|
3,000
|
|
|
$
|
—
|
|
Level 2: Significant Other Observable Inputs
|
209,359
|
|
|
330,539
|
|
Level 3: Significant Unobservable Inputs
|
26,189
|
|
|
9,398
|
|
Securities available for sale measured at fair value
|
$
|
238,548
|
|
|
$
|
339,937
|
|
First Guaranty's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While Management believes the methodologies used are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value.
The change in Level 1 securities available for sale from December 31, 2019 was due principally to a net increase in Treasury bills of $3.0 million. The change in Level 2 securities available for sale from December 31, 2019 was due principally to the transfer of mortgage-backed and municipal securities from the held for sale to available for sale portfolio and the transfer of securities between Level 2 and 3. $6.8 million in corporate securities and $1.4 million in municipal securities were transferred from Level 3 to Level 2 from December 31, 2019 to December 31, 2020. There were no transfers between Level 1 and 2 securities available for sale from December 31, 2019 to December 31, 2020.
The following table reconciles assets measured at fair value on a recurring basis using unobservable inputs ( Level 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Changes
|
(in thousands)
|
December 31, 2020
|
|
December 31, 2019
|
Balance, beginning of year
|
$
|
9,398
|
|
|
$
|
4,761
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
Included in earnings
|
—
|
|
|
—
|
|
Included in other comprehensive income
|
256
|
|
|
146
|
|
Purchases, sales, issuances and settlements, net
|
5,361
|
|
|
4,491
|
|
Transfers in and/or out of Level 3
|
11,174
|
|
|
—
|
|
Balance as of end of year
|
$
|
26,189
|
|
|
$
|
9,398
|
|
There were no gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held as of December 31, 2020.
The following table measures financial assets and financial liabilities measured at fair value on a non-recurring basis as of December 31, 2020 and December 31, 2019, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
At December 31, 2020
|
|
At December 31, 2019
|
Fair Value Measurements Using: Impaired Loans
|
|
|
|
Level 1: Quoted Prices in Active Markets For Identical Assets
|
$
|
—
|
|
|
$
|
—
|
|
Level 2: Significant Other Observable Inputs
|
—
|
|
|
—
|
|
Level 3: Significant Unobservable Inputs
|
7,842
|
|
|
4,046
|
|
Impaired loans measured at fair value
|
$
|
7,842
|
|
|
$
|
4,046
|
|
|
|
|
|
Fair Value Measurements Using: Other Real Estate Owned
|
|
|
|
Level 1: Quoted Prices in Active Markets For Identical Assets
|
$
|
—
|
|
|
$
|
—
|
|
Level 2: Significant Other Observable Inputs
|
363
|
|
|
4,158
|
|
Level 3: Significant Unobservable Inputs
|
1,877
|
|
|
721
|
|
Other real estate owned measured at fair value
|
$
|
2,240
|
|
|
$
|
4,879
|
|
ASC 825-10 provides First Guaranty with an option to report selected financial assets and liabilities at fair value. The fair value option established by this statement permits First Guaranty to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each reporting date subsequent to implementation.
First Guaranty has chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States.
Note 21. Financial Instruments
Fair value estimates are generally subjective in nature and are dependent upon a number of significant assumptions associated with each instrument or group of similar instruments, including estimates of discount rates, risks associated with specific financial instruments, estimates of future cash flows and relevant available market information. Fair value information is intended to represent an estimate of an amount at which a financial instrument could be exchanged in a current transaction between a willing buyer and seller engaging in an exchange transaction. However, since there are no established trading markets for a significant portion of First Guaranty's financial instruments, First Guaranty may not be able to immediately settle financial instruments; as such, the fair values are not necessarily indicative of the amounts that could be realized through immediate settlement. In addition, the majority of the financial instruments, such as loans and deposits, are held to maturity and are realized or paid according to the contractual agreement with the customer.
Quoted market prices are used to estimate fair values when available. However, due to the nature of the financial instruments, in many instances quoted market prices are not available. Accordingly, estimated fair values have been estimated based on other valuation techniques, such as discounting estimated future cash flows using a rate commensurate with the risks involved or other acceptable methods. Fair values are estimated without regard to any premium or discount that may result from concentrations of ownership of financial instruments, possible income tax ramifications or estimated transaction costs. The fair value estimates are subjective in nature and involve matters of significant judgment and, therefore, cannot be determined with precision. Fair values are also estimated at a specific point in time and are based on interest rates and other assumptions at that date. As events change the assumptions underlying these estimates, the fair values of financial instruments will change.
Disclosure of fair values is not required for certain items such as lease financing, investments accounted for under the equity method of accounting, obligations of pension and other postretirement benefits, premises and equipment, other real estate, prepaid expenses, the value of long-term relationships with depositors (core deposit intangibles) and other customer relationships, other intangible assets and income tax assets and liabilities. Fair value estimates are presented for existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of the unrealized gains and losses have not been considered in the estimates. Accordingly, the aggregate fair value amounts presented do not purport to represent and should not be considered representative of the underlying market or franchise value of First Guaranty.
Because the standard permits many alternative calculation techniques and because numerous assumptions have been used to estimate the fair values, reasonable comparison of the fair value information with other financial institutions' fair value information cannot necessarily be made. The methods and assumptions used to estimate the fair values of financial instruments are as follows:
Cash and due from banks, interest-bearing deposits with banks, federal funds sold and federal funds purchased.
These items are generally short-term and the carrying amounts reported in the consolidated balance sheets are a reasonable estimation of the fair values.
Investment Securities.
Fair values are principally based on quoted market prices. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or the use of discounted cash flow analyses.
Loans Held for Sale.
Fair values of mortgage loans held for sale are based on commitments on hand from investors or prevailing market prices. These loans are classified within level 3 of the fair value hierarchy.
Loans, net.
Market values are computed present values using net present value formulas. The present value is the sum of the present value of all projected cash flows on an item at a specified discount rate. The discount rate is set as an appropriate rate index, plus or minus an appropriate spread. These loans are classified within level 3 of the fair value hierarchy.
Impaired loans.
Fair value of impaired loans is measured by either the fair value of the collateral if the loan is collateral dependent (Level 2 or Level 3), or the present value of expected future cash flows, discounted at the loan's effective interest rate (Level 3). Fair value of the collateral is determined by appraisals or by independent valuation.
Cash Surrender of BOLI.
The cash surrender value of BOLI approximates fair value.
Accrued interest receivable.
The carrying amount of accrued interest receivable approximates its fair value.
Deposits.
Market values are actually computed present values using net present value formulas. The present value is the sum of the present value of all projected cash flows on an item at a specified discount rate. The discount rate is set as an appropriate rate index, plus or minus an appropriate spread. Deposits are classified within level 3 of the fair value hierarchy.
Accrued interest payable.
The carrying amount of accrued interest payable approximates its fair value.
Borrowings.
The carrying amount of federal funds purchased and other short-term borrowings approximate their fair values. The fair value of First Guaranty's long-term borrowings is computed using net present value formulas. The present value is the sum of the present value of all projected cash flows on an item at a specified discount rate. The discount rate is set as an appropriate rate index, plus or minus an appropriate spread. Borrowings are classified within level 3 of the fair value hierarchy.
Other Unrecognized Financial Instruments.
The fair value of commitments to extend credit is estimated using the fees charged to enter into similar legally binding agreements, taking into account the remaining terms of the agreements and customers' credit ratings. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. Noninterest-bearing deposits are held at cost. The fair values of letters of credit are based on fees charged for similar agreements or on estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. At December 31, 2020 and 2019 the fair value of guarantees under commercial and standby letters of credit was not material.
The carrying amounts and estimated fair values of financial instruments at December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2020 Using
|
(in thousands)
|
|
Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
298,903
|
|
|
$
|
298,903
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
298,903
|
|
Federal funds sold
|
|
702
|
|
|
702
|
|
|
—
|
|
|
—
|
|
|
702
|
|
Securities, available for sale
|
|
238,548
|
|
|
3,000
|
|
|
209,359
|
|
|
26,189
|
|
|
238,548
|
|
Loans held for sale
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loans, net
|
|
1,819,617
|
|
|
—
|
|
|
—
|
|
|
1,846,738
|
|
|
1,846,738
|
|
Cash surrender value of BOLI
|
|
5,427
|
|
|
—
|
|
|
—
|
|
|
5,427
|
|
|
5,427
|
|
Accrued interest receivable
|
|
11,933
|
|
|
—
|
|
|
—
|
|
|
11,933
|
|
|
11,933
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,166,318
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,179,004
|
|
|
2,179,004
|
|
Short-term advances from Federal Home Loan Bank
|
|
50,000
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
50,000
|
|
Repurchase agreements
|
|
6,121
|
|
|
—
|
|
|
—
|
|
|
6,154
|
|
|
6,154
|
|
Accrued interest payable
|
|
5,292
|
|
|
—
|
|
|
—
|
|
|
5,292
|
|
|
5,292
|
|
Long-term advances from Federal Home Loan Bank
|
|
3,366
|
|
|
—
|
|
|
—
|
|
|
3,366
|
|
|
3,366
|
|
Senior long-term debt
|
|
42,366
|
|
|
—
|
|
|
—
|
|
|
42,408
|
|
|
42,408
|
|
Junior subordinated debentures
|
|
14,777
|
|
|
—
|
|
|
—
|
|
|
14,452
|
|
|
14,452
|
|
The carrying amounts and estimated fair values of financial instruments at December 31, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2019 Using
|
(in thousands)
|
|
Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
66,511
|
|
|
$
|
66,511
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
66,511
|
|
Federal funds sold
|
|
914
|
|
|
914
|
|
|
—
|
|
|
—
|
|
|
914
|
|
Securities, available for sale
|
|
339,937
|
|
|
—
|
|
|
330,539
|
|
|
9,398
|
|
|
339,937
|
|
Securities, held for maturity
|
|
86,579
|
|
|
—
|
|
|
86,817
|
|
|
—
|
|
|
86,817
|
|
Loans, net
|
|
1,514,561
|
|
|
—
|
|
|
—
|
|
|
1,515,277
|
|
|
1,515,277
|
|
Cash surrender value of BOLI
|
|
5,288
|
|
|
—
|
|
|
—
|
|
|
5,288
|
|
|
5,288
|
|
Accrued interest receivable
|
|
8,412
|
|
|
—
|
|
|
—
|
|
|
8,412
|
|
|
8,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,853,013
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,863,179
|
|
|
1,863,179
|
|
Short-term advances from Federal Home Loan Bank
|
|
13,079
|
|
|
—
|
|
|
—
|
|
|
13,079
|
|
|
13,079
|
|
Repurchase agreements
|
|
6,840
|
|
|
—
|
|
|
—
|
|
|
6,840
|
|
|
6,840
|
|
Accrued interest payable
|
|
6,047
|
|
|
—
|
|
|
—
|
|
|
6,047
|
|
|
6,047
|
|
Long-term advances from Federal Home Loan Bank
|
|
3,533
|
|
|
—
|
|
|
—
|
|
|
3,533
|
|
|
3,533
|
|
Senior long-term debt
|
|
48,558
|
|
|
—
|
|
|
—
|
|
|
48,599
|
|
|
48,599
|
|
Junior subordinated debentures
|
|
14,737
|
|
|
—
|
|
|
—
|
|
|
14,762
|
|
|
14,762
|
|
There is no material difference between the contract amount and the estimated fair value of off-balance sheet items that are primarily comprised of short-term unfunded loan commitments that are generally at market prices.
Note 22. Concentrations of Credit and Other Risks
First Guaranty monitors loan portfolio concentrations by region, collateral type, loan type, and industry on a monthly basis and has established maximum thresholds as a percentage of its capital to ensure that the desired mix and diversification of its loan portfolio is achieved. First Guaranty is compliant with the established thresholds as of December 31, 2020. Personal, commercial and residential loans are granted to customers, most of who reside in northern and southern areas of Louisiana. Although First Guaranty has a diversified loan portfolio, significant portions of the loans are collateralized by real estate located in Tangipahoa Parish and surrounding parishes in Southeast Louisiana. Declines in the Louisiana economy could result in lower real estate values which could, under certain circumstances, result in losses to First Guaranty.
The distribution of commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were granted primarily to commercial borrowers.
Approximately 33.0% of First Guaranty's deposits are derived from local governmental agencies at December 31, 2020. These governmental depositing authorities are generally long-term customers. A number of the depositing authorities are under contractual obligation to maintain their operating funds exclusively with First Guaranty. In most cases, First Guaranty is required to pledge securities or letters of credit issued by the Federal Home Loan Bank to the depositing authorities to collateralize their deposits. Under certain circumstances, the withdrawal of all of, or a significant portion of, the deposits of one or more of the depositing authorities may result in a temporary reduction in liquidity, depending primarily on the maturities and/or classifications of the securities pledged against such deposits and the ability to replace such deposits with either new deposits or other borrowings. Public fund deposits totaled $715.3 million at December 31, 2020.
Note 23. Litigation
First Guaranty is subject to various legal proceedings in the normal course of its business. First Guaranty assesses its liabilities and contingencies in connection with outstanding legal proceedings. Where it is probable that First Guaranty will incur a loss and the amount of the loss can be reasonably estimated, First Guaranty records a liability in its consolidated financial statements. First Guaranty does not record a loss if the loss is not probable or the amount of the loss is not estimable. First Guaranty is a defendant in a lawsuit alleging overpayment of interest on a loan with a possible loss range of $0.0 million to $0.5 million. Judgment has been rendered against First Guaranty for the full amount, but First Guaranty is exercising its appeal rights. First Guaranty had an accrued liability of $0.1 million at December 31, 2020 related to this lawsuit. First Guaranty is also a defendant in a lawsuit alleging fault for a loss of funds by a customer with a possible loss range of $0.0 million to $1.5 million. No accrued liability has been recorded related to this lawsuit.
Note 24. Condensed Parent Company Information
The following condensed financial information reflects the accounts and transactions of First Guaranty Bancshares, Inc. for the dates indicated:
First Guaranty Bancshares, Inc.
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
Assets
|
|
|
|
Cash
|
$
|
1,796
|
|
|
$
|
633
|
|
Investment in bank subsidiary
|
228,869
|
|
|
224,677
|
|
Other assets
|
5,665
|
|
|
4,427
|
|
Total Assets
|
$
|
236,330
|
|
|
$
|
229,737
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
Senior long-term debt
|
42,366
|
|
|
48,558
|
|
Junior subordinated debentures
|
14,777
|
|
|
14,738
|
|
Other liabilities
|
596
|
|
|
406
|
|
Total Liabilities
|
57,739
|
|
|
63,702
|
|
Shareholders' Equity
|
178,591
|
|
|
166,035
|
|
Total Liabilities and Shareholders' Equity
|
$
|
236,330
|
|
|
$
|
229,737
|
|
First Guaranty Bancshares, Inc.
Condensed Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
|
2018
|
Operating Income
|
|
|
|
|
|
Dividends received from bank subsidiary
|
$
|
17,100
|
|
|
$
|
13,982
|
|
|
$
|
11,788
|
|
Net gains on sale of equity securities
|
—
|
|
|
196
|
|
|
—
|
|
Other income
|
332
|
|
|
424
|
|
|
289
|
|
Total operating income
|
17,432
|
|
|
14,602
|
|
|
12,077
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
Interest expense
|
2,197
|
|
|
1,795
|
|
|
1,675
|
|
Salaries & Benefits
|
132
|
|
|
208
|
|
|
133
|
|
Other expenses
|
1,225
|
|
|
953
|
|
|
916
|
|
Total operating expenses
|
3,554
|
|
|
2,956
|
|
|
2,724
|
|
|
|
|
|
|
|
Income before income tax benefit and increase in equity in undistributed earnings of subsidiary
|
13,878
|
|
|
11,646
|
|
|
9,353
|
|
Income tax benefit
|
720
|
|
|
494
|
|
|
540
|
|
Income before increase in equity in undistributed earnings of subsidiary
|
14,598
|
|
|
12,140
|
|
|
9,893
|
|
Increase in equity in undistributed earnings of subsidiary
|
5,720
|
|
|
2,101
|
|
|
4,320
|
|
Net Income
|
$
|
20,318
|
|
|
$
|
14,241
|
|
|
$
|
14,213
|
|
First Guaranty Bancshares, Inc.
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
(in thousands)
|
2020
|
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
$
|
20,318
|
|
|
$
|
14,241
|
|
|
$
|
14,213
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Increase in equity in undistributed earnings of subsidiary
|
(5,720)
|
|
|
(2,101)
|
|
|
(4,320)
|
|
Depreciation and amortization
|
92
|
|
|
80
|
|
|
43
|
|
Gain on sale of securities
|
—
|
|
|
(196)
|
|
|
—
|
|
Net change in other liabilities
|
189
|
|
|
(444)
|
|
|
136
|
|
Net change in other assets
|
(1,301)
|
|
|
(601)
|
|
|
1,360
|
|
Net cash provided by operating activities
|
13,578
|
|
|
10,979
|
|
|
11,432
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Proceeds from sales of equity securities
|
10
|
|
|
1,196
|
|
|
—
|
|
Purchases of premises and equipment
|
—
|
|
|
(136)
|
|
|
—
|
|
Cash paid in acquisition
|
—
|
|
|
(43,383)
|
|
|
—
|
|
Net cash used in investing activities
|
10
|
|
|
(42,323)
|
|
|
—
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Proceeds from long-term debt, net of costs
|
—
|
|
|
32,465
|
|
|
—
|
|
Repayment of long-term debt
|
(6,191)
|
|
|
(3,754)
|
|
|
(2,941)
|
|
Common stock issued in private placement
|
—
|
|
|
1,000
|
|
|
—
|
|
Dividends paid
|
(6,234)
|
|
|
(5,803)
|
|
|
(5,636)
|
|
Net cash (used in) provided by financing activities
|
(12,425)
|
|
|
23,908
|
|
|
(8,577)
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
1,163
|
|
|
(7,436)
|
|
|
2,855
|
|
Cash and cash equivalents at the beginning of the period
|
633
|
|
|
8,069
|
|
|
5,214
|
|
Cash and cash equivalents at the end of the period
|
$
|
1,796
|
|
|
$
|
633
|
|
|
$
|
8,069
|
|