Item 1. Consolidated Financial Statements
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except share data)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Assets
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
290,865
|
|
|
$
|
298,903
|
|
|
Federal funds sold
|
|
185
|
|
|
702
|
|
|
Cash and cash equivalents
|
|
291,050
|
|
|
299,605
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
Available for sale, at fair value
|
|
67,692
|
|
|
238,548
|
|
|
Held to maturity, at cost (estimated fair value of $148,160 and $0 respectively)
|
|
152,926
|
|
|
—
|
|
|
Investment securities
|
|
220,618
|
|
|
238,548
|
|
|
|
|
|
|
|
|
Federal Home Loan Bank stock, at cost
|
|
1,197
|
|
|
3,351
|
|
|
Loans held for sale
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Loans, net of unearned income
|
|
1,966,432
|
|
|
1,844,135
|
|
|
Less: allowance for loan losses
|
|
24,792
|
|
|
24,518
|
|
|
Net loans
|
|
1,941,640
|
|
|
1,819,617
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
60,064
|
|
|
59,892
|
|
|
Goodwill
|
|
12,900
|
|
|
12,900
|
|
|
Intangible assets, net
|
|
6,336
|
|
|
6,587
|
|
|
Other real estate, net
|
|
1,974
|
|
|
2,240
|
|
|
Accrued interest receivable
|
|
13,393
|
|
|
11,933
|
|
|
Other assets
|
|
17,520
|
|
|
18,405
|
|
|
Total Assets
|
|
$
|
2,566,692
|
|
|
$
|
2,473,078
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
Noninterest-bearing demand
|
|
$
|
466,672
|
|
|
$
|
411,416
|
|
|
Interest-bearing demand
|
|
931,069
|
|
|
860,394
|
|
|
Savings
|
|
184,669
|
|
|
168,879
|
|
|
Time
|
|
732,260
|
|
|
725,629
|
|
|
Total deposits
|
|
2,314,670
|
|
|
2,166,318
|
|
|
|
|
|
|
|
|
Short-term advances from Federal Home Loan Bank
|
|
—
|
|
|
50,000
|
|
|
Repurchase agreements
|
|
6,205
|
|
|
6,121
|
|
|
Accrued interest payable
|
|
4,471
|
|
|
5,292
|
|
|
Long-term advances from Federal Home Loan Bank
|
|
3,327
|
|
|
3,366
|
|
|
Senior long-term debt
|
|
40,844
|
|
|
42,366
|
|
|
Junior subordinated debentures
|
|
14,787
|
|
|
14,777
|
|
|
Other liabilities
|
|
6,093
|
|
|
6,247
|
|
|
Total Liabilities
|
|
2,390,397
|
|
|
2,294,487
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
Common stock:
|
|
|
|
|
|
$1 par value - authorized 100,600,000 shares; issued 9,741,253 shares
|
|
9,741
|
|
|
9,741
|
|
|
Surplus
|
|
110,836
|
|
|
110,836
|
|
|
Retained earnings
|
|
60,831
|
|
|
57,367
|
|
|
Accumulated other comprehensive income (loss)
|
|
(5,113)
|
|
|
647
|
|
|
Total Shareholders' Equity
|
|
176,295
|
|
|
178,591
|
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
2,566,692
|
|
|
$
|
2,473,078
|
|
See Notes to Consolidated Financial Statements
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(in thousands, except share data)
|
|
|
|
|
|
2021
|
|
2020
|
|
Interest Income:
|
|
|
|
|
|
|
|
|
|
Loans (including fees)
|
|
|
|
|
|
$
|
23,750
|
|
|
$
|
22,460
|
|
|
Deposits with other banks
|
|
|
|
|
|
66
|
|
|
235
|
|
|
Securities (including FHLB stock)
|
|
|
|
|
|
1,525
|
|
|
2,743
|
|
|
Federal funds sold
|
|
|
|
|
|
—
|
|
|
—
|
|
|
Total Interest Income
|
|
|
|
|
|
25,341
|
|
|
25,438
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense:
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
|
|
|
1,595
|
|
|
2,110
|
|
|
Savings deposits
|
|
|
|
|
|
52
|
|
|
116
|
|
|
Time deposits
|
|
|
|
|
|
3,520
|
|
|
4,560
|
|
|
Borrowings
|
|
|
|
|
|
572
|
|
|
728
|
|
|
Total Interest Expense
|
|
|
|
|
|
5,739
|
|
|
7,514
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income
|
|
|
|
|
|
19,602
|
|
|
17,924
|
|
|
Less: Provision for loan losses
|
|
|
|
|
|
608
|
|
|
1,245
|
|
|
Net Interest Income after Provision for Loan Losses
|
|
|
|
|
|
18,994
|
|
|
16,679
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income:
|
|
|
|
|
|
|
|
|
|
Service charges, commissions and fees
|
|
|
|
|
|
721
|
|
|
729
|
|
|
ATM and debit card fees
|
|
|
|
|
|
843
|
|
|
609
|
|
|
Net gains on securities
|
|
|
|
|
|
95
|
|
|
500
|
|
|
Net gains on sale of loans
|
|
|
|
|
|
34
|
|
|
16
|
|
|
Other
|
|
|
|
|
|
633
|
|
|
571
|
|
|
Total Noninterest Income
|
|
|
|
|
|
2,326
|
|
|
2,425
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expense:
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
|
|
|
7,535
|
|
|
7,399
|
|
|
Occupancy and equipment expense
|
|
|
|
|
|
2,321
|
|
|
1,829
|
|
|
Other
|
|
|
|
|
|
5,132
|
|
|
5,067
|
|
|
Total Noninterest Expense
|
|
|
|
|
|
14,988
|
|
|
14,295
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
|
|
|
6,332
|
|
|
4,809
|
|
|
Less: Provision for income taxes
|
|
|
|
|
|
1,309
|
|
|
984
|
|
|
Net Income
|
|
|
|
|
|
$
|
5,023
|
|
|
$
|
3,825
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share:
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
$
|
0.52
|
|
|
$
|
0.39
|
|
|
Cash dividends paid
|
|
|
|
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
9,741,253
|
|
|
9,741,253
|
|
See Notes to Consolidated Financial Statements
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(in thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
Net Income
|
|
|
|
|
|
$
|
5,023
|
|
|
$
|
3,825
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities:
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during the period
|
|
|
|
|
|
(7,196)
|
|
|
1,419
|
|
|
Reclassification adjustments for (gains) losses included in net income
|
|
|
|
|
|
(95)
|
|
|
(500)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) on securities
|
|
|
|
|
|
(7,291)
|
|
|
919
|
|
|
Tax impact
|
|
|
|
|
|
1,531
|
|
|
(193)
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
(5,760)
|
|
|
726
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
$
|
(737)
|
|
|
$
|
4,551
|
|
See Notes to Consolidated Financial Statements
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
$1 Par
|
|
Surplus
|
|
Retained
Earnings
|
|
Accumulated
Other Comprehensive
Income/(Loss)
|
|
Total
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019
|
|
$
|
9,741
|
|
|
$
|
110,836
|
|
|
$
|
43,283
|
|
|
$
|
2,175
|
|
|
$
|
166,035
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
3,825
|
|
|
—
|
|
|
3,825
|
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
726
|
|
|
726
|
|
|
Cash dividends on common stock ($0.16 per share)
|
|
—
|
|
|
—
|
|
|
(1,559)
|
|
|
—
|
|
|
(1,559)
|
|
|
Balance March 31, 2020 (unaudited)
|
|
$
|
9,741
|
|
|
$
|
110,836
|
|
|
$
|
45,549
|
|
|
$
|
2,901
|
|
|
$
|
169,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020
|
|
$
|
9,741
|
|
|
$
|
110,836
|
|
|
$
|
57,367
|
|
|
$
|
647
|
|
|
$
|
178,591
|
|
|
Net income
|
|
—
|
|
|
—
|
|
|
5,023
|
|
|
—
|
|
|
5,023
|
|
|
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,760)
|
|
|
(5,760)
|
|
|
Cash dividends on common stock ($0.16 per share)
|
|
—
|
|
|
—
|
|
|
(1,559)
|
|
|
—
|
|
|
(1,559)
|
|
|
Balance March 31, 2021 (unaudited)
|
|
$
|
9,741
|
|
|
$
|
110,836
|
|
|
$
|
60,831
|
|
|
$
|
(5,113)
|
|
|
$
|
176,295
|
|
See Notes to Consolidated Financial Statements
FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
Net income
|
|
$
|
5,023
|
|
|
$
|
3,825
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Provision for loan losses
|
|
608
|
|
|
1,245
|
|
|
Depreciation and amortization
|
|
1,173
|
|
|
895
|
|
|
Amortization/Accretion of investments
|
|
17
|
|
|
582
|
|
|
(Gain) loss on sale/call of securities
|
|
(95)
|
|
|
(500)
|
|
|
|
|
|
|
|
|
(Gain) loss on sale of assets
|
|
(42)
|
|
|
(15)
|
|
|
Repossessed asset write downs, gains and losses on dispositions
|
|
54
|
|
|
14
|
|
|
FHLB stock dividends
|
|
(6)
|
|
|
(16)
|
|
|
Net (increase) decrease in loans held for sale
|
|
—
|
|
|
(476)
|
|
|
Change in other assets and liabilities, net
|
|
(2,786)
|
|
|
(1,325)
|
|
|
Net Cash Provided By Operating Activities
|
|
3,946
|
|
|
4,229
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
Proceeds from maturities, calls and sales of HTM securities
|
|
—
|
|
|
34,022
|
|
|
Proceeds from maturities, calls and sales of AFS securities
|
|
210,092
|
|
|
100,327
|
|
|
Funds Invested in AFS securities
|
|
(199,375)
|
|
|
(144,904)
|
|
|
Proceeds from redemption of preferred securities
|
|
1,500
|
|
|
—
|
|
|
Proceeds from sale/redemption of Federal Home Loan Bank stock
|
|
2,160
|
|
|
—
|
|
|
Net increase in loans
|
|
(121,416)
|
|
|
(19,314)
|
|
|
Purchase of premises and equipment
|
|
(1,008)
|
|
|
(2,272)
|
|
|
Proceeds from sales of premises and equipment
|
|
8
|
|
|
1
|
|
|
Proceeds from sales of other real estate owned
|
|
212
|
|
|
798
|
|
|
Net Cash Used In Investing Activities
|
|
(107,827)
|
|
|
(31,342)
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
Net increase in deposits
|
|
148,352
|
|
|
95,596
|
|
|
Net (decrease) increase in federal funds purchased and short-term borrowings
|
|
(49,916)
|
|
|
36,684
|
|
|
Repayment of long-term borrowings
|
|
(1,551)
|
|
|
(1,578)
|
|
|
Dividends paid
|
|
(1,559)
|
|
|
(1,559)
|
|
|
Net Cash Provided By Financing Activities
|
|
95,326
|
|
|
129,143
|
|
|
|
|
|
|
|
|
Net (Decrease) Increase In Cash and Cash Equivalents
|
|
(8,555)
|
|
|
102,030
|
|
|
Cash and Cash Equivalents at the Beginning of the Period
|
|
299,605
|
|
|
67,425
|
|
|
Cash and Cash Equivalents at the End of the Period
|
|
$
|
291,050
|
|
|
$
|
169,455
|
|
|
|
|
|
|
|
|
Noncash Activities:
|
|
|
|
|
|
Acquisition of real estate in settlement of loans
|
|
$
|
—
|
|
|
$
|
319
|
|
|
Transfer of securities from HTM to AFS
|
|
$
|
—
|
|
|
$
|
52,553
|
|
|
Transfer of securities from AFS to HTM
|
|
$
|
160,014
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Cash Paid During The Period:
|
|
|
|
|
|
Interest on deposits and borrowed funds
|
|
$
|
6,560
|
|
|
$
|
7,621
|
|
|
Federal income taxes
|
|
$
|
2,000
|
|
|
$
|
—
|
|
|
State income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
See Notes to the Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. The consolidated financial statements and the footnotes of First Guaranty Bancshares, Inc. ("First Guaranty") thereto should be read in conjunction with the audited consolidated financial statements and note disclosures for First Guaranty previously filed with the Securities and Exchange Commission in First Guaranty's Annual Report on Form 10-K for the year ended December 31, 2020.
The consolidated financial statements include the accounts of First Guaranty Bancshares, Inc. and its wholly owned subsidiary First Guaranty Bank (the "Bank"). All significant intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the consolidated financial statements. Those adjustments are of a normal recurring nature. The results of operations at March 31, 2021 and for the three month periods ended March 31, 2021 and 2020 are not necessarily indicative of the results expected for the full year or any other interim period. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for loan losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, and the valuation of investment securities.
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.
Note 3. Securities
A summary comparison of securities by type at March 31, 2021 and December 31, 2020 is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(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
|
|
$
|
3,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,500
|
|
|
$
|
3,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,000
|
|
|
U.S. Government Agencies
|
|
9,973
|
|
|
—
|
|
|
(444)
|
|
|
9,529
|
|
|
169,986
|
|
|
77
|
|
|
(405)
|
|
|
169,658
|
|
|
Corporate debt securities
|
|
32,776
|
|
|
624
|
|
|
(187)
|
|
|
33,213
|
|
|
36,153
|
|
|
604
|
|
|
(268)
|
|
|
36,489
|
|
|
Municipal bonds
|
|
19,802
|
|
|
637
|
|
|
—
|
|
|
20,439
|
|
|
27,381
|
|
|
781
|
|
|
—
|
|
|
28,162
|
|
|
Mortgage-backed securities
|
|
991
|
|
|
20
|
|
|
—
|
|
|
1,011
|
|
|
1,208
|
|
|
31
|
|
|
—
|
|
|
1,239
|
|
|
Total available for sale securities
|
|
$
|
67,042
|
|
|
$
|
1,281
|
|
|
$
|
(631)
|
|
|
$
|
67,692
|
|
|
$
|
237,728
|
|
|
$
|
1,493
|
|
|
$
|
(673)
|
|
|
$
|
238,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
|
$
|
152,926
|
|
|
$
|
—
|
|
|
$
|
(4,766)
|
|
|
$
|
148,160
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total held to maturity securities
|
|
$
|
152,926
|
|
|
$
|
—
|
|
|
$
|
(4,766)
|
|
|
$
|
148,160
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
First Guaranty designated $152.9 million in U.S. Government agency securities for held to maturity status in the first quarter of 2021. This was done following the review of guidance for held to maturity portfolios in light of the COVID-19 pandemic. First Guaranty had terminated its held to maturity portfolio in the first quarter of 2020 due to the economic conditions associated with COVID-19. ASC 320-10-25 provides an exemption for events that are isolated, nonrecurring, and unusual for the reporting entity. The termination of the held to maturity portfolio in the first quarter of 2020 did not taint the portfolio under this guidance. The securities designated as held to maturity are agency securities that are part of First Guaranty’s investment strategy and public funds collateralization program.
The scheduled maturities of securities at March 31, 2021, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities due to calls 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2021
|
|
(in thousands)
|
|
Amortized Cost
|
|
Fair Value
|
|
Available for sale:
|
|
|
|
|
|
Due in one year or less
|
|
$
|
5,217
|
|
|
$
|
5,227
|
|
|
Due after one year through five years
|
|
4,514
|
|
|
4,552
|
|
|
Due after five years through 10 years
|
|
44,127
|
|
|
44,445
|
|
|
Over 10 years
|
|
12,193
|
|
|
12,457
|
|
|
Subtotal
|
|
66,051
|
|
|
66,681
|
|
|
Mortgage-backed securities
|
|
991
|
|
|
1,011
|
|
|
Total available for sale securities
|
|
$
|
67,042
|
|
|
$
|
67,692
|
|
|
|
|
|
|
|
|
Held to maturity:
|
|
|
|
|
|
Due in one year or less
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Due after one year through five years
|
|
—
|
|
|
—
|
|
|
Due after five years through 10 years
|
|
19,343
|
|
|
18,777
|
|
|
Over 10 years
|
|
133,583
|
|
|
129,383
|
|
|
Total held to maturity securities
|
|
$
|
152,926
|
|
|
$
|
148,160
|
|
At March 31, 2021, $171.4 million of First Guaranty's securities were pledged to secure public funds deposits and borrowings. The pledged securities had a market value of $167.3 million as of March 31, 2021.
The following is a summary of the fair value of securities with gross unrealized losses and an aging of those gross unrealized losses at March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2021
|
|
|
|
|
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
|
1
|
|
|
$
|
3,500
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
1
|
|
|
$
|
3,500
|
|
|
$
|
—
|
|
|
U.S. Government Agencies
|
3
|
|
|
9,529
|
|
|
(444)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
9,529
|
|
|
(444)
|
|
|
Corporate debt securities
|
9
|
|
|
5,612
|
|
|
(68)
|
|
|
4
|
|
|
1,440
|
|
|
(119)
|
|
|
13
|
|
|
7,052
|
|
|
(187)
|
|
|
Municipal bonds
|
1
|
|
|
67
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
67
|
|
|
—
|
|
|
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
10
|
|
|
—
|
|
|
6
|
|
|
10
|
|
|
—
|
|
|
Total available for sale securities
|
14
|
|
|
$
|
18,708
|
|
|
$
|
(512)
|
|
|
10
|
|
|
$
|
1,450
|
|
|
$
|
(119)
|
|
|
24
|
|
|
$
|
20,158
|
|
|
$
|
(631)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Agencies
|
16
|
|
|
$
|
148,160
|
|
|
$
|
(4,766)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
16
|
|
|
$
|
148,160
|
|
|
$
|
(4,766)
|
|
|
Total held to maturity securities
|
16
|
|
|
$
|
148,160
|
|
|
$
|
(4,766)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
16
|
|
|
$
|
148,160
|
|
|
$
|
(4,766)
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 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)
|
|
As of March 31, 2021, 40 of First Guaranty's debt securities had unrealized losses totaling 3.1% of the individual securities' amortized cost basis and 2.5% 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 $1.6 million and an unrealized loss of $0.1 million at March 31, 2021. 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 were no securities with an other-than-temporary impairment loss at March 31, 2021. 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 were no other-than-temporary impairment losses recognized on securities during the three months ended March 31, 2021 and 2020.
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 three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three Months Ended
March 31, 2021
|
|
Three Months Ended
March 31, 2020
|
|
Beginning balance of credit losses at end of prior year
|
|
$
|
100
|
|
|
$
|
—
|
|
|
Other-than-temporary impairment credit losses on securities not previously OTTI
|
|
—
|
|
|
—
|
|
|
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
|
|
(100)
|
|
|
—
|
|
|
Ending balance of cumulative credit losses recognized in earnings at end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
In the first three months of 2021 there were no other-than-temporary impairment credit losses on securities for which we 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 March 31, 2021, First Guaranty's exposure to bond issuers that exceeded 10% of shareholders' equity is below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2021
|
|
(in thousands)
|
|
Amortized Cost
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Home Loan Mortgage Corporation (Freddie Mac-FHLMC)
|
|
105,221
|
|
|
101,835
|
|
|
|
|
|
|
|
|
Federal Farm Credit Bank (FFCB)
|
|
52,102
|
|
|
50,509
|
|
|
Total
|
|
$
|
157,323
|
|
|
$
|
152,344
|
|
Note 4. Loans
The following table summarizes the components of First Guaranty's loan portfolio as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in thousands except for %)
|
|
Balance
|
|
As % of Category
|
|
Balance
|
|
As % of Category
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
|
$
|
141,858
|
|
|
7.2
|
%
|
|
$
|
150,841
|
|
|
8.2
|
%
|
|
Farmland
|
|
26,410
|
|
|
1.3
|
%
|
|
26,880
|
|
|
1.4
|
%
|
|
1- 4 Family
|
|
273,071
|
|
|
13.9
|
%
|
|
271,236
|
|
|
14.7
|
%
|
|
Multifamily
|
|
110,955
|
|
|
5.6
|
%
|
|
45,932
|
|
|
2.5
|
%
|
|
Non-farm non-residential
|
|
814,003
|
|
|
41.3
|
%
|
|
824,137
|
|
|
44.6
|
%
|
|
Total Real Estate
|
|
1,366,297
|
|
|
69.3
|
%
|
|
1,319,026
|
|
|
71.4
|
%
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
26,468
|
|
|
1.3
|
%
|
|
28,335
|
|
|
1.5
|
%
|
|
Commercial and industrial
|
|
330,332
|
|
|
16.8
|
%
|
|
353,028
|
|
|
19.1
|
%
|
|
Consumer and other
|
|
248,814
|
|
|
12.6
|
%
|
|
148,783
|
|
|
8.0
|
%
|
|
Total Non-Real Estate
|
|
605,614
|
|
|
30.7
|
%
|
|
530,146
|
|
|
28.6
|
%
|
|
Total Loans Before Unearned Income
|
|
1,971,911
|
|
|
100.0
|
%
|
|
1,849,172
|
|
|
100.0
|
%
|
|
Unearned income
|
|
(5,479)
|
|
|
|
|
(5,037)
|
|
|
|
|
Total Loans Net of Unearned Income
|
|
$
|
1,966,432
|
|
|
|
|
$
|
1,844,135
|
|
|
|
The following table summarizes fixed and floating rate loans by contractual maturity, excluding nonaccrual loans, as of March 31, 2021 and December 31, 2020 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
|
Fixed
|
|
Floating
|
|
Total
|
|
Fixed
|
|
Floating
|
|
Total
|
|
One year or less
|
|
$
|
211,955
|
|
|
$
|
72,136
|
|
|
$
|
284,091
|
|
|
$
|
186,252
|
|
|
$
|
79,680
|
|
|
$
|
265,932
|
|
|
More than one to five years
|
|
828,648
|
|
|
373,085
|
|
|
1,201,733
|
|
|
740,358
|
|
|
368,259
|
|
|
1,108,617
|
|
|
More than five to 15 years
|
|
147,253
|
|
|
93,057
|
|
|
240,310
|
|
|
128,860
|
|
|
91,032
|
|
|
219,892
|
|
|
Over 15 years
|
|
151,961
|
|
|
77,707
|
|
|
229,668
|
|
|
146,830
|
|
|
92,325
|
|
|
239,155
|
|
|
Subtotal
|
|
$
|
1,339,817
|
|
|
$
|
615,985
|
|
|
1,955,802
|
|
|
$
|
1,202,300
|
|
|
$
|
631,296
|
|
|
1,833,596
|
|
|
Nonaccrual loans
|
|
|
|
|
|
16,109
|
|
|
|
|
|
|
15,576
|
|
|
Total Loans Before Unearned Income
|
|
|
|
|
|
1,971,911
|
|
|
|
|
|
|
1,849,172
|
|
|
Unearned income
|
|
|
|
|
|
(5,479)
|
|
|
|
|
|
|
(5,037)
|
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
$
|
1,966,432
|
|
|
|
|
|
|
$
|
1,844,135
|
|
As of March 31, 2021, $292.8 million of floating rate loans were at their interest rate floor. At December 31, 2020, $305.0 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 March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
(in thousands)
|
|
30-89 Days Past Due
|
|
90 Days or Greater
|
|
Total Past Due
|
|
Current
|
|
Total Loans
|
|
Recorded Investment
90 Days Accruing
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
|
$
|
4,225
|
|
|
$
|
1,501
|
|
|
$
|
5,726
|
|
|
$
|
136,132
|
|
|
$
|
141,858
|
|
|
$
|
880
|
|
|
Farmland
|
|
—
|
|
|
840
|
|
|
840
|
|
|
25,570
|
|
|
26,410
|
|
|
—
|
|
|
1- 4 family
|
|
7,413
|
|
|
7,152
|
|
|
14,565
|
|
|
258,506
|
|
|
273,071
|
|
|
4,908
|
|
|
Multifamily
|
|
4,601
|
|
|
—
|
|
|
4,601
|
|
|
106,354
|
|
|
110,955
|
|
|
—
|
|
|
Non-farm non-residential
|
|
9,168
|
|
|
10,086
|
|
|
19,254
|
|
|
794,749
|
|
|
814,003
|
|
|
2,240
|
|
|
Total Real Estate
|
|
25,407
|
|
|
19,579
|
|
|
44,986
|
|
|
1,321,311
|
|
|
1,366,297
|
|
|
8,028
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
542
|
|
|
3,694
|
|
|
4,236
|
|
|
22,232
|
|
|
26,468
|
|
|
186
|
|
|
Commercial and industrial
|
|
850
|
|
|
1,444
|
|
|
2,294
|
|
|
328,038
|
|
|
330,332
|
|
|
781
|
|
|
Consumer and other
|
|
1,017
|
|
|
519
|
|
|
1,536
|
|
|
247,278
|
|
|
248,814
|
|
|
132
|
|
|
Total Non-Real Estate
|
|
2,409
|
|
|
5,657
|
|
|
8,066
|
|
|
597,548
|
|
|
605,614
|
|
|
1,099
|
|
|
Total Loans Before Unearned Income
|
|
$
|
27,816
|
|
|
$
|
25,236
|
|
|
$
|
53,052
|
|
|
$
|
1,918,859
|
|
|
$
|
1,971,911
|
|
|
$
|
9,127
|
|
|
Unearned income
|
|
|
|
|
|
|
|
|
|
(5,479)
|
|
|
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
|
$
|
1,966,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2020
|
|
(in thousands)
|
|
30-89 Days Past Due
|
|
90 Days or Greater
|
|
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
|
|
|
|
The tables above include $16.1 million and $15.6 million of nonaccrual loans at March 31, 2021 and December 31, 2020, 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
Real Estate:
|
|
|
|
|
|
Construction & land development
|
|
$
|
621
|
|
|
$
|
621
|
|
|
Farmland
|
|
840
|
|
|
857
|
|
|
1- 4 family
|
|
2,244
|
|
|
2,227
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
Non-farm non-residential
|
|
7,846
|
|
|
7,449
|
|
|
Total Real Estate
|
|
11,551
|
|
|
11,154
|
|
|
Non-Real Estate:
|
|
|
|
|
|
Agricultural
|
|
3,508
|
|
|
3,472
|
|
|
Commercial and industrial
|
|
663
|
|
|
701
|
|
|
Consumer and other
|
|
387
|
|
|
249
|
|
|
Total Non-Real Estate
|
|
4,558
|
|
|
4,422
|
|
|
Total Nonaccrual Loans
|
|
$
|
16,109
|
|
|
$
|
15,576
|
|
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 March 31, 2021
|
|
As of December 31, 2020
|
|
(in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
|
$
|
128,443
|
|
|
$
|
12,433
|
|
|
$
|
982
|
|
|
$
|
—
|
|
|
$
|
141,858
|
|
|
$
|
139,032
|
|
|
$
|
10,785
|
|
|
$
|
1,024
|
|
|
$
|
—
|
|
|
$
|
150,841
|
|
|
Farmland
|
|
22,355
|
|
|
60
|
|
|
3,995
|
|
|
—
|
|
|
26,410
|
|
|
22,822
|
|
|
46
|
|
|
4,012
|
|
|
—
|
|
|
26,880
|
|
|
1- 4 family
|
|
251,326
|
|
|
9,524
|
|
|
12,221
|
|
|
—
|
|
|
273,071
|
|
|
251,315
|
|
|
7,252
|
|
|
12,669
|
|
|
—
|
|
|
271,236
|
|
|
Multifamily
|
|
101,169
|
|
|
1,829
|
|
|
7,957
|
|
|
—
|
|
|
110,955
|
|
|
36,146
|
|
|
1,841
|
|
|
7,945
|
|
|
—
|
|
|
45,932
|
|
Non-farm
non-residential
|
|
744,197
|
|
|
51,458
|
|
|
18,348
|
|
|
—
|
|
|
814,003
|
|
|
756,760
|
|
|
51,355
|
|
|
16,022
|
|
|
—
|
|
|
824,137
|
|
|
Total Real Estate
|
|
1,247,490
|
|
|
75,304
|
|
|
43,503
|
|
|
—
|
|
|
1,366,297
|
|
|
1,206,075
|
|
|
71,279
|
|
|
41,672
|
|
|
—
|
|
|
1,319,026
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
22,284
|
|
|
91
|
|
|
4,093
|
|
|
—
|
|
|
26,468
|
|
|
24,180
|
|
|
92
|
|
|
4,063
|
|
|
—
|
|
|
28,335
|
|
Commercial
and industrial
|
|
294,793
|
|
|
26,107
|
|
|
9,432
|
|
|
—
|
|
|
330,332
|
|
|
321,957
|
|
|
27,388
|
|
|
3,683
|
|
|
—
|
|
|
353,028
|
|
|
Consumer and other
|
|
247,410
|
|
|
566
|
|
|
838
|
|
|
—
|
|
|
248,814
|
|
|
147,697
|
|
|
442
|
|
|
644
|
|
|
—
|
|
|
148,783
|
|
|
Total Non-Real Estate
|
|
564,487
|
|
|
26,764
|
|
|
14,363
|
|
|
—
|
|
|
605,614
|
|
|
493,834
|
|
|
27,922
|
|
|
8,390
|
|
|
—
|
|
|
530,146
|
|
|
Total Loans Before Unearned Income
|
|
$
|
1,811,977
|
|
|
$
|
102,068
|
|
|
$
|
57,866
|
|
|
$
|
—
|
|
|
1,971,911
|
|
|
$
|
1,699,909
|
|
|
$
|
99,201
|
|
|
$
|
50,062
|
|
|
$
|
—
|
|
|
1,849,172
|
|
|
Unearned income
|
|
|
|
|
|
|
|
|
|
(5,479)
|
|
|
|
|
|
|
|
|
|
|
(5,037)
|
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
|
$
|
1,966,432
|
|
|
|
|
|
|
|
|
|
|
$
|
1,844,135
|
|
Purchased Impaired Loans
As part of the acquisition of Union Bancshares, Incorporated 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 March 31, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
Real Estate:
|
|
|
|
|
|
Construction & land development
|
|
$
|
295
|
|
|
$
|
397
|
|
|
Farmland
|
|
—
|
|
|
—
|
|
|
1- 4 family
|
|
4,196
|
|
|
4,102
|
|
|
Multifamily
|
|
936
|
|
|
900
|
|
|
Non-farm non-residential
|
|
2,388
|
|
|
2,396
|
|
|
Total Real Estate
|
|
7,815
|
|
|
7,795
|
|
|
Non-Real Estate:
|
|
|
|
|
|
Agricultural
|
|
343
|
|
|
343
|
|
|
Commercial and industrial
|
|
829
|
|
|
1,017
|
|
|
Consumer and other
|
|
—
|
|
|
—
|
|
|
Total Non-Real Estate
|
|
1,172
|
|
|
1,360
|
|
|
Total
|
|
$
|
8,987
|
|
|
$
|
9,155
|
|
For those purchased loans disclosed above, there was an allowance for loan losses of $0.7 million at March 31, 2021 and $0.5 million at December 31, 2020.
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 three months ended March 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
|
|
Balance, beginning of period
|
|
$
|
2,892
|
|
|
$
|
3,647
|
|
|
Acquisition accretable yield
|
|
—
|
|
|
30
|
|
|
Accretion
|
|
(142)
|
|
|
(349)
|
|
|
Net transfers from nonaccretable difference to accretable yield
|
|
—
|
|
|
—
|
|
|
Balance, end of period
|
|
$
|
2,750
|
|
|
$
|
3,328
|
|
Note 5. Allowance for Loan Losses
A summary of changes in the allowance for loan losses, by portfolio type, for the three months ended March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2021
|
|
2020
|
|
(in thousands)
|
|
Beginning
Allowance
(12/31/2020)
|
|
Charge-offs
|
|
Recoveries
|
|
Provision
|
|
Ending
Allowance
(3/31/2021)
|
|
Beginning
Allowance
(12/31/2019)
|
|
Charge-offs
|
|
Recoveries
|
|
Provision
|
|
Ending
Allowance
(3/31/2020)
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
|
$
|
1,029
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(208)
|
|
|
$
|
821
|
|
|
$
|
423
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
266
|
|
|
$
|
689
|
|
|
Farmland
|
|
462
|
|
|
—
|
|
|
1
|
|
|
(26)
|
|
|
437
|
|
|
50
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
47
|
|
|
1- 4 family
|
|
2,510
|
|
|
(17)
|
|
|
10
|
|
|
(256)
|
|
|
2,247
|
|
|
1,027
|
|
|
(10)
|
|
|
12
|
|
|
398
|
|
|
1,427
|
|
|
Multifamily
|
|
978
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|
1,220
|
|
|
1,038
|
|
|
—
|
|
|
—
|
|
|
(102)
|
|
|
936
|
|
Non-farm
non-residential
|
|
15,064
|
|
|
—
|
|
|
—
|
|
|
(897)
|
|
|
14,167
|
|
|
5,277
|
|
|
—
|
|
|
—
|
|
|
391
|
|
|
5,668
|
|
|
Total Real Estate
|
|
20,043
|
|
|
(17)
|
|
|
11
|
|
|
(1,145)
|
|
|
18,892
|
|
|
7,815
|
|
|
(10)
|
|
|
12
|
|
|
950
|
|
|
8,767
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
181
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
|
166
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
95
|
|
Commercial
and industrial
|
|
2,802
|
|
|
(60)
|
|
|
11
|
|
|
(349)
|
|
|
2,404
|
|
|
1,909
|
|
|
(92)
|
|
|
7
|
|
|
368
|
|
|
2,192
|
|
|
Consumer and other
|
|
1,490
|
|
|
(362)
|
|
|
83
|
|
|
1,969
|
|
|
3,180
|
|
|
1,110
|
|
|
(196)
|
|
|
66
|
|
|
(85)
|
|
|
895
|
|
|
Unallocated
|
|
2
|
|
|
—
|
|
|
—
|
|
|
148
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
|
Total Non-Real Estate
|
|
4,475
|
|
|
(422)
|
|
|
94
|
|
|
1,753
|
|
|
5,900
|
|
|
3,114
|
|
|
(288)
|
|
|
73
|
|
|
295
|
|
|
3,194
|
|
|
Total
|
|
$
|
24,518
|
|
|
$
|
(439)
|
|
|
$
|
105
|
|
|
$
|
608
|
|
|
$
|
24,792
|
|
|
$
|
10,929
|
|
|
$
|
(298)
|
|
|
$
|
85
|
|
|
$
|
1,245
|
|
|
$
|
11,961
|
|
Negative provisions are caused by changes in the composition and credit quality of the loan portfolio and by recoveries. 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 March 31, 2021
|
|
(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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
821
|
|
|
$
|
821
|
|
|
$
|
—
|
|
|
$
|
295
|
|
|
$
|
141,563
|
|
|
$
|
141,858
|
|
|
Farmland
|
|
—
|
|
|
—
|
|
|
437
|
|
|
437
|
|
|
543
|
|
|
—
|
|
|
25,867
|
|
|
26,410
|
|
|
1- 4 family
|
|
266
|
|
|
—
|
|
|
1,981
|
|
|
2,247
|
|
|
1,474
|
|
|
4,196
|
|
|
267,401
|
|
|
273,071
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
1,220
|
|
|
1,220
|
|
|
—
|
|
|
936
|
|
|
110,019
|
|
|
110,955
|
|
Non-farm
non-residential
|
|
2,342
|
|
|
508
|
|
|
11,317
|
|
|
14,167
|
|
|
11,149
|
|
|
2,388
|
|
|
800,466
|
|
|
814,003
|
|
|
Total Real Estate
|
|
2,608
|
|
|
508
|
|
|
15,776
|
|
|
18,892
|
|
|
13,166
|
|
|
7,815
|
|
|
1,345,316
|
|
|
1,366,297
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
—
|
|
|
—
|
|
|
166
|
|
|
166
|
|
|
3,034
|
|
|
343
|
|
|
23,091
|
|
|
26,468
|
|
|
Commercial and industrial
|
|
91
|
|
|
216
|
|
|
2,097
|
|
|
2,404
|
|
|
1,397
|
|
|
829
|
|
|
328,106
|
|
|
330,332
|
|
|
Consumer and other
|
|
—
|
|
|
—
|
|
|
3,180
|
|
|
3,180
|
|
|
—
|
|
|
—
|
|
|
248,814
|
|
|
248,814
|
|
|
Unallocated
|
|
—
|
|
|
—
|
|
|
150
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Non-Real Estate
|
|
91
|
|
|
216
|
|
|
5,593
|
|
|
5,900
|
|
|
4,431
|
|
|
1,172
|
|
|
600,011
|
|
|
605,614
|
|
|
Total
|
|
$
|
2,699
|
|
|
$
|
724
|
|
|
$
|
21,369
|
|
|
$
|
24,792
|
|
|
$
|
17,597
|
|
|
$
|
8,987
|
|
|
$
|
1,945,327
|
|
|
1,971,911
|
|
|
Unearned Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,479)
|
|
|
Total Loans Net of Unearned Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,966,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
334
|
|
|
12,450
|
|
|
15,064
|
|
|
9,800
|
|
|
2,396
|
|
|
811,941
|
|
|
824,137
|
|
|
Total Real Estate
|
|
2,546
|
|
|
334
|
|
|
17,163
|
|
|
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
|
|
|
142
|
|
|
2,563
|
|
|
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
|
|
|
142
|
|
|
4,236
|
|
|
4,475
|
|
|
4,075
|
|
|
1,360
|
|
|
524,711
|
|
|
530,146
|
|
|
Total
|
|
$
|
2,643
|
|
|
$
|
476
|
|
|
$
|
21,399
|
|
|
$
|
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
|
|
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. Payment status, collateral value and the probability of collecting scheduled principal and interest payments when due are considered in evaluating loan impairment. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
The following is a summary of impaired loans, excluding loans acquired with deteriorated credit quality, by class as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021
|
|
(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
|
|
505
|
|
|
532
|
|
|
—
|
|
|
509
|
|
|
—
|
|
|
—
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-farm non-residential
|
|
1,728
|
|
|
1,728
|
|
|
—
|
|
|
1,730
|
|
|
20
|
|
|
23
|
|
|
Total Real Estate
|
|
2,776
|
|
|
2,812
|
|
|
—
|
|
|
2,782
|
|
|
20
|
|
|
23
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
2,531
|
|
|
2,661
|
|
|
—
|
|
|
2,531
|
|
|
—
|
|
|
—
|
|
|
Commercial and industrial
|
|
485
|
|
|
485
|
|
|
—
|
|
|
485
|
|
|
7
|
|
|
10
|
|
|
Consumer and other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Non-Real Estate
|
|
3,016
|
|
|
3,146
|
|
|
—
|
|
|
3,016
|
|
|
7
|
|
|
10
|
|
|
Total Impaired Loans with no related allowance
|
|
5,792
|
|
|
5,958
|
|
|
—
|
|
|
5,798
|
|
|
27
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Loans with an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Farmland
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1- 4 family
|
|
969
|
|
|
969
|
|
|
266
|
|
|
969
|
|
|
14
|
|
|
20
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-farm non-residential
|
|
9,924
|
|
|
10,061
|
|
|
2,342
|
|
|
9,968
|
|
|
33
|
|
|
31
|
|
|
Total Real Estate
|
|
10,893
|
|
|
11,030
|
|
|
2,608
|
|
|
10,937
|
|
|
47
|
|
|
51
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commercial and industrial
|
|
912
|
|
|
912
|
|
|
91
|
|
|
922
|
|
|
9
|
|
|
13
|
|
|
Consumer and other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Non-Real Estate
|
|
912
|
|
|
912
|
|
|
91
|
|
|
922
|
|
|
9
|
|
|
13
|
|
|
Total Impaired Loans with an allowance recorded
|
|
11,805
|
|
|
11,942
|
|
|
2,699
|
|
|
11,859
|
|
|
56
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans
|
|
$
|
17,597
|
|
|
$
|
17,900
|
|
|
$
|
2,699
|
|
|
$
|
17,657
|
|
|
$
|
83
|
|
|
$
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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 are generally concessions on either the interest rate charged or the amortization. The effect of the modifications to First Guaranty would be a reduction in interest income. First Guaranty has not restructured any loans that are considered TDRs in the three months ended March 31, 2021. At March 31, 2021 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 and as amended by subsequent legislation, 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) January 1, 2022 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 identifies the TDRs as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
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
|
|
—
|
|
|
—
|
|
|
3,524
|
|
|
3,524
|
|
|
—
|
|
|
—
|
|
|
3,591
|
|
|
3,591
|
|
|
Total Real Estate
|
|
—
|
|
|
—
|
|
|
3,524
|
|
|
3,524
|
|
|
—
|
|
|
—
|
|
|
3,591
|
|
|
3,591
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commercial and industrial
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Consumer and other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Non-Real Estate
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,524
|
|
|
$
|
3,524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,591
|
|
|
$
|
3,591
|
|
The following table discloses TDR activity for the three months ended March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled Debt Restructured Loans Activity
|
|
|
Three Months Ended March 31, 2021
|
|
(in thousands)
|
Beginning balance December 31, 2020
|
|
New TDRs
|
|
Charge-offs post-modification
|
|
Transferred to ORE
|
|
Paydowns
|
|
Construction to permanent financing
|
|
Restructured to market terms
|
|
Other adjustments
|
|
Ending balance March 31, 2021
|
|
Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction & land development
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Farmland
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1- 4 family
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Multifamily
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Non-farm non-residential
|
3,591
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(67)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,524
|
|
|
Total Real Estate
|
3,591
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(67)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,524
|
|
|
Non-Real Estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commercial and industrial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Consumer and other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total Non-Real Estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
3,591
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(67)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
3,524
|
|
Note 6. 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. First Guaranty's goodwill is the difference in purchase price over the fair value of net assets acquired from its acquisition of Homestead Bancorp in 2007, Premier Bancshares, Inc. in 2017 and Union Bancshares, Incorporated in 2019. Goodwill totaled $12.9 million at March 31, 2021 and December 31, 2020. No impairment charges have been recognized on First Guaranty's intangible assets since acquisition. Loan servicing assets decreased $43,000 to $0.7 million at March 31, 2021 compared to $0.8 million in December 31, 2020. Other intangible assets recorded include core deposit intangibles, which are subject to amortization. The weighted-average amortization period remaining for First Guaranty's core deposit intangibles is 8 years at March 31, 2021. The core deposits intangible reflect the value of deposit relationships, including the beneficial rates, which arose from acquisitions.
In accordance with ASC Topic 350, Intangibles - Goodwill and Other, during the first quarter of 2021, we evaluated recent potential triggering events that might be indicators that our goodwill was impaired. The events include, among others, the economic disruption and uncertainty surrounding the COVID-19 pandemic and the significant decline in our stock price. Based on our evaluation, we concluded that our goodwill was not impaired as of March 31, 2021.
Note 7. Other Real Estate (ORE)
Other real estate owned consists of the following at the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Real Estate Owned Acquired by Foreclosure:
|
|
|
|
|
|
Residential
|
|
$
|
119
|
|
|
$
|
131
|
|
|
Construction & land development
|
|
90
|
|
|
311
|
|
|
Non-farm non-residential
|
|
2,141
|
|
|
2,203
|
|
|
Total Other Real Estate Owned and Foreclosed Property
|
|
2,350
|
|
|
2,645
|
|
|
Allowance
|
|
(376)
|
|
|
(405)
|
|
|
Net Other Real Estate Owned and Foreclosed Property
|
|
$
|
1,974
|
|
|
$
|
2,240
|
|
Other real estate owned had a net carrying amount of $2.0 million which is made up of the outstanding balance of $2.4 million net of a valuation allowance of $0.4 million at March 31, 2021.
Loans secured by one-to-four family residential properties in the process of foreclosure totaled $1.3 million as of March 31, 2021.
Note 8. 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. The same credit policies are used in making commitments and conditional obligations as it does for balance sheet instruments. Unless otherwise noted, collateral or other security is not required to support financial instruments with credit risk.
Below is a summary of the notional amounts of the financial instruments with off-balance sheet risk at March 31, 2021 and December 31, 2020:
Contract Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Commitments to Extend Credit
|
|
$
|
157,545
|
|
|
$
|
154,047
|
|
|
Unfunded Commitments under lines of credit
|
|
$
|
199,322
|
|
|
$
|
169,151
|
|
|
Commercial and Standby letters of credit
|
|
$
|
11,719
|
|
|
$
|
11,728
|
|
Litigation
The nature of First Guaranty's business ordinarily results in a certain amount of claims, litigation and legal and administrative cases, all of which are considered incidental to the normal conduct of business. When First Guaranty determines it has defenses to the claims asserted, it defends itself. First Guaranty will consider settlement of cases when it is in the best interests of both First Guaranty and its shareholders.
While the final outcome of legal proceedings is inherently uncertain, based on information currently available as of March 31, 2021, any incremental liability arising from First Guaranty's legal proceedings in excess of any liability accrued will not have a material adverse effect on First Guaranty's financial position or results of operations.
Note 9. 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 within Level 3 in First Guaranty's portfolio as of March 31, 2021 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") 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 March 31, 2021 and December 31, 2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Available for Sale Securities Fair Value Measurements Using:
|
|
|
|
|
|
Level 1: Quoted Prices in Active Markets For Identical Assets
|
|
$
|
3,500
|
|
|
$
|
3,000
|
|
|
Level 2: Significant Other Observable Inputs
|
|
47,700
|
|
|
209,359
|
|
|
Level 3: Significant Unobservable Inputs
|
|
16,492
|
|
|
26,189
|
|
|
Securities available for sale measured at fair value
|
|
$
|
67,692
|
|
|
$
|
238,548
|
|
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 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, 2020 to March 31, 2021 was due to a net increase in Treasury bills of $0.5 million. The change in Level 2 securities available for sale from December 31, 2020 to March 31, 2021 was due principally to transfer of $152.9 million in U.S. Government agency securities from the available for sale to the held to maturity portfolio. $0.8 million in corporate securities and $1.1 million in municipal securities were transferred from Level 3 to Level 2 from December 31, 2020 to March 31, 2021. There were no transfers between Level 1 and 2 securities available for sale from December 31, 2020 to March 31, 2021.
The following table reconciles assets measured at fair value on a recurring basis using unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 Changes
|
|
(in thousands)
|
|
March 31, 2021
|
|
Balance, beginning of year
|
|
$
|
26,189
|
|
|
Total gains or losses (realized/unrealized):
|
|
|
|
Included in earnings
|
|
—
|
|
|
Included in other comprehensive income
|
|
(228)
|
|
|
Purchases, sales, issuances and settlements, net
|
|
(7,625)
|
|
|
Transfers in and/or out of Level 3
|
|
(1,844)
|
|
|
Balance as of end of period
|
|
$
|
16,492
|
|
There were no gains or losses for the period included in earnings attributable to the change in unrealized gains or losses related to assets still held as of March 31, 2021.
The following table measures financial assets and financial liabilities measured at fair value on a non-recurring basis as of March 31, 2021 and December 31, 2020, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
At March 31, 2021
|
|
At December 31, 2020
|
|
Impaired Loans - Fair Value Measurements Using:
|
|
|
|
|
|
Level 1: Quoted Prices in Active Markets For Identical Assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Level 2: Significant Other Observable Inputs
|
|
—
|
|
|
—
|
|
|
Level 3: Significant Unobservable Inputs
|
|
9,462
|
|
|
7,842
|
|
|
Impaired loans measured at fair value
|
|
$
|
9,462
|
|
|
$
|
7,842
|
|
|
|
|
|
|
|
|
Other Real Estate Owned - Fair Value Measurements Using:
|
|
|
|
|
|
Level 1: Quoted Prices in Active Markets For Identical Assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Level 2: Significant Other Observable Inputs
|
|
56
|
|
|
363
|
|
|
Level 3: Significant Unobservable Inputs
|
|
1,918
|
|
|
1,877
|
|
|
Other real estate owned measured at fair value
|
|
$
|
1,974
|
|
|
$
|
2,240
|
|
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 10. 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.
The fair value of demand deposits, savings and interest-bearing demand deposits is the amount payable on demand. The fair value of fixed-maturity certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. 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 March 31, 2021 and December 31, 2020 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 March 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2021 Using
|
|
(in thousands)
|
|
Carrying Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
290,865
|
|
|
$
|
290,865
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
290,865
|
|
|
Federal funds sold
|
|
185
|
|
|
185
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
Securities, available for sale
|
|
67,692
|
|
|
3,500
|
|
|
47,700
|
|
|
16,492
|
|
|
67,692
|
|
|
Securities, held for maturity
|
|
152,926
|
|
|
—
|
|
|
148,160
|
|
|
—
|
|
|
148,160
|
|
|
Loans held for sale
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Loans, net
|
|
1,941,640
|
|
|
—
|
|
|
—
|
|
|
1,956,778
|
|
|
1,956,778
|
|
|
Cash surrender value of BOLI
|
|
5,449
|
|
|
—
|
|
|
—
|
|
|
5,449
|
|
|
5,449
|
|
|
Accrued interest receivable
|
|
13,393
|
|
|
—
|
|
|
—
|
|
|
13,393
|
|
|
13,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,314,670
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,326,198
|
|
|
2,326,198
|
|
|
Short-term advances from Federal Home Loan Bank
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Repurchase agreements
|
|
6,205
|
|
|
—
|
|
|
—
|
|
|
6,233
|
|
|
6,233
|
|
|
Accrued interest payable
|
|
4,471
|
|
|
—
|
|
|
—
|
|
|
4,471
|
|
|
4,471
|
|
|
Long-term advances from Federal Home Loan Bank
|
|
3,327
|
|
|
—
|
|
|
—
|
|
|
3,327
|
|
|
3,327
|
|
|
Senior long-term debt
|
|
40,844
|
|
|
—
|
|
|
—
|
|
|
40,882
|
|
|
40,882
|
|
|
Junior subordinated debentures
|
|
14,787
|
|
|
—
|
|
|
—
|
|
|
14,476
|
|
|
14,476
|
|
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
|
|
|
Securities, held for maturity
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 11. COVID-19
The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments, including in Louisiana and Texas, have ordered businesses and individuals to modify their normal practices. As of March 31, 2021, some of these restrictions have been removed and many non-essential businesses have been allowed to re-open in a limited capacity, adhering to social distancing and disinfection guidelines. However, these restrictions and other consequences have resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 pandemic began, millions of people have filed claims for unemployment, and the stock market has been volatile. Certain industries have been particularly adversely affected, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences.
As of April 30, 2021, both Louisiana and Texas have continued to reduce the limitations on how businesses must operate. First Guaranty continues to keep its locations open with certain modifications to our business practices. First Guaranty places a high priority on ensuring the safety and health of its customers and employees, including social distancing protocols and enhanced cleaning measures as part of its operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of First Guaranty's financial condition and results of operations is intended to highlight the significant factors affecting First Guaranty's financial condition and results of operations presented in the consolidated financial statements included in this Form 10-Q. This discussion is designed to provide readers with a more comprehensive view of the operating results and financial position than would be obtained from reading the consolidated financial statements alone. Reference should be made to those statements for an understanding of the following review and analysis. The financial data at March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been derived from unaudited consolidated financial statements and include, in the opinion of management, all adjustments (consisting of normal recurring accruals and provisions) necessary to present fairly First Guaranty's financial position and results of operations for such periods.
Special Note Regarding Forward-Looking Statements
Congress passed the Private Securities Litigation Act of 1995 in an effort to encourage corporations to provide information about a company's anticipated future financial performance. This act provides a safe harbor for such disclosure, which protects us from unwarranted litigation, if actual results are different from management expectations. This discussion and analysis contains forward-looking statements and reflects management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "may," "should," "expect," "anticipate," "intend," "plan," "continue," "believe," "seek," "estimate" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of factors and uncertainties, including, changes in general economic conditions, either nationally or in our market areas, that are worse than expected; the ongoing effects of the COVID-19 pandemic on First Guaranty's operations and financial performance; competition among depository and other financial institutions; inflation and changes in the interest rate environment that reduce our margins or reduce the fair value of financial instruments; adverse changes in the securities markets; changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; our ability to enter new markets successfully and capitalize on growth opportunities; our ability to successfully integrate acquired entities; changes in consumer spending, borrowing and savings habits; changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board; changes in our organization, compensation and benefit plans; changes in our financial condition or results of operations that reduce capital available to pay dividends; increases in our provision for loan losses and changes in the financial condition or future prospects of issuers of securities that we own, which could cause our actual results and experience to differ from the anticipated results and expectations, expressed in such forward-looking statements. We undertake no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise.
First Quarter 2021 Financial Overview
First Guaranty Bancshares, Inc. is a Louisiana corporation and a financial holding company headquartered in Hammond, Louisiana. First Guaranty Bank, the wholly-owned subsidiary of First Guaranty Bancshares, Inc., is a Louisiana chartered commercial bank that provides personalized commercial banking services primarily to Louisiana and Texas customers through 34 banking facilities primary located throughout Southeast, Southwest, Central and North Louisiana and in North Central Texas. We emphasize personal relationships and localized decision making to ensure that products and services are matched to customer needs. First Guaranty competes for business principally on the basis of personal service to customers, customer access to officers and directors and competitive interest rates and fees.
Financial highlights for the first quarter 2021 are as follows:
•Total assets increased $93.6 million, or 3.8%, to $2.6 billion at March 31, 2021 when compared with December 31, 2020. Total loans at March 31, 2021 were $2.0 billion, an increase of $122.3 million, or 6.6%, compared with December 31, 2020. Total deposits were $2.3 billion at March 31, 2021, an increase of $148.4 million, or 6.8%, compared with December 31, 2020. Retained earnings were $60.8 million at March 31, 2021, an increase of $3.5 million compared to $57.4 million at December 31, 2020. Shareholders' equity was $176.3 million and $178.6 million at March 31, 2021 and December 31, 2020, respectively.
•Net income for the first quarter of 2021 and 2020 was $5.0 million and $3.8 million, respectively.
•Earnings per common share were $0.52 and $0.39 for the first quarter of 2021 and 2020, respectively. Total weighted average shares outstanding were 9,741,253 for the three months ended March 31, 2021 and 2020.
•First Guaranty continues to participate in the SBA Paycheck Protection Program ("PPP") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act authorized the SBA to guarantee loans under a new 7(a) loan program known as the PPP. As a qualified SBA lender, we were automatically authorized to originate PPP loans. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The program has been conducted in two phases which First Guaranty classifies as Round 1 loans (originated in 2020) and Round 2 loans (originated in 2021). As of March 31, 2021, First Guaranty had remaining Round 1 PPP loans of $62.3 million with deferred fees of $1.1 million. First Guaranty had Round 2 PPP loans of $21.9 million with deferred fees of $0.6 million at March 31, 2021. $0.2 million in PPP fees were recognized in the first quarter of 2021.
•The allowance for loan losses was 1.26% of total loans at March 31, 2021 compared to 1.33% at December 31, 2020. First Guaranty had acquisition related loan discounts that totaled approximately $1.9 million at March 31, 2021. First Guaranty had $84.2 million at March 31, 2021 of SBA guaranteed PPP loans that have no related allowance due to the government guarantee in accordance with regulatory guidance.
•First Guaranty had approximately $3.1 million of loans on deferral due to COVID-19 related modifications as of March 31, 2021.
•First Guaranty repaid a $50.0 million short-term Federal Home Loan Bank advance that was originally undertaken as part of COVID-19 liquidity planning in the first quarter of 2021.
•Net interest income for the first quarter of 2021 was $19.6 million compared to $17.9 million for the same period in 2020.
•The provision for loan losses for the first quarter of 2021 was $0.6 million compared to $1.2 million for the same period in 2020.
•First Guaranty had $2.0 million of other real estate owned as of March 31, 2021 compared to $2.2 million at December 31, 2020.
•Noninterest income for the first quarter of 2021 was $2.3 million compared to $2.4 million for the same period in 2020. Excluding the impact of securities gains, noninterest income for the first quarter of 2021 improved to $2.2 million from $1.9 million for the first quarter of 2020. The improvement was primarily due to higher ATM and debit card fees.
•The net interest margin for the three months ended March 31, 2021 was 3.25% which was a decrease of 32 basis points from the net interest margin of 3.57% for the same period in 2020. First Guaranty attributed the decrease in the net interest margin in the first quarter of 2021 due to the significant actions related to COVID-19 that impacted balance sheet composition for both assets and liabilities along with decreased rates on assets and liabilities. Loans as a percentage of average interest earning assets increased to 78.2% at March 31, 2021 compared to 74.9% at March 31, 2020.
•Investment securities totaled $220.6 million at March 31, 2021, a decrease of $17.9 million when compared to $238.5 million at December 31, 2020. Gains on the sale of securities for the first quarter of 2021 were $0.1 million compared to $0.5 million for the same period in 2020. At March 31, 2021, available for sale securities, at fair value, totaled $67.7 million, a decrease of $170.9 million when compared to $238.5 million at December 31, 2020. At March 31, 2021, held to maturity securities, at amortized cost, totaled $152.9 million as compared to $0 at December 31, 2020.
•Total loans net of unearned income were $2.0 billion, a net increase of $122.3 million from December 31, 2020. Total loans net of unearned income are reduced by the allowance for loan losses which totaled $24.8 million at March 31, 2021 and $24.5 million at December 31, 2020, respectively.
•Total impaired loans increased $1.7 million to $17.6 million at March 31, 2021 compared to $15.9 million at December 31, 2020.
•Nonaccrual loans increased $0.5 million to $16.1 million at March 31, 2021 compared to $15.6 million at December 31, 2020.
•First Guaranty is a smaller reporting company and has delayed the adoption of ASU 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments." First Guaranty uses the incurred loss model for the calculation of its allowance.
•Return on average assets for the three months ended March 31, 2021 and 2020 was 0.80% and 0.72%, respectively. Return on average common equity for the three months ended March 31, 2021 and 2020 was 11.31% and 9.00%, respectively. Return on average assets is calculated by dividing annualized net income by average assets. Return on average common equity is calculated by dividing annualized net income by average common equity.
•Book value per common share was $18.10 as of March 31, 2021 compared to $17.35 as of March 31, 2020. The increase in book value was due primarily to an increase in retained earnings partially offset by changes in accumulated other comprehensive income ("AOCI"). AOCI is comprised of unrealized gains and losses on available for sale securities, including unrealized losses on available for sale securities at the time of transfer to held to maturity.
•First Guaranty's Board of Directors declared cash dividends of $0.16 per common share in the first quarter of 2021 and $0.16 in the first quarter of 2020. First Guaranty has paid 111 consecutive quarterly dividends as of March 31, 2021.
•First Guaranty completed construction of its new FGB Center located in Hammond, Louisiana.
•On April 27, 2021, First Guaranty issued 34,500 shares of 6.75% Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock, par value $1,000 per share, with a liquidation preference of $1,000 per share through an underwritten public offering of 1,380,000 depositary shares, each representing a 1/40th ownership interest in a share of the Series A Preferred Stock. Total gross proceeds from the preferred stock offering were $34.5 million. The shares are listed on NASDAQ under the symbol FGBIP. The proceeds were used to redeem $13.2 million in senior debt and increase the bank subsidiary capital by $20.0 million effective April 30, 2021.
Financial Condition
Changes in Financial Condition from December 31, 2020 to March 31, 2021
Assets
Total assets at March 31, 2021 were $2.6 billion, an increase of $93.6 million, or 3.8%, from December 31, 2020. Assets increased primarily due to increases in net loans of $122.0 million, partially offset by a decrease in cash and cash equivalents of $8.6 million and investment securities of $17.9 million at March 31, 2021 compared to December 31, 2020.
Loans
Net loans increased $122.0 million, or 6.7%, to $1.9 billion at March 31, 2021 from December 31, 2020. Consumer and other loans increased $100.0 million during the first quarter of 2021 primarily due to new lease originations. First Guaranty has continued to expand its commercial lease portfolio which generally has higher yields than commercial real estate loans but shorter average lives. Commercial and equipment leases totaled $205.5 million at March 31, 2021 compared to $104.1 million at December 31, 2020 and are included in consumer and other loans. Multifamily loans increased $65.0 million primarily due to the conversion of existing construction loans to permanent financing and the origination of new loans. One-to four-family residential loans increased $1.8 million primarily due to new originations. Farmland loans decreased $0.5 million primarily due to decreases on agricultural loan commitments. Agricultural loans decreased $1.9 million due to seasonal activity. Construction and land development loans decreased $9.0 million principally due to payoffs and the conversion of interim construction loans to permanent financing that occurred in the first quarter of 2021. Non-farm non-residential loan balances decreased $10.1 million primarily due to loan payoffs. Commercial and industrial loans decreased $22.7 million primarily due to payoffs. SBA PPP loans totaled $84.2 million at March 31, 2021 which is a net reduction of $8.1 million during the first quarter of 2021. These totals are included in commercial and industrial loans. Round 1 SBA PPP loans decreased from $92.1 million at December 31, 2020 to $62.3 million at March 31, 2021 due to SBA loan forgiveness. Partially offseting these payoffs were Round 2 SBA PPP loan originations with total balances of $21.9 million at March 31, 2021. First Guaranty had approximately 4.4% of funded and 0.9% of unfunded commitments in our loan portfolio to businesses engaged in support or service activities for oil and gas operations. First Guaranty's hotel and motel portfolio totaled $126.3 million at March 31, 2021. As part of the management of risks in our loan portfolio, First Guaranty had previously established an internal guidance limit of approximately $160 million for its hotel and motel portfolio. First Guaranty had $249.3 million in loans related to our Texas markets at March 31, 2021. First Guaranty continues to have significant loan growth opportunities associated with its Texas branches. We anticipate additional growth opportunities in Texas as it contains four major cities in Austin, Dallas, Houston and San Antonio, plus the continued growth and development of these areas are exceeding that of other areas of the country. Syndicated loans at March 31, 2021 were $68.2 million, of which $29.0 million were shared national credits. Syndicated loans decreased $7.0 million during the first three months of 2021 from $75.2 million at December 31, 2020. First Guaranty continued its strong growth into the second quarter of 2021. Loan totals surpassed $2.0 billion as of April 30, 2021.
As of March 31, 2021, 69.3% of our loan portfolio was secured by real estate. The largest portion of our loan portfolio, at 41.3% as of March 31, 2021, was non-farm non-residential loans secured by real estate. Approximately 31.5% of the loan portfolio was based on a floating rate tied to the prime rate or LIBOR as of March 31, 2021. 76.0% of the loan portfolio is scheduled to mature within five years from March 31, 2021.
Net loans are reduced by the allowance for loan losses which totaled $24.8 million at March 31, 2021 and $24.5 million at December 31, 2020. Loan charge-offs were $0.4 million during the first three months of 2021 and $0.3 million during the same period in 2020. Recoveries totaled $0.1 million during the first three months of 2021 and $0.1 million during the same period in 2020. The provision for loan losses totaled $0.6 million for the first three months of 2021 and $1.2 million for the same period in 2020. See Note 4 of the Notes to Consolidated Financial Statements for more information on loans and Note 5 for more information on the allowance for loan losses.
Investment Securities
Investment securities at March 31, 2021 totaled $220.6 million, a decrease of $17.9 million compared to $238.5 million at December 31, 2020. The portfolio consists of both available for sale and held to maturity securities at March 31, 2021. First Guaranty designated $152.9 million in U.S. Government agency securities for held to maturity status in the first quarter of 2021. This was done following the review of guidance for held to maturity securities portfolios in light of the COVID-19 pandemic. First Guaranty had terminated its held to maturity portfolio in the first quarter of 2020 due to the economic conditions associated with COVID-19. ASC 320-10-25 provides an exemption for events that are isolated, nonrecurring, and unusual for the reporting entity. The termination of the held to maturity portfolio in the first quarter of 2020 did not taint the portfolio under this guidance. The securities designated as held to maturity are agency securities that are part of First Guaranty’s investment strategy and public funds collateralization program. We purchase securities for our investment portfolio to provide a source of liquidity, to provide an appropriate return on funds invested, to manage interest rate risk and meet pledging requirements for public funds and borrowings.
The securities portfolio consisted principally of U.S. Government and Government agency securities, agency mortgage-backed securities, corporate debt securities and municipal bonds. U.S. government agencies consist of FHLB, Federal Farm Credit Bank ("FFCB"), Freddie Mac and Fannie Mae obligations. Mortgage backed securities that we purchase are issued by Freddie Mac and Fannie Mae. Management monitors the securities portfolio for both credit and interest rate risk. We generally limit the purchase of corporate securities to individual issuers to manage concentration and credit risk. Corporate securities generally have a maturity of 10 years or less. U.S. Government securities consist of U.S. Treasury bills that have maturities of less than 30 days. Government agency securities generally have maturities of 15 years or less. Agency mortgage backed securities have stated final maturities of 15 to 20 years.
Our available for sale securities portfolio totaled $67.7 million at March 31, 2021, a decrease of $170.9 million, or 71.6%, compared to $238.5 million at December 31, 2020. The decrease was primarily due to the election of securities to the held to maturity portfolio and due to called bonds. Corporate securities have decreased $3.3 million since December 31, 2020.
Our held to maturity securities portfolio totaled $152.9 million at March 31, 2021 compared to $0 at December 31, 2020. The increase was primarily due to the election of securities as held to maturity.
At March 31, 2021, $5.2 million, or 2.4%, of the securities portfolio was scheduled to mature in less than one year. $4.6 million, or 2.1%, of the securities portfolio, not including collateralized mortgage obligations and mortgage-backed securities, were scheduled to mature between one and five years. $63.8 million, or 28.9%, of the securities portfolio, not including collateralized mortgage obligations and mortgage-backed securities, were scheduled to mature between five and ten years. Securities, not including collateralized mortgage obligations and mortgage-backed securities, with contractual maturity dates over 10 years totaled $146.0 million, or 66.2%, of the total securities portfolio at March 31, 2021. The average maturity of the securities portfolio is affected by call options that may be exercised by the issuer of the securities and are influenced by market interest rates. Prepayments of mortgages that collateralize mortgage-backed securities also affect the maturity of the securities portfolio. Based on internal forecasts as of March 31, 2021, management believes that the securities portfolio has a forecasted weighted average life of approximately 14.1 years based on the current interest rate environment. A parallel interest rate shock of 400 basis points is forecasted to increase the weighted average life of the portfolio to approximately 14.7 years. The portfolio had an estimated effective duration of 9.0 years at March 31, 2021.
There was no credit related other-than-temporary impairment of securities during the three months ended March 31, 2021 or March 31, 2020.
Nonperforming Assets
Non-performing assets consist of non-performing loans and other real-estate owned. Non-performing loans (including nonaccruing troubled debt restructurings described below) are those on which the accrual of interest has stopped or loans which are contractually 90 days past due on which interest continues to accrue. Loans are ordinarily placed on nonaccrual status when principal and interest is delinquent for 90 days or more. However, management may elect to continue the accrual when the asset is well secured and in the process of collection. It is our policy to discontinue the accrual of interest income on any loan for which we have reasonable doubt as to the payment of interest or principal. When a loan is placed on nonaccrual status, unpaid interest credited to income is reversed. Nonaccrual loans are returned to accrual status when the financial position of the borrower indicates there is no longer any reasonable doubt as to the payment of principal or interest and a reasonable payment performance period is observed (generally considered six months or longer). Other real estate owned consists of property acquired through formal foreclosure, in-substance foreclosure or by deed in lieu of foreclosure.
The table below sets forth the amounts and categories of our nonperforming assets at the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Nonaccrual loans:
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
Construction and land development
|
|
$
|
621
|
|
|
$
|
621
|
|
|
Farmland
|
|
840
|
|
|
857
|
|
|
1- 4 family
|
|
2,244
|
|
|
2,227
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
Non-farm non-residential
|
|
7,846
|
|
|
7,449
|
|
|
Total Real Estate
|
|
11,551
|
|
|
11,154
|
|
|
Non-Real Estate:
|
|
|
|
|
|
Agricultural
|
|
3,508
|
|
|
3,472
|
|
|
Commercial and industrial
|
|
663
|
|
|
701
|
|
|
Consumer and other
|
|
387
|
|
|
249
|
|
|
Total Non-Real Estate
|
|
4,558
|
|
|
4,422
|
|
|
Total nonaccrual loans
|
|
16,109
|
|
|
15,576
|
|
|
|
|
|
|
|
|
Loans 90 days and greater delinquent & accruing:
|
|
|
|
|
|
Real Estate:
|
|
|
|
|
|
Construction and land development
|
|
880
|
|
|
1,000
|
|
|
Farmland
|
|
—
|
|
|
—
|
|
|
1- 4 family
|
|
4,908
|
|
|
4,980
|
|
|
Multifamily
|
|
—
|
|
|
366
|
|
|
Non-farm non-residential
|
|
2,240
|
|
|
4,699
|
|
|
Total Real Estate
|
|
8,028
|
|
|
11,045
|
|
|
Non-Real Estate:
|
|
|
|
|
|
Agricultural
|
|
186
|
|
|
67
|
|
|
Commercial and industrial
|
|
781
|
|
|
1,856
|
|
|
Consumer and other
|
|
132
|
|
|
123
|
|
|
Total Non-Real Estate
|
|
1,099
|
|
|
2,046
|
|
|
Total loans 90 days and greater delinquent & accruing
|
|
9,127
|
|
|
13,091
|
|
|
|
|
|
|
|
|
Total non-performing loans
|
|
25,236
|
|
|
28,667
|
|
|
|
|
|
|
|
|
Real Estate Owned:
|
|
|
|
|
|
Construction and land development
|
|
90
|
|
|
311
|
|
|
Farmland
|
|
—
|
|
|
—
|
|
|
1- 4 family
|
|
119
|
|
|
131
|
|
|
Multifamily
|
|
—
|
|
|
—
|
|
|
Non-farm non-residential
|
|
1,765
|
|
|
1,798
|
|
|
Total Real Estate Owned
|
|
1,974
|
|
|
2,240
|
|
|
|
|
|
|
|
|
Total non-performing assets
|
|
$
|
27,210
|
|
|
$
|
30,907
|
|
|
|
|
|
|
|
|
Non-performing assets to total loans
|
|
1.38
|
%
|
|
1.68
|
%
|
|
Non-performing assets to total assets
|
|
1.06
|
%
|
|
1.25
|
%
|
|
Non-performing loans to total loans
|
|
1.28
|
%
|
|
1.55
|
%
|
At March 31, 2021, nonperforming assets totaled $27.2 million, or 1.06% of total assets, compared to $30.9 million, or 1.25%, of total assets at December 31, 2020, which represented a decrease of $3.7 million, or 12.0%. The decrease in non-performing assets occurred primarily due to a reduction in 90 day past due and still accruing loans.
Nonaccrual loans increased from $15.6 million at December 31, 2020 to $16.1 million at March 31, 2021. The increase in nonaccrual loans was primarily due to the addition of one non-farm non-residential loan that totaled $0.5 million and was secured by a restaurant and bar facility. Nonperforming assets included $3.7 million in loans with a government guarantee. These are structured as net loss guarantees in which up to 90% of loss exposure is covered.
At March 31, 2021, loans 90 days or greater delinquent and still accruing totaled $9.1 million, a decrease of $4.0 million compared to $13.1 million at December 31, 2020. The decrease in loans 90 days or greater delinquent and still accruing was concentrated primarily in non-farm non-residential loans and commercial and industrial loans. One-to-four family loans in the 90 day category included loans acquired from the Union acquisition that have contractually matured but have not been renewed due to operations issues following the acquisition. First Guaranty expects to satisfactorily renew the majority of these acquired loans and return them to performing status.
Other real estate owned at March 31, 2021 totaled $2.0 million, a decrease of $0.3 million compared to $2.2 million at December 31, 2020. First Guaranty has a reserve for other real estate owned losses. This reserve totaled $0.4 million at March 31, 2021.
At March 31, 2021, our largest non-performing assets were comprised of the following nonaccrual loans, 90 day plus and still accruing loans and other real estate owned: (1) a non-farm non-residential loan secured by a hotel that totaled $3.5 million that is classified as a troubled debt restructured loan or TDR; (2) a $2.0 million non-farm non-residential property included in other real estate owned; (3) a non-farm non-residential loan secured by a hotel that totaled $1.8 million; (4) a non-farm non-residential loan secured by a sports facility that totaled $1.3 million which has a partial government guarantee; (5) an agricultural/ farmland loan relationship that totaled $1.1 million; (6) an agricultural loan relationship that totaled $1.0 million; and (7) an agricultural loan relationship that totaled $1.0 million. The agricultural loans are partially guaranteed by the USDA Farm Service Agency.
Troubled Debt Restructurings
Another category of assets which contribute to our credit risk is troubled debt restructurings ("TDRs"). A TDR is a loan for which a concession has been granted to the borrower due to a deterioration of the borrower's financial condition. Such concessions may include reduction in interest rates, deferral of interest or principal payments, principal forgiveness and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. We strive to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before such loan reaches nonaccrual status. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest. TDRs that are not performing in accordance with their restructured terms and are either contractually 90 days past due or placed on nonaccrual status are reported as non-performing loans. Our policy provides that nonaccrual TDRs are returned to accrual status after a period of satisfactory and reasonable future payment performance under the terms of the restructuring. Satisfactory payment performance is generally no less than six consecutive months of timely payments and demonstrated ability to continue to repay.
Under section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law on March 27, 2020 and as subsequently modified by later legislation, 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) January 1, 2022 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 is a summary of loans restructured as TDRs at March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Restructured Loans:
|
|
|
|
|
|
In Compliance with Modified Terms
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Past Due 30 through 89 days and still accruing
|
|
—
|
|
|
—
|
|
|
Past Due 90 days and greater and still accruing
|
|
—
|
|
|
—
|
|
|
Nonaccrual
|
|
3,524
|
|
|
3,591
|
|
|
Restructured Loans that subsequently defaulted
|
|
—
|
|
|
—
|
|
|
Total Restructured Loans
|
|
$
|
3,524
|
|
|
$
|
3,591
|
|
At March 31, 2021, we had one outstanding TDR which was a $3.5 million non-farm non-residential loan secured by commercial real estate that is on nonaccrual. The restructuring of this loan was related to interest rate and amortization concessions. The loan is secured by a hotel facility. This loan was not eligible for a CARES act modification.
Allowance for Loan Losses
The allowance for loan losses is maintained to absorb potential losses in the loan portfolio. The allowance is increased by the provision for loan losses, offset by recoveries of previously charged-off loans and is decreased by loan charge-offs. The provision is a charge to current expense to provide for current loan losses and to maintain the allowance commensurate with management's evaluation of the risks inherent in the loan portfolio. Various factors are taken into consideration when determining the amount of the provision and the adequacy of the allowance. These factors include but are not limited to:
•past due and non-performing assets;
•specific internal analysis of loans requiring special attention;
•the current level of regulatory classified and criticized assets and the associated risk factors with each;
•changes in underwriting standards or lending procedures and policies;
•charge-off and recovery practices;
•national and local economic and business conditions;
•nature and volume of loans;
•overall portfolio quality;
•adequacy of loan collateral;
•quality of loan review system and degree of oversight by our board of directors;
•competition and legal and regulatory requirements on borrowers;
•examinations of the loan portfolio by federal and state regulatory agencies and examinations; and
•review by our internal loan review department and independent accountants.
The data collected from all sources in determining the adequacy of the allowance is evaluated on a regular basis by management with regard to current national and local economic trends, prior loss history, underlying collateral values, credit concentrations and industry risks. An estimate of potential loss on specific loans is developed in conjunction with an overall risk evaluation of the total loan portfolio. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as new information becomes available.
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 our syndicated loans, including shared national credits. The general component covers non-classified loans and special mention loans and is based on historical loss experience for the past three years adjusted for qualitative factors described above. An unallocated component is maintained to cover uncertainties that could affect the estimate of probable losses.
The balance in the allowance for loan losses is principally influenced by the provision for loan losses, recoveries, and by net loan loss experience. Additions to the allowance are charged to the provision for loan losses. Losses are charged to the allowance as incurred and recoveries on losses previously charged to the allowance are credited to the allowance at the time recovery is collected.
The allowance for loan losses was $24.8 million, or 1.26% of total loans, and 98.2% of nonperforming loans at March 31, 2021.
Comparing March 31, 2021 to December 31, 2020, there were changes within the specific components of the allowance balance.
A provision for loan losses of $0.6 million was made during the three months ended March 31, 2021 as compared to $1.2 million for the same period in 2020. The provisions made were taken to provide for current loan losses and to maintain the allowance proportionate to risks inherent in the loan portfolio. First Guaranty’s incurred loan loss calculation method incorporates risk factors in the loan portfolio such as historical loss rates along with qualitative and quantitative factors. The composition of the loan portfolio affects the final allowance calculation.
The loan portfolio factors in 2021 that primarily affected the allocation of the allowance included the following:
•The loan portfolio risks that changed and affected the allocation of the allowance were due to changes in historical loss rates, adjustments of certain qualitative factors to take into account the current estimated impact of COVID-19 and related economic conditions on borrowers' ability to repay loans and for allocations to impaired loans within their respective categories. First Guaranty adjusted allocations within its qualitative and quantitative factors to account for changes in potential COVID-19 related losses.
•Construction and land development loans declined during the first quarter of 2021 as several loans transitioned to permanent financing. The majority of these loans are now included in the multifamily loan category as of March 31, 2021.
•One-to four-family residential loans increased moderately in the first quarter of 2021. The provision decrease related to this portfolio was due to changes in the qualitative analysis of the portfolio related to COVID-19.
•Multifamily loans increased in the first quarter of 2021. The provision related to this portfolio was increased due to the growth in the portfolio which increased by $65.0 million during the quarter.
•Non-farm non-residential loans decreased during the first quarter of 2021. The provision decrease related to this portfolio was due to changes in the qualitative analysis of the portfolio related to COVID-19 and historical loss rates.
•Commercial and industrial loans decreased during the first quarter of 2021. The provision decrease related to this portfolio was due to the reduced balances, changes in historical loss rates and changes in the qualitative analysis of the portfolio related to COVID-19.
•Consumer and other loans increased during the first quarter of 2021. The increase in the related loan loss allowance balance was due primarily to the increased balances associated with commercial leases. Commercial leases grew during the quarter from $104.1 million at December 31, 2020 to $205.5 million at March 31, 2021.
•First Guaranty continues to monitor the acquired loans from the Union acquisition on November 7, 2019. Discounts on the acquired Union loans were approximately $1.7 million at March 31, 2021.
First Guaranty charged off $0.4 million in loan balances during the first three months of 2021. The $0.4 million in charged off loans were comprised of smaller loans and overdrawn deposit accounts.
Other information related to the allowance for loan losses is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three Months Ended
March 31, 2021
|
|
Three Months Ended
March 31, 2020
|
|
Loans:
|
|
|
|
|
|
Average outstanding balance
|
|
$
|
1,911,914
|
|
|
$
|
1,514,573
|
|
|
Balance at end of period
|
|
$
|
1,966,432
|
|
|
$
|
1,544,132
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses:
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
24,518
|
|
|
$
|
10,929
|
|
|
Charge-offs
|
|
(439)
|
|
|
(298)
|
|
|
Recoveries
|
|
105
|
|
|
85
|
|
|
Provision
|
|
608
|
|
|
1,245
|
|
|
Balance at end of period
|
|
$
|
24,792
|
|
|
$
|
11,961
|
|
Deposits
Managing the mix and pricing the maturities of deposit liabilities is an important factor affecting our ability to maximize our net interest margin. The strategies used to manage interest-bearing deposit liabilities are designed to adjust as the interest rate environment changes. We regularly assess our funding needs, deposit pricing and interest rate outlooks. From December 31, 2020 to March 31, 2021, total deposits increased $148.4 million, or 6.8%, to $2.3 billion. Noninterest-bearing demand deposits increased $55.3 million, or 13.4%, to $466.7 million at March 31, 2021. The increase in noninterest-bearing demand deposits was due to economic conditions associated with the CARES Act, proceeds from the SBA PPP program, and additional stimulus payments made due to pandemic relief to First Guaranty's consumer and business customers. Interest-bearing demand deposits increased $70.7 million, or 8.2%, to $931.1 million at March 31, 2021. The increase in interest-bearing demand deposits was primarily concentrated in public funds interest-bearing demand deposits that increase seasonally in the first quarter of each year. Savings deposits increased $15.8 million, or 9.3%, to $184.7 million at March 31, 2021, primarily related to increases in individual savings deposits. Time deposits decreased $6.6 million, or 0.9%, to $732.3 million at March 31, 2021, primarily due to decreases in business deposits.
As we seek to strengthen our net interest margin and improve our earnings, attracting non-interest-bearing or lower cost deposits will be a primary emphasis. Management will continue to evaluate and update our product mix and related technology in its efforts to attract additional customers. We currently offer a number of deposit products that are competitively priced and designed to attract and retain customers with primary emphasis on noninterest-bearing deposits and other lower cost deposits. For the remaining nine months of 2021, First Guaranty has approximately $149.6 million in non-public funds time deposits that are scheduled to mature and represent an opportunity for repricing to more favorable market terms. This includes approximately $89.9 million in one year time deposits at an average rate of 0.80%, $41.6 million in two year time deposits at an average rate of 2.32%, and approximately $18.1 million in greater than two year time deposits at an average rate of 2.29% that are scheduled to mature in the remaining nine months of 2021. First Guaranty expects to renew the majority of these time deposits at lower market rates.
As of March 31, 2021, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $513.7 million. At March 31, 2021, approximately $363.2 million of First Guaranty's certificates of deposit had a remaining term greater than one year.
The following table compares deposit categories for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deposits
|
|
For the Three Months Ended
March 31,
|
|
For the Years Ended December 31,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
(in thousands except for %)
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Noninterest-bearing Demand
|
|
$
|
428,310
|
|
|
19.0
|
%
|
|
—
|
%
|
|
$
|
393,734
|
|
|
19.2
|
%
|
|
—
|
%
|
|
$
|
262,379
|
|
|
15.7
|
%
|
|
—
|
|
|
Interest-bearing Demand
|
|
923,925
|
|
|
40.9
|
%
|
|
0.7
|
%
|
|
722,433
|
|
|
35.3
|
%
|
|
0.8
|
%
|
|
592,113
|
|
|
35.4
|
%
|
|
1.8
|
%
|
|
Savings
|
|
175,396
|
|
|
7.8
|
%
|
|
0.1
|
%
|
|
163,332
|
|
|
8.0
|
%
|
|
0.2
|
%
|
|
115,682
|
|
|
6.9
|
%
|
|
0.4
|
%
|
|
Time
|
|
728,112
|
|
|
32.3
|
%
|
|
2.0
|
%
|
|
767,075
|
|
|
37.5
|
%
|
|
2.2
|
%
|
|
703,685
|
|
|
42.0
|
%
|
|
2.4
|
%
|
|
Total Deposits
|
|
$
|
2,255,743
|
|
|
100.0
|
%
|
|
0.9
|
%
|
|
$
|
2,046,574
|
|
|
100.0
|
%
|
|
1.1
|
%
|
|
$
|
1,673,859
|
|
|
100.0
|
%
|
|
1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual and Business Deposits
|
|
For the Three Months Ended
March 31,
|
|
For the Years Ended December 31,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
(in thousands except for %)
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Noninterest-bearing Demand
|
|
$
|
422,151
|
|
|
28.4
|
%
|
|
—
|
%
|
|
$
|
382,940
|
|
|
27.5
|
%
|
|
—
|
|
$
|
256,099
|
|
|
23.7
|
%
|
|
—
|
|
Interest-bearing Demand
|
|
354,280
|
|
|
23.8
|
%
|
|
0.9
|
%
|
|
280,587
|
|
|
20.1
|
%
|
|
1.0
|
%
|
|
241,290
|
|
|
22.3
|
%
|
|
1.4
|
%
|
|
Savings
|
|
138,360
|
|
|
9.3
|
%
|
|
0.1
|
%
|
|
127,804
|
|
|
9.2
|
%
|
|
0.1
|
%
|
|
86,972
|
|
|
8.0
|
%
|
|
0.1
|
%
|
|
Time
|
|
573,978
|
|
|
38.5
|
%
|
|
2.3
|
%
|
|
600,887
|
|
|
43.2
|
%
|
|
2.5
|
%
|
|
498,521
|
|
|
46.0
|
%
|
|
2.6
|
%
|
|
Total Individual and Business Deposits
|
|
$
|
1,488,769
|
|
|
100.0
|
%
|
|
1.1
|
%
|
|
$
|
1,392,218
|
|
|
100.0
|
%
|
|
1.3
|
%
|
|
$
|
1,082,882
|
|
|
100.0
|
%
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Public Funds Deposits
|
|
For the Three Months Ended
March 31,
|
|
For the Years Ended December 31,
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
(in thousands except for %)
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Average Balance
|
|
Percent
|
|
Weighted
Average Rate
|
|
Noninterest-bearing Demand
|
|
$
|
6,159
|
|
|
0.8
|
%
|
|
—
|
%
|
|
$
|
10,794
|
|
|
1.7
|
%
|
|
—
|
|
$
|
6,280
|
|
|
1.1
|
%
|
|
—
|
|
Interest-bearing Demand
|
|
569,645
|
|
|
74.3
|
%
|
|
0.6
|
%
|
|
441,846
|
|
|
67.5
|
%
|
|
0.7
|
%
|
|
350,823
|
|
|
59.3
|
%
|
|
2.0
|
%
|
|
Savings
|
|
37,036
|
|
|
4.8
|
%
|
|
0.2
|
%
|
|
35,528
|
|
|
5.4
|
%
|
|
0.4
|
%
|
|
28,710
|
|
|
4.9
|
%
|
|
1.6
|
%
|
|
Time
|
|
154,134
|
|
|
20.1
|
%
|
|
0.7
|
%
|
|
166,188
|
|
|
25.4
|
%
|
|
1.1
|
%
|
|
205,164
|
|
|
34.7
|
%
|
|
2.1
|
%
|
|
Total Public Funds Deposits
|
|
$
|
766,974
|
|
|
100.0
|
%
|
|
0.6
|
%
|
|
$
|
654,356
|
|
|
100.0
|
%
|
|
0.8
|
%
|
|
$
|
590,977
|
|
|
100.0
|
%
|
|
1.9
|
%
|
The following table sets forth the distribution of our time deposit accounts.
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
Time deposits of less than $100,000
|
|
$
|
218,606
|
|
|
Time deposits of $100,000 through $250,000
|
|
252,737
|
|
|
Time deposits of more than $250,000
|
|
260,917
|
|
|
Total Time Deposits
|
|
$
|
732,260
|
|
The following table sets forth the maturity of the time deposits at March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
Due in one year or less
|
|
$
|
369,110
|
|
|
Due after one year through three years
|
|
287,042
|
|
|
Due after three years
|
|
76,108
|
|
|
Total Time Deposits
|
|
$
|
732,260
|
|
At March 31, 2021, public funds deposits totaled $767.7 million compared to $715.3 million at December 31, 2020. Public funds time deposits totaled $157.7 million at March 31, 2021 compared to $158.9 million at December 31, 2020. Public funds deposits increased due to seasonal fluctuations. We have developed a program for the retention and management of public funds deposits. Since the end of 2012, we have maintained public funds deposits in excess of $400.0 million. These deposits are from public entities such as school districts, hospital districts, sheriff departments and municipalities. The majority of these funds are under fiscal agency agreements with terms of three years or less. Deposits under fiscal agency agreements are generally stable but public entities may maintain the ability to negotiate term deposits on a specific basis including with other financial institutions. These deposits generally have stable balances as we maintain both operating accounts and time deposits for these entities. There is a seasonal component to public deposit levels associated with annual tax collections. Public funds will increase at the end of the year and during the first quarter. In addition to seasonal fluctuations, there are monthly fluctuations associated with internal payroll and short-term tax collection accounts for our public funds deposit accounts. Public funds deposit accounts are collateralized by FHLB letters of credit, by expanded reciprocal deposit insurance programs, by Louisiana municipal bonds and by eligible government and government agency securities such as those issued by the FHLB, FFCB, Fannie Mae, and Freddie Mac. First Guaranty continues to grow the proportion of its public funds portfolio that is collateralized by reciprocal deposit insurance as an alternative to pledging securities or utilizing FHLB letters of credit. First Guaranty initiated this strategy to more efficiently invest these deposits in higher yielding loans to improve the net interest margin and earnings. Total public funds collateralized by reciprocal deposit insurance programs increased to $237.5 million at March 31, 2021 compared to $217.7 million at December 31, 2020.
The following table sets forth public funds as a percent of total deposits.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands except for %)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
December 31, 2019
|
|
December 31, 2018
|
|
December 31, 2017
|
|
Public Funds:
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing Demand
|
|
$
|
6,540
|
|
|
$
|
5,109
|
|
|
$
|
9,944
|
|
|
$
|
6,930
|
|
|
$
|
4,828
|
|
|
Interest-bearing Demand
|
|
566,144
|
|
|
514,416
|
|
|
424,732
|
|
|
364,692
|
|
|
389,788
|
|
|
Savings
|
|
37,382
|
|
|
36,862
|
|
|
29,570
|
|
|
26,903
|
|
|
20,539
|
|
|
Time
|
|
157,670
|
|
|
158,925
|
|
|
146,420
|
|
|
247,004
|
|
|
225,591
|
|
|
Total Public Funds
|
|
$
|
767,736
|
|
|
$
|
715,312
|
|
|
$
|
610,666
|
|
|
$
|
645,529
|
|
|
$
|
640,746
|
|
|
Total Deposits
|
|
$
|
2,314,670
|
|
|
$
|
2,166,318
|
|
|
$
|
1,853,013
|
|
|
$
|
1,629,622
|
|
|
$
|
1,549,286
|
|
|
Total Public Funds as a percent of Total Deposits
|
|
33.2
|
%
|
|
33.0
|
%
|
|
33.0
|
%
|
|
39.6
|
%
|
|
41.4
|
%
|
Borrowings
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 $6.2 million in short-term borrowings outstanding at March 31, 2021 compared to $56.1 million at December 31, 2020. First Guaranty redeemed a $50.0 million short-term Federal Home Loan Bank advance in the first quarter of 2021 that had a rate of 0.72% and was acquired in connection with our COVID-19 contingency plans. The short-term borrowings at March 31, 2021 were comprised of repurchase agreements of $6.2 million. First Guaranty has a long term FHLB advance that was acquired from the Union transaction that totaled $3.3 million at March 31, 2021. First Guaranty has a line of credit for $6.5 million with another financial institution, with no outstanding balance at March 31, 2021. First Guaranty did not have any advances under the Federal Reserve Paycheck Protection Program Liquidity Facility ("PPPLF") at March 31, 2021.
First Guaranty had senior long-term debt totaling $40.8 million as of March 31, 2021 and $42.4 million at December 31, 2020. Subsequent to March 31, 2021, First Guaranty paid off $13.2 million in senior long-term debt using proceeds from its preferred stock capital offering.
First Guaranty also had junior subordinated debentures totaling $14.8 million at March 31, 2021 and December 31, 2020.
First Guaranty had $387.1 million in Federal Home Loan Bank letters of credit as of March 31, 2021 compared to $365.8 million at December 31, 2020. Federal Home Loan Bank letters of credit are obtained primarily for collateralizing public deposits.
Total Shareholders' Equity
Total shareholders' equity decreased to $176.3 million at March 31, 2021 from $178.6 million at December 31, 2020. The decrease in shareholders' equity was principally the result of a decrease of $5.8 million in accumulated other comprehensive income that was partially offset by an increase of $3.5 million in retained earnings. The decrease in accumulated other comprehensive income was primarily attributed to the increase in unrealized losses on available for sale securities during the three months ended March 31, 2021. The $3.5 million increase in retained earnings was due to net income of $5.0 million during the three months ended March 31, 2021, partially offset by $1.6 million in cash dividends paid on shares of our common stock.
Results of Operations for the First Quarter Ended March 31, 2021 and 2020
Performance Summary
Three months ended March 31, 2021 compared to the three months ended March 31, 2020. Net income for the three months ended March 31, 2021 was $5.0 million, an increase of $1.2 million, or 31.3%, from $3.8 million for the three months ended March 31, 2020. The increase in net income for the three months ended March 31, 2021 as compared to the prior year period was the result of several factors. First Guaranty experienced an increase in interest income associated with loans, a decrease in interest expense and a decrease in the provision for loan losses. This was partially offset by a decrease in interest income associated with securities, decreased noninterest income and an increase in noninterest expense. Loan interest income increased due to the growth in First Guaranty's loan portfolio, including loan fees recognized as an adjustment to yield from the origination of the SBA guaranteed PPP loans. Interest expense declined due to declines in market interest rates and First Guaranty's plan to reduce interest expense. Interest expense declined in 2021 even after factoring in an increase in deposit balances associated with SBA PPP loans and stimulus payments, and additional borrowings associated with our COVID-19 contingency plans. Factors that partially offset income included decreased securities interest income due to the decrease in the investment portfolio. Noninterest income decreased primarily as a result of a decrease in securities gains. Noninterest expense increased primarily associated with occupancy and equipment expense. Earnings per common share for the three months ended March 31, 2021 was $0.52 per common share, an increase of 33.3% or $0.13 per common share from $0.39 per common share for the three months ended March 31, 2020. Earnings per share was affected by the increase in earnings.
Net Interest Income
Our operating results depend primarily on our net interest income, which is the difference between interest income earned on interest-earning assets, including loans and securities, and interest expense incurred on interest-bearing liabilities, including deposits and other borrowed funds. Interest rate fluctuations, as well as changes in the amount and type of interest-earning assets and interest-bearing liabilities, combine to affect net interest income. First Guaranty’s assets and liabilities are generally most affected by changes in the Federal Funds rate, Libor rate, short term Treasury rates such as one month and three month Treasury bills, and longer term Treasury rates such as the U.S. ten year Treasury rate. Our net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities. There may also be a time lag in the effect of interest rate changes on assets and liabilities. It is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and other borrowed funds.
A financial institution's asset and liability structure is substantially different from that of a non-financial company, in that virtually all assets and liabilities are monetary in nature. Accordingly, changes in interest rates may have a significant impact on a financial institution's performance. The impact of interest rate changes depends on the sensitivity to the change of our interest-earning assets and interest-bearing liabilities. The effects of the changing interest rate environment in recent periods and our interest sensitivity position is discussed below.
Three months ended March 31, 2021 compared to the three months ended March 31, 2020. Net interest income for the three months ended March 31, 2021 and 2020 was $19.6 million and $17.9 million, respectively. The increase in net interest income for the three months ended March 31, 2021 as compared to the prior year period was primarily due to an increase in the average balance of our total interest-earning assets, and a decrease in the average rate of our total interest-bearing liabilities, partially offset by a decrease in the average yield of our total interest-earning assets and an increase in the average balance of our total interest-bearing liabilities. For the three months ended March 31, 2021, the average balance of our total interest-earning assets increased by $423.6 million to $2.4 billion due to the COVID-19 related lending activities, including SBA PPP loans, increased cash and due balances, and strong growth in commercial leases and our other loan portfolios. The average yield of our interest-earning assets decreased by 86 basis points to 4.20% for the three months ended March 31, 2021 from 5.06% for the three months ended March 31, 2020 due to the general decline in market interest rates. For the three months ended March 31, 2021, the average balance of our total interest-bearing liabilities increased by $292.4 million to $1.9 billion, and the average rate of our total interest-bearing liabilities decreased by 64 basis points to 1.21% for the three months ended March 31, 2021 from 1.85% for the three months ended March 31, 2020. As a result, our net interest rate spread decreased 22 basis points to 2.99% for the three months ended March 31, 2021 from 3.21% for the three months ended March 31, 2020. Our net interest margin decreased 32 basis points to 3.25% for the three months ended March 31, 2021 from 3.57% for the three months ended March 31, 2020.
Interest Income
Three months ended March 31, 2021 compared to the three months ended March 31, 2020. Interest income decreased $0.1 million, or 0.4%, to $25.3 million for the three months ended March 31, 2021 as compared to the prior year period. First Guaranty's loan portfolio expanded during the first quarter of 2021 due to growth associated with our loan originations, including commercial leases. These factors contributed to the change in interest income as the yield of interest-earning assets decreased due to the decline in market interest rates, partially offset by an increase in the average balance of our total interest-earning assets, primarily associated with loans. The average yield of interest-earning assets decreased by 86 basis points to 4.20% for the three months ended March 31, 2021 compared to 5.06% for the three months ended March 31, 2020. The average balance of our interest-earning assets increased $423.6 million to $2.4 billion for the three months ended March 31, 2021 as compared to the prior year.
Interest income on securities decreased $1.2 million to $1.5 million for the three months ended March 31, 2021 as compared to the prior year period primarily as a result of a decrease in average balances. The average balance of securities decreased $156.0 million to $257.8 million for the three months ended March 31, 2021 from $413.7 million for the three months ended March 31, 2020 primarily due to a decrease in the average balance of our mortgage-backed securities and corporate securities that were sold in the fourth quarter of 2020. The average yield on securities decreased 27 basis points to 2.40% for the three months ended March 31, 2021 compared to 2.67% for the three months ended March 31, 2020 due to the decrease in market interest rates.
Interest income on loans increased $1.3 million, or 5.7%, to $23.8 million for the three months ended March 31, 2021 as compared to the prior year period as a result of an increase in the average balance of loans. The average balance of loans (excluding loans held for sale) increased by $397.3 million to $1.9 billion for the three months ended March 31, 2021 from $1.5 billion for the three months ended March 31, 2020 as a result of new loan originations. The average yield on loans (excluding loans held for sale) decreased by 92 basis points to 5.04% for the three months ended March 31, 2021 from 5.96% for the three months ended March 31, 2020 due to the decrease in market interest rates and the impact of SBA PPP loans.
Interest Expense
Three months ended March 31, 2021 compared to the three months ended March 31, 2020. Interest expense decreased $1.8 million, or 23.6%, to $5.7 million for the three months ended March 31, 2021 from $7.5 million for the three months ended March 31, 2020 due primarily to a decrease in market interest rates partially offset by an increase in the average balance of interest-bearing liabilities. The average rate of interest-bearing demand deposits decreased by 61 basis points during the three months ended March 31, 2021 to 0.70% as compared to the prior year period. The decrease in the average rate on interest-bearing demand deposits was due to those deposits, primarily public funds accounts and brokered money market deposits, whose rates are contractually tied to national index rates such as the U.S. Federal Funds rate or short-term U.S. Treasury rates that declined during the current period. The average rate of time deposits decreased 46 basis points during the three months ended March 31, 2021 to 1.96% as compared to the prior year period. The decrease in the average rate of time deposits was due to significant decline in market interest primarily associated with the economic conditions from the COVID-19 pandemic. Partially offsetting the decrease in interest expense was an increase in the average balance of interest-bearing liabilities, which increased by $292.4 million during the three months ended March 31, 2021 to $1.9 billion as compared to the prior year period. This increase was a result of a $276.5 million increase in the average balance of interest-bearing demand deposits, a $30.4 million increase in the average balance of savings deposits, and a $16.2 million increase in the average balance of borrowings. These increases were partially offset by a $30.7 million decrease in the average balance of time deposits.
The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the tables as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.
The net interest income yield shown below in the average balance sheet is calculated by dividing net interest income by average interest-earning assets and is a measure of the efficiency of the earnings from balance sheet activities. It is affected by changes in the difference between interest on interest-earning assets and interest-bearing liabilities and the percentage of interest-earning assets funded by interest-bearing liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
|
|
(in thousands except for %)
|
|
Average Balance
|
|
Interest
|
|
Yield/Rate (6)
|
|
Average Balance
|
|
Interest
|
|
Yield/Rate (6)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning deposits with banks(1)
|
|
$
|
275,360
|
|
|
$
|
66
|
|
|
0.10
|
%
|
|
$
|
92,806
|
|
|
$
|
235
|
|
|
1.02
|
%
|
|
Securities (including FHLB stock)
|
|
257,763
|
|
|
1,525
|
|
|
2.40
|
%
|
|
413,718
|
|
|
2,743
|
|
|
2.67
|
%
|
|
Federal funds sold
|
|
448
|
|
|
—
|
|
|
—
|
%
|
|
571
|
|
|
—
|
|
|
—
|
%
|
|
Loans held for sale
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
223
|
|
|
3
|
|
|
5.69
|
%
|
|
Loans, net of unearned income
|
|
1,911,914
|
|
|
23,750
|
|
|
5.04
|
%
|
|
1,514,573
|
|
|
22,457
|
|
|
5.96
|
%
|
|
Total interest-earning assets
|
|
2,445,485
|
|
|
$
|
25,341
|
|
|
4.20
|
%
|
|
2,021,891
|
|
|
$
|
25,438
|
|
|
5.06
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
11,656
|
|
|
|
|
|
|
12,382
|
|
|
|
|
|
|
Premises and equipment, net
|
|
60,226
|
|
|
|
|
|
|
57,142
|
|
|
|
|
|
|
Other assets
|
|
25,141
|
|
|
|
|
|
|
34,010
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,542,508
|
|
|
|
|
|
|
$
|
2,125,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
$
|
923,925
|
|
|
$
|
1,595
|
|
|
0.70
|
%
|
|
$
|
647,432
|
|
|
$
|
2,110
|
|
|
1.31
|
%
|
|
Savings deposits
|
|
175,396
|
|
|
52
|
|
|
0.12
|
%
|
|
145,024
|
|
|
116
|
|
|
0.32
|
%
|
|
Time deposits
|
|
728,112
|
|
|
3,520
|
|
|
1.96
|
%
|
|
758,807
|
|
|
4,560
|
|
|
2.42
|
%
|
|
Borrowings
|
|
96,257
|
|
|
572
|
|
|
2.41
|
%
|
|
80,046
|
|
|
728
|
|
|
3.66
|
%
|
|
Total interest-bearing liabilities
|
|
1,923,690
|
|
|
$
|
5,739
|
|
|
1.21
|
%
|
|
1,631,309
|
|
|
$
|
7,514
|
|
|
1.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
428,310
|
|
|
|
|
|
|
312,160
|
|
|
|
|
|
|
Other
|
|
10,460
|
|
|
|
|
|
|
11,058
|
|
|
|
|
|
|
Total Liabilities
|
|
2,362,460
|
|
|
|
|
|
|
1,954,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
180,048
|
|
|
|
|
|
|
170,898
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity
|
|
$
|
2,542,508
|
|
|
|
|
|
|
$
|
2,125,425
|
|
|
|
|
|
|
Net interest income
|
|
|
|
$
|
19,602
|
|
|
|
|
|
|
$
|
17,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest rate spread (2)
|
|
|
|
|
|
2.99
|
%
|
|
|
|
|
|
3.21
|
%
|
|
Net interest-earning assets (3)
|
|
$
|
521,795
|
|
|
|
|
|
|
$
|
390,582
|
|
|
|
|
|
|
Net interest margin (4), (5)
|
|
|
|
|
|
3.25
|
%
|
|
|
|
|
|
3.57
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to interest-bearing liabilities
|
|
|
|
|
|
127.12
|
%
|
|
|
|
|
|
123.94
|
%
|
(1)Includes Federal Reserve balances reporting in cash and due from banks on the consolidated balance sheets.
(2)Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(3)Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(4)Net interest margin represents net interest income divided by average total interest-earning assets.
(5)The tax adjusted net interest margin was 3.26% and 3.57% for the above periods ended March 31, 2021 and 2020, respectively. A 21% tax rate was used to calculate the effect on securities income from tax exempt securities for the above periods ended March 31, 2021 and 2020, respectively.
(6)Annualized.
Provision for Loan Losses
A provision for loan losses is a charge to income in an amount that management believes is necessary to maintain an adequate allowance for loan losses. The provision is based on management's regular evaluation of current economic conditions in our specific markets as well as regionally and nationally, changes in the character and size of the loan portfolio, underlying collateral values securing loans, and other factors which deserve recognition in estimating loan losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change.
We recorded a $0.6 million provision for loan losses for the three months ended March 31, 2021 compared to $1.2 million for the same period in 2020. The decrease in the provision was attributable to the evaluation of the loan portfolio at March 31, 2021. Total charge-offs were $0.4 million for the three months ended March 31, 2021 and $0.3 million for the same period in 2020.
We believe that the allowance is adequate to cover potential losses in the loan portfolio given the current economic conditions, and current expected net charge-offs and non-performing asset levels. We expect economic uncertainty to continue which may result in additional increases to the allowance for loan losses in future periods.
Noninterest Income
Our primary sources of recurring noninterest income are customer service fees, ATM and debit card fees, loan fees, gains on the sales of loans and available for sale securities and other service fees. Noninterest income does not include loan origination fees which are recognized over the life of the related loan as an adjustment to yield using the interest method.
Noninterest income totaled $2.3 million for the three months ended March 31, 2021, a decrease of $0.1 million from $2.4 million for the three months ended March 31, 2020. The decrease was primarily due to decreased gains on the sale of securities. Service charges, commissions and fees totaled $0.7 million for the three months ended March 31, 2021 and 2020. ATM and debit card fees totaled $0.8 million for the three months ended March 31, 2021 and $0.6 million for the same period in 2020. Net securities gains were $0.1 million for the three months ended March 31, 2021 and $0.5 million for the same period in 2020. The gains on securities sales primarily occurred as First Guaranty sold investment securities in order to fund loan growth and convert unrealized gains into realized earnings. Net gains on the sale of loans were $34,000 for the three months ended March 31, 2021 and $16,000 for the same period in 2020. Other noninterest income totaled $0.6 million for the three months ended March 31, 2021 and 2020, respectively.
Noninterest Expense
Noninterest expense includes salaries and employee benefits, occupancy and equipment expense and other types of expenses. Noninterest expense totaled $15.0 million for the three months ended March 31, 2021 and $14.3 million for the three months ended March 31, 2020. Salaries and benefits expense totaled $7.5 million for the three months ended March 31, 2021 and $7.4 million for the three months ended March 31, 2020. The increase was primarily due to the increase in personnel expense from new hires. Occupancy and equipment expense totaled $2.3 million for the three months ended March 31, 2021 and $1.8 million for the same period in 2020. Other noninterest expense totaled $5.1 million for the three months ended March 31, 2021 and 2020.
The following table presents, for the periods indicated, the major categories of other noninterest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
(in thousands)
|
|
|
|
|
|
2021
|
|
2020
|
|
Other noninterest expense:
|
|
|
|
|
|
|
|
|
|
Legal and professional fees
|
|
|
|
|
|
$
|
666
|
|
|
$
|
598
|
|
|
Data processing
|
|
|
|
|
|
540
|
|
|
1,244
|
|
|
ATM fees
|
|
|
|
|
|
422
|
|
|
303
|
|
|
Marketing and public relations
|
|
|
|
|
|
433
|
|
|
224
|
|
|
Taxes - sales, capital, and franchise
|
|
|
|
|
|
343
|
|
|
335
|
|
|
Operating supplies
|
|
|
|
|
|
225
|
|
|
256
|
|
|
Software expense and amortization
|
|
|
|
|
|
665
|
|
|
408
|
|
|
Travel and lodging
|
|
|
|
|
|
142
|
|
|
239
|
|
|
Telephone
|
|
|
|
|
|
119
|
|
|
50
|
|
|
Amortization of core deposit intangibles
|
|
|
|
|
|
208
|
|
|
178
|
|
|
Donations
|
|
|
|
|
|
122
|
|
|
115
|
|
|
Net costs from other real estate and repossessions
|
|
|
|
|
|
110
|
|
|
90
|
|
|
Regulatory assessment
|
|
|
|
|
|
465
|
|
|
316
|
|
|
Other
|
|
|
|
|
|
672
|
|
|
711
|
|
|
Total other noninterest expense
|
|
|
|
|
|
$
|
5,132
|
|
|
$
|
5,067
|
|
Income Taxes
The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income and the amount of other non-deductible expenses and the statutory tax rate. The provision for income taxes for the three months ended March 31, 2021 and 2020 was $1.3 million and $1.0 million, respectively. The provision for income taxes increased due to an increase in income before income taxes. First Guaranty's statutory tax rate was 21.0% for the three months ended March 31, 2021 and 2020, respectively.
Liquidity and Capital Resources
Liquidity
Liquidity refers to the ability or flexibility to manage future cash flows to meet the needs of depositors and borrowers and fund operations. Maintaining appropriate levels of liquidity allows us to have sufficient funds available to meet customer demand for loans, withdrawal of deposit balances and maturities of deposits and other liabilities. Liquid assets include cash and due from banks, interest-earning demand deposits with banks, federal funds sold and available for sale investment securities.
First Guaranty's cash and cash equivalents totaled $291.1 million at March 31, 2021 compared to $299.6 million at December 31, 2020. Loans maturing within one year or less at March 31, 2021 totaled $284.1 million. At March 31, 2021, time deposits maturing within one year or less totaled $369.1 million compared to $355.1 million at December 31, 2020. Time deposits maturing after one year through three years totaled $287.0 million at March 31, 2021 compared to $234.1 million at December 31, 2020. Time deposits maturing after three years totaled $76.1 million at March 31, 2021 compared to $136.5 million at December 31, 2020. First Guaranty's held to maturity ("HTM") portfolio at March 31, 2021 was $152.9 million, or 69.3% of the investment portfolio, compared to $0 at December 31, 2020. First Guaranty's available for sale ("AFS") portfolio was $67.7 million, or 30.7% of the investment portfolio as of March 31, 2021 compared to $238.5 million, or 100% of the investment portfolio at December 31, 2020. The majority of the AFS portfolio was comprised of U.S. Government Agencies, municipal bonds and investment grade corporate bonds. Management believes these securities are readily marketable and enhance First Guaranty's liquidity.
First Guaranty maintained a net borrowing capacity at the Federal Home Loan Bank totaling $222.6 million and $161.2 million at March 31, 2021 and December 31, 2020, respectively with $3.3 million in FHLB advances outstanding at March 31, 2021 compared to $53.4 million at December 31, 2020, respectively. The advances outstanding at December 31, 2020 were comprised of a short-term advance that was originated in response to the COVID-19 pandemic that totaled $50.0 million and a long-term advance that totaled $3.4 million. First Guaranty paid off the short-term advance acquired in response to the COVID-19 pandemic during the first quarter of 2021. At March 31, 2021, First Guaranty maintained the $3.3 million long-term FHLB advance acquired from the Union acquisition. The change in borrowing capacity with the Federal Home Loan Bank was due to changes in the value that First Guaranty receives on pledged collateral and due to First Guaranty's usage of the line. First Guaranty also has a discount window line with the Federal Reserve Bank. We also maintain federal funds lines of credit at various correspondent banks with borrowing capacity of $100.5 million and a revolving line of credit for $6.5 million secured by a pledge of the Bank's common stock, with no outstanding balance at March 31, 2021. Management believes there is sufficient liquidity to satisfy current operating needs.
Capital Resources
First Guaranty's capital position is reflected in shareholders' equity, subject to certain adjustments for regulatory purposes. Further, our capital base allows us to take advantage of business opportunities while maintaining the level of resources we deem appropriate to address business risks inherent in daily operations.
Total shareholders' equity decreased to $176.3 million at March 31, 2021 from $178.6 million at December 31, 2020. The decrease in shareholders' equity was principally the result of a decrease of $5.8 million in accumulated other comprehensive income that was partially offset by an increase of $3.5 million in retained earnings. The decrease in accumulated other comprehensive income was primarily attributed to the increase in unrealized losses on available for sale securities during the three months ended March 31, 2021.The $3.5 million increase in retained earnings was due to net income of $5.0 million during the three month period ended March 31, 2021, partially offset by $1.6 million in cash dividends paid on our common stock.
Preferred Stock Offering
On April 27, 2021, First Guaranty issued 34,500 shares of 6.75% Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock, par value $1,000 per share, with a liquidation preference of $1,000 per share through an underwritten public offering of 1,380,000 depositary shares, each representing a 1/40th ownership interest in a share of the Series A Preferred Stock. Total gross proceeds from the preferred stock offering were $34.5 million. Net proceeds after underwriting discounts and offering expenses were approximately $33.1 million. The net proceeds will be used for general corporate purposes, including investments in First Guaranty Bank and potential strategic acquisitions.
Regulatory Capital
Risk-based capital regulations adopted by the FDIC require banks to achieve and maintain specified ratios of capital to risk-weighted assets. Similar capital regulations apply to bank holding companies over $3.0 billion in assets. The risk-based capital rules are designed to measure "Tier 1" capital (consisting of common equity, retained earnings and a limited amount of qualifying perpetual preferred stock and trust preferred securities, net of goodwill and other intangible assets and accumulated other comprehensive income) and total capital in relation to the credit risk of both on- and off- balance sheet items. Under the guidelines, one of its risk weights is applied to the different on-balance sheet items. Off-balance sheet items, such as loan commitments, are also subject to risk weighting. Applicable bank holding companies and all banks must maintain a minimum total capital to total risk weighted assets ratio of 8.00%, at least half of which must be in the form of core or Tier 1 capital. These guidelines also specify that bank holding companies that are experiencing internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels.
In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. As of March 31, 2021, the Bank's capital conservation buffer was 3.54% exceeding the minimum of 2.50%.
As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the Federal Reserve Board has amended its small bank holding company and savings and loan holding company policy statement to provide that holding companies with consolidated assets of less than $3 billion that are (i) not engaged in significant nonbanking activities, (ii) do not conduct significant off-balance sheet activities, and (3) do not have a material amount of SEC-registered debt or equity securities, other than trust preferred securities, that contribute to an organization's complexity, are no longer subject to regulatory capital requirements, effective August 30, 2018.
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 increased to 8.5% for the calendar year. Community banks will have until January 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. As of March 31, 2021, the Bank did not elect to follow the Community Bank Leverage Ratio.
At March 31, 2021, we satisfied the minimum regulatory capital requirements and were well capitalized within the meaning of federal regulatory requirements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
"Well Capitalized Minimums"
|
|
As of March 31, 2021
|
|
As of December 31, 2020
|
|
Bank:
|
|
|
|
|
|
|
|
Tier 1 Leverage Ratio
|
|
5.00
|
%
|
|
8.36
|
%
|
|
8.58
|
%
|
|
Tier 1 Risk-based Capital Ratio
|
|
8.00
|
%
|
|
10.33
|
%
|
|
10.97
|
%
|
|
Total Risk-based Capital Ratio
|
|
10.00
|
%
|
|
11.54
|
%
|
|
12.22
|
%
|
|
Common Equity Tier One Capital Ratio
|
|
6.50
|
%
|
|
10.33
|
%
|
|
10.97
|
%
|