First Guaranty Bancshares, Inc. (FGBI) is a Louisiana-based bank holding company that has been serving its communities for over a century. With a strong presence in Louisiana and a growing footprint in Texas and the Mideast region, First Guaranty has weathered various economic cycles and continues to evolve to meet the changing needs of its customers.
Business Overview First Guaranty Bancshares was founded in 1934 and is headquartered in Hammond, Louisiana. The company operates as a financial holding company for First Guaranty Bank, a Louisiana-chartered commercial bank that provides a range of banking services to both individuals and businesses. As of September 30, 2024, First Guaranty had total assets of $3.9 billion, total loans of $2.8 billion, and total deposits of $3.4 billion.
The company's operations are primarily focused in Louisiana, with additional markets in Texas and the Mideast region. First Guaranty Bank operates 35 banking facilities, with the majority located in the MSAs of Hammond, Baton Rouge, Lafayette, Shreveport-Bossier City, Lake Charles, and Alexandria, Louisiana, as well as the Dallas-Fort Worth-Arlington, Waco, and Mideast markets in Kentucky and West Virginia.
First Guaranty's business model emphasizes personalized commercial banking services, with a focus on building strong relationships with its customers. The company's lending portfolio is diversified across various sectors, including real estate, commercial and industrial, agricultural, and consumer loans. Additionally, First Guaranty maintains a portfolio of investment securities to manage liquidity and interest rate risk.
Throughout its history, First Guaranty has pursued strategic growth opportunities through acquisitions. In 2007, the company acquired Homestead Bancorp in an all-stock transaction, expanding its footprint into the Baton Rouge and Lafayette markets in Louisiana. A decade later, in 2017, First Guaranty Bancshares acquired Premier Bancshares, Inc., strengthening its presence in north Louisiana. In 2019, the company further expanded its reach by acquiring Union Bancshares, Incorporated, which added branches in Kentucky and West Virginia to its Mideast market.
First Guaranty has demonstrated resilience in the face of challenges common to community banks, such as managing interest rate risk, maintaining adequate capital levels, and controlling operating expenses. In 2021, the company settled a legal case for $1.1 million but was able to recover $0.9 million through an insurance claim, showcasing its ability to navigate legal and financial hurdles.
The company has maintained a strong commitment to its shareholders, having paid a consecutive quarterly dividend since the 1990s. This long-standing practice reflects First Guaranty's dedication to creating value for its investors while balancing growth and financial stability.
Financials
Financial Performance Over the past three years, First Guaranty has demonstrated solid financial performance, despite facing various challenges. In 2022, the company reported net income of $28.9 million, or $2.48 per diluted share, on total revenue of $109.3 million. The company's net interest margin remained strong at 2.75%, and its return on average assets and return on average equity were 0.92% and 12.27%, respectively.
In 2023, First Guaranty's financial results were impacted by the COVID-19 pandemic, which led to increased provision for credit losses and reduced net interest income. The company reported net income of $9.2 million, or $0.62 per diluted share, on total revenue of $93.5 million. The net interest margin declined to 2.54%, and the return on average assets and return on average equity were 0.26% and 3.70%, respectively.
For the first nine months of 2024, First Guaranty reported net income of $11.4 million, or $0.78 per diluted share, on total revenue of $186.2 million. The net interest margin for the period was 2.52%, and the return on average assets and return on average equity were 0.42% and 5.87%, respectively. The company's loan portfolio grew by 0.8% during this period, while deposits increased by 14.0%.
In the most recent quarter (Q3 2024), First Guaranty reported revenue of $26.68 million, an increase of 12.32% year-over-year. Net income for the quarter was $1.93 million, up 8.70% compared to the same period last year. The increase in revenue and net income was primarily driven by growth in the loan portfolio, higher yields on interest-earning assets, and increased gains on the sale of loans.
Liquidity First Guaranty has maintained a strong liquidity position, as evidenced by the significant growth in deposits over the past year. The 14.0% increase in deposits during the first nine months of 2024 demonstrates the company's ability to attract and retain customer funds. Additionally, the company's investment securities portfolio serves as a key component of its liquidity management strategy, providing a source of readily available funds if needed.
As of September 30, 2024, First Guaranty had $367.62 million in cash and cash equivalents. The company's debt-to-equity ratio stood at 0.76, while both its current ratio and quick ratio were 2.56, indicating a healthy liquidity position. First Guaranty maintains a $20 million revolving line of credit, with no outstanding balance as of September 30, 2024. It also has $100.5 million in federal funds lines of credit and a $242.8 million discount window line with the Federal Reserve Bank, providing additional liquidity sources if needed.
Product Segments and Portfolio Composition First Guaranty's primary business activities center around traditional community banking services, with a focus on commercial and residential real estate lending, deposit gathering, and investment portfolio management.
Loans: The loan portfolio is First Guaranty's primary revenue driver, comprising 77.8% of total loans as of September 30, 2024. The portfolio is diversified across several key categories: - Non-farm non-residential real estate loans (42.0% of total loans) - 1-4 family residential real estate loans (17.0%) - Multifamily real estate loans (5.8%) - Construction and land development loans (11.6%) - Farmland loans (1.4%) - Commercial and industrial loans (9.9%) - Commercial leases (9.0%) - Consumer and other loans (1.6%)
The loan portfolio experienced growth of 0.8% from December 31, 2023, to September 30, 2024, driven by increases in non-farm non-residential, multifamily, and 1-4 family residential real estate lending. However, the bank also saw declines in construction and land development and commercial and industrial loan balances during this period.
Investments: First Guaranty maintains an investment securities portfolio that totaled $664.0 million as of September 30, 2024, an increase of $259.9 million compared to December 31, 2023. The portfolio is split between available-for-sale securities ($342.6 million) and held-to-maturity securities ($321.4 million). The available-for-sale portfolio primarily consists of U.S. Treasury securities, corporate debt, municipal bonds, and mortgage-backed securities, while the held-to-maturity portfolio mainly comprises U.S. government agency and corporate debt securities.
Deposits: First Guaranty's deposit base totaled $3.43 billion as of September 30, 2024, representing a 14.0% increase from December 31, 2023. The deposit mix includes: - Interest-bearing demand deposits (43.9% of total deposits) - Time deposits (37.6%) - Savings deposits (6.8%) - Noninterest-bearing demand deposits (11.7%)
Public funds deposits, which are a significant portion of First Guaranty's deposit base, decreased from 39.7% of total deposits at the end of 2023 to 32.7% as of September 30, 2024.
Borrowings: First Guaranty utilizes both short-term and long-term borrowings to supplement its deposit funding. As of September 30, 2024, the bank had $7.0 million in short-term repurchase agreements and $135.0 million in long-term advances from the Federal Home Loan Bank. First Guaranty also had $16.2 million in senior long-term debt and $44.7 million in junior subordinated debentures outstanding.
Geographic Performance First Guaranty operates primarily in Louisiana and Texas, with some additional markets in Kentucky and West Virginia. The Texas and Mideast markets have shown significant growth, with loans in these regions accounting for $409 million and $346 million, respectively, as of September 30, 2024. This represents growth of 8.9% in Texas and 24.4% in the Mideast market from December 31, 2023.
Challenges and Initiatives First Guaranty has faced several challenges in recent years, including the COVID-19 pandemic, rising interest rates, and increased competition in its markets. In response, the company has implemented a series of strategic initiatives to strengthen its financial position and position itself for future growth.
In 2023, First Guaranty experienced a significant increase in its provision for credit losses, which reflected changes in the loan portfolio and elevated charge-offs. The company has since taken steps to enhance its risk management practices, including strengthening its underwriting standards and increasing its focus on portfolio diversification.
Additionally, the rising interest rate environment has put pressure on the company's net interest margin. First Guaranty has responded by actively managing its asset-liability mix, optimizing its deposit pricing, and increasing its investment in higher-yielding assets.
To address the competitive landscape, First Guaranty has invested in technological upgrades and process improvements to enhance the customer experience and improve operational efficiency. The company has also pursued strategic growth opportunities in its existing markets, as well as explored potential expansion into new markets within its regional footprint.
In the second quarter of 2024, First Guaranty announced a business strategy revamp that included a 15% reduction in its workforce, as well as a cut to its dividend payout. These measures were designed to reduce costs, increase capital, and position the company for long-term sustainable growth.
In June 2024, First Guaranty completed a sale-leaseback transaction on two branches and a portion of its headquarters building, resulting in a pre-tax gain of $13.3 million. This transaction was part of the company's initiatives to reduce costs and improve efficiency.
Leadership and Governance First Guaranty Bancshares is led by Michael R. Mineer, who has been serving as President and CEO since 2019. The company has not reported any major scandals, short seller reports, or CEO departures, indicating stability in its leadership and governance structure.
Outlook and Conclusion Despite the challenges faced in recent years, First Guaranty Bancshares remains well-positioned to navigate the evolving banking landscape. The company's strong market presence, diversified loan portfolio, and focus on relationship banking provide a solid foundation for future growth.
Looking ahead, First Guaranty will continue to prioritize risk management, optimize its balance sheet, and invest in technology and talent to drive operational efficiency and enhance the customer experience. The company's strategic initiatives, combined with its experienced management team and commitment to serving its communities, position First Guaranty Bancshares for continued success in the years to come.
The recent growth in the Texas and Mideast markets demonstrates the company's ability to expand its footprint and capitalize on new opportunities. With a strong liquidity position, improved efficiency measures, and a focus on strategic growth, First Guaranty is well-equipped to face the challenges of the banking industry while pursuing sustainable long-term growth for its shareholders and stakeholders.