A Message to Our Shareholders Consolidated Balance Sheets (in thousands, except share data) Consolidated Statements of Income (in thousands, except share, per share data & percentages) Consolidated Statements of Income (in thousands, except share, per share data & percentages) Six-Months Ended June 30, 2022 2021 (unaudited) Interest Income: Loans (including fees) $ 58,037 $ 48,944 Deposits with other banks 363 141 Securities (including FHLB stock) 4,619 3,244 Total Interest Income 63,019 52,329 Interest Expense: Demand deposits 5,160 3,239 Savings deposits 162 102 Time deposits 5,295 6,851 Borrowings 1,109 1,088 Total Interest Expense 11,726 11,280 Net Interest Income 51,293 41,049 Less: Provision for loan losses 1,389 1,508 Net Interest Income after Provision for Loan Losses 49,904 39,541 Noninterest Income: Service charges, commissions and fees 1,550 1,378 ATM and debit card fees 1,727 1,775 Net (losses) gains on securities (17) 1,060 Net gains on sale of loans 89 325 Other 1,140 1,386 Total Noninterest Income 4,489 5,924 Total Business Revenue, Net of Provision for Loan Losses 54,393 45,465 Noninterest Expense: Salaries and employee benefits 18,065 15,547 Occupancy and equipment expense 4,453 4,519 Other 12,052 10,946 Total Noninterest Expense 34,570 31,012 Income Before Income Taxes 19,823 14,453 Less: Provision for income taxes 4,114 2,996 Net Income 15,709 11,457 Less: Preferred stock dividends 1,164 220 Income Available to Common Shareholders $14,545 $11,237 Per Common Share1: Earnings $1.36 $1.05 Cash dividends paid $0.32 $0.30 Book Value Per Common Share1 $18.05 $16.92 Weighted Average Common Shares Outstanding 10,716,796 10,716,796 Return on Average Assets 1.08% 0.88% Return on Average Common Equity 15.37% 12.59% Dear Shareholders, In sports, fans get excited by the offense. When a team scores 5 touchdowns or if a player hits 40 points on the court in basketball, there is much excitement and much positive comment. However, the adage in sports is defense wins championships. For the last nine consecutive quarters, First Guaranty Bank has created tremendous excitement by its offensive performance. Loan production has consistently exceeded expectations. Earnings have also consistently exceeded expectations. The quarter ending June 30, 2022, continued the streak of outstanding financial performance. For the quarter, income available to common shareholders totaled $7,542,000 compared to $6,214,000 for the same quarter of 2021, an increase of 21.4%. For the six months ending June 30, 2022, income available to common shareholders totaled $14,545,000 compared to $11,237,000 for the same period of 2021, an increase of 29.4%. The loan portfolio rose to $2,295,738,000 compared to $2,066,408,000 as of June 30, 2021. As of June 30, 2022, our new Mideast region (Kentucky and West Virginia) had contributed a total of $171,500,000 in new loans closed. These are the exciting numbers. At the same time these exciting numbers were being put up, First Guaranty Bank was playing some strong defense. In the second quarter of 2022, First Guaranty Bank was able to get several big, longstanding problem loans out of the loan portfolio. First Guaranty Bank was also able to improve the handling and renewal of loans reaching maturity so that past due loans were significantly reduced. As a result of these efforts, as of June 30, 2022, the Texas capital ratio has been reduced to 3.86%, a significant reduction on the 13.54% level as of January 2021. For the six-month period ending June 30, 2022, interest expense increased only $446,000 an increase of only 4.0% during a time of rapidly rising interest rates. In addition to the financial accomplishments in the first six months of 2022 we also significantly improved the strength of our Management team with the addition of a highly qualified individual to oversee our various construction and maintenance projects, an extremely well qualified Chief Information Officer, an extremely well qualified Chief Information Security Officer, and a Chief Technology Officer. These changes make us extremely capable of continuing our growth and our success. Our aim is to increase our shareholder value while continuing to build a fortress balance sheet. We appreciate your support in our endeavors. If you have any questions, please do not hesitate to contact me. Thank you for your attention. Alton B. Lewis Chief Executive Officer/President First Guaranty Bancshares, Inc. June 30, 2022 2021 (unaudited) Assets Cash and cash equivalents: Cash and due from banks $120,164 $130,413 Federal funds sold 234 181 Cash and cash equivalents 120,398 130,594 Investment securities: Available for sale, at fair value 131,091 293,152 Held to maturity, at cost (estimated fair value of $264,310 and $157,638 respectively) 319,731 153,130 Investment securities 450,822 446,282 Federal Home Loan Bank stock, at cost 1,476 1,324 Loans held for sale - - Loans, net of unearned income 2,295,738 2,066,408 Less: allowance for loan and lease losses 23,583 25,516 Net loans 2,272,155 2,040,892 Premises and equipment, net 58,394 59,985 Goodwill 12,900 12,900 Intangible assets, net 5,313 6,236 Other real estate, net 1,634 2,020 Accrued interest receivable 12,359 12,370 Other assets 23,905 32,448 Total Assets $2,959,356 $2,745,051 Liabilities and Shareholders’ Equity Deposits: Noninterest-bearing demand 560,624 483,298 Interest-bearing demand 1,340,412 1,076,453 Savings 221,708 194,743 Time 537,317 666,239 Total deposits 2,660,061 2,420,733 Short-term borrowings 20,000 49,389 Repurchase agreements 6,361 6,245 Accrued interest payable 3,138 3,939 Long-term advances from Federal Home Loan Bank - 3,288 Senior long-term debt 23,549 26,791 Junior subordinated debentures 15,000 14,797 Other liabilities 4,711 5,530 Total Liabilities 2,732,820 2,530,712 Shareholders’ Equity Preferred Stock, Series A - $1,000 par value 100,000 shares authorized; non-cumulative perpetual; 34,500 issued and outstanding 33,058 33,058 Common stock - $1 par value 100,600,000 shares authorized; 10,716,796 shares issued1 10,717 10,717 Surplus 130,093 130,093 Retained earnings 67,769 45,254 Accumulated other comprehensive (loss) income (15,101) (4,783) Total Shareholders’ Equity 226,536 214,339 Total Liabilities & Shareholders’ Equity $2,959,356 $2,745,051 Three-Months Ended June 30, 2022 2021 (unaudited) Interest Income: Loans (including fees) $29,999 $25,194 Deposits with other banks 261 75 Securities (including FHLB stock) 2,280 1,719 Total Interest Income 32,540 26,988 Interest Expense: Demand deposits 2,884 1,644 Savings deposits 101 50 Time deposits 2,540 3,331 Borrowings 705 516 Total Interest Expense 6,230 5,541 Net Interest Income 26,310 21,447 Less: Provision for loan losses 757 900 Net Interest Income after Provision for Loan Losses 25,553 20,547 Noninterest Income: Service charges, commissions and fees 773 657 ATM and debit card fees 904 932 Net gains on securities - 965 Net gains on sale of loans 90 291 Other 760 753 Total Noninterest Income 2,527 3,598 Total Business Revenue, Net of Provision for Loan Losses 28,080 24,145 Noninterest Expense: Salaries and employee benefits 9,085 8,012 Occupancy and equipment expense 2,252 2,198 Other 6,482 5,814 Total Noninterest Expense 17,819 16,024 Income Before Income Taxes 10,261 8,121 Less: Provision for income taxes 2,137 1,687 Net Income 8,124 6,434 Less: Preferred stock dividends 582 220 Income Available to Common Shareholders $7,542 $6,214 Per Common Share1: Earnings $0.70 $0.58 Cash dividends paid $0.16 $0.15 Weighted Average Common Shares Outstanding 10,716,796 10,716,796 Return on Average Assets 1.11% 0.93% Return on Average Common Equity 15.73% 13.86% 1All share and per share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2021 to shareholders of record as of December 15, 2021. 1All share and per share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2021 to shareholders of record as of December 15, 2021. 1All share and per share amounts have been restated to reflect the ten percent stock dividend paid December 17, 2021 to shareholders of record as of December 15, 2021. Sincerely,
