FIRST GUARANTY BANCSHARES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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, 2022 and for the three months ended March 31, 2022
and 2021 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.


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first quarter March 31, 2022 Financial overview

First Guaranty Bancshares is a Louisiana corporation and a financial holding
company headquartered in Hammond, Louisiana. Our wholly-owned subsidiary, First
Guaranty Bank, a Louisiana-chartered commercial bank, provides personalized
commercial banking services primarily to Louisiana and Texas customers through
36 banking facilities primarily located in the MSAs of Hammond, Baton Rouge,
Lafayette, Shreveport-Bossier City, Lake Charles and Alexandria, Louisiana and
Dallas-Fort Worth-Arlington, Waco, Texas and our new Mideast markets in Kentucky
and West Virginia. We emphasize personal relationships and localized decision
making to ensure that products and services are matched to customer needs. We
compete for business principally on the basis of personal service to customers,
customer access to officers and directors and competitive interest rates and
fees.

The financial highlights for the first quarter of 2022 are as follows:

•Total assets increased $32.0 million, or 1.1%, to $2.9 billion at March 31,
2022 when compared with December 31, 2021. Total loans at March 31, 2022 were
$2.2 billion, an increase of $71.8 million, or 3.3%, compared with December 31,
2021. Total deposits were $2.6 billion at March 31, 2022, an increase of $27.4
million, or 1.1%, compared with December 31, 2021. Retained earnings were $61.9
million at March 31, 2022, an increase of $5.3 million compared to $56.7 million
at December 31, 2021. Shareholders' equity was $221.8 million and $223.9 million
at March 31, 2022 and December 31, 2021, respectively.

• Net profit for the first quarter of 2022 and 2021 was $7.6 million and $5.0 millionrespectively, an increase of $2.6 million or 51%.

• Earnings per common share were $0.65 and $0.47 for the first quarter of 2022 and 2021, respectively. The total weighted average number of shares outstanding was 10,716,796 for the three months ended March 31, 2022 and 2021.

•First Guaranty participated 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 guaranteed 100% of the PPP loans made to eligible
borrowers and will forgive such loans. 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, 2022, First Guaranty had
remaining Round 1 PPP loans of $4.7 million with deferred fees of $0.1 million
and Round 2 PPP loans of $15.6 million with deferred fees of $0.7 million
remaining. $0.6 million in PPP fees were recognized during the three months
ended March 31, 2022.

•The allowance for loan and lease losses was 1.08% of total loans at March 31,
2022 compared to 1.11% at December 31, 2021. First Guaranty had acquisition
related loan discounts that totaled approximately $1.3 million at March 31,
2022. First Guaranty had $20.2 million at March 31, 2022 of SBA guaranteed PPP
loans that have no related allowance due to the government guarantee in
accordance with regulatory guidance.

• Net interest income for the first quarter of 2022 was $25.0 million compared to
$19.6 million for the same period in 2021.

•The provision for loan losses has been $0.6 million for the first quarter of 2022 and 2021.

• The first guarantee had $1.9 million other real estate owned in March 31, 2022
compared to $2.1 million to December 31, 2021.

•Noninterest income for the first quarter of 2022 was $2.0 million compared to
$2.3 million for the same period in 2021. Excluding the impact of securities
gains, noninterest income for the first quarter of 2022 was $2.0 million
compared to $2.2 million for the first quarter of 2021.

•The net interest margin for the three months ended March 31, 2022 was 3.59%
which was an increase of 34 basis points from the net interest margin of 3.25%
for the same period in 2021. First Guaranty attributed the increase in the net
interest margin in the first quarter of 2022 compared to the same period in 2021
to an improved mix of loans compared to securities and cash along with continued
reduction in First Guaranty's cost of funds. Loans as a percentage of average
interest earning assets decreased to 76.4% at March 31, 2022 compared to 78.2%
at March 31, 2021.

•Investment securities totaled $452.8 million at March 31, 2022, an increase of
$88.6 million when compared to $364.2 million at December 31, 2021. Losses on
the sale of securities for the first quarter of 2022 were $17,000 compared to
gains of $0.1 million for the same period in 2021. At March 31, 2022, available
for sale securities, at fair value, totaled $133.2 million, a decrease of $77.4
million when compared to $210.6 million at December 31, 2021. At March 31, 2022,
held to maturity securities, at amortized cost, totaled $319.6 million, an
increase of $166.0 million when compared to $153.5 million at December 31, 2021.
During the first quarter of 2022, First Guaranty designated $165.8 million of
AFS securities for HTM status.

•Total loans net of unearned income were $2.2 billion, a net increase of $71.8
million from December 31, 2021. Total loans net of unearned income are reduced
by the allowance for loan and lease losses which totaled $24.1 million at
March 31, 2022 and $24.0 million at December 31, 2021, respectively.

• Total impaired loans decreased $3.5 million for $11.5 million to March 31, 2022
compared to $15.0 million to December 31, 2021.

• Unexpected loans decreased $1.6 million for $15.1 million to March 31, 2022
compared to $16.7 million to December 31, 2021.

•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.

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•Return on average assets for the three months ended March 31, 2022 and 2021 was
1.05% and 0.80%, respectively. Return on average common equity for the three
months ended March 31, 2022 and 2021 was 14.99% and 11.31%, 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 $17.61 as of March 31, 2022 compared to $16.45
as of March 31, 2021. Book value per share was $17.81 per share as of December
31, 2021. The year over year increase was due primarily to an increase in
retained earnings partially offset by changes in accumulated other comprehensive
income ("AOCI"). The year to date change was primarily due to changes in AOCI
partially offset by an increase in retained earnings. 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 2022. First Guaranty also declared $0.16 per
common share in the first quarter of 2021, which was the equivalent of $0.15 per
share after adjusting for the 10% common stock dividend paid in December 2021.
First Guaranty has paid 115 consecutive quarterly dividends as of March 31,
2022.

• First Guaranty paid preferred share dividends of $0.6 million in the first three months of 2022.


Recent Developments

As disclosed in previous filings by First Guaranty Bancshares, Inc., for
approximately 15 years First Guaranty Bank, a subsidiary of First Guaranty
Bancshares, Inc., utilized an "Employee Stock Grant Program" to incentivize and
reward bank employees for performance. Each quarter, the Board of Directors of
First Guaranty Bank allocated a $75,000 payment to an attorney to be used to
purchase, on the open market, shares of First Guaranty Bancshares, Inc. stock.
Nominations came from managers throughout the Bank for awards to employees which
ranged from clerical through top Management. An average of just over 100
employees received awards, in full ownership with no vesting nor other
requirements, each quarter with an average award of approximately 37 shares per
employee awarded.

The total cost of this program per year was approximately $300,000 with total shares granted of approximately 15,000 shares.

In addition, the same process was utilized by First Guaranty Bancshares, Inc. at
the conclusion of each year for the grant of stock bonuses to members of
Management of First Guaranty Bank, selected by the Board of Directors of First
Guaranty Bancshares, Inc. Those awards averaged approximately $275,000 or 12,500
shares per year.

the SECOND requested information regarding this practice. No process has been instituted; only, a request for information.

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Financial condition

Changes in the financial situation of December 31, 2021 for March 31, 2022

Assets

Total assets at March 31, 2022 were $2.9 billion, an increase of $32.0 million,
or 1.1%, from December 31, 2021. Assets increased primarily due to increases in
investment securities of $88.6 million and net loans of $71.6 million, partially
offset by a decrease in cash and cash equivalents of $129.2 million at March 31,
2022 compared to December 31, 2021.

Loans

Net loans increased $71.6 million, or 3.4%, to $2.2 billion at March 31,
2022 from December 31, 2021. Construction and land development loans
increased $26.2 million principally due to advances on existing construction
lines and new originations. Commercial and industrial loans increased $14.3
million primarily due to new originations. SBA PPP loans totaled $20.2 million
at March 31, 2022 compared to $35.4 million at December 31, 2021. These totals
are included in commercial and industrial loans. Round 1 SBA PPP loans decreased
from $12.7 million at December 31, 2021 to $4.7 million at March 31, 2022 due to
SBA loan forgiveness and payments received. Round 2 SBA PPP loans decreased from
$22.6 million at December 31, 2021 to $15.6 million at March 31, 2022 due to SBA
loan forgiveness and payments received. Commercial lease loan balances increased
$11.3 million 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. Non-farm
non-residential loan balances increased $7.7 million due to new
originations. One-to-four family residential loans increased $5.4
million primarily due to new originations. Multifamily loans increased $3.4
million primarily due to the conversion of existing construction loans to
permanent financing and the origination of new loans. Agricultural loans
increased $2.1 million due to seasonal activity. Consumer and other loans
increased $0.6 million primarily due to new originations. Farmland loans
increased $30,000 primarily due to increases on agricultural loan commitments.
First Guaranty had approximately 5.8% of funded and 1.3% 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
$161.1 million at March 31, 2022. As part of the management of risks in our loan
portfolio, First Guaranty had previously established an internal guidance limit
of approximately $187.0 million for its hotel and motel portfolio. First
Guaranty had $265.3 million in loans related to our Texas markets at March 31,
2022 which was an increase of $7.5 million or 2.9% from $257.8 million at
December 31, 2021. First Guaranty continues to have significant loan growth
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 is exceeding that of other areas of the country. Syndicated loans
at March 31, 2022 were $48.9 million, of which $17.9 million were shared
national credits. Syndicated loans increased $1.5 million from $47.4
million at December 31, 2021.

As of March 31, 2022, 66.6% of our loan portfolio was secured by real estate.
The largest portion of our loan portfolio, at 40.0% as of March 31, 2022, was
non-farm non-residential loans secured by real estate. Approximately 32.8% of
the loan portfolio was based on a floating rate tied to the prime rate or LIBOR
as of March 31, 2022. 75.6% of the loan portfolio is scheduled to mature within
five years from March 31, 2022. First Guaranty had $46.4 million in loans that
were priced off of the LIBOR index rate at March 31, 2022. As it is anticipated
that LIBOR will be discontinued after 2022, First Guaranty is reviewing its loan
documents to determine alternative reference rates and does not anticipate there
will be a significant financial statement impact with the transition.

Special mention loans decreased $43.9 million to $94.8 million at March 31, 2022
compared to $138.7 million at December 31, 2021. The decrease in special mention
loans was primarily the result of the upgrade of several loan relationships from
special mention to pass status.

Net loans are reduced by the allowance for loan and lease losses which totaled
$24.1 million at March 31, 2022 and $24.0 million at December 31, 2021. Loan
charge-offs were $0.8 million during the first three months of 2022 and $0.4
million during the same period in 2021. Recoveries totaled $0.3 million during
the first three months of 2022 and $0.1 million during the same period in 2021.
The provision for loan losses totaled $0.6 million for the first three months of
2022 and 2021. 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 and lease losses.



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Investment security

Investment securities at March 31, 2022 totaled $452.8 million, an increase of
$88.6 million compared to $364.2 million at December 31, 2021. The portfolio
consists of both available for sale (AFS) and held to maturity securities (HTM)
at March 31, 2022. The securities designated as held to maturity are agency and
corporate debt 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 portfolio of securities available for sale totals $133.2 million to March 31, 2022a decrease of $77.4 millioni.e. 36.7%, compared to $210.6 million to
December 31, 2021. The decrease is mainly due to the transfer of AFS securities to the HTM portfolio in the first quarter of 2022.

Our held to maturity securities portfolio totaled $319.6 million at March 31,
2022, an increase of $166.0 million, or 108.1%, compared to $153.5 million at
December 31, 2021. The increase was primarily due to the transfer of AFS
securities to the HTM portfolio in the first quarter of 2022.

At March 31, 2022, $50.9 million, or 11.2%, of the securities portfolio was
scheduled to mature in less than one year. $53.5 million, or 11.8%, of the
securities portfolio, not including collateralized mortgage obligations and
mortgage-backed securities, were scheduled to mature between one and five years.
$94.4 million, or 20.8%, 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 $253.6 million, or 56.0%, of
the total securities portfolio at March 31, 2022. 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, 2022, management believes that the securities portfolio has a
forecasted weighted average life of approximately 10.46 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 10.59 years. The portfolio had an estimated effective duration of
8.76 years at March 31, 2022.

There were no other than temporary credit-related impairments during the three months ended March 31, 2022 or March 31, 2021.

Non-performing 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.

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The table below shows the amounts and categories of our non-performing assets as of the dates indicated. (in thousands)

                                                        March 31, 2022         December 31, 2021
Nonaccrual loans:
Real Estate:
Construction and land development                                    $         257          $            530
Farmland                                                                       291                       787
1- 4 family                                                                  3,266                     2,861
Multifamily                                                                      -                         -
Non-farm non-residential                                                     8,172                     8,733
Total Real Estate                                                           11,986                    12,911
Non-Real Estate:
Agricultural                                                                 1,690                     2,302
Commercial and industrial                                                      671                       699
Commercial leases                                                                -                         -
Consumer and other                                                             784                       803
Total Non-Real Estate                                                        3,145                     3,804
Total nonaccrual loans                                                      15,131                    16,715

Loans 90 days and greater delinquent & accruing:
Real Estate:
Construction and land development                                               21                       246
Farmland                                                                         -                         -
1- 4 family                                                                    170                       514
Multifamily                                                                    162                       162
Non-farm non-residential                                                       478                       281
Total Real Estate                                                              831                     1,203
Non-Real Estate:
Agricultural                                                                     -                         -
Commercial and industrial                                                      123                        23
Commercial leases                                                                -                         -
Consumer and other                                                               -                        19
Total Non-Real Estate                                                          123                        42
Total loans 90 days and greater delinquent & accruing                          954                     1,245

Total non-performing loans                                                  16,085                    17,960

Real Estate Owned:
Construction and land development                                                -                         -
Farmland                                                                         -                         -
1- 4 family                                                                    362                       817
Multifamily                                                                      -                         -
Non-farm non-residential                                                     1,492                     1,255
Total Real Estate Owned                                                      1,854                     2,072

Total non-performing assets                                          $      

17,939 $20,032

Non-performing assets to total loans                                          0.80  %                   0.93  %
Non-performing assets to total assets                                         0.62  %                   0.70  %
Non-performing loans to total loans                                           0.72  %                   0.83  %
Nonaccrual loans to total loans                                               0.68  %                   0.77  %
Allowance for loan and lease losses to nonaccrual loans                     159.57  %                 143.76  %



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At March 31, 2022, nonperforming assets totaled $17.9 million, or 0.62% of total
assets, compared to $20.0 million, or 0.70%, of total assets at December 31,
2021, which represented a decrease of $2.1 million, or 10.4%. The decrease in
non-performing assets occurred primarily due to a reduction nonaccrual loans, 90
day past due and still accruing loans and other real estate owned.

Nonaccrual loans decreased from $16.7 million at December 31, 2021 to $15.1
million at March 31, 2022. The decrease in nonaccrual loans was concentrated
primarily in agricultural, non-farm non-residential and farmland loans.
Nonaccrual loans included $1.3 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, 2022, loans 90 days or greater delinquent and still accruing
totaled $1.0 million, a decrease of $0.3 million compared to $1.2 million at
December 31, 2021. The decrease in loans 90 days or greater delinquent and still
accruing was concentrated primarily in one-to four-family, construction and land
development and consumer and other loans.

Other real estate owned at March 31, 2022 totaled $1.9 million, a decrease of
$0.2 million compared to $2.1 million at December 31, 2021. First Guaranty has a
reserve for other real estate owned losses. This reserve totaled $0.7 million at
March 31, 2022 compared to $0.5 million at December 31, 2021.

At March 31, 2022, 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 $3.4 million; (2) a non-farm non-residential loan secured by a childcare
facility that totaled $1.7 million; (3) a $1.7 million non-farm non-residential
property included in other real estate owned; (4) a non-farm non-residential
loan secured by a mobile home facility that totaled $1.3 million; (5) a non-farm
non-residential loan secured by a waste treatment facility that totaled $0.9
million; and (6) an agricultural/farmland loan relationship that totaled $0.9
million. The agricultural loan is partially guaranteed by the USDA Farm Service
Agency. First Guaranty subsequently sold the loan note associated with the $3.4
million non-performing hotel loan after March 31, 2022.

Distressed 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 had 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 allowed 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 could 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.

Here is a summary of loans restructured in TDR at March 31, 2022 and
December 31, 2021:

                                                                                              December 31,
(in thousands)                                                        March 31, 2022              2021
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                                                                        -                 3,382
Restructured Loans that subsequently defaulted                                    -                     -
Total Restructured Loans                                            $             -          $      3,382



At March 31, 2022, we had no outstanding TDRs. The TDR at December 31, 2021 was
a $3.4 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. This loan was no longer
reportable as a TDR at March 31, 2022.

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Allowance for losses on loans and leases

The allowance for loan and lease 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:

• overdue and non-performing assets;

•specific internal analysis of credits requiring particular attention;

•the current level of classified and criticized regulatory assets and the risk factors associated with each;

•changes in underwriting standards or lending procedures and policies;

• charging and collection practices;

•national and local economic and commercial conditions;

•the nature and volume of loans;

•the overall quality of the portfolio;

• the adequacy of loan guarantees;

•the quality of the loan review system and the degree of oversight by our Board of Directors;

•competition and legal and regulatory requirements imposed on borrowers;

•Federal and state regulator loan portfolio reviews and reviews; and

•Review by our in-house 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. 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 and lease 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 provision for losses on loans and leases has been $24.1 millioni.e. 1.08% of total loans, and 150.1% of non-performing loans at March 31, 2022.

Comparing March 31, 2022 for December 31, 2021there were changes in the specific components of the allocation balance.

A provision for loan losses of $0.6 million was made during the three months
ended March 31, 2022 and 2021. 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.


                                      -38-
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Loan portfolio factors in the first three months of 2022 that primarily affected the allowance allocation 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 increased during the first three months
of 2022 due to advances on existing construction lines of credit and new loan
originations. Several loans previously in this category moved to permanent
financing and are now included in the multifamily loan category as of March 31,
2022. The allowance decrease related to this portfolio was due to changes in the
qualitative analysis of the portfolio related to COVID-19 and improving economic
conditions.

•One-to four-family residential loans increased during the first three months of
2022. The allowance decrease related to this portfolio was due to changes in the
qualitative analysis of the portfolio related to COVID-19 and improving economic
conditions.

• Multi-family loans increased in the first three months of 2022. The allowance related to this portfolio was increased due to the growth of the portfolio which increased by $3.4 million in the first three months of 2022.

•Non-farm non-residential loans increased during the first three months of 2022.
The allowance increase related to this portfolio was due to growth in the
portfolio along with changes in the qualitative analysis of the portfolio
related to COVID-19 and historical loss rates. First Guaranty continues to
maintain a significant allowance for hotel loans based on qualitative factors
primarily related to COVID-19 and related credit ratings for hotel loans.

•Commercial and industrial loans increased during the first three months of
2022. The allowance decrease related to this portfolio was due to the changes in
historical loss rates and changes in the qualitative analysis of the portfolio
related to COVID-19 and improving economic conditions.

•Commercial leases increased during the first three months of 2022. The
allowance decrease related to this portfolio was due to the changes in
historical loss rates and changes in the qualitative analysis of the portfolio
related to COVID-19 and improving economic conditions. Commercial leases grew
during the first three months of 2022 from $246.0 million at December 31, 2021
to $257.3 million at March 31, 2022.

• Consumer and other loans increased in the first three months of 2022. The increase in the related allowance for loan loss balance was primarily due to increased balances.

• First Guaranty continues to monitor acquired loans from the Union acquisition on November 7, 2019. Discounts on loans acquired from the Union were approximately $1.3 million to March 31, 2022.

First Guaranty charged off $0.8 million in loan balances during the first three
months of 2022. The $0.8 million in charged off loans were comprised of smaller
loans and overdrawn deposit accounts.

Other information related to the allowance for loan and lease losses is as
follows:

                                              Three Months Ended       Three Months Ended
   (in thousands)                               March 31, 2022           March 31, 2021
   Loans:
   Average outstanding balance               $         2,154,264      $         1,911,914
   Balance at end of period                  $         2,231,119      $         1,966,432

   Allowance for Loan and Lease Losses:
   Balance at beginning of year              $            24,029      $            24,518
   Charge-offs                                              (836)                    (439)
   Recoveries                                                319                      105
   Provision                                                 632                      608
   Balance at end of period                  $            24,144      $            24,792



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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,
2021 to March 31, 2022, total deposits increased $27.4 million, or 1.1%, to $2.6
billion. Noninterest-bearing demand deposits increased $23.4 million,
or 4.4%, to $556.0 million at March 31, 2022. The increase in
noninterest-bearing demand deposits was primarily due to growth of compensating
balances associated with new loan originations, existing loan customers, and new
customers as part of First Guaranty's efforts to increase lower cost deposits.
Interest-bearing demand deposits increased $23.8 million, or 1.9%, to $1.3
billion at March 31, 2022. The increase in interest-bearing demand deposits was
primarily concentrated in public funds interest-bearing demand deposits.
Included in the increase in interest-bearing demand deposits were public funds
time deposits that converted into interest-bearing deposits that were primarily
collateralized by reciprocal deposit insurance. Savings deposits increased $3.9
million, or 1.9%, to $205.6 million at March 31, 2022, primarily related to
increases in individual savings deposits. Time deposits decreased $23.6 million,
or 4.0%, to $563.0 million at March 31, 2022, primarily due to the transition of
several public funds customers from time deposits to interest-bearing 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. First Guaranty has over $200 million in
time deposits with average rates in excess of 3.00% that are scheduled to mature
during 2022 through 2024 with the majority of the maturities in 2023 and 2024.

As of March 31, 2022, the aggregate amount of outstanding certificates of
deposit in amounts greater than or equal to $250,000 was approximately $151.4
million. At March 31, 2022, approximately $76.9 million of First Guaranty's
certificates of deposit greater than or equal to $250,000 had a remaining term
greater than one year.


                                      -40-
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The following table compares the categories of deposits for the periods indicated.

                                                             For the Three Months Ended
Total Deposits                                                       March 31,                                                                                         For the Years Ended December 31,
                                                                        2022                                                                     2021                                                                       2020
                                                                                           Weighted                                                                     Weighted                                                                 Weighted
(in thousands except for %)                Average Balance          Percent              Average Rate               Average Balance              Percent              Average Rate             Average Balance            Percent              Average Rate
Noninterest-bearing Demand                 $    545,013                 20.6  %                      -  %       $       477,802                      19.8  %                      -  %       $        393,734                 19.2  %                      -  %
Interest-bearing Demand                       1,323,532                 50.0  %                    0.7  %             1,082,922                      45.0  %                    0.7  %                722,433                 35.3  %                    0.8  %
Savings                                         204,008                  7.7  %                    0.1  %               191,967                       8.0  %                    0.1  %                163,332                  8.0  %                    0.2  %
Time                                            576,199                 21.7  %                    1.9  %               655,025                      27.2  %                    2.0  %                767,075                 37.5  %                    2.2  %
Total Deposits                             $  2,648,752                100.0  %                    0.8  %       $     2,407,716                     100.0  %                    0.8  %       $      2,046,574                100.0  %                    1.1  %



                                                         For the Three Months Ended
Individual and Business Deposits                                 March 31,                                                                                         For the Years Ended December 31,
                                                                    2022                                                                     2021                                                                       2020
                                                                                       Weighted                                                                     Weighted                                                                 Weighted
(in thousands except for %)            Average Balance          Percent              Average Rate               Average Balance              Percent              Average Rate             Average Balance            Percent              Average Rate
Noninterest-bearing Demand             $    538,267                 32.6  %                      -  %       $       471,371                      29.7  %                      -  %       $        382,940                 27.5  %                      -  %
Interest-bearing Demand                     406,721                 24.6  %                    1.1  %               390,481                      24.6  %                    1.0  %                280,587                 20.1  %                    1.0  %
Savings                                     164,417                  9.9  %                    0.1  %               154,560                       9.8  %                    0.1  %                127,804                  9.2  %                    0.1  %
Time                                        544,580                 32.9  %                    2.0  %               569,924                      35.9  %                    2.2  %                600,887                 43.2  %                    2.5  %
Total Individual and Business
Deposits                               $  1,653,985                100.0  %                    0.9  %       $     1,586,336                     100.0  %                    1.0  %       $      1,392,218                100.0  %                    1.3  %


                                                            For the Three Months Ended
Public Funds Deposits                                                March 31,                                                                                  For the Years Ended December 31,
                                                                       2022                                                                  2021                                                                 2020
                                              Average                                     Weighted                                                               Weighted                Average                                   

Weighted

(in thousands except for %)                   Balance              Percent              Average Rate            Average Balance           Percent              Average Rate              Balance             Percent              Average Rate
Noninterest-bearing Demand                 $     6,746                  0.7  %                      -  %       $        6,431                  0.8  %                      -  %       $   10,794                  1.7  %                      -  %
Interest-bearing Demand                        916,811                 92.1  %                    0.5  %              692,441                 84.3  %                    0.5  %          441,846                 67.5  %                    0.7  %
Savings                                         39,591                  4.0  %                    0.3  %               37,407                  4.5  %                    0.2  %           35,528                  5.4  %                    0.4  %
Time                                            31,619                  3.2  %                    0.8  %               85,101                 10.4  %                    0.8  %          166,188                 25.4  %                    1.1  %
Total Public Funds  Deposits               $   994,767                100.0  %                    0.5  %       $      821,380                100.0  %                    0.5  %       $  654,356                100.0  %                    0.8  %




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The following table sets forth the distribution of our time deposit accounts.

           (in thousands)                                   March 31, 2022
           Time deposits of less than $100,000             $       202,537
           Time deposits of $100,000 through $250,000              209,046
           Time deposits of more than $250,000                     151,442
           Total Time Deposits                             $       563,025


The following table shows the maturity of term deposits greater than or equal to $250,000 to March 31, 2022.

(in thousands)                                               March 31, 2022
Due in one year or less                                     $        74,497
Due after one year through three years                               69,970
Due after three years                                                 6,975

Total term deposits greater than or equal to $250,000 $151,442



At March 31, 2022, public funds deposits totaled $979.5 million compared
to $957.9 million at December 31, 2021. Public funds time deposits totaled $31.8
million at March 31, 2022 compared to $31.4 million at December 31, 2021. Public
funds deposits increased due to new balances from existing customers that was
primarily attributed to seasonal fluctuations. First Guaranty has developed a
program for the retention and management of public funds deposits. Since the end
of 2012, First Guaranty has 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 $546.6 million at March 31, 2022 compared to
$496.4 million at December 31, 2021.

The following table presents public funds as a percentage of total deposits.

(in thousands except for %)                      March 31, 2022          

December 31, 2021 December 31, 2020 December 31, 2019

     December 31, 2018
Public Funds:
Noninterest-bearing Demand                      $        6,162          $           5,919          $           5,109          $           9,944          $           6,930
Interest-bearing Demand                                901,194                    882,156                    514,416                    424,732                    364,692
Savings                                                 40,372                     38,432                     36,862                     29,570                     26,903
Time                                                    31,792                     31,365                    158,925                    146,420                    247,004
Total Public Funds                              $      979,520          $         957,872          $         715,312          $         610,666          $         645,529
Total Deposits                                  $    2,623,935          $       2,596,492          $       2,166,318          $       1,853,013          $       1,629,622
Total Public Funds as a percent of Total
Deposits                                                  37.3  %                    36.9  %                    33.0  %                    33.0  %                    39.6  %



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Loans

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 $16.1 million in short-term
borrowings outstanding at March 31, 2022 compared to $6.4 million at
December 31, 2021. The short-term borrowings at March 31, 2022 were comprised of
a line of credit of $20.0 million, with an outstanding balance of $10.0 million
and repurchase agreements of $6.1 million. The advances outstanding at
December 31, 2021 were comprised of repurchase agreements of $6.4 million. First
Guaranty had a long-term FHLB advance that was acquired from the Union
transaction that totaled $3.2 million at December 31, 2021. This advance was
paid off during the first quarter of 2022. First Guaranty had available lines of
credit of $26.5 million, with $10.0 million outstanding at March 31, 2022. A net
availability of $16.5 million remained.

First Guaranty had senior long-term debt totaling $24.4 million from March 31, 2022 and $25.2 million to December 31, 2021.

First Guaranty also held subordinated subordinated debentures totaling $14.8 million to
March 31, 2022 and December 31, 2021.

First Guaranty had $260.7 million in Federal Home Loan Bank letters of credit as
of March 31, 2022 compared to $250.7 million at December 31, 2021. Federal Home
Loan Bank letters of credit are obtained primarily for collateralizing public
deposits.

Total Shareholders' Equity

Total shareholders' equity decreased to $221.8 million at March 31,
2022 from $223.9 million at December 31, 2021. The decrease in shareholders'
equity was principally the result of a decrease of $7.4 million in accumulated
other comprehensive income, partially offset by an increase of $5.3 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, 2022. The $5.3
million increase in retained earnings was due to net income of $7.6
million during the three months ended March 31, 2022, partially offset by $1.7
million in cash dividends paid on shares of our common stock and $0.6 million in
cash dividends paid on shares of our preferred stock.


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Operating results for the first quarter ended March 31, 2022 and 2021

Performance Summary

Three months ended March 31, 2022 compared to the three months ended March 31,
2021. Net income for the three months ended March 31, 2022 was $7.6 million, an
increase of $2.6 million, or 51.0%, from $5.0 million for the three months ended
March 31, 2021. The increase in net income for the three months ended March 31,
2022 as compared to the prior year period was the result of several factors.
First Guaranty experienced an increase in interest income and a decrease in
interest expense. This was partially offset by an increase in the provision for
loan losses, a decrease in 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. Securities interest income
increased due to an increase in the average balance of the investment portfolio.
Interest expense declined due to declines in market interest rates and First
Guaranty's plan to reduce interest expense by increasing lower cost deposits and
repricing existing deposits lower. Factors that partially offset the increase in
net income included an increase in the provision due to the growth in the loan
portfolio. Noninterest income decreased primarily due to higher securities
losses and a negative valuation adjustment to the SBA loan servicing asset.
Noninterest expense increased primarily due to increased personnel expenses,
software expense, legal fees, travel expense and higher regulatory assessments
due to increased deposit balances. Earnings per common share for the three
months ended March 31, 2022 was $0.65 per common share, an increase of 38.3% or
$0.18 per common share from $0.47 per common share for the three months ended
March 31, 2021. 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, 2022 compared to the three months ended March 31,
2021. Net interest income for the three months ended March 31, 2022 and 2021 was
$25.0 million and $19.6 million, respectively. The increase in net interest
income for the three months ended March 31, 2022 as compared to the prior year
period was primarily due to an increase in the average balance of our total
interest-earning assets, an increase in the average yield of our total
interest-earning assets, and a decrease in the average rate of our total
interest-bearing liabilities, partially offset by an increase in the average
balance of our total interest-bearing liabilities. For the three months
ended March 31, 2022, the average balance of our total interest-earning assets
increased by $375.0 million to $2.8 billion due to increased cash and due
average balances, and strong growth in commercial leases and our other loan
portfolios. The average yield of our interest-earning assets increased by 18
basis points to 4.38% for the three months ended March 31, 2022 from 4.20% for
the three months ended March 31, 2021 due to an improved mix of higher yielding
assets. For the three months ended March 31, 2022, the average balance of our
total interest-bearing liabilities increased by $227.9 million to $2.2 billion
due to the growth in low cost deposits and the average rate of our total
interest-bearing liabilities decreased by 17 basis points to 1.04% for the three
months ended March 31, 2022 from 1.21% for the three months ended March 31,
2021. As a result, our net interest rate spread increased 35 basis points to
3.34% for the three months ended March 31, 2022 from 2.99% for the three months
ended March 31, 2021. Our net interest margin increased 34 basis points
to 3.59% for the three months ended March 31, 2022 from 3.25% for the three
months ended March 31, 2021.


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interest income

Three months ended March 31, 2022 compared to the three months ended March 31,
2021. Interest income increased $5.1 million, or 20.3%, to $30.5 million for the
three months ended March 31, 2022 as compared to the prior year period. First
Guaranty's loan portfolio expanded during the first three months of 2022 due to
growth associated with our loan originations, including commercial leases. These
factors contributed to the increase in interest income as the average balance of
our total interest-earning assets, primarily associated with loans increased,
and the average yield of interest-earning assets increased. The average balance
of our interest-earning assets increased $375.0 million to $2.8 billion for the
three months ended March 31, 2022 as compared to the prior year. The average
yield of interest-earning assets increased by 18 basis points to 4.38% for the
three months ended March 31, 2022 compared to 4.20% for the three months ended
March 31, 2021.

Interest income on securities increased $0.8 million to $2.3 million for the
three months ended March 31, 2022 as compared to the prior year period primarily
as a result of an increase in average balances. The average balance of
securities increased $176.7 million to $434.4 million for the three months
ended March 31, 2022 from $257.8 million for the three months ended March 31,
2021 primarily due to an increase in the average balance of our U.S. Treasuries
securities portfolio compared to the prior year. The average yield on securities
decreased 22 basis points to 2.18% for the three months ended March 31,
2022 compared to 2.40% for the three months ended March 31, 2021 due to the
increase in lower yielding Treasury securities.

Interest income on loans increased $4.3 million, or 18.1%, to $28.0 million for
the three months ended March 31, 2022 as compared to the prior year period as a
result of an increase in the average balance and average yield of loans. The
average balance of loans (excluding loans held for sale) increased by $242.4
million to $2.2 billion for the three months ended March 31, 2022 from $1.9
billion for the three months ended March 31, 2021 as a result of new loan
originations. The average yield on loans (excluding loans held for sale)
increased by 24 basis points to 5.28% for the three months ended March 31,
2022 from 5.04% for the three months ended March 31, 2021 due to the improved
mix of loans with an increase in higher yielding commercial leases as a
percentage of the loan portfolio along with an increase in market interest
rates.

Interest charges

Three months ended March 31, 2022 compared to the three months ended March 31,
2021. Interest expense decreased $0.2 million, or 4.2%, to $5.5 million for the
three months ended March 31, 2022 from $5.7 million for the three months
ended March 31, 2021 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 was 0.70% for
the three months ended March 31, 2022 and 2021. The average rate of time
deposits decreased 2 basis points during the three months ended March 31,
2022 to 1.94% as compared to the prior year period. The decrease in the average
rate of time deposits was due to First Guaranty's efforts to reprice maturing
time deposits to more attractive and lower rates. Partially offsetting the
decrease in interest expense was an increase in the average balance of
interest-bearing liabilities, which increased by $227.9 million during the three
months ended March 31, 2022 to $2.2 billion as compared to the prior year
period. This increase was a result of a $399.6 million increase in the average
balance of interest-bearing demand deposits and a $28.6 million increase in the
average balance of savings deposits, which were partially offset by a $151.9
million decrease in the average balance of time deposits and a $48.4 million
decrease in the average balance of borrowings.

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The following tables set 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, 2022                                    Three Months Ended March 31, 2021
(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)                                   $    231,556          $    102                         0.18  %       $    275,360          $     66                         0.10  %
Securities (including FHLB stock)               434,420             2,339                         2.18  %            257,763             1,525                         2.40  %
Federal funds sold                                  232                 -                            -  %                448                 -                            -  %
Loans held for sale                                   -                 -                            -  %                  -                 -                            -  %
Loans, net of unearned income(7)              2,154,264            28,038                         5.28  %          1,911,914            23,750                         5.04  %
Total interest-earning assets                 2,820,472          $ 30,479                         4.38  %          2,445,485          $ 25,341                         4.20  %

Noninterest-earning assets:
Cash and due from banks                          18,481                                                               11,656
Premises and equipment, net                      58,393                                                               60,226
Other assets                                     28,589                                                               25,141
Total Assets                               $  2,925,935                                                         $  2,542,508

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Demand deposits                            $  1,323,532          $  2,276                         0.70  %       $    923,925          $  1,595                         0.70  %
Savings deposits                                204,008                61                         0.12  %            175,396                52                         0.12  %
Time deposits                                   576,199             2,755                         1.94  %            728,112             3,520                         1.96  %
Borrowings                                       47,886               404                         3.42  %             96,257               572                         2.41  %
Total interest-bearing liabilities            2,151,625          $  5,496                         1.04  %          1,923,690          $  5,739                         1.21  %

Noninterest-bearing liabilities:
Demand deposits                                 545,013                                                              428,310
Other                                             6,839                                                               10,460
Total Liabilities                             2,703,477                                                            2,362,460

Shareholders' equity                            222,458                                                              180,048
Total Liabilities and Shareholders'
Equity                                     $  2,925,935                                                         $  2,542,508
Net interest income                                              $ 24,983                                                             $ 19,602

Net interest rate spread (2)                                                                      3.34  %                                                              2.99  %
Net interest-earning assets (3)            $    668,847                                                         $    521,795
Net interest margin (4), (5)                                                                      3.59  %                                                              3.25  %

Average interest-earning assets to
interest-bearing liabilities                                                                    131.09  %                                                            127.12  %


(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 3.60% and 3.26% for the above
periods ended March 31, 2022 and 2021, 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, 2022 and 2021, respectively.
(6)Annualized.
(7)Includes loan fees of $2.1 million and $1.3 million for the above periods
ended March 31, 2022 and 2021, respectively. PPP loan fee income of $0.6 million
and $0.2 million was recognized for above periods ended March 31, 2022 and 2021,
respectively.
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Allowance 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 and lease
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 allowance for loan losses for the three months ended
March 31, 2022 and 2021. Total imputations were $0.8 million for the three months ended March 31, 2022 and $0.4 million for the same period in 2021.

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. Economic uncertainty may result in
additional increases to the allowance for loan and lease losses in future
periods.

Non-interest 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 $2.0 million for the three months ended March 31,
2022, a decrease of $0.4 million from $2.3 million for the three months ended
March 31, 2021. The decrease was primarily due to increased losses on securities
sales and a negative valuation adjustment to the SBA loan servicing asset.
Service charges, commissions and fees totaled $0.8 million for the three months
ended March 31, 2022 and $0.7 million for the same period in 2021. ATM and debit
card fees totaled $0.8 million for the three months ended March 31, 2022 and
2021. Net securities losses were $17,000 for the three months ended March 31,
2022 compared to gains of $0.1 million for the same period in 2021. The losses
on securities sales primarily occurred as First Guaranty sold investment
securities in order to fund loan growth and manage interest rate risk. Net
losses on the sale of loans were $1,000 for the three months ended March 31,
2022 and compared to gains of $34,000 for the same period in 2021. Other
noninterest income totaled $0.4 million and $0.6 million for the three months
ended March 31, 2022 and 2021, respectively.


                                      -47-
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Non-interest expenses

Noninterest expense includes salaries and employee benefits, occupancy and
equipment expense and other types of expenses. Noninterest expense totaled $16.8
million for the three months ended March 31, 2022 and $15.0 million for the
three months ended March 31, 2021. Salaries and benefits expense totaled $9.0
million for the three months ended March 31, 2022 and $7.5 million for the three
months ended March 31, 2021. The increase was primarily due to the increase in
personnel expense from new hires including those in the Mideast market.
Occupancy and equipment expense totaled $2.2 million for the three months ended
March 31, 2022 and $2.3 million for the same period in 2021. Other noninterest
expense totaled $5.6 million for the three months ended March 31, 2022 and $5.1
million for the same period in 2021.

The following table presents, for the periods indicated, the major categories of
other noninterest expense:

                                                                                 Three Months Ended
                                                                                     March 31,
(in thousands)                                                                             2022               2021
Other noninterest expense:
Legal and professional fees                                                            $     855          $     666
Data processing                                                                              229                540
ATM fees                                                                                     412                422
Marketing and public relations                                                               377                433
Taxes - sales, capital, and franchise                                                        362                343
Operating supplies                                                                           156                225
Software expense and amortization                                                            926                665
Travel and lodging                                                                           245                142
Telephone                                                                                    114                119
Amortization of core deposit intangibles                                                     174                208
Donations                                                                                    156                122
Net costs from other real estate and repossessions                                            94                110
Regulatory assessment                                                                        552                465
Other                                                                                        918                672
Total other noninterest expense                                                        $   5,570          $   5,132



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, 2022 and 2021 was $2.0 million and $1.3 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, 2022 and 2021.







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Cash 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 $132.7 million at March 31,
2022 compared to $261.9 million at December 31, 2021. Loans maturing within one
year or less at March 31, 2022 totaled $399.1 million. At March 31, 2022, time
deposits maturing within one year or less totaled $257.2 million compared to
$267.0 million at December 31, 2021. Time deposits maturing after one year
through three years totaled $258.1 million at March 31, 2022 compared to $269.7
million at December 31, 2021. Time deposits maturing after three years totaled
$47.7 million at March 31, 2022 compared to $50.0 million at December 31, 2021.
First Guaranty's held to maturity ("HTM") securities portfolio at March 31, 2022
was $319.6 million, or 70.6% of the investment portfolio, compared to $153.5
million, or 42.2% at December 31, 2021. First Guaranty's available for sale
("AFS") securities portfolio was $133.2 million, or 29.4% of the investment
portfolio as of March 31, 2022 compared to $210.6 million, or 57.8% of the
investment portfolio at December 31, 2021. The majority of the AFS portfolio was
comprised of U.S. Government Treasuries, 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 $451.2 million and $456.3 million at March 31, 2022 and December 31,
2021, respectively with no FHLB advances outstanding at March 31, 2022 compared
to $3.2 million at December 31, 2021, respectively. The advance outstanding at
December 31, 2021 was comprised of a long-term advance that totaled $3.2
million. First Guaranty paid off the $3.2 million long-term advance acquired
from the Union acquisition in the first quarter of 2022. 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 has increasingly transitioned public funds deposits
into reciprocal deposit programs for collateralization as an alternative to FHLB
letters of credit. We also maintain federal funds lines of credit at various
correspondent banks with borrowing capacity of $100.5 million and two revolving
lines of credit totaling $26.5 million secured by a pledge of the Bank's common
stock, with an outstanding balance of $10.0 million at March 31, 2022. We also
have a discount window line with the Federal Reserve Bank that totaled $16.1
million at March 31, 2022. First Guaranty did not have any advances under this
facility at March 31, 2022. 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 $221.8 million at March 31,
2022 from $223.9 million at December 31, 2021. The decrease in shareholders'
equity was principally the result of a decrease of $7.4 million in accumulated
other comprehensive income, partially offset by an increase of $5.3 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, 2022. The $5.3
million increase in retained earnings was due to net income of $7.6
million during the three months ended March 31, 2022, partially offset by $1.7
million in cash dividends paid on shares of our common stock and $0.6 million in
cash dividends paid on shares of our preferred stock.

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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, 2022, the Bank's capital conservation buffer was
3.38% 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, 2022, the Bank did not elect to follow the Community Bank Leverage
Ratio.

At March 31, 2022, we satisfied the minimum regulatory capital requirements and
were well capitalized within the meaning of federal regulatory requirements.
                                                                                                               As of December 31,
                                             "Well Capitalized Minimums"         As of March 31, 2022                 2021
Bank:
Tier 1 Leverage Ratio                                             5.00  %                      8.80  %                      8.71  %
Tier 1 Risk-based Capital Ratio                                   8.00  %                     10.40  %                     10.22  %
Total Risk-based Capital Ratio                                   10.00  %                     11.38  %                     11.22  %
Common Equity Tier One Capital Ratio                              6.50  %                     10.40  %                     10.22  %



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