First Guaranty Bancshares (FGBI) risk factors, FY2025 10-K

Risks Related to Our Lending

1. 01We have recently experienced an increase in nonperforming assets53% rewritten
2. 02Our efforts to resolve our existing and future non-performing assets may not be successful, and we may not be able to realize the current carrying value of such assetsNew
3. 03Adverse events in Louisiana, Texas, Kentucky, and West Virginia, where our business is concentrated, could adversely affect our results of operations and future growth
4. 04We have a significant number of loans secured by real estate, and a downturn in the local or national real estate market could negatively impact our profitability
5. 05Our loan portfolio is concentrated within certain industries and borrowing relationshipsNew
6. 06In addition to credit risks resulting from such concentrations, regulators could require that the Bank raise capital, diversify its loan portfolio, or limit further growth in such relationships or industries to mitigate such risksNew
7. 07Our loan portfolio consists of a high percentage of loans secured by non-farm non-residential real estate. These loans carry a greater credit risk than loans secured by one- to four-family properties
8. 08A portion of our loan portfolio is comprised of commercial and industrial loans secured by accounts receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could increase the potential for future losses
9. 09A portion of our loan portfolio is comprised of commercial leases secured by equipment or other commercial collateral, the deterioration in value of which could increase the potential for future losses
10. 10If the allowance for credit losses is not sufficient to cover actual loan losses, earnings could decrease
11. 11Emphasis on the origination of short-term loans could expose us to increased lending risks
12. 12The level of concentrations in our commercial real estate loan portfolio subjects us to additional regulatory scrutiny
13. 13We are subject to regulatory enforcement risk, reputation risk and litigation risk regarding our participation in the Paycheck Protection Program ("PPP") and Main Street Lending Program and we are subject to the risk that the SBA may not fund some or all PPP loan guarantees
14. 14The foreclosure process may adversely impact our recoveries on non-performing loans
15. 15We are subject to environmental liability risk associated with lending activities29% rewritten

Risks Related to Interest Rates

1. 16Interest rate shifts may reduce net interest income and otherwise negatively impact our financial condition and results of operations

Risks Related to Liquidity

1. 17A lack of liquidity could adversely affect our operations and jeopardize our business, financial condition and results of operations
2. 18Public funds deposits are an important source of funds for us and a reduced level of those deposits may hurt our profits

Risks Related to Business Strategy

1. 19Our strategy of pursuing acquisitions exposes us to financial, execution and operational risks that could have a material adverse effect on our business, financial condition, results of operations and growth prospects
2. 20We may not be able to successfully maintain and manage our growth

Risks Related to Earnings

1. 21We depend primarily on net interest income for our earnings rather than noninterest income29% rewritten
2. 22We obtain a significant portion of our noninterest revenue through service charges on core deposit accounts, and regulations impacting service charges could reduce our fee income36% rewritten

Risks Related to Competition

1. 23We may be unable to successfully compete with others for business52% rewritten

Risks Related to Operations

1. 24We face risks related to our operational, technological and organizational infrastructure, including those related to artificial intelligence23% rewritten
2. 25A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our businesses, result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses
3. 26Our failure to effectively implement new technologies including artificial intelligence could adversely affect our operations and financial conditionNew

Risks Related to Accounting

1. 27Changes in accounting policies or in accounting standards could materially affect how we report our financial condition and results of operations32% rewritten
2. 28We hold certain intangible assets that could be classified as impaired in the future. If these assets are considered to be either partially or fully impaired in the future, our earnings and the book values of these assets would decrease60% rewritten
3. 29Failure to maintain effective internal controls over financial reporting in the future could impair our ability to accurately and timely report our financial results or prevent fraud68% rewritten
4. 30We could recognize losses on securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate26% rewritten

Other General Business Risks

1. 31Hurricanes or other adverse weather conditions can have an adverse impact on our market areas
2. 32We rely on our management team and our board of directors for the successful implementation of our business strategy

Risks Related to Laws, Regulations and Industry

1. 33We operate in a highly regulated environment and may be adversely affected by changes in federal, state and local laws and regulations
2. 34Federal and state regulators periodically examine our business, and we may be required to remediate adverse examination findings
3. 35Certain of our activities require financial holding company status, which is subject to regulatory requirementsNew
4. 36We may be unable to disclose some restrictions or limitations on our operations imposed by our regulatorsNew
5. 37We may be required to raise additional capital in the future, but that capital may not be available when it is needed, or it may only be available on unacceptable terms, which could adversely affect our financial condition and results of operations
6. 38We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties
7. 39Difficult market conditions have adversely affected the industry in which we operate
8. 40Our FDIC deposit insurance premiums and assessments may increase, which would reduce our profitability
9. 41Changes in the policies of monetary authorities and other government action could adversely affect our profitability
10. 42Curtailment of government guaranteed loan programs could affect a segment of our business, and government agencies may not honor their guarantees if we do not originate loans in compliance with their guidelines23% rewritten
11. 43An active, liquid market for our securities may not be sustained
12. 44We have several large shareholders, and such shareholders may independently vote their shares in a manner that you may not consider to be consistent with your best interest or the best interest of our shareholders as a whole
13. 45Our ability to declare and pay dividends is limited
14. 46The Series A Preferred Stock constitutes an equity security and ranks junior to all of our indebtedness and will rank junior to our and First Guaranty Bank’s future indebtedness
15. 47The Series A Preferred Stock and the depositary shares representing the Series A Preferred Stock effectively rank junior to any existing and all future liabilities of our subsidiary First Guaranty Bank24% rewritten
16. 48Dividends on the Series A Preferred Stock are non-cumulative and discretionaryNew
17. 49The holders of the Series A Preferred Stock, and therefore the holders of the depositary shares representing the Series A Preferred Stock, have limited voting rights
18. 50First Guaranty and First Guaranty Bank have incurred indebtedness, and may in the future incur additional indebtedness, which have rights that are senior to those of First Guaranty’s shareholders
19. 51An investment in our common stock or depositary shares is not an insured deposit and is not guaranteed by the FDIC