First Guaranty Bancshares, Inc. (FGBI) Earnings Call Transcript & Summary

Good afternoon, ladies and gentleman. Welcome to First Guaranty Bancshares 2025 Annual Shareholders Meeting. This year's meeting is being recorded. We will upload to the Investor Relations page for anyone who cannot be here today. Please start with the recording. I'm Kristin Williams, Executive Assistant at First Guaranty Bank and I have the honor of kicking off today's meeting. We are hosting hybrid meeting. Some shareholders will join us virtually and others in person and all participants will have the ability to hear and see our presentation. For those attending virtually, if you need help at any time during this meeting, please call (813) 308-9980 and enter access code 675813. I suggest everyone take a moment to write down this information as we will not revisit during the presentation. If you have mailed in your proxy, there is no need to take any action at this time. However, if you have not and you are attending this session virtually, I encourage you to send it in now. You may send your proxy ballots to First Guaranty via fax at (985) 375-0447 or e-mail a scanned copy to enter [email protected]. Please do so within the next 5 minutes. For those here in person, you will have the opportunity to submit your proxy later in the meeting. Our standard disclosures regarding forward-looking statements are on Slide 4. At this time, I'd like to give the floor to Mr. Marshall Reynolds, Chairman of the Board.

Good afternoon, ladies and gentlemen. I'm Marshall Reynolds, Chairman of the Board. On behalf of the Directors, officers and staff of First Guaranty Bank. I would like to welcome everyone here this afternoon through the 2025 annual shareholders meeting of First Guaranty Bancshares, Inc. At this time, I'd like to introduce Mr. Tony Berner, one of our First Guaranty Bank Director representing Ponitudo, who will lead us in invocation to begin our meeting today. Would you please stand.

Heavenly Father, as we gather to this meeting unite our hearts and minds in common purpose, grant us the wisdom to work together effectively and the humility to value each person's perspective, guide our discussions and decisions that they may honor you and serve our shared goals towards in your holy name that we pray.

Thank you, Mr. Berner. Let's will take a few minutes to reflect and -- reflecting back on 2024 is really not a really good experience. We look at all the things that have happened in 2024. We obviously are quite a bit fewer people today than we were then. We lost our CEO, Alton Lewis, who was CEO for 14.5 years. Took this bank from $700 million to $3.5 billions, did just a fantastic job. But I wanted to tell you that a guy told me once, when I was just a kid that tough people don't last, what tough people do. And I want you to know that Mike has been here and this management team, our top people and they're making their headway through that to this. I think you'll see a tremendous difference by the end of this year. And more will surely be clear of the regulator books at the end of 2026 at some point in time. But that's my reflection on a bad story. Thank you.

Thank you, Mr. Reynolds. Appreciate you and your leadership. Good afternoon, and welcome to the 2025 Annual Shareholder Meeting, our First Guaranty Bancshares, Inc. I now declare the meeting officially convened. I'd like to proceed with the 2025 Annual Shareholder Meeting of First Guaranty Bancshares. As we start, I want to expand upon a legacy of leadership what Mr. Reynolds spoke of. I am reminded of a song who's going to fill the shoes. Who's going to stand this talk? Who's going to give their heart and soul to all, George Jones. Sometimes we can't stand in those shoes. Sometimes we can't walk on that path, but we can look to the leadership that we were given, take its guidance and proceed. The words that we're about to speak of today are just a minor reflection of the many years of commitment. I can't give enough words to say for the support and appreciation that we all have had for Mr. Alton Lewis. Alton Lewis joined First Guaranty Bancshares in October of 2009 as Chief Executive Officer, after practicing law in Louisiana for 30 years and being elected to the Board of the bank in 2002. Under his leadership, First Guaranty Bank went public in 2015, as First Guaranty Bancshares, Inc., setting FGB up for new opportunities of growth and expansion. First Guaranty had grown its total assets to $3.5 billion and established strong presence throughout Louisiana, Texas, Kentucky and West Virginia. Mr. Lewis, one of his proudest achievements as were all of us as a part of that was when First Guaranty Bank was recognized by LendingTree and Newsweek as the best small bank in the United States of America for 3 consecutive years. On behalf of the Board, on behalf of the staff, on behalf of the community, we all want to extend our heartfelt wishes to Mr. Alton Lewis for a wonderful and well-deserved retirement. We thank you for your leadership and no one can fill those shoes, but we all stand to give around of applause. Thank you again, Mr. Lewis, appreciate it. At this time, I would like to introduce the following individuals. And as I introduce you, I would ask you to stand to be recognized. If you can't, so don't feel like it's opening, please raise your hand. First, regarding Secretary to the Board is Ms. Vanessa Drew. Thank you, Vanessa. Now to the members and nominees of First Guaranty Bancshares, the Board of Directors are as follows: and in your proxy, you will find the biography of each. Again, I would ask you to stand or raise your hand as you were spoken. Our Chairman, Marshall T. Reynolds, William K. Hood, Vanessa R. Drew, Robert W. Walker, Bruce McAnally and I believe not present, but also with us in spirit is Edgar R. Smith, III. Members of First Guaranty Bank's Board of Directors are as follows: Anthony J. Berner, Jr., Gloria M. Dykes. Not present, but is Dr. Phillip Fincher, Robert H. Gabriel, Andrew Gasaway Jr., William K. Hood, Edwin L. Hoover, Jr., Bruce McAnally. Not with us, but as well as Morgan S. Nalty, Jack M. Reynolds, Nancy C. Ribas. Not in person, but also is Jack Rossi, Richard W. Sitman, Ann A. Smith, not in person, but with the Board as well. And lastly, Edgar R. Smith III. and I, Michael R. Mineer. Next, I will introduce individuals designated as proxies Chairman, Marshall T. Reynolds and our CFO, Eric J. Dosch. We'll now introduce inspectors of the election for today's meeting: Kristin Williams, Diane Lanier, Landa Domangue, and Katherine Campbell. At the inspectors of the election table, the following material is made available for review. A list of shareholders of record as of the close of business on March 24, 2025; an affidavit showing proof of notice of meeting and proxy statement; and form of proxy, which have been given to every shareholder of record as of March 24, 2025. Inspectors of election oath of office as well as the quorum certificate of inspectors of the election. The inspectors of the election have informed me that a quorum is present either by proxy or in person, such certificate is available for a review of the inspectors of the election table. Today, there are 4 proposals on the ballot for the meeting: to elect the Board of Directors to serve until next Annual Meeting of Shareholders, until their successors are duly elected and qualified. They are as follows: William K. Hood, Marshall T. Reynolds, Jack Rossi, Bruce McAnally, Edgar R. Smith III, Vanessa R. Drew, Robert W. Walker. To approve an advisory nonbinding resolution regarding our executive compensation as described in this proxy statement and to ratify the appointment of Griffith, DeLaney, Hillman & Lett, CPAs as First Guaranty's independent registered public accounting firm for the year ending December 31, 2025. And lastly, to transact such other business as may properly come before this meeting or any adjournment or postponement thereof. Since there are no other nominations in accordance with the holding company's bylaws, the nominations are closed. The polls are now open. Are there any votes to be cast by proxy or by ballot? [Voting]

If so, the inspectors of election, would you please collect the ballots? Saying none. We have those all accounted for? Has everyone had time to cast their ballot? I now declare the polls closed. Inspectors of election, would you please count the votes and return with the election results. Next, I would like to hear a motion to dispense the meeting -- the reading of the minutes from the 2024 Annual Shareholders Meeting. I would like to have Mr. Hoover has a motion to dispense of those minutes. Mr. Gabriel has seconded. All in favor say aye. Any in oppose like sign, motion to dispense is approved. At this time, I'd like to introduce Eric Dosch, Senior Vice President, Chief Financial Officer; he will be presenting our first quarter 2025 financial highlights.

Thank you, Mike. Good afternoon. The story of the first quarter was continuing our business strategy to address our nonperforming assets and work to reduce them. In the first quarter, we sold $70 million worth of loans in that credit deterioration. That ended up with a $5.8 million provision expense as a result of the sales. Our total provision for the quarter was $14.5 million. And so as a result of those, that's why we reported a loss of $0.54 per share. Our nonperforming assets, again, with our management team is aggressively addressing, it's really concentrated about 6 credits. We have a $33 million loan to assisted living center in Alabama, a $27.5 million loan to an assisted living center in Louisiana, a $26 million nonperforming loans and apartment complex in Texas, $8.8 million loan on a retail shopping center that's in the Midwest, a $7.5 million loan on land development in Texas and a smaller $2 million loan or residential property in West Virginia. That's the bulk of our nonperforming assets. Our net interest income before provision was $22.2 million for the first quarter of 2025. That's an improvement from this quarter of a year ago, which was $21.9 million. Our noninterest income also did increase year-over-year. It was $2.4 million in the first quarter compared to $2.3 million in the first quarter of 2024. Our noninterest expense was $18 million for the first quarter of 2025, which was lower than $18.9 million from this quarter last year. I now give the floor back to Mike Mineer, our CEO.

Thank you, Eric. I'm going to highlight the business strategy change since July of 2024. At the end of my presentation, we will open it up for questions-and-answer sessions with my management team as well as myself. There's a Q&A tab at the bottom of your screen. If you want to submit those questions now, if you're joining us electronically. Here are the things that we, as a management team came to our Board and they -- our Board supported us any change in business strategy starting July of last year. One was to reduce risk-weighted assets on the balance sheet to bring that number lower and to improve the capital ratios. This improved the bank risk-weighted capital ratio to 12.74% as of March 31, 2025, up from 11.28% at June of 2024. We will continue to drive that number higher. We reduced the common stock dividend in order to increase capital at the bank level. We have had tremendous growth in the past and by limiting the dividend to the holding company, we are now continuing to build capital at the bank level. We reduced construction lending commitments, and we are furthering to reduce our commercial real estate portfolio moving toward a trajectory of 300% CRE concentration to total capital. We have limited the size of new loan originations in order to limit risk and improve diversification. We will eventually start throttling back up our living machine when the time is appropriate. We've dramatically increased on-balance sheet liquidity. The engine runs on oil, which is liquidity, and we have improved that dramatically on our balance sheet. We've improved market sensitivity to interest rate risk to be much, much, much less liability-sensitive. In fact, we are neutralizing the balance sheet sensitivity. We have dramatically increased the provision for credit losses to deal with any situation of deterioration in the loan portfolio. We continually, emphatically every day, aggressively address nonperforming assets in order to reduce them. We've enacted cost reduction measures, approximately $12 million in annualized savings achieved when compared to expenses of last year. We have a lot fewer staff. It's been a challenge, but we have the right staff to move forward. I will say to our Board, to our shareholders, on behalf of the management team, I will quote all of our window homes. To say the greatness is not where we stand, but it's the direction in which we are moving. Sometimes, we sail against the wind and sometimes we sail with it. But sail we must, we cannot drift or lie at anchor, we are working. And lastly, to the management team, has commitment to you, both shareholders and directors, enough is never enough. The only thing about yesterday is it created us a benchmark to do more today. That is our drive and our passion on behalf of our management team. Despite the challenges of our year, none of this would have been possible to achieve the results and the strength and support of our management team without them, this will not have happened. To each of you, I'm greatly thankful. We appreciate your presence here today. At this point, the online questions are closed. We will open it up for a Q&A session for both myself as well as our management team. Judy with ClearTrust, she is not online?

Good afternoon, sir. At this time, we have no virtual attendee submitting any questions for this section.

We will now open it up to room for any questions within this room. Seeing no questions, we may have a report from the Inspector of Election Chairperson, Kristin Williams.

Good afternoon. All of the votes have been tallied. The proposals presented today have all been elected by majority of the votes.

Thank you, Ms. Williams. Do I hear a motion to accept the report of the Inspector of Election -- on the results of the election? R. Walker, Mrs. Ribas as second. All in favor say aye. Any in oppose like sign. Motion to accept. I now ask for a motion to approve and ratify all action of the Board of Directors, officers and personnel since the last annual meeting. Do I hear such a motion? Mrs. Ribas. Gloria, seconded by Jack. All in favor say aye. Any opposed like sign. Motion to approve. If there are no other business, then I would ask for a motion for adjournment. Mr. Hoover, motions? Bruce is second. All in favor say aye. Motion adjourned. Thank you.