First Guaranty Posts Loss as Costs Jump

Key Points

• As elevated credit costs weighed on results.

• Noninterest expense dropped by 16.0% compared to Q2 2024.

• Quarterly dividend was reduced from $0.16 to $0.01 per share, highlighting the shift toward capital preservation.

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First Guaranty Bancshares (NASDAQ:FGBI), a regional bank with banking operations in Louisiana, Texas, Kentucky, and West Virginia, reported results on July 31, 2025. Results fell well short of profitability expectations, driven by much higher provisions for loan losses. While the period included clear progress in risk management and operating expenses, the overall quarter was marked by continued restructuring and financial strain.

Understanding First Guaranty Bancshares’ Business and Focus

First Guaranty Bancshares is a regional banking company that provides community banking services across four states: Louisiana, Texas, Kentucky, and West Virginia. It offers a full suite of financial products, including business and personal loans, deposits, and related services, with a concentration in commercial lending and a significant share in its home markets.

In recent years, the company has focused on managing risk rather than rapid growth. It aimed to reduce exposure to commercial real estate lending and instead support residential mortgage, consumer, and agricultural lending. Its leaders prioritize expense control, asset quality improvement, and maintaining strong capital and liquidity buffers. These areas are key for weathering volatile market conditions and meeting regulatory demands.

Quarter in Detail: Financial Changes, Risk Actions, and Restructuring

This quarter marked a substantial shift in profitability. The net loss for common shareholders totaled $(6.4) million (GAAP), compared with a $6.6 million profit (GAAP) for Q2 2024. This reversal reflected both higher credit loss provisions and lower noninterest income, offsetting modest growth in net interest income (GAAP).

Higher loan loss reserves were a defining feature. Provision expenses (GAAP) jumped to $14.7 million, more than double last year’s figure, as the company tackled credit risk in parts of the loan book -- especially commercial real estate. The allowance for credit losses (GAAP) rose to $58.9 million, now 2.44% of total loans (up from 1.29% at year-end 2024). The company reduced total loans to $2.41 billion (GAAP) as part of a strategy to lower concentration risk in higher-risk segments.

Operational efficiency saw improvement, with noninterest expense (GAAP) decreasing by $3.3 million to $17.3 million. The largest gains were in staff-related costs, as salary and benefits spending dropped 24.8% compared to Q2 2024. This followed management’s plan to drive $13.4 million in annualized savings, as previously announced. Deposit levels increased year over year as of June 30, 2025.

The noninterest income (GAAP) line dropped sharply compared to Q2 2024. The prior period included a one-time gain from asset sales, which did not recur in the current period. The company was lacking the benefit of last year’s substantial non-core gains. Non-performing assets fell by $6.8 million during the quarter, highlighting progress on workout and sale of problem loans, and delinquent loans reached multi-year lows.

The company also made a significant change to its payout policy. The quarterly dividend was reduced from $0.16 to $0.01 per share (calendar year basis), reflecting a need to preserve capital amid recent losses. Despite the reduction, management continued its record of consecutive quarterly dividends, now at 128 periods.

Looking Ahead: Outlook and Watch Items

Management did not provide formal financial guidance for the rest of fiscal 2025. In commentary, leadership emphasized the ongoing focus on asset sales, risk reduction, and expense containment. There was no indication of new expansion plans or service launches in the period, with strategy centered on core banking and improving asset quality.

For investors monitoring future developments, key items include further progress in reducing non-performing assets, the outcome of the pending sale of the company’s largest real estate owned (OREO) loan, and trends in deposit mix and costs. Given that profitability remains under pressure from high credit costs, stabilization in the loan portfolio and continued cost discipline will be critical factors in future quarters. The quarterly dividend was reduced to $0.01 per share, down from $0.16 in Q2 2024.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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