First Guaranty Bancshares, Inc.

First Guaranty Bancshares, Inc. (FGBI): Reshaping for a Stronger Future

First Guaranty Bancshares, Inc. (FGBI) is making a decisive strategic move, selling its entire Texas banking operations to Armstrong Bank, an Oklahoma-based institution. This divestiture represents a deliberate effort by First Guaranty to streamline its business, bolster its financial position, and sharpen its focus on core markets.

1. The Transaction Details

First Guaranty Bank, FGBI's banking subsidiary, will sell five Texas branches: four in the Dallas-Fort Worth metroplex and one in Waco. As part of this deal, approximately $270 million in customer deposits and $110 million in loans will transfer to Armstrong Bank.

First Guaranty Bank will receive a deposit premium of 7.65% on these transferred deposits, amounting to an estimated $20.66 million in cash.

2. Timeline for the Sale

The boards of directors of both companies approved the definitive agreement for this sale, which they announced on March 10, 2026. The transaction should close in the third quarter of 2026, pending necessary regulatory approvals.

3. Strategic Rationale: Why This Move?

Michael R. Mineer, President and CEO of First Guaranty, describes this as a "strategic transition." He states its two main goals are to "reinforce First Guaranty’s capital position and strengthen our ability to focus on the markets most critical to our long-term success."

• Enhanced Financial Strength: The sale is expected to significantly improve First Guaranty Bank’s financial health. Specifically, it will increase the bank’s Tier 1 leverage ratio by approximately 100 basis points (or 1%). This ratio is a key indicator of a bank's core capital relative to its assets, showing its capacity to absorb potential losses and maintain stability. A higher ratio signifies a more robust financial foundation.
• Refocused Operations: By exiting the Texas market, First Guaranty plans to concentrate its resources and efforts on its existing core markets in Louisiana, Kentucky, and West Virginia. This strategic streamlining aims to boost operational efficiency and drive more targeted growth where the company believes it holds a stronger competitive advantage.
• Capital Deployment Flexibility: The cash proceeds from the sale, combined with improved capital ratios, will give First Guaranty greater financial flexibility. The company can strategically deploy this capital for future investments, organic growth initiatives within its core markets, or potentially return it to shareholders.

4. Impact and Significance for First Guaranty

This transaction marks a significant shift for First Guaranty Bancshares:

• Smaller Footprint, Sharper Focus: The company will reduce its branch network from 36 to 31 locations. While this means a smaller geographic and asset base (reducing total deposits by $270 million and loans by $110 million), First Guaranty views it as a move toward a more concentrated and financially resilient entity.
• Improved Financial Metrics: The concrete 100 basis point increase in the Tier 1 leverage ratio tangibly improves the bank's financial strength, making it more resilient against economic fluctuations.
• Strategic Repositioning: This move signals a clear strategic pivot, prioritizing capital strength and focused growth within established markets over broader geographic expansion.
• Potential Risks: While the capital boost and strategic focus are positive, investors should consider that divesting assets can lead to a temporary reduction in overall revenue and asset base. The ultimate success of this strategy depends on the company's ability to effectively redeploy capital and accelerate growth in its remaining core markets.

5. Who is Affected?

• Customers: Customers with accounts at the five Texas branches will transfer their banking relationships to Armstrong Bank. Their deposits and loans will become part of Armstrong Bank, and they can expect changes to their banking services, including new account details or online banking platforms. Armstrong Bank has committed to a smooth transition and continued community involvement.
• Employees: Employees at the five Texas branches are expected to transition to employment with Armstrong Bank. This will involve new management, systems, and potentially altered benefits or roles.
• Investors/Shareholders: This transaction directly impacts First Guaranty's financial structure and future prospects. The improved capital position and strategic focus could positively influence the market and stock performance. However, investors should monitor the reduction in asset base and the execution risk of the new strategy.
• Local Communities: The communities of Fort Worth, Denton, McKinney, Waco, and Garland will now see Armstrong Bank as their local banking presence instead of First Guaranty Bank.

6. What Happens Next?

• Regulatory Approval: The transaction requires approval from various banking regulators, a process that typically takes several months.
• Closing & Transition: Upon approval, the sale is expected to close in the third quarter of 2026. A comprehensive transition plan will ensure the smooth transfer of customer accounts, employees, and operational data.
• Performance Monitoring: Investors will closely watch First Guaranty's future earnings reports and strategic updates to assess the tangible benefits of this divestiture, particularly regarding capital deployment, efficiency gains, and growth in its core markets.

7. Key Investor Takeaways

• Concrete Financial Impact: Understand the specific financial implications: an estimated $20.66 million cash payment for deposits, a reduction of $270 million in deposits and $110 million in loans, and a significant 100 basis point increase in the Tier 1 leverage ratio.
• Clear Strategic Rationale: The company prioritizes capital strength and focused growth in its established markets (Louisiana, Kentucky, West Virginia), signaling a deliberate shift away from broader geographic presence.
• Risk Assessment: While the capital boost is positive, consider the potential for reduced scale and the need for successful execution of the refined strategy in core markets.
• Stock Performance: Monitor FGBI's stock (ticker: FGBI) for reactions to this strategic move. Short-term volatility is possible, but the long-term impact will depend on the company's ability to leverage its strengthened financial position and focused strategy to drive value.

This strategic divestiture is a significant event for First Guaranty Bancshares, Inc., aimed at creating a more focused and financially robust institution.