First Guaranty Bancshares, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32-1 - First Guaranty Bancshares, Inc.	t68687_ex32-1.htm
EX-31.2 - EXHIBIT 31-2 - First Guaranty Bancshares, Inc.	t68687_ex31-2.htm
EX-31.1 - EXHIBIT 31-1 - First Guaranty Bancshares, Inc.	t68687_ex31-1.htm
EX-32.2 - EXHIBIT 32-2 - First Guaranty Bancshares, Inc.	t68687_ex32-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2010

Commission File Number 000-52748

FIRST GUARANTY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Louisiana	26-0513559
(State or other jurisdiction	(I.R.S. Employer
incorporation or organization)	Identification Number)

400 East Thomas Street
Hammond, Louisiana	70401
(Address of principal executive office)	(Zip Code)

(985) 345-7685

(Telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer * Accelerated filer * Non-accelerated filer * Smaller reporting company T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

As of June 30, 2010, the registrant had 5,559,644 shares of $1 par value common stock which were issued and outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial

FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share data)

	June 30,		December 31,
	2010		2009
Assets	(unaudited)
Cash and cash equivalents:
Cash and due from banks	$	34,354	$	33,425
Interest-earning demand deposits with banks		41		14
Federal funds sold		1,004		13,279
Cash and cash equivalents		35,399		46,718

Investment securities:
Available for sale, at fair value		339,867		249,480
Held to maturity, at cost (estimated fair value of $12,462)		-		12,349

Investment securities		339,867		261,829

Federal Home Loan Bank stock, at cost		1,840		2,547
Loans held for sale		39		-

Loans, net of unearned income		622,607		589,902
Less: allowance for loan losses		8,625		7,919
Net loans		613,982		581,983

Premises and equipment, net		17,082		16,704
Goodwill		1,999		1,999
Intangible assets, net		1,828		1,893
Other real estate, net		1,607		658
Accrued interest receivable		5,984		5,807
Other assets		6,547		10,709
Total Assets		1,026,174		930,847

Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing demand	$	122,888	$	131,818
Interest-bearing demand		195,486		188,252
Savings		44,029		40,272
Time		522,550		439,404
Total deposits		884,953		799,746

Short-term borrowings		21,137		11,929
Accrued interest payable		2,855		2,519
Long-term borrowings		15,011		20,000
Other liabilities		2,047		1,718
Total Liabilities		926,003		835,912

Stockholders' Equity
Preferred stock:
Series A - $1,000 par value - authorized 5,000 shares; issued
and outstanding 2,069.9 shares		19,743		19,630
Series B - $1,000 par value - authorized 5,000 shares; issued
and outstanding 103 shares		1,129		1,140
Common stock:
$1 par value - authorized 100,600,000 shares; issued and
outstanding 5,559,644 shares		5,560		5,560
Surplus		26,459		26,459
Retained earnings		43,587		40,069
Accumulated other comprehensive income		3,693		2,077
Total Stockholders' Equity		100,171		94,935
Total Liabilities and Stockholders' Equity	$	1,026,174	$	930,847

See Notes to Consolidated Financial Statements.

FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (unaudited) (dollars in thousands, except per share data)

	Six Months					Three Months
	Ended June 30,					Ended June 30,
	2010				2009*		2010			2009*
Interest Income:
Loans (including fees)	$	17,888		$	17,530	$	9,184		$	8,873
Loans held for sale		4			3		3			2
Deposits with other banks		19			309		10			84
Securities (including FHLB stock)		6,944			4,542		3,525			2,468
Federal funds sold		5			27		3			10
Total Interest Income		24,860			22,411		12,725			11,437

Interest Expense:
Demand deposits		430			604		229			284
Savings deposits		21			77		11			36
Time deposits		5,529			7,095		2,811			3,503
Borrowings		70			159		29			98
Total Interest Expense		6,050			7,935		3,080			3,921

Net Interest Income		18,910			14,476		9,645			7,516
Provision for loan losses		1,302			1,349		623			701
Net Interest Income after Provision for Loan Losses		17,608			13,127		9,022			6,815

Noninterest Income:
Service charges, commissions and fees		1,998			2,020		1,015			1,040
Net gains on sale of securities		1,366			10		1,105			10
Loss on securities impairment		-			-					-
Net gains on sale of loans		151			272		92			192
Other		706			520		367			243
Total Noninterest Income		4,221			2,822		2,579			1,485

Noninterest Expense:
Salaries and employee benefits		5,844			5,493		2,946			2,667
Occupancy and equipment expense		1,508			1,411		756			728
Net cost from other real estate & repossessions		164			180		100			201
Regulatory assessment		746			1,307		390			935
Other		4,440			4,563		2,254			2,417
Total Noninterest Expense		12,702			12,954		6,446			6,948

Income Before Income Taxes		9,127			2,995		5,155			1,352
Provision for income taxes		3,165			1,039		1,776			469
Net Income		5,962			1,956		3,379			883
Preferred stock dividends		(666	)		0		(333	)		0
Income Available to Common Shareholders	$	5,296		$	1,956	$	3,046		$	883

Per Common Share:
Earnings	$	0.95		$	0.35	$	0.49		$	0.16
Cash dividends paid	$	0.32		$	0.32	$	0.16		$	0.16

Average Common Shares Outstanding		5,559,644			5,559,644		5,559,644			5,559,644

*Restated
See Notes to Consolidated Financial Statements

FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (dollars in thousands, except per share data)

	Series A		Series B										Accumulated
	Preferred		Preferred			Common							Other
	Stock		Stock			Stock				Retained			Comprehensive
	$1,000 Par		$1,000 Par			$1 Par		Surplus		Earnings			Income / (Loss)			Total

Balance December 31, 2008 as previously reported	$	-	$	-		$	5,560	$	26,459	$	37,769		$	(3,158	)	$	66,630
Corection of an error		-		-			-		-		(1,143	)		-			(1,143	)
Balance December 31, 2008 as restated		-		-			5,560		26,459		36,626			(3,158	)		65,487
Net income		-		-			-		-		1,956			-			1,956
Change in unrealized loss
on available for sale securities,
net of reclassification adjustments and taxes		-		-			-		-		-			464			464
Comprehensive income																	2,420
Cash dividends on common stock ($0.32 per share)		-		-			-		-		(1,779	)		-			(1,779	)
Balance June 30, 2009 (unaudited) as restated	$	-	$	-		$	5,560	$	26,459	$	36,803		$	(2,694	)	$	66,128


Balance December 31, 2009	$	19,630	$	1,140		$	5,560	$	26,459	$	40,069		$	2,077		$	94,935
Net income		-		-			-		-		5,962			-			5,962
Change in unrealized gain
on available for sale securities,
net of reclassification adjustments and taxes		-		-			-		-		-			1,616			1,616
Comprehensive income																	7,578
Cash dividends on common stock ($0.32 per share)		-		-			-		-		(1,778	)		-			(1,778	)
Preferred stock dividend, amortization and accretion		113		(11	)		-		-		(666	)		-			(564	)
Balance June 30, 2010 (unaudited)	$	19,743	$	1,129		$	5,560	$	26,459	$	43,587		$	3,693		$	100,171

See Notes to Consolidated Financial Statements

FIRST GUARANTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)

	Six Months Ended June 30,
	2010				2009*
Cash Flows From Operating Activities
Net income	$	5,962		$	1,956
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses		1,302			1,349
Depreciation and amortization		710			698
Amortization of discount on investments		(96	)		(458	)
Gain on call of securities		(1,366	)		(10	)
Gain on sale of assets		(150	)		(160	)
ORE writedowns and loss on disposition		80			125
FHLB stock dividends		(2	)		(2	)
Net decrease in loans held for sale		(39	)		(147	)
Change in other assets and liabilities, net		4,105			1,521
Net Cash Provided By Operating Activities		10,506			4,872

Cash Flows From Investing Activities
Proceeds from sales, maturities and calls of HTM securities		12,726			21,971
Proceeds from sales, maturities and calls of AFS securities		460,221			1,114,597
Funds invested in AFS securities		(547,297	)		(1,251,666	)
Proceeds from sale of Federal Home Loan Bank stock		1,294			-
Funds invested in Federal Home Loan Bank stock		(585	)		-
Proceeds from maturities of time deposits with banks		-			7,868
Net (increase) decrease in loans		(34,457	)		(2,112	)
Purchases of premises and equipment		(938	)		(320	)
Proceeds from sales of other real estate owned		128			258
Net Cash Used In Investing Activities		(108,908	)		(109,404	)

Cash Flows From Financing Activities
Net increase in deposits		85,207			72,004
Net increase in federal funds purchased and short-term borrowings		9,207			16,426
Repayment of long-term borrowings		(4,989	)		(4,987	)
Dividends paid		(2,342	)		(890	)
Net Cash Provided By Financing Activities		87,083			82,553

Net (Decrease) Increase In Cash and Cash Equivalents		(11,319	)		(21,979	)
Cash and Cash Equivalents at the Beginning of the Period		46,718			78,017
Cash and Cash Equivalents at the End of the Period	$	35,399		$	56,038

Noncash Activities:
Loans transferred to foreclosed assets	$	1,156		$	864

Cash Paid During The Period:
Interest on deposits and borrowed funds	$	5,714		$	6,498
Income taxes	$	3,300		$	2,900

*Restated
See Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. The consolidated financial statements and the footnotes of First Guaranty Bancshares, Inc. (the “Company”) thereto should be read in conjunction with the audited financial statements and note disclosures for the Company previously filed with the Securities and Exchange Commission in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2009.

The consolidated financial statements include the accounts of First Guaranty Bancshares, Inc. and its wholly owned subsidiary First Guaranty Bank. All significant intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the consolidated financial statements. Those adjustments are of a normal recurring nature. The results of operations for the three and six-month periods ended June 30, 2010 and 2009 are not necessarily indicative of the results expected for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for loan losses, valuation of goodwill, intangible assets and other purchase accounting adjustments. The presentation does not take into effect the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act.

Note 2. Correction of an Error

During 2009, the Company discovered errors related to the calculation of interest expense and prepaid assets for the years ending 2008, 2007 and 2006. The errors were reported and corrected in the financial statements for the year ended 2009.Net income previously reported for the three month period ended June 30, 2009 totaled $1.3 million compared to restated net income which totaled $0.9 million, a net decrease of $0.4 million. Net Income for the six month period ending June 30, 2009 totaled $2.4 million compared to a restated net income which totaled $2.0 million, a net decrease of $0.4 million. Beginning retained earnings at December 31, 2009 have been decreased by $1.1 million.

Note 3. Fair Value

Effective January 1, 2008, the Company adopted the provisions of FASB ASC 820-10-65, Fair Value Measurements and Disclosures (SFAS No. 157), for financial assets and liabilities. FASB ASC 820-1-65 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Valuation techniques use certain inputs to arrive at fair value. Inputs to valuation techniques are the assumptions that market participants would use in pricing the asset or liability. They may be observable or unobservable. FASB ASC 820-1-65 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

Level 1 Inputs – Unadjusted quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds or credit risks) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value follows, as well as the classification of such instruments within the valuation hierarchy.

Securities Available for Sale. Securities classified as available for sale are reported at fair value utilizing Level 1, Level 2 and Level 3 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, market yield curves, prepayment speeds, credit information and the instrument’s contractual terms and conditions, among other things.

Impaired Loans. Certain financial assets such as impaired loans are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. The fair value of impaired loans was $26.5 million at June 30, 2010. The fair value of impaired loans is measured by either the fair value of the collateral as determined by appraisals or independent valuation (Level 2), or the present value of expected future cash flows discounted at the effective interest rate of the loan (Level 3).

Other Real Estate Owned (OREO). As of June 30, 2010, the Company has $1.6 million in OREO and foreclosed property, which includes all real estate, other than bank premises used in bank operations, owned or controlled by the Company, including real estate acquired in settlement of loans. Properties are recorded at the balance of the loan or at estimated fair value less estimated selling costs, whichever is less, at the date acquired. Fair values of OREO at June 30, 2010 are determined by sales agreement or appraisal, and costs to sell are estimated based on the terms and conditions of the sales agreement. Inputs include appraisal values on the properties or recent sales activity for similar assets in the property’s market, and thus OREO measured at fair value would be classified within Level 2 of the hierarchy. In accordance with the OREO treatment described, the Company included property write-downs of $46,000 and $23,000 for the three months ended June 30, 2010 and 2009, respectively For the six months ended June 30, 2010, the company had write downs of $82,000 compared to $41,000 for the six months ended June 30, 2009.

Certain non-financial assets and non-financial liabilities are measured at fair value on a non-recurring basis including assets and liabilities related to reporting units measured at fair value in the testing of goodwill impairment, as well as intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2010, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

		Fair Value Measurements at
		June 30, 2010, Using
		Quoted
		Prices In
		Active
		Markets	Significant
	Assets/Liabilities	For	Other	Significant
	Measured at Fair	Identical	Observable	Unobservable
	Value	Assets	Inputs	Inputs
	June 30, 2010	(Level 1)	(Level 2)	(Level 3)
	(unaudited, dollars in thousands)

Securities available for sale	$ 339,867	$ 99,739	$ 231,740	$ 8,388

The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the methodologies used are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value.

Gains and losses (realized and unrealized) included in earnings (or changes in net assets) for the first six months of 2010 on a recurring basis are reported in noninterest income or other comprehensive income as follows:

			Other
	Noninterest		Comprehensive
	Income		Income
	(unaudited, in thousands)

Total gains included in earnings		1,366		-
(or changes in net assets)

Increase in unrealized gains relating to assets		-		1,616
still held at June 30, 2010

The gain above included $0.4 million in gains associated with the sale of held to maturity investments.

The Company did not record any assets or liabilities at fair value for which measurement of the fair value was made on a nonrecurring basis during the six months ended June 30, 2010.

ASC 825-10 provides the Company with an option to report selected financial assets and liabilities at fair value. The fair value option established by this Statement permits the Company to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each reporting date subsequent to implementation.

The Company has chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States, and as such has not included any gains or losses in earnings for the six months ended June 30, 2010.

Note 4. Loans and Allowance for Loan Losses

Loans, net of unearned income, totaled $622.6 million at June 30, 2010 and $589.9 million at December 31, 2009. At June 30, 2010, $39,000 in loans were held for sale and no loans were held for sale at December 31, 2009. The loan portfolio is the largest component of assets with total loans, net of allowance for loan losses, accounting for 59.8% and 62.5% of total assets as of June 30, 2010 and December 31, 2009, respectively. The loan portfolio consists solely of domestic loans.

Total loans at June 30, 2010 (unaudited) and December 31, 2009 were as follows:

	June 30,						December 31,
	2010						2009
				As % of						As % of
	Balance			Category			Balance			Category
	(dollars in thousands)
Real estate
Construction & land development	$	69,642			11.2	%	$	78,686			13.3	%
Farmland		11,859			1.9	%		11,352			1.9	%
1-4 Family		78,725			12.6	%		77,470			13.1	%
Multifamily		15,570			2.5	%		8,927			1.5	%
Non-farm non-residential		308,635			49.5	%		300,673			51.0	%
Total real estate		484,430			77.7	%		477,108			80.8	%

Agricultural		22,617			3.6	%		14,017			2.4	%
Commercial and industrial		91,844			14.8	%		82,348			13.9	%
Consumer and other		24,552			3.9	%		17,226			2.9	%
Total loans before unearned income		623,443			100.1	%		590,699			100.0	%
Less: unearned income		(837	)					(797	)
Total loans after unearned income	$	622,607					$	589,902

The following table sets forth the maturity and repricing of the loan portfolio and the allocation of fixed and floating rate loans:

	June 30, 2010
	Fixed		Floating		Total
	(unaudited, in thousands)
One year or less	$	77,057	$	183,423	$	260,480
One to five years	$	182,228	$	118,069	$	300,297
Five to 15 years	$	2,762	$	31,859	$	34,621
Over 15 years	$	1,067	$	6,372	$	7,439
Subtotal	$	263,114	$	339,723	$	602,837
Non-Accrual Loans					$	19,770

Total Loans					$	622,607

Percent of Loan Portfolio Fixed Loans		43.6%

Percent of Loan Portfolio Floating Loans		56.4%

The majority of floating rate loans have interest rate floors. As of June 30th, 2010 $290.5 million of these loans were at the floor rate.

The allowance for loan losses is reviewed by Management on a monthly basis and additions are recorded in order to maintain the allowance at an adequate level. In assessing the adequacy of the allowance, Management considers a variety of factors that might impact the performance of individual loans. These factors include, but are not limited to, economic conditions and their impact upon borrowers’ ability to repay loans, respective industry trends, borrower estimates and independent appraisals. Periodic changes in these factors impact Management’s assessment of each loan and its overall impact on the adequacy of the allowance for loan losses.

The allowance for loan losses totaled $8.6 million or 1.39% of total loans at June 30, 2010 and $7.9 million or 1.34% of total loans at December 31, 2009. Changes in the allowance for loan losses for the six months ended June 30, 2010 (unaudited) and the year ended December 31, 2009 are as follows:

	June 30,			December 31,
	2010			2009
	(unaudited, in thousands)

Balance beginning of period	$	7,919		$	6,482
Provision charged to expense		1,302			4,155
Loans charged-off		(726	)		(2,879	)
Recoveries		130			161
Allowance for loan losses	$	8,625		$	7,919

The following table sets forth, for the periods indicated, the allowance for loan losses, amounts charged-off and recoveries of loans previously charged-off:

	Six Months Ended
	June 30,
	2010			2009
	(unaudited, in thousands)

Balance at beginning of period	$	7,919		$	6,482

Charge-offs:
Real estate loans:
Construction and land development		(5	)		(63	)
One- to four- family residential		(262	)		(355	)
Non-farm non-residential		(75	)		(336	)
Commercial and industrial loans		(182	)		(120	)
Consumer and other		(202	)		(339	)
Total charge-offs		(726	)		(1,213	)

Recoveries:
Real estate loans:
Construction and land development		1			1
Farmland		-			1
One- to four- family residential		8			10
Commercial and industrial loans		63			15
Consumer and other		58			56
Total recoveries		130			83

Net charge-offs		(596	)		(1,130	)
Provision for loan losses		1,302			1,349

Balance at end of period	$	8,625		$	6,701

Note 5. Goodwill and Other Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other (ASC 350). Under ASC 350, goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but are subject to annual impairment tests in accordance with the provision of ASC 350. The Company’s goodwill is tested for impairment on an annual basis, or more often if events or circumstances indicate that there may be impairment. Adverse changes in the economic environment, declining operations, or other factors could result in a decline in the implied fair value of goodwill. If the implied fair value is less than the carrying amount, a loss would be recognized in other non-interest expense to reduce the carrying amount to implied fair value of goodwill. A goodwill impairment test includes two steps. Step one, used to identify potential impairment, compares the estimated fair value of a reporting unit with its carrying amount, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its estimated fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. Step two of the goodwill impairment test compares the implied estimated fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill for that reporting unit exceeds the implied fair value of that unit’s goodwill, an impairment loss is recognized in an amount equal to that excess. Other intangible assets continue to be amortized over their useful lives. Goodwill was $2.0 million at June 30, 2010 and December 31, 2009.

Mortgage servicing rights totaled $0.2 million and core deposit intangibles totaled $1.6 million at June 30, 2010. The mortgage servicing rights and core deposit intangibles are both subject to amortization. The core deposits reflect the value of deposit relationships, including the beneficial rates, which arose from the purchase of other financial institutions and the purchase of various banking center locations from one single financial institution. The following table summarizes the Company’s purchased accounting intangible assets subject to amortization.

	As of June 30, 2010						As of December 31, 2009
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
	(unaudited, in thousands)

Core deposit intangibles	$	7,997	$	6,348	$	1,649	$	7,997	$	6,240	$	1,757
Mortgage servicing rights		200		21		179		157		21		136
Total	$	8,197	$	6,369	$	1,828	$	8,154	$	6,261	$	1,893

Note 6. Borrowings

At June 30, 2010, short-term borrowings totaled $21.1 million, consisting of $6.2 million repurchase agreements and $14.9 million in federal funds purchased.

Long term borrowings decreased during the first six months of 2010 and totaled $15.0 million compared to $20.0 million at December 31, 2009. At June 30, 2010, long-term debt consisted of two advances from the Federal Home Loan Bank. On November 20, 2009, the Company obtained an original $10.0 million amortizing advance at a rate of 0.861% with maturity in December 1, 2010. The Company makes monthly principal and interest payments. On December 18, 2009, the Company obtained a $10.0 million interest only advance with a rate of 0.480%. The Company makes monthly interest payments with the balloon note due on December 20, 2010.

Note 7. Income Taxes

The ASC 740-10, Income Taxes, clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attribute for the consolidated financial statements recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company does not believe it has any unrecognized tax benefits included in its consolidated financial statements. The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in noninterest expense. During the three and six months ended June 30, 2010 and 2009, the Company has not recognized any interest or penalties in its consolidated financial statements, nor has it recorded an accrued liability for interest or penalty payments. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations for years before 2005.

Note 8. Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.” ASU 2010-06 amends Topic 820 by requiring more robust disclosures about (i) the different classes of assets and liabilities measured at fair value, (ii) the valuation techniques and inputs used, (iii) the activity in Level 3 fair value measurements, and (iv) the transfers between Levels 1, 2, and 3. Among other things, ASU 2010-06 requires separate disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements as opposed to presenting such activity on a net basis. The new disclosures required by ASU 2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about the roll forward of activity in Level 3 fair value measurements which are effective for interim and annual periods beginning after December 15, 2010. The provisions of ASU 2010-06 did not have a material impact on the Company’s financial position, results of operations or liquidity, but it will require expansion of the Company’s future disclosures about fair value measurements.

In December 2009, the FASB issued ASU 2009-16, “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets.” ASU 2009-16 amends Topic 860 and is intended to improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, ASU 2009-16 requires enhanced disclosures about the risks to which a transferor continues to be exposed because of its continuing involvement in transferred financial assets. The provisions of ASU 2009-16 were effective for interim and annual reporting periods beginning after November 15, 2009. The adoption of ASU 2009-16 did not have a material impact on the Company’s financial position, results of operations or liquidity.

ASU - Accounting Standards Update No. 2010-20, Receivables (Topic 310): Disclosure about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. The objective of this ASU is for an entity to provide disclosures that facilitate financial statement users’ evaluation of the following:

·	The nature of credit risk inherent in the entity’s portfolio of financing receivables;

·	How that risk is analyzed and assessed in arriving at the allowance for credit losses; and

·	The changes and reasons for those changes in the allowance for credit losses.

To achieve these objectives, an entity should provide disclosures on a disaggregated basis on two defined levels: (1) portfolio segment; and (2) class of financing receivable. The ASU makes changes to existing disclosure requirements and includes additional disclosure requirements about financing receivables, including:

·	Credit quality indicators of financing receivables at the end of the reporting period by class of financing receivables;

·	The aging of past due financing receivables at the end of the reporting period by class of financing receivables; and

·	The nature and extent of troubled debt restructurings that occurred during the period by class of financing receivables and their effect on the allowance for credit losses.

For public entities, the disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010. The adoption of this standard will require additional disclosures.

ASU - Accounting Standards Update No. 2010-18, Receivables (Topic 310): Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset. This ASU codifies the consensus reached in EITF Issue No. 09-I, “Effect of a Loan Modification When the Loan Is Part of a Pool That Is Accounted for as a Single Asset.” The amendments to the FASB Accounting Standards Codification™ (Codification) provide that modifications of loans that are accounted for within a pool under Subtopic 310-30 do not result in the removal of those loans from the pool even if the modification of those loans would otherwise be considered a troubled debt restructuring. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. ASU 2010-18 does not affect the accounting for loans under the scope of Subtopic 310-30 that are not accounted for within pools. Loans accounted for individually under Subtopic 310-30 continue to be subject to the troubled debt restructuring accounting provisions within Subtopic 310-40.

ASU 2010-18 is effective prospectively for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. Early application is permitted. Upon initial adoption of ASU 2010-18, an entity may make a one-time election to terminate accounting for loans as a pool under Subtopic 310-30. This election may be applied on a pool-by-pool basis and does not preclude an entity from applying pool accounting to subsequent acquisitions of loans with credit deterioration. The adoption of this update is not expected to have an impact on the consolidated financial statements.

ASU - Accounting Standards Update (ASU) No. 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The FASB believes this ASU clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption - one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature.

The amendments in the ASU are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after March 5, 2010. The adoption of this update is not expected to have an impact on the consolidated financial statements.

Note 9. Subsequent Events

New Federal Legislation

Congress has recently enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act which will significantly change the current bank regulatory structure and affect the lending, investment, trading and operating activities of financial institutions and their holding companies. The Dodd-Frank Act will eliminate the Office of Thrift Supervision. The Dodd-Frank Act also authorizes the Board of Governors of the Federal Reserve System to supervise and regulate all savings and loan holding companies, in addition to bank holding companies which it currently regulates. As a result, the Federal Reserve Board’s current regulations applicable to bank holding companies, including holding company capital requirements, will apply to savings and loan holding companies. The Dodd-Frank Act also requires the Federal Reserve Board to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital would be restricted to capital instruments that are currently considered to be Tier 1 capital for insured depository institutions. Bank holding companies with assets of less than $500 million are exempt from these capital requirements. Under the Dodd-Frank Act, the proceeds of trust preferred securities are excluded from Tier 1 capital unless such securities were issued prior to May 19, 2010 by bank or savings and loan holding companies with less than $15 billion of assets. The legislation also establishes a floor for capital of insured depository institutions that cannot be lower than the standards in effect today, and directs the federal banking regulators to implement new leverage and capital requirements within 18 months that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act also creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions such as the Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Banks and savings institutions with $10 billion or less in assets will be examined by their applicable bank regulators. The new legislation also weakens the federal preemption available for national banks and federal savings associations, and gives state attorneys general the ability to enforce applicable federal consumer protection laws.

The legislation also broadens the base for Federal Deposit Insurance Corporation insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2009, and non-interest bearing transaction accounts have unlimited deposit insurance through December 31, 2013. Lastly, the Dodd-Frank Act will increase stockholder influence over boards of directors by requiring companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and authorizing the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials. The legislation also directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following management discussion and analysis is intended to highlight the significant factors affecting the Company'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 for the three months and six months ended June 30 ,2010 and 2009 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 the Company'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; 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, if any; 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; 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.

New Federal Legislation

Second Quarter Overview

Financial highlights for the second quarter of 2010 and 2009 restated are as follows:

Net income for the second quarter of 2010 and 2009 was $3.4 million and $0.9 million respectively, with earnings per common share of $0.49 and $0.16 respectively. Net income for the six months ending June 30, 2010 was $6.0 million compared to $2.0 million for the six months ended June 30, 2009 with earnings per share of $0.95 and $0.35 respectively. The increase in net income was primarily the result of an increase in net interest income. The Company also recognized gains from sales of securities.

Net interest income for the second quarter of 2010 and 2009 was $9.6 million and $7.5 million, respectively. Net interest income for the six months ending June 30, 2010 was $18.9 million compared to $14.5 million for the same period in 2009. The net interest margin for the bank was 4.13% at the end of the second quarter 2010 and 3.41% at the end of the second quarter 2009.

·	The provision for loan losses for the second quarter of 2010 was $0.6 million compared to $0.7 million for the second quarter of 2009. The provision for loan loss for the six months ending June 30, 2010 was $1.3 million compared to $1.3 million for the six months ended June 30, 2009.

Total assets at June 30, 2010 were $1.0 billion, an increase of $95.3 million or 10.2% when compared to $930.8 million at December 31, 2009. The increase in assets primarily resulted from excess cash received from deposit growth which was ultimately invested in loans, securities investments, interest-earning deposits with banks and federal funds sold.

Investment securities totaled $339.9 million at June 30, 2010, an increase of $78.0 million when compared to $261.8 million at December 31, 2009. At June 30, 2010, available for sale securities, at fair value, totaled $339.9 million, an increase of $90.4 million when compared to December 31, 2009. Held to maturity securities, at cost, totaled $0.0 dollars as of June 30, 2010, the company did not have any securities in the held to maturity category. This was a decrease of $12.3 million when compared to $12.3 million at December 31, 2009.

·	The net loan portfolio at June 30, 2010 totaled $614.0 million, an increase of $32.0 million from the December 31, 2009 level of $582.0 million. Net loans are reduced by the allowance for loan losses which totaled $8.6 million for June 30, 2010 and $7.9 million for December 31, 2009.

·	Non-performing assets at June 30, 2010 were $23.1 million, an increase of $7.4 million compared to December 31, 2009.

·	Total deposits increased $85.2 million or 10.6% in the first six months of 2010 compared to the year ended December 31, 2009. Of this increase, individual and business deposits increased by $39.6 million and public fund deposits increased by $45.6 million.

Return on average assets for the three months ending June 30, 2010 and June 30, 2009 was 1.39% and 0.37% respectively. Return on average assets for the six months ended June 30, 2010 and June 30, 2009 were 1.24% and 0.41%, respectively. Return on average common equity for the three months ending June 30, 2010 and June 30, 2009 were 19.2% and 5.4% respectively. Return on average common equity for the six month period ending June 30, 2010 and June 30, 2009 was 16.8% and 5.9%, respectively.

·	The Company’s Board of Directors declared cash dividends of $0.16 per common share in the second quarter of 2010 and 2009.

Financial Condition

Changes in Financial Condition from December 31, 2009 to June 30, 2010

General. Total assets as of June 30, 2010 were $1.0 billion, an increase of $95.3 million or 10.2% when compared to $930.8 million at December 31, 2009. The increase in assets resulted primarily from cash received from increased deposits. This excess cash was ultimately used to fund loans, securities investments, increase interest-earning demand deposits with banks and federal funds purchased.

Cash and Cash Equivalents. Cash and cash equivalents at June 30, 2010 totaled $35.4 million, a decrease of $11.3 million when compared to $46.7 million at December 31, 2009. Cash and due from banks decreased $1.0 million, interest-earning demand deposits with banks increased $27,000 and federal funds sold decreased $12.3 million. The decrease in cash and cash equivalents was primarily a result of deploying excess liquidity into investments and loans.

Investment Securities. Investment securities at June 30, 2010 totaled $339.9 million, an increase of $78.0 million when compared to $261.8 million at December 31, 2009.

The securities portfolio consisted principally of U.S. Government agency securities, mortgage-backed obligations, corporate debt securities, municipal bonds and mutual funds or other equity securities. The securities portfolio provides us with a relatively stable source of income and provides a balance to interest rate and credit risks as compared to other categories of assets.

At June 30, 2010, $22.9 million or 6.76% of the securities portfolio was scheduled to mature in less than one year. Securities with maturity dates over 10 years totaled $62.3 million or 18.3% of the total portfolio. The average maturity of the securities portfolio was 2.95 years. The average maturity of the securities portfolio is affected by call options that are influenced by market interest rates.

At June 30, 2010, securities totaling $339.9 million were classified as available for sale and no securities were classified as held to maturity, compared to $249.5 million classified as available for sale and $12.3 million classified as held to maturity at December 31, 2009. The company sold all securities classified for held to maturity as part of its strategy to manage interest rate risk. The proceeds from the sale of these securities was used to fund loans and other investments. Management periodically assesses the quality of our investment holdings using procedures similar to those used in assessing the credit risks inherent in the loan portfolio.

On June 30, 2010, certain investment securities had continuous unrealized loss positions for more than 12 months. As of June 30, 2010, the unrealized losses on these securities totaled $0.6 million. Substantially all of these losses were in corporate securities, preferred securities and preferred stocks. At June 30, 2010, 27 securities were graded below investment grade with a total book value of $6.6 million, and three securities had no rating with a total book value of $0.2 million. All of the non-investment grade securities referenced above were initially investment grade and have been downgraded since purchase. As of June 30, 2010, the evaluation of securities with continuous unrealized losses indicated that no investments were other-than-temporarily impaired.

Average securities as a percentage of average interest-earning assets were 30.1% for the six-month period ended June 30, 2010 and 24.9% for the same period in 2009. At June 30, 2010, the U.S Government agency securities, mortgage-backed obligations, and municipal bonds qualified as securities pledgeable to collateralize repurchase agreements and public funds. Securities pledged at June 30, 2010 totaled $221.9 million.

Loans. The origination of loans is the primary use of our financial resources and represents the largest component of earning assets. Net total loans accounted for 59.8% of total assets at June 30, 2010, a decrease when compared to 62.5% at December 31, 2009. There are no significant concentrations of credit to any borrower. As of June 30, 2010, 77.7% of our loan portfolio was secured primarily or secondarily by real estate. The largest portion of our loan portfolio is in non-farm non-residential loans secured by real estate, which accounts for 49.5% of our total portfolio.

Our loan portfolio at June 30, 2010 totaled $614.0 million, an increase of approximately $32.0 million from the December 31, 2009 level of $582.0 million. Total loans include $45.7 million in syndicated loans acquired by assignment. Syndicated loans meet the same underwriting criteria used when making in-house loans. The allowance for loan losses totaled $8.6 million at June 30, 2010 and $7.9 million at December 31, 2009. Loan charge-offs totaled $0.7 million during the first six months of 2010, compared to $1.2 million during the same period of 2009. Recoveries totaled $130,000 and $83,000 during the first six months of 2010 and 2009, respectively. See Note 4 of the Notes to Consolidated Financial Statements for more information on loans and the allowance for loan losses.

Nonperforming Assets. Nonperforming assets consist of loans on which interest is no longer accrued, certain restructured loans where the interest rate or other terms have been renegotiated and real estate acquired through foreclosure (other real estate).

The accrual of interest is discontinued on loans when management believes there is reasonable uncertainty about the full collection of principal and interest or when the loan is contractually past due ninety days or more and not fully secured. If the principal amount of the loan is adequately secured, then interest income on such loans is subsequently recognized only in periods in which actual payments are received.

The table below sets forth the amounts and categories of our non-performing assets at June 30, 2010 (unaudited) and December 31, 2009.

	June 30,		December 31,
	2010		2009
	(in thousands)
Non-accrual loans:
Real estate loans:
Construction and land development	$	3,352	$	2,841
Farmland		82		54
One- to four- family residential		5,913		2,814
Non-farm non-residential		8,815		7,439
Non-real estate loans:
Commercial and industrial		1,475		830
Consumer and other		130		205
Total non-accrual loans		19,767		14,183

Loans 90 days and greater delinquent
and still accruing:
Real estate loans:
One- to four- family residential		1,693		757
Non-real estate loans:
Consumer and other		-		28
Total loans 90 days greater
delinquent and still accruing		1,693		785

Total nonperforming loans		21,460		14,968

Real estate owned:
Real estate loans:
One- to four- family residential		1,295		292
Non-farm non-residential		312		366
Total real estate owned		1,607		658

Total nonperforming assets	$	23,067	$	15,626

Nonperforming assets totaled $23.1 million or 2.2% of total assets at June 30, 2010, an increase of $7.4 million from December 31, 2009. Management has not identified additional information on any loans not already included in the nonperforming asset total that indicates possible credit problems that could cause doubt as to the ability of borrowers to comply with the loan repayment terms in the future.

Nonaccrual loans increased $5.6 million from December 31, 2009 to June 30, 2010. There were increases in construction and land Development nonaccrual loans, one- to four- family nonaccrual loans, non-farm non-residential nonaccrual loans and commercial and industrial nonaccrual loans, which were partially offset with decreases in construction and land development nonaccrual loans.

During the first six months of 2010, there was a $0.5 million increase in construction and land development nonaccrual loans. The increase in nonaccrual is mostly due to a loan in the amount of $1.9 million that is secured by acreage in Northern Louisiana. The property is currently in foreclosure and a loss is expected and we have reserved accordingly for the credit. In addition we were able to remove some loans from non-accrual since December 2009. Two of the loans were townhome developments, consisting of six units, totaling $0.6 million that were foreclosed on and booked into other real estate. Also, we booked additional properties to other real estate owned from a loan in the amount of $0.3 million secured by lots in a subdivision. We also received payment in full on another loan in the amount of $0.5 million that was secured by lots in a subdivision.

There was a $3.1 million increase in one- to four- family residential nonaccrual loans during the first six months of 2010. The increase in nonaccrual one- to four- family residential loans resulted from two loans, one of which has a balance of $1.8 million and is currently in bankruptcy. The house is located in a gated community and we anticipate no exposure on this property. This loan paid down from $3.0 million in the last 15 months from the liquidation of other assets of the borrower. The second loan is in the amount of $1.6 million and is also in foreclosure. We also expect this property to go to foreclosure sale in July, 2010.

Non-farm non-residential nonaccrual loans increased $1.4 million from December 31, 2009 to June 30, 2010. This category comprises of primarily two loans. One loan totaling $1.1 million is currently in foreclosure. It is secured by a commercial building.

Non-real estate commercial and industrial nonaccrual loans increased $0.7 million from December 31, 2009 to June 30, 2010. The largest loan addition to this category totals $0.4 million and is secured by oil well equipment. The borrower has a tentative agreement to sell the equipment and pay the loan in full. In addition we added a loan in the amount of $0.5 million secured by Medicare receivables. We have written a portion of this loan off and currently have a balance of $0.3 million as of June 30, 2010. We currently have approximately $0.4 million in receivables that have not been collected, however due to the slowing of the collections of the receivables; we have reserved $0.3 million against this credit.

Other real estate increased during the first six months of 2010 by $0.9 million. This increase is primarily from the addition of six properties in a townhome development mentioned in the nonaccrual construction and land development section above as well as five lots in a subdivision that were also referred to in the construction and land development section..

Allowance for Loan Losses. The Company maintains its allowance for loan losses at a level it considers sufficient to absorb potential losses embedded in the loan portfolio. The allowance is increased by the provision for anticipated loan losses as well as recoveries of previously charged-off loans and is decreased by loan charge-offs. The provision is the necessary charge to current expense to provide for current loan losses and to maintain the allowance at an adequate level commensurate with Management's evaluation of the risks inherent in the loan portfolio. Various factors are taken into consideration when the Company determines the amount of the provision and the adequacy of the allowance. These factors include but are not limited to:

·	Past due and nonperforming assets;

·	Specific internal analysis of loans requiring special attention;

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

·	Changes in underwriting standards or lending procedures and policies;

·	Charge-off and recovery practices;

·	National and local economic and business conditions;

·	Nature and volume of loans;

·	Overall portfolio quality;

·	Adequacy of loan collateral;

·	Quality of loan review system and degree of oversight by its Board of Directors;

·	Competition and legal and regulatory requirements on borrowers;

·	Examinations and review by the Company's internal loan review department, independent accountants and third-party independent loan review personnel; and

·	Examinations of the loan portfolio by federal and state regulatory agencies.

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 or special mention. 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 is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect Management’s estimate of probable losses.

Provisions made pursuant to these processes totaled $1.3 million in the first six months of 2010 as compared to $1.3 million for the same period in 2009. Provisions are necessary to maintain the allowance at an adequate level based on loan risk factors and the levels of net loan charge-offs. The provisions made in the first six months of 2010 were taken to provide for current loan losses and to maintain the allowance at an adequate level commensurate with Management’s evaluation of the risks inherent in the loan portfolio. Total charge-offs were $0.7 million for first six months of 2010 as compared to total charge-offs of $1.2 million for the same period in 2009. Recoveries were $130,000 for the first six months of 2010 as compared to recoveries of $83,000 for the same period in 2009.

Charged-off Real Estate loans totaled $342,000 for the first six months of 2010. The majority of this category is comprised of a few loans. One loan was made to a contractor to complete a project for one of our mortgage loan customers. The bank took a second mortgage on his house. The borrower was able to refinance his house and we were able to cash out on a portion of our loan, however did have to charge-off approximately $75,000. The second loan is in the amount of $560,000 secured by rental property. The borrower is in bankruptcy and the plan calls for a lower amount of principal to be paid because of decreased property. We wrote the loan down $106,000 to the amount of the bankruptcy plan. In addition the bank wrote off $74,000 on a building that was formerly a car dealership. There were some possible environmental concerns and we only had a second mortgage. The property sold for enough at the foreclosure sale to pay off the first mortgage to another bank and to allow some proceeds to be applied toward the bank’s debt. Another $67,000 was charged off, in which the bank foreclosed upon five lots in a subdivision. After the property was appraised it resulted in the write off of a portion of the debt.

Charged-off commercial and industrial loans totaled $182,000 for the first six months of 2010. This category is comprised of two loans in which we charged-off $125,000 on one of the loans because it is secured by Medicare receivables as well as some patient receivables and collection of the receivables has slowed. The second loan had a balance of $25,000 on a $50,000 committed line of credit and the credit was unsecured.

Charged-off consumer loans and credit cards totaled $202,000 for the first six months of 2010. This category is comprised of smaller consumer loans.

In some instances, loans are placed on nonaccrual status. All accrued but uncollected interest related to a loan is deducted from income in the period the loan is assigned a nonaccrual status. During the period a loan is in nonaccrual status, any cash receipts are first applied to the principal balance. Once the principal balance has been fully recovered, any residual amounts are applied to expenses resulting from the collection of the payment and to the recovery of any reversed interest income and interest income that would have been due had the loan not been placed on nonaccrual status. As of June 30, 2010 and December 31, 2009 the Company had loans totaling $19.8 million and $14.2 million, respectively, on which the accrual of interest had been discontinued.

The allowance for loan losses at June 30, 2010 was $8.6 million or 1.39% of total loans and 40.3% of nonperforming assets. Management believes that the current level of the allowance is adequate to cover losses in the loan portfolio given the current economic conditions, expected net charge-offs and nonperforming asset levels.

Other information relating to loans, the allowance for loan losses and other pertinent statistics follows.

	June 30.,
	2010			2009
	(unaudited, in thousands)
Loans:
Average outstanding balance	$	593,620		$	600,202
Balance at end of period	$	622,607			606,487

Allowance for Loan Losses:
Balance at beginning of year	$	7,919		$	6,482
Provision charged to expense		1,302			1,349
Loans charged-off		(726	)		(1,213	)
Recoveries		130			83
Balance at end of period	$	8,625		$	6,701

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. In this regard, management regularly assesses our funding needs, deposit pricing and interest rate outlooks. From December 31, 2009 to June 30, 2010, total deposits increased $85.2 million, or 10.7%, to $885.0 million at June 30, 2010 from $779.7 million at December 31, 2009. During 2010, consumer and business deposits increased $70.8 million and public fund deposits increased $13.5 million. Noninterest-bearing demand deposits decreased $8.9 million while interest-bearing deposits increased by $94.1 million when comparing June 30, 2010 to December 31, 2009.

At June 30, 2010, consumer deposits totaled $451.2 million, business deposits totaled $119.6 million and public fund deposits totaled $314.1 million. As of June 30, 2010, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $300.5 million.

Average noninterest-bearing deposits increased to $129.3 million for the six-month period ended June 30, 2010 from $117.8 million for the six-month period ended June 30, 2009. Average noninterest-bearing deposits represented 13.8% and 13.4% of average total deposits for the six-month periods ended June 30, 2010 and 2009, respectively.

As we seek to maintain a strong net interest margin and improve our earnings, attracting core noninterest-bearing deposits will remain a primary emphasis. Management will continue to evaluate and update our product mix in its efforts to attract additional core customers. We currently offer a number of noninterest-bearing deposit products that are competitively priced and designed to attract and retain customers with primary emphasis on core deposits. We have also offered several different time deposit promotions in an effort to increase our core deposits and to increase liquidity.

The following table sets forth the composition of the Company’s deposits at June 30, 2010 (unaudited) and December 31, 2009.

	June 30,		December 31,		Increase/(Decrease)
	2010		2009		Amount			Percent
	(dollars in thousands)
Deposits:
Noninterest-bearing demand	$	122,888	$	131,818	$	(8,930	)		-6.8	%
Interest-bearing demand		195,486		188,252		7,234			3.8	%
Savings		44,029		40,272		3,757			9.3	%
Time		522,550		439,404		83,146			18.9	%
Total deposits	$	884,954	$	799,746	$	85,207			10.7	%

Borrowings. The Company 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. At June 30, 2010, short-term borrowings totaled $21.1 million compared to $11.9 million at December 31, 2009. At June 30, 2010, short-term borrowings consisted of $6.2 million repurchase agreements and $14.9 million in federal funds purchased. At December 31, 2009, short term borrowings consisted solely of $11.9 million of repurchase agreements.. Overnight repurchase agreement balances are monitored daily for sufficient collateralization.

Long-term borrowings totaled $15 million at June 30, 2010 compared to $20.0 million at December 31, 2009. At June 30, 2010 long-term borrowings consisted of two Federal Home Loan Bank advances. See Note 6 of the Notes to Consolidated Financial Statements.

The average amount of total borrowings for the six months ended June 30, 2010 totaled $26.2 million, compared to $19.0 million for the six months ended June 30, 2009. At June 30, 2010, the Company had $145.0 million in Federal Home Loan Bank letters of credit outstanding obtained solely for collateralizing public deposits.

Equity. Total equity increased to $100.2 million as of June 30, 2010 from $94.9 million as of December 31, 2009. The increase in stockholders’ equity resulted from net income of $6.0 million and the change in accumulated other comprehensive income of $1.6 million, partially offset by dividends paid to common stockholders totaling $1.8 million and preferred stock dividends totaling $0.6 million. Cash dividends paid to common shareholders were $0.32 per share for the six-month periods ending June 30, 2010 and 2009.

Results of Operations for the Six Months and Three Months Ended June 30, 2010 and June 30, 2009

Net income. For the quarter ending June 30, 2010, First Guaranty Bancshares, Inc. had consolidated net income of $3.4 million, a $2.5 million increase from the $0.9 million of net income reported for the second quarter of 2009. Net income for the six months ended June 30, 2010 was $6.0 million, a increase of $4.0 million from $2.0 million for the six months ended June 30, 2009. The increase in net income for the three and six months ended June 30, 2010 resulted from increased net interest income, gains on sales of securities, and reduced non interest expense.

Net interest income. Net interest income is the largest component of our earnings. It is calculated by subtracting the cost of interest-bearing liabilities from the income earned on interest-earning assets and represents the earnings from our primary business of gathering deposits and making loans and investments. Our long-term objective is to manage this income to provide the largest possible amount of income while balancing interest rate, credit and liquidity risks.

A financial institution’s asset and liability structure is substantially different from that of an industrial 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 changes of our interest-earning assets and interest-bearing liabilities.

Net interest income for the quarter ended June 30, 2010 was $9.6 million, an increase of $2.1 million when compared to $7.5 million for the second quarter in 2009. Net interest income for the six-month period ended June 30, 2010 totaled $18.9 million. This reflects an increase of $4.4 million when compared to the six-month period ended June 30, 2009. The increase in net interest income for both the three month and six month periods reflected an increase in net interest spread and net interest margin as the yield on our interest-earning assets increased more than the cost of our interest-bearing liabilities.

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 (leverage). The leverage for the six months ending June 30, 2010 was 81.1%, compared to 84.1% for the same period in 2009.

The following table sets forth average balance sheets, average yields and costs, and certain other information for the six months ended June 30, 2010 and 2009, respectively. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Nonaccrual loans were included in the computation of average balances, but have been reflected in the table 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.

	Six Months Ended June 30,
	2010						2009* Restated
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
	(unaudited, dollars in thousands)
Assets
Interest-earning assets:
Interest-earning deposits with banks	$	16,930	$	19		0.22	%	$	43,062	$	309		1.45	%
Securities (including FHLB stock)		291,286		6,944		4.81	%		240,377		4,542		3.81	%
Federal funds sold		10,072		5		0.13	%		38,522		27		0.14	%
Loans, net of unearned income
including loans held for sale		593,620		17,892		6.08	%		600,202		17,533		5.89	%
Total interest-earning assets		911,908		24,860		5.50	%		922,163		22,411		4.90	%

Noninterest-earning assets:
Cash and due from banks		17,947							18,388
Premises and equipment, net		17,140							16,202
Other assets		19,689							9,166
Total	$	966,684						$	965,919

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Demand deposits	$	201,847	$	430		0.43	%	$	225,289	$	604		0.54	%
Savings deposits		42,060		21		0.10	%		41,663		77		0.37	%
Time deposits		465,481		5,529		2.40	%		484,474		7,095		2.95	%
Borrowings		30,515		70		0.47	%		23,921		159		1.34	%
Total interest-bearing liabilities		739,903		6,050		1.65	%		775,347		7,935		2.06	%

Noninterest-bearing liabilities:
Demand deposits		127,203							117,943
Other		7,316							5,986
Total liabilities		874,422							899,276
Stockholders' equity		92,261							66,795
Total	$	966,684						$	966,071
Net interest income			$	18,810						$	14,476
Net interest rate spread (1)						3.85	%						2.84	%
Net interest-earning assets (2)	$	172,005						$	146,816
Net interest margin (3)						4.16	%						3.17	%

Average interest-earning assets to
interest-bearing liabilities						123.25	%						118.94	%

(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.
(2) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.

Provision for Loan Losses. Management assesses the allowance for loan losses on a quarterly basis and makes provisions for loan losses as deemed appropriate in order to maintain an adequate allowance for loan losses. Increases to the allowance are made to the provision as loan losses and charged against income.

Provisions for loan losses totaled $0.6 million for the quarter ended June 30, 2010, a decrease of $0.1 million when compared to the same quarter in 2009. Year-to-date provisions totaled $1.3 million for the first six months of 2010 as compared to $1.3 million for the same period in 2009. Provisions are necessary to maintain the allowance at an adequate level based on loan risk factors and the levels of net loan charge-offs. The provisions made in the first six months of 2010 and 2009 were taken to provide for current loan losses and to maintain the allowance at an adequate level commensurate with Management’s evaluation of the risks inherent in the loan portfolio. Total charge-offs were $0.7 million for the first six months of 2010 as compared to $1.2 million for the same period in 2009. Recoveries were $130,000 for the first six months of 2010 as compared to $83,000 for the same period in 2009.

Noninterest Income. Noninterest income includes deposit service charges, return check charges, bankcard fees, other commissions and fees, gains and/or losses on sales of securities and loans, and various other types of income.

Noninterest income for the quarter ended June 30, 2010 totaled $2.6 million, an increase of $1.1 million when compared to the same period in 2009. This increase in noninterest income resulted primarily from realized gains on sales of securities totaling $1.1 million..

Noninterest income for the first six months of 2010 totaled $4.2 million, an increase of $1.4 million when compared to the same period in 2009.

Noninterest Expense. Noninterest expense includes salaries and employee benefits, occupancy and equipment expense, net cost from other real estate and repossessions, regulatory assessments and other types of expenses. Noninterest expense for the second quarter in 2010 totaled $6.4 million, a decrease of $0.5 million from the same period in 2009.

Salaries and benefits totaled $5.8 million for the six month period ending June 30, 2010 and $5.5 million at June 30, 2009 respectively. At June 30, 2010, our full-time equivalent employees totaled 240 compared to 226 full-time equivalent employees during the same period of 2009. Occupancy and equipment expense reflects an increase of $0.1 million when comparing the six-month periods ended June 30, 2010 and 2009. Net cost from other real estate and repossessions totaled $0.2 million at June 30, 2010 compared to $0.2 million at June 30, 2009. Regulatory assessments totaled $0.7 million for the six months ending June 30, 2010 compared to $1.3 million for the same period ending June 30, 2009. Other noninterest expense reflects a decrease of $0.1 million when comparing the six-month periods ended June 30, 2010 and 2009. The table below presents the components of other noninterest expense as of the six months ended June 30, 2010 and 2009.

	Six Months Ended June 30,				Three Months Ended June 30,
	2010		2009		2010		2009
	(unaudited, in thousands)				(unaudited, in thousands)
Other noninterest expense:
Legal and professional fees	$	688	$	590	$	376	$	299
Data processing		983		890		460		451
Marketing and public relations		584		467		299		272
Taxes - sales, capital and franchise		378		321		197		158
Operating supplies		346		248		206		127
Travel and lodging		190		199		103		105
Other		1,271		1,848		613		1,005
Total other expense	$	4,440	$	4,563	$	2,254	$	2,417

Income Taxes. The provision for income taxes totaled $1.8 million and $0.5 million for the quarters ended June 30, 2010 and 2009, respectively. The provision for income taxes for the six months ended June 30, 2010 increased $2.1 million to $3.2 million from $1.0 million for the same period in 2009. The increase in the provision for income taxes reflected increased income during both the three-month and six-month periods in 2010. In each of the six months ended June 30, 2010 and 2009, the income tax provision approximated the normal statutory rate. The effective rates were 34.6% and 34.7%, respectively.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Asset/Liability Management and Market Risk

Asset/LiabilityManagement. Our asset/liability management (ALM) process consists of quantifying, analyzing and controlling interest rate risk (IRR) to maintain reasonably stable net interest income levels under various interest rate environments. The principle objective of ALM is to maximize net interest income while operating within acceptable limits established for interest rate risk and maintain adequate levels of liquidity.

The majority of our assets and liabilities are monetary in nature. Consequently, one of our most significant forms of market risk is interest rate risk. Our assets, consisting primarily of loans secured by real estate, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established an Asset/Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Senior Management monitors the level of interest rate risk on a regular basis and the Asset/Liability Committee, which consists of executive Management and other bank personnel operating under a policy adopted by the Board of Directors, meets as needed to review our asset/liability policies and interest rate risk position. In addition, the level of interest rate risk is also discussed and reviewed in the monthly Investment Committee meetings, which consists of executive Management, other bank personnel and six Bank Directors.

The interest spread and liability funding discussed below are directly related to changes in asset and liability mixes, volumes, maturities and repricing opportunities for interest-earning assets and interest-bearing liabilities. Interest-sensitive assets and liabilities are those which are subject to being repriced in the near term, including both floating or adjustable rate instruments and instruments approaching maturity. The interest sensitivity gap is the difference between total interest-sensitive assets and total interest-sensitive liabilities. Interest rates on our various asset and liability categories do not respond uniformly to changing market conditions. Interest rate risk is the degree to which interest rate fluctuations in the marketplace can affect net interest income.

To maximize our margin, we attempt to be somewhat more asset sensitive during periods of rising rates and more liability sensitive during periods of falling rates. The need for interest sensitivity gap management is most critical in times of rapid changes in overall interest rates. We generally seek to limit our exposure to interest rate fluctuations by maintaining a relatively balanced mix of rate sensitive assets and liabilities on a one-year time horizon. The mix is relatively difficult to manage. Because of the significant impact on net interest margin from mismatches in repricing opportunities, the asset-liability mix is monitored periodically depending upon Management’s assessment of current business conditions and the interest rate outlook. Exposure to interest rate fluctuations is maintained within prudent levels by the use of varying investment strategies.

We monitor interest rate risk using an interest sensitivity analysis set forth on the following table. This analysis, which we prepare monthly, reflects the maturity and repricing characteristics of assets and liabilities over various time periods. The gap indicates whether more assets or liabilities are subject to repricing over a given time period. The interest sensitivity analysis at June 30, 2010 reflects a liability-sensitive position with a negative cumulative gap on a one-year basis.

	Interest Sensitivity Within
	3 Months			Over 3 Months			Total			Over
	Or Less			thru 12 Months			One Year			One Year		Total
	(unaudited, dollars in thousands)
Earning Assets:
Loans (including loans held for sale)	$	105,290		$	155,190		$	260,480			362,127	$	622,607
Securities (including FHLB stock)		14,354			10,441			24,795			316,912		341,707
Federal funds sold		1,004			-			1,004			-		1,004
Other earning assets		41			-			41			-		41
Total earning assets		120,689			165,631			286,320			679,039	$	965,359

Source of Funds:
Interest-bearing accounts:
Demand deposits		146,606			-			146,606			48,880		195,486
Savings		11,007			-			11,007			33,022		44,029
Time deposits		162,815			128,230			291,045			231,505		522,550
Short-term borrowings		21,137			-			21,137			-		21,137
Long-term borrowings		-			15,011			15,011			-		15,011
Noninterest-bearing, net		-			-			-			167,146		167,146
Total source of funds		341,565			143,241			484,806			480,553	$	965,359
Period gap		(220,876	)		22,390			(198,486	)		198,486
Cumulative gap	$	(220,876	)	$	(198,486	)	$	(198,486	)	$	-

Cumulative gap as a
percent of earning assets		-22.88	%		-20.56	%		-20.56	%

Liquidity 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 the Company 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. Including securities pledged to collateralize public fund deposits; these assets represent 36.6% and 31.8% of the total liquidity base at June 30, 2010 and December 31, 2009, respectively.

Loans maturing within one year or less at June 30, 2010 totaled $260.5 million. At June 30, 2010, time deposits maturing within one year or less totaled $291 million. Loan commitments maturing within one year or less at June 30, 2010 totaled $25.1 million.

The Company maintained a net borrowing availability capacity at the Federal Home Loan Bank totaling $72.6 million and $92.9 million at June 30, 2010 and December 31, 2009, respectively. This decrease in availability at Federal Home Loan Bank during 2010 resulted from an additional $5.0 million in letters of credit used solely to pledge to public funds, increase in borrowings of $14.9 million, and an adjustment to the borrowing base. We also maintain federal funds lines of credit at three correspondent banks with borrowing capacity of $63.2 million at June 30, 2010 and December 31, 2009, respectively. At June 30, 2010 and December 31, 2009, the Company did not have an outstanding balance on these lines of credit. Management believes there is sufficient liquidity to satisfy current operating needs.

Capital Resources. The Company’s capital position is reflected in stockholders’ 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 equity increased to $101.2 million as of June 30, 2010 from $94.9 million as of December 31, 2009. The increase in stockholders’ equity resulted from net income of $6.0 million and the change in accumulated other comprehensive income of $1.6 million, partially offset by dividends paid to common stockholders totaling $1.8 million and preferred stock dividends totaling $0.6 million. Cash dividends paid to common shareholders were $0.32 per share for the six-month periods ending June 30, 2010 and 2009.

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. 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. All bank holding companies and 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.

The calculated ratios for the Bank are as follows at June 30, 2010: Tier 1 leverage ratio of 8.78% (compared to a “well capitalized” threshold of 5.0%); Tier 1 risk-based capital ratio of 10.99% (compared to a “well capitalized threshold of 6.00%); and total risk based capital ratio of 12.10% (compared to a “well capitalized threshold of 10.00%).

At June 30, 2010, we satisfied the minimum regulatory capital requirements and were “well capitalized” within the meaning of federal regulatory requirements.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As defined by the Securities and Exchange Commission in Exchange Act Rules 13a-14(c) and 15d-14(c), a company’s “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within time periods specified in the Commission’s rules and forms. The Company maintains such controls designed to ensure this material information is communicated to Management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decision regarding required disclosure.

Management, with the participation of the CEO and CFO, have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, the CEO and CFO have concluded that the disclosure controls and procedures as of the end of the period covered by this quarterly report are effective. There were no changes in the Company’s internal control over financial reporting during the last fiscal quarter in the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to various other legal proceedings in the normal course of business and otherwise. It is management's belief that the ultimate resolution of such other claims will not have a material adverse effect on the Company's financial position or results of operations.

Item 1A. Risk Factors

In addition to the other information contained this Quarterly Report on Form 10-Q, the following risk factors represent material updates and additions to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2009 and the Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2009, as filed with the Securities and Exchange Commission. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 is non-applicable and is therefore not included.

Item 3. Defaults Upon Senior Securities

Item 3 is non-applicable and is therefore not included.

Item 4. Submission of Matters to a Vote of Security Holders

The Company’s Annual Meeting of Stockholders was held on May 20, 2010.

With respect to the election of 3 directors to serve one year and until their successors are elected and qualified, the following are the numbers of shares voted for each nominee:


Nominees	For		Against
William K. Hood		3,178,940		27
Alton B. Lewis		3,153,942		25,025
Marshall T. Reynolds		3,178,340		627

There were no abstentions or broker non-votes.

Item 5. Other Information

A vote was taken to approve an advisory non-binding vote to approve our employee compensation plan and policies.

		For		Against

		3,097,934		28,700

Item 6. Exhibits

1. Consolidated financial statements

The information required by this item is included as Part I herein.

2. Consolidated financial statements schedules

The information required by this item is not applicable and therefore is not included.

3. Exhibits

Exhibit

Number Exhibit

14.0	Code of Ethics

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FIRST GUARANTY BANCSHARES, INC.



Date: August 13, 2010	By:	/s/ Alton B. Lewis
		Chief Executive Officer


Date: August 13, 2010	By:	/s/ Eric J. Dosch
		Eric J. Dosch
		Chief Financial Officer
		Secretary and Treasurer

First Guaranty Bancshares, Inc. - FORM 10-Q - August 13, 2010

Attached files

First Guaranty Bancshares, Inc. Reports