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, 2009


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.
      Employerincorporation
      or organization)
            Identification
      Number)400
      East Thomas StreetHammond,
      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 companyT





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, 2009, the registrant had 5,559,644 shares of $1 par value common stock
which were issued and outstanding.


- 1
-


PART
I.  FINANCIAL INFORMATION


Item
1.  Consolidated Financial Statements





FIRST
      GUARANTY BANCSHARES, INC. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETS(dollars
      in thousands, except share data)June
      30,
              
              
              December
      31,2009
              
              
              2008Assets
              
              (unaudited)Cash
      and cash equivalents:Cash
      and due from banks
              
              $
              29,256
              
              
              $
              77,159Interest-earning
      demand deposits with banks
              
              
              26,782
              
              
              
              20Federal
      funds sold
              
              
              -
              
              
              
              838Cash
      and cash equivalents
              
              
              56,038
              
              
              
              78,017Interest-earning
      time deposits with banks
              
              
              13,613
              
              
              
              21,481Investment
      securities:Available
      for sale, at fair value
              
              
              252,638
              
              
              
              114,406Held
      to maturity, at cost (estimated fair value of$2,837
      and $24,936, respectively)
              
              
              2,792
              
              
              
              24,756Investment
      securities
              
              
              255,430
              
              
              
              139,162Federal
      Home Loan Bank stock, at cost
              
              
              947
              
              
              
              944Loans
      held for sale
              
              
              147
              
              
              
              -Loans,
      net of unearned income
              
              
              606,487
              
              
              
              606,369Less:
      allowance for loan losses
              
              
              6,701
              
              
              
              6,482Net
      loans
              
              
              599,786
              
              
              
              599,887Premises
      and equipment, net
              
              
              15,951
              
              
              
              16,141Goodwill
              
              
              1,980
              
              
              
              1,980Intangible
      assets, net
              
              
              2,006
              
              
              
              2,078Other
      real estate, net
              
              
              1,049
              
              
              
              568Accrued
      interest receivable
              
              
              5,304
              
              
              
              4,611Other
      assets
              
              
              6,343
              
              
              
              6,563Total
      Assets
              
              $
              958,594
              
              
              $
              871,432Liabilities
      and Stockholders' EquityDeposits:Noninterest-bearing
      demand
              
              $
              114,262
              
              
              $
              118,255Interest-bearing
      demand
              
              
              203,605
              
              
              
              180,230Savings
              
              
              42,233
              
              
              
              41,357Time
              
              
              492,276
              
              
              
              440,530Total
      deposits
              
              
              852,376
              
              
              
              780,372Short-term
      borrowings
              
              
              26,193
              
              
              
              9,767Accrued
      interest payable
              
              
              4,689
              
              
              
              3,033Long-term
      borrowings
              
              
              3,368
              
              
              
              8,355Other
      liabilities
              
              
              4,256
              
              
              
              3,275Total
      Liabilities
              
              
              890,882
              
              
              
              804,802Stockholders'
      EquityCommon
      stock:$1
      par value - authorized 100,600,000 shares; issued andoutstanding
      5,559,644 shares
              
              
              5,560
              
              
              
              5,560Surplus
              
              
              26,459
              
              
              
              26,459Retained
      earnings
              
              
              38,387
              
              
              
              37,769Accumulated
      other comprehensive loss
              
              
              (2,694
              )
              
              
              (3,158
              )Total
      Stockholders' Equity
              
              
              67,712
              
              
              
              66,630Total
      Liabilities and Stockholders' Equity
              
              $
              958,594
              
              
              $
              871,432See
      Notes to Consolidated Financial Statements.
  - 2
-


FIRST
      GUARANTY BANCSHARES, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF INCOME (unaudited)(dollars
      in thousands, except per share data)Three
      Months
              
              
              Six
      MonthsEnded
      June 30,
              
              
              Ended
      June 30,2009
              
              
              2008
              
              
              2009
              
              
              2008Interest
      Income:Loans
      (including fees)
              
              $
              8,873
              
              
              $
              10,141
              
              
              $
              17,530
              
              
              $
              20,999Loans
      held for sale
              
              
              2
              
              
              
              14
              
              
              
              3
              
              
              
              35Deposits
      with other banks
              
              
              84
              
              
              
              5
              
              
              
              309
              
              
              
              14Securities
      (including FHLB stock)
              
              
              2,468
              
              
              
              1,421
              
              
              
              4,542
              
              
              
              2,940Federal
      funds sold
              
              
              10
              
              
              
              42
              
              
              
              27
              
              
              
              358Total
      Interest Income
              
              
              11,437
              
              
              
              11,623
              
              
              
              22,411
              
              
              
              24,346Interest
      Expense:Demand
      deposits
              
              
              388
              
              
              
              672
              
              
              
              822
              
              
              
              1,641Savings
      deposits
              
              
              36
              
              
              
              46
              
              
              
              77
              
              
              
              102Time
      deposits
              
              
              3,503
              
              
              
              2,886
              
              
              
              7,095
              
              
              
              6,467Borrowings
              
              
              98
              
              
              
              102
              
              
              
              160
              
              
              
              211Total
      Interest Expense
              
              
              4,025
              
              
              
              3,706
              
              
              
              8,154
              
              
              
              8,421Net
      Interest Income
              
              
              7,412
              
              
              
              7,917
              
              
              
              14,257
              
              
              
              15,925Provision
      for loan losses
              
              
              701
              
              
              
              490
              
              
              
              1,349
              
              
              
              692Net
      Interest Income after Provision for Loan Losses
              
              
              6,711
              
              
              
              7,427
              
              
              
              12,908
              
              
              
              15,233Noninterest
      Income:Service
      charges, commissions and fees
              
              
              1,040
              
              
              
              962
              
              
              
              2,020
              
              
              
              1,975Net
      gains on sale of securities
              
              
              10
              
              
              
              -
              
              
              
              10
              
              
              
              3Net
      gains on sale of loans
              
              
              192
              
              
              
              92
              
              
              
              272
              
              
              
              175Other
              
              
              243
              
              
              
              484
              
              
              
              520
              
              
              
              827Total
      Noninterest Income
              
              
              1,485
              
              
              
              1,538
              
              
              
              2,822
              
              
              
              2,980Noninterest
      Expense:Salaries
      and employee benefits
              
              
              2,667
              
              
              
              2,578
              
              
              
              5,493
              
              
              
              5,178Occupancy
      and equipment expense
              
              
              728
              
              
              
              731
              
              
              
              1,411
              
              
              
              1,430Net
      cost from other real estate & repossessions
              
              
              70
              
              
              
              42
              
              
              
              180
              
              
              
              84Regulatory
      assessment
              
              
              717
              
              
              
              164
              
              
              
              945
              
              
              
              251Other
              
              
              2,050
              
              
              
              2,177
              
              
              
              4,037
              
              
              
              4,420Total
      Noninterest Expense
              
              
              6,232
              
              
              
              5,692
              
              
              
              12,066
              
              
              
              11,363Income
      Before Income Taxes
              
              
              1,964
              
              
              
              3,273
              
              
              
              3,664
              
              
              
              6,850Provision
      for income taxes
              
              
              677
              
              
              
              1,142
              
              
              
              1,267
              
              
              
              2,392Net
      Income
              
              $
              1,288
              
              
              $
              2,131
              
              
              $
              2,397
              
              
              $
              4,458Per
      Common Share:Earnings
              
              $
              0.23
              
              
              $
              0.38
              
              
              $
              0.43
              
              
              $
              0.80Cash
      dividends paid
              
              $
              0.16
              
              
              $
              0.16
              
              
              $
              0.32
              
              
              $
              0.32Average
      Common Shares Outstanding
              
              
              5,559,644
              
              
              
              5,559,644
              
              
              
              5,559,644
              
              
              
              5,559,644See
      Notes to Consolidated Financial Statements
  - 3
-


FIRST
      GUARANTY BANCSHARES, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF SHAREHOLDERS' EQUITY(dollars
      in thousands, except per share data)AccumulatedCommon
              
              
              
              
              
              
              
              
              OtherStock
              
              
              
              
              
              Retained
              
              
              Comprehensive$1
      Par
              
              
              Surplus
              
              
              Earnings
              
              
              Loss
              
              
              TotalBalance
      December 31, 2007
              
              $
              5,560
              
              
              $
              26,459
              
              
              $
              34,849
              
              
              $
              (335
              )
              
              $
              66,533Net
      income
              
              
              -
              
              
              
              -
              
              
              
              4,458
              
              
              
              -
              
              
              
              4,458Change
      in unrealized losson
      available for sale securities,net
      of reclassification adjustments and taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (815
              )
              
              
              (815
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,643Cash
      dividends on common stock ($0.32 per share)
              
              
              -
              
              
              
              -
              
              
              
              (1,780
              )
              
              
              -
              
              
              
              (1,780
              )Balance
      June 30, 2008 (unaudited)
              
              $
              5,560
              
              
              $
              26,459
              
              
              $
              37,527
              
              
              $
              (1,150
              )
              
              $
              68,396Balance
      December 31, 2008
              
              $
              5,560
              
              
              $
              26,459
              
              
              $
              37,769
              
              
              $
              (3,158
              )
              
              $
              66,630Net
      income
              
              
              -
              
              
              
              -
              
              
              
              2,397
              
              
              
              -
              
              
              
              2,397Change
      in unrealized losson
      available for sale securities,net
      of reclassification adjustments and taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              464
              
              
              
              464Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,861Cash
      dividends on common stock ($0.32 per share)
              
              
              -
              
              
              
              -
              
              
              
              (1,779
              )
              
              
              -
              
              
              
              (1,779
              )Balance
      June 30, 2009 (unaudited)
              
              $
              5,560
              
              
              $
              26,459
              
              
              $
              38,387
              
              
              $
              (2,694
              )
              
              $
              67,712See
      Notes to Consolidated Financial Statements
  - 4
-
   FIRST
      GUARANTY BANCSHARES, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWS (unaudited)(in
      thousands)Six
      Months Ended June 30,2009
              
              
              2008Cash
      Flows From Operating ActivitiesNet
      income
              
              $
              2,397
              
              
              $
              4,458Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Provision
      for loan losses
              
              
              1,349
              
              
              
              692Depreciation
      and amortization
              
              
              698
              
              
              
              735Amortization
      of discount on investments
              
              
              (458
              )
              
              
              (444
              )Gain
      on call of securities
              
              
              (10
              )
              
              
              (3
              )Gain
      on sale of assets
              
              
              (160
              )
              
              
              (175
              )ORE
      writedowns and loss on disposition
              
              
              125
              
              
              
              33FHLB
      stock dividends
              
              
              (2
              )
              
              
              (22
              )Net
      (increase) decrease in loans held for sale
              
              
              (147
              )
              
              
              3,298Change
      in other assets and liabilities, net
              
              
              1,080
              
              
              
              2,516Net
      Cash Provided By Operating Activities
              
              
              4,872
              
              
              
              11,088Cash
      Flows From Investing ActivitiesProceeds
      from maturities and calls of HTM securities
              
              
              21,971
              
              
              
              2,089Proceeds
      from maturities, calls and sales of AFS securities
              
              
              1,114,597
              
              
              
              450,234Funds
      invested in AFS securities
              
              
              (1,251,666
              )
              
              
              (439,869
              )Proceeds
      from sale of Federal Home Loan Bank stock
              
              
              -
              
              
              
              505Funds
      invested in Federal Home Loan Bank stock
              
              
              -
              
              
              
              (509
              )Proceeds
      from maturities of time deposits with banks
              
              
              7,868
              
              
              
              2,089Net
      increase in loans
              
              
              (2,112
              )
              
              
              (48,008
              )Purchase
      of premises and equipment
              
              
              (320
              )
              
              
              (217
              )Proceeds
      from sales of other real estate owned
              
              
              258
              
              
              
              84Additional
      acquisition costs paid
              
              
              -
              
              
              
              (12
              )Net
      Cash Used In Investing Activities
              
              
              (109,404
              )
              
              
              (33,614
              )Cash
      Flows From Financing ActivitiesNet
      increase (decrease) in deposits
              
              
              72,004
              
              
              
              (27,028
              )Net
      increase in federal funds purchased and short-term
    borrowings
              
              
              16,426
              
              
              
              19,906Repayment
      of long-term borrowings
              
              
              (4,987
              )
              
              
              -Dividends
      paid
              
              
              (890
              )
              
              
              (1,780
              )Net
      Cash Provided By (Used In) Financing Activities
              
              
              82,553
              
              
              
              (8,902
              )Net
      Decrease In Cash and Cash Equivalents
              
              
              (21,979
              )
              
              
              (31,428
              )Cash
      and Cash Equivalents at the Beginning of the Period
              
              
              78,017
              
              
              
              58,677Cash
      and Cash Equivalents at the End of the Period
              
              $
              56,038
              
              
              $
              27,249Noncash
      Activities:Loans
      transferred to foreclosed assets
              
              $
              864
              
              
              $
              537Cash
      Paid During The Period:Interest
      on deposits and borrowed funds
              
              $
              6,498
              
              
              $
              8,340Income
      taxes
              
              $
              2,900
              
              
              $
              1,200See
      Notes to Consolidated Financial Statements
  - 5
-


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, 2008.


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. Any interim 2007 financial statement
information contained herein reflect those of First Guaranty Bank as the
predecessor entity.


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, 2008 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.





Note
2. Fair Value


Effective
January 1, 2008, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 157, “Fair Value Measurements,” for financial
assets and liabilities. SFAS 157 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. SFAS 157 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 $7.0 million at June 30, 2009.
The fair value of impaired loans is measured by either the obtainable market
price (Level 1), 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).


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.




- 6
-


The
following table summarizes financial assets and financial liabilities measured
at fair value on a recurring basis as of June 30, 2009, segregated by the level
of the valuation inputs within the fair value hierarchy utilized to measure fair
value:





Fair
      Value Measurements atJune
      30, 2009, UsingQuotedPrices
      InActiveMarkets
              SignificantAssets/Liabilities
              For
              Other
              SignificantMeasured
      at Fair
              Identical
              Observable
              UnobservableValue
              Assets
              Inputs
              Inputs(Dollars
      in thousands)
              June
      30, 2009
              (Level
      1)
              (Level
      2)
              (Level
      3)Securities
      available for sale
              $ 
      252,638
              $ 
      76,050
              $ 
      176,588
              $ 
      -





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 used methodologies 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 2009 on a recurring basis are reported in
noninterest income or other comprehensive income as follows:





OtherNoninterest
              
              ComprehensiveIncome
              
              Income(in
      thousands)Total
      gains included in earnings
              10
              
              -(or
      changes in net assests)Increase
      in unrealized losses relating to assets
              -
              
              (464)still
      held at June 30, 2009


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, 2009.


SFAS No.
159 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 currently 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-month period ended June
30, 2009.





Note
3. Loans and Allowance for Loan Losses


Loans, net of unearned income, totaled
$606.5 million at June 30, 2009 and $606.4 million at December 31, 2008. The
Company also held $147,000 in loans held for sale at June 30, 2009. No loans
were held for sale at December 31, 2008.  The loan portfolio is the
largest component of assets with total loans, net of allowance for loan losses,
accounting for 62.6% and 68.8% of total assets as of June 30, 2009 and December
31, 2008, respectively.  The loan portfolio consists solely of
domestic loans.





- 7
-





Total loans
at June 30, 2009 (unaudited) and December 31, 2008 were as
follows:


June
      30,
              
              
              December
      31,2009
              
              
              2008As
      % of
              
              
              
              
              
              As
      % ofBalance
              
              
              Category
              
              
              Balance
              
              
              Category(dollars
      in thousands)Real
      estateConstruction
      & land development
              
              $
              70,061
              
              
              
              11.5
              %
              
              $
              92,029
              
              
              
              15.2
              %Farmland
              
              
              15,952
              
              
              
              2.6
              %
              
              
              16,403
              
              
              
              2.7
              %1-4
      Family
              
              
              71,727
              
              
              
              11.8
              %
              
              
              79,285
              
              
              
              13.1
              %Multifamily
              
              
              9,411
              
              
              
              1.5
              %
              
              
              15,707
              
              
              
              2.6
              %Non-farm
      non-residential
              
              
              300,494
              
              
              
              49.5
              %
              
              
              261,744
              
              
              
              43.0
              %Total
      real estate
              
              
              467,645
              
              
              
              77.0
              %
              
              
              465,168
              
              
              
              76.6
              %Agricultural
              
              
              20,609
              
              
              
              3.4
              %
              
              
              18,536
              
              
              
              3.0
              %Commercial
      and industrial
              
              
              101,522
              
              
              
              16.7
              %
              
              
              105,555
              
              
              
              17.4
              %Consumer
      and other
              
              
              17,629
              
              
              
              2.9
              %
              
              
              17,926
              
              
              
              3.0
              %Total
      loans before unearned income
              
              
              607,405
              
              
              
              100.0
              %
              
              
              607,185
              
              
              
              100.0
              %Less:
      unearned income
              
              
              (918
              )
              
              
              
              
              
              
              (816
              )Total
      loans after unearned income
              
              $
              606,487
              
              
              
              
              
              
              $
              606,369


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


June
      30, 2009Fixed
              Floating
              Total(unaudited,
      in thousands)One
      year or less
              $218,600
              $134,450
              $353,050One
      to five years
              157,803
              45,731
              203,534Five
      to 15 years
              23,913
              178
              24,091Over
      15 years
              17,242
              -
              17,242Subtotal
              417,558
              180,359
              597,917Nonaccrual
      loans
              
              
              8,570Total
      loans after unearned income
              $417,558
              $180,359
              $606,487





The
allowance for loan losses is reviewed by Management on a monthly basis and
additions thereto are recorded in order to maintain the allowance at an adequate
level.  In assessing the adequacy of the allowance, Management
considers a variety of internal and external 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
$6.7 million or 1.10% of total loans at June 30, 2009 and $6.5 million or 1.07%
of total loans at December 31, 2008.  Changes in the allowance for
loan losses for the six months ended June 30, 2009 (unaudited) and the year
ended December 31, 2008 are as follows:


June
      30,
              
              December
      31,2009
              
              2008(in
      thousands)Balance
      beginning of period
              $6,482
              
              $6,193Provision
      charged to expense
              1,349
              
              1,634Loans
      charged-off
              (1,213)
              
              (1,613)Recoveries
              83
              
              268Allowance
      for loan losses
              $6,701
              
              $6,482
  - 8
-


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 EndedJune
      30,
              
              
              June
      30,2009
              
              
              2008(unaudited,
      in thousands)Balance
      at beginning of period
              
              $
              6,482
              
              
              $
              6,193Charge-offs:Real
      estate loans:Construction
      and land development
              
              
              (63
              )
              
              
              (166
              )Farmland
              
              
              -
              
              
              
              (10
              )One-
      to four- family residential
              
              
              (355
              )
              
              
              (71
              )Non-farm
      non-residential
              
              
              (336
              )
              
              
              -Commercial
      and industrial loans
              
              
              (120
              )
              
              
              (240
              )Consumer
      and other
              
              
              (339
              )
              
              
              (156
              )Total
      charge-offs
              
              
              (1,213
              )
              
              
              (643
              )Recoveries:Real
      estate loans:Construction
      and land development
              
              
              1
              
              
              
              1Farmland
              
              
              1
              
              
              
              -One-
      to four- family residential
              
              
              10
              
              
              
              4Commercial
      and industrial loans
              
              
              15
              
              
              
              5Consumer
      and other
              
              
              56
              
              
              
              108Total
      recoveries
              
              
              83
              
              
              
              118Net
      charge-offs
              
              
              (1,130
              )
              
              
              (525
              )Provision
      for loan losses
              
              
              1,349
              
              
              
              692Balance
      at end of period
              
              $
              6,701
              
              
              $
              6,360


Note 4. Goodwill and Other
Intangible Assets


The
Company accounts for goodwill and intangible assets in accordance with SFAS No.
142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, 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 SFAS
No. 142. 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, 2009 and December 31, 2008.


Mortgage
servicing rights totaled $112,000 and core deposit intangibles totaled $1.9
million at June 30, 2009. 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.





- 9
-




As
      of June 30, 2009
              
              
              As
      of December 31, 2008Gross
      Carrying
              
              
              Accumulated
              
              
              Net
      Carrying
              
              
              Gross
      Carrying
              
              
              Accumulated
              
              
              Net
      CarryingAmount
              
              
              Amortization
              
              
              Amount
              
              
              Amount
              
              
              Amortization
              
              
              Amount(unaudited,
      in thousands)Core
      deposit intangibles
              
              $
              7,997
              
              
              $
              6,103
              
              
              $
              1,894
              
              
              $
              7,997
              
              
              $
              5,948
              
              
              $
              2,049Mortgage
      servicing rights
              
              
              133
              
              
              
              21
              
              
              
              112
              
              
              
              32
              
              
              
              3
              
              
              
              29Total
              
              $
              8,130
              
              
              $
              6,124
              
              
              $
              2,006
              
              
              $
              8,029
              
              
              $
              5,951
              
              
              $
              2,078


Note
5. Borrowings


Short
term borrowings totaled $26.2 million at June 30, 2009 and consists of $8.2
million in federal funds purchased, $13.3 million in repurchase agreements and
$4.7 million in outstanding borrowings on a line of credit.


In March
2009 the Company borrowed $6.0 million on its available line of credit and
injected the $6.0 million into the First Guaranty Bank to enhance capital. At
June 30, 2009, the outstanding balance on this line of credit totaled $4.7
million.  The interest rate on the line of credit is a floating rate
and is set at prime less 100 basis points with a floor of four percent (4.00%).
The Company intends to repay the debt in full by December 31, 2009.  The
line of credit expired on June 30, 2009 and was renewed through August 31,
2009.  At time of renewal, the line of credit was reduced from $15.0
million to $7.0 million.  The annual renewal will be for one year and
the availability will be reevaluated at that time.


The Company is in default of one
covenant imposed on its line of credit. The covenant states that each of the
Company’s subsidiaries must maintain a well capitalized categorization as
defined by the federal regulatory requirements at all times.  For the
quarter ended June 30, 2009, First Guaranty Bank did not achieve a well
capitalized status.  The Company will request a waiver of this
covenant but there can be no assurance the lender will consent to the
waiver.


Long term borrowings decreased in 2009
to $3.4 million from $8.4 million at December 31, 2008.  Long
term borrowings at June 30, 2009 consisted of one Federal Home Loan Bank advance
which matures on October 1, 2009.





Note
6. Income Taxes


The
Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income
Taxes(“FIN48) clarifies the accounting for uncertainty in income taxes
recognized in accordance with SFAS No. 109, Accounting for 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 quarters ended June 30, 2009 and
2008, 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.


At this
time, no tax years are under examination. With few exceptions, the Company is no
longer subject to U.S. federal, state or local income tax examinations for years
before 2005.





Note
7.  Recent Accounting Pronouncements


In June 2009, the FASB issued
Statement No. 168, “The
FASB Accounting Standards
Codification” and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162.TheFASB Accounting Standards
Codification(Codification)will become the
source of authoritative nongovernmental U.S. Generally Accepted Accounting
Principles (U.S.
GAAP).  The Codification does not change current U.S. GAAP but
is intended to simplify user access to all authoritative U.S. GAAP by providing
all the authoritative literature related to a particular topic in one
place.  All existing accounting standard documents will be superseded
and all other accounting literature not included in the Codification will be
considered nonauthoritative.  The Codification is effective for
interim and annual periods ending after September 15, 2009.  The
Codification is effective for the Company during its interim period ending
September 30, 2009 and is not expected to have an impact on its financial
condition or results of operations.  The Company is currently
evaluating the impact to its financial reporting process of providing
Codification references in its public filings.


On June 12, 2009, the FASB issued SFAS
No. 166, Accounting for Transfers of Financial Assets (“FAS 166”), and SFAS
No.167, Amendments to FASB Interpretation No. 46(R) (“FAS 167”), which change
the way entities account for securitizations and special-purpose
entities.


FAS 166 is a revision to FAS 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, and will require more information about transfers of financial
assets, including securitization transactions, and where companies have
continuing exposure to the risks related to transferred financial assets. FAS
166 also eliminates the concept of a “qualifying special-purpose entity”,
changes the requirements for derecognizing financial assets and requires
additional disclosures.


FAS 167 is a revision to FASB
Interpretation No. 46(R), Consolidation of Variable Interest Entities, and
changes how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. The determination of whether a company is required to consolidate
an entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance.




- 10
-


Both FAS 166 and FAS 167 will be
effective as of the beginning of each reporting entity’s first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter. Earlier application is prohibited. The recognition and measurement
provisions of FAS 166 shall be applied to transfers that occur on or after the
effective date. Management has not determined the impact adoption may have on
the Company’s consolidated financial statements.


In May 2009, the FASB issued SFAS No.
165, Subsequent Events
(SFAS 165). SFAS 165
establishes general standards of accounting for and disclosures of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued.  It requires entities to disclose the date
through which it has evaluated subsequent events and the basis for that
date.  SFAS 165 is effective for interim and annual periods ending
after June 15, 2009.  SFAS 165 was effective for the Company as
of June 30, 2009.  The adoption of SFAS 165 did not have a material
impact on our financial condition, results of operations, or
disclosures.


In April 2009, the Financial Accounting
Standards Board (“FASB”) issued FASB Staff Position (FSP) 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. This FSP
affirms that the objective of fair value when the market for an asset is not
active is the price that would be received to sell the asset in an orderly
transaction; includes additional factors for determining whether there has been
a significant decrease in market activity for an asset when the market is
inactive; eliminates the presumption that all transactions are distressed unless
proven otherwise requiring an entity to base its conclusion on the weight of
evidence; and requires an entity to disclose a change in valuation technique
resulting from application of the FSP and to quantify its effects, if
practicable. FSP 157-4 is effective for interim and annual periods ending after
June 15, 2009 with early adoption permitted for periods ending after March 15,
2009. The Company adopted this FSP in the second quarter.  The
adoption had no material effect on the results of operations or financial
position.


In April
2009, the FASB issued FSP 115-2 and FSP 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP changes existing guidance for
determining whether an impairment is other than temporary to debt securities;
replaces the existing requirement that the entity’s management assert it has
both the intent and ability to hold an impaired security until recovery with a
requirement that management assert: (a) it does not have the intent to sell the
security and (b) it is more likely than not it will not have to sell the
security before recovery of its cost basis; requires that an entity recognize
noncredit losses on held-to-maturity debt securities in other comprehensive
income and amortize the amount over the remaining life of the security in a
prospective manner by offsetting the recorded value of the asset unless the
security is subsequently sold or there are credit losses; requires an entity to
present the total other-than-temporary impairment in the statement of earnings
with an offset for the amount recognized in other comprehensive income; and at
adoption, requires an entity to record a cumulative-effect adjustment as of the
beginning of the period of adoption to reclassify the noncredit component of a
previously recognized other-than-temporary impairment from retained earnings to
accumulated other comprehensive income if the entity does not intend to sell the
security and it is more likely than not that the entity will be required to sell
the security before recovery. FSP 115-2 and FSP 124-2 are effective for interim
and annual periods ending after June 15, 2009 with early adoption permitted for
periods ending after March 15, 2009. The Company adopted this FSP in the second
quarter.  The adoption had no material effect on the results of
operations or financial position.


In April
2009, the FASB issued FSP 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. Under this FSP, a publicly traded company shall
include disclosures about the fair value of its financial instruments whenever
it issues summarized financial information for interim reporting periods. In
addition, an entity shall disclose in the body or in the accompanying notes of
its summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods the fair value of all
financial instruments for which it is practicable to estimate that value,
whether recognized or not recognized in the statement of financial position. FSP
107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009
with early adoption permitted for periods ending after March 15, 2009. The
Company adopted this FSP in the second quarter.  The adoption had no
material effect on the results of operations or financial position.


In
February 2009, the FASB issued FSP 141(R)-a, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination that Arise from Contingencies,amends provisions related to the initial recognition and measurement,
subsequent measurement and disclosure of assets and liabilities arising from
contingencies in a business combination. The FSP is effective for all business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. The
impact on the Company’s financial condition or results of operations is
dependent on the extent of future business combinations.





Note
8.  Subsequent Events


On July 8, 2009, the Company committed
to the Federal Reserve Bank (the “FRB”) and the Louisiana Office of Financial
Institution (the “OFI”) to inject $10 million in capital by September 15, 2009.
On August 7, 2009, the Company received preliminary approval for participation
in the Department of Treasury (the “Treasury”) Troubled Asset Relief Program
Capital Purchase Program (the “CPP”) under the Emergency Economic Stabilization
Act of 2008.  The Treasury preliminarily approved the Company’s
application in the amount of $20,699,000.


The Treasury will confirm this amount
prior to funding as this amount cannot exceed 3% of the Company’s institution’s
risk-weighted assets based upon information contained in the latest quarterly
supervisory report.  The Treasury may also slightly decrease this
amount in order to avoid the issuance of fractional shares.


Funding is anticipated to occur on or
before Friday, September 4, 2009. Communication between the Company, the FRB and
the OFI has begun as to whether the TARP funds satisfy the $10 million
capital injection committment. At this time, no decision has been
made.





- 11
-





On July 30, 2009, First Guaranty Bank
filed the June 30, 2009 Call Report with the FDIC. On or before this date,
securities were reviewed for impairment. The Company did not record any
other-than-temporary impairment charges during the second quarter of
2009.


As of June
30, 2009, the Company owned $250,000 par value, $241,818 book value and $19,044
market value, debt securities of Colonial National Bank (“CNB”), located in
Montgomery, Alabama. As of June 30, 2009, CNB was adequately capitalized and had
preliminary approval to issue a maximum of $553 million of TARP preferred stock
to the U. S. Treasury Department subject to certain conditions, including
raising $300 million in additional capital from unaffiliated parties. CNB
proposed a $300 million deal with Florida-based Taylor Bean & Whitaker
(TBW). The due diligence period was extended to July 31, 2009. With the
potential capital infusion and TARP funds still a viable option as of July 30,
2009, the Company did not record an OTTI charge for CNB as of June 30,
2009.


On July 31, 2009, CNB issued their June 30, 2009 Form 10-Q. It was
disclosed that CNB and TBW elected on July 31, 2009 to mutually terminate the
stock purchase agreement. As a result of the above regulatory actions and the
current uncertainties associated with CNB's ability to increase its capital
levels to meet regulatory requirements, CNB’s management has concluded that
there is substantial doubt about CNB’s ability to continue as a going
concern. FGB will continue to monitor the status of CNB and their
associated financial results and capital efforts as well as regulatory
compliance and record any appropriate OTTI adjustments associated with such
review.


Subsequent events have been evaluated
for their potential impact on the financial statements through August 14, 2009,
which is the date these financial statements were issued.





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 and  six months ended
June 30, 2009 and 2008 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, which could
cause our actual results and experience to differ from the anticipated results
and expectations, expressed in such forward-looking statements.





Second
Quarter Overview


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


·
            Net
      income for the second quarter of 2009 and 2008 was $1.3 million and $2.1
      million, respectively, with earnings per common share of $0.23 and $0.38,
      respectively. The earnings for the second quarter 2009 decreased due
      primarily to the compression placed on the net interest margin with the
      decline in shorter term market interest rates, an increase in the
      provision for loan losses and an increase in other noninterest expense
      from a special FDIC assessment charge. Year-to-date net income totaled
      $2.4 million as of June 30, 2009 and $4.5 million as of June 30,
      2008.


·
            Net
      interest income for the second quarter of 2009 and 2008 was $7.4 million
      and $7.9 million, respectively. The net interest margin was 3.1% for the
      second quarter 2009 and 4.3% for the second quarter
  2008.


·
            The
      provision for loan losses for the second quarter of 2009 was $701,000
      compared to $490,000 for the second quarter of
  2008.


·
            Total
      assets as of June 30, 2009 were $958.6 million, an increase of $87.2
      million or 10.0% when compared to $871.4 million at December 31, 2008. The
      increase in assets primarily resulted from cash received from deposit
      growth which was ultimately invested in available for sale investment
      securities.


·
            Investment
      securities totaled $255.4 million at June 30, 2009, an increase of $116.3
      million when compared to $139.2 million at December 31, 2008. The increase
      in securities was a result of deploying cash on hand, cash from maturing
      time deposits with banks and cash from increases in deposits. At June 30,
      2009, available for sale securities, at fair value totaled $252.6 million,
      an increase of $138.2 million when compared to December 31, 2008. Held to
      maturity securities, at cost, totaled $2.8 million, a decrease of $22.0
      million when compared to $24.8 million at December 31,
    2008.




- 12
-




·
            The
      net loan portfolio at June 30, 2009 totaled $599.8 million, a decrease of
      $101,000 from the December 31, 2008 level of $599.9 million. Net loans
      reflect a reduction for the allowance for loan losses which totaled $6.7
      million for June 30, 2009 and $6.5 million for December 31,
      2008.


·
            Non-performing
      assets at June 30, 2009 were $10.2 million, an increase of $0.3 million
      compared to December 31, 2008.


·
            Total
      deposits increased $72.0 million or 9.2% in 2009 compared to December 31,
      2008. Of this increase, individual and business deposits increased by
      $19.1 million and deposits from public fund deposits increased by $52.9
      million.


·
            Return
      on average assets for the quarters ended June 30, 2009 and 2008 were 0.53%
      and 1.10%, respectively and return on average equity for the same periods
      were 7.71% and 12.38%,
respectively.


·
            As
      of June 30, 2009, the year-to-date return on average assets (“ROAA”) and
      return on average equity (“ROAE”) were 0.50% and 7.24% respectively. The
      year-to-date ROAA and ROAE were 1.14% and 13.06% for the same period in
      2008.


·
            In
      each of the first two quarters 2009 and 2008, the Company’s Board of
      Directors declared cash dividends of $0.16 per common
    share.





Financial
Condition





Changes
in Financial Condition from December 31, 2008 to June 30, 2009





General. Total assets as of June
30, 2009 were $958.6 million, an increase of $87.2 million or 10.0% when
compared to $871.4 million at December 31, 2008. The increase in assets resulted
from purchasing additional securities classified as available for sale in an
effort to deploy cash on hand, cash received from the maturity of time deposits
with banks and cash from increased deposits.  Investment securities
increased $116.3 million during the first six months of 2009.





Cash and Cash
Equivalents.Cash and cash equivalents at June 30, 2009
totaled $56.0 million, a decrease of $22.0 million when compared to $78.0
million at December 31, 2008. Cash and due from banks decreased $47.9 million,
interest-earning demand deposits with banks increased $26.8 million and federal
funds sold decreased $0.8 million.





Investment
Securities.Investment securities at June 30, 2009 totaled
$255.4 million, an increase of $116.3 million when compared to $139.2 million at
December 31, 2008.  The net change in securities was a result of the
Company purchasing additional securities classified as available for sale
using cash on hand, cash received from maturing time deposits with banks
and cash received from increased deposits into investment
securities.


The
securities portfolio consisted principally of U.S. Government agency securities,
mortgage-backed obligations, asset-backed securities, corporate debt securities
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, 2009, $78.8 million or 30.8% of the securities portfolio was scheduled
to mature in less than one year. This includes $71.5 million in discount notes
that are being used solely for pledging purposes. When excluding these
securities, only 2.9% of securities mature in less than one year. Securities
with maturity dates over 15 years totaled 2.5% of the total portfolio. The
average maturity of the securities portfolio was 5.3 years.


At June
30, 2009, securities totaling $252.6 million were classified as available for
sale and $2.8 million were classified as held to maturity, compared to $114.4
million classified as available for sale and $24.8 million classified as held to
maturity at December 31, 2008.  The decrease in held to maturity
securities resulted from called securities.  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, 2009, certain investment securities had continuous unrealized loss positions
for more than 12 months. As of June 30, 2009, the unrealized losses on these
securities totaled $3.0 million. Substantially all of these losses were in
corporate securities, preferred securities and asset-backed securities. At June
30, 2009, 34 securities were graded below investment grade with a total book
value of $8.3 million and 11 securities had no rating with a total book value of
$0.8 million. All of the non-investment grade securities referenced above were
initially investment grade and have been downgraded since purchase. As of June
30, 2009, the evaluation of securities with continuous unrealized losses
indicated that there were no credit losses evident. Furthermore, the Company
does not intend to sell these securities and it is more likely than not that the
Company will not be required to sell these debt securities before the
anticipated recovery of the amortized cost basis. At June 30, 2009 no losses in
the securities portfolio were considered other than temporary and no impairment
charges were recorded on the investment securities portfolio during the six
month period ended June 30, 2009. See Note 8 of the Notes to the Consolidated
Financial Statements included in this Form 10-Q.


Average
securities as a percentage of average interest-earning assets were 26.1% for the
six-month period ended June 30, 2009 and 16.4% for the same period in 2008. Most
securities held at June 30, 2009 qualified as securities pledgeable to
collateralize repurchase agreements and public funds.Securities
pledged at June 30, 2009 totaled $150.7 million.





Loans.The
origination of loans is our primary use of our financial resources and
represents the largest component of earning assets. Total loans accounted for
63.3% of total assets at June 30, 2009, a decrease when compared to 69.6% at
December 31, 2008. There are no significant concentrations of credit to any
borrower or industry. As of June 30, 2009, 77.0% 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.




- 13
-


Our loan portfolio at June 30,
2009 totaled $606.5 million, an increase of approximately $0.1 million from the
December 31, 2008 level of $606.4 million. Total loans include $42.6 million in
syndicated loans acquired via assignment. Syndicated loans meet the same
underwriting criteria used when making in-house loans. The allowance for loan
losses totaled $6.7 million at June 30, 2009 and $6.5 million at December 31,
2008. Fixed rate loans increased from $309.6 million or 51.1% of the total
loan portfolio at December 31, 2008 to $417.6 million, or 68.9% of the total
loan portfolio at June 30, 2009. Fixed rate loans include loans with a fixed
rate until maturity and loans with variable rates with interest rate floors in
which the current variable interest rate is lower than the
floor.  During the six months ended June 30, 2009, a significant
portion of new and renewed variable rate loans have been funded with interest
rate floors, which provides us with a minimum level of interest
income.  Loan charge-offs totaled $1.0 million during the first six
months of 2009, compared to $0.3 million during the same period of
2008.  Recoveries totaled $83,000 and $63,000 during the first
six-months of 2009 and 2008, respectively.





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, 2009 (unaudited) and
December 31, 2008.




June
      30,
              
              
              December
      31,2009
              
              
              2008(in
      thousands)Non-accrual
      loans:Real
      estate loans:Construction
      and land development
              
              $
              2,781
              
              
              $
              1,644Farmland
              
              
              -
              
              
              
              182One-
      to four- family residential
              
              
              2,047
              
              
              
              1,445Non-farm
      non-residential
              
              
              2,461
              
              
              
              5,263Non-real
      estate loans:Commercial
      and industrial
              
              
              1,178
              
              
              
              275Consumer
      and other
              
              
              103
              
              
              
              320Total
      non-accrual loans
              
              
              8,570
              
              
              
              9,129Loans
      90 days and greater delinquentand
      still accruing:Real
      estate loans:Construction
      and land development
              
              
              185
              
              
              
              -One-
      to four- family residential
              
              
              384
              
              
              
              185Non-real
      estate loans:Commercial
      and industrial
              
              
              -
              
              
              
              17Consumer
      and other
              
              
              2
              
              
              
              3Total
      loans 90 days greaterdelinquent
      and still accruing
              
              
              571
              
              
              
              205Total
      non-performing loans
              
              
              9,141
              
              
              
              9,334Real
      estate owned:Real
      estate loans:Construction
      and land development
              
              
              197
              
              
              
              89One-
      to four- family residential
              
              
              388
              
              
              
              223Non-farm
      non-residential
              
              
              464
              
              
              
              256Total
      real estate owned
              
              
              1,049
              
              
              
              568Total
      non-performing assets
              
              $
              10,190
              
              
              $
              9,902


- 14
-


Nonperforming
assets totaled $10.2 million or 1.1% of total assets at June 30, 2009, an
increase of $0.3 million from December 31, 2008.  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 decreased $0.6 million from December 31, 2008 to June 30, 2009, largely
due to a decrease in non-farm non-residential and partially offset with
increases in nonaccrual construction and land development real estate loans,
nonaccrual one- to four- family residential loans and nonaccrual commercial and
industrial loans.


Non-farm
non-residential nonaccrual loans decreased $2.8 million from December 31, 2008
to June 30, 2009. The decrease was primarily the result of one loan secured
by real estate. The borrowers were able to put together a viable plan which was
confirmed by a bankruptcy trustee. The borrower had been making adequate
protection payments to the Company for several months prior to the plan being
confirmed. The Company also received a lump sum payment totaling $50,000 to
apply toward the indebtedness upon confirmation of the plan. Monthly
amortization payments began immediately after confirmation and are being paid as
agreed. The $2.5 million in non-farm non-residential nonaccrual loans at June
30, 2009 consisted primarily of three large credits.  One of the
credits totaled $700,000 and was for a steel fabrication company that is still
in operation.  This company is currently making payments toward the
loan to reduce the balance.  This loan is secured by real estate and
we currently have allocated $200,000 of the loan loss reserve for this credit.
Another credit consisted of two townhomes and three lots in a golf course
development with a loan amount of $802,000. The borrower is currently attempting
to liquidate the properties. Another credit in this category is a loan in the
amount of $338,000 which is secured by two pieces of real estate. The borrower
has agreed to give us a mortgage on an additional piece of property in the event
that we restructure the loan and allow them to continue making payments. We are
in the process of having the property appraised to determine if restructuring
the loan is the best course of action.


The
increase in nonaccrual construction and land development loans is partially
related to one loan for $522,000 secured by a subdivision development consisting
of 17 remaining lots and 6.32 acres of excess land. The loan to value is 58% and
the property was appraised for $896,000 in February 2005. The Company is
currently in foreclosure and does not anticipate any loss.  In
addition, there is a townhome development in which the Company has four of the
units financed totaling approximately $600,000.  This loan had a loan
to value of 83%.  In the fourth quarter of 2007, the properties
securing this loan were appraised at $180,000 each. The Company asked the
borrower to pay the loans in full but the borrower was unable to do
so.  The Company has filed suit to repossess the property and is
currently awaiting the foreclosure sale. Also included in nonaccrual
construction and land development loans are two loans which account for a
significant portion of the total. One is in the amount of $800,000 and is
secured by a single family dwelling that is currently in construction. The
borrower is bankrupt, however $600,000 has been escrowed by the bankruptcy court
and the bankruptcy court has agreed to a purchase agreement to sell the house.
The purchase agreement and the escrowed funds will pay the loan in full. It is
estimated to close prior to September 30, 2009. In 2005, we discovered mortgage
loans and commitments originated in one branch which involved irregularities
that suggest that many of these mortgage loans had been made against overvalued
collateral on the basis of misleading loan applications. The other large loan in
nonaccrual construction and land development loans is the last one of these
fraudulent loans. It is in the amount of $378,000 and is secured by a house that
has been completed. We are currently in litigation with the
borrower.


The $0.6
million increase in nonaccrual one- to four- family residential loans resulted
from a loan in the amount of $578,000 secured by several rental houses in the
Baton Rouge area.  The borrower has filed Chapter 11 bankruptcy and
the Company is waiting for a plan of repayment to be filed with the bankruptcy
court.  The Company has not been able to determine the level of
exposure, if any it will experience as a result of the bankruptcy of the
borrower. Also included in nonaccrual one- to four- family residential loans is
approximately 20 loans ranging from $400,000 to $700. Two of these loans
totaling $509,000 were made to one borrower and his business entity. These loans
are secured by two pieces of real estate and equipment. We have not yet
identified if any exposure exists on this credit and are currently pursuing a
sequestration of the equipment and a judgment against the company. Also included
in this category are two loans in the amounts of $194,000 and $120,000 that are
properties which were flooded during Hurricane Katrina. The borrowers have
received commitments from the state to assist in funding the rebuilding of the
properties. However, the borrowers must obtain a construction loan which the
state will pay off upon completion of the property. We are currently considering
making the construction loan.


Non-real
estate commercial and industrial nonaccrual loans increased $0.9 million from
December 31, 2008 to June 30, 2009.  The largest loan in this category
totals $454,000 and is unsecured.  The borrower is in Chapter 11
bankruptcy and has reflected a large net worth on the bankruptcy
schedules.  A plan is being developed to allocate cash from one of the
borrower’s partnerships to pay the unsecured creditors.  Although this
loan is unsecured, the Company currently anticipates receiving 100%
payment.  There are also some smaller loans included in this
nonaccrual category.  One is in the amount of $86,000 and the Company
is in the process of taking a mortgage on the guarantor’s home to pay down a
portion of the debt and renew the balance.  Another in the amount of
$70,000 has since been worked out and as of July 31, 2009 is no longer in
nonaccrual status.


Other
real estate increased during the first six months of 2009 by
$481,000.  This increase is primarily from the addition of two
properties.  One of the properties is an 80 acre tract of land
recorded at $155,000.  This loan is guaranteed 90% by Farm Service
Agency.  We currently have the property listed with a
realtor.  The other property is a warehouse in Southwest Louisiana
which is currently recorded at $351,000.  The Company is anticipating
having an auction in the near future to liquidate these properties.





- 15
-


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. The unallocated component of the allowance reflects
the margin of imprecision inherent in the underlying assumptions used in the
methodologies for estimating specific and general losses in the
portfolio.


Provisions
made pursuant to these processes totaled $1.3 million in the first six months of
2009 as compared to $0.7 million for the same period in 2008. 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 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
$1.2 million for first six months of 2009 as compared to total charge-offs of
$0.6 million for the same period in 2008. Recoveries were $83,000 for the first
six months of 2009 as compared to recoveries of $118,000 for the same period in
2008.


During the
first six months of 2009, charged-off one-to-four family residential real estate
loans totaled $0.4 million and comprised ten small balance loans.


During the
same period, charged-off non-farm non-residential loans totaled $0.3 million and
was primarily the result of one loan secured by commercial real
estate.  The performance of this loan was primarily supported by the
cash flows of the business. The borrower of the commercial loan is a lumber
milling and distributing company that had been in business for many years. The
loan performed in accordance with its terms until the death of its owner. The
distress of the lumber loan resulted from a decrease in lumber prices during
2007 which adversely and significantly affected the borrower’s
business.  In January 2008, the Company was able to liquidate
receivables and repay a portion of the lumber loan reducing the principle
balance from approximately $1.0 million to $0.8 million. The property has been
liquidated and the balance of the loan has been fully charged-off.


Charged-off
consumer and other loans during the first six months of 2009 totaled
$339,000.  These charge-offs include approximately $50,000 in credit
card charge-offs with the remainder in consumer installment
charge-offs.  The consumer installment charge-offs include a number of
smaller loans and one larger loan in the amount of $70,000.  This loan
was a workout loan made to an individual who ultimately liquidated equipment
used in a dirt hauling business.  The $70,000 charged-off was the
residual balance remaining after liquidation.  This loan was made in
the owner’s personal name, therefore classifying it as a consumer
loan.


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, 2009 and December
31, 2008 the Company had loans totaling $8.6 million and $9.1 million,
respectively, on which the accrual of interest had been
discontinued.




- 16
-
 
 The allowance
at June 30, 2009 was $6.7 million or 1.10% of total loans and 60.1% 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
      30,2009
              
              
              2008(unaudited,
      in thousands)Loans:Average
      outstanding balance
              
              $
              600,202
              
              
              $
              593,450Balance
      at end of period
              
              $
              606,487
              
              
              $
              622,202Allowance
      for Loan Losses:Balance
      at beginning of year
              
              $
              6,482
              
              
              $
              6,193Provision
      charged to expense
              
              
              1,349
              
              
              
              692Loans
      charged-off
              
              
              (1,213
              )
              
              
              (643
              )Recoveries
              
              
              83
              
              
              
              118Balance
      at end of period
              
              $
              6,701
              
              
              $
              6,360


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, 2008 to June 30, 2009, total
deposits increased $72.0 million, or 9.2%, to $852.4 million at June 30, 2009
from $780.4 million at December 31, 2008.  During 2009, consumer deposits
increased $26.3 million, public fund deposits increased $52.9 million and
business deposits decreased $7.2 million.  Noninterest-bearing demand
deposits decreased by $4.0 million while interest-bearing deposits increased by
$76.0 million.


At June
30, 2009, consumer deposits totaled $464.4 million, business deposits totaled
$109.3 million and public fund deposits totaled $278.7 million.  As of
June 30, 2009, the aggregate amount of outstanding certificates of deposit in
amounts greater than or equal to $100,000 was approximately $300.8
million.


Average
noninterest-bearing deposits decreased to $117.9 million for the six-month
period ended June 30, 2009 from $119.9 million for the six-month period ended
June 30, 2008. Average noninterest-bearing deposits represented 13.6% and 17.2%
of average total deposits for the six-month periods ended June 30, 2009 and
2008, 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,
2009 (unaudited) and December 31, 2008.


June
      30,
              
              
              December
      31,
              
              
              Increase/(Decrease)2009
              
              
              2008
              
              
              Amount
              
              
              Percent(dollars
      in thousands)Deposits:Noninterest-bearing
      demand
              
              $
              114,262
              
              
              $
              118,255
              
              
              $
              (3,993
              )
              
              
              -3.4
              %Interest-bearing
      demand
              
              
              203,605
              
              
              
              180,230
              
              
              
              23,376
              
              
              
              13.0
              %Savings
              
              
              42,233
              
              
              
              41,357
              
              
              
              876
              
              
              
              2.1
              %Time
              
              
              492,276
              
              
              
              440,530
              
              
              
              51,746
              
              
              
              11.7
              %Total
      deposits
              
              $
              852,376
              
              
              $
              780,372
              
              
              $
              72,004
              
              
              
              9.2
              %


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, 2009, short-term borrowings totaled
$26.2 million compared to $9.8 million at December 31,
2008.  Short-term borrowings included $13.3 million in repurchase
agreements at June 30, 2009 and $9.8 million in repurchase agreements at
December 31, 2008.


Long-term
borrowings decreased in 2009 to $3.4 million from $8.4 million at December 31,
2008.  At June 30, 2009 long-term borrowings consisted of one Federal
Home Loan Bank advance which matures on October 1, 2009.




- 17
-


During
the first quarter of 2009, total assets increased to the extent that it resulted
in a reduction of regulatory capital ratios. As a result, in March 2009 the
Company borrowed $6.0 million on its available line of credit and injected the
$6.0 million into the First Guaranty Bank to enhance capital. The interest rate
on the line of credit is a floating rate and is set at prime less 100 basis
points with a floor of four percent (4.00%). The Company intends to repay the
debt in full by December 31, 2009.


The Company is in default of one
covenant imposed on its line of credit. The covenant states that each of the
Company’s subsidiaries must maintain a “Well Capitalized” categorization as
defined by the federal regulatory requirements at all times.  For the
quarter ended June 30, 2009, First Guaranty Bank did not maintain a “Well
Capitalized” status.  The Company will request a waiver of this
covenant but there can be no assurance the lender will consent to the waiver. If
the lender does not consent to the waiver, the lender can demand immediate
payment of the outstanding balance on the line of credit.


The
average amount of total borrowings for the six months ended June 30, 2009 was
$23.9 million, compared to $12.1 million for the six months ended June 30, 2008.
At June 30, 2009, the Company had $165.0 million in Federal Home Loan Bank
letters of credit outstanding obtained solely for collateralizing public
deposits.




Equity.Total equity increased to $67.7 million as of June 30, 2009 from $66.6
million as of December 31, 2008.  The increase in stockholders’ equity
resulted from net income of $2.4 million and the change in accumulated other
comprehensive income of $0.5 million, partially offset by dividends paid to
stockholders totaling $1.8 million.  Cash dividends paid were $0.32
per share for the six-month periods ending June 30, 2009 and 2008.





Results
of Operations for the Six Months and Three Months Ended June 30, 2009 and June
30, 2008





Net
income.For the
quarter ending June 30, 2009, First Guaranty Bancshares, Inc. had consolidated
net income of $1.3 million, an $0.8 million decrease from the $2.1 million of
net income reported for the second quarter of 2008.  Net income for
the six months ended June 30, 2009 was $2.4 million, a decrease of
$2.1 million from $4.5 million for the six months ended June 30, 2008. The
decrease in net income for the three and six months ended June 30, 2009 resulted
from decreased net interest income reflecting the change in the composition of
our deposits to higher cost time deposits, higher deposit insurance premiums and
an increase in the provision for loan losses.





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, 2009 was $7.4 million, a decrease of
$0.5 millionwhen compared
to $7.9million for
the second quarter in 2008. Net interest income for the six-month period ended
June 30, 2009 totaled $14.3 million. This reflects a decrease of $1.7
million when compared to the six-month period ended June 30,
2008.  The decrease in net interest income for both the three month
and six month periods reflected a decrease in net interest spread and net
interest margin as the yield on our interest-earning assets decreased 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, 2009 was 84.1%, compared to 79.8% for the same period in
2008.


The following
table sets forth average balance sheets, average yields and costs, and certain
other information for the six months ended June 30, 2009 and 2008, 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.




- 18
-


Six
      Months Ended June 30,2009
              
              
              2008Average
              
              
              
              
              
              Yield/
              
              
              Average
              
              
              
              
              
              Yield/Balance
              
              
              Interest
              
              
              Rate
              
              
              Balance
              
              
              Interest
              
              
              Rate(dollars
      in thousands)AssetsInterest-earning
      assets:Interest-earning
      deposits with banks
              
              $
              43,062
              
              
              $
              309
              
              
              
              1.4
              %
              
              $
              1,024
              
              
              $
              14
              
              
              
              2.7
              %Securities
      (including FHLB stock)
              
              
              240,377
              
              
              
              4,542
              
              
              
              3.8
              %
              
              
              121,484
              
              
              
              2,940
              
              
              
              4.9
              %Federal
      funds sold
              
              
              38,522
              
              
              
              27
              
              
              
              0.1
              %
              
              
              23,525
              
              
              
              358
              
              
              
              3.1
              %Loans
      held for sale
              
              
              152
              
              
              
              3
              
              
              
              4.4
              %
              
              
              916
              
              
              
              35
              
              
              
              7.7
              %Loans,
      net of unearned income
              
              
              600,202
              
              
              
              17,530
              
              
              
              5.9
              %
              
              
              593,450
              
              
              
              20,999
              
              
              
              7.1
              %Total
      interest-earning assets
              
              
              922,315
              
              
              
              22,412
              
              
              
              4.9
              %
              
              
              740,399
              
              
              
              24,346
              
              
              
              6.6
              %Noninterest-earning
      assets:Cash
      and due from banks
              
              
              18,388
              
              
              
              
              
              
              
              
              
              
              
              23,255Premises
      and equipment, net
              
              
              16,202
              
              
              
              
              
              
              
              
              
              
              
              16,217Other
      assets
              
              
              9,166
              
              
              
              
              
              
              
              
              
              
              
              5,535Total
              
              $
              966,071
              
              
              
              
              
              
              
              
              
              
              $
              785,406Liabilities
      and Stockholders' EquityInterest-bearing
      liabilities:Demand
      deposits
              
              $
              225,289
              
              
              
              822
              
              
              
              0.7
              %
              
              $
              202,123
              
              
              
              1,641
              
              
              
              1.6
              %Savings
      deposits
              
              
              41,663
              
              
              
              77
              
              
              
              0.4
              %
              
              
              44,818
              
              
              
              102
              
              
              
              0.5
              %Time
      deposits
              
              
              484,474
              
              
              
              7,095
              
              
              
              3.0
              %
              
              
              331,889
              
              
              
              6,467
              
              
              
              3.9
              %Borrowings
              
              
              23,921
              
              
              
              160
              
              
              
              1.3
              %
              
              
              12,088
              
              
              
              211
              
              
              
              3.5
              %Total
      interest-bearing liabilities
              
              
              775,347
              
              
              
              8,154
              
              
              
              2.1
              %
              
              
              590,918
              
              
              
              8,421
              
              
              
              2.9
              %Noninterest-bearing
      liabilities:Demand
      deposits
              
              
              117,943
              
              
              
              
              
              
              
              
              
              
              
              119,946Other
              
              
              5,986
              
              
              
              
              
              
              
              
              
              
              
              5,904Total
      liabilities
              
              
              899,276
              
              
              
              
              
              
              
              
              
              
              
              716,768Stockholders'
      equity
              
              
              66,795
              
              
              
              
              
              
              
              
              
              
              
              68,638Total
              
              $
              966,071
              
              
              
              
              
              
              
              
              
              
              $
              785,406Net
      interest income
              
              
              
              
              
              $
              14,257
              
              
              
              
              
              
              
              
              
              
              $
              15,925Net
      interest rate spread (1)
              
              
              
              
              
              
              
              
              
              
              2.8
              %
              
              
              
              
              
              
              
              
              
              
              3.7
              %Net
      interest-earning assets(2)
              
              $
              146,968
              
              
              
              
              
              
              
              
              
              
              $
              149,481Net
      interest margin (3)
              
              
              
              
              
              
              
              
              
              
              3.1
              %
              
              
              
              
              
              
              
              
              
              
              4.3
              %Average
      interest-earning assets tointerest-bearing
      liabilities
              
              
              
              
              
              
              
              
              
              
              119.0
              %
              
              
              
              
              
              
              
              
              
              
              125.3
              %


(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 $0.7 million for the quarter ended June 30, 2009, an
increase of $0.2 million when compared to the same quarter in 2008. Year-to-date
provisions totaled $1.3 million for the first six months of 2009 as compared to
$692,000 for the same period in 2008. 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 2009 and
2008 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 $1.2 million for the
first six months of 2009 as compared to $0.6 million for the same period in
2008. Recoveries were $83,000 for the first six months of 2009 as compared to
$118,000 for the same period in 2008.





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, 2009 totaled $1.5 million, a decrease of
$53,000 when compared to the same period in 2008. This decrease in noninterest
income resulted primarily from a decrease in other noninterest
income.




- 19
-


Noninterest
income for the first six months of 2009 totaled $2.8 million, down $158,000
when compared to the same period in 2008. This decrease was primarily due to a
decrease in other noninterest income from a large reimbursement from Fidelity
which was received in 2008 for incorrect fees billed on our ATM services
contract.





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 2009 totaled $6.2 million, an increase of $0.5 million from the same
period in 2008. Other noninterest expense increased $0.4 million for the second
quarter 2009 when compared to the same period in 2008 primarily from increased
regulatory assessment expenses including a combination of an FDIC special
assessment of five basis points of total assets less Tier 1 Capital on June 30,
2009 and a higher level of regular quarterly premiums which totaled
$475,000.


Noninterest
expense totaled $12.1 million for the six months ended June 30, 2009, compared
to $11.4 million for the same period in 2008, an increase of $0.7 million.
Salaries and benefits totaled $5.5 million for the first six months of 2009, an
increase of $0.3 million when compared to the same period in 2008.  At
June 30, 2009, our full-time equivalent employees totaled 225.5, compared to 223
full-time equivalent employees during the same period of 2008. Occupancy and
equipment expense totaled $1.4 million for the first six months of 2009, a
decrease of $19,000 when compared to the same period in 2008. Net cost of other
real estate and repossessions increased $97,000 when comparing the six month
periods ending 2009 and 2008. Regulatory assessments totaled $0.9 million for
the first six months of 2009, an increase of $0.7 million compared to $0.2
million for the same period in 2008. The increased regulatory assessment
expenses resulted from a combination of an FDIC special assessment of five basis
points of total assets less Tier 1 Capital which was estimated at $470,000 on
June 30, 2009 and a higher level of regular quarterly premiums totaling $475,000
for the first six months of 2009.  If the FDIC estimates that the
Deposit Insurance Fund reserve ratio falls to a level that would negatively
affect public confidence in federal deposit insurance, it may impose additional
special assessments in the third or fourth quarter. Our regulatory capital
ratios decreased during the second quarter 2009 below “well capitalized” status
based on regulatory standards, which will cause increases in FDIC insurance
assessments. Other noninterest expense reflects a decrease of $383,000 when
comparing the six-month periods ended 2009 and 2008 primarily due to a decrease
in legal and professional fees.  The table below presents the
components of other noninterest expense as of the three months and six months
ended June 30, 2009 and 2008.




Three
      Months Ended June 30,
              
              
              Six
      Months Ended June 30,2009
              
              
              2008
              
              
              2009
              
              
              2008(in
      thousands)
              
              
              (in
      thousands)Other
      noninterest expense:Legal
      and professional fees
              
              $
              299
              
              
              $
              394
              
              
              $
              590
              
              
              $
              830Data
      processing
              
              
              449
              
              
              
              410
              
              
              
              888
              
              
              
              906Marketing
      and public relations
              
              
              272
              
              
              
              278
              
              
              
              467
              
              
              
              557Insurance
              
              
              9
              
              
              
              57
              
              
              
              112
              
              
              
              111Taxes
      - sales and capital
              
              
              158
              
              
              
              174
              
              
              
              321
              
              
              
              346Operating
      supplies
              
              
              127
              
              
              
              134
              
              
              
              248
              
              
              
              271Travel
      and lodging
              
              
              105
              
              
              
              102
              
              
              
              199
              
              
              
              212Other
              
              
              631
              
              
              
              628
              
              
              
              1,212
              
              
              
              1,187Total
      other expense
              
              $
              2,050
              
              
              $
              2,177
              
              
              $
              4,037
              
              
              $
              4,420


Income
Taxes. The provision for income taxes totaled $0.7 million and $1.1
million for the quarters ended June 30, 2009 and 2008, respectively. The
provision for income taxes for the six months ended June 30, 2009 decreased $1.1
million to $1.3 million from $2.4 million for the same period in 2008. The
decrease in the provision for income taxes reflected lower income during both
the three-month and six-month periods in 2009. In each of the six months ended
June 30, 2009 and 2008, the income tax provision approximated the normal
statutory rate.  The effective rates were 34.6% and 34.9%,
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
principal 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.




- 20
-


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, 2009 reflects a liability-sensitive position with a negative cumulative gap
on a one-year basis.


Interest
      Sensitivity Within3
      Months
              
              
              Over
      3 Months
              
              
              Total
              
              
              OverOr
      Less
              
              
              thru
      12 Months
              
              
              One
      Year
              
              
              One
      Year
              
              
              Total(unaudited,
      dollars in thousands)Earning
      Assets:Loans
      (including loans held for sale)
              
              $
              276,624
              
              
              $
              128,662
              
              
              $
              405,286
              
              
              $
              201,348
              
              
              $
              606,634Securities
      (including FHLB stock)
              
              
              73,478
              
              
              
              6,261
              
              
              
              79,739
              
              
              
              176,638
              
              
              
              256,377Federal
      funds sold
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Other
      earning assets
              
              
              26,782
              
              
              
              13,613
              
              
              
              40,395
              
              
              
              -
              
              
              
              40,395Total
      earning assets
              
              
              376,884
              
              
              
              148,536
              
              
              
              525,420
              
              
              
              377,986
              
              
              $
              903,406Source
      of Funds:Interest-bearing
      accounts:Demand
      deposits
              
              
              147,722
              
              
              
              -
              
              
              
              147,722
              
              
              
              55,883
              
              
              
              203,605Savings
              
              
              10,558
              
              
              
              -
              
              
              
              10,558
              
              
              
              31,675
              
              
              
              42,233Time
      deposits
              
              
              184,439
              
              
              
              208,559
              
              
              
              392,998
              
              
              
              99,278
              
              
              
              492,276Short-term
      borrowings
              
              
              21,533
              
              
              
              4,660
              
              
              
              26,193
              
              
              
              -
              
              
              
              26,193Long-term
      borrowings
              
              
              -
              
              
              
              3,368
              
              
              
              3,368
              
              
              
              -
              
              
              
              3,368Noninterest-bearing,
      net
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              135,731
              
              
              
              135,731Total
      source of funds
              
              
              364,252
              
              
              
              216,587
              
              
              
              580,839
              
              
              
              322,567
              
              
              $
              903,406Period
      gap
              
              
              12,632
              
              
              
              (68,051
              )
              
              
              (55,419
              )
              
              
              55,419Cumulative
      gap
              
              $
              12,632
              
              
              $
              (55,419
              )
              
              $
              (55,419
              )
              
              $
              -Cumulative
      gap as apercent
      of earning assets
              
              
              1.40
              %
              
              
              -6.13
              %
              
              
              -6.13
              %
  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 32.2% and 22.1% of the total
liquidity base at June 30, 2009 and December 31, 2008, respectively. In
addition, the Company maintained borrowing availability with the Federal Home
Loan Bank totaling $217.9 million and $226.5 million at June 30, 2009 and
December 31, 2008, respectively.  As of June 30, 2009, our net
availability of borrowing capacity at the Federal Home Loan Bank was $49.6
million, compared to $63.1 million at December 31, 2008 largely due to an
additional $10.0 million in letters of credit used solely to pledge to public
fund deposits. We also maintain federal funds lines of credit at three
other correspondent banks with borrowing capacity of $78.2 million at June 30,
2009 and December 31, 2008. As of June 30, 2009, the Company had $4.7
million outstanding on these lines of credit. At December 31, 2008, the Company
did not have an outstanding balance on these lines of credit. Management
believes there is sufficient liquidity to satisfy current operating
needs.




- 21
-


During the
first quarter of 2009, total assets increased to the extent that it resulted in
a reduction of regulatory capital ratios. As a result, in March 2009 the Company
borrowed $6.0 million on its available line of credit and injected the $6.0
million into the Bank to enhance capital. The interest rate on the line of
credit is a floating rate and is set at prime less 100 basis points with a floor
of four percent (4.00%). The Company intends to repay the debt in full by
December 31, 2009.  As a result of this additional debt, the Company’s
interest expense will likely increase until the loan is repaid.





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.


Stockholders’
equity was $67.7 million at June 30, 2009, an increase of $1.1 million when
compared to $66.6 million at December 31, 2008. The increase in stockholders’
equity resulted from net income of $2.4 million and the change in accumulated
other comprehensive income of $0.5 million, partially offset by dividends paid
to stockholders totaling $1.8 million.




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.


As a result
of investment downgrades by the rating agencies during the first and second
quarter, a total of 14 securities including nine trust preferred securities and
five asset-backed securities were rated as “highly speculative grade” debt
securities. As a consequence, the Bank is required to maintain higher levels of
regulatory risk-based capital for these securities due to the greater perceived
risk of default by the underlying bank and insurance company issuers.
Specifically, regulatory guidance requires the Bank to apply a higher “risk
weighting formula” for these securities to calculate its regulatory capital
ratios. The result of that calculation increased the Bank’s risk-weighted assets
for these securities to $28.3 million, well above the $2.3 million in
amortized cost of these securities as of June 30, 2009, thereby
significantly diluting the regulatory capital ratios. Upon applying the higher
level of risk weighted assets to the Banks’ regulatory capital ratios, the
calculated ratios are as follows at June 30, 2009: a Tier 1 leverage ratio
of 7.26% (compared to a “well capitalized” threshold of 5.0%); a Tier 1
risk-based capital ratio of 8.97% (compared to a “well capitalized threshold of
6.00%); and a total risk based capital ratio of 9.82% (compared to a “well
capitalized threshold of 10.00% and an “adequately capitalized” threshold of
8.00%)


At June 30,
2009, we satisfied the minimum regulatory capital requirements and were
“adequately 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.





- 22
-





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





FDIC
Insurance Assessments Will Increase From Not Maintaining a Well Capitalized
Status.





Our
regulatory capital ratios decreased during the second quarter 2009 below “well
capitalized” status based on regulatory standards.  At June 30, 2009,
we satisfied the minimum regulatory capital requirements and were “adequately
capitalized” within the meaning of federal regulatory
requirements.  Our FDIC insurance assessments will increase due to
this change in regulatory capital status.





We
Hold Certain Intangible Assets that Could Be Classified as Impaired in the
Future.  If These Assets Are Considered to Be Either Partially or
Fully Impaired in the Future, Our Earnings and the Book Values of These Assets
Would Decrease.





Pursuant
to SFAS No. 142, Goodwill and
Other Intangible Assets,we are required to test our goodwill and core
deposit intangible assets for impairment on a periodic basis. The impairment
testing process considers a variety of factors, including the current market
price of our common shares, the estimated net present value of our assets and
liabilities and information concerning the terminal valuation of similarly
situated insured depository institutions. The market price for our common shares
was above the tangible book value at October 1, 2008, the date of our impairment
testing, and June 30, 2009.  If there is a decline in the market value
of our common shares and a decline in the market prices of the common shares of
similarly situated insured depository institutions during future reporting
periods it is possible that future impairment testing could result in a
partial or full impairment of the value of our goodwill or core deposit
intangible assets, or both. If an impairment determination is made in a future
reporting period, our earnings and the book value of these intangible assets
will be reduced by the amount of the impairment. If an impairment loss is
recorded, it will have little or no impact on the tangible book value of our
common shares or our regulatory capital levels.





Any
Future FDIC Insurance Premiums Will Adversely Impact Our Earnings.





On May
22, 2009, the FDIC adopted a final rule levying a five basis point special
assessment on each insured depository institution's assets minus Tier I capital
as of June 30, 2009. The special assessment is payable on September
30, 2009. We recorded an expense of $470,000 during the quarter ended
June 30, 2009, to reflect the special assessment. The final rule permits
the FDIC's Board of Directors to levy up to two additional special assessments
of up to five basis points each during 2009 if the FDIC estimates that the
Deposit Insurance Fund reserve ratio will fall to a level that the FDIC's Board
of Directors believes would adversely affect public confidence or to a level
that will be close to or below zero. The FDIC has publicly announced that it is
probable that it will levy an additional special assessment of up to five basis
points later in 2009, the amount and timing of which are currently uncertain.
Any further special assessments that the FDIC levies will be recorded as an
expense during the appropriate period. In addition, the FDIC materially
increased the general assessment rate and, therefore, our FDIC general insurance
premium expense will increase substantially compared to prior
periods.





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


Item 2 is
nonapplicable and is therefore not included.





Item
3.  Defaults Upon Senior Securities


The Company
is in default of one covenant imposed on its line of credit. The covenant states
that each of the Company’s subsidiaries must maintain a “Well Capitalized”
categorization as defined by the federal regulatory requirements at all
times.  For the quarter ended June 30, 2009, First Guaranty Bank did
not maintain a “Well Capitalized” status.  The Company will request a
waiver of this covenant but there can be no assurance the lender will consent to
the waiver. If the lender does not consent to the waiver, the lender can demand
immediate payment of the outstanding balance on the line of credit.





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


The Company’s
Annual Meeting of Stockholders was held on May 21, 2009.





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
              
              AgainstWilliam
      K. Hood
              
              3,862,958
              
              2,608Alton
      B Lewis
              
              3,856,596
              
              8,970Marshall
      T. Reynolds
              
              3,861,016
              
              4,550


There were no
abstentions or broker non-votes.





Item
5.  Other Information


Item 5 is
non-applicable and is therefore not included.





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





ExhibitNumber
              
              Exhibit31.1
              
              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.
  - 24
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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
14,
2009                                              By:/s/Michael R. Sharp


Michael R. Sharp


President and


Chief Executive Officer








Date:                      August
14,
2009                                             
By:/s/Michele E.
LoBianco


Michele E. LoBianco


Chief Financial Officer


Secretary and
Treasurer


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