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, 2008


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 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
July 31, 2008, 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
      31,2008
              
              
              2007Assets
              
              (unaudited)Cash
      and cash equivalents:Cash
      and due from banks
              
              $
              24,224
              
              
              $
              22,778Interest-earning
      demand deposits with banks
              
              
              3,025
              
              
              
              30Federal
      funds sold
              
              
              -
              
              
              
              35,869Cash
      and cash equivalents
              
              
              27,249
              
              
              
              58,677Interest-earning
      time deposits with banks
              
              
              99
              
              
              
              2,188Investment
      securities:Available
      for sale, at fair value
              
              
              94,420
              
              
              
              105,570Held
      to maturity, at cost (estimated fair value of$34,092
      and $36,206, respectively)
              
              
              34,409
              
              
              
              36,498Investment
      securities
              
              
              128,829
              
              
              
              142,068Federal
      Home Loan Bank stock, at cost
              
              
              981
              
              
              
              955Loans
      held for sale
              
              
              661
              
              
              
              3,959Loans,
      net of unearned income
              
              
              622,202
              
              
              
              575,256Less:
      allowance for loan losses
              
              
              6,360
              
              
              
              6,193Net
      loans
              
              
              615,842
              
              
              
              569,063Premises
      and equipment, net
              
              
              15,838
              
              
              
              16,240Goodwill
              
              
              2,075
              
              
              
              1,911Intangible
      assets, net
              
              
              2,228
              
              
              
              2,383Other
      real estate, net
              
              
              793
              
              
              
              373Accrued
      interest receivable
              
              
              4,588
              
              
              
              5,126Other
      assets
              
              
              3,398
              
              
              
              4,388Total
      Assets
              
              $
              802,581
              
              
              $
              807,331Liabilities
      and Stockholders' EquityDeposits:Noninterest-bearing
      demand
              
              $
              127,770
              
              
              $
              120,740Interest-bearing
      demand
              
              
              196,779
              
              
              
              223,142Savings
              
              
              44,412
              
              
              
              45,044Time
              
              
              327,162
              
              
              
              334,168Total
      deposits
              
              
              696,123
              
              
              
              723,094Short-term
      borrowings
              
              
              30,307
              
              
              
              10,401Accrued
      interest payable
              
              
              3,037
              
              
              
              2,956Long-term
      borrowings
              
              
              3,093
              
              
              
              3,093Other
      liabilities
              
              
              1,625
              
              
              
              1,254Total
      Liabilities
              
              
              734,185
              
              
              
              740,798Stockholders'
      EquityCommon
      stock:$1
      par value - authorized 100,000,000 shares; issued andoutstanding
      5,559,644 shares
              
              
              5,560
              
              
              
              5,560Surplus
              
              
              26,459
              
              
              
              26,459Retained
      earnings
              
              
              37,527
              
              
              
              34,849Accumulated
      other comprehensive loss
              
              
              (1,150
              )
              
              
              (335
              )Total
      Stockholders' Equity
              
              
              68,396
              
              
              
              66,533Total
      Liabilities and Stockholders' Equity
              
              $
              802,581
              
              
              $
              807,331See
      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 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Interest
      Income:Loans
      (including fees)
            
            $
            10,141
            
            
            $
            11,155
            
            
            $
            20,999
            
            
            $
            21,656Loans
      held for sale
            
            
            14
            
            
            
            55
            
            
            
            35
            
            
            
            71Deposits
      with other banks
            
            
            5
            
            
            
            22
            
            
            
            14
            
            
            
            45Securities
      (including FHLB stock)
            
            
            1,421
            
            
            
            2,172
            
            
            
            2,940
            
            
            
            4,474Federal
      funds sold
            
            
            42
            
            
            
            129
            
            
            
            358
            
            
            
            248Total
      Interest Income
            
            
            11,623
            
            
            
            13,533
            
            
            
            24,346
            
            
            
            26,494Interest
      Expense:Demand
      deposits
            
            
            672
            
            
            
            1,626
            
            
            
            1,641
            
            
            
            3,285Savings
      deposits
            
            
            46
            
            
            
            55
            
            
            
            102
            
            
            
            105Time
      deposits
            
            
            2,886
            
            
            
            3,113
            
            
            
            6,467
            
            
            
            6,220Borrowings
            
            
            102
            
            
            
            201
            
            
            
            211
            
            
            
            475Total
      Interest Expense
            
            
            3,706
            
            
            
            4,995
            
            
            
            8,421
            
            
            
            10,085Net
      Interest Income
            
            
            7,917
            
            
            
            8,538
            
            
            
            15,925
            
            
            
            16,409Provision
      for loan losses
            
            
            490
            
            
            
            421
            
            
            
            692
            
            
            
            608Net
      Interest Income after Provision for Loan Losses
            
            
            7,427
            
            
            
            8,117
            
            
            
            15,233
            
            
            
            15,801Noninterest
      Income:Service
      charges, commissions and fees
            
            
            962
            
            
            
            953
            
            
            
            1,975
            
            
            
            1,835Net
      (losses) gains on sale of securities
            
            
            -
            
            
            
            (162
            )
            
            
            3
            
            
            
            (228
            )Net
      gains on sale of loans
            
            
            92
            
            
            
            38
            
            
            
            175
            
            
            
            76Other
            
            
            484
            
            
            
            263
            
            
            
            827
            
            
            
            552Total
      Noninterest Income
            
            
            1,538
            
            
            
            1,092
            
            
            
            2,980
            
            
            
            2,235Noninterest
      Expense:Salaries
      and employee benefits
            
            
            2,578
            
            
            
            2,311
            
            
            
            5,178
            
            
            
            4,591Occupancy
      and equipment expense
            
            
            731
            
            
            
            616
            
            
            
            1,430
            
            
            
            1,235Net
      cost from other real estate & repossessions
            
            
            42
            
            
            
            158
            
            
            
            84
            
            
            
            424Other
            
            
            2,341
            
            
            
            1,967
            
            
            
            4,671
            
            
            
            3,831Total
      Noninterest Expense
            
            
            5,692
            
            
            
            5,052
            
            
            
            11,363
            
            
            
            10,081Income
      Before Income Taxes
            
            
            3,273
            
            
            
            4,157
            
            
            
            6,850
            
            
            
            7,955Provision
      for income taxes
            
            
            1,142
            
            
            
            1,432
            
            
            
            2,392
            
            
            
            2,740Net
      Income
            
            $
            2,131
            
            
            $
            2,725
            
            
            $
            4,458
            
            
            $
            5,215Per
      Common Share:Earnings
            
            $
            0.38
            
            
            $
            0.49
            
            
            $
            0.80
            
            
            $
            0.94Cash
      dividends paid
            
            $
            0.16
            
            
            $
            0.16
            
            
            $
            0.32
            
            
            $
            0.31Average
      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, 2006
              
              $
              5,560
              
              
              $
              26,459
              
              
              $
              28,089
              
              
              $
              (905
              )
              
              $
              59,203Net
      income
              
              
              -
              
              
              
              -
              
              
              
              5,215
              
              
              
              -
              
              
              
              5,215Change
      in unrealized losson
      available for sale securities,net
      of reclassification adjustments and taxes
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (105
              )
              
              
              (105
              )Comprehensive
      income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5,110Cash
      dividends on common stock ($0.31 per share)
              
              
              -
              
              
              
              -
              
              
              
              (1,724
              )
              
              
              -
              
              
              
              (1,724
              )Balance
      June 30, 2007 (unaudited)
              
              $
              5,560
              
              
              $
              26,459
              
              
              $
              31,580
              
              
              $
              (1,010
              )
              
              $
              62,589Balance
      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
              )
              
              $
              68,396See
      Notes to Consolidated Financial Statements
  - 4
-
  FIRST
      GUARANTY BANCSHARES, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWS (unaudited)(in
      thousands)Six
      Months Ended June 30,2008
                
                
                2007Cash
      Flows From Operating ActivitiesNet
      income
                
                $
                4,458
                
                
                $
                5,215Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Provision
      for loan losses
                
                
                692
                
                
                
                608Depreciation
      and amortization
                
                
                735
                
                
                
                537Amortization
      of discount on investments
                
                
                (444
                )
                
                
                (479
                )(Gain)
      Loss on call / sale of securities
                
                
                (3
                )
                
                
                228Gain
      on sale of assets
                
                
                (175
                )
                
                
                (76
                )ORE
      writedowns and loss on disposition
                
                
                33
                
                
                
                294FHLB
      stock dividends
                
                
                (22
                )
                
                
                (55
                )Net
      decrease (increase) in loans held for sale
                
                
                3,298
                
                
                
                (1,400
                )Change
      in other assets and liabilities, net
                
                
                2,516
                
                
                
                1,183Net
      Cash Provided By Operating Activities
                
                
                11,088
                
                
                
                6,055Cash
      Flows From Investing ActivitiesProceeds
      from maturities and calls of HTM securities
                
                
                2,089
                
                
                
                275Proceeds
      from maturities, calls and sales of AFS securities
                
                
                450,234
                
                
                
                254,609Funds
      invested in AFS securities
                
                
                (439,869
                )
                
                
                (259,309
                )Proceeds
      from sale of Federal Home Loan Bank stock
                
                
                505
                
                
                
                1,326Funds
      invested in Federal Home Loan Bank stock
                
                
                (509
                )
                
                
                -Proceeds
      from maturities of time deposits with banks
                
                
                2,089
                
                
                
                -Net
      increase in loans
                
                
                (48,008
                )
                
                
                (19,258
                )Purchase
      of premises and equipment
                
                
                (217
                )
                
                
                (644
                )Proceeds
      from sales of other real estate owned
                
                
                84
                
                
                
                2,512Additional
      acquisition costs paid
                
                
                (12
                )
                
                
                -Net
      Cash (Used In) Investing Activities
                
                
                (33,614
                )
                
                
                (20,489
                )Cash
      Flows From Financing ActivitiesNet
      (decrease) increase in deposits
                
                
                (27,028
                )
                
                
                15,990Net
      increase in federal funds purchased and short-term
    borrowings
                
                
                19,906
                
                
                
                13,003Repayment
      of long-term borrowings
                
                
                -
                
                
                
                (15,168
                )Dividends
      paid
                
                
                (1,780
                )
                
                
                (1,724
                )Net
      Cash (Used In) Provided By Financing Activities
                
                
                (8,902
                )
                
                
                12,101Net
      Decrease In Cash and Cash Equivalents
                
                
                (31,428
                )
                
                
                (2,333
                )Cash
      and Cash Equivalents at the Beginning of the Period
                
                
                58,677
                
                
                
                24,817Cash
      and Cash Equivalents at the End of the Period
                
                $
                27,249
                
                
                $
                22,484Noncash
      Activities:Loans
      transferred to foreclosed assets
                
                $
                537
                
                
                $
                623Cash
      Paid During The Period:Interest
      on deposits and borrowed funds
                
                $
                8,340
                
                
                $
                9,785Income
      taxes
                
                $
                1,200
                
                
                $
                3,000See
      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 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, 2007.


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 six-month periods ended June 30, 2007
and 2008 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.


The
following table summarizes financial assets and financial liabilities measured
at fair value on a recurring basis as of June 30, 2008, segregated by the level
of the valuation inputs within the fair value hierarchy utilized to measure fair
value:





Fair
      Value Measurements atJune
      30, 2008, UsingQuotedPrices
      InActiveMarkets
              SignificantAssets/Liabilities
              
              For
              Other
              SignificantMeasured
      at Fair
              
              Identical
              Observable
              UnobservableValue
              
              Assets
              Inputs
              Inputs(Dollars
      in millions)
              June
      30, 2008
              
              (Level
      1)
              (Level
      2)
              (Level
      3)Securities
      available for sale
              $                     94.4
              
              $               31.4
              $               63.0
              $                  -





- 6
-


Securities Available for
Sale. Securities classified as available for sale are reported at fair
value utilizing Level 1 and Level 2 inputs. For these securities, the
Corporation 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.


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 $8.5 million at June 30, 2008.


Certain
non-financial assets and non-financial liabilities measured at fair value on a
non-recurring basis include non-financial assets and non-financial liabilities
related to reporting units measured at fair value in the testing of goodwill
impairment, as well as intangible assets and other non-financial long-lived
assets measured at fair value for impairment assessment. The Company will defer
application of SFAS 157 for nonfinancial assets and nonfinancial liabilities
until January 1, 2009.





Note
3. Loans and Allowance for Loan Losses


Loans at June 30, 2008
(unaudited) and December 31, 2007 were as follows:





June
      30,
              
              
              December
      31,2008
              
              
              2007As
      % of
              
              
              
              
              
              As
      % ofBalance
              
              
              Category
              
              
              Balance
              
              
              Category(dollars
      in thousands)Real
      estateConstruction
      & land development
              
              $
              83,869
              
              
              
              13.5
              %
              
              $
              98,127
              
              
              
              17.0
              %Farmland
              
              
              16,724
              
              
              
              2.7
              %
              
              
              23,065
              
              
              
              4.0
              %1-4
      Family
              
              
              85,132
              
              
              
              13.7
              %
              
              
              84,640
              
              
              
              14.7
              %Multifamily
              
              
              16,213
              
              
              
              2.6
              %
              
              
              13,061
              
              
              
              2.3
              %Non-farm
      non-residential
              
              
              226,197
              
              
              
              36.3
              %
              
              
              236,474
              
              
              
              41.1
              %Total
      real estate
              
              
              428,135
              
              
              
              68.7
              %
              
              
              455,367
              
              
              
              79.1
              %Agricultural
              
              
              21,642
              
              
              
              3.5
              %
              
              
              16,816
              
              
              
              2.9
              %Commercial
      and industrial
              
              
              151,582
              
              
              
              24.3
              %
              
              
              81,073
              
              
              
              14.1
              %Consumer
      and other
              
              
              21,510
              
              
              
              3.5
              %
              
              
              22,517
              
              
              
              3.9
              %Total
      loans before unearned income
              
              
              622,869
              
              
              
              100.0
              %
              
              
              575,773
              
              
              
              100.0
              %Less:
      unearned income
              
              
              (667
              )
              
              
              
              
              
              
              (517
              )Total
      loans after unearned income
              
              $
              622,202
              
              
              
              
              
              
              $
              575,256





Beginning in the
third quarter of 2008, the Company will begin using new risk categories in the
calculation of the allowance for loan losses. The calculation will continue to
include historical trends and current economic factors.


Changes in the allowance for loan
losses for the six months ended June 30, 2008 (unaudited) and the year ended
December 31, 2007 are as follows:


June
      30,
              
              
              December
      31,2008
              
              
              2007(in
      thousands)Balance
      beginning of period
              
              $
              6,193
              
              
              $
              6,675Additional
      provision from acquisition
              
              
              -
              
              
              
              325Provision
      charged to expense
              
              
              692
              
              
              
              1,918Loans
      charged off
              
              
              (643
              )
              
              
              (3,885
              )Recoveries
              
              
              118
              
              
              
              1,160Allowance
      for loan losses
              
              $
              6,360
              
              
              $
              6,193





The
loan charge-offs in 2008 consisted of $237,000 in 1-4 family residential loans,
$240,000 in commercial charge-offs, $10,000 in loans secured by farmland and
$156,000 in consumer loans. Of the loan charge-offs in 2007, approximately $3.0
million were loans secured by real estate of which $2.2 million were commercial
real estate and approximately $800,000 were residential properties.


In July
2007, the Company signed a Final Release and Settlement Agreement with
BankInsurance, Inc., the Company’s insurance company, for a claim made by the
Company under the Financial Institution Bond. Under this Release and Agreement,
the Company received $1.1 million as a settlement for mortgage loan
irregularities discovered in 2005. After attorney fees and expenses, the Company
recorded a loan recovery totaling $731,000 in July 2007. This transaction also
resulted in a reversal of the provision totaling $300,000 also recorded in July
2007.




- 7
-


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. Other
intangible assets continue to be amortized over their useful lives. Goodwill for
the quarter ended June 30, 2008 was $2.1 million compared to $1.9 million at
December 31, 2007. No impairment charges were recognized during
2008.


Mortgage
servicing rights totaled $24,000 at June 30, 2008. Other intangible assets
recorded include core deposit intangibles, which are subject to amortization.
The core deposits reflect the value of deposit relationships, including the
beneficial rates, which arose from the purchase of other financial institutions
and the purchase of various banking center locations from one single financial
institution. The following table summarizes the Company’s purchased accounting
intangible assets subject to amortization.





As
      of June 30, 2008
              
              
              As
      of December 31, 2007Gross
      Carrying
              
              
              Accumulated
              
              
              Net
      Carrying
              
              
              Gross
      Carrying
              
              
              Accumulated
              
              
              Net
      CarryingAmount
              
              
              Amortization
              
              
              Amount
              
              
              Amount
              
              
              Amortization
              
              
              Amount(in
      thousands, unaudited)Core
      deposit intangibles
              
              $
              7,997
              
              
              $
              5,793
              
              
              $
              2,204
              
              
              $
              7,997
              
              
              $
              5,638
              
              
              $
              2,359Mortgage
      servicing rights
              
              
              24
              
              
              
              -
              
              
              
              24
              
              
              
              24
              
              
              
              -
              
              
              
              24Total
              
              $
              8,021
              
              
              $
              5,793
              
              
              $
              2,228
              
              
              $
              8,021
              
              
              $
              5,638
              
              
              $
              2,383


Note
5. Income Taxes


On
January 1, 2007, the Company adopted the provisions of Financial Accounting
Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income
Taxes(“FIN48”).  FIN 48 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, 2008 and
2007, 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 2004.





Note
6.  Recent Accounting Pronouncements


In June 2008, the FASB ratified EITF
Issue No. 08-3, Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements, (EITF 08-3). EITF 08-3
provides guidance for accounting for nonrefundable maintenance deposits. EITF
08-3 is effective for fiscal years beginning after December 15, 2008. We
anticipate the adoption of EITF 08-3 will not have a significant impact to the
Company’s financial condition or results of operations.


In May 2008, the FASB issued SFAS
No. 162, The Hierarchy of
Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies
the sources of accounting principles and the framework for selecting the
principles to be used in the preparation of financial statements that are
presented in conformity with generally accepted accounting principles in
the United States. This Statement is effective 60 days following the Securities
and Exchange Commission’s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. We anticipate
the adoption of SFAS 162 will not have a significant impact to the Company’s
financial condition or results of operations.


In
May 2008, the FASB issued FASB Staff Position (“FSP”) APB 14-a, Accounting for Convertible
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement). The FSP requires that proceeds from the issuance of
convertible debt instruments be allocated between debt (at a discount) and an
equity component. The debt discount will be amortized over the period the
convertible debt is expected to be outstanding as additional non-cash interest
expense. This FSP is effective for fiscal years beginning after
December 15, 2008, and will be applied retrospectively to prior periods. We
anticipate the adoption of  APB 14-a will not have a significant
impact to the Company’s financial condition or results of
operations.


In April 2008, the FASB issued FASB
Staff Position (FSP) 142-3,
Determination of the Useful Life of Intangible Assets, (FSP 142-3). FSP
142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets. FSP 142-3 is effective for fiscal years beginning after
December 15, 2008. We anticipate the adoption of FSP 142-3 will not have a
significant impact to the Company’s financial condition or results of
operations.


- 8
-


In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133. This Statement changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial adoption. We
anticipate the adoption of SFAS No. 161 will not have a significant impact to
the Company’s financial condition or results of operations.


In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
SFAS 160, Non-controlling
Interests in Consolidated Financial Statements, an Amendment of ARB 51.
SFAS 160 establishes new accounting and reporting standards for
non-controlling interests in a subsidiary. SFAS 160 will require entities
to classify non-controlling interests as a component of stockholders’ equity and
will require subsequent changes in ownership interests in a subsidiary to be
accounted for as an equity transaction. SFAS 160 will also require entities
to recognize a gain or loss upon the loss of control of a subsidiary and to
re-measure any ownership interest retained at fair value on that date. This
statement also requires expanded disclosures that clearly identify and
distinguish between the interests of the parent and the interests of the
non-controlling owners. SFAS 160 is effective on a prospective basis for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008, except for the presentation and disclosure
requirements, which are required to be applied retrospectively. We anticipate
the adoption of SFAS No. 160 will not have a significant impact to the Company’s
financial condition or results of operations


In
December 2007, FASB issued SFAS No. 141R, Business Combinations (“SFAS
No. 141R”) which applies to all business combinations. The statement requires
most identifiable assets, liabilities, non-controlling interests, and goodwill
acquired in a business combination to be recorded at “full fair value.” All
business combinations will be accounted for by applying the acquisition method
(previously referred to as the purchase method). Companies will have to identify
the acquirer; determine the acquisition date and purchase price; recognize at
their acquisition-date fair values the identifiable assets acquired, liabilities
assumed, and any non-controlling interests in the acquiree, and recognize
goodwill or, in the case of a bargain purchase, a gain. SFAS No. 141R is
effective for periods beginning on or after December 15, 2008, and early
adoption is prohibited. It will be applied to business combinations occurring
after the effective date. We anticipate the adoption of SFAS No. 141R will not
have a significant impact to the Company’s financial condition or results of
operations.


In
November 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at
Fair Value Through Earnings (“SAB No. 109”). SAB No. 109 rescinds SAB No.
105’s prohibition on inclusion of expected net future cash flows related to loan
servicing activities in the fair value measurement of a written loan commitment.
SAB No. 109 applies to any loan commitments for which fair value accounting is
elected under SFAS No. 159. SAB No. 109 is effective prospectively for
derivative loan commitments issued or modified in fiscal quarters beginning
after December 15, 2007. We anticipate the adoption of SAB No. 109 will not
have a significant impact to the Company’s financial condition or results of
operations.




Note
7. Subsequent Events


The Agreement and Plan of Merger with
First Community Holding Company was terminated on July 16, 2008. We do not
anticipate incurring costs due to termination penalties or fees. The estimated
merger costs to be expensed in the third quarter of 2008 will be approximately
$150,000.


In July 2008,
the Company requested regulatory approval for the redemption of the junior
subordinated debentures. As a condition of the approval of the redemption, the
Federal Reserve Bank of Atlanta requested, until further notice, that the
Company obtain prior written approval before incurring any indebtedness,
declaring or paying any corporate dividends or redeeming any corporate stock.
Also, the Louisiana Office of Financial Institutions requested that the Bank
obtain prior approval before paying any dividends until compliant with LSA-R.S.
6:263(C).


On August 8,
2008, $3.1 million in junior subordinated debentures were redeemed. These
debentures were issued in August 2003 for a 30 year period, callable after 5
years, at a rate of LIBOR plus 300 basis points. In 2007, the Company assumed
the $3.1 million in subordinated debentures in the Homestead Bancorp, Inc.
acquisition. The Company repaid the debt with $1.0 million in cash and borrowed
the remaining amount by drawing on its line of credit at prime less 100 basis
points. The Company anticipates repaying the debt by December 31,
2008.





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, 2008 and
2007 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




- 9
-


Second
Quarter Overview


Financial highlights for the second
quarter of 2008 are as follows:


·
            Net
      income for the second quarter of 2008 and 2007 was $2.1 million and $2.7
      million, respectively, with earnings per common share of $0.38 and $0.49,
      respectively. The earnings for the second quarter 2008 decreased due
      primarily to the compression placed on the net interest margin with the
      decline in shorter term market interest
rates.


·
            Net
      interest income for the second quarter of 2008 and 2007 was $7.9 million
      and $8.5 million, respectively. The net interest margin was 4.3% for the
      second quarter 2008 and 4.8% for the second quarter
  2007.


·
            The
      provision for loan losses for the second quarter of 2008 was $490,000
      compared to $421,000 for the second quarter of
  2007.


·
            Noninterest
      income for the second quarter of 2008 was $1.5 million, an increase of
      $446,000 when compared to the second quarter of 2007. Included are
      increases of $9,000 in service charges, commissions and fees, $54,000 in
      net gains on sale of loans, $221,000 in other noninterest income and a
      $162,000 decrease in net losses on sale of
  securities.


·
            Noninterest
      expense for the second quarter of 2008 was $5.7 million, an increase of
      $640,000 when compared to the second quarter of 2007. Included are
      increases of $267,000 in salaries and employee benefits, $116,000 in
      occupancy and equipment expense, and $374,000 in other noninterest
      expense. These increases in noninterest expense were offset by the
      reduction in the net cost of other real estate and repossessions totaling
      $116,000.


·
            Total
      assets as of June 30, 2008 were $802.6 million, a decrease of $4.8 million
      or 0.6% when compared to $807.3 million at December 31, 2007. The decrease
      in assets resulted from decreases in cash and cash equivalents,
      interest-earning time deposits with banks, investment securities and a
      slight decrease in other assets, and was partially offset by an increase
      in total loans.


·
            The
      net loan portfolio at June 30, 2008 totaled $615.8 million, an increase of
      $46.8 million or 8.2% from the December 31, 2007 level of $569.1 million.
      Net loans reflect a reduction for the allowance for loan losses which
      totaled $6.4 million for June 30, 2008 and $6.2 million for December 31,
      2007.


·
            Non-performing
      assets ended at $11.2 million at June 30, 2008, a decrease of $29,000 when
      compared to December 31, 2007.


·
            Total
      deposits decreased $27.0 million or 3.7% in 2008 when compared to December
      31, 2007. Of this decrease, individual and business deposits decreased by
      $28.0 million and deposits from public fund deposits increased by $1.0
      million.


·
            At
      June 30, 2008, short-term borrowings were $30.3 million and consisted of
      $19.8 million in federal funds purchased and $10.5 million in repurchase
      agreements. Long-term borrowings remained unchanged for the second quarter
      2008 and are comprised solely of trust preferred
  debt.


·
            Stockholders’
      equity was $68.4 million at June 30, 2008, an increase of $1.9 million
      when compared to $66.5 million at December 31, 2007. The increase in
      stockholders’ equity resulted from net income of $4.5 million, which was
      partially offset by the change in accumulated other comprehensive income
      of $0.8 million and dividends paid to stockholders totaling $1.8
      million.


·
            Return
      on average assets for the six month periods ended June 30, 2008 and 2007
      were 1.14% and 1.46%, respectively and return on average equity for the
      same periods were 13.06% and 17.01%,
  respectively.


·
            In
      each of the first two quarters 2008, the Company’s Board of Directors
      declared cash dividends of $0.16 per common share, a 3.2% increase
      compared to the same period in
2007.





Financial
Condition





Changes
in Financial Condition from December 31, 2007 to June 30, 2008





General. Total assets as of June
30, 2008 were $802.6 million, a decrease of $4.8 million or 0.6% when compared
to $807.3 million at December 31, 2007. The decrease in assets resulted from
decreases in cash and cash equivalents, interest-earning time deposits,
investment securities and other assets partially offset by an increase in net
loans. Net loans increased by $46.8 million during 2008, an increase of 8.2%,
totaling $615.8 million at June 30, 2008.





Investment
Securities.Investment securities at June 30, 2008 totaled
$128.8 million, a decrease of $13.2 million when compared to $142.1 million at
December 31, 2007.  The net change in securities was primarily a
result of the Company redeploying investment maturities into loans which
currently provide higher yields than 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, 2008, $37.5 million or 29.1% of securities (excluding Federal Home Loan
Bank of Dallas stock) and mutual funds and other equity securities were
scheduled to mature in less than one year. This includes $35.7 million in
discount notes that are being used solely for pledging purposes. When excluding
these securities, only 1.4% of securities mature in less than one year.
Securities with maturity dates over 15 years totaled 10.5% of the total
portfolio. The average maturity of the securities portfolio was 4.7
years.


- 10
-


At June
30, 2008, securities totaling $94.4 million were classified as available for
sale and $34.4 million were classified as held to maturity, compared to $105.6
million classified as available for sale and $36.5 million classified as held to
maturity at December 31, 2007.  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. At June 30, 2008, it
is management’s opinion that we held no investment securities which bear a
greater than the normal amount of credit risk as compared to similar investments
and that no securities had an amortized cost greater than their recoverable
value.


Average
securities as a percentage of average interest-earning assets were 16.4% for the
six-month period ended June 30, 2008 and 23.3% for the same period in 2007. Most
securities held at June 30, 2008 qualified as securities pledgeable to
collateralize repurchase agreements and public funds.Securities
pledged at June 30, 2008 totaled $109.1 million.





Mortgage Loans
Held forSale. Loans held for sale
decreased $3.3 million to $661,000 at June 30, 2008 compared to $4.0 million at
December 31, 2007.





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
77.5% of total assets at June 30, 2008 an increase when compared to 71.3% at
December 31, 2007. There are no significant concentrations of credit to any
borrower or industry. As of June 30, 2008, 68.7% of our loan portfolio was
secured primarily or secondarily by real estate. The largest portion of our loan
portfolio is in non-farm non-residential loans secured by real
estate, which accounts for 36.3% of our total portfolio.


Our net loan portfolio at June 30, 2008
totaled $615.8 million, an increase of approximately $46.8 million from the
December 31, 2007 level of $569.1 million. The increase in
net loans includes $30.5 million in assignments purchased on
three non-real estate commercial and industrial loans and $16.3
million in loans made in-house, net of paydowns.  The loan assignments
purchased meet the same underwriting criteria used when making
in-house loans.  Net loans include the reduction for the allowance for loan
losses which totaled $6.4 million at June 30, 2008 and $6.2 at December 31,
2007. Fixed rate loans increased from $223.0 million or 38.8% of the total
loan portfolio at December 31, 2007 to $266.3 million, or 42.8% of the total
loan portfolio at June 30, 2008. Loan charge-offs totaled $643,000 during the
first six months of 2008, compared to $612,000 during the same period of
2007.  Recoveries totaled $118,000 and $303,000 during the first
six-months of 2008 and 2007, 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.


Nonperforming
assets totaled $10.9 million or 1.4% of total assets at June 30, 2008, a
decrease from $11.2 million at December 31, 2007.




- 11
-


The table below sets forth the amounts
and categories of our non-performing assets at June 30, 2008 (unaudited) and
December 31, 2007.




June
      30,
              
              
              December
      31,2008
              
              
              2007(in
      thousands)Non-accrual
      loans:Real estate
      loans:Construction
      and land development
              
              $
              1,954
              
              
              $
              1,841Farmland
              
              
              174
              
              
              
              419One- to
      four- family residential
              
              
              1,842
              
              
              
              1,819Multifamily
              
              
              -
              
              
              
              2Non-farm
      non-residential
              
              
              5,159
              
              
              
              4,950Non-real estate
      loans:Commercial and
      industrial
              
              
              648
              
              
              
              978Consumer and
      other
              
              
              347
              
              
              
              279Total non-accrual
      loans
              
              
              10,124
              
              
              
              10,288Loans
      90 days and greater delinquentand
      still accruing:Real estate
      loans:One- to
      four- family residential
              
              
              6
              
              
              
              544Non-real estate
      loans:Consumer and
      other
              
              
              6
              
              
              
              3Total loans 90 days
      greaterdelinquent and
      still accruing
              
              
              12
              
              
              
              547Restructured
      loans
              
              
              -
              
              
              
              -Total
      non-performing loans
              
              
              10,136
              
              
              
              10,835Real
      estate owned:Real estate
      loans:Construction
      and land development
              
              
              297
              
              
              
              84One- to
      four- family residential
              
              
              105
              
              
              
              170Non-farm
      non-residential
              
              
              391
              
              
              
              119Total real estate
      owned
              
              
              793
              
              
              
              373Total non-performing
      assets
              
              $
              10,929
              
              
              $
              11,208


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.





- 12
-


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 $692,000 in the first six months of 2008 as compared to
$608,000 for the same period in 2007. 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 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 $643,000 for first six months of
2008 as compared to total charge-offs of $612,000 for the same period in 2007.
Recoveries were $118,000 for the first six months of 2008 as compared to
recoveries of $303,000 for the same period in 2007.


The allowance at June 30, 2008 was $6.4
million or 1.02% of total loans and 56.9% 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
      30,2008
              
              
              2007(in
      thousands, unaudited)Loans:Average
      outstanding balance
              
              $
              593,450
              
              
              $
              511,777Balance
      at end of period
              
              $
              622,202
              
              
              $
              525,520Allowance
      for Loan Losses:Balance
      at beginning of year
              
              $
              6,193
              
              
              $
              6,675Provision
      charged to expense
              
              
              692
              
              
              
              608Loans
      charged off
              
              
              (643
              )
              
              
              (612
              )Recoveries
              
              
              118
              
              
              
              303Balance
      at end of period
              
              $
              6,360
              
              
              $
              6,974


Beginning in the third quarter of 2008,
the Company will begin using new risk categories in the calculation of the
allowance for loan losses. The calculation will continue to include historical
trends and current economic factors.





Deposits.Managing
the mix and pricing the maturities of deposit liabilities is an important factor
affecting our ability to maximize the 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, 2007 to June 30, 2008, total
deposits decreased $27.0 million, or 3.7%, to $696.1 million at June 30, 2008
from $723.1 million at December 31, 2007. Noninterest-bearing demand deposits
increased by $7.0 million while interest-bearing deposits decreased by $34.0
million. The decrease in interest-bearing deposits are from a decrease of $2.6
million in business deposits, $32.4 million in consumer deposits and an increase
of $1.0 million in public fund deposits. As of June 30, 2008, the aggregate
amount of outstanding certificates of deposit in amounts greater than or equal
to $100,000 was approximately $181.4 million.


Average
noninterest-bearing deposits decreased to $119.9 million for the six-month
period ended June 30, 2008 from $125.3 million for the six-month period ended
June 30, 2007. Average noninterest-bearing deposits represented 17.2% and 19.6%
of average total deposits for the six-month periods ended June 30, 2008 and
2007, 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.


- 13
-


The
following table sets forth the composition of the Company’s deposits at June 30,
2008 (unaudited) and December 31, 2007.





June
      30,
              
              
              December
      31,
              
              
              Increase/(Decrease)2008
              
              
              2007
              
              
              Amount
              
              
              Percent(dollars
      in thousands)Deposits:Noninterest-bearing
      demand
              
              $
              127,770
              
              
              $
              120,740
              
              
              $
              7,030
              
              
              
              5.8
              %Interest-bearing
      demand
              
              
              196,779
              
              
              
              223,142
              
              
              
              (26,363
              )
              
              
              -11.8
              %Savings
              
              
              44,412
              
              
              
              45,044
              
              
              
              (632
              )
              
              
              -1.4
              %Time
              
              
              327,162
              
              
              
              334,168
              
              
              
              (7,006
              )
              
              
              -2.1
              %Total
      deposits
              
              $
              696,123
              
              
              $
              723,094
              
              
              $
              (26,971
              )
              
              
              -3.7
              %


Borrowings.The Company maintains borrowing relationships with other financial
institutions as well as the Federal Home Loan Bank on a short- and long-term
basis to meet liquidity needs. At June 30, 2008, short term borrowings totaled
$30.3 million compared to $10.4 million at December 31, 2007. Long term
borrowings remained unchanged at $3.1 million at June 30, 2008 when
compared to December 31, 2007 and consisted solely of subordinated debt. The
average amount of total borrowings for the six months ended June 30, 2008 was
$12.1 million, compared to $14.1 million for the six months ended June 30, 2007.
At June 30, 2008, the Company had $135.0 million in Federal Home Loan Bank
letters of credit outstanding obtained solely for collateralizing public
deposits.





Equity.Total equity increased to $68.4 million as of June 30, 2008 from $66.5
million as of December 31, 2007. The increase in equity primarily resulted from
net income of $4.5 million for the six months ended June 30, 2008 less $0.8
million for the decrease in unrealized loss on available for sale securities and
$1.8 million in quarterly dividend payments. Cash dividends paid were $0.32 and
$0.31 per share for the six-month periods ending June 30, 2008 and 2007,
respectively.





Results
of Operations for the Six Months and Three Months Ended June 30, 2008 and June
30, 2007





Net income.For the quarter ending
June 30, 2008, First Guaranty Bancshares, Inc. had consolidated net income of
$2.1 million, a $0.6 million decrease from the $2.7 million of net income
reported for the second quarter of 2007.Net income for the six
months ended June 30, 2008 was $4.5 million, a decrease of $757,000, or 14.5%
from $5.2 million for the six months ended June 30, 2007. The largest decrease
in net income resulted in net interest income from market pressure placed on our
net interest margin with the decline in market interest rates. In addition,
noninterest expense increased due to additional costs related to strengthening
and enhancing the internal audit and control process, costs associated with
education and training of existing and new personnel, and the addition of staff
to position ourselves to take advantage of opportunities in our respective
markets.





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, which are generally
impacted by inflation rates, may have a significant impact on a financial
institution’s performance. The impact of interest rate changes depends on the
sensitivity to change of our interest-earning assets and interest-bearing
liabilities.


Net interest income
for the quarter ended June 30, 2008 was $7.9 million, a decrease of $0.6 million
when compared to $8.5 million for the second quarter in 2007.Net
interest income for the six-month period ended June 30, 2008 totaled $15.9
million. This reflects a decrease of $484,000 when compared to
the six-month period ended June 30, 2007.  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, 2008 was 79.8%, compared to 79.6% for the same period in
2007.


- 14
-


The following
table sets forth average balance sheets, average yields and costs, and certain
other information for the six months ended June 30, 2008 and 2007, respectively.
No tax-equivalent yield adjustments were made, as the effect thereof was not
material. All average balances are daily average balances. Nonaccrual loans were
included in the computation of average balances, but have been reflected in the
table as loans carrying a zero yield. The yields set forth below include the
effect of deferred fees, discounts and premiums that are amortized or accreted
to interest income or expense.


Six
      Months Ended June 30,2008
              
              
              2007Average
              
              
              
              
              
              Yield/
              
              
              Average
              
              
              
              
              
              Yield/Balance
              
              
              Interest
              
              
              Rate
              
              
              Balance
              
              
              Interest
              
              
              Rate(dollars
      in thousands)AssetsInterest-earning
      assets:Interest-earning
      deposits with banks
              
              $
              1,024
              
              
              $
              14
              
              
              
              2.7
              %
              
              $
              2,259
              
              
              $
              45
              
              
              
              4.0
              %Securities
      (including FHLB stock)
              
              
              121,484
              
              
              
              2,940
              
              
              
              4.9
              %
              
              
              159,733
              
              
              
              4,474
              
              
              
              5.6
              %Federal
      funds sold
              
              
              23,525
              
              
              
              358
              
              
              
              3.1
              %
              
              
              9,830
              
              
              
              248
              
              
              
              5.1
              %Loans
      held for sale
              
              
              916
              
              
              
              35
              
              
              
              7.7
              %
              
              
              2,147
              
              
              
              71
              
              
              
              6.7
              %Loans,
      net of unearned income
              
              
              593,450
              
              
              
              20,999
              
              
              
              7.1
              %
              
              
              511,777
              
              
              
              21,656
              
              
              
              8.5
              %Total
      interest-earning assets
              
              
              740,399
              
              
              
              24,346
              
              
              
              6.6
              %
              
              
              685,746
              
              
              
              26,494
              
              
              
              7.8
              %Noninterest-earning
      assets:Cash
      and due from banks
              
              
              23,255
              
              
              
              
              
              
              
              
              
              
              
              18,095Premises
      and equipment, net
              
              
              16,217
              
              
              
              
              
              
              
              
              
              
              
              13,934Other
      assets
              
              
              5,535
              
              
              
              
              
              
              
              
              
              
              
              2,440Total
              
              $
              785,406
              
              
              
              
              
              
              
              
              
              
              $
              720,215Liabilities
      and Stockholders' EquityInterest-bearing
      liabilities:Demand
      deposits
              
              $
              202,123
              
              
              
              1,641
              
              
              
              1.6
              %
              
              $
              197,440
              
              
              
              3,285
              
              
              
              3.4
              %Savings
      deposits
              
              
              44,818
              
              
              
              102
              
              
              
              0.5
              %
              
              
              40,197
              
              
              
              105
              
              
              
              0.5
              %Time
      deposits
              
              
              331,889
              
              
              
              6,467
              
              
              
              3.9
              %
              
              
              274,690
              
              
              
              6,220
              
              
              
              4.6
              %Borrowings
              
              
              12,088
              
              
              
              211
              
              
              
              3.5
              %
              
              
              14,109
              
              
              
              475
              
              
              
              6.8
              %Total
      interest-bearing liabilities
              
              
              590,918
              
              
              
              8,421
              
              
              
              2.9
              %
              
              
              526,436
              
              
              
              10,085
              
              
              
              3.9
              %Noninterest-bearing
      liabilities:Demand
      deposits
              
              
              119,946
              
              
              
              
              
              
              
              
              
              
              
              125,285Other
              
              
              5,904
              
              
              
              
              
              
              
              
              
              
              
              5,736Total
      liabilities
              
              
              716,768
              
              
              
              
              
              
              
              
              
              
              
              657,457Stockholders'
      equity
              
              
              68,638
              
              
              
              
              
              
              
              
              
              
              
              62,758Total
              
              $
              785,406
              
              
              
              
              
              
              
              
              
              
              $
              720,215Net
      interest income
              
              
              
              
              
              $
              15,925
              
              
              
              
              
              
              
              
              
              
              $
              16,409Net
      interest rate spread (1)
              
              
              
              
              
              
              
              
              
              
              3.7
              %
              
              
              
              
              
              
              
              
              
              
              3.9
              %Net
      interest-earning assets(2)
              
              $
              149,481
              
              
              
              
              
              
              
              
              
              
              $
              159,310Net
      interest spread (3)
              
              
              
              
              
              
              
              
              
              
              4.3
              %
              
              
              
              
              
              
              
              
              
              
              4.8
              %Average
      interest-earning assets tointerest-bearing
      liabilities
              
              
              
              
              
              
              
              
              
              
              125.3
              %
              
              
              
              
              
              
              
              
              
              
              130.3
              %


(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
made pursuant to these processes totaled $490,000 for the quarter ended June 30,
2008, an increase of $69,000 when compared to the same quarter in 2007.
Year-to-date provisions made totaled $692,000 for the first six months of 2008
as compared to $608,000 for the same period in 2007. 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 2008 and 2007 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 $643,000 for
the first six months of 2008 as compared to $612,000 for the same period in
2007. Recoveries were $118,000 for the first six months of 2008 as compared to
$303,000 for the same period in 2007.





- 15
-


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 three month period ended June 30, 2008 totaled $1.5 million, up
$0.4 million when compared to the same period in 2007. This increase in
noninterest income resulted from a decrease in losses taken on the sale of
securities and from an increase in other noninterest income.


Noninterest
income for the first six months of 2008 totaled $3.0 million, up $745,000 when
compared to the same period in 2007. This increase was due to increases in
service charge, commission and fee income totaling $140,000, increases of
$99,000 in net gains on sale of loans, increases of $275,000 in other
noninterest income and a $230,000 decrease in net losses on sale of securities.
The increase in other noninterest income resulted primarily from a reimbursement
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 and other types of
expenses. Noninterest expense for the second quarter in 2008 totaled $5.7
million, an increase of $0.6 million from the same period in 2007. The largest
increases in noninterest expense were reflected in salaries and employee
benefits and in other noninterest expenses. The increase in salaries and
employee benefits resulted from normal salary adjustments and an increase in the
number of employees in 2008 when compared to 2007 from the completion of the
Homestead Bank merger. Other noninterest expense increased $0.4 million for the
second quarter 2008 when compared to the same period in 2007, with increases in
insurance expenses, advertising costs in an effort to increase our market
presence and amortization expense on core deposit intangibles.


Noninterest
expense totaled $11.4 million for the six months ended June 30, 2008, compared
to $10.1 million for the same period in 2007, an increase of $1.3
million. Salaries and benefits increased $587,000 primarily due to an
increase in support staff and the acquisition of Homestead Bank which occurred
on July 30, 2007. At June 30, 2008, 241 employees represented full-time
equivalents of 223 staff members, compared to 223 employees which represented
full-time equivalents of 207 staff members during the same period of 2007. At
the time of the Homestead Bank acquisition, Homestead Bank employed 21
employees, all of whom became employees of Company. Occupancy and equipment
expense totaled $1.4 million for the first six months of 2008, an increase of
$195,000 when compared to the same period in 2007. Net cost of other real estate
and repossessions decreased $340,000 when comparing the six month periods ending
2008 and 2007. Other noninterest expense reflects an increase of $841,000 when
comparing the six-month periods ended 2008 and 2007.


The table
below presents the components of other noninterest expense as of the three
months and six months ended June 30, 2008 and 2007.





Three
      Months Ended June 30,
              
              
              Six
      Months Ended June 30,2008
              
              
              2007
              
              
              2008
              
              
              2007(in
      thousands)
              
              
              (in
      thousands)Other
      noninterest expense:Legal
      and professional fees
              
              $
              394
              
              
              $
              318
              
              
              $
              830
              
              
              $
              557Operating
      supplies
              
              
              134
              
              
              
              140
              
              
              
              271
              
              
              
              290Regulatory
      assessment
              
              
              164
              
              
              
              38
              
              
              
              251
              
              
              
              76Insurance
              
              
              57
              
              
              
              49
              
              
              
              111
              
              
              
              80Marketing
      and public relations
              
              
              278
              
              
              
              204
              
              
              
              557
              
              
              
              477Data
      processing
              
              
              410
              
              
              
              422
              
              
              
              906
              
              
              
              837Travel
      and lodging
              
              
              102
              
              
              
              107
              
              
              
              212
              
              
              
              228Taxes
      - sales and capital
              
              
              174
              
              
              
              163
              
              
              
              346
              
              
              
              326Postage
              
              
              58
              
              
              
              63
              
              
              
              123
              
              
              
              128Software
              
              
              72
              
              
              
              72
              
              
              
              143
              
              
              
              137Telephone
              
              
              53
              
              
              
              52
              
              
              
              99
              
              
              
              99Amortization
      of core deposit intangibles
              
              
              77
              
              
              
              31
              
              
              
              155
              
              
              
              63Other
              
              
              368
              
              
              
              308
              
              
              
              667
              
              
              
              533Total
      other expense
              
              $
              2,341
              
              
              $
              1,967
              
              
              $
              4,671
              
              
              $
              3,831





Noninterest
expense during the third quarter 2008 is expected to include approximately
$150,000 in expenses from our terminated transaction to acquire First Community
Holding Company.





Income
Taxes. The provision for income taxes totaled $1.1 million and $1.4
million for the quarters ended June 30, 2008 and 2007, respectively. The
provision for income taxes for the six months ended June 30, 2008 decreased
$348,000 when compared to the same period in 2007. The decrease in the provision
for income taxes reflected lower income during both the three-month and
six-month periods in 2008. In each of the six months ended June 30, 2008 and
2007, the income tax provision approximated the normal statutory
rate.  The effective rates were 34.9% and 34.4%,
respectively.





- 16
-


Item 3.Quantitative and Qualitative Disclosures about Market Risk





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.


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, 2008 reflects an asset-sensitive position with a positive cumulative gap on
a one-year basis.





Interest
      Sensitivity WithinOver
      3 Months3
      MonthsOr
      Less
              
              
              thru
      12 Months
              
              
              TotalOne
      Year
              
              
              OverOne
      Year
              
              
              Total(dollars
      in thousands)Earning
      Assets:Loans
      (including loans held for sale)
              
              $
              378,544
              
              
              $
              83,288
              
              
              $
              461,832
              
              
              $
              161,031
              
              
              $
              622,863Securities
      (including FHLB stock)
              
              
              36,721
              
              
              
              1,829
              
              
              
              38,550
              
              
              
              91,260
              
              
              
              129,810Federal
      funds sold
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Other
      earning assets
              
              
              3,025
              
              
              
              99
              
              
              
              3,124
              
              
              
              -
              
              
              
              3,124Total
      earning assets
              
              
              418,290
              
              
              
              85,216
              
              
              
              503,506
              
              
              
              252,291
              
              
              $
              755,797Source
      of Funds:Interest-bearing
      accounts:Demand
      deposits
              
              
              142,459
              
              
              
              -
              
              
              
              142,459
              
              
              
              54,320
              
              
              
              196,779Savings
              
              
              11,103
              
              
              
              -
              
              
              
              11,103
              
              
              
              33,309
              
              
              
              44,412Time
      deposits
              
              
              128,803
              
              
              
              129,625
              
              
              
              258,428
              
              
              
              68,734
              
              
              
              327,162Short-term
      borrowings
              
              
              30,307
              
              
              
              -
              
              
              
              30,307
              
              
              
              -
              
              
              
              30,307Long-term
      borrowings
              
              
              3,093
              
              
              
              -
              
              
              
              3,093
              
              
              
              -
              
              
              
              3,093Noninterest-bearing,
      net
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              154,044
              
              
              
              154,044Total
      source of funds
              
              
              315,765
              
              
              
              129,625
              
              
              
              445,390
              
              
              
              310,407
              
              
              $
              755,797Period
      gap
              
              
              102,525
              
              
              
              (44,409
              )
              
              
              58,116
              
              
              
              (58,116
              )Cumulative
      gap
              
              $
              102,525
              
              
              $
              58,116
              
              
              $
              58,116
              
              
              $
              -Cumulative
      gap as apercent
      of earning assets
              
              
              13.57
              %
              
              
              7.69
              %
              
              
              7.69
              %


- 17
-


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 15.2% and 20.6% of the total
liquidity base at June 30, 2008 and December 31, 2007, respectively. In
addition, the Company maintained borrowing availability with the Federal Home
Loan Bank totaling $144.4 million and $159.7 million at June 30, 2008 and
December 31, 2007, respectively.  As of June 30, 2008, the net
availability at the Federal Home Loan Bank was $4.0 million, compared to $54.7
million at December 31, 2007 largely due to an additional $30.0 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, 2008 and $74.7 million
at December 31, 2007. As of June 30, 2008, the Company had $14.4 million
outstanding on these lines of credit. At December 31, 2007, the Company did not
have an outstanding balance on these lines of credit. Management believes there
is sufficient liquidity to satisfy current operating needs.





Capital
Resources.  The Company’s capital position is reflected in
stockholders’ equity, subject to certain adjustments for regulatory purposes.
Further, our capital base allows us to take advantage of business opportunities
while maintaining the level of resources we deem appropriate to address business
risks inherent in daily operations.


Stockholders’
equity was $68.4 million at June 30, 2008, an increase of $1.9 million when
compared to $66.5 million at December 31, 2007. The increase in equity resulted
from net income of $4.5 million, which was partially offset by the change in
accumulated other comprehensive income of $815,000 and 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.


At June 30,
2008, we satisfied the minimum regulatory capital requirements and were “well
capitalized” within the meaning of federal regulatory requirements.




Item 4T.  Controls and Procedures




Evaluation of Disclosure
Controls and Procedures


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


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





- 18
-


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


There have
been no material changes in the risk factors disclosed by the Company in its
Annual Report filed on Form 10-K with the Securities and Exchange
Commission.





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


Item 3 is
nonapplicable and is therefore not included.





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


The Company’s
Annual Meeting of Stockholders was held on May 15, 2008.





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
              
              4,020,508
              
              4,459Alton
      B Lewis
              
              3,973,263
              
              51,704Marshall
      T. Reynolds
              
              4,024,535
              
              432


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








Exhibit


Number        
Exhibit


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




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.




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













- 19
-

















SIGNATURES





















FIRST GUARANTY BANCSHARES,
INC.











Date:                      August
14,
2008                                                                By:/s/
Michael R. Sharp


Michael R. Sharp


President and


Chief Executive Officer








Date:                      August
14,
2008                                                                By:
/s/
Michele E. LoBianco


Michele E. LoBianco


Chief Financial Officer


Secretary and Treasurer


- 20
-