First Guaranty Bancshares, Inc. Announces Amendments to Key Debt Instruments

Summary of Key Events

• Two material amendments to debt agreements executed on March 20, 2026:
• Second Amendment to Promissory Note with Smith & Tate Investment, L.L.C.
• Second Amendment to Floating Rate Subordinated Note due March 28, 2034, also with Smith & Tate
• Both agreements extend periods of principal payment waivers and allow the company flexibility to pay interest in cash or common stock.
• Smith & Tate Investment, L.L.C. is controlled by Edgar Ray Smith, III—a director and principal shareholder of First Guaranty Bancshares, Inc.

Details on the Second Amendment to the Promissory Note

The original Promissory Note (dated October 5, 2023) required thirty-nine quarterly installments of principal (\$1,007,812.50 each) plus accrued interest, starting December 31, 2023, with a final balloon payment due October 5, 2033.

First Amendment (June 30, 2025):

• Waived principal payments from June 30, 2025, through March 31, 2026.
• Allowed interest payments during this period to be made in cash or in shares of common stock, priced at the consolidated closing bid price on the day prior to payment.

Second Amendment (March 20, 2026):

• Extends the principal payment waiver for nine consecutive quarters from March 31, 2026, through March 31, 2028. The next required principal payment is now June 30, 2028.
• Interest payments during this extended period can also be made in cash or in common stock, calculated similarly as before.
• The number of shares issued will be rounded down to the nearest whole share.

Potential Impact:

• This amendment reduces near-term cash outflows for First Guaranty Bancshares, improving liquidity and cash preservation.
• It introduces potential dilution for shareholders if the company elects to pay interest in stock rather than cash.
• The flexibility in payment methods may be viewed as positive for financial stability, but shareholders should monitor dilution risk and impacts on per-share value.

Second Amendment to the Floating Rate Subordinated Note

The original Subordinated Note (issued March 28, 2024) is a ten-year instrument with a floating rate (Prime Rate + 75 basis points), previously amended on June 4, 2025.

First Subordinated Note Amendment:

• Changed interest payment frequency from monthly to quarterly.
• Allowed interest payments during the first modified payment period to be made in cash or common stock.

Second Subordinated Note Amendment (March 20, 2026):

• Extends the option for First Guaranty to pay interest in cash or common stock for the period from March 31, 2026, through March 31, 2028.
• No other terms of the note are changed; all other provisions remain in force.
• Effective upon execution by both parties.

Potential Impact:

• Similar to the Promissory Note, this amendment preserves cash for the company but may result in dilution if interest is paid in stock.
• The floating rate nature means interest costs may rise if Prime Rate increases, possibly affecting future cash flows or dilution magnitude.
• The relationship with Smith & Tate (controlled by a company insider) should be noted by shareholders for governance and related-party risk.

Shareholder Considerations and Price Sensitivity

• Shareholder dilution risk: Both amendments allow interest payments in common stock. If the company elects to pay in stock, the total outstanding shares will increase, potentially reducing per-share value and affecting share price.
• Liquidity improvement: Waiving principal payments for two years supports company liquidity, which may be positive for credit ratings and debt service coverage.
• Insider involvement: Smith & Tate Investment, L.L.C. is controlled by a director and principal shareholder, raising questions of related-party transactions and governance that investors may scrutinize.
• Potential for future cash needs: When principal payments resume in mid-2028, the company will have to prepare for larger outflows, which may affect future strategies and capital needs.
• Price sensitivity: The amendments—especially the option to pay interest in stock—may be viewed as price sensitive due to dilution risk and financial flexibility. Investors should monitor management’s use of this option and potential impacts on share value.

Exhibits Filed

• Exhibit 10.1: Second Amendment to Promissory Note (March 20, 2026)
• Exhibit 10.2: Second Amendment to Floating Rate Subordinated Note (March 20, 2026)

Conclusion

The amendments announced by First Guaranty Bancshares, Inc. materially alter the terms of two key debt agreements, providing significant flexibility to preserve cash but introducing dilution risk if interest is paid in stock. The involvement of an insider-controlled entity adds a governance dimension that investors should monitor. These changes are material, price sensitive, and should be carefully considered by shareholders evaluating the company’s financial outlook and share value.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisors before making investment decisions. The information herein is based on publicly filed SEC documents and may be subject to further updates or clarifications.

View First Guaranty Bancshares, Inc. Historical chart here