After watching the stock price of First Guaranty Bancshares languish for more than two months, the $3.2 billion-asset company's board of directors decided to act.
At the behest of Chairman Marshall Reynolds, all six directors, along with other insiders, participated in a $10 million private placement. The stock sale, announced last week, involved the purchase of more than 714,000 shares at $14 each, a price substantially higher than the previous day's closing of $13.07.
Shares in the Hammond, Louisiana-based First Guaranty jumped 5% on news of the sale Wednesday to close at $13.74. And though the rally lost steam as the week wore on — the stock closed at $13.27 Friday — the degree of insider support demonstrated by the private placement likely grabbed investors' attention, Freddie Strickland, who covers First Guaranty for Janney Montgomery Scott, noted in a research report.
"We welcome the decision to increase capital levels at [the bank] and feel that the participation of the entire board and several accredited investors within the bank is a vote of confidence in the story by insiders," Strickland wrote.
The private placement was designed to signal support for First Guaranty's battered currency, which has plunged more than 30% since early March, when
"That was basically the idea," Lewis said Thursday. "There's been so much negative media about banking in general. We've just been rocking along, doing our job, doing things right, but we're getting banged up."
The private placement "definitely reflects the board's commitment and its confidence in our staff," Chief Administrative Officer Desiree Simmons added.
First Guaranty reported first-quarter net income of $2.9 million last month, down 36% on a linked-quarter basis. The decline was due, in part, to higher funding costs, but expenses associated with
First Guaranty plans to use funds from the private placement to support the growth initiatives and boost regulatory capital ratios.
To be sure, numerous other banks can point to directors and insiders buying shares in recent weeks to demonstrate faith in their institutions. Directors and insiders at HomeStreet in Seattle, for example,
"It was his idea," Lewis said. "I've never heard of anybody doing this."
"We have been frustrated by the unfair beating our stock has taken in recent months," Reynolds said in a press release. "Completion of the offering with the 100% participation of directors shows our belief in our bank."
First Guaranty directors and insiders were already heavily invested. The six directors, along with Chief Financial Officer Eric Dosch, owned nearly 43% of the company's outstanding shares, according to its most recent proxy report, filed with the Securities and Exchange Commission on April 10. The company did not disclose how many shares each participant in Wednesday's private placement purchased.
"We've got a good bank," Lewis said. "Solid as a rock."
