Louisiana bank faces unusual limits on who it can lend to

• Key takeaway: The FDIC and Louisiana's Office of Financial Institutions pursued a wide-ranging consent order against First Guaranty, even after the bank demonstrated significant progress reducing its levels of nonperforming and criticized loans. 
• Forward look: A branch sale completed last week should boost the bank's capital, moving it closer to complying with a major requirement of the consent order. 
• Supporting data: First Guaranty earned $6.2 million through the first six months of 2026.

First Guaranty Bank has been contending with credit-quality problems for some time, and now its regulators have devised an unusual way to address the issue: The Hammond, Louisiana, lender will be restricted from extending additional credit to certain borrowers.

The $3.9 billion-asset bank recently agreed to a consent order that aims to reduce its criticized loans and strengthen its credit quality, according to a Friday securities filing.

That general focus isn't remarkable, but the consent order with the Federal Deposit Insurance Corp and Louisiana's Department of Financial Institutions does include rarely seen provisions about the bank's choice of customers.

For example, First Guaranty faces restrictions on extending additional credit to borrowers whose credit remains uncollected, and was charged off or classified as a loss by regulators, though there are certain exceptions to those restrictions. There's a similar provision regarding borrowers whose credit was classified as "doubtful" or "substandard" by the bank's regulators.

Over the past year, First Guaranty has made material progress in reducing the level of nonperforming assets on its books, but its criticized loans remain elevated. The bank said in the securities filing that it has already achieved "full compliance" with the consent order's requirements, except for one mandating that it raise its Tier 1 leverage capital ratio.

Still, news of the consent order triggered a selloff of First Guaranty's shares. The stock plummeted more than 12% on Monday, closing at $8.42 per share. 

Chris Marinac, an analyst who covers First Guaranty for Brean Capital, said he wasn't surprised by the fact that the consent order wasn't released until nearly a year after the bank was examined by its regulators, and after the bank had already made substantial efforts to bolster the health of its portfolio.

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"The key is, did the taxi meter start running a year ago in terms of resolution?" Marinac told American Banker.
An FDIC spokesperson declined to comment. A First Guaranty spokesperson did not respond to a request for comment by deadline. In its SEC filing Friday, the bank stated that it agreed to the issuance of the content order "without admitting or denying any charges of unsafe for unsound banking practices."

First Guaranty reported net income totaling $6.2 million for the first six months of 2026.

Between Sept. 30, 2025 and June 30, its nonperforming assets declined from $88.6 million, or 3.33% of total loans, to $38.3 million, or 1.81%. According to FDIC statistics, the industrywide ratio of noncurrent assets plus other real estate owned to total assets stood at 0.64% at March 31.

Marinac noted First Guaranty's dropoff in nonperforming assets in a July 30 research note. Criticized loans, which aren't necessarily past due, but have been judged to carry a higher risk of default, also declined, Still, they still totaled $463.2 million, or 26% of total loans, at the end of the second quarter, a number Marinac characterized as "very high." 

Clearly, regulators agreed. 

The consent order requires First Guaranty, a subsidiary of First Guaranty Bancshares, to upgrade its loan documentation and review procedures, and to improve the monitoring and stress testing of commercial real estate loans.

Beyond those more generalized requirements, the consent order directs First Guaranty to cut the levels of loans that were graded as doubtful or substandard — both categories of criticized loans — at the time of the September 2025 exam. First Guaranty reported zero doubtful loans as of June 30, but substandard credits totaled $276.6 million. 

Regarding capital levels, First Guaranty appears to be moving in a positive direction, after completing the sale of five Texas branches to the $2.7 billion-asset Armstrong Bank in Muskogee, Oklahoma, on Aug. 6.

When it announced the branch sale in March, First Guaranty noted the transaction was expected to boost Tier 1 leverage capital — which stood at 7.09% on June 30 — by approximately 100 basis points. The consent order requires First Guaranty to raise that capital ratio to 9%.

First Guaranty has encountered headwinds in recent years. In July 2023, the bank canceled plans to acquire Lone Star Bank in Houston after its share price plunged, upsetting the deal's economics. A year later, in July 2024, President and CEO Michael Mineer announced plans to eliminate 71 jobs to reduce operating costs. It also cut its quarterly dividend from 16 cents per share to 8 cents. First Guaranty slashed the dividend to a penny in December 2024.

The First Guaranty consent order even as the number of enforcement actions involving federal banking regulators has been declining for the past decade.