First NBC Bank in New Orleans may have avoided one problem only to run into a much bigger issue.
While the $4.9 billion-asset company finally filed its delinquent second-quarter report with regulators, the document disclosed that the Federal Reserve and the Louisiana Office of Financial Institutions earlier this month "deemed it to be in troubled condition."
The classification is a major blow to First NBC because it bars the company from taking on debt, buying back stock or paying dividends without regulatory approval. Similarly, the company must obtain Fed approval before adding any directors or senior executives.
The regulatory action comes less than two months after First NBC restated several years of financial reports. The restatements reduced capital by $99.2 million and pushed the company's Tier 1 and total risk-based ratios below the threshold for being considered "well capitalized."
To be considered "well capitalized," banks must maintain a Tier 1 risk-based ratio of at least 8% and a total risk-based capital ratio of at least 10%. At June 30, both of those ratios were below 7.3%.
The Federal Deposit Insurance Corp. limits the amount of brokered deposits held by banks that are not well-capitalized.
Ashton Ryan, First NBC's president and chief executive, did not respond to an email seeking comment.
Timothy Robichaux, deputy chief examiner for Louisiana's Office of Financial Institutions, declined to say whether any other state banks are classified as "troubled," though he stated in an email that officials in his office were working with federal regulators and First NBC "to address any issues relating to the organization."
First NBC investors were less than pleased with the news. The company's stock fell more than 19% on Friday, ending the day at $7.30 a share.
Kevin Fitzsimmons, an analyst at Hovde Group, wrote in a note to clients Friday that the "troubled institution" designation likely takes the option of issuing subordinated debt off the table for First NBC as it looks to bolster capital ratios. Under that scenario, it could take the sale of about 4.6 million shares of common stock to lift the company's total risk-based capital ratio to 10%, he added.
First NBC is known for extensive investments in low-income and historic housing projects, which yield tax credits for investors. In its recently filed document, First NBC reported that its deferred-tax asset has increased by 23% since the end of last year, reaching $253 million at June 30.
First NBC is still profitable, earning $26.7 million in the first half of this year.