Shivan Govindan wasted no time trying to turn First NBC Bank around.
Govindan, a veteran bank investor, became the New Orleans company's chairman in September. A few short months later, the $4.9 billion-asset First NBC has shaken up its management and agreed to sell more than a quarter of its assets.
But Govindan's work is far from done. While recent efforts have returned certain ratios to a level where First NBC could be deemed well capitalized, the company remains well below capital levels outlined in a November consent order with regulators.
That order also required First NBC to evaluate management and to review procedures for identifying and managing problem loans.
For those reasons, Govindan, who is front and center when it comes to addressing First NBC's issues, is one of American Banker's community bankers to watch in 2017.
"Having a permanent solution is the key and it is Shiv's duty to make that happen," Christopher Marinac, an analyst at FIG Partners, said in an interview before the asset sale was announced.
Ashton Ryan, who founded First NBC in 2006 in the wake of Hurricane Katrina, was originally eyed for American Banker's watch list. Ryan, however, was recently stripped of his CEO title, replaced on an interim basis by Buck Moyse, a First NBC director with banking experience.
A search is underway to find a permanent replacement for Ryan, who remains the company's president, and a chief operating officer.
Govindan — who is also an investor and director at the beleaguered The Bancorp in Wilmington, Del. — has moved with alacrity since turning First NBC's management structure on its head. On Friday, First NBC agreed to sell nine branches — most of them in the New Orleans area — and $1.3 billion in loans to Hancock Holding in Gulfport, Miss., for about $227 million in cash, subject to adjustment.
The move should boost First NBC's capital ratios by 300 to 400 basis points. That is no small accomplishment for a bank that, in October, was designated by regulators as a "troubled" institution after its total risk-based capital ratio slipped below the 8% threshold necessary to be considered well capitalized.
The asset sale was part of a "a comprehensive review" of First NBC's alternatives, Govindan said in a press release announcing the deal. "We believe the successful completion of the transaction should significantly increase our liquidity and our financial flexibility as we move forward and seek to refocus our efforts of managing and growing our core business," he said.
Representatives for First NBC and Hancock declined additional comment.
The deal, which is expected to close this quarter, should push total risk-based capital comfortably above 11%, Kevin Fitzsimmons, an analyst at Hovde Group, wrote in a note to clients on Tuesday.
Catherine Mealor, an analyst at Keefe, Bruyette & Woods, used her research note on Monday to commend the company on efforts to raise key ratios without a dilutive capital raise. Still, she characterized the expected infusion as a "lifeline" since First NBC will remain considerably short of the 15% total-risk based capital target regulators set in the consent order.
First NBC had dug itself a deep hole in recent years. Problems first surfaced in August 2015, when the company delayed filing a quarterly report after finding errors in its accounting for tax credits. Those issues deepened in March when a fresh crop of errors forced management to delay filing an annual report.
Though it has made progress, First NBC has yet to file its third-quarter report. Still, the bank was on pace to be profitable in 2016, earning $38 million through Sept. 30, based on a call report filed with the Federal Deposit Insurance Corp.
First NBC on Monday hired Crowe Horwath as its independent auditor, pledging to complete work on its third-quarter and full-year 2016 results as soon as possible.
Govindan and his management team may also have more work ahead when it comes to tackling issues with the loans the company didn't sell.
The loans being sold to Hancock are largely performing commercial real estate and commercial-and-industrial credits, Mealor said. That would leave First NBC's $183 million energy book untouched, doing little to improve credit quality.
If only performing loans change hands in the asset sale and no other moves are made by First NBC, nonperforming loans could rise from 4.5% at June 30 to more than 6.8% after the deal closes.
Govindan has given few indications of the course First NBC will follow in 2017 beyond a pledge to focus on core banking, cost-cutting and reducing nonperforming assets. There is still a belief among some industry observers that First NBC could eventually sell itself, though the asset sale calls that move into question.
One thing is certain: There will be more surprises in the months ahead.
"This story has uncertainty at every turn," Marinac said. "The company has higher intrinsic value by turning itself around, though it requires capital and heavy lifting."
Paul Davis contributed to this report.