Golden Mountain Financial Holdings Corp. (fka FNBCQ)

[56Chevy]

First NBC Bank fails, ordered closed; will be absorbed by Whitney Bank

Apr 28, 2017 - 4:31 pm

The beleaguered First NBC Bank was abruptly ordered closed by state regulators Friday, and it will be acquired by Whitney Bank, officials announced.

The Federal Deposit Insurance Corp., which is responsible for insuring bank deposits, was named receiver of the failed community bank.

It “immediately transferred” all the bank’s "transactional deposit" accounts to Whitney, according to a news release from the state Office of Financial Institutions, which made the decision to close the bank.

Transactional deposit accounts include checking, savings, money market and NOW accounts.

The FDIC will send checks to holders of "time deposit" accounts — including IRAs, brokered deposits and some CD accounts— starting Monday, the news release said.

The release said that no First NBC customers would incur a loss as a result of the closure.

Officials said that First NBC customers will be able to access their accounts at the bank's 29 former branch locations — which will be rebranded as Whitney Bank branches in Louisiana and Hancock Bank branches in Florida — under the new regime. The hours will not change, meaning that if a branch has been open on Saturdays, that will remain the case.

Customers will also be able to access their accounts normally through ATMs, the news release said.

Whitney Bank said its acquisition of First NBC includes approximately $1.6 billion in deposits and $1 billion in certain assets, including cash, securities and loans. Net cash to Whitney totals about $600 million.

Earlier this year, in a bid to stabilize its shaky finances, First NBC sold nine branches and $1.3 billion in loans to Hancock, Whitney's parent company, a transaction that it said provided it more than $200 million in cash.

Bank failures are relatively rare. First NBC is the fourth — and by far the largest — American bank to close thus far this year, according to the FDIC. Just five U.S. banks failed last year. First NBC is the largest bank to fail since Doral Bank, based in Puerto Rico, was shut down in 2015.

The sudden failure of First NBC came just weeks after bank founder and President Ashton Ryan Jr. stepped down. Ryan had relinquished the title of CEO four months earlier, amid a reorganization.

But in March, First NBC's parent company was notified by the FDIC that it was deemed "significantly undercapitalized," a designation that required it to increase its capital or take steps toward a merger.

First NBC's stock was trading Friday at $2.65 a share, down more than 90 percent from its peak of about $42 a share in December 2015. The stock value has fallen by roughly a third since early April.

Founded in 2006, First NBC was active in structuring and financing tax credit-related projects after Hurricane Katrina devastated the region in 2005. It struggled, however, with accounting issues involving those projects.

Those issues forced the company to delay financial reports, and also to state in filings that its financial statements dating back to 2011 should no longer be relied upon.

In another regulatory filing earlier this year, First NBC's parent company said it expected to record a "material valuation allowance" related to its deferred-tax assets — basically its expected cash flow from future tax benefits — as of Dec. 31.

The company said it was "unable to estimate the amount" of the potential write-down, but that the number would be based on factors tied to its still-uncompleted financial statements for 2016. First NBC had said it expected to file the statements by April 30.

Despite First NBC's recent setbacks, some industry experts were surprised by Friday's announcement.

Jonathan Briggs, a New Orleans bank mergers specialist at Performance Trust Capital Partners, called it a "stunning" development coming only months after the sale that gave the bank more than $200 million in cash.

"It was such a success story for banking in Louisiana, and certainly in New Orleans, for so many years, that the downfall was sudden," Briggs said.

At the same time, Briggs noted that First NBC's work in financing tax credit-related projects was "a different kind of business than what banks typically get into."

"I think part of the problem is that the regulators didn't quite understand it," he added.

With the FDIC absorbing nearly $1 billion in liabilities from First NBC's collapse, Briggs said the transaction was "a really good deal for Whitney and Hancock," which he viewed as among the few banks in the market large enough to facilitate the deal.

http://www.theadvocate.com/new_orleans/news/business/article_0f0a0f54-2c5a-11e7-8565-577c68c4ad5d.html

*Stunning news. There was no prior indication this would happen once the bank raised over $200MM.