Struggling First NBC Bank Holding Co. is pursuing strategic options, weighing the possibilities of raising new capital by selling shares or of an outright sale of the bank, according to people familiar with the matter.
In October, already battered shares in the New Orleans lender plunged further after it disclosed that regulators deemed it to be in "troubled condition" and restricted its ability to take on debt. While the bank had previously said it hoped to avoid issuing more common stock to bolster capital levels, the restrictions limited options like issuing subordinated debt.
A large common-stock offering would dilute existing shareholders especially given the 85% year-to-date decline in its stock. Beforethe company's latest troubles emerged, some analysts had estimated First NBC may need to raise as much as $150 million to shore up its balance sheet.
The bank currently trades at just 29% of book value. Its market value has shrunk to about $106 million from more than $700 million at the end of 2015.
The bank said last month that it hired financial advisors to help with a turnaround plan. First NBC's advisors at Sandler O'Neill & Partners have recently fielded inquiries from interested investors and potential acquirers, the people familiar with the matter said.
The bank is now considering a private placement of common stock and thinks there is enough investor interest to get a deal done, the people said. Another option is a sale. At least three other banks have expressed interest in buying First NBC, one of the people said. The identities of the potential buyers couldn't be determined.
The bank hopes to be in a position to announce either deal in coming weeks, the people said. However, there are a number of steps that remain before either option can happen. A capital raise, for instance, would need approval from regulators. And a further decline in its share price could complicate matters further.
First NBC opened in 2006 in the wake of Hurricane Katrina, backed by a slate of well-heeled local investors including football stars Peyton and Eli Manning. The lender grew rapidly, relying heavily on an esoteric tax-credit business for much of its profits.
This year, the tax credits have led to questions about First NBC's earnings, capital levels and accounting. In particular, its deferred tax assets may no longer count as much toward its capital under new regulations. At the same time, the bank is grappling with souring loans and securities.
The Federal Deposit Insurance Corp. told First NBC earlier this year that it is no longer "well capitalized," restricting its ability to take on certain deposits and pay interest, according to the bank.
First NBC has also faced accounting issues and has disclosed that these are being investigated by the U.S. Securities and Exchange Commission. It has had to restate results for prior years and its annual filing for 2015 and first and second quarter filings were both delayed; the latter was only filed last month.
Additionally, the bank doesn't currently have an auditor.
First NBC is trying to finalize the hiring of a new auditor.
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(END) Dow Jones Newswires
November 06, 2016 20:45 ET (01:45 GMT)
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