Four years to the day after they first went public, shares of First NBC Bank Holding Co. will stop trading this week, the final chapter in the stunning collapse of a one-time darling of New Orleans’ business community.
The death knell comes less than two weeks after federal and state regulators — their concerns about First NBC’s accounting practices and capital levels mounting — seized the beleaguered institution, ordering it closed and initiating a $1 billion cleanup, the costliest failure of an American bank since 2010.
“Relying on volatile funding sources, the bank has experienced rapid growth in assets that were not liquid,” John Ducrest, commissioner of the Louisiana Office of Financial Institutions, said in a four-page affidavit outlining the reasons for the seizure.
The affidavit, filed in Orleans Parish Civil District Court on April 28, the day of the seizure, added that First NBC was “in an unsafe and unsound condition, and cannot any longer continue the business of banking.”
Despite a tumultuous year for the New Orleans-based bank that saw its stock price tumble by 90 percent ahead of the closing, the sudden failure still caught many observers by surprise.
Ducrest’s affidavit shows the situation deteriorated rapidly, with the bank taking heavy losses in recent months in its portfolio of loans and tax-credit investments, despite measures to shore up its finances.
In the end, the bank was insolvent. As of March 31, its so-called Tier 1 capital, a measure of a bank’s financial strength, was roughly $72 million in the red.
After the seizure, First NBC Bank was acquired by Mississippi-based Hancock Holding Co., the parent company of Whitney Bank, in a deal that included $1.6 billion in deposits and $1 billion in assets, including $600 million in cash. The cost to the Federal Deposit Insurance Corp. — an arm of the government — was estimated at $1 billion.
It marked the fourth bank failure in the U.S. this year.
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