First Guaranty Bank agrees to FDIC consent order over credit quality

Hammond, Louisiana-based First Guaranty Bank has entered into a formal agreement with regulators to operate under a new consent order addressing the institution’s loan portfolio and capital adequacy. The directive was confirmed in a filing submitted to the Securities and Exchange Commission on Friday by bank officials. Under the terms of this arrangement, which became effective immediately upon announcement, federal and state authorities have imposed strict limitations on how First Guaranty can extend credit to specific borrowers.

The Federal Deposit Insurance Corporation and the Louisiana Office of Financial Institutions are now restricting the lender from issuing additional loans to any borrower whose account has been charged off or officially classified as a loss during an examination conducted in September 2025. Furthermore, the bank is prohibited from extending further credit to accounts marked as doubtful or substandard unless its board of directors provides written justification explaining why withholding such credit would cause detriment to the institution’s operations.

To ensure financial stability under this order, First Guaranty must maintain a Tier 1 leverage capital ratio of at least nine per cent and a total risk-based capital ratio of no less than fourteen per cent. The bank is also required to eliminate assets classified as losses or half of those marked doubtful from its books within one hundred and twenty days through either collection or charge-off procedures.

In the sixty-day period preceding that deadline, First Guaranty must submit a comprehensive written plan detailing strategies for reducing remaining doubtful and substandard assets. This document must include specific information regarding any single asset with a balance of two million dollars or more. Additionally, within ninety days, the bank’s board is mandated to present regulators with a plan identifying and monitoring concentrations in commercial real estate loans.

The same timeframe allows First Guaranty to implement corrective measures for weaknesses identified during stress testing on its commercial property portfolio as well as deficiencies found in loan underwriting and credit administration processes. While operating under these restrictions, the bank cannot pay dividends to its holding company without prior written consent from regulators. Quarterly progress reports must be submitted directly to both the FDIC and the Office of Financial Institutions.

In response to the order, First Guaranty stated it has already provided a capital plan to authorities. The institution noted that as of June 30, its Tier 1 leverage ratio stood at seven point zero nine per cent while its total risk-based capital ratio was sixteen point two one per cent. Recent actions include the sale of five branches to Armstrong Bank in Muskogee, Oklahoma, which is expected to improve the bank’s leverage figures by approximately one hundred basis points.

Financial results for the second quarter showed a significant recovery with reported profits reaching three point four million dollars compared to a loss of seven point three million dollars recorded during the same period twelve months earlier. Nonperforming assets related to real estate declined from eighty-eight point six million dollars in the previous reporting cycle to thirty-eight point three million dollars as of June 30. The bank currently reports no doubtful loan relationships but holds two hundred and seventy-six point six million dollars in substandard loans according to its latest earnings disclosure.