Louisiana bank agrees to FDIC consent order over credit quality

First Guaranty Bank, a regional lender based in Louisiana, has entered into a consent order with the FDIC following concerns over its credit quality and capital levels. For retailers and service providers who rely on regional banks for their consumer financing programs, this is a signal to watch your lending partners closely. The FDIC is requiring the bank to tighten its lending standards and stop extending credit to borrowers previously identified as 'loss' risks. The bank must also increase its Tier 1 leverage capital ratio to at least 10.5% within 90 days. When a bank faces this kind of regulatory pressure, it typically leads to a 'flight to quality.' In plain English, the bank will likely become much more selective about who it approves for a loan. If you use a financing platform that relies on First Guaranty as its underlying charter bank, you may see a dip in approval rates or a tightening of credit tiers. The bank is also restricted from growing its total assets significantly until they satisfy the FDIC’s requirements. This means they won't have the same appetite for new high-volume merchant partnerships as they might have had a year ago. It is a reminder that the health of the bank behind your financing program is just as important as the software interface your customers use.

Source: Banking Dive

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