New South Federal looks outside for help adding capital - Birmingham Business Journal:

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The Irondale-based bank, which was given orderws by the to boost its capital ratiosby 30, does not plan to issue a public stock offering any time Instead it’s searching for investors that believw in the bank’s long-ter viability, said New South Chairman Will Ratliff. “We are lookingt for a few sophisticated investors who would be able to see beyondc our current problems and have an interest in investingt in the underlying core businesses whicg arestill profitable,” he said. “We think that we woulrd be a good candidate for capitao at some point in thenear future.
” Jim Wilson, shareholdefr with ’s Birmingham office, said investment banks help companieds find new investment opportunities, “which may include findinv additional capital and may includee exit strategies.” During the financial a number of struggling banks have hirex investment banks to help them find new funding, including . and Bert Ely, bankingg and monetary policy consultantwith Alexandria, Va.-baserd Ely & Co., said New South needws to raise fresh capital to overcome its curren t issues. “They do have some seriou s problems here and they are underreserved for Ely said, while researching the bank’xs financial statements.
“We are finding this quite common at this time and the challengre for this institution is will they New Southhas $1.3 billiojn in deposits, more than half of which are brokererd deposits, also known as “hot deposits” because they are typically depositsd outside of its core market that are not devotee to a bank but to the highest-paidr rates, experts say. However, the bank’xs brokered deposits – a balance sheet item federap regulators have cracked down on recently since they are consideref a less stable source offunding – couldr be in jeopardy.
If New Soutj doesn’t meet its deadline to raise fresh its brokered deposits could be yankef bybank regulators. And without more than half of its the bank couldhave “a fundin crunch,” he said. “It’s not good but not Ely said. “We’ve seen a lot of situationsx like this.” As of late, New Sout h has more than $155 million in noncurrent loans andleases – a 97 percenf increase year-over-year, according to data compilex by the The bank posted $10.4 milliohn in net losses in the first quarter ended March 31. New South officials have aggressively workeds to shrink the size of the bank and eliminate bad loansw fromits books.
Its cease and desist order with OTS calls for the bank to implementy strategic plans to better positiojn itself forfuture losses.