Banking firms in Texas, New York face cease and desist order, written agreement from Fed

Banking firms in Texas and New York are facing enforcement actions by the Federal Reserve, the agency said Thursday.

Herring Bancorp Inc. (HBI), of Amarillo, Texas, and Quontic Bank Acquisition Corp., of Astoria, N.Y., and Quontic Bank Holdings Corp., also of Astoria, were cited by the Fed in separate cease and desist orders and written agreements.

The action against HBI follows up on previous action taken by another federal banking regulator two years ago. In October 2021, the Federal Deposit Insurance Corp. (FDIC) issued a consent order against HBI subsidiary Herring Bank for unsafe and unsound banking practices – including weaknesses in board and management oversight, capital, and liquidity.

In addition to agreeing to a plan to strengthen its board (with an external director, among other things) and management, as well as asset/liability management and developing a capital maintenance plan, the bank is also restricted from declaring a cash dividend without prior written consent of federal and state regulators.

However, in examinations last year, both the Fed and the Texas state banking department said they found that “previously identified deficiencies in HBI’s board oversight and financial reporting that HBI has yet to fully correct.” The agencies said they had found deficiencies in HBI’s board and management oversight, liquidity and funds management practices, and affiliate transaction policies.

The action against the New York firms, which according to the Fed, own a federal savings bank, also of Astoria, known as Quontic Bank, follows up on action (a “formal agreement”) taken by the Office of the Comptroller of the Currency (OCC) taken in 2018. According to the OCC, it determined that the bank has engaged in unsafe or unsound banking practices relating to its board and management oversight and funds management practices. The OCC said the bank agreed to several governance and planning requirements to be pursued by the banks.

The Fed agreement follows up on that for the holding companies, according to the agreement, with various requirements on capital, dividend payments, cash flow projections, and more.

Federal Reserve Board issues enforcement actions with Herring Bancorp, Inc., Quontic Bank Acquisition Corp., and Quontic Bank Holdings Corp.