Two banking holding company firms – one based in Wyoming, the other in Texas – face enforcement actions by the Federal Reserve for weak oversight and safety and soundness deficiencies of the banks they own, the agency said.
The Fed said that Mode Eleven Bancorp of Hulett, Wyoming, was served with a cease-and-desist order. According to the Fed, the firm, which owns Summit National Bank, also of Hulett, “had previously adopted a strategy focused on providing banking-related services to financial technology companies through certain nonbank subsidiaries requiring significant financial and managerial resources and support from the Firm.” The Fed referred to that as the company’s “fintech business strategy.”
The agency said that an exam last fall of the bank holding company revealed deficiencies in Mode Eleven’s operations, including with respect to pursuit of the fintech business strategy, related to board oversight, capital, earnings, liquidity, risk management, and compliance with the rules related to affiliate transactions. The agency said the firm as voluntarily ceased “pursuit of the fintech business strategy” and is winding down all related activities.
In the other action, the Fed said it had entered into a written agreement with Steele Bancshares, Inc. of Tyler, Texas – and its subsidiary bank, American State Bank of Arp, Texas – following an exam from last spring that found safety and soundness deficiencies of the bank.
The Texas Department of Banking was also a partner in the agreement.
Under the agreement, Steele Banchares agreed to, among other things, serve as a source of strength for the bank (to ensure the bank complies with the agreement), review its corporate governance structure and strengthen board oversight, and develop a lending and credit risk management plan, particularly regarding commercial real estate lending.
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