Forbright Bank’s compliance with the Community Reinvestment Act needs improvement. Updated Rating Issued by the Federal Deposit Insurance Corporation.
The downgrade is related to a lending relationship the Chevy Chase, Maryland-based climate-focused bank had with a third party, a source familiar with the rating told Banking Dive. That relationship ended in April 2022, and the loan in question accounted for less than 0.05% of the bank’s assets, the source said.
An unnamed third-party credit-building fintech charged users fees, sparking concerns from the FDIC’s CRA. Forbright does not charge these fees, nor does it make any money from them, and is refunding affected users, sources said. The bank said it is committed to remedying the issue once and for all.
“We are deeply committed to the communities we serve and have put systems and plans in place to remediate all of the issues identified in the CRA’s assessment, including eliminating problematic lines of business, strengthening our monitoring and reporting systems, and implementing new policies and procedures to enhance our processes going forward,” a Forbright Bank spokesperson said in an email.
The bank has also strengthened its risk management team and remains “committed to the highest standards of business conduct”, a spokesman said.
The CRA’s evaluation is: FDIC Consent Orders Faced by BanksThe order, published late last month but dated May 3, cited Forbright’s “dependence on non-core funding” as a liquidity risk.
This non-core funding came from broker-sweep deposits, a type of deposit made from uninvested cash in customer accounts. Broker-sweep deposits are sometimes considered “hot money” because they are less “sticky” than typical retail deposits as they move toward higher yields. American banker.
A Forbright spokesperson told Banking Dive that the bank takes the consent order seriously and is working to address the issues the FDIC identified.
“This includes strengthening our risk management policies and procedures and successfully launching direct-to-consumer savings accounts as an alternative to broker-directed sweep deposits,” the spokesperson said.
Forbright offers high-yield savings accounts and high-yield certificates of deposit.
“The bank has strong capital positions with a CET1 ratio of approximately 16%, cash and short-term liquidity exceeding 40% of assets and over 85% of deposits are insurance protected. Our earnings are strong and we are fortunate that only around 1% of our loans are secured by commercial office buildings and our securities portfolio is overwhelmingly short-term government securities,” the spokesperson said. “Our key lending areas – healthcare, mortgage financing, real estate and leveraged finance – are all actively lending in today’s market.”
An FDIC spokesperson did not respond to a request for comment by press time.
