Lineage Bank, a former partner institution for the now-bankrupt banking-as-a-service (BaaS) provider Synapse, has formally agreed to a consent order with the Federal Deposit Insurance Corporation (FDIC). The order, dated June 24 and announced by the FDIC on Friday, July 31, requires Lineage Bank to address specific areas of concern without admitting or denying any charges of unsafe or unsound banking practices.
FDIC Mandates Comprehensive Business and Financial Overhaul
The consent order outlines a series of stringent requirements aimed at bolstering Lineage Bank’s operational and financial stability. Key provisions include the development of a detailed three-year business plan, designed to guide the bank’s strategic direction. Furthermore, the bank must formulate a written profit plan and budget specifically intended to improve earnings. A critical component of the order is the requirement for a problem credit reduction plan, targeting improvements in loan relationships identified during a previous FDIC examination.
To ensure robust financial health, Lineage Bank is mandated to ensure its allowance for credit losses is appropriately funded. The bank must also maintain a specified capital plan and secure prior written consent from the regional director before declaring or paying any dividends or management fees. The order also emphasizes the need for a structured approach to managing brokered deposits, requiring the formulation of a plan to manage and reduce the volume of traditional brokered deposits.
In addition to these financial and operational directives, Lineage Bank is required to develop an interest rate risk mitigation plan. The bank will be obligated to submit quarterly progress reports to the regional director, detailing its compliance efforts with the consent order. A copy of the order must also be provided to its parent holding company, Lineage Financial Network.
Background and Previous Scrutiny
This development follows a period of increased scrutiny for Lineage Bank. PYMNTS reported in June 2024 that Lineage Bank was one of four partner banks that facilitated Synapse’s operations, where Synapse had opened demand deposit accounts on behalf of approximately 100 FinTech partner platforms over the preceding decade. Synapse itself filed for bankruptcy in 2024.
Adding to the context, PYMNTS also reported in June 2024 that Lineage Bank was already under a consent order from the FDIC, issued in February 2024. This prior order likely laid the groundwork for the more comprehensive measures now being implemented.
In March, a significant ownership change occurred when an investor group, Recap Financial Ventures, completed its acquisition of a majority interest in Lineage Bank’s holding company, Lineage Financial Network. This acquisition may influence the bank’s ability to implement the required changes outlined in the new FDIC consent order.
The current consent order remains in effect and enforceable until the FDIC determines otherwise. The FDIC has also stated that the order does not preclude any future actions against the bank or its affiliated parties by the FDIC or other regulatory bodies.
