Fed issues consent order to Industry Bancshares in Texas

Industry Bancshares in Industry, Texas, which has been embroiled in a battle with the Office of the Comptroller of the Currency, is now dealing with an enforcement action with the Federal Reserve.

The Fed announced that the $5.1 billion-asset company agreed to a consent order requiring it to submit a written plan to strengthen board oversight and for the board to “maintain effective control over” operations and activities such as risk management, interest rate risk management, liquidity, capital planning, strategic planning and cash flow.

Industry is the holding company for six banks. Three have national charters and are supervised by the OCC; the others have Texas state charters.

Industry’s executives had refused to sign off on cease-and-desist orders that the OCC had issued against three of its banks. The C&D orders stated that Industry was in a “troubled condition” and noted that the company’s strategy of investing in long-term bonds “resulted in excessive concentration risk.”

The OCC also cited Industry’s vulnerability to changes in interest rates and “liquidity exposures” because the company had become dependent on “funding sources that may not be available” if there was more financial stress. “The board and management were slow to recognize the sustained increase in interest rates and failed to enact meaningful corrective measures to address the effects of rising interest rates over the past 18 months,” the OCC added.

The OCC recently stated that it intends to amend its notice of charges against First National Bank of Shriner, Bank of Brenham and First National Bank of Bellville to include unsafe or unsound practices tied to corporate governance identified in the OCC’s March exam. The OCC is also implementing higher capital requirements for each bank.

Industry, which is dealing with underwater bonds, has argued that the C&D orders were unnecessary because it was already working to address the OCC’s concerns. Industry called the orders “regulatory overreach” and stated that was looking to have the issue addressed by an administrative law judge.

The company announced in August that it was raising $195 million by selling common stock to a group led by CSBH LLC. The lead investor is the holding company of New Horizon Bank, a Powhatan, Va., bank it bought and recapitalized in 2021.

Carl Chaney, a former president and CEO of Hancock Whitney, was named Industry’s executive chairman. Brian Hobart, former chief lending officer at Independent Financial, was named CEO.

Chaney, who also serves on the board of MidWestOne Financial Group in Iowa City, was chairman of Beach Bancorp in Fort Walton Beach, Fla., when it was sold to First Bancshares. Meanwhile, Independent Financial recently agreed to sell itself to SouthState in Winter Haven, Fla.

The stock sale “is a testament to the direction, ambition and values of our company, including its six bank subsidiaries,” J. Doak Hartley, Industry’s president, said in a release announcing the recapitalization. “The agreement provides additional capital to support our focus on serving our customers and communities with the exceptional experience they have come to expect.”

“Industry plays a vital role in its communities; serving households, businesses, farmers and ranchers, municipalities and nonprofits,” Uriel Cohen, CSBH’s founder and director, said in the release. “We have seen the passion Industry has for its customers and communities, and we eagerly anticipate working together to build upon the exceptional legacy Industry has established in its markets.”