Former BaaS bank Mode Eleven to seek buyer through bankruptcy

Mode Eleven Bancorp in Hulett, Wyo., which decided to shut down its Banking-as-a-Service platform last year after being hit with a regulatory order, is looking to sell its bank through a bankruptcy process.

The company filed for Chapter 11 bankruptcy protection on June 9. It is working with Hovde Group to find a buyer for its Summit National Bank. The filing was prompted by concerns that the bank could face more-intense regulatory scrutiny if capital levels continue to deteriorate.

Summit National is already operating below the minimum 13% capital ratio required under a consent order with the Office of the Comptroller of the Currency.

(OCC). More concerning: internal projections show one of the bank’s critical capital ratios could fall below 2% within months — a threshold that would trigger mandatory closure by the OCC. The bank is also operating under a cease-and-desist order with the Federal Reserve.

“The debtor lacks sufficient liquidity to inject funds to allow the bank to satisfy the capital ratio required by the OCC consent order,” the company said in the bankruptcy filing. The filing notes that regulators could impose harsher orders, civil penalties of up to $1 million per day, or close the bank.

Hovde is reportedly looking to market the bank to more than 30 potential buyers. The goal is to collect indications of interest by July 11, binding bids by July 25, and conduct a sale hearing on Aug. 4.

Mode Eleven tried to recapitalize in late 2024 through a $20 million private stock offering but the effort fell short of its minimum funding threshold and was terminated in April.