Forbright Bank, an environmentally-focused fast-growing Maryland community bank, entered a joint FDIC and Maryland DFR consent order on May 3, 2024 for deficiencies in board supervision, management performance, risk management, capital planning, liquidity and funds management, and interest rate risk arising from its reliance on brokered deposits to fund rapid loan growth — with a 10% annual growth cap and dividend/executive compensation restrictions.

Forbright Bank — FDIC/Maryland Consent Order: Brokered Deposit Funding Risk (2024)

Outcome: Forbright Bank, an environmentally-focused community bank headquartered in Chevy Chase, Maryland, entered a joint FDIC and Maryland Commissioner of Financial Regulation consent order on May 3, 2024, for deficiencies across board supervision, management performance, risk management, capital planning, liquidity management, and interest rate risk — primarily arising from the bank's aggressive use of brokered deposits to fund rapid loan growth in its climate-focused lending portfolio.

Forbright Bank had positioned itself as an environmental-mission-driven community bank, growing rapidly by focusing on lending to sustainable infrastructure and green economy projects. This growth strategy required the bank to rely heavily on brokered deposits — funds raised through deposit brokers rather than core local depositor relationships — as a primary funding source, a practice that regulators viewed as creating elevated liquidity and funding risk given the volatile and rate-sensitive nature of brokered deposits.

The FDIC and Maryland regulators found that the bank's board had not maintained adequate supervision of the risks created by this funding strategy, that management performance had deficiencies, and that risk management practices around liquidity, funds management, and interest rate risk were inadequate for the bank's growth trajectory. The order also referenced violations of insider lending rules and required the bank to address compensation-related deficiencies including director and executive pay practices.

Key consent order provisions included: immediate increase in board oversight of operations; revision of fund management programs within 60 days; a growth cap limiting the bank to no more than 10% asset growth per year; required regulatory pre-approval for dividend payments; required pre-approval before adding any director or executive officer; and a requirement to ensure board meeting minutes were "sufficiently detailed" to demonstrate active board oversight. The consent order was subsequently terminated after Forbright remediated the identified deficiencies.

Primary Source: FDIC/Maryland DFR Consent Order FDIC-23-0125b — Forbright Bank (May 3, 2024)