Former Synapse Partner Lineage Bank Agrees to FDIC Consent Order

Lineage Bank, one of the partner banks tied to the collapsed Synapse BaaS business, has agreed to a new FDIC consent order dated June 24 and announced on July 31. For anyone tracking high-risk banking partners, the interesting part is not the paperwork itself but the operating constraints it puts around capital, deposits, and fees.

1. The FDIC said Lineage Bank consented, “without admitting or denying any charges of unsafe or unsound banking practices,” to the issuance of the order. The bank must submit a three-year business plan, write a profit plan and budget to improve earnings, and prepare a problem credit reduction plan to address loan relationships flagged in an earlier FDIC examination.
2. The order also requires Lineage Bank to ensure the allowance for credit losses is appropriately funded, maintain a specified capital plan, and get prior written consent from the regional director before declaring or paying any dividend or management fees. In practice, that means less room to move cash around the group without the FDIC looking first.
3. On the funding side, Lineage Bank must formulate a brokered deposit plan to manage and reduce the volume of traditional brokered deposits, and it must also create an interest rate risk mitigation plan. It will need to send quarterly progress reports to the regional director, and it must provide a copy of the order to its parent holding company.
4. The order stays in effect and enforceable until the FDIC decides otherwise. It also says the provisions do not block the FDIC or any other federal or state agency from taking additional action against the bank or its current or former institution-affiliated parties.
5. PYMNTS reported in June 2024 that Lineage Bank was one of four partner banks where Synapse had opened demand deposit accounts on behalf of 100 FinTech partner platforms over the previous decade. PYMNTS also reported later that month that Lineage Bank had a separate FDIC consent order from February 2024. In March, Recap Financial Ventures completed its acquisition of a majority interest in Lineage Bank’s holding company, Lineage Financial Network.