Bank consolidation, capital cleanup and enforcement resolutions

Prosperity closed its Stellar merger, Richmond closed its Farmers merger, and Arrow closed its Adirondack acquisition. Prosperity Bancshares completed its merger with Stellar Bancorp on July 1, with Stellar shares converting into 0.3803 Prosperity common shares plus $11.36 cash per share and Prosperity assuming about $2.17 billion of Federal Home Loan Bank of Dallas obligations. Richmond Mutual Bancorporation completed its merger with The Farmers Bancorp the same day, with Farmers shareholders receiving 3.40 Richmond shares per Farmers share, and Arrow Financial closed its acquisition of Adirondack Bancorp and Adirondack Bank, with each Adirondack share converting into Arrow stock and $18.72 cash.

Colony and Bank 7 announced priced acquisitions. Colony Bankcorp entered a definitive merger agreement with First Reliance Bancshares, with closing expected in the fourth quarter, and ABA Banking Journal reported $163 million of stock consideration valuing First Reliance at 162% of tangible book value. Bank 7 Corp. entered a stock purchase agreement to acquire about a 71% controlling interest in Century Financial Services for $68.0 million through a court-supervised receivership stalking-horse bid.

OceanFirst completed its NYC multifamily loan sale. The June 30 filing said OceanFirst completed the sale of $1.3 billion of New York City multifamily loans acquired in its June 1 Flushing Financial merger, and a same-day amendment corrected the sold loan-collateral amount with rent-regulated exposure to $836 million from $736 million, meaning more such exposure was sold than first disclosed.

Large-bank stress buffers were preserved. All 32 tested banks stayed above minimum common equity tier 1 requirements under a scenario with a 39% commercial real estate price decline, a 30% house-price decline and 10% peak unemployment. Aggregate capital fell 1.6 percentage points after more than $708 billion of modeled loan losses, but the Fed preserved stress capital buffers and is weighing stress-test process changes as soon as next year.

Small Business Bank got a 30-day Fed capital order, and Rhinebeck approved a mutual-to-stock conversion. The Fed issued a prompt corrective action after deeming Small Business Bank significantly undercapitalized, giving it 30 days to issue new equity, arrange a sale or otherwise address capital issues. Rhinebeck Bancorp, MHC reported special-meeting approval of its amended and restated plan to convert from a mutual to a stock holding structure, a separate ownership and capital-structure change.

Patriot and BNP Paribas cleared supervisory actions. The OCC terminated its Jan. 14, 2025 Formal Agreement with Patriot Bank effective June 30, and American Banker reported that remediation cost more than $5 million and management expects compliance-related costs to decline sharply. The Federal Reserve terminated its cease-and-desist order against BNP Paribas and its U.S. subsidiaries tied to weak internal controls and oversight around foreign-exchange trading.

EagleBank and Merrill resolved control cases. EagleBank settled a U.S. Attorney’s Office investigation, entered a one-year DOJ non-prosecution agreement and paid about $9.8 million under the statement of facts. The SEC fined Merrill Lynch $7.5 million, censured the firm and issued a cease-and-desist order after saying its monitoring program missed suspicious transactions, and Bank of America retained a consultant to review its anti-money-laundering program.

SVB deposit litigation moved into trial. American Banker reported that the trial concerns roughly $1.7 billion of deposits left at Silicon Valley Bank when the FDIC took over the failed lender, with the parties disputing pre-collapse management decisions including a $294 million dividend. Bank Reg Blog described the broader bankruptcy-estate dispute as seeking $1.93 billion plus interest and said the FDIC’s answer alleged former officer and director fiduciary-duty breaches that could offset liability.