Forbright Bank’s Community Reinvestment Act Compliance Evaluation Update

Forbright Bank, a climate-focused bank based in Chevy Chase, Maryland, is facing scrutiny over its compliance with the Community Reinvestment Act (CRA), according to an updated evaluation by the Federal Deposit Insurance Corp. The evaluation revealed that the bank’s compliance needs improvement, particularly in relation to a now-ended origination relationship with a third party.

The third party, a credit-building fintech, charged users fees that raised concerns under the CRA. Although Forbright did not charge or benefit from these fees, the bank is taking steps to repay affected users and address the issue. A spokesperson for the bank stated that Forbright is committed to remedying all issues identified in the evaluation by discontinuing the problematic line of business, enhancing monitoring and reporting systems, and implementing new policies and procedures.

In addition to the CRA compliance concerns, Forbright Bank is also facing an FDIC consent order related to liquidity risk stemming from its reliance on noncore funding, specifically brokered sweep deposits. The bank is working to address the issues outlined in the consent order by enhancing risk management policies and launching direct-to-consumer savings accounts to replace brokered sweep deposits.

Despite these challenges, Forbright Bank maintains strong capital levels, with a CET1 ratio of approximately 16%, and robust liquidity exceeding 40% of assets. The bank’s core lending areas, including healthcare, lender finance, real estate, and leveraged finance, remain active in the market.

While an FDIC spokesperson did not provide a comment at the time of publication, Forbright Bank is focused on addressing the regulatory concerns and strengthening its operations to better serve the communities it operates in.