Dive Brief:

• Quontic Bank Holdings Corp., the holding company for New York City-based Quontic Bank, is restricted from distributing capital without permission from regulators, according to an enforcement action issued Thursday.
• The holding company will not pay dividends, engage in share repurchases or make any other capital distributions without the prior written approval of the Federal Reserve Bank of Philadelphia, according to an agreement.
• Thursday’s enforcement action follows a consent order the Office of the Comptroller of the Currency issued in October, in which the regulator claims the bank failed to address certain regulatory concerns outlined in a 2018 agreement.

Dive Insight:

As part of the enforcement action, Quontic Bank Holdings Corp. may not directly or indirectly incur, increase or guarantee any debt without the prior written approval of the Philadelphia Fed.

The company is required to submit, within 60 days of the agreement, a plan outlining how it plans to maintain sufficient capital at Quontic Bank. The firm is also required to provide the regulator with the bank’s cash flow projections for the remainder of 2023. 

The enforcement action is the third against Quontic Bank in five years, according to American Banker.

The OCC in October ordered the bank to maintain a total capital ratio of at least 13% and a leverage ratio greater than 9% after it claimed the firm failed to address certain regulatory concerns outlined in a 2018 agreement.

The firm’s total capital ratio as of March 31 was above 20%, Quontic Bank President Robert Russell said in an emailed statement to Banking Dive on Thursday.

“The Bank is fully committed to addressing all issues identified in the Written Agreement. The Bank has already made progress in several areas and has added significant resources throughout the organization,” he said said. “It is important for our customers and the public to know the matters outlined in the Written Agreement do not pose a risk to depositors’ funds and Quontic Bank is FDIC Insured.” 

Known as a tech-forward bank, Quontic launched a Bitcoin rewards program in 2020. The firm also rolled out a payments ring in 2021 and built a presence in the metaverse in 2022.

Quontic Bank founder and former CEO Steve Schnall, who launched the bank in 2009, died in a motorcycle accident last year.

After his passing, Schnall’s ownership stake in the bank was transferred to his wife, Sherri Schnall, in November, according to a regulatory filing.