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Tioga-Franklin Savings Bank, which had $68 million in assets, was founded in 1873.

Dive Brief:

• Philadelphia-based Tioga-Franklin Savings Bank was closed by regulators Friday, and Second Federal Savings and Loan Association of Philadelphia agreed to assume all of the bank’s deposits and substantially all of its assets, said the Federal Deposit Insurance Corp., which acted as receiver.
• Single-branch Tioga-Franklin had about $68 million in assets and $67 million in deposits as of June 30, the FDIC said. The bank’s sole location opened Monday as a branch of Second Federal Savings and Loan Association of Philadelphia, and depositors of Tioga-Franklin automatically became depositors at Second Federal.
• The FDIC estimates Tioga-Franklin’s failure will cost the Deposit Insurance Fund about $5.5 million, although that estimate is expected to change as retained assets are sold. 

Dive Insight:

Tioga-Franklin is the fifth bank to fail this year. It was founded in 1873, as Tioga Building and Loan Association, according to the bank’s LinkedIn page. It was one of about 22 Black-owned banks in the U.S., according to a Forbes list published this year. 

The transaction will give single-branch Second Federal about $115 million in assets, the lender said in a notice on its website. Second Federal, which has about $43.6 million in assets, was established in 1924, and is regulated by the Office of the Comptroller of the Currency. 

“We are pleased to welcome Tioga-Franklin Savings Bank’s customers and employees to Second Federal,” Second Federal CEO David Rowland said in a statement on the lender’s website. “Our immediate priority is to ensure a smooth transition and continuity of service. We look forward to building strong, long-term relationships with the Tioga-Franklin customers by delivering responsive, service-focused banking.”

With the deal, Second Federal has acquired Tioga-Franklin’s “more advanced core processing system,” Rowland said in a statement. “This will enable Second Federal to offer a more contemporary range of banking services and products to all of its customers.”

In April 2024, Tioga-Franklin entered into a consent order with the FDIC, after the regulator cited deficiencies in board supervision and direction; management performance; strategic, profit and capital planning; liquidity and funds management; interest rate risk; audit; and credit administration. That followed a 2023 exam that identified weaknesses related to capital, earnings and strategic direction, among other things.

The FDIC consent order also flagged Bank Secrecy Act violations and issues with Tioga-Franklin’s anti-money laundering/counterterrorism financing program, and nonconformance with regulatory guidelines for bank internal controls and information systems, the bank’s internal audit system, loan documentation, interest rate exposure and asset quality, the agency said. 

Under the 19-page consent order, the bank’s board was ordered to “immediately increase” its supervision and direction of bank management and its oversight of the bank’s financial condition and operations. 

The bank was also directed to bolster its AML/CFT program, conduct a three-year look-back review, ensure that the bank’s Office of Foreign Assets Control compliance program was sufficient, and revise its strategic plan to set goals and performance metrics for returning the bank to profitability and boosting capital, among other things.

An advisory Friday instructs lenders to help detect activity connected to the employment of immigrants lacking permanent legal status.

Dive Brief:

• Federal financial regulators issued a joint advisory Friday encouraging banks and credit unions to “be vigilant against” fraudulent or suspicious activity connected to the employment of immigrants lacking permanent legal status and the associated risks to the financial system. 
• In the advisory, FinCEN shared 18 “red flags” designed to help lenders detect and report activity tied to the employment of unlawful workers, and specifically called out the agriculture, construction, domestic service, hospitality or staffing industries.
• The advisory, which instructs banks to file suspicious activity reports related to the issue or contact Immigration and Customs Enforcement, follows a May 19 executive order aimed at getting banks to gather more information on their customers’ immigration status. 

Dive Insight:

The advisory was issued by the Treasury Department’s Financial Crimes Enforcement Network, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the National Credit Union Administration, in coordination with the Internal Revenue Service. 

“Non-work authorized populations and their employers often rely on access to the U.S. financial system,” the FinCEN advisory said. “In certain instances, the access to financial services and unlawfully obtained wages can be leveraged to facilitate the financing of transnational criminal organizations — several of which have been designated as Foreign Terrorist Organizations — and their global criminal enterprises, including drug trafficking, human trafficking, and other illegal activity in the United States.”

The May 19 executive order directed the Treasury Department, the Consumer Financial Protection Bureau and other federal financial regulators to change Bank Secrecy Act regulations “to strengthen risk-based customer due diligence requirements” for banks, ensuring lenders have the authority to pursue additional customer information including their immigration status.

The executive order “sets in motion a series of regulatory actions that could materially affect compliance obligations under anti-money laundering laws and credit underwriting practices,” Mayer Brown attorneys wrote in a May 27 web post. “It will require financial institutions to devote significant attention and resources” to implementing regulators’ guidance over the coming months.

Comptroller of the Currency Jonathan Gould, on May 20, called the executive order “a common-sense set of reforms that give us the tools that we need and preserve bank flexibility around how they establish the identities, that is, how they know their customers.”

Banks have an important obligation to know their customer and “the identities of their customer,” Gould said last month, and are held to a regulatory expectation that they’re not helping facilitate financial fraud, money laundering or terrorism finance.

The FinCEN advisory specifically mentions identity theft and payroll fraud as features of schemes undertaken by “complicit employers” in some industries.

“According to ICE, many employers across the agriculture, construction, domestic service, hospitality, and other industries are knowingly — or through willful negligence — facilitating the hiring, concealment, and in some cases, exploitation of unlawful alien labor in their workforce to reduce labor costs and gain an unfair advantage over competitors,” the advisory said.  

FinCEN said red flags indicating such activity include an individual customer’s Social Security number not matching Social Security Administration records; a customer receiving recurring peer-to-peer payments from a small or newly established company in the agriculture, construction, domestic service, hospitality or staffing industries; or a customer cashing a large volume of checks drawn on accounts owned by companies in those industries at a check casher or money transmitter. 

FinCEN also wants banks monitoring its business customers operating in those industries. Red flags of “complicit employers” include a company with a history of worksite compliance violations from ICE; one that has sizable business operations and transactional activity but lacks corresponding payroll activity; or a company issuing recurring and large volumes of checks for less than $1,000 made payable to a large number of people cashing the checks.

If an individual taxpayer identification number is presented in lieu of a Social Security number or valid employment authorization document during the account opening process, banks are “encouraged to assess” whether the ITIN’s use “may be a relevant risk factor,” FinCEN said.

ITINs are used by the IRS for individuals requiring identification for federal taxpayer purposes but who aren’t eligible for a Social Security number. 

Meanwhile, the CFPB filed a statement Monday that “reminds” banks of their Truth in Lending Act obligations in connection with the May 19 executive order, and emphasizes banks’ ability to consider an applicant’s immigration status as it relates to repayment abilities. 

Creditors are required to “assess consumers’ ability to repay before offering mortgages and certain open-end credit products. This statement emphasizes to creditors that these requirements may obligate consideration of a consumer’s immigration status, especially where removal from the United States may disrupt the consumer’s income,” the CFPB said.

If a borrower’s immigration status indicates they could be removed from the U.S., there’s a risk that a bank extending credit wouldn’t be repaid, the bureau said.

“Considering whether information regarding an applicant’s immigration status indicates a reasonably expected change in future income is a matter of sound compliance practice,” the CFPB said.

The bank will purchase over 18,000 verified direct air capture carbon dioxide removal credits from the Canadian CDR project developer.

Dive Brief:

• TD Bank Group has signed a 10-year carbon offtake agreement with carbon removal project developer Deep Sky in a bid to cut emissions, the companies announced Thursday during Toronto Climate Week.
• Under the deal, the Canada-based bank will purchase over 18,000 verified direct air capture carbon dioxide removal credits from Deep Sky. The companies did not disclose the financial terms of their agreement, according to a June 4 release.
• The CDR credits will be generated from Deep Sky’s DAC facilities located in Canada. The company, founded in 2022, uses both direct air capture and other carbon capture pathways to remove gigatons of carbon from the atmosphere and permanently store it underground.

Dive Insight:

TD said it has reduced its scope 1 and 2 emissions by 29% against a 2019 baseline and will continue to decrease these direct emissions. The Toronto-headquartered bank has a plan to address residual emissions over time by investing in carbon dioxide technologies, according to the release.

TD has committed to net-zero greenhouse gas emissions across its operations and financing activities by 2050. The bank also has 2030 interim targets for reducing financed emissions across high-emitting sectors like energy, power generation, aviation and automotive generation.

The deal, according to both companies, provides TD with “Canadian-produced, engineered, permanent removal supply verified on a third-party registry for the next decade” and serves as a “case study for enterprise carbon removal procurement.”

Deep Sky currently has one active DAC facility — Deep Sky Alpha — and is developing two additional large-scale commercial facilities. Deep Sky Alpha is located in Innisfail, Alberta, and came online in August last year. The facility’s infrastructure allows it to deploy several different DAC technologies simultaneously, according to the company, which calls it the “world’s first cross-technology carbon removal center” on its website.

“Deals like this represent an important step toward scaling the next generation of carbon removal solutions,” Susan Thompson, managing director and head of global sustainable finance and advisory at TD Securities, said in the release. “By working with innovative providers like Deep Sky, we are helping to support the build-out of critical infrastructure, while positioning us to support clients as they integrate high-integrity carbon removal into their decarbonization strategies.”

TD’s deal with Deep Sky comes shortly after it signed another decade-long offtake agreement. Through its deal with carbon removal startup Charm Industrial, TD Bank will receive 44,000 metric tons of carbon credits over the course of the deal, with the 10-year term beginning in 2029. Charm said it would deliver the credits through both biochar removals and bio-oil sequestration, and a portion of the removals would come directly from Charm Industrial’s future Canadian operations.

With payments as the entry point to banking relationships, the lender cultivates a low-cost funding base, said executive Arijit Roy.

As banks battle for deposits, U.S. Bank is leaning into a particular product suite to woo Gen Z customers. 

Gen Z thinks about banking as “the place where they have their primary payment vector,” which might be a peer-to-peer payment platform or a credit card, rather than where they have a checking account, said Arijit Roy, the Minneapolis-based lender’s head of consumer and business banking products. 

“They identify with banking almost with their payments vehicle as the lead-in,” he said. That’s inspired the bank to make its Bank Smartly credit card quick and easy to apply for and tie it to other products so customers are incentivized to do more with the lender.

The super-regional launched its Bank Smartly checking account in 2022. A Smartly savings product and credit card followed in 2024, and the savings offering has amassed nearly $50 billion in deposits since then, CFO John Stern said at an investor conference last month. 

CEO Gunjan Kedia, at that same conference, said U.S. Bank has been intent on improving the quality of its deposit base, cultivating deeper relationships and appealing to all generations of consumers.

With Smartly’s spend-and-save combination, the $700 billion-asset bank is betting younger generations will also be drawn to the ability to access rewards sooner, not just after reaching an affluent tier or depositing a large sum, Roy said. 

U.S. Bank sees “a fair amount of halo” for users who pay off their credit card balances rather than letting them revolve, Roy said in a recent interview. 

“People may not be switching their primary checking relationship to us, but because they transact on the card and they’re paying off their balances on a pretty regular basis, they’re actually parking more balances in the Smartly checking account,” Roy said. 

Since U.S. Bank doesn’t pay any interest on those accounts, it’s cultivated a low-cost funding base, he said. “You’ve got highly engaged clients that are unlocking their reward structure by bringing more deposits in, where we don’t have to pay up on high rates,” he said.

In the first quarter, the bank’s average consumer deposits rose 2.7% year over year, although they remained flat quarter over quarter, at $270 billion.

The Smartly products are giving the bank a leg up over peers, “to weather deposit wars that everybody’s running into, by having a liquid product,” Roy said. 

He said the lender is attracting younger customers and has seen a reduction in its cost of acquisitions, although the bank declined to provide figures around either, or detail any growth targets related to Gen Z retail customers. A bank spokesperson pointed to partnerships with a few dozen colleges and universities as an avenue to connect with Gen Z. 

Still, U.S. Bank is “deliberately not planting a flag and saying we’re going after a segment,” Roy said. “We’re a lot more focused on being multi-decade in nature,” and the bank wants to attract and retain customers for the long haul, he said. 

Of course, U.S. Bank faces fierce competition from other lenders and fintechs, particularly in courting younger customers. Peer-to-peer payment player Cash App, owned by Block, seeks to expand its relationship with customers, as do fintechs and buy now, pay later firms including Chime and Klarna Group.

Whether U.S. Bank’s products are sufficient to compete with fintechs is a frequent topic of conversation within the bank, Roy indicated. “We have a lot of debate on this topic internally,” he said. “It’s something that we pay a lot of attention to.” 

Fintechs have taught banks to be client-centric and “relentless about making it as seamless as possible for clients to engage,” and banks still have work to do there, he said. 

But banks have trust and longevity on their side, he asserted, which sets them apart from “a group of individuals whose credo is ‘move fast and break things.’”

Fintechs that want to become banks should brace for “a learning curve” as they ramp up governance, risk and compliance infrastructure, said LendingClub CEO Scott Sanborn.

LendingClub bought a bank at a time – 2021 – when a fintech obtaining a bank charter was “extraordinarily difficult,” said CEO Scott Sanborn.

Fast-forward five years, to a regulatory environment amenable to chartering, and Sanborn now faces more fintech competitors who’ve received or are applying for charters. 

“It’s cool to be a bank now,” said the CEO of the $11.9 billion-asset lender, which is changing its name to Happen Bank this summer. “I think everyone sees that.”

With regulators open to novel chartering, fintechs like Affirm and PayPal are applying for industrial loan company charters. Or they’re seeking to buy banks, like subprime lenders Enova and OppFi have moved to do. International players such as Revolut, Bunq and Nubank have all sought charters from the Office of the Comptroller of the Currency. And the CEO of fintech Chime recently said it’s “it’s more of a when, not if” the company applies for its own bank charter.

While competition is good for consumers and leads to innovation, “I think we’ll see a decent amount of people skinning their knees,” Sanborn predicted. 

A charter carries a “very different level of regulatory expectation and operational discipline,” Sanborn said, and fintechs pursuing that route should brace for “a learning curve” as they build out necessary governance, risk and compliance infrastructure and adapt to standards expected of a regulated bank. 

The San Francisco-based firm arguably experienced its own stumble five years ago, when it agreed to pay $18 million to settle Federal Trade Commission charges that it deceived customers about hidden fees. The company, though, disagreed with the FTC’s allegations. 

Sanborn also noted rivals come and go, pointing to Goldman Sachs’ Marcus and Sumitomo Mitsui Banking Corp.’s Jenius Bank as one-time competitors for LendingClub. Jenius Bank has said it’s winding down, with Axos Financial acquiring its deposits; Marcus has been pared down to an online platform only offering high-yield savings and certificates of deposit.

In “unsecured consumer, if you try to build your models by looking at bureau data, you’re going to get a bunch of unfortunate surprises,” Sanborn said, noting that behavioral signals and rigorous modeling are built into the company’s underwriting approach.  

“We feel good about our ability to compete, because we’re very clear on who our customer is,” Sanborn said. That’s the “motivated middle: high-FICO, above average income, digitally savvy consumers actively managing their financial lives,” the bank has said.

“We’re not trying to be everything to everybody,” Sanborn said. “We’re really targeting this customer that we know is trying to move their finances forward.”

The digital bank intends to make its identity clearer: LendingClub is changing its name to Happen Bank in July. Founded in 2006, the company got its start as a peer-to-peer lending platform, but left that model behind in 2021 with the acquisition of Boston-based Radius Bank. 

“It was clear to me then that the name was losing its relevance,” Sanborn said. When LendingClub became a bank, the moniker was “inherently limiting.”

The name also didn’t make sense to some customers. The company’s debit card doesn’t carry the LendingClub name, because customers said “that’s really weird, to have the name LendingClub on a debit card, because it’s my money. I’m not borrowing this; this is my money,” he said.

And consumers who hadn’t worked with the company had no idea what it offered under the LendingClub name. However, “you say the word ‘bank,’ it means you’re trustworthy,” and offers “peace of mind; I can keep my money with you,” Sanborn said. “Some of the nonbank companies that have failed and tied up people’s money has created a heightened awareness of that.”

The Happen Bank wordmark is designed to stand out, and convey innovation and ease, Sanborn said. “Happen” leans forward, signaling momentum, with the word “bank” underneath, “supporting that,” he said.

LendingClub’s core product is personal loans, which are largely used by customers to address credit card debt, but the company has added checking and savings products over the last 18 months. Sanborn said those products represent where the bank aims to go. 

Portrait Bank submitted its applications in September. It has raised $42 million from 248 local investors and aims to begin serving businesses, consumers and private-wealth clients this year.

A bank in Winter Park, Florida, is set to become the first new de novo in the central part of the Sunshine State in nearly a decade, having received conditional approvals from both federal and state regulators.

The Federal Deposit Insurance Corp. and Florida Office of Financial Regulation has handed Portrait Bank conditional approvals, the bank announced Wednesday.

Portrait submitted its applications in September, having raised some $25 million by that time. Now, it has raised $42 million from 248 local investors and aims to begin serving commercial businesses, consumers and private-wealth clients later this year.

“Portrait Bank’s vision has always been clear – help local entrepreneurs and businesses frame their financial futures,” founder and CEO Erik Weiner said in a prepared statement.

“Our goal is to create a long-lasting, trusted partnership with our clients, offering them the resources they need to succeed,” Weiner said. “Reaching this step of regulatory compliance is a pivotal milestone that brings us closer to working with underserved businesses and members of the Central Florida community.”

Before joining the Portrait effort, Weiner spent nearly two decades in executive roles at Fifth Third Bank, BankUnited and City National Bank, according to his LinkedIn page. Most recently, he spent five years as City National’s Central Florida market president.

The last de novo in the Orlando area opened in 2017, Weiner told Banking Dive in September. In the last couple of years, two de novos have been established elsewhere in the state: Gala Bank in Ocala in late 2024 and BankMiami in Miami in early 2025.

Portrait’s conditional approval comes amid a greater conversation on de novo openings, spurred by federal regulators.

Last year, the FDIC’s then-Acting Chair Travis Hill said new bank formation had “fallen off a cliff” and that, moving forward, the agency would encourage new bank formation, potentially by changing capital expectations and reevaluating the application process for new innovators. In 2024, then-Federal Reserve Gov. Michelle Bowman sounded the alarm on de novo formations, as well.

“In my view, the absence of de novo bank formation over the long run will create a void in the banking system, a void that could contribute to a decline in the availability of reliable and fairly priced credit, the absence of financial services in underserved markets, and the continued shift of banking activities outside the banking system,” she said at the time.

De novo openings have been rare in recent years, according to S&P Global, which found just six banks established in 2024 and eight in 2023.

Five federal regulators clarified how financial institutions can talk to customers about suspicious activity without violating the Bank Secrecy Act.

Banks can discuss suspicious transactions with customers and discuss the potential that their accounts might be closed, as long as they don’t disclose the filing or planned filing of a suspicious activity report, federal regulators said Wednesday.

The Federal Reserve, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp., National Credit Union Administration and Financial Crimes Enforcement Network released a joint statement to clarify how financial institutions can “ensure compliance with SAR confidentiality requirements and provide customers with transparent and timely communication as part of the bank’s fraud investigation.”

Bank personnel expressed concerns about their abilities to communicate with customers in these situations in response to a request for information issued by regulators in June 2025.

The Bank Secrecy Act prohibits disclosing a SAR or information that would reveal the existence of a SAR, and this does not change the law itself, regulators said.

But SAR confidentiality does not “prohibit banks and credit unions from communicating with a customer or other person who may be the subject of a SAR or with third parties, including other banks or credit unions, when such communication involves the underlying facts, transactions, and documents upon which a SAR is based,” the regulators said.

Banks and credit unions can inform customers about account restrictions or closures, and can tell them when a deposit has been rejected because of suspected fraud. They can also request customer due diligence-related information to understand customer relationships, and can ask a customer about the purpose of a transaction or the source of funds, according to the joint statement.