Key Points:

  • Philadelphia-based Tioga-Franklin Savings Bank was shut down by regulators on Friday, and Second Federal Savings and Loan Association agreed to assume all deposits and the vast majority of assets of the bank, with the Federal Deposit Insurance Corporation (FDIC) acting as receiver.
  • The FDIC said Tioga-Franklin, which had a single branch, had approximately $68 million in assets and $67 million in deposits as of June 30. The bank's only branch reopened on Monday as a branch of Second Federal Savings and Loan Association, and Tioga-Franklin depositors automatically became depositors of Second Federal.
  • The FDIC estimates that the failure of Tioga-Franklin will cost the Deposit Insurance Fund about $5.5 million, though this estimate is expected to change as retained assets are sold.

Deep Dive:

Tioga-Franklin is the fifth bank to fail this year. According to the bank's LinkedIn page, it was formerly known as Tioga Building and Loan Association, founded in 1873. According to a Forbes list published this year, the bank was also one of about 22 Black-owned banks in the United States.

In a notice posted on its website, Second Federal said the deal would give Second Federal, which has a single branch, approximately $115 million in assets. Second Federal, founded in 1924 and regulated by the Office of the Comptroller of the Currency, had assets of about $43.6 million.

"We are pleased to welcome Tioga-Franklin Savings Bank customers and employees to Second Federal," said David Rowland, CEO of Second Federal, in a statement on the bank'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 Tioga-Franklin customers by providing responsive, service-oriented banking."

In another statement, Rowland said that through the deal, Second Federal acquired Tioga-Franklin's "more advanced core processing system." "This will enable Second Federal to offer more modern banking services and products to all its customers."

In April 2024, Tioga-Franklin entered into a consent order with the FDIC, after regulators identified deficiencies at the bank in board oversight and guidance, management performance, strategic/earnings/capital planning, liquidity and funds management, interest rate risk, audit, and credit management. A prior examination in 2023 had already found weaknesses in the bank's capital, earnings, and strategic direction.

The FDIC said the consent order also cited Tioga-Franklin for violations related to Bank Secrecy Act compliance and problems with its anti-money laundering/counter-financing of terrorism program, and that the bank did not conform to regulatory guidance in areas including internal controls and information systems, internal audit, loan documentation, interest rate risk exposure, and asset quality.

Under the 19-page consent order, the bank's board was required to "immediately strengthen" oversight and guidance of bank management, as well as oversight of its financial condition and operations.

The bank was also required to strengthen its anti-money laundering/counter-financing of terrorism program, conduct a three-year look-back review, ensure its Office of Foreign Assets Control compliance program was adequate and effective, and revise its strategic plan to set goals and performance metrics to restore the bank to profitability and improve capital, among other requirements.