Fed puts stamp of approval on Texas holding company's ownership change

Samuel Corum/Bloomberg

The Federal Reserve has approved a Virginia-based bank holding company's application to take a controlling stake in a group of Texas banks. 

In an order made public Wednesday, the Fed gave its OK to a request by CSBH LLC, headquartered in Powhattan, Virginia, to acquire up to 49.9% of Industry Bancshares. The $4.4 billion-asset Industry, based in Industry, Texas, owns six community banks. 

CSBH controls the $148 million-asset New Horizon Bank in Powhattan. 

The Fed issued its order six months after CSBH agreed to serve as lead investor in a planned $195 million common stock raise for Industry. When it announced the deal in August, Industry noted that the transaction was "subject to standard and customary regulatory approvals."

Industry began experiencing difficulties in 2022 and 2023, when sharply rising interest rates exposed a balance that included significant investments in long-term, low-yield securities. A cash infusion would provide the cushion necessary for Industry to reconfigure its balance sheet, a process that has resulted in steep losses at a number of banks. In December, for example, the $43 billion-asset Associated Banc-Corp in Green Bay, Wisconsin, announced plans to sell a $2 billion block of low-yield mortgages and securities. Associated said the deal would boost earnings in 2025 but result in a $253 million fourth-quarter loss. 

Industry reported losses totaling $13.9 million through the first nine months of 2024.

An Industry spokesperson declined to comment Thursday, noting the company had only been notified of the Federal Reserve order late Wednesday. Uriel Cohen, a director and the founder of CSBH, had not responded to a request for comment at deadline.

In January 2024, the Office of the Comptroller of the Currency published Notices of Charges against three Industry subsidiaries, First National Bank of Shriner, Bank of Brenham and First National Bank of Bellville. The agency cited the underwater investments as evidence of unsafe practices, but Industry objected. It described the crackdown as unnecessary, since it had already begun seeking a remedy. 

Industry tapped Carl Chaney, a veteran turnaround executive and the former CEO at Hancock Holding Co. in Gulfport, Mississippi, as a consultant in February 2024. Chaney was named executive chairman in June.  

Three Industry subsidiaries, Industry State Bank, Fayetteville Bank and Citizens State Bank, entered into Consent Orders with the Federal Deposit Insurance Corp. in October. The Fed cited Industry in November, calling for improved risk management with a focus on interest rate risk, among other things.

Despite its difficulties, observers have tabbed Industry as a prime turnaround candidate, given its location in the Lone Star State's densely populated, fast-growing Texas Triangle region, which is bounded by Dallas, Houston and San Antonio. Commenting to American Banker in August, Chaney characterized Industry as "one of the most unique opportunities I've ever come across." 

Though Wednesday's order gives it the green light to  assume control of Industry, CSBH has no intention of consolidating the Texas banks' results on its balance sheet, according to the Fed. 

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CSBH's Virginia subsidiary, New Horizon, was founded in 2009. New Horizon, which operates a branch in Powhattan, is in the midst of expanding in Richmond and in the Hampton Roads area, where it named veteran banker Terri Ruby regional president in July.