Iowa bank holding company cited for inadequate capital

• Key insight: The Fed ordered TS Banking Group to bolster capital and provide financial support at its subsidiary First National Bank & Trust Co., which has been under an OCC enforcement action since 2025.
• Supporting data: The $383.8 million-asset Illinois bank's parent companies are barred from paying dividends, repurchasing stock or taking on new debt without Fed approval and must submit capital and cash flow plans.
• Forward look: The action comes as new research suggests that bank enforcement has declined steadily over the past decade.

The Federal Reserve this week entered into an enforcement action against Treynor, Iowa-based TS Banking Group and its subsidiary bank holding company TS Contrarian Bancshares for deficiencies at a pair of banks owned by the firms.

Under the agreement, signed Monday, the Fed is directing the parent companies to support Contrarian-owned First National Bank & Trust Company of Clinton, Illinois, and Tioga, North Dakota-based Bank of Tioga in strengthening their capital adequacies. The enforcement action comes after First National faced another action from the Office of the Comptroller of the Currency last July. First National had $383.8 million of assets as of the first quarter of 2026, according to the FDIC; Bank of Tioga reported $413 million of assets in Q1. 

TS Banking Group was formed in 2014 as a joint venture between Treynor Bancshares and the newly created TS Contrarian Bancshares to acquire community banks across the Upper Midwest. Under the agreement, the holding companies are restricted from certain financial activities to preserve capital at the bank subsidiaries. The holding companies may not pay dividends, repurchase stock, or conduct other capital distributions, pay interest on subordinated debt, or incur new debt without prior approval from the Fed. The companies must also present quarterly progress reports documenting steps they've taken to support the bank and comply with the agreement. 

As part of the agreement, the Fed is requiring the holding companies to act as a financial backstop for First National and the rest of the banking organization. The holding companies are directed to use all available financial and managerial resources to bolster the banks, including raising additional capital if necessary and providing financial assistance during periods of stress.

The agreement also directs the parent companies to ensure that First National follows the OCC's agreement from 2025, which "found unsafe or unsound practices, including those relating to capital, strategic planning, liquidity, and contingency funding planning" at the firm. 

The holding companies are required to establish a comprehensive capital plan in the next 60 days that weighs whether the firm has adequate capital, lays out a plan for raising additional equity if necessary and provides contingency plans for short and long-term capital needs for the banks. In 30 days after the agreement, the holding companies are required to submit cash flow forecasts demonstrating how they plan to meet debt obligations and operating expenses.

The Fed's enforcement action comes on the heels of new research from the Brookings Institution suggesting that enforcement actions — particularly from the Fed — have fallen off a cliff over the last ten years. The study found that public enforcement actions by the Fed, Federal Deposit Insurance Corp. and OCC have fallen by more than half over the past decade, with the Federal Reserve seeing the steepest drop.