When Evolve Bank & Trust announced Wednesday that its board had hired a new CEO, Robert Hartheimer, effective immediately, this was no run-of-the-mill succession announcement.
The appointment came at a time when the Memphis, Tennessee bank is still grappling with a June 2024 cease-and-desist order from the Federal Reserve and the aftermath of the Synapse mess, in which millions of customers of Evolve's fintech partners lost money.
The job of turning Evolve around "is definitely a challenge," Sarah Bloom Raskin, former Federal Reserve Board governor and Deputy Treasury Secretary, and a current professor at Duke Law School, told American Banker. "But I think that Bob Hartheimer is uniquely positioned to do it because Bob has experience doing this." She cited Hartheimer's recruitment to the FDIC to establish the division of resolutions in 1991, where he prepared 200 troubled banks for sale.
"He understands very deeply the phase of a bank having significant amounts of risk management and internal controls problems, and then putting in place the kind of systems necessary to turn it around," she said.
Hartheimer's main job is to pull the bank up, compliance-wise and reputationally, from the Synapse collapse and a 2024 cease-and-desist order.
The Synapse effect
Many of Evolve's troubles stem from its relationship with San Francisco banking-as-a-service middleware firm Synapse, which provided a shared ledger that tracked the flow of money between Evolve and its fintech partners. When Synapse filed for Chapter 11 bankruptcy in April 2024 and its operations shut down, bankruptcy trustee Jelena McWilliams, a managing partner at Cravath, Swaine and Moore and former FDIC chair, discovered a $65 million to $95 million shortfall between what Synapse's ledgers reflected and the actual customer funds Evolve and three other bank partners had in their coffers.
Several lawsuits followed, including one in which a large fintech customer,
"Many customers of Evolve have lost faith and so lost the ability to feel good about this bank," Bloom Raskin said. "So it is a tough road. But to me, if there's anybody who can do it, it's somebody with Bob Hartheimer's experience."
Evolve has said it
In a recent court filing, the
Though Hartheimer did not join Evolve until after the Synapse bankruptcy, he defended the bank's actions.
"We have been a Boy Scout in the Synapse matter," Hartheimer told American Banker. "We have spent millions of dollars to recreate the records. We are still holding out hope that the other baas banks in the Synapse ecosphere will work to create a total reconciliation."
The Synapse situation was a wake up call for all baas banks and regulators, he said.
"This is not uncommon in the banking business: new ways of doing things occur, and then there's a catch up on how those businesses need to be managed and overseen," he said. "So every baas bank is going through more rigorous compliance and risk changes."
Evolve has projects underway addressing data management, transaction monitoring and other facets of the Federal Reserve's cease-and-desist order, which cites deficiencies in its banking-as-a-service practices, specifically in its compliance with anti-money laundering laws and Office of Foreign Assets Control regulations and in how it manages consumer compliance risk, capital risk management and liquidity risk management.
How Hartheimer came to this role
About a year ago, Hartheimer was looking at the Evolve consent order, realized he knew the bank's attorney named in the consent order, and called him to offer help. He became a consultant to the board and to teams within the bank.
"That turned into a natural discussion in the spring of whether I would have interest in the job," he said.
The Evolve CEO job is "a great challenge," Hartheimer said. "It really encapsules everything I've done for the last 25 years or so in the world of banking and regulation."
"Appointing Bob Hartheimer as CEO marks a turning point for Evolve," said Board Chairman Steve Valentine in a statement. "Bob was selected for his unmatched corporate experience in strategically navigating challenges at financial institutions and enabling banks to move past their regulatory challenges. He has the full backing of the Board to take decisive action, restore thoughtful innovation, and lead Evolve into a future defined by transparency and sustainable growth. This is a structural change, demonstrating our continued commitment to doing the hard work to earn back the trust of our customers, employees, regulators, and investors."
Asked about rumors the bank is being cleaned up for sale, Hartheimer pointed out that Evolve has over 10% capital.
"It has plenty of liquidity. This is not a bank that is forced to do anything," he said. "My own view is, I want this bank to excel in all the different businesses. We're going through changes in the open banking business, like every other baas bank. We're improving our technology. We will come out in 2026 being one of the leaders in our technology for fintech customers, and I was not brought in with any sale agenda from the regulators.The regulators want to go away and examine other banks, and we want that as well, and we want them to be very comfortable with how we manage our bank."
Under the terms of the consent order, Evolve cannot bring in new open banking clients yet.
"We are working hand in hand with our regulators, and there will be a time in the future that our businesses and our infrastructure is strong enough for us to approach our regulators to be able to expand the business," Hartheimer said. "But I think we're very good at it. We have a strong team in that world."
Evolve also has a trust business, a mortgage business and a regional lending business in eastern Arkansas and in western Tennessee.
"To me, these are all important," Hartheimer said. "Those businesses have always done well and will continue, and we will expand those businesses and the open banking business. This team is working through reputation adversity and I think we see a lot at the end of the tunnel that's getting brighter."
Former colleagues expressed support for Hartheimer's new gig.
"Bob is a highly experienced bank leader and regulatory expert," Michelle Alt, partner at Klaros Group, where Hartheimer is a senior advisor, told American Banker. "I have every confidence in his ability to lead the bank."
