By Brian Brus
The Journal Record
OKLAHOMA CITY – Oklahoma Gov. Kevin Stitt’s mortgage company received the FDIC’s approval to merge with Farmers Exchange Bank on Wednesday.
The deal, expected to close in the first quarter of the year, will produce a combined entity called Gateway First Bank. Chief Executive Stephen Curry said it will be one of the nation’s largest mortgage banks, launching with more than 100,000 customers. When the doors open March 1, he said, the bank will have an asset base of about $1.2 billion and $200 million in equity.
Stitt’s stake in the combined company will be at least 60 percent, Curry said. The privately held company is in talks with institutional investors now, but Curry said he could not discuss financial details.
Stitt has strictly maintained his distance from the business deal throughout the merger process, said Deputy Banking Commissioner Dudley Gilbert. Shortly after declaring his candidacy last year, Stitt and other Gateway executives proposed that oversight be placed under the Federal Deposit Insurance Corp. rather than the Oklahoma Banking Department, which would normally handle state charters.
In early January, the Oklahoma Banking Board – which includes members appointed by Stitt since he took office – approved the charter application filed by the Jenks-based mortgage company, and then unanimously agreed to relinquish all future examinations of the resulting bank.
Stitt, who founded the company in 2000, regularly touted his business acumen and pride in his business’s success during the campaign. In his Feb. 4 State of the State address, Stitt identified one of Gateway’s employees as an example of community support in the battle against substance abuse.
Gateway is not without blemishes, however. About a decade ago during the recession, as banks and mortgage companies nationwide struggled with risky loans, Gateway faced allegations of fraud in Arkansas, Georgia and Illinois. The company paid fines in all three states.
Oklahoma Watch reported in August that Stitt’s mortgage company did not tell Wisconsin officials about its run-ins with other states’ regulators when it applied for a mortgage banking license there. Ultimately, they noticed the missing information, and Gateway paid a $4,000 fine. Campaign spokeswoman Donelle Harder said at the time that it was nothing more than a clerical error, according to Oklahoma Watch.
Former Oklahoma City Mayor Mick Cornett, in his own gubernatorial campaign, had raised questions about Stitt’s fitness to serve in the office because of such problems. By early January, Stitt submitted a separation plan to the Banking Department and the attorney general’s office for review. In that document, Stitt announced his resignation as Gateway manager and succession of Curry as manager and CEO.
Attorney General Mike Hunter could not be reached for comment. But a spokesman said Wednesday the attorney general’s office is in the process of finalizing its review of Gov. Stitt’s separation plan.
Stitt press secretary Baylee Lakey said Stitt was holding to the plan so strictly that he would not comment on the FDIC approval Wednesday.
“Kevin’s excited, but I think he’s fully engaged in being the governor of Oklahoma,” Curry said.
Under Oklahoma’s ethics laws, state officers are allowed to hold stakes in business, but they must recuse themselves from any actions that could be tied to their material interests.
Although the banking commissioner and board members are appointed by the governor, current Commissioner Mick Thompson has served consecutively for 25 years under four governors, both Democrat and Republican. Gilbert stressed that the department typically does not interact with the Capitol; its operations are self-funded by inspection fees paid by the banking industry and does not receive appropriations.
Gilbert said Stitt and his representatives have repeatedly stressed the need for transparency in the approval process, and he highlighted the checks and balances that protect consumers and investors from malfeasance. For example, applications for bank charters and mergers bust be approved by both the state Banking Department and federal regulators. Examination of Gateway’s holding company will be conducted by the Federal Reserve.
In Stitt’s separation plan, James Redman was designated as trustee for the Stitt Family Trusts, while McCrary Lowe of Gibraltar Capital Management was appointed as trust protector.
“Kevin Stitt will have no role in the governance structure of Gateway First Bank post-bank merger,” according to the document provided by Attorney General Mike Hunter. Further, “Each director went through an exhaustive business and financial background investigation and approval process with the FDIC and state of Oklahoma.”
The separation even addressed ownership of equipment such as phones and personal computers. Anything used by Stitt’s family that was Gateway property was turned over and replaced by personally owned equipment. Gateway-titled vehicles were transferred to Stitt.
“Kevin Stitt will have access to his current office at Gateway through May 31, 2019, but will not engage in any Gateway-related business when using the office,” according to the plan.
Curry said the bank will primarily operate electronically – “Bricks and mortar are dead,” he said of possible location branching. By the time Stitt leaves office, he could return to a much larger business.
“But we plan to be opportunistic with acquisitions, so there is a likelihood over time that we will add additional offices to our operation,” Curry said.