9 banks, thrifts pick up severe enforcement actions so far in H2'22

U.S. federal banking regulators have issued nine severe enforcement actions so far in the second half of 2022, bringing the full-year total to 24, compared to 32 in all of 2021 and 34 in 2020.

As of Nov. 28, 92 U.S. banks or thrifts were operating under a severe enforcement action issued since the start of 2010, according to S&P Global Market Intelligence data, down from 95 in a September analysis.

S&P Global Market Intelligence defines severe enforcement actions as cease and desist orders, prompt corrective action directives, and formal agreements/consent orders handed to a bank or thrift by a federal regulator. This analysis does not include severe enforcement actions issued to holding companies or credit unions.

Regulatory websites may refer to certain cease and desist orders issued by federal regulators as consent agreements. However, cease and desist and consent orders are derived from the same section of law 12 U.S.C. 1818(b) and have the same structure, articulating both the areas of concern and the corrective actions. To maintain consistency with previous years, this analysis refers to these actions as cease and desist orders.

Updated capital requirements listed in both October severe enforcement actions

Most recently, on Oct. 24, Pell City, Ala.-based Union State Bank received a cease and desist order from the Federal Deposit Insurance Corp. that requires the bank to maintain a Tier 1 leverage capital ratio of 7% by June 30, 2023, 8% by year-end 2023, and 9% by the end of 2024. In addition, the bank has to maintain a total capital ratio of at least 12% by the end of June 2023.

At the end of September, Union State Bank reported a 6.09% leverage ratio and a total capital ratio of 12.00%.

Meanwhile, New York-based Quontic Bank received a cease and desist order from the Office of the Comptroller of the Currency on Oct. 5 that requires the thrift to maintain a leverage ratio greater than 9% and a total capital ratio of 13% by Oct. 31. As of Sept. 30, Quontic reported a 10.17% leverage ratio.

This new order replaces Quontic's formal agreement from October 2018.

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Severe enforcement actions handed out in September

On Sept. 29, Mount Carmel, Ill.-based Wabash Savings Bank received a cease and desist order from the FDIC that requires the thrift to amend its strategic and capital plans and expand a long-term budget that includes at least three years of financial projections. The company also has to include "procedures for seeking, planning and finalizing a merger if capital ratios breach the [capital] plan's 8% Tier 1 leverage ratio threshold."

Wabash Savings Bank reported a 7.55% leverage ratio at the end of the third quarter, down from 7.70% at June 30 and 9.59% at Sept. 30, 2021.

Two weeks earlier, on Sept. 15, Cincinnati-based Union Savings Bank received its own cease and desist order from the FDIC tied to weaknesses in the thrift's handling of consumer protection and compliance.

* Access an Excel file containing every bank or thrift operating under a severe enforcement action issued since 2010. * Access severe enforcement action issuance data under the "Industries" tab at the top of the S&P Capital IQ Pro website.

Long-standing severe enforcement action terminated this month

On Nov. 17, the Federal Reserve announced that it terminated its June 2010 formal agreement with Elkton, Md.-based Cecil Bank. The bank had struggled for years and operated under a prompt corrective action directive between August 2015 and December 2017 as its reported leverage ratio dropped as low as 1.76%.

At the end of September, Cecil Bank had a leverage ratio of 9.20% and had reported four straight quarterly profits.