Federal bank regulators only issued seven severe enforcementactions in the year through March 28, according to publicly available information.There are now 304 banks operating under a severe enforcement action, down from 317in a previous analysis.
S&P Global Market Intelligence defines severe enforcementactions as cease and desist orders, prompt corrective action directives, and formalagreements/consent orders handed to a bank or thrift by a federal regulator. Thisanalysis does not include severe enforcement actions issued to holding companiesor credit unions.
It is important to note that certain cease and desist ordersissued by federal regulators in the recent past may be referred to as consent agreementson regulatory websites due to a change in language. However, a cease and desistorder and a consent order are derived from the same section of the law: 12 U.S.C.1818(b). Both orders are structured the same, outlining areas of concern and thecorrective actions that an institution must take. In order to maintain consistencywith previous years, this analysis refers to these recent actions as cease and desistorders.
Hazard, Ky.-based PeoplesBank & Trust Co. of Hazard agreed to a consent order with the Federal Reserve Bank of Clevelandand Commonwealth of Kentucky Department of Financial Institutions on March 3 regardingits credit risk management, lending and credit administration, and its allowancefor loan and lease losses, among other things. The bank's allowances-to-loans ratiodropped to 0.95% at the end of 2015, down from 1.50% in the third quarter. PeoplesBank & Trust Co. of Hazard reported an $8,000 net loss in the fourth quarterof 2015, but this was still an improvement from the $2.2 million loss from a yearearlier. Nonperforming assets jumped to $12.5 million, or 4.52% of assets, in thefourth quarter of 2015, up from 2.67% in the linked quarter and 2.99% in the year-agoquarter.
Kentucky-based mutual bank Blue Grass Federal Savings and Loan Association entered intoa formal agreement withthe OCC, which cited issues with real estate owned and commercial loans, creditadministration, the allowance for loans and leases and the bank's profit planning.Blue Grass Federal's total assets dropped to $37.8 million in the fourth quarterof 2015, down from $38.8 million in the previous quarter and $40.3 million at theclose of 2014. The bank has reported negative net income for seven of the last eightquarters.
Cuba, Mo.-based FirstCommunity National Bank received a severe enforcement action from the OCC calling for changesin the bank's reporting and oversight of certain criticized assets, including otherreal estate owned and nonaccrual loans. The bank reduced its OREO holdings to $2.7million in the fourth quarter of 2015 from $3.6 million a year earlier. However,nonperforming assets hit $15.9 million or 7.71% of assets in the fourth quarter,up from $12.6 million or 5.69% of assets in the third quarter.
North MilwaukeeState Bank received a ceaseand desist order from the FDIC in February in regards to lapses in consumerprotection and compliance. Last September, the bank received a requiring it to raisecapital, but on March 11 North Milwaukee became the first failed bank of 2016.
Click here to view the map as a PDF.
To view a refreshable spreadsheet of all operating banks and thrifts under a severe enforcement action as of March 28, click here.