US banking regulators publicized just four new severe enforcement actions in the first quarter, the lowest quarterly total in almost two years.

Year to date as of May 8, regulators have issued five new severe enforcement actions. In the latest one, regulators targeted capital retention and liquidity and interest rate risk management — hot topics right now following the failures of three regional banks since March.

On April 26, the Federal Reserve entered into a formal agreement with Illinois-based Perry County Bancorp Inc. and its unit, Du Quoin State Bank, requiring the companies to create plans to maintain capital and manage interest rate risk and liquidity risk, as well as other items.

At the end of 2022, Du Quoin was one of only 18 US banks to post a negative tangible common equity (TCE) ratio due to unrealized losses in its available-for-sale securities portfolio. The bank's TCE ratio improved to 1.10% as of March 31, up from negative 0.41% at Dec. 31, 2022, as its accumulated other comprehensive income improved to negative $11.1 million from negative $12.8 million as interest rates dropped in the first quarter.

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.

Q1 severe enforcement actions

Another Illinois-based company, Nokomis Savings Bank, was issued a cease and desist order on March 21, requiring the bank to maintain a leverage ratio of at least 10%, among other provisions. At the end of March, Nokomis' leverage ratio was 14.44%, according to S&P Global Market Intelligence data.

On April 28, Decatur, Ill.-based Land of Lincoln CU announced it would acquire Nokomis, marking the credit union's second bank deal announcement in less than five months. In December 2022, Land of Lincoln announced it would purchase substantially all assets and liabilities of Colchester State Bank.

Similarly, on Jan. 27, Iowa-based Maxwell State Bank received a cease and desist order from the Federal Deposit Insurance Corp. requiring the bank to maintain a leverage ratio of at least 10%, among other provisions. At the end of March, the bank was just below the mark at 9.92%, an increase from 9.71% at Dec. 31, 2022.

– 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.

On March 8, Fort Lee, NJ-based Cross River Bank picked up its own cease and desist order from the FDIC due to shortcomings in its anti-discrimination compliance.

Cross River, a financial technology partner bank, shot to prominence following the onset of the COVID-19 pandemic as it became one of the nation's top Paycheck Protection Program lenders. Now, the bank must obtain approval from the FDIC for any future partnerships.

Earlier this year, Dunkirk, NY-based Lake Shore Savings Bank received a cease and desist order from the Office of the Comptroller of the Currency for noncompliance with a July 2022 formal agreement that cited shortcomings in the bank's information technology security and controls. Daniel Reininga, president and CEO of the bank and its holding company, retired March 10 after previously disclosing that he would retire in May. In addition, COO of the bank Jennifer Zatkos retired May 5.