US banking regulators executed six new severe enforcement actions in the second quarter, bringing the year-to-date total at 12 as of Aug. 28.

There have been 107 severe enforcement actions issued to banks since 2020, according to S&P Global Market Intelligence data. The most recent one is the Federal Reserve's cease and desist order against Farmington State Bank, which is selling its loans and deposits to Heppner, Ore.-based Bank of Eastern Oregon with the intention of ceasing its operations and voluntarily liquidating.

According to the July 18 order, the Federal Reserve Bank of San Francisco and the Washington State Department of Financial Institutions found that the Farmington, Wash.-based bank violated the limitations imposed on it when its application to become a member of the Federal Reserve System was approved.

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.

Q2 severe enforcement actions

Two severe enforcement actions issued in the second quarter are related to Bank Secrecy Act/Anti-Money Laundering (BSA/AML).

On May 24, the Federal Deposit Insurance Corp. issued a consent order against Israel Discount Bank of New York. The bank did not admit or deny any charges of unsafe or unsound banking practices or violations of law or regulation relating to, among other things, deficiencies and weaknesses in its AML/Countering the Financing of Terrorism program.

The Office of the Comptroller of the Currency (OCC) on June 20 signed a written agreement with California International Bank NA after identifying deficiencies relating to the Westminster, Calif.-based bank's compliance with BSA/AML laws and regulations.

– 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.

Other enforcement actions in the second quarter included a May 23 consent order issued by the Fed with La Jolla, Calif.-based Silvergate Capital Corp. and its subsidiary, Silvergate Bank, to facilitate the voluntary liquidation of the bank.

The Fed also signed a written agreement with Du Quoin, Ill.-based Perry County Bancorp Inc. and its subsidiary, Du Quoin State Bank, on April 26. The company and the bank were required to create plans to maintain capital and manage interest rate risk and liquidity risk, among other requirements.

In the quarter, the OCC handed out two more severe enforcement actions, one to Chisholm, Minn.-based First National Bank of Chisholm and one to Kentland, Ind.-based Kentland Federal Savings and Loan Association, the smallest US bank with just about $3 million in total assets as of June 30.

The regulator entered into a written agreement with First National Bank of Chisholm on June 27 and issued a consent order to Kentland Federal Savings and Loan Association on April 10 following the discovery of unsafe or unsound practices.

Among other requirements, Kentland Federal Savings and Loan Association should maintain a leverage ratio of at least 10%. As of the end of the second quarter, the mutually owned bank's ratio was 12.8%.