Federal Reserve Ends Enforcement Action Against Oklahoma Bank

The US Federal Reserve has terminated a 2024 enforcement action against SNB Bancshares and its subsidiary, Bank of Eufaula, after the Oklahoma-based institutions spent more than two years under a regulatory agreement addressing deficiencies in governance, internal controls, lending and risk management.

The Federal Reserve said the written agreement, entered into on August 7, 2024, was terminated on September 3, 2026. The regulator announced the termination on Friday without providing details on the specific measures that led to the agreement’s closure.

The agreement followed a February 1, 2024 examination by the Federal Reserve Bank of Kansas City that identified deficiencies at Bank of Eufaula. The bank is a state-chartered member of the Federal Reserve System, while SNB Bancshares is its registered bank holding company.

Under the agreement, the bank was required to strengthen board oversight of capital, earnings, liquidity, lending and credit-risk management. It was also required to review the qualifications and structure of its management and board, improve internal controls and establish policies to address conflicts of interest.

The regulatory requirements extended to the bank’s lending operations. Bank of Eufaula was directed to strengthen underwriting standards, collateral management, loan documentation, loan grading and independent reviews of its loan portfolio. It was also required to improve systems for identifying deteriorating credits and monitoring problem loans.

The agreement further required the bank to submit plans covering asset quality, capital and liquidity, as well as business strategy and earnings. Certain capital distributions and debt transactions by the bank and its parent company were subject to regulatory approval under the agreement.

The termination comes after separate Federal Reserve enforcement action against a former senior executive of Bank of Eufaula.

In June, the Federal Reserve barred former chief executive Thomas W. Engelbrecht from participating in the banking industry and imposed a $125,000 civil money penalty. The regulator's order said Engelbrecht had served as a director of both the bank and SNB Bancshares and as the bank's chief executive until his termination in July 2024.

The June order concerned conduct between 2020 and 2023 involving more than $5 million in loans made by the bank to a company owned by a close relative of Engelbrecht, according to the Federal Reserve.

The individual enforcement action against Engelbrecht is separate from the institutional agreement terminated on September 3. The Federal Reserve's latest announcement did not state that other supervisory or enforcement matters involving the bank or its former executives had been resolved.

The regulator also did not characterize the termination as a finding that all issues identified in the 2024 examination had been eliminated. It simply announced that the specific written agreement with SNB Bancshares and Bank of Eufaula had been terminated.

Source: FSX Business News