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   [5047] FDIC Docket No. FDIC-83-217a and FDIC-82-78b(7-9-85).

   Although the ALJ found that a bank had engaged in unsafe or unsound banking practices, the FDIC entered an order terminating proceedings against the bank since the bank was closed by the state Superintendent of Banks.

   [.1] Unsafe or Unsound Banking Practices—Statutory Standard
   The term unsafe or unsound banking practice has been defined by appellate court decisions as any practice and resulting condition encompassing conduct that is contrary to accepted standards of proven banking procedures, and which might result in an abnormal risk or loss to the bank, its shareholders, or the FDIC.

   [.2] Practice and Procedure—Burden of Proof—Cease and Desist Proceedings
   The burden of proof in an administrative proceeding, unless otherwise provided by statute, is on the administrative agency to establish its charges by the preponderance of evidence.

June 20, 1985

MEMORANDUM TO: Robert V.
Shumway, Director
Division of Bank Supervision

FROM:
* * * Regional Director
SUBJECT: * * * Bank of * * * (In
Liquidation)
(Docket No. FDIC-83-217a and FDIC-82-
78b)

   RE: Termination of Section 8(a)
Proceeding and
Section 8(b) Order to Cease and Desist

   On April 12, 1985, subject Bank was closed by the Superintendent of Banks for the State of * * *. It is recommended that the outstanding Section 8(a) proceeding and Section 8(b) Order referenced above be terminated.
CONCUR: /s/ G. Michael Dew,
Chief Special Situations Section
CONCUR: /s/ Arthur L. Beamon
Assistant General Counsel
CONCUR: /s/ A. David Meadows,
Associate Director
Division of Bank Supervision

In the Matter of * * * BANK OF * * *
(INSURED STATE NONMEMBER
BANK)


ORDER TERMINATING AN ORDER
TO CEASE AND DESIST

FDIC-82-78b

   IT IS ORDERED, that the Order to Cease and Desist against * * * Bank of {{4-1-90 p.A-464}}* * *, adopted by the Board of Directors of the Federal Deposit Insurance Corporation on November 8, 1982, pursuant to Section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. § 1818(b)), be, and hereby is, terminated.
   Dated in Washington, D.C., this 9 day of July, 1985.

   Pursuant to delegated authority.

/s/ Robert V. Shumway, Director
Division of Bank Supervision

In the Matter of * * * OF * * *
(INSURED STATE NONMEMBER
BANK)


ORDER TERMINATING SECTION 8(a)
PROCEEDINGS

FDIC-83-217a

   IT IS ORDERED, that the Section 8(a) proceedings initiated by the Board of Directors of the Federal Deposit Insurance Corporation on October 3, 1983, pursuant to Section 8(a) of the Federal Deposit Insurance Act (12 U.S.C. § 1818(a)), be, and hereby are, terminated.
   Dated in Washington, D.C., this 9 day of July, 1985.
   Pursuant to delegated authority.
/s/ Robert V. Shumway, Director
Division of Bank Supervision

FDIC-83-217a

RECOMMENDED DECISION

/s/ Thomas N. Trotta
Administrative Law Judge
Date: January 25, 1985

JURISDICTION AND PROCEDURAL HISTORY

   This is an action by the Federal Deposit Insurance Corporation (FDIC) which is attempting to terminate the insured status of * * * Bank of * * *, (the Bank) based on its allegedly unsafe or unsound condition. The FDIC has proceeded pursuant to section 8(a) of the Federal Deposit Insurance Act (Act) (12 USC 1818(a)).
   Following an examination of the Bank on April 30, 1982, the FDIC Board of Directors determined that the Bank had engaged in unsafe or unsound banking practices and certain violations of law and regulations. It therefore initiated a "cease and desist" proceeding under section 8(b) of the Act. The Bank, by its board of directors, consented to the issuance of an Order to Cease and Desist (Order) (FDIC Ex. 11) issued pursuant to section 8(b) of the Act (12 USC 1818(b)). The Order required the Bank to take certain steps to, among other things, improve its equity capital and reserves, establish and maintain an adequate reserve for loan losses, to charge off certain loan losses, to improve the quality of its assets and to take other necessary steps to improve its management. The Order was issued by the FDIC Board of Directors on November 8, 1982 and became effective ten days thereafter.
   The Bank was subsequently examined by the FDIC on May 6, 1983. Based upon the results of that examination, the FDIC determined that, in fact, the condition of the Bank had deteriorated since the prior examination, and that the requirements of the Order had not been complied with. Therefore, on October 3, 1983, the FDIC issued Findings of Unsafe or Unsound Condition and Order of Correction (Order of Correction) pursuant to section 8(a) of the Act (12 USC 1818(a)) against the Bank. This Order of Correction required the Bank to restore itself to a safe and sound condition and to take specific steps to correct its unsound condition within 120 days.
   Some six weeks after the expiration of the 120-day corrective period, provided by the Order of Correction, the Bank was re-examined on March 16, 1984. Based upon that examination, the FDIC concluded that the Bank continued to be in an unsafe and unsound condition and substantially had not complied with the Order of Correction. Therefore, on June 11, 1984, the FDIC issued a Notice of Intention of Terminate Insured Status and an Order Setting Hearing on Termination of Insured Status (Termination Hearing Order) against the Bank. The Bank filed an answer on July 3, 1984 generally denying the allegations of the Termination Hearing Order.
   By letter of July 2, 1984, the undersigned was assigned as an administrative law judge by the Office of Personnel Management to conduct a formal hearing and issue a recommended decision on the charges filed by the FDIC. On July 26, 1984, a prehearing telephone conference took place between the Administrative Law Judge, Mr. * * *, Regional Counsel representing the FDIC, and Mr. * * *, Attorney at Law, representing * * * Bank of * * *. At that time, a verbal request was made by counsel for the Bank for postponement of the proceedings.

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   Subsequently, a written Motion for such postponement was filed on July 27, 1984 on behalf of the Bank. On August 17, 1984, after no objection to a postponement was made on behalf of the FDIC, an Order was issued granting the respondent's Motion for a Continuance and setting the hearing for September 25, 1984. The Order further specified that a prehearing conference would take place on Friday, September 14, 1984. At that prehearing conference, the Bank amended its general answer by specifically admitting the jurisdictional and procedural allegations contained in the Termination Hearing Order of June 11, 1984. It further admitted that it had not increased its equity capital, as required by the section 8(b) Cease and Desist Order, and specifically denied all other allegations. Thereafter, the hearing commenced as scheduled on September 25, 1984 and concluded on September 27, 1984. On October 26, 1984, the undersigned issued a Notice to the parties that the transcript of the hearing had been duly certified by the reporter and filed with the Administrative Law Judge. The parties were given 30 days for filing of Proposed Findings of Fact, Conclusions of Law and a Proposed Order. The FDIC submitted its proposals on December 1, 1984 and the respondent Bank submitted its proposals on December 3, 1984. Following a 15-day period for submission of reply briefs, and none having been filed, the record was officially closed on December 21, 1984 and the matter is now ready for decision.

STATEMENT OF THE ISSUES

   The general issue to be determined in this proceeding is whether the Federal Deposit Insurance Corporation should terminate the status of the * * * Bank of * * *, as an insured bank. More specifically, the issue is whether the Bank has engaged in unsafe or unsound practices in conducting the business of the Bank and was in an unsafe or unsound condition to continue operations as an insured bank.

APPLICABLE LAW AND REGULATIONS

   Section 8(a) of the Federal Deposit Insurance Act (12 USC 1818(a)) provides, inter alia, that whenever the Board of Directors of the FDIC shall find that an insured bank or its directors or trustees have engaged or are engaging in unsafe or unsound practices in conducting the business of such bank, or that it is in an unsafe or unsound condition to continue operations as an insured bank, or has violated an applicable law, rule or regulation or order of the Corporation, the directors may serve on the bank an Order of Correction to be made within 120 days or a shorter period up to 20 days. If following such period, it is determined that such corrections have not been made, the Board shall give the bank not less than 30 days written notice of intention to terminate the status of the bank as an insured bank and fix a time and place for a hearing at which evidence may be produced and upon such evidence the Board of Directors shall make written findings which shall be conclusive. If it is determined that an unsafe or unsound practice or condition or violation as specified in the statement had been established and has not been corrected within the time period proscribed, the Board of Directors may order that the insured status of the bank be terminated on a date subsequent to such findings.
   Section 8(b) of the FDIC Act (12 USC 1818(b)) provides, inter alia, for the issuance of a cease and desist order where the appropriate federal banking agency has determined that an insured bank, director, officer, employee or other person participating in the conduct or affairs of the bank is engaged or has engaged in unsafe or unsound practices in conducting the business of the bank, or has violated a rule, regulation or condition imposed by the agency. Such cease and desist order may require the bank or its directors, officers, employees, agents or other persons to cease and desist from such unsafe practices or from participating in the conduct or affairs of the bank, or to take other affirmative action as specified to correct the condition resulting from any such violation or practice.

   [.1] The terms "unsafe or unsound practice or condition" have been defined by appellate court decisions as any practice and resulting condition encompassing conduct that is contrary to accepted standards of proven banking procedures and which might result in an abnormal risk or loss to the banking institution, its shareholders or to the FDIC. First National Bank of Eden vs. Department of the Treasury, 568 F.2d 610 (8th Cir. 1978); one purpose of the Banking Control Act was to clearly provide {{4-1-90 p.A-466}}for a progressive definition of unsafe or unsound practices and conditions and to commit eradication of such practices to the expertise of appropriate regulatory agencies, Gross National Bank vs. Comptroller of the Currency, 573 F.2d 889 (5th Cir. 1978).

   [.2] The burden of proof in an administrative proceeding, unless otherwise provided by statute, is on the administrative agency to establish its charges by the preponderance of evidence. Steadman vs. Securities Exchange Commission, 450 U.S. 91 (1981). The FDIC Act contains no provision to the contrary. Thus, the standard of proof in this proceeding is the preponderance of evidence.
   Section 908 of the International Lending Supervision Act of 1983 (PL 98–181) provides, inter alia, that the appropriate federal banking agency shall require banking institutions to achieve and maintain an adequate level of capital by establishing minimum levels of capital for such banking institutions as the federal agency deems appropriate. Further, the failure of a banking institution to maintain capital at or above its minimum level as established may be deemed by the appropriate federal banking agency to constitute an unsafe and unsound practice within the meaning of section 8(a) of the FDIC Act.

SUMMARY AND EVALUATION OF THE EVIDENCE

   The record reveals that the subject Bank in this case first opened for business as a state non-member bank in 1945 in * * *, which is a small farming, timber and lumber community located in the northeast corner of * * *. It operates one branch in * * *, a smaller community some 30 miles to the east. Beginning in the period approximately 1977, the Bank came under close supervision by federal and state banking authorities as a "problem bank." It has been the subject of Section 8 actions on more than one occasion, with a prior Section 8(b) Order issued on June 13, 1977, and two Memoranda of Understanding, dated June 20, 1980, and again November 12, 1981. The current proceedings date from an April 30, 1982 examination which resulted in a consent Order to Cease and Desist, which was issued on November 8, 1982 (Ex. 1, page 1 and Ex. 16, page 1). Since that time, the Bank has been examined on at least three subsequent occasions: October 28, 1983 by state authorities (Ex. 35), May 6, 1983 by federal and state authorities (Ex. 1); and, most recently on March 16, 1984 by state and federal authorities (Ex. 16). In addition, the record shows extensive involvement by both state and federal examining and supervising authorities in an effort to help the Bank improve its operations so as to restore itself to a sound banking position. Exhibits 14, 27, 30, 31 and 32 document the efforts in the way of conferences with bank management and its Board of Directors, correspondence with other banking authorities, the transmittal reports informing the Bank of the results of the examination and corrective measures to be taken and, of course, the specific orders under sections 8(b) and 8(a) of the Act, which are the subject of the present proceedings.
   Despite the extensive efforts by supervising and examining authorities, the record shows resistance, ineptitude, indolence, impotence, sterility or negligence on the part of the Bank's management to either comply with the specific directions of the banking authorities or to generally improve basic bank operations. In this regard, the Bank's board of directors, as well as its officers, are considered "management." Specifically, Ex. 1 at page 1 through 1-a-3 reveals that the Bank failed to comply with eight out of ten of the provisions of the Cease and Desist Order in November 1982 (See also Ex. 16, pp1 through 1-a-3, and TR pp 204, 218 and 221). The Cease and Desist Order specifically required the Bank to first retain new management, including a chief lending officer. By the time of the May 6, 1983 examination, the Bank had not retained a new chief lending officer. Several other management changes were made with the resignation of * * * as manager of the * * * branch effective October 1, 1982. However, he was retained on a consulting basis until April 1, 1983, and he continued to serve as Chairman of the Board until some time thereafter. The senior vice president, * * *, was designated as the new manager of the * * * branch. * * * resigned as executive vice president effective December 31, 1982, but also continues to serve as a director. By the time of the March 1984 examination, Mr. * * * , as Chief Executive Officer, was approved by the FDIC (Ex. 30) on a conditional basis, provided that the other requirements of the Order were met. He had not been hired until January 1984. Secondly, the Bank was ordered to increase {{4-1-90 p.A-467}}the Bank's total capital and reserves by not less than $700,000.00 within 180 days. By the time of the May 1983 examination, no substantive actions had been taken to comply with this requirement, nor had there been compliance by the date of the March 1984 examination, as the evidence at that time showed there had been no common or perpetual preferred stock subscribed for or purchased; there had been no cash contributions from shareholders or directors; and only some $23,000.00 was recovered by way of the collection of assets previously charged off. Thirdly, the Bank was required to eliminate from its books all assets classified as loss and 50% of those classified as doubtful, and to reduce the total of remaining loans classified as doubtful and classified as substandard to not more than $800,000.00 within 180 days of the Order. Exhibit 1 at page 1-a reveals that these provisions had not been complied with when the time limit proscribed elapsed on May 17, 1983 during the May bank examination. The fourth provision of the Cease and Desist Order required the Bank to eliminate and/or correct all violations of laws and regulations which existed as of the April 30, 1982 examination. Again, the Bank failed to do so, with specific evidence showing that the legal lending limit violation concerning the * * * credit continued, as well as numerous other violations specified at pages 6-b to 6-b-3 of Exhibit 1. The fifth requirement was that the Bank establish and continue to maintain an adequate reserve for loan losses. This requirement had not been complied with, as the results of the examination showed the loan loss reserve at $139,000.00 was inadequate to cover loans scheduled as loss and 50% of those classified as doubtful. The sixth Order of Correction was that the Bank not extend, directly or indirectly, any additional credit to or for the benefit of borrowers whose loans or extensions of credit had been classified, in whole or in part, as "loss" or "doubtful." The examination did not show evidence that this provision had been violated. The seventh provision required the Bank to review its current loan policies and procedures and submit them in writing to the Regional Director of FDIC for review and acceptance. This also had not been complied with as of May 6, 1983. Although the Bank had addressed these issues in a board meeting on October 5, 1982, the policies, plans and procedures had not been established and submitted in writing to the Regional Director as required. The eighth requirement specified the Bank to initiate a program to obtain accurate and adequate documentation to perfect the Bank's interests and collateral. A review of the Bank's loan policy showed some partial compliance with this provision; however, no formal program had been established to insure that the Bank obtained relevant information. The lack of other corrective actions was evidenced by the number of technical exceptions noted elsewhere in the examination report. The ninth specific order required the Bank, within 120 days, to take specific steps to reduce the credit of * * *, and its affiliates and guarantors, as well as to the * * * credits to the extent that these credits should not exceed 25% of the Bank's total equity capital. By the time of the examination, the report shows that the credits to * * * continued to equal 74.7% of the total equity capital, and that of * * * equalled 44.3%. Finally, the tenth provision required certain orders to be filed with the Director on a regular basis commencing on January 10, 1983. Dilatory progress reports were received by the Director on February 4, 1983 and April 6, 1983. Similarly, a review of the requirements of the October 3, 1983 Order of Correction and the efforts to comply, as shown in Ex. 16, pp1 through 1-a-3, indicate that the Bank remained in substantial non-compliance as of that date.
   Aside from the specific violations noted above, the overall record is replete with testimony and exhibit evidence showing poor management of the Bank over a long period of time, with an unwillingness or inability to respond to sound banking principles and supervision. In this regard, it is true that the evidence shows the state of the depressed economy in * * * may have contributed somewhat to the effect of the Bank's overall soundness and performance in recent years (See, for example, FDIC Ex. 13 and 25, and TR pp 122 to 127 and 172). However, much of the effects of the poor economy would have been dissipated without adversely affecting the Bank's safeness and soundness if credit had not been unlawfully concentrated; loan guarantees had not been jeopardized; if weak servicing of loan accounts and assets had not been prevalent; if excessive overhead had not been perpetuated; {{4-1-90 p.A-468}}and, if adequate collateral had been required and appropriate documentation of credit worthiness maintained. Even with a poor economy, this Bank compares very poorly with other similar banks in the State of * * *. Specific testimony at TR p 127 reveals that the relationship after net tax operating income to average assets overall is a negative .35 for banks in the state, whereas for the subject Bank, this figure was 2.80. The significance of this figure shows that the Bank lost $2.80 for every $100.00 of assets that it was employing. Thus, even though it is true that the depressed * * * economy has had an adverse effect on the banking business, the unsafe and unsound condition of this Bank cannot be attributed primarily to those factors.
   Unfortunately, the Bank in its pleadings and presentation of its case at the hearing has not provided any substantial evidence to contradict that offered by the FDIC. The Bank offered only the testimony of two bank witnesses. One of these was the new Chief Operating Officer who was employed after January 3, 1984 and had little knowledge of the most important facts and the largest credit line established by the Bank and was not vitally connected with the Bank during any of the prior time during which many of the poor management practices were taking place. The other witness similarly provided only cursory testimony, although he was a long-time officer and board of directors member. No documentary evidence was offered by the Bank and no persuasive reasons were given for disagreeing with bank examiners' evaluations or judgments, or for the Bank's failure to comply with specific orders, directives and supervision of banking examiners designed to improve banking operations.
   In its proposed Findings of Fact and Conclusions of Law, the respondent Bank offers only three proposed findings. First, that the respondent and its board of directors were not operating the Bank with an inadequate adjusted equity capital and reserves at the end of the 120-day corrective period. Secondly, that the Bank was not operating with excessive adverse loan classifications as a result of failure to follow sound and proven lending practices; and third, that the board of directors was not operating the Bank with management whose policies and practices were detrimental to the Bank and jeopardized the safety of deposits at the end of the corrective period. The third of these proposed findings has been dealt with above in the discussion of the poor management practices which have plagued this Bank since at least 1982. Based on that discussion, there is no basis for adopting the Bank's proposed finding in this regard.
   As to the proposed findings regarding adequacy of capital and excessive loan classifications, it is concluded that all the evidence of record supports the classification of assets and loans, as made by the various federal bank examiners and their supervisors, as well as by the state banking authorities and their supervisors. The three primary exhibits in the case, Exhibits 1, 16 and 35, are very similar and consistent in their evaluation of the various assets, loans and condition of the Bank. Based upon the testimony and exhibits presented, these examiners, whether federal or state, used routine, generally accepted methods and procedures in evaluating the Bank and its assets and in classifying the various assets and loans. It is a matter of record that the FDIC bank examiners are well trained in uniform procedures, attend numerous schools and are constantly reminded of current banking procedures and policies by memoranda distributed by their supervising authorities. There is no evidence that in the case of this Bank the examinations were done in any arbitrary or capricious manner or were in any way impartial in connection with this Bank, as was implied during the presentation of the Bank's case. In this regard, it is further specifically found that the two federal banking examiners, Mr. * * * and Mr. * * * , and their supervisor, Mr. * * * , who testified at the hearing, are highly credible witnesses. The evidence shows that each had extensive training and experience, as well as knowledge and expertise, in their fields. Further, their testimony showed their evaluations were made independently; their conclusions and assessments were rationally based; and, their judgments were well founded by the facts in the record. It is noted also that the results of both of these federal examinations were verified by other similar findings reached independently by the state bank examiners. All concluded that the Bank was in an extremely unsafe and unsound condition and that its unsafeness and unsoundness was progressively worsening over the past several years (TR page 392-393). The only evidence offered by the Bank to counter the adverse loan and asset classifications and the inadequate level {{4-1-90 p.A-469}}of capital of the Bank was the testimony by Mr. * * *. This testimony, however, was not found substantially credible. His assertions regarding classifications were not shown to be based on sound banking principles, nor sound banking examiner judgment. As was pointed out during the testimony (TR page 344), it is not atypical for a bank officer to disagree with the judgment of a bank examiner. However, the latter has no interest in the particular bank and where, as here, the documentation of the reasons for his evaluations are clear and precise, his impartiality establishes his testimony as more credible than that of a bank officer who has a specific interest in sustaining his own or other bank officials' past judgments and actions in the outcome of the examination. With regard to Mr. * * * testimony regarding the capital adequacy of the Bank, even if his very unbusinesslike judgment as to which accounts have been adversely classified were accepted, the condition of the Bank would still be unsafe and unsound. Mr. * * * himself agreed, in his testimony at TR p 465, that the Bank's capital condition would still be "woefully inadequate" even under his own classification of the Bank's loans and assets and his own computation of the "capital ratio." When also considering that the Bank stipulated its capital was inadequate in the section 8(b) Cease and Desist Order and subsequently did not raise any significant new capital, no basis can be found for accepting the Bank's proposed findings of fact in regard to either loan classification or capital adequacy. It is also noted that the Bank's protestations of adverse classification by the bank examiners must be given little weight since empirically the Bank's evaluations have been carried out in the form of bank policies, procedures and action over the last several years and have resulted in a continuously worsening and unsafe and unsound condition. If the Bank's own evaluation and judgment had been prudent, safe and sound, the Bank's condition would not have regularly deteriorated, as and to the extent it did, over the last several years.
   After evaluation of all the foregoing evidence in the case, it is concluded that the FDIC has established by a preponderance of the evidence that the Bank has engaged in unsafe and unsound practices in the conducting of the business of the Bank, and was, and is, in an unsafe and unsound condition to continue operations as an insured bank. This conclusion is based on a longterm analysis of the Bank's operation, as shown by the various trends and ratios in the evidence and testified to at the hearing. It is recognized that the degree of the safeness and soundness of any bank fluctuates on a daily basis due to many factors which change frequently. Therefore, in arriving at the facts and conclusions and decision in this case, great weigh has been given to trends based on adjustments over the several year period as more accurately reflecting the seriousness of the deficits in areas of capital, assets, management, earnings and liquidity for they have shown an inability on the part of the officers and the board of directors of the Bank to correct past errors in spite of offered aid and supervision by chartering and deposit insurance examiners and authorities. The concept of unsafe and unsound practices is one of general application. The entire operations of a banking institution must be evaluated and even though some activities may not necessarily be unsafe or unsound in every instance, when considered in the long range in connection with all the relevant facts, the evidence shows that the Bank has been operated in a manner which is grossly contrary to generally accepted standards of prudent operation. Of particular concern is the continued operation with what is described by all banking authorities and even the Bank's current Chief Operating Officer as a "woefully inadequate" level of capital for the kind and quality of assets held by the Bank. Because of the exceptionally poor management over a period of the last several years, the Bank was not salvageable to a safe and sound condition unless a massive infusion of new capital were made. It was apparent that the high overhead, the lack of enough earnings, the poor profitability, or the negative profitability through massive losses and inadequate investment income, all contributed to the Bank reaching a point of no return to safeness and soundness without that equity capital infusion. Changes in the Chief Operating Officer and President to Mr. * * * have accomplished some tightening of procedures and documentation of collection efforts, but these efforts have been far from adequate to accomplish a turnaround from the Bank's unsafe and unsound condition.

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   As in the case of the terms "unsafe and unsound practices," the term "unsafe and unsound condition" is also not specifically defined by the Act, nor is precise definition possible. As in the case of evaluation of the Bank's practices, the Bank's overall condition must be analyzed over an extended period of time, evaluating all aspects of the Bank's operation. It is clear that a bank's condition need not deteriorate to the point where it is on the verge of insolvency before its condition may be found to be unsafe or unsound. However, the record in this case shows that the Bank's present condition is critical. The Bank itself has recognized the need for this capital infusion by its agreeing to the Cease and Desist Order on November 8, 1982. Yet, despite its consent to this Order, the Bank did almost nothing to change its capital position. Clearly, the continued operation of this bank would result in a grossly abnormal risk of loss or damage to the institution, to its shareholders, to the depositors and to the insurance fund administered by the FDIC.

FINDINGS OF FACT

   1. The Bank is a corporation existing and doing business under the laws of the State of * * * and has its principal place of business at * * * (P.H. Order at 2).
   2. The Bank is and has been, at all times pertinent to this proceeding, an insured State-chartered bank which is not a member of the Federal Reserve System, subject to the provisions of the Federal Deposit Insurance Act and the Rules and Regulations of the FDIC (P.H. Order at 2).
   3. The FDIC conducts periodic examinations of banks under its supervision. The purposes of an examination are: (1) to determine the financial condition of the bank, (2) to evaluate its management, and (3) to determine its compliance with applicable laws and regulations. Evaluation of the financial condition of a bank involves an analysis of capital adequacy, quality of assets, earnings, and liquidity (TR 26, 27, 127, 208-209).
   4. In the course of examining a bank, FDIC's examiners gather information from the Bank's records. In analyzing loans, information is derived form the notes, credit files, and discussions with management of the bank (TR 27-33, 35, 67-71, 209, 211, 223-226).
   5. The FDIC's examiners classify bank assets according to the degree of risk present in the assets (TR 51-54, 215-217).
   6. There are three categories of adverse classification which may be assigned to an asset or portion thereof. A "Substandard" classification applied to assets which have risk of nonpayment that would jeopardize the orderly liquidation of the asset or loan (TR 52, 53, 217). "Doubtful" assets contain the elements of risk of Substandard assets, but also contain an element of loss which is not clearly identifiable (TR 53, 26, 217). A "Loss" asset is an asset not presently deemed collectible (TR 53, 216).
   7. The Bank was examined by the FDIC as of the close of business May 6, 1983, by a group of FDIC examiners under the direction of Examiner-in-Charge, * * * (FDIC Ex. 1; TR 340).
   8. The examination of the Bank referred to in finding of fact No. 7 found the Bank to be in noncompliance with eight of the ten provisions of the Order issued pursuant to Section 8(b) of the Act (FDIC Ex. 1; FDIC Ex. 10; FDIC Ex. 11; FDIC Ex. 25; FDIC EX. 27; TR 44, 135-137, 149–150).
   9. As of May 6, 1983:
   a. The Bank's total equity capital and reserves equalled $1,012,000 (FDIC Ex. 1 at 3; TR 94, 95, 128).
   b. The Bank's adjusted equity capital and reserves $385,000 (FDIC Ex. 1 at 3; TR 95, 129, 131, 353).
   c. The Bank's total assets equalled $18,099,000 (FDIC Ex. 1 at 2; TR 49).
   d. The Bank's adjusted total assets equalled $17,704,000 (FDIC Ex. 1 at 3).
   e. The Bank's total deposits equalled $16,755,000 (FDIC Ex. 1 at 2).
   f. The Bank's total loans equalled $12,913,000 (FDIC Ex. 1 at 2-f).
   10. As of May 6, 1983:
   a. The Bank had extended credit to various borrowers with inadequate sources of repayment (FDIC Ex. 1 at 1-a-5, 2-a-1 through 2-a-27).
   b. The number of overdue loans was 125, totaling $1,696,000 which amount was 13.13% of the total amount of the Bank's loans (FDIC Ex. 1 at 2-f; TR 121, 122, 195, 198).
   c. A volume of overdue loans amounting to 13.13% of the total amount of the Bank's {{4-1-90 p.A-471}}loans is excessive (FDIC Ex. 1 at 2-f; TR 121, 122, 195, 198).
   d. The amount of adversely classified loans was $2,252,000, of which $1,786,000 was classified Substandard, $110,000 was classified Doubtful, and $356,000 was classified Loss. The total amount of classified loans was 17.44% of the amount of total loans in the Bank (FDIC Ex. 1 at 2, 2-a through 2-a-22; TR 87, 123, 132, 185, 228, 261, 281, 283).
   e. A volume of classified loans equal to 17.44% of a bank's total loans is excessive or very high. Such percentage in banks comparable to the Bank is normally 8% to 9% (FDIC Ex. 1 at 2; TR 87, 123, 124).
   f. Other than loans, the amount of assets of the Bank which was adversely classified was $425,000, of which $222,000 was classified Substandard, $161,000 was classified Doubtful, and $42,000 was classified Loss (FDIC Ex. 1 at 2; TR 309).
   g. The total amount of assets subject to adverse classification was $2,677,000. This amount equalled 264.53% of total equity capital and reserves of the Bank (FDIC Ex. 1 at 2, 3; TR 64, 74-75, 83-84, 90, 124, 222, 227, 229).
   h. An amount of classified assets equal to 264.53% of the total equity capital and reserves of the Bank is excessive. Such percentage in other banks in the State of * * * is usually less than 50% (TR 90-91, 124-125).
   i. The adjusted equity capital and reserves of the Bank equalled $385,000; this amount was 2.17% of adjusted total assets of $17,704,000 (FDIC Ex. 1 at 3; TR 95, 97, 125, 129, 131, 133, 232, 243, 353, 392).
   j. Adjusted equity capital and reserves in an amount equal to 2.17% of adjusted total assets is indicative of a significantly low capital account. That percentage in comparable banks in the State of * * * is 7.5% (TR 97, 125-126, 133).
   k. The contingent liabilities of the Bank totaled $2,035,000 (FDIC Ex. 1 at 1-a-5; TR 144, 189).
   l. Contingent liabilities totaling $2,035,000 exposes the Bank to a substantial degree of loss and presents a threat to the Bank's solvency (FDIC Ex. 1 at 1-a-5).
   m. The adversely classified assets not considered in the computation of the adjusted equity capital and reserves totaled $2,143,000 (TR 129-131).
   n. The significance of a large amount of classified assets which have not been deducted from capital for purposes of computing the adjusted equity capital and reserves is that a large portion of these assets, probably 15% to 25%, will deteriorate and become losses (TR 131).
   o. The loan valuation reserve of the Bank was inadequate in relation to the amount and quality of loans in the Bank. The loan valuation reserve was $139,000. After deducting loans classified Loss, totaling $356,000, and 50% of the loans classified Doubtful, totaling $55,000, the balance was a negative $272,000. In addition to the loan valuation reserve being inadequate for loans classified Loss and Doubtful, the reserve amount is inadequate to provide for probable future losses from the remaining loans classified Doubtful, from the loans classified Substandard, and from unclassified loans (FDIC Ex. 1 at 2, 3; TR 119–120, 128, 131–133).
   p. The Bank was being operated with high overhead expenses and a declining net interest margin, resulting in its unprofitable operation. In 1982, the Bank experienced a net loss of $491,000 due to heavy loan losses, high overhead, and loss of income from nonearning assets (FDIC Ex. 1 at 1-a-7); TR 100, 237).
   q. The Bank violated Section 708.305 of the * * * Revised Statutes (* * * Section 708.305) in that the Bank granted extensions of credit to * * *, or for its benefit, in excess of 15% of the Bank's capital stock, unimpaired surplus, and capital debentures maturing in more than five years. In this instance, proceeds from loans to * * * and * * * are deemed extensions of credit to * * * because the proceeds from these loans were deposited directly to the account of * * * (FDIC Ex. 1 at 6-b; TR 136-139).
   r. The Bank violated Section 22(h) of the Federal Reserve Act, as amended (12 U.S.C. Section 375b), as implemented by Section 215.4(d) of Regulation O of the Board of Governors of the Federal Reserve System (12 C.F.R. Section 215.4(d)), made applicable to State non-member banks by Section 22(j) of the Act (12 U.S.C. 1828(j)), in that the Bank allowed an overdraft of the account of * * * a Bank officer and director, for a period of 34 consecutive days,
{{4-1-90 p.A-472}}

    during which there was no written, preauthorized agreement for extension of credit or transfer of funds from another account; and no charge of any kind was made by the Bank to Mr. * * * , although there is a customary $5.00 charge per not sufficient funds (N.S.F.) check levied on other customers of the Bank (FDIC Ex. 1 at 6-b-1; TR 134-135).
       s. The Bank violated Section 708.445 of * * * Revised Statutes in that it continued to hold repossessed assets longer than the six months maximum period allowed by law (FDIC Ex. 1 at 6-b-2).
       t. The Bank violated Section 708.088 of * * * Revised Statutes, in that the Bank failed to charge-off certain assets from the Bank's books after being instructed to do so by the State Superintendent of Banks (FDIC Ex. 1 at 6-b-2).
       u. The Bank violated Section 708.058 of the * * * Revised Statutes, in that certain loans made by the Bank are not supported by an appraisal, as required by law (FDIC Ex. 1 at 6-b-3).
       v. The Bank's financial components and managerial adequacy were rated, based on the Uniform Financial Institutions Rating System. The instructions promulgated by the federal bank regulatory agencies were followed by Examiner * * * in making these ratings. The specific items evaluated included capital adequacy, asset quality, management, earnings, and liquidity. These items were accorded a numerical rating of 1 to 5, 1 being the best and 5 being the worst. On the basis of the individual ratings, a composite rating of 1 to 5 was assigned to the Bank. For making these ratings, guidelines have been provided and the ratings of the Bank were assigned in accordance with those guidelines. The ratings were: capital adequacy, 5; asset quality, 5; management, 5; earnings, 5; liquidity, 2; composite, 5 (FDIC Ex. 1 at 1-a-8; FDIC Ex. 12; TR 151–155).
       w. The instructions of the three federal bank regulatory agencies provide that capital of a bank should be rated 5 in those instances where a bank is inadequately capitalized and represents a situation of such gravity as to threaten the bank's viability and solvency and to require urgent assistance from shareholders or other external sources of financial support (FDIC Ex. 12).
       x. The instructions of the three federal bank regulatory agencies provide that assets of a bank should be rated 5 in those instances where a bank has severe asset problems and represents an imminent threat to a bank's viability through the corrosive effect of asset problems on the level of capital support (FDIC Ex. 12).
       y. The instructions of the three federal bank regulatory agencies provide that management of a bank should be rated 5 in those instances where incompetence has been demonstrated and where problems resulting from management are of such severity that management must be strengthened or replaced before sound condition can be brought about (FDIC Ex. 12).
       z. The instructions of the three federal bank regulatory agencies provide that earnings of a bank should be rated 5 in those instances where a bank has erratic fluctuations in net income, the development of a downward trend, and intermittent losses or a substantial drop from the previous year to such an extent as to represent a distinct threat to the bank's solvency through the erosion of capital (FDIC Ex. 12).
       aa. The instructions of the federal bank regulatory agencies provide that a bank given a composite rating of 5 is one wherein the volume and character of weaknesses are such as to require urgent aid from the shareholders or other sources. Such a bank requires immediate corrective action and constant supervisory attention, and the probability of failure is high for banks in this category (FDIC Ex. 12).
   11. The Bank was re-examined after the 120-day corrective period for compliance with the Order of Correction (FDIC Ex. 16; TR 211-212).
   12. The examination of the Bank referred to in finding of fact No. 11 was conducted by the FDIC as of the close of business March 16, 1984, by a group of FDIC examiners under the direction of Examiner-in-Charge, * * * (FDIC Ex. 16; Tr 210-211, 262-263).
   13. The examination of the Bank referred to in finding of fact No. 11 found the Bank to be in substantial non-compliance with the Order of Correction (FDIC Ex. 16; FDIC Ex. 31; FDIC Ex. 32; TR 218–221, 347).
   14. As of March 16, 1984:
       a. The Bank's total equity capital and reserves equalled $609,000 (FDIC Ex. 16 at 3; TR 230, 241, 259).
    {{4-1-90 p.A-473}}
       b. The Bank's adjusted equity capital and reserves equalled $234,000 (FDIC Ex. 16 at 3; TR 234, 242, 243, 304, 388).
       c. The Bank's total assets equalled $17,930,000 (FDIC Ex. 16 at 2).
       d. The Bank's adjusted total assets equalled $17,683,000 (FDIC Ex. 16 at 3).
       e. The Bank's total deposits equalled $16,922,000 (FDIC Ex. 16 at 2).
       f. The Bank's total loans equalled $12,463,000 (FDIC Ex. 16 at 2-f).
   15. As of March 16, 1984:
       a. The Bank had extended credit to various borrowers with inadequate sources of repayment and without adequate analysis (FDIC Ex. 16 at 1-a-4, 2-a-1 through 2-a-34).
       b. The number of overdue loans and leases was 150, totaling $2,145,000 which amount was 17.21% of the total amount of the Bank's loans and leases (FDIC Ex. 16 at 2-f; TR 235, 236).
       c. A volume of overdue loans amounting to 17.21% of the total amount of the Bank's loans is unacceptable and excessive. Such percentage for a normal, well run institution is 5% to 6% (TR at 236).
       d. The amount of adversely classified loans was $2,297,000, of which $2,097,000 was classified Substandard, $16,000 was classified Doubtful, and $184,000 was classified Loss. The total amount of classified loans was 18.43% of the amount of total loans in the Bank (FDIC Ex. 16 at 2, 2-a through 2-a-24; TR 218, 221, 228, 228).
       e. A volume of classified loans equal to 18.43% of a bank's total loans is excessive. Such percentage in banks comparable to the Bank is normally 5% to 7% but in the experience of Examiner * * * , the percentages in * * * are slightly higher, but not over 10% (TR 233-234).
       f. Other than loans, the amount of assets of the Bank which was adversely classified was $387,000, of which $223,000 was classified Substandard, $141,000 was classified Doubtful, and $23,000 was classified Loss (FDIC Ex. 16 at 2; TR 222, 277-278, 309).
       g. The total amount of all assets subject to adverse classification was $3,335,000. This amount equalled 547.62% of total equity capital and reserves of the Bank (FDIC Ex. 16 at 2, TR 222, 227, 229-231, 393).
       h. An amount of classified assets equal to 547.62% of the total equity capital and reserves of the Bank indicated that severe asset problems exist and that the depositors' funds are at risk, and that the percentage of adversely classified assets to total equity capital and reserves from the knowledge of Examiner * * * of other banks in * * * as of March 16, 1984 was the highest in the State of * * * (TR 229, 234-235).
       i. The adjusted equity capital and reserves of the Bank equalled $234,000; this amount was 1.32% of adjusted total assets of $17,683,000 (FDIC Ex. 16 at 3; TR 231-232, 241-242, 243, 304, 361, 392).
       j. Adjusted equity capital and reserves in an amount equal to 1.32% of adjusted total assets is indicative of a woefully inadequate capital account. In the experience of Examiner * * *, that percentage in banks is between 7% and 8.5%. In the experience of Assistant Regional Director * * * that percentage in a normal well run bank is between 7% and 7.5% (TR 242-244-, 361-362, 491).
       k. The loan valuation reserve of the Bank was woefully inadequate in relation to the quality of loans in the Bank. The loan valuation reserve was $81,000. After deducting loans classified Loss, totaling $184,000, and 50% of the loans classified Doubtful, totaling $8,000, the balance was negative $111,000. In addition to the loan valuation reserve being inadequate for loans classified Loss and Doubtful, the reserve amount is obviously inadequate to provide for probable future losses from the remaining loans classified Doubtful, from the loans classified Substandard, and from unclassified loans (FDIC Ex. 16 at 2, 3; TR 241, 242-243).
       1. The Bank was being operated with high overhead expenses and a declining net interest margin, resulting in its unprofitable operation. In 1983, the Bank experienced a net loss of $232,000 due to heavy loan losses, high overhead, and loss of income from non-earning assets (FDIC Ex. 16 at 1-a-4; TR 237, 238).
       m. The Bank violated Section 708.305 of the * * * Revised Statutes ( * * * Section 708.305) in that the Bank granted extensions of credit to * * * , or for its benefit, in excess of 15% of the Bank's capital stock, unimpaired surplus, and capital debentures
    {{4-1-90 p.A-474}}
    maturing in more than five years (FDIC Ex. 16 at 6-b).
       n. The Bank violated Section 22(h) of the Federal Reserve Act, as amended (12 U.S.C. Section 375b), as implemented by Section 215.4(d) of Regulation O of the Board of Governors of the Federal Reserve System (12 C.F.R. Section 215.4(d)), made applicable to State non-member banks by Section 22(j) of the Act (12 U.S.C. 1828(j)), in that the Bank on two occasions allowed an overdraft of the account of * * * , the Bank's cashier, in the absence of a written, preauthorized agreement for extension of credit or transfer of funds from another account; and no charge of any kind was made by the Bank to Mr. * * * , although there is a customary $5.00 charge per not sufficient funds (N.S.F.) check levied on other customers of the Bank (FDIC Ex. 16 at 6-b-1).
       o. The Bank violated Section 708.445 of * * * Revised Statutes in that it continued to hold repossessed assets longer than the six months maximum period allowed by law without charging off the asset (FDIC Ex. 16 at 6-b-2).
       p. The Bank violated Section 708.058 of the * * * Revised Statutes, in that a certain real estate or leasehold loan made by the Bank is not supported by evidence of title and insurance, as required by law (FDIC Ex. 16 at 6-b-2).
       q. The Bank's financial components and managerial adequacy were rated, based on the Uniform Financial Institutions Rating System. The instructions promulgated by the federal bank regulatory agencies were followed by Examiner * * * in making these ratings. The specific items evaluated included capital adequacy, asset quality, management, earnings, and liquidity. These items were accorded a numerical rating of 1 to 5, 1 being the best and 5 being the worst. On the basis of the individual ratings, a composite rating of 1 to 5 was assigned to the Bank. For making these ratings, guidelines have been provided and the ratings of the Bank were assigned in accordance with those guidelines. The ratings were: capital adequacy, 5; asset quality, 5; management, 5; earnings, 5; liquidity, 3; composite, 5 (FDIC Ex. 16 at a, 1-a-6; FDIC Ex. 12; TR 248-255).
       r. The instructions of the federal bank regulatory agencies with respect to the Uniform Financial Institutions Rating System were delineated in a News Release dated May 10, 1978 and designated PR-52-98 (FDIC Ex. 12).
       s. The condition of the Bank deteriorated between May 6, 1983 and March 16, 1984 (FDIC Ex. 1; FDIC Ex. 16; TR 222–223, 227–229, 232, 240, 243, 253–254).
   16. The condition of the Bank has deteriorated over the period covered by the last three examinations conducted by the FDIC, as follows:
       a. The volume of classified assets was $2,015,000 as of April 30, 1982; $2,677,000 as of May 6, 1983; and $3,335,000 as of March 16, 1984 (FDIC Ex. 1 at 2; FDIC Ex. 16 at 2; TR 64, 72, 74-75, 78, 83-84, 222-223, 227).
       b. The ratio of classified loans to total loans was 14.94% as of April 30, 1982; 17.44% as of May 6, 1983; and 18.43% as of March 16, 1984 (FDIC Ex. 1 at 2; FDIC Ex. 16 at 2; TR 87, 88, 228).
       c. The percentage of classified assets to total equity capital and reserves was 176.44% as of April 30, 1982; 264.53% as of May 6, 1983; and 547.62% as of March 16, 1984 (FDIC Ex. 1 at 3; FDIC Ex. 16 at 3; TR 90, 91, 124, 229, 230, 231, 393).
       d. The ratio of the Bank's adjusted equity capital and reserves to adjusted total assets was 3.40% as of April 30, 1982; 2.17% as of May 6, 1983; and 1.32% as of March 16, 1984 (FDIC Ex. 1 at 3; FDIC Ex. 16 at 3; TR 97, 125, 232, 243, 244, 351, 361, 379, 391-392, 465, 490-491).
       e. The net income of the Bank for the calendar year 1982 was a negative $491,000 and a negative $232,000 for the calendar year 1983 (FDIC Ex. 1 at 1-a-7; FDIC Ex. 16 at 4; TR 100, 237).
       f. The after-tax operating income of the Bank, as a percentage of average assets, was 0.31% in 1981, a negative 2.84% in 1982, and a negative 1.36% in 1983. The Bank's peer group percentages for these periods were 1.09% for 1981, 0.95% for 1982, and .90% for 1983 (FDIC Ex. 1 at 4; FDIC Ex.16 at 4; TR 105, 240).
   17. As of May 6, 1983, the largest loan in the Bank was to * * * , its affiliates and guarantors (" * * * "), totaling $1,078,068 (FDIC EX. 1 at 2-a-4).
   18. As of May 6, 1983, the loans to * * * , its affiliates and guarantors, represented 74.68% of the Bank's total equity capital (FDIC Ex. 1 at 2-b; TR 356).
{{4-1-90 p.A-475}}
   19. The Bank's servicing of the loan account to * * * was not done in a prudent fashion and there is a strong likelihood of withdrawal of the guarantee of the Farmers Home Administration ("FmHA"). The Bank would then become liable for the guaranteed portion of the loan (FDIC Ex. 13; TR 371, 372).
   20. The servicing of the loan account of * * * has been repeatedly characterized as "negligent" by the FmHA, guarantor of 90% of the * * * loans (FDIC Ex. 1 at A-4; FDIC Ex. 13 at 2; TR 141).
   21. As a result of the negligent servicing of the * * * account, the 90% FmHA guarantee of the loans by the Bank to * * * has been jeopardized, resulting in Potential Loss in Contingent Liabilities of $1,417,000 and Estimated Loss in Contingent Liabilities of $77,000 (FDIC Ex. 1 at 3-a; TR 144, 191, 192-193, 194, 291).
   22. Proceeds from the liquidation of collateral used to secure a portion of the loans to * * * , have been diverted from repayment of the FmHA guaranteed loans and applied instead to the personal indebtedness of the individual guarantors (FDIC Ex. 1 at 2-a-7; FDIC Ex. 13 at 6).
   23. The Bank has violated several provisions of a Guaranteed Agreement with the U. S. Small Business Administration ("SBA") governing the SBA 90% guarantee of a $200,000 loan to * * * , * * *. Additional credit of $141,000 has been extended to that borrower, thereby jeopardizing the SBA guarantee. Despite numerous and detailed requests as to the servicing of the loan to * * * , the Bank failed to respond in a timely and/or complete fashion, thereby jeopardizing the validity of the guarantee (FDIC Ex. 14 at 1, 2-3, 7, 10–11, 12, 13–14; FDIC Ex. 16 at 2-a-30; TR 147-149, 274).
   24. The purpose of a bank's capital account is:
       a. to act as a cushion to protect the bank from the risks of loss inherent in the banking business (TR 128, 242);
       b. to support growth (TR 128, 242);
       c. to restrain unjustified or imprudent expansion of assets (TR 128, 242);
       d. to absorb losses so that the bank can continue to operate during periods when the bank is sustaining losses (TR 128, 242);
       e. to provide a measure of assurance to the public that the bank will be able to continue to provide financial services (TR 128, 242); and
       f. to provide a measure of assurance to depositors in the event of threatened insolvency (TR 128, 242).
   25. The adequacy of a bank's capital account is based upon the overall condition of the bank, including the extent and quality of its assets and the nature and degree of its liabilities (FDIC Ex. 12 at 4).
   26. A bank requires an amount of capital to absorb losses commensurate with the amount of its total assets, the volume of its adversely classified loans and other assets, and earnings posture (FDIC Ex. 12; Tr 128, 242, 365).
   27. The Bank failed to provide management acceptable to the FDIC, except on a conditional basis and the conditions for acceptance of Mr. * * * as President and Chief Executive Officer of the Bank were not complied with (FDIC Ex. 11; FDIC Ex. 29; FDIC Ex. 30; TR 348-350, 367-369).
   28. FDIC witnesses, * * * , * * * and Mr. * * * presented highly credible expert testimony which established that the bank examinations (FDIC Ex. 1 and 16) were conducted in a routine, professional and skillful manner.
   29. Bank witnesses * * * and * * * were not substantially credible as their testimony was not founded on prudent and competent professional banking judgments.

CONCLUSIONS OF LAW

   1. The Bank has been and is an insured State nonmember bank subject to the provisions of the Act (12 U.S.C. Sections 1811-1831)(1982) and the Rules and Regulations of the FDIC (12 C.F.R. Chapter 111(1983). The FDIC has jurisdiction over the Bank and the subject matter of the proceeding.
   2. Considering the small amount of the Bank's capital and reserves, and taking into consideration the distressed condition of the Bank's assets and its negative earnings, the Bank's business was being operated without sufficient capital and reserves to protect its depositors against potential losses, and the Bank was in an unsafe or unsound condition within the meaning of Section 8(a) of the Act as of May 6, 1983, and such condition has continued at all relevant times through the date of this decision.
   3. The Bank has failed to follow sound and prudent lending practices, resulting in {{4-1-90 p.A-476}} an excessive volume of loans subject to adverse classifications, an excessive volume of overdue loans, an excessive volume of loan losses, unwarranted, and excessive concentrations of credit indicative of a failure to diversify risk and an excessive and a disproportionately large volume of poor quality assets in relation to its total assets. Such practices constituted unsafe or unsound practices at all times pertinent to this proceeding within the meaning of Section 8(a) of the Act (12 U.S.C. Section 1818(a)(1982).
   4. The Bank has failed to comply with the Order of Correction issued October 3, 1983 pursuant to the provisions of Section 8(a) of the Act (12 U.S.C. Section 1818(a)(1982)).

DECISION

   Based upon the foregoing findings of fact and conclusions of law, it is the decision of the undersigned that the preponderance of the evidence establishes that the Bank has engaged in unsafe or unsound practices in conducting the business of the Bank and was, and is, in such an unsafe or unsound condition as to preclude continued operations as an insured bank under the terms of the FDIC Act. A proposed order terminating the Bank's Federal Deposit Insurance is attached. /s/ Thomas N. Trotta
/s/ Thomas N. Trotta
Administrative Law Judge
Date: January 25, 1985

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