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FDIC Enforcement Decisions and Orders |
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Bank's insurance terminated. Bank found to be operating in an unsound or unsafe condition because of low capital-to-asset ratio, excessive level of poor quality assets, and failure to comply with an Order of Correction.
[.1] Terminations of InsuranceFailure to Comply with Order of Correction Inadequate Capital
[.3] Unsafe or Unsound PracticesCase-by-Case DeterminationManagement's Intentions
In the Matter of
Introduction
This proceeding seeks to terminate the insured status of * * * Bank, * * *, * * * (the "Bank" or "Respondent"), upon findings made by the Board of Directors (the "Board") of the Federal Deposit Insurance Corporation (the "FDIC") pursuant to section 8(a) of the Federal Deposit Insurance Act (the "FDI Act"), 12 U.S.C. §1818(a), that the Bank is in an unsafe or unsound condition to continue operations as an insured bank. After two examinations of the Bank by the FDIC as of July 31, 1986, and June 30, 1987, it was determined that: (1) the Bank was operating with inadequate capital and reserves and with an excessive volume of poor quality assets; (2) during this one year period the financial condition of the Bank had deteriorated; and (3) the Bank had failed to comply with the Order of Correction issued by the FDIC. For the reasons set forth below, the Board concludes that termination of insurance is warranted as found by the administrative law judge (the "ALJ") in his thorough and wellreasoned Recommended Decision which is adopted and incorporated herein.
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As a result of its examination of the Bank as of July 31, 1986, the FDIC issued its Findings of Unsafe or Unsound Practices and Condition ("Findings") and Order of Correction on January 20, 1987. The Findings charged that the Bank had engaged in unsafe or unsound practices in the conduct of its business and was in an unsafe or unsound condition to continue operations as an insured bank by reason of its inadequate capital and reserves and its excessive volume of poor quality assets.
Discussion
[.1] A. Statutory and Regulatory Requirements.
B. The Bank's Contentions.
The testimony and documentary evidence demonstrate that the condition of the
[.2] A major focus of the Bank's case-in-chief and Exceptions is its urging of the Board to view its condition "in light of the proposed `risk-based capital' structure, as proposed by the FDIC, the Office of the Comptroller of the Currency and the Federal Reserve Board, in a joint press release dated December 10, 1987." Respondent (Resp.) Exceptions at 78. In support of this position, it cites the testimony of the state bank examiner in response to a hypothetical question attempting to determine the Bank's capital to asset ratio if there were a risk-based capital structure. Resp. Exceptions at 8.
[.3] Finally, at the time of the hearing, the Bank contended that a capital infusion of $2 million is "imminent" with the purchase of $1.75 million in stock and recovery of a $250,000 note which previously had been charged off as a loss. R.D. at 4. While the stock purchase agreement and affidavit of the Bank's president are not part of this record, it is fair to say that based on Respondent's statement in its Exceptions, there has been no injection of capital to date. Respondent's Exceptions do not claim that the purchase has been consummated, but rather merely state that the Bank "has made strident efforts to increase its capital, and the Bank continues to work with third parties toward recapitalization of the Bank within the next several months." Resp. Exceptions at 9. In view of the several claims of imminent capital injections at various stages of this proceeding, the Board finds no comfort from this latest claim.
CONCLUSION
The Board has examined the record in light of Respondent's Exceptions and finds that nothing contained therein requires any modifications to the ALJ's Recommended Decision.
ORDER TERMINATING FEDERAL
IT IS HEREBY ORDERED, that the insured status of * * * Bank, * * *, * * *, is terminated effective as of the close of business sixty days from the date of this Order.
NOTICE
____, 1989
There may be included in such notice, with the written approval of the FDIC, any additional information or advice the Bank may deem desirable.
(Insured State Nonmember Bank)
RECOMMENDED DECISION
JAMES L. ROSE, Administrative Law Judge: This is an action under 12 U.S.C. §1818(a) brought by the Federal Deposit Insurance Corporation to terminate the insured status of the * * * Bank, * * * (herein the Bank or the Respondent). Following the hearing held on September 6, 1988, at * * *, counsel for the parties filed extensive briefs, reply briefs and proposed findings of fact and conclusions of law. Upon the record as a whole,1 including my observation
Findings and Conclusions
I. Statement of the Case
The Respondent is a small commercial bank operating on the outskirts of * * *. It is chartered by the State of * * * and is not a member of the Federal Reserve System, but is insured by the Federal Deposit Insurance Corporation. Accordingly, its primary regulator is the State of * * * Department of Banking, and is also regulated and examined by the FDIC.
II. Analysis and Concluding Findings
The Respondent does not really contest the power of the FDIC under §1818(a) to terminate a bank's insured status upon a finding that it is in an unsafe or unsound condition.
FINDINGS OF FACT
1. The Bank is a corporation organized, existing and doing business under the laws of the State of * * *, having its principal place of business in * * *. At all material times it has been an insured state nonmember bank. The Bank is not a member of the Federal Reserve System. (FDIC Ex. 4).
(FDIC Ex. 2 p. 4; TR. 39)
(b) Loans adversely classified were:
(FDIC Ex. 2 p. 4; TR. 40)
(c) Total equity capital was $1,834,000. (FDIC Ex. 2 p. 5; TR. 43).
(FDIC Ex. 7 p. 6; TR. 5657)
(b) Loans adversely classified were:
(FDIC Ex. 7 p. 6; TR. 57)
(c) The ratio of adversely classified loans and leases to total loans and leases was 22.22 percent.
14. The Call Reports of the Bank submitted from December 31, 1986, through June 30, 1988, show the following with regard to earnings:
15. On or about June 16, 1986, the Bank requested capital forbearance (FDIC Ex. 26), which request was denied because the Bank failed to meet the definition of an oil and gas bank. (FDIC Ex. 23; TR. 160).
CONCLUSIONS OF LAW
1. The FDIC has jurisdiction over insured State nonmember banks which are subject to the provisions of the Act (12 U.S.C. §§18111831) and the Rules and Regulations of the FDIC (12 C.F.R. Chapter III).
In the Matter of
(Insured State Nonmember Bank)
ORDER TERMINATING FEDERAL
NOW, THEREFORE, In conformity with the above Findings of Fact and Conclusions of Law, and pursuant to Section 8(a) of the Federal Deposit Insurance Act:
NOTICE
____, 1988
There may be included in such notice, with the written approval of the FDIC, and additional information or advice the Bank may deem desirable. |
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Last Updated 6/6/2003 | legal@fdic.gov |