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FDIC Enforcement Decisions and Orders |
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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 PracticesStatutory Standard
[.2] Practice and ProcedureBurden of ProofCease and Desist Proceedings
June 20, 1985
MEMORANDUM TO: Robert V.
FROM:
RE: Termination of Section 8(a)
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.
In the Matter of * * * BANK OF * * *
Pursuant to delegated authority.
/s/ Robert V. Shumway, Director
In the Matter of * * * OF * * *
FDIC-83-217a
RECOMMENDED DECISION
/s/ Thomas N. Trotta
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)).
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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.
[.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.
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.
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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).
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.
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 |
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Last Updated 6/6/2003 | legal@fdic.gov |