By letter dated June 26, 2003, ***, Chairman and Chief Executive Officer
of [Bank] (“the Bank”), requested a change to the Bank’s assessment risk
classification for the July 1, 2003 semiannual assessment period. The
request was denied by the Federal Deposit Insurance Corporation’s (“FDIC”)
Division of Insurance and Research (“DIR”) on August 29, 2003. The Bank
appealed DIR’s determination to the FDIC’s Assessment Appeals Committee
(“Committee”) by letter dated September 22, 2003. In its current appeal, the
Bank reasserts arguments made in an earlier appeal to the Committee relating
to the January 1, 2003 semiannual period (Case No. 2003-02). The Bank’s
earlier appeal was denied by the Committee on August 1, 2003. The Bank has
offered no new information or argument in support of its current appeal.
After carefully considering all of the submissions made in this matter,
the Committee has determined to deny the Bank’s appeal.
In its current appeal, the Bank challenges its assignment by the FDIC to
supervisory subgroup (“SS”) “1B” for the July 2003 semiannual period.
Supervisory subgroup assignments are made in accordance with the FDIC’s
12 C.F.R. § 327.4(a)(2), and guidelines set forth
in FIL 30-2000. The cut-off date for the July 1, 2003 semiannual assessment
period was the preceding March 31. The Bank’s SS assignment was based, in
part, on a May 28, 2002 examination conducted by the Office of Thrift
Supervision (“OTS”), the Bank’s primary federal regulator, with FDIC
participation. This examination was the last examination transmitted to the
Bank before the March 31, 2003 SS cut-off date.
The test for application of the SS cut-off date is whether examination
results were transmitted in writing to the institution prior to the cut-off
date, unless an institution is reviewed during the reconcilement period or
there is evidence of a change that is confirmed by an ongoing examination
during that period. The Bank has met neither exception.
The Bank contends that its assessment risk classification improved from
“1B” to “1A” prior to the July 1, 2003 semiannual period. These
improvements, according to the Bank, began prior to the March 31, 2003
cut-off date, and continued thereafter, with a “dramatic” decline in the
level of classified assets occurring in the last quarter of 2002. In the
Bank’s view, this is not indicative of an institution that exhibits risk to
the deposit insurance funds and therefore it should not have been assigned
an SS classification of 1B. The Bank seeks an exception to the cut-off date
so that subsequent alleged changes to the Bank’s condition can be given “due
consideration” by the FDIC. These are essentially the same arguments
presented by the Bank in its prior appeal.
The Committee finds no basis for the relief the Bank requests. OTS began
an examination of the Bank on May 28, 2002, completed it on August 7, 2002,
and transmitted the results to the Bank on August 27, 2002. The FDIC
participated in the examination and concurred with the rating assigned by
OTS. That examination resulted in a composite rating of “3,” and an SS
assignment of “1B.” No other examination was in process that would have led
to a review or upgrade of the Bank’s SS classification until after the
reconcilement period had ended on May 16, 2003. Consequently, the Bank was
correctly assigned an SS classification of “1B” for the July 1, 2003
Moreover, the Committee cannot concur with the Bank’s contention that its
condition during the last quarter of 2002 merited an SS upgrade; in fact, as
noted by the Committee in the Bank’s prior appeal, problems appear to have
existed during the relevant periods, and the Bank’s net income was negative
at the end of the first quarter of 2003.
Finally, the Committee notes that the OTS began a new examination of the
Bank on June 2, 2003, which was completed on August 7, 2003. As a result of
this new examination, the Bank will be upgraded to an SS rating of “A” for
the January 1, 2004 semiannual period. This examination, however, was begun
too late to affect the Bank’s SS assignment for the July 1, 2003 semiannual
To grant the Bank the relief it requests would conflict with the evidence
of the Bank’s actual condition during the relevant period and would
disregard consistent FDIC policy and practice concerning application of the
cut-off date. Accordingly, for the reasons set forth above, the Bank’s
appeal is denied.