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Deposit Insurance Assessment Appeals: Guidelines & Decisions
AAC-2003-04 (December 16, 2003)
By letter dated June 26, 2003, ***, Chairman and Chief Executive Officer of [Bank] (the Bank), requested a change to the Banks assessment risk classification for the July 1, 2003 semiannual assessment period. The request was denied by the Federal Deposit Insurance Corporations (FDIC) Division of Insurance and Research (DIR) on August 29, 2003. The Bank appealed DIRs determination to the FDICs 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 Banks 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 Banks 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 FDICs regulations, specifically, 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 Banks SS assignment was based, in part, on a May 28, 2002 examination conducted by the Office of Thrift Supervision (OTS), the Banks 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 Banks 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 Banks 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 Banks 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 semiannual period.
Moreover, the Committee cannot concur with the Banks contention that its condition during the last quarter of 2002 merited an SS upgrade; in fact, as noted by the Committee in the Banks prior appeal, problems appear to have existed during the relevant periods, and the Banks 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 Banks SS assignment for the July 1, 2003 semiannual period.
To grant the Bank the relief it requests would conflict with the evidence of the Banks 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 Banks appeal is denied.
By direction of the Assessment Appeals Committee.
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