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FDIC Enforcement Decisions and Orders |
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The FDIC Board adopts ALJ's recommendation and terminates the insured status of Bank found to be operating in an unsafe and unsound condition because of its poor capital-to-assets ratio. (This order was terminated by order of the FDIC dated 4-9-92; see ¶9008.)
[.1] Termination of InsuranceInadequate Capital
[.2] Termination of InsurancePost-Hearing Evidence
[.3] Termination of InsuranceTime for Correction
In the Matter of
This proceeding seeks to terminate the insured status of Bank of Healdton, Healdton, Oklahoma ("Bank" or "Respondent"), upon findings made by the Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC") pursuant to section 8(a) of the Federal Deposit Insurance Act ("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 examinations conducted by the FDIC on May 5, 1989, September 7, 1990, and April 12, 1991, the FDIC concluded that, given the Bank's inadequate capital, poor asset quality, lax management policies, and failure to comply with a 1982 cease-and-desist order, it should be found to be in an unsafe and unsound condition and its Federal Deposit Insurance should be terminated.
PROCEDURAL HISTORY
In December 1982, the FDIC and Respondent entered into an agreed cease-anddesist order, which, among other things, required the Bank to increase its primary capital and maintain it at 8 percent of its total assets.
Respondent submitted a Request for Oral Argument before the Board, which was unopposed by FDIC Enforcement Counsel. The Bank alleges that due to the unique facts in this case and the recent favorable earnings performance, oral argument should be granted.
A. Statutory and Regulatory Background
B. Enforcement Counsel's Assertions
Enforcement Counsel alleges that, due to the Bank's inadequate capital, poor asset quality, lax management policies, and failure to comply with the 1982 cease-anddesist order, it is operating in an unsafe or unsound condition and its Federal Deposit Insurance should be terminated. The extremely low primary capital ratio is the chief basis upon which the FDIC seeks to terminate insurance, and the issue was accorded extensive analysis by the ALJ.
C. The Bank's Defenses
[.1] Although Respondent filed numerous exceptions to the ALJ's Recommended Decision, they may be summarized into several major categories. First, the Bank is concerned that the ALJ (and presumably the FDIC) placed undue emphasis on capital in considering whether to terminate insurance, and failed to consider all material factors. This argument is not only wrong, but even if it were correct, it would not further Respondent's position. On page 4 of the ALJ's Decision, the ALJ stated that this case is "principally," not exclusively, about capital adequacy. He went on to cite "other areas of criticism in the examination reports, ... which could support an order of termination," and acknowledged that, because termination "is typically reserved only for egregious cases of capital inadequacy," he would focus his analysis on capital. Id.
[.2] Next, Respondent objects to the omission of net income data for June, July, and
[.3] On the basis of the alleged improvement in its financial condition resulting from the improved earnings discussed above, Respondent urges the Board to adopt a proposed alternative remedy, granting a "reasonable probationary period of time so that it may continue on its road to recovery." Respondent's Exceptions Brief, p. 7. In its Post-Hearing Brief, p. 11, Respondent re-
The Board has fully examined the record and finds no material modification of the ALJ's Recommended Decision required.
IT IS HEREBY ORDERED, that the insured status of the Bank of Healdton, Healdton, Oklahoma, is terminated effective as of the close of business sixty days from the date of this Order.
This matter is before me upon a Notice by the Federal Deposit Insurance Corporation to terminate the Federal Deposit Insurance of the Bank of Healdton (herein the Bank), pursuant to 12 U.S.C. § 1818(a).
The Respondent is a small commercial bank, and is the only financial institution located in Healdton, a town of about 3,000 in south central Oklahoma. The nearest alternative bank is 10 miles from Healdton. (Tr. 131, 132)
The FDIC alleges that given the Bank's inadequate capital, poor asset quality, lax management policies and failure to comply with the 1982 Cease and Desist Order, it should be found to be in an unsafe and unsound condition and its Federal Deposit Insurance should be terminated.
This case is principally about capital adequacy and asset quality. There are other areas of criticism in the examination reports, particularly including management, which could support an order of termination given the broad authority of Section 1818(a). However, insurance termination is an extreme sanction and is typically reserved only for egregious cases of capital inadequacy. Therefore, this analysis will focus on capital.
1. The Bank is a corporation existing and doing business under the laws of the State of Oklahoma, and maintains its principal place of business in Healdton, Oklahoma. Jt. Stip. 1.
1. The FDIC has jurisdiction of this matter pursuant to 12 U.S.C. §§ 1811 and 1833(k).
IT IS HEREBY ORDERED, that the insured status of Bank of Healdton, Healdton Oklahoma, ("Bank"), is terminated effective as of the close of business sixty days from the date of this Order Terminating Federal Deposit Insurance ("Order").
____, 1991
There may be included in such notice, with the written approval of the FDIC, any additional information or advice the Bank may deem desirable. The Board strongly suggests that the Bank post the above notice on its doors and at all locations where its depositors make deposits and withdrawals. |
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Last Updated 6/6/2003 | legal@fdic.gov |
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