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Conclusion The ombudsman conducted a comprehensive review of the information submitted by the bank as well as documentation supplied by the Supervisory Office (SO). The Uniform Financial Institutions Rating Systems (UFIRS) as defined in the Comptroller's Bank Supervision Process Handbook was used as the standard for determining the appropriate composite rating and component ratings for management, liquidity, and sensitivity to market risk. The bank was informed of the OCC's intent to issue a formal enforcement action; therefore, this review was limited to a determination that the standards were appropriately applied by the supervisory office in assigning the appealed ratings. Capital It is consistent with OCC supervisory policy to consider the inter-relationship and impact of the various banking components when rating capital. Asset quality, earnings, liquidity, and management all play a role in determining capital adequacy. The collective impact of these factors may require additional contributions to support long-term capital needs. After reviewing the information submitted, the ombudsman concluded that the supervisory office appropriately applied the ratings guidance in determining capital adequacy. Asset Quality The appeal does not dispute the increasingly negative trends regarding classified and criticized assets, loan losses, delinquencies, or lack of effective workout plans. Based on the significant level of problem assets and inadequate controls, asset quality posed a significant threat to the bank's viability. Therefore, the ombudsman concluded the rating assigned by the supervisory office for asset quality was reasonable. Management The appeal asserted that until the economic downturn stabilized it was impractical for management to update its strategic plan and it would continue to "keep bailing". This comment reflected a passive approach to problem solving and supported the supervisory office's determination that management was incapable of returning the bank to a safe and sound condition. Therefore, the ombudsman concluded the management rating assigned by the supervisory office was reasonable. Earnings Based on the ombudsman's review of the information submitted by the bank and the supervisory office, earnings performance was critically deficient to support bank operations and augment capital. Therefore, the rating assigned by the supervisory office was reasonable. Liquidity Historically, banks have incurred difficulty accessing established borrowing lines in time of crisis. The bank's actual condition was consistent with the crisis scenario projected in its Contingency Funding Plan (CFP) and the plan called for management to continue using borrowed funds to provide liquidity. Based on the ombudsman's review of the facts provided in the appeal and the supervisory office response, the bank's liquidity position was critically strained and the rating for liquidity was reasonable. Sensitivity to Market Risk The bank's appeal stated that monitoring systems were sufficient to identify, measure, and control exposure to market risk. Additionally, the appeal asserted that both the net interest margin (NIM) and rate sensitivity ratios were within policy limits. The supervisory office response referred to facts in the report of examination (ROE) regarding management's inability to timely adjust its balance sheet in a declining interest rate environment. Consequently, earnings were negatively impacted by the large volume of variable rates loans which would continue to present a moderate level of risk in the current environment. The ombudsman concluded, based on the above factors, the rating assigned for sensitivity to market risk was reasonable. Composite Based on the collective facts presented above, the ombudsman concluded the composite rating assigned by the supervisory office was well supported and reasonable. The volume and severity of problems were beyond management's ability or willingness to control or correct. Immediate outside financial or other assistance was needed in order for the financial institution to be viable and ongoing supervisory attention was necessary.