Expert witness: Frontier State Bank right in challenging FDIC in rare showdown

In a rare court hearing, Oklahoma City-based FSB did not back down to the FDIC when it said the bank should change its policies. The FDIC has said policies should change because the bank is exposed to rate swings. However, the bank has been profitable in every quarter since 2002 and has not violated any regulation or law. It also relies partially on mortgage obligations backed by Fannie Mae and Freddie Mac, two government-sponsored enterprises.

"It is unbelievable to think that in a time when banks are gasping for air and permanently closing their doors, the FDIC would go after a strong, healthy bank like Frontier State Bank," said Keith Geary, president and CEO of Capital West Securities in Oklahoma City. "I'm glad to see Frontier standing up for themselves, their customers and their community."

On June 1, FSB had more than $583 million in total assets and $63.7 million in total equity capital.

The FDIC started an exam in April 2008, and filed a complaint in October. The rare administrative hearing started last Monday. The administrative law judge, an FDIC employee, has 45 days from the hearing's conclusion to issue a decision to a three-person FDIC panel. The panel then has 45 days to uphold or overturn the judge's decision. The losing side has 30 days to reply, followed by a 15-day window for the prevailing party to respond.

The losing side can appeal the decision to the U.S. 10th Circuit Court of Appeals in Denver. An FDIC hearing this far into the process has not occurred in about 20 years. Most banks settle before the process gets this far, but Geary said current banking conditions could lead to more banks filing challenges.

"Frontier State Bank is profitable, they have a sound investment plan in place, they did not take taxpayer bailout funding and they volunteer in their community," Geary said. "They should be looked at as a model for the industry, not be under an investigative microscope.

"I am a strong supporter of the FDIC under most circumstances, but I believe they need to refocus their efforts on failing banks."

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About Capital West Securities, Inc.

Established in 1995, Capital West Securities is an Oklahoma-based full-service brokerage and municipal underwriting firm. Capital West is a member of the Financial Industry Regulatory Authority (FINRA) and the Security Investor Protection Corporation (SIPC) with a solid performance record with corporate and public finance services that include underwriting, trading and financial consulting. For more information, visit www.capitalwest.com.

SOURCE: Capital West Securities, Inc.

For Capital West Securities, Inc. 
Chad Previch, 405-608-0445 
Cell: 405-487-9249 
cprevich@saxumpr.com