United Western Bank v. Office of the Comptroller of the Currency , 928 F. Supp. 2d 70 ( 2013 )


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  •                        UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF COLUMBIA
    ____________________________________
    )
    UNITED WESTERN BANK,                )
    )
    Plaintiff,        )
    )
    v.                            )   Civil Action No. 11-0408 (ABJ)
    )
    OFFICE OF THE COMPTROLLER OF        )
    THE CURRENCY, et al.,               )
    )
    )
    Defendants.       )
    ____________________________________)
    MEMORANDUM OPINION
    The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”)
    grants the Director of the Office of Thrift Supervision (“OTS” or “the agency”) “exclusive power
    and jurisdiction” to appoint a receiver or conservator for a savings association “if the Director
    determines, in the Director’s discretion, that 1 or more of the grounds specified in section
    1821(c)(5) of this title exists.” 
    12 U.S.C. § 1464
    (d)(2)(A)–(B) (2006) (amended July 21, 2011).
    Although the agency’s decision to appoint a receiver is highly discretionary, it is not immune
    from judicial review. In the event of the appointment of a receiver, “the association may, within
    30 days thereafter, bring an action . . . in the United States District Court for the District of
    Columbia, for an order requiring the Director to remove such conservator or receiver.” 
    Id.
     §
    1464(d)(2)(B).
    In this case, plaintiff United Western Bank (“the Bank” or “the association”) asks the
    Court to set aside the January 21, 2011 decision by the Acting Director of OTS to appoint the
    Federal Deposit Insurance Corporation (“FDIC”) as receiver for the Bank. Compl. [Dkt. # 1] ¶
    1; see also United Western Bank’s Mot. for Summ. J. (“Pl.’s Mot.”) [Dkt. # 99] at 1. The Bank
    has moved for summary judgment contending that OTS’s appointment decision should be
    overturned because it “was arbitrary, capricious, an abuse of discretion, and not in accordance
    with FIRREA’s requirements.” See Mem. in Supp. of Pl.’s Mot. for Summ. J. (“Pl.’s Mem.”)
    [Dkt. # 99] at 2.
    Defendants – the Office of the Comptroller of the Currency (“OCC”) and Thomas Curry,
    Comptroller of the Currency – oppose the motion, and they have filed their own cross-motion for
    summary judgment. They assert that placing the Bank into receivership was a proper exercise of
    discretion under the FIRREA because the Acting Director’s decision was based on three
    independent statutory grounds and supported by the administrative record. Defs.’ Mem. in Supp.
    of their Mot. for Summ. J. and in Opp. to Pl.’s Mot. for Summ. J. (“Defs.’ Mem.”) [Dkt. # 111]
    at 1, 9. Because the Court finds that the Bank has failed to show that OTS’s decision was
    arbitrary or capricious, the Court will deny the Bank’s motion and grant defendants’ cross-
    motion.
    The Bank contends that it was not “necessary” for the agency to take the drastic step of
    placing the Bank into receivership on the date that the Acting Director issued his decision. Tr.
    [Dkt. # 112] 26:8–12. But that is not the proper inquiry. The law does not invite the Court to
    make its own judgment about whether it would have been feasible, appropriate, or even
    preferable, for the agency to wait; the sole question presented by this case is whether the agency
    action was unreasonable.
    In forcefully worded pleadings, the Bank passionately insists that the agency’s attitude
    took a “sudden” and inexplicable turn in December of 2011, and that the regulators surprised the
    bank with unrealistic deadlines and unnecessary requirements. Pl.’s Mem. at 36–37; Reply in
    Supp. of Pl.’s Mot. for Summ. J. (“Pl.’s Reply”) [Dkt. # 106] at 5. But any change in the
    2
    regulators’ approach was prompted by the seismic changes in the nation’s economy, and more
    particularly, by the ongoing and significant deterioration of the Bank’s financial condition. The
    review of the administrative record in its entirety reveals that the agency’s decision was the
    culmination of a steady progression and not, as the Bank would have the Court conclude, a
    sudden wrenching of gears. In early to mid-2009, the Bank had begun to suffer substantial
    losses, and the agency began voicing concerns about the adequacy of the Bank’s capitalization,
    its reliance on institutional investors, its liquidity, and its investment in mortgage-backed
    securities. The same concerns that led to the receivership were the focus of a 2009 Report of
    Examination, a Memorandum of Understanding between the Bank and the agency entered into in
    December of 2009, a January 2010 examination, and even a cease and desist order agreed to by
    the Bank in June of 2010. The Bank emphasizes that the record is devoid of evidence of
    criminal activity or malfeasance on the part of the Bank’s managers, and the Court has little
    doubt that they sincerely believed in their ability to save the institution until the moment the door
    was closed. But the absence of those factors cannot alter the result compelled by the review of
    the record under the deferential standard the Court is required to apply.
    BACKGROUND
    United Western Bank is a federally chartered savings association under 
    12 U.S.C. § 1464
    (a)(2) that was wholly owned by United Western Bancorp, Inc. (“the holding company”) at
    all times relevant to this case. Administrative Record (“AR”) 11. With primary operations in
    Colorado, the Bank originated construction, land, commercial real estate, and non-mortgage
    commercial loans, maintained a large portfolio of non-agency mortgage-backed securities, and
    3
    relied on institutional custodial deposits as its primary source of funding.1 AR 11, 23. The
    Bank’s largest institutional depositors were: Equity Trust Company (“ETC”), Matrix Settlement
    and Clearing Services, LLC (“MSCS”), Legent Clearing, and Lincoln Trust Company (“LTC”).
    AR 32.
    During the relevant period, the Office of Thrift Supervision was the primary regulator
    for savings associations, and as such, was responsible for their “examination, safe and sound
    operation, and regulation.” 
    12 U.S.C. § 1463
    (a)(1) (2006) (amended July 21, 2011);2 see also 
    12 C.F.R. § 563.170
    (a) (requiring OTS to periodically examine savings associations). During its
    examinations, OTS evaluated the financial health of savings associations using a variety of
    metrics. The agency rated the associations’ Capital, Asset Quality, Management, Earnings,
    Liquidity, and Sensitivity to Market Risk (“CAMELS”) on a scale of one to five with one being
    the best rating. See AR 22 n.1, 100. Banks received a separate rating for each of the CAMELS
    categories as well as a composite CAMELS rating reflecting the bank’s overall condition. See,
    e.g., United Western Bank 2007 Report of Examination, AR 55. In addition to the CAMELS
    rating, OTS also classified the adequacy of a bank’s capital according to the Federal Deposit
    Insurance Corporation Improvement Act of 1991 (the “FDICIA”), a portion of which was later
    codified at 12 U.S.C. § 1831o, and is commonly known as the Prompt Corrective Action
    (“PCA”) statute. The PCA divides bank capital levels into five different categories, ranging
    1       According to the Bank, these institutional depositors “are trust companies and settlement
    companies that provide significant and regulated trust or brokerage services to millions of
    customers. As a byproduct of their primary business activities, the Institutional Depositors
    regularly handle idle customer funds that are in transit to or from external investments or are
    awaiting distribution. The Institutional Depositors place these funds on deposit at omnibus
    deposit accounts at the Bank during these transitory periods.” United Western Bank Request for
    Review of Material Supervisory Determination, AR 1760.
    2      On July 21, 2011, OTS became part of OCC. OCC currently regulates both national
    banks and federal savings associations. 
    12 U.S.C. § 5412
    .
    4
    from “well capitalized” to “critically undercapitalized.” 12 U.S.C. § 1831o(b)(1). Negative
    ratings under these metrics can expose a bank to certain statutorily mandated regulatory
    responses.
    The administrative record in this case confirms that prior to early 2009, the Bank enjoyed
    “an unbroken 16 years of profitability” and correspondingly high CAMELS and PCA capital
    ratings. AR 1474. As a result of the global financial crisis, the Bank’s earnings, asset quality,
    and capital ratios deteriorated, and one of its largest sources of liquidity began withdrawing its
    funds. AR 11–12, 2475. The Bank based its hope for survival on the consummation of a highly
    contingent private sector recapitalization plan. AR 972–1091. The plan depended upon the
    agency’s agreement to lift certain requirements it had previously imposed, AR 1185–90, but the
    agency declined to do so, AR 4. Ultimately, the agency determined that there were three
    statutory grounds supporting placing the Bank into receivership.             AR 5–7; see also
    Recommendation for Appointment of the Federal Deposit Insurance Corporation (FDIC) as
    Receiver for United Western Bank, (“S-Memo”), AR 21–44. Based on this recommendation, on
    January 21, 2011, the Acting Director of OTS appointed the FDIC as a receiver for the Bank
    pursuant to 
    12 U.S.C. § 1464
    (d)(2)(A). AR 2–8.
    The chronology of the events that led to the imposition of the receivership is as follows:
    I. October 2007 OTS Examination
    Between October 2007 and January 2008, OTS conducted a comprehensive risk-focused
    examination of the Bank’s operations during the fifteen-month period ending on June 30, 2007.
    AR 51–52, 55. The 2007 Report of Examination (“2007 ROE”) was overall positive. In the
    report, the OTS examiners concluded that the Bank’s asset quality, earnings, and liquidity
    sources were satisfactory, and they gave the Bank a CAMELS composite rating of 2, which
    5
    meant that the Bank was “fundamentally sound[,] . . . stable and . . . capable of withstanding
    business fluctuations.” AR 56–57, 60, 100. The report also noted that as of June 30, 2007,
    approximately 73% of the Bank’s total deposits were attributable to four institutional depositors.
    AR 81.    Although the agency cautioned that the Bank “continue[d] to face risk from its
    concentration in institutional deposits,” it tempered this statement by concluding that the Bank’s
    continued efforts to increase its retail deposits and its “contractual agreements with some of the
    largest of these depositors help[ed] protect the institution’s liquidity position.”       AR 57.
    Additionally, the OTS examiners stated that although the Bank was “well capitalized” under
    PCA standards, it had to “remain cognizant” of its concentration in institutional deposits and
    “continue to maintain a prudent level of capital above the ‘well capitalized’ standards.”3 AR 56.
    II. March 2009 OTS Examination
    OTS’s next examination of the Bank occurred during the financial crisis; it began on
    March 30, 2009, and covered the twenty-six month period ending in mid-September 2009. AR
    130–31, 134.     As the 2009 Report of Examination explained, “the review period saw
    unprecedented declines in real estate markets, a changing economic environment, and dislocation
    in capital markets.” AR 135. These poor and uncertain market conditions adversely impacted
    certain aspects of the Bank’s operations. AR 135. The report specified that the Bank’s “asset
    quality ha[d] deteriorated” due, in part, to losses on its mortgage-backed securities, and its
    earnings had declined due to a $4.1 million write-down on two mortgage-backed securities. AR
    3       On June 30, 2007, the Bank had a 14.38% Total Risk-Based capital ratio and a 13.69%
    Tier 1 (Core) Risk-Based capital ratio. AR 60. Under the PCA, an institution is “well
    capitalized” if it has a total risk-based capital ratio of 10.0% or higher, has a Tier 1 risk-based
    capital ratio of 6.0% or higher, a leverage ratio of 5.0% or higher, and is not subject to an OTS
    directive to meet and maintain a specific capital level. 
    12 C.F.R. § 565.4
    (b).
    6
    135–36. The OTS examiners added that any further deterioration of the Bank’s mortgage-
    backed securities portfolio presented additional risks to its earnings. AR 136.
    The examiners also noted that their concerns about the Bank’s liquidity sources and
    capital levels had escalated due to the Bank’s deteriorating condition.
    Capital: The report concluded that the Bank’s capital – which had declined to just
    above the “well capitalized” PCA level – was “less than satisfactory” because it did
    not fully support the Bank’s risk profile. AR 141. Specifically, the OTS examiners
    warned that “capital levels remain a concern due to risks posed by the bank’s
    remaining non-agency MBS portfolio and negative asset quality trends.” AR 142–43.
    According to the report, the Bank’s management was aware of the need to bolster the
    capital position and was pursuing various options to maintain a prudent level of
    capital above the PCA “well capitalized” standard. AR 135, 143.
    Liquidity: The report also stated that the agency’s “[l]iquidity risk concerns ha[d]
    been elevated” due to the Bank’s continued overreliance on institutional deposits.
    AR 136. As of March 31, 2009, institutional deposits represented 86.9% of the
    Bank’s total deposits. AR 160. A third of these depositors could withdraw their
    deposits at any time because they had no contractual agreements with the Bank. AR
    161. The remaining two-thirds had contractual agreements with the Bank that
    allowed them to withdraw their funds in a variety of circumstances, including a
    decline of the Bank’s capital to below “well capitalized” levels. AR 161. OTS then
    concluded that the “termination of one or more of the larger institutional deposit
    relationships could place UWB in a precarious liquidity position, as it may not be
    able to find replacement funding on reasonable terms.” AR 161.
    In light of the problems and risks uncovered in the examination, OTS downgraded the Bank to a
    CAMELS composite rating of 3, which meant that the Bank had “a combination of weaknesses
    that may range from moderate to severe” and required “more than normal supervision.” AR 100,
    134.
    As part of the 2009 ROE, the agency also required the Bank to take remedial actions: (1)
    to increase core and total risk-based capital ratios from 9.07% and 10.17% to at least 8.0 and
    12.0% by December 31, 2009; (2) to “[d]evelop a revised comprehensive concentration policy
    that sets limits . . . for the bank’s funding sources, including exposures to institutional
    depositors”; and (3) to “[p]rovide a Liquidity Contingency Plan that contains specific board
    7
    strategies for ensuring that the Bank maintains adequate short-term and long-term liquidity to
    withstand any anticipated or extraordinary demand against its funding base.” AR 139–40.
    After the issuance of the March 2009 ROE, the Bank’s financial condition worsened; it
    lost a total of over $69 million during the year, and its capital ratios continued to decline. AR
    865–66, 2475–76. As a result of the Bank’s losses and declining capital, on December 10, 2009,
    OTS and the Bank signed a Memorandum of Understanding (“MOU”) in which the Bank again
    pledged to fulfill the remedial measures set forth in the 2009 ROE. AR 220–34. Specifically,
    the Bank agreed to raise its capital ratio levels to 12% and 8% by June 30, 2010, AR 220, and to
    develop a liquidity contingency plan that “specifically address[ed] deposit concentrations and
    plans to reduce or manage such concentrations,” AR 223–24.
    III. January 2010 OTS Examination
    As the financial crisis raged on, the Bank reported a loss of $21.02 million for the quarter
    ending on March 31, 2010. AR 865–66. In April of 2010, OTS sent a letter to the Bank
    summarizing the results of the agency’s January 2010 limited examination of the Bank. AR
    267–69. In the letter, the agency expressed serious concerns about the Bank’s capital levels and
    its continued concentration in institutional deposits. AR 267–69.4
    Capital: In the letter, the agency explained that the Bank’s capital rating had “been
    downgraded given current risks to capital posed by the bank’s worsening asset quality
    trends, the potential impact of future [write-downs] from the bank’s remaining
    relatively large portfolio of below investment grade MBS, and deteriorating
    earnings.” AR 267. Additionally, the agency explained that revised calculations
    performed by the Bank during the January 2010 field visit required the Bank to take
    an $18 million write-down for the 2009 year-end, which reduced the Bank’s total
    risk-based and core capital ratios to 10.07% and 7.68% respectively. AR 267–68.
    Although these capital levels were still above the “well capitalized” PCA standard,
    4       The Court will refrain from summarizing or quoting language from the January 2010
    Report of Examination because OTS has been unable to confirm whether the report was mailed
    to the Bank. Defs.’ Opp. to Pl.’s Mot. to Supplement the Admin. R. at 7 [Dkt. # 48]. However,
    the Bank does not dispute that it received the April 2010 letter. 
    Id.
    8
    they were below the levels required by the MOU and the agency expressed concern
    that the Bank may not be able to meet and maintain the capital levels required by the
    MOU by the June 30, 2010 deadline. AR 268.
    Liquidity: The agency also stated that “liquidity risk at UWB ha[d] increased and
    [was] of heightened concern” because of the “Bank’s significant concentration in
    institutional deposits.” AR 267. The letter explained that this concentration was
    particularly problematic because the FDIC was reviewing whether these deposits
    were “brokered.”5 If the FDIC concluded that the institutional deposits were all
    brokered, the Bank would not be able to accept or renew any such brokered deposits
    without a waiver from the FDIC once the Bank was officially deemed “Adequately
    Capitalized.” AR 267. The letter then noted that the agency had already informed
    the Bank that it would be deemed “adequately capitalized” in the near term,6 and
    directed the Bank to “consider all strategic alternatives available, including the
    possible sale, merger, or self-liquidation of United Western, to prevent the potential
    failure of the institution due to insufficient liquidity.” AR 267, 269.
    OTS’s concerns about the “brokered” status of the institutional deposits materialized on
    May 24, 2010. On that day, the FDIC notified the Bank that it had concluded that seven of the
    Bank’s institutional depositors, including ETC – the Bank’s largest depositor – were “deposit
    brokers” and that the Bank’s “adequately capitalized” status precluded it from accepting,
    renewing, or rolling over any brokered deposits without a waiver from the FDIC. AR 369–80.
    In response, the Bank filed a request for a waiver from the FDIC on June 10, 2010, AR 690, and
    it modified its depositor contracts in an attempt to place them within an exception to the
    “brokered deposit” designation, AR 1558. On June 22, 2010, OTS sent a letter to the Bank
    stating that in light of the uncertainty as to whether the FDIC would grant a waiver and the
    Bank’s failure to demonstrate its ability to replace the institutional deposits in the near future, the
    Bank could “face a severe liquidity crisis in the near future that would threaten the viability of
    5      A brokered deposit is “any deposit that is obtained, directly or indirectly, from or through
    the mediation or assistance of a deposit broker.” 
    12 C.F.R. § 337.6
    (a)(2).
    6       In a February 11, 2010 meeting, the agency told Bank management that the Bank would
    be deemed “Adequately Capitalized” and its CAMELS composite rating would be downgraded
    to a 4. AR 269. This downgrade meant that the Bank was “in troubled condition” pursuant to 
    12 C.F.R. § 563.555
     and would be subject to various operating restrictions. AR 269.
    9
    the institution.” AR 549. Based on this determination, the agency informed the Bank that its
    liquidity rating had been downgraded to 5, the lowest possible rating. AR 549.
    IV. June 2010 Cease and Desist Order
    Three days later on June 25, 2010, the Bank and its holding company consented to the
    issuance of a formal Cease and Desist Order from OTS. AR 553–94. The order set forth OTS’s
    determination that the Bank had “engaged in unsafe or unsound banking practices that resulted in
    deteriorating asset quality, ineffective risk management practices, inadequate oversight and
    supervision of the lending function, and inadequate liquidity planning at the [Bank].” AR 569.
    The Bank did not admit or deny OTS’s findings, but it agreed to comply with a number of
    legally binding requirements: to “meet and maintain” total risk-based and core capital ratios of
    12% and 8% by June 30, 2010; and to refrain from increasing its total assets beyond a certain
    level without prior approval from the OTS Regional Director. AR 554, 562, 569. Although the
    capital ratio requirements had been in place since the March 2009 OTS Report of Examination,
    the Bank made several requests for an extension of time to meet the requirements. OTS denied
    all of these requests. AR 671.
    V. The Bank Attempts to Recapitalize
    A. Legent Purchase and Recapitalization Transaction
    In mid- to late 2010, the Bank and its holding company proposed two transactions in an
    attempt to alleviate OTS’s concerns about the stability of the Bank’s institutional deposits and its
    capital ratios. First, on July 27, 2010, the Bank formally notified OTS of its intent to acquire
    Legent, one of its institutional depositors. AR 2551. By absorbing Legent as an operating
    subsidiary, the Bank hoped to obviate any concerns regarding the stability or status of Legent’s
    deposits. AR 2552. After determining that the proposed transaction raised “significant issues of
    10
    policy,” OTS transferred the acquisition application to its office in D.C. for additional review on
    November 4, 2010. AR 3008.
    Second, the Bank’s holding company developed a plan to raise approximately $200
    million from private investors, $102.5 million of which would be contributed as capital to the
    Bank (“Recapitalization Transaction”). AR 972–1091, 1111. On October 28, 2010, the holding
    company entered into an investment agreement (“Investment Agreement”) with Oak Hill Anchor
    Investor, Lovell Minnick Anchor Investor, and Legent/Duques Anchor Investor (together
    “Anchor Investors”). AR 980. Pursuant to the Investment Agreement, the Anchor Investors
    agreed to contribute $103 million to the Recapitalization Transaction if, prior to or
    contemporaneous with the closing of the proposed investment transaction: (1) the holding
    company raised an additional $97 to $102 million from other private investors; (2) OTS waived
    certain conditions of the Bank’s June 2010 Cease and Desist Order including the “meet and
    maintain” requirement; (3) OTS approved the Bank’s application to acquire Legent; and (4) OTS
    approved the Bank’s business plan. AR 980–85. In a November 29, 2010 letter, the Bank
    informed OTS that the Anchor Investors were willing to waive a number of the closing
    conditions but that they still insisted on these four requirements. AR 1185–90.
    The first nail in the Recapitalization Transaction’s coffin came on December 3, 2010,
    when OTS notified the Bank of its refusal to remove the “meet and maintain” requirement. AR
    1192–93. To make matters worse, in another letter on the same day, OTS also directed the Bank
    to take an additional write-down on certain mortgage-backed securities for the quarter ending
    September 30, 2010. AR 2092–93. This additional loss reduced the Bank’s total risk-based
    capital ratio to 7.8%, which meant that the Bank had become “undercapitalized.” AR 1441.
    Things continued to worsen for the Bank on December 13, 2010 when OTS explained that since
    11
    the Bank was “undercapitalized,” it was no longer permitted to accept brokered deposits or
    employee benefit plan deposits, including any such funds from its institutional depositors. AR
    1451. In yet another letter on the same day, the agency directed the Bank to submit a capital
    restoration plan (“CRP”) by December 20 and to restore its capital position to “adequately
    capitalized” no later than December 31, 2010. AR 1441–42.
    B. Capital Restoration Plan
    On December 20, 2010, the Bank submitted its CRP, which largely recapitulated the
    Recapitalization Transaction and projected an infusion of approximately $102.5 million of new
    capital into the Bank following the consummation of the transaction. AR 1473–79. The Bank
    recognized that OTS’s refusal to waive the “meet and maintain” requirement – one of the closing
    conditions of the Investment Agreement – affected the viability of its recapitalization plan. AR
    1476–77. Nonetheless, the Bank continued to argue in favor of the waiver and asserted that
    OTS’s unwillingness to waive the requirement was “not a proper exercise of the agency’s
    fiduciary duties to the Deposit Insurance Fund.” AR 1476–77. The Revised Business Plan that
    the Bank submitted as part of the CRP was also premised on the assumption that OTS would
    approve the Legent transaction. AR 1485.
    In late December 2010 and early January 2011, the Bank told OTS that a variety of
    investors had expressed interest in investing a total of up to $130 million in the Recapitalization
    Transaction. AR 1748, 2468–69. According to the Bank, some of these investors had confirmed
    their intent to invest and were in the process of reviewing proposed investment agreements,
    while others had offered “strong expression[s] of interest” but had not confirmed their intent to
    invest. AR 1800. All the potential additional investments were subject to the same conditions
    precedent included in the October 2010 Anchor Investment Agreement. AR 1748, 2470.
    12
    C. OTS Rejection of the Legent Application and Capital Restoration Plan
    On January 18, 2011, OTS rejected the Bank’s proposal to acquire Legent on the grounds
    that: (1) Legent had an unsatisfactory enforcement record due to its multiple, serious, and recent
    FINRA disciplinary violations; (2) Legent was an unprofitable business that had been losing
    money for three consecutive years and had lost 68% of its accounts in spring 2010; and (3) the
    purchase of Legent and placement of its institutional deposits in the Bank would exacerbate,
    rather than alleviate, the already high concentration of institutional deposits that was posing
    severe liquidity risks. AR 4190; see also AR 2540–41 (discussing Legent’s FINRA violations).
    On the same day, OTS also rejected the Bank’s CRP on the grounds that it was premised
    upon a series of assumptions that the agency found to be unrealistic. OTS noted that the CRP
    assumed that:
    1. The Bank would be able to secure the additional $100 million in funding necessary to
    complete the Recapitalization Transaction. AR 4124. The rejection letter explained that
    although the Bank had identified several potential additional investors, none of these
    investors had signed a letter of intent or executed an investment agreement. AR 4124.
    2. OTS would remove the growth restriction provision of the Cease and Desist Order. The
    agency explained the asset growth projected in the CRP was unacceptable in light of the
    Bank’s financial condition. AR 4124.
    3. OTS would approve an increase in institutional deposits from $1.2 billion to $1.8 billion,
    a growth that the agency considered to be an unacceptable increase in risk for the Bank.
    AR 4124.
    4. OTS would approve the Bank’s revised business plan, which according to the agency
    relied on “excessive concentration in institutional deposits” and an “excessive level of
    asset growth.” AR 4124–25, 4127.
    5. OTS would approve the Bank’s purchase of Legent, which the agency had rejected earlier
    that day. AR 4125.
    6. The Anchor Investors would amend or waive several unsatisfied closing conditions
    although the Bank had failed to explicitly state in the CRP that the Anchor Investors had
    agreed to amend or waive any closing conditions, and had failed to provide a draft or
    executed amendments to the Investment Agreement or communication from the Anchor
    Investors of their intent to waive the conditions. AR 4125.
    13
    OTS also faulted the Bank for submitting a guarantee that was different from the agency’s
    standard-form guarantee. AR 4125.
    VI. Liquidity and Institutional Investors
    While the Bank was attempting to restore its capital, it was simultaneously addressing
    some liquidity issues. Under the Federal Deposit Insurance Act, 
    12 U.S.C. § 1821
    (a)(1)(D)((ii),
    the Bank could no longer accept employee benefit plan (ERISA) deposits because of its
    “undercapitalized” status. Therefore, on December 20, 2010, MSCS, and its client CPI, began
    withdrawing their ERISA deposits from the Bank. AR 2242–43. MSCS withdrew its deposits
    on demand without adhering to the 60 day notice requirement contained in its depositor
    agreement. AR 2242–43. In a letter to OTS, the Bank explained that it did not expect MSCS
    and CPI’s withdrawals to impact the Bank’s operations because it had “sufficient liquidity to
    address these withdrawals,” and the Bank’s business plan did not assume that any material
    portion of the MSCS or CPI deposits would remain on deposit beyond 2011. AR 2243.
    The day after MSCS began withdrawing its funds, OTS directed the Bank to submit a
    revised liquidity contingency plan that “address[ed] the current acute liquidity risks” at the Bank.
    AR 1534. Specifically, OTS was concerned that the Bank’s “interpretation of its contractual
    agreements with Institutional Depositors . . . underestimate[d] the risk that certain Institutional
    Depositors [would] seek to terminate or withdraw deposits pursuant to their respective Depositor
    Agreement.” AR 1536. For example, two of the remaining institutional depositors, ETC and
    LTC, had the right to withdraw their deposits since the Bank’s capital had fallen below the PCA
    “well capitalized” level. AR 1945, 1952. So the agency asked the Bank to explain what steps it
    would take in a worst case scenario if other large institutional depositors, such as LTC and ETC,
    either voluntarily withdrew their funds or were required to withdraw their deposits in the event
    14
    the FDIC determined that the funds were “brokered deposits,” despite modifications to the
    depositor agreements aimed at avoiding that designation. AR 1536.
    On December 28, 2010, the Bank submitted its revised liquidity contingency plan. Like
    everything else the Bank had submitted to OTS, this plan was dependent on the consummation of
    the Investment Agreement with the Anchor Investors. With respect to the first scenario –
    voluntary withdrawal – the Bank noted that unlike MSCS, which was statutorily required to
    withdraw its ERISA deposits, the other institutional investors had few if any ERISA deposits.
    AR 1555–57. The Bank added that the depositors had remained loyal to the Bank during
    “significant and material challenges,” so it was “confident that in contemplation of the pending
    private-sector Recapitalization Transaction, none of the remaining Institutional Depositors
    [would] seek to withdraw their funds.” AR 1554 (footnote omitted).
    Specifically, the Bank stated that LTC had indicated that it would not terminate its
    deposit relationship “while the Recapitalization Transaction [was] still a viable transaction for
    the Bank’s parent company.” AR 1556. This assertion was supported by a December 22, 2010
    letter, in which LTC pledged to refrain from withdrawing its funds until January 31, 2011,
    subject to the condition that the Bank return to “well capitalized” status by then. AR 1947.
    Additionally, on December 29, 2010, ETC pledged to refrain from withdrawing its funds until
    February 15, 2011 but added that February 15 was an “absolute outside date” for recapitalization.
    AR 1944–45. Both ETC and LTC reserved their rights to withdraw their funds before the end of
    the forbearance period if the Bank’s capital position worsened. AR 1944, 1947.
    With respect to the second scenario – a determination from the FDIC that the institutional
    deposits were brokered despite modifications to the deposit agreements – the Bank explained
    that if the Recapitalization Transaction was not completed, and the FDIC maintained its position
    15
    that the institutional deposits were “brokered,” the Bank would be required to gradually
    eliminate the deposits in a safe and sound manner. AR 1559. It added that a “prompt reduction
    of 76% of the Bank’s deposits [all of its institutional deposits] would constitute a ‘worst case’
    scenario, likely requiring an unsustainable fire-sale of unencumbered assets of the Bank, which
    likely could not be accomplished without significant adverse changes to the Bank’s capital
    ratios.” AR 1559.
    In a December 29, 2010 letter to the Bank, the agency explained that after an off-site
    review of the Bank, the OTS examiners had concluded that the Bank’s undercapitalized status:
    greatly increased the risk that institutional depositors would withdraw their funds; precluded the
    Bank from continuing to accept ERISA deposits; and prevented the FDIC from considering a
    waiver of its brokered deposit regulations. AR 1729. Based on this conclusion and the Bank’s
    decline in earnings, OTS downgraded the Bank to a CAMEL composite rating of 5, the lowest
    possible rating. AR 1727, 1729–30. This rating meant that the institution had an extremely high
    probability of failure and an immediate infusion of capital was required. AR 1729.
    VII.   OTS Appoints FDIC as Receiver for the Bank
    On January 19, 2011, OTS field staff submitted a memorandum (“S-Memo”) to the
    agency’s Deputy Director, recommending that the Bank be placed into receivership. AR 21–49.
    The following day, the Bank informed OTS during a conference call that it was successfully
    recruiting investors for its Recapitalization Plan, but it still did not provide any legally binding
    investment agreement or letters of intent from any of them. AR 4192, 4229. On the same day,
    the OTS Deputy Director endorsed the S-Memo, AR 21, and the OTS Acting Chief Counsel
    signed a legal memorandum recommending that the Acting Director appoint FDIC as receiver
    for the Bank (“L-Memo”). AR 10–19.
    16
    On January 21, 2011, the OTS Acting Director appointed FDIC as a receiver for United
    Western Bank pursuant to 
    12 U.S.C. § 1464
    (d)(2)(A) (“Appointment Order”). AR 2–8. The S-
    Memo, L-Memo, and Appointment Order all identified the same three statutory grounds for the
    decision: (1) the association was in an unsafe and unsound condition to transact business, see 
    12 U.S.C. § 1821
    (c)(5)(C); (2) the association was “likely to be unable to pay its obligations or meet
    its depositors’ demands in the normal course of business,” see 
    12 U.S.C. § 1821
    (c)(5)(F); and (3)
    the association was undercapitalized, as defined by 12 U.S.C. § 1831o(b), and had “fail[ed] to
    submit a capital restoration plan acceptable” to OTS within the appropriate amount of time, see
    
    12 U.S.C. § 1821
    (c)(5)(K)(iii). AR 2, 10–11, 21.
    On February 18, 2011, the Bank brought this action under 
    12 U.S.C. § 1464
    (d)(2)(B)
    seeking the removal of the FDIC as its receiver and the restoration of the Bank to its prior owner.
    Compl. ¶ 1. The original defendants of that action included OTS, its Acting Director, and the
    FDIC. Compl. ¶¶ 26–28. On March 4, 2011, defendants OTS and its Acting Director moved
    under Fed. R. Civ. Proc. 12(b)(1) to dismiss the complaint for lack of subject matter jurisdiction.
    Defs. Bowman and OTS Mot. to Dismiss [Dkt. # 13]. On April 19, 2011, the FDIC also moved
    to dismiss the claims brought against it in its corporate capacity and in its capacity as receiver for
    the bank. Def. FDIC Mot. to Dismiss [Dkt. # 21].
    On June 24, 2011, the Court dismissed the FDIC as a defendant in this action, but it
    allowed the Bank’s claims to proceed against OTS and its Acting Director. Order [Dkt. # 32];
    see also Mem. Op. [Dkt. # 33]. On July 21, 2011, OTS became part of OCC and on July 25,
    2011, the Court granted OCC’s motion to substitute itself and the Acting Comptroller of the
    Currency for defendants OTS and its Acting Director. Minute Order (July 25, 2011). On
    February 9, 2012, the Court also granted the Bank’s motion to compel production of the
    17
    complete administrative record and permitted it to obtain information beyond what defendants
    had designated as the administrative record. Order [Dkt. # 74].
    On April 20, 2012, the Bank moved for summary judgment arguing that OTS’s decision
    to place the Bank into receivership was “arbitrary, capricious, an abuse of discretion, and
    otherwise not in accordance with the law” because the three statutory grounds the agency relied
    on were “unsupported and conclusory.” Pl.’s Mot. at 1; Pl.’s Mem. at 27. Defendants dispute
    these assertions in their cross-motion for summary judgment and contend that OTS’s decision
    was proper and reasonable and should be upheld. Defs.’ Mem. at 1–2, 26.
    STANDARD OF REVIEW
    Summary judgment is appropriate “if the movant shows that there is no genuine dispute
    as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
    56(a). The party seeking summary judgment bears the “initial responsibility of informing the
    district court of the basis for its motion, and identifying those portions of the pleadings,
    depositions, answers to interrogatories, and admissions on file, together with the affidavits, if
    any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
    Corp. v. Catrett, 
    477 U.S. 317
    , 323 (1986) (internal quotation marks omitted). To defeat
    summary judgment, the non-moving party must “designate specific facts showing that there is a
    genuine issue for trial.” 
    Id. at 324
     (internal quotation marks omitted). The existence of a factual
    dispute is insufficient to preclude summary judgment. Anderson v. Liberty Lobby, Inc., 
    477 U.S. 242
    , 247–48 (1986). A dispute is “genuine” only if a reasonable fact-finder could find for the
    non-moving party; a fact is only “material” if it is capable of affecting the outcome of the
    litigation. 
    Id. at 248
    ; see Laningham v. U.S. Navy, 
    813 F.2d 1236
    , 1241 (D.C. Cir. 1987).
    18
    “‘The rule governing cross-motions for summary judgment . . . is that neither party
    waives the right to a full trial on the merits by filing its own motion; each side concedes that no
    material facts are at issue only for the purposes of its own motion.’” Sherwood v. Washington
    Post, 
    871 F.2d 1144
    , 1147 n.4 (D.C. Cir. 1989), quoting McKenzie v. Sawyer, 
    684 F.2d 62
    , 68
    n.3 (D.C. Cir. 1982). In assessing a party’s motion, “[a]ll underlying facts and inferences are
    analyzed in the light most favorable to the non-moving party.” N.S. ex rel. Stein v. District of
    Columbia, 
    709 F. Supp. 2d 57
    , 65 (D.D.C. 2010), citing Anderson, 
    477 U.S. at 247
    .
    ANALYSIS
    In the January 21, 2011 order, the Acting Director of OTS identified three statutory
    grounds for appointing the FDIC as receiver for United Western Bank. In its motion, the Bank
    asserts that OTS’s appointment order should be set aside because the Acting Director’s
    determination that these three statutory grounds existed was conclusory and unsupported by the
    administrative record and the decision was therefore “arbitrary, capricious, an abuse of
    discretion, and not in accordance with FIRREA’s requirements.”7 Pl.’s Mot. at 2.
    Arbitrary and capricious review “focuses on the reasonableness of the agency’s
    decisionmaking processes.” Rural Cellular Ass’n v. FCC, 
    588 F.3d 1095
    , 1105 (D.C. Cir. 2009).
    The standard is highly deferential. Nat’l Ass’n of Clean Air Agencies v. EPA, 
    489 F.3d 1221
    ,
    1228 (D.C. Cir. 2007). “An agency need only articulate a rational connection between the facts
    found and the choice made, and the court will not intervene unless the [agency] failed to consider
    7       The weight of authority indicates – and both parties agree – that the judicial review
    provision of the FIRREA allows a federal court to set aside an appointment decision if it was
    “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.”
    James Madison Ltd. by Hecht v. Ludwig, 
    82 F.3d 1085
    , 1093 (D.C. Cir. 1996); Franklin Sav.
    Ass’n v. Dir. Office of Thrift Supervision, 
    934 F.2d 1127
    , 1142 (10th Cir. 1991); Woods v. Fed.
    Home Loan Bank Bd., 
    826 F.2d 1400
    , 1406 n.3 (5th Cir. 1987); see also Pl.’s Mem. at 26 &
    n.46; Defs.’ Mem. at 8.
    19
    relevant factors or made a manifest error in judgment.” Am. Radio Relay League, Inc. v. FCC,
    
    524 F.3d 227
    , 233 (D.C. Cir. 2008), citing Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State
    Farm Mut. Auto. Ins. Co., 
    463 U.S. 29
    , 43 (1983). “Where a highly technical question is
    involved, courts necessarily must show considerable deference to an agency’s expertise.” 
    Id.
    (internal quotation marks omitted). Although the court must conduct “a thorough, probing, in-
    depth review” of the agency’s decision, it may not “substitute its judgment for that of the
    agency.” Citizens to Pres. Overton Park, Inc. v. Volpe, 
    401 U.S. 402
    , 415–16 (1971), overruled
    on other grounds by Califano v. Sanders, 
    430 U.S. 99
    , 105 (1977). The party challenging the
    agency action as arbitrary and capricious bears the burden of proof. San Luis Obispo Mothers
    for Peace v. U.S. Nuclear Regulatory Comm’n, 
    789 F.2d 26
    , 37 (D.C. Cir. 1986). Judicial
    review of OTS’s appointment decision must be based upon the administrative record. See
    Franklin Sav. Ass’n v. Dir. Office of Thrift Supervision, 
    934 F.2d 1127
    , 1137 (10th Cir. 1991);
    Guar. Sav. & Loan Ass’n v. Fed. Home Loan Bank Bd., 
    794 F.2d 1339
    , 1342 (8th Cir. 1986).
    Since the Bank fails to overcome this high threshold, the Court will deny its motion for
    summary judgment and grant defendants’ cross-motion.
    20
    I. The Administrative Record Supports OTS’s Conclusion That The Bank Failed To
    Submit An Acceptable Capital Restoration Plan
    One of the statutory grounds for the agency’s decision to appoint a receiver for the Bank
    was that the Bank was undercapitalized and had failed to submit an acceptable capital restoration
    plan to OTS within the time prescribed by 12 U.S.C. § 1831o(e)(2)(D). AR 7. In its motion, the
    Bank argues that the Court should overturn the agency’s rejection of the CRP because: (1) the
    agency imposed a deadline for the submission of the plan that was shorter than the statutorily
    prescribed time period, and (2) “there was no basis for the OTS to reject the Bank’s CRP.” Pl.’s
    Mem. at 28–36. These arguments are unpersuasive.
    A. The Bank Had Reasonable Time To Submit Its CRP
    The Bank’s first challenge is procedural: it contends that OTS failed to give the Bank a
    reasonable time to file its CRP as required by statute. Pursuant to 12 U.S.C. § 1831o(e)(2)(D)(i),
    OTS is required to “establish deadlines that . . . provide insured depository institutions with
    reasonable time to submit capital restoration plans, and generally require an institution to submit
    a plan not later than 45 days after the institution becomes undercapitalized.” Contrary to the
    Bank’s pleadings, this statutory language does not “entitle[]” it to forty-five days to file its CRP.
    Pl.’s Mem. at 28. Rather, the word “generally” means that under normal circumstances, OTS
    should give an undercapitalized bank a period of up to forty-five days to submit a CRP. But the
    “not later than” wording also gives the agency discretion to impose a shorter deadline as long as
    that deadline is “reasonable.”8 According to the Bank, “[w]hat constitutes a reasonable time is a
    question of law for this Court [to review de novo] and an issue for which the agency receives no
    8       OTS’s regulations also allow the agency to impose a deadline shorter than forty-five days
    if it “notifies the savings association in writing that the plan is to be filed within a different
    period.” See 
    12 C.F.R. § 565.5
    (a)(1).
    21
    deference.” Pl.’s Mem. 28–29. Even if the Court accepts that legal proposition, it concludes that
    the date for the submission of the CRP was reasonable under the circumstances in this case.
    On December 13, 2010, OTS directed the Bank to submit a CRP by December 20. 9 AR
    1441. The Bank asserts that developing a CRP is a significant task and “seven short days . . . did
    not give the Bank ‘reasonable time’” to conduct the necessary preliminary financial analysis and
    projections, and create a plan that was acceptable to customers, shareholders, and regulators.
    Pl.’s Mem. at 28–30. But December 13 was not the first time OTS asked the Bank to restore its
    capital. OTS directed the Bank to increase its capital levels more than a year earlier in the March
    2009 Report of Examination, and the Bank agreed to do so in the December 2009 Memorandum
    of Understanding and June 2010 Cease and Desist Order. AR 139, 220, 554. In carrying out
    these obligations, the Bank conducted the necessary analysis and negotiations and developed a
    plan for a private sector recapitalization, which was formalized in the October 2010 Investment
    Agreement. AR 972–1091. Since the basis for the Bank’s CRP was already in place in October
    2010, the seven-day deadline gave the Bank reasonable time to transform its recapitalization plan
    into a CRP.    And in fact, the Bank met this deadline and submitted a CRP that largely
    recapitulated the October 2010 Investment Agreement.
    As the Bank admits in its own pleadings, OTS accepted additional submissions from the
    Bank concerning the Recapitalization Transaction “right up until its final hours of existence” –
    about thirty more days after the submission of the CRP. See Pl.’s Reply at 17. So while a seven
    day deadline could be viewed as unduly harsh when viewed in isolation, it is not as if OTS
    9        The Bank became undercapitalized on December 8, 2010 and was required to submit its
    CRP twelve days later on December 20, 2010. See AR 1441. Under 12 U.S.C. §
    1831o(e)(2)(D)(i), the forty-five day statutory maximum starts running from the date the
    institution becomes undercapitalized, not from the date the institution is required to submit a
    CRP. But since the pleadings of both parties focus on the seven day deadline imposed by the
    December 13 letter, the Court will evaluate whether this deadline was reasonable.
    22
    suddenly gave the Bank only seven days to restore its capital position. The seven days came
    after months of waiting for the promised investors to materialize, and in any event, the deadline
    did not operate as a bar to later supplementation while the plan was under consideration.
    The Bank’s argument that the deadline was not “reasonable” under the circumstances
    because OTS “failed to provide a reasoned explanation” for its imposition also fails. Pl.’s Mem.
    at 30. In the December 13 letter, OTS explained that the imposition of the shorter deadline was
    based on the Bank’s “unsafe and unsound condition.” AR 1441. This explanation is supported
    by the administrative record because at the time, the Bank was undercapitalized, its capital was
    continuing to decline, its asset quality and earnings were deteriorating, and the agency had been
    expressing serious concerns about the Bank’s liquidity for years. AR 865–66. The “unsafe and
    unsound” designation in December should not have come as a surprise to the Bank because it
    echoed the finding in the June 2010 Cease and Desist Order, which stated that the Bank had
    “engaged in unsafe or unsound banking practices,” AR 569, and OTS’s March 4, 2010 letter
    designating the Bank as being “in troubled condition,” AR 275–77. Thus, the CRP submission
    deadline was “reasonable.”
    B. OTS’s Rejection of the CRP Was Not Arbitrary and Capricious
    Recognizing that OTS rejected the CRP on its merits and not because the Bank failed to
    meet the submission deadline, the Bank next argues that “there was no basis for the OTS to reject
    the Bank’s CRP.” Pl.’s Mem. at 36. According to the Bank, the CRP projected an infusion of
    capital into the Bank in excess of the levels required by the agency. AR 1476. The Bank
    acknowledges, though, that OTS cannot accept a CRP unless: (1) it is based on “realistic
    assumptions,” and is likely to succeed in restoring the institution’s capital; and (2) it would not
    “appreciably increase” the risk (including credit risk, interest-rate risk, and other types of risk) to
    which the institution is exposed. Pl.’s Mem. at 28, citing 12 U.S.C. § 1831o(e)(2)(C).
    23
    In its January 2011 letter rejecting the CRP, the agency presented six grounds for its
    determination that the CRP failed to meet both statutory requirements. AR 4123–26. The Bank
    contends that none of these grounds “passes muster.” Pl.’s Mem. at 30. The Court disagrees.
    1. Additional Investors
    OTS’s first ground for rejecting the CRP was that it unreasonably assumed that the Bank
    would obtain the additional $100 million necessary to consummate the Investment Agreement.
    AR 4124. The agency noted that although the Bank had identified several potential additional
    investors, it had not executed letters of intent or investment agreements with any of them. Id. In
    challenging this determination, the Bank asserts that it had identified “serious and substantial”
    investors, and OTS’s desire for signed agreements was unreasonable because that “level of
    proof” is not required by statute or OTS’s regulations. Pl.’s Mem. at 31–32.
    This argument misses the mark. As the Bank notes in its own pleadings, the “statute only
    requires that a CRP be built on ‘realistic assumptions’”; it does not define what level of proof is
    required. Pl.’s Reply at 21. So the question before the Court is not whether the evidentiary
    standard that OTS employed was statutorily mandated but whether OTS’s determination that the
    CRP was based on unrealistic assumption was unreasonable or unsupported by the administrative
    record. In a January 10, 2011 letter, the Bank informed the agency that three potential investors
    had started reviewing proposed investment agreements and three others had expressed strong
    interest in the deal. AR 1801. However, none of these investors had legally committed to
    investing in the deal, and the Bank provided no timeline as to when it expected to obtain such
    commitments. AR 1800–02. In the absence of such commitments or a timeline, it was not
    unreasonable for the agency to conclude that the Bank had “fail[ed] to provide sufficient support
    for its optimistic assumption that Additional Investors will invest an additional $100 million into
    24
    UWBK in a timely manner or by January 31, 2011, the Association’s proposed date of
    recapitalization in the CRP.” AR 4124.10
    2. Increase of the Bank’s Risks
    The second, third, and fourth grounds for OTS’s rejection of the CRP were all related to
    the agency’s determination that the asset growth projected in the CRP unreasonably increased
    the Bank’s level of risk. AR 4124–25. OTS explained that the projected asset growth was
    unacceptable for two reasons.      First, the growth “rel[ied] upon an increase to the already
    excessive concentration of institutional deposits at the Association.” AR 4124. Since the agency
    had been voicing concern about the liquidity risks associated with the Bank’s concentration in
    institutional deposits since at least March 2009, it is not surprising or unreasonable for OTS to
    determine that a plan that relied on an increase in that concentration was unacceptable. Second,
    the agency explained that the “asset growth described in the CRP [was] also unacceptable in
    light of the Association’s poor ratings, troubled condition, high level of existing problem assets,
    and poor earnings.” Id. Again, this explanation was not novel or irrational; rather OTS relied on
    very similar reasons when it imposed the asset growth restriction in the Cease and Desist Order.
    In light of this reasoned explanation, the Court cannot agree with the Bank’s contention that the
    agency’s “concern over the Bank’s anticipated growth in total assets” was based on its
    “unfounded” assumption that “asset growth is per se destructive,” Pl.’s Mem. at 33; the agency
    was concerned about a particular type of asset growth.
    10       By the date of the appointment order, the Bank had still failed to submit any binding
    letters of intent or investment agreements with additional investors. AR 4192–4225. Although,
    the Bank submitted non-binding letters of intent from several investors, each expressly stated
    that the letter of intent “d[id] not constitute a legally binding offer or commitment on the part of
    the Investor or its affiliates to consummate any transaction with the Company or any of its
    members.” AR 4198–4201, 4207–10, 4221.
    25
    Moreover, as defendants point out in their motion, the success of the CRP was dependent
    upon an agreement by OTS to waive the “meet and maintain” requirement contained in the
    Cease and Desist Order. AR 1476–77. But OTS had already informed the Bank that it would
    not waive this requirement seventeen days before the CRP was submitted.           AR 1192–93.
    Nonetheless, in the CRP and its pleadings the Bank argued that OTS’s unwillingness to waive
    the requirement was “not a proper exercise of the agency’s fiduciary duties to the Deposit
    Insurance Fund.” AR 1476–77; see also Pl.’s Reply at 23. In open court, the Bank added that it
    was unreasonable for the agency to insist on the requirement because after the consummation of
    the Recapitalization Transaction, the Bank would have been well capitalized, and the
    requirement would have been unnecessary. Tr. 30:9–18. Based on the administrative record, the
    Court cannot conclude that it was unreasonable for the agency to insist on a requirement that it
    had imposed since March of 2009 and that the Bank had specifically agreed to fulfill in a
    memorandum of understanding and a consent decree. Even if the Bank is correct in its assertion
    that the Recapitalization Transaction would have allowed it to meet or exceed the agency’s
    demands, it was not irrational for OTS to decide wait until the Bank met the requirement before
    removing it.
    3. Legent Acquisition
    OTS’s fifth ground for rejecting the CRP was that “[t]he CRP’s assumption that the OTS
    will approve [the Legent] application is unreasonable.” AR 4125. The Bank argues that this
    determination was unfair because it was “forced to speculate about the prospects for the Legent
    application’s success” since the application was still pending when it submitted the CRP. Pl.’s
    Mem. at 34. But the Bank was not speculating in a vacuum. On November 4, 2010 – more than
    a month before the submission of the CRP – OTS informed the Bank that it had determined that
    the Legent application “raise[d] significant issues of policy.” AR 3008. This letter notified the
    26
    Bank of the very real possibility that the Legent application could be denied. Therefore, it was
    not irrational for OTS to conclude that the Bank’s assumption that the Legent acquisition would
    be approved was unreasonable.
    The Bank also submits that it was unfair to deny the Legent application and the CRP on
    the same day because “[h]ad the OTS issued its decision regarding Legent even one day before
    the CRP denial, then the Bank could have revised its CRP to reflect new assumptions following
    the rejection.” Pl.’s Mem. at 34. This argument also fails. Since the Legent acquisition was a
    condition precedent of the Recapitalization Transaction, the onus was on the Bank to submit a
    CRP that addressed the viability of the Recapitalization Transaction and the CRP if the Legent
    application was denied. In open court, the Bank argued that OTS’s short deadline prevented it
    from developing and including this kind of information in the CRP. Tr. 35:17–23. But as the
    Court has already noted, the November 2010 letter gave the Bank more than a month to plan for
    the possibility of the denial of the Legent application and include a back-up plan in its CRP.11
    4. Other Closing Conditions
    Lastly, the agency explained that the CRP was unacceptable because it “unreasonably
    and without support or explanation, assume[d] that the Anchor Investors [would] waive or
    amend [several] express closing conditions.” AR 4125. In its pleadings, the Bank contends that
    this determination was arbitrary and capricious because the agency ignored “the Bank’s
    representations [in a November 29, 2010 letter] that the Anchor Investors would waive [certain]
    11      In its pleadings, the Bank also argues that the denial of the Bank’s application to acquire
    Legent did not doom the Recapitalization Transaction because the Bank was prepared to
    restructure the deal to have the holding company purchase Legent. Pl.’s Reply at 24. However,
    since the CRP did not present this alternative, the Court cannot conclude that OTS acted
    irrationally when it concluded that the denial of the Legent application – one of the conditions
    precedent of the Investment Agreement – doomed the Recapitalization Transaction and the CRP.
    Moreover, in the three days between the rejection of the CRP and the appointment of the
    receiver, the Bank did not propose an alternative plan that did not depend on the Legent
    acquisition.
    27
    conditions.” Pl.’s Mem. at 32–33. But the agency expressly took the representations in the letter
    into consideration, saying: “the Association previously suggested that the Anchor Investors
    might be willing to provide new capital without satisfaction of some [of] these closing
    conditions.” AR 4125 n.2. The problem is that the November 29 letter was merely a list of
    “Proposed Revisions to Conditions to Closing,” AR 1185–90, and, as OTS pointed out in the
    CRP rejection letter, the Bank never provided the agency with any document stating “that the
    Anchor Investors ha[d] agreed to any of the proposed changes.” AR 4125. Without such
    documentation, OTS rationally concluded that the CRP’s assumption that investors who had
    protected themselves with conditions would waive or amend those conditions was unrealistic.
    AR 4125.
    In sum, the CRP was dependent upon a series of unlikely events, including predictions
    that the agency would be inclined to relax its position on the “meet and maintain” requirements
    even though it had just stated that it wouldn’t, and that the agency would bless the Legent
    transaction that it had just described as troubling. It was not unreasonable for the agency to find
    that the Bank’s assumptions – particularly its assumptions about what the agency itself was
    likely to do – were unduly optimistic, and it was not unreasonable for it to require confirmation
    beyond the Bank’s own say-so about what the investors were or were not willing to do. Since
    OTS has presented a reasoned explanation for its determination that the CRP was statutorily
    unacceptable, and the Bank has failed to demonstrate that these reasons were arbitrary or
    capricious, the Court will uphold the appointment decision based on this statutory ground.12
    12     OTS also rejected the CRP because the Bank submitted a guarantee that was different
    from the agency’s standard-form guarantee. AR 4125. The Court will not address this ground
    because it finds that the agency provided sufficient grounds for upholding the rejection based its
    determination that the CRP did not meet the statutory requirements that it be realistic and not
    appreciably increase the Bank’s risks.
    28
    II. OTS Reasonably Determined That The Bank Was Facing A Liquidity Crisis
    Another statutory basis for the appointment decision was that the Bank was “likely to be
    unable to . . . meet its depositors’ demands in the normal course of business” under 
    12 U.S.C. § 1821
    (c)(5)(F). AR 2. The Bank challenges this determination, asserting that OTS “wrongfully
    concluded that the Bank faced a liquidity crisis because of its relationships with the Institutional
    Depositors.” Pl.’s Mem. at 36. To support this assertion, the Bank argues that OTS: (1)
    arbitrarily reversed its prior policy concerning the institutional depositors; (2) wrongfully
    concluded that the institutional depositors were likely to withdraw their funds; and (3) erred in its
    determination that the Bank did not have sufficient funds to cover permissible withdrawals. Pl.’s
    Mem. at 36–44; Pl.’s Reply at 4–14. The Court will address these arguments in turn.
    A. OTS Did Not Unreasonably Reverse Its Prior Policy Concerning Institutional Deposits
    First, the Bank contends that the statement in the appointment order that “there [was] an
    unacceptable risk that institutional depositors may withdraw their deposits in the near term” was
    arbitrary and capricious because it constituted an unexplained and unsubstantiated reversal of the
    agency’s policy concerning the institutional depositors. Pl.’s Mem. at 36–37. The Bank points
    to the legal principle that an agency “may change its policy only if provides a reasoned analysis
    indicating that prior policies and standards are deliberately changed, not casually ignored.”
    Honeywell Int’l Inc. v. Nuclear Regulatory Comm’n, 
    628 F.3d 568
    , 579 (D.C. Cir. 2010),
    quoting Mich. Pub. Power Agency v. FERC, 
    405 F.3d 8
    , 12 (D.C. Cir. 2005) (internal quotation
    marks omitted). But that case has little bearing on the situation at hand.
    In Honeywell, a company requested exemptions from the Nuclear Regulatory
    Commission’s regulations in three consecutive years. 
    628 F.3d at 571
    . The Commission granted
    the company’s first two requests but denied the third. 
    Id.
     In its pleadings, the Commission
    attempt to justify its actions by arguing that the denial was warranted because of the company’s
    29
    declining financial condition. 
    Id. at 581
    . The Court of Appeals rejected this explanation and
    stated that the company’s financial condition did not justify the Commission’s denial of the third
    exemption request because the company was already in decline when the Commission granted
    the two other exemptions. 
    Id.
     The court then overturned the Commission’s denial of the third
    exemption request because the decision was “inconsistent with its precedent addressing [the
    company’s] exemption requests” and the Commission failed to provide a reasoned decision for
    changing its policy. 
    Id.
     at 580–81.
    Here, the administrative record reflects a fundamental change in circumstances
    warranting a different approach to institutional deposits. Prior to the financial crisis, the agency
    did not object to the Bank’s concentration in institutional depositors. AR 6 n.9. But contrary to
    the Bank’s assertion, the agency did not suddenly express concern about this concentration just
    before the seizure, and there is no inconsistent precedent as in the Honeywell case. After the
    economy collapsed and the Bank’s fortunes declined along with it, the agency regularly voiced
    its concerns on this subject, and it provided a reasoned explanation for its worry.13
    13      The Bank incorrectly argues that “the Court should look only to the Seizure Order to
    supply [the agency’s] reasoning” for concluding that the institutional depositors “presented a
    sudden liquidity danger.” Pl.’s Mem. at 37. In support of this argument, the Bank relies on the
    well-established rule that “[w]hen there is a contemporaneous explanation of the agency
    decision, the validity of that action must stand or fall on the propriety of that finding.” 
    Id.,
     citing
    Sierra Club v. Costle, 
    657 F.2d 298
    , 392 (D.C. Cir. 1981). The Bank takes that quotation out of
    context. When the Supreme Court announced this rule in Camp v. Pitts, 
    411 U.S. 138
    , 142–43
    (1973), it was explaining that “the focal point for judicial review [under the arbitrary and
    capricious standard] should be the administrative record already in existence, not some new
    record made initially in the reviewing court.” Thus, this rule requires the Court to confine its
    review of the agency’s decision to the administrative record to the exclusion of any evidence
    outside of that record. It does not restrict the Court to specific parts of that record. Therefore,
    the Court will look at the entire administrative record to supply OTS’s reasons for developing
    concern regarding the institutional depositors during the financial crisis.
    30
    OTS’s first clear warning about the Bank’s concentration in institutional deposits came
    during the global financial crisis.14 In the March 2009 Report of Examination, the agency
    cautioned that “termination of one or more of the larger institutional deposit relationships could
    place UWB in a precarious liquidity position.” AR 161. The Bank contends that “the [March
    2009] ROE . . . lacked any useful analysis explaining the agency’s new hostility toward the
    historically-stable, long-standing Institutional Depositors.” Pl.’s Reply at 7. Contrary to this
    contention, the March 2009 ROE provided an adequate explanation for OTS’s determination that
    the Bank’s concentration in institutional deposits had become risky. The report explained that as
    a result of the financial crisis, the Bank’s asset quality had deteriorated, its earnings had
    decreased, and its capital had declined to levels that were barely above the threshold necessary
    for the Bank to qualify as “well capitalized.” AR 135–36. The report added that the contractual
    agreements with some of the institutional depositors allowed them to withdraw their funds if the
    Bank’s capital fell below the PCA “well capitalized” level, and a continued decline of capital
    could place the Bank into a precarious liquidity position. AR 161, 164. Notably, the agency did
    not immediately take action against the Bank in light of these concerns. Rather, it worked with
    the Bank to develop a Memorandum of Understanding, pursuant to which the Bank pledged to
    develop a concentration policy that “specifically address[ed] deposit concentrations and plans to
    reduce or manage such concentrations.” AR 223–24.
    14      OTS argues that it first warned the Bank about this risk in the October 2007 ROE when it
    stated that the Bank “continue[d] to face risk from its concentration in institutional deposits.”
    AR 57; see also Defs.’ Mem. at 35. However, in the 2007 ROE, OTS tempered this warning by
    ultimately concluding that the Bank’s liquidity sources were “satisfactory” and that the Bank’s
    business strategy and contractual agreements with the institutional depositors “help[ed] protect
    the institution’s liquidity position.” AR 57. As the Bank notes, this muddled message “could
    hardly be said to have sounded the alarm” about the institutional deposits. Pl.’s Reply at 6.
    31
    As the Bank’s condition worsened, the agency’s concerns about the risks associated with
    its concentration in institutional deposits escalated. In an April 2010 letter, the agency stated that
    the Bank’s “significant concentration in institutional deposits . . . pose[d] a threat to the viability
    of the Bank” and directed the Bank to consider a “possible sale, merger, or self-liquidation . . . to
    prevent the potential failure of the institution due to insufficient liquidity.” AR 267. Again, the
    agency provided a reasoned explanation for these alarming statements. It explained that the
    concentration in institutional deposits was problematic because the FDIC was reviewing whether
    the deposits were “brokered.” AR 267. If the FDIC concluded that the institutional deposits
    were brokered, the Bank would not be able to accept or renew the brokered deposits without a
    waiver from the FDIC because it would have become only adequately capitalized. AR 267; see
    also AR 317, 1110 (the Bank became “adequately capitalized” as of March 31, 2010). Again,
    the agency did not immediately seize the Bank; rather it worked with the Bank and developed the
    Consent Cease and Desist Order in which the Bank again agreed to create a liquidity contingency
    plan that “specifically address[ed] deposit concentrations and plans to reduce or manage such
    concentrations.” AR 560.
    The change in the Bank’s financial condition during the financial crisis justifies OTS’s
    concern about the concentration in institutional investors. Unlike in Honeywell, where the
    Commission granted the two prior exemptions while the company’s financial condition was
    already in decline, here OTS made it clear that it did not approve of the Bank’s reliance on
    institutional depositors as soon as the Bank’s condition began to decline, and it never wavered.
    It alerted the Bank to its concerns in the March 2009 ROE, the December 2009 MOU, the April
    2010 letter, and the June 2010 Cease and Desist Order. In light of the changing economic
    environment, and the agency’s reasoned explanations for its concerns, the Court cannot agree
    32
    with the Bank’s contention that OTS “suddenly” and arbitrarily reversed its policy concerning
    institutional depositors shortly before the seizure.
    B. OTS’s Conclusion That There Was An Unacceptable Risk That Institutional Depositors
    May Withdraw Their Deposits In The Near Term Was Reasonable
    Second, the Bank’s contention that the agency “imagined” a liquidity crisis because
    “there was no likelihood whatsoever that the institutional depositors would withdraw,” Pl.’s
    Mem. at 39, is contradicted by the record. Approximately a month before the appointment
    decision, MSCS, the Bank’s second largest institutional depositor, began withdrawing its ERISA
    deposits because the Bank’s undercapitalized status prevented it from accepting such deposits.15
    AR 1457–58.
    Further, the Bank’s undercapitalized status triggered the termination clauses in the
    deposit agreements with ETC and LTC, the association’s largest and fourth largest institutional
    depositors. AR 1945, 1952; see also Defs.’ Mem. at 30. The Bank correctly points out that
    these depositors had a “long and loyal history,” with the Bank and had consistently worked with
    the Bank during the financial crisis. Pl.’s Reply at 13. As the Bank noted at the hearing, the
    depositors removed their ERISA deposits from the Bank so that they would not be subject to the
    same rule that required MSCS to withdraw its funds, they modified their deposit agreements with
    15       The Bank claims that MSCS and its client CPI were forced by OTS to withdraw their
    deposits because the agency “in its quest to set the Bank up for failure” forced “the Bank into
    undercapitalized status via an unnecessary” write-down on its mortgage portfolio. Pl.’s Reply at
    8–9 & n.7. But “when reviewing an agency’s decision concerning matters lying within the
    agency’s field of expertise, a reviewing court should begin by acknowledging that a presumption
    of procedural and substantive regularity attaches.” James Madison, 868 F. Supp. at 8, citing
    Franklin Savs. Ass’n v. Dir. Office of Thrift Supervision, 
    934 F.2d 1127
    , 1147 (10th Cir. 1991).
    In its letter directing the Bank to take the write-down, the agency explained that it had “carefully
    reviewed” the Bank’s objections to the write-down and had found that the Bank’s “modeling
    approach and assumptions do not conform to regulatory reporting requirements.” AR 2092.
    Since the Bank provides no basis for its claim that the write-down was unnecessary or that the
    agency wanted the Bank to fail, the Court concludes that it has not met its burden to overcome
    the presumption of validity accorded to the agency’s decision.
    33
    the Bank to avoid the “brokered deposit” designation, and they signed written agreements to
    refrain from withdrawing their funds from the Bank albeit with certain caveats. Tr. 40:1–13;
    41:7–23; 42:2–13. But even if the Court agrees that the depositors might have been willing to
    weather the storm with the Bank, the arbitrary and capricious standard does not allow it to
    substitute its judgment for that of the agency. Overton Park, 
    401 U.S. at
    415–16. The sole
    question before the Court is whether OTS’s conclusion that there was an “unacceptable risk that
    the institutional depositors may withdraw their deposits in the near term” was reasonable based
    on the administrative record. Pl.’s Mem. at 37.
    As the Bank has acknowledged, the institutional depositors were willing to maintain their
    deposits “so long as the recapitalization remained a viable option.” Tr. 41:15. Both ETC and
    LTC expressly conditioned their agreements to refrain from withdrawing their funds on the Bank
    restoring its capital by a set deadline: LTC specifically “reserve[d] its right to terminate the
    [deposit] Agreement” if the Bank did not achieve “well capitalized” status by January 31, 2011,
    AR 1947, and ETC agreed to refrain from exercising its right to withdraw its deposits until
    February 15, 2011 based on its understanding that the Bank was close to securing capital to
    remedy its situation. AR 1945, 1947. Since OTS had already refused to implement several
    conditions precedent of the Recapitalization Transaction, it was not unreasonable for it to
    determine that the plan was no longer viable, and that there was an unacceptable risk that the
    institutional depositors would withdraw their funds when it became “clear that the [Bank’s]
    present attempts to raise capital [would] be unsuccessful.” AR 34.16
    16     The depositors ultimately agreed to extend their forbearance agreements to match the
    scheduled closing date of the Recapitalization Transaction. Pl.’s Reply at 11–12. But this fact
    does not alter the Court’s analysis because the agreements were still conditioned on the Bank
    consummating the Recapitalization Transaction, which OTS had reasonably determined was no
    longer viable.
    34
    Indeed, the Bank’s holding company made public statements about the Bank’s liquidity
    position at the time that were consistent with OTS’s conclusions. In a December 2, 2010 letter to
    the Bank, the NASDAQ stock exchange explained that the holding company had informed it
    that:
    Due to its weakened financial status, the Bank has experienced a decline
    in deposits, and it believes that unless it resolves its difficulties in the near-
    term, additional depositors may move their funds elsewhere, further
    weakening the financial condition of both the Company and the Bank. . . .
    Consequently, pursuant to Cease and Desist Orders (the “Orders”), the
    banking regulators have imposed stringent enforcement actions requiring
    the Company and the Bank to raise additional capital in the near term or
    face additional regulatory actions. Thus far the Company has been unable
    to raise the amount of capital required under the Orders. . . . The
    Company also expects that at the end of the current year, the Bank will fall
    below the level required to be adequately capitalized. . . . As a result, the
    Bank would be unable to hold certain deposits (that currently account for
    over 75% of its total deposits) and would face a liquidity crisis that it
    believes would lead to the regulator recommending the seizure of the
    Bank, resulting in the liquidation of the Company.
    AR 2457–58 (emphasis added). The letter also stated that the holding company had informed the
    exchange that the Recapitalization Transaction was “the only viable option” for restoring its
    capital and eliminating “the prospect of the Bank being seized or the Company being liquidated.”
    AR 2458.     Again, since OTS had already rationally concluded that the Recapitalization
    Transaction was not viable, it was not unreasonable for it to agree with the holding company’s
    conclusion that without such recapitalization, the Bank “would face a liquidity crisis.”
    C. OTS’s Determination That the Bank Had Insufficient Liquidity To Sustain Institutional
    Deposit Withdrawals Was Not Arbitrary Or Made In Bad Faith
    Third, the Bank argues that OTS erroneously concluded that the Bank had insufficient
    liquidity to cover mass institutional deposit withdrawals. Pl.’s Reply at 13. OTS’s appraisal of
    assets leading to an insolvency determination “is a matter of judgment and discretion,” and the
    Court will not substitute its judgment for that of the agency “unless it appears by convincing
    35
    proof that the Comptroller’s action is plainly arbitrary, and made in bad faith.” United States
    Savs. Bank v. Morgenthau, 
    85 F.2d 811
    , 814 (D.C. Cir. 1936).17 The “presumption of the
    correctness of an agency’s determination is even stronger where Congress has charged an agency
    with complex analytical responsibilities and the duty to make predictive judgments.” James
    Madison, 868 F. Supp. at 8, quoting Franklin Savs. Ass’n v. Dir., Office of Thrift Supervision,
    
    934 F.2d 1127
    , 1147–48 (10th Cir. 1991).
    In its memorandum recommending placing the Bank into receivership, the OTS field
    staff provided a detailed analysis of the Bank’s liquidity situation. The memorandum explained
    that according to the Bank’s own liquidity analysis, as of January 13, 2011, the Bank had:
    $398.5 million in total cash, $17.8 million in unused borrowing capacity from FHLB-Topeka,
    and an additional $137 to $350 million that it could have obtained from Legent. AR 38–39; see
    also AR 39 n.30. This added up to a total of $553.3 to $766.3 million, which would have been
    insufficient to cover the potential withdrawal of a total of $848 million in deposits from ETC,
    LTC, and MSCS’s remaining funds. AR 39–40 n.30–31.
    The Bank disputes this conclusion by asserting that its on-hand liquidity increased to
    $426 million on January 20 and that it could have taken advances from the FHLB and accepted
    Qwikrate deposits to shore up its cash position. Pl.’s Reply at 13. However, as defendants point
    out, OTS’s calculations already accounted for the FHLB and Qwikrate funds, and the $27.5
    million increase in liquidity would have increased the Bank’s total available liquidity to a
    maximum of $793.8 million, which still would have been insufficient to cover the withdrawal of
    institutional deposits. Defs.’ Reply at 13 n.14. Even if the institutional depositors withdrew
    their funds incrementally over several months, instead of all at once, the Bank has not explained
    17     Although OTS did not actually declare the Bank to be insolvent, as the Bank points out,
    its “emphasis on liquidity and . . . capitalization was a close cousin.” Tr. 22:5.
    36
    how it would have obtained additional resources to cover the withdrawals. The Bank has thus
    failed to overcome the presumption of correctness accorded to the agency’s detailed analysis of
    the Bank’s liquidity position because it has not submitted any facts to show that the agency’s
    determination was arbitrary or made in bad faith.
    Since the Bank has failed to show that OTS’s conclusion that the Bank was likely to be
    unable to pay its obligations or meet its depositors’ demands in the normal course of business
    was irrational, manifestly erroneous, or made without consideration of the relevant factors, the
    Court will also uphold the appointment order on that ground.
    III. OTS’s Determination That the Bank Was Unsafe And Unsound Was Not Irrational
    The third statutory ground for the appointment order was that the Bank was operating in
    an unsafe and unsound condition under 
    12 U.S.C. § 1821
    (c)(5)(C). AR 2. In challenging this
    ground, the Bank asserts that OTS “erred in applying the wrong standard for ‘an unsafe or
    unsound practice’ . . . [and that] even if the agency had applied the correct standard, the
    agency’s position would still be refuted by the facts before it.” Pl.’s Mem. at 42.
    The Bank’s argument that the agency should have used the “unsafe and unsound”
    standard of the D.C. Circuit instead of the “more permissive standard” of the Tenth Circuit, Pl.’s
    Reply at 26, fails on its face. An agency must follow the law of the circuit having jurisdiction
    over the action, see Johnson v. U.S. R.R. Ret. Bd., 
    969 F.2d 1082
    , 1090–91 (D.C. Cir. 1992), and
    as the Bank admits in its pleadings, both the Tenth and the D.C. Circuit could have exercised
    jurisdiction over this lawsuit. Pl.’s Mem. at 42 & n.97. Since the Bank’s home office is in
    Colorado, and at the time of the appointment decision, there was no lawsuit pending in either
    circuit, the agency’s decision to apply the Tenth Circuit standard was reasonable. The cases
    cited by the Bank to support its position are inapposite because none of them require an agency
    to anticipate that the Bank will ultimately file a case in the jurisdiction with the more stringent
    37
    standard and apply the law of that circuit. See Pl.’s Mem. 42 n.97. Finally, the Bank’s argument
    that OTS routinely applies Tenth Circuit law even when there is no nexus with the Tenth Circuit
    is irrelevant because in this case, there was a strong nexus to the Tenth Circuit and the agency
    was legally allowed to apply its case law.
    More importantly, the factors that the agency considered in its appointment order support
    a conclusion that the Bank was unsafe and unsound even under the D.C. Circuit standard. In this
    circuit, a Bank operates in an unsafe and unsound condition if it is in a condition or engaged in
    practice that presents a reasonably foreseeable undue risk to the institution. See Kaplan v. OTS,
    
    104 F.3d 417
    , 421 (D.C. Cir. 1997).
    The appointment order articulated several events that presented a reasonably foreseeable
    undue risk to the Bank. The order cited the Bank’s:
    “[C]ontinuing significant operating losses.” AR 6. The Bank had in fact lost at least
    $152 million between 2009 and the date of the receivership. AR 30, 1492.
    “[W]eak capital position.” AR 6. From 2009 to 2010, the Bank’s capital levels
    deteriorated significantly. AR 142, AR 25; see also Bank CRP, AR 1491 (projecting
    that capital ratios would continue to decline).
    “[S]ignificant asset problems.” AR 6. The Bank’s assets had been deteriorating since
    2008. AR 135–36.
    “[R]eliance on a small number of institutional depositors” for the vast majority of its
    liquidity. AR 6. One of these depositors had already withdrawn most of its deposits
    and two others might have withdrawn their funds once they realized that the Bank’s
    recapitalization efforts were not viable. AR 5–6.
    The Bank argues that the agency’s “unsafe and unsound”’ determination does not meet
    this circuit’s standard because it was based on the “faulty premise that the Institutional
    Depositors posed a liquidity risk to the Bank” and the erroneous conclusion that the Bank had
    38
    “insufficient capital” and “no realistic prospects for raising capital in the short term.”18 Pl.’s
    Mem. at 45. However, as the Court has already decided, the agency had a reasonable basis for
    concluding that the Bank’s concentration in institutional deposits posed a liquidity risk to the
    Bank, and that the Bank had no viable plan for restoring its capital.
    Since the factors relied on by OTS in the appointment order also support a determination
    that the Bank was unsafe and unsound under the D.C. Circuit standard, the Court will uphold the
    appointment order on that ground.
    CONCLUSION
    At bottom, after one strips away all of the hyperbole about the agency’s “sudden” change
    of heart, the Bank’s fundamental grievance is that if only the agency had just given it a little
    more time, it would have been able to come up with the necessary capital to save the day.
    Maybe. There are reasons to be skeptical: the Bank’s plans were dependent upon regulatory
    changes that were unlikely to materialize, and the potential investors had carefully buffered their
    commitments with numerous contingencies. On the other hand, this was a Bank with a long
    history of profitability, it had longstanding institutional relationships, and there were at least
    some investors willing to take a closer look. There is no doubt that the officers and directors
    18       The Bank takes issue with OTS’s conclusion that the Bank had “no realistic prospects for
    raising capital in the short term” contending that Congress did not demand immediate
    recapitalization and that OTS’s belief that the Bank’s recapitalization efforts “would necessarily
    rise and fall with the Recapitalization Transaction” was an “unduly narrow view of the Bank’s
    capital prospects.” Pl.’s Mem. at 45–46. But the agency did not demand immediate
    capitalization. It had been asking the Bank to recapitalize for more than one and a half years.
    See e.g., 2009 MOU, AR 220 (asking the Bank to “submit a written Capital Plan”). In that time
    period, the Bank presented only one recapitalization plan and the holding company stated that
    this plan was the Bank’s “only viable option” for restoring its capital. AR 2458. Further, the
    2010 Investment Agreement prohibited the Bank from “enter[ing] into any agreement to raise
    capital other than in connection with the transaction contemplated under the Investment
    Agreement.” AR 1189 (November 2010 letter to OTS stating that the investors were unwilling
    to waive this provision). Therefore, the agency reasonably concluded that the since the
    Recapitalization Transaction was not viable, the Bank had no realistic prospects for restoring
    capital.
    39
    were seriously committed to the task, and one cannot simply dismiss their efforts, or their sincere
    belief that they would ultimately succeed, as frivolous. But in the end, whether the Court accepts
    the Bank’s assessment of its prospects wholeheartedly or with reservations is beside the point.
    Given the standard that must be applied in this proceeding, the Court cannot find that the
    agency’s decision was unreasonable under all of the circumstances at the time it was made, or
    that it was not supported by the administrative record. The Court will uphold OTS’s decision to
    appoint the FDIC as receiver for the Bank because the Bank has failed to demonstrate that the
    Acting Director failed to articulate a rational basis, failed to consider the relevant factors, or
    made a manifest error in judgment when he concluded that there were three statutory grounds
    that independently supported the decision.19 Accordingly, the Court will deny the Bank’s motion
    for summary judgment and grant the defendants’ cross-motion. A separate order will issue.
    AMY BERMAN JACKSON
    United States District Judge
    DATE: March 5, 2013
    19      “When an agency relies on multiple grounds for its decision, some of which are invalid,
    [courts] may only sustain the decision where one is valid and the agency would clearly have
    acted on that ground even if the other were unavailable.” Williams Gas Processing-Gulf Coast,
    Co., L.P. v. FERC, 
    475 F.3d 319
    , 321 (D.C. Cir. 2006). Since the Court has concluded that all
    three statutory grounds are valid, it need not address the Bank’s argument that “even if the Court
    determines that one ground of the seizure order was valid, none of the alleged grounds is
    sufficient – standing alone – to sustain the decision.” Pl.’s Reply at 29.
    40
    

Document Info

Docket Number: Civil Action No. 2011-0408

Citation Numbers: 928 F. Supp. 2d 70, 2013 WL 796021, 2013 U.S. Dist. LEXIS 29492

Judges: Judge Amy Berman Jackson

Filed Date: 3/5/2013

Precedential Status: Precedential

Modified Date: 11/7/2024

Authorities (23)

Califano v. Sanders , 97 S. Ct. 980 ( 1977 )

N.S. Ex Rel. Stein v. District of Columbia , 709 F. Supp. 2d 57 ( 2010 )

United States Sav. Bank v. Morgenthau , 85 F.2d 811 ( 1936 )

Motor Vehicle Mfrs. Assn. of United States, Inc. v. State ... , 103 S. Ct. 2856 ( 1983 )

guaranty-savings-loan-association-v-federal-home-loan-bank-board , 794 F.2d 1339 ( 1986 )

Citizens to Preserve Overton Park, Inc. v. Volpe , 91 S. Ct. 814 ( 1971 )

MI Pub Power Agcy v. FERC , 405 F.3d 8 ( 2005 )

Sierra Club v. Douglas M. Costle, Administrator of the ... , 657 F.2d 298 ( 1981 )

Honeywell International, Inc. v. Nuclear Regulatory ... , 628 F.3d 568 ( 2010 )

Thomas R. Sherwood v. The Washington Post , 871 F.2d 1144 ( 1989 )

san-luis-obispo-mothers-for-peace-v-united-states-nuclear-regulatory , 789 F.2d 26 ( 1986 )

Camp v. Pitts , 93 S. Ct. 1241 ( 1973 )

Anderson v. Liberty Lobby, Inc. , 106 S. Ct. 2505 ( 1986 )

Celotex Corp. v. Catrett, Administratrix of the Estate of ... , 106 S. Ct. 2548 ( 1986 )

alfred-u-mckenzie-individually-and-on-behalf-of-all-others-similarly , 684 F.2d 62 ( 1982 )

Ross J. Laningham v. United States Navy , 813 F.2d 1236 ( 1987 )

Donald M. Kaplan v. United States Office of Thrift ... , 104 F.3d 417 ( 1997 )

Jarrett E. Woods, Jr. v. Federal Home Loan Bank Board, (Two ... , 826 F.2d 1400 ( 1987 )

National Ass'n of Clean Air Agencies v. Environmental ... , 489 F.3d 1221 ( 2007 )

James Madison Limited, by Norman F. Hecht, Sr., Assignee v. ... , 82 F.3d 1085 ( 1996 )

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