Full text of Annual Report of the Federal Deposit Insurance Corporation : Annual Report, 1991

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

c
Annual
Report

Federal
D ep o sit
Insurance
C orporation

M is s io n S t a t e m e n t
The Federal Deposit Insurance
Corporation was created by
Congress in 1933 to restore
public confidence in the
nation's banking system
following a severe financial
crisis.
To maintain public confidence
in banking institutions, the
mission of the FDIC is to:
• Protect depositors'
accounts
• Promote sound banking
practices
• Reduce the disruptions
caused by bank failures
• Respond to a changing
economy and banking
system

H ouse
David Valdez, The White

199 1

Annual

Report

Treasury Secretary
Nicholas F. Brady (left)
administers the oath
of office to new FDIC
Chairman William Taylor
in a ceremony with
President Bush and
Mr. Taylor's wife, Sharon,
as participants.

Table of
Contents

In t r o d u c t io n

Transmittal Letter

O p e ra tio n s
o f th e C o r p o r a tio n
iii

Statistical Highlights

R e g u la tio n s
a n d L e g is la tio n
12

Rules and Regulations
Final or Proposed

Legislation Enacted

Chronological Highlights 13
Chairman's Statement

1
Supervision
and Enforcement

Board of Directors

4
Failed Banks and
Assistance Transactions 20

Officials

6
Liquidation Activities

Regional Offices

Legal Affairs

Organization Chart

Economic and
Policy Research

Divisions and Offices

Other Highlights

The State of the
Banking Industry

F in a n c ia l
S ta te m e n t s
Bank Insurance Fund

Savings Association
Insurance Fund

FSLIC Resolution Fund

In d e x

S t a t is t ic s
Introduction

126

Table A
Number and Deposits
of Failed Banks,
1934-91

127

Table B
Insured Banks Requiring
Disbursements,
1991
128
Table C
Recoveries and Losses
on Disbursements,
Bank Insurance Fund,
1934-91

132

Table D
Income and Expenses,
Bank Insurance Fund,
1933-91

133

Table E
Deposits and the
Bank Insurance Fund,
1934-91

134

FDIC

Federal Deposit Insurance Corporation
W a sh in g to n . DC 2 0 4 2 9

O ffice of th e C hairm an

July 20, 1991

Sirs:
In accordance with the provisions of section 17(a)
of the Federal Deposit Insurance Act,
the Federal Deposit Insurance Corporation
is pleased to submit its Annual Report for
the calendar year 1991.

Very truly yours,

William Taylor
Chairman

The President of the U.S. Senate
The Speaker of the U.S. House of Representatives

Chairman's
Statement

Nineteen ninety-one may
well be remembered as
a watershed year in the
history of the FDIC. The
agency, its personnel, and
the deposit insurance sys
tem itself were severely
tested by the combined
effect of a continued high
level of bank failures and the
precipitous decline of the
Bank Insurance Fund (BIF).
Throughout the year, the
FDIC faced numerous, and
often conflicting, challenges.
The agency strived to main
tain public confidence in the
banking industry; to ensure
the viability of the deposit
insurance system; and to
strengthen supervisory con
trols over risk in the banking
system without discouraging
the credit flows necessary to
sustain economic growth.

FDIC C hairm an W illiam Taylor

These developments fueled
public debate over deposit
insurance reform issues and
focused the attention of
Congress and the Adminis
tration on the problems
facing the FDIC. After a year
long legislative effort to
enact needed changes, the
Federal Deposit Insurance
Corporation Improvement
Act of 1991 (FDICIA) was
signed into law in December.
FDICIA, whose implementa
tion will create additional
challenges for the agency,
will have far-reaching and
lasting effects on the FDIC
and the banking system.

D e v e lo p m e n ts in 19 9 1
Pressure on some FDICinsured institutions contin
ued to be felt throughout
the year from the economic
slump, over-built and de
pressed real estate markets,
and the ongoing consolida
tion of the banking industry.
While the actual number
of failed and assisted banks
declined to 127 in 1991,
from 169 the previous year,
assets in such institutions
increased to a record $63.2
billion in 1991, from $15.7
billion in 1990. This increase
was mainly due to the failure
of several large institutions,
including the Bank of New
England, Miami's Southeast
Bank, and Goldome. Esti
mated losses to the BIF for
banks closed in 1991 also
reached a record high of
$7.4 billion.
A number of difficult deci
sions were made in 1991.
Among these was the deci
sion to raise the deposit
insurance assessment rate
from 19.5 cents per $100
in assessable deposits,
effective January 1st, to 23
cents, effective July 1st.
While the FDIC Board was
reluctant to put further pres
sure on bank earnings, the
agency recognized that
assessment revenue was
not keeping pace with the
losses being incurred by
the BIF. Insurance losses
have exceeded assessment
revenue every year since
1983.

Despite the enormous vol
ume of problem-bank assets
removed from the system
through FDIC resolution and
supervision activity in 1991,
and some signs that the
condition of the banking
industry is improving, under
lying difficulties continue to
trouble the industry. At yearend 1991, about $600 billion
in assets were held by prob
lem banks, compared to
about $400 billion one year
previously. Moreover, bank
exposure to weakened real
estate markets in several
regions of the country
remained substantial.
Given these conditions, the
agency decided to depart
from previous policy, where
by reserves were set aside
only for losses in banks
virtually certain to fail in the
near future. In 1991, the
FDIC Board took an aggres
sive approach and reserved
for a higher level of risk to
the Fund. Thus, the year-end
financial statements reflect
a provision for expenses and
insurance losses of $16.9
billion, of which $15.4 billion
is for contingent losses re
lated to banks that are weak
but have not yet failed. As
a result, the BIF decreased
to a negative $7 billion, the
first negative result since
the FDIC's founding in
1933.

F D IC IA H ig h lig h ts
In early 1991, the Treasury
Department released a
comprehensive study on
modernizing the financial
system that contained
numerous recommenda
tions for restructuring the
banking industry and reform
ing the deposit insurance
system. While the resulting
legislation failed to contain
structural reforms to the
banking industry, FDICIA
is nevertheless a significant
piece of legislation.
In hindsight, it may be seen
that FDICIA was written
with the regulatory lessons
of the past decade in mind.
It recognizes that capital and
strong prudential supervi
sion are the first lines of de
fense against bank failures;
that weak banks should not
be allowed to gamble with
insured deposits; and that
riskier banks should pay
more for deposit insurance.
The most immediate effect
of FDICIA was to buttress
the deposit insurance sys
tem. The FDIC may borrow
up to $30 billion from the
U.S. Treasury to cover losses
in the Bank Insurance Fund.
The industry must repay
the borrowed amounts over
a period not to exceed 15
years. The FDIC also may
borrow funds on a short
term basis for working
capital.

Other provisions of the new
law are aimed at improving
the oversight system for
the banking industry. Prompt
corrective action is the
underpinning of new regula
tions designed to focus
regulatory attention on
those institutions posing the
greatest risk to the deposit
insurance system. Bank
capital is to be a principal
tool in this effort. The FDIC
and other federal banking
regulators must establish
thresholds for a range of
capital zones and take speci
fied actions when a bank
falls to a lower capital zone.
As a bank's capital declines,
the required actions become
increasingly stringent, rang
ing from forced shrinkage
to early closure.
FDICIA also addressed the
much-criticized "too big to
fail" concept by requiring
the FDIC to resolve all fail
ing banks in the least costly
manner possible. Any excep
tions to the least costly
standard for "systemic risk"
situations are to be deter
mined, upon the recommen
dation of the FDIC and the
Federal Reserve Board, by
the Secretary of the Treasury
in consultation with the
President. Thus, the FDIC
no longer has the sole
responsibility for deciding
that the’failure of a large
bank might be so disruptive
as to require special
handling.

L o o k in g A h e a d
While many necessary
steps were taken during
1991 to strengthen the BIF
and to improve the safety
and soundness of the bank
ing industry, much remains
to be done. The writing of
regulations to implement
FDICIA will occupy much of
1992. An important feature
of the new legislation is the
requirement that the FDIC
develop and implement
a system of risk-related
insurance assessments by
January 1, 1994. The agency
plans to move expeditiously
to implement the first depar
ture from a flat-rate assess
ment schedule in its 58-year
history. This system of flatrate premiums has been
criticized for encouraging
excessive risk-taking by
insured institutions and
inequitably distributing the
burden of insurance losses
among banks.
Throughout the Corporation,
a variety of approaches and
techniques to limit the cost
of bank resolutions and the
disruption of local markets
in communities impacted by
banking industry difficulties
also are being examined.
Disposing of assets from
failed banks presents a con
tinuing challenge. Keeping
assets in the private sector
is a significant consideration
in the search for new and
innovative ways to handle
banking industry difficulties.

In the supervisory area,
the FDIC will continue to
seek the correct balance
between protecting the
deposit insurance fund by
controlling risk-taking, and
allowing healthy banks to
perform their role in facilitat
ing economic growth. The
tools given to us in FDICIA
will enable us to protect the
insurance fund more effec
tively. At the same time,
however, we must remain
cognizant of the regulatory
burden placed on the bank
ing industry and use these
tools in a way that does
not stifle banks' abilities to
serve their customers.
The foundation for a healthy
industry rests in large part
on our continued efforts in
these areas. The reserves
set aside by the FDIC this
year reflect the prudence
required of an insurance
agency. But prudence does
not imply pessimism, and
I am hopeful that the recent
signs of improvement re
flect a return to conditions
under which safe and sound
banking goes hand-in-hand
with profitable banking.

C o n c lu d in g T h o u g h ts
In recent years, the FDIC
and the banking industry
have faced a series of
challenges. Bank failures
over the last eight years
have been higher than at
any time since the height
of the Great Depression.
Yet, it is a testament to the
deposit insurance system
and the staff of the FDIC
that these challenges were
met in such a way as to
maintain public confidence
in our financial system.
Through this period of uncer
tainty, my appreciation has
grown for the important and
vital job performed daily by
the Corporation's employ
ees. These include bank
examiners who walk the
line between safe and
sound banking and choking
off credit; and liquidators
who must convert proper
ties to cash quickly without
dumping in fragile markets,
while at the same time at
tempting to maximize value.
Throughout the Corporation,
there are untold examples
of men and women who
are under constant pressure
to use sound judgment in
making difficult decisions.
I commend the FDIC's
employees for the important
public service they perform.

William Taylor

Board o f
Directors

W illia m T a y lo r
William Taylor became
the 15th Chairman of the
Federal Deposit Insurance
Corporation on October 25,
1991. He succeeded
L. William Seidman, whose
six-year term as Chairman
expired October 16, 1991.

Barbara Ries

Mr. Taylor spent most of his
professional career with the
Federal Reserve System.
Prior to his appointment to
the FDIC, Mr. Taylor was
Staff Director of the Federal
Reserve Board's Division of
Banking Supervision and
Regulation.

FDIC Board of Directors

front (l-r)
C.C. Hope, Jr.
D irector
W illiam Taylor
Chairm an

rear (l-r)___________________
A n d re w C. Hove, Jr.
V ice Chairm an
Robert L. Clarke
C om ptro ller of th e Currency
T im o th y Ryan
D irector
Office of T h rift Supervision

A Chicago native, Mr. Taylor
joined the Federal Reserve
Bank of Chicago as a bank
examiner in 1961 after grad
uating from Cornell College
in Mount Vernon, Iowa. In
1968, he joined Chicago's
Upper Avenue Bank as Vice
President in charge of lend
ing. In 1972, he became
Manager of the Chicago
office of James W. Rouse
and Company, a real estate
development and mortgage
banking firm.
Mr. Taylor returned to the
Federal Reserve System in
1976 as Chief of Financial
Institutions Supervision in the
Division of Banking Supervi
sion and Regulation. He
became Assistant Division
Director in 1977, Associate
Director in 1979, Deputy
Director in 1983, Director in
1985 and Staff Director in
1987. He also served in 1990
as Acting President of the
Resolution Trust Corporation
Oversight Board.

A n d r e w C . H o v e , J r.

C .C . H o p e , J r.

R o b e rt L. C la r k e

T im o t h y R yan

Andrew C. Hove, Jr., became
the FDIC's first Vice Chair
man on July 23, 1990. Prior
to his FDIC appointment,
Mr. Hove was Chairman and
Chief Executive Officer of
the Minden Exchange Bank
& Trust Company, Minden,
Nebraska, where he served
in every department during
his 30 years with the bank.

C.C. Hope, Jr., was named
to the FDIC Board of Direc
tors on March 10, 1986,
confirmed by the Senate on
March 27 and commissioned
by President Ronald Reagan
on April 7, 1986. He also
is Chairman of the Neighbor
hood Reinvestment Corpora
tion. Before his appointment
to the FDIC, Mr. Hope spent
38 years at First Union Na
tional Bank of North Carolina
in Charlotte, where he retired
as Vice Chairman in 1985.

Robert L. Clarke became
the 26th Comptroller of the
Currency and a member of
the FDIC's Board of Direc
tors on December 2, 1985.

Timothy Ryan was sworn in
as Director of the Office of
Thrift Supervision (OTS) on
April 9, 1990, after being
nominated by President
Bush and confirmed by the
U.S. Senate. As OTS Director,
he is a member of the FDIC's
Board of Directors.

Mr. Hove also served as
President of the Nebraska
Bankers Association in 198485 and held other leadership
positions in the organization,
including President of the
Nebraska Bankers Insurance
& Services Company and
membership on the execu
tive council. Mr. Hove also
was active in the American
Bankers Association.
Also active in local govern
ment, Mr. Hove was elected
Mayor of Minden from 1974
until 1982, and was Minden's
Treasurer from 1962 until
1974. Other civic activities
have included: President of
the Minden Chamber of
Commerce, President of the
South Platte United Cham
bers of Commerce and posi
tions associated with the
University of Nebraska.
He earned his B.S. degree
at the University of NebraskaLincoln. He also is a graduate
of the University of Wisconsin-Madison Graduate
School of Banking. After ser
vice as a U.S. Naval Officer
from 1956-60, including two
years as a pilot, Mr. Hove
was in the Nebraska National
Guard until 1963.

Mr. Hope is a former Presi
dent of the American Bankers
Association and has served
as Secretary of the North
Carolina Department of
Commerce. In the field of
education, Mr. Hope is a
trustee and former Chairman
of the Board of Wake Forest
University and was Dean of
the Southwestern Graduate
School of Banking at South
ern Methodist University.
He holds a B.A. in Business
Administration from Wake
Forest University and has
completed graduate work at
the Harvard Business School
and The Stonier Graduate
School of Banking at Rutgers
University.
He served in the U.S. Navy
in World War II and received
a battle star for the Battle
of Okinawa.

Before his appointment, Mr.
Clarke founded and headed
the banking section at the
Houston, Texas, law firm of
Bracewell & Patterson. He
joined that firm after com
pleting his military service in
1968. The banking section
prepared corporate applica
tions and securities registra
tions, counseled management
in expansion opportunities
and the effects of deregulatory initiatives, and repre
sented institutions in
enforcement matters.
Mr. Clarke holds a B.A.
in Economics from Rice
University and an L.L.B. from
Harvard Law School. He is
a member of the bars of
Texas and New Mexico. He
has served as a director for
two state banks and has been
active in a number of civic,
political and professional
organizations.

At OTS, Mr. Ryan oversees
the regulation and supervi
sion of the nation's savings
associations and thrift hold
ing companies. OTS, a
bureau of the U.S. Treasury
Department, was estab
lished by the Financial
Institutions Reform, Recov
ery, and Enforcement Act
of 1989 as the successor
agency to the Federal
Home Loan Bank Board.
Mr. Ryan was a partner and
a member of the executive
committee of the law firm
of Reed Smith Shaw &
McClay until his appointment
as OTS Director. He was the
Solicitor of Labor for the U.S.
Department of Labor from
1981 until 1983.
Mr. Ryan received an A.B. de
gree from Villanova University
and a J.D. from American
University Law School. He
served as an ammunitions
officer in the U.S. Army
from 1967 to 1970. ♦>

Officials

John F. Bovenzi

Deputy to the Chairman

Paul G. Fritts

Executive Director for Supervision and Resolutions

John W. Stone

Director, Division of Supervision

Harrison Young

Director, Division of Resolutions

Steven A. Seelig

Director, Division of Liquidation

Alfred J.T. Byrne

General Counsel

Stanley J. Poling

Director, Division of Accounting and Corporate Services

William R. Watson

Director, Division of Research and Statistics

A. David Meadows

Deputy to the Vice Chairman

Robert V. Shumway

Deputy to the Appointive Director

Thomas E. Zemke

Deputy to the Director (Comptroller of the Currency)

Walter B. Mason

Deputy to the Director (Office of Thrift Supervision)

Hoyle L. Robinson

Executive Secretary

Alan J. Whitney

Director, Office of Corporate Communications

Alice C. Goodman

Director (Acting), Office of Legislative Affairs

J. Russell Cherry

Director, Office of Budget and Corporate Planning

Robert D. Hoffman

Inspector General

Janice M. Smith

Director, Office of Consumer Affairs

Alfred P. Squerrini

Director, Office of Personnel Management

Mae Culp

Director, Office of Equal Opportunity

Jane Sartori

Director, Office of Training and Educational Services

Regional
Offices

D iv is io n o f S u p e rv is io n

R egional D irectors

Atlanta

Boston

Chicago

Dallas

245 Peachtree Center Ave., NE
Atlanta, GA 30303
(404) 525-0308
Lyle V. Helgerson

160 Gould Street
Needham, MA 02194
(617)449-9080
Paul H. Wiechman

30 S. Wacker Dr., Suite 3100
Chicago, IL 60606
(312) 207-0210
Simona L. Frank

1910 Pacific Ave., Suite 1900
Dallas, TX 75201
(214) 220-3342
Kenneth L. Walker

Alabama, Florida, Georgia,
North Carolina, South Carolina,
Virginia, W e st Virginia

Connecticut, Maine,
M assachusetts, N ew Hampshire,
Rhode Island, Verm ont

Illinois, Indiana, Michigan, Ohio,
W isconsin

Colorado, N ew M exico,
Oklahoma, Texas

Kansas City

Memphis

New York

San Francisco

2345 Grand Ave., Suite 1500
Kansas City, MO 64108
(816) 234-8000
Charles E. Thacker*

5100 Poplar Ave., Suite 1900
Memphis, TN 38137
(901) 685-1603
Bill C. Houston

452 Fifth Ave., 21st Floor
New York, NY 10018
(212) 704-1200
Nicholas J. Ketcha, Jr.

25 Ecker Street, Suite 2300
San Francisco, CA 94105
(415) 546-0160
George J. Masa

Iowa, Kansas, M innesota,
Missouri, Nebraska,
North Dakota, South Dakota

Arkansas, Kentucky, Louisiana,
Mississippi, Tennessee

Delaware, D istrict of Columbia,
Maryland, N ew Jersey,
N ew York, Pennsylvania,
Puerto Rico, Virgin Islands

Alaska, Arizona, California, Guam,
Hawaii, Idaho, Montana, Nevada,
Oregon, Utah, W ashington,
W yom ing

D iv is io n o f L iq u id a tio n

R egional D irectors

Chicago

Dallas

New York

San Francisco

30 S. Wacker Dr., 32nd Floor
Chicago, IL 60606
(312) 207-0200
Bart L. Federici

1910 Pacific Ave., Suite 1700
Dallas, TX 75201
(214) 754-0098
G. Michael Newton

452 Fifth Ave., 21st Floor
New York, NY 10018
(212) 704-1200
Thomas A. Beshara

25 Ecker Street, Suite 1900
San Francisco, CA 94105
(415) 546-1810
Keith W. Seibold

Alabama, Arkansas, Delaware,
D istrict o f Columbia, Florida,
Georgia, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana,
Maryland, M ichigan, M innesota,
M ississippi, Missouri, Nebraska,
North Carolina, North Dakota, Ohio,
South Carolina, South Dakota,
Tennessee, Virginia, W e s t Virginia,
W isconsin

Oklahoma, Texas

Connecticut Maine, Massachusetts,
N ew Hampshire, N e w Jersey,
N ew York, Pennsylvania,
Puerto Rico, Rhode Island,
Vermont, Virgin Islands

Alaska, Arizona, California,
Colorado, Guam, Hawaii, Idaho,
Montana, Nevada, New Mexico,
Oregon, Utah, Washington,
W yom ing

D iv is io n o f R e s o lu tio n s

Regional M a n a g e rs

Boston

Dallas

New York

San Francisco

Cochituate Place
24 Prime Parkway
Natick, MA 01760
(508) 655-5352
Paul M. Driscoll

1910 Pacific Place
Dallas, TX 75201
(214) 220-3449
Daniel L. Walker

120 West 45th Street
Tower 45, 22nd Floor
New York NY 10036
(212) 921-0044
Paul F. Doiron

25 Ecker Street, Suite 900
San Francisco, CA 94105
(415) 267-0156
Michael J. Paulson

Maine, M assachusetts,
N ew Hampshire, Rhode Island,
Verm ont

Alabama, Arkansas, Florida,
Georgia, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana,
Michigan, M innesota, Mississippi,
Missouri, Nebraska, North Carolina,
North Dakota, Ohio, Oklahoma,
South Carolina, South Dakota,
Tennessee, Texas, W e st Virginia,
W isconsin

Connecticut, Delaware,
D istrict o f Columbia, Maryland,
N ew Jersey, N ew York,
Pennsylvania, Puerto Rico,
Virginia

Alaska, Arizona, California,
Colorado, Guam, Hawaii, Idaho,
Montana, Nevada, N ew M exico,
Oregon, Utah, W ashington,
W yom ing

‘ Retired January 3, 1992, and
succeeded by Jam es O. Leese.

Organization
Chart

Divisions
and Offices

O ffic e s

D iv is io n s
Supervision

Research and Statistics

Executive Secretary

Consumer Affairs

Examines banks for safety
and soundness and compli
ance with consumer and
civil rights laws; develops
supervisory policies; exam
ines savings associations
on a back-up basis.

Compiles important financial
and economic data and
surveys, including industry
trends, market developments
and analyses of policy issues.

Processes over a thousand
matters each year for the FDIC
Board and its committees;
ensures compliance with
various public disclosure
laws; implements employee
ethics programs.

Handles complaints and
inquiries from consumers
and bankers; monitors the
adequacy of compliance with
consumer protection laws;
helps train examiners and
bankers on consumer protec
tion laws and deposit insur
ance; provides consumer
information publications.

Resolutions
Coordinates the FDIC's
response to failed and failing
banks, including the develop
ment, negotiation and moni
toring of all aspects of the
resolution process; manages
and disposes of equity posi
tions acquired in resolutions;
develops related policies
and financing strategies.
Liquidation
Makes payments to closed
bank depositors; manages
failed bank receiverships;
sells assets of failed institu
tions to reduce costs to
the FDIC.
Legal
Provides the FDIC with legal
services in areas including
corporate affairs, supervision,
enforcement, resolutions
of troubled institutions,
liquidations and litigation.

Accounting and
Corporate Services
Supports the FDIC’s financial
and administrative needs
nationwide, including
accounting, financial sys
tems, computer operations
and other business service
operations.

Corporate
Communications
Serves as the FDIC's infor
mation liaison with the media,
depository institutions and
the general public; issues
publications, press releases
and directives to institutions.
Legislative Affairs
Promotes legislation
important to the FDIC; helps
prepare testimony for the
Chairman and other FDIC offi
cials; serves as the agency's
congressional liaison.
Budget and
Corporate Planning
Coordinates agency-wide
processes for resource strat
egy, allocation and manage
ment; conducts productivity
studies for senior managers;
handles special projects on
budget performance and the
use of corporate resources.
Inspector General
Conducts independent
audits and investigations to
safeguard assets and detect
fraud and mismanagement;
provides reports to the
FDIC's Board, agency
managers and Congress.

Personnel Management
Plans, implements and
evaluates FDIC personnel
management programs,
including recruitment and
staffing, personnel policies
and procedures, labormanagement relations and
employee benefits.
Equal Opportunity
Manages the agency’s
affirmative employment pro
grams for minorities, women
and people with disabilities;
helps provide equal employ
ment training to employees;
administers the minority
and wom en's outreach pro
gram for FDIC contracting.
Training and
Educational Services
Plans and manages the
FDIC's extensive educational
and training programs to
help employees realize their
full potential in the workplace.

The State o f the
Banking Industry

Commercial banks insured
by the Bank Insurance Fund
(BIF) registered increased
profits in 1991, although
there were still segments
of the industry experiencing
credit quality problems
associated with real estate
lending. BIF-insured savings
banks continued to struggle
with troubled real estate
assets. The following is an
overview of conditions in
these tw o industries.

C o m m e r c ia l B a n k s
Thanks to a modest improve
ment in asset quality and
strong second-half earnings,
insured commercial banks
reported $18.6 billion in net
income in 1991. That is a
$2.4 billion improvement
over their earnings in 1990.
Increased net interest
income and substantially
larger gains from sales
of investment securities
combined to offset high
loan-loss provisions in 1991.
The average return on
assets for the year was
0.56 percent, up from an
average of 0.49 percent in
each of the previous two
years. More than 89 percent
of commercial banks were
profitable in 1991, the high
est proportion since 1982.
Almost tw o out of every
three banks reported higher
earnings than in 1990.

Despite these positive signs,
problems remain. While noncurrent loans in the industry
fell slightly, this was due
in part to increased foreclo
sures on these loans. The
record level of foreclosures
also resulted in a large
increase in banks' holdings
of foreclosed properties,
so that the industry's total
inventory of troubled assets
increased for the year.
Assets in banks considered
to represent significant risk
to the insurance fund
increased substantially in
1991. Banks continue to
have significant exposure
to weakened real estate
markets. At the end of the
year, commercial banks held
almost $400 billion in loans
secured by commercial real
estate and construction.
These loans are of consider
able concern because of
the continued repercussions
of the overbuilding of
commercial properties in
the 1980s.
Asset growth was extremely
weak in 1991. Total assets
at insured commercial banks
grew by only 1.2 percent,
the smallest percentage
since 1948, when assets
declined by 0.4 percent.
Total loans and leases held
by commercial banks
declined in every quarter
of the year, reflecting assetquality troubles and slack
loan demand. Most of the
loan shrinkage was in banks'
commercial and industrial
loans, which declined by
$56 billion. Total real estate

loans at commercial banks
grew by only $21 billion in
1991, after increasing by
$68 billion in 1990 and $86
billion in 1989. The only
asset categories to show
significant growth were
U.S. Treasury and mortgagebacked securities, which
increased by $91 billion.
Commercial banks increased
their equity capital by $13.5
billion in 1991. This increase
raised their average equity-toassets ratio to 6.77 percent,
the highest year-end level
since 1971, when it stood at
6.93 percent. Retained earn
ings contributed only $4.3
billion of the $13.5 billion
increase, as banks paid
$14.3 billion in dividends on
$18.6 billion in net income.
Banks' loan loss reserves
declined by $561 million in
1991. However, at the end
of 1991, the industry held
72 cents in reserves for every
dollar of noncurrent loans,
a slight increase from 71
cents at the end of 1990.
Consolidation of the banking
industry continued in 1991.
The number of banks fell
below 12,000 as the indus
try shrank by more than 400
institutions. New bank char
ters fell to 106, the lowest
number since 1968. Com
mercial bank failures and as
sistance transactions totaled
108, while there were 448
mergers during the year.
The number of employees
at commercial banks
declined for the second
consecutive year, to 1.49
million from 1.52 million in
1990. Employment in the
banking industry is now at
its lowest level since 1981.

S a v in g s B a n k s
There were 441 BIF-insured
savings banks at year-end
1991, accounting for about
nine percent of all deposits
insured by the fund. These
institutions are located pre
dominantly in the Northeast,
the area of the nation that
has been hardest hit by
weak real estate markets.
Nineteen BIF-insured savings
banks with assets totaling
$19.7 billion failed in 1991.
Of those failed institutions,
18 were headquartered in
New England. The remain
ing savings bank failure
was the largest of the year Goldome of Buffalo, New
York, which had $9.2 billion
in assets when it was
closed.
BIF-insured savings banks
lost $1.2 billion in 1991,
an improvement from the
$2.6 billion net loss the
previous year due in large
part to the FDIC's resolution
of 19 insolvent institutions
in 1991. Thirty-three percent
of all BIF-insured savings
banks were unprofitable in
1991, versus 40 percent the
previous year. Assets held
by savings banks declined
by $22 billion (8 percent) in
1991. Most of the shrinkage
was in mortgage loans, which
declined by $17 billion. ❖

Zip Video Services, Carl Lucci

Among the properties
sold at the FDIC's
successful nationwide
auction on December 12
was this renovated
shopping and office
complex in Boise, Idaho,
which dates back to the
early 1900s.

Statistical
Highlights

Bank Insurance Fund (BIF)
For the year ended December 31

Dollars in Millions

1991
Income
Operations Expense
Liquidation/Insurance Losses and Expenses
Net Income (Loss)
Insurance Fund Balance
Fund as a Percentage of Insured Deposits

5,790

1990
$

3,858

1989
$

3,495

284

220

214

16,578

12,803

4,132

(11,072)
(7,028)
(0.36)%

(9,165)
4,044
0.21%

(851)
13,210
0.70%

Selected Bank Statistics*
Total Insured Banks
Problem Banks
Total Assets of Problem Banks
Bank Failures
Assisted Banking Organizations
Total Assets of Failed and Assisted Banks
Num ber of Failed Bank Receiverships

12,343

13,239

1,046

1,109

$609,809

$408,766

$235,502

124

168

206

$ 63,204

$ 15,677

$ 29,425

1,136

1,041

964

* All BIF-insured depository institutions (com m ercial banks, savings banks and insured branches of foreign banks).

12,788

1,090

Chronological
Highlights

January 6

April 30

September 19

October 28

The FDIC sets up three
bridge banks to assume
the deposits of Bank of
New England, N.A., Boston;
Connecticut Bank & Trust
Company, N.A., Hartford;
and Maine National Bank,
Portland. The three bank
subsidiaries of the Bank of
New England Corporation,
Boston, were closed by the
Comptroller of the Currency.

The FDIC increases the
premium banks pay for
deposit insurance to 23.0
cents per $100 in domestic
deposits, from 19.5 cents,
effective July 1, 1991.

The FDIC approves the
assumption of deposits of
the $10.8 billion-asset South
east Bank, N.A., Miami,
Florida, and a $91.1 millionasset bank in the same hold
ing company, by First Union
National Bank of Florida.
Southeast Bank, N.A., was
closed by the Comptroller
of the Currency as a result
of a liquidity insolvency after
it was unable to repay a
loan from the Federal Re
serve Bank of Atlanta. First
Union agreed to purchase
the failed banks' assets,
including the problem loans,
under a loss-sharing arrange
ment with the FDIC.

The FDIC agrees to sell back
its equity interest in Bank
One Texas, N.A., Dallas,
for $387 million. The FDIC
purchased the non-voting
stock as part of the 1989
agreement with Banc One
Corp., Columbus, Ohio, to
acquire 20 failed bank sub
sidiaries of MCorp, Dallas.

February 5
The Treasury Department
releases its long-awaited
proposal for reforming the
deposit insurance and bank
regulatory systems, based
in part on a congressionally
mandated study done in
consultation with the FDIC
and other agencies. A lengthy
debate in Congress over
these and other recommen
dations later resulted in the
enactment of major legisla
tion (see December 19).
March 19
A new Division of Resolu
tions is created to coordinate
the FDIC's response to
failed and failing banks.
April 22
The FDIC announces the
resolution of Bank of
New England by selling
the franchise to Fleet/
Norstar Financial Group,
Providence, Rhode Island.

May 14
The FDIC announces a
public sale of its remaining
26 percent equity holding in
Continental Bank Corpora
tion, Chicago, Illinois. This
sale completes the return
to private ownership that
began shortly after the stock
was acquired by the FDIC
as part of the government's
1984 assistance package for
Continental Illinois National
Bank and Trust Company.
May 31
The FDIC arranges a deposit
assumption for the $9.2 bil
lion-asset Goldome, Buffalo,
New York. Certain deposits
are assumed by Key Bank
of Western New York, N.A.,
Buffalo, New York. KeyCorp,
Albany, New York, enters
into a simultaneous agree
ment with First Empire
State Corporation, Buffalo,
New York, to assume other
deposits and assets of
Goldome.
August 6
FDIC Chairman L. William
Seidman submits his resig
nation to President George
Bush, effective October 16.
Mr. Seidman served as
FDIC Chairman since
October 1985.

December 12
The FDIC holds a sale in
Dallas, Texas, for 178 com
mercial properties acquired
from failed institutions. The
auction attracted more than
1,000 bidders and yielded
$240 million from the 115
properties sold.

October 10
The FDIC approves the
assumption of deposits of
seven failed New Hampshire
banks by tw o institutions.
The transactions featured
the bundling of unaffiliated
banks by the FDIC into two
franchises instead of the
usual practice of marketing
the banks individually.
October 25
William Taylor becomes the
15th Chairman of the FDIC,
replacing L. William Seidman.
Prior to his appointment to
the FDIC, Mr. Taylor was
Staff Director of the Federal
Reserve Board's Division of
Banking Supervision and
Regulation.

December 19
President Bush signs the
FDIC Improvement Act of
1991. Among the many pro
visions of this major banking
law are: expanded FDIC
authority to borrow from
the U.S.Treasury to cover
insurance losses; increased
FDIC flexibility to adjust
deposit insurance premi
ums; requirements that fed
eral banking agencies take
specified "prompt corrective
actions" triggered by an
institution's capital level;
and a mandate that the
FDIC choose the least-costly
alternative in resolving
failing institutions, with an
exception for "systemic risk"
situations. (See pages 36 - 38
for a detailed summary of
the new law). ❖

Supervision
and Enforcement

With the economy slowing
down and real estate markets
suffering from the over
building of the 1980s, the
banking industry continued
to experience difficulties
throughout 1991. In this
environment, financial insti
tutions and their supervisors
increasingly became part
of the national debate over
economic issues.
The deteriorating condition
of many financial institutions
led to calls for tighter super
vision of banks and savings
associations. This culminated
in December with the sign
ing into law of the Federal
Deposit Insurance Corpora
tion Improvement Act of
1991, which included super
visory reforms such as:
(1) requirements for inde
pendent annual audits and
annual regulatory examina
tions, (2) explicit capitalbased "tripwires" for prompt
corrective action as an
institution’s condition
deteriorates, (3) further
limitations on the use of
brokered deposits, (4) limita
tions on certain activities of
state-chartered banks and
(5) requirements that the
federal regulators develop
uniform real estate lending
standards and other regula
tions promoting the safe
and sound operation of
financial institutions.
In addition, the sluggish
economy and the declining
property values in some
commercial real estate
markets contributed to an

FDIC Examinations, 1989-1991
1991

1990

1989

Safety and Soundness:

3,791

3,744

3,440

Savings Banks

298

211

191

National Banks

273

105

State N onm em ber Banks

State M em ber Banks

937

2,150

375

5,343

6,234

4,089

3,782

3,639

3,901

625

525

585

1,168

1,077

782

10,918

11,475

9,357

Savings Associations*
Subtotal
Compliance and Civil Rights
Trust Departments
Data Processing Facilities

Total

* The FDIC began to exam in e savings associations after the enactm ent o f the Financial Institutions R eform , Recovery,
and Enforcem ent Act of 1989 on A ugust 9, 1989.

increase in the level of non
performing assets held by
financial institutions. These
credit problems prompted
many institutions to tighten
underwriting standards,
reduce the pace of lending,
shore up their capital posi
tions and strengthen their
balance sheets.
However, as credit standards
tightened, critics alleged
the federal bank and thrift
regulators were applying
excessively rigid examination
standards that caused some
depository institutions to
become overly cautious in
their lending practices. To
ensure that regulatory poli
cies and actions did not inad
vertently curtail credit to
sound borrowers, the FDIC
joined the Federal Reserve
Board, the Office of the
Comptroller of the Currency
and the Office of Thrift
Supervision in issuing a
series of guidelines and
policy statements aimed

at clarifying long-standing
principles of effective super
vision. These initiatives and
a special interagency confer
ence held in December for
senior examiners are discus
sed in detail on page 19.

process, including the
prosecution of enforcement
actions, are handled by the
Legal Division, which has
staff in Washington as well
as in the eight DOS Regional
Offices.

The varied role of the FDIC
in examination and supervi
sion draws on a large segment
of the FDIC's work force,
primarily the Division of
Supervision (DOS) for on-site
and off-site reviews, problem
correction and policy devel
opment. Support is provided
by other areas of the FDIC,
including the Division of
Research and Statistics for
industry analysis, the Division
of Accounting and Corporate
Services for computer-based
monitoring programs and
the Division of Resolutions
for failing bank situations.
Legal issues arising out of the
examination and supervision

The FDIC is the primary
federal regulator of approxi
mately 7,100 state-chartered
banks that are not members
of the Federal Reserve
System and about 420
savings banks. The agency
also has certain back-up
supervisory authority, for
safety and soundness pur
poses, over state-chartered
banks that are members of
the Federal Reserve System,
national banks and savings
associations.

E x a m in a tio n s

Bank Insurance Fund (BIF) Problem Banks, 1987-1991 (Year-end)
Total Insured Banks (Commercial and Savings)

1991

1990

1989

1988

1987

12,343

12,788

13,239

13,606

14,289

Problem Banks

1,090

1,046

1,109

1,406

1,575

Assets of Problem Banks ($ billion)

609.8

408.8

235.5

352.2

358.5

Percentage Change in N um ber of Problem Banks

4.2

(5.7)

(21.1)

(10.7)

6.1

Percent of Total Insured Banks

8.8

8.2

8.4

10.3

11.0

Changes in BIF Problem Bank List, 1987-1991
Deletions

456

447

619

680

627

Additions

500

384

322

511

718

(297)

(169)

Net Change

As the primary supervisor
of state nonmember banks
and most savings banks
insured by the Bank
Insurance Fund, the FDIC
conducts four major types
of examinations:
Safety and soundness
The FDIC conducted 4,089
examinations of state
nonmember banks and
savings banks during 1991
to track emerging trends,
identify problems and
seek corrections. This
was about a three percent
increase from the 3,955
such examinations in 1990.
Trust departments
A total of 625 trust depart
ments were examined in
1991 to determine potential
losses to banks, up from the
525 examined in 1990.

Data processing facilities
DOS examiners in 1991 par
ticipated in reviews of 1,168
data processing facilities run
by banks or independent firms,
compared to 1,077 in 1990.
Compliance with consumer
and civil rights statutes
The FDIC conducted 3,782
examinations and visitations
to monitor how well institu
tions were implementing
consumer protection and
civil rights laws. There were
3,639 such reviews in 1990.

P r o b le m B a n k s a n d
E n fo r c e m e n t A c tio n s
Problem institutions are
those with severe financial,
operational and managerial
weaknesses. The FDIC
places a special emphasis
on examining these and
certain other banks because
of their potential impact
on the deposit insurance
fund. The FDIC also places
considerable emphasis on

(63)

attempting to recognize
potential difficulties and
seeking to have them
corrected before the bank
becomes a problem.
The number of problem
commercial banks and
savings banks insured by
the Bank Insurance Fund
increased slightly, to 1,090
at year-end 1991 from 1,046
at year-end 1990. However,
the size of the banks on the
problem list became signifi
cantly larger. Total assets
of banks on the problem
list at year-end 1991 had
increased to $609.8 billion
from $408.8 billion at the
previous year-end. Weak
management and poor lend
ing decisions continued to
be the causes of many prob
lem bank situations, but
shifting regional and national
economic weaknesses also
played a role in the increase
in the problem bank statistics.

Banks' recognition of
declining real estate values,
especially by larger institu
tions in the New England,
Mid-Atlantic and Western
states, also left its imprint.
Problem banks are frequently
rehabilitated, usually with
close supervision and
corrective measures by the
regulators. The FDIC uses
enforcement actions as cor
rective tools to bring about
desired changes in a prob
lem institution's condition.
These often include "ceaseand-desist" orders to halt
and correct unsafe and
unsound banking practices,
plus the removal of officials
of state nonmember banks
when other supervisory
procedures have proven
unsuccessful. Civil money
penalties may also be
imposed on individuals and
companies. The new banking
law enacted in December
expanded the FDIC's existing
authority to bring enforce
ment actions against all
insured institutions.

| Compliance, Enforcement and Other Legal Actions, 1989-1991
1991

1990

1989

Section 8(a) Term ination of Insurance Orders:
Notifications to Primary Regulator/Orders of Correction

Notices of Hearing/Notices of Intent Issued*

Tem porary Suspension of Insurance Issued*

Orders Accepting Voluntary Term ination Issued

Insurance Term ination Orders Issued*

Notices of Charges Issued

Orders Issued W ith Notice*

131

Section 8(b) Cease-and-Desist Orders:

Orders Issued W ithout Notice
Section 8(c) Tem porary Orders*
Section 8(e) Removal/Prohibition of Director or Officer:
Notices Issued
Orders Issued W ith Notice*
Orders Issued W ithout Notice

Section 8(e) Tem porary Removal Orders*

Section 8(g) Suspension/Removal for Felony

Section 8(p) Term inations/No Longer Accepting Deposits

Section 8(q) Terminations/Deposits Assumed

Capital Notices Issued

Civil M oney Penalties Issued

Capital Directives Issued*

W ritten Capital Agreements

Section 10(c) Orders of Investigation Issued

Section 5(e) Cross-guaranty/Notices of Assessment Issued

Section 7(j) Notices of Disapproval of Acquisition

Section 19 Officer/Director Requests to Serve - Denials

Notices of Disapproval

Rulings on Appeal Issued*

W aivers Issued

Final Orders Issued*
Section 32 Disapprovals of Officers and Directors:

Regulation Z (Truth-in-Lending) Requests for Relief:
Orders Issued Denying Relief from Reimbursement
Reconsiderations of Orders Denying Relief*
Orders Granting Relief Issued

Total Actions Initiated by FDIC

356

255

228

* N ot c ounted as separate proceedings and therefo re not included in total actions initiated.

During the year, the FDIC
initiated 356 enforcement
actions against insured
depository institutions and
persons affiliated with these
institutions for unsafe and
unsound banking practices
or violations of laws, rules or
regulations. By comparison,
the FDIC initiated 255
enforcement proceedings
during 1990. These enforce
ment actions initiated during
1991 included 71 proceed
ings to terminate deposit
insurance, 156 cease-anddesist orders, 34 actions to
remove or prohibit participa
tion by a bank director or
officer and 11 civil money
penalty assessments.

C a p ita l S ta n d a r d s
In February 1991, the FDIC
Board of Directors adopted
revisions to the agency's
minimum "leverage capital"
requirements that ensure
that a portion of a bank's
existing assets and future
asset growth will be funded
by owners' equity. The revi
sions were intended primar
ily to bring the definition of
capital under the leverage
requirements more closely
in line with that used in riskbased capital guidelines that
went into effect at year-end
1990. The leverage capital
and the risk-based capital
standards are significant
measurements of capital
adequacy.

In general, the revised lever
age capital rule combines a
more narrow definition of
capital with a lower minimum
acceptable ratio of capital to
assets. As such, the net
effect should be reduced
confusion over the definition
of capital but little, if any,
change in minimum capital
standards.
Previously, FDIC-supervised
banks needed to maintain
"primary capital" of 5.5 per
cent of total assets and
"total capital" of at least six
percent. The new rule
replaced these tw o require
ments with a new minimum
standard based solely on a
single definition of capital
called "Tier 1" or "core"
capital. Core capital generally
consists of common equity
capital minus most intangi
ble assets. This represents
a more narrow definition
of capital since it excludes
loan loss reserves and certain
other items previously
included as part of primary
capital.
Under the revised leverage
capital standard,.the most
highly rated banks (those
with a composite rating of
one on the five-point inter
agency rating system and
not anticipating or experienc
ing significant growth) must
meet a minimum core capi
tal leverage ratio of at least
three percent of total assets.
All other institutions are
required to maintain a
minimum leverage ratio
of four-to-five percent.

This revised leverage capital
rule, which became effective
on April 10, 1991, will be
used in tandem with the
FDIC's risk-based capital rule.
It will apply to FDIC-super
vised banks and savings
banks, as well as other
depository institutions that
file applications with the
agency or are deemed to
be in an unsafe or unsound
condition.

O f f - s it e A n a ly s is
Off-site monitoring efforts
are an important ingredient
in the FDIC's supervisory
process and the allocation
of time and staff resources.
As supervisory responsibili
ties continue to expand, the
use of off-site monitoring
becomes an increasingly
important companion to, but
not a substitute for, on-site
examinations. Off-site moni
toring depends to a large
extent on quarterly informa
tion filed by financial institu
tions, complemented by
information obtained from
other sources.
Through the years, the
FDIC has developed systems
for analyzing and ranking
institutions based on
financial performance and
growth profiles.
New off-site monitoring
tools developed during 1991
included improvements in
systems for identifying
banks with large real estate
exposures or banks that
have experienced rapid
growth.

Another new system meas
ures and ranks the financial
performance of savings
associations. A model
for assessing the financial
performance of savings
banks was being developed
in 1991 and is scheduled to
be in use in 1992.
In addition to these new
systems, the FDIC in 1991
improved its existing program
for identifying banks that
have deteriorated significantly
since their last examination.
The revised program includes
risk-based capital measures.
Other off-site efforts during
1991 included more com
prehensive analyses of the
largest institutions— banking
and thrift companies with
assets over $3 billion.

B a n k R e p o rtin g
A c t iv it ie s
The quarterly Report of
Condition and Income (Call
Report) is foremost among
the reports and surveys
completed by insured
depository institutions and
reviewed by the FDIC. This
report provides regulators
with information on assets,
liabilities, revenues, expen
ses, losses and related data
on the condition and perfor
mance of individual banks.
The FDIC processed approxi
mately 50,000 quarterly
Call Reports from state non
member banks and national
banks in 1991.

In addition, the FDIC obtains
data on deposits at main
offices and branches of BIFinsured institutions. The
agency processed surveys
for 62,000 such offices in
1991. The FDIC also col
lected year-end reports of
trust operations conducted
by about 5,000 institutions.
To facilitate the changing
needs of the FDIC and
others for data on conditions
at individual institutions and
for the depository industry
in general, new reporting
requirements were imple
mented as of March 31, 1991.
The revised Call Report
provides more detailed data
on real estate lending and
related exposures, as well
as other asset quality infor
mation in key areas. In
addition, the revised Call
Report better identifies the
components of noninterest
income and expense, and
permits quarterly estimates
of insured deposits in the
banking system.
Other revisions to the Call
Report developed during
1991 for implementation
in 1992 address foreclosed
real estate and mortgage
servicing volume. Additional
changes will improve the
measurement of the assess
ment base used to calculate
deposit insurance premiums.

FDIC Applications

A p p lic a t io n s

1991

1990

1989

141

101

135

100

898

1,121

1,160

898

1,118

1,160

Branches

572

812

891

Remote Service Facilities

326

306

269

Deposit Insurance
Approved
Denied

New Branches
Approved

Denied

Mergers

405

390

200

404

389

200

Approved
Denied

Requests for Consent to Serve
Approved
Section 19
Section 3 2*
Denied
Section 19
Section 32*

Notices of Change in Control
Letters of Intent Not to Disapprove
Disapproved

Conversions of Insurance Coverage
A pp ro ved *+
D enied*+

Brokered Deposit Waivers
Approved*
D enied*

Savings Association Activities
Approved*
Denied*

1,722

1,567

1,688

1,536

1,617

1,455

106

234

106

234

100

104

The applications process
helps promote safe and
sound banking operations
by authorizing the FDIC to
approve, deny or seek modi
fications in requests from
institutions to establish or
expand certain functions.
Applications traditionally
relate to deposit insurance,
the establishment or reloca
tion of branches by FDICsupervised banks, mergers
where the FDIC supervises
the resultant bank and
changes in control of state
nonmember banks. In certain
circumstances, the FDIC
decides who may serve as a
director, officer or employee
of a state nonmember bank.
As a result of the FDIC
Improvement Act of 1991,
the agency is now responsi
ble for acting on insurance
applications from all institu
tions that request insurance
from the FDIC, not just state
nonmember banks and
federal and state savings
associations. The new law
also changed the circum
stances under which a
SAIF-insured institution and
a BIF-insured institution are
allowed to merge without
paying entrance and exit
fees to the insurance funds.

A U nder Section 19 o f the Federal D eposit Insurance Act, an insured institution m ust receive FDIC approval before
em p loyin g a person convicted o f dishonesty or breach of trust. U nder Section 32, the FDIC m ust approve any change
o f directors or senior executive officers at a state no nm em ber bank th a t has been chartered less than tw o years, has
undergone a change o f control w ith in tw o years, is not in com pliance w ith capital requirem ents, or oth erw ise is in a
troub led condition.
* N e w application as o f the e nactm ent of th e Financial Institutions R eform , Recovery, and Enforcem ent A ct of 1989
on A ugust 9, 1989.
+ A pplications to convert from the Savings Association Insurance Fund to the Bank Insurance Fund or vice versa.

During 1991, applications
for deposit insurance totaled
69 compared to 141 in
1990. Requests for new
branches decreased to 898
from 1,121 in 1990.

In te r a g e n c y E f fo r ts
On March 1, the four
federal regulators of banks
and thrift institutions issued
a joint statement that ad
dressed a wide range of
supervisory issues including
problem loan workouts, lend
ing by undercapitalized insti
tutions and the valuation of
real estate loans. This state
ment — essentially a clarifi
cation and restatement of
existing policies — was
intended partly to dispel any
misunderstandings that might
hinder lending to sound
borrowers or certain other
borrowers experiencing tem
porary financial problems.
On November 7, the four
agencies issued a second
statement expanding the
March guidance on the
review and classification
of commercial real estate
loans. The intent of the regu
lators was to provide clear
and comprehensive guidance
to ensure that supervisory
personnel review loans in
a consistent, prudent and
balanced fashion, and that
all interested parties are
aware of the guidance.

To help examiners around
the country implement the
more comprehensive No
vember policy statement,
the agencies held a confer
ence December 16-17 in
Baltimore for nearly 500
senior field staff from the
four agencies. This special
meeting featured remarks
by FDIC Chairman William
Taylor and other top regula
tors clarifying the November
policy statement and rein
forcing its goals. Among
those who also addressed
the conference were Nicho
las Brady, the Secretary of
the Treasury, and Michael
Boskin, the Chairman of
the President's Council of
Economic Advisers, who
gave their views on credit
conditions and the impor
tance of reasoned and
balanced examinations.
Cooperation with the other
federal regulators also con
tinues through the Federal
Financial Institutions Exami
nation Council (FFIEC). A pol
icy statement was adopted
in December addressing the
selection of securities deal
ers and the need for prudent
securities investment strat
egies. The policy statement,
which supersedes a 1988
FFIEC statement, included
expanded guidance on
investments in high-risk
mortgage securities and
zero-coupon bonds.

The FFIEC also continued to
study possible new capital
requirements for "recourse"
arrangements. In general,
this term refers to a situa
tion where an institution
retains some or all of the
risk of loss associated with
an asset even though the
asset has been sold.
The FDIC and its Office of
Consumer Affairs actively
participated in the FFIEC's
Consumer Compliance Task
Force, which developed new
interagency policy statements
and examination procedures
in areas such as compliance
with the Community Rein
vestment Act (CRA). Among
the 1991 initiatives was a
policy statement, adopted by
the FDIC Board of Directors
on December 30, regarding
the need for institutions
to analyze the geographic
distribution of their lending
patterns as part of the CRA
planning process.
The FDIC also works closely
with the Department of Jus
tice and other government
agencies to improve law
enforcement and avoid dupli
cation of effort or expense.
For example, during 1991
DOS forwarded to the Justice
Department more than 2,500
referrals of possible criminal
activity at open financial
institutions. In addition,
the Legal Division provided
assistance to the Justice
Department on 46 criminal
cases that, by year-end,
resulted in 50 convictions
and 31 court-imposed resti
tution orders totaling more

than $101 million. It is diffi
cult and sometimes impossi
ble for the FDIC to collect
on such restitution orders
because, for example, many
defendants are in prison, in
bankruptcy or both. How
ever, the FDIC continues to
consider ways to improve
collections on restitution
orders.
The FDIC, the Justice
Department and other fed
eral regulators during 1991
also expanded on recent
initiatives to coordinate and
prioritize criminal referrals.
This effort includes partici
pation in an interagency
database project that, when
completed, will provide the
federal financial institution
regulatory agencies with a
pooled source of information
about referrals of suspected
criminal activity.
Another key 1991 develop
ment was the Legal Division's
agreement with the Office
of Thrift Supervision estab
lishing procedures to share
confidential investigation
results and legal analyses
in order to more effectively
pursue crimes against thrift
institutions.
The FDIC also continues to
be a member of the Basle
Supervisory Committee of
chief bank supervisors from
several countries who seek
to share information and
harmonize international
regulatory standards. ❖

Failed Banks and
Assistance Transactions

The FDIC handled 124 failed
banks during 1991 and
assisted three banks in dan
ger of failing. While the
number of failed bank cases
declined from 1990, when
168 banks failed and one
received assistance, the
average asset size of the
resolutions completed in
1991 increased significantly.
This shift has added to the
complexity of handling failed
banks and has required
increased resources and
attention from the FDIC.
The total assets of the banks
that failed in 1991 repre
sented a fourfold increase
to $63.1 billion from $15.7
billion a year earlier. This
increase is attributed primar
ily to the failure of:
• Three banking subsidiaries
of the Bank of New England
Corporation, Boston, with
total assets of $21.7 billion;
•The two banking subsidiaries
of Southeast Banking Cor
poration, Miami, with total
assets of $10.8 billion;
• Goldome, Buffalo, New York,
with assets totaling $9.2
billion; and
• Seven New Hampshire
banks, resolved contempora
neously, with assets totaling
$4.4 billion.
Of the 124 banks that failed
during the year, 103 were
handled as “purchase and
assumption" (P&A) transac
tions. In a P&A, most or
all deposits are assumed

and some portion of the
assets are acquired by
a healthy bank. The remain
ing 21 failed banks were
resolved either through a
payout of insured deposits
(four) or through a transfer
of insured deposits to
another institution (17).
The FDIC Board in March
1991 created a new Division
of Resolutions (DOR) central
izing responsibilities previ
ously handled by the Division
of Liquidation (DOL) and
the Division of Supervision
(DOS). In addition to a staff
in Washington, D.C., DOR
established Regional Offices
in Boston, Dallas, New York
and San Francisco.
DOR's responsibilities in
planning for and handling
bank failures include: assem
bling data about anticipated
failures, conducting meetings
with potential acquirers,
coordinating resolutions
with other regulatory agen
cies, and spearheading the
development of the FDIC’s
overall resolution policies
and financing strategies.
Specific aspects of the
resolution process now being
handled by DOR include
administering resolution
agreements (such as moni
toring adherence to terms),
managing and selling capital
instruments acquired from
assisted banks, and over
seeing the management of
FDIC-owned, full-service

"bridge banks" (established
on an interim basis when
an insured bank is closed
and time is needed to find
a permanent solution).
DOS, DOL, the Legal
Division, the Division of
Accounting and Corporate
Services and other areas of
the FDIC still continue to
play key roles in the handling
of bank failures and assis
tance transactions. The
Legal Division established
a section headed by an
Associate General Counsel
to assist DOR.
The major bank failures of
1991 and the actions the
FDIC took to resolve them
are explained in greater
detail as follows.

B a n k o f N e w E n g la n d
On January 6, 1991, the
Comptroller of the Currency
closed the three commercial
banking subsidiaries of the
Bank of New England Corpo
ration: Bank of New England,
N.A., Boston, Massachusetts;
Connecticut Bank & Trust
Company, N.A., Hartford,
Connecticut; and Maine
National Bank, Portland,
Maine. The failures were
attributed to rapid growth,
particularly in commercial
real estate, as well as the
deterioration in the regional
economy.

The FDIC, as receiver,
established three bridge
banks. All deposits and most
assets of the three closed
institutions were transferred
to the new banks.
The FDIC marketed the
three bridge banks to eligi
ble acquirers and invited
bids for the banks either
as a total package or individ
ually. On April 22, 1991, the
FDIC Board awarded the
three bridge banks to Fleet/
Norstar Financial Group,
Providence, Rhode Island.
Fleet managed the banks
on an interim basis and the
sale closed on July 14, 1991.
S o u th e a s t
On September 19, 1991,
the $10.8 billion-asset
Southeast Bank, N.A., Miami,
Florida, was closed by the
Comptroller of the Currency
after the bank was unable
to repay a loan from the
Federal Reserve Bank of
Atlanta. This bank failure
occurred because of a liquid
ity insolvency rather than
a depletion of book capital.
The $91.1 million-asset
Southeast Bank of West
Florida, Pensacola, Florida,
a member of the same bank
holding company, also was
closed by the state after it
was unable to cover its
share of the FDIC's antici
pated loss from the resolu
tion of the national bank.
The FDIC Board approved
a P&A transaction with First
Union National Bank of
Florida, Jacksonville, a
subsidiary of First Union
Corporation, Charlotte,
North Carolina.

The FDIC used a loss-shar
ing arrangement in the reso
lution of the tw o Southeast
banks to keep the assets of
the failed institutions in the
private sector and maximize
their value. Under the agree
ment negotiated by the
FDIC, First Union purchased
$10 billion of the failed
banks' assets, including the
problem loans. The FDIC will
reimburse First Union for
85 percent of the net chargeoffs from the failed banks'
portfolios over the next five
years, while First Union
will absorb the remaining
15 percent. On credit cards
and home equity loans, First
Union's loss-sharing gradually
will increase to 35 percent.

Failed Banks,* 1989-1991

Louisiana

The loss-sharing structure
is expected to bring cost
savings to the Bank Insurance
Fund while providing ade
quate protection to the
acquirer, in part by minimiz
ing disruption to loan
customers and reducing
the number of failed bank
assets placed in liquidation.
To further facilitate the
transaction, the FDIC agreed
to purchase $150 million
of 11 percent perpetual
preferred stock from First
Union redeemable at par
within one year.

Maine

G o id o m e
On May 31,1991, the New
York State Banking Depart
ment closed Goidome, head
quartered in Buffalo, and
named the FDIC receiver.
The FDIC Board approved

1991

1990

1989

1991

1990

1989

Alaska

Missouri

Arizona

Montana

Arkansas

Nebraska

California

New Hampshire

Colorado

New Jersey

N ew Mexico

N ew York

North Carolina

Connecticut

District of Columbia
Florida
Hawaii

North Dakota

Illinois

Ohio

Indiana

Oklahoma

Kansas

South Carolina

Kentucky

Tennessee

Maryland
Massachusetts
Minnesota

103

Verm ont

Texas

133+

Virginia

W est Virginia

124

168

206

Total
* Excludes open bank assistance transactions.

* Includes 20 bank subsidiaries o f M C orp o f Dallas, Texas, and 24 bank subsidiaries o f Texas A m erican Bankshares, Inc.
Fort W o rth , Texas.

the assumption of deposits
by Key Bank of Western
New York, N.A., a subsidiary
of KeyCorp, Albany, New
York. At the same time, Key
Corp sold certain branches,
deposits and assets to First
Empire State Corporation,
Buffalo, New York, the parent
company of Manufacturers
and Traders Bank, Buffalo.

N e w H a m p s h ire
Because of the severity of
the recession in New Hamp
shire and the problems
facing banks in the state,
the FDIC pursued a resolu
tion plan (commonly referred
to as the “New Hampshire
Plan") for several of the
largest failing banks in the
state. The FDIC grouped
the banks together and then
marketed them to potential
acquirers as tw o separate
franchises.

After months of discussions
between the FDIC and New
Hampshire officials aimed at
resolving the problem banks
with minimum disruptions
to the area's economy, an
innovative transaction was
announced October 10, 1991.
Seven banks with aggregate
assets of $4.4 billion were
closed by their respective
chartering authorities.

Three commercial banks
(BankEast, Manchester;
Nashua Trust Company,
Nashua; and Bank Meridian,
N.A., Hampton) and one
savings bank (Amoskeag
Bank, Manchester) became
branches of First NH Bank,
Concord, New Hampshire,
a U.S. subsidiary of The
Bank of Ireland, Dublin.
Three other savings banks
(New Hampshire Savings
Bank, Concord; Dartmouth
Bank, Manchester; and
Numerica Savings Bank, FSB,
Manchester) were assumed
by New Dartmouth Bank,
Manchester.
The transactions are unusual
for several reasons. For
example, the FDIC packaged
unaffiliated banks into two
franchises for sale instead
of marketing the banks
individually to potential
purchasers. A separate
asset pool also was estab
lished for the failed banks'
classified assets, repos
sessed real estate, all
subsidiaries and unwanted
bank premises. This pool
is owned by the FDIC and
managed by a third party
other than the acquiring
institutions.
The transactions also
included loss-sharing provis
ions applying to consumer
and residential mortgage
loans. The FDIC also agreed
to purchase preferred stock
of the acquiring institutions.
The "shared equity" feature

was designed to help the
acquirers obtain the capital
needed for the transaction
but on terms favorable
enough to the FDIC to
encourage the banks to
redeem the stock relatively
quickly.

A s s is ta n c e t o
O p e n In s t it u t io n s
Under certain circumstances,
the FDIC is authorized to
provide financial assistance
to prevent the closing of an
insured depository institution.
Three institutions in danger
of closing received open
bank assistance in 1991. On
September 10, the $29.7
million-asset First Bank and
Trust, Harrisburg, Illinois,
received open bank assis
tance. The bank then was
acquired by a newly formed
holding company, Shawnee
Bancorp., Inc., Harrisburg,
Illinois. On October 2, the FDIC
approved assistance to the
$22.3 million-asset Gunnison
Bank and Trust Company,
Gunnison, Colorado. Under
the assistance plan, Lindoe,
Inc., Ordway, Colorado,
acquired the bank. Then on
December 4, the FDIC gave
assistance to the $31.9 mil
lion-asset Douglass Bank,
Kansas City, Kansas, a
minority-owned institution.

Part of the Douglass Bank
assistance package included
a capital injection of $2.3
million by the bank's parent
company, consisting mainly
of funds from nonprofit com
munity organizations. The
Douglass Bank transaction
brought outside capital
into the banking industry
and preserved a minority
institution.

Im p a c t o f th e
N e w Law
The Federal Deposit Insurance
Corporation Improvement
Act of 1991, enacted in
December, will have a signif
icant impact on the resolution
process.
Among the changes imposed
by the new law is the require
ment that the resolution
transactions chosen be "the
least costly to the deposit
insurance fund of all possi
ble methods" of meeting
that obligation. Prior law
required only that the resolu
tion selected be less costly
than a payout of insured
deposits and a liquidation of
the assets, although it was
generally FDIC practice to
arrange transactions that
were less costly than other
alternatives.
Other provisions of the new
law affect the timing of bank
and thrift failures. For exam
ple, the FDIC Improvement
Act includes a requirement
that an institution must be
closed by its primary supervi
sor if it is "critically undercap
italized" for a prolonged

period. In general, the law
defines a critically undercapi
talized institution as having
tangible capital that is less
than tw o percent of total
assets. This "early interven
tion" requirement must be
effective by December 19,
1992. Under previous law,
an institution typically was
closed only after its capital
had been exhausted.
In addition, the FDIC Im
provement Act sets new
supervisory standards that
also could influence when
an institution is likely to fail.
These include a prohibition
on the acceptance of bro
kered deposits by undercapi
talized institutions and a
requirement that the FDIC
begin to charge higher
deposit insurance premiums
to institutions that pose
greater risks to the insurance
fund. These regulatory
changes could further reduce
capital at some weak institu
tions to the level where
regulators would be required
to close them under the
early intervention provisions
of the law.
Also effective in 1992, the
new law toughens the cri
teria for FDIC assistance
to open institutions, such
as a requirement that the
agency determine that assis
tance represents the least
costly resolution alternative
available. ❖

Liquidation
Activities

The liquidation of assets
from failed banks is at the
core of the FDIC's ability to
protect depositors at federally
insured banks and to reduce
the agency's need to bor
row from the U.S. Treasury
to meet deposit insurance
commitments. The main
elements of liquidation are:
managing failed financial
institution receiverships;
making payments to deposi
tors at closed FDIC-insured
banks; and converting the
assets of the failed institu
tions to cash. The FDIC's
Division of Liquidation (DOL)
is assisted in these activities
by the Legal Division, the
Division of Accounting and
Corporate Services and
other Divisions and Offices.
Atyear-end 1991, DOL
was handling the disposition
of assets from 1,136 failed
banks and 98 thrifts closed
by the former Federal Sav
ings and Loan Insurance
Corporation (FSLIC) before
the enactment of the Finan
cial Institutions Reform,
Recovery, and Enforcement
Act of 1989 (FIRREA). The
proceeds from liquidation
activities are used to make
payments to depositors and
creditors of failed financial
institutions, and to reim
burse the FDIC's Bank
Insurance Fund (BIF) or
the FSLIC Resolution Fund
(FRF). Reimbursements to

BIF relate to failed banks.
Payments to FRF, created
by Congress to handle obli
gations related to savings
associations that failed
before FIRREA in 1989,
arise from asset sales and
other matters related to
those closed thrifts.
From year-end 1990 to yearend 1991, the book value of
all bank and thrift assets in
liquidation (including assets
being liquidated for the FRF)
increased by $8.4 billion
to $44.8 billion despite the
failure of 44 fewer banks
in 1991. This increase in
assets is mainly due to the
larger size of the banks that
failed during the year.
Specifically, failed bank
assets being liquidated
directly by the FDIC at
year-end 1991 totaled
approximately $22.6 billion
(up from $18.0 billion the
previous year), while large
pools of failed bank assets
being managed and liqui
dated for the FDIC by thirdparty contractors totaled
$13.3 billion (up from $5.6
billion). The $12.3 billion
total increase in all bank
assets represented a rise
of about 52 percent from
the previous year’s total.

On the other hand, the assets
from failed savings associa
tions being liquidated by the
FDIC for the FRF decreased
during 1991 to $8.9 billion
from $12.8 billion, mainly
through sales, write-downs
and other transactions. The
reduction in these thrift
assets was more than twice
the amount disposed of by
the FDIC in 1990, the first
full year for which the agency
was responsible for liquidat
ing the assets of failed
savings associations.

L iq u id a tio n
T e c h n iq u e s
The FDIC uses a variety
of strategies to manage its
liquidation caseload.
The day-to-day liquidation
work is carried out through
a decentralized structure
because of the magnitude,
complexity and geographic
dispersion of the assets. At
the end of 1991, DOL had
four regional offices and 16
"consolidated" offices (field
sites established on a tem
porary basis according to
existing and projected
workloads). During the year,
consolidated offices in
Knoxville, Tennessee, and
Midland, Texas, were closed.
A consolidated office was
opened in Flartford, Connect
icut. Large real estate prop
erties owned by the FDIC
through receiverships are
marketed through six sales
centers around the country.

One of the most significant
steps taken by the FDIC
in 1991 to dispose of
acquired property was a
nationwide auction conducted
December 12 in Dallas for
178 commercial properties
with appraised value of
approximately $500 million.
Although the FDIC has
conducted auctions in the
past, they were on a much
smaller scale. The properties
offered, which included
office and industrial buildings,
shopping centers, apart
ment buildings and hotels,
were located in 23 states
but concentrated in Texas,
Florida, California, Colorado
and Massachusetts.
Special features were
designed to facilitate sales
at the auction. Potential bid
ders could prepare for the
auction by reviewing propertymarketing packages well in
advance of the sale and by
participating in seminars
that explained bidding proce
dures and financing options
offered by the FDIC. The
seminars were offered in
five cities. On the day of the
auction, satellite hook-ups
allowed bidders in those five
cities — Boston, Orlando,

Denver, Los Angeles and
the main auction site in
Dallas — to see, hear and
compete as though they were
all in the same room. The
auction attracted more than
1,000 bidders and exceeded
the FDIC’s expectations,
yielding $240 million from
the 115 properties that were
sold. By comparison, at the
FDIC's only other nationwide
auction of large real estate
holdings in March 1989 in
New York, 14 properties
were sold for $40.7 million.
DOL continued to contract
with a national servicer in
1991 to manage its large
portfolio of performing mort
gages. At the end of the
year, the portfolio stood at
31,164 performing mort
gages w ith a total book
value of $2.7 billion. The
DOL national sales center in
Irvine, California, which
concentrates on marketing
this mortgage portfolio, sold
more than 7,600 loans with
a book value of $429 million
for $401 million, slightly
under their $404 million
appraised value.

DOL also contracts with
private companies to admin
ister, manage and liquidate
significant pools of problem
assets from large failed
banks. These firms operate
under the Division's super
vision through DOL's Assis
tance Transactions Branch
(ATB), headquartered in
Dallas. The ATB opened
offices during 1991 in
Boston, Massachusetts,
and Manchester, New
Hampshire, to handle the
increased volume of failed
bank activity in the Northeast.
As of year-end 1991, problem
assets managed by thirdparty servicers under ATB
oversight were valued at
approximately $13.3 billion,
nearly twice the value of
ATB assets a year earlier.
On another front, DOL and
the Legal Division continued
aggressive investigations to
pursue professional liability
claims and criminal matters
arising from the actions of
directors, accountants and
others responsible for
losses at failed banks and
thrifts insured by the FDIC.
The agency collected more
than $300 million in 1991
from professional liability
claims. These collections
the previous year totaled
$263.6 million.

C o lle c tio n
P e r fo r m a n c e
Through all of these methods,
DOL strives to minimize
losses from failed bank and
thrift assets by increasing
cash collections and main
taining the ratio of expenses
to collections below ten
percent. Among the 1991
liquidation accomplishments
were:
• Cash collections of $9.3
billion by DOL, exceeding
the FDIC's goal of $8 billion.
Of the total, $7.1 billion was
collected on assets from BIFinsured commercial banks
and savings banks, and
$2.2 billion on assets from
the savings associations
closed by the FSLIC. During
1990, cash collections
totaled $4.1 billion from bank
assets and $2.4 billion from
savings association assets.
•Additional cash collections
of $4.3 billion by the private
servicers working under
ATB service agreements for
the large pools of problem
assets. This is an increase
from the $3.2 billion collected
on the ATB portfolio in 1990.
• Sales results far above
the 1990 levels. DOL sold
143,460 loans in 1991 with
book value of $2.1 billion
for $1.5 billion, representing
slightly more than their

appraised value. In addition
to the $240 million obtained
from the 115 sales at the
Dallas national auction of
commercial property in
December, DOL sold
another 6,885 properties
from receiverships for
$1 billion (98 percent of
appraised value). Sales of
real estate handled by the
ATB's servicers produced
an additional $687.7 million
in 1991 liquidation revenue.
DOL was able to hold its
1991 liquidation expenses
to approximately 8.3 percent
of its collections. DOL also
was able to pay cash divi
dends of $5.1 billion to the
Bank Insurance Fund and
$117.2 million to uninsured
depositors and creditors of
failed banks. In addition,
DOL paid cash dividends
of approximately $1.2 billion
to the FSLIC Resolution
Fund and $47.8 million to
uninsured depositors and
creditors of failed thrifts. ❖

Legal
Affairs

The FDIC's wide-ranging
legal affairs activities include
developing and enforcing
regulations, assisting in the
resolution and liquidation of
failed banks, and pursuing
claims against failed bank
directors, officers and pro
fessionals. The FDIC's
Legal Division works closely
with other Divisions and
Offices in handling these
responsibilities.
Until September 1991, the
FDIC's Legal Division also
provided services to the
Resolution Trust Corporation
(RTC), which was established
by Congress in 1989 under
FDIC management to sell or
liquidate failed thrifts. The
joint FDIC/RTC Board of
Directors in September
approved separating the
RTC's legal functions from
the FDIC's Legal Division
to more closely align the
new corporation's indepen
dent liquidation effort with
its own legal staff. As a
result, 1,572 positions were
transferred to the new RTC
Legal Division from the
FDIC Legal Division.

L e g a l A f f a ir s
W o r k lo a d
The total number of matters
handled by the Legal Division
(litigation cases, bankruptcy
claims and non-litigation
actions) for the FDIC at yearend 1991 was 41,878.
Specifically, the Legal
Division's Liquidation Branch,
which handles legal matters
involving closed banks,
had 20,452 litigation cases,
8,464 bankruptcy claims and
6,609 non-litigation matters
pending at the close of 1991.
There were also 819 profes
sional liability lawsuits and
investigations pending at
year-end. In addition, in
other areas such as bank
regulation, legislation, and
compliance and enforcement
efforts, the Division had
1,915 litigation cases, 51
bankruptcy matters and
3,568 non-litigation matters
pending at year-end.
The total number of matters
pending in the FDIC Legal
Division at the end of 1991
was down significantly
from the 159,251 pending
at year-end 1990. The reduc
tion is primarily due to the
transfer of thrift matters to
the RTC Legal Division in
September and the closing
of more than 28,000
matters by the FDIC Legal
Division during the year.

The resources and manage
ment systems of the Legal
Division have been under
considerable strain since
1989 when Congress
abolished the Federal
Savings and Loan Insurance
Corporation, transferred
savings association legal
work to the FDIC and
created the RTC. Continued
financial difficulties in the
banking and thrift industries
have exacerbated the pres
sures on the Legal Division
over the past tw o years, and
the Division is preparing for
additional increases in work
load over the next two years.
As the result of the Legal
Division's own initiatives and
reforms suggested by the
FDIC's Office of Inspector
General, the Division began
numerous improvements to
better manage its caseload
and make more efficient and
effective use of outside firms.
While regulatory, enforce
ment and internal matters
are staffed exclusively with
in-house attorneys, the
FDIC's litigation workload
from failed bank liquidations
has exceeded in-house
capacity and has necessi
tated the use of outside
firms.

Among the steps taken
during the year to improve
case management was an
increase in staff hired to
handle FDIC legal matters.
After shifts of personnel
to the RTC, there was a
19 percent net increase in
Legal Division staff devoted
to FDIC matters during the
year. The Legal Division also
is placing 143 new profes
sional liability staff in FDIC
offices around the country
to improve supervision of
professional liability cases.
These staff increases
should help the Division's
management keep abreast
of the expanding caseload
and increase the number of
legal matters handled by
in-house attorneys.
The Legal Division also
entered into a Memorandum
of Understanding with the
Civil Division of the Depart
ment of Justice in November
1991 that will allow Justice's
lawyers to represent the FDIC
in cases the Legal Division
refers to them. Every case
assigned to the Civil Division
results in a savings of out
side counsel expenditures.
As for the use of outside
firms, in February 1991 the
Legal Division announced a
new fee cap policy that, in
effect, spreads FDIC legal
work among more law firms.
This policy is designed to
enhance competition and
reduce costs for legal services
provided to the FDIC and the
RTC. The Legal Division also
created a new section that

supervises the competitive
selection of law firms and
implements the fee cap
policy. This section has
streamlined the law firm
contracting process, devel
oped a new guide for outside
counsel that do business
or want to do business with
the FDIC, and overhauled
the legal bill payment
system.
The Division also unveiled
a new automated database
that makes Legal Division
research materials available
electronically to Division
staff and outside firms used
by the FDIC. This should save
the FDIC millions of dollars
in research expenditures. In
addition, the Division com
pleted the functional design
of a sophisticated new
information management
system to assist in legal work
assignment, productivity
analysis, budgeting and
management planning.

L itig a tio n
D e v e lo p m e n ts
The FDIC, in both its
corporate and receivership
capacities, was involved in
significant court actions
during 1991.
The Legal Division, working
with the Justice Department
and the Office of Thrift
Supervision, at year-end
was defending more than

30 lawsuits challenging the
1989 application of tougher
new capital standards for
troubled thrifts that were
sold with government
assistance in the 1980s.
These new capital standards,
mandated by the Financial
Institutions Reform, Recov
ery, and Enforcement Act
of 1989 (FIRREA), are impor
tant in that they promote
efforts to ensure that banks
and thrifts are financially
healthy and secure.
Most of these lawsuits
assert that the Federal Home
Loan Bank Board, as the
primary federal supervisor
of thrifts at that time, made
binding contractual commit
ments to permit institutions
to use individualized capital
calculations that take so-called
"goodwill" into account.
Several United States District
Courts and Appeals Courts
ruled in the government's
favor in these goodwill
cases during 1991, holding
that the FIRREA capital
requirements apply. How
ever, some other District
Courts ruled against the
regulators. The government
has filed appeals in most
of those cases.
The Legal Division obtained
over 25 court decisions
during the year defining the
role of the receivership
claims process. Under this
process, all persons with
claims against a failed
depository institution must
participate in a centralized
procedure to present their
demands for payment

and give the receiver an ade
quate opportunity to decide
those claims. The process is
crucial because it presents
an opportunity to resolve
receivership claims without
a multiplicity of expensive
litigation. During 1991, sev
eral U.S. District Courts and
Circuit Courts of Appeal held
that a claimant may not sue
a failed institution absent full
compliance with the claims
process.
In eight U.S. District Court
cases, the Division obtained
asset freeze orders under
provisions of a new law (the
Crime Control Act of 1990)
that greatly enhances the
ability of the FDIC to recover
funds owed to a failed bank
receivership from those
who have defrauded the
institution or otherwise are
indebted to it. If the FDIC is
suing to recover a debt owed
to a failed bank and it appears
that the borrower is damag
ing the collateral or attempt
ing to hide assets, this law
authorizes the FDIC to
obtain a court order freezing
the collateral or assets pend
ing the outcome of the
lawsuit.
Among other significant
court cases in which
decisions were reached
in 1991 were the following:

Gaubert v. United States
In March, the U.S. Supreme
Court reversed a lower
court decision and ruled
that informal enforcement
and supervisory actions by
the federal banking agencies
and their officials are pro
tected from tort claims by
failed bank shareholders
and others under the Federal
Tort Claims Act. This act
permits persons to recover
monetary damages from
the federal government for
the actions of its employees.
By protecting the federal
banking agencies from this
liability, the Court preserved
the value of the informal
enforcement measures
the regulators have used
to provide sw ift and flexible
assistance to near-insolvent
institutions.

Armstrong v. Osborn

Jameson v. FDIC

Sletteland v. FDIC

In January, the U.S. Circuit
Court of Appeals in Denver
ruled that the doctrine of
"qualified immunity'' applies
to FDIC bank examiners.
The Court ruled that unless
examiners violate wellestablished constitutional
or statutory principles, they
may not be personally sued
for acts taken in the course
of their official duties. Quali
fied immunity will permit
examiners to continue to
criticize improper activities
without fear of retaliatory
lawsuits.

In April, the U.S. Circuit
Court of Appeals in New
Orleans ruled that federal
regulators can retroactively
apply a provision of FIRREA
that permits federal regula
tors to prohibit bank or thrift
directors and officers from
working in the banking
industry. Certain individuals
who violated banking laws
have stopped working in
the banking and thrift indus
try in an attempt to evade
a regulator's enforcement
jurisdiction. The Court ruled
that FIRREA can be applied
to directors and officers
who stopped working for
the institution before that
law was enacted.

In January, the U.S. Circuit
Court of Appeals in Washing
ton, D.C., ruled that the FDIC
properly refused to permit
an individual from becoming
the controlling shareholder
of a bank on the basis that
he did not have the requisite
"competence, experience
or integrity" required by law.
The Court ruled that the
FDIC can apply the same
standard of competence
it expects of bank manage
ment to controlling share
holders.

Marin Audubon Society
v. Seidman
In November, a U.S. District
Court in San Francisco
dismissed a suit alleging
that the FDIC is required to
consult with the U.S. Fish
and Wildlife Service before
selling a debt instrument
secured by land containing
an endangered species. The
Court agreed with the FDIC
that selling the instrument
does not affect the environ
ment and therefore does
not trigger the consultation
requirements of the Endan
gered Species Act. An
appeal against the FDIC
has been filed. ❖

Economic and
Policy Research

To effectively supervise
banks and protect insured
deposits, the FDIC conducts
economic analyses, policy
research and various kinds
of studies. This work is done
primarily by the Division of
Research and Statistics
(DRS) as well as the Legal
Division, the Division of
Supervision (DOS) and the
Division of Accounting and
Corporate Services.

The refinements to the model
in 1991 included updating the
historical data to incorporate
loss ratios for banks that
failed from 1987 through
1989. By using more recent
and more detailed receiver
ship data on liquidation
losses and expenses, FDIC
officials will be better pre
pared to predict bank failure
costs and act on individual
failing bank cases.

Major research activities of
1991 included the develop
ment of new systems to
more accurately project,
further into the future, the
costs to the Bank Insurance
Fund (BIF) of anticipated
bank failures.

The FDIC also estimates
the impact of future bank
failures on the BIF balance
by using a list of specific
banks that DOS has identi
fied as likely to fail. Prior to
October 1991, the FDIC
made projections for the BIF
balance tw o years into the
future based on DOS's list
of banks expected to close
in one-to-two years. Although
this approach was useful
for predicting bank failures
over the short run, it was
not practical for estimating
losses over longer time
periods as required for
budgetary purposes.

B a n k F a ilu re s
a n d th e B IF
As part of its ongoing
research into the costs of
bank failures, DRS updated
and extended the system
it developed in 1988 to
estimate the BIF's losses on
assets from individual banks
expected to close in the
future. The original system,
based on data from banks
that failed in 1985 and 1986,
has enabled FDIC officials
to make preliminary loss
estimates in failing bank
cases before more detailed
information is available from
on-site asset reviews after
a bank fails. The FDIC also
uses this model to help
evaluate the likely costs and
benefits of bids received
for failing banks.

To meet this need, DRS
in 1991 developed an
"actuarial method" that
uses historical data to pro
ject the number and assets
of failed banks up to three
years into the future. This
new approach does not

predict the failure of specific
banks. Instead, banks are
grouped according to their
financial characteristics.
Using past failure rates for
banks with those characteris
tics, DRS makes projections
of the number and assets of
bank failures in each group.
The FDIC first used this
model in October to project
the BIF balance for year-end
1993 based on year-end
1990 financial data for banks.

D e p o s it In s u ra n c e
P re m iu m s
As another part of its
research to assess the con
dition of the Bank Insurance
Fund, DRS staff in 1991
analyzed the likely impact
on banks and the BIF of a
proposed increase in the
premium banks pay for their
deposit insurance. This
research assisted the FDIC
Board in its April 30 decision
to increase the BIF assess
ment rate to 23.0 cents per
$100 of domestic deposits
from 19.5 cents, effective in
the second half of calendar
year 1991.
As part of its continuing ef
fort to develop better ways
of predicting future bank
performance, DRS in early
1991 began analyzing bank
loan losses by the type of
loan and the size of the
bank. DRS then developed

a system to estimate
a bank's loan charge-offs
based on its inventory of
noncurrent loans at a given
time. This model also will
prove useful for helping
to predict future bank
performance.

R e a l E s ta te S tu d ie s
During 1991, DRS continued
to monitor and analyze real
estate market conditions.
The DRS staff publishes
tw o major studies on real
estate several times a year.
Real Estate Market Indica
tors, published twice in 1991,
contains selected data
for the nation, regions
and metropolitan areas on
residential and commercial
real estate trends and bank
lending activity. The quarterly
Survey o f Real Estate Trends
is based on questions posed
to approximately 500 exam
iners and liquidation person
nel from the FDIC and other
federal banking agencies
about the general direction
of real estate markets. In
1991, both publications
tracked the increasing
deterioration of real estate
markets in the Northeast
and parts of the West as well
as improvements in the
Southwest.

D ir e c to r s ' a n d
O ff ic e r s ' L ia b ility
The Financial Institutions
Reform, Recovery, and
Enforcement Act of 1989
(FIRREA) required the FDIC,
the Secretary of the Treasury
and the Attorney General
to conduct a comprehensive
study of directors' and offi
cers' (D&O) liability insur
ance and the availability of
this type of insurance. The
subject is of significance to
the FDIC as the agency
prosecutes claims against
former directors and officers
of failed institutions for
breach of duty and attempts
to collect from insurance
companies that bonded
those institutions against
theft and fraud. The FDIC's
staff work on the study was
led by the Legal Division.
A final report was issued
in September 1991.
The report examined existing
state laws that limit D&O
liability in banking operations,
provisions in professional
liability bonds that limit
coverage in the event of
a receivership or conserva
torship, and other limits
placed upon the coverage
or the availability of the
insurance. Among the
conclusions in the report
was that the FDIC's ability
to make claims against
liability insurance policies
has been impaired by recent

court decisions enforcing
certain provisions in insur
ance contracts that purport
to exclude FDIC claims from
coverage. The report recom
mended that Congress enact
legislation that would "pre
clude attempts by D&O
insurance carriers to avoid
coverage through reliance
on those exclusions."

O th e r R e s e a rc h
S tu d ie s
DRS staff produces two
regular publications that are
basic reference sources for
banking industry statistics:
the Quarterly Banking Profile,
which is the earliest official
source of key performance
indicators for the banking
industry, and Statistics on
Banking, an extensive annual
update of year-end data and
ratios for BIF-insured com
mercial banks and savings
associations. In 1991, DRS
staff began preparing a new
annual publication of histori
cal banking statistics. The
publication will present
financial and structural data
on insured banks since the
FDIC began operations in
1934, as well as detailed
state-level banking data for
the past ten years.

Another DRS publication,
the FDIC Banking Review,
features the results of inde
pendent research projects
completed by the staff.
Topics discussed in the
tw o issues published in
1991 included: causes and
implications of the debt
crisis in less-developed
countries; factors that deter
mine the cost of resolving
failed thrifts; a framework for
analyzing deposit insurance
pricing; an analysis of bank
dividend patterns; and,
reducing deposit insurance
costs through "early cor
rective action" for troubled
banks. ♦

Other
Highlights

C o n s u m e r R e la tio n s
The Office of Consumer
Affairs (OCA) added an auto
mated feature to its toll-free
telephone "hotline" in 1991.
The recorded information
provides 24-hour, seven-day
service to callers. In addi
tion, nearly 103,000 callers
spoke to consumer affairs
staff in Washington and to
personnel in the eight regional
supervision offices in 1991.
This compares to 83,000
calls last year. The Washing
ton and regional offices also
received approximately
8,300 w ritten complaints
and inquiries in 1991, com
pared to more than 10,000
received in 1990. The largest
volume of calls and inquiries
related to deposit insurance.
OCA hosted tw o one-day
seminars for bankers in
Seattle, Washington, and
Springfield, Illinois, on com
plying with consumer rules
and regulations. OCA staff
also participated in five
conferences on deposit
insurance issues, which were
attended by more than 800
bankers and trade association
representatives.
The Office of Consumer
Affairs completed the pro
gram it began in 1990 to
place a Community Affairs
Officer (CAO) in each of the
FDIC's eight regional super
vision offices. The CAO's

responsibilities include
maintaining contact with
community groups, bankers
and government officials on
issues of community rein
vestment and fair lending.
As a result of the FDIC's
review of Truth-in-Lending
Act compliance, 15,571 con
sumers received total reim
bursements of $2,097,775
from 158 banks during the
year.
The FDIC received 13 pro
tests under the Community
Reinvestment Act against
mergers and other applica
tions filed by four FDICsupervised institutions in
1991. The FDIC Board
approved three of the appli
cations after the protests
against the institutions were
resolved. A protest against
the fourth institution was
unresolved at year-end.

S u p e r v is io n a n d
R e g u la tio n
The Division of Supervision
(DOS) issued written guid
ance to all FDIC-supervised
institutions in June clarifying
its examination policies on
the allowance for loan and
lease losses (ALLL). This
additional guidance was
provided primarily because
FDIC examiners had been
encountering institutions
with inadequate balances
in their ALLL despite the
increasing importance of

these reserves for absorbing
estimated losses inherent in
the loan and lease portfolio.
Also, in response to concerns
expressed by some bankers
and accountants, DOS
emphasized that the method
used by examiners to esti
mate an adequate ALLL
results in an amount that the
FDIC believes falls within
the acceptable range under
generally accepted account
ing principles.
The FDIC coordinated
with banking industry trade
associations and training
groups in the presentation
of 16 two-day Call Report
preparation workshops for
bankers. In addition, more
than 60 Call Report training
sessions were conducted
for examiners and others.
The FDIC administers and
enforces the registration
and reporting provisions of
the Securities Exchange Act
of 1934 for publicly held
insured nonmember banks.
As of the end of 1991, there
were 225 banks registered
with the FDIC, compared to
259 registered a year earlier.
In addition, 232 FDIC-super
vised banks were registered

with the FDIC at year-end
as having securities transfer
activities, 45 were registered
as dealers in U.S. govern
ment securities and 52 as
municipal securities dealers.
The FDIC in 1991 approved
49 applications by FDICsupervised banks to
exercise trust powers.
FDIC-supervised banks at
year-end had investment
discretion over $168.2 billion
in trust assets and responsi
bility for another $658.5
billion in non-discretionary
trust assets.

O p e r a tio n s
The Office of Budget and
Corporate Planning (OBCP)
coordinated several programs
during 1991 to enhance the
FDIC's planning, resource
allocation and resource
management processes.
In particular, OBCP initiated
a long-range strategic plan
ning process for the agency
and began developing
forecasting tools to help in
budgeting and long-range
planning.
The Office of Inspector
General's audit activity
during 1991 covered 784
liquidations and corporate
functions, and identified
$77 million in cost recovery

and savings to the FDIC.
Action by the FDIC manage
ment in response to the
audits has led to improve
ments in such areas as
liquidation and legal activities,
assistance transactions,
administrative systems and
electronic data processing
security. For example, a
comprehensive evaluation
of the Legal Division's organ
ization, staffing, planning,
litigation management and
use of outside counsel will
help promote wide-ranging
improvements in both
internal legal operations
and legal services provided
by outside firms.
The Legal Division continued
its efforts to ensure that
matters referred to outside
counsel are handled by more
minority- or women-owned
firms. During the year the
FDIC conducted several
meetings with minority
bar associations and spon
sored regional outreach
conferences for minority- and
women-owned law firms.
In 1991, the Legal Division's
Liquidation Branch referred
25.5 percent of its new
outside counsel matters
to law firms controlled by
minorities or women.

In f o r m a t io n a n d
P u b lic a tio n s
FDIC Chairmen Seidman
and Taylor, along with other
FDIC officials, testified at
40 congressional hearings
during 1991. In addition,
FDIC officials participated
in 18 meetings around
the country sponsored by
members of the Flouse and
Senate to discuss concerns
about the availability of credit.
At those sessions, FDIC
representatives explained
joint efforts by banking
regulators to improve the
climate in which banks
and thrifts make loans to
creditworthy borrowers
and to work with borrowers
experiencing difficulties.
The Office of Legislative
Affairs (OLA) coordinated
responses to approximately
3,000 w ritten inquiries
from members of Congress,
matching the previous
record level in 1989. Many
of these inquiries are on
behalf of constituents with
questions or problems. OLA
also followed congressional
action on 207 bills introduced
during 1991 on banking,
deposit insurance reform
and other subjects of inter
est to the FDIC. Of those, 82
received in-depth analysis
and review by OLA in co
operation with the Legal
Division and other parts of
the FDIC.

The Office of Corporate
Communications (OCC)
introduced a new quarterly
publication that warns
insured institutions and FDIC
examination staff about
scams and fraud artists
targeting banks and their
customers. In developing
each issue of the FDIC
Fraud Alert, OCC works
closely with investigators
in the Legal Divisions of the
FDIC and the Resolution
Trust Corporation (RTC),
the Divisions of Liquidation
and Supervision, and the
U.S. Department of Justice.
OCC also updated Symbol of
Confidence, the FDIC’s
widely distributed booklet
explaining the agency's
mission and operations to
the public.
Media interest in the FDIC's
operations continued to
increase during 1991 as a
result of major bank failures
and congressional debate
over banking legislation. To
provide information to the
local media and to assist
customers with questions
about bank failures or their
own accounts, OCC sent
staff to the sites of bank
failures during 1991.

OCC received more than
1,500 telephone calls a
week from the media and
the public requesting infor
mation about FDIC policy
decisions and industry data.
OCC also worked with DOL
and DOS regional offices to
conduct press briefings in
Connecticut, Massachusetts
and New Hampshire to
explain the FDIC's supervi
sory and liquidation functions
in the Northeast. The commu
nications office also provided
media training for FDIC
staff in several locations to
assist them in responding
to media requests.

F D IC S t a f f ____________
Total employment nation
wide for the FDIC and RTC
combined was 22,586, up
from 19,247 the previous
year. The major staff in
creases, however, occurred
in the RTC, where employ
ment increased to 8,614
from 4,899. Most of the RTC
work force have assignments
of limited duration.
DOS hired approximately
600 new financial institution
examiner trainees during
1991. Nearly all of them
were hired under the Out
standing Scholar Program,
which requires a college
grade point average of at
least 3.5 or a ranking in the
top 10 percent of the class.
DOS anticipates hiring
another 500 trainees in
1992. DOS field examiner
staff totaled more than
3,000 at year-end 1991.

Number of Officials and Employees of the FDIC, 1990-1991 (Year-end)
Washington
Office

Total

Regional/
Field Offices

1991

1990

1991

1990

192

152

1991

1990

201

152

Resolution Trust Corporation+

8,614

4,899

1,237

505

7,377

4,394

Division of Supervision

3,813

3,400

162

120

3,651

3,280

Division of Liquidation+

6,097

6,311

6,042

6,257

213

Legal Division

1,983

2,345

480

437

1,503

1,908

Division of Accounting and Corporate Services

1,304

1,529

764

739

540

790

Executive Offices*

Division of FSLIC Operations*

Division of Research and Statistics
Division of Resolutions

105

Office of the Inspector General

140

117

118

Office of Personnel M anagem ent

247

213

242

213

22,586

19,247

3,351

2,597

19,235

16,650

Office of Equal Opportunity

Total

* Executive Offices include the Offices o f the C hairm an, Vice C hairm an, D irector (A ppointive), Executive S ecretary, C orporate C om m unications, Legislative
Affairs, B udget and C orporate Planning, C onsum er Affairs, and Training and Educational Services.
+ The Resolution Trust C orporation (RTC) and the Division o f Liquidation totals include tem p orary em p loyees, m ost o f w h o m w ere e m p loyed by failed banks
or savings associations and assigned to field liquidations.
A The Division o f FSLIC O perations w as transferred to the RTC in 1991.

The Office of Training and
Educational Services (OTES)
completed its first full year
of operation in 1991, directly
offering or sponsoring 2,725
courses for 40,580 staff
members from the FDIC, RTC
and other state and federal
financial regulatory agencies.
The large increase in
"students" trained — up
from 18,305 in 1990 — is
in part attributable to
expanded microcomputer
courses. Examiner training
also continued to grow,
with 5,425 students in
1991, compared to 4,663
in 1990. In the spring,
OTES moved its operations
to the newly completed
L. William Seidman Center
in Arlington, Virginia.

The FDIC's Office of Equal
Opportunity and individual
staff members received
several awards and citations
during the year in apprecia
tion for efforts in areas such
as job placement for disabled
veterans and the visually
impaired. These included
special recognition from the
U.S. Department of Veterans
Affairs, the Asian Business
Association and the National
Coalition of Employers.

Recipients of the FDIC's
1991 honorary awards
were: Patricia Kirkpatrick,
Chief of the Administrative
Management Section in the
Division of Accounting and
Corporate Services (DACS)
in Washington (winner
of the Chairman's Award,
presented to an exceptional
non-examiner employee);
Frederick W. Watson, DOS
Field Office Supervisor, Con
cord, New Flampshire (win
ner of the Edward J. Roddy
Award for distinguished
service as a career examiner);
and Carolyn E. Simms,
Word Processing Operator

in DACS, Washington (win
ner of the Nancy K. Rector
Award, presented to an
employee who expands
opportunities for others).
A total of 35 employees from ■
the FDIC and the RTC were
called up for service during
the Persian Gulf War.

Helen G ebhardt

FDIC officials
worked w ith the
interagency Federal
Financial Institutions
Examination Council
in 1991 to adopt
uniform policies in
areas such as bank
securities purchases
and community
reinvestment.

Rules and
Regulations
F i n a l

Leverage Capital
The FDIC amended Part 325
of its regulations to bring
the definition of capital under
the leverage requirements
more closely into line with
risk-based capital guidelines
that went into effect at yearend 1990. The final rule
replaces the "primary" and
"total" capital definitions with
a more narrow definition
called "Tier 1" or "core" cap
ital and provides a minimum
standard capital-to-assets
ratio for the new definition.
This new ratio will be used
to determine the safety and
soundness of insured state
nonmember banks and to
evaluate applications from
all insured institutions.
Approved: February 28, 1991
Published: Federal Register
March 11, 1991

R u l e s

Savings Associations
Converting to Banks
The FDIC amended Part 333
of its regulations to imple
ment a rule requiring feder
ally insured savings
associations that convert to
bank charters to continue
adhering to restrictions on
high-risk activities imposed
on savings associations by
FIRREA. Those restrictions
include a prohibition on non
investment grade securities,
limits on loans to one bor
rower and prohibitions on
loans to affiliates engaging
in certain high-risk activities.
The final rule covers savings
associations converting to
savings banks as well as
conversions to any kind of
SAIF-insured state bank.
Approved: April 30, 1991
Published: Federal Register
May 6, 1991

Insurance Premiums
FIRREA required the FDIC to
increase the Bank Insurance
Fund's (BIF) reserves to $1.25
for every $100 of insured
deposits within a reasonable
period. Accordingly, the
FDIC amended Part 327 of
its regulations to increase
the deposit insurance
assessment paid by BIF
members. The rate had
been 19.5 cents per $100 of
domestic deposits, effective
January 1, 1991. On April 30,
1991, the FDIC's Board of
Directors approved an
increase in the premium to
23 cents per $100 of deposits,
effective July 1, 1991.
Approved: April 30, 1991
Published: Federal Register
May 7, 1991

Community Reinvestment
Title XII of FIRREA requires
each federal financial regula
tory agency to evaluate the
Community Reinvestment
Act (CRA) performance of
the institutions it regulates
using a four-tiered descriptive
rating system. This revision
to Part 345 of the FDIC's
rules and regulations requires
insured state nonmember
banks to disclose their CRA
evaluations and ratings to
the public.
Approved: March 26, 1991
Published: Federal Register
June 12,1991

Fair Housing

Entrance and Exit Fees

The FDIC streamlined the fair
housing recordkeeping require
ments of Part 338 of its regula
tions by eliminating the FDIC
home loan application log
sheet that banks were main
taining along with the loan
and application register required
by the Home Mortgage Disclo
sure Act (HMDA). As a result
of previous revisions to HMDA
and the Federal Reserve
Board's Regulation C, the
FDIC log sheet and the
HMDA register were very
similar and many banks had
been required to maintain
tw o largely duplicative forms.

Under FIRREA, institutions
that transfer between the
tw o deposit insurance funds
are required to pay entrance
and exit fees. The FDIC is
required to set the amount
of the fees and the proce
dures for payment. The
FDIC revised Part 312 of its
regulations to modify the
basis for calculating the
entrance fee and to delete
the requirement that
entrance fees be computed
once a year based on
audited year-end FDIC
financial statements. Instead,
the FDIC will recompute the
reserve ratio quarterly using
unaudited data. The reserve
ratio to be used when
calculating entrance fees
for a particular conversion
transaction is the most recent
quarterly reserve ratio calcu
lated by the FDIC before
the date of the conversion
transaction.

Approved: September 24,1991
Published: Federal Register
October 3, 1991

Security Procedures
The FDIC amended Part 326
of its regulations governing
the minimum security
devices and procedures
at banks. The revised rule
provides institutions with
greater flexibility in selecting
appropriate security devices
in light of the rapid changes
in technology.
Approved: March 26, 1991
Published: Federal Register
April 3, 1991

Approved: June 25, 1991
Published: Federal Register
July 1, 1991

Administrative Hearings
The FDIC, in conjunction
with other federal bank regu
lators, revised Part 308 of its
regulations to reflect the
standard uniform rules of
practice and procedures for
administrative hearings
required by FIRREA.
Approved: July 30, 1991
Published: Federal Register
August 9, 1991 ❖

P r o p o s e d

Golden Parachutes
and Indemnifications
The Crime Control Act of
1990 amended the Federal
Deposit Insurance Act to
prohibit or limit "golden para
chute" and indemnification
payments. The FDIC proposal
implementing this statute
would prohibit an institution
or holding company in a
troubled condition or nearly
insolvent from making any
golden parachute payment
to any employee or director.
Exceptions would be made
for: officers hired with
the consent of the primary
regulator and the FDIC;
company-wide severance
pay plans that pay a maxi
mum of six months' salary
to all employees who lose
their jobs in a cost-cutting
move; and bona fide
deferred compensation
plans.
The proposal also would
restrict the ability of insured
depository institutions and
holding companies to indem
nify employees involved in
administrative or civil actions
instituted by federal banking
agencies.
Proposed: September 24, 1991
Published: Federal Register
October 7,1991

R u l e s

Appraisals

Insider Transactions

Adverse Contracts

Part 323 of the FDIC's regu
lations identifies the real
estate-related transactions
that require an appraiser,
establishes minimum
standards for performing
appraisals and distinguishes
between appraisals that
require the services of a
state-certified appraiser and
those that require a statelicensed appraiser.

The FDIC issued for com
ment a proposal dealing
with conflicts of interest
that can result from insider
transactions. Under the
proposal, business dealings
between an insured state
nonmember bank and its
directors, officers and princi
pal shareholders must meet
an arm’s-length standard
similar to that used for loans.
The proposal also would
require some large transac
tions to be approved by the
bank's board of directors
and would require bank
insiders to disclose their
conflicts of interests.

The FDIC proposed a new
Part 334 to its regulations
to carry out FIRREA's ban
on insured depository
institutions' entering into
contracts for goods, products
or services that would ad
versely affect safety and
soundness. The agency also
sought comments on ways
to prevent special problems
involving contracts between
an insured institution and its
parent company or a non
depository affiliate of the
company.

The FDIC proposed amend
ments to reduce the number
of transactions requiring
a certified or licensed
appraiser by raising the
previous $50,000 threshold
to $100,000 and by permitting
the use of appraisals pre
pared for loans insured or
guaranteed by federal agen
cies. The regulations would
not apply to mineral rights,
timber rights or growing
crops.
Proposed: September 10, 1991
Published: Federal Register
September 17,1991

Further, the proposal would
create recordkeeping require
ments and require the
bank's board of directors
to adopt written guidelines
governing covered business
dealings. In addition, insured
state nonmember banks
would be barred under the
proposal from investing in
real estate in which any of
the bank's insiders has an
equity interest. The proposal
would not affect loan trans
actions already covered by
the Federal Reserve
Board's Regulation O.
Proposed: July 30, 1991
Published: Federal Register
August 8, 1991

Proposed: March 26, 1991
Published: Federal Register
April 1, 1991 ❖

Legislation
Enacted

Congress expanded the bor
rowing authority of the FDIC
and provided for sweeping
supervisory and regulatory
reforms with passage of the
Federal Deposit Insurance
Corporation Improvement .
Act of 1991. President Bush
signed the bill into law on
December 19, 1991.
The final approval of this
major legislation came after
months of congressional
debate following the release
of a Treasury Department
study in February 1991 that
set forth the Bush Adminis
tration's recommendations
for deposit insurance
reform, regulatory changes
and financial services
restructuring. The legislation
approved by Congress was
less comprehensive than
the Administration's propos
als, but it contains numerous
changes to the ways the
FDIC supervises, regulates
and resolves insured
depository institutions.
While this omnibus legisla
tion dominated congressional
debate over banking issues,
Congress also in 1991 gave
the Resolution Trust Corpo
ration (RTC) additional money
to continue to close failing
savings associations and
made other changes affect
ing the RTC and the FDIC.

Congress separately provided
the FDIC with additional
money to renegotiate and
to pay for agreements
between the now defunct
Federal Savings and Loan
Insurance Corporation
(FSLIC) and savings associa
tions — authority first given
to the FDIC in 1989.

T h e F D IC
Im p r o v e m e n t A c t
The following are major
provisions of The Federal
Deposit Insurance
Corporation Improvement
Act of 1991 (P.L. 102-242):
T h e In s u ra n c e Funds
FDIC Borrowing
Authority
The FDIC's authority to
borrow from the Treasury
Department to cover insur
ance losses is increased to
$30 billion from $5 billion.
The funds will be repaid
through deposit insurance
assessments. In addition,
the new law permits the
FDIC to borrow money on a
short-term basis for working
capital, subject to an overall
cap. Working capital bor
rowing may not exceed the
amount of cash and cash
equivalents held by the insur
ance fund, 90 percent of the
estimated fair market value
of the assets held by the
fund, and the amount author
ized to be borrowed from
the Treasury to cover insur
ance losses. Funds borrowed

for working capital are to be
repaid with proceeds from
the sales of assets acquired
from failed institutions.
Recapitalization
The Financial Institutions
Reform, Recovery, and
Enforcement Act of 1989
required the FDIC to boost
the reserves of the Bank
Insurance Fund (BIF) and
the Savings Association
Insurance Fund (SAIF) to
$1.25 for every $100 of
insured deposits. The FDIC
Improvement Act of 1991
expanded on that mandate
by requiring the FDIC Board
of Directors to adopt deposit
insurance premiums in
accordance with a recapital
ization schedule that is
expected to result in the
BIF meeting the designated
reserve ratio within 15 years.
For the SAIF, the Board
must set insurance premi
ums that will bring reserves
to the required ratio within
a "reasonable" time frame.
S u p e rv is o ry R efo rm s
Prompt Regulatory
Action
The new law requires fed
eral regulators to establish
five capital zones, ranging
from well-capitalized to criti
cally undercapitalized, that
will serve as the basis for
mandatory "prompt correc
tive action." As an institution's
capital declines, the appro
priate regulator must take
increasingly stringent mea
sures. The sanctions begin
with restrictions on deposit
gathering for depository

institutions that are not wellcapitalized and culminate in
the closing of depository
institutions that are critically
undercapitalized for a pre
scribed period.
Annual Examinations
With certain exceptions,
federally insured depository
institutions must undergo
an on-site safety and sound
ness examination at least
once a year starting in 1994.
Institutions that meet certain
performance criteria and
have less than $100 million
in assets need only to be
examined every 18 months.
Prior to 1994, examinations
must be performed at least
every 18 months unless the
bank is troubled or changes
ownership. Federal regula
tors may rely on examinations
by state regulators in alter
nate years.
Standards for Sound
Management
Each primary federal regula
tor is required to prescribe a
number of standards relat
ing to areas such as internal
controls, credit underwrit
ing, interest rate exposure,
asset growth and compensa
tion of officers. Final regula
tions must be effective by
December 1, 1993.

FDIC Back-Up
Enforcement Authority
In essence, existing FDIC
back-up enforcement author
ity over insured savings
associations is extended
to cover national banks and
state member banks. The
FDIC is given the authority
to recommend that the
primary federal regulator of
an institution take specified
enforcement action against
any insured depository
institution or affiliate of the
institution. If a federal bank
ing agency fails to take the
recommended action or an
acceptable alternative within
60 days, the FDIC may step
in and take action.
Outside Audits
Each insured institution must
submit to the FDIC and
other appropriate regulators
an annual financial statement
audited by an independent
public accountant. An excep
tion is provided for institu
tions with assets of less
than $150 million or a larger
asset size determined by
the FDIC.
Real Estate Lending
The federal regulators must
adopt uniform standards by
March 19, 1993, for real
estate lending by insured
depository institutions.
In setting standards, the
regulators must take into
account such factors as the
risks different types of loans
present to the bank and
savings association insurance
funds, the safety and sound
ness of the institution and
the availability of credit.

State Powers
An insured state-chartered
bank is prohibited from
engaging in an activity not
permitted for a national bank
unless the FDIC decides the
activity poses no significant
risk to the BIF and the bank
meets the agency's capital
standards. With certain
exceptions, state banks are
prohibited from insurance
underwriting and from
acquiring an equity invest
ment when such activities
are not permitted for
national banks.
Paying Examination Costs
The FDIC is authorized to
recoup the cost of conduct
ing regular or special exami
nations by charging fees to
the insured institution and
any affiliate examined.
Failed Banks
Least-Cost Resolution
The FDIC must choose
the least-cost alternative in
resolving failing institutions.
Previously, the agency by
law was required to select
a resolution that was less
costly than a payout of
insured deposits and a
liquidation of the assets. A
"systemic risk" exception
applies to the least-cost
provision of the new law
(see following paragraph).
This provision was effective
upon enactment of the law.

Too Big to Fail
The least-cost requirement
may be waived under speci
fied "systemic risk" situa
tions. The FDIC Board, the
Board of Governors of the
Federal Reserve System
and the Secretary of the
Treasury, in consultation
with the President, must
agree that compliance with
these provisions would have
a serious impact on eco
nomic conditions or financial
stability. Any loss to the BIF
under this exception must
be recovered through a
special assessment to be
paid by BIF-insured banks.

aggregate an individual's
interests in all Individual
Retirement Accounts (IRAs),
Keogh Plan accounts and
certain other pension
accounts, and insure the
total up to $100,000. The
law also puts new restrictions
on the insurance coverage of
Bank Investment Contracts
(a type of liability issued
by a bank and usually
purchased by a pension
fund sponsor) and Section
457 Plan accounts (a type of
deferred compensation plan
most commonly provided
for employees of state and
local governments).

Deposit Insurance Reform

Applications for
Deposit Insurance
The FDIC may deny insurance
to any applicant for deposit
insurance, including national
banks and state-chartered
banks supervised by the
Federal Reserve Board.
Previously, only FDIC-supervised state-chartered banks
and federal and state
savings associations were
required to apply to the FDIC
for insurance.

Risk-Based Premiums
Effective January 1, 1994,
the FDIC must establish a
system that sets deposit
insurance assessments paid
by institutions according to
the risks an institution
poses to the insurance fund.
The FDIC is permitted to
obtain private reinsurance
to cover a maximum of ten
percent of any loss from the
failure of an insured institu
tion. The FDIC also may
base an institution's semi
annual assessment on the
cost of the reinsurance.
Changes in Coverage
Among the changes in the
deposit insurance rules man
dated by the new law is the
requirement that the FDIC

Brokered Deposits
The new law places addi
tional restrictions on the use
of brokered deposits by
insured institutions and
imposes certain interest rate
limits on those deposits.
Institutions considered by
the regulators to be "under
capitalized” will be prohibited
from accepting brokered
deposits and will be subject
to interest rate limits on the

deposits they solicit directly
from the public. Institutions
classified as "adequately
capitalized” can accept
brokered deposits if they
first obtain a waiver from
the FDIC. These institutions
also will be subject to inter
est rate restrictions on all
deposits, not just those
obtained through third-party
money brokers. Institutions
meeting the regulators' defi
nition of “well-capitalized"
can accept brokered depos
its without limit and are not
subject to interest rate
restrictions.
Consumer Protection
Affordable Housing
To provide home ownership
and rental housing opportuni
ties for low-income families,
the FDIC must establish an
affordable housing program
in connection w ith the
agency's disposition of prop
erty. The program, scheduled
to last three years, is contin
gent on a congressional
appropriation.
Truth in Savings
The new law requires
uniformity in the disclosure
of terms and conditions
used by insured institutions
to determine interest paid
and fees assessed.
Incentives for Deposit
Accounts, Loans
Subject to appropriations
from Congress, institutions
offering no-frills, low-cost
"lifeline accounts" for
low-income persons would
be assessed for deposit
insurance at a lower rate.

Assessment credits would
be provided for lending and
other activities in economi
cally distressed areas.
Branch Closings
Before closing a branch,
a bank must notify the
appropriate federal banking
agency and the customers
of the affected branch at
least 90 days in advance.

R T C L e g is la tio n
The following are highlights
of The Resolution Trust
Corporation Refinancing,
Restructuring and Improve
ment Act of 1991
(P.L. 102-233):
New RTC Structure
The FDIC Board of Directors
no longer serves as the RTC
Board. The Chairman of the
FDIC no longer serves as
manager of the RTC and is
replaced by a Chief Executive
Officer at the RTC. The RTC
Oversight Board was recast
into the Thrift Depositor
Protection Oversight Board,
composed of the Chairman
of the FDIC, the Director of
the Office of Thrift Supervi
sion, the Chief Executive
Officer of the RTC, the
Chairman of the Federal
Reserve Board, the Sec
retary of the Treasury
and tw o private sector
representatives.

Thrift Resolutions
by the FDIC
The new law defers,
from August 9, 1992, to
October 1, 1993, the date
by which the FDIC's Savings
Association Insurance Fund
(SAIF) becomes responsible
for handling the resolution
of failed thrifts. The RTC will
continue to handle the reso
lution of failed thrifts until
October 1, 1993. The period
for which the Treasury
Department must make
up any shortfall in annual
funding goals of the SAIF is
delayed one year and now
runs from 1993 to 2000.

regulated depository
institutions must use
these appraisers. The law
also made it easier for insti
tutions to obtain temporary
waivers in circumstances
where a scarcity of qualified
appraisers would result in
delays.

Real Estate Appraisals
The new law clarifies and
revises provisions of the
Financial Institutions
Reform, Recovery, and
Enforcement Act of 1989
(FIRREA) that mandated
the use of state-certified or
state-licensed appraisers in
connection with certain real
estate transactions. The
new law clarifies that the
interagency FFIEC may not
set qualifications or experi
ence requirements for the
states in the licensing of
appraisers, and that recom
mendations of the FFIEC's
Appraisal Subcommittee are
not binding on the states.
The law also extended to
December 31,1992, the
date by which federally

FSLIC Resolution Fund
FIRREA provided that annual
congressional appropriations
will supply any shortfall in
funds used to meet contrac
tual obligations of the former
FSLIC. The 1989 law also
made the FDIC responsible
for administering all FSLIC
obligations. Once FIRREA
was enacted, the FDIC
created the FSLIC Resolution
Fund (FRF) to cover these
obligations. For Fiscal Year
1992, the FDIC asked for
about $15.9 billion in congres
sional appropriations for the
FSLIC obligations. In addition,
the FDIC and the RTC identi
fied potential cost savings
of nearly $2 billion that could
be achieved if Congress
provided the FRF with an
additional $10 billion to pre
pay certain notes and to
resolve five FSLIC-assisted
institutions. Congress ap
proved the amount the FDIC
requested. President Bush
signed the legislation into
law on October 28, 1991. ❖

F S L IC O b lig a tio n s
The Departments of Veter
ans Affairs and Flousing and
Urban Development, and
Independent Agencies
Appropriations Act of 1992
(P.L. 102-139) contains the
following:

Caryl A. A ustrian

The resolution of
Goldome, a savings
institution based
in Buffalo, New York,
was one of the largest
transactions handled
by the FDIC in 1991.

Financial

Statements

Bank Insurance Fund
B I F

Financial
Statements

Federal

Deposit

Insurance

Corporation

Bank Insurance Fund
S tatem en ts o f Incom e and the Fund Balance
Dollars in Thousands

For the Year Ended
December 31
1991

1990

Revenue
Assessments earned (Note 12)

5,160,486

2,855,263

Interest on U.S. Treasury obligations

471,072

855,252

Other revenue

158,409

147,079

5,789,967

3,857,594

284,147

219,581

49,192

4,448,055

15,427,000

7,685,033

1,102,056

669,962

16,862,395

13,022,631

Expenses and Losses
Administrative expenses
Provision for insurance losses - Actual (Note 6)
Provision for insurance losses - Unresolved (Note 6)
Interest and other insurance expenses (Note 13)

Net (Loss)

Fund Balance - Beginning

Fund Balance - Ending

The accompanying notes are an integral part o f these financial statem ents.

(11,072,428)

(9,165,037)

4,044,486

13,209,523

S (7,027,942)

4,044,486

Federal De p o s i t I ns ur anc e Co r por at i on
Bank Insurance Fund
S tatem en ts o f Financial Position
December 31

Dollars in Thousands
1991

1990

Assets
Cash and cash equivalents (Note 3)
Investment in U.S. Treasury obligations, net (Note 4)
Accrued interest receivable on investments and other assets
Net receivables from bank resolutions (Note 5)
Property and buildings (Note 7)

1,770,016

$ 1,122,179

3,302,861

5,649,222

163,986

196,795

21,014,834

12,935,346

163,466

145,218

26,415,163

20,048,760

83,835

87,942

10,745,964

-0-

6,106,324

8,079,396

16,345,871

7,685,033

Liabilities and the Fund Balance
Accounts payable, accrued and other liabilities
Notes Payable - Federal Financing Bank borrowings (Note 8)
Liabilities incurred from bank resolutions (Note 9)
Estimated Liabilities for: (Note 11)
Unresolved cases
Litigation losses
Total Liabilities

Fund Balance

161,111
33,443,105

(7,027,942)

$26,415,163

The accompanying notes are an integral part of these financial statem ents.

151,903
16,004,274

4,044,486

S 20,048,760

Federal

Deposit Insurance Corporation

Bank Insurance Fund
S tatem en ts of Cash Flows
Dollars in Thousands

For the Year Ended
December 31
1991

1990

Cash Flows From Operating Activities
Cash inflows from:
Assessments
Interest on U.S. Treasury obligations
Recoveries from bank resolutions
Miscellaneous receipts

$5,163,249

$2,851,561

600,748

1,019,085

7,880,293

2,700,099

30,717

51,518

340,550

218,214

22,902,196

9,834,529

259,294

309,031

Cash outflows for:
Administrative expenses
Disbursements for bank resolutions
Interest paid on indebtedness incurred from bank resolutions
Net Cash Used by Operating Activities

(9,827,033)

(3,739,511)

2,299,319

3,199,544

3,806

6,143

20,916

48,932

2,282,209

3,156,755

10,607,000

-0-

2,414,339

3,088,710

8,192,661

(3,088,710)

647,837

(3,671,466)

1,122,179

4,793,645

$ 1,770,016

$ 1,122,179

Cash Flows From Investing Activities
Cash inflows from:
Maturity and sale of U.S. Treasury obligations
Gain on sale of U.S. Treasury obligations
Cash outflows for:
Property and buildings
Net Cash Provided by Investing Activities

Cash Flows From Financing Activities
Cash inflows from:
Federal Financing Bank borrowings
Cash outflows for:
Payments of indebtedness incurred from bank resolutions
Cash Provided (Used) by Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

The accom panying notes are an integral part o f these financial statem ents.

Notes to Financial Statements
Bank Insurance Fund
December 31, 1991 and 1990

1. Legislative History
and Reform

The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA) was enacted to reform, recapitalize
and consolidate the federal deposit insurance system.
FIRREA designated the Federal Deposit Insurance Corpora
tion (FDIC) as administrator of the Bank Insurance Fund
(BIF), which insures the deposits of all BIF-member
institutions (normally commercial banks) and the Savings
Association Insurance Fund (SAIF), which insures the
deposits of all SAIF-member institutions (normally thrifts).
Both insurance funds are maintained separately to carry
out their respective mandates. The FDIC also administers
the FSLIC Resolution Fund (FRF), which is responsible for
winding up the affairs of the former Federal Savings and
Loan Insurance Corporation (FSLIC).
The Omnibus Budget Reconciliation Act of 1990 removed
caps on assessment rate increases and allowed for semi
annual rate increases. In addition, this Act permitted the
FDIC, on behalf of the BIF and the SAIF, to borrow from the
Federal Financing Bank (FFB) under terms and conditions
determined by the FFB.
The Federal Deposit Insurance Corporation Improvement
Act of 1991 (1991 Act) was enacted to further strengthen
the FDIC. The FDIC's authority to borrow from the U.S.
Treasury was increased from $5 billion to $30 billion. How
ever, the FDIC cannot incur any additional obligation for the
BIF or the SAIF if the amount of obligations in the respective
Fund would exceed the sum of: 1) its cash and cash equiva
lents; 2) the amount equal to 90 percent of the fair-market
value of its other assets; and 3) its portion of the total
amount authorized to be borrowed from the U.S. Treasury
(excluding FFB borrowings).
As required by the 1991 Act, U.S. Treasury borrowings are
to be repaid from assessment revenues. The FDIC must pro
vide the U.S. Treasury a repayment schedule demonstrating
that assessment revenues are adequate to make payment
when due. In addition, the FDIC now has authority to increase
assessment rates more frequently than semiannually and
impose emergency special assessments as necessary to
ensure that funds are available for these payments.
Other provisions of the 1991 Act require the FDIC to
strengthen the banking industry with improved capital
standards and regulatory controls, implement a risk-based
assessment system and limit insurance coverage for
uninsured liabilities. The FDIC must also resolve troubled
institutions in a manner that will result in the least possible
cost to the deposit insurance funds and provide a schedule
for bringing the reserves in the insurance funds to 1.25
percent of insured deposits.

2. Sum m ary o f
S ig n ific an t
A cco u n tin g
Policies

General

These financial statements pertain to the financial position,
results of operations and cash flows of the BIF. These state
ments do not include reporting for assets and liabilities of
closed banks for which the BIF acts as receiver or liquidating
agent. Periodic and final accountability reports of the BIF’s
activities as receiver or liquidating agent are furnished to
courts, supervisory authorities and others as required.

U.S. Treasury Obligations

Securities are intended to be held to maturity and are shown
at amortized cost, which is the purchase price of securities
less the amortized premium or plus the accreted discount.
Such amortizations and accretions are computed on a daily
basis from the date of acquisition to the date of maturity.
Interest is calculated on a daily basis and recorded monthly
using the constant yield method.

Allowance for Loss
on Receivables from
Bank Resolutions

A receivable and an associated estimated allowance for loss
are established for funds advanced for assisting and closing
banks. The allowance for loss represents the difference
between the funds advanced and the expected repayment.
The latter is based on the estimated cash recoveries from
the assets of assisted or failed banks, net of all estimated
liquidation costs. Estimated cash recoveries also include
dividends and gains on sales from equity instruments
acquired in assistance agreements (the proceeds of which
are deferred pending final settlement of the assistance
transaction).

Escrowed Funds from
Resolution Transactions

In various resolution transactions, the BIF pays the acquirer
the difference between failed bank liabilities assumed and
assets purchased, plus or minus any premium or discount.
The BIF considers the amount of the deduction for assets
purchased to be funds held on behalf of the receivership.
The funds will remain in escrow and accrue interest
until such time as the receivership uses the funds to:
1) repurchase assets under asset put options; 2) pay pre
ferred and secured claims; 3) pay receivership expenses;
or 4) pay dividends.

Litigation Losses

The BIF accrues, as a charge to current period operations,
an estimate of loss from litigation against the BIF in both its
corporate and receivership capacities. The FDIC's Legal Divi
sion recommends these estimates on a case-by-case basis.

Receivership
Administration

The BIF is responsible for controlling and disposing of
the assets of failed institutions in an orderly and efficient
manner. The assets, and the claims against those assets,
are accounted for separately to ensure that liquidation
proceeds are distributed in accordance with applicable laws
and regulations. Costs and expenses related to specific
receiverships are charged directly to those receiverships.
The BIF also recovers indirect liquidation expenses from the
receiverships.

3. Cash and Cash
Equivalents

Cost Allocations
Among Funds

Depreciation

The Washington office buildings and the L. William Seidman
Center in Arlington, Virginia, are depreciated on a straightline basis over a 50-year estimated life. The San Francisco
condominium offices are depreciated on a straight-line basis
over a 35-year estimated life. The BIF expenses its share of
furniture, fixtures and equipment at the time of acquisition
because of their immaterial amounts.

Reclassifications

Reclassifications have been made in the 1990 Financial
Statements to conform to the presentation used in 1991.

Related Parties

The nature of related parties and a description of related
party transactions are disclosed throughout the financial
statements and footnotes.

Restatement

Beginning in 1991, management has changed certain
accounting presentations to more appropriately reflect
financial position and cash flows. Accordingly, the following
changes have affected both the Statement of Financial
Position and the Statement of Cash Flows: 1) Cash and
Cash Equivalents and Liabilities Incurred from Bank Resolu
tions for 1990 have been restated to reflect the offset of
certain amounts previously included with liabilities and
2) Net Receivables from Bank Resolutions and Liabilities
Incurred from Bank Resolutions for 1990 have been restated
to include capital instruments previously presented as
off-balance sheet financial instruments.

The BIF considers cash equivalents to be short-term, highly
liquid investments with original maturities of three months
or less. In 1991, cash restrictions included $8,176,000 for
health insurance payable and $1,084,000 for funds held in
trust. In 1990, there was a cash restriction represented by
funds held in trust totaling $146,425,000. The funds related
to a litigation settlement on the sale to Citicorp of the
Delaware Bridge Bank (the credit card subsidiary of First
RepublicBank of Texas). Those funds were released in July
of 1991. Cash and cash equivalents for 1990 have been
restated to conform to the presentation used in 1991, and
resulted in a decrease of $94,006,000 in the 1990 cash and
cash equivalents line item. Cash and cash equivalents are
as follows:

1 Cash and Cash Equivalents
Dollars in Thousands

December 31
1991

Cash

Cash equivalents

4 . U.S. Treasury
O bligations

299,311

1990
$

467,033

1,470,705

655,146

$ 1,770,016

S 1,122,179

All cash received by the BIF is invested in U.S. Treasury
obligations unless the cash is: 1) to defray operating
expenses; 2) for outlays related to assistance to banks and
liquidation activities; or 3) invested in short-term, highly
liquid investments. The unamortized premium, net of
unaccreted discount, for 1991 and 1990 was $2,861,000
and $49,222,000, respectively. The amortized premium, net
of accreted discount, for 1991 and 1990 was $47,042,000
and $76,594,000, respectively. The BIF investment portfolio
consisted of the following:

1 U.S. Treasury O bligations
Dollars in Thousands

December 31,1991

Maturity

Description

Yield to
Maturity
at Market

Market Value

Face Value

Less than 1 year

U.S.T. Bills, Notes & Bonds

4.07%

$1,619,709

$ 1,647,748

$ 1,600,000

1-3 years

U.S.T. Notes & Bonds

4.52%

1,683,152

1,765,410

1,700,000

$ 3,302,861

S 3,413,158

$ 3,300,000

Dollars in Thousands

Book Value

December 31, 1990

Maturity

Description

Yield to
Maturity
at Market

Less than 1 year

U.S.T. Bills, Notes & Bonds

6.92%

$1,711,922

$ 1,714,568

1-3 years

U.S.T. Notes & Bonds

7.23%

3,937,300

3,970,721

3,900,000

$ 5,649,222

S 5,685,289

$ 5,600,000

Book Value

Market Value

Face Value
$ 1,700,000

5. N e t Receivables fro m
Bank Resolutions
N et Receivables fro m Bank Resolutions
Dollars in Thousands

December 31
1991

1990

Receivables from Open Banks:
Open banks
Capital instruments
Notes receivable
Accrued interest receivable
Allowance for losses

1,361,054
73,500

1,724,163
179,488

181,500

186,000
6,876

7,777

(1,198,946)

(1,207,158)

423,984

890,270

1,654,632

1,741,275

38,737,855

26,063,367

10,765

509,363

2,999,141

623,174

Receivables from Closed Banks:
Loans and related assets
Resolution transactions 11*
Depositors' claims unpaid
Corporate purchase transactions
Deferred settlements <2)
Allowance for losses

(403,901)

(298,992)

(22,407,642)

(16,593,111)

20,590,850

12,045,076

S 21,014,834

$ 12,935,346

(,) Includes $21 million due from the SAIF fo r Southeast Bank, N.A., Miami, Florida, transaction, Septem ber 19, 1991
121 Includes Continental Bank, Chicago, Illinois, transaction, Septem ber 26, 1984

The FDIC resolution process can take various forms. Open
bank assistance and assisted merger resolutions result
in contractual agreements to provide ongoing assistance
which allows banking operations to continue. Closed bank
resolutions occur when the failing bank is closed by its
chartering authority.
As stated in Note 2, the allowance for loss on receivables
from bank resolutions represents the difference between
amounts advanced and the expected repayment, based
upon the estimated cash recoveries from the assets of the
assisted or failed bank, net of all estimated liquidation costs.

As of December 31,1991 and 1990, the BIF, in its
receivership capacity, held assets of $43.2 billion and
$23.7 billion, respectively. The estimated cash recoveries
from the sale of these assets (excluding cash and miscella
neous receivables of $8.9 billion) are regularly evaluated,
but remain subject to uncertainties because of changing
economic conditions affecting real estate assets now in the
marketplace. These factors could reduce the BIF's actual
recoveries upon the sale of these assets from the level of
recoveries currently estimated.
Receivables from open banks include amounts outstanding
to qualified institutions under the Capital Instrument Pro
gram. This program, which was established at the FDIC by
authorization of the Garn-St Germain Depository Institutions
Act of 1982, was extended through October 13, 1991, by
the Competitive Equality Banking Act of 1987 (authority for
this program has not been extended). Under this program,
the BIF would purchase a qualified institution's capital instru
ment, such as Net Worth Certificates and Income Capital
Certificates. The BIF would issue, in a non-cash exchange,
its non-negotiable promissory note of equal value. The
total assistance outstanding to qualified institutions as of
December 31, 1991 and 1990 is $73,500,000 and
$179,488,000, respectively.

6. A nalysis o f Changes
in A llo w a n c e fo r
Losses and
E stim ated L iab ilities

The Provision for Loss transactions include estimates of loss
for bank resolutions occurring during the year for which an
estimated loss had not been previously established. It also
includes loss adjustments for bank resolutions that occurred
in prior periods.
Transfers consist of bank resolutions that occurred during
the year for which an estimated cost had already been recog
nized in a previous period. Terminations represent any final
adjustments to the estimated cost figures for those bank
resolutions that have been completed and for which the
receivership has been removed from the books of the BIF.

A n a l y s i s o f C h a n g e s in A l l o w a n c e f o r L o s s e s a n d E s t i m a t e d L i a b i l i t i e s

Dollars in Millions
Provision for Insurance Losses
Allow ance
for Losses

Begin Balance
(01-01-91)

O perating Banks

1,207

Current
Year

Prior
Year

130

N e t Cash
Paym ents

Total

131

(7)

Transfers/
A d just/T erm

(132)

End Balance
(12-31-91)

1,199

Closed Banks:
Loans and related assets
Resolution transactions
Corporate purchases
Operating/Closed Banks

1,120

-0-

15,067

747

407

-0-

17,801

-0-

1,157

(268)

-0-

5,793

20,592

258

-0-

(6)

659

748

(590)

158

(7)

5,655

23,607

(132)

(118)

(1,102)

502

198

(1,015)

Estim ated Liabilities for:
Assistance agreem ents

916

Litigation losses

152

Estim ated Liabilities

1,068

Total A llow an ce/E stim ated
Liabilities Failed Banks
18,869

-0-

161

(132)

-0-

(109)

(1,102)

502

359

616

(567)

(1,109)

6,157

23,966

15,427

-0-

(6,766)

16,346

S 15,476

S (1,109)

Estim ated Liabilities for:
Unresolved cases

Total A llow an ces/
Estim ated Liabilities

7,685

15,427

26,554

$ 16,043

-0-

S (567)

(609)

40,312

Analysis of Changes in A llo w an c e fo r Losses and Estim ated Liabilities
Dollars in Millions
Provision for Insurance Losses
A llow ance
for Losses

Begin Balance
(01-01-90)

Bridge Banks

1,158

00
00

Total

kf)

Operating Banks

Prior
Year

Current
Year

N et Cash
Paym ents

Transfers/
A d just/T erm

(45)

End Balance
(12-31-90)

1,207

1,750

-0-

(1,750)

-0-

1,058

-0-

1,120

10,892

2,798

609

3,407

-0-

768

15,067

223

-0-

145

-0-

407

15,081

2,800

902

3,702

(988)

17,801

2,730

-0-

716

(1,019)

916

122

-0-

_____ 30

-0-

152

2,852

-0-

746

(1,511)

(1,019)

1,068

17,933

2,800

1,648

4,448

(1,505)

(2,007)

18,869

1,095

7,685

-0-

7,685

(1,095)

7,685

10,485

S 1,648

5 12,133

S (3,102)

S 26,554

Closed Banks:
Loans and related assets
Resolution transactions
Corporate purchases

___

O perating/Bridge/
Closed Banks

Estimated Liabilities for:
A ssistance agreem ents
Litigation losses

___

Estim ated Liabilities

Total A llow an ce/E stim ated
Liabilities Failed Banks

(1,511)
-0-

Estim ated Liabilities for:
Unresolved cases

T otal A llow an ce/
Estim ated Liabilities

19,028

-0-

(1,505)

7. P rop erty and
Buildings
1 P roperty and Buildings
December 31

Dollars in Thousands
1991
Land
Office buildings
Accumulated depreciation

1990
$ 32,024

29,631
149,790

126,481
(15,955)

(13,287)

S 163,466

S 145,218

The 1991 net increase of $20,916,000 for land and
buildings represents disbursements for completion of the
L.William Seidman Center. The $2.4 million decrease in
land is a reclassification of capitalized expenditures from
land to buildings.

8. N o te Payable Federal Financing
Bank (FFB)
Borrow ings

The FDIC was authorized to borrow from the FFB under
the Omnibus Budget Reconciliation Act of 1990. On January
8, 1991, the FDIC and the FFB entered into a Note Purchase
Agreement, renewable annually, permitting the FDIC to
borrow for financing requirements. Funds borrowed will be
recovered and repaid to the FFB through the liquidation of
assets from failed institutions.
The terms of the note provide for quarterly renewal and
rollover of borrowing, and require estimates of subsequent
quarter financing needs. Periodic advances are drawn on the
note as needed. Interest rates are based on the U.S.
Treasury bill auction rate in effect during the quarter plus
12.5 basis points. Interest is expensed monthly and is
payable quarterly. The FDIC may elect to repay any portion
of the outstanding principal amount at any time consistent
with the terms of the note.
As of December 31, 1991, FFB borrowings and accrued
interest were $10,619,954,000 and $126,010,000, respec
tively. On January 2, 1992, the scheduled maturity date,
the outstanding note balance was rolled over into a new
borrowing that provides a borrowing authority up to $20
billion. The effective interest rates applicable for the out
standing borrowing ranged from 4.7 percent to 5.4 percent.

9 . L iabilities Incurred
fro m Bank
Resolutions
1 Liabilities Incurred fro m Bank Resolutions
Dollars in Thousands

December 31
1991

1990

$ 5,606,910

$ 3,673,279

1,084

146,425

10,765

509,363

Notes indebtedness

153,194

2,768,243

Estimated liabilities for assistance agreements

298,171

916,080

36,200

66,006

$ 6,106,324

$ 8,079,396

Escrowed funds from resolution transactions
Funds held in trust
Depositors' claims unpaid

Accrued interest/other liabilities

M a tu ritie s of Liabilities
Dollars in Thousands
1992

1993

1994

1995

1996

$ 5,925,987

$ 29,652

$ 19,446

$ 9,566

$ 121,673

10. Resolution o f
Large Failed Bank
Transactions

On-Balance Sheet
Separate Asset Pools

The FDIC structured several large 1991 resolutions by
negotiating Purchase and Assumption agreements between
the acquiring institution and the FDIC as receiver that pro
vided for the repurchase of classified assets by the receiver.
These assets are owned by the receiver, but are managed
and liquidated by the acquirer with oversight from the FDIC
through the administration of a service agreement. The
initial pool balance may be increased by subsequent transfers
of assets (putbacks) to the FDIC over a two- or three-year
period depending on the agreement. In addition, tw o trans
actions contain loss sharing components in which the
acquirer and the FDIC as receiver share in credit losses on
pool assets. One transaction involves tw o banking subsidiar
ies of Southeast Banking Corporation, Miami, Florida, which
were closed on September 19, 1991. The other involves
Connecticut Savings Bank, New Haven, Connecticut, which
was closed on November 14, 1991.

Off-Balance Sheet
Separate Asset Pools

The FDIC has negotiated several large transactions where
problem assets are purchased by an acquiring institution
under an agreement that calls for the FDIC to absorb credit
losses and to pay related costs for funding and administra
tion plus an incentive fee. Estimated total transaction costs
for institutions involving separate asset pools include
estimated costs for credit losses on all pool assets as well
as funding, administration and incentives. In addition, the
FDIC has a loss-sharing arrangement relating to Maine
Savings Bank, Portland, Maine, closed February 1, 1991.
This arrangement calls for the establishment of a deferred
settlement account on the records of Fleet Bank of Maine,
Portland, Maine, the acquiring institution, to which gains or
losses on the final disposition of pool assets are posted. At
termination of the asset pool, the FDIC pays the assuming
bank the aggregate of net losses over net gains, if any.
In addition to the above costs, for which the receiver has a
claim against the assets of the receivership, the FDIC incurs
an interest cost on borrowing for these and other resolution
transactions. Funds are borrowed from the FFB to acquire
and carry assets of failed banks until they are liquidated.
Interest expense on the borrowings is reflected as a period
expense and not as part of the cost resulting from bank
failures. In prior years the FDIC used its own cash and there
fore incurred an "opportunity cost" through reduced income.
Shown on the next page are the problem assets handled
in these transactions, actual and estimated additional asset
putbacks, the total volume of assets for which the FDIC
remains at risk and the estimated cost of these transactions,
which includes credit losses, carrying costs and administra
tive and incentive fee expenses.

Separate A sset Pools
D a te
of
F a ilu re

In itia l
Pool
B a la n c e

A c tu a l a n d
E s tim a te d
P u tb a c k s

E s tim a te d
T o ta l A s s e ts
a t R isk

R e m a in in g
A s s e ts a t R isk
1 2 /3 1 /9 1

E s tim a te d
T ra n s a c tio n
C ost

First RepublicBank3
Dallas, TX (41 banks)

07/29/88

S 9,132

$ 2 ,1 6 3

$ 11,295

$ 2,533

$ 3,600

Bank o f N e w England Corp.
Boston, M A (3 banks)

01/06/91

6,380

1,450

7,830

6,552

1,034

G oldome
Buffalo, NY

05/31/91

1,624

196

1,820

1,756

1,025

Southeast Bankb
M ia m i/W e st Pensacola, FL
(2 banks)

09/19/91

641

2,195

2,836

2,801

178

Bridgeport Group,
Bridgeport, CT (2 banks)

08/09/91

666

785

1,451

736

N ew Ham pshire Plan
N ew Ham pshire (7 banks)

10/10/91

1,060

298

1,358

960

C onnecticut Savings
N ew Haven, CT

11/14/91

337

-0-

337

112

M Corp
Dallas, TX (20 banks)

03/28/89

$ 3,388

818

$ 4,206

$ 1,034

$ 2,869

Texas Am erican Bancshares
Dallas, TX (24 banks)

07/20/89

1,249

267

1,516

383

1,039

M aine Savings Bank
Portland, ME

02/01/91

361

124

485

215

Dollars in M illions

O n -B a la n c e S h e e t P o o ls

Off-Balance Sheet Pools

T his w a s an o ff-b a la n ce sh e e t pool p rior to th e 1991 rep u rch a se o f assets.
b E s tim a te d tra n s a c tio n c o s t in clu d e s $21 m illio n th a t is th e re s p o n s ib ility o f th e SAIF (see N o te 5).

11. E stim ated Liabilities
For Unresolved
Cases

Unresolved Cases

In 1990, the BIF recorded as a contingent liability on its
financial statements an estimated loss for its probable cost
for banks that have not yet failed, but the regulatory process
had identified as either equity insolvent or in-substance
equity insolvent. The FDIC relied on this finding regarding
solvency as the determining factor in defining the existence
of the "accountable event" that triggers loss recognition
under generally accepted accounting principles.
In 1991, the FDIC has taken a new view of what constitutes
an accountable event for purposes of recognizing an esti
mated loss for future bank failures. Specifically, the FDIC
has expanded its concept of banks considered to be in
substance insolvent for 1991 to include those that are
solvent at yearend, but which have adverse financial
trends and, absent some favorable event (such as obtaining
additional capital or a merger), will probably become equity
deficient in 1992 or thereafter.
As with any of its contingent liabilities, the FDIC cannot
predict the timing of events with reasonable accuracy. Yet,
the FDIC recognizes these liabilities and a corresponding
reduction in the Fund Balance in the period in which they
are deemed probable and reasonably estimable. It should
be noted, however, that future assessment revenues will
be available to the BIF to recover some or all of these
losses, and that their amounts have not been reflected
as a reduction in the losses.
Liabilities for unresolved cases as of December 31, 1991
and 1990, using the definition of in-substance equity insol
vent employed in 1990, were $7.8 billion and $7.7 billion,
respectively. Additional losses of $7.7 billion were recorded
in 1991 using the expanded concept. The estimated costs
for these probable bank failures are derived in part from
estimates of recoveries from the sale of the assets of these
banks. As such, they are subject to the same uncertainties
as those affecting the BIF’s net receivables from bank
resolutions (see Note 5). This could understate the ultimate
costs to the BIF from probable bank failures.
The FDIC estimates that 375 banks with combined assets
ranging from $168 billion to $236 billion could fail in 1992
and 1993. These institutions are experiencing the effects
of softening real estate markets and weakening state
economies. The BIF's resolution costs of these institutions
are estimated to range from $25.8 billion to $35.3 billion, of
which $16.3 billion already has been recognized as a cost.
The further into the future projections of bank solvency are
made, the greater the uncertainty of which banks will fail
and the magnitude of the loss associated with those
failures. The accuracy of these estimates will depend

largely on future economic conditions, particularly in real
estate markets and in the volume of real estate held by
the federal government, and the resulting impact on the
financial performance of banks and bank borrowers.
Litigation Losses

12. Assessm ents

During a 1992 first quarter review, the FDIC's Legal Division
has determined that the estimated liability for unresolved
legal cases could result in litigation losses as high as $330
million. This exceeds the amount recorded for 1991 as
estimated liabilities for litigation losses by $169 million.

The FDI Act authorizes the FDIC to set assessment rates
for the BIF members semiannually, to be applied against a
member's average assessment base. The assessment rate
for the first semiannual period for calendar year 1991 was
0.195 percent (19.5 cents per $100 of domestic deposits).
The FDIC Board of Directors approved an increase in the
assessment rate to 0.230 percent (23 cents per $100 of
domestic deposits) for the second semiannual period of
1991 and thereafter.
The FDI Act, as amended by the 1991 Act, authorizes the
FDIC to increase assessment rates for BIF-member
institutions as needed to ensure that funds are available to
satisfy BIF obligations. Also, the 1991 Act requires the FDIC
to provide a recapitalization schedule, not to exceed 15
years, that outlines projected semiannual assessment rate
increases and interim targeted reserve ratios until the
designated reserve ratio of 1.25 percent of insured deposits
is achieved.

13. Interes t and O th er
Insurance Expenses

The FDIC incurs interest expense on its note obligations,
escrowed funds and FFB borrowings. Other insurance
expenses are incurred by the BIF as a result of: 1) paying
insured depositors in closed bank payoff activity, including
funding "bridge bank" operations; 2) administering and
liquidating assets purchased in a corporate capacity; and
3) administering assistance transactions.

Interest and O ther Insurance Expenses
Dollars in Thousands

December 31
1991

1990

Interest Expense for:
Notes payable

12,282

94,453

Escrowed funds from resolution transactions

664,102

313,073

FFB borrowings

237,853

-0-

914,237

407,526

2,895

16,704

55,226

43,472

129,698

202,260

187,819

262,436

$ 1,102,056

$ 669,962

Insurance Expense for:
Resolution transactions
Corporate purchases
Assistance transactions

14. Pension B enefits,
Savings Plans and
A ccru ed A nnual
Leave
1 Pension B enefits and Savings Plans Expenses
Dollars in Thousands

December 31
1991

Civil Service Retirement System
Federal Employee Retirement System (Basic Benefit)

6,622

1990
$

6,284

15,667

10,573

FDIC Savings Plan

7,308

5,697

Federal Thrift Savings Plan

3,838

2,181

$ 33,435

$ 24,735

Eligible FDIC employees (i.e., all permanent and temporary
employees with appointments exceeding one year) are
covered by either the Civil Service Retirement System
(CSRS) or the Federal Employee Retirement System (FERS).

The CSRS is a defined benefit plan integrated with the
Social Security System in certain cases. Plan benefits are
determined on the basis of years of creditable service and
compensation levels. The CSRS-covered employees can
also participate in a federally sponsored tax-deferred savings
plan available to provide additional retirement benefits. The
FERS is a three-part plan consisting of a basic defined
benefit plan that provides benefits based on years of
creditable service and compensation levels, Social Security
benefits and a tax-deferred savings plan. Further, automatic
and matching employer contributions are provided up to
specified amounts under the FERS. Eligible employees may
participate in an FDIC-sponsored tax-deferred savings plan
with matching contributions. The BIF pays the employer's
portion of the related costs.
The liability to employees for accrued annual leave is approxi
mately $20,444,000 and $17,062,000 at December 31, 1991
and 1990, respectively.
Although the BIF contributes a portion of pension benefits
for eligible employees, it does not account for the assets
of either retirement system, nor does it have actuarial data
with respect to accumulated plan benefits or the unfunded
liability relative to eligible employees. These amounts are
reported and accounted for by the U.S. Office of Personnel
Management.

15. FDIC H ealth , D en tal
and Life Insurance
Plans fo r Retirees

The BIF's allocated share of retiree benefits provided the
following:

| FDIC H ealth and D en tal Plans
December 31

Dollars in Thousands
1991

1990

Health premiums paid

$ 573

$434

Dental premiums paid

was changed to a "minimum premium funding arrange
ment." Fixed costs and expenses for claims are paid as
incurred. Premiums are deposited for claims incurred but
not reported. The premiums are held by the FDIC.
The life insurance program is underwritten by Metropolitan
Life Insurance Company. The program provides for basic
coverage at no cost and allows converting optional
coverages to direct-pay plans with Metropolitan Life.
The FDIC does not make any contributions towards
annuitants' basic life insurance coverage; this charge
is built into rates for active employees.
The Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 106 (Employers' Ac
counting for Postretirement Benefits Other Than Pensions),
which the FDIC is required to adopt by 1993. The standard
requires companies to recognize postretirement benefits
during the years employees are working and earning bene
fits for retirement. Resulting estimated expenses will be
allocated to the BIF based on the relative degree to which
expenses were incurred. Although the impact of the FDIC's
adoption of the standard cannot reasonably be estimated at
this time, the standard may increase reported administrative
costs and expenses of the BIF.

16. C om m itm en ts

Leases

Lease agreement commitments for the BIF office space are
$87,841,381 for future years. The agreements contain esca
lation clauses resulting in adjustments, usually on an annual
basis. The BIF recognized leased space expense of
$37,294,000 and $31,284,000 for the years ended Decem
ber 31, 1991 and 1990, respectively. The BIF's allocated
share of leased space fees for future years, which are
committed per contractual agreement, are as follows:

| Leased Fees
Dollars in Thousands
1992

1993

1994

1995

1996

$25,968

$22,823

$19,028

$13,029

$6,993

Asset Putbacks

Upon resolution of a failed bank, the assets are placed into
receivership and may be sold to an acquirer under an agree
ment that certain assets may be "put back," or resold,
to the receivership at the recognized book value within a
defined period of time. It is possible that the BIF could be
called upon to fund the purchase of any or all of the "unex
pired puts" at any time prior to expiration. The FDIC's esti
mate of the volume of assets that are subject to put under
existing agreements is $5.2 billion, including $1.3 billion
from the April sale of the Bank of New England franchise
to Fleet/Norstar and $2 billion from the Southeast Bank
assistance transaction. The total amount that will be
repurchased and the losses resulting from these acquisi
tions is not reasonably estimable at December 31, 1991.

17. C o n c en tra tio n o f
C red it Risk

The BIF is counterparty to a group of financial instruments
with entities located throughout regions of the United States
experiencing problems in both loans and real estate. The
BIF's maximum exposure to possible accounting loss,
should each counterparty to these instruments fail to
perform and any underlying assets prove to be of no value,
is shown as follows:

C o n c e n t r a t i o n o f C r e d i t R is k
D e c e m b e r 31, 1991

D ollars in M illio n s

M id w e s t

S o u th e a s t

S o u th w e s t

N o rth e a s t

$ 3 ,5 49

$ 1,815

$ 1 2 ,3 9 4

$ 16

2 ,1 40

111

2,106

-0-

$ 5,661

$ 3 ,9 5 5

C e n tral

W est

T o ta l

$369

$532

$ 18,675

-0-

2 ,3 40

3 ,0 53

-0-

5 ,1 59

$ 1 5 ,5 5 8

$16

$405

$579

$ 2 6 ,1 7 4

N e t rece iva b le s fro m
bank re s o lu tio n s
C o rpo ra te p u rch a se s (net)
A s s e t p u tb a c k a g re e m e n ts
(off-balance sheet)
T o ta l

18. S up p lem en tary
In fo rm a tio n R elating
to th e S ta te m en ts
o f Cash Flows
Reconciliation of N et Loss to N et Cash Used by O perating A c tiv itie s
Dollars in Thousands

Net (Loss)

December 31
1991

1990

$ (11,072,427)

$ (9,165,037)

Adjustments to reconcile net loss to net cash used by operating activities:

Provision for insurance losses
Amortization of U.S. Treasury obligations
Interest on Federal Financing Bank borrowings

15,476,192

12,133,088

47,042

76,594

126,010

Gain on sale of U.S. Treasury obligations

(3,806)

Depreciation expense

2,667

765

630

1,387

Decrease in assessment receivable

Increase (decrease) in accounts payable, accrued and other liabilities

Decrease in accrued interest receivable on investments and other assets

Disbursements for bank resolutions not impacting income

Accrual of assets and liabilities from bank resolutions

Net cash used by operating activities

(9,845)

188,658

(14,861,031)

278,877

$ (9,827,033)

(6,143)

31,359

20,159

(7,166,372)

334,689

$ (3,739,511)

The non-cash financing activity for the year ending
December 31,1991, included: 1) a write-down of a note
payable totaling $92,261,000 resulting from the repurchase
of stock owned by the Corporation and 2) an increase to
notes payable of $12,954,181 resulting from the rollover
of accrued interest on borrowings from the FFB.
In 1990, there was an increase of $2.1 billion in net
receivables from bank resolutions and a reciprocal increase
in liabilities incurred from bank resolutions. These
transactions were for notes issued and for the establish
ment of valuation allowances for failed banks previously
presented as unresolved contingent liabilities.

As stated in the Summary of Significant Accounting
Policies (See Note 2, Escrowed Funds from Resolution
Transactions), the BIF pays the acquirer the difference
between failed bank liabilities assumed and assets
purchased, plus or minus any premium or discount.
The BIF considers the assets purchased portion of this
transaction to be a non-cash adjustment. Accordingly,
for Cash Flow Statement presentation, cash outflows
for bank resolutions excludes $4.9 billion in 1991 and
$3.3 billion in 1990 for assets purchased.

19. Subsequent Events

CrossLand Savings, FSB
Brooklyn, New York

On January 24, 1992, CrossLand Savings, FSB, was closed
by the Office of Thrift Supervision (OTS) and the FDIC was
appointed receiver. The receiver organized a new assuming
savings bank (CrossLand Federal Savings Bank) and the
charter was approved by the OTS. The OTS appointed the
FDIC as conservator of the assuming bank, which acquired
virtually all of the assets, deposits and certain non-deposit
liabilities of the failed bank. In 1991, the BIF recorded an
estimated loss of $1.1 billion for this transaction.

Dollar Dry Dock Bank
White Plains, New York

On February 21, 1992, Dollar Dry Dock Bank, a savings
bank, was declared insolvent by the state chartering author
ity and subsequently closed and the FDIC was appointed
receiver. The FDIC approved the sale of the failed institution
to Emigrant Savings Bank of New York. In 1991, the BIF re
corded an estimated loss of $600 million for this transaction.

GAO

United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
o f the United States

B-114831

To the Board of Directors
Federal Deposit Insurance Corporation
We have audited the accompanying statements of financial
position of the Bank Insurance Fund as of December 31, 1991
and 1990, and the related statements of income and fund
balance and statements of cash flows for the years then
ended. These financial statements are the responsibility of
the management of the Federal Deposit Insurance Corporation
(FDIC), the Fund's administrator. Our responsibility is to
express an opinion on these financial statements based on
our audits.
In addition, we are reporting on our
consideration of FDIC's internal control structure and on
its compliance with laws and regulations as they relate to
the Fund.
We conducted our audits in accordance with generally
accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management as well as
evaluating the overall financial statements' presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of the Bank Insurance Fund as of December 31, 1991
and 1990, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles. However, significant
uncertainties regarding the value of real estate assets may
ultimately result in substantial reductions in the recovery
value of failed bank assets held by the Fund and in
substantial increases in costs from resolving future bank
failures.
The Fund's December 31, 1991, financial statements reported
a deficit fund balance for the first time in the Fund's
history. For the year ended December 31, 1991, the Fund

reported a net loss of $11.1 billion, resulting in a fund
deficit of $7 billion as of December 31, 1991. This deficit
reflects the Fund's continued erosion through 4 consecutive
years of net losses.
In 1991, problems facing the banking industry became
increasingly concentrated in larger banks. The number of
troubled banks at December 31, 1991, as represented by banks
on FDIC's problem institution list, increased slightly from
the previous year. However, total assets of these troubled
banks increased by nearly 50 percent over the previous year,
to over $600 billion. The failure of large banks can result
in additional, significant losses to the Fund in future
years, which could further increase the Fund's deficit.
UNCERTAINTIES AFFECT THE
ULTIMATE RECOVERIES FROM
RECEIVERSHIP ASSETS
The Fund's December 31, 1991 and 1990 financial statements
include $43.4 billion and $28.9 billion, respectively, in
amounts the Fund advanced for resolving troubled banks, net
of actual recoveries. These amounts are reported as
receivables from bank resolutions on the Fund's financial
statements. Funds to repay amounts advanced are generated
from FDIC's management and liguidation of assets acguired
from failed banks. Because the management and disposition
of these assets generally will not generate amounts equal to
the asset values as reflected on failed banks' financial
records, FDIC establishes an allowance for losses against
the receivables. The allowance for losses represents the
difference between amounts advanced and the expected
repayment, net of all estimated liquidation costs. As of
December 31, 1991 and 1990, the allowance for losses equaled
$22.4 billion and $16.6 billion, respectively.
FDIC maintains a management information system for assets in
liquidation, which provides information on estimated
recoveries from the management and sale of failed
institution assets. These estimated recoveries are used to
derive the allowance for losses. Because of material
internal control weaknesses we identified in this system, we
designed alternative audit procedures to test the
reasonableness of the allowance for losses reported on the
Fund's financial statements. These procedures, which
consisted of analyzing FDIC's collection experience on
failed bank assets to assess the reasonableness of the
estimated recoveries on the Fund's existing asset inventory,
provided us with reasonable assurance that the balance of
net receivables from bank resolutions reported on the Fund's
financial statements was fairly stated.
The estimates of future recoveries derived from historical
collection experience, however, are subject to significant
uncertainties.
In recent years, economic conditions have
adversely affected asset values, particularly real estate
assets. Furthermore, the rapid growth in government-held

assets and the significant volume of real estate assets now
on the market, coupled with the significant discounts the
Resolution Trust Corporation offers in an attempt to reduce
its inventory of real estate assets, could materially affect
FDIC's ability to generate future recoveries from asset
sales for the Fund at rates comparable to those it
experienced in the past.
As of December 31, 1991, the Fund, in its receivership
capacity, held failed bank assets with a book value of
$34.4 billion, an increase of nearly 200 percent from the
$11.5 billion book value of failed bank assets the Fund held
just 2 years ago. As more banks fail, the Fund's inventory
of assets may continue to grow, increasing the Fund's
exposure to unanticipated losses due to the existing
uncertainties which may adversely affect FDIC's ultimate
recovery on the disposition of these assets. Additionally,
material internal control weaknesses in FDIC's management
information system for assets in liquidation increases the
Fund's risk of future exposure to losses resulting from
errors and irregularities that may not be detected in a
timely manner.
UNCERTAINTIES AFFECT THE
FUND'S ULTIMATE COST OF
RESOLVING TROUBLED BANKS
The Fund's financial statements also reflect FDIC's estimate
of the cost that the Fund will incur in resolving troubled
banks that meet the criteria for loss recognition under
generally accepted accounting principles.
In 1990, FDIC
used the equity position of a troubled institution as its
basis for recognizing an estimated loss. Under these
criteria, FDIC recorded an estimated loss of $7.7 billion on
the Fund's December 31, 1990, financial statements for those
banks determined to be equity insolvent.1 The approach FDIC
used in determining the Fund's estimated loss from troubled
banks at December 31, 1990, was in accordance with existing
accounting standards.

xEquity insolvent banks are banks that reported negative
equity capital on their quarterly financial reports filed
with the regulators (call reports), and banks that reported
positive equity capital on their quarterly call reports but
whose reserves for loan losses, when compared to their level
of nonperforming loans and loss reserves levels for similar
banks in the same geographical region, were determined to be
insufficient to cover the level of losses inherent in their
loan portfolios. When these banks' reserves for loan losses
were increased to reflect a more appropriate level to cover
loan losses, their equity capital was depleted, resulting in
their insolvency.

In 1991, FDIC revised its approach for determining what
triggers the recognizing of estimated losses from troubled
banks on the Fund's financial statements. In addition to
including banks that are insolvent on an equity capital
basis at year-end, FDIC recognized estimated losses on the
Fund's financial statements for banks with positive equity
capital at year-end whose financial conditions are such that
FDIC believes it is more likely than not that the banks will
require resolution in the near future.
In general, these banks with positive equity capital at
year-end had minimal capital, excessive levels of problem
assets, and earnings trends that, if continued, would lead
to their insolvency in the near future. This approach is
consistent with the loss recognition criteria we discussed
in our report on the Fund's 1990 financial statements2 and
is within the latitude provided in the existing accounting
standards regarding loss recognition. As of December 31,
1991, FDIC estimated, using its revised approach, that the
Fund will incur costs of $16.3 billion for resolving
troubled banks in the near future. As we disclosed in our
report on the Fund's 1990 financial statements, if FDIC
had applied this approach in 1990, $5.4 billion in
additional estimated losses would have been recognized at
that time, and the Fund would have had a deficit balance of
$1.4 billion instead of the reported balance of $4.0 billion
as of December 31, 1990.
As stated in note 11 to the financial statements, FDIC has
estimated that troubled banks with combined assets ranging
from $168 billion to $236 billion could fail in the next 2
years. FDIC estimates that the cost of resolving these
banks could be between $25.8 billion and $35.3 billion, of
which $16.3 billion has already been recorded on the Fund's
1991 financial statements for those banks that met FDIC's
loss recognition criteria as of December 31, 1991. If the
additional banks do fail, the Fund faces estimated costs
beyond those already recognized on the financial statements
of between $9.5 billion and $19.0 billion.
FDIC's loss estimates for troubled banks are primarily based
on past resolution experience. Consequently, these
estimates are subject to the same uncertainties as those
affecting FDIC's estimates of future recoveries on the
management and liquidation of assets acquired from
previously failed banks. In addition, changes in economic
conditions and fluctuations in interest rates can affect the
timing of bank failures and the closing of these banks by
regulators. Short-term profits due to the current low
interest rates and gains from asset sales may delay the
timing of a troubled bank's failure, but they do not
necessarily eliminate the losses imbedded in the bank's
asset portfolio.
Sustained economic growth and improved

financial Audit: Bank Insurance Fund's 1990 and 1989
Financial Statements, (GAO/AFMD-92-24, November 12, 1991).

real estate market conditions, coupled with banks' efforts
to adequately recognize the extent of loan losses in their
portfolios, dispose of poor quality assets, and meet capital
requirements, are critical factors affecting a troubled
bank's return to viability.
ADEQUACY OF FUNDING FOR
RESOLVING TROUBLED BANKS IS
DEPENDENT ON FUTURE EVENTS
The Federal Deposit Insurance Corporation Improvement Act of
1991 (Public Law 102-242), enacted December 19, 1991,
provided FDIC with increased authority to borrow funds to
cover both losses and working capital needs related to
resolution activity. The FDIC Improvement Act increased
FDIC's authority to borrow funds from the Treasury on behalf
of the Bank Insurance Fund and the Savings Association
Insurance Fund (SAIF)3 to cover losses incurred in resolving
troubled institutions to $30 billion. However, it also
requires FDIC to recover these loss funds through premium
assessments charged to insured institutions.
In addition,
FDIC may borrow funds for working capital, but the amount of
its outstanding working capital borrowings is subject to a
formula in the act that limits FDIC's total outstanding
obligations. FDIC borrows working capital on behalf of the
Fund from the Federal Financing Bank. Such borrowings are
to be repaid primarily from the management and disposition
of failed financial institution assets.
The adequacy of the funding the act provides to deal with
the Fund's exposure to troubled banks is subject to a number
of uncertainties. To the extent actual recoveries from the
management and disposition of failed bank assets fall short
of expectations, the ultimate cost of resolving these
institutions will increase.
If this occurs, the Fund may
require additional loss funds to cover the shortfall.
Furthermore, it is difficult to project the Fund's long term
exposure to losses from troubled banks. While the
$30 billion in loss funds appears to be sufficient based on
FDIC's short-term projections of identifiable costs the Fund
faces from troubled banks, any additional banks requiring
resolution could result in the need for increased funding.
Future events in the thrift industry could also
significantly affect the adequacy of the funding provided.
Under the FDIC Improvement Act, FDIC is authorized to borrow
$30 billion from the Treasury to cover losses incurred in

3SAIF was established under the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
(Public Law 101-73) to insure the deposits of federallyinsured savings associations (thrifts) and thrift deposits
acquired by so-called "Oakar banks" under Section 5(d)(3) of
the Federal Deposit Insurance Act. Through September 30,
1993, however, SAIF will share resolution responsibility
with the Resolution Trust Corporation (RTC).

resolving institutions insured by both the Bank Insurance
Fund and SAIF. FIRREA also established RTC to resolve
thrifts whose deposits had been insured by the Federal
Savings and Loan Insurance Corporation (FSLIC) and that had
been, or will be, placed into conservatorship or
receivership from January 1, 1989, through August 8, 1992.
The Resolution Trust Corporation Refinancing, Restructuring,
and Improvement Act of 1991 (Public Law 102-233), enacted on
December 12, 1991, extended RTC's resolution authority to
thrifts placed into conservatorship or receivership through
September 30, 1993. After this date, responsibility for
resolving all federally-insured thrifts will be shifted to
SAIF.4
Favorable interest rates could delay many thrift failures
until after September 30, 1993. If the costs of resolving
these institutions exceed SAIF's other available funding
sources, FDIC could be forced to use some of the $30 billion
in borrowing authority to cover SAIF's losses. Were this to
occur, the funding the FDIC Improvement Act provides may not
be sufficient to cover the exposure posed to both SAIF and
the Bank Insurance Fund from their respective industries.
ADDITIO NAL EFFORTS TO
R E C A P IT A L IZ E THE FUND
MAY BE NEEDED

The last 4 years have demonstrated how quickly unanticipated
events can adversely impact the banking industry and
ultimately deplete the reserves of the Fund. The Fund's
dramatic decline from a high of $18.3 billion as of
December 31, 1987, to its reported deficit of $7 billion as
of December 31, 1991, illustrates the extent and swiftness
in which rising numbers and costs of bank failures have
depleted the Fund. At the time the Fund attained its
highest level, the ratio of its reserves to insured deposits
equaled approximately 1.10 percent.
In the succeeding 4
years, as the Fund's reserve position declined by over
$25 billion, the ratio of its reserve balance to insured
deposits declined precipitously to a negative 0.36 percent
as of December 31, 1991.
The FDIC Improvement Act contains provisions to recapitalize
the Fund. It requires FDIC to set semiannual assessment
rates for insured institutions that are sufficient to
increase the Fund's ratio of its reserves to insured
deposits to a designated ratio established by FIRREA of 1.25
“Any thrift requiring resolution after September 30, 1993,
which had previously been under RTC conservatorship or
receivership may be transferred back to RTC for resolution
in accordance with the provisions of the Resolution Trust
Corporation Refinancing, Restructuring, and Improvement Act
of 1991.

percent no later than 1 year after setting the assessment
rates, or in accordance with a recapitalization schedule
established by FDIC. This schedule must specify, at
semiannual intervals, target reserve ratios for the Fund,
culminating in a ratio of reserves to insured deposits that
is equal to the designated reserve ratio no later than 15
years after the date on which the schedule becomes
effective. The FDIC Improvement Act also requires FDIC to
implement a risk-based premium system by January 1, 1994.
Under this system, insured institutions considered to pose a
greater risk of loss to the Fund would be assessed at higher
rates than stronger, well capitalized and managed
institutions. The act permits FDIC to implement a
transitional risk-based premium system prior to January 1,
1994.
FDIC recently issued a proposal for public comment to
increase the semiannual assessment rates charged to insured
institutions from the current rate of 23 cents per $100 of
domestic deposits to 28 cents, effective January 1, 1993.
This proposed rate increase is based on an analysis of the
condition of the Fund and its ability to achieve the
designated reserve ratio over the next 15 years. Concurrent
with this proposal, FDIC proposed to shift to a risk-based
premium system, also effective January 1, 1993. The initial
assessment rates under the proposed risk-based premium
system range from between 25 cents and 31 cents per $100 of
domestic deposits and would vary from institution to
institution based on the regulators' assessment of the
institution's condition and health.
If FDIC implements such
a risk-based premium structure by January 1, 1993, it
estimates that the proposed assessment rate of 28 cents per
$100 of domestic deposits would become the average
assessment rate FDIC would charge.
Even under the proposed assessment rate increase, there is
considerable risk that the Fund will not achieve the
designated reserve ratio within the maximum 15 year period
allowed for in the FDIC Improvement Act. FDIC estimates
that, with an assessment rate of 28 cents per $100 of
domestic deposits, the probability of the Fund's reserves
achieving the designated reserve ratio in 15 years is only
60 percent. Given the uncertainties discussed above that
may ultimately impact asset recovery values, costs from
future resolution activity, and the adequacy of the funding
provided under the act, it is important to replenish the
Fund's reserves as expeditiously as possible. As the last 4
years have shown, unexpected events such as economic

downturns and their resulting impact on the banking industry
can quickly deplete reserve levels once considered to be
healthy.
It is important that the Fund be recapitalized to
avoid further borrowings from the taxpayers to finance
losses from financial institution failures. This is
consistent with previous positions we have taken regarding
the need to recapitalize the Fund.5

Charles A. Bowsher
Comptroller General
of the United States
May 11, 1992

Rebuilding the Bank Insurance Fund, (GAO/T-GGD-91-25,
April 26 , 1991) .

Financial

Statements

Savings Association
Insurance Fund

S A I F

Financial
Statements

Federal Deposit Insurance Corporation
Savings A ssociation Insurance Fund
S tatem e n ts o f Incom e and th e Fund Balance
For the Year Ended
December 31

Dollars in Thousands

1990

1991
Revenue
Assessments earned (Note 11)

87,964

16,999

-0-

2,908

-0-

90,880

16,999

Administrative expenses

42,362

56,088

Provision for losses (Note 5)

20,114

-0-

609

-0-

63,085

56,088

27,795

(39,089)

42,362

56,088

Net Income

70,157

16,999

Fund Balance - Beginning

17,001

Entrance fee revenue (Note 4)
Interest income

Expenses and Losses

Interest expense (Note 5)

Net Income (Loss) before Funding Transfer

Funding Transfer from the FSLIC Resolution Fund (Note 1)

Fund Balance - Ending

The accompanying notes are an integral part of these financial statements.

87,158

17,001

Federal Deposit Insurance Corporation
Savings A ssociation Insurance Fund
S tatem en ts of Financial Position
Dollars in Thousands

December 31
1991

1990

Assets
Cash and cash equivalents, including restricted amounts
of $56,119 for 1991 and $12,964 for 1990 (Note 3)

56,681

$ 16,535

Entrance and exit fees receivable, net (Note 4)

91,015

49,384

Due from the FSLIC Resolution Fund (Note 11)

109,561

17,010

Other assets

745

626
258,002

83,555

3,428

4,100

20,723

-0-

Liabilities and the Fund Balance
Accounts payable, accrued and other liabilities
Due to the Bank Insurance Fund (Note 5)
Total Liabilities

24,151

SAIF-member exit fees and investment proceeds held in reserve (Note 4)

Fund Balance

4,100

146,693

87,158

17,001

$ 258,002

The accompanying notes are an integral part of these financial statements.

62,454

$ 83,555

Federal Deposit Insurance Corporation
Savings A ssociation Insurance Fund
S tatem en ts of Cash Flows
Dollars in Thousands

For the Year Ended
December 31
1991

1990

Cash Flows From Operating Activities
Cash inflows from:
$ 40,650

$ 56,088

40,868

12,961

2,207

-0-

120

43,579

52,399

Net Cash Provided By Operating Activities (Note 10)

40,146

16,535

Cash and Cash Equivalents - Beginning

16,535

Administrative expenses funded by the FSLIC Resolution Fund (Note 1)
Entrance and exit fee collections (Note 4)
Interest on U.S. Treasury obligations

Cash outflows for:
Transition assessment payment transferred to the FSLIC Resolution Fund (Note 6)
Administrative expenses (Note 1)

Cash and Cash Equivalents - Ending

The accompanying notes are an integral part of these financial statements.

8 56,681

_____ ^

$16,535

Notes to Financial Statements
Savings Association Insurance Fund
December 31, 1991 and 1990

1. Legislative H istory
and Reform

The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) was enacted to reform,
recapitalize and consolidate the federal deposit insurance
system. FIRREA designated the Federal Deposit Insurance
Corporation (FDIC) as administrator of the Bank Insurance
Fund (BIF), which insures the deposits of all BIF-member
institutions (normally commercial banks), and the Savings
Association Insurance Fund (SAIF), which insures the
deposits of all SAIF-member institutions (normally thrifts).
Both insurance funds are maintained separately to carry out
their respective mandates. The FDIC also administers the
FSLIC Resolution Fund (FRF) which is responsible for
winding up the affairs of the former Federal Savings and
Loan Insurance Corporation (FSLIC).
FIRREA created the Resolution Trust Corporation (RTC),
which manages and resolves all thrifts previously insured by
the FSLIC for which a conservator or receiver is appointed
during the period January 1, 1989, through August 8, 1992.
The Resolution Trust Corporation Refinancing, Restructuring
and Improvement Act of 1991 (1991 RTC Act) extende'd the
RTC's general resolution authority through September 30,
1993, and beyond that date for those institutions previously
placed under RTC control.
The Resolution Funding Corporation (REFCORP) was
established by FIRREA to provide funds to the RTC for
use in the thrift industry bailout. The Financing Corporation
(FICO),established under the Competitive Equality Banking
Act of 1987, is a mixed-ownership government corporation
whose sole purpose was to function as a financing vehicle
for the FSLIC. However, effective December 12, 1991,
as provided by the Resolution Trust Corporation Thrift
Depositor Protection Reform Act of 1991, the FICO's
authority to issue obligations as a means of financing for
the FRF was terminated.
The Omnibus Budget Reconciliation Act of 1990 removed
caps on assessment rate increases and allowed for semi
annual rate increases. In addition, this Act permitted the
FDIC, on behalf of the BIF and the SAIF, to borrow from the
Federal Financing Bank (FFB) on terms and conditions
determined by the FFB.
The Federal Deposit Insurance Corporation Improvement
Act of 1991 (1991 Act) was enacted to further strengthen
the FDIC. The FDIC's authority to borrow from the U.S.
Treasury was increased from $5 billion to $30 billion.
However, the FDIC cannot incur any additional obligation
for the BIF or the SAIF if the amount of obligations in the
respective Fund would exceed the sum of: 1) its cash
and cash equivalents; 2) the amount equal to 90 percent

of the fair-market value of its other assets; and 3) its portion
of the total amount authorized to be borrowed from the
U.S. Treasury (excluding FFB borrowings).
As required by the 1991 Act, U.S. Treasury borrowings are
to be repaid from assessment revenues. The FDIC must
provide the U.S. Treasury a repayment schedule demonstrat
ing that future assessment revenues are adequate to repay
principal borrowed and pay interest due. In addition, the
FDIC now has authority to increase assessment rates
more frequently than semiannually and impose emergency
special assessments as necessary to ensure that funds
are available for these payments.
Operations of the SAIF

The primary purpose of the SAIF is to insure the deposits
and to protect the depositors of insured savings associa
tions. In this capacity, the SAIF currently has financial
responsibility for: 1) all federally insured depository
institutions that became members of the SAIF after
August 8, 1989, for which the RTC does not have resolution
authority and 2) all deposits insured by the SAIF which
are held by BIF-member banks (so called "Oakar"
banks, created pursuant to the "Oakar amendment"
provisions found in Section 5(d)(3) of the FDI Act). After
September 30, 1993, the SAIF will assume financial respon
sibility for all SAIF-member depository institutions which had
not previously been placed under the RTC's control.
The "Oakar amendment" provisions referred to above allow,
with approval of the appropriate federal regulatory authority,
any insured depository institution to merge, consolidate or
transfer the assets and liabilities of an acquired institution(s)
without changing insurance coverage for the acquired depos
its. Such acquired deposits continue to be either SAIF-insured deposits and assessed at the SAIF assessment rate
or BIF-insured deposits and assessed at the BIF assessment
rate. In addition, any losses resulting from the failure of
these institutions are to be allocated between the BIF and
the SAIF based on the respective dollar amounts of the
institution's BIF-insured and SAIF-insured deposits.
The SAIF is funded from the following sources: 1) Reim
bursement by the FRF of administrative and supervisory
expenses incurred between August 9, 1989, and September
30, 1992. These expenses have priority over other obliga
tions of the FRF and funding is provided as expenses are
recognized by the SAIF; 2) SAIF-member assessments from
"Oakar" banks; 3) SAIF assessments that are not required
for the FICO, the REFCORP or the FRF; 4) U.S. Treasury pay
ments for the amount, if any, needed to supplement
assessment revenue to reach a $2 billion level for each of
the fiscal years 1993 through 2000; 5) U.S. Treasury

payments for any additional amounts that may be necessary
to ensure that the SAIF has a statutory specified minimum
net worth for each of the fiscal years 1992 through 2000;
6) Discretionary payments by the RTC; 7) Federal Flome
Loan Bank borrowings; and 8) U.S. Treasury and FFB
borrowings.

2. Sum m ary of
S ig n ifica n t
A cco u n tin g
Policies

Assessment Revenue
Recognition

FIRREA directed that the FICO, the REFCORP and the
FRF have priority over the SAIF for receiving and utilizing
SAIF-member assessments to ensure availability of funds
for specific operational activities. Accordingly, the SAIF
recognizes as assessment revenue only that portion of
SAIF-member assessments not required by the FICO, the
REFCORP or the FRF. Assessments on SAIF-insured
deposits by "Oakar" banks are retained in the SAIF and,
thus, are not subject to draws by the FICO, the REFCORP
or the FRF (see Note 11).

Litigation Losses

The SAIF includes in current period expenses the change
in the estimated loss from litigation against the SAIF. The
FDIC's Legal Division recommends these estimated losses
on a case-by-case basis. As of December 31, 1991 and
1990, no litigation was pending against the SAIF.

Cost Allocations
Among Funds

Operating expenses (including personnel, administrative
and other indirect expenses) not directly charged to each
Fund under the FDIC's management are allocated on the
basis of the relative degree to which the expenses were
incurred by the Funds.
The cost of furniture, fixtures and equipment purchased
by the FDIC on behalf of the three Funds under its adminis
tration is allocated among these Funds on a pro rata basis.
The SAIF expenses its share of these allocated costs at the
time of acquisition because capitalizing these expenditures
would not be cost-beneficial to the SAIF.

Related Parties

The nature of related parties and descriptions of related
party transactions are disclosed throughout the financial
statements and footnotes.

Restatement

A restatement was made to the 1990 Financial Statements
regarding assessments paid on SAIF deposits by "Oakar"
banks (see Note 11).

Reclassifications

Reclassifications have been made in the 1990 Financial
Statements to conform to the presentation used in 1991.

3. Cash and Cash
Equivalents

The SAIF considers cash equivalents to be short-term,
highly liquid investments with original maturities of three
months or less. The SAIF exit fees collected plus interest
(See Note 4) comprise substantially all of the cash and
cash equivalent balances and may only be used to meet
the SAIF's potential obligation to the FICO. Cash and cash
equivalents consisted of the following:

Cash and Cash E quivalents
Dollars in Thousands

f
December 31
1991

Cash
Cash equivalents

4. Entrance and
E xit Fees

491

1990
$

6,241

56,190

10,294

$ 56,681

$ 16,535

The SAIF will receive entrance and exit fees for conversion
transactions in which an insured depository institution
converts from the BIF to the SAIF (resulting in an entrance
fee) or from the SAIF to the BIF (resulting in an exit fee).
Interim regulations approved by the FDIC Board of Directors
and published in the Federal Register on March 21, 1990,
directed that exit fees paid to the SAIF be held in a reserve
account until the FDIC and the Secretary of the Treasury
determine that it is no longer necessary to reserve such
funds for the payment of interest on obligations previously
issued by the FICO. It is the FDIC's policy to invest exit fee
collections in overnight Treasury securities and hold the
proceeds in reserve pending determination of ownership.
The SAIF records entrance fees as revenue after the BIFto-SAIF conversion transaction is consummated. However,
due to the requirement that the SAIF exit fees be held in a
reserve account, thereby restricting the SAIF's use of such
proceeds, the SAIF does not recognize exit fees, nor any
interest earned, as revenue. Instead, the SAIF recognizes
the consummation of a SAIF-to-BIF conversion transaction
by establishing a receivable from the institution and an
identical reserve account to recognize the potential
payment to the FICO. As exit fee proceeds are received,
the receivable is reduced while the reserve remains pending
the determination of funding requirements for interest
payments on the FICO's obligations.
Within specified parameters, the interim regulations allow
an acquiring institution to pay its entrance/exit fees due,
interest free, in equal annual installments over a period of
not more than five years. When an institution elects such
a payment plan, the SAIF records the entrance or exit fee

receivable at its present value. The discount rates (current
value of funds) for 1991 and 1990 were 8 percent and
9 percent, respectively. Entrance and Exit Fees Receivable
consisted of the following:
1 Entrance and Exit Fees
Dollars in Thousands

December 31
1991

Entrance fees receivable

Entrance fees collected

1990
10

(10)

(2)

Exit fees receivable

159,510

71,525

Exit fees collected

(53,358)

(12,991)

Unamortized discount

(15,137)
$ 91,015

5. Due to th e Bank
Insurance Fund

6. Assessm ents

(9,150)
$ 49,384

On September 19, 1991, Southeast Bank, N.A., Miami,
Florida, which held deposits insured by the BIF and the
SAIF pursuant to the "Oakar amendment" provisions (as
explained in Note 1), was closed by its chartering authority.
The BIF, which provided the funds and administers the reso
lution of Southeast Bank, N. A., has estimated the loss for
the failure of Southeast Bank, N.A., and its affiliate South
east Bank of W est Florida, Pensacola, Florida, at $178 mil
lion, of which the SAIF has responsibility for $21 million (its
allocated share of the loss incurred). Accordingly, the SAIF
has established a payable to the BIF for its estimated trans
action cost. In addition, interest will accrue on the SAIF's
obligation based on the quarterly FFB borrowing rate. During
1991, this rate ranged between 4.7 percent and 5.9 percent.

Assessment Rate

The rate set for 1991 is 0.23 percent (23 cents per $100
of domestic deposits). Based on the present and projected
status of the SAIF, and anticipated expenses and revenue
for the next year, the ratio of the deposit insurance fund
to insured deposits is not expected to exceed the current
designated reserve ratio of 1.25 percent.

Transition Assessment

In September 1989, the FDIC allowed for a one-time
transition assessment against SAIF members. A portion
of this special assessment was claimed by the FICO for
debt servicing needs and the remaining amount was
allocated to the FRF. The $120,000 in interest remaining
to be transferred to the FRF as of December 31,1989,
was paid in 1990.

Secondary Reserve Offset

The FDI Act authorizes insured savings associations to
offset against any assessment premiums their pro rata
share of amounts that were previously part of the FSLIC's
"Secondary Reserve." The Secondary Reserve represented
premium prepayments that insured savings institutions
were required by law to deposit with the FSLIC during
the period 1961 through 1973 to quickly increase FSLIC's
insurance reserves to absorb losses if the regular assess
ments were insufficient. The allowable offset is limited to
a maximum of 20 percent of an institution's remaining pro
rata share for any calendar year beginning before 1993.
After calendar year 1992, there is no limitation on the
remaining offset amount.
The Secondary Reserve offset serves to reduce the gross
SAIF-member assessments due (excluding assessments
from "Oakar'' banks), thereby reducing the assessment
premiums available to the FICO, the REFCORP, the FRF
and the SAIF. The remaining Secondary Reserve balance
was $297,761,164 and $359,121,134 at year end 1991
and 1990, respectively. Assessments against SAIF
members and "Oakar" banks were as follows:

Assessm ents
December 31

Dollars in Thousands

SAIF assessments collected from SAIF members (net of Secondary Reserve
offset and other adjustments/credits of $72,992 and $101,152 in 1991 and 1990)

1991

1990

$ 1,795,227

$1,811,443

87,964

16,999

1,883,191

1,828,442

SAIF assessments earned from "Oakar" banks
Total assessments earned from SAIF members and "Oakar" banks
Less: FICO assessment
REFCORP assessment
Funds recognized by the FRF
Funds owed to the SAIF

(756,700)

(738,200)

-0-

(1,061,495)

(1,038,527)

(11,748)

87,964

16,999

7. Pension B enefits,
Savings Plans and
Accrued Annual Leave

The SAIF's allocated share of pension benefits and savings
plans expenses consisted of the following:

P e n s io n B e n e f it a n d S a v in g s P la n s E x p e n s e s

December 31

Dollars in Thousands
1991
Civil Service Retirement System

771

1990
$

840

1,303

1,187

FDIC Savings Plan

754

735

Federal Thrift Savings Plan

318

256

$ 3,146

$3,018

Federal Employee Retirement System (Basic Benefits)

Eligible FDIC employees (i.e., all permanent and temporary
employees with an appointment exceeding one year) are
covered by either the Civil Service Retirement System
(CSRS) or the Federal Employee Retirement System
(FERS). The CSRS is a defined benefit plan integrated with
the Social Security system in certain cases. Plan benefits are
determined on the basis of years of creditable service and
compensation levels. The CSRS-covered employees can
also participate in a federally sponsored tax-deferred savings
plan available to provide additional retirement benefits. The
FERS is a three-part plan consisting of a basic defined bene
fit plan which provides benefits based on years of creditable
service and compensation levels, Social Security benefits
and a tax-deferred savings plan. Further, automatic and
matching employer contributions are provided up to
specified amounts under the FERS. Eligible employees may
participate in an FDIC-sponsored tax-deferred savings plan
with matching contributions. The SAIF pays the employer's
portion of the related costs.
The liability to employees for accrued annual leave is approxi
mately $1,305,000 and $1,610,000 at December 31,1991
and 1990, respectively.
Although the SAIF contributes a portion of pension benefits
for eligible employees, it does not account for the assets
of either retirement system, nor does it have actuarial data
with respect to accumulated plan benefits or the unfunded
liability relative to eligible employees. These amounts are
reported and accounted for by the U.S. Office of Personnel
Management.

8. FDIC H ealth , D en ta l
and Life Insurance
Plans fo r Retirees

The SAIF's allocated share of retiree behefits are as
follows:

1 FDIC H ealth and D en tal Plans
December 31

Dollars in Thousands
1991

1990

Health premiums paid

$27

$41

Dental premiums paid

The FDIC provides certain health, dental and life insurance
coverage for its eligible retirees. Eligible retirees are those
who have elected the FDIC's health and/or life insurance
program and are entitled to an immediate annuity. The
health insurance coverage is a comprehensive fee-forservice program underwritten by Blue Cross/Blue Shield of
the National Capital Area, with hospital coverage and a major
medical wraparound; the dental care is underwritten by
Connecticut General Life Insurance Company. The FDIC
makes the same contributions for retirees as those for
active employees. The FDIC benefit programs are fully
insured. Effective January 1, 1991, the funding mechanism
was changed to a "minimum premium funding arrange
ment." Fixed costs and expenses for claims are paid as
incurred. Premiums are deposited for claims incurred but
not reported. The premiums are held by the FDIC.
The life insurance program is underwritten by Metropolitan
Life Insurance Company. The program provides for basic
coverage at no cost and allows converting optional cover
ages to direct-pay plans with Metropolitan Life. The FDIC
does not make any contributions towards annuitants' basic
life insurance coverage; this charge is built into rates for
active employees.
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standard No. 106
(Employers' Accounting for Postretirement Benefits Other
Than Pensions), which the FDIC is required to adopt by
1993. The standard requires companies to recognize
postretirement benefits during the years employees are
working and earning benefits for retirement. Resulting
estimated expenses will be allocated to the SAIF based
on the relative degree to which expenses were incurred.
Although the impact of the FDIC's adoption of the standard
cannot reasonably be estimated at this time, the standard
may increase reported administrative costs and expenses
of the SAIF.

9. C o m m itm en ts

The SAIF is currently sharing in the FDIC's lease of office
space. The SAIF's lease commitments for office space total
$1,976,000 for future years. The agreements contain escala
tion clauses resulting in adjustments, usually on an annual
basis. The SAIF recognized leased space expense of
approximately $1,668,325 and $3,383,000 for the years
ended December 31, 1991 and 1990, respectively. The
SAIF's allocated share of leased space fees for future years,
which are committed per contractual agreement, are as
follows:

Leased Fees
Dollars in Thousands
1992

1993

1994

1995

1996

$684

$552

$391

$208

$141

10. S upp lem en tary
Inform ation Relating
to th e S ta te m e n ts
o f Cash Flows
R econciliation o f N et Incom e to N et Cash Provided by O perating A c tiv itie s
Dollars in Thousands

For the Year Ended
December 31
1991

Net Income

$70,157

1990
$ 16,999

Adjustments to reconcile net income to net cash provided by operating activities:
Increase in amount due from the FSLIC Resolution Fund

(92,551)

(17,010)

Increase in entrance and exit fees receivable

(41,630)

(46,231)

Decrease (increase) in other assets

(119)

1,527

Increase (decrease) in accounts payable, accrued and other liabilities

(673)

1,947

Increase in amount due to the Bank Insurance Fund

20,723

-0-

Increase in exit fees and investment proceeds held in reserve

84,239

59,303

$40,146

$ 16,535

Net cash provided by operating activities

11. Subsequent Event

On March 27, 1992, the FDIC's Legal Division rendered
the opinion that, under FIRREA, assessments paid on SAIFinsured deposits by "Oakar" banks must be retained in the
SAIF, and, thus, are not subject to draws by the FICO, the
REFCORP or the FRF. As FIRREA became effective in
August 1989, the financial statements for 1990 have been
restated. The FRF received the assessments paid on SAIFinsured deposits in 1990 and 1991; therefore the effect of
this restatement was to establish a receivable from the FRF
and to recognize assessment revenue of $17 million in
1990. Additionally, in 1991, the receivable from the FRF was
increased by $91 million and assessment revenue of $88 mil
lion and interest revenue of $3 million were recognized. In
April 1992, the SAIF received $108 million from the FRF for
the 1991 principal and interest receivables.

GAO

United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
o f the United States

B-114893

To the Board of Directors
Federal Deposit Insurance Corporation
We have audited the accompanying statements of financial
position of the Savings Association Insurance Fund (SAIF) as
of December 31, 1991 and 1990, and the related statements of
income and fund balance and the statements of cash flows for
the years then ended. These financial statements are the
responsibility of the Federal Deposit Insurance Corporation
(FDIC), SAIF's administrator. Our responsibility is to
express an opinion on these financial statements based on
our audit. In addition, we are reporting on our
consideration of FDIC's internal control structure and its
compliance with laws and regulations as they relate to SAIF.
We conducted our audits in accordance with generally
accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of SAIF as of December 31, 1991 and 1990, and the
results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting
principles.
The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA), created SAIF to provide deposit
insurance to all federally-insured savings associations
(thrifts) and to thrift deposits acquired by banks, commonly
referred to as "Oakar banks."
Through September 30, 1993, the Resolution Trust Corporation
(RTC) and SAIF share responsibility for resolution costs
associated with failed thrifts. RTC is responsible for

resolution costs of any federally-insured thrift that was
previously insured by the Federal Savings and Loan Insurance
Corporation (FSLIC) and placed into conservatorship or
receivership from January 1, 1989, through September 30,
1993. SAIF is responsible for resolution costs of any
federally-insured thrift that was not previously insured by
FSLIC. After September 30, 1993, SAIF will assume the
resolution costs of all SAIF-insured thrifts, including
thrifts that were previously insured by FSLIC.1
In addition, SAIF is currently responsible for a portion of
losses incurred in the resolution of failed Oakar banks.
Pursuant to section 5(d)(3) of the Federal Deposit Insurance
Act (FDI Act), federally-insured banks can engage in
specified transactions in which they acquire thrift deposits
without changing insurance coverage for the acquired
deposits. Such acquired deposits continue to be insured by
SAIF and assessed at SAIF's assessment rate. Losses
resulting from the failure of Oakar banks are allocated
between SAIF and the Bank Insurance Fund (BIF) in proportion
to the bank's SAIF-insured and BIF-insured deposits.
The following sections provide supplementary comments
relating to SAIF's financial condition, SAIF's exposure to
thrift and bank failures, and factors that could affect the
adequacy of SAIF's funding sources.
SAIF'S FINANCIAL CONDITION
As of December 31, 1991, SAIF reported an $87 million fund
balance. As discussed in note 5 to the financial
statements, SAIF's 1991 financial statements reflect a $21
million loss attributable to the September 1991 failure of
Southeast Bank, an Oakar bank. This expense represents
SAIF's allocated share of the estimated cost FDIC incurred
for Southeast's resolution. During 1991, Southeast Bank was
the only Oakar bank closed by federal regulators.
As discussed in note 11 to the financial statements, FDIC
recently examined its treatment of assessments paid by Oakar
banks on SAIF-insured deposits. Since the enactment of
FIRREA in 1989, FDIC had treated Oakar assessments like
assessments paid by SAIF members and, accordingly, had
distributed the Oakar assessments along with assessments
from SAIF members to the Financing Corporation (FICO),
Resolution Funding Corporation (REFCORP), and FSLIC

xAny thrift requiring resolution after September 30, 1993,
which had previously been under RTC conservatorship or
receivership may be returned to RTC for resolution, in
accordance with the provisions of the Resolution Trust
Corporation Refinancing, Restructuring, and Improvement Act
of 1991.

Resolution Fund (FRF), under applicable statutory
provisions.2 FDIC concluded that Oakar assessments could
be retained by SAIF rather than distributed among FICO,
REFCORP, and FRF, and has applied this determination
retroactively to FIRREA's enactment. This retroactive
treatment results in SAIF reporting revenues of $91 million
and $17 million in 1991 and 1990, respectively, and
recognizing a receivable in 1991 from FRF of $108 million
for the Oakar assessments originally paid to FRF.3 Based
on our review of the applicable statutory provisions and
information FDIC provided, we believe its conclusion and
treatment of Oakar assessments are reasonable.
SAIF's FUTURE VIABILITY
IS UNCERTAIN
The losses SAIF incurs from future thrift and Oakar bank
failures and the adequacy of its funding to carry out its
responsibilities in light of these losses will affect SAIF's
ability to provide insurance protection to depositors and
remain viable.
SAIF's Continuing Exposure to
Losses From Thrift Failures
Private sector thrifts (those not under the government's
control) ended 1991 with a $2 billion profit, making 1991
the thrift industry's first profitable year in 5 years. The
Office of Thrift Supervision (OTS), the industry's federal
regulator, attributes this profit to (1) the decline in
interest rates, resulting in a favorable spread between the
rates of interest thrifts earn and the rates thrifts must
pay to borrow funds, and (2) RTC's resolution actions, which
eliminated a total of 584 unprofitable thrifts between
August 9, 1989, and December 31, 1991.
2FICO, established in 1987 to recapitalize FSLIC, has first
claim on assessments of SAIF members for payment of interest
and custodial costs on its bonds. Although FICO no longer
has authority to issue bonds, its claim to the assessments
will continue until the 30-year recapitalization bonds
mature.
In addition, REFCORP, established in 1989 to
provide funding for RTC, was entitled to assessments of SAIF
members to finance payment of bond principal. REFCORP
ceased all future bond issuances in early 1991 and therefore
has no further claim to assessments. Finally, FRF,
established in 1989 to liquidate the assets and liabilities
of the former FSLIC, is entitled, through December 31, 1992,
to assessments from SAIF members not taken by FICO or
REFCORP.
3A11 of SAIF's Oakar assessments had been requested by and
given to FRF. SAIF's $108 million receivable as of December
31, 1991, consists of $105 million of Oakar assessments paid
to FRF during 1990 and 1991 plus $3 million of interest
income for FRF's use of the Oakar assessments. No Oakar
banks existed in 1989.

While the thrift industry's financial condition improved
during 1991, the industry's continued profitability will be
affected by uncertainties, including the future condition of
the economy, that will in turn impact SAIF's exposure to
potential insurance losses. If the interest rate spread
continues to be favorable, many poorly capitalized thrifts
may remain marginally viable, and their failure may be
delayed until after September 1993 when SAIF takes on its
full resolution responsibility.
In addition, some thrifts
have bolstered their earnings by selling a portion of their
income-producing, quality assets. However, by selling some
of their better assets, these thrifts are left with a
greater proportion of non-income producing, poor-quality
assets that could reduce future earnings, thus making those
thrifts more vulnerable to failure.
RTC's continued resolution progress will have a significant
effect on SAIF's exposure to insurance losses. Under
FIRREA, RTC was to resolve thrifts previously insured by
FSLIC for which a conservator or receiver was appointed by
August 9, 1992, leaving a smaller but healthier industry to
be insured by SAIF. However, the cleanup of the thrift
industry is taking longer than originally planned. The
Resolution Trust Corporation Refinancing, Restructuring, and
Improvement Act of 1991 extended RTC's resolution authority
through September 30, 1993, to enable SAIF to assume its
responsibilities without a backlog of institutions requiring
resolution.
Between August 9, 1989, and December 31, 1991, RTC resolved
a total of 584 thrifts. As of December 31, 1991, OTS had
identified another 190 thrifts as probable resolution
candidates and anticipates that RTC will resolve these
thrifts by September 30, 1993--the last date RTC can accept
thrifts for resolution. Of the 190 thrifts, 91 were in
conservatorship as of December 31, 1991, and thus will
remain RTC's responsibility. The remaining 99 thrifts were
either unprofitable or had poor earnings. OTS also had
identified another 70 thrifts, including several large
California thrifts, as possible candidates for resolution by
September 30, 1993. However, as of May 11, 1992, RTC had
not been provided with the requested funds necessary to
continue thrift resolutions.
If RTC is not given sufficient
funding to resolve the thrifts requiring resolution for
which a conservator or receiver is not appointed by the 1993
deadline, these thrifts will become SAIF's resolution
responsibility.
In addition to the 190 probable and 70
possible thrift resolution candidates, OTS considers another
260 thrifts as troubled. However, according to OTS, these
thrifts are not likely to fail within the next 2 years.
Therefore, if general economic conditions worsen, or
interest rates rise and these marginal thrifts actually
fail, SAIF will have resolution responsibility.
To monitor the condition of the thrift industry, OTS
classifies private sector thrifts into four groups based on
their ability to meet capital standards, their prospects for

future viability, and the results of supervisory/regulatory
examinations. OTS defines these groups as follows:
-- Group I thrifts are well-capitalized and profitable.
—

Group II thrifts currently meet or are expected to meet
capital requirements.

—

Group III thrifts are "troubled," with poor earnings and
low capital. OTS does not expect that all thrifts in
this group will require assistance. However, included in
this group are the several large California thrifts that
OTS believes may need assistance within the next year.

—

Group IV thrifts have negative tangible capital and are
consistently unprofitable. OTS expects that all thrifts
in this group will require resolution; however, eight of
these thrifts' resolutions are expected to be at no cost
to the government.

At December 31, 1991, OTS classified the remaining 2,096
private sector thrifts into the above groups as shown in
table 1.
Table 1:

OTS Classifications

(Dollars in billions)
i
Thrifts
Percent of
industry
Assets held
by thrifts
Percent of
industry's
assets

OTS Groups
XI
III

Total

983

676

372

2,096

100

$312

$299

$229

$49

889
100

At the end of 1991, OTS reported that Group IV thrifts
comprised 3 percent of the industry compared with 8 percent
at the end of 1990, and that thrifts in Group IV held 5
percent of the industry's assets compared with 13 percent at
the end of 1990. In addition, in 1991 there was a small
increase in the percentage of Group I thrifts, which are
thrifts that OTS considers to be well-capitalized and
profitable.
SAIF's Increased Exposure to
Losses From Bank Failures
The financial condition of the banking industry is of
increasing importance to SAIF because the number of Oakar
banks has more than doubled over the past year, increasing
SAIF's exposure to losses incurred from bank failures.
Since Oakar banks are created primarily through the

resolution of thrifts, the number of Oakar banks is expected
to increase as thrift resolutions continue. At the end of
1991, 305 Oakar banks held approximately $61 billion of
SAIF-insured deposits, or 8 percent of SAIF's total insured
deposits, compared with 138 Oakar banks holding $31 billion
of SAIF-insured deposits, or 3.7 percent of SAIF's total
insured deposits, at the end of 1990. During 1991, in
addition to the one Oakar bank that was closed, FDIC
identified nine Oakar banks with assets of $26 billion and
estimated SAIF-insured deposits of $3 billion as exhibiting
serious financial weaknesses and/or potential unsafe and
unsound conditions that could impair their viability and
therefore expose SAIF to insurance losses.
Adequacy of SAIF's Funding
Sources Is Uncertain

As amended, the FDI Act provides SAIF with two primary
revenue sources— insurance assessments and Treasury
payments, that may be used for resolution activity. Through
December 1992, SAIF will receive insurance assessments only
on SAIF-insured deposits held by Oakar banks. After
December 1992, SAIF will receive all insurance assessments—
from thrifts and Oakar banks--except for the portion used to
pay interest on FICO bonds. The FDI Act provides for
Treasury payments as a back-up funding source to insurance
assessments. To the extent that these assessments do not
total $2 billion a year, section 11(a)(6) requires the
Treasury to fund the difference for each fiscal year from
1993 through 2000. Assuming funds are appropriated, SAIF is
assured of at least $16 billion in either assessment income
or Treasury payments during this 8-year period. Section
11(a)(6) also requires the Treasury to make annual payments
necessary to ensure that SAIF has a specified net worth,
ranging from zero during fiscal year 1992 to $8.8 billion
during fiscal year 2000. The cumulative amounts of these
net worth payments cannot exceed $16 billion. Finally,
section 11(a)(6) provides an authorization for funds to be
appropriated to the Secretary of the Treasury for purposes
of these payments.
Assuming optimistic deposit growth rates of 5 percent a year
and no change in assessment rates applied against these
deposits, SAIF's assessment income is not likely to exceed
$2 billion in any year through 2000. Thus, the maximum
amount from insurance assessments and Treasury payments that
SAIF will receive under the statutory scheme through 2000 is
not likely to exceed $32 billion. Whether these revenue
sources will be sufficient to enable SAIF to carry out its
responsibilities and still achieve its specified net worth
goals will depend on resolution demands.
In addition to minimum net worth levels, the FDI Act, as
amended by FIRREA, established a designated reserve ratio
for SAIF of 1.25 percent of its insured deposits. SAIF is
currently well below this designated reserve ratio. As of
December 31, 1991, SAIF's reserve ratio was essentially
zero, and is not expected to improve through 1992 due to the

payment of SAIF insurance assessments to FICO and FRF. As
of December 31, 1991, SAIF would have needed a fund balance
or reserve of approximately $10.5 billion to have met the
1.25 percent designated reserve ratio. To meet this ratio
at the end of 1992, SAIF will need a reserve of
approximately $9.5 billion, assuming an optimistic deposit
growth rate of 5 percent and no insurance losses during
1992.
The FDI Act states that the SAIF assessment rate shall be
set by FDIC to maintain SAIF's reserve at its designated
reserve ratio or to increase the reserve ratio to the
designated ratio within a reasonable period of time. The
FDI Act, as amended by the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDIC Improvement Act),
also reguires FDIC to implement a risk-based premium system
by January 1, 1994. Under this system, insured institutions
considered to pose a greater risk of loss to SAIF would be
assessed at higher rates than stronger, well-capitalized and
better-managed institutions. FDIC may implement a
transitional risk-based premium system prior to January 1,
1994.
In May 1992, FDIC proposed an assessment rate increase from
the current rate of 23 cents per $100 of domestic deposits
to 28 cents effective January 1, 1993. This proposed rate
increase is based on FDIC's analysis of the condition of
SAIF and its ability to achieve the designated reserve ratio
over the next 15 years. This assessment rate increase,
along with assessments imposed under FDIC's risk-based
assessment system to be in effect by January 1, 1994, are
designed to allow SAIF to reach the designated reserve ratio
within a reasonable period of time.4 FDIC's analysis
supporting this rate determination did not consider the
Treasury payments reguired by the FDI Act because FDIC is
not certain that the Congress would appropriate the funds
for these Treasury payments.5
In addition to the revenue sources mentioned above, FDIC may
borrow from a number of sources on behalf of SAIF. Under
the FDI Act, as amended by the FDIC Improvement Act, FDIC's
borrowings are subject to a formula that limits its total
outstanding obligations. FDIC may borrow up to $30 billion
from the Treasury to cover losses incurred in resolving
institutions insured by SAIF or BIF. Such borrowing is to
be a liability of the related fund and is to be repaid by
the respective fund through insurance assessments.
Because
the $30 billion is available for both SAIF and BIF, the
amount of borrowing authority available for SAIF will
4If FDIC adopts a risk-based premium structure to become
effective at the same time as the proposed rate increase,
the increased assessment rate would be the target average
assessment rate of SAIF members, which is also 28 cents per
$100 of domestic deposits.
5The Federal Register; p . 21,627; May 21, 1992.

largely depend on BIF's borrowing demands.
In addition,
subject to the limitation on FDIC's outstanding obligations,
FDIC may borrow funds for working capital from the Federal
Financing Bank and, with the concurrence of the Federal
Housing Finance Board, may borrow from the Federal Home Loan
Banks on behalf of SAIF.
Although it appears that the Congress has provided SAIF with
funding sources that will allow SAIF to meet its
obligations, given the uncertainties over the actual funds
that will be available, SAIF's future viability cannot be
reliably predicted.

Charles A. Bowsher
Comptroller General
of the United States
May 11, 1992

Financial

FSLIC Resolution Fund

F R F

Financial
Statements

Federal

Deposit

Insurance

Corporation

F S L IC R e s o lu t io n F u n d

S tatem en ts of Incom e and A ccu m u lated D e fic it
Dollars in Thousands

For the Year Ended
December 31
1991

1990

Revenue
Assessments earned (Note 11)

1,038,527

Interest on U.S. Treasury obligations
Other interest

10,599

29,599
13,826

Revenue from corporate-owned assets

45,277
10,541

188,257

310,392

29,138

80,949

1,299,347

457,758

42,004

86,822

Interest expense

968,774

1,869,216

Operating expenses for corporate-owned assets

117,923

124,071

Other revenue

Expenses and Losses
Administrative expenses

Provision for losses (Note 9)
Other expenses

Net (Loss) Before Funding Transfer

1,669,366
69,446
2,867,513

6,398,535

(1,568,166)

(5,940,777)

(42,362)

(56,088)

Funding Transfer to Savings Association Insurance Fund (Note 1)

Net (Loss)

Accumulated Deficit - Beginning

Accumulated Deficit - Ending

The accompanying notes are an integral part of these financial statements.

4,311,682
6,744

(1,610,528)

(5,996,865)

(41,883,259)

(35,886,394)

S (43,493,787)

S (41,883,259)

Federal

Deposit

Insurance

Corporation

FSLIC Resolution Fund
S tatem en ts of Financial Position
Dollars in Thousands

December 31
1991

1990

Assets
Cash and cash equivalents (Note 3)
Net receivables from thrift resolutions (Note 4)

767,339

1,256,066

2,932,774

5,051,412

586,970

1,027,929

14,864

80,172

4,301,947

7,415,579

172,432

39,592

11,810,096

23,559,134

7,410,621

17,839,267

167,585

107,845

19,560,734

41,545,838

Contributed capital

28,235,000

7,753,000

Accumulated deficit

(43,493,787)

(41,883,259)

(15,258,787)

(34,130,259)

Investment in corporate-owned assets, net (Note 5)
Other assets (Note 6)

Liabilities
Accounts payable, accrued and other liabilities (Note 2)
Liabilities incurred from thrift resolutions (Note 7)
Estimated Liabilities for:
Assistance agreements (Note 8)
Litigation losses (Note 9)
Total Liabilities

Resolution Equity (Note 10)

Total Resolution Equity

$ 4,301,947

The accompanying notes are an integral part of these financial statements.

$ 7,415,579

Federal

Deposit

Insurance

Corporation

FSLIC Resolution Fund
S tatem e n ts o f Cash Flows
Dollars in Thousands

For the Year Ended
December 31
1991

1990

Cash Flows From Operating Activities
Cash inflows from:
Assessments

$ 1,050,275

Interest on U.S. Treasury obligations

-0-

30,031

45,278

1,923,914

2,047,069

Recoveries from corporate-owned assets

493,506

675,639

Miscellaneous receipts

148,490

91,141

60,657

89,342

10,126,068

6,629,108

117,055

124,071

Interest paid on indebtedness incurred from thrift resolutions

1,262,472

1,126,458

Net Cash Used by Operating Activities Before Funding Transfer

(7,920,036)

(5,109,852)

Recoveries from thrift resolutions

Cash outflows for:
Administrative expenses
Disbursements for thrift resolutions
Disbursements for corporate-owned assets

Funding transfer to the Savings Association Insurance Fund (Note 1)

40,650

Net Cash Used by Operating Activities (Note 16)

56,088

(7,960,686)

Cash Flows Provided From Investing Activities

(5,165,940)

Cash Flows From Financing Activities
Cash inflows from:
U.S. Treasury payments

20,482,000

5,924,000

13,010,041

1,078,121

7,471,959

4,845,879

Cash outflows for:
Payments of indebtedness incurred from thrift resolutions
Net Cash Provided by Financing Activities

(488,727)

Net Decrease in Cash and Cash Equivalents

1,256,066

Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending
The accom panying notes are an integral part of these financial statem ents.

(320,061)

767,339

1,576,127
$

1,256,066

Notes to Financial Statements
FSLIC Resolution Fund
December 31, 1991 and 1990

1. Legislative H istory
and R eform

FIRREA created the Resolution Trust Corporation (RTC),
which manages and resolves all thrifts previously insured by
the FSLIC for which a conservator or receiver is appointed
during the period January 1, 1989, through August 8, 1992.
The Resolution Trust Corporation Refinancing, Restructuring
and Improvement Act of 1991 (1991 RTC Act) extended the
RTC's general resolution authority through September 30,
1993, and beyond that date for those institutions previously
placed under RTC control.
The Resolution Funding Corporation (REFCORP) was
established by FIRREA to provide funds to the RTC for
use in the thrift industry bailout. The Financing Corporation
(FICO), established under the Competitive Equality Banking
Act of 1987, is a mixed-ownership government corporation
whose sole purpose was to function as a financing vehicle
for the FSLIC. However, effective December 12, 1991,
as provided by the Resolution Trust Corporation Thrift
Depositor Protection Reform Act of 1991, the FICO's
authority to issue obligations as a means of financing for
the FRF was terminated.
Operations of the FRF

The primary purpose of the FRF is to liquidate the assets
and contractual obligations of the now defunct FSLIC.
The FRF will complete the resolution of all thrifts that
failed before January 1, 1989, or were assisted before
August 9, 1989. FIRREA provided that the RTC manage
any receivership resulting from thrift failures that occurred
after January 1989 but prior to the enactment of FIRREA.
There were seven such receiverships that are included
in the FRF financial statements because the FRF remains
financially responsible for the losses associated with these
resolution cases.
The FRF is funded from the following sources, to the extent
funds are needed, in this order: 1) income earned on, and
proceeds from the disposition of, assets of the FRF;

10 0

2) liquidating dividends and payments made on claims
received by the FRF from receiverships to the extent such
funds are not required by the REFCORP or the FICO; 3)
amounts borrowed by the FICO; and 4) amounts assessed
against SAIF members by the FDIC that are not claimed
by the FICO or by the REFCORP during the period from
inception (August 9, 1989) through December 31, 1992.
Excluded are assessments paid by BIF-member banks
(so called "Oakar" banks, created pursuant to the "Oakar
amendment" provisions found in Section 5(d)(3) of the FDIC
Act) on SAIF-insured deposits. If these sources are insuffi
cient to satisfy the liabilities of the FRF, payments will be
made from the U.S. Treasury in such amounts as are
necessary, as approved by the Congress, to carry out the
purpose of the FRF.
The 1991 RTC Act amended the FDI Act by extending the
FRF funding of the SAIF administrative and supervisory
expenses through September 30, 1992. Upon termination
of the RTC (not later than December 31,1996), all assets
and liabilities of the RTC will be transferred to the FRF, after
which all future net proceeds from the sale of such assets
will be transferred to the REFCORP for interest payments.
The FRF will continue until all of its assets are sold or other
wise liquidated and all of its liabilities are satisfied. Upon the
dissolution of the FRF, any funds remaining will be paid to
the U.S. Treasury. Any administrative facilities and supplies
will be transferred to the SAIF.

2. S um m ary o f
S ig n ifica n t
A cco u n tin g
Policies

General

These financial statements pertain to the financial position,
results of operations and cash flows of the FRF. These
statements do not include reporting for assets and liabilities
of closed insured thrift institutions for which the FRF acts as
receiver or liquidating agent. Periodic and final accountability
reports of the FRF's activities as receiver or liquidating agent
are furnished to courts, supervisory authorities and others
as required.

Allowance for Loss
on Receivables and
Investment in CorporateOwned Assets

The FRF records as a receivable the amounts advanced for
assisting and closing thrift institutions. The FRF records as
an asset the amounts advanced for investment in assets.
Any related allowance for loss represents the difference
between the funds advanced and the expected repayment.
The latter is based on the estimated cash recoveries from
the assets of the assisted or failed thrift institution, net of
all estimated liquidation costs.

Estimated Liabilities
for Assistance
Agreements

The FRF establishes an estimated liability for probable
future assistance payable to acquirers of troubled thrifts
under its financial assistance agreements. Such estimates
are presented on a discounted basis.

101

Litigation Losses

The FRF accrues, as a charge to current period operations,
an estimate of loss from litigation against the FRF in both
its corporate and receivership capacities. The FDIC's Legal
Division recommends these estimates on a case-by-case
basis.

Receivership
Administration

The FRF is responsible for controlling and disposing of
the assets of failed institutions in an orderly and efficient
manner. The assets, and the claims against those assets,
are accounted for separately to ensure that liquidation
proceeds are distributed in accordance with applicable laws
and regulations. Costs and expenses relating to specific
receiverships are directly charged to those receiverships.
The FRF also recovers indirect liquidation expenses from
the receiverships.

Cost Allocations
Among Funds

Operating expenses (including personnel, administrative
and other indirect expenses) not directly charged to each
Fund under FDIC's management are allocated on the basis
of the relative degree to which the expenses were incurred
by the Funds.
The cost of furniture, fixtures and equipment purchased by
the FDIC on behalf of the three Funds under its administra
tion is allocated among these Funds on a pro rata basis. The
FRF expenses its share of these allocated costs at the time
of acquisition because of their immaterial amounts.

Assessment Revenue
Recognition

FIRREA directed that the FICO, the REFCORP and the
FRF have priority over the SAIF for receiving and utilizing
SAIF-member assessments to ensure availability of funds
for specific operational activities. Accordingly, the FRF
recognizes as assessment revenue only that portion of
SAIF-member assessments not claimed by the FICO or
the REFCORP. Assessments paid by "Oakar" banks on
their SAIF-insured deposits are retained in the SAIF and,
thus, are not subject to draws by the FICO, the REFCORP
or the FRF (see Notes 1,11 and 17).

Wholly Owned Subsidiary

The Federal Asset Disposition Association (FADA) is a
wholly owned subsidiary of the FRF. The FADA was placed
in receivership on February 5, 1990. However, due to
outstanding litigation, a final liquidating dividend to the FRF
will not be made until such time as the FADA's litigation
liability is settled or dismissed. The investment in the FADA
is accounted for using the equity method and is included in
the financial statement line item "Other assets" (Note 6).
The value of the investment has been adjusted for projected
expenses relating to the liquidation of the FADA. The FADA's
estimate of probable litigation losses range from $2 million
to $3.6 million. Accordingly, a $2 million litigation loss has
been recognized as a reduction in the value of FRF's

102

investment in the FADA. Additional litigation losses consid
ered reasonably possible are estimated to be from $4 million
to $45 million and remain unrecognized. In addition, losses
from tw o potential lawsuits and/or claims against the FADA
cannot be estimated at this time.
Related Parties

The nature of related parties and descriptions of related
party transactions are disclosed throughout the financial
statements and footnotes.

Restatement

The 1990 financial statements have been restated for the
following reasons: 1) the presentation of net receivables
from thrift resolutions and liabilities incurred from thrift
resolutions was changed from including Income Capital
Certificates (ICCs) and Net Worth Certificates (NWCs) as
off-balance sheet disclosure to presenting the effect of
these certificates directly on the statements; 2) assessment
revenue earned and accounts payable, accrued and other
liabilities were restated to comply with the requirements
of FIRREA (see Notes 10, 11 and 17); and 3) administrative
operating expense decreased by $107,000 due to a prior
period adjustment.

Reclassifications

Reclassifications have been made in the 1990 Financial
Statements to conform to the presentation used in 1991.

3. Cash and Cash
Equivalents

The FRF considers cash equivalents to be short-term, highly
liquid investments with original maturities of three months
or less. In 1991, cash restrictions included $2.5 million for
health insurance payable and $35.4 million for funds held
in trust.

| Cash and Cash Equivalents
Dollars in Thousands

December 31
1991

Cash
Cash equivalents

$ 233,875

1990

$ 1,018,643
533,464

237,423

$ 767,339

$ 1,256,066

103

4. N e t R eceivables fro m
T h rift Resolutions
1 N et Receivables fro m T h rift Resolutions
December 31

Dollars in Thousands
1991

1990

Receivables from Operating Thrifts:
Collateralized loans
Other loans

560,000

267,880

650,000
282,860

Capital instruments

289,471

323,403

Preferred stock from assistance transactions

445,659

511,686

21,190

19,668

(659,869)

(547,014)

Accrued interest receivable
Allowance for losses (Note 9)

924,331

1,240,603

11,361,828

12,827,137

Collateralized advances/loans

329,682

385,898

Other receivables

249,187

327,392

Receivables from Closed Thrifts:
Resolution transactions

Allowance for losses (Note 9)

(9,932,254)

(9,729,618)

2,008,443

3,810,809

$ 2,932,774

$ 5,051,412

As of December 31, 1991 and 1990, the FRF, in its receiver
ship capacity, held assets of $7 billion and $10.2 billion,
respectively. The estimated cash recoveries from the sale
of these assets (excluding cash and miscellaneous receiv
ables of $483 million) are regularly evaluated, but remain
subject to uncertainties because of changing economic
conditions affecting real estate assets now in the market
place. These factors could reduce the FRF's actual recoveries
upon the sale of these assets from the level of recoveries
currently estimated.
Receivables from thrift resolutions include amounts out
standing to qualified institutions under the Capital Instrument
Program. The FSLIC purchased capital instruments such
as ICCs and NWCs from insured institutions either in a non
cash exchange (by issuing a note payable of equal value) or
by cash payments. The total amount of ICCs outstanding as
of December 31, 1991 and 1990, is $157,446,000 and
$175,153,000, respectively. Likewise, the total amount of
NWCs outstanding as of December 31,1991 and 1990, is
$132,025,000 and $148,250,000, respectively.

104

The FRF pays interest on notes payable to an assisted
institution in cash, while the institution only accrues the
interest expense on the certificates to the FRF. If an
institution is profitable, it will pay interest to the FRF. The
FRF recognizes interest revenue when received from an
institution.

5. In vestm e n t in
C orp o rate-O w n ed
A ssets, N et
Investm en t in C o rp o rate-O w n ed Assets, N et
Dollars in Thousands

December 31
1991

Investment in corporate-owned assets

1990

$ 3,554,985

$ 3,701,828

(2,968,015)

(2,673,899)

586,970

$ 1,027,929

Allowance for losses
S

The FSLIC acquired assets from problem institutions in
its efforts to merge and/or sell failing thrifts. The vast
majority of these assets are real estate and mortgage loans.

6. O th er Assets
O ther Assets

Dollars in Thousands

December 31
1991

Investment in FADA, net

$ 11,417

Accounts receivable, net

3,447

S 14,864

1990
$ 15,781
64,391
S 80,172

105

7. L iab ilities Incurred
fro m T h rift
Resolutions
| I labilities Incurred from T h rift Resolutions
December 31

Dollars in Thousands
1991
$

Notes payable to Federal Flome Loan Banks/U.S. Treasury

560,000

Notes payable to acquirers of failed institutions

1990
$

650,000

700,572

775,112

Capital instruments (Note 4)

41,325

184,935

Assistance agreement notes

7,582,557

18,096,731

Accrued assistance agreement costs

2,437,188

2,929,623

Accrued interest

111,882

437,783

Other liabilities to savings institutions

376,572

484,950

$ 11,810,096

S 23,559,134

The FSLIC had issued promissory notes and entered into
assistance agreements in order to prevent the default and
subsequent liquidation of certain insured thrift institutions.
These notes and agreements required the FSLIC to provide
financial assistance over time. Under FIRREA, the FRF has
assumed these obligations. The FRF presents its notes
payable and its obligation for assistance agreement pay
ments incurred but not yet paid as a component of the line
item "Liabilities incurred from thrift resolutions." Estimated
future assistance payments to acquirers required under
its assistance agreements are presented as a component
of the line item "Estimated liabilities for assistance
agreements" (Note 8).

M a tu ritie s of Liabilities
Dollars in Thousands
1992

1993

1994

1995

1996

1997/Thereafter

$6,785,433

$494,516

$381,240

$795,368

$401,418

$2,952,121

106

8. Estim ated L iab ilities
fo r A ssistance
A g reem en ts

The "Estimated liabilities for assistance agreements"
line item represents, on a discounted basis, an estimate
of future assistance payments to acquirers of troubled
thrift institutions. The discount rate applied as of
December 31, 1991 and 1990, was 5.625 percent and
8.25 percent respectively, based on U.S. money rates
for federal funds.
Future assistance stems from the FRF's obligation to:
1) fund losses inherent in assets covered under the assis
tance agreement (e.g., by subsidizing asset write-downs,
capital losses and goodwill amortization) and 2) supplement
the actual yield earned from covered assets as necessary for
the acquirer to achieve a specified yield (the "guaranteed
yield"). Estimated total assistance costs recognized for
current assistance agreements with institutions involving
covered assets include estimates for the loss expected on
the assets based on their appraised values. The FRF is
obligated to fund any losses sustained by the institutions on
the sale of the assets. If asset losses are incurred in excess
of those recognized, the possible cash requirements and
the accounting loss could be as high as $9.4 billion, should
all underlying assets prove to be of no value (Note 15). The
costs and related cash requirements associated with the
maintenance of covered assets are calculated using market
interest rates and would change proportionately with any
change in market rates.
The RTC, on behalf of the FRF, has authority to modify,
renegotiate or restructure the 1989 and 1988 assistance
agreements with FSLIC-assisted institutions with terms
more favorable to the FRF. In accordance with a 1991 RTC
Board Resolution, any FSLIC-assisted institution that has
been placed in RTC conservatorship or receivership is
subject to revised termination procedures. During 1991,
the RTC exercised its authority by terminating assistance
agreements with tw o FSLIC-assisted institutions placed in
receivership/conservatorship. These transactions resulted
in a reclassification of $2.4 billion from "Estimated liabilities
for assistance agreements" to "Liabilities incurred from
thrift resolutions." An additional assistance agreement
was terminated resulting in the issuance of a $158 million
short-term note for the purchase of covered assets. There
were 131 assistance agreements outstanding as of
December 31, 1991, the last of which is scheduled to
expire in December 1998.
The estimated liabilities for assistance agreements are
affected by several factors, including adjustments to
expected notes payable, the terms of the assistance agree
ments outstanding and, in particular, the salability of the
related covered assets. The variable nature of the FRF

107

assistance agreements will cause the cost requirements to
fluctuate. This fluctuation will impact both the timing and
amount of eventual cash payments. Although the "Esti
mated liabilities for assistance agreements" line item is
presented on a discounted basis, the following schedule
details the projected timing of the future cash payments on
a nominal dollar basis:

December 31,1991

Dollars in Thousands
1992

1993

1994

1995

1996

1997/Thereafter

$4,231,675

$1,618,362

$828,056

$495,111

$263,436

$592,115

9. A nalysis o f Changes
in A llo w a n c e fo r
Losses and E stim ated
Liabilities

Adjustments include reclassifications, transfers and audit
adjustments to the allowance for losses and estimated liabilities. The majority of the 1991 adjustments to "Estimated
liabilities for assistance agreements" includes reclassifica
tions to the statements of financial position line item "Liabili
ties incurred from thrift resolutions" for notes payable and
related accrued assistance agreement costs.

Analysis of Changes in A llo w an ce fo r Losses and Estim ated Liabilities
Dollars in Millions
Allowance for Losses
Operating thrifts

Begin Balance
(01-01-91)

Adjustments

End Balance
(12-31-91)

129

9,730

264

(62)

9,932

Investment in corporate-owned assets

2,674

169

125

2,968

_____ 9^

____ 4_

12,960

566

Investment in FADA

547

Net Cash
Payments

Closed thrifts

Total Allowances

Provision for
Losses

(16)

______ ^
47

660

_______ 1 ^
13,573

Estimated Liabilities for:
Assistance agreements
Litigation losses
Total Estimated Liabilities
Total Allowances/Liabilities

17,839

1,043

108

____60

17,947

1,103

(9.645)

(1,826)

7,579

$ 30,907

$ 1,669

$ (9,645)

$ (1,779)

$21,152

(9.645)
____ ^

(1,826)
-

7,411
168

108

| Analysis of Change s in A llo w a n c e for Losses and Estim ated Liabilities
Dollars in Millions
Allowance for Losses
Operating thrifts

Begin Balance
(01-01-90)
$

405

Provision for
Losses
$

236

Closed thrifts

9,515

Investment in corporate-owned assets

2,674
9
12,603

448

20,048

3,859

103

20,151

3,864

$ 32,754

$ 4,312

Investment in FADA
Total Allowances

171

Net Cash
Payments
$

-0-

Adjustments
$ (94)

End Balance
(12-31-90)
$

547

-0-

9,730

-0-

(41)

2,674

-0-

(91)

12,960

(551)

17,839

-0-

108

(5,517)

(551)

17,947

S (5,517)

$(642)

$ 30,907

Estimated Liabilities for:
Assistance agreements
Litigation losses
Total Estimated Liabilities
Total Allowances/Liabilities

(5,517)
-0-

109

10. Resolution Equity
Resolution Equity
Dollars in Thousands
Treasury
Payments

End Balance
(12-31-91)

-0-

$ 20,482,000

$ 28,235,000

(41,883,259)

(1,610,528)

-0-

(43,493,787)

$ (34,130,259)

$ (1,610,528)

$ 20,482,000

$ (15,258,787)

Begin Balance
(01-01-90)

Net
(Loss)

Treasury
Payments

End Balance
(12-31-90)

Begin Balance
(01-01-91)
Contributed Capital

Accumulated Deficit

Contributed Capital
Accumulated Deficit

7,753,000

1,829,000
(35,886,394)

S (34,057,394)

Net
(Loss)
$

-0(5,996,865) (Note 2)

$ (5,996,865)

$ 5,924,000

7,753,000

-0-

(41,883,259)

$ 5,924,000

S (34,130,259)

The Accumulated Deficit includes $7.5 billion in nonredeemable capital certificates and redeemable capital
stock issued by the FSLIC. Capital instruments have been
issued by the FSLIC and the FRF to the FICO as a means
of obtaining capital. However, due to the availability of U.S.
Treasury payments to satisfy FRF obligations, no additional
borrowings from the FICO are anticipated. Effective
December 12, 1991, the FICO's authority to issue obligations
as a means of financing for the FRF was terminated (see
Note 1). Furthermore, the implementation of FIRREA has
effectively removed the redemption characteristics of the
capital stock issued by the FSLIC.

11. Assessm ents

In January 1991, FRF received $27.5 million of SAIF-member
assessments previously claimed by REFCORP. REFCORP
did not require the funds because they have no further plans
for issuing public debt. The FRF is next in line to claim
assessments not required by FICO or REFCORP. A receiv
able and corresponding credit to revenue were posted in
1990 to reflect entitlement to the assessment. The FRF
recognized assessments earned totaling $1 billion in 1991.
The FDIC Legal Division rendered an opinion in March 1992
that assessments paid by "Oakar" banks on SAIF-insured
deposits should be retained by the SAIF, and that income
recognition (by the SAIF) should be retroactive to FIRREA's
enactment date. As of December 31, 1991 and 1990, the
FRF recorded a payable to the SAIF of $88 million and $17
million, respectively, for "Oakar" assessment revenue.

110

Secondary Reserve Offset

The FDI Act authorizes insured savings institutions to offset
against any assessment premiums their pro rata share of
amounts that were previously part of the FSLIC's "Second
ary Reserve." The Secondary Reserve represented premium
prepayments that insured savings institutions were required
by law to deposit with the FSLIC during the period 1961
through 1973 to quickly increase the FSLIC's insurance
reserves to absorb losses if the regular assessments were
insufficient. The allowable offset is limited to a maximum
of 20 percent of an institution's remaining pro rata share
for any calendar year beginning before 1993. After calendar
year 1992, there is no limitation on the remaining offset
amount.
The FRF is also required to pay in cash (or reduce an out
standing indebtedness) the remaining portion of the savings
institution’s full pro rata distribution when the institution
loses its insured status or goes into receivership. The FRF
establishes a payable to that institution or its receiver with a
corresponding charge to expense. As of December 31, 1991
and 1990, the Secondary Reserve payable, included in the
line item "Accounts payable, accrued and other liabilities,"
was $47,818,560 and $1,068,988, respectively.
The remaining Secondary Reserve credit at December 31,
1991 and 1990, was $297,761,163 and $359,121,133,
respectively. This amount will be reduced in future years by
offsets against assessment premiums, forfeited amounts
due to mergers and payments to savings institutions that
lose their insured status.

12. Pension B enefits,
Savings Plans and
A ccru ed A nnual
Leave
1 Pension B enefits and Savings Plans Expenses
December 31

Dollars in Thousands
1991
Civil Service Retirement System

809

1990
$

725

Federal Employee Retirement System (Basic Benefit)

2,822

2,659

FDIC Savings Plan

1,006

619

Federal Thrift Savings Plan

717

593

$ 5,354

$ 4,596

The CSRS is a defined benefit plan integrated with the
Social Security system in certain cases. Plan benefits are
determined on the basis of years of creditable service and
compensation levels. The CSRS-covered employees can
also participate in a federally sponsored tax-deferred savings
plan available to provide additional retirement benefits. The
FERS is a three-part plan consisting of a basic defined
benefit plan which provides benefits based on years of
creditable service and compensation levels, Social Security
benefits and a tax-deferred savings plan. Further, automatic
and matching employer contributions are provided up to
specified amounts under the FERS. Eligible employees may
participate in an FDIC-sponsored tax-deferred savings plan
with matching contributions. The FRF pays the employer's
portion of the related costs.
The liability to employees for accrued annual leave is approxi
mately $4,785,000 and $4,829,000 at December 31, 1991
and 1990, respectively.
Although the FRF contributes a portion of pension benefits
for eligible employees, it does not account for the assets
of either retirement system, nor does it have actuarial data
with respect to accumulated plan benefits or the unfunded
liability relative to eligible employees. These amounts are
reported and accounted for by the U.S. Office of Personnel
Management.

13. FDIC H ealth , D en tal
and Life Insurance
Plans fo r Retirees
F D IC H e a lt h a n d D e n t a l P la n s

Dollars in Thousands

December 31
1991

1990

Health premiums paid

$ 80

$ 278

Dental premiums paid

112

was changed to a "minimum premium funding arrange
ment." Fixed costs and expenses for claims are paid as
incurred. Premiums are deposited for claims incurred but
not reported. The premiums are held by the FDIC.
The life insurance program is underwritten by Metropolitan
Life Insurance Company. The program provides for basic
coverage at no cost and allows converting optional cover
ages to direct-pay plans with Metropolitan Life. The FDIC
does not make any contributions towards annuitants' basic
life insurance coverage; this charge is built into rates for
active employees.
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standard No. 106
(Employers' Accounting for Postretirement Benefits Other
Than Pensions), which the FDIC is required to adopt by
1993. The standard requires companies to recognize
postretirement benefits during the years employees are
working and earning benefits for retirement. Resulting
estimated expenses will be allocated to the FRF based
on the relative degree to which expenses were incurred.
Although the impact of the FDIC's adoption of the standard
cannot reasonably be estimated at this time, the standard
may increase reported administrative costs and expenses
of the FRF.

14. C o m m itm en ts

The FRF is currently sharing in the FDIC's lease of office
space. The FRF's lease commitments for office space total
$7,447,000 for future years. The agreements contain
escalation clauses resulting in adjustments, usually on an
annual basis. The FRF recognized leased space expense
of approximately $8,725,000 and $14,821,000 for the years
ended December 31, 1991 and 1990, respectively. The
FRF's allocated share of leased space fees for future years,
which are committed per contractual agreement, are as
follows:

1 Leased Fees
Dollars in Thousands

1992

1993

1994

1995

1996

$2,303

$2,049

$1,664

$1,072

$359

113

15. C o n cen tratio n o f
C red it Risk

The FRF is counterparty to a group of financial instruments
with entities located throughout regions of the United States
that are experiencing significant problems in both loans
and real estate. The FRF's maximum exposure to possible
accounting loss should each counterparty to these instru
ments fail to perform and any underlying assets prove to be
of no value is shown as follows:

C o n c e n t r a t i o n o f C r e d i t R is k
D e c e m b e r 3 1 ,1 9 9 1

D ollars in M illio n s
S o u th e a s t
Net receivables from
th rift resolutions
Investm ent in
corporate-ow ned assets
Assistance agreem ents covered
assets (off-balance sheet)
Total

$ 566

S o u th w e s t

N o rth e a s t

M id w e s t

C e n tral

W est

T o ta l

101

$ 116

$ 1,008

$ 2,933

806

$ 336

-0-

564

-0-

587

130

3,344

408

5,464

9,422

S 696

S 4,714

S 339

174

$ 547

$ 6,472

$ 12,942

114

16. S u pp lem en tary
Inform atio n R elating
to th e S ta te m en ts
o f Cash Flows
1 R e c o n c ilia t io n o f N e t L o s s to N e t C a s h U s e d b y O p e r a tin g A c t iv it ie s

Dollars in Thousands

December 31
1991

Net (Loss)

$ (1,610,528)

1990
$ (5,996,865)

Adjustments to reconcile net loss to net cash used by operating activities:
1,669,366

4,311,682

Decrease in assessments receivable

28,748

-0-

Decrease in other assets

77,967

100,326

Provision for losses

(Decrease) in accounts payable, accrued and other liabilities
Net cash disbursed for thrift resolutions not affecting income
Accrual of assets and liabilities from thrift resolutions

Net cash used by operating activities

(6,953)

(7,933)

(7,732,848)

(3,678,009)

(386,438)

104,859

$ (7,960,686)

$ (5,165,940)

Non-cash financing activities for the year ended December
31, 1991, include: 1) canceled notes payable (NWCs)
of $12,740,000; 2) canceled notes payable (ICCs) of
$ 2,000,000; and 3) issued note payable of $158,670,000.
Non-cash financing activities for the year ended December
31, 1990 include: 1) canceled notes payable (NWCs) of
$10,700,000; and 2) canceled notes payable (ICCs) of
$18,000,000.

17. Subsequent Events

On September 25, 1990, the Boards of Directors of the
FDIC and the RTC authorized the implementation of a pro
gram whereby the FSLIC assistance agreements and promis
sory notes could be terminated during the period of an
institution's conservatorship, not just during the period
of its final receivership. The program also provides that the
assistance agreement settlement would be based on an
Asset Valuation Review (AVR), giving consideration to the
individual assistant agreement terms and adjusting for
certain amounts paid and/or accrued from the effective date
of the AVR to the termination date. Two institutions in RTC
conservatorship (Cimmarron, Muskogee, Oklahoma and
Merabank, El Paso, Texas) were terminated prior to
December 31, 1991. The FRF's liability to the RTC con
servatorships is currently estimated at between $330 and
$345 million for note principal and $4 million for accrued
interest on the notes.

115

Public Law #102-139, which was signed into law on October
28, 1991, appropriated $15.9 billion to the FRF for the fiscal
year ending September 30, 1992. The FRF has requested
appropriations of approximately $6.8 billion for FY 1993. The
funds may be used to prepay notes payable, accelerate
write-downs of covered assets, purchase covered assets
and/or renegotiate assistance contracts to reduce projected
costs to the FRF. As of March 31, 1992, $5.5 billion has
been received from the U.S. Treasury. The remaining $10.4
billion, expected to be requested by September 1992, will
be used to prepay notes, purchase covered assets,
renegotiate assistance agreements and pay normal
assistance agreements.
Through March 1992, $3.8 billion was expended for note
prepayments and $3.2 billion for normal assistance
payments, which includes note interest payments. No
payments were recorded for accelerated write-downs of
covered assets.
Assessment Premiums

On March 27, 1992, the FDIC's Legal Division rendered the
opinion that, under FIRREA, assessments paid on SAIFinsured deposits by "Oakar" banks must be retained in the
SAIF, and, thus, are not subject to draws by the FICO, the
REFCORP or the FRF. As FIRREA became effective in
August 1989, the financial statements for 1990 have been
restated. The FRF received the assessments paid on SAIFinsured deposits in 1990 and 1991; therefore the effect of
this restatement was to establish a payable to the SAIF and
to reduce assessment revenue by $17 million for 1990.
Additionally, in 1991, the payable to the SAIF was increased
by $91 million. This payable represents $88 million in assess
ment revenue and $3 million in interest expense.

116

GAO

United States
General Accounting Office
Washington, D.C. 20548
Comptroller General
o f the United States

B-24457 6

To the Board of Directors
Federal Deposit Insurance Corporation
We have audited the accompanying statements of financial
position of the FSLIC Resolution Fund1 as of December 31,
1991 and 1990, and the related statements of income and
accumulated deficit and statements of cash flows for the
years then ended. These financial statements are the
responsibility of the management of the Federal Deposit
Insurance Corporation (FDIC), the Fund's administrator. Our
responsibility is to express an opinion on these financial
statements based on our audits. In addition, we are
reporting on our consideration of FDIC's internal control
structure and its compliance with laws and regulations as
they relate to the Fund.
We conducted our audits in accordance with generally
accepted government auditing standards. Those standards
reguire that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the Fund's statement of financial position
as of December 31, 1991, and its statements of cash flows
for the years ended December 31, 1991 and 1990, present
fairly, in all material respects, the financial position of

xThe FSLIC Resolution Fund (Fund) was established on
August 9, 1989, by section 215 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to
manage the assets and pay the debts, obligations, contracts,
and other liabilities resulting from thrift resolution
actions initiated by the former Federal Savings and Loan
Insurance Corporation (FSLIC).

117

the FSLIC Resolution Fund and its cash flows for the periods
then ended in conformity with generally accepted accounting
principles.
In our previous report,2 we did not express an opinion on
the Fund's statement of financial position as of
December 31, 1990, or its statement of income and
accumulated deficit for the year then ended, largely due to
the potential material effect of economic factors on the
Fund's estimated payments under its assistance agreements
and on the Fund's estimated recoveries from its sale of
receivership and corporate owned assets. These factors,
which were beyond FDIC's control, included the instabilities
in local real estate markets and fluctuations in future
interest rates.
In addition, the Fund's estimated
assistance payments did not reflect the potential impact of
using appropriated funds to achieve cost savings under the
assistance agreements.
While the above factors will continue to influence the
Fund's future assistance payments and asset recoveries, we
believe the effects of the factors were more determinable
and supported by historical data at the end of 1991,
enabling more reasonable estimates by FDIC.
In addition,
over the past 3 years, FDIC has made significant
improvements in its procedures for estimating the Fund's
future assistance payments, increasing the reliability of
this estimate. Furthermore, the Fund's exposure to material
losses should its estimated assistance payments or estimated
asset recoveries prove inaccurate has significantly
decreased.
The Fund's 1991 statement of income and accumulated deficit
includes $1.7 billion in losses as a result of increases in
the estimated liability accounts and allowance for loss
accounts included in the Fund's statement of financial
position from 1990 to 1991. These losses are largely
attributable to an increase in the Fund's estimated
assistance payments and a decrease in the Fund's estimated
recoveries on receivership and corporate owned assets since
the end of 1990.3 In our 1990 report, we questioned the
reliability of using 1989 asset recovery rates in
calculating receivership asset recovery values at
December 31, 1990. We were unable to examine sufficient
evidence to determine the reliability of these values at
December 31, 1990, or whether a portion of the 1991 changes
in allowance for loss accounts should have been recorded in
1990. Because of this limitation on the scope of our work,
financial Audit: FSLIC Resolution Fund's 1990 and 1989
Financial Statements (GAO/AFMD-92-22, December 17, 1991).
3The Fund's total estimated liability for assistance
agreements decreased from 1990 to 1991 due to assistance
payments made during 1991. See footnote 9 to the financial
statements for an analysis of the changes in the Fund's
allowance for losses and estimated liabilities.

we are not expressing an opinion on the Fund's statement of
financial position as of December 31, 1990, and statements
of income and accumulated deficit for the years ended
December 31, 1991 and 1990.
Although we believe the Fund's estimated future assistance
payments and its estimated recoveries from asset sales are
reasonable as of December 31, 1991, uncertainties still
exist regarding general economic conditions, especially in
regard to real estate markets and interest rates. These
factors may ultimately result in assistance payments and
asset recoveries different from those the Fund has estimated
as of December 31, 1991. In addition, the use of
appropriations to achieve cost savings under the Fund's
assistance agreements will also affect future assistance
payments.
UNCERTAINTIES AFFECT
FUTURE ASSISTANCE PAYMENTS

FSLIC entered into assistance agreements to facilitate the
merger, acquisition, or stabilization of insolvent thrifts.
Under FIRREA, the FSLIC Resolution Fund is responsible for
making all payments required by these assistance agreements.
In January 1991, FDIC transferred management and oversight
responsibility for the assistance agreements to the
Resolution Trust Corporation (RTC). FDIC continues to
perform the accounting function for these agreements.
The larger assistance agreements generally provided assisted
thrifts with the following three main types of assistance.4
-- Negative net worth coverage was generally provided in the
form of interest-bearing notes equal to the acquired
thrifts' negative equity at the date of the assistance
agreement.
-- Capital loss coverage guarantees the recorded values
(usually historical cost) of poor-quality assets taken
over by the assisted thrift. Under this coverage,
assisted thrifts are compensated for the difference when
they sell a covered asset for less than its guaranteed
value.
—

Yield maintenance coverage guarantees the financial
performance of the covered assets. This coverage
guarantees that each agreement's covered assets will
collectively yield a specified rate which varies in
accordance with the terms of the agreement and with
market conditions.
If covered assets do not generate the
amount of income specified by the agreement, the Fund
pays the assisted thrift the difference.

4See Thrift Resolutions: Estimated Costs of FSLIC's 1988
and 1989 Assistance Agreements Subject to Change (GAO/AFMD90-81, September 13, 1990) for a more detailed discussion of
these and other assistance agreement provisions.

119

As of December 31, 1991, RTC estimated that the Fund would
pay more than $8 billion over the remaining life of the
assistance agreements (7 years for the larger agreements)
largely as a result of the capital loss and yield
maintenance guarantees.5 To estimate future capital loss
and yield maintenance assistance payments, RTC makes
assumptions with regard to losses resulting from covered
asset dispositions, the timing of these asset dispositions,
and future interest rates. RTC revises its estimates four
times a year based on changes in the above assumptions and
historical experience.
Although RTC has produced its future assistance payment
estimates from the best available information, these
payments remain subject to (1) instabilities in local real
estate markets, which in part will be affected by RTC's
discounting policy, (2) interest rate fluctuations, and
(3) RTC's future use of appropriated funds to achieve
additional cost savings under these agreements.
Uncertainties in Real Estate Markets
Continued uncertainties surrounding economic conditions and
the over-built real estate markets affect estimated recovery
values on the assets covered by the agreements. The
aggregate covered asset pool for all agreements was about
$14 billion as of December 31, 1991, over 88 percent of
which was real estate related. Projected capital loss
payments, which comprised about 52 percent of the Fund's
total December 31, 1991, estimated liability for assistance
agreements, were based on appraisals of covered assets.
However, appraisals, which generally estimate value based on
recent sales of similar assets, might not reliably indicate
future values because local real estate markets could
significantly change prior to asset disposition. RTC, FDIC,
and other public and private sector entities currently are
holding a large portfolio of troubled assets, including
large amounts of real estate related assets. Nonetheless,
over the past year, local real estate markets were able to
absorb over $2 billion in assisted thrifts' real estate
assets covered by the agreements.
In addition, RTC sold
about $7 billion in similar assets from failed thrifts
through December 31, 1991. As more experience is gained
5This estimate, which is reported in the financial statement
line item "Estimated Liability for Assistance Agreements" at
its present value of $7.4 billion, also includes less
significant amounts for reimbursable goodwill on assets
acquired under the agreements but not covered by capital
loss and yield maintenance provisions, and legal
indemnifications provided for under the agreements. Future
negative net worth note payments are not included in this
estimated liability because these note payments have already
been determined based on the notes' terms. The Fund
presents its future note payments determined but not yet
paid as a component of the financial statement line item
"Liabilities Incurred From Thrift Resolutions."

through sales of troubled assets and local markets
stabilize, estimated capital loss payments should be more
precise.
A factor that may help reduce uncertainty in local real
estate markets, due to competing governmental agencies
holding large amounts of real estate related assets, is the
adoption of RTC's discounting policy for marketing real
estate assets covered by the assistance agreements.
In July
1991, RTC adopted its policy that enables the real estate
assets covered by assistance agreements to be marketed at
the more deeply discounted prices that RTC uses to dispose
of assets acquired from failed thrifts. Consequently, where
this marketing strategy is used by both assisted thrifts and
for sales of similar assets from failed thrifts, the
assisted thrifts should be able to market these assets
without a competitive disadvantage regarding sales prices,
which may help reduce uncertainty in local markets.
RTC also modified its estimation procedures to reflect this
discounting policy strategy. Prior estimates of capital
losses were calculated based on 100 percent of the assets'
appraisal values without regard to expected disposition
dates. This new policy calculates capital loss for real
estate assets using asset values discounted from 20 percent
to 50 percent. The discounts are dependent on expected
asset disposition dates. While marketing of covered assets
may be facilitated by RTC's discounting policy, its
implementation adds to the complexity of estimating future
capital losses. However, depending on the accuracy of
estimated asset disposition dates and the extent to which
this policy is used, it may result in more reliable
estimates.
While the Fund's future capital loss payments are subject to
uncertainties, the Fund's exposure to additional capital
losses beyond what it has already recognized as of
December 31, 1991, has significantly decreased over the past
2 years. Specifically, the Fund's remaining exposure to
additional capital losses has decreased from $24.6 billion
at the end of 1989 to $9.4 billion at the end of 1991.
Market conditions will also affect the amount of yield
maintenance payments, which comprised about 25 percent of
the Fund's total December 31, 1991, estimated liability for
assistance agreements. For example, when market conditions
result in increased rental income, yield maintenance
payments are reduced. This is because such income offsets
the amount the Fund must pay to meet the assisted thrifts'
guaranteed yield. Similarly, real estate market conditions
that decrease rental income would increase the level of
assistance payments.

121

Uncertain Impact of Future
Interest Rate Fluctuations

Uncertainties in future interest rates affect the
reliability of projected yield maintenance payments. Even
small fluctuations of from 0.5 percent to 1.0 percent in
interest rates would produce changes of from $7 0 million to
$140 million, respectively, per year in yield maintenance
payments, based on the Fund's December 31, 1991, guaranteed
value of the covered asset pool. RTC's projection of future
assistance payments decreased over the past year, in part,
because relevant interest rates dropped by .86 percent to
3.25 percent. These rates decreased steadily from
October 31, 1990, through December 31, 1991.
Effect of Cost Saving
Measures Uncertain

RTC is responsible for actively reviewing all means by which
it can reduce costs under the assistance agreements. To
carry out this responsibility, RTC developed a plan to
prepay notes, renegotiate large assistance agreements, buy
out small agreements, write down guaranteed asset values,
and offer selected pools of covered assets to other private
sector asset managers under long-term repurchase agreements.
The successful implementation of RTC's plan would reduce
assistance agreement payments.
For example, prepaying notes would save interest costs
because the interest rate on federal borrowing would
typically be lower than the rate on the notes over the term
of the agreements. Renegotiating the agreements would
result in savings if lower yield maintenance and capital
loss coverage are negotiated in return for the Fund's equity
interests in the assisted thrifts. Buying out assistance
agreements would eliminate all future payments and would
result in savings if the government's costs of borrowing the
cash needed for the buyouts were less than the estimated
payments that would be eliminated. Writing down covered
assets to their fair market value would reduce the amount of
future yield maintenance assistance since this assistance is
based on the assets' guaranteed value. Offering selected
pools of covered assets to other private sector asset
managers would result in savings if payments under such
repurchase agreements were lower than payments projected for
the current assistance agreements.
As of March 31, 1992, RTC has used a total of $23.4 billion
in appropriated funds to execute cost saving actions, which
RTC estimates will achieve cost savings of $1.2 billion on a
present value basis.6 The majority of the estimated
6This cost-savings estimate of $1.2 billion takes into
account government borrowing costs and thus reflects the
potential cost savings for the government as a whole. We
will be reporting the details of RTC's cost saving actions
in a separate report on the FSLIC 1988 and 1989 assistance
agreement costs, to be issued later this year.

savings is attributable to interest cost savings as a result
of prepaying negative net worth notes, which does not affect
the Fund's estimated future assistance payments--capital
loss and yield maintenance payments. However, as of
March 31, 1992, FDIC estimated that about $9.5 billion of
the Fund's fiscal year 1992 appropriation remained available
for additional cost-saving actions.7 RTC plans more
renegotiations and covered asset write-downs to reduce
future capital loss and yield maintenance payments. The
Fund expects to receive a fiscal year 1993 appropriation of
$6.8 billion, a portion of which may be available to further
reduce assistance agreement costs.
Improvements in Estimating Future
Assistance Payments
In the last 3 years, FDIC and RTC have made significant
improvements in formalizing their policies, procedures, and
systems that are used to estimate the Fund's future
assistance payments. Since the end of 1989, FDIC and RTC
have developed written guidelines for preparing and
reviewing estimates of future assistance payments. These
written guidelines, which were enhanced during 1991, help
ensure consistency in this estimation process.
In addition,
during 1990, FDIC implemented an automated system to track
assistance payments by assistance agreement and assistance
payment type. This system readily provides historical
information, on both actual and estimated assistance
payments, for RTC to use in estimating future payments.
While the uncertainties surrounding these estimates make it
difficult to precisely predict actual future assistance
payments, FDIC's and RTC's improvements to their estimating
procedures, coupled with the experience gained over the last
3 years in preparing these estimates, increase the
reliability of the Fund's estimated liability for assistance
agreements as of December 31, 1991.
UNCERTAINTIES AFFECT ULTIMATE
RECOVERIES FROM ASSETS IN
RECEIVERSHIP AND OWNED BY THE FUND
As part of its resolution activities, FSLIC placed failed
thrifts into receivership and paid out funds required to
settle depositors' claims. However, FDIC expects to recover
some portion of these paid claims by managing and selling
the failed thrifts' assets that remain in receivership. As
of December 31, 1991, the Fund's claim against receiverships
totaled about $11.9 billion. Receivership assets associated
with those claims totaled about $7 billion, and FDIC
estimated it would recover only $2 billion from these
assets. In addition, the Fund has about $3.6 billion in
assets that were purchased to improve the marketability
7A s of March 31, 1992, a total of $10.4 billion of the
Fund's fiscal year 1992 appropriation remained available.
FDIC expects to use a portion of this amount to pay current
obligations and administrative costs.

123

(and, thus facilitate the sale) of certain troubled thrifts
and to terminate receiverships. These assets are commonly
referred to as corporate owned assets. As of December 31,
1991, FDIC estimated the Fund would recover approximately
$600 million from the management and liguidation of its
corporate owned assets.
FDIC records the amounts FSLIC paid to close failed thrifts
as a receivable from thrift resolutions and records the
amounts FSLIC paid to purchase assets from troubled or
failed thrifts as an investment in corporate owned assets.
FDIC establishes an allowance for loss against the
receivable and investment, which represents the difference
between amounts paid and the expected repayment. The
expected repayment is based on the estimated recoveries from
the sale of the receivership and corporate owned assets, net
of all estimated liguidation costs. At December 31, 1991,
the allowance for losses for the Fund's receivable from
thrift resolutions and investment in corporate owned assets
were about $9.9 billion, and $3 billion, respectively.
For assets in liguidation, FDIC maintains a management
information system which provides information on estimated
recoveries from the assets' management and sale. These
estimated recoveries are used to derive the allowance for
losses. Because of material internal control weaknesses we
identified in this system, we designed alternative audit
procedures to test the reasonableness of the allowance for
losses reported on the Fund's financial statements. These
procedures, which consisted of analyzing FDIC's collection
experience on assets in liguidation to assess the
reasonableness of the estimated recoveries on the Fund's
existing asset inventory, provided us with reasonable
assurance that the Fund's net receivable from thrift
resolutions and its net investment in corporate owned assets
reported on the Fund's financial statements were fairly
stated.
Even though FDIC has assumed that the Fund's receivership
and corporate owned assets will sell for considerably less
than their book value, any worsening of the economy or real
estate markets could result in recoveries even lower than
currently anticipated. While the Fund's recoveries from
asset sales remain subject to economic uncertainties, the
Fund's exposure to further losses should its receivership
and corporate owned assets prove worthless is only
$2.6 billion, significantly less than its exposure of

$6.8 billion at the end of 1989. This decrease is primarily
attributable to sales and increasing loss allowances on the
remaining assets. The Fund's exposure to additional asset
losses will continue to decrease as the Fund's inventory of
assets decreases.

Charles A. Bowsher
Comptroller General
of the United States
May 11, 1992

Allen C. S huler

Soon after taking office,
Chairman Taylor visited
several FDIC regional
offices to exchange
ideas and meet with
employees, including
the liquidation staff
in Orlando, Florida.

Statistics

The following tables
are included in the
1991 FDIC Annual Report:
Table A
(formerly Table 122)
Number and Deposits
of Banks Closed Because
of Financial Difficulties,
1934-1991
Table B
(formerly Table 123)
Insured Banks Requiring
Disbursements by the
Bank Insurance Fund
During 1991
Table C
(formerly Table125)
Recoveries and Losses
by the Bank Insurance Fund
on Disbursements for
Protection of Depositors,
1934-1991
Table D
(formerly Table127)
Income and Expenses,
Bank Insurance Fund,
by Year, from Beginning
of Operations,
September 11, 1933,
to December 31, 1991
Table E
(formerly Table 129)
Insured Deposits and the
Bank Insurance Fund,
1934-1991

D e p o s it In s u ra n c e
D is b u r s e m e n ts
Disbursements by the
Federal Deposit Insurance
Corporation to protect
depositors are made when
the insured depositors of
failed banks are paid off or
when the deposits of a failed
or failing bank are assumed
by another insured bank
with the financial aid of
the FDIC.
In deposit payoff cases, the
disbursement is the amount
paid by the FDIC on insured
deposits. In the insured de
posit transfer, an alternative
to a direct deposit payoff,
the FDIC transfers the failed
bank's insured and secured
deposits to another bank
while uninsured depositors
must share with the FDIC
and other general creditors
of the bank in any proceeds
realized from liquidation of
the failed bank's assets. In
certain deposit payoffs, the
FDIC may determine that
an advance of funds to
uninsured depositors and
other creditors of a failed
bank is warranted.

In deposit assumption
cases, the principal disburse
ment is the amount paid to
facilitate a purchase and
assumption transaction with
another insured bank. Addi
tional disbursements are
made in those cases as
advances for protection of
assets in process of liquida
tion and for liquidation
expenses. The FDIC also
may purchase assets or
guarantee an insured bank
against loss by reason of
its assuming the liabilities
and purchasing the assets
of an open or closed insured
bank. Under its Section
13(c) authority to provide
financial assistance to open
institutions, the FDIC made a
cash disbursement in 1991
to one operating bank.

S o u rc e s o f D a ta
o n B a n k F a ilu re s
Data in the following tables
regarding insured bank
failures are obtained from
the books of specific banks
at date of closing and
the books of the FDIC,
December 31, 1991. ❖

Table A (fo rm erly Table 1 2 2 )1
Num ber and Deposits o f Banks Closed Because of Financial Difficulties, 1934 - 1991

127

D o l l a r s In T h o u s a n d s

Number of

Deposits of

Insured Banks

Without
disbursements
by FDIC2

With
disbursements
by FDIC3

Assets

Total

Without
disbursements
by FDIC2
$41,147

$ 166,342,293

$ 202,497,383

Year

Total

1,895

1,887

$166,383,440

124

53,751,763
14,473,300
24,090,551
24,931,302
6,281,500

63,119,8705
15,660,800
29,168,596
35,697,789
6,850,700

19914
19904
19894
19884
19874

168
206
200
184

124
168
206
200
184

19864
19856
1984
1983
1982

138
120
79
48
42

6,471,100
8,059,441
2,883,162
5,441,608
9,908,379

6,991,600
8,741,268
3,276,411
7,026,923
11,632,415

1981
1980
1979
1978
1977

10
10
10
7
6

3,826,022
216,300
110,696
854,154
205,208

4,859,060
236,164

1976
1975
1974
1973
1972

16
13
4
6
1

864,859
339,574
1,575,832
971,296
20,480

1,039,293
419,950
3,822,596
1,309,675
22,054

1971
1970
1969
1968
1967

6
7
9
3
4

132,058
54,806
40,134
22,524
10,878

196,520
62,147
43,572
25,154
11,993

1966
1965
1964
1963
1962

7
5
7
2
1

7
5
7
2

103,523
43,861
23,438
23,444

120,647
58,750
25,849
26,179
7

1961
1960
1959
1958
1957

5
1
3
4
2

5
1
3
4
1

8,936
6,930
2,593
8,240
11,247

8,936
6,930
2,593
8,240
1,163

9,820
7,506
8,905
1,253

1956
1955
1954
1953
1952

2
5
2
4
3

2
5
2
2
3

11,330
11,953
998
44,711
3,170

11,330
11,953
998
18,262
3,170

12,914
11,985
1,138
18,811
2,388

1951
1950
1949
1948
1947

2
4
5
3
5

2
4
4
3
5

3,408
5,513
6,665
10,674
7,040

3,408
5,513
5,475
10,674
7,040

3,050
4,005
4,886
10,360
6,798

1946
1945
1944
1943
1942

1
1
2
5
20

347
5,695
1,915
12,525
19,185

351
6,392
2,098
14,058
22,254

1941
1940
1939
1938
1937

15
43
60
74
77

15
43
60
74
75

29,717
142,430
157,772
59,684
33,677

29,717
142,430
157,772
59,684
33,349

34,804
161,898
181,514
69,513
40,370

1936
1935
1934

69
26
9

69
25
9

27,508
13,405
1,968

27,508
13,320
1,968

31,941
17,242
2,661

3,011

3 ,011

10,084

26,449

1,190

328

132,988
994,035
232,612

'T h e Table no lon g e r re fle cts d ata on uninsured banks because o f th e d iffic u lty o f c o m p ilin g c o m ple te in fo rm a tio n on such banks.
2For in fo rm a tio n regarding th e se cases, see Table 23 o f th e A nnual R eport fo r 1963.
3For inform a tio n regarding each bank, see the 1958 A nnual R eport (pages 48-83, 98-127) and ta b le s regarding d isb u rse m en ts in subsequent annual reports.
‘‘ E xcludes data fo r banks granted fin an cia l assistan ce under S ectio n 13(c)(1) o f th e Federal D eposit Insurance A c t to prevent fa ilu re . Data fo r th e se banks are
inclu d ed in Table B o f th e 1991 A nnual R eport and Table 123 o f th e 1986-1990 A nnual R eports.
5Tw elve banks w ith assets o f $1.0 b illio n o r m ore represent 80 percent o f to ta l assets ($50.6 b illio n ) and 78 percent o f to ta l d e p o s its ($41.8 b illio n ),
in c lu d e s data fo r one bank granted fin an cia l a ssistance a ltho u g h no d is b u rse m en t was required u n til January 1986.
7N ot available.

T a b le B (fo rm e rly T a b le 1 2 3 )

128

Insured Banks Requiring Disbursements by the Bank Insurance Fund During 1991
D o l l a r s In T h o u s a n d s
Number of

Name and Location

Date o f Closing,

Receiver, Assuming Bank,

Class

Deposit

Total

FDIC

Deposit Assumption,

Transferee Bank or

of Bank

Accounts

Assets

Deposits

Disbursements

Merger, or Assistance

Merging Bank and Location

Insured Deposit Payoffs
Sabinal Bank
Sabinal, Texas

3,100

$21,328

$21,706

$17,092

March 21, 1991

Federal Deposit Insurance Corporation

Landmark Thrift and Loan Association
San Diego, California

716

14,043

12,572

12,611

July 12, 1991

Federal Deposit Insurance Corporation

Southcoast Bank Corporation
West Palm Beach, Florida

1,908

27,191

27,170

26,900

August 9, 1991

Federal Deposit Insurance Corporation

326

3,723

October 29, 1991

Federal Deposit Insurance Corporation

1,900

15,595

17,831

16,958

January 22, 1991

United New Mexico Bank at Albuquerque
Albuquerque, New Mexico

2,500

56,381

49,794

53,758

March 15, 1991

BayBank Boston, N.A.
Boston, Massachusetts

1,800

8,782

8,087

6,011

March 29, 1991

The First National Bank of Limon
Limon, Colorado

W hitney Bank and Trust
Hamden, Connecticut

2,200

42,814

42,900

41,361

April 12, 1991

First Constitution Bank
New Haven, Connecticut

Boston Trade Bank
Boston, Massaschusetts

8,100

347,116

328,883

263,723

May 3, 1991

First National Bank of Boston
Boston, Massachusetts

3,200

27,971

32,812

19,306

May 9, 1991

Bank of America Texas, N.A.
Houston, Texas

The Washington Bank (of Maryland)
Baltimore, Maryland

2,100

37,990

35,395

34,967

May 10, 1991

The First National Bank of Maryland
Baltimore, Maryland

First Security Bank
Roanoke, Virginia

1,600

15,958

14,996

12,438

May 24, 1991

First Century Bank
Roanoke, Virginia

University Bank, N.A.
Newton, Massachusetts

18,116

306,302

316,567

283,497

May 31, 1991

Sterling Bank
Waltham, Massachusetts

Enfield National Bank
Enfield, Connecticut

3,800

17,943

18,223

16,468

August 16, 1991

Savings Institute
W illimantic, Connecticut

Mid-Jersey National Bank
Somerville, New Jersey

2,700

29,094

29,602

27,604

September 20,1991

United Jersey Bank/Central, N.A.
West W indsor Township, New Jersey

Mission Valley Bank, N.A.
San Clemente, California

2,300

40,082

40,904

38,702

October 18, 1991

Mid City Bank, N.A.
Los Angeles, California

Community National Bank & Trust Company of New York
New York, New York

47,400

338,365

321,765

287,317

November 8, 1991

Chemical Bank
New York, New York

3,700

36,554

34,427

30,368

November 14, 1991

First Farmers State Bank
Sullivan, Indiana

3,000

30,737

30,928

26,867

November 26, 1991

Ready State Bank
Hialeah, Florida

Granite Co-Operative Bank
Quincy, Massachusetts

14.100

99,246

84,330

85,737

December 12, 1991

South Boston Savings Bank
Boston, Massachusetts

Federal Finance & Mortgage, LTD
Honolulu, Hawaii

300

9,323

8,436

8,027

December 13, 1991

First Hawaiian Creditcorp, Inc.
Honolulu, Hawaii

980,600

13,644,745 11,322,182

2,230,965

January 6, 1991

New Bank of New England, N.A.
Boston, Massachusetts

607,537

7,077,251

6,798,224

2,418,249

January 6,1991

New Connecticut Bank & Trust Company
Hartford, Connecticut

Maine National Bank
Portland, Maine

167,688

1,032,005

949,926

225,061

January 6, 1991

New Maine National Bank
Portland, Maine

Community National Bank
Glastonbury, Connecticut

16,100

96,844

92,241

80,421

January 11, 1991

Fleet Bank of Connecticut
Hartford, Connecticut

M etropolitan National Bank
Farmers Branch, Texas

14,800

89,417

91,383

72,167

January 24, 1991

Comerica Bank-Texas
Dallas, Texas

3,300

30,516

33,992

7,536

January 25, 1991

Pacific Bay Bank
Richmond, California

6,700

17,743

21,686

13,101

January 29, 1991

First Bank of Oak Park
Oak Park, Illinois

47,400

264,850

257,509

152,060

January 29, 1991

Team Bank
Ft. Worth, Texas

2,600

17,638

20,287

13,206

January 31, 1991

The Bank of Corpus Christi
Corpus Christi, Texas

The Merchants Bank and Trust Company
Norwalk, Connecticut

18,900

288,707

277,791

239,903

February 1, 1991

Union Trust Company
Stamford, Connecticut

Maine Savings Bank
Portland, Maine

186,600

1,208,071

1,143,684

289,604

February 1, 1991

Fleet Bank of Maine
Portland, Maine

Private Bank & Trust, N.A.
Coral Gables, Florida
Insured Deposit Transfers
American Bank, N.A.
Rio Rancho, New Mexico
Blackstone Bank and Trust Company
Boston, Massaschusetts
Citizens National Bank
Limon, Colorado

Village Green National Bank
Jersey Village, Texas

W orthington State Bank
W orthington, Indiana
First National Bank of Miami
Miami, Florida

Deposit Assumptions
Bank of New England, N.A.
Boston, Massachusetts
Connecticut Bank & Trust Company, N.A.
Hartford, Connecticut

Alvarado Bank
Richmond, California
Citizens National Bank and Trust Company of Chicago
Chicago, Illinois
Bank of the Hills
Austin, Texas
Rockport Bank, N.A.
Rockport, Texas

Codes for Class o f Bank:

SM-State-chartered bank that is a member of the Federal Reserve System. NM-State-chartered bank that is not a member of the Federal Reserve
System. N-National bank. SB-Savings bank.

T a b le B (fo rm e rly T a b le 1 2 3 )

Insured Banks Requiring Disbursements by the Bank Insurance Fund During 1991
D o l l a r s In T h o u s a n d s

Name and Location

Class
of Bank

Num ber of
Deposit
Accounts

Total
Assets

Total
Deposits

FDIC
Disbursements

Date of Closing,
Deposit Assumption,
Merger, or Assistance

Receiver, Assuming Bank,
Transferee Bank or
Merging Bank and Location

Deposit Assumptions (Continued)
Lockhart State Bank
Lockhart, Texas

5,600

$ 24,501

$ 25,934

$9,169

February 7, 1991

Omnibank, N.A.
Houston, Texas

First National Bank in Kaufman
Kaufman, Texas

5,000

20,203

20,764

12,927

February 7,1991

The Farmers & Merchants National Bank
Kaufman, Texas

Merchants Trust & Savings Bank
Kenner, Louisiana

8,100

42,109

43,653

16,071

February 14, 1991

First American Bank and Trust
Vacherie, Louisiana

The First National Bank of Wortham
Wortham, Texas

1,800

7,802

7,992

5,234

February 14, 1991

Farmers State Bank
Groesbeck, Texas

Southwest National Bank
Albuquerque, New Mexico

1,600

36,167

35,831

6,283

February 21,1991

The Bank of New Mexico
Springer, New Mexico

The McKinley Bank
Niles, Ohio

9,700

63,504

65,553

52,520

February 22, 1991

The Dollar Savings & Trust Company
Youngstown, Ohio

United Citizens Bank, N.A.
College Station, Texas

14,300

40,290

52,975

12,249

February 28, 1991

First American Bank
Bryan, Texas

SeaFirst Bank
Port St. Lucie, Florida

1,900

11,092

11,866

2,361

March 8, 1991

Riverside National Bank of Florida
Fort Pierce, Florida

First Marine Bank of Florida
Palm City, Florida

3,100

16,982

16,525

4,611

March 8, 1991

1st United Bank
Boca Raton, Florida

Manilabank California
Los Angeles, California

800

19,265

19,249

14,401

March 8, 1991

UST California, N.A.
Los Angeles, California

Crossroads Bank
Victoria, Texas

7,000

21,908

23,111

5,749

March 14, 1991

Victoria Bank & Trust Company
Victoria, Texas

Coolidge Corner Co-operative Bank
Brookline, Massachusetts

6,500

81,514

83,032

69,142

March 14, 1991

Brookline Savings Bank
Brookline, Massachusetts

Citadel Bank
W illis, Texas

5,300

20,871

21,762

9,123

March 21,1991

Tomball National Bank
Tomball, Texas

The Landmark Bank
Hartford, Connecticut

58,500

214,569

212,147

195,441

March 28,1991

People’s Bank
Bridgeport, Connecticut

City Bank and Trust
Claremont, New Hampshire

6,500

119,305

119,548

111,202

March 29, 1991

First NH Bank
Concord, New Hampshire

First State Bank
Weimar, Texas

4,500

24,116

25,862

7,566

April 4, 1991

Hill Bank & Trust Company
Weimar, Texas

The Blueville Bank of Grafton
Grafton, West Virginia

12,900

46,701

46,903

5,818

April 5, 1991

The Empire National Bank o f Clarksburg
Clarksburg, West Virginia

American Bank & Trust Company
Shreveport, Louisiana

3,700

48,568

60,977

12,510

April 11, 1991

Tri-State Bank and Trust
Haughton, Louisiana

Arizona Commerce Bank
Tucson, Arizona

5,000

79,619

79,218

55,955

April 12, 1991

Arizona Bank of Commerce
Tucson, Arizona
Caliber Bank
Phoenix, Arizona

(Joint Purchasers)
Community National Bank
Sherman, Texas

4,500

14,208

17,890

9,513

April 18, 1991

American Bank of Sherman, N.A.
Sherman, Texas

Columbine Valley Bank and Trust
Jefferson County, Colorado

1,900

6,600

8,470

5,829

April 26, 1991

Vectra Bank
Denver, Colorado

Chireno State Bank
Chireno, Texas

2,200

12,412

12,336

1,539

May 9, 1991

The First State Bank
Gladewater, Texas

Texas Bank and Trust of Temple
Temple, Texas

6,700

44,839

48,036

25,614

May 9, 1991

The Peoples National Bank of Belton
Belton, Texas

The First National Bank of Poth
Poth, Texas

2,500

18,506

18,981

5,482

May 9, 1991

Bank of Floresville
Floresville, Texas

Madison National Bank
Washington, D.C.

46,000

513,908

373,653

489,995

May 10, 1991

Signet Bank, N.A.
W ashington, D.C.

Madison National Bank of Virginia
McLean, Virginia

18,100

174,347

154,533

129,645

May 10, 1991

Signet Bank - Virginia
Richmond, Virginia

First National Bank o f Cedar Hill
Cedar Hill, Texas

2,600

9,374

11,825

9,778

May 16, 1991

First State Bank
Blooming Grove, Texas

Capital Bank
Dallas, Texas

11,200

102,123

112,301

33,801

May 16, 1991

Bank One, Texas, N.A.
Dallas, Texas

First City Bank
New Orleans, Louisiana

3,200

51,748

56,734

14,017

May 17, 1991

First Bank and Trust
New Orleans, Louisiana

The Cosmopolitan National Bank o f Chicago
Chicago, Illinois

7,800

108,717

115,901

24,271

May 17, 1991

Cosmopolitan Bank and Trust Company
Chicago, Illinois

The First National Bank of Toms River
Toms River, New Jersey

259,100

1,396,066

1,591,750

771,984

May 22, 1991

First Fidelity Bank, N.A.
Newark, New Jersey

Liberty National Bank
Lovington, New Mexico

10,200

50,679

55,711

7,179

May 23, 1991

Western Commerce Bank
Carlsbad, New Mexico

Florida State Bank
Holiday, Florida

13,000

87,957

82,525

51,750

May 24, 1991

Orange Bank
Ocoee, Florida

Goldome
Buffalo, New York

765,530

9,185,575

6,531,760

1,958,061

May 31, 1991

Key Bank of Western New York, N.A.
Buffalo, New York

Northwest Bank, N.A.
San Antonio, Texas

2,600

6,957

7,238

2,835

June 6, 1991

Valley-Hi National Bank of San Antonio
San Antonio, Texas

129

T a b le B (fo rm e rly T a b le 1 2 3 )

130

Insured Banks Requiring Disbursements by the Bank Insurance Fund During 1991
D o l l a r s In T h o u s a n d s

Name and Location

Class
of Bank

Num ber of
Deposit
Accounts

Total
Assets

Total
Deposits

FDIC
Disbursements

Date of Closing,
Deposit Assumption,
Merger, or Assistance

Receiver, Assuming Bank,
Transferee Bank or
Merging Bank and Location

Deposit Assumptions (Continued)
Woburn Five Cents Savings Bank
Woburn, Massachusetts

38,800

$ 270,806

$ 235,449

$ 197,552

June 7, 1991

Sterling Bank
Waltham, Massachusetts

The Bank of Horton
Horton, Kansas

4,300

141,912

155,694

118,507

June 13, 1991

Kansas State Bank
Holton, Kansas

Peoples Bank
Hewitt, Texas

3,600

16,278

17,093

7,763

June 13,1991

The National Bank of Gatesville
Gatesville, Texas

Tascosa National Bank of Amarillo
Amarillo, Texas

12,400

69,915

88,558

38,450

June 13,1991

Team Bank
Ft. Worth, Texas

Texas Premier Bank of Victoria, N.A.
Victoria, Texas

2,200

9,351

12,881

2,277

June 13,1991

Victoria Bank and Trust Company
Victoria, Texas

Beacon Co-operative Bank
Boston, Massachusetts

2,700

31,252

30,090

17,488

June 21,1991

Grove Bank
Boston, Massachusetts

First Mutual Bank for Savings
Boston, Massachusetts

129,600

1,232,268

1,063,852

857,607

June 28, 1991

First National Bank of Boston
Boston, Massachusetts

Dripping Springs National Bank
Dripping Springs, Texas

4,300

18,571

21,633

4,921

July 12, 1991

Texas Bank
Odessa, Texas

Community Guardian Bank
Elmwood Park, New Jersey

11,200

58,267

57,927

18,695

July 19, 1991

Interchange State Bank
Saddle Brook, New Jersey

Pontchartrain State Bank
Metairie, Louisiana

22,400

128,640

134,031

107,669

July 19, 1991

First National Bank of Commerce
New Orleans, Louisiana

The Kerens Bank
Kerens, Texas

2,700

19,094

19,789

17,995

July 25, 1991

Cedar Creek Bank
Seven Points, Texas

Suburban National Bank
Hillsborough Township, New Jersey

7,300

95,901

92,833

88,002

July 26, 1991

Provident Savings Bank
Jersey City, New Jersey

The Housatonic Bank & Trust Company
Ansonia, Connecticut

7,600

65,309

61,672

44,867

July 26, 1991

Shelton Savings Bank
Shelton, Connecticut

Citytrust
Bridgeport, Connecticut

146,000

1,883,999

1,697,825

568,663

August 9, 1991

Chase Manhattan Bank of Connecticut, N.A.
Bridgeport, Connecticut

Mechanics and Farmers Savings Bank, FSB
Bridgeport, Connecticut

105,000

1,037,736

878,401

433,038

August 9, 1991

Chase Manhattan Bank of Connecticut, N.A.
Bridgeport, Connecticut

Bank of South Palm Beaches
Hypoluxo, Florida

7,800

61,179

65,694

61,053

August 9, 1991

1st United Bank
Boca Raton, Florida

Northwest National Bank
Fayetteville, Arkansas

5,900

27,198

30,827

3,524

August 16, 1991

Citizens Bank of Northwest Arkansas
Fayetteville, Arkansas

First Mexia Bank
Mexia, Texas

4,200

23,227

22.823

19,715

August 22, 1991

The East Texas National Bank of Palestine
Palestine, Texas

Buchel Bank & Trust Company
Cuero, Texas

4,000

24,664

26,735

23,578

August 22, 1991

First Bank
Edna, Texas

San Saba National Bank
San Saba, Texas

2,200

14,129

15,139

13,478

August 29, 1991

First Llano Bank
Llano, Texas

First National Bank and Trust Company
Blackwell, Oklahoma

5,000

32,786

33,984

1,477

August 29, 1991

Central National Bank & Trust Company of Enid
Enid, Oklahoma

Hillsborough Bank and Trust Company
Milford, New Hampshire

3,500

46,004

59,398

55,712

August 30, 1991

Peterborough Savings Bank
Peterborough, New Hampshire

Lowell Institution for Savings
Lowell, Massachusetts

34,100

394,091

322,234

385,992

August 30, 1991

The Family Mutual Savings Bank
Haverhill, Massachusetts

Hilton Head Bank & Trust Company, N.A.
Hilton Head Island, South Carolina

6,100

63,036

59,063

38,150

August 30, 1991

The Anchor Bank
Myrtle Beach, South Carolina

Suffield Bank
Suffield, Connecticut

29,100

294,710

264,072

213,435

September 6,1991

First Federal Bank, FSB
Waterbury, Connecticut

The Family Bank and Trust
Allenstown, New Hampshire

7,800

40,871

45,605

44,409

September 6, 1991

The Valley Bank
Hillsborough, New Hampshire

Valley Bank
W hite River Junction, Vermont

5,100

35,814

35,950

23,936

September 13, 1991

Vermont National Bank
Brattleboro, Vermont

Southeast Bank, N.A.
Miami, Florida

1,100,000

10,758,507

8,000,000

3,386,762

September 19, 1991

First Union National Bank of Florida
Jacksonville, Florida

Southeast Bank of West Florida
Pensacola, Florida

13,000

91,143

85,000

82,335

September 19, 1991

First Union National Bank of Florida
Jacksonville, Florida

Bank Five for Savings
Arlington, Massachusetts

46,300

390,003

406,591

277,944

September 20, 1991

Cambridge Savings Bank
Cambridge, Massachusetts

MidCounty Bank and Trust Company
Norwood, Massachusetts

3,000

62,406

59,706

53,923

September 20, 1991

Dedham Institution for Savings
Dedham, Massachusetts

Harbor National Bank of Connecticut
Branford, Connecticut

5,200

19,197

22,301

17,521

October 3, 1991

The New Haven Savings Bank
New Haven, Connecticut

Reagan State Bank
Big Lake, Texas

2,700

15,792

19,707

15,394

October 3,1991

Security State Bank
McCamey, Texas

Amoskeag Bank
Manchester, New Hampshire

125,400

831,459

741,145

407,652

October 10,1991

First NH Bank
Concord, New Hampshire

BankEast
Manchester, New Hampshire

95,620

742,136

593,244

418,560

October 10,1991

First NH Bank
Concord, New Hampshire

Nashua Trust Company
Nashua, New Hampshire

73,509

409,065

383,557

204,913

October 10,1991

First NH Bank
Concord, New Hampshire

T a b le B (fo rm e rly T a b le 1 2 3 )

Insured Banks Requiring Disbursements by the Bank Insurance Fund During 1991

131

D o l l a r s In T h o u s a n d s

Name and Location

Class
of Bank

Num ber of
Deposit
Accounts

Total
Assets

Total
Deposits

FDIC
Disbursements

Date of Closing,
Deposit Assumption,
Merger, or Assistance

Receiver, Assuming Bank,
Transferee Bank or
Merging Bank and Location

Deposit Assumptions (Continued)
Bank Meridian, National Association
Hampton, New Hampshire

17,467

$ 108,434

$ 106,069

$ 47,562

October 10, 1991

First NH Bank
Concord, New Hampshire

New Hampshire Savings Bank
Concord, New Hampshire

113,018

1,012,139

917,035

480,897

October 10, 1991

New Dartmouth Bank
Manchester, New Hampshire

Dartmouth Bank
Manchester, New Hampshire

107,000

798,327

817,669

487,966

October 10, 1991

New Dartmouth Bank
Manchester, New Hampshire

Numerica Savings Bank, FSB
Manchester, New Hampshire

80,625

490,674

452,550

259,113

October 10, 1991

New Dartmouth Bank
Manchester, New Hampshire

Iona Savings Bank
Tilton, New Hampshire

3,400

30,996

28,293

30,477

October 11,1991

First Savings and Loan Association of New Hampshire
Exeter, New Hampshire

Central Bank
Meriden, Connecticut

66,800

683,689

626,466

688,631

October 18,1991

Centerbank
Waterbury, Connecticut

Connecticut Valley Bank
Cromwell, Connecticut

2,100

27,503

27,862

26,064

October 18, 1991

MidConn Bank
Kensington, Connecticut

First National Bank
Bedford, Texas

3,900

18,971

21,642

18,375

October 24, 1991

First International Bank
Bedford, Texas

Coolidge Bank and Trust Company
Boston, Massachusetts

29,500

265,332

260,466

248,528

October 25, 1991

Pioneer Financial, a Cooperative Bank
Malden, Massachusetts

The Citizens Bank of Pagosa Springs
Pagosa Springs, Colorado

2,600

17,192

16,897

15,007

October 25, 1991

Citizens Bank of Pagosa Springs
Pagosa Springs, Colorado

First Hanover Bank
Wilmington, North Carolina

5,200

48,262

35,500

35,394

October 25,1991

Central Carolina Bank and Trust Company
Durham, North Carolina

Bank of the South
Baton Rouge, Louisiana

3,400

30,073

37,274

30,650

October 30,1991

The First National Bank in St. Mary Parish
Morgan City, Louisiana

Union Bank
San Antonio, Texas

15,700

85,233

102,233

80,222

October 31,1991

Channelview Bank
Channelview, Texas

Connecticut Savings Bank
New Haven, Connecticut

146,000

1,084,525

867,219

889,723

November 14,1991

Centerbank
Waterbury, Connecticut

Alvarado National Bank
Alvarado, Texas

2,300

10,194

9,388

9,636

November 14, 1991

The First National Bank in Joshua
Joshua, Texas

Durham Trust Company
Durham, New Hampshire

9,500

63,652

67,428

63,623

November 15,1991

Granite Bank
Keene, New Hampshire

Saybrook Bank and Trust Company
Old Saybrook, Connecticut

7,800

76,547

78,617

72,010

December 6, 1991

The New Haven Savings Bank
New Haven, Connecticut

Bank of East Hartford
East Hartford, Connecticut

3,900

37,760

38,396

33,363

December 13,1991

Bank of South Windsor
South Windsor, Connecticut

Merchants National Bank
Leominster, Massachusetts

29,400

155,619

147,476

136,377

December 13,1991

Worcester County Institution for Savings
Worcester, Massachusetts

The Bank Mart
Bridgeport, Connecticut

41,700

514,879

486,776

471,190

December 13,1991

Gateway Bank
South Norwalk, Connecticut

North Ridge Bank
Oakland Park, Florida

11,000

85,724

87,225

82,093

December 20,1991

Intercontinental Bank
Miami, Florida

13,644,745 11,322,182

2,230,965

April 22, 1991

Fleet/Norstar Financial Group, Inc.
Providence, Rhode Island

Bridge Banks*
New Bank of New England, N.A.
Boston, Massachusetts

N/A

New Connecticut Bank and Trust Company, N.A.
Hartford, Connecticut

N/A

7,077,251

6,798,224

2,418,249

April 22, 1991

Fleet/Norstar Financial Group, Inc.
Providence, Rhode Island

New Maine National Bank
Portland, Maine

N/A

1,032,005

949,926

225,061

April 22, 1991

Fleet/Norstar Financial Group, Inc.
Providence, Rhode Island

First Bank and Trust
Harrisburg, Illinois

N/A

29,706

28,805

September 10, 1991

Shawnee Bancorp, Inc.
Harrisburg, Illinois

Gunnison Bank and Trust Company
Gunnison, Colorado

N/A

22,277

21,356

October 2, 1991

Lindoe, Inc.
Ordway, Colorado

The Douglass Bank
Kansas City, Kansas

N/A

31,860

30,217

1,000

December 4, 1991

The Douglass Bank
Kansas City, Kansas

Assistance Transactions

‘ Bridge banks are fu ll service national banks esta b lish ed on an interim basis to assum e th e d e p o sits, ce rta in lia b ilitie s and s u b s ta n tia lly all th e assets o f th e failed
banks. New Bank o f New England, N.A., New C o n n e cticu t Bank and T ru s t C om pany, N.A. and New M aine N ational Bank were esta b lish ed w ith th e January 6,1 9 91 ,
clo s in g o f the Bank o f New England, N.A., C o n n e cticu t Bank and Tru st Com pany, N.A. and M aine N ational Bank. They were su bse q u en tly acquired by Fle et/N o rsta r
Financial G roup, Inc., in A p ril 1991.

T a b le C (fo rm e rly T a b le 1 2 5 )

132

Recoveries and Losses by the Bank Insurance Fund on Disbursements
fo r Protection o f Depositors, 1934 - 1991
D o l l a r s In T h o u s a n d s

Liquidation
status and
year of
deposit
payoff or Number
Recoveries Estimated
deposit
of
Disburse to Dec. 31, Additional
assumption banks
ments
1991
Recoveries

All cases

Deposit payoff cases
Number
Recoveries Estimated
of
Disburse to Dec. 31, Additional
Losses3 banks
ments4
1991
Recoveries

Total

1,940

86.465,085 38,165,402 12,770,101 35,529,492

573

12,088,750 6,117,739

1991
1990
1989
1988
1987
1986

127
169
207
221
203
145

19,790,422 4,086,166 8,307,830 7,396,426
10,369,855 5,826,682
601,990 3,941,183
10,562,090 4,206,437 (154,936) 6,510,589
13,034,043 3,624,988 2,249,063 7,159,992
5,025,908 2,691,892
162,171 2,171,845
4,892,583 2,770,918
274,165 1,847,500

21
20
32
36
51
40

1,441,393 199,710
1,899,975 670,379
2,114,719 822,042
1,252,133 722,111
2,101,014 1,256,129
1,155,767 706,187

1985
19846
1983
1982
1981
1980

120
80
48
42
10
10

1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968

9
3

1967
1966
1965
1964

1,471,083

Deposit assumption cases1

Number
Recoveries Estimated
of
Disburse to Dec. 31, Additional
Losses3 banks
ments5
1991
Recoveries
4,499,928

621,391
620,292
410,311
819,285
217,139 1,075,538
455,771
74,251
728,454
116,431
440,304
9,276

1,294 49,946,316 23,939,663 8,305,849
103
148
174
164

6,903,508
8,468,027
3,662,084
2,922,029
133 2,737,818
98 3,349,422

3,086,456 7,604,893
5,156,303 191,679
2,830,122 (468,954)
681,625
41,795
1,433,996
71,380
2,054,977
78,778

Number
Recoveries Estimated
of
Disburse to Dec. 31, Additional
banks
ments
1991
Recoveries

Losses3
17,700,714

73 24,430,019 8,108,000

2,993,169 13,328,850

3
1
1
21
19
7

1,445,521
800,000
1,853
0
4,785,287
554,273
8,859,881 2,221,252
187,076
1,767
387,394
9,754

81,546
0
96,879
2,133,017
(25,640)
186,111

563,975
1,853
4,134,135
4,505,612
210,949
191,529

4
2
3
9
3

719,009
147,895
5,522,017 3,775,462
71,992
0
1,566,500
298,750
298,847
883,489

156,330
297,840
19,398
47,688
0

414,784
1,448,715
52,594
1,220,062
584,642

522,790
791,760
147,287
277,240
35,736
13,732

403,876
654,305
120,668
205,800
34,598
11,515

(7,786)
27,303
893
210
0
0

126,700
110,152
25,726
71,230
1,138
2,217

87 1,623,764
957,079
62 1,369,309
915,793
36 3,476,354 1,929,672
319,599
26 418,339
5
79,208
33,463
7 138,623
103,245

136,786
26,620
255,376
74,776
43,518
7,010

529,899
426,896
1,291,306
23,964
2,227
28,368

10,867
9,015
2,093
• 247
16,312
40

3
1

9,936
817

9,015
613

(12)

933
204

3
3

11,416
25,918

9,660
25,849

1,683
1

73
68

7
80,415
65,231
6 547,751
510,000
6
26,650
20,654
13 587,981
549,770
10 306,128 266,582
4 2,403,277 2,259,633

5,250
28,940
3,903
38,037
23,302
143,604

9,934

8,811
2,093
174
16,244
40

67,487
1,696
193
272
162
12

3
1
5
4
4

16,771
16,189
53,767
29,265
7,596

16,771
14,501
53,574
28,993
7,513

41,910
6,464

(1.101)
(8)
23
0
0
0

(8)
0
0
0

0
1,696
193
272
83

7,087
9,541
10,816
12,171
18,886

0
234
0
0
0

1,010
245
663
1,541
286

4
1

8,097

7,087

10,020
11,479
13,712
19,172

735
10,908
13,712
19,172

735
10,391
12,171
18,886

0
0
0
0
0

1,010
0
517
1,541
286

6,201
4,765
1,835
3,051
1,031
3,499

4,699
4,765
1,738
3,023
1,031
3,286

0
0
0
0
0
0

1,502
0
97
28
0
213

5
1
3
3
1
1

6,201
4,765
1,835
2,796
1,031
2,795

4,699
4,765
1,738
2,768
1,031
2,582

0
0
0
0
0
0

1,502
0
97

1956

5
1
3
4
1
2

1955
1954
1953
1952
1951
1950

5
2
2
3
2
4

7,315
1,029
5,359
1,525
1,986
4,404

7,085
771
5,359
733
1,986
3,019

0
0
0
0
0
0

230
258
0
792
0
1,385

4,438

4,208

230

1949
1948
1947
1946
1945
1944

4
3
5
1
1
2

2,685
3,150
2,038
274
1,845
1,532

2,316
2,509
1,979
274
1,845
1,492

0
0
0
0
0
0

369
641
59
0
0
40

404

364

1943
1942
1941

5
20
15
43
60
74

7,230
11,684
25,061
87,899
81,828
34,394

7,107
10,996
24,470
84,103
74,676
31,969

0
0
0
0
0
0

123
688
591
3,706
7,152
2,425

4
6
8
19
32
50

5,500
1,612
12,278
4,895
26,196
9,092

5,377
1,320
12,065
4,313
20,399
7,908

0
0
0
0
0
0

75
69
25
9

20,204

16,532
12,873
6,423
734

0
0
0
0

3,672
2,333
2,685
207

50
42
24
9

12,365
7,735
6,026
941

9,718
6,397

0
0
0
0

1963
19627
1961
1960
1959
1958
1957

1940
1939
1938
1937
1936
1935
1934

285,330
351,763
275,667
122,674
43,518
7,010

1,071,383
1,985,763
1,369,626
1,315,256
588,007

10
7
6
16
13
4

90,351
548,568
26,650
599,397
332,046
2,403,277

74,246
510,613
20,654
559,430
292,431
2,259,633

5,238
28,940
3,903
39,720
23,303
143.604

6
1
6
7

435,238
16,189
171,646
51,566
42,072
6,476

368,852
14,501
171,430
51,294

8,097

7
5
7
2

15,206
9,108
941

30,585

3
7
2

4,274
734

28
0
213

418,467

352,081

(1.101)

67,487

1
3
5
3

117,879
22,301
34,476
6,476

117,856
22,301
34,397
6,464

23
0
0
0

0
0
79
12

6
2

9,285
571

8,806
425

234
0

245
146

255

704

1
2
2
3
2
4

2,877
1,029
5,359
1,525
1,986
4,404

2,877
771
5,359
733
1,986
3,019

0
0
0
0
0
0

0
258
0
792
0
1,385

4
3
5
1
1
1

2,685
3,150
2,038
274

2,316
2,509
1,979
274

1,845
1,128

0
0
0
0
0
0

369
641
59
0
0
0

123
292
213
582
5,797
1,184

1
14
7
24

1,730
10,072
12,783
83,004
55,632
25,302

0
0
0
0
0
0

0
396
378
3,124

28
24

1,730
9,676
12,405
79,790
54,277
24,061

1,355
1,241

2,647

25
27

7,839
7,471

6,814

3,082

0
0
0

1,025
995
933

1,338
1,752
207

6,476
2,149

'Deposit assumption cases include S347.6 million of disbursements for advances to protect assets and liquidation expenses which had been excluded in prior years.
^Assistance transactions" includes banks merged with financial assistance from FDIC to prevent probable failure through 1991.
in c lu d e s estimated losses in active cases. Not adjusted for interest or allowable return, which was collected in some cases in which the disbursement was fully recovered.
4lncludes estimated additional disbursements in active cases.
5Excludes excess collections turned over to banks as additional purchase price at termination of liquidation,
in c lu d e s Continental Illinois National Bank Assistance Agreement, which had been previously excluded.
7No case in 1962 required disbursements.
Note: Assistance losses for 1988 through 1991 include estimated costs payable in future years.
Note: Certain failed banks from 1988 and 1989 classified in the 1989 Annual Report as assistance transactions have been reclassified as deposit assumption cases.

Losses3

6,212,159
3,120,045
1,300,916
2,198,609
1,232,442
1,215,667

29
16
9
7
2
3

2,865,563 1,508.850
7,683,086 5,345,560
3,695,633 2,050,340
2,262,079
824,149
998,433
366,908
152,355
114,760

Assistance transactions2

Table D (fo rm e rly Table 127)
Income and Expenses, Bank Insurance Fund, by Year, from Beginning of Operations,
September 11, 1933, to December 31, 1991

133

D o l l a r s In M i l l i o n s

Expenses and losses

Income

Year

Total

$49,429.2
5,789.9
3.838.3
3.494.6
3.347.7
3.319.4
3.260.1
3.385.4
3.099.5
2.628.1
2.524.6
2.074.7
1.310.4
1.090.4
952.1
837.8
764.9
689.3

1991
1990
1989
1988
1987
1986
1985
1984"
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
1950
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
1933-34

668.1
561.0
467.0
415.3
382.7
335.8
295.0
263.0
241.0
214.6
197.1
181.9
161.1
147.3
144.6
136.5
126.8
117.3
111.9
105.7
99.7
94.2

88.6
83.5
84.8
151.1
145.6
157.5
130.7

121.0
99.3

86.6
69.1
62.0
55.9
51.2
47.7
48.2
43.8

20.8
7.0

Assessment
income

Assessment
credits

$33,145.7
5,160.5
2.855.3
1.885.0
1.773.0
1.696.0
1.516.9
1.433.4
1.321.5
1.214.9
1.108.9
1.039.0
951.9
881.0
810.1
731.3
676.1
641.3
587.4
529.4
468.8
417.2
369.3
364.2
334.5
303.1
284.3
260.5
238.2

$6,709.1

220.6
203.4
188.9
180.4
178.2
166.8
159.3
155.5
151.5
144.2
138.7
131.0
124.3
122.9
122.7
119.3
114.4
107.0
93.7
80.9
70.0
56.5
51.4
46.2
40.7
38.3
38.8
35.6
11.5

0. 06

0.0

0.0
0.0

0.0
0.0
0.0
0.0
164.0
96.2
117.1
521.1
524.6
443.1
411.9
379.6
362.4
285.4
283.4
280.3
241.4

210.0
220.2

202.1

182.4
172.6
158.3
145.2
136.4
126.9
115.5

100.8
99.6
93.0
90.2
87.3
85.4
81.8
78.5
73.7
70.0
68.7

0.0

0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0

Investment
and other
sources'

$22,992.6
629.4
983.0
1.609.6
1.574.7
1,623.4
1.743.2
1.952.0
1.778.0
1.577.2
1,511.9
1.152.8
879.6
734.0
585.1
518.4
468.4
410.4
366.1
315.0
278.5
239.5
223.4
191.8
162.6
142.3
129.3
112.4
104.1
97.7
84.6
73.9
65.0
57.9
53.0
48.2
43.7
39.6
37.3
34.0
31.3
29.2
30.6
28.4
26.3
43.1
23.7
27.3
18.4
16.6

12.6
10.6
9.7
10.5
9.4
9.4

8.2
9.3
7.0

Total

$56,457.1
16.862.3
13.003.3
4.346.2
7,588.4
3.270.9
2,963.7
1.957.9
1.999.2
969.9
999.8
848.1
83.6
93.7
148.9
113.6
212.3
97.5
159.2
108.2
59.7
60.3
46.0
34.5
29.1
27.3
19.9
22.9
18.4
15.1
13.8
14.8
12.5

12.1

11.6
9.7
9.4
9.0
7.8
7.3
7.8

6.6
7.8
6.4
7.0
9.9

10.0
9.4
9.3
9.8

10.1
10.1

12.9
16.4
11.3
12.2
10.9
11.3

10.0

Deposit Insurance
losses and
expenses

$53,068.0
16,578.23
12,783.73
4.132.3
7,364.5
3.066.0
2.783.4
1,778.7
1.848.0
834.2
869.9
720.9
(34.6)
(13.1)
45.6
24.3
31.9
29.8

100.0
53.8

10.1
13.4
3.8

1.0
0.1
2.9

0.1
5.2
2.9
0.7
0.1
1.6
0.1

0.2
0.0
0.1
0.3
0.3

0.1

0.1
0.8
0.0
1.4
0.3
0.7

0.1
0.1
0.1
0.1

0.2
0.5
0.6
3.5
7.2
2.5
3.7

2.6

2.8
0.2

Interest on
capital stock2

$80.6
0.0
0.0
0.0
0.0
0.0

0.0

0.0
0.0
0.0

0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
4.8
5.8
5.8
5.8
5.8
5.8
5.8
5.8
5.8
5.8
5.8
5.8
5.8
5.6

Administrative
expenses

$3,308.5
284.1
219.6
213.9
223.9
204.9
180.3
179.2
151.2
135.7
129.9
127.2
118.2
106.8
103.35
89.3
180.45
67.7
59.2
54.4
49.6
46.9
42.2
33.5
29.0
24.4
19.8
17.7
15.5
14.4
13.7
13.2
12.4
11.9

11.6
9.6
9.1
8.7
7.7
7.2
7.0

6.6
6.4
6.1
5.7
5.0
4.1
3.5
3.4
3.8
3.8
3.7
3.6
3.4
3.0
2.7
2.5
2.7
4.27

Net income (Loss)
added to deposit
insurance fund

($7,027.9)
(11,072.4)
(9,165.0)
(851.6)
(4,240.7)
48.5
296.4
1.427.5
1,100.3
1,658.2
1.524.8
1.226.6
1.226.8
996.7
803.2
724.2
552.6
591.8
508.9
452.8
407.3
355.0
336.7
301.3
265.9
235.7

221.1
191.7
178.7
166.8
147.3
132.5
132.1
124.4
115.2
107.6
102.5
96.7
91.9
86.9
80.8
76.9
77.0
144.7
138.6
147.6
120.7

111.6
90.0
76.8
59.0
51.9
43.0
34.8
36.4
36.0
32.9
9.5
(3.0)

'In clud e s $757.4 m illion o f interest and allowable return received on funds advanced to receivership and deposit assum ption cases and $903.4 m illion o f interest on capital
notes advanced to facilitate deposit assumption transactions and assistance to open banks.
2Paid in 1950 and 1951, but allocated among years to which it applied. Initial capital of $289 m illion was retired by payments to the U.S. Treasury in 1947 and 1948.
in c lu d e s contingency losses for future unresolved cases.
4Revised due to restatement of December 31,1984, financial statements.
in c lu d e s net loss on sales o f U.S. Government securities o f $105.6 m illion in 1976 and $3.6 m illion in 1978.
A s se ssm e n ts collected from members o f the temporary insurance funds which became insured under the permanent plan were credited to their accounts at the termina
tion of the temporary funds and were applied toward payment o f subsequent assessments becoming due under the permanent insurance funding, resulting in no income
to the FDIC from assessments during the existence o f the temporary insurance funds.
7Net after deducting the portion o f expenses and losses charged to banks withdrawing from the temporary insurance funds on June 30, 1934.

Table E (fo rm erly Table 129)
Insured Deposits and the Bank Insurance Fund, 1934 - 1991

134

D o l l a r s In M i l l i o n s
Year
(December 31)
1991
19902
1989

Insurance
coverage

Deposits in insured banks1
Total

Insured

Percentage of
Deposit
insured deposits insurance fund

Insurance fund as a percentage of
Total deposits

Insured deposits

$ 100,000
100,000
100,000

$ 2,520,074
2,540,930
2,465,922

$ 1,957,722
1,929,612
1,873,837

77.7
75.9
76.0

$ (7,027.9)
4,044.5
13,209.5

(0.28)
0.16
0.54

(0.36)
0.21
0.70

1988
1987
1986
1985
1984

100,000
100,000
100,000
100,000
100,000

2,330,768
2,201,549
2,167,596
1,974,512
1,806,520

1,750,259
1,658,802
1,634,302
1,503,393
1,389,874

75.1
75.3
75.4
76.1
76.9

14,061.1
18,301.8
18,253.3
17,956.9
16,529.4

0.60
0.83
0.84
0.91
0.92

0.80
1.10
1.12
1.19
1.19

1983
1982
1981
1980
1979

100,000
100,000
100,000
100,000
40,000

1,690,576
1,544,697
1,409,322
1,324,463
1,226,943

1,268,332
1,134,221
988,898
948,717
808,555

75.0
73.4
70.2
71.6
65.9

15,429.1
13,770.9
12,246.1
11,019.5
9,792.7

0.91
0.89
0.87
0.83
0.80

1.22
1.21
1.24
1.16
1.21

1,145,835
1,050,435
941,923
875,985
833,277

760,706
692,533
628,263
569,101
520,309

66.4
65.9
66.7
65.0
62.5

8,796.0
7,992.8
7,268.8
6,716.0
6,124.2

0.77
0.76
0.77
0.77
0.73

1.16
1.15
1.16
1.18
1.18

1978
1977
1976
1975
1974

40.0003
40,000
40,000
40,000
40,000“

1973
1972
1971
1970
1969

20,000
20,000
20,000
20,000
20,000

766,509
697,480
610,685
545,198
495,858

465,600
419,756
374,568
349,581
313,085

60.7
60.2
61.3
64.1
63.1

5,615.3
5,158.7
4,739.9
4,379.6
4,051.1

0.73
0.74
0.78
0.80
0.82

1.21
1.23
1.27
1.25
1.29

1968
1967
1966
1965
1964

15,000
15,000
15,000
10,000
10,000

491,513
448,709
401,096
377,400
348,981

296,701
261,149
234,150
209,690
191,787

60.2
58.2
58.4
55.6
55.0

3,749.2
3,485.5
3,252.0
3,036.3
2,844.7

0.76
0.78
0.81
0.80
0.82

1.26
1.33
1.39
1.45
1.48

1963
1962
1961
1960
1959

10,000
10,000
10,000
10,000
10,000

313,304s
297,5486
281,304
260,495
247,589

177,381
170,210
160,309
149,684
142,131

56.6
57.2
57.0
57.5
57.4

2,667.9
2,502.0
2,353.8
2,222.2
2,089.8

0.85
0.84
0.84
0.85
0.84

1.50
1.47
1.47
1.48
1.47

1958
1957
1956
1955
1954

10,000
10,000
10,000
10,000
10,000

242,445
225,507
219,393
212,226
203,195

137,698
127,055
121,008
116,380
110,973

56.8
56.3
55.2
54.8
54.6

1,965.4
1,850.5
1,742.1
1,639.6
1,542.7

0.81
0.82
0.79
0.77
0.76

1.43
1.46
1.44
1.41
1.39

1953
1952
1951
1950
1949

10,000
10,000
10,000
10,000
5,000

193,466
188,142
178,540
167,818
156,786

105,610
101,841
96,713
91,359
76,589

54.6
54.1
54.2
54.4
48.8

1,450.7
1,363.5
1,282.2
1,243.9
1,203.9

0.75
0.72
0.72
0.74
0.77

1.37
1.34
1.33
1.36
1.57

1948
1947
1946
1945
1944

5,000
5,000
5,000
5,000
5,000

153,454
154,096
148,458
157,174
134,662

75,320
76,254
73,759
67,021
56,398

49.1
49.5
49.7
42.4
41.9

1,065.9
1,006.1
1,058.5
929.2
804.3

0.69
0.65
0.71
0.59
0.60

1.42
1.32
1.44
1.39
1.43

1943
1942
1941
1940
1939

5,000
5,000
5,000
5,000
5,000

111,650
89,869
71,209
65,288
57,485

48,440
32,837
28,249
26,638
24,650

43.4
36.5
39.7
40.8
42.9

703.1
616.9
553.5
496.0
452.7

0.63
0.69
0.78
0.76
0.79

1.45
1.88
1.96
1.86
1.84

1938
1937
1936
1935
1934

5,000
5,000
5,000
5,000
5,0007

50,791
48,228
50,281
45,125
40,060

23,121
22,557
22,330
20,158
18,075

45.5
46.8
44.4
44.7
45.1

420.5
383.1
343.4
306.0
291.7

0.83
0.79
0.68
0.68
0.73

1.82
1.70
1.54
1.52
1.61

’ D eposits in fo re ig n branches are o m itte d from to ta ls because th e y are n ot insured. Before 1991, insured d e p o s its were e stim ated by a pp lying to d e p o s its at regular
intervals th e percentages as d eterm ined from th e June Call R eport (quarterly report o f c o n d itio n and incom e) s u b m itte d by insured banks. Banks now report
q uarterly data on insured d e p o sits, so 1991 fig ure s are based on actual a m ounts reported at year-end, rather than e stim ates.
S ta r tin g in 1990, d e p o sits in insured banks e xclu d e th o se d e p o sits held by Bank Insurance Fund m em bers th a t are covered by th e Savings A s s o c ia tio n Insurance
Fund und e r th e “ Oakar A m e nd m e n t” to FIRREA.
3$100,000 fo r Individual R etirem ent A cco u n ts and Keogh a cco u n ts provided in 1978.
'*$100,000 fo r tim e and savings d e p o sits o f in-state governm ental u n its provided in 1974.
5D ecem ber 20,1963.
6D ecem ber 28, 1962.
'In itia l coverage was $2,500 fro m January 1 to June 30, 1934.

Index

E
Applications Processing

18, 37

FDIC Applications, 1989-1991

Enforcement Activities

15-16,19, 26-27, 37

Compliance, Enforcement
and Other Legal Actions, 1989-1991

Assessments (see Deposit Insurance Premiums)
Assistance Transactions

28-29

Economic and Policy Research

20,22

Equal Opportunity

31,32

Examinations
B

14-15, 19, 36, 37
14

FDIC Examinations, 1989-1991

Bank Insurance Fund (BIF)

1-2, 2 3 ,2 4 ,2 8 ,3 6

Statistical Highlights

Financial Statements

41-72
1, 13, 20

Bank of New England Corporation
Bank One Texas, N.A.

Bridge Banks

F
Failed or Failing Institutions

1-2, 20-24, 28, 37, 38

Failed Banks, 1989-1991

Federal Deposit Insurance Corporation
Board of Directors

4-5, 38

Chronological Highlights

Commercial Banks (Financial Performance)

Continental Bank Corporation
Credit Availability

Divisions and Offices

Financial Statements

41-123

2,16-17, 22, 26, 34, 36, 37-38

Clarke, Robert L.

Community Reinvestment
and Consumer Protection

Call Reports
Capital

Officials

Organization Chart

Regional Offices

19, 30, 34, 38

Statistical Highlights

FDIC Improvement Act
of 1991

1 ,2 -3 ,1 3 ,1 4 ,1 8 ,2 2 ,3 6 -3 8

14,19
FDIC Fraud Alert

Deposit Insurance Premiums
Deposit Insurance Reform

1,2, 13, 28, 34, 37
1 ,2 ,1 3 , 37-38

Federal Savings and Loan
Insurance Corporation (FSLIC)

23, 36, 38

FSLIC Resolution Fund (FRF)

23, 24, 38

Financial Statements
Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (FIRREA)

95-123
26, 34, 35, 38

136

General Accounting Office (GAO)

65-72, 87-93,116-123

Goldome

1, 10, 13, 20,21

Real Estate Loans

1 -2 ,10,14 ,19, 28, 37, 38

Resolution Trust Corporation

25, 36, 38

Resolutions, Division of

13, 20

nuies arm neguiauons adopted or rroposea in iaai

H
Hope, C.C., Jr.

Hove, Andrew C., Jr.

hyan, 1imothy

S
Savings Association Insurance Fund (SAIF)

1
Insured Deposit Payoffs and Transfers

Financial Statements

Interagency Cooperation

19, 25

36, 38
73-93

Savings Banks (Financial Performance)

Seidman, L. William

13,31

Southeast Banking Corporation
L
Legal Affairs
Legislation Enacted in 1991

25-27, 30-31

23-24

Litigation

25-27

Loss-Sharing

21,22

N
New Hampshire Bank Failures

Staffing

13, 20, 21-22

O
17

Off-site Monitoring

25, 31-32

INUI I lUtfl Ul TL^IV^ Ul MUIdlb dllU CII ipiUytJtJb, I

13, 36-38

Liquidation Activities

1, 13, 20-21

r\.

oicuouuai i auic
(formerly Table 122)
Number and Deposits of Banks Closed, 1934-91
Statistical Table B:
(formerly Table 123)
Banks Requiring Disbursements
by the Bank Insurance Fund During 1991

127

128-131

Statistical Table C:
(formerly Table 125)
neuuveiies anu i_usses uy me DariK insurance runu
on Disbursements to Protect Depositors, 1934-91

132

Statistical Table D:
(formerly Table 127)
Income and Expenses, Bank Insurance Fund
September 11,1933, to December 31, 1991

133

o I 0 l l S l l C 3 l I 9 D I6 t .

P
Problem Banks

2, 15-16

Bank Insurance Fund Problem Banks, 1987-1991
Professional Liability
Purchase and Assumption Transactions

(formerly Table 129)
Deposits and the Bank Insurance Fund, 1934-91
Supervision

134

2, 3, 14-19, 30, 34-38

24, 25, 29
20

T
Taylor, William

1-3, 4, 13, 19,31

D e s ig n C r e d its
Design and
Printing Coordinator
Geoffrey L. Wade

Art Director
Geri Bonebrake

This publication is printed
on recycled paper.

Designer
Sam Collicchio
Design Team
Mitchell W. Crawley
Addie Hargrove
Deidre L. Howard
Deborah Samek

1 9 9 1 A n n u a l R e p o rt
This report is published by:
The Office of Corporate
Communications
FDIC
Room 6058
550 17th Street, NW
Washington, DC
20429-9990
Director
Alan J. Whitney
Assistant Director
Caryl A. Austrian
Senior Writer-Editor
Jay Rosenstein
Assistant Editors
David Barr
Frank Gresock
A n d r e w P o r t e r f ie ld

Federal
D e p o sit
In su rance
C o rp o ra tio n
5 5 0 17th S t., NW
W ashington, DC
2 0 4 2 9 -9 9 9 0

P - 1 4 0 0 - 1 0 3 - 91

Full text of Annual Report of the Federal Deposit Insurance Corporation : Annual Report, 1991

FRASER