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Federal Deposit Insurance C orporation Washington, D.C. June 1,1984 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 1983. Very truly yours, W illiam M. Isaac Chairman The President of the U.S. Senate The Speaker of the U.S. House of Representatives BQ4RD OF DIRECTORS iv William M. Isaac Irvine H. Sprague William M. Isaac has been Chairman of the Federal Deposit Insurance Corporation since August 3,1981. He was a p pointed to a six-year term on the FDIC's Board of Directors in March 1978. From 1974 to 1978 he was vice president, general counsel and secretary of First Kentucky National Corporation and its subsidiaries, First National Bank of Louisville and First Kentucky Trust Company. From 1969 to 1974 he practiced law with Foley & Lardner, Milwaukee, Wisconsin. A native of Bryan, Ohio, Mr, Isaac received his undergraduate degree from Miami University, Oxford, Ohio, and his law degree (summa cum laude) from The Ohio State University, Columbus, Ohio. Irvine FI. Sprague, a member of the Federal Deposit Insurance Corporation Board of Directors from 1969 to 1972, and from 1979 to date, served as FDIC Chair man from February 1979 to August 1981. He has held a number of other government positions, including Special Assistant to President Lyndon Johnson in the White House, Deputy Director of Finance for the State of California, and Executive Director of the Steering and Policy Committee in the U.S. House of Representatives. Mr. Sprague, a native of Stockton, California, is a graduate of the College of the Pacific and the Advanced M anagem ent Pro gram at Harvard and also attended George Washington University and Indiana University. Mr. Sprague entered the Army in World War II as a private and retired from the Army Reserve as a lieutenant colonel. He earned the Com bat Infantry Badge, Purple Heart, California Medal of Merit and two Bronze Stars. C. T. Conover C. T. Conover becam e Comptroller of the Currency in December 1981. Mr. Conover, a native of Bronxville, New York, who holds a BA from Yale University and an MBA from the University of California at Berkeley, started in banking as a m anagem ent trainee with Seattle-First National Bank. He cam e to the Comptroller's post from Edgar, Dunn & Conover, Inc., a general management consulting firm he helped found in San Francisco. Earlier he was part of the m anagem ent con sulting group of Touche Ross & Co., San Francisco, serving as a principal and national services director from 1974 to 1978. Prior to that, Mr. Conover was vice president of U.S. Bancorp, Portland, Oregon, He was a m anagement consultant with McKinsey and Company from 1965 to 1972. 'I The Board of Directors of the FDIC: (from left) Irvine H. Sprague, Director; C. T. Conover, Comptroller of the Currency, and Chairman William M. Isaac. vi The FDIC Senior M anagem ent Group: (from left) Robert V. Shumway, Director, Division of Bank Supervision; Margaret L. Egginton, Deputy to the Chairman; Stanley C. Silverberg, Director, Division of Research and Strategic Planning; Chairman William M. Isaac; James A. Davis, Director, Division of Liquidation; Stanley J. Poling, Director, Division of Accounting and Corporate Services, and Thomas A. Brooks, General Counsel, Legal Division. FDIC OFFICIALS Deputy to the Chairman M a rg a re t L. Egginton Assistant to the Deputy to the Chairman Christie A. S c iacc a Deputy to the Director John R. Curtis Special Assistant to the Director Kenneth Fulton Deputy to the Director (Comptroller of the Currency) Alan Herlands Special Assistant to the Director (Comptroller of the Currency) Laura L. McAuliffe Director, Division of Bank Supervision Robert V. Shumway General Counsel Thomas A. Brooks Director, Division of Liquidation Jam es A. Davis Director, Division of Accounting and Corporate Services Stanley J. Poling Director, Division of Research and Strategic Planning Stanley C. Silverberg Executive Secretary Hoyle L. Robinson Director, Office of Congressional Relations and Public Information G rah am T. Northup Public Information Officer Alan J. W hitney Director, Office of Corporate Audits and Internal Investigations Robert D. Hoffman Director, Office of Personnel Management Jack C. Pleasant Director, Office of Equal Employment Opportunity Joe S. Arnold vii REGIONS, AREAS AND DIRECTORS R e g io n a l O ffic e s a n d D irecto rs ATLANTA MEMPHIS Edwin B. Burr 233 Peachtree Street, N.E., Suite 2400 Atlanta, G eorgia 30043 Sandra A. W aldrop 1 C om m erce Square, Suite 1800 Memphis, Tennessee 38103 BOSTON MINNEAPOLIS James E. Halvorson 60 State Street, 17th Floor Boston, Massachusetts 02109 Billy C. M ullican 730 Second Avenue South, Suite 266 Minneapolis, Minnesota 55402 C H IC A G O NEW YORK Paul G. Fritts 233 S. W acker Drive, Suite 6116 C hicago, Illinois 60606 Bernard J. McKeon 345 Park Avenue, 21st Floor New York, New York 10154 COLUMBUS OM AHA Charles E. Doster 1 Nationw ide Plaza, Suite 2600 Columbus, O hio 43215 Milos Konjevich, Jr. 1700 Farnam Street, Suite 1200 O m aha, Nebraska 68102 DALLAS PHILADELPHIA Roy E. Jackson 350 North St. Paul Street, Suite 2000 Dallas, Texas 75201 Robert A. Dorbad 1900 Market Street, Suite 616 Philadelphia, Pennsylvania 19103 KANSAS SAN FRANCISCO Joseph V. Prohaska 2345 G rand Avenue, Suite 1500 Kansas City, Missouri 64108 Anthony S. Scalzi 25 Ecker Street, Suite 2300 San Francisco, California 94105 L iq u id a tio n A re a O ffic e s a n d D irectors MIDWEST AREA SOUTHWEST AREA Thomas A. Beshara 200 W. Madison Street, Suite 700 C hicago, Illinois 60606 G. M ichael Newton 1910 Pacific Avenue, Floor 16 Dallas, Texas 75201 NORTHEAST AREA WESTERN AREA M ichael J. Martinelli 116 West 32nd Street, 12th Floor New York, New York 10001 Frank K. Pesek 25 Ecker Square, Suite 1900 San Francisco, California 94105 SOUTHEAST AREA M ichael B. Burgee 233 Peachtree Street, N.E., Suite 2000 Atlanta, G eorgia 30043 viii WBLE OF CONTENTS FDIC B o a rd o f D ir e c to r s _________________________________________ iv FDIC O rg a n iz a tio n C h a r t ________________________________________ vi FDIC O ffic ia ls ____________________________________________________ vii FDIC R eg io n s, L iq u id a tio n A re a O ffic e s a n d D ir e c to r s _________________________________________________ viii C h a ir m a n ’s S t a t e m e n t __________________________________________ x O p e ra tio n s o f th e C o r p o r a t io n _________________________________ 2 F in a n c ia l S ta te m e n ts ____________________________________________ 18 L e g isla tio n a n d R e g u la tio n s ____________________________________32 Legislation - 1 9 83 _______________________________ 32 Regulations - 1 9 8 3 ______________________________ 33 History o f th e F D IC ______________________________________________ 40 Statistics o f C lo s e d Banks a n d D e p o s it In s u r a n c e ____________ 52 Banks Closed Because of Financial Difficulties, FDIC Income, Disbursements, and Losses In d e x _____________________________________________________________ 59 ix CHWIRIVWN’S SWTEMENT The Federal Deposit Insurance Corporation reached an important milestone on June 16, 1983, when it com pleted its 50th year of service to the nation and the banking public. The occasion was marked by several receptions, the dedication of a permanent lobby exhibit, and the unveiling of the design for a commemorative U.S. postage stamp to be issued early in 1984. Although the anniversary was observed in a festive atmosphere, 1983 was a year of serious and intense activity for the FDIC. There were 48 bank failures, which was a post-Depression record, including several large institutions. This resulted in a substantial increase in the volume of assets acquired for liquidation in our role as receiver for failed banks. Despite the challenges and the adversity, the FDIC met its responsibilities in a fashion that maintained public confidence. Operations continued smoothly and efficiently, the FDIC tested new techniques for handling failures, and the insurance fund stood at a record $15,4 billion at year's end. The Corporation's administrative budget for the year totalled $136 million, an increase of just 4,4 percent over expenditures in 1982 following an increase of only 2,2 percent the previous year, The closing of the Madison Regional Office and transfer of its operations to the Chicago and Columbus Regional Offices resulted in a projected savings of over $1 million annually, The FDIC also com pleted on schedule the opening and staffing of five new Area Liquidation Offices. By decentralizing supervision of bank liquidations, the FDIC expects to cope more effectively with a growing workload. While 1983 was a year of achievement, it also was a year in which the need for major changes in the regulatory and deposit insurance structures becam e increasingly apparent. Striking changes in the competitive environment for financial institutions have m ade it clear that the mechanisms crafted to regulate and insure them half a century ago no longer are appropriate and that change can no longer be delayed. x Chairman William M. Isaac The most fundamental change has been the growth in competition in the banking markets flowing from deregulation. This enhanced competition has given rise to increased risk and greater opportunities for banks to fail. Our deposit insurance system continues to provide needed protection for consumers. However, because most failures result in mergers, large depositors and other bank creditors have perceived that their funds are only minimally at risk, if at all, resulting in a pronounced deterioration of market discipline. In April, in response to a provision of the Garn-St Germain Depository Institutions Act of 1982, the FDIC submitted to Congress a deposit insurance study. Similar studies were prepared by the other deposit insurance agencies. The FDIC stressed 1wo themes: marketplace discipline must increase as government controls on the banking industry are reduced, and major reforms of the regulatory and insurance systems must occur for those systems to continue to be effective and equitable in today's deregulated environment. Legislation was introduced late in 1983 at the FDIC's request by Senator Jake Garn and Congressman Fernand St Germain to strengthen and refine the provisions of the Federal Deposit Insurance Act. The Federal Deposit Insurance Improvements Act of 1983 (bills S. 2103 and H.R. 4451) would authorize the FDIC to vary deposit insurance premium rebates on the basis of the risk that any insured bank presents to the fund. It would require that the FDIC be designated as the receiver for any closed insured bank, and it would set priorities for payment of claims against a failed bank. The proposal also would provide the FDIC with enforcement authority over national and state member banks, as well as new authority to facilitate the operations of a Deposit Insurance National Bank formed by the FDIC to wrap up the affairs of a closed bank. Finally, the legislation would eliminate the necessity of FDIC approval of branch applications by state banks. Providing an important adjunct to these external initiatives, the FDIC's two principal operating elements — the Divisions of Liquidation and Bank Supervision — this year began developing their first long-term strategic plans, These are major efforts to chart a course for the next five years by anticipating possible industry and regulatory developments, and planning to ensure that the FDIC is properly oriented and has the resources and technology to be effective in an unpredictable environment. The broad framework of the strategic plan being developed by the Division of Bank Supervision envisions movement from "general purpose" regulation to focusing more on safety and soundness issues. As legislative reform permits, the FDIC will withdraw from activities such as consumer and investor protection and antitrust determinations. These functions will be reassigned to other appropriate agencies and the FDIC will concentrate on its central mission of promoting safety and soundness in the banking system. This will involve the identification and control of risk within the system generally, and closely monitoring individual problem banks. The Division of Bank Supervision adopted several measures in 1983 to initiate this new supervisory direction. One step is to examine non-problem banks once every 36 months instead of every 18 months, unless analysis of quarterly reports indicates the development of weaknesses in an institution, This enables our examining staff to concentrate on problem banks, resulting in more effective supervision and a reduction for well-run banks in their regulatory burden. A second undertaking involves agreements with the Office of the Comptroller of the Currency and the Federal Flome Loan Bank Board on cooperative examination programs for national banks and federal savings banks. These ventures focus primarily on problem banks, and are producing stronger, better coordinated supervisory efforts. The Division of Liquidation's strategic plan aims at keeping pace with a continued high rate of bank failures, and the adoption of innovative means of handling failed banks and liquidating their assets. In addition to addressing broad policy issues, the plan calls for a major overhaul of antiquated procedures and the introduction of an advanced automated data processing capability. Specific objectives include developing improved procedures for paying off depositors with minimal disruption in the community, expanding the Division's ability to rapidly dispose of assets and increase collections while minimizing costs, increasing profits from assets being operated until they are sold, and the adoption of automated systems to improve cash and asset management. The FDIC in 1984 will extend the long-range planning process Corporation-wide, review carefully its organizational structure, and work for progressive legislation involving further banking deregulation and an improved regulatory structure. William M, Isaac Chairm an xi S! S i1 ...,.,,IBS to ll mm HIHBRISBHaiB THE YEAR’S ACTIVITIES DECISIONS AMD RULINGS During 1983, the FDIC focused on further deregulation of the banking industry and response to changes in the industry resulting from deregulation. As a member of the Depository Institutions Deregulation Committee (DIDC), the Chairman of the FDIC Board of Directors took part in Committee actions that accomplished almost com plete deregulation of interest rates paid by insured banks and thrift institutions on deposits. All limits were removed on interest rates payable on deposits with maturities in excess of 31 days. The only remaining controls are a 5 Vi percent ceiling on passbook accounts and a 5 percent limit on NOW accounts and money market deposit accounts with balances under $2,500. The Chairman of the FDIC also is Chairman of the Federal Financial Institutions Examination Council (FFIEC), which in 1983 approved new Commercial Bank Reports of Condition and Income that are to be effective with the filing of the March 31,1984, reports. The revised reports reflect changes arising from deregulation and evolving industry practices and provide supervisory authorities with new and better regulatory data. The FFIEC also implemented provisions of the Garn-St Germain Act dealing with the reporting and public disclosure of insider loans by commercial and mutual savings banks. The Board of Directors acted on a number of key issues during the year, including new reporting rules on brokered deposits and a policy on insider loans. The Board also solicited public and industry com m ent in two controversial areas: (1) possible curbs on insurance of brokered deposits, and (2) whether the FDIC should impose limits on bank involvement in new financial services outside the traditional boundaries of banking. In addition, the General Counsel issued an opinion on the legality of banks providing discount brokerage services. 2 Brokered Deposits The Board of Directors voted to require that nonmember banks include in their Reports of Condition the dollar amount of their brokered deposits, regardless of the size of the deposit or the type of deposit instrument issued. Brokered deposits include those in which the entire deposit is held by a single depositor, as well as those in which the broker sells participations to one or more investors. The rapid growth of deposit brokering is of increasing concern to the FDIC because it undermines the disciplinary check on excessive bank risk-taking normally exercised by large depositors. Because large brokered deposits typically are divided into insured segments at different institutions, there is no need for the depositor or the broker to analyze an institution's likelihood of continued financial viability. The result is an undermining of market discipline, Such deposits also can artificially extend the life of a poorlym anaged institution, increasing the FDIC's costs when market forces finally cause failure. On November 1, the FDIC and the Federal Home Loan Bank Board jointly issued an advance notice of proposed rulemaking soliciting com m ent on whether regulatory or legislative steps should be taken to curb the undesirable effects of deposit brokering among banks and savings associations. Insider Loans Non-Banking Financial Services The FDIC eliminated the requirement for prior approval Py a majority of a bank's board of directors of all extensions of credit exceeding in the aggregate $25,000 to one of the bank's directors, executive officers, principal shareholders, or to any of their "related interests." Instead, all loans that exceed in the aggregate five percent of capital and unimpaired surplus or $25,000, whichever is greater, must receive prior board approval. Prior approval is required for any loans that total more than $500,000. The am ended rule reduced the regulatory burden by raising the threshold amount which triggers the prior approval requirement. Noting that the erosion of traditional boundaries am ong banking, other financial services and general com m erce is transforming the financial environment, the Board issued an advance notice of proposed rulemaking on bank involvement in historically "non-banking" activities. Specifically, the Board solicited com m ent on: - the need to regulate the direct or indirect involvement of insured banks in real estate or insurance brokerage and underwriting, data processing services, travel agency activities, and other financially-related activities, and, - what limitations, if any, the FDIC should impose on the ownership of insured banks by companies engaged in such activities. The Board said it was motivated to explore this controversial area by its obligation, as insurer for the banking system, to monitor marketplace developments and changes in law and to assess their potential im pact on bank safety and soundness. The Task Group on Regulation of Financial Services, in 1983 com pleted its task of creating a regulatory restructuring plan for the federal banking agencies. Members of the Task Group (from left, facing cam era) are Joseph R. Wright, Deputy Director, OMB; Martin Feldstein, Chairman of the Council of Economic Advisors; Edgar F. Callahan, Chairman, NCUA; FDIC Chairman William M. Isaac; Attorney General William French Smith; Susan Phillips, Chairman, Commodity Futures Trading Commission; Jack A. Svahn, Assistant to the President for Policy Development; John Shad, Chairman, SEC; Donald T. Regan, Secretary of the Treasury; Vice President George Bush, Task Group Chairman; Paul Volcker, Chairman of the Federal Reserve, and C. Todd Conover, Comptroller of the Currency. Discount Brokerage The FDIC's General Counsel issued an opinion on the legality of insured state nonmember banks offering discount brokerage services. The opinion was issued in response to numerous inquiries about whether such banks are permitted under the Glass-Steagall Act to enter into contractual agreements with unrelated discount brokers who execute securities transactions for bank customers and share the resulting commissions with the bank. The General Counsel concluded that banks are permitted to offer such services. The opinion noted, however, that the legality of any particular brokerage activity may vary from case to case. SUPERVISORY OPERATIONS The Division of Bank Supervision experienced a substantial reduction in 1983 in the number of bank examinations, from 17,886 in 1982 to 12,977 this year. This decline had two principal causes. First was a redirection of resources and emphasis from well-operated banks to problem institutions, based on the premise that the FDIC's greatest exposure is am ong banks that pose a threat of insolvency, not am ong the vast majority of banks that have a proven record of sound operation. The second factor was a threefold increase — from about 70,000 hours in 1982 to 210,000 hours this year — in details of examiner personnel to assist in the liquidation of a record number of failed banks, The Division's reordering of its examination priorities was facilitated by the increasing sophistication of the Corporation's Integrated Monitoring System (IMS). The IMS is used for offsite analysis of quarterly bank reports, permitting financial analysts to identify and target specific problem areas. Examiners Keith B. Nothstein (foreground) and (from left) Daniel E. Austin, Davis L. Statton and William C. Spangler, Jr., ana lyze assets and liabilities at the Fredericktown Bank and Trust Company, Frederick, Maryland, as they prepare their examina tion report. These problems then are addressed in short-term visits to the banks in place of more frequent full-scale examinations. The result is more efficient use of the Division's most valuable resource — its people — and diminished supervisory burden on the banking system. Examination activities in 1983 included 4,352 safety and soundness examinations, 3,467 consumer and civil rights com pliance examinations, 850 examinations of bank trust departments, 1,015 examinations of data processing facilities, 563 investigations, and 2,730 applications reviews. Based on its examinations and bank monitoring activities, the FDIC compiles an internal list of banks that are financially unsafe or unsound and pose a threat of failure. There were 642 banks on the problem bank list at the end of 1983, com pared with 369 on the list at year-end 1982. The increased number of banks on the list during 1983 reflects the continued effects of the recent econom ic recession and increased competition among banks due to deregulation. Most banks are removed from the problem list after applying corrective measures required by the FDIC. The FDIC is responsible for supervising bank trust departments and was supervising 2,620 departments in commercial banks and 25 in mutual savings bank at the end of 1983, including 82 departments approved for operation during the year. The dollar volume of trust account assets in these banks totalled $75 billion. In addition to trust departm ent supervision, the FDIC supervised the securities activities of 288 banks that had more than $1 million in assets and 500 or more shareholders of any class of equity security, and 364 banks that were registered securities transfer agents. Provisions of the Securities Exchange Act of 1934 give the FDIC supervisory responsibility for such banks. Applications Banks must apply to the FDIC for deposit insurance, and this includes foreign banks seeking insurance for their U.S. branches. During 1983 the FDIC received six applications for deposit insurance in domestic branches of foreign banks. State non-member banks also must obtain FDIC permission to merge with another bank, relocate a branch or establish new offices. The FDIC also has authority over changes of control of banks and over who may serve as a director, officer or other employee of an insured bank. The following data reflect FDIC actions on applications it received during 1983. FDIC APPLICATIONS 1983 1982 104 101 3 75 73 2 1,018 1,009 630 89 290 9 1,174 1,171 610 87 474 3 153 148 5 110 108 2 Request for Consent to Serve Approved Denied 48 42 6 48 48 0 Notices of changes in control Approved Denied 215 212 3 182 182 0 Deposit Insurance Approved Denied New Branches Approved Branch Ltd. Branch Remote Service Facility Denied Mergers Approved Denied 5 The FDIC in 1983 am ended its procedures for processing applications to establish or relocate branches, or establish remote service facilities. Under the new rule only a letter application is needed in most cases. In addition, the applicant usually is required to publish only one notice of its intent rather than two as previously required. These changes have reduced the average processing time for branch applications from 78 days to 18 days and have cut the paperwork burden on applicants in half. In addition to streamlining these procedures, the FDIC this year simplified its approval process for bank mergers. The FDIC must approve any merger in which the resulting bank would be an insured state nonmember bank, as well as those in which an insured bank merges with a non-insured institution. In the past, the Director of DBS and the Regional Directors had delegated authority to approve, but not deny, such transactions when they amounted to mere corporate reorganizations or "phantom" bank mergers. This year, the Board further delegated to the same officials the authority to approve, but not deny, substantive but routine merger transactions, if conditions specified in the FDI Act are satisfied and the application meets certain criteria. This delegation of authority eliminates several levels of review, saves at least ten days in the approval process, and allows Board members to deal only with matters of greater weight and urgency. The delegation gives the FDIC greater flexibility to accom m odate banks' particular circumstances if the normal 30-day waiting period might cause timing problems in a merger transaction. 6 Attendees at a meeting of the FDIC Board of Review are (from left); Charles Roger Denesia, (DBS); Christie A. Sciacca, (Assistant to the Deputy to the Chairman); William H. Roelle, (DACS); Alan S. McCall, (RES); Alan J. Kaplan, Deputy Executive Secretary; Laura McAuliffe, (Comptroller of the Currency); Irvine H. Sprague, FDIC Director; John R. Curtis, Deputy to the Director; Douglas H. Jones, (LEGAL); Arthur L. Beamon, (LEGAL); A. David Meadows, (DBS); Edward T. Lutz, (DBS); Carmen J. Sullivan, (DBS), and Charles E. Thacker, (DBS). Legal Activities In the legal area, the FDIC as receiver of closed banks is involved in extensive litigation connected with bank liquidation activities. The FDIC also acts to correct improper banking practices by issuing cease-and-desist orders (Sections 8(b) and 8(c) of the FDI Act), levying civil money penalties (Section 8(i)(2) and 180)(3) of the Act), and terminating deposit insurance (Section 8(a) of the Act). The FDIC first used its authority to correct bank's weaknesses or com pliance violations in 1971, and from 1971 through 1975 issued 37 cease-and-desist orders. From 1976 through 1982 the FDIC issued 293 orders. During 1983, the FDIC issued a total of 223 cease-anddesist orders. The FDIC also is authorized to initiate termination-of-insurance proceedings against any bank in an unsafe or unsound financial condition. The bank's customers must be notified of the action, but deposits Attorney Robert E. Feldman and law clerk Laurack Bray discuss a point of law in the Library. (less subsequent withdrawals) continue to be insured for two years. The FDIC in 1983 initiated 26 terminationof-insurance proceedings, bringing to 307 the number of times it has taken such action since 1933. In slightly less than half of the cases, the banks involved corrected their problems. In most of the remaining cases, the banks were absorbed by other banks or ceased operations before insurance was actually discontinued. Under Section 8(e) of the FDI Act, the FDIC may remove an officer, director or other person participating in the conduct of the affairs of an FDIC-supervised bank if the person has (1) violated a law, rule, regulation or final cease-and-desist order, (2) engaged in unsafe or unsound banking practices, or (3) breached his or her fiduciary duty. The individual's action must involve personal dishonesty or a willful or continuing disregard for the safety or soundness of the bank. Also, the action must entail substantial financial loss or other dam age to the bank, seriously prejudice the interests of its depositors or result in financial gain to. the individual. During 1983 nine Section 8(e) proceedings were initiated. The FDIC levied fourteen civil money penalties in 1983. A narrative summary of FDIC's 1983 enforcement actions, case by case but without banks' names, may be obtained from the FDIC Office of Public Information, 550 17th Street, N.W., Washington, D.C. 20429. Summaries of enforcem ent actions for prior years are included in the FDIC's annual reports, also available from the Office of Public Information. 7 Cease-and-Desist Orders and Actions to Correct Specific Unsafe or Unsound Practices or Violations of Law or Regulations: 1980,1981,1982, and 1983 1983 1982 1981 1980 Cease-and-desist orders outstanding at beginning of year-total Section 8(b) Section 8(c) 106 105 1 78 78 0 90 88 2 88 88 0 Cease-and-desist orders issued during year Section 8(b) Section 8(c) 223 188 35 69 63 6 38 37 1 41 38 3 80 49 31 41 36 5 50 47 3 39 38 1 249 244 5 106 105 1 78 78 0 90 88 2 Cease-and-desist orders terminatedtotal Section 8(b) Section 8(c) Cease-and-desist orders in force at end of year-total Section 8(b) Section 8(c) Divided Examinations In 25 states, the FDIC has formal agreements to divide the examination of non-problem (1- and 2-rated) banks with their state supervisors. The FDIC alternates examinations with state banking authorities to lighten the workload on all examiners and avoid duplication. Informal agreements to divide examinations are also in place in several other states. The Corporation in 1982 modified its agreements with these states to arrange for the FDIC to examine non-problem banks once every 36 months instead of every other year, with the states increasing the frequency of their examinations. The new arrangement took effect in October of 1983, to give the states time to adjust to the new schedule. The FDIC expects the reduced schedule of examinations of non-problem banks to lighten its workload in this area and allow it to concentrate its resources on problem banks. 8 Cooperative Examinations Late in the year, the FDIC and the Office of the Comptroller of the Currency established a cooperative examination program for national banks. The program will begin January 1,1984, and will supplement existing programs under which the two agencies share information derived from bank examinations. The FDIC also reached agreem ent with the Federal Home Loan Bank Board in 1983 on procedures for the FDIC to examine problem federal savings banks whose deposits continue to be insured by the FDIC even though the institutions have converted from state to federal charter. The FDIC expects both programs to strengthen the overall supervisory process and provide a better, more coordinated way to supervise troubled banks. The joint efforts also will help the FDIC to be more effective in carrying out its responsibilities as receiver for failed banks. Regional Office Realignment In November 1983 the FDIC Board of Directors approved a Division of Bank Supervision recommendation to close the Madison Regional Office, and transfer its Wisconsin operations to the Chicago Regional Office and its Michigan operations to the Columbus Regional Office, The Madison Region historically had been one of the FDIC's smaller regions in terms of both workload and field staff. There had been a 25 percent decline since 1979 in the field examiner staff in the Madison Region because of decreasing workload, creating an im balance between regional office and field staffs. The realignment will save the FDIC over $1 million annually. The FDIC took immediate steps to help those employees who were displaced by the closing of the Madison Office. All employees were offered com parable jobs elsewhere in the Corporation. Plans called for the Madison Office to remain open for up to one year to provide for a smooth transition of responsibilities and to allow adequate time for assistance to any displaced employees. Potential acquirers of the failed First National Bank of Midland, Midland, Texas, meet with FDIC officials in Washington, D.C., to make their bids to assume the deposit liabili ties of the closed bank. The suc cessful bidder was RepublicBank First National Midland. C O M M ER C IA L BANK FAILURES Commercial bank failures received widespread attention during the year for several reasons. First, the number of failures — 48 — was the greatest since 1939, when 60 banks failed. Second, several of the failures involved large, complex institutions and, finally, some of the failures involved controversial individuals and banking practices. United American Bank The failure of the United American Bank (UAB) in Knoxville, Tennessee, on February 15 initially m ade headlines because its owner, Jake Butcher, was the principal organizer and promoter of the 1982 World's Fair and twice was a candidate for governor. Before the year was out, seven more Tennessee banks controlled by Jake Butcher or his brother, C. H, Butcher, Jr., failed. As the story unfolded, there were almost daily reports of an excessive volume of classified loans, loans to insiders, loans far from the bank's trade area, and evidence of inaccurate or deliberately misleading accounting, The deposit liabilities and assets of UAB were transferred to First Tennessee Bank of Knoxville, a subsidiary of First Tennessee Corporation, Tennessee's largest bank holding company. The transaction was noteworthy because it marked the first use of the extraordinary acquisition provisions of the Garn-St Germain Act. The Act permits the sale of a failed bank with $500 million or more in assets to an in-state or out-of-state banking organization. A number of firms throughout the United States were invited to submit purchase proposals to the FDIC and eight of them, including three in Tennessee, elected to do so. Because the proposal representing the lowest cost to the FDIC was by an out-ofstate bidder, the Act required that a second round of bids be sought from the top bidder and from those within 15 percent of the top bid. In this round the bank was awarded to First Tennessee. The Butcher organization consisted of approximately 40 loosely-affiliated banks and savings and loan associations operating in two FDIC regions and three different Federal Reserve Districts. A total of seven different regulatory agencies were responsible for supervising the various institutions, making detection of problems within the com bined organization extraordinarily difficult. The insolvency of UAB, and subsequently of other Butcher-related institutions, was discovered only because the FDIC undertook in late 1982 a simultaneous examination of the major Butcher-affiliated banks, committing to the task nearly 10 percent of its field workforce for almost three months. 9 Other Butcher Banks Two other banks that had been part of the Butcher organization also failed in 1983 and their deposits were acquired by healthy banks. The First Peoples Bank of Washington County, Johnson City, Tennessee, was closed on July 29. The First Commerce Bank of Hawkins County, Rogersville, Tennessee, was closed on August 12. At the end of 1983, the FDIC was estimating that its losses in connection with the eight failed Butcher banks would amount to approximately $382.6 million. Five more banks in the Butcher empire failed on May 27 and were assumed by three other Tennessee banks. The acquisitions were accomplished through competitive bidding involving banking institutions and individuals both from within the state and from outside Tennessee. In addition to assuming deposits and other liabilities, the acquiring banks agreed to pay purchase premiums to the FDIC totaling $22.4 million. Each assuming bank purchased selected assets of the bank it acquired, To facilitate the transactions, the FDIC advanced cash to the assuming banks amounting to $402.1 million and retained assets of the closed banks having a combined book value of about $451.7 million. (The Commercial Bank of California, in Los Angeles, also failed on May 27, bringing the total closings for the day to six, matching the record set December 21,1936, when six banks failed in North Dakota.) First National Bank, M idland, Texas On October 14, the second largest commercial bank failure in FDIC history occurred when the deposit liabilities of First National Bank of Midland, Midland, Texas, were assumed by RepublicBank First National Midland, a newly-chartered subsidiary of RepublicBank Corporation, Dallas, Texas. With $1.4 billion in assets, First National was surpassed only by the October 1974 failure of New York City's Franklin National Bank. Insured Bank Failures, 1934—1983 Number of banks I 80 '34 10 '38 '42 '46 '50 Deposit Assumption '54 '58 '62 H Deposit Payoff '66 70 '74 78 '82 INSURED BANKS CLOSED DURING 1983 REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE CORPORATION Name and location Date of deposit payout or assumption Number of depositors or accounts Amount of deposits (in millions of dollars) 1. The Madison County Bank, Fredericktown, Missouri January 21,1983 7,100 6.6 2. State Bank of Barnum, Barnum, Minnesota February 9, 1983 3,043 12.6 302,531 2,038.0 3. Dry Dock Savings Bank, New York, New York February 9, 1983 4. American State Bank, Bradley, Illinois February 12, 1983 4,868 12.5 5. United American Bank in Knoxville, Knoxville, Tennessee February 14, 1983 134,945 584.6 6. Merchants and Farmers State Bank, Blythe, California February 18, 1983 1,500 5.2 7. American City Bank, Los Angeles, California February 25,1983 25, 749 254.5 44.2 8. Newport Harbour National Bank, Newport Beach, California March 11,1983 2,219 9. Columbia Pacific Bank and Trust Company, Portland, Oregon March 18, 1983 2,000 31.6 10. Pan American National Bank, Union City, New Jersey March 18; 1983 9,900 31.3 11. Prairie County Bank, Hazen, Arkansas March 24,1983 3,062 15.5 12. Bear Creek Valley Bank, Phoenix, Oregon March 25,1983 1,973 10.9 13. The Ina State Bank, Ina, Illinois April 8,1983 4,627 15.9 14. Bank of San Marino, San Marino, California April 8,1983 2,248 12.7 15. Sparta-Sanders State Bank, Sparta, Kentucky April 15, 1983 769 118.3 16. Heritage Bank, Ashland, Oregon April 29, 1983 3,342 14.6 17. First National Bank of O ak Lawn, Oak Lawn, Illinois A pril 29, 1983 25,172 119.4 18. Smith County Bank, Carthage, Tennessee May 6,1983 5,118 27.2 19. City and County Bank of Knox County, Knoxville, Tennessee May 27,1983 32,016 227.5 20. United Southern Bank of Nashville, Nashville, Tennessee May 27,1983 14,880 96.3 21. United American Bank in Hamilton County, Chattanooga, Tennessee May 27,1983 48,248 106.0 22. City and County Bank of Roane County, Kingston, Tennessee May 27,1983 7,000 36.5 23. City and County Bank of Anderson County, Lake City, Tennessee May 27, 1983 5,871 139.6 24. The Commercial Bank of California, Los Angeles, California May 27, 1983 5,158 23.1 25. Community Bank, Hartford, South Dakota June 17,1983 8,355 39.3 26. Western National Bank of Lovell, Lovell, Wyoming June 24, 1983 2,300 17.4 27. Mineral Bank of Nevada, Las Vegas, Nevada June 30, 1983 1,639 10.5 28. Union National Bank of Chicago, Chicago, Illinois July 8,1983 13,441 24.5 29. The First Central Bank, Smithville, Tennessee July 8,1983 3,222 18.2 30. Bank of Niobrara, Niobrara, Nebraska July 8,1983 773 6.2 31. First Peoples Bank of Washington County, Johnson City, Tennessee July 29, 1983 20,334 176.5 32. Metro Bank, Midland, Texas July 29,1983 33. Oregon Mutual Savings Bank, Portland, Oregon August 5, 1983 34. The First National Bank of Danvers, Danvers, Illinois August 5, 1983 2,560 10.8 35. First Commerce Bank of Hawkins County, Rogersville, Tennessee August 12,1983 8,821 43.7 2,500 28.8 47,745 251.3 36. United Southern Bank of Clarksville, Clarksville, Tennessee August 26,1983 3,666 10.4 37. The Douglass State Bank, Kansas City, Kansas September 2,1983 7,200 26.5 38. Warren County Bank, McMinnville, Tennessee September 16, 1983 4,019 18.8 39. Dominion Bank of Denver, Denver, Colorado September 30, 1983 2,653 11.9 40. National Bank of Odessa, Odessa, Texas September 30, 1983 41. Auburn Savings Bank, Auburn, New York October 1,1983 19,527 38,014 131.4 42. The Deschutes Bank, Redmond, Oregon October 7,1983 2,800 9.2 43. The First National Bank of M idland, Midland, Texas October 14, 1983 76,400 574.2 44. First National Bank of Browning, Browning, Montana November 10, 1983 4,000 11.6 45. Atkinson Trust and Savings Bank, Atkinson, Illinois November 25,1983 3,929 18.9 46. Union Trust Company, San Juan, Puerto Rico December 9,1983 1,267 23.3 47. Bank of Hackleburg, Hackleburg, Alabama December 13,1983 2,005 6.8 48. The Bank of Red Oak, Red Oak, Oklahoma December 16, 1983 3,514 10.4 76.2 11 In the 16 months prior to the failure, the bank experienced substantial losses on energy-related loans. Widespread publicity about the bank's losses eroded public confidence and the bank's deposit and funding sources withdrew. As a result, First National becam e unable to meet its obligations as they matured. Two days prior to the closing of First National, the FDIC stabilized the situation by purchasing a $100 million subordinated note from the bank under FDIC's authority to make loans or contributions to an insured bank in danger of closing to allow time for the bank to be merged with a sound institution. The deposit assumption of First National was the second time the FDIC used a provision of the Garn-St Germain Act to solicit bids across state lines. Deposit Transfers In 1983, the FDIC first used the procedure of making the insured deposits in a failed bank available to their owners by transferring their accounts to a healthy institution instead of directly paying depositors up to the insured limit. The Corporation used this approach in two failures. On July 8, the insured deposits of Union National Bank of Chicago were transferred to Seaway National Bank. On November 22, the FDIC transferred the insured deposits of the Atkinson Trust & Savings Bank, Atkinson, Illinois, to Bank of Atkinson, N. A., a newly-chartered subsidiary of Farmers National Bancorp Inc., Geneseo, Illinois. In both transfers, all insured deposits were immediately m ade available to their owners, checks drawn on those accounts were honored and customers who had interestbearing accounts in the closed banks continued to earn interest according to the terms of their deposit contracts. The Atkinson transfer had another unusual feature. The acquiring bank paid a purchase premium of $1.5 million for the right to serve as the paying agent. Payment of insured deposits through the transfer of accounts to another insured bank minimized disruption to the closed banks' customers and to the affected communities. The procedure also reduced the FDIC's costs in handling the failures. 12 /MUTUAL S41/IN G S B4NKS The magnitude of the mutual savings bank problem was greatly diminished in 1983, due to the improving economy and the decline in interest rates from 1982's record levels. Only three insured savings banks failed in 1983, at an estimated cost to the FDIC of about $47 million. By comparison, eight savings bank failures in 1982 resulted in an estimated cost of $1.01 billion. The FDIC assisted the merger in New York City of Dry Dock Savings Bank into The Dollar Savings Bank under terms of the "voluntary merger plan" announced in 1982. The estimated present value cost of the transaction to the FDIC, over a 10-year period, is $32 million. The resulting institution has com bined assets exceeding $5 billion. In Oregon, a change in state law m ade possible the conversion of Oregon Mutual Savings Bank into a stock-form state chartered bank and its subsequent acquisition by Moore Financial Group, Inc., Boise, Idaho. FDIC assistance consisted of a cash payment of $11.8 million. In the third assisted merger, Auburn Savings Bank, Auburn, New York, was absorbed by Syracuse Savings Bank. The cost of the FDIC assistance was $2.9 million. The FDIC's net worth certificate program, available to depository institutions that have suffered earnings and capital losses primarily as a result of m ortgage lending activities, has been useful in assisting mutual savings bank. The Garn-St Germain Depository Institutions Act of 1982 authorized the FDIC to assist any qualified institution by making periodic purchases of capital instruments in the form of net worth certificates. At the time that net worth certificates are purchased, the FDIC issues its promissory note in exchange for the institution's net worth certificate. For purposes of regulatory reporting, the FDIC's note is reflected as an "other asset" of the institution and its liability under the net worth certificate is reflected as a segregation of capital. At year end 1983, 23 depository institutions had net worth certificates outstanding totaling $376.8 million. This program will expire October 15, 1985, unless renewed by Congress. In the auction ring, handler Kenneth Murry shows Hop Skip and Jump, a brown mare that becam e FDIC property as a result of the failure of Penn Square Bank. Eighty race horses included in the receivership assets of Penn Square were offered for sale at the February 1983 auction. LIQUIDATION ACTIVITIES With 48 bank failures in 1983, the Division of Liquidation acquired an unprecedented number of assets for liquidation, bringing its total workload to 65,000 assets with a book value of $4.3 billion in 170 liquidations. The 48 failures included several large and complex liquidations, such as those stemming from the closings of First National Bank of Midland and twelve banks in Tennessee, to which the FDIC committed hundreds of employees. To handle its increased workload, the Division instituted new procedures and expanded its staff, The consolidation of some of its local field offices and the establishment in 1983 of five Area Liquidation Offices with substantial delegated authority have increased the efficiency of the Division. The number of new liquidation personnel more than doubled in the last year, and the FDIC's liquidation support staffs in the legal and accounting areas have been increased as well. The new area office framework represents a significant restructuring of the Division's m anagem ent approach. Prior to 1983, individual bank liquidations were conducted at each site by the liquidators-in-charge, with minimal supervision from Washington. With the advent of the area office concept, field liquidations now are supervised by the staffs of the area offices who are closer to the scene and more attuned to regional econom ic conditions than the headquarters staff, In addition, a substantial number of older and smaller liquidations were consolidated into the area offices to allow greater managerial control of collection activities and to realize the economies of scale that result from a larger operation, Another step was the creation of several sub-area offices to deal with heavy concentrations of liquidations in Tennessee and Southern California. The Division also revised its Washington m anagem ent structure in 1983 by creating three Associate Director positions to m anage operations, credit and administration. Finally, individuals with strong backgrounds in other areas of FDIC operations were brought into the Division in key positions, resulting in a cross fertilization of experience, ideas and skills. These changes have enabled the Division to gain greater and more effective control over a substantially enlarged workload and have facilitated the Division's policy of accelerating its collection activities through the adoption of new and innovative liquidation techniques. 13 Penn Square Bank, NA. Payments to Depositors A major continuing liquidation involves the Penn Square Bank, N. A., of Oklahoma City, which failed July 5,1982, resulting in the largest deposit payoff in FDIC history. Of the Bank's $465 million in deposits, only about $200 million were insured and immediately available to their owners. The FDIC established a Deposit Insurance National Bank (DINB) for the purpose of paying insured deposits. The FDIC determined in June 1983 that depositors in Penn Square may recover only up to 65 percent of deposits that exceeded the insurance limit. This estimate is subject to revision depending on future collections from the liquidation of Penn Square assets and the outcome of a large number of legal actions. As of the end of 1983, the FDIC had collected $500,4 million in principal and interest on loans, securities and other assets. Out of the total, $235.1 million was paid to the holders of loan participations sold by Penn Square, $5.7 million repaid secured advances from the Federal Reserve to Penn Square, $16.9 million was paid to owners of pledged deposits and approximately $87.6 million was paid to uninsured depositors and other creditors holding Receiver's Certificates for proven claims. The FDIC invested excess collections in Treasury bills totalling approximately $133.6 million. The remaining amount due on proven claims totaled about $347.3 million. The FDIC agreed to set aside about $442.1 million in reserve for those claims pending the outcome of related litigation. Remaining assets to be liquidated at the end of 1983 amounted to about $282.4 million, exclusive of the $133.6 million invested in Treasury bills. On August 18, the FDIC signed an agreement with Charter National Bank, N. A., a newly-chartered bank, providing that Charter National purchase the remaining $458,400 in deposits from the DINB and operate from Penn Square's former motor bank, Subsequently, $138,200 owned by depositors who could not be contacted was returned to the FDIC. Of the 668 banks that failed since the FDIC's inception in 1934, 340 were deposit assumption cases and 328 were deposit payoffs. All the accounts in the deposit assumption cases, with insured and noninsured deposits aggregating $24.2 billion, were fully protected. In the deposit payoffs, 85.5 percent of the $1.1 billion in deposits have been paid or m ade available, and full recovery has been paid or m ade available to 99.1 percent of the depositors, In comparison, through the end of 1982, 79,6 percent of the deposits had been paid or m ade available, with full recovery received by or m ade available to 98.4 percent of the depositors. The increase in the historical recovery rate is due to the payment in 1983 of a 20 percent dividend to uninsured depositors of the Penn Square Bank and an overall 96 percent recovery rate for depositors in payoff cases closed in 1983. There were 6.8 million accounts in the deposit assumption cases and .7 million in the payoff cases closed since January 1, 1934, with deposits aggregating more than $25 billion. Total disbursements by the FDIC since January 1,1934, amounted to $11.5 billion. Of that amount, the FDIC recovered $8.8 billion and lost $2.7 billion. 14 IN C O M E AND EXPENSES Revenues and the deposit insurance fund continued to increase during 1983 although the high bank failure rate created large expenses for the FDIC. The fund attained a new year-end high of $15.4 billion, an increase of $1.6 billion or 12.0 percent over 1982. Gross revenues for the year amounted to $2.6 billion, including $1,4 billion from investments in U.S. Treasury obligations and $1.2 billion from assessments on insured banks, interest bn notes receivable and other sources. The average maturity of the Corporation's investment portfolio during 1983 remained at two years and nine months as it had been during 1982, although 35 percent of the portfolio had maturities of under two years. The par value of the portfolio increased from $13.2 billion on December 31,1982, to $13.8 billion at year-end 1983. Its market value grew from $13.3 billion to $13.7 billion during the same period. The FDIC's total expenses and losses in closed banks and merger activities during 1983 was $834 million. Its administrative expenses were $136 million, an increase of 4.4 percent over 1982, following an increase of only 2.2% the previous year. The total gross expenses and losses for the year was $970 million. This was the fifth consecutive year in which the FDIC held its expenditure rate increase below both the rate of inflation and the increased cost of the federal government. The FDIC gives insured banks a credit against their next year's assessments for insurance coverage, depending on the FDIC's losses and expenses for the year. The losses and expenses sustained by FDIC in 1983 resulted in an assessment credit of $164 million, com pared to $96 million in 1982. The 1983 credit represents an effective assessment rate to banks of 1/m of one percent of assessable deposits, com pared to Vi3 of one percent in 1982. The 1983 assessment credit represents 13.54 percent of total assessments com pared to 8.68 percent in 1982, (The FDIC's complete 1983 financial statements with footnotes begin on page 18. The U.S. Comptroller General's audit opinion of the FDIC's financial statements is on page 29.) 15 Personnel The FDIC ended 1983 with 3,846 employees, or 342 more employees than at the end of 1982. Most of this gain involved temporary employment in the Liquidation Division hired to cope with the increased number of bank closings during 1983. About 53 percent of the FDIC's employees are assigned to the Division of Bank Supervision. About 92 percent of DBS employees are field examiners. The 1983 turnover rate for field examiners was 6.0 percent, com pared to 7.0 percent for 1982. Of the 97 examiners who resigned during the year, 28 found employment with banks. For all employees, exclusive of temporary field personnel, college students in the FDIC's cooperative work-study program and temporary summer personnel, the turnover rate was 7.0 percent, com pared to 7.8 percent in the previous year, Position vacancy announcements issued in 1983 numbered 331. Number of Officials and Employees of the Federal Deposit Insurance Corporation December 31, 1982 and 1983 WASHINGTON REGIONAL & OFFICE FIELD OFFICES TOTAL TOTAL Executive Offices Legal Division Division of Research an d Strategic Planning Division o f Liquidation* Division o f Bank Supervision Division of Accounting and Corporate Services Office o f Corporate Audits Office of Equal Opportunity Office o f Personnel M anagem ent 1983 1982 1983 1982 1983 1982 3846 46 103 3504 47 105 968 46 103 933 47 105 2878 0 0 2571 0 0 29 1153 28 778 29 170 28 185 0 983 0 593 2053 2129 158 151 1895 1978 379 347 379 347 0 0 38 29 38 29 0 0 6 6 6 6 0 0 39 35 39 35 0 0 'Division of Liquidation totals incluae tem porary employees, most of whom were em ployed by failed banks, assigned to field liquidations. 16 John T. Washington, a Supervisory Computer Operator in the Division of Accounting and Corporate Services, checks one of the many FDIC com puter programs. Computer Operator Vaughn Johnson loads a tape for Coquesse Matthews, also a Computer Operator (back ground) and Senior Computer Opera tor Gladys Coates to review. They work with the Amdahl mainframe computer in the FDIC headquarters building. Instructor Jeffrey Perry works with students in the School for Assistant Examiners at the FDIC's Training Center in Rosslyn, Virginia. 17 C o m p ara tive Statem ent of Financial Position (In th o u s a n d s ) Assets D ecem b er 31, 1983 D e c e m b e r 31, 1982 C as h $ $ 8 8 ,7 8 5 1 ,3 3 5 In v e s tm e n t in U .S . T re a s u ry o b lig a tio n s 1 3 ,9 9 2 ,0 5 9 1 3 ,2 5 2 ,3 6 5 3 7 0 ,6 4 2 3 3 9 ,2 8 1 O t h e r re c e iv a b le s a n d p r e p a id ite m s (N o te 3) 2 2 ,4 3 8 9 ,7 9 3 N o te s re c e iv a b le fro m in s u re d b a n k s (N o te 4) 4 2 3 ,6 4 1 7 0 5 ,2 6 2 413,748 7,048 2,494,059 386,917 1,290,820 320,216 9,547 616,964 401,563 631,632 2 ,0 1 0 ,9 5 2 7 1 6 ,6 5 8 4 ,0 1 4 4 ,0 1 4 3 2 ,9 5 5 3 0 ,1 3 9 $ 1 6 ,9 4 5 ,4 8 6 $ 1 5 ,0 5 8 ,8 4 7 (N o te 1) A c c ru e d in te re s t re c e iv a b le (N o te 2) A ssets a c q u ire d fro m fa ilu re s o f in s u re d b a n k s : D e p o s ito rs ' claim s p a id D e p o s ito rs ' claim s u n p a id Loans a nd assets p urcha sed Assets p urcha sed o u trig h t Less: A llo w a n c e fo r losses (N o te 5) T o ta l Land O ffic e b u ild in g s , less a c c u m u la te d d e p r e c ia tio n o n b u ild in g s T o ta l A ssets The a c c o m p a n y in g sum m ary o f s ig n ific a n t a c c o u n tin g p o lic ie s a nd notes to fin a n c ia l statem ents a re an in te g ra l p a rt o f these statem ents. 18 Liabilities a n d the D eposit Insurance Fund A c c o u n ts p a y a b le a n d a c c ru e d lia b ilitie s D ecem b er 31, 1983 $ 3 6 ,9 6 0 D ecem b er 31, 1982 $ 5 6 ,7 6 2 C o lle c tio n s h e ld fo r o th e rs 5 ,4 6 5 2 ,4 5 3 A c c ru e d a n n u a l le a v e o f e m p lo y e e s 7 ,1 4 3 6 ,9 3 5 1 8 ,7 8 9 1 9 ,2 1 4 0 164.039 96.181 0 1 6 4 .0 3 9 9 6 .1 8 1 1 1 ,2 2 4 1 2 ,2 8 2 811,666 242,293 192,756 7,048 293,333 511,601 276,595 9,547 1 ,2 5 3 ,7 6 3 1 ,0 9 1 ,0 7 6 1 8 ,9 2 3 3 ,0 0 0 1 ,5 1 6 ,3 0 6 1 ,2 8 7 ,9 0 3 1 5 ,4 2 9 ,1 8 0 1 3 ,7 7 0 ,9 4 4 $ 1 6 ,9 4 5 ,4 8 6 $ 1 5 ,0 5 8 ,8 4 7 A c c ru e d in te re s t p a y a b le (N o te 6) D u e in su re d b a n k s : N et assessm ent incom e credits: A v a ila b le July 1, 1983 (N o te 7) A v a ila b le July 1, 1984 (N o te 7) T o ta l F S tre e t p r o p e rty n o te s (N o te 8) L ia b ilitie s in c u rre d fro m fa ilu re s o f in su red b a n k s : FRB & FHLB ind eb te dn ess (N o te 9) N otes p a y a b le (N o te 9) Incom e m ainten an ce agree m e nts (N o te 10) D e p o s ito rs ' claim s u n p a id T o ta l E s tim a te d losses fro m C o r p o r a tio n litig a tio n (N o te 11) T o ta l L ia b ilitie s D e p o s it In s u ra n c e Fund T o ta l L ia b ilitie s a n d th e D e p o s it In s u ra n c e Fund The a c c o m p a n y in g su m m ary o f s ig n ific a n t a cco u n tin g p o lic ie s and notes to fin a n c ia l statem ents a re an in te g ra l p a rt o f these statem ents. 19 C o m p ara tive S tatem ent of Incom e a n d the Deposit Insurance Fund (In th o u s a n d s ) For the tw e lv e m onths end ed D ecem ber 31, 1983 D ecem ber 31, 1982 $ 1,215,817 164,903 $ 1,109,288 96,553 1 ,0 5 0 ,9 1 4 1 ,0 1 2 ,7 3 5 1,344,364 59,961 1,116,216 253,750 1 ,4 0 4 ,3 2 5 1 ,3 6 9 ,9 6 6 Interest e a rn e d on notes re ce iv a b le 6 5 ,0 6 5 7 9 ,0 2 9 Interest rece ive d on assets in liq u id a tio n 8 3 ,7 6 2 5 3 ,8 8 8 O th e r incom e 2 4 ,0 4 9 8 ,8 6 9 2 ,6 2 8 ,1 1 5 2 ,5 2 4 ,4 8 7 A d m in is tra tiv e o p e ra tin g expenses M e rg e r assistance losses a nd expenses P rovision fo r insurance losses Interest expense on FRB indebtedness N o n re c o v e ra b le insu ra n ce expenses 135,660 127,486 675,119 25,211 6,403 129,927 680,980 126,436 54,178 8,162 T o ta l Expenses a n d Losses 9 6 9 ,8 7 9 9 9 9 ,6 8 3 1 ,6 5 8 ,2 3 6 1 ,5 2 4 ,8 0 4 1 3 ,7 7 0 ,9 4 4 1 2 ,2 4 6 ,1 4 0 $ 1 5 ,4 2 9 ,1 8 0 $ 1 3 ,7 7 0 ,9 4 4 In c o m e : G ro ss assessments e arn e d Less: P rovision fo r assessm ent credits T o ta l Interest on U.S. T re a sury o b lig a tio n s A m o rtiz a tio n o f p re m iu m s a nd discounts T o ta l T o ta l In c o m e E xpenses a n d Losses: N e t In c o m e D e p o s it In s u ra n c e F u n d — J a n u a ry 1 D e p o s it In s u ra n c e F u n d — D e c e m b e r 31 The a c c o m p a n y in g sum m ary o f s ig n ific a n t a c c o u n tin g p o lic ie s and notes to fin a n c ia l statem ents a re an in te g ra l p a rt o f these statem ents. 20 C o m p arative S tatem ent of C hanges in Financial Position (in thousands) For the tw e lv e m onths ended D ecem ber 31, 1983 D ecem ber 31, 1982 $1,658,236 $1,524,804 F in a n c ia l R eso u rces W e r e P ro v id e d F ro m : O p e ra tio n s : N e t incom e A d d (deduct) items not in v o lv in g cash in the p e rio d : A m o rtiz a tio n on U.S. Tre a sury o b lig a tio n s D e p re c ia tio n Incom e m ainten an ce a g re e m e n t adjustm ents A m o rtiz a tio n fro m m e rg e r assistance a greem ents A llo w a n c e fo r loss adjustm ents R eso u rces p r o v id e d fro m o p e ra tio n s O th e r resources p ro v id e d fro m : M a tu rity on U.S. T reasury o b lig a tio n s C o lle c tio n s on notes re c e iv a b le C o lle c tio n s on assets a c q u ire d fro m fa ilu re s o f insured banks Increase (decrease) in assessm ent cred its due insured banks L ia b ilitie s in cu rre d fro m fa ilu re s o f insured banks T o ta l fin a n c ia l re s o u rc e s p ro v id e d (59,961) 897 1,418 51,315 675,119 (253,750) 493 (436,855) 93,751 126,436 2 ,3 2 7 ,0 2 4 1 ,0 5 4 ,8 7 9 4,346,245 375,619 3,992,098 20,669 611,849 458,552 67,858 698,565 (32,691) ^ & 1 6 ;3 3 0 $ 8 ,4 2 7 ,1 6 0 $ 6 ,5 0 9 ,8 3 7 $5,025,978 218,998 2,442,851 3,713 432,357 154,800 61,013 87,450 $4,985,721 298,750 742,695 11,714 170,880 239,932 59,192 953 $ 8 ,4 2 7 ,1 6 0 $ 6 ,5 0 9 ,8 3 7 F in a n c ia l R eso u rc es W e r e A p p lie d T o : Purchase o f U.S. T re a sury o b lig a tio n s A c q u is itio n o f notes re c e iv a b le Assets a c q u ire d fro m fa ilu re s o f insured banks Purchase o f San F rancisco c o n d o m in iu m o ffice s Payments on notes p a y a b le Paym ents on inco m e m ainten an ce a greem ents N e t ch a n g e in o th e r assets and lia b ilitie s Increase in cash T o ta l fin a n c ia l re s o u rc e s a p p lie d The a c c o m p a n y in g su m m ary o f s ig n ific a n t a cco u n tin g p o lic ie s a nd notes to fin a n c ia l statem ents a re an in te g ra l p a rt o f these statem ents. 21 Sum mary of Significant Accounting Policies G e n e ra l These statem ents d o not in clu d e a c c o u n ta b ility fo r assets and lia b ilitie s o f closed insured b an ks fo r w h ich the C o rp o ra tio n acts as re ce ive r o r liq u id a tin g agent. P e rio d ic a nd fin a l a c c o u n ta b ility rep orts o f its a ctivitie s as re ce ive r o r liq u id a tin g a g e n t a re fu rn ish e d by the C o rp o ra tio n to courts, su p e rv is o ry a u th o ritie s , and others as re q u ire d . U .S . T re a s u ry O b lig a tio n s Securities a re show n a t a m o rtiz e d cost w hich is the purchase p ric e o f the se curitie s less the a m o rtiz e d p re m iu m o r plus the a ccre te d d isco un t. Such a m o rtiz a tio n s and a c c re tio n s a re c o m p u te d on a d a ily s tra ig h t-lin e basis fro m the d a te o f a c q u is itio n to the d a te o f m aturity. D e p o s it In s u ra n c e A ssessm ents The C o rp o ra tio n assesses insured ban ks a t the rate o f 1 /12 o f one p ercen t p e r y e a r on the b a n k 's a v e ra g e d e p o s it lia b ility less ce rta in exclusions and d ed uctio ns. Assessm ents a re due in a d v a n c e fo r each six-m onth p e rio d a nd c re d ite d to inco m e each m onth. The D e p o s ito ry Institutions D e re g u la tio n and M o n e ta ry C o n tro l A c t o f 1980 ch an ge d the p e rc e n ta g e o f net assessm ent incom e to be tra n s fe rre d to insured ban ks each July 1 o f the fo llo w in g c a le n d a r y e a r fro m 66 2 /3 p e rce n t to 60 p e rc e n t and a u th o riz e d the FDIC B o ard o f D ire c to rs to m ake adjustm ents to this p e rc e n ta g e w ith in c e rta in lim its in o rd e r to m a in ta in the D e p o sit Insurance Fund betw een 1.25 and 1.40 p ercen t o f e stim a ted insured deposits. If this ra tio fa lls b e lo w 1.10 percen t o r a b o v e 1.40 p ercent, the FDIC is m a n d a te d to m ake fu rth e r re d u ctio n s, up to 50 p e rcen t, o r increases to the p e rc e n ta g e d is trib u tio n o f net assessm ent incom e. A llo w a n c e fo r Losses The C o rp o ra tio n e stablishes an e stim ated a llo w a n c e fo r loss a t the tim e a b a n k fa ils . These a llo w ances a re re vie w e d e very six m onths a nd a dju ste d as re q u ire d , based on fin a n c ia l d e v e lo p m e n ts w h ich o ccu r d u rin g each six-m onth p e rio d . The C o rp o ra tio n does not state its e stim a ted co n tin g e n t lia b ility fo r u nkn ow n fu tu re b a n k closin gs because such estim ates a re im p o ssib le to m ake. The C o r p o ra tio n 's co n tin g e n t lia b ility fo r e ven tua l net losses dep en ds upon fa c to rs w hich c a n n o t be assessed until o r a fte r a b a n k has a c tu a lly fa ile d . The C o rp o ra tio n 's e ntire D e p o s it Insurance Fund a nd b o r ro w in g a u th o rity a re a v a ila b le , h o w e ve r, fo r such co ntingencies. D e p re c ia tio n The W a sh in g to n O ffic e B u ild in g s a re d e p re c ia te d on a s tra ig h t-lin e basis o v e r a 5 0 -y e a r e stim ated life. The San F rancisco C o n d o m in iu m O ffic e s a re d e p re c ia te d on a s tra ig h t-lin e basis o v e r a 3 5 -y e a r estim ated life. The cost o f fu rn itu re , fixtu re s , and e q u ip m e n t is expensed at tim e o f a c q u is itio n . In c o m e M a in te n a n c e A g re e m e n ts The C o rp o ra tio n re co rd s its lia b ility u n d e r an incom e m ainten an ce a g re e m e n t a t the p resent v a lu e o f each e stim a ted cash o u tla y a t the tim e the a g re e m e n t is a ccep ted . Estim ated cash o utla ys a re a n tic i pated fu tu re paym ents the C o rp o ra tio n w ill p ro v id e to o ffs e t the d iffe re n c e betw een the a n n u a liz e d cost o f funds and the a n n u a liz e d return on the d e c lin in g vo lu m e o f e a rn in g assets a c q u ire d in a m e rg e r tra n s a c tio n , plus an a m o u n t to c o v e r o v e rh e a d costs. The c h a rg e is re c o rd e d to insu ra n ce loss. The present v a lu e o f the lia b ility is then a ccre te d d a ily and re c o rd e d m on thly o v e r the term o f the a gre e m e n t. A n y d iffe re n ce s betw een the estim ated and a ctua l cash o utla ys a re re c o rd e d a s 'p a y m e n t adjustm ents. The p resent va lu e o f re m a in in g estim ated cash outla ys a re a lso re v ie w e d a nd a dju ste d each y e a r w hen interest ra te changes o c c u rrin g in the m a rk e tp la c e a p p e a r m a te ria l o r p e rm a n e n t in nature. The o rig in a lly re c o rd e d loss, plus o r minus any p aym en t and present v a lu e a djustm e nts, w ill then be p ro ra te d b etw een insured ban ks and the D e p o sit Insurance Fund as p ro v id e d in Section 7(d) o f the F ederal D e p o sit Insurance Act. R e c la s s ific a tio n s R ecla ssifica tion s have been m ade in the 1982 F in a n cia l Statem ents to c o n fo rm to the p re s e n ta tio n used in 1983. 22 Notes to Financial Statem ents— D e c e m b e r 31,1 983 a n d 1982 1. U .S . T re a s u ry O b lig a tio n s A ll cash rece ive d by the C o rp o ra tio n w hich is not used to d e fra y o p e ra tin g expenses o r fo r outla ys re la te d to assistance to ban ks and liq u id a tio n a ctiv itie s , is invested in U.S. T re a sury securities. As o f D e ce m b e r 31, 1983 and 1982, the C o rp o ra tio n 's investm ent p o rtfo lio consisted o f the fo llo w in g : D ecem ber 31, 1983 (In thousands) M a t u r it y D e s c r ip tio n P a r V a lu e B o o k V a lu e M a r k e t V a lu e Cost 1 Day Special Treasury C ertificates Less than 1 Year U.S.T. Bills U.S.T. Notes and Bonds 450,000 1,469,500 414,189 1,472,021 414,220 1,470,695 412,104 1,507,118 1 -5 Years U.S.T. N otes and Bonds 10,526,626 10,767,164 10,596,598 10,835,408 5 -1 0 Years U.S.T. Notes a nd Bonds 855,546 854,354 779,366 852,837 $ 1 3 ,7 8 6 ,0 0 3 $ 1 3 ,9 9 2 ,0 5 9 $ 1 3 ,7 4 5 ,2 1 0 $ 1 4 ,0 9 1 ,7 9 8 T o ta l In v e s tm e n t $ 484,331 $ 484,331 $ 484,331 $ 484,331 Decem ber 31, 1982 (In thousands) M a t u r it y D e s c r ip tio n P a r V a lu e B o o k V a lu e M a r k e t V a lu e Cost 1 Day Special Treasury C ertificates Less than 1 Year U.S.T. Bills U.S.T. Notes a nd Bonds 1,975,000 1,606,200 1,876,300 1,607,446 1,895,998 1,616,458 1,765,458 1,613,593 1 649,376 $ 649,376 $ 649,376 $ 649,376 1-5 Years U.S.T. Notes and Bonds 7,106,126 7,232,759 7,363,982 7,274,441 5 -1 0 Years U.S.T. Notes and Bonds 1,820,000 1,812,924 1,732,709 1 ,807,740 O v e r 10 Years U.S.T. Bonds 75,546 73,560 62,255 71,806 $ 1 3 ,2 3 2 ,2 4 8 $ 1 3 ,2 5 2 ,3 6 5 $ 1 3 ,3 2 0 ,7 7 8 $ 1 3 ,1 8 2 ,4 1 4 T o ta l In v e s tm e n t 23 2. A c c ru e d In te re s t R e c e iv a b le The C o rp o ra tio n 's o u tsta n d in g a ccru e d interest re c e iv a b le b ala n ce s as o f D e c e m b e r 3 1 ,1 9 8 3 a nd 1982 are as fo llo w s : 1983 1982 In v e s tm e n t in U .S .T . O b lig a t io n s : 1-D ay Special T reasury C ertificates U.S.T. Notes and Bonds $ 128,000 361,684,000 $ 183,000 306,933,000 N o te s R e c e iv a b le fr o m In s u re d B a n k s : To Assist O p e ra tin g Banks To F acilitate M e rg e r Agreem ents To F acilitate D e posit Assum ptions T o ta l 0 5,935,000 2,895,000 12,001,000 18,790,000 1,374,000 S 3 7 0 ,6 4 2 ,0 0 0 $ 3 3 9 ,2 8 1 ,0 0 0 3 . O t h e r R e c e iv a b le s a n d P re p a id Ite m s The C o rp o ra tio n 's o th e r re ce iva b le s a nd p re p a id items a t D e ce m b e r 31, 1983 a nd 1982 a re : 1983 O th e r Receivables Prepaid Items T o ta l 1982 $21,931,000 507,000 $9,693,000 100,000 S 2 2 ,4 3 8 ,0 0 0 $ 9 ,7 9 3 ,0 0 0 4 . N o te s R e c e iv a b le fro m In s u re d B anks The C o rp o ra tio n 's o u tsta n d in g p rin c ip a l b ala n ce s on notes re c e iv a b le fro m insured ban ks a t D e c e m b e r 31, 1983 a nd 1982 a re : 1983 1982 T o A s s is t O p e r a t in g B a n k s : Bank o f the C om m onw ealth First Pennsylvania Bank, N.A. $ 27,000,000 0 I 30,000,000 325,000,000 0 216,250,000 50,000,000 9,398,000 30,000,000 216,250,000 50,000,000 2,500,000 3,750,000 25,000,000 2,500,000 143,000 36,000,000 51,100,000 2,500,000 5,000,000 40,000,000 3,000,000 179,000 0 0 3,333,000 S 4 2 3 ,6 4 1 ,0 0 0 $ 7 0 5 ,2 6 2 ,0 0 0 T o F a c ilita te M e r g e r A g r e e m e n ts : First Interstate Bank o f W ash in g ton , N.A. P h ila d e lp h ia Saving Fund Society A b ile n e N a tio n a l Bank Syracuse Savings Bank T o F a c ilita te D e p o s it A s s u m p tio n s : Bank Leumi Trust C om pany o f N e w Y ork E u ro pean-A m erican Bancorp. D rovers Bank o f C h ica g o T ow n -C o u n try N a tio n a l Bank First Tennessee N a tio n a l C o rp o ra tio n RepublicBank C o rp o ra tio n First Com m erce C o rp o ra tio n T o ta l 24 5. A llo w a n c e fo r Losses - A ssets in L iq u id a tio n An a na lysis o f the changes in the e stim ated a llo w a n c e fo r losses on assets in liq u id a tio n a re d e s c rib e d b e lo w by a cco u n t g ro u p s fo r the years e nd ed D e ce m b e r 31, 1983 and 1982: 1983 D e p o sito rs' claim s p a id : Balance, be g in ning o f p e rio d A d d (Subtract): Provision ch a rg e d to expense N et adjustm ent to p rio r years W rite -o ff at term in a tio n Balance, end o f p e rio d Loans and assets purchased: Balance, beg in ning o f p e rio d A d d (Subtract): Provision ch a rg e d to expense N et adjustm ent to p rio r years W rite -o ff at term in a tio n Balance, end o f p e rio d Assets purchased o u trig h t: Balance, b e g in ning o f p e rio d A d d (Subtract): Provision ch a rg e d to expense N et adjustm ent to p rio r years W rite -o ff a t term in a tio n Balance, end o f p e rio d T o ta l $ 58,352,000 1982 $ 11,285,000 48,009,000 (592.000) (350.000) 18.334.000 99.046.000 0 175,732,000 58,352,000 213.536.000 154,114,000 518.404.000 (4,590,000) 0 65,185,000 (5,106,000) (657,000) 727,350,000 213,536,000 359,744,000 344,846,000 0 27,994,000 0 21,464,000 (6,566,000) 0 387,738,000 359,744,000 $ 1 ,2 9 0 ,8 2 0 ,0 0 0 $ 6 3 1 ,6 3 2 ,0 0 0 6 . A c c ru e d In te re s t P a y a b le The C o rp o ra tio n 's o u tsta n d in g a ccru e d interest p a y a b le b alan ces as o f D e ce m b e r 3 1 ,1 9 8 3 and 1982 a re as fo llo w s : 1983 F Street Property Notes Federal Reserve Bank Notes Federal Hom e Loan Bank Notes F ranklin B uildings, Inc. Notes M e rg e r Assistance Notes T o ta l $ 320,000 1982 $ 375,000 15,830,000 0 3,890,000 82,000 72,000 88,000 2,567,000 14,779,000 $ 1 8 ,7 8 9 ,0 0 0 $ 1 9 ,2 1 4 ,0 0 0 25 7 . A ss es sm en t C re d its D u e In s u re d B anks C o n tin g e n t upon a le g is la tiv e ly sp e c ifie d ra tio o f the C o rp o ra tio n 's D e p o s it Insurance Fund to e sti m ated insured b a n k d ep o sits, the C o rp o ra tio n cred its a le g is la tiv e ly a u th o riz e d p e rc e n ta g e (cu rre n tly 60 percent) o f its net assessm ent incom e to insured banks. This c re d it is d is trib u te d , p ro -ra ta , to each insured b a n k as a re d u ctio n o f the fo llo w in g y e a r's assessment. N e t assessm ent inco m e is d e te rm in e d by gross assessm ents less a d m in is tra tiv e o p e ra tin g expenses and expenses and losses re la te d to in surance o p e ra tio n s . The G a rn -S t G e rm a in D e p o s ito ry Institutions A c t o f 1982, a m e n d e d Section 7(d)(1) o f the F ed era l D e p o sit Insurance A ct a nd a u th o riz e d the C o rp o ra tio n to in clu d e c e rta in le n d in g costs in the c o m p u ta tio n o f the net assessm ent incom e. The le n d in g costs a re the a m ounts by w h ich the a m o u n t o f interest e arn e d on each loa n m ad e by the C o rp o ra tio n u n d e r Section 13 o f the F ed era l D e p o s it Insurance A ct a fte r Ja n u a ry 1, 1982, is less than the a m o u n t o f interest the C o rp o ra tio n w o u ld have e a rn e d fo r the c a le n d a r y e a r if interest had been p a id on the loans a t a rate e q u a l to the a v e ra g e c u rre n t v a lu e o f funds to the U nite d States T reasury fo r the c a le n d a r year. The c o m p u ta tio n a nd d is trib u tio n o f net assessm ent incom e cred its fo r c a le n d a r y e a r 1983 a nd 1982 a re as fo llo w s : 1 9 8 3 N e t A s s e s s m e n t In c o m e C re d its D u e In s u re d B a n k s - J u ly 1, 1 9 8 4 C om putation: G ross Assessment Income - C.Y. 1983 Less: A d m in istra tive O p e ra tin g Expenses M e rg e r Assistance Losses and Expenses less A m o rtiza tio n and A ccretion Provision fo r Insurance Losses N o n re co ve ra b le Insurance Expenses Lending Costs $1,211,440,000 $135,660,000 90,123,000 675,119,000 31,426,000 8,640,000 N et Assessment Income 940,968,000 $ 270,472,000 $ 270,472,000 Assessment C re d it Due Insured Banks: Assessment C re d it - C.Y. 1983 Assessment C redits - Prior Years $ 162,283,000 1,756,000 T otal C redits Due, July 1, 1984 $ 164,039,000 D istrib u tion : 40% to the D e posit Insurance Fund 60% to Insured Banks $108,189,000 162,283,000 Effective Rate o f Assessment fo r C.Y. 1983: 1/14 o f 1% o f T otal Assessable D eposits Percent o f T otal C redits Due Insured Banks: 13.54086% o f G ross Assessments 1 9 8 2 N e t A s s e s s m e n t In c o m e C re d its D u e In s u re d B a n k s - J u ly 1, 1 9 8 3 C om putation: G ross Assessment Income - C.Y. 1982 Less: A d m in istra tive O p e ra tin g Expenses M e rg e r Assistance Losses and Expenses less A m o rtiza tio n and A ccretion Provision fo r Insurance Losses N o n re c o v e ra b le Insurance Expenses Lending Costs $1,108,254,000 $129,927,000 628,562)000 126,436,000 61,881,000 1,560,000 N et Assessment Income 948,366,000 $ 159,888,000 $ 159,888,000 Assessment C re d it Due Insured Banks: Assessment C re d it - C.Y. 1982 Assessment C redits - P rior Years $ 95,933,000 248,000 T ota l C redits Due, July 1, 1983 $ 96,181,000 D istrib u tion : 40% to the D e posit Insurance Fund 60% to Insured Banks $ 63,955,000 95,933,000 Effective Rate o f Assessment to r C.Y. 1982: 1/13 o f 1% o f T otal Assessable Deposits Percent o f T otal C redits Due Insured Banks: 8.67859% o f G ross Assessments 26 8 . F S tre e t P ro p e rty N o te s The C o rp o ra tio n 's o u tsta n d in g p rin c ip a l b a la n c e on F Street p ro p e rty notes as o f D e c e m b e r 31, 1983 and 1982 a re as fo llo w s : 1983 N e w Y o rk State C om m on Retirem ent Fund 1776 F Street Associates " a g e neral p a rtn e rship in d is so lu tio n " T o ta l 1982 $ 6,224,000 $ 6,282,000 5,000,000 6,000,000 5 1 1 ,2 2 4 ,0 0 0 $ 1 2 ,2 8 2 ,0 0 0 9. L ia b ilitie s In c u rre d fro m F a ilu re s o f In s u re d B anks The C o rp o ra tio n 's o u tsta n d in g p rin c ip a l b alan ces on lia b ilitie s in cu rre d fro m fa ilu re s o f insured banks as o f D ece m b e r 31, 1983 a nd 1982 a re as fo llo w s : 1983 Federal Reserve Bank o f N e w York Federal Reserve Bank o f D a lla s S 1982 142,666,000 664,000,000 $285,333,000 0 Federal H om e Loan Bank o f N ew York 5,000,000 8,000,000 F ranklin Buildings, Inc. 5,038,000 6,156,000 21,023,000 24,000,000 192,232,000 0 0 22,364,000 28,000,000 204,956,000 220,125,000 30,000,000 $ 1 ,0 5 3 ,9 5 9 ,0 0 0 $ 8 0 4 ,9 3 4 ,0 0 0 First Interstate Bank o f W a shington, N.A. Hudson City Savings Bank G o ld o m e FSB P h ila d e lp h ia Saving Fund Society A m e rican Savings Bank T o ta l 10. In c o m e M a in te n a n c e A g re e m e n ts The incom e m ainten an ce agree m e nts, in c lu d in g am ounts to co ve r o ve rh e a d costs, a re c la s s ifie d and presented on the fin a n c ia l statem ents a t the present v a lu e o f a n tic ip a te d fu tu re paym ents. The C o r p o ra tio n 's o u tsta n d in g lia b ility b ala n ce s o f a n tic ip a te d fu tu re paym ents a t p resent v a lu e w ith o p e ra tin g insured ban ks as o f D e ce m b e r 31, 1983 and 1982 a re as fo llo w s : 1983 M e tro p o lita n Savings Bank A p p le Bank fo r Savings M a rq u e tte N a tio n a l Bank First Interstate Bank o f W ashington, N .A . G o ld o m e FSB P h ila d e lp h ia Saving Fund Society D o lla r Dry D o ck Savings Bank Syracuse Savings Bank T o ta l 1982 $ 58,332,000 18,320,000 (15,021,000) 2,721,000 67,277,000 37,527,000 20,724,000 2,876,000 $ 73,358,000 23,643,000 3,078,000 2,974,000 128,023,000 45,519,000 0 0 $ 1 9 2 ,7 5 6 ,0 0 0 $ 2 7 6 ,5 9 5 ,0 0 0 11. E s tim a te d Losses F ro m C o rp o r a tio n L itig a tio n Estim ated losses fro m C o rp o ra tio n litig a tio n d u rin g 1983 and 1982 a m o u n te d to $18,923,000 and $3,000,000, resp ective ly. These am ounts rep re sen t estim ates fo r p o te n tia l losses in 6 o f 14 a nd 3 o f 10 le g a l action s in v o lv in g a to ta l o f a p p ro x im a te ly $49,562,000 and $44,835,000 o f claim s, c o u n te rc la im s , and p ossible in d e m n ity exposures a g a in s t the FDIC in its c o rp o ra te c a p a c ity as o f D e c e m b e r 31, 1983 and 1982, respectively. 12. L eas e C o m m itm e n ts Rent fo r o ffic e prem ises c h a rg e d to expense w as $6,829,000 (1983) and $5,695,000 (1982). M in im u m rentals fo r e a c lv o f the next five years and fo r subsequent years th e re a fte r a re as fo llo w s : 1984 1985 1986 1987 1988 1 9 8 9 /t h e r e a f t e r $7,068,000 $5,485,000 $3,999,000 $3,711,000 $2,210,000 $1,511,000 M o s t o ffic e pre m ise lease agree m e nts p ro v id e fo r increase in basic rentals re su ltin g fro m increased p ro p e rty taxes and m ainten an ce expense. 27 13 . R e tire m e n t P la n A ll p e rm a n e n t, fu ll-tim e a nd p a rt-tim e e m p lo ye es o f the FDIC a re co ve re d by the c o n trib u to ry C iv il Service R etirem ent Plan. The C o rp o ra tio n m akes b i-w e e k ly c o n trib u tio n s to the p la n e q u a l to the e m p lo ye e 's b i-w e e k ly c o n trib u tio n s . The re tire m e n t p la n expenses in c u rre d fo r c a le n d a r ye ars 1983 a nd 1982 w e re $7,073,000 and $6,439,000 respectively. 1 4 . N e t W o r th C e r tific a te P ro g ra m The net w o rth c e rtific a te p ro g ra m w a s e sta b lish e d a t the FDIC by a u th o riz a tio n o f the G a rn -S t G e r m ain D e p o s ito ry Institutions A c t o f 1982. U n d e r this p ro g ra m , the C o rp o ra tio n w o u ld p urcha se a q u a l ifie d in stitu tio n 's net w o rth c e rtific a te , and in a n on-cash e xcha ng e, the C o rp o ra tio n w o u ld issue its n o n -n e g o tia b le p ro m is s o ry note o f e q u a l v a lu e . The to ta l assistance o u ts ta n d in g to q u a lifie d in s ti tutions as o f D e ce m b e r 31, 1983 a nd 1982 is $376,866,000 and $174,529,000 re sp e ctive ly. The C o r p o ra tio n does n ot e xp e ct to in cu r a ny losses d ire c tly a ttrib u ta b le to such assistance. In 1982, the C o rp o ra tio n p resented the net w o rth c e rtific a te s as an asset a nd the re la te d p ro m is s o ry notes as a lia b ility on its S tatem ent o f F in a n cia l Position. As o f D e c e m b e r 31, 1983, the C o rp o ra tio n c h a n g e d its m ethod o f p re se n ta tio n to re fle c t such tra n s a c tio n s in a fo o tn o te d is c lo s u re as d e s c rib e d a b o v e . The C o rp o ra tio n believe s this tre a tm e n t is p re fe ra b le because it best re fle cts the tru e n atu re a nd substance o f the p ro g ra m . This ch a n g e had no e ffe c t on the C o rp o ra tio n 's net incom e. 1 5 . S u b s e q u e n t Events O n M a y 17, 1984, the FDIC, the F ed era l Reserve B o a rd , the C o m p tro lle r o f the C u rre n c y , a nd a g ro u p o f 28 c o m m e rc ia l b an ks a rra n g e d an e m e rg e n cy assistance p a c k a g e to ta lin g $7.5 b illio n . This a s sistance in c lu d e d a $5.5 b illio n unsecured line o f c re d it fro m the c o m m e rc ia l b a n ks, a nd a $2 b illio n c a p ita l in je c tio n p a c k a g e fro m the FDIC a nd seven p a rtic ip a tin g c o m m e rc ia l b an ks. In a d d itio n , the F ederal Reserve B o a rd g u a ra n te e d to m eet d a ily cash req uirem en ts, if a ny w e re n ee d e d , b e y o n d the $7.5 b illio n co m m itm e nt. A t the present tim e, it is u n ce rta in w h a t FDIC assistance w ill u ltim a te ly result a nd w h a t im p a c t such assistance w o u ld have on the D e p o s it Insurance Fund. 28 COMPTROLLER GENERAL OF THE UNITED STATES W A S H IN G T O N D .C . 20 54 8 B-114854 June 14, 1984 To the Board of Directors Federal Deposit Insurance Corporation We have examined the statements of financial position of the Federal Deposit Insurance Corporation as of December 31, 1983 and 1982, and the related statements of income and the deposit insur ance fund and changes in financial position for the years then ended. Our examination was made in accordance with generally ac cepted government auditing standards and, accordingly, included such tests of the accounting records and such other auditing pro cedures as we considered necessary in the circumstances. As a re sult of the work performed during our examination of the financial statements, we have also issued separate reports, dated June 14 , 1984, on compliance with laws and regulations, and internal ac counting controls. In an attempt to protect the safety and soundness of the banking system, FDIC arranged emergency assistance and took the unprecedented action of guaranteeing all deposits and debts of Continental Illinois National Bank & Trust Company of Chicago, Chicago, Illinois. (Reference is made to note 15 to the financial statements.) In our opinion, the financial statements referred to above present fairly the financial position of the Federal Deposit Insur ance Corporation as of December 31, 1983 and 1982, and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis after restatement for the change, with which GAO concurs, in the method of accounting for as sistance given to insured institutions under the net worth certifi cate program as described in note 14 to the financial statements. of the United States LEGISLATION AND REGUL4TIONS LEGISLATION 1983 The following is a summary of public laws enacted in 1983 that are pertinent to the activities of the FDIC. Net Worth Certificates Public Law 98-29, approved May 16,1983, amends the Federal Deposit Insurance Act to provide that the issuance of net worth certificates does not constitute default under existing subordinated debt obligations. The am endm ent took effect retroactively on October 15,1982, the date of enactm ent of the Garn-St Germain Depository Institutions Act of 1982. 32 international Lending Public Law 98-181, the Supplemental Appropriations Act of 1984, which is further known as the Domestic Housing and International Recovery and Financial Stability Act, approved November 30,1983, contains two titles of importance to the FDIC: -Title VII, an am endm ent to the Federal Deposit Insurance Act, permits any sitting member of the Board of Directors of the FDIC to remain in office until a successor has been confirmed by the Senate. -Title IX, the International Lending Supervision Act of 1983, is designed to increase the supervision and regulation by the FDIC and the other federal bank regulatory agencies of international lending, It provides for appropriate public disclosure of information on individual banks' foreign borrowing and lending, and mandates accounting procedures that accurately reflect the results of international lending. The legislation directs the agencies to require commercial banks to set aside a new category of special reserves against foreign loans when borrowers demonstrate a protracted inability to make debt service payments. Each agency also is empowered to require banking institutions to maintain adequate capital by establishing minimum levels of capital. The Act also promotes international cooperation am ong bank regulatory authorities, RULES/4ND REGULATIONS 1983 Delegations of Authority (Part 303) Effective March 9,1983, the FDIC am ended its regulations to specify that the Board of Review shall entertain any request for reconsideration of a request denied by the Board of Review under delegated authority. Effective June 13,1983, the Board of Directors deleg'ated authority to the Director of the Division of Bank Supervision and FDIC's regional directors to approve, but not deny, routine merger transactions if certain criteria are met. Effective July 20,1983, the FDIC simplified procedures for most applicants and provided for public participation in the application process. The amendments pertain primarily to applications to establish and relocate branches and establish remote service facilities. In addition, internal delegations of authority for acting on other types of applications were amended. Effective August 12,1983, FDIC delegated authority to certain officers of FDIC's Division of Bank Supervision to execute and issue orders to cease and desist from engaging in unsafe, unsound or other prohibited activities under section 8(b) of the Federal Deposit Insurance Act when the bank or other respondent consents to the order and waives certain rights. Forms, Instructions an d Reports (Parts 304 and 349) Effective July 20, 1983, in accordance with changes in Part 303, several obsolete or unnecessary forms were deleted from Part 304. Effective December 31,1983, the FDIC am ended Parts 304 and 349 of its regulations, which required annual reports of ownership of insured state nonmember banks and insider indebtedness to the banks and their correspondent banks. The final rule requires an insured state nonmember bank to disclose, upon written request, the names of its executive officers and principal shareholders who have substantial borrowings from the bank or its correspondent banks. The amendment also restates the existing statutory requirement for insiders to report to the board of directors of their bank any indebtedness to the correspondent banks of that bank. 33 Termination of Insured Status. (Part 307) Rules of Practice and Procedures (Part 308) Effective May 31,1983, the FDIC amended its regulation governing the notice procedures to be followed by a bank whose insured status has been terminated other than by an action of the FDIC Board of Directors. The am endm ent removes the requirement that a bank or institution that has assumed the liabilities of an insured bank give notice of the assumption to the depositors whose liabilities have been assumed. Effective March 7,1983, the FDIC am ended its regulations to incorporate provisions of the Garn-St Germain Depository Institutions Act of 1982 that give FDIC authority to compromise, modify or remit certain civil money penalties and provide for removal of a m anagem ent official for any violation of the Depository Institution Management Interlocks Act. Disclosure of Information (Part 309) The FDIC removed, effective May 31,1983, restrictions placed on the disclosure of financial records and information to federal financial supervisory agencies. The Garn-St Germain Depository Institutions Act of 1982 am ended the Right to Financial Privacy Act of 1978 to clarify that the exchange of records and information regarding financial institutions is permitted am ong the federal supervisory agencies. 34 Interest on Deposits (Port 329) Deposit Insurance (Part 330) Effective January 3,1983, the FDIC eliminated the requirement that retail repurchase agreements be issued for 89 days or less. The current regulatory environment favoring removal of interest rate controls rendered this restriction obsolete. Effective January 11,1983, the FDIC amended sections 329.1 and 329.103 of its regulations to allow public units that are not operated primarily for religious, philanthropic, charitable, fraternal, educational or similar purposes to maintain NOW accounts. Effective August 1,1983, the FDIC adopted two amendments to encourage the conversions of mutual savings banks to a capital stock form of ownership. The first amendment expands the definition of mutual savings bank to include statechartered stock savings banks, thereby permitting those institutions to pay the thrift differential interest rate on applicable deposits. The second am endm ent permits FDIC-insured, state-chartered savings bank to waive the otherwise mandatory premature withdrawal penalty when depositors withdraw time deposits to purchase stock upon the bank's conversion to a stock savings bank. Section 329.0 was amended, effective September 15,1983, to clarify that FDIC's interest rate regulations shall apply to certain extraterritorial deposits which may technically be situated outside of the U.S. but are automatically linked to, or are an integrated part of, a second deposit account maintained and payable within the U.S. In addition, effective the same date, technical amendments were m ade to conform Part 329 to the International Banking Act of 1978. On July 22,1983, FDIC published an amendment to Part 329 (retroactively effective December 14,1982) redefining savings deposits to include Money Market Deposit Accounts. On November 1, 1983, the FDIC and the Federal Home Loan Bank Board jointly published an Advance Notice of Proposed Rulemaking in the Federal Register soliciting comments on certain deposit-placement activities in the depository institutions industry. The focus of the Advance Notice was on how the agencies should deal with the issues raised by the increasing dollar amount of "insured" brokered deposits in banks and savings associations. Effective December 16,1983, the FDIC am ended Part 330 of its regulations by adding a new section that defined the amount of an insured deposit to include accrued or anticipated interest or earnings on deposits as part of the deposits for insurance purposes. Securities of N onm em ber Insured Banks (Part 335) On December 5,1983, FDIC am ended Part 335 to conform to changes on com parable SEC regulations. Effective January 13,1984, the am endm ent covers interim financial reporting, timely filing of statements, reporting effects of changing prices, accounting amendments, exhibit requirements, financial statements and technical amendments. 35 Unsafe and Unsound Banking Practices (Part 337) Foreign Activities of Insured State Nonm em ber Banks (Part 347) Effective September 21,1983, FDIC am ended Section 337.3(b) to eliminate the requirement for prior approval by a majority of a bank's entire board of directors of all extensions of credit to the bank's directors, executive officers, principal shareholders, and related interests of any such persons where those extensions of credit exceed in the aggregate $25,000. Substituted in its place was the requirement that a majority of the bank's entire board of directors approve in advance all extensions of credit to the above individuals and their related interests if the extensions of credit exceed in the aggregate five percent of the bank's capital and unimpaired surplus or $25,000, whichever is larger. In any event, however, any extension of credit exceeding in the aggregate $500,000 must receive prior approval despite the percentage of capital test. On September 12,1983, FDIC published an Advance Notice of Proposed Rulemaking soliciting com m ent on the need for rulemaking to govern the direct or indirect involvement of insured banks in the following activities: real estate; insurance; data processing for third parties; travel agency activities, and other financially related services. Comment also was solicited on whether limitations should be imposed on the ability of a com pany engaged in any of the above activities to own an insured bank. Effective July 20,1983, in line with changes in Part 303, changes were m ade in the application process for establishing, moving, or closing foreign branches. 36 M a n ag em en t Official Interlocks (Part 348) Effective February 7,1983, FDIC amended its regulations to permit persons who had terminated a grandfathered management official interlock because of a change in circumstances to resume their interlocking positions and serve out the remainder of the grandfather period (i.e., until November 10, 1988). Effective November 30,1983 the FDIC amended Part 348 to: (1) simplify the procedures for obtaining exceptions to the prohibitions and extensions of time to permit compliance; (2) ease the burden on depository institution holding companies by redefining the terms "office" and "total assets"; (3) broaden the exclusion for management officials whose functions relate exclusively to retail merchan'dising and manufacturing; (4) broaden the circumstances under which the exception for disruptive management loss is available; (5) clarify the circumstances that require termination of nongrandfathered interlocks, and (6) provide that interlocks between depository organizations and nondepository organizations that becam e diversified savings and loan holding companies, or their subsidiaries, need not be terminated until November 10,1988, despite the occurrence of subsequent changes in circumstances. Statement of Policy Effective August 25,1983, the FDIC issued a Statement of Policy as to whether financial assistance may be provided to prevent the closing of an insured bank other than a mutual savings bank under section 13(c) of the Federal Deposit Insurance Act, as am ended (12 U.S.C. 1823(c)). 37 ESM BLISH/M ENT OF THE FDIC After 50 years, it is instructive to reexamine the forces and events that brought the FDIC into being. The following segment reviews developments in the period 1930-1933 leading up to the enactm ent of the Banking Act of 1933 on June 16 of that year. It is excerpted from a history entitled FDIC: The First Fifty Years prepared by the FDIC's Division of Research and Strategic Planning and scheduled for publication early in 1984. On July 5,1934, Mrs. Lydia Lobsiger received the first federal deposit insurance reimbursement, following the failure of the Fond Du Lac State Bank in East Peoria, Illinois. 40 The a d o p tio n o f n ationw ide dep o sit insurance in 1933 was m a d e possible by the times, by the perseverance o f the C hairm an o f the House C om m itte e on Banking a n d Currency, a n d by the fa c t th a t the legislation a ttra c te d support from 1wo groups w hich form erly had divergent aims a n d interests — those w h o w ere d eterm ined to end destruction o f circulating m edium d u e to bank failures a n d those w ho sought to preserve th e existing banking structure.1 - C. GOLEMBE Banking Developments, 1930-1932 An average of more than 600 banks per year failed between 1921 and 1929, which was ten times the rate of failure during the preceding decade. The closings evoked relatively little concern, however, because they primarily involved small, rural banks, many of which were thought to be badly m anaged and weak. Although these failures caused the demise of the state insurance programs by early 1930, the prevailing view apparently was that the disappearance of these banks served to strengthen the banking system. This ambivalence disappeared after a wave of bank failures during the last few months of 1930 triggered widespread attempts to convert deposits to cash. Many banks, seeking to accom m odate cash demands or increase liquidity, contracted credit and, in some cases, liquidated assets. This reduced the quantity of cash available to the community which, in turn, placed additional cash demands on banks. Banks were forced to restrict credit and liquidate assets, further depressing asset prices and exacerbating liquidity problems. As more banks were unable to meet withdrawals and were closed, depositors becam e more sensitive to rumors. Confidence in the banking system began to erode and bank "runs" becam e more common. During this period, the Federal Reserve did little to ease the liquidity problems of banks. The failure of the Federal Reserve to adopt an aggressive stance with respect to either open market purchases of securities or its discount window operations has been ascribed to several factors.2 Most notably, it was generally believed that bank failures were an outgrowth of bad m anagem ent and, therefore, were not subject to corrective action by the Federal Reserve, Concern within the System also was muted because most failed banks in 1930 were nonmembers for which Federal Reserve officials felt no responsibility. In all, 1,350 banks suspended operations during 1930.3 Bank failures during the previous decade had been confined primarily to agricultural areas; this no longer was the case in 1930. In fact, the Bank of United States, one of the nation's largest banks based in New York City, failed that year. The large jump in bank failures in 1930 was accom panied by an even greater increase in depositor losses. As liquidity pressures subsequently eased during the early months of 1931, the number of bank failures declined sharply but the decrease proved to be short-lived. Bank failures again rose between March and June as the public resumed converting deposits into currency and banks sought to meet withdrawal demands, During the second-half of the year, another, more serious, liquidity scramble occurred, Commercial Bank Suspensions, 1921-1933 ($ Thousands) Y ea r 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 N um ber of Suspensions Deposits 0) (2) Losses Borne by Depositors (3) Losses to Depositors As a Percent of Deposits in Ail C om m ercial Banks (4) 172,806 91,182 149,601 210,150 166,937 260,153 199,332 142,386 230,643 837,096 1,690,232 706,187 3,596,708 $ 59,967 38,223 62,142 79,381 60,799 83,066 60,681 43,813 76,659 237,359 390,476 168,302 540,396 0.21 % 0.13 0.19 0.23 0.16 0.21 0.15 0.10 0.18 0.57 1.01 0.57 2.15 506 366 646 775 617 975 669 498 659 1,350 2,293 1,453 4,000 $ Source: Columns (1), (2), (3), FDIC; Column (4), Friedman and Schwartz. 41 FDIC’s 50th anniversary commemorative exhibit includes a replica of a typical bank of 1934, the year that the FDIC began opera tions. The bank is furnished with authentic period artifacts. Once again, the Federal Reserve failed to inject sufficient liquidity into the banking system. In 1931, policymakers were primarily preoccupied with international monetary matters. The abandonm ent by Great Britain of the gold standard in September 1931 aroused general fears that other countries might follow. These fears caused many foreigners with U.S. bank accounts to convert deposits to gold in the New York money market. To stem the ensuing gold outflow, the Reserve Bank of New York sharply increased its rediscount rate. While this action achieved the desired effect, no steps were taken to augm ent already depleted bank reserves through extensive open market purchases of securities. By ignoring domestic financial considerations, the Federal Reserve added to the banking industry's woes. 42 The effects of these liquidity crises were reflected in the failure statistics. About 2,300 banks suspended operations in 1931. The number of failures thus exceeded the average number for the 1921-1929 period by almost threefold. Losses borne by depositors in 1931 exceeded losses for the entire 1921-1929 period, In an attem pt to ease bank liquidity problems, a National Credit Corporation, organized by bankers in the private sector, was created in October 1931 to extend loans to weakened banks, However, the corporation failed within a matter of weeks, Business leaders appealed to the federal government for assistance, The Hoover Administration responded by recommending two measures, The first resulted in the creation, in January 1932, of a new major federal lending agency, the Reconstruction Finance Corporation (RFC). One of its primary functions was to make advances to banks. By the end of 1932, the RFC had authorized almost $900 million in loans to assist over 4,000 banks striving to remain open. The RFC might have assisted more banks had Congress not ordered it to disclose publicly the names of borrowers, beginning in August 1932. Appearance of a bank's name on the list was interpreted as a sign of weakness, and frequently led to runs on the bank. Consequently, many banks refrained from borrowing from the RFC. The second measure supported by the Hoover Administration, the Glass-Steagall Act of February 27,1932, broadened the circumstances under which member banks could borrow from the Federal Reserve System. It enabled a member bank to borrow from a Federal Reserve Bank upon paper other than that ordinarily eligible for rediscount or as collateral for loans. While the amounts subsequently borrowed were not large in the aggregate, the measure did aid individual banks. The generally improved banking situation during the ensuing months was marked by a significant drop in both the number of bank failures and depositor losses. Other signs suggested that the industry's troubles were far from over. Waves of bank failures still occurred during the year. Another disquieting sign was the em ergence of bank moratoria. Initially, they were declared by individual local communities. Later that year, Nevada proclaimed the first statewide moratorium when runs on individual banks threatened to involve banks throughout the state. Similar moratoria were to play a role in the events that culminated in the nationwide bank holiday of 1933. The Banking Crisis of 1933 During the winter of 1932-1933, banking conditions deteriorated rapidly. In retrospect, it is not possible to point to any single factor that precipitated the calamitous events of this period. The general uncertainty with respect to monetary and banking conditions undoubtedly played the major role, although there were specific events that tended to increase liquidity pressures within the system. Banks, especially in states that had declared bank moratoria, accelerated withdrawals from correspondents in an attem pt to strengthen their position. Currency holdings increased significantly, partially in anticipation of additional bank moratoria. Additional liquidity pressures were brought about by concern relating to the future of the dollar. With the election of Franklin D. Roosevelt in November 1932, rumors circulated that the new administration would devalue, which led to an increase in speculative holdings of foreign currencies, gold and gold certificates, Unlike the period of international monetary instability of 1931, a significant amount of the conversions from Federal Reserve Notes and deposits to gold cam e from domestic sources. These demands placed considerable strain on New York City banks and, ultimately, on the Federal Reserve Bank of New York. It was the suddenness of the withdrawal demands in selected parts of the country that started a panic of massive proportions. State after state declared bank holidays. The banking panic reached a peak during the first three days of March 1933. Visitors arriving in Washington to attend the presidential inauguration found notices in their hotel rooms that checks drawn on out-of-town banks would not be honored. By March 4, Inauguration Day, every state in the Union had declared a bank holiday. As one of his first official acts, President Roosevelt proclaimed a nationwide bank holiday to com m ence on March 6 and last four days. Administration officials quickly began to draft legislation designed to 43 legalize the holiday and resolve the banking crisis. Early in their deliberations they realized that the success of any proposed plan of action primarily would hinge on favorable public reaction, As noted by Raymond Moley, a key presidential adviser who attended many of the planning sessions: W e knew how m uch o f banking d e p e n d e d upon m ake-believe or, stated m ore conservatively, the vital p a rt th a t p u b lic c o n fid e n c e had in assuring solvency.4 To secure public support, officials formulated a plan that relied on orthodox banking procedures. Few members of Congress knew what was contained in the Administration's bill when they convened in extraordinary session at noon on March 9. In fact, Henry B. Steagall, Chairman of the Committee on Banking and Currency, purportedly had the only copy of the bill in the House. Waving the copy over his head, Steagall had entered the House chamber, shouting, "Here's the bill. Let's pass it."5 After only 40 minutes of debate, during which time no amendments were permitted, the House passed the bill, known as the Emergency Banking Act. Several hours later, the Senate also approved the emergency legislation intact. The Emergency Banking Act legalized the national bank holiday and set standards for the reopening of banks after the holiday. The Act expanded the RFC's powers as a means of dealing with the crisis then threatening the banking system. It authorized the RFC to invest in the preferred stock and capital notes of banks and to make secured loans to individual banks. To insure an adequate supply of currency, the Act provided for the issuance of Federal Reserve bank notes, which were to be backed by U.S. government securities. The Federal Reserve Banks were empowered to advance the new currency to member banks without requiring much collateral. After the Act was signed into law, the Bureau of Engraving and Printing promptly went into 24-hour production to manufacture the currency. 44 The President subsequently issued a proclamation extending the holiday in order to allow time for officials to reopen the banks. In his first "fireside chat," delivered on March 12, President Roosevelt reviewed the events of the past several days and outlined the reopening schedule. Following proper certification, member banks in the twelve Federal Reserve Bank cities were to reopen on March 13. Member banks in some 250 other cities with recognized clearinghouses were to reopen on March 14. Thereafter, licensed member banks in all other localities were to reopen. The President indicated that the Secretary of the Treasury already had contacted the various state banking departments and requested them to follow the same schedule in reopening state nonmember banks. Before concluding his radio address, the President cautioned that he could not promise that every bank in the nation would be reopened. About 4,000 banks never reopened either because of the events of the previous two months or the bank holiday itself. The task of implementing the Emergency Banking Act primarily was the responsibility of the Secretary of the Treasury. Under the Act, licenses for all member banks, both national and state, were to be issued by the Secretary. (State nonmember banks were to be licensed by the state banking departments.) The Treasury, however, dem anded that each of the Federal Reserve Banks approve of the reopening of banks in their respective districts. The Federal Reserve Board balked at this demand, preferring instead that the Treasury Department shoulder the entire burden of reopening member banks. The controversy was resolved in the Treasury Department's favor. It was agreed that licenses would be issued by the Secretary of the Treasury upon the recommendation of the district Federal Reserve Bank, the chief national bank examiner and the Comptroller of the Currency. Several hundred banks soon reopened for business on the certification of the Treasury. As the reopenings proceeded, public confidence increased significantly and widespread hoarding ceased. Members of the public visit FDIC’s 50th anniversary commemorative exhibit in Washington, D.C., and view documents and other memorabilia of the early years of fed eral deposit insurance operations. Federal Deposit Insurance Legislation After some semblance of order had returned to the financial system, efforts were renewed in Congress to enact deposit insurance legislation. Although a deposit insurance bill had been passed by the House in 1932, the Senate had adjourned without acting on the proposal. Insurance proponents hoped that legislative efforts would prove successful this time, since the banking crisis was still fresh in the public's mind. In their view, recent events had shown that a system of federal deposit insurance was necessary to achieve and maintain financial stability. One of the chief proponents of federal deposit insurance in Congress was Representative Henry B. Steagall. He has been credited with proposing the legislation which created the Federal Deposit Insurance Corporation, leading the fight for its adoption in the House and helping to effect a compromise when chances for passage of the bill appeared doomed. Steagall's achievement was all the more remarkable in view of the formidable opposition confronting the proponents of deposit insurance. Opposition em anated from the Roosevelt Administration, segments of the banking industry and from some members of Congress. Arguments offered against deposit insurance reflected both practical and philosophical considerations. Opponents asserted that deposit insurance would never work. They pointed to the defunct state-level deposit programs to substantiate their argument. Another widely held view was that deposit insurance would remove penalties for bad management. Critics also charged that deposit insurance would be too expensive and that it would represent an unwarranted intrusion by the federal government into the private sector. Within the Roosevelt Administration, the Secretary of the Treasury was strongly opposed to the idea of federal deposit insurance. While historians have asserted that Secretary Woodin's views were partially responsible for President Roosevelt's opposition to deposit insurance, accounts differ regarding the nature and extent of Franklin Roosevelt's opposition. However, the Administration was not of one mind on the issue. Support was voiced by Vice President John Nance Garner and Jesse H, Jones of the RFC, am ong others. Prior to Roosevelt's 45 inauguration, Garner, then-Speaker of the House, had appealed to the President-elect to support deposit insurance. When Roosevelt declined, stating that it would never work, Garner predicted that deposit insurance legislation eventually would be passed.6 Banking interests, particularly those representing the larger banks, generally viewed federal deposit insurance with distaste. The President of the American Bankers Association declared that deposit insurance was "unsound, unscientific and dangerous."7 The banking industry's views had only limited im pact since banking at that time was held in low esteem. The industry's already tarnished image was not helped by disclosures of unsavory security market dealings on the part of certain New York banks which cam e to light when deposit insurance-was being considered in Congress. More formidable opposition to deposit insurance cam e from several influential Congressmen. One of the most vociferous opponents was Carter Glass of Virginia, Chairman of the Senate Banking and Currency Committee. He had been Roosevelt's initial choice to serve as Secretary of the Treasury, but declined the Cabinet offer. Although Senator Glass was intent on passing banking reform legislation, federal deposit insurance was not one of the reforms he supported or sought. In opposing federal deposit insurance, Glass pointed to the record of the defunct state insurance programs. Nevertheless, he subsequently allowed bank deposit insurance to be written into a banking bill that he had sponsored. One business journal during the period reported that Glass simply had yielded to public opinion: It b e c a m e perfectly a p p a re n t th a t the voters w a n te d th e g u a ra n te e [deposit insurance], a n d th a t no bill w hich d id n o t co n ta in such a provision w ould b e satisfactory either to Congress or to th e public. W ashington does n o t rem em ber any issue on w hich th e sentim ent o f th e country has be e n so undivided or so e m p h a tica lly expressed as upon this.8 In mid-May, both Senator Glass and Representative Steagall formally introduced banking reform bills, which included provisions for deposit insurance. The two bills primarily differed with respect to the 46 conditions for membership in the deposit insurance corporation that was to be created, Whereas membership in the Federal Reserve was a precondition for obtaining deposit insurance under the Senate bill, it was not a prerequisite in the House version, Both bills incorporated the demands m ade by the Roosevelt Administration that: (1) deposit coverage be based on a sliding scale; and (2) there be a one-year delay in the start of the insurance corporation, Later that month, however, the Glass bill was am ended to incorporate Senator Arthur Vandenberg's proposal calling for the creation of a temporary deposit insurance fund. Vandenberg opposed a delay in the start of deposit insurance because "the need is greater in the next year than for the next hundred years."9 On the day Vandenberg introduced his proposal, Vice President Garner was presiding over the Senate, which was sitting as a court of im peachm ent in the trial of a district judge. Garner had heard that Vandenberg had formulated a deposit insurance plan that would accomplish the same goals as those contained in an insurance bill which Garner had pushed through the House in 1932. Desiring that deposit insurance be implemented as soon as possible, Garner therefore approached Vandenberg during the im peachm ent proceedings and inquired whether he had the deposit insurance am endm ent in his possession. After Vandenberg responded affirmatively, Garner instructed him to introduce the am endm ent when signaled. Several minutes later, Garner suspended the court proceedings and ordered the Senate into regular session to consider more banking legislation. With Garner sitting by his side, Vandenberg then offered his deposit insurance amendment, which was overwhelmingly adopted, The am endm ent stipulated that, effective January 1,1934, the temporary fund would provide insurance coverage up to $2,500 for each depositor and would function until a permanent corporation began operations on July 1,1934. If demands on the temporary fund exceeded available monies, the Treasury would be obliged to make up the difference. The am endm ent also provided that solvent state banks could join the fund. (From left) Vice President George Bush, Postmaster General William F. Bolger and Chairman William M. Isaac unveil the FDIC's 50th Anniversary commemorative stamp, as Mrs. Bush looks on, at a special ceremony and reception held at FDIC headquarters. 47 The inclusion of the Vandenberg am endm ent in the Senate bill almost resulted in the defeat of deposit insurance in Congress. When the banking reform bills that had been passed by both houses were sent to a joint conference committee, for resolution of differences, an impasse promptly developed. The House conferees opposed the Vandenberg amendment contained in the Senate version of the bill, particularly the provision calling for the immediate establishment of a temporary insurance corporation. Another issue that split the conferees was whether Federal Reserve membership should be a precondition for obtaining deposit insurance. A compromise finally was reached on June 12, after the Senate conferees threatened to remove all deposit insurance provisions from the bill. They feared that the impasse over deposit insurance could endanger all of the banking reform measures contained in the bill. In order to save the bill, the House conferees reluctantly accepted the Senate's version as well as an additional provision desired by the Senate conferees to liberalize the branching restrictions governing national banks. This provision reflected widespread public disillusionment with the failure-prone independent banking system. Proponents of branch banking maintained that geographic diversification of lending risks and the deposit Pase would result in a lower bank failure rate. The bill agreed to by the conferees passed both houses of Congress on the following day. Some opponents of deposit insurance had not yet thrown in the towel, though. The American Bankers Association wired its member banks, urging them to telegraph President Roosevelt immediately to request his veto of the legislation. Nevertheless, President Roosevelt signed the measure, known as the Banking Act of 1933, into law on June 16,1933. Section 8 of the Act created the Federal Deposit Insurance Corporation through an am endm ent to the Federal Reserve Act. The Banking Act of 1933 also created the Federal Reserve Open Market Committee and imposed restrictions on the permissible activities of member banks of the Federal Reserve System. 48 Deposit Insurance Provisions of the Banking Act of 1933 Section 12B of the Federal Reserve Act as am ended created the Federal Deposit Insurance Corporation and defined its organization, duties and functions. It provided for two separate plans of deposit insurance: a temporary plan which was to be initiated on January 1,1934, and a permanent plan which was to becom e effective on July 1,1934. Capital necessary to establish the FDIC was to be provided by the United States Treasury and the twelve Federal Reserve Banks. The Treasury was to contribute $150 million, Each of the twelve Federal Reserve Banks was required to subscribe to Class B capital stock in an amount equal to one-half of its surplus as of January 1,1933. M anagem ent of the FDIC was vested in a Board of Directors consisting of three members. The Comptroller of the Currency was designated a member ex officio; the other two members were to be appointed by the President for six-year terms with the advice and consent of the Senate, One of the two appointive directors was to serve as Chairman of the Board, and not more than two members of the Board could be members of the same political party. The temporary plan of deposit insurance initially limited protection to $2,500 for each depositor. Banks admitted to insurance under the temporary plan were to be assessed an amount equal to one-half of one percent of insurable deposits. One-half of the assessment was payable at once; the rest was payable upon call by the FDIC. All Federal Reserve member banks licensed by the Secretary of the Treasury under terms of an Executive Order of the President, issued March 10,1933, were required by law to becom e members of the temporary fund on January 1,1934. Other banks were authorized to join the fund upon certification of their solvency by the respective state supervisory agencies and after examination by, and with the approval of, the Federal Deposit Insurance Corporation. The original permanent plan, while it never took effect and was superseded by a new permanent plan in the Banking Act of 1935, contained certain features of historical interest. Banks participating in insurance under the original plan were to subscribe to capital stock of the FDIC and be subject to whatever assessments might be needed to meet the losses from deposit insurance operations. The plan provided for full protection of the first $10,000 of each depositor, 75 percent coverage of the next $40,000 of deposits, and 50 percent coverage of all deposits in excess of $50,000. In order to retain their insurance, all participating banks were required to becom e members of the Federal Reserve System within two years. Thus, with regard to financing, degree of protection and supervisory provisions, the original plan differed significantly from both the temporary plan and the permanent plan that becam e effective with the Banking Act of 1935. Footnotes 1G o le m b e , "The Deposit Insurance Legislation o f 1933," p. 182. 2A discussion o f th e Federal Reserve System's attitude a p p e a rs in Milton Friedman a n d Anna J. Schwartz, A Monetary History o f the United States, 1867-1960 (Princeton, New Jersey: N ational Bureau o f Econom ic Research, 1963), pp. 357-359. M uch o f th e discussion relating to the events p re c e d in g th e nationw ide bank holiday is based on this source. 3The terms "b a n k suspensions" a n d "bank failures" a re often used interchangeably. For th e most part, this p ra c tic e is fo llo w e d th ro u g h o u t th e chapter. Technically, however, "suspensions" include all banks th a t a re closed because o f fin a n cial difficulties, whereas "failures" a re lim ited to those suspended banks th a t w e re p la c e d in th e hands o f receivers and liquidated. Some o f th e suspended banks w ere reorganized or restored to solvency a n d resumed operations. In either instance, th e assumption is th a t th e suspended bank actually failed, though rehabilitation later occurred. 4Raymond Moley, The First New Deal (New York: Harcourt, Brace 8c World, Inc., 1966), p. 171. 5lb id „ p. 177. 6lb id „ pp. 318-319. 7"Wires Banks to Urge Veto o f Glass Bill," New York Times, June 16,1933, p. 14. ®"Deposit Insurance," Business Week, April 12,1933, p. 3. 9"Bank Bill D e b a te to O p e n in Senate," New York Times, M ay 19,1933, p. 4. 49 Banks Closed Because of Financial Difficulties: FDIC Income, Disbursements and Losses Certain statistical tables in the FDIC Annual Report have been deleted from the 1983 edition. These tables include: - the asset and liability portion of Table 123, Insured Banks Requiring Disbursements by the FDIC; - Table 124, Depositors, Deposits and Disbursements in Failed Banks Requiring Disbursements by the FDIC, 1934-1983; - Table 126, Analysis of Disbursements, Recoveries and Losses in Deposit Insurance Transactions, January 1, 1934-December 31,1983; - Table 128, Protection of Depositors of Failed Banks Requiring Disbursements by the FDIC, 1934-1983. Information that would have been presented in these tables is available from the FDIC Office of Information on a request basis. The following tables remain in the 1983 FDIC Annual Report: - Table 122, Number and Deposits of Banks Closed Because Of Financial Difficulties, 1934-1983; - Table 123, Insured Banks Requiring Disbursements By The Federal Deposit Insurance Corporation During 1983; - Table 125, Recoveries and Losses By The Federal Deposit Insurance Corporation On Principal Disbursements for Protection of Depositors, 1934-1983; - Table 127, Income and Expenses, Federal Deposit Insurance Corporation, By Year, From Beginning of Operations, September 11,1933 to December 31, 1983; - Table 129, Insured Deposits And The Deposit Insurance Fund, 1934-1983, Deposit Insurance Disbursements Disbursements by the Federal Deposit Insurance Corporation to protect depositors are m ade when the insured deposits of banks in financial difficulties are paid off, or when the deposits of a failing bank are assumed by another insured bank with the financial aid of the Corporation. In deposit payoff cases, the disbursement is the amount paid by the Corporation on insured deposits. In the modified deposit payoff, an alternative method, the FDIC transfers the failed bank's insured and secured deposits to another bank in the community 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 deposit assumption cases, the principal disbursement is the amount loaned to failing banks, or the price paid for assets purchased from them. Additional disbursements are m ade in those cases as advances for protection of assets in process of liquidation and for liquidation expenses. In deposit assumption cases, the Corporation 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, the Corporation m ade disbursements in 1983 to three operating banks. Noninsured Bank Failures Statistics in this report on failures of noninsured banks are com piled from information obtained from State banking departments, field supervisory officials, and other sources. The Corporation received no reports of noninsured bank closures due to financial difficulties in 1983. For detailed data regarding noninsured banks that were suspended in the years 1934-1962, see the FDIC Annual Report for 1963, pages 27-41. For 1963-1983, see Table 122 of this report, and previous reports for respective years. Sources of Data Insured banks: books of bank at date of closing, and books of FDIC, December 31, 1983. 52 Table 122. NUMBER AND DEPOSITS OF BANKS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES, 1934-1983 Number Deposits (in thousands of dollars) Insured Year Total NonInsured' Total Total 812 136 676 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 61 32 72 84 81 72 48 17 23 5 2 1 2 6 3 9 5 5 4 5 4 5 3 3 9 3 2 9 3 2 8 9 8 4 3 9 8 6 3 6 4 14 17 6 7 10 10 10 42 48 52 6 3 7 7 12 5 2 3 9 26 69 77 74 60 43 15 20 5 2 1 1 5 3 5 4 2 3 4 2 5 2 2 4 3 1 5 1 2 7 5 7 4 3 9 7 6 1 6 4 13 16 6 7 10 10 10 42 48 " i 1 "4 1 3 1 1 2 " l 1 5 “ i 4 2 "1 4 1 "1 " 2 Insured Without With disbursements disbursements by FDIC2 by FDIC3 8 "2 "2 Total NonInsured' Total 668 25,584,821 143,501 25,441,321 9 25 69 75 74 60 43 15 20 5 2 1 1 5 3 4 4 2 3 2 2 5 2 1 4 3 1 5 37,332 13,988 28,100 34,205 60,722 160,211 142,788 29,796 19,540 12,525 1,915 5,695 494 7,207 10,674 9,217 5,555 6,464 3,313 45,101 2,948 11,953 11,690 12,502 10,413 2,593 7,965 10,611 4,231 23,444 23,867 45,256 106,171 10,878 22,524 40,134 55,229 132,058 99,784 971,296 1,575,832 340,574 865,659 205,208 854,154 110,696 216,300 3,826,022 9,908,379 5,441,608 35,365 583 592 528 1,038 2,439 358 79 355 1,968 13,405 27,508 33,677 59,684 157,772 142,430 29,717 19,185 12,525 1,915 5,695 347 7,040 10,674 6,665 5,513 3,408 3,170 44,711 998 11,953 11,330 11,247 8,240 2,593 6,930 8,936 3,011 23,444 23,438 43,861 103,523 10,878 22,524 40,134 54,806 132,058 20,480 971,296 1,575,832 339,574 864,859 205,208 854,154 110,696 216,300 3,826,022 9,908,379 5,441,608 "2 7 5 7 4 3 9 7 6 1 6 4 13 16 6 7 10 10 10 42 48 147 167 2,552 42 3,056 143 390 1,950 360 1,255 2,173 1,035 1,675 1,220 429 1,395 2,648 423 79,304 1,000 800 Without With disbursements disbursements by FDIC2 by FDIC3 41,147 "8 5 328 1,190 26,449 10,084 Assets4 (in Thousands of Dollars) 25,400,174 33,025,350 1,968 13,320 27,508 33,349 59,684 157,772 142,430 29,717 19,185 12,525 1,915 5,695 347 7,040 10,674 5,475 5,513 3,408 3,170 18,262 998 11,953 11,330 1,163 8,240 2,593 6,930 8,936 2,661 17,242 31,941 40,370 69,513 181,514 161,898 34,804 22,254 14,058 2,098 6,392 351 6,798 10,360 4,886 4,005 3,050 2,388 18,811 1,138 11,985 12,914 1,253 8,905 2,858 7,506 9,820 23,444 23,438 43,861 103,523 10,878 22,524 40,134 54,806 132,058 20,480 971,296 1,575,832 339,574 864,859 205,208 854,154 110,696 216,300 3,826,022 9,908,379 5,441,608 26,179 25,849 58,750 120,647 11,993 25,154 43,572 62,147 196,520 22,054 1,309,675 3,822,596 419,950 1,039,293 232,612 994,035 132,988 236,164 4,859,060 11,632,415 7,206,923 3,011 5 'For information regarding each of these banks, see table 22 in the 1963 Annual Report (1963 and p rior years), and explanatory notes to tables regarding banks closed because of financial difficulties in subsequent annual reports. One noninsured bank placed in receivership in 1934, with no deposits at time or closing, is omitted (see table 22 note 9). Deposits are unavailable for seven banks. 2For information regarding these cases, see table 23 of the Annual Report for 1963. 3For information regarding each bank, see the Annual Report for 1958, pp. 48-83 and pp. 98-127, and tables regarding deposit insurance disbursements in subsequent annual reports. Deposits are adjusted as of December 31,1982. 4lnsured banks only. 5Not available. 53 Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL INSURANCE CORPORATION DURING 1983 Class of bank Number of depositors or accounts Total Assets (OOO's) Total Deposits (OOO's) FDIC disburse ments (OOO's) Date of closing or deposit assumption Receiver or liquidating agent or assuming bank State Bank of Barnum Barnum, Minnesota NM 3,043 13,288 12,611 11,900 February 9, 1983 Federal Deposit Insurance Corporation Columbia Pacific Bank and Trust Company Portland, Oregon SM 2,000 35,804 31,644 30,748 March 18,1983 Federal Deposit Insurance Corporation Prairie County Bank Hazen, Arkansas NM 3,062 16,455 15,479 14,884 March 24,1983 Federal Deposit Insurance Corporation Sparta-Sanders State Bank Sparta, Kentucky NM 769 19,585 18,303 18,193 April 15, 1983 Federal Deposit Insurance Corporation N 2,300 13,312 17,416 16,132 June 24,1983 Federal Deposit Insurance Corporation SM 1,639 10,037 10,525 11,230 June 30,1983 Federal Deposit Insurance Corporation July 8,1983 Federal Deposit Insurance Corporation Name and location Deposit Payoff Western National Bank of Lovell Lovell, Wyoming Mineral Bank of Nevada Las Vegas, Nevada Union National Bank of Chicago Chicago, Illinois N 13,441 23,908 24,518 20,379 First National Bank of Browning Browning, Montana N 4,000 11,289 11,602 9,675 November 10,1983 Federal Deposit Insurance Corporation Atkinson Trust and Savings Bank Atkinson, Illinois NM 3,929 20,359 18,900 17,937 November 25,1983 Federal Deposit Insurance Corporation The Madison County Bank Fredericktown, Missouri NM 7,100 6,701 6,555 3,064 January 21,1983 Madison Exchange Bank Fredericktown, Missouri Dry Dock Savings Bank New York, New York NM 302,531 2,500,000 2,037,959 33,343 February 9,1983 Dollar Savings Bank of New York New York, New York American State Bank Bradley, Illinois NM 4,868 12,115 12,463 5,657 February 12, 1983 Midwest Trust and Savings Bank of Bradley Bradley, Illinois United American Bank in Knoxville Knoxville, Tennessee NM 134,945 778,434 584,619 222,447 February 14, 1983 First Tennessee Bank Knoxville, Tennessee Merchants and Farmers State Bank Blythe, California NM 1,500 5,319 5,204 2,941 February 18, 1983 Credit Bank Blythe, California American City Bank Los Angeles, California NM 25,749 271,765 254,536 191,378 February 25, 1983 Central Bank Oakland, California Newport Harbour National Bank Newport Beach, California N 2,219 47,663 44,234 32,964 March 11, 1983 Trans American National Bank Monterey Park, California Pan American National Bank Union City, New Jersey N 9,900 30,830 31,275 17,905 March 18,1983 Hudson United Bank Union City, New Jersey Bear Creek Valley Bank Phoenix, Oregon NM 1,973 11,019 10,855 8,871 March 25,1983 Valley of the Rogue Bank Rogue River, Oregon The Ina State Bank Ina, Illinois NM 4,627 16,253 15,892 9,362 A pril 8,1983 First Bank and Trust Company Mount Vernon, Illinois Bank of San Marino San Marino, California NM 2,248 12,959 12,707 7,805 April 8,1983 Trans American National Bank Monterey Park, California Heritage Bank Ashland, Oregon NM 3,342 16,408 14,621 10,495 April 29, 1983 Valley of the Rogue Bank Rogue River, Oregon N 25,172 120,081 119,448 84,185 April 29,1983 Oak Lawn National Bank Oak Lawn, Illinois Smith County Bank Carthage, Tennessee NM 5,118 28,231 27,198 18,039 May 6,1983 Murfreesboro Bank and Trust Company Murfreesboro, Tennessee City and County Bank of Knox County Knoxville, Tennessee NM 32,016 243,885 227,481 151,601 May 27,1983 Bank of Knoxville Knoxville, Tennessee United Southern Bank of Nashville Nashville, Tennessee SM 14,880 114,835 96,300 117,457 May 27,1983 Union Planters Corporation Memphis, Tennessee United American Bank in Hamilton County Chattanooga, Tennessee NM 48,248 134,653 105,993 65,716 May 27,1983 Union Planters Corporation Memphis, Tennessee Deposit Assumptions, Loans and Financially Assisted Mergers First National Bank of Oak Lawn Oak Lawn, Illinois 54 Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL INSURANCE CORPORATION DURING 1983 Class of bank Number of depositors or accounts Total Assets (OOO's) Total Deposits (OOO's) FDIC disburse ments (OOO's) City and County Bank of Roane County Kingston, Tennessee NM 7,000 40,120 36,499 22,146 May 27,1983 Bank of O ak Ridge O ak Ridge, Tennessee City and County Bank of Anderson County Lake City, Tennessee NM 5,871 142,000 139,561 81,969 May 27,1983 Third National Corporation Nashville, Tennessee The Commercial Bank of California Los Angeles, California NM 5,158 27,772 23,057 16,653 May 27,1983 First Credit Bank Blythe, California Community Bank Hartford, South Dakota NM 8,355 42,383 39,327 23,814 June 17, 1983 Western Bank Sioux Falls, South Dakota The First Central Bank Smithville, Tennessee NM 3,222 18,989 18,246 11,353 July 8,1983 City Bank and Trust Company McMinnville, Tennessee Bank of Niobrara Niobrara, Nebraska NM 773 7,285 6,239 5,078 July 8,1983 Farmers and Merchants State Bank Bloomfield, Nebraska First Peoples Bank of Washington County Johnson City, Tennessee NM 20,334 152,543 176,549 86,515 July 29, 1983 First American National Bank — Eastern Kingsport, Tennessee Metro Bank Midland, Texas NM 2,500 30,747 28,786 20,794 July 29,1983 Mid-Cities National Bank Midland, Texas Oregon Mutual Savings Bank Portland, Oregon NM 47,745 260,000 251,337 11,850 August 5, 1983 Oregon First Bank Portland, Oregon N 2,560 10,557 10,843 7,623 August 5, 1983 First State Bank of Danvers Danvers, Illinois First Commerce Bank of Hawkins County Rogersville, Tennessee NM 8,821 47,213 43,734 20,805 August 12,1983 Hamilton Bank of Johnson City Johnson City, Tennessee United Southern Bank of Clarksville Clarksville, Tennessee NM 3,666 8,730 10,394 6,550 August 26,1983 First American Bank of Nashville, NA Nashville, Tennesee The Douglass Slate Bank Kansas City, Kansas NM 7,200 28,327 26,545 20,184 September 2,1983 The Douglass Bank Kansas City, Kansas Warren County Bank McMinnville, Tennessee NM 4,019 19,310 18,801 10,517 September 16, 1983 Murfreesboro Bank and Trust Company Murfreesboro, Tennesee Dominion Bank of Denver Denver, Colorado NM 2,653 11,461 11,915 7,233 September 30, 1983 Central Bank at Stapleton, N.A. Denver, Colorado National Bank of Odessa Odessa, Texas N 19,527 77,662 76,164 53,614 September 30, 1983 First State Bank of Odessa, NA Odessa, Texas Auburn Savinas Bank Auburn, New York NM 38,014 130,000 131,382 9,840 October 1,1983 Syracuse Savings Bank Syracuse, New York The Deschutes Bank Redmond, Oregon NM 2,800 9,414 9,224 7,318 October 7,1983 United States National Bank of Oregon Portland, Oregon N 76,400 1,404,092 574,183 1,076,217 October 14,1983 RepublicBank Corporation Dallas, Texas Union Trust Company San Juan, Puerto Rico NM 1,267 25,630 23,275 15,410 December 9,1983 Banco Popular de Puerto Rico San Juan, Puerto Rico Bank of Hackleburg Hackleburg, Alabama NM 2,005 6,833 6,800 2,797 December 13, 1983 Southrust Bank of Marion County Hamilton, Alabama The Bank of Red Oak Red Oak, Oklahoma NM 3,514 10,667 10,408 6,006 December 16, 1983 Farmers State Bank Quinton, Oklahoma Name and location The First National Bank of Danvers Danvers, Illinois The First National Bank of Midland Midland, Texas Date of closing or deposit assumption Receiver or liquidating agent or assuming bank 55 RECOVERIES AND LOSSES BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ON DISBURSEMENTS FOR PROTECTION OF DEPOSITORS, 1934-1983 (Amounts in thousands of dollars) Table 125. Liquidation status and year of deposit payoff or deposit assumption Total . . . . All cases Number of banks 668 Disburse ments Deposit payoff cases Recoveries Estimated to Dec. 31, additional 1983 recoveries Losses' 10,858,467 5,556,305, 2,725,109 2,577,053 Deposit assumption cases5 Number of banks Disburse ments2 Recoveries Estimated to Dec. 31, additional 1983 recoveries Losses' Number of banks 328 813,179 372,868 195,248 340 245,063 Disburse ments3 Recoveries Estimated to Dec. 31, additional 1983 recoveries Losses' 10,045,288 5,183,437 2,480,046 2,381,805 Year4 1934 1935 1936 1937 1938 .... .... .... .... .... 9 25 69 75 74 941 9,108 15,206 20,204 34,394 734 6,423 12,873 16,532 31,969 207 2,685 2,333 3,672 2,425 9 24 42 50 50 941 6,026 7,735 12,365 9,092 734 4,274 6,397 9,718 7,908 207 1,752 1,338 2,647 1,184 " l 27 25 24 3,082 7,471 7,839 25,302 2,149 6,476 6,814 24,061 933 995 1,025 1,241 1939 1940 1941 1942 1943 .... .... .... .... .... 60 43 15 20 5 81,828 87,899 25,061 11,684 7,230 74,676 84,103 24,470 10,996 7,107 7,152 3,796 591 688 123 32 19 8 6 4 26,196 4,895 12,278 1,612 5,500 20,399 4,313 12,065 1,320 5,377 5,797 582 213 292 123 28 24 7 14 1 55,632 83,004 12,783 10,072 1,730 54,277 79,790 12,405 9,676 1,730 1,355 3,214 378 396 1944 1945 1946 1947 1948 .... .... .... .... .... 2 1 1 5 3 1,532 1,845 274 2,038 3,150 1,492 1,845 274 1,979 2,509 40 1 404 364 40 1 1 1 5 3 1,128 1,845 274 2,038 3,150 1,128 1,845 274 1,979 2,509 1949 1950 1951 1952 1953 .... .... .... .... .... 4 4 2 3 2 2,685 4,404 1,986 1,525 5,359 2,316 3,019 1,986 733 5,359 369 1,385 4 4 2 3 2 2,685 4,404 1,986 1,525 5,359 2,316 3,019 1,986 733 5,359 369 1,385 1954 1955 1956 1957 1958 .... .... .... .... . ... 2 5 2 1 4 1,029 7,315 3,499 1,031 3,051 771 7,085 3,286 1,031 3,023 258 230 213 2 1 1 1,029 2,877 704 771 2,877 704 258 255 255 1959 1960 1961 1963 .... .... .... . ... 3 1 5 2 1,835 4,765 6,201 19,172 1,738 4,765 4,699 18,886 1964 1965 1966 1967 1968 .... .. . . .... .... .... 7 5 7 4 3 13,741 11,529 10,020 8,097 6,476 12,171 7,438 9,541 7,087 6,464 659 198 234 571 9,285 425 8,806 6,476 6,464 1969 1970 1971 1972 1973 .... .... .... .... .... 9 7 6 1 6 41,196 50,953 171,409 16,255 433,585 41,035 50,570 171,159 13,874 334,459 33,600 21,624 117,619 33,521 21,577 117,607 8 47 12 71 416,803 317,688 34,590 64,525 1974 1975 1976 1977 1978 .... .... .... . ... .... 4 13 16 6 7 2,400,675 2,230,103 326,024 275,804 591,865 502,853 25,043 18,155 529,061 453,156 2,400,675 2,230,103 300,032 250,458 580,403 493,723 25,043 18,155 528,243 452,584 170,227 31,113 71,653 4,535 70,009 345 18,461 15,027 2,353 5,650 1979 1980 1981 1982 1983 .... .... . ... .... .... 10 10 10 42 48 86,143 143,086 987,848 1,980,616 2,658,594 76,184 129,204 952,073 1,703,763 2,507,516 "5 9 641 792 "4 1 1 3 4,438 2,795 1,031 2,796 4,208 2,582 1,031 2,768 3 1 5 2 1,835 4,765 6,201 19,172 1,738 4,765 4,699 18,886 911 3,893 245 1,010 12 7 3 1 4 13,741 10,958 735 8,097 12,171 7,013 735 7,087 8 111 57 693 34,601 153 272 193 1,688 64,525 4 4 5 1 3 7,596 29,329 53,790 16,255 16,782 7,514 28,993 53,552 13,874 16,771 "6 4 45 693 11 170,227 31,672 72,125 4,535 70,096 345 18,548 16,887 2,353 5,809 3 25,992 11,462 25,346 9,130 559 472 "8 7 1,860 "l 818 572 "8 7 159 4 10 13 6 6 9,959 13,882 35,775 276,853 151,078 8,100 8,299 14,711 45,454 1,121 4,202 10,883 93,325 132,744 738 1,381 10,181 138,074 18,334 7 7 8 35 39 "2 8 97 1,502 286 9,691 67,617 8,835 90,178 29,491 23,417 321,356 49,362 617,130 232,238 551,996 1,196,382 374,368 1,699,353 584,873 230 213 "2 8 " l 3 3 2 7 9 792 97 1,502 286 659 198 911 3,747 "2 6 234 82 272 193 1,688 5 3' 1 "3 ' 12 59,517 8,097 8,570 25,289 81,879 22,036 38,479 606,949 306,645 186,784 458,671 1,058,308 566,539 374,368 1,566,609 'Includes 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, includes estimated additional disbursements in active cases. Excludes excess collections turned over to banks as additional purchase price at termination of liquidation. 4No case in 1962 required disbursements. 5"Deposit Assumption Cases" include: a) Banks merged with financial assistance from FDIC to prevent probable failure. b) $822.5 million of recorded liabilities at book value payable over future years. c) $435.0 million of recorded liabilities at present value expected to be payable over future years. a) $347.6 million of disbursements for advances to protect assets and liquidation expenses which had been excluded in prior years. 56 146 245 1,010 "3 "3 "5 9 641 INCOME AND EXPENSES, FEDERAL DEPOSIT INSURANCE CORPORATION, BY YEAR, FROM BEGINNING OF OPERATIONS. SEPTEMBER 11, 1933 TO DECEMBER 31, 1983 (In millions) Table 127. Income Expenses and losses Total Assessment Income Assessment Credits Investment and other sources' Total Deposit insurance losses and expenses T o ta l..................... $ 19,894.3 $ 15,504.1 $ 6,709.1 $ 11,099.3 $ 4,465.2 $ 2,733.2 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 ............ 2,628.1 2,524.6 2,074.7 1,310.4 1,090.4 952.1 837.8 764.9 689.3 668.1 561.0 467.0 415.3 382.7 335.8 295.0 263.0 241.0 214.6 197.1 181.9 161.1 147.3 144.6 136.5 126.8 117.3 111.9 105.7 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 7.0 164.0 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 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 Year 1,214.9 1,108.9 1,039.0 951.9 881.0 810.1 731.3 676.1 641.3 587.4 529.4 468.8 417.2 369.3 364.2 334.5 303.1 284.3 260.5 238.2 220.6 203.4 188.9 180.4 178.2 166.8 159.3 155.5 151.5 144.2 138.7 131.0 124.3 122.9 122.7 119.3 114.4 107.0 93.7 80.9 70.0 56.5 51.4 46.2 40.7 38.3 38.8 35.6 11.5 (4) 969.9 999.8 848.1 83.6 93.7 148.94 113.6 212.3“ 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 Interest on capital stock2 Administrative and operating expenses Net income added to deposit insurance fund3 $ 8 0 .6 $1,651.4 $ 15,429.1 834.2 869.9 720.9 (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 0.1 0.3 0.3 0.1 0.1 0.8 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 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 5.6 135.7 129.9 127.2 118.2 106.8 103.3 89.3 180.4s 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 4.25 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 'Includes $183.7 million of interest and allowable return received on funds advanced to receivership and deposit assumption cases and S287 million of 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 million was retired by payments to the U.S. Treasury in 1947 and 1948. Assessments collected from members of the temporary insurance funds which became insured under the permanent plan were credited to their accounts at the termination of the temporary funds and were applied toward payment of subsequent assessments becoming due under the permanent insurance funding, resulting in no income to the Corporation from assessments during the existence of the temporary insurance funds. “Includes net loss on sales of U.S. Government securities of $105.6 million in 1976 and $3.6 million in 1978. 5Net after deducting the portion of expenses and losses charged to banks withdrawing from the temporary insurance funds on June 30,1934. 57 Table 129. INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 1934-1983 (In millions) Year (December 31) Deposits in insured banks' Ratio of deposit insurance fund to— Insurance Coverage Total Insured Percentage of insured deposits Deposit insurance fund Total deposits Insured deposits 19837 ........................... $100,000 1,690,332 1,268,332 75.0 $15,429.1 .91 1.22 1982 1981 1980 1979 1978 1977 1976 1975 ......................... ......................... ......................... ......................... ......................... ......................... ......................... ......................... $100,000 100,000 100,000 40,000 40,000* 40,0005 40,000 40,000 1,544,697 1,409,322 1,324,463 1,226,943 1,145,835 1,050,435 941,923 875,985 1,134,221 988,898 948,717 808,555 760,706 692,533 628,263 569,101 73.4 70.2 71.6 65.9 66.4 65.9 66.7 65.0 13,770.9 12,246.1 11,019.5 9,792.7 8,796.0 7,992.8 7,268.8 6,716.0 .89 .87 .83 .80 .77 .76 .77 .77 1.21 1.24 1.16 1.21 1.16 1.15 1.16 1.18 1974 1973 1972 1971 1970 ......................... ......................... ......................... ......................... 40,000 20,000 20,000 20,000 20,000 833,277 766,509 697,480 610,685 545,198 520,309 465,600 419,756 374,568 349,581 62.5 60.7 60.2 61.3 64.1 6,124.2 5,615.3 5,158.7 4,739.9 4,379.6 .73 .73 .74 .78 .80 1.18 1.21 1.23 1.27 1.25 1969 1968 1967 1966 1965 ......................... ......................... ......................... ......................... ......................... 20,000 15,000 15,000 15,000 10,000 495,858 491,513 448,709 401,096 377,400 313,085 296,701 261,149 234,150 209,690 63.1 60.2 58.2 58.4 55.6 4,051.1 3,749.2 3,485.5 3,252.0 3,036.3 .82 .76 .78 .81 .80 1.29 1.26 1.33 1.39 1.45 1964 1963 1962 1961 1960 ......................... ......................... ......................... ......................... ......................... 10,000 10,000 10,000 10,000 10,000 348,981 313,3042 297,5483 281,304 260,495 191,787 177,381 170,210 160,309 149,684 55.0 56.6 57.2 57.0 57.5 2,844.7 2,667.9 2,502.0 2,353.8 2,222.2 .82 .85 .84 .84 .85 1.48 1.50 1.47 1.47 1.48 1959 1958 1957 1956 1955 ......................... ......................... ......................... ......................... ......................... 10,000 10,000 10,000 10,000 10,000 247,589 242,445 225,507 219,393 212,226 142,131 137,698 127,055 121,008 116,380 57.4 56.8 56.3 55.2 54.8 2,089.8 1,965.4 1,850.5 1,742.1 1,639.6 .84 .81 .82 .79 .77 1.47 1.43 1.46 1.44 1.41 1954 1953 1952 1951 1950 ......................... ......................... ......................... ......................... ......................... 10,000 10,000 10,000 10,000 10,000 203,195 193,466 188,142 178,540 167,818 110,973 105,610 101,841 96,713 91,359 54.6 54.6 54.1 54.2 54.4 1,542.7 1,450.7 1,363.5 1,282.2 1,243.9 .76 .75 .72 .72 .74 1.39 1.37 1.34 1.33 1.36 1949 1948 1947 1946 1945 ......................... ......................... ......................... ......................... ......................... 5,000 5,000 5,000 5,000 5,000 156,786 153,454 154,096 148,458 157,174 76,589 75,320 76,254 73,759 67,021 48.8 49.1 49.5 49.7 42.4 1,203.9 1,065.9 1,006.1 1,058.5 929.2 .77 .69 .65 .71 .59 1.57 1.42 1.32 1.44 1.39 1944 1943 1942 1941 1940 ......................... ......................... ......................... ......................... ......................... 5,000 5,000 5,000 5,000 5,000 134,662 111,650 89,869 71,209 65,288 56,398 48,440 32,837 28,249 26,638 41.9 43.4 36.5 39.7 40.8 804.3 703.1 616.9 553.5 496.0 .60 .63 .69 .78 .76 1.43 1.45 1.88 1.96 1.86 1939 1938 1937 1936 1935 1934 ......................... ......................... ......................... ......................... ......................... ......................... 5,000 5,000 5,000 5,000 5,000 5,0004 57,485 50,791 48,228 50,281 45,125 40,060 24,650 23,121 22,557 22,330 20,158 18,075 42.9 45.5 46.8 44.4 44.7 45.1 452.7 420.5 383.1 343.4 306.0 291.7 .79 .83 .79 .68 .68 .73 1.84 1.82 1.70 1.54 1.52 1.61 'Deposits in foreign brandies are omitted from totals because they are not insured. Insured deposits are estimated by applying to the deposits in the various types of accounts at the regular Call dates, the percentages insured as determined from the Summary of Deposits survey submitted by insured banks. D ecem ber 20, 1963. 3December 28,1962, ^Initial coverage was $2,500 from January 1 to June 30,1934. 55100.000 for time and savings deposits of in-state governmental units provided in 1974. 65100.000 for Individual Retiremenf accounts and Keogh accounts provided in 1978. 'Deposits are bas'ed on preliminary data. 58 INDEX Deposit Insurance Applications Public participation allowed in application process for establishing and/or relocating branches 33 Assessments Assessment credit, 1982 Assessment credit, 1983 Assessment credit as percentage of deposits Effective assessment rate, 1982 Effective assessment rate, 1983 Gross income from assessments 15 15 15 15 15 15 Atkinson Trust and Savings Bank, Atkinson, Illinois Deposits transferred to Bank of Atkinson, NA, First premium paid in deposit transfer 12 12 12 Bank of Atkinson N.A., Atkinson, Illinois Assumes deposits of Atkinson Trust and Savings Bank 12 Bank Examinations Breakdown by types Number of examinations Reasons for decrease in examinations Simultaneous examination of Butcher banks 5 5 4 9 10 12 9 9 41 43, 44 43 48 49 32 Branches Rule change on establishing or relocating 6 Brokered Deposits Included in reports of condition Solicitation of comments on proposed rule change 2 35 Butcher Banks Simultaneous examination Size of organization United American Bank, Knoxville, Tennessee 9 9 9 6 6 33 Civil Money Penalties Number in 1983 7 Cooperative Examinations Program with OCC 2 Discount Brokerage Opinion on legality for banks Cooperative examinations Examination schedule Number of States participating 4 8 8 8 Dry Dock Savings Bank, New York, N.Y. FDIC assisted merger into The Dollar Savings Bank of New York Emergency Banking Act 12 44 Enforcement Actions Availability of summary Federal Financial Institutions Examination Council Federal Reserve Actions 7 48 2 41, 42 Federal Reserve Act 48 Federal Reserve Bank Notes 44 Federal Reserve Open Market Committee, Creation of 48 Financial Assistance to Banks 37 Financial Privacy Act of 1978 Exchange of records among supervisory agencies 34 Financial Statements Audit opinion by Comptroller General Complete statements 29 18-28 First National Bank, Midland, Texas Deposit assumption Failure on October 14 10 10 Foreign Activities of Banks Rule change in application process 36 Requirement for special reserves Financial Privacy Act amended First extraordinary acquisition Penalties for management interlock violations Reporting and Disclosure Rules Second extraordinary acquisition Gold 33 32 Gam-St Germain Act 8 Delegation of Authority Allowing Regional Directors to approve but not deny routine merger transactions Allowing certain Division of Bank Supervision officials to execute and issue cease-and desist-orders 12 Foreign Loans Cease-and-Desist Orders Comparison by years 1980-1983 Number issued, 1983 Delegation of authority to issue Depository Institutions Deregulation Committee Policy on providing aid to prevent closing of a bank other than a mutual savings bank Board Members, Term of Office Law permitting sitting members of the Board of Directors to remain in office until successor is confirmed by the Senate Used in two bank failures Federal Deposit Insurance Corporation, Creation of Bank Failures First National Bank, Midland, Texas Mutual Savings Banks, cost of failures to FDIC Number of failures in 1983 United American Bank, Knoxville, Tennessee From 1921 through 1930 Bank Moratoria and Holidays Banking Crisis of 1933 Banking Act of 1933 Banking Act of 1935 Deposit Transfer Divided Examinations Auburn Savings Bank, Auburn, New York Absorbed by Syracuse Savings Bank in FDIC-assisted merger Applications processed (statistics) 5 Applications received 5 Inclusion of accrued or anticipated earnings as part of insured deposit 35 Legislation 43,45, 46, 48, 49 Rules on termination of insurance 6, 7 Insurance study submitted to Congress x Terminations of insurance 7 Variable premiums proposed xi 34 9 37 2 12 42, 43 Glass, Carter 46 Glass-Steagall Act 43 33 59 Penn Square Bank, NA., Oklahoma City Income and Expenses Gross Gross Gross Gross revenues — income from assessments revenues — income from investments expenses — administrative expenses expenses — in closed banks, mergers 15 15 15 15 Insider Loans Changes in rules on extension of credit Credit limits Rules governing reporting 36 3, 36 33 Insurance Sales by Banks Involvement of insured banks Request for comment on bank involvement 3 36 Integrated Monitoring System 15 15 15 x, 15 48 4 Interest Extraterritorial deposits Interest earnings as part of deposit for insurance Rate controls 35 35 2 32 Liquidation Activities Assets held Consolidation of field offices Number of liquidations Personnel assigned 13 13 13 13 Management Interlocks FDIC authority to compromise or modify civil money penalties for violations Resumption of interlocks after termination 34 37 Mergers Delegated authority Procedures simplified 8 7 Money Market Deposit Accounts Considered as savings deposits National Credit Corporation 12 47 12 12 12 12 42 Net Worth Certificates Amount outstanding at year end Number of institutions holding Public Law providing for issuance 12 12 32 NOW Accounts Permitted for some public units 47 60 Number at end of 1983 5 Real Estate Brokerage Involvement of insured banks Request for comment on proposed rule 3 36 42 Reconstruction Finance Corporation Regional Offices Madison, Wisconsin, office closed x, 8 Removal of Officer, Director 7 Retail Repurchase Agreements Time limits removed 35 Seaway National Bank, Chicago, Illinois Assumes deposits of Union National Bank, Chicago 12 Securities Departments Number supervised Technical details on filing of statements and other rule changes 5 35 52 53 54, 55 56 57 58 Statistical Tables Table Table Table Table Table 122 123 125 127 129 44, 45, 46 Syracuse Savings Bank, Syracuse, New York Task Group on Regulation of Financial Services 12 12 12 3 Termination of Insured Status Rules governing procedures 34 Travel Agencies Bank operation of 36 Trust Departments Applications for fiduciary powers Dollar volume Number supervised 5 5 5 Union National Bank of Chicago, Illinois Deposits transferred to Seaway National 12 United American Bank, Knoxville, Tennessee Assumption by First Tennessee Failure on February 15 Vandenberg, Arthur Oregon Mutual Savings Bank Converted to stock form of ownership Acquired by Moore Financial Group, Inc. 6 Acquirer of Auburn Savings Bank, Auburn, New York 12 Mutual Savings Banks Auburn Savings Bank Conversion to stock form of ownership Cost of failures to FDIC Dry Dock Savings Bank Failures in 1983 Oregon Mutual Savings Bank 16 16 16 16 16 Problem Banks Steagall, Henry B. 47 Moore Financial Group, Inc. Acquirer of Oregon Mutual Savings Bank Areas of assignment Breakdown by assignment, 1982-1983 Cooperative work-study program Total employees Turnover rate Reasons, procedures International Lending Provision for public disclosure on foreign borrowing and lending of an individual bank Personnel Phantom Mergers Insurance Fund Gross revenues for 1983 Investment portfolio Losses in closed banks and mergers Size of fund Temporary fund Agreement terminating Deposit Insurance National Bank 14 Collections on principal and interest 14 Depositor recovery prospects 14 Disposition of funds 14 Payments to depositors 14 9 9 46 Voluntary Merger Plan Used in New York 12