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Federal Deposit Insurance Corporation

1988 A nnual Report

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The FDIG handled one of the most demanding
assignments in the agency’s history on Friday, July 29,
1988, when the 40 Texas bank subsidiaries of First
RepublicBank Corporation were closed, consolidated into
a bridge bank and sold to NCNB Corporation, Charlotte,
North Carolina. All 40 offices opened as usual on the next
business day, August 1, ensuring customers continuous
uninterrupted service and access to their funds.
Em ployees from the Dallas Regional O ffice,
Washington headquarters and other locations across the
country met this logistical challenge with skill, flexibili
ty and professionalism. Photographs of many of them
appear throughout the pages of this report, which is
dedicated to all who worked on the First RepublicBank
project as representative of the countless employees who
enabled the FDIC to meet the year’s challenges.

FDIC Board of Directors

FDIC BOARD OF DIRECTORS: (From left) Comptroller of the Currency Robert L. Clarke,
Digitized Chairman
for FRASERL. William Seidman, and Director C.C. Hope, Jr.

Federal Deposit Insurance Corporation
Washington, D.C.
August 29, 1989

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 1988.

V ery truly yours,

L. W illiam Seidman
Chairman

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

L. William Scidman

C. C. H ope , Jr.

Robert L. Clarke

L. William Seidman was elected
Chairman of the Federal Deposit
Insurance Corporation on October
21, 1985. Prior to his appointment
to the FDIC, Mr. Seidman pursued
an extensive career in the financial
arena in both the private and
public sectors. He was Dean of the
College of Business of Arizona
State University and a director of
several organizations including the
Phelps Dodge Corporation,
Prudential-Bache Funds, United
Bancorp of Arizona and The
Conference Board. He has served
as Co-chair of the White House
Conference on Productivity, ViceChairman of the Phelps Dodge
Corporation, Assistant to President
Gerald Ford for Economic Affairs
and Managing Partner of Seidman
& Seidman, Certified Public
Accountants, New York. He also
was Chairman and a Director of
the Federal Reserve Bank of
Chicago, Detroit Branch. Mr. Seid
man received an A.B. degree from
Dartmouth College and earned an
LL.B. from Harvard Law School. He
also holds an M.B.A. from the
University of Michigan. He is a
member of the American Bar
Association, the American Institute
of Certified Public Accountants and
several academic honorary frater
nities including Phi Beta Kappa. He
is the author of two books and
numerous articles on business and
tax subjects.

C.C. Hope, Jr., was named to the
Board of Directors of the Federal
Deposit Insurance Corporation on
March 10, 1986, confirmed by the
Senate on March 27 and commis
sioned by President Ronald Reagan
on April 7, 1986. Before his
appointment to the FDIC, Mr. Hope
spent 38 years at First Union
National Bank of North Carolina in
Charlotte, where he retired as Vice
Chairman in 1985. Mr. Hope is a
former President of the American
Bankers Association and has served
as Secretary of the North Carolina
Department of Commerce. In the
field of education, Mr. Hope is a
trustee and former Chairman of the
Board of Wake Forest University
and has been Dean of the
Southwestern Graduate School of
Banking at Southern Methodist
University. He holds a B.A. in
Business Administration from Wake
Forest University and has
completed graduate work at the
Harvard Business School and The
Stonier Graduate School of Bank
ing at Rutgers University.

Robert L. Clarke became the 26th
Comptroller of the Currency on
December 2, 1985, and
simultaneously became a member
of the FDIC’s Board of Directors.
Before his appointment, Mr. Clarke
founded and headed the banking
section at the Houston, Texas, law
firm of Bracewell & Patterson. He
joined that firm after completing
his military service in 1968. The
banking section prepared corporate
applications and securities registra
tions, counseled management in
expansion opportunities and the
effects of deregulatory initiatives
and represented institutions in
enforcement matters. Mr. Clarke
holds a B.A. in Economics from
Rice University and an LL.B. from
Harvard Law School. He is a
member of the bars of Texas and
New Mexico. He has served as a
director for two state banks and
has been active in a number of
civic, political and professional
organizations.

FDIC Organization Chart

FDIG Committee on Management

FD IC C O M M ITTE E O N M A N A G EM EN T: (From left, front row) Robert D. Hoffman, Mae Gulp,
L. William Seidman, Hoyle L. Robinson, and Janice M. Smith. (From left, middle row) Steven A.
Seelig, David C. Cooke, J. Russell Cherry, Robert V. Shumway, Robert A. Dorbad, and Stanley J.
Poling. (From left, back row) Beth L. Climo, Thomas E. Zemke, Paul G. Fritts, John L. Douglas, and
Alan J. Whitney.

FD IC Officials

Deputy to the Chairman

. David C. Cooke

Special Assistant to the Deputy to the Chairman.

. Louis E. Wright

Special Assistant to the Chairman ______________

Michael J. Lyon

Director, Division of Bank Supervision

__ Paul G. Fritts

Acting Director, Division of Liquidation

. Steven A. Seelig

General Counsel________________________

. John L. Douglas

Director, Division of Accounting and Corporate Services .
Deputy to the Appointive Director ______________________
Special Assistant to the Appointive Director _________

Stanley J. Poling
Robert V. Shumway
_____ Dean F. Cobos

Deputy to the Director (Comptroller of the Currency)

. Thomas E. Zemke

Executive Secretary __________________________________

Hoyle L. Robinson

Director, Office of Corporate Communications

__ Alan J. Whitney

Director, Office of Legislative A ffa irs__________

____ Beth L. Climo

Director, Office of Research and Statistics

William R. Watson

Director, Office of Budget and Corporate Planning ____________

_ J. Russell Cherry

Director, Office of Corporate Audits and Internal Investigations.

Robert D. Hoffman

Director, Office of Consumer Affairs ___________________________
Director, Office of Personnel M an agem en t
Director, Office of Equal Employment Opportunity

__ Janice M. Smith
Robert A. Dorbad
________ Mae Culp

Regional Directors — Division of Bank Supervision

A. David Meadows

Paul H. Wiechman

George J- Masa

Kenneth L. Walker

A T L A N T A (404)525-0308
245 Peachtree Ctr. Ave., N.E., 1200
Atlanta, GA 30303
AL, FL, GA, NC, SC, VA, VW

B O ST O N (617)449-9080
160 Gould St
Needham, MA 02194
CT, ME, MA, NH, RI, VT

C H IC A G O (312)207-0210
30 S. Waeker Dr., Suite 3100
Chicago, IL 60606
IL, IN, MI, OH, WI

D A L L A S (214)220-3342
1910 Pacific Ave., Suite 1900
Dallas, TX 75201
CO, NM, OK, TX

Charles E. Thacker

Bill C. Houston

Nicholas J. Ketclui

Anthony S. Scatei

K A N S A S C IT Y (816)234-8000
2345 Grand Ave., Suite 1500
Kansas City, MO 64108
IA, KS, MN, MO, NE, ND, SD

M E M PH IS (901)6851603
5100 Poplar Ave., Suite 1900
Memphis, TN 38137
AR, KY, LA, MS, TN

N E W Y O R K (212)704-1200
452 Fifth Ave., 21st Floor
New York, NY 10018
DE, DC, MD, N.l, NY, PA, PR, VI

S A N FR A N C IS C O (415)546-0160
25 Ecker St., Suite 2300
San Francisco, CA 94105
AK, AZ, CA, GU, HI, ID, MT, NV, OR,

Regional Directors — Division of Liquidation

W illiam M. Dudley

Thomas A . Beshara

G. Michael Newtcm

A T L A N T A (404)522-1145
245 Peachtree Gtr. Ave, N.E., 1400
Atlanta, GA 30303
AL, FL, GA, LA, MS, SC

C H IC A G O (312)207-0200
30 South Wacker Dr., Suite 3200
Chicago, IL 60606
IL, IA, MN, NI), SD, WI

D A L L A S (214)754-0098
1910 Pacific Ave., Suite 1600
Dallas, TX 75201
AR, OK, TX

Carmen J. Sullivan

Michael J. M artinelli

Lam ar C. Kelly, Jr.

K A N S A S CIT Y (816)531-2212
4900 Main St., 5th Floor
Kansas City, MO 64112
CO, KS, MO, NE, WY

N E W Y O R K (212)704-1200
452 Fifth Ave., 21st Floor
New York, NY 10018
CT, DE, DC, IN, KY, ME, MD,
MA, MI, NH, NJ, NY, NC, OH,
PA, PR, RI, TN, VT, VA, VI, WV

S A N FR AN C ISC O (415)546-1810
25 Ecker St, Suite 1900
San Francisco, CA 94105
AK, AZ, CA, GU, HI, ID, MT, NV, NM,
OR, UT, WA

Table of Contents
Transmittal Letter

iii

FDIC Board of Directors_________________________________________________________

FDIC Organization Chart _______________________________________________________

FDIC Committee on Management_______________________________________________

vii

FDIC Officials___________________________________________________________________ viii
FDIC Regional Directors and O ffices____________________________________________

Chairman’s Statement___________________________________________________________

xii

FDIC Highlights 1988 ___________________________________________________________

Operations of the Corporation__________________________________________________
Division of Bank Supervision__________________________________________________
Division of Liquidation _______________________________________________________
Legal Division_________________________________________________________________
Division of Accounting and Corporate Services _______________________________
Corporate Support Offices ____________________________________________________

1
2
16
20
25
29

Legislation and Regulations______________________________________________________

Financial Statements____________________________________________________________

Opinion of the Comptroller General of the United States _______________________ 55
Statistics ________________________________________________________________________

In d e x ___________________________________________________________________________

Tables
FDIC Highlights 1988____________________________________________________________

Division of Bank Supervision
FDIC Examinations, 1986—1988 _____________________________________________
FDIC Problem Banks, 1984—1988 ____________________________________________
Assisted Banks by State, 1984—1988 _________________________________________
Ten Largest FDIC Assistance Transactions ____________________________________
Failed Banks by State, 1986—1988____________________________________________
FDIC Applications, 19 8 6 -1 9 8 8 _______________________________________________
External Auditing Programs of Banks, 1987____________________________________

4
5
7
8
10
11
12

Division of Liquidation
DOL Statistical Highlights, 1983—1988 _______________________________________ 16
Failed and Assisted Banks, 1988 ______________________________________________ 18
Legal Division
Compliance and Enforcement Actions, 1986—1988___________________________ 20
Cease and Desist Orders, 1986—1988 _________________________________________ 21
Office of Personnel Management
Number of Officials and Employees of the FDIC, 1987—1988 ________________

Statistics
Table 122—Number and Deposits of Banks Closed Because of
Financial Difficulties, 1934—1988 __________________________________________ 61
Table 123—Insured Banks Requiring Disbursements by the FDIC During 1988 62
Table 125—Recoveries and Losses by the FDIC on Disbursements
for Protection of Depositors, 1934—1988____________________________________ 72
Table 127—Income and Expenses, FDIC, By Year, From Beginning
of Operations, September 11, 1933, to December 1988_____________________ 73
Table 129—Insured Deposits and the Deposit Insurance Fund, 1934—1988 ___ 74

Chairman’s Statement

The year 1988 produced
the FDIG’s first operating
loss in its 55-year history. A
record 200 banks failed and
21 assistance transactions
were completed, including
two of the most costly
banking problems ever
handled by the FDIC. The
loss also represented the
commitment of funds to
handle certain large trans
actions scheduled for
completion in 1989. Taken
together, the FDIC handled
more problem bank assets
in 1988 than it did in its
entire previous 55 years
combined.
Despite these challenges,
the Corporation came
through 1988 in relatively
good shape. The insurance
fund declined 23 percent
from $18.3 billion, but still
ended 1988 with a strong
$14.1 billion net worth.
Cash and investments at
year-end 1988 were essen
tially unchanged from
1987, totaling $16.2 billion.
Notwithstanding the
record level of failures and
assistance transactions, the
FDIC’s portfolio of assets
acquired from failed and
assisted institutions decreas
ed sharply in 1988, ending
the year with 106,000
assets with a book value of
$9.3 billion, compared with
178,000 assets with a book
value of $11.3 billion at
year-end 1987. This reduc
tion was achieved through
the adoption of improved
marketing strategies and
new approaches to selling
failed banks.

xiii

Fewer assets means more FDIG
cash for dealing with bank
problems, and less federal intrusion
into the marketplace. Thus, our
policy is that every asset we own is
for sale at a fair price.
Our success in reducing the size
of the existing asset portfolio was
facilitated by keeping more failed
bank assets in the private sector. A
major factor in this achievement is
the increased use of the “whole
bank” purchase and assumption
transaction. O f 164 purchase and
assumption transactions completed
in 1988, 69, or 42 percent, were
whole bank transactions. We began
using the whole bank transaction —
so-called because an acquirer
agrees to take essentially all of the
assets of a failed bank, including its
bad loans — in 1987, when 19, or
13.5 percent, of the 133 purchase
and assumption transactions were
handled on a whole bank basis.
Strong marketing and asset
management resulted in significant
asset sales at or near current
appraised values. Getting these
assets back into the private sector
at reasonable prices is the first step
in helping troubled economies
recover.
Even though we handled record
failures and assistance transactions,
improvements in personnel
management, deployment and
productivity enabled us to achieve
an almost 11 percent net reduction
in the FDIC staff in 1988. We
ended the year with 8,060
employees, down from 9,098 a
year earlier.
After reaching a historical high of
1,624 in mid-1987, the number of
FDIC-insured problem banks declin
ed by year-end 1988 to 1,406. This
trend, which is continuing, is due
to increased supervisory attention
and to improvements in the
economy of the Midwest.
Through more efficient and
prudent use of staff resources, the

FDIC’s Division of Bank Supervi
sion significantly increased the
number of examinations conducted
in 1988, and reduced the time
between examinations. Total safety
and soundness examinations
increased 10 percent to 4,019
during 1988, and the number of
commercial banks subject to FDIC
supervision that had not been
examined within three years declin
ed. The Division also continued its
enhanced recruiting and hiring
efforts, attracting 284 new
examiners to this challenging
profession in 1988. An ambitious
hiring program for 1989 is current
ly under way. W e have also made
strides in improving coordination
with state banking authorities,
further improving the overall bank
supervisory process.
Although the economy in the
Southwest has been showing signs
of improvement, most failed banks
again were located in Texas,
Oklahoma and Louisiana in 1988.
With 113 failures, including 40
subsidiaries of Dallas-based First
RepublicBank Corporation, Texas
alone accounted for more than half
of the 200 banks that failed.
The two most costly transactions
handled by the FDIC in 1988
involved First City Bancorporation
of Houston, Texas, and First
RepublicBank Corporation. For
First City, the FDIC Board on April
20 approved a rehabilitation plan
involving the sale of First City’s 59
banking subsidiaries to a private
investor group led by A. Robert
Abboud. In the case of First
RepublicBank, the FDIC initially
provided financial assistance to the
holding company’s two largest
banks. All of the banking
subsidiaries eventually failed and
were consolidated into a bridge
bank. The FDIC Board of Directors
on July 29 approved a financial
assistance package to facilitate the
bridge bank’s acquisition by NCNB

Corporation of Charlotte, North
Carolina. Responding to the
simultaneous closing and reopening
of First Republic’s 40 Texas banks
over a single weekend was a
logistical challenge for the FDIC.
Staff responded admirably and all
depositors were assured their funds
were safe and available.
Along with these two sizable
transactions, the FDIC in 1988 set
up reserves for handling three
problem banking organizations —
MCorp of Dallas, Texas American
Bancshares Inc., Fort Worth, and
National Bancshares Corporation of
Texas, San Antonio. (On March 29,
1989, the FDIC transferred the
deposits of 20 insolvent commer
cial bank subsidiaries of MCorp to
a newly chartered bridge bank.)
Although bank failures drew a lot
of attention in 1988, many other
important events occurred at the
FDIC: W e sold Capital Bank &
Trust Company, Baton Rouge, Loui
siana, which in 1987 became the
first bridge bank established under
authority granted to us that year
by Congress; we assisted the Farm
Credit Administration in the
liquidation of a huge land bank in
Jackson, Mississippi (the Farm
Credit System’s first such failure in
its history); we sold a sizable
portion of our stock in Continental
Illinois National Bank and Trust
Company, Chicago, for $277.2
million, reducing our ownership
interest to below 50 percent for the
first time; and we paid off the
preferred shareholders of Franklin
National Bank, which failed in
1974, essentially marking the
conclusion of that notable
receivership.
One of the most important
projects completed in 1988 was
our year long study, Deposit
Insurance For the Nineties —
Meeting the Challenge. W e under
took this comprehensive study
because we realized that the

xiv

deposit insurance system needs
fundamental change if it is to
continue to serve the purposes for
which Congress created it over 55
years ago. Among the principal
conclusions of the FDIC’s study: a
deposit insurance agency should be
an independent, self-funded
organization, operated as much as
possible like a private sector
institution; the insurer should be
able to terminate deposit insurance
promptly; and the insurer should
be able to adjust insurance
premiums, within limits, to reflect
loss experience. Most of the FDIC’s
conclusions and recommendations
would be incorporated into
legislative proposals submitted to
Congress in 1989 by President
Bush.
In 1988, we introduced a new
publication, FDIC Banking Review,
which contains articles by our
research staff and others on topics
of current interest to the banking,
academic and financial
communities. In response to ques
tions about deposit insurance, in
1988 we produced a videotape
program, FDIC Insurance — Protec
ting Your Deposits, containing basic

information about deposit
insurance, which can be used by
banks and consumer and communi
ty groups and in training FDIC
employees.
Within the FDIC there were also
milestones in 1988. James A.
Davis, Director of the Division of
Liquidation, retired after an
outstanding 30-year career. His
talents will be missed. W e prepared
to break ground for the FDIC’s new
Operations and Training Center in
Arlington, Virginia. And we began
the nationwide installation in all
FDIC offices of a telecommunica
tions network that will improve
interoffice communication and help
reduce our operating costs.
As is always the case, in 1988
our dedicated and skilled people
made the difference. Here are two
among many examples of the
versatility and professionalism of
our staff: To complete the multi
year project of integrating the
FDIC’s entire inventory of failed
bank assets into the computerized
Liquidation Asset Management
Information System, on one Satur
day in December you would have
seen staff from our Knoxville,

Houston, Costa Mesa and San Fran
cisco offices helping our people at
headquarters with the task of
integrating over 19,000 assets from
the Houston Consolidated Office.
When the 40 Texas bank
subsidiaries of First RepublicBank
Corporation were closed in a single
evening, along with examiners we
had hundreds of members of our
liquidation, legal and accounting
staffs spread across Texas. Helping
the legal staff from Texas were
lawyers and paralegals from Kansas
City, Chicago, Atlanta, New York
and San Francisco.
That’s how we made it through a
tough 1988 in good shape — with
people who can and do rise to
meet any challenge wherever and
whatever it may be. As we face the
two biggest issues ahead — deposit
insurance reform and resolution of
the thrift crisis — we shall continue
to rely on their skills, flexibility and
devotion to their job. My
congratulations and thanks to all
for a superb job.

FD IC Highlights 1988

Chronological Highlights

Feb. 11

— FDIC begins distributing Pocket Guide for Directors to chief executive officers of all insured banks

March 15 — FDIC issues proposed risk-based capital guidelines for public comment (see p. 11)
March 17 — FDIC Board of Directors approves assistance to subsidiary banks of First RepublicBank Corporation,
Dallas, Texas (see pp. 9-10, 23-24)
April 6

— FDIC concludes negotiations on sale of Capital Bank & Trust Company, Baton Rouge, Louisiana, to
Grenada Sunburst Systems Corporation, Grenada, Mississippi (see p. xiii)

April 20

— FDIC Board of Directors grants final approval to assistance plan for subsidiary banks of First City Bancorporation of Houston, Texas (see pp. 7-8)

May 19

— FDIC amends its rules and regulations covering minimum security devices and procedures, and Bank
Secrecy Act compliance, to clarify their applicability to insured branches of foreign banks (see p. 39)

May 20

— FDIC helps Farm Credit Administration close Federal Land Bank of Jackson, Mississippi (see p. 19)

June 6

— FDIC retires remaining preferred stock of Franklin National Bank, New York City, substantially
completing largest liquidation in agency’s 55-year history

July 20

— FDIC Board of Directors preliminarily agrees to assist Texas American Bancshares Inc., Fort Worth, Texas,
and National Bancshares Corporation of Texas, San Antonio, Texas

July 29

— New record is established for highest number of banks to fail in one day when the 40 Texas bank
subsidiaries of First RepublicBank Corporation are closed and sold to NCNB Corporation, Charlotte, North
Carolina (see pp. 10, 18, 23)

Aug. 2

— FDIC organizes Delaware Bridge Bank, National Association, to assume deposits and liabilities of First
RepublicBank of Delaware, Newark, Delaware (see p. 10)

Aug. 16

— FDIC amends its Fair Housing regulations to eliminate home equity, home repair and other related types
of loans from existing data gathering requirements (see p. 39)

Sept. 1

— FDIC adopts Regulation CG, implementing the Expedited Funds Availability Act of 1988

Sept. 9

— FDIC sells Delaware Bridge Bank, N.A., to Citibank (Delaware), New Castle, Delaware (see p. 10)

Oct. 12

— FDIC proposes a rule providing deposit insurance in the amount of $100,000 to each beneficial owner of
a unit investment trust (see p. 40)

Nov. 7

— FDIC introduces FDIC Banking Review (see p. 31)

Nov. 10

— The Technical and Miscellaneous Revenue Act of 1988 becomes law (see p. 38)

Nov. 16

— FDIC issues Policy Statement urging banks to obtain annual independent external audit (see p. 11)

Nov. 18

— 1987 record of 184 failed banks is surpassed when First National Bank, Covington, Louisiana, becomes
185th bank to fail in 1988

Nov. 25

— FDIC issues for public comment a proposed regulation expanding definition of term “deposit” (see p. 40)

Nov. 30

— Chairman L. William Seidman announces completion of FDIC study, Deposit Insurance for the Nineties —
Meeting the Challenge (see p. 31)
— FDIC completes automation of all assets acquired from failed banks when Houston Consolidated Office’s
assets are integrated into Liquidation Asset Management Information System (LAMIS) (see pp. 17-18)

Dec. 3
Dec. 8

— FDIC sells 55.2 million shares of common stock of Continental Illinois Corporation, reducing its interest
to less than 50 percent for the first time

Dec. 14

— FDIC begins filling orders for FDIC Insurance — Protecting Your Deposits, a videotape about deposit
insurance coverage (see p. 33)

Dec. 20

— FDIC issues final rule changing the deadline for insured U.S. branches of foreign banks to comply with
limitations on country exposures from December 31, 1988, to 30 days’ prior notice (see p. 39)

Statistical Highlights

Comparative Financial Information
(dollar figures in billions)
(year-end)

1988
Income
Operations Expense
Liquidation/Insurance Losses
and Expenses
Net Income
Insurance Fund
Fund as % of Insured Deposits

$ 3.347
.224
7.364
(4.241)
14.061
.80%
9.3

Assets Held for Liquidation

1987

1986

3.320

$ 3.260

.205

.180

3.066

2.784

.049

.296

18.302

18.253

1.10%

1.12%

11.0

10.9

Selcctcd Year-end Bank Statistics

Total Insured Banks
Problem Banks
Bank Failures
Failed Agricultural Banks
Assisted Banking Organizations
Number of Failed Bank
Receiverships

1988

1987

1986

13,606
1,406
200
28
21

14,289

14,837

1,575

1,484

184

138

848

684

507

Division of Bank Supervision

The 1988 performance of the
Division of Bank Supervision
(DBS), along with the rest of the
FDIC, was significantly affected by
the new record of 221 bank
failures and assistance transactions,
including two of the largest cases
in FDIC history, First City Bancorporation of Houston, Texas, and
First RepublicBank Corporation of
Dallas, Texas. The number of FDICinsured problem banks remained
relatively high at 1,406 as of yearend, although this number had
declined steadily during the year
after peaking at 1,624 during 1987.
The DBS staff met these and other
challenges during 1988 and
continued to progress toward its
main objectives: more prospective
supervision and more frequent
examination of banks. DBS is work
ing toward these goals with a fourpoint program to increase staff,
improve productivity, strengthen
off-site monitoring and allocate
resources more effectively. This
program results in earlier recogni
tion of potential problems and
enhances DBS’s ability to take
quicker and more effective action
to confront these problems.
During 1988 DBS completed a
reorganization of the Washington
office which resulted in the
consolidation of several operating
areas, more functional lines of
authority and a reduction in staff.
The reorganization was a natural
outgrowth of the additional delega
tions of authority to act on certain
applications, enforcement actions
and other activities granted to the
Division Director in 1987; some of
these responsibilities were subse
quently redelegated to the regional
offices.

Under the reorganization, the
Washington office of DBS now
comprises three branches headed
by Associate Directors who report
directly to the Division Director.
The Operations Branch has overall
responsibility for supervising
operating banks, including all
problem banks, enforcement
actions, the review of statutory
applications and mergers, off-site
monitoring and analysis and special
supervisory activities.
The Policy and Administration
Branch is responsible for
establishing policies and procedures
for the Division, directing program
and evaluation activities, and
providing administrative and
automation support. The Branch
also is responsible for the training
sessions conducted at the Corpora
tion’s training facility in Rosslyn,
Virginia.
The Failing Banks and Assistance
Transactions Branch provides
support and direction in the FDIC’s
handling of failing banks and
requests for financial assistance
from operating banks.
Significant changes took place in
the banking industry during 1988
in areas such as highly leveraged
financing, asset securitization,
lender liability, security and
insurance activities, and direct
investment in real estate. The Divi
sion is constantly challenged to
keep pace with these changes from
a supervisory perspective. The staff
of DBS worked closely with the
other regulators and the industry to
develop appropriate supervisory
guidelines and accounting stan
dards in these important areas. The
FDIC is a major source of informa
tion for Congress on these issues,

and throughout the year, DBS was
involved in preparing testimony on
these and other subjects.
DBS was an active contributor to
the FDIC study, Deposit Insurance
for the Nineties — Meeting the
Challenge. The study was prompted
by a recognition that fundamental
changes in the economic, technologi
cal and regulatory environment had
exacerbated some underlying flaws
in the present deposit insurance
system. The study contains recom
mendations for improving the
current deposit insurance system.
DBS’s major role was to analyze the
supervisory system as it presently
exists and recommend appropriate
changes. The FDIC concluded that
strong and effective supervision,
including strict enforcement of
capital standards, appropriate rules
for closing failing banks, and a
streamlined insurance removal
process should be essential
elements of any effective insurance
reform.
Through more efficient and
prudent use of staff resources, DBS
significantly increased the number
of examinations conducted and
reduced the time between examina
tions. In addition, those banks not
examined within three years receiv
ed supervisory oversight through
visitations, offsite review and state
examinations. As of year-end 1988,
197 commercial banks subject to
FDIC supervision had not been
examined by the FDIC within three
years; the year-end totals for 1987
and 1986 were 924 and 1,814,
respectively. This improvement was
accomplished by increasing the
number of safety and soundness
examinations 10 percent to 4,019
during 1988.

DBS continued to have success
recruiting and hiring the best possi
ble trainee examiner candidates.
During 1988 the Division hired 284
new examiners. By year-end 1988,
DBS had 1,983 field examiners, an
increase of 74 over the previous
year-end. The goal for year-end
1989 is 2,222 examiners.
FDIC’s offsite monitoring
activities were strengthened in
1988 by the implementation of the
GAEL Offsite Review Program.
CAEL is an acronym for four
components — capital, asset quali
ty, earnings performance and
liquidity — of the bank rating
system used by U.S. bank
regulatory agencies. Under this
program, a formal review of finan
cial information submitted by
banks is conducted and that infor
mation is then compared to
examination data. The program
establishes supervisory follow-up
procedures to be used by the
FDIG’s regional offices on a
quarterly basis. Benefits of the
program include a timely response
to deterioration in a bank’s condi
tion and more efficient allocation
of examination and analytical
resources.

•■(Left to right)
Wayne Nichols, Field
Examiner; Jason
George, Assistant
Examiner; Les
Winsper, Field
Examiner; Charles
Foster, Field
Examiner

During 1988 work began on the
development of a comparative
performance report for savings
banks. The Savings Bank Perfor
mance Report, scheduled to go into
production during 1989, is similar
to the current Uniform Bank
Performance Report for commer
cial banks, but contains additional
schedules designed to capture infor
mation of particular relevance in
the analysis of savings banks. This
analytical tool will enable
examiners, analysts and the public
to interpret the condition and
operating results of savings institu
tions more easily and will provide a
basis for developing an offsite
monitoring system for savings
banks.
Advances in technology are help
ing the Division to become more
productive and efficient. Examiners
are making full use of automated
reports of examination and
numerous specialty applications
such as earnings models, graphics
and financial tables, in addition to
accessing information in the main
frame computer. The expanded use
of microcomputers and telecom
munications has given examiners
instant access to the latest super

visory data and financial informa
tion. In order to expedite the flow
of information from an examina
tion site through a regional office
to Washington, the Division began
installing modern local area
networks in the Washington office
and the regional offices during
1988. These networks will create a
computer link among all of the
Division’s major offices.

Examinations
The FDIC conducts four main
types of examinations: safety and
soundness: compliance with
consumer protection and civil
rights laws and regulations; perfor
mance of fiduciary responsibilities
in trust departments; and adequacy
of internal controls in electronic
data processing operations.
To maintain a safe and sound
banking system, bank supervision
must evolve as the industry
evolves. Today traditional super
visory methods are giving way to a
more continuous, forward-looking
form of supervision. Instead of
performing onsite examinations
based on a fixed examination cycle
that can result in some banks
receiving too much supervision and

►Patricia Deveny,
Assistant
Examiner

FDIC EXAMINATIONS, 1986—1988
1988

1987

1986

3,751

3,364

2,795

183

163

171

National banks

172

State member banks

4,019

3,653

3,194

Safety and soundness
State nonmember banks
Savings banks

Subtotal

4,282

2,832

1,436

Trust departments

683

588

333

Data processing facilities

848

619

427

9,832

7,692

5,390

Compliance and civil rights

TO TAL

others not enough, more emphasis
is being placed on identifying
economic and industry risk and
identifying individual hanks that
exhibit symptoms of higher risk.
Supervision must address that risk
with an appropriate response,
which may take the form of an
examination, a visit or possibly just
a telephone call.
The Division took a number of
important steps in 1988 to improve
supervisory oversight. After
evaluating staffing resources,
operating procedures and the
appropriate level of onsite examina
tions, DBS adopted an examination
frequency cycle designed to put
more examiners into banks more
often. The emphasis is on troubled
institutions and on those exhibiting
adverse trends. The goal is to
conduct an onsite examination at
least every 24 months for well
rated institutions (those rated 1 or
2), and an onsite examination at
least every 12 months for problem
and near-problem institutions.
However, the key to the new
examination frequency policy is
flexibility, which DBS is
accomplishing through more direct
cooperation with state banking
authorities. Under the new policy,
many state examinations of 1-, 2-,
and 3-rated banks are counted the
same as FDIC examinations for the

purpose of tracking adherence to
examination guidelines. Moreover,
DBS meets with state officials to
develop cooperative examination
schedules so that each agency can
better plan resource requirements.
As a result, the Division and the
states have more flexibility to
concentrate resources in areas of
emerging or anticipated concern
and not just in those areas with
known problems.
DBS’s intensified examination
program also is designed to include
more FDIC examinations of
national and state member banks
in cooperation with the Office of
the Comptroller of the Currency
and the Federal Reserve Board. The
results of these arrangements are
expected to emerge in coming
years.
The FDIC participates with the
other federal and state bank super
visory agencies in the Shared
National Credit Program. This
program promotes efficient use of
examination resources through
coordinated and uniform super
visory treatment of large loans in
which two or more banks
participate. In 1988, FDIC staff
devoted 17,662 hours to the review
of 4,564 loans totaling $581 billion,
compared to 16,730 hours spent
reviewing 3,879 loans totaling $471
billion in 1987.

Congress has charged the FDIC
and the other federal financial
institution regulators with the
responsibility for administering
certain consumer protection and
civil rights laws. DBS monitors
FDIC-supervised banks for
adherence to these laws and their
implementing regulations through
separate compliance examinations.
During 1988 the FDIC conducted
4,282 compliance examinations
and visitations nationwide, an
increase of 51 percent over 1987.
Areas covered by compliance
examinations include federal laws
covering Truth in Lending, Fair
Credit Reporting, Electronic Funds
Transfer, Financial Recordkeeping
and Currency Reporting, Fair Debt
Collection Practices, Community
Reinvestment, Fair Housing, Home
Mortgage Disclosure and Real
Estate Settlement Procedures.
During 1988 Congress passed the
Expedited Funds Availability Act,
and the FDIC subsequently began
examining for compliance with the
Act’s implementing Federal
Reserve Board Regulation CC.
As part of its review of Truth in
Lending Act provisions requiring
accurate disclosure to consumers of
interest rates and finance changes,
the FDIC obtained $1,722,994 in
reimbursements for 22,105
consumers from 228 FDICsupervised banks during 1988,
compared to reimbursements of
$612,614 from 98 banks for 9,208
consumers in 1987.
The FDIC’s supervisory respon
sibilities include examining and
regulating trust departments and
the securities transfer activities of
FDIC-supervised banks. During
1988 consent was given to 37
banks to begin exercising trust
powers. This brings to 2,384 the
number of trust departments super
vised by the FDIC at year-end.
FDIC-supervised banks had invest
ment discretion over $125.7 billion

in trust assets, and responsibility
for a further $433 billion in non
managed assets at year-end 1988,
compared to $ 120.3 billion in trust
assets and $348.8 billion in non
managed assets at the end of 1987.
The FDIC also supervised the
securities transfer activities of 258
banks registered with it under
federal securities laws and 52
examinations of their activities
were performed during the year,
compared to 282 banks and 39
examinations in the previous year.
FDIC examiners participated in
examinations of 749 bank-operated
and independent data processing
operations during 1988, compared
to 497 in 1987. As a result of these
examinations, 18 data centers (14
banks and 4 non-bank institutions)
were identified as problem situa
tions in 1988. In 1987, 19 data
centers (17 banks and two non
bank institutions) were considered
problem situations. Examinations of
multi-regional data processing
servicers are conducted jointly with
the other federal financial institu
tion supervisory agencies. This
arrangement saves examiner
resources, reduces disruption at the
data center and provides for
uniform supervision of the servicer.

FDIC PROBLEM BANKS, 1984—1988
(Year-end)

1988

1987

1986

1985

1984

13,606

14,289

14,837

14,906

Problem Banks

1,406

1,575

1,484

1,140

848

% Change in Number of Problem Banks

(10.7)

6.1

30.2

34.4

32.1

10.7

11.0

10.0

7.6

5.7

Total Insured Banks

% of Total Insured Banks

14,825

CHANGES IN FDIC PROBLEM BANK LIST, 1984—1988
Deletions

680

627

494

312

296

Additions

o il

718

838

604

502

(169)

344

292

206

Net Change

Problem Banks
The federal bank regulators
assign a composite supervisory
rating (on a scale of one to five in
ascending order of supervisory
concern) to each federally
regulated financial institution based
on a general framework for
evaluating and assimilating all
significant financial, operational
and compliance factors. Institutions
whose financial, operational or
managerial weaknesses are so
severe as to pose a serious threat
to continued financial viability are,
depending on the degree of risk
and supervisory concern, rated

Composite “4” or “5” and
considered problem institutions.
Because it insures deposits in
virtually all commercial and
savings banks, the FDIC’s problem
list includes national banks, savings
banks and insured state member
and nonmember banks. The FDIC
places a special emphasis on
examining these problem banks
because of their potential effect on
the deposit insurance fund.
After reaching a historical high of
1,624 in mid-1987, the number of
FDIC-insured problem banks has
been declining. This trend is due
primarily to increased supervisory
attention, improvements in the

economy of the Midwest and the
record number of failures. At yearend 1988, there were 1,406
problem banks. Although failures
contributed to the decline, many
more former problem banks were
rehabilitated, usually with close
supervisory guidance, as shown in
the accompanying table. Even
though mismanagement and poor
lending decisions continue to be
the primary causes of most
problem bank situations,
weaknesses in the energy sector of
the economy and the related
effects on real estate and business
markets in the Southwest preclud
ed any significant improvement in
the number of problem banks in
that section of the country during
1988.

Capital Forbearance Program
The FDIG’s Capital Forbearance
Program was adopted in 1986 and
expires December 31, 1989. The
program is available to any bank
with difficulties primarily attribut
able to economic problems beyond
the control of management. Under
the capital forbearance program, a
bank may operate temporarily with

capital below normal supervisory
standards if it is viable and has a
reasonable plan for restoring
capital.
Since the program began, the
FDIC has received 312 applica
tions for forbearance. O f the 181
banks admitted to the program, 56
were terminated for various
reasons, leaving 125 banks in the
program at year-end. Applications
of 84 banks have been denied and
21 were being processed. In 26
cases the application was
withdrawn or not processed for
other reasons.

Loan Loss Deferral—
Agricultural Banks
The Competitive Equality Bank
ing Act of 1987 permits qualifying
agricultural banks to amortize
losses on agricultural loans and
related assets over a seven-year
period. Under the program, a
qualifying bank may amortize
eligible losses that are incurred
between December 31, 1983, and
January 1, 1992. A t year-end the
FDIC had received 81 applications
for the program and 35 had been
accepted. Four have been

terminated for various reasons,
leaving 31 banks in the program.
Applications of 19 banks were
denied and six were still in
process at year-end. In 21 cases,
the application was either
withdrawn by the filing bank or
returned because the institution
did not qualify as an agricultural
bank.

Fraud and Insider Abuse
Insider abuse or criminal fraud
was present to some degree in
about one-third of 1988 bank
failures. This proportion has
remained about the same in recent
years. A total of 625, or eight
percent, of state nonmember banks
were victimized by a theft or fraud
of $10,000 or more in 1988, down
slightly from eight percent in 1987.
The FDIC works closely with the
Attorney General’s Bank Fraud
Working Group in its supervisory
response to bank fraud and insider
abuse. In 1988 special fraud
examiners in each region received
advanced training in criminal
psychology and fraud detection
techniques. The FDIC continued its
sponsorship of regional, joint
Federal Bureau of Investigation/
examiner training sessions and a
white collar crime school run by
the Federal Financial Institutions
Examination Council. In another
development aimed at stemming
bank fraud, The Report of Apparent
Crime form used by banks was
revised in 1988 to include money
laundering violations involving the
structuring of currency transactions
in such a way as to avoid filing a
currency transaction report with
the IRS.
Several local bank fraud working
groups were established or acti
vated in 1988, mainly in major
cities. The working group in
Chicago was singled out for praise
in Congress and by the business

press and became the model for
similar organizations in other cities.
In October 1988 Congress
enacted anti-drug abuse legislation
that included some changes to the
Treasury’s Bank Secrecy Act
regulations. In one such change,
beginning in 1989 banks will be
required to record identifying infor
mation on all individuals who
purchase official checks in amounts
greater than $3,000. The legislation
also amended the Right to Finan
cial Privacy Act to permit the
transfer of information from the
FDIC and other regulatory agencies
to the Department of Justice when
there is reason to believe that
records obtained in the exercise of
the agency’s supervisory or
regulatory functions may be rele
vant to a violation of federal
criminal law. The FDIC strongly
supported these amendments,
which removed barriers to effective
cooperation between examiners
and law enforcement agents.
Also in October, the Committee
on Government Operations of the
House of Representatives issued its
second report on fraud, abuse and
misconduct in the nation’s financial
institutions. The report offered
many valuable recommendations
that will help combat fraud and
insider abuse in the banking
industry. In responding to the
report, Chairman Seidman noted
the significant progress that has
already been made by the FDIC
and the other agencies: “Since
1984, all aspects of the federal
mechanism for detecting, reporting,
investigating and prosecuting bank
fraud and embezzlement in this
country have been improved. Basic
methods and philosophies have
been altered. Examiners and
auditors have accepted greater
responsibility for detecting and
reporting criminal conduct in finan
cial institutions. The criminal refer
ral system has also been improved,

significantly increasing the probabili
ty of prosecution and conviction ..

Assistance Transactions
The Federal Deposit Insurance
Act authorizes the FDIC to provide
financial assistance to prevent the
closing of an insured bank.
Assistance may be granted directly
to an insured bank in danger of fail
ing, to facilitate a merger of an
insured bank in danger of failing, or
to a company that controls or will
control an insured bank in-danger
of failing. To provide such
assistance, the FDIC’s Board of
Directors must determine that the
amount of assistance is less than
the cost of liquidating the bank. An
exception is made, however, when
the continued operation of the bank
is essential to provide adequate

ASSISTED BANKS BY STATE,
1984—1988

Alabama
Alaska
Arkansas
Illinois
Iowa
Kansas
Kentucky
Louisiana
Missouri
Minnesota
Montana
New Jersey
New Mexico
New York
Ohio
Oklahoma
Oregon
South Dakota
Tennessee
Texas
Utah
Washington
TOTAL

’ 88

’87

’86

’85

’84

0
0
0
0
0
1
0
1

0
0
0
0
0
2
0
1

1
0
0
0
0
0
0
0

0
0
0
1
0
0
0
0

1
0

0
0

1
0

0
0

0
0
0

2
0
0
0
12*
0
0

1
0
0
1
0
0
1

1*
1
1
1
2

1
2

0
1
0
0
1
0
1
2

0
1

St
1

0
21

0
0

0
0
1

0
0

0
0
0
0

1
0
0
0
0
0

0
0
0
0
0
0

* One transaction involved Alaska Mutual Bank and
United Bank of Alaska, both of Anchorage, Alaska,
t One transaction involved the 59 bank subsidiaries
of First City Bancorporation, Houston, Texas, and
one transaction involved two bank subsidiaries of
First RepublicBank Corporation, Dallas, Texas.
X Includes 11 bank subsidiaries of BancTEXAS
Group Inc., Dallas, Texas.

banking services to its community
or severe financial conditions exist
that threaten a significant number
of financial institutions or financial
institutions with significant
resources. A bank applying for
financial assistance should have a
commitment for a capital infusion
from an outside source other than
the FDIC and demonstrate to the
FDIC that its management can
restore the bank to health.
Shareholders of the bank generally
should receive no greater return on
their investment than they would
have received if the bank had failed.
In 1988 the FDIC entered into 21
assistance transactions, which
benefited 81 banks. These
assistance transactions resulted in
estimated savings to the FDIC of
$917,600,000. The savings are
calculated by estimating the cost of
an assistance transaction compared
to the estimated cost to the FDIC if
the bank failed and its depositors
were paid off. These savings arise
because the acquirer in an
assistance transaction normally pays
the FDIC a premium for the failing
bank’s franchise; an assisted bank
generally is run by new manage
ment, which is often better position
ed to liquidate assets more quickly
and at a more advantageous price
than if the same functions were
performed by the FDIC; and the
FDIC avoids the administrative costs
of liquidating assets and bringing in
personnel to handle a payoff of the
bank’s depositors.

First City Bancorporation
On April 20, 1988, the FDIC’s
Board of Directors granted final
approval to an assistance plan to
recapitalize and restore financial
health to the subsidiary banks of
First City Bancorporation of Texas,
Houston, Texas, an $11 billion
organization with 59 banking
subsidiaries. Control of First City

TEN LARGEST FDIC ASSISTANCE TRANSACTIONS
(By FDIC Estimated Cost, in millions)

Name

Assistance
Date(s)

Total Assets
o f Assisted
Bank(s)

FDIC
Outlay

Estimated
Cost

Acquiring
Bank
NCNB, Texas
National Bank,
Dallas, TX

First RepublicBank Dallas,
N.A., Dallas, TX; First
RepublicBank Houston, N.A.,
Houston, TX*

3-17-88
7-29-88

* 32,700

*3,800

1 3,000

Continental Illinois National Bank
and Trust Company, Chicago, IL
(now Continental Bank, N.A.)

5-17-84
9-26-84

33,633

2,000
4,500

0
1,439

First City Bancorporation,
Houston, TX (59 banks)

4-20-88

11,200

1,066

979

The New York Bank for
Savings, New York, NY

3-26-82

2,780

694

Buffalo Savings
Bank, Buffalo,
NY (now
Goldome Bank
for Savings,
Buffalo, NY)

Greenwich Savings Bank,
New York, NY

11-4-81

2,491

576

363

Metropolitan
Savings Bank,
New York, NY
(now Crossland
Savings Bank,
New York, NY)

Alaska Mutual Bank and
United Bank Alaska,
Anchorage, AK

1-28-88

1,285

295

Alliance Bank,
Anchorage, AK

Western Saving Fund
Society of Philadelphia,
Haverford, PA

4-03-82

2,113

518

296

Philadelphia
Saving Fund
Society,
Philadelphia, PA

10-01-85

5,279

561

259

Bowery Savings
Bank, Inc., New
York, NY

7-17-87

1,193

150

—

12-04-81

899

179

127

Harlem Savings
Bank, New York,
NY (now Apple
Bank for
Savings, New
York, N Y)

Bowery Savings Bank,
New York, NY

BancTEXAS Group, Inc.,
Dallas, TX
Central Savings Bank,
New York, NY

* Assistance of t>\ billion provided to two banks on March 17, 1988. On July 29, 1988, the 40 Texas bank sub
sidiaries of First RepublicBank Corporation were closed and acquired by NGNB Texas National Bank, a bridge
bank, and the FDIC agreed to sell the bridge bank to NGNB Corporation, Charlotte, North Carolina. On August
2, 1988, First RepublicBank’s Delaware consumer bank subsidiary was closed and acquired by Delaware Bridge
Bank, National Association, and on September 9,1988, the FDIC agreed to sell substantially all of the bridge bank’s
assets to Citibank (Delaware), New Castle, Delaware.

was assumed by a new private
investor group that raised $500
million in new capital through a
stock offering. The FDIC’s
assistance to First City’s subsidiary
banks was in the form of $970
million in notes.

A key feature of the First City
agreement was the transfer of
approximately $1.7 billion in
nonperforming and troubled assets
to a separate entity created to
service such assets, which was
funded by notes from the First City

subsidiary banks. Collections by
this new entity will be used first to
repay the subsidiary banks, then
the FDIC and then the previous
shareholders of First City. The
FDIC did not purchase any assets
held by the assisted banks and is
guaranteed a minimum repayment
of $100 million from collections. In
addition, the FDIC received
warrants, exercisable for five years,
to purchase five percent of the
common stock of First City at a
price equal to the initial offering
price of the stock. The FDIC also
purchased $43 million of junior
preferred stock convertible into a
10 percent interest in the common
stock of the restructured holding
company. Finally, holders of First
City’s preferred stock and publiclyheld, long-term debt agreed to
substantial concessions as a
requisite to the transaction.

Net Worth Certificates
In prior years, under terms of the
Gam-St Germain Depository
Institutions Act of 1982, Net Worth
Certificates (NWCs) totaling $710.4
million were issued to 29 savings
banks experiencing severe losses
due to interest rate mismatches. In
1988 outstanding NWCs were
reduced by $18.1 million through
contractually required payments.
At year-end 1988 three banks had
NWCs outstanding aggregating
$322 million.

Failed Banks
At 200, the number of insured
bank failures in 1988 again set a
post-Depression annual record,
exceeding the previous high of 184
set in 1987. Of the 200 failed
banks, 41 (40 in Texas and one in
Delaware) were subsidiaries of one
multi-bank holding company, First
RepublicBank Corporation, Dallas,
Texas. States with the highest
number of failures in 1988 were
again Texas (113), Oklahoma (23)

and Louisiana (11). The concentra
tion of bank failures in these three
states, like the higher incidence of
problem banks, was an outgrowth
of the continued depressed energy
and real estate industries in those
areas.
Average assets of all failed banks
in 1988 were #250.2 million, while
average deposits were #159.7
million, compared to #37.6 million
in average assets and 834.7 million
in average deposits in the previous
year. The significant increase over
1987 figures is due to the First
RepublicBank failures. If these
banks are excluded, the average
assets and deposits for 1988 failed
banks are #37.6 million and #36.0
million, respectively, or about the
same as 1987. Approximately 43
percent of the 1988 failures involv
ed state nonmember banks with
average deposits of #43.7 million.
Deposits in all failed banks in 1988,
exclusive of First RepublicBank
Corporation’s subsidiaries, totaled
#5.7 billion, compared to #6.4
billion in 1987 and #6.0 billion in
1986.
Purchase and assumption trans
actions (P&As) were arranged for
164, or 82 percent, of the bank
failures. In 1987, P&As, at 133,
constituted 72 percent of the trans
actions. In P&As, a healthy institu
tion assumes the deposits and other
liabilities and purchases a portion of
the assets of the failed bank. In
1988 premiums totaling more than
#171 million were paid by the
assuming banks. Direct savings
resulting from these transactions
compared to the cost of payoffs are
estimated to be approximately #3.0
billion.
The increase in the number of
successful attempts to use P&As
was due in significant part to the
use of whole bank transactions. In
this type of transaction, prospective
acquirers submit bids to purchase
essentially all assets of a failing

bank “as is,” on a discounted ?>asis.
This type of sale is desirable
because loan customers can
continue to be serviced locally by
an ongoing financial institution
instead of FDIC liquidators, it
minimizes FDIC cash outlays and it
restrains growth in assets held by
the FDIC for liquidation. In 1988
the FDIC attempted whole bank
transactions in 129 failing bank
situations (excluding First Republic
Bank), succeeding in 69 cases,
compared to 52 attempts and 19
successful transactions in 1987.
For 30 failed banks, the FDIC
arranged insured deposit transfers
instead of directly paying off
depositors up to the insurance limit.
In an insured deposit transfer,
insured deposits are made
available to their owners by
transferring the accounts to an
existing healthy institution or a
newly-formed bank. The transferee
bank also may purchase some of
the assets of the failed bank. In
fact, in two cases in 1988, insured
deposit transfers were arranged
where the assuming institution

purchased all, or nearly all, of the
failed bank’s assets. The FDIC
received purchase premiums of
#4.7 million on these transactions
in 1988.
The FDIC directly paid
depositors their insured claims in
six failures in 1988 when neither a
purchase and assumption transac
tion nor an insured deposit
transfer could be arranged.

First RepublicBank
Corporation
The largest banking organization
to fail in 1988 was First Republic
Bank Corporation, Dallas, Texas,
which had 41 banks and gross
assets of #32.5 billion. This
organization, the largest in Texas
and the fourteenth largest in the
country, experienced a major
outflow of funds during early 1988
following adverse publicity about its
distressed financial condition. As a
result, the FDIC in March of 1988
provided an interim financial
assistance package consisting of a
#1 billion loan to First Republic’s
two largest banks. This loan was

FAILED BANKS BY STATE, 1986—1988

FAILED BANKS
1988

PURCHASE &
ASSUMPTIONS
(P&As)

1987

1986

1988

1987

1986

INSURED
DEPOSIT
TRANSFERS

PAYOFFS
1988 1987

1986

1988 1987

1986

Alabama
Alaska
Arizona
California

0
1
1
3

2
2
0
8

1
1
0
8

0
1
0
1

2
1
0
6

1
1
0
5

0
0
0
1

0
0
0
0

0
0
1
1

0
1
0
1

0
0
0
3

Colorado
Delaware
Florida
Idaho

10
1*
3
0

13
0
3
0

7
0
3
1

7
1
2
0

10
0
2
0

3
0
2
1

0
0
0
0

2
0
1
0

3
0
1
0

2
0
0
0

1
1
6
6

2
3
6
8

1
1
10
14

0
1
4
6

2
2
6
4

1
1
9
11

0
0
0
0

0
0
0
2

0
0
1
3

1
0
2
0

0
1
0
2

0
0
0
0

0
11
0
1

1
14
2
0

2
8
0
0

0
10
0
1

1
14
0
0

1
8
0
0

0
0
0
0

0
1
0
0

0
0
2
0

1
0
0
0

Minnesota
Mississippi
Missouri
Montana

7
0
2
1

10
1
4
3

5
0
9
1

7
0
2
1

5
1
2
3

4
0
6
1

0
0
0
0

0
0
2
0

0
0
0
0

5
0
0
0

1
0
1
0

Nebraska
New Mexico
New York
North Dakota

1
0
1
1

6
0
1
2

6
2
0
0

0
0
0
1

6
0
0
1

6
2
0
0

1
0
0
0

0
0
1
0

0
0
0
0

0
0
1
0

0
0
0
1

0
0
0
0

Ohio
Oklahoma
Oregon
Pennsylvania

1
23
0
0

1
31
1
1

0
16
1
0

1
19
0
0

1
22
1
1

0
7
1
0

0
0
0
0

0
4
0
0

0
9
0
0

0
5
0
0

South Dakota
Tennessee
Texas
Utah

1
0
113t
2

2
0
50
3

1
2
26
3

0
0
95
2

1
37
2

1
1
19
3

0
0
4
0

0
0
5
0

0
0
4
0

1
0
14
0

1
0
8
1

0
1
3
0

1
0
1
0

0
0
4
0

0
1
7
1

1
0
1
0

0
0
0
0

0
0
2
1

0
0
0
0

0
0
4
0

0
0
0
0

0
0
4
0

0
1
1
0

200

184

138

164

133

Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Massachusetts
Michigan

Washington
Wisconsin
Wyoming
Puerto Rico
TOTAL

* Represents First RepublicBank, Delaware, the credit card subsidiary of First RepublicBank Corporation, Dallas,
Texas.
f Includes the 40 Texas bank subsidiaries of First RepublicBank Corporation, Dallas, Texas.

collateralized by the stock of 30 of
the bank subsidiaries and guaranteed
by all the bank subsidiaries. The
FDIG also provided assurances of
protection to all bank depositors
and bank creditors. This protection
did not extend to intra-bank
funding within the First Republic
Bank system or holding company
obligations.
After extensive negotiations with

several interested parties, the
FDIG entered into an agreement
with NGNB Corporation, Charlotte,
North Carolina, utilizing the bridge
bank legislation enacted in 1987.
The FDIC notified the other
regulators involved that the $1
billion loan would not be renewed,
which led to a determination that
the lead bank was nonviable.
Losses on intra-bank financing and

loan guarantees rendered the other
banks in the First RepublicBank
system insolvent.
On July 29, a new bridge bank,
NCNB Texas National Bank, was
created to be managed by NCNB
Corporation under an interim
managerial contract. NCNB Texas
did not assume any obligations of
the holding company, First
RepublicBank Corporation, but
received the assets and liabilities
from the FDIC acting as receiver
for the 40 Texas banks that had
been closed. NCNB Corporation
and the FDIC completed the
permanent recapitalization of the
new bank in November by infusing
$1.05 billion of new equity. Initial
ly, 20 percent was provided by
NCNB Corporation and 80 percent
by the FDIC. NCNB has exclusive
options to purchase the FDIC’s 80
percent interest over a five-year
period at increasing premiums.
In a related transaction, a
separate bridge bank was created to
assume the assets and liabilities of
First RepublicBank Delaware, First
RepublieBank’s credit card
subsidiary in Delaware. This bank
was closed on August 2 by
Delaware authorities after it was
unable to fund itself. After soliciting
bids, the FDIC on September 9,
1988, agreed to sell the bridge bank
in a separate transaction to Citibank
(Delaware), New Castle, Delaware.

Applications
The FDIC is responsible for
acting on several types of applica
tions. Through the applications
process and strict standards, the
FDIC strives to control risk to the
deposit insurance fund. Proposed
state nonmember banks must
apply to the FDIC for federal
deposit insurance; FDIC-supervised
banks must apply to establish bran
ches and facilities or to relocate
existing offices; proposed mergers,

consolidations and purchase and
assumption transactions involving
state nonmember banks or a nonFDIC-insured institution are
evaluated by the FDIC; the FDIC
has statutory authority to disap
prove a prospective director, officer
or employee of an insured bank;
and anyone intending to acquire
control of an insured nonmember
bank must file a notice with the
FDIC, which can prohibit the
proposed arrangement.
The adjacent table shows the
FDIC’s actions on selected types of
applications and related activities in
1988 compared to the two previous
years. In 1988, 98.1 percent of the
actions on applications were taken
under delegated authority, with 94.7
percent of the total actions taken at
the DBS regional level.

Merger Policy
In October the FDIC published
for comment a proposed revised
merger policy. The revision would
redefine product and geographic
markets to take into account the
changes that have occurred in the
marketplace for financial services
over the past several years. Action
on the proposal is expected in
1989.

Risk-Based Capital
During 1988 major strides were
made by bank regulators, both in
the United States and abroad, in the
development of a common riskbased capital framework. In March
the FDIC joined the Comptroller of
the Currency and the Federal
Reserve Board in issuing proposed
risk-based capital guidelines for
public comment. In July the Basle
Committee on Banking Regulations
and Supervisory Practices issued a
final report, which was endorsed by
the central bank governors of the
major industrial countries, that set
forth a common risk-based frame

FDIC APPLICATIONS, 1986—1988
1988

1987

1986

159
156
3

188
180
8

195
190
5

1,032
1,032
846
186
0

1,029
1,027
812
215
2

804
801
746
55
3

288
287
1

234
234
0

244
244
0

Requests for Consent to Serve
Approved
Denied

45
44
1

39
37
2

72
70
2

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

89
87
2

80
79
1

121
118
3

Deposit Insurance
Approved
Denied
New Branches
Approved
Branches
Remote Service Facilities
Denied
Mergers
Approved
Denied

work for international banks
domiciled within the Basle
Committee countries. The Basle
Committee, which includes
representatives from the bank
regulatory authorities in the United
States, Canada, Japan and nine
European countries, is actively
involved in efforts to strengthen
the soundness of the international
banking system and eliminate an
existing source of competitive
inequity by encouraging the
establishment of uniform minimum
capital standards among the major
industrial countries. Based on the
final Basle Committee report, the
comments received on the FDIC’s
March proposal, and discussions
with other bank regulators, the
FDIC issued a final statement of
policy on risk-based capital in early
1989.
The risk-based capital framework
sets forth a definition of capital, a
system for calculating risk-weighted
assets by assigning balance sheet
assets and off-balance-sheet items
to broad risk categories, and a
schedule, including transitional
arrangements, for achieving a
minimum supervisory ratio for

capital as a percent of risk-weighted
assets. Examples of off-balancesheet items incorporated into the
framework include letters of credit,
loan commitments, interest rate
swaps and foreign exchange
contracts. Banks will need to
achieve a minimum ratio of capital
to risk-weighted assets of 7.25
percent by year-end 1990 and 8
percent by year-end 1992. The riskbased capital ratio will not
eliminate the FDIC’s existing
primary and total capital to total
assets ratios, although the capital
definitions used for these leverage
ratios may be revised in the future
to more closely conform to the
capital definitions used for riskbased capital purposes.

External Auditing Policy
Statement
The FDIC adopted a statement of
policy in November 1988 providing
more explicit direction regarding
independent external auditing
programs of state nonmember
banks. The statement of policy
strongly encourages each state
nonmember bank to have an
annual external auditing program

Part 350—Disclosure
Regulation

EXTERNAL AUDITING PROGRAMS OF BANKS, 1987
All Commercial Banks and FDIC-Supervised Savings Banks (Percent)
Size

Audit*

Directors’
Examt

All
Other*
2

Over 81 billion

Over 8300 million to #1 billion

Over $150 million to $300 million

Over 8100 million to 8150 million

Over 875 million to $100 million

Over 850 million to $75 million

Over $25 million to $50 million

$25 million and below

All Banks

Source: June 30, 1988 Reports of Condition.
* Audit of the bank or parent holding company’s consolidated financial statements by CPAs,
f Directors’ examination of the bank by CPAs or other independent external auditors.
$ Includes review compilation and other specified auditing procedures as well as no auditing work and no
response to the item.

performed by an independent
auditor (who need not be a public
accountant). The statement defines
an external auditing program and
explains acceptable alternatives to
such a program. A bank subject to
an annual audit of its financial
statements that is performed by an
independent public accountant
would generally be considered to
have a satisfactory external
auditing program.
Banks applying for deposit
insurance are expected to obtain
an audit of their financial
statements by an independent
public accountant annually for at
least the first three years after
deposit insurance is granted. If
certain conditions exist in troubled
bank situations, the administrative
orders issued by the FDIC may
require that an audit of the finan
cial statements or specified auditing
work be performed. In addition,
banks are requested to submit
copies of the external auditor’s
reports to the appropriate FDIC
regional office as soon as possible
after they are received by the bank.

The FDIC continues to believe
that an annual external review by
an independent party would greatly
improve the safety and soundness
of all banks. For this reason, the
DBS staff has been working with
the accounting profession to
develop a series of basic external
auditing procedures for securities,
loans, insider transactions, and inter
nal controls that, as a minimum, an
independent auditor should perform
for all banks as part of their exter
nal auditing program.
Information indicating the level of
auditing work performed for all
commercial banks and FDICsupervised savings banks was
collected for the first time in 1988
from all banks that file Call Reports.
This information shows that 65
percent had an external audit
performed by a CPA firm during
the previous year and that smaller
banks are less likely to have had an
audit. O f the banks surveyed,
another 26 percent had at least a
director’s examination performed. A
table showing the complete results
is shown above.

An FDIC regulation effective in
1988 requires state nonmember
banks to prepare disclosure state
ments and make them available to
the public by March 31 of each
year. The regulation requires that
banks’ disclosure statements include
financial reports for the two
preceding years. Also, the annual
disclosure statement must include
any other information that the
FDIC may require of a particular
bank, such as enforcement actions
when the FDIC deems it is in the
public interest to do so. The regula
tion also permits banks to include,
at their option, additional informa
tion that bank management
considers important to an evalua
tion of the overall condition of the
bank.
The intent of this regulation is to
improve the public’s awareness and
understanding of the financial
condition of individual banks and
enhance public confidence in the
banking system.

Accounting Issues
During the first quarter of 1988,
the DBS staff prepared a study of
the differences between generally
accepted accounting principles and
bank regulatory reporting
requirements, which are described
primarily in the instructions for
preparing Reports of Condition and
Income (Call Reports). The study
identifies the various differences,
the reasons for their existence, and
whether and how they should be
eliminated. In moving to eliminate
as many of these differences as
possible, the Division has initiated
interagency discussions of the
study’s recommendations through
the Federal Financial Institution
Examination Council’s (FFIEC)
Task Force on Reports. The Task
Force is moving toward developing

revised reporting requirements for
futures contracts and adopting a
uniform position on the use of
“push down” accounting. The Task
Force also has been evaluating how
the difference in reporting asset
transfers with recourse or other
forms of risk retention can be
eliminated by incorporating the
risk exposure into the banking
agencies’ risk-based capital
guidelines.
Because the banking agencies
were concerned about the lack of a
consistent, authoritative standard
on recognizing income from
interest rate swaps, the FFIEG
proposed regulatory reporting stand
ards for swaps in November 1988.
The proposal would preclude banks
from recognizing arrangement fees
and spread income at the inception
of a swap and would specify the
conditions under which changes in
the market value of a swap after its
inception must be recognized
immediately. A final decision on
the proposal is expected in 1989.
During the year, the banking
agencies considered how sales of
agricultural mortgage loan pools
that back securities guaranteed by
the new Federal Agricultural Mort
gage Corporation (Farmer Mac)
should be reported for Call Report
purposes. To receive a Farmer Mac
guarantee, the organization pooling
the loans must absorb the first ten
percent of losses from defaults on
mortgages in the pool. The Call
Report instructions treat transfers of
loans in which the transferring bank
retains a risk of loss, except those
involving residential mortgages
under federally-sponsored programs,
as borrowing transactions. The
banking agencies concluded that,
like transfers under these federallysponsored residential mortgage
programs, transfers of agricultural
mortgages under the Farmer Mac
program should be treated like sales.

The FDIC and the other federal
bank supervisory agencies advised
banks in March 1988 that the
existing generally accepted account
ing principles governing accounting
for income taxes were being
superseded by Financial Account
ing Standards Board Statement No.
96. Statement No. 96, as amended,
is effective for fiscal years begin
ning after December 15, 1989.
Since banks must follow generally
accepted accounting principles
when preparing their Call Reports
unless the instructions specifically
require a different reporting treat
ment, banks will be expected to
report their applicable income
taxes in their Call Reports in accor
dance with Statement No. 96 after
its effective date. Earlier application
of Statement No. 96 is acceptable.
Other 1988 Call Report changes
include requests for new informa
tion that generally is intended to
help the banking agencies identify
and monitor risks, such as bank
holdings of equity securities, direct
and indirect investments in real
estate ventures, and the risk
exposure associated with three
types of mortgage transfers with
recourse that are treated as sales

George Unthank,
Financial Atialyst

-B o n n ie Kreiling,
Field E x a m in er

for Call Report purposes.
In November 1988 the. FDIC
Board of Directors approved DBS’s
recommendation to integrate the
quarterly reporting requirements
of savings and commercial banks by
eliminating the separate savings
bank Call Report. Effective as of the
March 31, 1989, reporting date,
FDIC-insured state-chartered savings
banks will begin filing the Federal
Financial Institutions Examination
Council Reports of Condition and
Income now completed by commer
cial banks, together with a
supplemental schedule — on
interest rate sensitivity data — for
savings banks only.
In the first quarter of 1988, an
electronic system for transmitting
Call Reports became available to
banks. The system gives banks the
option of sending their Call Report
data to the banking agencies over
telephone lines, using computer
software that has been certified for
this purpose. Bank participation in
this electronic transmission system
rose from around 800 in the first
quarter of 1988 to over 1,400 —
more than ten percent of the
population — at year-end. Banks

choosing not to use this electronic
system continue to submit their
Call Reports in the traditional hard
copy form.
During the second half of 1988,
DBS assisted the Legal Division in
developing a proposed regulation
that expands the definition of the
term “deposit.” The proposal,
which was published for a 60-day
comment period on November 25,
is intended to supplement and
complement the statutory defini
tion of deposit in the Federal
Deposit Insurance Act by prescrib
ing that certain other obligations
are deposit liabilities by general
usage. Under proposed Part 354 of
the FDIG’s Rules and Regulations, a
bank’s liability on a promissory
note, bond, acknowledgment of
advance or similar obligation issued
or undertaken as a means of
obtaining funds would be, unless
specifically excepted, a deposit
liability for insurance and assess
ment purposes. The analysis of the
comments received on the proposal
is under way and DBS staff will
continue to provide support to the
Legal Division as it prepares its
final recommendations on this
issue.
The extensive use of whole bank
purchase and assumption transac
tions during 1988, along with the
FDIG’s efforts to effect Section
13(c) assistance transactions and
bulk sales of assets acquired from
failed banks, has given rise to
frequent questions from examiners
and bankers about the appropriate
accounting for such transactions by
banks. As a result, DBS staff is
working on a discussion paper that
identifies financial accounting
issues associated with such transac
tions, analyzes possible methods of
accounting for them in bank finan
cial statements, and provides obser
vations about the supervisory
implications of these methods. The
feedback received on a discussion

draft, and its tentative conclusions
from within the FDIC and the
other federal banking agencies,
should enable DBS to prepare final
guidance for its staff and bankers in
1989 on the preferred accounting
treatment for failed bank acquisi
tions, assistance transactions and
bulk purchases of assets.

Bank Investment Practices
In April 1988 the FDIC adopted
the Federal Financial Institutions
Examination Council’s policy state
ment on unsuitable investment
practices and the selection of
securities dealers. The guidelines in
the policy statement were devised
because a number of financial
institutions incurred substantial
losses as a result of engaging in
speculative securities activities. The
policy statement stresses the need
for financial institutions to know
the financial condition and reputa
tion of the dealers with whom they
do business. It also describes
various securities transactions that
are considered to be unacceptable
for a bank’s investment account
and advises that securities acquired
through these types of transactions
are to be marked to market, or the
lower of cost or market. Additional
ly, the policy statement points out
the risks associated with
investments in zero coupon bonds,
residuals and stripped mortgagebacked securities and describes
procedures to be followed by
institutions that purchase them.

on an ongoing basis. A number of
positive developments with respect
to international lending were noted
during 1988, including significant
reductions in LDC debt exposure at
a number of banks and the
maintenance of higher reserve
levels against LDC portfolios. In
addition, the completion of a debt
rescheduling arrangement by Brazil
enabled that country to bring
interest current for a favorable
impact on bank earnings for 1988.
Domestic branches of foreign
banks are eligible for deposit
insurance pursuant to the Interna
tional Banking Act of 1978. At
year-end 22 foreign banks operated
51 insured branches in ten U.S.
cities. In 1988, under its Regulation
Review Program, the FDIC publish
ed proposed revisions to the regula
tion governing operation of these
branches. The revisions relate to
exemptions from the deposit
insurance, minimum capital
equivalency levels and pledge of
assets requirements, as well as the
country exposure limitation provi
sion. A final regulation is expected
to be issued during 1989.
The FDIC frequently receives
visitors and official delegations
from foreign countries seeking an
understanding of US. bank regula
tion, FDIC policies and procedures
and methods of assessing risk.
During 1988, at least 20 countries
were represented among those
visitors and delegations.

Government Securities Act
International
The international lending
activities and other exposures to
lesser developed countries (LDCs)
by domestic insured banks
continued to be a focus of FDIC
attention during 1988. As a
member of the Interagency Coun
try Exposure Review Committee,
the FDIC monitors such activities

Regulations issued by the Depart
ment of the Treasury under the
Government Securities Act of 1986
(GSA) require each nonexempt
financial institution that acts as a
U.S. government securities broker
or dealer to notify its federal
regulator of its broker-dealer
activities. As of December 31, 1988,
42 state nonmember banks had

filed notice with the FDIC of their
U.S. government securities brokerdealer status. Parts of the regula
tions also apply to any depository
institution that engages in certain
repurchase agreements with
customers or holds U.S. government
securities for customers other than
in a fiduciary manner. During the
year, instructions were developed to
help examiners check for bank
compliance with the GSA regula
tions, and an FDIC Bank Letter was
prepared for issuance early in 1989
to remind depository institutions
that even through they may not be
required to give notice of U.S.
government securities broker or
dealer activities, they may be
subject to certain parts of the GSA
regulations.

Banks Registered Under
the Securities Exchange
Act of 1934
The FDIC administers and
enforces the registration and report
ing provisions of the Securities
Exchange Act of 1934 for publiclyheld insured nonmember banks. All
required statements and reports
filed by state nonmember banks
under implementing regulation Part
335 are public documents and are
available for inspection at FDIC

headquarters in Washington, D.G. A
total of 1,898 individuals inspected
these records during 1988 and
requested copies, and an additional
3,205 requested copies by tele
phone. Copies of 45,861 pages were
provided in response to these
requests. At the end of 1988, 246
banks were registered with the
FDIC, down from 261 a year earlier.

Training
At the FDIC Training Center in
Rosslyn, Virginia, developmental
training is conducted for employees
in the core examination practices
and procedures — for areas such as
loans, investments, internal routines
and controls, earnings and interest
rate risk — as well as specialty
training in areas such as consumer
compliance, data processing and
bank trust activities. Training in
emerging issues such as real estate
investment and off-balance-sheet
activity also is offered.
The increased hiring of examiners
that began in 1985 continued to
affect the Division’s training efforts,
as student attendance at the DBS
Training Center again increased
over the previous year. During
1988, 140 sessions of 16 courses
were attended by 2,274 FDIC
examiners, 95 employees of other

FDIC divisions, 383 state examiners,
and 88 employees of other federal
agencies and several foreign coun
tries. In addition, 777 FDIC
employees and 192 state examiners
under FDIC sponsorship attended
15 different courses offered under
the auspices of the Federal Finan
cial Institutions Examination
Council.
Training levels are expected to
increase in 1989 and beyond to
meet the needs of the increased
field examiner staff. A cadre of 350
instructors, including examiners
from the various FDIC Regions, staff
members and senior management
from the Washington Office, and
guest lecturers from the academic
community, banking and other
business fields taught at the DBS
Training Center in 1988. In addi
tion, the FFIEC courses were
supported by 22 FDIC instructors.
One of the significant activities
conducted at the DBS Training
Center is the assessment of assistant
examiners for commissioned
examiner status. In 1988, 173
candidates were evaluated at the
Assessment Center, representing
more than triple the number assess
ed in 1987. More than 300
candidates will be evaluated at the
facility in 1989, reflecting the
continued expansion of the field
examiner staff.

Division of Liquidation

The Division of Liquidation
(DOL) plans for and responds to
bank failures; administers failed
bank receiverships; makes payments
to depositors in closed FDIC-insured
banks; and establishes operating
policies and procedures related to
the liquidation of failed bank assets.

DOL STATISTICAL HIGHLIGHTS, 1983—1988

Total
Failed
Banks

Operating Results
The Division of Liquidation
achieved favorable operating results
in 1988. Gash collections for the
year equaled $2.326 billion while
operating expenses totaled $238.9
million, or 10.27 percent of collec
tions. The $238.9 million in
expenses represents a 10 percent
decrease from the $265.9 million
expended during 1987 on collec
tions of $2,415 billion. Despite the
addition of 200 failed bank
receiverships to DOL’s portfolio,
total assets in liquidation at vearend decreased by $2,035 billion
from year-end 1987 to S9.305
billion. Despite the sizable increase
in its activities, the Division was

Total Assets
of Failed
Banks*
(billions)

Collections*
(billions)

Estimated
Book Value
o f Assets in
Liquidation
(billions)

Total

Operating
Expenses*
(millions)

Number
of
Employees

1988

200

8 35.7

8 2.326

8 9.3

8 238.9$

3,386

1987

184

6.9

2.415

11.3

265.9*

4,421

1986

138

7.0

1.749

10.9

230.8$

4,706

1985

116

2.8

1.282

9.6

249.3§

3,318

1984

2.8

1.538

10.0

232.5§

2,158

1983

4.1

1.008

4.1

119.8§

1,153

* Excludes open bank assistance transactions.
Collection and DOL operating expense data exclude Continental Bank, N.A., Chicago, Illinois, and First National
Bank and Trust Company of Oklahoma City, Oklahoma, where asset servicing agreements are in place.
t DOL only.
§ FDIC-wide expenses.

able to reduce its staff to 3,386 by
year-end 1988, or 1,035 positions
below the previous year-end total.
Additionally, 51 bank receiverships
were terminated and removed from
the Corporation’s books and an
additional 203 banks were placed
in termination status awaiting
approval from the appropriate
court.
The accomplishments of the Divi
sion can be attributed to several

key initiatives: (1) aggressively
marketing acquired assets; (2)
monitoring major asset and large
litigation strategies; (3) updating
and streamlining policies and
procedures on asset management;
and (4) emphasizing debt
compromises as a cost-effective
alternative to protracted litigation.
DOL’s asset marketing efforts
have been very productive over the
past two years. For example, 574

►Lena Greene,
Supervisory
Liquidation
Specialist,
Operations

(Left to right)
Larry Pigg.
Supervisory
Liquidation
Specialist, Owned
Real Estate: Brenda
Jones, Secretary;
Ken Blincow.
Supervisory
Liquidation
Specialist Closing
Manager

►Victor Robert,
Bank Liquidation
Specialist, Owned
Real Estate

bulk sales were consummated in
1987, involving 91,123 assets with
a book value of $860 million. In
1988, 546 transactions involving
71,865 assets with a book value of
$875 million were sold. These
results, to some extent, reflect a
shift in DOL’s marketing emphasis
from high overhead, small balance
loans to larger balance, mixed quali
ty loans.
Activities during the past year
included major sales at four Mid
west DOL sites, in which virtually
all assets from those locations were
offered. Based on the success of
these sales in reducing the inven
tory of failed bank assets, two of
those offices — in Des Moines,
Iowa, and Omaha, Nebraska — were
closed in 1988.
To facilitate asset marketing
activities, DOL has further
developed its computerized asset
inventory maintenance system
known as the Secondary Marketing
Asset Pricing System (SMAPS). In
addition to maintaining the Divi
sion’s investor profile list, SMAPS
can develop specific loan portfolios
tailored to prospective buyers’
needs from the Liquidation Asset
Management Information System
(LAMIS).
In a 1988 pilot project, DOL
planned a public auction of some of
its largest holdings of other real
estate. As a result of the auction,
which was held in March 1989 by
Cushman & Wakefield at Christie’s
in New York City, the FDIC sold
14 properties, about half of those
offered. The FDIC realized an
overall gross sales recovery of $40.7
million — 99.4 percent of the
properties’ appraised value. For this
auction, and in general when dispos
ing of real estate acquired from fail
ed banks, the FDIC’s policy is to
obtain appraised value or close to it
for a property or hold it until that
target can be met.

As a means of monitoring high
risk major assets, DOL prepares
quarterly status reports for the
review of upper management. This
procedure is in addition to the
routine monitoring that takes place
within each DOL site, and is intend
ed to assure that the most
expeditious and logical recovery
strategy is being pursued for the
assets. Similarly, DOL has a litiga
tion review process whereby all
assets in litigation are reviewed
semi-annually. The intent of this
process is to measure the cost of
legal proceedings against other
recovery alternatives. Increased
recoveries through debt settlement
and reduced legal expenses have
resulted from this litigation review
process.
In 1987 the FDIC’s Board of
Directors provided DOL with
broader delegations of authority.
Operating within the context of that
authority, DOL’s ability to perform
its primary goal — the liquidation of
acquired assets in a timely manner
while maximizing recovery potential
— has been greatly enhanced.
Likewise, DOL continues to be
highly decentralized, with the vast

►Jeam'e Avery,
Liquidation
Technician/
Operations

majority of all business decisions
made at the field or regional level.
O f the approximately 28,100
actions taken in 1988, less than one
percent required approval by the
Washington office. This structure
serves the dual purposes of
expediting decision-making and
permitting prompt response to the
customers of failed institutions.
For several years, DOL has stress
ed the importance of considering
debt compromises as an acceptable
method of asset liquidation. Increas
ed emphasis has been placed on the
need to consider the time value of
money in debt compromise
analysis; the by-product of this effort
has been a significant increase in
debt compromise as a method of
resolving problem loans.
A multi-year project to automate
records of the FDIC’s enormous
inventory of assets from failed
banks on one computer system was
completed in 1988. In the last step
of the project, in December over
19,000 assets from DOL’s Houston,
Texas, Consolidated Office were
integrated into the Liquidation Asset
Management Information System
(LAMIS).

- Robert Lehman,
Regional
Manager, Credit

Maurie Houlihan,
Assistant
Managing
Liquidator

FAILED AND ASSISTED BANKS, 1988
(By state and type of transaction)
In sured
Failed

Assistan ce

Banks

T ran saction s

D e p o s it
P&A

P a y o ff

T ra n s fe r

W h o le
Bank

Ag
Bank

P& As

ALA S K A

AR IZO N A

AR K ANSAS

C A LIF O R N IA

C O LO R AD O

DELAW ARE

FLORIDA

1
2

ILLIN O IS

IN D IA N A

IO W A

-1

KANSAS

1
2

KENTUCKY

M ICH IG AN

M INNESO TA

7
2

0
0

4
2

LO U ISIAN A

MISSOURI

M O N TA N A

NEBRASKA

NEW M EXICO

NEW YO RK

NORTH D AK O TA

O HIO

1
23

1
2

1
19

113

5
1

95
2

W A S H IN G TO N

W YO M IN G

200

O K LAH O M A
SOUTH D AK O TA
TEXAS
UTAH

TOTAL

Didi Dillard,
Liquidation
Technician/
Operations

0
0

164

► Signe Nash.
Secretary

Now that all failed bank assets
are contained in LAMIS, reports
based on a unified file can be
prepared for management as well
as other FDIC personnel who need
to make decisions about the asset
inventory. The reports can be
designed to contain specific infor
mation about assets, such as type,
dollar range, amount by each of
DOL’s account officers and many
other categories. Further enhancing
DOL’s access to information about
its inventory are hook-ups between
LAMIS and other FDIC computeriz
ed systems that are anticipated in
1989. For example, the Legal Case
Management System (CMS) will
permit the status of assets in litiga
tion to be determined via LAMIS.

Closing Activity
DOL handled 200 failed bank
cases in 1988. Nearly three-fourths
of the 1988 failures took place in
three states — Texas (113),
Oklahoma (23) and Louisiana (11).
Forty of the 113 Texas failures
occurred on July 29, 1988, when
the 40 Texas bank subsidiaries of
First RepublicBank Corporation,
Dallas, Texas, were closed — the
largest number of failures in any
one day in the history of the FDIC.
The banks of the First Republic
system, including the 817.0 billionasset lead bank in Dallas, had total
assets of approximately $32.5
billion.
Federal regulators approved the
acquisition of the 40 Texas bank

Greg Wilson,
Supervisory
Liquidation
Specialist, Real
Estate

subsidiaries of the First Republic
system by NCNB Corporation,
Charlotte, North Carolina, in an
arrangement that ensured the full
protection of all depositors and
general creditors, and the continued
operation of all banking offices
without interruption.
The Division successfully carried
out the FDIC’s responsibilities as

receiver for First RepublicBank
institutions by transferring their
assets and liabilities to a newlychartered bank, NGNB Texas
National Bank, over the weekend of
July 29. The transfer involved the
use of DOL personnel from the
Dallas Regional Office
supplemented by additional staff
from DOL’s five other regions
throughout the country.
When the FDIC is notified of an
imminent insolvency by the bank’s
primary regulator, DOL develops a
bid information package for that
particular bank. The bid package
contains both financial and nonfinancial information about the
bank that helps the Division of
Bank Supervision develop a recom
mendation to the FDIG’s Board of
Directors on the type of transaction
to be attempted (“whole bank” or
other variety of purchase and
assumption, insured deposit
transfer or payoff). The package is
distributed to potential bidders so
they can make an informed deci
sion in submitting a bid on the
proposed transaction. DOL began
preparing bid information packages
for failed banks in late 1988. The
task formerly was handled by the

Division of Bank Supervision.
When bid packages are being
prepared in anticipation of handling
a failed bank, DOL also conducts a
detailed asset valuation review. The
purpose of the asset valuation
review is to provide the FDIG’s
Board of Directors with an estimate
of the loss in a failing bank to
determine the cost-effectiveness of
transactions where the FDIC is
attempting to arrange a total asset
purchase and assumption of
liabilities (whole bank transaction)
or open bank assistance. The infor
mation developed by the Division
does not substitute for an examiner
review; it supplements examination
data so the best possible estimate of
the FDIG’s cost in the event of a
liquidation can be determined. DOL
conducted 198 detailed asset valua
tion reviews in 1988.
In another closing activity, the
Division of Liquidation was called
upon in May 1988 to help the Farm
Credit Administration (FCA) with a
huge challenge it faced. The FCA
needed to close the insolvent
Federal Land Bank of Jackson,
Mississippi, and its 90 branches. The
Jackson bank is one of 12 federal
land banks within the Farm Credit

System, a $50 billion nationwide
network of borrower-owned banks
and lending institutions. This was
the first closing since the land bank
system began back in 1917, and the
task was complicated by the
Jackson bank’s diverse locations in
three states: Alabama, Louisiana and
Mississippi. The FCA turned to the
FDIC, with its extensive experience,
for help with handling the closing
procedures. A force of some 220
FDIC liquidators provided technical
assistance to 138 FCA specialists,
and the closing was completed
without major problems.
When the Jackson bank offices
were closed, FDIC liquidators took
possession and control of their
assets and made an inventory. The
FDIC’s Division of Accounting and
Corporate Services also was involv
ed; its staff produced a “pro forma,”
bringing all of the land bank’s
records together to standardize
them to the date of the closing and
produce an adjusted Statement of
Condition. The May 1988 event is
believed to be the first two-agency,
multistate closing of any type of
financial services offices.

Legal Division

The Legal Division is essentially a
large law office that provides
various legal services for the divi
sions and offices of the FDIC,
which are its clients. The Division’s
staff includes about 400 attorneys
throughout the U.S.; 89 are located
in the Washington headquarters
office, while the remainder are
located in the FDIG’s regional and
field offices.
More attorneys were hired by the
Legal Division staff during 1988,
reflecting increased workloads,
especially in the Southwest, where
a special office was established in
Dallas in July to supervise specific
litigation arising from the trans
action involving First RepublicBank
Corporation. The staffing of a new
unit, the Assisted Acquisitions and
Transactions Section, and heavier
demands on the legal staff related
to troubled and failing institutions,
also led to an increase in the Divi
sion’s staff in 1988.
Over the past three years, the
Legal Division has developed a
training program for its attorneys
and paralegals that includes a train
ing conference for most of them
approximately every 18 months. In
1988 two major training
conferences for legal staff took
place at each of the Division of
Liquidation’s six regional offices.
Along with general training
programs, the Division presented
specialty courses on management
and procedures and policies of
bank examination.
The FDIG’s Regional Counsels
and Managing Senior Attorneys
held four meetings during 1988 on
the general operation and policies
of the Legal Division. These discus
sions helped the Division to meet

its goals for the year. The Division’s
management also met during the
year with each operating division
client. These meetings greatly
improved communication and
helped to ensure that the Division
was fulfilling its clients’ needs for
legal services.
Even though the Legal Division’s
case load lightened somewhat in
1988 — 15,168 cases on the litiga
tion docket at year-end 1988,
compared to 22,719 in 1987 — the
extent of the FDIC’s legal activities
requires the use of private law
firms to help handle the work. In
1988, 600 firms were used to
handle over 6,700 cases, down
from about 850 outside firms that
handled over 10,200 cases in 1987.

The FDIC monitors all of its
active cases, including those assign
ed to outside law firms, through the
Case Management System (CMS), a
computerized data base that
contains specific information about
each action. CMS permits the FDIC
to track each piece of litigation
separately. Information is entered
in CMS when the case is filed or
inherited (when a bank fails and
the FDIC is named receiver, any
litigation in which the failed bank
was involved becomes part of the
FDIC’s portfolio). The file is
continuously updated from status
reports received from both inside
and outside counsel. An important
feature of CMS is its ability to
monitor fees and expenses

COMPLIANCE AND ENFORCEMENT ACTIONS, 1986—1988
1988

1987

1986

223

236

216

Section 8(a) (Term ination o f Insurance Orders)
Orders o f Correction Issued
Notices o f Hearing Issued*

77
10

91
18

59
11

Section 8 (b ) (Cease-and-Desist Orders)
Notices o f Charges Issued
Orders Issued W ith N otice*
Orders Issued W ithout Notice
Section 8 (c ) (Tem porary Orders)*

26
24
74
5

31
16
89
3

28
26
97
8

Section 8 (e ) (Removal/Prohibition o f Director or
O fficer)
Notices Issued
Orders Issued W ith Notice*
Orders Issued Without Notice
Section 8 (e )(4 ) (Suspensions Issued)*

10
14
19
0

5
8
13
0

8
24
8
2

Section 8 (g ) (Suspension/Removal o f Director or
O fficer Charged W ith Felony)
Notices Issued
Permanent Orders Issued

1
0

2
0

1
0

Actions Initiated by FDIC

Section 8 (p ) (Term ination o f Insurance/No
Longer Accepting Deposits)
Orders Issued
Civil M oney Penalties Issued
Capital Notices Issued
Capital Directives Issued*

1
1

0
1

* Not counted as separate proceedings and therefore not included in total actions initiated.

associated with litigation efforts.
The FDIC’s Legal Division is
organized into open (operating)
and closed (failed) bank functions,
reflecting the overall organization
of its clients, the FDIG’s divisions
and offices. The open bank side
deals with matters arising from the
FDIG’s supervisory responsibilities,
open bank litigation, regulation and
legislation, compliance and enforce
ment and assisted transactions and
acquisitions. The closed bank side
handles closed bank litigation,
regional affairs (overlapping with
open banks), directors and officers
liability and bond claims. The
administrative section, which
overlaps both open and closed
bank functions, is responsible for
administrative aspects of the Legal
Division, including personnel
matters, training for Division staff,
the Division’s budget, and regional
affairs relating to both open and
closed banks.

Compliance and
Enforcement
As a bank regulator, the FDIC
monitors compliance with banking
laws and works to ensure the
continued safety and soundness of
the financial institutions under its
regulatory jurisdiction. The
Compliance and Enforcement
Section of the Legal Division
provides legal support, advice and
counsel to the Division of Bank
Supervision (DBS) and prosecutes
civil enforcement actions on behalf
of DBS against banks or bankrelated individuals whose activities
pose a threat to the depositors of
the bank. Compliance and Enforce
ment is analogous to a “district
attorney’s office” for DBS, which
must “police” the banking industry
through such administrative
actions. DBS and Compliance and
Enforcement are the first lines of
protection for the federal deposit
insurance fund.

CEASE-AND-DESIST ORDERS, 1986—1988
1988

1987

1986

295

292
3

336
334
2

341
335
6

Cease-and-desist orders issued during year — total
Section 8(b)
Section 8(c)

101
96
5

123
120
3

135
127
8

Cease-and-desist orders terminated — total
Section 8(b)
Section 8(c)

140
137
3

148
147
1

152
145
7

Cease-and-desist orders in force at end of year — total
Section 8(b)
Section 8(c)

267
262
5

295
292
3

336
334
2

Cease-and-desist orders outstanding at beginning of
year — total
Section 8(b)
Section 8(c)

A total of 226 administrative
proceedings were initiated in 1988,
on a par with the 237 in 1987. In
keeping with the FDIC’s commit
ment to reducing insider abuses,
enforcement actions against
individuals were emphasized. In
1988, 29 removal and prohibition
actions were brought and ten civil
money penalty actions were
initiated, involving a total of 69
individuals. In 1987, 18 removal
and prohibition actions and three
civil money penalty actions were
initiated, involving a total of 39
individuals. (A single administrative
action may be brought against
several individuals, especially when
the criticized action involves
individuals acting in
concert with one
another.)
As the accompanying
table shows, the level

►(Left to right)
Bennett Reynolds,
Case Management
Technician; Laurette
Powell, Legal
Technician;
Ronald Hubert, Legal
Technician

of total enforcement actions has
not eased, reflecting the FDIC’s
continuing efforts to stop unsafe
and unsound banking practices.
Cease-and-desist orders are used
to halt and correct unsafe or
unsound banking practices commit
ted by banks or individuals related
to those institutions. Cease-anddesist orders are still the most
common administrative enforce
ment tool, and the use of them has
remained fairly constant.
Litigation activity of enforcement
actions in 1988 remained at about
the same level: In 1988, ten cases
went through full administrative
hearings, compared to 14 in 1987.

Open Bank and Corporate
Litigation
This section of the Legal Div ision
represents the FDIC in its
corporate or supervisory capacity.
Significant court decisions in 1988
evolved from the following cases.
FD IC v. Mullen
In May 1988, the United States
Supreme Court reversed an Iowa
district court decision which had
held unconstitutional section 8(g)
of the Federal Deposit Insurance
Act, 12 U.S.C. 1818(g), which sets
out the procedures used by the
FDIC to suspend bank officers
indicted for crimes. The Court
found the statutory 90-day period
for the agency to hear and consider
a challenge to a post-indictment
suspension to be within constitu
tional limits and noted, with
approval, Congress’s expectation
that suspensions of indicted officers
would be “routine.”
First RepublicBank
C orp ora tion v. FD IC
In November 1988, the three
statutory creditors’ committees of

First RepublicBank Corporation
jointly instituted suit against the
FDIC on behalf of First Republic.
The suit alleges that both the
March 1988 interim assistance
transaction, in which the FDIC
loaned $1 billion to First Republic
and guaranteed depositors and
unsubordinated general creditors
of the First Republic subsidiary
banks against loss, and the July
bridge bank transaction in which
the First Republic subsidiary
banks’ assets and certain of their
liabilities were assumed by NCNB
Texas National Bank, exceeded the
FDIC’s statutory authority. The
committees seek, among other
things, to prevent the FDIC from
prosecuting, in the First Republic
Bank Corporation bankruptcy, its
claim arising out of the billion
dollar loan, to void guarantees of
that loan by the holding company,
and to recover the value of
allegedly solvent First Republic
subsidiary banks whose assets
were transferred to NCNB Texas
National Bank. The litigation is in
the early stages and is expected to
continue for several years.

►(Left to right) Denise Neese,
Secretary; Lynne Thomas.
Paralegal Specialist;
Arturo Vera-Rojas. Senior
Regional Attorney

(Left to right) Charlotte
Roberson. Legal Technician;
Ruth Moore. Secretary;
Richard Owen. Regional
Attorney'

FDIC -v. Michigan N ational Bank
In June 1987, Michigan National
Bank agreed to pay the full
amount of a disputed deposit
insurance assessment. As a result,
the FDIC and Michigan National
agreed to a dismissal of this
litigation.
Pogue v. F D IC
In March 1988, the U.S. Court of
Appeals for the Sixth Circuit, in a
decision from the bench, upheld a
$90,000 civil penalty against a
bank president and director for
multiple violations of Federal
Reserve Board Regulation O,
which relates to loans by a bank to
executive officers, directors and
principal shareholders. The court
held that such a penalty was
neither arbitrary, excessive nor
disproportionate to the sanctions
issued to other bank directors.
G erlach v. U.S.
In January 1988, the United
States District Court for the
Central District of California
dismissed the complaint of a

former FDIC employee who was
terminated from his job. The court
held that the Federal Tort Claims
Act does not apply to discharges of
federal employees and that the
FDIC could discharge excepted
service employees summarily
because Title V protections do not
apply to them.

Assisted Acquisitions
and Transactions
In response to the increasing
volume of requests from banks for
financial assistance, in June 1988
the Assisted Acquisitions and Tran
sactions Section was formed
within the Legal Division to handle
assistance transactions. The
section drafts and negotiates
agreements for open bank
assistance and provides legal
support for related financial trans
actions, such as the sale of
securities acquired in assistance
transactions.
Open bank assistance transac
tions have increased over the last
few years as follows: in 1986 seven
transactions were consummated;
19 were completed in 1987; and in
1988 the number increased to 21
transactions. Two sizable
transactions took place in
1988 — one involving the
recapitalization of the
subsidiary banks of First
City Bancorporation of
Texas and the other
involving the restruc
turing and recapitali
zation of the subsidiary
banks of First Republic
Bank Corporation.

The First City Bancorporation of
Texas transaction, which evolved
over nine months of negotiations,
concluded on April 20, 1988. The
rehabilitation plan included the
raising of $500 million in new
capital through a stock offering
arranged by Donaldson, Lufkin &
Jenrette Securities Corporation
and Drexel Burnham Lambert
Incorporated, and the formation of
a new holding company by new
private investors, led by A. Robert
Abboud. FDIC assistance took the
form of a $970 million note.
Approximately $1.7 billion in
nonperforming and troubled assets
were transferred to a separate enti
ty created to service such assets,
funded by notes from the First
City subsidiary banks. Collections
by this new entity will go first to
repay the subsidiary banks, then to
the FDIC and finally to former
shareholders. The FDIC purchased
$43 million of junior preferred
stock convertible into a 10 percent
interest in the common stock of
the restructured First City and has
received warrants, exercisable for
five years, to purchase an addi
tional five percent of the common
stock of First City.

The First RepublicBank Corpora
tion transaction involved three
distinct stages: emergency
assistance; bridge bank transac
tions; and financial assistance. The
first stage occurred in March 1988
when the FDIC provided the
subsidiary banks of First Republic
Bank Corporation with $1 billion
in emergency assistance in the
form of a six-month subordinated
note. The note was guaranteed by
First RepublicBank Corporation
and collateralized by a pledge of
certain assets of the holding
company.
The second stage, the bridge
bank transactions, took place in
July and August 1988. In July a
bridge bank called NCNB Texas
National Bank was established,
with 100 percent of the voting
stock owned by NCNB Corpora
tion, Charlotte, North Carolina. As
receiver of First Republic’s failed
40 Texas bank subsidiaries, the
FDIC transferred their assets and
most of their liabilities to NCNB
Texas National Bank. In August
the FDIC, as receiver, transferred
the assets and liabilities of First
RepublicBank Delaware, primarily
a credit card operation, to a newly

►Diane Kowal,
Paralegal
Specialist

►Don McKinley,
Regional Counsel

•< Douglas Jones,
Deputy General
Counsel

chartered bridge bank, Delaware
Bridge Bank, National Association.
In September Citibank (Delaware)
purchased the credit card
receivables of the Delaware Bridge
Bank.
The final stage of the First
Republic transaction took place in
November, when the FDIC provided
financial assistance of $840 million
to NCNB Texas National Bank,
while NCNB Corporation infused
$210 million in new equity capital.
The FDIC’s total assistance was
approximately $3.0 billion, including
the $1 billion emergency assistance
provided in March. Additional
outlays will be determined over the
next two years, depending on the
performance of existing loans and
associated servicing costs.

Closed Bank Litigation
When a bank closes and the
FDIC is appointed receiver, it
“inherits” the rights and liabilities
of the bank, which may include on
going litigation or litigation brought
by the FDIC in its receivership
capacity. A description of the signifi
cant cases decided in 1988 follows.
FD IC v. Ernst & Whinney
The FDIC initiated this litigation,
seeking damages of approximately
$250 million, based on the allega
tion that United American Bank,
Knoxville, Tennessee, City and
County Bank of Anderson County,
Lake City, Tennessee and First
Peoples Bank of Washington
County, Johnson City, Tennessee,
sustained tremendous losses as a
result of the failure of Ernst &
Whinney to perform audits in
accordance with generally accepted
auditing standards. The litigation is
in the early stages.
F D IC v. M a in Hurdm an
The FDIC initiated this litigation
shortly after it provided assistance

to Continental Illinois National
Bank and Trust Company of
Chicago, Illinois, in September
1984. The litigation is based on
audits performed by Main Hurd
man in 1980 and 1981 for Holt
Leasing Company, a borrower
from Continental Illinois. The
loans to Holt Leasing were advanc
ed in reliance upon Main Hurdman
audit work. The FDIC seeks
approximately $60 million in
damages for alleged deliberate and
fraudulent misrepresentation by
Main Hurdman. The FDIC pled
negligence in the alternative. The
litigation is ongoing.
F D IC v. Bank o f Boulder
In September 1988 the Tenth
Circuit Court of Appeals reversed a
district court decision and held that
under 12 U.S.C. 1823(c)(2)(A) and
federal common law, the FDIC
Corporate could acquire assets
from the FDIC Receiver in a
purchase and assumption agree
ment that were otherwise
nontransferrable under state law or
by their own terms.
The case involved a standby
letter of credit issued by the Bank
of Boulder, Colorado, that later
came into the possession of the
FDIC Receiver when the
beneficiary bank was declared
insolvent. As part of a purchase
and assumption transaction, the
FDIC Corporate purchased certain
assets including the Bank of
Boulder letter of credit. Subsequent
attempts by the FDIC Corporate to
draw on the letter of credit were
refused by the Bank of Boulder.
The FDIC Corporate brought suit
in the United States District Court
for the District of Colorado for
payment on the letter of credit.
The Tenth Circuit has granted a
request from the Bank of Boulder
for Rehearing En Banc. The
American Bankers Association as
amicus curiae has filed a brief in

support of the Bank of Boulder. A
decision is expected in 1989.

Directors and Officers
Liability
Negligence or willful misconduct
on the part of directors or officers
often contributes to a bank’s
failure. Each bank failure is
investigated to determine whether
claims should be brought against
the bank’s former officers and
directors. During 1988 the FDIC
further systematized and streamlin
ed its initial investigative process
and increased efforts to identify at
an early stage those investigations
that were unlikely to produce
viable cases. Despite the record
number of bank failures in 1988,
through these efforts by the the
Division of Liquidation’s
Investigative Units and the Legal
Division the number of active
investigations declined slightly to
275 from 300 a year earlier. At the
same time, the number of cases in
active litigation grew to 100 at yearend from 80 at the end of 1987.
During 1988 the FDIC tried three
significant cases. In the first, FDIC
v. Hudson, all but two directors
settled before trial. The jury found
the two remaining defendants liable
for a total of more than $1 million.
In FDIC v. Bryan, the jury found
the directors of an Oklahoma bank
liable for over $3 million in losses
suffered in their bank. In National
Union v. FDIC, the directors and
officers of United American Bank
of Knoxville had previously settled
with the FDIC. As part of that
settlement, they assigned their
rights against their insurance
carrier to the FDIC. In this non-jury
trial, the court awarded over $16
million to the FDIC. Total
recoveries in 1988 on claims
against directors and officers
exceeded $64 million, up from $59
million in 1987.

Division of Accounting and Corporate Services

Throughout 1988 the Division of
Accounting and Corporate Services
continued to support the financial,
accounting, automation and service
needs of the FDIC through its three
branches, Financial Services,
Management Information Services
and Corporate Services.

Financial Services
Branch (FSB)
C orp ora te A cco u n tin g
Due to the record number of fail
ed and assisted banks in 1988, the
volume and complexity of account
ing data processed by DACS finan
cial systems increased dramatically.
More than 2.9 million accounting
transactions were processed, an
increase of 52 percent over 1986
and a 10 percent increase over
1987.
During the course of the year,
FSB processed work from 19
nationwide locations for 848 banks
in liquidation. Although the number
of locations was 27 percent lower
than 1987, the number of individual
banks increased 24 percent.
To meet the challenge of the
increased workload, FSB again turn
ed to two methods that proved
successful in 1987: providing addi
tional training for staff and enhanc
ing the capability of automated
financial systems. As a result, the
additional volume of work was not
only absorbed, but processed with
20 percent less staff than in 1987.
Other objectives accomplished
during 1988 included the formation
of a regional processing center in
Kansas City, the establishment of a
payment processing center in
Chicago, reconciliations of both
corporate and liquidating bank

assets, and the expansion of the
FDIC’s tax functions.
Assessments and Financial
O p e ra tio n
To insure deposits in more than
13,000 U.S. financial institutions, the
FDIC assesses an annual fee on
insured banks of 1/12 of 1 percent
of the bank’s average deposits. In
addition to verifying the deposit
amounts and collecting the
assessments, FSB provides a staff of
field auditors who conduct assess
ment audits of the largest commer
cial banks during a three-to-five-year
cycle.
FSB collected $1.8 billion in
assessment revenues from 14,275
banks in 1988. (In 1987, $1.7
billion was collected from approx
imately 14,500 banks.) As the result
of field audits of 56 of the 500
largest insured banks, an additional
$8 million was collected in 1988.

More than 71,000 accounts
payable documents, nearly 63,000
travel reimbursement documents
and approximately 4,800 relocation
voucher documents were processed
by FSB in 1988.
Financial Systems
As the volume and complexity of
financial information requests grew
in 1988, so did reliance on the
FDIC’s Financial Information
System (FIS). One of the Corpora
tion’s largest computer systems,
FIS contains all of the FDIC’s
general ledgers and detailed
subsidiary data to support the
ledgers.
The Financial Systems Section is
dedicated to managing FIS and its
related subsystems. During 1988
enhancements to FIS enabled the
system to accommodate regional
processing center needs and
respond more quickly and

accurately to increased information
requests. In support of initiatives
from the Office of Budget and
Corporate Planning, FIS tables and
programs were changed to account
for the revised program budgets.
Also, additional reports were
transmitted to field sites to
improve information response time.
To provide a basis for evaluating
proposed system changes and to
ensure that newly developed
procedures operated as intended,
the Financial Systems Section
continued to update its systems
documentation in 1988. The
section also continued to support
training efforts by providing
assistance on new systems
procedures in classrooms and at
conferences.
A ccoun tin g Policy and
Fiscal Controls
To safeguard assets and to ensure
accurate financial reporting, effec
tive accounting policy and
procedures remained a major area
of emphasis in 1988. To fulfill this
function, the section was involved
in diverse activities, including a
review of the Gash Management
Unit, the preparation and publica
tion of the first Chart of Accounts
Manual (which contains descrip
tions of all Corporation and liquida
tion accounts), the automation of
various field accounting processes
and procedures, and the develop
ment of the newly required State
ment of Cash Flows in the
Corporation’s financial statements.
The Accounting Policy and Fiscal
Controls Section also provided
project management for the
development of the new
automated, decentralized Check
Reconciliation System and the
Liability/Dividend System. The
section also continued to be
instrumental in developing the
Corporation’s loan loss reserves

and analyzing certain assistance
transactions.

Management Information
Serv ice Branch (M ISB)
Com puter Technology
The demand for computer
support grew at a phenomenal rate
in 1988. Unlike past years, when
the workload handled by the
FDIC’s central computer rose an
average of 20 percent annually,
1988 saw a 40 percent rise in work
processed.
To meet this increased demand
and to improve response time, the
FDIG’s central processing unit was
replaced at the end of 1988 with a
more sophisticated model. The new
computer is approximately 50
percent faster than the one it
replaced.
The use of microcomputers
continued to grow in 1988 as new
local area networks were establish
ed to take advantage of modern
office automation technology. The
networks, which permit authorized
microcomputer users to gain access
to information on the FDIC’s
central computer, are designed to
improve efficiency and cut costs by
standardizing computer capabilities.
The advantages of such networks
include the electronic transmission
of documents, the sharing of data
and equipment, and access to word
processing, spreadsheet software
and other customized applications.
The nationwide conversion to local
area network systems began in late
1987 and continued through 1988.
System Developm ent and
M aintenance
Major developmental activities in
1988 involved three computer
systems: the Banking Information
Tracking System (BITS); the Secon
dary Marketing Asset Pricing
System (SMAPS); and the Legal
Case Management System (CMS).

BITS functions as an umbrella for
several related banking systems and
serves as a single source for infor
mation previously gained through a
variety of automated and manual
procedures. Largest among the
systems included in BITS is the
FDIC On-Line Communications
System (FOCUS). FOCUS is a
complex data retrieval system that
provides structure and financial data
obtained from various FDIC data
base files and displays that data in
formatted report screens. Informa
tion available through FOCUS
ranges from Call Report and Report
of Examination data to specialized
information about a bank’s manage
ment changes and performance
ratios. Other systems available
through BITS include Summary
Analysis, Capital Asset Quality Earn
ings Liquidity, Uniform Bank Perfor
mance, Failing Banks, Applications
Analysis and Bank Profile.
SMAPS helps FDIC asset
marketing personnel to identify,
package, market and price loans
acquired from closed banks. Using
the system, FDIC personnel match
loans against potential investors.
SMAPS also generates marketing
and sales reports, computes the
price of loans and monitors investor
response to specific portfolios.
SMAPS was used to identify approx
imately 25,000 assets, out of more
than 100,000 on file, for some type
of marketing effort in 1988.
CMS contains information on
approximately 75,000 active, inac
tive or closed legal cases. The
system tracks such data as the
individual case name, type (litiga
tion, bankruptcy, foreclosure, etc.),
claim amount and status. In
consolidated field offices, the system
is used by staff attorneys to monitor
case loads and supervise the outside
law firms working for the FDIC. In
the FDIC’s regional offices, CMS is
used by managing attorneys to keep
track of statistics such as the

number of cases assigned to
individual attorneys and fees from
outside law firms. In the
Washington office, executive manag
ing attorneys use the system to
monitor active, inactive or closed
cases for planning and budgeting
purposes.
The maintenance of existing
computer systems played an impor
tant role in the Management Infor
mation Services Branch (MISB) in
1988. In addition to maintaining
dozens of smaller systems, MISB
personnel enhanced and expanded
the Liquidation Asset Management
Information System (LAMIS) and
the Financial Information System
(FIS).
LAMIS, the FDIC’s largest
computer system, is used by
liquidators and accountants at loca
tions across the country to manage
assets acquired from failed banks. In
response to the needs of the Divi
sion of Liquidation, LAMIS person
nel accomplished a major goal in
1988 by completing the multi-year
project of automating the entire
inventory of failed bank assets
maintained by the FDIC’s regional
offices.
FIS continued to control the
FDIC’s public payments, maintain

►(Left to right)
Ron Baker, Chief,
General Accounting
Unit; Karen Hughes,
Chief, Policy Control
and Analysts Unit;
Cathy Jordan, Senior
Accountant;
Ralph Elosser. Chief,
Corporate
Accounting Section

budgets and general ledgers,
produce financial reports and main
tain FDIC accounting records and
individual ledgers for failed banks in
the process of liquidation. During
1988 an automated interface from
LAMIS to FIS was implemented,
which provides for the daily transfer
of journal entries from the LAMIS
loan subsystem to the liquidated
bank’s general ledgers.

Corporate Services
Branch (CSB )
The Corporate Services Branch
(CSB) continued to provide a wide
variety of services to support the
FDIC’s day-to-day business opera
tions in 1988. CSB functions
include: maintaining the FDIC’s
property, facilities and supplies;
administering contracts; providing
health care services and education
to Washington headquarters person
nel; distributing mail; designing and
printing publications such as this
report; and responding to requests
for information through the
research resources of the FDIC’s
library.
As the need for these support
services increased in 1988, CSB
used computer technology wherever

feasible to modernize its operations.
For example, the FDIC library,
which responded to approximately
4,300 requests for information in
1988, acquired an integrated
automation system. The system
automates such major functions as
indexing and routing the library’s
vital collection of banking literature,
law publications and other reference
material. As a result, the library
increased its efficiency in supplying
information to FDIC employees in
Washington and the regional offices.
Similarly, the Contracts and
Acquisitions Unit began the first full
year of processing procurements on
the automated Walker Purchase
Order System (POS) during 1988.
The POS, which is integrated with
other FDIC financial systems such
as Accounts Payable and General
Ledger, will be used to handle infor
mation on over 3,000 contracts and
purchase orders in 1989. The diver
sity of these contracts ranges from
acquiring highly technical profes
sional services to purchasing
ordinary office supplies.
Bank Financial Reporting
Insured banks file quarterly
Reports of Condition and Income

(Gall Reports) and other types of
financial information about their
performance. In 1988 the Bank
Financial Reporting Section (BFR)
received and processed nearly
70,000 original and amended Call
Reports from approximately 13,000
reporting banks.
To help bank personnel prepare
Gall Reports, BFR in conjunction
with state banking associations
again produced a satellite
teleconference at which Call Report
requirements were explained.
Further assistance to Call Report
preparers continued to be available
through the toll-free telephone
“hotline” established in 1987
(1-800-424-5101). Training plans for
1989 include developing and
conducting courses for personnel at
mutual savings banks on changes to
the MSB Call Report that went into
effect in March 1989.
The electronic transmission of
Call Report data began in 1987 and
increased during 1988, when more

than 1,400 reports were transmitted
electronically. During 1988, BFR
reduced the time needed to process
uniform bank performance reports
and surveillance reports from 75 to
70 days. As a result, the published
information was available sooner.
BFR continued to support produc
tion of the Quarterly Banking
Profile, a statistical compilation that
is the earliest official release of
performance data about the banking
industry'.

New Operations and
Training Center
Detailed planning for the FDIC’s
new operations and training center
progressed in 1988. Construction
was to begin in early 1989 and is
scheduled for completion in 1991.
Located on a 9.5-acre site about
five miles from the FDIC’s
downtown Washington headquarters
building, the complex will consist of
both an office building and a
residential building.

When completed, the seven-story
office building will house training
facilities for the FDIC and the
Federal Financial Institutions
Examination Council. The FDIC
Computer Center and other support
functions will also move to the new
office building.
The 12-story residential building
will contain 350 rooms for person
nel attending training classes. (In
1988, the FDIC offered classes at
leased facilities to almost 5,000
students, including FDIC personnel,
employees from state banking
departments and other financial
institution regulators, and represen
tatives of foreign countries.)
The new training facility will
enhance the quality of the FDIC’s
training programs and accom
modate the necessary expansion of
its administrative support activities.
The Corporation expects to realize
long-term savings from consolidating
several leased facilities into one
FDIC-owned building.

Corporate Support Offices

Standing Committees
The FDIC’s Board of Directors
has established five standing
committees to assist in handling
matters that come before the
Board. The committees are: the
Committee on Management; the
Bank Supervision Review Commit
tee; the Committee on Liquida
tions, Loans and Purchases of
Assets; the Audit Committee; and
the Electronic Data Processing
Steering Committee.
The standing committees meet
regularly and either review matters
over which the Board of Directors
has retained exclusive authority
and submit recommendations, or
take final action on matters, mainly
related to liquidation and receiver
ship activities, under authority
delegated to them by the Board of
Directors. The Committees submit
reports to the Board of Directors
when asked to do so.

Office of the Executive Secretaryr
Acting as the FDIC’s corporate
secretary, the Office of the
Executive Secretary (OES) gives
public notice of meetings of the
Board of Directors, records all
votes and minutes of the meetings
and maintains corporate records.
OES also acts as corporate
secretary for certain standing
committees. In 1988, OES
performed those functions for 108
Board meetings and 108 commit
tee meetings.
OES also maintains an index of
official actions taken by the Board
of Directors and by committees
and officers of the FDIC exercising
authority delegated by the Board
of Directors. The index has been

automated since 1984 and even
tually will reference all Board
minutes and delegated authority
actions since the FDIC was
established in 1933.
In its extensive role in process
ing administrative enforcement
actions, OES reviews documents,
prepares transmittal correspon
dence, establishes and maintains
docket files and responds to
inquiries about the status of
administrative actions.
OES ensures FDIC compliance
with the Freedom of Information
Act (F O IA ) and the Privacy Act of
1974. In 1988 the FDIC received
841 FOIA requests, compared to
925 in 1987. Also in 1988, OES
continued its comprehensive
review of its Privacy Act systems
o f records and began developing a
training program on the Privacy
Act for FDIC employees.
OES performs all editorial work
on the FDIC loose-leaf reference
service, which contains the Federal
Deposit Insurance Act, FDIC rules
and regulations, and related
statutes and regulations of interest
to the banking community.
Supplements to the service are
distributed six times each year to
insured banks, FDIC employees,
congressional committeees, federal
and state agencies and private
subscribers.
As the FDIC’s ethics counselor,
OES manages the FDIC’s ethics
program. Through a network of 92
deputy ethics counselors, the OES
Ethics Unit reviews approximately
6,400 financial disclosure reports
and confidential statements of
employment and financial interests
filed by FDIC employees. The
Ethics Unit also develops and

conducts training programs on stan
dards of conduct and related ethics
matters. During 1988 over 1,700
FDIC employees participated in
these programs. An ethics
videotape, developed in 1987, has
been viewed by over 5,000
employees. The videotape has been
made available to other government
agencies and has been reproduced
in an open-captioned version for
hearing-impaired employees. Also
during 1988, the FDIC Board of
Directors approved substantive revi
sions of Part 336 of the FDIC’s
regulations, entitled Employee
Responsibilities and Conduct, which
became effective on November 29,
1988.
An Executive Order and FDIC
rules and regulations prohibit FDIC
employees from accepting gifts in
their official capacity from private
sources. The FDIC’s Ethics Office
oversees the disposal of gifts receiv
ed by either returning them to the
sender, if possible, or donating them
to nonprofit organizations such as
The Children’s National Medical
Center, homes for senior citizens,
women’s shelters and the Special
Olympics.
OES coordinates the FDIC’s
compliance with the Paperwork
Reduction Act of 1980. During
1988 the FDIC achieved a net
paperwork burden reduction of
151,691 hours for the banks it
supervises. The reduction represents
almost 11 percent of the total
burden hours imposed by the FDIC
at the beginning of 1988. Most of
the reduction (139,646 hours)
resulted from changes to the
quarterly reports of condition and
income required of insured banks.

Office of Corporate
Communications
The Office of Corporate
Communications (OCC) prepares
and disseminates information about
the FDIC and responds to inquiries
from the media, the public, banks,
students and others.
As part of its responsibility for
interfacing with the media, OCC
arranges interviews with reporters
and appearances on local and
national radio and television for
Chairman Seidman and other
senior Corporation officials. OCC
also assists the media by arranging
briefings on important
developments. In 1988 press
conferences or briefings were held
to announce major bank transac
tions such as the failure of
First RepublicBank Corporation’s
subsidiary banks. Special briefings
on banking legislation also were
held. In addition, OCC continued
to hold the quarterly briefings on
the banking industry’s perfor
mance. OCC also provides relevant
materials to media representatives
who attend open sessions of FDIC
Board meetings.
In 1988 OCC began using
facsimile transmission (FAX) to
distribute information about FDIC
actions to the press. The use of
FAX permits OCC to notify news
wire services and individual
newspapers when banks fail in the
local area within minutes of the
acquisition or closing of an institu
tion. The public thus learns about
the transaction without delay and
confidence is maintained among
depositors and creditors of the
failed bank.
Along with using FAX to
distribute information, OCC staff
continue to respond via telephone
and mail to numerous questions
and requests for information about
deposit insurance, bank failures, the

condition and history of the U.S.
banking system and many other
topics.
The OCC filled thousands of
requests for FDIC publications in
1988, including more than 1,200
requests for the new FDIC Banking
Review within the week after its
publication. The popularity of The
Quarterly Banking Profile, which
was introduced last year, continues;
hundreds of requests for this
publication were processed last
year.
OCC also handles subscriptions
and renewals for the FDIC’s Rules
and Regulations loose-leaf service,
prepares the FDIC NEWS for the
Corporation’s employees, and
produces the FDIC’s Annual
Report.

Office of Legislative Affairs
The Office of Legislative Affairs
(O LA), which is the FDIC’s liaison
with Congress, advises the Board of
Directors on legislative issues, coor
dinates the drafting of proposed
legislation, prepares testimony,
responds to congressional inquiries
and represents the FDIC’s interests
before the Congress on legislative
and other matters.
OLA coordinates answers to writ
ten correspondence from congres
sional offices with other FDIC
divisions before providing timely
replies. Telephone inquiries, which
often require similar coordination,
were usually answered within one
day. During 1988, O LA also
prepared testimony for seven
appearances by Chairman Seidman
before congressional committees.
To promote legislation important
to the operations of the FDIC, OLA
meets with members of Congress
and their staffs to provide them
with relevant information and to
explain the need for the legislation.
As a result of O LA’s activities in

1988, Congress enacted tax provi
sions important to the FDIC as
part of The Technical and
Miscellaneous Revenue Act of
1988 (TAM RA), which was signed
into law on November 10. These
provisions deal with failed and fail
ing institutions. First, they clarify
the tax treatment of assistance
payments, net operating losses and
built-in losses by extending to the
FDIC, with some modifications,
provisions previously applicable
only to the Federal Home Loan
Bank Board. Second, they provide
the IRS with authority to issue
regulations permitting the FDIC to
file returns for — and receive funds
owed to — failed banks when a fail
ed bank is a member of a holding
company.
In the upcoming year, the Office
of Legislative Affairs will work to
secure enactment of legislation deal
ing with:
•

Troubled Thrifts. By providing
testimony and through congres
sional staff discussions, O LA will
work to complete a legislative
solution to the escalating thrift
crisis. The FDIC’s study, Deposit
Insurance for the Nineties —
Meeting the Challenge, together
with the Administration’s recom
mendations, will be the basis for
legislative action. Priorities
include financial, regulatory and
structural reforms to the deposit
insurance system. Areas of
particular interest to the FDIC
include preservation of a finan
cially and organizationally
independent insurance fund,
controlling insurance costs by
acting more like a private
insurer and obtaining additional
controls over revenues. OLA
also will seek strengthened
enforcement powers, including
the ability to require cross
guarantees from affiliated institu
tions when one institution fails.

•

Batik Powers. Prior efforts to
make banks more competitive,
while protecting the deposit
insurance fund, will continue.
Tax Provisions. The tax
assistance provisions contained
in TAMRA are scheduled to
expire on December 31, 1989.
O LA will work to retain the
clarifications provided by these
provisions.

•

Office of Research
and Statistics
The U.S. deposit insurance system
was the major subject of discussion
and study in the Office of Research
and Statistics (ORS) during 1988.
At the request of Chairman Seidman, ORS, in conjunction with the
Division of Bank Supervision’s
Office of Policy, undertook this
review because of the growing
realization that the deposit
insurance system requires some
fundamental changes if it is to
continue to serve the purposes for
which Congress created it over 55
years ago. The resulting study,
Deposit Insurance for the Nineties
— Meeting the Challenge, examines
the FDIC’s recent experience, and
that of the FSLIC, and explores how
to improve deposit insurance so it
can become a cost-effective system
for the Nineties. The study resulted
in ten recommendations:
•

•

Federal deposit insurance is here
to stay; so our efforts must be to
manage the system better.
Federal insurers should be able
to operate as much as possible
like private insurers.
The primary mission of federal
insurers must be to maintain the
integrity of their insurance fund,
preventing undue risk-taking by
insured institutions.
Federal insurers should be
separately budgeted, and not a
part of the regular federal
budget.

•

Federal insurers should be able
to set insurance premium rates
that reflect loss experience.
Federal insurers should have the
right to decide who shall have
deposit insurance, and be able to
implement that decision swiftly.
All insured institutions should be
regulated according to common
accounting and supervisory
standards.
All financial institutions that
“buy” federal deposit insurance
should be obligated, in addition
to paying premiums, to
guarantee the insurer against
any insurance loss caused by
other banks owned by a
common parent.
A banking structure should be
established that limits risk inside
the banks to traditional banking
activities.
The supervision of risk in finan
cial institutions needs to be
improved to prevent concentra
tions in portfolios, among other
things.

Other studies conducted by ORS
during 1988 dealt with resolution
costs of bank failures, interest rate
exposure of financial intermediaries
and “derivative” mortgage securities.

I Maureen Muldoon,
Financial Analyst

►A rthur Murton.
Financial
Economist

The results of these studies
appeared in the FDIC Banking
Review, a new FDIC publication.
Staff banking analyses are
reported in the Quarterly Banking
Profile, an FDIC publication that
contains aggregate condition and
income data for all FDIC-insured
commercial banks as well as a brief
discussion and graphical presenta
tion highlighting significant
developments and trends in the
banking industry. Generally publish
ed within 75 days of the end of the
reporting period, the Quarterly
Banking Profile is the earliest
official release of industry-wide
aggregate banking data.

Office of Budget and
Corporate Planning
The Office of Budget and
Corporate Planning (OBCP) coor
dinates and oversees the FDIC’s
ongoing budget processes. Using
general guidance from senior
management, and specific instruc
tions from OBCP, each component
organization prepares its own
budget and performance plan for
analysis by OBCP. Following

•Roger Watson,
Director

a formal review of the individual
submissions, OBGP prepares a
unified budget and presents it to
the FDIG’s Board of Directors for
approval.
Because of the increase in failed
banks and resulting liquidation
activities, many of the FDIC’s field
offices in 1988 were further
consolidated to enhance efficiency.
These changes increased the
complexity of FDIC budgeting and
added new challenges to the
preparation of year-to-year
comparative analyses.
The FDIG’s 1989 budget
(collected in 1988) emphasizes
three concepts: program tracking,
productivity/workload analysis and
staff-year measurement. OBGP
monitors actual performance
against plans and budgets and
provides senior management with
periodic reports on significant
variances, emerging trends and the
achievement of goals.
Program tracking. For budget
purposes, in late 1988 the FDIC’s
workload was organized into seven
specific programs: applications, risk
management, compliance, failing
banks and assistance, closings, asset
management and general
administration. These programs
represent the life cycle of banks
and cut across organizational and
expense lines that were previously
difficult to quantify. OBGP will
track these reclassified programs in
1989 and the resulting statistics
will help the FDIC to allocate
resources more efficiently in the
future.
Productivity/w orkload
measurement. The FDIC’s 1989
budget, like the previous year’s
budget, reflects productivity/
workload statistics and goals of the
FDIC’s divisions and offices. These
productivity objectives (and results)
form an important part of OBGP’s
effort to keep senior management
informed about the Corporation’s

performance. They are vital to
long-term resource planning and
allocation efforts.
Staff year analysis. With staffing
and benefits costs constituting
more than 55 percent of the
FDIC’s budget, the computation of
staff years (known as Full Time
Equivalents, or FTE’s, throughout
the federal government) by pay
period is a key component of all
financial analyses. Staff years were
closely examined in late 1988 and
served as the basis for allocating
the personnel-related portions of
the 1989 budget. Related costs
such as travel, office support and
contract services, wherever
applicable, will be refined in 1989
based on the knowledge gained
from these analyses.
In addition to its budgeting role,
OBCP increasingly served as an
information source and special
project team for other offices and
senior management in 1988
because of its continuous access to
financial, staffing and workload
information about the FDIC.

Office of Corporate Audits
and Internal Investigations
The operations of the Office of
Corporate Audits and Internal
Investigations (OCAII), which is the
FDIC’s professional internal auditor,
serve to safeguard the FDIC’s assets,
perform a managerial control func
tion for the Board of Directors and
eliminate waste, fraud and ineffi
ciency.
OCAII recommends improvements
in fiscal and operational controls and
provides audit reports to the FDIC
Board of Directors and senior
management. OCAII also coor
dinates its work with the U.S
General Accounting Office (GAO)
and provides consultation to the
GAO in the conduct of its oversight
activities.
In 1988, OCAII had audit and
investigative responsibility for over

835 billion of assets, consisting of
over $25 billion of Corporation
assets and about $10 billion in assets
of liquidation sites. OCAII also had
the same responsibilities for the
activities of over 8,000 FDIC
employees. In 1988, OCAII issued
audit reports on 258 receiverships,
offices and corporate functions.
Based on audit work performed
during the year, OCAII identified
numerous conditions and presented
related recommendations to improve
controls over operations, the efficien
cy and effectiveness of activities, and
the integrity and accuracy of
corporate and liquidation records.
Productivity initiatives permitted
OCAII to expand audit coverage
while reducing fees for supplemental
audit services almost 15 percent
from 1987 levels and almost 50
percent in the last two years.
The investigative staff completed
16 in-depth investigations during the
year. OCAII’s investigations
contributed significantly to the
FDIC’s efforts to promote
employees’ integrity, provide a
positive environment in which the
FDIC’s activities can be conducted
and combat fraud waste and abuse.
On October 18, 1988, President
Reagan signed the Inspector General
Act Amendments of 1988 which
establish Offices of Inspector
General in 33 designated federal
entities, one of which is the FDIC. In
1989, OCAII will be named as the
Office of Inspector General and
various requirements of the Act,
such as semi-annual reporting to
Congress, will be implemented.

Office of Consumer Affairs
The Office of Consumer Affairs
(O C A) is responsible for monitoring
consumer and civil rights issues and
responding to complaints about
bank practices that may be unfair
or deceptive.
One of OGA’s primary functions
is handling complaints and inquiries
received from consumers and

others. OCA and consumer
compliance personnel in the FDIC’s
regional offices reported a total of
3,890 complaints and 39,147
inquiries in 1988, an increase of
five percent in complaints and 35.5
percent in inquiries over 1987. The
toll-free telephone “ hotline” (1-800424-5488) is a major source of the
Office’s inquiries. Again in 1988,
the topics that generated the most
questions were deposit insurance
(35 percent) and general banking
information (13 percent).
In response to the public’s grow
ing concern about deposit
insurance, OCA in a cooperative
effort with representatives from
other FDIC divisions and offices,
produced a videotape on the
subject, FDIC Insurance — Protec
ting Your Deposits. The videotape,
available in English and Spanish, is
designed to inform consumers,
personnel of financial institutions
and new FDIC employees about
the basics of deposit insurance
coverage. In December the FDIC
began filling orders for the
videotape.
OCA also is responsible for
evaluating the adequacy of the
FDIC’s compliance examination
program. During 1988, compliance
examinations increased 34.5
percent (excluding visitations) to
2,988. With support from FDIC
regional offices, OCA conducted
three one-day seminars — in
Wisconsin, Texas and California —
for bankers in 1988. The purpose
of the seminars was to help
bankers comply with consumerrelated laws and regulations, thus
reducing the number of substantive
violations found during examina
tions. Over 270 bankers from 196
institutions participated. Based on
the success of these seminars, OCA
plans to conduct three or four
similar seminars during 1989.
In July, OCA sponsored its
second annual Consumer and

NUMBER OF OFFICIALS AND EMPLOYEES OF THE FDIC,
1987—1988 (Year-end)_____________________________________
Washington
Office

Total

Regional &
F ield Offices

1988

1987

1988

1987

1988

Division of Bank Supervision

2594

2521

113

149

2481

2372

Division of Liquidationt

Executive Offices*

1987

3371

4400

3344

4357

Legal Division

904

880

163

155

741

725

Division of Accounting and
Corporate Services

903

1017

524

520

376

497

Office of Research and
Statistics

Office of Corporate Audits and
Internal Investigations

Office of Personnel
Management

Office of Equal Employment
Opportunity

8060

9098

1106

1135

6954

7963

TO TAL

* Executive Offices include the Offices o f the Executive Secretary, Corporate Communications, Legislative Affairs, Budget
and Corporate Planning and Consumer Affairs.

t Division o f Liquidation totals include temporary employees, most of whom were employed by failed banks and assigned
to field liquidations.

Community Group meeting. Topics
discussed included: compliance
examinations and consumer-related
banking legislation, soundness of
the deposit insurance system,
liquidation of closed banks, bank
supervision and safety and sound
ness. The meeting, attended by
leaders of consumer and communi
ty groups, small and minority
business representatives, and FDIC
officials improved communication
among these groups. As part of
OCA’s ongoing educational
activities, an annual training
conference was conducted in April
for regional office and senior
compliance examiners.

Office of Personnel Management
The Office of Personnel Manage
ment (OPM) plans, develops,
implements and evaluates the
personnel management programs
of the FDIC. These programs
include: (1) position management
and position classification; (2)
labor-management relations; (3)

recruitment, staffing and place
ment; payroll; awards; (4)
employee development and train
ing; (5) employee performance
evaluations; (6) grievances,
disciplinary actions and appeals; (7)
employee relations and services,
including a health program; and (8)
personnel records, reports and
procedures to ensure the preserva
tion of employees’ rights under the
Freedom of Information and
Privacy Acts.
The total number of FDIC staff
nationwide at year-end 1988 was
8,060, down nine percent from
9,098 a year earlier. Field office
staff decreased almost nine percent,
while the number of employees
located in Washington, D.C.,
remained about the same. These
and other staffing totals are shown
in the above table.
OPM continued its active recruit
ment programs in 1988, especially
for bank examiner (trainee) posi
tions, with an emphasis on
recruiting outstanding scholars and
bi-lingual/bi-cultural, minority and

female applicants. OPM reviewed
over 2,800 bank examiner (trainee)
applications, visited more than 285
colleges and universities and attend
ed some two dozen job fairs and
community outreach programs for
minority and Hispanic groups.
Through these efforts, the FDIC
hired 250 new bank examiner
trainees and 124 outstanding
scholars (a GPA of 3.6 or above).
The overall average GPA of those
selected was 3.4. In addition,
minority appointments increased
seven percent.
The FDIC successfully completed
the first full year of processing
payroll and personnel actions under
the U.S. Department of Agriculture
National Finance Center, and began
further payroll/personnel service
enhancements with additional
automated systems.
The government-wide annual
leave transfer program was
implemented in mid-1988, permit
ting federal employees, including
FDIC staff, to donate earned annual
leave to other employees for
medical emergencies.
Training programs for FDIC
employees increased significantly in
1988. About 300 individual training
authorizations were issued during
1988, about twice as many as in
the previous year. OPM conducted
160 on-site training sessions in
regional and liquidation offices
around the country in 1988,
compared to 98 in 1987.
To keep pace with the FDIC’s
rapidly increasing use of microcom
puters, OPM offered more courses
to employees in 1988 on learning
how to use them. A substantial
increase in microcomputer training
is anticipated in 1989 as the FDIC
installs local area network systems
in its offices across the country.
OPM also administers the
Executive Development Program.
Two sessions of the Executive and
Management Leadership Seminar, a

two-week residential program for
senior level staff, were held for the
first time in 1988 and two more
sessions are planned for 1989.
OPM’s Employee Relations
Branch experienced a significant
increase in its workload in 1988 as
a result of increased activity in the
labor-management relations area
The branch responded to many
inquiries about the new Federal
Employees Retirement System and
changes to existing FDIC benefit
programs.
OPM coordinates the nomination
and selection of outstanding
employees for the FDIC’s annual
awards. In 1988, Maren Hardy,
public affairs specialist in the Office
of Corporate Communications,
Washington, D.C., won the Chair
man’s Award, which is presented to
a non-examiner employee who has
demonstrated devotion to duty,
integrity and professional expertise;
the Edward J. Roddy Award, which
recognizes the exceptional career
examiner who exhibits integrity,
imagination and leadership, was
presented to William D. Mitchell,
Field Office Supervisor in Baton
Rouge, Louisiana; and Thomas W.
Louden, Jr., assistant to the director
of the Corporate Services Branch of
the Division of Accounting and
Corporate Services, was selected for
the Nancy K. Rector Award,
presented to an employee who
expands opportunities for personal
or professional growth in others.
Each winner received a cash award
and a gift.
Each year the FDIC presents an
award to an outstanding handicap
ped employee. In 1988, the winner
was Nellie Marin, an administrative
clerk in the FDIC’s New York
Regional Office. Bom with a birth
defect attributed to the drug
thalidomide, which was banned in
the U.S. after its potential effects on
unborn children became known,
Ms. Marin is known for her interest

in helping handicapped children.
She was honored by the FDIC for
her competence in payroll and
other tasks and as a word processor,
her flexibility in performing multi
ple tasks without supervision and
her willingness to accept new
assignments.

Office of Equal
Employment Opportunity
The Office of Equal Employment
Opportunity (OEEO) manages the
FDIC’s affirmative action programs
for minorities, women, the handi
capped and disabled veterans.
OEEO also administers discrimina
tion complaint procedures. In 1988,
OEEO prepared a second five-year
affirmative action plan for
minorities and women, which was
reviewed by the Equal Employment
Opportunity Commission. OEEO
also prepared annual updates and
affirmative action accomplishment
reports for minorities and women,
veterans and the handicapped
during 1988.
Changes in the FDIC’s workforce
resulted in 98 requests for counsel
ing and the filing of 31 complaints
of discrimination. A t year-end 1988,
there were 47 Equal Employment
Opportunity Counselors located
throughout the U.S at regional,
consolidated or field offices and at
FDIC headquarters.
As part of its responsibilities,
OEEO acquires equipment needed
by employees to accommodate
their disabilities. Requests for
devices are evaluated by OEEO.
Purchases in 1988 included a
wheelchair, teletype and printer,
phone amplifiers, lumbar support
chairs and personal computers for
visually handicapped and hearingimpaired employees. In addition,
telephone devices for the deaf were
installed in the Office of Personnel
Management and the FDIC Credit
Union.

During 1988 OEEO provided sign
language interpreters for several
events, enabling hearing impaired
employees to participate in training
classes, Awareness Week activities
and the FDIC’s annual awards
ceremony. A new pamphlet, Work
ing With a Hearing Impaired CoWorker, was developed by OEEO
and distributed to employees.
To further its outreach efforts to
potential employees, OEEO
conducted employment application
workshops at Gallaudet University,
Washington, D.C., the Maryland
Department of Economic and
Employment Development, District
of Columbia Rehabilitation Services,
University of Puerto Rico at
Mayaguez and Humacao, and

Catholic University, Ponce, Puerto
Rico. In addition, OEEO
participated in recruitment fairs at
Haskell College in Kansas and
Crown Point Institute of
Technology, New Mexico. OEEO
also provided exhibits about the
FDIC at conventions, including the
Hispanic Bar Association, NAACP,
Federally Employed Women,
League of United Latin American
Citizens, U.S. Hispanic Chamber of
Commerce and the President’s
Committee on Employment of
People With Disabilities.
Through OEEO efforts, there were
two participants from the United
and South Eastern Tribes in the Job
Training Partnership Act program;
one was subsequently hired by the

FDIC (the United and South Eastern
Tribes recognized the FDIC in 1988
for its assistance in job placement).
Under the Veteran’s Administration
unpaid work experience program,
one person participated and was
subsequently hired by the FDIC.
Under the Outreach Program, six
students from Washington, D.C.,
area high schools or universities
were placed in various headquarters
offices.
Training courses for FDIC
employees initiated by OEEO
during 1988 included: Sign
Language, Equal Employment
Opportunity for Managers and
Supervisors, Career Strategies, The
Promotable Woman, and the second
Annual EEO Counselors Seminar.

Legislation Enacted in 1988

The Technical and Miscellaneous
Revenue Act of 1988
(Pub. L. 100-647).
This Act extends to troubled
banks assisted by the FDIC, until
December 31, 1989, the special tax
treatment formerly accorded only
to FSLIC-assisted institutions.
However, deductions for net
operating losses, interest expenses
and loan portfolio losses will be
reduced to an amount equal to 50
percent of the tax-free FDIC (or
FSLIC) assistance payments. The
Act also provides that 50 percent
of a failed bank’s over-funded
pension plan assets transferred to a
bridge bank may be distributed to
the benefit plan maintained by the
bridge bank.

grant an exemption from the
notification requirements
applicable to insiders of financial
institutions, and (3) clarify that the
“good faith” defense from liability
currently available to financial
institutions also applies whenever
records exempted by the insider
provision are furnished to law
enforcement agencies.

Moratorium Extension
(Pub. L. 100-378).
This law extends for an additional
year, until August 10, 1989, the
moratorium on FSLIC-insured
institutions converting to FDICinsured institutions.

The Management Interlocks
Revision Act of 1988

Anti-Drug Abuse Act of 1988

(Pub. L. 100-650).

(Pub. L. 100-690).

This legislation changes the defini
tion of management “control” from
50 percent to 25 percent, permits
interlocks involving advisory and
honorary directors in depository
institutions with assets of no more
than $100 million, allows interlocks
resulting from the acquisition of a
failed or failing institution to
continue for five years after the
acquisition, permits a limited excep
tion for director interlocks between
diversified savings-and-loan holding
companies, and extends for another
five years the existing 10-year
grandfather provision for pre-1978
interlocks.

This legislation amends the Bank
Secrecy Act to (1) broaden the
definition of “financial institution,”
for purposes of money laundering
reporting requirements, to cover
businesses similar to financial
institutions, (2) require financial
institutions to request and record
identification for cash-like trans
actions over $3,000, and (3) permit
the Secretary of the Treasury to
target certain institutions or
geographic areas for additional
recordkeeping and reporting
requirements with respect to
currency transaction reports.
The legislation also amends the
Right to Financial Privacy Act to (1)
grant an exemption permitting
government agencies to transfer
records to the Justice Department
to aid a criminal investigation, (2)

Fair Credit and Charge Card
Disclosure Act of 1988
(Pub. L. 100-583).
This Act amends the Truth in
Lending Act to require new dis

closures in connection with
applications and solicitations for
all credit cards (including bank
and retail store cards), and for
“ charge cards” as well. The Act
requires the following credit card
terms to be disclosed on or with
all applications and solicitations to
open a credit card account mailed
to consumers: the annual percent
age rate (APR), any periodic
membership fee, any minimum
finance charge, any transaction
charge, the grace period and the
type of balance calculation method
used. The Act also preempts all
state laws with respect to the
disclosures mandated by its
provisions.

Home Equity Loan Consumer
Protection Act of 1988
(Pub. L. 100-709).
This law requires lenders to
disclose significant details about the
terms of open-end home equity
loans, including a notice that
defaulting on such a loan could lead
to loss of the house. Lenders are
required to make the disclosures
before an application is filed and to
provide detailed explanations of
how variable-rate loans work, the
effect of interest rate changes on a
borrower and the full costs of apply
ing for the loan. The legislation also
prohibits a lender from unilaterally
changing the terms of a loan agree
ment after the contract is signed
and, except in certain situations,
unilaterally terminating an open-end
home equity loan. The act is effec
tive five months after implementing
regulations are issued by the
Federal Reserve Board.

Rules and Regulations Adopted in 1988

Agricultural Loan Loss
Amortization
(June 14, 1988)
The FDIC amended Part 324 of
its regulation that establishes
eligibility requirements and applica
tion procedures for FDIC-insured
state nonmember banks in distress
ed agricultural regions of the coun
try that wish to amortize farm loan
losses.

code; clarifying the permissible
conditions of acceptance of food,
refreshments and entertainment;
modifying existing credit restric
tions with regard to credit cards;
and permitting renegotiation of
existing debt on the same terms
and conditions as those offered to
the public.

Fair Housing
(August 16, 1988)

Applications, Requests,
Submittals, Delegations of
Authority, and Notices of
Acquisition of Control
(December 27, 1988)
The FDIC has amended section
303.4 of Part 303 of its regulations
to implement certain amendments
to the Change in Bank Control Act
made by section 1360 of the AntiDrug Abuse Act of 1986. Under the
amendment, the FDIC may waive
the newspaper publication or
public comment solicitation
requirements of the regulation, or
may act on a proposed change in
control prior to the expiration of
the comment period. The amend
ment also provides that the FDIC
may shorten the public comment
period to a period of not less than
10 days.

Employee Responsibilities
and Conduct
(November 29, 1988)
The FDIC amended Part 336 of
its rules and regulations governing
standards of ethical and other
conduct of FDIC employees. Signifi
cant changes include: identifying
certain employees subject to report
ing requirements and credit restric
tions by position description series

The FDIC amended section
338.1(f) of its regulations to
eliminate improvement,
maintenance and repair loans from
existing “ home loan” data gathering
requirements. Home equity loans
for these purposes would also be
eliminated. This amendment brings
more uniformity to fair housing
lending data requirements among
federal bank regulators and should
result in administrative cost savings
for both the FDIC and state
nonmember banks. The FDIC
believes this amendment will
reduce the paperwork burden on
the banking industry without
impairing enforcement of fair
housing lending laws.

Foreign Banks; Country
Exposures Concentration
(December 20, 1988)
The FDIC amended section
346.23 of its rules and regulations
to change the deadline for comply
ing with the limitations on country
exposures of insured U.S. branches
of foreign banks from December
31, 1988, to a provision
establishing that 30 days’ prior
notice will be given before
compliance is required.

Interest on Deposits
(November 23, 1988)
The FDIC amended Part 329 of
its rules and regulations to reflect a
recent change in the law that
permits nonprofit political organiza
tions to hold negotiable order of
withdrawal (N O W ) accounts.

Minimum Security Devices and
Procedures and Bank Secrecy
Act Compliance
(May 19, 1988)
The FDIC amended Part 326 of
its rules and regulations covering
minimum security devices and
procedures and Bank Secrecy Act
compliance. The amendment
reduces the overall recordkeeping
burden by eliminating the require
ment that insured nonmember
banks retain a record identifying
the law enforcement official
consulted on security matters.
However, the consultation
continues to be mandated. Among
other technical changes, to clarify
the applicability of all sections of
Part 326 to insured branches of
foreign banks, the term “ insured
nonmember bank” has been
substituted for the term ’’insured
state nonmember bank” wherever
the latter term previously appeared
in Part 326.

Rules of Practice
and Procedure
(December 22, 1988)
The FDIC amended Part 308 of
its rules and regulations governing
the conduct of administrative
proceedings before the FDIC. The
changes include a reorganization of
existing sections of Part 308,

revisions of some sections that
existed previously, and the addition
of new sections. The purpose of the
revised regulation is to secure a just
and orderly determination of
administrative proceedings before
the FDIC. The revision of Part 308
is a result of the review conducted
under the FDIC’s Regulation Review
Program.

PROPOSED RULES
Capital; Risk-Based
Capital Guidelines
(March 15, 1988)
The FDIC issued for public
comment a proposal to amend Part
325 of its rules and regulations by
adding an appendix containing a
statement of policy on risk-based
capital that would apply to all
insured state nonmember banks.
The risk-based capital framework
reflected in the proposed policy

statement was developed jointly
with representatives from the

Foreign Banks - Part 346

Federal Reserve System and the
Office of the Comptroller of the

The FDIC prepared for public
comment revisions to the rules in

Currency. It is based largely on the
December 10, 1987, consultative
paper prepared by the Basle

Part 346 governing FDIC-insured
branches of foreign banks that
relate to: policy regarding the

Committee on Banking Regulations
and Supervisory Practices.

operation of insured and nonin
sured branches by a foreign bank;
pledge of assets; and asset

Deposit Liabilities
(November 25, 1988)

(October 20, 1988)

maintenance.

The FDIC issued for public
comment a proposed regulation
expanding the definition of the

Insurance Coverage - Unit
Investment Trust - Part 330

term “deposit.” The proposed rule

Under a proposed rule, unit
investment trusts would no longer
be treated as corporations for
purposes of insurance coverage
limits. Instead, each beneficial
owner of the trust’s deposits would
be insured up to the $100,000
insurance limit.

holds that a bank’s liability on a
promissory note, bond acknowledg
ment of advance, or similar obliga
tion that is issued or undertaken by
the insured bank as a means of
obtaining funds is a deposit
liability.

(October 12, 1988)

Statements of Financial Position

December 31

(In thousands)

1988

1987

Assets
Gash

Investment in U.S. Treasury obligations,
net (Note 2)

12,644

18,499

16,208,010

16,098,874

669,243

464,292

5,687,327

5,771,421

77,534

73,438

£ 22,654,758

$ 22,426,524

Accrued interest receivable on investments
and other assets
Net receivables from bank assistance
and failures (Note 3)
Property and buildings (Note 4)

Liabilities and the Deposit Insurance Fund
Accounts payable, accrued liabilities
and other

120,498

59,499

Liabilities for estimated
bank assistance (Note 5)

3,877,376

1,236,952

Liabilities incurred from bank
assistance and failures (Note 6)

4,595,654

2,827,631

100

600

8,593,628

4,124,682

14,061,130

18,301,842

$ 22,654,758

$ 22,426,524

Estimated losses from Corporation
litigation

Total Liabilities
Deposit Insurance Fund

See accompanying notes.

Statements of Income and the Deposit Insurance Fund

For the year ended
December 31
1988
1987

(In thousands)

Income:
Assessments earned (Note 7)
Interest on U.S. Treasury obligations
Other income

Total Income

1,773,011
1,396,402
178,245

1,695,958
1,534,937
88,532

3,347,658

3,319,427

223,911

204,938

1,023,926

20,256

6,298,266

2,996,923

42,267

48,785

7,588,370

3,270,902

Expenses and Losses:
Administrative operating expenses
Merger assistance losses and expenses
(Note 3)
Provision for insurance losses
(Note 3)
Nonrecoverable insurance expenses

Total Expenses and Losses

Net Income (Loss)

(4,240,712)

Deposit Insurance Fund—January 1

18,301,842

18,253,317

^>14,061,130

#18,301,842

Deposit Insurance Fund—December 31

See accompanying notes.

48,525

Statements of Cash Flow

For the year ended
December 31
1988
1987

(In thousands)
Cash Flows From Operating Activities:
Cash inflows from:
Assessments earned
Interest on U.S. Treasury obligations
Recoveries from bank assistance and failures
Increase (decrease) in accounts payable,
accrued liabilities and other
Cash outflows for:
Administrative operating expenses
Disbursements for bank assistance and failures
Increase (decrease) in accrued interest
receivable on investments and other assets
Net Cash Provided by Operating Activities

1,773,011
1,492,126
4,451,660
60,999

226,245
6,639,154
204,951

$ 1,695,958
1,646,125
3,161,837
(57,209)

215,706
4,908,006
(39,265)

707,446

1,362,264

Cash inflows from:
Maturity and sale of U.S. Treasury obligations

3,390,000

8,706,937

Cash outflows for:
Purchase of U.S. Treasury obligations
Property and buildings

1,985,938
5,483

9,057,297
23,816

1,398,579

(374,176)

Cash Flows From Investing Activities:

Net Cash Provided (Used) by Investing Activities
Cash Flows From Financing Activities:
Cash outflows for:
Payments of liabilities incurred from bank
assistance and failures
Cash Used by Financing Activities

502,957

1,755,323

502,957

1,755,323

Net Increase (Decrease) in Cash and Cash
Equivalents

1,603,068

Cash and Cash Equivalents—January 1

1,324,942

2,092,177

$ 2,928,010

$ 1,324,942

Cash and Cash Equivalents—December 31

See accompanying notes.

(767,235)

Notes To Financial Statements

DECEMBER 31, 1988 A N D 1987
1. Summary o f Significant Accounting Policies:
General. These statements do not include accountability for assets and liabilities of closed insured banks for which the
Corporation acts as receiver or liquidating agent. Periodic and final accountability reports of the Corporation’s activities
as receiver or liquidating agent are furnished to courts, supervisory authorities, and others as required.
U.S. Treasury Obligations. Securities are shown at amortized cost, which is the purchase price of securities less the
amortized premium or plus the accreted discount. Such amortizations and accretions are computed on a daily basis from
the date of acquisition to the date of maturity. Interest is also calculated on a daily basis and recorded monthly using
the constant-yield method.
Allow ance fo r Loss. The Corporation records as a receivable the funds advanced for assisting and closing banks and
establishes an estimated allowance for loss. The allowance for loss represents the difference between the funds advanced
and the expected repayment, based on the estimated cash recoveries from the assets o f the assisted or failed bank, net
of all liquidation costs. The Corporation has recorded the estimated losses related to all banks that have been closed,
or that have entered into financial assistance agreements, or that the Corporation has identified as probable to fail or
in need of assistance as of year-end. The Corporation establishes an estimate for potential loss regarding litigation against
the Corporation in its Corporate capacity. The Corporation’s Legal Division recommends these estimated losses on a
case-by-case basis.
Depreciation. The cost of furniture, fixtures, and equipment is expensed at time of acquisition. This policy is a departure
from generally accepted accounting principles; however, the financial impact is not material to the Corporation’s finan
cial statements. The Washington Office Buildings are depreciated on a straight-line basis over a 50-year estimated life.
The San Francisco Condominium Offices are depreciated on a straight-line basis over a 35-year estimated life.
Merger Assistance Losses and Expenses. The Corporation records the costs incurred for 13(c) assistance and/or merger
assistance with banks as a merger assistance loss. These costs, which are not liquidation-related, are specified in the terms
of the agreements and have no potential for recovery by the Corporation.
N onrecoverable Insurance Expenses. Nonrecoverable insurance expenses are incurred by the Corporation as a result
of (1) paying insured depositors in closed bank payoff activity; (2) administering and liquidating assets purchased in a
corporate capacity; (3) bid-package preparation for assistance transactions; and (4) bridge bank operations.
Statements o f Cash Flow. In November 1987, the Financial Accounting Standards Board issued Statement No.95, State
ment of Cash Flows (SFAS 95). The Corporation has elected to adopt the provisions of SFAS 95 by presenting the Statements
of Cash Flow in place of the Statements of Changes in Financial Position. For purposes of implementing SFAS 95, the
Corporation has defined cash equivalents as short-term, highly liquid investments with original maturities of three months
or less. This includes the daily purchase of one-day Special Treasury Certificates. The Corporation has also elected to
restate 1987 results for comparative purposes.
Reclassifications. Reclassifications have been made in the 1987 Financial Statements to conform to the presentation
used in 1988.

2. U.S. Treasury Obligations:
All cash received by the Corporation not used to defray operating expenses or for outlays related to assistance to banks
and liquidation activities is invested in U.S. Treasury securities. The Corporation’s investment portfolio consists of the
following (in thousands):
December 31, 1988

M aturity
One Day

Description

Yield to M aturity

Book

Market

Face

at Market

Value

Special Treasury
Certificates

9.30

* 2,915,366

$ 2,915,366

Less Than

U.S.T. Bills,

1 year

Notes and Bonds

9.07

4,289,304

4,302,784

4,280,000

1-3 years

U.S.T. Notes and Bonds

9.21

5,004,351

4,935,705

4,900,000

3-5 years

U.S.T. Notes and Bonds

9.21

3,998,989

3,809,137

3,900,000

£16,208,010

*15,962,992

*15,995,366

December 31, 1987

M aturity
One Day

Description

Yield to M aturity

Book

Market

Face

at Market

Value

Special Treasury
Certificates

6.60

* 1,306,443

Less Than

U.S.T. Bills,

1 year

Notes and Bonds

6.78

3,394,085

3,442,391

3,390,000

1-3 years

U.S.T. Notes and Bonds

7.81

5,158,332

5,355,063

5,080,000

3-5 years

U.S.T. Notes and Bonds

8.29

4,586,418

4,475,610

4,300,000

5-10 years

U.S.T. Notes and Bonds

8.55

1,653,596

1,613,677

1,700,000

*16,098,874

*16,193,184

*15,776,443

The unamortized premium, net of unaccreted discount, for 1988 and 1987 was $212,644,000 and $322,431,000, respec
tively. The amortized premium expense, net of accreted discount income, for 1988 and 1987 was $95,724,000 and
$111,188,000, respectively.

3. Net Receivables from Bank Assistance and Failures (in thousands):
December 31
1988

1987

Receivables from Bank Assistance:
Open banks

81,301,753

Facilitate merger agreements
Allowance for losses

233,995

36,000

87,600

350,648

351,148

Facilitate deposit assumptions

(1,110,328)

(115,105)

578,073

557,638

Bridge Bank Receivable:
Capitalization

1,008,241

Continental Bank (C IN B ) Assistance:
2,153,189

Loans and related assets
Preferred stock
Allowance for losses

2,531,644

12,797

9,973

515,436

763,750

Dividend receivable

(1,439,200)

(1,640,852)

1,242,222

1,664,515

3,207,323

3,180,629

Receivables from Bank Failures:
Insured Depositor Payoff

32,841

18,717

8,456,417

6,897,625

Depositors’ claims unpaid
Purchase and Assumption transactions

500,999

Corporate Purchase transactions
Allowance for losses

280,634

(9,338,789)

(6,828,337)

2,858,791

3,549,268

85,687,327

85,771,421

Analysis of Changes in Allowance for Losses (in thousands):
1988

Beginning
Balance
Open bank assistance
CINB

115,105
1,640,852

Provision

Transfers

For

And
Adjustments

Loss
8

53,271
(201,652)

Ending
Balance

941,952

1,110,328

1,439,200

- -

Closed Bank:
Insured Depositor Payoff

1,634,862

423,578

(4,428)

2,054,012

Purchase and Assumption

5,072,785

1,966,368

(54,891)

6,984,262

120,690

179,825

6,828,337

1,236,952

Corporate Purchases
Total Closed Bank

300,515

2,569,771

(59,31 9 )

9,338,789

3,877,376

(1,236,952)

3,877,376

-a

100

8 (3 54,319)

8 15,765.793

Liabilities for estimated
bank assistance
Estimated losses from
Corporation litigation

600
8 9,821,846

(500)
86,298,266

1987
Provision

Open bank assistance

For

And

Ending

Balance

Loss

Adjustments

Balance

116,308

1,691,846

CINB

Transfers

Beginning

(1,203)

(50,994)

-0-

115,105
1,640,852

Closed Bank:
Insured Depositor Payoff
Purchase and Assumption
Corporate Purchases
Total Closed Bank

975,148

659,721

(7)

1,634,862

4,005,253

1,089,488

(21,956)

5,072,785

388,101

68,610

(336,021)

120,690

5,368,502

1,817,819

(3 5 7 ,9 8 4 )

6,828,337

150,000

1,236,952

(150,000)

1,236,952

-0-

600

g (5 07 ,9 8 4)

g 9,821,846

Liabilities for estimated
bank assistance
Estimated losses from
Corporation litigation

6,251
* 7,332,907

(5,651)
g 2,996,923

The Corporation’s liabilities for estimated bank assistance for prior years included amounts which were either transferred
to other line items or which were adjusted through cash outlays.
First RepublicBank/NCNB Texas National (Bridge) Bank:
On July 29, 1988, the forty subsidiary banks of First RepublicBank Corporation, Dallas, Texas, were declared insolvent
by their chartering authority and subsequently closed, with the Corporation appointed receiver. Pursuant to the authority
granted in 12 U.S.C. 1821 (i), the Corporation organized a new national “bridge” bank, called NCNB (North Carolina
National Bank) Texas National Bank (the “ Bank” ), to purchase all assets and assume all deposits and certain other non
deposit liabilities from the failed institutions.
On November 22, 1988, the Corporation, NCNB Corporation, NCNB Texas Corporation, NCNB Texas Bancorporation,
Inc., and NCNB Texas National Bank entered into a financial assistance agreement designed to capitalize and stabilize
the new bridge bank. The key elements of the assistance program are embodied in the Assistance, Service, and Shareholders
Agreements among and between the above mentioned parties. The following discussion outlines the major aspects of
the Corporation’s participation in the overall assistance program.
As part of the initial capitalization, the Corporation purchased 100% (8 million shares) of NCNB Texas National Bank
nonvoting common stock for $840.0 million (included above in the Bridge Bank Receivable). NCNB Texas Bancorpora
tion (100% indirectly owned by NCNB Corporation) purchased 100% (2 million shares) of NCNB Texas National Bank
voting common stock for $210.0 million. Thus, the Corporation retains an 80% nonvoting equity interest in the bridge
bank. NCNB Texas Bancorporation has an exclusive option to purchase the Corporation’s shares for a premium over
the initial per share price. The premium is a factor of the cumulative increase in book value per share of the Bank’s
common stock times an exercise premium multiplier (based on the exercise date). This option terminates on November
22, 1993. The Corporation expects full recovery of its common stock investment.
The new bridge bank began operations with all assets, deposits, and certain non-deposit liabilities (exclusive of $1,051
billion in Corporation Assistance notes which are fully reserved for in the Allowance for Loss from Purchase and Assump
tion transactions above) from the failed First RepublicBank subsidiaries. In accordance with the November 22, 1988

Assistance Agreement, on the Commencement Date, NCNB Texas National Bank segregated into a Separate Asset Pool
(SAP) account approximately $9.2 billion of troubled loans, real estate properties, and other distressed assets, and wrote
them down to market value. In addition, the Bank adjusted all assets (other than SAP assets) and liabilities to their respec
tive fair market value, and established on its books a loan loss reserve equal to approximately 1.25% of the aggregate
book value of its non-SAP Loans. The Corporation’s initial assistance in this transaction stemmed from funding the negative
equity created by these mark-to-market revaluations of assumed assets and liabilities. The Corporation’s payment for
the resultant negative equity was in the form of (1) the assumption of $1.0 billion of the Bank’s Federal Reserve Bank
indebtedness, and (2) the forgiveness of $131.8 million of the Bank’s $300 million indebtedness to the Corporation under
a revolving credit agreement, of which the remaining outstanding balance of $168.2 million is included in the Bridge
Bank Receivable above and was paid on January 11, 1989. Additionally, on January 20, 1989, the Corporation received
a $267.0 million payment from NCNB Texas National Bank as a result of subsequent settlement adjustments. The net
of these three transactions, $864.8 million, is included in Merger Assistance Losses and Expenses in the Statement of
Income for 1988.
Future financial exposure for the Corporation is centered primarily on the Separate Asset Pool. First, the Bank retains
management and administrative responsibility with respect to the SAP (subject to Corporation oversight), but the Cor
poration has financial responsibility for any subsequent decline in the SAP value. The Corporation also must periodically
reimburse the Bank for amounts by which the SAP expenses exceed income. Qualifying SAP expenses include those
costs related to (a) administration of assets, (b) SAP cost to carry, and (c) management incentive fees (not to exceed
$48 million over the life of the SAP).
Secondly, the Corporation is obligated to fund the mark-to-market revaluation of troubled assets transferred to the SAP
during a two-year time frame. In addition to the initial transfer of assets, the Bank may, at its option, transfer unlimited
qualifying assets (as described in the Assistance Agreement) to the SAP in the first year (through December 31, 1989),
and up to $750 million in qualifying assets in the second year (through December 31, 1990). The Corporation estimates
that at the end of the two-year option period, a total of approximately $11.0 billion of distressed assets will have been
transferred to the Separate Asset Pool. Corporation concurrence is required with regard to all distressed asset classifica
tions (i.e., risk ratings) before these assets may be transferred to the SAP. All disputes will be settled by arbitration.
And third, in accordance with the terms of the Assistance Agreement, the Corporation has indemnified the affiliates,
directors, officers, employees, and agents of NCNB Corporation and of NCNB Texas National Bank (other than those
who were, at any time on or prior to July 29,1988, employed by First RepublicBank Corporation or its affiliates) against
costs, losses, liabilities, and expenses incurred in connection with certain claims that may arise as a result of this assistance
transaction.
The Corporation estimates that its total loss associated with the First RepublicBank failure and the subsequent assistance
to the bridge bank will approximate $3.0 billion. Accordingly, the Corporation has established an Allowance for Loss
and corresponding provision for $2,135 billion, consisting of $1,058 billion for Corporation assistance notes and related
accrued interest due from the failed bank included in the Allowance for Loss from Purchase and Assumption transactions
and $1,077 billion included in liabilities for estimated bank assistance. The remaining loss of $865 million, related to
the bridge bank negative equity funding discussed above, is recorded as a merger assistance loss and expense.
After the later of the Majority Ownership Date (i.e., when NCNB Texas Bancorporation becomes owner of 51% or more
of the Bank’s outstanding Common Stock) or November 22, 1991, the Bank may require the Corporation to purchase
all of the remaining Separate Asset Pool assets. The Corporation’s purchase price shall be the book value of the remaining
SAP assets plus or minus the cumulative amount of all gains and losses realized on disposition of SAP assets. The Cor
poration may either purchase the remaining SAP assets itself or direct that a newly chartered, Corporation-funded, Li
quidating Bank purchase the assets. In addition to the above-noted transfer of assets, settlement of the Separate Asset
Pool may occur (a) when the Bank ceases to be manager of at least 50% of the book value o f the SAP assets, (b) when

all SAP assets have been liquidated, or (c) on Novem ber 22, 1993 (the fifth anniversary of the Commencement Date).
In these instances, the Corporation must pay to the Bank the sum of (i) the fair market value of the remaining SAP assets,
(ii) the cumulative gain or loss on the SAP assets (both those previously liquidated and those remaining), and (iii) if a
cumulative gain in item (ii) results, an additional deferred management incentive fee.
CINB Assistance:
The Continental Illinois National Bank and Trust Company of Chicago (CINB) assistance program provided by the Cor
poration, the Federal Reserve Board, the Comptroller o f the Currency, and a group of major U.S. banks, received final
approval from Continental Illinois Corporation shareholders on September 26, 1984. The key aspects of the assistance
program applicable to the Corporation are embodied in an Assistance Agreement and an Implementation Agreement
between the Corporation and CINB, Continental Illinois Corporation, and Continental Illinois Holding Corporation. Dur
ing 1988, Continental Illinois Corporation changed its name to Continental Bank Corporation and the bank’s name was
changed to simply Continental Bank. Discussed below are the major aspects of the Corporation’s participation in the
assistance program.
After consummation of the assistance program on September 26,1984, CINB transferred to the Corporation 02.0 billion
in troubled loans. The Corporation also received a three-year $1.5 billion promissory note from CINB which was paid
in full on September 26, 1987, by transferring additional troubled loans to the Corporation. The $3.5 billion troubled
loan portfolio was, in part, funded by the Corporation’s assumption of $3.5 billion of Federal Reserve Bank of Chicago
(FRB) indebtedness on behalf of CINB. These borrowings bear interest at specified rates established by the FRB and the
U.S. Treasury. The range of rates paid on the debt for 1988 was 6.10% to 1.12%. The Corporation repays these borrowings
by making quarterly remittances of its collections, less expenses, on the troubled loans. If there is a shortfall at September
26,1989, the termination date of the assistance program, the Corporation will make up such deficiency with its own funds.
The Implementation Agreement provides for the Corporation to be reimbursed each quarter for its expenses related to
administering the transferred loan portfolio and for interest paid on the FRB indebtedness. According to the terms of
the Implementation Agreement, collections are to be applied quarterly in the following manner: 1) to the administrative
expenses paid by the Corporation; 2) to the interest owing on the assumed indebtedness; 3) to fund the special reserve
account such that this account plus accrued interest thereon is at least $75 million; and 4) to principal owing under the
FRB agreement.
Collection proceeds totaled $556,849,000 for the year ended December 31, 1988. The collection proceeds were applied
to administrative costs and interest expense of $20,331,000 and $167,653,000, respectively, and to the payment of prin
cipal owing under the FRB agreement amounting to $368,865,000. The Corporation estimated an allowance for loss amoun
ting to $1,439,200,000, as of December 31, 1988, representing the difference between the amount the Corporation will
pay the FRB and the collections on the disposition of the remaining assets after expenses.
The Corporation holds an option to acquire up to 40.3 million shares of Continental Bank Corporation common stock.
Effective close of business December 12,1988, a 4-to-l reverse stock split was declared by Continental Bank, which changes
the number of shares available for purchase under the stock option to 10.075 million shares of new common stock. The
option is exercisable only if the Corporation suffers a loss on the transferred loan portfolio, including unrecovered ad
ministrative costs and interest expense, and cannot be exercised prior to the fifth anniversary of the commencement
date, September 26,1989. The shares subject to the option are owned by Continental Illinois Holding Corporation, which
is owned by the former stockholders of Continental Bank Corporation. If a loss occurs, the Corporation will be entitled
to retain any remaining transferred loans and to exercise the option for one share of Continental Bank Corporation com
mon stock for every $20 of loss at the exercise price of $0.00001 per share of common stock.

In addition to the $3.5 billion in troubled loans, the Corporation purchased $1 billion of two non-voting Continental Bank
Corporation preferred stock issues, consisting of (i) 32 million shares of Junior Perpetual Convertible Preference Stock
for $720 million and (ii) 11.2 million shares of Adjustable Rate Preferred Stock, Class A for $280 million. The Corpora
tion sold 10.5 million shares of the Junior Perpetual Convertible Preference Stock to an underwriting syndicate for pro
ceeds of $259,350,000 in December 1986. During December 1988, two sales of Junior Perpetual Convertible Preference
Stock occurred, a private placement of 1 million shares to the Continental Bank Employee Stock Option Plan — converti
ble to 5 million shares of common stock, and a public offering of 10 million shares — convertible to 50 million shares
of common, with an additional option for 1.25 million shares for oversubscriptions. Total proceeds amounted to
$277,200,000 in December 1988. Currently, the Corporation retains 10.5 million shares of the Junior Perpetual Converti
ble Preference Stock which, based on its conversion potential to Continental Bank Corporation new Common Stock,
has a fair market value as of December 31, 1988, of $25.94 per share or $272 million. Cash dividends received for the
year ended December 31,1988 on the Junior Perpetual Convertible Preference Stock and the Adjustable Rate Preferred
Stock, Class A were $8,600,000 and $29,808,050, respectively.
Net Worth Certificate Program:
The net worth certificate program was established at the Corporation by authorization of the Gam-St Germain Depository
Institutions Act of 1982. Under this program, the Corporation would purchase a qualified institution’s net worth certificate
and, in a non-cash exchange, the Corporation would issue its non-negotiable promissory note of equal value. The total
assistance outstanding to qualified institutions as of December 31, 1988 and 1987, is $321,897,000 and $340,016,000,
respectively. As of December 31, 1988 and 1987, the financial statements excluded $321,897,000 and $340,016,000,
respectively, of net worth certificates, for which no losses are expected. The original authority to issue net worth cer
tificates expired October 13, 1986. The Competitive Equality Banking Act of 1987 reinstated the net worth certificate
program through October 13, 1991.

4. Property and Buildings:
Property and buildings consist of (in thousands):
December 31
1988

Land
Office buildings
Accumulated depreciation

$31,850

1987

$28,283
56,197

54,281
(10,513)
$77,534

(9,126)
$73,438

The Corporation’s 1776 F Street property is subject to notes payable, included in accounts payable, accrued liabilities,
and other, totaling $5,939,000 and $6,131,000 at December 31, 1988 and 1987, respectively.
A portion of depreciation expense is allocated to the failed banks as liquidation expense. In 1988 and 1987, the amount
of depreciation expense allocated to the failed banks was $496,000 and $598,000 respectively.

5. Liabilities for Estimated Bank Assistance:
The Corporation records an estimated loss for its future or potential assistance to those banks which the regulatory pro
cess has identified as being distressed and where ongoing negotiations and/or current agreement terms indicate that Cor
poration bank assistance will be necessary. The Corporation’s outstanding liabilities for this estimated bank assistance
as of December 31, 1988 and 1987, are $3,877,376,000 and $1,236,952,000 respectively.

6. Liabilities Incurred from Bank Assistance and Failures:
The Corporation’s outstanding principal balances on liabilities incurred from bank assistance and failures are as follows
(in thousands):
December 31
1988
Funds held in trust

1987

$ 233,278

Depositors’ claims unpaid

32,841

Notes indebtedness

998,818

Guaranty assistance

14,539

Federal indebtedness

37
18,717

185,405
-0-

3,316,178

2,623,472

114,595,654

$2,827,631

Maturities of these liabilities for each of the next five years and thereafter are (in thousands):
1989

1990

1991

1992

1993

1994/Thereafter

#3,797,728

*200,646

£201,586

8199,397

8102,014

894,283

7. Assessments:
The Corporation assesses insured banks at the rate of 1/12 of one percent per year on the bank’s average deposit liability
less certain exclusions and deductions. The Corporation credits a legislatively authorized percentage of net assessment
income to insured banks. Net assessment income is determined by gross assessments less administrative operating ex
penses and expenses and losses related to insurance operations. This credit is distributed, pro rata, to each insured bank
as a reduction of the following year’s assessment. If the ratio of the Deposit Insurance Fund to estimated insured deposits
drops below 1.10 percent, the Corporation is mandated to reduce the percentage of the net assessment income credited
to a limit of 50 percent. The ratio of the fund to total insured deposits is currently .83% at year-end. For the years ended
December 31,1988 and 1987, losses and expenses related to insurance operations exceeded gross assessments. The Cor
poration did not pay an assessment credit to insured banks in either year and is unable to pay an assessment credit until
assessment income exceeds allowable losses and expenses on a cumulative basis. The following computation reflects the
cumulative balance of assessment income adjusted for allowable expenses (in thousands):
Net Assessment Incom e Credit Computation - Calendar Year 1988
Computation:
Gross assessment income—C.Y. 1988
Less: Carry-over of net losses
and expenses from C.Y. 1987
Administrative operating expenses

8 1,764,132
84,102,433
223,911

Merger assistance losses and expenses

1,023,926

Provision for insurance losses

6,298,266

Nonrecoverable insurance expenses

Excess of losses and expenses over gross assessment income

42,267

11,690,803

9,926,671

Assessment credit adjustment—prior years

(639)

Net excess of losses and expenses over gross assessment income—C.Y. 1988

89.926,032

8. Pension Plan and Accrued Annual Leave:
The Corporation’s eligible employees are covered by the Civil Service Retirement and Disability Fund. Total Corporation
(em ployer) matching contributions to the Civil Service Retirement and Disability Fund for all eligible employees were
approximately $13,404,000 and $12,194,000 for the years ending December 31, 1988 and 1987, respectively.
Although the Corporation funds a portion of pension benefits under the Civil Service Retirement and Disability Fund
relating to its eligible employees and makes the necessary payroll withholdings from them, the Corporation does not
account for the assets of the Civil Service Retirement and Disability Fund nor does it have actuarial data with respect
to accumulated plan benefits or the unfunded liability relative to its eligible employees. These amounts are reported by
the U. S. Office of Personnel Management (OPM ) for the Civil Service Retirement and Disability Fund and are not allocated
to the individual employers. OPM also accounts for all health and life insurance programs for retired Corporation eligible
employees.
The Corporation’s liability to employees for accrued annual leave is approximately $14,698,000 and $13,763,000 at
December 31, 1988 and 1987, respectively.
9. Commitments:
The Corporation’s lease agreements for office space are approximately $114,536,000. The agreements contain escalation
clauses resulting in adjustments, usually on an annual basis. During 1988 and 1987, lease space expense was $34,038,000
and $33,570,000 respectively. Leased space fees for future years are as follows (in thousands):
1989

1990

1991

1992

1993

1994/Thereafter

*25,854

*18,658

*15,154

*13,254

*10,713

*30,903

10. Supplementary Information Relating to the Statements of Cash Flow:
Reconciliation of net income (loss) to net cash provided by operating activities (in thousands):
For the year ended
December 31
1988
Net Income (Loss)

*(4,240,712)

1987
*

48,525

Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Amortization o f U.S. Treasury obligations

95,724

111,188

Building depreciation

891

Provision for insurance losses

6,298,266

2,996,923

12,934

34,998

Accrual of assets and liabilities from bank assistance and failures
Loss incurred for debt assumption
Loss incurred by forgiveness of note receivable

798

1,000,000

-0-

131,759

-0-

Net cash disbursed for bank assistance and
failures not impacting income

(2,447,464)

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

60,999

(1,812,224)
(57,209)

(Increase) decrease in accrued interest receivable on investments
and other assets

Net cash provided by operating activities

(204,951)

707,446

39,265

*1,362,264

Schedule of noncash transactions incurred from bank assistance and failures (in thousands):
For the year ended
December 31
1988

1987

Increase (decrease) in net receivable from bank
assistance and failures:
Preferred stock
Note receivable

970,000
2,100

-0-

(129,809)

Notes in lieu o f cash

18,673

821,534

Depositors’ claims unpaid

14,124

5,552

(941,952)

-0-

Transfer of allowance for loss
Decrease (increase) in liabilities incurred from bank
assistance and failures:
Notes payable
Pending claims o f depositors
Liabilities for estimated bank assistance transfer

(990,773)

(691,725)

(14,124)

(5,552)

941,952

-0-

GAO

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

B-114831

To the Board of Directors
Federal Deposit Insurance Corporation
We have audited the accompanying statements of financial
position of the Federal Deposit Insurance Corporation
(FDIC) as of December 31, 1988 and 1987, and the related
statements of income and the deposit insurance fund and
statements of cash flow for the years then ended. These
financial statements are the responsibility of the
Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted government auditing standards.
Those standards
require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of the Federal Deposit Insurance Corporation as of
December 31, 1988 and 1987, and the results of its
operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
BANKING INDUSTRY'S FINANCIAL CONDITION
Since the early 1980s, the banking industry's performance
has been adversely affected by (1) problems in the energy
and agricultural sectors of the economy and their resulting
impact on the real estate sector and (2) the significant
difficulties certain less developed countries have been
experiencing in servicing their debt to many of the larger
commercial banks.
Of the 13,114 FDIC-insured commercial
banks at December 31, 1988, 1,823 reported losses for the
period then ended. Nonetheless, the commercial banking
industry had earnings of about $25 billion during 1988,
compared to 1987 earnings of less than $3 billion.
Industry earnings increased in each geographical region
except the Southwest, where losses remained the same as
1987 at approximately $1.7 billion.
The 1988 results do
not include the losses of failed banks which were taken
over or assisted by the Corporation during the year.
The Corporation has reported that the improvement in
industry earnings was due to several factors.
First,
after setting aside sizable reserves for troubled loans to
less developed countries in 1987, the banks' provisions
for loan losses of $20.9 billion were 56 percent less in
1988 than they were in 1987.
Second, banks received almost
$3.0 billion of interest on certain troubled foreign debt

which had not previously been accrued.
In addition,
noninterest income increased by $3.1 billion.
Industry
earnings in 1988 did not reflect the $2.3 billion in losses
incurred by the First RepublicBank Corporation of Dallas,
Texas, before its failure on July 29, 1988, because it was
taken over by the Corporation by the end of the year. The
cost associated with this failure was the highest for a
single institution in the Corporation's history.
Corporation officials have stated that industry performance
in 1989 will largely be determined by the state of
inflation and the economy.
In particular, the continued
growth of nonperforming assets in the Northeast and
Southeast regions and the potential impact of increased
interest rates are areas of concern for the industry and
the Corporation. The Corporation defines nonperforming
assets as the sum of loans past due 90 days or more and
loans in nonaccrual status.
The level of nonperforming assets has historically been an
early indicator of a deteriorating economy.
Although,
overall, the industry's nonperforming assets decreased,
they increased in the Northeast region by 0.7 percent and
in the Southeast by 4.9 percent.
The increase in
nonperforming assets in the Northeast is noteworthy
considering its write-offs of loans and leases increased
27.1 percent during 1988 compared to 1987. Overall
industry write-offs increased by 11.0 percent.
We believe that if interest rates increase, the result
could be a decline in the net interest margin of banks,
thus reducing the industry's profitability.
Any
substantial increase in interest rates would have the
greatest impact on the larger commercial banks because
(1) they operate on a lower interest rate margin than
smaller banks and (2) they have become increasingly
involved in highly leveraged transactions.
For the year
ended December 31, 1988, the net interest margin for banks
with assets greater than $10 billion was 3.5 percent
compared to 4.4 percent for the remaining banks. The lower
margin leaves larger banks more exposed to significant
increases in interest rates.
In addition, the Corporation
has reported that it has become increasingly concerned as
banks and other institutions appear to be increasing their
concentrations in high-yield, high-risk ("junk") bonds and
highly leveraged loans used to pay for risky corporate
restructurings, particularly leveraged buyouts. The
Corporation has stated that banks have already invested
about $150 billion in leveraged buyout loans. Rising
interest rates or an economic downturn may cause highly
leveraged businesses to default on their loans as their
interest costs increase and/or their operating income
declines.
Although banks usually reduce their exposure to
losses by selling a large amount of these loans, defaults
on the amounts they hold could result in losses to the
banks, and potentially, to the Corporation.
Also, the debt servicing problems of some less developed
countries continue to present a long-term financial concern
for the banking industry and the Corporation. The
administration has prepared a proposal to reduce the debt
burden of these countries. Nonetheless, since 1982, banks
have reduced their exposure by curtailing new loans to
these countries, with some banks substantially eliminating
these loans from their portfolios, and increasing their
capital and loan loss allowances.

Internal controls are also a factor that can affect a
bank's performance.
GAO's review of regulatory and
examination documents related to the 184 insured banks
which failed in 1987 showed serious internal control
weaknesses contributed significantly to nearly all of the
failures.
Conversely, we found that strong internal
controls tended to serve as a buffer to protect banks from
environmental factors, such as adverse economic
conditions.
(See GAO/AFMD-89-25.)
THE CORPORATION'S FINANCIAL CONDITION
Despite the industry's overall profits, during 1988, 200
insured banks failed and 22 were assisted.
Banks in Texas
accounted for 113 of the 200 failed banks and 5 of the 22
assisted banks.
In 1988, the Corporation incurred its
first net loss since its inception— $4.2 billion.
This
loss was primarily due to the $7.3 billion cost associated
with 1988 failure and assistance transactions, including
$3.0 billion for the failed First RepublicBank, and to
amounts set aside for several probable assistance
transactions, primarily in the Southwest (including a
significant amount for the recently failed banks of
MCorp). The Corporation's $4.2 billion net loss reduced
its insurance fund balance from $18.3 billion as of
December 31, 1987, to $14.1 billion as of December 31,
1988. As a result, the ratio of the insurance fund balance
to insured deposits declined to its lowest level ever,
estimated by the Corporation to be 0.83 percent.
The accompanying financial statements reflect the estimated
losses related to all banks that have been closed, those
that have entered into financial assistance agreements, and
those that the Corporation has identified as probable to
fail or to need assistance from the Corporation.
The
Corporation monitors banks that have marginal or
deteriorating financial conditions and follows a policy of
minimizing the cost to the insurance fund by promptly
providing assistance or participating in the closing of a
bank whenever an insured bank has financial difficulties
that threaten its existence or when action is needed to
limit the insurance fund's exposure.
The Corporation anticipates it will have net income in
1989. However, a downturn in the Northeast or Southeast or
increasing interest rates could result in additional
insurance costs to the Corporation.
In addition, if the
Southwest economy in particular continues to deteriorate,
the Corporation may incur greater costs due to more bank
failures than anticipated and to higher costs for existing
assistance agreements.
In spite of the significant number of bank failures and
the potentially adverse conditions which could affect the
Corporation, we believe that it has sufficient funds to
handle current and near-term identifiable needs.
The
administration has proposed an increase in the fee banks
pay for deposit insurance which, if enacted by the
Congress, would enhance the fund's financial strength.
We
believe it is important to increase the Corporation's
insurance fund through higher insurance premiums because of
the uncertainties discussed above.
Subsequent to December 31, 1988, the Administration
introduced legislation, which if enacted, would put the
savings and loan association's insurance fund under the
management of the Corporation. The Savings Association
Insurance Fund and Bank Insurance Fund would continue to

be maintained as separate funds and premiums from the
banking industry and the savings and loan industry would
continue to be used for their respective funds. Also, on
February 7, 1989, the Corporation entered into an agreement
with the Federal Home Loan Bank Board and the Federal
Savings and Loan Insurance Corporation to manage all
savings and loan associations which are insolvent on the
basis of regulatory accounting principles. This agreement
stipulates that the Corporation will manage these savings
and loans on a reimbursable-cost basis.
Therefore, neither
the legislation nor the agreement should adversely affect
the Corporation's current financial resources, but will
greatly increase its workload and may place some strains on
its operations.
In addition to this report on our examination of the
Corporation's 1988 and 1987 financial statements, we are
also reporting on our study and evaluation of internal
accounting controls and compliance with laws and
regulations.
Also, during our examination, we identified
matters that do not affect the fair presentation of the
financial statements, but nonetheless warrant management's
attention. We are reporting them separately to the
Corporation.

Charles A. Bowsher
Comptroller General
of the United States
March 15, 1989

Statistics

Banks Closed Because of Finan
cial Difficulties: FDIC Income,
Disbursements and Losses
The following tables are included
in the 1988 FDIC Annual Report:
— Table 122, Number and
Deposits of Banks Closed
Because of Financial Difficulties,
1934-1988;
— Table 123, Insured Banks
Requiring Disbursements by the
Federal Deposit Insurance
Corporation During 1988;
— Table 125, Recoveries and
Losses by the Federal Deposit
Insurance Corporation on
Disbursements for Protection of
Depositors, 1934-1988;
— Table 127, Income and
Expenses, Federal Deposit
Insurance Corporation, by Year,
From Beginning of Operations,
September 11, 1933, to
December 1988; and
— Table 129, Insured Deposits and
the Deposit Insurance Fund,
1934-1988.
D eposit Insurance Disbursements
Disbursements by the Federal
Deposit Insurance Corporation to
protect depositors are made when

the insured deposits of failed banks
are paid off, or when the deposits
of a failed or failing bank are
assumed by another insured bank
with the financial aid of the FDIC.
In deposit payoff cases, the
disbursement is the amount paid
by the FDIC on insured deposits. In
the insured deposit transfer, an
alternative to a direct deposit
payoff, the FDIC transfers the failed
bank’s insured and secured deposits
to another bank while uninsured
depositors must share with the
FDIC and other general creditors of
the bank in any proceeds realized
from liquidation of the failed bank’s
assets. In certain deposit payoffs,
the FDIC may determine that an
advance of funds to uninsured
depositors and other creditors of a
failed bank is warranted.
In deposit assumption cases, the
principal disbursement is the
amount paid to facilitate a
purchase and assumption transac
tion with another insured bank.
Additional disbursements are made
in those cases as advances for
protection of assets in process of
liquidation and for liquidation
expenses. In deposit assumption
cases, the FDIC also may purchase

assets or guarantee an insured
bank against loss by reason of its
assuming the liabilities and
purchasing the assets of an open or
closed insured bank. Under its
Section 13(c) authority, the FDIC
made a disbursement or approved
other forms of assistance in 1988
for 81 operating banks.
Noninsured Bank Failures
Statistics in this report on failures
of noninsured banks are compiled
from information obtained from
state banking departments, field
supervisory officials and other
sources. The FDIC received no
official reports of noninsured bank
closings due to financial difficulties
in 1988. For detailed data regarding
noninsured banks that were
suspended in the years 1934-1962,
see the 1962 FDIC Annual Report,
pages 27-41. For 1963-1988, see
Table 122 of this report and
previous reports for respective
years.
Sources o f Data
Insured banks: books of specific
banks at date of closing and books
of the FDIC, December 31, 1988.

Table 122. NUMBER AND DEPOSITS OF BANKS CLOSED BECAUSE OF FINANCIAL DIFFICULTIES,
1934-1988
Number

Deposits (in thousands of dollars)
Insured

Year
NonInsured'

Total

1,533

136

1,397

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
1984
1985*
19867
19877
19887

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
79
120
138
184
200

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
79
120
138
184
200

” l
1
”4
1
3
1
1
2
" i
1
5
"i
4
2
"1
4
1

” f
"2
" i
1

Insured

Without
With
disbursements disbursements
by FDIC2
by FDIC3
8

Total
Total

NonInsured'

Total

1,389

74,211,327

143,501

74,067,826

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

37,333
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
2,883,162
8,059,441
6,471,100
6,281,500
24,931,302

35,365
583
592
528
1,038
2,439
358
79
355

1,968
13,405
27,508
33,677
59,684
157,722
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
2,883,162
8,059,441
6,471,100
6,281,500
24,931,302

2
7
5
7
4
3
9
7
6
1
6
4
13
16
6
7
10
10
10
42
48
79
120
138
184
200

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

Assets4

With
Without
disbursements disbursements
by FDIC2
by FDIC3
41,147

85
328

1,190

26,449

10,084

(in
Thousands
Dollars)

74,026,679

94,548,117

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
5

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
2,883,162
8,059,441
.6,471,100
6,281,500
24,931,302

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
7,026,923
3,276,411
8,741,268
6,991,600
6,850,700
35,697,789

3,011

1For information regarding each of these banks, see table 22 in the 1963 Annual Report{1963 and prior 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 of dosing, 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 fo r 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.
Insured banks only.
5Not available.
includes data fo r one bank granted financial assistance although no disbursement was required until January, 1986.
Excludes data fo r banks granted financial assistance under Section 13(c)(1) of the Federal Deposit Insurance Act to prevent failure. Data fo r these banks are included in table 123.

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

1,900

24,900

23,500

24,618

January 4,1988

Federal Deposit Insurance Corporation

Houston Commerce Bank
Houston, Texas

2,200

31,600

39,300

31,618

January 28,1988

Federal Deposit Insurance Corporation

Frenchman Valley Bank
Palisade, Nebraska

700

2,500

2,400

2,413

March 10,1988

Federal Deposit Insurance Corporation

First American Bank and
Trust of Friendswood
Friendswood, Texas

500

6,400

6,600

8,262

March 10,1988

Federal Deposit Insurance Corporation

NAME AND LOCATION

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

IN SURED DEPO SIT PAYOFFS

Balboa National Bank
San Diego, California

Texas National Bank
Austin, Texas

2,100

15,400

16,600

16,430

April 21, 1988

Federal Deposit Insurance Corporation

Resource Bank, N.A.
Houston, Texas

1,800

42,900

42,800

42,486

December 8,1988

Federal Deposit Insurance Corporation

Commerce Bank of Plano
Plano, Texas

2,300

41,200

36,900

39,860

January 7,1988

Federal Deposit Insurance Corporation

The North American Bank
Phoenix, Arizona

2,400

28,300

28,200

27,529

January 8,1988

Federal Deposit Insurance Corporation

Northwest Bank
Dallas, Texas

5,100

44,600

51,500

44,052

January 21,1988

Federal Deposit Insurance Corporation

The Trust Bank
Hialeah, Florida

13,800

163,600

160,200

148,458

January 29,1988

Republic National Bank of Miami,
Miami, Florida

First Houston Bonk, N.A.
Houston, Texas Houston, Texas

2,000

27,000

27,900

33,687

February 11,1988

Texas Commerce Bank, N.A.,

Harris County Bank - Houston, N.A.
Houston, Texas

16,600

72,900

81,100

72,649

February 25,1988

OmniBanc South, N.A., Houston, Texas

The First National Bank and
Trust Company of Cushing
Cushing, Oklahoma

5,800

58,200

57,900

43,903

March 10,1988

The American National Bank of
Bristow, Bristow, Oklahoma

First American Bank and
Trust of Manvel
Manvel, Texas

2,200

12,100

11,800

11,832

March 10,1988

First National Bank of Alvin,
Alvin, Texas

Hayesville Savings Bank
Hayesville, Iowa

8,600

35,100

34,800

34,769

March 10,1988

Farmers Savings Bank, Fremont, Iowa

First Intercounty Bank of New York
New York, New York

800

40,000

37,100

36,664

March 11,1988

Community National Bank and Trust
Company, New York, New York

4,600

29,200

25,000

28,713

March 25,1988

Lincoln National Bank,
Oklahoma City, Oklahoma

2,500

5,700

5,600

4,829

April 7, 1988

Farmers and Merchants National Bank,
Merkel, Texas

2,000

12,000

11,200

13,036

April 14,1988

Charier National Bank-Willowbrook,
Houston, Texas

Metropolitan Industrial Bank
Denver, Colorado

3,200

12,500

12,200

12,144

April 15, 1988

Resources Industrial Bank,
Denver, Colorado

Citizens National Bank
Colorado Springs, Colorado

3,200

15,500

14,000

16,950

April 21,1988

State Bank and Trust of Colorado
Springs, Colorado Springs, Colorado

IN SU R ED DEPO SIT TRANSFERS

First National Bank of Del City
Del City, Oklahoma
Home State Bank
Trent, Texas
Cy-Fair Bank, N.A.
Houston, Texas

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

The First State Bank
Rockwall, Texas

6,500

37,700

38,000

48,016

May 26,1988

Community Bank, Rockwall, Texas

First Capitol Bank
West Columbia, Texas

5,800

44,700

43,600

44,217

July 28,1988

First Bank, Edna, Texas

Westlake Thrift and Loan
Association
Westlake Village, California

2,000

40,300

36,500

36,078

July 29,1988

Independence Bank, Los Angeles,
California

Marshall County Bank
Britton, South Dakota

2,100

10,300

9,500

8,975

August 19, 1988

First National Bank, Beresford,
South Dakota

Commercial State Bank
San Augustine, Texas

4,700

23,000

23,500

23,538

September 1,1988

The Hamilton National Bank,
Hamilton, Texas

Pisgah Savings Bank
Pisgah, Iowa

1,600

9,600

9,500

9,536

September 1,1988

Iowa Savings Bank, Woodbine, Iowa

2,000

23,700

23,900

23,603

September 15, 1988

Central Bank and Trust, Fort Worth,
Texas

1,000

3,900

3,400

3,890

September 23,1988

The First National Bank of Meeker,
Meeker, Colorado

Round Rock National Bank
Round Rock, Texas

2,700

33,600

35,400

35,452

October 27,1988

First State Bank, Austin, Texas

Southwest National Bank
Houston, Texas

1,600

14,900

14,200

14,718

November 3,1988

Spring National Bank, Spring, Texas

6,300

25,700

25,300

22,504

November 4,1988

Mt. Zion State Bank & Trust Company,
Mount Zion, Illinois

The First National Bank
of Gracemont
Gracemont, Oklahoma

1,100

6,600

6,800

6,890

November 10,1988

First State Bank, Anadarko, Oklahoma

Bank of the Northwest
Woodward, Oklahoma

2,500

19,800

17,400

17,192

November 10,1988

The Bank of W oodward, Woodward,
Oklahoma

First National Bank
Covington, Louisiana

59,200

244,000

246,100

242,482

November 18,1988

Hibernia National Bank,
New Orleans, Louisiana

Texana National Bank of Belton
Belton, Texas

5,300

17,300

18,700

18,660

December 1,1988

First National Bank of Temple,
Temple, Texas

2,000

16,600

16,700

10,936

January 14,1988

The Peoples State Bank, Clyde, Texas

Colonial Bank
New Orleans, Louisiana

5,296

49,528

49,463

5,968

January 14,1988

Pontchartrain State Bank,
Metairie, Louisiana

Aredale State Bank
Aredale, lowo

1,700

10,000

9,400

2,818

January 20,1988

First Security Bank & Trust Company,
Charles City, Iowa

United Mercantile Bank
Shreveport, Louisiana

10,700

69,600

66,500

51,326

January 21,1988

Hibernia National Bank,
New Orleans, Louisiana

Louisiana Commercial Bank
Madisonville, Louisiana

2,000

23,900

8,424

January 21,1988

Pontchartrain State Bank, Metairie,
Louisiana

Williston Basin State Bank
Williston, North Dakota

2,600

10,400

10,200

8,129

January 21,1988

First National Bank & Trust Company
of Williston, Williston, North Dakota

4,100

34,700

37,300

35,483

January 21,1988

The Huntsville National Bank,
Huntsville, Texas

NAME AND LOCATION

Capital National Bank
Fort Worth, Texas
Peoples State Bank of Meeker
Meeker, Colorado

Mt, Zion State Bank
Mount Zion, Illinois

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

D EPO SIT A S S U M P TIO N S

The Moran National Bank
Moran, Texas

Sam Houston National Bank
o f W alker County
Huntsville, Texas

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988
FDIC
Disburse
ments
(SOOO's)

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

Cedar Vale State Bank
Cedar Vale, Kansas

2,100

11,000

10,700

5,974

January 21,1988

Chisholm Trail State Bank, Wichita,
Kansas

Bank of Casper
Casper, Wyoming

2,000

5,200

5,000

1,273

January 22,1988

First Wyoming Bank - Casper,
Casper, Wyoming

Port City Bank
Houston, Texas

14,400

55,300

61,100

36,015

January 28,1988

Channelview Bank, Channelview, Texas

The Bank of Louisburg
Louisburg, Kansas

3,700

19,900

19,600

8,647

February 3,1988

Peoples National Bank & Trust,
Ottawa, Kansas

Bank of Dallas
Dallas, Texas

14,900

177,200

169,400

90,163

February 5,1988

Deposit Guaranty Bank, Dallas, Texas

First State Bank
Oilton, Oklahoma

2,900

11,200

11,300

5,124

February 11,1988

American National Bank of Bristow,
Bristow, Oklahoma

Basin State Bank
Vernal, Utah

3,200

11,500

11,000

9,575

February 12,1988

Zions First National Bank,
Salt Lake City, Utah

The First State Bank
White Cloud, Michigan

7,900

31,600

33,600

12,323

February 12,1988

The Peoples State Bank, St. Joseph,
Michigan

Global Bank
Hialeah, Florida

2,500

20,400

18,300

12,795

February 12,1988

Ocean Bank O f M iami, Miami, Florida

The Farmers and Merchants
Bank of Hill City
Hill City, Kansas

2,700

14,800

15,000

5,782

February 18,1988

Farmers and Merchants Bank of
Hill City, Hill City, Kansas

Mustang Community Bank
Mustang, Oklahoma

2,400

8,900

9,200

3,532

February 18,1988

First National Bank of Moore,
Moore, Oklahoma

Collin County State Bank
Melissa, Texas

2,200

11,000

11,300

4,123

February 25,1988

W illow Bend National Bank,
Plano, Texas

American National Bank
Stafford, Texas

5,600

28,300

29,400

14,880

February 25,1988

Park National Bank of Houston,
Houston, Texas

The Home State Bank
Russell, Kansas

8,100

50,200

52,400

23,371

March 3, 1988

The First National Bank & Trust
Company, Salina, Kansas

Flower Mound Bank
Flower Mound, Texas

5,000

16,700

17,600

4,195

March 3,1988

Security Bank, Flower Mound, Texas

4,900

13,900

14,000

3,287

March 10,1988

City Center National Bank of Aurora,
Aurora, Colorado

6,000

35,000

39,800

29,603

March 10,1988

Citizens Bank and Trust Company of
Baytown, Baytown, Texas

2,600

17,300

17,000

4,822

March 17,1988

Iberville Trust and Savings Bank,
Plaquemine, Louisiana

Citizens State Bank of Gibbon
Gibbon, Minnesota

2,900

14,800

14,600

9,097

March 18, 1988

Minnesota Valley Bank,
Redwood Falls, Minnesota

State Bank of Morgan
Morgan, Minnesota

4,600

18,100

18,400

8,065

March 18,1988

Farmers and Merchants State Bank,
Springfield, Minnesota

Cashion Community Bank
Cashion, Oklahoma

1,700

6,200

3,131

March 24,1988

Community State Bank,
Cashion, Oklahoma

Century Bank
Tulsa, Oklahoma

13,800

65,600

66,600

39,934

March 24,1988

The Fourth National Bank of Tulsa,
Tulsa, Oklahoma

First Bank & Trust
Tomball, Texas

10,700

63,400

57,700

34,573

March 31,1988

The Hamilton National Bank,
Hamilton, Texas

NAME AND LOCATION

Security Bank of Denver, N.A.
Denver, Colorado
First American Bank and
Trust of Baytown
Baytown, Texas
First National Bank of Port Allen
Port Allen, Louisiana

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Tabic 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

26,100

159,800

159,900

25,657

March 31,1988

Union Bank and Trust Company,
Oklahoma City, Oklahoma

2,400

13,300

15,300

14,912

April 7, 1988

Deposit Guaranty Bank, Dallas, Texas

Citizens State Bank of Eagle Bend
Eagle Bend, Minnesota

3,000

9,000

8,900

1,996

April 8,1988

Lake County State Bank,
Long Prairie, Minnesota

Jennings Bank
Jennings, Kansas

1,600

6,800

743

April 14,1988

Bank of Oberlin, Oberlin, Kansas

Colonial Thrift and Loan
Association
Culver City, California

3,700

18,100

17,900

12,253

April 15,1988

Southern Pacific Thrift and Loan
Association, Culver City, California

Me Allen State Bank
Me Allen, Texas

39,400

532,900

556,000

433

April 19,1988

First City National Bank of Houston,
Houston, Texas

Unity Bank
Dayton, Ohio

1,800

5,700

5,600

5,671

April 22,1988

The First National Bank, Dayton, Ohio

The Village Bank
Great Falls, Montana

4,500

22,100

18,400

1,712

April 22, 1988

The Village Bank of Great Falls,
Great Falls, Montana

Oak Park Bank
Oak Park Heights, Minnesota

2,500

13,300

14,900

7,164

April 29,1988

O ak Park State Bank,
O ak Park Heights, Minnesota

Union Bank & Trust of Dallas
Dallas, Texas

3,400

34,500

33,200

10,789

May 5,1988

Cornerstone Bank, N.A., Dallas, Texas

Lincoln National Bank
Arlington, Texas

3,800

11,400

11,200

5,063

May 5,1988

Tarrant Bank, Ft. Worth, Texas

Forest City Bank and
Trust Company
Forest City, Iowa

5,000

23,800

23,600

1,175

May 6, 1988

Liberty Bank and Trust,
Forest City, Iowa

The First State Bank
Childress, Texas

2,800

14,200

15,000

8,227

May 12,1988

Citizens State Bank O f Dalhart,
Dalhart, Texas

Westside National Bank
Houston, Texas

3,300

29,300

36,400

25,559

May 13, 1988

Compass Bank, N.A., Houston, Texas

National Bank o f Texas
Houston, Texas

1,800

18,400

25,200

27,506

May 19,1988

Old Braeswood National Bank,
Houston, Texas

2,300

11,400

11,700

8,988

May 26, 1988

Citizens Bank and Trust Company of
Baytown, Baytown, Texas

4,100

15,400

14,700

12,085

May 26,1988

Interstate Bank North, Houston, Texas

700

8,100

6,300

6,304

May 27, 1988

Zions First National Bank,
Salt Lake City, Utah

NAME AND LOCATION
Union Bank and Trust Company
Oklahoma City, Oklahoma
Central National Bank
Dallas, Texas

Lone Star Bank
Baytown, Texas
First National Bank of Kingwood
Kingwood, Texas
Sandy State Bank
Sandy, Utah

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Williamstown Bank, N.A.
Houston, Texas

3,300

21,700

17,900

7,013

June 2,1988

City National Bank, Houston, Texas

Security Bank of Aurora
Aurora, Colorado

3,400

10,500

10,400

1,251

June 2,1988

Security Bank o f Colorado,
Aurora, Colorado

Security Bank of Boulder
Boulder, Colorado

5,100

13,900

13,500

883

June 2,1988

Affiliated First National Bank of
Boulder, Boulder, Colorado

Community State Bank
Whiting, Iowa

1,300

4,600

4,400

1,183

June 2,1988

Sloan State Bank, Sloan, Iowa

Guaranty Bank
Dallas, Texas

10,200

81,400

70,200

43,290

June 2,1988

The Red O ak State Bank,
Red Oak, Texas

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

3,400

38,900

41,800

18,556

June 2,1988

Tarrant Bank, Ft. Worth, Texas

2,600

38,000

39,000

34,109

June 9,1988

Deposit Guaranty Bank, Dallas, Texas

Kingsland National Bank
Kingsland, Texas

1,700

12,500

12,700

4,703

June 16,1988

Security Bank and Trust,
Fredericksburg, Texas

Century National Bank
Austin, Texas

5,600

52,000

54,800

38,615

June 16,1988

Community National Bank,
Austin, Texas

The Liberty Bank of Seattle
Seattle, Washington

1,800

21,800

22,500

8,956

June 17,1988

The Emerald City Bank,
Seattle, Washington

The Bank of Westminster
Westminster, Colorado

1,600

5,200

5,300

982

June 22,1988

Affiliated First National Bank,
Westminster, Westminster, Colorado

2,200

10,900

11,600

3,423

June 23,1988

Texas National Bank of Victoria,
Victoria, Texas

Northwest Bank and Trust
Houston, Texas

10,300

88,000

84,200

52,941

June 23,1988

Northwest Bank, Inc., Houston, Texas

Tri-Cities Bank & Trust
O villa, Texas

800

8,200

4,305

June 23,1988

Abrams Centre National Bank,
Dallas, Texas

Claiborne Bank & Trust Company
Homer, Louisiana

2,800

12,100

1,273

June 29,1988

The Homer National Bank,
Homer, Louisiana

Mercantile Bank & Trust
San Antonio, Texas

12,400

77,900

81,800

15,603

June 30,1988

Groos Bank, N.A., San Antonio, Texas

First National Bank
Sherman, Texas

3,600

22,900

20,600

6,216

June 30,1988

First National Bank of Van Alstyne,
Van Alstyne, Texas

Republic National Bank
Norman, Oklahoma

2,800

20,600

23,200

8,595

June 30,1988

Republic Bank O f Norman,
Norman, Oklahoma

The Security Bank
Warner, Oklahoma

2,200

9,200

9,300

544

July 14,1988

Vian State Bank, Vian, Oklahoma

Allen National Bank
Allen, Texas

4,200

19,000

17,200

7,034

July 14,1988

Benchmark Bank, Quinlan, Texas

The American Bank
Palestine, Texas

4,200

17,800

17,500

12,009

July 14,1988

The Royall National Bank of Palestine,
Palestine, Texas

3,600

17,900

2,018

July 21,1988

First American Bank of Blooming
Prairie, Blooming Prairie, Minnesota

Union Bank and Trust
Bartlesville, Oklahoma

18,000

105,000

116,600

74,684

July 21,1988

First National Bank in Bartlesville,
Bartlesville, Oklahoma

National Fidelity Bank
of Shreveport
Shreveport, Louisiana

800

8,000

8,100

7,130

July 28,1988

Hibernia National Bank,
New Orleans, Louisiana

First RepublicBank-Corsicana, N.A.
Corsicana, Texas

N /A

182,500

187,800

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Plano, N.A.
Plano, Texas

N/A

163,200

177,500

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Midland, N.A.
Midland, Texas

N /A

556,600

572,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Harlingen, N.A.
Harlingen, Texas

N/A

182,500

195,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

NAME AND LOCATION
River Plaza National Bank
Ft. Worth, Texas
Parkway Bank & Trust
Dallas, Texas

Texas National Bank
Victoria, Texas

The First National Bank
of Blooming Prairie
Blooming Prairie, Minnesota

N/A-Not available.

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Tabic 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988
FDIC
Disburse
ments
(SOOO's)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Class
o f Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

First RepublicBank-Abilene, N.A.
Abilene, Texas

N /A

188,600

202,700

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Ennis, N.A.
Ennis, Texas

N /A

84,400

89,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankStephenville, N.A.
Slephenville, Texas

N /A

107,900

116,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Hillsboro
Hillsboro, Texas

N /A

53,600

62,700

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Tyler, N.A.
Tyler, Texas

N /A

539,100

545,300

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Austin, N.A.
Austin, Texas

N /A

1,621,300

1,266,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

N /A

154,100

161,700

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankFt. Sam Houston, N.A.
Ft. Sam Houston, Texas

N /A

550,500

505,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Waco, N.A.
Waco, Texas

N /A

651,400

610,800

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Temple, N.A.
Temple, Texas

N /A

150,700

150,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankWichita Falls, N.A.
Wichita Falls, Texas

N /A

255,900

269,300

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Odessa, N.A.
Odessa, Texas

N /A

146,900

101,800

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

N /A

66,500

76,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Dallas, N.A.
Dallas, Texas

N/A

16,379,600

6,848,700

858,098*

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankWilliamson County, N.A.
Austin, Texas

N /A

35,400

42,100

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankMt. Pleasant, N.A.
Mt. Pleasant, Texas

N /A

125,500

139,000

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-EI Paso, N.A.
El Paso, Texas

N/A

191,300

205,400

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

N/A

67,600

76,800

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Cleburne, N.A.
Cleburne, Texas

N /A

105,200

110,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Ft. Worth, N.A.
Ft. Worth, Texas

N /A

1,750,700

1,501,100

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Galveston, N.A.
Galveston, Texas

N /A

244,300

246,700

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

NAME AND LOCATION

First RepublicBank-Victoria
Victoria, Texas

First RepublicBank-Clifton
Clifton, Texas

First RepublicBank-Paris
Paris, Texas

•Included in disbursement here is the $1 billion loon made March 17,1988, which was in default on July 29,1988.
N /A -N o t available.

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988
Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

Class
of Bank

Number of
Depositors
or Accounts

N /A

2,525,000

2,217,900

201,195*

July 29,1988

NCNB Texas National Bank,
Dallas, Texos

N /A

43,500

50,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankSan Antonio, N.A.
San Antonio, Texas

N /A

679,400

675,400

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Lubbock, N.A.
Lubbock, Texas

N /A

471,100

445,400

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Denison, N.A.
Denison, Texas

N/A

125,700

137,700

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Richmond, N.A.
Richmond, Texas

N/A

78,200

90,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Malakoff
M alakoff, Texas

N /A

40,900

48,600

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Lufkin
Lufkin, Texas

N /A

201,900

192,500

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankBrownwood, N.A.
Brownwood, Texas

N /A

109,600

119,600

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Henderson, N.A.
Henderson, Texas

N/A

102,800

118,100

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Jefferson County
Beaumont, Texas

N /A

195,400

138,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBankMineral Wells, N.A.
Mineral Wells, Texas

N /A

143,800

169,100

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Conroe, N.A.
Conroe, Texas

N /A

182,500

202,200

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

N /A

83,800

88,000

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

N/A

73,300

79,900

July 29,1988

NCNB Texas National Bank,
Dallas, Texas

First RepublicBank-Delaware
Newark, Delaware

N /A

620,800

211,500

August 2,1988

Citibank (Delaware), New Castle,
Delaware

Alaska Continental Bank
Anchorage, Alaska

6,700

49,500

50,700

43,422

August 3,1988

First Interstate Bank of Alaska,
Anchorage, Alaska

Farmers & Merchants Bank
of Elmo
Elmo, Missouri

2,200

8,900

3,464

August 4,1988

First Bank of Maryville,
Maryville, Missouri

Galena Park State Bank
Galena Park, Texas

5,700

23,700

28,200

16,439

August 11,1988

Lockwood National Bank of Houston,
Houston, Texas

1,800

23,300

23,400

19,209

August 11,1988

Texas Commerce Bank, N.A.,
Houston, Texas

9,200

36,200

36,100

7,532

August 11,1988

Gateway National Bank, Dallas, Texas

First National Bank Austin
Austin, Texas

1,500

24,800

24,100

12,009

August 18,1988

First State Bank, Austin, Texas

Town and Country National Bank
Harlingen, Texas

3,300

27,200

26,300

11,116

August 18,1988

The Harlingen National Bank,
Harlingen, Texas

NAME AND LOCATION
First RepublicBank-Houston, N.A.
Houston, Texas
First RepublicBank-Forney
Forney, Texas

First RepublicBank-A & M
College Station, Texas
First RepublicBank-Greenville, N.A.
Greenville, Texas

West Houston National Bank
Houston, Texas
First Bank
Balch Springs, Texas

Date of Closing,
Deposit Assumption,
Merger, or Assistance

‘ Included in disbursement here is the SI billion loon made March 17, 1988, which was in default on July 29,1988.
N /A -N o t available.

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

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988
Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

3,700

10,100

9,900

8,562

August 18,1988

The Bank, N.A., McAlester, Oklahoma

3,000

24,500

28,300

17,901

August 25,1988

Deposit Guaranty Bank, Dallas, Texas

4,000

28,100

27,100

7,940

August 25,1988

Red River Valley Bank,
Bossier City, Louisiana

1,900

15,400

15,900

6,931

August 25, 1988

Union National Bank, Austin, Texas

1,600

3,200

430

August 26,1988

First National Bank,
Keewatin, Minnesota

First National Bank of Atascocita
Harris County (Humble), Texas

2,800

7,900

9,500

6,724

September 1,1988

First Interstate Bank o f Texas, N.A.,
Houston, Texas

Pioneer National Bank
Arlington, Texas

2,900

19,000

21,400

6,222

September 1,1988

Deposit Guaranty Bank, Dallas, Texas

American Bank of Muskogee
Muskogee, Oklahoma

5,000

26,900

26,500

11,455

September 1,1988

Citizens National Bank of Muskogee,
Muskogee, Oklahoma

Mingo Trust and Savings Bank
Mingo, Iowa

2,300

11,200

10,500

1,445

September 1,1988

Exchange State Bank, Collins, Iowa

Lakeland State Bank
Sunrise Beach, Missouri

2,100

8,700

8,600

771

September 1, 1988

Community Bank of the Ozarks,
Sunrise Beach, Missouri

The Sylvia State Bank
Sylvia, Kansas

900

5,200

4,600

1,280

September 8,1988

The Turon State Bank, Turon, Kansas

River City Bank
Castle Hills, Texas

1,600

13,300

14,900

7,259

September 15,1988

Citizens State Bank of Luling,
Luling, Texas

Town and Country Bank
Bixby, Oklahoma

2,700

37,200

37,100

26,089

September 15,1988

Brookside State Bank, Tulsa, Oklahoma

Citizens Bank of Littleton
Littleton, Colorado

2,200

5,700

4,600

4,365

September 15,1988

Equitable Bank O f Littleton, N.A.,
Littleton, Colorado

3,900

28,100

29,000

24,670

September 15,1988

First National Bank of Rio Grande
City, Rio Grande City, Texas

Community Bank and Trust
Rockdale, Texas Cameron, Texas

2,100

13,900

13,300

5,292

September 22,1988

The Citizens National Bank of Cameron,

First State Bank in Talihina
Talihina, Oklahoma

3,900

15,800

14,600

5,560

September 22,1988

Spiro State Bank, Spiro, Oklahoma

The Security State Bank
Comanche, Oklahoma

1,700

8,100

2,504

September 22,1988

American National Bank,
Ardmore, Oklahoma

First State Bank
Seminole, Oklahoma

2,800

11,100

10,400

1,754

September 29,1988

First State Bank of Harrah,
Harrah, Oklahoma

Watson State Bank
Watson, Minnesota

2,272

13,081

11,512

9,021

September 30,1988

Minnwest Bank Montevideo,
Montevideo, Minnesota

Liberty Bank and Trust Company
Warsaw, Indiana

10,600

49,100

47,000

32,248

October 3,1988

Trustcorp, Goshen,
Goshen, Indiana

3,000

31,800

32,600

10,911

October 6,1988

Fidelity Bank, Fort Worth, Texas

Security Bank
Dallas, Texas

1,100

18,600

19,553

October 20, 1988

Deposit Guaranty Bank, Dallas, Texas

Commercial Bank and Trust
Company
Metairie, Louisiana

11,300

46,400

49,000

13,329

October 20,1988

Pontchartrain State Bank,
Metairie, Louisiana

NAME AND LOCATION
Citizens State Bank
Maud, Oklahoma
Highland Park National Bank
Dallas, Texas
Bank of the Mid-South
Bossier City, Louisiana
BancFirst-Westlake, N.A.
Austin, Texas
Biwabik State Bank
Biwabik, Minnesota

Trinity National Bank
San Antonio, Texas

Fidelity National Bank of Fort Worth
Fort Worth, Texas

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Table 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

4,400

32,500

34,700

11,485

October 27, 1988

First State Bank, Austin, Texas

4,500

7,900

7,800

2,236

October 27, 1988

American State Bank, Tulsa, Oklahoma

4,900

20,800

21,100

7,836

November 10,1988

First National Bank of Winnsboro,
Winnsboro, Texas

5,400

25,200

29,100

9,839

November 10,1988

Bunkie Bank & Trust Company,
Bunkie, Louisiana

Miami National Bank
Miami, Oklahoma

2,400

8,500

8,900

2,485

November 10,1988

Bank of M iami, Miami, Oklahoma

East Texas State Bank
Buno,Texas

5,800

20,300

19,800

7,061

November 17,1988

First National Bank of Bonham,
Bonham,Texas

The Bank of Kerrville
Kerrville, Texas

3,310

38,059

29,716

12,166

November 17,1988

Bank of Kerrville
Kerrville, Texas

Union Bank of Houston
Houston, Texas

5,900

51,700

39,700

37,199

December 1, 1988

Texas Commerce Bank, N.A.,
Houston, Texas

O ak Lawn Bank, N.A.
Dallas, Texas

2,200

9,400

10,200

4,678

December 1,1988

Cornerstone Bank, N.A., Dallas, Texas

Enterprise National Bank
Englewood, Colorado

1,100

4,800

4,400

4,070

December 1, 1988

Colonial National Bank,
Denver, Colorado

First Bank & Trust Company
Duncan, Oklahoma

9,200

40,600

44,000

10,002

December 8,1988

First Bank & Trust Company,
Duncan, Oklahoma

Waukomis State Bank
Waukomis, Oklahoma

2,200

11,200

11,000

3,037

December 8,1988

Cimarron Bank, W oodward, Oklahoma

Caribank
Dania, Florida

37,500

554,400

528,600

48,392

December 9,1988

Citibank (Florida), N.A.,
Dania, Florida

3,700

31,200

39,600

20,363

December 15, 1988

Cornerstone Bank, N.A., Dallas, Texas

Crescent City Bank and
Trust Company
New Orleans, Louisiana

1,400

23,500

24,300

5,691

December 15, 1988

Omni Bank, New Orleans, Louisiana

Texas Bank of Plano
Plano, Texas

2,700

13,500

13,400

5,592

December 15,1988

Plano East National Bank,
Plano, Texas

First National Bank in Bogota
Bogota, Texas

3,700

12,700

1,660

December 15, 1988

Peoples National Bank, Bogota, Texas

First National Bank in Center
Center, Texas

3,700

25,700

25,800

5,616

December 15,1988

Citizens Bank, Kilgore, Texas

First Industrial Bank of Rocky Ford
Rocky Ford, Colorado

2,400

12,500

11,600

9,029

December 16,1988

First National Bank of Ordway,
Ordway, Colorado

First Southwest Bank
Eldorado, Oklahoma

3,100

9,500

9,100

3,319

December 16,1988

First State Bank and Trust Company,
Hollis, Oklahoma

The Peoples State Bank
and Trust Company
Ellinwood, Kansas

N /A

40,600

40,000

5,300

January 7,1988

The Peoples State Bank and Trust
Company, Ellinwood, Kansas

The Jefferson Guaranty Bank
Metairie, Louisiana

N /A

287,400

270,000

57,500

January 13,1988

The Jefferson Guaranty Bank,
Metairie, Louisiana

NAME AND LOCATION
Frontier National Bank
Round Rock, Texas
Medical Center State Bank
Oklahoma City, Oklahoma
American National Bank
Tyler, Texas
Avoyelles Trust & Savings Bank
Bunkie, Louisiana

Texas National Bank
Dallas, Texas

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

ASSISTANCE TR A N S A C T IO N S

N/A-Nol available.

Tabic 123. INSURED BANKS REQUIRING DISBURSEMENTS BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION DURING 1988
Receiver, Assuming Bank,
Transferee Bank, or
Merging Bank and Location

Citizens State Bank of Hayfield
Hayfield, Minnesota

N /A

30,100

29,300

900

January 27,1988

Citizens State Bank of Hayfield,
Hayfield, Minnesota

United Bank Alaska and
Alaska Mutual Bank
Anchorage, Alaska

N /A

1,285,100

1,095,900

295,000

January 28,1988

Alliance Bank, Anchorage, Alaska

American National Bank
Parma, Ohio

N/A

27,200

24,700

February 12, 1988

American National Bank, Parma, Ohio

Morehead National Bank
Morehead, Kentucky

N /A

8,200

7,800

1,071

March 15,1988

Morehead National Bank,
Morehead, Kentucky

First RepublicBank Corporation
Dallas/Houston, Texas

N/A

20,829,000

9,066,600

1,059,293

March 17,1988

First RepublicBank Corporation,
Dallas, Texas

Burns State Bank
Burns, Kansas

N /A

4,100

3,600

567

April 15, 1988

First National Bank & Trust Company,
El Dorado, Kansas

Bank of Santa Fe
Santa Fe, New Mexico

N /A

101,200

93,700

23,015

April 20,1988

Bank of Santa Fe, Santa Fe,
New Mexico

First City Bancorporation
Houston, Texas

N/A

11,200,000

9,400,000

1,065,868

April 20, 1988

First City Bancorporation,
Houston, Texas

Bond County State Bank
Pocahontas, Illinois

N /A

6,600

6,400

1,272

April 25,1988

Bond County State Bank,
Pocahontas, Illinois

Citizens Bank of Tulsa
Tulsa, Oklahoma

N /A

8,800

8,700

2,075

April 28, 1988

Citizens Bank of Tulsa,
Tulsa, Oklahoma

The American State Bank
Yankton, South Dakota

N /A

67,300

63,500

4,250

May 18,1988

First Dakota National Bank,
Yankton, South Dakota

Bank of Imboden
Imboden, Arkansas

N /A

17,800

17,200

2,164

June 14, 1988

Bank of Imboden, Imboden, Arkansas

Texas Bancorp Shares, Inc.
San Antonio, Texas

N/A

76,500

74,200

14,476

July 14,1988

Texas Bank, N. A., San Antonio, Texas

O ak Forest National Bank
Longview, Texas

N /A

8,800

8,600

1,746

July 15,1988

Longview Bank and Trust Company,
Longview, Texas

N /A

16,800

16,300

900

August 9,1988

Security State Bank, Casey, Iowa

Guaranty National Bank
Austin, Texas

N /A

22,000

23,000

4,309

September 16,1988

Guaranty National Bank, Austin, Texas

Alliance Bank, N.A.
Oklahoma City, Oklahoma

N /A

9,600

12,000

4,336

November 16,1988

First National Bank, Oklahoma City,
Oklahoma

Baton Rouge Bank & Trust
Company
Baton Rouge, Louisiana

N/A

114,900

115,300

18,000

December 21,1988

Baton Rouge Bank & Trust Company,
Baton Rouge, Louisiana

Tracy-Collins Bank and Trust
Company
Salt Lake City, Utah

N/A

206,000

191,000

21,000

December 30,1988

The Continental Bank and Trust
Company, Salt Lake City, Utah

NCNB Texas National Bank
Dallas, Texas

N /A

29,612,300

9,237,300

2,140,035

Delaware Bridge Bank,
National Association
Newark, Delaware

N /A

620,800

211,500

619,000

Security State Bank
Casey, Iowa

Total
Deposits
(SOOO's)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

Class
of Bank

NAME AND LOCATION

Total
Assets
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

Number of
Depositors
or Accounts

BRIDG E BANKS

N/A-Not available.

July 29,1988

NCNB Corporation, Charlotte,
North Carolina

September 9, 1988

Citibank (Delaware), New Castle,
Delaware

Tabic 125. RECOVERIES AND LOSSES BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ON
DISBURSEMENTS FOR PROTECTION OF DEPOSITORS, 1934-1988 (Amounts in thousands of dollars)
Liquidation
status and
year of
deposit
No.
payoff or
deposit
of
assumption banks
Total.....
Year4 ..
1934 .....
1935 .....
1936 .....
1937 .....
1938 .....
1939 .....
1940 .....
1941.....
1942 .....
1943 .....

Deposit assumption cases5

Deposit payoff cases

All cases

Recoveries Estimated
Disburse to Dec. 31, additional
ments
1988 recoveries Losses'

1,437 39,911,938 18,806,517 6,068,541 15,036,879

Recoveries Estimoted
Disburse to Dec. 31, additional
ments2
1988 recoveries Losses'

No.
of
banks

500 6,613,935 3,325,313 1,274,853 2,013,769

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
1338
2,647
1,184

60
43
15

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

32
19

26,196
4,895
12,278
1,612
5500

20,399
4313
12,065
1,320
5,377

5,797
582
213
292
123

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

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

404

364

2,685
4,404
1,986
1,525
5,359

20
5

1944 .....
1945 .....
1946.....
1947 .....
1948 .....

2
1
1

1949 .....
1950 .....
1951.....
1952 .....
1953 .....

4
4

1954 .....
1955 .....
1956 .....
1957 .....
1958 .....

1959 .....
1960 .....
1961.....
1963 .....

8
6

123

Recoveries Estimated
Disburse to Dec, 31, additional
1988 recoveries Losses'
ments3

869 20,055,247 11,064,201 1,927,194 7,063,852

3,082
7,471
7,839
25302

2,149
6,476
6,814
24,061

28
24
7
14

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

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

1,128
1,845
274
2,038
3,150

1,128
1,845
274
1,979
2509

2,685
4,404
1,986
1525
5,359

3,019
1,986
733
5359

2582

230
213

2
1
1

1,029
2,877
704

771
2,877
704

1,031
2,768

255

2
6

571
9,285

425
8,806

6,476

6,464

5
3

34,397
22,301
117,842

34,476
22,301
117,846

418,425

352,755

947

64,723

4 2,403,277 2,259,633

143,605
23,302
38,377
3,903
27,036

39
16,244
174
2,093
8,850

1
1
1
5
3

2,316
3,019
1,986
733
5,359

369
1,385

4
4

1,029
7,315
3,499
1,031
3,051

771
7,085
3,286
1,031
3,023

258
230
213
28

1,835
4,765

6,201
2 19,172

1,738
4,765
4,699
18,886

1964 .....
1965 .....
1966 .....
1967 .....
1968 .....

7
5
7
4
3

13,712
11,479
8,097
6,476

12,171
10,816
9,541
7,087
6,464

1969 .....
1970 .....
1971.....
1972 .....
1973 .....

9
7

42,072
51,566
171,613
16,189
435,196

41,910
51,294
171,416
14,485
369,526

947

82
272
193
1,704
64,723

1974 .....
1975 .....
1976 .....
1977 .....
1978 .....

4 2,403,277 2,259,633
13 332,046 292,431
16 599,337 559,030
6 26,650 20,654
7 545,738 509,648

143,605
23,303
40,060
3,903
27,036

39
16,312
247
2,093
9,054

1979 .....
1980 .....
1981.....
1982 .....
1983 .....

10 90,351 74,170
10 152,352 114,072
10 998,429 365,127

5,320
10,861
30,769
7511
44,813 588,489
306,376 1,285,269
192,395 1529,849

2
3

2
5

2
1
4

1
5

6
1
6

10,020

42 2,176,765 585,120
48 3,543,976 1,821,732

2
792

1
1

0
0
234

0
0
80

0
4

80 7,598,924 4,660,812

4,438
2,795
1,031
2,796

4,208

1,835
4,765

1,738
4,765
4,699
18,886

6,201
2 19,172

1,502
286

1,540
663
245

7
3

1,010
12

928,188 2,009,924
908,354
145 4X425 2,205,447 547,689 1,834,289
203 4,834,676 1,833,481 860,164 2,141,031
221 8,175,359 1,130,554 2,474522 4570,283

120 2,713,962 1,343,217 462,391

1.
2,
3.
4.
5.
6.

13,712
10,908
735
8,097

12,171
10391
735
7,087

0
0

1541
517

1,010

1
0
0
0
0

3
3

25,918
11,416

25,849
9,660

1
1,683

82
272
193
1,704

10 306,128 266,582

587,921

549,370

817

613

204

9,936
13,732
35,735
276,832
147,266

8,939
11522
32,878
198,627

70
(7)
1,265
3,331
7,463

927
2,217
1592
74,874
28,701

7 80,415 65,231
7 138,620 102550
5 79,205 33,402
26 415514 303,993
36 3324,718 1,710,630

16 771,171
29 515,042
40 1,164,780
51 2,103,358
36 1,250,815

583,155
357,353
596,839
880,031
243,479

77,861
43,389
146,133
419,848
573,815

110,155
114300
421,808
803,479
433521

3
3

2
7
9

111,102

1355
3,214
378
396

59
641

2316

6 26,650 20,654
6 544,921 509,035

369
1,385
792
258

62
87
98
133
164

1323,865 804,865
1585,645 851,768
3,188,143 1,601,289
2,562,911 951,792
2,641,760 267,284

146
245

12
0
4

5,250
9,934
7518
28552
43548
2,255
86,795
24,726
165534 1,448554
65,759 453,241
197,893 535,984
329,475 1,257379
439,272 1,171,847
348,663 2,025,813

Includes estimated losses in active cases. Not adjusted lor interest or allowable return, which was collected in some coses in which the disbursement was fully recovered,
Includes estimated additionol disbursements in active cases.
Excludes excess collections turned over to bonks as additional purchase price at termination of liquidation.
No case in 1962 required disbursements.
Deposit Assumption Cases include $347.6 million of disbursements for advances to protect assets and liquidation expenses which hod been excluded in prior years.
"Assistance transactions' include: a) Banks merged with financial assistance from FDIC to prevent probable failure through 1988.
b) $4,333.1 million of recorded liabilities at book value payable over future years.
Includes
CINB Assistance Agreement which had been previously excluded.
Digitized7.for
FRASER

933
995
1,025
1,241

1502
286

7513
28,993
53,574
14,485
16,771

Recoveries Estimated
Disburse to Dec. 31, additional
ments
1988 recoveries Losses'
68 13,242,756 4,417,003 2,866,494 5,959,259

No.
of
banks

7596
29,265
53,767
16,189
16,771

4
4
5

i
27
25
24

59
641

19847 ....
1985 .....
1986 .....
1987 .....
1988 .....

5
3

688

No.
of
banks

Assistance Transactions6

3 883,489
9 1,484,419
3
71,992

298,847
82,500

0 584,642
216,250 1,185,669
52594
19398

2 5503,888 3,272,792 784568 1,446528
4
7
19

613,275
234502
168,407
4,282,784

134,096 221,109 258,070
7319
72,081 155,102
1,044 165,705
1,658
619,791 1552,044 2,110,949

Table 127. INCOME AND EXPENSES, FEDERAL DEPOSIT INSURANCE CORPORATION, BY YEAR, FROM
BEGINNING OF OPERATIONS, SEPTEMBER 11, 1933, TO DECEMBER 1988 (in millions)
Income

Expenses and losses

Year
Total

Assessment
Income

Total ......................

36,306.4

23,244.9

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

3,347.7
3,319.4
3,260.1
3,385.4
3,099.5
2,628.1
2,524.6
2,074.7
1,310.4
1,090.4
952.1
837.8
764.9
689.3
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

1,773.0
1,696.0
1,516.9
1,433.4
1,321.5
1,214.9
1,108.9
1,039.0
951.9
881.0
810.1
731.3
676.1
641.3
587.4
529.4
468.8
417.2
369.3
364.2
334.5
303.1
284.3
260.5
238.2
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)

Assessment
Credits

Investment and
other sources1

6,709.1

19,770.6

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

1,574.7
1,623.4
1,743.2
1,952.0
1,778.0
1,577.2
1,511.9
1,152.8
879.6
734.0
585.1
518.4
468.4
410.4
366.1
315.0
278.5
239.5
223.4
191.8
162.6
142.3
129.3
112.4
104.1
97.7
84.6
73.9
65.0
57.9
53.0
48.2
43.7
39.6
37.3
34.0
31.3
29.2
30.6
28.4
26.3
43.1
23.7
27.3
18.4
16.6
12.6
10.6
9.7
10.5
9.4
9.4
8.2
9.3
7.0

Total
22,245.3

7,588.4
3,270.9
2,963.7
1,957.9
1,999.2
969.9
999.8
848.1
83.6
93.7
148.94
113.6
212.34
97.5
159.2
108.2
59.7
60.3
46.0
34.5
29.1
27.3
19.9
22.9
18.4
15.1
13.8
14.8
12.5
12.1
11.6
9.7
9.4
9.0
7.8
7.3
7.8
6.6
7.8
6.4
7.0
9.9
10.0
9.4
9.3
9.8
10.1
10.1
12.9
16.4
11.3
12.2
10.9
11.3
10.0

Deposit insurance
losses and
expenses
19,573.8

Interest on
capital stock2
80.6

7,364.5
3,066.0
2,783.4
1,778.7
1,848.0
834.2
869.9
720.9
(34.6)
(13.1)
45.6
24.3
31.9
29.8
100.0
53.8
10.1
13.4
3.8
1.0
0.1
2.9
0.1
5.2
2.9
0.7
0.1
1.6
0.1
0.2
0.1
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

Administrative
and operating
expenses

Net Income
added to deposit
insurance fund3

2,590.9

14,061.1

223.9
204.9
180.3
179.2
151.2
135.7
129.9
127.2
118.2
106.8
103.3
89.3
180.45
67.7
59.2
54.4
49.6
46.9
42.2
33.5
29.0
24.4
19.8
17.7
15.5
14.4
13.7
13.2
12.4
11.9
11.6
9.6
9.1
8.7
7.7
7.2
7.0
6.6
6.4
6.1
5.7
5.0
4.1
3.5
3.4
3.8
3.8
3.7
3.6
3.4
3.0
2.7
2.5
2.7
4.25

(4,240.7)
48.5
296.4
1,427.5
1,100.3
1,658.2
1,524.8
1,226.6
1,226.8
996.7
803.2
724.2
552.6
591.8
508.9
452.8
407.3
355.0
336.7
301.3
265.9
235.7
221.1
191.7
178.7
166.8
147.3
132.5
132.1
124.4
115.2
107.6
102.5
96.7
91.9
86.9
80.8
76.9
77.0
144.7
138.6
147.6
120.7
111.6
90.0
76.8
59.0
51.9
43.0
34.8
36.4
36.0
32.9
9.5
-3.0

'Includes $674.1 million of interest and allowable return received on funds advanced to receivership and deposit assumption cases and $637.7 million of interest on capital notes and
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 thetemporary insurance funds which became insured under the permanent plan were credited to their accounts at the termination o f thetemporary
funds and were applied toward payment o f subsequent assessments becoming due under the permanent insurance funding, resulting in no income to the Corporation from assessments
during the existence o f the temporary insurance funds.
“ Includes net loss on sales of U.S. Governement 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.
6Revised due to restatement of December 31,1984 financial statements.

Table 129. INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND, 1934-1988 (in millions)
Year
(December 31)

Insurance
Coverage

Deposits in insured banks1
Total

Insured

Percentage of
insured deposits

Deposit insurance
fund

Ratio o f deposit insurance fund to—
Total Deposits

Insured deposits

1988 .............................

100,000

2,330,768

1,750,259

75.1

14,061.1

.60

.80

1987 .........................
1986 .........................
1985 .........................

100,000
100,000
100,000

2,201,549
2,167,596
1,974,512

1,658,802
1,634,302
1,503,393

76.9
75.4
76.1

18,301.8
18,253.3
17,956.9

.83
.84
.91

1.10
1.12
1.19

1984
1983
1982
1981
1980

.........................
.........................
.........................
.........................
.........................

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

1,806,520
1,690,576
1,544,697
1,409,322
1,324,463

1,389,874
1,268,332
1,134,221
988,898
948,717

76.9
75.0
73.4
70.2
71.6

16,529.4
15,429.1
13,770.9
12,246.1
11,019.5

.92
.91
.89
.87
.83

1.19
1.22
1.21
1.24
1.16

1979
1978
1977
1976
1975

..........................
..........................
..........................
.........................
.........................

40,000
40,0006
40,0005
40,000
40,000

1,226,943
1,145,835
1,050,435
941,923
875,985

808,555
760,706
692,533
628,263
569,101

65.9
66.4
65.9
66.7
65.0

9,792.7
8,796.0
7,992.8
7,268.8
6,716.0

.80
.77
.76
.77
.77

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
.133
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 branches are omitted from totals because they are not insured. Insured deposits are estimated by applying to deposits at the regular Call dates the percentages as
determined from the June Call Report submitted by insured banks.
’ December 20,1963.
3December 28,1962.
4lnitial coverage was $2,500 from January 1 to June 30,1934.
5$100,000 fo r time and savings deposits of in-state governmental units provided in 1974.
‘ 5100,000 fo r Individual Retirement accounts and Keogh accounts provided in 1978.

Index

Accounting and Corporate
Services, Division o f

Examinations

xiii, 2-5

Frequency

xiii, 2-4

Accounting Issues

Types

Agricultural Loan Loss Deferral

6, 39

Executive Secretary, Office o f

Applications

10-11

External Auditing Policy Statement

Assessments

Assistance Transactions

xii, xiii, 7-8,
23-24, 70-71

By State

Ten Largest

Assisted Acquisitions and
Transactions Section, Legal Division
Bank Investment Practices

Bank Supervision, Division o f
Bridge Banks

2
xiii, 10, 23, 71

Budget and Corporate
Planning, Office o f

31
3
12-13, 27-28

Capital Forbearance
Case Management System (CM S)

6
20, 26-27

Cease and Desist Orders
Clarke, Robert L.

21
iv-v

Compliance and Enforcement

20-21

Comptroller General o f the U.S.

55-58

Consumer Affairs, Office of
Consumer Inquiries and Complaints

32
32-33

Corporate Audits and Internal
Investigations, Office o f

Corporate Communications, Office of

Corporate Support Offices

Delegations of Authority

11,17

Deposit Assumptions (see Purchase
and Assumption Transactions)

International

11-12
Legal Case Management System
(see Case Management System)

10, 18

Legal Division

Legislation Enacted in 1988

xiii, 19

Legislative Affairs, Office o f

Farm Credit Administration
Federal Agricultural Mortgage
Corporation (Farmer Mac)

F D IC Banking Review

xiv, 30, 31

F D IC Insurance — Protecting Your
Deposits (videotape)

xiv, 33

Federal Deposit Insurance Corporation
Awards

Chronological Highlights

Committee on Management

vii

Ethics Program

Financial Statements

Officials and Employees,
Number o f

Officials, List o f

viii

Operations and Training Center
Organization Chart
Regional Offices and Directors

xiv, 28

ix-x
29

Statistical Highlights

xvi

Statistical Tables

Federal Land Bank o f Jackson,
Mississippi

First City Bancorporation, Houston,
Texas
xiii, 7-8, 23
First RepublicBank Corporation,
Dallas, Texas xiii, xiv, 9-10, 18-19, 22, 23-24

General Accounting Office (G A O )

Government Securities Act

Disclosure Statements (Part 350)

12
Hope, C.C., Jr.
Inspector General, Office of

Equal Employment Opportunity,

Insured Deposit Payoffs
Insured Deposit Transfers

xiv, 17, 27

Liquidation, Division o f

Litigation
Closed Bank

Open Bank and Corporate

M erger Policy

Net W orth Certificates

Personnel Management, Office o f
Problem Banks

33
xiii, 5-6

Purchase and Assumption
Transactions

9, 63-70

Quarterly Banking Profile

28, 30, 31

Standing Committees

Enforcement Actions
(see Compliance and Enforcement)

Liquidation Asset Management
Information System (L A M IS )

34
iv-v, 17, 29, 32

Directors and Officers Liability

By Type

Fraud and Insider Abuse

Interest Rate Swaps

xii-xiii, 8-10, 18-19

Deposit Insurance fo r the Nineties —
M eeting the Challenge
xiii, 2, 30, 31

Office o f

3-4

By State

Board of Directors

CAEL Offsite Review Program
Call Reports

Failed Banks

Interagency Country Exposure
Review Committee (ICERC)

6-7
32, 55
14-15
iv-v
32

Recruiting, Division of
Bank Supervision

xiii, 3, 33-34

Reports o f Condition and Incom e
Research and Statistics, Office o f
Risk-Based Capital

31
11, 40

Rules and Regulations
Adopted in 1988

Savings Bank Performance Report
Secondary Marketing Asset
Pricing System (SM APS)
Securities Exchange Act of 1934
Seidman, L. William

12, 27

3
17, 26
15

iv-v, xii-xiv, 7, 30, 31

Shared National Credit Program

Technical and Miscellaneous Revenue
A ct of 1988 (T A M R A )
30, 31, 38
Training

15, 34, 35

9, 62
9, 62-63

W hole Bank Transaction

xiii, 14, 19

The 1988 Annual Report of the Federal Deposit Insurance Corporation is published by the FDIC.
Office of Corporate Communications, Room 6061-B, 550 17th Street, N.W., Washington, D.C. 20429
Alan J. Whitney, Director
Stephen J. Katsanos, Assistant Director
Writer-Editor: Caryl A. Austrian
Art Director: Geoffrey L. Wade
Designer: Geri Bonebrake
Photography: Paul Fetters, Geoffrey L. Wade

FE D E R A L D E P O S IT IN S U R A N C E C O R P O R A T IO N
550 17th Street, N W , Washington, DC 20429