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. .to maintain public confidence
in banking institutions
for the good of individual con
and the entire nation.”

The Federal Deposit Insurance Corporation
was created by Congress in 1933 to restore
public confidence in the nation’s banking
system following a severe financial crisis.
Since that time, the mission of the FDIC
has been, and continues to be: to protect
depositors’ accounts; to promote sound
banking practices; to prevent or reduce
the disruptions caused by bank failures;
and to respond to a changing economy
and banking system, all in an effort to
maintain public confidence in banking
institutions for the good of individual
consumers and the entire nation.

October 29, 1990

Federal Deposit Insurance Corporation
Washington, D.C.

L. Willia
Chairman

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

Table of Contents
Federal Deposit Insurance Corporation
iii
vii
xii
xiv

Transmittal Letter
Chairman’s Statement
Board of Directors
Officials
Regional Directors
Statistical Highlights
Chronological Highlights
Organization Chart

xv i
xvii
xviii

The State of the Industry

Operations of the Corporation

Division of Supervision
Division of Liquidation
Legal Division
Division of Accounting and Corporate Services
Division of Research and Statistics

6
26
32
41
48
51

Division of FSLIC Operations
Corporate Support Offices:
Office of the Executive Secretary
Office of Corporate Communications
Office of Legislative Affairs
O ffice of Budget and Corporate Planning
Office of Inspector General
Office of Consumer Affairs
Office of Personnel Management
Office of Equal Opportunity
Standing Committees

54
56
57
59
61
62
65
68
71

Legislation and Regulations

Legislation Enacted in 1989
Rules and Regulations Adopted in 1989

74
77

Financial Statem ents

Statistics

Index

115

C hairm an’s S tatem ent
In last year’s Annual Report, I said that
we faced two major challenges in the
future — a resolution of the thrift in
dustry crisis and the development of
deposit insurance reform. This year, I
can report that we have made signifi
cant progress in these and other areas
of importance to this agency and to the
U.S. economy. While much work remains
— in fact, several years’ more work to
resolve the thrift industry problems —
much has been accomplished in this
past year.
The landmark Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989 (FIRREA), which was enacted
primarily to recapitalize the th rift in
surance fund, calm the thrift crisis and
deal with insolvent savings and loan
associations, made major changes in
the FDIC as well. As early as February
of 1989, long before FIRREA was
enacted, we began dedicating
resources to the thrift industry’s
problems.

Richard

A. B lo o m

But even as the S&L rescue operation
was gearing up, the banking industry
also was having a d ifficult year and
required significant attention from us.

Banking industry losses primarily from
real estate loans and loans to develop
ing countries brought down industry
earnings 35 percent during the year, to
$16.3 billion. A total of 206 FDIC-insured
banks were closed during the year —
the most ever — and one small institu
tion received assistance from the FDIC
to keep from closing. As a result of
these and other industry conditions,
the FDIC insurance fund for bank
deposits lost money for the second
year in a row.
The Bank Insurance Fund ended 1989
with a net worth of $13.2 billion, down
about $850 million from the previous
year. For these and other reasons, 1989
was the most demanding year in the
56-year history of the FDIC and a likely
harbinger of more tough times ahead.

The Im pact of FIRREA
FIRREA is the most significant piece of
financial institution legislation since the
Great Depression. While it is far from
perfect, we consider it a solid first step
toward a stronger th rift industry and a
sounder deposit insurance system.
Authorized by FIRREA, the Resolution
Trust Corporation (RTC) was set up to
dispose of hundreds of billions of
dollars of assets from failed thrifts. The
new agency will sell or liquidate savings
institutions with combined assets three
times the size of all the bank failures
and assistance transactions in the last
half century.
Under FIRREA, the FDIC Board of
Directors was appointed to act as the
RTC Board, and all RTC employees are
FDIC employees as well. In fact, we
sent nearly a thousand FDIC employees
to start up the RTC. By year-end, they
had made good progress in asset
sales, while still getting organized.

FDIC Chairman L. W illiam Seidman

V II

Depositors need not be concerned
since their funds are guaranteed by
the U.S. government as specifically
provided in FIRREA.
The RTC’s 1989 Annual Report provides
more details.
FIRREA gave the FDIC the job of man
aging the federal deposit insurance fund
for savings institutions. As a result, we
inherited responsibility for 98 savings
institution receiverships formerly handled
by the Federal Savings and Loan
Insurance Corporation. This more than
doubled our Division of Liquidation’s
portfolio, bringing its total to approx
imately $24 billion.

■■■

V III

We are working with other government
agencies to close insolvent savings
institutions, and to promote the
strength and safety of the industry.
Along with the RTC, we are filing a
record number of lawsuits to bring to
account those responsible for the
unsafe and unsound management of
savings institutions.
FIRREA implements several of the FDIC’s
recommendations for more stringent
standards on institutions and for broader
regulatory powers. The legislation directs
the Treasury Department, in cooperation
with the FDIC and other agencies, to
conduct a major study of the deposit
insurance system and to make specific
recommendations to Congress in 1991.

The Y ear in Review
W ithout a doubt, the Bank Insurance
Fund was under pressure in 1989. The
level of the fund as a percentage of
insured deposits declined to an all-time
low, ending the year with the equivalent
of 70 cents for every $100 of deposits
we insure. At the end of 1988, when
the fund’s ratio hit its previous low, we
had 80 cents in reserve for every $100
of insured deposits. The level of the
fund is a concern that the FDIC Board
will be reviewing.

The 206 closed banks handled by the
FDIC in 1989 totaled $29 billion in assets,
primarily from three cases. They were:
20 subsidiary banks of MCorp of
Dallas, Texas, with about $15.4 billion
in assets; 24 subsidiary banks of Texas
American Bancshares, Inc. (TAB), of
Fort Worth, Texas, with about $4.2
billion in assets; and the $1 billionasset First American Bank and Trust,
North Palm Beach, Florida.
The 206 failures and one assistance
transaction in 1989 compare to the
record 221 institutions closed or aided
the previous year. Also, the size and
the costs of the cases handled in 1989
were lower than in 1988. For example,
the $29 billion in assets of closed or
assisted banks in 1989 were considerably
less than the nearly $54 billion in assets
at failed or assisted banks in 1988.
Average assets of failed banks in 1989
were $141.6 million, compared to
$250.2 m illion the previous year. We
also reserved on our books in 1988 for
the estimated costs of handling several
large problems in 1989, such as MCorp
and TAB, which meant that our fund
didn’t really “ pay” for those transactions
in 1989 but will do so in 1990.
I am hopeful that ongoing improvements
in our operations will help strengthen
the fund and hold down costs. One
example is a new procedure, being
implemented in 1990. Our Division of
Liquidation (DOL) will take over the
final stages of most bank closings
from our Division of Supervision (DOS).
In essence, this will give the DOL more
time and flexibility to dispose of assets
while leaving our DOS examiners more
time to do what they do best, which is
to m onitor banks.

Another hopeful sign is that the
number of insured institutions on our
list of “ problem banks” is declining. In
mid-1987, the problem bank list hit its
all-time high of 1,624. By the end of
1988, the number was down to 1,406.
By the end of 1989, the number of prob
lem banks declined to 1,109.
Close supervision by the FDIC is one
reason for the decline in problem
banks. We increased our examination
force substantially and conducted 4,089
on-site exams to check banks for safety
and soundness, up from 4,019 in 1988
and 3,653 in 1987. This increase came
despite the heavy involvement of our
personnel in the management of sav
ings institutions put into conservator
ship in 1989. We are moving closer and
closer toward achieving our goal of
conducting an on-site examination at
each bank on our “ watch lis t” at least
once a year.
While examinations are an essential part
of our early warning system, a major
problem we face is the effect of eco
nomic downturns, especially in certain
regions. The most obvious example is
Texas, where sharply declining real
estate values translated into a corre
sponding increase in bank problems. In
1984, only six banks failed in Texas; in
1989, there were 133 failures and one
assistance transaction. Signs of
recovery in the Texas banking sector
are evident, and the decline there and
throughout much of the Southwest may
have ended.
This past year, we monitored national
and regional trends and developments
more closely to try to prevent problems
before they occur and before they run
up a big bill for the insurance fund. As
real estate problems in particular are a
prime reason for bank failures, we are
focusing attention there. Despite some
improvements, banks in the Southwest

region of the U.S. continued to present
the worst problems, with a net chargeoff rate on real estate loans nearly four
times the national average. But real
estate lending by banks elsewhere also
is cause for concern.
Real estate problems at New England
banks are on the rise, but to this point
are neither as severe nor as widespread
as those encountered in the south
western states in recent years. Neverthe
less, in 1989 almost one out of four
banks in the New England states lost
money, compared to one out of 13 the
previous year. We anticipate some
worsening of the situation in New
England in 1990, but we do not expect
the problems there to approach those
of the Southwest.
Real estate loans pose two kinds of risk
— the risk of default and the risk that
rising interest rates might make the
loans unprofitable. Banks have become
increasingly dependent on real estate
lending as a source of asset growth.
As recently as year-end 1985, real estate
loans amounted to 16 percent of commer
cial bank assets. At the end of 1989,
this proportion had risen to 23 percent.
At the end of 1985, real estate loans
came to 27 percent of total loans. By
the end of 1989, that share was up to
37 percent.
Of the $168 billion in net asset growth
for commercial banks in 1989, just over
half was due to an increase in real
estate lending. Commercial real estate
loans, which historically have a higher
loss rate than residential loans, accounted
for about 45 percent of the real estate
loan growth during the year.
We are developing sophisticated new
surveys of real estate activities in 50 or
more major geographic areas. This proj
ect is coordinated by our Division of

The Challenges Ahead

Research and Statistics in conjunction
with examiners in the field and other
FDIC staff members.
In addition to real estate lending, other
areas requiring supervisory attention
include loans to developing countries,
commercial loans to highly-leveraged
borrowers and consumer lending.
We worked closely with other regulators
during 1989 on initiatives that put
renewed emphasis on adequate capital
at banks and thrift institutions. Because
of increased risks to the financial
system, we believe institutions would
benefit from additional capital.

The more thrift industry losses pile up
from real estate lending, junk bonds,
fraud, changes in interest rates and
other sources, the tougher and costlier
the government’s task becomes. How
we handle these challenges will affect
the reputation of this agency as well as
the pocket of every U.S. taxpayer.

David

H a th c o x

I also am encouraged by discussions
among U.S. banking supervisors and
regulators from other major industrialized
nations leading to common, minimum
capital standards based on the riskiness
of banking activities.

The year ahead will be difficult for the
FDIC, especially operating the RTC with
its job of resolving failed and failing
savings institutions. The savings and
loan industry had by far its worst year
in 1989, with losses totaling more than
$19 billion. That’s worse than anyone
had expected. In 1988, thrift industry
losses came to $13.4 billion. As a result,
the workload of our Division of Supervi
sion surely will increase in 1990. In just
the first few months of 1990, we’ve
seen major, unexpected insolvencies,
including the $11 billion-asset Imperial
Savings of San Diego, the $10.2 billionasset Empire of America in Buffalo and
the $8.9 billion-asset CenTrust of Miami.

Chairman Seidman in his office with FDIC staff from around the country for a discussion of workplace issues
that included travel, recruitment and the overall impact on the agency of the thrift crisis, May 1989.

As we start the 1990s, I’ve identified
what I see as the major questions and
challenges of the future.
Deposit insurance reform certainly is
crucial. I have often said that deposit
insurance is like a nuclear power plant;
when it works right it’s a great thing
and when it breaks down it can be very
dangerous. We need to determine the
best ways to control the exposure of
the deposit insurance funds.
Issues currently on the table include:
Limiting insurance coverage to provide
better depositor discipline;
Various “ narrow” banking proposals,
including separate rules for small
banks;
Higher capital requirements;
Alternative deposit insurance structures,
including private insurance; and
Risk-related insurance premiums.
Each of these proposals has its support
ers among the agencies and we are
studying each one carefully.
It has become standard, almost a cliche,
for any chief executive officer to include
in an Annual Report a note about the
hard work and dedication of the
employees. But in this unprecedented
year of change and growth at the FDIC,
such recognition is no cliche.

This was a year when hundreds of FDIC
examiners, lawyers, liquidation special
ists and others, from different divisions
and different cities, pulled together
when we were brought in to manage
several hundred problem savings
institutions placed in conservatorship.
This was a year when FDIC personnel
were doing the work of two or three
people, often to make up for col
leagues who had not been replaced
after being assigned to the RTC or to
conservatorships.
This was a year when we needed
extremely fast turnaround preparing fail
ing banks or thrifts for sale. Time and
again, FDIC workers did the job, some
times literally working around the clock.
I’m also heartened that FDIC employees
have worked so well with the many
hundreds of skilled people who have
joined our agency from the former
Federal Savings and Loan Insurance
Corporation and Federal Home Loan
Bank Board.
One major news publication during the
year had a photo on the cover of me
wearing a big white hat. That was very
flattering. Except the real good guys are
the thousands of FDIC employees around
the country who have made this the proud
and successful agency that it is.

L. W illiam Seidman

C. C. Hope, Jr.

Board of Directors
L. W illiam Seidman
L. W illiam Seidman was elected
Chairman of the Federal Deposit
Insurance Corporation on O ctober 21,
1985. Prior to his appointm ent to the
FDIC, Mr. Seidman pursued an exten
sive 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 direc
to r 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
W hite House Conference on Produc
tivity, Vice Chairman of the Phelps
Dodge Corporation, A ssistant to Presi
dent Gerald Ford fo r Economic A ffairs
and Managing Partner of Seidman &
Seidman, Certified Public Accountants,
New York. He also was Chairman and
a D irector o f the Federal Reserve
Bank of Chicago, Detroit Branch.
Mr. Seidman 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 Associa
tion, the American Institu te of Certified
Public A ccountants and several
academic honorary fra ternities including
Phi Beta Kappa. He is the author of
one book and numerous articles on
business and tax subjects.

C. C. Hope, Jr., was named to the
Board of Directors o f the Federal
Deposit Insurance Corporation on
March 10, 1986, confirm ed by the
Senate on March 27 and com m issioned
by President Ronald Reagan on April
7, 1986. Before his appointm ent 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 form er President of the
American Bankers A ssociation and
has served as Secretary of the North
Carolina Department of Commerce. In
the field of education, Mr. Hope is a
trustee and form er Chairman of the
Board of Wake Forest University and
has been Dean of the Southwestern
Graduate School of Banking at
Southern M ethodist University.
He holds a B.A. in Business A dm inis
tration from Wake Forest University
and has com pleted graduate work at
the Harvard Business School and The
Stonier Graduate School of Banking
at Rutgers University.

0
3

L-R: M. Danny Wall, Director, O ffice o f T hrift Supervision;
Director C.C. Hope, Jr.; Chairman L. W illiam Seidman;
and Robert L. Clarke, Com ptroller of the Currency

M. Danny Wall

Robert L. Clarke
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 sec
tion at the Houston, Texas, law firm of
Bracewell & Patterson. He joined that
firm after completing his military ser
vice in 1968. The banking section
prepared corporate applications and
securities registrations, counseled
management in expansion opportunities
and the effects of deregulatory initiatives
and represented institutions in enforce
ment 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 profes
sional organizations.

M. Danny Wall, after nomination by
President Reagan, was sworn in as
Chairman of the Federal Home Loan
Bank Board (FHLBB) on July 1, 1987.
Mr. Wall became Director of the Office
of Thrift Supervision (OTS) and a mem
ber of the FDIC Board of Directors in
August 1989 under the Financial Institu
tions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA).
Under FIRREA, the FHLBB was abolished
and its regulatory functions were
transferred to the new OTS. FIRREA
also increased the FDIC Board’s
membership to five persons by adding
a Vice Chairperson and the Director of
the OTS. (At year-end 1989, a Vice
Chairperson had not yet been nominated
and confirmed by the Senate.) Mr. Wall
announced his resignation from the
OTS in December 1989 and left the
agency in March 1990.
Prior to his appointment to the FHLBB,
Mr. Wall served eight and one-half
years on the staff of the Senate Banking
Committee, where he was Staff Direc
tor from 1981 to 1987. He came to
Washington in 1975 as Director of
Legislation for Senator Jake Garn of
Utah. Before that, Mr. Wall organized
the Salt Lake City Redevelopment
Agency and served as its Executive
Director from 1971 to 1975. Mr. Wall
earned a Bachelor of Architecture
degree from North Dakota State
University in 1963.

X III

Officials
Deputy to the Chairman

John F. Bovenzi

Administrative Assistant to the Chairman

Donna R. Mahon

Director, Division of Supervision

Paul G. Fritts

Director, Division of Liquidation

Steven A. Seelig

General Counsel

Alfred J. T. Byrne

Director, Division of Accounting and Corporate Services

Stanley J. Poling

Director, Division of Research and Statistics

W illiam R. Watson

Director, Division of FSLIC Operations

Stanley J. Poling

Deputy to the Appointive Director

Robert V. Shumway

Deputy to the Director (Comptroller of the Currency)

Thomas E. Zemke

Deputy to the Director (Office of Thrift Supervision)

Linda B. Plye

Executive Secretary

Hoyle L. Robinson

Director, Office of Corporate Communications

Alan J. Whitney

Director, Office of Legislative Affairs

Beth L. Climo

Director, Office of Budget and Corporate Planning

J. Russell Cherry

Inspector General

Robert D. Hoffman

Director, Office of Consumer Affairs

Janice M. Smith

Director, Office of Personnel Management

Alfred P. Squerrini

Director, Office of Equal Opportunity

Mae Culp

Director, Office of Training and Educational Services

Jane Sartori

Regional Directors
Supervision

San Francisco (415) 546-0160
John R. Sexton
25 Ecker Street, Suite 2300
San Francisco, California 94105
Alaska, Arizona, California, Guam,
Hawaii, Idaho, Montana, Nevada,
Oregon, Utah, Washington, Wyoming

• Atlanta (404) 525-0308
Liquidation
Lyle V. Helgerson
245 Peachtree Center Avenue, NE, 12th Floor
Atlanta, Georgia 30303
* Chicago (312) 207-0200
Bart L. Federici
Alabama, Florida, Georgia, North Carolina,
30 S. Wacker Drive, 32nd Floor
South Carolina, Virginia, West Virginia
Chicago, Illinois 60606
Arkansas, Illinois, Iowa, Kansas,
• Boston (617) 449-9080
Louisiana, Minnesota, Missouri,
Paul H. Wiechman
Nebraska, North Dakota, South Dakota,
180 Gould Street
Wisconsin
Needham, Massachusetts 02194
Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, Vermont
• Dallas (214) 754-0098
G. Michael Newton
• Chicago (312) 207-0210
1910 Pacific Avenue, Suite 1700
George J. Masa
Dallas, Texas 75201
30 S. Wacker Drive, Suite 3100
Oklahoma, Texas
Chicago, Illinois 60606
Illinois, Indiana, Michigan, Ohio, Wisconsin • New York (212) 704-1200
Thomas A. Beshara
• Dallas (214) 220-3342
452 Fifth Avenue, 21st Floor
Kenneth L. Walker
New York, New York 10018
1910 Pacific Avenue, Suite 1900
Alabama, Connecticut, Delaware,
Dallas, Texas 75201
District of Columbia, Florida, Georgia,
Colorado, New Mexico, Oklahoma, Texas
Indiana, Kentucky, Maine, Maryland,
Massachusetts, Michigan, Mississippi,
• Kansas City (816) 234-8000
New Hampshire, New Jersey, New York,
Charles E. Thacker
North Carolina, Ohio, Pennsylvania,
2345 Grand Avenue, Suite 1500
Puerto Rico, Rhode Island,South Carolina,
Kansas City, Missouri 64108
Tennessee, Vermont, Virginia,
Iowa, Kansas, Minnesota, Missouri,
Virgin Islands, West Virginia
Nebraska, North Dakota, South Dakota
San Francisco (415) 546-1810
• Memphis (901) 685-1603
Keith W. Seibold
Bill C. Houston
25 Ecker Street, Suite 1900
5100 Poplar Avenue, Suite 1900
San Francisco, California 94105
Memphis, Tennessee 38137
Alaska, Arizona, California, Colorado,
Arkansas, Kentucky, Louisiana,
Guam, Hawaii, Idaho, Montana, Nevada,
Mississippi, Tennessee
New Mexico, Oregon, Utah, Washington,
Wyoming
• New York (212) 704-1200
Nicholas J. Ketcha, Jr.
452 Fifth Avenue, 21st Floor
New York, New York 10018
Delaware, District of Columbia,
Maryland, New Jersey, New York,
Pennsylvania, Puerto Rico, Virgin Islands

deposits and liabilities of 20 failed
bank subsidiaries of MCorp of Dallas,
(see p. 13)

Chronological Highlights
January 4
Chairman L. William Seidman unveils a
comprehensive FDIC study of the
federal deposit insurance system and
the principles that should guide the
system in the years ahead.
February 6
President Bush announces proposed
legislation and interim steps to address
the savings and loan industry crisis,
including a program to place troubled
institutions into conservatorship under
an interagency effort led by the FDIC.
Joint regulatory teams assumed over
sight of the first group of institutions
the following day.
February 9
The FDIC breaks ground for a new
operations and training center located
in Arlington, Virginia. Completion is
scheduled for 1991. (see p. 47)
March 13
Chairman Seidman announces that the
nation’s commercial banks posted
aggregate net income of $25.3 billion
for 1988, the highest in history.
March 14
The FDIC reports an operating loss for
1988, the first in the agency’s history.
March 14
The FDIC Board approves a framework
for bank capital standards that would
reflect the relative investment risks of
various assets banks hold in their port
folio. Sim ilar risk-based capital stand
ards were adopted by the O ffice of the
Com ptroller of the Currency and the
Federal Reserve Board, (see p. 19)
March 28
The Deposit Insurance Bridge Bank,
National Association, Dallas, is
established by the FDIC to assume

July 20
Texas American Bridge Bank, National
Association, Fort W orth, is organized
by the FDIC to assume deposits and
liabilities of 24 failed commercial bank
subsidiaries of Texas American Bancshares, Inc., Fort Worth, (see p. 13)
August 9
President Bush signs into law the
Financial Institutions Reform,
Recovery, and Enforcement Act of
1989 (FIRREA), the landmark legislation
primarily aimed at addressing the th rift
industry crisis but also making fun
damental changes in the way banks
and savings associations are supervis
ed and insured. The law included pro
visions that greatly expanded the
regulatory and insurance functions of
the FDIC and established the Resolu
tion Trust Corporation under FDIC
management, (see pp. 24-26)
December 5
As required by FIRREA, the FDIC Board
agreed to seek public comment on a
variety of proposed changes to the
rules governing deposit insurance at
banks and savings institutions, largely
to resolve differences in the regulations
of the FDIC and the former Federal
Savings and Loan Insurance Corporation,
(see p. 79)
December 13
FDIC-insured bank closings surpass the
previous year’s record of 200, with the
year-end total to reach 206.
December 15
First American Bank and Trust, National
Association, a bridge bank, is organized
by the FDIC to assume deposits and
liabilities of the failed First American
Bank and Trust, North Palm Beach,
Florida, (see p. 13)

xvii

Organization Chart
Board of Directors

xviii

• Banks in the Midwest and West enjoyed
improved profitability in 1989.

The State of the
Banking Industry, 1989
To better understand the FDIC’s work, it
is important to understand conditions in
the commercial banking industry and the
challenges those conditions present to the
agency. For that reason, the 1989 FDIC
Annual Report includes for the first time
a detailed analysis of FDIC-insured com
mercial bank performance. The following
report, which excludes savings banks,
was prepared by the FDIC’s Division of
Research and Statistics.

• The number of commercial banks on
the FDIC’s “ problem list” declined for
the second straight year, to 1,092. That
was the lowest level since 1985.
• The combination of 205 commercial
banks that failed and one that required
assistance to avert failure in 1989 was
15 fewer than 1988’s combined total.
More significantly, the average asset
size of failed or assisted banks in 1989
was roughly half as large as in 1988, a
reflection of resolving most of the
largest troubled banks in the Southwest.

Money-Center Bank Problems
Commercial bank performance presented
a mixed picture in 1989. On the one
hand, in aggregate terms, the commer
cial banking industry finished 1989 in
worse condition than it began:
Earnings were more than a third lower
than the year before.
Provisions for losses
$13 billion higher, as
for future charge-offs
domestic and foreign

were more than
banks prepared
on both their
loans.

Net loan charge-offs in 1989 were at
their highest levels in the 42 years that
the industry has reported them, and
were still insufficient to reduce the
industry’s inventory of troubled assets.
Problem assets increased in relative
terms, and equity capital declined as
a proportion of total assets.
On the other hand, there were some
encouraging signs in other bank perfor
mance indicators in 1989:
Smaller banks in the Southwest were
doing better. Their earnings were up,
fewer of them posted full-year losses,
and problem assets declined.

The unfavorable picture presented by
some of the aggregate performance
indicators is a result of credit-quality
troubles at a number of the nation’s
largest banks.
Money-center bank earnings continued
to suffer as a consequence of their
troubled loans to “ lesser developed
countries” (LDCs). Net charge-offs on
loans to foreign borrowers exceeded
$7.5 billion in 1989, as large banks
reduced their lending exposure to Latin
American borrowers by $12.3 billion.
Provisions for foreign losses were even
higher at $10 billion, their highest level
since 1987.
These developments had a major impact
on money-center bank earnings. Five of
the 10 largest commercial banks reported
net losses for 1989. Money-center banks
increased their reserves for losses on
LDC debt to an average of about 50 per
cent of the banks’ exposure, from less
than 40 percent at the beginning of the
year. The risk posed by LDC exposure has
diminished for the money-center banks.

Regional banks have sold and chargedo ff most of their LDC loans. The majority
of institutions in the medium-to-large
size range are performing well, but
there are notable exceptions. Many
large institutions in the Southwest con
tinued to struggle with weak local real
estate markets and nonperforming
assets from earlier economic troubles.
Of the 206 commercial banks that failed
or required assistance during the year,
167 were in the Southwest.

Real Estate Problems Spread
Most of the areas that experienced
depressed real estate markets first had
a jum p in real estate values, followed
by speculative over-building supported
by speculative over-lending. This
“ boom-and-bust” pattern has subse
quently appeared in some real estate
markets in the Northeast, evidenced by
higher problem assets and loss provi
sioning at many of the region’s banks.
Nevertheless, real estate lending re
mained the main source of commercial
bank asset growth in 1989. The interest
rate environment was favorable, and
loan demand in other categories was
not as vigorous.
Growth in real estate lending was par
ticularly evident in the West and
Southeast. Residential mortgage loans,
which typically have a lower default
rate than commercial real estate loans,
accounted for more than half of the
$87 billion net growth in real estate
loans in 1989. Still, commercial real
estate loans accounted for about 45
percent of the net growth.
Home equity lines of credit were the
fastest-growing category of real estate
loans, increasing by $10 billion. The
d ifficulties of savings and loan associa
tions with negative or inadequate
capital meant that commercial banks

faced less com petition in real estate
lending. Credit card lending also grew
rapidly in 1989, and remained highly
profitable, even though delinquency
and loss rates increased.

Trends in the Cost of Funds
Net interest margins widened at
smaller banks and narrowed at larger
institutions in 1989, but the net interest
margin for the entire banking industry
was unchanged from 1988. As interest
rates rose, larger banks were less able
to control rising interest expense. In
terest income at money-center banks
was held down by high levels of non
accruing loans to developing countries.
Commercial banks were fairly successful
in limiting the growth of overhead costs.
Non-interest expense was up only 6.6
percent from the 1988 level. Non-interest
income increased by 13.7 percent, as
smaller banks were able to increase
their non-interest revenues more rapidly
than larger banks.

Industry Consolidation Continued
The number of insured commercial banks
fell for the fifth straight year, from
13,139 at year-end 1988 to 12,712 at
year-end 1989. Also, the 206 commer
cial banks that failed or received
assistance offset the 192 new commer
cial banks chartered during the year.
The number of new banks chartered
declined to the lowest level since 1978.
Much of the merger activity that removed
more than 1,000 institutions from the
commercial banking industry in the past
two years has consisted of conversions
of subsidiary banks by multi-bank
holding companies into branch offices
in those states that have liberalized
their branching restrictions.

loan exposure could reduce industry
earnings. If provisions taken in 1989 for
future domestic losses prove inade
quate, or if real estate markets outside
the Southwest deteriorate further, then
provisioning for domestic losses also
could lim it bank profits.

Outlook
In the future, the focus of asset-quality
problems will continue to shift from the
Southwest to the Northeast. Real estate
markets in the southeastern, mid-Atlantic
and western states also will bear watch
ing for problems.

Economic conditions will have a strong
influence on asset growth and credit
quality. Higher interest rates would
adversely affect some commercial loans
and would squeeze profits at those
banks that have increased their fixedrate mortgage loans. Slower economic
growth would further erode the credit
quality of consumer loans.

The earnings outlook for the commercial
banking industry will depend on a
number of factors. Another round of
money-center bank reserving for LDC

Return on Assets, Calendar Year 1989, FDIC - Insured Commercial Banks
West

Midwest

Central

Southwest

Legend: ROA Percentages
W est
Avg. ROA:
N evada
Oregon
Hawaii
W ashington
C alifornia
W yom ing
Alaska
Idaho
Montana
Utah
Colorado
Arizona

%
1.00
2.12
1.22
1.21
1.21
1.19
1.17
1.14
1.14
1.04
0.68
0.41
(1.80)

□

Less than 0%

Southeast

G O to 0.75%

B 0 .7 6 to 1 . 1 0 %

M idw est
Avg. ROA:

%
1.01

C entral
Avg. ROA:

%
1.00

%
Southw est
Avg. ROA: (0.07)

South D akota
N ebraska
Iowa
Kansas
M issouri
N orth D akota
M innesota

2.24
1.23
1.14
0.97
0.94
0.84
0.48

Wisconsin
M ichigan
Ohio
Kentucky
Indiana
Illinois

1.11
1.10
1.07
1.03
1.00
0.90

Arkansas
New M exico
O klahom a
Louisiana
Texas

National Average ROA (all FD IC -insured com m ercial banks): 0.50%

Northeast

1.04
0.82
0.50
(0.11)
(0.34)

> 1 .1 1 % and higher

N ortheast
Avg. ROA:

% S outheast
(0.02) Avg. ROA:

%
0.88

Delaware
V erm ont
R hode Island
New Jersey
Maryland
M aine
W ashington, DC
Pennsylvania
New H am pshire
New York
M assachusetts
C onnecticut

1.50
1.12
1.04
1.00
0.94
0.83
0.76
0.72
0.61
(0.48)
(0.53)
(1.26)

1.12
1.09
1.06
1.03
1.01
1.00
0.79
0.61
0.60

Virginia
G eorgia
W est V irginia
N orth C arolina
Alabama
South Carolina
Mississippi
Florida
Tennessee

Division of Supervision
Adds Role as Backup Supervisor of
Thrifts to Traditional Duties
The announcement in February by
President Bush of an interagency plan
to address the th rift crisis marked the
start of major changes and challenges
for the Division. The FDIC’s subsequent
involvement in the supervision of thrifts
resulted in changing the name of the
Division of Bank Supervision in 1989 to
the Division of Supervision (DOS).
DOS first devoted a significant number
of personnel to developing and imple
menting permanent solutions for the
Federal Savings and Loan Insurance
Corporation’s (FSLIC) inventory of the
most insolvent, unprofitable thrifts.
Many examiners served as managing
agents responsible for preserving assets
of these badly troubled institutions.
Others were members of examination
teams who worked with the managing
agents to arrive at accurate evaluations
of each institution’s condition. At the
height of the effort, almost 600 of the
Division’s examiners — about a third of
the entire field examiner staff at the
time — were directly involved.

Then in August, DOS began implement
ing certain provisions of the Financial
Institutions Reform, Recovery, and
Enforcement Act (FIRREA) that sig n ifi
cantly expanded the Division’s respon
sibilities for commercial banks and also
assigned to the FDIC the role of back
up supervisor of savings associations.
In general, these provisions strengthened
supervision of savings associations, cur
tailed activities that pose unacceptable
risks to the federal deposit insurance
fund, increased the enforcement
powers of the regulators, and expanded
civil sanctions and criminal penalties
for fraud and abuse.
While efforts to promote stability in the
thrift industry commanded much of the
popular attention, DOS was active in
1989 in its historical responsibility for
supervising state nonmember banks
and for otherwise promoting the mainte
nance of a sound banking system.
Among the highlights were:
• Handling 206 bank failures and monitoring
more than 1,100 “problem” institutions.
The 206 failed institutions set a postDepression annual record, exceeding
the previous high of 200 in 1988. Of the
206 failures, one was a savings bank.
The rest were commercial banks.
• Significantly increasing the DOS
examining staff and using the staff
more efficiently.
During the year, 634 new examiners
were hired, with two-thirds of them
joining the FDIC through an accelerated
hiring program for top students. This boost
in staffing enabled DOS to increase the
number of safety and soundness examina
tions conducted and to reduce the time
between bank examinations.
* Issuing guidelines on “highly leveraged
transactions” (HLTs).
These typically are credits extended to
finance the buyout, acquisition or
recapitalization of an existing business.

DOS officials taping information video for examiners. Seated L-R:
Assistant Director Robert Miailovich, Associate Director John Stone,
Director Paul Fritts and Associate Director Michael Hovan, Jr.

Because these credits may carry more
risks than those of traditional large cor
porate loans, the FDIC issued guidelines
in May for examiners, officers and direc
tors of FDIC-supervised banks. The
guidelines were followed in November
by a common definition of HLTs by the
three federal bank regulatory agencies,
which was clarified in early 1990 in
response to comments and questions
from the industry.

Basle Committee on Banking Supervi
sion, where officials from 12 nations
meet quarterly to share information and
to coordinate policies intended to ensure
consistent supervision of major interna
tional banks. Accom plishm ents of the
Committee during 1989 included imple
mentation of a uniform risk-based
capital framework, establishing appro
priate coordination with securities
regulators, and working to detect and
eliminate bank com plicity in money
laundering schemes.

Safety and Soundness Examinations
* Disseminating guidelines that stress the
need for banks to establish policies and
procedures against conflicts of interest.
The guidelines are designed to ensure
that boards of directors become aware
of, and respond to, potential conflicts
in which a bank officer, director, prin
cipal shareholder or an associate may
be directly or indirectly involved.
• Publishing guidelines for banks on the
need to address concentrations of credit.
The guidelines requested policies to
address concentrations of credit and
procedures for tracking potential con
centrations in particular industries.
In another important effort, DOS joined
the other federal bank regulators in
representing the United States at the

Examinations for the safety and sound
ness of overall operations are increas
ingly important because today’s rapidly
changing banking environment demands
that the FDIC identify emerging trends
and pinpoint individual banks with
symptoms of higher-than-normal risk.
Past methods that emphasized on-site
examinations at fixed cycles have given
way in recent years to more continuous
methods of supervision. DOS’s current
program combines on-site examinations
and visitations with off-site monitoring,
exchanges of information with other
regulators, and the use of guidelines,
policy statements, rules and regulations.
Over the past several years the Division
has taken a number of important steps
to improve and intensify the FDIC’s
supervisory program. Examination cycles
have been revised to increase the fre
quency of on-site examinations and to
place examiners in more institutions
more often. The Division also is em
phasizing an examination cycle based
more on indications of potential prob
lems and less on the passage of time
between exams. Much of this was made
possible by increasingly sophisticated
off-site monitoring systems.

DOS implemented a revised on-site
examination program at the end of
1989 that takes advantage of enhanced
automation and off-site monitoring
capabilities. This program requires that,
prior to the start of an on-site examina
tion, a risk analysis be conducted
using all available information. The
results of that analysis will form the
basis for the scope of the on-site
examination and for allocating
resources. By concentrating resources
in areas with high risk potential,
resources assigned to other areas can
be reduced and substantial amounts of
time can be saved.
Despite a heavy early role in the
management of savings association
conservatorships in 1989, the FDIC con
ducted 4,089 safety and soundness
examinations at banks and thrifts,
compared to 4,019 in 1988 and 3,653
in 1987. As of year-end 1989, only 92
commercial banks subject to FDIC
supervision had not been examined by
the FDIC within three years, versus 197
at the end of 1988 and 924 at the end
of 1987. This intensified examination
program should allow DOS to continue
moving toward the goal of conducting
at least one on-site examination every
12 months at problem and near-problem
institutions (those rated 3, 4 or 5 on the
interagency rating system, with 5 denoting
institutions most in danger of failing)
and one exam every 24 months for all
other institutions (those rated 1 or 2).
DOS’s participation in examinations
with other regulatory agencies increased
in 1989, particularly as the FDIC took
on the responsibility for insuring
deposits at thrift institutions under
FIRREA. The FDIC for years has par
ticipated in examinations with the
Office of the Comptroller of the Currency,
the Federal Reserve Board and state
regulatory agencies. In 1989, DOS

entered into a cooperative examination
agreement with the O ffice of Thrift
Supervision (OTS) regarding the supervi
sion of savings associations insured by
the new Savings Association Insurance
Fund (SAIF). The agreement, which em
phasizes tim ely and effective supervi
sion of savings associations w ithout a
duplication of efforts, is aimed toward
having an FDIC presence in the on-site
examination of every insured savings
association by the end of 1990. The
FDIC conducted examinations of 375
savings associations between August
1989 and the end of the year.
International lending activities of U.S.
banks continued to draw a consider
able amount of attention during the
year. The FDIC monitors these ac
tivities through its membership on the
Interagency Country Exposure Review
Committee, which is responsible for
assessing and categorizing the risks
associated with international lending.

Consumer Protection Examinations
DOS uses separate compliance ex
aminations to m onitor how well FDICsupervised institutions are conforming
with certain consumer protection and
civil rights laws and implementing
regulations. In 1989, the FDIC conducted
2,660 compliance examinations, exclud
ing visitations for particular circum
stances. That is down from the 2,988
examinations in the previous year,
largely because of the extensive use of
examiners in the management of savings
and loan association conservatorships,
especially during the first few months
of the year.
The compliance examination process
checks for adherence to laws and
regulations that include those pro
moting truth-in-lending, fair lending,
community reinvestment, fair debt

assets and responsibility for another
$491 billion in non-managed assets.
The FDIC conducted 585 trust examina
tions compared to 683 in 1988.
collection and the fast availability of
deposited funds. Changes were made
in the process in 1989 to account for
amendments that became effective in
areas such as fair housing, credit card
disclosures and home equity loan pro
tections for consumers.
During the latter part of the year, the
FDIC was working with the Federal
Financial Institutions Examination
Council (FFIEC) to develop regulations
and compliance examination material
for amendments to the Home Mortgage
Disclosure Act and the Community
Reinvestment Act that were to take
effect in 1990.
As a result of the review of Truth-inLending Act provisions that require
accurate disclosures to consumers
of interest rates and finance charges,
105,126 consumers received total reim
bursements of $5,791,025 from 248 insti
tutions during 1989. Collections during
1988 totaled $1,722,994 from 228 institu
tions for 22,105 consumers.

The securities transfer activities of
241 FDIC-supervised institutions were
registered with the agency under
federal securities laws, down slightly
from the 258 institutions a year earlier.
The FDIC conducted 24 examinations
of securities transfer activities during
1989, versus 52 the previous year.

Data Processing Examinations
FDIC examiners participated in reviews
of 782 data processing operations run
by banks or by independent data pro
cessing firm s in 1989, compared to 848
in 1988. As a result of these examina
tions, 10 data centers, all run by banks,
were identified as problem situations in
1989. In 1988, 18 data centers (14 banks
and four non-bank institutions) were
identified as problem situations.
Examinations of large data processing
firm s that service institutions through
out many regions of the country are
conducted jo in tly with the other federal

Trust and Transfer Agent Examinations
The FDIC examines and regulates trust
departments and securities transfer
activities at state nonmember banks.
The main reason for these examinations
is to determine the existence of any
potential losses to a bank arising out
of its fiduciary responsibilities in the
administration of its trust accounts or
transfer activities.
During 1989, consent was given to
54 FDIC-supervised institutions to
begin exercising trust powers. That
brought to 2,349 the number of such
institutions with trust powers in 1989,
of which 1,820 were active departments.
As of the end of the year, FDIC-supervised institutions had investment dis
cretion over $133.5 billion in trust

Robert Storch, chief of the DOS accounting section, was one of
several FDIC officials interviewed for an American Bankers
Association video about changes in bank reporting requirements.

financial institution supervisory agen
cies. This arrangement saves examiner
resources, reduces disruption at the
data center and provides for uniform
supervision of the servicer.
In January 1989, the FDIC adopted a
revised work program developed in
conjunction with the FFIEC for the ex
amination of large data centers. The
program focuses the bulk of examiner
resources in data centers experiencing
problems. Later in 1989, field testing
was done on a work program for data
processing examinations of small com
munity banks that use “ turnkey” so ft
ware supplied and supported by vendors.
Initial results indicate an approximate
50 percent savings in examination hours.
In July 1989, the FDIC issued an FFIEC
policy statement on contingency plan
ning by financial institutions for their
data processing services. Institutions
are encouraged to adopt procedures
that would minimize the disruption of
services and financial loss, and ensure
timely resumption of operations in the
event of a disaster. The FDIC also is
participating in a test of an FFIECapproved program of interagency review
of data processing software being used
by a large number of financial institu
tions. If adopted, additional efficiencies
and uniform ity in examining banks us
ing turnkey software should result.

O ther Examination Functions
At year-end, 47 FDIC-supervised institu
tions were listed as U.S. government
securities brokers or dealers under the
Government Securities Act of 1986 or
were otherwise covered by rules imple
menting that law. The FDIC furnished
examiners with special instructions,
checklists and examination report forms
to facilitate the monitoring of institutions
covered by the regulations.

U.S. branches of foreign banks that
engage in domestic retail deposit ac
tivities are required to obtain deposit
insurance under the International Bank
ing Act of 1978. At year-end 1989, insur
ance was held by 24 foreign banks repre
senting 14 different countries and
operating 57 branches in 11 U.S. cities.
In 1989, the FDIC completed a revision
of the separate regulations governing the
operations of these insured branches.
The major change was an asset mainte
nance requirement for each branch,
designed to be equivalent to a domestic
bank’s capital requirement for purposes
of providing a cushion against losses.

BIF-lnsured Failed Banks
In terms of the Bank Insurance Fund,
Texas had the highest number of bank
failures among the states for the fourth
year in a row, with 133 in 1989. Next
came Louisiana with 21 failed banks
and Oklahoma with 12. The concentra
tion of bank failures in these three
states, like the higher incidence of prob
lem banks, was an outgrowth of the
continued depressed energy and real
estate industries there.
Average assets of all 206 failed banks
in 1989 were $141.6 million, down
significantly from the $250.2 m illion in
average assets at the 200 failed banks
the previous year. The average deposits
at failed banks in 1989 were $116.9
million, compared to $159.7 million in
1988. The figures for 1989 include the
failures of 20 banks of MCorp of Dallas
and 24 banks of Texas American Bancshares, Inc., Fort Worth.
Excluding these two banking organiza
tions and First American Bank and
Trust, North Palm Beach, Florida,
another large failure, the assets for
all other 1989 failed banks averaged
$46.4 million and deposits averaged

— — ------------

---------- --------

;;- '-*

P u rch a se s
A ssum ptions
(P&As)

Failed
Banks

Deposit
Transfers

Payoffs

’87

’89

o
, .,
1 .■
,

2 K$§

5 S 'ii

- 3 .

:’ 7

o :,

Delaware

0 •' |

Florida

4 . •'

Illinois

1■

Indiana

i ■; ■ 3

0 i% !

Iowa

0 • V-

0 V ,£': 4

■88

Alaska

0 V
■
-1
2

Arizona

.6 % ;

Alabama ’. f 3 ^

California
Colorado
*
t
Connecticut •;•

Kansas

. 'I m p

’87

f P

p l
■■
■

Massachusetts.

Michigan

Minnesota

:.:C

Ohio

0
ssisls
.1

0 ...
1 '

0 ’I

0 .

0
5

•

S llll

0 .

- 0

; 2 ;

. 1

0 l l l l i l l

‘k $ v ; ;

1 7

;. 1

1V,r v idv.i

' 0

:
0 ’•

ii v 1

1 ^

0 "

t‘

9 1
0

. -6
0

115

■q§§p 0

1 ><h 0

J V - V- 133

113*

o ;

'. 4;, .

o ■

'/I \

0 -

■» ■ ■
■
•>
r 1- -

0 ■
-

W e s t V irg in ia

1 /'V - 0

ti
ps* ”■■-, Vr
iSSS ■ >St.
.
1
0 ;

Wyoming

206

200

184

174

164

'X . 1 i

m
1

•

| | 1

• a
1

0
4 1 5k

0
? v*
■
■ 0 .?

1,,

0
f i <~ v*5?
0 p ;:i o

Total

0
0

23 •

. 2 *

■
1

Jltv

t l &

2 'M

Virginia

•' 0 ;
iSBfE&f*

W m
> 1;

1 .u

Washington

O '-

3 ?
m

1 ■

New York

Utah •

.■ r ;

1
0

North Dakota

Texas

, 2

South Dakota

Montana , ■
-

Pennsylvania

0
.

•

Oklahoma

l l W i

O'.

Oregon

• o >r

0 -

’88

Mississippi
M iSSO j||lSS|

Nebraska 'M i§ £

• ■’
..■■

> /jo

'89

0 if

Louisiana

’87

'88

4 .

'6 ■
V

Kentucky

’89

’88

if*

Still

133

14 ■
'

8 ■

:• 1'

%$ M !; $ 0
;- jW &
■

li t i l

':
:

■ 0
:

11
‘ Includes the ^0 Texas bank subsidiaries ofMCorp of Dallas; TX, and the 24 Texas, fciank subsidiaries of Texas. American Bahcshares, Inc., Fort Worth; TX.
’ Represents First RepublicBank. Delaware, the credit card subsidiary of First RepublicBank Corporation, Dallas, Texas.
. .. . ’
-,' ' " v,‘
. ' Include the 40 Texas bank subsidiaries of First RepublicBank Corporation, Dallis, Texas.

^ rfS e w X v ti# • .* '.Vi'# . 'JWJffiSifiis
&■ .
>

-s H j I s i f 4 i l i s i -

.
•«?»3B3»lK

cases. The previous year, the agency
made 129 such attempts and was suc
cessful in 69 cases.
$43.7 million. That is comparable to the
previous year when, excluding the
failure of the $32.5 billion-asset First
RepublicBank Corporation of Dallas, the
average assets of failed banks in 1988
were $37.6 million and average deposits
were $36 million.
Deposits in all failed banks in 1989,
exclusive of MCorp, Texas American
banks and the First American Bank,
totaled $7.0 billion. That compares with
$5.7 billion in 1988 excluding deposits
of First RepublicBank Corporation’s 40
failed bank subsidiaries.
Purchase and assumption transactions
(P&As) were arranged for 174 bank
failures in 1989, or 84 percent of the
total. In 1988 there were 164 P&As,
which constituted 82 percent of the
failed bank transactions. In a P&A, a
healthy institution assumes all the
deposits and other liabilities of a failed
bank and purchases a portion of its
assets. In 1989, premiums totaling
more than $40 m illion were paid by the
assuming banks. Direct savings to the
Bank Insurance Fund resulting from
P&As versus the cost of insured
deposit payoffs are estimated to be
approximately $100 million.
The FDIC continues to make extensive
use of “ whole bank” P&As, in which
prospective acquirers submit bids to
purchase essentially all assets of a fail
ing bank “ as is,” on a discounted basis.
This type of sale is desirable because
loan customers continue to be serviced
locally by an ongoing financial institu
tion instead of by FDIC liquidators.
This transaction also minimizes FDIC
cash outlays and restrains growth in
total assets held by the FDIC for liq
uidation. In 1989, the FDIC attempted
whole bank transactions in 132 smaller
failing bank situations, succeeding in 42

For 23 failed banks in 1989, the FDIC
arranged “ insured deposit transfers”
instead of directly paying o ff depositors
up to the insurance limit. In this type
of transaction, insured deposits are
made available to their owners by
transferring the accounts to an existing
healthy institution or a newly-formed
bank. Account holders are then able to
withdraw their funds from the assum
ing bank or keep them there if they so
choose. The assuming bank also may
purchase some of the assets of the
failed bank. In one case in 1989, an
insured deposit transfer was arranged
where the assuming institution pur
chased nearly all of the failed bank’s
assets. The FDIC received purchase
premiums of $7.8 m illion on these
transactions in 1989.
The FDIC directly paid depositors their
insured claims in nine failures in 1989
when neither a P&A nor an insured
deposit transfer could be arranged.

Bridge Banks
The FDIC may establish a “ bridge bank”
when an insured bank is closed and
more time is needed to find a perma
nent solution. A bridge bank is a fullservice national bank established on an
interim basis to assume the deposits,
certain liabilities and substantially all
the assets of a failed bank. It can be
operated for up to five years by a board
of directors appointed by the FDIC. A
bridge bank may be established if the
cost of operating it does not exceed
the cost of liquidating the closed bank.
The FDIC used its bridge bank authority,
gained under the Competitive Equality
Banking Act of 1987, for the three largest
bank failures in 1989.

On March 28, the Comptroller of the
Currency declared insolvent 20 com
mercial bank subsidiaries of MCorp of
Dallas, Texas. The banks, which had
gross assets of $15.4 billion, failed due
to continuing loan losses largely at
tributable to depressed economic
conditions in the Southwest, and to
losses on intracompany transactions.
The FDIC’s response included the
establishment of The Deposit Insurance
Bridge Bank, National Association. On
June 28,1989, the FDIC agreed in principle
to the acquisition of the bridge bank by
Banc One Corporation, Columbus, Ohio.
The bridge bank’s name was changed

to Bank One, Texas, N.A. A Banc One
Corporation subsidiary managed the
bridge bank under contract with the FDIC
until the transaction was consummated
on January 30, 1990.
On July 20, the 22 national bank sub
sidiaries and two state-chartered banks
of Texas American Bancshares, Inc.,
Fort Worth, with assets of about $4.2
billion, were declared insolvent. Deterio
ration in the banks’ major real estate
markets contributed to loan losses that
exhausted capital at 10 of the national
banks, while the other banks became
insolvent as a result of loan losses and
losses on intracompany transactions.
In response, the FDIC established
Texas American Bridge Bank, National
Association. An agreement to sell the
bridge bank to Deposit Guaranty Bank,
Dallas, Texas, was arranged almost
immediately. The bank was renamed
Team Bank.
The FDIC’s bridge bank authority also
was used for First American Bank and
Trust, North Palm Beach, Florida, which
had assets of nearly $1.1 billion at the
time it was closed by the state on Decem
ber 15 due to its continued operation in
an unsound, unsafe or unauthorized
manner. In this case, the FDIC estab
lished a bridge bank known as First
American Bank and Trust, N.A. On
March 20, 1990, the FDIC approved a
transaction with Barnett Bank of Palm
Beach County, West Palm Beach,
Florida, for the assumption of all
deposits and certain other liabilities
and the purchase of a significant por
tion of the assets of the bridge bank.

Assistance Transactions
Section 13(c) of the Federal Deposit
Insurance Act authorizes the FDIC to
provide financial assistance to prevent
the closing of an insured depository

i includes 1

institution. Assistance may be granted
in three ways: directly to an insured
institution in danger of failing; to facilitate
a merger of an insured institution in
danger of failing; or to a company that
already controls or will control an
institution in danger of failing.
To provide such assistance, the FDIC’s
Board must determine that the amount
of assistance is less than the cost of
liquidating the institution. An exception
may be made when the continued
operation of the depository institution is
essential to provide adequate depository
services to its community or when
severe financial conditions exist that
threaten a large number of financial
institutions with significant resources.

In past years, a net worth certificate
was another form of assistance provided
by the FDIC under terms of the Garn-St
Germain Depository Institutions Act of
1982. Under certain conditions, insured
savings banks applied for these cer
tificates in amounts equal to a percent
age of their operating losses. The cer
tificates then counted as surplus for
regulatory purposes.
Net worth certificates totaling $710.4
m illion had been issued in past years
to 29 savings banks. In 1989, outstand
ing certificates were reduced by $63.4
million through contractually required
payments. At year-end 1989, only three
savings banks had certificates out
standing aggregating $233.5 million.

Problem Banks

FIRREA granted the FDIC additional
power to provide open financial assis
tance to some members of the new
SAIF under special circumstances
specified in Section 13(k)(5) of the
Federal Deposit Insurance Act.

Banks and BIF-insured savings banks
whose financial, operational or manage
rial weaknesses are so severe as to
pose a serious threat to continued
viability — those rated 4 or 5 on the
composite supervisory rating system
used by the three federal agencies —
are considered problem institutions.

Only one assistance transaction, involv
ing the $5.7 million-asset Metropolitan
National Bank in San Antonio, Texas,
took place in 1989. This transaction in
January resulted in estimated savings
to the FDIC of $410,000, based on the
estimated cost if the institution were to
fail and its depositors paid off.

The FDIC places a special emphasis on
examining these problem banks because
of the potential effect on the deposit
insurance fund. In early 1990, a similar
system was in place to generate a list
of SAIF-insured problem institutions.

Problem Banks, 1985-1989
(Year-end)
'otal Insured
Problem Banks

r—---------- r-------------- --------------- -

% Change in Number of Problem Banks
.% of Total Insured Banks

Changes in FDIC Problem Bai
Editions
let Change

FIRREA made substantial changes to
applications matters. Among them:

A fter reaching a historical high of 1,624
in mid-1987, the number of BIF-insured
problem banks has been declining. At
year-end 1988, the number stood at
1,406. By year-end 1989, the number
was down to 1,109.
Although failures contributed to the
decline, many more former problem banks
were rehabilitated, usually with close
supervisory guidance. Management and
poor lending decisions continue to be
the underlying causes of most problem
bank situations. However, shifting
regional weaknesses in the economy
have affected the number of problem
banks and can be anticipated to do so
again in the future.

Processing Applications
The major applications processed by
DOS are for: deposit insurance; the
establishment or relocation of branches
by FDIC-supervised banks; mergers
where the agency supervises the resul
tant bank or where an uninsured institu
tion is involved; changes in control of
state nonmember banks; and, in certain
circumstances, decisions as to who
may serve as a director, officer or
employee of an insured institution.
In 1989, there was a decline in deposit
insurance actions from 1988, the
result of fewer new banks being formed
in the Northeast and Southeast. There
also was a lower level of merger ac
tions due to fewer banks acquiring
branches from savings associations.
In the interest of expediency and effi
ciency, most FDIC applications are
decided under delegated authority. Of
all 1989 applications filed, 97.1 percent
were decided at the regional level of
DOS and 1.8 percent were acted on by
DOS in Washington. Only 1.1 percent of
all applications were forwarded to the
Board of Directors for action.

• Savings associations will obtain deposit
insurance by applying to the FDIC.
• Applications for charters for proposed
national and Federal Reserve member
state banks will be submitted to the
FDIC for comment before approval by
the primary regulator.
• The acceptance or renewal of brokered
deposits by undercapitalized institutions
is prohibited unless the FDIC grants a
waiver.
• Before certain state nonmember banks,
including those in troubled condition,
can add a director or employ a senior
executive officer, a notice must be sent
to the FDIC.
• Savings associations must notify the
FDIC of plans to divest “junk bond”
investments and to lim it certain other
activities.
• The FDIC is responsible for permitting
institutions to convert from membership
in one insurance fund, BIF or SAIF, to
the other.
As a result of changes in the com
petitive environment for financial ser
vices over the past decade, the FDIC
adopted a new policy on bank merger
transactions that replaces a policy
adopted in 1980. The new policy clarifies
the standards that the FDIC will use in
assessing whether a proposed bank
merger would have anti-competitive ef
fects or create other concerns that would
warrant denial of an application. When
analyzing the level of competition in a
particular market, the FDIC will consider
not just bank services but also equiv
alent products offered by other types of
competitors, such as thrifts, credit
unions and securities firms.

Bank Fraud and Insider Abuse
Insider abuse or criminal fraud was pre
sent to some degree in about onequarter of all bank failures in 1989, a
slight drop from the one-third found in
bank failures the previous year. However,
the numbers for 1989 may increase as
investigations at failed banks continue.
A total of 667 state nonmember banks,
or 9 percent of the total, were victimized
by a theft or fraud of $10,000 or more
in 1989, up slightly from eight percent
the year before. Fraud and abuse con
nected to real estate transactions had
been prevalent in the Southwest the
past few years, but those problems
appear to be abating. Similar problems
are now surfacing in the Northeast and
are contributing to real estate loan
losses there. These problems include:
conflicts of interest and other insider
abuses; inflated real estate appraisals;
and fraudulent sales contracts, loan
applications or title policies.
FDIC Applications, 1987-1989
tsurance

Service Facilities

Change in Conti
of .Intent

A Special Activities Section was estab
lished in DOS in the mid-1960s to identify
individuals who pose a threat to an in
sured bank or the banking system and
then to try to prevent these individuals
from causing harm. The section coor
dinates the activities of the FDIC’s
specially trained fraud specialists and
fraud examiners, monitors fraudulent
and abusive activity in individual in
stitutions, maintains a data base, and
develops examination procedures and
supervisory strategies to detect and
prevent harmful activities.
The Special Activities Section works
closely with the FDIC’s Legal Division,
which files suits against offenders, or
refers potentially harmful activities to
the Federal Bureau of Investigation and
other federal and state law enforcement
authorities. These include the Justice
Department’s interagency Bank Fraud
Working Group and the Treasury
Department’s interagency Bank Secrecy
Act Working Group. The latter attempts
to support the war on drug trafficking
and money laundering through investi
gations and increased training for
examiners and bank personnel.
To promote the prosecution of offenses
in which relatively small amounts of
money are lost, the FDIC and other
federal regulatory agencies in 1989
increasingly encouraged institutions to
cooperate with Department of Justice
prosecutors in a program known as
“ Fast Track.”
Under the Fast Track program, federal
prosecutors send m ultiple cases of
small dollar-amount fraud and embezzle
ment through the judicial system as a
single package. This allows the prose
cution of bank fraud and embezzlement
cases that previously were considered
too small to warrant federal resources.
It also helps deter financial crimes
through publicity about the offenders.

Large Bank Analysis Program

Improved communication between the
regulatory agencies and federal law
enforcement organizations, plus increased
reports of apparent criminal activities by
insiders due to a relaxation of privacy
laws, should improve future crimefighting efforts.

Off-Site Monitoring
and Analysis Program
During 1989, DOS became increasingly
concerned with the rapid deterioration
of institutions exhibiting high-growth
characteristics. A key development in
1989 was the revision of an existing
off-site surveillance system to include
a model that identifies institutions with
unfavorable and problematic growth
characteristics. These institutions are
flagged for appropriate supervisory
follow-up. The Division also placed ad
ditional senior bank analysts in the
regional offices to review financial
reports and alert senior staff members
to conditions that might trigger an
examination or other follow-up.
Also during 1989, the capability to
produce Uniform Bank Performance
Reports (UBPRs) for BIF-insured sav
ings banks was developed. Long
available for commercial banks, these
quarterly reports provide examiners,
bankers and analysts with a valuable
tool for assessing the condition of
individual institutions, peer groups and
the industry in general. Beginning with
March 1990, savings bank performance
reports will be publicly available.
The FDIC’s Uniform Bank Performance
System provides on-line access to most
UBPR information. This system displays
historical data as well as performance
ratios based on the most recent infor
mation available. These data enable ex
aminers to assess current developments
in a particular institution.

As part of its program to manage risk
to the deposit insurance fund, the Divi
sion’s financial analysts conduct
quarterly reviews of conditions and trends
in all commercial banking companies
with total assets of $3 billion or more.
These activities take place under a
Large Bank Analysis Program, which
in 1989 covered 123 banking companies
holding approximately 66 percent of
total U.S. bank assets.
Through 1989, most activity associated
with this program took place off-site. In
1990, the program’s links with on-site
supervision will be strengthened by an
increased presence of FDIC examiners
during the reviews of large banks con
ducted by the Comptroller of the Cur
rency and the Federal Reserve. This
should improve the FDIC’s access to
needed information and assist in super
visory follow-up.

Capital Forbearance Program
In 1986, the FDIC adopted a Capital
Forbearance Program available to any
bank with difficulties primarily attrib
utable to economic problems beyond
the control of management. Under the
program, a bank may operate temporarily
with capital below normal supervisory
standards if it is viable and has a
reasonable plan for restoring capital.
Banks had to obtain approval of a plan
to return to normal capital levels by
January 1, 1995.
The capital forbearance program expired
on December 31, 1989. During its exis
tence, the FDIC received 352 applica
tions for forbearance and admitted 204
banks into the program. Of those 204
banks, 112 were still in the program at
year-end 1989. The other 92 banks left
the program for reasons that include

mergers and steps being taken to in
crease capital to satisfactory levels.
Applications of 96 banks were denied.
In 34 cases, the application was w ith
drawn or not processed for other reasons.
At year-end, 18 applications still were
being processed.

Loan Loss D eferrals by
A gricultural Banks
The Competitive Equality Banking Act of
1987 permits certain agricultural banks to
amortize loan losses on farm loans and
related assets over a seven-year period.
Under the program, a qualifying bank
may amortize eligible losses incurred
between December 31, 1983, and
January 1, 1992.
Since the start of the program until
year-end 1989, the FDIC had received 87
applications, of which 38 were accepted.
Eight banks are no longer in the program
for various reasons, leaving 30 banks still
participating at year-end. Applications of
22 banks were denied and three were still
External Auditing Programs of Bank*
AH Commercial Banks and FDIC-Supei
(In Percentages)
' \
/• >-i

being processed at year-end. In 24
cases, the application was either
withdrawn or returned because the
institution did not qualify as an
agricultural bank.

Auditing
In late 1988, the FDIC Board of Direc
tors adopted a policy statement that
urges each state nonmember bank to
have an annual external audit of its
financial statements performed by an
independent public accountant. Because
the FDIC believes that an annual exter
nal review by an independent party con
tributes to the safety and soundness of
the banking system, DOS identified a set
of basic auditing procedures for use at
banks that choose not to have an an
nual external audit performed by an in
dependent public accountant.
On May 16, 1989, the Board of Directors
issued a proposed policy statement on
minimum recommended external auditing
procedures. A final statement of policy
was adopted on January 16, 1990.
Under the final policy, all state
nonmember banks that do not engage
an independent public accountant to
— r ---------------1988
Savings Banks

* ^

------------------------------------------ ~ ^8---------------All
Others*

Directors’
Audit*
.......... ;
.............- .....'T-

Over $75
•Over $50

$25' miltjon

All Banks
Sourpe:/June3(
•’’Audit of the bai
* Directors' exii
fefclu$es reviei

t o respoilse to the item.

Exam *

AH
others*

... — - ........................ ■
’
'

i --....

conduct an annual audit are strongly
encouraged to have an independent
external auditor perform basic auditing
procedures recommended by the FDIC
and other additional procedures deemed
necessary to address high-risk areas of
the bank.

Capital
Several important developments took
place during 1989 relating to bank and
thrift capital requirements. These in
itiatives represented continuing
regulatory efforts to ensure that ade
quate capital levels are maintained by
insured financial institutions.
Of particular importance was the em
phasis placed on ensuring that ac
tivities involving different levels of risk
are backed by appropriate amounts of
capital. That focus applies regardless
of whether the activity involves a
balance sheet asset or an off-balance
sheet activity, or whether the institution
is a bank or thrift.
These initiatives resulted in greater
similarity of capital standards among
financial institutions both international
ly and within the U.S. In addition, new
capital standards adopted for U.S. thrifts
by the OTS brought capital require
ments at savings associations into
closer alignment with the standards
applied to U.S. banks.
The FDIC, the Comptroller of the Cur
rency and the Federal Reserve Board
completed their risk-based capital
guidelines in early 1989. The risk-based
capital framework was recommended
by the international Basle Committee
on Banking Supervision. Under the new
risk-based framework, capital is divided
into core and supplementary tiers. Risk
evaluations are assigned to balance
sheet assets and off-balance sheet

items. Beginning with year-end 1990,
banks are expected to meet an interim
minimum capital ratio of 7.25 percent
of risk-based assets and, by year-end
1992, a fully phased-in risk-based ratio
of eight percent.
U.S. banking regulators also began
discussions on revising the existing
leverage capital standards, which cur
rently require banks to maintain 5.5 per
cent primary capital and 6 percent total
capital ratios. The intent is to refine
the capital definitions under the
leverage standard so that they better
conform to the core and supplementary
capital definitions used under the riskbased capital framework.
Unlike the risk-based ratio, which com
pares capital to risk-weighted assets
and off-balance sheet activity, the
leverage ratio compares capital to total
balance sheet assets. The leverage ratio
requirements, which have remained
unchanged since 1985, ensure that a
portion of balance sheet assets and
future asset growth will be funded by
owners’ equity, rather than exclusively
by insured deposits. The U.S. bank
regulators hope to begin applying both
a revised leverage standard and the
risk-based capital standard by year-end
1990. One important aspect under con
sideration is whether the allowance for
loan losses should be removed from
the definition of capital for purposes of
calculating the leverage ratio.

Call Report Changes
After adoption of final risk-based
capital measures by the three federal
banking agencies, the regulators revised
the Reports of Condition and Income
(Call Reports) to take the new capital
standards into account. These reporting
changes will facilitate the off-site
measurement and monitoring of

Accounting Issues

banks’ risk-based capital levels. Other
changes considered necessary for bank
supervisory purposes also were developed
by the FFIEC’s Task Force on Reports.
These changes include: a new risk-based
capital schedule; a revised schedule for
off-balance sheet items; and more details
on holdings of securities of U.S. Govern
ment agencies, corporations, and state
and local governments. The Call Report
for March 31, 1990, was the first to in
corporate many of the changes.
A central feature of the new risk-based
capital schedule is a test that banks
with less than $1 billion in total assets
will use to determine whether they are
exempt from completing the entire
schedule. At least 85 percent of the
banks are expected to qualify for this
reporting exemption. Data for individual
banks will become publicly available
beginning with the reports for December
31, 1990, the date when banks are first
required to achieve a specified minimum
capital ratio under the new risk-based
capital standards.
A number of other reporting changes
adopted in late 1988 took effect with
the Call Reports for the period ending
March 31, 1989. The new information is
designed primarily to help the banking
agencies identify and m onitor risk areas,
such as bank holdings of equity
securities, direct and indirect invest
ments in real estate ventures, certain
time deposits and mortgage transfers
with recourse. The latter primarily
refers to situations where banks sell
loans but still are liable if problems
develop later.
The report for March 31, 1989, also
marked the first time that approximate
ly 475 FDIC-supervised savings banks
filed the same Call Report forms used
by commercial banks instead of using
a different set.

Several initiatives that govern industry
accounting practices took place during
1989. Among them was the develop
ment of an interagency policy, effective
September 30, governing the use and
reporting of “ push dow n” accounting
when there is a change in ownership of
a bank. This method of accounting and
reporting records the assets of the
bank based on their fair market value,
not their book value, as of the date of
the acquisition. A benefit to the
regulators is that this method provides
a better indication of the value of ex
isting assets and their recoverability.
For changes in control of 95 percent or
more, the use of push down accounting
is required for reporting purposes. It is
optional for changes in control of be
tween 80 percent and 94 percent.
During 1989, the Division’s staff con
tinued to participate in interagency
discussions concerning reporting and
capital requirements for asset sales
with recourse as well as other forms of
risk retention. In November, the agen
cies agreed to prepare for public com
ment in 1990 a paper of broader scope
on recourse arrangements associated
with asset sales and other transactions.
The paper, issued by the FFIEC on
June 25,1990, addressed possible defini
tions of recourse for supervisory pur
poses as well as reporting requirements,
capital standards and other consider
ations. The evaluation of the comments
that are received will assist the agen
cies in developing possible revisions to
their regulatory reporting requirements
and capital standards.
It became evident to regulators in late
1988 and early 1989 that banks and
data processing servicers were entering
into arrangements apparently permitting

a bank to defer loss recognition on the
disposal of in-house electronic data
processing operations and equipment.
Although no accounting standards exist
that apply specifically to these transac
tions, examiners were advised to be
alert for them. The deferral of loss
recognition on EDP-related transac
tions, or other transactions, represents
an unsafe and unsound practice. Con
gress expressed its concern about
such transactions in Section 225 of
FIRREA, which prohibits an insured in
stitution from entering into a contract
that “ would adversely affect the safety
and soundness of the institution.”
DOS also issued policy guidance in
September to address the complexity
of the accounting issues arising from
the acquisition of failed or failing banks
by new owners, especially transactions
involving FDIC assistance. These issues
included how to account for FDIC assist
ance, intangible assets, negative good
will and acquired loan loss reserves.
The guidance was issued to ensure
timely notice of FDIC policy to poten
tial buyers of failed or failing banks.

FIRREA and Accounting Issues
The FDIC’s new role as insurer and
back-up supervisor of savings associa
tions has led DOS to make sure that
staff involved in examining and super
vising thrifts are fully informed of thrift
accounting standards. In many respects,
accounting practices used by thrifts
formerly insured by the FSLIC are
sim ilar to those of the insured statechartered savings banks supervised by
the FDIC. However, generally accepted
accounting principles (GAAP) and
regulatory reporting requirements for
savings associations and banks differ in
some respects. DOS staff prepared a
study in 1989 to help the FDIC field staff
understand the accounting practices they
will encounter when examining thrifts.

Section 1215 of FIRREA requires each
federal banking agency to establish
uniform accounting standards for deter
mining capital ratios and for other pur
poses. As a result, the FDIC and the
other regulators have used the DOS
study of accounting practices as a basis
for initiating discussions on resolving
accounting differences between banks
and thrifts. In addition, the FDIC has
asked the Financial Accounting Stan
dards Board (FASB) to assist the
regulatory agencies by eliminating as
soon as possible differences in banks’
and th rifts ’ accounting treatment of
sim ilar transactions. The FFIEC also
approved a project to study a common
reporting system for banks and thrifts.
FIRREA requires the OTS Director to
prescribe and maintain uniform capital
standards for thrifts that, for the most
part, are no less stringent than those
applicable to national banks. Savings
associations not meeting the minimum
capital standards will be subject to
asset growth restrictions. FIRREA
makes an exception from the OTS rule
for “ purchased mortgage servicing
rights,” which are intangible assets that
represent the right to service mortgage
loans owned by others. The OTS capital
treatment of purchased mortgage serv
icing rights for regulatory capital pur
poses must be at least as stringent as
that applied by the FDIC to state
nonmember banks.
In addition, the FDIC is to prescribe the
maximum amount of purchased mort
gage servicing rights that savings
associations may recognize for OTS
capital purposes. In late 1989, the FDIC
staff developed a proposal for lim iting
the amount of servicing rights that the
agency would accept as core capital for
state nonmember banks and tangible
capital for thrifts. On January 30, 1990,
the FDIC Board of Directors issued the
proposal for public comment.

Publicly-Held Banks
The FDIC administers and enforces the
registration and reporting provisions of
the Securities Exchange Act of 1934 for
publicly-held insured nonmember banks.
At the end of 1989, there were 254
banks registered with the FDIC, up
from 246 a year earlier. Required
statements and reports filed by these
banks are public documents and are
available for inspection at FDIC head
quarters in Washington. A total of 1,955
individuals inspected these records dur
ing 1989 and requested copies, and an
additional 2,995 requested copies by
telephone. Copies of 52,576 pages were
provided in response to these requests.
In December, the FDIC Board of Direc
tors adopted amendments to Part 335
of the Corporation’s rules pertaining to
independent audits, executive compen
sation disclosure and other matters
regarding the securities of insured
state nonmember banks. The amend
ments, which for the most part took ef
fect January 29, 1990, make the FDIC’s
securities disclosure requirements
substantially the same as those of the
Securities and Exchange Commission.
One substantive difference from past
procedures shortened the amount of
time institutions have to report changes
in accountants and resignations of
bank directors.

Automation Activities
DOS is continually striving to improve
productivity through increased automa
tion and the use of state-of-the-art
equipment. An important objective of
the Division’s automation plan has
been to provide rapid and easy access
to supervisory and financial informa
tion. Personal computers have become
an essential tool in the examination
function.

During 1989, the first 500 laptop com
puters of about 2,000 expected to
be purchased by DOS were sent to
examiners in the field to supplement
and eventually replace the bulky por
table computers that had been used.
The new computers, which are small
enough to be carried comfortably in
a briefcase, enable examiners to have
access to examination reports and hun
dreds of FDIC rules, regulations and
memorandums within seconds. The lap
top program is expected to save sig n ifi
cant amounts of examiner time and
improve the quality of the work being
done. DOS’s goal is to have one laptop
computer for every field examiner by
the end of 1992.
DOS also began installing “ local area
networks,” providing a computerized
communications link among workers
in a particular area. Local networks
were operating in the Washington o f
fice and in several of the regional
offices by year-end 1989. The network
has provided each review examiner with
quick access to the FDIC’s data bases
and the capability to communicate with
DOS field offices, other divisions and
private data bases. The program also
will speed up the transmission and
review of examination reports from the
field. Plans are to install “ wide area net
works” that will connect all the FDIC
networks by the end of 1990. The first
wide area network was installed be
tween the Kansas City and Washington
offices during 1989.
Also in 1989, the FDIC’s financial infor
mation data base was replaced with a
more modern product that is easier to
use and has increased capacity. The
programming task, one of the largest
ever by the FDIC, took nearly two years
to complete. The new data base, known
as the Bank Information Tracking System
(BITS), was tested in 1988 and became

fully operational early in 1989. The
FDIC and other regulators rely heavily
on BITS in supervising and monitoring
financial institutions. Other data bases
acquired for examiner use will provide
access to the manual of examination
policies, DOS memorandums and S&L
financial data. Other FDIC manuals will
be added in 1990.
During 1989, the Division began develop
ing an updated, expanded management
information system in tandem with the
wide area network project. The system
will track and provide reports on examina
tion performance, financial institution
growth, aggregate statistical informa
tion, regional profiles and various
regional office activities.

Training
DOS attracted a high caliber of examiner
trainees in 1989. Of the 634 individuals
hired in 1989, about 67 percent were
recruited under an Outstanding Scholar
Program. To qualify, applicants must
have graduated from their college with
at least a 3.5 grade point average or
have ranked in the top 10 percent of
their class or subdivision.
All training programs during the year
emphasized emerging issues such as
interest rate risk management and
capital markets instruments.
FIRREA also had a dramatic impact on
training activities in 1989. Thrift ac
counting and operations schools were
conducted at eight regional sites and the
Washington area. This was followed by
a financial analysis seminar that focused
on thrift issues.
The increased hiring of examiners that
began in 1985 continued to affect the
Division’s training efforts at all levels,

with student attendance at the DOS
Training Center remaining very high.
During the year, 90 sessions of 13
courses were attended by 1,544 FDIC
examiners, 41 employees of other FDIC
Divisions and Offices, 384 state ex
aminers and 74 employees of other
U.S. agencies and foreign governments.
Some FDIC examiners were unable to
attend FFIEC schools because of com
peting demands on their time from the
thrift industry crisis. Nonetheless,
269 FDIC employees and 58 state
examiners under FDIC sponsorship
attended 13 different courses offered
under the auspices of the FFIEC.
Training levels are expected to increase
in 1990 and beyond to meet the needs
of the increased field examiner staff. A
cadre of 350 instructors taught at the
DOS Training Center in 1989. They in
cluded DOS examiners, senior manage
ment from all Divisions and Offices in
Washington headquarters, and guest
lecturers from the academic communi
ty, banking and other business fields.
The number of instructors is expected
to increase to 390 in 1990, with most
of the increase being industry experts
enlisted to help develop examiners. In
addition, the FFIEC’s courses were
supported by 17 FDIC instructors in
1989, but that will increase dramatically
in 1990 as the FDIC’s use of these
courses rises.
The DOS Training Center administers
the testing and assessment of assistant
examiners for promotion to com m is
sioned examiner status. In 1989, there
were 244 staff members evaluated for
possible promotion to commissioned
examiner status. Nearly 300 are ex
pected to be evaluated during 1990,
reflecting the continued expansion of
the field staff.

Outlook
• Off-site Monitoring
In 1990, the FDIC and the other regulatory
agencies will be evaluating the Uniform
Bank Performance Report in light of
changes instituted by FIRREA. Riskbased capital and interest-rate sensitivity
are areas where the UBPR’s content
might be revised. The question of
whether to include savings associations
also will be addressed, although a
significant effort would be required to
make S&L financial information compati
ble with the UBPR format. A separate
system may prove desirable.

FIRREA has mandated that each bank
make available to its external auditor
any examination reports, supervisory
agreements or enforcement actions in
volving a federal or state regulator. The
accounting profession also has been
developing a position providing
guidance to auditors on communica
tions with examiners and on the need
to review examination information
about a financial institution. In addition,
the FDIC’s auditing policy requests
banks to subm it auditors’ reports to
the FDIC regional office so that agency
staff members may communicate in a
more tim ely fashion with institutions
and their auditors to help resolve
issues of supervisory concern.
The FDIC has agreed with the Florida
Board of Accountancy that examiners

James

Tk a tc h

Other significant off-site monitoring
projects for 1990 include the develop
ment of new interest rate sensitivity
measures and aggregate data on ac
tivities such as real estate lending, and
the on-line availability of financial data
that otherwise has been available only
in hard copy.

• External Audits
The FDIC’s encouragement of external
audits and acceptable alternative audit
ing programs for banks is expected to
continue with increased emphasis on
cooperation and communication be
tween auditors and examiners.

At FDIC headquarters, Chairman Seidman discusses supervision and regulation issues with bankers from
nearly 60 countries who gathered in Washington for a one-week conference in September 1989.

or liquidators who discover apparently
substandard audit work at a financial
institution will notify the Florida Board
of such situations for its review and
possible disciplinary action. This model
may be used to establish similar
agreements between other states and
the federal financial institution super
visory agencies.
Capital Adequacy
Capital standards for banks and thrifts
will continue to be a paramount con
cern of regulators throughout the
1990s. FDIC staff in the coming years
undoubtedly will be paying attention to
issues such as: proper capital for mort
gage banking activities; whether the
allowance for loan losses should be
part of regulatory capital; and the
application of the risk-based capital
framework to current and developing
financial instruments and off-balance
sheet activities.
Financial Instruments
The new decade is likely to find the ac
counting profession and regulators con
tinuing to struggle with the accounting
and supervisory issues resulting from
new and constantly evolving financial
instruments.
Various mortgage-derivative products
have proliferated in the portfolios of
depository institutions in recent years.
The accounting profession is reviewing
the treatment of transactions involving
these and other financial instruments.
An awareness of the considerable level
of interest rate risk in many of these
instruments has been added to the
traditional concerns about credit quality.
There are several reasons for continued
DOS scrutiny of these types of instru
ments. One is the FDIC’s new responsi

bilities as insurer and back-up super
visor of thrifts, which have been more
active purchasers of mortgage-derivative
products than banks. Another is the
increased holding of these assets by
commercial banks.
The categorization of securities and
other assets held for investment, sale
or trading has been under increasing
discussion in the accounting profession
and among the regulators. DOS’s staff
has participated in deliberations to
reconcile differences in the criteria
used to determine how these assets
should be reported. This effort includes
developing interagency guidance on
proper investment practices.
• Recourse Arrangements
The market’s appetite for securitized
assets that pose reduced risk to in
vestors likely will continue as invest
ment bankers devise new financial
instruments tailored to their custom ers’
needs. Discussions on the relationship
between the recourse retained in a
transfer of assets and the reporting
and capital treatment of these transac
tions will likely remain a top priority.
• Hiring
The Division plans to hire more than
700 field bank examiners in 1990 who
would be dedicated to conducting
safety and soundness examinations. The
goal is to have more than 2,600 field ex
aminers on staff by year-end 1990, up
from about 2,200 at the end of 1989.
DOS also intends to help support the
examiner staff by hiring 200 experi
enced loan analysts on temporary ap
pointments of up to three years. This
would expand a pilot program that by
year-end 1989 involved about 30 loan
analysts in selected regions.

Division of Liquidation
Picking up the Pieces from
Failed Banks and Thrifts
When President Bush asked the FDIC
in early 1989 to become part of the
solution to the thrift industry crisis,
much of the burden fell directly on the
Division of Liquidation (DOL).
This is the FDIC Division that ad
ministers failed financial institution
receiverships, makes payments to
depositors in closed FDIC-insured
banks, and converts the assets of the
failed institutions to cash to reduce
the costs to the agency.
In 1989, DOL successfully handled the
closing of a record 206 FDIC-insured
commercial banks having total assets
in excess of $29 billion. That surpassed
the previous record of 200 bank failures
set in 1988, although total assets that
year were higher at $35.7 billion.
About 75 percent of the $29 billion in
failed bank assets brought under the
DOL’s responsibility in 1989 related to
the failures of three large organizations:
the 20 subsidiary banks of MCorp of
Dallas, Texas, with combined assets of
approximately $15.4 billion; the 24 sub
sidiary banks of Texas American Bancshares, Inc. (TAB), Fort Worth, Texas,
with combined assets of about $4.2
billion; and the nearly $1.1 billion-asset
First American Bank and Trust, North
Palm Beach, Florida.
At the same time, DOL efforts helped
stabilize problem savings institutions.
About 850 senior personnel from DOL,
along with two regional offices and
three field offices, were transferred to
the Resolution Trust Corporation (RTC)
when the new agency was created in
August to act as conservator and
receiver for failed thrifts.

In addition, the Division’s portfolio of
assets to be liquidated more than
doubled to approximately $24 billion
when, under FIRREA, the FSLIC
Resolution Fund was established within
the FDIC. This new fund assumed
responsibility for the assets and
liabilities of the 98 savings and loan
receiverships in existence prior to 1989,
for which the former Federal Savings
and Loan Insurance Corporation (FSLIC)
had been named receiver. The respon
sibility for liquidating those assets was
given to DOL.
Taken together, these various responsi
bilities made 1989 the most challenging
year in DOL’s history. Other highlights
of its operations in 1989 include:
• Achieving cash collections of $2,322
billion on commercial bank assets in
liquidation and $392 million on FSLIC
assets during November and December.
• Holding the ratio of DOL expenses to
assets collected to a low 9.6 percent.
• Performing reviews of the assets at the
206 failed commercial banks prior to
their being closed and at 253 savings
and loans after being placed into con
servatorship. Through these asset
reviews, the FDIC was able to estimate
the costs and losses that would be in
curred in liquidating these institutions.
• Participating in the assembling of finan
cial information used to facilitate the
sale of most of the 206 failed banks.
• Holding the FDIC’s first public nation
wide auction of large holdings of real
estate. The March 1989auction, conducted
in New York, sold 14 properties for
$40.7 million, an impressive 99.4 percent
of their appraised value.

Assistance Transactions Beneficial
The FDIC established bridge banks
in connection w ith the three large
failures of 1989 involving MCorp,
Texas American Bancshares and
First American Bank and Trust.
A bridge bank is a full service national
bank established by the FDIC on an
interim basis to assume the deposits,
certain other lia b ilitie s and substan
tia lly all of the assets of a failed bank.
The FDIC may operate a bridge bank
up to five years w hile it seeks a pur
chaser. The goal is to m aintain banking
services u ntil a permanent so lution is
found fo r the insolvent in stitutio n .
The bridge bank created in March to
handle the MCorp failures was sold
three m onths later to Banc One Cor
poration, Columbus, Ohio, and renamed
Bank One, Texas, N.A. A lm ost im
m ediately after the TAB bridge bank
was established in July, an agreement
in principle was reached to sell it to
Deposit Guaranty Bank, Dallas, Texas.
As fo r the bridge bank created in
December fo r First American, the
FDIC approved a transaction on March
20, 1990, w ith Barnett Bank of Palm

Beach County, W est Palm Beach,
Florida. Barnett agreed to assume all
deposits and certain other lia b ilitie s
and to purchase a sig n ifica n t portion
of the assets of the bridge bank. Banc
One and Deposit Guaranty Bank (later
renamed Team Bank) acquired the ir
bridge banks w ith FDIC assistance.
In each case, under the term s of the
assistance plans approved by the
FDIC, the acquired bank’s balance
sheet was marked to market. The
FDIC agreed to provide a cash con
trib u tio n su fficie n t to elim inate the
bank’s negative net worth. The FDIC
also agreed to absorb losses on a
pool of problem assets, which each
assum ing bank w ill manage under
FDIC supervision.
In return, the FDIC benefits by having
few er assets to liquidate, which
ultim ately lowers the agency’s costs.
By working together w ith the private
sector, DOL can maximize the fin an
cial return to the insurance fund.
The Banc One and Deposit Guaranty
assistance and service agreements
were largely patterned after the
FDIC’s 1988 arrangement w ith NCNB
Texas National Bank (NCNB) for
managing the classified assets of the
failed FirstR epublic Bank, Dallas.
Total assets in the pool under the
management of NCNB had a book value

atistical Highlights, 1984-1989
Total

pSnmis
of Failed

ffjjSB li
B
(billions)

Estimated
Book Value
of Assets in
Liquidation
(billions)

Operating
Expenses*
(millions)

Number
of DOL
Employees

k assistance transactions.,
ral Savings and Loan Insurance Resot

-wide.expenses.

> Trust Corporation (BTC) expenses, collections and asset
n

Asset Management and Sales

of approximately $10 billion. NCNB col
lected for the FDIC a substantial $2.4
billion from these assets in 1989.
Private sector collections on MCorp and
TAB assets eventually should bring to
the FDIC an additional $7 billion.

An Assistance Transactions Branch
headquartered in Dallas, Texas, was
established in 1989 for the purpose of
monitoring and providing oversight for
major assistance transactions nation
wide. The relatively small but highly
experienced staff of this branch, based
in the state where most of the FDIC’s
failed bank assets are located, enables
the agency to leverage its personnel
resources to provide management for a
large volume of assets.

.... —

With four regional offices and 16 field
offices, the Division has been able to
decentralize decision-making and
delegate considerable authority to the
field. This arrangement has helped DOL
make decisions in a timely and costeffective manner.
For example, DOL took 25,844 creditrelated actions in 1989 in areas such as
settlements, foreclosures and sales of
loans and acquired real estate. But
under DOL’s delegated procedures, only
about 1.5 percent of those credit ac
tions had to be approved in the
Washington Office.
The Division of Liquidation’s account
officers collected nearly $2.7 billion on
bank and th rift assets. Through its bulk
sales efforts, the Division sold more

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

— 1

than 28,000 loans having a book value
of $493 m illion. While 1989’s bulk sales
efforts represent a small percentage of
the total asset portfolio in terms of
dollars, the numbers of loans sold is
significant in that it reduces the
volume of small loans requiring servic
ing. The Division’s field offices also ad
m inister asset sales and oversee the
use of outside contractors.

DOL goes to great lengths to market the
real estate properties it acquires from
failed institutions. This includes notices
in FDIC publications, listings with real
estate brokers and advertising in various
media, including trade journals that would
feature specialized properties such as
hotels or restaurants.
Properties usually are sold through real
estate brokers, but also are sold at
public auctions and by the FDIC’s own
real estate personnel. Sales typically are
on an all-cash basis, although financing
is considered.

The

Philadelphia

Inquirer/Akira

Suw a

Properties acquired from failed banks
are sold through the Owned Real
Estate Department in each field office
and loans are sold by the Asset
Marketing Department. The names of
investors interested in purchasing prop
erties or loans are maintained on a
data network that can be accessed by
all liquidation offices. To be listed, in
vestors must complete a form available
from any of the Division’s offices.

Listings of properties for sale are
available on a local or regional basis
upon request from any DOL office.
In the second quarter of 1990, DOL
began publishing listings of commercial
properties for sale nationwide. Each
property is listed by type and by city
and state, along with a brief descrip
tion and a phone number for further
information.

Christie’s auctioneer acknowledges a bid for a property during the FDIC’s successful public auction of large
real estate holdings, March 8, 1989, in New York City.

Investigations
Negligence and criminal behavior by
directors, officers or third parties were
major reasons for record numbers of
financial institution failures over the last
several years. DOL’s Investigations Unit
is responsible for uncovering, pursuing
and redressing these wrongdoings.
Several steps were taken in 1989 to
upgrade the Investigations Unit and to
make sure it is equipped to accomplish
its mission. One was the creation of a
new senior position, the Assistant Direc
tor for Investigations, to put additional
emphasis on these matters.
The unit also started using in 1989 a
new computer-based system to help
FDIC investigators track alleged viola
tions at banks and follow-up actions by
the Department of Justice. This com
puter network should speed the comple
tion of investigations, give a more
complete picture of recurring criminal
acts and help track referrals to the
Justice Department for possible criminal
prosecution. The system also will help
the FDIC track the dates that criminal
sentences are to be imposed, which is
important as the agency aggressively
seeks restitution payments from defen
dants when they are sentenced.
DOL also is establishing a comprehen
sive training program to give FDIC
investigators a complete background in
financial institution operations as well
as rigorous training in investigative
techniques. The FDIC intends to make
this one of the premier investigative
training programs in the country.

Early Response to the Thrift Crisis
When President Bush announced on
February 6 his plans to resolve problems

in the thrift industry, a first step was
the placement of 253 troubled savings
associations into conservatorship under
a joint team of regulatory agencies led
by the FDIC. The team consisted of the
FDIC, the Federal Home Loan Bank
Board (FHLBB), the FSLIC, the Office of
Comptroller of the Currency and the
Federal Reserve Board.
The mission of the regulators was to
promote public confidence and maintain
customer services while working to find
a permanent, cost-effective resolution to
the institutions’ problems. To accomplish
these goals, the regulators took control
of the troubled institutions, evaluated
their financial condition and took steps
to ensure that they would be operated in
a safe and sound manner. These actions
enabled the regulators to minimize
operating losses, lim it growth, eliminate
highly speculative activities and stop
waste, fraud and abuse at these
institutions.
In a related move, on February 7, the
FDIC agreed to manage thrift institu
tions placed in conservatorship or
receivership. This came after the FHLBB
determined that the magnitude of the
problems of the thrift industry exceeded
its resources and those of the FSLIC.
The FDIC was reimbursed by the FSLIC
for the services it performed.
The Division of Liquidation’s initial par
ticipation in the management agreement
consisted of conducting asset reviews
to determine the estimated losses and
providing support in monitoring the
credit function at each conservatorship.
DOL conducted asset reviews at the
253 savings institutions in the conser
vatorship program and subsequently
supplied many of its most experienced
personnel to act as managing agents of
these institutions.

Outlook

The Im pact of FIRREA
Enactment of FIRREA in August added
some burdens to the Division but lifted
others. Not only did DOL assign approx
imately 850 senior personnel to the
RTC, but it also transferred two of its
six DOL regional offices to the new
agency. These were DOL’s Atlanta and
Kansas City Regional Offices. DOL also
transferred to the RTC three field
offices located in Kansas City, Missouri;
Tulsa, Oklahoma; and Burnsville, Min
nesota. At the same time, DOL absorbed
the liquidation activities and personnel
of the FSLIC’s Operations and Liquida
tion Division, which meant a doubling of
the portfolio of assets to be liquidated.
FIRREA also gave the FDIC greater
flexibility in arranging and processing
“ purchase and assum ption” (P&A) trans
actions for failed banks. In a P&A, vir
tually all deposits of an insolvent insti
tution, including uninsured deposits,
are assumed by a healthy institution
with financial aid from the FDIC.
FIRREA codified the FDIC’s long
standing position that non-depositor
creditors of a failed institution should
share proportionately, or “ pro rata,”
with the FDIC in the proceeds of the
liquidation of an insured institution
whenever a purchase and assumption
transaction is arranged. The FDIC
previously had taken the position that
it was im plicitly authorized to utilize
this approach to pay non-depositor
creditors what they would have received
in a straight liquidation. By specifically
codifying the pro rata concept, the
FDIC’s ability to use the less costly
P&A transaction is enhanced.

One key development that will affect
1990 and the years ahead will be the
transfer to DOL of the responsibility for
the resolution of most failing banks.
That responsibility, which includes con
ducting asset reviews at failing banks
and preparing for meetings with poten
tial acquirers, has rested with the
FDIC’s Division of Supervision (DOS).
By bringing DOL specialists into the
liquidation process much sooner than
in the past, the Division is expected to
have increased flexibility in fashioning
new and innovative ways to sell assum
ed assets. The change also will free up
more DOS examiners for bank supervi
sion duties.
DOL also w ill work toward improving
and expanding its loan sales programs
as a way to further reduce costs. The
Division plans to contract with outside
vendors who would purchase good
mortgage loans acquired by the FDIC
and then sell interests in the loans to
the public by securitizing them. DOL
also wants to increase the sales of
small loans, such as consumer loans.
DOL plans to establish real estate
offices staffed by FDIC marketing and
sales specialists in locations near high
concentrations of properties acquired
from failed institutions. The offices will
serve as a base of operations for prop
erty sales. In addition, DOL is develop
ing a telemarketing system designed to
quickly and easily provide information
to investors about properties for sale.

Legal Division
Assumes New Duties for
Interpreting, Enforcing FIRREA
This Division’s primary role is to provide
the legal support necessary for the FDIC to
fulfill its duties as regulator of depository
institutions and insurer of deposits. With
the tremendous expansion of the agency’s
duties under FIRREA, the workload and
responsibilities of the Legal Division
expanded as well, especially for major
“ clients,” including the Resolution Trust
Corporation (RTC), the FDIC’s Divisions
of Supervision and Liquidation, and the
new Division of FSLIC Operations.
W ith the transfer of the deposit
insurance system for savings associa
tions from the Federal Savings and
Loan Insurance Corporation (FSLIC) to
the FDIC, the Legal Division faced
many new legal issues. Those included
reconciling differences in bank and
th rift deposit insurance rules and
implementing receivership and conser
vatorship powers. The transfer of
pre-1989 savings association receiver
ships from the FSLIC to the FDIC also
increased the number of resolution and
asset liquidation matters requiring action.

Another addition to the Division’s
workload is providing legal support for
the administration of approximately 200
FSLIC assistance agreements that are
obligations of the FSLIC Resolution
Fund, which is managed by the FDIC.
Also, the FDIC’s new authority to
regulate certain activities of insured
savings associations brought with it
new supervisory matters to be resolved
by the Legal Division. These included
revised or expanded enforcement,
receivership and conservatorship
powers that required new interpreta
tions and implementation.
A fter the enactment of FIRREA in
August 1989, the Division also was
responsible for the major undertaking
of providing legal services to the RTC.
While the Legal Division’s overriding
concern was interpreting, implementing
and enforcing the many provisions of
FIRREA — a focus that is likely to
continue for years to come — it also
did its part in helping the FDIC handle
206 insured bank failures in 1989.
Indicative of the tremendous respon
sibilities faced by the Legal Division in
1989 are the approximately 65,000 pend
ing cases in litigation at year-end, more
than four times the 15,168 pending
cases at the end of 1988.

Structural Changes
The Legal Division’s responsibilities
can be loosely divided into the follow
ing four functions: (1) working with the
Division of Supervision (DOS) to ensure
that FDIC-insured institutions operate
in a safe and sound manner; (2) pro
viding legal advice and support when
troubled FDIC-insured institutions are
merged or liquidated; (3) resolving
through mediation, settlement or

Assistant general counsel Roger Hood (second from right) testifying
at a congressional hearing on deposit insurance, with legislative af
fairs director Beth Climo and senior attorney Claude Rollin.

litigation disputes involving assets or
liabilities of failed financial institutions,
including claims against directors, of
ficers, attorneys, accountants and bor
rowers; and (4) supporting the FDIC on
day-to-day operations, such as advising
on personnel and labor law and proper
ty leases and purchases.
In response to FIRREA and the tremen
dous increase in the agency’s litigation
caseload, the Division increased its
staff from 904 at the end of 1988 to
1,340 at the end of 1989. Its authorized
strength for 1990 has been increased to
2,637 people, with about 80 percent of
the new positions to be in regional and
field offices.
The Division’s increased duties also
necessitated an internal reorganization.
Under a plan approved by Chairman
Seidman in August of 1989, the Divi
sion’s former structure of three branches
and nine sections was replaced with a
new system of four branches and 14
sections, with responsibilities and ac
complishments as explained below.
The new structure regroups organiza
tional units to parallel the Division’s
new functions under FIRREA. The four
branches are:
The Supervision and Legislation Branch
The three sections in this branch
specialize in implementing and develop
ing regulations and laws involving
deposit insurance, bank and thrift
supervision and other related issues;
developing and supervising enforce
ment policies; and drafting and
negotiating FDIC-assisted acquisitions
of problem institutions.
The Financial Institutions Operations
and Liquidation Branch
This new branch is responsible for
legal operations at the agency’s
regional liquidation offices and field

sites. Its five sections handle failed
bank and th rift resolutions and asset liq
uidations, legal services for the RTC,
bankruptcy matters handled by the
FDIC, advice on administering thrift
assistance agreements transferred from
the FSLIC, and advice on legal issues
stemming from asset liquidations.
• The Litigation Branch
This branch is responsible for litigation
matters handled from Washington
rather than from the regional offices.
Its three sections handle trial litigation
involving open and closed institutions;
appeals court cases from the state
level to the U.S. Supreme Court; and
investigations of, and civil damage
recovery from, professionals who have
breached duties to failed institutions.
* The Operations Branch
This branch has three sections respon
sible for the Legal Division’s administra
tive and personnel matters, the coor
dination of the Division’s efforts to
investigate and prosecute crimes and
to mediate conflicts between institu
tions, and advising on general cor
porate issues, such as the FDIC’s
corporate powers and personnel and
labor law.

Supervision and Legislation Branch
During 1989, the Regulation and
Legislation Section was actively involved
assisting Congress in developing por
tions of FIRREA. Once the law was
enacted, the section was responsible
for identifying the new responsibilities,
procedures, regulations, reports and
other obligations required of the FDIC
or the RTC. In this regard, the section
worked closely with DOS and other
Divisions and Offices of the FDIC to
assist in interpreting and responding
to FIRREA.

For example, FIRREA specifically re
quired 17 mandatory rulemakings and
authorized more than 20 others, virtual
ly all of which were the Regulation and
Legislation Section’s responsibility to
draft and recommend to the Board of
Directors for approval. This section
developed and published 15 FIRREArelated proposed, interim or final
regulations and two other regulations
unrelated to FIRREA.
The section also responded to hun
dreds of requests from outside parties
for legal opinions on the effects of
FIRREA and the implementing regula
tions. Inquiries about deposit insurance
coverage in particular greatly increased
as public perceptions about the instabi
lity of the savings and loan industry
created concern about the safety of
deposits.
FIRREA also required the FDIC to recon
cile differences between the deposit
insurance regulations that govern banks
and savings associations. The section
began working on this extensive project
in 1989. Final rules were adopted by the
FDIC’s Board on April 30, 1990. The
revised insurance rules also codified
certain long-standing staff interpreta
tions. The rules are expected to lead
to an increase in deposit insurance
inquiries from depository institutions
and the public. The section has
increased its staff to accommodate
those inquiries.
FIRREA greatly enhanced the enforce
ment powers at the FDIC’s disposal,
in turn expanding the duties of the
Compliance and Enforcement Section,
which drafts policies and helps enforce
compliance with consumer protection
and depository institution laws.
Of special interest are provisions of
FIRREA that enable the FDIC to sus
pend temporarily the deposit insurance

of an institution operating with no
tangible capital, to recoup some of
the losses caused by the failure of an
institution by assessing other commonly
controlled institutions, to assert en
forcement jurisdiction over individuals
formerly employed by an insured
depository institution and to impose
dramatically tougher civil money
penalties for violations of FDIC rules
and orders.
In addition, FIRREA expanded the
FDIC’s powers to issue cease-anddesist orders, prohibit individuals from
participating in an in stitutio n ’s affairs,
and take enforcement actions against
savings associations. Also new is a
requirement that the FDIC publish and
make available to the public any final
order issued with respect to an
administrative enforcement action.
Although FIRREA is still a new law,
the Compliance and Enforcement Section
by year-end began using the new
statute’s more streamlined procedures
to initiate termination of deposit in
surance at 13 institutions and to
impose one temporary suspension of
deposit insurance. The section also
initiated proceedings under the cross
guarantee provisions of FIRREA for the
first time in one case.
Other actions are being pursued under
a combination of both FIRREA and the
Federal Deposit Insurance Act. There
were 207 enforcement actions initiated
during the year, comparable to the 223
from 1988. A cease-and-desist order,
which is used to halt and correct un
safe or unsound banking practices, is
the most common administrative en
forcement tool used by the FDIC.
The Assisted A cquisitions and Transac
tions Section within the branch was
busy during 1989 finishing the details
of previously consummated assistance

deals and stock sales, in addition to
playing a key role in several new
assistance transactions, such as those
for Texas American Bancshares (TAB),
Fort Worth, and MCorp of Dallas.
m pliance and Ertfoi

Actions Initii

■

•'----->

Section 8{a;

latiqn of

’rimary Ri
; Issued**

Notices
'emporai

Notices ol
Orders I
Orders Issued Without Notice '
Section ^

g) •(Temporary

Orders)*

ection 8(e) (Removal/Prohil
Director or Officer)
Notices Issued
Orders Issued With Ndtio
: Orders Is:
Sectiori 8(
Section 8(g) (
of Director or
Notices I:
Permanei
Section 8(p),
Insurance/Ni
Orders I:
ction 8(q) (Te:
;urance/Depo!
Orders li

The section negotiated with NCNB
Texas National Bank, Dallas, and First
City Bancorporation of Texas, Houston,
for the banks’ repurchase of stock the
FDIC bought under the terms of 1988
assistance agreements. The section
also participated in several public and
private sales of stock of Continental
Bank Corporation, Chicago, held by the
FDIC as part of a 1984 assistance
agreement.
In the case of TAB, which was declared
insolvent in July of 1989, the section
worked closely with the Legal Divi
sion’s Financial Institutions Operations
and Liquidation Branch, the Division of
Supervision and other parts of the
FDIC to establish a bridge bank. Later,
the section assisted in the bridge
bank’s merger with a healthy institu
tion, the Deposit Guaranty Bank of
Dallas. The FDIC provided financial
assistance of approximately $900 million.
As for MCorp, when the Comptroller of
the Currency closed 20 of its sub
sidiary banks in March 1989, the FDIC
transferred almost all their assets and
liabilities to a bridge bank and signed
an agreement in principle to sell the
bridge bank to Ohio-based Banc One
Corporation. In January 1990, a final
agreement was reached whereby Banc
One would buy approximately $34
million of the resulting in stitutio n ’s
voting common stock and the FDIC
would purchase approximately $416
million of nonvoting common stock,
which is to be redeemed by Banc One
within a five-year period. Troubled and
nonperforming assets would continue
to be held by the bridge bank, but ser
viced by a subsidiary of Banc One.
Total assistance from the FDIC is ex
pected to be approximately $2.7 billion.

Civil Money f
Capital Notici

* Not counted as separate proceedings and therefore not included in total actions initiated
f Pre-FIRREA document name is NOTICE OF HEARING. post-FIRREA document name
is NOTICE Off INTENT
,
_
.* New enforcement power granted by FIRREA in 1989; therefore data for previous years
do not exist.

The fact that FIRREA increased the
FDIC’s power to provide financial
assistance to unstable institutions —

the section issued interpretations of
these new provisions and began defend
ing legal challenges to their use.

Cease-and-Desist Orders, 1987-1989
Cease-and-desist orders
outstanding at beginning of year — ti
Section 8(b)
Section 8(c)1
Cease-and:desist. orders
issued during year — total
.Section 8(b) ■

Section 8(c)
Cease-and-desis
term inated— tota

•' Section 8(c)
Gease-and-desis
in force at end of

■^ediqr>-8{c)

savings associations as well as banks
— means expanded responsibilities for
the Assisted A cquisitions and Transac
tions Section. To meet these demands,
this section has more than doubled its
legal staff.

Financial Institutions Operations
and Liquidation Branch
W ithin this branch is the Operations
and Liquidations Section, which during
the year worked on the 206 failed bank
transactions and the establishment of
three bridge banks. The section also
played a major role in drafting provi
sions of FIRREA that deal with the
establishment of bridge banks.
Other aspects of this section’s work
included the legal administration of
FSLIC receiverships that were created
before January 1, 1989. Since FIRREA
provides revised and expanded statu
tory authority and direction for conduct
ing depository institution receiverships,

A new Operations and Liquidations
(RTC) Section was created to provide
legal services for the RTC’s resolution
and asset liquidation functions. The
section also serves as the liaison be
tween the RTC and the FDIC’s Legal
Division. Typically, Washington personnel
concentrate on general policy and pro
cedures, as well as large or sensitive
cases or resolutions. The regional and
field offices provide legal support for
the RTC’s regional operations.
As of the end of the year, the section
supervised more than 280 conservator
ships and receiverships, and over
40,000 lawsuits. At least 200 more
conservatorships are expected to be
added to this workload in the future.
In another developm ent during the
year, the FDIC began bringing an
increasing num ber of claim s against
bankrupt individuals and entities. As
of the end of 1989, the new Bankruptcy
Section w ith in this branch was over
seeing or m onitoring the pursuit of
FDIC claim s in more than 7,800 bank
ruptcy cases arising out of failed
banks, up from 4,850 in 1988.
The FDIC generally is the largest
cre d itor in these bankruptcy pro
ceedings, and it plays a critica l role
in the cases. Eighty-seven percent of
these bankruptcy claim s were handled
entirely by FDIC attorneys, w ith the
remaining cases going to outside
counsel. Nearly half o f these claim s
are fo r more than $100,000. W ith the
enactm ent o f FIRREA, the FDIC also
assumed an additional 4,500 savings
association-related bankruptcy cases,
a num ber that is expected to increase
during 1990.

There were approximately 200 savings
association assistance agreements
transferred to the FDIC from the FSLIC
under FIRREA, some of which will re
main in force for as long as ten years.
The new Thrift Agreement Adm inistra
tion and Oversight Section was created
during 1989 to handle matters such as
interpreting provisions of these assist
ance agreements, resolving disputes
with assisted associations and over
seeing lawsuits by or against these
thrifts where the government has a
financial interest because of indem
nification provisions of the assistance
agreements. The section also tends to
general legal policy concerns relating
to the agreements, such as clarifying
FIRREA’s impact on the activities of
assisted savings associations and work
ing with the O ffice of Thrift Supervision
(OTS) and the Comptroller of the Cur
rency to develop policies for regulating
assisted savings associations.
Because the Legal Division is facing
diverse new issues as a result of
FIRREA, a Special Projects Section
was created to develop uniform inter
pretations of issues relating to certain
resolution and asset liquidation func
tions. The section helped coordinate
the FDIC’s legal policy on tax issues,
pension plans, the environment, securi
ties, bulk sales and service corporations.
The Special Projects Section also
manages the Division’s computerized
Case Management System, which main
tains data on thousands of pending
FDIC and RTC lawsuits related to asset
liquidation functions and tracks the use
of outside counsel and their fee bills.

Litigation Branch
The Trial Litigation Section within this
branch expanded to include cases in
volving closed savings associations,

along with its traditional role in open
and closed bank litigation. In general,
the section handles litigation that in
cludes certain challenges to bank and
thrift closings, FDIC assistance transac
tions, FDIC regulations, suits against of
ficials and employees of the FDIC and
other major matters. Although the sec
tion transferred most of its appellate
matters to the new Appellate Litigation
Section, it will continue to defend the
administrative enforcement decisions of
the FDIC’s Board of Directors in the
U.S. Courts of Appeals.
In the area of regulatory and enforce
ment matters, the FDIC Board of Direc
tors issued 13 final administrative
enforcement decisions in 1989, five of
which were appealed to the United
States Courts of Appeals. The appellate
courts issued four decisions in these
cases in 1989 and two other appeals
were pending at the end of the year.
One decision issued by the Fifth Circuit
Court of Appeals in New Orleans,
Arnold v. FDIC, was quite significant. On
July 28,1989, the court affirmed the
assessment of a $1,225,000 civil money
penalty against Kenneth O. Arnold, a
former president of American Bank of
Coushatta, Louisiana. The charges were
for multiple violations of rules that limit
“ insider” loans by a bank to executive
officers, directors and principal share
holders and limit loans by a bank to
affiliated entities. This case represents
one of the largest single civil monetary
assessments ever imposed on an in
dividual by a bank regulatory agency.
FIRREA and its tough new capital stan
dards produced a number of lawsuits
against the FDIC and the OTS, challeng
ing both the law and its application.
Separate suits were filed by Long Island
Savings Bank of Syosset, New York;
Northeast Savings Bank of Hartford,

Connecticut; CenTrust Bank of Miami,
Florida; and El Paso Savings and Loan
Association of El Paso, Texas. Each in
stitution claimed it has a contract with
the former Federal Home Loan Bank
Board or the FSLIC in connection with
the assisted acquisition of a troubled
th rift prior to the enactment of FIRREA
and that the contract permits it to
count “ goodw ill” toward minimum
capital requirements under standards
more liberal than permitted in FIRREA.
In early 1990, the FDIC and the OTS filed
m otions to dismiss the complaints. The
issue of eliminating goodwill has
generated considerable protest from
savings association officials.
The FDIC also has been named a
defendant in both its corporate and
receivership capacities in major litiga
tion by holding companies arising out
of the failures of subsidiary banks of
First RepublicBank Corporation, TAB
and MCorp.
The First Republic litigation is a com
plex suit by creditors of the bankrupt
holding company who are attempting to
avoid First Republic’s obligation to
repay a $1 billion loan by the FDIC in
1988 as part of the temporary assistance
package. The creditors also asserted
that the stock pledges and guarantees
by the holding company for the loan
exceeded the FDIC’s statutory authority
and constituted fraudulent conveyances.
The creditors also asserted that the sub
sidiary banks were closed improperly.
The TAB and MCorp cases focus on
allegations that the subsidiary banks
were closed improperly and that forced
recognition of losses on interbank
“ federal funds” loans was improper. In
the TAB case, the FDIC received an
adverse ruling on June 25, 1990, and is
appealing the decision. In the MCorp
case, the FDIC asked the court to reject
the challenge and is awaiting a ruling.

The Appellate Litigation Section is
defending in appeals courts many cases
concerning the FDIC’s use of aspects of
FIRREA that provide special protections
to conservatorships and receiverships.
During 1989, the section won significant
decisions in the following cases:
• Downriver Community Federal Credit
Union v. Penn Square Bank
The Tenth Circuit Court of Appeals in
Denver upheld the FDIC’s position that
federal law requires assets in a receiver
ship to be distributed equally among all
general creditors. The court rejected the
credit union’s claim that fraud which
occurred before the institution went into
receivership entitled it to a greater share
than the other creditors.
• FDIC v. Hartford Insurance Company
The Seventh Circuit Court of Appeals in
Chicago decided that, under the National
Bank Act, tort claims against the FDIC
as receiver for a national bank must be
brought in the judicial district in which
the main office of the closed institution
is located. The court declined to accept
the defendant’s argument that provi
sions of the Federal Tort Claims Act
established a contrary venue, although
the court agreed that the tort claims
law applied to the FDIC as receiver.
• FDIC v. Texarkana National Bank
The Fifth Circuit Court of Appeals in
Dallas agreed with an FDIC motion to
remove certain language from the
court’s original opinion. This language
implied that all receivership creditors —
even non-depositors — were entitled to
full payment of their claims in a pur
chase and assumption transaction, and
that FDIC funds would be used to make
the payments if the failed bank’s assets
were insufficient. The FDIC contended
that the original language would have
resulted in a windfall to creditors at
public expense.

Chairman and Chief Executive Officer of
Vernon Savings and Loan Association of
Dallas, Texas, to 30 years in jail in a fraud
case arising out of the S&L’s 1987 failure.
Negligence or w illful misconduct on
the part of directors, officers and other
professionals has contributed to numer
ous bank and savings association
failures. As a result, the Professional
Liabilities Section of the Litigation
Branch helps the Division of Liquidation
and the RTC investigate each depository
institution failure to determine whether
the FDIC should bring civil claims for
monetary damages against certain
individuals and then supervises the
litigation of claims made.
The Professional Liabilities Section also
began handling claims arising from the
RTC and pre-1989 conservatorships and
receiverships of the FSLIC. In general,
the FDIC’s litigation workload in cases
involving professional liabilities tripled
to encompass ongoing cases and investi
gations involving 1,250 failed banks and
savings associations. The section
recovered a total of $100 million in
claims against failed banks and thrifts
during the year, a 56 percent increase
over the $64 million recorded in 1988.

Various courts across the country during
1989 awarded more than $60 m illion in
restitution payments to the FDIC and
the FSLIC from former officers, direc
tors or borrowers at closed banks and
thrifts who were convicted of embezzle
ment or other forms of bank fraud.
In addition, the new section has deve
loped local working groups around the
country to provide assistance to the
Justice Department's expanded fraud
prosecution efforts under FIRREA.
The section also has trained field
attorneys as well as FDIC and RTC
investigators in techniques needed to
detect and prevent fraud at institutions.

A second major aspect of the new
se ction’s operations is to assist
regional attorneys to resolve, out of
court, major commercial disputes in
volving government entities. Examples
are cases in which various conser
vatorships or receiverships have legal
claim s against each other as a result

Operations Branch
The new Conflicts and Criminal Restitu
tion Section within the Operations
Branch is adding another dimension to
the FDIC’s efforts to combat financial
crime and resolve disputes through
litigation and negotiation. Formed in
October 1989, the section has received
nationwide attention for its success in
obtaining restitution orders and in sup
porting government efforts to impose
lengthy prison sentences.
Examples include the sentencing of Jay
and Leif Soderling, former directors of
Golden Pacific Savings and Loan Associ
ation, Santa Rosa, California, to six and
one-half years in prison and $6.7 million
in restitution for bank fraud, and the
sentencing of Woody F. Lemons, former

Legal Division counsel Pamela LeCren was one of 20 FDIC o fficia ls
at a hotline at USA Today news office s on June 5,1990, to answer
consum ers’ questions about deposit insurance.

• Part 303.14, on FDIC approval of bank
officers and directors at state non
member banks;
of transactions before they became
insolvent. Alternative dispute resolution
is very often cheaper and faster than
the protracted litigation sometimes
necessary to resolve these disputes.

• Part 312, setting entrance and exit fees
payable upon an institution’s conversion
from the Savings Association Insurance
Fund (SAIF) to the Bank Insurance Fund
(BIF), or vice versa; and

In internal matters, the Corporate
Affairs Section handled 77 personnel
and labor cases for the FDIC during
the year, compared to 65 in 1988. It was
also significantly involved in the transfer
of many employees of the former
Federal Home Loan Bank Board and
FSLIC to the FDIC.

• Part 337.6, on the use of brokered
deposits by troubled institutions.

The Legal Division’s substantial growth
during the year put special demands on
the Administration Section in the areas
of human resource development, facilities
management and other administrative
functions. Among its projects during
1989 was the start of a program to give
all Legal Division attorneys and support
staff access to a single computer network.

Outlook
FIRREA will continue to impact on the
Legal Division in 1990 and beyond. The
Regulation and Legislation Section in
particular expects a substantial increase
in its workload throughout 1990. The
section must develop final regulations
for proposals initiated in 1989, many
stemming from FIRREA. The section
also will continue to address the many
interpretive questions that have arisen
under various provisions of FIRREA.
In addition, several regulations adopted in
1989 as interim rules must be reviewed
and issued in final form during 1990.
Examples include:
• Part 303.13 of the FDIC’s regulations,
which governs permissible activities of
state-chartered savings associations;

The Compliance and Enforcement Sec
tion plans to adopt a new policy memo
randum applying provisions of FIRREA
that prohibit individuals convicted of cer
tain crimes from participating in the af
fairs of insured institutions. The section
also is preparing a letter of understand
ing with the OTS that will implement
certain aspects of the FDIC’s new back
up enforcement authority over savings
associations under FIRREA.
The Thrift Agreement Administration
and Oversight Section plans to transfer
many of its litigation oversight activities
to offices in Dallas and San Francisco.
This transfer will increase efficiency,
reduce outside counsel costs and
decrease response time by putting at
torneys closer to the sites where they
are needed while allowing the head
quarters staff to concentrate on inter
pretations of assistance agreements and
more general legal policy matters.
The Legal Division in 1990 plans to put
increased emphasis on hiring and train
ing sufficient staff to cope with its in
creased work demands, enhance
systems and controls for overseeing
outside counsel and improve its com
puterized case tracking system. Such
initiatives will enable the Division to
better service its clients and add to
FDIC and RTC asset recoveries.

• Overseeing the acquisition and manage
ment of additional office buildings and
storage needed by the expanding FDIC
and the new RTC.

Division of Accounting
and Corporate Services
Facing a New Era of Financial
Management under FIRREA
The thrift industry crisis and FIRREA put
exceptional demands on the FDIC for
new financial services, boosts in auto
mation and expanded efforts that in
clude the handling of deposit insurance
premiums from savings associations as
well as banks. Those reponsibilities fall
largely to the Division of Accounting and
Corporate Services (DACS). Highlights of
1989 for DACS include the following:
• Accounting and reporting for the Sav
ings Association Insurance Fund (SAIF),
the FSLIC Resolution Fund (FRF) and
the Resolution Trust Corporation (RTC).
This is in addition to traditional duties
for the Bank Insurance Fund (BIF).
• Enabling agency computers to access
and store key financial data and other
information about savings associations
in addition to what had been maintained
for banks.
• Providing the RTC with the technical
support needed to track financial infor
mation nationwide.

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Construction began in 1989 on the Virginia Square complex in
Arlington, Virginia, which will be used for FDIC offices, classrooms
and a residential center for personnel attending sessions.

• Helping the FDIC and the RTC monitor
the growing number of active and inac
tive lawsuits involving these agencies.
• Taking steps to shorten the processing
time of payments due from the FDIC by
giving regional offices more authority to
approve spending.
To meet the new re sp on sib ilitie s under
FIRREA w ith o ut neglecting its tra di
tional m ission, DACS undertook a
m ajor reorganization, stream lining itse lf
along functional lines. As a result,
DACS now consists of four branches:
Financial Reporting, Financial Services,
Management Inform ation Services and
Corporate Services.

Financial Reporting Branch
The Financial Reporting Branch (FRB)
handles two overall responsibilities. One,
“ accounting services,” focuses on finan
cial and managerial reporting, account
ing and tax policy, financial analysis,
fiscal control, general ledger systems
maintenance and resource management.
The second, “ accounting operations,” is
in charge of Washington and field office
accounting activities. This work expanded
significantly with the insurance funds
and agencies created by FIRREA.
As a result of FIRREA, basic financial
reporting processes underwent dramatic
changes to accommodate the new in
surance fund, the FRF and the RTC.
This included the expanded preparation
of periodic reports to the Treasury Depart
ment and the White House Office of
Management and Budget (OMB), monthly
internal analyses and year-end financial
statements.

to help ensure that operations comply
with FDIC accounting and control prac
tices and that financial reports are
developed within an environment of
appropriate internal controls.
The FDIC’s general ledger is the central
system for aggregating and reporting
the financial condition of insurance
fund activities nationwide. Major m odifi
cations were made in 1989 to establish
multi-fund processing capabilities.
Scores of reports and programs were
changed, reviewed and tested to ensure
the accuracy and reliability of the finan
cial data generated.

John W ashington of the Management Information Services Branch
briefs visitors from Taiwan studying deposit insurance.

A major effort was devoted to develop
ing financial statements for SAIF, FRF
and the RTC in terms of balance sheets,
income statements and statements of
cash flows. New financial schedules
were developed to support these
statements. The entire program required
extensive coordination within the FDIC
and the RTC to ensure that new report
ing procedures complied with various
laws and regulations.
Detailed analyses of FIRREA’s many
accounting and tax policy changes were
conducted to guide the financial reporting,
accounting and systems development
efforts of the branch. New financial
statement formats and footnotes were
developed for each fund — an activity
that required assessments of statutory
requirements and legislative intent,
applications of generally accepted
accounting principles and consideration
of past FSLIC operations. In addition,
a new system to improve tax reporting
to the IRS was implemented.
To better maintain a solid internal con
trol structure within the FDIC’s vastly
expanded accounting operations, FRB
took on new and growing duties for
fiscal control. The aim of this effort is

Extensive efforts also were devoted to
improving existing processes to accom
modate the vast increases in workload.
FRB began developing improved methods
to bring higher investment yields on
funds obtained through receiverships.
Also, a new system was developed to
better distribute FDIC overhead costs
from liquidations to the institutions
receiving the benefits of those costs.
In terms of accounting activity, an exten
sive evaluation of existing operations
was undertaken in light of FIRREA that
resulted in a reorganization of the
branch’s resources and methods. Ac
counting activity was structured accord
ing to the three insurance funds and
the RTC. New procedures for account
reconciliation and transaction review
were implemented to ensure accuracy
and quality control.
The continued large number of failed
banks handled during the year and
other activities resulted in the posting
of 2.9 million financial accounting trans
actions to the accounting records,
about the same as in 1988. During the
course of 1989, FRB personnel processed
accounting data related to institutions
in receivership from 28 locations nation
wide. These locations included 19 for
the Bank Insurance Fund, four for the

Financial Services Branch

FSLIC Resolution Fund and five for the
Resolution Trust Corporation. Through
enhanced systems and accounting
practices, these locations have increas
ed productivity at a time when the
number of institutions in receivership
has increased. The number of active
financial institutions in receivership as
of December 31, 1989, totaled 1,076, up
from 848 as of December 31, 1988.
Included in the 1989 processing efforts
are 276 savings associations for which
the RTC was appointed conservator as
of year-end.
During 1989, the branch began using a
new system to facilitate the processing
and reconciling of insurance claim
checks generated during a payoff of
depositors of a failed institution. A
complete billing system also was
developed to support the conservator
ships and reimbursement to the RTC.
To accommodate the accounting re
quirements associated with setting up a
receivership from a closed institution,
FRB developed procedures, manuals and
training courses to provide standardized
instruction on closing the accounting
records of an old institution and
establishing the accounting balances
on the receivership’s books.
The branch also conducted an extensive
review of accounting processes used in
the savings and loan industry. Based on
that review and indications of needs for
improvement in existing accounting pro
cedures, the branch instituted changes
for use by institutions in receivership.
The addition of the funds created by
FIRREA and the associated accounting
functions required a number of personnel
changes. Positions were created, existing
positions were redefined and members of
the Federal Savings and Loan Insurance
Corporation’s accounting staff were in
tegrated into the FDIC’s operations.

The Financial Services Branch (FSB) is
responsible for the Division’s financial
accounting and asset management ser
vices and operations. This includes
managing, coordinating and directing
support activities for the FDIC’s Finan
cial Information System (FIS) and the
Liquidation Asset Management Informa
tion System (LAMIS).
The Financial Information System is an
umbrella term for the accounting system
and various financial subsystems used
by FDIC accountants and financial per
sonnel to generate the official financial
reports of the agency. During 1989,
changes were made to the systems to
accommodate the substantial require
ments of FIRREA.
Other enhancements made during 1989
included an increased access to loan
loss reserves for FDIC field locations.
The enhancements resulted in increased
capabilities in financial processing and
reporting, which achieved greater opera
tional efficiencies and easier availability
of financial information.
LAMIS is the FDIC’s largest computer
system and provides the capability for
tracking and servicing the assets of
failed financial institutions. Major
enhancements made during the year
include the conversion of the Estimated
Cash Recovery System from a micro
computer application to the mainframe.
As a result of the conversion, this
system used by the FDIC to project
recoveries on acquired loans and other
assets will have greater flexibility, more
storage and faster response time. Also,
LAMIS in 1989 added special capabilities
and data for processing real estate prop
erties acquired, which in turn provides
additional information to field staff
working these assets.

In addition to the system responsibilities
of FSB, the branch determines and col
lects insurance premiums. To insure
deposits, the FDIC assesses an annual
fee on all insured financial institutions.
With the passage of FIRREA, the assess
ments function of FSB grew dramatically.
The increased responsibility involved in
collecting assessments from savings
associations formerly insured by the
FSLIC resulted in a one-third increase in
the FDIC’s assessments staff by the end
of 1989. In addition, the branch will
oversee the FDIC’s implementation of
increased assessment rates for deposit
insurancethat were authorized by FIRREA.
The branch performs audits of the
assessment premiums paid by the
largest banks in order to determine if
they are in compliance with current
regulations. During 1989, the number of
audits performed increased to properly
administer the enlarged responsibilities
for assessments. Uniformity of approach
among financial institutions has been
stressed, and the assessment rules that
apply to banks also are being applied to
savings associations.
FSB also is responsible for travel reim
bursement policy and payments to
employees, as well as for the accounts
payable function. Growth in travel ex
penses and accounts payable vouchers
processed agency-wide resulted in a
40 percent increase in workload before
the end of 1989. In addition, the pro
cessing of wire transfers used to send
funds to failed and assisted institutions
doubled during the year.
To meet this existing burden and to
prepare for even further increases in
workload, a number of programs were
instituted. Transferring more authority
for spending to the regional level will
shorten the processing time for many
transactions and reduce the demand for
services at Washington headquarters. A

new automated reimbursement system
is being developed to support the in
creased amount of travel being done for
the FDIC. To enhance internal controls,
an internal tracking system that better
monitors the payment process was
established in 1989. Steps also were
taken to better ensure that FDIC com
pliance with laws guaranteeing prompt
payment of invoices was not com
promised by the enormous growth in
the number of financial transactions
handled.

Management Information
Services Branch
The role of computers in helping the
FDIC meet a growing demand for infor
mation continued to expand in 1989.
The number of jobs handled through
the FDIC’s central computer, such as
processing Reports of Condition and
Income (Call Reports), increased 30
percent from year-end 1988. Also, the
number of individual on-line transactions
jumped 56 percent. The FDIC’s high
speed central computer, which was in
stalled at the end of 1988, enabled the
Management Information Services Branch
(MISB) to produce more information in
less time despite the increased
workload. Indicative of this, computer
time used actually decreased seven
percent.
The year 1989 ushered in an increased
use of data communication lines that
connect FDIC computers throughout the
country in the same way telephone
lines link callers. Dependence on these
lines grew with the expanded use of
microcomputers and the establishment
of additional “ local area networks” at
the FDIC and the RTC.
Local area networks enable microcom
puter users to communicate with the
FDIC central computer and other micro

computers. Network users can transmit
documents electronically, share data
and use a greater number of software
applications. Just as individual micro
computers are now linked by local net
works, the FDIC eventually will be con
nected by a “ wide area network,” further
expanding the communication range of
the microcomputer user.
MISB also created new programs to
support the FDIC’s Growth Monitoring
System, which enables analysts, primarily
staff from the Division of Supervision,
to identify banks that exceed selected
growth thresholds. The branch also
enhanced other systems to accom
modate the need for information on
savings and loan associations.
FIRREA directly affected decisions
about the enhancement and maintenance
of computer systems in 1989. For example,
the Bank Information Tracking System
(BITS), which serves as a single source
for information on bank performance and
management, in 1989 began accepting
data from Office of Thrift Supervision
examinations in order to help the FDIC
track problem savings associations.
Similarly, the FDIC’s Case Management
System, which tracks active, inactive or
closed court cases, added 12,000 S&L
cases in 1989. That brought the total
number of cases on the system to ap
proximately 100,000, up from about
75,000 at the end of 1988.
MISB also developed systems in sup
port of the RTC for purposes that in
clude providing profiles of the financial
condition of individual savings associa
tions, logging correspondence to and
from Congress, and maintaining mailing
lists for RTC publications.
A major effort was launched to improve
the branch’s ability to reduce develop
ment costs while increasing the quality

of products and services — goals that
will continue in the coming year. Quality
assurance testing procedures were
developed for changes to the central
computer operating environment to en
sure stability and enhance operations.
FDIC policy states that information col
lected and generated in conducting its
business, such as data about financial
institutions and customer assets, must
be treated and protected as highly sen
sitive. In 1989, additional security
measures and controls were established
to augment that policy, including the
appointment of security contact person
nel throughout the FDIC and the
development of new forms of documen
tation and training.
Critical bank surveillance information
was processed by MISB in 1989 for the
use of other government regulatory
agencies and the banking community.
This information was gathered from
about 70,000 original and amended
quarterly Call Reports filed with the
FDIC by about 13,000 insured banks, ap
proximately the same number that filed
in 1988. The branch also supported the
Division of Research and Statistics’ pro
duction of the Quarterly Banking Profile,
the earliest official release of performance
data about the banking industry.
The FDIC again provided training and
assistance to bank personnel submitting
Call Reports and other types of financial
information about bank performance.
The FDIC’s toll-free telephone “ hotline”
for Call Report information and
assistance continued to be a popular
feature for national banks and FDICsupervised institutions. That hotline can
be reached at 1-800-424-5101 or, in the
Washington, D.C. area, at 202-898-6607. It
is in operation Monday through Friday,
8 am . to 5 p.m. EST.

decals and brochures that are distributed
to financial institutions and the general
public.
Several moves were made to enhance
the FDIC’s telephone system while con
trolling costs. The agency replaced the
various companies previously used for
telephone service with a single long
distance carrier that is providing ex
panded services at a lower rate. To en
sure uninterrupted service, back-up
service was arranged with another com
pany. The FDIC telephone system was
further enhanced in 1989 by the addi
tion of an automated telephone answer
ing service for senior employees.

Corporate Services Branch
W ith the assumption of the FSLIC and
the establishment of the RTC, the pace
of activity for the Corporate Services
Branch (CSB) increased dramatically in
1989, particularly in the acquisition and
management of buildings. As the number
of employees grew in Washington and
the regional offices, so did the demand
for work space.
The FDIC nearly doubled the amount of
space it leases in the Washington, D.C.,
area and in the regions to accommodate
the growing number of employees.
The FDIC also provided extensive
assistance to the RTC in identifying
facilities, negotiating leases and prepar
ing and furnishing space for the network
of RTC regional and consolidated field
offices that opened in 1989.
The FDIC not only acquired extensive
assets from failed institutions, but with
those assets also came literally tons of
vital records. CSB developed new
records retention and disposition pro
grams to handle these documents. The
need for storage space also increased
in 1989. A new warehouse in Landover,
Maryland, was acquired to store sup
plies, equipment, forms, publications,
manuals and other materials, such as

Also in terms of records management,
the FDIC library in recent years has
established and expanded facilities in
the regional and consolidated offices.
Responding to an even greater need for
specialized information in 1989, the
library obtained several major data
bases, including Prentice-Hall On-Line
and TRW, Inc. These data bases pro
vide up-to-date credit information,
which is used by FDIC liquidation
specialists, examiners and Legal Divi
sion personnel. Also, in response to
the growing needs of the FDIC under
FIRREA, the library expanded its collec
tions to include more information on
asset marketing, real estate, the hous
ing industry and local and regional
economic conditions.
As the need for more equipment and
professional sen/ices for the FDIC and
the RTC grew, CSB worked with
various private firm s to add the help
needed. A major contracting effort in
volved negotiating contracts for the
procurement and installation of automa
tion and communication equipment for
the RTC. This included a national net
work of personal computers, local area
networks and telephone systems.
As a result of FIRREA, the demands on
design and printing services more than
doubled. CSB continued the printing
and distribution of FDIC material, such
as the Call Report forms and the
Quarterly Banking Profile. It also pre
pared visual material and graphics for
an unprecedented number of press
conferences and other public appear
ances by FDIC officials in 1989.
For the RTC, the branch printed hun
dreds of press releases as well as
thousands of copies of the first

RTC Asset Inventory. The latter con
sisted of nearly 3,000 pages about
30,000 single family homes, commercial
properties and other assets available
for sale.

officers’ liability and other subjects.
The FDIC library in Washington has
what may be the best collection of
books and other research material in
the United States on the subject of
deposit insurance. The library also is
continuing to add highly-specialized,
on-line data bases that FDIC and RTC
employees across the nation can use
for such purposes as tracking individual
and corporate debtors.

Outlook
Because of the major role the Division
plays in providing services nationwide,
it is increasingly important that opera
tional systems and processes be placed
close to the user. To an ever-increasing
degree, that means providing greater
access to services in the field.
A major goal of the Division is the con
tinued decentralization of operations,
such as the processing and payment of
invoices and travel vouchers that are
currently handled entirely in Washington.
Consistent with this, an upgrade of the
Financial Information System software
during 1990 will provide more flexibility
for the user.
DACS also expects to have a role in
the expanding use of computer systems
by the RTC, which is responsible for hun
dreds of billions of dollars in assets.
Projects being studied include new
ways to provide information to the
public on assets assumed by the FDIC
and the RTC. One possibility is the
establishment of regional reading rooms.
MISB also is initiating long-range plans
to upgrade or redesign the existing
Case Management System in order to
better handle the increasing number of
FDIC and RTC lawsuits.
In the coming year, the FDIC’s library
is likely to be increasingly involved in
assisting the agency’s staff with congressionally mandated studies of
deposit insurance reform, directors’ and

DACS also plans more Call Report
preparation seminars for bankers. The
program will emphasize the significant
changes to the Call Reports imple
mented in March 1990.
By October 1990, the Financial Report
ing Branch expects to complete its
enhancement of the automated Finan
cial Information System to better
m onitor and report assistance agree
ment transactions entered into by the
FDIC for resolving financially troubled
institutions. When completed, the pro
cess will incorporate budgetary, fore
casting, accounting and reporting func
tions for existing BIF and FRF assis
tance agreements as well as future
agreements, including those entered
into by the RTC.
Among other computer systems planned
for 1990 is one from MISB to track the
assets of savings associations in con
servatorship.
The new Virginia Square building com
plex in Arlington, Virginia, which will
feature 300,000 square feet of space for
offices, the FDIC Computer Center, a
training center and an 11-story residen
tial building for personnel attending
FDIC training classes, should be ready
for tenants by mid-1991. Its completion
w ill ease some of the FDIC’s pressing
needs for additional space. The ground
breaking took place in February 1989
and construction began in May.

Division of Research
and Statistics
Providing the Facts and Figures that
Help Shape FDIC Policymaking
With the FDIC spending much of 1989
anticipating and responding to crises in
the banking and thrift industries, it was
essential for the agency’s top policymakers
to have access to in-depth analyses of
the issues. For much of that, they
turned to the Division of Research and
Statistics (DRS).

assignment in February to coordinate
interagency oversight of insolvent savings
associations. This was done initially
through the formation of a DRS-led
“ planning group” created by Chairman
Seidman to develop FDIC policies for
resolving troubled thrifts. As part of its
work, the planning group met with finan
cial industry representatives, explored the
feasibility of various cost reduction
strategies and designed business plans
for individual conservatorships.
Once the RTC was established in August,
DRS further assisted in its development by
detailing several key staff members there.

Ongoing Activities
During the months of debate over the
appropriate reaction to the thrift industry
crisis, DRS helped shape and focus the
FDIC’s response. The Division analyzed
appropriate funding levels to resolve thrift
failures, “working capital” requirements for
the Resolution Trust Corporation (RTC),
changes in insurance assessments paid
by insured banks and thrifts, entrance and
exit fees to be charged by the insurance
funds and capital standards for both
thrifts and banks. DRS also analyzed the
impact of the FDIC’s new risk-based
capital standards for commercial and
mutual savings banks during 1989.

Geoffrey

L. W a d e

DRS participated in the FDIC’s early
efforts to carry out President Bush’s

Quarterly press conferences to release bank performance data gathered
by the Division of Research and Statistics attract much attention from
the news media.

Aside from taking on new duties related
to the thrift situation, DRS continued in
its traditional research activities for the
purpose of assisting the FDIC Board and
staff in regulating banks and insuring
deposits.
One such DRS activity is the prepara
tion of a quarterly summary of national
economic trends for use by FDIC officials.
The summary is designed to provide a
concise review of 24 indicators of business
and financial activity and their possible
effects on depository institutions and the
insurance funds.
The DRS staff’s analysis of the banking
industry in particular is reported in the
Quarterly Banking Profile, an FDIC publi
cation that contains aggregate data for
the condition and income of FDIC-insured
commercial banks. This publication, initi
ated in 1987, presents key performance
measurements as well as a discussion
and graphics that highlight significant
developments and trends. Generally pub
lished about two months after quarterly
financial information is received from the
banks, the Quarterly Banking Profile is
the earliest official source of industry
wide banking data.

Statistics and analyses from DRS play
a crucial role in FDIC efforts to inform
bankers and the general public about key
developments facing the industry. DRS
staff members work with the O ffice of
Corporate Communications on a daily
basis to help respond to media inquiries
about industry trends and conditions.
Press conferences to release the findings
published in the Quarterly Banking Profile
are well-attended and widely reported.
Another example of DRS analyses that
received much attention in the media
was a collection of indicators of risks
in 40 major real estate markets. The
analysis was based on indicators such
as new office space created, vacancy
rates and regional employment growth.
These indicators called attention to
potential risks in the real estate market
in various areas of the country. In
releasing the analysis on April 17, 1990,
Chairman Seidman said it should serve
as a reminder to institutions about the
need for prudent lending standards.
Under the leadership of Chairman
Seidman, DRS staff also helped for
mulate a plan for an international debt
insurance program. The concept, unveiled
by the Chairman in August 1989 before
the Bretton Woods Committee, is an
attempt to deal with the large debts
that “ lesser developed countries”
(LDCs) owe to U.S. and other
commercial banks.
The FDIC’s suggestion was to establish
a new facility, owned by U.S. and other
banks, the World Bank, the International
Monetary Fund and individual govern
ments, that would insure portions of
bank debt to LDCs. The plan would ease
LDC debt sen/ice burdens and financing
constraints while stabilizing the values of
bank exposures.
In 1989, DRS staff also updated a data
base for use in a continuing analysis of

the cost of resolving bank failures. The
analysis focuses on comparing the costs
of failures at large banks versus small
banks, regional differences in resolu
tion costs and policy implications of
the FDIC’s methods of resolving failed
institutions.
DRS also played a role in the FDIC’s
deliberations over resolving two large
bank failures in Texas in 1989 — MCorp
in Dallas and Texas American Bancshares in Fort Worth — and efforts
that continued into 1990 to sell
problem banks owned by National
Bancshares Corporation, San Antonio.
DRS provided support to the Division
of Supervision in designing, negotiating
and evaluating the resolution transac
tions. This involved participating in
meetings with potential buyers and
other regulatory agencies, as well as
working closely with investment bank
ing firm s hired by the FDIC to develop
a methodology for projecting the costs
of proposed transactions.
The increased attention paid to deposit
insurance reform issues during 1989
led DRS to conduct several studies of
the issue, three of which were published
in the 1989 edition of the FDIC Banking
Review. Those studies examined the
impact of deposit insurance on the
economy, addressed various proposals
to change the $100,000 deposit insur
ance limit, and discussed the uses of
“ forbearance,” or restraint, in dealing
with institutions that fail to meet
established criteria for safe and sound
operation.

Outlook
In 1990, DRS staff is undertaking
several studies mandated by FIRREA
either separately or in concert with
other FDIC Divisions. They include:

are members of the Bank Insurance
Fund pay the same rate and share pro
portionately in any premium rebates.
“Pass-through” Insurance
DRS participated with other FDIC Divi
sions in completing in February 1990 a
report on issues relating to “ pass
through” insurance. This term refers to
situations where insurance coverage of
large deposit accounts maintained by
pension funds and other fiduciaries
“ passes through” to each beneficiary
so that an individual’s interest in the
account would be insured by the FDIC
up to $100,000. The FDIC has been pro
viding pass-through insurance coverage
for deposits of most trusteed employee
benefit plans for several decades. The
report analyzes various suggestions to
deny or expand pass-through insurance.
Risk-based Deposit Insurance
At issue is whether the FDIC should
be able to charge a higher premium to
institutions that pose greater risks to
the insurance fund. Under the current
system, for example, all institutions that

* Directors’ and Officers’ Insurance
DRS will conduct a study of the avail
ability and affordability of directors’
and officers’ liability insurance from
the private sector.
In addition, DRS assisted in planning
an international conference on deposit
insurance and problem bank resolution
policies that the FDIC was scheduled to
host on September 26, 1990, at the
time of the World Bank and Interna
tional Monetary Fund meetings in
Washington. This conference grew out
of a desire by Chairman Seidman to
discuss multilateral approaches to the
dilemma confronting bank regulators
about whether certain large institutions
should be considered “ too big to fail.”

Audit Work Accomplished

Division of FSLIC Operations
Settling Obligations of Form er Fund
On August 9, 1989, upon the signing of
FIRREA, the Division of FSLIC Operations
(DFO) was established to administer 219
thrift assistance agreements entered into
by the former Federal Home Loan Bank
Board (FHLBB). These transactions in
volved covered assets estimated at $53.4
billion from failed thrifts. By year-end
1989, DFO continued to administer 202
of these assistance agreements, with
estimated covered assets of $35.9 billion.
DFO also assumed responsibility for
overseeing other contracts and financial
operations of the former Federal Sav
ings and Loan Insurance Corporation
(FSLIC) that are now obligations of the
FSLIC Resolution Fund (FRF), also
created by FIRREA.
In addition, DFO initially was put in charge
of managing the 98 thrift receiverships
with about $13 billion in assets that
were closed before August 9, 1989.
However, those liquidation functions
were transferred to the FDIC’s Division
of Liquidation in early 1990, and case
resolution duties were transferred to the
Resolution Trust Corporation (RTC).

After DFO was established, it began
working to complete inventory audits of
the former FSLIC’s assistance transac
tions and to establish accounting
systems and controls that would enable
the FDIC to settle the obligations of
the former FSLIC.
The audits analyze the asset inventory and
otherwise determine the financial condi
tion of these failed thrifts. The audits
also provide accurate cost estimates of
the obligations of the FSLIC Resolution
Fund. Indications are that the extent of
insolvency in a number of failed thrifts
in the Southwest is greater than
originally estimated.
DFO prepared several key reports during
1989, including the following:
• The final report of the FSLIC, required
by Section 406 of FIRREA. The report
highlighted the FSLIC’s finances and
operations through its official closing
date of August 8, 1989.
• The final audited financial statements of
the FSLIC for the period ending August
8, 1989. Separately, the U.S. General
Accounting Office (GAO) completed its
own audit review of FSLIC’s financial
statements as specified in FIRREA.
• Documentation for the GAO regarding
assisted th rifts’ compliance with the terms
of assistance agreements, and information
regarding the Division’s cash flow pro
jections, loss reserve projections and
associated adjustments to the loss
reserves.
One of the first actions taken by DFO
was the drafting of a strategic plan to
ensure that institutions that had received
assistance from the former FHLBB
understand the FDIC’s goals and objec
tives. The FDIC Board approved a threeyear strategic plan for DFO in June 1990.

Terrace Tower II, a 12-story office building near Denver, Colorado, is an
example of FSLIC commercial property acquired by the FDIC in 1989.
The property was owned by the failed First Texas Savings of Dallas.

Assessing the Im pact of FIRREA
DFO has been working to assess and
minimize the possible negative effects
that provisions of FIRREA might have
on the ability of assisted institutions to
carry out responsibilities under their
assistance agreements. Of special con
cern is how the law might have
unintended additional costs for case
resolutions, which would increase the
ultimate costs to the government.
For example, DFO was concerned that
if loan-to-one-borrower lim itations in
FIRREA were interpreted to apply to
financing by acquiring institutions to
facilitate the sale of distressed assets
covered by assistance agreements,
those assets that could not qualify for
conventional financing would remain
unsold. Such an interpretation would
increase holding costs, risk a further
deterioration of value and create other
problems. However, in June 1990, the
O ffice of Thrift Supervision (OTS)
issued a clarifying opinion, sought by
the FDIC, that loan-to-one-borrower
lim itations do not apply to these
transactions.
O ther provisions of FIRREA that may
increase the ultim ate cost of the
resolutions to the federal government
include capital standards, direct in
vestm ent authority, goodw ill am ortiza
tion and more restrictive collateral
requirem ents fo r borrowing from the
Federal Home Loan Banks. DFO has
participated in discussions with
representatives from the OTS, the
C om ptroller of the Currency, the RTC,
the Legal Division of the FDIC and the
Federal Housing Finance Board aimed
at resolving these and other problem
areas and issues generated by FIRREA.
FIRREA’s more stringent capital stan
dards fo rth rifts , including those in s titu
tio ns receiving financial assistance, is

The FDIC sold the 52-unit Rem ington A partm ents in Dallas in
June 1990. The apartm ent com plex was acquired by the FSLIC
after the 1987 failure o f Dallas’ Vernon Savings and Loan.

sig n ifica n t to DFO because the FSLIC
Resolution Fund holds various capital
instrum ents purchased or acquired by
the FSLIC in assistance transactions.
The income to DFO from these in stru
m ents reduces the costs of the assis
tance provided. But under FIRREA,
these instrum ents — prim arily cum ula
tive preferred stock, subordinated
debentures, capital ce rtifica te s and
warrants — no longer qualify as tan g i
ble or core capital. To overcome this
problem, DFO is taking steps that
include negotiating the exchange of
these instrum ents fo r those that
qualify as core capital. DFO’s goal is
to preserve and realize the value of
these holdings w ith o u t creating addi
tional cost to the taxpayers.
DFO during 1989 also approved the
liquidation of the mortgage-backed
securities p ortfo lio held by New West
Federal Savings and Loan A ssociation,
which totaled more than $15 b illion on
the a cquisition date. New West Federal
was established by the FHLBB to d is
pose of troubled assets in connection
w ith the Robert M. Bass G roup’s
December 1988 a cquisition of American
Savings of Stockton, California.

The prompt and orderly liquidation of
this portfolio, which was one of the
largest ever performed, took full
advantage of declining interest rates
without disrupting the mortgage
markets. At the date of the American
Savings acquisition, the estimated
mark-to-market loss in the portfolio was
approximately $1.3 billion. The actual
cost incurred by the FSLIC Resolution
Fund was $665 million.

Outlook
DFO was formed in August 1989 with
521 employees, almost all from the staff
of the FSLIC. That number was trimmed
to 401 by year-end as a result of
reassignments to other organizations,
such as the RTC. However, the Division
plans to add resources where needed.
By early 1990, for example, plans were
initiated to establish 70 positions for
field offices and special teams to help
accomplish other parts of the workload,
such as audits.
DFO also will coordinate with the
FDIC’s O ffice of Inspector General in
monitoring ongoing compliance audits
of assistance agreements.

Integrating assistance agreements into
the FDIC’s automated Financial Infor
mation System is another priority for
1990. The move will help the FDIC
m onitor compliance with assistance
plans and will help track property, busi
ness and collection plans.
The Division also will closely monitor
the tax provisions of assistance
agreements to minimize the cost to the
government. This will require the
preparation of federal and state tax
returns and any previously unfiled
returns for more than 175 institutions.
The tax status of FDIC-assisted thrift
institutions is important due to gainsharing provisions of many assistance
agreements. The filing of these returns
is the first step needed to determine
the amount of tax benefits that will
accrue to the FSLIC Resolution Fund.
As of the end of 1989, DFO employed
contractors to assist in the on-site
administration of 28 assistance
agreements. During 1990, the Division
will evaluate the performance of these
contractors and develop a plan to
reduce dependence on them.

reference all Board minutes and
delegated authority actions since the
FDIC was established in 1933.

Office of the
Executive Secretary
Helping to Meet the Increased
Demand for Information
As the FDIC expanded during 1989, so
did its records and the number of re
quests for them. That meant a tremen
dous increase in the workload and
importance of the O ffice of the
Executive Secretary (OES).
OES performs functions that range from
keeping track of all rulemakings to man
aging the agency’s employee ethics pro
gram. Each year, the Office handles
thousands of requests from the general
public, other government agencies and
the FDIC staff for various kinds of infor
mation and documentation. Since
FIRREA, the O ffice’s responsibilities in
1989 have broadened to include support
for the Resolution Trust Corporation
(RTC) as well as the former Federal Sav
ings and Loan Insurance Corporation.
As an example of the added workload,
OES in 1989 received 1,137 requests for
documents about the FDIC or the RTC
under the Freedom of Information Act
(FOIA) and the Privacy Act of 1974.
That represents an increase of more
than 35 percent from the 841 requests
received in 1988.

Access to Information
An automated index of FDIC actions is
proving to be among the most valuable
new tools for FDIC employees and out
side observers. Users of the index are
able to quickly locate information about
agency actions that include rulemakings,
responses to bank failures, bank applica
tions to open or expand, enforcement
actions against banks, FDIC personnel
changes and contracts with private
vendors. The index eventually will

Another extensive function of OES is
processing enforcement actions, such
as cease-and-desist orders. In this role,
OES serves like a clerk of the court,
maintaining docket files and respond
ing to inquiries about the status of
administrative actions.
OES performs editorial work on the
FDIC’s loose-leaf service, a collection
of the laws and rules that affect the
operations of the agency and insured
institutions. The service is expanding
considerably due to the comprehen
sive changes made by FIRREA to the
Federal Deposit Insurance Act and
various FDIC rules and regulations.
Interest in the laws and rules affect
ing depository institutions has greatly
expanded printing requirements.
Supplements to the loose-leaf service
were distributed six times in 1989 to
insured depository institutions, FDIC
employees, congressional committees,
federal and state agencies and private
subscribers.
OES also coordinates FDIC and RTC
compliance with the Paperwork Reduc
tion Act of 1980. As a result of 1989
changes in bank reporting and applica
tion requirements, OES estimates that
the paperwork burden of the banks
supervised by the FDIC was reduced by
47,535 hours.
To accommodate the increased workload
throughout OES, the staff was reorganized
in 1989 along functional lines. Groups
were created that specialize in record
services, FDIC Board meetings, standing
committees and enforcement actions.
OES also set up two units specializing in
FOIA and Privacy Act requests, each
under the direction of a senior attorney.

Ethics Counseling
As the FDIC’s ethics counselor, OES
oversees employees’ personal financial
disclosures required under the law and
provides guidance to the staff on mat
ters relating to their responsibilities
and conduct.
OES implemented amendments to
FDIC rules in 1989 that decentralized
the employee financial reporting
system to regional and consolidated
offices, resulting in a streamlining of
the reporting process.
The ethics section processed more
than 6,000 annual employee disclosures
of confidential personal financial infor
mation, up nearly 30 percent from
about 4,650 the previous year.
Approximately 2,250 FDIC employees
received training in government ethics
standards in 1989, up from about 1,700
employees the previous year. About 75
percent of those employees received
their training during the last half of the
year, when the FDIC added large numbers
of new employees to handle added
responsibilities for savings institutions.
In just the last half of the year, OES
held 20 one-day ethics seminars around
the country and participated in 18 gen
eral orientation sessions in Washington.
In addition, OES conducted three weeklong training sessions for the network
of 118 deputy ethics counselors who sup
port the FDIC ethics program nationwide.
The ethics program expanded during
the year to include the RTC. As a
result, OES was the primary drafter of
two major proposals for public com
ment regarding RTC ethics rules. One
involved the ethical conduct of RTC
employees. The other involved stan
dards for determining which private con
sultants and asset managers would be

eligible to do business with the RTC in
order to screen out those with conflicts
of interest or histories of fraud or other
problems with savings associations.
Final rules were adopted in 1990.

Corporate Secretary
OES gives public notice of meetings of
the Board of Directors, records all votes
and minutes and maintains official
records. OES performed these functions
for 79 Board meetings in 1989.
OES also acts as secretary for the six
standing committees established by the
FDIC. In 1989, OES assisted with 89
meetings of the standing committees.

Outlook
OES is preparing to handle continued
increases in requests fo r inform ation
and fo r training in ethics, the FOIA
and the Privacy Act.
Also, OES expects a ctivity to increase
in its corporate secretary function as
the num ber of Board and com m ittee
cases increase and as meeting agen
das become more lengthy and com
plex. OES has been authorized to add
nine new sta ff positions in 1990. Four
additional p ositions are planned fo r
1991-92. The O ffice also expects the
number of employees who will par
ticipate in ethics seminars and orienta
tion sessions to more than double in
1990, largely due to the shifting of
FDIC employees to the RTC and new
employees hired to replace them.
In addition, one OES staff member will
be devoted to setting up training pro
grams to help FDIC and RTC employees
around the country better administer
the FOIA and the Privacy Act.

Office of Corporate
Communications
New FDIC Responsibilities Generate
More Requests for Information
The Office of Corporate Communications
(OCC) serves as the FDIC’s information
liaison with the media, professional
organizations, banks and the general
public. The ever-increasing focus on the
agency’s new responsibilities involving
savings associations has meant signifi
cantly more requests for information and
other assistance from OCC.
One of many ways OCC disseminates
information about the FDIC is by arranging
interviews with national and local broad
cast and print media for Chairman Seidman
and other senior agency officials. OCC
prepares news releases on failed banks,
new regulatory and supervisory policies
and other newsworthy events. The Office
also arranges briefings for reporters on
various topics, including the FDIC’s
quarterly report on the banking industry’s
performance.
In addition, OCC responds to requests
for information on the FDIC’s history
and policy decisions, as well as for data
on the banking industry. Each week,
OCC receives approximately 1,000 to
1,500 written and telephone requests for
information from the media and the
general public. OCC staff members also
were on the scene at a number of bank
failures during the year to respond to
press inquiries and to reassure
depositors.
The FDIC’s role in resolving the thrift
industry crisis placed additional demands
on OCC, among them the responsibility
for providing the initial staffing for the
Resolution Trust Corporation’s com
munications office. OCC also responded
to large numbers of requests from the
media and the general public on matters

such as the insurance coverage of
deposits in savings associations and
the FDIC’s management of assets and
liabilities assumed from the Federal Sav
ings and Loan Insurance Corporation.
Directives issued through OCC now are
sent to insured savings associations as
well as insured banks, as appropriate.
These directives, called Financial Institu
tion Letters (FILs), generally notify
institutions of changes in the FDIC’s
policies, rules and regulations. FILs were
called Bank Letters prior to the enact
ment of FIRREA. OCC distributed 31
Bank Letters and 27 FILs during 1989.
During 1989, OCC also continued its
assistance with the FDIC’s loose-leaf
service for Laws, Regulations and Related
Acts, filled thousands of orders for
publications, managed the distribution
system for the agency’s final adminis
trative enforcement actions, as required
under FIRREA, and provided relevant
materials for the public segments of the
FDIC Board meetings. OCC also
prepares the FDIC News for employees
and produces the FDIC’s Annual Report.

Outlook
In the coming year, OCC will revise
several FDIC publications to reflect re
cent statutory and regulatory changes.
OCC is working with the Legal Division
and the Office of Consumer Affairs to
update the FDIC’s much-requested con
sumer brochure that explains deposit
insurance rules.
OCC also is developing several videotapes.
One series of videotapes is intended to
improve communications between head
quarters officials and field staff by
presenting discussions by senior officials
of subjects and issues of current in
terest. Another is designed to help
prepare FDIC officials who are called
upon to participate in media inquiries
and interviews.

Office of Legislative Affairs
Protecting the FDIC’s Interests in a
Historic Year in Congress
As congressional liaison for the FDIC,
the Office of Legislative Affairs (OLA)
played a major role in the passage of the
Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (FIRREA).
Internally, OLA coordinated with the
FDIC’s Board of Directors, Management
Committee and other top officials to
analyze and respond to key provisions of
the legislation. On Capitol Hill, OLA
represented the FDIC’s interests during
all phases of the legislative process.
While the main goal of FIRREA was to
find a legislative solution to the thrift
crisis, OLA played a part in many other
important aspects of the new law.
Among them were:
• Preserving the FDIC as an independent
insurer with a greater ability to control
costs like a private insurer and new
authority to obtain sources of revenue.
• Strengthened enforcement powers to
ensure safe and sound banking practices.

• Winning the right for “ cross-guarantees”
when handling a failed institution, which
enables the FDIC to recover part of its
costs from still solvent institutions in the
same holding company.
OLA’s role in promoting the FDIC’s
objectives is crucial and diverse.
The Office advises top management on
bills pending in Congress and other
matters that would affect the FDIC or the
institutions it insures and supervises.
During 1989, OLA tracked more than 70
bills on issues of significance to the FDIC.
OLA also coordinates the drafting of pro
posed legislation and the preparation of
congressional testimony. It coordinated
the preparation of testimony for 25 ap
pearances by Chairman Seidman and
other top FDIC officials during 1989,
more than double the 10 appearances
made the previous year. FDIC officials
testified on a variety of topics that
included the condition of the banking
industry and the reform of laws related
to organized crime.
OLA also meets with members of Con
gress and their staffs to explain the
FDIC’s position on legislation and to pro
vide relevant information. It also responds
to inquiries from members of Congress,
who often contact the FDIC as part of
their oversight responsibilities. Lawmakers
ask about agency policies in areas such
as bank examinations and the use of out
side legal counsel. They also often con
tact the FDIC on behalf of constituents
who have questions or problems. During
1989, OLA coordinated nearly 3,000 writ
ten responses to congressional inquiries,
up substantially from approximately 2,200
requests the previous year.
OLA also helped launch a legislative
affairs office for the new Resolution
Trust Corporation.

Chairman Seidman greets House Banking Committee leaders prior to
recent testimony. From left: Chairman Seidman, Committee Chairman
Henry B. Gonzalez and ranking Republican Chalmers P. Wylie.

Outlook
OLA anticipates ongoing congressional
oversight of the FDIC’s expanded
responsibilities under FIRREA during
1990. The Office also will monitor and
respond to new proposals that would
amend FIRREA or otherwise change the
way banks and thrifts are supervised.
Other issues likely to be examined by
Congress in the coming year include:
Deposit Insurance Reform
The current system will continue to be
reviewed while Congress awaits a
Treasury Department study on the sub
ject mandated by FIRREA and due in
February 1991. The FDIC is participating
in the Treasury study.
Bank Powers
As the European market moves toward
unification in 1992, European banks will
become more competitive in the United
States and American banks will face
new challenges in the world market.
OLA will continue to work for legisla
tion that would make banks more com
petitive internationally while protecting
the safety and soundness of the
deposit insurance funds.
Consumer Legislation
Congress will continue addressing the
banking needs of low- and moderateincome consumers. Proposals include

mandating that no-frills “ lifeline” ac
counts be made available for certain
consumers and requiring institutions to
cash Social Security checks and other
government checks. OLA will work
toward ensuring that consumers have
adequate banking services which, at the
same time, are cost-effective for
depository institutions.
* Environmental Lender Liability
Under certain federal and state environ
mental laws, lenders face an increasing
risk of liability for the cost of cleaning
up hazardous substances found on prop
erties in their asset inventory. As the
insurer of banks and thrifts, as well as
the receiver or liquidator of failed
institutions, the FDIC is concerned
about lenders’ potential liability under
environmental laws. OLA will work for
legislation to protect the deposit
insurance funds from potential environ
mental liability claims.
• Bank and Thrift Fraud
Congress is expected to pass com
prehensive legislation designed to curb
fraud and abuse in federally insured
depository institutions. Among other
things, legislators are studying what
additional tools the FDIC and other
bank regulatory agencies may need to
control fraudulent activities and to
prevent bank and thrift insiders from
profiting from these illegal activities.

Office of Budget and
Corporate Planning
Planning For and Monitoring the
Resources of Four Funds
The Office of Budget and Corporate
Planning (OBCP) integrates agency-wide
organization, long-range planning and
budgeting. Those responsibilities were
expanded significantly by FIRREA.
Using general guidance from senior
management, and specific instructions
from OBCP, each Division and O ffice of
the FDIC prepares its own budget and
performance plans. After further
analysis and review, OBCP prepares a
unified budget and presents it to the
FDIC’s Board of Directors for approval.
OBCP also budgets for FDIC-managed
resources supporting the Resolution
Trust Corporation (RTC).
Chief among the new challenges fac
ing OBCP under FIRREA is the respon
s ib ility fo r the adm inistrative resource
needs of three d iffe re n t funds — the
Bank Insurance Fund (BIF), the Savings
A ssociation Insurance Fund (SAIF) and
the FSLIC Resolution Fund (FRF) —
as well as FDIC support for a fund for
the RTC. For the OBCP, th is new
environm ent means major changes in
its perform ance measures, m onitoring
procedures and expense reporting.
Another significant change in 1989
was that the FDIC began budgeting for
a two-year period, covering calendar
years 1989 and 1990. Operating under a
biennial budget will save staff time and
will provide a more realistic time span
for organizations to meet performance
targets with budgeted resources.

Major Office Functions
OBCP serves the agency in a variety of
significant ways. While the functions of

the Office remain the same as in the
past, FIRREA has introduced new
dimensions to the work so that the
added demands on the FDIC are ade
quately taken into account. Primarily,
these functions are:
* Productivity/Workload Measurement
The budget reflects the goals of the
FDIC’s Divisions and Offices in terms
of productivity and workload. Budget
management includes the analysis of
actual expenses and the achievement
of performance goals. To assist senior
management, OBCP prepares a quarterly
Corporation Status Report, the agency’s
most comprehensive source of data on
budget planning and performance.
These reports are vital to the FDIC’s
long-term resource planning and alloca
tion efforts.
* Staff Year Analysis
Salaries and benefits will consume
about 48 percent of the FDIC budget in
1990, excluding RTC-managed organiza
tions. OBCP continuously analyzes staff
ing needs and provides managers
throughout the agency with monthly
reports that help measure and control
the costs of salaries and benefits.
OBCP’s analyses of the relationship
between staffing levels and other
expenses, such as travel and equip
ment, were used extensively in for
mulating the current budget.
* Expense Monitoring
OBCP continually measures and pro
vides enhanced expense monitoring
tools to FDIC Divisions and O ffices to
promote cost awareness. Further in
tegration of expense information with
the budgeting process occurred in 1989
with the development of the Corpora
tio n ’s first biennial budget. This integra
tion gives those persons preparing the
budget at the field site level a much
clearer picture of actual costs and thus
a better predictive tool and budget.

Program Tracking
OBCP tracks costs by seven specific
programs: applications, risk manage
ment, compliance, failing banks and
assistance, closings, asset manage
ment and general administration. These
programs cut across organizational
lines and were previously d ifficult to
quantify. By tracking these programs,
OBCP will help the FDIC allocate
resources more efficiently to achieve
its major goals.
Special Projects
During 1989, OBCP staff participated
in a wide variety of special budgetrelated activities that included the
negotiation of agreements with the
former Federal Home Loan Bank Board
over the distribution of FSLIC staff and
other resources following FIRREA. The
O ffice also developed models for the
first RTC budget and staffing projec
tions, as well as the FDIC’s budget,
post-FIRREA.
Among the specific studies undertaken
was an evaluation to enhance the
FDIC’s training and educational pro
grams. OBCP recommendations in

favor of a centralized approach toward
training were instrumental in a December
decision by Chairman Seidman to
create a new Office of Training and
Educational Services, which began
operations in April 1990.
In addition to its budgeting role, OBCP
increasingly serves as an information
source and special project team for
FDIC senior management. OBCP’s ef
fectiveness is due in part to its interac
tion with all components of the FDIC
and its continuous access to financial
and staffing information.

Outlook
OBCP’s main challenge in 1990 and
beyond will be to adapt its analytic and
budgeting techniques to accurately pro
ject the resource needs of the FDIC as
conditions change in the banking and
th rift industries.
Initiatives in monitoring and reporting
expenses during the coming years will
affect major resource allocation deci
sions throughout the FDIC.

sisted of more than $20 billion in the
FDIC’s own assets and $24 billion in
assets controlled by the FDIC in liquidat
ing closed depository institutions.

Office of Inspector General
Safeguarding the Assets and
the Integrity of the FDIC
Largely as a result of the broad new
powers granted under FIRREA, the FDIC
now is among the most closely scru
tinized agencies in the U.S. Government.
Congress, the White House and the
news media are among those watching
over the FDIC — and the new Resolution
Trust Corporation — for signs of waste,
fraud or abuse. Performing similar watch
dog duties internally for the FDIC is the
Office of Inspector General (OIG).
OIG’s mission is to provide policy direc
tion for audits, investigations and other
activities designed to promote economy
and efficiency and to prevent and detect
fraud and abuse in FDIC operations.
OIG conducts and coordinates audits
and investigations, recommends improve
ments in fiscal and operational controls
and provides audit reports to the FDIC’s
top officials.
OIG works closely with the U.S.
General Accounting Office, which con
ducts oversight of the FDIC as well as
the other financial institution regulatory
agencies. OIG also works with the
Department of Justice and the Federal
Bureau of Investigation to identify and
prosecute fraud by FDIC employees.
Also as a result of FIRREA, most of the
responsibilities and resources of the
Inspector General’s Office of the former
Federal Home Loan Bank Board
(FHLBB) were transferred to the OIG.
The FDIC’s expanded responsibilities
have resulted in OIG audit and in
vestigative oversight requirements for
more than $100 billion in assets and
assistance agreements — up from $35
billion in 1988. This included $60 billion
in asset guarantees related to thrift
assistance transactions. The rest con

OIG also was responsible for the over
sight of nearly 12,000 FDIC employees,
up about 45 percent from the previous
year’s approximately 8,000.

Accomplishments
OIG was established by the FDIC on
April 17,1989, in response to the Inspec
tor General Act Amendments of 1988.
However, OIG actually is a redesignation
of the FDIC’s Office of Corporate Audits
and Internal Investigations, which had
been performing duties consistent with
the intent of the new law for many years.
In 1989, audit reports were issued
regarding 785 liquidations and corporate
functions, which was three times the
number audited last year. These audits
include receiverships, payrolls, travel
vouchers, computer systems, assistance
agreements and other FDIC business.
On October 31,1989, OIG submitted its
first semi-annual report to Congress in
accordance with the Inspector General
Act. The report outlined OIG activities
and accomplishments from April 1
through September 30, 1989.

Outlook
As a result of productivity initiatives,
the 1990 OIG budget was reduced by
more than 40 percent from the 1989
level despite the O ffice’s increased
responsibilities. Those productivity
initiatives include a refocusing of audit
and investigative requirements and a
more efficient and effective use of
combined resources of the FDIC’s OIG
and the former FHLBB’s Inspector
General’s Office.

telephone inquiries related to deposit
insurance coverage in savings associa
tions and banks.

Office of Consumer Affairs
Providing Assistance to Consumers,
Bankers and Examiners
With the enactment of FIRREA, Congress
made several major changes affecting
the relationship of consumers and their
depository institutions. Those changes
greatly increased the demands on the
FDIC’s O ffice of Consumer Affairs
(OCA), which serves as a liaison with
the public and the industry on matters
such as deposit insurance coverage,
unfair and deceptive banking practices,
and civil rights issues.
In particular, FIRREA brought federal
deposit insurance for savings associa
tions under the management of the
FDIC. It also required the FDIC to
resolve differences in the insurance
coverage rules and interpretations of the
FDIC and the former Federal Savings
and Loan Insurance Corporation (FSLIC).
OCA has assumed many of the respon
sibilities related to insurance coverage
handled by the former Insurance Divi
sion of the FSLIC. As a result, OCA
staff members are handling a signifi
cantly increased number of written and

The new law also mandates the public
disclosure of agency evaluations of an
in stitutio n ’s performance in serving its
community under the Community
Reinvestment Act (CRA). The Office
played a central role with other federal
financial institution regulators in draft
ing proposed guidelines to implement
the new CRA disclosure requirements
and changes in the way institutions are
evaluated under the CRA. Proposals
were issued for public comment in
December 1989 and final guidelines
were adopted by the FDIC and other
regulators in April 1990.
FIRREA also expanded the amount of
information about loan applications and
decisions that must be made publicly
available under the Home Mortgage
Disclosure Act (HMDA). The Office par
ticipated with representatives of the
other federal financial institution
regulatory agencies in drafting the new
reporting requirements, which include a
new Loan/Application Register form
and tables that show aggregate lending
patterns in each “ metropolitan
statistical area.”

Hearing and Helping the Public
One of OCA’s primary responsibilities
is monitoring and responding to con
sumer complaints and inquiries. Many
bankers also contact OCA with ques
tions about regulatory matters.
In Washington and in the eight regional
offices, OCA reported a total of 48,100
telephone calls dealing with either
complaints or inquiries, about a 22 per
cent increase over the nearly 39,450
calls reported during 1988. There also
were 4,400 letters received in 1989,

FDIC Board member C.C. Hope, Jr., much in demand as a speaker,
addresses Wake Forest University students and faculty at the cam
pus in Winston-Salem, North Carolina.

W orking to Ensure Compliance

which represents about a 13 percent in
crease over 3,890 in the previous year.
A toll-free telephone “ hotline” ad
ministered by OCA specialists in the
Washington headquarters is a major
source of consumer requests for
assistance. OCA received approximately
13,400 calls on the hotline during the
year, about a third more than the
10,100 reported last year.
The telephone number for the toll-free
“ hotline” is 1-800-424-5488. For callers
in the Washington, D.C. area, the
number is 202-898-3536. The hotline is
in operation Monday through Friday,
9 a.m. to 4 p.m. EST.
The FDIC’s regional offices reported
approximately 34,700 telephone calls on
matters relating to consumer issues, an
increase of about 18 percent from the
29.300 calls logged the previous year.
Nationwide, the most common ques
tions and topics of concern reported by
OCA and regional office staff in tele
phone calls involved deposit insurance
coverage, general banking issues, fair
housing and the Home Mortgage
Disclosure Act. Many bankers also call
the OCA and regional offices inquiring
about their responsibilities under
deposit insurance and consumer and
civil rights regulations.
In terms of written correspondence,
OCA and the regional offices reported
receiving approximately 1,900 letters of
complaint against individual institutions
or other aspects of banking. That is up
nearly 50 percent from the approximately
1.300 written complaints in 1988.
Another 2,500 written requests for infor
mation on FDIC rules and procedures
were received during 1989, nearly three
times as many as the approximately
900 received the previous year.

Another function of OCA is to evaluate
the adequacy of the FDIC’s examina
tion program for monitoring individual
institutions’ compliance with various
consumer and civil rights laws. During
1989, the FDIC’s Division of Supervi
sion (DOS) conducted 2,660 consumer
compliance examinations, excluding
visitations, which are of a more limited
scope. This was a decrease from the
2,988 compliance examinations con
ducted in 1988, largely due to the ex
tensive use of examiners in the
management of savings association
conservatorships, especially during the
first few months of the year.
OCA also emphasizes to FDIC examiners
and the banking industry the impor
tance of complying with consumer pro
tection laws and regulations, and
provides guidance and instruction.
The annual training conference con
ducted by OCA for the regional office
compliance review examiners and
senior compliance field examiners was
held in October 1989. Attention was
focused on issues such as industry
and consumer perspectives of com
pliance, CRA and neighborhood
redevelopment, fair lending laws and
differences between FDIC and FSLIC
deposit insurance coverage. Speakers
included representatives from the FDIC,
other federal agencies, the banking in
dustry and consumer and community
groups.
In 1989, OCA worked with DOS and
outside vendors on a new school for
more experienced examiners. The goal
of the Advanced Consumer Protection
School is to provide additional training
beyond the basic one-week program
given by DOS and to address more
complex problems and issues. The first
two sessions were held in April 1990.

Geoffrey

L. W a d e

OCA will continue working closely with
the other financial institution regulators
in implementing the CRA and HMDA
provisions of FIRREA, as well as other
activities involving consumer protection
laws and regulations.

Consumer affairs director Janice Smith was one of the agency’s
officials explaining the FDIC’s deposit insurance rules in a satellite
TV program for bankers.

OCA, in conjunction with various DOS
regional offices, also conducted three
one-day compliance seminars for
bankers. Nearly 240 bankers from 204
banks participated in seminars held in
Baltimore, Memphis and Indianapolis.
The purpose of the seminars was to
provide a forum for discussing issues
related to consumer protection laws
and regulations.

Outlook
OCA expects to continue to participate
in schools and seminars for examiners
and bankers around the country. It also
will participate in new CRA training
sessions for examiners to be spon
sored by the interagency Federal Finan
cial Institutions Examination Council.
The various training efforts are con
sidered especially important in clarifying
what will be expected under FIRREA.

In early 1990, OCA established a new
Community Affairs program primarily
intended to enhance existing outreach
efforts. The new program provides for a
community affairs officer in each of the
FDIC’s eight DOS regional offices. The
community affairs officer will be
responsible primarily for making con
tact and meeting with citizen groups,
government and industry organizations,
and others regarding the credit needs
of communities and the lending prac
tices of institutions. Each community
affairs officer also will provide informa
tion to examiners to assist them in
evaluating the fair lending performance
of FDIC-supervised institutions.
OCA will continue to work with DOS
on establishing a separate compliance
examination program with specialized
examiners who have career paths
separate and distinct from safety and
soundness examiners. The program,
which will be under the jurisdiction of
the DOS and separate from its safety
and soundness examination activities,
includes an expanded group of field
compliance examiners and an increased
emphasis on compliance with consumer
protection laws and regulations. OCA
also will continue to m onitor the effec
tiveness of the consumer compliance
examination program and make indepen
dent recommendations as necessary.

Office of Personnel
Management
Handling a 4 5 Percent Increase
in Agency Staff
The responsibility for processing
thousands of new employees quickly
and smoothly in just a few months
of 1989 fell to the FDIC’s Office of
Personnel Management (OPM).
Recruitment, job placement, payroll and
benefits administration, employee
development and training, performance
evaluations — these functions and
more come under the duties of OPM.
In 1989, this Office undertook extensive
hiring efforts for the newly created
Resolution Trust Corporation (RTC) as
well as for existing FDIC Divisions and
Offices. Total employment nationwide,
including RTC, was 11,703 by year-end.
That is up 45 percent from the 1988
employment figure of 8,057. Most of
the increase came from staffing needs
of the RTC and the FDIC’s Divisions of
Liquidation and Supervision.

The FDIC and the RTC actually made
4,815 new appointments during 1989.
Of these, 2,677 employees, or about
55 percent, were for permanent positions.
The other 2,138 employees were tem
porary appointments hired from local
markets to assist the FDIC in carrying
out new receivership responsibilities for
savings associations, predominantly in
the Southwest. These temporary
employees typically include liquidation
specialists and clerical workers assigned
to a particular receivership for periods
that may last two years or more.
Bank examiner trainees by far were the
largest occupation group for new per
manent positions. There were 487 such
trainees hired last year — one out of
every 10 permanent employees who
joined the agency. Next came bank liq
uidation specialists, of which 176 were
hired on a permanent basis. Overall,
the number of permanent job vacancies
advertised for filling FDIC positions
was three times the number advertised
the previous year.
In addition to new appointments, the
FDIC transferred 850 employees of
the former Federal Savings and Loan
Insurance Corporation (FSLIC) onto its
rolls effective October 8, 1989. The

Number of Officials and Employees of the FDIC, 1988*1989 (Year-end)
Iw H p ig to n
Office
I89
. 1988

lesolutii
►ivision

ivision
livision

•ivision
•ivision c
rffice of

itary, Coipoia:

Regional &
Field Offices
IK T

1988

overall effectiveness. The new Office
began operations in April 1990.

process included pre-transfer orienta
tion sessions covering FDIC benefits,
services and other topics in order to
ease the transition during a d ifficult
time for these FSLIC employees.
Indicative of the interest in the RTC
were the nearly 10,000 unsolicited appli
cations for employment received there
during the last quarter of 1989. More
than 5,000 applications also were filed
in response to specific announcements
posted during that last quarter. OPM
established an RTC Support Branch
devoted to handling the management
and staffing needs of that agency.

An Emphasis on Flexibility
Due in large part to the magnitude of
the hiring needed to be done after the
enactment of FIRREA, the FDIC sought
and obtained approval from the U.S.
Office of Personnel Management for
broad authority to screen and hire
federal job candidates. This unusual
delegation of authority, which covers
positions at grade levels 9 through 15
at the FDIC and the RTC, enabled the
positions to be filled more rapidly and
at lower cost than under the standard
federal appointment process.
OPM employee training programs contin
ued at a steady pace in 1989, although
some sessions were postponed in order
to devote resources to the savings and
loan industry crisis. Computer training
sessions were active during the year,
largely to keep pace with the agency’s
continued installation of personal com
puters and the development of computerbased communication networks for the
employees. In addition, the FDIC
announced plans to create an O ffice of
Training and Educational Services, part
of a move to centralize the agency’s
training programs and improve their

In view of the additional demands placed
on the agency by FIRREA, the FDIC
undertook a survey of all employees in
order to give management better insight
into perceptions about the FDIC as a
place to work. More than 4,500 employees
responded to the survey. The results
showed that FDIC employees were
satisfied with their work and were w ill
ing to do even more to make the agency
successful, although the survey showed
certain aspects of working for the agency
that the staff said needed improvement.
Nearly 99 percent expressed a w ill
ingness to do more than required to
ensure that quality work was done in a
tim ely manner. More than 75 percent of
all employees responding said they
found their jobs challenging and mean
ingful. About seven out of 10 con
sistently gave positive views to questions
about equal employment opportunity
and the competence and fairness of
supervisors.
Many employees did, though, indicate
in the survey that they thought the FDIC
could do a better job in areas such as
professional training and in communica
tions with senior management. Largely
in response to the survey, the FDIC’s
leadership initiated steps to improve
training programs and to improve com
munications through internal publica
tions, videos and other means.

People Helping People
The FDIC is proud of its employees who
unselfishly give of themselves for the
benefit of the agency, its personnel and
the community. OPM tries to assist in
those efforts and recognizes employees
for their good deeds.

The agency saw increased usage of a
program adopted in 1988 that allows
employees to donate annual leave to
other employees absent from work due to
medical emergencies but who lack suffi
cient leave time. The program provides
income protection to those employees
during their time away from work. During
1989, there were 565 employees who
donated 6,520 hours of annual leave to
help 35 FDIC employees in need.
OPM also coordinates the annual nomina
tion and selection of outstanding em
ployees for the FDIC’s Honorary Awards.
Each winner receives a cash award and a
gift, and is honored at a special ceremony
in the Washington headquarters. These
employees were recognized in 1989:
• John R. Keiper, Jr., Assistant Executive
Secretary in the Office of the Executive
Secretary in Washington, won the
Chairman’s Award. That honor is pre
sented to a non-examiner who has
demonstrated devotion to duty, integri
ty and professional expertise. Keiper, a
20-year veteran, was cited for promoting
cooperation between the agency and
the U.S. Office of Management and
Budget on projects that reduce federal
paperwork requirements.

• James R. Lewis, a supervisor in the
Chicago Region’s Champaign, Illinois,
Field Office and an FDIC employee for 32
years, won the Edward J. Roddy Award.
This award recognizes the exceptional
career examiner who exhibits integrity,
imagination and leadership. Lewis was
singled out for his efforts in training and
motivating young examiners assigned to
the Champaign Field Office.
• Evelyn J. Wright, a liquidation assistant
in the Houston Consolidated Office,
was selected for the Nancy K. Rector
Award. The award is presented to an
employee who expands opportunities
for personal or professional growth in
others. Wright, a four-year FDIC
employee, was given the award for her
positive influence on the job and her
volunteer work in a Texas program that
helps welfare recipients find employment.
The FDIC also issues performance
awards to employees who respond to
unusually heavy workloads, often at
great personal sacrifice. The number of
employees receiving these cash awards
during 1989 greatly exceeded previous
years, largely as a result of FIRREA.
Many incentive awards were given to
employees for managing or otherwise
supporting savings associations facing
insolvency, while other employees add
ed to their regular responsibilities the
work of those on other assignments.

Outlook
In 1990, OPM expects to continue to
pursue an aggressive hiring program.
By the end of 1990, the Office projects
that total employment for the FDIC and
the RTC could hit 19,000.

Board member C.C. Hope, Jr., presents 1989 Edward J. Roddy Award
for exceptional examiners to James Lewis of the Champaign, Illinois,
field office. Chairman’s Award winner John Keiper, Jr., is in front.

handicapped and disabled veterans for
the new Resolution Trust Corporation
(RTC). The new support branch also will
adm inister an RTC outreach program.

Office of Equal Opportunity
Develops Expanded Minority Outreach
Programs for Jobs, Federal Contracts
The FDIC’s O ffice of Equal Opportunity
(OEO) manages the agency’s affirmative
action programs for minorities, women,
the handicapped and disabled veterans —
a role expanded in 1989 due to FIRREA.
In fact, OEO’s name was changed from
the O ffice of Equal Employment O ppor
tunity to reflect additional responsibilities
for the monitoring of government
contracts under FIRREA.
The FDIC has a long history of promoting
equal opportunity in employment and
government contracts. In April 1981, for
example, the FDIC adopted a detailed
policy to provide “ all suppliers an equal
opportunity to compete” for contracts
for supplies and services.
FIRREA gave the FDIC added responsi
bilities in 1989 by requiring several
federal financial regulatory agencies to
issue rules for minority outreach pro
grams that would promote, “ to the maxi
mum extent possible,” the awarding of
contracts to firm s owned by minorities
and women and to preserve minorityowned financial institutions. As a result,
the FDIC in late 1989 started to expand
its existing minority outreach system.
The FDIC began to encourage minorities
and women to actively participate in
the bidding process for the sale of failed
or failing institutions. And in February
1990, the FDIC Board adopted an interim
program intended to develop a more
formal and comprehensive approach to
identifying and targeting women- and
minority-owned firm s nationwide for
use in liquidation activities, administra
tive contracts and legal sen/ices.
OEO also established a support branch
to manage an affirmative employment
program for women, minorities, the

Employment Programs
As part of the FDIC’s general com m it
ment to affirmative action, OEO works
with other Divisions and O ffices to
recruit new employees from colleges
and universities with a high percentage
of minorities and women.
To further its outreach efforts to poten
tial employees, OEO conducted employ
ment application workshops at schools
and special programs for the hearing
impaired and the handicapped, such
as Gallaudet University in Washington,
D.C., and the National Technical Insti
tute for the Deaf in Rochester, New York.
OEO also provided information about
the FDIC and career opportunities at
the agency at conventions for groups
that included the National Urban
League, the National Hispanic Bar
Association, the National Asian Pacific
American Bar Association and the
President’s Committee on Employment
of People with Disabilities.
OEO also helps coordinate programs to
provide summer jobs or unpaid work
experience for students from predom
inantly m inority high schools and col
leges, mentally handicapped individuals
and others in need of assistance.
OEO efforts during 1989, for example,
resulted in the placement of three
Native Americans in a special job train
ing program. Two of these individuals
later were hired by the FDIC for perma
nent positions, while the third was
placed at another federal government
agency. The Office worked closely with
the Veterans Adm inistration in pro
viding training and job placement
assistance for three disabled veterans.

sections of the FDIC also established
group sign language training to
facilitate communication.
Counseling and Training
Special Aw ards
0 E 0 also administers discrim ination
complaint procedures. There were 82
requests for counseling on anti-discrimi
nation rules and procedures for filing
discrim ination complaints. There were
47 formal discrim ination complaints filed
during the year. At year-end 1989, there
were 40 equal employment counselors
located throughout the U.S..
OEO sponsored 18 training courses
devoted to equal employment oppor
tunity issues for FDIC supervisors and
managers. The Office also presented
instruction on equal employment oppor
tunity at five general seminars on per
sonnel management for supervisors.
A pilot “ multi-cultural awareness
seminar” was sponsored in 1989 for
FDIC managers and supervisors so that
they can better appreciate the diversity
of backgrounds among FDIC-employed
minorities and women, and to help
those managers better integrate the
employees into the workforce. OEO
also sponsored courses in sign lan
guage, career growth, self-protection
and other topics for employees.
As part of FDIC’s efforts to accom
modate the special needs of employees,
OEO provided equipment such as
wheelchairs, telephone amplifiers, lap
top computers for the physically handi
capped and enlarging equipment for
the visually impaired. OEO assisted in
the installation of visual alarm systems
and telecomm unications devices for the
hearing impaired. It also prepared a
booklet on emergency evacuation pro
cedures for disabled FDIC employees.
OEO provided sign language interpreters
to enable hearing impaired employees
to participate in training classes,
meetings, interviews and other sessions.
With the assistance of OEO, individual

The FDIC also was extremely proud to
have one of its staff members, Joanne
Giese, recognized by President George
Bush for a special award given to a
handicapped federal employee. Giese, a
supervisory liquidation specialist in the
Kansas City Regional O ffice with 11
years of experience at the FDIC, was born
with cystic fibrosis, an incurable, degener
ative illness characterized by chronic lung
infections, frequent bouts with pneumonia
and other severe problems.
Those ailments can be particularly
challenging for someone whose job in
volves high stress, frequent travel and
visits to older bank buildings where the
ventilation systems may be inadequate.
Giese has nonetheless excelled in both
her professional and personal endeavors
She was named one of the first credit
specialists assisting with the savings
association conservatorship program
managed by FDIC.

Joanne Giese of the Division of Liquidation in Kansas City received
the 1989 Presidential Award for handicapped federal employees from
First Lady Barbara Bush on October 5, 1989.

Giese’s remarkable courage and deter
mination earned her the FDIC’s
Handicapped Employee of the Year
Award, which is coordinated by OEO.
She then won the 1989 Presidential
Award for Outstanding Federal
Employees with Disabilities, presented
by First Lady Barbara Bush in a
ceremony held on October 5, 1989.

Outlook
OEO intends to intensify efforts to
recruit more minorities and women for
all occupation groups and for the award
ing of contracts. It will do so by increased
advertising in minority publications, ex
panded use of minority-related data
bases and greater participation in
specialized conferences.
Also as a result of FIRREA, OEO will ex
plore ways to increase the utilization of
minority and women-owned institutions

as depositories and financial agents for
FDIC funds from liquidation activities.
Also in terms of the awarding of govern
ment contracts, OEO intends to develop
more detailed records of the FDIC’s use
of firm s owned by women and
minorities.
OEO plans to nearly double the number
of equal employment opportunity train
ing courses for supervisors and managers
and to increase the number of personnel
management seminars from five in 1989
to approximately 25 in 1990.
W ith the anticipated increase in the
FDIC’s handicapped workforce will
come an increase in the accommoda
tions to be provided. OEO also is look
ing into the possibility of enhancing
the computers used by deaf employees
so that they can become aware of
incoming telephone calls, read the in
coming telephone communication on
the computer screen and answer back
via the computer.

Standing Committees
Assist in Matters Before the Board
The FDIC’s Board has established six
standing committees that make recom
mendations to it. In some cases, mainly
related to liquidation and receivership
activities, these committees can take
final action under delegated authority.
The Management Committee
The largest and most influential of the
standing committees serves as a forum
for senior managers to discuss issues
of common concern. Examples of
topics addressed by the Management
Committee include major regulatory
issues, pending legislation, research
projects and personnel matters.

Richard

A. B lo o m

The Chairman of the FDIC also is the
Chairman of the Management Commit
tee. Its other members include the
FDIC Vice Chairman, Deputies to the
Board members, Directors of Divisions
and Offices, the General Counsel and
the Inspector General. Due to FIRREA,
the FDIC Board in October 1989 added
senior managers of the Resolution
Trust Corporation (RTC) to the FDIC’s
Management Committee.

Chairman Seidman at a Management Committee meeting with,
from left, FDIC officials Steven Seelig and Stanley Poling and
RTC executive director David Cooke.

The Management Committee considers
matters that are referred by other stand
ing committees or that are not within
their exclusive jurisdiction. The five
other standing committees are:
• The Supervision Review Committee
This committee reviews enforcement
actions and institutions’ applications for
insurance or assistance. It also makes
referrals to the Management Committee
or the FDIC Board when significant
supervisory issues are raised.
• The Committee on Liquidations,
Loans and Purchases of Assets
It oversees and makes recommenda
tions regarding asset sales, problem
loan workouts and litigation stemming
from liquidations and receiverships.
* The Audit Committee
This panel reviews reports by the
FDIC’s Office of Inspector General
(OIG) except for matters pertaining to
internal investigations. The Audit Com
mittee reviews completed OIG audit
reports, requests follow-up if necessary
and submits recommendations to the
FDIC Board.

Lamar Kelly, Jr. (left), RTC director of asset and real estate
management, discusses a bill in Congress with FDIC legislative
affairs director Beth Climo at a Management Committee meeting.

Richard

A. B lo o m

* The Electronic Data Processing
Steering Committee
This group analyzes the current and
future information needs of the agency
and the changes in computer hardware
and software necessary to meet those
needs.

* The Data Integrity Board
This new committee was formed in
response to the Computer Matching
and Privacy Protection Act of 1988. The
panel will review proposals for the
FDIC and other government agencies
to share information via computers in
what are known as matching programs.
It also will do follow-up analyses of the
costs of the programs and compliance
with privacy protection laws.

Chairman Seidman leads the discussion at Management Committee meetings, where top FDIC and RTC
officials air views on major issues.

Insurance Fund. The FSLIC Resolution
Fund is established under the FDIC to
manage most of the assets and
liabilities of the former FSLIC.

Legislation Enacted in 1989
T he F inancial Institutions Reform ,
R ecovery, and E nforcem ent A ct of
1 9 8 9 (FIRREA) (P.L. 1 0 1 -7 3 )
On A ugust 9, 1989, President Bush
signed into law FIRREA — one of the
m ost im portant changes affe ctin g the
financial services industry since the
Great Depression.
FIRREA was intended prim arily to
address the financial crisis facing the
th rift industry, which had about 600
seriously troubled savings associa
tio ns w ith assets of about $350 billion.
However, that crisis also provided
lawmakers w ith the o pp o rtun ity to
make fundam ental changes in the way
banks and savings associations are
supervised and insured. The duties of
the FDIC in particular were greatly ex
panded under the new law.
In general, FIRREA changed the fin an
cial in stitu tio n regulatory structure
and strengthened the authority of
federal supervisors to require ade
quate capital, promote safe banking
practices and ensure com pliance with
applicable laws. These changes w ill
have an im pact on financial in s titu
tions, th e ir custom ers and the U.S.
econom y fo r decades.
Some m ajor initiatives in the new law:
• Savings Association Insurance Fund
Federal deposit insurance for savings
associations is now provided by a new
insurance fund directed and administered
by the FDIC. The new fund, called the
Savings Association Insurance Fund
(SAIF), replaces the former Federal
Savings and Loan Insurance Corporation
(FSLIC). The FDIC will maintain the
new insurance fund for savings
associations separate from the Bank

* Resolution Trust Corporation
The Resolution Trust Corporation (RTC)
is established to merge or liquidate
savings associations declared insolvent
during the period from January 1, 1989,
through August 9, 1992. The FDIC is
the manager of the RTC, handling dayto-day operations.
* Resolution Funding Corporation
The law establishes the Resolution
Funding Corporation (REFCORP) to fund
the activities of the RTC, primarily
through bond sales. The bill provides
public and private funds to deal with
thrifts that fail between 1989 and 1999,
as well as a mechanism to capitalize
the new SAIF.
* Office of Thrift Supervision
The Federal Home Loan Bank Board
(FHLBB) is abolished and its former
activities are divided among several
other agencies. The FHLBB’s former
duties examining and supervising
thrifts and their holding companies are
taken over by the O ffice of Thrift
Supervision (OTS), a new agency under
the Treasury Department.
* Expanded FDIC Board
The Board of Directors of the FDIC
is increased from three to five mem
bers. There w ill be three Presidential
appointees, w ith one designated as
Chairperson and another as Vice
Chairperson. The C om ptroller of the
Currency w ill continue to serve on the
FDIC Board. The fifth Board member
w ill be the D irector of the OTS.
* Assessments Increase
Initially, the d iffe re n t premiums that
banks and th rifts pay fo r deposit
insurance coverage are increased
to help bolster the insurance funds.

The statute of lim itations for financial
institution fraud and related crimes is
lengthened from five to ten years.
* Cross-guarantee Provision
To recover part of its costs of liquidating
or aiding an insured institution in trou
ble, the FDIC may seek reimbursement
from other insured institutions in the
same holding company.
* Increased Civil Money Penalties
The law dramatically increases the civil
money penalties that may be imposed
against officers and directors for viola
tions of law or for unsafe or unsound
banking practices. It also widens the
scope of the penalties to include con
trolling shareholders, independent con
tractors and others.

* Restrictions on Thrift Activities
Growth by undercapitalized thrifts is
prohibited or limited. The FDIC is given
the authority to prohibit or lim it ac
tivities of state-chartered thrifts that
pose serious risks to the insurance
fund. These include investments in
“ junk bonds” and direct investments
in real estate.
* Additional Requirements for Thrifts
Savings associations will be required to

David

Valdez/The

White

House

* Stiffer Prison Sentences and Fees
Maximum prison sentences for major
financial institution crimes, such as
bribery and fraud, are increased from
five years to 20 years. The maximum
criminal fine for these violations is
increased from $5,000 to $1 million.

* Broader Enforcement Authority
FDIC authority to order an institution to
“ cease and desist” from engaging in
certain activities is expanded. The
agency’s power to remove or prohibit
a party from engaging in an insured
in stitutio n ’s affairs is broadened. The
FDIC also gains authority to take
enforcement action against insured sav
ings associations for violations of safety
and soundness requirements.

President George Bush, flanked by key members of Congress and his Adm inistration, signs FIRREA into
law at a W hite House Rose Garden ceremony, August 9, 1989.

maintain 70 percent of their assets
in housing-related loans and other
qualified assets. Also, savings associa
tions will be required to meet capital
and accounting standards similar to
those imposed on national banks.
Associations will have to meet new
risk-based capital standards and main
tain core capital of at least three per
cent of assets. All “ supervisory
goodw ill” must be phased out by
January 1, 1995.
CRA and HMDA Disclosure
The new law mandates public dis
closure of agency evaluations of in
dividual institutions in meeting their
local credit needs under the Community
Reinvestment Act. It also expands the
disclosure of fair lending data under
the Home Mortgage Disclosure Act.
Appraisal Standards
Federal regulators are required to
establish uniform real estate appraisal
standards.

The International Development and
Finance Act of 1 9 8 9 (P.L. 1 0 1 -2 4 0 )
In recent years, U.S. banks have in
creased their reserves against possible
losses on loans to highly indebted
countries in response to deteriorating

conditions in those countries. However,
members of Congress in 1989 were
concerned that U.S. bank reserves in
some cases still were significantly
lower than those established by banks
in other countries and may not be ade
quate to deal with the potential risks.
As a result, Congress passed this new
law to increase the level of bank
reserves while providing the regulators
flexibility to deal with the specific
needs of individual institutions. It re
quires the federal banking agencies to
review the resen/e levels of U.S. bank
ing institutions for potential losses
from loans to highly indebted coun
tries. Based on their reviews, the agen
cies are to provide direction to banks
about whether they need to add to
their reserves.
The regulators can exempt all or part
of a loan from higher reserve require
ments based on factors that include
the type of loan and the collateral
backing it; the existence of World
Bank/International Monetary Fund
assistance programs for the country;
and the individual bank’s capital,
reserves and earnings prospects.
The law also requires the agencies
to report to Congress each year on
actions taken under the law.

Rules and Regulations 1989
Final Rules
Advertisement of Membership
August 9, 1989
The FDIC amended Part 328 of its
regulations to require insured savings
associations to display an official sav
ings association sign. This sign was
prescribed by the Financial Institutions
Reform, Recovery, and Enforcement Act
of 1989 (FIRREA). It consists of a sym
bol of an eagle with the statement,
“ Deposits federally insured to $100,000
— backed by the full faith and credit of
the United States Government.” The
sign must be displayed at each station
or window where insured deposits are
normally received. The regulation also
authorizes banks to display the savings
association sign as an alternative to
their traditional FDIC bank sign.

Fair Housing
December 12, 1989
The FDIC amended Part 338 of its
regulations concerning fair housing to
incorporate changes made by the Fair
Housing Amendments Act of 1988. The
FDIC’s changes amend the fair housing
advertising and poster requirements for
insured state nonmember banks by
expanding prohibitions to include
discrim inatory housing practices in
“ residential real estate-related transac
tio ns” (as defined by the Act) and
discrim ination based on handicap or
familial status.

Entrance and Exit Fees for
Conversion Transactions
September 22 and December 12, 1989
The FDIC added, at Part 312 of its regu
lations, a new interim rule prescribing

entrance and exit fees to be paid by
insured institutions that participate in
certain conversion transactions permit
ted by FIRREA. A conversion transac
tion occurs when an institution
changes its membership from the Bank
Insurance Fund (BIF) to the Savings
Association Insurance Fund (SAIF), or
vice versa. In separate actions, the FDIC
prescribed, on an interim basis, the
entrance fee for SAIF to BIF conver
sions (September 22, 1989) and the
entrance and exit fees for BIF to SAIF
conversions (December 12, 1989).

Assessment Procedures
December 5, 1989
The FDIC amended Part 327 of its
regulations on the assessment of
deposit insurance premiums. The new
rule, issued in response to FIRREA,
essentially preserved existing pro
cedures that banks use to calculate and
pay deposit insurance assessments,
with some modifications, and created
new rules for savings associations.

Brokered Deposits
December 5, 1989
The FDIC added, at Section 337.6 of its
regulations, an interim rule implementing
a provision of FIRREA that prohibits
the acceptance or renewal of brokered
deposits by any undercapitalized insured
depository institution, except on specific
application to and waiver of the prohibi
tion by the FDIC. The interim rule pro
vides guidance on when an institution
is considered to be undercapitalized,
when certain deposits are considered to
be “ brokered” and the circumstances
under which a waiver may be granted.
The rule was written so that it would
automatically terminate six months after
it takes effect unless it is modified,
replaced or extended. The FDIC Board
extended the interim rule twice, most
recently until November 9, 1990.

Applications to Add or Replace Directors,
or to Name New Senior Executive Officers
December 5, 1989
The FDIC added, as an interim rule, a
new section 303.14 to Part 303 of its
regulations. The new section implements
FIRREA’s requirement that certain
insured state nonmember banks file a
notice with the FDIC prior to adding or
replacing a director, employing a senior
executive officer or promoting an in
dividual to senior executive officer. The
FDIC may disapprove plans to employ
an individual whose service in not con
sidered to be in the best interest of
depositors or the public. A bank comes
under the notice requirement if it has
been chartered less than two years, if
it has undergone a change in control
within the preceding two years, or if it
is determined to be in a “ troubled con
dition.” The FDIC also added as an in
terim rule a new Subpart L to Part 308
of its regulations that sets out the
rights an individual or a bank may exer
cise upon receipt of a notice of disap
proval under the new section 303.14.
The new subpart also explains the pro
cedures the individual or the bank must
follow in pursuit of those rights.

Activities and Investments
of Savings Associations
December 12, 1989
The FDIC added, as an interim rule, a
new section 303.13 to Part 303 of its
regulations to implement provisions of
FIRREA that impose new restrictions
on savings association powers. The
new section governs applications and
notice procedures for state savings
associations to engage in activities
and make investments that are not
permissible for federal savings associa
tions. The section governs divestiture
of certain prohibited equity investments
by state savings associations and

divestiture of debt securities that are
not of investment grade (so-called “ junk
bonds” ) by state and federal savings
associations. It also sets out the rules
for the acquisition or establishment of
a subsidiary by a savings association
or the engagement in new activities by
a subsidiary of a savings association.
The FDIC also amended its procedures
for handling applications and making
decisions under delegated authority in
connection with its new responsibilities
under FIRREA.

Foreign Banks
March 31 and June 20, 1989
In two separate actions, the FDIC
adopted major amendments to Part
346 of its regulations, which govern the
operations of U.S. branches of foreign
banks that are required to obtain deposit
insurance under the International Bank
ing Act of 1978. An asset maintenance
concept, which is intended to serve the
same purpose as the minimum capital
requirement for dom estic banks, replaced
the capital equivalency ledger account.
Other substantial revisions included the
elimination of restrictions on country
exposure concentrations and exemptions
from the requirement that branches
obtain deposit insurance.

Securities Disclosure
December 5, 1989
The FDIC amended Part 335 of its
regulations governing registration and
disclosure of bank securities. In
general, the rule affects insured state
nonmember banks that have 500 or
more stockholders and total assets of
more than $1 million. Revised rules were
adopted pertaining to independent audits,
disclosures of executive compensation
and other matters. The amendments
make the FDIC’s securities disclosure

requirements substantially the same as
those of the Securities and Exchange
Commission, in accordance with Sec
tion 12(i) of the Securities Exchange
Act of 1934. Among the differences
from past procedures is a shorter time
period for institutions to report changes
in accountants and resignations of bank
directors. Annual financial statements
by banks subject to Part 335 also must
be audited by an independent public
accountant. The amendments took ef
fect on January 29, 1990, except for the
audit requirement, which takeseffect
for financial statements issued after
December 15, 1990.

technical changes to existing deposit
insurance rules that would affect
customers of all banks and savings
associations insured by the FDIC,
including th rift institutions previously
insured by the FSLIC. Some of the pro
posed changes were intended to
resolve differences between the regula
tions and interpretations of the FDIC
and those of the former FSLIC. Others,
in essence, were proposed to update
the FDIC’s deposit insurance regula
tions, which had not been substantially
revised since they were first adopted in
1967. The FDIC Board approved final
regulations on April 30, 1990. With cer
tain exceptions, the new regulations
took effect on July 29, 1990.

Rapid Asset Growth
March 21, 1989
Regulations Transferred from
the FSLIC to the FDIC
October 12, 1989
As required by FIRREA, the FDIC and
the Office of Thrift Supervision (OTS)
jointly identified those regulations of
the former Federal Home Loan Bank
Board and the former Federal Savings
and Loan Insurance Corporation (FSLIC)
that relate to the conduct of conser
vatorships and receiverships, the insur
ance of accounts and the administration
of the FSLIC Fund. These regulations
were allocated between the OTS and
the FDIC. Those former FSLIC rules
allocated to the FDIC were redesignated
and transferred to the FDIC’s regulations.

Proposed Rules
Deposit Insurance
December 5, 1989
The FDIC issued a proposal to com
pletely revise Parts 330 and 331 of its
regulations concerning deposit insur
ance. The proposal was issued, in part,
to comply with certain provisions of
FIRREA. The proposal included many

Since a number of institutions in re
cent years had grown very rapidly in a
short period of time and later
developed serious financial problems,
the FDIC proposed that any insured
bank planning to grow by more than
nine percent of assets during any threemonth period be required to provide
the agency with 30 days’ advance w rit
ten notice. The FDIC also proposed
that if an institution experienced
unplanned growth of more than nine
percent it would have seven days to
notify the agency in writing. The aim of
the proposal was to enhance the
FDIC’s ability to m onitor rapid growth
in time to apply appropriate supervision
and avoid losses to the deposit in
surance fund. As a result of comments
received, the FDIC adopted a more nar
row final rule on April 3, 1990. Under
the final rule, which became effective
on July 23, 1990, a bank must give the
FDIC 30 days’ advance notice only
when planning to increase its assets
7.5 percent or more during any threemonth period through any combination

of fully insured brokered deposits, fully
insured out-of-territory deposits or
secured borrowings, including repur
chase agreements.

Advance Notice of Proposed
Rulemaking
Advertisement of Membership
August 9, 1989

M ic h a e l Sargent/The

White

House

The FDIC issued a notice of proposed
rulemaking to advise the public that it

was considering amending Part 328 of
its regulations concerning advertise
ment by insured depository institutions.
The notice invited the public to com
ment on whether each insured savings
association should be required to
display a statement in its advertisements
that its deposits are federally insured,
as insured banks are required to do. In
the alternative, the FDIC asked whether
it should eliminate the existing require
ment for insured banks. The notice
also invited the public to comment on
whether there is a need for regulations
implementing FIRREA’s requirement
that uninsured savings associations
disclose, in their advertisements and
account statements, the fact that their
deposits are not insured.

President Bush, FDIC Chairman Seidman (far right) and others at W hite House press conference announc
ing plans to resolve the S&L crisis, February 6, 1989. Others, from left: Federal Home Loan Bank Board
Chairman M. Danny Wall, Comptroller of the Currency Robert L. Clarke, Attorney General Richard Thornburgh
and Federal Reserve Board Chairman Alan Greenspan.

Federal Deposit Insurance Corporation
Bank Insurance Fund
Statements of Income and the Fund Balance
(Dollars in Thousands)
'
For the year ended
December 31
1988

1989
Revenue:

Assessments earned (Note 9)

I- .

$ 1,885,029

Interest on U.S. Treasury obligations
Other revenue

1,371.962 - ;

‘' \

$ 1,773,011
1,396.402

237,637
3,494,628

3,347,658

213,855

Total Revenue

178,245

223,911

Expenses and Losses:
Administrative operating expenses
Merger assistance losses and expenses
Provision for insurance losses (Note 5)
Nonrecoverable insurance expenses
Total Expenses and Losses

Net Income (Loss)
Fund Balance - January 1

Fund Balance - December 31

See accompanying notes

-■ ;
•
,

.. 235,314:

1,023,926

3,811,290

6,298,266

85,776

42,267

4,346,235

7,588,370

(851,607)

(4,240,712)

14,061,130 :

18,301,842

$13,209,523

$14,061,130

Federal Deposit Insurance Corporation
Bank Insurance Fund
Statements of Financial Position
(Dollars in Thousands)
'

- >- 1 ‘

• December 31 '
1989

1988

Assets
Gash and cash equivalents (Note 3)

$ 4,813,914

$ 2,928.010

Investment in U. S. Treasury obligations, net (Note 4)

8,925,360

13,292,644

Accrued interest receivable on investments and other assets

• 279,333

652,119

Net receivables from bank assistance and failures (Note 5)

5,498,127

5,813,873

97,673

77,534

$19,614,407

$22,764,180

Property and buildings (Note 6)

Liabilities and the Fund Balance * ,
Accounts payable, accrued liabilities and other

. *■' \

49,701

64,763

Liabilities for estimated bank assistance (Note 7)

3,820,297

3,877,376

Liabilities incurred from bank assistance and failures (Note 8)

2,412,685

4,651,388

122,201

; 109.523

6,404,884

8,703,050

13,209,523

14,061,130

$19,614,407

$22,764,180

Estimated losses from litigation
Total Liabilities

Fund Balance

See accompanying notes

Federal Deposit Insurance Corporation
Bank Insurance Fund
Statements of Cash Flows
(Dollars in Thousands)
For the year ended
December 31
v

, „

;

1989

1988

Cash Flows From Operating Activities:
Cash inflows from:
Assessments earned

$ 1,885,029

$ 1,773,011

Interest on U.S. Treasury obligations

1,446,156

1,492,126

Recoveries from bank assistance and failures

4,285,312

4,451,660

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

(15,064)

I ' 60,999

Cash outflows for:
214,294

226,245

6,637,407

6,639,154

(372,786)

204,951

1,112,518

707,446

6,092,095

3,390,000

1,773,967

1,985,938

21,527

5,483

4,296,601

1,398,579

Liabilities assumed from bank assistance and failures

3,553,215

502,957

Cash Used by Financing Activities

3,533,215

502,957

Net Increase in Cash and Cash Equivalents

1,885,904

1,603,068

Cash and Cash Equivalents - January 1

2,928,010

1,324,942

$4,813,914

$ 2,928,010

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

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

Cash Flows From Financing Activities:
Cash outflows for:

Cash and Cash Equivalents - December 31
See accompanying notes

F I N A N C I A L

S T A T E M E N T S

Notes to Bank Insurance Fund (BIF)
December 31, 1989 and 1988

.j® j

1. Impact of FIRREA Legislation
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) became
public law on August 9,1989. The primary purpose of the legislation was.to reform,
recapitalize, and consolidate the federal deposit insurance system so as to restore the
public’s confidence in the savings and loan industry and to ensure a safe and stable system
of affordable housing finance through major regulatory reforms, strengthened capital
standards and safeguards for the disposal of recoverable assets. FIRREA abolished the
Federal Savings and Loan Insurance Corporation (FSLIC) and the Federal Home Loan Bank
Board (FHLBB). Their functions were transferred, in a prescribed manner, to the Federal
Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision, the Federal Housing
Finance Board, and the Resolution Trust Corporation (RTC).
Under FIRREA, the FDIC became the administrator of two separate and distinct insurance
funds: the Bank Insurance Fund (BIF formerly the Deposit Insurance Fund) which insures
the deposits of all BIF-member banks, and the Savings Association Insurance Fund (SAIF)
which insures the deposits of all SAIF-member savings associations (formerly a function of
the FSLIC). Both insurance funds are maintained separately to carry out their respective
legislative mandates, with no commingling of assets or liabilities. The FSLIC Resolution Fund
(FRF), a third separate fund under FDIC management, and the RTC replaced the FSLIC in
case resolution activities. The FRF will complete the resolution of all thrifts that failed or were
assisted before January 1, 1989; the RTC will resolve all troubled thrift cases that occur from
January 1, 1989 through August 8, 1992, after which the SAIF will begin resolving cases.
These financial statements pertain to the financial position, results of operations, and cash
flows of the Bank Insurance Fund only.
2. Summary of Significant Accounting Policies
General
These statements do not include accountability for assets and liabilities of closed insured
banks for which the BIF acts as receiver or liquidating agent. Periodic and final accountability
reports of the BIF 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.
Allowance for Loss on Receivables From Bank Assistance and Failures
The BIF 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 of the assisted or failed bank, net of all liquidation costs, and also
from dividends received from, and sale of, equity instruments acquired in assistance
agreements (the proceeds of which are deferred pending final settlement of the assistance
transaction).

Litigation Losses
The BIF establishes an estimate for potential loss for litigation against the BIF in its corporate
and receivership capacity. The FDIC Legal Division recommends these estimated losses on
a case-by-case basis J H *
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 BIF financial 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 costs incurred by the BIF which resulted from either providing assistance to open insured
banks or merging of insured banks are recorded as merger assistance losses. These costs,
which are not liquidation-related, are specified in the terms of the agreements and have no
potential for recovery by the BIF.
“
Nonrecoverable Insurance Expenses
* . •
Nonrecoverable insurance expenses are incurred by the BIF 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.
'
,
v
Reclassifications
—
. •
Reclassifications have been made in the 1988 Financial Statements to conform to the
presentation used in 1989‘. ^ ^ ^ ^ ^ ^ S p
3. Cash and Cash Equivalents
.
,
The BIF considers cash equivalents to be short-term, highly liquid investments with original
maturities of three months or less. This includes the purchase of one-day Special Treasury
Certificates: rliSraSEP '
J '
■
■
; . • CM)
(Dollars in thousands)
December 31
1989
Cash
Cash Equivalents

77,443

1988
$

12,644

4,736,471

2,915,366

$4,813,914

$2,928,010

4. U. S. Treasury Obligations
'
y/J. •
Alt cash received by the Bt.F not used to defray operating expenses or for outlays related to
assistance to banks and liquidation activities or invested in short-term highly liquid • '
Investments is invested in U. S. Treasury obligations. The BIF investment portfolio consists of'
the following:. *
•'
'
(Dollars irt thousands)
December 31 j 1989
Yield to
Maturity
at Market

Book
Vafue

/M a rk e t
Value

Face
\ ' " Value

Maturity

Description

Less than
one year

U.S.T. Bills,
Notes & Bonds

8.16

$ 1,812.004

$ 1,824;807

$ 1,800,000

1-3 years

U.S.T. Notes & Bonds

7.99

5,446,301

5,414,175

5,300,000

3-5 years

U.S.T. Notes & Bonds

7.97

1,667;055

1 669,277 .

1,700,000

v
‘::

"****’*+" VS'
'■
?

~
V-

A
->S-

'. i -

$ 8,925,360

$8,908,259

$ 8,800,000

December 31,1988
Yield to
Maturity
at Market

Book
Value

Market
Value

Face
Value

Maturity

Description

Less than
one year

U.S.T. Bills
Notes & Bonds

9.07

$ 4,289,304

$ 4,302,784

$ 4,280'000

1-3 years

U.S.T. Notes & Bonds

9.21

5,004,351

.4,935,705

. 4,900.000

3-5 years

U.S.T. Notes & Bonds

9.2!

3,998,989

3,809,137

3,900:000

$13,292,644

$13,047,626

$13,080,000

The unamortized premium, net of unaccreted discount, for 1989 and 1988 was $125,360,000
and $212,644,000, respectively. The amortized premium expense, net of accreted discount
income, for 1989 and 1988 was $49,157,000 and $95,724,000, respectively.

5. Net Receivables from Bank Assistance and Failures
December 31
1989 .
Receivables from Bank Assistance:

V-'.'V'

1988
;

$ 1.640.443

$ 1,301,753

Facilitate deposit assumptions

36.000

36,000

Facilitate merger agreements

134,398

350,648

14.366

8,257

Open banks

Accrued interest receivable
Allowance for losses

(1,153,122)

(1,110.328)

(5,198)

-0-

666,887

Deferred settlements

586,330

Bridge Bank Receivables:
Capitalization

•

Accrued interest receivable

1,950,000
93,582

;

Allowance for losses

1,008,241
8,866

(1,750,000)

-0-.

293,582

1,017,107

2,018,692

2,153,189

Continental. Bank (CINB) Assistance:
Loans and related assets

‘

Dividends receivable

^
^

Preferred stock/common stock

-o-

73,436

12,797
515,436

Allowance for losses

(1,057,727)

(1,280,110)

Deferred settlement

(284,217)

(159,090)

750,184

1,242,222

Insured Depositor Payoffs

4,952,026

3,207,323

Depositors’ claims unpaid

79,055

32,841

9.347,867

8,456,417

523,239

500,999

Receivables from Bank Failures:

Purchase and Assumption transactions
Corporate Purchase transactions
Allowance for losses

(11,114,713)

(9,229,366)

3,787,474

2,968,214

$5,498,127

$5,813,873

1989 Analysis of Changes in Allowance for Losses

(Dollars in thousands)
Beginning
Balance
Open bank assistance

$ 1,110,328

P"'

y ‘/

CINB

Provision
For Loss
$

42,794

/'is / ih

1,439,200

$
’*

(222,383)

Ending
Balance

Transfers &
Adjustments
-0-

u" x

(159,090) ;

$ 1,153,122
l

1,057,727

-0-

1,750,000

Insured Depositor Payoffs

2,006,406

1,172,612

(12,959)

3,166,059

Purchase and Assumptions

6,925,445

877,658

(77,138)

7,725,965

297,515

(74,826)

Total Closed Banks

9,229,366

1,975,444

(90,097)

11,114,713

Liabilities for estimated
bank assistance

3,877,376

2,002,757

(2,059,836)

3,820,297

109,523

12,678

-0-

122,201

Total Allowance for Losses $ 15,765,793

$3,811,290

Bridge Banks

Closed Banks:

Corporate Purchases

Estimated losses from litigation

-0-

222,689

$(559,023) $19,018,060

1988 Analysis of Changes in Allowance for Losses

(Dollars in thousands)

.r
Beginning
Balance

Open bank assistance

$115,105

Transfers &
Adjustments

Provision
For Loss
$

53,271

941,952

** - - ’’j
'

;

$ 1,110,328

t.CJ?

-o-

1,439,200

423,578

(52,034)

2,006,406

5,072,785

1,966,368

(113,708)

6,925,445

120,690

179,825

(3,000)

297,515

6,828,337

2,569,771

1,640,852

(201,652)

Insured Depositor Payoffs

1,634,862

Purchase and Assumptions

Ending
Balance

CINB

•

*-r-'t;

Closed Banks:

Corporate Purchases
Total Closed Banks

1 Jj | g jj| g j|
^
Liabilities for estimated
bank assistance

1,236,952.

3,877.376 '
7-. v 1

Estimated losses from litigation

600

$9,821,846

■

9,229,366

: %V
tv ‘

(1,236,952)

■
3,877,376

109,423

109,523

r x
(500)

’

§ § 1 |§ 11
Total Allowance for Losses

(168,742) ,

$ 6,298,266

$ (354,319) $15,765,793

The BIF liabilities for estimated bank assistance include amounts transferred to other line
items, adjustments for cash outlays, and deferred settlements.
.
First RepublicBank/NCNB Texas National (Bridge Bank)
' * • ' {y''
During 1989, the FDIC sold its shares of stock in NCNB Texas National Bank to NCNB
Corporation for $1.1 billion, resulting in a gain of approximately $270 million.

, . ••
<
’;*•

r Termination and final asset pool settlement is scheduled to occur on the fifth anniversary • ; _
(November. 22,1993) of the agreement. At the time of termination, the FDIC must (a)
•, •
purchase remaining unliquidated assets at fair market value; (b) settle with NCNB for the - .
current settlement account balance arising from administering the Separate Asset Pool; and
(c) settle with NCNB for deferred settlement account balances arising from gains and losses
on disposition of assets as well as charge-offs and write-ups of pool assets, . • .
^
~
The Separate Asset Pool balance on December 31,1989 was $4.7 billion. Total estimated
cost for the length of the entire Assistance Agreement is projected to be $2.9 billion. ‘
' r„
MCorp/BancOne (Bridge Bank)
>
On March 28,1989, twenty of the twenty-five MCorp subsidiary banks were declared
insolvent by their chartering authorities and subsequently closed, with the FDIC appointed
receiver. The FDIC organized a new Deposit Insurance Bridge Bank, N.A., Dallas, Texas,
chartered by the Comptroller,6f the Currency (OCC) to purchase all assets and assume .
deposits and certain non-deposit liabilities from the failed institutions.
On July 5,1989, the FDIC, BancOne Corporation, BancOne Texas Corporation, and
BancOne Texas, N.A. entered into a financial assistance agreement designed to capitalize
and stabilize the new bridge bank. The final approval on January 1,1990 of the principal
terms of BIF outlays and costs for the merger assistance included:

a) The BIF will purchase 3,375,000 shares of Class B non-voting Convertible Common Stopk
and‘1,250,000 shares of Class C non-voting Common Stock of BancOne Texas, N.A. in
exchange for a note payable in the amount of $416.3 million due on or before the day 0ft V ,

, WhiGh tfie FDIC no Iohger own& any shares trf sach stpck.'
b) The BIF funded negative equity of the Bridge Bank (including Bridge Bank operating
losses) during its tenure of operation (March 29, 1989 to December 31, 1989), as well a s .
mark-to-market for assets and liabilities as of the date of BancOne’s acquisition, 'January
1990. During January 1990, total funding of $2.6 billion was paid by (i) assumption of FRB
indebtedness including principal and interest totalling $1.519 billion and forgiveness of a $300
million subordinated note advanced to the Bridge Bank, and (ii) a non-negotiable promissory
note to BancOne Texas in the amount of $737 million due on or before March 1,1995.
_ c) By terms of the assistance agreement, the BIF and BancOne Texas, N.A. transferred to a
Separate Asset Pool $2.5 billion of troubled assets and owned real estate of the insolvent
MCorp banks. BancOne retains the right to transfer additional troubled loans to the Separate
Asset Pool during its first two years of operations. Administration and funding costs of tlie - w
Separate Asset Pool are to be borne by the BIF during its five year tenure. ? V
Final settlement on the Separate Asset Pool will occur no later than January 1, 1995. At such
time, the BIF will settle with BancOne Texas, N. A, for the current settlement account balance
arising from the administration of the separate asset pool and for the deferred settlement
account balance arising from gains and losses on the disposition of assets as well as
charge-offs and write-ups of pool assets. In addition, the BIF will purchase the remaining
unliquidated assets of the pool at fair market value. The total estimated cost to the BIF is $2.7
• billion..

• ’ '>

Texas American Bancshares/Texas American (Bridge Bank)
On July 20, 1989, the twenty-four subsidiary banks of Texas American Bancshares, Inc. were
declared insolvent by their chartering authorities and subsequently closed, with the FDIP'
appointed receiver. Pursuant to the authority granted in 12 U.SC. 1821, the FDIC organized,
a new national “bridge bank” called Texas American Bridge Bank, N.A., Fort Worth, Texas, to
; purchase all assets and assume deposits and certain non-deposit liabilities from the failed

• institutions.’

’•

Afedon July 20, 1989, the FDIC Board of Directors approved the acquisition of Texas’ v ' <
American Bridge Bank by Deposit Guaranty Bank, Dallas, Texas. An Interim Management.
Agreement was executed for the operation of the bridge bank pending completion of the. 'V
: assistance agreement. The financial assistance agreement was consummated on January ;
31,1990, principal terms of which included: (a) the BIF funded negative equity of the Bridge
Bank (renamed Team Bank) including the Bridge Bank operating losses incurred during its
tenure of operation July 20,1989 through January 31, 1990, as well as mark-to-market of .'/■
certain assets and liabilities as of the date of Deposit Guaranty acquisition January 31, f99Q;
and (b) the FDIC and Deposit Guaranty Bank transferred approximately $772 million of
/troubled assets and owned real estate of the insolvent Texas American institutions to a
Separate Asset Pool for liquidation. Administration and funding costs of the Separate Asset
Pool are to be borne by the BIF. Total estimated cost to the BIF is approximately $900 million.

CINB Assistance
The CINB assistance agreement, entered into on September 26,1984, between the FDIC,
the Federal Reserve Board, the Comptroller of the Currency, and a group of major U. S.
banks terminated when it reached its prescribed valuation date on September 26,1989. The
Bank Insurance Fund (BIF) made the final payment for the indebtedness assumed of $2.2
billion on September 26, 1989.
During the term of the agreement, collection proceeds totaled $2.6 billion. Application of the
proceeds were to administrative costs and interest expense totaling $176 million and $1.1
billion, respectively, and $1.3 billion in principal payments owing under the FRB agreement.
The BIF estimated allowance for loss as of December 31, 1989 was $1.0 billion, which
represents the difference between the amount funded and the amount BIF estimates as
recoverable from the remaining assets and future proceeds from the sale of equity
instruments, which will be deferred until final disposition of the remaining assets.
Under the terms of the agreement, on the valuation date, the BIF exercised its option to
acquire from Continental Illinois Holding Corporation (CIHC) the 10,080,809 remaining
shares of Continental Bank Corporation (CBC) common stock. For every $20 of loss the BIF
incurred, the BIF was entitled to acquire one share of CBC common stock at an exercise
' price of $0.00001 per share: 5
/
- . • ■
During 1989, the BIF sold all its shares (12.838 million) of the Continental Bank Corporation
(CBC) Adjustable Rate Preferred Stock, Class A, valued at $280 million, for $273 million.
Also, 7.2 million shares of CBC Junior Perpetual Convertible Preference Stock, valued at
$162 million, was sold for $217 million. Cash dividends received for the year ended
December 31,1989 on the Junior Perpetual Convertible Preference Stock and the Adjustable
Rate Preferred Stock, Class A were $11.4 million and $25.8 million, respectively. The gain on
sale and the cash dividends received are being deferred until final disposition has been made
of the remaining assets.
In addition, the BIF has remaining 3.264 million shares of the Junior Perpetual Convertible
Preference Stock, which has a fair market value as of December 31,1989 of $81 million. ’ ■’
Also, the BIF retains the 10,080,809 shares of CBC common stock resulting from the
exercise of the option, that as of December 31,1989 has a fair market value of $199 million.
Net Worth Certificate Program
The net worth certificate program was established at the FDIC by authorization of the Garn-St
Germain Depository Institutions Act of 1982. Under this program, the BIF would purchase a
qualified institution’s net worth certificate and, in a non-cash exchange, the BIF would issue
its non-negotiable promissory note of equal value. The total assistance outstanding to
qualified institutions as of December 31,1989 and 1988, is $258,539,000 and $321,897,000,
respectively. As of December 31,1989 and 1988, the financial statements excluded
$258,539,000 and $321,897,000, respectively, of net worth certificates, for which no losses
are expected. The original authority to issue net worth certificates expired October 13,1986.
The Competitive Equality Banking Act of 1987 reinstated the net worth certificate program
through October 1 3 ,199T.
,' JaM B

6. Property and Buildings
(Dollars in thousands) ;;
'■

December31

- %

1989
$ 31,930

$ 31.850

77,643

56,197

(11,900)

Land '

1988

(10,513)

Office buildings
Accumulated depreciation

$ 77,534

$ 97,673

' The'BIF 4776' FStreet property notes payable of $5,939,000 were paid in full as of »,
- December 31,1989.
t
\
A portion of depreciation expense is allocated to the failed banks as liquidation expens^. 1n
both 1989 and 1988, the amount of depreciation expense-allocated to the failed banks was
$496,000.
«.-!
:
:
7. Liabilities for Estimated Bank Assistance
The BIF records an estimated loss for its future or potential assistance to those banks which
the regulatory process has identified as being distressed and where ongoing negotiations
and/or current agreement terms indicate that BIF assistance will be necessary. The BIF
outstanding liabilities for this estimated bank assistance as of December 31,1989 and 1988,
are $3,820;297,000 and $3,877,376,000, respectively.
The BIF has included in the December 31,1989 Liabilities for Estimated Bank Assistance,
$535,963,000 of realized proceeds from the sale of equity instruments and other such
transactions associated with the assisted institution. BIF defers recognition of such proceeds
pending final termination of the assistance agreement. Such proceeds are available to fund
future assistance costs and have been considered in determining the estimated loss to the
BIF for future assistance.
‘ , , • *8
'
, >
’
8. Liabilities Incurred from Bank Assistance and Failures
(Dollars in thousands) ,
December 3 1 '

•, ; ‘

1989
Funds held in trust

• •.

$ ,,

Depositors’ claims unpaid

233,278

' /

Accrued interest/other liabilities

32,841

798,982

Federal indebtedness

79,055

Notes indebtedness .
Guaranty assistance

489

1988

998,818

6.660

14,539

1.450,000

3,316,178

77,499

55,734

$2,412,685

$4,651,388

Maturities of these liabilities for each of the next five years and thereafter:
(Dollars in thousands)
1990
$1,808,614
::

1991
$206,311

1992
$199,558

1995/
thereafter

1993
$103,919

$5,741

$88,542

/ v',x:* '' V ' ■9- Assessments
'■ | | | | |
’ r- ..• ! The Federal Deposit Insurance (FDI) Act, as amended by FIRREA, directs that the FDIC set
. ‘ ■' \
> - assessment rates for the Bank Insurance Fund members annually in accordance with the
legislatively mandated rates against a member's average assessment base."v ’
The FDI Act also provides for an assessment credit to BIF members when the Board of
• Directors determines that the BIF reserve ratio is expected to exceed the designated reserve
>
ratio in the succeeding year, after taking into account expected expenses and revenues. The
FDI Act defines the BIF designated reserve ratio as (i) 1.25 percent of estimated insured
’
deposits.; or (ii) a higher percentage, not to exceed 1.50 percent, as determined by the B o a rd ^ /'
■ ;of'C$r©fctors toccivterexpected risks of
r

w- '
•

The assessment rate is 0.12 percent for calendar year 1990. Based on the present p r o j e c t e d - v
status of the BIF, and anticipated expenses and revenue for the next year, the reserve ratio is
expected to exceed the designated reserve ratio. Therefore, insured members will not
"f:
receive an assessment credit in 1990.
■ ' \ ’ /,
•
'

9 4
/:' ’** V
..
•- 7';;

. ^ -v-'-,-.
y v
-

*• ,

< '•
’

■/'*’
*-

, ./
'» •
s ’•; ' 't

10. Pension Plan and Accrued Annual Leave
- The FDIC eligible employees assigned to the Bank Insurance Fund are covered by the Civil ^K ':
.% ’ Service Retirement and Disability Fund. Matching employer contributions provided by the
' / •: for all eligible employees were approximately $13,786,000 and $13,404,000 for the years
ending December S l/I^O S iand 1;p88, respectively.
.Although the BIF contributes a portion of pension benefits for eligible employees and makes . ■/
the necessary payroll withholdings from them, the BIF does not account for the assets of th e - ffc
Civil Service Retirement and Disability Fund and does not have actuarial data with respect to
• .
accumulated plan benefits or the unfunded liability relative to its eligible employees. These . . V 1
‘ 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 em ployer^;,-'. V
J '
OPM also accounts for'all health and life insurance programs for retired BIF eligible-;/'♦
^

- The BIF liability to employees for accrued annual leave is approximately $18,430,000 a n d 'J S lg
$14,698,000 at December 31,1989 and 1988, respectively.

BIF lease agreement commitments for office space are $150,921,000 for future years.- / . / &•
? -> x ,
The agreements contain escalation clauses resulting in adjustments, usually on an annual
:•r - b a s i s . During 1989 and 1988,-lease space expense was $29,390,000 and $34,038,000, /
respectively. Leased space fees for future years are as follows:
'
‘
• ' (Dollars in thousands);
^ J t'\ ’*
'

v i •" v

' * 4' \

1990

' $31,835.

1991
$25,223;

'' :/y :
1995/
1992_________ 1993__________ 1994_______ thereafter
$18,363

$14,540

$11,758

$49,202

•

12. Entrance and Exit Fee Revenue
In accordance with FIRREA provisions, the BIF will receive both entrance and exit fees for
conversion and transfer transactions between the BIF and the SAIF. Interim regulations \" r
describing the fee calculations have been approved by the FDIC Board of Directors, however,
revisions are anticipated with final approval expected in the coming year.
The BIF has elected not to record the entrance and exit fee revenues which had been '■
calculated using the interim regulations until the regulations have been finalized. ‘ ■ • i
/
Approximately $2.4 million in revenues had been calculated for conversion and transfer
transactions consummated as of December 31, 1989. ’ •.
\
. ‘
\
13. Contingencies
•
,
VvU
The FDIC and bank chartering authorities are directing additional resources to the monitoring
of the financial condition of certain large banks predominately located in the Northeast region.,
These institutions are experiencing the effects of softening real estate markets and
■y-;U
:
weakening state economies and may, in time, require financial assistance from the BIF. At .;
this time, however, the FDIC cannot reasonably estimate the timing of such assistance or the
expected cost to the BIF. Depending bn the extent of the continued downturn in the condition
of these segments of the economy in the Northeast, the financial assistance required could
have a material'impact on the condition o f tfje.Bank' Insurance Fund/tself’: • . 14. Supplementary Information Relating to the Statements Of Cash Flows

v *

Reconciliation of net income (loss) to net cash provided by operating activities
(Dollars in thousands)
■
'
,
,
-

. ' .

’

For the year ended
December 31

'
1989
$

Net Income (Loss)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:

, _ ';
_

1988

(851,607)
*

$ (4,240,712)
■

Amortization of U. S. Treasury obligations

49.156

95,724

Interest on Funds Held in Escrow

25.037

-0-

1,387

891

3,811,290

6,298,266

(127,425)

12,934

Loss incurred for debt assumption

-0-

1,000,000

Loss incurred for forgiveness of note receivable

-0-

131,759

(2,143,042)

(2.447.464)

(15,064)

60,999

Building depreciation

•

Provision for insurance losses

’,

Accrual of assets and liabilities from bank
assistance and failures

•
■
'

Net cash disbursed for bank assistance and
failures n o t impacting income
Increase (decrease) in accounts payable,
accrued liabilities and other
(Increase) decrease in accrued interest
receivable on investments and other assets

Net cash provided by operating activities

^ >

-372,786'

$ 1,122,518

(204,951)

707,446

Schedule of noncash transactions incurred from bank assistance and failures
(Dollars in thousands)
- ■,

’

For the year ended
December 31 .
1989

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

’ ‘

1988

;
•;

(941,952)

(453,787)

62,945

(1,450,000)

(990,773)

(46,213)

Total Increase (Decrease)

14,124

(1,950,000)

Transfer of allowance for loss

18,673

46,213

Depositors’ claims unpaid

2,100

-0-

Notes in lieu of cash

$ 970,000

1,770,000

Notes receivable

(320,000)

(14,124)

Decrease (increase) in liabilities incurred from
bank assistance and failures:
Notes payable
Pending claims of depositors

1,950,000

Liabilities for estimated assistance transfer

453,787

Total Decrease (Increase)

941,952

-0-

(62,945)

GAO

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

B-114831

To the Board of Directors
, .
Federal Deposit Insurance Corporation
We have audited the financial statements of the Bank - .
Insurance Fund for the years ended December 31, 1989 and
1988, and have issued our opinion thereon.
This report
pertains only to our study and evaluation of the Federal
Deposit Insurance Corporation's internal control structure
as it relates to the Bank Insurance Fund for the year ended
December 31, 1989.
The report on our study and evaluation
of the Corporation's internal control structure for the
year ended December 31, 1988, is presented in GAO/
AFMD-.89-63, dated-April 28, L989. ;
k
We conducted our audit in accordance with generally
accepted government auditing standards.
Those standards
require that we plan and perform the audit td obtain ’
reasonable assurance about whether the financial statements
are free of material misstatement. •
‘ ■/
"
“ ■
In planning and performing our audit of the financial
statements of the Bank Insurance Fund for the year ended
1.
December 31, 1989, we considered its internal control. ■
structure in order to determine our auditing procedures for
the purposes of expressing our opinion on the financial
statements and not to provide assurance on the internal
control structure.
■
' . , •
'
The Corporation's management is responsible for
establishing and maintaining an internal control structure.
In fulfilling this responsibility, estimates and judgments
by management are required to assess the expected benefits
and related costs of internal control structure policies
and procedures.
The objectives of an internal control
structure are to provide management with reasonable, but
not absolute, assurance that assets are safeguarded against
loss from unauthorized use or disposition, and that
transactions are executed in accordance with management's
authorization and recorded properly to permit the
preparation of financial statements in accordance with
V
generally accepted accounting p r i n c i p l e s . Because of
inherent limitations in any internal control structure, , • errors or irregularities may nevertheless occur and not be
detected.
Also, projection of any 'evaluation of the
internal control structure to future periods is subject to
the risk that procedures may become inadequate because ofu • ‘

changes in conditions or that the effectiveness of the
design and operation of policies and procedures may
'
deteriorate."/ v

„

For purposes of this report, we have classified the
Corporation's significant internal control structure
policies and procedures into the following categoriesi^,;ir
^»4
'- ^ t r e a s u r y , consisting of policies and procedures over r . y
“
^-pash disbursements, cash receipts, and investmentv:-"
. a c t i v i t i e s , and
-.
'
f
- -

assistance to problem banks, consisting of policies and
‘ •procedures over FDIC's supervision and liquidation
activities for-failed or assisted banks.

For all of the internal control structure categories
listed above, we obtained an understanding of the design of
the relevant policies and procedures and whether they have
been placed in operation, and we assessed control risk.
We
performed limited tests of control procedures for all the
categories listed above, except that we found it more
efficient to rely solely on substantive audit tests for ,?^
investment and cash receipt activities.
For alL:4>
categories, we performed audit tests to substantiate .
5
account balances associated with each control category.
Such tests can also serve to identify weaknesses in the
internal control structure.
Our consideration of the internal control structure would
not necessarily disclose all matters in the internal
control structure that might be material weaknesses.
A
material weakness is a condition in which the design or
operation of one or more of the specific internal control
structure elements does not reduce to a relatively low
level the risk that errors or irregularities in amounts
that would be material in relation to the financial
statements being audited may occur and not be detected
within a timely period by employees in the normal course of
performing their assigned functions.
We noted no matters
involving the internal control structure and its operation
that we consider,to be material weaknesses as defined
above. ,
However, we noted certain matters involving the internal)-;;.;,
control structure and its operations that do not affect the
fair presentation of the Bank Insurance Fund's financial
statements, but which nevertheless warrant management's
attention.
We are reporting these other matters separately
to the Corporation's m a n a g e m e n t ^ ^ ^ ^ ^ ^ S ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ ^ S

Charles A. B o w s h e r .
.
.
Comptroller General
of the United States
June 28,

1990

Statistics
Banks Closed Because of
Financial Difficulties; FDIC Income,
Disbursements and Losses
The following tables are included in the
1989 FDIC Annual Report:
Table 122
Number and Deposits of Banks Closed
Because of Financial Difficulties,
1934-1989.
Table 123
Insured Banks Requiring Disbursements
by the Federal Deposit Insurance
Corporation During 1989.
Table 125
Recoveries and Losses by the Federal
Deposit Insurance Corporation on
Disbursements for Protection of
Depositors, 1934-1989.
Table 127
Income and Expenses, Federal Deposit
Insurance Corporation, by Year,
From Begining of Operations,
September 11, 1933, to December 1989.
Table 129
Insured Deposits and the Bank
Insurance Fund, 1934-1989.
Deposit Insurance Disbursements
Disbursements by the Federal Deposit
Insurance Corporation to protect
depositors are made when the insured
depositors of failed banks are paid off,
or when the deposits of a failed or fail
ing bank are assumed by another in
sured 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 in
any proceeds realized from liquidation
of the failed bank’s assets. In certain
deposit payoffs, the FDIC may deter
mine that an advance of funds to unin
sured depositors and other creditors of
a failed bank is warranted.
In deposit assumption cases, the prin
cipal disbursement is the amount paid
to facilitate a purchase and assumption
transaction 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. The FDIC also
may purchase assets or guarantee an
insured bank against loss by reason of
its assuming the liabilities and purchas
ing 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 1989 for 45 operating banks.
Noninsured Bank Failures
S tatistics in this report on failures of
noninsured banks are compiled from
state banking departments, field super
visory officials and other sources. The
FDIC received no official reports of
noninsured bank closings due to finan
cial difficulties in 1989. For detailed
data regarding noninsured banks that
were suspended in the years 1934-1962,
see the 1962 FDIC Annual Report,
pages 27-41. For 1963-1989, see Table
122 of this report and previous reports
for respective years.
Sources of Data
Insured banks: books of specific banks
at date of closing and books of the
FDIC, December 31, 1989.

Table 122.
Number and Deposits of Banks Closed Because of Financial Difficulties, 1934-1989
Number

Deposits (In thousands of dollars)

NonInsured1

Year

Total

1,533

136

Total
1,397

1934
1935
1936
1937
1938

61
32
72
84
81

52
6
3
7
7

9
26
69
77
74

1939
1940
1941
1942
1943

72
48
17
23
5

12
5
2
3

1944
1945
1946
1947
1948

2
1
2
6
3

1949
1950
1951
1952
1953

9
5
5
4
5

1954
1955
1956
1957
1958

4
5
3
3
9

1959
1960
1961
1962
1963

3
2
9
3
2

1964
1965
1966
1967
1968

8
9
8
4
3

1969
1970
1971
1972
1973

Without
With
disbursements disbursements
by FDIC2
by FDIC3

Total

1.968
13.320
27.508
33.349
59.684

2.661
17 242
31.941
40.370
69.513

157 722
142 430
29.717
19.185
12.525

157.772
142.430
29.717
19.185
12 525

181.514
161.898
34 804
22.254
14.058

1.915
5.695
347
7.040
10.674

1.915
5,695
347
7,040
10.674

2,098
6,392
351
6.798
10.360

5.475
5.513
3.408
3.170
18.262

4.886
4,005
3.050
2.388
18.811

3
1
1
2

998
11.953
11.330
1.163
8.240

1.138
11.985
12.914
1.253
8,905

1
1
5

2,593
6,930
8,936

2,858
7,506
9.820

23,444

26.179

23 438
43 861
103 523
'0 .S 7 8
22.524

23.438
43.861
103.523
10.878
22.524

25849
58.750
120.647
11.993
25 154

4 0 4 34
54,806
132,058
20 480
971,296

40.134
54,806
132,058
20,480
971,296

43.572
62.147
196.520
22.054
1.309.675

1.575,832
339,574
864,859
205,208
854 154

1,575.832
339.574
864.859
205.208
854,154

3.822.596
419,950
1.039.293
232,612
994,035

• ’ 0 696
216,300
3.826.022
9.908.379
5.44I.608

’ 10.696
216.300
3.826.022
9 .908.379
5 .441.608

110,696
216300
3 8 2 6 .0 2 2
9 908.379
5.441.608

132 988
236,164
4 8 5 9 .0 6 0
1 1.632.415
7.026.923

2 883.162
8.059 441
6.471,100
6,281,500
24,931,302
24,090,551

2 .8 8 3 1 6 2
8.059.441
6 .471,100
6 ,281.500
24,931.302
24,090.551

2.883.162
8.059.441
6.471.100
6.281.500
24,931.302
24.090,551

3.276.41 1
8.741,268
6.991.600
6,850,700
35,697,789
29.168,596

9
25
69
75
74

37.333
13 988
28.100
34 205
60 722

35.365
583
592
528
1 038

1 968
13 405
27.508
33.677
59 684

60
43
15
20
5

160.211
142.788
29.796
19.540
12.525

2.439
358
79
355

2
1
1
5
3

1.915
5.695
494
7.207
10.674

4
4
2
3
2

9 .2 17
5 555
6.464
3.313
45.101

2.552
42
3.056
M3
390

6665
5.513
3.408
3.170
44 71 1

2
5
2
2
4

2
5
2
1
4

2 948
11.953
11.690
12.502
10.413

1.950

998
11.953
11.330
11 247
8.240

1
1

74,067,826

3
1
5

5
4
2
3
4

7
5
7
4
3

23.867
45.256
106.171
10 878
22.524

9
8
6
3
6

9
7
6

9
7
6
1
6

40 134
55 229
132.058
99.784
971,296

1974
1975
1976
1977
1978

4
14
17
6
7

4
13
16
6
7

4
13
16

1,575,832
340,574
865,659
205,208
854,154

1979
1980
1981
1982
1983

10
10
10
42
48

10
10
42
48

-o
'0
'0

79
120
138
184
200
206

4
2

1
4
1

42
48
79
120

138
184
2 00

206

(in
Thousands
Dollars)
94,548,117

143,501

Without
With
disbursements disbursements
by FDIC2
by FDIC3
74,026,679

74,211,327

2,593
7,965
10,611
4.231
23.444

1984
1985"
1986’
19877
1 9887
19897

NonInsured’

1,389

Assets4

Insured

147
167

360
1.255
2.173

1.035
1.675
1.220

429
1.395
2.648

423
79.304

1.000
800

2,593
6,930
8,936
3.011
23.444

41,147

85
328

1.190

26 449

10.084

3.011

'F o r inform ation reg a rd in g each of these banks, see tab le 22 in the 1963 Annual Report {1963 and prior years), and e xplanatory notes to ta b ies re g a rd in g banks clo se d b e cau se of financial
d ifficu ltie s in su b se qu e n t annual reports. O ne noninsured bank p laced in receiversh ip in 1934. with no d ep o sits at tim e of c lo sin g, is o m itte d (see tab le 22 note 9). D eposits are unava ila ble for
seven banks.
2For inform ation re g a rd in g these cases, see tab le 23 o ‘ the Annual Report'or 1963
T o r inform ation re g a rd in g each bank, see the Annual Report for 1958. pp 48-83 and pp. 98-127. and ta b les reg a rdin g d e p o sit in su ra n ce d isb urse m e nts in su b se q u e n t annual reports.
D eposits are a d iu sted as o ‘ D e ce m be r 31. 1982
"In su red banks only.
5Not available

“ Includes data ‘or one ban k g ra n te d fin a ncia l a ssistance a lthough no d isb urse m e nt was req u ired until January 1986
http://fraser.stlouisfed.org/ra n te d fin a ncia l a ssistance u nd e r Section 13(c)(1 ) o ‘ the Federal D eposit Insurance A ct to prevent fa ilu re D ata ‘ or these b an ks are in clud e d in tab le 123.
'E x clu d e s data ‘ or b an ks g

Federal Reserve Bank of St. Louis

101

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Name and Location

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOOs)

FDIC
Disburse
ments
(SOOO's)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Insured Deposit Payoffs
First C ontinental N ational Bank
Houston. Texas

700

8,400

8,800

8.758

February 15, 1989

Federal D eposit Insurance C orporation

The Hom e S tate Bank
A rcadia. K ansas

400

1.300

1,400

1.194

February 16. 1989

Federal D eposit Insurance C orporation

Interstate B ank of C om m erce
M iam i. Florida

1.000

5.200

5,500

5.060

M arch 31, 1989

Federal D eposit Insurance C orporation

B ank of A urora
A urora, C olorado

1.100

8,100

5.300

4,910

M ay 24. 1989

Federal D e po sit Insurance C orporation

Fulshear S tate Bank
Fulshear. Texas

1.400

9.000

9.300

9.082

June 8. 1989

Federal D eposit Insurance C orporation

20.500

415.200

410.700

340,856

June 21, 1989

Federal D eposit Insurance C orporation

1.700

25,000

26,700

25,088

July 28. 1989

Federal D eposit Insurance C orporation

5,100

16,500

16,000

14,374

N ovem ber 17, 1989

Federal D eposit Insurance C orporation

800

37.800

36.300

35,493

D ecem ber 20, 1989

Federal D eposit Insurance C orporation

C o m m un ity Bank, N.A.
D ecker Prairie. Texas

2,000

7.600

7.900

8.784

January 26. 1989

T om ball N ational Bank
T om ball. Texas

Texas N ational Bank
Houston, Texas

2,100

40,200

56,300

56,256

February 16. 1989

First G alleria Bank
H ouston, Teaxs

The First State Bank
A bilene. Texas

27,500

262.300

171.800

239.922

February 17. 1989

N C N B Te xa s N ational Bank
Dallas, Texas

B ankers T ru st of Louisiana. N.A.
K enner, Louisiana

5,600

73.600

81.800

78.260

M arch 10. 1989

Investors B ank & T ru st C o m pany
G retna, Louisiana

M B ank A bilene, N.A.
Abilene, Texas

N/A

189,400

196.800

181.029

M arch 28, 1989

The D eposit Insurance B ridge B ank, N.A.
Dallas, Texas

56,300

866.600

707.700

756.737

M arch 31, 1989

P eoples S avings Bank
W orcester, M a ssachusetts

2,400

37.700

36.400

34.352

M arch 31, 1989

D eposit G uaranty Bank
Dallas, Texas

600

11,300

10,800

10,255

M ay 19. 1989

Bank of Fountain Hills
Fountain Hills. A rizona

1.400

6,700

7,000

6,987

June 8, 1989

Lake B uchanan S tate Bank
B uchanan Dam , Texas

1.400

14.200

14,300

14,218

June 8. 1989

Jourdanton S tate Bank
Jo urdanton. Texas

C apital B ank-N orthw est. N.A.
S an A ntonio, Texas

4.200

14.300

15,700

15,727

June 15 1989

M cM ullen C ounty S tate Bank
Tilden. Texas

Independent B ank-E ast, N.A.
Rockwall, Texas

N/A

32.500

33.600

35,338

June 30. 1989

A m erican N ational B ank o f Terrell, N.A.
Terrell, Texas

G uardian Bank. N.A.
H em pstead. N ew York
E m pire S tate Bank
New York, New Y ork
S ecurity N ational B ank o f S hreveport
S hreveport, Louisiana

1 0 2

First C ity N ational Bank
and Trust C om pany
New York, New Y ork

Insured Deposit Transfers

First S ervice Bank For Savings
Leom inster. M assachusetts
P rem ier Bank. N ational A ssociation
Dallas. Texas
G rand Canyon S tate Bank
S cottsdale, A rizona
Lake C ountry N ational Bank
Burnet, Texas
First A m erican Bank
San A ntonio. Texas

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989
FDIC
Disburse
ments
(SOOO's)

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

Class
of Bank

Number of
Depositors
or Accounts

1.700

4,900

5,000

4.990

Ju ly 5, 1989

The N odaw ay V alley Bank
M aryville. M issouri

B ennett N ational Bank
Bennett, C olorado

2.100

8.700

7.900

6,469

July 13, 1989

First N ational Bank o f S trasburg, N.A,
Strasburg, C olorado

Independent Bank. N.A.
C oppell. Texas

9.000

32,500

31,800

33,474

July 14, 1989

M etropolitan N ational Bank
Farm ers Branch, Texas

Fallbrook N ational Bank
H ouston, Texas

1,600

33,400

32.600

32.641

July 20. 1989

C harter N ational B ank-C olonial
H ouston, Texas

Forestw ood N ational Bank
Dallas. Texas

6,900

49,500

53,000

77,071

July 27, 1989

C om erica B ank-Texas
Dallas. Texas

Park Forty-Five N ational Bank
Spring, Texas

4,100

19,700

20,300

19,385

A ugust 3. 1989

Klein Bank
H arris C ounty, Texas

7.100

2.700

26,700

24,848

A ugust 24. 1989

First N ational Bank, South
G rand Forks. N orth D akota

1.500

10.100

13,300

13.579

A ug u st 24. 1989

C olonial N ational Bank
Ft, W orth, Texas

S um m it Bank
San A ntonio. Texas

4.100

16.700

16,000

15.368

A ugust 24, 1989

The Frost N ational Bank o f San A ntonio
San A ntonio. Texas

The Burr O ak S tate Bank
Burr O ak, K ansas

700

4.000

3.900

3.385

A ug u st 31. 1989

First N ational Bank
M ankato, K ansas

Prairie S tate Bank
G rand Prairie, Texas

5,700

15,000

15.500

15.376

S eptem ber 14, 1989

B edford N ational Bank
B edford. Texas

Bank ot Benton
Benton, Louisiana

2.000

10.200

10,400

6,840

Ja nuary 5, 1989

Red R iver V alley Bank
Bossier City, Louisiana

First State Bank
Harper. Texas

1.700

9.200

9.800

2.701

January 1 2 ,1 9 8 9

S ecurity S tate Bank and Trust
Fredericksburg. Texas

Rolling Hills State Bank
Piedm ont. O klahom a

2.600

11.500

11,000

2.941

January 1 2 .1 9 8 9

Farm ers & M erchants Bank of P iedm ont
Piedm ont, O klahom a

O ak Hill N ational Bank
A ustin. Texas

3,200

15,700

15.900

12.993

January 12, 1989

C o m m un ity N ational Bank
Austin, Texas

C om m ercial State Bank
Houston, Texas

11.700

45.800

43,900

21.923

January 12. 1989

C h an n e lview Bank
C hannelview . Texas

W est Belt N ational Bank
H ouston, Texas

2,900

27,000

28,600

24,017

January 12, 1989

D eposit G uaranty Bank
Dallas, Texas

O rleans Bank and Trust C om pany
New O rleans, Louisiana

1.700

20,800

21.400

19.191

January 12, 1989

M ississippi R iver Bank
Belle C hasse. Louisiana

The N ational Bank of B ossier C ity
B ossier City, Louisiana

15.000

72,500

73,700

50,839

January 12. 1989

H ibernia N ational Bank
New O rleans, Louisiana

First N ational Bank of C edar Park
C edar Park, Texas

3.400

17.300

17.400

14.962

January 19, 1989

U nion N ational Bank of Texas
Austin. Texas

M erchants State Bank
Dallas, Texas

17.100

135,200

137.700

30,157

Ja nuary 19, 1989

G rand Bank
D allas. Texas

The P lanters Bank & Trust C om pany
Haynesville. Louisiana

7,500

57.100

57,200

20,568

Ja nuary 19. 1989

P lanters Bank and Trust C om pany
H aynesville, Louisiana

Name and Location
102 Valley Bank
H opkins. M issouri

The D akota Bank
G rand Forks. N orth D akota
Park C entral Bank. N.A.
Ft. W orth. Texas

Total
Assets
(SOOO's)

Total
Deposits
(SOOO’s)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

Deposit Assumptions

103

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Class
of Bank

O akw ood N ational Bank
Enid. O klahom a

4.700

22.000

26.000

7.789

January 26. 1989

The N ational Bank o f C o m m erce o f A ltus
Altus. O klahom a

First State Bank o f Texas
Duncanville. Texas

4.000

16.100

17.200

7.702

January 2 6 ,1 9 8 9

Fidelity N ational B ank o f Dallas
Dallas. Texas

C itizens S tate Bank
Earth, Texas

1.900

15.400

14.600

5.369

January 26. 1989

The First S tate B ank of D im m itt
Dim m itt. Texas

A laska S tatebank
A nchorage. A laska

14.700

91.500

99.500

53.412

February 3. 1989

Key Bank o f A laska
A nchorage. A laska

C itizens Bank - Houston
Houston. Texas

15,800

102.500

95.400

63.944

February 9. 1989

D eposit G uaranty Bank
Dallas. Texas

First Bank & Trust
B ryan. Texas

12.100

140.400

132.700

34.717

February 9 .1 9 8 9

First A m erican Bank
B ryan. Texas

C itizens Bank
Houston. Texas

5,700

38.300

35.500

25.976

February 9. 1989

D eposit G ua ra nty Bank
D allas. Texas

1.700

8.000

11.300

9.398

February 9 ,1 9 8 9

The Frost N ational Bank o f S an A ntonio
San A ntonio, Texas

Louisiana B ank & Trust C om pany
S hreveport. Louisiana

43.800

245.800

229.100

141.342

February 16. 1989

H ibernia N ational Bank
N ew O rleans. Louisiana

S ecurity Bank
Houston. Texas

4.400

14,500

15.300

14,629

February 16. 1989

Te xa s C om m erce B ank, N.A.
H ouston. Texas

Bank of the W est
Austin, Texas

4.300

44.200

44.500

21.389

M arch 9. 1989

The B ank o f the W est
Austin, Texas

4.200

17.100

17.400

6.769

M arch 9. 1989

First C om m erce Bank
Seguin. Texas

C itizens Bank & Trust
Calvert. Texas

3,100

11.300

14.200

13,880

M arch 9. 1989

First S tate Bank
B rem ond. Texas

The Farm ers S tate Bank
Bogue. K ansas

1.800

7.800

4.495

M arch 16. 1989

Farm ers & M ercha n ts B ank of Hill C ity
Hill City, K ansas

Livingston Bank
D enham S prings. Louisiana

20.400

101.400

56.779

M arch 16, 1989

H ibernia N ational Bank
New O rleans, Louisiana

M erchants M arine Bank
Port Isabel, Texas

4,600

23.600

26.300

19.223

M arch 16. 1989

Firstbank
Los Fresnos, Texas

Island Bank
S outh P adre Island. Texas

2.300

16.500

17.200

11.197

M arch 16. 1989

Firstbank
Los Fresnos, Texas

The Farmers & Merchants State Bank
Ballinger. Texas

3,000

21,900

21.400

2,484

M arch 16, 1989

The First N ational B ank o f Rotan
Rotan. Texas

E nterprise Bank o f Florida
M iam i Lakes, Florida

2.000

25.500

17.900

14.030

M arch 17. 1989

Eastern N ational Bank
H ialeah, Florida

First Bank o f Rowlett
Rowlett. Texas

5.600

32.100

15.123

M arch 23. 1989

D eposit G ua ra nty Bank
D allas. Texas

Industrial Bank
Houston. Texas

14,500

64.200

63.100

13,772

M arch 23. 1989

M etroB ank, N.A.
H ouston, Texas

First State Bank
Rogers. Texas

1.900

8.900

6.762

M arch 23. 1989

The B uckholts S tate Bank
B uckholts, Texas

142.600

135.200

M arch 28. 1989

The D eposit Insurance Bridge B ank, N.A.
D allas, Texas

Name and Location

W estpom t N ational Bank
San A ntonio, Texas

104

Lakew ay N ational Bank
Austin. Texas

M B ank B renham . N.A.
B renham . Texas

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

Number of
Depositors
or Accounts

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 1989
FDIC
Disburse
ments
(SOOO’s)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO’s)

M B ank Dallas, N.A.
D allas, Texas

N/A

6,972,000

3,547,200

7,416

M arch 28, 1989

The D eposit Insurance B ridge Bank, N.A.
Dallas, Texas

M B ank H ouston, N.A.
H ouston, Texas

2.819.500

2.261.500

235

M arch 28. 1989

The D eposit Insurance B ridge Bank. N.A.
D allas. Texas

M B ank O dessa, N.A.
O dessa, Texas

322.200

301.300

M arch 28. 1989

The D eposit Insurance B ridge Bank. N.A.
D allas, Texas

M B ank Round Rock, N.A.
Round R ock, Texas

N/A

159,900

155.700

M arch 2 8 .1 9 8 9

The D eposit Insurance B ridge Bank, N.A.
Dallas, Texas

M B ank A ustin, N.A.
Austin, Texas

111

M arch 28. 1989

The D eposit Insurance Bridge B ank. N.A.
Dallas. Texas

M B ank Ft. W orth, N.A.
Fort W orth, Texas

N/A

765.200

672,400

M arch 28. 1989

The D eposit Insurance Bridge B ank, N.A.
Dallas, Texas

M B ank Jefferson C ounty, N.A.
Port A rthur, Texas

N/A

324,600

299.200

M arch 29. 1989

The D eposit Insurance B ridge B ank, N.A.
D allas. Texas

M B ank Longview . N.A.
Longview , Texas

260.800

249.900

M arch 29. 1989

The D eposit Insurance B ridge B ank. N.A.
Dallas. Texas

M B ank M arshall, N.A.
M arshall, Texas

N/A

217.700

205,400

M arch 2 9 .1 9 8 9

The D eposit Insurance Bridge B ank, N.A.
Dallas, Texas

M B ank C orsicana, N.A.
C orsicana, Texas

190,800

177.300

M arch 29. 1989

The D eposit Insurance B ridge Bank. N.A.
Dallas. Texas

M B ank Denton C ounty. N.A.
Lew isville, Texas

230.000

218.400

M arch 2 9 .1 9 8 9

The D eposit Insurance B ridge B ank. N.A.
D allas. Texas

M B ank G reenville, N.A.
G reenville, Texas

N/A

166,100

154,400

M arch 29, 1989

The D eposit Insurance Bridge B ank, N.A.
Dallas, Texas

M B ank M idcities, N.A.
Arlington. Texas

369.100

343.000

M arch 29. 1989

The D eposit Insurance B ridge Bank, N.A.
Dallas. Texas

M B ank O range, N.A.
O range, Texas

158.800

148.200

M arch 2 9 .1 9 8 9

The D eposit Insurance Bridge B ank, N.A.
D allas. Texas

M B ank S herm an, N.A.
S herm an, Texas

N/A

274,100

259,100

M arch 29, 1989

The D eposit Insurance Bridge B ank, N.A.
D allas, Texas

M B ank W ichita Falls, N.A.
W ichita Falls. Texas

455.100

4 17.100

M arch 29. 1989

The D eposit Insurance B ridge Bank, N.A.
D allas. Texas

M B ank The W oodlands. N.A.
W oodlands, Texas

164,800

153,400

M arch 29, 1989

The D eposit Insurance B ridge B ank, N.A.
D allas, Texas

M B ank Alam o, N.A.
San A ntonio, Texas

N/A

691,600

643,600

M arch 2 9 ,1 9 8 9

The D eposit Insurance B ridge Bank, N.A.
D allas. Texas

M arch 30. 1989

S outhern N ational Bank
Tulsa. O klahom a

Name and Location

2.700

20.400

18.700

6.319

First N ational Bank o f N ocona
N ocona, Texas

2,900

22,600

23,600

13.416

April 6. 1989

The First N ational Bank of Bow ie, N.A.
Bowie, Texas

St. T a m m a ny National Bank
M andeville, Louisiana

5,900

47,200

42,800

6,886

A pril 6, 1989

W hitney N ational Bank in St. T a m m any Parish
N ew O rleans. Louisiana

3.300

55.400

54.500

18.888

A pril 12. 1989

Park N ational B ank of Houston
H ouston. Texas

12,000

55,400

57,000

11,138

April 13, 1989

C entral B ank of O klah o m a City
O klahom a City, O klahom a

H arvard Bank
Tulsa, O klahom a

The C om m onw ealth Bank
B ellaire. Texas
A llied O klahom a Bank, N.A.
O klahom a City, O klahom a

105

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Name and Location

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO’s)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Travis Bank and Trust
A ustin, Texas

7.700

44,300

46.800

29,871

April 20, 1989

Union N ational B ank o f Texas
A ustin, Texas

First State Bank
D eanville, Texas

1.700

9.400

9.300

1.244

April 20. 1989

C itizens S tate Bank
S om erville, Texas

3.500

10.500

11.100

8.505

April 20. 1989

C itizens S tate Bank o f Luling
Luling. Texas

37.400

606.100

784.700

515.801

April 21. 1989

N ational B ank o f A laska
A nchorage, A laska

S em inole N ational Bank
H ollyw ood, Florida

2.700

6.700

1,390

April 27, 1989

Fam ily B ank o f H allandale
H allandale, Florida

B ank of Lakew ood. N.A.
Lakew ood. C olorado

1,400

9.900

8.900

3,707

A pril 27. 1989

B ank O f Lakew ood
Lakew ood. C olorado

K aty N ational Bank
K aty. Texas

9.900

47.000

50.700

30.425

M ay 4. 1989

First Bank
N avasota. Texas

First National Bank of East Baton Rouge
Baton Rouge, Louisiana

1.800

32.000

34.300

17.577

M ay 4. 1989

First N ational B ank in St. M ary Parish
M organ C ity, Louisiana

G reater Te xa s B ank Leander
Leander, Texas

3.600

20.300

22,700

21.235

M ay 4 ,1 9 8 9

Hill C o un try Bank
Leander. Texas

Lexington State Bank
Lexington, Texas

2.300

13.400

13,000

7.283

M ay 11. 1989

C entral B ank of H ouston
H ouston. Texas

Lewis C ounty S avings and Loan Co.
W eston. W e st V irginia

700

3.900

39.400

2.602

M ay 12. 1989

C om m unity Bank & Trust. N.A.
Fairm ont. W e st V irginia

C ontinental N ational Bank
S an A ntonio. Texas
A lliance Bank
A nchorage. A laska

1 0 6

The First N ational B ank o f G ordon
G ordon. Texas

1.800

11.800

11.300

1.291

M ay 18. 1989

The First N ational B ank of A lbany
A lbany, Texas

S ecurity B ank and Trust C om pany
W harton, Texas

6.300

36.900

35,900

21.212

M ay 18. 1989

First N ational Bank of El C am po
El C am po. Texas

First N ational Bank at O sw ego
O sw ego. K ansas

3.500

22.200

21.800

2.321

M ay 18. 1989

P arsons C om m ercial Bank
O sw ego. K ansas

The Bank of E dm ond. N.A.
E dm ond. O klahom a

1.700

7.500

8.000

830

M ay 18. 1989

First Interstate B ank o f O klahom a. N.A.
O klah o m a City. O klahom a

2.900

28,300

20.800

7,916

M ay 24, 1989

M idSouth N ational Bank
Lafayette, Louisiana

1,900

26.600

26.100

24,924

M ay 24, 1989

P eoples Bank & T ru st of St. B ernard
C halm ette. Louisiana

Liberty National Bank
D allas. Texas

5.800

62.500

61.400

50.637

M ay 25. 1989

C ornerstone Bank. N.A.
Dallas. Texas

The First S tate Bank
Forgan. O klahom a

1.600

10.800

10.100

1.725

M ay 25. 1989

The Bank o f B eaver City
B eaver. O klahom a

Treasure S tate Bank
G lasgow , M ontana

12,800

13.800

12,800

4,459

June 9 ,1 9 8 9

V alley Bank o f G lasgow
G lasgow , M ontana

H elotes S tate Bank
H elotes, Texas

3,300

19.400

18,800

6.202

June 1 5 .1 9 8 9

Bank of Leon S prings
S an A ntonio. Texas

N orthern Bank & Trust
Fort Collins, C olorado

900

6.300

6,000

1.428

June 1 5 .1 9 8 9

U nion C olony Bank
G reeley. C olorado

700

5.500

5,400

2.690

June 22, 1989

S equor N ational B ank Texas
D allas, Texas

C om m erce and E nergy
Bank of Lafayette
Lafayette, Louisiana
First E astern B ank & T ru st C om pany
New O rleans. Louisiana

P reston North N ational Bank
D allas, Texas

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Name and Location

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO’s)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

N ew Ulm S tate Bank
N ew U lm , Texas

2.400

10.800

10.300

4,073

June 29. 1989

Industry S tate Bank
Industry. Texas

H obby C om m unity Bank
Houston, Texas

1,200

7,400

7,300

7,188

Ju n e 29, 1989

lola S tate Bank
lola, Texas

8.500

40,600

41.400

26,295

June 30. 1989

D eposit G uaranty Bank
Dallas. Texas

3,200

13,500

13,400

6,712

July 13, 1989

B ank of St. Joseph & T ru st C om pany
St. Joseph, Louisiana

N ational Bank o f C om m erce
B row nsville, Texas

6.300

30.900

31.800

28,754

July 13. 1989

Texas C om m erce B ank-R io G rande
B row nsville, Texas

U tica N ational Bank & T ru st C om pany
Tulsa, O klahom a

2,100

157,700

173,500

113,964

July 20, 1989

F&M Bank & Trust C om pany
Tulsa, O klahom a

49.000

49.400

Ju ly 20, 1989

Texas A m erican Bridge Bank, N.A.
Fort W orth. Texas

N/A

1,990,600

1,312,100

1,319

Ju ly 20, 1989

Texas A m erican Bridge Bank, N.A.
Fort W orth, Texas

66,600

65,700

July 20, 1989

Te xa s A m erican B ridge Bank, N.A.
Fort W orth, Texas

N/A

67,200

67,400

July 20, 1989

Texas A m erican Bridge Bank, N.A.
Fort W orth, Texas

41.000

39,100

July 20. 1989

T e xa s A m erica n B ridge Bank. N.A.
Fort W orth, Texas

Texas American Bank/Duncanville, N.A.
Duncanville, Texas

N/A

218,500

214,900

July 20, 1989

Texas A m erican Bridge Bank, N.A.
Fort W orth, Texas

Texas American Bank W ichita Falls, N.A.
W ichita Falls, Texas

66.700

64,400

July 20, 1989

T e xa s A m erican Bridge Bank, N.A.
Fort W orth, Texas

Texas A m erican B ank/D allas, N.A.
Dallas, Texas

N/A

227,300

253,600

July 20. 1989

Texas A m erica n B ridge Bank, N.A.
Fort W orth, Texas

Texas A m erican B an k Denison, N.A.
Denison, Texas

139.300

137.800

July 20, 1989

Texas A m erican Bridge B ank. N.A.
Fort W orth. Texas

Texas American Bank McKinney, N.A.
M cK inney, Texas

168,400

166,700

July 20, 1989

Te xa s A m erican Bridge Bank, N.A.
Fort W orth, Texas

Texas A m erican Bank
B reckenridge, N.A.
B reckenridge, Texas

85.700

86.200

July 20. 1989

Texas A m erican Bridge Bank, N.A.
Fort W orth, Texas

Texas A m erican Bank
Farm ers Branch, N.A.
Farm ers Branch, Texas

N/A

49,400

47,900

July 20, 1989

T e xa s A m erican B ridge Bank, N.A.
Fort W orth, Texas

Texas A m erican B a n k T y le r. N.A.
Tyler, Texas

148,300

140.900

Ju ly 20. 1989

Texas A m erican Bridge B ank, N.A.
Fort W orth. Texas

Texas A m erican B ank/P lano, N.A.
Plano, Texas

N/A

35,500

36,400

Ju ly 20, 1989

Texas A m erican Bridge Bank, N.A.
Fort W orth, Texas

Texas American Bank Longview, N.A.
Longview , Texas

92,900

93.500

July 20, 1989

Te xa s A m erican B ridge Bank, N.A.
Fort W orth, Texas

First N ational B ank of Richardson
Richardson, Texas
The S terlington Bank
S terlington, Louisiana

Texas A m erican Bank
D allas-P restonw ood. N.A
D allas, Texas
Texas Am erican Bank Ft. W orth, N.A.
Ft. W orth, Texas
Texas A m erican Bank
F orum -A rlington. N.A.
A rlington, Texas
Texas American Bank/Dallas-LBJ, N.A.
Dallas, Texas
Texas A m erican Bank
G reater S outhw est
G rand Prairie, Texas

107

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Texas American Bank Richardson. N.A.
R ichardson. Texas

43.100

40.600

July 20. 1989

Te xa s A m erican B ridge B ank. N.A.
Fort W orth. Texas

Texas American Houston-Galleria, N.A.
Houston, Texas

300,000

351,300

July 20, 1989

Te xa s A m erican Bridge Bank, N.A.
Fort W orth, Texas

Texas American Bank Southwest. N.A.
Stafford. Texas

38.200

41,100

July 20, 1989

Te xa s A m erican B ridge B ank, N.A.
Fort W orth. Texas

Texas A m erican B an k A m arillo. N.A.
A m arillo, Texas

222.200

207,100

Ju ly 20, 1989

Te xa s A m erican B ridge B ank. N.A.
Fort W orth. Texas

Texas A m erican Bank M idland, N.A.
M idland, Texas

146,000

133,600

July 20, 1989

Te xa s A m erican B ridge B ank, N.A.
Fort W orth, Texas

Texas A m erican B ank T e m p le . N.A.
Tem ple. Texas

69.000

68.100

July 20, 1989

Te xa s A m erican B ridge Bank, N.A.
Fort W orth. Texas

198.500

181.100

July 20, 1989

Te xa s A m erican B ridge B ank, N.A,
Fort W orth, Texas

N/A

145,100

140,700

July 20, 1989

Te xa s A m erica n B ridge B ank, N.A.
Fort W orth, Texas

Texas A m erican Austin, N.A.
Austin, Texas

144,400

180,900

July 20, 1989

Te xa s A m erican B ridge B ank, N.A.
Fort W orth, Texas

Fidelity Bank
S cottsdale, A rizona

1,600

10,600

11.000

6,488

July 21. 1989

The B ank o f Fountain Hills
Fountain Hills, A rizona

Hidalgo County Bank & Trust Company
M ercedes, Texas

5,000

17,600

17,300

10,456

July 26, 1989

The First N ational B ank o f La Feria
La Feria, Texas

The Texas Bank & Trust C om pany
S w eetw ater. Texas

900

31,800

19.000

18.098

July 27. 1989

First N ational B ank. S w eetw ater
S w eetw ater. Texas

2,400

8,900

9.500

8,064

July 27, 1989

U nion N ational B ank, Austin
A ustin, Texas

Texas A m erican Bank Levelland
Levelland, Texas
Texas A m erican B ank Fredricksbura,
N.A.
Fredricksburg, Texas

1 0 8

B rushy C reek N ational Bank
Round Rock, Texas

Total
Deposits
(SOOO’s)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

Class
of Bank

Name and Location

Total
Assets
(SOOO's)

FDIC
Disburse
ments
(SOOO’s)

Number of
Depositors
or Accounts

Barnard S tate Bank
B ernard. K ansas

800

4,800

5.000

2,862

A ug u st 3, 1989

S aline V alle y Bank
Lincoln, K ansas

First Bank and T ru st C om pany
Yale. O klahom a

4.000

26.500

14,997

A ugust 3, 1989

M annford S tate Bank
Yale. O klahom a

2,500

15,900

18.600

18,451

A ug u st 3, 1989

The Frost N ational B ank o f San A ntonio
San A ntonio, Texas

6,500

57,400

54.600

41,926

A ug u st 17, 1989

First City, Te xa s-B e a u m on t, N.A.
B eaum ont. Texas

10,700

34.500

34.200

15,781

A ug u st 17, 1989

First N ational B ank of Tem ple
Tem ple, Texas

First State Bank M cK inney
M cK inney, Texas

3,800

18,500

20,500

13,160

A ug u st 17, 1989

First Bank
F a rm ersville, Texas

First State Bank
P flugerville. Texas

5.300

29.500

30.600

22,986

A ugust 24, 1989

H ibernia N ational B ank in Texas
P flugerville, Texas

Troup Bank & T ru st Co.
Troup, Texas

3.500

22.900

23.600

11,508

A ugust 2 4 ,1 9 8 9

First N ational Bank of Ja ckson ville
Ja cksonville, Texas

Fanners S tate B ank of Y um a
Y um a, C olorado

3,500

29,300

22,500

5,931

A ugust 24, 1989

First S ecurity Bank
Fort Lupton, C olorado

Liberty Bank
G lendale. A rizona

2.800

23.500

25.700

12.787

S eptem ber 1. 1989

C om m un ity Bank o f A rizona
W ickenburg, A rizona

U niversity N ational Bank
San A ntonio, Texas
First State Bank
Liberty. Texas
C itizens N ational Bank o f Killeen
Killeen, Texas

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Name and Location

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

8,000

37.400

36.700

37.593

S eptem ber 7. 1989

Jo n esville Bank & Trust C om pany
Jo nesville. Louisiana

5,700

24,700

27,100

27,338

S eptem ber 7 .1 9 8 9

H ibernia N ational Bank in Texas
P flugerville. Texas

First B ankers T ru st o f B ossier City
B ossier City, Louisiana

2.600

26,400

27.800

29.669

S eptem ber 14. 1989

First A m erican B ank & T ru st o f Louisiana
M onroe. Louisiana

Kirby State Bank
Kirby, Texas

3.600

15,800

15.800

15.927

S eptem ber 14, 1989

S chertz B ank & Trust
Schertz, Texas

2.300

16.500

12.400

22.000

S eptem ber 14, 1989

First City, Texas-S an A ntonio. N.A.
San A ntonio. Texas

R ose C apital Bank
T yler, Texas

9.800

55.400

53.400

53.857

S eptem ber 21, 1989

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

The Farm ers S tate Bank
Lym an, N ebraska

1.300

4.900

4,700

4.667

S eptem ber 22, 1989

First N ational Bank in M orrill
M orrill. Nebraska

N ational Bank o f A rizona
S cottsdale, A rizona

1.100

11.700

11.900

11.950

S eptem ber 28, 1989

S ecurity P acific Bank. N.A.
S cottsdale, A rizona

T he O lla State Bank
O lla, Louisiana

3,000

21,000

20,800

21,055

O ctober 5, 1989

Jo n esville Bank & Trust C om pany
Jonesville, Louisiana

Straw n S ecurity Bank
Straw n. Texas

2.600

13,800

13.500

13.588

O ctober 5. 1989

The First N ational Bank o f A lbany
A lbany. Texas

C om m onw ealth Bank
A rlington, Texas

23,100

66,600

73,400

98,730

O ctober 5 .1 9 8 9

C om erica B ank-Texas
D allas, Texas

1.300

3.700

3.600

3.214

O ctober 5. 1989

Bank N orthw est
S team boat S prings, C olorado

First Bank
C olorado S prings, C olorado

6.100

35,000

30.300

32,008

O ctober 6 ,1 9 8 9

C olorado N ational B ank-E xchange
C olorado S prings, C olorado

C itizens Bank
G alveston. Texas

4.900

28.900

29.100

29.324

O ctober 12, 1989

Bank o f G alveston. N.A.
G alveston. Texas

N orth Bank, N.A.
O klahom a City, O klahom a

3,200

9.500

10,100

10.358

O ctober 12. 1989

The L iberty N ational B ank & Trust C om pany
O klahom a City, O klahom a

Park A venue Bank, N.A.
O klahom a City, O klahom a

1,100

17.000

13.000

13.145

O ctober 1 9 .1 9 8 9

Founders Bank & Trust C om pany
O klah o m a City. O klahom a

B eaum ont Bank. N.A.
B eaum ont, Texas

1.800

23.800

22.100

22.551

O ctober 19. 1989

T e xa s C om m erce B ank-B eaum ont
Beaum ont. Texas

C entury Bank
P hoenix, Arizona

9,500

117,700

117,500

121.015

O ctober 19. 1989

C e ntu ry Bank
P hoenix. Arizona

First C onsolidated B ank-Ferris
Ferris. Texas

2.700

9.500

4.100

9.580

O ctober 20. 1989

First C ity Texas-B ryan. N.A.
B ryan. Texas

First C onsolidated B ank-H illsboro
H illsboro, Texas

2,600

8,900

8,700

8,712

O ctober 20, 1989

First State Bank
H ubbard, Texas

First C o nsolidated B ank-B uda
Buda. Texas

3.600

12,800

12.800

13.851

O ctober 20. 1989

A ustin N ational Bank
Austin. Texas

First C onsolidated B ank-R osebud
R osebud, Texas

2.900

14,500

14,200

14,337

O ctober 20, 1989

First C ity Texas-B ryan, N.A
B ryan, Texas

First C o nsolidated B ank-Lancaster
Lancaster, Texas

3.300

15.500

16.700

16.759

O ctober 2 0 .1 9 8 9

First C ity T e xas-B ryan. N.A.
B ryan. Texas

The La S alle State Bank
Jena, Louisiana
Thousand O aks N ational Bank
San A ntonio, Texas

MedCentre Bank, National Association
San A ntonio, Texas

First N ational Bank of Vail
V ail, Colorado

109

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Name and Location

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO's)

Total
Deposits
(SOOO's)

FDIC
Disburse
ments
(SOOO's)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

2.200

11.000

11.300

11.371

O ctober 26. 1989

K aplan S tate Bank
K aplan. Louisiana

First S ecurity B ank & T ru st C om pany
Haughton, Louisiana

6,500

19.000

19,200

19.375

O ctober 2 6 .1 9 8 9

Tri-S tate B ank & Trust
H aughton, Louisiana

Bank o f St. Charles
St. Rose. Louisiana

13,100

62.500

62,500

63,314

N ovem ber 2. 1989

First A m erica n B ank and T ru st - V acherie
V acherie, Louisiana

The Lee S tate Bank
B row erville. M innesota

3,800

13.400

13.500

13.630

N ovem ber 9. 1989

First N ational B ank o f Long Prairie
Long P rairie. M innesota

United N ational B ank of Plano
Plano, Texas

4,200

27.300

28,100

28,453

N ovem ber 9. 1989

H ibernia N ational in Texas
P flugerville, Texas

C ity N ational Bank o f Plano
Plano. Texas

10.500

52.200

66.900

67.784

N ovem ber 9. 1989

C om pa ss B ank-P lano
Plano. Texas

National Industrial Bank of Connecticut
M eriden, C onnecticut

7.300

43,300

44.600

44,600

N ovem ber 9 .1 9 8 9

C entral Bank
M eriden, C onnecticut

Love Field N ational Bank
Dallas, Texas

5.100

26.100

27,200

27,325

N ovem ber 1 6 ,1 9 8 9

H ibernia N ational in Texas
P flugerville, Texas

E xecutive N ational Bank
S an A ntonio. Texas

1.700

6.300

8.000

8.115

N ovem ber 1 6 .1 9 8 9

H ibernia N ational in Texas
P flugerville, Texas

G reater Texas B ank, North, N.A.
A ustin, Texas

4.300

21.500

24.600

24.690

N ovem ber 30, 1989

H ibernia N ational in Texas
P flugerville, Texas

Greater Texas Bank, Southwest. N.A.
Austin. Texas

4,900

31,300

29,200

29.250

N ovem ber 30, 1989

N C N B D allas. N.A.
Dallas, Texas

Central D akota Bank
Lehr, North D akota

2.700

12.800

12.700

12.808

D ecem ber 1, 1989

S ecurity S tate Bank
W ishek. North D akota

First S ecurity Bank o f G lendive
G lendive, M ontana

5,500

32.600

31.900

31.204

D ecem ber 1, 1989

The First N ational B ank o f G lendive
G lendive. M ontana

A ledo S tate Bank
A ledo. Texas

2.300

9,200

9,000

9.081

D ecem ber 7, 1989

The C itizens N ational Bank of W eathe rfo rd
W eatherford. Texas

A tlantic N ational Bank
Norfolk, V irginia

3.100

15.200

14.100

14.166

D ecem ber 7. 1989

N ew A tlantic B ank. N.A.
Norfolk. V irginia

First N ational B ank of Frisco
Frisco. Texas

2,600

7,100

7.700

7,759

D ecem ber 7, 1989

H ibernia N ational B ank in Texas
P flugerville, Texas

First C om m erce N ational Bank
Phoenix. A rizona

2,800

17,100

18.700

18.376

D ecem ber 7, 1989

C itibank
Phoenix. A rizona

1.100

6.700

6.900

1,791

D ecem ber 8. 1989

Helm Bank
M iam i, Florida

3,200

39.200

48.700

48,929

D ecem ber 8 ,1 9 8 9

H ibernia N ational in Texas
P flugerville. Texas

11.500

75.900

66.700

73.242

D ecem ber 8 .1 9 8 9

R apides Bank & T ru st C om pany
A lexandria. Louisiana

M idlothian N ational Bank
M idlothian. Texas

2.800

10.100

10.300

10.445

D ecem ber 13. 1989

The First N ational B ank in Jo shua
Joshua, Texas

C ity N ational B ank of Sayre
S ayre, O klahom a

3,100

20.500

22.000

22,131

D ecem ber 13, 1989

First S tate B ank and T ru st C om pany
H ollis, O klahom a

7.300

42.800

41,000

41.761

D ecem ber 14. 1989

A m erican S ecurity Bank o f V ille Platte
Ville Platte. Louisiana

W estern N ational Bank of Louisiana
K aplan. Louisiana

110

O range S tate Bank
M iam i. Florida
W e stheim er M em orial Bank, N.A.
H ouston, Texas
First Bank
Pineville. Louisiana

First A cadiana Bank
E unice. Louisiana

Table 123.
Insured Banks Requiring Disbursements by the Federal Deposit Insurance Corporation During 1989

Name and Location

Class
of Bank

Number of
Depositors
or Accounts

Total
Assets
(SOOO’s)

Total
Deposits
(SOOO’s)

FDIC
Disburse
ments
(SOOO’s)

Date of Closing,
Deposit Assumption,
Merger, or Assistance

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

C anyon Lake Bank
C anyon Lake, Texas

4,900

29,100

28,900

29,104

D ecem ber 1 4 ,1 9 8 9

V icto ria B ank and T ru st C o m pany - W est
New B raunfels, Texas

North S ide S tate Bank
Tulsa, O klahom a

5,100

18.600

19.700

19.852

D ecem ber 14, 1989

B ank of Tulsa
T ulsa, O klahom a

First A m erican B ank and Trust
North Palm Beach, Florida

87,400

917,600

940,800

D ecem ber 1 5 ,1 9 8 9

First A m erican B ank and Trust, N.A.
North Palm B each, Florida

U nited C om m unity Bank
W estlake Village, C alifornia

1.600

26.600

24,300

24,370

D ecem ber 2 0 .1 9 8 9

O lym pic N ational Bank
Los A ngeles, C alifornia

M arch 28. 1989
M arch 29, 1989

Banc O ne C orporation
C olum bus, O hio

Texas A m erican B ridge Bank, N.A.
Fort W orth. Texas

4,752.900

4,120,300

1.479

July 20, 1989

D e po sit G ua ra nty Bank
D allas. Texas

First A m erican-B ank and Trust, N.A.
North Palm Beach, Florida

917,600

940,800

77,000

73,000

2,370

Bridge Banks
The D eposit Insurance
Bridge Bank, N.A.
D allas, Texas

2.732,850

D ecem ber 15, 1989

Assistance Transactions
M etropolitan Bank
San A ntonio, Texas

Ja nuary 3 0 .1 9 8 9

Te xa s Bank. N ational A ssociation
San A ntonio, Texas

Table 125.
Recoveries and Losses by the Federal Deposit Insurance Corporation
on Disbursements for Protection of Depositors, 1934-1989
(Dollars in thousands)
Lua n
iq id tio
sta sa d
tu n
A ca s
ll se
ye r of
a
d p sit
eo
p or N.
ayoff
stimte
o
te ries E a d
cove
d p sit
eo
o
f
D u toD c 3 , a d n l
isb rse
e . 1 d itio a
a mtio b n
ssu p n a ks m n
1 8 ■ c v rie Losses’
9 9 eoe s
e ts
T ta
ol

D p sit payoff ca e
eo
ss

A n T n ctio s6
ssista ce ra sa n

D p sit a p ca s5
e o ssum tion se

R co rie stimte
e ve sE a d
N.
o
R co rie E a d
e ve s stimte
N.
o
R co rie stimte
e ve sE a d
N.
o
e . 1 d itio a
o
f
D u to Dc 3 , a d n l
isb rse
e . 1 d itio a
of
D u to Dc 3 , a d n l
isb rse
e . 1 d itio a
of
D u toD c 3 , a d n l
isb rse
9 9 cove
an
ents3 1 8 re ries Losses1 b ks m
9 9 cove
an
ents
1 8 recove Losses1
99
ries
bn
a ks m n
e ts2 1 8 re ries Losses1 b ks m

1 4 5 ,5 4 6 2 ,2 0 7 5 2 ,1 0 2 ,4 4 7
,6 4 1 3 ,9 1 3 8 ,6 7 ,8 0 3 2 3 ,1 4

5 2 8 4 .5 4 4 8 ,2 6 1 3 ,9 6 2 2 ,3 2
3 ,5 2 1 ,1 1 2 ,5 7 3 3 3 5

9 7 2 ,6 0 6 1 ,9 2 7 2 1 ,3 9 8 9 ^4
5 3 6 ,3 4 2 5 ,6 1 ,3 1 4 ,3 6 4

1 5 1 ,3 2 0 6 4 ,7 0 1 7 ,8 5 1 ,2 4 7
5 9 3 ,1 3 ,1 6 8 ,9 0 4 1 1 ,4 8

Ya
e r4
1934
‘ 935
1936
•9 37
1938

■9

75
74

941
25
69
20.204
3 ^.39*

734
9108
'5 .2 0 6
•6 532
31.969

207
2
6423 685
-2.87 3

60
43
2 5 ,0 6 '
20
5

81,828
87,899
24,470
" ,6 V
7,107
7,230

74,676 7,152
84 .-0 3

2.425

1939
1940
1941
1942
1943
1944
1945
1946
1947
19*8

112

2
1
1
5
3

1,532
1,492
1,845
1,845
274 274
2.038 ’ 979
3,150
2.509

1949
1950
1951
1952
•9 53

4
4
2

2,685
2,316
4,404 3,019
1,986
1.986
3
1.525
5.359
5.359

10.996 688

5
2
1
*

7,315
3,499
1.031
3,051

1959
■960
1961
1963

1
5
2

3
-.835
4.765
4.765
6,201
4.699
19.172 18,886

'9 6 4
'9 6 5
•9 66
•9 67
1968

7
4

'3 .771 2
5
’ 0,020
8.097
3

26,196
20,399 5.797
4,895
4.313
3.796
•2 8
065
5 9’ ’ 2 2 7 8
6
1 .6 '2
• 3 2 0 292
4
5 37?
-23 5 5 0 0
'2 3

28
24
7
-4
'

404
40

364

1
1

207
2 ,i4 9
3082
0
6476
•3 3 87.471
7839 6 8 -4
25302
24 .0 6!

258
4
4.438
4.208
230
1 213 2,795 2,582
1
-.031
1.031
2
2.768
28 7 9 6
3

42,072
41,910
9
51.294
51.566
0
171.646
1 7 -4 3 0
-4.49 3
16.-89
0
6
-3 5 .2 3 8
368.852

-8 3 5
4 765
6,2
1.5020 ’
2
19,172
286
1

80
272
23
•6 9 6

59
64'
369
1.385
792
1.525

3
2

1.541
0
10.816
234
245
0
1.010
•2
0

378
396

2.685
2.316
4.404 3.019
1.986
1.986

733792

1.738 97

1,355
3.214

1.128
1.128
1.845
1.845
274
274
1
2038
'9 7 9
31 50 25 09

4
4
2

369
1,385

933
995
•0 2 5
* .2 4 ‘

55.632 54,277
83.004 79.790
582
213 7 8 3
•2
•2 4 0 5
•0 072
9.676
•7 3 0
•7 3 0

5
3

59
64-

7,085
3.286
1.031
3.023

12,171
11,479
9.541
7.087
6.464
6.476

’
27
9 7 - 8 25
24

771
•.029

1954
1955
1956
1957
1958

94'
734
9
4 274
1.752
24
6.026
42
7735
6397
2.333
3.672
50
'2 .3 6 5 2 647
1,184
509.092
7.908

7
0
’
4

13,712
•0 9 0 8
735
8.097

213

2
1.029
• 230 2 8 7 7
'
704
1

771

258
2.877

704

28 255

255

•5 0 2
286
0
3

1.541
5 -7
0

571

425
6 234

7.513
28993
53 574

•4 6
9.285 245 8.806

i. 0 ' 0
6.464

4 82 7.596
4
29 2 6 5
53
5 •93 7 6 7
•
•6 1 8 9
! 6 .7 7 ’
0
66.386

733

5359

•7 3 8
4 765
4 6995
18,886

12.171
663 10.391
735
7087

5.359

82
0

5
272
'•7 .8 7 9

34,397
34,476

12
6.476

3
79
22.301

1969
1970
•9 7 '
•972
•9 73

7
6
'

1974
1975
1976
•977
•978

4 2,403,277 2,259.633 143,604
40
292,431
23,303
16.312
13
332,046
4 559.030
0 .'’ 1
247
16
599.388
6
26.650 20.654
3.903
2093
511.717
26 637,015
7 5^7 369
9

1979
1980
198'
'9 8 2
•983

7
9.934
8.939
59
938 80.415
65.231
5.250
5.309
3
9.936
10
90,35!
74,170 10.872
2 .2 -7
7
•3,732 3 11.515
0
138,623
103,245
7,010
28.368
1 ’ 4,760
7,010
30,585
10
152,355
2
35,736
32.878.627
1231
5
79,208
33,463 2.227 43,518 3
883.489 298,847
'0
998,433
365,188
4 5 .’ 45
588.100
7
277 198 199.245
7 697
70 25 6
26
4-6 .7 1 9
3-6 .7 99
75,1651.500.74824.755
298.750
42
82.862 1.297.009
2.194.665 814,794
26444
'3
14 72 87
" 5 8 - 2 5.031
71.992
9
36 3 3 8 6 9 3 1 .81 11 56 3 .2 6 4 1.442.511
3
48 3 .6 0 6.2-0 • 926.968 •.5 2 -. 549
157.693

19847
1985
1986
1987
1988
1989

80 7,598.464 4.874.304 818.053 1,906,107
120 2 ,71 6.13’ 1.405,026 876,774
434,331
2,470,171
347,112
145 4,631,801
1,814,518
203 4.895.387 2.215.985
531,813
0635*
22'
’ 3231.770 7 2 '4 6 . - 8 5 6.022.068
60
207 8 .3 7 7 9 3 8 ' 2 8 ' 5 9 2
' 006.722 8 9 6 2 4

3
11.416

8*7

•4493

16.771

0
0
0
3

25.849
25.918
9 660
6 ’3

-9 3
•6 9 6

3
’ •7 8 5 6

4 '8 .4 6 7 3 3 5 2 0 8 ’

1 68
'6 8 3
0

204

22 .3 0'

23
0

66.386

4
10

2.403.2772,259,633 143.604
40
16.244
30 6 7 2 8
266.582
23.302
•7549.370
4
73
•3
587.972
6
2 6 6 5 0 20.654
3.903
2093
2 6 6 3 7 8.811
6
546 552 5 " 104

42 .-7 0
- ’ 0 .0 -9
'6
7 7 0 1 9 06 ’ 8.00"
87
29
514.878 372 554
26.789
-15.535
98
40 1,155,722
654.955
71.718
429.049
2.094.34- 1.048.833 287,457 758.051
2,147.589
51
-.249.989
583.656
195.650
470.683
36
32 -.948.237 233.442 898.053 8 '6 742
•2 9

62864.537 9 .9 128.558
•3 3
0
446.8*5
537.492
75 86 .4 99
887.368
•61,639
3.241,514 1.805.462
1.229.021
207,031
244,327
133 2 6 3 2 5 8 0 1.-65.385 1.222.868
2 .7 3 7 8 8 7 '2 347 9.’ -5 •8 2 .3 ’ 7 2.076.455
3 .3 0 3 8 7 01.048 7 04 987.060 •.26 8.70 6

38.428

62
46

0
0

584,642
91,201,998
0
52,594
19.398

5.488.3643 .3 9 : 766 747.325 1,349.273
4
614,754
145.104
245,903 223,747
9,754
7
68,363
156,44
234.565
1,767
29
’9
168,466
166,670
7.243.8942.000.746 1.768,2183,474,930
46 (87 8.39 -) 4,004,17
3725831

'I n d i c e s estim ated lo sses in active cases. Not a d ju s te d t o interest or allo w able
w hich was c o llectec in som e case s in which the disbursem ent w a s fully ■ e c o w e a
in c lu d e s es’im atea acd ition al disbursem ents in active cases.
.
3Excludes excess collectio ns turned over to banxs as additional pu rchase pric e at term in ation of liquidation.
" N o case in 1962 required disbursem ents.
50e p o s it Assum ption Cases in clud e $347.6 million o ‘ disburse m en ts ‘ o ' ad vances to protect assets and liquidation expenses which hac been exclude d in p n o ' years.
6 A ssistance t r a c t i o n s ' in clude: a) B anks m ergeo with ‘ m anciai assistance ‘ 'o n FDIC to pre vent p ro bab le ‘ a iL re Iti'o u g h '9 8 8 .
b) S2 255 6 m illion of reco rded liabilities at b o ok value payab le o v e r future years.
'In d u c e s CINB A ssistance A g reem ent w h ich hac been pre viou sly excluded.
http://fraser.stlouisfed.org/
“ A ssistan ce losses, in 1988 an c *989. in c lu d e estim ated costs payab le in future years.

Federal Reserve Bank of St. Louis

Table 127.
Income and Expenses, Federal Deposit Insurance Corporation,
by Year, from Beginning of Operations, September 11, 1933, to December 1989
( D o lla rs in m illio n s )
Income
Assessment
Income

Expenses and losses
Deposit insurance
losses and
expenses

Administrative
and operating
expenses

Net Income
added to deposit
insurance fund3

2,804.8

13,209.5

4,132,3
7,364.5
3,066.0
2,783.4
1.778.7

213.9
223.9
2049
180.3
179.2

(851.6)
(4,240,7)
48.5
296.4
1.427.5

1.848.0
834.2
869.9
720 9
(3 4 6 )

151.2
135.7
129.9
127.2
118.2

1,100,3
1,658.2
1,524.8
1.226.6
1.226.8

Assessment
Credits

Investment and
other sources'

6,709.1

21,380.2

26,591.5

23,706.1

1,609.6
1,574,7
1,623.4
1.743.2
1,952.0

4.346.2
7.588,4
3,270.9
2.963.7
1,957.9
1.999.2
969 9
999.8
848.1
83.6

Year

Total

39,801.0

25,129.9

1989
1988
1987
1986
1985

3 .4 9 4 6
3,347.7
3.319.4
3.260.1
3.385.4

1,885.0
1,773.0
1,696.0
1.516.9
1.433.4

19846
1983
1982
1981
1980

3.099.5
2,628.1
2,524,6
2,074.7
1.310.4

1.321.5
1,214.9
1,108.9
1,039,0
951.9

164.0
96.2
117,1
521.1

1.778.0
1,577.2
1.511.9
1,152.8
879.6

1979
1978
1977
1976
1975

1.090.4
952.1
837,8
764 9
689.3

881.0
810.1
731.3
676.1
641.3

524.6
443.1
411.9
379.6
362.4

734.0
585.1
518.4
468.4
410.4

93.7
148.94
113.6
212.3“
975

(1 3 1 )
45.6
24.3
31.9
29.8

106.8
103.3
89.3
180,4-"
677

996.7
8032
724.2
552.6
591,8

1974
1973
1972
1971
1970

668.1
5 61.0
467.0
415.3
382 7

587.4
529.4
468.8
417.2
369 3

285.4
283.4
280.3
241.4
2100

366.1
315.0
278.5
239.5
223.4

159.2
108.2
59.7
60.3
46.0

100.0
538
10.1
13.4
3.8

59.2
54.4
49.6
46.9
42.2

508,9
452.8
407.3
355.0
336.7

1969
1968
1967
1966
1965

335.8
2950
263.0
241.0
2146

364,2
334.5
303.1
284.3
260.5

220 2
202.1
182.4
172.6
158.3

191.8
162.6
142.3
129.3
112.4

34.5
29.1
273
19.9
22.9

1.0
0.1
29
0.1
5.2

33.5
29,0
24.4
19.8
17.7

301.3
265.9
235.7
221.1
191.7

1964
1963
1962
1961
1960

197.1
181,9
161.1
147.3
144.6

238.2
220.6
203.4
188.9
180.4

145.2
136.4
126.9
115.5
100.8

104.1
97.7
84.6
73.9
65.0

18.4
15.1
13.8
14.8
12.5

2.9
0.7
0.1
1.6
0.1

15.5
14.4
13.7
13.2
12.4

178.7
166.8
147.3
132.5
132.1

1959
1958
1957
1956
1955

136.5
126.8
117.3
111.9
1057

178.2
166.8
159.3
155.5
151.5

996
930
90.2
87.3
85.4

57.9
530
482
43,7
39.6

12.1
11.6
9.7
9.4
9.0

0.2

11.9
11.6
9.6
9.1
8.7

124.4
115.2
107,6
102,5
967

1954
1953
1952
1951
1950

99.7
94.2
88.6
83.5
848

144.2
138.7
131.0
124.3
122.9

81.8
78.5
73.7
70.0
68.7

37.3
34.0
31.3
29.2
30.6

7.8
7.3
7.8
6.6
7.8

0.1
0.1
0.8

7.7
7.2
7.0
6.6
6.4

91,9
86.9
80.8
76.9
77.0

1949
1948
1947
1946
1945

151.1
1456
1575
130.7
121,0

122.7
119 3
114.4
1070
93.7

28.4
26.3
43.1
23.7
27.3

6.4
7.0
9.9
10.0
9.4

0.3
0.7
0.1
0.1
0.1

06
4.8
5,8
5.8

6,1
5,7
5,0
4,1
3.5

144.7
138.6
147.6
120.7
111.6

1944
1943
1942
1941
1940

99.3
866
69.1
620
55,9

809
700
56.5
51.4
46.2

18.4
16.6
126
10.6
9.7

9.3
9.8
10.1
10.1
12.9

0.1
0.2
0.5
0.6
3.5

5.8
5.8
5,8
5.8
5.8

3.4
3.8
3,8
3.7
3.6

90.0
76.8
59.0
51.9
43.0

1939
1938
1937
1936
1935
1933-34

51.2
47.7
48.2
43.8
20.8
7.0

40.7
383
388
35.6
11.5

10.5
9.4
9.4
8.2
9,3
7.0

16.4
11.3
12.2
10.9
11.3
10.0

7.2
2,5
3,7
2.6
2.8
0.2

5.8
5.8
5.8
5.8
5.8
5.6

3.4
3.0
2.7
2.5
2.7
4 .2 5

34.8
36.4
36.0
32.9
9.5
-3.0

(4 )

Total

Interest on
capital stock2
80.6

o 'i
0.3
0.3

1.4

'In c lu d e s $689.1 m illion of interest and allo w a b le return received on funds a d v a n ce d to receiversh ip a rd d ep o sit a ssum ption ca se s and $843.4 m illion of interest on ca p ita l notes a d v a n ce d to
facilita te d e p o sit assum ption tra n sa ctio ns and a ssistance to o pen banks.
2Paid m 1950 and 1951. but a llo ca te d a m on g years to w hich it a p p lie d. Initial ca p ita l of $289 m illion was retired by p aym ents to the U.S. Treasury in 1947 a nd 1948.
A s s e s s m e n ts co lle c te d from m em bers of the te m p o ra ry insu ra n ce fu n d s w hich b ecam e insured u nd e r the p erm anent plan w ere c re d ite d to their a cco u n ts at the te rm ination of the te m p o ra ry
fu n d s and w ere a p p lie d to w a rd p aym en t of s u b se q u e n t a ssessm ents b e com in g due under the p erm anent insurance fu n d in g , resulting in no in co m e to the C orp o ration from a sse ssm e n ts d uring
the existe n ce of the te m p o ra ry in su ra n ce funds.
"In c lu d e s net loss on sales of U.S. G overnm ent secu rities of $10 5 .6 m illion in 1976 and $3.6 m illion in 1978.
5Net after d e d u c tin g
the portion of e xp e n se s and losses ch a rg e d to b an ks w ith d ra w in g from the te m p o ra ry insu ra n ce fu n d s on Ju n e 30. 1934.
6Revised due to restatem ent of D e ce m b e r 31. 1984 fin a ncia l statem ents.

113

Table 129.
Insured Deposits and the Bank Insurance Fund, 1934-1989
(D o lla rs in m illio n s )
Year
(December 31)

insurance
Coverage

Deposits in insured banks1
Total

Insured

Percentage of
insured deposits

Deposit insurance
fund

Ratio of deposit insurance fund to—
Total Deposits

Insured deposits

1989

100,000

2,465,922

1,873,837

76.0

13,209.5

.54

.70

1988
1987
1986
1985
1984

100.000
100.000
100.000
100,000
100,000

2,330,768
2.201,549
2.167.596
1.974.512
1.806,520

1,750,259
1,658.802
1.634.302
1.503.393
1,389.874

751
76.9
75.4
76.1
76.9

14,061.1
18,301.8
18.253.3
17.956.9
16.529.4

.60
.83
.84
.91
.92

.80
1.10
1.12
1.19
1.19

1983
1982
1981
1980
1979

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

1,690,576
1,544,697
1,409,322
1,324,463
1.226,943

1.268,332
1,134,221
988,898
948,717
808,555

75.0
73.4
70.2
71.6
659

15,429.1
13,770,9
12.246.1
11,019.5
9.792.7

.91
.89
.87
83
80

1.22
1.21
1.24
1.16
1.21

1,145,835
1.050,435
941,923
875,985
833,277

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

66.4
65.9
66.7
650
62.5

8,796,0
7,992,8
7,268,8
6.716.0
6.124.2

.77
.76
.77
.77
.73

1.16
1.15
1.16
1.18
1.18

1978
1977
1976
1975
1974
1973
1972
1971
1970
1969

114

4 0.0 00 6
4 0.0 00 s
40.000
40,000
40.000
20,000
20,000
20,000
20,000
20,000

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

465,600
419,756
374,568
349,581
313085

607
60.2
61.3
6 41
63.1

5.615.3
5,158,7
4,739,9
4,379,6
4,051.1

.73
.74
.78
.80
.82

1.21
1.23
1.27
1.25
1.29

1968
1967
1966
1965
1964

15,000
15,000
15,000
10,000
10.000

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

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

602
582
58.4
55.6
55.0

3.749.2
3,485.5
3,252,0
3,036.3
2.844.7

.76
.78
.81
.80
.82

1.26
1.33
1.39
1.45
1.48

1963
1962
1961
1960
1959

10.000
10,000
10,000
10,000
10,000

313 .30 4 2
297,5483
281,304
260,495
247.589

177.381
170,210
160,309
149,684
142.131

56.6
57.2
570
57.5
57.4

2.667.9
2.502.0
2,353.8
2,222,2
2.089.8

.85
.84
.84
.85
.84

1.50
1.47
1.47
1.48
1.47

1958
1957
1956
1955
1954

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

242,445
225.507
219,393
212,226
203,195

137.698
127.055
121,008
116,380
110,973

56.8
56.3
55.2
54.8
54.6

1.965.4
1.850.5
1,742.1
1,639.6
1,542.7

81
.82
79
.77
.76

1.43
1.46
1.44
1.41
1.39

1953
1952
1951
1950
1949

10,000
10,000
10.000
10,000
5,000

193.466
188.142
178.540
167,818
156,786

105,610
101,841
96.713
91.359
76.589

54.6
54.1
54.2
54.4
48.8

1.450.7
1.363.5
1.282.2
1,243.9
1,203.9

.75
.72
.72
.74
.77

1.37
1.34
.133
1.36
1.57

1948
1947
1946
1945
1944

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

153,454
154,096
148.458
157.174
134.662

75,320
76,254
73.759
67.021
56,398

49.1
49.5
49.7
42.4
41.9

1,065.9
1,006.1
1,058.5
929.2
804.3

.69
.65
.71
.59
.60

1.42
1.32
1.44
1.39
1.43

1943
1942
1941
1940
1939

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

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

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

43.4
36.5
39.7
408
42.9

703.1
616.9
553.5
496.0
452.7

.63
.69
.78
.76
.79

1.45
1.88
1.96
1.86
1.84

1938
1937
1936
1935
1934

5,000
5,000
5,000
5,000
5 ,000a

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

23,121
22,557
22,330
20.158
18,075

45.5
468
44.4
44.7
45.1

420.5
383.1
343.4
306.0
291.7

.83
.79
.68
.68
.73

1.82
1.70
1.54
1.52
1.61

'D e p o s its in fo re ig n b ra n ch e s are o m itte d from totals b e cau se th e y are not insured. Insured d e p o sits are estim a te d by a p p lyin g to d e p o sits at the re g u la r C all d a te s the p e rce n ta g e s as
dete rm in e d from the Ju n e Call R eport su b m itte d by insured banks.
D e c e m b e r 20, 1963.
D e c e m b e r 28. 1962.
“ Initial co ve ra g e w a s $ 2,5 00 from Ja n ua ry 1 to June 3 0 ,1 9 3 4 .
5$10 0 ,0 0 0 for tim e and sa vin gs d e p o sits of in-state govern m e ntal units p ro vid e d in 1974.
6$ 1 00,000 for Ind ividu a l R etirem ent a cco u nts and K eogh a cco u nts p ro vid e d in 1978.

Index
Accounting and Corporate Services,
Division of

41-47

Accounting Issues

20-21

68-70

Equal Opportunity, O ffice of

Agricultural Loan Loss Deferrals

Applications

ix, 7-10, 63

Examinations

54-55

Executive Secretary, O ffice of

15
44, 74, 77

Assessments
Asset Management and Sales
Assistance Transactions

28-29

vii, viii, 13-14, 27-28, 111

Automation Activities

22-23, 41-47, 54

18-19, 24-25

External Auditing

Failed Banks

vii, viii, ix, xvii, 6, 10-12, 26, 39

Federal Deposit Insurance Corporation
67, 69-70

Awards
Board of Directors

xii-xiii, 71, 74
xvii

Chronological Highlights
Bank Insurance Fund (BIF)

vii, viii, 10, 12,
74, 77, 81-98
1-4

Return on Assets, 1989,
FDIC-lnsured Commercial Banks

Basle Committee on Banking Supervision

Budget and Corporate Planning, O ffice of

Capital

7, 19

12-13, 27, 111
59-60

19-20, 45

Call Reports

x, xvn, 1a, 20, 21, 15

Capital Forbearance Program

17-18

Case Management System

37, 45
xiii

Clarke, Robert L.
Community Reinvestment Act

9, 62, 63, 64, 76

Com ptroller General of the U.S.

97-98

Consumer Affairs, O ffice of

62-64

Consumer Inquiries and Complaints

62-63

Corporate Communications, Office of

Deposit Assumptions
(see Purchase and Assumption Transactions)
Deposit Insurance Reform

Deposit Insurance Regulations

81-98

Financial Statements (BIF)

vii, viii, xi, xvii,
49, 50, 58
xvii, 34, 79

Management Committee

Officials, List of

Banking Industry, State of

Bridge Banks

Ethics Counseling

xiv

Organization Chart

xviii

Regional Directors

71-72

Standing Committees

xvi

Statistical Highlights
Federal Financial Institutions
Examination Council

9, 10, 20, 23

Federal Savings and Loan
Insurance Corporation (FSLIC) viii, 6, 26, 30, 32,
51-53, 65, 74, 79
32, 51-53,

FSLIC Operations, Division of
FSLIC Resolution Fund

26, 51, 53, 74

Financial Institutions Reform,
Recovery, and Enforcement
Act of 1989 (FIRREA)
vii-viii, xiii, 6, 14, 21,
24, 31, 32-34, 41-42,
51, 52, 57-58, 68, 74-76
First American Bank and Trust,
North Palm Beach, Florida

Fraud and Insider Abuse

General Accounting O ffice (GAO)

Highly Leveraged Transactions (HLTs)
Home Mortgage Disclosure Act
Hope, C.C., Jr.

viii, xvii, 10,
13, 26, 27
16-17, 58, 75

51, 61

6-7
9, 62, 63, 76
xii

115

Inspector General, Office of

Insured Deposit Payoffs

12, 100, 102

Insured Deposit Transfers

12, 100, 102-103

International Development and Finance
Act of 1989

Real Estate Loans
Recruiting

ix-x, 3, 4
6, 23, 25, 65-66, 67, 68, 70

Reports of Condition and Income
(see Call Reports)
Research and Statistics, Division of
Resolution Trust Corporation

Legal Case Management System
(see Case Management System)

ix-x, 2, 48-50
vii-viii, 26, 32,
36, 39, 74

Rules and Regulations 1989

Legal Division

77-80

32-40

Compliance and Enforcement Actions,
1987-1989

Cease-and-Desist Orders, 1987-1989

Savings Associations

vii-viii, x, 6, 8, 15, 21, 26,
30, 32, 34, 39, 40, 41, 48
51-53, 75, 78, 79, 80

Legislation Enacted in 1989

74-76

Legislative Affairs, Office of

57-58

Savings Association Insurance Fund (SAIF) 8, 15,
40, 74, 77

Liquidation, Division of

26-31

Seidman, L. W illiam

DOL Statistical Highlights, 1984-1989

Failed and Assisted Banks, 1989

Liquidation Asset Management
Information System (LAMIS)

116

MCorp, Dallas, Texas

viii, 13, 26, 27-28, 35, 38, 49

Merger Policy

Net Worth Certificates

O ffice of Thrift Supervision (OTS)

xiii, 8, 19, 21,
37-38, 52, 74

Off-Site Monitoring and Analysis

17, 19-20, 24

vii-xi, xii, xvii, 33,
49, 50, 56, 57, 60

Statistical Tables

99-114

Table 122-Number and Deposits
of Banks Closed, 1934-1989
Table 123-Banks Requiring
FDIC Disbursements During 1989

Number of O fficials and Employees
of the FDIC, 1988-1989
Problem Banks

65-67

112

Table 127-FDIC Income and Expenses,
September 11, 1933, to December 1989

113

Table 129-Insured Deposits and
the Bank Insurance Fund, 1934-1989

114

Supervision, Division of

6-25, 63

FDIC Examinations, 1987-1989

65
ix, 14-15

48-49

Assisted Banks by State, 1985-1989

FDIC Problem Banks, 1985-1989

Purchase and Assumption Transactions
12, 31,
100, 103-111

Quarterly Banking Profile

102-111

Table 125-FDIC Recoveries and
Losses on Disbursements to
Protect Depositors, 1934-1989

Failed Banks by State, 1987-1989
Personnel Management, Office of

101

FDIC Applications, 1987-1989

External Auditing Programs
of Banks, 1987-1988

Texas American Bancshares, Inc.
(TAB), Fort Worth, Texas

Training

Wall, M. Danny
Whole Bank Transactions

viii, xvii, 13, 26,
27, 28, 35, 38, 49
23, 60

xiii

The Federal Deposit Insurance Corporation
1989 Annual Report is published by:
The FDIC Office of Corporate Communications
Room 6068
550 17th Street, N.W.
Washington, D.C. 20429
Director:
Assistant Director:
Senior Writer-Editor:
Editorial Assistant:

Alan J. Whitney
Caryl A. Austrian
Jay Rosenstein
David Barr

Design and Printing Coordinator: Geoffrey L. Wade
Art Director:
Geri Bonebrake
Designer:
Sam Collicchio
Typography:
Mitchell W. Crawley
Deidre L. Woodward

Full text of Annual Report of the Federal Deposit Insurance Corporation : Annual Report, 1989

FRASER