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protecting
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savings




The Federal Deposit Insurance Corporation
(F D IC ) is the independent deposit insurance
agency created by Congress to maintain
stability and public confidence in the nation’s
banking system.
In its unique role as deposit insurer o f banks
and savings associations, and in cooperation
with the other federal and state regulatory
agencies, the FDIC promotes the safety and
soundness o f insured depository institutions
and the U.S. financial system by identifying,
monitoring, and addressing risks to the
deposit insurance funds.
The FDIC promotes public understanding
and sound public policies by providing
financial and econom ic information and
analyses. It m inimizes disruptive effects from
the failure o f banks and savings associations.
It assures fairness in the sale o f financial products
and the provision o f financial services.
The FDIC’s long and continuing tradition
o f public service is supported and sustained
by a highly skilled and diverse w orkforce that
responds rapidly and successfully to changes
in the financial environment.







FDIC

Federal Deposit Insurance Corporation
Office of the Chairman

Washington, DC 20429

September 11, 1996

Sirs,
In accordance with the provisions of section 17(a)
o f the Federal Deposit Insurance Act,
the Federal Deposit Insurance Corporation
is pleased to submit its Annual Report
for the calendar year 1995.

Sincerely,

Chairman

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

Table
of Contents
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O verview

2
4
6
9
12

14

Chairman’s Statement
Highlights
Condition o f the FDIC’s Funds
The State o f the Banking and Thrift Industries
Board o f Directors
Organization Chart/Officials
Operations of the Corporation

17
25
27
29
51

57
42

45
65
77

Supervision and Enforcement
Failed Institutions
Consumer Protection Activities
Significant Court Cases
Internal Operations
Regulations and Legislation
Regulations Adopted and Proposed
Significant Legislation Enacted

Financial Statements
Bank Insurance Fund (B IF)
Savings Association Insurance Fund (SAIF)
FSLIC Resolution Fund
S tatistical Tables

107
108
109
110
111

111
111




Number and Deposits o f Banks Closed, 1934-95
Recoveries and Losses on Disbursements-BIF, 1934-95
Income and Expenses-BIF, 1933-95
Insured Deposits and the BIF, 1934-95
BIF-lnsured Banks Closed During 1995
Income and Expenses-SAIF, 1989-95
Insured Deposits and the SAIF, 1989-95

115
116
118

For M ore Inform ation
Sources o f Information
Regional Offices
M ajor Speeches and Testimony







Chairman's
Statement

2

Much has changed since Congress
created the Federal Deposit
Insurance Corporation in 1933
to restore public confidence in
the nation’s banking system, but
banking today continues to rest
on public confidence, and public
confidence, in turn, rests on a
strong deposit insurance system.
During 1995, the extraordinary
profitability o f the commercial
banking industry translated into
declining numbers o f problem
and failed banks. The favorable
environment gave the Federal
Deposit Insurance Corporation
the opportunity to refine its
operations, both as a bank super­
visor and as a deposit insurer,
to reinforce the foundation it
provides for public confidence. By
striving for greater productivity
and enhanced performance, by
basing decisions on rigorous
analysis that included weighing
the costs and benefits o f our
actions, and by relying on upto-date management concepts
and technology, the FDIC moved
toward managing itself the way
that a business operates.
Our intent in all our actions is to
strengthen the deposit insurance
system, both directly or indirectly.
Our efforts would not have been
possible had not the banking
industry returned to health from
the crisis o f the late 1980s and
early 1990s. In the fourth con­
secutive year o f record earnings,
commercial banks reported
$48.8 billion in 1995, or a return
on assets o f 1.17 percent. Only
six comm ercial banks failed,
the fewest since 1977. The Bank
Insurance Fund (B IF ) fully
recapitalized at mid-year, with
$1.5 billion in insurance over­
payments refunded to members.
As a result o f recapitalization
o f the fund, the condition o f the
industry, and the commitment



o f the FDIC to reward well-run
institutions and to give w eaker
institutions an incentive to
improve, the FDIC Board of
Directors reduced BIF insurance
premiums for the best-rated
institutions to four cents per
$100 o f domestic deposits from
23 cents per $100, and, then,
at year-end, to the minimum
required by law o f $2,000 annu­
ally. M ore than nine-out-of-10
commercial banks w ere in the
best-rated category. The banking
industry deserved enormous
credit for rebuilding itself and
rebuilding the fund, and these
premium reductions in turn
contributed to further improve­
ments in the industry.
In 1995, the BIF was in the
strongest position it had experi­
enced since 1971, the last time
bank deposit insurance exceeded
1.25 percent o f insured deposits.
M eanwhile, the Savings
Association Insurance Fund
(SAIF) remained significantly
undercapitalized. At the end o f
1995, the SAIF held 47 cents for
each $100 o f insured deposits barely a third o f the $1.25
required by statute. An under­
capitalized SAIF jeopardized
the confidence that the FDIC
has spent six decades building.
Much effort was devoted to
designing, developing and
advancing a solution to the SAIF
problem, a solution that would
benefit every FDIC-insured
institution by strengthening the
deposit insurance system and
that would at last close the books
on the savings and loan crisis
o f the 1980s.
The strong economy and contin­
ued profitability of the commercial
banking industry in 1995 allowed
the FDIC to look ahead and to
become m ore anticipatory than
reactive.

In April 1995, the FDIC Board
o f Directors approved the first
corporate-wide strategic plan in
our 61-year history, a plan that
emphasizes identifying and
addressing potential problems
within the financial industry that
may cause losses to the insurance
funds. The strategic plan w ill
guide the agency in developing
and evaluating our policies and
programs for the remainder o f the
decade. During 1995, it generated
approximately 150 projects under
a corporate-wide operating plan
intended to position the FDIC on
a business footing w hile dealing
with em erging risks.
One o f those projects was to define
the number o f people w e w ill
need to operate the organization
once w e have liquidated the
remaining assets from the bank
and thrift failures o f the late 1980s
and early 1990s and instituted
managerial reforms to make the
organization m ore efficient. At
year-end, the Corporation had
9,789 employees, a 16 percent
reduction from 1994. With the
absorption o f employees from the
Besolution Trust Corporation as required by law - the number
o f Corporation staff rose to
11,856 as o f January 1, 1996.
According to current analyses,
w e expect to reduce the number
o f staff positions to between 6,000
and 7,000 within the next three
years. No one welcomes these
painful reductions, which affect
people w ho have devoted years
o f service to the FDIC and the
nation, but a voluntary buyout
program in 1995 gave employees
an opportunity to receive a cash
payment to help them transition
to other careers or to retirement.
The extremely positive response
to the offer - 940 employees
accepted the buyout - w ill in
all likelihood reduce the scope
o f future reductions in force.

FDIC Chairman Ricki Heifer

The strategic plan set out the
direction the FDIC is headed and
the operating plan established
how the agency w ill advance.
To help identify and address
potential problems in the finan­
cial system, w e are leveraging a
remarkable resource - a treasury
o f historical and current data on
the banking industry. The FDIC
and our sister bank and thrift
regulatory agencies generate
data on the banking and thrift
industries as a by-product of
regulatory and monetary policy
functions. Historically, however,
w e have all found it difficult to
bridge the gap that separates the
macro perspective o f economics
from the micro perspective o f
bank examinations. A ll the
regulators have had difficulty
translating this data into
directions that examiners
can use in institutions with
differing levels and types o f risk
exposures. We at the FDIC are
bridging that gap in a number
o f ways.
As a first step, the Division o f
Insurance was created.
This new division identifies,
analyzes, and disseminates
information on current and
em erging risks to the insurance
funds, thereby helping the FDIC
keep banks open and operating
safely and soundly. It works
closely with our examiners,
economists, financial analysts
and other FDIC staff, as w ell as
with the same types o f analysts
at the other regulatory agencies
and in the private sector, to
monitor, assess and address risks
in the banking system. It w ill be
sending economic and analytical
information to banks to help
bank management address
trends or weaknesses before
Ihey become problems.



We also began an underwriting
survey o f our examiners to
benchmark the level o f - and
trends in - credit risk to provide
an early warning system of
problems.
Further, w e began looking back
at the 1980s and early 1990s to
learn in a systematic way what
caused nearly 1,500 bank fail­
ures. We are also looking at
how those failures w ere resolved.
The focus o f this effort is a study
that w ill give us an analytical
base on which to rely in predict­
ing and dealing with bank
problems in the future. We
also began developing a new,
improved model on bank failure
rates that takes econom ic factors
into account.
In terms o f regulatory burden,
leveraging our statistical and
analytical resources helps exam­
iners focus their efforts on the
real risks that an institution
poses. This w ill increase the
effectiveness o f examinations,
and allow examiners to stay on
site only as long as necessary to
address the specific risks that
individual institutions present.
To the same ends, we are also
leveraging technology. In 1995,
for example, w e began develop­
ing an automated examination
package that w ill let us do a
significant amount o f analysis
off-site. This package w ill
improve the quality o f supervi­
sion, w hile holding down FDIC
operating costs. It w ill permit
us to do an even better job in
examinations, w hile requiring us
to be on-site for a shorter time.
Examiners w ill have to spend
less time traveling away from
home. Through leveraging tech­
nology, w e aim to cut our on-site
safety-and-soundness examination
time - as w ell as our compliance

and Community Reinvestment
Act examination time - by 25
percent over the next year, w hile
at the same time im proving the
quality o f examinations.
In leveraging data and tech­
nology, and in communicating
m ore effectively with financial
institutions, w e are headed
toward a diagnostic approach to
bank examinations - a combina­
tion o f observ ation with factual
findings from our analytical and
technological innovations. It w ill
provide a structured framework
for discussing specific strengths,
weaknesses, and possible
improvements with the manage­
ment and boards o f directors
o f financial institutions. The
result w ill be a m ore effective
and accurate assessment o f an
institution’s ability to identify,
measure, monitor and control
its risks.
In enhancing the ways that we
do business, w e are assuring that
Americans continue to enjoy the
security that the deposit insurance
system creates. For three genera­
tions o f Americans, federal
deposit insurance - with the full
faith and credit backing o f the
U.S. government - has provided
a reason for unconditional faith
in the banking system. It is a
certainty in an uncertain world.
The FDIC w ill continue to make
sure that faith in the banking
system is justified.

Ricki Heifer

Chairman

Highlights

4

January 51___________________

April 1

August 8_______________________

The FDIC Board proposed cuts
in Bank Insurance Fund (B IF)
assessment rates for nearly
all BIF-insured institutions in
recognition o f the health of
the banking industry and the
increased strength o f the fund.
The Board proposed no change
in insurance rates for the Savings
Association Insurance Fund
(SAIF) at this time (see Page 6).

The FDIC began a system to
invoice and collect deposit insur­
ance premiums electronically.
The new arrangement w ill
make the process o f calculating
and collecting insurance assess­
ments m ore efficient and less
burdensome (see Page 8).

The FDIC Board voted to reduce
premiums paid by institutions
insured by the Bank Insurance
Fund. The average rate dropped
to 4.4 cents per $100 o f assess­
able deposits, from 23.2 cents
per $100. The rate reduction and
a $1.5 billion refund w ere made
possible because, at the end of
May, the BIF reached its mandat­
ed reserve level o f $1.25 for
every $100 o f insured deposits
(see Page 6). The Board did not
reduce assessment rates for the
Savings Association Insurance
Fund, which remained seriously
undercapitalized (see Page 7).

April 24

The FDIC reported that com m er­
cial banks earned $44.6 billion
during 1994, marking the third
consecutive year o f record
profits (see Page 9).

For the first time in the agency’s
61-year history, the Board
approved a corporate-wide
strategic plan. M ajor goals center
on identifying and addressing
risks to the insurance funds and
im proving communications with
the public (see Page 31).

March 21_______________________

May 17_________________________

The agency adopted a formal
appeals process for material
supervisory determinations made
by FDIC examiners and regional
supervisory officials. Institutions
may appeal determinations in
areas including examination
ratings, the adequacy o f loan loss
reserve provisions, and possible
violations o f law or regulations
(see Page 20).

The FDIC announced a reorgani­
zation that included the creation
o f a Division o f Insurance to
identify risks to the insurance
funds (see Page 1T). The agency
also established an Office o f
the Ombudsman to respond to
questions or concerns about the
FDIC (see Page 20) and a
Division o f Administration
(see Page 31).

March 15_______________________

March 24

July 28

The FDIC announced a program
to survey bankers for suggestions
to improve the quality o f safety
and soundness examinations.
Approximately 3,500 FDICsupervised institutions that w ill
undergo examinations within
a one-year period w ill be asked
about the appropriateness of
examination procedures, the
quality o f the examination
team and the usefulness o f the
examination report (see Page 20).

The last two FDIC-insured bank
closings o f 1995 occurred, bring­
ing the total for the year to six,
the lowest number since six
banks failed in 1977
(see Page 23).




October 12
Chairman Heifer announced
a review o f all FDIC regulations
and policies, with the aim o f
eliminating or reducing require­
ments that are not essential. The
FDIC w ill be w orking with the
other banking agencies to elim i­
nate differences among regula­
tions and guidelines they have
in common (see Page 21).

Novem ber 2_________________
Federal and state banking
regulators, including the FDIC,
ordered the termination o f the
U.S. operations o f The Daiwa
Bank, Limited, Osaka, Japan.
Daiwa had been concealing
m ajor securities losses from
regulators and the public
(see Page 22).

Novem ber 9
Faced with a declining workload
from bank failures, llie FDIC
announced a program to reduce
staffing levels by offering many
career employees incentives to
retire or seek other employment
voluntarily (see Page 31).

Selected Statistics

Bank Insurance Fund
Dollars

Decem ber 22__________________
Mississippi banking commission­
er Joseph H. Neely is confirmed
by the U.S. Senate to be a
m em ber o f the FDIC Board of
Directors. He was sworn in on
January 29, 1996. This marked
the first time since August 1992
that all five Board positions
w ere fllfed (see Page 31).

For the year ended December 31

1995 i

1994

1993

Financial Results
Revenue
Operating Expenses
Insurance Losses and Expenses
Net Income
Insurance Fund Balance
Fund as a Percentage of Insured Deposits

November 14________________
For the second time in 1995,
the FDIC reduced insurance
premiums for BIF-insured
institutions. A projected 93.5
percent w ill pay the statutory
minimum o f $2,000 per year
for insurance (see Page 6).
The Board decided not to lower
rates for the SAIF because that
fund remained seriously under­
capitalized (see Page 7).

in M i l l i o n s

$ 4,089
471
12
3,606
$ 25,454
1.30%

$

6,467
423
(2,682)
8,726
$ 21,848
1.15%

$

$

6,431
388
(7,179)
13,222
13,122
0.69%

Selected Statistics
10,243
Total BIF-Member Institutions*
151
Problem Institutions
%20,160
Total Assets of Problem Institutions
Institution Failures
Assisted Banking Organizations
Total Assets of Failed and Assisted Institutions $
753
Number of Active Failed Institution Receiverships
590

10,758
264
$ 42,213
13

11,291
472
$ 269,201
41

$

1,392
802

$

$

1,215

3,539
877

Savings Association Insurance Fund
Financial Results
Revenue
Operating Expenses
Insurance Losses and Expenses
Net Income
Insurance Fund Balance
Fund as a Percentage of Insured Deposits

$ 1,140
40
J321)
1,421
$ 3,358
0.47%

20

$

414
781
1.937
0.28%

$

924
30
17
877
1,156
0.17%

Selected Statistics
Total SAIF-Member Institutions"
1,727
Problem Institutions
42
$ 10,862
Total Assets of Problem Institutions
Institution Failures*
Total Assets of Failed Institutions*
456
Number of Active Failed Institution Receiverships

Decem ber 51
The Resofution Trust Corporation
(RTC), which was created to
manage and sell failed savings
associations since 1989, officiaify
closed on this day. All remaining
assets and liabilities w ere trans­
ferred to the FSLIC Resolution
Fund, which is managed by the
FDIC (see Page 26).




1,844
54
$ 30,630

$

65,162

137

$

6,132

1,929

10
0

r

*

Commercial banks and savings institutions. Does not include U.S. branches of foreign banks.

*

Commercial banks and savings institutions. Does not include Resolution Trust Corporation (RTC) conservatorships.

A

No SAIF- insured institutions that failed were the financial responsibility of the SAIF. The RTC was responsible for
the resolution and related costs of SAIF -insured institutions that failed before July 1,1995. The SAIF is responsible
for resolutions thereafter.

T

This represents the receivership for Heartland Federal Savings and Loan Association, Ponca City, Oklahoma, which
was closed on October 8,1993. Although this is a SAIF receivership, any financial burden will be borne by the FSLIC
Resolution Fund (FRF). The number of active failed thrift receiverships for the FRF was: 62 in 1995; 76 in 1994; and
83 in 1993.

Condition of
the FDIC's Funds
For m ore information about the BIF, SAIF and FRF,
see the financial statements that begin on Page 45.

The FDIC administers two
deposit insurance funds, the
Bank Insurance Fund (B IF)
and the Savings Association
Insurance Fund (SAIF), along
with a third fund fulfilling the
obligations o f the form er Federal
Savings and Loan Insurance
Corporation (F S LIC ) and called
the FSLIC Resolution Fund
(FRF). An overview o f the
funds follows.

Fund B alance 1991-1995
(year-end)_________________
■ Savings A ssociation Insurance Fund
■ Bank Insurance Fund

1991

1992

1993

$ billio n s

25
20
15
10

Bank Insurance Fund
With the continuing recovery
o f the banking industry and
institutions’ earnings at record
levels, 1995 was another positive
year for the BIF. After dipping to
a record year-end low in 1991
(a negative $7 billion) follow ing
record numbers o f bank failures,
the BIF grew7to a record high of
$25.5 billion at the close o f 1995.
That balance represented a
17 percent increase from the
year-end 1994 balance o f $21.8
billion. The previous year-end
high was $18.3 billion in 1987.
The BIF’s growth in 1995 con­
sisted prim arily o f assessment
revenue ($2.9 billion) and
interest earned on investments
in U.S. Treasury obligations
($1.1 billion). Minimal bank
failures allowed the BIF to retain
and invest this cash. Only six
banks with $753 million in assets
and $104 million in estimated
losses to the BIF failed during
1995. The estimated loss figure
is the lowest since 11 banks
failed in 1980 at a loss o f
$30.6 million.
The BIF reached its designated
reserve ratio o f 1.25 percent of
insured deposits, as mandated
by law, on May 31,1995. Based
on the recapitalization, the FDIC
Board approved a reduction in



m

i f

i r

-5
-10

Note:
More details appear in the tables in the back of this Annual Report.

BIF assessment rates for the
semiannual assessment period
beginning July 1, 1995. The
rates w ere lowered to a range
o f four cents to 31 cents per
$100 o f assessable deposits. The
previous range was 23 cents to
31 cents per $100.
The Board revised the rate
schedule a second time in 1995,
paring rates again in November.
This m ove followed the Board’s
regular semiannual review o f
assessment rates to ensure that
funds are maintained at an
appropriate level. For the sem i­
annual period beginning January
1, 1996, the highest-rated
institutions (93.5 percent o f BIFinsured institutions) w ill pay the
statutory annual minimum of
$2,000 for deposit insurance.
Rates for all other institutions
w ill drop to a range o f three
cents to 27 cents per $100 of
assessable deposits.

Under the new assessment
schedule, the average annual
assessment rate for BIF-insured
institutions was expected to
decline to approximately
0.3 cents per $100 in the first
h alf o f 1996, from 4.4 cents per
$100 in the second half o f 1995.
The projected rate w ould be the
lowest in the m ore than 60-year
history o f federal deposit insur­
ance for banks. The lowest
average annual assessment
rate for banks previously was
3.13 cents per $100 in both 1962
and 1963, including assessment
credits.
Cash and investments in
U.S. Treasury obligations, the
main components o f the BIF’s
total assets, jumped to 81 percent
o f the fund’s total assets at yearend 1995 from 62 percent at
year-end 1994. Cash and invest­
ments at year-end w ere 30 times
the BIF’s total liabilities.

Insurance Fund Reserve Ratios 1991-1995 (year-end)
Percent of Insured Deposits___________________________________
■ Savings A ssociation Insurance Fund
■ Bank Insurance Fund

Insured deposit amounts are estimates. More details appear in the tables in the back of this Annual Report.

Savings Association
Insurance Fund
The SAIF, which the FDIC
administers to protect depositors
o f thrift institutions, grew to a
balance o f $3.4 billion at year-end
1995. That balance represented
a 73 percent increase over the
$1.9 billion at year-end 1994.
The SAIF’s reserves amounted
to 47 cents for every $100 o f
insured deposits, up from
28 cents per $100 at year-end
1994. The SAIF’s designated
reserve ratio is far below the
1.25 percent o f insured deposits
mandated by law. Based on
industry deposit levels at yearend 1995, the SAIF would require
an additional $5.5 billion to
reach that mandated level.
Since 1993, each SAIF-insured
institution has paid an assessment
rate o f between 23 and 31 cents
per $100 o f assessable deposits,



depending on risk classification.
The assessment rate averaged
approximately 23 cents per $100
o f assessable deposits in 1995.
These rates w ill continue until
the SAIF reaches its designated
reserve ratio o f 1.25 percent o f
insured deposits.
The SAIF’s growth has been slow
for several reasons. One factor
was the diversion o f $7.7 billion
o f SAIF assessments from 1989
through 1995 to pay for the fed­
eral cleanup o f the thrift industry.
From 1989 through 1992, nearly
all assessment income was used
to pay various cleanup costs,
including interest on bonds issued
by the Financing Corporation
(FICO ). Since then, nearly half
o f the SAIF’s assessment income
was used for the FICO bond
interest payments. Interest pay­
ments are required until the
FICO bonds mature in the years
2017 through 2019.

A disparity between what B1Fand SAIF-insured institutions pay
for deposit insurance unfolded
with the Board’s decision to cut
BIF assessment rates when the
BIF recapitalized in May 1995.
By law, the Board must set pre­
miums for each fund separately
based on the circumstances fac­
ing each fund. The prospect o f
continued, significant disparities
in premiums for identical insur­
ance coverage has given SAIFinsured institutions a strong
econom ic incentive to move
deposits to BIF-insured affiliates
or to rely less on deposits as a
funding source.
Many variables make it difficult
to predict accurately w hen the
SAIF w ill be fully capitalized,
but that date is probably several
years away. At year-end, FDIC
staff was exploring the agency’s
options under the law, the differ­
ent assessment rates for the two
insurance funds, and the likely
effects on the thrift industry
o f the rate disparity. Legislative
proposals also w ere under
consideration that would fully
capitalize the SAIF in the near
term.
On July 1,1995, the SAIF became
responsible for handling failing
thrift institutions from the
Resolution Trust Corporation
(RTC). No thrift failures occurred
in 1995 after the SAIF assumed
this responsibility.

FSLIC Resolution Fund_______
The FRF was established by law
in 1989 to assume the remaining
assets and obligations o f the for­
m er FSLIC arising from thrift
failures prior to January 1, 1989.
Congress placed this new fund
under the management o f the
FDIC.

To w ind up the FRF’s resolution
activity, Congress allocated $827
million in appropriated funds in
fiscal year 1995, which are avail­
able to Ibe FRF throughout its
remaining life. The FRF uses
appropriated funds only w hen
funds generated from collections
o f failed thrift assets and other
internal sources are insufficient.
The FRF received $165 million
o f this appropriation on
Novem ber 1, 1995. The remain­
ing $662 m illion is available for
future use as needed.
All RTC assets and obligations
w ere transferred to the FRF on
January 1, 1996, as required by
law. As manager o f the FRF, the
FDIC w ill sell the remaining
assets and settle the obligations
o f the RTC as it has been doing
for the activities inherited from
the FSLIC. The FRF’s primary
focus w ill be disposing o f the
approximately $7.7 billion of
assets in liquidation remaining
from failed thrift institutions,
managing the assets set aside to
pay claims arising from credit
enhancements on securitized
assets, and repaying the RTC’s
debt from the Federal Financing
Bank. Internally generated funds
are expected to be sufficient
to complete the RTC’s mission
without additional use of
taxpayer funds.




Electronic Collection
o f Assessments________________
The FDIC in 1995 began to
invoice and collect deposit insur­
ance premiums electronically.
Under a new rule adopted in
December 1994 and effective
April 1, 1995, the FDIC calculated
assessments for each institution
and initiated an electronic debit
through the Automated Clearing
House Network to collect the
premium.
The new process reduced the
regulatory burden on institutions
and automated a system that was
labor-intensive. With the new
method, the FDIC experienced
an error rate o f less than 0.1 per­
cent, a significant improvement
over the error rate o f eight to
13 percent under the previous
manual, paper-based system.
The new process proved its
value further in September 1995
when the FDIC used it to refund
$1.5 billion to BIF-insured insti­
tutions within 10 days o f the
recapitalization announcement.

W.W.Reid

W illia m A, Longbrake, Deputy to the
Chairman and CFO, w as a key architect
o f Chairman Heifer's strategy to refocus
the FDIC's attention from closing failed
banks to ensuring th a t they operate s a fe ly .,

The State of the
Banking and Thrift Industries

9

Insured commercial banks and
savings institutions reported
record profits in 1995, continuing
a four-year trend o f strong earn­
ings performance. Commercial
banks’ earnings set a new record
for the fourth year in a row. The
improvement in bank earnings
was made possible by strong
loan growth and healthy net
interest margins. Profits at savings
institutions surpassed the indus­
try’s previous record, set in 1993;
average return on assets (ROA)
reached the highest level since
1962. Thrifts’ earnings were
boosted by improved asset quali­
ty and by the absence o f restruc­
turing charges at large institu­
tions. Both industries improved
their balance sheets in 1995 as
capital levels rose and troubled
assets declined. The follow ing
is an overview o f conditions
in these two industries.

Commercial Banks____________
Com m ercial banks earned
$48.8 billion in 1995, an increase
o f $4.2 billion or 9.4 percent
over the previous record level
reached in 1994. Almost 97 per­
cent reported positive earnings,
with 68 percent reporting higher
earnings than in 1994.
The industry’s average ROA rose
to 1.17 percent, from 1.15 percent
in 1994. This marked the third
consecutive year that the average
ROA at commercial banks was
above one percent and more than
doubled the ROA o f 0.48 percent
in 1990. ROA in 1993 exceeded
one percent for the first time in
FDIC history.
Net interest income in 1995
o f $154.2 billion was $7.7 billion
higher than in 1994, even though
net interest margins w ere slightly
narrower. The improvement
was due to strong loan growth.



Annual Return on Assets (ROA)
FD IC -lnsured Institutions 1934-1995
■ C om m ercial Banks
■ Savings In stitu tio n s

1934

40

45

50

55

60

65

70

75

80

85

90

95

Savings institution data not available prior to 1947.

Total loans at commercial banks
increased by $244.5 billion
(10.4 percent) in 1995 - the
largest annual dollar increase
ever reported and the largest
percentage growth registered
since 1984. Real estate loans
accounted for the largest share
o f the increase in total credit,
grow ing by $82.3 billion.
Noninterest revenue o f $82.4 bil­
lion was $6.2 billion higher than
in 1994, reflecting strong growth
in fee income. Sales o f securities
held for investment netted banks
$545 million in gains in 1995,
a vast improvement over 1994
when securities sales resulted
in $571 million in net losses.
Low er deposit insurance prem i­
ums, made possible by the recap­
italization o f the Bank Insurance
Fund (B IF) at the end o f May,
reduced banks’ operating costs
in the second half o f the year
by approximately $2.5 billion.

Despite the bright earnings
picture, banks experienced some
problems with loan quality,
especially in the consumer area.
Banks’ provisions for future loan
losses w ere $1.6 billion higher
than in 1994, an increase o f
14.5 percent. This is the first
annual increase in industry loanloss provisions since 1991. Net
loan charge-offs also increased
by $920 million (8.2 percent)
due to rising losses on consumer
loans. Levels o f noncurrent loans
(those 90 days or m ore past due
or no longer accruing interest
incom e) fell for the fifth consecu­
tive year. However, the net
decline in non current loans of
$328 million, or 1.1 percent, was
much smaller in 1995 than in
any o f the previous four years.
The number o f insured com m er­
cial banks reporting financial
results at year-end 1995 fell
below 10,000 for the first time

since the start o f the FDIC.
After reaching a peak o f 14,496
at the end o f 1984, the number
o f commercial banks declined
by almost one-third to 9,941 at
year-end 1995. The decline was
due prim arily to mergers.

Num ber of FDIC-lnsured "Problem " Institutions
by Fund M em bership 1991-1995 (year-end)_____________________________
■ Savings A ssociation Insurance Fund (SAIF) M em bers
■ Bank Insurance Fund (BIF) M em bers

Only six insured com m ercial
banks failed in 1995, the small­
est number since 1977. The
number o f banks on the FD IC ’s
“problem list” declined to 144
during the year, from 247 at
the end o f 1994. Assets o f prob­
lem banks fell by one-half, to
$17 billion from $33 billion.
(Inform ation about problem
institutions by fund membership,
not by financial institution
type, appears in the charts on
Pages 10 and 11.)

1992

1991

1
S

In stitu tio n to ta l
1400
1200

1 non
I uuu

E

!■

s
1
■1
i
i

■

i

s1
1

I

1
IP ® ® ® ® * ®

i

0

Savings Institutions_______
Savings institutions earned a
record $7.6 billion in 1995, a
$1.2-billion increase from their
1994 earnings and a $783 million
increase over their previous
record set in 1993.

1995

■

600

200

1994

■

800

400

1993

i

1991

1992

1993

1994

1995

Total SAIF Members*
Problem Institutions
Percent of Total

2,177
337
15.5

2,039
207
10.2

1,929
100
5.2

1,844
54
2.9

1,727
42
2.4

Total BIF Members *
Problem Institutions
Percent of Total

12,305
1,089
8.9

11,813
856
7.2

11,291
472
4.2

10,758
264
2.5

10,243
151
1.5

* Commercial banks and savings institutions. Does not include Resolution Trust Corporation conservatorships.

The average return on assets was
0.78 percent, the highest annual
ROA reported since 1962. Most
o f the increase in earnings came
at large institutions, w here prof­
its have been held down in
recent years by credit losses.
A $1.4-billion reduction in non­
interest expenses, reflecting
few er restructuring charges at
large institutions, was a major
contributor to the earnings
improvement.
Although earnings w ere up
significantly industry-wide, only
47 percent o f thrifts reported
higher earnings in 1995. The
main problem for many institu­
tions was a decline in net interest
income at smaller thrifts.



■ Commercial banks and savings institutions. Does not include insured branches of foreign banks.

Thrifts received relatively little
benefit from the reduction in BIF
deposit insurance premiums, as
three-quarters o f all deposits at
savings institutions are insured
by the Savings Association
Insurance Fund (SAIF). Unlike
the BIF, the SAIF remains
undercapitalized, and there was
no reduction in SAIF deposit
insurance premiums in 1995.
Noninterest incom e o f $7.1 billion
was almost $1 billion higher than
in 1994, primarily due to gains
from asset sales. The reduced
noninterest expense and higher
noninterest income, combined

with a $371-million decline in
loan-loss provisions, helped
offset a $1.6-billion decline in
net interest income.
Total assets increased for the
second consecutive year, follow ­
ing five years o f shrinkage. Assets
grew by $17.2 billion (1.7 percent),
after increasing by $7.7 billion
in 1994. Much o f the growth
occurred in holdings o f home
mortgage loans, which increased
by $9.8 billion (2.1 percent).
There also was growth in more
liquid assets, such as cash,
deposits with other institutions,
and overnight lending.

Geoffrey L. Wade

Research Director William R. Watson
(left) speaks with a foreign journalist
about U.S. banking conditions.

Assets of FDIC-lnsured "Problem " Institutions
by Fund M em bership 1991-1995 (year-end)
■ Savings Association Insurance Fund (SAIF) Members
■ Bank Insurance Fund (BIF) Members
1991

1992

1993

1994

1995

1993 __________ 1994

1995

$65
269

$11
20

$ billions
1050
900
750
600

1

450
300

MM #

■

150

0

1
---1
■ 1
1
1 II 1 1
1 II__ 1__
__
1

($ billions)________
Total Assets of
Problem Institutions
SAIF Members
BIF Members

I

1991

1992

$ 209
610

$128
464

Deposits increased by $4.7 billion
and other borrowings increased
by $4.1 billion, which helped to
fund the $17.2 billion increase
in assets. Most o f the increase
in deposits occurred during the
first half o f 1995, when asset
growth was strongest. Deposits
declined during the second
half o f the year, when thrifts
switched back to other borrow ­
ings and asset growth slowed
considerably.
Equity capital continued to rise
throughout the year, increasing
by $6.1 billion and reducing
thrifts’ needs for deposits to fund
asset growth. At year-end 1995,
equity capital reached 8.39 percent
o f assets - the highest level
since 1951.




$31
42

The number o f insured savings
institutions declined by 123 in
1995, due to acquisitions by
comm ercial banks, conversions
to commercial bank charters and
mergers within the thrift indus­
try. Only two savings institutions
(both SAIF m embers) failed in
1995, the fewest since 1975. The
number o f “problem” institutions
fell to 49 from 71 during the year,
and their assets declined by more
than half, to $14 billion from
$39 billion. (Information about
problem institutions by fund
membership, not by financial
institution type, appears in the
charts on Pages 10 and 11.)

Board of
Directors

1

12

Iticki H eller
Ms. Heifer became the
16th Chairman o f the Federal
Deposit Insurance Corporation
on October 7, 1994, and the first
woman to head a federal banking
agency. Before her appointment
by President Clinton, Ms. Heifer
had been a partner in the
Washington office o f the law
firm o f Gibson, Dunn & Crutcher
specializing in banking and
finance.
Ms. Heifer has held positions
in all branches o f the federal
government. From 1985 to 1992,
she was the chief international
lawyer for the Board o f Governors
o f the Federal Reserve System.
Prior to working at the Federal
Reserve Board, she served nearly
two years as Senior Counsel
for international finance at the
U.S. Treasury Department. From
1978 to 1979 she was Counsel
to the Judiciary Committee of
the U.S. Senate.

FDIC Board o f Directors (le ft to right):
Eugene A. Ludwig
Ricki Heifer
A nd rew C. Hove. Jr.
Jonathan L. Fiechter




Born in North Carolina and
raised in Tennessee, Ms. Heifer
graduated magna cum laude
from Vanderbilt University with
a B.A. and from the University
o f North Carolina with an M.A.
She clerked for U.S. Court of
Appeals Judge John M inor
Wisdom after graduating with
honors from the University o f
Chicago Law School and serving
as Associate Editor o f the Law
Review. She is a member o f the
American Law Institute, the
Council on Foreign Relations,
and the Visiting Committee o f
the University o f Chicago Law
School. She is past Chairman o f
the Committee on International
Banking and Finance o f the
American Bar Association.
Ms. Heifer’s various civic activities
include serving as a member
o f the beard o f directors o f the
Girl Scouts o f the USA.

Andrew C. Hove. Jr.

Eugene A. Ludwig:________

Jonathan L. Fieeliter

Mr. Hove was appointed for a
second term as Vice Chairman
o f the FDIC in 1994. He served
as Acting Chairman from August
1992 until the confirmation o f
Ricki Heifer as the Chairman in
October 1994. Prior to his first
appointment as Vice Chairman
in 1990, Mr. Hove was Chairman
and Chief Executive Officer of
the Minden Exchange Bank
& Trust Company, Minden,
Nebraska, where he served in
every department during his
30 years with the bank.

Mr. Ludw ig became the 27th
Comptroller o f the Currency on
April 5, 1993. As the Comptroller,
Mr. Ludw ig also serves as an
FDIC Board member.

Mr. Fiechter has been Acting
Director o f the Office o f Thrift
Supervision (O TS) since
December 1992 and has spent
the past 25 years in government
service. As Acting Director o f the
OTS, Mr. Fiechter also serves as
an FDIC Board member.

Also involved in local government,
Mr. Hove was elected Mayor o f
Minden from 1974 until 1982 and
was Minden’s Treasurer from
1962 until 1974.
Other civic activities included
President o f the Minden Chamber
o f Commerce, President o f the
South Platte United Chambers
o f Commerce and positions
associated with the University
o f Nebraska. Mr. Hove also was
active in the Nebraska Rankers
Association and the American
Bankers Association.
Mr. Hove earned his B.S. degree
at the University o f NebraskaLincoln. He also is a graduate
o f the University o f WisconsinMadison Graduate School of
Banking. After serving as a
U.S. naval officer and naval
aviator from 1956-60, Mr. Hove
was in the Nebraska National
Guard until 1963.




Prior to becoming Comptroller,
Mr. Ludw ig had been with the
law firm o f Covington and
Burling in Washington, DC,
since 1973, w here he specialized
in intellectual property law,
banking and international trade.
He became a partner in 1981.
Mr. Ludw ig earned his
B.A. magna cum laude from
Haverford College in Pennsylvania.
He also received a Keasbey
scholarship to attend Oxford
University, w here he earned a
B.A. and M.A. Mr. Ludw ig holds
an LL.R. from Yale University,
w here he served as Editor o f the
Yale Law Journal and Chairman
o f Yale Legislative Services.

Prior to becoming Acting Director
o f the OTS, Mr. Fiechter was one
o f two Deputy Directors o f the
agency. In that capacity, he was
responsible for overseeing the
OTS’s Washington, DC, operations
and the closing o f nonviable
thrifts. Mr. Fiechter came to the
OTS in 1987 from the Office o f
the Comptroller o f the Currency,
which he joined in 1978. At
the OCC, Mr. Fiechter served as
Deputy Comptroller in charge
o f research.
Mr. Fiechter began his govern­
ment service in 1971 in the
Office o f the Secretary at the
U.S. Treasury Department,
working on issues related to
international finance, Treasury
debt policy and financial institu­
tions reform.
A graduate o f Rockford College,
Rockford, Illinois, Mr. Fiechter
has done graduate w ork in
economics at the University
o f Virginia.

On December 22, 1995,
the U.S. Senate confirmed
Mississippi banking commissioner
Joseph H. Neely to be a member
o f the F D IC Board. He was sworn
in on January 29, 1996.

Organization Chart
(as of December 31,1995)

Board of Directors
Ricki Heifer
Andrew C. Hove, Jr.
Eugene A. Ludwig
Jonathan L. Fiechter

Office of the Chairman
Ricki Heifer
Chairman

Inspector General

Legal Division

James A. Renick
Acting Inspector General

W illia m F. Kroener, III
General Counsel

Deputy to the Chairman
for Finance and
Chief Financial Officer

Deputy to the: Chairman
and
Chief Operatiing Officer

Deputy to the Chairman
lor Policy

W illiam A. Longbrake

Dennis F. Geer

Leslie A. W oolley

Division of
Insurance

Division of
Administration

Division of
Compliance and
Consumer Affairs

Office of
Corporate
Communications

Arthur J. M urton
Director

Jane Sartori
Director

Paul L. Sachtleben
Director

Alan J. W hitney
Director

Division of
Resolutions

Division of
Information Resources
Management

Division of
Research
and Statistics

Office of the
Ombudsman

Gail L. Patelunas
Acting Director

Donald C. Demitros
Director

W illiam R. Watson
Director

Carmen J. Sullivan
Ombudsman

Division of
Depositor and
Asset Services

Division of
Supervision

Office of
Equal Opportunity

Office of
Legislative Affairs

John F. Bovenzi
Director

Nicholas J. Ketcha Jr.
Director

Johnnie B. Booker
Director

Alice C. Goodman
Director

Division of
Finance

Office of
Executive Secretary

Steven A. Seelig
Director

Jerry L. Langley
Executive Secretary




■
M







Supervision
and Enforcement
More information about FDIC enforcement cases
appears in the Significant Court Cases chapter
o f this Annual Report.

In 1995, the banking industry
had its fourth consecutive year
o f record profits, with nearly
97 percent o f all commercial
banks reporting positive earnings
and two-thirds having higher
earnings than in 1994. The favor­
able earnings, plus high levels
o f capital and declining troubled
assets, resulted in few er bank
failures and problem institutions.
During this relatively calm period,
the FDIC initiated a number o f
projects aimed at redesigning the
supervisory process, im proving
communication with the industry
and reducing regulatory burden.

New Initiatives in Supervision
and Risk Assessment____
The FDIC at year-end 1995 was
the primary federal regulator of
6,041 state-chartered banks that
are not members o f the Federal
Reserve System and 593 statechartered savings banks. The
FDIC also has back-up supervi­
sory responsibility for insurance
purposes over the remaining
5,336 federally insured banks
and savings associations. The
Division o f Supervision (DOS)
leads the FD IC’s supervisory
efforts in conjunction with other
Divisions and Offices.
The DOS process for examining
and supervising institutions
includes on-site examinations
and off-site analyses to detect
poor risk management or exces­
sive risk-taking by an institution
before losses occur. As part o f
Chairman Heifer’s emphasis on
shifting the agency’s focus from
resolving bank failures to w ork­
ing to help banks remain open
and operating safely, the FDIC in
1995 worked to develop a more
dynamic approach that combines
traditional examination methods
with new initiatives.



FDIC Exam inations 1993-1995
1995

1994

1993

3,931
386
11
3
9J

4,439
375
255
92
523

4,340

5,684

Consumer and Civil Rights
Trust Departments
Data Processing Facilities

3.218
294
6
4
6
3,528
3,148
657
1,671

3,528
684
1,882

3,749
782
1,910

Total

9,004

One o f the major steps taken
by the FDIC in 1995 was the
creation in June o f a new
Division o f Insurance (D O I) that
w ill analyze risks to the deposit
insurance funds from a more
comprehensive perspective than
in the past. The new Division
w ill identify and monitor em erg­
ing and existing risks by drawing
on a w ide variety o f sources
o f information, including other
FDIC Divisions, other bank
regulatory agencies, other
government economic statistics
and analyses and data from the
private sector. DOI w ifi analyze
information from the unique
perspective o f the deposit insurer
and translate the results into
guidance for examiners and
financiai anaiysts, senior FDfC
managers, bankers and others
w ho monitor banking trends.
DOI also w ill manage the
agency’s risk-related premium
system, whereby well-capitalized
and well-managed institutions
are charged considerably iess for
deposit insurance than institu­
tions that are undercapitaiized
and exhibit other weaknesses.

bank faiiures o f the f980s and
the early 1990s and the effective­
ness o f early w arning signals,
methods o f preventing failures
and actions to limit insurance
losses at failed institutions. The
study w ill be the subject o f an
FDfC-sponsored symposium
with academic and other nonFDIC participants scheduled for
January 1997.

Safety and Soundness:
State Nonmember Banks
Savings Banks
National Banks
State Member Banks
Savings Associations

Subtotal

The FD IC’s Division o f Research
and Statistics (DRS), in coopera­
tion with other divisions and
offices, began a m ajor study of

10,434 1

DRS and DOI staff afso began
work on an effort to improve the
faiiure projection process at the
FDfC by anafyzing the influence
o f regional and national econom­
ic trends on bank performance.
This effort is consistent with the
FD IC’s goal o f becom ing m ore
proactive in the identification
o f em erging risks.
In order to expand the FD IC ’s
early warning system for potential
ioan probfems, FDIC examiners
began completing an “under­
w riting standards” questionnaire
after each examination. The
answers reflect an examiner’s
view o f an institution’s ability to
identify, measure, monitor and
control credit risks in various
types o f lending. This process
is designed to help the FDIC
monitor em erging risks in
the banking system, identify

troublesome underwriting trends
across the country and direct
supervisory efforts. The results
o f the questionnaires are expect­
ed to be released semiannually.
To improve the structure and
consistency o f the examination
process, “decision flow charts”
are being developed for examin­
ers to use for each major risk
area. These decision charts for
credit risk, interest rate risk,
operational risk and other risks
w ill outline a diagnostic process
that involves a graduated
approach to examinations based
on the level o f risk at each
institution. These decision flow
charts are being designed to aid
examiners at critical junctures
in their inquiry and decision­
making process. These enhanced
examination procedures are
expected to be used in 1996.
To prepare for full-scale interstate
banking in 1997 and in an effort
to centralize supervision o f
affiliated institutions, the FDIC
is reorganizing its examination
operations to create “case man­
agers” in its regional offices.
Each manager w ill become the
authority on a given banking
organization and w ill be respon­
sible for preparing its risk analy­
sis regardless o f its regional or
geographic boundaries. Through
this process, an individual bank­
ing organization’s unique risk
profile w ill be better assessed
and coordinated w ith other bank­
ing agencies. The case manager
system also is expected to improve
communication between the
FDIC and banks operating in
m ore than one region o f the
country.
DOS continued to develop and
train specialists in em erging risk
areas, including capital markets
investments-such as derivatives 


R is k -R e la te d Premiums_______________________________________________
The following tables show the number and percentage of institutions insured by the Bank Insurance Fund
(BIF) and the Savings Association Insurance Fund (SAIF), according to their risk classification as of
December 31,1995. Each institution is categorized based on its capitalization and a safety and soundness
rating (A, B or C) as determined by on-site examinations and off-site reviews. Assessment rates shown
represent average full-year rates per $100 of assessable deposits. Assessment rates for the BIF from
January 1,1995, to May 31,1995, were the same as SAIF rates. From June 1,1995, to December 31,1995,
rates for the BIF ranged from a low of four cents to a high of 31 cents per $100 of assessable deposits.

BIF Supervisory Groups
A
W e ll Capitalized:
Assessment rate
Number of institutions
A dequately C apitalized:
Assessment rate
Number of institutions
U ndercapitalized:
Assessment rate
Number of institutions

B

C

$0.12
9,646 (93.5%)

$0.15
431 (4.2%)

$0.24
92 (0.9%)

$0.15
75 (0.7%)

$0.20
22 (0.2%)

$0.29
32 (0.3%)

$0.20
3 (0.0%)

$0.29
0 (0.0%)

$0.31
17(0.2% )

$0.23
2,288 (90.5%)

$0.26
139 (5.5%)

$0.29
20 (0.8%)

$0.26
27(1.1% )

$0.29
21 (0.8%)

$0.30
27(1.1% )

$0.29
0 (0.0%)

$0.30
0 (0.0%)

$0.31
6 (0.2%)

SAIF Supervisory Groups
W e ll Capitalized:
Assessment rate
Number of institutions
A dequately Capitalized:
Assessment rate
Number of institutions
Undercapitalized:
Assessment rate
Number of institutions

Note:
BIF data exclude 39 insured branches of foreign banks and include 75 SAIF-member "Oakar" institutions that
hold BIF-insured deposits that are also included in the SAIF table. SAIF data include 801 BIF-member Oakar
institutions that also hold SAIF-insured deposits that are also included in the BIF table.

and the sales o f mutual funds
and other nondeposit investment
products. The FDIC also estab­
lished a task force on electronic
banking and chairs an intera­
gency w orking group on the
subject. These groups w ere
created in 1995 to analyze many
o f the issues presented by new
and em erging technologies,
including “smart cards” that
can handle complex banking
transactions and banks

conducting business on the
Internet. These efforts ensure
proper coordination among the
regulatory agencies and help the
FDIC address issues that are crit­
ical to its own functions, such as
deposit insurance coverage,
insolvency and settlement risk,
and consumer protection.
The FDIC also has established
examiner training programs to
expand knowledge o f electronic
banking issues.

In 1995, the FDIC began expand­
ing and strengthening its ability
to assess risks inherent in inter­
national banking. W hile the
agency has personnel with
extensive international banking
knowledge, this program w ill
centralize the expertise into a
core group in DOS to ensure
greater coordination in assessing
the nature and impact o f these
risks. This risk-assessment
program w ill include activities
o f U.S. banks abroad and foreign
banks in the U.S.
In addition, the FDIC continued
working with other U.S. and for­
eign regulators to develop a more
coordinated supervisory strategy
to respond to risks in internation­
al banking. For example, the
FDIC, along with other U.S. bank
regulators, developed a program
to uniformly analyze and rate
foreign banking organizations
that have a U.S. presence.
The FDIC formed a task force
to study how the Riegle-Neal
Interstate Banking and
Branching Efficiency Act o f 1994
would affect the banking industry
and the FDIC. The law autho­
rized interstate banking and
branching to U.S. and foreign
banks in 1997. The task force has
been looking at the adequacy of
off-site supervisory information,
the effect o f interstate banking on
staffing, examination procedures,
the insurance funds and other
issues.
Also, in conjunction with other
regulators, the FDIC joined in
a State-Federal W orking Group
on Interstate Supervision. Other
members o f the group include
the Federal Reserve System and
state regulators, under the spon­
sorship o f the Conference o f State
Bank Supervisors. The w orking
group’s purpose is to m inimize



FDIC A p p licatio n s 1993-1995
1995
146

1994
106

1993
89

145
1

Deposit Insurance

103
3

89
0

2,135

1,715

1,224

2,135
1,224
911
0

1,713
1,017
696
2

1,223
786
437
1

Approved
Denied

New Branches
Approved
Branches
Remote Service Facilities
Denied

Mergers

419

451

326

419
0

451
0

326
0

1,092

1,364

1,772

1,086
86
1,000
6
2
4

1,357
127
1,230
7
1
6

1,759
99
1,660
13
1
12

46

50

56

45
1

50
0

56
0

3

10

7

3
0

10
0

7
0

30

42

68

29
1

42
0

64
4

Approved
Denied

Requests for Consent to Serve*
Approved
Section
Section
Denied
Section
Section

19
32
19
32

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

Conversions of Insurance Coverage*
Approved
Denied

Brokered Deposit Waivers
Approved
Denied

Savings Association Activities

0

State Bank Activities/Investments*
Approved
Denied

7

6

0
0

Approved
Denied

7
0

6
0

367

118

583

366
1

118
0

581
2

24

14

-

Conversions of Mutual Institutions7
Non-Objection
Objection

24
0^

9
5

-

-

*

Under Section 19 of the Federal Deposit Insurance Act, an insured institution must receive FDIC approval before
employing a person convicted of dishonesty or breach of trust. Under Section 32, the FDIC must approve any
change of directors or senior executive officers at a state nonmember bank that has been chartered less than two
years, has undergone a change of control within two years, is not in compliance with capital requirements, or
otherwise is in a troubled condition.

■

Applications to convert from the SAIF to the BIF or vice versa.

A

Section 24 of the FDI Act in general precludes an insured state bank from engaging in an activity not permissible
for a national bank and requires notices be filed with the FDIC.

T

A new requirement in 1994 for banks to provide such notice.

A prototype created by St. Louis exam iner |
Debra M ille r w as instrum ental in the
developm ent of the ALERT system of
o ff-site loan analysis.

20

conflicts and duplication among
state and federal regulators in the
supervision o f state-chartered
banks that operate in more
than one state. In addition, the
group is working toward shared
technologies and common
application forms.
An interagency w orking
group operating under the
Federal Financial Institutions
Examination Council (FFIE C )
continued its w ork on revising
the Uniform Financial Institutions
Rating System, comm only called
the “ CAMEL” system. The FFIEC
adopted the C A M E L system on
Novem ber 13, 1979, and it has
proven to be an effective tool to
uniformly evaluate the sound­
ness o f financiai institutions and
to identify institutions requiring
special attention. The current
review was prompted by changes
in the banking industry and in
the agencies’ policies and proce­
dures since 1979. M ajor revisions
being considered include an
explicit reference to the quality
o f risk management, the identifi­
cation o f risk elements within
each component o f the CAM EL
system, and a new aspect
covering interest rate risk.
DOS, in conjunction with the
Division o f Information Resources
Management, continued to
develop automated examination
software packages that allow
examiners to do a significant
amount o f analysis off-site, there­
by m inim izing examiner time
spent in an on-site review o f an
institution’s risks.
An automated examination pack­
age called the A LE R T System
was field-tested in late 1995
and in use in May 1996. A LERT
provides examiners the ability to
collect loan data from institutions
electronically, load the information



into an application and select
loans for off-site review. ALERT
is the first step in an effort to
automate much o f the examina­
tion and anaiytical process. The
goal o f these undertakings is to
m axim ize efficiency, m inim ize
burden and enhance the riskassessment process.
Finally, DOS is expanding
examiner access to internal and
external databases to enhance
pre-examination planning and
off-site analysis in an effort to
reduce supervisory burden. DOS
has set a goal o f reducing total
examination hours by 10 percent
and the time spent in the institu­
tion by 25 percent.

_
Improved Communication _
The FDIC emphasizes the need
for clear communication with
bankers, including the sharing
o f economic and analytical
expertise that can assist banks
and thrifts in identifying, mea­
suring and controlling risks.
The FDIC in 1995 also made
changes to become more
responsive to the industry’s
view s toward the supervisory
process.
As required by the Riegle
Community Development and
Regulatory Improvement Act o f
1994, the FDIC created an Office
o f the Ombudsman that w ill be
an independent, neutral source
o f assistance to the banking
community, the public and FDIC
employees. Its mission is to assist
in the impartial and prompt
resolution o f complaints against
the FDIC, to gather information
that ensures the FD IC ’s regula­
tions and procedures are clear
and up-to-date, and to address
other concerns or questions
about the agency.

Pursuant to the same law, the
FDIC established an appeals
process for decisions and conclu­
sions made by FDIC examiners
and regional supervisory officials.
An appeals committee in the
Washington headquarters w ill
consider and decide an appeal
and notify the institution o f its
decision within 60 days. The
committee is comprised o f the
Vice Chairman o f the FDIC, the
Director o f DOS, the Director
o f the Division o f Compliance
and Consumer Affairs (DCA),
the General Counsel and the
Ombudsman. Institutions may
appeal a variety o f material
supervisory determinations,
including examination ratings.
Guidelines contain provisions
designed to protect institutions
from possible retaliation as a
result o f filing an appeal.
In March, DOS began asking
bankers to complete a question­
naire to solicit opinions and
suggestions on how to improve
the quality and efficiency o f the
examination process. Most o f
the approximately 3,500 FDICsupervised comm ercial banks
and savings banks examined
within a one-year period w ill be
asked to complete a three-page
questionnaire on such matters
as the appropriateness o f exami­
nation procedures, the quality
o f the examination team and
the usefulness o f the examination
report.
In addition, the FDIC began to
use the Internet to accept public
comment on proposed regula­
tions. The FDIC also began to
explore the use o f the Internet to
permit electronic submission of
applications and to make avail­
able supervisory materials, such
as examination manuals and
notices o f final and proposed
regulations.

Reduced Regulatory Burden
A variety o f laws and regulations
affecting banks in the areas o f
safety and soundness, crime
detection and consumer protection
have imposed significant costs
on insured banks and thrifts (as
compared to other competitors).
In order to reduce these costs,
the FDIC in 1995 intensified
its efforts to eliminate excess
regulatory burden.
Congress, for example, required
the FDIC and other bank and
thrift supervisors to review all
regulations and policy statements.
The Office o f the Executive
Secretary led these efforts in
cooperation with other Divisions
and Offices. (In 1996, new Board
mem ber Joseph H. N eely began
to direct these efforts and the
new Office o f Policy Development
took a leading role.) The FDIC
also worked with other federal
banking agencies to review com­
mon regulations, written policies
and guidelines, with the goal
o f working toward uniformity.
Begulations are being tested as
to whether they are necessary to
ensure a safe and sound banking
system, enhance the functioning
o f the marketplace, or implement
public policy related to
consumer protection.

Com pliance, Enforcem ent and Other Related Legal Actions 1993-1995
Sect 8a Termination of Insurance *
Voluntary Termination of Insurance
Involuntary Termination of Insurance
Notices to Primary Regulator
Notices of Hearing*
Final Order Terminating Insurance"

Sect 8p Termination of Insurance (no deposits)
Sect 8q Termination of Insurance (deposits assumed)
Sect 8b Cease-and-Desist Orders
Notices of Charges Issued
Orders Issued W ith Notices of Charges"
Orders Issued Without Notice of Charges
Section 8 (c) Temporary Orders"

Sect 8e Removal/Prohibition of Director or Officer
Notices of Intention to Remove/Prohibit
Orders Issued With Notice"
Orders Issued Without Notice

Sect 8g Suspension/Removal When Charged With Crime
Civil Money Penalties Issued
Sect 5e Cross-Guaranty Assessments/Waivers
Notices of Assessment of Liability
Waivers Issued

Sect 7 j Notices Disapproving Acquisition/Control
Sect 19 Denials of Service After Criminal Conviction
Denials of Requests to Serve Issued
Final Orders Issued After Hearing"

Sect 32 Notices Disapproving of Officer or Director1
Notices of Disapproval Issued
Final Rulings Issued After Appeal"

Regulation Z Requests for Relief from Reimbursement7
Orders Denying Requests for Relief
Orders Granting Relief Issued

Other Actions Not Listed Above
Total Number of Actions Initiated by the FDIC

In response to the examination
questionnaire mentioned previ­
ously, DOS and DCA also took
steps to identify areas o f the
examination process that can be
streamlined. For example, DOS
examiners w ill provide banks
with a minimum two-week notice
before an upcoming examination,
w hile on-site examination hours
w ill be reduced by shifting
certain examination functions
outside o f the bank. Also, the
questionnaire asks bankers if
they would prefer to have safetyand-soundness examinations



1995
7

1994
5

1993
5

7

2

1

0
0
1

3
1
1

4
2
2

1
16
29

2
9
42

11
8
78

2
3
27
1

1
7
41
0

11
8
67
2

42

50

64

7
20
35

17
23
33

20
23
44

1
9
0

0
10
1

2
15 i
6

0
0

0
1

2
4

1
2

0
1

0
1

2
0

1
1

1
0

4

5

11

4
0

5
0

11
3

5

3

10

5
0

3
0

10
0

9

16

17

126

144

228

•

The FDIC can order the termination of deposit insurance under Section 8a for reasons that include unsafe or
unsound conditions, unsafe or unsound practices, and violations of laws. After initial notice, most matters are
resolved through the correction of problems or the closing of the institution.

■

These orders generally do not signify the start of compliance/enforcement proceedings and therefore are not
included in totals for actions initiated.

A

Linder Section 32, the FDIC must approve any change of directors or senior executive officers at a state nonmember
bank that has been chartered less than two years, has undergone a change of control within two years, is not
in compliance with capital requirements, or otherwise is in a troubled condition.

T

Regulation Z, which implements the Truth in Lending Act, requires accurate disclosures to consumers of interest
rates and finance charges. Institutions that fail to comply may be ordered to reimburse customers.
Note:
Detailed information about the full range of FDIC enforcement actions, penalties, criminal referrals, lawsuits and
related measures is contained in the annual "Section 918 Report to Congress,” which is available from the FDIC.

Frank Gresock

separate from or in conjunction
with other examinations.
Approximately two-thirds o f
the respondents wanted to have
various examinations at the same
time. DCA is increasing offsite,
pre-examination analysis in
order to m inim ize the burden
associated with on-site
examinations.

Enforceinent Actions
The number o f enforcement
actions initiated in 1995 totaled
126, compared to 144 in 1994
and 228 in 1993 (see table on
Page 21). This is indicative
o f continued improvement and
prosperity in the industry.
Another sign o f the improved
conditions in the industry is that
in 1995 the FDIC initiated no
“prompt corrective actions,” such
as early-intervention authorized
by a 1991 law w hen an insured
institution’s capital condition
is eroding.
One m ajor enforcement case in
1995 involved The Daiwa Bank,
Limited, Osaka, Japan. In
September, Daiwa disclosed
approximately $1.1 billion in
securities trading losses at its
N ew York City branch, after
having concealed those losses
from regulators. The FDIC,
the Federal Reserve Board, and
the N ew York State Banking
Department issued joint ceaseand-desist orders against Daiwa
and its insured New York
subsidiary, Daiwa Bank Trust
Company (D aiwa Trust), to
control securities trading.




These government agencies
also began an investigation o f
Daiwa’s N ew York City branch
and Daiwa Trust. Soon there­
after, Daiwa disclosed that Daiwa
Trust had lost $97 m illion from
trading activities from 1984
through 1987. At the direction
o f senior management, Daiwa
concealed the losses from regula­
tors and the public. In November,
Daiwa was ordered by its federal
and state bank regulators to
close its U.S. banking operations.
The N ew York State Banking
Department also ordered Daiwa
Trust to cease its operations,
w hile the FDIC terminated its
deposit insurance. Daiwa subse­
quently pled guilty to assorted
federal crimes and paid a line
o f $340 million.

Failed
Institutions
More information about failed institutions appears
in the financial statements and statistical tables
in the back o f this Annual Report,

The success of the FDIC’s mission
in protecting the depositors o f
insured banks and savings asso­
ciations is demonstrated by the
fact that no depositor has ever
suffered a loss o f insured funds
from the closing o f an FDICinsured institution. The FDIC
protects depositors by managing
two insurance funds-the Bank
Insurance Fund (B IF ) and the
Savings Association Insurance
Fund (SAIF). The FDIC assumed
responsibility for resolving SAIFinsured institutions from the
Resolution Trust Corporation
(RTC) on July 1, 1995. The RTC
was established by Congress in
August 1989 to resolve hundreds
o f troubled savings associations.
In addition to operating two
insurance funds, the FDIC
manages the assets and liabilities
o f the form er Federal Savings
and Loan Insurance Corporation
(FSLIC). The assets and liabilities
o f the form er FSLIC are managed
through the FSLIC Resolution
Fund (FRF).
In most cases, a depository
institution is closed by its
chartering authority w hen it
fails to meet prescribed capital
requirements or is insolvent.
The FDIC works closely with
all chartering authorities in
dealing with institutions in
danger o f failing.
The Division o f Resolutions
(D O R ) is responsible for
resolving a failed institution
using the least-costly alternative.
DOR works with other FDIC
Divisions to gather data about
the failing institution, estimate
the potential loss from a liquida­
tion, solicit and evaluate bids
from potential acquirers and
recommend the least-costly
resolution to the FD IC’s Board
o f Directors.



Failed Banks 1994--1995
California
Connecticut
Hawaii
Massachusetts
Missouri

Total
Assets remaining after a failure
are liquidated by the Division
o f Depositor and Asset Services
(DAS) in an orderly fashion. The
proceeds are used to pay, to the
extent possible, uninsured depos­
itors and any remaining creditors,
including the repayment o f the
insurance funds. The Legal
Division assists DOR and DAS
with these duties and, when
appropriate, pursues legal action
against individuals whose
misconduct caused losses to
an insured institution.

Protecting Depositors
During 1995, the FDIC resolved
six BIF-insured institutions with
total assets o f $753 million, down
from 13 failures in 1994 with
$1.4 billion in assets. The size
o f bank failures in 1995 was the
lowest since 1980, when failedbank assets totaled $236.2 million.
This also was the lowest number
o f failures since 1977, w hen
there w ere also six failures, and
substantially below the record
206 failures in 1989. The FDIC
resolved all six failures during
the year through Purchase and
Assumption (P& A) transactions
w here the insured deposits as
w ell as some assets o f the failed
bank w ere acquired by another
institution. Depositors with
balances above the $100,000
insurance limit at the time of
closing w ill receive a pro rata

1995
4
1
1
0
0

1994

6

13

8
2
0
2
1

share o f the proceeds from the
liquidation o f the institution.
There w ere no failures o f SAIFinsured institutions after the
FDIC became responsible for
them on July 1, 1995, although
two savings institutions failed
earlier in the year and were
resolved by the RTC.
The FDIC may make an
“advance dividend” payment to
uninsured depositors soon after
a bank’s closing. The advance
dividend is based on the estimat­
ed recoveries from liquidating
the failed bank’s assets. The
FDIC made advance payments
o f $12.3 m illion to uninsured
depositors in 1995. An advance
dividend is not generally paid
in cases w here the value o f the
failed institution’s assets cannot
be reasonably determined.
Advance payments w ere made
to uninsured depositors in all
six failures in 1995 and ranged
from 48 to 70 percent o f unin­
sured depositor claims.
W here appropriate, as assets
are liquidated, DAS makes sub­
sequent dividend payments
to uninsured depositors and
general creditors o f failed banks,
including payments to the FDIC
as a creditor for advancing funds
for insured deposits at the time
o f bank failures. Dividend pay­
ments during 1995 totaled
$3.9 billion for bank failures from
that year and previous years.

Resolution Strategies
The FDIC uses several strategies
to achieve the least-costly resolu­
tion o f a failing institution. The
most frequently used resolution
strategy is the P&A transaction,
described previously. Typically,
acquirers pay a premium for a
failed bank’s deposits and certain
assets, prim arily performing
loans. The least desirable option
is a payout o f insured deposits
and the subsequent liquidation
o f assets. This option was last
used on Novem ber 5, 1993.
The FDIC also may provide
“shared equity” in a resolution,
through some form o f preferred
stock or debt, to help an acquir­
ing institution capitalize its new
assets. These capital instruments
are typically issued at riskadjusted rates and are structured
with incentives for early redemp­
tion. Both the BIF and the FRF
own these securities, and DOR
is responsible for their manage­
ment and eventual disposition.
In 1995, the FDIC realized
$9.5 m illion from one previous
resolution transaction. The FDIC
did not provide any capital
assistance in 1995.
At year-end 1995, DOR was man­
aging 40 assistance agreements
dating back to 1977. O f these,
12 involved open bank assistance,
20 involved loss-sharing agree­
ments with 13 different acquir­
ers, two w ere limited partnership
agreements and the remaining
six comprised other types o f
assistance. These assistance
agreements cover $4.3 billion
in assets owned by acquiring
institutions. In addition,
at the close o f the RTC on
December 31, 1995, DOR
assumed responsibility for ten
interim capital assistance agree­
ments between the RTC and
m inority-owned institutions that



acquired thrifts from the RTC.
A separate discussion o f the
FSLIC Resolution Fund assistance
agreements, also managed by
DOR, appears on the next page.

•

2,687 real estate properties,
which w ere sold for a total
o f $573.3 million, yielded a
recovery o f 94.3 percent o f
the average appraised value.

•

Over 23,750 loans and other
assets, totaling $2 billion in
book value, w ere sold in
sealed-bid offerings and
other asset marketing events.
Net sales proceeds represent
ed 97.7 percent o f the
appraised value.

Asset Disposition_____________
When an insured institution is
closed, the FDIC is appointed
receiver to administer the failed
institution’s deposits and assets.
As o f December 31, 1995, DAS
was responsible for managing
653 active receiverships
(590 for the BIF, 62 for the FRF
and one for the SAIF). During
1995, the FDIC terminated 231
receiverships.
The FD IC’s ability to provide
incentives for healthy institutions
to assume deposits and purchase
assets o f failed banks allows a
portion o f assets to be returned
to the private sector immediately.
The remaining assets are retained
by the FDIC for later sale, loan
workouts or other disposition.
During the year, the FD IC’s efforts
to dispose o f assets at the time of
closing resulted in approximately
27 percent o f the assets o f the
six failed banks remaining in
the private sector (about $203
million out o f $753 million total).
The FDIC retained the remaining
73 percent, or $550 million.
During 1995, DAS successfully
settled, sold or otherwise resolved
a significant portion o f its asset
inventory from failed institutions
as follows:
•

The FDIC reduced the book
value o f assets in liquidation
38.4 percent during the
year, to $10.3 billion from
$16.7 billion. Net collections
for all funds totaled about
$4.5 billion.

Affordable 1 on sing;___________
1
The congressional appropriation
o f $15 million for affordable
housing for fiscal year 1995
was reduced to approximately
$3.7 m illion in July 1995.
Notwithstanding the reduction
in funds, the FDIC was able to
help qualified buyers purchase
412 single-family properties
during the fiscal year. In addition,
eight multifamily properties
containing 225 units w ere sold
to nonprofit organizations and
public agencies. Notable trans­
actions included the following:
•

Two multifamily properties
containing a total o f 15 units
w ere sold on June 13 to the
Comm unity D evelopm ent
Corporation of Fitchburg, MA,
for $7,500. Eight units w ill
be set aside for low-incom e
tenants.

•

On Martin Luther King’s
birthday (January 16, 1995),
the 83-unit Copley Gardens
was dedicated in a ceremony
with Rep. Barney Frank
(D -M A ) in Rockland, MA.
The South Shore Housing
Development Corporation,
a nonprofit housing group,
had purchased it from the
FDIC for $950,000.

On October 1 - three months
before the RTC closed - the RTC
and FDIC affordable housing
programs form ally merged. The
FDIC w ill sell the remaining RTC
affordable housing.

Professional Liability
Recoveries_____________________
The FD IC ’s Legal Division and
DAS work together to identify
claims against directors and
officers, accountants, appraisers,
attorneys and other professionals
w ho may have contributed to
the failure o f insured financial
institutions. The Corporation
investigates the circumstances
surrounding the failure o f every
institution and, w here appro­
priate, sends criminal referrals
to the Department o f Justice.
The FDIC also w ill pursue
administrative enforcement
actions and professional liability
proceedings.
During 1995, the Legal Division
and DAS recovered $252 million
from professional liability
settlements or judgments. At
year-end 1995, the FD IC ’s
caseload included investigations
and lawsuits involving 147 institu­
tions. This caseload is expected
to increase in 1996 as the FDIC
assumes responsibility for
RTC-related cases that are still
pending.
The Legal Division’s criminal
restitution unit tracked and
coordinated m ore than 3,000
new criminal referrals made
by regulators and institutions
during 1995. O f these, 36
involved closed institutions.
Also during 1995, the FDIC as
receiver collected $7.6 m illion
in court-ordered restitution from
individuals convicted o f bank
fraud.



Liquidation H ighlights 1993-1995
Dollars

in b i l l i o n s

Total Failed Banks*
Assets of Failed Banks*
Net Collections"
Total Assets in Liquidation (year-end)*

1995
6
0.8
$
4.5
$
$ 10.3

1994
$
$
$

13
1.4
8.5
16.7

1993
$
$
$

41
3.5
12.5
28.0

•

Excludes open bank assistance transactions. The 1993 items exclude one SAIF-insured failure resolved by the
Resolution Trust Corporation.

■

Includes assets from failed banks and from failed thrifts formerly insured by the Federal Savings and Loan
Insurance Corporation. These assets are serviced by the FDIC as well as by asset management contractors
and national servicers.

FSLIC Resolution Fund
The FDIC, through the FRF,
is responsible for managing
assistance agreements the
form er FSLIC entered into prior
to August 9, 1989. The last agree­
ment is scheduled to terminate
in December 1998.
The FRF, which receives
federally appropriated funds,
was allocated $827 million, o f
which $662 million was available
at the end o f the year.
DOR is responsible for managing
FRF’s assistance agreements,
which include “covered assets”
(those w here acquirers w ere
guaranteed against loss and/or
guaranteed a certain yield).
During the year, DOR reduced
the number o f agreements it
managed to seven from 11. Three
o f these assistance agreements
w ere terminated through negoti­
ation before their contracted
termination dates.
These “early terminations” are
expected to yield a cost savings
o f $10.6 million, primarily involv­
ing a September 1988 assistance
agreement with Guaranty Federal
Bank, F.S.B., Dallas, and an
August 1988 assistance agreement
with American Federal Bank,
F.S.B., Dallas.

A settlement also was reached
in a lawsuit involving FD IC’s
managem ent o f a FSLIC
assistance agreem ent with
Bluebonnet Savings Bank, F.S.B.,
Dallas, Texas. In June 1991,
Bluebonnet, FSB Corporation
and James M. Fail filed suit in
the U.S. District Court in Dallas
against the FDIC and the Office
o f Thrift Supervision. The
lawsuit asserted that the FDIC,
as manager o f the FRF, breached
the terms o f the FSLIC assistance
agreement. In August 1995,
the lawsuit was settled. The
FRF made a total payment
o f $77.5 million to Bluebonnet
to settle all matters and to
provide for an early termination
o f the assistance agreement.
Covered assets w ere reduced
to $108 million from $1.0 billion
through sales and other adjust­
ments. In addition, DOR is
administering 30 terminated
FRF agreements that have
outstanding issues and
45 agreements that only require
the monitoring and collection
o f tax benefits due to the
FRF beyond the contractual
termination o f the agreements.
Approximately $279 million in
tax benefits w ere reafized by the
FRF in 1995.

W hile DOR manages the FRF
agreements and covered assets,
DAS is responsible for liquidating
FRF assets and liabilities. At
year-end 1995, the FRF portfolio
o f assets in liquidation had a
book value o f $1.5 billion, down
from $1.8 billion at the end of
1994, despite the purchase of
$534 million o f assets during
1995 related to the early ter­
minations. FRF net liquidation
collections totaled $634 million
in 1995.
On January 1, 1996, the FD IC’s
FRF received from the RTC its
remaining $14 billion o f corporate
assets and $11 billion o f corpo­
rate liabilities. RTC receivership
assets included $7.7 billion (book
value) o f assets in liquidation
and $12.7 billion (book value)
in other assets and cash reserves
from the RTC’s securitization
sales. The FDIC expects to
recover $14 billion from these
receivership assets to cover the
$11 billion in corporate liabilities
assumed.
The FRF w ill continue until all
o f its assets are sold or liquidated
and all o f its liabilities are satis­
fied. Any funds remaining w ill
revert to the U.S. Treasury.




W. W. Reid

Chairman Heifer discussed the new
strategic plan-the first in the agency’s
history—at an April videotaping for
employees.

Consumer Protection
Activities

27

In addition to protecting failedbank depositors, the FDIC has
a strong consumer protection
responsibility in other areas.
These efforts include enforcing
compliance with consumer
protection and civil rights laws,
and helping to educate bankers
and consumers on topics such
as community reinvestment, fair
lending and deposit insurance.
Highlights for 1995 follow.

Implementation o f the final regu­
lation w ill occur during a two-year
period that began July 1, 1995.
Small institutions began to be
evaluated under the new stream­
lined standards for performance
on January 1, 1996. Large institu­
tions began collecting data for
the new tests on January 1, 1996,
but the first reports are not due
until March 1, 1997. Institutions
received free software in
December o f 1995 to assist them
in collecting the CRA loan data.

CRA Reform___________________
The FDIC continued working
with the other federal bank and
thrift regulatory agencies on
revising regulations relating to
the Community Reinvestment
Act (CRA), a 1977 law that
encourages banks and thrifts
to meet the credit needs o f their
communities. After issuing pro­
posed changes to the regulations
in 1993 and 1994 - on which the
agencies collectively received
almost 14,000 comment letters a final rule was approved in
April 1995.

After the final rule was issued,
the FDIC continued to w ork with
the other federal bank and thrift
regulatory agencies to apply
the new standards consistently.
Uniform interagency CRA
examination procedures and
performance evaluations were
issued in December 1995. In
addition, under the auspices of
the Federal Financial Institutions
Examination Council, the
agencies conducted joint CRA
training sessions attended by
more than 1,200 examiners and
other personnel.

The revised CRA regulation
emphasizes evaluations o f
an institution based on actual
lending, investment and service.
The new regulation promotes
consistency in evaluations, and
eliminates unnecessary record­
keeping and reporting require­
ments without compromising
effective enforcement. In general,
the new regulation establishes
different performance tests for
different types o f institutions large institutions, small institu­
tions, and w holesale and limitedpurpose institutions. Also, an
institution may opt to be assessed
under an agency-approved “strate­
gic plan” that has been designed
by the institution, issued for
public comment and is based on
measurable performance goals.

The duties o f the Division o f
Compliance and Consumer
Affairs (D CA) include examining
FDIC-supervised banks for
compliance with consumer
protection laws. DCA conducted
3,148 such examinations in 1995.
As a result o f these or previous
examinations, 328 banks reim ­
bursed nearly $2.3 million to
consumers during 1995 for viola­
tions o f the Truth in Lending Act
regarding incorrect disclosures.
That law requires accurate
disclosures o f interest rates and
finance charges so that loan
applicants can comparison-shop
for a mortgage or other consumer
loan.




During 1995, DCA continued its
efforts to improve the quality and
effectiveness o f the compliance
examination. To identify and
address the concerns o f the
banking industry, DCA surveyed
784 FDIC-supervised banks to
determine how institutions
view ed the quality o f the exami­
nation. By year-end, DCA began
implementing improvements
in the examination process that
reflected survey findings. Among
the most important changes
was the adoption o f extensive
pre-examination planning aimed
at narrowing the focus o f the
compliance examination and
reducing the time examiners
spend in a bank.
A new manual outlining the
compliance examination from
pre-examination planning to
report preparation was being
developed for distribution in
1996. Additionally, DCA began
testing new software that w ill
assist examiners in evaluating
lending performance by provid­
ing ready access to census, loan
and other data.

Compliance Examinations
Community Outreach
One o f the many ways the
FDIC promotes compliance with
fair lending laws is by meeting
with bankers, community and
consumer groups, government
officials and citizens to exchange
information about CRA and fair
lending. Examples o f community
outreach activities conducted by
DCA during 1995 include a focus
group held in Mississippi to iden­
tify roadblocks to rural lending,
banker training sessions in
Kansas and Texas on fair lending
and fair housing, and seminars
in California with community
groups and tribal representatives
on lending to Native Americans.

DCA in 1995 also emphasized
programs intended to overcome
obstacles to lending for minorityowned small businesses. For
example, the Division sponsored
meetings in South Carolina
with bankers, local government
officials, small business owners
and representatives o f communi­
ty organizations to discuss issues
such as fending discrimination
and changes to CRA reguiations
o f interest to small businesses.
Similar forums and activities were
conducted in several locations
nationwide.

Deposit Insurance Training
DCA and the FD IC ’s Legai
Division sponsored deposit
insurance training seminars for
bankers in 11 cities during 1995.
As the staff o f an insured institu­
tion generaliy is a customer’s
first source o f information about
FDIC deposit insurance, the
seminars were aimed at educating
bank employees on w hat deposit
insurance does and does not
cover, and how to explain
coverage accurately and clearly
to consumers.
Topics addressed at the FDIC
seminars included the most
common reasons w hy deposits
are not insured. A guide to
uninsured investment products,
such as mutual funds, also was
provided. Each participant
received a handbook containing
a comprehensive description
o f the deposit insurance rules,
and other materials that institu­
tions can use to develop and
conduct their own training
programs. DCA, in conjunction
with the Legal Division, also
began developing a video based
on the seminars.




Responses to Consumer
Complaints and Inquiries
DCA maintains a toll-free
telephone hotline to handle
inquiries from the public
[1-800-934-FDfC (3342)
or 202-942-3100 in the
Washington, DC, area]. The
service aiso accommodates
telecommunications devices
for the deaf (1-800-925-4618 or
202-942-3147). More than 48,000
telephones calls w ere received by
DCA’s Washington headquarters
and eight regional offices in
1995. As in the past, the vast
majority o f the calls dealt with
deposit insurance. However,
other significant categories of
caffs involved generai information
about bank operations and
consumer protection laws, the
use o f Home Mortgage Disclosure
Act reports in detecting possible
lending discrimination, and
truth-in-lending rules that ensure
borrowers have adequate infor­
mation about a loan’s costs and
terms. The number o f calls
received during 1995 was some­
what lower than the 55,000 calls
in 1994, which may be due to the
continuing decline in the number
o f bank failures.
DCA also responded to approxi­
mately 5,800 written consumer
complaints and inquiries during
the year. Significant categories
included lending discrimination,
protections against inaccurate or
misleading information in credit
files, deposit insurance coverage
and other matters relating to
deposit services.
In addition, the FD IC’s Office
o f Legisfative Affairs (O L A )
coordinated w ith other Divisions
and Offices on responses to
approximately 1,400 written
inquiries from members of
Congress. Most o f these inquiries
w ere on behalf o f constituents

wanting to know about FDIC
policies and practices. Many
inquiries received by O LA raised
consumer-related issues such as
financial institution compliance
with consumer protection laws,
questions about deposit insurance
coverage, and bank and thrift dis­
putes with individual consumers
over services and prices.
In a related development, the
agency in 1995 created an Office
o f the Ombudsman to respond
to questions, concerns or com ­
plaints about the FDIC from
consumers, bankers and other
members o f the public.

On-Line Consumer
Inform ation___________________
In February 1995, the FDIC
unveiled its W orld W ide Web
page on the Internet
(http://www.fdic.gov), thus
providing the public with ready
access to FDIC consumer
information, press reieases and
statistics on banking.
Consumer information on the
FD fC ’s Internet web-site includes
selected articles and fact sheets
on deposit insurance coverage,
an explanation o f the FD IC ’s
procedures for paying deposit
insurance w hen an institution
fails, and the text o f two consumer
brochures {Your Insured Deposit,
a summary o f the FDIC’s deposit
insurance rules, and Insured o r
N o t Insured, a guide to what
bank products are and are not
insured by the FDIC).
Consumers now can send mes­
sages to DCA via the Internet to
get answers to specific questions
about deposit insurance, fair
lending rules and other consumer
protections (Internet address:
consumer@fdic.gov).

Significant
Court Cases

The FD IC’s wide-ranging legal
activities include matters relating
to the supervision o f FDICinsured institutions, the resolu­
tion o f failed institutions, the
liquidation o f assets, and the
pursuit o f liability claims against
failed bank officers, directors and
professionals.
In 1995, the Legal Division,
w orking closely w ith other
Divisions and Offices, was
involved in several noteworthy
court cases. Most involved failed
institutions and the “cross­
guaranty” authority o f the
FDIC to recover all or part o f its
failed-bank costs from commonly
controlled subsidiaries o f a
holding company.

(O ’M elveny and Myers v. FDIC),
the D. C. Circuit found that the
Supreme Court held that new
and comprehensive legislation
replaced common law doctrines
such as D ’Oench Duhme. The
FDIC disagreed with the D.C.
Circuit’s decision and continued
to litigate D ’Oench cases within
FDIC guidelines outside o f the
D.C. Circuit. (On May 8, 1996, in
Motorcity v. FDIC, the U.S. Court
o f Appeals for the Eleventh
Circuit in Atlanta, Georgia,
expressly rejected the D.C.
Circuit’s holding and found that
the D ’Oench Duhme doctrine
was not displaced by FIRREA.)

First City Bancorporation____

D ’Oench Duhme
In 1942, in D’Oench, Duhme &
Co. v. FDIC, the U.S. Supreme
Court established a broad rule
protecting the FDIC against any
arrangements, including verbal
or secret agreements, that are
likely to mislead bank examiners
in their review o f a bank’s
records, even if there was no
intent to deceive. Since then, the
FDIC has relied on the so-called
D ’Oench Duhme doctrine and
its statutory counterpart to
ensure that the true financial
condition o f an institution can
be accurately assessed from
its records. This is essential to
supervising open institutions
and resolving failing ones.
However, in a 1995 decision,
the U.S. Court o f Appeals for the
District o f Columbia Circuit
(Murphy v. FDIC) held that the
Financial Institutions Reform,
Recovery, and Enforcement Act
o f 1989 (FIR R E A ) replaced the
D’Oench Duhme doctrine. Citing
a June 1994 Supreme Court ruling



A global settlement reached
in 1995 released the FDIC from
all claims made by First City
Rancorporation o f Texas,
Houston, in a case involving
a series o f transactions. In 1988,
the FDIC provided significant
assistance to the banking sub­
sidiaries o f First City, to enable
the banks to maintain solvency.
On October 30, 1992, the Office
o f the Comptroller o f the Currency
closed First City’s Houston
operation and the Texas Banking
Commissioner closed its Dallas
subsidiary. Later that same day,
chartering authorities closed the
holding company’s 18 other
bank subsidiaries after the FDIC
exercised its authority to seek
reimbursement for its losses on
the Houston and Dallas banks.
The FD IC’s use o f this “cross­
guaranty” authority, granted by
FIRREA, rendered the 18 banks
insolvent.
In 1995, First City filed suit
against the FDIC, contesting a
portion o f the open-bank assis­
tance agreement from 1988 and
the FD IC ’s right to assess First

City’s 18 subsidiaries in 1992.
In June and July o f 1995, a global
settlement was reached, with the
approval o f a Dallas bankruptcy
court, releasing the FDIC from
all claims and liabilities. The
settlement, which involved no
cost to the Bank Insurance Fund,
enabled claimants against the
bankrupt holding company to
receive early distributions o f
m ore than $300 million in
assets held by the FDIC in its
receivership capacity.

Meriden Trust and
Safe Deposit Com pany_______
In 1992, the FDIC assessed
Meriden Trust and Safe
Deposit Company o f Meriden,
Connecticut, for a $152 million
loss from the failure o f its affiliate,
Central Bank o f Meriden. Cenvest,
Inc., the holding company that
owned the two banks, challenged
the FD IC’s decision.
Th e U.S. District Court in
Connecticut ruled in favor o f the
FDIC in June o f 1994, confirming
its authority to levy the cross­
guaranty assessment. Then, in
July o f 1994, the FDIC closed
Meriden Trust, marking the first
time the FDIC closed an insured
institution and appointed itself
as receiver under powers granted
by Congress in 1991 (in contrast
to being appointed receiver by
the chartering authority). The
bank reopened as an FD ICowned “bridge bank” and was
sold in Novem ber o f 1994 for
$7.8 million.
Cenvest appealed the District
Court’s decision, but on
August 2, 1995, the U.S. Court
o f Appeals for the Second Circuit
in New York City upheld the
District Court’s ruling in favor
o f the FDIC.

Maine National Bank
The FDIC levied a cross-guaranty
assessment against M aine
National Bank, Portland, Maine,
for the 1991 failure o f its affiliate,
Bank o f N ew England, N.A.,
Boston. The assessment rendered
Maine National insolvent, and
the chartering authority closed it
in 1991. The trustee o f the banks’
holding company contested the
FD IC’s assessment in court,
arguing that it was a taking of
property without just compensa­
tion in violation o f the Fifth
Amendment. The U.S. Court o f
Federal Claims in Washington,
D.C., ruled in favor o f the trustee,
finding that there was a taking of
property without compensation.
The FDIC appealed the Court’s
decision.
On Novem ber 13, 1995, the
U.S. Court o f Appeals for the
Federal Circuit in Washington,
D.C., in a unanimous opinion,
reversed the earlier decision. It
upheld the FD IC’s cross-guaranty
assessment power and rejected
the trial court’s conclusion that
such authority is a radical depar­
ture from the common law
principle o f limited corporate
liability. On December 28, 1995,
the trustee filed a petition for
rehearing before the Federal
Circuit. As o f year-end, a decision
was still pending.

Doolin Security
Sayings Bank, FSB
In May, the U.S. Court of
Appeals for the Fourth Circuit
in Richmond, Virginia, affirmed
the 1994 decision o f the FDIC
Board to terminate deposit insur­
ance for Doolin Security Savings
Bank, FSB, N ew Martinsville,
West Virginia. Doolin had disput­
ed its deposit insurance premium
and withheld a portion o f its



payment to the FDIC. The FDIC
initiated insurance termination
proceedings against the bank.
Doolin later petitioned the
U.S. Supreme Court to review
the matter, but the petition was
denied on Novem ber 13, 1995.
Thus, Doolin was required to pay
its delinquent deposit insurance
premiums.
The case is considered significant
in terms o f supporting the FD IC ’s
risk-related insurance premium
system, which went into effect
in 1993. Throughout the dispute,
the FDIC maintained deposit
insurance coverage at the bank
for the benefit o f Doolin’s
customers.

Meritor Savmgsjtank
In April 1994, a major share­
holder in Meritor Savings Bank,
Philadelphia, and other assorted
shareholders filed suit against
the FDIC, alleging that the
Commonwealth o f Pennsylvania
and the FDIC conspired to close
M eritor in 1992. The sharehold­
ers also alleged that the FDIC
had mismanaged the receivership
estate.
In February 1995, the U.S. District
Court for the Eastern District
o f Pennsylvania, sitting in
Philadelphia, dismissed all counts
o f the complaint against the FDIC
as receiver and in its corporate
capacity. The case is significant
because the Court concluded that
the shareholders did not have a
right to an accounting from the
FDIC for the receivership’s
actions beyond the information
the statute requires the receiver­
ship to make available to other
parts o f the government.

Internal
Operations

A main focus o f the FDIC in
1995 was conducting a thorough
review o f the Corporation’s
mission and operations as the
workload from failed banks
continued to decline and as
Resolution Trust Corporation
(RTC) employees and functions
transferred to the FDIC. This
review emphasized key goals
o f Chairman Heifer, including
shifting the focus from an agency
that resolves bank failures to one
that actively works to keep insti­
tutions open and operating. This
shift w ill require enhancing
and building upon many o f the
functions the FDIC has long
performed.
Also, on December 22, 1995,
the U.S. Senate confirmed
Joseph H. Neely as a member
o f the Board o f Directors.
Mr. Neely, a form er Mississippi
banking commissioner, was
nominated by President Clinton
on July 14. (He was sworn in
on January 29, 1996.) Mr. N eely’s
confirm ation marked the
first time since August 1992
that all live Board positions
w ere filled.

specific short-term objectives and
projects to achieve the long-term
goals set out in the strategic plan.
Initially, the agency established
151 projects, o f which approxi­
mately 30 w ere completed as o f
year-end 1995. FDIC staff w ill
add projects to the plan in 1996
as needed.
In May, Chairman H eifer
announced significant organiza­
tional changes to help achieve
the goals o f the strategic plan.
These changes included the
creation of a Division o f Insurance
(see Page 17), an Office o f the
Ombudsman (see Page 20),
a Division o f Administration
(D O A) and an Office o f Policy
Development (OPD).

Emphasis on Efficiency
and Running the FDIC
Like a Business ______________

DOA consolidates functions of
three separate offices for person­
nel management, corporate
services and staff training. DOA’s
early initiatives included a new
performance-management sys­
tem that encourages employees
to take an active part in estab­
lishing the criteria for their
performance evaluation. OPD
w ill coordinate policy develop­
ment among all FDIC Divisions
and Offices, evaluate the policy
implications o f regufatory
and legislative proposals, and
formulate corporate positions
on em erging issues.

In setting a new direction for
the agency, the FDIC launched
several initiatives. In April, the
Board approved a strategic plan
to guide the Corporation through
the end o f the decade. It is the first
formal, corporate-wide strategic
plan in the FD IC’s 61-year history.
M ajor goals center on identifying
and addressing risks to the
insurance funds and im proving
communications with the public.
To carry out the strategic plan,
staff developed a corporate-w ide
operating plan that focuses on

The Office o f fnspector General
(O IG ) continued to conduct
audits, investigations and other
activities that improved corporate
economy and efficiency w hile
preventing fraud and abuse.
The Inspector General, w ho is
appointed by the President and
confirmed by the Senate, keeps
the Board o f Directors and
Congress apprised o f potential
waste, fraud and abuse or other
serious problems in FDIC
programs and operations.




During 1995, the OIG issued
reports identifying $18.8 million
in potential cost recoveries
and savings that Corporation
management agreed to pursue.
The OIG presented a total o f 126
audit reports to the Board of
Directors, resulting in im prove­
ments across the Corporation.
In addition, the OIG helped
obtain 12 convictions or guilty
pleas and made 103 referrals to
the Department o f Justice, the
FBI and other federal agencies
during the year. These investi­
gations resulted in the recovery
and restitution o f more than
$1 million to the Corporation.
Am ong the many other examples
o f efforts to increase efficiency at
the FDIC is the continued work
to make banking statistics avail­
able on the Internet. Various
reports, which can be down­
loaded and incorporated into
spreadsheet applications, allow
for easier use and updating, and
significantly reduce the FD IC’s
printing costs.

Staffing and Budget
Reductions____________________
At year-end, the FDIC had 9,789
employees, down approximately
16 percent from year-end 1994
and 37 percent below the peak
level in the second quarter o f
1993. These figures reflect the
continuing decline in agency
workload from bank failures.
In Novem ber 1995, senior
management announced a twophased buyout program for
career FDIC and RTC employees
with incentives either to retire or
voluntarily resign. Employees in
the first phase w ere eligible to
leave by year-end, and m ore than
300 accepted. Eligible employees
who accepted the second phase

Num ber of O ffic ia ls and Employees of the FDIC 1994-1995 (year-end)
Washington

Total
Executive Offices*"
Division of Supervision*
Division of Depositor and Asset Services
Legal Division
Division of Compliance and Consumer Affairs'1
Division of Finance
Division of Information Resources Management
Division of Research and Statistics
Division of Resolutions
Office of Inspector General
Office of Personnel Management"
Office of Equal Opportunity
Office of Corporate Services"
Office of the OmbudsmanT
Division of Insurance0
Division of Administration’

Subtotal-FDIC
Resolution Trust Corporation0

Total

Regional/Field

1994

178
3,369
3,796
1,531
398
692
548
60
253
192
196
31
383
N /A
N /A
N /A

1995
96
149
129
435
40
279
352
51
81
149
N/A
28
N/A
3
1
386

9,789
2.067

11,627
5,899

11,856

17,526

1995
96
3,055
2,623
1,298
463
629
499
51
233
149
n /a
34
n/a
66
1
592

1994

169
159
79
434
24
311
382
60
74
192
185
31
209
N /A
N /A
N /A

1995
0
2,906
2,494
863
423
350
147
0
152
0
N/A
6
N/A
63
0
206

1994
9
3,210
3,717
1,097
373
381
166
0
179
0
11
0
174
N/A
N/A
N/A

2,179
1,072

2,309
1,649

7,610
995

9,318
4,250

3,251

3,958

8,605

13,568

*

For 1994, Executive Offices include the Offices of the Chairman, Vice Chairman, Director (Appointive), Executive Secretary, Corporate Communications, Legislative Affairs, and
Training and Educational Services. The 1995 number also includes the Chief financial Officer, Chief Operating Officer and the Deputy for Policy but omits the Office of Training
and Educational Services.

■

In May 1995, the FDIC announced the merger of the Offices of Personnel Management, Corporate Services, and Training and Educational Services (the latter formerly part
of the Executive Offices) into a new Division of Administration.

A

In August 1994, the FDIC announced the merger of the former Office of Consumer Affairs and the compliance examination function from the Division of Supervision into a new
Division of Compliance and Consumer Affairs.

T

In May 1995, the FDIC began staffing the new Office of the Ombudsman.

a

The only employee in the new Division of Insurance in 1995 was its director, named on October 30.

°

The RTC staffing totals include employees who were organizationally transferred from the RTC to the FDIC in Spring/Summer 1995, but who continued to work exclusively on RTC
functions throughout 1995. The RTC totals also include certain FDIC employees in Chicago who were dedicated to RTC functions early in 1995, and who worked exclusively on
these RTC functions for the balance of 1995.

o f the buyout began leaving
during the first quarter o f
1996 and w ill continue leaving
through the third quarter o f 1997.
For both phases, 940 employees
accepted the buyout offer.
The buyout program was intended
to lessen the scope o f a reductionin-force (R IF ), which under
federal law and FDIC policy
cannot take place until 1997. By
offering a buyout in 1995, the
Corporation estimated it w ill



save $129 million compared
to waiting until 1997 to conduct
a wide-scale RIF. Throughout
1996, the FDIC w ill evaluate
additional voluntary staff reduc­
tions in an effort to minim ize
the effect o f a possible RIF.
Approximately 1,200 temporary
staff appointments expire in
1996.
The FDIC assisted personnel
affected by the downsizing
effort by conducting numerous

training seminars and job fairs
and establishing Outplacement
Resource Centers both in the
field and in Washington.
As a result o f efforts to stream­
line, consolidate and reduce
its operations, FDIC spending
dropped to $1.37 billion in 1995,
which was 23 percent below the
previous level and eight percent
below the amount budgeted for
the year.

As D irector o f the n e w D ivision o f Adm inistration,
Jane Sartori had major responsibility for
integrating RTC personnel and functions into
the FDIC.

FDIC-RTC Transition
The FDIC successfully completed
the integration o f RTC personnel
and operations into the FDIC in
conjunction with the close o f the
RTC on December 31, 1995. The
joint FDIC/RTC Transition Task
Force, which had the statutory
mission o f planning for and over­
seeing the transition, coordinated
this effort.
Approximately 1,300 permanent
RTC employees w ere reassigned
to the FDIC during 1995, bringing
the total number o f permanent
RTC employees absorbed by the
FDIC over the past four years to
about 2,100. An additional 764
temporary RTC employees also
w ere transferred to the FDIC
at the end o f 1995, prim arily to
assist with the completion o f the
substantial volum e o f residual
RTC work. This included respon­
sibility for the management and
disposition o f the remaining
RTC assets and liabilities
(see Page 26).
The task force also completed
extensive reviews o f FDIC and
RTC automated systems and
other significant operational
differences between the two
corporations. These reviews were
the basis for recommendations
to the FDIC on the best systems
and practices to be used for
future FDIC work. At year-end,
the FDIC had implemented, or
was in the process o f implement­
ing, each o f the best practice and
system recommendations made
by the task force.













Regulations Adopted
and Proposed
Note: Publication dates refer to w hen an item
appeared in the Federal Register.

Final Rules
Deposit Insurance
Disclosures____________________
The FDIC amended Part 330 of
its regulations to require insured
institutions to disclose to admin­
istrators o f certain retirement and
other employee benefit plan
accounts whether their funds
qualify for “pass-through” deposit
insurance coverage. Among the
types o f accounts affected are
401(k) retirement accounts, Keogh
plan accounts, and corporate
pension and profit-sharing plan
accounts. Generally, “pass­
through” insurance means that
each participant in the plan, rather
than the total account balance,
is individually insured up to
$100,000. The new rule also
makes technical amendments to
Part 330 involving joint accounts,
accounts where an insured
institution is acting in a fiduciary
capacity, and commingled funds
o f a bankruptcy estate. The
“pass-through” revisions became
effective on July 1, 1995, while
the technical amendments went
into effect on March 13, 1995.
Approved:

January 31, 1995

Published:

February 9, 1995




Deferred Tax Assets
The FDIC amended Part 325
o f its regulations by revising its
capital standards to establish a
limit on the amount o f deferred
tax assets an FDIC-supervised
bank may include in T ier 1
capital for risk-based and leverage
capital purposes. Deferred tax
assets are assets that reflect, for
financial reporting purposes, the
amounts that w ill be realized as
reductions o f future taxes or as
future receivables from a taxing
authority. The effective date of
the final rule was April 1, 1995.
Approved:

January 31, 1995

Published:

February 13, 1995

Standards for
Safety and Soundness
To comply with Section 132 of
the FDIC Improvement Act o f
1991, the FDIC, together with
the other federal bank and thrift
regulatory agencies, amended
Parts 303, 308 and 364 o f its
regulations to establish deadlines
for submitting and reviewing
safety and soundness compliance
plans. The agencies also adopted
interagency guidelines establish­
ing standards for safety and
soundness, which appear as an
appendix to each agency’s final
rule. The effective date o f the
final rule was August 9, 1995.
Approved:

M arch 21, 1995

Published:

July 10, 1995

Assets Transferred with
Low Levels o f Recourse
The FDIC amended Part 325
o f its regulations to limit the
amount o f risk-based capital that
FDIC-supervised banks must
maintain for low-level “recourse”
transactions. Recourse involves
the retention o f any risk o f loss
by an institution in connection
with an asset or pool o f assets
it transfers to some other party.
The final rule, which became
effective on April 27, 1995, im ple­
ments Section 350 o f the Riegle
Community Development and
Regulatory Improvement Act of
1994 and corrects an inconsisten­
cy in the FDIC’s risk-based
capital standards.
Approved:

M arch 21, 1995

Published:

March 28, 1995

Community Reinvestment Act
The FDIC amended Part 345 of
its regulations implementing the
Community Reinvestment Act,
w hile the other federal bank and
thrift regulators approved paral­
lel rules. The new regulation
replaces the 12 assessment factors
in the old rule with a more
performance-based process
to determine whether financial
institutions are meeting the
credit needs o f their communities.
The new rule also establishes dif­
ferent tests for large and small
institutions, as w ell as for retail
and wholesale or limited purpose
banks. It also gives all institu­
tions the option o f being evaluat­
ed on the basis o f a “strategic
plan” designed by each institu­
tion. The rule also reduces regu­
latory burdens, particularly for
small institutions. The final rule
w ill be phased in over a two-year
period that began July 1, 1995.
Approved:

A p ril 24, 1995

Published:

M ay 4, 1995

FDIC veteran econom ist A rthur J. M urton
w as chosen D irector o f th e new
Division o f Insurance, w hich w ill identify
potential risks to the insurance funds.

Final Rules
Interest Rale Risk
The FDIC, acting jointly with
the Federal Reserve Board and
the Office o f the Comptroller
o f the Currency, amended its
risk-based capital standards
(Part 325) to include a bank’s
exposure to changes in interest
rates as a factor in evaluating
the institution's capital adequacy.
The final rule, which became
effective on September 1, 1995,
implements Section 305 o f the
FDIC Im provem ent Act o f 1991.
Approved:

June 27, 1995

Published:

August 2, 1995

Assessment Rales
lor the Rank Insurance Fund
The FDIC amended Part 327
o f its regulations to reduce the
insurance premiums for the
Bank Insurance Fund (BIF).
The rule establishes a new
assessment rate range o f four
to 31 cents per $100 o f assessable
deposits, depending on each
institution’s risk classification.
The previous range was 23 to
31 cents per $100. In addition,
the rule amends the assessment
schedule to w iden the rate
spread to 27 cents per $100, from
eight cents per $100. The rule
also established a procedure for
adjusting the rate schedule if
necessary to maintain the BIF’s
designated reserve ratio o f
1.25 o f total estimated insured
deposits. The effective date o f
the rule is September 15, 1995.
The FDIC Board reduced the BIF
rate again on Novem ber 14, 1995
(see the next page).
Approved:

August 8, 1995

Published:

August 16, 1995




Assessment Rates
for the Savings Association

Insurance Collections
and Calculations

Insurance Fund_______

The FDIC amended Part 327 of
its regulations to change the pay­
ment date for the first quarterly
assessment payment for the first
semiannual period in each year.
This first quarterly payment now
w ill be due the first business day
after January 1, rather than by
December 30 o f the previous
year. This change eliminates
a possible fifih assessment pay­
ment in 1995 that would have
been required for institutions
using the cash-basis method o f
accounting. The rule also allows
prepayment o f premiums as well
as doubling o f invoice payments
(except the January payment)
with advance notice to the FDIC.
Additionally, the rule changes the
way interest rates on assessment
underpayments and overpay­
ments are calculated, and short­
ens the timetable for announcing
changes in the assessment rate
from 45 to 15 days prior to the
invoice date. The effective date
o f the final rule was September
29, 1995, except for the change
to the calculation o f interest
rates, which became effective
October 30, 1995.

The FDIC Board voted to retain
the existing assessment rate
schedule for the Savings
Association Insurance Fund
(SAIF). The effect o f this final
rule is that institutions whose
deposits are subject to assess­
ment by the SAIF w ill pay higher
assessment rates than BIFinsured institutions. The Board
noted in its rulemaking that the
SAIF remains seriously under­
capitalized. The SAIF assessment
rate w ill continue to range from
23 to 31 cents per $100 o f assess­
able deposits, depending on risk
classification. This rule became
effective on September 15, 1995.
The Board also voted on
Novem ber 14, 1995, to maintain
this same rate (see the next page).
Approved:

August 8, 1995

Published:

August 16, 1995

Derivative Contracts
The FDIC amended Part 325 of
its regulations to revise the riskbased capital calculations used
to determine the potential future
exposure o f derivative contracts.
Under the final rule, the “conver­
sion factors” used in calculating
potential future exposure w ill be
changed to reflect the higher
risks o f “ long dated” interest rate
and exchange rate contracts.
Conversion factors for derivative
contracts related to equities,
precious metals and other com ­
modities w ill be revised to reflecl
the volatility o f the underlying
indices or prices. The final rule
was effective October 1, 1995.
Approved:

August 25, 1995

Published:

September 5, 1995

Approved:

September 26, 1995

Published:

September 29, 1995

Final Rules
Claim s on OECD-Based
Governm ents and Banks___
The FDIC amended Part 325 o f
its regulations to modify the riskbased capital definition for claims
on central governments and banks
in countries that are members
o f the Organization for Economic
Cooperation and Development
(OECD). Given that claims on
OECD countries generally get
favorable capital treatment, the
new rule clarifies that the OECDbased group o f countries includes
all countries that are members,
regardless o f when they entered
the OECD. The effective date o f
the rule is April 6, 1996.
Approved:

December 20, 1995

For the second time this year, the
FDIC Board voted to maintain
existing assessment rates for the
SAIF. Those rates range from
23 cents to 31 cents per $100
o f assessable deposits. SAIFinsured institutions w ill continue
to pay higher rates than BIFinsured institutions because
the SAIF remains seriously
undercapitalized.
Approved:

November 14, 1995

Published:

December 11, 1995

October 26, 1995

Published:

Assessment Rates
for the Savings Association
Insurance Fund

Assessment Rates Tor the
Bank Insurance Fund
For the second time this year, the
FDIC Board voted to reduce the
deposit insurance premiums
paid by BIF-insured institutions.
Assessment rates w ere lowered
by four cents per $100 o f assess­
able deposits, starting in January
o f 1996. Given the four cent
reduction, the highest-rated
institutions w ill pay the statutory
annual minimum o f $2,000 for
FDIC insurance. The assessment
rate for the weakest institutions
was reduced to 27 cents per
$100, from 31 cents per $100.
The average assessment rate is
the lowest in the more than 60year history o f federal deposit
insurance for banks. The rate
reduction was made possible
because o f the high balance in
the BIF, the health o f the banking
industry and the low projected
losses to the fund.
Approved:

November 14, 1995

Published:

December 11, 1995




Technical Amendments
to the CRA Rules
The FDIC, along with the other
federal bank and thrift regula­
tors, amended Part 345 to make
technical corrections to the
Community Reinvestment Act
regulations adopted by the FDIC
on April 24. The amendments
also clarify the transition rules.
The technical amendments took
effect January 1, 1996.
Approved:

December 13, 1995

Published:

December 20, 1995

Qualified Financial Contracts
The FDIC amended Part 360
o f its regulations to expand the
definition o f “qualified financial
contracts.” The definition now
includes spot and other short-term
foreign-exchange agreements
and repurchase agreements on
qualified foreign government
securities. The effective date of
the rule was December 27, 1995.
Approved:

December 19, 1995

Published:

December 27, 1995

DCA consumer affairs specialists
nationw ide, including M a rie tta M oore
in W ashington, help bankers and th e ir
custom ers understand FDIC rules.

Interim Rules

Proposed Rules

Originated Mortgage
Servicing Rights______________

Annual Audits and
Reporting Requirements

Standards for

The FDIC, together with the
other federal bank and thrift
regufators, approved an interim
rule amending Part 325 o f its
regulations regarding capitaf
limits on “originated mortgage
servicing rights” held by FDICsupervised banks. These gener­
ally are servicing rights acquired
when an institution originates
mortgage loans and later selfs
the loans but retains the rights
to provide services for a fee. The
effective date was August 1, 1995,
although written comments w ere
accepted until October 2, 1995.

The FDIC proposed an amend­
ment to the Corporation’s annuai
independent audit and reporting
requirements (Part 363 o f its
regufations) that would provide
relief from duplicative reporting
and audit committee requirements
for certain sound, well-managed
banks. The proposal would
implement Section 314(a) o f the
Riegle Community Development
and Regulatory Improvement
Act o f f994.

The FDIC, joining the other
federaf bank and thrift regulatory
agencies, issued for public
comment proposed guidelines
for safety and soundness refating
to asset quafity and earnings,
f f adopted as final, the proposed
rule would appear as an appendix
to each agency’s final rule
(in the FD IC’s case, Part 364).

Approved:

Published:

February 15, 1995

August 1, 1995

Golden Parachutes

Small Business Loans
Sold with Recourse
The FDIC approved an interim
rule amending Part 325 of
its regulations to reduce the m in­
imum capital levels FDIC-supervised institutions must maintain
for certain small business loans
and leases that are sold with
recourse. The interim rufe,
which became effective
August 31, 1995, implements
Section 208 o f the Riegle
Comm unity Developm ent
and Regulatory Improvement
Act o f 1994. Written comments
w ere received through
October 30, 1995.
Approved:

August 25, 1995

Published:

August 31, 1995




Approved:

M arch 21, 1995

Published:

July 10, 1995

January 31, 1995

July 21, 1995

Published:

Approved:

Safety and Soundness________

The FDIC issued for public
comment a proposed amendment
to Parts 303 and 359 o f its
regulations that would provide
guidance to insured state non­
m em ber banks on w hich “golden
parachute” and indemnification
payments w oufd be considered
fegitimate and which woufd be
considered abusive or improper.
A golden parachute typically is
a large payment made by an
institution to a management
official who resigns just before
the institution is cfosed or
sold. The proposal would
implement Section 2523 o f the
Comprehensive Thrift and Bank
Fraud Prosecution and Taxpayer
Recovery Act o f f990. Although
the FDIC first issued a proposal
in this area in 1991, the agency
decided to seek additional public
comment given the passage o f
time and several changes being
considered in the second proposal.

Approved:

M arch 21, 1995

Published:

M arch 29, 1995

Foreign Banks
The FDIC issued for public
comment proposed amendments
to Part 346 o f its regulations
intended to ensure that foreign
banks do not receive an unfair
competitive advantage over
U.S. banks in domestic retail
deposit-taking activities. The
proposed amendments are
required by Section 107 o f the
Riegle-Neal Interstate Banking
and Branching Efficiency Act
o f 1994.
Approved:

June 27, 1995

Published:

July 13, 1995

Proposed Rules
Market Risk__________________
The FDIC, the Federal Reserve
Board and the Office o f the
Comptroller o f the Currency
jointly issued for public comment
a proposed rule that would
establish a risk-based capital
requirement for market risk in
foreign exchange, commodity
activities and in the trading of
debt and equity instruments.
The proposed rule would amend
Part 525 o f the FDIC’s regulations.
Approved:

July 11, 1995

Published:

July 25, 1995

Suspicious Activity Reporting
The FDIC joined the other
federal financial institution
regulatory agencies in proposing
to amend Part 555 o f its regula­
tions regarding the reporting
o f known or suspected crimes.
The proposal would update and
clarify the reporting requirements,
and implement a new referral
process and a new interagency
reporting form. The proposal
is intended to meet the goals
o f Section 303 o f the Riegle
Community Development and
Regulatory Improvement Act
o f 1994.
Approved:

September 6, 1995

Published:

September 14, 1995




Proposals W ith d ra w n
Loans in Areas Having
Special Flood Hazards

Management Official
Interlocks

The FDIC joined the other
federal regulators o f depository
institutions and the Farm Credit
Administration by proposing
to expand current requirements
for loans in areas having special
flood hazards. The proposed
amendments to Part 339 o f
the FD IC’s regulations would
implement the National Flood
Insurance Reform Act o f 1994.
One provision would establish
new escrow requirements for
flood insurance premiums.
Another provision would
authorize lenders to purchase
insurance on beh alf o f the
borrower, and pass the cost along
to the borrower, i f the customer
would not purchase the policy
when requested.

The FDIC withdrew proposed
amendments from February of
1994 that would have permitted
certain management interlocks
under Part 348 o f the agency’s
regulations. The proposal was
withdrawn because the Riegle
Community Development and
Regulatory Improvement Act o f
1994 limited the FD IC ’s authority
to create the exemption
(see previous item).

Approved:

September 26, 1995

Published:

October 18, 1995

Management Official
Interlocks
The four federal regulators of
banks and thrifts jointly issued
for public comment a proposed
rule that would amend each
agency’s regulations relating to
management official interlocks
(in the FD IC’s case, Part 348).
With certain exceptions, the
existing rules prohibit bank
management officials from
simultaneously serving in
a sim ilar capacity w ith other
financial institutions. The
proposed rule reflects provisions
o f the Riegle Community
Development and Regulatory
Improvement Act o f 1994 that
restrict the agencies’ authority
to permit certain interlocks.
Approved:

December 12, 1995

Published:

December 29, 1995

Approved:

January 31, 1995

Published:

Februaryr 7, 1995

Deposit Liabilities
The FDIC withdrew a proposed
amendment to Part 354 o f its
regulations issued in 1988 that
would have expanded the defini­
tion o f the term “deposit.” The
proposed rule was withdrawn
because o f an FDIC policy
statement recom mending that
proposed rules be withdrawn
if not acted upon within nine
months.
Approved:

December 19, 1995

Published:

December 27, 1995

Significant Legislation
Enacted
M ark S. Schm idt (right), Kansas City DOS
Assistant Regional Director, w as tapped
in late 1995 for a tem porary assignm ent
on the s ta ff of House Banking Com m ittee
Chairman Jim Leach (left).

W h ile Congress enacted no
major banking statutes in 1995,
lawmakers approved measures
addressing litigation under the
Truth in Lending Act, paperwork
burdens generated by government
agencies, and spending for certain
federal programs.

Truth In Lending
Congress enacted the Truth in
Lending Act Amendments o f
1995 (P.L. 104-29) in response
to a 1994 court ruling based on
technical violations o f the Truth
in Lending Act that resulted in
a variety o f class action lawsuits
against lenders.
Key provisions clarify the
calculation and disclosure of
fees, such as mortgage brokerage
fees. These changes are intended
to give lenders m ore certainty
about what information is to
be disclosed and to provide
consumers with m ore accurate
and consistent disclosures. Other
provisions raise the tolerance
level for understatements of
finance charges, to $100 from
$ 10, before a penalty could be
imposed. The new law also
raises the statutory damages
for individual violations o f the
act, to $2,000 from $1,000.




Paperwork Reduction________
The Paperwork Reduction Act
o f 1995 (P.L. 104-13), enacted
on May 22, 1995, reaffirms and
strengthens the fundamental
objective o f a 1980 law intended
to m inim ize the federal paper­
w ork burdens imposed on the
public.
The new law sets annual govern­
ment-wide paperwork reduction
goals and imposes significant
new responsibilities on agencies
to seek public comment on
proposed changes in paperwork
requirements and to clear new
requirements through the Office
o f Management and Budget.

Appropriations
On July 27, 1995, Congress enact­
ed a suppfemental appropriations
bill (P.L. 104-19) that rescinded
$11.3 million of the $15 m illion
previously made available for
the FD IC ’s Affordable Housing
Program under the Federal
Deposit Insurance Act. No addi­
tional funding for the Affordable
Housing Program was enacted
during the year.







Bank Insurance Fund

Federal Deposit Insurance Corporation

1 Bank Insurance Fund Statements of Financial Position
Dollars in Thousands

December 31
1995

1994

Assets
Cash and cash equivalents (Note 3)

$

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

531,308

$

1,621,456

20,762,046

12,896,856

406,804

260,702

4,143,040

8,190,492

Investment in corporate owned assets, net (Note 6)

180,293

242,628

Property and buildings, net (Note 7)

151,740

155,079

Interest receivable on investments and other assets, net
Receivables from bank resolutions, net (Note 5)

Total Assets

$ 26,175,231

$

23,367,213

$

$

256,197

Liabilities and the Fund Balance
Accounts payable and other liabilities
Liabilities incurred from bank resolutions (Note 8)

192,744
31,882

81,945

279,000

875,000

55,941

163,164

126,151

128,417

Litigation losses

35,815

14,708

Total Liabilities

721,533

1,519,431

25,453,698

21,847,782

$ 26,175,231

$ 23,367,213

Estimated Liabilities fo r : (Note 9)
Anticipated failure o f insured institutions
Assistance agreements
Asset securitization guarantee

Commitments and contingencies (Notes 14 and 15)

Fund Balance
Total Liabilities and the Fund Balance

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




Federal Deposit Insurance Corporation
Bank Insurance Fund Statements o f Income and the Fund Balance

For the Year Ended
December 31

Dollars in Thousands
1995

1994

Revenue
Assessments (Note 11)

$

2,906,943

$

5,590,644

Interest on U.S. Treasury investments

1,068,395

521,473

Revenue from corporate owned assets

58,585

140,821

Other revenue

55,176

214,086

4,089,099

6,467,024

Operating expenses

470,625

423,196

Provision for insurance losses (Note 10)

(33,167)

Total Revenue

Expenses and Losses

Corporate owned asset expenses

(2,873,419)

73,599

137,632

Interest and other insurance expenses

(27,874)

53,493

Total Expenses and Losses

483,183

(2,259,098)

3,605,916

8,726,122

21,847,782

13,121,660

$ 25,453,698

$ 21,847,782

Net Income

Fund Balance - Beginning

Fund Balance - Ending

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




Bank Insurance Fund

Federal Deposit Insurance Corporation
1 Bank Insurance Fund Statements o f Cash Flows

Dollars in Thousands

For the Year Ended
December 31
1994

1995
Cash Flows from Operating Activities
Cash provided from:
Assessments

$

2,796,114

$

5,709,912

875,226

Miscellaneous receipts

694,401

36,084

Recoveries from corporate owned assets

5,336,125

211,691

Recoveries from bank resolutions

458,606

5,059,751

Interest on U.S. Treasury investments

22,337

Cash used for:
(442,101)

8,769,742

3,830,000

Net Cash Provided by Operating Activities (Note 17)

(658)

6,757,146

Miscellaneous disbursements

(173,601)

(23,929)

Disbursements for corporate owned assets

(2,791,417)

(159,299)

Disbursements for bank resolutions

(485,963)

(1,596,391)

Operating expenses

800,000

Cash Flows from Investing Activities
Cash provided from:
Maturity o f U.S. Treasury obligations

Cash used for:
Purchase o f U.S. Treasury obligations

(11,675,925)

(7,845,925)

(7,631,525)

(1,369)

0

(1,369)

0

(1,090,148)

1,138,217

1,621,456

Net Cash Used by Investing Activities

(8,431,525)

483,239

Cash Flows from Financing Activities
Cash used for:
Repayments o f indebtedness incurred from bank resolutions

Net Cash Used by Financing Activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

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




$

531,308

$

1,621,456

Notes to the Financial Statements
Bank Insurance Fund
December 51,1995 and 1994

48

1. Legislative History and Operations of the Bank Insurance Fund
Legislative History
The U.S. Congress created the Federal Deposit
Insurance Corporation (FD IC) through enactment o f
the Banking Act o f 1933. The FDIC was created to
restore and maintain public confidence in the
nation’s banking system.
More recently, the Financial Institutions Reform,
Recovery, and Enforcement Act o f 1989 (FIRRE A)
was enacted to reform, recapitalize and consolidate
the federal deposit insurance system. The FIRREA
created the Bank Insurance Fund (BIF), the Savings
Association Insurance Fund (SA IF) and the FSLIC
Resolution Fund (FRF). It also designated the FDIC
as the administrator o f these three funds. A ll three
funds are maintained separately to carry out their
respective mandates.
Pursuant to FIRREA, an active institution’s
insurance fund membership and primary federal
supervisor are generally determined by the
institution’ s charter type. Deposits o f BIF-member
institutions are mostly insured by the BIF; BIF
members are predominantly commercial and savings
banks supervised by the FDIC, the Office o f the
Comptroller o f the Currency, or the Federal
Reserve. Deposits o f SAIF-member institutions are
mostly insured by the SAIF; SAIF members are
predominantly thrifts supervised by the Office o f
Thrift Supervision (OTS). The Oakar amendment to
the Federal Deposit Insurance Act (FD I Act) allows
BIF and SAIF members to acquire deposits insured
by the other insurance fund without changing
insurance fund coverage for the acquired deposits.
The FRF is responsible for winding up the affairs o f
the former Federal Savings and Loan Insurance
Corporation (FSLIC).
Other significant legislation includes the Omnibus
Budget Reconciliation Act o f 1990 (1990 OBR Act)
and the Federal Deposit Insurance Corporation
Improvement Act o f 1991 (F D IC IA ). These acts
made changes to the FDIC's assessment authority
(see Note 11) and borrowing authority (see
"Operations o f the BIF" in a following section). The
F D IC IA also requires the FDIC to: 1) resolve
troubled institutions in a manner that will result in
the least possible cost to the deposit insurance funds;




2) provide a schedule for bringing the reserves in
the insurance funds to 1.25 percent o f insured
deposits; and 3) upon recapitalization, maintain the
insurance funds at 1.25 percent o f insured deposits
or a higher percentage as circumstances warrant.
Recent Legislative Proposals
Recent proposed legislation would, i f signed into
law, affect the BIF in the following ways: 1) BIFmembers would be required to share the interest
costs o f Financing Corporation (FICO ) debt on a
proportional basis with SAIF-members; 2) i f the
B IF’ s capitalization level exceeds the designated
reserve ratio (currently 1.25 percent), FDIC would
be required to refund such excess up to the amount
o f the BIF-members’ most recent semi-annual
assessment; and 3) if the thrift charter is eliminated
by January 1, 1998, the BIF and the SAIF would be
merged on that date. There would be a separate
assessment to fund the BIF-members' share o f the
FICO interest costs, and therefore such interest
costs would not affect regular assessments or the
fund balance. Legislative proposals are subject to
change as part o f the normal legislative process;
therefore, it is uncertain what provisions the
proposed law, i f enacted, will ultimately include.
The FICO, established under the Competitive
Equality Banking Act o f 1987, is a mixed-ownership
government corporation whose sole purpose was to
function as a financing vehicle for the FSLIC.
Operations of the BIF
The primary purpose o f the BIF is to: 1) insure the
deposits and protect the depositors o f BIF-insured
banks and 2) finance the resolution o f failed banks,
including managing and liquidating their assets. In
addition, the FDIC, acting on behalf o f the BIF,
examines state-chartered banks that are not members
o f the Federal Reserve System and provides and
monitors assistance to troubled banks.
The BIF is primarily funded from the following
sources: 1) BIF assessment premiums; 2) interest
earned on investments in U.S. Treasury obligations;
3) income earned on and funds received from the
management and disposition o f assets acquired from
failed banks; and 4) U.S. Treasury and Federal
Financing Bank (FFB) borrowings, if necessary.

Bank Insurance Fund

The 1990 OBR Act established the FDIC's authority
to borrow working capital from the FFB on behalf
o f the BIF and the SAIF. The FD ICIA increased the
FDIC's authority to borrow for insurance losses
from the U.S. Treasury, on behalf o f the BIF and
the SAIF, from $5 billion to $30 billion.
The FD IC IA also established a limitation on
obligations that can be incurred by the BIF known as
the maximum obligation limitation (M O L). Under
the M O L, the BIF cannot incur any additional

obligation i f its total obligations exceed the sum of:
1) the BIF's cash and cash equivalents; 2) 90
percent o f the fair market value o f the BIF's other
assets; and 3) the total amount authorized to be
borrowed from the U.S. Treasury, excluding FFB
borrowings. For purposes o f calculating the M O L,
the FDIC's total U.S. Treasury borrowing authority
was allocated between the BIF and the SAIF based
on the ratio o f each fund’ s insured deposits to total
insured deposits. At December 31, 1995, the M O L
for the BIF was $47 billion.

2. Summary of Significant Accounting Policies
General
These financial statements pertain to the financial
position, results o f operations and cash flows o f the
BIF and are presented in accordance with generally
accepted accounting principles (G A A P ). These
statements do not include reporting for assets and
liabilities o f closed banks for which the BIF acts as
receiver or liquidating agent. Periodic and final
accountability reports o f the BIF's activities as
receiver or liquidating agent are furnished to courts,
supervisory authorities and others as required.

and closing banks. The BIF also records as an asset
the amounts advanced for investment in corporate
owned assets. Any related allowance for loss
represents the difference between the funds
advanced and/or obligations incurred and the
expected repayment. The latter is based on the
estimated cash recoveries from the assets o f assisted
or failed banks, net o f all estimated liquidation
costs. Estimated cash recoveries also include
dividends and gains on sales from equity instruments
acquired in resolution transactions.

Use of Estimates
The preparation o f the BIF’ s financial statements
in conformity with generally accepted accounting
principles requires FDIC management to make
estimates and assumptions that affect the amounts
reported in the financial statements and
accompanying notes. Actual results could differ
from these estimates. Where it is reasonably
possible that changes in estimates will cause a
material change in the financial statements in the
near term, the nature and extent o f such changes
in estimates have been disclosed in the financial
statement.

Escrowed Funds from Resolution Transactions
In various resolution transactions, the BIF paid the
acquirer the difference between failed bank
liabilities assumed and assets purchased, plus or
minus any premium or discount. The BIF considered
the amount o f the deduction for assets purchased to
be funds held on behalf o f the receivership (an
obligation). The funds remained in escrow and
accrued interest until such time as the receivership
used the funds to: 1) repurchase assets under asset
putback options; 2) pay preferred and secured
claims; 3) pay receivership expenses; or 4) pay
dividends.

U.S. Treasury Obligations
Securities are intended to be held to maturity and
are shown at book value. Book value is the face
value o f securities plus the unamortized premium
or less the unamortized discount. Amortizations
are computed on a daily basis from the date o f
acquisition to the date o f maturity. Interest is
calculated on a daily basis and recorded monthly
using the effective interest method.

The FDIC policy o f holding escrowed funds was
terminated during 1994. The BIF continues to pay
the acquirer o f the failed bank the difference
between liabilities assumed and assets purchased,
plus or minus any premium or discount. The BIF
then pays the receivership for the assets purchased
by the assuming institution, plus or minus the
premium or discount paid.

Allowance for Losses on Receivables from
Bank Resolutions and Investment in
Corporate Owned Assets
The BIF records as a receivable the amounts
advanced and/or obligations incurred for assisting




Litigation Losses
The BIF accrues, as a charge to current period
operations, an estimate o f probable losses from
litigation against the BIF in both its corporate and
receivership capacities. The FDIC's Legal Division
recommends these estimates on a case-by-case basis.

The litigation loss estimates related to receiverships
are included in the allowance for losses for
receivables from bank resolutions.
Receivership Administration
The FDIC is responsible for controlling and
disposing o f the assets o f failed institutions in an
orderly and efficient manner. The assets, and the
claims against them, are accounted for separately
to ensure that liquidation proceeds are distributed
in accordance with applicable laws and regulations.
Also, the income and expenses attributable to
receiverships are accounted for as transactions of
those receiverships. Liquidation expenses incurred
by the BIF on behalf o f the receiverships are
recovered from those receiverships.

o f this pronouncement. These assets do not meet the
definition o f a loan within the meaning o f the
statement or are valued through alternative methods.
Any assets subject to Statement No. 114 are
immaterial either because o f insignificant book value
or because any potential adjustment to the carrying
value as a result o f applying Statement No. 114
would be immaterial.
The FASB issued SFAS No. 118, “Accounting
by Creditors for Impairment o f a Loan - Income
Recognition and Disclosures, “in October 1994,
to be adopted for fiscal years beginning after
December 15, 1994". This statement is an
amendment to SFAS No. 114 and was adopted
by the FDIC this year.

Cost Allocations Among Funds
Certain operating expenses (including personnel,
administrative and other indirect expenses) not
directly charged to each fund under the FDIC's
management are allocated on the basis o f the
relative degree to which the operating expenses
were incurred by the funds. The cost o f furniture,
fixtures and equipment purchased by the FDIC on
behalf o f the three funds under its administration is
allocated among these funds on a pro rata basis. The
BIF expenses its share o f these allocated costs at the
time o f acquisition because o f their immaterial
amounts.

Other recent pronouncements issued by the FASB
have been adopted or are either not applicable or not
material to the financial statements.

Postretirement Benefits Other Than Pensions
The FDIC established an entity to provide the
accounting and administration o f postretirement
benefits on behalf of the BIF, the SAIF, the FRF
and the Resolution Trust Corporation (RTC ). The
BIF funds its liabilities for these benefits directly
to the entity.

The Washington, D .C., office buildings and the L.
William Seidman Center in Arlington, Virginia, 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.

Disclosure about Recent Financial Accounting
Standards Board Pronouncements
In May 1993, the Financial Accounting Standards
Board (FASB) issued Statement o f Financial
Accounting Standards (SFAS) No. 114, "Accounting
by Creditors for Impairment o f a Loan," to be
adopted for fiscal years beginning after December
15, 1994. While FDIC adopted SFAS No. 114, most
o f the BIF assets are specifically outside the scope

Depreciation
The FDIC has designated the BIF administrator o f
facilities owned and used in its operations.
Consequently, the BIF includes the cost o f these
facilities in its financial statements and provides the
necessary funding for them. The BIF charges other
funds sharing the facilities a rental fee representing
an allocated share o f its annual depreciation
expense.

Related Parties
The nature o f related parties and a description o f
related party transactions are disclosed throughout
the financial statements and footnotes.
Reclassifications
Reclassifications have been made in the 1994
financial statements to conform to the presentation
used in 1995.

3. Cash and Cash Equivalents
The BIF considers cash equivalents to be short-term,
highly liquid investments with original maturities o f
three months or less. In 1995, cash restrictions
included $10 million for health insurance payable




and $274 thousand for funds held in trust. In 1994,
cash restrictions included $7.4 million for health
insurance payable and $737 thousand for funds held
in trust.

Bank Insurance Fund

1 4. Investment in U.S. Treasury Obligations, Net
A ll cash received by the BIF is invested in U.S.
Treasury obligations unless the cash is: 1) used to
defray operating expenses; 2) used for outlays

related to assistance to banks and liquidation
activities; or 3) invested in cash equivalents.

U.S. Treasury Obligations at December 31, 1995
Dollars in Thousands
Maturity

Description

Yield
at Purchase

Book
Value

Market
Value

Face
Value

Less than
one year (a)

U.S. Treasury
notes

5.53%

$ 6,750,414

$ 6,765,086

$ 6,750,000

1-3 years

U.S. Treasury
notes

5.88%

12,318,436

12,441,422

12,350,000

3-5 years

U.S. Treasury
notes

5.59%

1,693,196

1,708,809

1,690,000

$ 20,762,046

Total

$ 20,915,317

$ 20,790,000

(a) Includes a $400 million Treasury note which matured on Sunday, December 31, 1995. Settlement occurred on the next
business day, January 2, 1996.

U.S. Treasury Obligations at December 31, 1994
Dollars in Thousands
Maturity

Description

Less than
one year

U.S. Treasury
notes & bills

1-3 years

U.S. Treasury
notes
U.S. Treasury
notes

3-5 years

Yield
at Purchase

Book
Value

4.83%

$ 3,821,758

$ 3,775,131

$ 3,830,000

5.37%

8,034,591

7,763,422

8,000,000

4.72%

1,040,507

945,562

1,000,000

$ 12,896,856

$ 12,484,115

$ 12,830,000

Total

Market
Value

Face
Value

In 1995, the unamortized discount, net of unamortized premium, was $28 million. In 1994, the unamortized premium, net
of unamortized discount, was $66.9 million.

5. Receivables from Bank Resolutions, Net
The FDIC resolution process results in different
types o f transactions depending on the unique facts
and circumstances surrounding each failing or failed
institution. Payments to prevent a failure are made
to operating institutions when cost and other criteria
are met. Such payments may facilitate a merger or
allow a troubled institution to continue operations.
Payments for institutions that fail are made to cover
insured depositors' claims and represent a claim
against the receiverships’ assets.
The FDIC, as receiver for failed banks, engages
in a variety o f strategies at the time o f failure to
maximize the return from the sale or disposition o f
assets and to minimize realized losses. A failed bank



acquirer can purchase selected assets at the time o f
resolution and assume full ownership, benefit and
risk related to such assets. In certain cases, the
receiver offers a period o f time when an acquirer
can sell assets back to the receivership at a specified
value (i.e., an asset "putback" option). The receiver
can also enter into a loss-sharing arrangement with
an acquirer whereby, for specified assets and in
accordance with individual contract terms, the two
parties share in credit losses and certain qualifying
expenses. These arrangements typically direct that
the receiver pay to the acquirer a specified
percentage o f the losses triggered by the charge-off
o f assets covered by the terms o f the loss-sharing
agreement. The receiver absorbs the majority o f the

losses incurred and shares in the acquirer's future
recoveries o f previously charged-off assets. Failed
bank assets also can be retained by the receiver to
either be managed and disposed o f by FDIC
liquidation staff or by contracted private-sector
servicers with oversight from the FDIC.
As stated in Note 2, the allowance for losses on
receivables from bank resolutions represents the
difference between amounts advanced and/or
obligations incurred and the expected repayment.
This is based upon the estimated cash recoveries
from the management and disposition o f the assets

o f the assisted or failed bank, net o f all estimated
liquidation costs.
As of December 31, 1995 and 1994, the BIF, in its
receivership capacity, held assets with a book value of
$10 billion and $18.3 billion, respectively. The
estimated cash recoveries from the sale of these assets
(excluding cash and miscellaneous receivables o f $2.1
billion in 1995 and $4.2 billion in 1994) are regularly
evaluated, but remain subject to uncertainties because
of changing economic conditions. These factors could
affect the claimants' (including the BIF's) actual
recoveries from the level currently estimated.

Receivables from Bank Resolutions, Net
Dollars in Thousands

December 31
1994

1995
Assets from Open Bank Assistance:
Redeemable preferred stock/warrants
Subordinated debt instruments

$

23,500

$

993,500

100,000

Notes receivable

119,500

3,222

22,037

29,761

29,773

0

Other open bank assistance

229,525

Deferred settlement
Interest receivable

1,517

Allowance for losses (Note 10)

(57,405)

1,921
(1,155,680)

100,595

240,576

1,525,295

1,528,443

Receivables from Closed Banks:
Loans and related assets
Resolution transactions

23,512,531

28,736,839

Capital instruments

25,000

25,000

Depositors' claims unpaid

10,339

Allowance for losses (Note 10)

13,561

4,042,445
Total

(21,030,720)

(22,353,927)
7,949,916

$4,143,040

$8,190,492

6. Investment in Corporate Owned Assets, Net
The BIF acquires assets in certain troubled and
failed bank cases by either purchasing an
institution's assets outright or purchasing the assets
under the terms specified in each resolution
agreement. In addition, the BIF can purchase assets
remaining in a receivership to facilitate termination.
The majority o f corporate owned assets are real




estate and mortgage loans. The BIF recognizes
income and expenses on these assets. Income
consists primarily o f the portion o f collections on
performing mortgages related to interest earned.
Expenses are recognized for administering the
management and liquidation o f these assets.

Bank Insurance Fund

Investment in Corporate Owned Assets, Net
December 31

Dollars in Thousands

1995
$

Investment in corporate owned assets
Allowance for losses (Note 10)

1994

939,756

$

(659,676)

(759,463)
$

Total

180,293

902,304

$

242,628

1 7. Property and Buildings, Net
Dollars in Thousands

December 31
1994

1995
Land

29,631

$

$

29,631

Office buildings

151,442

151,442

Accumulated depreciation

(29,333)

(25,994)

Total

151,740

$

$

155,079

8. Liabilities Incurred from Bank Resolutions
The FDIC can enter into different types o f
resolution transactions depending on the unique facts
and circumstances surrounding each failing or failed

institution. The BIF can assume certain liabilities
that require future payments over a specified period
o f time.

Liabilities Incurred from Bank Resolutions
Dollars in Thousands

December 31
1995

1994

0

$54,410

274

737

10,339

Escrowed funds from resolution transactions (Note 2)

13,561

$

Funds held in trust
Depositors' claims unpaid
Note indebtedness

0

1,389

21,269

11,848

$31,882

Interest payable/other liabilities
Total

$81,945

The BIF's liabilities of $32 million are considered current liabilities.

9. Estimated Liabilities for:
Anticipated Failure of Insured Institutions
The BIF records an estimated loss for banks that
have not yet failed but have been identified by the
regulatory process as likely (probable) to fail within
the foreseeable future as a result o f regulatory
insolvency (equity less than two percent o f assets).
This includes banks that were solvent at year-end,
but that have adverse financial trends and, absent
some favorable event (such as obtaining additional
capital or merging), are likely to fail in the future.
The FDIC relies on this finding regarding regulatory
insolvency as the determining factor in defining the




existence o f the "accountable event" that triggers
loss recognition under G AAP.
The FDIC cannot predict the precise timing and cost
o f bank failures. An estimated liability and a
corresponding reduction in the fund balance are
recorded in the period when the liability is deemed
probable and reasonably estimable. It should be
noted, however, that future assessment revenues
will be available to the BIF to recover some or
all o f these losses and that their amounts have not
been reflected as a reduction in the losses.

The estimated liabilities for anticipated failure of
insured institutions as o f December 31, 1995 and
1994, were $279 million and $875 million, respective­
ly. The estimated liability is derived in part from
estimates o f recoveries from the sale of the assets of
these probable bank failures. As such, they are subject
to the same uncertainties as those affecting the BIF's
receivables from bank resolutions (see Note 5). This
could affect the ultimate costs to the BIF from
probable bank failures.
The FDIC estimates that banks with combined assets
o f approximately $2 billion may fail in 1996 and
1997, and the BIF has recognized a loss o f $279
million for those failures considered probable. The
level o f bank failures during 1996 and 1997 may
vary from this estimate with additional losses
reasonably possible ranging up to $70 million. The
further into the future projections o f bank failures
are made, the greater the uncertainty o f banks
failing and the magnitude o f the loss associated with
those failures. The accuracy o f these estimates will
largely depend on future economic conditions.
Assistance Agreements
The estimated liabilities for assistance agreements
resulted from several large transactions where
problem assets were purchased by an acquiring
institution under an agreement that calls for the
FDIC to absorb credit losses and to pay related
costs for funding and asset administration plus an
incentive fee.
Asset Securitization Guarantee
As part o f the FD IC ’ s efforts to maximize the return
from the failed bank assets and minimize losses
from bank resolutions, the FDIC entered into its
first securitization transaction in August 1994. The
securitization transaction was accomplished through
the creation o f a real estate mortgage investment
conduit (REM IC), a trust, that purchases the loans
to be securitized from one or more institutions for
which the FDIC acts as a receiver or purchases
loans owned by the Corporation. The loans in the
trust are pooled and stratified and the resulting cash
flow is directed into a number o f different classes of
pass-through certificates. The regular pass-through
certificates are sold to the public through licensed
brokerage houses. The largest contributing receiver­
ship retains residual pass-through certificates, which
are entitled to any remaining cash flows from the




trust after obligations to regular pass-through
holders have been met.
To increase the likelihood o f full and timely
distributions o f interest and principal to the holders
o f the regular pass-through certificates, and thus the
marketability o f such certificates, the BIF agreed to
provide a credit enhancement through a limited
guarantee to cover future credit losses with respect
to the loans underlying the certificates.
The FDIC securitization involved the following
structure: 1) approximately 1,800 performing
commercial mortgages from nearly 200 failed banks
were sold to a REMIC (FDIC REMIC Trust 1994
C -l); 2) the REMIC in turn sold approximately $759
million in 11 classes o f securities backed by the
commercial mortgages; and 3) the investors received
a limited guarantee backed by the BIF covering
credit losses and other shortfalls due to credit
defaults up to a maximum o f $248 million.
In exchange for backing the limited guarantee, the
BIF received REMIC securities and a portion o f the
proceeds from the sale o f the commercial
mortgages. The net present value (N P V ) o f the
assets received was priced to equal the N P V o f the
expected exposure under the guarantee so that the
BIF neither profits nor suffers a loss as a result o f
the limited guarantee.
At December 31, 1995, the BIF has a liability o f $126
million under the guarantee and assets o f $126 million
representing the REMIC securities and the portion of
the mortgage sales proceeds received. At December
31, 1994, the BIF liability for the guarantee was $128
million and assets were $128 million.
Cash receipts from the REMIC securities and
mortgages sales proceeds received are $12.9 million
and $5.3 million at December 31, 1995 and 1994,
respectively, and are reflected in the Statement o f
Cash Flows as “Miscellaneous receipts.” Cash
payments o f guarantee claims are $2.1 million at
December 31, 1995 and are reflected in the
Statement o f Cash Flows as “Miscellaneous
disbursements." Income related to the REMIC
securities is $183 thousand and $28 thousand at
December 31, 1995 and 1994, respectively, and is
presented as “Other revenue.” The following chart
summarizes the B IF’ s remaining obligation under
the guarantee.

Bank Insurance Fund

55

Asset Securitization Guarantee
Dollars in Thousands
Maximum

Guarantee Claims Paid

Maximum Remaining Obligation

Obligation

through December 31

at December 31

1995

$247,748

$2,429

$245,319

1994

$247,748

$0

$247,748

Litigation Losses
The BIF records an estimated loss for unresolved
legal cases to the extent those losses are considered
to be probable in occurrence and reasonably
estimable in amount. In addition, the FDIC's Legal
Division has determined that losses from unresolved

legal cases totaling $406 million are reasonably
possible. This includes $12 million in losses for
the BIF in its corporate capacity and $394 million
in losses for the BIF in its receivership capacity
(see Note 2).

10. Analysis of Changes in Allowance for Losses and Estimated Liabilities
Provision for insurance losses includes the estimated
losses for bank resolutions that occurred during the
year for which an estimated loss was not established
and loss adjustments for bank resolutions that occurred
in prior years. It also includes an estimated loss for
banks that have not yet failed but have been identified
by the regulatory process as likely to fail (see Note 9).
These are referred to as estimated liabilities for
anticipated failure o f insured institutions.

In the following charts, transfers include
reclassifications from "Estimated Liabilities for:
Anticipated failure o f insured institutions" to
“Closed banks.” Terminations represent final
adjustments to the estimated cost figures for those
bank resolutions that were completed and the
operations o f the receivership ended.

Analysis of Changes in Allowance for Losses and Estimated Liabilities - 1995

Dollars in Millions

Beginning
Balance
01/01/95

Provision for Insurance Losses
Current
Prior
Year
Years
Total

Net Cash
Payments

Adjustments/
Transfers/
Terminations

Ending
Balance
12/31/95

Allowance for Losses:
Open bank assistance
Corporate owned assets

$

1,156
660

$

0

$

0

(140)

$

(140)

$

0

99

99

0

$

(959)
0

$

57
759

Closed banks

22,354

(52)

464

412

0

(1,735)

21,031

Total Allowance for Losses

24,170

(52)

423

371

0

(2,694)

21,847

(570)
14

(439)
14

(157)
(20)

279
56

Estimated Liabilities for:
Anticipated failure of
insured institutions
Assistance agreements guarantee

875
163

131
0

Asset securitization guarantee

128

0

0

0

15

0

21

21

1,181

131

(535)

(404)

Litigation losses
Total Estimated Liabilities

Provision for Insurance Losses




$79

$

(112)

$

(33)

0
(101)
(2)

0

126

0

0

36

(103)

(177)

497

Analysis o f Changes in Allowance for Losses and Estimated Liabilities - 1994

Dollars in Millions

Beginning
Balance
01/01/94

Provision for Insurance Losses
Prior
Current
Year
Years
Total

Net Cash
Payments

Adjustments/
Transfers/
Terminations

Ending
Balance
12/31/94

Allowance for Losses:
Open bank assistance
Corporate owned assets

$

215

$

0

742

0

3

$ 1,359

(82)

$

(82)

0

0

(421)

$

(421)

$

$ 1,156
660

Closed banks

23,191

(236)

(229)

(465)

0

(372)

22,354

Total Allowance for Losses

24,148

(236)

(732)

(968)

3

987

24,170

2.972
326

406
0

(2.128)
(177)

(1.722)
(177)

0
(37)

(375)
51

875
163

Estimated Liabilities for:
Anticipated failure of
insured institutions
Assistance agreements guarantee
Asset securitization guarantee
Litigation losses
Total Estimated Liabilities

Provision for Insurance Losses

0

0

0

0

0

128

128

21

0

(6)

(6)

0

0

15

3,319

406

(2,311)

(1,905)

$ 170

$(3,043)

$(2,873)

(37)

(196)

1,181

1 11. Assessments

The 1990 OBR Act removed caps on assessment
rate increases and authorized the FDIC to set
assessment rates for BIF members semiannually, to
be applied against a member's average assessment
base. The FDICIA: 1) required the FDIC to
implement a risk-based assessment system;
2) authorized the FDIC to increase assessment rates
for BIF-member institutions as needed to ensure that
funds are available to satisfy the BIF's obligations;
and 3) authorized the FDIC to increase assessment
rates more frequently than semiannually and impose
emergency special assessments as necessary
to ensure that funds are available to repay
U.S. Treasury borrowings.
The FDIC uses a risk-based assessment system that
charges higher rates to those institutions that pose
greater risks to the BIF. To arrive at a risk-based
assessment for a particular institution, the FDIC
places each institution in one o f nine risk categories
using a two-step process based first on capital ratios
and then on other relevant information. The F D IC ‘s
Board o f Directors (Board) reviews premium rates
semiannually.
The BIF reached its capitalization level o f 1.25
percent, as mandated by FD IC IA, at the end




o f May 1995 (see Note 1). Based on the
recapitalization, the Board approved a reduction in
assessment rates for BIF members from a range of
23 cents to 31 cents per $100 o f domestic deposits
to a range o f 4 cents to 31 cents per $100 of
domestic deposits. The Board’ s BIF rate decrease
was approved retroactively to June 1, 1995,
therefore the BIF refunded $1.5 billion in
assessment overpayments in September 1995.
In November 1995, the Board approved a new
assessment rate structure for the BIF. Effective
January 19%, the highest-rated institutions
(approximately 92 percent o f the nearly 11,000 BIFinsured banks) will pay the statutory annual minimum
of $2,000 for deposit insurance. Rates for all other
institutions will be reduced to a range o f 3 cents to
27 cents per $100 of insured deposits.
The average assessment rate is expected to decline to
approximately 0.43 cents per $100 of domestic
deposits, versus the current average assessment rate of
4.4 cents per $100. The projected average assessment
rate would be the lowest in the more than 60-year
history o f federal deposit insurance for banks. The
lowest average assessment rates for banks previously
was 3.13 cents per $100 in both 1962 and 1963.

Bank Insurance Fund

57

12. Pension Benefits, Savings Plans, Postemployment Benefits and Accrued Annual Leave
Eligible FDIC employees (i.e., all permanent and
temporary employees with appointments exceeding
one year) are covered by either the Civil Service
Retirement System (CSRS) or the Federal Employee
Retirement System (FERS). The CSRS is a defined
benefit plan offset with the Social Security System in
certain cases. Plan benefits are determined on the basis
of years of creditable service and compensation levels.
The CSRS-covered employees also can contribute to
the tax-deferred Federal Thrift Savings Plan (TSP).
The FERS is a three-part plan consisting o f a basic
defined benefit plan that provides benefits based on
years o f creditable service and compensation levels,
Social Security benefits and the TSP. Automatic and
matching employer contributions to the TSP are
provided up to specified amounts under the FERS.
Eligible FDIC employees also may participate in an
FDIC-sponsored tax-deferred savings plan with
matching contributions. The BIF pays its share of
the employer's portion o f all related costs.
Although the BIF contributes a portion of pension
benefits for eligible employees, it does not account for the
assets of either retirement system. The BIF also does not
have actuarial data for accumulated plan benefits or the

unfunded liability relative to eligible employees. These
amounts are reported and accounted for by the
U.S. Office of Personnel Management.
Due to a substantial decline in the FDIC's workload, the
Corporation developed a staffing reduction program, a
component of which is a voluntary separation incentive
plan, or buyout. Employees eligible to participate in the
buyout program were placed into two categories,
depending on the immediacy of the need for staffing
reduction. Participating Category I employees agreed to
retirement or resignation by December 31, 1995. There
are 328 Category I FDIC employees participating at an
estimated cost to the BIF of $8.3 million. TTie cost for
Category I employees is presented as “Operating
expenses” in 1995. Participating Category II employees
must have applied by February 7, 1996, and resign or
retire no later than September 30, 1997. Consideration
o f all Category II applications is not complete; however,
the Corporation estimates the possible cost of the buyout
program for Category II employees to be about
$15.8 million. The cost for Category II employees will
be expensed in 19%. The buyout affects other liabilities
(postretirement and accrued annual leave); however, that
effect is not estimable at this time.The liability to
employees for accrued annual leave is approximately
$43.4 million and $40.3 million at December 31, 1995
and 1994, respectively.

Pension Benefits and Savings Plans Expenses
Dollars in Thousands

For the Year Ended
December 31
1995

Civil Service Retirement System

$ 9,411

1994
$ 9,988

Federal Employee Retirement System (Basic Benefit)

36,741

32,410

FDIC Savings Plan

20,545

21,603

Federal Thrift Savings Plan
Total

10,264

10,513

$ 76,961

$ 74,514

13. Postretirement Benefits Other than Pensions
The FDIC provides certain health, dental and life
insurance coverage for its eligible retirees, the
retirees' beneficiaries and covered dependents.
Retirees eligible for health and/or life insurance
coverage are those who have qualified due to:
1) immediate enrollment upon appointment or
five years o f participation in the plan and 2)
eligibility for an immediate annuity. Dental




coverage is provided to all retirees eligible for an
immediate annuity.
The FDIC is self-insured for hospital/medical,
prescription drug, mental health and chemical
dependency coverage. Additional risk protection was
purchased from Aetna Life Insurance Company
through stop-loss and fiduciary liability insurance.
A ll claims are administered on an administrative

services only basis with the hospital/medical claims
administered by Aetna Life Insurance Company,
the mental health and chemical dependency claims
administered by OHS Foundation Health Psychcare
Inc., and the prescription drug claims administered
by Caremark.
The life insurance program, underwritten by
Metropolitan Life Insurance Company, provides
basic coverage at no cost to retirees and allows
converting optional coverages to direct-pay plans.
Dental care is underwritten by Connecticut General
Life Insurance Company and provides coverage at
no cost to retirees.
The BIF expensed $18.8 million and $23 million
for net periodic postretirement benefit costs for the
years ended December 31, 1995 and 1994,

respectively. For measurement purposes, the FDIC
assumed the following: 1) a discount rate of
6 percent; 2) an average long-term rate o f return on
plan assets o f 5 percent; 3) an increase in health
costs in 1995 o f 12 percent, decreasing down to an
ultimate rate in 1999 o f 8 percent; and 4) an
increase in dental costs for 1995 and thereafter of
8 percent. Both the assumed discount rate and health
care cost rate have a significant effect on the amount
o f the obligation and periodic cost reported.
I f the health care cost rate were increased one
percent, the accumulated postretirement benefit
obligation as o f December 31, 1995, would have
increased by 22.9 percent. The effect o f this change
on the aggregate o f service and interest cost for
1995 would be an increase o f 25.6 percent.

Net Periodic Postretirement Benefit Cost
Dollars in Thousands

For the Year Ended
December 31
1995

Service cost (benefits attributed to employee service during the year)
Interest cost on accumulated postretirement benefit obligation
Net total o f other components

$ 22,574

$ 25,206

14,706

14,323

(3,567)

Total

(4,881)

(14,907)

Return on plan assets

As stated in Note 2, the FDIC established an entity
to provide accounting and administration on behalf
o f the BIF, the SAIF, the FRF and the RTC. The

1994

(11,651)

$ 18,806

$ 22,997

BIF funds its liability and these funds are being
managed as "plan assets."

Accumulated Postretirement Benefit Obligation and Funded Status
Dollars in Thousands

December 31
1995

1994

$ 79,370

$ 70,944

22,401

16,831

Other active participants

182,408

234,852

Total Obligation

284,179

322,627

Less: Plan assets at fair value (a)

317,037

302,130

(Over) Under Funded Status

(32,858)

Retirees
Fully eligible active plan participants

Unrecognized prior service cost
Unrecognized net gain

20,497

57,242

0

11,954

0

$ 36,338

$ 20,497

Postretirement Benefit Liability Recognized in
the Statements of Financial Position
(a) Consists of U.S. Treasury investments




Bank Insurance Fund

59

14. Commitments

Leases
The BIF's allocated share o f FDIC’s lease
commitments totals $132.9 million for future years.
The lease agreements contain escalation

clauses resulting in adjustments, usually on an annual
basis. The BIF recognized leased space expense of
$42.7 million and $50.9 million for the years ended
December 31, 1995 and 1994, respectively.

Leased Space Fees
Dollars in Thousands
1996

1997

1998

1999

2000

2001

$34,869

$30,604

$21,004

$17,603

$14,318

$14,516

Asset Putbacks
Upon resolution o f a failed bank, the assets are
placed into receivership and may be sold to an
acquirer under an agreement that certain assets may
be resold, or “putback,” to the receivership. The
values and time limits for these assets to be putback

are defined within each agreement. It is possible that
the BIF could be called upon to fund the purchase of
any or all o f the "unexpired putbacks" at any time
prior to expiration. As o f December 31, 1995 there
are no assets that are eligible for putback.

15. Concentration o f Credit Risk
The BIF is counterparty to a group o f financial
instruments with entities located throughout regions
o f the United States experiencing problems in both
loans and real estate. The BIF's maximum exposure

to possible accounting loss, should each
counterparty to these instruments fail to perform and
any underlying assets prove to be o f no value, is
shown as follows:

Concentration of Credit Risk at December 31, 1995
Dollars in Millions
South­
east
Receivables from
bank resolutions, net
Corporate owned
assets, net

Total

South­
west

North­
east

M id­
west

Central

West

$97

$267

$2,958

$150

$13

$652

24

53

51

0

20

32

180

$121

$320

$3,009

$150

$33

$684

$4,317

Total
$4,137 (a)

(a) The net receivable excludes $3.9 million and $2.5 million, respectively, of the SAIF’s allocated share of maximum credit
loss exposure from the resolutions of Southeast Bank, N .A ., Miami, FL, and Olympic National Bank, Los Angeles, CA.
There is no risk that the SAIF will not meet these obligations.

Insured Deposits
As o f December 31, 1995, the total deposits insured
by the BIF is approximately $2 trillion. This would




be the accounting loss if all depository institutions
fail and i f any assets acquired as a result o f the
resolution process provide no recovery.

60

16. Disclosures about the Fair Value of Financial Instruments

Cash equivalents are short-term, highly liquid
investments and are shown at current value. The
fair market value o f the investment in U.S. Treasury
obligations is disclosed in Note 4 and is based on
current market prices. The carrying amount of
interest receivable on investments, accounts payable
and liabilities incurred from bank resolutions
approximates their fair market value. This is due to
their short maturities or comparisons with current
interest rates.
It is not practicable to estimate the fair market value
o f net receivables from bank resolutions. These
assets are unique, not intended for sale to the private
sector, and have no established market. The FDIC
believes that a sale to the private sector would
require indeterminate, but substantial discounts
for an interested party to profit from these assets
because o f credit and other risks. A discount o f this
proportion would significantly increase the cost of
bank resolutions to the BIF. Comparisons with othei
financial instruments do not provide a reliable
measure o f their fair market value. Due to these
and other factors, the FDIC cannot determine an
appropriate market discount rate and, thus, is unable
to estimate fair market value on a discounted cash
flow basis. As shown in Note 5, the carrying
amount is the estimated cash recovery value which
is the original amount advanced (and/or obligations
incurred) net o f the estimated allowance for loss.




The majority o f the net investment in corporate
owned assets (except real estate) is comprised o f
various types o f financial instruments (investments,
loans, accounts receivable, etc.) acquired from
failed banks. As with net receivables from bank
resolutions, it is not practicable to estimate fair
market values. Cash recoveries are primarily from
the sale o f poor quality assets. They are dependent
on market conditions that vary over time and can
occur unpredictably over many years following
resolution. Since the FDIC cannot reasonably
predict the timing o f these cash recoveries, it is
unable to estimate fair market value on a discounted
cash flow basis. As shown in Note 6, the carrying
amount is the estimated cash recovery value, which
is the original amount advanced (and/or obligations
incurred) net o f the estimated allowance for loss.
As stated in Note 9, the carrying amount o f the
estimated liability for anticipated failure o f insured
institutions is the total o f estimated losses for banks
that have not failed, but the regulatory process has
identified as likely to fail within the foreseeable
future. It does not consider discounted future cash
flows. This is because the FDIC cannot predict the
timing o f events with reasonable accuracy. For this
reason, the FDIC considers the total estimate o f
these losses to be the best measure o f their fair
market value.

Bank Insurance Fund

1 17. Supplementary Information Relating to the Statements of Cash Flows

Reconciliation of Net Income to Net Cash Provided by Operating Activities
Dollars in Thousands

For the Year Ended
December 31
1994

1995
Net Income

$

3,605,916

$

8,726,122

Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Income Statement Items:
Provision for insurance losses

(33,167)

Amortization o f U.S. Treasury securities

(19,266)

Depreciation on buildings

3,339

(2,873,419)
43,145
3,339

Change in Assets and Liabilities:
(Increase) in interest receivable on investments and other assets
Decrease in receivables from bank resolutions

(146,102)
3,659,128

(179,994)
5,916,593

(Increase) decrease in corporate owned assets

(37,452)

566,472

(Decrease) increase in accounts payable and other liabilities

(63,454)

64,366

(Decrease) in liabilities incurred from bank resolutions

(48,694)

(3,263,790)

(157,000)

(375,000)

(Decrease) in estimated liability for anticipated failure
o f insured institutions
(Decrease) increase in estimated liabilities for assistance agreements

(4,048)

13,479

(Decrease) increase in estimated liability for asset securitization guarantee

(2,054)

128,429

Net Cash Provided by Operating Activities




$ 6,757,146

8,769,742




Savings Association Insurance Fund

Federal Deposit Insurance Corporation___________________________________________________________________

1 Savings Association Insurance Fund Statements of Financial Position
Dollars in Thousands

December 31
1995

1994

Assets
Cash and cash equivalents, including restricted amounts
of $12,640 for 1995 and $19,004 for 1994 (Note 3)

$

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

$

80,200

2,832,919

2,422,230

8,821

35,692

48,634

38,863

51

6,892

$

3,802,235

$2,583,877

$

117,628

Entrance and exit fees receivable, net (Note 5)
Interest receivable on investments and other assets
Receivables from thrift resolutions, net
Total Assets

911,810

Liabilities and the Fund Balance
Accounts payable and other liabilities

$

12,429

Estimated liability for anticipated failure of
insured institutions (Note 6)

111,000

432,000

228,628

444,429

215,760

202,733

3,357,847

1,936,715

$ 3,802,235

$ 2,583,877

Total Liabilities
Commitments and contingencies (Notes 10 and 11)
SAIF-Member Exit Fees and Investment
Proceeds Held in Escrow (Note 5)

Fund Balance
Total Liabilities and the Fund Balance

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




63

Federal Deposit Insurance Corporation

Savings Association Insurance Fund Statements of Income and the Fund Balance
For the Year Ended
December 31

Dollars in Thousands

1995

1994

Revenue
Assessments (Note 7)

$

Interest on U.S. Treasury investments

970,027

$

1,132,102

169,101
11

1,215,289

39,784

Total Revenue

213

1,139,916

Other revenue

32

777

Entrance fees (Note 5)

82,942

20,303

Expenses and Losses
Operating expenses
Provision for insurance losses

(321,000)

414,000

Total Expenses and Losses

(281,216)

434,303

Net Income

1,421,132

780,986

Fund Balance - Beginning

1,936,715

1,155,729

Fund Balance - Ending

$

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




3,357,847

$

1,936,715

Savings Association Insurance Fund

Federal Deposit Insurance Corporation

Savings Association Insurance Fund Statements of Cash Flows
Dollars in Thousands

For the Year Ended
December 31
1995

1994

Cash Flows from Operating Activities
Cash provided from:
Assessments

$1,060,829

$1,132,914

152,622

61,085

8,449

6,984

29,757

31,144

0

1,469

17,149

169,919

437

602

Interest on U.S. Treasury investments
Interest on exit fees
Entrance and exit fee collections (Note 5)
Recoveries from "Oakar" bank resolutions
Recoveries from thrift resolutions
Miscellaneous receipts
Cash used for:
Operating expenses

(18,487)

(14,581)

Reimbursement to the FSLIC Resolution Fund for thrift resolutions

(15,881)

(166,958)

(1,142)

(1,864)

Disbursements for thrift resolutions
Miscellaneous disbursements

1
1,233,734

1,385,000

Net Cash Provided by Operating Activities (Note 13)

0
1,220,714

220,420

Cash Flows from Investing Activities
Cash provided from:
Maturity and sale of U.S. Treasury obligations
Cash used for:
Purchase of U.S. Treasury obligations

(1,787,124)

(1,376,669)

(402,124)

(1,156,249)

831,610

64,465

80,200

15,735

Net Cash Used by Investing Activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

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




$

911,810

$

80,200

Notes to the Financial Statements
Savings Association Insurance Fund
December 51,1995 and 1994

1. Legislative History and Operations of the Savings Association Insurance Fund
Legislative History
The Financial Institutions Reform, Recovery, and
Enforcement Act o f 1989 (FIRRE A ) was enacted
to reform, recapitalize and consolidate the federal
deposit insurance system. The FIRREA created
the Savings Association Insurance Fund (SAIF),
the Bank Insurance Fund (BIF) and the FSLIC
Resolution Fund (FRF). It also designated the
Federal Deposit Insurance Corporation (FD IC)
as the administrator o f these three funds. A ll three
funds are maintained separately to carry out their
respective mandates.
Pursuant to FIRREA, an active institution’ s
insurance fund membership and primary federal
supervisor are generally determined by the
institution’s charter type. Deposits o f SAIF-member
institutions are mostly insured by the SAIF; SAIF
members are predominantly thrifts supervised by
the Office o f Thrift Supervision (OTS). Deposits o f
BIF-member institutions are mostly insured by the
BIF; BIF members are predominantly commercial
and savings banks supervised by the FDIC, the
Office o f the Comptroller o f the Currency, or
the Federal Reserve. The FRF is responsible for
winding up the affairs o f the former Federal Savings
and Loan Insurance Corporation (FSLIC).
The FIRREA also created the Resolution Trust
Corporation (RTC ), which managed and resolved
all thrifts previously insured by the FSLIC for
which a conservator or receiver was appointed
during the period January 1, 1989, through August
8, 1992. The Resolution Trust Corporation
Refinancing, Restructuring and Improvement Act
o f 1991 (1991 RTC Act) extended the R T C ’s
general resolution responsibility through September
30, 1993, and beyond that date for those institutions
previously placed under RTC control.
The Resolution Trust Corporation Completion Act of
1993 (1993 RTC Act) enacted December 17, 1993,
extended the RTC's general resolution responsibility
through a date between January 1, 1995, and
July 1, 1995. Resolution responsibility transferred
from the RTC to the SAIF on July 1, 1995.




The Financing Corporation (FICO ), established
under the Competitive Equality Banking Act o f
1987, is a mixed-ownership government corporation
whose sole purpose was to function as a financing
vehicle for the FSLIC. Effective December 12, 1991,
as provided by the 1991 RTC Act, the FICO's
ability to serve as a financing vehicle for new debt
was terminated. Assessments paid on SAIF-insured
deposits (excluding BIF-member "Oakar" and
"Sasser" banks) are subject to draws by FICO for
payment o f interest on their outstanding debt
through maturity o f this debt in 2019. "Sasser"
banks are SAIF members that converted to a state
bank charter in accordance with Section 5(d)(2)(G)
o f the Federal Deposit Insurance Act (FD I Act).
"Oakar" banks are described in a following section,
"Operations o f the SA IF".
Other significant legislation includes the Omnibus
Budget Reconciliation Act o f 1990 (1990 OBR Act)
and the Federal Deposit Insurance Corporation
Improvement Act o f 1991 (F D IC IA ). These acts
made changes to the FD IC's assessment authority
(see Note 7) and borrowing authority (see
"Operations o f the S A IF"). The FD ICIA also
requires the FDIC to: 1) resolve troubled institutions
in a manner that will result in the least possible cost
to the deposit insurance funds; 2) to build the
reserves in the insurance funds to 1.25 percent o f
insured deposits; and 3) upon recapitalization,
maintain the insurance funds at 1.25 percent o f
insured deposits or a higher percentage as
circumstances warrant.
Recent Legislative Proposals
Recent proposed legislation would, if signed into
law, affect the SAIF in the following ways: 1) there
would be a one-time special assessment on SAIFassessable deposits to capitalize the SAIF at the
designated reserve ratio o f 1.25 percent; 2) BIFmembers would be required to share the interest
costs o f Financing Corporation (FICO ) debt on a
proportional basis with SAIF-members; and 3) if
the thrift charter is eliminated by January 1, 1998,
the BIF and the SAIF would be merged on that date.
There would be a separate assessment to fund the
SAIF-members' share o f the FICO interest costs,

Savings Association Insurance Fund

and therefore such interest costs would no longer
affect regular assessments or the fund balance.
Legislative proposals are subject to change as part
of the normal legislative process; therefore, it is
uncertain what provisions the proposed law, if
enacted, will ultimately include.
Operations of the SAIF
The primary purpose o f the SAIF is to insure the
deposits and to protect the depositors o f SAIFinsured institutions. In this capacity, the SAIF has
financial responsibility for: 1) all SAIF-insured
deposits held by SAIF-member institutions,
and 2) all SAIF-insured deposits held by BIFmember "Oakar" banks.
The "Oakar" bank provisions are found in Section
5 (d) (3) o f the FDI Act. The provisions allow,
with approval o f the appropriate federal regulatory
authority, any insured depository institution to
merge, consolidate or transfer the assets and
liabilities o f an acquired institution without changing
insurance coverage for the acquired deposits. Such
acquired deposits continue to be either SAIF-insured
deposits and assessed at the SAIF assessment rate
or BIF-insured deposits and assessed at the BIF
assessment rate. In addition, any losses resulting
from the failure o f these institutions are to be
allocated between the BIF and the SAIF based on
the respective dollar amounts o f the institution's
BIF-insured and SAIF-insured deposits.
The SAIF is funded from the following sources:
1) SAIF assessments from BIF-member "Oakar"
banks; 2) other SAIF assessments that are not
required for the FICO, including assessments from
"Sasser" banks; 3) interest earned on unrestricted
investments in U.S. Treasury obligations; 4) U.S.
Treasury payments not to exceed $8 billion for
losses for fiscal years 1994 through 1998 contingent
upon appropriations from the U.S. Treasury; 5)

U.S. Treasury payments from unused appropriations
to the RTC for losses for two years after the date
the RTC is terminated (December 31, 1995); and
borrowings from 6) Federal Home Loan Banks; and
7) U.S. Treasury and Federal Financing Bank (FFB).
The 1993 RTC Act places significant restrictions on
funding from sources 4) and 5) above. Among other
restrictions, before appropriated funds from either
source are used, the FDIC must certify to Congress
that: 1) SAIF-insured institutions are unable to pay
premiums sufficient to cover insurance losses or to
repay amounts borrowed from the U.S. Treasury
without adversely affecting their ability to raise and
maintain capital or to maintain the assessment base
and 2) an increase in premiums could reasonably
be expected to result in greater losses to the
government.
The 1990 OBR Act established the FDIC's authority
to borrow working capital from the FFB on behalf
o f the BIF and the SAIF. FD IC IA increased the
FD IC's authority to borrow for insurance losses
from the U.S. Treasury, on behalf o f the BIF and
the SAIF, from $5 billion to $30 billion.
The F D IC IA also established a limitation on
obligations that can be incurred by the SAIF, known
as the maximum obligation limitation (M O L ). Under
the M O L, the SAIF cannot incur any additional
obligations i f its total obligations exceed the sum
of: 1) the SAIF's cash and cash equivalents; 2) 90
percent o f the fair-market value o f the SAIF's other
assets; and 3) the total amount authorized to be
borrowed from the U.S. Treasury, excluding FFB
borrowings. For purposes o f calculating the M O L,
the FD IC's total U.S. Treasury borrowing authority
was allocated between the BIF and the SAIF based
on the ratio o f each fund’ s insured deposits to total
insured deposits. A t December 31, 1995, the M O L
for the SAIF was $11.7 billion.

2. Summary of Significant Accounting Policies
General
These financial statements pertain to the financial
position, results o f operations and cash flows
of the SAIF and are presented in accordance with
generally accepted accounting principles (GAAP).
These statements do not include reporting for assets
and liabilities o f closed thrifts for which the SAIF acts
as receiver or liquidating agent. Periodic and final




accountability reports o f the SAIF's activities as
receiver or liquidating agent are furnished to courts,
supervisory authorities and others as required,
Use of Estimates
The preparation of the SAIF’s financial statements in
conformity with generally accepted accounting
principles requires FDIC management to make

estimates and assumptions that affect the amounts
reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
Where it is reasonably possible that changes in
estimates will cause a material change in the financial
statements in the near term, the nature and extent of
such changes in estimates have been disclosed in the
financial statements.
U.S. Treasury Obligations
Securities are intended to be held to maturity and
are shown at book value. Book value is the face
value o f securities plus the unamortized premium
or less the unamortized discount. Amortizations
are computed on a daily basis from the date of
acquisition to the date o f maturity. Interest is
calculated on a daily basis and recorded monthly
using the effective interest method.
Litigation Losses
The SAIF accrues, as a charge to current period
operations, an estimate o f probable losses from
litigation against the SAIF in both its corporate and
receivership capacities. The FDIC's Legal Division
recommends these estimates on a case-by-case basis.
The litigation loss estimates related to receiverships
would be included in the allowance for losses for
receivables from thrift resolutions.
Receivership Administration
The FDIC is responsible for controlling and
disposing o f the assets o f failed thrift institutions
placed in SAIF receivership in an orderly and
efficient manner. The assets, and the claims against
them, are accounted for separately to ensure that
liquidation proceeds are distributed in accordance
with applicable laws and regulations. Liquidation
expenses incurred by the SAIF on behalf o f its
receivership are recovered from the receivership.
Cost Allocations Among Funds
Certain operating expenses (including personnel,
administrative and other indirect expenses) not
directly charged to each fund under the F D IC ’s
management are allocated on the basis o f the
relative degree to which the operating expenses
were incurred by the funds.
The FDIC includes the cost o f facilities used in
operations in the BIF's financial statements. The
BIF charges the SAIF a rental fee representing an
allocated share o f its annual depreciation. The cost




o f furniture, fixtures and equipment purchased by
the FDIC on behalf o f the three funds under its
administration is allocated among these funds on a
pro rata basis. The SAIF expenses its share o f these
allocated costs at the time o f acquisition because
o f their immaterial amounts.
Postretirement Benefits Other Than Pensions The
FDIC established an entity to provide the accounting
and administration o f postretirement benefits on
behalf o f the SAIF, the BIF, the FRF and the RTC.
The SAIF funds its liabilities for these benefits
directly to the entity.
Disclosure about Recent Financial Accounting
Standards Board Pronouncements
In May 1993, the Financial Accounting Standards
Board (FASB) issued Statement o f Financial
Accounting Standards (SFAS) No. 114, "Accounting
by Creditors for Impairment o f a Loan,” to be
adopted for fiscal years beginning after December
15, 1994. While FDIC adopted SFAS No. 114, most
o f the SAIF assets are specifically outside the scope
o f this pronouncement. These assets do not meet the
definition o f a loan within the meaning o f the
statement or are valued through alternative methods.
Any assets subject to Statement No. 114 are
immaterial either because o f insignificant book value
or because any potential adjustment to the carrying
value as a result o f applying Statement No. 114
would be immaterial.
The FASB issued SFAS No. 118, “Accounting
by Creditors for Impairment o f a Loan - Income
Recognition and Disclosures,” in October 1994,
to be adopted for fiscal years beginning after
December 15, 1994". This statement is an
amendment to SFAS No. 114 and was adopted
by the FDIC this year.
Other recent pronouncements issued by the FASB
have been adopted or are either not applicable or
not material to the financial statements.
Related Parties
The nature of related parties and descriptions of
related party transactions are disclosed throughout the
financial statements and footnotes.
Reclassifications
Reclassifications have been made in the 1994 financial
statements to conform to the presentation used in 1995.

Savings Association Insurance Fund

69

3. Cash and Cash Equivalents
The SAIF considers cash equivalents to be short­
term, highly liquid investments with original
maturities o f three months or less. Substantially,
all the restricted cash is comprised o f the SAIF
exit fees collected plus interest earned on exit fees.
These funds have been restricted to meet any
potential obligation o f the SAIF to the FICO

(see Note 5). In 1995, cash restrictions included
$190 thousand for health insurance payable and
$12.5 million for exit fee and related interest
collections. In 1994, cash restrictions included
$148 thousand for health insurance payable and
$18.9 million for exit fee and related interest
collections.

4. Investment in U.S. Treasury Obligations, Net
A ll cash received by the SAIF is invested in U.S.
Treasury obligations unless the cash is: 1) to defray
operating expenses; 2) used for outlays related to
liquidation activities; or 3) invested in cash or cash
equivalents. In 1995, $190 million was restricted for
exit fee and related interest collections invested in
U.S. Treasury notes. In 1994, $145 million was
restricted for exit fee and related interest collections
invested in U.S. Treasury notes.

During 1994, the SAIF sold debt securities
classified as held-to-maturity. The book value
o f the securities sold was $170 million and realized
loss was $289 thousand. The sale was compelled
by the need to transfer to the FRF funds that were
retained by the SAIF in error and subsequently
invested. This was an isolated, non-recurring and
unusual event that could not have been reasonably
anticipated.

U.S. Treasury Obligations at December 31, 1995
Dollars in Thousands
Maturity

Description

Less than
one year

U.S. Treasury
notes
U.S. Treasury
notes
U.S. Treasury
notes

1-3 years
3-5 years

Yield
at Purchase

Book
Value

Market
Value

Face
Value

5.8%

$1,785,035

$1,791,208

$ 1,785,000

5.7%

588,968

594,712

590,000

5.4%

458,916
$2,832,919

460,500
$2,846,420

$ 2,825,000

Total

450,000

U.S. Treasury Obligations at December 31, 1994
Dollars in Thousands
Yield
at Purchase

Maturity

Description

Less than
one year

U.S. Treasury
notes

4.4%

1-3 years

U.S. Treasury
notes

5.8%

Total

Book
Value
$1,380,705

Market
Value
$1,366,503

Face
Value
$ 1,385,000

1,041,525

1,017,402

1,045,000

$2,422,230

$2,383,905

$ 2,430,000

In 1995, the unamortized premium, net of unamortized discount, was $7.9 million. In 1994, the unamortized
discount, net of unamortized premium, was $7.8 million.




70

5. Entrance and Exit Fees Receivable, Net

The SAIF receives entrance and exit fees for con­
version transactions when an insured depository
institution converts from the BIF to the SAIF
(resulting in an entrance fee) or from the SAIF
to the BIF (resulting in an exit fee). Regulations
approved by the FDIC's Board o f Directors and
published in the Federal Register on March 21, 1990,
directed that exit fees paid to the SAIF be held in
escrow. The FDIC and the Secretary o f the Treasury
w ill determine when it is no longer necessary to
escrow such funds for the payment o f interest on
obligations previously issued by the FICO. These
escrowed exit fees are invested in U.S. Treasury
securities pending determination o f ownership. The
interest earned is also held in escrow. Interest on
these investments was $9.1 million and $6.5 million
for 1995 and 1994, respectively.
The SAIF records entrance fees as revenue after a
BIF-to-SAIF conversion transaction. However, due to
the requirement that the SAIF exit fees be held in an

escrow account, the SAIF does not recognize exit fees
or related interest earned as revenue. Instead, the SAIF
recognizes a SAIF-to-BIF conversion transaction by
establishing a receivable from the institution and a
corresponding escrow account entry to recognize the
potential payment to the FICO. As exit fee proceeds
are received, the receivable is reduced while the
escrow remains pending the determination o f funding
requirements for interest payments on the FICO's
obligations.
Within specified parameters, the regulations allow
an institution to pay its entrance/exit fees interest
free, in equal annual installments over a maximum
period o f not more than five years. When an
institution elects such a payment plan, the SAIF
records the entrance or exit fee receivable at its
present value. The discount rate used to determine
the present value o f the funds for 1995 and 1994
was three percent.

Entrance and Exit Fees Receivable, Net -1995
Dollars in Thousands

Entrance fees

Beginning
Balance
01/01/95
$
6

New
Receivables
$
11

35,686

1,117

Exit fees
Total

$

35,692

$

1,128

Collections
$

(6)

1,758

$

(29,751)
$

(29,757)

0

Ending
Balance
12/31/95
$
11
8,810

Net Change
Unamortized
Discount

$

1,758

$

8,821

Entrance and Exit Fees Receivable, Net - 1994
Dollars in Thousands
Beginning
Balance
01/01/94
Entrance fees

$

Exit fees
Total

3

New
Receivables
$

60,652
$

60,655

32

Collections
$

998
$

1,030

(29)

Net Change
Unamortized
Discount

Ending
Balance
12/31/94

$

$

$

(31,144)

0

6

5,151

(31,115)
$

35,686

5,151

$ 35,692

6. Estimated Liabilities for:
Anticipated Failure of Insured Institutions
The SAIF records an estimated loss for thrifts as
well as "Oakar" and "Sasser" banks that have not
yet failed but have been identified by the regulatory



process as likely (probable) to fail within the
foreseeable future as a result o f regulatory
insolvency (equity less than two percent o f assets).
This includes institutions that were solvent at year-

Savings Association Insurance Fund

end, but that have adverse financial trends and,
absent some favorable event (such as obtaining
additional capital or merging), are likely to fail
in the future. The FDIC relies on this finding
regarding regulatory insolvency as the determining
factor in defining the existence o f the "accountable
event" that triggers loss recognition under G A AP.
The FDIC cannot predict the precise timing and
cost o f failures. An estimated liability and a
corresponding reduction in the fund balance are
recorded in the period when the liability is deemed
probable and reasonably estimable. It should be
noted, however, that future assessment revenues
will be available to the SAIF to recover some or all
of these losses and that these amounts have not been
reflected as a reduction in the losses.
The estimated liabilities for anticipated failure
o f insured institutions as o f December 31, 1995
and 1994 were $111 million and $432 million,
respectively. The estimated liability is derived in
part from estimates o f recoveries from the sale o f
the assets o f these probable thrift failures. These
estimates are regularly re-evaluated in light o f
changing economic conditions, but because the

amount o f recoveries is uncertain, the ultimate costs
to the SAIF from thrift failures could be affected.
The FDIC estimates that thrifts with combined
assets o f approximately $2 billion may fail in 1996
and 1997, and the SAIF has recognized a loss o f
$111 million for those failures considered probable.
The level o f thrift failures during 1996 and 1997
may vary from this estimate with additional losses
reasonably possible ranging up to $160 million. The
further into the future projections o f thrift failures
are made, the greater the uncertainty o f thrifts
failing and the magnitude o f the loss associated with
those failures. The accuracy o f these estimates will
largely depend on future economic conditions,
particularly in the real estate markets and the level
o f future interest rates.
Litigation Losses
The SAIF records an estimated loss for unresolved
legal cases to the extent those losses are considered
to be probable in occurrence and reasonably
estimable in amount. In addition, the FDIC's Legal
Division has determined that losses from unresolved
legal cases totaling $11 million are reasonably
possible.

7. Assessments
The 1990 OBR Act removed caps on assessment
rate increases and authorized the FDIC to set
assessment rates for SAIF members semiannually,
to be applied against a member's average
assessment base. The FDICIA: 1) required the
FDIC to implement a risk-based assessment system;
2) authorized the FDIC to increase assessment rates
for SAIF-member institutions as needed to ensure
that funds are available to satisfy the S A IF ’s
obligations; and 3) authorized FDIC to increase
assessment rates more frequently than semiannually
and impose emergency special assessments as
necessary to ensure that funds are available to repay
U.S. Treasury borrowings.
The FDIC uses a risk-based assessment system that
charges higher rates to those institutions that pose
greater risks to the SAIF. To arrive at a risk-based
assessment for a particular institution, the FDIC places
each institution in one of nine risk categories using a
two-step process based first on capital ratios and then
on other relevant information. The FDIC’s Board of
Directors reviews premium rates semiannually.



The FICO has priority over the SAIF for receiving
and utilizing SAIF assessments to ensure availability
o f funds for interest on F IC O ’s debt obligations.
Accordingly, the SAIF recognized as assessment
revenue only that portion o f SAIF assessments not
required by the FICO. Assessments on the SAIFinsured deposits held by BIF-member "Oakar" or
SAIF-member "Sasser" institutions are not subject
to draws by FICO and, thus, are retained in SAIF
in their entirety.
Since 1993, each thrift has paid an assessment rate
of between 23 and 31 cents per $100 o f domestic
deposits, depending on risk classification. For
calendar year 1995, the assessment rate averaged
approximately 23.2 cents per $100 o f domestic
deposits. As o f December 31, 1995, the SAIF's
reserve ratio is .47 percent o f insured deposits.
Secondary Reserve Offset
The FIRREA authorized insured thrifts to offset
against any assessment premiums their pro rata
share o f amounts that previously were part o f the

71

F SLIC ’s "Secondary Reserve." The Secondary
Reserve represented premium prepayments that
insured thrifts were required by law to deposit with
the FSLIC during the period 1961 through 1973 to
quickly increase the FSLIC's insurance reserves to
absorb losses if the regular assessments were
insufficient.

The Secondary Reserve offset reduces the gross SAIFmember assessments due from certain institutions,
thereby reducing the assessment premiums available
to the FICO and the SAIF. In 1994, the SAIF paid
$11 million in refunds to institutions due secondary
reserve credits that had previously been acquired
through an unassisted merger. The remaining
Secondary Reserve credit is $399 thousand and
$427 thousand for 1995 and 1994, respectively.

SAIF Assessments
Dollars in Thousands

For the Year Ended
December 31
1995

SAIF assessments from thrifts

$ 1,184,097

Less: Secondary Reserve offset/refunds

1994
$ 1,301,499

(13,170)
(717,909)

FICO assessment (a)
Plus: Assessment receivables outstanding

(14,318)
(596,000)

(70)

1,453

Less: Prepaid assessments

(26,832)

SAIF-Member Assessments Earned, (Net)

426,116

690,369

SAIF assessments from “Sasser” banks

121,209

99,895

SAIF assessments from BIF-member “Oakar” banks
Total Assessment Revenue

(2,265)

422,702
$

341,838

970,027

$ 1,132,102

(a) FICO payments were reduced by $69 million and $185 million in 1995 and 1994, respectively, because of cash held
by FICO.

8. Pension Benefits, Savings Plans, Postemployment Benefits and Accrued Annual Leave
Eligible FDIC employees (i.e., all permanent and
temporary employees with appointments exceeding
one year) are covered by either the C ivil Service
Retirement System (CSRS) or the Federal
Employee Retirement System (FERS). The CSRS
is a defined benefit plan offset with the Social
Security System in certain cases. Plan benefits
are determined on the basis o f years o f creditable
service and compensation levels. The CSRScovered employees also can contribute to the
tax-deferred Federal Thrift Savings Plan (TSP).
The FERS is a three-part plan consisting o f a basic
defined benefit plan that provides benefits based on
years o f creditable service and compensation levels,
Social Security benefits and the TSP. Automatic and
matching employer contributions to the TSP are
provided up to specified amounts under the FERS.




Eligible FDIC employees also may participate in
an FDIC-sponsored tax-deferred savings plan with
matching contributions. The SAIF pays its share
o f the employer's portion o f all related costs.
Although the SAIF contributes a portion o f pension
benefits for eligible employees, it does not account
for the assets o f either retirement system. The
SA IF also does not have actuarial data for
accumulated plan benefits or the unfunded liability
relative to eligible employees. These amounts are
reported and accounted for by the U.S. O ffice o f
Personnel Management.
Due to a substantial decline in the FD IC 's
workload, the Corporation developed a staffing
reduction program, a component o f which is a
voluntary separation incentive plan, or buyout.
Employees eligible to participate in the buyout

Savings Association Insurance Fund

program were placed into two categories,
depending on the immediacy o f the need for
staffing reduction. Participating Category I
employees agreed to retirement or resignation by
December 31, 1995. There are 328 Category I
FDIC employees participating at an estimated cost
to the SAIF o f $3.1 million. The cost for Category
I employees is presented as “Operating expenses”
in 1995. Participating Category II employees must
have applied by February 7, 1996, and resign or
retire no later than September 30, 1997.
Consideration o f all Category II applications is not

complete; however, the FDIC estimates the
possible cost o f the buyout program for Category II
employees to be about $5.8 million. The cost for
Category II employees will be expensed in 1996.
The buyout affects other liabilities (postretirement
and accrued annual leave); however, that effect is
not estimable at this time.
The liability to employees for accrued annual leave
is approximately $757 thousand and $685 thousand
at December 31, 1995 and 1994, respectively.

Pension Benefits and Savings Plans Expenses
Dollars in Thousands

For the Year Ended
December 31
1995

Civil Service Retirement System

$

549

1994
$

329

1,394

663

FDIC Savings Plan

895

436

Federal Thrift Savings Plan

486

202

Federal Employee Retirement System (Basic Benefit)

Total

$ 3,324

$ 1,630

9. Postretirement Benefits Other than Pensions
The FDIC provides certain health, dental and life
insurance coverage for its eligible retirees, the
retirees' beneficiaries and covered dependents.
Retirees eligible for health and/or life insurance
coverage are those who have qualified due to:
1) immediate enrollment upon appointment or five
years of participation in the plan and 2) eligibility
for an immediate annuity. Dental coverage is provided
to all retirees eligible for an immediate annuity.
The FDIC is self-insured for hospital/medical,
prescription drug, mental health and chemical
dependency coverage. Additional risk protection
was purchased from Aetna Life Insurance Company
through stop-loss and fiduciary liability insurance.
A ll claims are administered on an administrative
services only basis with the hospital/medical claims
administered by Aetna Life Insurance Company,
the mental health and chemical dependency claims
administered by OHS Foundation Health Psychcare
Inc., and the prescription drug claims administered
by Caremark.
The life insurance program, underwritten by
Metropolitan Life Insurance Company, provides basic



coverage at no cost to retirees and allows converting
optional coverages to direct-pay plans. Dental care is
underwritten by Connecticut General Life Insurance
Company and provides coverage at no cost to retirees.
The SAIF expensed $226 thousand and $586 thousand
for net periodic postretirement benefit costs for the
years ended December 31, 1995 and 1994,
respectively. For measurement purposes, the FDIC
assumed the following: 1) a discount rate of
6 percent; 2) an average long-term rate o f return on
plan assets o f 5 percent; 3) an increase in health costs
in 1995 o f 12 percent, decreasing down to
an ultimate rate in 1999 of 8 percent; and 4) an
increase in dental costs in 1995 and thereafter of
8 percent. Both the assumed discount rate and health
care cost rate have a significant effect on the amount
of the obligation and periodic cost reported.
I f the health care cost rate were increased one percent,
the accumulated postretirement benefit obligation
as of December 31, 1995, would have increased
by 22.9 percent. The effect o f this change on the
aggregate of service and interest cost for 1995 would
be an increase o f 25.6 percent.

73

Net Periodic Postretirement Benefit Cost
For the Year Ended

Dollars in Thousands

December 31
1995
$ 431

Service cost (benefits attributed to employee service during the year)

1994
$ 664
378

Interest cost on accumulated postretirement benefit obligation

281

Net total o f other components

(68)

(129)

(418)

(327)

Return on plan assets
Total

$ 226

As stated in Note 2, the FDIC established an entity
to provide accounting and administration on behalf
o f the SAIF, the BIF, the FRF and the RTC. The

$ 586

SAIF funds its liability and these funds are being
managed as "plan assets."

Accumulated Postretirement Benefit Obligation and Funded Status
Dollars in Thousands

December 31
1994

1995
Retirees

$ 2,230

Fully eligible active plan participants

$ 1,979

629

470

Other active participants

5,124

6,552

Total Obligation

7,983

9,001

Less: Plan assets at fair value (a)

8,904

8,486

(Over) Under Funded Status

(921)

Unrecognized prior service cost

515

1,305

0

273

Unrecognized net gain

0

Postretirement Benefit Liability Recognized in
the Statements of Financial Position

$

657

$

515

(a) Consists of U.S. Treasury investments

10. Commitments
The SAIF's allocated share o f FDIC lease
commitments totals $2.6 million for future years.
The lease agreements contain escalation clauses
resulting in adjustments, usually on an annual basis

The SAIF recognized leased space expense o f
$1.6 million and $1.1 million for the years ended
December 31, 1995 and 1994, respectively.

Leased Space Fees
Dollars in Thousands
1996

1997

1998

1999

2000

2001

$660

$595

$408

$329

$298

$306




Savings Association Insurance Fund

75

11. Concentration of Credit Risk
The SAIF is counterparty to financial instruments with
entities located in two regions o f the United States
experiencing problems in both loans and real estate.
The SAIF's maximum exposure to possible accounting
loss for these instruments is $3.9 million for Southeast
Bank, N .A ., Miami, Florida, and $2.5 million for
Olympic National Bank, Los Angeles, California.

Insured Deposits
As o f December 31, 1995, the total deposits insured
by the SAIF is approximately $711 billion. This
would be the accounting loss i f all the depository
institutions fail and i f any assets acquired as a result
o f the resolution process provide no recovery.

12. Disclosures about the Fair Value of Financial Instruments
Cash equivalents are short-term, highly liquid
investments and are shown at current value.
The fair market value o f the investment in
U.S. Treasury obligations is disclosed in Note 4
and is based on current market prices. The carrying
amount o f interest receivable on investments,
short-term receivables, and accounts payable and
other liabilities approximates their fair market
value. This is due to their short maturities or
comparison with current interest rates. As explained
in Note 5, entrance and exit fees receivable are net
o f discounts calculated using an interest rate com­
parable to U.S. Treasury Bill or Government
bond/note rates at the time the receivables are
accrued.
It is not practicable to estimate the fair market
value o f net receivables from thrift resolutions.
These assets are unique, not intended for sale to
the private sector and have no established market.
The FDIC believes that a sale to the private sector
would require indeterminate, but substantial




discounts for an interested party to profit from these
assets because o f credit and other risks. A discount
o f this proportion would significantly increase the
cost o f resolutions to the SAIF. Comparisons with
other financial instruments do not provide a reliable
measure o f their fair market value. Due to these
and other factors, the FDIC cannot determine an
appropriate market discount rate and, thus, is
unable to estimate fair market value on a discounted
cash flow basis.
As stated in Note 6, the carrying amount o f the
estimated liability for anticipated failure o f insured
institutions is the total o f estimated losses for thrifts
as well as "Oakar" and "Sasser" banks that have
not failed, but the regulatory process has identified
as likely to fail within the foreseeable future. It
does not consider discounted future cash flows. This
is because the FDIC cannot predict the timing o f
events with reasonable accuracy. For this reason,
the FDIC considers the total estimate o f these losses
to be the best measure o f their fair market value.

13. Supplementary Information Relating to the Statements of Cash Flows
Reconciliation of Net Income to Net Cash Provided by Operating Activities____________________________
Dollars in Thousands

For the Year Ended
December 31
______________________________________________________________________________ 1995________________1994
Net Income_____________________________________________________________ $ 1,421,132________ $

780,986

Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Income Statement Items:
Provision for insurance losses
Amortization o f U.S. Treasury securities (unrestricted)
Loss on sale o f U.S. Treasury securities

414,000

(321,000)

(2,646)

(8,114)

289

0

Change in Assets and Liabilities:
(Increase) in amortization o f U.S. Treasury
securities (restricted)

(450)

(17)
24,963

Decrease in entrance and exit fees receivable

26,871

(Increase) in interest receivable on investments

(9,771)

(10,824)

6,841

168,056

and other assets
Decrease in receivables from thrift resolutions
Increase (Decrease) in accounts payable and other liabilities
(Decrease) in liabilities incurred from thrift resolutions
Increase in exit fees and investment proceeds held in escrow
Net Cash Provided by Operating Activities
(a) SAIF Transferred $169 million to the FRF




105,198
0

(a)

(166,953)
(932)

13,027

13,792

$ 1,233,734

$ 1,220,714

FSLIC Resolution Fund

Federal Deposit Insurance Corporation
FSLIC Resolution Fund Statements of Financial Position

Dollars in Thousands

December 31
1995

1994

Assets
Cash and cash equivalents (Note 3)

$

274,973

$

1,278,548

Receivables from thrift resolutions, net (Note 4)

370,443

1,054,107

Investment in corporate owned assets, net (Note 5)

504,341

370,177

4,620

20,003

$ 1,154,377

$ 2,722,835

$

$

Other assets, net (Note 6)
Total Assets

Liabilities
Accounts payable and other liabilities

11,045

13,262

238,387

2,164,438

Assistance agreements

81,340

277,577

Litigation losses

27,000

2,100

Total Liabilities

357,772

2,457,377

Contributed capital

44,156,000

43,991,000

Accumulated deficit

(43,359,395)

(43,725,542)

796,605

265,458

$ 1,154,377

$ 2,722,835

Liabilities incurred from thrift resolutions (Note 7)

Estimated Liabilities fo r : (Note 8)

Commitments and contingencies (Notes 14 and 15)

Resolution Equity (Note 10)

Total Resolution Equity
Total Liabilities and Resolution Equity

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




Federal Deposit Insurance Corporation
FSLIC Resolution Fund Statements of Income and Accumulated Deficit

Dollars in Thousands

For the Year Ended
December 31

____________________________________________________________________ 1995___________________1994
Revenue
Interest on U .S. Treasury investments

$

Revenue from corporate owned assets

46,904

$

77,191

77,087

115,280

Limited partnership and other revenue (Note 11)

314,012

275,779

Total Revenue

438,003

468,250

Operating expenses

11,640

15,535

Interest expense

13,901

37,624

Expenses and Losses

Corporate owned asset expenses

55,181

Provision for losses (Note 9)

(13,684)

Other expenses

4,818

Total Expenses and Losses

(233,904)

366,147

Accumulated Deficit - Beginning

702,154

(43,725,542)

(44,427,696)

$ (43,359,395)

$ (43,725,542)

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




10,355

71,856

Net Income

Accumulated Deficit - Ending

66,394
(363,812)

FSLIC Resolution Fund

Federal Deposit Insurance Corporation

FSLIC Resolution Fund Statements of Cash Flows
Dollars in Thousands

For the Year Ended
December 31
1995

1994

Cash Flows from Operating Activities
Cash provided from:
Interest on U.S. Treasury investments

$

47,028

$

77,191

Recoveries from thrift resolutions

785,698

2,019,635

Recoveries from corporate owned assets

420,182

416,987

3,502

4,722

Miscellaneous receipts

Cash used for:
Operating expenses

(14,399)

(19,053)

(9,719)

(28,620)

(1,790,471)

(2,077,535)

(576,996)

(222,037)

(1,840)

(2,578)

Interest paid on indebtedness incurred from thrift resolutions
Disbursements for thrift resolutions
Disbursements for corporate owned assets
Miscellaneous disbursements

Net Cash (Used by) Provided by Operating Activities (Note 17)

(1,137,015)

168,712

Cash Flows from Financing Activities
Cash provided from:
U.S. Treasury payments

165,000

0

Cash used for:
(31,560)

(494,095)

133,440

(494,095)

(1,003,575)

(325,383)

Payments o f indebtedness incurred from thrift resolutions

Net Cash Provided by (Used by) Financing Activities
Net Decrease in Cash and Cash Equivalents

1,278,548

Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

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




$

1,603,931

274,973

$ 1,278,548

Notes to the Financial Statements
FSLIC Resolution Fund
December 31,1995 and 1994

1. Legislative History and Operations of the FSLIC Resolution Fund
Legislative History
The Financial Institutions Reform, Recovery, and
Enforcement Act o f 1989 (FIRRE A ) was enacted to
reform, recapitalize and consolidate the federal
deposit insurance system. The FIRREA created the
FSLIC Resolution Fund (FRF), the Bank Insurance
Fund (BIF), and the Savings Association Insurance
Fund (SAIF). It also designated the Federal Deposit
Insurance Corporation (FD IC ) as the administrator
o f these three funds. A ll three funds are maintained
separately to carry out their respective mandates.
The FRF is responsible for winding up the affairs
o f the former Federal Savings and Loan Insurance
Corporation (FSLIC). The BIF and SAIF provide
insurance for member banks and thrifts.
The FIRREA also created the Resolution Trust
Corporation (R TC ), which managed and resolved
all thrifts previously insured by the FSLIC for
which a conservator or receiver was appointed
during the period January 1, 1989, through August
8, 1992. The Resolution Trust Corporation
Refinancing, Restructuring and Improvement Act o f
1991 (1991 RTC Act) extended the RTC 's general
resolution responsibility through September 30,
1993, and beyond that date for those institutions
previously placed under the R TC 's control. The
Resolution Trust Corporation Completion Act o f
1993 (1993 RTC Act), enacted December 17, 1993,
extended the RTC 's general resolution responsibility
through a date between January 1, 1995 and July 1,
1995. Resolution responsibility transferred from the
RTC to the SAIF on July 1, 1995.
The Resolution Funding Corporation (REFCORP)
was established by the FIRREA to provide funds to
the RTC for use in thrift resolutions. The Financing
Corporation (FICO ), established under the
Competitive Equality Banking Act o f 1987, is a
mixed-ownership government corporation whose
sole purpose was to function as a financing vehicle
for the FSLIC. Effective December 12, 1991, as
provided by the 1991 RTC Act, the FICO's ability
to serve as a financing vehicle for new debt was
terminated.




Operations of the FRF
The primary purpose o f the FRF is to liquidate
the assets and contractual obligations o f the nowdefunct FSLIC. The FRF will complete the resolution
of all thrifts that failed before January 1, 1989, or were
assisted through August 8, 1989. The FIRREA
provided that the RTC manage any receiverships
resulting from thrift failures that occurred after
December 31, 1988, but prior to the enactment o f
the FIRREA. There are five such receiverships
that affect the FRF financial statements because the
FRF remains financially responsible for the losses
associated with these resolution cases.
The FRF is primarily funded from the following
sources: 1) income earned on and funds received
from the management and disposition o f assets o f
the FRF; 2) the FRF’ s portion o f liquidating
dividends paid by FRF receiverships, provided
such funds are not required by the REFCORP or
the FICO; and 3) interest earned on one-day
U.S. Treasury investments purchased with proceeds
of 1) and 2). I f these sources are insufficient to
satisfy the liabilities o f the FRF, payments will be
made from the U.S. Treasury in amounts necessary,
as are appropriated by Congress, to carry out the
objectives o f the FRF. T o facilitate efforts to wind
up the resolution activity o f the FRF, Public Law
103-327 provides $827 million in funding to be
available until expended. The FRF received
$165 million under this appropriation on
November 2, 1995.
The 1993 RTC Act accelerated the termination date
o f the RTC from no later than December 31, 1996,
to no later than December 31, 1995. A ll remaining
assets and liabilities o f the RTC were transferred to
the FRF on January 1, 1996, after which any future
net proceeds from the sale o f such assets will be
transferred to the REFCORP for interest payments
after satisfaction o f any outstanding liabilities o f the
RTC. The FRF will continue until all o f its assets
are sold or otherwise liquidated and all o f its
liabilities are satisfied. Upon the dissolution o f
the FRF, any funds remaining w ill be paid to the
U.S. Treasury.

FSLIC Resolution Fund

81

2. Summary o f Significant Accounting Policies
General
These financial statements pertain to the financial
position, results o f operations and cash flows o f the
FRF and are presented in accordance with generally
accepted accounting principles (G A A P ). These
statements do not include reporting for assets and
liabilities o f closed insured thrift institutions for
which the FRF acts as receiver or liquidating
agent. Periodic and final accountability reports o f
the FRF's activities as receiver or liquidating agent
are furnished to courts, supervisory authorities and
others as required.
Use of Estimates
The preparation o f the FR F’s financial statements
in conformity with generally accepted accounting
principles requires FDIC management to make
estimates and assumptions that affect the amounts
reported in the financial statements and
accompanying notes. Actual results could differ
from these estimates. Where it is reasonably
possible that changes in estimates will cause a
material change in the financial statements in the
near term, the nature and extent o f such changes
in estimates have been disclosed in the financial
statements.
Allowance for Losses on Receivables from Thrift
Resolutions and Investment in Corporate Owned
Assets
The FRF records as a receivable the amounts
advanced and/or obligations incurred for assisting
and closing thrift institutions. The FRF also records
as an asset the amounts advanced for investment in
corporate owned assets. Any related allowance for
loss represents the difference between the funds
advanced and/or obligations incurred and the
expected repayment. The latter is based on the
estimated cash recoveries from the assets o f the
assisted or failed thrift institution, net o f all
estimated liquidation costs.
Estimated Liabilities for
Assistance Agreements
The FRF establishes an estimated liability for
probable future assistance payable to acquirers
o f troubled thrifts under its financial assistance
agreements. Such estimates are presented on a
discounted basis.




Litigation Losses
The FRF accrues, as a charge to current period
operations, an estimate o f probable losses from
litigation against the FRF in both its corporate and
receivership capacities. The FDIC's Legal Division
recommends these estimates on a case-by-case basis.
The litigation loss estimates related to receiverships
are included in the allowance for losses for
receivables from thrift resolutions.
Receivership Administration
The FDIC is responsible for controlling and
disposing o f the assets o f failed institutions in an
orderly and efficient manner. The assets, and the
claims against them, are accounted for separately
to ensure that liquidation proceeds are distributed
in accordance with applicable laws and regulations.
Also, the income and expenses attributable to
receiverships are accounted for as transactions o f
those receiverships. Liquidation expenses incurred
by the FRF on behalf of the receiverships are
recovered from those receiverships.
Cost Allocations Among Funds
Certain operating expenses (including personnel,
administrative and other indirect expenses) not
directly charged to each fund under the FDIC's
management are allocated on the basis o f the
relative degree to which the operating expenses
were incurred by the funds.
The FDIC includes the cost o f facilities used in
operations in the B IF’s financial statements. The
BIF charges the FRF a rental fee representing an
allocated share o f its annual depreciation. The cost
o f furniture, fixtures and equipment purchased by
the FDIC on behalf o f the three funds under its
administration is allocated among these funds on a
pro rata basis. The FRF expenses its share o f these
allocated costs at the time o f acquisition because
o f their immaterial amounts.
Postretirement Benefits Other Than Pensions
The FDIC established an entity to provide the
accounting and administration o f postretirement
benefits on behalf o f the FRF, the BIF, the SAIF
and the RTC. The FRF funds its liabilities for these
benefits directly to the entity.

Disclosure about Recent Financial Accounting
Standards Board Pronouncements
In May 1993, the Financial Accounting Standards
Board (FASB) issued Statement o f Financial
Accounting Standards (SFAS) No. 114, "Accounting
by Creditors for Impairment o f a Loan,"
to be adopted for fiscal years beginning after
December 15, 1994. While FDIC adopted SFAS
No. 114, most o f the FRF assets are specifically
outside the scope o f this pronouncement. These
assets do not meet the definition o f a loan within
the meaning o f the statement or are valued through
alternative methods. Any assets subject to Statement
No. 114 are immaterial either because o f
insignificant book value or because any potential
adjustment to the carrying value as a result o f
applying Statement No. 114 would be immaterial.
The FASB issued SFAS No. 118, “Accounting
by Creditors for Impairment o f a Loan - Income
Recognition and Disclosures,” in October 1994,
to be adopted for fiscal years beginning after
December 15, 1994". This statement is an
amendment to SFAS No. 114 and was adopted
by the FDIC this year.
Other recent pronouncements issued by the FASB
have been adopted or are either not applicable or not
material to the financial statements.

Wholly Owned Subsidiary
The Federal Asset Disposition Association
(F A D A ) is a wholly owned subsidiary o f the
FRF. The F A D A was placed in receivership on
February 5, 1990. However, due to outstanding
litigation, a final liquidating dividend to the FRF
will not be made until the F A D A 's litigation liability
is settled or dismissed. The investment in the F A D A
is accounted for using the equity method and is
included in "Other assets, net" (Note 6). As of
December 31, 1995, the value o f the investment has
been adjusted for projected expenses relating to the
liquidation o f the F A D A . The F A D A 's estimate
o f probable litigation losses is $2.8 million.
Accordingly, a $2.8 million litigation loss has been
recognized as a reduction in the value o f the FRF's
investment in the F A D A . There were no additional
litigation losses considered reasonably possible as
o f December 31, 1995.
Related Parties
The nature o f related parties and descriptions o f
related party transactions are disclosed throughout
the financial statements and footnotes.
Reclassifications
Reclassifications have been made in the 1994
financial statements to conform to the presentation
used in 1995.

3. Cash and Cash Equivalents
The FRF considers cash equivalents to be
short-term, highly liquid investments with original
maturities o f three months or less. In 1995, cash
restrictions included $403 thousand for health

insurance payable and $565 thousand for funds
held in trust. In 1994, cash restrictions included
$204 thousand for health insurance payable and
$821 thousand for funds held in trust.

4. Receivables from Thrift Resolutions, Net
As o f December 31, 1995 and 1994, the FRF, in its
receivership capacity, held assets with a book value
o f $533 million and $947 million, respectively. The
estimated cash recoveries from the sale o f these
assets (excluding cash and miscellaneous receivables
o f $174 million in 1995 and $168 million in 1994)




are regularly evaluated, but remain subject to
uncertainties because o f changing economic
conditions. These factors could affect the FRF's
actual recoveries upon the sale o f these assets from
the level o f recoveries currently estimated.

FSLIC Resolution Fund

Receivables from Thrift Resolutions, Net
Dollars in Thousands

December 31
1995

1994

Assets from Open Thrift Assistance:
Collateralized loans

$

Notes receivable

0

$

130,420

360,000
130,657

Subordinated debt instruments

14,301

21,301

Capital instruments

65,000

65,000

0

29,624

417,733

429,628

2,761

4,717

(446,514)

(423,296)

183,701

617,631

8,600,088

9,114,230

Collateralized advances/loans

279,297

289,494

Other receivables

219,737

218,918

Interest in limited partnerships
Preferred stock
Interest receivable
Allowance for losses (Note 9)

Receivables from Closed Thrifts:
Resolution transactions

(8,912,380)

(9,186,166)

186,742

Allowance for losses (Note 9)

436,476

370,443

$ 1,054,107

Total_________________________________________________________________________$

5. Investment in Corporate Owned Assets, Net
The FRF's investment in corporate owned assets
is comprised o f amounts that: 1) the FSLIC paid to
purchase assets from troubled or failed thrifts and
2) the FRF pays to acquire receivership assets,
terminate receiverships and purchase covered assets.
The majority o f these assets are real estate and
mortgage loans.

The FRF recognizes income and expenses on these
assets. Income consists primarily o f the portion
o f collections on performing mortgages related to
interest earned. Expenses are recognized for
administering the management and liquidation
o f these assets.

Investment in Corporate Owned Assets, Net
Dollars in Thousands

December 31
1995

Investment in corporate owned assets
Allowance for losses (Note 9)
Total




$ 3,664,397

1994
$ 3,444,413

(3,160,056)
$

504,341

(3,074,236)
$

370,177

84

w Other Assets, Net
M.nm xmminw
m
6.
December 31

Dollars in Thousands

1995

1994

$ 15,000

Investment in FAD A (Note 2)

$ 25,000

(11,074)

Allowance for loss (Note 9)

(12,375)

3,926

Accounts receivable

12,625

126

Investment in FAD A, Net

230

568

7,148

$ 4,620

$ 20,003

Due from other government entities
Total

I 7. Liabilities Incurred from Thrift Resolutions
The FSLIC issued promissory notes and entered into
assistance agreements to prevent the default and
subsequent liquidation o f certain insured thrift
institutions. These notes and agreements required
the FSLIC to provide financial assistance over time.
Under the FIRREA, the FRF assumed these

obligations. Notes payable and obligations for
assistance agreement payments incurred but not
yet paid are in "Liabilities incurred from thrift
resolutions." Estimated future assistance payments
are included in "Estimated liabilities for: Assistance
agreements" (see Note 8).

Liabilities Incurred from Thrift Resolutions
Dollars in Thousands

December 31
1995

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

$

$

360,000

725

725

157,800

189,360

0

1,530,043

Capital instruments
Assistance agreement notes payable
Assistance agreement costs payable
Interest payable

2,600

2,931

77,262

Other liabilities to thrift institutions
Total

$

Maturities of Liabilities
Dollars in Thousands




1994
0

1996

1997

1998

$112,147

$31,560

$94,680

81,379

238,387

$ 2,164,438

FSLIC Resolution Fund

85

8. Estimated Liabilities for:
Assistance Agreements
The "Estimated liabilities for: Assistance
agreements" represents, on a discounted basis, an
estimate o f future assistance payments to acquirers
o f troubled thrift institutions. The nominal dollar
amount before discounting was $91 million and
$294 million, as o f December 31, 1995 and 1994,
respectively. The discount rates applied as o f
December 31, 1995 and 1994, were 5.5 percent
and 6.3 percent, respectively, based on U.S. money
rates for federal funds.
Future assistance stems from the FRF's obligation
to: 1) fund losses inherent in assets covered under
the assistance agreements (e.g., by subsidizing asset
write-downs, capital losses and goodwill
amortization) and 2) supplement the actual yield
earned from covered assets as necessary for the
acquirer to achieve a specified yield (the
"guaranteed yield"). Estimated total assistance costs
recognized for current assistance agreements with
institutions involving covered assets include
estimates for the loss expected on the assets based
on their appraised values. The FRF is obligated to
fund any losses sustained by the institutions on the
sale o f the assets. I f all underlying assets prove to
be o f no value, the possible cash requirements and
the accounting loss could be as high as $467 million
(see Note 15). The costs and related cash
requirements associated with maintaining covered
assets are calculated using an applicable cost o f
funds rate and would change proportionately with
market rates.
The estimated liabilities for assistance agreements
are affected by several factors, including
adjustments to expected notes payable, the terms
o f the assistance agreements outstanding and, in
particular, the marketability o f the related covered
assets. The variable nature o f the FRF assistance
agreements will cause the cost requirements to

fluctuate. This fluctuation will impact both the
timing and amount o f eventual cash flows.
The number o f assistance agreements outstanding
as o f December 31, 1995 and 1994, were 37 and 54,
respectively. The last agreement is scheduled to
expire in December 1998.
Litigation Losses
The FRF records an estimated loss for unresolved
legal cases to the extent those losses are considered
to be probable in occurrence and reasonably
estimable in amount. In addition, the FD IC ’ s Legal
Division has determined that losses from unresolved
legal cases totaling $132 million are reasonably
possible. This includes $125 million in losses for the
FRF in its corporate capacity and $7 million in
losses for the FRF in its receivership capacity (see
Note 2).
There exists an additional category o f contingencies
with respect to FRF that arises from supervisory
goodwill and other capital forbearances granted to
the acquirers o f troubled thrifts by the Federal
Home Loan Bank Board in the 1980’s.
Subsequently, FIRREA imposed minimum capital
requirements on thrifts and limited the use of
supervisory goodwill and other forbearances to meet
these capital requirements. There are currently
approximately 120 cases pending which result from
the elimination o f supervisory goodwill and
forbearances.
To date, one o f these cases has resulted in a final
judgment o f $6 million against FDIC, which FDIC
paid from FRF in accordance with the court’s order.
FDIC believes that judgments in such cases are
properly paid from the Judgment Fund, a
permanent, indefinite appropriation established by
31 U.S.C. 1304. The extent to which FRF will be
the source for paying other judgments in such cases
is uncertain.

9. Analysis o f Changes in Allowance for Losses and Estimated Liabilities
In the following charts, transfers primarily include
reclassifications from "Estimated liabilities for:
Assistance agreements" to "Liabilities incurred
from thrift resolutions" for notes payable and related
accrued assistance agreement costs. Terminations




represent final adjustments to the estimated cost
figures for those thrift resolutions that were
completed and the operations o f the receivership ended.

Analysis of Changes in Allowance for Losses and Estimated Liabilities - 1995
Dollars in Millions

Allowance for Losses:
Open thrift assistance

Provision
for
Losses

Beginning
Balance
01/01/95
$

423

$

16

Net
Cash
Payments
$

0

Adjustments/
Transfers/
Terminations
$

7

Ending
Balance
12/31/95
$

446

(7)

0

(267)

8,912

90

0

(4)

3,160

12

(1)

0

0

11

12,695

98

0

(264)

12,529

(203)

143

81

Closed thrifts

9,186

Corporate owned assets

3,074

Investment in F A D A
Total Allowance for Losses
Estimated Liabilities for:

278

Assistance agreements

(137)
25

2

Litigation losses

280

Total Estimated Liabilities
Provision for Losses

$

0

27

143

0
(203)

(112)

108

(14)

Analysis of Changes in Allowance for Losses and Estimated Liabilities - 1994
Dollars in Millions

Allowance for Losses:
Open thrift assistance

Beginning
Balance
01/01/94
$

423

Closed thrifts

$

9,549

Corporate owned assets

Provision
for
Losses

2,988

Due from the SAIF
Investment in F A D A
Total Allowance for Losses

0
(133)

Net
Cash
Payments
$

0

Adjustments/
Transfers/
Terminations
$

0

Ending
Balance
12/31/94
$

423

0

(230)

9,186

86

0

0

3,074

7

0

0

(7)

0

11

1

0

0

12

12,978

(46)

0

1,290

(320)

(1,424)

70

2

0

(237)

12,695

Estimated Liabilities for:
Assistance agreements
Litigation losses
Total Estimated Liabilities

Provision for Losses




1,360

(318)

$

(364)

(1,424)

732

278

(70)

2

662

280

FSLIC Resolution Fund

87

10. Resolution Equity

The accumulated deficit includes $7.5 billion in
non-redeemable capital certificates and redeemable
capital stock issued by the FSLIC. Capital
instruments were issued by the FSLIC and the
FRF to the FICO as a means o f obtaining capital.
Effective December 12, 1991, the FICO's authority

to issue obligations as a means o f financing for the
FRF was terminated (see Note 1). Furthermore, the
implementation o f the FIRREA, in effect, removed
the redemption characteristics o f the capital stock
issued by the FSLIC.

Resolution Equity
Dollars in Thousands
Beginning
Balance
01/01/95

Contributed capital

Total

Net Income

$ 43,991,000

$

$

265,458

$

Beginning
Balance
01/01/94
Contributed capital

$43,991,000

Total

$

(436,696)

366,147

Net Income
$

$

0

$

702,154

$ 44,156,000

165,000
0

$

(43,359,395)

165,000

$

$

0

$

0
$

796,605
Ending
Balance
12/31/94

Treasury
Payments

702,154

(44,427,696)

Accumulated deficit

0
366,147

(43,725,542)

Accumulated deficit

Ending
Balance
12/31/95

Treasury
Payments

43,991,000
(43,725,542)

0

$

265,458

11. Limited Partnership and Other Revenue
During 1993, the FDIC's Board o f Directors
delegated to the RTC the authority to execute
partnership agreements on behalf o f the FDIC.
Under that authority, the FRF secured a limited
partnership interest in two partnerships, Mountain

A M D and Brazos Partners, in order to achieve a
least cost resolution. The FRF has collected its
entire interest in the partnerships. However, funds
in excess o f the original investment continue to be
collected by the FRF.

Limited Partnership and Other Revenue
Dollars in Thousands

For the Year Ended
December 31
1995

Gain on limited partnership agreements
Interest earned on assistance agreements
Other assistance agreements revenue
Interest earned on subrogated claims o f depositors
Interest earned on advances to receiverships

1994

$292,124

$229,651

10,776

23,798

7,940

300

0

20,786

1,737

1,054

Other

1,435

190

Total

$ 314,012

$ 275,779




88

12. Pension Benefits, Savings Plans and Accrued Annual Leave

Eligible FDIC employees (i.e., all permanent and
temporary employees with appointments exceeding
one year) are covered by either the Civil Service
Retirement System (CSRS) or the Federal Employee
Retirement System (FERS). The CSRS is a defined
benefit plan offset with the Social Security System
in certain cases. Plan benefits are determined on the
basis o f years o f creditable service and
compensation levels. The CSRS-covered employees
also can contribute to the tax-deferred Federal Thrift
Savings Plan (TSP) .
The FERS is a three-part plan consisting o f a basic
defined benefit plan that provides benefits based on
years o f creditable service and compensation levels,
Social Security benefits and the TSP. Automatic and
matching employer contributions to the TSP are
provided up to specified amounts under the FERS.

Eligible FDIC employees also may participate in
an FDIC-sponsored tax-deferred savings plan with
matching contributions. The FRF pays its share
o f the employer's portion o f all related costs.
Although the FRF contributes a portion o f pension
benefits for eligible employees, it does not account
for the assets o f either retirement system. The FRF
also does not have actuarial data for accumulated
plan benefits or the unfunded liability relative to
eligible employees. These amounts are reported
and accounted for by the U.S. Office o f Personnel
Management.
The liability to employees for accrued annual leave
is approximately $2.9 million and $3.2 million at
December 31, 1995 and 1994, respectively.

Pension Benefits and Savings Plans Expenses
For the Year Ended
December 31

Dollars in Thousands

1995
$

Civil Service Retirement System

1994

471

$

548

Federal Employee Retirement System (Basic Benefit)

2,691

2,222

FDIC Savings Plan

1,357

1,520

Federal Thrift Savings Plan
Total

703
$ 5,222

725
$ 5,015

13. Postretirement Benefits Other than Pensions
The FDIC provides certain health, dental and life
insurance coverage for its eligible retirees, the
retirees' beneficiaries and covered dependents.
Retirees eligible for health and/or life insurance
coverage are those who have qualified due to:
1) immediate enrollment upon appointment or five
years o f participation in the plan and 2) eligibility
for an immediate annuity. Dental coverage is
provided to all retirees eligible for an immediate
annuity.
The FDIC is self-insured for hospital/medical,
prescription drug, mental health and chemical
dependency coverage. Additional risk protection
was purchased from Aetna Life Insurance Company
through stop-loss and fiduciary liability insurance.
A ll claims are administered on an administrative



services only basis with the hospital/medical claims
administered by Aetna Life Insurance Company,
the mental health and chemical dependency claims
administered by OHS Foundation Health Psychcare
Inc., and the prescription drug claims administered
by Caremark.
The life insurance program, underwritten by
Metropolitan Life Insurance Company, provides
basic coverage at no cost to retirees and allows
converting optional coverages to direct-pay plans.
Dental care is underwritten by Connecticut General
Life Insurance Company and provides coverage at
no cost to retirees.
The FRF expensed $1.8 million and $1.4 million for
net periodic postretirement benefit costs for the

FSLIC Resolution Fund

89
years ended December 31, 1995 and 1994,
respectively. For measurement purposes, the FDIC
assumed the following: 1) a discount rate o f 6
percent; 2) an average long-term rate of return on plan
assets o f 5 percent; 3) an increase in health costs in
1995 of 12 percent, decreasing down to an ultimate
rate in 1999 of 8 percent; and 4) an increase in dental
costs in 1995 and thereafter o f 8 percent. Both the
assumed discount rate and health care cost rate have

a significant effect on the amount o f the obligation
and periodic cost reported.
I f the health care cost rate were increased one
percent, the accumulated postretirement benefit
obligation as o f December 31, 1995, would have
increased by 22.9 percent. The effect o f this change
on the aggregate o f service and interest cost for
1995 would be an increase o f 25.6 percent.

Net Periodic Postretirement Benefit Cost
Dollars in Thousands

For the Year Ended
December 31
1995

Service cost (benefits attributed to employee service during the year)

1994

$ 1,587

Interest cost on accumulated postretirement benefit obligation

$ 1,325

1,035

752

Net total o f other components

(251)

(256)

Return on plan assets

(563)

(442)

Total
As stated in Note 2, the FDIC established an entity
to provide accounting and administration on behalf
o f the FRF, the BIF, the SAIF and the RTC. The

$ 1,808

$ 1,379

FRF funds its liability and these funds are being
managed as "plan assets."

Accumulated Postretirement Benefit Obligation and Funded Status
Dollars in Thousands

December 31
1995

Retirees
Fully eligible active plan participants

$ 3,010

1994
$ 2,798

849

664

6,917

9,262

Total Obligation

10,776

12,724

Less: Plan assets at fair value (a)

12,018

11,455

(Over) Under Funded Status

(1,242)

1,269

Other active participants

Unrecognized prior service cost
Unrecognized net gain

3,480

0

727

0

$ 2,965

$ 1,269

Postretirement Benefit Liability Recognized in
the Statements of Financial Position
(a) Consists of U.S. Treasury investments

I 14. Commitments
The FRF's allocated share o f FD IC ’ s lease
commitments totals $7.3 million for future years.
The lease agreements contain escalation clauses
resulting in adjustments, usually on an annual basis.




The FRF recognized leased space expense of
$4.5 million and $8.9 million for the years ended
December 31, 1995 and 1994, respectively,

Leased Space Fees
Dollars in Thousands
1996_____________ 1997_____________ 1998______________ 1999______________ 2000____________ 2001
$1,845

$1,668

$1,145_____________ $921______________ $837____________ $862

15. Concentration o f Credit Risk
The FRF is counterparty to a group o f financial
instruments with entities located throughout regions o f
the United States experiencing problems in both loans
and real estate. The FRF's maximum exposure to

possible accounting loss, should each counterparty to
these instruments fail to perform and any underlying
assets prove to be o f no value, is shown as follows:

Concentration of Credit Risk at December 31, 1995
Dollars in Millions
South­
east
Receivables from
thrift resolutions, net

South­
west

$

$

Investment in
corporate owned assets, net

10

Assistance agreements
covered assets, net of
estimated capital loss
(off-balance-sheet)
Total

36

163

$

407

46

$ 1,030

0

M id­
west
$

0

460

0
$

Northeast

0

$

0

0
$

7

7

26

$

3

0
$

West

Central

79

$

467

10
$

179

370
504

31

50
$

138

Total

$

1,341

16. Disclosures about the Fair Value o f Financial Instruments
Cash equivalents are short-term, highly liquid
investments and are shown at current value. The
carrying amount of accounts payable, liabilities
incurred from thrift resolutions and the estimated
liabilities for assistance agreements approximates their
fair market value. This is due to their short maturities
or comparisons with current interest rates.
It is not practicable to estimate fair market values of
net receivables from thrift resolutions. These assets are
unique, not intended for sale to the private sector and
have no established market. The FDIC believes that a
sale to the private sector would require indeterminate,
but substantial discounts for an interested party to
profit from these assets because o f credit and other
risks. A discount o f this proportion would significantly
increase the cost o f thrift resolutions to the FRF.
Comparisons with other financial instruments do not
provide a reliable measure o f their fair market value.
Due to these and other factors, the FDIC cannot
determine an appropriate market discount rate and,
thus, is unable to estimate fair market value on a
discounted cash flow basis. As shown in Note 4, the



carrying amount is the estimated cash recovery value,
which is the original amount advanced (and/or
obligations incurred) net o f the estimated allowance for
loss.
The majority o f the net investment in corporate owned
assets (except real estate) is comprised o f various types
o f financial instruments (investments, loans, accounts
receivable, etc.) acquired from failed thrifts. As with
net receivables from thrift resolutions, it is not
practicable to estimate fair market values. Cash
recoveries are primarily from the sale o f poor quality
assets. They are dependent on market conditions that
vary over time, and can occur unpredictably over many
years following resolution. Since the FDIC cannot
reasonably predict the timing o f these cash recoveries,
it is unable to estimate fair market value on a
discounted cash flow basis. As shown in Note 5, the
carrying amount is the estimated cash recovery value,
which is the original amount advanced (and/or
obligations incurred) net o f the estimated allowance for
loss.

FSLIC Resolution Fund

1 17. Supplementary Information Relating to the Statements of Cash Flows
Non-cash financing activities for the years ended
December 31, 1995 and 1994, include a decrease in

collateralized loans guaranteed by the FRF o f $360
million and $20 million, respectively (see Note 4).

Reconciliation of Net Income to Net Cash ( Used by) Provided by Operating Activities
Dollars in Thousands

For the Year Ended
December 31
1995

Net Income

$

366,147

1994
$

702,154

Adjustments to Reconcile Net Income to Net Cash
(Used by) Provided by Operating Activities

Income Statement Item:
Provision for losses

(13,684)

(363,812)

Change in Assets and Liabilities:
Decrease in receivables from thrift resolutions
(Increase) decrease in investment in corporate owned assets
Decrease in other assets
(Decrease) in accounts payable and other liabilities
(Decrease) in liabilities incurred from thrift resolutions
(Decrease) in estimated liabilities for assistance agreements
Net Cash (Used by) Provided by Operating Activities




675,943

1,343,143

(223,856)

121,049

14,281

160,511

(2,217)

(93,129)

(1,899,484)

(838,703)

(54,145)

(862,501)

$ (1,137,015)

$

168,712







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

B-262039

To the Board of Directors
Federal Deposit Insurance Corporation

We have audited the statements of financial position as of December 31, 1995
and 1994, of the three funds administered by the Federal Deposit Insurance
Corporation (FDIC), the related statements of income and fund balance
(accumulated deficit), and statements of cash flows for the years then ended. In
our audits of the Bank Insurance Fund (BIF), the Savings Association Insurance
Fund (SAIF), and the Federal Savings and Loan Insurance Corporation (FSLIC)
Resolution Fund (FRF), we found
- the financial statements of each fund, taken as a whole, were reliable in all
material respects;
-- although certain internal controls should be improved, FDIC management fairly
stated that internal controls in place on December 31, 1995, were effective in
safeguarding assets from material loss, assuring compliance with relevant laws
and regulations, and assuring that there were no material misstatements in the
financial statements of the three funds administered by FDIC; and
- no reportable noncompliance with laws and regulations we tested.
During our audits of the 1994 financial statements of the three funds,1we
identified weaknesses in FDIC's internal controls which, while not material,
affected its ability to ensure that internal control objectives were achieved. We
made a number of recommendations to address each of the weaknesses identified
in our 1994 audits.
In conducting our 1995 audits, we found that FDIC made progress in addressing
several internal control weaknesses identified in our 1994 audits. FDIC's actions
during 1995 fully resolved weaknesses we identified in controls over safeguarding
of assets and proper reporting of asset management and disposition activity by
contracted asset servicing entities. Also, FDIC made some progress in improving
controls over its asset valuation process. However, additional improvements are
needed, as FDIC has not fully addressed our concerns regarding weaknesses in
documentation maintained to support asset recovery estimates. Our 1995 audits
continued to find weaknesses, though not material, in controls over FDIC’s
process for estimating recoveries from failed institution assets. In our 1995
audits, we also continued to find weaknesses in FDIC's time and attendance
reporting process. FDIC has initiatives underway to streamline its time and
attendance process which it believes will address the internal control weaknesses
we identified. In addition, during 1995, we found a weakness in FDIC's electronic
data processing controls which, due to its sensitive nature, is being communicated
separately to FDIC.
The condition of the nation's banks and savings associations continued to
improve. The improved condition of the banking industry, and the higher
premiums BIF-insured institutions have paid in the last several years, resulted in
BIF reaching its designated capitalization level in 1995. Consequently, FDIC
lowered premium rates charged to BIF-insured institutions. While the improved
condition of the nation's thrifts and higher premiums have helped improve SAIF's
condition, a significant premium rate differential developed between BIF and
SAIF during 1995 and, absent legislative action, will likely remain for a number of
years. This significant premium rate differential could adversely affect the thrift
industry’s ability to finance certain obligations arising from the thrift crisis of the
1980s and could eventually lead to higher deposit insurance premium rates.

‘Financial Audit: Federal Deposit Insurance Corporation's 1994 and 1993 Financial
Statements (GA07AIMD-95-102, March 31, 1995).




The following sections discuss our conclusions in more detail and discuss (1) the
scope of our audits, (2) significant matters related to the condition and outlook of
the banking and thrift industries and the insurance funds, and what progress the
Corporation has made in addressing internal control weaknesses identified in
prior audits, (3) reportable conditions2identified in our 1995 audits,
(4) recommendations from our 1995 audits, and (5) the Corporation's comments
on a draft of this report and our evaluation.
OPINION ON FINANCIAL STATEMENTS
Bank Insurance Fimd
In our opinion, the financial statements and accompanying notes present fairly, in
all material respects, in conformity with generally accepted accounting principles,
the Bank Insurance Fund's financial position as of December 31, 1995 and 1994,
and the results of its operations and its cash flows for the years then ended.
However, misstatements may nevertheless occur in other FDIC-reported financial
information on BIF as a result of the internal control weaknesses summarized
above and discussed in detail in a later section of this report.
Savings Association Insurance Fund
In our opinion, the financial statements and accompanying notes present fairly, in
all material respects, in conformity with generally accepted accounting principles,
the Savings Association Insurance Fund's financial position as of December 31,
1995 and 1994, and the results of its operations and its cash flows for the years
then ended.
However, misstatements may nevertheless occur in other FDIC-reported financial
information on SAIF as a result of the internal control weaknesses summarized
above and discussed in detail in a later section of this report.
FSLIC Resolution Fund
In our opinion, the financial statements and accompanying notes present fairly, in
all material respects, in conformity with generally accepted accounting principles,
the FSLIC Resolution Fund's financial position as of December 31, 1995 and 1994,
and the results of its operations and its cash flows for the years then ended.
However, misstatements may nevertheless occur in other FDIC-reported financial
information on FRF as a result of the internal control weaknesses summarized
above and discussed in detail in a later section of this report.

2
Reportable conditions involve matters coming to the auditor’s attention relating
to significant deficiencies in the design or operation of internal controls that, in
the auditor’s judgment, could adversely affect an entity’s ability to (1) safeguard
assets against loss from unauthorized acquisition, use, or disposition, (2) ensure
the execution of transactions in accordance with management’s authority and in
accordance with laws and regulations, and (3) properly record, process, and
summarize transactions to permit the preparation of financial statements and to
maintain accountability for assets. A material weakness is a reportable condition
in which the design or operation of the internal controls does not reduce to a
relatively low level the risk that losses, noncompliance, or misstatements in
amounts that would be material in relation to the financial statements may occur
and not be detected within a timely period by employees in the normal course of
their assigned duties.




On January 1, 1996, FRF assumed responsibility for liquidating the assets and
satisfying the obligations of the Resolution Trust Corporation (RTC).3 As
discussed in note 1 of FRF’s financial statements,4proceeds from the
management and disposition of RTC’s assets will be used to satisfy the
transferred obligations. Any additional proceeds after satisfaction of RTC’s
obligations will be transferred to the Resolution Funding Corporation.6
As discussed in note 8 of FRF's financial statements, there are approximately 120
pending lawsuits which stem from legislation that resulted in the elimination of
supervisory goodwill and other forbearances from regulatory capital. These
lawsuits assert various legal claims including breach of contract or an
uncompensated taking of property resulting from the FIRREA provisions
regarding minimum capital requirements for thrifts and limitations as to the use
of supervisory goodwill to meet minimum capital requirements. One case has
resulted in a final judgment of $6 million against FDIC, which was paid by FRF.
On July 1, 1996, the United States Supreme Court concluded that the government
is liable for damages in three other cases, consolidated for appeal to the Supreme
Court, in which the changes in regulatory treatment required by FIRREA led the
government to not honor its contractual obligations. However, because the lower
courts had not determined the appropriate measure or amount of damages, the
Supreme Court returned the cases to the Court of Federal Claims for further
proceedings. Until the amount of damages are determined by the court, the
amount of additional costs from these three cases is uncertain. Further, with
respect to the other pending cases, the outcome of each case and the amount of
any possible damages will depend on the facts and circumstances, including the
wording of agreements between thrift regulators and acquirers of troubled savings
and loan institutions. Estimates of possible damages suggest that the additional
costs associated with these claims may be in the billions. The Congressional
Budget Office's December 1995 update of its baseline budget projections
increased its projection of future outlays for fiscal years 1997 through 2002 by
$9 billion for possible payments of such claims.
As mentioned above, the final judgment of $6 million in one case against FDIC
was paid by FRF. However, as discussed in note 8 of FRF's financial statements,
FDIC believes that judgments in such cases are properly paid from the Judgment
Fund.6 The extent to which FRF will be the source of paying other judgments in
such cases is uncertain.

:iThe Resolution Trust Corporation was created by the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to manage and resolve
all troubled savings institutions that were previously insured by FSLIC and for
which a conservator or receiver was appointed during the period January 1, 1989,
through August 8, 1992. This period was extended to September 30, 1993, by the
Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of
1991 and was further extended on December 17, 1993, to a date not earlier than
January 1, 1995, nor later than July 1, 1995, by the Resolution Trust Corporation
Completion Act of 1993 (RTC Completion Act). The RTC Completion Act stated
that the final date would be determined by the Chairperson of the Thrift
Depositor Protection Oversight Board. On December 5, 1994, the Chairperson
made the determination that RTC would continue to resolve failed thrift
institutions through June 30, 1995. Finally, the RTC Completion Act required RTC
to terminate its operations no later than December 31, 1995.
4
The notes to FRF's financial statements do not present amounts associated with
the assets and obligations transferred from RTC as FDIC management is currently
considering the future form of the reporting entity (that is, FRF and RTC).
'The Resolution Funding Corporation was established by FIRREA to provide
funding for RTC through issuance of long-term debt securities. Any proceeds
transferred to the Resolution Funding Corporation will be used to make interest
payments on the long-term debt securities.
6
The Judgment Fund is a permanent, indefinite appropriation established by
31 U.S.C. Sec. 1304.




OPINION ON FDIC MANAGEMENT'S
ASSERTIONS ABOUT THE EFFECTIVENESS
OF FDIC'S INTERNAL CONTROLS
For the three funds administered by FDIC, we evaluated FDIC management's
assertions about the effectiveness of its internal controls designed to
- safeguard assets against unauthorized acquisition, use, or disposition;
- assure the execution of transactions in accordance with management's
authority and with provisions of selected laws and regulations that have a
direct and material effect on the financial statements of the three funds; and
- properly record, process, and summarize transactions to permit the preparation
of financial statements in accordance with generally accepted accounting
principles.
FDIC management fairly stated that those controls in place on December 31,
1995, provided reasonable assurance that losses, noncompliance, or misstatements
material in relation to the financial statements of each of the three funds would
be prevented or detected on a timely basis. Management made this assertion
based on criteria in GAO’s Standards for Internal Controls in the Federal
Government and consistent with the requirements of the Federal Managers’
Financial Integrity Act of 1982. However, our work identified the need to improve
certain internal controls, which were previously summarized and are described in
detail in a later section of this report. These weaknesses in internal controls,
although not considered to be material weaknesses, represent significant
deficiencies in the design or operation of internal controls which could adversely
affect FDIC's ability to meet the internal control objectives listed above.
COMPLIANCE WITH LAWS AND REGULATIONS
Our tests for compliance with selected provisions of laws and regulations
disclosed no instances of noncompliance that would be reportable under generally
accepted government auditing standards. However, the objective of our audits
was not to provide an opinion on overall compliance with laws and regulations.
Accordingly, we do not express such an opinion.
ORIECTIVES. SCOPE. AND
METHODOLOGY
FDIC management is responsible for
- preparing the annual financial statements of BIF, SAIF, and FEF in conformity
with generally accepted accounting principles;
- establishing, maintaining, and assessing the Corporation's internal control
structure to provide reasonable assurance that internal control objectives as
described in GAO's Standards for Internal Controls in the Federal Government
are met; and
- complying with applicable laws and regulations.
We are responsible for obtaining reasonable assurance about whether (1) the
financial statements of each of the three funds are free of material misstatement
and are presented fairly, in all material respects, in conformity with generally
accepted accounting principles and (2) FDIC management’s assertion about the
effectiveness of internal controls is fairly stated, in all material respects, based
upon the control criteria used by FDIC management in making its assertion. We
are also responsible for testing compliance with selected provisions of laws and
regulations and for performing limited procedures with respect to certain other
information in FDIC's annual financial report.
In order to fulfill our responsibilities as auditor of record for the Federal Deposit
Insurance Corporation, we
- examined, on a test basis, evidence supporting the amounts and disclosures in
the financial statements of each of the three funds;
- assessed the accounting principles used and significant estimates made by
FDIC management;




- evaluated the overall presentation of the financial statements for each of the
three funds;
- obtained an understanding of the internal control structure related to
safeguarding assets, compliance with laws and regulations, including the
execution of transactions in accordance with management’s authority, and
financial reporting;
- tested relevant internal controls over safeguarding, compliance, and financial
reporting and evaluated management's assertion about the effectiveness of
internal controls; and
- tested compliance with selected provisions of the Federal Deposit Insurance
Act, as amended; the Chief Financial Officers Act; and the Federal Home Loan
Bank Act, as amended.
We did not evaluate all internal controls relevant to operating objectives, such as
controls relevant to preparing statistical reports and ensuring efficient operations.
We limited our internal control testing to those controls necessary to achieve the
objectives outlined in our opinion on management's assertion about the
effectiveness of internal controls. Because of inherent limitations in any internal
control structure, losses, noncompliance, or misstatements may nevertheless
occur and not be detected. We also caution that projecting our evaluation to
future periods is subject to the risk that controls may become inadequate because
of changes in conditions or that the degree of compliance with controls may
deteriorate.
We conducted our audits from July 6, 1995 through May 2, 1996. Our audits were
conducted in accordance with generally accepted government auditing standards.
FDIC provided comments on a draft of this report. FDIC's comments are
discussed and evaluated in a later section of this report.
SIGNIFICANT MATTERS
The following section is provided to highlight the condition and outlook of the
banking and thrift industries and the insurance funds. In addition, we discuss
FDIC's progress in addressing internal control weaknesses identified during our
previous audits.
Condition of FDIC-Insured Institutions
Showed Continued Imnrovement in 1995
During 1995, the banking and thrift industries continued their strong
performances.7 Commercial banks reported record profits of $48.8 billion in 1995,
marking the fourth consecutive year of record earnings. The main source of
earnings in 1995 was higher net interest income. The increase in net interest
income was attributable to growth in interest-bearing assets, even though net
interest margins declined for a second consecutive year. During 1995, commercial
banks’ return on assets was 1.17 percent, the third consecutive year that the
industry return on assets has exceeded 1 percent.
The strong performance of banks was also reflected in the continued reduction in
the number of banks identified as problem institutions. As of December 31, 1995,
144 commercial banks with total assets of $17 billion were identified by FDIC as
problem institutions. This represented an improvement over 1994, when 247
commercial banks with total assets of $33 billion were identified as problem
institutions. Six commercial banks failed in 1995, the fewest number of failures in
any year since 1977.

?
The information in this section of the report was obtained from The FDIC
Quarterly Banking Profile. Fourth Quarter 1995, compiled by FDIC's Division of
Research and Statistics from quarterly financial reports submitted by federally
insured depository institutions. Thus, we did not audit this information; however,
we believe it is consistent with other audited information.




Savings institutions reported record earnings of $7.6 billion in 1995, up from the
$6.4 billion earned in 1994. Thrifts experienced an increase in net interest
margins in the fourth quarter 1995, the first such increase since 1993. In addition,
the thrift industry’s annual return on assets rose to 0.78 percent, the highest since
1962. The industry’s improved performance was also reflected in the reduction in
the number of troubled institutions. As of December 31, 1995, regulators
identified 49 savings institutions with total assets of $14 billion as problem
institutions. This was a significant improvement over 1994, when 71 institutions
with total assets of $39 billion were identified as problem institutions. In 1995,
only two savings institutions failed.
A Significant Premium Rate Differential
Between Banks and Thrifts Developed
in 1995
The strengthened condition of the banking industry, coupled with the relatively
high insurance premiums that banks paid between 1991 and 1995, resulted in an
accelerated rebuilding of BIF’s reserves. BIF reached its designated reserve ratio
of 1.25 percent of estimated insured deposits in May 1995. Consequently, FDIC’s
Board of Directors significantly reduced the risk-based premium rates charged to
BIF-insured institutions, and, in September 1995, refunded assessment
overpayments from the month following the month BIF recapitalized, or from
June 1995 through September 1995, after FDIC confirmed that BIF had achieved
its designated reserve ratio. At December 31, 1995, BIF’s ratio of reserves to
insured deposits equaled 1.30 percent.
Although the thrift industry also experienced significant improvements over the
past few years, SAIF has not experienced a similar increase in its ratio of reserves
to insured deposits. As of December 31, 1995, SAIF's ratio of reserves to insured
deposits equaled 0.47 percent, which is still substantially below its designated
reserve ratio of 1.25 percent. SAIFs capitalization has been slowed because its
members’ premiums have and continue to be used to pay for certain obligations
of the thrift crisis, including interest on 30-year bonds issued by the Financing
Corporation (FICO).8 FDIC estimates that, absent the statutory requirement to
use premiums for these other obligations, SAIF would have been fully capitalized
in 1994. Under current law, FICO has authority to assess SAIF-member savings
associations to cover its annual interest expense, which will continue until the
30-year bonds mature in the years 2017 through 2019. In 1995, FICO’s assessment
totaled $718 million, or approximately 42 percent of SAIF’s assessment revenue.8
As a result of the annual FICO interest payments, the need to capitalize SAIF to
its designated reserve ratio, and a reduction in premium rates for BIF-insured
institutions, a significant differential in premium rates charged by BIF and SAIF
developed in 1995 and, absent legislative action, will likely remain for many
years.1 For example, during 1996, institutions with deposits insured by BIF are
0
paying an average of less than one cent per $100 of assessable deposits for
deposit insurance (0.3 cents). In contrast, institutions with deposits insured by
SAIF are paying an average of 23.4 cents per $100 of assessable deposits for
similar deposit insurance. Thus, a premium differential of about 23 basis points1
1
currently exists.
®FICO was established in 1987 to recapitalize the Federal Savings and Loan
Insurance Fund, the former insurance fund for thrifts. FICO was funded mainly
through the issuance of public debt offerings which were initially limited to
$10.8 billion but were later effectively capped at $8.2 billion by the RTC
Refinancing, Restructuring, and Improvement Act of 1991. Neither FICO's bond
obligations or the interest on these obligations are obligations of the United States
nor are they guaranteed by the United States.
'The annual FICO interest obligation, on average, equals approximately
$780 million. Because FICO had available cash reserves in 1995, its draw on
SAIF’s assessments was slightly less than the amount needed to fully fund the
1995 interest payments.
l0
Denosit. Insurance Funds: Analysis of Insurance Premium Disnaritv Between
Banks and Thrifts (GAO/AIMD-95-84, March 3, 1995) and Denosit Insurance
Funds: Analysis of Insurance Premium Disnaritv Between Banks and Thrifts
(GAO/T-AIMD-95-U1, March 23, 1995).
“ One hundred basis points are equivalent to one percentage point. In this
context, the 23 basis points would translate into a 23-cent premium differential
for every $100 in assessable deposits.




The Premium Rate Differential Could
Affect Funding for FICO’s Interest Obligation
and Future Deposit Insurance Premium Rates
Only a portion of SAIF’s assessment base is available to fund the annual FICO
interest obligation.1 This portion of SAIF’s assessment base has declined on
2
average 11 percent each year since SAIF’s inception in 1989. At December 31,
1995, only $459 billion of SAIF’s total assessment base of $734 billion, or about 62
percent, was available to fund the annual FICO interest obligation. At SAIF's
current premium rates, the portion of SAIF’s assessment base needed to fund
FICO cannot decline below $333 billion in order to avoid a default on the FICO
interest payments.
Absent a legislative solution, the premium rate differential between BIF and SAIF
provides incentive for SAIF-member institutions to reduce their SAIF-insured
deposits to avoid paying higher premiums. Such reductions would further
decrease SAIF’s assessment base and increase the potential for a default on the
FICO bond interest obligation.
When the same product exists in the market place-in this case, deposit insurance-but at two substantially different prices, market forces can provide a strong
incentive to avoid the higher price in favor of the lower. Institutions seeking to
avoid higher SAIF premiums could do so in a number of ways: (1) reduce the
institution’s total assets, which, in turn, would reduce its need for deposits,
(2) obtain funding from sources such as Federal Home Loan Bank advances or
repurchase agreements, which are not subject to insurance premiums, (3) accept
BIF-insured deposits as agents for BIF-member affiliates, or (4) pay lower interest
rates on deposits, which would encourage deposits to migrate from SAIF to BIF
by letting BIF-member affiliates draw away business with deposit rates reflecting
their lower deposit insurance costs.
Federal regulators have already observed that some institutions are beginning to
use these strategies to decrease their SAIF-insured deposits and, thus, to avoid
the higher SAIF premiums. Recently, one large thrift shifted $2.6 billion in
deposits to a BIF affiliate. Currently, about 150 SAIF members, with deposits
totaling $165 billion, have BIF-member affiliates or are actively pursuing affiliates.
The banking regulators have stated that, under existing law, they have limited
ability to stop such deposit migration.
As noted above, a continual shrinkage of SAIF’s assessment base could have
implications not only for debt servicing of the FICO interest obligation, but also
for SAIF and BIF premium rates. If SAIF’s assessment base shrinks to the point
that current SAIF premium rates can no longer provide for sufficient revenue to
fund the annual FICO interest payments, a default on the FICO interest obligation
could result absent an increase in SAIF's premium rates. Increasing premium
rates to compensate for the shrinkage in SAIF's assessment base could lead to
even further shrinkage as the higher premiums force more institutions to seek
relief by reducing their dependence on SAIF-insured deposits. This, in turn,
would increase the potential for a default on the FICO interest obligation. Also, if
SAIF deposits continue to shrink, the fund will become smaller and less able to
diversify risk, as it is likely that the stronger SAIF member institutions will shift
their deposits to BIF, leaving the weaker institutions to SAIF. Finally, if deposits
migrate from SAIF to BIF, BIF’s reserve ratio could be adversely affected because
the transferred deposits do not bring with them any reserves. This could
ultimately result in higher future premium rates for BIF members in order for the
fund to maintain its designated reserve ratio.

1Thrift deposits acquired by BIF members, referred to as “Oakar” deposits, retain
2
SAIF insurance coverage, and the acquiring institution pays insurance premiums
to SAIF for these deposits at SAIF’s premium rates. However, because the
institution acquiring these deposits is not a savings association and remains a BIF
member as opposed to a SAIF member, the insurance premiums it pays to SAIF,
while available to capitalize SAIF, are not available to service the FICO interest
obligation. Similarly, premiums paid by SAIF-member savings associations that
have converted to bank charters, referred to as “Sasser” institutions, are
unavailable to fund the FICO interest obligation since the institutions are banks as
opposed to savings associations.




On March 19, 1996, the House Committee on Banking and Financial Services held
hearings on the condition of SAIF. At these hearings, the FDIC Chairman, the
Acting Director of the Office of Thrift Supervision, and the Under Secretary for
Domestic Finance of the United States Treasury, urged the Congress to pass
comprehensive legislation to provide a solution to the problems associated with
capitalizing SAIF, funding FICO, and eliminating the premium rate differential.
We have, and continue, to support the need to address the significant risks
associated with the premium rate differential.1
3
1995 Actions Address Some Weaknesses
Identified in Previous Audits
In our 1994 financial statement audit report on the three funds administered by
FDIC, we identified reportable conditions which affected FDIC's ability to ensure
that internal control objectives were achieved. These weaknesses related to
FDIC's internal controls designed to ensure that (1) estimated recoveries for
failed institution assets were determined using sound methodologies and were
adequately documented, (2) third party entities properly safeguarded assets and
reported asset activity to FDIC, and (3) time and attendance reporting procedures
were effective. During 1995, FDIC and third party asset servicing entities’ actions
addressed, or partially addressed, some of the weaknesses identified in our 1994
audit report.
During our 1994 audits, we identified weaknesses in FDIC’s documentation of,
and methodology for, estimating recoveries from assets acquired from failed
institutions. To address our concerns, FDIC developed historical data to support
the formula recovery estimates used for most assets with book values under
$250,000. Also, FDIC revised its guidance for estimating recoveries from failed
institution assets. The revised guidance provides more comprehensive recovery
estimation criteria which take into account the asset’s most probable disposition
strategy and contains strict documentation standards to support recovery
estimates. However, while the revised procedures provide a sound basis for
estimating recoveries for failed institution assets, our 1995 audits found that the
revised procedures were not effectively implemented.
Our 1994 audits also identified weaknesses in oversight of third party entities
contracted to manage and dispose of failed institution assets. During 1995, FDIC
and third party servicers acted to address internal control weaknesses over third
party servicers’ reporting of asset management and disposition activity and
safeguarding of collections. Specifically, the Contractor Accounting Oversight
Group (CAOG) and Contractor Oversight and Monitoring Branch (COMB) of
FDIC’s Division of Finance and Division of Depositor and Asset Services,
respectively, fully implemented the requirements of the Letter of Understanding
on Accounting Roles and Responsibilities of CAOG and COMB. This letter
outlines specific verification procedures, the timing of those procedures, and the
FDIC entity responsible for performing the procedures at the contracted asset
servicers. The letter was issued in October 1994, but was not fully implemented
until after December 31, 1994. However, we found that during 1995, FDIC
verified the accuracy of reported asset activity to supporting documentation and
to servicers’ detailed accounting records.
Third party servicers also improved daily collection procedures designed to
ensure that collections are properly safeguarded and completely and accurately
reported. Specifically, one servicer effectively implemented procedures to verify
collections received and reconcile collections processed and deposited to daily
collections. Another servicer implemented dual controls over daily collections
and instituted aggressive procedures for collecting delinquent payments. In
addition, another servicer completed its servicing agreement with FDIC. As a
result of the actions taken by FDIC regarding verification of servicer activity
reports and actions taken by the asset servicers regarding safeguarding of
collections, we no longer consider these issues to be a reportable condition as of
December 31, 1995.

1Peposit Insurance Funds: Analysis of Insurance Premium Disparity Between
3
Banks and Thrifts (GAO/T-AIMD-95-223, August 2, 1995).




While the above actions address some of the internal control deficiencies
identified in our prior year’s audits, some long-standing deficiencies remain.
During 1995, we continued to find weaknesses in FDIC’s adherence to its time
and attendance reporting procedures. Also, we continued to find weaknesses in
documentation used to support estimated recoveries from failed institution assets.
Finally, while FDIC revised its procedures for estimating recoveries for failed
institution assets, we found these procedures were not effectively implemented.
Consequently, as discussed below, we still consider these weaknesses to be
reportable conditions as of December 31, 1995.
REPORTABLE CONDITIONS
The following reportable conditions represent significant deficiencies in FDIC's
internal controls and should be corrected by FDIC management.
1 Controls to ensure that recovery estimates for assets acquired from failed
.
financial institutions comply with FDIC’s revised asset recoveiy estimation
methodology are not working effectively. Specifically, FDIC’s controls do not
ensure that recovery estimates comply with the methodologies specified in FDIC’s
Asset Disposition Manual (ADM), or are based on current and complete file
documentation. Also, FDIC does not have controls in place to ensure that, in
deriving reasonable estimates of recovery for assets in liquidation, the asset
recovery estimation process considers the impact of events through the period
covered by the three funds’ financial statements. These estimates are used by
FDIC to determine the allowance for losses on receivables from resolution
activities and investment in corporate-owned assets for the funds. Consequently,
these weaknesses resulted in misstatements to BIF's and FRF's 1995 financial
statements and could result in future misstatements to each fund’s financial
statements if corrective action is not taken by FDIC management.
In response to recommendations in our 1994 audit report, in August 1995, FDIC
completed the ADM and issued it to Division of Depositor and Asset Services field
office staff. This manual contained detailed guidance in asset recovery estimation
methodologies and strict requirements for documentation to support such
estimates. FDIC’s intent in issuing this manual was to ensure that reasonable
estimates of recoveries were available to facilitate the calculation of the
December 31, 1995, allowance for losses for the funds administered by FDIC.
However, we found that the ADM was not effectively implemented. Specifically,
we found that asset recovery estimates were not always consistently supported
by, and/or consistent with file documentation or the most probable disposition
strategy. Also, we found that asset recovery estimates were not always prepared
using the most current information available at the time the estimate was
developed.
The Asset. Disposition Manual requires supervisory review to verify the accuracy
and adequacy of recoveiy estimates. However, we found that the supervisory
reviews were generally cursory in nature and frequently did not identify recovery
estimates that were not in compliance with the ADM. Consequently, these
reviews did not always identify inaccurate or unsupported asset recovery
estimates.
FDIC uses asset recovery estimates prepared no later than September 30 in
calculating the year-end allowance for losses on the receivables from resolution
activities and investments in corporate-owned assets reflected in the funds’
financial statements. This creates the potential for significant changes in the
estimates of recoveries on the underlying assets in liquidation in the last 3 months
of the year to not be fully reflected in the year-end financial statements.
In this regard, we found that significant fluctuations in the aggregate estimated
recovery value of BIF’s and FRF’s failed institution asset inventory that occurred
during the fourth quarter of 1995 were not fully reflected in the year-end
allowance for losses on BIF’s and FRF’s receivables from resolution activities and
investment in corporate-owned assets. These fluctuations were caused by a
number of factors, such as collections on assets, asset dispositions, write-offs, and
changes in the circumstances affecting individual assets’ recovery potential. The
ADM requires individual asset recovery estimates to be updated within 30 days
following any significant event or change in disposition strategy that affects the
estimated recovery by 5 percent or more. However, we found that recovery
estimates were not always updated to reflect these changes. Also, when such
changes were made, they were not used to update the year-end allowance for loss
calculation.




The lack of consistent adherence to the revised asset valuation methodology,
particularly regarding the need for adequate documentation to support such
estimates, combined with the lack of an effective process for fully considering the
impact of events between the asset valuation date and year-end, resulted in FDIC
understating BIF’s and FRF’s allowance for losses on their receivables from
resolution activity and investment in corporate-owned assets. This, in turn,
contributed to FDIC misstating BIF's fund balance and FRF's accumulated deficit
as of December 31, 1995.
We selected samples of BIF's and FRF's inventories of failed institution assets.
Using the criteria contained in the ADM, we reviewed FDIC's compliance with the
ADM at September 30, 1995, and we estimated recoveries for the assets in our
samples through the December 31, 1995, financial statement date. Based on our
work, we estimate that BIF's fund balance was overstated by about $266 million
and FRF's accumulated deficit was understated by about $183 million. However,
these amounts were not significant enough to materially misstate the 1995
financial statements.1
4
FDIC is currently making substantial changes to its asset valuation process. The
new process is intended to provide for uniformity throughout the organization in
estimating amounts to be recovered from failed financial institution assets and
will rely heavily on statistical sampling procedures as well as economic and
market assumptions. However, it will also rely heavily on available asset
documentation in determining the appropriate assumptions to be used to develop
recovery estimates. Consequently, in implementing this new asset valuation
process, FDIC should ensure that the weaknesses we have identified with respect
to the process used during 1995 are fully addressed.
2. FDIC has not strictly enforced adherence to its time and attendance reporting
procedures. As in previous audits, our 1995 audits continued to identify
deficiencies in adherence to required procedures in preparing time and attendance
reports, separation of duties between timekeeping and data entry functions, and
reconciliation of payroll reports to time cards. These weaknesses could adversely
affect FDIC’s ability to properly allocate expenses among the three funds.
In April 1996, FDIC began implementing a new process intended to streamline
and improve time and attendance reporting. FDIC officials have indicated that
the revised time and attendance process constitutes the initial steps in developing
a fully automated system. However, while this revised process may result in
some increased efficiencies, the new process, in and of itself, will not correct the
deficiencies we identified during the past several years. Further improvements
and ultimately a fully automated system may reduce the occurrence of
weaknesses such as inadequate reconciliations and lack of separation of duties,
but they offer no assurance that existing problems will be fully resolved. Given
the longstanding nature of time and attendance reporting deficiencies and the
failure of past efforts to fully satisfy our prior audits’ recommendations to correct
these deficiencies, it is critical that FDIC management strictly enforce adherence
to current and future time and attendance reporting procedures.
3. We identified another weakness related to FDIC's electronic data processing
controls during our 1995 audits which, due to its sensitive nature, is being
communicated to FDIC management, along with our recommendations for
corrective action, through separate correspondence.

1In making this determination, we considered the needs of the users of BIF's and
4
FRF's financial statements. In BIF's case, we considered the Fund balance to be
the most significant component to the financial statement users, as the Fund
balance reflects BIF's financial health and is a primary consideration in setting
premium rates for insured member institutions. In FRF's case, we considered the
Accumulated Deficit to be the most significant component to the financial
statement users, as it reflects amounts to be funded from appropriations to
liquidate the assets and contractual obligations of the defunct FSLIC. In this
context, the misstatements we identified through our audits represent one-percent
of BIF's $25.5 billion fund balance, and 0.4 percent of FRF's $43.4 billion
Accumulated Deficit, respectively, at December 31, 1995. We also noted in FRF's
case that the Fund's Resolution Equity at December 31, 1995, is more than
sufficient to cover additional losses even were such losses to exceed the level of
misstatement we identified in FRF's 1995 financial statements.




In addition to the weaknesses discussed above, we noted other less significant
matters involving FDIC’s system of internal accounting controls and its
operations, which we will be reporting separately to FDIC.
RECOMMENDATIONS
To address weaknesses identified in this year's audits in the area of estimating
recoveries for failed institution assets, we recommend that the Chairman of the
Federal Deposit Insurance Corporation direct heads of the Division of Depositor
and Asset Services and Division of Finance to
- ensure that field office personnel maintain complete and current
documentation in asset files to provide a basis for assumptions used to derive
asset recovery estimates and that the assumptions used are appropriately
documented,
- ensure that supervisory reviews of asset recovery estimates are performed
thoroughly and include a review of asset file documentation to identify and
correct inaccurate or unsupported estimates, and
- establish and enforce procedures to ensure that recovery estimates are updated
for information made available between the valuation date and the year-end
financial statement reporting date.
CORPORATION COMMENTS
AND 01JR EVALUATION
In commenting on a draft of this report, FDIC acknowledged that further
improvements could be made to resolve weaknesses in its asset valuation process
and is initiating a new process for estimating asset recoveries. FDIC expects this
process to be in place for the 1996 annual financial statements. FDIC believes
that this new process will address concerns regarding asset valuation
methodology, documentation, management review, and timing differences. We
will review FDIC's new asset valuation process as part of our 1996 financial
audits.
FDIC also stated that it reviewed the assets sampled by us in our audits. FDIC
noted that its own review found instances of noncompliance by FDIC personnel
with the revised Asset Disposition Manual guidelines for estimating asset
recoveries. FDIC stated that its review also found numerous instances in which
GAO and FDIC were in complete or substantial agreement. FDIC concluded from
its review that the revised asset recovery methodology was generally understood
and that its staff, in general, properly prepared asset recovery estimates.
FDIC also stated that it believes its asset recovery estimates, in the aggregate,
are reasonable. FDIC said that asset valuations often cannot be determined with
precision, and that various reasonableness tests performed by FDIC staff support
the position that both FDIC's asset recovery estimates as reflected in BIF's and
FRF's 1995 financial statements and our estimates of the aggregate recovery value
of the assets are reasonable. Thus, FDIC believes that there is no basis for
asserting that either set of estimates is more accurate than the other.
We agree that estimating potential recoveries on failed institution assets is subject
to some degree of uncertainty. It is this inherent uncertainty in the estimation
process that makes strict adherence to a sound methodology critical to ensuring
that reasonable estimates are derived for use in preparing the financial
statements. Our estimates are based on a strict application of FDIC's revised
methodology and include the impact on asset recovery potential of events through
the financial statement reporting date. While certain analytical procedures, as
applied by FDIC, may help to provide additional comfort as to the reasonableness
of FDIC's official estimation process, they are not a substitute for a systematic,
reasonable, and verifiable methodology.
As we discuss in this report, FDIC took significant steps during 1995 to address
the deficiencies in its asset valuation methodology that we identified in previous
audits. However, the level of compliance with the revised methodology was
significantly deficient. We found that in over 41 percent of the assets we
sampled, FDIC field office personnel did not comply with the revised
methodology. This level of noncompliance coupled with the impact on asset
recovery estimates of events subsequent to FDIC's valuation date but up to the
financial statement reporting date resulted in differences in recovery estimates in




about 89 percent of the assets we reviewed. FDIC's own review of the assets we
sampled confirmed our audit findings. As we noted in this report, we believe the
resulting level of misstatements were not significant enough to materially misstate
BIF's and FRF's 1995 financial statements. However, they do illustrate the impact
that weaknesses in controls over the asset valuation process can have on the
financial statements.
FDIC also commented on initatives it has underway to address the deficiencies
we identified in its time and attendance reporting and audit processes. FDIC
believes these initiatives will facilitate the timely identification and correction of
time and attendance related issues. In addition, FDIC noted that it is studying its
current expense allocation and recovery methodologies and, as part of this
undertaking, is developing methods that will reduce reliance on time and
attendance reporting in determining expense allocations to funds and
receiverships. FDIC noted that it is currently addressing weaknesses we
identified in its electronic data processing controls.
FDIC also discussed other management initiatives it has underway to improve its
operational effectiveness, including enhancements to its contracting oversight and
a more corporatewide monitoring of internal control issues. FDIC noted that it
has also established an audit committee to review the adequacy of the
Corporation's internal controls and compliance with laws and regulations, and to
review internal and external audit recommendations.

Charles A. Bowsher
Comptroller General
of the United States
May 2, 1996







Num ber and Deposits of BIF-lnsured Banks Closed
Because of Financial Difficulties, 1934 through 19951
(D ollars in Thousands)
Number of
Insured Banks
Without
With
disbursements disbursements
by FDIC
Total
by FDIC

Year
Total

2,075

1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
1950
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
1934

6
13
41
120
124
168
206
200
184
138
120
79
48
42
10
10
10
7
6
16
13
4
6
1
6
7
9
3
4
7
5
7
2
1
5
1
3
4
2
2
5
2
4
3
2
4
5
3
5
1
1
2
5
20
15
43
60
74
77
69
26
9

19
1
10

1

1

2

1

2
1

Deposits of
Insured Banks
Without
disbursements
Total

2,056

$212,535,703

6
12
41
110
124
168
206
200
184
138
120
79
48
42
10
10
10
7
6
16
13
4
6
1
6
7
9
3
4
7
5
7
2
0
5
1
3
4
1
2
5
2
2
3
2
4
4
3
5
1
1
2
5
20
15
43
60
74
75
69
25
9

632,700
1,236,488
3,132,177
41,150,898
53,751,763
14,473,300
24,090,551
24,931,302
6,281,500
6,471,100
8,059,441
2,883,162
5,441,608
9,908,379
3,826,022
216,300
110,696
854,154
205,208
864,859
339,574
1,575,832
971,296
20,480
132,058
54,806
40,134
22,524
10,878
103,523
43,861
23,438
23,444
3,011
8,936
6,930
2,593
8,240
11,247
11,330
11,953
998
44,711
3,170
3,408
5,513
6,665
10,674
7,040
347
5,695
1,915
12,525
19,185
29,717
142,430
157,772
59,684
33,677
27,508
13,405
1,968

With
disbursements
by FDIC

$4,298,814

$208,236,889

$252,378,929

632,700
1,236,488
3,132,177
36,893,231
53,751,763
14,473,300
24,090,551
24,931,302
6,281,500
6,471,100
8,059,441
2,883,162
5,441,608
9,908,379
3,826,022
216,300
110,696
854,154
205,208
864,859
339,574
1,575,832
971,296
20,480
132,058
54,806
40,134
22,524
10,878
103,523
43,861
23,438
23,444
0
8,936
6,930
2,593
8,240
1,163
11,330
11,953
998
18,262
3,170
3,408
5,513
5,475
10,674
7,040
347
5,695
1,915
12,525
19,185
29,717
142,430
157,772
59,684
33,349
27,508
13,320
1,968

753,024
1,392,140
3,539,373
44,197,009
63,119,870
15,660,800
29,168,596
35,697,789
6,850,700
6,991,600
8,741,268
3,276,411
7,026,923
11,632,415
4,859,060
236,164
132,988
994,035
232,612
1,039,293
419,950
3,822,596
1,309,675
22,054
196,520
62,147
43,572
25,154
11,993
120,647
58,750
25,849
26,179
N/A
9,820
7,506
2,858
8,905
1,253
12,914
11,985
1,138
18,811
2,388
3,050
4,005
4,886
10,360
6,798
351
6,392
2,098
14,058
22,254
34,804
161,898
181,514
69,513
40,370
31,941
17,242
2,661

4,257,667

3,011

10,084

26,449

1,190

328
85

' Does not include institutions insured by the Savings Association Insurance Fund (SAIF), which was established by the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989.




Assets

by FDIC

R ecoveries and L osses by th e B ank In su ran ce Fund
on D isb ursem en ts fo r the P rotection o f D epositors, 1934 thro u gh 1995
(Dollars in T h o u sa n d s)
ALL CASES1
Year

No.
of
banks

Disburse­
ments

Recoveries

Deposit payoff cases2
Estimated
Additional
Recoveries

Estimated
Losses

Year

No.
of
banks

Disburse­
ments

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

Total

2,127

5104,293,099

$62,471,283

54,955,024

$36,866,852

Total

602

$14,463,350

$8,544,410

$1,386,592

1995

6

717,799

342,039

271,347

104,413

1995

0

0

0

0

0

1994

13

1,268,533

602,391

457,849

208,293

1994

0

0

0

0

0

$4,532,348

1993

41

1,767,530

1,032,190

80,824

654,516

1993

5

271,452

165,259

4,257

101,936

1992

122

12,868,562

8,645,986

515,209

3,707,367

1992

24

1,786,457

999,875

279,511

507,071

1991

127

20,638,267

14,083,129

518,492

6,036,646

1991

21

1,468,407

667,688

314,661

486,058

1990

169

10,813,381

7,588,763

335,437

2,889,181

1990

20

2,182,583

1,150,882

293,309

738,392

1989

207

11,445,033

4,712,930

517,216

6,214,947

1989

32

2,116,556

889,604

413,169

813,783

1988

221

12,183,656

4,292,578

1,024,832

6,866,246

1988

36

1,252,160

804,053

17,269

430,838

1987

203

5,037,871

2,976,052

34,258

2,027,561

1987

51

2,103,792

1,371,012

26,455

706,325

1986

145

4,717,669

2,980,561

9,317

1,727,791

1986

40

1,155,981

732,810

5,824

417,347

1985

120

2,920,886

1,701,751

211,568

1,007,567

1985

29

523,789

407,408

3,589

112,792

1984

80

7,696,215

5,506,306 I

554,730

1,635,179

1984

16

791,838

670,935

28,548

92,355

1983

48

3,768,020

2,240,432

102,630

1,424,958

1983

9

148,423

122,484

0

25,939

1982

42

2,275,150

829,794

276,417

1,168,939

1982

7

277,240

205,879

0

71,361

1981

10

888,999

69,326

37,895

781,778

1981

2

35,736

34,598

0

1,138

1980

11

152,355

114,760

7,003

30,592

1980

3

13,732

11,515

0

2,217

562

5,133,173

4,752,295

0

380,878

307

335,204

310,408

0

24,796

1934-79 3

1934-79 3

Deposit assumption cases
Year

No.
of
banks

Disburse­
ments

Recoveries

Assistance transactions1

Estimated
Additional
Recoveries

Estimated
Losses

Year

No.
of
banks

Disburse­
ments

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

Total

1,444

$79,010,316

$49,192,315

$2,669,180

$27,148,821

Total

81

$10,819,433

$4,734,558

$899,252

1995

6

717,799

342,039

271,347

104,413

0

0

0

0

0

1994

13

1,268,533

602,391

457,849

208,293

1995
1994

0

0

0

0

0

1993

36

1,496,078

866,931

76,567

552,580

1993

0

0

0

0

0

1992

96

11,081,031

7,645,911

235,233

3,199,887

1992

2

1,074

200

465

409

1991

103

19,164,135

13,414,895

201,763

5,547,477

1991

3

5,725

546

2,068

3,111

1990

148

8,628,265

6,437,799

42,034

2,148,432

1990

1

2,533

82

94

2.357

1989

174

9,326,075

3,823,266

103,963

5,398,846

1989

1

2,402

60

84

2,318

1988

164

9,180,495

3,334,299

1,005,285

4,840,911

1988

21

1,751,001

154,226

2,278

1,594,497

1987

133

2,773,202

1,604,327

7,803

1,161,072

1987

19

160,877

713

0

160,164

1986

98

3,402,840

2,186,319

3,493

1,213,028

1986

7

158,848

61,432

0

97,416

1985

87

1,631,365

990,262

105,384

535,719

1985

4

765,732

304,081

102,595

359,056
1,111,299

$5,185,683

1984

62

1,373,198

940,375

1,298

431,525

1984

2

5,531,179

3,894,996

524,884

1983

36

3,533,179

2,099,741

98,488

1,334,950

1983

3

86,418

18,207

4,142

64,069

1982

25

418,321

325,165

13,775

79,381

1982

10

1,579,589

298,750

262,642

1,018,197

1981

5

79,208

33,463

37,895

7,850

1981

3

774,055

1,265

0

772,790

1980

7

138,623

103,245

7,003

28,375

1980

1

N/A

N/A

N/A

N/A

251

4,797,969

4,441,887

0

356,082

1934-79 3

4

0

0

0

0

1934-79 3

1 Totals do not include dollar amounts for five open bank assistance transactions between 1971 and 1980. Excludes eight transactions prior to 1962 that
required no disbursements.
2 Includes insured deposit transfer cases.
3 For detail of years 1934 through 1979, refer to Table C of the 1994 Annual Report.




In co m e and Expenses, Bank In su ran ce Fund, by Year,
from B eginning o f O p eratio n s, S ep tem b er 11, 1933, through D ecem b er 31, 1995
(Dollars in Millions)
In c o m e

Year

Total

Assessment
Income

Total
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
1950
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
" 1939
1938
1937
1936
1935
1933-34

$72,717.7
4,089.1
6,467.0
6,430.8
6,301.5
5.789.9
3,838.3
3,494.6
3,347.7
3,319.4
3,260.1
3,385.4
3,099.5
2,628.1
2,524.6
2,074.7
1,310 4
1,090.4
952.1
837.8
764.9
689.3
668.1
561.0
467.0
415.3
382.7
335.8
295.0
263.0
241.0
214.6
197.1
181.9
161.1
147.3
144.6
136.5
126.8
117.3
111.9
105.8
99.7
94.2
88.6
83.5
84.8
151.1
145.6
157.5
130.7
121.0
99.3
86.6
69.1
62 0
55.9
51.2
47.7
48.2
43.8
20 8
7.0

$53,015.3
2,906.9
5,590.6
5,784.3
5,587.8
5.160.5
2,855.3
1,885.0
1,773.0
1,696.0
1,516.9
1,4334
1,321.5
1,214.9
1,108.9
1,039.0
951.9
881.0
810.1
731.3
676.1
641.3
587.4
529.4
468.8
417.2
369.3
364.2
334.5
303.1
284.3
260.5
238.2
220.6
203.4
188.9
180.4
178.2
166.8
159.3
155.5
151.5
144.2
138.7
131.0
124.3
122 9
122.7
119.3
114.4
107.0
93.7
80.9
70.0
56 5
51.4
46.2
40.7
38 3
38.8
35.6
11.5
0.0

Investment
Assessment and Other
Credits
Sources

$6,709.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
164.0
96.2
117.1
521.1
524.6
443.1
411.9
379.6
362.4
285.4
283.4
280.3
241.4
210.0
220.2
202.1
182.4
172.6
158.3
145.2
136.4
126.9
115.5
100.8
99.6
93.0
90.2
87.3
85.4
81 8
78.5
73.7
70.0
68.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

$26,411.5
1,182.2
876.4
646.5
713.7
629.4
983.0
1,609.6
1,574.7
1,623.4
1,743.2
1,952.0
1,778.0
1,577.2
1,511.9
1,152.8
879.6
734.0
585.1
518.4
468.4
410.4
366.1
315.0
278.5
239.5
223.4
191.8
162.6
142.3
129.3
112.4
104.1
97.7
84.6
73.9
65.0
57 9
53.0
48.2
43.7
39.7
37.3
34.0
31.3
29.2
30.6
28.4
26.3
43.1
23 7
27.3
18.4
16.6
12.6
10.6
9.7
10.5
9.4
9.4
8.2
9.3
7.0

Effective
Assessment
Rate1

0.1240%
0.2360%
0.2440%
0.2300%
02125%
0.1200%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0800%
0.0714%
0.0769%
0.0714%
0.0370%
0.0333%
0.0385%
0.0370%
0.0370%
0.0357%
0.0435%
0.0385%
0.0333%
0.0345%
0.0357%
0.0333%
0.0333%
0.0333%
0 0323%
0.0323%
0.0323%
0.0313%
0.0313%
0.0323%
0.0370%
0.0370%
0.0370%
0.0357%
0.0370%
0.0370%
0.0357%
0.0357%
0.0370%
0.0370%
0.0370%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
N/A

Total

$47,264.0
483.2
(2,259.1)
(6,791.4)
(625.8)
16,862.3
13,003.3
4,346.2
7,588.4
3,270.9
2,963.7
1,957.9
1,999.2
969.9
999.8
848.1
83.6
93.7
148.9
113.6
212.3
97.5
159.2
108.2
59.7
60.3
46.0
34.5
29.1
27.3
19.9
22.9
18.4
15.1
13.8
14.8
12.5
12.1
11.6
9.7
9.4
9.0
7.8
7.3
7.8
6.6
7.8
6.4
7.0
9.9
10.0
9.4
9.3
9.8
10.1
10.1
12.9
16.4
11.3
12.2
10.9
11.3
10.0

E x p e n s e s a n d L o sses
Deposit Insurance Administrative
Losses and
and Operating
Expenses
Expenses

$42,021.8
12 6
(2,682.3)
(7.179.9)
(1,196.6)
16,578.2
12,783.7
4,132.3
7,364.5
3,066.0
2,783.4
1,778.7
1,848.0
834.2
869.9
720.9
(34.6)
(13.1)
45.6
24.3
31.9
29.8
100.0
53.8
10.1
13.4
3.8
1.0
0.1
2.9
0.1
5.2
2.9
0.7
0.1
1.6
0.1
0.2
0.0
0.1
0.3
0.3
0.1
0.1
0.8
0.0
1.4
0.3
0.7
0.1
0.1
0.1
0.1
0.2
0.5
0.6
3.5
7.2
2.5
3.7
2.6
2.8
0.2

$5,242.2
470.6
423.2
388.5
570.8
284.1
219.6
213.9
2239
204.9
180.3
179.2
151.2
135.7
129.9
127.2
118.2
106.8
103.3
89 3
180.4
67.7
59.2
54.4
49.6
46.9
42.2
33.5
29.0
24.4
19.8
17.7
15.5
14.4
13.7
13.2
12 4
11.9
11.6
9.6
9.1
8.7
7.7
7.2
7.0
6.6
6.4
6.1
6.3
9.8
9.9
9.3
9.2
9.6
9.6
9.5
9.4
9.2
8.8
8.5
8.3
8.5
9.8

Net Income/
(Loss)

$25,453.7
3,605.9
8,726.1
13,222.2
6,927.3
(11,072.4)
(9,165.0)
(851.6)
(4,240.7)
48.5
296.4
1,427 5
1,100.3
1,658.2
1,524.8
1,226.6
1,226 8
996.7
803.2
7242
552.6
591.8
508.9
452.8
407.3
355.0
336.7
301.3
265.9
235 7
221.1
191.7
178.7
166.8
147.3
132.5
132.1
1244
115.2
107.6
102.5
96.8
91.9
86.9
80.8
76 9
77.0
144.7
138 6
147.6
120.7
111.6
90.0
76.8
59.0
51.9
43.0
34.8
36.4
36.0
32.9
9.5
(3.0)

' The effective rates from 1950 through 1984 vary from the statutory rate of 0.0833 percent due to assessment credits provided in those years.
The statutory rate increased to 0.12 percent in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and 1992 vary because
the FDIC exercised new authority to increase assessments above the statutory rate when needed. Beginning in 1993, the effective rate is based
on a risk-related premium system under which institutions pay assessments in the range of 0.23 percent to 0.31 percent. In May 1995, the BIF reached
the mandatory recapitalization level of 1.25%. As a result, the assessment rate was reduced to 4.4 cents per $100 of insured deposits and assessment
premiums totaling $1.5 billion were refunded in September.




Insured Deposits and the Bank Insurance Fund, December 31, 1934, through 1995
(D o lla rs in M illio n s )
Insurance
Year'

Coverage

1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
1950
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
19343

$100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
40,000
40,000
40,000
40,000
40,000
40,000
20,000
20,000
20,000
20,000
20,000
15,000
15,000
15,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000

Deposits in Insured Banks
Total

$2,576,581
2,463,813
2,493,636
2,512,278
2,520,074
2,540,930
2,465,922
2,330,768
2,201,549
2,167,596
1,974,512
1,806,520
1,690,576
1,544,697
1,409,322
1,324,463
1,226,943
1,145,835
1,050,435
941,923
875,985
833,277
766,509
697,480
610,685
545,198
495,858
491,513
448,709
401,096
377,400
348,981
313,304
297,548
281,304
260,495
247,589
242,445
225,507
219,393
212,226
203,195
193,466
188,142
178,540
167,818
156,786
153,454
154,096
148,458
157,174
134,662
111,650
89,869
71,209
65,288
57,485
50,791
48,228
50,281
45,125
40,060

Insured1

$1,952,543
1,896,060
1,906,885
1,945,623
1,957,722
1,929,612
1,873,837
1,750,259
1,658,802
1,634,302
1,503,393
1,389,874
1,268,332
1,134,221
988,898
948,717
808,555
760,706
692,533
628,263
569,101
520,309
465,600
419,756
374,568
349,581
313,085
296,701
261,149
234,150
209,690
191,787
177,381
170,210
160,309
149,684
142,131
137,698
127,055
121,008
116,380
110,973
105,610
101,841
96,713
91,359
76,589
75,320
76,254
73,759
67,021
56,398
48,440
32,837
28,249
26,638
24,650
23,121
22,557
22,330
20,158
18,075

Insurance Fund as a Percentage of

Percentage of

Deposit Insurance

Total

Insured

Insured Deposits

Fund

Deposits

Deposits

75.8
77.0
76.5
77.4
77.7
75.9
76.0
75.1
75.3
75.4
761
76.9
75.0
73.4
70.2
71.6
659
66.4
65.9
66.7
65.0
62 5
60.7
60.2
61.3
64.1
63.1
60.2
58.2
58.4
55.6
55.0
56.6
57.2
57.0
57.5
57.4
56.8
56.3
55.2
54.8
54.6
54.6
54.1
54.2
54.4
48 8
49.1
49.5
49.7
42.4
41.9
43.4
36 5
39.7
40.8
42.9
45.5
46.8
44.4
44.7
45.1

$25,453.7
21,847.8
13,121.6
(100.6)
(7,027.9)
4,044 5
13,209.5
14,061.1
18,301.8
18,253.3
17,956.9
16,529.4
15.429.1
13,770.9
12,246.1
11,019.5
9,792.7
8,796.0
7,992.8
7,268.8
6,716.0
6,124.2
5,615.3
5,158.7
4,739.9
4,379.6
4,051.1
3,749.2
3,485.5
3,252.0
3,036.3
2,844.7
2,667.9
2,502.0
2.353 8
2,222.2
2,089.8
1,965.4
1,850.5
1,742.1
1,639.6
1,542.7
1,450.7
1,363.5
1,282.2
1,243.9
1,203.9
1,065.9
1,006.1
1,058.5
929.2
804.3
703.1
616.9
553.5
496.0
452.7
420.5
383 1
343 4
306.0
291.7

0.99
0.89
0.53
(0.00)
(0.28)
0.16
0.54
0.60
0.83
0.84
0.91
0.92
0.91
0.89
0.87
0.83
0.80
0.77
0.76
0.77
0.77
0.73
0.73
0.74
0.78
0.80
0.82
0.76
0.78
0.81
0.80
0 82
0.85
0.84
0.84
0.85
0.84
0.81
0.82
0.79
0.77
0.76
0.75
0.72
0.72
0.74
0 77
0.69
0.65
0.71
0.59
0.60
0.63
0.69
0.78
0.76
0.79
0.83
0.79
0.68
0.68
0.73

1.30
1.15
0.69
(001)
(0.36)
021
0.70
0.80
1.10
1.12
1.19
1.19
1.22
1.21
1 24
1.16
1.21
1.16
1.15
1.16
1.18
1.18
1.21
1.23
1.27
1.25
1.29
1.26
1.33
1.39
1.45
1.48
1.50
1.47
1.47
1.48
1.47
1 43
1.46
1.44
1.41
1.39
1 37
1.34
1.33
1.36
1.57
1.42
1.32
1.44
1.39
1.43
1.45
1.88
1.96
1.86
1.84
1.82
1.70
1 54
1.52
1.61

1Starting in 1990, deposits in insured banks exclude those deposits held by Bank Insurance Fund members that are covered by the Savings
Association Insurance Fund.
1 Insured deposits are estimated based on deposit information submitted in the December 31 Call Reports (quarterly Reports of Condition and
Income) and Thrift Financial Reports submitted by insured institutions. Before 1991, insured deposits were estimated using percentages
determined from the June 30 Call Reports.
3 Initial coverage was $2,500 from January 1 to June 30, 1934.




BIF- Insured Banks Closed During 1995
(Dollars in Thousands)
Number
of
Deposit
Accounts

Bank
Class

Name and Location

Total
Assets

Total
Deposits

FDIC
Disburse­
ments

Estimated
Loss1

Receiver/
Assuming Bank
and Location

Date of
Closing or
Acquisition

Purchase and Assumption - Insured DeD O S its Onlv
Guardian Bank
Los Angeles, CA

SM

4,700

$277,013

$193,600

$262,693

$27,574

01/20/95

Imperial Bank
Los Angeles, CA

First Trust Bank
Ontario, CA

NM

26,200

217,814

197,200

211,410

23,007

03/03/95

First Interstate Bank of California
Los Angeles, CA

Los Angeles Thrift and Loan Company
Los Angeles, CA

NM

451

21,449

21,900

21,327

5,932

03/31/95

California Federal Bank, FSB
Los Angeles, CA

Bank USA, N.A.
Kihei, HI

N

1,000

9,361

8,900

9,165

1,600

05/19/95

Hawaii National Bank
Honolulu, HI

Founders Bank
New Haven, CT

NM

5,000

76,279

72,700

74,595

9,000

07/28/95

Centerbank
Waterbury, CT

Pacific Heritage Bank
Los Angeles, CA

NM

10,300

151,108

138,400

138,609

37,300

07/28/95

California Federal Bank, FSB
Los Angeles, CA

Codes for Bank Class:

SM
NM
N

State-chartered bank that is a member of the Federal Reserve System.
State-chartered bank that is not a member of the Federal Reserve System.
National bank.

1 Estimated losses are as of 12/31/95. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales, which ultimately
affect the asset values and projected recoveries.

Income and Expenses, Savings Association Insurance Fund, by Year,
from Beginning of Operations, August 9,1989, through December 31,1995
(Dollars in Thousands)
In c o m e

E x p e n s e s an d L osses

Investment
Assessment
Year

Effective

and Other

Assessment

Income

Sources

Rate

Total

Total

$3,572,007

1995
1994

Administrative

Provision

Funding Transfer

for

Interest

and Operating

from the FSLIC

Total

Losses

Expenses

Expenses

Resolution Fund

Net Income/

$353,658

$114,700

$604

$238,354

$139,498

$3,357,847
1,421,132

(Loss)

$3,283,625

$288,382

1,139,916

970,027

169,889

0.234%

(281,216)

(321,000)

0

39,784

0

1,215,289

1,132,102

83,187

0.244%

434,303

414,000

0

20,303

0

780,986

1993

923,516

897,692

25,824

0.250%

46,814

16,531

0

30,283

0

876,702

1992

178,643

172,079

6,564

0.230%

28,982

(14,945)

35,446

185,107

96,446

93,530

2,916

0.230%

63,085

20,114

(5)
609

43,932

1991

42,362

42,362

75,723

1990

18,195

18,195

0

0.208%

56,088

0

0

56,088

56,088

18,195

1989

2

0

2

0.208%

5,602

0

0

5,602

5,602

2

Insured D ep osits and the S a v in g s A sso cia tio n In suran ce Fund, D ecem b er 3 1 , 1989, through 19 9 5
(D o lla rs in M illio n s )
Insurance

Deposits in Insured Institutions

Year1

Coverage

Total

Insured2

Insurance Fund as a Percentage of

Percentage of

Deposit Insurance

Total

Insured

Insured Deposits

Fund

Deposits

Deposits

1995

$100,000

$742,467

$711,017

95.8

$3,357.8

0.45

0.47

1994

100,000

720,823

692,626

96.1

1,936.7

0.27

0.28

1993

100,000

726,473

695,158

95.7

1,155.7

0.16

0.17

1992

100,000

760,902

729,458

95.9

279.0

0.04

0.04

1991

100,000

810,664

776,351

95.8

93.9

0.01

0.01

1990

100,000

874,738

830,028

94.9

18.2

0.00

1989

100,000

948,144

882,920

93.1

0.0

0.00

0.00
0.00

1 Starting in 1990, deposits in insured institutions exclude those deposits held by Savings Association Insurance Fund members that are covered by the Bank
Insurance Fund.
2 Insured deposits are estimated based on deposit information submitted in the December 31 Call Reports (quarterly Reports of Condition and Income) and
Thrift Financial Reports submitted by insured institutions. Before 1991, insured deposits were estimated using percentages determined from the June 30
Call Reports.













Sources
of Information
For a listing o f Regional Offices
that also are sources o f information,
see Pages 116 and 117.

Public Inform ation Center

Office o f the Ombudsman

801 17th Street, NW
Washington, DC 20434

550 17th Street, NW
Washington, DC 20429

Phone:

202-416-6940

Phone:

800-250-9286 or
202-942-3500

Fax:

202-416-2076

Fax:

202-942-3040 or
202-942-3041

Internet:

publicinfo@fdic.gov

Internet:

ombudsman@fdic.gov

A variety o f FDIC publications,
press releases, speeches and
Congressional testimony, direc­
tives to financial institutions and
other documents is available
through the Public Information
Center. These documents include
the Quarterly Banking Profile,
Statistics on Banking and a
variety o f consumer pamphlets.

The Office o f the Ombudsman
answers general questions and
responds to concerns about
FDIC operations.

Home Page on the Internet
World W ide Web:
http://www.fdic.gov
The FDIC’s “gopher” address:
gopher.fdic.gov

Division o f Compliance
and Consumer Affairs
550 17th Street, N W
Washington, DC 20429
Phone:

800-934-3342 or
202-942-3100

Fax:

202-942-3429 or
202-942-3427

Internet:

consumer@fdic.gov

The Division o f Compliance and
Consumer Affairs responds to
questions about deposit insur­
ance and other consumer issues
and concerns, and also offers a
number o f publications geared
to consumers.




A w ide range o f banking and
financial information, including
the FD IC ’s Quarterly Banking
Profile and Statistics on Banking,
is available on the FD IC’s Home
Page on the Internet. Readers
can also access FDIC press
releases, recently delivered
speeches, and other updates
on FDIC activities.

115

Regional
Offices

116
Division of Supervision (DOS) / Division of Compliance and Consumer A ffa irs (DCA)
Atlanta

Dallas

New York

1201 West Peachtree Street, NE

1910 Pacific Avenue
Suite 1900
Dallas, Texas 75201
214-220-3342

452 Fifth Avenue

Suite 1600
Atlanta, Georgia 30309
404-817-1300

Alabama
Florida
Georgia
North Carolina

South Carolina
Virginia
W est Virginia

Colorado
New Mexico

Oklahoma
Texas

19th Floor
N ew York, N ew York 10018
212-704-1200

Delaware
District of Columbia
Maryland
New Jersey

Boston

Kansas City

San Francisco

200 Lowder Brook Drive

2345 Grand Avenue
Suite 1500
Kansas City, Missouri 64108
816-234-8000

25 Ecker Street

Iowa
Kansas
Minnesota
Missouri

Alaska
Arizona
California
Guam
Hawaii
Idaho

New York
Pennsylvania
Puerto Rico
Virgin Islands

Suite 3100
Westwood, Massachusetts 02090
617-320-1600
Connecticut
Maine
Massachusetts

New Hampshire
Rhode Island
Vermont

Nebraska
North Dakota
South Dakota

Chicago

5100 Poplar Avenue
Suite 1900
Memphis, Tennessee 38137

312-382-7500

Montana
Nevada
Oregon
Utah
Washington
W yoming

Mem phis

500 West M onroe Street
Suite 3600
Chicago, Illinois 60661

Suite 2300
San Francisco, California 94105
415-546-0160

901-685-1603

Illinois
Indiana
Michigan




Ohio
Wisconsin

Arkansas
Kentucky
Louisiana

Mississippi
Tennessee

DOS: Examines and superv ises
state-chartered banks that are not
members of the Federal Reserve
System. Provides information about
sound banking practices.
DCA: Examines FDIC-supervised
banks for compliance with consumer
protection laws. Informs bankers and
the public about deposil insurance
and other consumer protections.

117
Division of Depositor and Asset Services (DAS) / Office of the Ombudsman (00)
Northeast Service C enter

Southeast Service C enter

Southwest Service C enter

101 East River Drive

1201 West Peachtree Street, NE

5080 Spectrum Drive

East Hartford, Connecticut 06108
860-291-4000 (DAS)

Suite 1800
Atlanta, Georgia 30309
404-817-2500 (DAS)
404-817 8990/800 765 5512 ( 0 0 )

Suite 1000E
Dallas, Texas 75248
214-991-0059 (DAS)

Alabama
Delaware
District of Columbia
Florida
Georgia
Kentucky
Maryland

1910 Pacific Avenue
Suite 1404

860-291-4500/800-875-7785 ( 0 0 )

Connecticut
Maine
Massachusetts
New Hampshire
New Jersey
New York

Pennsylvania
Puerto Rico
Rhode Island
Vermont
Virgin Islands

Mississippi
North Carolina
South Carolina
Tennessee
Virginia
W est Virginia

Midwest Service C enter

New Mexico
Oklahoma
Texas

Four Park Plaza

Suite 3200
Chicago, Illinois 60661

Arkansas
Colorado
Louisiana

W estern Service C enter

500 West Monroe

Dallas, Texas 75201
214-754 6 1
00/800 568 9161(00)

Irvine, California 92614
714-263-7100 (DAS)
714-263-7600/800-756-3558(00)

312-382-6000 (DAS)
312 - 382-5700/800-944-5343 ( 0 0 )
Illinois
Indiana
Iowa
Kansas
Michigan
Minnesota




Missouri
Nebraska
North Dakota
Ohio
South Dakota
Wisconsin

Alaska
Arizona
California
Hawaii
Idaho
Guam

Montana
Nevada
Oregon
Utah
Washington
Wyoming

DAS: Makes payments to a closed
institution’s depositors and creditors,
and performs other duties related to
failed institutions. Answers questions
about buying assets or tiling claims.
0 0 : A neutral, independent advocate
of fairness in FDIC policies and
programs. Responds to questions or
concerns from the public, the banking
industry and FDIC employees.

Major Speeches and Testimony
by Chairman Heifer
Text o f these and other statements
are available from the Public Information Center
listed on Page 115.

118
Speeches

Congressional Testimony

February 14__________ 1
_______

February 28_________________

May 2________________________

To the Independent Bankers
Association o f America, on the
health o f the banking industry,
projections for the Bank Insurance
Fund (B IF ), and an FDIC
proposal to lower BIF premiums.

Before the House Committee on
Banking and Financial Services,
on legislation that would repeal
Glass-Steagall Act restrictions
on the securities activities o f
comm ercial banks.

March 15

March 8_____________________

Before the Senate Committee
on Banking, Housing and Urban
Affairs’ Subcommittee on
Financial Institutions and
Regulatory Relief, on the FD IC’s
efforts to reduce regulatory
burdens and provisions o f
regulatory reform legislation
that the FDIC supports.

To the Exchequer Club, on the
need for solutions for the Savings
Association Insurance Fund
(SAIF) and the possible migration
o f SAIF-insured deposits to the
BIF.

Before the House Committee on
Banking and Financial Services’
Subcommittee on Financial
Institutions and Consumer
Credit, on the FD IC’s support
for an interagency proposal
to improve enforcement o f the
Community Reinvestment Act.

October 10_________________
To the American Bankers
Association, on the FD IC’s
drive to boost efficiency, cut
costs, reduce staff and retool
the Corporation for the future.

October 51___________________
To Am erica’s Community
Bankers, on steps by the FDIC to
adapt to changes in the financial
services industry, including
efforts to improve cost-efficiencies
and reduce regulatory burdens.




March 25
Before the House Committee on
Banking and Financial Services’
Subcommittee on Financial
Institutions and Consumer
Credit, on the condition o f the
BIF and SAIF.

Jill} 28________________
Before the Senate Committee
on Banking, Housing and Urban
Affairs, on problems facing the
SAIF and FDIC recommendations
to solve those problems.

Index

119

F

A
Administration, Division o f

31

Affordable Housing Program

24

Appeals Process
Applications Processing:
FDIC Applications, 1993-95
Assessments (see Deposit Insurance Premiums)

20

Asset Disposition

19

Failed Institutions:
Failed Banks by State, 1994-95

Federal Deposit Insurance Corporation:
Board o f Directors
Financial Statements
Highlights

B

Organization Chart/Officials

Bank Insurance Fund (B IF):
Financial Statements

Regional Offices
Sources o f Information

2,6

Fund Balance, 1991-95
Highlights
Problem Institutions, 1991-95

5
10,11
7

Reserve Ratios, 1991-95
Risk-Related Premiums

23
25

Liquidation Highlights
(also see Statistical Tables)

24,25

45-61
6

23 -26,29-30

Fiechter, Jonathan L.
First City Bancorporation
FSLIC Resolution Fund (FRF):
Financial Statements

12-13
45-91
4-5
14
116-117
115
13
29
7-8,25-26
77-91

18
G

(also see Statistical Tables)
Budget

31-32

General Accounting Office (GAO)

93-104

H

C
Commercial Banks (Financial Performance):
Annual Return on Assets, 1934-95
Community Reinvestment Act (C R A)
Congressional Testimony
Consumer Protection Activities
Criminal Referrals
Cross-Guaranty Transactions

9-10
9

27, 37, 39
118
27-28
25,31
29, 30

D

Heifer, Ricki
Hove, Andrew (Skip) C., Jr.

2-3,12,17,31
13

I
Insurance, Division o f
Internet
Interstate Banking

3,17
20,28,115
19

L

Daiwa Bank and Trust Company

22

Deposit Insurance Premiums
2,6 -7,8, 38,39
Depositor Protection
23
Director and Officer Liability
(see Professional Liability Recoveries)
29
D’Oench Duhme
Doolin Security Savings Bank, FSB

30

Legislation Enacted in 1995
Litigation
Ludwig, Eugene A.

42
29-30
13

M

Enforcement Actions:
Compliance, Enforcement and
Other Legal Actions, 1993-95
Examinations:
FDIC Examinations, 1993-95



22
21
3,17-18,20-22
17

29

M eritor Savings Bank

E

Meriden Trust

30

120

N

S (continued)

Neely, Joseph H.

13,21,31

O
Ombudsman, Office o f the

Statistical Tables:
Number and Deposits o f Banks Closed,
1934-95
Recoveries and Losses by the BIF on
Disbursements to Protect Depositors,
1934-95
Income and Expenses,
BIF, 1933-95
Insured Deposits and the BIF,
1934-95

20,115

P
Policy Development, Office of

31

Problem Institutions
Professional Liability Recoveries

10,11
25

107

108
109
110

R

BIF-Insured Banks Closed
During 1995

111

Regulations Adopted and Proposed

Income and Expenses, SAIF,
1989-95

111

37-41

Regulatory R elief
Reorganization
Resolution Trust Corporation (RTC )
Risk Assessment

3,21-22
31
8,23,24,26,33
2.,3,17-20

S

Insured Deposits and the SAIF,
1989-95
Strategic Plan
Supervision

111
2-3,31
2--3,17-22

T

Savings Association Insurance Fund (SAIF):
Financial Statements

2,7
63-76
6
5
10,11
7
18

Fund Balance
Highlights
Problem Institutions, 1991-95
Reserve Ratios
Risk-Related Premiums
(also see Statistical Tables)
Saving Institutions (Financial Performance) : 10,11
9
Annual Return on Assets, 1947-95
Speeches
118
Staffing:
2,31-33
Num ber o f FDIC Officials
and Employees, 1994-95




32

Truth in Lending

27,42




Published by:

T h e O ffice o f C orporate
Com m unications
R ob ert M. Garsson, Jr.
Director___________________

Elizabeth R. Ford
Assistant Director_________

Jay Roscnstein
Senior Writer-Editor______

David Barr
Associate Editor___________

M a rjorie C. Bradshaw
Sally J. Kearney
Contributing Editors

FDIC Annual Report
1995

Design, Production
and Printing by:

Th e D ivision o f Adm inistration
Design Unit
GeofTrey L. Wade
Coordinator

Sam C ollicchio
Art Director/Designer

Design and Production
o f the Financial Statements by:

Th e D ivision o f Finance
Financial Statements Section
Scott D. M iller
Senior Financial Management Analyst

Federal Deposit Insurance Corporation
550 17th Street, N W
W ashington, DC 20429-9990