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A n n u a l R eport 2000 S a f e g u a r d i n g F ed era l D e p o sit I n s ii ran ee C o r p o r a l ion A m e r i c a ' s F u t u r e The Federal D ep osit In suran ce C orporation (FDIC) is the independent de po sit insurance agency created by Congress to m aintain s ta b ility and public confidence in th e nation's banking system. In its unique role as deposit insurer of banks and savings associations, and in cooperation w ith the oth e r federal and state regulatory agencies, the FDIC prom otes the safety and soundness o f insured depository institutions and the U.S. financial system by id en tifyin g, m onitoring and addressing risks to th e deposit insurance funds. The FDIC prom otes public understanding and sound public policies by providing fin a n cia l and econom ic inform ation and analyses. It m inim izes disruptive effects from the fa ilu re o f banks and savings associations. It assures fairness in the sale o f fin a n cia l products and the provision of finan cial services. The FDIC's long and continuing tra d itio n of public service is supported and sustained by a highly skilled and dive rse w o rk fo rc e th a t responds ra p id ly and successfully to changes in the fin a n cia l environm ent. Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation Washington, DC 20429-9990 _______ Office of the Chairman May 31, 2001 Sirs, | ' g 11 In accordance w ith the provisions of section 17 (a) of the Federal Deposit Insurance Act, the Federal Deposit Insurance Corporation is pleased to subm it its Annual Report fo r the calendar year 2000. l®S9te Sincerely, Donna Tanoue C h airm an T a b l e of C o n t e n t s • C h airm an 's S ta te m e n t 2 • Board o f D irecto rs 4 • 2 0 0 0 -T h e Year of D e p o sit Insurance 8 • O p e ra tio n s of th e C o rp o ra tio n -T h e Year in R e view Overview of the Industry and the Deposit Insurance Funds Responding to Emerging Risks 16 Technology 18 Gramm-Leach-Bliley Act 19 Diversity Initiatives • 14 20 F inancial S ta te m e n ts Bank Insurance Fund (BIF) 25 Savings Association Insurance Fund (SAIF) 45 FSLIC Resolution Fund (FRF) 63 • K ey S ta tis tic s • Resources 89 Organization C hart/O fficials Corporate Staffing 103 Sources of Information 104 Regional Offices • 102 105 Index 106 FDIC Chairm an Donna Tanoue In good tim es and in bad tim es, the public can depend on federal deposit insurance. The men and w om en of the Federal Deposit Insurance Corporation know that our mission is safeguarding America's future. The seal on the door of every FDICinsured institution represents our pledge that federal deposit insurance is one certainty in an uncertain world. Deposit insurance has served America w ell. In 1999, the FDIC began a comprehensive review of the deposit insurance system to make sure that it continues to serve America w e lland to explore w ays that it m ight be strengthened. For more than a year, w e have analyzed the system 's weaknesses and how to address them . This Annual Report begins w ith an essay discussing the results of that analysis and our recom m en dations for change, w hich w e issued in April 2001. These recom mendations address a number of unintentional flaw s in the current system . For example, the w ay w e price insur ance now has a potential procyclical bias that could undermine economic and financial stability. W e recommend changing the way w e charge for insur ance, not to raise revenue, but to allocate costs more evenly over time, and more fairly among institutions, based on risk and expected loss. Bank failures are likely to come in waves, along w ith serious downturns in the economy. Under our present system, however, banks are likely to be faced w ith steep increases in deposit insurance prem ium s in an economic dow nturn when their earnings are already depressed. Such prem ium s w ould divert billions of dollars out of the banking system and w ould raise the cost of gathering deposits at a tim e when credit w ould already be tight. This, in turn, could cause a further cutback in credit, resulting in a further slow dow n of econom ic activity at precisely the w rong tim e in the business cycle. By contrast, when the econom y and the banking system are strong, as at the present tim e, m ost banks are paying no prem ium s at all. This anomaly results from existing legal restrictions on insurance prem i ums tied to the size of the deposit insurance fund. Currently, the FDIC is required to maintain its deposit insurance fund at a statutorily desig nated reserve ratio of 1.25 percent of estim ated insured deposits. W hen the fund is at or above this ratio, the FDIC is constrained from charging prem ium s to m ost highly rated, well-capitalized institutions. Currently, over 90 percent of the institutions pay no prem ium s fo r deposit insurance. But w hen the fund is below 1.25 per cent, the law requires prem ium s to be increased sharply unless the fund w ould otherw ise be restored to the 1.25 percent level w ithin one year. Therefore, w e are recom m ending that the FDIC have greater flexibility in charging prem ium s over the business cycle to sm ooth prem ium sw ings over tim e. In order not to distort incentives, these prem ium s should be priced as accurately as possible to re fle ct expected loss, and should not be dependent on the size of the fund. To avoid enormous grow th of the deposit insurance fund during long stretches of good years, it may be prudent to give rebates to insured institutions. Because basing rebates on current deposit levels w ould exacerbate moral hazardthe faster you grow, the larger the re b a te -w e are also recom mending that rebates be based on the past contributions of insured institutions to the fund. The net e ffe ct o f these recom m en dations is that there w ould be billions of additional dollars available to the banking industry to help fuel economic grow th at the trough of the business cycle, and insurance premiums would more closely reflect risk, ending subsidization of riskier institutions by safer ones. Our recommendations could not come at a better tim e, positioned as w e are between a past of unprecedented prosperity and an uncertain future. The past decade of econom ic expan sion has contributed to a strong, well-capitalized banking industry. Both the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF) are fully capitalized. The numbers of troubled institutions and of bank failures are very low by his torical standards. Experience teaches, however, that good tim es do not last forever. A n d -a s the year 2000 drew to a clo se -sig n s of stress in the economy w ere emerging, casting doubt on the ability of banks to sustain recent grow th rates in the face of softening loan demand. When bad tim es return, more banks w ill fail. If banks fail in greater numbers, the BIF and the SAIF w ill decline. Our recom m endations fo r deposit insurance reform w ill elim inate inequities, making the deposit insurance system stronger and fairer. By providing certainty and stability in the future, they w ill ensure that the system w ill continue to serve the American public well. To enjoy these benefits, however, w e need to reform the deposit insurance system w hile the industry is strong and the overw helm ing majority of institutions remain healthy. W e have a good opportunity to act now. No one can say how long that opportunity w ill remain open. As the C om m issioner fo r Financial Institutions fo r the State of Hawaii, I saw runs on financial institutions. I w itnessed how fragile public confi dence can be w ith o u t the certainty that federal deposit insurance brings. A fte r nearly three years as FDIC Chairman, now more than ever I am convinced o f the importance of federal deposit insurance and the need fo r the Corporation to advocate the recom m endations w e have proposed. For me personally, it continues to be a great honor and privilege to serve the public as FDIC Chairman, and to w ork shoulder to shoulder w ith the men and w om en of the FDIC. Aside from developing the m ost far reaching proposals fo r deposit insurance reform since our founding, w e w orked to g e th e r in 2000 to address the risks of subprime lending by banks. W e initiated im portant proposals to address the problems of predatory and payday lending. We called fo r an early reexamination of the Community Reinvestment Act. And w e advanced the public debate on the need for greater sim plicity in bank capital regulation-all this in addition to sounding the appropriate safety and soundness alarms. The Annual Reports of many organi zations include a recognition of how the success of the organization rests on the hard w o rk and dedication of its employees, but in no case is that truer than in our own. M any things set the FDIC apart, but nothing stands out more than the c o m m it m ent of our men and w om en to the Corporation's mission and their per form ance in accomplishing it, many tim es under harsh conditions. Time and tim e again duty calls. Every tim e it does, the men and w om en of the Corporation answer. In my years as FDIC Chairman, nothing brought greater pleasure and satisfaction than working w ith my colleagues on the Board and throughout the C orporation-and w ith so many leaders of the financial services industry. I feel privileged and honored to have had that opportunity. I also w a n t to thank A ndrew "S kip" Hove, Jr., for the many years he gave to public service as Vice Chairman of the FDIC from 1990 until his retirem ent in January, 2001. During those years, Skip served as Acting Chairman three tim es and he ably guided the Corporation through some of the more difficu lt tim es it has faced. I salute Skip for all he has done on behalf of the FDIC and the American people. In addition, I w ant to w ish John Reich, FDIC Director, and Don Powell, the nominee for FDIC Chairman, all the best as they take the re in s-a n d the fu tu re of the Corporation into their hands. There is no better place to serve America. O onna Tanoue Chairman May, 2001 Board of Directors 4 FDIC Board of Directors: Donna Tanoue (seated), John D. Hawke, Jr., Ellen Seidman, Andrew C. Hove, Jr. (standing left to right) A n d re w C. H o ve, Jr. Mr. Hove w as appointed to his second term as Vice Chairman of the FDIC in 1994. His first term as Vice Chairman began in 1990. Since 1991, Mr. Hove has served as Acting Chairman of the FDIC three tim es, m ost recently from June 1, 1997, w hen Chairman Ricki Heifer resigned, to May 26, 1998, w hen Donna Tanoue w as sw orn in as the 17th Chairman. Before joining the FDIC, Mr. Hove w as Chairman and Chief Executive O fficer of the Minden Exchange Bank & Trust Company, Minden, Nebraska, w here he served in every departm ent during his 30 years w ith the bank. D o n na Tanoue Donna Tanoue took office as the 17th Chairman of the Federal Deposit Insurance Corporation on May 26, 1998. Chairman Tanoue has led the FDIC on the m ost significant reevaluation of its mission since the agency was created in 1933: reforming deposit insurance to make the system fairer, m ore effective and more secure. She has also focused the attention of the C orporation-and the p u b lic on emerging risks in the financial institutions industry and has initiated effective safeguards to assure safety and soundness in a w ide range of banking activities, from subprime lending to on-line banking. In addition, she has advanced proposals to protect consumers from predatory lending and address problems in payday lending. Before she became FDIC Chairman, Ms. Tanoue w as a partner in the Flawaii law firm of Goodsill Anderson Quinn & Stifel, w hich she joined in 1987. She specialized in banking, real estate finance, and governm ent affairs. From 1983 to 1987, Ms. Tanoue was C om m issioner fo r Financial Institutions for the State of Hawaii. In that post, she was the primary state regulator fo r state-chartered banks, savings and loan associations, tru st companies, industrial loan companies, credit unions, and escrow depository companies. She also served as Special Deputy A ttorney General to the D epartm ent of C om m erce and Consumer Affairs for the State of Hawaii from 1981 to 1983. Ms. Tanoue received a J.D. from G eorgetown University Law Center in 1981 and a B.A. from the University of Hawaii in 1977. Also involved in local governm ent, Mr. Hove was Mayor of Minden from 1974 until 1982 and was Minden's Treasurer from 1962 until 1974. O ther civic activities included serving as President of the M inden Chamber of Commerce, President o f the South Platte United Chambers of Commerce and positions associated w ith the University of Nebraska. Mr. Hove also was active in the Nebraska Bankers Association and the American Bankers Association. Mr. Hove earned his B.S. degree at the U niversity of Nebraska-Lincoln. He also is a graduate of the University of W isconsin-M adison Graduate School of Banking. A fte r serving as a U.S. naval officer and naval aviator from 1956 to 1960, Mr. Hove was in the Nebraska National Guard until 1963. Ellen S eid m a n Jo h n D. H a w k e , Jr. Ms. Seidman became Director of the Office of Thrift Supervision (OTS) on October 28, 1997. As OTS Director, Ms. Seidman is also an FDIC Board member. Mr. Hawke was sworn in as the 28th Com ptroller of the Currency on December 8, 1998. A fte r serving 10 m onths under a recess appointment, he was sw orn in fo r a full five-year term on O ctober 13, 1999. As Comptroller, Mr. Hawke serves as an FDIC Board member. Ms. Seidman joined the OTS from the W hite House, w here from 1993 to 1997 she was Special Assistant to President Clinton for economic policy at the W hite House National Economic Council. She chaired the interagency working group on pen sions and dealt w ith such issues as financial institutions, natural disaster insurance, bankruptcy and home ownership. From 1987 to 1993, Ms. Seidman served in various positions at Fannie Mae, ending her career there as Senior Vice President for Regulation, Research and Economics. Other prior positions include Special Assistant to the Treasury Under Secretary for Finance from 1986 to 1987, and Deputy Assistant General Counsel at the Departm ent of Transportation from 1979 to 1981. Ms. Seidman also practiced law for three years beginning in 1975 w ith Caplin & Drysdale, a W ashington, DC, law firm specializing in tax, securities and bankruptcy issues. Ms. Seidman received an A.B. degree in governm ent from Radcliffe College, an M.B.A. from George Washington U niversity and a J.D. from George to w n University Law Center. Prior to his appointm ent as Com p troller, Mr. Hawke served for three and a half years as Under Secretary of the Treasury for Domestic Finance. He oversaw the developm ent of policy and legislation in the financial institutions, debt management and capital markets areas, and served as Chairman o f the Advanced C ounterfeit Deterrence Steering C om m ittee and as a m em ber of the board of the Securities Investor Protection Corporation. Before Treasury, Mr. Hawke was a senior partner at the W ashington, DC, law firm of Arnold & Porter, w hich he first joined as an associate in 1962. W hile there, he headed the financial institutions practice, and from 1987 to 1995, served as the firm 's Chair man. In 1975, he left the firm to serve as General Counsel to the Board of Governors of the Federal Reserve System, returning in 1978. Mr. Hawke graduated from Yale U niversity in 1954 w ith a B.A. in English. From 1955 to 1957, he served on active duty w ith the U.S. Air Force. A fte r graduating in 1960 from Columbia University School of Law, w here he was Editor-in-Chief of the Columbia Law Review, Mr. Hawke was a law clerk for Judge E. Barrett Prettyman on the U.S. Court of Appeals fo r the District of Columbia Circuit. From 1961 to 1962, he served as counsel to the Select Subcom m ittee on Education in the House of Representatives. From 1970 to 1987, Mr. Hawke taught courses on federal regulation of banking at Georgetown University Law Center. He has also taught courses on bank acquisitions and financial regulation, and serves as the Chairman of the Board of Advisors of the Morin Center for Banking Law Studies in Boston. Mr. Hawke has w ritte n extensively on matters relating to the regulation of financial institutions, and is the author of "C om m entaries on Banking R egulation," published in 1985. He was a founding m em ber of the Shadow Financial Regulatory C om m ittee, and served on the com m ittee until joining Treasury in April 1995. Vice Chairman Hove retired from the FDIC in January 2001. John Reich, a form er banker and C hief o f S ta ff for form er U.S. Senator Connie Mack, was sw o rn in as an FDIC Board m e m b e r later that m onth. 2000 The Year - of Deposit Insurance 2000I lie Year o f Deposit Insurance Work begun in 2000 to study deposit insurance reforms led to final recommendations announced at an April 5, 2001, press conference by Chairman Tanoue. During the year 2000, the FDIC undertook a major study of its deposit insurance system . The decision to conduct the study was not made in an atm osphere of crisis. The U.S. econom y was beginning its tenth year of expansion and running at full throttle. Bank capital and earnings w ere at record levels. The FDIC insurance funds began the year at a combined $40 billion. The FDIC's guarantee o f the safety of insured deposits w a s -a n d is-ironclad. So w hy the need fo r a study? The answ er is that w hile the FDIC has adequate revenues to discharge its responsibilities, the w ay it is required to collect those revenues does not prom ote macroeconom ic stability, fairness or appropriate economic incentives. The FDIC's goal during the year 2000 was not, however, m erely to critique specific aspects of the law governing its operations, but to o ffer a concrete and construc tive fram ew ork fo r change. T h e Issues Insurance reform w ould require legislative changes, and one core recom mendation from the FDIC to Congress is to resume operating one insurance fund by merging the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). The tw o funds provide an identical insurance product, each provides that product to both banks and thrifts, and they provide it in some cases to the same institution. Because BIF and SAIF prem ium s m ust be set separately-and in a way that is rigidly tied to the level of each insurance fu n d -in s titu tio n s w ith similar risk characteristics can pay different pre m iums. It w ould be entirely possible fo r one institution to be paying 23 basis points for deposit insurance w hile a com petitor across the street that posed similar risk to its insurance fund was paying nothing. Moreover, some institutions have both BIF and SAIF deposits and m ust track them separately, in order to know w hich deposits w ould pay prem ium s at w h a t rate. Also, existing law restricts the FDIC's ability either to sm ooth insurance costs over tim e or allocate those costs fairly among insured institu tions based on the risks they pose. To understand this constraint, one m ust go back to the roots of the FDIC's assessm ent system in the Federal Deposit Insurance Corporation Im provem ent A ct of 1991 (FDICIA). FDICIA required the FDIC to imple m ent a risk-based insurance system. It also required the FDIC to maintain funds at a designated reserve ratio (DRR), the ratio of required reserves to insured deposits, of 1.25 percent. W hen a fund's reserve ra tio -th e ratio of a fund's balance to the deposits it in su re s-fa lls below the DRR, the FDIC m ust either raise prem ium s by enough to bring the reserve ratio back to the DRR w ithin a year or charge at least 23 cents per $100 of deposits (23 basis points) until the reserve ratio meets the DRR. This requirem ent w orks against the loss-smoothing that is normally a feature of insurance. The philosophy underlying the requirem ent w ould seem to be that banks should pay fo r banking crises w hen they o c c u rnot before and not after. The difficulty w ith this is that during a period of heightened insurance losses, both the econom y and banks in general are likely to be in a distressed condi tion. A 23 basis point prem ium at such a point in the banking cycle is likely to be a significant drain on bank net income, thereby retarding bank lending and econom ic recovery. R isk -R e la ted Prem ium s Conversely, w hen the fund exceeds the DRR, the pendulum sw ings the other way, and the FDIC is prohibited from charging any deposit insurance prem ium s to m ost banks. Under a provision of the Deposit Insurance Funds A ct of 1996, well-capitalized institutions w ith the tw o strongest examination ratings (1 or 2 on a 5 point scale), a group that comprised about 92 percent of all insured institutions at year-end 2000, are generally exem pt from paying pre m ium s w hen the fund exceeds the DRR. The FDIC's inability to price risk w hen the fund exceeds the DRR presents a number of issues. Insurers generally price their product to reflect their risk of loss. The FDIC's inability to do this encourages new deposits to enter the system and enjoy the benefits of deposit insur ance w ith o u t shouldering any of the costs. Since very little in prem ium s has been collected since 1996, the deposit insurance system is almost entirely financed by those institu tions that paid prem ium s in the past. There are currently over 900 new ly chartered institutions that have never paid prem iums. There are, moreover, significant and identifiable differences in risk exposure among the 92 per cent of insured institutions now in the same risk group, and the current system in e ffect forces the safer banks in the group to subsidize the riskier ones. Finally, some bankers may take risks they w ould have avoided if the insurance had been appropriately priced. The follow ing tables show the number and percentage of institutions insured by the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF), according to risk classifications effective fo r the first semiannual assessment period of 2001. Each institution is categorized based on its capitalization and a supervisory subgroup rating (A, B, or C), w hich is generally determined by on-site examinations. Assessment rates are basis points, cents per S100 of assessable deposits, per year. BIF Supervisory Subgroups* ________ c A B 0 7,965 (92.7%) 3 383 (4.5%) 17 55 (0.6%) 3 157(1.8% ) 10 15(0.2% ) 24 7(0.1% ) 10 3 (0.0%) 24 2 (0.0%) 27 4 (0.0%) 0 1,184 (88.8%) 3 102 (7.7%) 17 15(1.1% ) 3 15(1.1% ) 10 10(0.8% ) 24 4 (0.3%) 10 1 (0.1%) 24 0 (0.0%) 27 2 (0.2%) W ell Capitalized: Assessment Rate Number of Institutions Adequately Capitalized: Assessment Rate Number of Institutions Undercapitalized: Assessment Rate Number of Institutions SAIF Supervisory Subgroups* W ell Capitalized: Assessment Rate Number of Institutions Adequately Capitalized: Assessment Rate Number of Institutions Undercapitalized: Assessment Rate Number of Institutions * BIF data exclude SAIF-member "Oakar" institutions that hold BIF-insured deposits. The assessment rate reflects the rate for BIF-assessable deposits, which remained the same throughout 2000. * SAIF data exclude BIF-member "Oakar" institutions that hold SAIF-insured deposits. The assessment rate reflects the rate for SAIF-assessable deposits, which remained the same throughout 2000. During the year 2000, financial insti tutions outside the realm of traditional banking began to make more use of FDIC-insured deposits in their product mix. A fe w major investment banks began or announced plans to begin sw eeping large dollar volumes of brokerage accounts into deposits in their insured subsidiaries. This is, of course, another example o f the continuing erosion of barriers between com m ercial banking and investm ent banking. Nevertheless, these institu tions paid no insurance prem ium s and, by lowering the fund's reserve ratio, increased the likelihood that other banks w ould face higher pre mium s in the fu tu re -a n d this high lighted some of the anomalies of the current system . There also was spirited discussion among policymakers during the year 2000 of the appropriate level of deposit insurance coverage. One of the purposes of deposit insurance is to provide unsophisticated investors w ith a safe place to invest w ith o u t the burden of m onitoring their banks. Over tim e, inflation eats away at the value of deposit insurance. The question, then, was w hether the $100,000 coverage limit, w hich had remained in place since 1980, ought to be changed. The debate was couched in fam iliar term s. Those w h o argued against higher coverage emphasized the potential for moral hazard, the danger that large increases in coverage can encourage some bankers to exploit the ability to gather insured deposits and deploy them to finance risky activities. On the other hand, there w ere those w h o asked w hether the erosion of coverage should be allowed to continue indefinitely: in constant dollars, the coverage lim it at year-end 2000 was alm ost 30 per cent below its 1974 level. Both of these concerns are legitimate, but the debate highlighted one fact that w as indisputable. Unlike other feder al programs that are indexed, such as Social Security, Medicare and taxes, deposit insurance levels are determ ined at unpredictable intervals by the outcom e of such a debate. The recommendations that ultimately resulted from this process w ere as follow s: • The BIF and the SAIF should be merged. • The current statutory restrictions on the FDIC's ability to charge risk-based prem ium s to all institu tions should be eliminated: the FDIC should charge regular prem i ums fo r risk regardless of the level of the fund. • Sharp prem ium sw ings triggered by deviations from the DRR should be eliminated. If the fund falls below a target level, premiums should increase gradually. If it grow s above a target level, funds should be rebated gradually. • Rebates should be based on past contributions to the fund, not the current assessm ent base. • The coverage lim it should be indexed to keep pace w ith inflation. T h e FDIC's R e c o m m e n d a tio n s The FDIC devoted considerable tim e and e ffo rt during the year to analyz ing these issues. In April the agency conducted a roundtable discussion w ith the leadership of the major banking trade associations, several consumer organizations and interested individuals. In M ay and June, Chairman Tanoue, Vice Chairman Flove and senior management of the FDIC held outreach meetings w ith bank chief executive officers in Minneapolis, Dallas and Kansas City. In August 2000, the agency published a comprehensive options paper that discussed various approaches to deposit insurance pricing, funding and coverage that m ight replace the current approaches. A fte r the release of the options paper, staff devoted extensive e ffo rts to narrowing and refining the possible approaches to produce a workable package of recom mendations. There w ere numerous meetings w ith bankers, trade groups, academ ics, outside experts, Capitol Hill and other interested parties along the way. The FDIC had been advocating a merger of the tw o insurance funds fo r som e tim e. The resulting $42 bil lion fund (based on year-end 2000 financial results) w ould be stronger than either fund w ould be on its ow n. A m erger is the only w ay to eliminate the possibility of prem ium disparities betw een the deposits of the tw o funds and the attendant com petitive inequalities. Similarly, the FDIC had been sug gesting fo r som e tim e that it needs expanded discretion to price risk. If deposit insurance premiums continue to be fixed at zero fo r m ost banks m ost of the tim e, our deposit insur ance system w ill continue to suffer from the deficiencies described earlier: premiums will rise dramatically during periods of economic adversity because the FDIC w ill be forced to charge banks for m ost o f the losses all at once; new deposits w ill impose risks and costs on other banks w ith out sharing in any of the costs of operating the system ; the safer banks in the system w ill subsidize the riskier ones; and the moral hazard problems caused by mispriced deposit insurance w ill be magnified. In recommending steady risk charges over tim e, the FDIC recognized the analytical challenges involved in im plem enting them . Staff spent considerable tim e after the release of the options paper developing a scoring model for insured institutions analogous to those used in the private sector fo r evaluating borrowers' creditw orthiness. The results w ere promising. Collecting prem ium s from all banks regardless o f the level of the fund creates the possibility that the fund w ill g ro w very large. A t w ha t point the fund becom es too large is an im portant policy question. An insur ance fund allows the FDIC to act quickly to resolve banking problems when needed, facilitates paying for bank failures over tim e rather than all at once, and buffers the taxpayer W.W.Reid Chairman Tanoue and Vice Chairman Hove, along w ith senior officials Arthur J. Murton (left) and W illiam R. Watson (right), lead a pane! of industry experts in a discussion of key deposit insurance issues at an FDIC-sponsored roundtable in Washington on April 25.2000. against loss. Determ ining an appro priate range fo r the insurance fund involves a tradeoff, because there is a cost that m ust be w eighed against these benefits, namely, dollars in the fund could have been used to support bank lending. In coming to its recom mendations, the FDIC recognized that this policy tradeoff m ust be confronted and that, one w ay or another, the size of the fund has to be managed. The current system manages the size o f the fund by eliminating deposit insurance prem ium s fo r m ost banks w hen the fund is above the DRR, and adjusting them upward abruptly w hen the fund is below the DRR. The FDIC concluded that a better w ay to manage the size of the fu n d one that m itigates prem ium volatility and preserves risk-based pricing — w ould be to increase prem ium s gradually rather than abruptly w hen the fund is below a target, and to provide gradually increasing rebates w hen the fund is above a target. The rebate system advocated by the FDIC would be a significant departure from past practice. The reason the FDIC recom m ended a rebate system bears re-emphasizing: rebates could allow the FDIC to price risk at indi vidual institutions regardless of the level of the fund. Under the scheme the FDIC has operated under since 1933, apart from increases in cover age the only w ay to slow the grow th of the reserve ratio has been to reduce deposit insurance prem iums. W ith a rebate system in place to provide a self-correcting mechanism to control the grow th o f the fund, risk-based prem ium s could be assessed on all institutions regard less of the level of the fund. This argum ent in favor of a rebate system presum es that the rebates w ould not them selves distort eco nom ic incentives or create new moral hazard problems. To put the m atter another way, the FDIC should not pay banks sim ply to exist, nor should it pay them to grow. This reasoning led the FDIC to conclude that a bank's rebate should depend on w ha t it has paid into the fund in the past, and not on its current assessm ent base. As noted earlier, developments during the year 2000 highlighted the concern raised by rapidly grow ing institutions that dilute the fund's reserve ratio and pay nothing for deposit insur ance. A t this point it is possible to summarize how the FDIC's recom mendations w ould address this issue. First, under the assessm ent system the FDIC recom mends, a decrease in the reserve ratio w ould have, at most, a gradual e ffe ct on banks' net payments to the FDIC. This means the effect of new deposit grow th on other insured institutions w ould be substantially diminished. Second, regular risk-based prem iums for all banks w ould mean that fast grow ing institutions w ould pay increasingly larger prem ium s as they gathered deposits. In addition, fast grow th, if it posed greater risk, could result in additional premiums through the operation of the FDIC's expanded discretion to price risk. Finally, w ith rebates based upon past contributions, w hen the FDIC is paying rebates, those rebates w ould be paid in relatively smaller amounts to fast grow ers and in relatively greater am ounts to established institutions or slow er growers. Over tim e, as all institutions paid assess m ents (and as rebates w ere made based upon past assessments), new institutions and fast grow ers w ould build their "rebate shares." The recom mendation to index cover age to inflation was based on a pre sum ption that if deposit insurance is an im portant part of the federal governm ent's overall program to ensure financial stability, then its relative importance ought to be maintained in a predictable manner. The FDIC view ed the recom m enda tions that resulted from the w ork done in the year 2000 as a package, arguing against picking and choosing some parts of the fram ew ork but not others. For example, raising cover age w ith no change to the pricing system w ould exacerbate the distor tion of incentives that already exists. Paying rebates w ith o u t changing pricing would, again, not address the problems that come from a lack of prem ium s when the fund exceeds the DRR, and w ould increase the need to raise premiums in bad times. And a poorly designed rebate system could negate the benefits o f any deposit insurance pricing system , and make incentive problems much w orse than they are now. For exam ple, giving rebates proportional to a bank's deposits could mean the FDIC in e ffe ct w ould pay a bank to exist, and pay it m ore to grow. Conclusion The FDIC has protected depositors and prom oted the safety and sound ness of insured depository institutions fo r over 65 years. The year 2000 marked the end of a decade that saw both a banking crisis and an economic b o o m -a n d a decade that saw major legislative changes to the FDIC's assessm ent system . The year 2000 was, in short, a good year for taking stock. The FDIC believes that the recom m endations fo r depositinsurance reform developed during the year w ill provide a sound basis fo r helping the agency achieve its mission, m ore efficiently and more fairly, fo r years to come. O p e r a t i o n s of t he C o r p o r a t i o n The Ye a r in R e v i e w FDIC participants in the "Seminar on Establishing a Deposit Insurance System" in Basel, Switzerland, were: (I to r) James McFadyen, Christie Sciacca, George Hanc, Rose Kushmeider, Oetta Voesar, Claude Rollin. Stanley Ivie and Christine Blair. O v e rv ie w of th e In d u stry an d th e D e p o sit Insuran ce Funds During 2000, insured commercial banks and savings institutions reported a slight decline in earnings perform ance from the record levels of 1999, higher levels of provision expenses, and an increase in loan losses from comm ercial and industrial borrowers. The year 2000 may w ell be rem em bered as a w atershed in the history of the FDIC. The Corporation under took a comprehensive review of the deposit insurance system w ith an eye tow ard addressing its weaknesses. As part of that effort, the Corporation com m issioned a national household survey, conducted by the Gallup Organization, to measure public understanding o f-a n d support fo r the deposit insurance program. Also, the FDIC sponsored global efforts to establish or improve deposit insur ance system s. In May, fo r example, the Corporation and the Financial Stability Institute co-hosted a seminar on these issues in Basel, Switzerland a seminar that drew approximately 150 people w ho represented more than 60 countries. And in June the Corporation hosted a meeting in W ashington, DC, o f th e Financial Stability Forum's (FSF) Working Group on Deposit Insurance. The FSF was created in 1999 by the finance m inisters and other officials of the G-7 industrial nations as a w ay to promote international financial stability through inform ation exchange and international cooperation. In addition to deposit insurance, the year 2000 m ight be considered a watershed in other ways. Concerns began to grow about the condition of the industry, w hich had experienced unprecedented profitability during the 1990s. And, though industry conditions did not significantly affect the deposit insurance funds, the Corporation in 2000 undertook several safety and soundness initiatives to address emerging risks. It also devel oped contingency plans for the failure of a very large institution, or an institution th a t operates on the Internet. It addressed the effects of evolving technology, both internally and externally. The Corporation invested in its employees through its diversity program. A n d -w o rk in g w ith other bank re g u la to rs -it dealt w ith many of the demands of the landmark financial modernization legislation enacted in 1999, the Gramm-Leach-Bliley Act. In summary, the FDIC spent the year 2000 respond ing to changes in the industry it insures and supervises, and in doing so prepared itself for the new financial w orld technology continues to create. Commercial banks' eight consecutive years of record earnings came to an end in 2000, as net income of $71.2 billion fell $380 million (0.5 percent) short of 1999's record total. The industry's earnings decline was m ostly attributable to problems at a fe w large banks. The average return on assets (ROA) of 1.19 percent was dow n from the record 1.31 percent registered in 1999. Even so, 2000 marks the eighth consecutive year that the industry had an ROA above one percent. The industry's net interest margin of 3.95 percent was the low est level since 1990. In 2000, securities sales produced net losses and provision expenses rose sharply w ith loan-loss provisions totaling $29.3 billion, an increase of $7.4 billion (34.1 percent) over 1999. Noninterest income grow th was sluggish in 2000; however, this w as aided by slo w e r g ro w th in noninterest expenses. From 1999 to 2000, the annualized net charge-off rate on commercial and industrial (C&l) loans rose to 1.15 percent, from 0.79 per cent a year ago. Noncurrent loans during 2000 increased by $9.9 billion (30.0 percent), w ith C&l loans account ing fo r $6.1 billion (61.4 percent) of the increase. ^ S e le c te d S ta tis tic s J Insured savings institutions earned $10.7 billion in 2000, dow n $126 mil lion from the record earnings of 1999. This was the third year in a row that industry earnings w ere over $10 billion. The average ROA was 0.92 percent, down from 1.00 per cent in 1999. Increased noninterest expenses negated improvem ents in noninterest income, w hile an inverted yield curve continued to put dow nward pressure on th rifts ' net interest margins. Net chargeoffs, at 0.20 percent o f loans, w ere $349 million (29 percent) higher than in 1999, but provisions for loan losses exceeded these charges by over 30 percent in both years. D o l l a r s Deposit insurance assessm ent rates remained unchanged from 1999 for both the BIF and the SAIF, ranging from 0 to 27 cents annually per $100 of assessable deposits. Under the assessm ent rate schedule, 92.7 per cent of BIF-member institutions and 88.8 percent of SAIF-member institutions w ere in the low est riskassessm ent rate category and paid no deposit insurance assessments fo r the first semiannual period of 2001. ■ m i l l i o n s H : For the year ended December 31 2000 1999 1998 Bank Insurance Fund I Financial Results M Revenue 1 Operating Expenses I Insurance Losses and Expenses N et Income 1 Comprehensive Incom e T 1 Insurance Fund Balance H Fund as a Percentage of Insured Deposits 1j J 1 I I The FDIC administers tw o deposit insurance fu n d s -th e Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF)-and manages the FSLIC Resolution Fund (FRF), which fulfills the obligations of the form er Federal Savings and Loan Insurance Corporation (FSLIC) and the fo rm e r Resolution Trust Corporation (RTC). The following summarizes the condition of insured institutions and the FDIC's insurance funds. in i ■ | 1 $ 1,906 1,816 $ 773 (128) 1,192 1,261 1,561 (6 ) 1,309 ( 198) $ 29,414 1,319 $ 29,612 ! 1.36 % 1.35% 2,000 698 (106) $ 30,975 1.38 % Selected Statistics Total BIF-M em ber Institutions Problem Institutions Total Assets of Problem Institutions $ Institution Failures Total Assets of Current Year Failed Institutions s Number of Active Failed Institution Receiverships 8,572 8,834 74 66 11,000 68 4,000 7 1,424 $ 6 378 9,031 $ $ 5,000 $ 370 3 101 51 ; 219 ■ Savings Association Insurance Fund Financial Results Revenue Operating Expenses Insurance Losses and Expenses Net Income Comprehensive Incom e* Insurance Fund Balance Fund as a Percentage of Insured Deposits 1 $ 664 601 $ $ 584 111 85 189 31 32 364 477 467 478 $ 93 441 10,759 1.43% 472 $ 10,281 1.45 % $ 9,840 1.39 % __________________________________ I Selected Statistics Total SAIF-M em ber Institutio n s" Problem Institutions Total Assets of Problem Institutions Institution Failures Total Assets of Current Year Failed Institutions N um ber o f A ctive Failed In s titu tio n Receiverships ■ ■ 1,333 s 30 $ 6,000 1 63 $ 3 3 1 s T Comprehensive Income is added to conform w ith SFAS No. 130, "Comprehensive Income.” • ■ Commercial banks and savings institutions. Does not include U.S. branches of foreign banks. Savings institutions and commercial banks. H 13 13,000 ■ 1,387 20 1 I 1 $ 730 IM 1,430 16 $ 6,000 $ 0 o 2 I • - ■ -v' - >' 'r ■ -/• Research by FDIC s ta ff, inclu d ing i! to r| s e n io r fin a n c ia l a nalyst Thom as M urray, senior a n a ly s t C harles C o llie r and e c o n o m is t D anie l N u xo ll. id e n tifie s p o te n tia l risks to banks and c itie s fro m c o m m e rc ia l re a l e s ta te d e v e lo p m e n t Despite the relatively rapid grow th of insured deposits, insured institutions continued to rely increasingly on other funding alternatives. Insured deposits as a percentage of dom estic liabilities continued a steady, nine-year decline, falling to 51.7 percent at the end of 2000, compared to 52.6 percent a year earlier and 70 percent in 1992. A t year-end 2000, the ratio was 46.4 percent fo r in stitu tio n s w ith total assets greater than $1 billion, and 74 percent for smaller institutions. Deposits insured by the FDIC moved past the $3 trillion level in 2000, to $3.05 trillion, despite the number of insured institutions falling below the 10,000 mark for the firs t time. Insured deposits rose by 2.1 percent in the final three m onths of 2000, bringing the grow th rate for 2000 to 6.5 percent. This annual grow th rate for federally insured deposits is the highest since 1986, when deposits insured by the FDIC and the FSLIC increased by eight percent. Insured deposits reported by the 9,924 FDIC-insured institutions rose by $185 billion in 2000, including a $73 billion increase (81 percent) in insured brokered deposits. About half of the latter am ount was attrib utable to tw o insured banks w ith brokerage affiliates that "s w e e p ” cash management account balances into FDIC-insured bank accounts. By year-end 2000, deposits insured by the BIF grew at seven percent and reached $2.3 trillion. This annual grow th rate fo r BIF-insured deposits w as the highest since 1989. The BIF balance w as $31 billion at year-end 2000, or 1.35 percent of estim ated insured deposits. This w as dow n from the year-end 1999 reserve ratio of 1.36 percent as the $1.6 billion grow th of the fund's balance during 2000 was more than o ffs e t by the g ro w th of insured deposits. The reserve ratio of the SAIF was 1.43 percent at year-end 2000, dow n slightly from 1.45 percent at year-end 1999. The balance of the SAIF was $10.8 billion on D ecember 31, 2000. SAIF-insured deposits w ere $753 billion at yearend 2000, having grow n 5.8 percent fo r the year. The annual grow th rate was the highest since the inception of the SAIF in 1989. During 2000, seven FDIC-insured institutions failed. Six of those insti tutions w ere insured by the BIF and one was insured by the SAIF. The failed institutions had combined assets of approximately $408 million. Losses for the seven failures are estim ated at $40 million. In 1999, there w ere eight failures of insured institutions, w ith total assets of $1.5 billion and estim ated losses of $839 million. The contingent liability fo r anticipated failures of BIFand SAIF-insured institutions as of December 31, 2000, was $141 million and $234 million, respectively. R esp on d in g to E m e rg in g Risks In the firs t quarter of 2000, the FDIC announced enhancements to the Risk-Related Premium System that w ill provide a more flexible, forwardlooking system that keeps pace w ith new and emerging risks to the insurance funds. The enhancements focus on "o u tlie rs" —institutions w ith atypically high-risk profiles among those in the best-rated prem ium c a te g o ry -to ensure that the FDIC is making all possible efforts w ithin the existing deposit insurance system to maintain the insurance funds' strong condition. R efinem ents w ere made Keith Ligon. chief of FDIC supervision policy for bank securities, capital markets and trust activities, discusses proposed capital rules at an interagency staff meeting. to id e n tify the o u tlie r in stitu tio n s among those in the best-rated prem ium category, and to determ ine w h ether there are unresolved super visory concerns regarding the riskm anagem ent practices of these institutions. W here such concerns are present, the institutions are given an opportunity to address the defi ciencies in their risk-management practices before higher prem ium s are assessed. FD IC -lnsured Deposits (e s tim a te d y e a r-e n d th r o u g h 2 0 0 0 ) D o l l a r s in b i l l i o n s ■ SAIF-lnsured ■ BIF-lnsured 1960 70 80 3,000 2,500 2,000 1,500 1,000 500 ......... i ll! Mill Source: Commercial Bank Call Reports and Thrift Financial Reports Note: For more details, see pages 25 (BIF) and 45 (SAIF). 90 2000 N ew "scre e n s," or models designed to flag outlier statistics and ratios, based on quarterly financial data, were added to the process fo r assigning assessment risk classifications. These screens identify institutions in the best-rated category w ith atypically high-risk profiles. The screens flag combinations of rapid loan grow th, high-yielding loan portfolios, con centrations in high-risk assets, and recent changes in business mix. For the institutions identified, a supervisory review is conducted to determ ine if concerns e xist regarding riskm anagem ent practices. If so, the in stitu tio n is notified th a t unless actions are taken to address the concerns before the next semiannual assessment period, a higher premium may be assessed. During the year, the FDIC developed a training program to instruct exam iners in m ethods of fraud detection and investigation, desirable skills w hen technology makes fraud ever easier to co m m it and harder to detect. The FDIC also participated in a num ber of local, state and national working groups relating to financial institution fraud and money launder ing. These groups seek to improve inform ation sharing and to develop uniform policies and approaches to deterring and detecting fraud. " ' ^ ’ 5 - 'v * Stephen M. Cross, Director of the FDIC's Division of Compliance and Consumer Affairs In Septem ber 2000, the FDIC, along w ith the other banking and th rift agencies, proposed a revision to the capital treatm ent for residual interests in securitizations or other transfers of assets. Residual interests are typically the assets an institution retains in connection w ith its securi tization activities. The proposed rule w ould require an institution to hold a dollar of capital fo r every dollar in residual interests, and w ould make related changes in Tier 1 capital. Lastly, to keep pace w ith the evolving banking industry, the FDIC continued its contingency planning fo r possible future failures. In light of the banking industry's increasing consolidation and reliance on and use of the Internet and electronic comm erce, the FDIC focused its planning in 2000 on the need to address possible technological failures and large insured depository institution failures. As a result, the FDIC began m odify ing its resolution procedures to address issues associated w ith larger, more complex, institutions and electronic banking and comm erce. Additionally, the FDIC began im ple m enting a core training program to cross-train personnel to maintain its readiness capacity. T ech n olo gy In late 1999, Chairman Tanoue initiat ed a project to evaluate the FDIC's preparedness in continuing to keep pace w ith the dynamics of bank technology. The project concluded in early 2000 w ith the establishm ent of an internal Bank Technology Group to help ensure that the FDIC adopts an integrated approach to risks and opportunities associated w ith emerging bank technologies, such as Internet banking, electronic cash, electronic lending, and w ireless banking. Significant grow th in electronic bank ing or "E-Banking" was evidenced by the 64 percent increase in the num ber of FDIC-insured banks offer ing transactional services over the Internet (1,850 institutions at yearend 2000 compared to 1,130 a year earlier), as w ell as the increasing ^ L iq u id a tio n H ig h lig h ts 1 9 9 8 -2 0 0 0 Dollars in b i l l i o n s 2000 Assets of Failed Banks 1999 6 Total Failed Banks 7 1.42 $ .38 Assets of Failed Savings Associations $ .03 Net Collections from Assets in Liquidation* S .60 [Total Assets in Liquidation* $ Net Collections from Assets Not in Liquidation* S [Total Assets Not in Liquidation* $ 2.80 Total Failed Savings Associations 1 • $ 1 1998 3 $ 0 H H I $ $ .06 .98 .54 $ 1.98 .16 $ .21 $ 5.20 .37 $ 0 $ $ $ 3.55 $ 6.71 Also includes assets from thrifts resolved by the former Federal Savings and Loan Insurance Corporation 2.38 .38 The FDIC in M a ri h hasted an ntera gency urn o n th e privacy o f consum er fin a n cia l in fo rm a tio n th a t w a s atten ded by bankers, consum er advo cates, reg u la to rs and othe rs C h a irm a n fan o u t) lia r rig h t! is s h o w n h ere w ith o th e r aud ie n ce m em bers For example, the Corporation began working w ith the National Association of Insurance C om m issioners to explore ways that inform ation can be shared among the banking and insurance regulators to improve regulation. Similar arrangements w ill be explored w ith securities regulators. sophistication of technology used in E-banking activities. The FDIC at year-end 2000 had 288 specially trained electronic banking examiners and similar specialists nationwide, and it established the Electronic Banking Branch in its Division of Supervision. This new ly created branch w ill provide oversight of information system s and E-banking activities for all state nonm em ber banks. The FDIC also worked w ith the Federal Reserve to enhance the risk-focused examination module for electronic banking used in bank examinations. In addition, general electronic banking training also was provided to examiners. And, the FDIC continued to use technology to improve the failed bank resolution and asset marketing processes. In 2000, the FDIC conducted its first teleconference w ith prospective acquirers for a failed bank at five locations across the country; established a secure Web site allow ing for the rapid sharing of confidential inform ation w ith prospective acquirers of a failed institution; and conducted its first sale of financial assets over the Internet, w ith approximately $12.3 million of loans at a recovery that was 16 per cent higher than expected. G ra m m -L e a c h -B lile y A ct Under the Gramm-Leach-Bliley Act (GLBA), banking organizations may more freely provide a full range of financial services including brokerage, underwriting, and even sponsoring and distributing mutual funds. During 2000, the FDIC took many steps to deal w ith its demands. The Corporation also revised its reg ulatory standards to reflect aspects of GLBA that require separate ade quate capital for a bank and its secu rities subsidiary, and restrict financial dealings betw een the bank and its securities affiliate or subsidiary. j-----------------------------------------------FDIC E xam in ation s 1 9 9 8 2 0 0 0 2000 1999 1998 2,232 2,289 241 2,170 Safety and Soundness: IT State Nonmember Banks Savings Banks National Banks State M em ber Banks Savings Associations 235 17 2 'Y 221 1 7 6 0 0 1 Subtotal 2,486 2,540 2,399 Compliance/Comm unity Reinvestment Act 2,257 2,368 1,989 533 452 542 1,585 1,446 1.335 6,861 6,806 6,265 Trust D e p a r tm e n ts ■Data Processing Facilities Total Left: In W a s h in g to n , DC, and around th e natio n, FDIC em ployees g a th e re d to d is c u s s th e ag e n cy's fir s t D iv e rs ity S tra te g ic Plan GLBA also made Federal Home Loan Bank (FHLB) mem bership available to more institutions and perm itted certain FHLB-member institutions to obtain more advance funding. In response to these changes, the FDIC issued supplem ental examina tion guidance in A ugust 2000. The guidance provides an overview of FHLB advance strategies and pres ents a fram ew ork for examining the effects of these strategies w hen determ ining the adequacy of an insti tution's policies, practices and finan cial condition. Lastly, the FDIC and the other bank ing agencies im plem ented regula tions protecting consumers purchas ing insurance products and annuities through the bank. The new rules govern the sale and solicitation of insurance products and annuities made by the bank as w ell as by oth ers selling on the bank's behalf. These protections include custom er disclosures, advertising require ments, standards regarding the physical location w here sales may occur, and prohibitions against tying the purchase of insurance products to the use of any bank product.This regulation w ill go into e ffe ct late in 2001 . Right: D irectors M icke y C ollins (left) o f the FDIC's O ffice o f D iversity and Econom ic O pp o rtu n ity and A.i leas U pton Kea (center) of th e D ivisio n of A d m in istra tio n acce pt an a w a rd on b e h a if o! th e FDIC fro m th e Federal A sian Pacific A m erican C ouncil fo r th e agency's excellence in d iv e rs ity program s. D ive rs ity In itia tiv e s In 2000, the FDIC advanced many of the goals and strategies of its first corporate Diversity Strategic Plan, w hich reflects the Corporation's c om m itm ent to a fair and inclusive w o rk environm ent. To gauge employee opinion about the FDIC's w ork environm ent and culture, the FDIC engaged the Gallup Organization to design an organizational assess m ent survey that was administered in 2000. The survey results provided baseline data fo r planning and instituting a range of programs and policy initiatives prom oting and m aintaining the FDIC's position as an em ployer o f choice. Also in 2000, the Corporation: • • • • • Provided diversity training to 6,315 em ployees, representing about 95 percent of all head quarters and field staff. Established new guidelines ensuring that groups making selections fo r m erit prom otions represent our diverse w orkforce. Sponsored 200 employees in a m entoring program in w hich m ore-experienced employees are paired w ith less-experienced ones to share their knowledge and skills. Instituted a perm anent Career M anagem ent Program to help employees assess and develop their career plans. Expanded its Employee Advisory Resources program w ith a LifeW orks program -a one-stop resource fo r consultation, information, direction and referrals to help employees balance the demands of w ork w ith their personal lives. C om pliance, Enforcem ent and Other Related Legal A ctions 1 9 9 8 -2 0 0 0 2000 1999 1998 87 110 143 5 19 2 21 Total Number of Actions Initiated by the FDIC Termination of Insurance Involuntary Termination Sec. 8a For Violations, Unsafe/Unsound Practices or Condition 1 Voluntary Termination Sec.8a By Order Upon Request Sec.8p No Deposits Sec.8q Deposits Assumed 0 6 5 Sec. 8b Cease-and-Desist Actions Notices o f Charges Issued Consent Orders 4’ 26 Sec. 8e Removal/Prohibition of Director or Officer Notices of Intention to Remove/Prohibit Consent Orders 3 4 2 17 22 15 3 15 20 41 35 Sec. 8g Suspension/Removal When Charged With Crime Civil Money Penalties Issued Sec.7a Call Report Penalties Sec.8i Civil M oney Penalties 11 Sec. 10c Orders of Investigation Sec. 19 Denials of Service After Criminal Conviction Sec. 32 Notices Disapproving Officer/Directors Request for Review 0 Truth in Lending Act Reimbursement Actions Denials of Requests fo r Relief Grants o f Relief Banks M aking Reim bursem ent* Suspicious Activity Reports (Open and closed institutions) 0 0 1 1 0 0 127 134 161 20,720 22,015 20,229 Other Actions Not Listed 2 Two actions included Sec.8 (c) temporary orders. One action included a Sec.8 (e) suspension order. One action involved a denial of request to waive 10-year ban under Sec. 19 (a) (2). These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of actions initiated. I C o n su m er C o m p la in ts and Inq u iries FDIC A p p lic a tio n s 1 9 9 8 -2 0 0 0 1999 2000 341 0 0 210 207 41 166 3 1 145 154 5 3 0 N ew Branches 1,286 1,286 Approved Denied 0 316 Mergers Approved Denied Requests for Consent to Serve* 249 248 19 32 15 233 1 1 v- 295 295 0 1,347................... 1.347 0 ' 341 19 32 0 Notices of Change in Control 28 2 31 ................ 28 31 Letters of intent Not to Disapprove Disapproved Brokered Deposit Waivers Approved Denied Savings Association Activities' Approved Denied State Bank Activities/Investments7 Approved Denied Conversions of Mutual Institutions Non-Objection Objection • * T The FDIC investigates and responds to consum er com plaints of unfair or deceptive acts or practices by financial institutions. T h e agency 296 296 0 1,450 1,450 0 390 390 0 304 : 299 205 205 Approved Denied Approved Section Section Denied Section Section 1998 316 Deposit Insurance 25 0 16 ’ 25 0 83 0 80 2 , 34 0 16 0 .. : ~ .....10 I 9 1 ’ 0 83 0 0 0 24 23 0 24 0 23 0 8 16 30 8 15 1 30 0 80 0 36 36 0 also responds to inquiries fro m consum ers, financial institu tion s and o th e r parties ab o u t consum er p ro tectio n and fair lending m a tte rs and deposit insurance. T h e FDIC's C o n su m er Affairs Program inform s depositors, financial institu tion s and o th e rs a b o u t th e FDIC's re s p o n s ib ilitie s fo r e n fo rcin g co n s u m e r p ro te c tio n an d fa ir len d in g la w s an d re g u la tio n s . In 2000, th e FDIC received nearly 4,500 w ritte n consum er com plaints against state-chartered n on m em b er banks. The agency tracks th e vo lum e and n atu re of co m p laints to m o n ito r tre n d s and identify em erg in g issues. N early tw o -th ird s of th ese co m p laints concerned c re d it card acco u n ts. T h e m o s t fre q u e n t c o m p la in ts in v o lv e d billing disputes and account errors; loan denials; credit card fees and service charges; and collection practices. 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 is not in compliance w ith capital requirements or is otherwise in troubled condition. Amendments to Part 303 of the FDIC Rules and Regulations changed FDIC oversight responsibility in October 1998. The FDIC also received over 2,000 w ritte n inquiries fro m consum ers and o v e r 2 0 0 w r itte n in q u irie s fro m b an ke rs as to w h e th e r Section 24 of the FDI Act, generally, precludes an insured state bank from engaging in an activity not permissible for a national bank and requires notices be filed with the FDIC. specific financial institutions are insured by th e FDIC, or questions a b o u t FDIC d e p o s it in s u ran ce coverage. O th e r co m m o n inquiries w e re requests for copies of FDIC consum er publications, questions about banking practices and consum ers' rights under federal consum er pro tectio n law s, and questions related to obtaining a personal credit report. Federal Deposit Insurance Corporation iB a n k Insuran ce Fund S ta te m e n ts of Financial Position a t D e ce m b er 31 Dollars in Thousands 2000 1999 Assets Cash and cash equivalents $ 156,396 $ 164,455 Investment in U.S. Treasuryobligations.net: (Note 3) He 1 d-to-m atu rity securities 22,510,892 23,949,655 A vailable-for-sale securities 7,421,597 4,288,410 Interest receivable on investm ents and other assets, net 552,671 467,070 Receivables from bank resolutions, ne t (N ote 4) 349,589 743,011 11,727 20,750 Assets acquired from assisted banks and term inated receiverships, net (Note 5) Property and equipm ent, net (N ote 6) Total Assets 303,438 $ 31,306,310 260,040 s 29,893.391 $ 148,821 Liabilities Accounts payable and other lia b ilitie s $ 165,972 Contingent liabilities for: (Note 7) A nticipa ted fa ilu re o f insured in stitution s 141,355 307,000 234 479,208 30,755,569 29,494,950 219,653 (80,767) 30,975,222 Total Liabilities 2,477 331,088 Asset securitization guarantees 10,000 1,605 Litigation losses 10,910 21,922 A ssistance agreem ents 29,414,183 Commitments and off-balance-sheet exposure (Note 12) Fund Balance A ccum ulated net income Unrealized gain/(loss) on available-for-sale securities, net (N ote 3) Total Fund Balance Total Liabilities and Fund Balance The accompanying notes are an integral part o f these financial statements. $ 31.306.310 S 29,893.391 Bank Insurance Fund 1 Bank Insurance Fund S ta te m e n ts o f In co m e and Fund B alance fo r th e Years Ended D e ce m b er 31 Dollars in T h o u s a n d s 2000 1999 Revenue Interest on U.S. Treasury obligations $ Assessm ents (N ote 8) 1,827,404 45,091 Interest on advances and subrogated claim s Total Revenue 1,733,603 33,333 7,616 Revenue from assets acquired from assisted banks and term inated receiverships O ther revenue $ 20,626 10,077 15,676 11,484 16,556 1,905,864 1,815,602 Expenses and Losses O perating expenses 772,918 (152,962) Total Expenses and Losses Net Income (Loss) (198,127) 29,414,183 S (91,682) 1,561,039 Fund Balance - Beginning (106,445) 300,420 Comprehensive Income (Loss) The accompanying notes are an integral part o f these financial statements. 1,922,047 1,260,619 Unrealized gain/(loss) on available-for-sale securities, ne t (N ote 3) Fund Balance - Ending 4,126 645,245 Interest and other insurance expenses 18,778 8,630 Expenses for assets acquired from assisted banks and term inated receiverships 1,168,749 16,659 Provision fo r insurance losses (N ote 9) 730,394 29,612,310 30,975,222 S 29,414,183 Bank Insurance Fund Statements of Cash Flows for the Years Ended December 31 Dollars in Thousands 2000 1999 Cash Flows From Operating Activities Cash provided by: Interest on U.S. Treasury obligations $ Recoveries from bank resolutions 1,775,552 $ 1,848,536 755,936 426,348 0 175,720 45,070 46,390 Recoveries on conversion of be ne fit plan Recoveries from assets acquired from assisted banks and term inated receiverships Assessm ents 34,692 48,518 M iscellaneous receipts 13,279 19,029 (742,733) (722,096) Cash used by: Operating expenses Disbursem ents fo r bank resolutions (388,276) (22,994) 459,699 2,560,000 2,120,000 430,000 1,060,000 (60,761) Net Cash Provided by Operating Activities (Note 15) (7,542) 1,482,378 M iscellaneous disbursem ents (27,756) (1,974) Disbursem ents fo r assets acquired from assisted banks and term inated receiverships (1,333,622) (70,886) Cash Flows From Investing Activities Cash provided by: M a tu rity of U.S. Treasury obligations, he ld -to-m atu rity M a tu rity and sale of U.S. Treasury obligations, available-for-sale Cash used by: Purchase of property and equipm ent Purchase o f U.S. Treasury obligations, he ld -to-m atu rity (1,239,157) (1,596,859) Purchase of U.S. Treasury obligations, available-for-sale (3,180,519) (3,925,143) (1,490,437) (2,412,888) (8,059) (1,953,189) 164,455 2,117,644 Net Cash Used by Investing Activities Net Decrease in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning Cash and Cash Equivalents - Ending The accompanying notes are an integral part o f these financial statements. $ 156,396 $ 164,455 2S Bank Insurance Fund Notes to the Financial Statements December 31, 2000 and 1999 1. Legislative H istory and O perations o f th e Bank Insurance Fund L e g is la tiv e H is t o r y The U.S. Congress created the Federal Deposit Insurance Corporation (FDIC) through enactm ent of the Banking A ct of 1933. The FDIC was created to restore and maintain public confidence in the nation's banking system. The Financial Institutions Reform, Recovery, and Enforcem ent A ct of 1989 (FIRREA) 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 (SAIF), and the FSLIC Resolution Fund (FRF). It also designated the FDIC as the adm inistrator of these funds. All three funds are maintained separately to carry out their respective mandates. The BIF and the SAIF are insurance funds responsible for protecting insured bank and th rift depositors from loss due to institution failures. The FRF is a resolution fund responsible for winding up the affairs of the form er Federal Savings and Loan Insurance Corporation (FSLIC) and liquidating the assets and liabilities transferred from the form er Resolution Trust Corporation (RTC). Pursuant to FIRREA, an active institution's insurance fund m em bership and primary federal supervisor are generally determ ined by the institution's charter type. Deposits of BIF-member institutions are generally insured by the BIF; BIF mem bers are predom inantly commercial and savings banks supervised by the FDIC, the Office of the Comptroller of the Currency, or the Federal Reserve Board. Deposits of SAIF-member institutions are generally insured by the SAIF; SAIF m em bers are predom inantly th rifts supervised by the O ffice of Thrift Supervision. In addition to traditional banks and thrifts, several other categories of institutions exist. The Federal Deposit Insurance A ct (FDI Act), Section 5(d)(3), provides that a m em ber of one insurance fund may, w ith the approval of its primary federal supervisor, merge, consolidate w ith, or acquire the deposit liabilities of an institution that is a m em ber of the other insurance fund w ith o u t changing insurance fund status for the acquired deposits. These institutions w ith deposits insured by both insurance funds are referred to as Oakar financial institutions. The FDI Act, Section 5(d)(2)(G), allows SAIF-member th rifts to convert to a bank charter and retain their These institutions are referred to institutions. The Home O w ners' Section 5(o), allows BIF-member to a th rift charter and retain their These institutions are referred to SAIF m em bership. as Sasser financial Loan A ct (HOLA), banks to convert BIF m em bership. as HOLA thrifts. O t h e r S ig n if ic a n t L e g is la tio n The Com petitive Equality Banking A ct of 1987 established the Financing Corporation (FICO) as a mixed-ownership governm ent corporation w hose sole purpose was to function as a financing vehicle for the FSLIC. The Om nibus Budget Reconciliation A ct of 1990 (1990 OBR Act) and the Federal Deposit Insurance Corporation Im provem ent A ct of 1991 (FDICIA) made changes to the FDIC's assessm ent authority (see Note 8) and borrowing authority. The FDICIA also requires the FDIC to: 1) resolve failing institutions in a manner that w ill result in the least possible cost to the deposit insurance funds and 2) maintain the insurance funds at 1.25 percent of insured deposits or a higher percentage as circumstances warrant. The Deposit Insurance Funds A ct of 1996 (DIFA) was enacted to provide for: 1) the capitalization of the SAIF to its designated reserve ratio (DRR) of 1.25 percent by means of a one-tim e special assessm ent on SAIF-insured deposits; 2) the expansion of the assessm ent base for payments of the interest on obligations issued by the FICO to include all FDIC-insured banks and thrifts; 3) beginning January 1, 1997, the imposition of a FICO assessm ent rate on BIF-assessable deposits that is one-fifth of the rate fo r SAIF-assessable deposits through the earlier of December 31, 1999, or the date on w hich the last savings association ceases to exist; 4) the pay m ent of the annual FICO interest obligation of approxi mately $790 million on a pro rata basis betw een banks and th rifts on the earlier of January 1, 2000, or the date on w hich the last savings association ceases to exist; 5) authorization of BIF assessm ents only if needed to maintain the fund at the DRR; 6) the refund of am ounts in the BIF in excess of the DRR w ith such refund not to exceed the previous semiannual assessment; 7) assessm ent rates fo r SAIF m em bers not low er than the assessm ent rates fo r BIF m em bers w ith comparable risk; and 8) the m erger of the BIF and the SAIF on January 1, 1999, if no insured depository institution is a savings association on that date. Congress did not enact legislation to either merge the BIF and the SAIF or to eliminate the th rift charter. The Gramm-Leach-Bliley A ct (GLBA), was enacted on November 12, 1999, in order to modernize the financial services industry (banks, brokerages, insurers, and other financial services providers). The GLBA lifts restrictions on affiliations among banks, securities firm s, and insur ance companies. It also expands the financial activities perm issible fo r financial holding companies and insured depository institutions, their affiliates and subsidiaries. R e c e n t L e g is la t iv e In it ia t iv e s Congress continues to focus on legislative proposals that w ould affect the deposit insurance funds. The FDIC has proposed an initiative to reform the deposit insurance system . Some of the proposals, such as deposit insur ance pricing and determ ining deposit insurance levels, may have a significant im pact on the BIF and the SAIF, if enacted into law. However, these proposals continue to vary and FDIC management cannot predict w hich provisions, if any, w ill ultim ately be enacted. O p e r a tio n s o f t h e B IF The primary purpose of the BIF is to: 1) insure the deposits and protect the depositors o f BIF-insured institutions and 2) resolve failed institutions, including managing and liqui dating their assets. In addition, the FDIC, acting on behalf of the BIF, examines state-chartered banks that are not m em bers o f the Federal Reserve System. Further, the FDIC can also provide assistance to failing banks and m onitor compliance w ith assistance agreements. The BIF is primarily funded from interest earned on investm ents in U.S. Treasury obligations and BIF assessm ent prem ium s. Additional funding sources are U.S. Treasury and Federal Financing Bank (FFB) borrow ings, if necessary. The 1990 OBR A ct established the FDIC's authority to borrow w orking capital from the FFB on behalf of the BIF and the SAIF. The FDICIA increased the FDIC's authority to borrow fo r insurance losses from the U.S. Treasury, on behalf of the BIF and the SAIF, from $5 billion to $30 billion. The FDICIA also established a lim itation on obligations that can be incurred by the BIF, known as the m aximum obligation lim itation (MOL). As of December 31, 2000 and Decem ber 31, 1999, the M O L for the BIF was $53.2 billion and $51.8 billion, respectively. R e c e iv e r s h ip O p e r a tio n s The FDIC is responsible fo r managing and disposing of the assets of failed institutions in an orderly and efficient manner. The assets held by receivership entities, and the claims against them , are accounted fo r separately from BIF assets and liabilities to ensure that liquidation proceeds are distributed in accordance w ith applicable laws and regulations. Also, the income and expenses attributable to receiverships are accounted fo r as trans actions of those receiverships. Liquidation expenses paid by the BIF on behalf of the receiverships are recovered from those receiverships. Bank Insurance Fund ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 2. S um m ary o f S ig n ific a n t A ccounting Policies G e n e ra l These financial statem ents pertain to the financial posi tion, results of operations, and cash flo w s of the BIF and are presented in accordance w ith generally accepted accounting principles (GAAP). These statem ents do not include reporting fo r assets and liabilities of closed banks fo r w hich the FDIC acts as receiver or liquidating agent. Periodic and final accountability reports of the FDIC's activities as receiver or liquidating agent are furnished to courts, supervisory authorities, and others as required. and losses are included in Comprehensive Income. Realized gains and losses are included in the Statem ents of Income and Fund Balance as com ponents of Net Income. Interest on both types of securities is calculated on a daily basis and recorded m onthly using the effective interest method. A l lo w a n c e f o r L o s s e s o n R e c e iv a b le s F r o m B a n k R e s o lu tio n s a n d A s s e ts A c q u ir e d F ro m A s s is te d B a n k s a n d T e r m in a te d R e c e iv e r s h ip s FDIC management makes estim ates and assumptions that a ffect the am ounts reported in the financial state m ents and accompanying notes. Actual results could dif fe r from these estim ates. W here it is reasonably possible that changes in estim ates w ill cause a material change in the financial statem ents in the near term , the nature and extent of such changes in estim ates have been disclosed. The BIF records a receivable fo r the am ounts advanced and/or obligations incurred fo r resolving failing and failed banks. The BIF also records as an asset the am ounts paid fo r assets acquired from assisted banks and te rm i nated receiverships. Any related allowance for loss repre sents the difference betw een the funds advanced and/or obligations incurred and the expected repayment. The latter is based on estim ates of discounted cash recover ies from the assets of assisted or failed banks, net of all applicable estim ated liquidation costs. C a s h E q u iv a le n ts C o s t A llo c a tio n s A m o n g F u n d s Cash equivalents are short-term , highly liquid investm ents w ith original maturities of three m onths or less. Cash equivalents consist primarily of Special U.S. Treasury Certificates. Operating expenses not directly charged to the funds are allocated to all funds administered by the FDIC using workload-based-allocation percentages. These percent ages are developed during the annual corporate planning process and through supplem ental functional analyses. U s e o f E s t im a te s In v e s t m e n t s in U .S . T r e a s u r y O b lig a tio n s P o s t r e t ir e m e n t B e n e fits O t h e r T h a n P e n s io n s Investm ents in U.S. Treasury obligations are recorded pur suant to the S tatem ent o f Financial Accounting Standards (SFAS) No. 115, “Accounting fo r Certain Investm ents in Debt and Equity Securities." SFAS No. 115 requires that securities be classified in one of three categories: held-tomaturity, available-for-sale, or trading. The BIF does not designate any securities as trading. Securities designated as held-to-maturity are show n at amortized cost. Am ortized cost is the face value of securities plus the unamortized prem ium or less the unamortized discount. Am ortizations are com puted on a daily basis from the date of acquisition to the date of maturity. Securities designated as available-for-sale are shown at market value, w hich approximates fair value. Unrealized gains The FDIC established an entity to provide the accounting and administration of postretirem ent benefits on behalf of the BIF, the SAIF, and the FRF. Each fund has fully paid its liability fo r these benefits directly to the entity. The BIF’s prepaid or accrued postretirem ent benefit cost is presented in the BIF's Statem ents of Financial Position. D is c lo s u r e A b o u t R e c e n t A c c o u n tin g P r o n o u n c e m e n ts Statement of Financial Accounting Standards (SFAS) No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an am endm ent of SFAS No. 133," was issued in June 2000. For entities that adopted SFAS No. 133, "Accounting fo r Derivative Instrum ents and Hedging Activities" prior to June 15, 2000, Statem ent 138 is effective for all fiscal quarters beginning after June 15, 2000. SFAS No. 138 amends Statem ent 133 principally fo r certain issues relating to hedging transac tions. The adoption of these statem ents has no material quantitative or qualitative impact on the BIF's Statements of Financial Position, Income and Fund Balance, and Cash Flows. The FDIC has designated the BIF as adm inistrator of property and equipm ent used in its operations. Consequently, the BIF includes the cost of these assets in its financial statem ents and provides the necessary funding for them . The BIF charges the other funds usage fees representing an allocated share of its annual depreci ation expense. These usage fees are recorded as cost recoveries, w hich reduce operating expenses. In September 2000, the Financial Accounting Standards Board (FASB) issued SFAS No. 140, "Accounting for Transfers and Servicing o f Financial A ssets and Extinguishm ents of Liabilities; a replacement of SFAS No. 125." This statem ent applies to securitization trans actions w here the transferor has continuing involvem ent w ith the transferred assets or the transferee. SFAS No. 140 is e ffe ctive fo r transfers occurring after March 31, 2001. However, disclosure requirements for existing securitizations are effective for fiscal years ending after December 15, 2000. BIF's disclosures for its securitization transactions, w hich conform to the SFAS No. 140 requirements, are discussed in Notes 7 and 12. The W ashington, D.C. office buildings and the L. W illiam Seidman Center in Arlington, Virginia, are depreciated on a straight-line basis over a 50-year estim ated life. The San Francisco condom inium offices are depreciated on a straight-line basis over a 35-year estimated life. Leasehold im provem ents are capitalized and depreciated over the lesser of the remaining life of the lease or the estim ated useful life of the im provem ents, if determ ined to be material. Capital assets depreciated on a straightline basis over a five-year estim ated life include main fram e equipm ent; furniture, fixtures, and general equip m ent; and internal-use software. Personal com puter equipm ent is depreciated on a straight-line basis over a three-year estim ated life. Other recent accounting pronouncem ents w ere evaluated and deem ed to be not applicable to the financial statem ents. D e p r e c ia tio n R e la t e d P a r tie s The nature of related parties and a description of related party transactions are discussed in Note 1 and disclosed throughout the financial statem ents and footnotes. 3. In vestm en t in U.S. Treasury O bligations, N et Cash received by the BIF is invested in non-marketable Government A ccount Series (GAS) market-based U.S. Treasury securities w ith maturities exceeding three m onths. As of D ecem ber 31, 2000 and D ecember 31, 1999, the book value of investm ents in U.S. Treasury Obligations, net, was $29.9 billion and $28.2 billion, respectively. The book value is com puted by adding the amortized cost of the held-to-m aturity securities to the m arket value of the available-for-sale securities. In 2000, the FDIC purchased $1.3 billion of Treasury inflation-indexed securities (TIIS) for the BIF. These securities are indexed to increases or decreases in the Consum er Price Index (CPI). Bank Insurance Fund Dollars in Thousands Held-to-Maturity Maturity Yield at Purchase* Face Value 5.69% 6.19% 5,965,000 6,178,310 104,475 0 6,282,785 3-5 years 6.59% 4,955,000 5,020,380 264,712 (169) 5,284,923 5-10 years 5.64% 8,068,506 8,287,557 266,541 (26,826) 8,527,272 Total $ 22,008,506 22,510,892 $ $ S 6,851 642,579 $ (598) Market Value Less than one year $ 3,024,645 Unrealized Holding Losses 1-3 years $ 3,020,000 T Unrealized Holding Gains Amortized Cost S (27,593) $ 3,030,898 $ 23,125,878 Available-for-Sale Maturity Yield at Purchase* Face Value 776,417 $ 194 Unrealized Holding Losses 6.40% 3-5 years 6.30% 960,000 981,289 39,830 0 1,021,119 5-10 years 4.80% 4,254,527 4,149,625 151,990 0 4,301,615 Total $ $ 7,304,527 $ 29,313,033 28,692 1,294,613 $ 7,201,944 (1,053) 775,558 5.59% 1-3 years 1,315,000 $ Market Value Less than one year $ 775,000 Unrealized Holding Gains Amortized Cost $ 220,706 s 29,712,836 $ 863,285 1,323,305 S (1,053) s $ (28,646) s Total Investment in U.S. Treasury Obligations, Net Total $ 0 7,421,597 30,547,475 * For Treasury inflation-indexed securities ITIIS), the yields in the above table include their real yields a t purchase, not their effective yields. Effective yields on TIIS include a weighted average o f Bloomberg's calculation o f yield with an inflation assumption. The inflation assumption o f 3.4% was the latest year-over-year increase in the Consumer Price Index (CPII on November 30, 2000. These effective yields are 7 .15% and 7.51% for TIIS classified as held-to-maturity and available-for-sale, respectively. T Includes one Treasury note totaling $200 million which matured on Sunday, December 31, 2000. Settlement occured on the next business day, January 2, 2001. 1 U .S. Treasury O b lig a tio n s a t D e ce m b er 31, 1999 Dollars in Thousands Held-to-Maturity Maturity Yield at Purchase * Face Value Unrealized Holding Gains Amortized Cost Unrealized Holding Losses Market Value Less than one year 6.02% 1-3 years 6.06% 6,540,000 6,669,580 7,233 (32,331) 6,644,482 3-5 years 6.45% 4,805,000 5,052,441 18,300 (17,217) 5,053,524 5-10 years 5.88% 9,439,053 9,665,955 58,403 (374,526) 9,349,832 Total $ $ 2,560,000 23,344,053 $ $ 2,561,679 23,949,655 $ 3,087 $ 87,023 $ (2,468) $ (426,542) $ 2,562,298 $ 23,610,136 Available-for-Sale Maturity Yield at Purchase* Face Value Unrealized Holding Gains Amortized Cost Unrealized Holding Losses Market Value Less than one year 5.62% 1-3 years 5.36% 625,000 631,662 0 (7,001) 624,661 3-5 years 6.00% 445,000 454,254 0 (6,391) 447,863 5-10 years 5.15% Total $ 430,000 $ 2,977,452 $ 4,477,452 431,206 $ 2,852,055 $ 4,369,177 48 $ 0 S 48 (94) $ (67,329) $ (80,815) 431,160 2,784,726 S 4,288,410 Total Investment in U.S. Treasury Obligations, Net Total * $ 27,821,505 $ 28,318,832 $ 87,071 S (507,357) $ 27,898,546 For Treasury inflation-indexed securities ITUS), the yields in the above table include their real yields at purchase, not their effective yields. Effective yields on TIIS include a weighted average of Bloomberg's calculation o f yield with an inflation assumption. The inflation assumption o f 2.6% was the latest year-over-year increase in the Consumer Price Index (CPI) on December 14, 1999. These effective yields are 6.44% and 6.70% for TIIS classified as held-to-maturity and available-for-sale, respectively. As of December 31, 2000 and 1999, the unamortized prem ium , net of the unamortized discount, was $400 million and $497 million, respectively. Bank Insurance Fund 4 . Receivables fro m Bank Resolutions, N e t The bank resolution process takes d iffe re n t fo rm s depending on the unique facts and circum stances surrounding each failing or failed institution. Payments for institutions that fail are made to cover obligations to insured depositors and represent claims by the BIF against the receiverships' assets. There w ere six bank failures in 2000 and seven in 1999, w ith assets at failure of $378 million and $1.4 billion, respectively, and BIF outlays of $301.7 million and $1.2 billion, respectively. Assets held by the FDIC in its receivership capacity for closed BIF-insured institutions are the main source of repaym ent of the BIF's receivables from closed banks. As of December 31, 2000 and 1999, BIF receiverships held assets w ith a book value of $510.9 million and $1.9 billion, respectively (including cash and miscellaneous receivables of $337 million and $524 million at December 31, 2000 and 1999, respectively). The estim ated cash recoveries from the management and disposition of these assets that are used to derive the allowance for losses are based in part on a statistical sampling of receiver-ship assets. These estim ated recoveries are regularly evaluated, but remain subject to uncertainties because of potential changes in econom ic conditions. These factors could cause the BIF's and other claimants' actual recoveries to vary from the level currently estimated. I R eceivab les fro m Bank R eso lu tion s, N e t a t D e ce m b er 31 Dollars in 1 Thousands 1999 2000 A ssets from open bank assistance A llow an ce fo r losses Net Assets From Open Bank Assistance Receivables from closed banks A llow an ce fo r losses Net Receivables From Closed Banks $ 1,240 $ 105,655 (1,240) (4,196) 0 101,459 9,083,357 15,673,843 (8,733,768) (15,032,291) 349,589 641,552 5. Assets A cqu ired fro m Assisted Banks and Term inated Receiverships, N e t The BIF has acquired assets from certain troubled and failed banks by either purchasing an institution's assets outright or purchasing the assets under the term s speci fied in each resolution agreement. In addition, the BIF can purchase assets remaining in a receivership to facili tate term ination. The m ethodology to estim ate cash recoveries from these assets, w hich is used to derive the related allowance fo r losses, is similar to that for receivables from bank resolutions (see Note 4). The estim ated cash recoveries are based upon a statistical sampling of the assets but only include expenses for the disposition of the assets to represent liquidating value. The BIF recognizes revenue and expenses on these acquired assets. Revenue consists primarily of interest earned on assets in liquidation. Expenses are recognized fo r the disposition and administration of these assets. A ssets A c q u ired fro m A ssisted Banks and T e rm in a te d R eceiverships, N e t a t D e ce m b er 31 Dollars in T h o u s a n d s 1999 2000 A ssets acquired from assisted banks and te rm in ate d receiverships $ $ $ 11,727 105,136 (84,386) (44,018) A llow ance fo r losses Total 55,745 $ 20,750 6. P roperty and Equipm ent, N e t 1 P ro p erty and E q u ip m e n t, N e t a t D e ce m b er 31 Dollars | in T h o u s a n d s 1999 2000 Land $ 29,631 $ 29,631 168,996 159,188 P C /LAN /W AN equipm ent 46,030 27,748 A pp lication softw a re 73,041 29,671 Buildings 7,370 Furniture, fixtu res, and general equipm ent 10,596 3,357 Accum ulated depreciation $ 48,961 (81,893) W ork in Progress - A pplication softw are 1,771 36,934 Telephone equipm ent Total 5,569 19,972 M a in fram e equipm ent (53,095) 303,438 The depreciation expense was $28.8 million and $12.3 million for 2000 and 1999, respectively. S 260,040 ■■■■■■■■■M H M M M B M nM B M nM N M M M M M B M B M M H H M M M M H nN M aaH i 7. C o n tin g en t Liabilities for: A n t ic ip a t e d F a ilu r e o f In s u r e d In s t it u t io n s L it ig a t io n L o s s e s The BIF records a contingent liability and a loss provision fo r banks (including Oakar and Sasser financial institu tions) that are likely to fail, absent some favorable event such as obtaining additional capital or merging, w hen the liability becomes probable and reasonably estimable. The BIF records an estim ated loss fo r unresolved legal cases to the extent those losses are considered probable and reasonably estimable. In addition to the am ount recorded as probable, the FDIC has determ ined that losses from unresolved legal cases totaling $75 million are reasonably possible. The contingent liabilities for anticipated failure of insured institutions as of December 31, 2000 and 1999, w ere $141 million and $307 million, respectively. The contingent liability is derived in part from estimates of recoveries from the m anagem ent and disposition of the assets of these probable bank failures. Therefore, these estim ates are subject to the same uncertainties as those affecting the BIF's receivables from bank resolutions (see Note 4). Several recent bank failures have involved some degree of fraud, w hich adds uncertainty to estim ates of loss and recovery rates. These uncertainties, along w ith potential changes in economic conditions, could a ffect the ultimate cost to the BIF from probable failures. There are other banks w here the risk of failure is less certain, but still considered reasonably possible. Should these banks fail, the BIF could incur additional estimated losses ranging from $1 million to $639 million. The accuracy of these estim ates w ill largely depend on future economic conditions. The FDIC's Board of Directors (Board) has the statutory authority to consider the contingent liability for anticipated failures of insured institutions w hen setting assessm ent rates. A s s is ta n c e A g r e e m e n t s The contingent liabilities for assistance agreem ents result ed from several large transactions w here problem assets w ere purchased by an acquiring institution under an agreem ent that calls for the FDIC to pay losses incurred for indemnification and litigation. In addition, tw o cases are currently pending in the U.S. Court of Federal Claims against the United States for actions taken by the FDIC in supervising tw o BIF-insured, state-chartered mutual savings banks. These tw o cases allege that the FDIC's conduct in supervising these insti tutions breached agreements, w hich caused state regula tors to close the institutions. The Court has not yet ruled on the question of w h e th e r any agreem ents w ere breached. Flowever, should such a determ ination be made and the court award either damages or restitution, it is possible that the BIF w ould be responsible for pay m ent of such an award. At this tim e, it is not possible to estim ate a potential loss to the BIF from these tw o cases. A s s e t S e c u r it iz a t io n G u a r a n t e e s As part of the FDIC's efforts to maximize the return from the sale or disposition of assets from bank resolutions, the FDIC has securitized some receivership assets. To facilitate the securitizations, the BIF provided limited guarantees to cover certain losses on the securitized assets up to a specified maximum. In exchange for back ing the limited guarantees, the BIF received assets from the receiverships in an am ount equal to the expected exposure under the guarantees. A t December 31, 2000 and 1999, the BIF had a contingent liability under the guarantees of $1.6 million and $2.5 million, respectively. 8. Assessm ents The 1990 OBR A ct removed caps on assessm ent rate increases and authorized the FDIC to set assessm ent rates for BIF m em bers semiannually, to be applied against a m em ber's average assessm ent base. The FDICIA: 1) required the FDIC to im plem ent a risk-based assessm ent system ; 2) authorized the FDIC to increase assessm ent rates for BIF-member institutions as needed to ensure that funds are available to satisfy the BIF's obligations; 3) required the FDIC to build and maintain the reserves in the insurance funds to 1.25 percent of insured deposits; and 4) authorized the FDIC to increase assessm ent 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 assessm ent system that charges higher rates to those institutions that pose greater risks to the BIF. To arrive at a risk-based assess m ent for a particular institution, the FDIC places each institution in one of nine risk categories, using a tw o step process based first on capital ratios and then on other relevant information. The assessm ent rate averaged approximately 0.14 cents and 0.11 cents per $100 of assessable deposits for 2000 and 1999, respec tively. On November 7, 2000, the Board voted to retain the BIF assessm ent schedule at the annual rate of 0 to 27 cents per $100 of assessable deposits for the first semiannual period of 2001. The Board reviews prem ium rates semiannually. Since May 1995, the BIF has maintained a capitalization level at or higher than the DRR of 1.25 percent of insured deposits. As of December 31, 2000, the capitalization level for BIF is 1.35 percent of estim ated insured deposits. The DIFA (see Note 1) provided, among other things, for the elimination of the mandatory m inim um assessment form erly provided fo r in the FDI Act. It also provided for the expansion of the assessm ent base fo r payments of the interest on obligations issued by the FICO to include all FDIC-insured institutions (including banks, thrifts, and Oakar and Sasser financial institutions). It also made the FICO assessm ent separate from regular assessments, effective on January 1, 1997. BIF-insured banks began paying a FICO assessment on January 1, 1997. From January 1, 1997, through December 31, 1999, the FICO assessm ent rate on BIF-assessable deposits was one-fifth the rate for SAIFassessable deposits. Beginning on January 1, 2000, the annual FICO interest obligations of approximately $790 million w ill be paid on a pro rata basis using the same rate fo r banks and thrifts. The FICO assessm ent has no financial impact on the BIF. The FICO assessm ent is separate from the regular assessments and is imposed on banks and thrifts, not on the insurance funds. The FDIC, as adm inistrator of the BIF and the SAIF, is acting solely as a collection agent for the FICO. During 2000 and 1999, $635 million and $364 million, respectively, was collected from banks and rem itted to the FICO. ■HNHBMMBMHHHMEnBHHMBMMMHnHBMHHMHSHMSMHMMMMHHHNHHHHMHHMMBBI 9. Provision fo r Insurance Losses Provision for insurance losses was negative $153 million for 2000 and $1.2 billion for 1999. The follow ing chart lists the major com ponents of the provision for insurance losses. I Provision fo r Insuran ce Losses fo r th e Years Ended D e ce m b er 31 Dollars in } Thousands 2000 1999 Valuation Adjustments: Open bank assistance $ Closed banks (2,956) $ (20,098) Assets acquired from assisted banks and term inated receiverships (6,280) 325,836 336 (10,977) (22,718) Total Valuation Adjustments 308,579 Contingent Liabilities Adjustments: A nticipa ted fa ilu re of insured in stitution s (133,645) 849,000 Assistance agreem ents (533) 8,792 Litigation losses 3,964 2,294 A sset securitization guarantees (30) Total $ 84 (130,244) Total Contingent Liabilities Adjustments 860,170 (152,962) S 1,168,749 10. Pension Benefits, Savings Plans, and A ccrued A nnual Leave Eligible FDIC employees (permanent and term employees w ith appointm ents exceeding one year) are covered by either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). The CSRS is a defined benefit plan, w hich is o ffse t w ith the Social Security System in certain cases. Plan benefits are determ ined on the basis o f years of creditable service and compensation levels. The CSRS-covered employees also can contribute to the tax-deferred Federal T hrift Savings Plan (TSP). The FERS is a three-part plan consisting o f a basic defined b e n e fit plan th a t provides benefits based on years o f creditable service and com pensation levels, Social S ecurity benefits, and the TSP. A u to m a tic and matching em ployer contributions to the TSP are provided up to specified am ounts under the FERS. IPension Dollars Although the BIF contributes a portion of pension benefits fo r eligible employees, it does not account for the assets of either retirem ent system . The BIF also does not have actuarial data fo r accumulated plan bene fits or the unfunded liability relative to eligible employees. These am ounts are reported on and accounted fo r by the U.S. O ffice of Personnel Management. Eligible FDIC employees also may participate in a FDICsponsored tax-deferred 401 (k) savings plan w ith matching contributions. The BIF pays its share of the em ployer's portion of all related costs. The BIF's pro rata share of the Corporation's liability to employees fo r accrued annual leave is approximately $36.0 million and $38.2 million at December 31, 2000 and 1999, respectively. j B enefits and S aving s Plans Expenses fo r th e Years Ended D e ce m b er 31 in T h o u s a n d s 1999 2000 Civil Service R etirem ent System $ 11,503 $ 10,270 Federal Employees R etirem ent System (Basic Benefit) 30,454 28,449 FDIC Savings Plan 19,202 17,215 Federal T h rift Savings Plan 12,154 11,018 Total $ 73,313 $ 66,952 Bank Insurance Fund 11. P o stretire m e n t Benefits O ther Than Pensions The FDIC provides certain dental and life insurance cover age for its eligible retirees, the retirees' beneficiaries, and covered dependents. Retirees eligible for life insurance coverage are those w h o have qualified due to: 1) im m edi ate enrollm ent upon appointm ent or five years of partici pation in the plan and 2) eligibility fo r an immediate annuity. Dental coverage is provided to all retirees eligible fo r an im m ediate annuity. The life insurance program, underw ritten by M etropolitan Life Insurance Company, provides basic coverage at no cost to retirees and allows converting optional coverages to direct-pay plans. Dental care is u n d e rw ritten by Connecticut General Life Insurance Company and provides coverage at no cost to retirees. I P o s tre tire m e n t B enefits O th e r Than Pensions Dollars in Thousands 2000 1999 Funded Status at December 31 Fair value of plan assets * $ Less: B enefit obligation 75,696 $ 71,286 67,995 75,275 Over/(Under) Funded Status of the Plans S 7,701 S (3,989) Prepaid (accrued) po stretirem ent be ne fit cost recognized in the Statem ents of Financial Position $ 3,618 $ (3,989) $ 3,945 $ 2,468 Expenses and Cash Flows for the Period Ended December 31 N et periodic be ne fit cost Employer contributions 1.604 1,111 Benefits paid 1.604 1,111 Discount rate 5.25% 4.50% Expected return on plan assets 5.25% 4.50% Rate o f com pensation increase 6.30% 3.00% Weighted-Average Assumptions at December 31 * Invested in U.S. Treasury obligations. Total dental coverage trend rates w ere assumed to be 7% per year, inclusive of general inflation. Dental costs w ere assumed to be subject to an annual cap of $2,000. 12. C o m m itm en ts and O ff-B alance-S heet Exposure C o m m it m e n t s Leases The BIF's allocated share of the FDIC’s lease co m m it m ents totals $138.4 million fo r future years. The lease agreem ents contain escalation clauses resulting in adjust ments, usually on an annual basis. The allocation to the BIF of the FDIC's future lease com m itm ents is based upon current relationships of the w orkloads among the BIF, the SAIF, and the FRF. Changes in the relative w ork loads could cause the am ounts allocated to the BIF in the future to vary from the am ounts show n below. The BIF recognized leased space expense of $38.1 million and $41.5 million fo r the years ended December 31, 2000 and 1999, respectively. I Lease C o m m itm e n ts Dollars in Thousands 2001 2002 2003 2004 2005 2006/Thereafter $ 36,547 S 34,802 S 25,635 $ 16,192 $ 10,770 $ 14,424 O f f- B a la n c e - S h e e t E x p o s u r e Asset S ec u ritiza tio n G u a ra n te es As discussed in Note 7, the BIF provided certain limited guarantees to facilitate securitization transactions. The table below gives the maximum off-balance-sheet exposure the BIF has under these guarantees. f lA ss et S e c u ritiza tio n G u a ra n te e s a t D e ce m b er 31 Dollars in Thousands 2000 M axim um exposure under the lim ited guarantees $ Less: G uarantee claim s paid (inception-to-date) 1999 $ (33,730) Less: A m ount o f exposure recognized as a contingent lia b ility (see N ote 7) Maximum Off-Balance-Sheet Exposure Under the Limited Guarantees 406,690 (32,716) (1,605) S 371,355 448,881 (2,477) S 413,688 42 Bank Insurance Fund D epo sit Insurance As of Decem ber 31, 2000, deposits insured by the BIF totaled approximately $2.3 trillion. This w ould be the accounting loss if all depository institutions w ere to fail and the acquired assets provided no recoveries. A s se t Putbacks Upon resolution of a failed bank, the assets are placed into receivership and may be sold to an acquirer under an agreem ent that certain assets may be resold, or "putback,” to the receivership. The values and tim e lim its for these assets to be putback are defined w ithin each agree ment. It is possible that the BIF could be called upon to fund the purchase o f any or all o f the ''unexpired put backs" at any tim e prior to expiration. The FDIC's esti mate of the volume of assets subject to repurchase under existing agreem ents is $73 million. The actual am ount subject to repurchase should be significantly low er because the estim ate does not reflect subsequent collections on or sales of assets kept by the acquirer. It also does not reflect any decrease due to acts by the acquirers w hich m ight disqualify assets from repurchase eligibility. Repurchase eligibility is determ ined by the FDIC when the acquirer initiates the asset putback procedures. The FDIC projects that a total of $2.2 million in book value of assets w ill be putback. 13. C o n cen tratio n o f C re d it Risk As of December 31, 2000, the BIF had $9.1 billion in gross receivables from bank resolutions and $55.7 million in gross assets acquired from assisted banks and te rm i nated receiverships. An allowance fo r loss of $8.7 billion and $44.0 million, respectively, has been recorded against these assets. The liquidating entities' ability to make repayments to the BIF is largely influenced by the econom y of the area in w hich they are located. The BIF's estim ated maximum exposure to possible account ing loss fo r these assets is show n in the table below. 1C o n cen tra tio n of C re d it Risk a t D e ce m b er 31, 2000 Dollars in Millions Southeast Receivables from bank resolutions, net A ssets acquired from assisted banks and term in ate d receiverships, net Total Southwest Northeast Midwest Central West Total $174 $6 $39 $9 $63 $58 $349 0 12 0 0 0 0 12 $174 $18 $39 $9 $63 $58 $361 14. Disclosures A b o u t th e Fair V alue o f Financial Instrum ents Cash equivalents are short-term , highly liquid investm ents and are shown at current value. The fair market value of the investm ent in U.S. Treasury obligations is disclosed in Note 3 and is based on current market prices. The carrying am ount of interest receivable on investm ents, short-term receivables, and accounts payable and other liabilities approximates their fair market value. This is due to their short maturities or comparisons w ith current interest rates. The net receivables from bank resolutions primarily include the BIF's subrogated claim arising from payments to insured depositors. The receivership assets that w ill ulti mately be used to pay the corporate subrogated claim are valued using discount rates that include consideration of market risk. These discounts ultim ately affect the BIF's allowance for loss against the net receivables from bank resolutions. Therefore, the corporate subrogated claim indirectly includes the effect of discounting and should not be viewed as being stated in term s of nominal cash flows. Although the value of the corporate subrogated claim is influenced by valuation o f receivership assets (see Note 4), such receivership valuation is not equivalent to the valuation of the corporate claim. Since the corporate claim is unique, not intended for sale to the private sector, and has no established market, it is not practicable to estim ate its fair market value. The FDIC believes that a sale to the private sector of the corporate claim w ould require indeterm inate, but substan tial discounts fo r an interested party to profit from these assets because of credit and other risks. In addition, the tim ing of receivership payments to the BIF on the subro gated claim does not necessarily correspond w ith the tim ing of collections on receivership assets. Therefore, the e ffe ct of discounting used by receiverships should not necessarily be vie w e d as producing an estim ate o f m arket value fo r the net receivables from bank resolutions. The m ajority of the net assets acquired from assisted banks and term inated receiverships (except real estate) is com prised of various types of financial instrum ents, including investm ents, loans and accounts receivables. Like receivership assets, assets acquired from assisted banks and term inated receiverships are valued using discount rates that include consideration of m arket risk. However, assets acquired from assisted banks and term inated receiverships do not involve the unique aspects of the corporate subrogated claim, and there fore the discounting can be view ed as producing a reasonable estim ate of fair market value. Bank Insurance Fund 1 5 . S u p p le m e n t a r y In f o r m a t i o n R e la t in g t o t h e S t a t e m e n t s o f C a s h F lo w s I R eco nciliatio n of N e t In co m e to N e t Cash Pro vid ed by O p e ra tin g A c tiv itie s fo r th e Years Ended D e ce m b er 31 Dollars J in T h o u s a n d s 1999 2000 Net Income S 1,260,619 S (106,445) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Income Statement Items: (152,962) 1,168,749 A m ortization o f U.S. Treasury obligations 128,875 164,880 TIIS in fla tio n adjustm ent (93,204) (26,930) 28,799 12,288 1,152 4,476 (Increase) Decrease in in tere st receivable on investm ents and other assets (85,516) 188,322 Decrease (Increase) in receivables from bank resolutions 602,712 (311,671) 8,686 17,599 Provision fo r insurance losses D epreciation on property and equipm ent R etirem ent of capitalized equipm ent Change in Assets and Liabilities: Decrease in assets acquired fro m assisted banks and te rm in ate d receiverships 5,244 (45,219) (219,000) Increase (Decrease) in accounts payable and other lia b ilitie s (Decrease) in contingent lia b ilitie s fo r an ticipated fa ilu re o f insured in stitution s (574,000) (10,143) (13,007) Increase (Decrease) in contingent lia b ilitie s fo r litig a tio n losses 7,958 (14,595) (Decrease) in contingent lia b ilitie s fo r asset securitization guarantees (842) (4,748) (Decrease) in contingent lia b ilitie s fo r assistance agreem ents Net Cash Provided by Operating Activities $ 1,482,378 S 459,699 Federal Deposit Insurance Corporation 1 S aving s A ssociation Insurance Fund S ta te m e n ts of Financial Position a t D e ce m b er 31 Dollars in | Thousands 2000 1999 Assets Cash and cash equivalents $ Cash and other assets: Restricted fo r SAIF-m em ber e xit fees (N ote 3) (Includes cash and cash equivalents of $ 40.2 million and $ 23.3 million at December 31 , 2000 and December 31 , 1999 , respectively) 149,988 $ 146,186 283,780 268,490 H eld -to-m atu rity securities 7,950,849 8,080,854 Available-for-sale securities 2,708,965 1,898,718 188,473 153,558 4,147 62,244 Investment in U.S. Treasuryobligations.net: (Note 4) Interest receivable on investm ents and other assets, net Receivables from th rift resolutions, net (N ote 5) Total Assets $ 11,286,202 S 10,610,050 $ 7,748 $ 4,888 Liabilities Accounts payable and other lia b ilitie s Contingent liabilities for: (Note 6) A nticipated fa ilu re of insured in stitution s 234,083 Litigation losses 56,000 1,943 0 SAIF-member e x it fees and investm ent proceeds held in escrow (N ote 3) 283,780 268,490 Total Liabilities 527,554 329,378 10,676,477 10,312,416 82,171 (31,744) 10,758,648 10,280,672 Commitments and off-balance-sheet exposure (Note 11) Fund Balance Accum ulated net income Unrealized gain/(loss) on available-for-sale securities, ne t (N ote 4) Total Fund Balance Total Liabilities and Fund Balance The accompanying notes are an integral part o f these financial statements. $ 11,286,202 $ 10,610,050 46 1 Savinj>>. A ss ocialiou h iM J r a iic c Fund 1Savings Association Insurance Fund S ta te m e n ts of Incom e and Fund Balance fo r th e Years Ended D ecem b er 31 Dollars 1 in T h o u s a n d s 2000 1999 Revenue Interest on U.S. Treasury obligations $ A ssessm ents (N ote 7) 644,222 $ 585,830 19,237 49 664,080 Total Revenue 15,116 621 O ther revenue 600,995 Expenses and Losses Operating expenses 110,920 92,882 Provision fo r insurance losses (N ote 8) 180,805 30,648 O ther insurance expenses 8,293 Net Income 626 300,018 Total Expenses and Losses 124,156 364,062 476,839 Unrealized gain/(loss) on available-for-sale securities, net (N ote 4) 113,914 (35,998) Comprehensive Income 477,976 440,841 10,280,672 9,839,831 Fund Balance - Beginning Fund Balance - Ending The accompanying notes are an integral part o f these financial statements. S 10,758,648 $ 10,280,672 1 S aving s A ssociation Insurance Fund S ta te m e n ts o f Cash F lo w s fo r th e Years Ended D e ce m b er 31 Dollars in Thousands 2000 1999 Cash Flows From Operating Activities Cash provided by: Interest on U.S. Treasury obligations $ 606,521 $ 606,244 Assessm ents 19,829 15,384 Entrance and e x it fees, including in tere st on e xit fees (N ote 3) 14,414 15,487 Recoveries fro m th rift resolutions 88,451 5,775 60 2,310 M iscellaneous receipts Cash used by: (107,137) Disbursem ents fo r th rift resolutions M iscellaneous disbursem ents (91,789) (39,753) O perating expenses (64,494) (17) 582,368 1,630,000 1,635,000 150,000 Net Cash Provided by Operating Activities (Note 13) (306) 488,611 425,000 Cash Flows From Investing Activities Cash provided by: M a tu rity o f U.S. Treasury obligations, he ld -to-m atu rity M a tu rity o f U.S. Treasury obligations, available-for-sale Cash used by: (1,522,399) Restricted Cash and Cash Equivalents - Ending Cash and Cash Equivalents - Ending The accompanying notes are an integral part o f these financial statements. 721,984 149,988 Unrestricted Cash and Cash Equivalents - Ending (552,496) 169,488 Cash and Cash Equivalents - Beginning (1,041,107) 20,653 Net lncrease/(Decrease) in Cash and Cash Equivalents (1,775,103) (561,715) Net Cash Used by Investing Activities (1,326,004) (819,316) Purchase of U.S. Treasury obligations, he ld -to-m atu rity Purchase of U.S. Treasury obligations, available-for-sale 146,186 40,153 $ 190,141 23,302 $ 169,488 Notes to the Financial Statements December 31, 2000 and 1999 1. Legislative H istory and O perations o f th e Savings A ssociation Insurance Fund Legislative History The Financial In stitu tio n s Reform , Recovery, and E nforcem ent A ct o f 1989 (FIRREA) w as 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 (FDIC) as the adm inistrator of these funds. All three funds are maintained separately to carry out their respective mandates. The SAIF and the BIF are insurance funds responsible for protecting insured th rift and bank depositors from loss due to institution failures. The FRF is a resolution fund responsible for winding up the affairs of the form er Federal Savings and Loan Insurance Corporation (FSLIC) and liquidating the assets and liabilities transferred from the form er Resolution Trust Corporation (RTC). Pursuant to the Resolution Trust Corporation Completion A ct of 1993 (RTC Completion Act), resolution responsibili ty transferred from the RTC to the SAIF on July 1, 1995. Prior to that date, th rift resolutions w ere the responsibility of the RTC (January 1, 1989 through June 30, 1995) or the FSLIC (prior to 1989). Pursuant to FIRREA, an active institution's insurance fund mem bership and primary federal supervisor are generally determ ined by the institution's charter type. Deposits of SAIF-member institutions are generally insured by the SAIF; SAIF m em bers are predom inantly th rifts supervised by the O ffice of Thrift Supervision (OTS). Deposits of BIF-member institutions are generally insured by the BIF; BIF mem bers are predom inantly commercial and savings banks supervised by the FDIC, the O ffice of the Com ptroller of the Currency, or the Federal Reserve Board. In addition to traditional th rifts and banks, several other categories of institutions exist. The Federal Deposit Insurance A ct (FDI Act), Section 5(d)(3), provides that a m em ber of one insurance fund may, w ith the approval of its primary federal supervisor, merge, consolidate w ith, or acquire the deposit liabilities of an institution that is a m em ber of the other insurance fund w ith o u t changing insurance fund status for the acquired deposits. These institutions w ith deposits insured by both insurance funds are referred to as Oakar financial institutions. The FDI Act, Section 5(d)(2)(G), allows SAIF-member th rifts to convert to a bank charter and retain their SAIF m em ber ship. These institutions are referred to as Sasser financial in stitutions. The Hom e O w n e rs' Loan A ct (HOLA), Section 5(o), allow s B IF-m em ber banks to convert to a th rift charter and retain th e ir BIF m em bership. These in stitu tio n s are referred to as HOLA th rifts. Other Significant Legislation The Com petitive Equality Banking A ct of 1987 established the Financing Corporation (FICO) as a mixed-ownership governm ent corporation w hose sole purpose was to function as a financing vehicle fo r the FSLIC. The Omnibus Budget Reconciliation A ct of 1990 (1990 OBR Act) and the Federal Deposit Insurance Corporation Im provem ent A ct of 1991 (FDICIA) made changes to the FDIC's assessm ent authority (see Note 7) and borrowing authority. The FDICIA also requires the FDIC to: 1) resolve failing institutions in a manner that w ill result in the least possible cost to the deposit insurance funds and 2) maintain the insurance funds at 1.25 percent of insured deposits or a higher percentage as circumstances warrant. The Deposit Insurance Funds A ct of 1996 (DIFA) was enacted to provide for: 1) the capitalization of the SAIF to its designated reserve ratio (DRR) of 1.25 percent by means of a one-tim e special assessm ent on SAIF-insured deposits; 2) the expansion of the assessm ent base for payments of the interest on obligations issued by the FICO to include all FDIC-insured th rifts and banks; 3) beginning January 1, 1997, the im position of a FICO assessm ent rate on SAIF-assessable deposits that is five tim es the rate for BIF-assessable deposits through the earlier of Decem ber 31, 1999, or the date on w hich the last savings association ceases to exist; 4) the pay m ent of the annual FICO interest obligation of approxi mately $790 million on a pro rata basis betw een thrifts and banks on the earlier of January 1, 2000, or the date on w hich the last savings association ceases to exist; 5) authorization of SAIF assessm ents only if needed to maintain the fund at the DRR; 6) the refund of am ounts in the SAIF in excess o f the DRR w ith such refund not to exceed the previous semiannual assessment; 7) assess m ent rates fo r SAIF m em bers not low er than the assess m ent rates fo r BIF m em bers w ith comparable risk; and 8) the merger of the SAIF and the BIF on January 1, 1999, if no insured depository institution is a savings association on that date. Congress did not enact legislation to either merge the SAIF and the BIF or to elim inate the th rift charter. The DIFA required the establishment of a Special Reserve of the SAIF if, on January 1, 1999, the reserve ratio exceeded the DRR of 1.25 percent. The reserve ratio exceeded the DRR by approximately 0.14 percent on January 1, 1999. As a result, $978 million was placed in a Special Reserve of the SAIF and was administered by the FDIC. On November 12, 1999, the Gramm-LeachBliley A ct (GLBA) w as enacted w hich eliminated the SAIF Special Reserve. The GLBA was enacted in order to modernize the finan cial services industry (banks, brokerages, insurers, and other financial service providers). The GLBA lifts restric tions on affiliations among banks, securities firm s, and insurance companies. It also expands the financial activities perm issible fo r financial holding companies and insured depository institutions, their affiliates and subsidiaries. Recent Legislative Initiatives Congress continues to focus on legislative proposals that w ould affect the deposit insurance funds. The FDIC has proposed an initiative to reform the deposit insurance system. Some of the proposals, such as deposit insurance pricing and determ ining deposit insurance levels, may have a significant im pact on the SAIF and the BIF, if enacted into law. However, these proposals continue to vary and FDIC management cannot predict w hich provisions, if any, w ill ultim ately be enacted. Operations of the SAIF The primary purpose of the SAIF is to: 1) insure the deposits and protect the depositors of SAIF-insured insti tutions and 2) resolve failed institutions, including manag ing and liquidating their assets. In this capacity, the SAIF has financial responsibility fo r all SAIF-insured deposits held by SAIF-member institutions and by BIF-member banks designated as Oakar financial institutions. The SAIF is primarily funded from interest earned on investm ents in U.S. Treasury obligations and SAIF assessm ent prem ium s. Additional funding sources are borrowings from the U.S. Treasury, the Federal Financing Bank (FFB), and the Federal Flome Loan Banks, if neces sary. The 1990 OBR A ct established the FDIC's authority to borrow working capital from the FFB on behalf of the SAIF and the BIF. The FDICIA increased the FDIC's authority to borrow fo r insurance losses from the U.S. Treasury, on behalf of the SAIF and the BIF, from $5 billion to $30 billion. The FDICIA also established a limitation on obligations that can be incurred by the SAIF, known as the m axim um obligation lim itation (MOL). As of D ecem ber 31, 2000 and D ecem ber 31,1999, the M O L fo r the SAIF w as $18.4 billion and $16.7 billion, respectively. Receivership Operations The FDIC is responsible fo r managing and disposing of the assets o f failed institutions in an orderly and efficient manner. The assets held by receivership entities, and the claims against them , are accounted fo r separately from SAIF assets and liabilities to ensure that liquidation proceeds are distributed in accordance w ith applicable laws and regulations. Also, the income and expenses attributable to receiverships are accounted fo r as transac tions o f those receiverships. Liquidation expenses paid by the SAIF on behalf o f the receiverships are recovered from those receiverships. 2. S um m ary o f S ig n ific a n t A ccounting Policies General These financial statem ents pertain to the financial position, results of operations, and cash flo w s of the SAIF and are presented in accordance w ith generally accepted accounting principles (GAAP). These statem ents do not include reporting fo r assets and liabilities of closed th rift institutions for w hich the FDIC acts as receiver or liquidat ing agent. Periodic and final accountability reports of the FDIC's activities as receiver or liquidating agent are furnished to courts, supervisory authorities, and others as required. Use of Estimates FDIC m anagem ent makes estim ates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estim ates. W here it is reasonably possible that changes in estim ates w ill cause a material change in the financial statem ents in the near term , the nature and extent of such changes in estim ates have been disclosed. Cash Equivalents Cash equivalents are short-term , highly liquid investm ents w ith original m aturities of three m onths or less. Cash equivalents consist prim arily of Special U.S. Treasury C ertificates. Investments in U.S. Treasury Obligations Investm ents in U.S. Treasury obligations are recorded pur suant to the S tatem ent of Financial Accounting Standards (SFAS) No. 115, "Accounting fo r Certain Investm ents in Debt and Equity Securities.” SFAS No. 115 requires that securities be classified in one of three categories: held-tomaturity, available-for-sale, or trading. The SAIF does not designate any securities as trading. Securities designated as held-to-m aturity are show n at am ortized cost. Am ortized cost is the face value of securities plus the unamortized prem ium or less the unamortized discount. Am ortizations are com puted on a daily basis from the date of acquisition to the date of maturity. Securities designated as available-for-sale are show n at market value, w hich approximates fair value. Unrealized gains and losses are included in C om prehensive Income. Realized gains and losses are included in the Statem ents of Incom e and Fund Balance as com ponents of Net Income. Interest on both types of securities is calculated on a daily basis and recorded m onthly using the effective interest method. Allowance for Losses on Receivables From Thrift Resolutions The SAIF records a receivable fo r the am ounts advanced and/or obligations incurred fo r resolving failing and failed thrifts. Any related allowance fo r loss represents the dif ference betw een the funds advanced and/or obligations incurred and the expected repayment. The latter is based on estim ates of discounted cash recoveries from the assets of assisted or failed thrifts, net of all applicable estim ated liquidation costs. Cost Allocations Among Funds Operating expenses not directly charged to the funds are allocated to all funds administered by the FDIC using workload-based-allocation percentages. These percent ages are developed during the annual corporate planning process and through supplem ental functional analyses. Postretirement Benefits Other Than Pensions The FDIC established an e ntity to provide the accounting and adm inistration of postretirem ent benefits on behalf of the SAIF, the BIF, and the FRF. Each fund has fully paid its liability fo r these benefits directly to the entity. The SAIF's prepaid or accrued postretirem ent benefit cost is presented in the SAIF's Statem ents o f Financial Position. Disclosure About Recent Accounting Pronouncements S tatem ent of Financial A ccounting Standards (SFAS) No. 138, “Accounting fo r Certain Derivative Instrum ents and Certain Hedging Activities, an am endm ent of SFAS No. 133,” was issued in June 2000. For entities that adopted SFAS No. 133, “Accounting fo r Derivative Other recent accounting pronouncem ents w ere evaluated and deemed to be not applicable to the financial statements. Instruments and Hedging Activities" prior to June 15, 2000, Statem ent 138 is effective for all fiscal quarters beginning after June 15, 2000. SFAS No. 138 amends Statem ent 133 principally fo r certain issues relating to hedging transactions. The adoption o f these sta te m e n ts has no material quantitative or qualitative impact on the SAIF's Statements of Financial Position, Income and Fund Balance, and Cash Flows. Related Parties The nature of related parties and a description of related party transactions are discussed in Note 1 and disclosed throughout the financial statem ents and footnotes. WMBMMBMMMBMWBHWBBMWHWMWBMMMBMWMHIMMIIIIIIIIWWIIBIIM 3. Cash and O ther Assets: R estricted fo r S A IF-M em ber Exit Fees The SAIF collects entrance and exit fees fo r conversion transactions when an insured depository institution con verts 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 of Directors (Board) and published in the Federal R egister on March 21, 1990, directed that exit fees paid to the SAIF be held in escrow. The FDIC and the Secretary of the Treasury will determine when it is no longer necessary to escrow such funds for the payment of interest on obligations previously issued by the FICO. These escrowed exit fees are invested in U.S. Treasury securities pending determination of ow ner ship. The interest earned is also held in escrow. There w ere no conversion transactions during 2000 and 1999 that resulted in an exit fee to the SAIF. le a s h and O th e r Assets: R estricted fo r S A IF -M e m b e r E xit Fees a t D e ce m b er 31 Dollars \ in T h o u s a n d s 1999 2000 Cash and cash equivalents ' '$ 23,302 239,975 4,529 684 3 Exit fees receivable $ 4,535 Interest receivable on U.S. Treasury obligations Total 40,154 239,088 Investm ent in U.S. Treasury obligations, net s 283,780 s 268,490 52 Havings Association Insurance Fund 1 U .S. T reasu ry O b lig a tio n s a t D e ce m b er 31, 20 00 (R estricted fo r S A IF -M e m b e r E xit Fees) Dollars in I Thousands Held-to-Maturity Unrealized Unrealized Yield at Face Amortized Holding Holding Maturity Purchase Value Cost Gains Losses Less than 1 year 5.52% 1 -3 years 6.12% 135,000 134,831 2,012 3-5 years 5.79% 20,000 21,189 455 5-10 years 5.20% Total $ 15,000 $ 15,093 64,000 _ _____ $ 234,000 $ $ 0 $ 2,921 Value (20) $ 0 0 454 67,975 239,088 $ Market 21,644 (373) $ (393) 15,073 136,843 6J3,056 $ 241,616 I U .S. Treasury O b lig a tio n s a t D e ce m b er 31, 1999 (R estricted fo r S A IF -M e m b e r E xit Fees) Dollars in Thousands Held-to-Maturity Unrealized Maturity Unrealized Yield at Face Amortized Holding Holding Market Purchase Value Cost Gains Losses Value 1-3 years 5.90% 3-5 years 6.30% 55,000 56,131 217 (582) 55,766 5-10 years 5.20% 64,000 68,508 0 (5,265) 63,243 Total $ S 115,000 234,000 $ $ 115,336 239,975 $ S 0 217 $ $ (876) (6,723) $ $ 114,460 233,469 The unamortized premium, net of the unamortized discount, was $5.1 million and $6.0 million at December 31, 2000 and 1999, respectively. 4. Investm en t in U.S. Treasury O bligations, N e t book value is com puted by adding the amortized cost of the held-to-maturity securities to the market value of the available-for-sale securities. In 2000, the FDIC purchased $291 million of Treasury inflation-indexed securities (TIIS) fo r the SAIF. These securities are indexed to increases or decreases in the Consumer Price Index (CPI). Cash received by the SAIF is invested in non-marketable Government A ccount Series (GAS) market-based U.S. Treasury securities w ith maturities exceeding three months. As of December 31, 2000 and December 31, 1999, the book value of investm ents in U.S. Treasury Obligations, net, w as $10.7 billion and $10 billion, respectively. The III.S . Treasury O b lig a tio n s a t D e ce m b er 31, 2 0 00 (U n re stric te d ) Dollars in Thousands Held-to-Maturity Unrealized Maturity Purchase Amortized Holding Holding Value • Unrealized Face Yield at Cost Gains Losses 6.04% 1,640,000 1,675,585 21,246 0 3-5 years 6.62% 930,000 932,512 49,654 0 982,166 5-10 years 5.64% 3,380,394 3,440,704 117,935 (5,768) 3,552,871 7,950,849 S 191,181 7,849,894 $ $ 2,346 $ $ (52) 1,904,342 1-3 years $ 1,902,048 Value 5.98% Total $ $ Less than one year $ 1,899,500’ Market (5,820) 1,696,831 $ 8,136,210 A v a ila b le -fo r-S a le Unrealized Maturity Unrealized Yield at Face Amortized Holding Holding Market Purchase* Value Cost Gains Losses Value Less than one year 5.17% 1-3 years 6.56% $ 80,000 $ 80,269 $ 439,061 450,000 0 $ (181) 14,005 $ 0 80,088 453,066 3-5 years 6.14% 805,000 836,059 30,855 0 866,914 5-10 years 4.43% 1,288,270 1,271,405 37,492 0 1,308,897 Total S 2,623,270 S 2,626,794 $ 82,352 S (181) S (6,001) S 2,708,965 Total Investment in U.S. Treasury Obligations, Net Total S 10,473,164 S 10,577,643 $ 273,533 S 10,845,175 For Treasury inflation-indexed securities (TIIS), the yields in the above table include their real yields at purchase, not their effective yields. Effective yields on TIIS include a weighted average o f Bloomberg's calculation o f yield with an inflation assumption. The inflation assumption o f 3.4% was the latest year-over-year increase in the Consumer Price Index (CPII on November 30, 2000. These effective yields are 7 18% and 7.47% for TIIS classified as held-to-maturity and available-for-sale, respectively. . T Includes two Treasury notes totaling $150 million which matured on Sunday, December 31,2000. Settlement occurred on the next business day, January 2,2001. 1 U .S. Treasury O b lig a tio n s, N e t a t D e ce m b er 31, 1999 (U n re stric te d ) Dollars in H H Thousands Held-to-Maturity Unrealized Maturity Unrealized Yield at Face Amortized Holding Holding Purchase* Value Cost Gains Losses Less than one year 5.93% 1 -3 years 5.97% 3-5 years 5.34% 5-10 years 5.61% Total $ 1,630,000 $ 2,915,000 1,631,605 $ 1,020 $ (1,154) Market Value $ 1,631,471 280 705,000 739,940 2,131 (4,218) 737,853 2,713,214 $ 2,937,618 2,771,691 5,896 (126,467) 2,651,120 9,327 S (145,860) 7,963,214 $ 8,080,854 $ (14,021) 2,923,877 $ 7,944,321 Available-for-Sale Unrealized Maturity Unrealized Yield at Face Amortized Holding Holding Market Purchase* Value Cost Gains Losses Value Less than one year 5.62% 1-3 years 5.17% 80,000 81,096 3-5 years 6.28% 240,000 255,838 5-10 years 5.03% 1,447,582 1,443,149 Total $ $ 150,000 1,917,582 $ $ 150,379 1,930,462 $ 22 $ 0 0 0 $ 22 (14) $ 150,387 (1,046) 253,687 (28,555) $ 80,050 (2,151) 1,414,594 (31,766) $ 1,898,718 $ (177,626) S 9,843,039 Total Investment in U.S. Treasury Obligations, Net Total $ 9,880,796 S 10,011,316 $ 9,349 * For Treasury inflation-indexed securities (TIIS), the yields in the above table include their real yields at purchase, not their effective yields. Effective yields on TIIS include a weighted average o f Bloomberg's calculation o f yield with an inflation assumption. The inflation assumption o f 2.6% was the latest year-over-year increase in the Consumer Price Index (CPI) on December 14, 1999. These effective yields are 6.47% and 6.71 % for TIIS classified as held-tomaturity and available-for-sale, respectively. As of Decem ber 31, 2000 and 1999, the unamortized prem ium, net of the unamortized discount, was $104.5 million and $130.5 million, respectively. R H M M H i ■ ■ M M M 5. Receivables fro m T h rift Resolutions, N e t The th rift resolution process takes different form s depending on the unique facts and circumstances surrounding each failing or failed institution. Payments for institutions that fail are made to cover obligations to insured depositors and represent claims by the SAIF against the receiverships' assets. There was one th rift failure in 2000 and one in 1999, w ith assets at failure of $30 million and $63 million, respectively, and SAIF outlays of $29 million and $63 million, respectively. Assets held by the FDIC in its receivership capacity for closed SAIF-insured institutions are the main source of repaym ent of the SAIF's receivables from closed thrifts. As of December 31, 2000 and 1999, SAIF receiverships held assets w ith a book value of $56.1 million and $114 million, respectively (including cash and miscellaneous receivables of $48.2 m illion and $104.0 m illion at December 31, 2000, and 1999, respectively). The estimated cash recoveries from the management and disposition of these assets that are used to derive the allowance fo r losses are based, in part, on a statistical sampling of receivership assets. These estim ated recoveries are regularly evaluated, but remain subject to uncertainties because of potential changes in economic conditions. These factors could cause the SAIF’s and other claimants' actual recoveries to vary from the level currently estimated. 6. C o n tin g en t Liabilities for: Anticipated Failure of Insured Institutions The SAIF records a contingent liability and a loss provision fo r thrifts (including Oakar and Sasser financial institu tions) that are likely to fail, absent some favorable event such as obtaining additional capital or merging, w hen the liability becomes probable and reasonably estimable. The contingent liabilities for anticipated failure of insured institutions as of December 31, 2000 and 1999, were $135 million and $56 million, respectively. The contingent liability is derived in part from estim ates of recoveries from the management and disposition of the assets of these probable th rift failures. Therefore, these estim ates are subject to the same uncertainties as those affecting the SAIF's receivables from thrift resolutions (see Note 5). Consequently, this could affect the ultim ate cost to the SAIF from probable failures. There are other th rifts w here the risk of failure is less certain, but still considered reasonably possible. Should these th rifts fail, the SAIF could incur additional estim ated losses ranging from $1 million to $255 million. The accuracy of these estim ates w ill largely depend on future economic conditions. The Board has the statutory authority to consider the contingent liability from anticipat ed failures of insured institutions w hen setting assessment rates. Litigation Losses The SAIF records an estim ated loss fo r unresolved legal cases to the extent those losses are considered probable and reasonably estimable. In addition to the am ount recorded as probable, the FDIC has determined that losses from unresolved legal cases totaling $617 thousand are reasonably possible. 7. Assessm ents The 1990 OBR A ct removed caps on assessm ent rate increases and authorized the FDIC to set assessm ent rates for SAIF m em bers semiannually, to be applied against a m em ber's average assessm ent base. The FDICIA: 1) required the FDIC to im plem ent a risk-based assessm ent system ; 2) authorized the FDIC to increase assessm ent rates fo r SAIF-member institutions as needed to ensure that funds are available to satisfy the SAIF's obligations; 3) required the FDIC to build and maintain the reserves in the insurance funds to 1.25 percent of insured deposits; and 4) authorized the FDIC to increase assess m ent rates more frequently than semiannually and impose em ergency special assessm ents as necessary to ensure that funds are available to repay U.S. Treasury borrowings. The FDIC uses a risk-based assessm ent system that charges higher rates to those institutions that pose greater risks to the SAIF. To arrive at a risk-based assessm ent for a particular institution, the FDIC places each institution in one of nine risk categories, using a tw o-step process based first on capital ratios and then on other relevant information. The assessment rate averaged approximately 0.24 cents and 0.20 cents per $100 of assessable deposits for 2000 and 1999, respectively. On November 7, 2000, the Board voted to retain the SAIF assessm ent schedule at the annual rate of 0 to 27 cents per $100 of assessable deposits for the firs t semiannual period of 2001. The Board reviews prem ium rates semiannually. The DIFA (see Note 1) provided, among other things, for the capitalization of the SAIF to its DRR of 1.25 percent by means of a one-tim e special assessm ent on SAIFinsured deposits. The SAIF achieved its required capital ization by means of a $4.5 billion special assessm ent effective October 1, 1996. Since October 1996, the SAIF has maintained a capitalization level at or higher than the DRR of 1.25 percent of insured deposits. As of December 31, 2000, the capitalization level fo r the SAIF is 1.43 percent of estim ated insured deposits. The DIFA provided fo r the elimination of the mandatory m inim um assessm ent form erly provided for in the FDI Act. It also provided for the expansion of the assessm ent base fo r payments of the interest on obligations issued by the FICO to include all FDIC-insured institutions (including thrifts, banks, and Oakar and Sasser financial institutions). It also made the FICO assessm ent separate from regular assessments, effective on January 1, 1997. The FICO assessm ent has no financial impact on the SAIF. The FICO assessm ent is separate from the regular assessm ents and is imposed on th rifts and banks, not on the insurance funds. The FDIC, as adm inistrator of the SAIF and the BIF, is acting solely as a collection agent fo r the FICO. During 2000 and 1999, $158 million and $426 million, respectively, w as collected from SAIFm em ber institutions and rem itted to the FICO. 8. Provision fo r Insurance Losses Provision for insurance losses was $180.8 million and $30.6 m illion fo r Decem ber 31, 2000 and D ecem ber 31, 1999, respectively. The large provision in 2000 was primarily attributed to recognizing losses of $186.1 million fo r the anticipated failure of insured institutions. The follow ing chart lists the major com ponents of the provision for insurance losses. I Provision fo r Insurance Losses fo r th e Years Ended D e ce m b er 31 Dollars in T h o u s a n d s 2000 Valuation Adjustments: Closed banks $ (7,221) 1999 $ (11,352) (7,221) (11,352) 186,083 42,000 1,943 Total Valuation Adjustments 0 Contingent Liabilities Adjustments: A nticipa ted fa ilu re of insured in stitution s Litigation losses Total Contingent Liabilities Adjustments Total 188,026 $ 180,805 42,000 $ 30,648 9 . Pension B enefits, Savings Plans, and A ccrued A nnual Leave Eligible FDIC employees (permanent and term employees w ith appointm ents exceeding one year) are covered by either the Civil Service R etirem ent System (CSRS) or the Federal Employees R etirem ent System (FERS). The CSRS is a defined benefit plan, w hich is o ffse t w ith the Social Security System in certain cases. Plan benefits are determ ined 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 b e n e fit plan that provides ben e fits based on years of creditable service and com pensation levels, Social Security benefits, and the TSP. A u to m a tic and matching em ployer contributions to the TSP are provided up to specified am ounts under the FERS. Although the SAIF contributes a portion of pension benefits fo r eligible employees, it does not account for the assets of either retirem ent system . The SAIF also does not have actuarial data fo r accumulated plan bene fits or the unfunded liability relative to eligible employees. These am ounts are reported on and accounted for by the U.S. O ffice of Personnel Management. Eligible FDIC employees also may participate in a FDICsponsored tax-deferred 401 (k) savings plan w ith matching contributions. The SAIF pays its share of the em ployer's portion of all related costs. The SAIF's pro rata share of the Corporation's liability to employees fo r accrued annual leave is approximately $5.0 million and $4.4 million at Decem ber 31, 2000 and 1999, respectively. Pension B enefits and S aving s Plans Expenses fo r th e Years Ended D e ce m b er 31 Dollars in T h o u s a n d s 2000 Civil Service R etirem ent System "$ 1,603 1999 $ 1,276 Federal Employees R etirem ent System (Basic Benefit) 4,092 3,268 FDIC Savings Plan 2,594 2,029 Federal T h rift Savings Plan 1,631 1,267 Total $ 9,920 S 7,840 10. P o stretire m e n t Benefits O ther Than Pensions The FDIC provides certain dental and life insurance cover age for its eligible retirees, the retirees' beneficiaries, and covered dependents. Retirees eligible fo r life insurance coverage are those w ho have qualified due to: 1) im m edi ate enrollm ent upon appointm ent or five years of partici pation in the plan and 2) eligibility for an immediate annuity. Dental coverage is provided to all retirees eligible fo r an im m ediate annuity. The life insurance program, underw ritten 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 u n d e rw ritten by Connecticut General Life Insurance Company and provides coverage at no cost to retirees. I P o s tre tire m e n t B enefits O th e r T h a n Pensions Dollars in Thousands 2000 1999 Funded Status at December 31 Fair value of plan assets* $ Less: B enefit obligation Over/(Under) Funded Status of the Plans Prepaid (accrued) po stretirem ent b e n e fit cost recognized in th e S tatem ents of Financial Position 5,479 $ 4,811 5,160 5,833 $ 668 $ (673) $ 101 $ (673) 601 $ 483 Expenses and Cash Flows for the Period Ended December 31 N et periodic b e n e fit cost $ Employer contributions 223 129 Benefits paid 223 129 Weighted-Average Assumptions at December 31 D iscount rate 5.25% 4.50% Expected return on plan assets 5.25% 4.50% Rate o f com pensation increase 6.30% 3.00% * Invested in U.S. Treasury obligations. Total dental coverage trend rates w ere assumed to be 7% per year, inclusive of general inflation. Dental costs w ere assumed to be subject to an annual cap of $2,000. 11. C o m m itm en ts and O ff-B alance-S heet Exposure C om m itm ents Leases The SAIF's allocated share of the FDIC's lease co m m it m ents totals $19.2 million fo r future years. The lease agreem ents contain escalation clauses resulting in adjust ments, usually on an annual basis. The allocation to the SAIF of the FDIC's future lease com m itm ents is based upon current relationships of the workloads among the SAIF, the BIF, and the FRF. Changes in the relative w ork loads could cause the am ounts allocated to the SAIF in the future to vary from the am ounts show n below. The SAIF recognized leased space expense o f $5.7 million at both December 31, 2000 and 1999, respectively. Lease C o m m itm e n ts Dollars in T h o u s a n d s 2001 2002 2003 2004 2005 2006/Thereafter S 5,074 $ 4,832 $ 3,559 S 2,248 S 1,495 $ 2,003 Off-Balance-Sheet Exposure D e p o sit Insurance As of Decem ber 31, 2000, deposits insured by the SAIF totaled approximately $753 billion. This w ould be the accounting loss if all depository institutions w e re to fail and the acquired assets provided no recoveries. ■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■ 12. Disclosures A b o u t th e Fair V alue o f Financial Instrum ents Cash equivalents are short-term , highly liquid investm ents and are show n at current value. The fair m arket value of the investm ent in U.S. Treasury obligations is disclosed in Notes 3 and 4 and is based on current m arket prices. The carrying am ount of interest receivable on investments, short-term receivables, and accounts payable and other liabilities approximates their fair m arket value. This is due to their short m aturities or comparisons w ith current interest rates. As explained in Note 3, entrance and exit fees receivables are net of discounts calculated using an interest rate comparable to U.S. Treasury Bill or Government bond/note rates at the tim e the receivables are accrued. The net receivables from th rift resolutions primarily include the SAIF's subrogated claim arising fro m paym ents to insured depositors. The receivership assets th a t w ill ultim ately be used to pay the corporate subrogated claim are valued using discount rates that include consid eration of market risk. These discounts ultim ately affect the SAIF's allowance for loss against the net receivables from thrift resolutions. Therefore, the corporate subrogated claim indirectly includes the e ffe c t o f discounting and should not be view ed as being stated in te rm s of nominal cash flow s. Although the value of the corporate subrogated claim is influenced by valuation of receivership assets (see Note 5), such receivership valuation is not equivalent to the valua tion of the corporate claim. Since the corporate claim is unique, not intended fo r sale to the private sector, and has no established market, it is not practicable to estimate its fair m arket value. The FDIC believes that a sale to the private sector of the corporate claim w ould require indeterm inate, but substantial, discounts fo r an interested party to profit from these assets because of credit and other risks. In addition, the tim ing of receivership payments to the SAIF on the subrogated claim does not necessarily correspond w ith the tim ing o f collections on receivership assets. Therefore, the e ffe ct o f discounting used by receiverships should not necessarily be vie w e d as producing an estim ate of market value for the net receivables from th rift resolutions. 13. S up plem en tary In fo rm a tio n R elating to th e S ta te m en ts o f Cash Flows I R eco nciliatio n of N e t In co m e to N e t Cash Pro vid ed by O p e ra tin g A c tiv itie s fo r th e Years Ended D ecem b er 31 Dollars in Thousands 2000 Net Income $ 364,062 1999 $ 476,839 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Income Statement Items: 30,648 180,805 Provision fo r insurance losses 32,317 51,708 (36,930) (11,818) Decrease in am ortization o f U.S. Treasury oblig ation s (restricted) 887 808 (Increase) in entrance and e xit fees receivable, including interest receivable on investm ents and other assets (33,381) (13,500) 64,716 (41,450) A m ortization o f U.S. Treasury obligations (unrestricted) TIIS in fla tio n adjustm ent Change in Assets and Liabilities: Decrease (Increase) in receivables from th rift resolutions Increase in receivables from acquired fins (240) 0 Increase (Decrease) in accounts payable and other lia b ilitie s 2,842 (2,325) (Decrease) in contingent lia b ility fo r an ticipated fa ilu re o f insured in stitution s (8,000) (17,000) Increase in e xit fees and investm ent proceeds held in escrow 15,290 14,701 582,368 488,611 Net Cash Provided by Operating Activities $ S FSLIC Resolulion Fund Federal Deposit Insurance Corporation I FSLIC Resolution Fund Statements of Financial Position at December Dollars 31 I in T h o u s a n d s 2000 1999 Assets Cash and cash equivalents $ Receivables from th rift resolutions, ne t (N ote 3) 3,514,541 $ 2,948,138 416,376 1,336,755 1,811,442 Investm ent in securitization related assets acquired from receiverships (N ote 4) 2,725,243 Assets acquired from assisted th rifts and term inated receiverships, net (N ote 5) 34,616 34,407 Other assets, net (N ote 6) 16,125 36,748 Total Assets S 5,793,100 $ $ 42,618 $ 7,081,291 Liabilities Accounts payable and other lia b ilitie s Liab ilities from th rift resolutions (N ote 7) 74,872 73,621 296,817 Contingent liabilities for: (Note 8) A ssistance agreem ents 0 1,445 120,535 Total Liabilities 339 3,045 Litigation losses 372,222 Commitments and concentration o f credit risk (Note 14 and Note 15) Resolution Equity (Note 11) C ontributed capital 129,484,926 131,328,499 A ccum ulated d e fic it (124,267,778) (124,999,600) 455,417 380,170 (123,812,361) (124,619,430) 5,672,565 6,709,069 Unrealized gain on available-for-sale securities, net (N ote 4) A ccum ulated d e ficit, net ________ Total Resolution Equity Total Liabilities and Resolution Equity The accompanying notes are an integral part o f these financial statements. $ 5,793,100 $ 7,081,291 1FSLIC R e s o lu tio n Fund Statements of Income and Accumulated Deficit for the Years Ended December 31 Dollars in Thousands 1999 2000 Revenue Interest on securitization related assets acquired from receiverships $ 85,511 Interest on U.S. Treasury obligations 145,063 Interest on advances and subrogated claim s (N ote 9) $ 104,232 108,001 158,865 19,033 Revenue fro m assets acquired from assisted th rifts and term inated receiverships 15,607 25,476 Lim ited partnership eq uity interests and other revenue 25,640 23,787 Realized gain on investm ent in securitization related assets acquired from receiverships (N ote 4) 91,487 93,113 522,173 373,642 74,102 83,317 (438,642) (278,267) 94,159 80,921 7,114 15,664 Interest expense on notes payable and other expenses 16,133 6,650 Realized loss on investm ent in securitization related assets acquired from receiverships (N ote 4) 37,485 93,604 (209,649) 1,889 731,822 371,753 75,247 64,494 807,069 436,247 (124,619,430) (125,055,677) $ (123,812,361) $ (124,619,430) Total Revenue Expenses and Losses Operating expenses Provision fo r losses (N ote 10) Expenses fo r g o od w ill settlem ents and litig a tio n (N ote 1) Expenses fo r assets acquired from assisted th rifts and term inated receiverships Total Expenses and Losses Net Income Unrealized gain on available-for-sale securities, net (N ote 4) Comprehensive Income Accumulated Deficit - Beginning Accumulated Deficit - Ending The accompanying notes are an integral part o f these financial statements. 1 1 FSLIC Resolution Fund Statem ents of Cash Flows for the Years Ended December 31 Dollars in Thousands 2000 1999 Cash Flows From Operating Activities Cash provided by: Interest on U.S. Treasury obligations $ Interest on securitization related assets acquired from receiverships 145,063 $ 108,001 89,417 1,392,486 Recoveries from th rift resolutions 111,159 592,198 Recoveries from lim ited partnership equity interests 35,616 80,046 Recoveries from assets acquired from assisted th rifts and term in ate d receiverships 51,474 103,699 0 8,166 (78,978) M iscellaneous receipts 28,332 440 Recoveries on conversion o f be ne fit plan (97,299) Cash used by: Operating expenses (121,176) (82,069) Disbursem ents fo r g o od w ill settlem ents and litig a tio n expenses (94,159) (80,921) Disbursem ents fo r assets acquired from assisted th rifts and term inated receiverships (38,196) (40,690) Disbursem ents fo r th rift resolutions M iscellaneous disbursem ents (2) (6) 1,381,985 730,616 1,027,943 1,752,917 1,027,943 1,752,917 25 1,000 (394,593) Net Cash Provided by Operating Activities (Note 17) (4,167,774) Cash Flows From Investing Activities Cash provided by: Investm ent in securitization related assets acquired from receiverships Net Cash Provided by Investing Activities Cash Flows From Financing Activities Cash provided by: U.S. Treasury paym ents fo r g o o d w ill settlem ents Cash used for: Return o f U.S. Treasury paym ents (N ote 11) (1,448,957) Cash and Cash Equivalents - Beginning Cash and Cash Equivalents - Ending The accompanying notes are an integral part o f these financial statements. $ (1,683,241) 2,948,138 Net lncrease/(Decrease) in Cash and Cash Equivalents (4,166,774) 566,403 Net Cash Used by Financing Activities 0 (1,843,525) Payments to R esolution Funding Corporation (N ote 11) 4,631,379 3,514,541 $ 2,948,138 66 FSLIC Resolution Fund Notes to the Financial Statements December 31, 2000 and 1999 1. Legislative H istory and O perations o f th e FSLIC Resolution Fund Legislative History The U.S. Congress created the Federal Savings and Loan Insurance Corporation (FSLIC) through the enactm ent of the National Housing A ct of 1934. The Financial Institutions Reform, Recovery, and Enforcem ent A ct of 1989 (FIRREA) abolished the insolvent FSLIC, created the FSLIC Resolution Fund (FRF), and transferred the assets and liabilities of the FSLIC to the FRF (except those assets and liabilities transferred to the Resolution Trust Corporation (RTC), effective on August 9, 1989. The FRF is responsi ble for w inding up the affairs of the form er FSLIC. The FIRREA was enacted to reform, recapitalize, and consolidate the federal deposit insurance system . In addition to the FRF, FIRREA created the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). It also designated the Federal Deposit Insurance Corporation (FDIC) as the adm inistrator of these funds. All three funds are maintained separately to carry out their respective mandates. The FIRREA also created the RTC to manage and resolve all th rifts previously insured by the FSLIC for w hich a conservator or receiver was appointed during the period January 1, 1989, through A ugust 8, 1992. The FIRREA established the Resolution Funding Corporation (REFCORP) to provide part of the initial funds used by the RTC for th rift resolutions. Additionally, funds w ere appro priated fo r RTC resolutions pursuant to FIRREA, the RTC Funding A ct o f 1991, the RTC Refinancing, Restructuring and Im provem ent A ct of 1991, and the RTC Completion A ct of 1993. The RTC's resolution responsibility was extended through subsequent legislation from the original term ination date of A ugust 8, 1992. Resolution responsibility transferred from the RTC to the SAIF on July 1, 1995. The RTC Completion A ct of 1993 (RTC Completion Act) term in ated the RTC as o f D ecem ber 31, 1995. All remaining assets and liabilities of the RTC w ere transferred to the FRF on January 1, 1996. Today, the FRF consists of tw o distin ct pools o f assets and liabilities: one com posed o f th e assets and liabilities o f th e FSLIC transferred to the FRF upon the dissolution of the FSLIC on A ugust 9, 1989 (FRF-FSLIC), and the other composed of the RTC assets and liabilities transferred to the FRF on January 1, 1996 (FRF-RTC). The assets of one pool are not available to satisfy obligations of the other. The RTC Completion A ct also made available approxi mately $18 billion w o rth of additional funding to the RTC, of w hich the RTC actually drew dow n $4.6 billion. The RTC Completion A ct requires the FDIC to return to the U.S. Treasury any funds that w e re transferred to the RTC pursuant to the RTC Completion A ct but not needed by the RTC. During 1999 and 2000, the FRF-RTC returned $4.2 billion and $391 million, respectively, to fully repay this appropriation. The FDIC m ust transfer to the REFCORP the net proceeds from the FRF's sale of RTC assets, after providing fo r all outstanding RTC liabilities. Any such funds transferred to the REFCORP pay the interest on the REFCORP bonds issued to fund the early RTC resolutions. Any such pay m ents benefit the U.S. Treasury, w hich w ould otherw ise be obligated to pay the interest on the bonds. During 2000, the FRF-RTC paid $1.4 billion to the REFCORP. Operations of the FRF The FRF w ill continue operations until all of its assets are sold or otherw ise liquidated and all of its liabilities are satisfied. Any funds remaining in the FRF-FSLIC w ill be paid to the U.S. Treasury. Any remaining funds o f the FRF-RTC w ill be distributed to the REFCORP to pay the interest on the REFCORP bonds. The FRF has been primarily funded from the follow ing sources: 1) U.S. Treasury appropriations; 2) am ounts bor rowed by the RTC from the Federal Financing Bank (FFB); 3) am ounts received from the issuance of capital certifi cates to REFCORP; 4) funds received from the manage m ent and disposition of assets of the FRF; 5) the FRF's portion of liquidating dividends paid by FRF receiverships; and 6) interest earned on Special U.S. Treasury Certificates purchased w ith proceeds of 4) and 5). If these sources are insufficient to satisfy the liabilities of the FRF, pay m ents w ill be made from the U.S. Treasury in am ounts necessary, as appropriated by Congress, to carry out the objectives o f the FRF. Public Law 103-327 provided $827 million in funding to be available until expended to facilitate e fforts to w ind up the resolution activity of the FRF-FSLIC. The FRF received $165 million under this appropriation on November 2, 1995. In addition, Public Law 104-208 and Public Law 105-61 authorized the use by the U.S. Departm ent of Justice (DOJ) of $26.1 million and $33.7 million, respectively, from the original $827 million in funding, thus reducing the am ount available to be expended to $602.2 million. The funding made available to DOJ covers the reimburse m ent of reasonable expenses of litigation incurred in the defense of claims against the United States arising from the goodwill litigation cases. Additional goodwill litigation expenses incurred by DOJ are paid directly from the FRF-FSLIC based on a M em orandum of Understanding (MOU) dated October 2, 1998, betw een the FDIC and DOJ. Under the term s of the MOU, the FRF-FSLIC paid $96.9 million and $79.1 million to DOJ for fiscal years 2001 and 2000, respectively. Subsequently, DOJ returns any unused fiscal year funding to the FRF-FSLIC. Separate funding fo r goodwill judgm ents and settlem ents is available through Public Law 106-113 (see Note 8). Receivership Operations The FDIC is responsible for managing and disposing of the assets of failed institutions in an orderly and efficient manner. The assets held by receivership entities, and the claims against them , are accounted for separately from FRF assets and liabilities to ensure that liquidation proceeds are distributed in accordance w ith applicable laws and regulations. Also, the income and expenses attributable to receiverships are accounted for as trans actions of those receiverships. Liquidation expenses incurred by the FRF on behalf of the receiverships are recovered from those receiverships. 2. S um m ary o f S ig n ific a n t A ccounting Policies General Cash Equivalents These financial statem ents pertain to the financial position, results of operations, and cash flow s of the FRF and are presented in accordance w ith generally accepted account ing principles (GAAP). These statem ents do not include reporting for assets and liabilities of closed thrift institutions for w hich the FDIC acts as receiver or liquidating agent. Periodic and final accountability reports of the FDIC's activities as receiver or liquidating agent are furnished to courts, supervisory authorities, and others as required. Cash equivalents are short-term , highly liquid investm ents w ith original m aturities of three m onths or less. Cash equivalents consist of Special U.S. Treasury Certificates. Use of Estimates FDIC management makes estim ates and assumptions that affect the am ounts reported in the financial state ments and accompanying notes. Actual results could dif fer from these estimates. W here it is reasonably possible that changes in estim ates w ill cause a material change in the financial statem ents in the near term , the nature and extent of such changes in estim ates have been disclosed. Investm ent in Securitization Related Assets Acquired from Receiverships The investm ent in securitization related assets acquired from receiverships is classified as available-for-sale and is shown at fair value w ith unrealized gains and losses included in Resolution Equity. Realized gains and losses are included in the Statem ents of Income and Accum ulated Deficit as com ponents of Net Income. Allowance for Losses on Receivables from Thrift Resolutions and Assets Acquired from Assisted Thrifts and Terminated Receiverships The FRF records a receivable fo r the am ounts advanced and/or obligations incurred fo r resolving troubled and failed thrifts. The FRF also records as an asset the KSL1C Resolution Fund am ounts paid fo r assets acquired from assisted thrifts and term inated receiverships. Any related allowance fo r loss represents the difference betw een the funds advanced and/or obligations incurred and the expected repayment. The latter is based on estimates of discounted cash recoveries from the assets of assisted or failed th rift institutions, net of all applicable estim ated liquidation costs. Estimated cash recoveries also include dividends and gains on sales from equity instrum ents acquired in resolution transactions. Cost Allocations Among Funds Operating expenses not directly charged to the funds are allocated to all funds administered by the FDIC using workload-based-allocation percentages. These percent ages are developed during the annual corporate planning process and through supplem ental functional analyses. In Septem ber 2000, the Financial Accounting Standards Board (FASB) issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguish m ents of Liabilities; a replacement of SFAS No. 125." This statem ent applies to securitization transactions where the transferor has continuing involvem ent w ith the transferred assets or the transferee. SFAS No. 140 is e ffe ctive fo r transfers occurring after March 31, 2001. However, disclosure requirem ents fo r existing securitizations are effective for fiscal years ending after December 15, 2000. FRF's disclosures for its securitiza tion transactions, w hich conform to the SFAS No. 140 requirements, are discussed in Note 4. Other recent accounting pronouncem ents w e re evaluated and deemed to be not applicable to the financial statements. Related Parties L im ite d P artnership E q u ity Interests. Former RTC Postretirem ent Benefits O ther Than Pensions The FDIC established an entity to provide the accounting and administration of postretirem ent benefits on behalf of the FRF, the BIF, and the SAIF. Each fund has fully paid its liability for these benefits directly to the entity. The FRF's prepaid or accrued postretirem ent benefit cost is presented in the FRF's Statem ents of Financial Position. Disclosure About Recent Accounting Pronouncements Statement of Financial Accounting Standards (SFAS) No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendm ent of SFAS No. 133," was issued in June 2000. For entities that adopted SFAS No. 133, "A ccounting for Derivative Instrum ents and Hedging A ctivities" prior to June 15, 2000, Statem ent 138 is effective for all fiscal quarters beginning after June 15, 2000. SFAS N o.138 amends Statem ent 133 principally for certain issues relating to hedging transac tions. The adoption of these statem ents has no material quantitative or qualitative impact on the Corporation's S tatem ents of Financial Position, Incom e and A ccum ulated Deficit, and Cash Flows. receiverships w ere holders of lim ited partnership equity interests as a result of various RTC sales programs that included the National Land Fund, M ultiple Investor Fund, N-Series, and S-Series programs. The m ajority of the lim ited partnership equity interests have been transferred from the receiverships to the FRF. These assets are included in the "O th e r A ssets" line item in the FRF's Statem ents of Financial Position. The nature of related parties and a description of related party transactions are discussed in Footnote 1 and dis closed throughout the financial statem ents and footnotes. Reclassifications Reclassifications have been made in the 1999 financial statem ents to conform to the presentation used in 2000. Restatem ent The credit enhancem ent reserve included in the "Invest m ent in securitization related assets acquired from receiverships" has been restated to conform w ith SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The change is due to recognizing real ized losses that represent an other-than-temporary decline in fair value. As a result, the cost basis of the asset was w ritten down to reflect these losses. Further, the unreal ized gains and losses on the credit enhancem ent reserve w e re restated to adjust the cum ulative balance of credit losses. The im pact of this restatem ent on the January 1, 1999 accum ulated de ficit is a reduction of $20.1 million. Additionally, corrections w ere made to the "Contingent liability for assistance agreem ents" to reverse amounts that w ere erroneously calculated. The impact of this restatem ent on the January 1, 1999 accumulated deficit is a reduction of $4.4 million. 3. Receivables fro m T h rift Resolutions, N et The thrift resolution process took different forms depending on the unique facts and circumstances surrounding each failing or failed institution. Payments for institutions that failed w ere made to cover obligations to insured deposi tors and represent claims by the FRF against the receiver ships' assets. Payments to prevent a failure w ere made to operating institutions w hen cost and other criteria w ere met. Assets held by the FDIC in its receivership capacity for the form er FSLIC and SAIF-insured institutions are the main source of repaym ent of the FRF's receivables from th rift resolutions. As of December 31, 2000 and 1999, FRF receiverships held assets w ith a book value of $712 million and $2.1 billion, respectively (including cash and miscellaneous receivables of $493 million and $1.5 billion at December 31, 2000 and 1999, respectively). The estim ated cash recoveries from the management and disposition of these assets that are used to derive the allowance for losses are based in part on a statistical sampling of receivership assets. These estim ated recov eries are regularly evaluated, but remain subject to uncertainties because of potential changes in economic conditions. These factors could cause the FRF's and other claim ants' actual recoveries to vary from the level currently estimated. [Receivables from Thrift Resolutions, N et at December 31 Dollars in T h o u s a n d s 2000 Assets from open th rift assistance $ A llow an ce fo r losses 393,697 Receivables from closed th rifts (371,557) 13,325 22,140 37,883,574 $ (53,656,376) 403,051 Net Receivables From Closed Thrifts 54,970,991 (37,480,523) A llow an ce fo r losses $ (371,557) Net Assets From Open Thrift Assistance Total 384,882 1999 1,314,615 416,376 $ 1,336,755 70 FSLIC Resolution Fund A ? - \ * '•»< ■>£<? Representations and W arranties The RTC provided guarantees, representations, and war ranties on approximately $108 billion in unpaid principal bal ance of loans sold and approximately $125 billion in unpaid principal balance of loans under servicing right contracts that had been sold. In general, the guarantees, representations, and warranties on loans sold related to the completeness and accuracy of loan documentation, the quality of the under writing standards used, the accuracy of the delinquency status w hen sold, and the conformity of the loans with characteristics of the pool in which they were sold. The representations and warranties made in connection w ith the sale of servicing rights were limited to the responsibilities of acting as a servicer of the loans. Future losses on represen tations and warranties could be incurred over the remaining life of the loans sold and could be in effect as long as 20 years. a*T j The FRF includes estim ates of corporate losses related to the receiverships' representations and warranties as part of the FRF's allowance fo r loss valuation. The allowance fo r these estim ated losses was $1.6 million and $30 m il lion as of Decem ber 31, 2000 and 1999, respectively. The contingent liability fo r representations and warranties associated w ith loan sales that involved assets acquired from assisted th rifts and term inated receiverships is included in "Accounts payable and other liabilities" ($1.5 million and $4 million for 2000 and 1999, respec tively). Based on recent evaluations of the payment history associated w ith these obligations and the number of contract expirations anticipated in the near future, the estim ate of the allowance indicated above, should be su fficie n t to cover future exposure from these obligations. 4. In vestm en t in S ec u ritiza tio n Related Assets A cquired fro m Receiverships Through 1995, the RTC sold, through its mortgage-backed securities securitization program, $42.4 billion of receiver ship, conservatorship, and corporate loans. These loans w ere secured by various types of real estate including residential homes, m ulti-fam ily dw ellings and commercial properties. Each securitization transaction was accom plished through the creation of a trust w hich purchased these loans and issued regular pass-through certificates to the public through licensed brokerage houses. The receiverships retained residual pass-through certificates that w ere entitled to any remaining cash flo w s from the trusts after satisfying the expenses of the trusts and the obligations to regular pass-through holders. To increase the likelihood of full and tim ely distributions of principal and interest to regular certificate holders and increase the marketability of the certificates, the various rating agencies required the RTC to place a portion of the proceeds from the sale of the regular certificates in credit enhancement reserve or escrow accounts to cover future losses from the loans underlying the regular certificates. Additional protection for the regular certificate holders from these losses was provided by a clause included in certain Pooling and Servicing Agreements (PSA) stipulating that losses experienced by the credit enhancement reserve over the life of the transactions would be reimbursed from proceeds expected from the residual certificates. A t the end of 2000, 15 deals that were structured w ith PSA clauses stipulating reimbursem ent from the proceeds of the residual certificates. In 1996 and 1998, the escrow accounts and residual certificates w ere transferred from the receiverships to the FRF for $5.7 billion and $1.4 billion, respectively. Both transfers w ere o ffse t by am ounts owed by the receiver ships to the FRF. During 2000, the FRF received $413 million in proceeds from term inated securitization deals and $910 million during 1999. Interest income earned on investm ents in securitization related assets during 2000 w as $85.5 million and $104.2 million during 1999. Realized gains and losses are recorded based upon the difference betw een the proceeds at term ination of the deal and the cost basis of the investment. This calculation is perform ed fo r both the residual certificates and the credit enhancem ent reserves. Additionally, realized losses are recognized on the credit enhancement reserve for a decline in fair value that is judged to be an other-than-temporary impairment. Unrealized gains and losses are com puted quarterly using a cash flow model that projects the estimated fair values for each transaction based on a forecast of the projected termination of each deal. This model is updated w ith current data supplied by the trustees, w hich includes prepaym ent speed, delinquency rates, and m arket pricing. 1Investm ent in Securitization Related Assets Acquired from Receiverships at December 3 1 , 2000 Dollars j in T h o u s a n d s Cost Credit enhancem ent accounts $ Total 799,518 $ 248,731 $ S $ 1,356,025 501,150 Fair Value $ (43,645) ..$ " 1,004,604 (2,088) 252,419 556,507 Residual certifica tes Unrealized Holding Losses Unrealized Holding Gains 806,838 (45,733) $ 1,811,442 I Investm ent in Securitization Related Assets Acquired from Receiverships at December 31, 1999 Dollars in Thousands Cost Credit enhancem ent accounts $ Unrealized Holding Gains 1,473,172 $ ” 315^629” 871,901 $ 2,345,073 S 427,446 Fair Value T 111,817 Residual certifica tes Total Unrealized Holding Losses ! |7 4 T 5 2 5 0 $ (47,276) 983,718 $ 2,725,243 5. Assets A cquired fro m Assisted T h rifts and Term inated Receiverships, N e t The FRF's assets acquired from assisted th rifts and te rm i nated receiverships include: 1) assets the form er FSLIC and the form er RTC purchased from failing or failed thrifts and 2) assets the FRF acquired from receiverships and purchased under assistance agreements. The methodology to estim ate cash recoveries from these assets, w hich is used to derive the related allowance fo r losses, is similar to that for receivables from th rift resolutions (see Note 3). The estimated cash recoveries are based upon a statistical sampling of the assets but only include expenses for the disposition of the assets to represent liquidating value. The FRF recognizes revenue and expenses on these acquired assets. Revenue consists primarily of proceeds from interest earned on assets in liquidation, professional liability claims, proceeds and/or settlem ents from conflicts and criminal restitutions, and other liquidation income. Expenses are recognized for the disposition and adminis tration of these assets. Assets Acquired from Assisted Thrifts and Terminated Receiverships, N et at December 31 Dollars in T h o u s a n d s _________ ____________________ Assets acquired from assisted th rifts and term inated receiverships 2000 A llow an ce fo r losses S 1999 107,617 $ " 148,584 (73,001) $ (114,177) 34,616 $ 34,407 T2 I SI 1C ({('solution Fund 6. O th e r A ssets, N et O ther Assets, N et at December 31 Dollars in Thousands 2000 Accounts receivable 1999 4,815 7,159 309 0 Lim ited partnership eq uity interests 11,001 29,589 Total 16,125 36,748 Due from FDIC fund-BIF 7. Liabilities fro m T h rift Resolutions Liabilities from th rift resolutions decreased by $223.5 mil lion as a result of eliminating the reserve estim ated for the future costs associated w ith liquidating the assets of failed thrifts. In prior years, this reserve was appropriate because of large am ounts of assets held in liquidation and funding concerns faced by the form er RTC in the mid and latter 1990s. Because of the rapid w ind-dow n of the FRF-RTC activity over the past years, funding concerns have diminished. The net e ffe ct in 2000 of this change in estim ate is a decrease to the accumulated deficit of $223.5 million. In addition, the FSLIC issued prom issory notes and entered into assistance agreem ents to prevent the default and subsequent liquidation of certain insured th rift institutions. These notes and agreem ents required the FSLIC to provide financial assistance over tim e. Pursuant to FIRREA, the FRF assumed these obligations. Notes payable and obligations fo r assistance agreem ents are presented in the "Liabilities from th rift resolutions" line item. 8. C o n tin g en t Liabilities for: Litigation Losses Additional Contingency The FRF records an estim ated loss for unresolved legal cases to the extent those losses are considered probable and reasonably estimable. In addition to the amount recorded as probable, the FDIC has determ ined that losses from unresolved legal cases totaling $10 million are reasonably possible. In U n ite d S ta te s v. W in s ta r Corp., 518 U.S. 839 (1996), the Supreme Court held that when it became im possible fo llo w in g the e nactm ent of FIRREA in 1989 fo r the Federal Home Loan Bank Board to perform certain agree m ents to count g oodw ill to w a rd regulatory capital, the p la in tiffs w e re e ntitled to recover damages from the United States. To date, approximately 120 lawsuits have been filed against the United States based on alleged breaches of these agreem ents (Goodwill Litigation). On July 23, 1998, the U.S. Treasury determined, based on an opinion of the DOJ's Office of Legal Counsel (OLC) dated July 22, 1998, that the FRF is legally available to satisfy all judgm ents and settlem ents in the Goodwill Litigation involving supervisory action or assistance agreements. The U.S. Treasury further determ ined that the FRF is the appropriate source of funds for payments of any such judgm ents and settlem ents. The OLC opinion concluded that the nonperformance of these agreem ents was a contingent liability that was transferred to the FRF on A ugust 9, 1989, upon the dis solution of the FSLIC. Under the analysis set forth in the OLC opinion, as liabilities transferred on August 9, 1989, these contingent liabilities for future nonperformance of prior agreem ents w ith respect to supervisory goodwill w ere transferred to the FRF-FSLIC, w hich is that portion of the FRF encompassing the obligations of the form er FSLIC. The FRF-RTC, w hich encompasses the obliga tions of the form er RTC and was created upon the te rm i nation of the RTC on December 31, 1995, is not available to pay any settlem ents or judgm ents arising out of the Goodwill Litigation. The lawsuits comprising the Goodwill Litigation are against the United States and as such are defended by the DOJ. On January 18, 2001, the DOJ again informed the FDIC that it is "unable at this tim e to provide a reason able estim ate of the aggregate loss to the FRF from the 120 W instar-related cases." The DOJ notes that this uncertainty arises, in part, from the existence of signifi cant unresolved issues pending at the appellate or trial court level, as w ell as the unique circumstances of each case. The FDIC believes that it is probable that additional amounts, possibly substantial, may be paid from the FRF-FSLIC as a result of judgm ents and settlem ents in the Goodwill Litigation. Flowever, based on the response from the DOJ, the FDIC is unable to estim ate a range of loss to the FRF-FSLIC from the Goodwill Litigation, or determ ine w hether any such loss w ould have a material e ffe ct on the financial condition of the FRF-FSLIC. Section 110 of the Departm ent of Justice Appropriations Act, 2000 (Public Law 106-113, Appendix A, Title I, 113 Stat. 1501A-3, 1501A-20) provides to the FRF-FSLIC such sums as may be necessary for the payment of judgm ents and com prom ise settlem ents in the Goodwill Litigation, to remain available until expended. Even if the Goodwill Litigation judgm ents and com prom ise settlem ents w ere to exceed other available resources of the FRF-FSLIC, an appropriation is available to pay such judgm ents and settlem ents. In these circumstances, any liabilities for the Goodwill Litigation should have no material impact on the financial condition of the FRF-FSLIC. 9. In te res t on Advances and S ubrogated Claim s During 2000, the FRF received $68.8 million in cash from RTC receiverships for interest on claims owed RTC arising out of th rift failures. No accrual was previously recog nized on these amounts due to the uncertainty surrounding the receiverships' ability to pay the interest due on the Corporate claim. A t year end 2000, the FRF accrued $90.0 million for interest deemed likely to be received w ithin the next year from receiverships that have paid higher priority claims in full. 10. Provision fo r Losses The provision fo r losses was a negative $439 million and a negative $278 million fo r 2000 and 1999, respectively. In 2000, the negative provision was primarily due to: 1) the elimination of the reserve fo r the estimated future costs associated w ith liquidating the assets of failed thrifts of $223.5 million (see Note 7) and 2) cash recoveries from assistance agreem ents of $86 million for net tax benefits sharing collections and $36 million for the redem ption of stock warrants. The negative provision in 1999 resulted primarily from decreased losses expected for assets in liquidation. The follow ing chart lists the major com ponents of the negative provision fo r losses. Provision for Losses for the Years Ended December 31 Dollars in T h o u s a n d s 2000 1999 Valuation Adjustments: Open th rift assistance $ (38,049) $ 10,092 (86,001) Tax benefits sharing recoveries (110,061) (14,585) Total Valuation Adjustments 0 (433,028) M iscellaneous receivables 16,357 (65,359) Investm ent in securitization related assets acquired from receiverships 15,907 0 Assets acquired from assisted th rifts and te rm in ate d receiverships 95,000 (5,534) Estim ated cost associated w ith liquida tin g assets (284,699) (223,500) Closed th rifts (257,404) Contingent Liabilities Adjustments: Litigation losses (5,614) (20,863) Total Contingent Liabilities Adjustments (5,614) (20,863) Total $ (438,642) S (278,267) 11. Resolution E quity As stated in the Legislative History section of Note 1, the FRF is comprised of tw o distinct pools: the FRF-FSLIC and the FRF-RTC. The FRF-FSLIC consists of the assets and liabilities of the form er FSLIC. The FRF-RTC consists of the assets and liabilities of the form er RTC. Pursuant to legal restrictions, the tw o pools are maintained sepa rately and the assets of one pool are not available to satisfy obligations of the other. The follow ing table show s the contributed capital, accumulated deficit, and resulting resolution equity for each pool, Resolution Equity at December 31, 2000 Dollars in Thousands FRF-FSLIC Contributed capital - beginning $ M iscellaneous paym ents/adjustm ents $ 87,171,499 $ 131,328,499 25 (48) (23) 0 Less: U.S. Treasury repayments (394,593) (394,593) 0 Accumulated deficit, net $ (82,529,627) (124,267,778) 455,417 455,417 (41,738,151) Less: Unrealized gain on available-for-sale securities 129,484,926 0 Accum ulated d e fic it (1,448,957) 85,327,901 (41,738,151) Contributed capital - ending (1,448,957) 44,157,025 Less: REFCORP paym ents Total 44,157,000 ' FRF Consolidated FRF-RTC (82,074,210) (123,812,361) 2,418,874 $ 3,253,691 $ 5,672,565 1 Resolution Equity at December 31, 1999 Dollars in Thousands FRF-FSLIC Contributed capital - beginning $ M iscellaneous paym ents/adjustm ents 44,156,000 FRF Consolidated FRF-RTC $ 91,334,742 $ 135,490.742 1,000 4,531 5,531 Less: U.S. Treasury repayments 0 (4,167,774) (4,167,774) Contributed capital - ending 44,157,000 87,171,499 131,328,499 (41,925,270) (83,074,330) (124,999,600) 0 380,170 380,170 (41,925,270) (82,694,160) (124,619,430) Accum ulated d e fic it Less: Unrealized gain on available-for-sale securities Accumulated deficit, net Total $ Contributed Capital To date, the FRF-FSLIC and the fo rm e r RTC received $43.5 billion and $60.1 billion from the U.S. Treasury, respectively. These payments w e re used to fund losses from th rift resolutions prior to July 1, 1995. Additionally, the FRF-FSLIC issued $670 million in capital certificates to the FICO and the RTC issued $31.3 billion of these instrum ents to the REFCORP. FIRREA prohibited the paym ent o f dividends on any of these capital certificates. Through Decem ber 31, 2000, as described in Note 1, the 2,231,730 S 4,477,339 $ 6,709,069 FRF-RTC has returned $4,556 billion to the U.S. Treasury and made payments of $1.4 billion to the REFCORP. These actions serve to reduce contributed capital. Accumulated Deficit The accumulated d eficit represents the cumulative excess of expenses over revenue fo r activity related to the form er FSLIC and the form er RTC ($29.7 billion and $87.9 billion w ere brought forw ard from the FSLIC and RTC, respectively). FSLIC Resolution Fund 12. Pension Benefits, Savings Plans, and A ccrued A nnual Leave Eligible FDIC employees (permanent and term employees w ith appointm ents exceeding one year) are covered by either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). The CSRS is a defined benefit plan, w hich is o ffse t w ith the Social Security System in certain cases. Plan benefits are determ ined 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 of a basic defined benefit plan that provides benefits based on years of creditable service and compensation levels, Social Security benefits, and the TSP. Autom atic and matching employer contributions to the TSP are provided up to specified am ounts under the FERS. Although the FRF contributes a portion of pension bene fits fo r eligible employees, it does not account for the assets of either retirem ent system . The FRF also does not have actuarial data fo r accumulated plan benefits or the unfunded liability relative to eligible employees. These am ounts are reported on and accounted for by the U.S. O ffice of Personnel Management. Eligible FDIC employees also may participate in a FDICsponsored tax-deferred 401 (k) savings plan w ith matching contributions. The FRF pays its share of the em ployer's portion of all related costs. The FRF's pro rata share of the Corporation's liability to employees fo r accrued annual leave is approximately $5.2 million and $6.9 million at Decem ber 31, 2000 and 1999, respectively. I Pension Benefits and Savings Plans Expenses for the Years Ended December 31 Dollars in T h o u s a n d s 2000 Civil Service R etirem ent System $ 1,152 1999 $ 1,367 Federal Employees R etirem ent System (Basic Benefit) 3,708 4,687 FDIC Savings Plan 2,186 2,619 Federal T h rift Savings Plan 1,408 1,767 T u i.il $ 8,454 $ 10,440 1 3 . P o s tre tire m e n t B e n e fits O th e r T h a n P ensions The FDIC provides certain dental and life insurance cover age fo r its eligible retirees, the retirees' beneficiaries and covered dependents. Retirees eligible for life insurance coverage are those w ho have qualified due to: 1) im m edi ate enrollm ent upon appointm ent or five years of partici pation in the plan and 2) e ligibility fo r an im m ediate annuity. Dental coverage is provided to all retirees eligible fo r an im m ediate annuity. The life insurance program, underw ritten 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 u n d e rw ritten by Connecticut General Life Insurance Company and provides coverage at no cost to retirees. I Postretirem ent Benefits Other Than Pensions Dol l ar s f in T h o u s a n d s 2000 1999 Funded Status at December 31 Fair value of plan assets* Less: Benefit obligation $ Over/(Under) Funded Status of the Plans $ Prepaid (accrued) postretirement benefit cost recognized in the Statements of Financial Position 15,921 $ 14,994 16,130 938 $ (1,136) $ 347 $ (1,136) $ ...552.... 232 232 $ 563 202 202 14,985 Expenses and Cash Flows for the Period Ended December 31 Net periodic benefit cost Employer contributions Benefits paid Weighted-Average Assumptions at December 31 Discount rate 5.25% 4.50% Expected return on plan assets Rate of compensation increase 5.25% 6.30% 4.50% 3.00% * Invested in U Treasury obligations. .S. Total dental coverage trend rates w ere assumed to be 7% per year, inclusive of general inflation. Dental costs w ere assumed to be subject to an annual cap of $2,000. 14 C o m m itm en ts Letters of Credit Leases The RTC had adopted special policies that included honor ing outstanQing conservatorship and receivership collater alized letters of credit. This enabled the RTC to minimize the im pact of its actions on capital markets. In m ost cases, these letters of credit w ere issued by th rifts that later failed and w ere used to guarantee tax-exem pt bonds issued by state and local housing authorities or other public agencies to finance housing projects fo r low and m oderate incom e individuals or fam ilies. As of December 31, 2000 and 1999, securities pledged as col lateral to honor these letters of credit totaled $7.5 million and $7.6 million, respectively. The FRF estim ated corpo rate losses related to the receiverships' letters of credit as part of the allowance for loss valuation. The allowance fo r these losses was $2.3 million and $1.1 million as of December 31, 2000 and 1999, respectively. The FRF's allocated share of the FDIC's lease com m it m ents totals $14.2 million fo r future years. The lease agreem ents contain escalation clauses resulting in adjust ments, usually on an annual basis. The allocation to the FRF of the FDIC's future lease com m itm ents is based upon current relationships of the w orkloads among the FRF, the BIF, and the SAIF. Changes in the relative w o rk loads could cause the am ounts allocated to the FRF in the future to vary from the am ounts show n below. The FRF recognized leased space expense of $5.0 million and $7.2 million for the years ended Decem ber 31, 2000 and 1999, respectively. Lease Com m itm ents Dollars in Thousands 2001 2002 2003 2004 2005 2006/Thereafter $ 3,938 $ 3,778 $ 2,628 $1,507 $1,141 $1,203 15. C o n centratio n o f C red it Risk As of December 31, 2000, the FRF had gross receivables from th rift resolutions totaling $38.3 billion, gross assets acquired from assisted thrifts and terminated receiverships totaling $107.6 million, and an investm ent in securitization related assets acquired from receiverships totaling $1.8 billion. The allowance fo r loss against receivables from th rift resolutions totaled $37.8 billion, and the allowance against the assets acquired fro m assisted th rifts and term inated receiverships totaled $73 million. Cash recoveries may be influenced by econom ic condi tions. Similarly, the value of the investm ent in securitiza tion related assets acquired from receiverships can be influenced by the econom y of the area relating to the underlying loans and other assets. Accordingly, the FRF's maximum exposure to possible accounting loss is the recorded (net of allowance) value and is also shown in the table below. Concentration of Credit Risk at December 31, 2000 Dollars in Millions Southeast Southwest Northeast Midwest Central West Total Receivables from th rift resolutions, net $ 18 $ 15 $ 42 $ 4 $ 36 $ 301 $ 416 A ssets acquired from assisted th rifts and te rm in ate d receiverships, net 0 34 1 0 0 0 35 Investm ent in securitization related assets acquired from receiverships Total 217 342 S 360 $ 266 268 $ 311 65 $ 69 53 S 866 1,811 89 $ 1,167 $ 2,262 16. Disclosures A b o u t th e Fair Value o f Financial Instrum ents Cash equivalents are short-term , highly liquid investm ents and are show n at current value. The carrying am ount of short-term receivables and accounts payable and other liabilities approximates their fair m arket value. This is due to their short maturities or comparisons w ith current interest rates. The net receivables fro m th rift resolutions prim arily include the FRF's subrogated claim arising from payments to insured depositors. The receivership assets that w ill ultim ately be used to pay the corporate subrogated claim are valued using discount rates that include consideration of market risk. These discounts ultim ately a ffect the FRF's allowance fo r loss against the net receivables from th rift resolutions. Therefore, the corporate subrogated claim indirectly includes the e ffe ct of discounting and should not be view ed as being stated in term s of nominal cash flow s. Although the value of the corporate subrogated claim is influenced by valuation of receivership assets (see Note 3), such receivership valuation is not equivalent to the valua tion of the corporate claim. Since the corporate claim is unique, not intended for sale to the private sector, and has no established market, it is not practicable to estim ate its fair market value. FSLIC Resolution Fund “ I The FDIC believes that a sale to the private sector of the corporate claim w ould require indeterm inate, but substan tial, discounts fo r an interested party to profit from these assets because of credit and other risks. In addition, the tim ing of receivership payments to the FRF on the subro gated claim does not necessarily correspond w ith the tim ing o f collections on receivership assets. Therefore, the e ffe ct of discounting used by receiverships should not necessarily be view ed as producing an estim ate of market value for the net receivables from thrift resolutions. The majority o f the net assets acquired from assisted th rifts and term inated receiverships (except real estate) is com prised of various types o f financial instrum ents, including investm ents, loans, and accounts receivable. Like receivership assets, assets acquired from assisted th rifts and term inated receiverships are valued using discount rates that include consideration of m arket risk. However, assets acquired from assisted th rifts and term i nated receiverships do not involve the unique aspects of the corporate subrogated claim, and therefore the discounting can be view ed as producing a reasonable estim ate of fair market value. The investm ent in securitization related assets acquired from receiverships is adjusted to fair value at each report ing date using a valuation model that estim ates the present value of estim ated expected future cash flow s discounted fo r the various risks involved, including both m arket and credit risks, as w ell as other attributes of the underlying assets (see Note 4). 17. S up plem entary In fo rm a tio n R elating to th e S ta te m en ts o f Cash Flows I Reconciliation of Net Income to Net Cash Provided by Operating Activities for the Years Ended December 31 I Dollars in T h o u s a n d s 2000 Net Income $ 1999 731,822 371,753 $ Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Income Statement Items: Provision fo r losses Prior year appropriation adjustm ents (438,642) (278,267) (48) 4,531 1,282,069 467,338 (38,895) 14,289 5,324 13,788 Change in Assets and Liabilities: Decrease in receivables from th rift resolutions (lncrease)/D ecrease in securitization related assets acquired from receiverships Decrease in assets acquired from assisted th rifts and term in ate d receiverships Decrease in other assets (Decrease)/lncrease in accounts payable and other lia b ilitie s (Decrease)/lncrease in lia b ilitie s from th rift resolutions Increase in conting ent lia b ilitie s fo r litig a tio n losses Increase in conting ent lia b ilitie s fo r assistance agreem ents Net Cash Provided by Operating Activities 85,922 6,092 (30,943) 34,710 (221,944) 92,414 7,215 3,968 105 0 S 1,381,985 $ 730,616 Com ptroller General o f the United States United States General Accounting O ffice Washington, D.C. 20548 To the Board o f Directors Federal Deposit Insurance Corporation We have audited the statements of financial position as o f December 51, 2000 and 1999, for the three funds administered by the Federal Deposit Insurance Corporation (FDIC), the related statements o f income and fund balance (accumulated deticit), and the statements o f cash flows for the years then ended. In our audits o f the Bank Insurance Fund (BIF), the Savings Association Insurance Fund (SAIF), and the FSLIC Resolution Fund (FRF), we found • the financial statements o f each fund are presented fairly in conformity with U.S. generally accepted accounting principles; • although certain internal controls should be improved, FDIC had effective internal control over financial reporting (including safeguarding o f assets) and compliance with laws and regulations; and • no reportable noncompliance w ith the laws and regulations that we tested. The following sections discuss our conclusions in more detail. They also present information on (1) the scope o f our audits, (2) a reportable condition1 related to information system general control weaknesses noted during our 2000 audits, (3) the l'uIure o f FRF, and (4) our evaluation o f FDIC’s comments on a draft o f this report. Opinion on Bank Insurance Fund’s Financial Statements The financial statements including the accompanying notes present fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, the Bank Insurance Fund’s financial position as o f December 31, 2000 and 1999, and the results o f its operations and its cash flows for the years then ended. Opinion on Savings Association Insurance Fund’s Financial Statements The financial statements including the accompanying notes present fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, the Savings Association Insurance Fund’s financial position as of December 51, 2000 and 1999, and the results o f its operations and its cash flows for the years then ended. 1 Reportable conditions involve m atters com in g to the auditor’s attention that, in the auditor’s judgment, should be com m unicated because they represent significant deficiencies in the design or operation o f internal control, and could adversely affect F D IC ’s ability to meet, the control objectives described in this report. Opinion on FSLIC Resolution Fund’s Financial Statements The financial statements including the accompanying notes present fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, the FSLIC Resolution Fund’s financial position as o f December 51, 2000 and 1999, and the results o f its operations and its cash flows for the years then ended. As discussed in note 8 o f FRFs financial statements, a contingency exists from approximately 120 lawsuits filed in the United States Court o f Federal Claims concerning the counting o f goodwill assets as part o f regulatory capital. FDIC has concluded that it is probable that FRF will be required to pay possibly substantial amounts as a result o f future judgments and settlements. FDIC is currently unable to estimate a range o f loss to FRF, or determine whether any such loss would have a material effect on the financial condition o f FRF. However, funds to pay such judgments or compromise settlements from these goodwill litigation cases are made available to the FRF by an indefinite, permanent appropriation as provided by Section 110 o f the Department of Justice Appropriations Act, 2000. Opinion on Internal Control Although certain internal controls should be improved, FDIC management maintained, in all material respects, effective internal control over financial reporting (including safeguarding assets) and compliance as o f December 51, 2000, that provided reason able assurance that misstatements, losses, or noncompliance, material in relation to the FDIC’s financial statements would be prevented or detected on a timely basis. FDIC management asserted that its internal control was effective based on criteria established under 31 U.S.C. 3512 (Federal Managers’ Financial Integrity Act — FMFIA). In making its assertion, FDIC management also fairly stated the need to improve certain internal controls. Our work identified weaknesses in FDIC’s Information system general controls, as described as a reportable condition in a later section o f this report. The weakness in information system general controls, although not considered material, represents a significant deficiency in the design or operations o f internal control that could adversely affect FDIC’s ability to meet its internal control objectives. Although the weakness did not materially affect the 2000 financial statements, misstatements may nevertheless occur in other FDIC-reported financial information as a result of the internal control weakness. Compliance With Laws and Regulations Our tests for compliance with selected provisions o f law s and regulations disclosed no instances o f noncompliance that would be reportable under U.S. generally accept ed government auditing standards. However, the objective o f our audits was not to provide an opinion on overall compliance with laws and regulations. Accordingly, we do not express such an opinion. Objectives, Scope, and Methodology FDIC’s management is responsible for (1) preparing the annual financial statements in conformity' with U.S. generally accepted accounting principles, (2) establishing, maintaining, and assessing internal control to provide reasonable assurance that the broad control objectives o f FM FIA are met, and (3) complying with applicable laws and regulations. We arc responsible for obtaining reasonable assurance about whether (1) the finan cial statements are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles, and (2) management maintained effective internal control, the objectives o f which are • financial reporting - transactions are properly recorded, processed, and summa rized to permit the preparation o f financial statements in conformity with U.S. generally accepted accounting principles, and assets are safeguarded against loss from unauthorized acquisition, use, or disposition, and • compliance with laws and regulations - transactions are executed in accordance with laws and regulations that could have a direct and material effect on the financial statements. We are also responsible for testing compliance with selected provisions of laws and regulations that have a direct and material effect on the financial statements. In order to fulfill these responsibilities, we • examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements; • assessed the accounting principles used and significant estimates made by management; • evaluated the overall presentation o f the financial statements; • obtained an understanding o f internal control related to financial reporting, including safeguarding assets, and compliance with laws and regulations, including the execution o f transactions in accordance with management’s authority; • tested relevant internal control over financial reporting, including safeguarding assets, and compliance, and evaluated the design and operating effectiveness o f internal control; • considered FDIC’s process for evaluating and reporting on internal control based on criteria established by FMFIA; and • tested compliance with selected provisions o f the Federal Deposit Insurance Act, as amended and the Chief Financial Officers Act o f 1990. We did not evaluate all internal controls relevant to operating objectives as broadly defined by FMFIA, such as those controls relevant to preparing statistical reports and ensuring efficient operations. We limited our internal control testing to controls over financial reporting and compliance. Because o f inherent limitations in internal con trol, misstatements due to error or fraud, losses, or noncompliance 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 o f changes in conditions or that the degree o f compliance with controls may deteriorate. We did not test compliance with all laws and regulations applicable to FDIC. We lim ited our tests o f compliance to those deemed applicable to the financial statements for the year ended December 51, 2000. We caution that noncompliance may occur and not be delected by these tests and that such testing may not be sufficient for other purposes. YVe conducted our audits from July 2000 through April 6, 2001. We performed our work in accordance with U.S. generally accepted government auditing standards. FDIC provided comments on a draft o f this report. They are discussed and evaluated in a later section of this report. Reportable Condition As part o f the financial statement audits, w e reviewed FDIC’s information systems general controls. The primary objectives o f information system general controls are to safeguard data, protect computer application programs, prevent system software from unauthorized access, and ensure continued computer operations in case of unexpected Interruption. Information system general controls include corporatewide security program planning and management, access controls, system software, appli cation software development and change controls, segregation o f duties, and service continuity controls. The effectiveness o f application controls2 depends on the effec tiveness o f general controls. Both information system general controls and application controls must be effective to help ensure the reliability, appropriate confidentiality, and availability o f critical automated Information. In performing our tests, we identified weaknesses in FDIC’s corporatewide security program, access controls, segregation o f duties, system software, and service continu ity. As we have reported to FDIC in 1998 and 1999, ’ the underlying cause o f many of these general control weaknesses is rooted in the lack o f a fully implemented and effective corporatewide security' program. This critical area is generally the foundation o f an entity’s security control, and reflects the entity’s commitment to addressing security risks over the long term. In our 1999 report, we provided FDIC with recom mended corrective actions and acknowledged that it takes a significant and sustained effort by FDIC management to establish an effective corporatewide security program. In response, FDIC management stated its commitment to implement a strong infor mation system environment During 2000, we found that FDIC developed plans for correcting many o f the weaknesses we identified, however, implementation o f these plans had not occurred as o f December 51, 2000. The weaknesses in information system general controls can significantly impair the effectiveness o f all FDIC’s application controls, including financial systems. We considered the effect o f the information system general control weaknesses and determined that other management controls mitigated their effect on the financial statements. Because o f their sensitive nature, the details surrounding these weaknesses are being communicated to FDIC management, along with our recommendations for corrective actions, through separate correspondence. In addition to these weaknesses, we identified less significant matters involving FDIC’s system of internal accounting control that we will be reporting in separate correspondence to FDIC management. Future o f FRF FDIC, as administrator o f FRF, is responsible for completing the liquidation of the assets and liabilities o f the former Federal Savings and Loan Insurance Corporation (FSLIC) and Resolution Trust Corporation (RTC).4 FRF will continue operations until all o f its assets are sold or otherwise liquidated and all of its liabilities are satisfied. As 2 Application controls consist o f the structure, policies, and procedures that apply to separate, individual systems, such as accounts payable and general led ger systems. 3Because o f their sensitive nature, in 1998 and 1999 w e comm unicated to FD IC m anagem ent the details surrounding the weaknesses and vulnerabilities w e identified, along w ith our recom m endations for corrective action, through separate correspondence. 4 On January 1, 1996, F R F assumed responsibility fo r all rem aining assets and liabilities o f the form er RTC. Table 1: FRF’s Assets and Liabilities as of January 1, 1996, and December 5 1 , 2000 Dollars in Billions Jan. 1, 1996 Cash and cash equivalents $ Assets not yet liquidated 1.5 Dec. 51, 2000 Percent Increase/(Decrease) $ 5.5 155 2.5 (85) Total Assets $ 15.9 15.4 $ 5.8 (62) Total Liabilities $ 11.2 $ 0.1 (99) shown in lable 1, since 1996 FRF has had a significant decline in lolal assets and liabilities and, in particular, in the assets not yet liquidated. FDIC expects continued rapid decline in FRF assets. Through December 51, 2000, FRF has returned $4.6 billion to the U.S. Treasury and has made $1.4 billion o f payments to the Resolution Funding Corporation (REFCORP).5 As described in notes 3 and 4 o f FRF’s financial statements, two major components of the assets not yet liquidated are receivables from thrift resolutions (about $0.5 bil lion) and investments in securitization related assets (about $1.8 billion). Most o f the receivables from thrift resolutions represent amounts advanced and/or obligations incurred for resolving troubled and failed insured thrifts. FDIC manages and disposes the assets from failed thrifts through receiverships.*’ Most o f the remaining assets in these receiverships are cash. FDIC is pursuing the complete liquidation o f these receiverships during the year 2001 except for those receiverships involved in goodwill litigation.7 The securitization related assets had a weighted-average remaining lir e of less than I year on December 51, 2000. The operations o f FRF will eventually meet a point where maintaining a separate liquidation entity may not be cost-effective. At that time, there may be some assets that are not fully liquidated; pending legal liabilities that may lake years to settle; and certain assets the disposal of which may not be in the best interest o f the United Stales government. FDIC has a research and evaluation effort underway to identify the remaining issues that need to be resolved, along with possible disposition strate gies, in order to dissolve FRF as contemplated by the Federal Deposit Insurance Act Also, due lo the unique nature o f several o f these assets and liabilities, FDIC antici pates that its effort will include the development o f new disposal plans for its remaining assets and liabilities. 5 T h e RTC Com pletion Act required FDIC to return to the U.S. Treasury any funds that w ere transferred to RTC pursuant to the RTC Com pletion Act but not needed by RTC. Th e RTC Com pletion Act m ade available $18.3 billion o f additional funding. Prior to RTC’s term ination on Decem ber 31,1995, RTC drew down $4.6 billion o f the $18.3 billion m ade available by the RTC Com pletion Act. T h e full amount o f the appro priation transferred to RTC lias been fully repaid. After p roviding for all outstanding RTC liabilities, FDIC m ust also transfer the net proceeds from the sale o f RTC -related assets to the REFCORP. Any funds trans ferred to RE FC O R P are used to pay the interest on R E F C O R P bonds issued to provide funding fo r the early RTC resolutions. 6 T h e assets held by receiverships, and the claim s against them, are accounted fo r separately from FRF’s assets and liabilities to ensure that liquidation proceeds are distributed in accordance w ith applicable laws and regulations. 7 Sec note 8 o f F R F ’s financial statements fo r a description o f good w ill litigation and its impact. Following are some o f the issues and items remaining in FRF: • Over 900 criminal restitution orders are outstanding, in the amount o f approximately $600 million, which w ill remain open for nearly 20 years. The actual amount that will ultimately be collected is unknown.8 During 2000, FDIC collected $3.2 million from these outstanding restitution orders. • Over 90 outstanding items, w hich include litigation claims and judgments, were obtained against officers and directors and other professionals responsible for causing thrift losses with an estimated recoverable value o f approximately $80 million. These judgments are renewable based on individual state law. Generally, the renewals vary from 5 to 10 years and are renewable more than once.9 FDIC recovered $51.9 million in claims during 2000. • Numerous assistance agreements entered into by the former FSLIC will remain open for many years as those assisted institutions share with FRF their tax savings that result from the tax free nature o f FSLIC assistance.11 In 2000, FRF collected 1 over $80 million as its share o f these tax savings. • Various litigation cases are outstanding. FRF is involved in approximately 700 cases.1 The most numerous, and substantial in terms o f liability involve goodwill 1 litigation.12 To date, approximately 120 lawsuits have been filed against the United States government. Recause o f appeals and differences in awarding damages in the cases thus far, the final outcome in the cases and the amount o f any possible damages remain uncertain. There are also litigation cases in which FRF is the plaintiff for itself, or is acting in a fiduciary manner on behalf of the receiverships resulting from failed financial institutions. These pending cases may take years to settle, and many o f the goodwill cases are still pending from the early 1990s. • Potential liabilities may exist due to representations and warranties made to support the sale o f loans and servicing rights.1 These liabilities could be incurred over the 5 remaining life o f the loans, which could be as long as 20 years. Only when the remaining asset and liability issues, some o f which are highlighted above, are resolved can FRF be formally dissolved. FDIC is considering whether seeking enabling legislation or other measures may be needed to dissolve the remaining FRF assets and liabilities. 8 U.S. generally accepted accounting principles state that contingencies that result in gains are usually not reflected in the financial statements to avoid recogn izin g revenue prior to its realization. 9 See footnote 8 o f this reporl. 10 See footnote 8 o f this report. 11 W hereas F R F is involved in approxim ately 700 cases, F D IC records losses fo r only those eases w h ere the contingent loss is considered probable and reasonably estimable. FD IC also discloses contingent losses that are reasonably possible. See note 8 o f F R F ’s financial statements. 12 See footnote 7 o f this report. 15 See note 3 o f F R F ’s financial statements fo r a description o f representations and warranties. FDIC Comments and O ur Evaluation In commenting on a draft o f this report, FDIC acknowledged the information system weakness, and stated a commitment to continue its efforts to strengthen its informa tion security program and to incorporate GAO’s recommendations into its security plans for 2001. We plan to evaluate the effectiveness on FDIC’s corrective actions in information security as part o f our 2001 audit o f FDIC’s financial statements and internal control. FDIC also stated that it will continue to monitor the other matters discussed in our report, including goodwill litigation cases. David M. Walker Comptroller General Of the United States April 6, 2001 Key Statistics Num ber and Deposits of BIF-Insured Banks Closed Because of Financial Difficulties, 1934 through 2000 D o l l a r s in T h o u s a n d s D eposits of Insured Banks N u m b e r of Insured Banks W ithout disbursements TotalTotal by FDIC With disbursements by FDIC Assets $4,298,814 $210,347,094 $632,470,043 3 1 1 ,9 5 0 1,268,151 3 3 5 ,0 7 6 26,8 00 1 68,228 6 3 2 ,7 0 0 3 7 8 ,08 8,4 72 1 ,423,819 3 70 ,40 0 25,921 182,502 7 53 ,02 4 1 ,236,488 3 ,1 3 2,1 77 36,893,231 5 3,7 51 ,76 3 1 4,4 73 ,30 0 1 ,392,140 3,5 3 9,3 73 4 4,1 97 ,00 9 6 3,1 19 ,87 0 15,6 60 ,80 0 24,090,551 2 4,9 31 ,30 2 6 ,2 8 1,5 00 6 ,4 7 1,1 00 8,059,441 24,090,551 24,9 31 ,30 2 6 ,2 8 1,5 00 6 ,4 7 1,1 00 8,059,441 2 9,168,596 35,6 97 ,78 9 6 ,8 5 0,7 00 6 ,9 9 1,6 00 8,7 4 1,2 68 W ithout disbursements by FDIC Year With disbursements by FDIC 19 2,078 $214,645,908 6 7 3 1 5 6 3 11 ,95 0 1,268,151 3 35 ,07 6 26,8 00 168,228 6 32 ,70 0 12 41 110 124 168 1 ,236,488 3 ,1 3 2,1 77 4 1,1 50 ,89 8 5 3,7 51 ,76 3 14,4 73 ,30 0 206 2 00 184 138 120 Total 2 000 1999 1998 1997 1996 1995 6 7 3 1 5 6 1994 1993 1992 1991 1990 13 41 120 124 168 1989 1988 1987 1986 1985 206 200 184 138 120 1984 1983 1982 1981 1980 79 48 42 10 10 79 48 42 10 10 2,8 8 3,1 62 5 ,4 4 1,6 08 9 ,9 0 8,3 79 3 ,8 2 6,0 22 2 16 ,30 0 2,8 8 3,1 62 5,4 4 1,6 08 9 ,9 0 8,3 79 3 ,8 2 6,0 22 2 16 ,30 0 3,276,411 7 ,026,923 11,632,415 4 ,8 5 9,0 60 2 36,164 1979 1978 1977 1976 1975 10 7 6 16 13 10 7 6 16 13 110,696 8 54 ,15 4 2 05,208 8 64 ,85 9 3 39 ,57 4 110,696 8 54,154 2 05,208 8 64,859 3 39 ,57 4 1 32,988 9 94,035 2 32,612 1,039,293 4 19 ,95 0 1974 1973 1972 1971 1970 4 6 1 6 7 4 6 1 6 7 1 ,575,832 9 71 ,29 6 20,4 80 132,058 54,806 1,575,832 9 71 ,29 6 20,4 80 132,058 5 4,806 3,8 2 2,5 96 1,309,675 2 2,054 196,520 62,1 47 1969 1968 1967 1966 1965 9 3 4 7 5 9 3 4 7 5 4 0 ,1 3 4 2 2,5 24 10,878 103,523 43,861 4 0 ,1 3 4 22,5 24 10,878 103,523 43,861 43,5 72 25,154 11,993 120,647 58,7 50 1964 1963 1962 1961 1960 7 2 1 5 1 ... 7 2 0 5 1 23,4 38 2 3,4 44 3,011 8 ,9 3 6 6 ,930 3,011 23,4 38 23,4 44 0 8 ,936 6 ,930 25,8 49 26,1 79 N /A 9 ,820 7 ,506 1959 1958 1957 1956 1955 3 4 2 2 5 ... 3 4 1 ... ... 1 2 5 2,593 8 ,2 4 0 11,247 11,330 11,953 10,084 2 ,593 8 ,240 1,163 11,330 11,953 2 ,858 8 ,9 0 5 1,253 12,914 11,985 1954 1953 1952 1951 1950 2 4 3 2 4 ... 2 . .. . .. 2 2 3 2 4 998 44,711 3 ,1 7 0 3 ,408 5,513 9 98 18,262 3 ,1 7 0 3 ,4 0 8 5 ,513 1,138 18,811 2 ,3 8 8 3 ,050 4 ,0 0 5 1949 1948 1947 1946 1945 5 3 5 1 1 1 4 3 5 1 1 6 ,665 10,674 7 ,040 3 47 5 ,695 5 ,475 10,674 7 ,0 4 0 347 5,695 4 ,8 8 6 10,360 6 ,7 9 8 351 6,392 1944 1943 1942 1941 ... | 1940 2 5 20 15 43 2 5 20 15 43 1,915 12,525 19,185 29,7 17 142,430 1,915 12,525 19,185 29,7 17 142,430 2 ,098 14,058 22,2 54 34,8 04 161,898 1939 1938 1937 1936 1935 1934 1 2,097 60 74 77 69 26 9 ... | 60 74 75 69 25 9 157,772 59,6 84 3 3,6 77 27,5 08 13,405 1,968 157,772 59,684 33,3 49 2 7,5 08 13,320 1,968 1 81,514 | ... I 1 10 ... ... ... ... I | . . . | 1 ... 2 1 | | | | 4 ,2 5 7 ,6 6 7 26,4 49 1,190 3 28 85 69,513 4 0,3 70 31,941 17,242 2,661 D o es n o t in clu de in s titu tio n s th a t re ceived FDIC assistan ce and w e re n o t clo sed . A lso d o e s n o t in clu d e in s titu tio n s in sured b y th e S avings A sso cia tio n Insurance Fund (SAIF), w h ic h w a s e sta b lish ed b y th e Financial In s titu tio n s R e form , Recovery, and E n fo rce m e n t A c t o f 1989. Recoveries and Losses by the Bank Insurance Fund on Disbursements for the Protection of Depositors, 1934 through 2000 D o l l a r s in T h o u s a n d s A ll C ases1 Year Number of banks Disburse ments Total 2,208 2 00 0 1999 1998 1997 1996 1995 6 7 3 1 5 6 1994 1993 1992 1991 1990 13 41 122 127 169 1989 1988 1987 1986 1985 D ep osit Payoff Cases2 Estimated Losses Number of banks Disburse ments Recoveries Estimated Additional Recoveries Estimated Losses S 108,282,625 $ 360,291 $ 38,013,649 603 $ 14,469,299 $ 9,918,765 $ 1,467 $ 4,549,067 8 2,4 45 2 81 ,89 0 52,658 2 0,5 20 130,966 523,695 179,191 121,221 0 0 0 293 38,6 80 8 41,172 2 34,049 5,026 3 8 ,4 2 0 85,0 57 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 1 ,224,797 1 ,797,297 14,0 84 ,66 3 2 1,412,647 1 0,816,602 1,045,721 1,146,878 10,390,760 1 5,231,388 8,030,281 135 3 ,953 18,042 32,487 1,258 178,941 6 46,466 3,675,861 6 ,1 4 8,7 72 2 ,7 8 5,0 63 0 5 25 21 20 0 2 61 ,20 3 1 ,802,655 1,468,407 2 ,1 8 2,5 83 0 159,268 1 ,309,252 1 ,000,732 1 ,427,687 0 0 631 0 8 36 0 101,935 4 92 ,77 2 4 6 7 ,6 7 5 7 54,060 2 07 2 80 2 03 145 120 11,4 45 ,82 9 12,1 63 ,00 6 5,037,871 4 ,7 9 0,9 69 2 ,9 2 0,6 87 5,2 4 2,8 38 5,2 4 1,2 15 3,014,851 3 ,0 1 5,2 52 1,913,452 3 ,692 0 0 0 0 6 ,1 9 9,2 99 6,921,791 2 ,0 2 3,0 20 1,775,717 1 ,007,235 32 36 51 40 29 2 ,1 1 6,5 56 1 ,252,160 2,1 0 3,7 92 1,155,981 5 23 ,78 9 1 ,262,145 8 22 ,61 2 1,4 0 1,5 88 7 39 ,65 9 4 1 1 ,1 7 5 0 0 0 0 0 854,411 4 2 9 ,5 4 8 7 02 ,20 4 4 16 ,32 2 1 12,614 1984 1983 1982 1981 1980 80 48 42 10 11 7 ,6 9 6,2 15 3,8 0 7,0 82 2 ,2 7 5,1 50 8 88 ,99 9 152,355 6,056,061 2,4 0 0,0 44 1 ,106,579 107,221 121,675 0 19 0 0 o 1,640,154 1,407,019 1,168,571 7 81 ,77 8 30,680 16 9 7 2 3 7 91 ,83 8 148,423 2 77 ,24 0 3 5,7 36 13,732 6 99 ,48 3 122,484 2 06 ,24 7 3 4,5 98 11,427 0 0 0 0 0 9 2 ,3 5 5 2 5,9 39 7 0,9 93 1,138 2 ,305 1979 1978 1977 1976 1975 10 7 6 17 13 90,4 89 5 48,568 26,6 50 5 99,397 332 ,04 6 7 4,372 512,927 2 0,6 54 561,532 292,431 0 0 0 0 0 16,117 35,641 5,996 37,8 65 3 9 ,6 1 5 3 1 0 3 3 9 ,936 817 0 11,416 2 5,9 18 9 ,003 6 13 0 9 ,660 25,8 49 0 0 0 0 0 9 33 2 04 0 1,756 69 1974 1973 1972 1971 1970 5 6 2 7 7 2,4 0 3,2 77 435 ,23 8 16,189 171,646 51,5 66 2,2 5 9,6 33 3 68,852 14,501 171,430 51,2 94 0 0 0 0 0 3 1 5 4 0 16,771 16,189 53,767 29,2 65 0 16,771 14,501 53,5 74 28,993 0 0 0 0 o 143,644 66,3 86 1,688 216 272 0 0 1,688 193 272 1969 1968 1967 1966 1965 9 3 4 7 5 4 2 ,0 7 2 6,476 8,097 10,020 11,479 0 0 0 0 0 162 12 1,010 4 79 663 4 0 4 1 3 7 ,596 0 8,097 735 10,908 7 ,513 0 7,087 7 35 10,391 1964 1963 1962 1961 1960 7 2 0 5 . 1 ! 0 0 0 0 0 1,541 286 0 1,501 0 7 2 0 5 1 13,712 19,172 0 6,201 4 ,7 6 5 12,171 18,886 0 4,700 4,765 0 0 0 0 0 1959 1958 1957 1956 1955 0 0 0 0 0 97 28 0 213 230 1,835 2 ,796 1,031 2 ,795 4 ,4 3 8 1,738 2,768 1,031 2,582 4 ,2 0 8 0 o o 0 0 : $ 69,908,685 3 00 ,31 6 1 ,244,283 2 86 ,70 7 25,5 46 169,386 6 09 ,04 5 ; Recoveries Estimated Additional Recoveries | 4 1 ,9 1 0 6 ,464 7,087 9,541 10,816 | ! ! i I 0 ! 0 0 0 0 0 ; 83 0 1,010 0 517 13,712 19,172 0 6,201 4 ,7 6 5 12,171 18,886 0 4 ,700 4 ,765 3 4 1 2 5 1,835 3,051 1,031 3 ,499 7,315 1,738 3 ,023 1,031 3 ,286 7 ,085 1954 1953 1952 1951 1950 2 2 3 2 4 1,029 5 ,359 1,525 1,986 4 ,404 771 5,359 733 1,986 3 ,019 0 0 0 0 0 258 0 792 0 1,385 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 1949 1948 1947 1946 1945 4 3 5 1 1 2 ,685 3 ,1 5 0 2 ,038 274 1,845 2 ,316 2 ,509 1,979 274 1,845 0 0 0 0 0 369 641 59 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 o 0 0 0 0 0 0 1944 2 5 20 15 43 1,532 7 ,230 11,684 25,061 87,8 99 1,492 7 ,107 10,996 24,4 70 84,1 03 0 0 0 0 0 40 123 688 591 3 ,796 1 4 6 8 19 4 04 364 5,377 1 ,320 12,065 4 ,3 1 3 0 0 0 0 0 40 123 292 213 582 60 74 75 69 81,8 28 34,3 94 20,2 04 15,206 74,6 76 31,9 69 16,532 1 2,873 6,423 734 0 0 0 0 0 0 7 ,152 2 ,425 3,672 20,3 99 0 0 0 0 0 0 5 ,797 1943 1942 1941 1940 1939 1938 1937 1936 1935 1934 25 9 ; 9,108 941 | I 2 ,333 2 ,685 207 i 3 3 1 1 4 5,500 1,612 12,278 4 ,8 9 5 : 42 24 26,1 96 9 ,092 12,365 7 ,735 6 ,026 I 9 941 ^ 32 50 i 50 7,908 9,718 6 ,397 4 ,2 7 4 7 34 ; 1,541 2 86 0 1,501 0 ; ! j : c o n tin u e d on n e x t pa g e 97 28 0 213 230 1,184 2 ,647 1 ,338 1,752 207 Recoveries and Losses by the Bank Insurance Fund on Disbursements for the Protection of Depositors, 1934 through 2000 D o l l a r s in T h o u s a n d s D eposit A ssum ption Cases Year Number of banks Disburse ments Total 1,464 2000 1999 1998 1997 1996 1995 6 7 3 1 5 6 1994 1993 1992 1991 1990 Assistance Transactions1 Recoveries Estimated Additional Recoveries Estimated Losses Number of banks Disburse ments $ 82,182,970 $ 53,790,044 3 00 ,31 6 1,244,283 286,707 25,5 46 169,386 6 09 ,04 5 82,4 45 2 81,890 52,658 20,5 20 130,966 5 23,695 $ 358,805 $ 28,034,121 141 179,191 121,221 0 0 0 293 38,6 80 8 41,172 234 ,04 9 0 13 36 95 103 148 1,224,797 1,536,094 12,2 80 ,52 2 19,9 38 ,12 3 8,6 2 9,0 84 1,045,721 9 87,610 9,0 8 0,2 72 14,227,563 6,5 9 9,9 97 135 3 ,953 17,411 32,4 87 422 1989 1988 1987 1986 1985 174 164 133 98 87 9,3 2 6,7 25 9 ,1 8 0,4 95 2,7 7 3,2 02 3 ,4 7 6,1 40 1,631,166 3,980,441 4 ,2 2 8,8 94 1,612,549 2,2 0 9,9 24 1,095,601 3 ,692 0 0 0 0 1984 1983 1982 1981 1980 62 35 25 5 7 1,373,198 2 ,8 9 3,9 69 2 68,372 79,2 08 138,623 941 ,67 4 1,850,553 2 13,578 71,3 58 110,248 1979 1978 1977 1976 1975 7 6 6 13 10 80,5 53 547,751 26,6 50 587,981 3 06 ,12 8 1974 1973 1972 1971 1970 4 3 0 1 3 1969 1968 1967 1966 1965 S 11,630,356 S 6,199,876 $ 19 $ 5,430,461 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 0 178,941 544,531 3,1 8 2,8 39 5,6 7 8,0 73 2,0 2 8,6 65 0 0 2 3 1 0 0 1,486 6 ,117 4 ,9 3 5 0 0 1,236 3,093 2,597 0 0 0 0 0 0 0 250 3 ,024 2 ,338 5 ,342,592 4,951,601 1,160,653 1 ,266,216 5 35 ,56 5 1 80 19 7 4 2 ,548 1,730,351 160,877 158,848 765,732 252 189,709 714 65,6 69 4 06 ,67 6 o 0 0 0 0 0 4 3 1 ,5 2 4 1 ,043,416 54,794 7 ,850 28,3 75 2 4 10 3 1 5,5 3 1,1 79 7 64 ,69 0 1,729,538 7 74 ,05 5 0 4 ,4 1 4,9 04 4 2 7 ,0 0 7 6 86 ,75 4 1,265 0 0 19 0 0 0 1,116,275 3 37 ,66 4 1,042,784 772,790 0 65,3 69 5 12,314 20,6 54 551,872 2 66,582 0 0 0 0 0 15,184 35,4 37 5,996 36,1 09 39,5 46 0 0 0 1 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 0 0 0 2,4 0 3,2 77 4 18,467 0 117,879 22,301 2,2 5 9,6 33 352,081 0 117,856 22,301 0 0 0 0 0 143,644 66,3 86 0 23 1 0 1 1 0 ! 0 0 0 0 0 0 0 0 o o 0 0 0 0 0 5 3 0 6 2 3 4,4 76 6 ,476 0 9 ,285 571 34,397 6 ,464 0 8 ,806 4 25 0 0 0 0 0 79 12 0 4 79 146 0 0 0 0 0 I 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1959 1958 1957 1956 1955 0 1 0 1 1 0 255 0 704 2 ,877 0 255 0 704 2 ,877 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1954 1953 1952 1951 1950 2 2 3 2 1,029 5,359 1,525 1,986 4 ,4 0 4 771 5 ,359 7 33 1,986 3 ,019 0 0 0 0 0 258 0 792 0 1,385 o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1949 1948 1947 1946 1945 4 3 5 1 1 2 ,685 3 ,150 2 ,038 274 1,845 2 ,316 2 ,509 1,979 2 74 1,845 0 0 0 0 0 369 641 59 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 0 0 0 1944 1943 1942 1941 1940 1 1 14 7 24 1,128 1,730 10,072 12,783 83,0 04 1 ,128 1,730 9 ,676 12,405 7 9,7 90 0 0 0 0 0 0 0 396 378 3 ,214 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 1939 1938 1937 1936 1935 1934 2 Estimated Losses 1964 1963 1962 1961 1960 1 Recoveries Estimated Additional Recoveries 28 24 25 27 1 0 55,632 25,302 7 ,839 7,471 3 ,082 54,277 24,061 6 ,814 6 ,4 7 6 2 ,149 0 0 0 0 0 0 1,355 1,241 1,025 995 933 0 0 0 0 o o 0 0 0 0 0 ! o o j 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 0 i j | 4 | 0 | 0 | | j 5 ,026 3 8,4 20 8 5,0 57 j ] | 0 : 0 \ : ; ; f o o 0 0 0 ; I I I I I I 0 0 0 0 0 ; I o 0 0 0 o o i I ; J ; : j o ; o 0 0 i 2,296 1,540,642 i 160,163 93,1 79 359,056 ; I 0 0 0 0 0 Totals do n o t in clu de d ollar a m o u n ts fo r fiv e o pe n bank assistan ce tra nsa ctio ns b e tw e e n 1971 and 1980. E xcludes e ig h t tra n sa ctio n s p rio r to 1962 th a t re q uired no d is b u rse m e n ts. A lso, d isb u rse m e n ts, re co veries, and e s tim a te d additional re co veries do n o t include w o rk in g capital a dvances to and re p a ym e n ts b y rece ivership s. In clud es in sured d e p o sit tra n s fe r cases. N ote: B eg in ning w ith th e 1997 A nn u al R eport th e n u m b e r o f banks in th e A ssista n ce Transactions c o lu m n fo r 1988 w a s chan ge d fro m 21 to 8 0 and th e n u m b e r o f banks in th e All Cases c o lu m n w a s ch an ge d fro m 221 to 2 8 0 to re fle c t th a t one a ssistan ce tra n sa ctio n e nco m p a sse d 60 in stitu tio n s . A lso, ce rtain 1982, 1983, 1989 and 1992 re so lu tio n s p re vio u sly re p orte d in e ith e r th e D e p o sit P ayo ff o r D e p o sit A s s u m p tio n ca te g ories w e re reclassified. Incom e and Expenses, Bank Insurance Fund, fro m Beginning of O perations, S e p te m b e r 11, 1933, th ro u g h D ecem ber 31, 2000 D o l l a r s in M i l l i o n s Incom e Expenses and Losses Year Total Assessment Income Assessment Credits Total $81,710.5 $53,212.8 $6,709.1 1 ,905.9 1 ,815.6 2,0 0 0.3 1 ,615.6 1 ,655.3 4,089.1 45.1 3 3.3 2 1.7 24.7 72.7 2 ,9 0 6.9 0.0 0.0 0.0 0 .0 0.0 0.0 1 ,860.8 1,782.3 1 ,978.6 1 ,590.9 1 ,582.6 1,182.2 5 ,5 9 0.6 i 5 ,784.3 5 ,5 8 7.8 j 5 ,160.5 2 ,855.3 0.0 0.0 0.0 0.0 0.0 8 76.4 6 46.5 7 13.7 6 29.5 9 83.0 1,885.0 | 1,773.0 1,696.0 1,516.9 1,433.4 0.0 0.0 0.0 0.0 0.0 ] ; I 0 .2 3 6 0 % 0 .2 4 4 0 % 0 .2 3 0 0 % 0 .2 1 2 5 % 0 .1 2 0 0 % j 1 ,609.6 1 ,574.7 1 ,623.4 1,743.2 1,952.0 0 .0 8 3 3 % 0 .0 8 33 % 0 .0 8 33 % 0 .0 8 33 % 0 .0 8 33 % \ 1994 1993 1992 1991 1990 6,4 6 7.0 6 ,4 3 0 .8 6 ,3 0 1 .5 5 ,7 9 0.0 3,8 3 8.3 1989 1988 1987 1986 1985 3 ,4 9 4 .6 3 ,3 4 7 .7 3 ,3 1 9 .4 3,260.1 3 ,3 8 5 .4 1984 1983 1982 1981 1980 3 ,0 9 9 .5 2,628.1 2 ,5 2 4.6 2 ,0 7 4.7 1,310.4 1,321.5 1,214.9 1,108.9 1,039.0 951.9 0.0 164.0 96.2 117.1 521.1 1,778.0 1,577.2 1,511.9 1,152.8 879.6 0 .0 8 00 % 0 .0 7 14 % 0 .0 7 69 % 0 .0 7 14 % 0 .0 3 70 % 1979 1978 1977 1976 1975 1,090.4 952.1 837.8 7 64.9 689.3 881.0 810.1 731.3 676.1 641.3 5 24.6 443.1 4 1 1 .9 3 79.6 3 62.4 734.0 585.1 518.4 4 6 8 .4 4 1 0 .4 0 .0 3 3 3 % 0 .0 3 85 % 0 .0 3 70 % 0 .0 3 70 % 0 .0 3 5 7 % 1974 1973 1972 1971 1970 668.1 5 61.0 4 6 7 .0 415.3 382.7 587.4 529.4 468.8 417.2 369.3 2 85.4 2 83.4 2 80.3 2 41.4 2 10.0 366.1 315.0 278.5 2 39.5 223.4 0 .0 4 35 % 0 .0 3 85 % 0 .0 3 33 % 0 .0 3 45 % 0 .0 3 57 % 1969 1968 1967 1966 1965 3 3 5 .8 2 95.0 2 63.0 2 41.0 2 14.6 364.2 334.5 303.1 284.3 2 60.5 220.2 202.1 182.4 172.6 158.3 191.8 162.6 142.3 129.3 112.4 0 .0 3 3 3 % 0 .0 3 3 3 % 0 .0 3 33 % 0 .0 3 2 3 % 0 .0 3 23 % 1964 1963 1962 1961 1960 197.1 181.9 161.1 147.3 144.6 238.2 2 20.6 203.4 188.9 180.4 145.2 136.4 126.9 115.5 100.8 104.1 97.7 8 4.6 7 3.9 6 5.0 0 .0 3 23 % 0 .0 3 1 3 % 0 .0 3 13 % 0 .0 3 23 % 0 .0 3 70 % I ! j : i ; j 5 I ! 1 1 $8,553.6 $6,955.3 645.2 1 ,922.0 6 91 .5 177.3 254.6 483.2 (153.0) 1,168.7 (37.7) (503.7) (325.2) (33.2) 7 72.9 7 30.4 6 9 7 .6 6 05.2 5 05.3 4 7 0 .6 2 5 .3 2 2.9 3 1.6 7 5.8 7 4.5 4 5 .8 i 1,260.7 (106.4) 1 ,308.8 1 ,438.3 1 ,400.7 3 ,6 0 5 .9 (2,259.1) (6,791.4) (625.8) 16,862.3 13,003.3 (2,873.4) (7,677.4) (2,259.7) 15,476.2 12,133.1 4 2 3 .2 j 3 88.5 5 7 0 .8 3 i 284.1 ! 2 19 .6 191.1 4 9 7 .5 1,063.1 1,102.0 6 50.6 ! 8,726.1 13,222.2 6 ,9 2 7.3 (11,072.3) (9,165.0) 4,346.2 7 ,588.4 3 ,270.9 2 ,9 6 3.7 1,957.9 3 ,8 1 1.3 6 ,2 9 8.3 2,9 9 6.9 2 ,827.7 1,569.0 213.9 223.9 204.9 180.3 179.2 3 21.0 1,066.2 69.1 (44.3) 209.7 (851.6) (4,240.7) 4 8.5 2 96.4 1 ,427.5 1,633.4 675.1 126.4 3 20.4 (38.1) 151.2 135.7 129.9 127.2 118.2 214.6 159.1 743.5 4 0 0 .5 3.5 1,100.3 1,658.2 1 ,524.8 1 ,226.6 1,226.8 93.7 148.9 113.6 212.3 97.5 (17.2) 36.5 20.8 28.0 27.6 159.2 108.2 59.7 60.3 4 6.0 0 .0 0 1 4 % 0.0011 % 0 .0 0 0 8 % 0 .0 0 0 8 % 0 .0 0 2 4 % 0 .1 2 4 0 % $35,451.7 1,999.2 9 6 9 .9 9 9 9 .8 848.1 8 3.6 $35,206.8 2 000 1999 1998 1997 1996 1995 Total Effective Assessment Rate1 Provision for Losses $50,954.6 Investment and Other Sources 9 7.9 52.5 10.1 13.4 3 .8 59.2 54.4 4 9.6 4 6.9 42.2 2.1 1.3 6 .0 5 0.0 0.0 508.9 4 5 2 .8 4 0 7 .3 3 5 5 .0 3 3 6 .7 34.5 29.1 27.3 19.9 2 2.9 1.0 0.1 2.9 0.1 5.2 3 3.5 29.0 24.4 19.8 17.7 0.0 0.0 0.0 0.0 0.0 3 0 1 .3 2 6 5 .9 235.7 221.1 191.7 18.4 15.1 13.8 14.8 12.5 2.9 0.7 0.1 1.6 0.1 15.5 14.4 13.7 13.2 12.4 0.0 0.0 0.0 0.0 0.0 178.7 166.8 147.3 132.5 132.1 : Administrative and Operating Expenses2 i j | 106.8 103.3 89.3 180.4 4 67.7 Interest & Other Insur. Expenses 4.1 9.1 3.5 3.9 2.2 Net Income/ (Loss) $30,755.9 i c o n tin u e d on n e x t pa g e 996.7 803.2 724.2 5 52.6 591.8 Incom e and Expenses, Bank Insurance Fund, from Beginning of O perations, S ep tem b er 11, 1933, through D ecem ber 31, 2000 (c o n tin u e d ) D o l l a r s in M i l l i o n s Incom e Expenses and Losses Year Total Assessment Income Assessment Credits Investment and Other Sources Effective Assessment Rate 1 Total Provision for Losses Total $81,710.5 $53,212.8 $6,709.1 $35,206.8 1959 1958 1957 1956 1955 136.5 126.8 117.3 111.9 105.8 178.2 1 66.8 159.3 155.5 151.5 99.6 9 3.0 90.2 87.3 8 5.4 5 7.9 5 3.0 4 8.2 4 3.7 39.7 0 .0 3 70 % 0 .0 3 7 0 % 0 .0 3 5 7 % 0 .0 3 7 0 % 0 .0 3 7 0 % $50,954.6 $35,451.7 12.1 11.6 9.7 9.4 9.0 0.2 0.0 0.1 0 .3 0 .3 1954 1953 1952 1951 1950 9 9.7 94.2 88.6 83.5 8 4.8 144.2 138.7 131.0 124.3 122.9 8 1.8 78.5 73.7 70.0 68.7 37.3 34.0 31.3 29.2 30.6 0 .0 3 5 7 % 0 .0 3 5 7 % 0 .0 3 70 % 0 .0 3 70 % 0 .0 3 70 % 7.8 7.3 7.8 6.6 7.8 0.1 0.1 0 .8 0 .0 1.4 1949 1948 1947 1946 1945 151.1 145.6 157.5 130.7 121.0 122.7 119.3 114.4 107.0 93.7 0.0 0.0 0.0 0.0 0.0 28.4 26.3 43.1 2 3.7 2 7.3 0 .0 8 33 % 0 .0 8 33 % 0 .0 8 33 % 0 .0 8 33 % 0 .0 8 3 3 % 6.4 7.0 9.9 10.0 9 .4 0 .3 0 .7 0.1 0.1 0.1 1944 1943 1942 1941 1940 9 9.3 86.6 69.1 6 2.0 55.9 8 0.9 7 0.0 5 6.5 51.4 46.2 0.0 0.0 0.0 0.0 0.0 18.4 16.6 0 .0 8 33 % 0 .0 8 3 3 % 12.6 10.6 9.7 0 .0 8 3 3 % 0 .0 8 3 3 % 0 .0 8 3 3 % 9 .3 9 .8 10.1 10.1 12.9 1939 1938 1937 1936 1935 1933-34 51.2 4 7.7 48.2 4 3.8 20.8 7.0 40.7 38.3 38.8 35.6 11.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.5 9.4 9.4 8.2 9.3 7.0 0 .0 8 3 3 % 0 .0 8 3 3 % 0 .0 8 3 3 % 0 .0 8 3 3 % 0 .0 8 3 3 % N /A 16.4 11.3 12.2 10.9 11.3 10.0 : I ! Administrative and Operating Expenses2 Net Income/ (Loss) $8,553.6 $6,955.3 $30,755.9 11.9 11.6 9.6 9.1 8.7 0.0 0.0 0.0 0.0 0.0 124.4 115.2 107.6 102.5 9 6.8 7.7 7.2 7.0 6.6 6.4 j : Interest & Other Insur. Expenses 0.0 0.0 0.0 0.0 0.0 9 1.9 8 6.9 8 0.8 76.9 77.0 6 ' 1fi 6.3 ; 9.8 9 .9 9.3 0 .0 0.0 0 .0 0.0 0.0 144.7 138.6 147.6 120.7 111.6 0.0 0.0 0.5 0.6 3.5 9.2 9.6 9.6 9.5 9.4 0.0 0.0 0.0 9 0.0 76.8 59.0 51.9 4 3.0 7.2 2.5 3.7 2.6 2.8 0.2 9.2 8.8 8.5 8.3 8.5 9.8 0.0 0.0 0.0 0.0 0.0 0.0 34.8 36.4 36.0 32.9 9 .5 (3.0) 0.1 0.2 : 1 The e ffe c tiv e rates fro m 1950 th ro u g h 1984 vary fro m th e s ta tu to ry rate o f 0.0 8 33 p e rce n t d ue to a ss e s s m e n t c re d its pro vide d in th o s e years. The s ta tu to ry rate increased to 0.12 p e rce n t in 1990 and to a m in in u m o f 0 .1 5 p e rce n t in 1991. The e ffe c tiv e rates in 1991 and 1992 vary b ecause th e FDIC e xercised n e w a u th o rity to in crease a s se ssm e n ts above th e s ta tu to ry rate w h e n n eeded. B eg in ning in 1993, th e e ffe c tiv e rate is based on a risk-related p re m iu m sy s te m u nd er w h ic h in s titu tio n s pay a s se ssm e n ts in th e range o f 0 .2 3 p e rce n t to 0.31 p e rce n t. In M a y 1995, th e BIF reached th e m a n da tory recapitalization level o f 1 .2 5 % . A s a result, th e a s s e s s m e n t rate w a s re d uce d to 4.4 c e n ts per $ 10 0 o f in sured d ep osits a nd a ss e s s m e n t p re m iu m s to ta lin g $ 1.5 billion w e re re fu n d e d in S e p te m b e r 1995. 2 Th ese expe nse s, w h ic h are p re se n te d as o p e ra ting e xpe nse s in th e S ta te m e n ts o f In co m e and Fund Balance, perta in to th e FDIC in its co rp o ra te ca pa city o n ly and d o n o t include co s ts th a t are charged to th e failed bank re ce ivership s th a t are m anaged b y th e FDIC. T he re ce ivership e xp e n se s are p re se n te d as part o f th e "R eceivables fro m Bank R e solutions, n e t' lin e on th e S ta te m e n ts o f Financial P osition. The narrative and graph p re se n te d in th e "C orporate P lanning and B ud g et" se ctio n o f th is re p o rt (n e xt page) s h o w th e agg re ga te (corporate and re ceivership) e xp e n d itu re s o f th e FDIC. 3 Includ es $ 21 0 m illio n fo r th e c u m u la tive e ffe c t o f an a ccou ntin g ch an ge fo r ce rtain p o s tre tire m e n t b e n e fits. 4 Includ es $ 10 5.6 m illio n n e t loss on g o v e rn m e n t se curities. 5 T his a m o u n t re p rese n ts in te re s t and o th e r insuran ce e xpe nse s fro m 1933 to 1972. 6 Includ es $ 80 .6 m illio n o f in te re s t paid on capital sto c k b e tw e e n 1933 and 1948. 96 Corporate Planning and Budget, FDIC Expenditures, 1991-2000 D o l l a r s in M i l l i o n s F D IC E x p e n d it u r e s C o n tin u e D o w n w a r d T r e n d ■ FDIC ■ RTC ; 2,500 2,000 1991 92 93 94 95 Note: Resolution Trust Corporation (RTC) expenditures became the responsibility of the FDIC on January 1,1996. The FDIC's Strategic Plan and Annual Performance Plan provide the basis for annual planning and budgeting for needed resources. The 2000 aggregate budget (for corporate and receivership expenses) was $1.19 billion, while actual expenditures fo r the year w e re $1.12 billion, about $35 m illion less than 1999 expenditures. Over the past 10 years, the FDIC's expenditures have risen and declined in response to its workload. During the firs t half of the decade, costs increased as the FDIC became heavily involved w ith resolving the banking crisis of the late 1980s and early 1990s. In 1994 and 1995, expendi tures declined due to decreasing resolution and receivership activity, but tem porarily increased in 1996 in conjunction w ith the absorption of the Resolution Trust Corporation (RTC). Total expenditures have decreased each year since 1996. The largest com ponent of FDIC spending is for the costs associated w ith staffing. The FDIC's staff has declined each year during the past five years. S taffing decreased by about 11 percent in 2000, from 7,266 employees at the beginning of the year to 6,452 at the end of the year. Estim ated Insured D eposits and th e Bank Insurance Fund, D ecem ber 31, 1934, th ro u g h D ecem ber 31, 2000 Deposits in Insured Banks (Dollars in M illions) Insurance C overage Total D o m estic D eposits 2 000 1999 1998 1997 1996 1995 $10 0,0 00 100,000 100,000 100,000 100,000 100,000 $ 3,3 26 ,74 5 3 ,0 3 8,3 85 2 ,9 9 6,3 96 2,7 8 5,9 90 2,6 4 2,1 07 2,5 7 5,9 66 1994 1993 1992 1991 1990 100,000 100,000 100,000 100,000 100,000 1989 1988 1987 1986 1985 Est. Insured 2 D eposits In s u ra n c e F u n d as a P e rc e n ta g e o f Percentage of Insured D eposits D eposit Insurance Fund Total D o m estic Deposits Est. Insured D eposits $ 2,3 01 ,60 4 2 ,1 5 7,5 36 2 ,1 4 1,2 68 2 ,0 5 5,8 74 2,0 0 7,4 47 1,952,543 69.2 71.0 71.5 73.8 76.0 75.8 $30 ,97 5.2 2 9,414.2 2 9,6 12 .3 2 8,2 92 .5 2 6,8 54 .4 2 5,453.7 0.93 0.97 0.99 1.02 1.02 0.99 1.35 1.36 1.38 1.38 1.34 1.30 2,4 6 3,8 13 2,4 9 3,6 36 2 ,5 1 2,2 78 2,5 2 0,0 74 2,5 4 0,9 30 1 ,896,060 1,906,885 1,945,623 1 ,957,722 1,929,612 77.0 76.5 77.4 77.7 7 5.9 2 1,8 47 .8 1 3,121.6 (100.6) (7,027.9) 4 ,0 4 4.5 0.89 0.53 (0.00) (0.28) 0.16 1.15 0.69 (0.01) (0.36) 0.21 100,000 100,000 100,000 100,000 100,000 2 ,465,922 2 ,3 3 0,7 68 2,2 0 1,5 49 2,1 6 7,5 96 1,974,512 1 ,873,837 1 ,750,259 1,658,802 1,634,302 1,503,393 76.0 75.1 75.3 75.4 76.1 13,209.5 14,061.1 18,301.8 18,253.3 17,956.9 0.54 0 .6 0 0.83 0.84 0.91 0 .7 0 0 .8 0 1.10 1.12 1.19 1984 1983 1982 1981 1980 100,000 100,000 100,000 100,000 100,000 1 ,806,520 1 ,690,576 1,544,697 1,409,322 1,324,463 1 ,389,874 1,268,332 1,134,221 9 88 ,89 8 9 48 ,71 7 76.9 75.0 73.4 70.2 71.6 16,529.4 15,429.1 1 3,770.9 12,246.1 1 1,019.5 0.92 0.91 0.89 0.87 0.83 1.19 1.22 1.21 1.24 1.16 1979 1978 1977 1976 1975 40,0 00 40,0 00 40,0 00 4 0 ,0 0 0 4 0 ,0 0 0 1 ,226,943 1 ,145,835 1 ,050,435 9 41 ,92 3 875 ,98 5 8 0 8 ,5 5 5 7 60,706 6 92 ,53 3 6 28 ,26 3 569,101 6 5.9 66.4 6 5.9 66.7 65.0 9,7 9 2.7 8,7 9 6.0 7 ,9 9 2.8 7 ,268.8 6,7 1 6.0 0.80 0.77 0 .7 6 0.77 0.77 1.21 1.16 1.15 1.16 1.18 1974 1973 1972 1971 1970 4 0 ,0 0 0 20,000 20,0 00 20,000 20,000 833,277 7 66 ,50 9 6 97,480 6 10 ,68 5 5 45,198 5 20,309 4 6 5 ,6 0 0 4 1 9 ,7 5 6 3 74 ,56 8 349,581 62.5 60.7 60.2 61.3 64.1 6,124.2 5,6 1 5.3 5,158.7 4 ,7 3 9 .9 4 ,3 7 9 .6 0.73 0.73 0.74 0.78 0.80 1.18 1.21 1.23 1.27 1.25 1969 1968 1967 1966 1965 20,000 15,000 15,000 15,000 10,000 4 95 ,85 8 4 91 ,51 3 4 48 ,70 9 4 01 ,09 6 3 77 ,40 0 3 13 ,08 5 296,701 2 61,149 2 34,150 2 09,690 63.1 60.2 58.2 58.4 55.6 4,051.1 3,7 4 9.2 3,4 8 5.5 3,2 5 2.0 3,0 3 6.3 0.82 0.76 0.78 0.81 0.80 1.29 1.26 1.33 1.39 1.45 1964 1963 1962 1961 1960 10,000 10,000 10,000 10,000 10,000 348,981 3 13 ,30 4 2 97 ,54 8 2 81 ,30 4 2 60 ,49 5 191,787 177,381 170,210 160,309 149,684 55.0 56.6 57.2 57.0 57.5 2,844.7 2,6 6 7.9 2,5 0 2.0 2,3 5 3.8 2 ,222.2 0.82 0 .8 5 0 .8 4 0 .8 4 0 .8 5 1.48 1.50 1.47 1.47 1.48 1959 1958 1957 1956 1955 10,000 10,000 10,000 10,000 10,000 2 47 ,58 9 2 42 ,44 5 2 25,507 2 19,393 2 12 ,22 6 142,131 137,698 127,055 121,008 116,380 57.4 56.8 56.3 55.2 54.8 2,0 8 9.8 1,965.4 1,850.5 1,742.1 1,639.6 0 .8 4 0.81 0.82 0.79 0.77 1.47 1.43 1.46 1.44 1.41 1954 1953 1952 1951 1950 10,000 10,000 10,000 10,000 10,000 2 03,195 193,466 188,142 178,540 167,818 110,973 105,610 101,841 96,7 13 91,3 59 54.6 54.6 54.1 54.2 54.4 1,542.7 1,450.7 1,363.5 1,282.2 1,243.9 0.76 0.75 0.72 0.72 0.74 1.39 1.37 1.34 1.33 1.36 1949 1948 1947 1946 1945 5 ,000 5,000 5,000 5,000 5,000 156,786 153,454 154,096 148,458 157,174 76,589 75,320 76,2 54 73,7 59 67,021 48.8 49.1 4 9.5 4 9.7 4 2.4 1,203.9 1,065.9 1,006.1 1,058.5 929.2 0.77 0.69 0.65 0.71 0.59 1.57 1.42 1.32 1.44 1.39 1944 1943 1942 1941 1940 5 ,000 5 ,000 5 ,000 5 ,000 5 ,000 134,662 1 11,650 8 9,8 69 71,2 09 65,2 88 56,3 98 4 8,4 40 32,8 37 28,2 49 26,6 38 4 1.9 4 3.4 3 6.5 39.7 4 0.8 804.3 703.1 6 1 6 .9 553.5 4 9 6 .0 0 .6 0 0.63 0 .6 9 0 .7 8 0.76 1.43 1.45 1.88 1.96 1.86 1939 1938 1937 1936 1935 1 93 4 3 5 ,000 5 ,000 5 ,000 5 ,000 5,000 5,000 57,485 50,791 48,2 28 50,281 45,1 25 40,0 60 24,650 23,121 22,5 57 22,3 30 20,1 58 18,075 4 2.9 4 5.5 4 6.8 44.4 44.7 45.1 4 52.7 4 2 0 .5 383.1 3 43.4 3 0 6 .0 2 91.7 0.79 0.83 0 .7 9 0 .6 8 0 .6 8 0.73 1.84 1.82 1.70 1.54 1.52 1.61 Y ear 1 1 S tarting in 1990, d e p o sits in in sured banks e xclud e th o s e d e p o s its h eld by Bank Insurance Fund m e m b e rs th a t are in sured by th e S avings A ssociatio n Insurance Fund and include th o s e d e p o s its h eld b y S avings A sso cia tio n Insurance Fund m e m b e rs th a t are in sured by th e Bank Insurance Fund. 2 E stim a te d in sured d e p o sits re fle c t d ep osit in form atio n as rep orte d in th e fo u rth q ua rte r FDIC Q u a rte rly Banking Profile. B efo re 1991, in sured d e p o sits w e re e stim a te d using p ercentages d ete rm in e d fro m th e Ju n e 30 Call Reports. 3 Initial coverage w a s $ 2 ,5 0 0 fro m Janu ary 1 to Ju n e 30, 1934. Incom e and Expenses, Savings A ssociation Insurance Fund, by Year, fro m B eginning of O p eratio n s, A u gu st 9, 1989, th ro u g h D ecem ber 31, 2000 9S D o l l a r s in T h o u s a n d s Expenses and Losses Incom e Effective Assessment Rate Total Provision for Losses Interest & Other Insur. Expenses Administrative and Operating Expenses Funding Transfer from the FSLIC Resolution Fund Net Income $935,557 Investment and Other Sources $264,630 $9,660 $661,267 $139,498 $10,676,478 Year Total Assessment Income Total $11,472,537 $8,568,804 $2,903,733 2 000 1999 1998 1997 1996 1995 6 64 ,08 0 6 00 ,99 5 5 83,859 549,912 5,5 0 1,6 84 1 ,139,916 19,237 15,116 15,352 13,914 5,2 2 1,5 60 9 70,027 6 44 ,84 3 5 85,879 5 68,507 5 35,998 2 80,124 169,889 0 .0 0 2% 0 .0 0 2% 0 .0 0 2% 0 .0 0 4% 0 .2 0 4% 0 .2 3 4 % 3 00 ,01 8 124,156 116,629 69,9 86 (28,890) (281,216) 180,805 30,6 48 31,9 92 (1,879) (91,636) (321,000) 8 ,293 626 9 0 128 0 1 10,920 92,8 82 84,6 28 71,8 65 62,6 18 39,7 84 0 0 0 0 0 0 3 64 ,06 2 4 7 6 ,8 3 9 4 6 7 ,2 3 0 4 79 ,92 6 5 ,5 3 0,5 74 1,421,132 1994 1993 1992 1991 1990 1989 1 ,215,289 9 23 ,51 6 178,643 9 6,4 46 18,195 2 1 ,132,102 8 97,692 1 72,079 93,5 30 18,195 0 83,187 25,8 24 6 ,564 2 ,916 0 2 0 .2 4 4 % 0 .2 5 0% 0 .2 3 0% 0 .2 3 0% 0 .2 0 8% 0 .2 0 8% 4 34 ,30 3 46,8 14 2 8,982 63,0 85 56,088 5,602 4 1 4 ,0 0 0 16,531 (14,945) 2 0,1 14 0 0 0 0 (5) 609 0 0 20,3 03 30,2 83 43,9 32 42,3 62 56,0 88 5,602 0 0 35,4 46 42,3 62 56,088 5,602 7 80 ,98 6 8 76,702 185,107 75,723 18,195 2 FDIC-lnsured Institutions Closed During 2000 D o l l a r s in T h o u s a n d s Date of Closing or Acquisition Assuming Bank and Location $ 74 8 0 6/0 2/0 0 Israel D isco u n t Bank N e w York, NY $ 70 ,48 8 $ 11,127 0 1/1 4/0 0 C itize n s Bank Carlisle, IA $ 25 ,65 7 $ 25 ,65 8 $3,6 05 0 7/1 4/0 0 S&C Bank o f M in n e so ta A lm e lu n d , M N $ 61,247 $ 58,202 $ 56,727 $2,5 00 10/13/00 B ank o f th e O rie n t San Francisco, CA 5,827 $75,681 $ 72 ,53 4 $ 67 ,05 5 $ 12 ,70 0 0 9/2 9/0 0 C itize n s Bank & S avings C om pany R ussellville, A L N 8 ,157 $93,011 $ 74,104 $ 71 ,64 5 $8,0 00 12/14/00 B anterra Bank M a rio n , IL SB 6 ,023 $ 29 ,53 0 $ 28 ,58 3 $ 28 ,58 3 $1,4 02 03 /1 0 /0 0 C itize n s Trust Bank A tlan ta, G A Bank Class Number of Deposit Accounts Total Assets Total Deposits FDIC Disbursements N 743 $ 10 ,33 3 $ 10 ,11 6 $ 10,117 Hartford-Carlisle Sa vin gs Bank Carlisle, IA NM 7 ,700 $ 11 3,3 13 $ 71,337 Town and Country Bank of Almelund Alm elund, MN NM 4 ,9 0 0 $ 24,503 Bank of Honolulu Honolulu, HI NM 5 ,900 NM Name and Location Estimated Loss1 Bank Insurance Fund Purchase and Assumption - All Deposits M onument National Bank Ridgecrest, CA Purchase and Assumption - Insured Deposits Insured Deposit Transfer - Asset Purchase The Bank of Falkner Falkner, MS National State Bank of Metropolis Metropolis, IL Savings Association Insurance Fund Purchase and Assumption - All Deposits Mutual Federal Sa vin gs Bank of Atlanta Atlanta, GA C odes fo r B ank Class: N M S ta te-cha rte re d bank th a t is n o t a m e m b e r o f th e Federal R eserve S yste m N N ational bank SB S avings bank 1 E stim a te d lo sses are as o f 12/31/00. E stim a te d lo sses are ro u tin e ly a d ju ste d w ith u pd ate d in fo rm a tio n fro m n e w appraisals and a sse t sales, w h ic h u ltim a te ly a ffe c t th e a sse t values and p ro je cte d recoveries. E stim ated Insured D eposits and th e Savings Association Insurance Fund, D ecem ber 31, 1989, th ro u g h D ecem ber 31, 2000 Deposits in Insured Institutions (Dollars in Millions) Insurance Coverage 2000 1999 1998 1997 1996 1995 $ 10 0,0 00 100,000 100,000 1 00,000 1 00,000 100,000 1994 1993 1992 1991 1990 1989 100,000 100,000 100,000 100,000 100,000 100,000 7 20,823 7 26,473 760,902 8 10,664 874 ,73 8 9 48 ,14 4 Deposit Insurance Fund Total Domestic Deposits Est. Insured Deposits 91.5 93.1 9 4.4 95.7 96.4 95.8 $ 1 0 ,75 8.6 10,280.7 9 ,8 3 9.8 9 ,368.3 8 ,8 8 8.4 3 ,3 5 7.8 1.31 1.35 1.31 1.30 1.25 0 .4 5 1.43 1.45 1.39 1.36 1.30 0.47 6 92 ,62 6 6 95 ,15 8 7 29,458 776,351 8 30 ,02 8 8 82 ,92 0 $ 8 2 2,6 10 7 64,359 7 51,413 7 21,503 7 08,749 7 42,547 Percentage of Insured Deposits $ 7 5 2,7 56 7 11 ,34 5 7 08 ,95 9 6 90,132 6 83,090 7 11,017 Total Domestic Deposits Year1 Insurance Fund as a Percentage of 96.1 95.7 95.9 9 5.8 9 4.9 93.1 1,936.7 1,155.7 2 79.0 93.9 18.2 0.0 0.27 0.16 0.04 0.01 0.28 0.17 0.04 0.01 0.00 0.00 0.00 0.00 Est. Insured2 Deposits 1 S tarting in 1990, d e p o sits in in sured in stitu tio n s e xclude th o s e d e p osits h eld b y Savings A ssociatio n Insurance Fund m e m b e rs th a t are in sured b y th e Bank Insurance Fund and include th o s e d e p o s its held b y Bank Insurance Fund m e m b e rs th a t are in sured by th e S avings A sso cia tio n Insurance Fund. 2 E stim a te d in sured d e p o s its re fle c t d e p o sit in fo rm a tio n as re p orte d in th e fo u rth q u a rte r FDIC Q ua rte rly Banking Profile. B efo re 1991, in sured d e p o s its w e re e s tim a te d using p e rcen tag es d ete rm in e d fro m th e Ju n e 3 0 Call Reports. Number, Assets, Deposits, Losses, and Loss to Funds of Insured Thrifts 1 Taken Over or Closed Because of Financial Difficulties, 1989 through 2000 D ollars in Thousands Estimated Receivership Loss3 Total Assets Deposits Total 751 $394,111,336 $ 317,624,631 $ 74,536,757 $ 82,047,953 2 000 1999 1998 1997 1996 1995 1 1 0 0 1 2 29,5 30 62,9 56 0 0 32,5 76 4 2 3 ,8 1 9 28,583 63,427 0 0 32,7 45 4 14 ,69 2 1,402 1,343 0 0 2 1,222 28,931 1,402 1,343 0 0 2 1,2 22 28,4 89 2 10 59 144 213 3 18 136,815 6,1 4 7,9 62 4 4,1 96 ,94 6 78,8 98 ,70 4 1 29,66 2,3 98 1 34,51 9,6 30 127,508 4,881,461 34,7 73 ,22 4 65,1 73 ,12 2 98,9 63 ,96 0 1 13,165,909 11,472 2 52 ,83 6 3 ,0 8 2,2 99 8 ,4 3 4,2 88 16,071,715 4 6 ,6 3 1 ,2 4 9 14,599 2 03 ,77 9 3 ,6 8 8,2 50 9 ,2 2 6,6 08 1 9,2 97 ,71 2 4 9,5 64 ,54 9 Year2 1994 1993 1992 1991 1990 1989 5 Loss to Funds4 1 Prior to Ju ly 1, 1995, all th r ift clo sin gs w e re th e re sp o n sib ility o f th e R e solutio n Trust C orp oratio n (RTC). Since th e RTC w a s te rm in a te d on D e ce m b e r 31, 1995, and all a sse ts and liabilities tra n sfe rre d to th e FSLIC R esolution Fund (FRF), all th e re su lts o f th e th r ift clo sin g a c tiv ity fro m 1989 th ro u g h 1995 are n o w re fle cte d on FRF's books. T he S avings A ssociatio n Insurance Fund (SAIF) beca m e re sp on sib le fo r all th rifts clo se d a fte r Ju n e 30, 1995; th e re have b een o n ly th re e such failures. A d d itio na lly, SAIF w a s a pp ointe d re ce iver o f o ne th r ift (H eartland FSLA) on O c to b e r 8, 1993, because, at th a t tim e , RTC's a u th o rity to reso lve FS LIC-insured th rifts had n o t y e t been e xte n d e d b y th e RTC C o m p le tio n A ct. 2 Year is th e ye ar o f failure, n o t th e ye ar o f reso lutio n . 3 The e s tim a te d lo sses re p re se n t th e p ro jecte d loss at th e fu n d level fro m re ce ivership s fo r u n re im b u rse d su brog ate d cla im s o f th e FRF/SAIF and unpaid a dvances to re ce ivership s fro m th e FRF. 4 The Loss to Funds re p re se n ts th e to ta l re so lu tio n c o s t o f th e failed th rifts in th e SAIF and FRF-RTC fu n d s, w h ic h in clu de s co rp o ra te re ve nu e and e xp e n se ite m s su ch as in te re s t e xp e n se on Federal Financing Bank d eb t, in te re s t e xpe nse on e s c ro w e d fu n d s, and in te re s t re ve nu e on a dvances to rece ivership s, in a dd itio n to th e e s tim a te d lo sses fo r receivership s. 5 Total fo r 1989 e xclud e s n ine fa ilu re s o f th e fo rm e r FSLIC. Resources B oard of D irecto rs Donna Tanoue Andrew C Hove, Jr. . Ellen Seidman John D. Hawke, Jr. O ffice of the Chairm an Donna Tanoue Chairman v I! Deputy to th e Chairm an Jadine Nielsen C hief of Staff Mark P Jacobsen b h ih h h b h b h h h h O ffice of In specto r G eneral C hief Inform ation O fficer Gaston L. Gianni, Jr. Inspector General Donald C Demitros . b Deputy to the C hairm an and C hief O perating O fficer G en eral Counsel William F Kroener, III . John F Bovenzi . I I D ivision of Supervision jj 1 Michael J. Zamorski Acting Director Ih h h h D ivision of In suran ce Arthur J. Murton Director D ivision of C om pliance and Consum er A ffairs Stephen M. Cross 1 D ivision of Inform ation 1 R esources M a n a g e m e n t J Donald C. Demitros II Director D ivision of R esearch I O ffice of D iversity and | Econom ic Opportunity f t J D. Michael Collins 1|j Director O ffice of 1 O ffice of Legislative Pub lic A ffairs | A ffairs Phil Battey O ffice of the .1 Alice C Goodman . I Bank Technology 1 Group Ronald F Bieker . ’ 3 Christie A. Sciacca Ombudsman 1I Director ■-...................... J Ombudsman Legal D ivision Wi l l i am F Kroener, III . General Counsel h and S tatistics William R Watson . Director i O ffice of the E xecutive S ecreta ry Robert E Feldman . Executive Secretary S taffin g Trends 1991 -2000 24.000 21.000 ________________ 1991 93 ... 94 ..........95 ........._96_... 97 98_ _ 99 2000 7,409 6,775 5,899 2,043 FDIC ■ _____ 13,972 15,050 14,219 11,627 9,813 9,151 7,793 7,359 7,266 6,452 Total Staffing 22,586 22,459 20,994 17,526 11,856 9,151 7,793 7,359 7,266 6,452 RTC ■ ________ 8,614 92 _______________ _________ Note: All staffing totals reflect year-end balances. The Resolution Trust Corporation (RTC) was fully staffed with FDIC employees and, until February 1992, the RTC was managed by the FDIC Board of Directors. Upon the RTC sunset at year-end 1995, all of its remaining workload and employees were transferred to the FDIC. 104 Sources of Information Home Page on the Internet Public Information Center www.fdic.gov 801 17th Street, NW Washington, DC 20434 A w ide range of banking, consumer and financial information is available on the FDIC's Internet home page. This includes the FDIC's Electronic Deposit Insurance Estimator, "EDIE," w hich estim ates an individual's deposit insurance coverage; the Institution Directory, financial profiles of FDIC-supervised institutions; C om m unity R einvestm ent A ct evalua tions and ratings fo r banks and th rifts supervised by the FDIC; and Call Reports, banks' reports o f condition and income. Readers also can access a variety of consum er pam phlets, FDIC press releases, speeches and other updates on the agency's activities, as w ell as corporate databases and custom ized reports of FDIC and banking industry inform ation. Newly available in 2000 is a page allowing interested parties to subm it com m ents via the Internet on proposed regulations. The "A sk FDIC" feature has been upgraded, enabling the public to more easily iden tify and contact the appropriate source of inform ation at the FDIC. Phone: (877) 275-3342 (ASK FDIC), option 4, or (202) 416-6940 Fax: (202) 416-2076 E-mail: FDIC p u b lic a tio n s , press releases, s p e e ch e s and Congressional testim ony, directives to financial institutions, policy manuals and other docum ents are available on request or by subscription through the Public Information Center. These docum ents include the Quarterly Banking Profile, Statistics on Banking, Sum m ary o f Deposits and a variety o f consum er pamphlets. Office of the Ombudsman FDIC Call Center 550 17th Street, NW Washington, DC 20429 Phone: (877) 275-3342 (ASK FDIC) (202) 736-0000 Phone: (877) 275-3342 (ASK FDIC), option 3 TDD: (800) 925-4618 The FDIC Call Center in W ashington, DC, is the primary tele phone point of contact fo r general questions from the bank ing com m unity, the public and FDIC employees. The Call Center directly, or in concert w ith other FDIC subject m atter experts, responds to questions about deposit insurance and other consum er issues and concerns, as w ell as ques tions about FDIC programs and activities. The Call Center also makes referrals to other federal and state agencies as needed. Hours of operation are 8:00 a.m. to 8:00 p.m. eastern standard tim e. Information also is available in Spanish. Fax: (202) 942-3040 or (202) 942-3041 E-mail: ombudsman@fdic.gov The O ffice of the Om budsman responds to inquiries about the FDIC in a fair, impartial and tim ely manner. It researches questions and complaints from bankers, the public and FDIC employees on a confidential basis. The office also recommends ways to improve FDIC operations, regulations and custom er service. m Kegionnl Offices Division of Supervision (DOS) and Division of C om pliance and Consumer Affairs (DCA) DOS Examines and supervises 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 and the Community Reinvestment Act. Informs bankers and the public about deposit insurance and other consumer protections. Atlanta ■ M M New York Dallas One Atlantic Center 1201 W est Peachtree Street, NE Suite 1800 Atlanta, Georgia 30309 (404) 817-1300 1910 Pacific Avenue Suite 1900 Dallas, Texas 75201 (214) 754-0098 20 Exchange Place New York, New York 10005 (917) 320-2500 Alabama Florida Georgia North Carolina South Carolina Virginia Colorado New Mexico Oklahoma Texas Delaware District of Columbia Maryland New Jersey New York Pennsylvania West Virginia Puerto Rico Virgin Islands _ _ _ Boston Kansas City San Francisco 15 Braintree Hill Office Park Suite 100 Braintree, M assachusetts 02184 (781) 794-5500 2345 Grand Avenue Suite 1500 Kansas City, Missouri 64108 (816) 234-8000 25 Ecker Street Suite 2300 San Francisco, California 94105 (415) 546-0160 Connecticut Maine Massachusetts New Hampshire Rhode Island Vermont Iowa Kansas Minnesota Missouri Nebraska North Dakota Alaska Arizona California Guam Hawaii Idaho Chicago 500 W est Monroe Street Suite 3600 Chicago, Illinois 60661 (312) 382-7500 Illinois Indiana Michigan Ohio Wisconsin South Dakota M Memphis 5100 Poplar Avenue Suite 1900 M em phis, Tennessee 38137 (901) 685-1603 ■ 1 Arkansas Kentucky Louisiana Mississippi Tennessee Montana Nevada Oregon Utah Washington Wyoming 106 Index 22 Applications, 1998-2000 Hawke, John D., Jr. 3, 4, 5, 10 Hove, Andrew (Skip) C., Jr. Assessments (see Deposit Insurance Premiums) 18 Asset Liquidation Legislation Enacted (see Gram m-Leach-Bliley Act) 19 Bank Insurance Fund (BIF): Highlights 15-16 Financial Statements 25-44 Commercial Banks (Financial Performance): Return on Assets 14 Consumer Complaints and Inquiries 22 Deposit Insurance Premiums: Risk-Related Premiums 9,16-17 2-3,8-12 Diversity 20-21 Electronic Banking (see Technology) Emerging Risks 16-18 Enforcement Actions 21 Examinations, 1998-2000 19 Failed Institutions: FDIC-insured Institutions Closed During 2000 Liquidation Highlights Savings Associations (Performance): Return on Assets 15-16 45-61 9 15 4, 5 Staffing: Staffing Trends 1991-2000 103 Statistical Tables: Number and Deposits of BIF-lnsured Banks Closed, 1934-2000 91 Recoveries and Losses by the BIF on Disbursements for the Protection of Depositors, 1934-2000 92-93 Income and Expenses, BIF, 1933-2000 94-95 98 18 4-5 96 102 105 104 103 General Accounting Office (GAO) 81-87 Gramm-Leach-Bliley Act 19-20 FDIC Expenditures, 1991-2000 96 Estimated Insured Deposits and the BIF, 1934-2000 97 Income and Expenses, SAIF, 1989-2000 Federal Savings and Loan Insurance Corporation Resolution Fund (FRF): 63-80 Financial Statements Savings Association Insurance Fund (SAIF): Highlights Financial Statements Risk-Related Premiums Seidman, Ellen Deposit Insurance Funds (see BIF and SAIF) Federal Deposit Insurance Corporation (FDIC): Board of Directors Corporate Planning and Budget Organization Chart/Officials Regional Offices Sources of Information Staffing Trends 1991-2000 3, 5 9 Risk-Related Premiums Deposit Insurance Reform Reich, John 98 FDIC-insured Institutions Closed During 2000 98 Estimated Insured Deposits and the SAIF, 1989-2000 99 Number, Assets, Deposits, and Losses of Insured Thrifts Taken Over or Closed, 1989-2000 99 Tanoue, Donna Technology 2-3, 4, 8 ,1 0 ,1 1 ,1 8 , 19 18-19 Published by: O ffice of Public Affairs Phil B a ttey Director E liza b e th R. Ford A ssistant Director D avid Barr M a rjo rie C. B rad sh aw Jay Rosenstein Co-Editors Design, Production/Typesetting by: D ivision o f A d m in is tra tio n D esign U n it A d d ie H a rg ro ve Chief, Design and Printing Unit Patricia Hughes Head, Design Group S am Collicchio Coordinator, A rt Director/Designer Production of the Financial Statem ents by: D ivision of Finance Financial S ta te m e n ts S ection S a m u e l E. Forkkio Chief Paul A. Covas A ssistant Chief D enise M . H arris Senior Accountant H Slipsips mm M F e d e r a l D e p o s it I n s u r a n c e C o r p o r a t i o n • .">.">() I T lli S tr e e t . WN • W a s h in g t o n . DC.