Full text of Annual Report (Resolution Trust Corporation) : 1992
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R e s o tv in g T h e C ris is R e s to rin g T h e C b n H d e n c e /?fso/.</r/G"v n?i/sr co/?po/?^r/o/v^ Reso)vingTheCrists RestoringTheConfMtnce October 29,1993 Resolution Trust Corporation Washington, D.C. Sirs: In accordance with the provisions of section 501 o f the Financial Institutions Reform, Recovery, and Enforcement Act o f 1989, the Resolution Trust Corporation is pleased to submit its Annual Report for 1992. Financial operating plans and forecasts have been provided separately. Very truly yours, Roger C. Altman Chief Executive Officer The President o f the U.S. Senate The Speaker of the U.S. House o f Representatives 19 9 2 A N N U A L R E P O R T Chief Executive Officer's Statement Resolution Trust Corporation (R T C ) ing the m om entum established in the R T C 's first H has confronted a host o f difficult challenges tw o years o f operation. U ntil 1 9 9 2 , the R T C H since its creation in August o f 1989. Th e focused on closing hundreds o f insolvent savings H challenge o f 1993 is to implement the and loans. In 1 9 9 2 , however, with the bulk o f this H ambitious m anagement reform agenda task com pleted, the R T C shifted m ore o f its atten * outlined by Treasury Secretary Lloyd tion to marketing its remaining inventory o f Bentsen at his M arch appearances before the assets—three-fourths o f which were such hard-to- H ouse and Senate Banking Com m ittees. sell assets as land and non-perfbrm ing loans. T h e T he management reform plan includes the following nine goals: R T C also needed to streamline its operations. Early in 1 9 9 2 , R T C m anagem ent to o k action # Strengthening internal controls; # Providing an audit follow-up system; to confront the necessary changes—a process which involved removing layers o f bureaucracy, consoli dating offices and delegating more decision-making # Preparing a comprehensive business plan; authority to a new hands-on executive com m ittee. # Expanding opportunities for minorities Th e R T C also unveiled tw o pioneering programs designed to sell hard-to-sell distressed assets, the and w om en; # Improving the Professional Liability Section; # Im proving the management information systems; National Land Fund and the M ultiple Investor Fund. B o th received positive attention from other governm ent agencies and private sector firms involved in managing distressed assets. # Strengthening contractor oversight; # Appointing a C h ief Financial O fficer; and # Appointing an Audit C om m ittee. Even as this shift in priorities was gaining m om entum , R T C 's resolution activities suffered a severe setback. T h e R T C 's funding expired in April o f 1 9 92, and the R T C had to suspend its resolu This ambitious program should place the R T C on a sound management footing and give renewed T h e R T C is now waiting for Congress to authorize emphasis to one o f the R T C 's the last installment o f funds needed to com plete central objectives: maximizing its jo b. savings to the taxpayers. We also must plan to wind down the R T C as soon as possi T h e R T C has had one o f the toughest govern m ent missions in U .S. history, and has made substantial progress toward carrying out that m is ble w ithout impairing its opera sion—despite funding delays and the controversy tions, and ensure an orderly surrounding such a large and com plex undertaking. transition o f personnel and sys M uch o f the credit for these achievements rests tems to the F D IC . Accordingly, with the dedication and professionalism o f the Secretary Bentsen asked the R T C 's employees, both career and temporary. F D IC and the R T C to establish a Roger C. Attman Chief Executive Officer tions o f failed thrifts for the remainder o f the year. Finally, I extend the R T C 's recently nominated joint task force to sm ooth the C E O the very best wishes for a speedy confirm a transition process. This task force tion and a successful com pletion o f the final chap tias been established and is beginning its work. ter o f this m ost im portant and challenging task. This management reform agenda builds on the R T C 's primary focus in 1 9 9 2 —managing a shift in priorities while maintain R E S O L U T t O N T R U S T C O R P O R A T t O N August 5, 1993 19 9 2 A N N U A L R E P O R T TaMe of Contents Transmitta! Letter 1 Chief Executive Officer's Statement 2 introduction 4 Division of Lega! Services 7 Department of Corporate Affairs Department of Asset Disposition Department of Conservatorships and Receiverships Department of Litigation Division of Administration and Corporate Relations 8 9 9 10 11 Department of Administration 12 Department of Contracts, Oversight, and Evaluation 13 Department of Minority and Women's Programs 14 Office of the Secretary 16 Office of Ethics 16 Office of Governmental Relations Office of Corporate Communications 16 16 Division of institution Operations and Saies 19 Department of FSLIC Resolution Fund Restructuring 20 Department of Corporate Finance 20 Department of Operations 22 Department of Resolutions Department of Planning and Analysis 28 31 Division of Asset Management and Saies 33 Department of Asset Management Department of Field Activities and Sales Department of Capital Markets Department of Affordable Housing 34 35 37 37 Regutations 41 Financia! Statements and intemai Controis 45 Statistics 75 index 80 1 9 9 2 A N N U A L R E P O R T ! N T R O D U C T ! O N !ntroduction ^ With Congress' passage o f the Financial funds through the m anagem ent and sale o f the g Institutions Reform , Recovery, and institutions' assets. These thrifts are ones that had ^ H g Enforcem ent A ct o f 1989 (F IR R E A ), ^ g * ^ g been insured by F S L IC for which a conservator or the Resolution Trust Corporation receiver was appointed during the period January 1, (R T C ) was established on August 9 , 19 89, through Septem ber 3 0 , 1993. ^ 1989. Its jo b is to resolve the crisis in F IR R E A also mandates the R T C to maximize the savings and loan industry created during the the net present value return from the sale or other 1980s by, in many cases, risky investments, fraud, disposition o f failed thrifts and their assets, m ini and mismanagement at the thrifts. mize the im pact o f such transactions on local real Six m onths prior to F IR R E A 's enactm ent, the estate and financial markets, minimize the am ount Federal D eposit Insurance Corporation (F D IC ) led o f any loss realized in the resolution o f the insol an interagency effort to evaluate and oversee the vent thrifts, and maximize the availability and operations o f the nation's insolvent thrifts, which affordability o f residential real property for low- and had been rapidly increasing in num bers. Joining the m oderate-incom e individuals. F D IC in this task were the Federal Savings and T o ensure that as many S & L violators as possi Loan Insurance C orporation (F S L IC ), the Federal ble are punished, and to recover m oney for taxpay H o m e Loan Bank Board, the Federal Reserve ers from wrongdoers, the R T C also has the Board, and the O ffice o f the Com ptroller o f the authority to investigate, initiate civil litigation, and Currency. T h e F D IC to o k control o f 2 6 2 ailing make criminal referrals in cases involving form er thrifts during this period (each o f which was placed officers, directors, and other professionals who in conservatorship or receivership), which the R T C contributed to the downfMl o f the thrifts. inherited upon its establishment in August 1989. T h e R T C 's mission is to contain, manage, and sell failed savings institutions and recover taxpayer RTC Executive Com m ittee L-R (seated): Wittiam H. Roe!!e, Chairman (Senior Vice President and Chief Financia! Officer, Division of institution Operations and Sates); Lamar C. Ketty, Jr. (Senior Vice President, Division of Asset Management and Sa!es); Richard T. Aboussie (Acting Senior Vice President and Genera! Counse!, Division of Legat Services). L-R (standing): Barry S. Kotatch (Vice President, Department of Ptanning and Anatysis); Thomas P. Horton (Vice President, Department of Fietd Activities and Sates). H L S !) L U I !0 \ ! Mt S t C 0 H !' 0 H \ t I () \ O n N ovem ber 2 7 , 1991, Congress passed the Resolution Trust C orporation Refinancing, Restructuring, and Im provem ent A ct o f 1991 ] 9 9 2 A N N U A L R E P O R T WASHtNGTOM HFFtCE STRUCTURE President and Chief Officer - - - - *- - - - - D iv i^ o n o f A d m in is tr a tio n s ^ ^ L C o rp o ra te R e ia tio n s j . M v is iw o f L eg a! S e r v ic e s ; D<;partment of Asset Restructuring Department of Department of Contracts, D<:[)nrtment of Asset Oversight, and' Corporate Disposition Evaluation Finance Departmentof Department of Conservatorships Minority and and Receiverships Women's Programs Department of Resolution Administration Affairs D iv i^ m o f A s s H ! M anagenw nt an d S a !es Department of FSMC Department of' Corporate D ivisio n o f O p e ra tio n s an d S ates ^ Oflit'C of thH Scrrnlitrs. Mmugcnmnt Department w ! Operations Department of Department w ! Affordable Resolutions Housing Department of Planning and Analysis j Office of i Govemment.il Rdtttiotn- ____j i Office of (lommuntcations 1HH2 A N N U A L R E P O R T (H.R.3435), which provided the RTC with $25 billion more in funding through April 1,1992; extended the RTC's ability to accept appointment as conservator or receiver from August 9,1992, set forth in FIRREA, to September 30,1993; redesig nated the RTC Oversight Board as the Thrift Depositor Protection Oversight Board and restruc tured its membership; abolished the RTC Board of Directors and removed the FDIC as exclusive man ager of the RTC; and created the office of Chief Executive Officer of the RTC, requiring appoint ment to that office by the President with the advice and consent of the Senate. After April 1,1992, the RTC was left without additional funding to resolve failed savings and loan institutions. Despite Congress' failure to provide more funds, during the year the RTC took control of 50 savings and loans determined to be insolvent by the Office of Thrift Supervision (OTS). In 1992, the RTC also closed or sold 69 insolvent savings institutions and achieved asset sales and collections of approximately $77 billion (net of putbacks). From inception through 1992, the RTC closed or sold 653 thrifts; total sales and collections amounted to $305 billion (net of putbacks). The RTC operates from its headquarters in Washington, D.C., and Held offices and sales cen ters throughout the country. In 1992, at the direc tion of the President and CEO, the RTC began to downsize the agency—consolidating its 19 field and regional offices, and eliminating duplicative efforts throughout the organization—as it moved closer to its sunset date of December 31, 1996. At yearend, the RTC had 13 6eld ofRces and 14 sales R E S O L U T I O N T R U S T C O R P O R A T i O N centers nationwide, including the National Sales Center in Washington, D.C. During 1992 and through March 15,1993, Albert V Casey, RTC President and CEO, directed the daily executive and administrative functions of the agency. The Executive Committee, which replaced the RTC Board of Directors in 1992, con sists of three senior vice presidents and two vice presidents. In 1992, the committee members were Richard T. Aboussie, Acting Senior Vice President and General Counsel, Division of Legal Services; William H. Roelle, Senior Vice President and Chief Financial Officer, Division of Institution Operations and Sales; Lamar C. Kelly, Jr., Senior Vice President, Division of Asset Management and Sales; Barry S. Kolatch, Vice President, Department of Planning and Analysis; and Thomas P. Horton, Vice President, Department of Field Activities and Sales. The committee serves as the policy-setting entity of the RTC and addresses major operational matters. The Thrift Depositor Protection Oversight Board reviews the RTC's overall strategies, policies, and goals, including those deemed likely to impact significantly on the RTC's financial condition, its operations, or its cash Hows; or those it deems to involve substantial public policy issues. The Board's membership includes the Secretary of the Treasury, who chairs the Board; the Chairman of the FDIC Board of Directors; the RTC CEO; the Director of the OTS; the Chairman of the Board of Governors of the Federal Reserve System; and two indepen dent members appointed by the President, with the advice and consent of the Senate. L E G A L S E R V ! C E S Services provides co m Office o f Corporate Issues prehensive legal services During the year, the O ffice o f unit oversees the resolution o f to the R T C . T he divi Corporate Issues provided legal disputes with, and claims sion advises the analysis o f legislation im pacting against, the R T C , the F D IC , W ashington and held on the R T C , including several other federal and state govern staffs on such issues as resolu funding bills and the Resolution m ent agencies, and outside par tions, conservatorship and Trust C orporation Refinancing, ties through negotiation, receivership operations, and liti Restructuring, and m ediation, and arbitration. gation, as well as special issues, Improvem ent Act o f 1991. T h e These disputes and claims were including the R T C 's statutory office drafted a proposal to inherited by the R T C when it authority and responsibilities, restructure the R T C in confbr- becam e conservator o r receiver and environmental matters. In mity with the new law, and co o r o f the failed thrifts, and dealt 1992, the division restructured dinated the drafting o f all with mostly failed loans or taxes and consolidated its staff into six delegations o f authority for the owed to the Internal Revenue field sites as part o f the Corporation. Service. he Division o f Legal C orporation's reorganization. the resolution o f $ 5 billion in claims against the R T C . T h e Th e office also prepared an T h e office established and opinion on the applicability o f oversaw a legal review process the division and serves as the the Americans with Disabilities for all environmental site assess principal legal advisor to the Act to the R T C , and led a w ork m ents performed on all R T C real R T C 's President and C E O . T h e ing group that produced a draft estate owned properties. T h e division is organized into four policy on the applicability o f the office also initiated litigation departments: C orporate Affairs, act to public spaces at R T C against the Financial Institutions Asset D isposition, receiverships and conservator Retirem ent Fund (F IR F ) to Conservatorships and ships. T h e office administered recover surplus funds in retire Receiverships, and Litigation. the Settlem ent/W orkout Asset m ent plan accounts that F IR F T h e General Counsel heads Department of Corporate Affairs Team Program , which uses refused to distribute to R T C teams o f attorneys and asset spe receiverships. cialists to expedite the resolution o f problem assets. Office o f Employment and Labor Law Office o f Special Projects In 1 9 9 2 , the O ffice o f C orporation's internal corporate T h e O ffice o f Special Projects was established, which devel T T h e D epartm ent o f Corporate ] Affairs oversees any legal H matters pertaining to the Em ploym ent and L abor Law structure, governance, and pro provided legal support on tax oped procedures to coordinate cedure, as well as legislative and and environmental law, and personnel and em ploym ent m at policy matters. implemented the com puterized ters with the O ffices o f H um an tracking system fbr legal m at Resources M anagem ent, all personnel, labor-relations, ters—the R T C Legal Inspector General, and Ethics. and general em ployment matters Inform ation System (R L IS ). D uring the year, the office repre Th e department also handles involving the R T C as a federal During 1992, R L IS was fully sented the R T C in 3 9 em ploy employer. T h e department is operational in every R T C office, m ent actions brought before the comprised o f the Offices o f providing an on-line, integrated Federal L abor Relations C orporate Issues, Special tracking and payment database Authority, the Equal Projects, and Em ploym ent and for all legal matters referred to Em ploym ent O pportunity L abor Law. outside counsel. In addition, the Com m ission, the M erit Systems office's Alternative Dispute Protection Board, and the Resolution U nit helped to settle D epartm ent o f Justice in federal 164 legal disputes, resulting in district court. R E S O L U T t O N T R U S T C O R P O R A T t O N 1 9 9 2 Department of Asset Disposition "T h e Department of Asset H Disposition reviews the legal H aspects of RTC asset sales, including the disposition of high-yield and other securities, and performing and non-performing loans through securi tized transactions. The department is comprised of the Offices of Real Estate, and Securities and Finance. OfRce o f Real Estate In 1992, the OfRce of Real Estate assisted the OfRce of National Sales in closing more than $7 bil lion (book value) in sales of real estate and loans secured by real estate through sealed-bid offer ings, portfolio sales, and open-cry auctions. The office also assisted in structuring the National Land Fund, a limited partnership arrangement designed to sell $2 billion in undeveloped land and loans secured by land. Private sector firms acting as the general partner for the fund will manage and market its assets in 1993. OfEce o f Securities and Finance In 1992, the Office of Securities and Finance assisted with 34 mortgage-backed securities transactions, resulting in the sale of more than $23 billion (book value) of single-family, multifam ily, commercial, manufactured housing, and home equity loans. In addition, the office assisted in the development of programs for the disposition of consumer loans, subordinate securities, and reserve funds. The office also participated in the structuring and implemen tation of the RTC's Multiple Investor Fund program, in which the RTC is expected to sell between $2 billion and $6 billion in non-performing and sub-perfbrming loans in 1993. In addition, the ofRce assisted in disposing of a variety of highyield and other securities through the Securities Sales Program. The RTC sold over $1 billion (face value) in junk bonds and equity securities through the program during 1992. The ofRce also assisted in disposing of portfolios of broad ly syndicated corporate loans through the Highly Leveraged Transactions Sales Program and in implementing the Cash Management Program for the investments of receivership cash balances. Department of Conservatorships and Receiverships he Department of Conservatorships and Receiverships provides legal advice and support to conserva torship and receivership opera tions, legal counsel and documentation for sales of sub sidiaries, and all documentation required when the RTC takes over and resolves failed thrifts. The department consists of the Offices of Conservatorships, Receiverships, and Resolutions; and Contracting. A N N U A L R E P O R T OfRce o f Conservatorships, Receiverships, and Resolutions The OfRce of Conservatorships, Receiverships, and Resolutions provided legal support for 16 major thrift resolutions (resolu tions of thrifts with liabilities exceeding $500 million as of the date of conservatorship) in 1992, representing an aggregate of more than $16 billion in deposits. In addition, the ofRce assisted with the termination of 34 receiverships, which was accomplished through the RTC's purchase of the remaining receivership assets and its pay ment of final dividends to credi tors of the former institutions. OfRce o f Contracting The OfRce of Contracting helped to revamp the RTC's entire contracting process and issued a revised Contracting Policy and Procedures Manual. These changes were made to reflect new policies and adminis trative changes, including the revision of the Contractor Complaint Resolution process, clariRcation of the non-competitive provision for awards under $5,000, and redefinition of the ownership requirements for minority- and women-owned businesses. The ofRce also han dled 72 ethics matters, assisted in the resolution of contractor conflicts of interest, and reviewed investigative findings of the OfRce of Inspector General relating to enforcement cases. 1 9 9 2 A N N U A L R E P O R T L E G A L S E R V ! C E S Department of L!t!gat!on "T h e Department of Litigation H oversees and coordinates ail of H the litigation affecting the RTC, including trial and appellate Rtigation in all federal and state courts; claims against directors, officers, accountants, and attor neys of Ailed financial institutions; and claims and proceedings in bankruptcy. The department con sists of the Offices of Complex Litigation, Litigation, and Professional Liability. OfHce o f Complex Litigation OfHce o f Litigation The Office of Complex Litigation is responsible for all bankruptcy cases and litigation involving junk bond investments. The ofHce handled junk bond claims against Drexel Burnham Lambert, Michael Milken, and other former employees of Drexel. The office negotiated a number of settlements in 1992 involving junk bond claims, including a settlement in the Drexel bankruptcy case and a "global settlement" with Milken, his associates, and affiliates. Total recoveries from junk-bond-related cases should ultimately reach $1 billion, including $503 million from the global settlement with Milken. The office's Bankruptcy Section handled over 11,000 bankruptcy cases in 1992. A per sistent issue for the RTC in some bankruptcy cases has been the relationship between the RTC's powers to dispose of assets of e R E S O L U T i O N T R U S T Ailed thrift institutions and the powers of the bankruptcy courts to control such assets. In 1992, the RTC won a significant victory on this issue when it obtained an appellate court decision that a bankruptcy court could not restrain the RTC from exercising control over the subsidiaries of the Ailed Oak Tree Savings Bank, New Orleans, Louisiana. The Office of Complex Litigation closely monitors cases involving the RTC's powers and regularly assigns them to in-house attor neys who argue the RTC's posi tion in court. The Office of Litigation is com posed of two Trial Litigation Units and an Appellate Litigation Unit. Trial unit attorneys, along with the RTC's field office litiga tors, oversaw more than 34,000 cases in state and federal trial courts in 1992. The trial units were directly involved in more than 1,000 "significant issue" cases, which involve the interpre tation of RTC policy or may set a precedent for future RTC cases. During 1992, the appellate unit directly supervised the prepa ration of briefs on more than 400 matters pending in state appellate courts and in the 11 United States Circuit Courts of Appeal. Many of these cases were argued by members of the appellate unit. In addition to its litigationmanagement duties, the office advised senior management on matters relating to litigation poli cy; acted as a liaison with other federal agencies, such as the C O R P O R A T i O N Department of Justice, on litiga tion-related issues of mutual inter est; participated in training activities and acted as a resource for the RTC's held office litiga tors; and prepared and published the comprehensive two-volume RTC Litigation Deskbook, which, at yearend, was in the process of being updated. OfHce o f Professional Liability By yearend 1992, the Office of Professional Liability was in the process of prosecuting 233 civil actions, including 194 RTC-initiated lawsuits and 39 other RTC related lawsuits, for improper conduct by directors, officers, attorneys, appraisers, accountants, and other professionals who pro vided services to 167 failed thrifts. At yearend, investigations were underway on one or more claims in 381 thrifts. By yearend, $328 million had been collected in settlements and judgments in professional liability cases. Setdement negotiations with defendants in the RTC's case against professionals, insiders, and borrowers at Lincoln Savings and Loan Association, Irvine, California, have resulted in agreed-to settlements totaling over $115.8 million, of which the RTC had recovered $95.4 million by yearend. In addition, the RTC, along with the FDIC and the Office of Thrift Supervision, entered into a global settlement with the accounting firm of Ernst & Young, New York, New York. The RTC's share of this settle ment is over $128 million. A D M ! N ! S T R A T ! O N AND *^ ^ ^ *h e Division of H Administration and H Corporate Relations H provides administrative H and related services to the RTC in a wide range of areas, including personnel, contracting, information ser vices, and minority and women's programs. During 1992, the division also helped to imple ment the reorganization plan of the Corporation as the RTC began to downsize its opera tions. The division is comprised of three departments and four offices that report directly to the division vice president. Department of Administration "T h e Department of ] Administration is the main H provider of corporate ser vices, and is the central point for analyzing and proposing changes to the Corporation's organiza tional structure. The department consists of the Offices of Corporate Information, Human Resources Management, Administrative Services, and Organization and Resource Management. OfEce o f Corporate Information The Office of Corporate Information provides informa tion systems and voice and data telecommunications services; formulates policies and guidance on information management, security, and related areas; and develops the RTC's Information Resources Management (IRM) plans and budget. R E S 0 L U T ! 0 N T R U S T C O R P O R A T E R E L A T i O N S The office maintains and operates a corporate-wide infor mation network consisting of over 11,000 work stations, 330 servers, 1,600 printers, and 1,100 lap top computers. The ofRce completed the RTC Wide Area Network (WAN), which was fully integrated to support all network and mainframe systems for more efficient exchanges of business information. The new RTC WAN enabled the RTC to establish video-teleconferencing capabilities at headquarters and in the field offices. To minimize risk to sensitive RTC data, the office improved corporate access-control policies for information systems. In addition, virus protection soft ware was distributed throughout the Corporation to protect sys tems against computer virus contamination. The office completed the second of three phases of the Corporate Information System, which collects and integrates data from key RTC information systems for inclusion in a corpo rate-wide database. In addition, the Corporate Data Repository was implemented, which tracks and safeguards critical data with in major corporate information systems. The office supported the field office restructuring by coor dinating the efforts of the "clos ing teams." These teams work with both the closing and receiv ing field offices in the areas of computer hardware, software, security, telecommunications, and national application systems to ensure timely, efficient field office closings. C 0 R P 0 R A T ! 0 N OfRce o f Human Resources Management The Office of Human Resources Management administers per sonnel and management adviso ry services in the areas of staffing, position classification, employee relations, training, personnel management evaluation, and personnel information systems and processing. The office was created on May 4,1992, and immediately began assisting in the field reor ganization and downsizing effort, including establishing a nationwide outplacement train ing program. The office helped coordinate the return of 376 permanent employees from the RTC to the FDIC. It also devel oped and produced the Field Restructuring Handbook, the Managers' Guide to Restructuring, and the Separating Employee's Guide to Benefits; and established a hot line for employees' questions on the reorganization. The RTC's training pro grams were coordinated by this office during the year. The office also streamlined the incentive awards process, and implement ed a labor-management relations program at headquarters in 1992. OfHce o f Administrative Services The Office of Administrative Services develops and manages the RTC's corporate services, maintains the RTC's facilities, and establishes policies, proce dures, and guidelines for a wide variety of both real property management and administrative service functions. The office pro- 1 9 9 2 vides direct operational support to all RTC headquarters activi ties and technical assistance to Held ofHces in these areas. In 1992, the ofHce devel oped and implemented a hous ing plan for the Washington headquarters ofHces that accom modated staff increases and site consolidation (from six to four locations), while allowing opera tions to continue uninterrupted. The ofHce also relocated approx imately 65 percent of the head quarters staff (more than 1,100 employees) over a nine-month period. The office established inhouse graphic design capabilities to provide improved-quality graphic support and to save on design costs. In addition, the office implemented the Records Management Tracking System, providing a consolidated database of all institutional records to track the RTC asset inventory and sales, as well as the completion of investigations and litigation. OfHce o f Organization and Resource Management The OfHce of Organization and Resource Management provides organization- and managementanalysis services to the Corporation. The office is the focal point for all budget formu lation, execution, analysis, and reporting for the Division of Administration and Corporate Relations. In 1992, the office recom mended the restructuring of and developed mission and function statements for ofHces in the Divisions of Administration and Corporate Relations, Legal Services, and Asset Management and Sales, as well as the Held ofHces. The ofHce also revised the Corporation's administrative delegations of authority to reHect new organizational struc tures and policies, and developed new functional and expenditure authorities. The ofHce developed a "management-by-objectives" process for key initiatives in the division, in which projects and goals are developed and tracked. Policies, procedures, and report ing requirements for the Administrative Initiatives Management System (AIMS), which prioritizes RTC manage ment's program initiatives, were also established during the year. Department of Contracts, Oversight, and Evaluation "T h e Department of Contracts, H Oversight, and Evaluation * oversees all RTC contracts through the OfHces of Contracts; Contractor Oversight and Surveillance; and Administrative Evaluation. OfHce o f Contracts The OfHce of Contracts provides corporate-wide contracting poli cies, procedures, and direction on the management and disposi tion of assets acquired from failed thrifts. Additionally, the ofHce directs, manages, and controls the contracting process and activ ity at the headquarters level and administers existing contracts. In 1992, the ofHce devel oped a comprehensive contract policies and procedures manual A N N U A L R E P O and training program for the RTC, standardized many widely used contracting documents, and implemented a Contracting OfHcer Warrant Program, which established guidelines for con tracting ofHcials in approving contracts. The following chart shows RTC contract ing activity nationwide from inception in August 1989 through 1992: RTC CONTRACTING ACT!V!IY 1989 through 1992 Year Number of Awards 1989 216 1990 10,719 443,670,516 1991 48,830 1,375,497,279 1992 44,301 1,121,200,267 1 M ,M 6 $ 2,943,223,146 n m Fees Paid to Contractors $ 2,855,084 OfHce o f Contractor Oversight and Surveillance The OfHce of Contractor Oversight and Surveillance monitors and evaluates the per formance of major asset-management and sales contractors; reviews and investigates contrac tor performance and contracting irregularities; coordinates major RTC contract terminations; ini tiates suspension and exclusion actions of contractors for viola tions of Htness and integrity, fraud, and non-performance; and administers the RTC Competition Advocacy Program, designed to ensure that all competitive-bid stan1 9 9 2 A N N U A L R E P O R T A D M ! N ! S T R A T ! 0 N A N D dar& have been met through a review of all contracts. In 1992, the ofRce closed over 150 contractor fitness and integrity investigations resulting in 35 suspension and exclusion actions. The ofRce also reviewed the internal control structure and operations of 140 contractors responsible for asset manage ment and disposition activity. O f those reviews, 60 cases were closed and final reports issued. In addition, the ofRce issued a report concluding that the pre qualification and buyer-eligibility procedures employed during the November 1991 Lone Star Affordable Housing Auctions, held throughout Texas, were ineffective in ensuring that buy ers were in compliance with the RTC's Affordable Housing Disposition Program eligibility and residency guidelines. The office published and dis tributed to contractor oversight staff in the field a fraud training manual that outlines contractor fitness and integrity require ments, and a guide to the AntiKickback Act, which prohibits RTC contractors from taking kickbacks from sub contractors. OfHce o f Administrative Evaluation The OfHce of Administrative Evaluation develops and admin isters the Corporation's overall internal controls program, and monitors its compliance with the Chief Financial Officers Act of 1990 and associated policies of the RTC Thrift Depositor Protection Oversight Board. The office also conducts corporatewide evaluations of the Division R E S O L U T I O N T R U S T C O R P O R A T E R E L A T ! 0 N S of Administration and Corporate Relations' programs to ensure that the programs are in compli ance with statutory and RTC corporate policy, and are meet ing their objectives. In addition, the office coordinates the pro gram offices' responses to audits and investigations conducted by the General Accounting OfRce (GAO) and the RTC OfHce of Inspector General (OIG). In 1992, the ofRce coordi nated the Corporation's responses to 36 GAO and 105 OIG audits and investigations, and 94 cases resulting from calls to the OIG Hotline, which receives complaints of waste, fraud, and abuse at the agency. The ofRce also completed administrative reviews of 10 Held ofRces, and developed an audit program to review the internal control structure within receiver ships. Five receivership audits were completed during the year. Department of Minority and Women's Programs "T h e Department of Minority H and Women's Programs H manages and develops policy for minority- and women-owned business (MWOB) participation in all RTC activities, including contracting, investment, and securitization programs; and equal employment opportunity activities. The department is comprised of the OfRces of Minority- and Women-Owned Business; Policy, Evaluation, and Field Management; Equal Employment Opportunity and Affirmative Action; and Legal Programs. C 0 R P 0 R A T ! 0 N OfRce o f M inority- and W om en-Owned Business The OfRce of Minority- and Women-Owned Business ensures that firms owned and operated by minorities and women have the maximum opportunity to participate in all contracting activities of the Corporation, as well as at con servatorships and receiverships. In 1992, the ofRce devel oped, published, and imple mented RTC policies and procedures for the MWOB con tracting program. This included establishing an annual goal of 30 percent MWOB participation in all RTC contracts, applying bonus points to MWOB con tract proposals, and creating joint-venture and subcontracting policies and guidelines for MWOBs. O fEce o f Polity, Evaluation, and Field Management The OfHce of Policy, Evaluation, and Field Management develops nationwide program standards, policies, and procedures for the RTC's minority and women's programs to ensure that they are in compliance with FIRREA; the RTC Funding Act of 1991; and the RTC Refinancing, Restructuring, and Improvement Act of 1991. In 1992, the ofRce devel oped standards and criteria for the oversight and review of minority and women's programs in the Reid to determine the pro grams' effectiveness, and com pleted Program Compliance Reviews in four Reid ofRces (Kansas City, Valley Forge, 1 9 9 2 A N N U A L OfHce o f Equal Employment Opportunity and Affirmative Action o f minority and women-ow ned law Hrms (M W O L F s) and ly C ontracting Activity and T he Office o f Equal tracting with the R T C . Performance Reports for the Em ploym ent Opportunity and R T C President and C E O in Affirmative A ction provides lead oped and issued a policy state Dallas, and Atlanta) to deter mine the programs' adherence to policies and requirements. T he ofHce produced m onth minority and w om en attorneys in n on -M W O L Fs in legal co n In 1 9 9 2 , the ofHce devel 1992. T h e office also produced ership and guidance to the m ent concerning the quarterly Field Office C orporation in all areas o f the requirements o f the R T C 's C ontracting Activity and equal em ploym ent opportunity minority and w om en's pro Performance Analyses o f all co n program. grams, including the M inority tract awards and fees for each In 1 992, the office devel R E P O R T and W om en Partners Program, ethnic minority and non-m inori oped a new affirmative action which encourages majority- ty group by gender in each R T C plan for managers based on the owned Hrms to prom ote m inori office, receivership, and conser field restructuring and downsiz ties and w omen as partners. It vatorship. ing, and monitored the return o f also established M inority and R T C employees to the F D IC to W omen Outreach Coordinators pared 12 reports and/or ensure E E O guidelines were to provide support to regional Congressional testimonies on the being followed. and Held outreach efforts. During 1992, the office pre R T C 's efforts in minority and T he office sponsored pro T h e ofHce and the National w om en's programs. T h e staff grams for the observance o f M inority and W om en Bar also assisted in developing pre Asian, Hispanic, and Disability Associations co-sponsored a sentations for the R T C President Awareness M onths. It also initi national symposium for and C E O and the department's ated the R T C 's first Summer M W O L F s in Dallas, Texas, in Assistant Vice President, who Employment Program for People January 1992. In addition, the participated in several workshops with Disabilities, which included ofHce created held in conjunction with the hiring six disabled students from quarterly newsletter distributed Congressional Black Caucus universities across the country to to Congress and R T C legal staff Foundation Legislative Weekend work in various R T C offices. to prom ote minority and women in Washington, D .C ., in Septem ber 1992. T he office also improved the T he office coordinated with O 2# , a outreach activities nationwide. the OfHce o f Corporate T h e ofHce also established a join t Inform ation and the OfHce o f venture task force to ensure uni department's advertising efforts by targeting specific w omen and Administrative Services to acquire a variety o f adaptive form im plementation o f the join t venture program and to ethnic minority markets, and equipment for the disabled. encourage and m onitor join t venture referrals. strengthening coordination Telephone amplifiers, telecom between the held offices. In m unication devices for the deaf, addition, the staff developed and orthopedic chairs, air puriHca- implemented a management tion systems, and vision aids compiled a national directory o f program for the department's were am ong the adaptive equip M W O L F s that are on the R T C 's field personnel on new minority m ent requested and procured for List o f Counsel. T h e A W O Z F and w om en outreach and co n disabled R T C employees. tracting policies. T h e staff developed the Join t Venture Tracking System, and contains inform ation about each RTC-registered OfHce o f Legal Program s includes Hrm expertise, size, co n The OfHce o f Legal Programs tacts, as well as other pertinent establishes and oversees policies, data. M W O LF. T he information procedures, and programs designed to ensure the inclusion 1 9 9 2 A N N U A L R E P O R T A D M ! N ! S T R A T ! O N AND ^ q/" O^c^y o/' ^ &c7Yf%r% Gop^yww^^/ Corpom^ CcwwMM^^OMy. OfEce o f the Secretary The OfRce of the Secretary man ages the decision-making process for the RTC's senior executives, including record-keeping and infbrmation-dissemination. In addition, the ofRce administers three nationwide programs that provide the public with compiaint-resolution services and access to RTC information. In 1992, the ofRce processed more than 850 decisions approved by the RTC President and CEO, the Executive Committee, the senior vice presi dents and headquarters vice pres idents, and the newly established Information Resources Manage ment Steering Committee, which screens all software and hardware proposals presented to the Executive Committee. The ofRce responded to more than 1,200 requests for information about actions taken by the former RTC Board of Directors, the President and CEO, and other senior ofRcials. The ofRce also processed 1,600 litigation Rlings. The ofRce handled nearly 2,000 complaints through the RTC Client Responsiveness Program, created in June 1992, which established corporatewide responsiveness standards. Processing techniques in the Public Reading Room in Washington, D.C., and in Regional Public Service Centers R E S O L U T I O N T R U S T C O R P O R A T E R E L A T i O N S were streamlined by the ofRce, enabling it to handle a record 225,000 requests for docu ments. During the year, public reading room and FOIA pro grams in the Valley Forge, Pennsylvania, and Costa Mesa, California, Reid ofRces were established. The ofRce also developed and published a FOIA procedures manual, and issued regulations regarding FOIA and the Privacy Act. In 1992, the ofRce processed 1,795 FOIA requests. OfHce o f Ethics The OfRce of Ethics administers regulations governing the Rtness and integrity of independent contractors that do business with the RTC, and suspends and excludes contractors that violate these regulations. The ofRce also administers the RTC's compli ance with employee ethics and standards of conduct laws, regu lations, and related directives and executive orders; and grants or denies waivers for conflicts of interest under RTC contracts. In 1992, the ofRce utilized national data communications systems, such as the Contractor Conflicts Database and the Document Management System, to track contractor ethics compli ance. The ofRce also established a national network of Reid ethics ofRcers and staff in each RTC Reid ofRce and established an RTC employee ethics program in the spring of 1992. O ffice o f G overnm ental R elations The OfRce of Governmental Relations serves as the RTC's C O R P O R A T i O N liaison with Congressional ofR cials. It maintains communica tions with House and Senate members and their staffs, and supplies them with information about RTC policy concerns. The ofRce also responds to member inquiries on behalf of constituents. In 1992, the ofRce worked with, but failed to convince, Congress to extend the April 1, 1992, deadline for the RTC to spend its authorized funds, or to authorize the RTC's funding request of $25 billion. The ofRce also worked with Congress for the defeat of various amendments opposed by the RTC, including a provision treating receiverships and conservatorships as federal government agencies for environ mental purposes. In 1992, the ofRce partici pated in over 450 meetings with members of Congress or their staffs, and responded to over 10,000 telephone and written inquiries R*om Congressional ofRces concerning RTC opera tions. From inception through 1992, the ofRce coordinated 57 appearances by RTC ofRcials at Congressional hearings, includ ing 16 in 1992. OfRce o f Corporate Communications The OfRce of Corporate Communications is the gateway to information for news organi zations and the public about RTC activities. The ofRce Reids numerous daily telephone inquiries from the press and the public throughout the country and abroad. The ofRce advises and assists the President and CEO and 1 9 9 2 other senior R T C executives in releases (nearly 3 0 0 in 1 9 9 2 ); developing and executing the writes and edits opinion editori A N N U A L R E P O R T m onthly employee newsletter. T h e office keeps R T C R T C 's public affairs programs. als, letters to the editor, and In addition, the office briefs speeches for the President and coverage o f the agency's activi R T C managers prior to media C E O and other key R T C offi ties through a daily summary o f interviews and provides m an cials, as well as copy lo r various em erging news stories, a daily employees informed o f media agers with material and policy publications; and produces pub clipsheet o f articles, and a weekly interpretations in advance o f lications such as the R T C 's wrap-up o f news stories. T he speaking engagements. Annual Report. In 1 9 92, the office also distributes through office began production o f out the Corporation a weekly T h e office headquarters staff issues all national and field press JVfMv, a scorecard o f the R T C 's activities. 1 9 9 2 A N N U A L R E P O R T "y,yy* * ^ "- - - ,- . ! '.T-:-' . '' ; ' r - ' r .! v ......... J * - -- "' :' - " " ^ " ,/ ..... . . . , -.1 ^ ^ ," ? '- ' * - . * . . f . . ^ ' .. '- . V / . - . ' ^ , , * -y * / y .y \ ..r^ . y* ^ ''' * ,' r .L,...<- ^ , y * ^ ' ; ^-". -,- ;-'7 ;^'^y ' .,r.y.r;y..,:.!iy,;^-y.v'y'-Y..7y. ' * .r" ':" "*^^ -. ,*<' - -.. -- /-,..,-f' - - . *,^.% y :,^ ^ *y.'' y -'' '** '*'^'.. ' ^ " -y y '' --'^y ' ^ y * -" - ,-," * y^yy-!^y''-^y"Y^'y^ -<y ..'Y^^yy/jy^y-'^^Y^-r'y.'..,./ .y^?y^ . ; . . ':* ' ^r/^.^..:.y ,.' y^:v^-; .. .'.; - ..* <-* '. - '. .7 ^ -'j' / .-r- - "-'' , j- f .'. ^ -y"y'^ *',.yy; . -.^'r' , f" ' „ . . " ' ,. " ; . / : , -, , . ' ' ,-. . .' ." . ..-' , '. yy- y'-y -y .y.'' .yyy., ,-y;':'*y y ^ y ^ ':y ^ l-,^ y 'y 'Y -:'-:' ';Y 1'* " , ;.. '.\.^y ", f . ...'' . ',.':... ' i". ,' ,. . I';.- / . . , ,' . ''<- . ,.. : '" - ^ y - * , ^'M,-^ .,y' ..f * < -' . , . *^.- ' -y.' . r ,/- ^^.rfyy;i r . y * y. *-y'y-'y y:,r'-yy''y' . y .y y,' f f ' f r ,- „.< - "Y- y . y # v - y y i ' * " * '.- -- - ^'.' , / " * '-*''" ^ -* -* — * -' * * ^^.v'y'*'-yry'rry,:y..-'^ ! N S T ! T U T ! O N O P E R A T I O N S ^ ^ ^ h e Division of H Institution Operations H and Sales oversees the H management and operaH tion of insolvent thrifts H while they are in the RTC's conservatorship program, and the negotiation and execu tion of the most cost-effective resolutions of these thrifts as well as those in the Accelerated Resolutions Program (ARP). At the beginning of 1992, the RTC was managing 91 conservator ships. During the year, 50 more thrifts entered the program. A total of 69 thrifts were resolved in 1992: 60 conservatorships plus nine thrifts resolved through ARP, which bypassed a conserva torship action. Resolution activi ty came to a virtual standstill after April 1,1992, because Congress declined to act on RTC funding. The division investigates fraud and other abuses at failed thrifts. In addition, the division develops and operates the Corporation's funding programs and capital markets activities, and coordinates the operations of the Corporation's financial departments. It also provides research and analytical support of RTC activities to ensure the RTC's effective operation. The division consists of the Departments of FSLIC Resolution Fund Restructuring, Corporate Finance, Operations, Resolutions, and Planning and Analysis. R E S O L U T t O N T R U S T AND S A L E S Department of FSUC Resotution Fund Restructuring "T h e Department of FSLIC H Resolution Fund H Restructuring renegotiates and restructures the 96 1988-89 FSLIC assistance agreements entered into by the former Federal Savings and Loan Insurance Corporation (FSLIC) with 91 acquirers to facilitate the acquisition of over 200 failed or failing thrifts between January 1, 1988, and August 9,1989. All funds expended by the depart ment to amend the assistance agreements in order to reduce the associated costs, which Congress mandated, are drawn from the FSLIC Resolution Fund (FRF), a separate appro priated fund managed by the FDIC. Management of this fund reverted to the FDIC in October 1992. During 1992, the RTC rene gotiated and amended 18 FSLIC assistance agreements and exer cised its cost-savings options in 19 other agreements. In the aggregate, the renegotiations and the exercise of cost-savings options resulted in cash outlays from the FRF of $8.9 billion to privately owned thrifts. The RTC estimates that the cash out lays will save taxpayers, in pre sent value terms, between $450 million and $1.3 billion. Minimum savings were calculat ed without regard to tax-sharing provisions; the maximum savings incorporate the tax-sharing pro visions assuming the assisted institutions will fully utilize such benefits. C 0 R P 0 R A T ! 0 N During 1992, an additional $2.4 billion from the FRF was expended to settle the FRF's assistance obligations to FSLIC assisted thrifts that subsequently failed and were placed under RTC conservatorship or receivership. From RTC inception on August 9, 1989, through December 31,1992, more than $20.8 billion was expended by the FRF to modify, renegotiate, or restructure these agreements. The RTC estimates that the cost savings from these actions—in present value terms—will range from $1.3 billion to $3 billion. Department of Corporate Finance *T*he Department of Corporate ] Finance maintains all H accounting records for the RTC. The department consists of the Offices of Accounting Services, and Field Accounting and Asset Operations. OfHce o f Accounting Services The OfHce of Accounting Services performs the corporate accounting function for the RTC. The ofHce produces and main tains the RTC corporate account ing records and systems, the corporate funding/cash manage ment operations, and the ofHcial corporate financial statements and reports that reHect the finan cial performance of the RTC in its corporate, conservatorship, and receivership capacities. In 1992, the ofHce imple mented the RTC Financial Management System (FMS). The FMS integrates the General ] 9 9 2 A N N U A L R E P O R T cial accounting system o f the development o f the R T C R T C , and numerous other sub Accounts Payable System (APS) O fH ce o f F ield A cco u n tin g and A sset O p eratio n s systems into a comprehensive to enable the office to assume all T he Office o f Field Accounting financial management system. corporate processing responsibil and Asset Operations directs and Th e F M S has enhanced data ities, including all corporate dis manages all asset and Held integrity and strengthened R T C bursements by check or wire accounting operations for R T C reporting abilities to manage transfer. Ledger System, which is the olfi m ent, government entities, and other interested parties. The office expanded its m an T he office also initiated the asset sales, management, and disposition activities. As such, In 1992, the ofHce renegoti ated the R T C 's annua! Federal the office acts as a liaison Financing Bank (F F B ) lending between the Held ofHces and agement reporting role in the agreement, and oversaw the net headquarters' corporate Hnance areas o f loan securitizations, paydown o f F F B borrowings by and asset management depart receivership terminations, and $ 1 9 .8 billion in principal and ments. T he ofHce develops pro corporate purchases. New quar $2.1 billion in interest. T he R T C cedures for the R T C 's Hnancial terly reports for Congress, borrows funds from the F F B , service centers to ensure their required by the 1991 funding which provides loans to federal compliance with R T C proce legislation, provided information agencies ibr working capital pur dures relating to asset and on asset sales activity, working poses. accounting functions, and the capita! needs, auction sates, and integrity o f accounting and R T C seUer financing. Hnancial information ibr receiverships. 1 9 9 2 RTC CONSERVATORSH!P & RESOLUTION ACI!V !IY ' VI' A ^ "/I B/l / A / l B/l " ' R/l R/l* 8/3 * ? ^ ^ B/3' t B /l'^ R/l A/3 M M 4 ' *" M R/2* R/3 B/3 A/1 R/3 B/3 A/4 B/2 - ^ R/3* A/1 B/l R/l A/2 ^ V d _ B /l . , B/2 ' R/l R/l B/l B/S ^ 3 ^ . § v Legend R/4 B / Beginning Conservatorships at 12/31/91 91 ' ^8/10 A / Conservatorships Added in 1992 50 R / Cases Resoived in 1992 69 *These figures inctude 9 associations never ptaced into conservatorship. 1 9 9 2 A N N U A L R E P O R T ) ! N S T ) T U T i O N O P E R A T I O N S The following chart shows the number of thrifts placed in the RTC conservatorship program and the number o f resolutions: CONSERVATORSH!P !NST!TUT!ONS 1 9 8 9 - 1 9 9 2 Conservatorships Estabiished Pre-F!RREA Post-FtRREA 1989 (8/9-12/31) Conservatorships Tota! Resotved Resoiutions 262 56 37 37 1990 207 309 315* 1991 123 211 232** 1992 50 60 698 617 Iota! 1989-92 69*** 653 inciudes six non-conservatorship institutions resotved, four of which were resolved through the Accelerated Resoiutions Program. **)nc!udes 21 institutions resolved through the Acceierated Resoiutions Program. ***)nciudes nine institutions resoived through the Acceierated Resoiutions Program. The ofHce also directs a nationwide cash-management program for receiverships, moni tors a national internal Hnanciai controls program, and develops accounting policies. In 1992, the number of receiverships increased by 69 to 653, resulting in $29 billion (net of putbacks) in new receivership assets retained by the Corporation. During 1992, over $39 bil lion in cash receipts were processed by the ofHce from asset sales. By yearend, the RTC managed approximately $63 bil lion in liquidation assets. The ofHce also assisted in processing more than $20 billion in mort gage-backed securities transac tions, over $1.5 billion in seller-Hnanced sales, approxi mately $7 billion in structured transactions, and approximately $210 million in corporate pur chase transactions. The ofHce implemented a comprehensive cash-manage R E S O L U T I O N T R U S T AND S A L E S ment system providing all Held ofHces with depository and other banking services, developed a formal investment program designed to enhance yields on receivership cash balances held prior to the payment of divi dends, conducted tax beneHt reviews of FSLIC assistance agreements, and provided tax assistance for the renegotiation of the 1988 FSLIC transactions. Department of Operations ^ *h e Department of ] Operations manages and H oversees conservatorship and receivership operations, the pay ment of insured deposits, the administration of resolution agreements and the representa tions (reps) and warranties provi sions of asset sales agreements, the processing of creditor claims, and the termination of receiver ships. In addition, the depart ment investigates fraud and other abuses at conservatorships and receiverships, and develops customized computer resources to aid in program activities. The department is composed of the OfHces of Operations, Investigations, and Systems Development. OfHce o f Operations The OfHce of Operations devel ops policies and procedures for the conservatorship program that ensure compliance with applicable laws and the RTC's goal of minimizing the costs and risks to the general public. The ofHce provides day-to-day guid ance to individual conservator ships in implementing these C 0 R P 0 R A T ! 0 N policies and procedures. The ofHce monitors the per formance of conservatorships, supports Held efforts related to the closing of insolvent institu tions and subsequent payment of creditor and insurance claims, monitors settlement activities, reviews and reconciles sales agreements, analyzes and pays claims resulting from asset sales, manages the termination of receiverships, and issues reports on program activities. Institutions and Assets in Conservatorship From the RTC's inception in August 1989 to yearend 1992, the RTC managed a total of 698 institutions in the conservator ship program. When the RTC was established, the ofHce imme diately assumed responsibility for 262 conservatorships from the FDIC. From inception through December 31,1992, 617 conser vatorships were resolved, leaving 81 in the program at yearend. At the beginning of 1992, the RTC was managing 91 conserva torships. During the year, 50 additional thrifts entered the pro gram, and 60 conservatorships were resolved. Nine other institu tions were resolved through the Accelerated Resolutions Program (ARP), bypassing a conservator ship action. The RTC prepares a conser vatorship for resolution by downsizing the institution pri marily through asset sales. This accelerates the payment of liabili ties of the failed institution and reduces dependency on the Treasury Department to fund future operations. Gross conser vatorship assets in January 1992 1 9 9 2 RTC CONSERVAIORSHiP ANO RESOLUHO^ ACUVMY (doiiars in mi!!ions) State Conservatorships Beginning Deposits Aiabama 2 Arizona 1 129 Arkansas 1 135 Cattfomia 10 3 Connecticut $ 1,607 Deposits Added 2 Baiance Resoived 161 1 0 0 12,978 5 323 1 $ Deposits $ Ending Deposits 485 3 $ 1,283 0 1 129 0 0 0 1 135 0 0 10,287 5 4,775 10 18,490 223 3 323 1 223 Ftorida 10 6,638 4 345 4 3,685 10 3,299 Georgia 5 376 2 247 4 294 3 330 !!!inois 3 731 3 695 4 993 2 432 indiana 1 10 0 0 1 10 0 0 !owa 3 862 0 0 2 150 1 712 Kansas 1 4,657 1 95 0 0 2 4,751 Louisiana 2 2,514 1 32 0 0 3 2,546 Maine 0 0 1 76 0 0 1 76 Maryiand 3 814 4 2,123 2 157 5 2,780 Massachusetts 1 138 1 118 0 0 2 255 Michigan 2 581 0 0 1 34 1 547 Mississippi 0 0 1 247 0 0 1 247 Missouri 2 2,615 0 0 2 2,615 0 0 New Hampshire 1 192 0 0 0 0 1 192 New Jersey 6 1,267 5 4,308 3 620 8 4,955 New Mexico 1 193 0 0 1 193 0 0 New York 3 1,376 1 1,073 3 1,376 1 1,073 North Carotina 2 586 1 639 1 424 2 802 2,419 Ohio 1 18 2 2,419 1 18 2 OMahoma 4 1,386 0 0 3 676 1 710 Oregon 1 1,273 0 0 0 0 1 1,273 Pennsyivania 5 1,200 4 838 2 812 7 1,226 Rhode !s!and 1 62 0 0 1 62 0 0 South Carotina 1 278 3 287 0 0 4 564 Tennessee 1 807 1 124 1 807 1 124 Texas 7 5,363 0 0 7 5,363 0 0 Utah 1 10 0 0 1 10 0 0 Virginia 4 2,491 6 852 4 2,491 6 852 West Virginia 1 35 1 68 0 0 2 103 Wisconsin 1 136 0 0 1 136 0 0 $51,780 50 $25,257 81 $50,266 Totai [35] 91 6 0 ** $26,771 * Deposits at quarter prior to date of conservatorship. * * Does not include 9 thrifts resoived in 1992 through the Acceierated Resoiutions Program. Note: Detai! may not add to totats due to rounding. 1 9 9 2 A N N U A L R E P O R T ! N S T ! T U T ! O N O P E R A T I O N S AND S A L E S The following chart details asset sales, collections, and other conservatorship activities during 1992: 1 9 9 2 CONSERVAIORSHiP ASSET SALES AND OTHER ACT!V!T!ES (doiiars in mi!!ions) 1/1/92 Batance New institutions 91 institutions 50 institutions Cash and Securities Activities* Saies Cotiections Adjustm ents* Resoiutions 12/31/92 Baiance 60 institutions 81 institutions $12,166 $ 7,963 $ 8,263 $ 6,112 $12,345 $ 4,018 $14,081 1-4 Famity Mortgages 10,949 12,641 7,164 2,836 116 4,489 9,217 Other Mortgages 12,505 7,297 4,019 1,459 (118) 6,512 7,694 2,874 2,198 982 962 122 1,188 2,062 Other Loans Owned Assets 5,128 2,503 1,302 0 (243) 3,115 2,971 Other Assets 3,709 2,875 790 745 969 1,841 4,177 $47,331 $35,477 $22,520 $ 12 ,114 $13,191 $21,163 $40,202 Totais * inctudes activities from a)) institutions in conservatorship at any time during December 1992. **tnctudes new asset purchases, vatuation revisions, and other transactions affecting vaiue. Note: "Securities" indude investment-grade securities and mortgage-poo! securities. "Other toans" inctude commercia), consumer, and student toans. "Owned assets" consist of repossessed residentiai and non-residentiat rea) estate, iand, and other repossessed assets. "Other assets" inctude a wide array of assets, some types of mortgage servicing rights, office equipment, and subsidiary companies of controtied institutions. The following chart summarizes RTC advance activity during 1992: Conservatorship Operations Activities 1992 RTC NNSERtNORSHiP & RECEiVERSHiP AMANCE ACHViTY Principa) Amount 0n!y (doiiars in biiiions) Advances Outstanding at 12/31/91 $18.3 Totai Advances Made in 1992 11.7 Totai Advances Paid in 1992 -16.8* Advances Outstanding at 12/31/92 $ 1 3 .2 ** * Advances Paid batance inctudes $3.6 bittion in non-cash payments, but does not inciude $804 miiiion in interest cottections during 1992. * * Advances are generaiiy made to conservatorships, l i e Advances Outstanding batance at 12/31/92 inctudes $6.4 bittion in advances to conservatorships which have been resotved and wi!t be repaid by the receiverships. totaled $47.3 billion; they were reduced to an estimated $40.2 billion by yearend. During the year, 50 institutions with assets of approximately $35.5 billion were added to the conservator ship program; 60 conservator ships were resolved, removing $21.2 billion in assets from the program. Book value sales and collections during 1992 totaled $34.6 billion. R E S O L U T I O N T R U S T Liability Management—As a conservatorship is prepared for resolution, the overall liability expenses are reduced by elimi nating wholesale (high-cost) deposits, Federal Home Loan Bank advances, and short-term collateralized borrowings. Funding is raised for this pur pose through asset sales supple mented with borrowings from the RTC, as necessary. From August 9,1989, through December 31,1992, the RTC advanced a total of $56 billion to conservatorships for working capital purposes. Claims and Settlem ent Activities Insurance Payments—During 1992, more than 3.1 million insured deposit accounts at insolvent thrifts were protected. More than 1.4 million of these C 0 R P 0 R A T ! 0 N deposit accounts were protected through the purchase and assumption of failing thrifts by other institutions; the remaining 1.7 million deposit accounts were paid off by RTC check in a payoff (PO) transaction or trans ferred to other financial institu tions through insured deposit transfers (IDTs). O f the $6.86 billion in deposits that were involved in IDTs or POs, only $16.5 million, or less than one percent, were uninsured. Liquidating Dividends—To expedite the return of funds to the Corporation and to credi tors, the Accelerated Dividend Program was implemented in October 1992, authorizing field office vice presidents to approve dividend cases. In 1992, cash dividends to the Corporation totaled $28.8 billion and non cash dividends totaled $21.6 bil lion, an increase of 25 percent 1 9 9 2 over 1991 in dividend returns to the Corporation. From incep tion of the dividend process in September 1990 through yearend 1992, 1,144 dividend cases were paid for a total recov ery to the Corporation of $47.8 billion in cash and $43.6 billion in non-cash dividends. Creditor Claims—Essential goods or services provided to the RTC's managing agents for con servatorships are paid as adminis trative expenses. General trade creditor claims of former associa tions, however, are considered to be unsecured claims. Pass through receivership data from RTC inception in August 1989 through yearend 1992 show that $408 million in claims from 5,159 creditors were allowed, $3 billion in claims from 4,584 creditors were disallowed, and $5 billion in claims from 2,255 creditors were still pending at yearend. In liquidating receiver ships, $73 million in non-RTC unsecured creditor claims were allowed while $1.5 billion in claims of 5,767 creditors were disallowed; $13 billion from 4,029 creditors were still pend ing at yearend. Repurchase of Assets—During 1992, only $6.3 billion in assets were transferred to acquirers through the resolution process, due to the lack of significant reso= lution activity in the second half of the year. O f that total, approm= mately $2.5 billion in assets were transferred subject to short term putba& options. A putback option g^ves an acquirer the right to require the RTC to repurchase the assets if the acquirer exerdses the option by its expiration date. At the beginning of 1992, assets sold at resolution that had unex pired repurchase options totaled $864 million (down from an alltime high of $12 billion in 1991). These assets, combined with assets transferred in 1992 subject to putback options, brought the total amount of assets with repur chase options in 1992 to almost $3.4 billion. Of this amount, nearly $1.9 billion in assets were repurchased by the RTC. By yearend, all remaining repurchase options had expired, leaving the RTC with no obligation to repur chase assets subject to putback. Settlements—The RTC took advantage of the slower resolu tion activity to focus on receiver ship settlement activity with acquirers under resolution agree ments. During 1992, settlement activity was concluded on 170 receiverships, leaving 46 settle ments to be completed at yearend. In addition, the ofRce issued the RTC establishing compre hensive policies and procedures for the administration of resolu tion agreements between the RTC and acquirers; enhanced the Settlement Status Tracking System, which tracks the status of the RTC's settlements with acquirers under resolution agree ments; and conducted annual Reid o f f i c e Program Compliance Reviews to assess adherence with established settlement policies and procedures of the ofRce. In 1992,12 Reid o f f i c e reviews were conducted in the claims, closing, and settlement areas. A N N U A L R E P O R T Asset Claims In 1992, reps and warranties provisions were extended to the RTC's structured transactions (sales of large mixed pools of non-performing or sub-perfbrm ing loans and real estate assets, packaged either by collateral type or investor requirements) and auctions following the use of these provisions to signiRcantly enhance recoveries from loan sales, securitizations, and servic ing rights sales in 1991. At yearend, 3.4 million loans valued at approximately $182 billion with reps and warranties were being administered by the ofRce. From inception through yearend 1992, the RTC received a total o f9,344 claims under reps and warranties provisions of asset sales agreements, involving 92,000 loans with balances total ing $610 million. At yearend, the RTC had paid $304 million on these claims. The ofRce also manages the establishment and maintenance of reserves by sellers (conservator ships, receiverships, or wholly owned subsidiaries) to cover the cost of reps and warranties claims. Reserves are established and monitored to minimize any con tingent liability that may accrue to the seller or to the RTC in its corporate capacity. At yearend 1992, the cash reserve balance for all asset sales totaled $1.01 billion. Terminations o f Receiverships In early 1992, the RTC began terminating receiverships that were at least one year old and had no legal or other compelling reasons for remaining open. Receivership assets that remained 1 9 9 2 A N N U A L R E P O R T ! N S T ! T U T ! O N O P E R A T I O N S The following chart shows RTC detection o f criminal activity by savings and loan directors, officers, and other professionals, and legal action undertaken by the Department o f Justice, as o f December 31, 1992. Thrifts referred to are now under RTC supervision. REST!TUT!ON ANO CR!M!NAL ACI!V!TY Cases where fraud and abuse contributed to faiiure Number of defendants charged determinations to be made. Such substantial investigative determinations will help the resources to assist the Justice R T C better project its future D epartm ent in pursuing crim i funding needs. nal cases. OfHce o f Investigations T h e R T C O ffice o f OfHce o f Systems Development Investigations exam ines the T h e O ffice o f Systems D evelopm ent provides the R T C 531 th rou gh fraud and o th er abuses tems that support R T C opera 257 by thrift officials. tions and management In 1992, the R T C received inform ation needs. T o ensure $ 2 8 3 million in cash from direc that these application systems are 888 tor, officer, and other professional im plem ented effectively, the 780 liability claims. From inception in office works closely with the Number awaiting sentencing 108 Tota) prison time sentenced* 843 years, 4 months Number of restitution orders 500 Tota) restitution paid*** failed thrifts. T h e R T C allocates with national inform ation sys Number sentenced Tota! restitution ordered** ing expenses and allows final loss helps to recover funds lost 1,093 Number of convictions S A L E S causes o f thrift failures and (from inception in August 1989 through 1992) Thrifts with suspected criminai conduct AND $126,901,968 $10,272,042 * Based on information provided by the Department of Justice and does not inciude state and !oca! cases. August 1989 through yearend O ffice o f Corporate 1992, the R T C collected approxi Inform ation, which is responsi mately $ 3 2 8 million in profes ble for technical hardware and sional liability claims, $ 1 5 6 .7 software acquisition, database million o f which was from litiga managem ent and administration, tion involving Drexel Burnham and operational management. Lambert. In addition, $ 1 0 .2 mil Th e office has tw o branches: lion o f criminal restitution was Software M anagem ent and collected, bringing total cash Business Applications Analysis. * * This figure inciudes orders both initiated and inherited by the RTC. Some orders may inciude muttipie payees. These statistics refiect oniy the RTC portion of such orders. recoveries to approximately $ 3 3 8 ***Ttiis figure is a cumuiative statistic, rejecting ait known RTC coiiections. million. Note: Uniess otherwise indicated, statistics given inciude federai, state, and iocai prose cutions. to be liquidated were purchased Th e Software M anagem ent Branch plans, develops, im ple m ents, and maintains m ajor Interagency Coordination R T C information systems, and T h e D epartm ent o f Justice is provides user training, docum en by the R T C in its corporate responsible for prosecuting tation, and other required sup capacity, with proceeds used by criminal cond u ct com m itted by port for them . In 1 9 92, the the receivership for payment o f insiders and parties associated branch provided support in the priority claims, establishment o f with RTC-supervised thrifts. asset, resolution, finance, and reserves for liabilities assumed by R T C investigators and attorneys administration areas using the the C orporation, and distribu work closely w ith the Federal inform ation systems listed below. tion o f final dividends to credi Bureau o f Investigation ( F B I) , tors according to established U .S . A ttorneys' offices, the Applications Analysis Branch was priority. In 1992, the R T C ter Internal Revenue Service (IR S ), established to resolve issues minated 3 4 receiverships, which the Securities and Exchange involving the R T C 's m ost visible In 1 9 9 2 , the Business was accomplished through the Com m ission (S E C ), the O ffice and m ission-critical systems, par R T C 's repurchase o f the remain o f T h rift Supervision (O T S ), ticularly the Real Estate Owned ing receivership assets and its and the Secret Service to pro M anagem ent System and the payment o f final dividends to vide the necessary docum ents, w ork papers, and, in some Asset M anager System, whose creditors o f the form er institu tions. Tim ely termination o f cases, expert testim ony needed and have differing and often co n receiverships reduces costs by to prosecute individuals sus flicting needs and perspectives. eliminating unnecessary operat pected o f criminal con d u ct in R E S O L U T I O N T R U S T C O R P O R A T i O N users cross organizational lines 1 9 9 2 Major Systems Reassessment In 1992, the ofRce reassessed sev eral major RTC information sys tems in an effort to reduce costs and produce better quality sys tems. The reassessments estab lished firm implementation dates for the development of new sys tems as well as enhancements for existing systems. In addition, the ofRce established the require ment that cost/beneRt analyses must be conducted prior to authorization for systems devel opment or enhancement. The Information Resource Management Steering Committee, whose membership consists of Corporation vice presidents, was created in late 1992 to direct the allocation of resources for the RTC's infor mation systems. The RTC's Executive Committee approves more substantial expenditures and strategic plans that have a corporate-wide impact. In 1992, the ofRce actively developed or enhanced the RTC's corporate information sys tems. They include the following: Financial Systems H Financial Management System General Ledger (FM S-G L) The FMS-GL sys tem was implemented in September 1992. This system allows the RTC to capture and report RTC-speciRc financial information and to respond to the RTC's changing Rnancial requirements. It is also designed to work in concert with the new Control Totals Module. H Control Totals Module (CTM ) CTM processes Rnan cial information provided by the RTC's loan servicers, interfaces with the RTC's General Ledger, and supports Rnancial reconcilia tion requirements for receiver ship assets. In 1992, CTM was implemented at all RTC sites. Enhancements to CTM were also made to support the corporate-purchase and split-banking (the transfer of the management of an asset from one location to another) strategies for complet ing the resolution of institutions. H Asset Manager System (AMS) AMS is a cash-management system that tracks receipts and disbursements for Asset Management and Disposition Agreement (AMDA) contractors. Automating the transfer of funds between the RTC and AMDA contractors through AMS was initiated in September 1992. H Automated Grouping System/Automated Payoff System (AG S/A PS) AGS/APS is used to support the closing of failed institutions by computing insurance determina tions and indicating the level of uninsured funds. The system was enhanced to support resolutions requiring that the deposit base be split among multiple acquirers. Asset Systems H Real Estate Owned Management System (REO M S) REOMS is the cor porate-wide repository for infor mation on the RTC's real estate assets. Major enhancements were implemented in 1992, such as increased reporting capabilities for the Affordable Housing Disposition Program and the A N N U A L R E P O R T ability to set up and track sales initiatives. Increased Hexibility in selecting and scheduling locally produced standard reports was also provided during the year. The system's response time was improved by almost 50 percent from 1991. H Subsidiary Inform ation Management Network System (SIMAN) SIMAN was developed in 1992 for the OfRce of Subsidiary Management to enable the staff to track Rnancial, management, and sales data for RTC-controlled subsidiary com panies. H W arranties and Representations Accounts Processing System (WRAPS) WRAPS is used to track contractual obligations between the RTC and the pur chasers of RTC assets, reserve account balances required to fulRll potential obligations, and associated claims activities. An automated interface between WRAPS and the Mortgage Guarantee Insurance Corporation, which administers these claims activities for the RTC, was created to streamline management and administrative tasks fbr the WRAPS users. H National Loan Exception Tracking System (N LETS) NLETS was implemented in November 1992 fbr the OfRce of Securities Transactions. NLETS is a personal computerbased application used to track and reconcile discrepancies between scheduled and servicer information fbr RTC securitized loans. Reconciling these loan 1 9 9 2 A N N U A L R E P O R T [ N S T ) T U T ) 0 N ; O P E R A T I O N S exceptions helps ensure a viable secondary market for RTC mortgage-backed securities. Investigative and Legal Systems H RTC Legal Inform ation System (R LIS) An enhanced version of RLIS was implement ed nationwide to provide auto mated assistance to the Division of Legal Services to track matters referred to outside law firms, cre ate and maintain budgets at the case level, and process thousands of invoices received monthly. H Asset Tracing and Reporting System (ATAR) ATARwas developed to facilitate investigations of the personal assets of individuals whose sus pected criminal activities con tributed to the collapse of savings and loan institutions. H Thrift Investigation Management System (TIM S) TIMS provides the OfHce of Investigations data relating to investigations of indi viduals and organizations sus pected of fraud and/or civil or criminal violations in managing deposit accounts at failed thrifts. The system is also used to moni tor the status of legal claims, potential litigation, ongoing cases, and financial recoveries. H Financial Institutions Regulatory Criminal Enforcem ent System (FIRA CR ES) FIRACRES is a criminal referral database system consisting of shared data from the RTC and five other federal financial regulatory agencies. This data is accessed through the R E S 0 L U T ! 0 N T R U S T AN -i.'. Financial Crimes Enforcement Network. Internal Reference System H Document Management System (DM S) DMS is an on line text retrieval system that enables RTC users across the country to view directives, policy manuals, and other important references rapidly. In 1992, the system was enhanced to provide graphics capability and improved text-search features. Department of Reso)ut!ons TThe Department of ] Resolutions markets and exeH cutes the most cost-effective resolutions for insolvent thrifts placed in the RTC's conservator ship program by the OTS. The department is composed of the Offices of Major Resolutions and Field Resolutions. The lack of Congressional funding after April 1,1992, sig nificantly limited resolution activity. Sixty-nine thrifts were resolved in 1992, compared to 232 in 1991, and 315 in 1990. O f the $25 billion in loss funds allocated in the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991, $6.7 billion was utilized before the April 1 deadline. The December 1991 appro priation was used in 64 of the 69 resolutions in 1992. Four resolu tions were "no-cost" transac tions in which the acquirers assumed all of the liabilities and purchased virtually all of the assets for total premiums of $11.1 million, exceeding all losses C O R P O R A T I O N in the institutions. The last reso lution in 1992, the July sale of the deposit franchise of Investors Federal Savings Bank, Richmond, Virginia, to Central Fidelity Bank, Richmond, uti lized resolution funds that had been appropriated prior to the December 1991 legislation. In 1992, insured deposits accounted for 99.6 percent of all deposits at institutions. The total cost of the 69 resolutions was estimated at $7.2 billion. (The cost is estimated until all assets associated with the institutions are sold.) This total is $660 mil lion less than the projected cost taxpayers would have borne if a liquidation or payoff of insured deposits had been required in all cases. The gross RTC funding for these 69 institutions was $24.4 billion, including conser vatorship advances of $2.5 bil lion, for a net RTC funding cost of $21.9 billion. OfHce o f Major Resolutions The Office of Major Resolutions managed the disposition of larg er conservatorships, generally those with over $500 million in total liabilities (as of the date of conservatorship). During 1992, the ofHce completed 16 resolu tions (compared to 45 in 1991 and 39 in 1990) involving $17 billion in deposits (compared to $56 billion in 1991 and $60 bil lion in 1990). The $308 million in premiums paid to the RTC in these resolutions represented about 2.6 percent of the $12 bil lion of resolved core deposits (deposit accounts with balances of $80,Q0Q or less) . Eight of the major resolutions involved mul- 19 9 2 tiple purchasers, with 68 finan involving the payoff o f $ 9 0 0 mil cial institutions acquiring one or lion o f deposits in one Arkansas A N N U A L R E P O R T 1 9 9 2 RESOLUHONS BY T R A N S A C T S TYPE more branches (or the deposits office, three Kansas offices, and thereof). N one o f the thrifts was 11 M issouri offices. T he remain resolved as a total payoff; howev ing 51 offices and $ 1 .3 billion in insured Deposit er, four o f the resolutions deposits were sold to 33 financial Transfer-2 involved paying o ff deposits in institutions located in 2 9 mid- one or more individual branches western towns and cities. T he for a total o f $1.2 billion. franchise premiums paid to the Num ber of Resolutions — 69 3% R T C by the acquirers totaled Size of Resolved Conservatorships $11.9 million. T he largest conservatorship reso torship resolution was lution o f 1992 was Sunbelt AmeriFirst Federal Savings Bank, Federal Savings, F SB , Irving, M iami, Florida, whose $ 2 .0 bil T he third largest conserva Texas, with $ 3 .4 billion in lion in deposits and 5 4 offices deposits and 112 offices. In were acquired by Great Western August 1988, the institution was Bank, a Federal Savings Bank created through the "Southw est (Great W estern), Beverly Hills, Plan" merger, which com bined California. T he franchise premi the previously existing $ 2 .2 bil um paid to the R T C by Great lion Sunbelt Savings Association Western totaled $ 2 7 .5 million or o f Texas, Dallas; the $1 billion 1.7 percent o f core deposits. Western Federal Savings and Far West Savings and Loan Loan Association, Dallas; and six Association, FA (Far W est), other ailing institutions to form Newport Beach, California, with a "super-thrift" with com bined $ 2 .0 billion in total deposits, was assets o f nearly $5 billion and a the fourth largest conservator cross-Texas franchise. T he thrift, ship resolution. Only 4 6 percent which had grown to over $ 6 bil o f the deposits were core lion in assets during two-and- deposits, garnering a premium one-half years, was declared o f $ 3 .8 million or .4 percent o f insolvent and placed in R T C conservatorship in April 1991. It the core deposits. Three o f the institution's offices, with a total o f $ 120 million in deposits, were was resolved by the R T C in Apri) COST OF RES0LUT!0N AS A PERCENT OF L!AB!HT!ES AT CONSERVATORSH!P* Transfer * Cost of resolution is the estimated doilar amount to be spent by the RTC to cover differences between cash outtays and future net asset recoveries from the resotution of insotvent S & Ls , the shortfa!) representing a !oss to the RTC. This toss consists prtmarity of the negative net worth of the insotvent institution pius tosses from asset sates, reduced by acquirer premiums. * * P & A transactions inctude 7 resotutions with a partiat payoff of branches. 1992. Acquiring all deposits and paid o ff by the R T C . O f the thrift's assets and liabilities are a small amount o f the thrift's three acquirers o f Far West marketed simultaneously, but assets was Bank o f America deposits, American Savings packaged so that potential Texas, N .A ., H ouston, with a Bank, F.A., Stockton, California, "asset-only" acquirers can place $ 103 million premium, or assumed the largest amount o f bids exclusively for certain asset 4 .2 percent o f core deposits. deposits, $ 1 .0 2 billion in packages, while financial institu deposits in 2 0 offices. tions interested primarily in the T h e second largest conserva torship resolution was H om e Federal Savings Association o f Kansas City (H o m e Federal), Cooperative Institution Marketing Program Assumption** deposit franchise can place "liability-only" bids. In addition, franchise bidders can link their Kansas City, Missouri, with $ 2 .2 In 1992, the department imple franchise bid to a bid on the billion in deposits. H om e mented the Cooperative asset pools. W hole-thrift bids are Federal was the most complex Institution M arketing (C IM ) also encouraged. Investors resolution o f the year, ultimately program. Under the program, a Federal Savings Bank (Investors 1 9 9 2 A N N U A L R E P O R T i N S T ! T U T ! O N 0 P E R A T ! 0 N S 1 9 9 2 RESOLUTION COST AND SAViNGS BY STATE (dottars in miHions) State Resotved institutions Resoiution Cost** Estimated Savings Catifornia* 1 1 1 6 Connecticut 3 62 6 Aiabama Arizona Arkansas $ 70 15 $ 9 0 22 3 1,254 49 F!orida* 7 1,428 226 Georgia 4 79 3 Minois 4 115 26 indiana 1 1 0 !owa 2 12 5 Louisiana* 1 446 15 Maryland 2 15 1 Michigan 1 2 2 Missouri* 3 608 16 New Jersey 3 148 5 New Mexico 1 34 0 New York 3 477 15 North Carotina 1 82 5 Ohio* 2 3 5 Oktahoma 3 128 8 Pennsytvania 2 189 11 Rhode !s!and 1 10 0 South Dakota* 1 49 9 Tennessee 1 170 17 Texas 7 355 106 Utah 1 3 0 Virginia* 5 1,399 115 Wisconsin 1 15 3 Tota! [28] 69 $7,190 $660 * These states contain 9 thrifts resolved under the Accelerated Resoiutions Program. AND S A L E S OfHce o f Field Resolutions In 1992, the OfRce of Field Resolutions resolved 44 conser vatorships with a total of $4.5 billion in deposits. Two thrifts— Springfield Federal Savings Association, Springfield, Pennsylvania; and Republic Federal Savings Bank, Matteson, Illinois—were resolved without cost to the RTC. Both were acquired by thrifts in their respec tive states. Field resolutions also included four insured deposit payoffs (two in Texas, and one each in Rhode Island and Virginia, all single-ofRce opera tions) with a combined total of $169 million in insured deposits. Two others involved partial pay offs of $46 million in insured deposits serviced by six unsalable branches. The 44 transactions generated $73 million in premi um income, or approximately 2 percent of resolved core deposits. Field resolutions in 1992 includ ed 14 transactions involving two or more acquirers. A total of 59 financial institutions, many of them community banks with less than $100 million in assets, were acquirers in these field resolutions. A ccelerated Resolutions Program **Resotution cost estimated at time of resolution. Note: Detaii may not add to totais due to rounding. Federal), Richmond, Virginia, was the only thrift resolved under the CIM program in 1992. Central Fidelity Bank, Richmond, Virginia, assumed Investors Federal*'s $.9 billion in deposits in 47 Virginia ofRces; 16 different investors acquired $1.06 billion (book value) in Investors FederaTs assets. R E S O L U T i O N T R U S T The Accelerated Resolutions Program (ARP) was created in 1990 on the premise that early intervention in a failing thrift could create significant taxpayer savings. Unlike other thrifts resolved by the RTC, those resolved through ARP are not placed in conservatorship prior to resolution. Thrifts placed in ARP are those that the Director of the OTS has determined are C 0 R P 0 R A T ! 0 N in danger of failing and whose financial condition would cause them to be placed into RTC conservatorship within one year. The thrifts are not necessarily insolvent, but generally fail to meet minimum capital require ments and have agreed to partici pate in the program. To be placed in ARP, there must be identified investor interest in the thrift's entire franchise, and its management must be stable. In 1992, nine thrifts were resolved through ARP, com pared to 21 in 1991 and four in 1990. These nine thrifts had total deposits of $8.5 billion, compared to $7.4 billion in 1991 and $3.7 billion in 1990, as of date of resolution. ARP resolu tions generated deposit premi ums of $131 million, or about 1.8 percent of the transferred core deposits. In addition, pre miums totaling $170 million were paid for "Schedule B" assets (one- to four-family mort gages), which under ARP are offered simultaneously with the franchise to both franchise and mortgage buyers. The estimated cost of resolv ing thrifts through ARP in 1992, as a percentage of total deposits of resolved thrifts, was 16 per cent, compared to 19 percent for the thrifts resolved by the OfRce of Field Resolutions, and 30 per cent for those resolved by the OfRce of Major Resolutions. OTS and RTC personnel coordinate the marketing of ARP thrifts. OTS is responsible for overseeing the management of the institution pending its sale, and the RTC is responsible for managing the transaction. The two agencies also work 1 9 9 2 together to And other alterna tives to conservatorship for weak thrifts, such as no-cost mergers and open assistance, in which the government provides funds to the thrift to maintain its fran chise value until it is sold. Two ARP resolutions were completed in 1992 without cost to the RTC. First Ohio Savings Bank, FSB, Saint Bernard, Ohio, with $32 million in deposits, was acquired by the Indiana-based MBT Bancorp; and First State Savings Association, Sedalia, Missouri, with $166 million in deposits, was acquired by Mercantile Bank of Sedalia, Sedalia. The largest ARP resolution in 1992 was Perpetual Savings Bank, F.S.B. (Perpetual), Vienna, Virginia. The thrift's $2.6 billion in deposits were transferred to subsidiaries of Crestar Financial Corporation, Richmond, Virginia, which paid an $8 million deposit premium, or 0.3 percent of core deposits. Perpetual was one of five $1 billion-plus institutions resolved through the ARP in 1992. HomeFed Bank (HomeFed), San Diego, California, with $10.2 billion in deposits and $13.9 billion in assets, was placed in the ARP in April 1992 and was to be marketed under the CIM program. Because Congress did not provide funding for the RTC after March 31,1992, HomeFed was placed into RTC conserva torship on July 6,1992. M inority Participation The National Marketing List includes more than 300 individ uals, investor groups, and finan cial institutions that have indicated that they are minorityor women-owned, or are a minority member or a woman. Included in the list are 64 Asian American, 95 Black American, 75 Hispanic American, and 47 Native American groups or indi viduals, and 28 women. In 1992, two minorityowned thrifts were resolved. No like minority institution present ed an acceptable offer for either of these franchises. Service was continued to the minority com munities, however, as the $8 mil lion in deposits of New Age Federal Savings Association, St. Louis, Missouri, were acquired by Commerce Bank of St. Louis, N.A., St. Louis; and the $6 mil lion in deposits of Connecticut Federal Savings and Loan Association, Hartford, Connecticut, were acquired by Bank of Boston-Connecticut, Waterbury, Connecticut. In the latter resolution, the Black American-owned Boston Bank of Commerce acquired $15 mil lion (virtually the entirety) of the failed thrift's assets. Department of Manning and Ana)ys!s *V*he Department of Planning ] and Analysis was established H in February 1992 by consoli dating the OfHces of Research and Statistics, and Budget and Planning to provide research and analytical services to support RTC operations, and to facilitate the use of corporate resources through resource management. A N N U A L R E P O R T OfHce o f Research and Statistics The OfHce of Research and Statistics provides economic, financial, and statistical data and analysis to other ofHces and divi sions, and provides information on RTC activities to Congress and the public. The ofHce con sists of three sections: Financial Modeling and Statistics, Financial Markets and Institutions, and Cost Analysis. The Financial Modeling and Statistics Section regularly pre pares data on the RTC's opera tions and performance for dissemination within the Corporation and to the Thrift Depositor Protection Oversight Board, Congress, and the public. The monthly RTC pro vides much of this information. The section projects the RTC's future loss fund and working capital needs for use in funding requests made to Congress, the RTC's operating plan, and its financial statements. In addition, the section prepares public information packages for distribution to potential bidders of insolvent thrifts, and prepares estimates of future asset sales and collections for use in the prepa ration of RTC sales goals. During 1992, the staff pro vided analytical support for receivership operations through the calculation of payments due to general creditors left behind in pass-through receiverships, assisted in the preparation and operation of the flexible budget model, and served as Raison between users of the Corporate Information System, which inte grates data from a number of key RTC data systems into one data1 9 9 2 A N N U A L R E P O R T ! N S T ) T U T ! O N O P E R A T I O N S base, and the OfRce of Corporate Information. The Financial Markets and Institutions Section addresses the policy- and economics-oriented issues of asset management and disposition. The section publishes the bi-monthly R^pon%/ R#y$w , which provides valuable indicators of red estate market conditions, and participates in the esdmated cash recovery (ECR) process fbr quarterly valuation of receivership assets. The section designed the analytical and statistical methodology fbr the ECR process. In addition, the section also coordinates and prepares most RTC testimony presented be^re Congress. The section provided analytical assistance fbr the 1988 FSLIC assistance agreement renegotia= tions, and prepared a number of studies on specific aspects of RTC operations, including a model predicting future thriA institution losses; bidding activity on National Sales Center portfblio sales; indirect expenses associated with different types of assets; open bank assistance; redesign of the SAM DA pro gram; and estimates of net returns on sales of real estate and R E S O L U T t O N TRUST j i j ! j i j ! ! ! ! ! j i ! ! j i j i ! ! ;' j j j j ! j j j AND S A L E S OfHce o f Budget and Planning non-performing loans through National Sales Center portfolio transactions, SAMDA contrac tors, and open-cry and sealed-bid auctions. The Cost Analysis Section supplies analytical support, financial forecasting, and infor mation management in the R TC's resolutions and ECR processes. The section produces the RTC's "cost test" fbr all major resolutions and fbr accel erated resolutions, and provides technical assistance to Held ofRce personnel on Reid resolutions. The section provides the resolu tion database, and provides reso lution reports to BTC senior management, the ThriA Depositor Protection Oversight Board, Congress, and the GAO. The section is also responsible fbr conducting the quarterly ECR process in which the mar ket value of receivership assets is estimated. j i CORPORATt ON : :: !! :: The OfRce of Budget and Planning coordinates and over sees the RTC's budget process, and facilitates the use of corpo rate resources in business plan ning, resource estimation, performance measurement, and progress monitoring. The ofRce initiated major changes in 1992 to accommo date the RTC's maturing opera tions. With the assistance of the OfRce of Research and Statistics, the ofRce developed a Rnancial model to aid in forecasting, flexi ble budgeting, and Rnancial reporting. During the year, the ofRce contributed to the design and implementation of the new Financial Management System and General Ledger, which require periodic review. In the RTC's 1992 budget, operating expenses totaled $3.5 billion. O f this amount, outside services accounted fbr 60 per cent, receivership real estate accounted fbr 17 percent, and employee compensation accounted fbr 14 percent. In 1992, the RTC staff decreased by 1,125 employees, a 14 percent reduction from 1991. http://fraser.stlouisfed.org/ . - r -<t-f . ^ -. * . ' Federal Reserve Bank of St. Louis 7 - " ' ^ -n- /^ ^ ^ y ' : "^- * ' A S S E T M A N A G E M E N T AND ^ ^ ^ ^ h e Division o f Asset H M anagem ent and Sales H manages and disposes o f H assets acquired from H failed thrifts. T h e divi- H! sion accomplishes this S A L E S Department of Asset Management " T h e D epartm ent o f Asset contractors were managing assets with a total book value o f approximately $ 2 3 billion. From August 1990 through H M anagem ent develops and D ecem ber 1 9 9 2 , SA M D A con H implements all policies and tractors managed assets with a through the Departm ents o f procedures governing the m an total book value o f $ 3 6 .4 billion, Asset M anagem ent, Field agement and disposition o f and disposed o f one-third, or Activities and Sales, and Capital assets, except fbr securitization $ 1 2 .6 6 billion, o f those assets. M arkets, and through the transactions. T h e department Affordable H ousing Disposition consists o f the Offices o f downsize the SA M D A program Program. SAM DA Program M anagem ent, because the am ount o f R T C assets had been reduced through In 1 9 92, the R T C began to During 1992, R T C asset Asset and Subsidiary sales and collections totaled $ 7 7 M anagem ent, Case sales. M anagem ent o f SAM DAs billion (net o f putbacks); from M anagem ent and Program was consolidated into six field inception through 1992, asset Com pliance, Settlem ent offices in Valley Forge, sales and collections amounted W orkout, and Systems Pennsylvania; Atlanta, Georgia; to $ 3 0 5 billion (net o f putbacks). M anagem ent. Kansas City, M issouri; Dallas, B ook value reductions fbr the fis Texas; Denver, C olorado; and Newport Beach, California. 1992, totaled $101 billion, or 101 OfRce o f SA M D A Program Management percent o f the R T C 's goal, with Th e O ffice o f SAM D A cal year ended Septem ber 30, the R T C realizing an 8 7 percent (Standard Asset M anagem ent return o f the book value o f dis and Disposition Agreem ent) OfHce o f Asset and Subsidiary Management posed assets. From inception Program M anagem ent issues T h e O ffice o f Asset and through the end o f 1992, book and m onitors all SAM DAs, Subsidiary M anagem ent devel value reductions totaled $ 3 3 0 billion. T h e asset inventory which totaled 188 from incep ops the R T C 's policies and pro tion o f the SA M D A program in cedures on asset valuation, seller remaining at yearend 1992 August 1990 through yearend financing, subsidiary m anage totaled $ 1 0 4 billion. 1992. At yearend, 9 2 SAM D A ment and disposition, and gen eral real estate and loan credit CONSERVATORSH!P AND RECE!VERSH!P ASSETS UNDER RTC MANAGEMENT AS OF DECEMBER 3 1 , 1 9 9 2 (percentage of gross assets) Other Loans 4% m anagement. In 1 9 9 2 , the R T C developed procedures fbr originating sellerfinancing loans fbr com mercial R E O and servicing notes, and equity interests acquired from Lows 18% multiple asset sales and multiple 8ther Mortgages 18% investor funds. A commercial seller-financing staff was created in each field office to manage Cash & Securities 13% Mortgages <j REO12% <. Assets 17% Mortgage and shipping to loan servicers. By yearend, the R T C had closed approximately $1.41 billion in comm ercial seller-financed trans Securities 4% R E S O L U T i O N loan origination, loan approval, actions. D uring 1992, the office lota) Assets: SIM Ritiinn T R U S T C O R P O R A T i O N established a policy on lead- 1 9 9 2 based paint in RTC-occupied and non-occupied residential properties. The policy calls for the RTC to assess the potential health and financial risks before it sells, leases, or forecloses on properties with lead-based paint. The ofRce also accelerated the use of private sector contractors and various environmental groups to improve the RTC's ability to identify environmental resources on REO property and property held as collateral for loans. In addition, the ofRce coordinated the marketing of hazardous properties to Rrms interested in purchase, remedia tion, and resale with the National Sales Center. OfEce o f Case Management and Program Compliance The OfRce of Case Management and Program Compliance ana lyzes all proposed asset-related actions (i.e., sales and financing) that require headquarters approval, monitors the perfor mance of asset sales contractors, coordinates the assessment of each Reid ofRce's compliance with internal controls related to division program areas, and coordinates the development and implementation of asset management and sales policy training programs with the RTC's OfHce of Human Resources Management. In 1992, the RTC imple mented a collection policy to ensure that contractors and thrift or asset purchasers are not in default to an RTC/FDIC-controlled institution. In addition, the ofRce conducted annual Program Compliance Reviews at seven Reid ofRces, and revised appraisal policies to enhance the asset sales process. OfRce o f Settlement W orkout The OfRce of Settlement Workout restructures problem loans and negotiates settlements with defaulted borrowers. Assets assigned to the ofRce generally have a high book value; may have the potential for substantial legal costs; may be involved in, or have the threat of, complex litiga tion; or may not have sold after a prolonged period according to their proposed disposition plans. In 1992, two Settlement Workout Assistance Teams (SWATs) were assigned to each Reid ofRce to evaluate problem assets and execute necessary workout negotiations or collec tion strategies with defaulted borrowers. SWATs were autho rized to work out credit prob lems of up to $100 million, allowing for a more timely approval process. By yearend, SWATs—with the assistance of 18 SWAT contractors—had restruc tured, sold, or worked out $2.7 billion in SWAT assets; another $4.7 billion in assets were under review at the end of 1992. In addition, 19,000 prob lem assets, with a total book value of $42 billion, were involved in litigation in 1992. Litigation Review Committees in each permanent Reid ofRce evaluated major litigation, including expenses. OfEce o f Systems Management The OfHce of Systems Management coordinates the A N N U A L R E P O R T development, implementation, and maintenance of the divi sion's information systems; man ages related contracts, such as the Data Integrity Support and the Policy and Procedure Support contracts; and monitors the performance of major oper ating systems such as the Real Estate Owned Management System (REOMS) and the Asset Manager System (AMS). During 1992, the data integrity of REOMS and AMS was improved by correcting existing information and decreasing the number of data elements in the systems. In addi tion, REOMS Data Upload Facilities were developed to min imize the need for duplicate data entry by SAMDA and RTC sys tems. Department of Retd Activities and Sates ^The Department of Field ] Activities and Sales coordi* nates national sales efforts, and oversees Held ofRce sales and operations. The department consists of the OfRces of Field Liaison, National Sales, and National Marketing. OfRce o f Field Liaison The OfHce of Field Liaison over sees the asset management and sales operations in the six major Held ofRces, which manage assets primarily through SAMDA con tracts. The ofRce also manages and disposes of the institutions' subsidiaries, and oversees the Held responsibilities of the RTC self-insurance program. In 1992, the RTC reduced insurance administration and premium 1 9 9 2 A N N U A L R E P O R T A S S E T M A N A G E M E N T AND S A L E S In August, Daiwa Finance 1 9 9 2 ASSET SALES AND COLLECT!ONSCONSERVAIORSH!PS, R E S 0 L U T ! 0 N S AND RECE!VERSH !PS C orporation o f New York pur chased a portfblio o f 6 9 per form ing congregate care and nursing hom e loans for approxi mately $ 2 0 5 m illion, or 91 per cent o f its book value. Also in August, Com m ercial Properties Funding C orporation, Stam ford, C onnecticu t, purchased a port REQ$3 fblio o f 4 7 shopping centers, with a book value o f $218 mil lion, for $71 million in an all cash transaction. In September, the office conducted the R T C s largest auction since its incep tio n —nearly $ 5 0 0 million (b oo k value) in non-perform ing loans lata) Sates ant! hilliidiiins: ^77 itillimi (Met nf I'atliacks)' were auctioned in Los Angeles, California, for a total o f *Puthacks M a te d $ 1.9 hillion in 1992. Puthacks include some assets returned from pre 1992 resolution sales. $ 2 4 7 .9 million. costs by $ 3 2 .7 million by switch new sales strategies to dispose o f T h e office developed several g-related data, develops and ing from existing policies on elements new sales strategies the remaining asset inventory. To assets to self-insurance. dispose o f assets, and conducts dispose o f hard-to-sel! land tionwide auctions o f real estate assets, the National Land Fund T h e office also oversees all field ofBce staff support activities such as facilities operations, bud geting, information services, res olutions, claims and settlements, asset operations, and financial reporting. OfHce o f National Sales T he OfHce o f National Sales plans, coordinates, and executes m ajor asset sales. T he office dis loans. T he office is the primacontact for investors needing ormation about R T C sales )i*ocedures and opportunities. In 1 9 92, the ofBce was and financing source would serve as general partner and the R T C would be a passive limited part olved in a num ber o f notable ner. T h e M ultiple Investor Fund es transactions. For example, program and the N-series trans le R T C signed a contract with actions were also developed to lequers Investm ent Associates, )allas, Texas, for the $ 1 3 0 .5 mil- sell non-perform ing and sub- ion sale o f the R T C 's first large structures with private investors. poses o f illiquid assets such as uctured portfolio o f hotel real estate and non-perform ing )roperties, performing loans, loans, and conducts portfolio was designed as a partnership in which a m ajor land developer non-perform ing loans collat- performing loans in partnership OfHce o f National Marketing and structured sales (sales o f lized by hotel assets, with a T h e Office o f National Marketing pools o f assets chosen by the al book value o f $ 2 3 7 million, coordinates asset marketing pro R T C and a purchaser) o f more le office also conducted a than $ 1 0 0 million in assets in a m ber o f portfolio sales o f asset sales support through adver single transaction. T h e latter lque assets such as mini-ware- tising, industry relations, market offerings are com posed primarily grams nationwide, and provides louse facilities and shopping ing systems, and customer o f commercial real estate and iters, and loans secured by services and telemarketing. non-perform ing mortgages. usual or specialized collateral T he office develops market R E S O L U T I O N T R U S T ch as congregate care facilities. C O R P O R A T t O N In 1 9 92, the office estab lished an in-house advertising 1 9 9 2 facility with graphic-design and media-buying capabilities, saving $1.5 million annually. The ofHce also produced a new RTC logo to project a progressive image of the Corporation, promote more consistent identification, and reduce reproduction costs. The ofHce also designed and produced a series of 12 informa tional and sales brochures for use by all field and national sales staff in promoting RTC sales pro grams. In addition, the ofHce increased the number of investors listed on the National Asset Marketing Application (also known as the Investor Database) to over 10,000—a 200 percent increase from 1991. The list serves as the primary marketing source for Held and national sales cam paigns and event nodHcations. In 1992, the National 1-800 Telemarketing Program, devel oped by the ofHce, became the central point for the general public to obtain RTC informa tion. Almost one million calls were received on the Affordable Housing Hotline, the Broker Hotline, and the Information Center Line Horn the program's March 15,1991, inception to yearend 1992. Callers can access all services of the telemarketing program through a single call. Department of Capita! Markets *T*he Department of Capital ] Markets plans, coordinates, H and directs RTC capital mar kets transactions. This includes the creation and sale of securi tized loan products, and the sale of debt and equity acquired through RTC interventions. The department consists of the OfHces of Securities Transactions and Securitization. OfHce o f Securities Transactions The OfHce of Securities Transactions sells securities acquired through RTC interven tions. The types of securities offered include junk bonds, equity securities, U.S. Treasury obligations, and federal agency and mortgage-backed securities. In 1992, the RTC registered with the Securities and Exchange Commission (SEC) a total of $15 billion in residendal, multifamily, and manufactured hous ing mortgage pass-through securities; $14.45 billion was taken down from the shelf. From inception of the secu rities sales program in March 1990 through yearend 1992, the RTC sold over $61 billion of securities and $9 billion of interest-rate swaps, and disposed of over $8 billion in junk bonds, recovering approximately 65 cents on the dollar for the tax payers. At yearend, only $211 million in junk bonds remained in the RTC inventory. The ofHce used several pro grams to sell highly illiquid secu rities, including limited partnership interests, highly leveraged transactions, and com mercial loan participations. OfHce o f Securitization The OfHce of Securitization develops, manages, and imple ments a program to securitize financial assets taken over by the RTC, including performing mortgage and other loans, and non-perfbrming commercial A N N U A L R E P O R T mortgage loans. In 1992, the ofHce used the Multiple Investor Fund and Nseries transactions to dispose of non-performing and sub-performing loans. These transac tions involve establishing partnerships between the RTC and private investors who pur chase, manage, and then sell portfolios of non-perfbrming and sub-performing loan assets, and share in the proHts with the RTC. The structure provides incentives for equity partners to work out portfolios with the highest returns to the partners and the RTC. In 1992, the ofHce developed the RTC securitizadon program for non conforming single-family mortgages, multifamily loans, and commercial real estate loans. The RTC also Hied a separate registradon with the SEC for one home equity loan securities issue totaling $311 million. From incepdon of the securi tization program in June 1991 to yearend 1992, over $32.8 billion in assets were securitized, includ ing single-family, multifamily, and commercial mortgages, and commercial and consumer loans. Department of Affordable Housing he Department of Affordable H Housing identiHes real estate H assets suitable for sale to lowto moderate-income families and individuals, as well as non-proHt housing organizadons, through its Affordable Housing Disposidon Program. 1 9 9 2 A N N U A L R E P O R T A S S E T M A N A G E M E N T AND In 1992, the RTC sold the following properties to state and local housing authorities through its Affordable Housing Disposition Program: P R O P E R H E S SOLO TO STATE ANO LOCAL HOUSING AUTHOR!T!ES Property Sates Pnce Panam a City H A Northgate $ Panam a City, F L Terrace ii Apts. Housing Authority [HA] 425,865 Panam a City, F L Pierce County H A Eagies W atch Ap ts. Tacom a, W A Puyaiiup, W A Futton County H A Provence North Apts. Atianta, G A $2,40 0 ,0 0 0 Attanta, G A Reno H A 7th S t. Apts. $ 200,000 R en o, N V R en o, N V Ciark County H A W ainut G rove Apts. Las V egas, N V Las V egas, N V N e w M exico M ortgage Partt Terrace Apts. Finance Aibuquerque, N M $2,500,000 $3 ,500,000 $ 7 8 1 ,0 0 0 $ 7,0 0 0 $ 11,200 $ 5,000 $ 75 ,0 0 0 Aibuquerque, N M City of Lakeiand 508 N . Gitm ore R d . Lakeiand, F L Lakeiand, F L Housing Redevetopm ent 536 Edm und A ve . Authority S t. Paui, M N S t. Pau!, M N H A of San Antonio 5 1 2 W . M agnoiia Apts. San Antonio, I X San Antonio, I X City of Aibuquerque 5405/5401 Tucson R d . Aibuquerque, N M Aibuquerque, N M City of Enid 140 5 N . Centra) $ Enid, O K 1 3 1 8 N . Centra) 1 3 1 0 N . 19th $ 12,6 5 5 $ 15,0 0 0 9 15 W ashington $ 10,000 Norfoik Redevetopm ent 109 W . 3rd S t. $ 4 ,0 0 0 and Housing Authority 829 W . 3 7th S t. $ 9 ,000 N orfoik, V A 802 34th S t. 9 632-3 G rove A v e . $ $ 5 ,000 52,500 12 Properties: $ 1,4 0 0 ,0 0 0 Coiorado Housing and Finance Authority D enver, C O FranMin Apts. D enver, C O Hudson Apts. C oiorado Springs, C O S a xo n y Apts. D enver, C O The Rectory Apts. C oiorado Springs, C O Courtyard Com m ons D en ver, C O M urray Pa rk Apts. C oiorado Springs, C O 2029 W . 36th S t. Apts. D enver, C O H udson i! Apts. C oiorado Springs, C O ivy Hiii Apts. Aurora , C O 6 15 N . Corona S t. Apts. Coiorado Springs, C O 7 2 2 /2 4 N . N evada Apts. Coiorado Springs, C O Gib Lane Apts. C oiorado Springs, C O R E S O L U T t O N T R U S T 1 1 ,5 0 0 S A L E S Affordable Housing Disposition Program The Affordable Housing Disposition Program oilers income-eligible purchasers and non-profit housing organizations an exclusive 97-day marketing period and option to purchase these properties. Non-profit housing organizations include consumer and public interest groups, as well as state and local housing agencies. In 1992, 5,942 single-family properties were sold through the affordable housing program fbr a total of $156 million. From the program's inception in August 1990 to yearend 1992,13,645 single-family properties were sold fbr a total of $384 million, with sales averaging 63 percent of book value. These properties were offered primarily through auctions and sealed bids. During the year, over 200 affordable housing sales events were held in 31 states. Sixty-nine percent of the purchasers were from lower-income families— those with incomes of less than 80 percent of the national medi an income—with an average income of $22,864. The average sales price of a single-family home in the program was $28,151; single-family sales aver aged 70 percent of book value. The RTC provided seller financing fbr 1,443 single-family homes sold under the affordable housing program in 1992. From the program's inception through yearend 1992, the RTC provided seller financing fbr 2,342 single family homes, or 17 percent of the total sold. Purchasers utilized $52 million of RTC-sponsored mortgage revenue bonds. C O R P O R A T t O N In 1992, 183 multifamily affordable housing properties were sold fbr a total of $164 mil lion; the RTC provided seller financing fbr six of the proper ties. From inception through 1992, the RTC sold 309 multifamily affordable housing prop erties, containing 27,000 units, fbr a total of $306 million. From inception of the affordable housing program through yearend 1992, approxi mately 820 properties with no reasonable recovery value had been made available fbr con veyance to non-profit organiza tions and public agencies. O f those, 736 were conveyed by yearend, 175 of which were con veyed in 1992 alone. On May 6,1992, an interim final rule was published in the amending some parts of the affordable housing program. In addition, the RTC issued two directives on the rule's amendments. Changes in the single-family housing sales program included the following: H Purchasers of single-family properties under the affordable housing program must reside in the property fbr at least 12 months. If the property is sold before then, the RTC may take 75 percent of any profits from the sale. H The RTC may sell a single family affordable housing prop erty to a family earning above 115 percent of the area median income (the maximum income allowed fbr purchasers of afford- 1 9 9 2 able housing properties) if that family is renting the property when it is placed into the afford able housing program. public agencies, or for-profit entities that agree to the lowerincome occupancy requirements for condominiums. Changes in the condominium housing sales program included the following: H One hundred percent of the properties purchased by non profit organizations, public agencies, and for-profit entities must be made available for occu pancy and maintained as afford able for lower-income families. H Individual properties may only be sold to persons who qualify under affordable housing income guidelines. Properties listed in portfolios may be sold to non-profit organizations, Changes in the multifamily sales program included the A N N U A L R E P O R T following: H In a portfolio sale of multifam ily properties, purchasers must commit at least 15 percent of the units per property for very lowincome or lower-income families (this rule affects properties whose marketing period commenced on or after June 2,1992). H The RTC will give discounts to purchasers who commit to setting aside more than 35 per cent of the units for very lowand lower-income occupancy. 1 9 9 2 A N N U A L R E P O R T .j /_, * '< * '* .'.A' /' -.f ^ * - ^ "-A : ^ -l-i ^ ','.'-'.y;: -r-' " ;7,- /-W./' ^ ^ R E G U L A T I O N S Real Estate Appraisals Fina! Ru!es Restrictions on the Sale of Assets by the Resolution Trust Corporation Published July 21, 1992; Effective August 20, 1992 The RTC adopted a regulation requiring that assets held by the RTC in the course of liquidating federally insured savings associa tions not be sold to persons who, in ways specified in the Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of 1990, con tributed to the demise of the savings associations. The rule is intended to accomplish the Congressional directive by implementing a self-certification process that is a prerequisite to the sale of assets by the RTC. The regulation provides defini tions that clarify the intent of Congress regarding the scope of the statutory prohibitions. Disclosure o f Information October 29, 1992 The RTC adopted a regulation for the processing of requests for access to RTC records, other than the records of the RTC Inspector General, pursuant to the Freedom of Information Act (FOIA). This regulation estab lishes the procedures to be used by the public to request records from the RTC, the procedures to be used to appeal a decision to deny access to records, and the fees for access to records. R E S O L U T I O N T R U S T C O R P O Published November 2, 1992; E lectiv e December 2, 1992 The RTC amended its real estate appraisal regulations, identifying additional transactions for which the services of an appraiser are not required. This regulation eliminates the requirement for regulated institutions (i.e., depository institutions under RTC conservatorship or receivership) to obtain appraisals by certified or licensed appraisers for real estate-related financial transactions having a value, as defined in the regulation, of $100,000 or less; permits regu lated institutions to use appraisals prepared for loans insured or guaranteed by an agency of the federal govern ment if the appraisal conforms to regulations or other require ments of the federal insurer or guarantor; exempts appraisals involving one- to four-family res idential properties from certain minimum appraisal standards under specified conditions; and adds a definition of "real estate" and "real property" to clarify that the appraisal regulation does not apply to transactions involv ing mineral rights, timber rights, growing crops, or water rights. The regulation also incorpo rates three technical amend ments. The first technical amendment clarifies that the requirements of the appraisal regulation must be met for all real estate-related financial trans actions except those in which the services of an appraiser are not required under the regulation. The second technical amend ment confirms that in accor R A T ! 0 N dance with the Federal Deposit Insurance Corporation Improvement Act of 1991, the RTC delayed until December 31, 1992, the date by which statecertified and licensed appraisers must be used for all federally related transactions. The third technical amendment clarifies that the appraisal regulation does not apply to loans not secured by real property. OfHce o f Inspector General: Privacy Act Regulations December 2, 1992 The RTC Office of Inspector General (OIG) adopted a regu lation for the processing of requests for access to or amend ment of records pursuant to the Privacy Act of 1974. This regula tion establishes the procedures to be used in requesting records from the RTC OIG, the proce dures for contesting the content of records, and the identification of records systems that are exempt from the access, amend ment, and disclosure accounting provisions of the Privacy Act. One records system exempt from certain provisions of the Privacy Act, entitled "Office of Inspector General Investigative Files," contains investigatory material compiled for law enforcement purposes and for determining suitability, eligibili ty, or qualifications for federal civilian employment, federal contracts, or access to classified information. 1 9 9 2 interim Fina! Ruies Affordable Housing Disposition Program May 6,1992 The RTC adopted an interim final rule amending the existing regulations governing its Affordable Housing Disposition Program because the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991 changed the manner in which the RTC is to identify, market, and sell certain affordable hous ing properties. This interim final rule also clarifies certain policies of the RTC regarding the dispo sition of assets in the affordable housing program, thereby enhancing the availability and affordability of residential real property fbr very low income, lower-income, and moderateincome families and individuals. Minority and W omen Outreach Contracting Program August 10,1992 The RTC adopted an interim final rule fbr the RTC to identify, promote, and certify eligible firms fbr inclusion in its con tracting activities, while assuring that the RTC's use of privatesector services is accomplished practicably and efficiently. The RTC deemed it appropriate to design a program that will aggressively reach out to minori ties and women, and firms owned by minorities and women, enabling them to partic ipate more fully in RTC con tracting activities through joint venture agreements and other devices. The RTC also will pro vide incentives (i.e., cost and technical bonuses) to firms owned by minorities and women when evaluating competitive offers to contract. The rule also governs the identification, pro motion, and certification of eligi ble law firms fbr inclusion in the RTC legal services contracting process. interim Ruies Privacy Act Regulations September 22, 1992 The RTC adopted an interim rule fbr the processing of requests fbr access to or amend ment of records, other than the records of the RTC Inspector General, pursuant to the Privacy Act of 1974. The rule also estab lishes administrative appeals pro cedures and conditions fbr disclosure of information from a records system outside the Corporation. In addition, the rule exempts certain records sys tems from certain sections of the Privacy Act. A N N U A L R E P O R T Proposed Reguiations Procedures Applicable to RTC Investigations July 27, 1992 The RTC proposed regulations fbr procedures to be used in RTC investigations that involve the exercise of powers, including subpoena powers, contained in section 8(n) of the Federal Deposit Insurance Act, as amended. The RTC is autho rized under FIRREA to exercise such investigatory powers in car rying out its statutory obliga tions to resolve failed savings associations. Program Fraud Civil Remedies and Procedures November 18, 1992 The RTC proposed rules to implement the Program Fraud Civil Remedies Act of 1986. The proposed rules would establish administrative procedures fbr determining whether to impose the statutorily authorized civil penalties against any person who makes, submits, or presents a false, fictitious, or fraudulent claim or written statement to the Corporation. 9 92 A N N U A L R E P O R T H RESOLUTION TRUST C O R P O R A T E STATEMENTS OF F!NANC!AL P O S !T !O N (dottars in thousands) December 31,1992 December 31,1991 ASSETS Cash (Note 3) $ 3,048,320 $ 9,034,326 9 ,3 3 1,3 48 15 ,9 2 7,9 6 7 32,490,003 3 7 ,5 1 6 ,1 4 4 Net advances (Note 4 ,6 ,1 5 and 18) Net subrogated ctaims (Note 5 ,6 ,1 5 and 18) Net assets purchased by the Corporation (Note 6 ,7 and 15) 0 82,305 13,398 Other assets 13 ,3 19 TOTALASSETS(Note 14) $44,965,295 $62,491,835 L!AB!L!T!ES Accounts payabte, accrued tiabitities, and other (Note 16 and 1 7 ) $ 224,558 $ 275 ,636 2 9 ,1 1 1 1,6 3 4 ,19 9 Notes payabte and accrued interest (Note 9) 3 7 ,4 7 4 ,3 7 1 5 7,5 18 ,5 6 1 Estimated cost of unresotved cases (Note 6 ,1 0 and 15) 16,858,857 25,492,652 3 75 ,3 75 197,5 9 9 Due to receiverships (Note 8) Estimated tosses from corporate litigation (Note 6 and 1 1 ) 54,962,272 85,118,647 Contributed capita) (Note 3) 55 ,5 22,0 19 4 8 ,8 2 7,5 5 1 Capita) certificates 3 1,28 6 ,32 5 3 1,2 8 6 ,12 2 TOTALL!AB)L!T!ES EQU!IY Accumutated deficit TOTALEQUMY(Note 12) TOTALL!AB!L!T!ESANDEQU!TY(Note 14) See accompanying notes R E S O L U T I O N T R U S T C O R P O R A T i O N (9 6 ,8 0 5 ,3 2 1) (10 2 ,7 4 0 ,4 8 5 ) (9,996,977) (22,626,812) $44,965,295 $62,491,835 1 9 9 2 A N N U A L R E P O R T R E S0 L UT !0 N TRUST C O R P O R A T E STATEMENTS OF REVENUES, EXPENSES ANO ACCUMULATED OEF!C!T (dollars in thousands) Year Ended December 31,1992 Year Ended December 31,1991 REVENUES Interest on advances and subrogated ctaims 532,183 $ 1 ,4 7 3 ,1 7 4 Other interest income 10 ,087 14,300 Other revenue (Note 3) 33,288 19,085 575,558 1,506,559 TOTALREVENUES EXPENSES Interest expense on notes issued by the Corporation Interest expense on amounts due receiverships Reduction in loss allowances (Note 6) Administrative operating and other expenses (Note 2 ,1 4 and 17) TOTALEXPENSES NETREVENUE(LOSS) 1,928,623 3 ,4 72 ,2 8 8 774 ,3 2 0 1,9 03 ,837 (8 ,1 1 6 ,7 6 2 ) (1 ,4 4 9 ,1 9 1 ) 5 4 ,2 13 29,957 (5,359,606) 3,956,891 5 ,9 3 5 ,16 4 (2,45 0 ,33 2) ACCUMULATEDDEF!C!T, BEG!NN)NG (10 2 ,74 0 ,4 8 5 ) (10 0 ,2 9 0 ,15 3 ) ACCUMULATEDDEF!C!T, END!NG(Note 12) ($96,805,321) ($102,740,485) See accompanying notes 1 9 9 2 A N N U A L R E P O R T H F ! \ \ \ ( i \ i S T A T E M E N T S AND ! N T E R N A L C O N T R O L S RESOLUTiON TRUST CORPORATiON STATEMENTS OF CASH FLOWS (dotiars in thousands) Year Ended December 31,1992 Year Ended December 31,1991 CASHFLOWSFROMOPERAUNGACT!V!T!ES Cash inftowsfrom: $29,655,899 $ 17,6 6 5 ,4 8 8 1 4 ,7 7 2 ,7 0 1 2 3 ,0 6 4 ,17 4 Receipts of interest on advances 75 4,48 0 1,595,363 Receipts from asset tiquidations 53,089 Receipts from other operations 3 2 ,14 0 Receipts from subrogated ctaims Repayments of advances and reimbursabte expenditures 0 2 7,6 5 7 Cash outftows for: Disbursements for subrogated ctaims (2 2 ,6 6 8 ,74 7 ) (5 6 ,19 9 ,0 15 ) Disbursem ents for advances ( 1 1 ,7 3 5 ,5 5 7 ) (18 ,4 2 7 ,9 9 6 ) (1,5 5 4 ,5 8 8 ) (1 ,0 2 2 ,1 4 9 ) (4 1,5 5 5 ) (3 1,0 8 1) (1,6 0 5 ,8 0 7 ) (9 0 7,8 3 1) Disbursem ents for reimbursabie expenditures Adm inistrative operating and other expenditures interest paid on notes payabte Net Cash Provided (Used) byOperatingActivities (Note 13): 7,662,055 (34,235,390) CASHFLOWSFROMF!NANC!NGACT!V!T!ES Cash inftows from: Contributed capita) Notes payabte Capita) certificates 25 ,03 3,510 30,030,328 7,50 0,0 00 12 ,15 0 ,0 0 0 203 7,03 8,2 68 Cash outfiows for: Contributed capita) returned to the Treasury (Note 1) ( 1 8 ,3 1 4 ,7 6 7 ) 0 Repaym ent of notes payabte, principat (2 7 ,8 6 7 ,0 0 7 ) ( 1 1 ,1 2 5 ,6 7 4 ) (13,648,061) 38,092,922 (5,986,006) 3,857,532 9,034,326 5,176,794 $3,048,320 $9,034,326 Net Cash Provided (Used) byFinancingActivities Net increase (decrease) inCash CASH-BEG!NN!NG CASH-END!NG________________________ See accompanying notes R E S O L U T i O N T R U S T C O R P O R A T i O N 1 9 9 2 A N N U A L R E P O R T Resotution Trust Corporation Motes to Fmancia! Statements December 31,1992 and 1991 1. Impact o f Legislation The RTC, a Government Corporation, was created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) to manage and resolve ail troubled savings institutions that were previ ously insured by the Federal Savings and Loan Insurance Corporation (FSLIC) and for which a conservator or receiver was appointed during the period January 1, 1989 through August 8, 1992. In December 1991, this period was extended to September 30,1993 by the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991. The activities of the RTC are subject to the general oversight of the Oversight Board, which was redesignat ed the Thrift Depositor Protection (TDP) Oversight Board and increased in size by the December 1991 leg islation. The TDP Oversight Board monitors the operations of the RTC, provides the RTC with general policy direction, and reviews the RTC's performance. The seven members on the TDP Oversight Board include: the Secretary of the Treasury; the Chairperson of the Board of Governors of the Federal Reserve System; the Director of the OfHce of Thrift Supervision (OTS); the Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation (FDIC); the Chief Executive Officer of the RTC; and two independent members appointed by the President, with the advice and consent of the Senate. Under current law, the RTC will terminate on or before December 31,1996. All remaining assets and liabil ities will be transferred to the FSLIC Resolution Fund which is managed by the FDIC. Proceeds from the sale of such assets will be transferred to the Resolution Funding Corporation (REFCORP) for interest pay ments after satisfaction of any outstanding liabilities. &M4TV2 o f The RTC is funded from the following sources: 1) U.S. Treasury appropriations and borrowings; 2) a con tribution from the Federal Home Loan Banks through REFCORP; 3) amounts borrowed by REFCORP which is authorized to issue long term debt securities; 4) the issuance of debt obligations and guarantees as permitted by the TDP Oversight Board; and 5) income earned on the assets of the RTC, proceeds from the sale of assets, and collections made on claims received by the RTC from receiverships. The Secretary of the Treasury has contributed capital of $55.5 billion to the RTC as of December 31, 1992, $18.8 billion of which was authorized by FIRREA, $30 billion of which was authorized by the Resolution Trust Corporation Funding Act of 1991 and $6.7 billion of which related to the December 1991 legislation (See Note 12). The December 1991 legislation authorized the Secretary of the Treasury to provide an addi tional $25 billion in capital to the RTC for its operations through March 31,1992. These funds were received in January 1992. In April 1992, the RTC returned $18.3 billion to the Treasury which represented funds not committed by the March 31, 1992 deadline. No additional capital has been contributed since that date. The RTC has also issued capital certificates of $31.3 billion to REFCORP as of December 31,1992, includ ing $203 thousand of certificates during 1992 and $7.0 billion issued in 1991 (see Note 12). FIRREA pro hibits the payment of dividends on any of these capital certificates. The RTC is also authorized to borrow directly from the Treasury an amount not to exceed in the aggregate $5.0 billion. There have been no draws against these authorized borrowings through the end of 1992. 1 9 9 2 A N N U A L R E P O R T F I N A N C I A L S T A T E M E N T S AND I N T E R N A L C O N T R O L S 2. Summary o f Significant Accounting Policies These statements do not include accountability fbr assets and liabilities of closed thrifts for which the RTC acts as receiver/liquidating agent or of thrifts in conservatorship fbr which the RTC acts as managing agent. /or ZoRKf The RTC recognizes an estimated loss on advances. The allowance fbr losses represents the difference between amounts advanced to conservatorships or receiverships and expected repayments. /or Lawfy C/m'wy. The RTC records as assets the amounts disbursed fbr assisting and closing thrifts, primarily the amounts fbr insured deposit liabilities. An allowance fbr losses is established against subrogated claims representing the difference between the amounts disbursed and the expected repay ments. The allowance is based on the estimated cash recoveries from the assets of the assisted or failed thrifts, net of estimated asset liquidation and overhead expenses, including interest costs. Cast o/' The RTC has recorded the estimated losses related to thrifts in conser vatorship and those identified in the regulatory process as probable to fail on or before the statutory date of September 30, 1993. ZaHKf. The RTC recognizes an estimated loss fbr litigation against it in its Corporate, conservator ship and receivership capacities. The RTC Legal Division recommends these estimated losses on a case-by-case basis. a? SoM. The RTC establishes a contra asset account to record the amount payable to receiverships fbr the purchase price of receivership assets sold to acquiring institutions in resolution trans actions. This is done in lieu of the receivership receiving the cash proceeds from the sale of its assets. This contra account offsets the balance due from the receiverships fbr subrogated claims. The amounts that exceed the expected recovery of subrogated claims due from the receiverships are recorded as a liability entitled "Due to receiverships." The RTC accrues interest on the total of the contra asset and liability accounts. ylV/w%f3(77% The RTC shares certain administrative operating expenses with several funds of the FDIC including the Bank Insurance Fund, the FSLIC Resolution Fund, and the Savings Association Insurance Fund. The administrative operating expenses include allocated personnel, administrative, and other overhead expenses. o/' The RTC recovers costs incurred by the Corporation in support of liqui dation/receivership activities, including a portion of administrative expenses. These costs are billed to indi vidual receiverships with the offsetting credits reducing the Corporation's 'Administrative operating and other expenses." The cost of furniture, fixtures, equipment and other hxed assets is expensed at the time of acqui sition and is reported as 'Administrative operating and other expenses." This policy is a departure from gener ally accepted accounting principles, however, the financial impact is not material to the RTC's financial statements. The RTC considers cash equivalents to be short-term, highly liquid investments with orig inal maturities of three months or less. As o f December 31,1992 and 1991, the RTC did not have any cash equivalents. Aw o/' The balances of Rnancial instruments included in the RTC's Statement of Financial Position approximate their estimated fair values. The values of "Net advances" and "Net subro gated claims" are based on the discounted net cash flows expected to be received from those instruments. The frequent repricing of the balances of "Due to receiverships" and the short-term nature of "Notes Payable" result in face amounts of such instruments which approximate their fair values. Certain balances in the 1991 financial statements have been reclassified fbr comparative pur poses. R E S O L U T t O N T R U S T C O R P O R A T i O N 1 9 9 2 A N N U A L R E P O R T 3. OfHce o f Inspector General FIRREA established an Inspector General of the Corporation and authorized to be appropriated such sums as may be necessary for the operation of the OfHce of Inspector General (OIG). All financial transactions related to the OIG are included in the Corporation's financial statements. The OIG has received $74.6 million of appropriated funds from the U.S. Treasury since it was established of which $33.5 million relate to the Government's Fiscal Year (FY) 1993 and $30.3 million relate to FY 1992. These funds are used to finance the activities of the OIG. Restricted amounts of $6,845,045 for FY 1992 and $32,414 for FY 1991 are included in "Cash." These funds were unobligated at year end. Reductions to the OIG appropriated funds resulting from obligations are recorded as "Other revenue." Accordingly, the OIG appropriated funds were reduced by $24,274,873 and $12,867,302 during 1992 and 1991, respectively, and recorded as "Other revenue." Disbursements of the OIG appropriated funds for expenditures are recorded as "Administrative operating and other expenses." These disbursements totalled $20,955,917 during 1992 and $11,622,049 during 1991. As of December 31, 1992 and 1991, the unobligated OIG appropriation balances included in "Contributed capital" were $36.8 million and $27.5 million, respectively. 4. Net Advances (in thousands) The RTC makes advances to receiverships and conservatorships. Advances are made to conservatorships to provide funds for liquidity needs and to reduce the cost of funds, and to receiverships to provide working capital. The advances generally are either secured by the assets of the conscrvatorship or receivership at the time the advances were made or have the highest priority of unsecured claims. The Corporation accrues inter est on these advances which is included in the Statements of Revenues, Expenses and Accumulated Deficit. The Corporation expects repayment of these advances, including interest, before any subrogated claims are paid by receiverships. The advances carry a floating rate of interest based upon the 13-week Treasury Bill rate. Interest rates charged during 1992 ranged between 2.98% and 4.44%, and between 4.10% and 6.97% in 1991. At December 31, 1992 and 1991, the interest rates on advances were 3.54% and 4.26%, respectively. Advances to conservatorships Advances to receiverships December 31, 1992 December 31, 1991 $ 6 ,7 7 7 ,0 6 6 $ 4 ,9 3 1 ,0 2 1 6,3 79,43 6 13,402,648 4 1 9 ,6 1 1 750,398 38,921 326,789 Reimbursements due from receiverships andconservatorships Accrued interest Write-offs attermination-advances (Note 6 and 7) (3,575) 0 (3 ,9 0 7,0 79 ) (3,482,889) (373,032) 0 $9,331,348 $15,927,967 Atlowance for tosses on receivership advances (Note 6) Attowance for tosses on conservatorship advances (Note 6) 1 9 9 2 A N N U A L R E P O R T F ! N A N C ! A L S T A T E M E N T S AND ! N T E R N A L C O N T R O L S Reimbursements due from receiverships and conservatorships represent operating expenses paid by the RTC on behalf of the receiverships and conservatorships for which repayment is expected in full. Interest is not accrued on these reimbursements. 5. Net Subrogated Claims (in thousands) Subrogated claims represent disbursements made by the RTC primarily for deposit liabilities. The Corporation recognizes an estimated loss on these subrogated claims. These estimates are based in part on a statistical sam pling of receivership assets subject to a sampling error of plus or minus $1.8 billion with a 95 percent confi dence interval. The value of assets under RTC management could be lower (or higher) than projected because general eco nomic conditions, interest rates and real estate markets could change. Because of these uncertainties, it is rea sonably possible that the actual losses may be higher (or lower) than the current "Allowance for losses on subrogated claims." Receiverships frequently sell a portion of their assets to institutions acquiring their deposit liabilities. In lieu of the receiverships receiving cash fbr the sale, the purchase price of the assets sold is recorded by the receiver ship as a receivable and by the RTC in a contra asset account entitled "Due to receiverships - assets sold." This account is offset against subrogated claims expected to be collected from the receivership. The portion of the contra asset account, if any, in excess of expected subrogated claim recoveries is recorded as a liability entitled "Due to receiverships" (see Note 8). The RTC accrues interest payable to the receiverships on the total of the contra asset and liability accounts. The rates used by the RTC to accrue interest are based upon the Chicago FHLB Daily Investment Deposit Rates. Interest rates paid during 1992 ranged between 2.59% and 4.74%, and between 3.83% and 7.68% in 1991. At December 31, 1992 and 1991, the interest rates paid on these accounts were 2.63% and 4.70%, respectively. Subrogated claims Recovery of subrogated claims Claims of depositors pending and unpaid Due to receiverships-assets sold Write-offs at termination-subrogated claims (Note 6 and 7) Allowance for losses on subrogated claims (Note 6) R E S O L U T i O N T R U S T C O R P O R A T i O N December 31, 1992 December 31, 1991 $200,461,308 $ 172 ,6 2 5 ,2 0 5 (92,855,555) 19 ,9 74 (4 1,5 6 8 ,75 5 ) 50,990 (7,5 2 0 ,3 78 ) (25,503,185) (3 5 2 ,712 ) 0 (67,26 2,63 4) (6 8 ,0 8 8 ,111) $32,490,003 $ 37,516,144 1 9 9 2 A N N U A L R E P O R T 6. Changes in Allowance for Losses (in thousands) Attowance for Attowance for Attowance for Estimated cost Estimated tosses losses on tosses on tosses on of unresotved from corporate subrogated ctaims advances corp assets cases titigation $ 41,208,071 $1,402 ,742 Batance, Dec 3 1 ,1 9 9 0 $ 0 TOTAL $ 55,94 1,445 $158,1 84 $98,71 0,442 Provision (reductions) (6,779,500) 2,080,147 - 3,210,747 39,415 (1,449,191) Reclassifications 33,65 9 ,5 4 0 - - (33 ,659,540) - 0 Batance, Dec 3 1 ,1 9 9 1 68,088,111 3,482,889 0 25,492 ,652 197,599 97,261 ,251 Provision (reductions) (7,663,264) 800,79 7 11,225 (1,443,296) 177,776 (8,116,762) (352,712) (3,575) - - - (356,287) 7,190,499 - - (7,190,499) - 0 $67,262,634 $4,280,111 $11,225 $16,858,857 $375,375 Write-offs at termination (Note 7) Rectassitications Batance, Dec 3 1,19 9 2 $88,788,202 The "Allowance for losses on subrogated claims" includes future interest costs and overhead expenses. Total "reductions" in loss allowances contain the offset of net interest costs incurred in the current period that were previously included in provisions. "Reclassifications" represent amounts transferred from "Estimated cost of unresolved cases" to "Allowance for losses on subrogated claims" as a result of case resolutions. 7. Net Assets Purchased by the Corporation (in thousands) During 1992, the RTC initiated a program to purchase the remaining assets of selected receiverships in order to pay a final dividend to the receiverships'* creditors and to begin the process of legally terminating the receiver ship entities. As of December 31, 1992, the RTC had purchased assets for $142 million from 36 receiverships and is com pleting the necessary procedures to terminate the receivership entities. Assets purchased include mortgage loans backed by 1-4 family homes, multi-family dwellings or commercial real estate; consumer loans; real estate; and other assets including receivership interests in credit enhancement reserve funds created when receiverships participated in RTC loan securitizations. Upon termination, the RTC may realize a loss on advances and subrogated claims that was previously included in the respective allowances and recognized in the provision for losses in a prior year. December 31, 1992 Assets purchased December 31, 1991 $ 1 4 1 ,7 9 5 $0 Sales, collections and adjustments (48,265) 0 Allowance for tosses on corporate assets (Note 6) (1 1 ,2 2 5 ) (0) $82,305 $0 1 9 9 2 A N N U A L R E P O R T F I N A N C ! A L S T A T E M E N T S AND ) N T E R N A L C O N T R O L S 8. Due to Receiverships Receiverships frequently sell some of their assets to institutions acquiring their deposit liabilities. In lieu of the receiverships receiving cash fbr the sale, the RTC establishes a contra asset account equal to the purchase price of the assets sold and the receiverships record a receivable. This account is offset against the subrogat ed claims due from the receivership to the extent that the RTC expects full repayment of such claims. If a receivership's contra account exceeds the expected repayment of its subrogated claims to the RTC, the excess is recorded as "Due to receiverships." The balance of "Due to receiverships" was $29.1 million and $1.6 bil lion at December 31, 1992 and 1991, respectively. 9. Notes Payable and Accrued Interest Working capital has been made available to the RTC under an agreement between the RTC and the Federal Financing Bank. The working capital is available to fund the resolution of thrifts and fbr use in the RTC's high-cost funds replacement and emergency liquidity programs. The outstanding notes mature at the end of each calendar quarter, at which time they are generally refinanced at similar terms. Payments on the note bal ance may also be made during each calendar quarter. The notes payable carry a floating rate of interest estab lished by the Federal Financing Bank and ranged between 2.82% and 5.09% during 1992 and between 5.09% and 6.76% in 1991. As of December 31, 1992 and 1991, the RTC had $37.5 billion and $57.5 billion, respec tively, in borrowings and accrued interest outstanding from the Federal Financing Bank. These borrowings, approved by the Oversight Board, are within the limitations imposed under FIRREA. 10. Estimated Cost of Unresolved Cases The RTC has established a liability of $16.9 billion at December 31, 1992 fbr the anticipated costs of resolv ing an additional 120 troubled institutions. Of the 120 institutions, 81 were in conservatorship as of that date. The other 39 associations were identified by the OTS as institutions fbr which it is probable that government assistance may be required by September 30, 1993, the last date by which the RTC may be appointed con servator. The 1992 "Estimated cost of unresolved cases" has declined from the December 31,1991 and 1990 estimates of $25.5 billion and $55.9 billion, respectively. The primary reason fbr this decline was the resolution of 69 cases during 1992 and 232 cases during 1991, leaving fewer unresolved cases at the end of each year. The OTS has also identified 52 savings associations fbr which it is reasonably possible that government assis tance may be required by September 30, 1993. The estimated cost to resolve these 52 institutions could total an additional $2 billion. Furthermore, the value of assets anticipated to come to the RTC could be lower (or higher) than projected because general economic conditions, interest rates, and real estate markets could change. Because of these uncertainties, it is reasonably possible that the cost of unresolved cases will be higher (or lower) than what has been estimated. R E S O L U T i O N T R U S T C O R P O R A T i O N 1 9 9 2 A N N U A L R E P O R T 11. Estimated Losses from Corporate Litigation As of December 31,1992, the RTC has been named in several thousand lawsuits while serving in its Corporate, conservatorship or receivership capacities. Currently, it is not possible to predict the outcome for all of the various actions. An allowance for loss totalling $375.4 million has been established as of December 31, 1992 for the 71 actions that management feels are probable to result in a significant loss ($197.6 million at December 31, 1991 fbr 77 actions). Additionally, the Corporation could possibly incur further losses from other pend ing lawsuits and other yet unasserted claims. 12. Changes in Equity (in thousands) Contributed Capita! Batance, Dec 3 1 ,1 9 9 0 18 ,8 10 ,0 9 0 Capitai Certificates Accumuiated Deficit $ 2 4 ,2 4 7 ,8 5 4 $ (10 0 ,2 9 0 ,15 3 ) $ (5 7,2 3 2 ,2 0 9 ) (2,45 0 ,3 3 2) (2,45 0 ,33 2) 19 9 1 Net toss Tota! Equity Resotution Trust Corporation Funding Act of 19 9 1 FY 92 OtG appropriation 19 9 1 Obtigated OtG funds 30,000,000 30,328 30,328 (12 ,8 6 7 ) (12 ,8 6 7 ) tssuance of capita! certificates: 01/23/91 Batance, Dec 3 1 ,1 9 9 1 30,000,000 7,0 3 8 ,2 6 8 4 8 ,8 2 7 ,5 5 1 3 1 ,2 8 6 ,1 2 2 7,0 3 8 ,2 6 8 (10 2 ,7 4 0 ,4 8 5 ) 5 ,9 3 5 ,16 4 1992 Net revenue (2 2 ,6 2 6 ,8 12 ) 5 ,9 3 5 ,16 4 Resotution Trust Corporation Refinancing, Restructuring and 6,685,233 6,685,233 FY 93 OtG appropriation 3 3 ,5 10 3 3 ,5 10 1992 Obtigated OtG funds (2 4 ,2 75 ) (2 4 ,2 75 ) tmprovement Act of 199 1 tssuance of capita) certificates: 01/30/92 Baiance, Dec 31,1992 203 $55,522,019 $31,286,325 203 $(96,805,321) 1 9 9 2 $(9,996,977) A N N U A L R E P O R T 0 F ! N A N C ! A L S T A T E M E N T S AND ! N T E R N A L C O N T R O L S 13. Supplementary Information Relating to the Statement o f Cash Flows (in thousands) Reconciliation of net revenue (loss) to net cash provided (used) by operating activities: For the Years Ended December 31, December 31, 1991 1992 $ Net Revenue (Loss) Reduction in toss attowances interest expense financed as additionat notes payabte 5 ,9 3 5 ,16 4 (8 ,1 1 6 ,7 6 2 ) 5 4 5 ,2 15 $ (2,45 0 ,3 3 2) (1 ,4 4 9 ,1 9 1 ) 3 ,0 0 1 ,6 7 2 (222,3 98) (4 3 7 ,2 15 ) tncrease in accrued interest on amounts due to receiverships 7 7 4 ,3 2 0 1,9 0 3 ,8 3 7 Decrease in accrued interest due from advances 2 3 8 ,1 1 5 12 2 ,3 5 1 Receipts from subrogated ctaims 29 ,655,899 1 7 ,6 6 5 ,4 8 8 Repaym ents of advances and reimbursabte expenditures 1 4 ,7 7 2 ,7 0 1 2 3 ,0 6 4 ,1 7 4 Decrease in accrued interest on notes payabte 0 Receipts from asset tiquidations 53,089 tncrease (decrease) in accounts payabte, accrued tiabitities and other (7,4 0 0 ) 1 2 7 ,8 1 4 (tncrease) decrease in reimbursabte portion of tiabitities above 39,045 (12 0 ,0 1 6 ) Disbursem ents for advances ( 1 1 ,7 3 5 ,5 5 7 ) (18 ,4 2 7 ,9 9 6 ) Disbursem ents for subrogated ctaims (2 2 ,6 6 8 ,74 7 ) (5 6 ,19 9 ,0 15 ) (1,5 5 4 ,5 8 8 ) (1 ,0 2 2 ,1 4 9 ) OtG income recognized (2 4 ,2 75 ) (1 2 ,8 6 7 ) Other non-cash income and expenses (net) (22,56 4) 0 Disbursements for reimbursabte expenditures Decrease (increase) in other assets Net cash provided (used) byoperatingactivities __________ 7 9 8 _ $ 7,662,055 (1,9 4 5 ) $(34,235,390) Noncash transactions incurred from thrift assistance and failures (in thousands): H $7,190,499 and $33,659,540 were reclassified from "Estimated cost of unresolved cases" to "Allowance for losses on subrogated claims" during 1992 and 1991, respectively, due to the resolution of 69 cases dur ing 1992 and 232 cases in 1991. H "Due to receiverships - assets sold" decreased by $3,661,299 and $0 in 1992 and 1991, respectively, with offsetting decreases of $3,611,547 and $0 to 'Advances to receiverships" and of $49,752 and $0 to 'Accrued interest" to repay receivership advances and related interest. H $545,215 and $3,001,672 of interest expense was financed through increases in notes payable in 1992 and 1991, respectively. H "Recovery of subrogated claims" increased by $21,630,902 and $20,873,976 during 1992 and 1991, respec tively, with an offsetting decrease in "Due to receiverships - assets sold", to record liquidating dividends declared by receiverships. H "Subrogated claims" increased by $5,190,331 and $14,852,406 in 1992 and 1991, respectively, resulting from resolution activity with an offsetting increase in "Due to receiverships - assets sold." R E S O L U T t O N T R U S T C O R P O R A T t O N 1 9 9 2 A N N U A L R E P O R T H "Due to receiverships" decreased by $1,605,088 and increased by $443,526 in 1992 and 1991, respectively, with the offset to "Due to receiverships - assets sold" (a component of "Net subrogated claims") fbr amounts exceeding the expected recovery of subrogated claims due from the receiverships. H "Reimbursements due from receiverships and conservatorships" decreased by $389,551 and $388,500 dur ing 1992 and 1991, respectively, with an offsetting decrease to "Due to receiverships - assets sold." H "Due to receiverships - assets sold" increased by $141,795 and $0 in 1992 and 1991, respectively, with an offsetting increase to "Net assets purchased by the Corporation" relating to the purchase of receivership assets by the Corporation. 14. Related Party Transactions The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 established the RTC to manage and resolve failed savings institutions that were formerly insured by the FSLIC and fbr which a receiver or con servator was appointed after January 1, 1989. At December 31, 1992, there were 734 institutions with $124.0 billion of assets fbr which the RTC was appointed conservator or receiver. This compares to 675 institutions with $164.5 billion of assets at December 31, 1991. In its fiduciary capacity as receiver or conservator, the RTC has substantial control over the operations of the institutions placed in receivership or conservatorship by the OTS. The RTC, as receiver or conservator, has ulti mate authority in the day-to-day operations, including the timing and methods of the disposal of the institu tions' assets in an effort to maximize returns on such assets. The RTC does not include the assets and liabilities of the receiverships and conservatorships in its financial state ments. However, certain transactions with these institutions, including advances to and receivables from the institutions, as well as interest paid or received on such items, are included in the RTC's financial records. At December 31, 1992, the net balances of advances and subrogated claims were $9.3 billion and $32.5 billion (net of "Due to receiverships - assets sold" of $7.5 billion), respectively. The RTC owed $7.5 billion to receiver ships, including the liability account of $29 million, at December 31, 1992 resulting from resolution transac tions (see notes 5 and 8). Interest income earned on advances and subrogated claims was $0.5 billion during the year ended December 31, 1992 and interest expense on amounts due receiverships was $0.8 billion. At December 31, 1991, the net balances of advances and subrogated claims were $15.9 billion and $37.5 bil lion (net of "Due to receiverships - assets sold" of $25.5 billion), respectively. Total amounts due receiverships were $27.1 billion, including the liability account of $1.6 billion. Interest income on advances and subrogated claims was $1.5 billion during the year ended December 31,1991 and interest expense on amounts due receiver ships was $1.9 billion. The RTC funds the activities of the TDP Oversight Board based on its fiscal year budgets. The amounts fund ed in 1992 and 1991 were $5.0 million and $6.1 million, respectively. These amounts are subject to the Corporation's policy of allocating corporate expenses to the receiverships. 'Administrative operating and other expenses" fbr the Corporation were $54.2 million and $30.0 million fbr the years ended December 31, 1992 and 1991, respectively (total costs of $970.9 million and $734.3 million less $916.7 million and $704.3 million billed back to receiverships during 1992 and 1991, respectively). 1 9 9 2 A N N U A L R E P O R T F I N A N C ) A L S T A T E M E N T S AND t N T E R N A L C O N T R O L S 15. Commitments and Guarantees Securitization Credit Reserves: In 1992, the RTC sold through its securitization program $22.6 billion of receivership, conservatorship and Corporate loans ($10.2 billion during 1991). The loans sold were secured by various types of real estate includ ing 1-4 family homes, multi-family dwellings and commercial real estate. Each securitization transaction is accomplished through the creation of a trust, which purchases the loans to be securitized from one or more institutions for which the Corporation acts as a receiver or conservator or purchases loans owned by the Corporation. The loans in each trust are pooled and stratified and the resulting cash Row is directed into a number of diHerent classes of pass-through certificates. The regular pass-through certificates are sold to the public through licensed brokerage houses. RTC and its receiverships and conservatorships retain residual pass through certificates which are entitled to any remaining cash flows from the trust after obligations to regular pass-through holders have been met. To increase the likelihood of full and timely distributions of interest and principal to the holders of the regu lar pass-through certificates, and thus the marketability of such certificates, a portion of the proceeds from the sale of the certificates is placed in credit enhancement reserve funds (reserve funds) to cover future cred it losses with respect to the loans underlying the certificates. The reserve funds' structure limits the receiver ships', conservatorships' or Corporation's exposure from credit losses on loans sold through the RTC securitization program to the balance of the reserve funds. The initial balances of the reserve funds are deter mined by independent rating agencies and are subsequently reduced for claims paid. Through December 1992, the amount of claims paid is less than 1% of the reserve balances. At December 31, 1992 and 1991, reserve funds related to the RTC securitization program totalled $6.2 billion and $2.0 billion, respectively. O f the total reserve funds, $4.5 billion relate to receivership reserves ($1.5 billion for 1991), $1.6 billion relate to conservatorship reserves ($0.5 billion for 1991), and $20 million relate to Corporate reserves ($0 for 1991). RTC management expects to recover a substantial portion of the reserve funds over time. The RTC estimates Corporate losses related to the receiverships' reserve funds as part of the RTC's allowances for losses. Additionally, the RTC estimates Corporate losses related to conservatorships' reserve funds as part of the RTC's "Estimated cost of unresolved cases." As of December 31, 1992, the RTC included $1.3 billion in these provisions to cover estimated losses on the reserve funds ($0.3 billion as of December 31, 1991). Representations and Warranties: The RTC provides certain representations and warranties on loans sold through the securitization program. Funds have been placed in escrow by the receiverships and conservatorships participating in the securitiza tion transactions to honor obligations that may arise from the representations and warranties. The Corporation has also established a liability for the estimate of representation and warranty claims associated with the secu ritization transactions that involved corporate purchased assets. The RTC has provided guarantees, representations and warranties on approximately $39 billion in unpaid principal of loans sold for cash or exchanged for mortgaged-backed securities. The RTC also has provided guarantees, representations and warranties on approximately $129 billion of loans under servicing right con tracts which have been sold. The representations and warranties made in connection with the sale of servic ing rights are limited to the responsibilities of acting as a servicer of loans. Where there are corporate guarantees, institutions have established escrow fund accounts containing a portion of the sales proceeds to honor any obligations that might arise from the guarantees, representations and warranties. The RTC estimates Corporate losses related to the receiverships' representation and warranty claims as part of the RTC's allowances for losses. Additionally, the RTC estimates Corporate losses related to the conser vatorships' representation and warranty claims as part of the RTC's "Estimated cost of unresolved cases." As of December 31,1992, the RTC included $1.5 billion in these provisions to cover the estimated costs of rep resentation and warranty claims ($0.2 billion as of December 31, 1991). R E S O L U T I O N T R U S T C 0 R P 0 R A T ! 0 N 19 9 2 A N N U A L R E P O R T Letters of Credit: The RTC has adopted special policies for outstanding RTC conservatorship and receivership collateralized letters of credit. These policies enable the RTC to minimize the impact of its actions on capital markets. In most cases, these letters of credit are used to guarantee tax exempt bonds issued by state and local housing authorities or other public agencies to finance housing projects for low and moderate income individuals or families. As of December 31, 1992, the RTC has issued a commitment to honor approximately $4.6 billion of these letters of credit. The total amount that will ultimately be paid, the fair value of such letters of cred it, and the losses resulting from these letters of credit are not reasonably estimable at December 31, 1992. Affordabte Housing Program: As part of its Affordable Housing Program, RTC management has committed to expend up to $6 million to pay reasonable and customary commitment fees to various state and local housing authorities who will, in turn, assist in providing financing to low and moderate income families. Under this program, the RTC works with state and local housing finance agencies to secure commitments of Mortgage Revenue Bond and Mortgage Credit Certificate funds which will be lent to qualifying families to enable them to purchase properties from the RTC. At December 31, 1992, $2.1 million remains unexpended. No substantial recoveries are anticipat ed from the program. Renta! Expense: The RTC is currently leasing office space at several locations to accommodate its staff. As of December 31, 1992, these offices include: (1) the Washington, D.C., Headquarter offices, (2) the six megasite offices, and (3) the seven satellite offices located throughout the country. Two additional satellite offices have closed as of December 1992 and the RTC remains obligated for the remainder of their lease terms pending negotia tions for lease buyouts or subleases. These obligations total $5.2 million. In addition, the Tampa, Baton Rouge, Phoenix, and San Antonio offices have closed during the beginning of 1993 and their collective oblig ations for leases total $8.5 million. The RTC's rental expense for 1992 and 1991 totalled $44.8 million and $41.1 million, respectively. The RTC's total contractual obligations under lease agreements for office space are approximately $170.5 million. These agreements often contain escalation clauses which can result in adjust ments to rental fees for future years. The minimum yearly rental expense for all locations is as follows (in thou sands): 1993 1994 1995 1996 19 9 7 1998/Thereafter $ 4 4 ,2 5 4 $ 3 6 ,7 7 1 $ 3 1,5 9 6 $ 18 ,2 7 5 $ 6 ,6 1 6 $ 3 2 ,9 8 9 Lease obligations for 1997 and beyond are exclusively fbr the RTC headquarters building in Washington, D.C. This lease was entered into by the now defunct FSLIC in 1987. At the date of RTC's termination, which under current law shall not be later than December 31, 1996, all of the RTC's debts, obligations and assets, including the above lease obligations, shall be transferred to the FSLIC Resolution Fund which is managed by the FDIC. 16. Pension Plan and Accrued Annual Leave The FDIC eligible employees assigned to the RTC are covered by the Civil Service Retirement System and the Federal Employees Retirement System. Employer contributions provided by the RTC fbr all eligible employees fbr the years ended December 31, 1992 and 1991 were approximately $16.9 million and $12.4 million, respectively. Although the RTC contributes a portion of pension benefits fbr eligible employees and makes the necessary payroll withholdings from them, the RTC does not account fbr the assets of either of these retirement funds and does not have actuarial data with respect to accumulated plan benefits or the unfunded liability relative to its eligible employees. These amounts are reported by the U.S. OfHce of Personnel Management (OPM) 1 9 9 2 A N N U A L R E P O R T F I N A N C I A L S T A T E M E N T S AND I N T E R N A L C O N T R O L S and are not allocated to the individual employers. OPM also accounts fbr Federal health and life insurance programs fbr those RTC retired eligible employees who had selected Federal government sponsored plans. The RTC's liability to employees fbr accrued annual leave was approximately $20.0 million at December 31, 1992, and $17.0 million at December 31, 1991. 17. Health, Dental and Life Insurance Plans fbr Retirees The RTC, through its association with the FDIC, provides certain health, dental and life insurance coverage fbr its eligible retirees, the retirees' beneficiaries and covered dependents. Eligible retirees are those who have elected the FDIC's health and/or life insurance programs and are entitled to an immediate annuity (dental coverage is automatic at retirement). The health insurance coverage is a comprehensive fee-for-service pro gram, with hospital coverage and a major medical wraparound. Corporate contributions fbr retirees are the same as those fbr active employees. Premiums are paid to the FDIC, where they are held until plan fixed costs and expenses are paid. The life insurance program provides fbr basic coverage at no cost and allows converting optional coverages to direct-pay plans. The cost of pro viding this benefit is not separable from the cost of providing benefits fbr active employees, as the charge fbr retirees is built into rates fbr active employees. The RTC adopted Financial Accounting Standard No. 106 (FAS 106), Employer's Accounting fbr Postretirement Benefits Other than Pensions, as of January 1, 1992. FAS 106 requires the accrual method of accounting fbr postretirement health and life insurance costs. These costs are generally recognized over the period from the date of hire to the full eligibility date of employees who are expected to qualify fbr such benefits. This is a sig nificant change from the RTC's previous policy of recognizing these costs in the year in which the benefits are provided. The RTC elected to immediately recognize the accumulated postretirement benefit liability measured as of January 1, 1992. The accumulated liability, known as the transition obligation, represents that portion of future retiree benefit costs related to service rendered by both active and retired employees prior to the date of adoption. During 1992, the RTC recorded charges of $18.1 million fbr the transition liability and $11 mil lion fbr the current periodic cost, which have been reflected in the 'Administrative operating and other expense" line of the Statements of Revenues, Expenses and Accumulated Deficit. The net periodic postretirement benefit cost fbr 1992 included the following components (in millions): Service cost, benefits attributed to emptoyee service during the year interest cost on accumutated postretirement benefit obtigations Net periodic postretirement benefit cost R E S 0 L U T ! 0 N T R U S T C 0 R P 0 R A T ! 0 N $6.8 4 .2 $11.0 1 9 9 2 A N N U A L R E P O R T The RTC, as a government corporation scheduled under current law to terminate on or before December 31, 1996, decided, in conjunction with the FDIC, that the liability for postretirement benefits for eligible employ ees assigned to the RTC will be recorded on the books of the FDIC. The RTC will pay the FDIC an amount equal to the RTC's transition obligation plus the RTC's 1992 net periodic postretirement cost. In return, the FDIC agrees to pay the costs associated with postretirement benefits due to eligible employees assigned to the RTC upon their retirement. As of December 31,1992, the RTC has included as a current liability on its Statement of Financial Position an amount equal to the RTC's transition obligation plus the RTC's net periodic postre tirement cost. The RTC expects to pay this liability to the FDIC during 1993. The discount rate used in the calculation of the postretirement benefit obligation was 7.0%. The assumed med ical inflation trend in 1992 was 16.5%, decreasing to an ultimate rate of 9.0% in 1998 and remaining at that level thereafter. The dental cost trend rate in 1992 and thereafter was 8.0%. Both the assumed discount rate and health care cost trend rates have a significant effect on the amount of the obligation and periodic cost reported. If the health care cost trend rate was increased one percent, the accumulated postretirement benefit obliga tion as of December 31, 1992 would have increased $6.6 million, or 22.8%. The effect of this change would have increased aggregate 1992 service and interest costs by $2.9 million, or 26.1%. 18. Concentration o f Credit Risk The RTC has receivables from conservatorships and receiverships located throughout the United States which are experiencing problems with both loans and real estate. Their ability to make repayments to the RTC is largely influenced by the economy of the area in which they are located. The gross balance of these receiv ables at December 31, 1992 is $121.2 billion (against which $79.4 billion of reserves and contra assets have been recorded). Of this total, $31.1 billion is attributable to institutions located in Texas, $15.3 billion is attrib utable to institutions located in California, $9.5 billion is attributable to institutions located in Florida and $7.6 billion is attributable to institutions located in Arizona. 1 9 9 2 A N N U A L R E P O R T F ! N A N C ! A L GAO S T A T E M E N T S AND ! N T E R N A L C O N T R O L S United States Genera! Accounting Office Washington, D C. 20548 Comptroller General of the United States B-240108 June 30, 1993 To the Thrift Depositor Protection Oversight Board Resolution Trust Corporation In our audits of the Resolution Trust Corporation for the years ended December 31, 1992 and 1991, we found -- The Corporation's statements of financial position as of December 31, 1992 and 1991, the statements of cash flows for the years then ended, and the statement of revenues, expenses and accumulated deficit for the year ended December 31, 1992, to be reliable in all material respects. We do not express an opinion on the statement of revenues, expenses and accumulated deficit for the year ended December 31, 1991. -- Internal controls as of December 31, 1992, to be effective in protecting assets and in assuring that transactions are executed in accordance with management's authority and materially comply with significant provisions of selected laws and regulations but not effective in assuring that there were no material misstatements in the financial statements. -- No material noncompliance with laws and regulations we tested. Discussed in the following section are significant matters considered in performing our audits and forming our opinions. This report also outlines each of our conclusions in more detail and discusses the scope of our audits. SIGNIFICANT MATTERS The following information is provided to highlight uncertainties that could affect the Corporation's loss estimates, to discuss the effect that recent higher-thanexpected recoveries from asset sales have had on future funding needs, and to explain other matters. R E S O L U T i O N T R U S T C O R P O R A T i O N 1 9 9 2 A N N U A L R E P O R T B-240108 Uncertainties Affect Estimated Recoveries From Receiverships and Costs of Future Resolutions Although the Corporation has produced its estimates of the recovery value of receivership assets from the best available information, significant uncertainties still exist regarding general economic conditions, interest rates, and real estate markets that could affect the value of assets in resolved and unresolved institutions. As of March 31, 1993, the Corporation's receiverships and conservatorships held $91 billion in assets of which more than 40 percent were delinquent loans, real estate owned, and investments in the subsidiaries of failed institutions. Because these assets are considered among its hard-to-sell assets, it is difficult for the Corporation to predict the recovery value and timing of sales. If assets sell later or for less than predicted, the Corporation's costs will be higher than estimated. Conversely, higher or earlier recoveries will lower the Corporation's final costs. As discussed in footnote 15, the Corporation has established reserve funds for securitization transactions to cover future credit losses on the underlying loans.* The Corporation and its receiverships also provide representations and warranties on the unpaid principal balance of certain loans sold for cash, sold as part of securitization transactions, exchanged for mortgage-backed securities, or sold under servicing right contracts.^ As of December 31, 1992, the Corporation's loss allowances for resolved and unresolved institutions included $1.3 billion for the expected cost of future securitization credit losses and $1.5 billion for claims arising from the representations and warranties. We found these reserve amounts to be reasonable, based on the best available information. ^Securitization refers to the practice of grouping assets (usually performing mortgage loans) and selling securities backed by the underlying future cash flows of those assets. Purchasers of the securities demand some protection against credit losses which may occur due to defaults and delinquencies on the underlying loans. ^These contracts convey the right to service mortgages, which includes collecting loan payments and controlling mortgage escrow funds. 1 9 9 2 A N N U A L R E P O R T F ! N A N C ! A L S T A T E M E N T S AND ! N T E R N A L C O N T R O L S B-240108 However, we caution that the Corporation's claims experience to date has been very limited and cannot be relied upon to predict the nature or amount of future losses. These future losses will be affected by the behavior of the economy, interest rates, and real estate markets as well as the performance of the collateral underlying the transactions. Changes in these factors, which are beyond the Corporation's control, could result in either higher or lower credit and claims losses than currently estimated. Higher Asset Sales Recoveries Could Reduce Future Funding Needs The Corporation provided us with draft financial statements on March 31, 1993, showing that $84.4 billion of loss funds had been used to resolve the 653 institutions closed as of December 31, 1992. Those statements also showed that an additional $17 billion in loss funds would be needed to complete the resolution of 81 institutions in conservatorship, 39 institutions considered probable failures on or before September 30, 1993, and 52 institutions considered possible failures before the Corporation's resolution responsibility ends on September 30, 1993. However, the Corporation's cost estimates were not based on its most recent sales experience. Due to improved economic conditions, the Corporation's receiverships have realized higher rates of recovery on their asset sales than previously estimated. The Corporation was accounting for these higher recoveries in an unallocated reserve of $7 billion to cover unanticipated future losses or estimation errors . We agreed with the Corporation that a minimum of $2 billion should remain in unallocated reserves for unforeseen problems or errors until the audit was completed. The Corporation and its Oversight Board decided in April 1993, to release $3 billion of the $7 billion in unallocated reserves and make the funds available to resolve selected institutions in conservatorship. The Corporation's final financial statements no longer contain any unallocated reserves; instead, reserve and loss accounts have been adjusted to reflect the best current estimates of probable future losses resulting from its resolution activities. The Corporation's audited financial statements report the cost of closed institutions at $79.5 billion, which could allow another $1.9 billion to be used for future R E S O L U T t O N T R U S T C 0 R P 0 R A T ! 0 N 1 9 9 2 A N N U A L R E P O R T B-240108 resolutions, subject to appropriation restrictions,^ and could decrease its estimated future funding needs to $12 billion. This decrease of $5 billion in expected future funding needs is the result of improved economic conditions, particularly lower interest rates, over the past 2 years; however, if conditions should worsen, the Corporation may need to increase its loss estimates. If conditions continue to improve, the need for additional loss funds could be less than presently estimated. Weaknesses in Contractor Oversight Could Result in Reduced Recoveries The Corporation's statements of cash flows report the cash that the Corporation has actually received and disbursed. However, due to weaknesses in its oversight of certain loan servicers and other contractors, the Corporation cannot be sure that it is recovering all it should from its receiverships. In April 1992, we reported that the Corporation cannot ensure that all of its loan servicers are accurately accounting for and remitting loan payments.* In October 1992, we identified weaknesses in the cash management practices of property management subcontractors that could make the Corporation's funds vulnerable to loss from unauthorized use.^ We also identified a policy that has resulted in forgone interest income of hundreds of thousands of dollars annually. Lost revenues to receiverships mean lower recoveries for the Corporation. In response to reported weaknesses, the Corporation's Oversight Board has pledged to strengthen contracting systems and contractor oversight as part of its 10 point reform ^The $25 billion in loss funds provided in the Resolution Trust Corporation Refinancing, Restructuring, and Improvement Act of 1991, in contrast to loss funds provided by prior Acts, was available for obligation only until April 1, 1992. Thus, any amount previously obligated against this appropriation that becomes available due to a reduced loss may only be used if the Corporation identifies an increased loss for another resolution properly chargeable against this appropriation. ^Resolution Trust Corporation: Oversight of Certain Loan Servicers Needs Improvement (GAO/GGD-92-76, April 24, 1992). ^Resolution Trust Corporation: Subcontractor Cash Management Practices Violate Policy and Reduce Income (GAO/GGD-93-7, October 20, 1992). 1HM2 A N N U A L R E P O R T F t N A N C i A L S T A T E M E N T S AND t N T E R N A L C O N T R O L S B-240108 agenda.^ The Oversight Board's specific objectives are to require adequate planning of contracts, ensure adherence to contracting policies and procedures, increase contractor oversight, and ensure that management's span of control over contractors is adequate to protect the Corporation's interests. In conjunction with these initiatives, the Corporation recently announced that it will increase the size of its contract surveillance unit by an additional 150 accountants, investigators, and other staff. Disclaimer Given on the 1991 Statement of Revenues, Expenses and Accumulated Deficit Because we did not express an opinion on the Corporation's statement of financial position as of December 31, 1990, we cannot express an opinion on the Corporation's statement of revenues, expenses and accumulated deficit for the year ended December 31, 1991. MATERIAL INTERNAL CONTROL WEAKNESS During our 1992 audit, we identified a material weakness^ in the Corporation's internal control structure related to the Corporation's calculation of its allowance for loss. Through substantive test procedures, we were able to satisfy ourselves that audit adjustments corrected the effect of this weakness on the Corporation's 1992 financial statements. Lack of Control Procedures Resulted in Undetected Error In its draft financial statements, the Corporation understated a component of its loss allowance calculation for subrogated claims (paid claims of the depositors of failed institutions) ^On March 16, 1993, the Chairman of the Thrift Depositor Protection Oversight Board announced a program of 10 administrative initiatives to strengthen the Corporation's management in the areas of planning, financial management and controls, operations, and public policy. ^A material weakness is a reportable condition in which the design or operation of the internal controls does not reduce to a relatively low level the risk that losses, noncompliance, or misstatements in amounts that would be material in relation to the financial statements may occur and not be detected within a timely period by employees in the normal course of their assigned duties. R E S O L U T i O N T R U S T C O R P O R A T i O N 1 9 9 2 A N N U A L R E P O R T B-240108 by $1.5 billion. Although the Corporation's management reviewed the overall calculation for the loss allowance estimates, no procedures were in place to review certain computer-generated data used in the calculation and, as a result, an error in the data went undetected. The Corporation made the proposed audit adjustment to its final December 31, 1992, allowance for loss on subrogated claims and has acted to prevent such data errors from occurring in future calculations. Our internal control report, which we expect to issue soon, provides more detail on this weakness and other reportable conditions briefly discussed in a later section. OPINION ON FINANCIAL STATEMENTS The financial statements and accompanying notes present fairly, in accordance with generally accepted accounting principles, the Corporation's — assets, liabilities and equity as of December 31, 1992 and 1991, -- revenues, expenses and accumulated deficit for the year ending December 31, 1992, and -- cash flows for the years ending December 31, 1992 and 1991. As discussed in the Significant Matters section, we do not express an opinion on the statement of revenues, expenses and accumulated deficit for the year ending December 31, 1991. Misstatements may have occurred in other financial information reported by the Corporation as a result of the material internal control weakness described above. In addition, significant uncertainties discussed earlier in this report and in footnotes 5 and 10 to the financial statements, may ultimately result in higher or lower resolution costs than projected in these statements. Also, factors beyond the Corporation's control could result in higher or lower credit and claims losses than currently estimated for certain sales transactions. OPINION ON INTERNAL CONTROLS The internal controls we evaluated were those designed to -- safeguard assets against loss from unauthorized use or disposition; 1 9 9 2 A N N U A L R E P O R T F i N A N C i A L S T A T E M E N T S AND I N T E R N A L C O N T R O L S B-240108 -- assure the execution of transactions in accordance with management's authority and with laws and regulations; and -- properly record, process, and summarize transactions to permit the preparation of financial statements in accordance with generally accepted accounting principles and to maintain accountability for assets. Because of the material weakness in internal controls described previously, internal controls did not provide reasonable assurance that the Corporation properly recorded, processed, and summarized transactions. However, controls in effect on December 31, 1992, provided reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management's authority and with significant provisions of selected laws and regulations. REPORTABLE CONDITIONS We also identified the following reportable conditions which, although not considered to be material, represent significant deficiencies in the design or operation of the Corporation's internal controls and should be corrected. 1. The Corporation used information from the wrong data base system to calculate its loss accrual for claims arising from representations and warranties that are offered with the sale of loans and servicing rights. As a result, the Corporation needed to make an adjustment of nearly $500 million to reflect the correct reserve amount for representations and warranties losses. By using the data base that tracks the funding status of reserves rather than the required amount of reserves, the Corporation ignores the fact that reserves can be, and often are, under- or overfunded. 2. The Corporation's contractor estimated recovery values for receivership assets without adequate supporting file documentation. (The most common missing item was a recent appraisal.) Based on our test results, we found it likely that 13 percent of the Corporation's assets do not have the key file documents necessary to support a particular recovery value. Missing data increases the risk that the Corporation's estimated recovery rates will be materially under- or overstated. R E S O L U T i O N T R U S T C 0 R P 0 R A T ! 0 N B-240108 3. The Corporation's contractor did not consider all available file documentation or information in estimating receivership asset recoveries and made errors in recording valuation information. Based on the results of our testing, we found it likely that 20 percent of contractor valued assets had these problems. As a result, assigned recovery rates could be lower or higher than if all available information is considered or all data transcribed correctly. 4. During 1992, 9 of the Corporation's 13 field offices did not perform the required reconciliation of checks received and processed. In addition, most of these 9 field offices could not provide sufficient documentation to enable us to complete the needed reconciliations. Without adequate controls over check receipts, the Corporation may not detect checks withheld from deposit, lost, stolen, or improperly released to third parties. 5. The Corporation's field offices did not post wire disbursements to the correct general ledger accounts. Based on the results of our tests, we estimate that approximately 11 percent of all wire disbursements to third parties contained at least one account posting error. If such a high error rate continues in its field offices, the Corporation faces the risk that future financial reports could be inaccurate. 6. The Corporation did not identify the material weakness or all of the reportable conditions described above in its 1992 statement on the effectiveness of its internal accounting and administrative controls prepared under the Chief Financial Officers Act of 1990. This occurred because the Corporation's assessment focused more on operating controls than on financial reporting controls. However, without more emphasis on reporting controls, the Corporation may fail to identify serious weaknesses in the future. 7. The Corporation processed its financial information on the Federal Deposit Insurance Corporation's (FDIC) general ledger system during the first 8 months of 1992. FDIC's inadequate controls over access to its electronic data processing center and systems software were reported as a significant deficiency in our report on FDIC's 1992 financial statements (GAO/AIMD-93-5, June 30, 1993). The lack of adequate security controls exposed the data center to unauthorized entry and exposed software and data to use by unauthorized personnel. 1 9 9 2 A N N U A L R E P O R T B-240108 We also noted other less significant matters involving the system of internal accounting control and its operation for which we will be submitting a separate report to Corporation management. COMPLIANCE WITH LAWS AND REGULATIONS Our tests for compliance with significant provisions of selected laws and regulations disclosed no material instances of noncompliance. Also, nothing came to our attention in the course of our other work to indicate that material noncompliance with such provisions occurred. OBJECTIVES, SCOPE, AND METHODOLOGY The Corporation's management is responsible for — preparing annual financial statements in conformity with generally accepted accounting principles; — establishing and maintaining internal controls and systems to provide reasonable assurance that the internal control objectives previously mentioned are met; and — complying with applicable laws and regulations. We are responsible for obtaining reasonable assurance about whether (1) the financial statements are reliable (free of material misstatement and presented fairly in conformity with generally accepted accounting principles) and (2) relevant internal controls are in place and operating effectively. We are also responsible for testing compliance with significant provisions of selected laws and regulations. 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 of the financial statements; — evaluated and tested relevant internal controls over the following significant cycles, classes of transactions, and account balances: B-240108 — resolved institutions, consisting of policies and procedures related to (1) resolution activities, (2) receipts and disbursements in receiverships, and (3) valuation of the Corporation's net receivables from resolution transactions and assistance; -- unresolved institutions, consisting of policies and procedures related to identifying and estimating the cost of future resolutions and of providing advances to institutions in conservatorship; -- Federal Financing Bank borrowings, consisting of policies and procedures related to the borrowing, use, and repayment of working capital; — treasury, consisting of policies and procedures related to Corporate cash receipts and disbursement; and -- financial reporting, consisting of policies and procedures related to the processing of journal entries into the general ledger and the preparation of financial statements; and -- tested compliance with selected provisions of the following laws and regulations: -- Section 21A of the Federal Home Loan Bank Act (12 U.S.C. 1441a). — Chief Financial Officers Act of 1990 (Public Law 101576) . We limited our work to accounting and other controls necessary to achieve the objectives outlined in our opinion on internal controls. Because of inherent limitations in any system of internal control, losses, noncompliance or misstatements may nevertheless occur and not be detected. We also caution that projecting to future periods our favorable evaluation of controls related to the safeguarding of assets and the execution of transactions in accordance with management's authority and in compliance with laws and regulations is subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with controls may deteriorate. 1 9 9 2 A N N U A L R E P O R T F ! N A N C ! A L S T A T E M E N T S AND ! N T E R N A L C O N T R O L S B-240108 We conducted our audits in accordance with generally accepted government auditing standards. We believe that our audits provide a reasonable basis for our opinions. Charles A. Bowsher Comptroller General of the United States June 8, 1993 R E S O L U T i O N T R U S T C O R P O R A T i O N 1 9 9 2 A N N U A L R E P O R T 1992 Management Report On !nterna! Controls Since its inception, the Corporation has made significant progress in developing and implementing a sound internal control system designed to ensure accountability and to reduce the potential fbr loss, waste, or mis appropriation. In 1992, the RTC took several steps to strengthen controls throughout the agency and to implement initiatives that had been developed in 1991. The Corporation's management has made the establishment and maintenance of a sound system of internal controls a high priority. The nature of much of the RTC's work is inherently risky and complex, and there fore requires a workable and comprehensive internal control system that includes annual reviews of both field and headquarters operations. The RTC has responded to this need by developing an agency-wide system, and by clearly assigning responsibility fbr maintaining controls along organizational lines. There are risks associated with the management and sale of the large volume and wide variety of assets under RTC control. Other factors —such as the timeliness and availability of funding required to resolve failed insti tutions, the state of the overall economy, interest rate fluctuations, and regulatory and legislative policies — greatly influence operations and affect the length of time an asset remains under the RTC's control, there fore contributing to the potential fbr loss, waste, or misappropriation. Three of the Corporation's particu larly high-risk areas are: real estate disposition planning and execution; asset disposition-related contract planning, and contractor management and oversight; and, information systems that support asset manage ment and sales activity. Proff&y In 1992, the Corporation implemented the management control and review process designed to evaluate the Corporation's internal controls and, where necessary, improve their effectiveness. During the year, the RTC issued the corporate policy directive on the internal control and review process. The Corporation also restruc tured its inventory of assessable units to better reflect program operations; vulnerability assessments were completed and risk levels were established fbr each of the units. An early warning reporting system was put into effect to alert senior management to emerging problems asso ciated with internal controls. A management information system was created to catalogue, monitor, and report on the implementation of corrective actions taken by the Corporation to resolve internal control deficiencies. Formal internal reviews and audits were also scheduled and conducted throughout the year. 1 9 9 2 A N N U A L R E P O R T F I N A N C t A L S T A T E M E N T S AND t N T E R N A L C O N T R O L S In 1992, RTC program managers conducted 87 reviews covering most aspects of Held office operations. These internal reviews were effective in evaluating the adequacy of internal controls for the administrative and accounting functions, as well as compliance with RTC policies and procedures, and for uncovering opera tional weaknesses. The reviews also helped measure the effectiveness of corrective actions already taken to strengthen controls. In response to these reviews, corrective action plans were developed to rectify deficien cies; many of the plans were implemented by yearend. The Genera! Accounting Office (GAO) and the RTC's Office of Inspector General performed a total of 79 audits and reviews during the year. The audits were performed, in part, to evaluate the effectiveness and ade quacy of internal administrative and accounting controls over the Corporation's activities and business oper ations. The GAO, in its "Resolution Trust Corporation Management Report," dated June 30,1992, concluded that the RTC's financial statements presented fairly, in all material respects, the financial position of the RTC as of December 31, 1991. The GAO also reported favorably on the RTC's internal control structure and on its compliance with laws and regulations. In 1992, the RTC identified the program areas considered most vulnerable to risk. A new management con trol plan was developed to ensure that all program areas are reviewed regularly, with a particular emphasis on high-risk areas. During the year, the Corporation also established the appropriate management infrastruc ture, including assignment of responsibilities, for maintaining a strong internal control system. The numer ous reviews conducted during the year were successful in identifying weaknesses, and specific corrective actions have been initiated, and in many cases, completed, by the affected managers. As a result of its efforts in 1992, the Corporation has substantially improved the effectiveness of its internal control systems and procedures. R E S O L U T I O N T R U S T C 0 R P 0 R A T ! 0 N . * A-'' ^ ''' ' ' - . : / . i" ,..r - '-rt.- .. - ' : ' ,r' , -;- ^ - ' . ^ 1 ' . , , ; / -. ' - . * ........ . - . * * < .' - ^ - , " -' - , < .* .7*-'. . ^ . ' . - r - .. ^ ^ f- r - , '." 7 - " r , . ' . ' , ** * /.I ,v . ' ' ' ...: ; f"^ -."*' '' ' .?..... ,...... . ''''^ y' - ** -' ff- ., - .,- ../v;' '. ...... '. . ' J";." 4 ^' S T A T ! S T ! C S RTC Conservatorships January 1,1992 through December 31,1992 ASSOCtATtONS PLACED tNTO STATE ASSOCtATtONS )N CONSERVATORSHtP CONSERVATORSHtP JANUARY 1 ,1 9 9 2 - DECEMBER 3 1,19 9 1 DECEMBER 31,1992 P&A 2 1 2 ALABAMA ARIZONA 1 ARKANSAS 1 CALIFORNIA 10 CONSERVATORSHtP RESOLUTtONS ASSOCtATtONS tN JANUARY 1 ,1 9 9 2 -D E C E M B E R 31,1992 CONSERVATORSHtP !DT PAYOFF 1 TOTAL DECEMBER 31,1992 1 3 1 0 1 1 0 5 5 5 10 3 1 3 3 1 FLORIDA 10 4 4 4 10 GEORGIA 5 2 4 4 3 4 4 2 0 CONNECTICUT ILLINOIS 3 3 INDIANA 1 1 1 IOWA 3 2 2 1 KANSAS 1 1 0 2 LOUISIANA 2 1 0 3 MAINE 0 1 0 1 MARYLAND 3 4 2 5 MASSACHUSETTS 1 1 0 2 MICHIGAN 2 1 1 MISSISSIPPI 0 MISSOURI 2 1 1 2 NEW HAMPSHIRE 1 NEW JERSEY 6 NEW MEXICO NEW YORK 1 3 1 NORTH CAROLINA 2 1 OHIO 1 2 OKLAHOMA 4 OREGON PENNSYLVANIA 1 5 RHODE ISLAND 1 SOUTH CAROLINA 1 3 TENNESSEE 1 1 TEXAS 7 UTAH 1 VIRGINIA 4 6 WEST VIRGINIA 1 1 WISCONSIN 1 TOTAL 91 2 5 4 T R U S T 1 3 8 1 3 1 3 0 1 1 1 2 1 1 2 3 3 1 0 1 2 1 2 5 1 1 3 1 C O R P O R A T t O N 0 0 54 * Does not include 9 institutions resolved under the Accelerated Resolutions Program in 1992. R E S O L U T i O N 1 2 3 1 50 0 2 4 2 7 1 0 0 4 1 1 7 0 1 0 4 6 0 2 1 0 60* 81 1 9 9 2 A N N U A L R E P O R T New RTC Conservatorships January 1,1992 through December 31,1992 (doHars in thousands) Date of Conservatorship Nameoftnstitution and Location Gross Assets Totat Liabitities 52,843 581,550 23,353 108,931 200,874 46,212 7,651 117,052 82,870 36,864 74,378 32,648 57,988 98,220 86,987 700,343 295,696 817,607 52,114 233,201 223,452 1,373,649 145,175 36,920 242,929 134,461 160,504 12,760,385 166,639 3,415,412 233,412 141,270 95,466 90,429 39,693 92,612 74,600 470,966 292,407 1,732,719 1,344,197 111,406 212,577 273,621 465,171 31,186 1,636,037 4,920,683 1,226,646 60,449 $ 10-Jan 10-Jan 24-Jan 31-Jan 28-Feb 28-Feb 28-Feb 28-Feb 12-Mar 13-Mar 03-Apr 10-Apr 24-Apr 08-May 21-May 04-Jun 05-Jun 05-Jun 05-Jun 05-Jun 12-Jun 12-Jun 12-Jun 19-Jun 19-Jun 19-Jun 26-Jun 06-Jul 10-Jui 10-Jul 10-Jul 17-Ju! 17-Jul 24-Jul 07-Aug 21-Aug 28-Aug 0 9-0ct 16-0ct 21-0ct 30-0ct 06-Nov 13-Nov 20-Nov 20-Nov 20-Nov 04-Dec 04-Dec 04-Dec 08-Dec Hansen FSB, Paim Beach Gardens, FL Hansen FSA, Hammonton, NJ Advanced FSB, Northridge, CA Security FSA, Panama City, FL Lemont FSA, Lemont, IL Irvington FSB, Baltimore, MD Alpha Indian Rock FS&LA, Philadelphia, PA Vista FSA, Reston, VA Ukrainian FS&LA, Philadelphia, PA Carrollton Homestead Assn, FA, New Orleans, LA Commonwealth FSB, Manassas, VA Federal SA of Virginia, Falls Church, VA First South FSB, Columbia, SC Shenandoah FSA, Martinsburg, WV First FSA, Lewiston, ME Home Unity FS&LA, Lafayette Hill, PA Republic FSB, Matteson, IL First American FSB, Greensboro, NC Volunteer FSA, Little Ferry, NJ Cooper River FSA, North Charleston, SC San Clemente FSB, San Clemente, CA Columbia Banking FSA, Rochester, NY Cherokee Valley FSA, Cleveland, IN First Newport FSB, Newport Beach, CA Coastal FSB, New London, CT First Home FSA, Pittsburgh, PA Jacksonville FSA, Jacksonville, FL HomeFed Bank, FA, San Diego, CA Southern FSA of Georgia, Atlanta, GA Transohio FSB, Cleveland, OH Home FSB, Norfolk, VA New England FSA, Wellesley, MA Liberty FSB, Warrenton, VA First FS&LA of Russell County, FA, Phenix City, AL Citadel FS&LA, Charleston, SC Birmingham FSB, Birmingham, AL Potomac FSB, Silver Spring, MD Piedmont FSA, Manassas, VA Security FS&LA, Jackson, MS Standard FSA, Gaithersburg, MD Homestead FSA, San Francisco, CA First FSB of Georgia, FA, Winder, GA The Overland Park FS&LA, Overland Park, KS Irving FB for Savings, FSB, Chicago, IL Polifly FS&LA, New Milford, NJ Crestline FS&LA, Crestline, OH Second National FSA, Salisbury, MD Carteret FSB, Newark, NJ Security FSB, Vineland, NJ Palm Beach FSA, Palm Beach Gardens, FL $ Iota) 50 Institutions $35,912,455 50,408 547,888 24,106 104,288 194,560 43,434 7,806 117,286 75,109 35,535 76,453 31,743 56,203 95,174 83,455 701,780 273,076 812,735 50,979 228,115 215,092 1,313,715 140,171 35,075 234,989 130,130 147,802 12,344,563 159,645 3,386,001 224,884 136,014 93,319 85,695 38,698 91,277 71,830 443,996 276,646 1,716,343 1,265,017 108,266 210,198 246,890 447,794 29,027 1,561,702 4,771,219 1,146,205 55,521 $34,737,857 Totat Deposits $ Number of Deposit Accounts 43,441 426,571 23,557 100,444 187,057 42,661 7,615 108,439 72,106 32,260 64,211 29,564 48,459 68,074 76,093 630,305 262,826 639,074 49,370 200,550 205,745 1,073,441 123,807 34,355 222,671 127,527 146,896 8,798,172 150,349 2,392,364 194,315 117,816 86,107 79,449 37,571 81,717 67,678 369,774 247,242 857,655 1,225,317 96,930 94,525 245,014 371,061 26,643 1,155,484 2,618,686 841,819 54,303 2,574 46,685 1,572 9,275 12,940 7,435 996 8,023 7,880 1,907 7,803 1,207 2,920 13,481 10,124 98,754 28,656 93,532 6,822 29,308 9,857 167,209 24,005 911 35,364 20,570 10,496 775,670 11,048 403,868 12,857 3,959 11,878 14,873 1,672 8,454 4,124 34,342 27,841 153,120 260,254 13,644 6,946 33,434 38,945 4,596 100,460 277,975 134,086 2,193 $25,257,110 2,996,545 Note: Data based on TFR data for the quarter prior to date of conservatorship. 1 9 9 2 A N N U A L R E P O R T S T A T ! S T ! C S RTC Resolutions January 1, 1992 through December 31,1992 (dottars in thousands) Number of Date of Resolution Name of institution and Location Type 10-Jan 31-Jan 31-Jan 31-Jan 31-Jan 07-Feb 07-Feb 07-Feb 07-Feb 07-Feb 07-Feb 21-Feb 21-Feb 28-Feb 28-Feb 28-Feb 28-Feb 28-Feb 06-Mar 06-Mar 06-Mar 13-Mar 13-Mar 13-Mar 13-Mar 13-Mar 13-Mar 13-Mar 13-Mar 13-Mar 13 Mar 13-Mar 19-Mar 20-Mar 20-Mar 20-Mar 20-M ar 20-Mar 20-M ar 20-M ar 20-Mar 20-Mar 20-M ar 20-M ar 20-M ar 20-M ar 27-Mar 27-M ar 27-M ar 27-M ar 27-M ar 27-M ar 27-Mar 27-Mar 27-Mar 27-M ar 03-Apr 03-Apr 03-Apr 03-Apr 10-Apr 10-Apr 10-Apr 10-Apr 10-Apr 24-Apr 24-Apr 10-Jul 06-Nov Perpetual SB, Vienna, VA * Home FS&LA, FA, Atgona, IA Century FSB, Chicago, IL Pelican Homestead SA, Metairie, LA * Liberty SB, FSB, Marietta, OH Connecticut FS&LA, Hartford, CT United Savings of America, Melbourne, FL * First Commerce SB, FSB, Lowell, IN Ludington FSB, Ludington, Ml First FSA of Chickasha, Chickasha, OK Fidelity FS&LA, Austin, IX Irving FS&LA, Paterson, NJ Centre SA, FA, Arlington, TX Executive SB, FSB, Marina del Rey, CA New Metropolitan FSB, Hialeah, FL Republic SB, FSB, Rockville, MD Burleson Co. FSA, Caldwell, TX Home SB, FSB, Salt Lake City, UT First FSA of Raleigh, Raleigh, NC Davy Crockett FSA, Crockett, TX CorEast FSB, Richmond, VA Jefferson FS&LA, Birmingham, AL United FS&LA, Jonesboro, AR Progressive SB, FSB, Pasadena, CA Danbury FS&LA, Danbury, CT Professional FSB, Coral Gables, FL Guaranty FSA, Warner Robins, GA Security FS&LA, Albuquerque, NM Central FSB, Mineola, NY First Ohio SB, St. Bernard, OH * Colonial FSB, Cranston, Rl Monycor FSB, Barron, Wl New Age FSA, St. Louis, MO Far West S&LA, FA, Newport Beach, CA Security FS&LA, Waterbury, CT Amerifirst FSB, Miami, FL Peoples FSA, Ottumwa, IA Western FS&LA, Glenview, IL Augusta FSA, Baltimore, MD Newton SB, FSB, Fairfield, NJ Chisholm FSA, Kingfisher, OK Bell FSB, Upper Darby, PA Springfield FSA, Springfield, PA First FSA, Lubbock, TX Sentry FSA, Norfolk, VA TrustBank FSB, Tysons Corner, VA County Bank, FSB, Santa Barbara, CA Flagler FS&LA, Miami, F L * United FSB, Smyrna, GA Federal SB, FSB, Swainsboro, GA Olympic FSA, Berwyn, IL Home FSA of Kansas City, Kansas City, MO Westerleigh FS&LA, Staten Island, NY State Savings FSB, Jackson Heights, NY Red River FS&LA, Lawton, OK Metropolitan FS&LA, Nashville, IN First FS&LA of Seminole Co, FA, Sanford, FL First FSB, FSB, Ashburn, GA First State SA, Sedalia, MO * New Merabank Texas, FSB, El Paso, TX Atlantic Financial FSB, San Francisco, CA Valley FS&LA, Van Nuys, CA * Security 1st FS&LA, Daytona Beach, FL * Metrobank FS&LA, Palisades Park, NJ Sunbelt Federal Savings, FSB, Irving, D( First American FSB, Tucson, AZ First FSB of South Dakota, Rapid City, SD * Investors FSB, Richmond, VA Republic FSB, Matteson, IL PA PA PA PA PA PA PA PA PA PA PO PA PA PA PA PA PA IDT PA/PO PO PA/PO PA PA PA PA PA PA PA/PO PA PA PO PA PA PA/PO PA PA PA PA PA/PO PA PA PA PA PA PO PA/PO PA PA PA PA PA PA/PO PA PA PA PA PA PA PA PA PA PA PA PA PA IDT PA PA PA Total 69 institutions Notes: Gross Assets Iota! Liabilities Totat Deposits Deposit Accounts Estimated Cost of Resotution Acquiring institution and Location Crestar Bank, Richmond, VA Branch Sale Metropolitan B&TC, Chicago, IL First Commerce Corp., New Orleans, LA People's B&TC, Marietta, OH Bank of Boston Connecticut/BBOC, Waterbury, CT Barnett Bank of Central FL, Orlando, FL Centier Bank, Whiting, IN Northwestern SB&T, Traverse City, Ml Branch Sale None Hudson United Bank, Union City, NJ American FB, FSB, Dallas, TX Century FS, Pasadena, CA Desjardins FSB, Hallandale, FL First FSB of Delaware, Wilmington, DE Citizens State Bank, Somerville, TX Zions First NB, Salt Lake City, UT Branch Sate None Branch Sate Branch Sale Branch Sale Branch Sale Bristol FSB, Bristol, CT Branch Sale Crossroads Bank of GA, Perry, GA Branch Sale Chemical Bank, New York, NY MBT Bancorp, W. Harrison, IN None Branch Sale Commerce Bank of St. Louis, St. Louis, MO Branch Sale American Bank of CT, Waterbury, CT Great Western Bank, FSB, Beverty Hills, CA South Ottumwa SB, Ottumwa, IA Devon Bank, Chicago, IL Branch Sale Sussex County State Bank, Franklin, NJ Branch Sale Meridian Bank, Reading, PA Germantown SB, Bala Cynwyd, PA First NB of Lubbock, Lubbock, TX None Branch Sale Home Savings of America FSB, Irwindale, CA First Union NB of FL, Jacksonville, FL Branch Sale Branch Sale Branch Sale Branch Sale Branch Sale Branch Sale Branch Sale Union Planters NB, Memphis, TN Federal Trust Bank, FSB, Winter Park, FL Branch Sale Mercantile Bank of Sedalia, Sedalia, MO Branch Sale Branch Sale American SB, Irvine, CA First Union NB of FL, Jacksonville, FL First FSB (of Delaware), Wilmington, DE Bank of America, Dallas, TX State SB, FSB, Tucson, AZ Metropolitan FB, FSB, Fargo, ND Central Fidelity Bank, Richmond, VA Regency SB, FSB, Naperville, IL $ 2,973,410 119,598 18,858 1,349,410 15,353 16,202 328,955 6,899 26,446 121,912 64,130 150,428 9,297 41,885 8,563 20,528 23,900 6,003 342,502 41,112 701,776 456,996 140,060 290,014 219,971 302,451 18,879 118,889 687,695 41,689 51,648 116,962 8,233 1,804,478 124,372 2,516,196 32,432 38,001 88,241 38,138 143,797 723,074 82,063 191,038 29,209 1,120,512 753,854 1,644,065 103,368 90,070 588,007 2,498,504 122,747 427,594 448,418 619,650 107,634 17,690 166,927 635,941 335,130 2,026,697 1,027,784 426,769 3,148,035 109,780 168,861 1,307,488 218,023 $ 2 ,889,32 9 116,717 19,902 1,497,873 15,383 16,335 334,905 6,969 27,124 121,851 62,369 167,084 9,282 41,212 34,772 22,789 24,357 8,021 327,701 38,009 715,730 447,775 133,372 281,906 218,612 450,223 21,669 133,316 794,013 40,247 51,014 115,406 8,678 2,043,985 121,809 2,746,780 31,968 33,869 100,527 37,661 132,669 708,217 78,387 188,615 34,652 1,109,734 714,070 1,603,659 105,592 104,374 685,652 2,473,315 120,442 428,938 330,808 631,344 120,725 19,828 164,899 584,820 347,279 1,992,057 995,383 443,630 3,524,788 97,905 189,500 1,286,720 205,362 $ 2 ,440,63 8 96,786 19,838 1,483,718 11,163 5,468 292,379 6,919 27,004 119,077 41,924 165,332 9,198 40,782 32,005 15,388 23,883 7,956 175,221 33,211 623,185 352,556 123,631 278,565 139,069 444,080 12,000 131,230 526,285 31,640 39,972 103,373 8,595 1,961,058 93,915 1,973,561 31,697 25,922 99,651 27,391 131,556 480,364 75,917 187,339 30,743 896,608 638,950 1,488,065 81,736 82,024 468,821 2,218,928 117,531 343,425 328,232 614,603 119,450 19,729 163,210 575,740 339,850 1,549,633 893,246 232,421 3,394,552 89,542 168,500 893,105 203,028 326,164 18,606 3,414 174,910 1,165 1,382 45,102 1,781 4,587 10,224 820 32,195 954 1,466 2,623 487 3,061 519 34,016 3,746 65,532 65,080 27,786 20,179 17,112 41,207 1,223 7,713 84,935 3,735 3,959 24,274 2,502 73,210 16,662 212,801 4,508 3,299 14,711 6,793 11,975 68,771 13,963 22,189 1,952 100,234 32,355 150,000 10,140 5,910 42,970 230,611 19,273 51,721 36,021 47,820 21,438 1,233 23,093 43,585 36,579 113,097 131,108 26,827 300,279 6,529 26,042 118,354 22,189 $ 418,910 11,156 1,419 445,947 3,067 2,767 25,628 694 1,668 25,337 8,203 34,721 3,053 5,595 27,303 7,091 5,925 3,133 81,627 4,548 254,624 69,580 21,557 26,921 21,146 268,609 8,569 34,273 338,415 0 10,475 14,514 1,048 831,018 38,183 806,665 483 2,258 8,244 3,878 11,962 189,104 0 16,595 11,288 227,154 176,760 224,610 21,389 44,957 111,577 607,208 10,045 128,547 90,421 170,305 16,616 4,579 0 20,229 23,968 189,503 58,280 108,908 296,558 15,426 49,286 486,972 0 $32,765,241 $33,733,908 $28,902,114 3,080,701 $7,190,499 1) Data based on TFR data tor the quarter prior to the date of resolution. 2) IDT— insured Deposit Transfer; PO— Deposit Payoff, PA— Purchase & Assumption 3) "Estimated Cost of Resolution" as of date of resolution. * Institution was resolved under the Accelerated Resolutions Program (ARP). There were 9 ARP resolutions in 1992. R E S O L U T I O N T R U S T C O R P O R A T t O N 19 9 2 A N N U A L R E P O R T RTC Resotved Conservatorships August 9 ,1 9 8 9 to December 31,1992 (dottars in thousands) Number tn Conservatorship as of 8/9/89 Assets Liabilities Deposits Number of Accounts 262 $114,322,627 $120,788,239 $91,721,957 8,787,092 Added in 1989 56 25,872,928 25,774,115 19,774,644 2,230,425 Resotved in 1989 37 13,730,737 14,459,356 11,308,281 1,159,387 tn Conservatorship as of 12/31/89 281 $126,464,818 $132,102,998 $100,188,320 9,858,130 Added in 1990 207 129,778,490 128,889,934 94,826,424 9,218,763 Resotved in 1990 309 134,521,901 138,580,070 105,329,383 11,168,506 tn Conservatorship as of 12/31/90 179 $121,721,407 $122,412,862 $89,685,361 7,908,387 Added in 1991 123 71,089,358 70,256,474 55,992,835 4,979,963 Resotved in 1991 211 122,399,634 123,758,665 93,898,247 8,337,015 tn Conservatorship as of 12/31/91 91 $70,411,131 $68,910,671 $51,779,949 4,551,335 Added in 1992 50 35,912,456 34,737,857 25,257,110 2,996,545 Resotved in 1992 60 34,452,261 33,863,275 26,771,438 2,559,752 tn Conservatorship as of 12/31/92 81 $71,871,326 $69,785,253 $50,265,621 4,988,128 6 $4,000,207 $4,421,669 $3,724,296 560,411 tnstitutions resotved under the Acceterated Resotutions Program in 1991 21 $8,828,559 $8,571,564 $7,394,198 1,053,701 tnstitutions resotved under the Acceterated Resotutions Program in 1992 9 $9,727,798 $9,707,852 $8,511,029 993,251 tnstitutions never placed in conservatorship prior to resotution in 1990 Note: Data at quarter prior to date of conservatorship (date of resotution for non-conservatorship resotutions). 1 9 9 2 A N N U A L R E P O R T ! N D E X A Accelerated Resolutions Program 2 0 , 2 2 , 30 31 Accounting Services, OfHce of 20-21 Administration, Department of 12 Administration and Corporate Rdations, Division 11-17 Administrative Evaluation, OfHce of 14 Administrative Services, OfHce of 12-13 Affordable Housing, Department of 37-39 Affordable Housing Disposition Program 4 , 14, 27, 3 7 -3 9 ,4 3 ,5 9 Asset and Subsidiary Management, OfHce of 34-35 Asset Disposition, Department of 9 Asset Management, Department of 34-35 Asset Management and Sales, Division of 33-39 B Budget and Planning, OfHce of 32 C Capita! Markets, Department of 37 Case Management and Program Compliance, OfHce o f 35 Casey, Albert V. 6 Complex Litigation, OfHce of 10 Conservatorships 4 , 8 , 9 , 14, 2 0 , 21, 2 2 , 2 3 , 2 4 , 31, 3 4 , 36, 51, 5 2 , 5 4 , 57, 5 8 , 61, 76, 77, 79 Conservatorships and Receiverships, Department of 9 Conservatorships, Receiverships, and Resolutions, OfHce of 9 Contracting, OfHce of 9 Contractor Oversight and Surveillance, OfHce of 13-14 Contracts, OfHce of 13 Contracts, Oversight, and Evaluation, Department of 13-14 Cooperative Institution Marketing Program 2 9 -3 0 , 31 Corporate Affairs, Department of 8 Corporate Communications, OfHce of 16-17 Corporate Finance, Department of 20-22 Corporate Information, OfHce of 12, 15 Corporate Issues, OlHce of 8 E Employment and Labor Law, OfHce of 8 R E S O L U T I O N T R U S T Equal Employment Opportunity and AfHrmative Action, OfHce of 15 Ethics, OfHce of 8 , 16 Executive Committee 4 , 6 , 16 F Federal Deposit Insurance Corporation 2 , 4 , 6 , 8 , 10, 12, 20, 22, 35, 49, 50, 59, 60, 61 Federal Savings and Loan Insurance Corporation 4 , 2 0 ,2 2 , 4 9 ,5 7 , 5 9 Field Accounting and Asset Operations, OfHce of 21-22 Field Activities and Sales, Department of 35 -3 7 Field Liaison, OfHce of 35 -3 6 Field Resolutions, OfHce of 30 Financial Institutions Reform, Recovery, and Enforcement Act of 1989 1, 4 , 6 , 14, 4 3 , 4 9 , 51, 54, 57 FSLIC Resolution Fund Restructuring, Department of 20 G Governmental Relations, OfHce of 16 H Human Resources Management, OfHce of 8 , 12, 35 ! Institution Operations and Sales, Division of 19-32 Internal Controls 2 , 14, 3 5 , 7 3 -7 4 Investigations, OfHce of 2 6 , 28 J Justice, Department of 8 , 10, 2 6 L Legal Programs, OfHce of 15 Legal Services, Division of 7-10, 28 Litigation, Department of 10 Litigation, OfHce of 10 M Major Resolutions, OfHce of 2 8 -3 0 Minority- and Women-Owned Business, OfHce of 14 Minority and Women's Programs, Department of 14-15 Minority Participation 31 N National Marketing, OfHce o f 3 6 -3 7 National Sales, OfHce o f 9 , 36 0 OfHce of Thrift Supervision 6 , 10, 2 6 ,2 8 , 3 0 , 5 4 , 57 Operations, Department of 2 2 -2 8 Operations, OfHce of 2 2 -2 6 C 0 R P 0 R A T ! 0 N Organization and Resource Management, OfHce of 13 P Planning and Analysis, Department of 31-32 Policy, Evaluation, and Field Management, OfHce of 14-15 Professional Liability, OfHce of 10 R Real Estate, OfHce o f 9 Receiverships 4 , 8 , 9 , 14, 21, 2 2 , 2 4 , 2 6 , 3 2 , 3 4 , 3 6 , 51, 5 2 , 5 3 , 57, 5 8 , 61 Regulations 41-43 Research and Statistics, OHice of 31-32 Resoludon Trust Corporation Financial Statements 45-61 Organization Chart 5 Resolution Trust Corporation ReHnancing, Restructuring, and Improvement Act of 1991 4 -6 , 8 , 14, 2 8 , 4 3 , 4 9 , 55 Resolutions 2 , 6 , 8 , 9 , 2 0 , 2 2 , 2 3 , 2 8 31, 3 2 , 3 6 , 5 4 , 78 Resolutions, Department of 28-31 S SAMDA Program Management, OfHce of 34 Secretary, OfHce of the 16 Securities and Finance, OfHce of 9 Securities Transactions, OfHce of 37 Securitization, OfHce o f 37 Seller Financing 3 4 , 38 Settlement Workout, OfHce of 35 Special Projects, OfHce of 8 Standard Asset Management and Disposition Agreements 34 Statistics RTC Conservatorships, January 1 , 1992-December 31, 1992 76 New RTC Conservatorships, January 1 ,1992-December 31, 1992 77 RTC Resolutions, January 1 , 1992-December 31, 1992 78 RTC Resolved Conservatorships, August 9 , 1989-December 31, 1992 79 Systems Development, OfHce of 2 6 -2 8 Systems Management, OfHce of 35 T Thrift Depositor Protection Oversight Board 6 , 14, 31, 32 , 4 9 , 54, 57 The 1992 RTC Annua! Report PuMished by: The Resotution Trust Corporation Office of Corporate Communications SOI 17th Street, MW Washington, DC 2 0 4 3 4 -0 0 0 1 Director Stephen J . Katsanos Deputy Director Eiizabeth R. Ford Chief Reports and Anatysis Branch Majorie C. Bradshaw Office of Administrative Services Chief Printing and Graphics Thomas A. Serio