July 1990 FINANCIAL AUDIT Federal Savings and Loan Insurance Corporation’s 1989 and 1988 Financial Statements - -- GAO/AFMD-90-79 GAO United States General Accounting Office Washington, D.C. 20548 Comptroller General of the United States B-l 14893 July 17, 1990 To the President of the Senate and the Speaker of the House of Representatives This report presents our opinion on the Federal Savings and Loan Insur- ance Corporation’s final financial statements, disclosing that significant uncertainties remain that will affect the ultimate cost of assistance already provided to failed thrifts and the estimated cost of resolving problem thrifts not yet assisted. We expect final costs to be higher than estimated. This report also presents our reports on the Corporation’s internal accounting controls and on its compliance with laws and regula- tions. We conducted our audits pursuant to the provisions of 31 USC. 9105 and in accordance with generally accepted government auditing standards. On August 8, 1989, its last day of operation, the Corporation reported a capital deficit of $87 billion-the largest ever reported by a public OI private corporation. The Financial Institutions Reform, Recover?;. and Enforcement Act of 1989 (FIRREA) provided mechanisms to pay off the Corporation’s obligations, which were transferred to a resolution fund. It also created the Resolution Trust Corporation and provided it $50 bil- lion to resolve problem thrifts placed into conservatorship or receiver- ship from January 1, 1989, through August 9, 1992. On April 6, 1990, we testified before the Senate Committee on Banking, Housing and Urban Affairs that at least $325 billion will be needed to pay off existing obligations, to resolve the problems of institutions awaiting resolution, to pay interest on the bonds issued to effect resolu- tions, and to pay some administrative expenses. We recommended that the Resolution Trust Corporation Oversight Board and the Federal Deposit Insurance Corporation develop proposals to provide the addi- tional funds and semiannually report to the Congress on the total cost. The $325 billion represents a least cost estimate based on present condi- tions that are subject to significant change. It is also based on the ( )ffke of Management and Budget’s optimistic interest rate assumptions. This estimate could easily rise to $400 billion if more thrifts fail than r hcl X0 identified by the Corporation and could reach $500 billion if the economy suffers a downturn and interest rates rise. On May 23, 1990, the Secretary of the Treasury, as Chairman of rho Oversight Board, testified before the Senate Committee on Banking. Page 1 GAO/AFMINO-79 Federal Savings and Loan Insurancr ( ‘~~~MWHIWN B-114893 Housing and Urban Affairs that the amounts authorized for the Resolu- tion Trust Corporation in FIRREA will fall short of what is required. Depending on the ultimate number of failures and amount of losses incurred, the Secretary estimated that the Resolution Trust Corpora- tion’s cost would range from $90 billion to $130 billion if paid today. The Oversight Board intends to work with the Congress and the admin- istration to develop a funding approach for the necessary resources. We are sending copies of this report to the Chairmen of the Senate Com- mittee on Banking, Housing and Urban Affairs and the House Committee on Banking, Finance and Urban Affairs; the Director of the Office of Management and Budget; the Secretary of the Treasury; and the Chairman of the Federal Deposit Insurance Corporation. Charles A. Bowsher Comptroller General of the United States Page 2 GAO/AFMD9@79 Federal Savings and Loan Insururr C~oqwntion Page 3 GAO/AFMD-9&79 Federal Savinga and Loan Insurance ( orpwa~rtim Contents Letter 1 Opinion Letter 6 Report on Internal 12 Accounting Controls Report on Compliance 14 With Laws and Regulations Financial Statements 15 Consolidated Statements of Financial Condition 15 Consolidated Statements of Income and Expenses and 17 Reserves Consolidated Statements of Cash Flows 19 Notes to Financial Statements 21 Abbreviations FSLIC Federal Savings and Loan Insurance Corporation FIRREA Financial Institutions Reform, Recovery, and Enforcement Act of 1989 RX Resolution Trust Corporation Page 4 GAO/AFMD-99-79 Federal Savings and Laan Insurance Corporation Page 5 GAO/AFMDBlWB Federal Savlnpr and Lum Imumnce Chrporation GAO United States General Accounting Office Washington, D.C. 20548 Comptroller General of the United States B-l 14893 To the Board of Directors Federal Deposit Insurance Corporation We have audited the accompanying consolidated statements of financial condition of the Federal Savings and Loan Insurance Corporation (F-SIX) as of August 8, 1989, and December 31, 1988, and the related consoli- dated statements of income and expense and reserves and statements of cash flows for the periods then ended. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits. In addition to this report on our audits of the Cor- poration’s financial statements, we are reporting on our consideration of its system of internal accounting controls and on its compliance with laws and regulations. We conducted our audits in accordance with generally accepted govern- ment auditing standards. Those standards require that we plan and per- form the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. However, as discussed in the following paragraph, the esti- mated liabilities for assisted and unresolved institutions are subject to significant uncertainties that limited our audit and precluded us from opining on these reported balances. To develop its estimated liabilities for assisted institutions and unresolved institutions, the Corporation used information available at the time. However, actual costs depend on various uncertainties, such as the extent of continued operating losses; the quality of each institution’s assets; future interest rates; the potential effect of the Financial Institu- tions Reform, Recovery, and Enforcement Act of 1989 (FIRREX); and the economic outlook for certain sectors of the economy. For assisted insti- tutions, the actual cost to the Corporation is also dependent on the results of independent audits to determine the value of each institution’s assets and its negative net worth, most of which were not completed as of August 8, 1989. For unresolved institutions, actual costs will btl fur- ther affected by any delays in completing resolution actions and anj increase in the universe of troubled institutions. As a result of t hcstl Page 6 GAO/AFMD-99-79 Federal Savings and Loan Insuran~ (‘orporation El 14893 uncertainties, the Corporation’s estimates are subject to significant change, and we expect final costs to be higher than estimated. In our opinion, except for the effects that the uncertainties discussed in the preceding paragraph may have on the cost of assisted institutions and unresolved institutions, the financial statements referred to above present fairly, in all material respects, the financial position of the Fed- eral Savings and Loan Insurance Corporation as of August 8, 1989, and December 31, 1988, and the results of its operations and its cash flows for the periods then ended, in conformity with generally accepted accounting principles. In response to the savings and loan industry crisis and the Corporation’s mounting losses, FIRREX was enacted on August 9, 1989. FIRREA abolished the Corporation and transferred its insurance function to the Federal Deposit Insurance Corporation, which, among other things, will admin- ister a newly created insurance fund for savings and loan associations, the Savings Association Insurance Fund. FIRREA also transferred the Cor- poration’s assets, debts, obligations, contracts, and other liabilities to a newly established fund, the FSLIC Resolution Fund. The Federal Deposit Insurance Corporation is responsible for administering the fund to ensure that its assets are sold and liabilities paid. The necessary funds to pay these liabilities will come from a variety of sources including sav- ings and loan insurance premiums and recoveries from asset sales. -Any shortfall in the amounts needed to pay obligations and expenses is to be provided by the Department of the Treasury through appropriations. FIRREA also created the Resolution Trust Corporation (RTC) to resolve the problems of institutions placed into conservatorship or receivership from January 1, 1989, until August 9, 1992. It provided RTC $50 billion to resolve the problems of those institutions and to pay administrative expenses. The following sections provide details on the Corporation’s liabilities and discuss the amount of funds needed to resolve the savings and loan industry crisis. Assistance associations already merged or sold with Corporation assistance. I IoM.- Agreements ever, the Corporation estimated that net cash outlays for these ~WY- ments over the next 9 years would likely be more than $60 billion. Page 7 GAO/AFMD-90-79 Federal Savings and Loan Insurance Corporation El14893 To develop its cost estimates for assistance agreements, the Corporation made various assumptions regarding future economic conditions and acquirer actions. For example, the Corporation assumed that, for most assistance agreements, interest rates would increase moderately and assets would be sold over periods ranging from 3 years to 7-l/2 years. Using these various assumptions and information on the financial condi- tion of the acquired institutions, the Corporation estimated its expected future net cash outlays. It then discounted these outlays back to present value. The resulting present value cost represents the estimated amount the Corporation would have needed at the report date to pay its liability for assistance agreements. However, actual costs as well as cash outlays will likely differ from those projected. In particular, the Corporation needs to review detailed asset management plans on the assisted institutions’ significant assets, most of which were not due until 1 year after the date of the agreement, to provide a more accurate estimate of the value of assets covered by guarantees. Also, it needs the results of audits of the institutions’ finan- cial condition to adjust the notes issued to acquirers for the estimated amount that liabilities exceeded assets. Once the required audits are completed, we expect the Corporation’s costs to be higher. liability for resolving 560 troubled but still operating institutions. How- Unresolved ever, the Corporation estimated that net future cash outlays for these Institutions resolutions will likely exceed $63 billion. To estimate its liability, the Corporation made various assumptions regarding future operating losses, economic conditions, interest rates, and projected resolution costs. For example, the Corporation assumed that half of the 560 troubled institutions would be resolved by March 31, 1991. It also assumed that the troubled institutions would continue to incur operating losses through resolution at a slightly increasing rate based upon third quarter 1989 losses. In December 1989, the Office of Thrift Supervision estimated that 6 10 institutions not included in the Corporation’s liability at August 8. 1989, would fail to meet the new capital requirements imposed by FIRHEA Some of these 610 may be able to increase their capital to meet the new requirements or be acquired with no assistance from RTC. However. it is also possible that some may be placed into conservatorship or receiver- ship. In that case, they would represent a future liability for R-K'. Page 8 GAO/AFMD-90-79 Federal Savinga and Loan Insuranrr (‘orpwation 5114893 Because the Corporation’s estimate was based upon information avail- able at the time, actual costs may differ from those projected. If asset values continue to decline or operating losses are higher than estimated, costs will increase. Also, any delays in resolving troubled institutions or growth in the universe of troubled institutions will increase ultimate resolution costs. On April 6, 1990, we testified before the Senate Committee on Banking, F’undsNeeded to Housing and Urban Affairs on our analysis of the amount of funds Resolvethe Savings needed to resolve the savings and loan crisis.’ In that testimony, we and Loan Crisis stated that at least $325 billion would be needed to pay off the Corpora- tion’s obligations, resolve the problems of institutions awaiting resolu- tion, pay interest on the bonds to be issued by the Resolution Funding Corporation and on working capital funds RTC will need to borrow, and pay administrative and other expenses. The $325 billion represents a least cost estimate, based on present condi- tions, of total cash needs over 40 years using the Office of Management and Budget’s optimistic interest rate assumptions. Actual costs depend on various uncertainties, such as the number of institutions requiring resolution and the extent of continuing operating losses, the quality and value of assets in assisted or troubled institutions, future interest rates, the economic outlook for certain sectors of the economy, and the poten- tial effect of FIRREX Therefore, this estimate could easily rise to $400 billion if an increased number of institutions fail and could rrxh $500 billion if the economy suffers a downturn and interest rates rise. As a result of our analysis and RTC'S need for additional funds, we made recommendations to the Chairmen of the RTC Oversight Board and the Federal Deposit Insurance Corporation regarding the need to develop proposals to provide the additional funds RTc will need and to jointly report semiannually to the Congress on the total cash needs, net costs. and sources of funds to pay for FSLIC’Sobligations, RTC resolutions, and related costs. On May 23, 1990, the Secretary of the Treasury, as Chairman of t hcb Resolution Trust Corporation Oversight Board, testified before t htl Senate Committee on Banking, Housing and Urban Affairs that t ht~ amounts authorized for the Resolution Trust Corporation in FIKKt:.\1~111 ’ Resolving The Savings And Loan Crisis: Billions More and Additional Reforms Seeded ( ; \I 1 I Page 9 GAO/AFMD-90-79 Federal Savings and Loan Insuranrr t ~~rprrat ion B-114993 fall short of what is required. The Secretary cited three primary reasons for the increased costs: larger than expected losses in thrifts, marginal thrifts likely to fail sooner than expected and becoming the responsi- bility of the Resolution Trust Corporation, and an increased number of thrifts expected to fail. Depending on the ultimate number of failures and amount of losses incurred, the Secretary estimated that the Resolu- tion Trust Corporation’s cost would range from $90 billion to $130 bil- lion if paid today. The Oversight Board intends to work with the Congress and the administration to develop a funding approach for the necessary resources. Charles A. Bowsher Comptroller General of the United States February 9,199O Page 10 GAO/AFMD-9@79 Federal Savings and Loan Insurancr (‘orpwation Page 11 GAO/AFMD-90-79 Federal Savings and Loan Insurancr (‘t>rpmstion Report on Internal Accounting Controls We have audited the consolidated financial statements of the Federal Savings and Loan Insurance Corporation for the period ended August 8, 1989, and the year ended December 31,1988, and have issued our opinion thereon. As part of our audits, we made a study and evaluation of the Corporation’s system of internal accounting controls to the extent we considered necessary to evaluate the system as required by generally accepted government auditing standards. This report pertains only to our study and evaluation of the system of internal accounting controls for the period ended August 8,1989. Our report on the study and evalu- ation of internal accounting controls for the year ended December 3 1, 1988, is presented in GAO/AFMD90-34, dated October 31, 1989. The purpose of our study and evaluation was to determine the nature, timing, and extent of the auditing procedures necessary for expressing an opinion on the Corporation’s consolidated financial statements. For purposes of this report, we have classified the significant internal accounting controls into the following categories: l assistance to merged/acquired institutions, . costs related to closed institutions, . costs related to unresolved institutions, . expenditures, . financial reporting, . revenue, and . treasury. Our study and evaluation included all of the control categories listcti above. The Corporation’s management is responsible for establishing and main- taining an effective system of internal accounting controls. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control pro- cedures. The objectives of a system of internal accounting controls :ircL to provide management with reasonable assurance that (1) obligat ICES and costs are in compliance with applicable laws, (2) funds, propt*rt y. and assets are safeguarded against waste, loss, and unauthorized IIS(’ ()t- misappropriation, and (3) assets, liabilities, revenues, and expentllr I I r(ls applicable to operations are properly recorded and accounted fc)r (( B permit the preparation of reliable financial reports and to maint a111 accountability over the Corporation’s assets. Because of inhewn t IIml t a- tions in any system of internal accounting controls, errors or irr(w I LIIJ- ties may nevertheless occur and not be detected. Also, projectiorl (bt .rn> Page 12 GAO/AFMLMO-79 Federal !Savings and Loan Insurance 1 ~wpwa~~on Report on Internal Accounting Controls evaluation of the system to future periods is subject to the risk that pro- cedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study and evaluation, made for the limited purpose described in the second paragraph, would not necessarily disclose all material weak- nesses in the system. Accordingly, we do not express an opinion on the Corporation’s system of internal accounting controls taken as a whole or on the categories of controls identified in the second paragraph. Our study and evaluation did not disclose any internal accounting control weaknesses which we considered to be material in relation to the finan- cial statements taken as a whole. During our audit, we identified several internal accounting control mat- ters which, although not material, nonetheless merit corrective action. Accordingly, we are reporting them separately to the Federal Deposit Insurance Corporation, which has taken over responsibility for the Cor- poration’s activities. Page 13 GAO/AFMDW79 Federal Savings and Loan Imwanrr ( 4qm bra c ticm Report on Compliance With Laws and Regulations We have audited the consolidated financial statements of the Federal Savings and Loan Insurance Corporation for the period ended August 8, 1989, and the year ended December 31, 1988, and have issued our opinion thereon. Our audits were made in accordance with generally accepted government auditing standards and, accordingly, included such tests of compliance with laws and regulations as we considered neces- sary in the circumstances. This report pertains only to our review of compliance with laws and regulations for the period ended August 8, 1989. Our report on the review of compliance with laws and regulations for the year ended December 31, 1988, is presented in GAOIAFMD-90-34, dated October 31, 1989. The Corporation’s management is responsible for compliance with laws and regulations. In connection with our audits, we selected and tested transactions and records to determine the Corporation’s compliance with laws and regulations, noncompliance with which could have a material effect on the financial statements. As part of our audit, we reviewed and tested compliance with provisions of title IV of the National Housing Act, as amended (12 U.S.C. 1724- 1730), title III of the Competitive Equality Banking Act of 1987 (12 U.S.C. 226 note), the Prompt Payment Act (39 U.S.C. 3901), and such other laws and regulations as we considered pertinent to the Corpora- tion. In our opinion, the Corporation complied with the terms and provi- sions of laws and regulations for the transactions tested that could have materially affected the financial statements. In connection with our audit, nothing came to our attention that caused us to believe that the Corporation was not in compliance with the terms and provisions of laws and regulations for those transactions not tested. Page 14 GAO/AF’MD-99-79 Federal Savings and Loan Insurance (‘orpcm~tion - Financial Statements Consolidated Statements of Financial Condition r AUGUST 08. 1989 AND DECEl48ER 31, 1988 (in thousands) AUGUST 08, 1989 DECEMBER 31. 1988 Assets Cash and Cash Equivalents (Note 3)......... $ 1.930.934 $ 3,090,776 Investments (Nois 3)....................... 574,226 574,002 Interest Receivable on Investments......... 0 765 Insurance Premiums and Accounts Receivable. 112.615 8,497 Subrogated Accounts from Receivers (Note 4) 5.191.380 5.200.380 Collateralized Advances due from Receivers (Note S).................................. 403,536 558.791 Loans to Receivers (Note ZI)................ 109,100 128.612 Interest Receivable on Loans to Receivers.. 0 5.217 Collateralized Loans to Insured Institutions (Note 6).................................. 800.000 830,000 Other Loans to Insured Institutions (Note 6) 198,803 205.123 Interest Receivable on Other Loans to Insured Institutions...................... 5.423 11.485 Real Estate, Mortgage Loans and Other Assets in Process of Liquidation.... (Note 7).................................. 1.286.370 1,356.096 Income Capital Certificates (Notes 8 and 10) 182,152 257,819 Net Worth Certificates (Notes 9 and lo).... 162.325 171.200 Miscellaneous Assets....................... 11,378 17.473 Total Assets............................... Liabilities Accounts Payable and Other Liabilities..... 199,049 127,066 Notes Payable to Insured Institutions (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.014,401 19,748.114 Miscellaneous Liabilities to Insured Institutions...................... 289,008 286.690 Accrued Interest on Notes Payable to Insured Institutions...................... 243,233 220,456 Notes Payable to Federal Home Loan Banks (Note 6).................................. 800.000 830,000 Allowance for Loss - Assistance Agreements (Note lz)................................. 22.018.995 22,645,OOO Allowance for Loss - Unresolved Cases (Note 13)................................. 55,240.OOO 43,550,ooo Total Liabilities.......................... 97.804.686 87.407.326 ========== s========= Page 16 GAO/AFMD-90-79 Federal Savings and Loan Insurance (‘orpwetion Financial Statements Insurance Fund Reserves Capital Stock.............................. 602,500 497,000 Capital Certificates....................... 6,897.SOO 5.353.000 Insurance Reserves......................... (94,256,444) (80,841.090) Total Primary Reserve (Note 17)............ (86,756,444) (74.991.090) Total Liabilities and Reserves............. $ 11.048.242 $ 12,416,236 =======m== =P-=*II*Pli The accompanying notes are an integral part of these financial statements. Page 16 GAO/AFMD-90-79 Federal Savings and Loan Insurance C‘orporation - Financial Statements Consolidated Statements of Income and Expenses and Reserves FOR THE PERIODS ENDED AUGUST 08. 1989 AND DECEUBER 31. (in thousands) 1988 -l August 08, 1989 December 31. 1988 Income Insurance Premiums (Note l)............. $ 29,397 $ 473.167 Special Assessment Premiums (Note l).... 602,218 1.195.037 Less Secondary Reserve Offset (Note 1). (64,878) (162.220) Interest on Investments................. 128.679 179.978 Interest on Collateralized Advances and Loans to Receivers..................... 1.372 36,378 Interest on Other Loans to Insured Institutions................... 25,183 44,130 Interest on Collateralized Loans to Insured Institutions................... 48.321 62,627 Interest on Advances to Insured Institutions........................... 0 1.256 Interest from Real Estate, Mortgage Loans and Other Assets in Process of Liquidation............................ 35,119 11.432 Gain on Sale of Assets.................. 27,601 54,457 Gain on Transfer of Insured Accounts.... 2,967 73.998 Other Income............................ 87,059 482,603 Total Income............................ 923,038 2.452.843 ~=~~~rl~=l i======P3= Expenses Insurance Settlement and Administrative Expenses................................ 174,306 223.928 Services Rendered to FSLIC by the FHLBB (Note Z)................................ 23,825 30.562 Interest on Notes Payable to the PtiLBanks 52,918 64.731 Interest on Notes Payable to Insured Institutions............................ 1,090,850 522,351 Provision for Loss on: Subrogated Accounts from Receivers..... (4,554 2,813,697 Collateralized Advances due from Receivers............................. 6,560 (3.780) Real Estate, Mortgage Loans and Other Assets in Process of Liquidation...... (169 2,587,454 Loans to Receivers..................... 1,777 8,775 Other Loans to Insured Institutions.... 400 97,600 Income Capital Certificates............ 498 113,938 Assistance Agreements.................. 1,301,981 35.794.457 Unresolved Cases....................... 11.690,OOO 26,150.OOO Total Expenses........................... 14.338.392 68.403.713 =========3 ---------- Page17 GAO/AFMD-90-79 FederalSavingsand LoanInsurancr (‘o~~~ra~ion Financial Statements Net Loss From Operations................. (13,415,354) (65,950,870) ==%z===z=== ========== Primary Reserve at Beginning of Period... (74.991.090) (13.690.220) Net Loss............................. (13.415.354) (65.950.870) Capital Stock........................ 105.500 367,500 Capital Certificates................. 1,544.500 4.282,500 Primary Reserve at End of Period (Note 17) $ (86,756,444) s (74,991,090) =icIPIDsI== ======a==%z The accompanying notes are an integral part of these financial statements. Page 18 GAO/AFMD-9@79 Federal Savings and Loan Insurancr ( Iqnlration FinancialStatements Consolidated Statements of Cash Flows FOR THE PERIODS AUGUST 08, 1989 AND DECEUSER 31, 1966 (in thousands) AUGUST 08, 1989 DECEHBER 31, 1968 OperatinE Activities Net Loss.................................. $ (13.415.354) $ (65,950,870) Adjustments to Reconcile Net Income to Net Cash Used by Operating Activities: Gain on Sale of Assets................ (27.601) (54,457) Gain on Transfer of Insured Accounts.. (2,967) (73.998) Provision for Loss on: Subrogated Accounts from Receivers.. (4,554) 2.813.697 Collateralized Advances due from Receivers.......................... 6.560 (3.780) Income Capital Certificates......... 490 113.938 Assistance Agreements............... 1.301.981 35.794,457 Loans to Receivers 1.777 8,775 Real Estate and Mortgage Loans...... (169) 2.507.454 Loans to Insured Institutions....... 400 97,600 Unresolved Cases.................... 11,690,OOO 26.150,OOO Changes in Operating Assets h Liabilities: Decrease (Increase) in Accounts Receivable......................... (104,118) 3.054 Decrease (Increaee) in Accrued Interest Receivable................ 12.044 (2,183) Decrease (Increase) in Subrogated Accounts from Receivers............. 15.512 (2.917.454) Decrease in Other Assets............ 6,095 9,081 Increase in Accounts Payable........ 71.983 7.643 Increase in Interest Payable........ 22,777 120.444 Increase (Decrease) in Miscellaneous Liabilities to Insured Institutions 2.318 (15.455) Paysrants made on Assistance Agreements......................... (1,868,908) (1.715.490) Sale (Purchase) of Acquired Assets.. 97,496 (85,092) Net Cash Used by Operating Activities (2.194.230) (3.112.636) Page19 - Financial Statements 1 Investing Activities Maturity of Marketable Securities... 1,001 54,007 Purchase of SLL Stock............... 0 (133.230) Repayment of Collateralized Advances due from Receivers................. 68,695 259,270 Repayment of Loans to Receivers..... 17,735 (23,804) Increase in Other Loans to Insured Institutions....................... 5,920 (15.109) Redemption of Income Capital Certificates 75,169 2.334 Net Cash Provided by Investing Activities 168,520 143.468 Financing Activities Sale of Capital Stock................. 105,500 367,500 Sale of Capital Certificates........ 1.544.500 4.282.500 Redemption of Notes Payable to Insured Institutions............... (784,132) (1,512,880 Net Cash Provided by Financing Activities 865,868 3,137,120 Increase (Decrease) in Cash h Cash Equivalents (Note l)..................... (1.159.842) 167.952 Cash h Cash Equivalents Beginning of the Period (Note 3)........................... 3,090,776 2.922,824 Cash h Cash Equivalents End of the Period (Note 3).......................... s 1,930,934 s 3.090,776 =PIIIII== aIw=IPI=wI The accompanying notes are an integral part of these financial statements. - Page20 GAO/AFMD-90-79 Federal Savings and Loan Inauranw (‘~w~~wation - Financial Statements Notes to Financial Statements AUGUST8, 1989 AND DECERBER31, 1988 On August 9, 1989 President Bush signed into law the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (PIRBEA), PL 101-73, which abolished the Federal Borne Loan Bank Board, its authority, and its functions. The act also dissolved the Federal Savings and Loan Insurance Corporation (PSLIC) and transferred its insurance function to a nevly-created thrift industry insurance fund called the Savings Association Insurance Fund (SAIP). In addition to the transfer of FSLIC’s insurance function, the act transferred all of PSLIC’s assets, debts, obligations, and contracts to a newly-created PSLIC Resolution Fund (FM), except for the liability for unresolved cases, which the Resolution Trust Corporation (RTC) assumed. Both SAIP and FRF funds are to be administered by the Federal Deposit Insurance Corporation (PDIC) in its corporate capacity. These statements reflect the the final accounting of the Federal Savings and Loan Insurance Corporation and the Federal Asset Disposition Association as of August 8, 1989. 1. Summary of Significant Accounting Policies: a) Principles of Consolidation - The Federal Savings and Loan Insurance Corporation (FSLIC) began accounting for its investment in the Federal Asset Disposition Association (FADA), a wholly ovned subsidiary, through consolidation effective December 31, 1986. Bowever, these consolidated statements do not include accountability for assets and liabilities of closed insured institutions for vhich the Corporation acted as receiver or liquidating agent. The Corporation furnished periodic and final accountability reports of its receivership or liquidating agent activities to courts, supervisory authorities, and other interested parties as requested. b) Premium Income Recognition - Insurance premium income was recognized as earned vhen member institutions vere assessed. These premiums were assessed annually and semi-annually based on an institution’s insurance anniversary date. On August 10, 1987, the Congress passed the Competitive Equality Banking Act of 1987 (CEBA), PL 100-86. Title III, Section 305 of this act limited FSLIC’s authority to collect assessment preriums by a combined limit shared vith the Financing Corporation. The combined maximum rate of assessment could not exceed l/12 of one percent of the insured institution’s total savings capital, whether the premiums were paid to the FSLIC, the Financing Corporation, or a combination of both. As a result of CEBA, $452.8 and $340.8 million of insurance premiums vere assessed and collected by the Financing Corporation through 818189 and 12/31/88 respectively. Page 2 1 GAO/AFMD-8879 Federal Savings and Loan Insuranrr ( orpora~ ion Fincial Statements c) Special Assessment Recognition - In addition to the regular insurance nremiums. the Cornoration had the authority under Section 404(c) of ‘the National Eousing Act to assess each insured member a special premium not to exceed l/8 of one percent of their total savings capital. The special assessment was billed quarterly and income was recognized as earned when member institutions were billed. Title III, Section 307 of CEBA authorized insured institutions to offset against future special assessment premiums amounts that were previously part of the “Secondary Reserve”. This offset reduced special assessment premiums by $64.9 and $162.2 million through 818189 and 12/31/88 respectively. Title III, Section 306(c) of CEBA also placed limitations on the amount of special assessments for the years 1987 through 1991. The 1989 limitation was l/16 of one percent, while the 1988 limitation was l/12 of one percent of total savings capital. liovever, the Act allowed the Bank Board to postpone the reduction in this assessment if the Board determined that severe pressures on the Corporation warranted an infusion of additional funds. The Board approved postponement of the reduction in both 1989 and 1988. d) Allowance for Loss - The Corporation’s policy was to establish an estimated allowance for loss at the time the Bank Board approved either financial assistance to or the liquidation of an insured institution. Financial assistance or liquidation costs took several forms (Notes 4 through 12). The estimated allowance for loss represents the purchase price of the assets of an institution less the estimated recovery value, including all disposition costs. These allowances were reviewed at least annually and adjusted to reflect changes in projected interest rates, recent appraisals, historical experience, etc. The Allowance for Loss on Unresolved Cases was the estimated cost to FSLIC of all unresolved, troubled institutions (Note 13). This allowance represented the estimated present value cost to the Government to resolve financially troubled thrift institution cases that were probable and could be reasonably estimated as of August 8, 1989, and was not a projection of the cost to resolve all future problems in the savings and loan industry. e) Furniture, Fixtures, and Equipment (FFLE) - PSLIC’s FFhE cost as of August 8, 1989 and December 31, 1988 was zero. In 1987, it was decided that all FFLE of the FSLIC should be expensed rather than capitalized. Eovever, the FPSE of FAUA was capitalized and stated at cost less accumulated depreciation, with depreciation computed on a straight line basis over the estimated useful lives of the assets. The net FADA FPbB balance is nominal and was included in other assets. Page 22 GAO/APMD-W-79 Federal Savings and Loan Insuranrr ( q~ryl,“tion Financial Statements f) Statement of Cash Plovs - In November 1987, the Financial Accounting Standards Board issued Statement No. 95, Statement of Cash Flow (SFAS 95). Pursuant to SPAS 95, the FSLIC elected the indirect method of reporting cash flows from operations. For the purposes of the Statement of Cash Plows, all highly liquid investments vith original maturities of three months or less were considered to be cash equivalents. 2. Related Parties - The Federal Savings and Loan Insurance Corporation, a government agency created by the National Bousing Act of 1934, vas governed by the Federal Borne Loan Bank Board. Bank Board expenses vere met through assessments to the FSLIC and the Federal BorneLoan Banks (Pi&Banks). The FSLIC’s share of the Bank Board assessment vas charged to operating expenses of the Corporation during the year in vhich the assessment vas levied. In addition to the Bank Board, the FSLIC interacted vith FIlLBanks, FADA and the Financing Corporation which were also under the Bank Board’s direction. FIlLBanks - The FSLIC, as part of its default prevention activities, guaranteed repayment of FELBank advances that had been made to certain insured institutions. These guarantees generally cover advances that are secured. As of August 8, 1989, the FSLIC had guaranteed commitments of $9.3 billion, of which $1.1 billion had been advanced to member associations. By comparison, as of December 31, 1988, guaranteed commitments totaled $4.5 billion, of which $1.6 billion had been advanced. In the event that FSLIC had been called upon to honor these guarantees, they vould have been recorded as an asset on FSLIC’s books with a FSLIC claim against any assets pledged as collateral to secure such advances. The PI&Banks are also authorized, as directed by the Bank Board, to make loans to the FSLIC. All such loans must be in accordance with the provisions of section 402(d) of the National Housing Act. Loans froa FfiLBanks have been passed through to member institutions as Collateralized Loans (Note 6). These loans totaled $800 million as of August 8, 1989, and $830 million as of December 31, 1988. FADA - In November 1985, the Bank Board approved the formation of the Federal Asset Disposition Association (FADA). The FADA, vhich was a wholly owned subsidiary of the FSLIC, managed and disposed of certain assets received by the FSLIC in case resolution actions. As of December 31, 1986, the PSLIC had purchased 25,000 shares of PADA common stock for $25 million. As of July 31, 1989, FADA reported assets of $20.8 million, liabilities of $1.7 million, net income of $1.4 million, a retained deficit of $5.9 million, and total stockholder’s equity of $19.1 million. Page 23 GAO/AFMD-W-79 Federal Savings and Loan Insuranw ( ~wp~wacwn Financial Statements As required by FIRRRA, the FADA ceased operations on February 2, 1990. tlovever, due to outstanding litigation actions, a final liquidating dividend to FADA’s sole stockholder, the FRF, vi11 not be made until such time as FADA’s litigation liability, if any, is definitively established. Under a contract vith the Federal Home Loan Bank of Topeka, the FSLIC guaranteed repayment of up to $50 million in Bank advances to the FADA. As of August 8, 1989 and December 31, 1988, the FADA had no outstanding borrovings against this open line of credit. FADA’s July 31, 1989 statements are unaudited. Financing Corporation - Title III, Section 302 of CEBA established a nevly created Financing Corporation. The Financing Corporation (FICO) is funded by the FELBanks investment and its issuance of public debt offerings which are limited to $10.8 billion. The net proceeds of obligations issued by the Financing Corporation are required to be used to purchase Capital Stock or Capital Certificates issued by the FSLIC (Note 17). Through August 8, 1989, the FICO has purchased $7.5 billion in FSLIC Capital Stock and Capital Certificates. 3. Cash and Investments - All cash received by the Corporation vhich vas not used to defray operating expenses or for outlays related to assistance to insured institutions and liquidation activities, vas invested in U.S. Treasury securities. Other investments vere mostly SLL stock and CNRAs issued by Federal Government Agencies other than the U.S. Treasury which vere obtained through the Corporation’s default prevention activities. Investment securities were stated at cost , adjusted for amortization of premiums and accretion of discounts. Such amortization and accretion vere computed by the interest method at rates based upon the maturity dates of the related securities. Both amortization and accretion are recognized as an adjustment to interest on investments. Through August 8, 1989, the Corporation earned an average rate of return of 9.61% on all investments, excluding preferred stock. As of August 8, 1989 and December 31, 1988, the Corporation’s cash and investment portfolio consisted of the following: B/B/89 12/31/88 Book Value Harket Value Book Value Market Value (in thousands) (in thousands) Cash and Cash Equivalents: Cash $ 57,207 $ 57,207 $ 77,301 $ 77,301 U.S Treasury Overnight Funds 1,869,309 1,869,309 3,004,775 3,004,775 FADA Honey Harket Funds 4,418 4,418 8,700 8,700 Total Cash and Cash Bquivalents: 1,930,934 1,930,934 3,090,776 3,090,776 ia====i== i==zxP=== =~~.~I~IP =*==11mmm Page 24 GAO/APMD-W-79 Federal Savings and Loan Insurance corporation - Financial Statements - 8/8/89 12/31/88 Book Value flarket Value Book Value Market Value (in thousands) (in thousands) Investments: Ifaturities up to One Year 0 0 0 0 lfaturities Over One Year 2,010 1,958 3,011 2,853 Total Securities: 2,010 1,958 3,011 2,853 Preferred Stock 572,216 572,216 570,991 570,991 Total Investments: $ 574.226 S 574.174 -574.002 4. Subrogated Accounts - As required by statute, an institution was closed unless there vas a default prevention measure that would have been less costly thmn liquidation. In the case of liquidation, the FSLIC settled insurance claims either by cash payout of insured accounts or by transferring insured accounts to another insured institution. The FSLIC’s subrogated account claim against the receivership of the liquidated institution vas equal to the amount of the insured accounts transferred or paid out. As assets vere liquidated by the receivership, the FSLIC and other creditors received periodic liquidating dividends in payment of their claims against the receiver. In most cases, a receivership does not have sufficient assets to pay all claims. The FSLIC estimated the amount of its recovery over the life of the receivership and recorded the difference as an allowance for loss against the claim. The changes in Subrogated Accounts for the periods ended August 8, 1989 and December 31, 1988 are: 8/E/89 12/31/88 (in thousands) Balance: Beginning of Period $16,232,992 $10,847,248 Additions During the Period 534,198 5,394,620 Receiverships Closed During the Period 0 (8,478) Losses Realized During the Period 0 (398) Gross Subrogated Accounts 16,767,190 16,232,992 Less: Liquidating Dividends from Open Receiverships 2,260,363 1,712,612 Less: Allowance for Loss for Open Receiverships 9,315,447 9,320,ooo Net: End of Period s s Page 26 GAO/AFMD-90-79 Federal Savings and Loan Insurance ( ‘oryc~mt 10n Financial Statements 5. Collateralized Advances Due from Receivers and Loans to Receivers - At times, the FSLIC guaranteed repayment of advances made by FRLBanks to insured institutions. If, subsequently, such an institution was closed by the FSLIC, the FSLIC may have been required by the FHLBank to repay the advance. The FSLIC repayment of the advance resulted in a claim against the receivership for the insured institution and establishment of a FSLIC asset, Collateralized Advances Due from Receivers. These Collateralized Advances are recovered from the receivership’s liquidation of assets. The FSLIC also made loans to meet the administrative and operating expense requirements of certain receiverships. These loans are to be repaid from the liquidation of assets of the receivership. The changes in Collateralized Advances Due from Receivers and Loans to Receivers for the periods ended August 8, 1989 and December 31, 1988 are: Collateralized LOMS Advances to Receivers 818189 12/31/88 8/8/89 12/31/88 (in thousands) (in thousands) Balance : Beginning of Period $731,791 $990,827 $161,612 $137,798 Net Increase (Decrease) End of Period Less : Allovance for Loss Net: Bnd of Period s483.536s558.791s1o9.1oos128.612 6. Other Loans to Insured Institutions - The FSLIC made both collateralized and other types of loans in assistance cases. The collateralized loans were funded by pass-through loans from FIlLBanks. In these transactions, FSLIC issued a note payable to the FliLBank and loaned the proceeds to an insured institution. The FSLIC had tvo loans of this type, one for $600 million and one for $200 million, totaling $800 million. Interest rates on the $200 million loan and the corresponding note to the FHLBank are the sane and averaged 9.4% in 1989. The interest rate on the remaining $600 million loan receivable is based on the monthly weighted-average cost of funds charged to members of the FBLBank in which the institution is located and ranged from 8.0% to 8.9% in 1989. Interest on the corresponding note payable to the FHLBank is based on the cost of FBLBank funds plus 20 basis points. This rate varied between 9.0% and 10.0% during 1989. Principal payments on the $600 million collateralized loan began in 1988 and end in 1995, while principal payments on the $200 million collateralized loan begin August 15, 1989 and end in 1995. The $198.8 million in Other Loans to Insured Institutions is shown net of a $103.4 million allowance. The interest rate on these loans varies vith each note. Page 26 GAO/AFMD-!W79 Federal Savings and Loan Insurance (‘orporation - Financial Statements 7. Real Estate, Mortgage Loans, and Other Assets in Process of Liquidation - At times the FSLIC made direct acauisitions of troubled assets from problem associations in its attempt to merge a failing institution. The vast majority of these assets consists of real estate and mortgage loans. An allowance for loss has been established to reduce these assets to their net realizable value. The changes in Real Estate, Rortgage Loans and Other Assets in Process of Liquidation for the periods ended August 8, 1989 and December 31, 1988 are: 8/8/89 12/31/88 (in thousands) Balance: Beginning of Period $4,043,096 $ 287,919 Add : Increase (Decrease) 3,755,177 Balance: End of Period 4,043,096 Less : Allowance for Loss 2,667,533 2,687,OOO Net: End of Period $1,286,370 $ 1,356,096 ********* ********* 8. Income Capital Certificates - Since 1981 the FSLIC had purchased Income Capital Certificates (ICCs) from insured institutions as part of its default prevention activities. The FSLIC usually purchased an ICC by issuing a note payable and recorded the ICC at cost (Note 10). The ICCs earn annual income payments based on the United States Treasury Bill rates. The annual income payments and principal are due vhen the issuing institution has profitable operations and attains a specified net worth level. The changes in the ICCs for the periods ended August 8, 1989 and December 31, 1988 are: 8/8/89 12131188 (in thousands) Balance : Beginning of Period $ 415,819 S 1,645,883 Add: Net Purchases or (Cancellations) (122,666) (1,230,064) Balance 8: End of Period 293,153 415,819 Less: Allovance for Loss 111,001 158,000 Net : Knd of Period S 182.152 S 757.8u Page 27 GAO/APMD-9@79 Federal !3aving~ and Loan Insurance Cwporation Financial Statements 9. Net Worth Certificates - Since 1982, the FSLIC had purchased Net Worth Certificates (NWCs) from insured institutions as part of its default prevention activities. The FSLIC purchased an NWCby issuing a note payable and recorded the NYC at cost (Note 10). NWs earn annual income payments based on the cost of Federal Borne Loan Bank System Obligations plus l/4 of one percent. Annual income and principal payments are due vhen the issuing institution has profitable operations and attains a specified net vorth level. The legislation authorizing the issuance of Net Worth Certificates expired in October 1986 and vas reinstated vith the passage of the Competitive Equality Banking Act of 1987 on August 10, 1987. The program will expire on October 13, 1991. The changes in the NWCs for the periods ended August 8, 1989 and December 31, 1988 arez 8/8/89 12/31/88 (in thousands) Balance: Beginning of Period S 171,200 S 225,025 Add : Net Purchases or (Cancellations) Net: Bnd of Period $ i&E?7 s RE’ ******* ******* 10. Notes Payable and Other Liabilities to Insured Institutions - The FSLIC had outstanding negotiable notes to purchase ICCs and promissory notes to purchase ICCs and NVCs. Generally, variable interest is paid semi-annually baaed on the cost of Federal Borne Loan Bank System Obligations or the average auction yield for United States Treasury Notes vith maturities from S-10 years. In addition to issuing notes to purchase ICCs and NWCs, the FSLIC had also issued notes to insured institutions vho have acquired the deposits of defaulted ShLs. The principal on these notes may be paid through the transfer of cash and/or assets to the acquirer. The interest on these notes is paid either quarterly or semi-annually based on various indices. The weighted average rate as of August 8, 1989 VW 9.56%. In addition to thQSQ notes, FSLIC had other liabilities to acquiring institutions of $289.0 million. Page 28 GAO/AFMD-88.79 Federal Savings and Loan Insurance (‘orpwation Flna.nciaI Statements The aggregate amount of the Notes Payable to Insured Institutions and their maturity dates as of August 8, 1989 are as follovs: ICC9 talcs Acquirers & Other Total (in thousands) 1989 s OS 0 $ 2,284,177* $ 2,284,177 1990 58,801 475,238 534,039 1991 l,ooO 8 174,756 175,756 1992 15,000 16,300 174,756 206,056 1993 0 33,825 1,980,244 2,014,069 1994 0 60,950 54,636 115,586 Later 27,000 51,250 13,606,468 13,684,718 Total $101,801 $162,325 $18,750,275 $19,014,401 ******* ******* ********** ********** * Includes $2,036,478 in renewable notes. 11. Joint Lending Program - On February 23, 1989, the Bank Board and the Federal Reserve Board announced the establishment of the Joint Lending Program, a8 an interim measure, to meet the liquidity needs of troubled savings and loens. To be eligible for this cooperative venture, a thrift had to have exhausted its normal sources of liquidity, including FHLBank advances, brokered deposits, and funding from rQpUrchQSQ agreements. Under the program, funds for these eligible thrifts vere shared by wing Federal RQSQrVQ resources (45X), FHLBenk resources (45X), and FSLIC resources (10%). The FSLIC resources vere derived from its $750 million borroving authority vith the U.S. Treasury. Bad funds from FSLIC’s U.S. Treasury borrovings been exhausted, the FSLIC’s share of lending to individual thrifts vould have bQQII shared 50-50 by the PEL8anks and the Federal Reserve Ranks. As of August 8, 1989, $120.6 aillion in loans vere outstanding under the program and PSLIC had utilized $34.8 million of its U.S. Treasury borroving authority. All outstanding loans from the Federal RQsQrVQ and Federal liome L.oan Banka vere guaranteed by FSLIC and have subsequently been rewid by member institutions. The $34.8 million owed to FSLIC remains as an accounts receivable, and its repayment will be used to pay an off-setting accounts payable to the U.S. Treasury in full satisfaction of the FSLIC’s borrovings covered by this program. Page 29 GAO/AFMIMW79 Federal Savings and LOan Insurance Corpocrhn Financial Statements 12. Allovance for LOSS - Assistance Agreements - The FSLIC entered into assistance agreements, vhich vere usually associated with mergers, to prevent the default of insured institutions. Under these arrangements, the Corporation agreed to give financial assistance over time. All future cash outlays are estimated and discounted to their present value using discount rates of 9.86% and 9.64% for August 8, 1989 and December 31, 1988, respectively. The changes in the Allowance for Loss on Assistance Agreements for the periods ended August 8, 1989 and December 31, 1988 are: 8/8/89 12/31/88 (in thousands) Balance: Beginning of Period $ 22,645,OOO $ 749,069 Add : Provisions 1,301,980 35,794,457 Less : Assistance Provided 1,927,985 Balance: End of Period 13. Allovance for Loss - Unresolved Cases - The Corporation established a liability for future assistance to, or liquidation of, troubled institutions. The recorded liability represented the present value of future Federal assistance that is probable and can be reasonably estimated as of August 8, 1989. Present value discount rates of 8.61% and 9.95% vert used for August 8, 1989 and December 31, 1988, respectively. The liability vas determined by using Federal Borne Loan Bank Board thrift financial reports and PIlLBank estimates to adjust the liability for anticipated asset vrite downs, interest rate market adjustments, and projected resolution costs. A comparison of the August 8, 1989 and December 31, 1988 Allovances for Loss on Unresolved Cases indicates a $11.7 billion on-statement increase that is primarily the result of additional operating losses incurred and projected vithin the savings and loan industry subsequent to the 1988 Financial Statements. Various uncertainties could cause this estimate to further increase or decrease. Changes in the Allowance for Loss on Unresolved Cases for the periods ended August 8, 1989 and December 31, 1988 art: 8/8/89 12/31/88 (in thousands) Balance: Beginning of Period $ 43,550,ooo $ 17,400,000 Add : Provisions 11,690,OOO 26,150,OOO Balance: 8nd of Period S 55.24O.OOQ 5-g Page 30 GAO/AFMD-W-79 Federal &wings and Loan Insuranrr (‘wporation Financial Statements 14. Retirement Plan - Approximately 31% of the FSLIC’s employees are covered by the Civil Service Retirement System (CSRS), vhich is currently two-tiered. Por employees hired prior to January 1, 1984, the PSLIC vithheld approximately 7 percent of their gross earnings. This contribution vas then matched by the PSLIC and the sum was transferred to the Civil Service Retirement Fund, from which this group will receive retirement benefits. For employees hired on or after January 1, 1984, vith more than five years of service (not necessarily continuous), the PSLIC vithheld, in addition to Social Security vithholdings, .94 percent of their gross earnings, but matched such vithholdings with a 7 percent contribution. At the point such earnings exceeded the FICA maximum vages of $48,OOC for 1989, employees covered under this tier of CSRS vere required to have 7.51 percent of their earnings vithheld, while the agency expense matched this vithheld amount. This second employee group vi11 receive retirement benefits from the CSRS along vith the Social Security System, to vhich they concurrently contribute. Beginning in January 1987, all employees hired since January 1, 1984, either as ntv employees or as having less than 5 years of accumulated service (vith a break in service over one year) art included in the nev Federal Rmployet Retirement System (PERS). For such employees, the PSLIC vithhtld .94 percent of their gross earnings and matched those vithholdings vith a 12.86 percent contribution. This group of employees vi11 receive benefits from the FIBS, as vell as the Social Security System, to vhich they concurrently contribute. The retirement expenses incurred for all plans during the periods ended August 8, 1989 and December 31, 1988 vere $2,025,133 and $2,323,854 respectively. Although the FSLk funded a portion of pension benefits under both of the above Retirement Systems relating to its employees and made the necessary payroll vithholdings from them , the PSLIC did not account for the assets of either retirement plan nor did it have actuarial data with respect to accumulated plan benefits or the unfunded pension liability relative to its employees. These amounts are reported by the Office of Personnel Htnagtmtnt for both Retirement Systems and art not allocated to the individual employers. The Office of Personnel Ranagement accounts for all health and lift insurance programs for retired federal employees. 15. Least Commitments - At the beginning of 1989, FSLIC vas leasing office space i five Washington D.C. locations. FSLIC’s rental expenses for the period t:ding August 8, 1989 vere $5.2 million. As a result of FIRMA, FSLIC’s lease obligations vere transferred to various FIRRRA mandated agencies. Page 31 GAO/AFMB90-79 Federal Savings and Loan Insurance Corporation Financial Statements 16. Litigation - As of August 8, 1989, FSLIC vas named in numerous legal or administrative actions vhile serving in its corporate, receivership, or conservator capacities. Currently, it is not possible to predict the eventual outcome of the various actions. Hovever, it is management’s opinion that these claims will not result in liabilities to such an extent that they will materially affect the FSLIC’s financial position. 17. Reserves - As of August 8, 1989 and December 31, 1988, the Corporation’s Primary Reserve consisted of the following: 8/8/89 12/31/88 (in thousands) Balance: Beginning of Period $ (74,991,090) S (13,690,220) Net Loss (13,415,354) (65,950,870) Capital Stock 105.500 367.500 Capital Certificates 1,544;500 Balance: End of Period asizmla Title III, Section 304 of CEBA authorizes the FSLIC to issue equity in the form of redeemable non-voting Capital Stock and non-redeemable Capital Certificates. The non-voting Capital Stock is issued in an mount equal to the aggregate investment by the PBLBanks in the Financing Corporation. The Financing Corporation is the sole purchaser of both the Capital Stock and Capital Certificates, and proceeds paid to the FSLIC from that purchase are included as part of its Primary Reserve. The FSLIC was prohibited from paying any dividends to the Financing Corporation on the Capital Stock or Certificates. Page 32 GAO/AFMD-8@79Federal Savinga and Loan Insararw ! +mwation Financial Statements 18. Supplementary Cash Flov Information 8/8/89 12/31/88 (in thousands) Noncash Investing Activities: Increase in SLL Stock S 1,225 S 48,000 Increase in Collateralized Advances due from Receivers 234 Decrease in Collaterlized Loans * (30,0000) (70,000) Increase in Loans to Receivers 0 10 Increase in Other Loans to Insured Institutions 73,433 Decrease in Income Capital Certificates (47,49Y) (1,227,730) Decrease in Net Worth Certificates * (8,875) (53,825) Total Noncash Investing Activities (85,147) (1,229,878) Noncash Financing Activities: Increase in Notes Payable 50,419 16,599,901 Decrease in Notes Payable - FBLR * (30,000) (70,000) Total Noncash Financing Activities 20,419 16,529,901 Total Noncash Investing and Financing Activities S (64.728) S 15.300.023 Cash paid during the year for: Interest Expenses sl. 120.991 s 466.531 * 1988 presentation vas revised to conform vith GAAP. Page 33 GAO/AFMD-90.79 Federal Savings and Loan Insurance t’wpwation . Requests for copies of GAO reports should be sent to: U.S. General Accounting Office Post Office Box 6015 Gaithersburg, Maryland 20877 Telephone 202-275-624 1 The first five copies of each report are free. Additional copies are $2.00 each. There is a 25’0 discount on orders for 100 or more copies mailed to a single address. Orders must be prepaid by cash or by check or money order made out to the Superintendent of Documents.
Financial Audit: Federal Savings and Loan Insurance Corporation's 1989 and 1988 Financial Statements
Published by the Government Accountability Office on 1990-07-17.
Below is a raw (and likely hideous) rendition of the original report. (PDF)