oversight

Thrift Resolutions: Estimated Costs of FSLIC's 1988 and 1989 Assistance Agreements Subject to Change

Published by the Government Accountability Office on 1990-09-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

THRIFT
RESOLUTIONS
Estimated Costs of
FSLIC’s 1988 and
1989 Assistance
Agreements Subject
to Change



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                   united
                     states
GAO                General Accounting office
                   Washington, D.C. 20648

                   Comptroller General
                   of the United States

                   B-2403 13

                   September 13,199O

                   To the President of the Senate and the
                   Speaker of the House of Representatives

                   Section 501 (f) of the Financial Institutions Reform, Recovery, and
                   Enforcement Act of 1989 (FIRREA) requires us to report to the Congress
                   on the costs of assistance agreements entered into by the Federal Sav-
                   ings and Loan Insurance Corporation (FSUC)from January 1,1988,
                   through August 9, 1989.’ These agreements provided financial assis-
                   tance to the acquirers or FsLIc-selected new management of insolvent
                   thrifts. Since August 1989, the Federal Deposit Insurance Corporation
                   (FDIC) has been responsible for monitoring and making payments on all
                   FSLIC assistance agreements. This report presents the results of our
                   review of R)IC’S March 3 1, 1990, and FSLIC’Sinitial estimates of total
                   payments to be made under these agreements. As required by the act,
                   we will be issuing follow-up reports on the costs of these agreements in
                   1991 and 1992.


                   As of March 31, 1990, EDIC estimated that the 96 assistance agreements
Results in Brief   FSLIC   entered into during 1988 and 1989 would ultimately require
                   $67 billion in payments to acquirers or new management. Of this
                   amount, $58 billion had yet to be paid as of March 31, 1990. FSUChad
                   initially estimated these agreements would cost $61.9 billion. We did not
                   develop our own estimate of agreement costs.

                   Projecting assistance agreement payments requires forecasting condi-
                   tions which cannot be predicted with certainty over the term of the
                    agreement. For example, estimating losses to be paid when real estate
                    related assets covered by the agreements are disposed of requires pro-
                   jecting local real estate market conditions and their effect on the assets’
                   values. Estimating payments to be made prior to asset disposition
                   requires projecting future interest rate levels and the assets’ financial
                    performance prior to disposition. Estimating either type of payment
                    requires predicting the effects FDIC’S asset disposition strategies will
                   have on asset values. Actual payments after March 31, 1990, will be
                   more than $58 billion if real estate markets are worse than FDIC pro-
                   jected, interest rates are higher than the levels forecast by FDIC, and


                   ‘FIRREA also requires us to examine and monitor all insolvent thrifts resolved during this time
                   period. We have separately reported the results of these efforts in Failed Thrifts: FDIC Oversight of
                   1988 Deals Needs Improvement (GAO/GGD-90-93, July 19,1QQO).



                   Page 1                                                         GAO/AFMD-Ml         Thrift   Resolutions
             B-240313                                                                                       >




             asset disposition strategies are not as successful in maximizing values as
             FDICanticipates.

             Finally, costs other than assistance payments are being incurred as a
             result of these agreements-most significantly, decreased federal tax
             revenues. FSLIC estimated in early 1989 that the tax implications of the
             agreements will provide $8.5 billion in tax benefits. FSLIC estimated,
             however, that under tax-sharing provisions contained in many agree-
             ments, about $4.3 billion of the $8.5 billion would be used to reduce
             assistance payments. Agency legal expenses and various monitoring and
             oversight costs are also being incurred.


             Until August 1989, when it was abolished by FIRREA, FSLIC insured the
Background   deposits of its member savings associations. FSLIC, as insurer, was
             responsible for resolving insolvent institutions when its operating head,
             the Federal Home Loan Bank Board, or another chartering authority
             declared them insolvent. During 1988, when faced with a backlog of
             institutions with deficit capital positions, FSLIC and the Bank Board
             increased their reliance on providing long-term financial assistance to
             acquirers of insolvent thrifts. In 1988 and 1989, FSLIC resolved 199 insol-
             vent institution@ with 96 assistance agreements. Due to the costs of
             these and other resolution actions, and its liability for insolvent but still
             operating savings associations, FSLIC ended operations with an $87 bil-
             lion deficit.

             FSLIC'S losses and the continuing problems in the savings and loan
             industry contributed to FIRREA'S enactment on August 9, 1989. The act
             abolished FSI,IC and the Bank Board and established the FSLIC Resolution
             Fund, which FDIC administers, and the Resolution Trust Corporation
             (RTC). All of FSLIC'S assets and liabilities, except those assumed by RTC,
             transferred to the Fund. If the Fund is unable to pay its obligations,
             including those under the agreements, from the sources provided by the
             legislation, the act authorizes the Secretary of Treasury to fund the
             shortfall through appropriations. RW is responsible for resolving all
             thrifts placed into conservatorship or receivership from January 1,
              1989, through August 9, 1992. FIRREA also requires RTC to review all
             means by which it can reduce the costs of the assistance agreements. RTC


             20f these 199 insolvent institutions, 18 did not have an acquirer. Rather, FSLIC combined them into 6
             new thrifts, brought in new management, and agreed to provide financial assistance to stabilize their
             operations until permanent acquirers could be found. The costs of these interim actions are included
             in this report because they are part of total resolution costs for these 18 institutions.



             Page 2                                                        GAO/AFMD-90.31     Thrift   Resolutions
                        expects to send the results of its review to the   RTC   Oversight Board by
                        mid-September.

                        The assistance agreements generally committed FSLIC (now FDIC) to fund
                        the acquired institutions’ reported negative net worth, provide capital
                        loss coverage on certain assets (referred to as “covered assets”), and
                        ensure that the acquirer receives a guaranteed yield on those assets
                        until they are disposed. According to FSLIC'S initial estimates, these three
                        types of assistance account for more than 90 percent of the agreements’
                        total costs. The larger agreements typically had terms of either 5 or
                        10 years.

                        Appendixes I, II, and III provide background information on the assis-
                        tance agreements. Appendix I describes each major assistance compo-
                        nent in additional detail and discusses other significant assistance
                        agreement provisions. Appendix II lists the 96 assistance agreements,
                        FSLIC'S initial total cost estimate for each agreement, the insolvent insti-
                        tutions resolved by each agreement, and the total assets, in aggregate, of
                        the insolvent institutions covered by each agreement. Appendix III
                        presents FSLIC'S initial cost estimates for the major provisions of the 20
                        assistance agreements that were selected for detailed review.


                        To meet the legislative requirement to report on the costs of FSLIC’S1988
Objectives, Scope,and   and 1989 assistance agreements, we (1) determined how FSLIC and FDIC
Methodology             estimated the costs of the agreements, (2) identified factors that could
                        cause the estimates to significantly change, and (3) determined whether
                        costs other than assistance payments were being incurred.

                         To gain an understanding of how FDICand FSLIC estimated the costs of
                        the agreements, we interviewed FDIC officials and obtained summaries of
                        FSLIC'S initial and FDIC'S most recent cost estimates. Cost estimates pre-
                         pared by both FSLIC and FDIC only considered assistance payments under
                         agreement provisions. To identify factors impacting projected payments,
                         we reviewed the projections and determined, primarily based on addi-
                        tional interviews with FDIC officials, what would cause actual payments
                         to significantly change. Finally, we identified and quantified, based on
                         discussions with FDIC and our understanding of the agreements, any
                        other costs related to the agreements that were being incurred. Our anal-
                        ysis of costs other than assistance payments was generally limited to
                         actual amounts incurred through December 3 1,1989, and amounts pro-
                        jected for 1990.



                        Page 3                                        GAO/AJ?MD-90-31   Thrift   Resolutions
                           B-240313                                                                    ,




                           We judgmentally selected 20 of the highest cost assistance agreements,
                           based on initial estimates, for detailed review. These 20 agreements
                           represent approximately 87 percent of FSLIC'S initial cost estimates for
                           all 96 agreements. For this sample, we reviewed assistance agreement
                           documentation and detailed assistance payment projections in order to
                           gain an understanding of significant agreement provisions and associ-
                           ated costs.

                           We did not attempt to independently estimate the costs of the assistance
                           agreements. Instead, we reviewed the type of assistance provided
                           acquirers and the processes and information FSLIC and FDIC used to esti-
                           mate total assistance payments. We also did not review any payments
                           made through March 31,1990, to determine if such payments complied
                           with the terms of the agreements.

                           We conducted our review at FDIC locations in Washington, D.C., from
                           October 1989 to August 1990 in accordance with generally accepted
                           government auditing standards. We discussed a draft of this report with
                           FDIC officials and have incorporated their views where appropriate.



                                   initially estimated that the 96 assistance agreements would cost
FSLIC’s Initial Cost       FSLIC
                           $6 1.9 billion-$5.1     billion less than FDIC'S March 3 1, 1990, estimate of
Estimates   were   Lower   total cash payments to be made. However, FSLIC'S initial cost estimate
Than FDIC’s                for one large agreement, the New West/American Savings Bank agree-
                           ment, was not a projection of total payments over the term of the agree-
                           ment. Rather, FSLIC'S initial $1.7 billion estimate for this agreement
                           equaled the estimated cost to liquidate the insolvent institution less
                           acquirer concessions. FDIC believes that if total cash payments had been
                           initially estimated by FSLIC for this agreement, that estimate would have
                           been $4 billion. Accordingly, $2.3 billion of the total overall difference
                           results from the different methods FSLIC and FDIC used to determine the
                           cost of the New West/American agreement.

                           FSLIC'S initial estimates were developed when it and the Bank Board
                           were considering whether to approve individual assistance agreement
                           proposals. The final amount of the initial estimate was usually prepared
                           shortly after the individual agreement was approved. Lacking extensive
                           knowledge on the condition and quality of assets covered by the agree-
                           ments, FSLIC'S cost estimates assumed covered asset disposition dates
                           and prices based on FSLIC'S projections of regional real estate market
                           conditions. F-SLIC also projected future interest rate levels as part of its



                           Page 4                                         GAO/-99-81     Thrift   Resolutions
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                              B-240313




                              cost estimation processes. Changes to these factors have also caused
                              FDIC’Sestimates to differ from FSLIC’S.


                                   estimated that as of March 31, 1990, total cash payments, including
FDIC’s Latest Estimate        FDIC
                              principal and interest payments on negative net worth and other notes
Subject to Further            issued in connection with the agreements, would be $67 billion.
Modifications                 Appendix IV provides actual and projected cash payments as of
                              March 31, 1990, for each of the agreements selected for detailed review
                              and provides the same information, in aggregate, for the other 76 agree-
                              ments. As indicated in the appendix, $9 billion in payments had been
                              made through March 31, 1990, leaving an estimated $58 billion of pay-
                              ments yet to be made. FDIC estimates that payments to be made after
                              March 31, 1990, when computed on a present value basis, represent a
                              current cost of $39.1 billion,

                              However, three related uncertainties will significantly affect the actual
                              payments to be made after March 31, 1990. First, regional real estate
                              markets will determine the value of most covered assets, directly
                              impacting actual capital losses. Second, future interest rate levels will
                              determine the amount of interest payments and guaranteed yield levels.
                              Finally, the success of FDIC’S covered asset management and disposition
                              strategies in maximizing values, and thereby minimizing costs, will also
                              significantly affect actual payments.


Real Estate and Interest      FDIC  estimates that the guaranteed value of all covered assets was
Level ChangesCould            approximately $35.2 billion at March 3 1, 1990. Insolvent institutions in
                              the southwest and certain areas of California held the majority of these
Significantly Affect Future   assets. FDIC projected it would pay $10.8 billion in capital losses on these
Payments                      assets after March 31, 1990. The value of real estate related covered
                              assets3 will primarily be determined by regional real estate market con-
                              ditions. FDIC officials estimate that over 80 percent of all covered assets
                              at March 31, 1990, are real estate related. The value of these covered
                              assets directly impacts actual capital losses to be paid. Future real estate
                              values are difficult to accurately predict. Should actual covered asset
                              disposition values change by even 1 percent from FDIC’S March 31, 1990,
                              projections, capital loss payments would increase or decrease by about
                              $240 million.

                              3Real estate related covered assets includes (1) loans and investments secured by primarily commer-
                              cial properties, (2) foreclosed commercial or residential properties, and (3) subsidiaries which hold
                              these types of assets, when the acquired institutions’ investment in the subsidiary became a covered
                              asset. This definition considers undeveloped land to be commercial property.



                              Page 8                                                        GAO/AFMD-90-81 Thrift Resolutions
                              B-240313




                              Estimating guaranteed yield and note interest costs requires projecting
                              future levels of the indexes on which these payments are based.
                              Common indexes include regional cost of funds rates for savings institu-
                              tions and Treasury borrowing rates. These indexes generally parallel
                              changes to prevailing interest rate levels. FDIC projected that $13.1 bil-
                              lion in yield maintenance payments and $14.1 billion in note interest
                              payments would be made after March 31, 1990. Such projections involve
                              subjectivity and uncertainty, particularly when projecting payments
                              beyond 1 year. Accordingly, such costs will continue to be revised over
                              the term of the agreements. If, for instance, the actual cost of funds to
                              thrifts for any year changes by 100 basis points (1 percent), note
                              interest payments for that year would increase or decrease by
                              $164 million.


Covered Asset Disposition     The manner in which FDIC allows the assisted institutions to manage and
Strategies Will Also Affect   dispose of covered assets will also significantly affect payments related
                              to covered assets. Asset management plans detailing management’s
Total Payments                intended disposition strategies are required for all covered assets with
                              relatively high guaranteed values or large projected losses. These plans
                              document how the asset will be managed until disposition and provide
                              estimated disposition dates and values. The assistance agreements
                              require acquirers or new management to prepare such plans for FDIC
                              review and approval. FDIC intends to ensure the assets are being pru-
                              dently managed in a manner which minimizes overall agreement costs
                              during the review and approval process. Most plans were in the process
                              of being approved when FDIC made its March 31, 1990, estimate. The
                              asset management plans will generally be updated annually. Changing
                              market conditions could cause changes to covered asset disposition
                              strategies,

                              Management’s primary disposition options for real estate related cov-
                              ered assets are (1) pursuing collections from the borrowers under cur-
                              rent or modified loan terms, (2) foreclosing on covered loans and selling
                              the collateral, and (3) selling covered loans and investments. FDIC can
                              also require management to write down assets under most agreement
                              terms or can purchase covered assets at guaranteed values under agree-
                              ment call options.4 FDIC’S assessment of current regional real estate
                              market conditions and future trends will determine its approval deci-
                              sions on real estate related covered assets. For example, if FDIC does not
                              expect the value of an asset to improve significantly, a write-down,

                              4Call provisions are described in more detail in appendix I.



                              Page 6                                                         GAO/AFMD-O-81 Thrift Resolutions
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     4

                            E240318




                            which triggers an immediate capital loss payment, could minimize total
                            costs by reducing yield maintenance payments. Should values be
                            expected to increase, the most cost-effective disposition strategy could
                            be to pursue collection from current borrowers or foreclose on covered
                            loans and sell the collateral. If FDIC purchases covered assets, which
                            would terminate yield maintenance payments, the cost implications
                            associated with government management of the assets would have to be
                            considered. The outcome of the options FDIC ultimately decides on for
                            individual assets will significantly impact total payments.


Other Factors Will Affect   Six other factors or uncertainties could also impact total payments:
Future Payments             (1) the actual yield on covered assets, (2) negative net worth amounts
                            which have not yet been finalized, (3) whether notes are paid prior to
                            maturity, (4) unforeseen lawsuits which could arise from indemnifica-
                            tions contained in the agreements, (6) tax benefits actually realized by
                            acquirers or new management, and (6) the effects of certain FIRREA
                            provisions.

                            To project future yield maintenance payments, FDIC must estimate the
                            actual future yield of covered assets. Actual yields will be affected by
                            asset disposition strategies and real estate market conditions, among
                            other things. Differences between actual and projected yield amounts
                            would directly impact yield maintenance payments.

                            Negative net worth notes had not been finalized on many agreements as
                            of March 31, 1990. In most cases, the note amount is subject to FDIC
                            review and approval of limited scope inventory audits of the insolvent
                            institutions. These audits determine the amounts by which the insolvent
                            institutions’ liabilities exceeded the recorded values of their tangible
                            assets as of the agreement dates. Based on either preliminary or final
                            results of audits relating to 23 agreements, FDIC’S March 31, 1990, cost
                            estimate included $1.9 billion for additional negative net worth note
                            principal above FSLIC'S initial estimates. Additional adjustments to the
                            negative net worth notes will likely occur as more audits are completed,
                            FDIC expects to have final note amounts determined on all but 6 agree-
                            ments by the end of August.

                            FDIC is currently considering paying off negative net worth and other
                            notes issued in connection with the agreements prior to maturity. FDIC'S
                            March 31, 1990, estimate assumed all notes would be paid at maturity.




                            Page7                                         GAO/AB’MD&Ml   Thrift Resolutions
5240313




Prepaying these notes would significantly reduce total assistance pay-
ments because additional interest payments would not be made. How-
ever, such action would require Treasury funding. Therefore, Treasury’s
borrowing costs would have to be considered when determining the
actual amount of savings to be realized.

Indemnifications contained in the agreements expose FDIC to potential
litigation costs not included in its March 31, 1990, estimate. The amount
included in FDIC’S estimate is, for the most part, based on information
supplied by the institutions receiving assistance. However, currently
unforeseen lawsuits related to the indemnifications could arise. For
instance, seven assistance agreements covering 18 insolvent institutions
contain provisions which indemnify acquirers against any expenses
attributable to toxic waste or hazardous conditions on real estate assets.
FDIC could incur significant legal fees and liabilities in defending against
unforeseen litigation arising from these indemnification provisions.

Payments after March 31, 1990, will also be affected by the amount of
tax benefits actually realized by acquirers or new management. FDIC did
not estimate tax-sharing benefits on all agreements containing such pro-
visions. Accordingly, FDIC could receive more benefits than anticipated
in its March 31, 1990, estimate.

Total payments under these agreements could also be affected by
FIRREA’S strengthened capital requirements, The Office of Thrift Super-
vision (ars) determined that 27 assisted thrifts did not meet the new
capital standards as of December 31, 1989. FIRREA requires any institu-
tion not meeting the new capital standards to submit to the ors a plan
outlining how it intends to comply with those standards. Twenty-one of
the assisted institutions submitted such plans to CYEin January 1990.
FIRREA grants ors broad enforcement powers over such institutions,
including the authority to impose a receivership or conservatorship if it
finds the institution to have “substantially insufficient capital.” Receiv-
ership or conservatorship actions on assisted institutions could increase6
because ors has taken the position that FIRREA eliminated the capital for-
bearances@provided most assisted institutions in connection with the
assistance agreements. Under these capital forbearances, the Bank
Board agreed not to take regulatory or supervisory enforcement actions


“Four assisted institutions have been placed into conservatorship through July 31, 1990.
“Capital forbearances are described in more detail in appendix I.



Page 9                                                        GAO/AFMD-90431 Thrift Resolutions
                             if, under certain conditions, assisted institutions did not meet capital
                             requirements.

                             FDIC  is considering, but has not adopted, a formal policy on whether
                             assistance payments terminate when 0~s appoints RTC as conservator or
                             receiver for any assisted institution. Agency officials indicate that pay-
                             ments have continued to the four assisted thrifts placed into conserva-
                             torship through July 31, 1990. Terminating assistance payments to
                             assisted institutions in conservatorship or receivership would reduce
                             total payments under these agreements. However, losses that would
                             have been funded with the assistance payments remain and would be
                             part of the cost of resolving the failed institutions.

                             FIRREA  also requires RTC to review these agreements and exercise all
                             legal rights to modify, renegotiate, or restructure them where savings
                             would be realized by such actions. RTC began awarding contracts pri-
                             marily to public accounting and law firms in April 1990 to review FSLIC'S
                             1988 and 1989 assistance agreements. Modification or renegotiation of
                             any agreement by RTC should reduce its ultimate cost.


Additional Costs Are Being   In addition to assistance payments, other costs have been incurred
Incurred                     under these agreements. Reduced federal tax revenues are the most sig-
                             nificant of these costs. Fees for contracts to monitor the assistance
                             agreements, inventory and compliance audits performed by accounting
                             firms, and agency legal services are also being incurred.

                             Total federal tax revenues will be reduced as a result of the tax benefits
                             associated with the agreements. The level of tax benefits retained by
                             acquirers was an integral component of agreement negotiations. These
                             tax benefits primarily arise from three factors. First, assistance pay-
                             ments made under these agreements are excluded from taxable income.
                             Second, the full value of assets to the acquired institution carries over to
                             the new thrift. Because these values are generally higher than actual
                             market values, tax losses will be created when the assets are sold. These
                             tax losses will offset any other taxable income of the thrift or, in certain
                             situations, the taxable income of the thrift’s holding company. Finally,
                             the net operating losses accumulated by the insolvent institutions can
                             generally be used to offset future taxable income of the assisted institu-
                             tions. A FSLIC study completed in February 1989 estimated that total tax
                             revenue reductions over the term of the agreements would be $8.5 bil-
                             lion. Tax-sharing provisions in the agreements require some tax savings
                             to be passed on to FDIC in the form of reduced payments. FSLIC estimated


                             Page 9                                         GAO/AFML%99-81   Thrift Resolutions
                                                                         .
B240318                                                                      >




that $4.3 billion in assistance payment reductions would be realized over
the term of the agreements.

FSLIC (now FDIC) has contracted out certain oversight and monitoring
tasks. More than $20 million in costs for the services of asset manage-
ment and auditing firms were incurred through December 31, 1989. FSLIC
contracted with asset management firms primarily to review asset man-
agement plans and quarterly assistance payment requests. The audit
fees are for the audits used to determine negative net worth note
amounts. Once all audits on any individual agreement are completed,
FDICanticipates hiring public accounting firms to audit assistance
payments.

These oversight and monitoring costs continue to be incurred, although
FDIC expects some reduction in the later years of the agreements. FDIC
estimates that about $21 million in similar costs will be incurred during
1990.

Oversight and monitoring costs, whether contracted out or performed by
FDIC staff, would have been incurred with any other resolution action.
We did not attempt to determine if using assistance agreements resulted
in more oversight and monitoring costs than other resolution actions.

As with other resolution actions, a significant level of agency legal ser-
vices are being performed in support of these agreements. FDIC estimates
that approximately $143 million in agency legal services and expenses
has been incurred from the time negotiations on individual agreements
began through December 31, 1989. These costs are in addition to indem-
nification costs included in FDIC'S March 31, 1990, estimate. FDIC esti-
mates that $100 million in agency legal expenses will be incurred during
1990. Agency legal costs will continue to be incurred, although FDIC
anticipates they will diminish after 1990-barring     any large, currently
unforeseen lawsuits. FDIC believes agency legal costs for these agree-
ments are not significantly different from the agency legal costs that
would have been incurred in any other resolution action.


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 Secretary of the Treasury;
the Chairman of the Federal Deposit Insurance Corporation; the Execu-
tive Director of the Resolution Trust Corporation; and the President of
the Resolution Trust Corporation Oversight Board.


Page 10                                       GAO/AFMD-90-31   ThrifX Resolutions
    .
*

        ES-240313




        This report was prepared under the direction of Robert W. Gramling,
        Director, Corporate Financial Audits, who can be reached on (202)
        276-9406. Other major contributors are listed in appendix V.




        Charles A. Bowsher%
        Comptroller General
        of the United States




        Page 11                                    GAWAFMD-f)O-81 Thrift Resolutions
Contents


Letter
Appendix1
Structure andTerms
of Assistance
Agreements
Appendix II
Assistance
Agreements FSLIC
Entered Into
January1,1988,
Through
August9,1989
Appendix III                                                     27
Major Provisions of
FSLIC’s1988and1989
Assistance
Agreements
AppendixIV                                                       32
Actual and Projected
CashPaymentsasof
March 31,lQQO
AppendixV
Major Contributors to
ThisReport




                        Page 12   GAO/AF’MD-90431 Thrift Resolutiom
         Cmtente




Tables   Table III. 1: FSLIC’s Initial Estimates of Negative Net                    28
             Worth Note Principal and Interest Costs
         Table 111.2:FSLIC’s Initial Estimates of Covered Asset                     29
             Pool Size and Costs
         Table 111.3:1988 and 1989 Assistance Agreements                            30
             Providing FSLIC (Now FDIC) With Equity Rights
         Table 111.4:Forbearances Granted to Selected Acquiring                     31
             Institutions Receiving Assistance




         Abbreviations

         FDIC      Federal Deposit Insurance Corporation
         FIKKEA    Financial Institutions Reform, Recovery, and Enforcement Act
                       of 1989
         FSLIC     Federal Savings and Loan Insurance Corporation
         GAO       General Accounting Office
         HTC       Resolution Trust Corporation
         cm        Office of Thrift Supervision


         Page 13                                     GAO/AFMD-90.81 Thrift Resolutions
Appendix I

Structure and Temnsof AssistanceAgreement&


                     Appendix II provides information on the 96 assistance agreements I%IC
                     entered into during 1988 and 1989.’ While each assistance agreement
                     was structured to address the characteristics of the specific insolvent
                     institution(s) being resolved, most contained similar terms. In general,
                     acquirers agreed to take over the insolvent institutions, invested new
                     capital, and in return received assistance and guarantees.

                     Acquirers’ capital contributions were generally made in cash but occa-
                     sionally in real estate or other assets. Acquirers typically received
                     common stock for their contributions, but occasionally received pre-
                     ferred stock or subordinated debt. Preferred stock and subordinated
                     debt are included in regulatory capital but are generally excluded from
                     capital as determined by generally accepted accounting principles. Pre-
                     ferred stock and subordinated debt holders have less risk than common
                     stock holders.

                     Acquirers generally received some combination of the following kinds of
                     assistance and guarantees.


                           usually compensated acquirers for the negative tangible net worth
Negative Net Worth   FSLIC
                     reported by the insolvent institutions2 being acquired. This was com-
Assistance           monly called negative net worth assistance and was generally equal to
                     the amount by which the insolvent institution’s liabilities exceeded the
                     recorded value of its tangible assets. Subject to the negotiated terms of
                     each agreement, FSLIC issued an interest-bearing note for the amount of
                     the institution’s negative tangible net worth. Occasionally, FSLIC paid
                     negative net worth assistance in cash. FSLIC considered all initial cash
                     payments it made to acquirers as negative net worth assistance.

                     For most agreements, the negative net worth note amount was subject to
                     an inventory audit contracted and paid for by FSLIC (now FDIC). The
                     inventory audit determines negative tangible net worth by assuming
                     that all problem assets will recover historical cost. In some cases, the
                     note was based on the historical cost of the assets less any loss
                     allowances recorded prior to the agreement’s date. In other cases, the

                     ‘FSLIC actually approved more than 96 assistance agreements during this time period. However,
                     several of the agreements were superseded by later agreements that FSLIC approved. The original
                     agreements are not included in the count of 96 but their costs are considered as part of the agree-
                     ments that superseded them.
                     2The capital deficit reported by the insolvent institution typically was less than its actual deficit
                     because many losses on poor quality assets generally had not been recognized. These unrecognized
                     losses were addressed by capital loss coverage.



                     Page 14                                                         GAO/Al%lIMMl        Thrift   Redutlons
                           Appendix I
                           Structure and Terms of
                           Assietance Agreements




                           note was based on gross asset values. The note amount was higher when
                           based on net asset values and lower when based on gross asset values.
                           However, estimated costs for yield maintenance and capital loss cov-
                           erage, described below, are higher when the negative net worth note
                           was based on gross asset values and lower when based on net asset
                           values,

                           The negative net worth note carries a variable interest rate typically
                           based on the average cost of funds for all savings and loans in the same
                           region. The actual note rate is determined by adding a specific margin,
                           measured in basis points, to the average cost of funds. Agreements for
                           thrifts located in the southwest typically had margins ranging from 40
                           to 60 basis points, while margins on other agreements had a much wider
                           spread, ranging anywhere from 25 to 200 basis points. The notes gener-
                           ally mature at the end of the assistance agreement term, typically 3,5,
                           or 10 years, However, many notes can be paid prior to stated maturity
                           at FDIC’S option.

                           Table III.1 of appendix III provides the note terms, note interest rate
                           factors, and FSLIC’S initial estimates of the note principal and interest
                           payments for 19 of the 20 agreements selected for detailed review. One
                           agreement selected for detailed review did not include a negative net
                           worth note.


                           The poor quality assets of the insolvent institutions being acquired, gen-
Yield Maintenance and      erally real estate, nonperforming loans, performing loans considered to
Capital   hss   coverage   h ave a high risk of default, and some interest rate sensitive assets, pri-
                           marily mortgage backed securities that cost more than their current
                           value, were put into covered asset pools. Assets in covered asset pools
                           are subject to yield maintenance and capital loss provisions.

                           Yield maintenance guarantees acquirers that the covered asset pool will
                           collectively yield a specified variable rate for the term of the agreement.
                           The yield maintenance rate is typically determined by adding a set
                           number of basis points, as negotiated and documented in the assistance
                           agreements, to the average cost of funds for all savings institutions in
                           the same general geographical area. The amount of the spread over the
                           average cost of funds typically declines over the term of the assistance
                           agreements. Under capital loss coverage, acquirers are compensated
                           when the guaranteed value of any covered asset, generally its historical
                           cost, exceeds its disposition price.



                           Page 15                                       GAO/AF’MD-90-81   Thrift   Resolutions
                   Appendix I
                   Structure and Terms of
                   Assistance Agreements




                   Table III.2 of appendix III lists the indexes used to determine guaran-
                   teed yield levels and provides FSLIC’Sinitial estimates of the guaranteed
                   value of the covered asset pools, yield maintenance payments, and cap-
                   ital loss payments for 19 of the 20 agreements selected for detailed
                   review. One of the agreements only included negative net worth
                   assistance.


                   Many of the larger assistance agreements gave the acquirer up to 1 year
Put and Call       to “put” loans that become delinquent or other assets that exhibit poor
Provisions         quality characteristics into the covered asset pool, The size of the cov-
                   ered asset pool and generally the amount of estimated yield mainte-
                   nance and capital loss payments increased when acquirers exercised
                   these rights.

                   Many of the 20 agreements selected for detailed review allow FDIC to
                   “call,” or purchase, covered assets at their guaranteed value during the
                   assistance agreement term. Generally, exercising call provisions requires
                   FDIC to immediately fund, with a note or cash, the difference between
                   the asset’s current and guaranteed values. If the purchase is funded
                   with cash, FDIC will not have to make additional yield maintenance pay-
                   ments for that asset-reducing total assistance payments.3 On the other
                   hand, if FDIC uses a note to fund the call, it will pay interest costs that
                   could be as much as the yield maintenance payments it would otherwise
                   have paid.


                   As an incentive for assisted institutions to maximize the value of cov-
Gain-Sharing       ered assets, FSLIC included gain-sharing provisions in many assistance
                   agreements. These provisions allow the acquirer to share sale proceeds
                   exceeding a predetermined percentage of historical cost.


                   The assistance agreements also indemnified acquirers from certain other
Indemnifications   costs. The most common was indemnification from legal costs and liabili-
                   ties due to the actions of prior management or resulting from any chal-
                   lenges by prior management, creditors, stockholders and others to
                   FSLIC'S receivership actions. In addition, new management is not liable
                   under the agreements for any regulatory violations committed by pre-
                   ceding management. Some agreements also explicitly indemnify

                   “FDIC would need Treasury to provide the cash. Therefore, Treasury’s borrowing costs would have
                   to be considered when determining the actual amount of savings to be realized.



                   Page 16                                                    GAO/AFMJMO-81      Thrift   Resolutions
         .
     *

                           Appendix I
                           Struchwe and Terms of
                           Assistance Agreements




                           acquirers against expenses for toxic waste or other hazardous condi-
                           tions found on acquired properties.


                           Some agreements also included provisions that could reduce          FDIC’S   costs.
Provisions Reducing        Equity rights and tax-sharing are two such provisions.
Cost of Agreements

Equity Rights              Under some agreements, FDIC has received rights to purchase equity
                           instruments (typically common or preferred stock) in the assisted insti-
                           tutions, or its parent/holding company, at a future date. If the value of
                           the equity instruments exceeds the price at which they can be bought,
                           FDIC'S total costs will be reduced. Table III.3 in appendix III identifies all
                           1988 and 1989 agreements which provide FDIC with equity rights, the
                           period during which FDIC has the option to purchase the equity instru-
                           ments, and the percentage ownership FDIC would hold if all rights are
                           exercised.


Tax-Sharing                In many agreements, new management must return to FnIc some or all of
                           the tax benefits realized from the agreements, FDIC'S portion of the tax
                           benefits generally reduces its payments under other assistance agree-
                           ment provisions. The tax-sharing provisions vary by agreement. The
                           actual percentage of tax benefits to be provided to FDIC was negotiated
                           and is as high as 100 percent of all benefits realized. Under some agree-
                           ments, FDIC is guaranteed to receive a specific amount of tax-sharing
                           benefits.

                      -1
                           Typically negotiated in connection with the agreements were provisions
Forbearances               that the Bank Board would not take certain regulatory or supervisory
                           enforcement actions under certain conditions. Unlike the standard
                           agreement provisions described in this appendix, these provisions, com-
                           monly called forbearances, do not involve financial costs or savings to
                           FDIC. Rather, they provide acquirers with protection from specific regu-
                           latory or supervisory enforcement actions to which other institutions
                           are subject. The forbearances were documented in separate letters
                           rather than in the actual assistance agreements.

                           The Office of Thrift Supervision (errs) has been studying the impact of
                           FIRREAon these forbearances. Eight of the more common forbearances



                           Page17                                          GAO/AF’MD-@O-S1 Thrift   Resolutions
                        Appendix I
                        Structure   and Terms of
                        Assistance Agreements




                        are described below. As indicated in the following section, urs
                        announced a position on capital and accounting forbearances in January
                        1990. ors advised us that all other forbearances remain in effect until
                        their study is completed. However, urs also advised us that capital
                        plans, required for any institution not meeting FIRREA’S more stringent
                        capital standards, will not be accepted if the plans are dependent on the
                        continuation of forbearances granted in connection with the agreements.

                        Table III.4 of appendix III indicates which of the eight forbearances
                        described below were granted in connection with 18 of the 20 agree-
                        ments selected for detailed review. Office of Thrift Supervision staff
                        were unable to provide copies of executed forbearance letters for two of
                        the agreements.


Capital Forbearance     Under this forbearance, the Bank Board agreed not to take regulatory or
                        supervisory enforcement action if, under certain conditions, the assisted
                        institution did not meet minimum regulatory capital requirements. This
                        forbearance only applied when (1) the regulatory capital deficiency was
                        due to the assets, liabilities, or negative net worth acquired from the
                        insolvent institution, and (2) the acquirer had maintained the specific
                        capital levels required by the forbearance letter.

                        In January 1990, ors took the position that FIRREA eliminated capital for-
                        bearances granted to assisted institutions. Since announcing its position,
                        urs has been, and continues to be, involved in a series of court challenges
                        to the new capital standards and its position on the capital forbearances.
                        For example, in one case,4a federal district court ruled that a forbear-
                        ance letter granting a capital forbearance was not a contract because it
                        contained an escape clause which allowed the Bank Board to rescind the
                        forbearance under certain conditions. In another case,6a federal district
                        court ruled that ars, as successor to the Bank Board, was bound by the
                        contractual terms of an agreement containing a capital forbearance and
                        that FIRREA did not abrogate the agreement.


Liquidity Forbearance   Federal liquidity regulations establish the minimum amount of liquid
                        assets, generally cash and securities that can be quickly converted to

                        4Flagship Federal Savings Bank v. Director, Office of Thrift Supervision, No. 90-0079 GT (S.D. Cal
                        Feb. 14, 1990).

                        ‘jFar West Federal Bank v. Director, Office of Thrift Supervision, No. 90-103-PA (D.C.Ore. May 14,
                        199Q).



                        Page 18                                                       GAO/AFMD-90-81      Thrift   Resolutions
     t

                          Appendix    I
                          Structure   and Terms of
                          Adstance      Agreements




                          cash, a savings institution must have and empowers um to levy mone-
                          tary penalties if those levels are not maintained. The liquidity forbear-
                          ances reduced required liquidity levels, typically for 1 to 3 years
                          depending on the agreement, by the sum of the acquired institution’s
                          liquidity deficiency plus net withdrawals from branch offices of the
                          acquired institution(s).


Equity Risk Forbearance   This forbearance provided certain exemptions from regulatory limits on
                          the level of equity risk investments that savings institutions can have.
                          Equity risk regulations limit the amount of certain equity securities an
                          institution can hold. Assisted institutions were generally given a specific
                          period of time to dispose of any excess equity risk investments resulting
                          from the acquisition.


Service Corporation       This forbearance provided a specific period of time to allow acquirers to
Forbearance               dispose of service corporations, or subsidiaries, which cause the institu-
                          tion to exceed regulatory limits on the amount that can be invested in
                          subsidiaries or whose operations are not permitted by the institutions’
                          charters.


Qualified Thrift Lender   Under the qualified thrift lender forbearance, typically granted in agree-
Forbearance               ments covering insolvent institutions in the southwest, the Bank Board
                          considers the assisted institution to be a qualified thrift lender, as
                          defined in the National Housing Act of 1934, if the institution no longer
                          complied with the definition because of acquired assets. To be a quali-
                          fied thrift lender, an institution must maintain investments in housing
                          related assets exceeding a specific percentage of its total tangible assets.
                          Qualified thrift lenders can receive, within certain restrictions, Federal
                          Home Loan Bank advances with appropriate collateral. Savings institu-
                          tions failing to comply with the qualified thrift lender definition have
                          more limited access to Federal Home Loan Bank advances.


Loans to One Borrower     Various regulations limit the amount institutions can lend to one bor-
Forbearance               rower. The Bank Board agreed that it would not take regulatory action
                          on loans to one borrower violations provided the loans causing the viola-
                          tion were from the acquired institution. However, no additional loans to
             Y
                          the borrower could be made.




                          Page 19                                       GAO/AFMD=90-81   Thrift   Resolutions
                         Appendix I
                         Structure and Terms of
                         Assistance Agreements




Accounting Forbearance   Numerous accounting forbearances were granted in connection with the
                         agreements. These forbearances allowed the assisted institution to
                         include, for regulatory capital purposes, certain items that would not be
                         considered capital under generally accepted accounting principles. Some
                         of these provisions also allow acquirers to consider assistance agree-
                         ment payments and guarantees to be fully collectible when determining
                         regulatory capital, even if accounting standard-setting bodies in th.e pri-
                         vate sector decide that such amounts should not be considered fully
                         collectible.


Asset Classification     This forbearance addresses the poor quality, or classified, assets
Forbearance              acquired from the insolvent institution(s). Acquirers were granted a spe-
                         cific period of time to work out or dispose of such assets. During that
                         period, they would not be denied the ability to engage in certain other-
                         wise allowable activities even though the level of classified assets would
                         normally preclude such activities.




                         Page 20                                      GAO/APMD-90-81   Thrift   Resolutions
               1




Appcn&x II

Assbtice AgreementsFSLIC Entered Into
January 1,1988, Through August 9,1989

Dollars in millions            __- __---_ .----                        .--
                                                                                                                        Initial estimate of                          Assets of
Acquirer/institution      receiving                                                                Effective date of             total cash                  merged/acquired
  a8sistancea                                         Acquired institution(s)b                            agreement_I__-         payments                         institutionP
Agreements With Acquirers                                     --____-._.-.                                                                                                      -__
Home FSLA (Rockford)                                   First FSLA-----(Freeport)                                 01/27/88--                   $14.7                               $30.4
                                                                                                                                            -___
Atlantic Financial Federald/                           Traders FSLA                                              02/l O/88                     72.2                               706.8
   Atlantic Financial Federal-                         Magnet Bank, FSB
   WVA, FSB                                            Mountain State FSLA                                                                   ~_.-...--~.---_-._~-__
PrF;&eInvestor/Great    West SB,                       First FSLA                                                0311o/a8                        3.1                               30.1
                                                                         -..-~ . --. -_--.---_--
The Statesman Group/                                   First FSB                                                 03/l 1/a0                       167.8                            560.6
  Sgzsman Bank for Savings,                            Perpetual SLA
      0                                                Peoples FSLA
                                                       First Federated SB
Sterling SA                                            Tri-Cities SLA                                      04/11/88                            17.3                                53.8
Lemont SA                                              Citizens SLA                                        0411 i 188                           6.5                                38.6
Home FSLA of Upper East                                Valley FSLA               _______                   04/l 2100                            7.1                                88.1
  Tennessee           .~~                         -.. -___-.--~ --- . ~~..--. ----..-___             ________                               _I____--             ..-.---.----
Coastal Bane SA                                        Colorado County FSLA                                05/i 3188                          237.2                              456.3
                                                       Security SLA
                                                       Cameron County SLA
                                                       Alliance SLA
Southwest SAC                                          Lamar SA                                                  05/i 8188                  3,727.3                             4,094.o
                                                       Briercroft SA
                                                       City SLA
                                                       Stockton SA                                            .-.-____.--~~
Rantan Valley SLA/ Hansen SB,                          First FSLA (Hammonton)                                      05/25/E@                       71.5                           244.8
   SLA                  _.                            --.-..--          -..~~- _~ _._~.
First Savings of Brenham/ Frrst                        Bluebonnet SA                                             05/26/88                          9.9                             24.3
   FSB of Hempstead                                                                                                              _____
America First Financial                               Eureka FSLA                                                05/27jaa                        269.6                          1,762.5
   Corporatron/Eureka FSLA                                                                                            I_..  -__
Local Investor Group/                                 Muskegon FSLA                                              06/02/88                          4.0                         211.8
   Amenbank, FSB                                                                                                 06/06/aa ._____--._                 .-.--      --.__       ._.._
Bailey Mortgage Co./ Savetrust                        Frontier FSB                                                                                 9.6                           46.4
   FSB                                                                         --.-~~__--__-.            .-
Merabank FSBd/ Merabank                              First Financial SA (El Paso)                              06/22/88                          162.5                           354.9
   Texas, FSB’                                       Brownfield FSLA                                         ___.                        ____
America First/Eureka FSLA.-‘.                        Stanford SA                                         _I____06/24/88                    -__     8.1-_.__-~                    76.0
                                                                                                                                                                          ~ ~..-~~ ~~~~
Golden West Financial Group/                         Lynwood SLA                                               06/24/88                            5.4                           24.0
   World SLA of America FSLA ..-~ -               ..___-          .__... ...__. ..~_____.          __-                                                                --..-.---     -
Pr;;teal~;egStors/River Valley                       Galva FSLA                                                  07/28/88                         34.5                          170.3
                                                     Home FSLA (Peoria)
                                                     Mutual
                                                        .___ SLA --- .~-.--__- .“._                                   __---__-
River Valley SB, a FSB _..-. -. ~--.._-. ..._.....- Republic     Savings FSLA
                                                         -- .----..         -.                                   07/28/88                         17.8
                                                                                                                                                 ___--._--.__.-.                   36.5
Private Investors/First FSB                          First FSLA (Longview)                                       00/02/0a                          9.4                             80.3
   Northwest
                                                                                                                                                                        (continued)




                                                            Page 21                                                                GAO/AFMD90431             Thrift     Resolutions
                                                     Appendix II
                                                     Awi~tanee Agreementa FBLIC Entered Into
                                                     January 1,1999, Through Ayluet 9,1989




                                                                                                       Initial estimate of               Assets of
Acquirer/institution         receiving                                            Effective date of             total cash       merged/acquired
  aasiatance.                                    Acauired institutionWb                  agreement              payments              institution@
United Savings of America
---___-.-~-                                      First FSLA (Taylorville)                  08/l O/88                   2.7                           36.1
Standard FSLA (Chicago)                          Capitol Federal Savings of                08/l l/88                  12.7                          2556
                                                 America
First FSLA of Lincoln-Iowa                       First FB, FSB                             08/l l/88                  12.2                           47.0
                                                 Western FSLA
Gi;r;:gup,             Inc./ American            Gladewater FSLA                           08/l 8188              2,399.2                       2,168.6
                                                 Commerce FSLA
                                                 Irving SA
                                                 Majestic SA
                                                 Richardson SLA
                                                 Mercury SA
                                                 Longview SLA
                                                 Ben Milam SLA
                                                 Paris SLA
                                                 American Bane SA
                                                 Southland SA
.-..         .--.._.        ~-                   Skvline
                                                     ,   SA                                                                                   --
Merabank FSiY/ Merabank                          State FSLA (Lubbock)                      08/26/88                1,466.4                          454.3
  Texas, FSB’                                                                                                                             ___-.-
Metrpolitan FSB/ Metropolitan                    Washington FSB                            08/26/88                 626.4                          1,085.8
                                                 Pioneer FSLA
                                                 First FSLA (Brainerd)
                                                 First FSLA (Hibbing)
                                                 First FSLA (Grand Rapids)
                                                 Peoples SLA                                                                               _.--~__.
Washington                                                                                                            2.4                          26.5
_       - ..-.  .FSLA
                   -_-~--~-~-                    Northwest FSLA                            08/26/88
Old Stone Bank of California, a                  Homestate SLA                             08/26/88                  40.1                        182.2
     FSB
Security Trust FSLA                              Commerce FSB                              08/26/88                   17.2                           40.2
First FSB & Trust __.--.-       ____I-           Citizens FSLA                             09;01;88                   (0.5)                          59.3
Secor S8I                 ----
                    -..- -____--                 Coosa FSLA                                09/06/88                   13.0                           76.6
KW Bankshares Inc./First FSB                     First FSB                                 09/07/88
                                                                                             I                        25.4                          122.4
-. ._of Rogers            ’ .._._____-
           ..I _ ._.._l__.._
United Savrngs of America                        Fidelity FSLA                             09/08/88                    3.6                  __.. 40.1
                                                                                                                                                    -.~
Puke Diversified Co., Inc./                      Bay City FSLA                             09/09/88                1,029.7                       642.5
     Heights of Texas, FSB                       Gulf Coast SLA
                                                 Heights SA
                                                 Allen Park FSLA
Washington
Home             FSLA
         iSLAofRockford--.----          _____-   Freedom FSLA                              09/l 6188                 60.9                           307.0
Western .~SLA- --.- -_----.-.--                  Loves ParkFSB                             09/21/88                   5.0                            41.5
                                                 Bell FSLA                                 09/23/88                 695.8                  -931.9
    .._._.....
           -. ... . . - _-----
Pulte Diversified Co., Inc./First                Champion SA                               09 /23/88                978.3                           661.7
    Heights, FSA
Union Holding Company/ Union                     Arsenal SA                                09123188                   36.39                         1616
    FSB of Indianapolis
               - _---.._-_           --
Union Holding Company/ Union                     Frankton PSLA                             09/23/88                          9                       30.7
    FSB of Frankton           ”
Downey       SLA/Butterfield     SLA             Butterfield SLA                           09/29/88                 386.3                         517.2
.-.. ___.._._. -...-__-..- ._------     -.-                   -___
                                                                                                                                           (continued)



                                                     Page 22                                               GAO/AFMD-90-91        Thrift    Resolutions
        I


                                                       Appendix II
                                                       Anahtauce Agreementa EBUC Entered Into
                                                       January 1,1999, Through Auguat 0,1989




                                                                                                             Initial estimate of           Assets of
Acquber/institutlon     receiving                                                        Effective date of            total cash   merged/acquired
  assistance’                                    Acquired lnstltution(s)b                       agreement             payments          institutionsC
Americana
_^_          SB, ‘~s~~“~~~-~~---‘~-~~--~-
                  ._ _.                          Citizens FSLA (New Castle)                      09/30/88                    5.4                    52.4
Club Corp. International/                              Great West SB                             09J3OJ88                1,872.2                 1,210.B
    l$rrklin Federal Bancorp, a                        Creditbanc SA
  .                    ..~ .~.-- ---__--_              Franklin SA
First FB, a FSB                                        United SA of Central Indiana FA           09/30/88                   9.3                     60.4
Tracy SLA,. FA                                         Adobe SB                                  09 J3OJ88                  3.0                     46.4
Temple.lnland/ Guaranty FSB                            First FSLA (Austin)                       09/30/88               3,325.0                  3,051.4
                                                       Delta Savin s of Texas
Maco Bancorp,FirsiFSB.~~- -....-- -....                Guaranty F .YLA
                                                       1st FSB of Indiana                        1O/02/88                  28.8                    340.3
   Indiana                                             Capital FSLA
Republic SB, FSB                                       First FSLA (Mayfield)                     10/12/88                  25.2                     51.5
Adam C&p. GroupjAm-~~~tSA-------                       Olney SA                                  10/14/88               2,625.2                  3,677.3
                                                       Security FSLA
                                                       First FSLA (Amarillo)
                                                       San Angelo SA
                                                       Odessa SA
                                                       Southwest SLA
                                                       Bane Home SA
                                                       Southern SLA
                                                       Heart O’Texas SA
                                                       Shamrock FSB
                                                       Petroplex SA
F&ttzancorporation/      Peoples                       Peoples FSB                               1O/25 J88                 34.9                    368.6
                                                _____l---
Crossland Savings, FSB .-. .._.-__- ~-.---___          Reliance SLA                              11JO2188                  11.8                     62.0
First
-. .  Nationwrde   Bank
                   -    - ---. .~...._-.._~_I_         Lincoln FSLA                              11/04/88                 186.6                  1,242.6
Private Investors/Flagship FSB                         Flagship FSLA                             11JlBJ88                  23.6                     97.8
“. ” .,
Amencrty FSB                                           Tesoro SLA                                1l/19/88                 281.7                    251.1
Liberty Capital, Inc./ Southside                       The South Side SLA                        11J3OJ88                  10.4                     57.3
   SB, FSB
Private Investor Group/                                MidAmerica SB                             12/l 2188                  14.0                   256.5
   MidAmerica SB, FSB
Frrst Western SA                                       Eastern Washington SLA                    12/14/88                   2.0                     50.2
Pacific First FSLA/ Pacific First                      American Home Savings FSB                 12/15/88                 224.6                    788.7
   FSB                                                 Community First FSLA
Frrst FSLA of Lincoln                                  Rooks County SLA                          12Jl5J88                  19.5                     25.5
Rocky Mountain Financial                               Rocky Mountain FSLA                       12/16/88                 211.1                    505.7
   Corp./Rocky
First            Mountain
      Nat,onwide-FSB           FSB
                         ..-. .._.
                                 - .-- ..._.---..-     United SB of Wyoming
                                                       First Dearborn, FA                        12/l 6108                256.3                    869.5
                                                       Bloomfield SLA, FA
Go&West        Financial CorpJ                         Ohio Valley SLA                           12/l 7J88                 83.7                    312.0
   World SLA of Ohio                                   First Border SB
                                                    -____-
                                                                                                                                            (continued)




                                                      Page 23                                                    GAO/AFMD-90-31    Thrift   Resolutions
                                                                         Appendix II
                                                                         Aaeietance Agreements WLIC Entered Into
                                                                         January 1,1988, Through August 9,198B




                                                                                                                           Initial estimate of           Assets of
Acquirer/institution         receiving                                                                Effective date of             total cash   merged/acquired
  assistance’                                                       Acquired institution(s)b                 agreement              payments          institutionsC
CT;    (F&p., Inc./ Bluebonnet                                      ;;;~;lW;IIs    SLA                         12,22,88               3,377.7                 1,803.a
                                                                    Mesquite SLA
                                                                    First Western SLA
                                                                    Commodore SA
                                                                    First FSLA
                                                                    Sentry SA
                                                                    Vista SA
                                                                    Lamesa FSLA
                                                                    Interwest SA
                                                                    Southern Federal Bane, SLA
                                                                    Reliance SA
                                                                    NorthPark SA
                                                                    Metroplex FSA
                                                                    Hi-Plains SLA, FSA
Crtrcorp Mortgage, Inc./ Citicorp                                   Glen Ellyn FSLA                            12,22,88                  21.7                     69.1
  Savrnas of Illinois. a FSLA
MNC   Fi;anc,al   ,nc,,   V,rginia-~ss....-.--------~irginia-FSLA                                              12,23,88                   13.5                  685.2
Barne’tt Banks’lnc./Barnett Bank ~~~~~~~~~~~~~~~~~~~~~~~~~~~~                                                  12127188                    4.9                  254.6
   of SW Georgia
McAndrews and Forbes/ First                    Gibraltar SA                                                    i 2,27,88              8,890.7               11,404.8
   Gibraltar Bank, FSB                          First Texas SA
                                                Killeen SLA
                                                Home SA
                                                Montfort SA
                                                                                                                                                        ___--
Coast to Coast Financial Corp./ -~--~-.----.----Lyor-rsSavings FSLA                                            12,28,88                 538.1                 1,485.O
   Suoenor Bank. FSB
Metropolitan. FB                                First FSB
                                      . ..__.---_       _--.. ..-..-...---.--                                  12,28,88                 124.4                  262.4
NVRyan LP/NVR SB, FSB                           McLean SLA FSLA                                                12,28,88                  77.2                  287.1
Robert M. Bass Group/New                       American Savings, a FSLA                                        12,28,88               1,699.0h              30,142.l
   West FSLA & American SE.
   FA
Cttrzens FB, a FSB                             American SB                                                     12,29,88                 203.3      ._-_---..-...- 891.8
Pacific USA Holdings/ Pacific                  First FSLA                                                      i 2,29,88              1,282.4                   832.8
   Southwest Bank, FSB                         Yoakum FSLA
                                               Seguin SA
                                               Charter SLA
                                               Union SA
                                               IndependenceSLA
                                               Keystone SLA
                                               Bayview FSLA
Centex Corporation/ Texas                      Peoples SLA                                                     i 2,29,88                657.3                   318.0
  Trust SB, FSB                                Burnet SLA
                                               Lee SA
                                               Ranchers
                                              ---.-.-   _.. SA-
Local FSLA/ Local Amencan                      First Oklahoma SB                                               12,29,88                 126.0                   541.9
  Bank of Tulsa FSB                            Mid America FSLA
Jackson County, FSLA                           Jackson County FSLA            -                               12,30,88                   77.4                   275.5
Northwest FSB            *                     Northwest FSLA (Spencer)                                       I 2,30,88                 109.9                   170.1
                                               Home FSLA (Spencer)
                                                                                                                                                        (continued)




                                                                         Page 24                                               GAO/AFhID-90-81   Thrift Resolutions
                                                                 Appendix II
                                                                 AssWance Agreements FWX Entered Into
                                                                 January 1.1988, Through August 9,198B




                                                                                                                 Initial estimate of           Assets of
Acquirer/institution receiving                                                               Effective date of            total cash   merged/acquired
  assi8tanctP
  _“”_ .I“... _ .--..-.--__I_                                Acquired institution(s)b               agreement             payments          institutionsc
First Nationwide FSB’                                        Cardinal FSB                            1Z/30,08               2,802.7                  7,943.5
                                                             Columbia a FSLA
                                                             Pathway Financial FA
  ._                                                         Mile High FSLAr
Western
 .._    FSB
        _-. of _Montana
                     --________ --                           Great Fails FSLA                        12,30,88                  11.5                    129.0
Home FSLA                                                    Columbus SLA FSLA                       12,30,88                 356.4                    557.7
                                                             Cal America SLA FSLA
                                                             First Security FSLA
Southeast Banking Corp.,                                     South Florida FSLA                      12,30,88                  29.0                  1,342.3
  So&theast Bank for Savrngs, a
                             .-_---.-.
Golden West Financial/ Beach                                 Beach FSLA                              12,30,88                1,906.O                 1,156.7
   FSLA, SB,
           _. FSB.._.__- .- ._.____..-
                                    --
Hy e$;sn ;;sners/lJnited      SA of                          United SA of Texas                      12,30,88               2,201.g                  4,412.B
   f     ,
Northwest FSLA                                               Capital FSB                             12,30,88                 141.9                    315.4
First Network So’- _.... . ---.-.--                          Mutual FSLA (Oklahoma City)
River Val,ey. sB.~ss -.-.-. ~--.--                           Tahoe SLA FSLA                          1213l/88                  57.3                     46.8
                                                             Peoria SLA                              12,31,88                  31.2                    176.4
ca$$nia      FSLA/California                         FB, a   Broward FSLA                            12,31,88                 252.4                    549.7
i$i/h;gan    Natjonal‘Corp./.-----‘-.---‘-~r~-~~~A
                                                                                                     12/31,88               1,769.6                  1,190.l
 .- _Beverly
       .-     . Hills__FSB
                        ._-,--.-__-_----
Home  .   FSLA     of._-
                       Sioux-_ Falls
                         ._....  .-.. .._____- ___           United Federal SLA                      12/31/88                   8.0                     93.4
Private Investor/First Cook Bank                             Cook County FSLA                        02,03,89                 147.9                    227.3
    for Savings, a FSA                                       First American SLA
First Tropical SB FSB/ First                                 Tropical FSLA                           04/l 3189                  12.1                    55.0
 -,..Florida
           ..-_SB,
                “_. FSB
                     ..-_---.--.---.-_____
Total for 1989 and 1999                                                                                                  $48,854.3               $97,977.8
  agreements with acquirers

Stabilizationsk
Sunbelt Savings, FSB                                         Federated SLA                           08/l 9,88             11,421 .O                 9,387.2
                                                             Multibanc SA
                                                             Sunbelt SA
                                                             Summit SA
                                                             Texana SLA
                                                             First City SA
                                                             Western FSLA
                                                             independent American SA
Cimarron FSLA                                                Home SLA                                08/31,88                 709.5                    967.5
                                                             Phoenix FSLA
                           ._....__..._---                   Cimarron FSLA
Red River FSLA                                               First FSLA Elk City)                    08/31,88                 258.9                    514.4
                                                             Peoples FSI A (Ardmore)
                                                             Home SB, FA
                                                             Heritage SLA (Elk City)
                                             ”                                                                                                  (continued)




                                                                 Page 26                                             GAO/AFMD-BO-81    Thrift   Resolution
                                                Appendix II
                                                heiatance  Agreement33 FSLIC Entered Into
                                                January 1,1@88, Through August B, 1989




                                                                                                              Initial estimate of                 Assets of
Acquirer/lncltltutlon         receiving                                              Effective date of                 total cash         merged/acquired
   a88latance*
_.-.-
   ___._
       -.--___.--__                       Acquired institution(s)b                          agreement                  payments                institutior@

Chisholm       FSLA                       Kin fisher FSLA                                       OS/31 188                     105.2                       195.0
.._....- .__.__....
                 --- -... -               Sun % elt Savings FSLA
Heartland
.- -___ .-_-..- FSLA-.---                 Frontier   FSLA                                       OS/31 100                     503.9                     1,147.5
Total for 1988 and 1989                                                                                                 $12,998.5                   $12,211.6
._.stabilization
   --- -...--    agreements
Total for All 1988 and 1989                                                                                             $61,852.8                  $110,188.2
   Aweements
                                                Legend
                                                FA - Federal Association
                                                FB - Federal Bank
                                                FSA = Federal Savings Association
                                                FSB - Federal Savings Bank
                                                FSLA = Federal Savings and Loan Association
                                                SA - Savings Association
                                                SB = Savings Bank
                                                SLA = Savings and Loan Association
                                                aWhere two entities are shown, the first is the acquirer and the second is the institution owned by the
                                                acquiring entity that is receiving assistance payments. If only one entity is shown, it is both the acquirer
                                                and the assisted institution.
                                                bCity names have been added in parentheses to distinguish between some similarly named institutions.
                                                CRepresents total assets as reported on the last Thrift Financial Report prior to the effective date of the
                                                assistance agreement. The agreements generally provided assistance on some portion of these assets.
                                                The amount of assets covered by assistance provisions is shown on table III.2 of appendix III.
                                                dThese acquirers, which are savings and loans, were in conservatorship      as of July 31, 1990
                                                eThese institutions receiving assistance were in conservatorship    as of July 31, 1990
                                                ‘Merabank Texas was the assisted institution under two different assistance agreements. In appendixes
                                                Ill and IV, Merabank Texas, FSB includes both assistance agreements.
                                               QUnion Holding Company acquired Arsenal SA and Frankton FSLA on the same day. Although each
                                               acquisition is a separate assistance agreement, FSLIC prepared one initial estimate of total cash pay-
                                               ments covering both agreements.
                                                hFSLIC did not estimate total cash payments for this agreement; instead, this amount is FSLIC’s esti-
                                                mated liquidation costs for American Savings less acquirer concessions.
                                                ‘Institutions currently receiving assistance under this assistance agreement are Columbia, a FSLA;
                                                Pathway Financial, a FA; and Cardinal FSB. Mile High FSLA was merged into Columbia, a FSLA. Two of
                                                these institutions will subsequently be merged into First Nationwide FSB; the other, Columbia, a FSLA,
                                                will remain a separate institution.
                                                iMile High FSLA was created by FSLIC on December 9, 1989, to acquire the insured deposits and a
                                                portion of the assets of Silverado Banking, SLA.
                                                kThese five agreements had no acquirer. Rather, FSLIC brought in new management and agreed to
                                                provide financial assistance to stabilize their operations until acquirers could be found.


                                                Source: FDIC records




                                               Page 26                                                             GAO/APMD-90-81         Thrift   Resolutions
*p*endix’*11
Maor provisions of ISLE’s 1988 ayld 1989
Assistawe Agreements                                   l




               The following tables present, for informational purposes only, FSLIC'S
               initial cost estimates and other information related to the major provi-
               sions of the 1988 and 1989 assistance agreements. Tables 111.1,111.2,and
               III.4 include details on the provisions of our judgmentally selected
               sample of 20 assistance agreements. Table 111.3includes all 1988 and
               1989 assistance agreements which provided FSLIC (now FDIC) with equity
               rights.

               The following abbreviations are used in the tables for this appendix:

               Legend

               FA = Federal Association
               FB = Federal Bank
               FSA= Federal Savings Association
               FSB = Federal Savings Bank
               I?%A = Federal Savings and Loan Association
               SA = Savings Association
               SB= Savings Bank
               SLA = Savings and Loan Association




               Page 27                                       GAO/AFMD-90431   Thrift   Resolutions
                                             Appmdix III
                                             Major    Pmvlsiona   of FSLIc’s    191 and 1888
                                             AseletanceAgreements




Table 111.1:FSLIC’a lnltlal Estimates of Negatlve Net Worth Note Principal and Interest Costs
Dollars
“-l.l-,l in..-_I_~
             millions
                                                                                                                      Estimated               Estimated
                                                                      Term                   Interest                  principal                interest
lnrtltutlon
I--_-_    ._------receiving arbirtance                               Wars)                       rate0                  balance               payments
American        Federal Bank, FSB
...-._I__-..._-_-_                                                         10             TXCOF+40                        $535.7                   $472.6
AmWest,
__..______.    SA
              -_-..-                                                       IO             TXCOF+GO                          303.4                   297.2
Beach ._.--
---        FSLA, ~_ SB, FSB                                                 5          1 lDCOF+l75                        1,002.4               -~  903.6
Beverly Hills FSB
.____ ___..,...__
                ------                                                     10          ’ ‘DcoF+2Y                           793.9                    810.1
Bluebonnet
-..--_.- .-.- --.  SB FSB                                                  10             TXCOF+45                          836.7                    807.1
First   Gibraltar
- -__ -_-             Bank, FSB                                            10             TXCOF+SO                          865.6                    804.9
First   Nationwide
-_--_.---               FSBb                                               10                TBill+25                     1,199.g                    947.9
Franklin
-I_------    Federal    Bancorp, a FSB                                     10             TXCOF+GO                          264.4                    259.0
Guaranty        FSB
_-__-.-. ..-.-~..                                                          10             TXCOF+40                          710.1                    681.5
Heights of Texas, FSB
-_.-...---                                                                 10             TXCOF+40                          311.8                    326.9
Merabank -~Texas, FSB
~..__                                                                      10                 TXCOF                         187.6                    158.2
New
----- West FSLA                                                            10               7 percent                       250.0                    175.0
Pacific
..-.-     .-Southwest Bank, FSB                                            10             TXCOFt50                          161.7                    150.4
Southwest
_.-.-_._--       SA                                                        10             TXCOF+40                          569.7                    510.2
Sunbelt
.-__--_.---  Savings,    FSBc                                              10             TXCOF+50                        2,459.8                  2,260.8
Superior Bank FSB                                                          10            7DCOFtl40                          205.0                    106.0
Texas
----      Trust SB, FSB                                                    10             TXCOF+50                          221.2                    205.7
.-._...._. SA
United           0-m
             --.-_-                                                        10             TXCOFt50                          261 .O                   242.7
Western FSLA                                                                5               TBillt175                       492.5                    136.2

Total selected agreements                                                                                              $11,632.4               $10,256.0
01 her 1988 and 1989 aareements                                                                                           2.442.3                  18732.7

Total 1966 and 1969 Agreements                                                                                         $14,074.7               $11,988.7
                                             Legend
                                             TXCOF = Texas cost of funds: Average cost of deposits and borrowings for savings institutions in Texas
                                             as determined by the Federal Home Loan Bank of Dallas.
                                             DCOF = District cost of funds: Average cost of deposits and borrowings for savings institutions as
                                             determined by the Federal Home Loan Bank Districts. The number preceding the DCOF represents the
                                             district, with 7 representing Chicago and 11, San Francisco.
                                            TBill = Treasury Bill rate: Published Treasury borrowing rate as specified by the assistance agreement.
                                             Vrterest rates are enerally comprised of a base factor plus a spread, measured in basis points-l
                                             basis point is l/10 8 th of a percent. When basis point spread is represented in the form x/y, x is the
                                             initial spread and y is the ending spread.
                                             blnstitutions currently receivin assistance under this assistance agreement are Columbia a FSLA;
                                             Pathway Financial, a FA; and e ardrnal FSB.
                                             CSunbelt Savings, FSB, was in conservatorship     at July 31, 1990.
                                             Source: FDIC records




                                             Page 28                                                               GAO/~-!Wf31       Thrift   Resolutions
               .
           .

                                                      Appendix Ill
                                                      Major Provisions of FsLIC’s            1988 aud 1989
                                                      Aselstance Agreements




Table 111.2:FSLIC’a Initial Estimate8 of Covered ASbet Pool Size and Costs
EZiars in milllons
                                                                                                                                      Estimated
                                                                                           Covered                                   guaranteed          Estimated
                                                                                         as8et pool          Guaranteed yield               yield       capital loss
Institution receiving assistance
                         __-.--_-.--                                                     book value                     levela        payments            payments
American Federal Bank, FSB                               -                --.                $1,889           TXCOFt275/160                $617.3 --___ $752.2
AmWest SA                                                                                     2,144           TXCOF+250/120                 726.3            996.8
Beverly                                                                                                      11DCOF+250/150                  96.1            --181.4
        HIIIs FSB                                                                               765
 . “.             .._ -.
Bluebonnet SE%FSB                                        ---      ---           ___-          1,648           TXCOF+235/173                 762.2            946.4
Eureka FSLA                 ~.
                                                                                   -.-          150               1 IDCOF+12                 17.9         __-.- 9.5
l&t Gibraltar B&k, F$8-‘-- _-~---~                                                            4,115           TXCOF-t225/150              2,007.8          2,819.7
First NationwIde FSBb                                                                         4,760              11DCOFt250                 453.4--------    482.3
FrankIln Federal .~ancolpla-~~~--------~----                                      _--.-__       914           TXCOFS250/185                 496.0            471.9
Guaranty ofFSB
He,ghts     Texasl Fss --...-. .._- ____  -_             -                                    1,617           TXCOF+240/170                 523.8            578.8
                                                                -                               946           TXCOF+250/155                 164.6            218.4
Merabank
New   West Texas,
           FSLA . FSB
                    ..~ ..- - _...._.--..- ~-~            ..--                                  344           TXCOF+250/160                 163.2            279.0
                                                                                                    c                            c                c                  c
                  .
Pacific Southwest Bank, FSB                                         -____.~-                    564           TXCOFt260/185                 254.6              388.7
Southwest SA                                       ____-.___________^
                                                                                              2,944           TXCOF+275/200                 826.8            1,820.6
Sunbelt Savings, FSBe                          _I_____-_- -..__- -.                           5,231           TXCOF+220/135               2,423.g ..____ 4,067.3
                                                                                                                                                               - .-
Superior BankFiB         ..- _ . - --.--_-~-                                                    504              7DCOF+275                  168.5               19.3
Texas Tr”st se.,~FSB                                ___.-- .__....-___.___-                     329           TXCOFt250050                  110 .o -----rGii
United SA of T&as. F$E- .-_...._ ---‘--~--
                                    _-- ._.___--______        -__                             1,598           TXCOFt220/180                 684.3              921.6
Western FSLA          .--                                                    -_-                375              TBill+250/150          ___-I_80.2              35.9
                                                                                                                                                             .--__.-.

Total selected agreemented                                                                  $30,837                                    $10,578.9          $15,130.4
Other 1988 and 1989 agreements                   ____-         ___.-_..                       3,629                                       1,040.i            1,263.0

Total 1988 and 1989 Aweementsd                                                              $34,468                                    $11,617.0          $16,393.4
                                                       Legend

                                                      TXCOF = Texas cost of funds: Average cost of deposits and borrowings for savings institutions in Texas
                                                      as determined by the Federal Home Loan Bank of Dallas.
                                                      DCOF = District cost of funds: Average cost of deposits and borrowings for savings institutions as
                                                      determined by the Federal Home Loan Bank districts. The number preceding the DCOF represents the
                                                      district, with 7 representing Chicago and 11, San Francisco.

                                                      TBill = Treasury Bill rate: Published Treasury borrowing rate as specified by the assistance agreement

                                                      *The guaranteed yield level is usually comprised of a base factor plus a spread, measured In basis
                                                      points. The basis point spread usually declines in even increments over the term of the assistance
                                                      agreement. Some agreements provide a guaranteed yield level for each specific category of covered
                                                      assets. In this table, when basis pornt spread is represented by x/y, x is the highest initial spread and y
                                                      is the lowest ending spread. The primary base factors used to determine guaranteed yield are
                                                      described in table 11.1
                                                                                                                                                        (contrnued)




                                                      Page 29                                                             GAO/AFMD-90-81       Thrift   Resolutions
                                        Appendix III                                                                                      l


                                        lb@jor Provisione of FSLIC’e 1988 and 1989
                                        Aasietance Agreements




                                        blnstitutions currently receiving assistance under this assistance agreement are Columbia a FSLA;
                                        Pathway Financial, a FA; and Cardinal FSB.

                                        ‘New West’s assistance agreement funds all losses on its assets. FSLIC did not initially estimate capital
                                        losses or yield maintenance costs. Therefore, New West’s $22.1 billion in covered assets is not included
                                        in this table. FDIC later estimated these amounts to be $2.0 billion and $1.6 billion respectively.

                                        dNot including New West. See c above.

                                        %unbelt Savings, FSB, was in conservatorship     at July 31, 1990

                                        Source: FDIC records


Table 111.3:1988 and 1989 Assistance
Agreement8 Providing FSLIC (Now FDIC)                                                                                                  Ownership
With Equity Rights                      Institution0                                       Exercise periodb                             (percent)
                                        American    SB. FA                                 i 2/28/98--c                                         30
                                        Americity   FSB                                    11/18/03-11/18/13                                    20
                                        AmWest SA                                          lO/l4/98-lO/l4/03                                    20
                                        Bluebonnet SB, FSB                                 12/22/94- 12/22/04                                   20
                                        Coastal Bane SA                                    05/l 3/93-05/l 3103                                  15
                                        First Gibraltar Bank, FSB                          12/28/88- 12/28/03                                   20
                                        Franklin Federal Bancorp, a FSB                    09/30/98-09/30/03                                    20
                                        Guarantv FSB                                       09/30/98-09/30/03                                    20
                                        Heiahts of Texas, FSB                              09/09/98-09/09/03                                    20
                                        Local American Bank of Tulsa, FSB                  12/29/93-d                                           IO
                                        Merabank Texas, FSB                                06;22;98-06/22/03                                    20
                                        MidAmerica SB. FSB                                 12/12/88-12/12/94                                       e
                                        Pacific Southwest Bank, FSB                        12/29/88-12129103                                    20
                                        Southwest SA                                       05131i98-05i31103                            -_I__   50
                                        Texas Trust SB, FSB                                12;29;93- 12;29;03                                   20
                                        United SA of Texas. FSB                            12/30/88-12129104                                    15
                                        aAll agreements which provided FSLIC (now FDIC) with equity rights are included, even if not in our
                                        judgmentally selected sample of 20 agreements, FDIC would own equity in the institution listed or a
                                        parent/holding company of that institution.
                                        bPeriod during which FDIC can exercise its option to purchase stock or other equity investment at a set
                                        price.
                                        CExercise period restricted to 10th anniversary date or December 28, 2003, if extended for 5 years

                                        dExercise period terminates at time of first exercise or surrender of warrants.
                                        BFifty percent ownership if warrants exercised during first 18 months; 20 percent thereafter

                                        Source: FDIC records




                                        Page 30                                                             GAO/AFMD-!M-81 Thrift Resolutions
           .
                                                         Appe*m
                                                         lb&jor Provido~       of FBLIC’s 1088   and 1989
                                                         Aseletanee     Agreements




Table 111.4:Forbearances Granted to Selected Acquiring Institutions Receiving Assistance

                                                                                 Type of forbearance granted0
                                                                                                          Loans to
Institution receiving                                                 Equi           Service    Thrift        one                                                   Asset
assistanceb
  ..-I”.-....- _... _-...--_l____         Capital     Liquidity         rls2     corporation lender      borrower                    Accounting            classification
Arn$r;an Federal Bank,
     -               -..._..*-_.-._~- .---.      X                X        X                X             X                                       X                          X
AmWest
   .         SA.._ _.... _-~                     X                X        X                              X                   X                   X                          X
Beach
    _._    FSLA,   SB,     FSB
                         .---                    X
Beverly t-Ii& FSB                                X                X        X                X                                 X                   X                          X
Bluebonnet
  ,_I _..       _SE, FSB ___.-_.---              X                X        X                X                                                     X                          X
Eureka FSLA                                      X                X                                                                               X
First
    ,,_ Gibraltar
          _     _.. Bank, _- FSB                 X                X        X                X                                 X                   X                          X
FrF;;;Federal            Bancorp,           --
      _        -. . .._..--.._ -_-_              X                X                         X             X                                       X                          X
Heights
  .-...__ - of Texas,
               . - . FSB                         X                X        X                X             X                   X                   X
Merabank
-. .      _    Texas,     FSB
                        ._.- --_---              X                X        X                X             X                   X                   X                          X
New West FSLA/
    Amencan
          _ . ..~SB,    FA
                   . ..._.                       X                X        X                X             X                                       X                          X
Pacific Southwest Bank,
    FSB
southwest       SA.- ..---_--_-_-__              xX               X        X                X             X                   X                   X                          X
                                                                  X        X                              X
Sunbelt Savings,
suDerior         FSBc
         Bank.Fse--                                                        X                X                                 X
                                                 X                X                                       X                                       X                          X
Texas Trust SB, FSB                              X                X        X                X             X                   X                   X                          X
                         ~-
UnIted SA of ~~x~s~l%%--                         X                X        X                X                                 X                   X                    _
?&stern .F$LA                                    X                X                         X                                 X                   X
                                                         %ee appendix I for further explanation of these forbearances. Other forbearances may have been
                                                         granted to the institutions in connection with the assistance agreements. This summary only indicates if
                                                         any of these eight forbearances were included.
                                                         bAuthoritative documentation of forbearances for two assistance agreements was not available; there.
                                                         fore, only 18 of the 20 agreements in our judgmental sample are included in this table.
                                                         CSunbelt Savings, FSB, was in conservatorship        at July 31, 1990.

                                                         Source: Office of Thrift Supervision documents




                                                         Page 31                                                                  GAO/AFMD9O-81       Thrift   Resolutions
  PW

izlkl and ProjectedCashPaymentsas of                                                                                                                    l




March 31,199O

Dollars In millions                                   --
                                                                                                                             Projected
                                                                                       FSLIC’s         Pay YE%                     cash                  FIX’s
                                                                                   initial total        throu 1 h           payments               revised tcoJt;
                                                                                           cost        March 1,            a ter March
Institution receiving_-_.-..-_
                       assistance
                             _.-.--.                                                estimates               1990               31,199o    -- estimates’
American Federal Bank, FSB                                                            $2,399.2             $489.9              $2553.0               $3,042.9
                                                                                                                                                   --___
AmWest SA                                                                              2,625.2               294.3              2,426.7
                                                                                                                        -___________.....              2,721 .O
                                                                                                                                                    -__-
Beach FSLA, SB, FSB                                                                    1,906.O               108.7              1,492.6
                                                                                                                             ~~~-..                     1,601.3
Beverly Hills FSB                                                                      1,769.6               156.9              1507.8                  1,664.7
Bluebonnet SB, FSB                                                                     3.377.7               221.6              3,072.g
                                                                                                                                  ___.-                3,294.;
Eureka FSLA-                                                                             269.6               401.6                 69.9                   471.5
Frrsl Gibraltar Bank, FSB                                                              8,890.7               924.7              8,583.3                9,508.O
Frrst Natronwrde FSBb                                                  ..___-          2,802.7               160.2              2,082.7        -____--
                                                                                                                                                -. 2,242.g
Franklin Federal Bankcorp, a FSB                                    ...___             1,872.2               206.8       -      1,510.g                 1,717.7
                                                                                                                                                       ---
Guaranty FSB                                                                           3,325.0               364.1              3,006.l                3,370.2
Heights of Texas, FSB                -.-   ~-.___--         ____-                      1,029.7                90.4                668.0    --___-         758.4
Merabank Texas, FSB                                                                    1,628.g               150.6              1,406.8      ---- 1,557.4
New West FSLA/AmericanSB,      FA                      ~~-.. --.                       1,699.O               273.7              4,978.8                5,252.5
                                                                                                                                                         _-
Paciftc Southwest Bank, FSB       ~~- -~--                                             1.282.4               127.8              1a303.6                 1,431.4
Southwest SA                                                                           31727.3               711.3              53350.0__--            6,061.3
Sunbelt Savings, FSBC                                                                 11,421 .O            1,167.l              9,062.8               10,229.g
Superior Bank FSB                                           .-._____                     538.1               110.7                533.8       _-___- 644.5
Texas Trust SB, FSB                                                                      657.3                94.0                628.2                   722.2
United SA of Texas, FSB                                                    --___
                                                                                       2,201.g               417.2              1.866.5                2,283.7
                                                                                                                                                 . ...--____
Western FSLA                                                                             695.8               192.4            -. 647.5             ..____ 839.9
Total selected agreements                                                           $54,119.3            $6,664.0            $52,751.9                959,415.g
Other 1988 and 1989 agreements            __--_--___---..                              7,733.4             2,345.8              5,276.8                  7,622.5
Total for All 1966 and 1969 Agreements                                              $61,652.7            $9,009.6            $56,026.7                $67,036.4
                                             Legend
                                             FA = Federal Association
                                             FB = Federal Bank
                                             FSA = Federal Savings Association
                                             FSB = Federal Savings Bank
                                             FSLA = Federal Savings and Loan Association
                                             SA f Savings Association
                                             SB = Savings Bank
                                             SLA = Savings and Loan Association
                                             aAs of March 31, 1990.
                                             %stitutions currently receiving assistance under this assistance agreement are Columbia, a FSLA;
                                             Pathway Financial, a FA; and Cardinal FSB.
                                             ‘Sunbelt Savings, FSB, was in conservatorship         at July 31, 1990
                                             Source: FDIC records




                                             Page 32                                                                  GAO/AFMD-90-81      Thrift    Resolutions
Apponddx V

Major Contributors to This Report


                      WI David Grindstaff, Assistant Director
Accounting and        Thomas K. Bradshaw, Audit Manager
Financial Management vera M. Seekins, Accountant-in-Charge
Division, Washington, Barbara  E. Billingsley, Staff Accountant
                      Kristin R. Wilson, Staff Accountant
D.C.                  Christina L. Quattrociocchi, Staff Accountant




(917487)                      Page 33                                 GAO/AFM.D-SO-31   Thrift   Resolutions
    i
.
--
     Orctt~ring Inforruat.ion

     The first five copies of each GAO repor are free, Additional    copit*s
     are $2 each. Orders should he sent to the following address, ~CCOIII-
     pauicd by a check or rnon~y order made out t,o the Superirrt~rldeI~t
     of Documents, when necessary. Orders for 100 or more copies to be
     mailed t.0 a single address are discounted 25 pf3cent..

     I:.S. Gent~ral Accounting Office
     I’.(). 130x 6015
     (;ait.hc~rsburg, MI) 20877

     Ortit*rs nliky also he pla~<l   by calling   (202) 2756241.