Resolving Failed Savings and Loan Institutions: Estimated Costs and Additional Funding Needs

Published by the Government Accountability Office on 1990-09-19.

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

                     United States General Accounting OERce /$/dd

kiA0                 Testimohy


For Release          Resolving   Failed Savings and Loan Institutions::
on Delivery          Estimated   Costs and Additional Funding Needs
Expected at
9:30 a.m. EDT
September 19, 1990

                     Statement   of
                     Charles A. Bowsher
                     Comptroller    General   of the   United   States
                     Before 'the
                     Committee on Ways and Means
                     House of Representatives


                                                                    GAO Form 160 (12~871
/   ’             Chairman         and Members of                  the Committee:

                  We are pleased                to be here                 today      to discuss             the      Resolution
        Trust       Corporation's               (RX)             funding           needs and the cost                   estimates             for
        resolving          failed       and troubled                     savings       institutions                which         were
        released          within       the     last         few months               by RTC, its             Oversight              Board,
        and the Congressional                        Budget          Office          (CBO).          In April,              we testified
        before       the Senate              Committee             on Banking,            Housing,             and Urban Affairs
        on the       need for          additional                 funds       to resolve             this      crisisl.                 At that
        time,       we stated          that         $325 billion               would      likely            be needed over
        43 years          to pay for           the      Federal             Savings       and Loan Insurance
        Corporation's                (FSLIC)         assistance               transactions,                 RTC resolution
        actions,          interest           on Resolution                  Funding       Corporation                 (REFCORP)
        bonds,       and establishment                      of     the      new Savings            Association                Insurance
        Fund.        We also         stated          that        costs       could      reach         $400 billion                 if
        additional          savings           institutions                  fail      or $500 billion                  if     the        economy
        suffers       a downturn              and interest                  rates      rise.

                  Since     that       time,        more institutions                     have been predicted                            to   fail
        and the old           FSLICtransactions                            are also       expected            to cost            more.
        Our revised           estimate          of      the        total       cost     now ranges               from        $335 billion
        to $370 billion.                     These     revised              estimates          are       in line          with      our
        earlier       predictions              of     how costs              could      easily           reach      $400 billion
        and $500 billion                if     the     economy starts                   working             against         you.          Also,
        these      estimates           do not         include            any interest              for       Treasury            borrowing.

        1Resol;ing          The Savings And Loan Crisis:   Billions      'More and
         Additional          Reforms Needed (GAO/T-AFMD-90-15,     April    6, 1990)
          We know of your                   interest            in the       total          funding          needs         and we
plan      to discuss           these         at the        end of our                testimony.               However,          we
would      first       like         to focus         on a significant                       piece      of     that         total-&the
estimated           cost      for      RTC resolutions.

          In our April               testimony,            we also           stated          that      funding             provided
by the Financial                    Institutions              Reform,         Recovery,              and Enforcement                    Act
of   1989 (FIRREA)                 would      not      be sufficient                  for     RTC to          resolve          known
problem       institutions.                   At that           time,        we estimated               that         RTC would
need at least               $100 billion,               or $50 billion                  more than              already
provided           by FIRREA,           to cover           resolution               costs,          administrative                  costs
and interest               on working           capital.              Recent         RTC quarterly                   funding
projections            and resolution                  cost      estimates             independently                  developed
by the Oversight                   Board,       RTC and CBO also                     show that               RTC will         need
substantial            additional             funds        to    resolve            troubled          institutions.

        To address             the      shortfall,              we recommended                 in our          April
testimony           that      the RTC Oversight                      Board     and the Federal                       Deposit
Insurance          Corporation               (FDIC)      develop          funding             proposals              for
congressional               consideration.                  The Administration                        has since              proposed
various       general          funding         mechanisms,               any of which                 will      resolve          RTC's
immediate          cash       flow      needs.          But a funding                 decision,               whether         short
term or long               term,      must     be made soon.                   It      is critical              that         RTC not
run out       of     funds         to resolve           problem          savings            and loan           institutions.
While     it is        important             that      we remain          vigilant             as we oversee                  the
cleanup               of    this         unparalleled            financial             crisis,             RTC must be given
the       funds            to proceed             expeditiously                since        prolonging                  the operations
of    insolvent                thrifts            will      add significantly                          to the          ultimate       cost.

           During            May and June,                  the Oversight                Board,            RTC, and CBO all
produced               estimates            of     the cost           ‘for     resolving                failed          and failing
savings               institutions.                  Although              we did      not        audit          these      estimates          or
examine           the        supporting              detail          for     all      the calculations,                        we did
discuss           the        individual              methodologies,                   the various                 assumptions,               and
the       financial                data     used with            the        responsible                analysts            at each
entity.                In general,                we found           that      the Oversight                     Board,        RTC and CBO
used similar                  methodologies                   and basically                 the         same financial                data     to
produce           present            value         estimates           of      resolution                costs.            The resulting
independent                  estimates             are    reasonably                 comparable               with       differences
due in large                  part         to the        number of             institutions                   considered             to be
resolution                  candidates             by the estimators.

           Defining                the     size      and composition                   of        the     universe           requiring
resolution                  has always             been a major                stumbling               block         to producing
comparable                  cost     estimates.                The Office              of Thrift                 Supervision            (OTS)
has recently                  developed              a method              by which         it     measures              the      relative
health           of        savings         institutions               and categorizes                     private           sector
thrifts           according                to their           resolution              probability.                     Before
commenting                  on the         specific           cost         estimates         of        the Oversight                Board,
RTC , and CBO, I will                             discuss       OTS's assessment                         of      the     industry's
health           which        provides             a foundation                for     comparing                 these      estimates.


           In July,              OTS released          industry            data     for, the quarter                 ended
March           31,   1990.         In an attempt              to define            the     universe         of      potential
resolution               cases,          OTS divided          the    2,505        remaining          private          sector
thrifts           into      four         groups     based upon their                 ability         to meet capital
standards,               their      prospects          for     future         viability,           and the           results         of
supervisory/regulatory                            examinations2.               As shown in the                 attachment,
the       various         groupings           are categorized                 as follows:

           --     Category          I institutions              comprise           half         the private           sector
                  industry          and hold         approximately                38 percent          of     its      assets.
                  This     group          is considered             healthy        and well         capitalized.
                  These        institutions            have a composite                    supervisory             rating       of    1
                  or 2 and are              allowed          reasonable           flexibility          to engage               in
                  activities              without      excessive            regulation            as long          as they
                  keep their              strong     capital         and low risk               positions.

           --     Category          II     institutions,             the     “near-healthy”,                 total
                  approximately               one quarter            of     the    industry         and hold           more

20TS has developed         a rating     system that reflects          its evaluation      of
 each institution’s         financial     condition,       compliance     with laws and
 regulations,      and overall       operating       soundness.     Each institution        is
 assigned a uniform composite              rating     based on an OTS evaluation.
 This overall       rating    is expressed        through use of a numerical          scale
 of “1” through         “5” in ascending order of supervisory                concern;    “1”
 indicates     the highest      rating    and least degree of concern,             while
 ” 5 ” is the lowest rating           and therefore       highest   degree of concern.
     than      30 percent           of     its       assets.                 These             institutions
     currently         meet or are expected                                  to meet capital
     requirements.                 category              II         institutions                  have composite
     supervisory            ratings          of 2 or 3 and are also                                     allowed
     reasonable            flexibility               as long              as capital                   continues             to
     improve        and risk           remains                low.

--   Category        III        institutions,                   about          one-eighth                of       the    total
     institutions               holding          14 percent                  of     its         assets,           are
     considered            ‘troubled”              with         poor         earnings              and low capital.
     Many institutions                    failed              the     new OTS capital                      requirements
     and had to submit                   capital               plans          for    approval.                 Most
     institutions               whose capital                   plans          are disapproved                      or who
     fail      to follow           their         approved               plans        are         relegated              to
     Category        IV.         The OTS composite                            supervisory                 rating         is
     usually        a 3 or 4 and,                  as a result,                     these          institutions                   are
     subject        to more regulation                          and tracked                     very     closely             to
     ensure       compliance             with        approved                capital             plans.            The future
     viability         of Category                 III         institutions                     is clearly              tenuous.

--   Category        IV institutions,                          one-eighth                 of     the      total         with
     18 percent            of    the      assets,              are given             little             or no chance                of
     continuing            in the private                      sector.              These          institutions                   have
     composite         supervisory                 ratings              of     5, the worst                   possible.
     Since       OTS is virtually                    certain              that       these             institutions                will
                    be transferred                     to     RTC, its             overriding           regulatory              concern             is
                    to reduce              the        eventual           resolution             cost.

          In addition                   to the          fo’ur       OTS private              sector          categories,               a fifth
group          of    savings            institutions                 are currently                   being      operated             under
government                control           while           awaiting          resolution.                These
conservatorship                      institutions                  were transferred                     to RTC because                      they
had negative                    capital,          were consistently                         unprofitable,                and/or         were
operating                in an unsafe                  and unsound             manner.               While      under      RTC
management,                conservatorships                        are operated               under          strict       policies
regarding                asset      sales,             high       risk       investments              and high           cost        funds.

          By grouping                   institutions                 according              to their          likelihood               of
becoming             resolution              candidates,                 OTS has created                     a useful           tool         for
defining             the size            and composition                      of     the potential                  resolution
universe             and for            producing             comparable               estimates.               In general,
current             estimates            produced             by the Oversight                       Board,         RTC and CBO can
be examined                 in terms             of     these        groups.            We found             that       when the
resolution                universes              are composed of                     the     same categories                    of
institutions                    being       resolved              over       the     same general               time      period,             the
resulting                cost      estimates                are    similar.

          It        is    important              to remember,                 however,           that        the condition                  of
the   savings               industry             is not           static.            Institutions               will,      and have,
moved from one to another                                    category          based on new quarterly
f inancJa1               data.           While          the       situation            is    fluid      and assumptions                       have

to be made as to how many from                              any category                   will       ultimately             have to
be resolved,            cost     estimates           reported             in terms            of      these         categories
will      make -it      easier        to track            and compare           future             estimates              and the
progress        made toward            resolving            this     crisis.


          From our       discussions              with      agency         analysts               and our           review         of
available           supporting        documentation,                 we determined                     that,         in general,
the Oversight            Board,       RTC, and CBO used similar                                   methodologies               for
calculating           their      present          value      resolution               cost         estimates.                All
three      relied      on December 31,                   1989,      financial               data       supplied           to OTS
by     individual        savings        institutions                as part           of      their         quarterly
reporting           requirement.            All      three         then      used this              data       to     calculate

the     tangible        net worth           (TNW)3 of            savings        institutions                   and to
determine           a “mark      to market”              writedown           in an attempt                   to prope.rly
reflect       the value          of   the     institutions’                 assets.                .The asset          wr itedown
was required           because,         as previous                experience               has shown with
resolved        institutions,            the quarterly                    financial               reports       consistently
and significantly                underestimate               asset         losses.

          Although       the asset          valuation              approach           was similar,                  the
Oversight           Board,     RTC and CBO stratified                         or grouped                the assets

3TNW equals tangible       assets                    (intangibles               such as goodwill                       are
 excluded)  minus liabilities.

    differently                and applied            different           mark down percentages                       based on
    previous          RTC experience                 , FDIC experience                  and/or       the        analysts’
    professional                judgment.             For example,               the    Oversight          Board          stratified
    assets        into         categories            such as cash and securities,                            mortgage             loans,
    and real          estate           owned.         Based on the               analysts’         judgment,              different
    loss     ratios            were applied             to each category                  under      three         different
    scenarios            representing                low level,           mid level,          and high             level       losses
    on expected                asset     sales.          RTC, on the              other      hand,      relied            on its
    actual        resolution             experience            through           May 1990 to calculate                       asset
    loss     ratios            by geographic             region.           The appropriate                 loss       ratio          was
    then     applied            to the        unstratified               asset     population          for         that
    geographic             region.            When comparing               comparable             universes,              much of
    the difference                between         the     low and high                 ends of       range. estimates                  is
    due to the differences                           inasset         writedowns.

             Although            the Oversight               Board,        RTC and CBO did                 not      produce
    estimates            for     all     of    the     categories           of     institutions              identified               by
    OTS, there            is some overlapping                      among groupings                 which          allows       for
    comparison.                 As shown in the                following           table,         the Oversight                Board
    and RTC estimated                    that,        at a minimum,               institutions             in
    conservatorship                    and in Category               IV would           require       resolution               by RTC
    at a cost         of        between        $89 billion               and $114 billion.                   If     additional
    institutions--               most of which               would        be in Category              III--are             also
    considered            probable            RTC resolutions,                   the Oversight             Board          reports
    costs     of between                $99 and $132 billion,                          For a similar               universe,           CBO
    present        value         estimates            range       from $90 billion                 to $150 billion.
The high        end of CBO's estimate                         includes             approximately              $20 billion
    for   the cost        of delaying        resolution                and allowing                 failed        and
troubled        thrifts        to continue              to     incur       losses           for     several        years.

                                       COMPARISON OF UNIVERSES
                                      UNRESOLVED CASES ESTIMATES

                           Category        Category                  Category                 Category                Category
                              V*               IV                        III                      II                       I
(In Billions)
RTC                           X                    X
Oversight                     X                    X
 Board (Low)
$89 - $114
Oversight                     X                    X                           X
 Board (High)
$99 - $132
CBO                           X                    X                           X
$90 - $150
CBO (High)                    X                    X                           X                     X                   x**

*  We added Category V which represents   institutions       in
** In CBO's high estimate,   most of the additional    institutions
   are from Category  II, but some are from Category      I.

          In general,         the      estimates             discussed             above      are        limited'to
institutions          in conservatorship                      and in the              lower         OTS categories
expected        to fail       within       the         next       2 years          and require              RTC
assistance.           The number of                these          institutions               ranges         from about
700 to       1,000.         However,       CBO did            not      limit         its     loss        projections           to
just      RTC resolutions.                CBO also            estimated              that     an additional
800 institutions              could       be possible               candidates               for     resolution          after
1992 at a cost                  of $35 billion.                      In general,             these       institutions
currently             have tangible                 capital          ratios         greater      than       3 percent             of
assets         but,      when their                assets       were         subjected         to CBO’S mark-to-
market         writedown,              they        became insolvent                  on a tangible              net       worth
basis.          Most of             these       institutions               are currently               in OTS Category                    II
(the      “near        healthy”             that     meet or are               expected         to meet capital
standards)             but      some are            from Category               I     (those     considered               healthy
and well          capitalized).

         We caution                 you that         all       of    the      estimates         we are discussing                      are
subject         to signif            icant         uncertainties,               particularly.             those       which
consider          currently             healthy            institutions              as resolution              candidates
more than             3 years          in the        future.             In general,            cost      estimate           ranges
represent             the best          and worst              case scenarios                bdsed on currently
available             data      using        analysts’              professional             judgments.            These
scenarios             reflect         differences               in the         number of potential                    resolution
cases,         asset         loss      rates,        and other             factors.            In addition            to
depending             on highly             uncertain           general         economic         conditions               that
affect         interest             rates       and real            estate      markets,         the      actual          cost      to
ultimately             resolve          this        crisis          depends         on a host          of highly
interrelated                 RTC specific              factors           including           the manner of
resolution,              the order              and pace of              resolution,            and the         actual           timing
of     asset      sales.             A change          in any one of                 these      factors         could       have a
significant              effect         on the         final         numbers.           In particular,                a
recession             could         dramatically               increase         resolution             costs.

          Because              RTC has control                    of     institutions                in    conservatorship                 and

can perform                   a review              and valuation            of     their           assets,        the best
available               information                  on resolution               cost      relates            to the     very     near
future        and can be found                          in RTC’s quarterly                     operating            plan.
However,               this      information                 is available               too    late        and covers           too
short        a time            period          to serve           as the         basis        for     major        funding
decisions.                    Given         that,      the      next      best      estimates              are those
discussed               above         for      the     institutions                in conservatorship                    and
Category               IV that          will         require       RTC assistance                    within        the   next
1 l/2        to 2 years.                     While       these         estimates          probably             provide        the best
basis        for        funding             decisions           today,       the        industry’s             condition         is not
static        and the composition                            of    the OTS categories                         is constantly
changing           .     New         estimates           will      therefore             have to be developed
periodically                   for     managing , budgeting                       and funding               purposes.            To
facilitate                this        process,           RTC and the Oversight                            Board     can do some
things        to        improve             future       estimates           and to make them less                           subject        to
potential               misinterpretation.

         While           having             several        independent             estimates               may be desirable,
RTC and the Oversight                               Board       need to develop                 an “official                 estimate”
for      funding              purposes          based on the OTS categories,                                   using     a
consistent               methodology                  adjusted          to reflect             actual          experience.
Also,        a more structured                         reporting            format        is needed               to ensure       the
estimates               are      informative              and understandable.                             Since     FIRREA already
requires               a semi-annual                  report       by the Oversight                       Board     on RTC’s
funding            needs,            this      estimate           could      be calculated                  and included              as
part      of that        report.                 The universe,               assumptions,           methodology,
calculations,                and any supporting                       documentation               should         be available
to the Congress                     for     review       and comparison.                   Differing                independent
estimates         could             then      be discussed             and evaluated               in terms            of changes
to the       "official               estimate."

          In addition,                    RTC needs           to develop         a method. for                tracking          asset
valuation        changes                  from     the original              resolution         cost          estimate
through       the sale.                    Asset      writedowns             are a major           part        of     any
estimation          methodology                    and more accurate                  information              on actual
market      value        is necessary                  to refine             future       costs.estimates.                      RTC
has informed             us that             such a system              already          exists          in
conservatorships                     and is currently                 being       planned          for        receiverships.


          As we stated                in our          April      testimony            and as the              independent
estimates        discussed                  earlier       support,            RTC will        need at least
another       $50 billion                   in resolution              funding          to complete             its      task     of
closing       failed          thrifts              in an orderly              and expeditious                  manner,           RTC
projections            for      the         fourth       quarter        of     fiscal       year         1990 show that                 at
September        30, RTC will                     be only        $1 billion             under      the obligations
limit      imposed by FIRREA.                          Without        additional            funding,            RTC will          then
be unable        to continue                     resolving         institutions             and the            ultimate
cleanup       costs          will          increase.

           Due to changes                      made in FIRREA concerning                              RTC funding               sources,
the obligations                       limit       formula          technically                allows      RTC an additional
$18.8           billion             in borrowing              authority             since      Treasury        funding             is not
explicitly                 mentioned             as part         of     the        formula.         We reported                 this
situation                 in our         review         of RTC’s quarterly                      report     of compliance
with       the obligations                       limitd.           Recent           testimony           by Chairman              Seidman
and the            Treasury              Under        Secretary              for    Finance        indicated             that      RTC may
take       advantage                of    that        technicality                 rather      than      run out          of
obligating                 authority.                 While      this         increase         would      allow          resolution
activity             to continue                 into      the     first           and perhaps           the   second            quarter
of     1991,         it      will        not     buy much more time                      than     that.        The Congress
needs           to raise            the cap on the maximum obligations                                     limit          to at         least
$100 billion                  so that            RTC can plan                 and budget          for     longer          than         the
immediate                 future.

           In July            testimony,                the    Treasury             under     Secretary            for     Finance
outlined             three          approaches             which        might        be considered             for        providing
RTC with            additional                 funds       to cover            losses:

           --      a short            term       funding         bill         to keep resolution                   activity             going
                   into       early           1991;

40bligations Limit:  Resolution  Trust Corporation's                                                           Compliance                as
 of March 31, 1990 (GAO/AFMD-90-101,   July 27, 1990)
          --     funding         to cover          estimated           needs         for     some intermediate
                 period;         or

          --     a permanent             and indefinite                appropriation                to complete             the
                 job of         resolving          failed         thrifts.

          It     is our opinion                 that     providing            short        t,!rm    financing           through
early          1991     may prove         disruptive              to the           resolution        process          and be
costly          in time         for     both      RTC and the Congress.                         Likewise,            addressing
the      shortfall             every     three         months      or so would              probably        be
disruptive.                  On the other              hand., providing                RTC with       a permanent                and
indefinite              appropriation              would      eliminate              the note        cap control
specifically                 written       into        FIRREA to           limit       RTC’s spending                authority.
It    would        seem important                 to retain          FIRREA provided                 control
mechaninms              that     are     already         in place            and functioning.                  Therefore,
we believe              that     the     RTC should           be given              an additional           $50       billion
in     resolution              funding         which     would       increase             the obligations               limit       to
$100 billion.                   This     amount should               allow          RTC to operate             for     at       least
another          year.          RTC should             continue        to report            on,     and we will
continue           to review,            its      complia*nce          with,        the    limit.

          In addition,                 we believe          that      all      RTC funding            should          be on-
budget.            Off-budget            financing          has only               added to the         already          too
high      costs         of     the crisis          cleanup.            Interest            rates     on REFCORP bonds
issued          since        FIRREA’s          passage      have ranged                from approximately
l/4      p:rcent         to more than              l/3    percent            above Treasury            offerings.                 On

borrowings               of      an additional                $50 billion                   for       resolutions,              that          rate
differential                   translates             into      $125 million                      to $165 million                 a year             in
interest.                Over 30 years,                   these        higher            interest             rates      would           add
$4 billion               to $5 billion                   to the cost                of      RTC resolutions.


           Up to this                 point,        we have been talking                              about     estimated                losses
or the        costs            for       RTC to resolve                   failed         and failing              savings
institutions--                  certainly            a major          component                  of     the    total       cost          to
resolve           this         crisis.            And thus           far,          the discussion                 has been on a
present           value         basis--          as if       this     were an investment                          decision             and we
could        pay it            off       today.          However,            if     the Congress                 is to make an
informed            decision              concerning            how to finance                        the     resolution           of         this
crisis,           there         are       significant               other          costs         that       contribute            to the
total        that        must be considered.                          Because               it     is not       possible            to
resolve           all     troubled               institutions               today,           operating            losses          will
continue            to be incurred                   until          the      regulator                closes      them,      the          RTC
will       continue             to       incur     costs        as assets                acquired             from     troubled
thrifts           are sold,               and the         regulators                are continuing                    to pay interest
and guarantee                   payments           on FSLIC’s               assistance                  transactions.                  For
these        reasons,                we have presented                     the      total         cost        estimates          on a cash

           As stated                 in my opening              remarks,             we estimated                 in April             that
the       total         cost         was at least             $325 billion,                      excluding            general                 .

Treasury          borrowing         costs.         We stated          then     that       the      estimates              for
RTC resolution              costs        and for      FSLIC assistance                   transactions               were                .
likely       to change            and,    as previously              discussed,           they      have.          To show
the      effect     of     the Oversight             Board's         new low and high                 resolution
cost      estimates         and to reflect             new estimates              for       pre-1988          FSLIC
assistance          transactions             and increased             REFCORP interest                    expense,               we
now calculate              that     the    total      cost     for     the crisis                cleanup      is         likely
to be $335 billion                  to $370 billion,                 excluding           Treasury          financing
costs.         The Oversight              Board     estimates           include          the      700 to 1,000
institutions              in conservatorship,                 Category         IV and Category                    III.            As
you can see,             we are approaching                  the $400 billion                  mark and,            if      the
economy suffers     a downturn                     and interest           rates          rise,      we could              easily
reach $500 billion.


          While     many will            want to debate              the numbers            and argue             over
whose assumptions                  and estimates             are more accurate,                    we can not               allow
this      to paralyze             RTC's ability          to resolve            the problem                institutions.
Therefore,          at a minimum,             RTC's obligations                  limit           should      be
increased          and an additional                 $50 billion             in resolution                funds
provided.           These funds,             which     should         be on-budget,                should         be
sufficient          for     RTC to continue              an aggressive                resolution            program               for
some time.


           To ensure        that     the   Congress        receives      the m ost current               and
    com plete    inform ation         on which      to base       future        funding       decisions--
    both   for   RTC resolutions            and for        the   total     crisis         clean-up--we          have
    recom m ended    that         the Oversight       Board      and FDIC develop              these
    estim ates    and report          them sem i-annually.               Only       the    Oversight        Board
    and FDIC have the              necessary      resources       to accum ulate            and track          the
    data   necessary        for     preparing      and updating          such estim ates.

* ATTACHMENT                                                                                  ATTACHMENT
                                     SAVINGS AND LOAN INDUSTRY
                                   CATEGORIES AND CHARACTERISTICS.
                                       (Dollars in Billions)
                        Number of                         1st Qtr.     TNW at      Capital      OTS
                        Institutions      Assets           1990        3/31/90      Level       Rating]
  Category     I            1264            $404 8         $   l   7     $26        6.4%          l&2
  "healthy,      well
  Category  II               620            $326           $   .2        $13        3.9%          2&3
  "near healthy”
  Category     III           311            $149           $<.3>         $3         2.1%          3&4
  Category      IV           310            $195           $X.9>         $<3>       <1.4>%          5
  "likely     to be
  Category V2                350            $164           $<3>          $<31>      <19>%         N/A

  Source:      Office  of Thrift  Supervision    Analysis of the Condition   of the
               Thrift  Industry  (August 30, 1990) and RTC 1st Quarter      Performance
               Data for Conservatorships      (September 9, 1990).  Figures    are as of
               March 31, 1990.

  1These ratings     are based on the Office   of Thrift  Supervision's MACRO
   (Eanagement,    isset  quality,  C_apital adequacy, Risk management, and
   Operating   results)   composite  rating.
  2We added Category        V which    represents     institutions      in conservatorship.