|
Managing the Crisis: The FDIC and RTC
Experience
Chronological Overview: Chapter
Sixteen—1993
Acting FDIC Chairman Andrew C. Hove, Jr. remarked in the FDIC’s 1993
annual report, “The reductions in both actual bank failures and in our
forecasts for future closings enabled the BIF [Bank Insurance Fund] to end
1993 with a
balance of $13.1 billion. That is a significant improvement over the negative
balance of $101 million at the close of 1992 and the $7 billion deficit at
year-end 1991—the only years since the FDIC began operations in 1934 that
the insurance fund had a negative balance.”
Table 16-1
|
1992 - 1993: FDIC at a Glance ($ in Millions) |
| |
12/31/92 |
12/31/93 |
Percent Change |
| Number of Bank
Failures |
120 |
41 |
-65.83% |
| Assistance to
Open Banks |
2 |
0 |
-100.00% |
| Total Failed
and Assisted Banks |
122 |
41 |
-66.39% |
| Total Assets
of Failed and Assisted Banks |
$45,391.1 |
$3,828.9 |
-91.56% |
| Estimated Losses
on Failed and Assisted Banks* |
$3,675.2 |
$646.1 |
-82.42% |
Estimated Losses
as a Percent of Total Assets |
8.10% |
16.87% |
108.27% |
| Assets in Liquidation |
$43,273.4 |
$28,015.1 |
-35.26% |
| FDIC Staffing |
15,044 |
14,220 |
-5.48% |
| Number of Problem
Banks |
863 |
472 |
-45.31% |
| Bank Insurance
Fund Balance |
$-100.6 |
$13,121.6 |
-- |
| Bank Insurance
Fund Balance as a Percent of Insured Deposits |
-0.01% |
0.69% |
-- |
| Savings Insurance
Fund Balance |
$279.0 |
$1,155.7 |
314.23% |
| Savings Insurance
Fund Balance as a Percent of Insured Deposits |
0.04% |
0.17% |
325.00% |
*Losses
for all resolutions occurring in this calendar year have been updated
through 12/31/03. The loss amounts on open receiverships are routinely
adjusted with updated information from new appraisals and asset sales,
which ultimately affect projected recoveries.
Percent change is not provided if either the latest period or the
year-ago period contains a negative number.
Back
to table
Source:
FDIC, 1993 Annual Report and Reports from FDIC Division of Finance
and Division of Research and Statistics.
|
Notable Events
Certain events important
to the FDIC occurred in 1993, as follows:
-
On January 1, FDIC insured institutions began paying
risk-based premiums for deposit insurance;
- On September
29, $391 million in additional funds were distributed
to the FDIC and the RTC in the Drexel Burnham Lambert
case;
- On November 17,
President William J. Clinton announced his intention
to nominate Ricki Tigert as chairman of the FDIC; and
- On December 14,
the FDIC held a two-day nationwide real estate auction
in which 165 properties were sold for a total of $312.2
million.
Economic/Banking Conditions
The economy continued
its recovery with Gross Domestic Product growing at the modest pace of 2.3
percent and the unemployment rate declining from 7.5 percent to 6.9 percent.16-1
The discount rate fell to 3 percent, and the 30-year mortgage rate also reached
a low of 7.3 percent.16-2 The inflation rate fell slightly from 2.8 percent
to 2.6 percent.16-3 The low interest rates and inflation rate spurred the
housing sector with home sales and housing starts at 8.2 percent and 7.3
percent, respectively. The office vacancy rate also declined from 18.5 percent
to 17.1 percent.16-4
The Southwest was in the midst of a full recovery, as the number of failures
declined from 36 in 1992 to only 10 failures in 1993. The recovery was
fueled in part by the fact that Southwest banks held smaller fractions
of their portfolios in the form of commercial real estate and Commercial
and Industrial (C&I) loans than they had held in the mid-1980s. Commercial
real estate loans made up close to 9 percent of Southwest banks’ assets
in 1986, but only 6.8 percent of the assets in 1993. Similarly, the percentage
of C&I loans was about 16 percent in the early 1980s, but plummeted
to a low of 7 percent in 1993. Total loans and leases, which made up about
57 percent of the assets in the mid-1980s, fell to under 45 percent in
1993.
The Northeast had only three failures in 1993, a substantial drop from
the previous years’ totals of 52 in 1991 and 43 in 1992. Further,
the number of problem banks in the region also declined to 148 institutions.
Asset growth rates came out of the red for the first time in four years,
and return on assets increased by more than 20 basis points. Nonperforming
assets relative to total assets continued to fall, as did net charge-offs
on loans and leases. The decline in the number of failures was accompanied
by a huge drop in the Northeast banks’ holding of C&I loans from
a high of slightly above 10 percent in 1980 to an all-time low of under
4 percent in 1993. Total loans and leases also declined to 62 percent of
assets from a high of 73 percent in the mid-1980s. Real estate loans also
declined in 1993, but not as much as those other types of loans.
Bank failures in California peaked in 1993 at 19 institutions. Unlike
the Southwest, California did not experience large numbers of failures.
Of the banks that did fail in California, 77 percent were banks that had
been chartered in the 1980s, and 83 percent of the failures were southern
California community banks which were small, local, and not diversified.
Net charge-offs on loans and leases peaked in southern California at 0.8
percent of assets, while the rest of California and the U.S. had levels
of 0.2 percent and 0.1 percent, respectively. Return on assets for the
California banking industry was -0.01 percent, its lowest point in ten
years. Lending activity in the state remained steady with total loans and
leases totaling 64 percent of assets. Total real estate loans fell slightly
relative to assets, while commercial real estate loans remained around
24 percent of assets. C&I loans continued to fall from 13.5 percent
of assets in 1992 to 12.5 percent.
Overall, the U.S. banking industry continued its good performance from
the previous year. There were 59 new charters, down slightly from the previous
year.
FDIC insured institutions in 1993 reported record earnings, due to favorable
interest rates and improved interest earning asset quality. More than two-thirds
of the institutions reported higher earnings, and fewer than 1 in 20 institutions
was unprofitable. In addition, troubled assets declined further in 1993,
and noncurrent loans and other real estate portfolios shrank to their lowest
levels since 1986.
Commercial banks reported a gain in net income of $43.4 billion, exceeding
the 1992 record of $32 billion. The Northeast and California banking industries
were slightly less profitable than the rest of the U.S. because of the
condition of some large savings banks. Equity capital grew, supported by
high levels of retained earnings and favorable conditions for new capital
issues. Commercial banks’ equity capital as a percent of total assets
rose to an average of 8.01 percent by the end of 1993, and that was the
first time in 30 years that capital rates were above 8 percent. Total loans
held by commercial banks grew by 6 percent in 1993. The FDIC’s problem
bank list shrank again to 472 commercial banks with assets of $269.2 billion
at the end of the year. In addition, there were 100 Savings Association
Insurance Fund (SAIF) insured savings banks with combined assets of $65
billion on the FDIC’s problem list by the end of 1993. That was the
third consecutive decline in the SAIF member problem bank list.
By the end of the year, 2,26416-5 savings banks and savings associations
insured by the FDIC held assets totaling $1 trillion and had combined earnings
of $7 billion. Their net income for 1993 was up 4.2 percent, although total
assets declined by 2.8 percent. Unlike commercial banks, savings institutions
did not show uniform earnings strength. Institutions in the Northeast and
California, including some of the largest savings institutions in the nation,
were less profitable than the rest of the industry.
Table 16-2 shows the number and total assets of FDIC insured institutions,
as well as their profitability as of the end of 1993.
|
Table 16-2
Open
Financial Institutions Insured by FDIC ($ in Billions)
|
Commercial Banks - FDIC
Regulated |
| |
1992 |
1993 |
Percent Change |
| Number |
11,462 |
10,958 |
-4.40% |
| Total Assets |
$3,505.7 |
$3,706.2 |
5.72% |
| Return on Assets |
0.93% |
1.20% |
29.03% |
| Return on Equity |
12.98% |
15.34% |
18.18% |
|
Savings
Banks – FDIC Regulated |
| |
1992 |
1993 |
Percent Change |
| Number
|
518 |
593 |
14.48% |
| Total Assets |
$218.2 |
$226.1 |
3.62% |
| Return on Assets |
0.74% |
0.95% |
28.38% |
| Return on Equity |
9.35% |
11.09% |
18.61% |
|
Savings
Associations – OTS Regulated |
| Item |
1992 |
1993 |
Percent Change |
| Number
|
1,872 |
1,669 |
-10.84% |
| Total Assets |
$812.0 |
$774.8 |
-4.58% |
| Return on Assets |
0.63% |
0.63% |
0.00% |
| Return on Equity |
9.53% |
8.61% |
-9.65% |
Source: Reports from FDIC
Division of Research and Statistics.
Bank
Failures
During
1993, bank failures decreased in both pace and volume. The FDIC
handled 41 bank closings in 1993, the lowest level in 12 years.
Assets in the failed institutions totaled $3.8 billion, and there
was only one failed bank with total assets near $1 billion. No
assistance transactions took place in 1993.
Of the 41 failures in 1993, a total of 36 were purchase and
assumption (P&A) transactions, including 30 transactions
in which only the insured deposits (as opposed to all deposits)
passed to the assuming institution. The five remaining failures
were resolved through payoffs. In most of the closings in 1993,
advance dividends were paid to uninsured depositors. In 35 of
the 41 failures, uninsured depositors received less than 100
cents per dollar on their uninsured deposits.
In 1993, there were three major resolutions, and each one involved
failed banks from previous years:
-
On February 13, the 20 bridge banks with total assets
of $8.1 billion established in 1992 for First City
Bancorporation of Houston, Inc., Houston, Texas,
were sold in P&A
transactions to various purchasers.
-
On April
23, Missouri Bridge Bank, N.A., Kansas City, Missouri,
established in 1992 to assume certain assets and liabilities
of two banks,
Metro North State Bank, Kansas City, Missouri, and The
Merchants Bank, Kansas City, Missouri, was sold to Boatmen’s
First National Bank of Kansas City, Kansas City, Missouri;
total assets were $1.9 billion (two resolutions).
-
On August 12, CrossLand
Federal Savings Bank, Brooklyn, New York was resolved
through a public stock offering, with estimated savings
to BIF of $400 million; total
assets were $7.4 billion.
A recent estimate of losses
per transaction type is shown in Table 16-3.
Table 16-3
|
1993
Estimated Losses by FDIC Transaction Type ($ in Millions) |
Transaction
Type |
Number
of
Transactions |
Total
Assets |
Estimated
Loss*
as of 12/31/03 |
Estimated
Losses
as a
Percent of Assets
|
| P&As |
36 |
$3,493.3 |
$544.2 |
15.58% |
| Payoffs |
5 |
335.6 |
101.9 |
30.36% |
| Totals |
41 |
$3,828.9 |
$646.1 |
16.87% |
*Losses
for all resolutions occurring in this calendar year have been updated
through 12/31/03. The loss amounts on open receiverships are routinely adjusted
with
updated information from new appraisals and asset sales, which ultimately
affect projected recoveries. Back
to table
Source: Reports from FDIC Division of Research and Statistics.
In 1993, the FDIC promulgated several final regulations to further implement
the Federal Deposit Insurance Corporation Improvement Act (FDICIA) of 1991,
including the following:
-
A new prohibition against insured state chartered
banks and their majority-owned subsidiaries from
conducting activities “as principal” which
were not permitted at national banks.
- The final
risk-related insurance premium system;
- The final amendments
to risk-based capital rules; and
- Regulations further
implementing the prompt corrective action requirement.
|
During the year, two significant acts of Congress had an impact on the
FDIC. In the Omnibus Budget Reconciliation Act of 1993, Congress included
a “national depositor preference” amendment, which applied
to all insured institutions closed on or after August 10, 1993. The
second significant act was the appropriation by Congress of an additional
$1.2
billion to the FSLIC Resolution Fund (FRF) to handle the assets and
liabilities of the former Federal Savings and Loan Insurance Corporation.
|
|
The National Depositor Preference Amendment provided
for failed bank assets to be distributed in the following order to:
1. Cover the FDIC’s administrative expenses;
2. Pay the claims of all depositors;
3. Pay general creditor claims;
4. Pay subordinated creditor claims; and
5. Pay claims of shareholders
|
|
Payments to Depositors
and Other Creditors
In the 41 banks that
failed in 1993, deposits totaled $3.5 billion in 1,712,224 deposit accounts.
Payoffs accounted for five transactions with 16,774 deposit accounts and
total deposits of $320.2 million. Dividends paid on all active receiverships
totaled $17.9 billion in 1993.
Of the 2,108 insured bank resolutions16-6 since the FDIC began operations
in 1934, 1,224 were P&A transactions and 202 were whole bank deals.
Deposit payoff transactions accounted for 603 cases, of which there were
176 insured deposit transfers (IDTs). There were also 79 open bank assistance
(OBA) transactions.
Total disbursements by the FDIC since January 1, 1934, amounted to $102.1
billion. Of that amount, the FDIC recovered $64.4 billion, for a net loss
of $37.7 billion.
Asset Disposition
At the beginning of 1993, the FDIC held $43.3 billion in assets of
failed banks. During the year, the FDIC handled 41 failed banks with total
assets of $3.8 billion and acquired $1.9 billion in assets for liquidation.
Also during 1993, the FDIC became responsible for certain failed institutions
insured by SAIF. Assets from failed SAIF-insured institutions totaled $729
million, of which the FDIC acquired $354 million for liquidation. Principal
collections amounted to $8.1 billion for BIF, $769 million for FRF, and
$278 million for SAIF, for a total of about $9.2 billion. At the end of
1993, there were $25.2 billion in assets in liquidation for BIF, $2.7 billion
for FRF, and $72 million for SAIF, for a total of $28 billion, a reduction
of 35 percent from the total at the end of 1992.
During 1993, the FDIC disposed of a large portion of its asset inventory
acquired from failed institutions. Total book value reduction was $15.3
billion, from $43.3 billion to $28 billion. Total collections were approximately
$9.2 billion. Significant activities were as follows:
-
During the year, the sale of 10,275 real estate properties
had a total sales price of $2.2 billion. The sales
resulted in recoveries of 89.8 percent of the average
appraised value.
- The sale
of over 136,000 loans, totaling $5.4 billion in book
value, in sealed bid offerings and other asset marketing
events, or
$1.3 billion more than the $4.1 billion record of 1992.
Net sales proceeds of $3.3 billion hit a new high and
represented 99.8 percent of appraised value.
- The third annual
national real estate auction held in December in Boston,
Massachusetts, included 197 properties valued at approximately
$400 million. The FDIC
sold 165 of the properties for $312.2 million, which
was an average price of more than 90 percent of the appraised
value. Satellite coverage
allowed bidders to participate from several other major
locations.
In 1993, the FDIC acquired its first assets for liquidation
from SAIF-insured institutions. The SAIF had responsibility
for:
-
All federally insured depository institutions that became
members of SAIF after August 8, 1989, for which the RTC
did not have resolution authority, and
-
All deposits
insured by SAIF held by BIF member banks, so called “Oakar
banks,” created pursuant to the Oakar amendment provisions
found in Section 5(d)(3) of the Federal Deposit Insurance
Act.
|
|
The“Oakar Amendment” provisions
allowed, with approval of the appropriate federal regulatory authority,
any insured depository institution to merge, consolidate, or transfer the
assets
and liabilities of an acquired institution without changing insurance coverage
for the acquired deposits. Such acquired deposits continued to be either
SAIF-insured deposits or BIF insured deposits and assessed at the appropriate
assessment
rate. In addition, any losses from the failure of those institutions were
to be allocated between BIF and SAIF based on the respective dollar amounts
of the deposits. |
|
Table 16-4 shows the FDIC’s assets in liquidation and Chart 16-1 shows
the asset mix.
|
Table 16-4
|
1993
FDIC End of the Year Assets in Liquidation ($ in Billions*) |
| Asset
Type |
12/31/92
Book
Value |
1993
Assets
Acquired |
1993
Prin.
Coll. |
1993
Write
Downs |
12/31/93
Book
Value |
12/31/93
Est. Rec.
Value |
Commercial
Loans |
$14.9 |
$0.7 |
$2.6 |
$3.0 |
$10.0 |
$5.0 |
| Mortgage Loans |
14.2 |
1.2 |
3.2 |
2.1 |
10.1 |
6.5 |
| Other Loans |
0.7 |
0.2 |
0.2 |
0.2 |
0.5 |
0.3 |
| Real Estate Owned |
3.8 |
1.3 |
1.4 |
1.3 |
2.4 |
1.4 |
| Judgments |
1.9 |
0.5 |
0.1 |
0.5 |
1.8 |
0.3 |
| Securities |
0.8 |
0.2 |
0.7 |
0.1 |
0.2 |
0.0 |
| Other Assets |
4.5 |
-1.9 ** |
0.2 |
0.5 |
1.9 |
0.7 |
| Equity in Subs. |
2.5 |
-0.7 ** |
0.8 |
0.1 |
0.9 |
0.4 |
| Deficiencies*** |
|
0.8 |
0.0 |
0.6 |
0.2 |
0.1 |
| Total |
$43.3 |
$2.3 |
$9.2 |
$8.4 |
$28.0 |
$14.7 |
*Totals
may not foot due to rounding differences. Back
to table
**Amounts
are negative due to adjustments made for the previous year’s transactions. Back
to table
***New
asset category added in 1993. Back
to table
Source: Reports from FDIC Division of Finance.
Chart
16-1
1993
FDIC End of Year Asset Mix
 d
|
Chart
16-2
FDIC/RTC Staffing
|
|
 d |
Insurance
Fund and Staffing At the end of 1993, BIF’s balance was $13.1 billion, significantly
up from 1992’s negative $101 million and 1991’s negative $7 billion.
SAIF reserves grew to $1.2 billion from $279 million in 1992. However, SAIF’s
reserves were only 17 cents per $100 of insured deposits, compared with 69
cents per $100 in BIF.
FDIC staffing stood at 14,220, including 3,971 Division of Supervision
personnel and 5,665 Division of Depositor and Asset Services (formerly
known as Division of Liquidation) personnel. Total staffing including
6,778 RTC employees equaled 20,998. Chart 16-2 shows the staffing
levels for the past five years. |
|
Table 16-5
Resolution
Trust Corporation
|
1992 - 1993: RTC at a Glance ($ in Millions) |
| |
12/31/92 |
12/31/93 |
Percent Change |
| Number of Conservatorships
at the beginning of the year |
91 |
81 |
-10.99% |
| Number of Conservatorships
added during the year |
50 |
8 |
-84.00% |
| Thrifts in the
ARP Program* |
9 |
1 |
-88.89% |
| Total of all
thrift takeovers |
59 |
9 |
-84.75% |
| Conservatorships
resolved during the year |
60 |
26 |
-56.67% |
| Thrifts in the
ARP Program* |
9 |
1 |
-88.89% |
| Total of thrift
resolutions |
69 |
27 |
-60.87% |
| Conservatorships
at the end of the year |
81 |
63 |
-22.22% |
| |
12/31/92 |
12/31/93 |
Percent Change |
Conservatorships
|
$35,448 |
$6,061 |
-82.90% |
| Thrifts in the
ARP Program |
$9,437 |
$44 |
-99.53% |
| Total |
$44,885 |
$6,105 |
-86.40% |
| Estimated Losses
on thrift resolutions** |
$4,180 |
$609 |
-85.43% |
| Estimated Losses
as a Percent of Total Assets |
9.31% |
9.97% |
7.09% |
| |
12/31/92 |
12/31/93 |
Percent Change |
| Conservatorships |
$40,211 |
$23,166 |
-42.39% |
| Receiverships |
$64,335 |
$40,664 |
-36.79% |
| Total |
$104,546 |
$63,830 |
-38.95% |
| RTC Staffing |
7,382 |
6,778 |
-8.18% |
*Thrifts
placed into the ARP program are included for clarity, although they were
never placed into the conservatorship program. Back
to table
**Losses
for all resolutions occurring in this calendar year have been updated through
12/31/95. The loss amounts are routinely adjusted with updated information from
new appraisals and asset sales, which ultimately affect projected recoveries. Back
to table
Source: RTC, 1993 Annual Report and Reports from FDIC Division of Research
and Statistics.
Notable Events
On
March 15, 1993, Deputy Treasury Secretary Roger C. Altman became interim
chief executive officer (CEO), taking over the helm from resigning President
and CEO Albert V. Casey. Altman would later hold the post for approximately
one year.
In the RTC’s 1993 annual report issued in June 1994, RTC Acting CEO
John Ryan stated that: “[RTC] has now entered the last phase of its
operations . . .The days when RTC resolved scores of thrifts in a single
month and disposed of tens of billions of dollars in assets in one quarter
are thankfully behind us.” By the end of the year, the RTC had only
63 thrifts remaining to be resolved, and $63.8 billion in assets awaiting
disposal.
On December 17, 1993, President Clinton signed the Resolution Trust Corporation
Completion Act into law. The Act removed the prior April 1, 1992 limitation
on funds previously established under the RTC Refinancing, Restructuring,
and Improvement Act (RTCRRIA) of 1991, and authorized up to $18.3 billion
to resolve the remaining insolvent thrifts. The Act also established a new
RTC sunset date of December 31, 1995, one year earlier than previously mandated.
S&L Resolutions
At
the beginning of 1993, the RTC was managing 81 conservatorships with
total assets of $71.9 billion in total assets. During the year, eight
more thrifts with total assets of $6.3 billion entered the conservatorship
program, while 26 conservatorships with total assets of $7.5 billion
were resolved. Additionally, one institution with total assets of $44
million was resolved through the Accelerated Resolution Program (ARP).
In spite of the Congressional funding impasse, recoveries on asset sales
and favorable economic conditions resulted in a release of unallocated
reserves, which made $3 billion available for resolutions. Of the 27
resolutions in 1993, 24 were resolved using those funds, while the remaining
three were completed without cost to the RTC. Estimated savings over
the cost of paying off insured deposits was $300 million.
In 16 of the 26 P&A resolutions, all deposits were transferred to acquirers,
while in ten resolutions, only insured deposits were transferred. One institution
was resolved through a payoff. The 26 thrifts resolved in P&A transactions
had total assets of $7.4 billion. The only institution whose deposits were
paid off in 1993 had total assets of $93.7 million.
The largest conservatorship resolution in 1993 was HomeFed Bank, F.A.,
San Diego, California, (HomeFed) which had $10.2 billion in deposits, $13.9
billion in assets, and 201 offices in July 1992 at the time it was placed
into conservatorship. While HomeFed was in conservatorship, the RTC aggressively
marketed the institution’s assets as it downsized the thrift by selling
56 branches and closing 9 branches in the process. The remaining 136 branches
were sold in the resolution of HomeFed to four acquirers.
Losses per transaction type are shown in Table 16-6 and Table 16-7 shows
conservatorships and receiverships at year-end 1993.
|
Table 16-6
|
1993 Losses by RTC Transaction Type ($ in Millions) |
Transaction
Type |
Number
of
Transactions |
Total Assets |
Loss*
as of 12/31/95 |
Estimated
Losses
as a
Percent of Assets
|
| P&As |
26 |
$7,392.1 |
$1,643.8 |
22.24% |
| Payoffs |
1 |
93.7 |
16.5 |
17.61% |
| Totals |
27 |
$7,485.8 |
$1,660.3 |
22.18% |
*Losses
for all resolutions occurring in this calendar year have been updated
through 12/31/95. Back
to table
Source: Reports from FDIC Division of Research and Statistics.
Table 16-7
|
Item |
Total |
| In
Conservatorship at 12/31/92 |
81 |
| Conservatorships
added in 1993 |
8 |
| Subtotal |
89 |
| Conservatorships
resolved in 1993 (New Receiverships) |
26 |
| Conservatorships
remaining 12/31/93 |
63 |
|
Item |
Total |
| Receiverships
as of 12/31/92 |
653 |
| New Receiverships
that were previously Conservatorships in 1993 |
26 |
| New Receiverships
that were resolved through ARP in 1993 |
1 |
| Total New Receiverships
during 1993 |
27 |
| Total Receiverships
as of 12/31/93 |
680 |
Source: RTC, 1994 Annual Report.
Payments to
Depositors and Other Creditors
In 1993, there were 27 resolutions
with total deposits of $8 billion in 1,065,319 deposit accounts.
Of that total, there was one payoff transaction with $47.1 million
in total deposits in 751 deposit accounts.
Of the 680 insured thrift failures since the RTC began operations
in August of 1989, a total of 433 were P&A transactions, 89
were payoff transactions, and 158 were IDTs.
Asset Disposition
At
the beginning of 1993, the RTC held $104.5 billion in assets
of savings and loan associations in receivership and conservatorship.
Assets acquired during the year through conservatorships, other
resolved institutions, and putbacks or repurchases totaled $23.5
billion for the year. Losses and collections totaled $64.2 billion
for the year. At the end of 1993, total assets in liquidation
from receiverships and conservatorships was $63.8 billion, a
reduction of 39 percent.
In December 1992, the RTC had established goals to
reduce the book value of Standard Asset Management
Disposition Agreement (SAMDA) assets as of September
30, 1992, by 90 percent before the end of 1993. In
1993, the RTC developed policies and procedures to
ensure that all RTC contractors completed their contractual
obligations. The focus of the SAMDA program was shifted
back to loan workout/compromise and sale of individual
assets and away from the bulk sales strategies used
in 1992. At the end of the year, 91 SAMDA contractors
were managing assets with a total book value of approximately
$10.9 billion.
During 1993, the RTC closed approximately $1.6 billion
in commercial seller financed transactions. Special
teams in 23 offices restructured, sold, or worked out
approximately $2 billion in problem assets, and another
$2.9 billion in assets were being reviewed at the end
of 1993.
In addition, the RTC conducted two national, nonperforming
loan auctions in Kansas City, Missouri. In March 1993,
approximately 18,000 loans with a total book value
of about $503 million were sold at an auction yielding
a $249 million recovery. Later, in August 1993, 11,200
loans with a total book value of $670 million were
sold for a total recovery of $335 million.
Concerning the RTC’s securities portfolio, the
RTC sold a total of $62.5 billion of securities from
March 1990 through the end of 1993. The securities
sold included $9 billion of interest rate swaps and
$9 billion in junk bonds for a total recovery of about
65 cents on the dollar.
|
| In 1993, the RTC used
the Multiple Investor Fund, the N Series, and the S Series transactions
to dispose of nonperforming and subperforming loans. Those transactions
involved the formation of partnerships with private investors who
purchased, managed, and then sold portfolios of nonperforming and subperforming
loan
assets, and then shared in the profit with the RTC. Approximately
$4.1 billion book value in nonperforming commercial and multi-family mortgage
loans was sold in 1993.
|
|
The S Series
securitization transactions were similar to the N Series transactions
designed to dispose of nonperforming and subperforming commercial
loans through
leveraged trusts. The S Series transactions targeted investors with
moderate capital levels by reducing the investors’ equity investment
to $4 million, which was down from the $9 million required in the
N Series transactions. |
|
Approximately $3.8 billion book value in performing loans was securitized
in 1993. Five transactions were collateralized by $1.6 billion in performing
single-family mortgages and three transactions by $2.2 billion in performing
commercial and multi-family mortgages. More than $36.6 billion in assets
were securitized from the inception of the program in June 1991 through
1993, including single-family, multi-family, commercial mortgages, and
commercial and consumer loans.
Overall, $50 billion was recovered through collections and asset sales.
This figure is net of assets sold and then put back or repurchased and
net of discounted payoffs, bulk sale discounts, and write-offs. Table 16-8
shows the RTC’s assets in liquidation and Chart 16-3 shows the asset
mix.
|
Table 16-8
|
1993 RTC End of the Year Assets in Liquidation ($
in Billions) |
| Asset
Type |
12/31/92
Total
Book
Value |
Assets
Acq’D
During The Yr.
|
1993
Collec-tions
|
1993
Losses |
12/31/93
Total
Book
Value
|
Memo Item |
1-4 Family
Mtges |
$16.6 |
$3.4 |
$10.0 |
$1.0 |
$9.0 |
$0.9 |
| Other Mtges |
32.7 |
2.2 |
10.2 |
7.2 |
17.5 |
1.2 |
| Other Loans |
7.2 |
2.1 |
3.8 |
1.0 |
4.5 |
0.1 |
| R/Estate Owned |
12.9 |
0.6 |
3.5 |
4.0 |
6.0 |
0.5 |
| Other Assets |
16.8 |
1.0 |
2.7 |
-0.2 |
15.3 |
1.3 |
| Cash/Securities |
18.3 |
14.2 |
19.7 |
1.3 |
11.5 |
3.4 |
| Totals |
$104.5 |
$23.5 |
$49.9 |
$14.3 |
$63.8 |
$7.4 |
MEMO ITEM: Assets transferred from conservatorship to receivership.
Does not affect total of assets in liquidation.
*Totals
may not foot due to rounding differences. Back
to table
Source: RTC August 1989/September 1995 Statistical Abstract.
Chart
16-3
1993
RTC End of Year Asset Mix
Funding and Staffing
During
the year, the RTC reorganized its field operations in a downsizing effort.
The RTC closed field offices in Houston, Texas; Baton Rouge, Louisiana;
Somerset, New Jersey; Phoenix, Arizona; Tampa, Florida; San Antonio, Texas;
and Chicago,
Illinois. More than 600 permanent employees returned to the FDIC. The Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 guaranteed that
all transferred (returned) employees were guaranteed a position with the
same status, tenure, and pay as that held on the day immediately preceding
the
transfer. Each such employee holding a permanent position could not be
involuntarily separated or reduced in grade or compensation for one year
after the date
of the transfer, except for cause. Total RTC staffing declined from 7,382
at the end of 1992 to 6,778 at the end of 1993.
|
|
16-1:
Bureau of Economic Analysis and Bureau of Labor Statistics, Department
of Labor.Back
to Text
16-2:
Housing Market Statistics, National Association of Home Builders (June
1996), and Federal Home Loan Mortgage Corporation.Back
to Text
16-3:
Bureau of Labor Statistics, Department of Labor.Back
to Text
16-4:
Housing Market Statistics, National Association of Home Builders (June
1996), and CB Commercial Torto/Wheaton Research.Back
to Text
16-5:
Figures do not include member institutions of SAIF that were in RTC conservatorship.Back
to Text
16-6:In
1988 there were 21 assistance agreements that resolved 79 institutions.
The FDIC annual report (source data) calculates failure data per transaction;
this report calculates failures per failed institution. Actual resolutions
through 1993 totaled 2,166.Back
to Text
|
