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DEPOSIT INSURANCE FUND (DIF)

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NOTES TO THE FINANCIAL STATEMENTS

December 31, 2018 and 2017

  1. Operations of the Deposit Insurance Fund

    OVERVIEW

    The Federal Deposit Insurance Corporation (FDIC) is the independent deposit insurance agency created by Congress in 1933 to maintain stability and public confidence in the nation’s banking system. Provisions that govern the FDIC’s operations are generally found in the Federal Deposit Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq). In accordance with the FDI Act, the FDIC, as administrator of the Deposit Insurance Fund (DIF), insures the deposits of banks and savings associations (insured depository institutions). In cooperation with other federal and state agencies, the FDIC promotes the safety and soundness of insured depository institutions (IDIs) by identifying, monitoring, and addressing risks to the DIF. Commercial banks, savings banks and savings associations (known as “thrifts”) are supervised by either the FDIC, the Office of the Comptroller of the Currency, or the Federal Reserve Board. 

    In addition to being the administrator of the DIF, the FDIC is the administrator of the FSLIC Resolution Fund (FRF). The FRF is a resolution fund responsible for the sale of the remaining assets and the satisfaction of the liabilities associated with the former Federal Savings and Loan Insurance Corporation (FSLIC) and the former Resolution Trust Corporation. The FDIC maintains the DIF and the FRF separately to support their respective functions.

    Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the FDIC also manages the Orderly Liquidation Fund (OLF). Established as a separate fund in the U.S. Treasury (Treasury), the OLF is inactive and unfunded until the FDIC is appointed as receiver for a covered financial company. A covered financial company is a failing financial company (for example, a bank holding company or nonbank financial company) for which a systemic risk determination has been made as set forth in section 203 of the Dodd-Frank Act. 

    The Dodd-Frank Act (Public Law 111-203) granted the FDIC authority to establish a widely available program to guarantee obligations of solvent IDIs or solvent depository institution holding companies (including affiliates) upon the systemic risk determination of a liquidity event during times of severe economic distress. The program would not be funded by the DIF but rather by fees and assessments paid by all participants in the program. If fees are insufficient to cover losses or expenses, the FDIC must impose a special assessment on participants as necessary to cover the shortfall. Any excess funds at the end of the liquidity event program would be deposited in the General Fund of the Treasury. 

    The Dodd-Frank Act also created the Financial Stability Oversight Council (FSOC) of which the Chairman of the FDIC is a member and expanded the FDIC’s responsibilities to include supervisory review of resolution plans (known as living wills) and backup examination authority for systemically important bank holding companies and nonbank financial companies supervised by the Federal Reserve Board. The living wills provide for an entity’s rapid and orderly resolution in the event of material financial distress or failure.

    OPERATIONS OF THE DIF

    The primary purposes of the DIF are to (1) insure the deposits and protect the depositors of IDIs and (2) resolve failed IDIs upon appointment of the FDIC as receiver in a manner that will result in the least possible cost to the DIF.

    The DIF is primarily funded from deposit insurance assessments. Other available funding sources, if necessary, are borrowings from the Treasury, the Federal Financing Bank (FFB), Federal Home Loan Banks, and IDIs. The FDIC has borrowing authority of $100 billion from the Treasury and a Note Purchase Agreement with the FFB, not to exceed $100 billion, to enhance the DIF’s ability to fund deposit insurance. 

    A statutory formula, known as the Maximum Obligation Limitation (MOL), limits the amount of obligations the DIF can incur to the sum of its cash, 90 percent of the fair market value of other assets, and the amount authorized to be borrowed from the Treasury. The MOL for the DIF was $201.8 billion and $191.5 billion as of December 31, 2018 and 2017, respectively. 

    OPERATIONS OF RESOLUTION ENTITIES

    The FDIC, as receiver, is responsible for managing and disposing of the assets of failed institutions in an orderly and efficient manner. The assets held by receiverships, conservatorships, and bridge institutions (collectively, resolution entities), and the claims against them, are accounted for separately from the DIF assets and liabilities to ensure that proceeds from these entities are distributed according to applicable laws and regulations. Therefore, income and expenses attributable to resolution entities are accounted for as transactions of those entities. The FDIC, as administrator of the DIF, bills resolution entities for services provided on their behalf.

  2. Summary of Significant Accounting Policies

    GENERAL

    The financial statements include the financial position, results of operations, and cash flows of the DIF and are presented in accordance with U.S. generally accepted accounting principles (GAAP). These statements do not include reporting for assets and liabilities of resolution entities because these entities are legally separate and distinct, and the DIF does not have any ownership or beneficial interests in them. Periodic and final accounting reports of resolution entities are furnished to courts, supervisory authorities, and others upon request.

    USE OF ESTIMATES

    The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and disclosure of contingent liabilities. Actual results could differ from these estimates. Where it is reasonably possible that changes in estimates will cause a material change in the financial statements in the near term, the nature and extent of such potential changes in estimates have been disclosed. The more significant estimates include the assessments receivable and associated revenue; the allowance for loss on receivables from resolutions (which considers the impact of shared-loss agreements); the guarantee obligations for structured transactions; the postretirement benefit obligation; and the estimated losses for anticipated failures. 

    CASH EQUIVALENTS

    Cash equivalents are short-term, highly liquid investments consisting primarily of U.S. Treasury Overnight Certificates.

    INVESTMENT IN U.S. TREASURY SECURITIES

    The FDI Act requires that the DIF funds be invested in obligations of the United States or in obligations guaranteed as to principal and interest by the United States. The Secretary of the Treasury must approve all such investments in excess of $100,000 and has granted the FDIC approval to invest the DIF funds only in U.S. Treasury obligations that are purchased or sold exclusively through the Treasury’s Bureau of the Fiscal Service’s Government Account Series program.

    The DIF’s investments in U.S. Treasury securities are classified as available-for-sale (AFS). Securities designated as AFS are shown at fair value. Unrealized gains and losses are reported as other comprehensive income. Any realized gains and losses are included in the Statement of Income and Fund Balance as components of net income. Income on securities is calculated and recorded daily using the effective interest or straight-line method depending on the maturity of the security (see Note 3). 

    REVENUE RECOGNITION FOR ASSESSMENTS

    Assessment revenue is recognized for the quarterly period of insurance coverage based on an estimate. The estimate is derived from an institution’s regular risk-based assessment rate and assessment base for the prior quarter adjusted for certain changes in supervisory examination ratings for larger institutions as well as modest assessment base growth and average assessment rate adjustment factors. Effective third quarter 2016 through third quarter 2018, the estimate included a surcharge for institutions with $10 billion or more in total consolidated assets (see Note 9). At the subsequent quarter-end, the estimated revenue amounts are adjusted when actual assessments for the covered period are determined for each institution. 

    CAPITAL ASSETS AND DEPRECIATION

    The FDIC buildings are depreciated on a straight-line basis over a 35- to 50-year estimated life. Building improvements are capitalized and depreciated over the estimated useful life of the improvements. Leasehold improvements are capitalized and depreciated over the lesser of the remaining life of the lease or the estimated useful life of the improvements, if determined to be material. Capital assets depreciated on a straight-line basis over a five-year estimated useful life include mainframe equipment; furniture, fixtures, and general equipment; and internal-use software. Computer equipment is depreciated on a straight-line basis over a three-year estimated useful life (see Note 5).

    PROVISION FOR INSURANCE LOSSES

    The provision for insurance losses primarily represents changes in the allowance for losses on receivables from closed banks and the contingent liability for anticipated failure of insured institutions (see Note 11).

    REPORTING ON VARIABLE INTEREST ENTITIES

    The receiverships engaged in structured transactions, some of which resulted in the issuance of note obligations that were guaranteed by the FDIC, in its corporate capacity. As the guarantor of note obligations for several structured transactions, the FDIC, in its corporate capacity, holds an interest in many variable interest entities (VIEs). The FDIC conducts a qualitative assessment of its relationship with each VIE as required by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 810, Consolidation. These assessments are conducted to determine if the FDIC, in its corporate capacity, has (1) power to direct the activities that most significantly affect the economic performance of the VIE and (2) an obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. When a variable interest holder has met both of these characteristics, the enterprise is considered the primary beneficiary and must consolidate the VIE. In accordance with the provisions of FASB ASC Topic 810, an assessment of the terms of the legal agreement for each VIE was conducted to determine whether any of the terms had been activated or modified in a manner that would cause the FDIC, in its corporate capacity, to be characterized as a primary beneficiary. In making that determination, consideration was given to which, if any, activities were significant to each VIE. Often, the right to service collateral, to liquidate collateral, or to unilaterally dissolve the VIE was determined to be the most significant activity. In other cases, it was determined that the structured transactions did not include such significant activities and that the design of the entity was the best indicator of which party was the primary beneficiary.

    The conclusion of these analyses was that the FDIC, in its corporate capacity, has not engaged in any activity that would cause the FDIC to be characterized as a primary beneficiary to any VIE with which it was involved as of December 31, 2018 and 2017. Therefore, consolidation is not required for the December 31, 2018 and 2017 DIF financial statements. In the future, the FDIC, in its corporate capacity, may become the primary beneficiary upon the activation of provisional contract rights that extend to the FDIC if payments are made on guarantee claims. Ongoing analyses will be required to monitor consolidation implications under FASB ASC Topic 810.

    The FDIC’s involvement with VIEs is fully described in Note 8 under FDIC Guaranteed Debt of Structured Transactions.

    RELATED PARTIES

    The nature of related parties and a description of related party transactions are discussed in Note 1 and disclosed throughout the financial statements and footnotes.

    APPLICATION OF RECENT ACCOUNTING STANDARDS

    In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU will replace the incurred loss impairment model with a new expected credit loss model for financial assets measured at amortized cost and for off-balance-sheet credit exposures. The guidance also amends the AFS debt securities impairment model by requiring the use of an allowance to record estimated credit losses (and subsequent recoveries) related to AFS debt securities. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, that changed the effective date of ASU 2016-13 for the DIF to January 1, 2022. ASU 2016-13 requires the cumulative effect of the change on the DIF’s beginning fund balance when it is adopted. The FDIC continues to assess the effect ASU 2016-13 will have on the DIF’s financial position and results of operations.

    Other recent accounting pronouncements have been deemed not applicable or material to the financial statements as presented.

  3. Investment in U.S. Treasury Securities

    The “Investment in U.S. Treasury securities” line item on the Balance Sheet consisted of the following components by maturity (dollars in millions).
    December 31, 2018
    Maturity Yield at Purchase Face Value Net Carrying Amount Unrealized Holding Gains Unrealized Holding Losses Fair Value
    U.S. Treasury notes and bonds
    Within 1 year 1.90% $ 28,950 $ 28,997 $ 0 $ (104) $ 28,893
    After 1 year through 5 years 2.08% 64,650 64,327 137 (649) 63,815
    Total   $ 93,600 $ 93,324 $ 137 $ (753)a $ 92,708

    a These unrealized losses occurred as a result of temporary changes in market interest rates. The FDIC does not intend to sell the securities and is not likely to be required to sell them before their maturity date, thus, the FDIC does not consider these securities to be other than temporarily impaired at December 31, 2018. As of December 31, 2018, securities with a continuous unrealized loss position of less than 12 months had an aggregate related fair value and unrealized loss of $21.6 billion and $77 million, respectively. For those with a continuous unrealized loss position of 12 months or longer, their aggregate related fair value and unrealized losses were $53.1 billion and $676 million, respectively.

    The “Investment in U.S. Treasury securities” line item on the Balance Sheet consisted of the following components by maturity (dollars in millions).
    December 31, 2017
    Maturity Yield at Purchasea Face Value Net Carrying Amount Unrealized Holding Gains Unrealized Holding Losses Fair Value
    U.S. Treasury notes and bonds
    Within 1 year 1.25% $ 26,525b $ 26,661 $ 0 $ (53) $ 26,608
    After 1 year through 5 years 1.67% 56,500 56,694 3 (428) 56,269
    Subtotal   $ 83,025 $ 83,355 $ 3 $ (481) $ 82,877
    U.S. Treasury Inflation-Protected Securities
    Within 1 year -0.14% $ 400 $ 427 $ 0 $ (1) $ 426
    Subtotal   $ 400 $ 427 $ 0 $ (1) $ 426
    Total   $ 83,425 $ 83,782 $ 3 $ (482)c $ 83,303

    a The Treasury Inflation-Protected Securities (TIPS) are indexed to increases or decreases in the Consumer Price Index for All Urban Consumers (CPI-U). For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, based on figures issued by the Congressional Budget Office and Blue Chip Economic Indicators in early 2017.

    b Includes two Treasury notes totaling $2.1 billion which matured on Sunday, December 31, 2017. Settlements occurred the next business day, January 2, 2018.

    c These unrealized losses occurred over a period of less than a year as a result of temporary changes in market interest rates. The FDIC does not intend to sell the securities and is not likely to be required to sell them before their maturity date, thus, the FDIC does not consider these securities to be other than temporarily impaired at December 31, 2017. The aggregate related fair value of securities with unrealized losses was $75.5 billion as of December 31, 2017.

  4. Receivables from Resolutions, Net

    The receivables from resolutions result from DIF payments to cover obligations to insured depositors (subrogated claims), advances to resolution entities for working capital, and administrative expenses paid on behalf of resolution entities. Any related allowance for loss represents the difference between the funds advanced and/or obligations incurred and the expected repayment. Estimated future payments on losses incurred on assets sold to an acquiring institution under a shared-loss agreement (SLA) are factored into the computation of the expected repayment. Assets held by resolution entities (including structured transaction-related assets; see Note 8) are the main source of repayment of the DIF's receivables from resolutions.

    The “Receivables from resolutions, net” line item on the Balance Sheet consisted of the following components (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Receivables from closed banks $ 68,267,737 $ 76,725,761
    Allowance for losses (65,209,496) (70,752,790)
    Total $ 3,058,241 $ 5,972,971

     

    As of December 31, 2018, the FDIC, as receiver, managed 272 active receiverships; no new receiverships were established in 2018. The resolution entities held assets with a book value of $5.1 billion as of December 31, 2018, and $8.8 billion as of December 31, 2017 (including $4.0 billion and $6.5 billion, respectively, of cash, investments, receivables due from the DIF, and other receivables).

    Estimated cash recoveries from the management and disposition of assets that are used to determine the allowance for losses are based on asset recovery rates from several sources, including actual or pending institution-specific asset disposition data, failed institution-specific asset valuation data, aggregate asset valuation data on several recently failed or troubled institutions, sampled asset valuation data, and empirical asset recovery data based on failures since 2007. Methodologies for determining the asset recovery rates incorporate estimating future cash recoveries, net of applicable liquidation cost estimates, and discounting based on market-based risk factors applicable to a given asset’s type and quality. The resulting estimated cash recoveries are then used to derive the allowance for loss on the receivables from these resolutions.

    For failed institutions resolved using a whole bank purchase and assumption transaction with an accompanying SLA, the projected future shared-loss payments on the covered residential and commercial loan assets sold to the acquiring institution under the agreement are considered in determining the allowance for loss on the receivables from these resolutions. The shared-loss cost projections are based on the covered assets’ intrinsic value, which is determined using financial models that consider the quality, condition and type of covered assets, current and future market conditions, risk factors, and estimated asset holding periods. 

    For year-end 2018, the shared-loss cost estimates were updated for all 81 receiverships with active SLAs. The updated shared-loss cost projections for 13 residential SLAs, which represent the majority ($5.0 billion or 52 percent) of shared-loss covered assets of $9.6 billion, were primarily based on third-party valuations estimating the cumulative loss of covered assets. The updated cost projections on the remaining residential shared-loss covered assets ($4.6 billion or 48 percent) were based on pending sales activity and the FDIC’s historical loss experience that also factors in the time period based on the life of the agreement. This is a change from 2017, when the valuation methodology on such assets were either based on third-party valuations or a stratified random sample of institutions selected for third-party loss estimations and valuation results from the sampled institutions were aggregated and extrapolated to the non-sampled institutions by asset type and performance status. This change was made to address the seasoned nature of this portfolio (loss coverage will expire on 75 percent of the remaining covered assets within one year of December 2018). The effect of this change was a $138 million decrease to the shared-loss liability. As of December 31, 2018, all commercial asset shared-loss coverage has expired. For the year ending December 31, 2017, shared-loss cost projections for commercial covered assets were based on the FDIC’s historical loss experience that also factored in the time period based on the life of the agreement.

    Also reflected in the allowance for loss calculation are end-of-agreement SLA “true-up” recoveries. True-up recoveries are projected to be received at expiration in accordance with the terms of the SLA, if actual losses at expiration are lower than originally estimated. 

    Note that estimated asset recoveries are regularly evaluated during the year, but remain subject to uncertainties because of potential changes in economic and market conditions, which may cause the DIF’s actual recoveries to vary significantly from current estimates.

    WHOLE BANK PURCHASE AND ASSUMPTION TRANSACTIONS WITH SHARED-LOSS AGREEMENTS

    Since the beginning of 2008 through 2013, the FDIC resolved 304 failures using whole bank purchase and assumption resolution transactions with accompanying SLAs on total assets of $215.7 billion purchased by the financial institution acquirers. The acquirer typically assumed all of the deposits and purchased essentially all of the assets of a failed institution. The majority of the commercial and residential loan assets were purchased under an SLA, where the FDIC agreed to share in future losses and recoveries experienced by the acquirer on those assets covered under the agreement.

    Losses on the covered assets of failed institutions are shared between the acquirer and the FDIC, in its receivership capacity, when losses occur through the sale, foreclosure, loan modification, or charge-off of loans under the terms of the SLA. The majority of the agreements cover commercial and single-family loans over a five- to ten-year shared-loss period, respectively, with the receiver covering 80 percent of the losses incurred by the acquirer and the acquiring institution covering 20 percent. Prior to March 26, 2010, most SLAs included a threshold amount, above which the receiver covered 95 percent of the losses incurred by the acquirer. Recoveries by the acquirer on covered commercial and single-family SLA losses are also shared over an eight- to ten-year period, respectively. Note that future recoveries on SLA losses are not factored into the DIF allowance for loss calculation because the amount and timing of such receipts are not determinable. 

    The estimated shared-loss liability is accounted for by the receiver and is included in the calculation of the DIF’s allowance for loss against the corporate receivable from the resolution. As shared-loss claims are asserted and proven, receiverships satisfy these shared-loss payments using available liquidation funds and/or by drawing on amounts due from the DIF for funding the deposits assumed by the acquirer (see Note 6).

    Receivership shared-loss transactions are summarized as follows (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Shared-loss payments made to date, net of recoveries $ 29,088,461 $ 29,014,957
    Projected shared-loss payments, net of "true-up" recoveries $ 175,207 $ 428,971
    Total remaining shared-loss covered assets $ 9,602,069 $ 13,896,921

     

    The $4.3 billion reduction in the remaining shared-loss covered assets from 2017 to 2018 is primarily due to the liquidation of covered assets from active SLAs, expiration of loss coverage for two commercial loan SLAs, and early termination of SLAs impacting 20 receiverships during 2018.

    CONCENTRATION OF CREDIT RISK

    Financial instruments that potentially subject the DIF to concentrations of credit risk are receivables from resolutions. The repayment of these receivables is primarily influenced by recoveries on assets held by receiverships and payments on the covered assets under SLAs. The majority of the remaining assets in liquidation ($1.2 billion) and current shared-loss covered assets ($9.6 billion), which together total $10.8 billion, are concentrated in commercial loans ($34 million), residential loans ($9.7 billion), and structured transaction-related assets ($853 million) as described in Note 8. Most of the assets originated from failed institutions located in California ($7.3 billion), Puerto Rico ($1.1 billion), and Florida ($898 million).

  5. Property and Equipment, Net

    Depreciation expense was $51 million and $54 million for 2018 and 2017, respectively. The “Property and equipment, net” line item on the Balance Sheet consisted of the following components (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Land $ 37,352 $ 37,352
    Buildings (including building and leasehold improvements) 328,787 325,322
    Application software (includes work-in-process) 103,543 112,727
    Furniture, fixtures, and equipment 66,889 72,384
    Accumulated depreciation (208,041) (213,735)
    Total $ 328,530 $ 334,050
  6. Liabilities Due to Resolutions

    As of December 31, 2018 and 2017, the DIF recorded liabilities totaling $601 million and $1.2 billion, respectively, to resolution entities representing the agreed-upon value of assets transferred from the receiverships, at the time of failure, to the acquirers/bridge institutions for use in funding the deposits assumed by the acquirers/bridge institutions. Ninety-seven percent of these liabilities are due to failures resolved under whole-bank purchase and assumption transactions, most with an accompanying SLA. The DIF satisfies these liabilities either by sending cash directly to a receivership to fund shared-loss and other expenses or by offsetting receivables from resolutions when a receivership declares a dividend.

    In addition, there were $4 million and $9 million in unpaid deposit claims related to multiple receiverships as of December 31, 2018 and 2017, respectively. The DIF pays these liabilities when the claims are approved.

  7. Contingent Liabilities

    ANTICIPATED FAILURE OF INSURED INSTITUTIONS

    The DIF records a contingent liability and a loss provision for DIF-insured institutions that are likely to fail when the liability is probable and reasonably estimable, absent some favorable event such as obtaining additional capital or merging. The contingent liability is derived by applying expected failure rates and loss rates to the institutions based on supervisory ratings, balance sheet characteristics, and projected capital levels.

    The banking industry’s financial condition and performance were generally positive in 2018. According to the most recent quarterly financial data submitted by DIF-insured institutions, the industry’s capital levels continued to improve, and the percentage of total loans that were noncurrent at September 30 fell to its lowest level since second quarter 2007. The industry reported total net income of $178.1 billion for the first nine months of 2018, an increase of 27.4 percent over the comparable period one year ago.

    Consistent with the positive performance of the banking industry, the contingent liability remained relatively stable as of December 31, 2018 compared to December 31, 2017. The DIF recorded contingent liabilities totaling $114 million and $98 million as of December 31, 2018 and 2017, respectively.

    In addition to the recorded contingent liabilities, the FDIC has identified risks in the financial services industry that could result in additional losses to the DIF, should potentially vulnerable insured institutions ultimately fail. As a result of these risks, the FDIC believes that it is reasonably possible that the DIF could incur additional estimated losses of approximately $227 million as of December 31, 2018, compared to $373 million as of year-end 2017. The actual losses, if any, will largely depend on future economic and market conditions and could differ materially from this estimate.

    During 2018, no institutions failed. The improvement in financial performance and condition of the banking industry of the past year should continue if market conditions remain favorable. However, the operating environment poses several key challenges. Interest rates have been exceptionally low for an extended period, and there are signs of growing credit and liquidity risk. Recently, revenue growth and net interest margins have benefited from interest rate hikes; however, margins may be squeezed as deposit rates begin to increase. Economic conditions that challenge the banking sector include the potential effect of increases in interest rates on liquidity and economic activity; the impact of trade tariffs on economic growth and exports; the impact of continued weak commodity prices on local markets; and the risk of market volatility from geopolitical developments. The FDIC continues to evaluate ongoing risks to affected institutions in light of existing economic and financial conditions, and the extent to which such risks may put stress on the resources of the insurance fund.

    LITIGATION LOSSES

    The DIF records an estimated loss for unresolved legal cases to the extent that those losses are considered probable and reasonably estimable. The FDIC recorded probable litigation losses of $200 thousand for the DIF as of December 31, 2018 and 2017. In addition, the FDIC has identified no reasonably possible losses from unresolved cases as of December 31, 2018 and $1 million as of December 31, 2017.

  8. Other Contingencies

    INDYMAC FEDERAL BANK REPRESENTATION AND INDEMNIFICATION CONTINGENT LIABILITY

    On March 19, 2009, the FDIC, as receiver, for IndyMac Federal Bank (IMFB) and certain subsidiaries (collectively, Sellers) sold substantially all of the assets, which included mortgage loans and servicing rights, to OneWest Bank (now known as CIT Bank) and its affiliates (collectively, Acquirers). Under the sale agreements, the Acquirers have indemnification rights to recover losses incurred as a result of third-party claims and breaches of the Sellers’ representations. The FDIC, in its corporate capacity, guaranteed the Sellers’ indemnification obligations under the sale agreements. Until all indemnification claims are asserted, quantified and paid, losses could continue to be incurred by the receivership and indirectly by the DIF.

    The unpaid principal balances of loans in the servicing portfolios sold subject to the Sellers’ indemnification obligations totaled $171.6 billion at the time of sale. The IndyMac receivership has paid cumulative claims totaling $110 million through December 31, 2018 and 2017. There were no claims accrued as of December 31, 2018 and 2017.

    The Acquirers’ rights to submit breach notices as well as their right to submit claims for reimbursement with respect to certain third-party claims have passed. However, the Acquirers retain the right to assert indemnification claims for losses over the life of those loans for which breach notices or third-party claim notices were timely submitted. While many loans are subject to notices of alleged breaches, not all breach allegations or third-party claims will result in an indemnifiable loss. In addition, the Acquirers retain the right to seek reimbursement for losses incurred as a result of claims alleging breaches of loan seller representations asserted by Ginnie Mae on or before March 19, 2019 for its reverse mortgage servicing portfolios. At the time of the sale to CIT the reverse loans serviced for Ginnie Mae constituted approximately 2 percent of the reverse servicing portfolio. Quantifying the contingent liability is subject to a number of uncertainties, including market conditions, the occurrence of borrower defaults and resulting foreclosures and losses, and the possible allocation of certain losses to the Acquirers. Therefore, because of these uncertainties the FDIC has determined that, while additional losses are probable, the amount is not currently estimable.

    PURCHASE AND ASSUMPTION INDEMNIFICATION

    In connection with purchase and assumption agreements for resolutions, the FDIC, in its receivership capacity, generally indemnifies the purchaser of a failed institution’s assets and liabilities in the event a third party asserts a claim against the purchaser unrelated to the explicit assets purchased or liabilities assumed at the time of failure. The FDIC, in its corporate capacity, is a secondary guarantor if a receivership is unable to pay. These indemnifications generally extend for a term of six years after the date of institution failure. The FDIC is unable to estimate the maximum potential liability for these types of guarantees as the agreements do not specify a maximum amount and any payments are dependent upon the outcome of future contingent events, the nature and likelihood of which cannot be determined at this time. During 2018 and 2017, the FDIC, in its corporate capacity, made no indemnification payments under such agreements, and no amount has been accrued in the accompanying financial statements with respect to these indemnification guarantees.

    FDIC GUARANTEED DEBT OF STRUCTURED TRANSACTIONS

    The FDIC, as receiver, used structured transactions (securitizations and structured sales of guaranteed notes (SSGNs) or collectively, “trusts”) to dispose of residential mortgage loans, commercial loans, and mortgage-backed securities held by the receiverships. 

    For these transactions, certain loans or securities from failed institutions were pooled and transferred into a trust structure. The trusts issued senior and/or subordinated debt instruments and owner trust or residual certificates collateralized by the underlying mortgage-backed securities or loans.

    From March 2010 through March 2013, the receiverships transferred a portfolio of loans with an unpaid principal balance of $2.4 billion and mortgage-backed securities with a book value of $6.4 billion to the trusts. Private investors purchased the senior notes issued by the trusts for $6.2 billion in cash and the receiverships held the subordinated debt instruments and owner trust or residual certificates. In exchange for a fee, the FDIC, in its corporate capacity, guarantees the timely payment of principal and interest due on the senior notes, with the last guarantee expected to terminate in 2022. If the FDIC is required to perform under its guarantees, it acquires an interest in the cash flows of the trust equal to the amount of guarantee payments made plus accrued interest. The subordinated note holders and owner trust or residual certificate holders receive cash flows from the trust only after all expenses have been paid, the guaranteed notes have been satisfied, and the FDIC has been reimbursed for any guarantee payments.

    The following table provides the maximum loss exposure to the FDIC, as guarantor, total guarantee fees collected, guarantee fees receivable, and other information related to the FDIC guaranteed debt for the trusts as of December 31, 2018 and 2017 (dollars in millions).
      December 31
    2018
    December 31
    2017
    Number of trusts
    Initial 11 11
    Current 8 11
    Trust collateral balances
    Initial $ 8,780 $ 8,780
    Current $ 1,643 $ 2,169
    Guaranteed note balances
    Initial $ 6,196 $ 6,196
    Current (maximum loss exposure) $ 404 $ 672
    Guarantee fees collected to date $ 163 $ 159
    Amounts recognized in Interest receivable on investments and other assets, net
    Receivable for guarantee fees $ 4 $ 8
    Receivable for guarantee payments, net $ 28 $ 20
    Amounts recognized in Contingent liabilities: Guarantee payments and litigation losses
    Contingent liability for guarantee payments $ 33 $ 34
    Amounts recognized in Accounts payable and other liabilities
    Deferred revenue for guarantee feesa $ 4 $ 8

    (a) All guarantee fees are recorded as deferred revenue and recognized as revenue primarily on a straight-line basis over the term of the notes.

    Except as presented above, the DIF records no other structured transaction-related assets or liabilities on its balance sheet.

    ESTIMATED LOSS FROM GUARANTEE PAYMENTS

    Any estimated loss to the DIF from the guarantees is based on an analysis of the expected guarantee payments by the FDIC, net of reimbursements to the FDIC for such guarantee payments. The DIF recorded a contingent liability of $33 million as of December 31, 2018, for estimated payments under the guarantee for one SSGN transaction, down from $34 million at December 31, 2017. As guarantor, the FDIC, in its corporate capacity, is entitled to reimbursement from the trust for any guarantee payments; therefore a corresponding receivable has been recorded. The related allowance for loss on this receivable is $5 million as of December 31, 2018, reflecting the expected shortfall of proceeds available for reimbursement after liquidation of the SSGN’s underlying collateral at note maturity, as compared to the $14 million allowance recorded at year-end 2017. Guarantee payments are expected to be made at note maturity in December 2020. 

    For all of the remaining transactions, the estimated cash flows from the trust assets provide sufficient coverage to fully pay the debts. To date, the FDIC, in its corporate capacity, has not provided, and does not intend to provide, any form of financial or other type of support for structured transactions that it was not previously contractually required to provide.

  9. Assessments

    The FDIC deposit insurance assessment system is mandated by section 7 of the FDI Act and governed by part 327 of title 12 of the Code of Federal Regulations (12 CFR Part 327). The risk-based system requires the payment of quarterly assessments by all IDIs.

    In response to the Dodd-Frank Act, the FDIC implemented several changes to the assessment system, amended its Restoration Plan (which is required when the ratio of the DIF balance to estimated insured deposits, or reserve ratio, is below the statutorily mandated minimum), and developed a comprehensive, long-term fund management plan. The plan is designed to restore and maintain a positive fund balance for the DIF even during a banking crisis and achieve moderate, steady assessment rates throughout any economic cycle. Summarized below are actions taken to implement requirements of the Dodd-Frank Act and provisions of the comprehensive, long-term fund management plan.

    • The FDIC amended the Restoration Plan, which was intended to ensure that the reserve ratio reaches 1.35 percent by September 30, 2020, as required by the Dodd-Frank Act, in lieu of the previous statutory minimum of 1.15 percent by the end of 2016. While under the restoration plan, the FDIC updates, at least semiannually, its loss and income projections for the fund and, if needed, increases or decreases assessment rates, following notice-and-comment rulemaking, if required.
    • The FDIC Board of Directors designates a reserve ratio for the DIF and publishes the designated reserve ratio (DRR) before the beginning of each calendar year, as required by the FDI Act. Accordingly, in December 2018, the FDIC published a notice maintaining the DRR at 2 percent for 2019. The DRR is an integral part of the FDIC’s comprehensive, long-term management plan for the DIF and is viewed as a long-range, minimum target for the reserve ratio.
    • The FDIC adopted a final rule that suspends dividends indefinitely, and, in lieu of dividends, adopts lower assessment rate schedules when the reserve ratio reaches 1.15 percent, 2 percent, and 2.5 percent.

     

    The Dodd-Frank Act requires that the FDIC offset the effect of increasing the minimum reserve ratio from 1.15 percent to 1.35 percent on small banks. To implement this requirement, the FDIC imposed a surcharge to the regular quarterly assessments of IDIs with $10 billion or more in total consolidated assets (larger institutions), beginning with the quarter ending September 30, 2016. Pursuant to a final rule published in March 2016:

    • The surcharge generally equals an annual rate of 4.5 basis points applied to a larger institution’s regular quarterly assessment base (with certain adjustments).
    • The FDIC will provide assessment credits, as described in 12 CFR 327.11(c)(4), to institutions with less than $10 billion in total assets (small banks) for the portion of their assessments that contributed to the growth in the reserve ratio between 1.15 percent and 1.35 percent to ensure that the effect of reaching 1.35 percent is fully borne by the larger institutions.

     

    As of September 30, 2018, the reserve ratio of the DIF exceeded the required minimum of 1.35 percent by reaching 1.36 percent. As a result, the requirements of the amended Restoration Plan were achieved and the surcharge assessment on large banks ended effective October 1, 2018. The total amount of small bank assessment credits is $765 million. In each quarter that the reserve ratio is at or above 1.38 percent, the FDIC will automatically apply a small bank’s credits to reduce its regular assessment up to the entire amount of the assessment, until credits are exhausted. 

    The reserve ratio as of December 31, 2018, is not yet known, and it is uncertain whether the fourth quarter reserve ratio will be at least 1.38 percent. The year-end 2018 assessment receivable and related assessment revenue have not been reduced for the potential use of small bank assessment credits since it is only reasonably possible the small bank credits will be applied against fourth quarter assessments. The reserve ratio for December 31, 2018, will be determined before the fourth quarter assessments are billed and collected at the end of the first quarter of 2019. If the reserve ratio is at least 1.38 percent, then the FDIC expects that approximately $305 million in assessment credits will be applied against the first quarter collection in 2019, with an equal reduction to revenue at that time.

    If the reserve ratio falls below 1.35 percent in the future, the FDIC would again establish and implement a restoration plan; however, under the FDI Act, the FDIC would have 8 years to restore the reserve ratio to the 1.35 percent minimum, and possibly longer if the Board finds that extraordinary circumstances warrant a longer time period [12 U.S.C. 1817(b)(3)(E)]. The FDIC must also establish and implement a restoration plan if the FDIC determines the DIF’s reserve ratio will, within 6 months of such determination, fall below 1.35 percent [12 U.S.C. 1817(b)(3)(E)(i)].

    ASSESSMENT REVENUE

    Annual assessment rates averaged approximately 7.2 cents per $100 of the assessment base through September 30, 2018. Annual assessment rates averaged approximately 3.5 cents per $100 for the fourth quarter of 2018, reflecting the end of surcharges on larger institutions beginning October 1, 2018. Annual assessment rates averaged approximately 7.2 cents per $100 of the assessment base during 2017. The assessment base is generally defined as average consolidated total assets minus average tangible equity (measured as Tier 1 capital) of an IDI during the assessment period. 

    The “Assessments receivable” line item on the Balance Sheet of $1.4 billion and $2.6 billion represents the estimated premiums due from IDIs for the fourth quarter of 2018 and 2017, respectively. The actual deposit insurance assessments for the fourth quarter of 2018 will be billed and collected at the end of the first quarter of 2019. During 2018 and 2017, $9.5 billion and $10.6 billion, respectively, were recognized as assessment revenue from institutions, including $3.8 billion and $4.9 billion in surcharges from large IDIs in 2018 and 2017, respectively. In total, surcharges of $11.2 billion were collected over nine quarters.

    PENDING LITIGATION FOR UNDERPAID ASSESSMENTS

    On January 9, 2017, the FDIC filed suit in the United States District Court for the District of Columbia (and amended this complaint on April 7, 2017), alleging that Bank of America, N.A. (BoA) underpaid its insurance assessments for multiple quarters based on the underreporting of counterparty exposures. In total, the FDIC alleges that BoA underpaid insurance assessments by $1.12 billion, including interest for the quarters ending March 2012 through December 2014. The FDIC invoiced BoA for $542 million and $583 million representing claims in the initial suit and the amended complaint, respectively. BoA has failed to pay these past due amounts. Pending resolution of this matter, BoA has fully pledged security with a third-party custodian pursuant to a security agreement with the FDIC. As of December 31, 2018, the total amount of unpaid assessments (including accrued interest) was $1.16 billion. For the years ending December 31, 2018 and 2017, the impact of this litigation is not reflected in the financial statements of the DIF.

    RESERVE RATIO

    As of September 30, 2018 and December 31, 2017, the DIF reserve ratio was 1.36 percent and 1.30 percent, respectively.

    ASSESSMENTS RELATED TO FICO

    Assessments are levied on institutions for payments of the interest on bond obligations issued by the Financing Corporation (FICO). The final FICO assessment is estimated to be collected in March 2019 pursuant to a final rule issued in December 2018 by the Federal Housing Finance Agency, the agency authorized by Congress to prescribe regulations relating to the FICO. The FICO was established as a mixed-ownership government corporation to function solely as a financing vehicle for the former FSLIC. The FICO assessment has no financial impact on the DIF and is separate from deposit insurance assessments. The FDIC, as administrator of the DIF, acts solely as a collection agent for the FICO. Interest obligations collected and remitted to the FICO as of December 31, 2018 and 2017, were $460 million and $760 million, respectively.

  10. Operating Expenses

    The “Operating expenses” line item on the Statement of Income and Fund Balance consisted of the following components (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Salaries and benefits $ 1,221,138 $ 1,222,793
    Outside services 268,693 265,514
    Travel 89,443 88,786
    Buildings and leased space 86,795 88,465
    Software/Hardware maintenance 83,276 77,911
    Depreciation of property and equipment 51,316 53,639
    Other 26,666 26,362
    Subtotal 1,827,327 1,823,470
    Less: Expenses billed to resolution entities and others (62,579) (84,075)
    Total $ 1,764,748 $ 1,739,395
  11. Provision for Insurance Losses

    The provision for insurance losses was a negative $563 million for 2018, compared to negative $183 million for 2017. The negative provision for 2018 primarily resulted from a $570 million decrease to the estimated losses for prior year failures.

    As described in Note 4, the estimated recoveries from assets held by receiverships and estimated payments related to assets sold by receiverships to acquiring institutions under shared-loss agreements (SLAs) are used to derive the loss allowance on the receivables from resolutions. Summarized below are the three primary components that comprise the majority of the decrease in estimated losses for prior year failures.

    • Receivership shared-loss liability cost estimates decreased $186 million primarily due to lower-than-anticipated losses on covered assets, reductions in shared-loss cost estimates from the early termination of SLAs during the year, and unanticipated recoveries from SLAs where the commercial loss coverage has expired but the recovery period remains active.
    • Estimated recoveries from residual certificates retained by receiverships for structured transactions of $172 million were recognized in 2018 as uncertainties regarding collection have diminished. The likelihood of collection has increased given that the majority of the senior notes are at least 92 percent amortized as of year-end 2018 and all are projected to be fully paid within one to three years. The residual certificates will receive cash from the trust once the senior notes have been fully satisfied.
    • Receiverships received $130 million of unanticipated recoveries from tax refunds, litigation settlements, and professional liability claims. These recoveries are typically not recognized in the allowance for loss estimate until the cash is received by receiverships, or collectability is assured, since significant uncertainties surround their recovery. 
  12. Employee Benefits

    PENSION BENEFITS AND SAVINGS PLANS

    Eligible FDIC employees (permanent and term employees with appointments exceeding one year) are covered by the federal government retirement plans, either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). Although the DIF contributes a portion of pension benefits for eligible employees, it does not account for the assets of either retirement system. The DIF also does not have actuarial data for accumulated plan benefits or the unfunded liability relative to eligible employees. These amounts are reported on and accounted for by the U.S. Office of Personnel Management (OPM).

    Under the Federal Thrift Savings Plan (TSP), the FDIC provides FERS employees with an automatic contribution of 1 percent of pay and an additional matching contribution up to 4 percent of pay. CSRS employees also can contribute to the TSP, but they do not receive agency matching contributions. Eligible FDIC employees may also participate in an FDIC-sponsored tax-deferred 401(k) savings plan with an automatic contribution of 1 percent of pay and an additional matching contribution up to 4 percent of pay.

    The expenses for these plans are presented in the table below (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Civil Service Retirement System $ 2,089 $ 2,644
    Federal Employees Retirement System (Basic Benefit) 111,926 111,228
    Federal Thrift Savings Plan 35,564 35,180
    FDIC Savings Plan 39,466 39,004
    Total $ 189,045 $ 188,056

     

    POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

    The DIF has no postretirement health insurance liability since all eligible retirees are covered by the Federal Employees Health Benefits (FEHB) program. The FEHB is administered and accounted for by the OPM. In addition, OPM pays the employer share of the retiree’s health insurance premiums.

    The FDIC provides certain life and dental insurance coverage for its eligible retirees, the retirees’ beneficiaries, and covered dependents. Retirees eligible for life and dental insurance coverage are those who have qualified due to (1) immediate enrollment upon appointment or five years of participation in the plan and (2) eligibility for an immediate annuity. The life insurance program provides basic coverage at no cost to retirees and allows converting optional coverage to direct-pay plans. For the dental coverage, retirees are responsible for a portion of the premium.

    The FDIC has elected not to fund the postretirement life and dental benefit liabilities. As a result, the DIF recognized the underfunded status (the difference between the accumulated postretirement benefit obligation and the plan assets at fair value) as a liability. Since there are no plan assets, the plan’s benefit liability is equal to the accumulated postretirement benefit obligation. 

    Postretirement benefit obligation, gain and loss, and expense information included in the Balance Sheet and Statement of Income and Fund Balance are summarized as follows (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Accumulated postretirement benefit
    obligation recognized in
    Postretirement benefit liability
    $ 235,935 $ 259,316
    Amounts recognized in accumulated other comprehensive income:
    Unrealized postretirement benefit (loss)
    Cumulative net actuarial loss $ (13,155) $ (44,630)
    Prior service cost (385) (960)
    Total $ (13,540) $ (45,590)
    Amounts recognized in other comprehensive income:
    Unrealized postretirement benefit gain (loss)
    Actuarial gain (loss) $ 31,475 $ (20,418)
    Prior service credit 575 575
    Total $ 32,050 $ (19,843)
    Net periodic benefit costs recognized in Operating expenses
    Service cost $ 4,625 $ 4,098
    Interest cost 9,334 9,241
    Net amortization out of other comprehensive
    income 2,064 654
    Total $ 16,023 $ 13,993

    Expected amortization of accumulated other comprehensive income into net periodic benefit cost over the next year is shown in the table below (dollars in thousands).
    December 31, 2019
    Prior service costs $ 385
    Net actuarial loss 0
    Total $ 385

     

    The annual postretirement contributions and benefits paid are included in the table below (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Employer contributions $ 7,354 $ 6,720
    Plan participants' contributions $ 846 $ 788
    Benefits paid $ (8,200) $ (7,508)

     

    The expected contributions for the year ending December 31, 2019, are $9 million. Expected future benefit payments for each of the next 10 years are presented in the following table (dollars in thousands).
    2019 2020 2021 2022 2023 2024-2028
    $ 7,885 $ 8,448 $ 9,004 $ 9,575 $ 10,164 $ 59,735

     

    Assumptions used to determine the amount of the accumulated postretirement benefit obligation and the net periodic benefit costs are summarized as follows.
      December 31
    2018
    December 31
    2017
    Discount rate for future benefits (benefit obligation) 4.81% 4.03%
    Rate of compensation increase 3.49% 3.44%
    Discount rate (benefit cost) 4.03% 4.67%
    Dental health care cost-trend rate
    Assumed for next year 3.80% 4.00%
    Ultimate 3.80% 4.00%
    Year rate will reach ultimate 2019 2018
  13. Commitments and Off-Balance-Sheet Exposure

    COMMITMENTS:

    Leased Space

    The DIF leased space expense totaled $44 million for 2018 and 2017. The FDIC’s lease commitments total $127 million for future years. The lease agreements contain escalation clauses resulting in adjustments, usually on an annual basis.

    Future minimum lease commitments are as follows (dollars in thousands).
    2019 2020 2021 2022 2023 2024/Thereafter
    $ 42,835 $ 29,795 $ 21,580 $ 11,816 $ 10,115 $ 10,432

     

    OFF-BALANCE-SHEET EXPOSURE:

    Deposit Insurance

    Estimates of insured deposits are derived primarily from quarterly financial data submitted by IDIs to the FDIC and represent the accounting loss that would be realized if all IDIs were to fail and the acquired assets provided no recoveries. As of September 30, 2018 and December 31, 2017, estimated insured deposits for the DIF were $7.4 trillion and $7.2 trillion, respectively.

  14. Fair Value of Financial Instruments

    Financial assets recognized and measured at fair value on a recurring basis at each reporting date include cash equivalents (see Note 2) and the investment in U.S. Treasury securities (see Note 3). Other financial assets and liabilities, measured at amortized cost, are the receivables from resolutions, assessments receivable, interest receivable on investments, other short-term receivables, and accounts payable and other liabilities.

    The DIF’s financial assets measured at fair value consisted of the following components (dollars in millions).
      Quoted Prices in
    Active Markets for
    Identical Assets
    (Level 1)
    Significant Other
    Observable Inputs
    (Level 2)
    Significant
    Unobservable Inputs
    (Level 3)
    Total Assets
    at Fair Value
    December 31, 2018
    Assets
    Cash equivalents1 $ 5,739     $ 5,739
    Available-for-Sale Debt Securities
    Investment in U.S. Treasury securities2 92,708     92,708
    Total Assets $ 98,447 $ 0 $ 0 $ 98,447

    (1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the Treasury’s Bureau of the Fiscal Service.

    (2) The investment in U.S. Treasury securities is measured based on prevailing market yields for federal government entities.

     

    The DIF’s financial assets measured at fair value consisted of the following components (dollars in millions).
      Quoted Prices in
    Active Markets for
    Identical Assets
    (Level 1)
    Significant Other
    Observable Inputs
    (Level 2)
    Significant
    Unobservable Inputs
    (Level 3)
    Total Assets
    at Fair Value
    December 31, 2017
    Assets
    Cash equivalents1 $ 1,820     $ 1,820
    Available-for-Sale Debt Securities
    Investment in U.S. Treasury securities2 83,303     83,303
    Total Assets $ 85,123 $0 $0 $ 85,123

    (1) Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the Treasury’s Bureau of the Fiscal Service.

    (2) The investment in U.S. Treasury securities is measured based on prevailing market yields for federal government entities.

  15. Information Relating to the Statement of Cash Flows

    The following table presents a reconciliation of net income to net cash from operating activities (dollars in thousands).
      December 31
    2018
    December 31
    2017
    Operating Activities  
    Net Income:
    Adjustments to reconcile net income to net cash
    provided by operating activities:
    $9,965,566 $10,105,456
    Adjustments to reconcile net income to net cash provided by operating activities:
    Amortization of U.S. Treasury securities 246,725 543,445
    Treasury Inflation-Protected Securities inflation adjustment (2,980) (8,564)
    Depreciation on property and equipment 51,316 53,639
    (Gain) loss on retirement of property and equipment (524) 386
    Provision for insurance losses (562,622) (183,149)
    Unrealized gain (loss) on postretirement benefits 32,050 (19,843)
    Change in Assets and Liabilities:
    Decrease in assessments receivable 1,258,045 31,881
    (Increase) Decrease in interest receivable and other assets (43,889) 21,171
    Decrease in receivables from resolutions 3,493,375 1,620,258
    (Decrease) in accounts payable and other liabilities (38,899) (1,352)
    (Decrease) Increase in postretirement benefit liability (23,381) 27,116
    (Decrease) Increase in contingent liabilities -
    guarantee payments and litigation losses
    (904) 31,927
    (Decrease) in liabilities due to resolutions (598,484) (870,115)
    Net Cash Provided by Operating Activities $13,775,394 $11,352,256
  16. Subsequent Events

    Subsequent events have been evaluated through February 7, 2019, the date the financial statements are available to be issued. Based on management’s evaluation, there were no subsequent events requiring disclosure.

 

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