<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One) /x/ Annual Report pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
for fiscal year ended December 31, 1996
or
/ / Transition Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act 1934
for the transaction period from __________to ___________
Commission File Number: 333-16397
FDIC REMIC TRUST 1996-C1
(Exact name of registrant as specified in its charter)
New York 04-334-2274
---------------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
c/o State Street Bank and Trust Company
Corporate Trust Department
225 Franklin Street
Boston, MA 02110
----------------------------------------- -------------------
(Address of Principal Executive Offices) Zip Code
(202) 664-5500
--------------------------------------------------
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes/x/ No/ /
Aggregate market value of voting stock held by non-affiliates of the registrant
as of April 13, 1997.
Not Applicable.
Number of shares of common stock outstanding as of April 13, 1997.
Not Applicable.
Registrant has not been involved in bankruptcy proceedings during the proceeding
five years, and is not reporting as a corporate issuer.
The following documents are incorporated by reference into this Form 10-K.
None.
<PAGE>
FDIC REMIC TRUST 1996 C-1
FORM 10-K
INDEX
Page
PART I.
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 1
Item 3. Legal Proceedings........................................... 1
Item 4. Submission of Matters to a Vote of Security Holders......... 1
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................1
Item 6. Selected Financial Data..................................... 1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................1
Item 8. Financial Statements and Supplementary Data................. 1
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure............................2
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 2
Item 11. Executive Compensation...................................... 2
Item 12. Security Ownership of Certain Beneficial Owners and Management. 2
Item 13. Certain Relationships and Related Transactions.............. 2
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.2
SIGNATURES................................................................. 4
Supplemental Information to be Furnished with Reports Filed Pursuant
to Section 15(d) of the Securities Exchange Act of 1934 of Registrants
Which Have Not Registered Securities Pursuant to Section 12 of such Act.4
INDEX OF EXHIBITS........................................................... 5
<PAGE>
PART I
Item 1. Business
Not Applicable.
Item 2. Properties
An Annual Statement of Compliance delivered by the servicer for the two pools
of mortgages or participation interests constituting the property of the
FDIC REMIC Trust 1996-C1 (referred to herein as the "Trust" or the
"Registrant") is not available currently but will be subsequently filed on
Form 8K.
Item 3. Legal Proceedings
The Registrant knows of no material pending legal proceedings involving
either of the two pools of mortgages or participation interests constituting
the property of the Trust, or the Registrant, the Servicer or the Trustee
with respect to the pools other than ordinary routine litigation, if any,
incidental to the Trustee's, the Servicer's or the Registrant's duties under
the Pooling and Servicing Agreement dated as of December 1, 1996 and not
material when taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote or consent of the holders of the
Registrant's Commercial Mortgage Pass-Through Certificates, Series 1996-C1
(the "Certificates") during the period covered by this report.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Registrant does not issue stock. Presently, there is no established trading
market for the Certificates known to the Registrant. As of April 7, 1997,
there are 95 holders of all Classes of the Certificates, including
direct participants of the Depository Trust Company ("DTC") but excluding Cede &
Co., DTC's nominee.
Item 6. Selected Financial Data
Not Applicable.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Not Applicable.
Item 8. Financial Statements and Supplementary Data
Annual Statement of Compliance........................Not available currently.
Will be subsequently filed on Form 8-K.
Independent Accountant's Report on Servicer's Servicing Activities.............
Not available currently.
Will be subsequently filed on Form 8-K.
The following financial statements of the Bank Insurance Fund of the
Federal Deposit Insurance Corporation, as guarantor under a Limited Guaranty
Agreement dated as of December 1, 1996, are filed as part of this report on
pages F-1 through F-18 hereto:
Report of Independent Public Accountants
Statements of Income and the Fund Balance for the years ended December 31,
1996, 1995 and 1994
Statements of Financial Position for the years ended
December 31, 1996 and 1995
Statements of Cash for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
1
<PAGE>
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
The Registrant knows of no changes or disagreements with accountants on
accounting and financial disclosure.
Item 10. Directors and Executive Officers of the Registrant
Not Applicable.
Item 11. Executive Compensation
Not Applicable.
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners................See Exhibit 99
Item 13. Certain Relationships and Related Transactions
Not Applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The Annual Statement of Compliance by the Servicer and Independent
Accountant's Report on Servicer's Servicing Activities are not
currently available but will be filed subsequently on Form 8-K.
The following financial statements of the Bank Insurance Fund of the
Federal Deposit Insurance Corporation, the guarantor of certain
distributions on the Certificates, are filed as part of this report:
Report of Independent Public Accountants
Statements of Income and the Fund Balance for the years ended
December 31, 1996, 1995 and 1994
Statements of Financial Position for
the years ended December 31, 1996 and 1995
Statements of Cash for the years ended December 31, 1996, 1995 and
1994
Notes to Financial Statements
(a)(2) Financial Statement Schedules
None.
(a)(3) Exhibits
Unless otherwise indicated, the following exhibits required by
Item 601 of Regulation S-K and previously furnished to the Commission
as exhibits to a Report on Form 8-K with a Date of Report of
December 20, 1996 and filed on January 13, 1997, are incorporated
into this Form 10-K by reference:
2
<PAGE>
4. Pooling and Servicing Agreement dated as of December 1, 1996, by
and among the Federal Deposit Insurance Corporation in its
corporate capacity, and in its capacities as administrator of the
Bank Insurance Fund and as Receiver of certain state and
federally chartered depository institutions, Banc One Management
and Consulting Corporation, as Servicer, and State Street Bank
and Trust Company, as Trustee.
10. Limited Guaranty Agreement dated as of December 1, 1996, by and
between the Federal Deposit Insurance Corporation, solely in its
corporate capacity, and State Street Bank and Trust Company, not
in its individual capacity but solely as trustee of FDIC REMIC
Trust 1996-C1.
23.* Consent of Independent Public Accountants, Arthur Anderson, LLP
99.* Security Ownership of Certain Beneficial Owners and Management.
(b) No Reports on Form 8-K were filed by the Registrant with the Commission
during the last quarter of the period covered by this report.
----------------------
* Filed herewith.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OF REGISTRANTS WHICH
HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF SUCH ACT.
The Registrant has not sent an annual report or proxy material to the holders
of its Certificates. The Registrant will not be sending an annual report or
proxy materials to the holders of its Certificates subsequent to the filing
of this Form 10-K.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FDIC REMIC TRUST 1996 C-1 (the "Trust Fund")
(Registrant)
Dated: April 14, 1997 By: State Street Bank and Trust Company,
solely in its capacity as Trustee of
the Trust Fund and not individually
By: /s/ David Duclos
-----------------------------------------
David Duclos, Assistant Vice President
4
<PAGE>
INDEX OF EXHIBITS
4. Pooling and Servicing Agreement dated as of December 1, 1996, by and
among the Federal Deposit Insurance Corporation in its corporate capacity,
and in its capacities as administrator of the Bank Insurance Fund and as
Receiver of certain state and federally chartered depository institutions,
Banc One Management and Consulting Corporation, as Servicer, and State
Street Bank and Trust Company, as Trustee.
10. Limited Guaranty Agreement dated as of December 1, 1996, by and between
the Federal Deposit Insurance Corporation, solely in its corporate
capacity, and State Street Bank and Trust Company, not in its individual
capacity but solely as trustee of FDIC REMIC Trust 1996-C1.
23* Consent of Independent Public Accountants,
Arthur Anderson, LLP.
99.* Security Ownership of Certain Beneficial Owners,
as of April 7, 1997 (with original principal
balances).
- --------------------------
* Filed herewith
5
<PAGE>
INDEX TO INDEPENDENT ACCOUNTANT'S REPORT
AND FINANCIAL STATEMENTS OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION'S
BANK INSURANCE FUND
Page of Sequentially
Numbered Pages
----------------------
Report of Independent Public Accountants.............. F-1
Statements of Income and the Fund Balance for
the years ended December 31, 1996, 1995 and 1994..... F-2
Statements of Financial Position for the years
ended December 31, 1996 and 1995..................... F-3
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994................................... F-4
Notes to Financial Statements......................... F-5
6
<PAGE>
ARTHUR
ANDERSEN
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Federal Deposit Insurance Corporation:
We have audited the accompanying statements of financial position of the
Federal Deposit Insurance Corporation's Bank Insurance Fund (the "Fund") as
of December 31, 1996 and 1995, and the related statements of income and the
fund balance and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Fund as of December 31,
1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Washington, D.C.
March 21, 1997
F-1
<PAGE>
Federal Deposit Insurance Corporation
Bank Insurance Fund Statements of Income and the Fund Balance
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995 1994
- -------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Revenue
Assessments (Note 10)................................. $ 72,662 $ 2,906,943 $ 5,590,644
Interest on U.S. Treasury investments................. 1,267,134 1,068,395 521,473
Revenue from corporate owned assets................... 69,879 58,585 140,821
Other revenue (Note 7)................................ 245,585 55,176 214,086
------------- ------------- -------------
Total Revenue......................................... 1,655,260 4,089,099 6,467,024
------------- ------------- -------------
------------- ------------- -------------
Expenses and Losses
Operating expenses.................................... 505,299 470,625 423,196
Reduction in provision for insurance losses (Note
9).................................................. (325,206) (33,167) (2,873,419)
Corporate owned asset expenses........................ 73,819 73,599 137,632
Interest and other insurance expenses................. 667 (27,874) 53,493
------------- ------------- -------------
Total Expenses and Losses............................. 254,579 483,183 (2,259,098)
------------- ------------- -------------
Net Income............................................ 1,400,681 3,605,916 8,726,122
------------- ------------- -------------
Fund Balance - Beginning.............................. 25,453,698 21,847,782 13,121,660
------------- ------------- -------------
Fund Balance--Ending.................................. $ 26,854,379 $ 25,453,698 $ 21,847,782
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Federal Deposit Insurance Corporation
Bank Insurance Fund Statements of Financial Position
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995
- -------------------- ----------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents........................................................... $ 258,132 $ 531,308
Investment in U.S. Treasury obligations, net (Note 3)............................... 22,083,494 20,762,046
(Market value of investments at December 31, 1996 and December 31, 1995
was $22.1 billion and $20.9 billion, respectively)
Interest receivable on investments and other assets, net............................ 384,824 406,804
Receivables from bank resolutions, net (Note 4)..................................... 4,341,154 4,143,040
Investment in corporate owned assets, net (Note 5).................................. 63,406 180,293
Property and buildings, net (Note 6)................................................ 148,400 151,740
----------------------------------
Total Assets........................................................................ $27,279,410 $ 26,175,231
----------------------------------
Liabilities and the Fund Balance
Accounts payable and other liabilities.............................................. $240,185 $ 224,626
ESTIMATED LIABILITIES FOR: (NOTES 8 AND 9)
Anticipated failure of insured institutions......................................... 75,000 279,000
Assistance agreements............................................................... 50,817 55,941
Asset securitization guarantees..................................................... 44,279 126,151
Litigation losses................................................................... 14,750 35,815
----------------------------------
Total Liabilities 425,031 721,533
COMMITMENTS AND CONTINGENCIES (NOTES 13 AND 14)
Fund Balance........................................................................ 26,854,379 25,453,698
----------------------------------
Total Liabilities and the Fund Balance............................................. $27,279,410 $ 26,175,231
----------------------------------
----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Federal Deposit Insurance Corporation
Bank Insurance Fund Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
----------------------------------------
DOLLARS IN THOUSANDS 1996 1995 1994
- -------------------- ----------- ------------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Cash provided from:
Assessments............................................................ $ 73,961 $ 2,796,114 $ 5,709,912
Interest on U.S. Treasury investments.................................. 1,303,629 875,226 458,606
Recoveries from bank resolutions....................................... 624,502 5,059,751 5,336,125
Recoveries from corporate owned assets................................. 355,913 211,691 694,401
Miscellaneous receipts................................................. 34,329 36,084 22,337
Cash used for:
Operating expenses..................................................... (489,372) (442,101) (485,963)
Disbursements for bank resolutions..................................... (632,930) (1,596,391) (2,791,417)
Disbursements for corporate owned assets............................... (205,775) (159,299) (173,601)
Miscellaneous disbursements............................................ (16,810) (23,929) (658)
----------- ------------- ------------
Net Cash Provided by Operating Activities (Note 16)........................ 1,047,447 6,757,146 8,769,742
----------- ------------- ------------
----------- ------------- ------------
Cash Flows from Investing Activities
Cash provided from:
Maturity of U.S. Treasury obligations.................................. 8,350,000 3,830,000 800,000
Cash used for:
Purchase of U.S. Treasury obligations.................................. (9,670,623) (11,675,925) (8,431,525)
----------- ------------- ------------
Net Cash Used by Investing Activities (1,320,623) (7,845,925) (7,631,525)
----------- ------------- ------------
----------- ------------- ------------
Cash Flows from Financing Activities
Cash used for:
Repayments of indebtedness incurred from bank resolutions.............. 0 (1,369) 0
----------- ------------- ------------
Net Cash Used by Financing Activities................................ 0 (1,369) 0
----------- ------------- ------------
----------- ------------- ------------
Net (Decrease) Increase in Cash and Cash Equivalents....................... (273,176) (1,090,148) 1,138,217
----------- ------------- ------------
----------- ------------- ------------
Cash and Cash Equivalents--Beginning....................................... 531,308 1,621,456 483,239
----------- ------------- ------------
----------- ------------- ------------
Cash and Cash Equivalents--Ending.......................................... $ 258,132 $ 531,308 $ 1,621,456
----------- ------------- ------------
----------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BANK INSURANCE FUND
December 31, 1996, 1995 and 1994
- -----------------------------------------------------------------------------
1. LEGISLATIVE HISTORY AND OPERATIONS OF THE BANK INSURANCE FUND
- -----------------------------------------------------------------------------
LEGISLATIVE HISTORY
The U.S. Congress created the Federal Deposit Insurance Corporation (FDIC)
through enactment of the Banking Act of 1933. The FDIC was created to restore
and maintain public confidence in the nation's banking system.
More recently, the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA) was enacted to reform, recapitalize and consolidate the
federal deposit insurance system. The FIRREA created the Bank Insurance Fund
(BIF), the Savings Association Insurance Fund (SAIF) and the FSLIC Resolution
Fund (FRF). It also designated the FDIC as the administrator of these three
funds. All three funds are maintained separately to carry out their respective
mandates.
The BIF and SAIF are insurance funds responsible for protecting depositors
in operating banks and thrift institutions from loss due to failure of the
institution. The FRF is a resolution fund responsible for winding up the affairs
of the former Federal Savings and Loan Insurance Corporation (FSLIC) and
liquidating the assets and liabilities transferred from the former Resolution
Trust Corporation (RTC).
Pursuant to FIRREA, an active institution's insurance fund membership and
primary federal supervisor are generally determined by the institution's charter
type. Deposits of BIF-member institutions are mostly insured by the BIF; BIF
members are predominantly commercial and savings banks supervised by the FDIC,
the Office of the Comptroller of the Currency, or the Federal Reserve. Deposits
of SAIF-member institutions are mostly insured by the SAIF; SAIF members are
predominantly thrifts supervised by the Office of Thrift Supervision (OTS). The
Oakar amendment to the Federal Deposit Insurance Act (FDI Act) allows BIF and
SAIF members to acquire deposits insured by the other insurance fund without
changing insurance fund coverage for the acquired deposits.
Other significant legislation includes the Omnibus Budget Reconciliation Act
of 1990 (1990 OBR Act) and the Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA). These acts made changes to the FDIC's assessment authority
(see Note 10) and borrowing authority (see "Operations of the BIF" below). The
FDICIA also requires the FDIC to: 1) resolve troubled institutions in a manner
that will result in the least possible cost to the deposit insurance funds and
2) maintain the insurance funds at 1.25 percent of insured deposits or a higher
percentage as circumstances warrant.
RECENT LEGISLATION
The Deposit Insurance Funds Act of 1996 (DIFA 1996) was enacted to provide
for: 1) the capitalization of the SAIF to its designated reserve ratio of 1.25
percent by means of a one-time special assessment on SAIF-insured deposits; 2)
the expansion of the assessment base for payments of the interest on obligations
issued by the Financing Corporation (FICO) to include all FDIC-insured
institutions, i.e., banks and thrifts; 3) beginning January 1, 1997, the
imposition of a FICO assessment rate for banks that is one-fifth of that paid by
thrifts; 4) the payment of the approximately $790 million annual FICO interest
obligation on a pro rata basis between banks and thrifts after December 31,
1999; 5) the refund of amounts in the BIF in excess of the designated reserve
ratio with such refund not to exceed the previous semi-annual assessment; 6)
authorization of BIF assessments only if needed to maintain the fund at the
designated reserve ratio; and 7) the merger of the BIF and the SAIF on January
1, 1999, if no insured depository institution is a savings association on that
date.
The FICO, established under the Competitive Banking Act of 1987, is a
mixed-ownership government corporation whose sole purpose was to function as a
financing vehicle for the FSLIC.
OPERATIONS OF THE BIF
The primary purpose of the BIF is to: 1) insure the deposits and protect the
depositors of BIF-insured banks and 2) resolve failed banks, including managing
and liquidating their assets. In addition, the FDIC, acting on behalf of the
BIF, examines state-chartered banks that are not members of the Federal Reserve
System and
F-5
<PAGE>
provides and monitors assistance to troubled banks.
The BIF is primarily funded from the following sources: 1) interest earned
on investments in U.S. Treasury obligations; 2) BIF assessment premiums; 3)
income earned on and funds received from the management and disposition of
assets acquired from failed banks; and 4) U.S. Treasury and Federal Financing
Bank (FFB) borrowings, if necessary.
The 1990 OBR Act established the FDIC's authority to borrow working capital
from the FFB on behalf of the BIF and the SAIF. The FDICIA increased the FDIC's
authority to borrow for insurance losses from the U.S. Treasury, on behalf of
the BIF and the SAIF, from $5 billion to $30 billion.
The FDICIA also established a limitation on obligations that can be incurred
by the BIF, known as the maximum obligation limitation (MOL). At December 31,
1996, the MOL for the BIF was $49 billion.
- -----------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------------------------------
GENERAL
These financial statements pertain to the financial position, results of
operations and cash flows of the BIF and are presented in accordance with
generally accepted accounting principles (GAAP). These statements do not include
reporting for assets and liabilities of closed banks for which the BIF acts as
receiver or liquidating agent. Periodic and final accountability reports of the
BIF's activities as receiver or liquidating agent are furnished to courts,
supervisory authorities and others as required.
USE OF ESTIMATES
The preparation of the BIF's financial statements in conformity with GAAP
requires FDIC management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. 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 changes in estimates have been
disclosed.
CASH AND CASH EQUIVALENTS
The BIF considers cash equivalents to be short-term, highly liquid
investments with original maturities of three months or less.
U.S. TREASURY OBLIGATIONS
Securities are intended to be held to maturity and are shown at book value.
Book value is the face value of securities plus the unamortized premium or less
the unamortized discount. Amortizations are computed on a daily basis from the
date of acquisition to the date of maturity. Interest is calculated on a daily
basis and recorded monthly using the effective interest method.
ALLOWANCE FOR LOSSES ON RECEIVABLES FROM
BANK RESOLUTIONS AND INVESTMENT IN
CORPORATE OWNED ASSETS
The BIF records as a receivable the amounts advanced and/or obligations
incurred for resolving troubled and failed banks. The BIF also records as an
asset the amounts advanced for investment in corporate owned assets. Any related
allowance for loss represents the difference between the funds advanced and/or
obligations incurred and the expected repayment. The latter is based on
estimates of discounted cash recoveries from assets of assisted or failed banks,
net of all estimated liquidation costs.
LITIGATION LOSSES
The BIF accrues, as a charge to current period operations, an estimate of
probable losses from litigation. The FDIC's Legal Division recommends these
estimates on a case-by-case basis. The litigation loss estimates related to the
BIF in its corporate capacity are included in the "Estimated liabilities for:
Litigation losses." The litigation loss estimates related to receiverships are
included in the allowance for losses for "Receivables from bank resolutions,
net."
RECEIVERSHIP OPERATIONS
The FDIC is responsible for controlling and disposing of the assets of
failed institutions in an orderly and efficient manner. The assets, and the
claims against them, are accounted for separately
F-6
<PAGE>
to ensure that liquidation proceeds are distributed in accordance with
applicable laws and regulations. Also, the income and expenses attributable
to receiverships are accounted for as transactions of those receiverships.
Liquidation expenses incurred by the BIF on behalf of the receiverships are
recovered from those receiverships.
COST ALLOCATIONS AMONG FUNDS
Certain operating expenses (including personnel, administrative and other
indirect expenses) not directly charged to each fund under the FDIC's management
are allocated on the basis of the relative degree to which the operating
expenses were incurred by the funds. The cost of furniture, fixtures and
equipment purchased by the FDIC on behalf of the three funds under its
administration is allocated among these funds on a pro rata basis. The BIF
expenses its share of these allocated costs at the time of acquisition because
of their immaterial amounts.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The FDIC established an entity to provide the accounting and administration
of postretirement benefits on behalf of the BIF, the SAIF and the FRF. The BIF
funds its liabilities for these benefits directly to the entity.
DISCLOSURE ABOUT RECENT FINANCIAL ACCOUNTING STANDARDS BOARD PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities" in June 1996, effective for
transactions occurring after December 31, 1996. The BIF will generally be
unaffected by its provisions since most transactions subject to SFAS 125 occur
at the receivership level and not at the fund level. To the extent that the BIF
may be affected, the FDIC's current accounting practices are consistent with the
rules contained in SFAS 125. Other recent pronouncements issued by the FASB have
been adopted or are either not applicable or not material to the financial
statements.
DEPRECIATION
The FDIC has designated the BIF administrator of buildings owned and used in
its operations. Consequently, the BIF includes the cost of these assets in its
financial statements and provides the necessary funding for them. The BIF
charges other funds a rental fee representing an allocated share of its annual
depreciation expense.
The Washington, D.C., office buildings and the L. William Seidman Center in
Arlington, Virginia, are depreciated on a straight-line basis over a 50-year
estimated life. The San Francisco condominium offices are depreciated on a
straight-line basis over a 35-year estimated life.
RELATED PARTIES
The nature of related parties and a description of related party
transactions are disclosed throughout the financial statements and footnotes.
RECLASSIFICATIONS
Reclassifications have been made in the 1995 financial statements to conform
to the presentation used in 1996.
F-7
<PAGE>
- -----------------------------------------------------------------------------
3. INVESTMENT IN U.S. TREASURY OBLIGATIONS, NET
- -----------------------------------------------------------------------------
All cash received by the BIF is invested in U.S. Treasury obligations with
maturities exceeding three months unless the cash is used: 1) to defray
operating expenses; 2) for outlays related to assistance to banks and
liquidation activities; or 3) for investments in U.S. Treasury one-day special
certificates which are cash equivalents.
- -----------------------------------------------------------------------------
U.S. Treasury Obligations at December 31, 1996
- -----------------------------------------------------------------------------
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
UNREALIZEDD UNREALIZED
YIELD BOOK HOLDING HOLDING MARKET FACE
MATURITY AT PURCHASE VALUE GAINS LOSSES VALUE VALUE
----------- ------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Less than one year..... 6.02% $ 5,805,090 $ 15,032 $ (6,934) $ 5,813,188 $ 5,800,000
1-3 years.............. 5.62% 8,339,386 8,499 (37,429) 8,310,456 8,320,000
3-5 years.............. 6.10% 4,811,582 21,306 (30,560) 4,802,328 4,770,000
5-10 years............. 6.51% 3,127,436 38,415 (328) 3,165,523 3,100,000
----------- ------------ ----------- ------------- ----------- ------------
Total.................. $ 22,083,494 $ 83,252 $ (75,251) $22,091,495 $ 21,990,000
----------- ------------ ----------- ------------- ----------- ------------
----------- ------------ ----------- ------------- ----------- ------------
</TABLE>
- ------------------------------------------------------------------------------
U.S. Treasury Obligations at December 31, 1995
- ------------------------------------------------------------------------------
DOLLARS IN THOUSANDS
<TABLE>
<CAPTION>
UNREALIZEDD UNREALIZED
YIELD BOOK HOLDING HOLDING MARKET FACE
MATURITY AT PURCHASE VALUE GAINS LOSSES VALUE VALUE
----------- ------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Less than one year(a)... 5.53% $ 6,750,414 $ 19,934 $ (5,262) $ 6,765,086 $ 6,750,000
1-3 years............... 5.88% 12,318,436 147,762 (24,776) 12,441,422 12,350,000
3-5 years............... 5.59% 1,693,196 15,613 0 1,708,809 1,690,000
----------- ------------ ----------- ------------- ----------- ------------
Total................... $ 20,762,046 $ 183,309 $ (30,038) $20,915,317 $ 20,790,000
----------- ------------ ----------- ------------- ----------- ------------
----------- ------------ ----------- ------------- ----------- ------------
</TABLE>
(a) Includes a $400 million Treasury note which matured on Sunday, December 31,
1995. Settlement occurred on the next business day, January 2, 1996.
At December 31, 1996, the unamortized discount, net of unamortized premium,
was $93 million. At December 31, 1995, the unamortized premium, net of
unamortized discount, was $28 million.
- ------------------------------------------------------------------------------
4. RECEIVABLES FROM BANK RESOLUTIONS, NET
- ------------------------------------------------------------------------------
The FDIC resolution process results in different types of transactions
depending on the unique facts and circumstances surrounding each failing or
failed institution. Payments to prevent a failure are made to operating
institutions when cost and other criteria are met. Such payments may facilitate
a merger or allow a troubled institution to continue operations. Payments for
institutions that fail are made to cover the institution's obligation to insured
depositors and represent a claim by the BIF against the receiverships' assets.
The FDIC, as receiver for failed banks, engages in a variety of strategies
at the time of failure to maximize the return from the sale or disposition of
assets and to minimize realized losses. A failed bank acquirer can purchase
selected assets at the time of resolution and assume full
F-8
<PAGE>
ownership, benefit and risk related to such assets. The receiver may also engage
in other types of transactions as circumstances warrant. As described in Note 2,
an allowance for loss is established against the receivable from bank
resolutions.
As of December 31, 1996 and 1995, the BIF, in its receivership capacity,
held assets with a book value of $7 billion and $10 billion, respectively. These
assets represent a significant source of repayment of receivables from bank
resolutions. The estimated cash recoveries from the management and disposition
of these assets (excluding cash and miscellaneous receivables of $3.9 billion at
December 31, 1996 and $2.1 billion at December 31, 1995) used to derive the
allowance for losses are based in part on a statistical sampling of receivership
assets. The potential sampling error is not material to the BIF's financial
statements. These estimated recoveries are regularly evaluated, but remain
subject to uncertainties because of changing economic conditions. These factors
could affect the BIF's and other claimants' actual recoveries from the level
currently estimated.
- ------------------------------------------------------------------------------
RECEIVABLES FROM BANK RESOLUTIONS, NET
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995
- -------------------- ------------- -------------
<S> <C> <C>
Assets from Open Bank Assistance............................... $ 142,267 $ 158,000
Allowance for losses (Note 9).................................. (49,580) (57,405)
Receivables from Closed Banks.................................. 23,563,609 25,073,165
Allowance for losses (Note 9).................................. (19,315,142) (21,030,720)
4,248,467 4,042,445
------------- -------------
Total.......................................................... $ 4,341,154 $ 4,143,040
------------- -------------
------------- -------------
</TABLE>
- ------------------------------------------------------------------------------
5. INVESTMENT IN CORPORATE OWNED ASSETS, NET
- ------------------------------------------------------------------------------
The BIF acquires assets in certain troubled and failed bank cases by either
purchasing an institution's assets outright or purchasing the assets under the
terms specified in each resolution agreement. In addition, the BIF can purchase
assets remaining in a receivership to facilitate termination. The majority of
corporate owned assets are real estate and mortgage loans.
The BIF recognizes income and expenses on these assets. Income consists
primarily of the portion of collections on performing mortgages related to
interest earned. Expenses are recognized for administering the management and
liquidation of these assets.
- -----------------------------------------------------------------------------
INVESTMENT IN CORPORATE OWNED ASSETS, NET
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995
- -------------------- ---------- ----------
<S> <C> <C>
Investment in corporate owned assets................................ $ 873,458 $ 939,756
Allowance for losses (Note 9)....................................... (810,052) (759,463)
---------- ----------
Total............................................................... $ 63,406 $ 180,293
---------- ----------
---------- ----------
</TABLE>
F-9
<PAGE>
- -----------------------------------------------------------------------------
6. PROPERTY AND BUILDINGS, NET
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995
- -------------------- ---------- ----------
<S> <C> <C>
Land................................................................ $ 29,631 $ 29,631
Office buildings.................................................... 151,442 151,442
Accumulated depreciation............................................ (32,673) (29,333)
---------- ----------
Total............................................................... $ 148,400 $ 151,740
---------- ----------
---------- ----------
</TABLE>
- -----------------------------------------------------------------------------
7. OTHER REVENUE
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995 1994
- -------------------- ---------- --------- ----------
<S> <C> <C> <C>
Interest on subrogated claims and advances.................................... $ 230,871 $ 37,771 $ 66,364
Income from assistance transactions........................................... 5,980 9,234 6,057
Other miscellaneous income.................................................... 8,734 8,171 141,665
---------- --------- ----------
Total......................................................................... $ 245,585 $ 55,176 $ 214,086
---------- --------- ----------
---------- --------- ----------
</TABLE>
The interest on subrogated claims and advances to financial institutions
includes $205 million in post-insolvency interest. There are a number of BIF
receiverships that have residual funds remaining after paying all regular
claims. Once those claims have been paid, the BIF and other claimants are
eligible to receive interest on their claims against the receivers on a pro rata
basis. Due to the uncertainty of collection, post-insolvency interest is
recognized when received.
- -------------------------------------------------------------------------------
8. ESTIMATED LIABILITIES FOR:
- -------------------------------------------------------------------------------
ANTICIPATED FAILURE OF INSURED INSTITUTIONS
The BIF records an estimated liability and loss provision for banks that are
likely to fail in the foreseeable future (absent some favorable event such as
obtaining additional capital or merging). The estimated liability and
corresponding reduction in provision for insurance losses are recorded in the
period when the liability is deemed probable and reasonably estimable.
The estimated liabilities for anticipated failure of insured institutions as
of December 31, 1996 and 1995, were $75 million and $279 million, respectively.
The estimated liability is derived in part from estimates of recoveries from the
management and disposition of the assets of these probable bank failures.
Therefore, they are subject to the same uncertainties as those affecting the
BIF's receivables from bank resolutions (see Note 4). This could affect the
ultimate costs to the BIF from probable bank failures.
There are other banks where the risk of failure is less certain, but still
considered reasonably possible. Should these banks fail, management estimates
that the BIF would incur additional losses of about $160 million.
The accuracy of these estimates will largely depend on future economic
conditions. In addition, FDIC considers probable losses in setting assessment
rates and, as circumstances warrant, may increase assessment rates to recover
some or all losses due to anticipated bank failures.
ASSISTANCE AGREEMENTS
The estimated liabilities for assistance agreements resulted from several
large transactions where problem assets were purchased by an acquiring
institution under an agreement that calls for the FDIC to absorb credit losses
and to pay related costs for funding and asset administration plus an incentive
fee.
F-10
<PAGE>
ASSET SECURITIZATION GUARANTEE
As part of the FDIC's efforts to maximize the return from the sale or
disposition of assets and minimize losses from bank resolutions, the FDIC has
securitized some receivership assets. To facilitate the securitizations, the
FDIC's BIF provided Limited Guarantees to cover certain losses on the
receivership assets up to a specified maximum. In exchange for backing the
limited guarantee, the BIF received assets from the receiverships in an amount
equal to the expected exposure under the guarantee. The deals were initially
structured so that the BIF would neither profit nor suffer a loss as a result of
the limited guarantees.
At December 31, 1996 and 1995, the BIF had an estimated liability under the
guarantees of $44 million and $126 million, respectively.
During 1996 the BIF returned to receiverships $91.6 million in cash
(including interest of $8.4 million) received for backing the limited guarantee.
The BIF made this refund as a result of lowering the estimate of expected
exposure under one of the guarantees. The following chart summarizes the BIF's
remaining potential exposure under the guarantees.
- -------------------------------------------------------------------------------
Asset Securitization Guarantees (cumulative inception-to-date balances)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAXIMUM EXPOSURE UNDER
THE GUARANTEE GUARANTEE CLAIMS PAID MAXIMUM REMAINING POTENTIAL
DOLLARS IN THOUSANDS OBLIGATIONS THROUGH DECEMBER 31 OBLIGATIONS AT DECEMBER 31
- -------------------- ---------------------- --------------------- ---------------------------
<S> <C> <C> <C>
1996...................... $ 481,313 $ 8,651 $ 472,662
1995...................... $ 247,748 $ 2,406 $ 245,342
</TABLE>
LITIGATION LOSSES
The BIF records an estimated loss for unresolved legal cases to the extent
those losses are considered to be probable in occurrence and reasonably
estimable in amount. In addition to the amount recorded, the FDIC's Legal
Division has determined that losses from unresolved legal cases totaling $314
million are reasonably possible. This includes $18 million in losses for the BIF
in its corporate capacity and $296 million in losses for the BIF related to
receiverships (see Note 2).
- -------------------------------------------------------------------------------
9. ANALYSIS OF CHANGES IN ALLOWANCE FOR LOSSES AND ESTIMATED LIABILITIES
- -------------------------------------------------------------------------------
The reduction in provision for insurance losses includes the normal,
recurring changes in estimates for prior year, current, and anticipated bank
resolutions. In the following charts, transfers include reclassifications from
"Estimated Liabilities for: Anticipated failure of insured institutions" to
"Closed banks." Terminations represent final adjustments to the estimated cost
figures for those bank resolutions that were completed.
F-11
<PAGE>
- ------------------------------------------------------------------------------
Analysis of Changes in Allowance for Losses and Estimated Liabilities--1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROVISION FOR INSURANCE LOSSES
BEGINNING --------------------------------- ADJUSTMENTS/ ENDING
BALANCE CURRENT PRIOR NET CASH TRANSFERS/ BALANCE
DOLLARS IN MILLIONS 01/01/96 YEAR YEARS TOTAL PAYMENTS TERMINATIONS 12/31/96
- -------------------------------------------- ----------- ----------- --------- --------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for Losses:
Open bank assistance........................ $ 57 $ 0 $ (4) $ (4) $ 0 $ (3) $ 50
Corporate owned assets...................... 759 0 51 51 0 0 810
Closed banks................................ 21,031 (95) (33) (128) 0 (1,588) 19,315
----------- ----- --- --------- --------- ------ -------
Total Allowance for Losses.................. 21,847 (95) 14 (81) 0 (1,591) 20,175
Estimated Liabilities for:
Anticipated failure of insured institutions. 279 (204) 0 (204) 0 0 75
Assistance agreements....................... 56 0 (4) (4) (1) 0 51
Asset securitization guarantee.............. 126 (15) 0 (15) (81) 14 44
Litigation losses........................... 36 0 (21) (21) 0 0 15
----------- ----- --- --------- --------- ------ -------
Total Estimated Liabilities................. 497 (219) (25) (244) (82) 14 185
----------- ----- --- --------- --------- ------ -------
Reduction in Provision for Insurance Losses. $ (314) $ (11) $ (325)
</TABLE>
- ------------------------------------------------------------------------------
Analysis of Changes in Allowance for Losses and Estimated Liabilities--1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROVISION FOR INSURANCE LOSSES
BEGINNING --------------------------------- ADJUSTMENTS/ ENDING
BALANCE CURRENT PRIOR NET CASH TRANSFERS/ BALANCE
DOLLARS IN MILLIONS 01/01/95 YEAR YEARS TOTAL PAYMENTS TERMINATIONS 12/31/95
- --------------------------------------------- ----------- ----------- --------- --------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for Losses:
Open bank assistance........................ $ 1,156 $ 0 $ (140) $ (140) $ 0 $ (959) $ 57
Corporate owned assets...................... 660 0 99 99 0 0 759
Closed banks................................ 22,354 (52) 464 412 0 (1,735) 21,031
----------- --------- --------- --------- --- ------ -------
Total Allowance for Losses.................. 24,170 (52) 423 371 0 (2,694) 21,847
Estimated Liabilities for:
Anticipated failure of insured institutions. 875 131 (570) (439) 0 (157) 279
Assistance agreements....................... 163 0 14 14 (101) (20) 56
Asset securitization guarantee.............. 128 0 0 0 (2) 0 126
Litigation losses........................... 15 0 21 21 0 0 36
----------- --------- --------- --------- --- ------ -------
Total Estimated Liabilities................. 1,181 131 (535) (404) (103) (177) 497
----------- --------- --------- --------- --- ------ -------
Increase/(Reduction) in Provision for
Insurance Losses.......................... $ 79 $ (112) $ (33)
</TABLE>
F-12
<PAGE>
- ------------------------------------------------------------------------------
Analysis of Changes in Allowance for Losses and Estimated Liabilities--1994
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROVISION FOR INSURANCE LOSSES
BEGINNING --------------------------------- ADJUSTMENTS/ ENDING
BALANCE CURRENT PRIOR NET CASH TRANSFERS/ BALANCE
DOLLARS IN MILLIONS 01/01/94 YEAR YEARS TOTAL PAYMENTS TERMINATIONS 12/31/94
- ---------------------------------------- ----------- ----------- --------- --------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for Losses:
Open bank assistance.................... $ 215 $ 0 $ (421) $ (421) $ 3 $ 1,359 $ 1,156
Corporate owned assets.................. 742 0 (82) (82) 0 0 660
Closed banks............................ 23,191 (236) (229) (465) 0 (372) 22,354
----------- --- --------- --------- --------- ------ --------
Total Allowance for Losses.............. 24,148 (236) (732) (968) 3 987 24,170
Estimated Liabilities for:
Anticipated failure of insured
institutions........................... 2,972 406 (2,128) (1,722) 0 (375) 875
Assistance agreements................... 326 0 (177) (177) (37) 51 163
Asset securitization guarantee.......... 0 0 0 0 0 128 128
Litigation losses....................... 21 0 (6) (6) 0 0 15
----------- --- --------- --------- --------- ------ --------
Total Estimated Liabilities............. 3,319 406 (2,311) (1,905) (37) (196) 1,181
----------- --- --------- --------- --------- ------ --------
Increase/(Reduction) in Provision for
Insurance Losses...................... $ 170 $ (3,043) $ (2,873)
</TABLE>
- -------------------------------------------------------------------------------
10. ASSESSMENTS
- -------------------------------------------------------------------------------
The 1990 OBR Act removed caps on assessment rate increases and authorized
the FDIC to set assessment rates for BIF members semiannually, to be applied
against a member's average assessment base. The FDICIA: 1) required the FDIC
to implement a risk-based assessment system; 2) authorized the FDIC to
increase assessment rates for BIF-member institutions as needed to ensure
that funds are available to satisfy the BIF's obligations; and 3) authorized
the FDIC to increase assessment rates more frequently than semiannually and
impose emergency special assessments as necessary to ensure that funds are
available to repay U.S. Treasury borrowings.
In May 1995, the BIF reached the FDICIA mandated capitalization level of
1.25 percent of insured deposits.
The DIFA 1996 (see Note 1) provided, among other things, for the
elimination of the mandatory minimum assessment formerly provided for in the
FDI Act, and for the expansion of the assessment base for payments on the
interest on obligations issued by FICO to include all FDIC-insured
institutions, including banks. Beginning January 1, 1997, banks will start
paying a FICO-assessment. The FICO-assessment rate on BIF-assessable deposits
will be one-fifth of the rate paid on SAIF assessable deposits. After
December 31, 1999, the approximately $790 million annual FICO interest
obligation will be paid on a pro rata basis between banks and thrifts.
The FICO assessment will have no financial effect on the BIF since the
FICO claim will be assessed separately from the regular assessment, and the
FICO assessment is imposed on banks and not on the BIF. The FDIC as
administrator of the BIF is acting solely as an agent for the FICO to collect
and remit the FICO assessment to the FICO.
The FDIC uses a risk-based assessment system that charges higher rates to
those institutions that pose greater risks to the BIF. To arrive at a
risk-based assessment for a particular institution, the FDIC places each
institution in one of nine risk categories using a two-step process based
first on capital ratios and then on other relevant
F-13
<PAGE>
information. The FDIC Board of Directors (Board) reviews premium rates
semiannually. The average assessment rate for 1996 was 0.24 cents per $100 of
insured deposits.
On November 26, 1996, the FDIC Board of Directors voted to retain the BIF
assessment schedule of 0 to 27 cents per $100 of insured deposits (annual
rates) for the first semiannual period of 1997.
- -----------------------------------------------------------------------------
11. PENSION BENEFITS, SAVINGS PLANS, POSTEMPLOYMENT BENEFITS AND ACCRUED
ANNUAL LEAVE
- -----------------------------------------------------------------------------
Eligible FDIC employees (i.e., all permanent and temporary employees with
appointments exceeding one year) are covered by either the Civil Service
Retirement System (CSRS) or the Federal Employee Retirement System (FERS).
The CSRS is a defined benefit plan, which is offset with the Social Security
System in certain cases. Plan benefits are determined on the basis of years
of creditable service and compensation levels. The CSRS-covered employees
also can contribute to the tax-deferred Federal Thrift Savings Plan (TSP).
The FERS is a three-part plan consisting of a basic defined benefit plan
that provides benefits based on years of creditable service and compensation
levels, Social Security benefits and the TSP. Automatic and matching employer
contributions to the TSP are provided up to specified amounts under the FERS.
Eligible FDIC employees also may participate in an FDIC-sponsored
tax-deferred savings plan with matching contributions. The BIF pays its share
of the employer's portion of all related costs.
Although the BIF contributes a portion of pension benefits for eligible
employees, it does not account for the assets of either retirement system.
The BIF also does not have actuarial data for accumulated plan benefits or
the unfunded liability relative to eligible employees. These amounts are
reported and accounted for by the U.S. Office of Personnel Management.
Due to a substantial decline in the FDIC's workload, the Corporation
developed a staffing reduction program, a component of which is a voluntary
separation incentive plan, or buyout. To date, two corporate-wide buyout
plans have been offered to eligible employees. The first buyout plan did not
have a material financial effect on the BIF, and management believes the
second buyout plan will also not have a material financial effect on the fund.
The liability to employees for accrued annual leave is approximately
$38.9 million and $43.4 million at December 31, 1996 and 1995, respectively.
- ------------------------------------------------------------------------------
Pension Benefits and Savings Plans Expenses
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995 1994
- ------------------------------------------------------------------ ------- --------- --------
<S> <C> <C> <C>
Civil Service Retirement System................................... $ 9,113 $ 9,411 $ 9,988
Federal Employee Retirement System (Basic Benefit)................ 34,989 36,741 32,410
FDIC Savings Plan................................................. 19,474 20,545 21,603
Federal Thrift Savings Plan....................................... 12,195 10,264 10,513
------- --------- -------
Total............................................................. $75,771 $76,961 $74,514
------- --------- -------
------- --------- -------
</TABLE>
F-14
<PAGE>
- ------------------------------------------------------------------------------
12. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- ------------------------------------------------------------------------------
The FDIC provides certain health, dental and life insurance coverage for
its eligible retirees, the retirees' beneficiaries and covered dependents.
Retirees eligible for health and/or life 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.
Dental coverage is provided to all retirees eligible for an immediate annuity.
The FDIC is self-insured for hospital/medical, prescription drug, mental
health and chemical dependency coverage. Additional risk protection was
purchased from Aetna Life Insurance Company through stop-loss and fiduciary
liability insurance. All claims are administered on an administrative
services only basis with the hospital/medical claims administered by Aetna
Life Insurance Company, the mental health and chemical dependency claims
administered by OHS Foundation Health Psychcare Inc., and the prescription
drug claims administered by Caremark.
The life insurance program, underwritten by Metropolitan Life Insurance
Company, provides basic coverage at no cost to retirees and allows converting
optional coverages to direct-pay plans. Dental care is underwritten by
Connecticut General Life Insurance Company and provides coverage at no cost
to retirees.
The BIF expensed $6.1 million, $18.8 million, and $23.0 million for net
periodic postretirement benefit costs for the years ended December 31, 1996,
1995, and 1994, respectively. For measurement purposes for 1996, the FDIC
assumed the following: 1) a discount rate of 5.75 percent; 2) an average
long-term rate of return on plan assets of 5.75 percent; 3) an increase in
health costs in 1996 of 10.75 percent (inclusive of general inflation of 3.00
percent), decreasing to an ultimate rate in 2000 of 7.75 percent; and 4) an
increase in dental costs for 1997 and thereafter of 4.00 percent (in addition
to general inflation). Both the assumed discount rate and health care cost
rate have a significant effect on the amount of the obligation and periodic
cost reported.
If the health care cost rate was increased one percent, the accumulated
postretirement benefit obligation as of December 31, 1996, would have
increased by 20.4 percent. The effect of this change on the aggregate of
service and interest cost for 1996 would be an increase of 26.2 percent.
- ------------------------------------------------------------------------------
Net Periodic Postretirement Benefit Cost
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995 1994
- ------------------------------------------------------------------------------ --------- ------------ ---------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year)........ $ 15,575 $ 22,574 $ 25,206
Interest cost on accumulated postretirement benefit obligation................ 16,258 14,706 14,323
Net total of other components................................................. (7,369) (3,567) (4,881)
Return on plan assets......................................................... (18,402) (14,907) (11,651)
--------- ---------- ---------
Total......................................................................... $ 6,062 $ 18,806 $ 22,997
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
As stated in Note 2, the FDIC established an entity to provide accounting
and administration on behalf of the BIF, the SAIF, and the FRF. The BIF funds
its liability and these funds are being managed as "plan assets."
F-15
<PAGE>
- ------------------------------------------------------------------------------
Accumulated Postretirement Benefit Obligation and Funded Status
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995
- ----------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Retirees............................................................... $ 136,730 $ 79,370
Fully eligible active plan participants................................ 12,724 22,401
Other active participants.............................................. 152,993 182,408
---------- ---------
Total Obligation....................................................... 302,447 284,179
Less: Plan assets at fair value (a).................................... 335,439 317,037
---------- ---------
(Over) Funded Status................................................... (32,992) (32,858)
Unrecognized prior service cost........................................ 46,136 57,242
Unrecognized net gain.................................................. 26,846 11,954
---------- ---------
Postretirement Benefit Liability Recognized in the Statements of
Financial Position................................................... $ 39,990 $ 36,338
---------- ---------
---------- ---------
</TABLE>
- ------------------------
(a) Invested in U.S. Treasury instruments
- -------------------------------------------------------------------------
13. COMMITMENTS
- -------------------------------------------------------------------------
The BIF's allocated share of FDIC's lease commitments totals $138.8
million for future years. The lease agreements contain escalation clauses
resulting in adjustments, usually on an annual basis. The allocation to the
BIF of FDIC's future lease commitments is based upon current relationships of
the workloads among BIF, SAIF and FRF. Changes in the relative workloads
among the three funds in future years could change the amount of FDIC's lease
payments which will be allocated to BIF. The BIF recognized leased space
expense of $39.9 million, $42.7 million, and $50.9 million for the years
ended December 31, 1996, 1995, and 1994, respectively.
- ------------------------------------------------------------------------------
Leased Space Fees
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS
2002 AND
1997 1998 1999 2000 2001 THEREAFTER
- --------- --------- --------- --------- --------- ------------------
<S> <C> <C> <C> <C> <C>
$38,355 $25,004 $19,390 $16,597 $15,748 $23,742
</TABLE>
- -----------------------------------------------------------------------
14. CONCENTRATION OF CREDIT RISK
- -----------------------------------------------------------------------
As of December 31, 1996, the BIF had $23.7 billion and $873 million in
gross receivables from bank resolutions and investment in corporate owned
assets, respectively. An allowance for loss of $19.4 billion and $810
million, respectively, has been recorded against these receivables. The
receivables arose from bank resolutions. The BIF's maximum exposure to
possible accounting loss for these receivables is shown in the table below.
F-16
<PAGE>
- ------------------------------------------------------------------------------
Concentration of Credit Risk at December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SOUTH- SOUTH- NORTH- MID-
DOLLARS IN MILLIONS EAST WEST EAST WEST CENTRAL WEST TOTAL
- -------------------------------------------------------------- -------- ------- ------ ------ ------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Receivables from bank resolutions, net and Investment in
corporate owned assets, net................................. $89 $297 $3,145 $230 $8 $631 $4,400
</TABLE>
- -------------------
(a) The net receivable excludes $2.3 million and $1.9 million,
respectively, of the SAIF's allocated share of maximum credit loss
exposure from the resolutions of Olympic National Bank, Los Angeles,
CA, and the First National Bank of the Panhandle, Panhandle, TX.
There is no risk that the SAIF will not meet these obligations.
Insured Deposits
As of December 31, 1996, the total deposits insured by the BIF is
approximately $2 trillion. This would be the accounting loss if all
depository institutions fail and the assets acquired as a result of the
resolution process provided no recoveries.
- --------------------------------------------------------------------------
15. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------
Cash equivalents are short-term, highly liquid investments and are shown
at current value. The fair market value of the investment in U.S. Treasury
obligations is disclosed in Note 3 and is based on current market prices. The
carrying amount of interest receivable on investments, short-term
receivables, accounts payable and liabilities incurred from bank resolutions
approximates their fair market value. This is due to their short maturities
or comparisons with current interest rates.
The net receivable from bank resolutions primarily involves the BIF's
subrogated claim arising from payments to insured depositors. The
receivership assets which will ultimately be used to pay the corporate
subrogated claim are valued using discount rates which include consideration
of market risk. These discounts ultimately affect the BIF's allowance for
loss against the net receivable from bank resolutions. Therefore the
corporate subrogated claim indirectly includes the effect of discounting and
should not be viewed as being stated in terms of nominal cash flows.
Although the value of the corporate subrogated claim is influenced by
valuation of receivership assets, such receivership valuation is not
equivalent to the valuation of the corporate claim. Since the corporate claim
is unique, not intended for sale to the private sector, and has no
established market, it is not practicable to estimate its fair market value.
The FDIC believes that a sale to the private sector of the corporate
claim would require indeterminate, but substantial discounts for an
interested party to profit from these assets because of credit and other
risks. In addition, the timing of receivership payments to the BIF on the
subrogated claim do not necessarily correspond with the timing of collections
on receivership assets. Therefore the effect of discounting used by
receiverships should not necessarily be viewed as producing an estimate of
market value for the net receivables from bank resolutions.
The majority of the net investment in corporate owned assets (except real
estate) is comprised of various types of financial instruments (investments,
loans, accounts receivable, etc.) acquired from failed banks. Like
receivership assets, corporate owned assets are valued using discount rates
which include consideration of market risk. However, corporate owned assets
do not involve the unique aspects of the corporate subrogated claim, and
therefore the discounting can be viewed as producing a reasonable estimate of
fair market value.
F-17
<PAGE>
- -----------------------------------------------------------------------------
16. SUPPLEMENTARY INFORMATION RELATING TO THE STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Reconciliation of Net Income to Net Cash Provided by Operating Activities
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
DOLLARS IN THOUSANDS 1996 1995 1994
- ------------------------------------ --------- ------------ ------------
<S> <C> <C> <C>
Net Income.......................... $1,400,681 $3,605,916 $ 8,726,122
---------- ---------- ------------
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities
Income Statement Items:
Reduction in provision for
insurance losses.................. (325,206) (33,167) (2,873,419)
Amortization of U.S. Treasury
securities........................ (825) (19,266) 43,145
Depreciation on buildings........... 3,339 3,339 3,339
Change in Assets and Liabilities:
Decrease (Increase) in interest
receivable on investments and other
assets............................. 22,041 (146,102) (179,994)
(Increase) Decrease in receivables
from bank resolutions............. (66,360) 3,659,128 5,916,593
Decrease (Increase) in corporate
owned assets...................... 66,298 (37,452) 566,472
Increase (Decrease) in accounts
payable and other liabilities..... 15,500 (112,148) (3,199,424)
(Decrease) in estimated liabilities
for anticipated failure of insured
institutions...................... 0 (157,000) (375,000)
(Decrease) in estimated liabilities
for assistance agreements......... (721) (4,048) 13,479
(Decrease) in estimated liabilities
for asset securitization
guarantees........................ (67,300) (2,054) 128,429
---------- ---------- ------------
Net Cash Provided by Operating
Activities........................ $1,047,447 $6,757,146 $ 8,769,742
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
- ----------------------------------------------------------------------------
17. SUBSEQUENT EVENTS
- ----------------------------------------------------------------------------
In the first quarter of 1997, management negotiated with the National
Treasury Employees Union (NTEU) a change in employee health benefits. This
change involves a conversion from the FDIC health plan to the Federal
Employees Health Benefits (FEHB) plan. This conversion will involve all
employees with five or more years until retirement eligibility. Assuming
enabling legislation is also passed, the conversion will also affect all
retirees and employees within five years of retirement. Management does not
expect the conversion, which will become effective on January 1, 1998, to
result in an accounting loss to the BIF.
F-18
<PAGE>
Exhibit 23
ARTHUR
ANDERSEN
Consent of Independent Public Accountants
-----------------------------------------
We agree to the inclusion in this Form 10-K of our report, dated March 21,
1997, on our audit of the financial statements of the Federal Deposit
Insurance Corporation's Bank Insurance Fund. It should be noted that we have
performed no audit procedures subsequent to March 21, 1997, the date of our
report. Furthermore, we have not audited any financial statements of the Bank
Insurance Fund as of any date or for any period subsequent to December 31,
1996.
/s/ Arthur Andersen LLP
March 31, 1997
<PAGE>
FDIC REMIC TRUST 1996-C1
EXHIBIT 99.
PAGE 1 OF 2
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
As of April 7, 1997, the following persons were known to the Registrant
to be the registered beneficial owners of more than 5% of the aggregate
fractional undivided interest evidenced by each Class of the Certificates
referenced below:
<TABLE>
<CAPTION>
TITLE NAME AND ADDRESS AMOUNT OF BENEFICIAL
OF CLASS OF BENEFICIAL HOLDERS OWNERSHIP (ORIGINAL PRINCIPAL) % CLASS
- ----------- --------------------- ------------------------------ --------
<S> <C> <C> <C>
Class 1-A* Bank of New York $60,529,000 13.60
925 Patterson Plank Road
Secaucus, NJ 07094
Bankers Trust Company $70,031,000 15.73
c/o BT Services Tennessee Inc.
648 Grassmere Park Drive
Nashville, TN 37211
Boston Safe Deposit & Trust Co. $72,838,000 16.36
c/o Mellon Bank N.A.
Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
Chase Manhattan Bank $42,096,000 9.46
Two Chase Manhattan Plaza, 5th Fl.
New York, NY 10081
Citicorp Services, Inc. $36,020,000 8.09
P.O. Box 30576
Tampa, FL 33630-3576
SSB-Custodian $52,509,000 11.79
Global Proxy Unit, A5NW
P.O. Box 1631
Boston, MA 02105-1631
Class I-B* Bankers Trust Company $11,000,000 33.35
c/o BT Services Tennessee Inc.
648 Grassmere Park Drive
Nashville, TN 37211
Boston Safe Deposit & Trust Co. $7,000,000 21.23
c/o Mellon Bank N.A.
Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
Chase Manhattan Bank $3,500,000 10.61
Two Chase Manhattan Plaza, 5th Fl.
New York, NY 10081
Citicorp Services, Inc. $7,979,000 24.19
P.O. Box 30576
Tampa, FL 33630-3576
SSB-Custodian $3,500,000 10.61
Global Proxy Unit, A5NW
P.O. Box 1631
Boston, MA 02105-1631
Class I-C* Bank of New York $5,000,000 18.19
925 Patterson Plank Road
Secaucus, NJ 07094
Boston Safe Deposit & Trust Co. $7,000,000 25.47
c/o Mellon Bank N.A.
Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
Citicorp Services, Inc. $12,483,000 45.42
P.O. Box 30576
Tampa, FL 33630-3576
Nations Bank of Texas N.A. $2,000,000 7.28
Trust Operations, 16th Floor
1401 Elm Street
Dallas, TX 75202
Class I-D* Boston Safe Deposit & Trust Co. $25,000,000 56.85
c/o Mellon Bank N.A.
Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
First National Bank of Boston $10,972,693 24.95
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
PNC National Association $ 3,000,000 6.82
1835 Market Street
11 Penn Center, 15th Floor
Philadelphia, PA 19103
SSB-Custodian $ 3,500,000 7.96
Global Proxy Unit, A5NW
P.O. Box 1631
Boston, MA 02105-1631
Class II-A* Bank of New York $22,000,000 14.85
925 Patterson Plank Road
Secaucus, NJ 07094
Bankers Trust Company $16,568,000 11.18
c/o BT Services Tennessee Inc.
648 Grassmere Park Drive
Nashville, TN 37211
Boston Safe Deposit & Trust Co. $17,800,000 12.01
c/o Mellon Bank N.A.
Three Mellon Bank Center
Room 153-3015
Pittsburgh, PA 15259
Citicorp Services, Inc. $21,500,000 14.51
P.O. Box 30576
Tampa, FL 33630-3576
NBD Bank Municipal Bond $13,400,000 9.04
Department
Attn: Securities Dept.
611 Woodward Avenue
Detroit, MI 48226
SSB-Custodian $28,150,000 19.00
Global Proxy Unit, A5NW
P.O. Box 1631
Boston, MA 02105-1631
Class II-B* Bank of New York $4,500,000 29.96
925 Patterson Plank Road
Secaucus, NJ 07094
Bankers Trust Company $ 5,650,000 37.62
c/o BT Services Tennessee Inc.
648 Grassmere Park Drive
Nashville, TN 37211
Bankers Trust Company/First Union $4,868,000 32.41
Clearance
Dealer Clearance
16 Wall Street, 5th Floor
New York, NY 10005
Class II-C* Bankers Trust Company/First Union $1,660,000 14.21
Clearance
Dealer Clearance
16 Wall Street, 5th Floor
New York, NY 10005
Goldman, Sachs & Co. $6,700,806 57.37
c/o ADP Proxy Services
51 Mercedes Way
Edgewood, NY 11717
Investors Fiduciary Trust $2,060,000 17.64
Company/SSB
Global Proxy Unit, A5NW
P.O. Box 1631
Boston, MA 02105-1631
LBI-Lehman Government Securities $1,260,000 10.79
Inc. (LBI)
200 Vesey Street
New York, NY 10285
Class I-XS Federal Deposit Insurance Corp. N/A** 100
801 17th Street, N.W.
Washington, D.C. 20434
Class II-XS Federal Deposit Insurance Corp. N/A** 100
801 17th Street, N.W.
Washington, D.C. 20434
Class R-UT Federal Deposit Insurance Corp. N/A 100
801 17th Street, N.W.
Washington, D.C. 20434
Class R-LT Federal Deposit Insurance Corp. N/A 100
801 17th Street, N.W.
Washington, D.C. 20434
</TABLE>
- ---------------------------
* As of April 7, 1997, the security ownership of the Class of Certificates was
registered on the books and records of the Trustee to "Cede & Co.," The
Depository Trust Company's nominee. The beneficial ownership of such Class
disclosed herein is based on a security positions listing of The Depository
Trust Company as of April 7, 1997.
** The Class I-XS and II-XS Certificates have no principal balances, the
holders thereof being entitled solely to distributions of interest accruing
on the respective National Amount of such Certificates.
