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FDIC Banking Review

Table 6
Comparison of Low-Cost and High-Cost Failures At Resolution and In Receivership
  Low-Cost High-Cost Difference
Number of Institutions 16 29 13
Median Total Assets ($MM) 66 64 (2)
Median Resolution Data
Total Bid/Total Deposits 3.01 2.38 (0.63)
Deposit Bid/Total Deposits 2.88 1.42 (1.46)
Median Loss Rates over Life of the Receivership
  (as % of Total Assets at Failure)
Investment Securities Lossa 0.00 0.00 0.00
C&I Loan Loss 15.00 28.11 13.11***
Mortgage Loan Lossb 14.99 16.22 1.23
Consumer Loan Loss 9.26 13.37 4.11
Owned Real Estate (OREO) Loss 21.27 42.30 21.03**
Investment in Subsidiaries Loss 3.03 0.00 (3.03)
Other Asset Loss 5.97 16.11 10.14
Total Asset Loss 7.99 21.96 13.97***
Median Receivership Reserve Ratios
Reserves/Total Assets 2.84 3.04 0.20
Reserves/Total Asset Losses 28.67 14.27 (14.40)**
Median Performance over Life of the Receivership
Percentage Point Change in Cost Estimate
  (Original to 12/2000)		 2.88 8.03 5.15***
  (as % of Total Assets at Failure)
Receivership Income 0.51 4.58 4.07***
Receivership Expenses (Excludes Holding Costs) 2.97 11.24 8.27***
Holding Costs 0.58 3.34 2.76***
Assets Passed to Acquirer 62.99 24.84 (38.15)**
  (as % of Total Expenses)
Legal Expenses 1.47 1.61 0.14
OREO Expenses (Net of OREO Income) 0.72 3.03 2.31*
Indirect Expenses 59.74 62.57 2.83

Note: The total bid includes all items that reduce the FDIC’s cost; the deposit bid includes the amount that is directly tied todeposits Receivership income and expenses exclude gains and losses from asset-sales adjustments made directly to equity.

*Significant at the 10% level

**Significant at the 5% level

***Significant at the 1% level

aFor failures that occurred in 2000, gains/losses on investment securities that were sold to the acquirer are excluded from these figures Also note that some acquirers may bid for investment securities at par and adjust their bid for deposits accordingly, particularly if the deposit bid is contingent on receiving the securities as well.

bMortgage loss rates (and possibly the difference between low-cost and high-cost failures) may be understated because of foreclosure activity If the FDIC forecloses on a property, the receivership reclassifies the asset to an OREO asset prior to sale Thus the losses from selling the underlying real estate are recorded under OREO instead of mortgages. We calculated thechange in the percentage of the banks’ assets held in OREO over the course of the receivership, and we found that the medianincrease (in percentage points) was 2 percent for the both groups of banks.

Last Updated 7/25/2003 Questions, Suggestions & Requests