I. Management’s Discussion and Analysis - The Year in Review
The FDIC has the unique mission of protecting the depositors of insured banks and savings associations. Since the FDIC’s inception over 70 years ago, no depositor has ever experienced a loss of insured deposits at an FDIC-insured institution due to a failure. The FDIC protects insured depositors by prudently managing the BIF and the SAIF and using the assets of the funds to pay insured deposits at the time of the institution failure. Once an institution is closed by its chartering authority – the state for state-chartered institutions, the OCC for national banks, or the Office of Thrift Supervision (OTS) for federal savings associations–the FDIC is responsible for the resolution of the failed bank or savings association. FDIC staff gathers data about the troubled institution, estimates the potential loss due to its failure, solicits and evaluates bids from all known qualified and interested bidders, and then recommends the least costly resolution transaction to the FDIC’s Board of Directors.
Resolving Financial Institution Failures
During 2004, the FDIC resolved three BIF-insured institution failures and one SAIF-insured institution failure. The SAIF - insured institution, Dollar Savings Bank, Newark, New Jersey, with total assets of $15 million, was closed on February 14, and depositors received their insured funds by check. Guaranty National Bank of Tallahassee, Tallahassee, Florida, with total assets of $77 million, was closed on March 12. All of Guaranty’s deposits and a large portion of its assets were sold to another FDIC-insured institution. Reliance Bank, White Plains, New York, with total assets of $27 million, was closed on March 19. All of Reliance’s deposits and a large portion of its assets were also sold to another FDIC - insured institution. The Bank of Ephraim, Ephraim, Utah, with total assets of $46 million, was closed on June 25. In all cases, the target time frame was met for giving depositors access to their funds. Ephraim’s insured deposits were sold to another FDIC- insured institution. (See the accompanying table above for details about liquidation activities.)
During 2004, the FDIC completed investigations and decisions regarding closure or pursuit of claims for all five receiverships that had failed within the prior 18 months. This exceeded the performance target of reaching decisions on closure or pursuit of professional liability claims for 80 percent of failed institutions within 18 months of the failure date.
Protecting Insured Depositors Through Asset Marketing
The FDIC’s ability to attract healthy FDIC-insured institutions to assume deposits and purchase the assets of failed banks and savings associations ensures that depositors have prompt access to their insured deposits, minimizes the disruption to the customers and the community, and allows a fair portion of the failed institution’s assets to be returned to the private sector almost immediately. Assets remaining after the resolution transaction are liquidated by the FDIC in an orderly manner, and the proceeds are used to pay creditors and uninsured depositors (depositors whose accounts exceed the $100,000 deposit insurance limits), and to reimburse the insurance fund that funded the resolution transaction. In 2004, the FDIC again met its goal of marketing 85 percent of a failed institution's marketable assets within 90 days of the institution's failure.
Liquidation Highlights 2002-2004
Dollars in billions
Total Resolved Banks
Assets of Resolved Banks
Total Resolved Savings Associations
Assets of Resolved Savings Associations
Net Collections from Assets in Liquidation*
Total Assets in Liquidation*
Total Dividends Paid*
* Includes activity from thrifts resolved by the former Federal Savings and Loan Insurance Corporation and the Resolution Trust Corporation.
Customer Service Center
In order to help consumers needing assistance with matters arising from failed financial institutions, the FDIC operates a Customer Service Call Center with staff dedicated to handling records research and collateral releases. During 2004, the FDIC staff responded to 36,791 inquiries. The records research staff reviews the historical records of failed financial institutions in order to answer customer questions on deposit accounts, loan transaction histories, tax suits for delinquent real estate and other issues.
The collateral release staff researches and determines ownership of collateral securing loans of failed financial institutions in order to provide a release of lien, assignment or reconveyance to the borrower. This staff successfully handled 13,494 collateral release inquiries in 2004. The Customer Service Call Center handled 76,217 calls asking for information or assistance. The FDIC Customer Service Center also supported the Federal Emergency Management Agency (FEMA) in its effort to help the people affected by hurricanes in Florida and other parts of the country. More than 100 FDIC employees assisted FEMA in fielding calls and processing FEMA applications associated with these emergencies.
The FDIC, as receiver, manages the receivership estate and the subsidiaries of failed financial institutions with the goal of achieving an expeditious and orderly termination. The oversight and prompt termination of receiverships help to preserve value for the uninsured depositors and creditors by reducing overhead and other holding costs. For that reason, the FDIC has established a target of terminating 75 percent of receiverships within three years of the failure date. This goal was met at year-end 2004, with only one of four 2001 receiverships still active. The single remaining receivership could not be terminated due to the existence of ongoing professional liability litigation and other impediments. These cases continue to be vigorously pursued through appropriate negotiations and litigation proceedings. In 2004, there were 30 pre–2001 receiverships terminated; 59 remain to be terminated.