APPENDIX III Income APPENDIX III FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION The accompanying notes are an integral part of these financial statements. APPENDIX III FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION APPENDIX III 1. Summary of Significant Accounting Policies: a) Income Recognition Insurance Premium Income is recognized as earned when member institutions are assessed. 2. b) Generally the Provision for Possible Future Losses is recorded when a default prevention action is taken. Investments Investment securities are stated at cost, adjusted for amortization of premiums and accretion of discounts. Such amortization and accretion are computed on the level yield method at rates based upon the lives of the related securities. Both amortization and accretions are recognized as an adjustment to Interest on Investments. All cash received by the Corporation which is not used to defray operating expenses or for outlays related to assistance to insured institutions and liquidation activities, is invested in U.S. Treasury securities. Other obligations are mostly securities issued by Federal Government Agencies other than the U.S. Treasury which were obtained through the Corporation's default prevention activities. As of December 31, 1984 and 1983, the Corporation's investment portfolio consisted of the following: 3. 4. APPENDIX IIT Su! As required by Statute, the IC closes institu only when there is no default prevention measure that would be less 4 liquidation. In these cases, FSLTC settles insurance claims either cash payout of insured accounts on by transferring sured accounts another insured institution. In either case insurance payment is made in exchange the account holder's claim against the assets of the defaulted institution. Subrogated Accounts represent the total of these outstanding claims. The changes in the Allowance for Possible Future Losses on Subrogated Accour to for the years ended December 31, 1984 and 1983 are: Contribution Agreements The FSLIC makes contribution agreements to prevent default of an insured institution. Under some of these agreements the Corporation agrees to make, or commits itself to make, certain contributions over time. The FSLIC may incur additional contingent liabilities in excess of Possible Future Losses resulting from uncertainties concerning litigation and other undisclosed liabilities. However, it is management's opinion that these amounts cannot be reasonably estimated. The changes in the Allowance for Possible Future Losses Under Contribution Agreements for the years ended December 31, 1984 and 1983 are: 5. Income Capital & Net Worth Certificates - Since 1981 the FSLIC has purchased Income Capital Certificates (ICC's) from insured institutions. The FSLIC records the ICC's at cost. The ICC's earn annual income payments based on the United States Treasury Bill rates. The annual income payments and principal are redeemable upon the issuing institution having profitable operations and attaining a specified net worth level. The changes in the ICC's for the years ended December 31, 1984 and 1983 are: APPENDIX III APPENDIX III 5. (Con't) In addition, since 1982 the FSLIC has purchased Net Worth Certificates 6. Notes Payable to Insured Institutions - The FSLIC has outstanding negotiable 7. Loans to Insured Institutions 8. The FSLIC has made loans to insured institu tions on occasion as part of its default prevention activities. The outstanding balance of these loans at December 31, 1984 and 1983 were $922,349,947 and $208,749,278, respectively. The majority of the increase was a $700,000,000 collateralized loan to an insured institution. In order to finance the loan to an insured institution, FSLIC issued a Pelated Party Transactions The Federal Home Loan Bank Board is an |