Free Motion in Limine - District Court of Federal Claims - federal

Case 1:95-cv-00468-TCW

Document 204-5

Filed 05/01/2007

Page 1 of 6

Impact of FIRREA on Fidelity's Regulatory Capital Calculated Pro Forma As of March 31, 1989 (Millions)
Pre-FIRREA
$150
Actual, $121

Post-FI RREA Tangible

Post-FIRREA Core

$100

Required, $55

$5O
Required, $28

Actual, $(18)

$(50)

Actual, $(46)

Deficit, $(73)

Deficit, $(73)

$(100)
Source: Fidelity Consolidated Financial Statements as of March 31, 1989 (PX476 at 1 and 22]

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Case 1:95-cv-00468-TCW

Document 204-5

Filed 05/01/2007

Page 2 of 6

Impact of FIRREA on Fidelity's Regulatory Capital Calculated Pro Forma As of March 31, 1989 (Thousands)
Line Pre-FIRREA Regulatory Capital: Net Worth Under GAAP (per balance sheet, after restatement of Suburbia goodwill) Additional Non-GAAP Contractual Supervisory Goodwill from Suburbia Net Worth Certificates from Suburbia General Valuation Allowances Other Regulatory Items (deferred losses, loan fees and discounts) Total Regulatory Capital Regulatory Capital Requirement as of March 31, 1989 Excess (Deficit) Pre-FIRREA Capital OTS FIRREA Tangible Capital Requirement: Net Worth Under GAAP Less: GAAP Supervisory Goodwill (Suburbia & Dollar) Tangible Capital (Deficit) Tangible Capital Requirement (1.5% tangible assets) Excess (Deficit) FIRREA Tangible Capital OTS FIRREA Core Capital Requirement: Tangible Capital (Deficit) Plus: Qualifying Supervisory Goodwill (up to 1.5% tangible assets) Total Core Capital (Deficit) 31-Mar-89 Audit 54,994 50,438 5,123 3,887 6,471 120,913 64,229 56,684 54,994 (100,591) (45,597) 27,537 (73,134) (45,597) 27,537 (18,060) 55,074 (73,134)

1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16

17 Core Capital Requirement (3% of tangible assets) 18 Excess (Deficit) FIRREA Core Capital (Deficit)

Source: Fidelity Consolidated Financial Statements as of Maich 31, 1989 (PX 476 at 1 and 22)

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Case 1:95-cv-00468-TCW

Document 204-5

Filed 05/01/2007

Page 3 of 6

Fidelity's Regulatory Capital But For the Breach Calculated Pro Forma as of March 31, 1989 (Millions)
Tangible
$140

Core

Risk-Based

$120
But For, $111

But For, $114

$100
But For, $91

$8o -Surplus, $62 ~equired, $61 Surplus, $53

$60

$40
~equired, $2!

$20 i--

N
~~

Source: Fidelity Consofidated Financial Statements as of March 31, 1989 (PX 476 at I and 22]

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Case 1:95-cv-00468-TCW

Document 204-5

Filed 05/01/2007

Page 4 of 6

Fidelity's Non-Breached Regulatory Capital Calculated Pro Forma as of March 31, 1989 (Thousands)
Line OTS FIRREA Tangible Capital Requirement: Net Worth Under GAAP (per balance sheet, after restatement of Suburbia goodwill) Additional Contractual Supervisory Goodwill from Suburbia Net Worth Certificates from Suburbia Less: GAAP Supervisory Goodwill (Suburbia & Dollar) Tangible Capital Tangible Capital Requirement 1o5% tangible assets) Excess (Deficit) Tangible Capital Tangible Capital Ratio OTS FIRREA Core Capital Requirement: Tangible Capital Surplus (Deficit) Plus: Qualifying Supervisory. Goodwill (up to 1.5% tangible assets) Total Core Capital Core Capital Requirement (3% of tangible assets) Core Capital Surplus (Deficit) Core Capital Ratio 31-Mar-89 Breached 54,994 31-Mar-89 But For 54,994 50,438 5,123 (20,007) 90,548 28,746 61,802 4.72% 90,548 20,007 110,555 57,491 .53,064 5.77% 110,555 3,88i 114,442 61,324 53,118 11.94%

1 2 3 4 5 6 7 8 9 10 11

(100,591) (45,597) 27,537 (73,134) -2.48% (45,597) 27,537 (18,060) 55,074 (73,134) -0.98% (18,060) (18,060) 58,745 (76,805) -1.97%

12 13 14

OTS FIRREA Risk-Based Capital Requirement: 15 Core Capital 16 Plus: General Valuation Allowances (if tangible capital is positive) Total Risk-Based Capital 17 18 19 20 Risk-Based Capital Requirement (6.4% of risk-weighted assets) Risk-Based Capital Surplus (Deficit) Risk-Based Capital Ratio

Note: (18) Assumes rfsk-weighted assets were equal to 50% of unweighted total tangible assets; at 3/31/90 the ratio was 48% Source: Fidefily Consolidated Financial Statements as of March 31, 1989 (PX 476 at I and 22]

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Case 1:95-cv-00468-TCW

Document 204-5

Filed 05/01/2007

Page 5 of 6

:

Immediate Impact of FIRREA on Fidelity's Core Capital Absent the Breach December 31, 1989 (Millions)
Line Amount Lost Amount Immediately Pre-FIRREA Regulatory Capital Loan Discounts Recognized Prematurely under RAP Loan Fees Recognized Prematurely under RAP GeneraIValuation Allowances Deferred Loan Losses Net Worth Certificates Dollar Federal Goodwill Total Percent of Regulatory Capital $136.828 2.266 1.086 4.010 2.851 4.664 ¯ 19.330 $ 34.207 25% Comment
Calculated as $34.207 divided by 25%

1 2
3

$ 2.266 Not permanently lost; fully recognized under GAAP 1.086 Not permanently lost; fully recognized under GAAP 4.010 Counted toward the risk-based capital requirement 2.851 Eliminated immediately instead of over the folkJwing 4 years
Contractual; in December 1990, Fidelity received a cash buyout for $3.0 million, plus $0.7 million of interest forgiveness Includable in core capital pursuant to the phase-out through 1994

4 5 6 7 8 9

$10.213 7%

Source: Defendant's Memorandum of Contentions of Fact and Law, March 15, 2007

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Case 1:95-cv-00468-TCW

Document 204-5

Filed 05/01/2007

Page 6 of 6

Absent the Breach, Most of the Dollar Federal Goodwill Would Have Counted as Core and Risk-Based Capital Through 1994 (Dollar Amounts in Millions)
As of Dec-89 No Asset Growth 1989-1994: Tangible Assets Maximum SGW includable in Core Capital: Percent of Tangible Assets Maximum Amount Dollar Federal Goodwill Outstanding (1) Dollar Federal Goodwill Deducted from Capital But For Asset Growth 1989-1994: Non-breached Tangible Assets Maximum SGW Includable in Core Capital: Percent of Tangible Assets Maximum Amount Dollar Federal Goodwill Outstanding (1) Dollar Federal Goodwill Deducted from Capital 1,919 1.500% 29 19 _ 2,077 1.500% 31 18 2,248 1.500% 34 17 2,433 1.000% . 24 16 2,634 0.750% 20 15 2,542 0.375% 10 14 (5) 1,847 1.500% 28 19 1,847 1.500% 28 18 1,847 1.500% 28 17 1,847 1.000% 18 16 1,847 0.750% 14 15 (2) 1,847 0.375% 7 14 For the Year Ended Dec-92 Dec-93 Dec-91

Dec-90

Dec-94

(8)

(1) Based on starting balance of $19, 326, 203 and 20-year amortization factor of $978,827 per year, that reflected the 20-year FIRREA amortization requirement (KPMG 1990 Work Papers, PX 576 at KPMG 001676)

Source: Kaplan Report, Exhibit 9 (Revised), (PX 1314); KPMG 1990 Wod{paper (PX 576)

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