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USAA FEDERAL SAVINGS BANKFDIC Resolution PlanPUBLIC SECTION

USAA FSB IDI Resolution PlanUSAA Mission StatementThe mission of the association is to facilitate the financial security of its members, associates, andtheir families through provision of a full range of highly competitive financial products and services;in so doing, USAA seeks to be the provider of choice for the military community.USAA Core ValuesUSAA’s core values of Service, Loyalty, Honesty, and Integrity are the foundation upon which theassociation’s heritage is based, and upon which its future depends. Each and every USAA employeeis expected to embody these core values.USAA SignatureWe Know What It Means To Serve has long been USAA’s signature. Every day, USAA’s employeescome to work for one reason, to serve members. Our signature is a reminder that we know what itmeans to serve like no one else.Balanced Approach to Managing USAAIn executing its mission, USAA must continually achieve the optimal balance between members’needs for high-quality, competitive products and services, the well-being of employees, and theongoing financial strength of USAA. Operational excellence forms the foundation for this balance.2

USAA FSB IDI Resolution PlanTable of ContentsUSAA Mission Statement2USAA Core Values2USAA Signature2Balanced Approach to Managing USAA2I.Executive Summary of Resolution Plan4A.Description of Material Entities5B.Description of Core Business Lines7C.Consolidated Financial Information Regarding Assets, Liabilities, and Capital and MajorFunding Sources8D.Description of Derivative Activities and Hedging Activities12E.Memberships in Material Payment, Clearing and Settlement Systems14F.Description of Foreign Operations15G.Material Supervisory Authorities16H.Principal Officers17I.Resolution Planning Corporate Governance Structure and Processes Related to ResolutionPlanning18J.Description of Material Management Information Systems (MIS)19K.High-Level Description of Resolution Strategy20

USAA FSB IDI Resolution PlanI. Executive Summary of Resolution PlanOn January 23, 2012, the Federal Deposit Insurance Corporation (FDIC) adopted a final rulerequiring insured depository institutions (IDIs) with at least 50 billion in total assets -Covered Insured Depository Institutions (CIDIs) -- to submit to the FDIC periodic plans for thehypothetical resolution of such institutions in the event of their failure (Resolution Plans orPlans). In accordance with the FDIC’s final rule, USAA Federal Savings Bank (FSB or Bank), aFederal savings association with more than 50 billion in assets, is submitting this ResolutionPlan to the FDIC before December 31, 2015. This Resolution Plan describes how FSB could beresolved in a manner that ensures depositors receive timely access to their insured deposits,maximizes the net present value return from the sale or disposition of FSB’s assets, andminimizes the amount of any loss to be realized by the Deposit Insurance Fund (DIF) and FSB’screditors and proposes the strategy that would more than likely be the most cost-effective,timely, and least complex option.The principal mission of United Services Automobile Association (USAA), FSB’s ultimateparent, is to provide directly and through FSB and its other affiliates for the financial securityof its members, who include those currently serving in the United States military, or who havehonorably served in the past, and their eligible family members. FSB is a wholly-ownedsubsidiary of USAA Capital Corporation (CapCo), which in turn is a wholly-owned subsidiary ofUSAA.FSB is a full-service retail bank that offers credit cards (through its subsidiary, USAA SavingsBank (USB)), consumer loans, home equity loans, residential mortgages, trust services, USAABillPay, and a full range of deposit products, including sweep accounts in conjunction withUSAA Investment Management Company (IMCO).Headquartered in San Antonio, Texas, FSB operates primarily via electronic commercethrough www.usaa.com, mobile banking, and direct mail. Members with Internet access areprovided account information, funds transfer, product information, account applications,electronic statements for checking, savings and credit cards, pre-approvals for credit cards,consumer loans, residential mortgages, home equity loan products, and BillPay. FSB alsoutilizes mobile deposit capture to provide additional services to customers.Operating as a Federal savings association with 67 billion in assets and over 16 million clientaccounts, FSB's primary source of funds is its retail deposit base. Rather than having areliance on purchased funds, FSB serves as a net funds provider to the banking system (i.e., itis a seller of Fed Funds).4

USAA FSB IDI Resolution PlanA. Description of Material Entities1Material Entities (MEs) were determined based on their functions with respect to FSB and theirsignificance to the activities of the Core Business Lines (CBLs) of FSB. Below is a description ofeach ME and their importance to how FSB functions.United Services Automobile Association (USAA)Founded in 1922, USAA is a Texas-based reciprocal insurance company, headquartered in SanAntonio, Texas, that directly offers property and casualty (P&C) insurance, life and healthinsurance products to members who are, or are family members of, current or retired membersof the U.S. armed services. Through its subsidiaries, USAA offers other financial products andrelated services to its members such as annuities, mutual funds, discount brokerage services,credit cards, deposit and savings accounts, consumer and home equity loans, mortgage andrelocation services, financial planning and advice, catalogue merchandise and memberdiscounts. As of December 31, 2014, USAA serves more than 10 million members. As aninsurance company, USAA is subject to the supervision and regulation of the Texas Departmentof Insurance.USAA Capital Corporation (CapCo)A Delaware corporation organized in 1985, CapCo is a direct wholly-owned subsidiary of USAA.Through its other direct and indirect wholly-owned non-insurance subsidiaries, CapCo engagesin various business activities including investment management and financial planning servicesthat are intended to complement USAA’s insurance offerings. In addition to its holdingcompany operations, CapCo serves as a general purpose finance subsidiary for USAA.USAA Federal Savings Bank (FSB)FSB is an FDIC-insured Federal savings bank depository institution subject to primary regulationand supervision examination by the Office of the Comptroller of the Currency (OCC). FSBprovides banking products and services including credit cards (through its operating subsidiary,USAA Savings Bank), consumer loans, home equity loans, mortgages, real estate brokerageservices, trust services, checking, savings and time deposits. FSB is also subject to regulation bythe Consumer Financial Protection Bureau and is a member of the Federal Home Loan BankSystem.1Material Entities as of December 31, 2014.5

USAA FSB IDI Resolution PlanUSAA Savings Bank (USB)USB is an FDIC-insured Nevada industrial loan company that is a direct, wholly-ownedsubsidiary of FSB. USB’s primary regulators are the FDIC and the State of Nevada Department ofBusiness and Industry’s Division of Financial Institutions. USB is engaged in credit card lendingand related activities.USAA Investment Corporation (IMCO)IMCO is registered with the Securities Exchange Commission (SEC) as a broker-dealer and as aninvestment advisor. Also a member of the Financial Industry Regulatory Authority (FINRA),IMCO acts as a distributor of USAA’s mutual funds and as a clearing broker-dealer.USAA Financial Planning Services Insurance Agency (MX)MX functions as the relationship management center for FSB, USB, and the P&C insurance,investments, and life insurance products of USAA. By leveraging its highly integrated callcenters, digital channels, marketing, and financial centers, MX serves as the centralized sharedservices provider for USAA’s entities while also providing financial planning services to USAAmembers.6

USAA FSB IDI Resolution PlanB. Description of Core Business LinesFSB’s Core Business Lines (CBLs) are those businesses that under the FDIC’s rule represent thekey business activities of FSB and reflect those assets, associated operations, services andfunctions that, in the view of FSB, upon failure would result in a material loss of revenue, profit,or franchise value. FSB management has identified the following CBLs:Credit CardsLines of credit made available via card products, including rewards programs and special militarybenefits.MortgagesLending and refinancing products available to members where the loan is secured by real estate.Loan options include conventional fixed-rate, adjustable, and Veterans Affairs (VA).CheckingDepositsSavingsDepositsThe offering and management of transaction accounts, including check, debit card, ATM, andonline services on behalf of members.The offering and management of savings accounts, including debit card, ATM, and online serviceson behalf of members.ConsumerLoansLending products available to members where the loan is generally secured by automobile orother property and unsecured personal loans.HomeEquityLoansLoans and lines of credit available to members where the loan is secured by residential real estate.7

USAA FSB IDI Resolution PlanC. Consolidated Financial Information Regarding Assets, Liabilities,and Capital and Major Funding SourcesThe following attachments: (i) USAA FSB Balance Sheet and (ii) USAA FSB Income Statementsummarize the assets, liabilities, and capital position for FSB as of December 31, 2014. Theseattachments immediately follow page 20.1. Regulatory CapitalAs of December 31, 2014, FSB reported tier 1 and total risk-based capital ratios of 13.0%and 14.2% respectively, and a leverage ratio of 8.7%; all above the minimum regulatoryrequirements to be considered well-capitalized.FSB Capital Levels and RequirementsAs of December 31,2014Minimum for CapitalAdequacy PurposesActualTo be Well-Capitalized underPrompt Corrective ActionsAmountRatioAmountRatioAmountRatioTangible capital, andratio to adjustedtotal assets 5,880,9738.7% 1,345,6912.0%N/AN/ATier 1 (core) capital,and ratio to adjustedtotal assets 5,864,3778.7% 2,692,0464.0% 3,365,0585.0%Tier 1 capital, andratio to riskweighted assets 5,864,37713.0%N/AN/A 2,714,1356.0%Total risk-basedcapital, and ratio torisk-weighted assets 6,431,77014.2% 3,618,8468.0% 4,523,55810.0%8

USAA FSB IDI Resolution PlanAs of December 31,2013Minimum for CapitalAdequacy PurposesActualTo be Well-Capitalized underPrompt Corrective ActionsTangible capital, andratio to adjustedtotal assets 5,375,2838.6% 1,257,0322.0%N/AN/ATier 1 (core) capital,and ratio to adjustedtotal assets 5,360,6778.5% 2,514,6494.0% 3,143,3115.0%Tier 1 capital, andratio to riskweighted assets 5,360,67712.8%N/AN/A 2,508,5106.0%Total risk-basedcapital, and ratio torisk-weighted assets 5,885,90814.1% 3,344,6808.0% 4,180,85010.0%2. Liquidity and Major Funding SourcesLiquidity levels are maintained to ensure FSB’s safety and soundness, and serve as anadequate base for growth and expansion. Liquidity risk management strategies areperformed by both Treasury and FSB’s Senior Financial Officer department to assure (1)FSB’s ability to generate or obtain cash or cash equivalent (collateral) in a timely, costefficient manner so that obligations can be met as they fall due; and (2) that profitablebusiness opportunities can be pursued through stressed market environments for anextended period of time without liquidating assets prematurely.9

USAA FSB IDI Resolution PlanTo monitor the Bank’s liquidity position, Treasury and the Bank’s SFO department monitorcash flows in combination with other financial and non-financial information at the Bank.Non-financial information utilized as early warning indicators of a potential liquidity eventinclude member feedback and media coverage of USAA. Treasury also evaluates systemicand/or idiosyncratic events when they occur that could lead to exceedingBoard/Committee-approved risk triggers or policy thresholds.FSB relies on core deposits as its primary sources of funds. Funds generated from depositsare used to support loans and investments with the remainder held as cash and cashequivalents. Cash and cash equivalents are available to meet any immediate liquidity needs.Additional Funding Sources AvailableFSB was highly liquid at year-end 2014; additional sources of funds in a business as usualenvironment include, but are not limited to the following: Cash & Short-term Investments: consist of cash, money market funds andsecurities with maturities less than 90 days at time of purchase. The Federal Home Loan Bank of Dallas (FHLB Dallas): maintained through acontractual arrangement with the FHLB Dallas to borrow against the value ofcertain investment securities and mortgage loans in first lien position. Investment Portfolio Liquidation: sale of unencumbered investment securities. Asset Securitization: collateralized borrowing primarily against FSB's auto andcredit card loan portfolios. Primary investor base of asset backed securitiesincludes large investment and pension funds, insurance companies and banks. Commercial Paper and Medium-Term Note Debt Issuance: USAA CapitalCorporation, which serves as a centralized funding source for USAA, itssubsidiaries and affiliates, maintains access to funds through establishedprograms and revolving committed lines of credit with money center banks. Federal Reserve Discount Window: FSB is approved to borrow from the FederalReserve Bank of Dallas (FRB Dallas) using its consumer loans and credit cardreceivables purchased from USB as collateral, while USB is approved to borrowagainst approved securities at the Federal Reserve Bank of San Francisco (FRBSan Francisco).10

USAA FSB IDI Resolution PlanFSB also has a borrower-in-custody (BIC) arrangement with the Federal Reserve Bank of Dallas.This capacity is limited only to the acceptable collateral (loan receivables) that FSB is able topledge. Currently, FSB has pledged only nominal amounts to each for testing purposes. FSBalso has Daylight Overdraft (DLOD) capacity at the Federal Reserve Bank of Dallas and theFederal Reserve Bank of San Francisco. FSB follows the de minimis capital methodology for itsmaster account with the Federal Reserve Bank of Dallas.11

USAA FSB IDI Resolution PlanD. Description of Derivative Activities and Hedging ActivitiesDerivative transactions are evaluated against the risks they are expected to mitigate. Thederivative transaction itself should not increase FSB’s overall risk without a commensurateincrease in return/cost reduction. Other risks associated with derivatives (e.g., market, liquidity,credit, legal, etc.) are evaluated to determine that the benefits outweigh these risks. Prohibitedderivative transactions include: Any transaction in which speculation is the primary purpose.Complex derivative transactions for which the value at risk cannot be internallycalculated.Derivative transactions that are motivated primarily for accounting, as opposed toeconomic, reasons.Highly customized derivative transactions for which there is no liquid market, unlessapproved in advance by the Bank’s Asset/Liability Committee (ALCO).Writing options to hedge the pipeline.Derivative counterparties must have a credit rating from either Moody’s, Standard & Poor’s, ora rating agency whose rating is approved by FSB’s ALCO. For derivative transactions involvingexchange traded instruments, the exchange is the counterparty and will be assumed to have anAAA rating. Any counterparty below AAA may be allowed if adequate credit enhancement isprovided by the counterparty. The ALCO must approve all counterparties requiringenhancement. Should a counterparty be downgraded below an “A” rating during the life of thederivative contract, FSB will evaluate alternative courses of action, to include: Obtaining collateral or other credit enhancement to mitigate increased credit risk Terminating the transaction where appropriateHedges on the mortgage pipeline and warehouse are used to protect the profitability of therate lock and loans in the position. All aspects of the hedge program, including approvedinstruments, risk limits, counterparties, and traders are approved by FSB’s ALCO and aregoverned by the Bank’s Secondary Marketing Hedge Policy approved by the Board of Directors.The Secondary Marketing Committee, a sub-committee of ALCO, provides oversight of theseactivities weekly.Hedges on the retained mortgage servicing rights asset are used to protect the FSB from losseson the asset from a decrease in interest rates. Similarly to the Pipeline and Warehouse activity,12

USAA FSB IDI Resolution Planapproved instruments, risk limits, counterparties, and traders are approved by FSB’s ALCO andare governed by the Bank’s Secondary Marketing Hedge Policy approved by the Board ofDirectors. The Secondary Marketing Committee provides oversight of these activities weekly.13

USAA FSB IDI Resolution PlanE. Memberships in Material Payment, Clearing and SettlementSystemsFor small value electronic payments, 2 FSB uses the FedACH Services product suite. The FederalReserve Banks’ FedACH Services provides for the electronic exchange of debit and credittransactions among business and consumer accounts at depository financial institutions.FedACH Services are used for preauthorized recurring payments, such as payroll, corporatepayments to vendors, Social Security, insurance premiums and utility payments, as well asnonrecurring payments, such as point-of-purchase, telephone-initiated and Internet-initiatedentries. FSB shares one line for transmission for both ACH and wire activity via Fedline Direct.FSB utilizes Fedwire Funds via the Fedline Direct service through the LAPS wire application forprocessing large value payments. The FHLB and several large money-center U.S. banks are alsoused to channel large corporate settlements, which are non-member related.FSB uses Fedline Direct for the daily processes and connections that are available in the primaryand backup centers. For business continuity purposes, FSB would most likely initiate only themost critical wires via telephone with the Federal Reserve. A major money-center U.S. bankwould be used for back-up purposes if either FSB were unable to access the LAPS wireapplication or the Fed were experiencing issues specific to FSB’s Fedline Direct connection.International Wire Transfer requests are handled through a major money-center US bank.These payments are channelled using LAPS wire application via the Federal Reserve’s FedlineDirect connection. The U.S. money-center bank in turn forwards the wire transfers via theirSWIFT address to various international correspondents.Demand Deposit Account (DDA) deposits are processed in-house by FSB employees in SanAntonio, Texas. The applications used are described in more detail in the confidential portion ofthe Plan.FSB utilizes Bloomberg and Tradeweb for trading. Bloomberg facilitates the trading ofinvestment securities, Eurodollar Futures, market information, and live mortgage backedsecurities prices. USB also utilizes the same systems as FSB (i.e., Bloomberg and TradeWeb)when facilitating investment securities acquisition. Tradeweb is used for trading MortgageBacked Security Forwards. USAA Asset Management Company uses Bloomberg while bothapplications are utilized for the Mortgage business line.2Defined as payments less than 100,000.14

USAA FSB IDI Resolution PlanF. Description of Foreign OperationsFSB does not have any material components that are based or located outside the UnitedStates, including foreign branches, subsidiaries and offices. It also does not have any foreignlocations, deposits or assets.15

USAA FSB IDI Resolution PlanG. Material Supervisory AuthoritiesFSB is a Federal Deposit Insurance Corporation-insured Federal savings association subject toprimary regulation and supervision examination by the Office of the Comptroller of theCurrency. FSB is also subject to regulation and supervision of its consumer lending activities bythe Consumer Financial Protection Bureau.16

USAA FSB IDI Resolution PlanH. Principal Officers Jamie Warder, President FSBGlen Segrato , Assistant Vice President, Bank General Counsel (Interim)Paul Vincent, Senior Vice President, Bank Operations and Direct ChannelsRyan Barth, Vice President, Financial FoundationsMatthew Bomersbach, Senior Vice President, Head of CreditThomas Cianelli, Vice President, Bank Senior Financial OfficerWinston Wilkinson, Senior Vice President, Long Term BorrowerMarcos Rosenberg, Vice President, Savings AssuranceScott Lippert, Vice President, Bank Senior Strategy OfficerMatt Bruhn, Vice President, Borrow WiselyGeorge Bruns, Assistant Vice President, Head of TrustKivin Jones, Assistant Vice President, HR Business PartnerDale Cochran, Vice President, Senior Risk OfficerJessica Mobley, Vice President, Bank Business ControlsJay Christoff, Vice President, Bank Chief Compliance OfficerDavid Fersdahl, President USB17

USAA FSB IDI Resolution PlanI. Resolution Planning Corporate GovernanceProcesses Related to Resolution PlanningStructureandThe development of the Resolution Plan leverages the existing business-as-usual (BAU) FSBgovernance structure, risk management principles and control processes. These governanceprinciples and processes serve as the basis and foundation in which FSB scopes, resources andexecutes the completion of its Resolution Plan.In developing FSB’s Resolution Plan, senior management worked with the Bank’s central projectteam to focus on different elements of the IDI requirements stated in the rule. A workinggroup, consisting of senior members of FSB’s Management team, was established to facilitatethe development of the resolution strategies. Along with the Executive Sponsor, this group wascharged with the task of ensuring the strategy development and considerations were alignedwith the underlying assumptions. The working group also provided feedback and guidance tothe work streams over the course of the project, in order to validate and refine the content ofthe Resolution Plan during its development and completion.In addition, FSB business lines, legal counsel, supporting functions and operations groupsprovided assistance in data gathering, analysis, and the drafting of content for this ResolutionPlan. As subject matter experts in their particular area of business or support function, thesegroups are essential to the resolution planning process, participating in strategy sessions andteam discussions, while also providing ideas and recommendations for the tactical implicationsof each Plan requirement for their respective area.18

USAA FSB IDI Resolution PlanJ. Description of Material Management Information Systems (MIS)USAA utilizes MIS for accounting, cash management, risk management, financial, andregulatory reporting, as well as internal management reporting and analysis. The Core BusinessLines use the MIS to perform necessary business functions. USAA generates and distributesmanagement reports on a periodic basis that are utilized by Executive Management to monitorthe financial health, risks, and operation of FSB and its Core Business Lines.Systems and applications at FSB are essential to smooth and effective operations and aremanaged through a best practices Business Continuity approach. The program is built to assureUSAA’s commitment to uphold its mission to facilitate the financial security of its members,associates, and families. The Business Continuity Plan’s strategy is to mitigate risk from evolvingthreats, increase resiliency through dynamic business continuity planning, and improveoperational effectiveness through enhanced command, control, and communication acrossUSAA.The majority of the MIS software used by FSB has been developed internally and issupplemented with third-party vendor developed applications. Governance, control andmaintenance of critical applications are critical components of the technology process, whichemphasizes minimal recovery times in the event of material financial distress or disruption.Business areas perform a risk assessment to identify activities within the Bank’s products andservices which must be performed in order to stay in business; avoid penalties, fines, andlawsuits; or avoid significant adverse customer impact. Prioritizations and Maximum TolerableDowntime (MTDs) are determined through this assessment.Though all systems and applications at FSB are essential to smooth and effective operations,MIS with activities that are reported to Executive Management are considered “key” and vitalto the business and operations.19

USAA FSB IDI Resolution PlanK. High-Level Description of Resolution StrategyConsistent with supervisory guidance, including the FDIC’s Guidance for Covered InsuredDepository Institution Resolution Plan Submissions release on December 17, 2014, and forResolution Plan purposes, FSB developed its third submission under the assumption that FSBwould have experienced an idiosyncratic stress event that resulted in the failure of theinstitution. It is anticipated that the stress event would also result in FSB experiencing materialfinancial distress causing deterioration in liquidity and restricted access to funding. It is alsoassumed that markets would be functioning normally (albeit subject to the threemacroeconomic scenarios specified in the baseline, adverse, and severely adverse economicconditions from the Federal Reserve’s October 2014 Stress Test Guidance) and no unusualbarriers would exist that would preclude the execution of the identified strategic actions. It isfurther assumed that no extraordinary government support would be provided to FSB inadvance of failure. For this Plan, a number of resolution strategies and alternatives wereconsidered as to how FSB should be resolved once it is placed into FDIC receivership, including apurchase and assumption of FSB in its entirety (“Whole Bank P&A”), the creation of a bridgebank, a purchase and assumption of FSB in its parts, and a wind-down and liquidation of theFSB.FSB and USBA purchase and assumption of FSB in its entirety, which would include USAA Savings Bank(USB), would be the easiest option to execute from an operational perspective and also providefor limited adverse effects on FSB’s members. This preferred strategy would most likelyminimize interrupted continuity of the CBLs in addition to retaining synergies amongst thebusiness activities.Carrying minimal balance sheet risk, FSB would be an attractive strategic investmentconsidering its robust levels of liquidity, stable earnings generation, and the intangible value ofits unique and loyal member base. Given the size of FSB, the transaction would require a largeacquirer with the capacity to absorb the institution in its entirety. Potential buyers couldinclude domestic commercial banks seeking balance sheet diversification, major retail banksattempting to build a military niche, or competing financial institutions that possess similarcultures and missions focused on serving the military community.The Whole Bank P&A transaction would involve all the assets and liabilities of the Bank(excluding any liability that directly caused the failure of the Bank) and would occur20

USAA FSB IDI Resolution Planimmediately after the failure of the Bank (i.e., over a “Resolution Weekend”). FSB believes theWhole Bank P&A option would be optimal for the FDIC, as it would limit the adverse effects onthe Bank’s members (i.e., its depositors) and the public. This option would also prove to be theleast complex strategy from an operational perspective.In addition to providing the least disruption for FSB members, a Whole Bank P&A wouldmaximize the value of the combined CBLs, as an acquirer would gain access to an extremelyloyal membership base of customers affiliated through the U.S. military, in addition to receivingstrong credit quality and highly marketable retail banking assets. Pursuing a Whole Bank P&Awould also preserve key products that are jointly offered through the aligned activities of theCBLs to the members, while maximizing the value of the combined business lines. FSB believesthat this strategy would more than likely be the most cost-effective, timely, and least complexamong all the options considered.21

USAA Core Values USAA's core values of Service, Loyalty, Honesty, and Integrity are the foundation upon which the association's heritage is based, and upon which its future depends. Each and every USAA employee is expected to embody these core values. USAA Signature We Know What It Means To Serve has long been USAA's signature.