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FEDERAL




DEPOSIT

INSURANCE

CORPORATION

FDIG




In its unique role as deposit insurer of banks
and savings associations, and in cooperation
w ith the other state and federal regulatory
agencies, the Federal Deposit Insurance
Corporation (FDIC) promotes the safety
and soundness of the U.S. financial system
and the insured depository institutions by
identifying, monitoring and addressing risks
to the deposit insurance funds.
The FDIC promotes public understanding
and the development of sound public policy
by providing timely and accurate financial
and economic information and analyses. It
minimizes disruptive effects from the failure
of banks and savings associations. It assures
fairness in the sale of financial products and
the provision of financial services.
The FDIC's long and continuing tradition
of excellence in public service is supported
and sustained by a highly skilled and diverse
workforce that continuously monitors and
responds rapidly and successfully to changes
in the financial environment.

The Federal Deposit Insurance Corporation
(FDIC) is an independent agency created by
the Congress that maintains the stability
and public confidence in the nations financial
system by insuring deposits, examining
and supervising financial institutions, and
managing receiverships.

The FDIC is a leader in developing and
implementing sound public policies, identifying
and addressing new and existing risks in
the nation's financial system, and effectively
carrying out its insurance, supervisory, and
receivership management responsibilities.




The FDIC and its employees have a long and continuing tradition of distinguished public service.
Six core values guide FDIC employees as they strive to fu lfill the Corporation's mission and vision:
Integrity

Effectiveness

FDIC employees adhere to the highest ethical
standards in the performance of their duties
and responsibilities.

The FDIC responds quickly and successfully to
identified risks in insured financial institutions
and in the broader financial system.

Competence

Financial Stewardship

The FDIC maintains a highly skilled, dedicated
and diverse workforce.

The FDIC acts as a responsible fiduciary,
consistently operating in an efficient and
cost-effective manner on behalf of insured
financial institutions and other stakeholders.

Teamwork

FDIC employees w ork cooperatively w ith
one another and w ith employees in other
regulatory agencies to accomplish the
Corporation's mission.

Fairness

The FDIC treats all employees, insured
financial institutions, and other stakeholders
w ith im partiality and mutual respect.




FDIC
Federal Deposit Insurance Corporation
550 17th St. NW Washington, DC 20429

Office of the Chairman

M arch 2, 2006

Sirs,
In accordance with:
•

the provisions of section 17(a) of the Federal Deposit Insurance Act,

•

the Chief Financial Officers Act of 1990, Public Law 101-576,

•

the Government Performance and Results Act o f 1993,

•

the provisions o f Section 5 (as amended) o f the Inspector General Act o f 1978,
and

•

the Reports Consolidation A ct o f 2000,

the Federal Deposit Insurance Corporation is pleased to submit its 2005
Annual Report (also referred to as the Performance and Accountability
Report), which includes the audited financial statements o f the Bank Insurance
Fund, the Savings Association Insurance Fund, and the Federal Savings
and Loan Insurance Corporation Resolution Fund.
In accordance with the Reports Consolidation Act o f 2000, the FDIC completed
an assessment o f the reliability of the performance data contained in this report.
No material inadequacies were found and the data are considered to be complete
and reliable.
Based on internal m anagement evaluations, and in conjunction with the results
of independent financial statement audits, the FDIC can provide reasonable
assurance that the objectives o f Section 2 (internal controls) and Section 4
(financial management systems) o f the Federal M anagers’ Financial Integrity
Act o f 1982 have been achieved, and the FDIC has no material weaknesses.
The Government Accountability Office did, however, identify a number of
information technology issues that aggregate to a reportable condition. All
such issues will receive appropriate attention during 2006.

Martin J. Gruenberg
Acting Chairman

The President o f the U nited States
The President o f the U nited States Senate
The Speaker o f the United States House o f Representatives




Message from the Acting Chairman
Message from the Chief Financial Officer

I.

4
6

Management’ Discussion and Analysis
s

8

The Year in Review
Insurance
Supervision and Consumer Protection
Receivership Management
Effective Management of Strategic Resources

II. Financial Highlights
Deposit Insurance Fund Performance
Operating Expenses
Investment Spending

III. Performance Results Summary
Summary of 2005 Performance Results by Program
2005 Budget and Expenditures by Program (Excluding Investments)
Performance Results by Program and Strategic Goal
Multi-Year Performance Trend
Program Evaluation

IV. Financial Statements and Notes
Bank Insurance Fund (BIF)
Savings Association Insurance Fund (SAIF)
FSLIC Resolution Fund (FRF)
GAO's Audit Opinion
Management's Response
Overview of the Industry

V
.

Management Control
Enterprise Risk Management
Material Weaknesses
Management Report on Final Action

VI. Appendixes

8
8
12
19
20

24
24
25
25

28
28
30
31
37
41

42
42
60
80
94
99
100

102
102
103
103

106

A. Key Statistics

106

B. More About the FDIC

118

C. Office of Inspector General's Assessment of the
Management and Performance Challenges Facing the FDIC

126

Message from the Acting Chairman
Martin J. Gruenberg




I am pleased to present the Federal Deposit Insurance Corporation's (FDIC) Annual
2005 Performance and Accountability Report (Annual Report), a comprehensive
overview of the FDIC's programs and performance for the calendar year. The FDIC
has been and will continue to be exceedingly well served by the professionalism
and dedication of its staff. I am honored to have the opportunity to report the
important results and accomplishments of their activities in 2005.
I assumed my duties as Acting Chairman on November 15, 2005, upon the
resignation of Chairman Donald Powell, who, at President Bush's request, departed
the FDIC to take charge of coordinating the federal government's efforts towards
rebuilding of the Gulf Coast following the unprecedented natural disasters of
Hurricanes Katrina and Rita. For the FDIC, the year w ill be remembered for these
storms and their effect on Gulf Coast banks. Our top priority was ensuring stability
and public confidence in the region's banking system. We worked around the clock
with our fellow banking regulators, financial institutions and the public so that
consumers and businesses could quickly regain access to needed financial services.
We actively monitored the operational condition of financial institutions in the region
until our concerns were mitigated. And we joined other regulators in encouraging
banks to work with borrowers affected by the hurricanes. Once again, the federal
deposit insurance system served the public well by providing certainty to the citizens
of the Gulf Coast with respect to the safety of their funds in their time of crisis.
The region's banking industry will be dealing with the consequences of the storms
for some time to come. In 2006, we will continue to work closely with affected
banks and consumers to address those issues.
The FDIC also continued to respond to the long term changes taking place in the
banking industry, one that continues to consolidate and advance technologically.
Conditions in the industry have never been better, but the broader changes
underway have made our mission more challenging and important. We have
prepared ourselves well for the challenges of the future in many areas.
We continued working toward securing Congressional passage of deposit insurance
reform. This legislation, signed by President Bush on February 8, 2006, combines the
Bank Insurance Fund and Savings Association Insurance Fund and allows the FDIC
to better price deposit insurance for risk.
We devoted substantial resources to the interagency process for implementing
the Basel II Accord in the United States. The FDIC's efforts highlighted the need to
maintain existing U. S. Prompt Corrective Action standards under Basel II, and to find
ways to address concerns identified by the fourth quantitative impact study (QIS-4).
Our Center for Financial Research (CFR) co-sponsored tw o premier research
conferences, both attracting over 100 prominent researchers and banking
scholars from the United States and abroad. Also, 14 CFR working papers were
published on topics such as risk-measurement and capital allocation regulations.
Along with members of FFIEC-the Federal Reserve Board and the Office of
the Comptroller of the Currency-w e successfully implemented the Central Data
Repository (CDR), a web-based system to collect, validate and manage quarterly
Call Report data. The CDR employs a new flexible data standard-XBRL (extensible
Business Reporting Language)-enabling Call Report data to be shared more easily
and compared more readily with other financial data.




As part of our continuing effort to improve our response to a potential large-bank
failure, we sought comments on the best way to enhance the deposit insurance
determination process. Given the increasing concentration of banking assets in
a small number of the largest federally-insured institutions, we identified this
as a major priority. We are conducting a thorough review of our policies, systems
capabilities, interagency communication procedures and workforce readiness to
ensure that we are better prepared to properly manage the failure of a large bank
or thrift.
We implemented our new Relationship Manager Program nationwide for all FDICsupervised institutions. Designed to strengthen communication between bankers
and the FDIC, this program will enhance efficiency and increase flexibility in
conducting examination activities.
We established the new Anti-Money Laundering and Financial Crimes Branch
within our Division of Supervision and Consumer Protection to better focus attention
on increasing responsibilities in these areas. This Branch will address issues related
to the Bank Secrecy Act, compliance, money laundering, financial crimes, terrorist
financing and cyber-fraud.
We continued to be a leader in helping banks to combat identity theft. The publication
of our study, Putting an End to Account-Hijacking and Identity Theft, and a Study
Supplement led to the issuance of FFIEC guidance in October 2005 requiring
financial institutions to use stronger customer authentication techniques for Internet
banking by year-end 2006. We also sponsored four identity theft symposiums
around the country to educate the public and raise awareness about account
hijacking and identity theft.
We conducted a summer-long media campaign to raise awareness of the
importance of financial education in Hispanic communities across the nation
using the FDIC's free M oney Smart financial education program.
As the foregoing accomplishments illustrate, the FDIC continued to serve the
deposit insurance system and the public well. In no case was this truer than for
the citizens of the Gulf Coast who were able to rely on the guarantee of federal
deposit insurance despite the uncertainties they were facing on other fronts.
It is a testament to the strength and effectiveness of the system created over
70 years ago.
For me personally, it is an honor to serve as Acting Chairman until a permanent
successor is named.

Sincerely,

Martin J. Gruenberg

Message from the Chief Financial Officer
Steven O. App




I am pleased to report that overall, the deposit insurance funds remained financially
sound and exhibited healthy earnings throughout 2005. Additionally, estimated
losses from probable failures for both the Bank Insurance Fund (BIF) and the
Savings Association Insurance Fund (SAIF) remain at or near historically low levels
for both deposit insurance funds.
For the fourteenth consecutive year, the U.S. Government Accountability Office
(GAO) issued unqualified audit opinions on the three funds administered by the
FDIC (BIF, SAIF and the Federal Savings and Loan Insurance Corporation (FSLIC)
Resolution Fund). We are especially proud of this record and have dedicated
ourselves to ensuring that it continues in 2006 and beyond.
Financial highlights during 2005 include:
The BIF reported comprehensive income (net income plus current period unrealized
gains/losses on available-for-sale (AFS) securities) of $680 million in 2005 compared
to $1.004 billion in 2004. This reduction of $324 million was primarily due to an
increase in unrealized losses on AFS securities of $279 million, lower recoveries of
prior years' provisions for insurance losses of $143 million, an increase in operating
expenses of $25 million, and a decrease in assessment revenues of $43 million,
offset by an increase of $161 million in interest revenue on U.S. Treasury obligations.
As of December 31, 2005, the fund balance was $35.5 billion, up from $34.8 billion
at year-end 2004.
The SAIF reported comprehensive income of $409 million in 2005, compared
to $480 million in 2004. This reduction of $71 million was primarily due to an
increase in unrealized losses on AFS securities of $93 million and lower recoveries
of prior years' provisions for insurance losses of $50 million, offset by a $73 million
increase in interest revenue on U.S. Treasury obligations. As of December 31, 2005,
the fund balance was $13.1 billion, up from $12.7 billion at year-end 2004.
For both BIF and SAIF, higher interest revenue on U.S. Treasury obligations
stemmed from higher overnight and short-term Treasury yields, as well as
higher inflation compensation on Treasury Inflation-Protected Securities. However,
the higher interest revenue was more than offset by an increase in unrealized
losses that resulted from a rise in Treasury market yields on short- to intermediatematurity AFS securities during 2005.
During 2005, we continued our efforts to provide effective stewardship of the
resources of the funds managed by the FDIC. The 2006 Corporate Operating
Budget, approved by the FDIC Board of Directors on December 5, 2005, is
5 percent less than the 2005 Corporate Operating budget. Projected savings were
achieved primarily through significant staff reductions. Additionally, the completion
of a number of major capital investment projects will permanently reduce the
Corporation's cost base going forward. We are especially proud of our staff for
successfully managing, to near completion, the Virginia Square facility expansion.
The project is expected to be completed in early 2006 both on time and under
budget and w ill result in substantial savings over our current leased space
headquarters' facilities.




The FDIC successfully implemented the New Financial Environment (NFE),
modernizing our aging, highly customized and complex financial systems
environment. This major systems modernization is part of our corporate-wide
initiative to achieve greater operational efficiencies, as well as to reduce the
high costs of maintaining the expensive and outdated legacy systems that
were replaced or eliminated as a result of implementing NFE.
We successfully consolidated numerous existing information technology (IT)
contracts into fewer, longer-term strategic contracts. These ten-year agreements
encompass a broad range of IT services including infrastructure management,
application development and maintenance, organizational and management
support, data management and software process improvement. This IT contract
consolidation initiative is expected to reduce costs, improve services and provide
enhanced accountability.
With respect to the requirements of the Federal Managers' Financial Integrity
Act of 1982, the FDIC's management made an assessment and concluded that
the system of internal controls, taken as a whole, complies with internal control
standards prescribed by the GAO and provides reasonable assurance that the
related objectives are being met.
During 2006, we will continue to work toward achieving the Corporation's
strategic goals and objectives. These include identifying and addressing risks
to the insurance funds, improving the deposit insurance system, and providing
Congress, other regulatory agencies, insured depository institutions, and the
public with critical and timely information and analysis on the financial condition
of both the banking industry and the FDIC-managed funds.
Sincerely,

Steven O. App

/. Management’s Discussion and Analysis




The Year in R eview
In 2005, the FDIC continued to pursue
an ambitious agenda in meeting its
responsibilities. Responding to the
multiple hurricanes that occurred
this past year tested our readiness,
but it also underscored the critical
importance of our core m issionmaintaining stability of the nation's
financial system and public confidence
in insured depository institutions.
Highlights of the Corporation's 2005
accomplishments in each of its three
major business lines-lnsurance,
Supervision and Consumer Protection,
and Receivership Management-as
well as in its program support areas
are presented in this section.
Insurance
The FDIC insures bank and savings
association deposits. As insurer, the
FDIC must continually evaluate and
effectively manage how changes in
the economy, the financial markets
and the banking system affect the
adequacy and the viability of the
deposit insurance funds.
Deposit Insurance Reform
The FDIC again gave priority attention
to enactment of comprehensive
deposit insurance reform legislation
in 2005.

Both the House and the Senate
passed separate deposit insurance
reform bills in 2005. These bills
were included as part of S.1932,
budget reconciliation legislation
that contained many provisions
unrelated to reform.
The Senate took final action on
S. 1932 on December 21, 2005,
passing the measure by voice vote.
On February 1, 2006, the House
cleared the bill for action by the
President by a vote of 216 to 214.
The President signed the bill into
law on February 8, 2006. The
Federal Deposit Insurance Reform
Act of 2005, contained in S. 1932,
includes the major provisions of
the FDIC's deposit insurance
reform proposals. H.R. 4636,
the Deposit Insurance Reform
Conforming Amendments Act
of 2005, contains the necessary
technical and conforming changes
to implement deposit insurance
reform. H.R. 4636 was passed
by the House and Senate in
December 2005, separately
from S. 1932. Specifically, together
S. 1932 and H.R. 4636 would:
•

Merge the Bank Insurance Fund
(BIF) and the Savings Association
Insurance Fund (SAIF) into a new
fund, the Deposit Insurance Fund
(DIF), effective no later than
July 1, 2006.

•

Establish a range for the designated
reserve ratio of 1.15 percent to
1.50 percent.

Allow the FDIC to manage the
pace at which the reserve ratio
varies within this range. (However,
if the reserve ratio falls below
1.15 percen t-or is expected to
within 6 m onths-the FDIC must
adopt a restoration plan that
provides that the DIF will return
to 1.15 percent within 5 years.)
Eliminate the connection between
designated reserve ratio (DRR)
and premium rates and grant
the FDIC's Board of Directors
the discretion to price deposit
insurance according to risk for
all insured institutions at all times.
Mandate rebates to the industry
of half of any amount above the
1.35 percent level, unless the
FDIC's Board of Directors,
considering statutory factors,
suspends the rebates.
Mandate rebates to the industry
of all amounts in the fund above
the 1.50 percent level.
Grant a one-time initial assessment
credit (of approximately $4.7 billion)
to recognize institutions' past
contributions to the fund.
Increase the coverage limit for
retirement accounts to $250,000.
Index this limit and the general
deposit insurance coverage limit
to inflation and allow the FDIC
(in conjunction with the National
Credit Union Administration) to
increase the limits every five
years beginning January 1, 2011,
if warranted.




Implementation of deposit insurance
reform will be one of the FDIC's
main priorities for 2006.
International Capital Standards
The FDIC, as insurer, has a substantial
interest in ensuring that bank capital
regulation effectively serves its
function of safeguarding the federal
bank safety net against excessive
loss. During 2005, the FDIC partici­
pated on the Basel Committee on
Banking Supervision (BCBS) and
many of its subgroups. The FDIC also
participated in various U.S. regulatory
efforts aimed at interpreting inter­
national standards and establishing
sound policy and procedures for
implementing these standards.
The BCBS, jointly w ith the Inter­
national Organization of Securities
Commissions (IOSCO), published
The Application o f Basel II to Trading
Activities and the Treatment
o f Double Default Effects in
July 2005. The document sets
forth new capital treatments for
over-the-counter derivatives and
short term, repo-style transactions,
hedged exposures, trading book
exposures, and failed securities
trades.

Ensuring the adequacy of insured
institutions' capital under Basel II
remains a key objective for the
FDIC. In 2005, the FDIC devoted
substantial resources to domestic
and international efforts to ensure
these new rules are designed
appropriately. These efforts included
the continued development of a
notice of proposed rulemaking
(NPR) and examination guidance,
which is intended to provide the
industry with regulatory perspectives
for implementation. Additionally,
the fourth quantitative impact study
(QIS-4), which was begun in 2004
to assess the potential impact of
the Revised Framework on financial
institution and industry-wide capital
levels, was completed. The QIS-4
findings suggested that, without
modification, the Basel II framework
could result in an unacceptable
decline in minimum risk-based
capital requirements. As a result, on
September 30, 2005, the domestic
bank and thrift regulatory authorities
issued a joint press release stating
that while they intend to move
forward w ith the Basel II NPR,
prudential safeguards must be
incorporated into the Basel II
framework to address the concerns
created by the QIS-4 findings. FDICsupervised institutions that plan to
operate under the new Basel Capital
Accord are making satisfactory
progress towards meeting the
expected requirements.

Domestic Capital Standards
The FDIC led the development of
efforts to revise the existing riskbased capital standards for those
banks that will not be subject to
Basel II. These efforts are intended
to: (a) modernize the risk-based
capital rules for non-Basel II banks
to ensure that the framework
remains a relevant and reliable
measure of the risks present in the
banking system, and (b) minimize
potential competitive inequities that
may arise between banks that adopt
Basel II and those banks that remain
under the existing rules. An Advance
Notice of Proposed Rulemaking
reflecting these efforts was published
in October 2005, with a comment
period extended to January 2006.
These revisions are currently antici­
pated to be finalized by domestic
bank and thrift regulatory authorities
in 2007 for implementation in
January 2008.
Regulatory Burden Reduction
Initiatives
The Economic Growth and Regulatory
Paperwork Reduction Act of 1996
(EGRPRA) requires the banking
agencies to solicit public comments
to identify outdated or burdensome
regulations, review the comments,
and publish a summary in the
Federal Register. The agencies
must also eliminate unnecessary
regulations to the extent appropriate.
Finally, the Federal Financial
Institutions Examination Council
must report to Congress the
significant issues and the merit of
the issues raised during the public
comment period and provide an
analysis of whether the agencies
are able to address the issues by
regulation or whether the burdens
must be addressed by legislative
action.




During 2005, the agencies published
tw o notices in the Federal Register
seeking comments on 56 regulations
covering Money Laundering; Safety
and Soundness; Securities; Banking
Operations; Directors, Officers and
Employees; and Rules of Procedure;
a total of 155 letters were received.
Since June 2003, the agencies have
issued five separate Requests for
Burden Reduction Recommendations
on a total of 127 regulations. More
than 900 comments were received
in response to those requests for
comment. They are being analyzed
by staff to determine the feasibility
of implementing the recommenda­
tions. All of the comment letters
received to date are available on
the EGRPRA Web site at
www.EGRPRA.aov.
The agencies, as part of the EGRPRA
initiative to gather recommendations
on regulatory burden reduction,
held three outreach meetings with
bankers in Phoenix, New Orleans
and Boston; tw o meetings with
community groups in Boston and
Washington, DC; and three joint
banker-community group meetings
in Los Angeles, Kansas City and
Washington, DC. Significant issues
have been raised and the agencies
are in the process of weighing the
issues.
The major success of the EGRPRA
project to date is that the agencies,
the industry and consumer groups
were able to have an open dialogue
about regulatory burden. Over 180
legislative proposals for regulatory
relief were presented to Congress
through testimony by the agencies,
the industry and consumer advocates.

Moreover, effective September 1, 2005,
the FDIC, the Office of the Comptroller
of the Currency (OCC), and the
Federal Reserve Board (FRB) made
changes to their uniform joint
Community Reinvestment Act (CRA)
regulations that will provide regulatory
relief for smaller community banks
a n d -a t the same tim e-prese rve
the importance of comm unity
development in the CRA evaluations
of these banks.
Additionally, the FDIC conducted
a comprehensive review of its
International Banking Rules. The
revised rules, which became effective
July 1, 2005, amend Parts 303,
325 and 327 relating to international
banking and revise Part 347, Subparts
A and B. As a result:
•

The rules were reorganized and
clarified to reduce regulatory
burden.

•

The availability of general consent
for foreign branching and invest­
ments by insured state non­
member banks abroad was
expanded.

•

The "fixed" percentage asset
pledge requirement for existing
insured U.S. branches of foreign
banks ("grandfathered branches")
was replaced by a risk-focused
asset pledge requirement.

•

The relocation rule for "grand­
fathered branches" was amended
to address intrastate and interstate
relocations.

Center for Financial Research
The FDIC's Center for Financial
Research (CFR) was established
in 2003 to promote and support
innovative research on topics relating
to deposit insurance, the financial
sector, prudential supervision, risk
measurement and management, and
regulatory policy that are important
to the FDIC's roles as deposit insurer
and bank supervisor. The CFR is
a partnership between the FDIC
and the academic community with
prominent scholars actively engaged
in administering its research program.
The CFR carries out its mission
through an agenda of research,
analysis, forums and conferences
that encourage and facilitate an
ongoing dialogue that incorporates
industry, academic and public-sector
perspectives.
The CFR supports high-quality original
research by sponsoring relevant
research program lines and soliciting
rigorous analysis of the issues
within six program areas (Deposit
Insurance, Credit and Market
Risk, Bank Performance and the
Economy, Corporate Finance and
Risk Management, Consumer
Finance and Credit Issues and Policy
and Regulation). These programs
benefit from the leadership of
program coordinators who are
drawn largely from the outside
academic community. Input is
also obtained from six prominent
economists who serve as Senior
Fellows. The CFR sponsors a Visiting
Research Fellows Program to provide




support for in-residence scholars for
defined time periods. The CFR also
organizes visits and encourages
interaction and collaboration between
outside scholars and FDIC staff on
subjects of mutual interest.
The CFR co-sponsored tw o premier
research conferences during 2005.
The fifteenth annual Derivatives
Securities and Risk Management
Conference, co-sponsored by the
FDIC, Cornell University's Johnson
Graduate School of Management,
and the University of Houston's
Bauer College of Business, was
held in April 2005. The CFR and
The Journal for Financial Services
Research (JFSR) sponsored their
fifth annual research conference,
Financial Sector Integrity, and
Emerging Risks in Banking, in
September 2005. Both conferences
included high-quality presentations and
attracted more than 100 researchers,
including both domestic and inter­
national participants. Fourteen
CFR Working Papers have been
completed on topics dealing with
risk measurement, capital allocation,
or regulations related to these topics.
The CFR Senior Fellows met in June
to discuss ongoing CFR research on
Basel II and payday lending, and to
discuss CFR activities for the coming
year.
FFIEC Central Data Repository
The FFIEC Central Data Repository
(CDR) was successfully implemented
on October 1, 2005. The CDR is
designed to consolidate the collection,
validation and publication of quarterly
bank financial reports. This multi-year

development effort was undertaken
by the FDIC, the FRB and the OCC,
and in cooperation with the Call
Report software vendors and the
banking industry. The CDR employs
new technology that uses the XBRL
(extensible Business Reporting
Language) data standard to stream­
line the collection, validation and
publication of Call Report data.
Over 8,000 financial institutions
were enrolled in the CDR and used
it to file their financial reports for
the third quarter of 2005. The initial
quality of the data was much higher
than in previous quarters, speeding
the availability of the data to our
analysts and ultimately the public,
thus fulfilling one of the overarching
goals of the CDR project. Higher data
integrity, accuracy and consistency
will help to increase the efficiency
with which the data can be collected,
analyzed and released to the public.
In September 2005, the OCC, FRB
and the FDIC requested comments
on proposed revisions to the Call
Report, representing the first set of
revisions to the report content since
2002. The proposed changes would
affect banks of all sizes and would
take effect as of the March 31, 2006,
report date. The proposed revisions
would enhance the agencies' onand off-site supervision activities,
which should alleviate overall
regulatory burden on banks.

DRR Director Mitchell Glassman,
second from left, chairs a meeting
of the Hurricane Task Force at
Washington Headquarters.

Risk Analysis Center
The Risk Analysis Center (RAC),
established in 2003 to provide
information about current and
emerging risk issues, is guided
by its Management and Operating
Com m ittees-represented by the
Division of Supervision and Consumer
Protection, the Division of Insurance
and Research and the Division of
Resolutions and Receiverships.
These Committees oversee and
coordinate risk-monitoring activities
that include presentations and
reports regarding risk issues, and
special projects. The activities in
the RAC are guided by the National
Risk Committee, which is chaired by
the Chief Operating Officer. Major
projects in-process or completed for
2005 include the following: Evaluation
of Operational and Reputation Risk,
Mortgage Credit Trends Analysis,
Enhancing the Effectiveness of the
Regional Risk Committee Process,
Quantification of Bank Vulnerability
to Rising Interest Rates, Hedge
Funds, Market Data Repository,
Offsite Monitoring, and Collateralized
Debt Obligations.
Supervision and
Consumer Protection
Supervision and consumer protection
are cornerstones of the FDIC's
efforts to ensure the stability of
and public confidence in the nation's
financial system. The FDIC's
supervision program promotes
the safety and soundness of FDICsupervised insured depository
institutions, protects consumers'
rights, and promotes community
investment initiatives by FDICsupervised insured depository
institutions.




At year-end 2005, the Corporation
was the primary federal regulator for
5,265 FDIC-insured, state-chartered
institutions that are not members
of the Federal Reserve System
(generally referred to as "state
non-member" institutions). Through
safety and soundness, consumer
compliance and Community
Reinvestment Act (CRA) examinations
of these FDIC-supervised institutions,
the FDIC assesses their operating
condition, management practices
and policies, and their compliance
with applicable laws and regulations.
The FDIC also educates bankers and
consumers on matters of interest
and addresses consumers' questions
and concerns.
Hurricane Recovery Assistance
The federal banking regulatory agen­
cies (agencies) worked cooperatively
with state banking regulatory agencies
and other organizations to determine
the operating status of financial
institutions located in the areas
affected by the Gulf Coast hurricanes
during 2005. The agencies quickly
released regulatory relief guidance
to help facilitate rebuilding in the
areas affected by these hurricanes
and encouraged bankers to work
with consumers and business owners
experiencing difficulties due to the
storms. Exercising their authority
under Section 2 of the Depository
Institutions Disaster Relief Act
of 1992 (DIDRA), the agencies
made exceptions to statutory and
regulatory requirements relating
to appraisals for transactions involving
real property in major disaster areas
when the exceptions would facilitate

recovery from the disaster and
would be consistent with principles
of safety and soundness.
In the wake of the 2005 hurricane
season, the agencies confirmed that
the banking industry is resilient in
the face of tremendous devastation.
There were 280 financial institutions,
with approximately $270 billion in
total assets, operating in the area
impacted by Hurricane Katrina.
Only a handful of smaller institutions
remain as supervisory concerns. The
majority of institutions operating in
the path of Hurricane Katrina were
well-run, had strong management
teams, implemented sound back-up
contingency plans, and were well
capitalized.
The Federal Financial Institutions
Examination Council (FFIEC)
announced the formation of an
interagency working group to enhance
the agencies' coordination and
communication on, and supervisory
responses to, issues facing
the industry in the aftermath of
Hurricane Katrina. This working
group established a user-friendly,
web-based, frequently asked
questions forum on the FFIEC's
Web site at w w w .ffiec.oov. The
task force will also publish examiner
guidance to clarify expectations with
respect to the assessment of credit
risk and other supervisory issues.

Members of the Dallas Region
Hurricane Katrina Task Force (l-r):
Randy Taylor, Nann Wright,
Stan Ivie, Cheryl Couch and
Cynthia Scott.

In addition to interagency efforts,
the FDIC established a 24-hour hotline
and a Web page devoted to assisting
hurricane victims to obtain informa­
tion about their financial institution's
operating status, as well as tips
on other financial matters, such as
replacing identification documents,
checks and credit cards.
Safety and Soundness
Examinations
As of December 31, 2005, the
Corporation had conducted 2,399,
or 100 percent of the statutorily
required safety and soundness
examinations. The number and total
assets of FDIC-supervised institutions
identified as "problem" institutions
(defined as having a composite
CAMELS1 rating of "4 " or "5 ")
declined during 2005. As of
December 31, 2005, 29 institutions
with total assets of $2.9 billion
were identified as problem institu­
tions, compared to 44 institutions
with total assets of $5.4 billion on
December 31, 2004. These changes
represent a decrease of 34.1 percent
and 46.3 percent, respectively, in
the number and assets of problem
institutions. During 2005, 36 institu­
tions were removed from problem
institution status due to composite

1 The CAMELS composite rating represents the adequacy of
Capital, the quality of Assets, the capability of Management,
the quality and level of Earnings, the adequacy of
Liquidity, and the Sensitivity to market risk, and ranges
from "1" (strongest) to "5" (weakest).




rating upgrades, mergers, consolida­
tions or sales, and 19 were newly
identified as problem institutions.
Additionally, tw o problem institutions
converted to State non-member
charters and are now under FDIC
supervision. The FDIC is required to
conduct follow-up examinations of
all designated problem institutions
within 12 months of the last exami­
nation. As of December 31, 2005,
100 percent of all follow-up exami­
nations for problem institutions had
been performed on schedule.
Compliance and Community
Reinvestment Act (CRA)
Examinations
The FDIC conducted 815 comprehen­
sive compliance-CRA examinations,
1,198 compliance-only examinations,2
and seven CRA-only examinations
in 2005, compared to 1,459 joint
compliance-CRA examinations,
673 compliance-only examinations,
and four CRA-only examinations in
2004. The FDIC conducted 100 per­
cent of all joint and comprehensive
examinations within established time
frames. As of December 31, 2005,
three institutions were assigned a
"4 " rating for compliance, and no
institutions were rated "5 ." The first
" 4 " - rated institution is currently under
an outstanding Cease and Desist
Order and an on-site examination was
underway at year-end. Management
of the second institution executed

2 Compliance-only examinations are conducted for most
institutions at or near the mid-point between joint
compliance-CRA examinations under the Community
Reinvestment Act of 1977, as amended by the GrammLeach-Bliley Act of 1999. CRA examinations of financial
institutions w ith aggregate assets of $250 million or less
are subject to a CRA examination no more than once every
five years if they receive a CRA rating of "Outstanding"
and no more than once every four years if they receive
a CRA rating of "Satisfactory."

a Memorandum of Understanding
on October 5, 2005. The third
institution was examined in 2005
and the Regional Office is currently
finalizing a Cease and Desist Order
to address the FDIC's examination
findings.
Relationship Manager Program
On October 1, 2005, the Corporation
implemented the Relationship
Manager Program for all FDICsupervised institutions. The program,
which was piloted in 390 institutions
during 2004, is designed to strengthen
communication between bankers
and the FDIC, as well as improve
the coordination, continuity and
effectiveness of regulatory
supervision. Each FDIC-supervised
institution was assigned a relationship
manager, who serves as a local
point of contact over an extended
period and will often participate
in or lead examinations for his or
her assigned institution. The program
will allow for flexibility in conducting
examination activities at various
times during the 12- or 18-month
examination cycle based on risk
or staffing considerations.

FDIC Examinations 2 0 0 3 -2 0 0 5

2005

2004

2,198

2,276
236
0
0
3
2,515

2,182
231
0
5
3
2,421

1,459
673
4
2,136

1,610
307
2
1,919

534
2,570
3,104
7,755

501
2,304
2,805
7,145

Safety and Soundness:

State Nonmember Banks
Savings Banks
Savings Associations
National Banks
State Member Banks
Subtotal - Safety and Soundness Examinations

199
1
0
1
2,399

CRA/Compliance Examinations:

Compliance-Community Reinvestment Act
Compliance-only
CRA-only
{Subtotal CRA/Compliance Examinations

815
1,198
7
2,020

Specialty Examinations:

Trust Departments
Data Processing Facilities
(Subtotal-Specialty Examinations

450
2,708
3,158
7,577

IT Examinations
The FDIC has updated its risk-focused
information technology (IT) examina­
tion procedures for FDIC-supervised
financial institutions under its
new Information Technology Risk
Management Program (IT-RMP).
IT-RMP procedures were issued
to examiners on August 15, 2005. The
new procedures focus on the financial
institution's information security
program and risk-management
practices for securing information
assets. The program integrates with
the Relationship Manager Program
by embedding the IT examination
within the Risk Management Report
of Examination for all FDIC-supervised
financial institutions, regardless of
size, technical complexity or prior
examination rating. IT-RMP eliminates
separate reporting of IT component
ratings and reports only a single
technology rating.




Homeland Security
The financial sector is a critical part of
the infrastructure in the United States,
and the FDIC has taken a leadership
role in assisting the financial sector
to prepare for emergencies. As a
member of the Financial and Banking
Information Infrastructure Committee
(FBIIC), the FDIC sponsored a
series of outreach meetings titled
Protecting the Financial Sector:
A Public and Private Partnership.
From 2003 to early 2005, the
homeland security meetings were
held in 29 cities across the United
States with the last meeting held in
New York City, NY. These meetings
provided members of the financial
sector with the opportunity to
communicate with senior government
officials, law enforcement, emergency
management personnel and private
sector leaders about emergency
preparedness. A second round of
homeland security meetings started
in late 2005 with four meetings held
during this timeframe. Homeland
Security meetings are planned for
21 cities in 2006.

The FDIC served as FBIIC's liaison
with the Department of Homeland
Security (DHS) during 2005 and
assisted DHS with items relating
to the financial sector.
Bank Secrecy Act
The FDIC is committed to assisting
in efforts designed to thw art the
inappropriate use of the banking
system through activities conducted
by terrorists and other criminals. In
2005, the Division of Supervision and
Consumer Protection established a
new Anti-Money Laundering (AML)
and Financial Crimes Branch to focus
important resources and attention
on our increasing responsibilities in
these areas. The new branch brings
together specialists to address
issues related to Bank Secrecy Act
(BSA) compliance, money laundering,
financial crimes, terrorist financing,
and cyber-fraud.
The FDIC continued in 2005 to play
a critical role in the fight against
money laundering and terrorist
financing. Our efforts included:
•

Contributing to the development
and implementation of rules and
interpretive guidance related to
BSA and the USA PATRIOT Act.

•

Adopting through the FFIEC,
comprehensive interagency
examination procedures. The
new procedures emphasize
a banking organization's
responsibility to establish and
implement risk-based policies
and procedures to comply with
the BSA and safeguard its
operations from money laundering
and terrorist financing.

At the BSA/AML teleconference
in the FDIC RAC(l-r):
W illiam Spaniel, FFIEC;
Bridget Neil, Federal Reserve;
Lisa Arquette, FDIC-DSC;
John Wagner, OCC; and
Timothy Leary, OTS

•

•

Dedicating more staff to BSA/AML
oversight. The number of trained
BSA/AML subject-matter experts
has more than doubled to 347
since 2004. These specialists
perform BSA/AML examinations
at institutions that have a higherrisk profile due to geographic
location, customer base, BSA/AML
compliance record, or types of
products or services offered.
Providing various form s of
examiner and industry training
including one outreach session
per region, over 70 events hosted
by Washington and Regional
offices and representation in
212 BSA/AML events sponsored
by states and other entities. In
total, the banker calls and outreach
events reached more than 23,000
bankers and examiners.

Minority-Depository Institutions
The FDIC has long recognized the
importance of minority depository
institutions and their importance
in promoting the economic viability
of minority and under-served com­
munities. As a reflection of the FDIC's
commitment to minority depository
institutions, on April 9, 2002, the
FDIC issued a Policy Statement
Regarding Minority Depository
Institutions. The policy, which
can be found at www.fdic.aov/
reaulations/resources/index.html.
implements an outreach program
designed to preserve and encourage
minority ownership of financial
institutions.




Since the adoption of the policy
by the FDIC Board of Directors,
the program's National Coordinator
has maintained contact with various
minority depository institution trade
associations, and has met periodically
w ith the other Federal banking
regulators to discuss the initiatives
underway at the FDIC, and to identify
opportunities where the agencies
might work together to assist minority
institutions. All of the FDIC's six DSC
Regions have held annual Minority
Depository Institution Outreach
Programs, made annual contact
with each FDIC-supervised minority
depository institution, and offered to
make return visits to these institutions
following the examination process.
During 2004, the FDIC created the
Minority Bankers' Roundtable series,
a forum designed primarily to explore
partnerships between the minority
depository institutions community
and the FDIC. During 2005, there
were six sessions held in: Nashville,
Tennessee; New York, New York;
Houston, Texas; Santa Monica,
California; Atlanta, Georgia; and
San Juan, Puerto Rico. The Minority
Banker Roundtable and annual
regional outreach events will
continue in 2006.
In 2005, the FDIC also provided
technical assistance, training and
educational programs and held
interagency forums to address the
unique challenges faced by minority
depository institutions. Training and
educational programs for minority
depository institutions included the
FDIC's Director's College Program and
the FDIC's M oney Smart Program.
The FDIC co-hosted Regional Forums

w ith the America's Community
Bankers Association and the
National Bankers Association in
2005. FDIC also participated in
and/or co-sponsored conferences
with America’s Community Bankers,
National Bankers Association,
National Association of Chinese
American Bankers, Western
Independent Bankers, and
Puerto Rico Bankers Association.
FDIC also supported the preservation
of minority depository institutions in
its response to Hurricane Katrina.
The FDIC Task Force on Minority
Community Banking and Non-Branch
Banking met with representatives
from the Utah industrial loan
company industry to facilitate their
assistance to minority depository
institutions in the Gulf Coast region
affected by Hurricane Katrina. The
result has been that as of year-end
2005, the Utah industrial loans
companies have pledged more than
$18 million in deposits and over
$120,000 in direct grants to this
effort. Efforts similar to these made
by this FDIC task force will continue
in 2006.
FDIC w ill continue its minority
depository institution programs
in 2006.

Large-Bank Program
In recognition of the increasing
concentration of risk exposure in
large insured institutions, as well
as new challenges posed by the
implementation of the Basel II
Capital Accord, the FDIC enhanced
its large-bank supervision and risk
assessment efforts in 2005 by
creating tw o branches-the Large
Bank Supervision Branch and the
International and Large Bank Policy
Branch.
The Large Bank Supervision Branch
is responsible for supporting super­
visory activities in large banks and
establishing minimum standards and
supervisory strategies necessary to
ensure a consistent approach to
large-bank supervision on a national
basis. In 2005, Branch staff was
actively involved in domestic and
international discussions intended
to ensure effective implementation
of the Basel II Capital Accord, which
included participation in numerous
"supervisory working group" meetings
with foreign regulatory authorities to
address Basel II home-host issues.
The International and Large Bank
Policy Branch is responsible for
supporting supervisory activities
in the areas of risk model assess­
ment, economic capital processes,
examination work related to market
risk under Part 325 Appendix C
of the FDIC rules and regulations and
other processes that are dependent
on quantitative methods. The purpose
of Part 325 Appendix C is to ensure
that banks with significant exposure
to market risk maintain adequate




capital to support that exposure. In
addition, the International and Large
Bank Policy Branch is responsible
for policy development regarding
large-bank supervision and
international matters.
International Stability
The FDIC, as a member of the
Consultative Group (CG) with respect
to the Middle East-North Africa
(MENA) Partnership for Financial
Excellence (PFE) initiative, continues
to work with the other federal bank­
ing agencies, the State Department
and the Department of Treasury,
to develop technical assistance
programs to meet needs in the
MENA region. In 2005, the FDIC
delivered tw o courses under the
MENA training initiative in 2005:
Principles of Bank Resolutions and
Receiverships hosted by the Arab
Academy for Training and Financial
Sciences in Amman, Jordan; and
Examination Management hosted
by the Central Bank of Tunisia in
Tunis. Preparations are underway
to establish training venues and
course curriculum for this initiative
in 2006. The objective of this
initiative is to help foster economic
growth in the region through the
implementation of sound supervisory
systems.
The FDIC chairs the Association of
Supervisors of Banks of the Americas,
(ASBA) Working Group on Deposit
Insurance and Bank Resolutions.
The Working Group, an outgrowth of
action plans for ASBA's 2004-2008
strategic plan, is charged with promot­
ing best practices and identifying
opportunities for improvement
in deposit insurance and bank
resolutions. Similarly, in 2005,

the FDIC also actively participated
in ASBA's Working Group on Credit
and Operational Risk, which was
formed to identify best practices
and opportunities for improvement
in credit risk and operational risk
management policies and procedures
among ASBA's membership.
The FDIC fulfilled 20 technical
assistance missions in 2005. The
missions provided technical support
in supervision, deposit insurance,
resolutions/receiverships, and legal
underpinnings of supervision and
insurance. Beneficiaries of these
missions included Macedonia,
Russia, Tanzania, Thailand, Ukraine,
several Latin American countries,
and several countries involved in the
Partnership for Financial Excellence
Program in the Middle East and
North Africa. The FDIC also held
60 meetings with representatives
from foreign countries, typically
representing a country's central bank,
bank supervisory authority or deposit
insurance agency. Frequent visitors
included: Albania (2), Canada (2),
China (11), France (2), Japan (6),
Korea (8), Malaysia (2), Russia (2),
and Taiwan (2).
Identity Theft and Consumer
Privacy
In 2005, the FDIC continued to take
a leading role in helping banks
combat identity theft. The FDIC
solicited public comment on its study,
Putting an End to Account-Hijacking
and Identity Theft, published in
December 2004; and in June 2005,
published a study supplement.
The study and the supplement took
an in-depth look at identity theft,
focusing on account hijacking
(the unauthorized use of deposit
accounts).

Chicago Region team makes sure
bankers get the answers they need (l-r):
Art Khan, Sharon Vejvoda, Dan Peters,
Angelina Pollard, Ronald Regal,
Teresa Sabanty, and Ray Jackson

One of the study's conclusions was
that increased consumer education
and information sharing could reduce
the incidence of identity theft. As a
result of these recommendations,
the FDIC sponsored four symposia
in 2005 in Washington, DC, Atlanta,
Los Angeles and Chicago that brought
together experts representing federal
and state government, the banking
industry, consumer groups, and
law enforcement who discussed
current efforts to combat scams
such as phishing, which can lead to
account hijacking. The symposium
speakers also addressed efforts
to educate consumers on avoiding
other scams that can lead to identity
theft and on the steps to take in the
unfortunate event that identity theft
should happen to them.
The FDIC is one of several federal
agencies charged with implementing
the provisions of the Fair and Accurate
Credit Transactions Act of 2003
(FACT Act), which substantially
amended the Fair Credit Reporting
Act, particularly in the areas of
consumer access to and quality
of credit information, privacy, and
identity theft. The FACT Act:
•

preserves uniform national
standards for the content of
consumer report information
and creditor access to such
information,

•

improves consumer access to
credit information,

•

improves the quality of reported
credit information,

•

protects privacy,

•

combats identity theft, and

•

promotes financial literacy.




Consistent w ith the privacy
requirements of the FACT Act,
the FDIC worked with other federal
agencies to finalize rules in 2005
that permit creditors to obtain, use
and share medical information only
to the degree necessary to facilitate
legitimate operational needs. The
FDIC is training its examiners on the
concepts underlying the entire FACT
Act, and is developing examination
procedures to evaluate industry
compliance.
Consistent with the identity theft
provision of the FACT Act, the FDIC
worked with other federal agencies
in 2005 to propose rules that would
require banks to implement a written
identity th e ft protection program
which includes procedures to evaluate
red flags that might indicate identity
theft. The FDIC, w ith the other
agencies, also finalized rules requiring
institutions to properly dispose of
consumer information derived from
credit reports in order to prevent
identity th eft and other fraud.
The rules on disposal of consumer
information became effective on
July 1, 2005.
Consumer Complaints
and Inquiries
The FDIC’s centralized Consumer
Response Center (CRC) is responsible
for investigating all types of consumer
complaints about FDIC-supervised
institutions and for answering inquiries
about consumer protection laws and
banking practices. During 2005, the
FDIC received 8,851 complaints, of
which 3,307 were against state non­
member institutions. Approximately
36 percent of the state non-member
bank consumer complaints concerned
credit card accounts, with the most

frequent complaints involving billing
disputes and account errors, loan
denials, terms and conditions,
collection practices, reporting of
erroneous information, credit card
fees and service charges, interest
rates, and disclosures. The FDIC
responded to over 97 percent of
written complaints on a timely
basis.
The FDIC also responded to 4,042
written and 9,395 telephone inquiries
from consumers and members
of the banking community about
consumer protection issues. In
addition, the FDIC responded to
over 64,000 written and telephone
inquiries from bankers and consumers
about the FDIC's deposit insurance
program and insurance coverage
issues.
Deposit Insurance Education
An important part of the FDIC's
role in insuring deposits and
protecting the rights of depositors
is its responsibility to ensure that
bankers and consumers have access
to accurate information about FDIC's
deposit insurance rules. To that end,
the FDIC has an extensive deposit
insurance education program
consisting of seminars for bankers,
electronic tools for estimating
deposit insurance coverage, and
written and electronic information
targeting both bankers and
consumers.

During 2005, the FDIC completed
development of a major update of its
popular Electronic Deposit Insurance
Estimator (EDIE) for consumers, an
Internet application located on FDIC’s
Web site that estimates insurance
coverage for users' deposit accounts
at insured institutions. The new
Consumer EDIE offers tw o different
approaches for estimating coverage,
one for novice users and one for
frequent users. The new Consumer
EDIE application is available for
public use starting January 2006.

•

During 2005, the FDIC conducted
a nationwide series of telephone/
Internet seminars for bankers and
a nationwide survey of insured
institutions to gather information
about current awareness of, and
opinions about, the FDIC's existing
educational resources on the deposit
insurance rules. The FDIC also initiated
an effort to encourage more bank
trade organizations to sponsor FDIC
deposit insurance seminars for their
members.

The FDIC conducted 27 seminars
for financial institution employees
and consumer organizations on
the rules for deposit insurance
coverage. These seminars, which
were conducted in a variety of
formats, including Internet, tele­
conference and classroom, provided
a comprehensive review of how
FDIC insurance works, including
the FDIC's rules for coverage of
different types of deposit accounts.

In 2005, the FDIC released several
new job aids for bankers, including:
•

A new 100-minute video for
bankers that provides an in-depth
review of FDIC deposit insurance
coverage, available on CD-ROM
and for viewing on the FDIC's
Web site.

•

An Inventory o f Deposit Insurance
Guidance (IDIG), which is an
electronic support system on
CD-ROM that includes a search­
able database of deposit insurance
information and has links to
all FDIC deposit insurance
publications, application tools
and services.




A major update of The Financial
Institution Employee's Guide to
Deposit Insurance, the FDIC's
most authoritative resource on
deposit insurance coverage for
bankers.

The FDIC also released its tw o
most popular brochures for bank
customers— Insuring Your Deposits
(a basic primer on deposit insurance
coverage) and Your Insured Deposits
(a comprehensive guide to deposit
insurance coverage) in Chinese
and Korean.

Financial Education and
Community Development
The FDIC's financial education
activities continue to serve as a
vital part of the Corporation's efforts
to help maintain the stability of the
nation's financial system, support
community development and
strengthen the economy. Since
launching its award-winning Money
Smart financial education program
in 2001, the FDIC has helped
thousands of consumers get started
on the road to greater financial
independence and gain access to
mainstream products and services.
The FDIC continues to distribute
and promote the Money Smart
curriculum, which is available in
five languages-English, Spanish,
Chinese, Korean and Vietnamese.

The FDIC exceeded tw o of the three
program goals for M oney Smart.
With over 252,000 copies of the
curriculum having been distributed,
the FDIC has exceeded by more than
tw o tim es the original distribution
goal of 100,000 copies. This year,
the FDIC also exceeded its goal to
recruit 1,000 partners for Money
Smart Alliance. Over 1,200 organiza­
tions throughout the country have
joined with the FDIC to help deliver
and promote financial education.
The FDIC has also made significant
strides towards achieving the
third g o a l-to provide one million
consumers with financial educationmore than 589,000 consumers have
now been reached. Of the consumers
that have taken Money Smart classes,
the FDIC is aware of over 82,100
who have subsequently opened bank
accounts. Some class participants
have become first-time home-buyers
and others have engaged in other
asset-building activities.
To raise awareness of the FDIC's
M oney Smart program among
Hispanic adults and encourage them
to ask about Money Smart classes
and products, a summer-long Spanish
language advertising campaign
included print and radio ads that ran
in 14 key markets. A total of 1,080
people attended M oney Smart
classes as a result of the advertising
campaign. The FDIC introduced a
Spanish-language Web page at
www.fdic.aov/auicklinks/sDanish.html
that contains many consumer-related
materials, including Money Smart. In
recognition of the FDIC's leadership
in financial education and outreach
to the Hispanic community, President
Bush asked the FDIC to be a part
of his national public-private sector

partnership to ensure financial
education is available consistently
and comprehensively to Hispanic
communities. The partnership, which
includes representatives from the
FDIC, U.S. Department of Treasury,
Small Business Administration,
Latino Coalition, U.S. Hispanic
Chamber of Commerce and others,
is charged with directing federal,
non-profit and private resources to
areas in need of financial education
and coordinating private sector
resources to reach Hispanics
nationwide.
In 2005, the FDIC provided assistance
to the Inter-American Development
Bank (IADB) Multilateral Investment
Fund to offer financial education
services and help develop products
with special remittance features.
These products were created in
collaboration with Latin American
Consulates, foreign banks, U.S.
financial institutions and bank trade
groups. The FDIC also spoke on
panels at the 2005 International
Forum on Remittances sponsored
by the IADB Multilateral Investment
Fund. The panels focused on financial
education curricula and outreach
and the importance of balancing
competition and regulation in the
remittance market. In addition,
FDIC participated in the Forum's
Remittances, Business Models
and Technology Trade Fair. This fair
provided attendees the opportunity
to network and view innovative
electronic transfer products, which
can enable community banks,
credit unions, credit cooperatives,
and micro-finance institutions
to become more competitive
in pricing and product features.




In 2005, the FDIC expanded its
efforts with the New Alliance Task
Force (NATF), originally launched
and continuing in Chicago, to two
additional m arkets-L os Angeles,
California and Austin, Texas-w ith
60 financial institutions participating
in those markets. NATF is a broadbased coalition comprised of banks,
community-based organizations, bank
regulatory agencies, government
agencies, representatives from
the secondary market and private
mortgage insurance companies
and the Mexican Consulate. The
foundation has also been laid for
the launch of NATF in four other
m arkets-Boston, New York City,
Raleigh-Durham and Kansas City.
Virtual Supervisory Information
On The Net (ViSIOIM)
In February 2005, the FDIC released
the fourth and final phase of ViSION,
a comprehensive processing and
tracking system supporting the
Corporation's supervision function.
This phase represents the culmination
of a five-year and approximately
$32 million capital-investment project
and brings to g e th e r-in a single,
customized product-detailed
information on examination,
application, enforcem ent and
numerous other bank activities.
The system, which includes such
features as automated event
notification, deadline tracking,
and job-specific role-based security,
is used by more than 3,200 federal
and state regulators.

Annual Independent Audits and
Reporting Requirements
The Corporation amended Part 363
of its regulations by raising the assetsize threshold from $500 million to
$1 billion for requirements relating
to internal control assessments and
reports by management and external
auditors. The amendment also
relieved covered institutions with
total assets of less than $1 billion
of the requirement that all outside
directors on the audit committee
be independent of management;
under the amended rule, a majority
of independent directors on the
audit committee is sufficient. The
amendment does not relieve public
covered institutions from their
obligation to comply with applicable
provisions of the Sarbanes-Oxley
Act and the Securities and Exchange
Commission's implementing rules.
The amendments took effect in
December 2005.
Receivership Management
The FDIC has the unique mission of
protecting depositors of insured banks
and savings associations. No insured
depositor has ever experienced
a loss in a FDIC-insured institution
due to a failure.
Once an institution is closed by its
chartering authority-the state for
state-chartered institutions, the
Office of the Comptroller of the
Currency (OCC) for national banks and
the Office of Thrift Supervision (OTS)
for federal savings associations-the
FDIC is responsible for resolving
that failed bank or savings association.
The FDIC staff gathers data about
the troubled institution, estimates
the potential loss to the insurance
fund(s) from various resolution
alternatives, solicits and evaluates

^ L iq u id a tio n Highlights 2 0 0 3 -2 0 0 5

■

D o l l a r s i n b i l l i o n s (except where noted)
2005

Total Resolved Banks
^ A s s e ts of Resolved Banks

2003

3
$ 0.15
1
$ 0.01
$ 0.38
$ 0.61
$ 0.38
$11.6 million

3
1.10
0
$ 0.00
$ 1.70
$ 0.81
$ 1.06
S28.2 million

$ 0.00
0

Total Resolved Savings A sso cia tio n s

■ A sse ts of Resolved Savings Associations
N e t Collections from A ssets in Liquidation*
(jflb ta lA sse ts in Liquidation"
Total Dividends Paid'
J pavings Over Cost of Liquidation’

2004

0

$ 0.00
S 0.37

S 0.44
S 0.44

$

0

$

*N o failures in 2005.
■Includes activity from thrifts resolved by the former Federal Savings and Loan Insurance Corporation and the
Resolution Trust Corporation.
’ Least Cost Test Savings.

bids from potential acquirers, and
recommends the least-costly
resolution method to the FDIC's
Board of Directors.
Resolving Financial Institutions
Failures
During 2005, there were no institu­
tion failures. This is the first calendar
year in the history of the FDIC
during which no federally-insured
institutions failed.
Protecting Insured Depositors
Although the focus of the FDIC
in recent years has shifted from
resolving large numbers of failed
institutions to addressing existing
and emerging risks in insured
depository institutions, the FDIC
continues to protect deposits in
those institutions that fail. The
FDIC's ability to attract healthy
institutions to assume deposits
and purchase assets of failed banks
and savings associations minimizes
the disruption to customers and
allows some assets to be returned
to the private sector immediately.
Assets remaining after resolution
are liquidated by the FDIC in an
orderly manner and the proceeds
are used to pay creditors, including
depositors whose accounts exceeded
the insured $100,000 limit. During
2005, the FDIC paid dividends of
77.9 percent of the deposit amount
exceeding the insured limit. These
dividends paid in 2005 are up 4.9
percent from 2004.



Receivership Management
Activities
The FDIC, as receiver, manages the
failed banks and their subsidiaries
with the goal of expeditiously winding
up their affairs. The oversight and
prompt termination of receiverships
help to preserve value for the
uninsured depositors and other
creditors by reducing overhead and
other holding costs. Once the assets
of the failed institutions have been
sold and the final distribution of
any proceeds are made, the FDIC
terminates the receivership estates.
In 2005, the number of receiverships
under management was reduced by
31 percent (from 94 to 65), while the
book value of assets under manage­
ment was reduced by 28 percent
(from $615 million to $441 million).
Professional Liability Recoveries
The FDIC staff works to identify
potential claims against directors
and officers, accountants, appraisers,
attorneys and other professionals who
may have contributed to the failure
of an insured financial institution.
Once a claim is deemed viable and
cost effective to pursue, FDIC initiates
legal action against the appropriate
parties. During the year, the FDIC
recovered approximately $65 million
from these professional liability suits.
In addition, as part of the sentencing

process for those convicted of
criminal wrongdoing against failed
institutions, the court may order a
defendant to pay restitution to the
receivership. The FDIC, working in
conjunction with the U.S. Department
of Justice, collected more than
$6 million in criminal restitution during
the year. The FDIC's caseload at the
end of 2005 included investigations,
lawsuits and ongoing settlement
collections involving 21 claims and
106 other active collections, down
from 233 at the beginning of 2005.
At the end of 2005, there were
995 pending restitution orders,
down from 1,181. This includes RTC
orders that the FDIC inherited on
January 1, 1996.
Effective Management of Strategic
Resources
To carry out its mission successfully,
the FDIC must effectively manage
and utilize a number of critical
strategic resources particularly its
human, financial, and information
technology (IT) resources. Major
accomplishments in improving the
Corporation's operational efficiency
and effectiveness are described
below. Although the FDIC is
not subject to the President's
Management Agenda, many
of these efforts are consistent
with the spirit of that agenda.

Expansion of Virginia Square
Facility

Management of Financial
Resources
Beginning in 2003, the Corporation
separated its investment expenses
from its annual operating budget
in order to ensure a more rigorous
approach to the approval and
management of major investment
initiatives. The single most significant
current initiative is the construction
of additional FDIC office and multi­
purpose buildings adjacent to the
existing facilities at Virginia Square.
This project w ill eliminate the
need for the Corporation to lease
commercial space in downtown
Washington, DC, and will substantially
reduce future facility costs.
Management processes have been
implemented to ensure adherence
to the project budget and schedule.
Once completed and occupied, the
new building will provide estimated
cost savings of approximately
$78 million (net present value) over
20 years, when compared to the
projected costs associated with
the current headquarters leasing
arrangements. Construction has
progressed on schedule and under
budget. Occupancy began in
mid-January 2006 and should be
completed prior to the end of the
first quarter 2006, as targeted.




Human Capital Management
The FDIC's employees are its most
important resource for accomplishing
its mission. For that reason, it seeks
to continue to be the employer of
choice within the financial regulatory
community and to operate a human
resources program that attracts,
develops, evaluates, rewards and
retains a high-quality results-oriented
workforce. This has been a difficult
challenge over the past 13 years
because the Corporation has been
in a continuous downsizing mode as
it completed the residual workload
from the banking and thrift crises
of the late 1980s and early 1990s.
Although the pace of downsizing
has slowed in the past few years,
the Corporation continues to adjust
both the size and composition of
its workforce to meet the changing
course of the financial services
industry. In 2005, the FDIC
implemented a number of strategies
identified in the human capital plan
developed in 2004 to procure the skill
sets needed in this new environment.
In 2005, the FDIC completed its
workforce restructuring activities
in the Division of Resolutions and
Receiverships and the Division of
Information Technology, and identified
the skills sets needed to better
position these organizations for
future challenges. Through judicious
use of Voluntary Early Retirement
Authority, Voluntary Separation
Incentive Payments, and outplace­
ment assistance, our Information
Technology organization met its

workforce restructuring goals without
the need for involuntary separations.
The Division of Resolutions and
Receiverships involuntarily separated
66 employees, while reducing its
workforce by over 50 percent (a
reduction of more than 250 positions
from the 2004 authorized level).
In both organizations, any remaining
vacancies were filled by matching
existing employees with the requi­
site skill sets. The Corporation also
plans workforce restructurings in
several support divisions in 2006.
In 2005, the FDIC established the
Corporate Employee Program (CEP)
to begin the cross-training that
will produce the flexible workforce
envisioned in the FDIC's Human
Capital Plan. During the year, four
CEP training classes were held
for approximately 100 new hires
and existing employees. In addition,
employees in the Supervision
business line who had prior
experience in the Resolutions
and Receiverships business line
received refresher training.
The FDIC requested increased
flexibilities from the U.S. Office
of Personnel Management (OPM)
to facilitate implementation of
its Human Capital Plan. In 2005,
the FDIC received OPM approval
to establish a three-year career
internship for the Corporate Employee
Program. This delegation provided
additional hiring flexibility with the

ability to permanently retain or
release these employees at the
end of three years. The FDIC also
established a Corporate Expert
pay plan to hire and retain nationally
recognized experts in a limited
number of senior, non-managerial
positions. In addition, the Corporation
received authority to waive the dual
compensation restrictions allowing
the rehiring of annuitants in critical
positions in the event of a severe
banking emergency. In 2006,
the Corporation w ill continue to
seek increased human resources
flexibilities through OPM authorities
and legislation as needed.

and cost analysis. The annual BIA
examined the Corporate Business
Continuity Plan to determine
whether it was current w ith regard
to the Corporation's critical business
functions and resources needed
to manage those functions during
an emergency. The Corporation
also enhanced its emergency
preparedness training with the
development of computer-based
instruction for all employees. In
addition, the FDIC continued to
conduct emergency preparedness
exercises that included evacuation
and shelter-in-place drills, as well
as tabletop and functional exercises.

The FDIC conducted negotiations
with the National Treasury Employees
Union (NTEU) over compensation
and benefits, and met its goals
of providing competitive pay and
benefits that allow the Corporation to
continue its status as an "employer
of choice" in the financial regulatory
community. A significant portion of
the compensation in all pay plans
remains linked to each employee's
contributions to the FDIC's goals
and objectives and overall success.

Other Significant Information
Technology Initiatives
On May 2, 2005, the FDIC
implemented the New Financial
Environment (NFE) and its supporting
systems. The implementation was
the culmination of years of effort
by the FDIC to modernize its aging,
highly-customized and complex
financial systems environment.
The NFE project was a corporate-wide
effort focused on implementing an
enterprise-wide, integrated software
solution to support the current and
future financial needs of the FDIC.
NFE also enhanced the capability
of other significant development
efforts such as the Corporate
Human Resources Information
System Time and Attendance
System, and the Legal Integrated
Management System, and also
provided more robust cost informa­
tion for improved decision making.

Emergency Preparedness
During 2005, the FDIC has strength­
ened and refined the FDIC Emergency
Preparedness Program, which
includes the Emergency Response
Plan and the Business Continuity Plan.
Some of the major accomplishments
include expanding the capabilities
at the headquarters alternate site
to include IT back-up operations;
developing a new emergency notifi­
cation system to allow for immediate
electronic and voice notification
of staff; and conducting an annual
business impact analysis (BIA)
with major emphasis on IT systems




The FDIC continues to collect quality
and timely information in 2005 with
the use of FDlCconnect. FDlCconnect
is a secure Web site that facilitates
electronic communication w ith FDICinsured institutions, and became
the primary method of delivery
for the quarterly deposit insurance
assessment invoices through a rule
change effective with the March 2005
assessment cycle. In 2005, over
150,000 transactions were completed
by financial institutions using
FDlCconnect.
Transformation of the Information
Technology Program
In 2005, the FDIC completed critical
steps toward transforming its
information technology program an initiative began in 2004. Using
a roadmap developed with Deloitte
Touche over 18 months ago, the
FDIC implemented an outsourcing
strategy, employee buyout and
divisional reorganization that
significantly improved the program's
overall efficiency and effectiveness.
The immediate benefits of steps
taken so far include:
•

Establishment of the Chief
Information Officer (CIO) Council,
advising the CIO on all aspects
of adoption and use of IT at the
FDIC.

•

Additional IT expertise and best
practices from global contracting
partners.

•

A leaner organization with fewer
staff and an increased span of
control.

•

A streamlined technical
infrastructure.

•

A realigned IT product and services
delivery-management structure
that is organized along the lines
of the new systems development
life cycle (Rational Unified ProcessRUP).

•

A new delivery management
structure that in conjunction with
the new Project Management
Office (PMO) provides a consistent
approach for all IT projects.

•

Enhanced integration of information
security requirements and
perspectives in all IT projects.

•

The consolidation of nearly 100
support contracts into six. The
structure of the new contracts
emphasized contractor perform­
ance and linked contractor
compensation to results achieved
rather than costs incurred.

Once completed, the FDIC anticipates
that the benefits of the transformation
will include:
•

The greater use of contracting
partners for operation and
implementation allowing in-house
staff to focus on strategic business
planning, design and consultation.

•

Reduced costs through improving
the efficiency and effectiveness
of IT products and services.

•

A targeted long-term plan
for personal and technical
development of all IT employees
resulting from a new skills
assessment to be conducted
during 2006.




Privacy Program
In 2005, the charter of the Chief
Information Officer's Council was
expanded to include oversight of
Privacy Act responsibilities, and
the corporate Privacy Program
was enhanced under the guidance
of the newly appointed Chief
Privacy Officer (CPO). The
program's objective is to ensure
that the FDIC is taking appropriate
steps to protect personally identifiable
information from unauthorized use,
access, disclosure or sharing, and
to protect associated information
systems from unauthorized access,
modification, disruption or destruction.
One of the first priorities is increasing
employee awareness. The program
requires mandatory privacy training
so that all FDIC employees and
contractors are aware of the require­
ments for safeguarding sensitive
information and know where to
obtain privacy-related reference
material. Many initiatives were
completed in 2005 in support of the
newly enhanced Corporate Privacy
Program, including mandatory
computer-based privacy training
and distribution of a Privacy
Awareness Package.




D eposit Insurance Fund
P erform ance
The FDIC administers tw o deposit
insurance fu n d s -th e Bank Insurance
Fund (BIF) and the Savings Association
Insurance Fund (SAIF)-and manages
the FSLIC Resolution Fund (FRF),
which fulfills the obligations of the
former Federal Savings and Loan
Insurance Corporation (FSLIC)
and the former Resolution Trust
Corporation (RTC). The following
summarizes the condition of the
FDIC's insurance funds. (See the
accompanying tables on FDICInsured Deposits, Insurance Fund
Reserve Ratios and Risk-Related
Premiums on the following pages.)
The BIF reported comprehensive
income (net income plus current
period unrealized gains/losses on
available-for-sale (AFS) securities)
of $680 million in 2005 compared to
$1.004 billion in 2004. This reduction
of $324 million was primarily due to
an increase in unrealized losses on
AFS securities of $279 million, lower
recoveries of prior years' provisions
for insurance losses of $143 million,
an increase in operating expenses
of $25 million, and a decrease in
assessment revenues of $43 million,
offset by an increase of $161 million
in interest revenue on U.S. Treasury
obligations. As of December 31, 2005,
the fund balance was $35.5 billion,
up from $34.8 billion at year-end
2004.

The SAIF reported comprehensive
income of $409 million in 2005,
compared to $480 million in 2004.
This reduction of $71 million was
primarily due to an increase in
unrealized losses on AFS securities
of $93 million and lower recoveries
of prior years' provisions for insurance
losses of $50 million, offset by
a $73 million increase in interest
revenue on U.S. Treasury obligations.
As of December 31, 2005, the fund
balance was $13.1 billion, up from
$12.7 billion at year-end 2004.
For both BIF and SAIF, higher interest
revenue on U.S. Treasury obligations
stemmed from higher overnight and
short-term Treasury yields as well
as higher inflation compensation on
Treasury Inflation Protected Securities.
However, the higher interest revenue
was more than offset by an increase
in unrealized losses that resulted
from a rise in Treasury market yields
on short- to intermediate-maturity
AFS securities during 2005.

FDIC-lnsured Deposits (e s tim a te d 1 9 6 0 -2 0 0 5 )*
Dollars
in
■ SAIF-lnsured
■ BIF-lnsured

O perating Expenses

1960

Corporate Operating Budget expenses
totaled $990 million in 2005, including
$979 million in ongoing operations and
$11 million for receivership funding.
This represented approximately
95 percent of the approved budget
for ongoing operations and 15 percent
of the approved budget for receiver­
ship funding.

70

80

90

2000

3,500

In December 2005, the Board of
Directors approved a 2006 Corporate
Operating Budget of approximately
$1.05 billion, including $975 million
for ongoing operations. The level
of approved Corporate Operating
Budget for 2006 is more than
5 percent lower than the Corporate
Operating Budget for 2005 due to
savings achieved through continued
staffing reductions and the realization
of other efficiencies. The Corporate
Operating Budget includes funding
for a number of major new initiatives,
including increased funding for
consumer protection activities;
continued implementation of the
Corporate Employee Program;
several new learning initiatives
consistent w ith the Corporation's
commitment to an environment of
continuous employee growth and
development; and several projects
to explore increased automation
of the bank examination process.

billi ons

1,000




3,000
2,500
2,000

1,500

500
0

.... mu lllilll

• All amounts are yearend except 2005 is as of 9/30/05.
Source: Commercial Bank Call Reports and Thrift Financial Reports

Investm ent Spending
The FDIC has a disciplined process
for reviewing proposed new
investment projects and managing
the implementation of approved
projects. Most of the projects in
the current investment portfolio are
major IT system initiatives. Proposed
IT projects are carefully reviewed
to ensure that they are consistent
w ith the Corporation's enterprise
architecture and include an appropriate
return on investment for the insurance
funds. The process also enables
the FDIC to be aware of risks to the
major capital investment projects
and facilitates appropriate, timely
intervention to address these risks
throughout the development process.
An investment portfolio performance
review of the major capital invest­
ments is provided to the FDIC's
Board of Directors quarterly.

During 2005, the Corporation
completed and implemented three
projects in its investment portfolio.
Spending for investment projects in
2005 totaled approximately $62 million,
but is expected to drop significantly
in 2006. The Board of Directors did
not approve any new investment
projects in 2005.

05

In su ran ce Fund R eserve Ratios Fund B a la n ce s as a P e rc e n t o f In s u re d D e p o s its

■ BIF
■ SAIF




R isk -R e la ted Prem ium s

The following tables show the number and percentage of institutions insured by the Bank Insurance Fund
(BIF) and the Savings Association Insurance Fund (SAIF), according to risk classifications effective for
the first semiannual assessment period of 2005. Each institution is categorized based on its capital group
(1,2, or 3) and supervisory subgroup (A, B, or C), which is generally determined by on-site examinations.
Assessment rates are basis points, cents per $100 of assessable deposits, per year.
BIF Supervisory Subgroups’
B

A

Capital Group
1. Well Capitalized:

c

$

—
0
7,307 (94.2%)

3
344 (4.4%)

17
47 (0.6%)

Assessment Rate
Number of Institutions

3
49(0.6%)

10
5(0.1%)

24
7(0.1%)

Assessment Rate
Number of Institutions

10
0(0.0%)

24
0 (0.0%)

27
2 (0.0%)

0
1,034(93.5%)

3
58(5.2%)

3
3 (0.3%)

10
0(0.0%)

17
11(1.0%)
' 24
0(0.0%)

10
0(0.0%)

24
0(0.0%)

27
0(0.0%)

Assessment Rate
Number of Institutions
2. Adequately Capitalized:

■

SAIF Supervisory Subgroups*
------------------

1. Well Capitalized:

Assessment Rate
Number of Institutions
2. Adequately Capitalized:

Assessment Rate
Number of Institutions
3. Undercapitalized:

Assessment Rate
Number of Institutions

* BIF data exclude SAIF-member "Oakar" institutions that hold BIF-insured deposits. The assessment rates reflect the
rates for BIF-assessable deposits, which remained the same throughout 2005.
* SAIF data exclude BIF-member "Oakar" institutions that hold SAIF-insured deposits. The assessment rates reflect the
rates for SAIF-assessable deposits, which remained the same throughout 2005.




III. Performance Results Summary




S um m ary o f 2 0 0 5 P erform ance Results by Program
The FDIC successfully achieved 27 of the 34 annual performance targets
established in its 2005 Annual Performance Plan. Six performance targets were
not applicable and one was not met.
Key accomplishments by program are highlighted on the following page. There
were no instances in which 2005 performance had a material adverse effect on
successful achievement of the FDIC's mission or its strategic goals and objectives
regarding its major program responsibilities. In addition, consideration of 2005
performance results was an integral part of the development of the FDIC's 2006
Annual Performance Goals.
The Office of Inspector General (OIG) has shared its view of the most significant
challenges the Corporation is confronting and has acknowledged actions underway
to address these issues. (See Appendix C for a list of these challenges.)
Management is com m itted to addressing each of the issues identified by
the OIG.

Program Area

Insurance

Performance Results

• Successfully implemented the Central Data Repository (CDR) to collect and process Reports of
Condition and Income (Call Reports) from financial institutions. This FFIEC project will improve
the quality and timeliness of financial institution data.
• Conducted and published analysis on the effects of Flurricanes Katrina and Rita.
• Issued numerous economic and banking information and analyses publications including Outlook,
FYI electronic bulletins, and Center for Financial Research Working Papers.
• Completed risk assessments for all large insured depository institutions and followed up on all
identified concerns referred for examination or other supervisory action.
• Developed a working prototype of an integrated fund model (IFM) during 2005, with enhancements
focusing on the primary component of the IF M -th e Loss Distribution Model.
• No financial institution failures occurred during 2005.

Supervision and
Consumer Protection

• Conducted 2,399 safety and soundness examinations. This included all statutorily required safety
and soundness examinations, except for a small number deferred due to pending mergers or
postponed to early 2006 to give financial institutions time to recover from the effects of the
Gulf Coast Flurricanes.
• Conducted 2,020 compliance and Community Reinvestment Act examinations in accordance with
FDIC policy, except for a small number postponed to early 2006 to give financial institutions time
to recover from the effects of the Gulf Coast Flurricanes.
• Participated in 406 Money Smart events and technical assistance activities related to the
Community Reinvestment Act, fair lending and community development, added 306
Money Smart Alliance members, and distributed 95,283 copies of the Money Smart curriculum.

Receivership
Management




• Terminated 29 of the 94 (31 percent) financial institution receiverships existing at the beginning
of the year.
• Conducted 100 percent of professional liability investigations on all four institutions that reached
the 18-month milestone.

2005 Budget and Expenditures by Program (Excluding Investments)
The FDIC budget for 2005 totaled $1.101 billion. Excluding $113 million for
Corporate General and Administrative expenditures, budget amounts were
allocated to corporate programs and related goals as follows: $174 million,
or 16 percent, to the Insurance program; $555 million, or 50 percent, to
the Supervision and Consumer Protection program; and $259 million, or
24 percent, to the Receivership Management program.
Actual expenditures for the year totaled $990 million. Excluding $136 million
for Corporate General and Administrative expenditures, actual expenditures
were allocated to programs as follows: $129 million, or 13 percent, to
the Insurance program; $605 million, or 61 percent, to the Supervision and
Consumer Protection program; and $120 million, or 12 percent, to the
Receivership Management program.




2005 E xpenditures and Budget (Support A llo c a te d )

Dollars

in

Millions

■ Expenditures
■ Budget

Insurance
Program

Supervision and
Consumer Protection
Program

Receivership
Management
Program

General
and
Administrative

P e r f o r m a n c e R e s u l t s by P r o g r a m a n d S t r a t e g i c G o a l
Insurance Program Results
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goal
Respond promptly to financial
institution closings and emerging
issues.

Number of business days after
institution failure depositors
have access to insured funds
either through transfer of
deposits to successor insured
depository institution or
depositor payout.

If the failure occurs on
a Friday, the target is one
business day.

Not
Applicable.
No failures
in 2005.

If a failure occurs on any
other day of the week, the
target is tw o business days.

Not
Applicable.
No failures
in 2005.

Insurance risks posed by large
insured depository institutions.

Assess the insurance risks in
100 percent of large insured
depository institutions and
adopt appropriate strategies.

Achieved.
See pg. 29.

Identify and follow up on
100 percent of referrals.

Achieved.
See pg. 29.

Results of research and
analyses are disseminated
in a timely manner through
regular publications, ad hoc
reports and other means.

Achieved.
See pg. 29.

Industry outreach activities
are undertaken to inform
bankers and other stake­
holders about current trends
and concerns and available
FDIC resources.
3.

Results

Dissemination of data and
analyses on issues and risks
affecting the banking industry
to bankers, supervisors, the
public, and other stakeholders.

2.

Target

Concerns referred for
examination or other action.

1.

Indicator

Achieved.
See pgs.
10-11.

Implement a modernized
Call Reporting process during
the second Call Reporting
period in 2005.

Achieved.
See pg. 11.

Identify and address risks to the
insurance funds.

Maintain sufficient and reliable
information on insured depository
institutions.




Quality and timeliness of bank
data.

Insurance Program Results (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goal
4.

Indicator

Target

Results

Maintain and improve the deposit
insurance system.

Deposit Insurance Reform.

Provide information and
analysis to Congressional
committees in support of
deposit insurance reform
legislation.

Achieved.
See pgs.
8-9.

Obtain legislative support
for a proposed assessment
credit and rebate system
and a new deposit insurance
pricing system.

Achieved.
See pgs.
8-9.

When deposit insurance
reform is enacted, implement
the legislation in accordance
with statutorily prescribed
time frames.

Not
Applicable.
Legislation
enacted
Feb. 8, 2006.

Loss Reserves.

Enhance the effectiveness
of the reserving methodology
by applying sophisticated
analytical techniques to
review variances between
projected losses and actual
losses, and by adjusting the
methodology accordingly.

Achieved.
See pg. 29.

Fund Adequacy.

Set assessment rates to
maintain the insurance funds
at the designated reserve
ratio (DRR) or return them
to the DRR if they fall below
it, as required by statute.

Achieved.
See pg. 37

When deposit insurance
reform legislation is enacted,
promulgate rules and
regulations establishing criteria
for replenishing the Deposit
Insurance Fund when it falls
below the low end of the
range.

Not
Applicable.
Legislation
enacted
Feb. 8, 2006.

Enhance the working prototype
of the integrated fund model
for financial risk management.

Achieved.
See pg. 29.




Insurance Program Results (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goal
5.

Indicator

Target

Results

Provide educational information
to insured depository institutions
and their customers to help them
understand the rules for determining
the amount of insurance coverage
on deposit accounts.

Utility of educational tools
developed for bankers and
consumers.

Update the consumer version
of the EDIE (Electronic
Deposit Insurance Estimator)
located on the FDIC's Web
site.

Achieved.
See pg. 18.




Supervision and C onsum er P ro tectio n Program Results
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goal

Indicator

Target

Results

1.

Conduct on-site risk management
examinations to assess an FDICsupervised insured depository
institution's overall financial condition,
management practices and policies,
and compliance with applicable laws
and regulations.

Percentage of required
examinations conducted in
accordance with statutory
requirements and FDIC policy.

One hundred percent of
required safety and soundness
examinations (including a
review for BSA compliance)
are conducted on schedule.

Achieved.
See pg. 13.

2.

Take prompt and effective supervisory
action to address problems identified
during the FDIC examination of FDICsupervised institutions that receive
a composite Uniform Financial
Institutions Rating of 4 or 5 (problem
institutions). Monitor FDIC-supervised
insured depository institutions'
compliance with formal and informal
enforcement actions.

Percentage of follow-up
examinations of problem
institutions conducted within
required time frames.

One hundred percent of
follow-up examinations are
conducted within 12 months
of completion of the prior
examination.

Achieved.
See pg. 13.

3.

Increase industry and regulatory
awareness of emerging/high-risk
areas.

Number of trained BSA/AML
subject-matter experts.

The number of trained
BSA/AML subject matter
experts is increased to 300.

Achieved.
See pg. 15.

Advanced training is completed Achieved.
for all BSA/AML subject
See pg.39.
matter experts.
Number of industry outreach
sessions on BSA/AMl/Counter
Financing of Terrorism (CFT)
issues.
4.

More closely align regulatory capital
with risk in large or multinational
banks.




At least one outreach session
is conducted per region.

Completion of preparatory
activities for implementation of
the new Basel Capital Accord.

Notice of Proposed Rulemaking Achieved.
(NPR) and associated
See pg. 10.
examination guidance for
implementing the new Basel
Capital Accord are published
for comment.
Quantitative Impact Study 4
is completed.

Achieved.
See pg. 15.

Achieved
See pg 9.

Supervision and C onsum er P ro te ctio n Program Results (continued)

mmm

Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goal

Indicator

Target

Results

5.

Ensure that FDIC-supervised institutions Percentage of on-site
that plan to operate under the new
examinations or off-site
Basel Capital Accord are making
analyses performed.
satisfactory progress toward meeting
required qualification standards.

On-site examinations or
offsite analyses are performed
for all FDIC-supervised banks
that intend to operate under
Basel II to ensure that they
are effectively working toward
meeting required qualification
standards.

Achieved.
See pg. 9.

6.

Provide effective outreach and technical Number of Money Smart
assistance on topics related to the
Alliance members.
CRA, fair lending, and community
development.
Number of Money Smart
curricula distributed.

200 additional members
are added to the Money
Smart Alliance.

Achieved.
See pg. 38.

20.000 additional copies
of the Money Smart
curricula are distributed.

Achieved.
See pg. 38.

200.000 additional individuals
are taught using the Money
Smart curriculum.

Achieved.
See pg. 38.

Number of outreach activities
conducted with technical
assistance.

125 technical assistance
(examination support) efforts
or banker/community outreach
activities are conducted
related to CRA, fair lending,
or community development.

Achieved.
See pg. 38.

7.

Effectively meet the statutory
mandate to investigate and respond
to consumer complaints about FDICsupervised financial institutions.

Timely responses to written
complaints.

Responses are provided
to 90 percent of written
complaints within time frames
established by policy.

Achieved.
See pg. 17.

8.

Conduct CRA and compliance
examinations in accordance with
FDIC examination frequency policy.

Percentage of examinations
conducted in accordance with
required time frames.

One hundred percent of
required examinations are
conducted within time frames
established by FDIC policy.

Achieved.
See pg. 13.

9.

Take prompt and effective supervisory
action to m onitor and address
problems identified during compliance
examinations of FDIC-supervised
institutions that receive a 4 or 5
rating for compliance with consumer
protection and fair lending laws.

Percentage of follow-up
examinations or related activities
conducted w ithin required
time frames.

One hundred percent of
follow-up examinations or
related activities are conducted
within 12 months from the
date of a formal enforcement
action to confirm that the
institution is in compliance
with the enforcement action.

Achieved.
See pg. 39.




R eceivership M an a g e m e n t Program Results
Strategic Goal: Recovery to creditors of receivership is achieved.____________

________

_____________

Annual Performance Goal

Indicator

Target

Results

1.

Market failing institutions to all known
qualified and interested potential
bidders.

List of qualified and interested
bidders.

Contact all known qualified
and interested bidders.

Not
Applicable.
No failures
in 2005.

2.

Value, manage, and market assets of
failed institutions and their subsidiaries
in a timely manner to maximize net
return.

Percentage of failed institution's
assets marketed.

Ninety percent of book
value of a failed institution's
marketable assets are
marketed within 90 days
of failure.

Not
Applicable.
No failures
in 2005.

3.

Manage the receivership estate and
its subsidiaries toward an orderly
termination.

Timely termination of new
receiverships.

Inactivate 75 percent of
Not
receiverships managed
Achieved.
through the Receivership
See pg.40.
Oversight Program within
three years of the failure dates.

4.

Conduct investigations into all
potential professional liability claim
areas in all failed insured depository
institutions, and decide as promptly
as possible to close or pursue each
claim, considering the size and
complexity of the institution.

Percentage of investigated
claim areas for which a decision
has been made to close or
pursue the claim.

For 80 percent of all claim
areas, a decision is made
to close or pursue the claim
within 18 months after the
failure date.




Achieved.
See pg.40.

M u lti-Y e a r P e r fo r m a n c e T re n d

Depositor Payouts in Instance of Failure
Annual Goal

2002 Results

2003 Results

2004 Results

2005 Results

The FDIC responds promptly
to financial institution closings
and emerging issues.

Tmely payments made
to all depositors of the
11 insured depository
institutions that failed
in 2002.

Timely payments made
to all depositors of the
three insured depository
institutions that failed
in 2003.

Tm ely payments made
to all depositors of the
four insured depository
institutions that failed
in 2004.

There were no failures
in 2005.

Bank Insurance Fund (BIF) BIF and SAIF reserve
and Savings Association
ratios maintained at
or above the statutory
Insurance Fund (SAIF)
reserve ratios maintained ratio of 1.25 percent.
at or above the statutory
Chairman testified before
ratio of 1.25 percent.
the Senate Committee
Chairman testified before in support of deposit
insurance reform.
the Senate Committee
in support of deposit
insurance reform.

The FDIC completed
implementation of
enhancements to the
reserving process and
methodology in
March 2004. BIF and
SAIF reserve ratios
were maintained at
or above the statutory
ratio of 1.25 percent.

Through September 30,
2005, BIF and SAIF
reserve ratios were
maintained at or above
the statutory ratio of
1.25 percent.

Legislation on deposit
insurance reform was
introduced in the House
and the Senate.

Legislation on deposit
insurance reform was
passed in the House
and was pending in the
Senate when Congress
recessed for the year.

Deposit insurance reform Congress included
deposit insurance
remained under
consideration in the
reform legislation in
Senate, but no action was budget reconciliation
taken prior to the end
legislation, S. 1932.
The measure was
of the 108th Congress.
adopted by the Senate
in December and was
passed by the House
on February 1, 2006.
The President signed
the bill enacting
deposit insurance
reform legislation
on February 8, 2006.

Conducted 2,421
required safety and
soundness examinations
in accordance with FDIC
policy.

Conducted 2,515
required safety and
soundness examinations
in accordance with FDIC
policy.

Risk Classifications
Maintain and improve the
deposit insurance system.

Risk Management, Safety

nd Soundness

Conduct on-site risk
management examinations
to assess an FDIC-supervised
insured depository institution's
overall financial condition,
management practices and
policies, and compliance with
applicable laws and regulations.

Conducted 2,534 or
98 percent of required
safety and soundness
examinations.




Conducted 2,399
required safety and
soundness examinations
in accordance with FDIC
policy.

Safety and Soundness Enforcements Actions
Annual Goal

2002 Results

2003 Results

2004 Results

2005 Results

Take prompt and effective
supervisory action to address
issues identified during the
FDIC's examination of FDICsupervised institutions
that receive a composite
Uniform Financial Institutions
Rating of "4 " or "5 " (problem
institution). Monitor FDICsupervised insured depository
institutions' compliance
w ith formal and informal
enforcem ent actions.
(Revised - 2005)

Eighty-four institutions
designated as problem
(composite "4 " or "5 "
rated). Forty-eight were
removed from problem
status and 63 were
added.

Seventy-three institutions
designated as problem
(composite "4 " or "5 "
rated). Fifty-eight with
total assets of $6.98
billion were removed
from problem status
and 47 with total assets
of $4.99 billion were
added. Additionally, the
FDIC issued the following
formal and informal
enforcement actions:
40 (5 contained BSA
provisions) Cease and
Desist Orders and 157
(6 contained BSA
provisions) Memoranda
of Understanding.

Forty-four institutions
designated as problem
(composite "4 " or "5 "
rated). Fifty-seven with
total assets of $6.3
billion were removed
from problem status
and 28 institutions with
total assets of $4.8 billion
were added. Additionally,
the FDIC issued the
following formal and
informal actions:
38 (11 contained BSA
provisions) Cease and
Desist Orders and 145
(31 contained BSA
provisions) Memoranda
of Understanding.

Twenty-nine institutions
designated as problem
(composite "4 " or "5 "
rated). Thirty-six with
total assets of $2.8
billion were removed
from problem status and
19 institutions with total
assets of $802 million
were added. Additionally,
the FDIC issued the
following formal and
informal actions:
15 (8 contained BSA
provisions) Cease and
Desist Orders and 152
(69 contained BSA
provisions) Memoranda
of Understanding.

Conducted 1,840
comprehensive
compliance-only and
CRA examinations in
accordance with FDIC
policy. There were no
delinquencies in 2002.

Conducted 1,919
comprehensive
compliance-only and
CRA examinations in
accordance with FDIC
policy. There were no
delinquencies in 2003.

Conducted 2,136
comprehensive
compliance-only and
CRA examinations in
accordance with FDIC
policy. There were no
delinquencies in 2004.

Conducted 2,020
comprehensive
compliance-only and
CRA examinations in
accordance with FDIC
policy. A small number
of exams were postponed
to early 2006 to give
financial institutions
time to recover from
the effects of the
Gulf Coast hurricanes.

Money Smart
classes attended
by approximately
2,800 participants.

The FDIC supplied
more than 111,000
copies of Money Smart
curricula to organizations.
FDIC sponsored 65 public
outreach initiatives,
111 community
development activities,
and 67 technical
assistance activities.

Targets for the following
were met: added 200
new Money Smart
Alliance members;
distributed 20,000 copies
of M oney Smart
curriculum; additional
294,000 members
reached; and conducted
125 outreach and
technical assistance
activities.

Targets for the following
were met: added 306
new Money Smart
Alliance members;
distributed 95,283 copies
of Money Smart
curriculum; additional
195,000 members
reached; and conducted
163 outreach and
technical assistance
activities.

C o m p lia n c e E x a m in a tio n s

Conduct CRA and compliance
examinations in accordance
w ith FDIC examination
frequency policy.
(Revised -2005)

C R A O u tr e a c h

Provide effective outreach and
technical assistance on topics
related to CRA, fair lending,
and community development.




Compliance Enforcement Actions
Annual Goal

2002 Results

2003 Results

2004 Results

2005 Results

Take prompt and effective
supervisory action to monitor
and address problems identified
during compliance examinations
of FDIC-supervised institutions
that receive a "4 " or "5 " rating
for compliance with consumer
protection and fair lending laws.
(Revised - 2005)

Eight of nine institutions
entered into a
Memorandum of
Understanding (MOU)
with the FDIC; the ninth
was in the process
of reviewing the
recommended MOU
at year-end.

The only "4 " rated
institution entered into
a MOU with the FDIC.

Of the five institutions
rated "4 " as of
December 31, 2004,
tw o entered into
Memoranda of
Understanding with the
FDIC; and tw o were
subject to outstanding
Cease and Desist Orders.
A Cease and Desist
Order for the fifth
institution was issued
during the second
quarter of 2005.

Of the three institutions
rated "4 " as of
December 31, 2005,
one entered into a
Memorandum of
Understanding with
the FDIC; and tw o are
subject to outstanding
Cease and Desist
Orders. There are no
institutions currently
rated "5 ."

Risk Management Safety and Soundness
Increase industry and
regulatory awareness of
emerging/high-risk areas.
(Added - 2005)

The Anti-Money Laundering
(AML) goal has met
targets and the advanced
training for all BSA/AML
subject matter experts
has been accomplished.

More closely align regulatory
capital with risk in large or
multinational banks.
(Added-2005)

Final results of the
4th Quantitative Impact
Study (QIS-4) show
a 15.5 percent decline
in minimum regulatory
capital from current levels,
with a wide dispersion in
results that was primarily
due to banks' internal
measurement of risk,
rather than actual risk.

Basel Capital Accord
Ensure that FDIC-supervised
institutions that plan to operate
under the new Basel Capital
Accord are making satisfactory
progress toward meeting
required qualification standards.
(Added-2005)




Initial Basel II outreach
efforts or baseline reviews
continue at FDICsupervised institutions
that have indicated
their possible intent
to opt-in for treatment
under the new rules.
FDIC is integrally involved
in domestic and inter­
national policy and imple­
mentation processes to
help ensure a smooth
transition to Basel II.

Consumer Complaints and Inquiries
Annual Goal

2002 Results

2003 Results

2004 Results

2005 Results

Meet the statutory mandate
to investigate and respond
to consumer complaints
about FDIC-supervised
financial institutions.

FDIC received 8,368
consumer complaints and
closed 95 percent of them.
Of the complaints closed,
94 percent were closed
within policy tim e frames.

FDIC received 8,010
consumer complaints and
closed 99 percent of them.
Of the complaints closed,
94 percent were closed
within policy time frames.

FDIC received 8,742
consumer complaints,
closing 95 percent of
them. Of the closed
complaints, 95 percent
were closed within
policy tim e frames.

FDIC received 8,851
consumer complaints,
closing 96 percent of
them. Of the closed
complaints, 97 percent
were closed within
policy tim e frames.

For all 11 institutions that
failed, at least 87 percent
of all marketable assets
were marketed within the
90-day time frame, thus
exceeding the target
of 85 percent.

For all three institutions
that failed, at least 98
percent of all marketable
assets were marketed
within the 90-day time
frame, thus exceeding
the target of 85 percent.

Five financial institutions
reached their 90-day
threshold during 2004.
One hundred percent
of all marketable assets
were marketed within
the 90-day time frame.

No financial institutions
reached their 90-day
threshold during 2005.

Market failing institutions
to all known qualified and
interested potential bidders.

There were 11 failures
in 2002. One hundred
percent of the qualified
potential bidders were
contacted.

There were three failures
in 2003. One hundred
percent of the qualified
potential bidders were
contacted.

There were four failures
in 2004. One hundred
percent of the qualified
potential bidders were
contacted for the sale of
three failed institutions.
One failed institution
was not offered for sale.

There were no failures
in 2005.

Conduct investigations into all
potential professional liability
claim areas in all failed insured
depository institutions and
decide as promptly as possible
to close or pursue each claim
considering the size and
complexity of the institution.
(Revised -2005)

Two of six institutions
that reached the 18-month
milestone during 2002 had
100 percent of professional
liability investigations
completed.The other four
institutions had at least
80 percent of professional
liability investigations
completed, meeting the
goal of 80 percent.

Four of ten institutions
that reached the 18-month
milestone during 2003 had
100 percent of professional
liability investigations
completed. The other six
institutions had at least
80 percent of professional
liability investigations
completed, meeting the
goal of 80 percent.

All five institutions that
reached the 18-month
milestone during 2004
had 100 percent of
professional liability
investigations completed,
meeting the goal
of 80 percent.

All four institutions that
reached the 18-month
milestone during 2005
had 100 percent of
professional liability
investigations completed,
meeting the goal
of 80 percent.

Manage the receivership
estate and its subsidiaries
toward an orderly termination.

For the eight failures
from 1999 that
matured in 2002, the
FDIC terminated six
receiverships, meeting
the target to terminate
75 percent within three
years of failure.

For the seven failures
that occurred during
2000 that matured in
2003, the FDIC
terminated four
receiverships, below
the target to terminate
75 percent within three
years of failure.

For the four failures
that occurred during
2001 that matured in
2004, the FDIC
terminated three
receiverships, meeting
the target to terminate
75 percent within three
years of failure.

For the eleven failures
that occurred during 2002
that matured in 2005, the
FDIC terminated four
receiverships. This did not
meet the target to term­
inate 75 percent within
three years of failure and
was due to various imped­
iments to terminations.

Asset Management
Value, manage and market
assets of the failed institutions
and their subsidiaries in a
timely manner to maximize
net return.

Least-Cost Resolution




P ro g ra m E v a lu a tio n

During 2005, the FDIC completed evaluations of programs designed to achieve the strategic
objectives set forth in the Supervision Program area of the FDIC's 2005 - 2010 Strategic Plan.
The program evaluation of each strategic objective included a list of issues to be evaluated,
background context of the evaluation, analysis of programs and actions to achieve the objective,
evaluation methodology, and findings. The following section highlights the issues evaluated
and summarizes the results of this evaluation.
Strategic
Objective
Issues evaluated

FDIC-supervised institutions appropriately manage risk.
★ How does the FDIC ensure that FDIC-supervised institutions appropriately manage risk?
★ What happens to FDIC-supervised institutions that are not appropriately managing risk?

Findings

The FDIC performs safety and soundness, trust, Bank Secrecy Act, and information technology
examinations of FDIC-supervised institutions. The examinations are conducted to assess an
institution's overall financial condition, management practices and policies, and compliance with
applicable laws and regulations. Through the examination process, the FDIC also assesses the
adequacy of management and internal control systems to identify, measure and control risks.
If the examination process reveals weaknesses in an FDIC-supervised institution's operations
or conditions, appropriate actions are taken. Informal or formal enforcement actions may be
issued to the institutions that have significant weaknesses or that are operating in a deteriorated
financial condition. The actions remain in effect until corrective actions are taken arid the identified
weaknesses are corrected. If the problems remain unresolved, the FDIC may take further steps
to encourage or compel institutions to comply.

Strategic
Objective

Consumers have access to easily understood information about their rights
and the disclosures due them under consumer protection and fair lending laws.

Issues evaluated

★ Does the FDIC provide information to consumers about their rights and the disclosures
due consumers under current consumer protection and fair lending laws?
*

Is the information easily accessible and easily understood?

Findings

The FDIC undertakes an extensive and expanding number of activities to provide information
on consumers' rights and the disclosures due them under consumer protection and fair lending
laws. A wide array of materials detail consumers' rights; provide information and answers to
questions concerning deposit insurance, banks and consumer rights; and offer practical guidance
on how to become a better informed user of financial services. These are readily accessible and
widely distributed on the FDIC's Web site and at outreach seminars and workshops. Many
materials are also available in hard copy and some in multiple languages. The FDIC also has
been actively involved in consumer education and disclosure with the on-going support of
programs such as Money Smart and EDIE.

Strategic
Objective

FDIC-supervised institutions comply with consumer protection. Community Reinvestment
Act (CRA), and fair lending laws.

Issues evaluated
Findings




★ How does the FDIC ensure that FDIC-supervised institutions comply with consumer protection,
CRA, and fair lending laws?
The FDIC conducts compliance and CRA examinations to evaluate FDIC-insured institutions'
practices regarding these areas. In addition to the examination process, the FDIC investigates
consumer complaints about banking practices. Noncompliance with consumer protection and fair
lending laws can result in civil liability and negative publicity as well as informal or formal enforce­
ment actions against the institution to correct identified violations. The FDIC also utilizes the
institution's record of compliance with consumer protection, CRA, and fair lending laws when
evaluating applications for new or expanded activities and certain other corporate applications.

IV. Financial Statements and Notes

Bank Insurance Fund
December 31, 2005 and 2004




Bank Insurance Fund

Federal

Deposit

Insurance

Corporation

IBank Insurance Fund Balance Sheet at December 31
Dollars

in T h o u s a n d s

2004

2005
Assets
Cash and cash equivalents
Investment in U.S. Treasury obligations, net: (Note 3)
Held-to-maturity securities

$

$

Receivables from bank resolutions, net (Note 4)
Property and equipment, net (Note 5)

$ 35,934,755

1,821,776
22,637,330
9,470,605
601,498

24,678,611
7,620,733
546,202
299,317
378,064

Available-for-sale securities
Interest receivable on investments and other assets, net

Total Assets

2,411,828

375,303
357,106

$

35,263,618

Liabilities

Accounts payable and other liabilities
Contingent liabilities for: (Note 6)
Anticipated failure of insured institutions

$

265,687

268,451

1,591

8,261

200,435

200,301

467,713

477,013

Accumulated net income
Unrealized gain on available-for-sale securities, net (Note 3)

35,168,698
298,344

34,096,676
689,929

Total Fund Balance

35,467,042

34,786,605

Litigation losses and other
Total Liabilities

Commitments and off-balance-sheet exposure (Note / 1)
Fund Balance

Total Liabilities and Fund Balance
The accompanying notes are an integralpart o fthese financialstatements.




$ 35,934,755

$

35,263,618

Federal

Deposit

Insurance

Corporation

j Bank Insurance Fund Statement of Income and Fund Balance for the Years Ended December 31
Dollars

in T h o u s a n d s

2004

2005
Revenue
Interest on U.S. Treasury obligations
Assessments (Note 7)
Other revenue

$

1,713,316
52,570
17,587

Total Revenue

$

1,552,576
95,268
27,547

1,783,473

1,675,391

846,183
(138,181)
3,449

821,341
(281,390)
18,662

711,451

558,613

Expenses and Losses
Operating expenses (Note 8 )
Provision for insurance losses (Note 9)
Insurance and other expenses

Total Expenses and Losses
Net Income

1,072,022

Unrealized loss on available-for-sale securities, net

(391,585)

The accompanying notes are an integralpart o fthese financialstatements.




$

1,004,410

34,786,605

Fund Balance - Beginning

(112,368)

680,437

Comprehensive Income

Fund Balance - Ending

1,116,778

33,782,195

35,467,042

$

34,786,605

Bank Insurance Fund

Federal

Deposit

Insurance

Corporation

1 Bank Insurance Fund Statement of Cash Flows for the Years Ended December 31
Dollars

in T h o u s a n d s

2005
Operating Activities
Net Income:

$

1,072,022

2004
$

1,116,778

Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of U.S.Treasury obligations
Treasury inflation-protected securities (TIPS) inflation adjustment
Depreciation on property and equipment

613,971

737,439

(257,829)
55,989

(181,650)
54,424

Provision for insurance losses
Terminations/adjustments of work-in-process accounts

(138,181)
178

(281,390)
817

(3,398)
211,955
21,860
(182)

218,693
15,590
(1,047)

1,576,385

1,655,243

6,290,000
1,560,000

3,365,000
5,810,000

(47,197)

(104,502)
(10,026,597)

Change in Operating Assets and Liabilities:
(Increase) in interest receivable and other assets
Decrease in receivables from bank resolutions
Increase in accounts payable and other liabilities
(Decrease) in contingent liabilities for litigation losses and other

Net Cash Provided by Operating Activities

(24,411)

Investing Activities
Provided by:
M aturity of U.S.Treasury obligations, held-to-maturity
M aturity of U.S.Treasury obligations, available-for-sale

Used by:
Purchase of property and equipment
Purchase of U.S.Treasury obligations, held-to-maturity
Purchase of U.S Treasury obligations, available-for-sale

(8,789,136)

Net Cash Used by Investing Activities

(986,333)

The accompanying notes are an integralpart o fthese financialstatements.




(2,377,748)

590,052
$

(722,505)

1,821,776

Net lncrease/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

(1,421,649)

0

2,544,281

2,411,828

$

1,821,776

Financial Statements and Notes

Bank Insurance Fund
Notes to the Financial Statements December 31, 2005 and 2004




1. Legislation and Operations of the Bank Insurance Fund
Overview
The Federal Deposit Insurance Corporation (FDIC) is the independent deposit
insurance agency created by Congress in 1933 to maintain stability and public
confidence in the nation's banking system. Provisions that govern the operations
of the FDIC are generally found in the Federal Deposit Insurance (FDD Act, as
amended, (12 U.S.C. 1811, etseq). In carrying out the purposes of the FDI Act,
as amended, the FDIC insures the deposits of banks and savings associations,
and in cooperation with other federal and state agencies promotes the safety
and soundness of insured depository institutions by identifying, monitoring and
addressing risks to the deposit insurance funds. The FDIC is the administrator of
the Bank Insurance Fund (BIF), the Savings Association Insurance Fund (SAIF),
and the FSLIC Resolution Fund (FRF), which are maintained separately to
carry out their respective mandates. The BIF and the SAIF are insurance funds
responsible for protecting insured bank and thrift depositors from loss due
to institution failures. These insurance funds must be maintained at not less
than 1.25 percent of estimated insured deposits or a higher percentage as
circumstances warrant. The FRF is a resolution fund responsible for the sale
of remaining assets and satisfaction of liabilities associated with the former
Federal Savings and Loan Insurance Corporation (FSLIC) and the Resolution
Trust Corporation.
An active institution's insurance fund membership and primary federal supervisor
are generally determined by the institution's charter type. Deposits of BIF-member
institutions are generally insured by the BIF; BIF members are predominantly
commercial and savings banks supervised by the FDIC, the Office of the
Comptroller of the Currency, or the Federal Reserve Board. Deposits of SAIFmember institutions are generally insured by the SAIF; SAIF members are
predominantly thrifts supervised by the Office of Thrift Supervision.
In addition to traditional banks and thrifts, several other categories of institutions
exist. A member of one insurance fund may, with the approval of its primary
federal supervisor, merge, consolidate with, or acquire the deposit liabilities of
an institution that is a member of the other insurance fund without changing
insurance fund status for the acquired deposits. These institutions with deposits
insured by both insurance funds are referred to as Oakar financial institutions.
In addition, SAIF-member thrifts can convert to a bank charter and retain their
SAIF membership. These institutions are referred to as Sasser financial institutions.
Likewise, BIF-member banks can convert to a thrift charter and retain their BIF
membership.

Operations of the BIF
The primary purpose of the BIF is to: 1) insure the deposits and protect the
depositors of BIF-insured institutions and 2) resolve BIF-insured failed institutions
upon appointment of FDIC as receiver in a manner that will result in the least
possible cost to the BIF. In addition, the FDIC, acting on behalf of the BIF,
examines state-chartered banks that are not members of the Federal Reserve
System.




Bank Insurance Fund
The BIF is primarily funded from : 1) interest earned on investments in
U.S. Treasury obligations and 2) deposit insurance assessments. Additional
funding sources are U.S. Treasury and Federal Financing Bank (FFB) borrowings,
if necessary. The FDIC has borrowing authority from the U.S. Treasury up to
$30 billion for insurance purposes on behalf of the BIF and the SAIF.
A statutory formula, known as the Maximum Obligation Limitation (MOL), limits
the amount of obligations the BIF can incur to the sum of its cash, 90 percent of
the fair market value of other assets, and the amount authorized to be borrowed
from the U.S. Treasury. The MOL for the BIF was $57.2 billion and $57.0 billion
as of December 31, 2005 and 2004, respectively.

Receivership Operations
The FDIC is responsible for managing and disposing of the assets of failed
institutions in an orderly and efficient manner. The assets held by receivership
entities, and the claims against them, are accounted for separately from BIF
assets and liabilities to ensure that receivership proceeds are distributed in
accordance with applicable laws and regulations. Accordingly, income and
expenses attributable to receiverships are accounted for as transactions
of those receiverships. Receiverships are billed by the FDIC for services
provided on their behalf.

Recent Legislative Initiatives
The Deposit Insurance Reform Act of 2005 (Title II of Public Law 109-171) was
enacted on February 8, 2006. The companion legislation, the Federal Deposit
Insurance Reform Conforming Amendments Act of 2005 (Public Law 109-173),
was enacted on February 15, 2006. The legislation: 1) merges the BIF and the
SAIF into a new fund, the Deposit Insurance Fund (DIF); 2) annually permits
the designated reserve ratio to vary between 1.15 and 1.50 of estimated insured
deposits, thereby eliminating the fixed designated reserve ratio of 1.25;
3) requires the declaration of dividends from the DIF for the full amount
of the reserve ratio in excess of 1.50 percent or, if less than 1.50 percent,
one-half of the amount between 1.35 and 1.50 percent; 4) grants a one-time
assessment credit for each eligible institution or its successor based on
an institution's proportionate share of the aggregate assessment base at
December 31,1996; and 5) immediately increases coverage for certain
retirement accounts to $250,000 and indexes all deposit insurance coverage
every five years beginning January 1, 2011.




2, S um m ary o f S ig n ific a n t A cco u n tin g Policies
General
These financial statements pertain to the financial position, results of operations,
and cash flows of the BIF and are presented in conformity with U.S. generally
accepted accounting principles (GAAP). These statements do not include
reporting for assets and liabilities of closed banks for which the FDIC acts as
receiver. Periodic and final accountability reports of the FDIC's activities as
receiver are furnished to courts, supervisory authorities, and others as required.

Use of Estimates
Management makes estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from these estimates. Where it is reasonably possible that changes in estimates
w ill cause a material change in the financial statem ents in the near term,
the nature and extent of such changes in estimates have been disclosed. The
more significant estimates include allowance for loss on receivables from bank
resolutions, the estimated losses for anticipated failures and litigation, and the
postretirement benefit obligation.

Cash Equivalents
Cash equivalents are short-term, highly liquid investments with original maturities
of three months or less. Cash equivalents consist primarily of Special U.S. Treasury
Certificates.

Investment in U.S. Treasury Obligations
BIF funds are required to be invested in obligations of the United States or
in obligations guaranteed as to principal and interest by the United States; the
Secretary of the U.S. Treasury must approve all such investments in excess
of $100,000. The Secretary has granted approval to invest BIF funds only in
U.S. Treasury obligations that are purchased or sold exclusively through the
Bureau of the Public Debt's Government Account Series (GAS) program.
BIF's investments in U.S. Treasury obligations are either classified as heldto-maturity or available-for-sale. Securities designated as held-to-maturity are
shown at amortized cost. Amortized cost is the face value of securities plus
the unamortized premium or less the unamortized discount. Amortizations are
computed on a daily basis from the date of acquisition to the date of maturity,
except for callable U.S. Treasury securities, which are amortized to the first
call date. Securities designated as available-for-sale are shown at market value,
which approximates fair value. Unrealized gains and losses are included
in Comprehensive Income. Realized gains and losses are included in the
Statement of Income and Fund Balance as components of Net Income.
Income on both types of securities is calculated and recorded on a daily basis
using the effective interest method.




Bank Insurance Fund

Cost Allocations Among Funds
Operating expenses not directly charged to the BIF, the SAIF, and the FRF
are allocated to all funds using workload-based allocation percentages. These
percentages are developed during the annual corporate planning process and
through supplemental functional analyses.

Capital Assets and Depreciation
The FDIC has designated the BIF as administrator of property and equipment
used in its operations. Consequently, the BIF includes the cost of these assets
in its financial statements and provides the necessary funding for them. The BIF
charges the other funds usage fees representing an allocated share of its annual
depreciation expense. These usage fees are recorded as cost recoveries, which
reduce operating expenses.
The FDIC buildings are depreciated on a straight-line basis over a 35 to 50 year
estimated life. Leasehold improvements are capitalized and depreciated over
the lesser of the remaining life of the lease or the estimated useful life of the
improvements, if determined to be material. Capital assets depreciated on a
straight-line basis over a five-year estimated life include mainframe equipment;
furniture, fixtures, and general equipment; and internal-use software. Personal
computer equipment is depreciated on a straight-line basis over a three-year
estimated life.

Disclosure about Recent Accounting Pronouncements
Recent accounting pronouncements have been adopted or deemed to be not
applicable to the financial statements as presented.

Related Parties
The nature of related parties and a description of related party transactions
are discussed in Note 1 and disclosed throughout the financial statements
and footnotes.

Reclassifications
Reclassifications have been made in the 2004 financial statements to conform
to the presentation used in 2005. These reclassifications include the reallocation
of amounts from "Provision for insurance losses" to "Insurance and other
expenses" for assets acquired from assisted banks and terminated receiverships.
The reclassifications, which were based on the restructuring of accounts, had no
impact on the prior year's net income or fund balance.

3. Investm ent in U .S .Treasury O bligations, N e t
As of December 31, 2005 and 2004, the book value of investments in
U.S. Treasury obligations, net, was $32.3 billion and $32.1 billion, respectively.
As of December 31, 2005, the BIF held $6.5 billion of Treasury inflation-protected
securities (TIPS). These securities are indexed to increases or decreases in the
Consumer Price Index for All Urban Consumers (CPI-U). Additionally, the BIF
held $5.4 billion of callable U.S. Treasury bonds at December 31, 2005. Callable
U.S. Treasury bonds may be called five years prior to the respective bonds' stated
maturity on their semi-annual coupon payment dates upon 120 days notice.

U.S. Treasury Obligations at December 31, 2005
Dollars

in T h o u s a n d s

Maturity*

Yield at
Purchase’

Net
Carrying
Amount

Face
Value

Unrealized
Holding
Gains

Unrealized
Holding
Losses*

Market
Value

I Held-to-Maturity
W ithin 1 year
A fter 1 year thru 5 years

5.30%
4.40%

A fter 5 years thru 10 years
A fter 10 years

4.51%
4.72%

Treasury Inflation-Protected
A fter 1 year thru 5 years

3.82%

Total

$

4,300,000
13,150,000

$

3,980,000

23,194
123,794

$

668,008
$

675,000

$

(13,557)
(135,647)

4,323,348
14,016,333

$

(10,065)

4,261,365

24,669

668,838

23,203,008

$

44,264

4,227,166
1,440,710

1,105,000

$

4,313,711
14,028,186

0

1,465,379

33,252

24,678,611

$

249,173

713,006

$

0

$ (159,269)

702,090

s

24,768,515

| Available-for-Sale
W ithin 1 year
A fter 1 year thru 5 years

3.85%
3.64%

629

$

(4,849)

1 0 1 0 ,0 0 0

$

1,092,280

3,429

(16,448)

708,786
1,079,261
4,108,057

,

Treasury Inflation-Protected
A fter 1 year thru 5 years

3.94%

3,891,165

3,896,133

211,924

0

A fter 5 years thru 10 years

3.39%

1,613,689

1,620,970

103,659

$

0

Total

$

7,189,854

$

7,322,389

$

32,001,000

$

319,641

$

(21,297)

1,724,629
$

7,620,733

Total Investment in U.S. Treasury Obligations, Net
Total

$

30,392,862

$ 568,814

$ (180,566)

$ 32,389,248

*For purposes of this table, all callable securities are assumed to mature on their first call dates. Their yields at purchase are reported as their yield to first call date.
TFor TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation
assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.2%, based on figures issued by the Congressional Budget Office and Blue Chip
Economic Indicators in early 2005.
"All unrealized losses occurred as a result of changes in market interest rates. FDIC has the ability and intent to hold the related securities until maturity. As a result, all
unrealized losses are considered temporary. However, of the $181 million reported as total unrealized losses, $86 million is recognized as unrealized losses occurring over
a period of
 12 months or longer with a market value of $3.7 billion applied to the affected securities.


Bank Insurance Fund

U.S. Treasury Obligations at December 31, 2004
Dollars

in T h o u s a n d s

Maturity*

Yield at
Purchase’

Net
Carrying
Amount

Face
Value

Unrealized
Holding
Gains

Unrealized
Holding
Losses ‘

Market
Value

! Held-to-Maturity
W ithin 1 year

3.93%

A fter 1 year thru 5 years
A fter 5 years thru 10 years

4.94%
4.76%

Treasury Inflation-Protected
A fter 1 year thru 5 years

3.82%

Total

6,290,000

$

$

10,575,000
4,360,000

6,486,753

50,757

11,135,043
4,374,344

640,107
$

$

1,598,564

S

724,219

$

(10,104)
(1,336)

76,255

22,637,330

1,560,000

(11,129)

$

399,365
197,842

641,190

21,865,107

$

$

11,524,304
4,570,850
717,445

0

$

(22,569)

6,526,381

S 23,338,980

Available-for-Sale
W ithin 1 year

3.65%

A fter 1 year thru 5 years
Treasury Inflation-Protected
A fter 1 year thru 5 years

3.72%

1,685,000

1,893,380

31,116

3.81%

A fter 5 years thru 10 years

3.75%

2,270,854
3,004,072

2,268,756
3,019,976

236,566
427,114

Total

$

S

8,519,926

s

$

10,129

$

(3,051)

$

1,605,642

(11,945)

1,912,551

0

2,505,322

8,780,676

$

704,925

$

(14,996)

3,447,090
$ 9,470,605

31,418,006

$

1,429,144

$

(37,565)

$ 32,809,585

0

Total Investment in U.S. Treasury Obligations, Net
Total

$

30,385,033

$

*For purposes of this table, all callable securities are assumed to mature on their first call dates. Their yields at purchase are reported as their yield to first call date.
’ For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation
assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.2%, based on figures issued by the Congressional Budget Office and Blue Chip
Economic Indicators in early 2004.
"All unrealized losses occurred during the last 12 months as a result of changes in market interest rates. FDIC has the ability and intent to hold the related securities
until maturity. As a result, all unrealized losses are considered temporary.




As of December 31, 2005 and 2004, the unamortized premium, net of the
unamortized discount, was $1.6 billion and $1 billion, respectively.

a
mmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmammmatBammmmmmmmmmmmm

4. Receivables fro m Bank Resolutions, N e t
The receivables from bank resolutions include payments made by the BIF to
cover obligations to insured depositors, advances to receiverships for working
capital, and administrative expenses paid on behalf of receiverships. Any related
allowance for loss represents the difference between the funds advanced and/or
obligations incurred and the expected repayment. Assets held by BIF receiverships
are the main source of repayment of the BIF's receivables from closed banks.
As of December 31, 2005, there were 24 active receiverships, with no failures
in the current year.
As of December 31, 2005 and 2004, BIF receiverships held assets with
a book value of $357 million and $504 million, respectively (including cash,
investments, and miscellaneous receivables of $251 million and $269 million
at December 31, 2005 and 2004, respectively). The estimated cash recoveries
from the management and disposition of these assets that are used to derive
the allowance for losses are based on a sampling of receivership assets in
liquidation. The sampled assets are generally valued by estimating future cash
recoveries, net of applicable liquidation cost estimates, and then discounting
these net cash recoveries using current market-based risk factors based on
a given asset's type and quality. Resultant recovery estimates are extrapolated
to the non-sampled assets in order to derive the allowance for loss on the
receivable. These estimated recoveries are regularly evaluated, but remain
subject to uncertainties because of potential changes in economic and market
conditions. Such uncertainties could cause the BIF's actual recoveries to vary
from the level currently estimated.
I Receivables From Bank Resolutions, Net at December 31
Dollars

in T h o u s a n d s

2004

2005
Receivables from closed banks

$




$

(4,066,991)

Allowance for losses

Total

4,366,308

$

299,317

4,621,702
(4,246,399)

$

375,303

As of December 31, 2005, an allowance for loss of $4.1 billion, or 93 percent
of the gross receivable, was recorded. Of the remaining seven percent of the
gross receivable, the amount of credit risk is limited since 71 percent of the
receivable will be repaid from receivership cash and investments.

Bank Insurance Fund

5. P roperty and E quipm ent, N e t
Property and Equipment, Net at December 31
Dollars

in T h o u s a n d s

2004

2005
Land

$

37,352

Buildings (includes construction-in-process)
Application software (includes work-in-process)
Furniture, fixtures, and equipment
Accumulated depreciation




37,352
221,494
223,149
133,556
(258,445)

272,861
241,424
140,728
(273,789)

Retirements

Total

$

(40,512)

$

378,064

0

$

357,106

The depreciation expense was $56 million and $54 million for December 31, 2005
and 2004, respectively.

6. C o n tin g en t Liabilities for:
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■I
Anticipated Failure of Insured Institutions
The BIF records a contingent liability and a loss provision for BIF-insured institutions
(including Oakar and Sasser financial institutions) that are likely to fail within
one year of the reporting date, absent some favorable event such as obtaining
additional capital or merging, when the liability becomes probable and reasonably
estimable.
The contingent liability is derived by applying expected failure rates and loss
rates to institutions based on supervisory ratings, balance sheet characteristics,
and projected capital levels. In addition, institution-specific analysis is performed
on those institutions where failure is imminent absent institution management
resolution of existing problems, or where additional information is available that
may affect the estimate of losses. As of December 31, 2005 and 2004, the
contingent liabilities for anticipated failure of insured institutions were $2 million
and $8 million, respectively.
In addition to these recorded contingent liabilities, the FDIC has identified additional
risk in the financial services industry that could result in an additional loss to
the BIF should potentially vulnerable financial institutions ultimately fail. This risk
results from the presence of various high-risk banking business activities that are
particularly vulnerable to adverse economic and market conditions. Due to the
uncertainty surrounding such conditions in the future, there are institutions other
than those with losses included in the contingent liability for which the risk of
failure is less certain, but still considered reasonably possible. As a result of
these risks, the FDIC believes that it is reasonably possible that the BIF could
incur additional estimated losses up to approximately $0.3 billion.




The accuracy of these estimates will largely depend on future economic and
market conditions. The FDIC's Board of Directors has the statutory authority to
consider the contingent liability from anticipated failures of insured institutions
when setting assessment rates.
There remains uncertainty about the effect of the 2005 hurricane season on
the deposit insurance fund balances. The economic dislocations as well as the
potential adverse effects on collateral values and the repayment capacity of
borrowers resulting from the hurricanes may stress the balance sheets of a few,
small institutions that are located in the areas of greatest devastation. The FDIC
continues to evaluate the risks to affected institutions in light of economic
conditions, the amount of insurance proceeds that will protect institution collateral,
and the level of government disaster relief. At this point, however, the FDIC
cannot estimate the impact of such risks on the insurance funds.

Litigation Losses
The BIF records an estimated loss for unresolved legal cases to the extent that
those losses are considered probable and reasonably estimable. In addition to
the amount recorded as probable, the FDIC has determined that losses from
unresolved legal cases totaling $1.2 million are reasonably possible.

Other Contingencies
Representations and Warranties
As part of the FDIC's efforts to maximize the return from the sale of assets
from bank resolutions, representations and warranties, and guarantees were
offered on certain loan sales. In general, the guarantees, representations,
and warranties on loans sold relate to the completeness and accuracy of loan
documentation, the quality of the underwriting standards used, the accuracy
of the delinquency status when sold, and the conformity of the loans with
characteristics of the pool in which they were sold. The total amount of loans
sold subject to unexpired representations and warranties, and guarantees was
$3.4 billion as of December 31, 2005. There were no contingent liabilities from
any of the outstanding claims asserted in connection with representations and
warranties at December 31, 2005 and 2004, respectively.
In addition, future losses on representations and warranties, and guarantees
could be incurred over the remaining life of the loans sold, which is generally
20 years or more. Consequently, the FDIC believes it is possible that additional
losses may be incurred by the BIF from the universe of outstanding contracts
w ith unasserted representation and warranty claims. However, because of
the uncertainties surrounding the timing of when claims may be asserted,
the FDIC is unable to reasonably estimate a range of loss to the BIF from
outstanding contracts w ith unasserted representation and warranty claims.




Bank Insurance Fund

7. Assessm ents
In compliance with provisions of the FDI Act, as amended, the FDIC uses a
risk-based assessment system that charges higher rates to those institutions that
pose greater risks to the BIF. To arrive at a risk-based assessment for a particular
institution, the FDIC places each institution in one of nine risk categories based
on capital ratios and supervisory examination data. Due to the continuing health
of the banking industry, the majority of the financial institutions are not assessed.
Of those assessed, the assessment rate averaged approximately 11 cents and
22 cents per $100 of assessable deposits for 2005 and 2004, respectively. During
2005 and 2004, $53 million and $95 million were recognized as assessment
income from BIF-member institutions, respectively. On November 8, 2005, the
Board voted to retain the BIF assessment schedule at the annual rate of 0 to
27 cents per $100 of assessable deposits for the first semiannual period of
2006. The Board reviews assessment rates semiannually to ensure that funds
are available to satisfy the BIF's obligations. If necessary, the Board may impose
more frequent rate adjustments or emergency special assessments.
The FDIC is required to maintain the insurance funds at a designated reserve
ratio (DRR) of not less than 1.25 percent of estimated insured deposits (or a
higher percentage as circumstances warrant). If the reserve ratio falls below the
DRR, the FDIC is required to set semiannual assessment rates that are sufficient
to increase the reserve ratio to the DRR not later than one year after such rates
are set, or in accordance with a recapitalization schedule of fifteen years or less.
As of September 30, 2005, the BIF reserve ratio was 1.25 percent of estimated
insured deposits.
Assessments are also levied on institutions for payments of the interest
on obligations issued by the Financing Corporation (FICO). The FICO was
established as a mixed-ownership government corporation to function solely
as a financing vehicle for the FSLIC. The annual FICO interest obligation of
approximately $790 million is paid on a pro rata basis using the same rate
for banks and thrifts. The FICO assessment has no financial impact on the
BIF and is separate from the regular deposit insurance assessments. The
FDIC, as administrator of the BIF, acts solely as a collection agent for the
FICO. During 2005 and 2004, $620 million and $631 million, respectively,
were collected from BIF-member institutions and remitted to the FICO.

8. O perating Expenses
Operating expenses were $846 million for 2005, compared to $821 million for
2004. The chart below lists the major components of operating expenses.
Operating Expenses for the Years Ended December 31
Dollars

in T h o u s a n d s

2004

2005
$

Salaries and benefits

$

567,936

575,100

Outside services

97,863

84,947

Travel
Buildings and leased space
Software/Hardware maintenance
Depreciation of property and equipment

36,089
60,693

Other

40,918
62,807
21,803
55,989
19,093

Services billed to receiverships

(20,226)

(20,569)

$

Total

10,778
54,424
19,879

$

846,183

821,341

9. Provision fo r Insurance Losses
Provision for insurance losses was a negative $138 million for 2005 and a negative
$281 million for 2004. The following chart lists the major components of the
provision for insurance losses.
1 Provision for Insurance Losses for the Years Ended December 31
Dollars

in T h o u s a n d s

2005

2004

Valuation Adjustments:
Other assets

$

(136,305)
4,479

Total Valuation Adjustments

(131,826)

(108,040)

(6,670)

(170,005)

174
141

(3,998)
653

(6,355)

(173,350)

Closed banks

$

(82,758)
(25,282)

Contingent Liabilities Adjustments:
Anticipated failure of insured institutions
Litigation losses
Other contingencies

Total Contingent Liabilities Adjustments
Total




S

(138,181)

$

(281,390)

Bank Insurance Fund

10. Em ployee Benefits
Pension Benefits, Savings Plans and Postemployment Benefits
Eligible FDIC employees (permanent and term employees with appointments
exceeding one year) are covered by the federal government retirement plans,
either the Civil Service Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Although the BIF contributes a portion of pension
benefits for eligible employees, it does not account for the assets of either
retirement system. The BIF also does not have actuarial data for accumulated
plan benefits or the unfunded liability relative to eligible employees. These amounts
are reported on and accounted for by the U.S. Office of Personnel Management.
Eligible FDIC employees also may participate in a FDIC-sponsored tax-deferred
401 (k) savings plan with matching contributions up to five percent. The BIF
pays its share of the employer's portion of all related costs.
The FDIC offered a voluntary employee buyout program to a majority of its
employees during 2004 and conducted a reduction-in-force (RIF) during 2005
in an effort to further reduce identified staffing excesses. Consequently, 578
employees left or will leave the FDIC as a result of the buyout program and
an additional 62 employees left due to the RIF. Termination benefits included
compensation of fifty percent of the current salary for voluntary departures
and severance pay for employees that left due to the RIF. The total cost of
the buyout program and the RIF to the FDIC was $32.6 million, w ith BIF's
share totaling $28 million, which is included in the "Operating expenses"
line item for 2005 and 2004.
I Pension Benefits, Savings Plans Expenses and Postemployment Benefits for the Years Ended December 31
Dollars

in T h o u s a n d s

2004

2005
Civil Service Retirement System
Federal Employees Retirement System (Basic Benefit)
FDIC Savings Plan
Federal Thrift Savings Plan
Separation Incentive Payment
Severance Pay

Total




$

6,659
33,867
18,358
13,421
19,463

$

198

2,301

S

7,958
33,638
19,604
13,715
6,082

94,069

$

81.195

Postretirement Benefits Other Than Pensions
The FDIC provides certain life and dental insurance coverage for its eligible
retirees, the retirees' beneficiaries, and covered dependents. Retirees eligible
for life insurance coverage are those who have qualified due to: 1) immediate
enrollment upon appointment or five years of participation in the plan and
2) eligibility for an immediate annuity. The life insurance program provides
basic coverage at no cost to retirees and allows converting optional coverages
to direct-pay plans. Dental coverage is provided to all retirees eligible for an
immediate annuity.

At December 31, 2005 and 2004, the BIF's net postretirement benefit liability
recognized in the "Accounts payable and other liabilities" line item in the
Balance Sheet was $110 million and $104 million, respectively. In addition,
the BIF's expense for these benefits in 2005 and 2004 was $9.0 million and
$9.3 million, respectively, which is included in the current and prior year's
operating expenses. Key actuarial assumptions used in the accounting for
the plan include the discount rate, the rate of compensation increase, and
the dental coverage trend rate.

11. C o m m itm en ts and O ff-B alance-S heet Exposure
Commitments
Leased Space
The BIF's allocated share of the FDIC's lease commitments totals $78.6 million
for future years. The lease agreements contain escalation clauses resulting in
adjustments, usually on an annual basis. The allocation to the BIF of the FDIC's
future lease commitments is based upon current relationships of the workloads
among the BIF and the SAIF. Changes in the relative workloads could cause
the amounts allocated to the BIF in the future to vary from the amounts shown
below. The BIF recognized leased space expense of $34 million and $36 million
for the years ended December 31, 2005 and 2004, respectively.
Leased Space Commitments
Dollars

in T h o u s a n d s

2006 __________
2007
$ 27,412
S 18,392




2008
$ 13,159

2009
$ 11,445

2010

2011/Thereafter

$ 5,019

$ 3,189

Off-Balance-Sheet Exposure
Deposit Insurance
As of September 30, 2005, the estimated insured deposits for BIF were
$2.8 trillion. This would be the accounting loss if all depository institutions
were to fail and the acquired assets provided no recoveries.




Bank Insurance Fund

12. Disclosures A bout the Fair Value o f Financial Instrum ents
Cash equivalents are short-term, highly liquid investments and are shown at
current value. The fair market value of the investment in U.S. Treasury obligations
is disclosed in Note 3 and is based on current market prices. The carrying amount
of interest receivable on investments, short-term receivables, and accounts
payable and other liabilities approximates their fair market value, due to their
short maturities and/or comparability with current interest rates.
The net receivables from bank resolutions primarily include the BIF's subrogated
claim arising from payments to insured depositors. The receivership assets
that will ultimately be used to pay the corporate subrogated claim are valued
using discount rates that include consideration of market risk. These discounts
ultimately affect the BIF's allowance for loss against the net receivables from
bank resolutions. Therefore, the corporate subrogated claim indirectly includes
the effect of discounting and should not be viewed as being stated in terms
of nominal cash flows.
Although the value of the corporate subrogated claim is influenced by valuation
of receivership assets (see Note 4), such receivership valuation is not equivalent
to the valuation of the corporate claim. Since the corporate claim is unique, not
intended for sale to the private sector, and has no established market, it is not
practicable to estimate its fair market value.
The FDIC believes that a sale to the private sector of the corporate claim
would require indeterminate, but substantial, discounts for an interested party
to profit from these assets because of credit and other risks. In addition, the
timing of receivership payments to the BIF on the subrogated claim does not
necessarily correspond with the timing of collections on receivership assets.
Therefore, the effect of discounting used by receiverships should not necessarily
be viewed as producing an estimate of market value for the net receivables
from bank resolutions.

Financial Statements and Notes

Savings A ssociation Insurance Fund
December 31, 2005 and 2004




Savings A ssociation Insurance Fund

Federal

Deposit

Insurance

Corporation

Savings Association Insurance Fund Balance Sheet at December 31
Dollars

in T h o u s a n d s

2005

2004

797,616

644,346

341,656

328.394

9,574,627
2,366,489
191,364

8,835,964

234,157

346,923

$

13,505,909

13,076,146

$

30,854

25,568

3,775

1,957

SAIF-member exit fees and investment proceeds held in escrow (Note 3)

341,656

328.394

Total Liabilities

376,350

355,958

13,021,364

12,482,227

108,195

237,961

13,129,559

12,720,188

Assets
Cash and cash equivalents

$

Cash and other assets: Restricted for SAIF-member exit fees (Note 3)
(Includes cash and cash equivalents of $20.9 million and $56.5 million
at December 31, 2005 and 2004, respectively!
Investment in U.S. Treasury obligations, net: (Note 4)
Held-to-maturity securities
Available-for-sale securities
Interest receivable on investments and other assets, net
Receivables from th rift resolutions, net (Note 5)

Total Assets

2,720,315
200,204

Liabilities
Accounts payable and other liabilities
Contingent liabilities for: (Note 6)
Anticipated failure of insured institutions
Litigation losses

65

39

Commitments and off-balance-sheet exposure (Note 7 V

Fund Balance
Accumulated net income
Unrealized gain on available-for-sale securities, net (Note 4)

Total Fund Balance
Total Liabilities and Fund Balance
The accompanying notes are an integralpart o fthese financialstatements.




$

13,505,909

$

13,076,146

Federal

Deposit

Insurance

Corporation

Savings Association Insurance Fund Statement of Income and Fund Balance for the Years Ended December 31
Dollars

in T h o u s a n d s

2005

2004
555,592

Other revenue

628,189
8,315
485

Total Revenue

636,989

564,777

119,468
(21,988)

119,998
(72,385)

Insurance and other expenses

372

713

Total Expenses and Losses

97,852

48,326

Revenue
Interest on U.S.Treasury obligations
Assessments (Note 7)

8,891
294

Expenses and Losses
Operating expenses (Note 8 )
Provision for insurance losses (Note 9)

539,137

Fund Balance - Beginning
Fund Balance - Ending
The accompanying notes are an integralpart o f these financialstatements.




$

480,123

12,720,188

Comprehensive Income

(36,328)

409,371

Unrealized loss on available-for-sale securities, net

516,451

(129,766)

Net Income

12,240,065

13,129,559

$

12.720,188

Savings A ssociation Insurance Fund

Federal

Deposit

Insurance

Corporation

Savings Association Insurance Fund Statement of Cash Flows for the Years Ended December 31
Dollars

in T h o u s a n d s

2004

2005
Operating Activities
Net Income:

$

Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of U.S.Treasury obligations

539,137

$

516,451

220,147

262,317

(87,194)

Treasury inflation-protected securities (TIPS) inflation adjustment
Provision for losses

(61,431)
(72,385)

(21,988)

Amortization of prepaid FFIEC assets

17

0

(6,565)

2,443

8,988

(16,065)

136,218
5,285

(2,635)
5,028

Change in Operating Assets and Liabilities:
(IncreaseJ/Decrease in unamortized premium and discount
of U.S.Treasury Obligations (restricted)
Decrease/flncrease) in entrance and exit fees receivable, including interest receivable
on investments and other assets
Decrease/(lncrease) in receivables from th rift resolutions
Increase in accounts payable and other liabilities
Increase in exit fees and investment proceeds held in escrow

28,556

9,107

822.601

642,830

1,930,000
270,000

Net Cash Provided by Operating Activities

1,690,000
1,360,000

Investing Activities
Provided by:
M aturity of U.S.Treasury obligations, held-to-maturity
M aturity of U.S.Treasury obligations, available-for-sale

Used by:
Purchase of U.S.Treasury obligations, held-to-maturity

(2,904,848)

(4,051,084)

(704,848)

Net Cash Used by Investing Activities

(1,001,084)

Net lncrease/(Decrease) in Cash and Cash Equivalents

117,753

(358,254)

Cash and Cash Equivalents - Beginning

700,798

1,059,052

797,616

644,346

20,935

56,452

Unrestricted Cash and Cash Equivalents - Ending
Restricted Cash and Cash Equivalents - Ending
Cash and Cash Equivalents - Ending
The accompanying notes are an integralpart o fthese financialstatements.




$

818,551

$

700,798

Financial Statements and Notes

Savings A ssociation Insurance Fund
Notes to the Financial Statements December 31, 2005 and 2004




1. Legislation and Operations of the Savings A ssociation Insurance
Fund
Overview
The Federal Deposit Insurance Corporation (FDIC) is the independent deposit
insurance agency created by Congress in 1933 to maintain stability and public
confidence in the nation's banking system. Provisions that govern the operations
of the FDIC are generally found in the Federal Deposit Insurance (FDD Act, as
amended, (12 U.S.C. 1811, et seq). In carrying out the purposes of the FDI Act,
as amended, the FDIC insures the deposits of banks and savings associations,
and in cooperation with other federal and state agencies promotes the safety
and soundness of insured depository institutions by identifying, monitoring and
addressing risks to the deposit insurance funds. FDIC is the administrator of the
Savings Association Insurance Fund (SAIF), the Bank Insurance Fund (BIF), and
the FSLIC Resolution Fund (FRF), which are maintained separately to carry out
their respective mandates. The SAIF and the BIF are insurance funds responsible
for protecting insured thrift and bank depositors from loss due to institution
failures. These insurance funds must be maintained at not less than 1.25 percent
of estimated insured deposits or a higher percentage as circumstances warrant.
The FRF is a resolution fund responsible for the sale of remaining assets and
satisfaction of liabilities associated with the former Federal Savings and Loan
Insurance Corporation (FSLIC) and the Resolution Trust Corporation.
An active institution's insurance fund membership and primary federal
supervisor are generally determined by the institution's charter type. Deposits
of SAIF-member institutions are generally insured by the SAIF; SAIF members
are predominantly thrifts supervised by the Office of Thrift Supervision (OTS).
Deposits of BIF-member institutions are generally insured by the BIF; BIF
members are predominantly commercial and savings banks supervised by the
FDIC, the Office of the Comptroller of the Currency, or the Federal Reserve Board.
In addition to traditional thrifts and banks, several other categories of institutions
exist. A member of one insurance fund may, with the approval of its primary
federal supervisor, merge, consolidate with, or acquire the deposit liabilities of
an institution that is a member of the other insurance fund without changing
insurance fund status for the acquired deposits. These institutions with deposits
insured by both insurance funds are referred to as Oakar financial institutions.
In addition, SAIF-member thrifts can convert to a bank charter and retain their SAIF
membership. These institutions are referred to as Sasser financial institutions.
Likewise, BIF-member banks can convert to a thrift charter and retain their BIF
membership.

Operations of the SAIF
The primary purpose of the SAIF is to: 1) insure the deposits and protect
the depositors of SAIF-insured institutions and 2) resolve SAIF-insured failed
institutions upon appointment of FDIC as receiver in a manner that will result
in the least possible cost to the SAIF.




Savings A ssociation Insurance Fund
The SAIF is primarily funded from: 1) interest earned on investments in
U.S. Treasury obligations and 2) deposit insurance assessments. Additional
funding sources are borrowings from the U.S.Treasury, the Federal Financing
Bank (FFB), and the Federal Home Loan Banks, if necessary. The FDIC has
borrowing authority from the U.S. Treasury up to $30 billion for insurance
purposes on behalf of the SAIF and the BIF.
A statutory formula, known as the Maximum Obligation Limitation (MOL),
limits the amount of obligations the SAIF can incur to the sum of its cash,
90 percent of the fair market value of other assets, and the amount authorized
to be borrowed from the U.S. Treasury. The MOL for the SAIF was $21.0 billion
as of December 31, 2005 and 2004, respectively.

Receivership Operations
The FDIC is responsible for managing and disposing of the assets of failed
institutions in an orderly and efficient manner. The assets held by receivership
entities, and the claims against them, are accounted for separately from SAIF
assets and liabilities to ensure that receivership proceeds are distributed in
accordance w ith applicable laws and regulations. Accordingly, income and
expenses attributable to receiverships are accounted for as transactions of
those receiverships. Receiverships are billed by the FDIC for services provided
on their behalf.

Recent Legislative Initiatives
The Deposit Insurance Reform Act of 2005 (Title II of Public Law 109-171) was
enacted on February 8, 2006. The companion legislation, the Federal Deposit
Insurance Reform Conforming Amendments Act of 2005 (Public Law 109-173),
was enacted on February 15, 2006. The legislation: 1) merges the BIF and the
SAIF into a new fund, the Deposit Insurance Fund (DIF); 2) requires the deposit
of funds into the DIF for SAIF-member exit fees that have been restricted and
held in escrow; 3) annually permits the designated reserve ratio to vary between
1.15 and 1.50 of estimated insured deposits, thereby eliminating the fixed
designated reserve ratio of 1.25; 4) requires the declaration of dividends from
the DIF for the full amount of the reserve ratio in excess of 1.50 percent or, if
less than 1.50 percent, one-half of the amount between 1.35 and 1.50 percent;
5) grants a one-time assessment credit for each eligible institution or its
successor based on an institution's proportionate share of the aggregate
assessment base at December 31, 1996; and 6) immediately increases coverage
for certain retirement accounts to $250,000 and indexes all deposit insurance
coverage every five years beginning January 1, 2011.




2. Sum m ary of Significant A ccounting Policies
General
These financial statements pertain to the financial position, results of operations,
and cash flows of the SAIF and are presented in conformity with U.S. generally
accepted accounting principles (GAAP). These statements do not include reporting
for assets and liabilities of closed thrift institutions for which the FDIC acts as
receiver. Periodic and final accountability reports of the FDIC’s activities as
receiver are furnished to courts, supervisory authorities, and others as required.

Use of Estimates
Management makes estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from these estimates. Where it is reasonably possible that changes in estimates
will cause a material change in the financial statements in the near term, the
nature and extent of such changes in estimates have been disclosed. The
more significant estimates include allowance for loss on receivables from
th rift resolutions, the estimated losses for anticipated failures and litigation,
and the postretirement benefit obligation.

Cash Equivalents
Cash equivalents are short-term, highly liquid investments w ith original
m aturities of three months or less. Cash equivalents consist primarily of
Special U.S. Treasury Certificates.

Investment in U.S. Treasury Obligations
SAIF funds are required to be invested in obligations of the United States
or in obligations guaranteed as to principal and interest by the United States;
the Secretary of the U.S. Treasury must approve all such investments in excess
of $100,000. The Secretary has granted approval to invest SAIF funds only in
U.S. Treasury obligations that are purchased or sold exclusively through the
Bureau of the Public Debt's Government Account Series (GAS) program.
SAIF's investments in U.S. Treasury obligations are either classified as heldto-m aturity or available-for-sale. Securities designated as held-to-maturity are
shown at amortized cost. Amortized cost is the face value of securities plus
the unamortized premium or less the unamortized discount. Amortizations are
computed on a daily basis from the date of acquisition to the date of maturity,
except for callable U.S. Treasury securities, which are amortized to the first
call date. Securities designated as available-for-sale are shown at market value,
which approximates fair value. Unrealized gains and losses are included in
Comprehensive Income. Realized gains and losses are included in the Statement
of Income and Fund Balance as components of Net Income. Income on both
types of securities is calculated and recorded on a daily basis using the effective
interest method.




Savings A ssociation Insurance Fund

Cost Allocations Among Funds
Operating expenses not directly charged to the SAIF, the BIF, and the FRF
are allocated to all funds using workload-based allocation percentages. These
percentages are developed during the annual corporate planning process and
through supplemental functional analyses.

Disclosure about Recent Accounting Pronouncements
Recent accounting pronouncements have been adopted or deemed to be not
applicable to the financial statements as presented.

Related Parties
The nature of related parties and a description of related party transactions
are discussed in Note 1 and disclosed throughout the financial statements and
footnotes.

Reclassifications
Reclassifications have been made in the 2004 financial statements to conform
to the presentation used in 2005. These reclassifications include the reallocation
of amounts from "Provision for insurance losses" to "Insurance and other
expenses" for assets acquired from assisted thrifts and terminated receiverships.
Additionally, amounts were reallocated from "Operating expenses" to "Insurance
and other expenses" for SAIF's share of the loss on the retirement of capital
assets. The reclassifications, which were based on the restructuring of accounts,
had no impact on the prior year's net income or fund balance.

3. Cash and Other A sse ts: Restricted for SAIF-Member Exit Fees
The SAIF collects entrance and exit fees for conversion transactions when an
insured depository institution converts from the BIF to the SAIF (resulting in an
entrance fee) or from the SAIF to the BIF (resulting in an exit fee). Regulations
approved by the FDIC's Board of Directors (Board) and published in the Federal
Register on March 21, 1990, directed that exit fees paid to the SAIF be held in
escrow.
The FDIC and the Secretary of the Treasury will determine when it is no longer
necessary to escrow such funds for the payment of interest on obligations
previously issued by the Financing Corporation (FICO). These escrowed exit
fees are invested in U.S. Treasury securities pending determination of ownership.
The interest earned is also held in escrow. There were no conversion transactions
during 2005 and 2004 that resulted in an entrance/exit fee to the SAIF.

Cash and Other Assets: Restricted for SAIF-Member Exit Fees at December 31
Dollars

in T h o u s a n d s

2004

2005
Cash and cash equivalents

$

20,935

Total

$

267,375

4,781

Interest receivable on U.S. Treasury obligations

56,452

315,940

Investment in U.S. Treasury obligations, net

4,567

341,656

$

328,394

U.S. Treasury Obligations at December 31, 2005 (Restricted for SAIF-Member Exit Fees)
Dollars

in T h o u s a n d s

Held-to-Maturity
Yield at
Purchase

Maturity

Net
Carrying
Amount

Face
Value

Unrealized
Holding
Gains

Unrealized
Holding
Losses*

$

$

Market
Value

W ithin 1 year

4.55%

A fter 1 year thru 5 years

4.08%

146,000

157,004

475

A fte r 5 years thru 10 years

4.66%

85,000

85,423

1,475

0

86,898

A fte r 10 years

4.69%

30,000

38,067

587

0

38,654

Total

$

$

35,000

296,000

$

$

35,446

315,940

$

87

2,624

(8 8 )

$

(1,689)

S

(1,777)

35,445
155,790

$ 316,787

* All unrealized losses occurred as a result of changes in market interest rates. FDIC has the ability and intent to hold the related securities until maturity. As a result, all
unrealized losses are considered temporary. However, of the $1.8 million reported as total unrealized losses, $829 thousand is recognized as unrealized losses occurring
over a period of 12 months or longer with a market value of $35.6 million applied to the affected securities.

U.S. Treasury Obligations at December 31, 2004 (Restricted for SAIF-Member Exit Fees)
Dollars

in T h o u s a n d s

Held-to-Maturity

Maturity

Yield at
Purchase

Net
Carrying
Amount

Face
Value
$

70,000

$

73,879

Unrealized
Holding
Gains

Unrealized
Holding
Losses

$

$

W ithin 1 year

2.36%

A fte r 1 year thru 5 years

4.40%

104,000

115,725

2,852

A fter 5 years thru 10 years

4.67%

80,000

77,771

3,184

Total

$

254,000

$

267,375

$

0

6,036

(162)

Market
Value
$

(60)

80,955

0

$

(222)

73,717
118,517

$ 273,189

* Ail unrealized losses occurred during the last 12 months as a result of changes in market interest rates. FDIC has the ability and intent to hold the related securities until
maturity. As a result, all unrealized losses are considered temporary.




As of December 31, 2005 and 2004, the unamortized premium, net of the
unamortized discount, was $19.9 million and $13.4 million, respectively.




Savings A ssociation Insurance Fund

4. Investm ent in U .S. Treasury Obligations, Net
As of December 31,2005 and 2004, the book value of investments in U.S. Treasury
obligations, net, was $11.9 billion and $11.6 billion, respectively. As of
December 31, 2005, the SAIF held $2.2 billion of Treasury inflation-protected
securities (TIPS). These securities are indexed to increases or decreases in the
Consumer Price Index for All Urban Consumers (CPI-U). Additionally, the SAIF
held $2.1 billion of callable U.S. Treasury bonds at December 31, 2005. Callable
U.S. Treasury bonds may be called five years prior to the respective bonds'
stated m aturity on their semi-annual coupon payment dates upon 120 days
notice.

U.S. Treasury Obligations at December 31, 2005 (Unrestricted)
Dollars

in T h o u s a n d s

Maturity *

. y-.-.v;

Yield at
Purchase’

Net
Carrying
Amount

Face
Value

Unrealized
Holding
Gains

Unrealized
Holding
Losses "

Market
Value

Held-to-Maturity
W ithin 1 year
A fte r 1 year thru 5 years
A fter 5 years thru 10 years
A fte r 10 years

4.93%
4.65%
4.57%
4.72%

Treasury Inflation-Protected
A fter 1 year thru 5 years

$

3.86%

1,620,000

$

5,530,000
1,370,000
315,000

$

245,674

246,588

9,081,588

$

$

170,000
215,000

$

6,360
96,071
18,314

$

6,999

407,813

$

Total

1,628,688
5,844,665
1,447,787

$

185,714

$

135,276

$

1,630,418
5,888,711
1,462,983
414,812

0

7,532

9,574,627

(4,630)
(52,025)
(3,118)

253,206

0

S (59,773)

$

9,650,130

$

$

Available-for-Sale
W ithin 1 year
A fter 1 year thru 5 years

3.14%
4.87%

Treasury Inflation-Protected
A fter 1 year thru 5 years

4.05%

A fte r 5 years thru 10 years

3.41%

Total

1,538

0

183,759
233,313

1,228,700

1,226,281

68,755

0

1,295,036

612,286

$

231,775

614,524

39,857

0

2,225,986

$

66

(2 ,0 2 1 )

654,381

2,258,294

$

110,216

$

(2,021)

S 2,366,489

$ 11,832,921

$

245,492

$

(61,794)

$ 12,016,619

Total Investment in U.S. Treasury Obligations, Net
Total

$

11,307,574

For purposes of this table, ail callable securities are assumed to mature on their first call dates. Their yields at purchase are reported as their yield to first call date.
T For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation
assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.2%, based on figures issued by the Congressional Budget Office and Blue Chip
Economic Indicators in early 2005.
" All unrealized losses occurred as a result of changes in market interest rates. FDIC has the ability and intent to hold the related securities until maturity. As a result, all
unrealized losses are considered temporary. However, of the $61.8 million reported as total unrealized losses, $30.0 million is recognized as unrealized losses occurring
over a period of 12 months or longer with a market value of $1.3 billion applied to the affected securities.




Savings A ssociation Insurance Fund

U.S. Treasury Obligations at December 31, 2004 (Unrestricted)
Dollars

in T h o u s a n d s

Maturity *

Net
Carrying
Amount

Unrealized
Holding
Gains

$

1,900,000

1,935,365
4,755,416
1,910,232

236,288

234,951

Yield at^
Purchase’

Face
Value

Unrealized
Holding
Losses‘

Market
Value

! Held-to-Maturity
W ithin 1 year
A fter 1 year thru 5 years
A fter 5 years thru 10 years
Treasury Inflation-Protected
A fter 1 year thru 5 years

3.13%
4.93%
4.97%

$

3.86%

1,860,000
4,540,000

$

9,296
200,907

$

107,408

$

(401)

22,428

8,536,288

$

8,835,964

$

340,039

$

$

270,000
385,000

$

275,656
443,689

$

1,831
10,916

$

(11.382)

1,940,053
4,949,950
2,017,239
257,379

0

$

Total

(4,608)
(6,373)

$

9,164,621

$

277,487
453,571

Available-for-Sale
W ithin 1 year
A fter 1 year thru 5 years

5.00%
4.10%

0

(1,034)

Treasury Inflation-Protected
A fter 1 year thru 5 years

4.07%

859,729

853,047

101,420

0

954,467

A fter 5 years thru 10 years

3.63%

904,362

909,962

124,828

0

1,034,790

Total

S

2,419,091

$

2,482,354

S

238,995

$

(1.034)

$ 11,318,318

$

579,034

$

(12,416)

$

2,720,315

Total Investment in U.S. Treasury Obligations, Net
Total

$

10,955,379

$ 11,884,936

* For purposes of this table, all callable securities are assumed to mature on their first call dates, Their yields at purchase are reported as their yield to first call date.
T For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation
assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.2%, based on figures issued by the Congressional Budget Office and Blue Chip
Economic Indicators in early 2004.
"A ll unrealized losses occurred during the last 12 months as a result of changes in market interest rates. FDIC has the ability and intent to hold the related securities until
maturity. As a result, all unrealized losses are considered temporary.




As of December 31, 2005 and 2004, the unamortized premium, net of the
unamortized discount, was $525.3 million and $362.9 million, respectively.

5. Receivables From Thrift Resolutions, Net
The receivables from thrift resolutions include payments made by the SAIF to
cover obligations to insured depositors, advances to receiverships for working
capital, and administrative expenses paid on behalf of receiverships. Any related
allowance for loss represents the difference between the funds advanced and/
or obligations incurred and the expected repayment. Assets held by SAIF
receiverships are the main source of repayment of the SAIF's receivables from
closed thrifts. As of December 31, 2005, there were three active receiverships,
with no failures in the current year.
As of December 31, 2005 and 2004, SAIF receiverships held assets w ith
a book value of $388 million and $483 million, respectively (including cash,
investments, and miscellaneous receivables of $118 million and $182 million
at December 31, 2005 and 2004, respectively). The estimated cash recoveries
from the management and disposition of these assets that are used to derive
the allowance for losses are based on a sampling of receivership assets in
liquidation. The sampled assets are generally valued by estimating future cash
recoveries, net of applicable liquidation cost estimates, and then discounting
these net cash recoveries using current market-based risk factors based on
a given asset's type and quality. Resultant recovery estimates are extrapolated
to the non-sampled assets in order to derive the allowance for loss on the
receivable. These estimated recoveries are regularly evaluated, but remain
subject to uncertainties because of potential changes in economic and market
conditions. Such uncertainties could cause the SAIF's actual recoveries to vary
from the level currently estimated.

| Receivables From Thrift Resolutions, Net at December 31
Dollars

in T h o u s a n d s

2005
Receivables from closed thrifts

$

Allowance for losses

Total




574,113

2004
$

$

234,157

710,217
(363,294)

(339,956)
$

346,923

At December 31, 2005, about 99 percent of the SAIF's $234 million net receivable
will be repaid from assets related to the Superior receivership (which failed in
July 2001). These assets primarily consist of cash, investments, and a promissory
note arising from a settlem ent w ith the owners of the failed institution. The
credit risk related to the promissory note is limited since half of the outstanding
note is secured by a letter of credit and the remaining half is subject to the
creditworthiness of the payor of the note. Annual monitoring of the credit­
worthiness of the payor is performed and currently indicates a low risk of
non-performance.




Savings A ssociation Insurance Fund
■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■■

6. Contingent Liabilities for:
Anticipated Failure of Insured Institutions
The SAIF records a contingent liability and a loss provision for SAIF-insured
institutions (including Oakar and Sasser financial institutions) that are likely
to fail within one year of the reporting date, absent some favorable event such
as obtaining additional capital or merging, when the liability becomes probable
and reasonably estimable.
The contingent liability is derived by applying expected failure rates and loss
rates to institutions based on supervisory ratings, balance sheet characteristics,
and projected capital levels. In addition, institution-specific analysis is performed
on those institutions where failure is imminent absent institution management
resolution of existing problems, or where additional information is available that
may affect the estimate of losses. As of December 31, 2005 and 2004, the
contingent liabilities for anticipated failure of insured institutions were $4 million
and $2 million, respectively.
In addition to these recorded contingent liabilities, the FDIC has identified
additional risk in the financial services industry that could result in an additional
loss to the SAIF should potentially vulnerable financial institutions ultimately
fail. This risk results from the presence of various high-risk banking business
activities that are particularly vulnerable to adverse economic and market
conditions. Due to the uncertainty surrounding such conditions in the future,
there are institutions other than those with losses included in the contingent
liability for which the risk of failure is less certain, but still considered reasonably
possible. As a result of these risks, the FDIC believes that it is reasonably
possible that the SAIF could incur additional estimated losses up to
approximately $0.2 billion.
The accuracy of these estimates will largely depend on future economic and
market conditions. The FDIC's Board of Directors has the statutory authority to
consider the contingent liability from anticipated failures of insured institutions
when setting assessment rates.
There remains uncertainty about the effect of the 2005 hurricane season on
the deposit insurance fund balances. The economic dislocations as well as
the potential adverse effects on collateral values and the repayment capacity
of borrowers resulting from the hurricanes may stress the balance sheets of a
few, small institutions that are located in the areas of greatest devastation. The
FDIC continues to evaluate the risks to affected institutions in light of economic
conditions, the amount of insurance proceeds that will protect institution collateral,
and the level of government disaster relief. At this point, however, the FDIC
cannot estimate the impact of such risks on the insurance funds.

Litigation Losses
The SAIF records an estimated loss for unresolved legal cases to the extent
those losses are considered probable and reasonably estimable. In addition to
the amount recorded as probable, the FDIC has determined that losses from
unresolved legal cases totaling $140 thousand are reasonably possible.




Other Contingencies

Representations and Warranties
As part of the FDIC's efforts to maximize the return from the sale of assets from
thrift resolutions, representations and warranties, and guarantees were offered
on certain loan sales. In general, the guarantees, representations, and warranties
on loans sold relate to the completeness and accuracy of loan documentation,
the quality of the underwriting standards used, the accuracy of the delinquency
status when sold, and the conformity of the loans w ith characteristics of
the pool in which they were sold. The total amount of loans sold subject to
unexpired representations and warranties, and guarantees was $4.7 billion
as of December 31, 2005. SAIF did not establish a liability for all outstanding
claims asserted in connection with representations and warranties because
the receiverships have sufficient funds to pay for such claims.
In addition, future losses on representations and warranties, and guarantees
could be incurred over the remaining life of the loans sold, which is generally
20 years or more. Consequently, the FDIC believes it is possible that additional
losses may be incurred by the SAIF from the universe of outstanding contracts
with unasserted representation and warranty claims. However, because of the
uncertainties surrounding the timing of when claims may be asserted, the FDIC
is unable to reasonably estimate a range of loss to the SAIF from outstanding
contracts with unasserted representation and warranty claims.

7. Assessm ents
In compliance with provisions of the FDI Act, as amended, the FDIC uses a
risk-based assessment system that charges higher rates to those institutions
that pose greater risks to the SAIF. To arrive at a risk-based assessment for a
particular institution, the FDIC places each institution in one of nine risk categories
based on capital ratios and supervisory examination data. Due to the continuing
health of the th rift industry, the majority of the financial institutions are not
assessed. Of those assessed, the assessment rate averaged approximately
7 cents and 8 cents per $100 of assessable deposits for 2005 and 2004,
respectively. During 2005 and 2004, $8 million and $9 million were recognized
as assessment income from SAIF-member institutions, respectively. On
November 8, 2005, the Board voted to retain the SAIF assessment schedule
at the annual rate of 0 to 27 cents per $100 of assessable deposits for the first
semiannual period of 2006. The Board reviews assessment rates semiannually
to ensure that funds are available to satisfy the SAIF's obligations. If necessary,
the Board may impose more frequent rate adjustments or emergency special
assessments.
The FDIC is required to maintain the insurance funds at a designated reserve
ratio (DRR) of not less than 1.25 percent of estimated insured deposits (or a
higher percentage as circumstances warrant). If the reserve ratio falls below the
DRR, the FDIC is required to set semiannual assessment rates that are sufficient
to increase the reserve ratio to the DRR not later than one year after such rates

Savings A ssociation Insurance Fund
are set, or in accordance with a recapitalization schedule of fifteen years or less.
As of September 30, 2005, the SAIF reserve ratio was 1.30 percent of estimated
insured deposits.
Assessments are also levied on institutions for payments of the interest on
obligations issued by the FICO. The FICO was established as a mixed-ownership
government corporation to function solely as a financing vehicle for the FSLIC.
The annual FICO interest obligation of approximately $790 million is paid on a
pro rata basis using the same rate for banks and thrifts. The FICO assessment
has no financial impact on the SAIF and is separate from the regular deposit
insurance assessments. The FDIC, as administrator of the SAIF, acts solely
as a collection agent for the FICO. During 2005 and 2004, $160 million and
$161 million, respectively, were collected from SAIF-member institutions and
remitted to the FICO.

8. Operating Expenses
Operating expenses totaled $119 million for 2005, compared to $120 million
for 2004. The chart below lists the major components of operating expenses.

I Operating Expenses for the Years Ended December 31
Dollars

in T h o u s a n d s

2005
Salaries and benefits

$

Outside services

2004

15,553

Travel

10,662
9,404
2,881
(3,412)

11,563
2,865
(1,482)

$

81,649

4,357
8,673

Services billed to receiverships




$

14,457

4,814

Buildings and leased space
S oftw are/H ardware maintenance
Other

Total

77,482

119,468

$

119,998

9 . Provision fo r Insurance Losses
Provision for insurance losses was a negative $22 million for 2005 and a negative
$72 million for 2004. The following chart lists the major components of the
provision for insurance losses.
1Provision for Insurance Losses for the Years Ended December 31
Dollars

in T h o u s a n d s

2004

2005
Valuation Adjustments:
$

Closed thrifts

(23,832)

$

(70,658)

(23,832)

(70,658)

1,818

(1,235)

26

Total Valuation Adjustments

(492)

Contingent Liabilities Adjustments:
Anticipated failure of insured institutions
Litigation losses




(1,727)

1,844

Total Contingent Liabilities Adjustments
$

Total

(21,988)

$

(72,385)

10. Em ployee Benefits
Pension Benefits, Savings Plans and Postemployment Benefits
Eligible FDIC employees (permanent and term employees with appointments
exceeding one year) are covered by the federal government retirement plans,
either the Civil Service Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Although the SAIF contributes a portion of pension
benefits for eligible employees, it does not account for the assets of either
retirement system. The SAIF also does not have actuarial data for accumulated
plan benefits or the unfunded liability relative to eligible employees. These
amounts are reported on and accounted for by the U.S. Office of Personnel
Management.
Eligible FDIC employees also may participate in a FDIC-sponsored tax-deferred
401 (k) savings plan with matching contributions up to five percent. The SAIF
pays its share of the employer's portion of all related costs.
The FDIC offered a voluntary employee buyout program to a majority of its
employees during 2004 and conducted a reduction-in-force (RIF) during 2005
in an effort to further reduce identified staffing excesses. Consequently, 578
employees left or will leave the FDIC as a result of the buyout program and
an additional 62 employees left due to the RIF. Termination benefits included
compensation of fifty percent of the current salary for voluntary departures
and severance pay for employees that left due to the RIF. The total cost of the
buyout program and the RIF to the FDIC was $32.6 million, with SAIF's share
totaling $4.3 million, which is included in the "Operating expenses" line item
for 2005 and 2004.

Savings A ssociation Insurance Fund

Pension Benefits, Savings Plans Expenses and Postemployment Benefits for the Years Ended December 31
Dollars

in T h o u s a n d s

2005
Civil Service Retirement System

$

Federal Employees Retirement System (Basic Benefit)
FDIC Savings Plan

2004

973

1,182

$

4,591

4,793

2,528

2,813

Federal Thrift Savings Plan

1,807

1,934

Separation Incentive Payment

2,908

909

432

40

Severance Pay

Total




$

13,239

$

11,671

Postretirement Benefits Other Than Pensions
The FDIC provides certain life and dental insurance coverage for its eligible
retirees, the retirees' beneficiaries, and covered dependents. Retirees eligible
for life insurance coverage are those who have qualified due to: 1) immediate
enrollment upon appointment or five years of participation in the plan and
2) eligibility for an immediate annuity. The life insurance program provides basic
coverage at no cost to retirees and allows converting optional coverages to
direct-pay plans. Dental coverage is provided to all retirees eligible for an
immediate annuity.
At December 31, 2005 and 2004, the SAIF's net postretirement benefit liability
recognized in the "Accounts payable and other liabilities" line item in the
Balance Sheet was $16.7 million and $15.7 million, respectively. In addition,
the SAIF's expense for these benefits in 2005 and 2004 was $1.3 million
and $1.4 million, respectively, which is included in the current and prior year's
operating expenses. Key actuarial assumptions used in the accounting for the
plan include the discount rate, the rate of compensation increase, and the
dental coverage trend rate.

a B M H H I

m

B B B a H M

M

H a a s s H M

a i

11. Com m itm ents and Off-Balance-Sheet Exposure

Commitments
Leased Space
The SAIF’s allocated share of the FDIC's lease commitments totals $11.7 million
for future years. The lease agreements contain escalation clauses resulting in
adjustments, usually on an annual basis. The allocation to the SAIF of the FDIC's
future lease commitments is based upon current relationships of the workloads
among the SAIF and the BIF. Changes in the relative workloads could cause the
amounts allocated to the SAIF in the future to vary from the amounts shown
below. The SAIF recognized leased space expense of $5.0 million and $6.9 million
for the years ended December 31, 2005 and December 31, 2004, respectively.
Leased Space Commitments
Dollars

............................

in T h o u s a n d s

2006

2007

2008

2009

2010

2011/Thereafter

$ 4,096

$ 2,748

S 1,966

$ 1,710

S 750

$ 477




Off-Balance-Sheet Exposure

Deposit Insurance
As of September 30, 2005, the estimated insured deposits for SAIF were
$1.0 trillion. This would be the accounting loss if all depository institutions
were to fail and the acquired assets provided no recoveries.




Savings A ssociation Insurance Fund

12. D isclosures About the Fair Value of Financial Instrum ents
Cash equivalents are short-term, highly liquid investments and are shown at current
value. The fair market value of the investment in U.S.Treasury obligations is
disclosed in Notes 3 and 4 and is based on current market prices. The carrying
amount of interest receivable on investments, short-term receivables, and
accounts payable and other liabilities approximates their fair market value,
due to their short maturities and/or comparability with current interest rates.
The net receivables from thrift resolutions primarily include the SAIF's subrogated
claim arising from payments to insured depositors. The receivership assets that
will ultimately be used to pay the corporate subrogated claim are valued using
discount rates that include consideration of market risk. These discounts ultimately
affect the SAIF's allowance for loss against the net receivables from thrift
resolutions. Therefore, the corporate subrogated claim indirectly includes
the effect of discounting and should not be viewed as being stated in terms
of nominal cash flows.
Although the value of the corporate subrogated claim is influenced by valuation
of receivership assets (see Note 5), such receivership valuation is not equivalent
to the valuation of the corporate claim. Since the corporate claim is unique, not
intended for sale to the private sector, and has no established market, it is not
practicable to estimate its fair market value.
The FDIC believes that a sale to the private sector of the corporate claim would
require indeterminate, but substantial, discounts for an interested party to profit
from these assets because of credit and other risks. In addition, the timing of
receivership payments to the SAIF on the subrogated claim does not necessarily
correspond w ith the timing of collections on receivership assets. Therefore,
the effect of discounting used by receiverships should not necessarily be
viewed as producing an estimate of market value for the net receivables
from th rift resolutions.

Financial Statements and Notes

FSLIC Resolution Fund
December 31,2005 and 2004




FSLIC Resolution Fund

Federal

Deposit

Insurance

Corporation

FSLIC R esolution Fund Balance S h e et at D ecem ber 31
Dollars

in T h o u s a n d s

2005

2004

Cash and cash equivalents
Receivables from th rift resolutions and other assets, net (Note 3)

3,602,703
38,746

3,501,384
82,275

Total Assets

3.641.449

3.583.659

Assets

Liabilities
7,799

5,603

Contingent liabilities for litigation losses and other (Note 4)

257,503

410

Total Liabilities

265,302

6,013

127,007,441

126,382,877

Accumulated deficit
Unrealized loss on available-for-sale securities, net

(123.631.294)

0

(122,805,158)
(73)

Accumulated deficit, net

Accounts payable and other liabilities

Resolution Equity (Note 6)
Contributed capital

____________________

(123.631.294)

(122,805,231)

Total Resolution Equity

3,376,147

3,577,646

Total Liabilities and Resolution Equity

3.641.449

3.583.659

_____ __________________________

The accompanying notes are an integralpart o fthese financialstatements.




Federal

Deposit

Insurance

Corporation

[FSLIC Resolution Fund S ta te m en t of Incom e and Accum ulated Deficit for th e Years Ended D ecem ber 31
Dollars

in T h o u s a n d s

2005

2004

Revenue
Interest on U.S. Treasury obligations
Realized gain on investment in securitization-related assets acquired
from receiverships (Note 3)
Other revenue

Total Revenue

$

98,260

$

40,076
66,708

0

21,114

24,176

122,436

127,898

Expenses and Losses
Operating expenses
Provision for losses (Note 5)
Expenses for goodw ill settlements and litigation (Note 4)
Recovery of tax benefits
Other expenses

Total Expenses and Losses
Net (Loss)/lncome
Unrealized gain/(loss) on available-for-sale securities, net (Note 3)

Comprehensive (Loss)/lncome
Accumulated Deficit - Beginning
Accumulated Deficit - Ending
The accompanying notes are an integralpart o fthese financialstatements.




24,626
241,065
718,494

22,928
(13,206)
31,632
(82,937)

(45,946)
10,333

11,703

948,572

(29,880)

(826,136)

157,778

'7 3

(41,572)

(826,063)

116,206

(122,805,231)

(122,921,437)

$ (123,631,294)

$

(122,805,231)

FSLIC Resolution Fund

Federal

Deposit

Insurance

Corporation

FSLIC R esolution Fund S ta te m e n t of Cash Flow s for th e Years Ended D ecem ber 31
Dollars

in T h o u s a n d s

2005

2004

(826,136)

157,778

241,065

(13,206)

59,459
2,196

(28,943)
(13,778)

(523,416)

101,851

171

115.975

171

115.975

624.564

5.026

Net Cash Provided by Financing Activities

624.564

5.026

Net Increase in Cash and Cash Equivalents

101,319

222,852

3,501,384

3,278,532

Operating Activities
Net (Loss)/lncome:
Adjustments to reconcile net (loss)/income to net cash (used by)
provided by operating activities:
Provision for losses

Change in Assets and Liabilities:
Decrease/(lncrease) in receivables from th rift resolutions and other assets
lncrease/(Decrease) in accounts payable and other liabilities

Net Cash (Used by) Provided by Operating Activities
Investing Activities
Investment in securitization-related assets acquired from receiverships

Net Cash Provided by Investing Activities
Financing Activities
Provided by:
U.S.Treasury payments for goodwill settlements

Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending
The accompanying notes are an integral part o f these financial statements.




$

3,602,703

$

3,501,384

Financial Statements and Notes

FSLIC Resolution Fund
Notes to the Financial Statements December 31,2005 and 2004




1. Legislative History and Operations/
Dissolution of the FSLIC Resolution Fund
........... Fir if....—

....—

...... ......

Legislative History
The Federal Deposit Insurance Corporation (FDIC) is the independent deposit
insurance agency created by Congress in 1933 to maintain stability and public
confidence in the nation's banking system. Provisions that govern the operations
of the FDIC are generally found in the Federal Deposit Insurance (FDD Act, as
amended, (12 U.S.C. 1811, et seq). In carrying out the purposes of the FDI Act,
as amended, the FDIC insures the deposits of banks and savings associations,
and in cooperation with other federal and state agencies promotes the safety
and soundness of insured depository institutions by identifying, monitoring
and addressing risks to the deposit insurance funds established in the FDI Act,
as amended. In addition, FDIC is charged w ith responsibility for the sale
of remaining assets and satisfaction of liabilities associated w ith the former
Federal Savings and Loan Insurance Corporation (FSLIC) and the Resolution
Trust Corporation (RTC).
The U.S. Congress created the FSLIC through the enactment of the National
Housing Act of 1934. The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) abolished the insolvent FSLIC, created
the FSLIC Resolution Fund (FRF), and transferred the assets and liabilities
of the FSLIC to the FRF-except those assets and liabilities transferred to
the RTC-effective on August 9, 1989.
The FIRREA was enacted to reform, recapitalize, and consolidate the federal
deposit insurance system. In addition to the FRF, FIRREA created the Bank
Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF).
It also designated the FDIC as the administrator of these funds. All three
funds are maintained separately to carry out their respective mandates.
The FIRREA created the RTC to manage and resolve all thrifts previously
insured by the FSLIC for which a conservator or receiver was appointed during
the period January 1, 1989, through August 8, 1992. Resolution responsibility
was subsequently extended and ultimately transferred from the RTC to the SAIF
on July 1, 1995. The FIRREA established the Resolution Funding Corporation
(REFCORP) to provide part of the initial funds used by the RTC for thrift resolutions.
The RTC Completion Act of 1993 (RTC Completion Act) terminated the RTC
as of December 31, 1995. All remaining assets and liabilities of the RTC were
transferred to the FRF on January 1, 1996. Today, the FRF consists of two distinct
pools of assets and liabilities: one composed of the assets and liabilities of the
FSLIC transferred to the FRF upon the dissolution of the FSLIC (FRF-FSLIC),
and the other composed of the RTC assets and liabilities (FRF-RTC). The assets
of one pool are not available to satisfy obligations of the other.




FSLIC Resolution Fund

Operations/Dissolution of the FRF
The FRF will continue operations until all of its assets are sold or otherwise
liquidated and all of its liabilities are satisfied. Any funds remaining in the
FRF-FSLIC will be paid to the U.S.Treasury. Any remaining funds of the FRFRTC will be distributed to the REFCORP to pay the interest on the REFCORP
bonds. In addition, the FRF-FSLIC has available until expended $602.2 million
in appropriations to facilitate, if required, efforts to wind up the resolution activity
of the FRF-FSLIC.
The FDIC has conducted an extensive review and cataloging of FRF's remaining
assets and liabilities and is continuing to explore approaches for concluding
FRF's activities. An executive-level Steering Committee was established in
2003 to facilitate the FRF dissolution. Some of the issues and items that remain
open in FRF are: 1) criminal restitution orders (generally have from five to ten
years remaining); 2) litigation claims and judgments obtained against officers and
directors and other professionals responsible for causing or contributing to thrift
losses (judgments generally vary from five to ten years); 3) numerous assistance
agreements entered into by the former FSLIC (FRF could continue to receive
tax-sharing benefits through year 2008); 4) Goodwill and Guarini litigation (no
final date for resolution has been established; see Note 4); and 5) environmentally
impaired owned real estate assets. The FDIC is considering whether enabling
legislation or other measures may be needed to accelerate liquidation of the
remaining FRF assets and liabilities. The FRF could realize substantial recoveries
from the aforementioned tax-sharing benefits ranging from $144 million to
$224 million; however, any associated recoveries are not reflected in FRF’s financial
statements given the significant uncertainties surrounding the ultimate outcome.

Receivership Operations
The FDIC is responsible for managing and disposing of the assets of failed
institutions in an orderly and efficient manner. The assets held by receivership
entities, and the claims against them, are accounted for separately from FRF
assets and liabilities to ensure that receivership proceeds are distributed
in accordance w ith applicable laws and regulations. Also, the income and
expenses attributable to receiverships are accounted for as transactions
of those receiverships. Receiverships are billed by the FDIC for services
provided on their behalf.

2. S um m ary o f S ig n ific a n t A c c o u n tin g Policies
General
These financial statements pertain to the financial position, results of operations,
and cash flows of the FRF and are presented in conformity with U.S. generally
accepted accounting principles (GAAP). These statements do not include reporting
for assets and liabilities of closed thrift institutions for which the FDIC acts
as receiver. Periodic and final accountability reports of the FDIC's activities as
receiver are furnished to courts, supervisory authorities, and others as required.




Use of Estimates
Management makes estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from these estimates. Where it is reasonably possible that changes in estimates
will cause a material change in the financial statements in the near term, the
nature and extent of such changes in estimates have been disclosed. The more
significant estimates include allowance for losses on receivables from thrift
resolutions and the estimated losses for litigation.

Fair Value of Financial Instruments
Cash equivalents, which consist of Special U.S. Treasury Certificates, are short­
term, highly liquid investments with original maturities of three months or less
and are shown at fair value. The carrying amount of short-term receivables and
accounts payable and other liabilities approximates their fair market value, due
to their short maturities.
The investment in securitization-related assets acquired from receiverships
consists of credit enhancement reserves. The credit enhancement reserves,
which resulted from swap transactions, are valued by performing projected
cash flow analyses using market-based assumptions (see Note 3).
The net receivable from thrift resolutions is influenced by the underlying valuation
of receivership assets. This corporate receivable is unique and the estimate
presented is not necessarily indicative of the amount that could be realized
in a sale to the private sector. Such a sale would require indeterminate, but
substantial, discounts for an interested party to profit from these assets because
of credit and other risks. Consequently, it is not practicable to estimate its
fair market value.

Cost Allocations Among Funds
Operating expenses not directly charged to the FRF, the BIF, and the SAIF
are allocated to all funds using workload-based allocation percentages. These
percentages are developed during the annual corporate planning process and
through supplemental functional analyses.

Disclosure about Recent Accounting Pronouncements
Recent accounting pronouncements have been adopted or deemed to be not
applicable to the financial statements as presented.

Related Parties
The nature of related parties and a description of related party transactions
are discussed in Note 1 and disclosed throughout the financial statements
and footnotes.




FSLIC Resolution Fund
■■■■■■■■■■■■■■■■■■■
Reclassifications
Reclassifications have been made in the 2004 financial statements to conform to
the presentation used in 2005. These reclassifications include the reallocation of
amounts from "Provision for insurance losses" to "Other expenses" for assets
acquired from assisted thrifts and terminated receiverships. The reclassifications
had no impact on the prior year's net income or resolution equity.

3. Receivables From T h rift Resolutions and O ther Assets, N et
Receivables From Thrift Resolutions
The receivables from thrift resolutions include payments made by the FRF to
cover obligations to insured depositors, advances to receiverships for working
capital, and administrative expenses paid on behalf of receiverships. Any related
allowance for loss represents the difference between the funds advanced and/or
obligations incurred and the expected repayment. Assets held by the FDIC in its
receivership capacity for the former FSLIC and SAIF-insured institutions are a
significant source of repayment of the FRF’s receivables from thrift resolutions.
As of December 31, 2005, 25 of the 850 FRF receiverships remain active primarily
due to unresolved litigation, including Goodwill matters.
As of December 31, 2005 and 2004, FRF receiverships held assets with
a book value of $139 million and $175 million, respectively (including cash,
investments, and miscellaneous receivables of $113 million and $142 million
at December 31, 2005 and 2004, respectively). The estimated cash recoveries
from the management and disposition of these assets that are used to derive
the allowance for losses are based on a sampling of receivership assets in
liquidation. The sampled assets are generally valued by estimating future cash
recoveries, net of applicable liquidation cost estimates, and then discounting
these net cash recoveries using current market-based risk factors based on
a given asset's type and quality. Resultant recovery estimates are extrapolated
to the non-sampled assets in order to derive the allowance for loss on the
receivable. These estimated recoveries are regularly evaluated, but remain
subject to uncertainties because of potential changes in economic and market
conditions. Such uncertainties could cause the FRF's actual recoveries to vary
from the level currently estimated.

Investment in Securitization-Related Assets Acquired from Receiverships
This investment includes credit enhancement reserves valued at $16.7 million
and $15.6 million as of December 31, 2005 and 2004, respectively. The credit
enhancement reserves resulted from swap transactions where the former RTC
received mortgage-backed securities in exchange for single-family mortgage
loans. The former RTC supplied credit enhancement reserves for the mortgage
loans in the form of cash collateral to cover future credit losses over the
remaining life of the loans. These reserves may cover future credit losses
through 2020.
Receivables From T h rift Resolutions and O th er Assets, N e t at D ecem ber 31
Dollars

in T h o u s a n d s

2004

2005
$

Receivables from closed thrifts

19,952,501

Investment in securitization-related assets acquired from receiverships

$

(19,894,023)

15,086

Receivables from Thrift Resolutions, Net

58,478

16,721

$

S

38,746

15,643
8,154

6,939

Other assets




$

(16,065,703)

Allowance for losses

Total

16,080,789

$

82,275

Gross receivables from thrift resolutions and the investment in securitizationrelated assets subject the FRF to credit risk. An allowance for loss of $16.1 billion,
or 99.9 percent of the gross receivable, was recorded as of December 31, 2005.
Of the remaining 0.1 percent of the gross receivable, 71 percent is expected to
be repaid from receivership cash and investments.




FSLIC Resolution Fund

4. C o n tin g en t Liabilities for:
Litigation Losses
The FRF records an estimated loss for unresolved legal cases to the extent
those losses are considered probable and reasonably estimable. In addition to
the amount recorded as probable, the FDIC has determined that losses from
unresolved legal cases totaling $85.4 million are reasonably possible.

Additional Contingency
Goodwill Litigation
In United States y. Winstar Corp., 518 U.S. 839 (1996), the Supreme Court held
that when it became impossible following the enactment of FIRREA in 1989
for the federal government to perform certain agreements to count goodwill
toward regulatory capital, the plaintiffs were entitled to recover damages from
the United States. Approximately 35 remaining cases are pending against the
United States based on alleged breaches of these agreements.
On July 22, 1998, the Department of Justice's (DOJ's) Office of Legal Counsel
(OLC) concluded that the FRF is legally available to satisfy all judgments and
settlements in the Goodwill Litigation involving supervisory action or assistance
agreements. OLC determined that nonperformance of these agreements was a
contingent liability that was transferred to the FRF on August 9, 1989, upon the
dissolution of the FSLIC. On July 23, 1998, the U.S. Treasury determined, based
on OLC's opinion, that the FRF is the appropriate source of funds for payments
of any such judgments and settlements. The FDIC General Counsel concluded
that, as liabilities transferred on August 9, 1989, these contingent liabilities
for future nonperformance of prior agreements with respect to supervisory
goodwill were transferred to the FRF-FSLIC, which is that portion of the
FRF encompassing the obligations of the form er FSLIC. The FRF-RTC, which
encompasses the obligations of the form er RTC and was created upon the
termination of the RTC on December 31, 1995, is not available to pay any
settlements or judgments arising out of the Goodwill Litigation.
The Goodwill lawsuits are against the United States and as such are defended
by the DOJ. On November 16, 2005, the DOJ again informed the FDIC that
it is "unable at this time to provide a reasonable estimate of the likely aggregate
contingent liability resulting from the Winstar-re\ated cases." This uncertainty
arises, in part, from the existence of significant unresolved issues pending at the
appellate or trial court level, as well as the unique circumstances of each case.
The FDIC believes that it is probable that additional amounts, possibly substantial,
may be paid from the FRF-FSLIC as a result of judgments and settlements in
the Goodwill Litigation. Based on the response from the DOJ, the FDIC is
unable to estimate a range of loss to the FRF-FSLIC from the Goodwill Litigation.
However, the FRF can draw from an appropriation provided by Section 110
of the Department of Justice Appropriations Act, 2000 (Public Law 106-113,
Appendix A, Title I, 113 Stat. 1501A-3, 1501A-20) such sums as may be necessary
for the payment of judgments and compromise settlements in the Goodwill




Litigation. This appropriation is to remain available until expended. Because an
appropriation is available to pay such judgments and settlements, any liabilities
for the Goodwill Litigation should have no impact on the financial condition of
the FRF-FSLIC.
The FRF paid $624.6 million as a result of judgments and settlements in seven
Goodwill cases during 2005, compared to $5 million for one Goodwill case for
2004. However, as described above, the FRF received appropriations from the
U.S. Treasury to fund these payments.
In January 2006, the Department of Justice decided not to appeal the
December 30, 2005 U.S.Court of Federal Claims order that FRF pay a $134 million
partial judgment in another Goodwill litigation case. As in the previous cases,
the FRF will receive an appropriation from the U.S.Treasury to satisfy this
judgment. The December 31, 2005 FRF financial statements do not reflect
the liability to pay the judgment to the plaintiff or the offsetting receivable for
the U.S.Treasury appropriation to fund the judgment.
In addition, the FRF-FSLIC pays the goodwill litigation expenses incurred by
DOJ based on a Memorandum of Understanding (MOU) dated October 2, 1998,
between the FDIC and DOJ. Under the terms of the MOU, the FRF-FSLIC paid
$18.3 million and $30.1 million to DOJ for fiscal years 2006 and 2005, respectively.
DOJ returns any unused fiscal year funding to the FRF unless special circum­
stances warrant these funds be carried over and applied against current fiscal
year charges. In April 2005, DOJ returned $3 million of unused fiscal year 2005
funds. At September 30, 2005, DOJ had an additional $10.1 million in unused
fiscal year 2005 funds that were applied against FY 2006 charges of $28.4 million.
Guarini Litigation
Paralleling the Goodwill cases are similar cases alleging that the government
breached agreements regarding tax benefits associated with certain FSLICassisted acquisitions. These agreements allegedly contained the promise of
tax deductions for losses incurred on the sale of certain thrift assets purchased
by plaintiffs from the FSLIC, even though the FSLIC provided the plaintiffs with
tax-exempt reimbursement. A provision in the Omnibus Budget Reconciliation
Act of 1993 (popularly referred to as the "Guarini legislation") eliminated the
tax deductions for these losses.
Eight "Guarini" cases originally were filed seeking damages. Four "Guarini"
cases have now concluded. In the first, no damages were awarded by
the trial court and the case was not appealed. A second case was settled
for $20,000. In the third and fourth cases, the FRF-FSLIC paid damages of
$28.1 million and $48.7 million, respectively. (Certain attorneys' fees and cost
issues in these tw o cases are pending in the trial court.) In a fifth case, the
Federal Circuit recently affirmed the trial court's decision to award damages
of $70 million. The time has not run yet for the Justice Department to decide
whether it w ill seek further review of this decision. Two other cases are
currently pending on appeal before the Federal Circuit; in those cases the
trial court awarded plaintiffs damages totaling about $33 million in the
aggregate. The eighth case is pending in trial court; in November, the court
granted most of plaintiff's motion for partial summary judgment, entitling
plaintiff to $149.6 million. However, other issues remain to be resolved
before the trial court.




FSLIC Resolution Fund
The FDIC has established a loss reserve of approximately $257 million for the
remaining four Guarini cases because these losses are deemed probable and
reasonably estimable. An additional loss of $82.4 million on the Guarini Litigation
is considered reasonably possible.
Representations and Warranties
As part of the RTC's efforts to maximize the return from the sale of assets from
thrift resolutions, representations and warranties, and guarantees were offered
on certain loan sales. The majority of loans subject to these agreements have
most likely been paid off, refinanced, or the period for filing claims has expired.
However, there is no reporting mechanism to determine the aggregate amount
of remaining loans. Therefore, the FDIC is unable to provide an estimate of
maximum exposure to the FRF. Based on the above and our history of claims
processed, the FDIC believes that any future representation and warranty liability
to the FRF will likely be minimal.

5. Provision fo r Losses
The provision for losses was $241.1 million and a negative $13.2 million for 2005
and 2004, respectively. The increased provision in 2005 was primarily due to the
recognition of a probable loss on the unresolved Guarini cases.

6. Resolution E quity
As stated in the Legislative History section of Note 1, the FRF is comprised
of tw o distinct pools: the FRF-FSLIC and the FRF-RTC. The FRF-FSLIC consists
of the assets and liabilities of the former FSLIC. The FRF-RTC consists of the
assets and liabilities of the former RTC. Pursuant to legal restrictions, the tw o
pools are maintained separately and the assets of one pool are not available
to satisfy obligations of the other.
The following table shows the contributed capital, accumulated deficit, and
resulting resolution equity for each pool.

I R esolution Equity at D ecem ber 31, 2005
Dollars

in T h o u s a n d s

FRF-FSLIC
Contributed capital - beginning

$

82,199,337

$

126,382,877

624,564

Add: Unrealized loss on available-for-sale securities

Accumulated deficit, net

624,564

127,007,441

(81,645,755)

(123,631,294)

0

Accumulated deficit

0
82,199,337

(41,985,539)

Contributed capital-ending




$

44,808,104

Add: U.S.Treasury payments for goodwill settlements

Total

44,183,540

FRF
Consolidated

FRF-RTC

0
(81,645,755)

0
(123,631,294)

(41,985,539)
$

2,822,565

S

553,582

S

3,376,147

Contributed Capital
The FRF-FSLIC and the former RTC received $43.5 billion and $60.1 billion from
the U.S.Treasury, respectively, to fund losses from thrift resolutions prior to
July 1,1995. Additionally, the FRF-FSLIC issued $670 million in capital certificates
to the Financing Corporation (a mixed-ownership government corporation estab­
lished to function solely as a financing vehicle for the FSLIC) and the RTC issued
$31.3 billion of these instruments to the REFCORP. FIRREA prohibited the payment
of dividends on any of these capital certificates. Through December 31, 2005,
the FRF-RTC has returned $4,556 billion to the U.S.Treasury and made payments
of $4,572 billion to the REFCORP. These actions serve to reduce contributed
capital.

Accumulated Deficit
The accumulated deficit represents the cumulative excess of expenses over
revenue for activity related to the FRF-FSLIC and the FRF-RTC. Approximately
$29.8 billion and $87.9 billion were brought forward from the form er FSLIC
and the former RTC on August 9, 1989, and January 1, 1996, respectively.
The FRF-FSLIC accumulated deficit has increased by $12.2 billion, whereas
the FRF-RTC accumulated deficit has decreased by $6.3 billion, since their
dissolution dates.




FSLIC Resolution Fund

7. Em ployee B enefits
Pension Benefits
Eligible FDIC employees (permanent and term employees with appointments
exceeding one year) are covered by the federal government retirement plans,
either the Civil Service Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Although the FRF contributes a portion of pension
benefits for eligible employees, it does not account for the assets of either
retirement system. The FRF also does not have actuarial data for accumulated
plan benefits or the unfunded liability relative to eligible employees. These
amounts are reported on and accounted for by the U.S. Office of Personnel
Management.
The FRF's pro rata share of pension-related expenses was $2.9 million and
$2.8 million, as of December 31, 2005 and 2004, respectively.

Postretirement Benefits Other Than Pensions
The FRF no longer records a liability for the postretirement benefits of life and
dental insurance as a result of FDIC's change in funding policy for these benefits
and elimination of the separate entity formerly used to account for such estimated
future costs. In implementing this change, management decided not to allocate
either the plan assets or the revised net accumulated postretirement benefit
obligation (a long-term liability) to the FRF due to the expected dissolution of
the Fund. However, the FRF does continue to pay its proportionate share of
the yearly claim expenses associated with these benefits.

Comptroller General
o f the United States

Accountability * Integrity * Reliability

United States Government Accountability Office
Washington, D.C. 20548

To the B oard o f D irectors
T he F ederal D ep o sit In su ran ce C o rporation

W e have audited th e b alan ce sheets as o f D ecem b er 31, 2005 and 2004, fo r the three
funds adm inistered by the F ederal D ep o sit Insurance C o rp o ratio n (F D IC ), th e related
statem ents o f incom e and fu n d balan ce (accum ulated deficit), and the statem ents o f
cash flow s for the years then ended. In o ur audits o f th e B ank In su ran ce F u n d (B IF),
the Savings A ssociation Insurance Fund (SA IF), and the F S L IC R esolution F u nd (FRF),
w e found
•

the financial statem ents o f each fu n d are p resen ted fairly, in all m aterial respects,
in con fo rm ity w ith U .S. g enerally accepted accounting p rinciples;

•

although certain internal co ntrols should be im proved, F D IC h ad effective internal
co n tro l over financial rep o rtin g and com pliance w ith law s and regulations fo r each
fund; and

•

no rep o rtable n o n com pliance w ith law s and regulations w e tested.

T h e follow ing sections discuss o u r con clu sio n s in m ore detail. T hey also present
info rm ation on the scope o f o ur audits and o ur evaluation o f FD IC m an ag e m en t’s
co m m en ts on a d raft o f this report.

O p in io n o n B I F ’s
p,.

. , „

in a n c ia

a em en S

T h e financial statem ents, including the accom panying notes, p resen t fairly, in all
m aterial respects, in conform ity w ith U .S. generally accepted accounting principles,
B IF ’S financial position as o f D ecem b er 31, 2005 and 2004, and th e resu lts o f its
o perations and its cash flow s fo r the years then ended.
A s discussed in note 1 to B IF ’s financial statem ents, on February 8, 2006, the President
signed into law the Federal D eposit Insurance R eform A ct o f 2005. A m ong its provisions,
the A ct calls fo r the m erger o f B IF and S A IF into a single D eposit Insurance F und
no later than the first day o f the first calen d ar q u arter th at begins after the en d o f the
9 0-day perio d b eginning on the d ate o f enactm ent, w h ich w o u ld b e July 1, 2006.

O p in io n o n S A I F ’s
p-

• i q

in a n c ia

a em en S




T h e financial statem ents, including th e accom panying notes, p resen t fairly, in all
m aterial respects, in conform ity w ith U .S. generally accepted accounting principles,
S A IF ’S financial po sitio n as o f D ecem b er 31, 2005 and 2004, and th e resu lts o f its
operations and its cash flow s fo r the y ears then ended.

A s d iscu ssed in note 1 to S A IF ’s financial statem ents, on F ebruary 8, 2006, the
P resid en t signed into law th e F ederal D ep o sit In su ran ce R efo rm A ct o f 2005.
A m ong its provisions, th e A ct calls fo r the m erg er o f S A IF and B IF into a single
D ep o sit Insurance F u n d no later th an th e first day o f the first cale n d ar q u arter th at
begins after the end o f the 90-day p erio d b eginning on the date o f enactm ent, w hich
w ould be July 1, 2006.

O p in io n o n F R F ’s
F in a n c ia l S ta te m e n ts

T h e financial statem ents, in cluding the accom panying notes, presen t fairly, in all
m aterial respects, in conform ity w ith U .S. generally accepted accounting principles,
F R F ’s financial p osition as o f D ecem b er 31, 2005 and 2004, and the results o f its
o perations and its cash flow s for the years then ended.

O p in io n o n I n te r n a l
C o n tro l

A lthough certain internal controls should be im proved, F D IC m anagem ent m aintained,
m
m aterial respects, effective in ternal control over financial rep o rtin g (including
safeguarding assets) and com pliance as o f D ecem ber 31, 2005, that provided reasonable
assurance th a t m isstatem ents, losses, o r n oncom pliance m aterial in relation to F D IC ’s
financial statem ents o f each fu n d w ould be prevented o r d etected on a tim ely basis.
O u r opinion is b ased on criteria estab lish ed u n d er 31 U .S.C . 3512 (c), (d) [com m only
k now n as the F ederal M an ag ers’ F in an cial Integrity A ct (FM FIA )].
W eaknesses th at w e id entified in F D IC ’s in fo rm atio n system controls, w hich we
co n sid er to be a reportable condition, are d escrib ed in a later section o f this report.
T h e reportable co ndition in in form ation system co ntrols, although n o t considered
m aterial, represents a significant deficiency in the desig n or o peration o f internal
control th at could adversely affect F D IC ’s ability to m eet its in ternal control objectives.
A lthough the w eaknesses d id n o t m aterially affect th e 2005 financial statem ents o f
each o f the three funds, m isstatem en ts m ay nevertheless o ccu r in o th er F D IC -reported
financial info rm atio n as a resu lt o f the internal control w eaknesses.
In addition to the rep o rtab le condition concern in g info rm atio n system controls, we
noted o th er less significant m atters involving F D IC ’s in tern al controls. We w ill be
reporting separately to FD IC m anagem ent on these m atters.

C o m p lia n c e w ith L a w s
a n d R e Illa tio n s
°

O b je c tiv e s S c o p e a n d
M e th n H n ln o v




O ur tests for com pliance w ith selected provisions o f law s and regulations disclosed no
instances o f n oncom pliance that w ould b e rep o rtab le u n d er U .S. g enerally accepted
governm ent auditing standards. However, the objective o f o ur audits w as not to provide
an opinion on overall com pliance w ith law s and regulations. A ccordingly, w e do not
express such an opinion.

FD IC m anagem ent is responsible fo r (1) prep arin g the annual financial statem ents
*n conf orm ity
U .S. generally accepted acco u n tin g prin cip les; (2) establishing,
m aintaining, and assessing in tern al control to pro v id e reaso n ab le assurance th at the
b ro ad control objectives o f F M F IA are m et; and (3) co m p ly in g w ith applicable law s
and regulations.




W e are resp o n sib le fo r obtaining reasonable assurance about w h eth er (1) th e financial
statem ents are p resented fairly, in all m aterial resp ects, in con fo rm ity w ith U .S. gener­
ally accepted accounting principles, and (2) m anagem ent m aintained effective internal
control, the objectives o f w hich are the follow ing:
•

financial re p o rtin g -tra n sa c tio n s are pro p erly recorded, processed, and sum m arized
to p erm it the prep aratio n o f financial statem ents in con fo rm ity w ith U .S. generally
accepted accounting p rinciples, and assets are safeguarded ag ain st loss from
unau th o rized acquisition, use, o r d isposition, and

•

co m p lian ce w ith law s and re g u la tio n s-tra n sa c tio n s are ex ecuted in accordance
w ith law s and regulations th at co u ld have a d irect and m aterial effect on the
financial statem ents.

We are also responsible for testing com pliance w ith selected provisions o f law s and
regulations that could have a d irect and m aterial effect on the financial statem ents.
In o rd er to fulfill these responsibilities, w e
•

exam ined, on a test basis, evidence supporting the am ounts and disclosures in
the financial statem ents;

•

assessed the accounting principles used and sig n ifican t estim ates m ade by
m anagem ent;

•

evaluated the overall p resen tatio n o f the financial statem ents;

•

obtained an u n d erstanding o f internal con tro l related to fin an cial reporting
(including safeguarding assets) and com pliance w ith law s and regulations;

•

tested relevant internal co ntrols over financial reporting and com pliance, and
evaluated the desig n and o perating effectiveness o f internal control;

•

co n sid ered F D IC ’s p rocess fo r evaluating and reporting on internal control based
on criteria estab lish ed by FM F IA ; and

•

tested com pliance w ith certain law s and regulations, in cluding selected provisions
o f th e F ederal D ep o sit Insurance A ct, as am ended, and the C h ie f F in an cial O fficers
A ct o f 1990.

W e d id no t evaluate all internal co ntrols relevant to o perating objectives as broadly
defined by FM F IA , such as those controls relevant to prep arin g statistical reports and
ensuring efficient operations. We lim ited our internal control testing to controls over
financial reporting and com pliance. B ecause o f inherent lim itations in internal control,
m isstatem ents due to erro r or fraud, losses, or no n co m p lian ce m ay nevertheless occur
and n o t b e detected. W e also caution that projecting o ur ev aluation to fu tu re periods
is subject to th e risk that controls m ay b eco m e inadequate b ecau se o f ch an g es in
conditions o r th at the degree o f com pliance w ith con tro ls m ay d eteriorate.

W e d id n o t test com pliance w ith all law s and reg u latio n s applicable to F D IC . W e
lim ited o u r tests o f co m p lian ce to those law s and regulations th at could have a d irect
and m aterial effect on th e financial statem ents for the y ear ended D ecem ber 31, 2005.
W e cau tio n th at nonco m p lian ce m ay o c cu r and no t be detected by these tests and that
such testing m ay not be sufficient for other purposes.
W e p erfo rm ed o ur w o rk in accordance w ith U .S. generally accepted governm ent
auditing standards.

R e p o r ta b le C o n d itio n




In connection w ith our audits o f the financial statem ents o f the three funds adm inistered
by F D IC , w e review ed F D IC ’s info rm atio n system controls. E ffective inform ation
system controls are essential to safeguarding fin an cial data, protecting com puter
applicatio n p rogram s, p roviding fo r the in tegrity o f system softw are, and ensuring
co n tin u ed co m p u ter o perations in case o f unexpected interruption. T hese controls
include the corporatew ide security m an ag em en t p rogram , access controls, system
softw are, applicatio n developm ent and ch an g e control, segregation o f duties, and
service con tin uity controls.
In y ears p rio r to o u r 2004 financial audit, w e rep o rted on w eaknesses w e identified
in F D IC ’s info rm atio n system controls, w hich w e co n sid ered to be a reportable
condition. O ver a p erio d o f years, FD IC m ade progress in correcting these inform ation
system con tro l w eaknesses and, in 2004, m ade su bstantial pro g ress b y correcting
m o st o f the w eaknesses w e h ad id en tified in p rio r years, in clu d in g taking steps to
fully estab lish a co m prehensive info rm atio n security program . T hese im provem ents
enabled us to co nclu d e th at th e rem ain in g issues related to inform ation system
controls no longer constituted a reportable condition. H ow ever, w e n oted in o u r 2004
audit re p o rt1 that F D IC ’s im plem entation o f a new financial system in 2005 w ould
significantly ch an g e its info rm atio n system s en v iro n m en t and th e related in form ation
system con tro ls n ecessary for th eir effective o p eratio n an d that, consequently, co ntin­
u ed co m m itm en t to an effective info rm atio n security p ro g ram w ould b e essential to
en su re that the c o rp o ratio n ’s financial and sensitive info rm atio n w ould be adequately
protected in the new environm ent.
F D IC im plem en ted its new financial system in M ay 2005. H ow ever, in doing so,
F D IC d id not ensure th at con tro ls w ere ad equate to acco m m o d ate its new system s
environm ent. O u r audit id entified in form ation system con tro l w eaknesses, w hich
w e co n sid er to be a reportable co ndition th at in creased the risk o f unauthorized
m odification and disclosure o f critical FD IC financial and sensitive p ersonnel
in form ation, disru p tio n o f critical operations, and loss o f assets.
Specifically, F D IC did n o t (1) adequately restrict access to critical financial program s
and data; (2) en su re in com patible system s-related functions, duties, and capabilities
w ere ap propriately segregated; and (3) sufficiently m o n ito r access to system program s
and data. S uch w eaknesses affected F D IC ’s ability to en su re th at users only h ad the
access n eed ed to perfo rm th eir assigned duties and th at its system s w ere sufficiently
p ro tected from u n au tho rized users.

1
GAO. Financial Audit: Federal Deposit Insurance Corporation Funds’ 2004 and 2003 Financial Statements,
GAO-05-281 (Washington, D.C.: Feb. 11, 2005).

W e determ ined that other m anagem ent controls m itigated the effect o f the inform ation
system co n tro l w eaknesses on the prep aratio n o f th e fu n d s’ financial statem ents for
2005. H ow ever, it is im p o rtan t going fo rw ard th at F D IC w ork to address these
w eaknesses to en sure its in form ation system con tro ls appropriately safeguard the
in tegrity o f its financial and oth er data. B ecau se o f th eir sensitive nature, the details
surrounding these w eaknesses w ill b e rep o rted separately to F D IC m anagem ent,
along w ith reco m m en d ation s fo r corrective actions.

F D I C C o m m e n ts a n d
O u r E v a lu a tio n




11 com m en tin g on a draft o f this report, F D IC ’s C h ie f F in an cial O fficer (C F O ) w as
1
p leased to receive unqualified opin io n s on B IF ’s, S A IF ’s, and F R F 's 2005 and 2004
financial statem ents, and to note th at there w ere no m aterial w eak n esses id entified
during the 2005 audits. W ith resp ect to o ur rep o rtin g as a rep o rtab le co n d itio n in
2005 w eaknesses in in form ation system controls, F D IC ’s C F O ackno w led g ed but
d id no t share o ur assessm en t regarding th e severity o f the risks o r the m ag n itude o f
the v ulnerability po sed b y th e issues id entified during th e audit. T he C F O expressed
co nfidence in the sufficiency o f the F D IC ’s info rm atio n system s enviro n m ent and
related controls based on the corp o ratio n ’s view that it h ad a deliberate, com prehensive
p ro g ram d esigned to integrate not only system controls, but p rocedural, m anagerial,
and audit controls into a balan ced and cost-effective control fram ew ork. T h e C FO
nonetheless ack now ledged th at the corp o ratio n w ould w o rk dilig en tly w ith us over
the next audit cycle to b o th reco n cile the tw o differing view points and, w here it feels
changes are appropriate, to aug m en t th e co rp o ratio n ’s program .
We are p leased th at F D IC ’s C F O has pled g ed his co m m itm en t to w o rk w ith us on
th ese m atters during the 2006 audits. H ow ever, the issues w e identified during our
2005 audits, including (1) lack o f adequate restriction o f access to critical financial
p rogram s and data; (2) inappropriate segregation o f in co m p atib le system s-related
functions, duties, and capabilities; and (3) lack o f an effective p rocess to sufficiently
m o n ito r access to system s p rogram s and data, collectively, w e believe, create
a significant risk th at critical financial and sensitive perso n n el info rm atio n c o u ld be
inappro priately disclo sed and m odified, assets lost, and critical system s operations
disrupted. W h ile w e acknow ledge th a t certain m an ag em en t controls F D IC h ad in
p lace w ere able to m itigate the effect o f th ese w eaknesses w ith resp ect to preparation
o f the th ree fu n d s’ 2005 financial statem ents, the w eaknesses no n eth eless represent
significant v ulnerabilities in F D IC ’s info rm atio n system con tro ls and thus constitute
a rep o rtable condition.
T h e com p lete tex t o f F D IC ’s com m ents is rep rin ted in appendix I.

D avid M . W alker
C o m p tro ller G eneral
o f th e U nited States
Jan u ary 31, 2006

A ppendix I




FDIC
Federal Deposit Insurance Corporation
550 17th St. NW Washington, DC 20429

Deputy to the Chairman & Chief Financial Officer

February 22, 2006

Mr. David M. Walker
Com ptroller General o f the U nited States
U.S. Governm ent Accountability Office
441 G Street, NW
Washington, DC 20548
Re: FDIC M anagem ent Response on the
GAO 2005 Financial Statem ents Audit Report
D ear Mr. Walker:
Thank you for the opportunity to com ment on the U.S. Government Accountability Office’s
(GAO) draft audit report titled, Financial Audit: Federal Deposit Insurance Corporation
F unds’ 2005 and 2004 Financial Statem ents, G AO -06-146. T he report presents G AO’s
opinions on the calendar years 2005 and 2004 financial statements o f the Bank Insurance
F und (BIF), the Savings Association Insurance Fund (SAIF), and the Federal Savings and
L oan Insurance Corporation Resolution Fund (FRF). The report also presents GAO’s
opinion on the effectiveness o f FD IC ’s internal controls as o f Decem ber 31, 2005, and
G AO’s evaluation o f FD IC ’s com pliance with applicable laws and regulations.
We are pleased to accept G AO’s unqualified opinions on the BIF, SAIF, and FR F financial
statements and to note that there w ere no m aterial weaknesses identified during the 2005
audits. The GAO reported that the funds’ financial statements w ere presented fairly, in
all m aterial respects, in conform ity with U.S. generally accepted accounting principles;
FDIC had effective internal control over financial reporting and com pliance with laws
and regulations; and there were no instances o f noncom pliance with laws and regulations
that were tested.
Regarding the reinstated reportable condition on inform ation system s controls, we
acknowledge but do not share the GAO’s assessm ent regarding the severity o f the risk
impact or the magnitude of the collective vulnerability posed by the potential control issues
identified by the G A O ’s audit team. Confidence in the sufficiency o f our inform ation
system s environment and the related inform ation system controls is grounded in what
FDIC believes is a deliberate, comprehensive program designed, in conjunction with
the deploym ent of our new financial system, to integrate not only system controls, but
procedural, managerial, and audit controls into a balanced and cost-effective control frame­
work. Nevertheless, the FDIC will work diligently with our GAO audit partners, throughout
the 2006 audit cycle, to reconcile our respective views on this m atter and to augm ent our
program in those instances where it is determ ined that changes are appropriate.
If you have any questions or concerns, please do not hesitate to contact me.
Sincerely,

Steven O. App
Deputy to the Chairm an and C hief Financial Officer

O ve rv iew o f th e Industry
The 8,856 FDIC-insured commercial
banks and savings institutions filing
financial reports for September 30
reported total net income of $102
billion for the first three quarters
of 2005, an increase of $10.2 billion
(11.1 percent) over the same period
of 2004. The three highest quarterly
earnings totals for the industry
have all come in 2005, as strong
loan demand, favorable asset quality,
and improvements in market-related
revenue have all supported growth
in earnings. The improving trend has
been broadly based; almost tw o out
of every three insured institutions
(64 percent) reported higher earnings
for the first three quarters of 2005
than in the same period of 2004.
The average return on assets
(ROA), a basic yardstick of earnings
performance, was 1.31 percent,
up from 1.29 percent in the same
period of 2004. Merger accounting
caused more than $3 billion to be
excluded from 2004 earnings,
so the year-over-year increase in
earnings is somewhat overstated,




but there was still substantial growth
in profits. One important source of
improvement was higher noninterest
income, especially market-sensitive
revenues such as trading income.
Total noninterest revenue was
$19.1 billion (12.8 percent) higher
than in the first three quarters
of 2004, as income from trading
rose by $3.5 billion (46.3 percent).
Transaction-based noninterest
income registered strong growth,
as service charges on deposit
accounts increased by $1.4 billion
(5.7 percent). Net interest income
also helped boost earnings, rising
by $20.3 billion (9.3 percent). Banks
and thrifts were able to limit declines
in their net interest margins despite
a flattening yield curve, so that
growth in interest-bearing assets
was reflected in higher revenue.
There were few negatives contained
in the first three quarters of the
2005 results. Unlike the previous two
years, industry earnings received no
benefit from lower credit expenses.
Provisions for loan losses were
$3 million higher than a year earlier
(0.01 percent). Higher interest rates
reduced the values of institutions'
fixed-rate securities, and gains from
sales of securities and other assets
were $2.2 billion (33.5 percent)
lower than in the first three quarters

of 2004. Noninterest expenses were
up by $20.5 billion (9.5 percent),
but some of this increase reflected
merger accounting in 2004, and the
actual growth in overhead expenses
was lower.
Residential real estate lending
continued to support overall asset
growth during the first three quarters
of 2005. During the 12 months ended
September 30, 2005, residential
mortgage assets (1-4 family mortgage
loans, home equity loans, mortgagebacked securities, and multifamily
residential mortgage loans) increased
by $426 billion (12.3 percent),
accounting for 52 percent of total
asset growth at insured institutions.
Loans to commercial and industrial
(C&l) borrowers was another area
of strength; C&l loans increased by
$99 billion (10.4 percent). Real estate
construction and development loans
grew by $98.5 billion (30.9 percent),
and commercial real estate loans
rose by $72 billion (9.9 percent).

Deposit growth remained strong,
as rising short-term interest rates
attracted more investment-oriented
deposits into insured institutions.
Total deposits increased by $585
billion (9.2 percent) in the 12 months
ended September 30. Deposits in
accounts of less than $100,000 grew
by $185 billion (6.6 percent), while
deposits in accounts of $100,000
or more increased by $318.5 billion
(11.4 percent). Deposits in foreign
offices rose by $82.9 billion
(10.1 percent).
Capital growth kept pace with the
growth in total assets during the
first three quarters of 2005. The
industry’s equity capital ratio reached
a 67-year high at mid-year, fueled
in part by large increases in mergerrelated goodwill. At the same time,
the industry's core capital (leverage)
ratio, which excludes goodwill,
reached its highest level in the
25 years that risk-based capital
standards have been in effect. At
the end of September 2005, more
than 99 percent of all FDIC-insured
institutions met or exceeded the
highest standards for regulatory
capital.







Enterprise Risk
M anagem ent
The Office of Enterprise Risk
Management is responsible for
corporate oversight of internal control
and enterprise risk management. This
includes ensuring that the FDIC's
operations and programs are effective
and efficient and that internal controls
are sufficient to minimize exposure
to waste, fraud, and mismanagement.
The FDIC recognizes the importance
of a strong risk management and
internal control program and has
adopted a more proactive and
enterprise-wide approach to man­
aging risk. This approach focuses on
the identification, quantification and
mitigation of risk consistently and
effectively throughout the Corporation.
An effective enterprise risk manage­
ment program ensures adequate
compliance with key authorities,
including but not limited to the:

The CFO Act extends to the FDIC the
FMFIA requirements for establishing,
evaluating and reporting on internal
controls. The FMFIA requires
agencies to annually provide a
statem ent of assurance regarding
the effectiveness of management,
administrative and accounting
controls, and financial management
systems.
The FDIC has developed and imple­
mented management, administrative
and financial system controls that
reasonably ensure that:

Federal Managers' Financial
Integrity Act (FMFIA)

•

Chief Financial Officers Act
(CFO Act)

•

Government Performance and
Results Act (GPRA)

•

Federal Information Security
Management Act (FISMA)

•

OMB Circular A-123

Programs are efficiently and
effectively carried out in accordance
w ith applicable laws and
management policies;

•

Programs and resources are
safeguarded against waste, fraud
and mismanagement;

•

Obligations and costs comply
with applicable laws; and

•
•

•

Reliable, complete, and timely
data are maintained for decision­
making and reporting purposes.

The FDIC's control standards
incorporate the GAO's Standards
for Internal Controls In the Federal
Government. Good internal control
systems are essential for ensuring the
proper conduct of FDIC business and
the accomplishment of management
objectives by serving as checks and
balances against undesirable actions
or outcomes.

As part of the Corporation's
continued com m itm ent to establish
and maintain effective and efficient
internal controls, FDIC management
routinely conducts reviews of internal
control systems. The results of these
reviews, as well as consideration
of audits, evaluations and reviews
conducted by the U.S. Government
Accountability Office (GAO), the
Office of Inspector General (OIG)
and other outside entities, are used
as a basis for the FDIC's reporting
on the condition of the Corporation's
internal control activities.

M a te rial W eaknesses
Material weaknesses are control
shortcomings in operations or systems
which, among other things, severely
impair or threaten the organization's
ability to accomplish its mission or
to prepare timely, accurate financial
statements or reports. The short­
comings are of sufficient magnitude
that the Corporation is obliged to
report them to external stakeholders.
To determine the existence of
material weaknesses, the FDIC
has assessed the results of
management evaluations and
external audits of the Corporation's
risk management and internal control
systems conducted in 2005, as well
as management actions taken to
address issues identified in these
audits and evaluations. Based on
this assessment and application of
other criteria, the FDIC concludes
that no material weaknesses existed




within the Corporation's operations
for 2005. This is the eighth consecu­
tive year that the FDIC has not had
a material weakness; however,
FDIC management will continue
to focus on high priority areas,
including IT systems security,
the New Financial Environment,
disaster recovery, privacy, and
contract oversight management,
among others. The FDIC will also
address all control issues raised by
GAO in its 2005 financial statement
audit report.

M a n ag em en t Report
on Final A ctio n
As required under amended Section
5 of the Inspector General's Act,
the tables on the following pages
provide information on final action
taken by management on audit
reports for the federal fiscal
year period, October 1, 2 0 0 4 September 30, 2005.

Number
of
Reports

Disallowed
Costs
(000's)

A. Management decisions-final action
not taken at beginning of period

6

$ 3,764

B. Management decisions made
during the period

2

$ 1,969

C. Total reports pending final action
during the period (A and B)

8

$ 5,733
■■■■■■

D. Audit reports on which final action
was taken during the period:
1. Recoveries:
a. Collections and offsets
b. Other
2. Write-offs
3. Total of 1a, 1b, and 2

4
4
0
4
6t

$
$
$
$
$

1,324
1,324
0
2,439
3,763

E. Audit reports needing final action
at the end of the period

Table 1
Management Report
on Final Action on Audits
with Disallowed Costs
For Fiscal Year 2005
(October 1, 2004-September 30, 2005)

2

$

1,969*

Audit Reports

• The FDIC agreed to coordinate w ith the General Services Administration (GSA) on potential cost
recoveries from the contractor, but after reviewing the OIG's findings, GSA declined to take action
to pursue recoveries from the contractor.
T Two reports had both collections and write-offs, thus the total of 1(a), 1(b), and 2 is six.

AThe total

Table 2
Management Report
on Final Action on Audits
with Recommendations
to Put Funds to Better Use
For Fiscal Year 2005
(October 1, 2004-September 30, 2005)




is off due to rounding.

Audit Reports

Number
of
Reports

Funds Put to
Better Use
(000's)

A. Management decisions-final action
not taken at beginning of period

0

$

0

B. Management decisions made
during the period

1

$

602

C. Total reports pending final action
during the period (A and B)

1

$

602

D. Final Action taken during the period:
1. Value of recommendations
implemented (completed)
2. Value of recommendations that
management concluded should not or
could not be implemented or completed
3. Total of 1 and 2

1

$

602

0
1

$
$

0
602

E. Audit reports needing final action
at the end of the period

0

$

0

Table 3
Audit Reports Without Final Actions But With Management Decisions Over One Year Old
For Fiscal Year 2005 (October 1, 2004-September 30, 2005)
M a n a g e m e n t A c t i o n in P r o c e s s
Report Number
and Issue Date
1.

03-007
11-27-02

OIG Audit Finding

Management Action

The OIG made recommendations
for improvements in the FDIC's
internal network controls.

FDIC is working to secure sensitive data in
conjunction with implementation of the
enterprise encryption project.
Expected completion date: 1st quarter 2006.

Disallowed
Costs

$

0

2

03-028
04-14-03

The OIG recommended that
the FDIC take a number of actions
for improvements related to the
public key infrastructure.

Additional time is required to accomplish
tasks related to the Intranet PKI components.
The FDIC is in the process of issuing MOUs
to external users of sensitive data.
Expected completion date: 2nd quarter 2006.

3

03-041
09-17-03

The OIG made recommendations
related to the established process
metrics for accurate insurance
determinations.

The FDIC agreed to establish a process to
routinely test the accuracy of insurance
determinations and evaluate results in
relationship to established benchmarks within
requirements of a proposed new system.
Expected completion date: 2nd quarter 2006.

$

0

The FDIC agreed to explore options for estimating
budgeted service line program maintenance costs
and determining reasonable adjustments for
such costs. It is expected that the necessary
information will be available through the
New Financial Environment.
Expected completion date: 4th quarter 2006.

$

0

The FDIC will continue with its data integrity
review of the Corporate Human Resources
Information System data and initiate
investigations as appropriate.
Expected completion date: 1st quarter 2006.

$

0

The OIG made recommendations to
improve the system development
control framework.

Staffing of the newly created Project
Management Organization is in progress.
Expected completion date: 4th quarter 2005.

$

0

The OIG made recommendations to
strengthen the quality of the FDIC's
Business Continuity Plan.

The FDIC is working to ensure that current
contracts essential to business continuity include
backup arrangements. Additional time is required
to complete the standard language and modify
the affected contracts.
Expected completion date: 1st quarter 2006.

$

0

4

5

6

7.

8

04-002
01-15-04

04-016
03-30-04

04-019
04-30-04
04-029
08-09-04

04-039
09-23-04




The OIG made recommendations
to improve the service line
rate-setting process.

The OIG made recommendations
to improve the accuracy of the data
used to manage the FDIC's
personnel security program.

The OIG made recommendations
to strengthen capital planning and
investment management related
guidance, including guidance
related to the FDIC's investment
management governance structure.

The Chief Information Officer's Council is
reviewing all information technology projects.
Expected completion date: 2nd quarter 2006.

VI. Appendixes

A p pend ix A - K e y S ta tistic s




S e le c te d Statistics

Dollars

in

!

mil lions

For the years ended December 31
2005

2004

2003

Bank Insurance Fund

j

Financial Results

Revenue
[Operating Expenses
Insurance and other expenses
Wet Income
Comprehensive income
Insurance Fund Balance
Fund as a Percentage of Insured Deposits

$

1,783
846
(135)
1,072
680

S 35,467
1.25%’

1,626
805
(921)
1,742
1,732
$ 33,782
1.32%

$

1,675
821
(263)
1,117
1,004
$ 34,787
1.30%

$

7,839
69
$ 27,161
3
$ 151
31

7,995
102
$ 28,812 ;
3
i 1,097 1
31

Selected Statistics

[Total BIF-Member Institutions'
7,748 T
Problem Institutions
58 *
[Total Assets of Problem Institutions
$ 18,714 T
Institution Failures
0
{Total Assets of Current Year Failed Institutions
$
0
Number of Active Failed Institution Receiverships
24

P
Savings Association Insurance Fund
Financial Results

Revenue
({Operating Expenses
Insurance and other expenses
Net Income
Comprehensive Income
insurance Fund Balance
Fund as a Percentage of Insured Deposits

'Si

637

$

120
(22)

$

120
(72)
516
480
$ 12,720
1.34%

539
409

$

13,130
1.30%T

$

K

547
130 :
(83)
500
493
12,240
1.37%

Selected Statistics

§Total SAIF-Member Institutions'
Problem Institutions
[Total Assets of Problem Institutions
$
Institution Failures
Total Assets of Current Year Failed Institutions
s
Number of Active Failed Institution Receiverships

I

1,136

1,108 T
10 T
2.151 T

.

|
$

1,089

0

0
3

*
vV:

S

15
3

$

1,186 j
14
1,105
0
0 1
2

............................ ... ........................................................
T As of September 30,2005.
* Commercial banks and savings institutions. Does not include U.S. branches o f foreign banks.
Savings institutions and commercial banks.

1

N u m b er and D epo sits o f BIF-lnsured Banks Closed Because o f Financial D iffic u ltie s , 1 9 3 4 th ro u g h 2 0 0 5 1
Dollars

in

Thousands
N u m b e r o f In su red Banks

Year

Total
2005
2004

D e p o s its o f Insured B anks

W ithout
Disbursements
by FDIC

2,116

W ith
Disbursements
by FDIC

19

2,097

0
3

2003
2002
2001
2000
1999
1998
1997

3
10
3
6
7
3
1

1996
1995
1994
1993
1992
1991
1990

5
6
13
41
120
124
168

_

1989
1988
1987
1986
1985
1984
1983

206
200
184
138
120
79
48

1982
1981
1980
1979
1978
1977
1976

42
10
10
10
7
6
16

1975
1974
1973
1972
1971
1970
1969

13
4
6
1
6
7
9

1968
1967
1966
1965
1964
1963
1962

3
4
7
5
7
2

1961
1960
1959
1958
1957
1956
1955

5
1
3
4
2
2
5

1954
1953
1952
1951
1950
1949
1948

2
4
3
2
4
5
3

1947
1946
1945
1944
1943
1942
1941

5
1
1
2
5
20
15

_

1940
1939
1938
1937
1936
1935
1934

43
60
74
77
69
26
9

_

-

-

1
-

10
_
_
-

_
_
-

-

-

1
_

2
-

1
-

-

_

2
_

1
-

$

217,856,719

$

4,298,814

W ith
Disbursements
by FDIC

$

213,557,905

Assets

$

408,937,918

0
132,880

-

0
132,880

0
150,519,500

3
10
3
6
7
3
1

903,504
2,124,501
49,926
311,950
1,268,151
335,076
26,800

-

903,504
2,124,501
49,926
311,950
1,268,151
335,076
26,800

1,096,724
2,507,565
54,470
378,088
1,423,819
370,400
25,921

5
6
12
41
110
124
168

168,228
632,700
1,236,488
3,132,177
41,150,898
53,751,763
14,473,300

168,228
632,700
1,236,488
3,132,177
36,893,231
53,751,763
14,473,300

182,502
753,024
1,392,140
3,539,373
44,197,009
63,119,870
15,660,800

206
200
184
138
120
79
48

24,090,551
24,931,302
6,281,500
6,471,100
8,059,441
2,883,162
5,441,608

24,090,551
24,931,302
6,281,500
6,471,100
8,059,441
2,883,162
5,441,608

29,168,596
35,697,789
6,850,700
6,991,600
8,741,268
3,276,411
7,026,923

42
10
10
10
7
6
16

9,908,379
3,826,022
216,300
110,696
854,154
205,208
864,859

9,908,379
3,826,022
216,300
110,696
854,154
205,208
864,859

11,632,415
4,859,060
236,164
132,988
994,035
232,612
1,039,293

13
4
6
1
6
7
9

339,574
1,575,832
971,296
20,480
132,058
54,806
40,134

_

339,574
1,575,832
971,296
20,480
132,058
54,806
40,134

419, 950
3,822,596
1,309,675
22,054
196,520
62,147
43,572

3
4
7
5
7
2

22,524
10,878
103,523
43,861
23,438
23,444
3,011

-

22,524
10,878
103,523
43,861
23,438
23,444
0

25,154
11,993
120,647
58,750
25,849
26,179
N/A

8,936
6,930
2,593
8,240
1,163
11,330
11,953

9,820
7,506
2,858
8,905
1,253
12,914
11,985

998
18,262
3,170
3,408
5,513
5,475
10,674

1,138
18,811
2,388
3,050
4,005
4,886
10,360

7,040
347
5,695
1,915
12,525
19,185
29,717

6,798
351
6,392
2,098
14,058
22,254
34,804

142,430
157,772
59,684
33,349
27,508
13,320
1,968

161,898
181,514
69,513
40,370
31,941
17,242
2,661

o
3
-

Total

W ithout
Disbursements
Total
by FDIC

o
5
1
3
4
1
2
5

8,936
6,930
2,593
8,240
11,247
11,330
11,953

2
2
3
2
4
4
3

998
44,711
3,170
3,408
5,513
6,665
10,674

5
1
1
2
5
20
15

7,040
347
5,695
1,915
12,525
19,185
29,717

43
60
74
75
69
25
9

142,430
157,772
59,684
33,677
27,508
13,405
1,968

_
-

4,257,667
-

_
-

-

-

-

3,011
-

10,084
-

26,449
-

1,190
-

328
_

85
-

1 Does not include institutions that received FDIC assistance and w ere not closed. Also does not include institutions insured by the Savings Association Insurance Fund (SAIF), which was
established by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.




Recoveries and Losses by th e Bank Insurance Fund on D isbursem ents fo r th e P ro te c tio n o f D epositors,
1 9 3 4 th ro u g h 2 0 0 5
Dollars

in

Thousands
A ll C a ses1

Year

Number
of
Banks

Disbursements

Total

2,227
0

D e p o s it P a y o ff Cases2

Estimated
Losses

Number
of
Banks

Disbursements

323,892

34,976,152

608

Recoveries

Estimated
Additional
Recoveries

112,571,316

74,095,625

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

15,929,270

11,180,391

114,936

4,633,943

3
3
10
3
6
7
3
1

0
132,781

0
127,791

0
0

0
4,990

0
0

0
0

0
0

0
0

0
0

883,772
2,030,455
48,631
268,730
1,244,448
286,678
25,546

681,532
1,470,428
42,839
237,913
560,175
43,487
20,520

124,507
116,506
0
0
51,149
17,282
0

77,733
443,521
5,792
30,817
633,124
225,909
5,026

0
5
0
0
0
0
0

0
1,585,058
0
0
0
0
0

0
1,169,657
0
0
0
0
0

0
114,936
0
0
0
0
0

0
300,465
0
0
0
0
0

1996
1995
1994
1993
1992
1991
1990

5
6
13
41
122
127
169

169,387
609,043
1,224,769
3,146,456
14,175,372
21,196,493
10,817,419

130,723
524,571
1,045,718
2,500,256
10,506,348
15,187,471
8,034,946

0
0
0
1,603
989
11,856
0

38,664
84,472
179,051
644,597
492,388
5,997,166
2,782,473

0
0
0
5
25
21
20

0
0
0
261,361
1,893,324
1,251,676
2,183,400

0
0
0
162,749
1,401,186
784,002
1,641,564

0
0
0
0
0
0
0

0
0
0
98,612
492,138
467,674
541,836

1989
1988
1987
1986
1985
1984
1983

207
280
203
145
120
80
48

11,445,829
12,163,006
5,037,871
4,790,969
2,920,687
7,696,215
3,807,082

5,248,247
5,244,866
3,015,215
3,015,252
1,913,452
6,056,061
2,400,044

0
0
0
0
0
0
0

6,197,582
6,918,140
2,022,656
1,775,717
1,007,235
1,640,154
1,407,038

32
36
51
40
29
16
9

2,116,556
1,252,160
2,103,792
1,155,981
523,789
791,838
148,423

1,262,140
822,612
1,401,000
739,659
411,175
699,483
122,484

0
0
0
0
0
0
0

854,416
429,548
702,792
416,322
112,614
92,355
25,939

1982
1981
1980
1979
1978
1977
1976

42
10
11
10
7
6
17

2,275,150
888,999
152,355
90,489
548,568
26,650
599,397

1,106,579
107,221
121,675
74,372
512,927
20,654
561,532

0
0
0
0
0
0
0

1,168,571
781,778
30,680
16,117
35,641
5,996
37,865

7
2
3
3
1
0
3

277,240
35,736
13,732
9,936
817
0
11,416

206,247
34,598
11,427
9,003
613
0
9,660

0
0
0
0
0
0
0

70,993
1,138
2,305
933
204
0
1,756

1975
1974
1973
1972
1971
1970
1969

13
5
6
2
7
7
9

332,046
2,403,277
435,238
16,189
171,646
51,566
42,072

292,431
2,259,633
368,852
14,501
171,430
51,294
41,910

0
0
0
0
0
0
0

39,615
143,644
66,386
1,688
216
272
162

3
0
3
1
5
4
4

25,918
0
16,771
16,189
53,767
29,265
7,596

25,849
0
16,771
14,501
53,574
28,993
7,513

0
0
0
0
0
0
0

69
0
0
1,688
193
272
83

1968
1967
1966
1965
1964
1963
1962

3
4
7
5
7
2
0

6,476
8,097
10,020
11,479
13,712
19,172
0

6,464
7,087
9,541
10,816
12,171
18,886
0

0
0
0
0
0
0
0

12
1,010
479
663
1,541
286
0

0
4
1
3
7
2
0

0
8,097
735
10,908
13,712
19,172
0

0
7,087
735
10,391
12,171
18,886
0

0
0
0
0
0
0
0

0
1,010
0
517
1,541
286
0

1961
1960
1959
1958
1957
1956
1955

5
1
3
4
1
2
5

6,201
4,765
1,835
3,051
1,031
3,499
7,315

4,700
4,765
1,738
3,023
1,031
3,286
7,085

0
0
0
0
0
0
0

1,501
0
97
28
0
213
230

5
1
3
3
1
1
4

6,201
4,765
1,835
2,796
1,031
2,795
4,438

4,700
4,765
1,738
2,768
1,031
2,582
4,208

0
0
0
0
0
0
0

1,501
0
97
28
0
213
230

1954
1953
1952
1951
1950
1949
1948

2
2
3
2
4
4
3

1,029
5,359
1,525
1,986
4,404
2,685
3,150

771
5,359
733
1,986
3,019
2,316
2,509

0
0
0
0
0
0
0

258
0
792
0
1,385
369
641

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

1947
1946
1945
1944
1943
1942
1941

5
1
1
2
5
20
15

2,038
274
1,845
1,532
7,230
11,684
25,061

1,979
274
1,845
1,492
7,107
10,996
24,470

0
0
0
0
0
0
0

59
0
0
40
123
688
591

0
0
0
1
4
6
8

0
0
0
404
5,500
1,612
12,278

0
0
0
364
5,377
1,320
12,065

0
0
0
0
0
0
0

0
0
0
40
123
292
213

1940
1939
1938
1937
1936
1935
1934

43
60
74
75
69
25
9

87,899
81,828
34,394
20,204
15,206
9,108
941

84,103
74,676
31,969
16,532
12,873
6,423
734

0
0
0
0
0
0
0

3,796
7,152
2,425
3,672
2,333
2,685
207

19
32
50
50
42
24
9

4,895
26,196
9,092
12,365
7,735
6,026
941

4,313
20,399
7,908
9,718
6,397
4,274
734

0
0
0
0
0
0
0

582
5,797
1,184
2,647
1,338
1,752
207

2005
2004
2003
2002
2001
2000
1999
1998
1997

!
;




continued on next page

Recoveries and Losses by th e Bank Insurance Fund on D isb u rsem ents fo r th e P ro tec tio n o f D epositors,
1 9 3 4 th ro u g h 2 0 0 5 (continued)
Dollars

in

Thousands
D e p o s it A s s u m p tio n C ases

Year

Number
of
Banks

Disbursements

Total

1,478

2005
2004

A s s is ta n c e T ra n s a c tio n s 1

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

Number
of
Banks

Disbursements

85,011,690

56,715,359

208,956

28,087,375

141

0
3

0
132,781

0
127,791

0
0

0
4,990

2003
2002
2001
2000
1999
1998
1997

3
5
3
6
7
3
1

883,772
445,397
48,631
268,730
1,244,448
286,678
25,546

681,532
300,771
42,839
237,913
560,175
43,487
20,520

124,507
1,570
0
0
51,149
17,282
0

77,733
143,056
5,792
30,817
633,124
225,909
5,026

1996
1995
1994
1993
1992
1991
1990

5
6
13
36
95
103
148

169,387
609,043
1,224,769
2,885,095
12,280,562
19,938,700
8,629,084

130,723
524,571
1,045,718
2,337,507
9,103,926
14,400,376
6,390,785

0
0
0
1,603
989
11,856
0

38,664
84,472
179,051
545,985
3,175,647
5,526,468
2,238,299

1989
1988
1987
1986
1985
1984
1983

174
164
133
98
87
62
35

9,326,725
9,180,495
2,773,202
3,476,140
1,631,166
1,373,198
2,893,969

3,985,855
4,232,545
1,613,502
2,209,924
1,095,601
941,674
1,850,553

0
0
0
0
0
0
0

1982
1981
1980
1979
1978
1977
1976

25
5
7
7
6
6
13

268,372
79,208
138,623
80,553
547,751
26,650
587,981

213,578
71,358
110,248
65,369
512,314
20,654
551,872

1975
1974
1973
1972
1971
1970
1969

10
4
3
0
1
3
5

306,128
2,403,277
418,467
0
117,879
22,301
34,476

1968
1967
1966
1965
1964
1963
1962

3
0
6
2
0
0
0

1961
1960
1959
1958
1957
1956
1955

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

11,630,356

6,199,875

0

5,430,481

0
0

0
0

0
0

0
0

0
0

0
0
0
0
0
0
0
0
0
0
0
2
3
1

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
1,486
6,117
4,935

0
0
0
0
1,236
3,093
2,597

0
0
0
0
0
0
0

0
0
0
0
250
3,024
2,338

5,340,870
4,947,950
1,159,700
1,266,216
535,565
431,524
1,043,416

1
80
19
7
4
2
4

2,548
1,730,351
160,877
158,848
765,732
5,531,179
764,690

252
189,709
713
65,669
406,676
4,414,904
427,007

0
0
0
0
0
0
0

2,296
1,540,642
160,164
93,179
359,056
1,116,275
337,683

0
0
0
0
0
0
0

54,794
7,850
28,375
15,184
35,437
5,996
36,109

10
3
1
0
0
0
1

1,729,538
774,055
0
0
0
0
0

686,754
1,265
0
0
0
0
0

0
0
0
0
0
0
0

1,042,784
772,790
0
0
0
0
0

266,582
2,259,633
352,081
0
117,856
22,301
34,397

0
0
0
0
0
0
0

39,546
143,644
66,386
0
23
0
79

0
1
0
1
1
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

6,476
0
9,285
571
0
0
0

6,464
0
8,806
425
0
o
o

o
0
0
0
0
0
0

12
0
479
146
o
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
1
0
1
1

0
0
0
255
0
704
2,877

0
0
0
255
0
704
2,877

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

1954
1953
1952
1951
1950
1949
1948

2
2
3
2
4
4
3

1,029
5,359
1,525
1,986
4,404
2,685
3,150

771
5,359
733
1,986
3,019
2,316
2,509

0
0
0
0
0
0
0

258
0
792
0
1,385
369
641

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

1947
1946
1945
1944
1943
1942
1941

5
1
1
1
1
14
7

2,038
274
1,845
1,128
1,730
10,072
12,783

1,979
274
1,845
1,128
1,730
9,676
12,405

0
0
0
0
0
0
0

59
0
0
0
0
396
378

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

1940
1939
1938
1937
1936
1935
1934

24
28
24
25
27

83,004
55,632
25,302
7,839
7,471
3,082
0

79,790
54,277
24,061
6,814
6,476
2,149
0

0
0
0
0
0
0
0

3,214
1,355
1,241
1,025
995
933
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

0
0
0
0
0
0
0

1

0

Totals do not include dollar amounts for the five open bank assistance transactions between 1971 and 1980. Excludes eight transactions prior to 1962 that required no disbursements.
Also, disbursements, recoveries, and estimated additional recoveries do not include working capital advances to and repayments by receiverships.
Includes insured deposit transfer cases.
Note: Beginning w ith the 1997 Annual Report the number of banks in the Assistance Transactions column for 1988 was changed from 21 to 80 and the number of banks in the All Cases
column was changed from 221 to 280 to reflect that one assistance transaction encompassed 60 institutions. Also, certain 1982, 1983, 1989 and 1992 resolutions previously reported
Digitizedinfor FRASER Payoff or Deposit Assumption categories w ere reclassified.
either the Deposit



Incom e and Expenses, Bank Insurance Fund, fro m Beginning o f O peratio ns,
S ep tem b e r 11, 1 9 3 3 , th ro ug h D e ce m b er 3 1 , 2 0 0 5
Dollars

in

Millions
In co m e

Expenses and Losses

Total

Provision
for
Losses

Administrative
and Operating
Expenses2

Interest and
Other Insur.
Expenses

Net Incom e/
(Loss)

S 55,419.0

$ 35,772.9

S 12,633.6

$ 7,018.5

$ 35,169.0

0.0022%
0.0022%
0.0020%
0.0022%
0.0014%
0.0014%
0.0011 %
0.0008%

711.5
558.6
(115.7)
750.6
2,559.4
645.2
1,922.0
691.5

(138.2)
(281.4)
(928.5)
(87.0)
1,756.3
(153.0)
1,168.7
(37.7)

846.2
821.3
805.5
821.1
785.9
772.9
730.4
697.6

3.5
18.7
7.3
16.5
17.2
25.3
22.9
31.6

1,072.0
1,116.8
1,741.7
1,045.3
(562.7)
1,260.7
(106.4)
1,308.8

1,590.9
1,582.6
1,182.2
876.4
646.5
713.7
629.5
983.0
1609.6

0.0008%
0.0024%
0.1240%
0.2360%
0.2440%
0.2300%
0.2125%
0.1200%
0.0833%

177.3
254.6
483.2
(2,259.1)
(6,791.4)
(625.8)
16,862.3
13,003.3
4,346.2

(503.7)
(325.2)
(33.2)
(2,873.4)
(7,677.4)
(2,259.7)
15,476.2
12,133.1
3,811.3

605.2
505.3
470.6
423,2
388.5
570.83
284.1
219.6
213.9

75.8
74.5
45.8
191.1
497.5
1,063.1
1,102.0
650.6
321.0

1,438.3
1,400.7
3,605.9
8,726.1
13,222.2
6,927.3
(11,072.3)
(9,165.0)
(851.6)

0.0
0.0
0.0
0.0
0.0
164.0
96.2
117.1
521.1

1,574.7
1,623.4
1,743.2
1,952.0
1,778.0
1,577.2
1,511.9
1,152.8
879.6

0.0833%
0.0833%
0.0833%
0.0833%
0.0800%
0.0714%
0.0769%
0.0714%
0.0370%

7,588.4
3,270.9
2,963.7
1,957.9
1,999.2
969.9
999.8
848.1
83.6

6,298.3
2,996.9
2,827.7
1,569.0
1,633.4
675.1
126.4
320.4
(38.1)

223.9
204.9
180.3
179.2
151.2
135.7
129.9
127.2
118.2

1,066.2
69.1
(44.3)
209.7
214.6
159.1
743.5
400.5
3.5

(4,240.7)
48.5
296.4
1,427.5
1,100.3
1,658.2
1,524.8
1,226.6
1,226.8

881.0
810.1
731.3
676.1
641.3
587.4
529.4
468.8
417.2

524.6
443.1
411.9
379.6
362.4
285.4
283.4
280.3
241.4

734.0
585.1
518.4
468.4
410.4
366.1
315.0
278.5
239.5

0.0333%
0.0385%
0.0370%
0.0370%
0.0357%
0.0435%
0.0385%
0.0333%
0.0345%

93.7
148.9
113.6
212.3
97.5
159.2
108.2
59.7
60.3

(17.2)
36.5
20.8
28.0
27.6
97.9
52.5
10.1
13.4

369.3
364.2
334.5
303.1
284.3
260.5
238.2
220.6
203.4

210.0
220.2
202.1
182.4
172.6
158.3
145.2
136.4
126.9

223.4
191.8
162.6
142.3
129.3
112.4
104.1
97.7
84.6

0.0357%
0.0333%
0.0333%
0.0333%
0.0323%
0.0323%
0.0323%
0.0313%
0.0313%

46.0
34.5
29.1
27.3
19.9
22.9
18.4
15.1
13.8

3.8
1.0
0.1
2.9
0.1
5.2
2.9
0.7
0.1

Total

Assessment
Income

Assessment
Credits

Investment
and Other
Sources

Total

$ 90,588.0

$ 53,572.7

$ 6,709.1

$ 43,724.4

2005
2004
2003
2002
2001
2000
1999
1998

1,783.5
1,675.4
1,626.0
1,795.9
1,996.7
1,905.9
1,815.6
2,000.3

52.6
95.3
80.2
84.0
47.8
45.1
33.3
21.7

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

1,730.9
1,580.1
1,545.8
1,711.9
1,948.9
1,860.8
1,782.3
1,978.6

1997
1996
1995
1994
1993
1992
1991
1990
1989

1,615.6
1,655.3
4,089.1
6,467.0
6,430.8
6,301.5
5,790.0
3,838.3
3,494.6

24.7
72.7
2,906.9
5,590.6
5,784.3
5,587.8
5,160.5
2,855.3
1,885.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

1988
1987
1986
1985
1984
1983
1982
1981
1980

3,347.7
3,319.4
3,260.1
3,385.4
3,099.5
2,628.1
2,524.6
2,074.7
1,310.4

1,773.0
1,696.0
1,516.9
1,433.4
1,321.5
1,214.9
1,108.9
1,039.0
951.9

1979
1978
1977
1976
1975
1974
1973
1972
1971

1,090.4
952.1
837.8
764.9
689.3
668.1
561.0
467.0
415.3

1970
1969
1968
1967
1966
1965
1964
1963
1962

382.7
335.8
295.0
263.0
241.0
214.6
197.1
181.9
161.1

Year




Effective
Assessment
Rate1

106.8
103.3
89.3
180.44
67.7
59.2
54.4
49.6
46.9

4.1
9.1
3.5
3.9
2.2
2.1
1.3
6.0*
0.0

996.7
803.2
724.2
552.6
591.8
508.9
452.8
407.3
355.0

42.2
33.5
29.0
24.4
19.8
17.7
15.5
14.4
13.7

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

336.7
301.3
265.9
235.7
221.1
191.7
178.7
166.8
147.3

continued on next page

Incom e and Expenses, Bank Insurance Fund, fro m Beginning o f O peratio ns,
S ep tem b e r 11, 1 9 3 3 , th ro u g h D e ce m b er 3 1 , 2 0 0 5 (continued)
Dollars

in

Millions
In co m e

E xpenses an d Losses
Investment
and Other
Sources

Total

Provision
for
Losses

$ 55,419.0

$ 35,772.9

$ 12,633.6

$ 7,018.5

$ 35,169.0

0.0323%
0.0370%
0.0370%
0.0370%
0.0357%
0.0370%
0.0370%

14.8
12.5
12.1
11.6
9.7
9.4
9.0

1.6
0.1
0.2
0.0
0.1
0.3
0.3

13.2
12.4
11.9
11.6
9.6
9.1
8.7

0.0
0.0
0.0
0.0
0.0
0.0
0.0

132.5
132.1
124.4
115.2
107.6
102.5
96.8

37.3
34.0
31.3
29.2
30.6
28.4
26.3

0.0357%
0.0357%
0.0370%
0.0370%
0.0370%
0.0833%
0.0833%

7.8
7.3
7.8
6.6
7.8
6.4
7.0

0.1
0.1
0.8
0.0
1.4
0.3
0.7

7.7
7.2
7.0
6.6
6.4
6,1 g
6.3

0.0
0.0
0.0
0.0
0.0
0.0
0.0

91.9
86.9
80.8
76.9
77.0
144.7
138.6

0.0
0.0
0.0
0.0
0.0
0.0
0.0

43.1
23.7
27.3
18.4
16.6
12.6
10.6

0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%

9.9
10.0
9.4
9.3
9.8
10.1
10.1

0.1
0.1
0.1
0.1
0.2
0.5
0.6

9.8
9.9
9.3
9.2
9.6
9.6
9.5

0.0
0.0
0.0
0.0
0.0
0.0
0.0

147.6
120.7
111.6
90.0
76.8
59.0
51.9

0.0
0.0
0.0
0.0
0.0
0.0
0.0

9.7
10.5
9.4
9.4
8.2
9.3
7.0

0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
0.0833%
N/A

12.9
16.4
11.3
12.2
10.9
11.3
10.0

3.5
7.2
2.5
3.7
2.6
2.8
0.2

9.4
9.2
8.8
8.5
8.3
8.5
9.8

0.0
0.0
0.0
0.0
0.0
0.0
0.0

43.0
34.8
36.4
36.0
32.9
9.5
(3.0)

Year

Total

Assessment
Income

Total

$ 90,588.0

$ 53,572.7

$ 6,709.1

$ 43,724.4

1961
1960
1959
1958
1957
1956
1955

147.3
144.6
136.5
126.8
117.3
111.9
105.8

188.9
180.4
178.2
166.8
159.3
155.5
151.5

115.5
100.8
99.6
93.0
90.2
87.3
85.4

73.9
65.0
57.9
53.0
48.2
43.7
39.7

1954
1953
1952
1951
1950
1949
1948

99.7
94.2
88.6
83.5
84.8
151.1
145.6

144.2
138.7
131.0
124.3
122.9
122.7
119.3

81.8
78.5
73.7
70.0
68.7
0.0
0.0

1947
1946
1945
1944
1943
1942
1941

157.5
130.7
121.0
99.3
86.6
69.1
62.0

114.4
107.0
93.7
80.9
70.0
56.5
51.4

55.9
51.2
47.7
48.2
43.8
20.8
7.0

46.2
40.7
38.3
38.8
35.6
11.5
0.0

1940
1939
1938
1937
1936
1935
1933/4

Assessment
Credits

Effective
Assessment
Rate1

Administrative
and Operating
Expenses2

Interest and
Other Insur.
Expenses

Net Income/
(Loss)

1 The effective rates from 1950 through 1984 vary from the statutory rate of 0.0833 percent due to assessment credits provided in those years. The statutory rate increased to 0.12
percent in 1990 and to a m inimum o f 0.15 percent in 1991. The effective rates in 1991 and 1992 vary because the FDIC exercised new authority to increase assessments above the
statutory rate when needed. Beginning in 1993, the effective rate is based on a risk-related premium system under which institutions pay assessments in the range of 0.23 percent
to 0.31 percent. In May 1995, the BIF reached the mandatory recapitalization level of 1.25%. As a result, the assessment rate was reduced to 4.4 cents per $100 of insured deposits
and assessment premiums totaling $1.5 billion w ere refunded in September 1995.
2 These expenses, which are presented as operating expenses in the Statements of Income and Fund Balance, pertain to the FDIC in its corporate capacity only and do not include costs
that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are presented as part of the "Receivables from Bank Resolutions, net" line
on the Balance Sheets. The narrative and graph presented in the "Corporate Planning and Budget" section of this report (next page) show the aggregate (corporate and receivership)
expenditures of the FDIC.
3 Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits.
4 Includes $105.6 million net loss on governm ent securities.
5 This amount represents interest and other insurance expenses from 1933 to 1972.
6 Includes the aggregate amount of $80.6 million of interest paid on Capital Stock between 1933 and 1948.




C o rp o rate Plan nin g and Budget

FDIC Expenditures 1 9 9 5 -2 0 0 5
Dollars

in

Millions

B FDIC
b rtc

LlDffl,

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Note:
Resolution Trust Corporation (RTC) expenditures became the responsibility of the FDIC on January 1,1996.




The FDIC's Strategic Plan and Annual Performance Plan provide
the basis for annual planning and budgeting for needed resources.
The 2005 aggregate budget (for corporate, receivership and
investment spending) was $1.18 billion, while actual expenditures
for the year were $1.05 billion, about $60 million less than 2004
expenditures.
Over the past ten years, the FDIC's expenditures have varied
in response to workload. During the past decade, expenditures
generally declined due to decreasing resolution and receivership
activity, although they temporarily increased in 1996 in conjunction
with the absorption of the Resolution Trust Corporation (RTC)
and its residual operations and workload. Total expenditures
increased in 2002 due to an increase in receivership-related
expenses.
The largest component of FDIC spending is for costs associated
with staffing. Staffing decreased by just over 11 percent in 2005,
from 5,078 employees at the beginning of the year to 4,514 at
the end of the year.

E stim ated Insured D epo sits and th e Bank Insurance Fund, D e ce m b er 3 1 ,1 9 3 4 , th ro u g h S ep tem b e r 3 0 , 2 0 0 5 1

D e p o s its in In su red B anks ($ millions)

P e rc e n ta g e o f

Year2

Insurance
Coverage

2005
2004

S 100,000
100,000

S 4,782,354
4,530,207

S 2,825,366
2,672,397

59.1
59.0

$ 35,334.4
34,786.6

0.74
0.77

1.25
1.30

2003
2002
2001
2000
1999
1998
1997

100,000
100,000
100,000
100,000
100,000
100,000
100,000

4,139,287
3,867,096
3,584,610
3,326,745
3,038,385
2,996,396
2,785,990

2,554,624
2,527,948
2,408,878
2,301,604
2,157,536
2,141,268
2,055,874

61.7
65.4
67.2
69.2
71.0
71.5
73.8

33,782.2
32,050.3
30,438.8
30,975.2
29,414.2
29,612.3
28,292.5

0.82
0.83
0.85
0.93
0.97
0.99
1.02

1.32
1.27
1.26
1.35
1.36
1.38
1.38

1996
1995
1994
1993
1992
1991
1990

100,000
100,000
100,000
100,000
100,000
100,000
100,000

2,642,107
2,575,966
2,463,813
2,493,636
2,512,278
2,520,074
2,540,930

2,007,447
1,952,543
1,896,060
1,906,885
1.945,623
1,957,722
1,929,612

76.0
75.8
77.0
76.5
77.4
77.7
75.9

26,854.4
25,453.7
21,847.8
13,121.6
(100.6)
(7,027.9)
4,044.5

1.02
0.99
0.89
0.53
(0.00)
(0.28)
0.16

1.34
1.30
1.15
0.69
(0.01)
(0.36)
0.21

1989
1988
1987
1986
1985
1984
1983

100,000
100,000
100,000
100,000
100,000
100,000
100,000

2,465,922
2,330,768
2,201,549
2,167,596
1,974,512
1,806,520
1,690,576

1,873,837
1,750,259
1,658,802
1,634,302
1,503,393
1,389,874
1,268,332

76.0
75.1
75.3
75.4
76.1
76.9
75.0

13,209.5
14,061.1
18,301.8
18,253.3
17,956.9
16,529.4
15,429.1

0.54
0.60
0.83
0.84
0.91
0.92
0.91

0.70
0.80
1.10
1.12
1.19
1.19
1.22

1982
1981
1980
1979
1978
1977
1976

100,000
100,000
100,000
40,000
40,000
40,000
40,000

1,544,697
1,409,322
1,324,463
1,226,943
1,145,835
1,050,435
941,923

1,134,221
988,898
948,717
808,555
760,706
692,533
628,263

73.4
70.2
71.6
65.9
66.4
65.9
66.7

13,770.9
12,246.1
11,019.5
9,792.7
8,796.0
7,992.8
7,268.8

0.89
0.87
0.83
0.80
0.77
0.76
0.77

1.21
1.24
1.16
1.21
1.16
1.15
1.16

1975
1974
1973
1972
1971
1970
1969

40,000
40,000
20,000
20,000
20,000
20,000
20,000

875,985
833,277
766,509
697,480
610,685
545,198
495,858

569,101
520,309
465,600
419,756
374,568
349,581
313,085

65.0
62.5
60.7
60.2
61.3
64.1
63.1

6,716.0
6,124.2
5,615.3
5,158.7
4,739.9
4,379.6
4,051.1

0.77
0.73
0.73
0.74
0.78
0.80
0.82

1.18
1.18
1.21
1.23
1.27
1.25
1.29

1968
1967
1966
1965
1964
1963
1962

15,000
15,000
15,000
10,000
10,000
10,000
10,000

491,513
448,709
401,096
377,400
348,981
313,304
297,548

296,701
261,149
234,150
209,690
191,787
177,381
170,210

60.2
58.2
58.4
55.6
55.0
56.6
57.2

3,749.2
3,485.5
3,252.0
3,036.3
2,844.7
2,667.9
2,502.0

0.76
0.78
0.81
0.80
0.82
0.85
0.84

1.26
1.33
1.39
1.45
1.48
1.50
1.47

1961
1960
1959
1958
1957
1956
1955

10,000
10,000
10,000
10,000
10,000
10,000
10,000

281,304
260,495
247,589
242,445
225,507
219,393
212,226

160,309
149,684
142,131
137,698
127,055
121,008
116,380

57.0
57.5
57.4
56.8
56.3
55.2
54.8

2,353.8
2,222.2
2,089.8
1,965.4
1,850.5
1,742.1
1,639.6

0.84
0.85
0.84
0.81
0.82
0.79
0.77

1.47
1.48
1.47
1.43
1.46
1.44
1.41

1954
1953
1952
1951
1950
1949
1948

10,000
10,000
10,000
10,000
10,000
5,000
5,000

203,195
193,466
188,142
178,540
167,818
156,786
153,454

110,973
105,610
101,841
96,713
91,359
76,589
75,320

54.6
54.6
54.1
54.2
54.4
48.8
49.1

1,542.7
1,450.7
1,363.5
1,282.2
1,243.9
1,203.9
1,065.9

0.76
0.75
0.72
0.72
0.74
0.77
0.69

1.39
1.37
1.34
1.33
1.36
1.57
1.42

1947
1946
1945
1944
1943
1942
1941

5,000
5,000
5,000
5,000
5,000
5,000
5,000

154,096
148,458
157,174
134,662
111,650
89,869
71,209

76,254
73,759
67,021
56,398
48,440
32,837
28,249

49.5
49.7
42.4
41.9
43.4
36.5
39.7

1,006.1
1,058.5
929.2
804.3
703.1
616.9
553.5

0.65
0.71
0.59
0.60
0.63
0.69
0.78

1.32
1.44
1.39
1.43
1.45
1.88
1.96

1940
1939
1938
1937
1936
1935
1934

5,000
5,000
5,000
5,000
5,000
5,000
5,000

65,288
57,485
50,791
48,228
50,281
45,125
40,060

26,638
24,650
23,121
22,557
22,330
20,158
18,075

40.8
42.9
45.5
46.8
44.4
44.7
45.1

496.0
452.7
420.5
383.1
343.4
306.0
291.7

0.76
0.79
0.83
0.79
0.68
0.68
0.73

1.86
1.84
1.82
1.70
1.54
1.52
1.61

_________

Estimated
Insured 3
Deposits

Insu ran ce Fund as

Total
Domestic
Deposits

Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Estimated
Insured
Deposits

For 2005, the numbers are as of September 30, and prior years reflect December 31.
Starting in 1990, deposits in insured banks exclude those deposits held by Bank Insurance Fund members that are insured by the Savings Association Insurance Fund and include those
deposits held by Savings Association Insurance Fund members that are insured by the Bank Insurance Fund.
Estimated insured deposits reflect deposit information as reported in the fourth quarter FDIC Quarterly Banking Profile. Before 1991, insured deposits w ere estimated using percentages

Digitized determined from the June 30 Call Reports.
for FRASER
Initial coverage was $2,500 from January 1 to June 30,


1934.

Income and Expenses, Savings Association Insurance Fund, by Year,
from Beginning of Operations, August 9, 1989, through December 31, 2005
Dollars

in

Thousands
In c o m e

Expenses and Losses

Year

Total

Assessment
Income

Investment
and
Other
Sources

Effective
Assessment
Rate

Total

Provision
for
Losses

Interest
and Other
Insurance
Expenses

Administrative
and
Operating
Expenses

Funding
Transfer
from
the FSLIC
Resolut. Fund

Net Incom e/
(Loss)

Total

$ 14,543,505

$ 8,659,789

$ 5,883,716

$ 1,661,638

$ 374,377

$ 30,990

$ 1,256,271

$ 139,498

$ 13,021,365

2005
2004

636,989
564,777

8,315
8,891

628,674
555,886

0.001%
0.001 %

97,852
48,326

(21,988)
(72,385)

372
713

119,468
119,998

0
0

539,137
516,451

2003
2002
2001
2000
1999

547,260
588,821
733,121
664,080
600,995

14,594
23,783
35,402
19,237
15,116

532,666
565,038
697,719
644,843
585,879

0.001 %
0.003%
0.004%
0.002%
0.002%

47,200
(31,380)
564,083
300,018
124,156

(82,489)
(156,494)
443,103
180,805
30,648

105
751
19,389
8,293
626

129,584
124,363
101,591
110,920
92,882

0
0
0
0
0

500,060
620,201
169,038
364,062
476,839

1998
1997
1996
1995
1994

583,859
549,912
5,501,684
1,139,916
1,215,289

15,352
13,914
5,221,560
970,027
1,132,102

568,507
535,998
280,124
169,889
83,187

0.002%
0.004%
0.204%
0.234%
0.244%

116,629
69,986
(28,890)
(281,216)
434,303

31,992
(1,879)
(91,636)
(321,000)
414,000

9
0
128
o
0

84,628
71,865
62,618
39,784
20,303

0
0
0
0
0

467,230
479,926
5,530,574
1,421,132
780,986

1993
1992
1991
1990
1989

923,516
178,643
96,446
18,195
2

897,692
172,079
93,530
18,195
0

25,824
6,564
2,916
0
2

0.250%
0.230%
0.230%
0.208%
0.208%

46,814
28,982
63,085
56,088
5,602

16,531
(14,945)
20,114
0
0

0
(5)
609
0
0

30,283
43,932
42,362
56,088
5,602

0
35,446
42,362
56,088
5,602

876,702
185,107
75,723
18,195
2




Estim ated Insured D epo sits and th e Savings A sso ciatio n Insurance Fund,
D ecem b er 3 1 , 1 9 8 9 , th ro u g h S ep tem b e r 3 0 , 2 0 0 5 1
D e p o s its in Insured In s titu tio n s ($ Millions)
Total
Domestic
Deposits

Insurance
Coverage

Year2

Estimated
Insured
Deposits3

In su ran ce Fund as a P e rc e n ta g e o f

Percentage of
Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Estimated
Insured
Deposits

2005
2004

$ 100,000
100,000

$ 1,254,070
1,156,473

$ 1,005,554
951,316

80.2
82.3

$ 13,038.8
12,720.2

1.04
1.10

1.30
1.34

2003
2002
2001
2000
1999

100,000
100,000
100,000
100,000
100,000

1,042,729
990,231
897,278
822,610
764,359

896,493
860,351
801,849
752,756
711,345

86.0
86.9
89.4
91.5
93.1

12,240.1
11,746.7
10,935.0
10,758.6
10,280.7

1.17
1.19
1.22
1.31
1.35

1.37
1.37
1.36
1.43
1.45

1998
1997
1996
1995
1994

100,000
100,000
100,000
100,000
100,000

751,413
721,503
708,749
742,547
720,823

708,959
690,132
683,090
711,017
692,626

94.4
95.7
96.4
95.8
96.1

9,839.8
9,368.3
8,888.4
3,357.8
1,936.7

1.31
1.30
1.25
0.45
0.27

1.39
1.36
1.30
0.47
0.28

1993
1992
1991
1990
1989

100,000
100,000
100,000
100,000
100,000

726,473
760,902
810,664
874,738
948,144

695,158
729,458
776,351
830,028
882,920

95.7
95.9
95.8
94.9
93.1

1,155.7
279.0
93.9
18.2
0.0

0.16
0.04
0.01
0.00
0.00

0.17
0.04
0.01
0.00
0.00

1 For 2005, the numbers are as of September 30, and prior years reflect December 31

2

Starting in 1990, deposits in insured institutions exclude those deposits held by Savings Association Insurance Fund members that are insured by the Bank Insurance Fund and include
those deposits held by Bank Insurance Fund members that are insured by the Savings Association Insurance Fund.

3 Estimated insured deposits reflect deposit information as reported in the fourth quarter FDIC Quarterly Banking Profile. Before 1991, insured deposits were estim ated using percentages
determined from the June 30 Call Reports.

N um ber, Assets, D epo sits, Losses, and Loss to Funds o f Insured T h rifts
i
Taken O ver or Closed Because o f Financial D iffic u ltie s , 1 9 8 9 th ro u g h 2 0 0 5
Dollars

in

Thousands
Estimated
Receivership
Loss 3

4
Loss to Funds

Total

Assets

Deposits

Total

754

397,387,643

320,186,773

75,471,820

82,009,786

2005
2004

0
1

0
15,346

0
13,005

0
0

0
0

2003
2002
2001
2000
1999

0
1
1
1
1

0
50,246
2,179,783
29,530
62,956

0
50,542
1,670,802
28,583
63,427

0
973
338,694
1,322
1,195

0
973
338,694
1,322
1,194

1998
1997
1996
1995
1994

0
0
1
2
2

0
0
32,576
423,819
136,815

0
0
32,745
414,692
127,508

0
0
21,921
28,192
11,472

0
0
21,921
27,750
14,599

10
59
144
213
318

7,178,794
44,196,946
78,898,804
129,662,398
134,519,630

5,708,253
34,773,224
65,173,122
98,963,961
113,166,909

267,595
3,237,913
8,635,366
16,064,160
46,863,017

65,212
3,772,356
9,086,672
19,257,844
49,421,249

Year2

1993
1992
1991
1990
1909 6

1 Prior to July 1,1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC was term inated on December 31,1995, and all assets and liabilities
transferred to the FSLIC Resolution Fund (FRF), all the results of the thrift closing activity from 1989 through 1995 are now reflected on FRF's books. The Savings Association Insurance
Fund (SAIF) became responsible for all thrifts closed after June 30, 1995; there have been only six such failures. Additionally, SAIF was appointed receiver of one thrift (Heartland FSLA)
on October 8, 1993, because, at that tim e, RTC's authority to resolve FSLIC-insured thrifts had not yet been extended by the RTC Completion Act.
2 Year is the year of failure, not the year of resolution.
3 The estimated losses represent the projected loss at the fund level from receiverships fo r unreimbursed subrogated claims of the FRF/SAIF and unpaid advances to receiverships from
the FRF.
4 The Loss to Funds represents the total resolution cost of the failed thrifts in the SAIF and FRF-RTC funds, which includes corporate revenue and expense items such as interest expense
on Federal Financing Bank debt, interest expense on escrowed funds, and interest revenue on advances to receiverships, in addition to the estimated losses for receiverships.
5 Total fo r 1989 excludes nine failures of the form er FSLIC.




FDIC Actions on Financial Institutions Applications 2 0 0 3 -2 0 0 5
2005
Deposit Insurance

Approved
Denied
New Branches

Approved
Denied
Mergers

Approved
Denied
Requests for Consent to Serve*

Approved
Section 19
Section 32
Denied
Section 19
Section 32
Notices of Change in Control

Letters of intent Not to Disapprove
Disapproved
Brokered Deposit Waivers

Approved
Denied
Savings Association Activities'

Approved
Denied
State Bank Activities/Investments7

Approved
Denied
Conversions of Mutual institutions

Non-Objection
Objection

2004

2003

219
219
0
1,575
1,575
0
286
286
0
170
170
13
157
0
0
0
9
9
0
40
40
0
59
59
0
18
18
0
11
11
0

176
176
0
1,447
1,447
0
311
311
0
301
301
13
288
0
0
0
18
18
0
32
32
0
70
70
0
27
27
0
12
12
0

141
140
1
1,227
1,227
0
304
304
0
369
368
13
355
1
0
1
30
30
0
28
28
0
56
56
0
19
19
0
7
7
0

* Under Section 19 of the Federal Deposit Insurance (FDI) Act, an insured institution must receive FDIC approval before
employing a person convicted of dishonesty or breach of trust. Under Section 32, the FDIC must also approve any change
of directors or senior executive officers at a state nonmember bank that is not in compliance w ith capital requirements
or is otherwise in troubled condition.
■ Amendments to Part 303 of the FDIC Rules and Regulations changed FDIC oversight responsibility in October 1998.
In 1998, Part 303 changed the Delegations of Authority to act upon applications.
* Section 24 of the FDI Act, in general, precludes a federally insured state bank from engaging in an activity not
permissible for a national bank and requires notices to be filed w ith the FDIC.







Compliance, Enforcement and Other Related Legal Actions 2 0 0 3 -2 0 0 5

.

2005

2004

2003

192

217

174

0

0

0

0
2
11

0
2
38

0
5
12

0
20

0
28

2
33

2
73

3
58

4
31

0

1

0

0
69

0
68

0
55

15

15

20

Total Number of Actions Initiated by the FDIC
Termination of Insurance
Involuntary Termination

Sec. 8a For Violations, Unsafe/Unsound Practices or Condition
Voluntary Termination

Sec.8a By Order Upon Request
Sec.8p No Deposits
Sec.8q Deposits Assumed
Sec. 8 b Cease-and-Desist Actions

Notices of Charges Issued
Consent Orders
Sec. 8e Removal/Prohibition of Director or Officer

Notices of Intention to Remove/Prohibit
Consent Orders
Sec. 8g Suspension/Removal When Charged With Crime
Civil Money Penalties Issued

Sec.7a Call Report Penalties
Sec.8i Civil Money Penalties
Sec. 10c Orders of Investigation

0

Sec. 19 Denials of Service After Criminal Conviction
Sec. 32 Notices Disapproving Officer/Director's Request for Review 0
Truth-in-Lending Act Reimbursement Actions

Denials of Requests for Relief
Grants of Relief
Banks Making Reimbursement*
Suspicious Activity Reports (Open and closed institutions)'
Other Actions Not Listed

0

0

0
0

0
0

78

73

96

102,080

83,453

62,179

0

3

11

'These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total
number of actions initiated.

:

A ppendix B -M o r e A b o u t th e FDIC

James i^egiey

FDIC Board of Directors
Acting Chairman Martin J. Gruenberg (seated),
John C. Dugan, Thomas J. Curry, and John M. Reich (standing, left to right)

w m m m m mm m m m
mmmmma mmmm
Martin J. Gruenberg
Martin J. Gruenberg was sworn in
as Vice Chairman of the FDIC Board
of Directors on August 22, 2005. He
became Acting Chairman of the FDIC
on November 15, 2005, upon the
resignation of Chairman Donald Powell.
Mr. Gruenberg joined the Board after
broad congressional experience in
the financial services and regulatory
areas. He had been Senior Counsel
to Senator Paul S. Sarbanes (D-MD)
since 1995 while the Senator was




■■■■■
alternately Committee Chairman and
Ranking Member on the U.S. Senate
Committee on Banking, Housing,
and Urban Affairs. Mr. Gruenberg
advised the Senator on all issues of
domestic and international financial
regulation, monetary policy and
trade. Mr. Gruenberg also served
as Counsel to Senator Sarbanes from
1993 to 1994, advising him on all
issues under the jurisdiction of the
Banking Committee, and as Staff

Director of the Banking Committee's
Subcommittee on International
Finance and Monetary Policy from
1987 to 1992. Mr. Gruenberg's
congressional experience with
finance and banking issues dates
back to 1979.
Mr. Gruenberg holds a J.D. from
Case Western Reserve Law School
and an A.B. from Princeton University,
Woodrow Wilson School of Public
and International Affairs.

Donald E. Powell
Donald E. Powell served as the
18th Chairman of the FDIC from
August 29, 2001, until his resignation
on November 15, 2005. Prior to being
named the 18th Chairman of the
FDIC, Mr. P ow ell-a life-long Texanwas President and CEO of The First
National Bank of Amarillo, where he
started his banking career in 1971.
In addition to his professional experi­
ence as a banker, Mr. Powell served
on numerous boards at universities,
civic associations, hospitals and
charities. Mr. Powell has served as
the Chairman of the Board of Regents
of the Texas A&M University System,
which has more than 90,000 students,
the Chairman of the Amarillo Chamber
of Commerce, and on the Advisory
Board of the George Bush School
of Government and Public Service.
He received his B.S. in economics
from West Texas State University and
is a graduate of The Southwestern
Graduate School of Banking at
Southern Methodist University.




Thomas J. Curry
Mr. Curry took office as a member
of the FDIC Board of Directors on
January 12, 2004. Previously, he
had served five Massachusetts
Governors as the Commonwealth's
Commissioner of Banks, from
1995 to 2003. He served as Acting
Commissioner from 1994 to 1995,
and as First Deputy Commissioner
from 1987 to 1994.
Mr. Curry is Chairman of the
Neighborhood Reinvestment
Corporation. Mr. Curry was also
Chairman of the Conference of
State Bank Supervisors from 2000
to 2001, and a member of the State
Liaison Committee of the Federal
Financial Institutions Examination
Council from 1996 to 2003.
Mr. Curry joined the Commonwealth's
Division of Banks in 1986. He
entered state government in 1982 as
an attorney with the Massachusetts
Secretary of State's Office.
Mr. Curry is a graduate of Manhattan
College (summa cum laude), where
he was elected to Phi Beta Kappa.
He received his law degree from
the New England School of Law.

John C. Dugan
Mr. Dugan was sworn in as the
29th Comptroller of the Currency
on August 4, 2005. As Comptroller,
Mr. Dugan serves as an ex-officio
member of the FDIC Board.
Prior to his appointment as
Comptroller, Mr. Dugan was a
partner at the law firm of Covington
& Burling, where he chaired the
firm's Financial Institutions Group,
specializing in banking and financial
institution regulation. He also served
as outside counsel to the ABA
Securities Association.
He served at the Department of
Treasury from 1989 to 1993 and
was appointed assistant secretary
for domestic finance in 1992. In
1991, he oversaw a comprehensive
study of the banking industry that
formed the basis for the financial
modernization legislation proposed
by the administration of the first
President Bush. From 1985 to
1989, Mr. Dugan was minority
counsel and minority general counsel
for the U.S. Senate Committee on
Banking, Housing, and Urban Affairs.
Among his professional and volunteer
activities before becoming Comptroller,
he served as a director of Minbanc,
a charitable organization whose
mission is to enhance professional
and educational opportunities for
minorities in the banking industry.
He is also a member of the American
Bar Association's committee on
banking law, the Federal Bar
Association's Section of Financial
Institutions and the Economy,
and the District of Columbia Bar
Association's Section of Corporations,
Finance, and Securities Laws.
A graduate of the University of
Michigan in 1977 with an A.B. in
English literature, Mr. Dugan also
earned his J.D. from Harvard Law
School in 1981.

Julie L. Williams
Ms. W illiams served as Acting
Comptroller of the Currency,
and a member of the FDIC
Board of Directors from
October 14, 2004 until the
confirmation of Mr. John C. Dugan
as Comptroller of the Currency on
August 4, 2005. Ms. Williams has
been First Senior Deputy Comptroller
since 1999 and also Chief Counsel
of the Office of the Comptroller of
the Currency (OCC) since 1994. She
was also Acting Comptroller from
April to December 1998.
As Chief Counsel, Ms. Williams
was responsible for all of the OCC's
legal activities and also supervised
the Licensing Department and the
Community Affairs Department.
Ms. Williams served as a member
of the OCC's Executive Committee.
She has led the Executive Committee
in providing policy and strategic
direction to the agency.
Ms. Williams is a graduate of Goddard
College, Vermont, and graduated
first in her class at Antioch School
of Law, Washington, DC. She is
the author of numerous articles
on banking, securities and financial
institutions law.




John M. Reich
John M. Reich was sworn in
as Director of the Office of Thrift
Supervision (OTS) on August 9, 2005.
In this capacity, Mr. Reich, who
form erly served as Vice Chairman
of the FDIC Board of Directors, will
continue to serve as an FDIC Board
member.
Mr. Reich served as Vice Chairman
of the FDIC Board of Directors from
November 2002 until his appointment
as Director of OTS. Fie has been
a member of the FDIC Board since
January 2001. He also served as
Acting Chairman of the FDIC
from July to August 2001.
Prior to coming to Washington, DC,
Mr. Reich spent 23 years as a com­
munity banker in Illinois and Florida,
including 10 years as President and
CEO of the National Bank of Sarasota,
in Sarasota, Florida.
Mr. Reich also served 12 years on
the staff of U.S. Senator Connie Mack
(R-FL), before joining the FDIC.
From 1998 through 2000, he was
Senator Mack's Chief of Staff,
directing and overseeing all of the
Senator's offices and committee
activities, including those at the
Senate Banking Committee.
Mr. Reich's community service
includes serving as Chairman of
the Board of Trustees of a public
hospital facility in Ft. Myers, FL,
and as Chairman of the Board of
Directors of the Sarasota Family
YMCA. He has also served as a
Board member for a number of
civic organizations, and was active
for many years in youth baseball
programs.
Mr. Reich holds a B.S. degree from
Southern Illinois University and
an M.B.A. from the University of
South Florida. He is also a graduate
of Louisiana State University's
School of Banking of the South.

James E. Gilleran
Mr. Gilleran became Director of the
Office of Thrift Supervision (OTS) on
December 7, 2001. As OTS Director,
Mr. Gilleran was an ex-officio member
of the FDIC Board until his resignation
on April 29, 2005.
Mr. Gilleran was Chairman and CEO
of the Bank of San Francisco from
October 1994 until December 2000.
From 1989 to 1994, he was the
California State Banking Super­
intendent. He served as Chairman
of the Conference of State Bank
Supervisors (CSBS) from 1993 to
1994, and was a member of the
CSBS's Bankers Advisory Council
until 2000.
Mr. Gilleran is a certified public
accountant and a member of the
American Institute of CPAs. He
graduated from Pace University in
1955, and received his law degree
from Northwestern California
University in 1996.

FDIC Organization Chart/Officials
as of December 31, 2005

Board of Directors

Martin J. Gruenberg (acting)
Thomas J. Curry
John M. Reich
John C. Dugan

Office of the Chairman

Vice Chairman

Martin J. Gruenberg

Martin J. Gruenberg

A cting Chairman

Special Advisor
to the Chairman

Deputy to the
Acting Chairman

George E. French

Sandra L. Thompson

Office of Inspector
General

Chief Information Officer
Chief Privacy Officer

Patricia M. Black

Michael E. Bartell

A cting Inspector General

Office of
Public Affairs

1

Office of
Legislative Affairs

D.J.Nordquist

Alice C. Goodman

Director/Deputy Chief of Staff

Director

Deputy to the Chairman
and Chief Financial Officer

Deputy to the Chairman
and Chief Operating Officer

General
Counsel

Steven 0. App

John F Bovenzi
.

William F Kroener, III
.

Division
of Finance

■ r

Division of Supervision
and Consumer Protection

_ I
_

Division of Insurance
and Research

Legai
Division

Frederick S. Selby

Christopher J. Spoth

Arthur J. Murton

William F. Kroener, III

Director

Acting Director

Director

General Counsel

W

J

I

Division of Resolutions
and Receiverships

Office of Enterprise
Risk Management

Division of Information
Technology

James H. Angel, Jr.

Michael E. Bartell

Director

Director

Director

Office of Diversity and
Economic Opportunity

Division of
Administration




D. Michael Collins

Director

Mitchell L. Glassman

Arleas Upton Kea

i

I

Office of the
Ombudsman

A
l

Director

Corporate
University

Cottrell L Webster

David C. Cooke

Ombudsman

Chief, Learning Officer

r

Corporate Staffing

Staffing Trends 1996-2005

15,000
12,000

1996
FDIC Staffing

1997

1998

1999

2000

2001

2002

2003

2004

2005

9,151

7,793

7,359

7,266

6,452

6,167

5,430

5,311

5,078

4,514

Note:
All staffing totals reflect year-end balances.




Number o! O fficials and Employees of the FDIC 2 0 0 4 -2 0 0 5 (ye a r-e n d )
Total

Washington
2004

Executive Offices’
'■Division of Supervision and Consumer Protection
Division of Resolutions and Receiverships
Legal Division
Division of Finance
Division of Information Technology'
Division of Insurance and Research
(Division of Administration
Office of Inspector General
(Office of Diversity and Economic Opportunity
Office of the Ombudsman
(Office of Enterprise Risk Management*
Corporate University
Total

37
2,541
235
433
175
270
178
349
127
31
12
11
115

42
2,604
504
488

4,514

Regional/Field
2004

2005

2004

42
179
SS
303
195
324
157
274

0
2,343
174
159
0
61

11
37

34
15
12
32

0
78

0
2,425
405
185
0
62
34
141
46
0
3
0
0

1,516

1,777

2.998

3,301

37
198
61
274
175
209

195

386
191
415
157
34

232
95
31

IS

10

12
32
5,078

146

'11

32
117

32
0

2

* Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Legislative Affairs, and
Public Affairs.
^Division of Information Resources Management was renamed to Division of Information Technology on September 4, 2005.
■Office of Internal Control Management was renamed to Office of Enterprise Risk Management on April 2,2004.




Sources of Information

Home Page on the Internet

FDIC Call Center

www.fdic.gov

Phone:

A wide range of banking, consumer
and financial information is available
on the FDIC's Internet home page.
This includes the FDIC's Electronic
Deposit Insurance Estimator (EDIE),
which estimates an individual's
deposit insurance coverage; the
Institution D irectory-financial
profiles of FDIC-insured institutions;
Community Reinvestment Act
evaluations and ratings for institutions
supervised by the FDIC; Call Reportsbanks' reports of condition and
income; and M oney Smart, a
training program to help individuals
outside the financial mainstream
enhance their money management
skills and create positive banking
relationships. Readers also can
access a variety of consumer
pamphlets, FDIC press releases,
speeches and other updates on
the agency's activities, as well as
corporate databases and customized
reports of FDIC and banking industry
information.




877-275-3342
(877-ASK FDIC)

Office of the Ombudsman
3503 Fairfax Drive
Room E-2022
Arlington, VA 22226

703-562-2222
Hearing
Impaired: 800-925-4618

Phone: 877-275-3342
(877-ASK FDIC)
Fax:

The FDIC Call Center in Washington, DC,
is the primary telephone point of
contact for general questions from
the banking community, the public and
FDIC employees. The Call Center
directly, or in concert w ith other FDIC
subject-m atter experts, responds to
questions about deposit insurance and
other consumer issues and concerns,
as well as questions about FDIC
programs and activities. The Call
Center also makes referrals to other
federal and state agencies as needed.
Hours of operation are 8:00 a.m. to
8:00 p.m. Eastern Time. Information
is also available in Spanish. Recorded
information about deposit insurance
and other topics is available 24 hours
a day at the same telephone number.

Public Information Center
3503 Fairfax Drive
Room E-1002
Arlington, VA 22226
Phone: 877-275-3342
(877-ASK FDIC), or
703-562-2200
Fax:

703-562-2296

E-mail: publicinfo@fdic.gov
FDIC publications, press releases,
speeches and Congressional
testimony, directives to financial
institutions, policy manuals and other
documents are available on request
or by subscription through the
Public Information Center. These
documents include the Quarterly
Banking Profile, FDIC Consumer
News and a variety of deposit
insurance and consumer pamphlets.

703-562-6057

E-mail: ombudsman@fdic.gov
The Office of the Ombudsman
responds to inquiries about the
FDIC in a fair, impartial and timely
manner. It researches questions and
complaints from bankers and the
public. The Office also recommends
ways to improve FDIC operations,
regulations and customer service.

Regional and Area Offices

Atlanta Regional Office

|

10 Tenth Street, NE
S uite 800
A tlanta, G eorgia 30309
(678) 916-2200
Alabama
Florida
Georgia
North Carolina
South Carolina

Virginia
West Virginia

Chicago Regional Office

i

Dallas Regional Office

500 W e s t M o n ro e S tree t
S uite 3500
Chicago, Illinois 60661
(312) 382-7500

1910 Pacific Avenue
S uite 1900
Dallas, Texas 75201
(214) 7 5 4 -0 0 9 8

Illinois
Indiana
Kentucky
Michigan
Ohio

Colorado
N ew Mexico
Oklahoma
Texas

Wisconsin

____ : ................................... -_____ ______ 1
.

M em p h is Area Office

K ansas C ity Regional Office

New York Regional Office

5100 Poplar Avenue
S uite 1900
M e m p h is, Tennessee 38137
(901) 6 8 5 -1 6 0 3

2345 Grand Boulevard
S uite 1200
Kansas City, M isso uri 64108
(816) 2 3 4 -8 0 0 0

20 Exchange Place
4 th Floor
N e w York, N e w York 10005
(917) 3 2 0 -2 5 0 0

Arkansas
Louisiana
Mississippi
Tennessee

Iowa
Kansas
Minnesota
Missouri
Nebraska

North Dakota
South Dakota




Delaware
District of Columbia
Maryland
New Jersey
New York
Pennsylvania

Puerto Rico
Virgin Islands

Boston Area Office
15 B raintree Hill O ffic e Park
S uite 100
Braintree, M a ssa ch u se tts 02184
(781) 7 9 4 -5 5 0 0

Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont

San Francisco Regional Office i
25 Ecker S treet
Suite 2300
San Francisco, California 94105
(415) 5 4 6 -0 1 6 0

Alaska
Arizona
California
Guam
Hawaii
Idaho

Montana
Nevada
Oregon
Utah
Washington
Wyoming

A ppendix C - O ffic e o f Inspector General's Assessm ent
o f th e M a n ag em en t and P erform ance C hallenges Facing th e FDIC

In keeping with the Reports Consolidation Act, the OIG has identified the
following management and performance challenges facing the Corporation*
Each of the challenges we have identified is marked by one or more of the
following characteristics:
1. It is important to the achievement of the FDIC mission and the
strength of the nation's financial system.
2. It involves significant resources, expenditures or fiduciary
responsibility.
3. It directly impacts consumers of financial services.
The following challenges reflect the OIG's view of the Corporation's overall
program and operational responsibilities; industry, economic and technological
trends; areas of congressional interest; relevant laws and regulations; the
Chairman's priorities and corresponding corporate performance and
Government Performance and Results Act goals; and the ongoing activities
to address the issues involved.
• Assessing and Mitigating Risks to the Insurance Funds
• Ensuring Institution Safety and Soundness Through Effective
Examinations, Enforcement and Follow-Up
• Contributing to Public Confidence in Insured Depository Institutions
• Protecting and Educating Consumers and Ensuring Compliance
• Being Ready for Potential Institution Failures
• Managing and Protecting Financial, Fluman, Information Technology
and Procurement Resources
Assessing and Mitigating Risks
to the Insurance Funds




As of the end of the third quarter of 2005, the FDIC insured $3,830 trillion
in deposits in 8,856 institutions. According to FDIC projections, if the current
trend of industry consolidation continues, the banks the FDIC directly
supervises will likely represent a smaller and smaller portion of the financial
exposure it faces as deposit insurer. Also, another potential risk has become
apparent as a result of recent natural disasters-multiple bank failures in
a geographic region. Given these circumstances, the Corporation faces
several challenges:
Assessing Risks in Large Banks
To effectively fulfill its fundamental responsibilities as deposit insurer, the
Corporation must ensure its large-bank program provides ready access to
the information it needs to effectively identify and assess risks that large
institutions, including those it does not supervise, pose to the insurance
funds. Effectively communicating and coordinating with the other primary
federal banking regulators is central to the Corporation's ability to meet this

* Under the Reports Consolidation Act, the OIG is required to identify the most significant management
and performance challenges facing the Corporation and provide its assessment to the Corporation for
inclusion in its annual performance and accountability report (annual report). The OIG conducts this
assessment yearly and identifies a number of specific areas of challenge facing the Corporation at the
time.

challenge. Moreover, given the inherent complexity of these large institutions,
the FDIC must have or develop the capability to assess the risks associated
with these institutions, which are different from those found in smaller banks.
As the FDIC and other regulators are evaluating policy options to ensure that
large institutions and the industry as a whole maintain adequate capital and
reserves under Basel II, the FDIC must ensure that its staff has the necessary
information and expertise to understand and evaluate the adequacy of the
largest institutions' capital models. The possibility of a large bank failure,
however remote, looms as a significant challenge confronting the FDIC.
Monitoring Risks from Recent Natural Disasters
The FDIC and the other primary federal regulators have long emphasized the
importance of disaster recovery and business continuity planning at insured
depository institutions. While the focus of September 11 was on terrorist
attacks and related disruption of commercial activities, recent natural disasters
have added a new dimension to the risks associated with major regional
crises. While initial indications from the FDIC are that the banking industry
has initially fared well through the latest natural disasters, considerable risk
remains over the long term to affected institutions and, in turn, the insurance
funds. For example, the impact, if any, of relaxing examination and other
regulatory requirements will likely not be plainly visible for many months.
Preparing for Deposit Insurance Reform
The FDIC has been working w ith the Congress over the past several
years on a comprehensive deposit insurance reform package. If enacted,
the FDIC will be faced with managing the funds under the current system
while transitioning under tight time constraints to a new fund structure and
premium system. Implementation of operational changes may result from
deposit insurance reform.
Ensuring Institution Safety
and Soundness through Effective
Examinations, Enforcement
and Follow-up




Supervision is a cornerstone of the FDIC's efforts to ensure stability and
public confidence in the nation's financial system. As of September 30, 2005,
the FDIC was the primary federal regulator for more than 5,250 institutions.
The FDIC performs safety and soundness, Bank Secrecy Act (BSA), information
technology, trust and other types of examinations of FDIC-supervised insured
depository institutions. The Corporation's system of supervisory controls
must identify and effectively address financial institution activities that are
unsafe, unsound, illegal or improper before the activities cause a drain on
the insurance funds. Specific challenges related to this core FDIC mission
include:
Maintaining an Effective Examination and Supervision Program
The FDIC has adopted a more risk-focused approach to examinations to
minimize regulatory burden and better direct its resources to those areas
that carry the greatest potential risk. The FDIC must continue to monitor
the effectiveness of its risk-focused procedures and any related resource
reductions to ensure that this approach does not compromise examination
quality or results. The FDIC must also ensure that financial institutions have
adequate corporate governance structures relative to the bank's size,
complexity and risk profile to prevent financial losses and maintain confidence
in those entrusted with operating the institutions. The FDIC's follow-up
processes must be effective to ensure institutions are promptly complying
with supervisory actions that arise as a result of the FDIC's examination
process.

Supervising Industrial Loan Companies
The FDIC is the primary federal regulator for a number of industrial loan
companies (ILCs), which are insured depository institutions owned by
organizations that, as bank holding companies, are subject to a different
supervisory regimen when compared to other bank holding companies.
The ILC industry includes large, complex financial institutions. The FDIC
must establish and maintain effective controls in its processes for granting
insurance to, supervising and examining ILCs and their parent companies,
particularly in cases where consolidated supervision is not provided by
another federal regulator.

Contributing to Public Confidence
in Insured Depository Institutions

Guarding Against Financial Crimes in Insured Institutions
All financial institutions are at risk of being used to facilitate or being
victimized by criminal activities including money laundering and terrorist
financing. Such activities serve to undermine public confidence in the
institutions. The Corporation is faced with developing and implementing
programs to minimize the extent to which the institutions it supervises are
involved in or victims of financial crimes and other abuse. The challenge is
to facilitate the effective implementation of regulatory reporting requirements
without imposing any undue regulatory burden. Examiners must also be
alert to the possibility of fraudulent activity in financial institutions, which
is inherently difficult because fraud is both purposeful and hard to detect.
Part of the FDIC's overall responsibility and authority to examine banks for
safety and soundness is the responsibility for examining state-chartered
non-member financial institutions for compliance with the Bank Secrecy Act.
The BSA requires financial institutions to keep records and file reports on
certain financial transactions. FDIC-supervised institutions are required to
establish and maintain procedures designed to assure and monitor compliance
with the BSA's requirements. An institution's level of risk for potential money
laundering determines the necessary scope of the BSA examination. In its
role as supervisor, the FDIC also analyzes data security threats, occurrences
of bank security breaches, and incidents of electronic crime that involve
financial institutions. Misuse and misappropriation of personal information
are emerging as major developments in financial crime. Despite generally
strong controls and practices by financial institutions, methods for stealing
personal data and committing fraud with that data are continuously evolving.
The FDIC must continue its work in assuring the security of customer data
against such criminal activity to help maintain the public's trust in the banking
system.

Protecting and
Educating Consumers
and Ensuring Compliance




The FDIC protects consumers through its oversight of a variety of statutory
and regulatory requirements aimed at safeguarding consumers from unfair
and unscrupulous banking practices. Through community outreach efforts
and technical assistance, the FDIC encourages lenders to work with members
of their local communities in meeting the communities' credit needs. Specific
challenges include:

Protecting Consumer Privacy
The FDIC implements regulations and conducts regularly scheduled
examinations to verify that institutions comply with laws designed to protect
personal information, which serve to guard against the growing threat of
identity theft. The FDIC evaluates the adequacy of financial institutions'
programs for securing customer data and may pursue informal or formal
supervisory action if it finds a deficiency.
Educating the Public and Handling Complaints
The FDIC has made it a priority to impart financial education to the millions
of Americans who lack basic financial skills. The Corporation's challenge is
to join with its regulatory counterparts to effectively implement programs
that help integrate into the financial system the large number of households
that are isolated from the opportunity to establish credit, own a home, and
build a better future for their families.
Regulating Lending Practices
The FDIC's programs of supervision and education can help prevent abusive
lending practices that target the financially illiterate or disadvantaged. The
FDIC must evaluate laws and implement regulations to find ways to curb
these lending practices, while ensuring continued access to credit for the
widest range of qualified customers and protection against the abuse of
vulnerable individuals. The challenge is to balance the need for regulation
with avoiding inappropriate or undue interference in legitimate business
activities.
Ensuring Compliance with Laws and Regulations
The FDIC is responsible for evaluating financial institution compliance with
consumer protection laws and regulations. Such laws include, for example,
the Community Reinvestment Act, Home Mortgage Disclosure Act, and
Fair Credit Reporting Act. In June 2003, the FDIC revised its compliance
examination program. Compliance examinations now combine a risk-based
examination process with an in-depth evaluation of an institution's compliance
management system, resulting in a top-down, risk-focused approach to
examinations. The Corporation's challenge is to ensure that the new approach
makes the examination process more effective and efficient and reduces
the examination burden on banks.
Being Ready for Potential
Institution Failures




The FDIC is responsible for the resolution of failed banks or savings
associations. The Corporation is required by law to protect taxpayers by
prudently managing the Bank Insurance Fund and the Savings Association
Insurance Fund and to protect insured depositors by using the assets of the
funds to pay insured deposits at the time of the institution failure. The trend
toward fewer failures over the past few years changes the nature of the
challenge for the FDIC. Planning for failing and failed institutions, including
large or multiple bank failures, needs to be evaluated, revisited and tested
for adequacy in light of FDIC downsizing activities and corresponding loss
of institutional knowledge and expertise. Catastrophic events such as the
multiple hurricanes that occurred during the past year underscore the need
for the Corporation's readiness to respond.

Managing and Protecting Financial,
Human, Information Technology
and Procurement Resources




The FDIC must effectively manage and utilize a number of critical strategic
resources in order to carry out its mission successfully, particularly its financial,
human, information technology (IT) and procurement resources. The FDIC
has emphasized its stewardship responsibilities in its strategic planning
process. A number of key management activities pose governance challenges
to corporate executives and managers, as discussed below:
Financial Resource and Capital Investment Management
The FDIC's operating expenses are largely paid from the insurance funds,
and consistent with good corporate governance principles, the Corporation
must continuously seek to improve its operational efficiency. Because 65
percent of the FDIC's budget costs are personnel-related, a challenge to the
Corporation is to ensure that budgeted resources are properly aligned with
workload. With respect to capital investments, effective planning and
management of IT and non-IT capital investments are mandated by
Congress and by the Office of Management and Budget for most federal
agencies. Although many of these laws and executive orders are not legally
binding on the FDIC, the Corporation recognizes that they constitute best
practices and has adopted them in whole, or in part. The underlying challenge
is to carry out approved investment projects on time and within budget,
while realizing anticipated benefits.
Human Capital Management
In the last several years, the FDIC has undergone significant restructuring
and downsizing in response to changes in the industry, technological
advances, and business process improvements and, as with many government
agencies, the FDIC anticipates a high level of retirement in the next five
years. Amidst such change, the Corporation must seek to maintain employee
morale and positive employee-management relationships. To that end, the
FDIC formulated a human capital strategy to guide the FDIC through the
rest of this decade. A key part of its human capital strategy is the Corporate
Employee Program designed to help create a more adaptable permanent
workforce and that reflects a more collaborative and corporate approach
to meeting critical mission functions. The challenge now is implementing its
strategy and monitoring the success of related human capital initiatives and
programs. Additionally, developing new leaders and engaging in succession
planning pose a challenge. Finally, in an age of identity theft risks, the FDIC
needs to maintain effective controls to protect personal employee-related
information that the Corporation possesses. The appointment of a Chief
Privacy Officer and implementation of a privacy program are positive steps
toward addressing that challenge.
Information Technology Management
The FDIC seeks to maximize its IT resources to improve the efficiency and
effectiveness of its operational processes. The Corporation's IT transformation
initiative targets three broad areas of challenge:
• Governance and process improvements that focus on making strategic
alignment a requirement for all IT work.
• Technical improvements to continue to replace/upgrade critical
components of the IT infrastructure.
• Organizational changes to better align IT resources with workload,
flatten the organizational structure, and improve communication
with customers.




To address these broad challenges, the FDIC is embracing a capability
maturity model to improve long-term business performance; employing
a new system-development life cycle methodology to minimize risk, provide
more predictable results, and deliver high-quality systems on time and within
budget; and continuing to enhance its Enterprise Architecture (EA) program
by identifying duplicative resources/investments and opportunities for internal
and external collaboration to promote operational improvements and costeffective solutions to business requirements.
The establishment of an integrated and streamlined e-government infra­
structure is a key component of the Corporation's target EA. In this regard,
the Corporation has initiated a number of major projects designed to improve
internal operations, communications and service to members of the public,
business and other government entities. The challenge is to ensure that
such projects are consistent with e-government principles and implementing
guidance from the Office of Management and Budget, most recently guidance
that is related to the use of earned value management.
Security M anagem ent-IT and Physical
The FDIC recognizes that a robust information security program requires
an ongoing commitment by the organization. The OIG's 2005 Federal
Information Security Management Act evaluation results showed that
the Corporation had established and implemented controls in all of the
management control areas assessed that provided either limited or
reasonable assurance of adequate security over its information resources.
Still, attention was needed in certain areas such as information security
risk management, oversight of contractors with access to sensitive data
and systems, and implementation of an enterprise security architecture.
Additionally, following Y2K and in light of terrorist-related disruptions and,
more recently, adverse impacts of natural disasters, the importance of
corporate disaster recovery and business continuity planning has been
underscored and elevated to an enterprise-wide level. Such planning
involves more than the recovery of the technology; it involves the recovery
of the entire business. The FDIC must be sure that its Emergency
Preparedness Program provides for the safety and physical security
of its personnel and ensures that its critical business functions remain
operational during any emergency.
Procurement Management
With corporate downsizing has come, in many instances, increased reliance
on contracted services and potential increased exposure to risk if contracts
are not managed properly. Processes and related controls for identifying
needed goods and services, acquiring them, and monitoring contractors
after the contract award must be in place and work effectively. Many
employees with contracting expertise have left the Corporation and contract
management responsibilities have shifted. Also, a number of new contracting
vehicles and approaches are being implemented. For example, the Corporation
combined approximately 40 IT-related contracts into one contract with
multiple vendors for a total program value of $555 million over ten years.
Also, for the first time, it is using a large technical infrastructure contract
through the General Services Administration (GSA) valued at over $300 million.
Along with the expected benefits of these contracts come challenges. The
Corporation has not previously outsourced a procurement process to GSA,

Enterprise Risk Management
As an integral part of its stewardship of the insurance funds, the FDIC has
established a risk management and internal control program. The Corporation
has committed to adopting an Enterprise Risk Management approach to
identifying and analyzing risks on an integrated, corporate-wide basis. Revised
OMB Circular A-123, which became effective for fiscal year 2006, requires
a strengthened process for conducting management's assessment of the
effectiveness of internal control over financial reporting. The Circular also
emphasizes the need for agencies to integrate and coordinate internal control
assessments with other internal control-related activities, and ensure that
an appropriate balance exists between the strength of controls and the
relative risk associated with particular programs and operations.

Design: FDIC/DOA/CSB/Design and Printing U nit




and both new contracts are performance-based, requiring different oversight
mechanisms and strategies than the time and materials contracts that the
Corporation has historically used.

Federal
D eposit
Insurance
C orporation




This Annual Report was produced
by talented and dedicated staff.
To these individuals, we would
like to offer our sincere thanks
and appreciation. Special recognition
is given to the following individuals
for their contributions:
Sam Collicchio
■ ■

.

Pearline Crosland
Jannie F Eaddy
.
Terry Ferril
Barbara Glasby
Patricia Hughes
Mia Jordan
Joan Spirtas





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102