View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

F E D E R A L D E P O S I T I N S U R A N C E C O R P O R AT I O N

THIS PAGE INTENTIONALLY LEFT BLANK.

F E D E R A L D E P O S I T I N S U R A N C E C O R P O R AT I O N

ANNUAL REPORT

2012

Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429 	

Office of the Chairman

May 31, 2013
Dear Sir,
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 of 1993 (as amended) and the GPRA Modernization Act of 2010,
♦	 the provisions of Section 5 (as amended) of the Inspector General Act of 1978, and
♦	 the Reports Consolidation Act of 2000,
the Federal Deposit Insurance Corporation (FDIC) is pleased to submit its 2012 Annual Report (also referred to as the
Performance and Accountability Report), which includes the audited financial statements of the Deposit Insurance Fund
(DIF) and the Federal Savings and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF).
In accordance with the Reports Consolidation Act of 2000, the FDIC assessed 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 management evaluations, and in conjunction with the results of independent financial statement audits,
the FDIC can provide reasonable assurance that the objectives of Section 2 (internal controls) and Section 4 (financial
management systems) of the Federal Managers’ Financial Integrity Act of 1982 have been achieved, and that the FDIC
has no material weaknesses. Additionally, the U.S. Government Accountability Office did not identify any significant
deficiencies in the FDIC’s internal controls for 2012. We are committed to maintaining effective internal controls
corporate-wide in 2013.
Sincerely,

Martin J. Gruenberg
Chairman

The President of the United States
The President of the United States Senate
The Speaker of the United States House of Representatives

2

FEDERAL DEPOSIT INSURANCE CORPORATION

Table of Contents
Message from the Chairman.........................................................................................................5
Message from the Chief Financial Officer...................................................................................11
I.	 Management’s Discussion and Analysis.................................................................................13
	

The Year in Review................................................................................................................13
	Overview..................................................................................................................................................................................... 13
	Insurance.................................................................................................................................................................................... 13
	

Activities Related to Systemically Important Financial Institutions................................................................................... 16

	

Supervision and Consumer Protection................................................................................................................................... 18

	

Resolutions and Receiverships ............................................................................................................................................... 30

	

International Outreach ............................................................................................................................................................. 33

	

Effective Management of Strategic Resources.......................................................................................................... 36

II.	 Financial Highlights...............................................................................................................41
Deposit Insurance Fund Performance ........................................................................................................................................ 41
Corporate Operating Budget.......................................................................................................................................................... 43
Investment Spending...................................................................................................................................................................... 44

III.	 Performance Results Summary..............................................................................................45
Summary of 2012 Performance Results by Program.................................................................................................................. 45
2012 Budget and Expenditures by Program ............................................................................................................................... 47
Performance Results by Program and Strategic Goal................................................................................................................ 48
Prior Years’ Performance Results................................................................................................................................................. 55

IV.	 Financial Statements and Notes............................................................................................63
Deposit Insurance Fund (DIF)...................................................................................................................................................... 64
FSLIC Resolution Fund (FRF)....................................................................................................................................................... 85
Government Accountability Office’s Audit Opinion................................................................................................................... 94
Management’s Response.............................................................................................................................................................. 102
Overview of the Industry.............................................................................................................................................................. 104

V.	 Corporate Management Control.........................................................................................107
Management Report on Final Actions........................................................................................................................................ 108

VI.	Appendices..........................................................................................................................111
A. Key Statistics............................................................................................................................................................................. 111
B. More About the FDIC............................................................................................................................................................... 128
C. Office of Inspector General’s Assessment of the Management and Performance Challenges Facing the FDIC......... 136

ANNUAL REPORT 2012

3

INSURING DEPOSITS • EXAMINING INSTITUTIONS •
MANAGING RECEIVERSHIPS • EDUCATING CONSUMERS
In its unique role as deposit insurer of banks and savings associations, and
in cooperation with the other state and federal regulatory agencies, the
FDIC promotes the safety and soundness of the U.S. financial system and
insured depository institutions by identifying, monitoring, and addressing
risks to the Deposit Insurance Fund (DIF).
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 financial institutions. 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.

At the FDIC, we are working together to be the best.

Message from the Chairman
I am pleased to present the Federal
Deposit Insurance Corporation’s (FDIC)
2012 Annual Report.
In 2012, we saw the continuation of the
gradual but steady recovery of FDIC-insured
institutions. Capital has increased and
banks have bolstered their liquidity. Loan
growth has shown improvement, and banks
continued to strengthen their balance sheets.
Revenue growth surpassed reductions in
loss provisions as the principal contributor
to earnings, although much of that growth
came from loan sales.
At year-end, domestic and international
issues still presented challenges for the
economy and the banking industry, but the
underlying trends were positive. Indeed,
bank performance indicators improved
during 2012, particularly earnings and
credit quality of loans on the books of
FDIC-insured institutions. Much of the
improvement in earnings over the last
few years was driven by lower loan-loss
provisions, reflecting improved credit
quality. Going forward, industry earnings
will depend on increased lending, consistent
with sound underwriting.
Although challenges to the recovery remain,
the FDIC is well positioned to carry out
its mission of maintaining stability and
public confidence in the nation’s financial
system by insuring deposits, examining and
supervising financial institutions for safety
and soundness and consumer protection,
and managing receiverships. At the end of
2012, the FDIC insured a record $7.4 trillion
of deposits in over half a billion accounts at
more than 7,000 institutions.
Our current top priorities include:

under the Dodd-Frank Wall
Street Reform and Consumer
Protection Act (Dodd-Frank
Act), including resolution
planning and promoting
cross border cooperation and
coordination with respect
to an orderly resolution of a
globally active, systemically
important financial institution;
♦ following up on the FDIC’s
Community Banking
Initiatives, including pursuing
additional research relating
to the continued viability
of community banks, and
continuing our review of examination
and rulemaking processes with the
goal of identifying additional ways to
make the supervisory process more
efficient, consistent, and transparent,
consistent with safe and sound banking
practices; and
♦ continuing our economic inclusion
initiatives to expand access to mainstream
financial services for all people in the
United States.
A great strength of our agency is a highly
dedicated and motivated workforce. The
FDIC’s employees understand the agency’s
mission and how it relates to what they
do. For the second year in a row, the FDIC
took the top spot in the Best Places to Work
in the Federal Government rankings, this
year in the new category for mid-sized
federal agencies. We are very proud of this
recognition. All of us at the FDIC share
the responsibility for cultivating a highperformance environment with a deep sense
of mission among our workforce.

♦	continuing implementation of FDIC’s
systemic resolution responsibilities

Message From the Chairman 5

ANNUAL REPORT
Strengthening the
Deposit Insurance
Fund and Resolving
Failed Banks
The FDIC has made significant
progress in rebuilding the DIF. In
2010, the FDIC Board approved
a comprehensive, long-term plan
for fund management based on
Dodd-Frank Act requirements and
on an FDIC historical analysis of DIF
losses. After returning to a positive
balance of $11.8 billion at the end of
2011, from negative $7.4 billion a year
earlier, the DIF balance rose to $33.0
billion at the end of 2012. Assessment
revenue, fewer bank failures, and
fees transferred to the DIF from
the Temporary Liquidity Guarantee
Program, were the main drivers of
fund growth in 2012.
The number of both failed and
problem institutions continued to
decline in 2012. Failed institutions
peaked in 2010 at 157, and declined to
92 in 2011 and 51 in 2012. Similarly,
problem banks peaked at 888 in
March 2011 and declined to 651 by the
fourth quarter of 2012. Although both
trends are positive, they still represent
highly elevated levels of failed and
troubled banks. As a result, the FDIC
continues to devote considerable
resources to managing receiverships,
examining problem institutions,
and implementing provisions of the
Dodd-Frank Act.
Nonetheless, as the banking industry
continues to stabilize, the FDIC will
require fewer resources. The FDIC’s
authorized workforce for 2012 was
8,713 full-time equivalent positions
compared with 9,269 the year before.
The 2012 Corporate Operating Budget
was $3.3 billion, a decrease of $0.6
billion (15 percent) from 2011.

6

For 2013, the Board reduced the
budget by 18 percent to $2.7 billion
and reduced authorized staffing
by 8 percent to 8,026 positions in
anticipation of a further drop in bank
failure activity in the years ahead. The
FDIC also announced plans to close
the last of three temporary satellite
offices that were set up to handle
crisis-related workload. The Irvine
(California) office closed in January
2012, and the Schaumburg (Illinois)
office closed in September 2012. The
Jacksonville (Florida) office is now
scheduled to close in 2014. Contingent
resources are included in the budget,
however, to ensure readiness should
economic conditions unexpectedly
deteriorate.
During 2012, the FDIC continued
using successful resolution strategies
instituted in 2009 to protect insured
depositors of failed institutions at
the least cost to the DIF. The FDIC
actively marketed failing institutions,
and the large majority of those
institutions were sold to other
financial institutions. These strategies
protected insured depositors and
preserved banking relationships
in many communities, providing
depositors and customers with
uninterrupted access to essential
banking services.

Implementing the
FDIC’s New Authorities
Under the DoddFrank Act and Other
Financial Reform
The Dodd-Frank Act included
far-reaching changes to make
financial regulation more effective in
addressing systemic risks and gave
the FDIC the authority to resolve
systemically important financial
institutions (SIFIs).

message from the chAIrman
FEDERAL DEPOSIT INSURANCE CORPORATION

2012
For SIFIs, the Title II – Orderly
Liquidation Authority (OLA) of the
Dodd-Frank Act provides the FDIC
authority to resolve a parent holding
company, and any financial affiliate,
as well as other nonbank SIFIs. The
FDIC has been working for the past
two years to develop the strategic and
operational capability to carry out this
new authority.
During 2012, the FDIC developed
internal plans for resolving a failing
SIFI premised on utilizing the
new Title II OLA authorities of the
Dodd-Frank Act. If the FDIC is
appointed as receiver of such an
institution, it will be required to carry
out an orderly liquidation in a manner
that mitigates systemic risk, imposes
losses on shareholders and creditors,
replaces culpable management, and
ensures, as required by the statute,
that taxpayers bear no losses.
The FDIC also engaged with our
counterparts overseas on crossborder protocols for resolving failing
SIFIs. As part of our bilateral efforts
in this area, the FDIC and the Bank
of England, in conjunction with
the prudential regulators in our
jurisdictions, have been working to
develop contingency plans for the
failure of Global SIFIs (G-SIFIs) that
have operations in both the U.S. and
the U.K. Of the 28 G-SIFIs designated
by the Financial Stability Board of the
G-20 countries, four are headquartered
in the U.K., and another eight are
headquartered in the U.S. As part of
this effort, the FDIC and the Bank of
England jointly released a paper in
December 2012 discussing resolution
strategies for G-SIFIs. In addition to
the close working relationship with
the U.K., the FDIC and the European
Commission (E.C.) established a joint
Working Group in 2012 comprised of

senior staff to discuss resolution and
deposit guarantee issues common
to our respective jurisdictions. We
expect that these meetings will
enhance close coordination on
resolution related matters between
the FDIC and the E.C., as well as
European Union Member States.
In addition, the Dodd-Frank Act
requires bank holding companies with
more than $50 billion in assets and
other financial companies, designated
by the Financial Stability Oversight
Council (FSOC) for heightened
prudential supervision by the Board
of Governors of the Federal Reserve
System, to develop their own
resolution plans, otherwise known as
“living wills.” These firms are required
to demonstrate how they could be
resolved under the bankruptcy code
without disruption to the financial
system and the economy. Bankruptcy
remains the preferred resolution
option for these firms. Only when
bankruptcy is not a viable option
would the FDIC’s OLA under Title II of
the Dodd-Frank Act be considered.
The FDIC Board has adopted two
rules regarding resolution plans.
The first rule, jointly issued with
the Federal Reserve Board in 2011,
requires SIFIs to develop, maintain,
and periodically submit resolution
plans or “living wills” to the Federal
Reserve Board and the FDIC. The
second rule requires any FDIC-insured
depository institution with assets over
$50 billion to develop, maintain, and
periodically submit plans for rapid and
orderly resolution under the Federal
Deposit Insurance Act in the event of
material financial distress or failure.
Eleven institutions submitted plans in
2012 under the rulemaking. The FDIC
and the Federal Reserve Board are

jointly reviewing the plans as required
by the statute.
Along with the other U.S. banking
agencies, the FDIC participated in
an intensive international effort to
strengthen bank capital standards
that resulted in the Basel III capital
agreement. In broad terms, the new
standards aim to improve the quality
and increase the required level of bank
capital. The FDIC Board has proposed
implementing rules for Basel III and is
now reviewing public comments.
Ongoing resolution planning, regular
dialogue with potential SIFIs, stronger
capital standards, and international
cooperation are critical to the
FDIC’s implementation of its new
responsibilities under the Dodd-Frank
Act. The FDIC’s Systemic Resolution
Advisory Committee continues to
advise the FDIC on a variety of issues
including the effects on financial
stability and economic conditions
resulting from the failure of a SIFI,
the ways in which specific resolution
strategies would affect stakeholders
and their customers, and the tools
available to the FDIC to wind down
the operations of a failed organization.

facing community banks, and to share
that knowledge with bankers and the
general public.
In early 2012, the FDIC announced a
series of initiatives focusing on the
challenges and opportunities facing
community banks. The first was a
national conference in early 2012 on
the Future of Community Banking.
During the year, we held a series of
roundtables with community bankers
in each of the FDIC’s six regions. Our
most senior executives and I attended
these roundtables to hear firsthand the
concerns of bankers and to discuss
what the FDIC could do in response.

Community banks play a crucial role
in the American financial system.
Community banks account for about
14 percent of the banking assets in
our nation, but they provide nearly
46 percent of all the small loans that
FDIC-insured depository institutions
make to businesses and farms.

We also issued a comprehensive
study of the evolution of community
banking in the United States over the
past 25 years. The FDIC Community
Banking Study is an important
initial step in understanding the
current state of the industry. It also
will provide a platform for future
research and analysis by the FDIC
and other interested parties. Key
areas that the study covered include:
the definition of a community bank,
structural changes among community
and non-community banks, the
geography of community banking,
the performance of community banks
compared to non-community banks,
the performance of community bank
lending specialty groups, and capital
formation at community banks. The
study is the most comprehensive
analysis of the financial performance
and structural change in the
community banking industry over the
past 25 years.

The FDIC is the lead federal regulator
for the majority of community banks,
and the insurer of all. As such, the
FDIC has an ongoing responsibility
to better understand the challenges

We reviewed the FDIC’s bank
examination process for both
risk management and compliance
supervision. We also looked at the
rulemakings and guidance process,

Community
Banking Initiative

message ANNUAL REPORT 2012
from the chAIrman

7

ANNUAL REPORT
in an effort to make it more efficient
and transparent while maintaining
supervisory standards. The FDIC
solicited input from community
bankers and incorporated that
feedback into specific actions
we took in response. Based on
feedback received, the FDIC
began implementing a number of
enhancements to our supervisory
and rulemaking processes in
2012, including revamping the
pre-exam process to better scope
examinations and taking steps to
improve communication by using
web-based tools to provide critical
information regarding new or
changing rules and regulations as
well as comment deadlines. The
FDIC has also instituted a number
of new outreach and technical
assistance efforts, including increased
direct communication between
examinations, increased opportunities
for attendance at training workshops
and symposiums, and current and
planned conference calls and training
videos on complex subjects of interest.
The FDIC’s review of examination
and rulemaking processes will be
an ongoing effort, and we plan to
pursue additional enhancements and
modifications to our processes.
Finally, our Advisory Committee on
Community Banking is a permanent
forum for discussing critical issues.
The Committee, which is composed
of 15 community bank CEOs from
around the country, is a valuable
source of information and input on
a wide variety of topics, including
the latest examination policies
and procedures, capital and other
supervisory issues, credit and
lending practices, deposit insurance
assessments and coverage, and
regulatory compliance issues.

8

Our community banking initiative
will remain an ongoing priority that
includes outreach programs, research,
and improvements in the examination
process.

Protecting
Consumers and
Expanding Access
to Banking Services
Deposit insurance provides security
and peace of mind for customers
depositing their money into financial
institutions. However, accessing
insured institutions has proven elusive
for millions of people across the U.S.
In September 2012, the FDIC released
the results of the second biennial
survey of unbanked and underbanked
households, conducted jointly with the
U.S. Bureau of the Census. The survey
was conducted in mid-2011. It found
that one in four U.S. households (28
percent) do not have bank accounts
or are underbanked, a slight increase
from the 2009 survey.
A separate survey of banks, conducted
by the FDIC and released in 2012,
found that four in 10 banks develop
products and services specifically
for unbanked and underbanked
consumers, while eight in 10 provide
free counseling. Nearly two-thirds
said they charged no maintenance
fees on basic checking accounts but
some banks have account opening
requirements that can be challenging
for underserved populations, such as
initial deposits of $100 or more.
At the national policy level, the
FDIC’s Advisory Committee on
Economic Inclusion—composed of
bankers, community and consumer
organizations, and academics—
explored strategies to bring
the unbanked into the financial

message from the chAIrman
FEDERAL DEPOSIT INSURANCE CORPORATION

2012
mainstream. The Committee has
pursued a number of initiatives since it
was formed in 2007. One of its initial
projects—the Small-Dollar Loan Pilot
Program—demonstrated that banks
can offer safe, affordable, small-dollar
loans as an alternative to high-priced
sources of emergency credit, such as
payday loans or fee-based overdrafts.
In 2012, the Committee completed
another pilot program, Model Safe
Accounts, that evaluated how
banks can offer safe, low-cost
transaction and savings accounts
that are responsive to the needs
of underserved consumers. Nine
financial institutions participated in
the pilot, which featured electronic
and card-based accounts. The
results indicated that Safe Accounts
performed on par with, or better
than, other transaction and savings
accounts offered by the pilot
banks. A large portion of account
holders remained banked during
the year, suggesting that consumers
can maintain successful banking
relationships using Safe Accounts.
Most of the pilot institutions reported
that the cost of offering Safe Accounts
was roughly the same, if not lower,
because the pilot accounts do not have
paper check-related costs.
The Committee also looked at the
role that technology and innovation,
particularly mobile banking, can play
in expanding access to mainstream
financial services. The Committee
formed a Mobile Financial Services
Subcommittee to examine ways
in which the FDIC can support
the ongoing development of
mobile financial services in ways
that facilitate broader access to
mainstream financial services. The
Committee will continue to meet
during 2013, and mobile banking

will continue to be a focus of the
Committee and the FDIC.
At the local level, the FDIC’s Alliance
for Economic Inclusion has organized
coalitions of financial institutions,
community organizations, local
government officials, and other
partners in communities across
the country to bring unbanked and
underbanked households into the
financial mainstream. The effort
includes better access to basic retail
financial services, such as checking
and savings accounts, affordable

remittance products, small-dollar
loans, targeted financial education
programs, and asset-building
programs. These partnerships are
currently operating in 16 communities
nationwide, with two new
partnerships formed in 2012.

Conclusion
The banking industry made
measurable progress in 2012, with
stronger earnings, better asset quality,
and fewer bank failures and problem
institutions. Still, we remain mindful
that challenges remain.

The FDIC’s workforce remains
committed to carrying out our
mission. I am very grateful to the
dedicated professionals of the FDIC
for their work during the financial
crisis to maintain the stability of and
public confidence in the financial
system, and have full confidence
that this commitment to our mission
will continue as the banking system
recovers.
Sincerely,

Martin J. Gruenberg

ANNUAL REPORT 2012

9

THIS PAGE INTENTIONALLY LEFT BLANK.

Message from the Chief Financial Officer
I am pleased to present the Federal Deposit
Insurance Corporation’s (FDIC) 2012
Annual Report (also referred to as the
Performance and Accountability Report).
The report covers financial and program
performance information and summarizes
our successes for the year. The FDIC
takes pride in providing timely, reliable,
and meaningful information to its
many stakeholders.
For 21 consecutive years, the U.S.
Government Accountability Office (GAO)
has issued unmodified (unqualified) audit
opinions for the two funds administered by
the FDIC: the Deposit Insurance Fund (DIF)
and the Federal Savings and Loan Insurance
Corporation (FSLIC) Resolution Fund (FRF).
We take pride in our responsibility and
demonstrate discipline and accountability
as stewards of these funds. We remain
proactive in execution of sound financial
management and in providing reliable
financial data.
During 2012, the DIF continued to recover
from the recent crisis. The DIF balance
increased from $11.8 billion at the end of
2011, to $33.0 billion at the end of 2012.
The increase in the DIF balance was due in
part to the decrease in the number of bank
failures, from 92 in 2011 to 51 in 2012. Other
factors contributing to the increase include
assessment income and net fees transferred
from the Temporary Liquidity Guarantee
Program (TLGP). The FDIC expects that
the rate at which troubled banks fail will
continue to decline and the DIF balance will
continue to grow.

Financial Results for 2012
For 2012, the DIF’s comprehensive
income totaled $21.1 billion compared to
comprehensive income of $19.2 billion

during 2011. This $1.9 billion year-overyear increase was primarily due to a
$3.3 billion increase in revenue from
excess Debt Guarantee Program (DGP)
fees previously held as systemic risk
deferred revenue, partially offset by
a $1.1 billion decrease in assessments
and a $191 million increase in the
provision for insurance losses.
As the TLGP expired at year-end, the
DIF recognized revenue of $5.9 billion
in 2012, representing the remaining
deferred revenue not absorbed by the
TLGP for losses. Through the end of
the debt issuance period, the FDIC collected
$10.4 billion in fees and surcharges under
the DGP. In addition, the FDIC collected
Transaction Account Guarantee Program
(TAG) fees of $1.2 billion for unlimited
coverage for noninterest-bearing transaction
accounts held by insured depository
institutions (IDIs) on all deposit amounts
exceeding the fully insured limit of $250,000.
Since inception of the program, the TLGP
incurred estimated losses of $153 million
and $2.1 billion on DGP and TAG Program
claims, respectively. Over the duration of
the TLGP, $8.5 billion in TLGP assets were
transferred to the DIF. In addition, during
2009, surcharges of $872 million were
collected and deposited into the DIF.
Assessment revenue was $12.4 billion for
2012. The decrease of $1.1 billion, from
$13.5 billion in 2011, was primarily due to
lower average assessment rates in 2012,
resulting from improvement in the financial
condition of the banking industry.
The provision for insurance losses was
negative $4.2 billion for 2012, compared to
negative $4.4 billion for 2011. The negative
provision for 2012 primarily resulted from a
reduction in the contingent loss reserve due

message from the Chief Financial Officer

11

2012

ANNUAL REPORT
to the improvement in the financial
condition of institutions that were
previously identified to fail, and a
reduction in the estimated losses for
institutions that have failed in the
current and prior years.
While the number of bank failures
over the last two years, 143, was

12

fewer than at the height of the recent
banking crisis, with 157 failures in
2010, we will maintain our focus
on risks to the insurance fund
going forward. In addition, we will
continue to employ sound financial
management techniques, emphasize
the importance of a strong enterprisewide risk management and internal

message from the Chief Financial Officer

control program, and continue to
implement the changes under the
Dodd-Frank Act.
Sincerely,

Steven O. App

I.

Management’s
Discussion and
Analysis

The Year in Review

some of our accomplishments during
the year.

Overview

Insurance

Much of our work during 2012
focused on a number of key areas,
all mission-based. First was moving
forward on implementing our new
responsibilities under the Dodd-Frank
Act. This effort included continuing
implementation of FDIC’s systemic
resolution responsibilities under the
Dodd-Frank Act, including resolution
planning and promoting cross border
cooperation and cooperation with
respect to any orderly resolution of a
globally active, systemically important
financial institution. We commenced
a Community Banking Initiative to
further the understanding of the future
of community banking, which included
outreach, research, and efforts to
streamline examinations without
compromising safe and sound banking
practices. As always, our mission
to maintain stability and public
confidence in the nation’s financial
system guided our work. The sections
below fill in the details and highlight

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 Fund (DIF).

Long-Term Comprehensive
Fund Management Plan
In 2010 and 2011, the FDIC developed
a comprehensive, long-term
management plan designed to reduce
the effects of cyclicality and achieve
moderate, steady assessment rates
throughout economic and credit
cycles, while also maintaining a
positive fund balance even during a
banking crisis. The plan is designed
to ensure that the reserve ratio will
reach 1.35 percent by September 30,
2020, as required by the Dodd-Frank
Act.1 The plan includes a reduction
in rates that the FDIC Board has

adopted to become effective once the
reserve ratio reaches 1.15 percent.
To increase the probability that the
fund reserve ratio will reach a level
sufficient to withstand a future crisis,
the FDIC Board has—pursuant to
the plan—suspended dividends
indefinitely. The plan prescribes
progressively lower assessment rates
that will become effective when the
reserve ratio exceeds 2.0 percent and
2.5 percent. These lower assessment
rates serve almost the same function
as dividends, but provide more stable
and predictable effective assessment
rates.
Under provisions in the Federal
Deposit Insurance Act that require
the FDIC Board to set the Designated
Reserve Ratio (DRR) for the DIF
annually, the FDIC Board voted
in December 2012 to maintain the
2.0 percent DRR for 2013. Using
historical fund loss and simulated
income data from 1950 to 2010, FDIC
analysis showed the reserve ratio
would have had to exceed 2.0 percent
before the onset of the two crises
that occurred since the late 1980s, to

1

	 The Act also requires that the FDIC offset the effect on institutions with less than $10 billion in assets of increasing the reserve
ratio from 1.15 percent to 1.35 percent. The FDIC will promulgate a rulemaking that implements this requirement at a later
date to better take into account prevailing industry conditions at the time of the offset.

Management Discussion and Analysis

13

ANNUAL REPORT
have maintained both a positive fund
balance and stable assessment rates
throughout both crises. The analysis
assumes a moderate, long-term
average industry assessment rate,
consistent with the rates set forth in
the plan. The 2.0 percent DRR should
not be viewed as a cap on the fund.
The FDIC views the 2.0 percent DRR
as a long-term goal and the minimum
level needed to withstand future crises
of the magnitude of past crises.

State of the Deposit
Insurance Fund
Estimated losses to the DIF were
$2.7 billion from failures occurring in
2012, and were lower than losses from
failures in each of the previous four
years. The fund balance continued
to grow through the fourth quarter of
2012, with 12 consecutive quarters of
positive growth. Assessment revenue,
fewer anticipated bank failures,
and the transfer of fees previously
set aside for debt guaranteed under
the Temporary Liquidity Guarantee
Program (TLGP) have driven the
increase in the fund balance. The fund
reserve ratio rose to 0.35 percent at
September 30, 2012, from 0.17 percent
at the beginning of the year.

Assessment System for Large
and Highly Complex Institutions
On October 9, 2012, the FDIC Board
approved a final rule to amend the
assessment system for large and
highly complex institutions. The rule
amends definitions adopted in the
February 2011 large bank pricing rule
used to identify concentrations in
higher-risk assets. This rule, which
went into effect on April 1, 2013,
amends the definitions of leveraged
loans and subprime loans, which are
areas of significant potential risk.
The revised definition of leveraged
loans, renamed higher-risk C&I

14

(commercial and industrial) loans
and securities, focuses on large loans
to the riskiest borrowers—those that
are highly leveraged as the result of
loans to finance a buyout, acquisition,
or capital distribution. The revised
definition of subprime consumer
loans, renamed higher-risk consumer
loans, focuses on the most important
characteristic—the probability of
default. The final rule resulted from
concerns raised by the industry about
the cost and burden of reporting under
the definitions in the February 2011
rule. Nonetheless, the new definitions
better reflect the risk that institutions
pose to the DIF.

Temporary Liquidity
Guarantee Program
On October 14, 2008, as part of a
coordinated response by the U.S.
government to the disruption in the
financial system and the collapse of
credit markets, the FDIC implemented
the Temporary Liquidity Guarantee
Program (TLGP). By calming market
fears and encouraging lending,
the TLGP helped bring stability to
financial markets and the banking
industry during the crisis period. The
TLGP consisted of two components:
(1) the Transaction Account Guarantee
Program (TAG), an FDIC guarantee in
full of noninterest-bearing transaction
accounts; and (2) the Debt Guarantee
Program (DGP), an FDIC guarantee of
certain newly issued senior unsecured
debt.
The TAG Program initially guaranteed
in full all domestic noninterestbearing transaction deposits held at
participating banks and thrifts through
December 31, 2009. The deadline
was extended twice and expired on
December 31, 2010.
The TAG Program brought stability
and confidence to banks and their

Management Discussion and Analysis

2012
business customers by removing the
risk of loss from deposit accounts
that are commonly used to meet
payroll and other business transaction
purposes. Deposits provide the
primary source of funding for most
banks, and they are particularly
important for smaller institutions.
The temporary coverage allowed
institutions, particularly smaller ones,
to retain these accounts and maintain
the ability to make loans within their
communities.
Under the DGP, the FDIC initially
guaranteed in full, through maturity or
June 30, 2012, whichever came first,
the senior unsecured debt issued by a
participating entity between October
14, 2008, and June 30, 2009. In 2009,
the issuance period was extended
through October 31, 2009. The FDIC’s
guarantee on each debt instrument
was also extended in 2009 to the
earlier of the stated maturity date of
the debt or December 31, 2012.
The DGP enabled financial institutions
to meet their financing needs during
a period of record high credit spreads
and aided the successful return of
the credit market to near normalcy,
despite the recession and slow
economic recovery. This improvement
in the credit markets was reflected
in the increasing ability of banks
and their holding companies to issue
longer-term debt over the course
of the DGP issuance period. At
the inception of the program, firms
heavily relied upon the DGP to roll
over short-term liabilities because
of the fragility of the credit markets
and investors’ continued aversion to
risk. By providing the ability to issue
debt guaranteed by the FDIC, the
DGP allowed institutions to extend
maturities and obtain more stable
unsecured funding.

Outstanding TLGP Debt by Month
350

300

Dollars in Bilions

250

200

150

100

50

0
12-09 2-10

4-10

6-10

8-10 10-10 12-10 2-11

Program Statistics
Over the course of the DGP’s
existence, 122 entities issued TLGP
debt. At its peak, the DGP guaranteed
$345.8 billion of debt outstanding (see
the chart above). The DGP guarantee
on all TLGP debt that had not already
matured, expired on December 31,
2012. Therefore, at the end of 2012, no
debt guaranteed by the DGP remained.
The FDIC collected $10.4 billion in
fees and surcharges under the DGP.
As of December 31, 2012, the FDIC
paid $153 million in losses resulting
from six participating entities
defaulting on debt issued under the
DGP. The majority of these losses
($113 million) arose from banks
with outstanding DGP notes that

4-11

6-11

8-11 10-11 12-11

failed in 2011 and were placed into
receivership.
The FDIC collected $1.2 billion in fees
under the TAG Program. Cumulative
estimated TAG Program losses on
failures as of December 31, 2012,
totaled $2.1 billion.
Overall, TLGP fees exceeded the
losses from the program. From
inception of the TLGP, it was the
FDIC’s policy to recognize revenue to
the DIF for any deferred revenue not
absorbed by losses upon expiration of
the TLGP guarantee period (December
31, 2012) or earlier, for any portion of
guarantee fees determined in excess
of amounts needed to cover potential
losses. In total, $9.3 billion in TLGP
fees and surcharges were deposited
into the DIF.

2-12

4-12

6-12

8-12 10-12 12-12

Temporary Unlimited Coverage
for Noninterest-Bearing
Transaction Accounts under the
Dodd-Frank Act Ends
The Dodd-Frank Act provided
temporary unlimited deposit insurance
coverage for noninterest-bearing
transaction accounts from December
31, 2010, through December 31,
2012, regardless of the balance in the
account and the ownership capacity
of the funds. This coverage essentially
replaced the TAG Program, which
expired on December 31, 2010,
and was available to all depositors,
including consumers, businesses,
and government entities. The
coverage was separate from, and in
addition to, the standard insurance
coverage provided for a depositor’s
other accounts held at an FDICinsured bank.

Management Discussion and Analysis

15

2012

ANNUAL REPORT

through 2012, like the original TAG Program,
served as a source of stability to both banks
and their business customers in the wake of
the financial crisis and economic downturn.

Activities Related to
Systemically Important
Financial Institutions
Risk Monitoring Activities
for Systemically Important
Financial Institutions

James Wigand,
Director of the Office
of Complex Financial
Institutions, outlines
the FDIC’s resolution
strategy for systemically
important financial
institutions during a
committee meeting.

A noninterest-bearing transaction account is
a deposit account in which interest is neither
accrued nor paid, depositors are permitted
to make transfers and withdrawals, and the
bank does not reserve the right to require
advance notice of an intended withdrawal.
Similar to the TAG Program, the temporary
unlimited coverage also included trust
accounts established by an attorney or
law firm on behalf of clients, commonly
known as IOLTAs, or functionally equivalent
accounts. Money market deposit accounts
and negotiable order of withdrawal accounts
were not eligible for this temporary
unlimited insurance coverage, regardless
of the interest rate and even if no interest
was paid. 
As of September 30, 2012, insured
institutions had $1.5 trillion above the
basic coverage limit of $250,000 per
account in domestic noninterest-bearing
transaction accounts. This amount was fully
insured through the end of 2012 under the
Dodd-Frank Act.
The provision of the Dodd-Frank Act
extending unlimited FDIC coverage to
noninterest-bearing transaction accounts

16

Management Discussion and Analysis

The Dodd-Frank Act expanded the
FDIC’s responsibilities for overseeing and
monitoring the largest, most complex
banking organizations and large systemically
important financial institutions designated
by the FSOC for Federal Reserve Board
supervision. In 2012, the FDIC’s complex
financial institution program activities
included ongoing reviews of selected
banking organizations with more than $100
billion in assets as well as certain nonbank
financial companies. In addition, the FDIC
continued to work closely with other federal
regulators to gain a better understanding
of the risk measurement and management
practices of these institutions, and assess the
potential risks they pose to financial stability.

Title I Resolution Plans
In 2012, according to the “living will” rules
promulgated by the FDIC and Federal
Reserve, under Title I of the Dodd-Frank
Act, Section 165(d), covered companies
with nonbank assets over $250 billion or
insured depository institution (IDI) assets
over $50 billion, were required to submit
plans for a nonsystemic resolution under
the bankruptcy code. By July 2012, the
FDIC and Board of Governors of the Federal
Reserve System received the first set of plans
from these companies and began the process
of reviewing the plans for completeness
and sufficiency. These plans are intended
to provide information about each firm’s
critical operations and core business lines
and to identify key obstacles to an orderly
resolution in bankruptcy. The first set

of companies filing resolution plans will
submit revised plans by July 2013. Covered
companies with nonbank assets over $100
billion will submit their first resolution
plans by July 2013, and all other covered
companies must submit their first resolution
plans by December 2013.

Title II Resolution
Strategy Development
Title II of the Dodd-Frank Act authorizes
the FDIC to resolve certain systemically
important bank holding companies and
other financial companies (other than IDIs
which the FDIC resolves under provisions
of the Federal Deposit Insurance Act and
insurance companies, which are resolved
under applicable state law), if their failure
would have serious adverse consequences
on U.S. financial stability. During 2012, the
FDIC reviewed the characteristics of each
domestic company and studied the systemic
effects and channels of contagion of
previous financial downturns and consulted
with external practitioners and experts on
key resolution components and options.
As a result of these activities, the FDIC
developed a baseline conceptual approach
that could be used across a spectrum of
large financial institutions. Throughout 2012,
the FDIC discussed this concept at outreach
events with other domestic government
agencies, the Systemic Resolution Advisory
Committee, industry groups, the academic
community, and international financial
regulators.

Systemic Resolution
Advisory Committee
In 2011, the FDIC Board approved the
creation of the Systemic Resolution Advisory
Committee. During 2012, the Committee
continued to provide important advice to the
FDIC regarding systemic resolutions. The
Committee advises the FDIC on a variety
of issues including the effects on financial
stability and economic conditions resulting
from the failure of a SIFI, the ways in which
specific resolution strategies would affect
stakeholders and their customers, the tools
available to the FDIC to wind down the
operations of a failed organization, and
the tools needed to assist in cross-border
relations with foreign regulators and
governments when a systemic company has
international operations. Members of the
Committee have a wide range of experience
including managing complex firms;
administering bankruptcies; and working
in the legal system, accounting field, and
academia.

Coordinating Interagency
Resolution Planning
In 2012, the FDIC conducted events to
promote interagency information-sharing
and cooperative resolution planning.
Coordinating with the other federal
regulators, these events covered a variety of
topics, including the following:

Then-Acting
Chairman Gruenberg
(center) discusses
the FDIC’s progress
on implementing
the Dodd-Frank Act
during a meeting
of the Systemic
Resolution Advisory
Committee.
Also pictured
are (from left)
William H.
Donaldson,
Chairman, Donaldson
Enterprises;
Paul A. Volcker,
former Chairman
of the Board of
Governors, Federal
Reserve System;
John S. Reed,
Chairman of the
Massachusetts
Institute of
Technology's
Corporation; and
Thomas Curry,
FDIC Director.

♦	QFC Tabletop – focused on issues
arising from derivative instruments, and
other financial contracts considered as

MANAGEMENT DISCUSSION AND ANALYSIS

17

ANNUAL REPORT
“Qualified Financial Contracts,” held
by a hypothetical company subject
to resolution under Title II.
♦	Funding Tabletop – covered
the operational implementation
of funding a potential global
systemically important financial
institution (G-SIFI) resolution,
subject to Title II of the Dodd-Frank
Act.
♦	Three Keys Tabletop – explored the
logistical and practical components
involved in making the decision to
“turn the keys,” and place a SIFI into
a Title II receivership.
♦	Systemic Risk Committee (SRC)
Tabletop on Hedge Funds and
Systemic Risk – focused on whether
there is sufficient actionable
information available to FSOC
members to determine the systemic
impact associated with the failure of
a large derivatives counterparty that
is not a G-SIFI, e.g., a large domestic
hedge fund.
♦	Central Counterparty (CCP)
Informational Lecture – explained
the nature of central counterparties,
their primary concerns and
rule-based requirements, and
potential resolution considerations;
this lecture was a prelude to a
facilitated discussion on CCPs and
Title II.
The FDIC also conducted an
interagency simulation “Getting to
Title II Implementation” in November
2012 that involved evaluating
the required steps and possible
alternatives when making a decision
to implement a Title II resolution for
a failing SIFI. The simulation tested
the intra- and inter-agency decisionmaking process leading up to a Title
II resolution, identified issues and
resolution alternatives, and improved

18

interagency communication and
coordination in the context of Title II.

Financial Stability
Oversight Council
The Financial Stability Oversight
Council (FSOC) was created by
the Dodd-Frank Act in July 2010
to monitor and mitigate systemic
risk largely through filling gaps in
regulatory oversight. The FSOC is
composed of ten voting members,
including the FDIC, and five
non-voting members.
FSOC responsibilities include the
following:
♦	Identifying risks to financial stability,
responding to emerging threats in
the system, and promoting market
discipline.
♦	Designating whether a nonbank
financial company should be
supervised by the Board of
Governors of the Federal Reserve
System and subject to heightened
prudential standards.
♦	Designating financial market utilities
(FMUs) and payment, clearing, or
settlement activities that are, or
are likely to become, systemically
important.
♦	Facilitating regulatory coordination
and information-sharing regarding
policy development, rulemaking,
supervisory information, and
reporting requirements.
♦	Issuing specialized studies and
reports.
♦	Producing annual financial stability
reports and requiring each voting
member to submit a signed
statement indicating whether the
member believes that the FSOC
is taking all reasonable actions to
mitigate systemic risk.

Management Discussion and Analysis

2012
During 2012, the FSOC issued a
final rule on designating nonbank
financial companies for supervision
by the Board of Governors of the
Federal Reserve System and subject
to enhanced prudential standards. 
Additionally, several nonbank
financial companies were moved
to the advanced stage of review for
potential designation as systemically
important financial companies.  The
FSOC also designated eight companies
as systemically important FMUs,
which may subject them to additional
risk management standards.  Also
during 2012, the FSOC released its
second annual report, and reports
regarding contingent capital and use
of prompt corrective action at credit
unions. Moreover, in November
2012, the FSOC published options for
money market mutual fund reform
for a 60-day comment period, which
was extended for 30 days.  Generally,
at each meeting, the FSOC discusses
various risk issues, and in 2012,
addressed U.S. fiscal issues, the status
of Eurozone economies, mortgage
servicing and foreclosure issues,
energy prices, reforms in the tri-party
repurchase agreement market, the
status of the investigation regarding
potential manipulation of LIBOR, and
implications of Superstorm Sandy,
among other items.

Supervision and
Consumer Protection
Supervision and consumer protection
are cornerstones of the FDIC’s efforts
to maintain the stability and public
confidence in, the nation’s financial
system. The FDIC’s supervision
program promotes the safety and
soundness of FDIC-supervised IDIs,
protects consumers’ rights, and
promotes community investment
initiatives.

Examination Program
The FDIC’s strong bank examination
program is the core of its supervisory
program. As of December 31, 2012,
the FDIC was the primary federal
regulator for 4,472 FDIC-insured,
state-chartered institutions that were
not members of the Federal Reserve
System (generally referred to as
“state nonmember” institutions).
Through risk management (safety and
soundness), consumer compliance
and the Community Reinvestment
Act (CRA), and other specialty
examinations, the FDIC assesses
an institution’s operating condition,
management practices and policies,
and compliance with applicable laws
and regulations. The FDIC also

educates bankers and consumers
on matters of interest and addresses
consumer questions and concerns.
As of December 31, 2012, the FDIC
conducted 2,563 statutorily required
risk management (safety and
soundness) examinations, including
a review of Bank Secrecy Act (BSA)
compliance, and all required follow-up
examinations for FDIC-supervised
problem institutions, within prescribed
time frames. The FDIC also
conducted 1,665 statutorily required
CRA/compliance examinations (1,044
joint CRA/compliance examinations,
611 compliance-only examinations,
and 10 CRA-only examinations)
and 5,673 specialty examinations.
As of December 31, 2012, all CRA/

FDIC Examinations 2010 – 2012
2012

2011

2010

2,310

2,477

2,488

249

227

225

1

3

0

Risk Management (Safety and Soundness):
     State Nonmember Banks
     Savings Banks
     Savings Associations
     National Banks

1

1

3

     State Member Banks

2

4

4

2,563

2,712

2,720

1,044

825

914

611

921

854

10

11

12

1,665

1,757

1,780

446

466

465

     Data Processing Facilities

2,642

2,802

2,811

Subtotal─Risk Management Examinations
CRA/Compliance Examinations:
     Compliance/Community Reinvestment Act
     Compliance-only
     CRA-only
Subtotal─CRA/Compliance Examinations
Specialty Examinations:
     Trust Departments
     Bank Secrecy Act

2,734

2,813

5,673

6,002

6,089

Total

2

2,585

Subtotal─Specialty Examinations

9,901

10,471

10,589

compliance examinations were
conducted within the time frame
established by policy. The table on
this page compares the number of
examinations, by type, conducted
from 2010 through 2012.

Risk Management
As of December 31, 2012, there were
651 insured institutions with total
assets of $232.7 billion designated
as problem institutions for safety
and soundness purposes (defined
as those institutions having a
composite CAMELS2 rating of “4”
or “5”), compared to the 813 problem
institutions with total assets of $319.4
billion on December 31, 2011. This
constituted a 20 percent decline in
the number of problem institutions
and a 27 percent decrease in problem
institution assets. In 2012, 256
institutions with aggregate assets of
$94.1 billion were removed from the
list of problem financial institutions,
while 94 institutions with aggregate
assets of $34.3 billion were added to
the list. Tennessee Commerce Bank,
located in Franklin, Tennessee, was
the largest failure in 2012, with $1.0
billion in assets. The FDIC is the
primary federal regulator for 433 of
the 651 problem institutions, with total
assets of $138.7 billion.
During 2012, the FDIC issued the
following formal and informal
corrective actions to address safety
and soundness concerns: 104 Consent
Orders and 224 Memoranda of
Understanding (MOUs). Of these
actions, 19 Consent Orders and 15
MOUs were issued, based in whole or
in part, on apparent violations of
the BSA.

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).

Management Discussion and Analysis

19

ANNUAL REPORT
Compliance
As of December 31, 2012, 29 insured
state nonmember institutions,
about 1 percent of all supervised
institutions, having total assets of
$54.0 billion were rated “4” or “5” for
consumer compliance purposes. As
of December 31, 2012, all follow-up
examinations for problem institutions
were performed on schedule.
Overall, banks demonstrated strong
consumer compliance programs.
The most significant consumer
protection issue that emerged from
the 2012 compliance examinations
involved banks’ failure to adequately
monitor third-party vendors. As a
result, we found violations involving
unfair or deceptive acts or practices,
resulting in consumer restitution
and civil money penalties. The
violations involved a variety of issues
including failure to disclose material
information about new products being
offered, deceptive marketing and sales
practices, and misrepresentations
about the costs of products.
During 2012, the FDIC issued the
following formal and informal
corrective actions to address
compliance concerns: 23 Consent
Orders, 92 MOUs, and 109 Civil
Money Penalties (CMPs). In certain
cases, the Consent Orders issued
by the FDIC contain requirements
for institutions to pay restitution in
the form of refunds to consumers
for different violations of laws.
During 2012, over $294 million was
refunded to consumers by institutions
subject to Consent Orders. These
refunds primarily related to unfair or
deceptive practices by institutions,
mainly related to different credit card
programs, as discussed above.
In the case of CMPs, institutions
pay penalties to the U.S. Treasury.

20

Approximately 85 percent of the
CMPs involved repeated errors in the
submission of required data under
the Home Mortgage Disclosure Act
(HMDA) or statutorily mandated
penalties for violations of the
regulations entitled Loans in Areas
Having Special Flood Hazards. The
average CMP for HMDA and Flood
Insurance violations was $8,700.

Bank Secrecy Act/
Anti-Money Laundering
The FDIC pursued a number of BSA,
Anti-Money Laundering (AML), and
Counter-Terrorist Financing (CTF)
initiatives in 2012.
The FDIC conducted a Basic
International AML and CTF training
session in May 2012, for 22 financial
sector supervisors and regulatory staff
from Bangladesh, Djibouti, Ethiopia,
India, and Niger. Also, two Advanced
International AML and CTF training
sessions were held in October and
December 2012 for 47 participants
from Bahrain, Indonesia, Kuwait,
Malaysia, Oman, Qatar, Philippines,
Thailand, and Yemen. The training
focused on AML/CTF controls, the
AML examination process, customer
due diligence, suspicious activity
monitoring, and foreign correspondent
banking. The session also included
presentations from the Federal Bureau
of Investigation, the Financial Crimes
Enforcement Network (FinCEN), and
the Department of Homeland Security.
Topics addressed by invited speakers
included combating terrorist financing,
trade-based money laundering,
bulk cash smuggling and related
investigations, law enforcement’s
use of BSA reporting by financial
institutions, and the role of financial
intelligence units in detecting and
investigating illegal activities. The
basic training session concentrated on

Management Discussion and Analysis

2012
core areas of AML risk (e.g., customer
due diligence, suspicious activity
reporting, private banking, wire
transfers, and foreign correspondent
banking), while the advanced
class focused more on effective
implementation of AML examination
processes, such as expectations for
enhanced due diligence.

Minority Depository
Institution Activities
The preservation of Minority
Depository Institutions (MDIs)
remains a high priority for the
FDIC. In 2012, the FDIC appointed
a dedicated permanent executive
to lead the National Minority
Depository Institution and Community
Development Financial Institution
programs. The FDIC is developing
a more comprehensive approach to
preserving the number of minority
financial institutions, preserving the
minority character in cases of merger
or acquisition, and promoting and
encouraging the creation of new MDIs.
In 2012, the FDIC continued to seek
ways to improve communication and
interaction with MDIs and to respond
to the concerns of minority bankers.
Many of the MDIs took advantage
of FDIC technical assistance on
a number of bank supervision,
compliance, and resolution and
receivership issues, including but not
limited to, the following:
♦	Overview of the MDI program
♦	Commercial real estate appraisal
guidelines, monitoring and stress
testing
♦	Allowance for loan and lease losses
methodology
♦	Guidance on third party risk
♦	Interest rate risk monitoring systems

♦	Liquidity funds management
♦	FDIC overdraft guidance
♦	Achieving compliance with
outstanding corrective programs
♦	Regulatory guidance on
implementing pre-paid card
programs
♦	Financial education for unbanked
and underbanked customers,
including the Money Smart Program
♦	Bank Secrecy Act, Anti-Money
Laundering, currency transaction
reporting, financial recordkeeping,
and the USA Patriot Act
♦	Application process for a variety of
regulatory applications including
branch activity and change in
control
♦	Flood insurance and the Real Estate
Settlement Procedures Act
♦	Bidding on failed financial
institutions
♦	Purchasing assets from FDIC
receiverships
The FDIC continued to offer the
benefit of having an examiner
or a member of regional office
management return to FDICsupervised MDIs from 90 to 120
days after an examination, to
help management understand
and implement examination
recommendations, or to discuss
other issues of interest. Several
MDIs took advantage of this initiative
in 2012. Also, the FDIC regional
offices held outreach training
efforts and educational programs
for MDIs through conference calls
and banker roundtables with MDIs
in the geographic regions. Topics
of discussion for these sessions
included both compliance and
risk management, and additional

discussions included the economy,
overall banking conditions, proposed
Basel III capital rules, asset
disposition, accounting, and other
bank examination issues.

Capital Rulemaking
and Guidance
Market Risk Final Rule
In June 2012, the FDIC and the
federal banking agencies published a
final rule that revises the risk-based
capital treatment for trading assets
and liabilities for certain banking
organizations. This final rule applies
to a banking organization with
aggregate trading assets and liabilities
equal to 10 percent of total assets,
or $1 billion or more. Additionally,
the final rule includes alternative
standards of creditworthiness for the
use of credit ratings consistent with
Section 939A of the Dodd-Frank Act.
The final rule became effective on
January 1, 2013.

Regulatory Capital Rules Notices
of Proposed Rulemaking
Also in June 2012, the FDIC and the
federal banking agencies published
several Notices of Proposed
Rulemaking (NPRs):
♦	Basel III NPR – published
consistent with agreements
reached by the Basel Committee
on Banking Supervision (BCBS),
would apply to all insured banks
and savings associations, top-tier
bank holding companies domiciled
in the United States with more
than $500 million in assets, and
savings and loan holding companies
that are domiciled in the United
States. The NPR would implement
a new common equity tier 1
minimum capital requirement, a
higher minimum tier 1 risk-based

capital requirement, and, for
banking organizations subject to
the advanced approaches capital
rules, a supplementary leverage
ratio that incorporates a broader
set of exposures. Additionally,
the Basel III NPR would apply
limits on a banking organization’s
capital distributions and certain
discretionary bonus payments if
the banking organization does not
hold a specified “buffer” of common
equity tier 1 capital, in addition to
the minimum risk-based capital
requirements. Lastly, the NPR
would revise the federal banking
agencies’ prompt corrective action
framework by incorporating the new
regulatory capital minimums.
♦	Advanced Approaches NPR – would
revise the advanced approaches
risk-based capital rules consistent
with Basel III and other changes
to the Basel Committee’s capital
standards. The NPR also revised
the advanced approaches risk-based
capital rules to be consistent with
Section 939A and Section 171 of the
Dodd-Frank Act. Additionally in this
NPR, the Office of the Comptroller
of the Currency (OCC) and the
FDIC propose that the market risk
capital rules apply to federal and
state savings associations, and the
Board of Governors of the Federal
Reserve System proposes that the
advanced approaches and market
risk capital rules apply to top-tier
savings and loan holding companies
domiciled in the United States, if
stated thresholds for trading activity
are met. Generally, the advanced
approaches rules would apply to
such institutions with $250 billion or
more in consolidated assets or $10
billion or more in foreign exposure,
and the market risk rule would
apply to savings and loan holding

Management Discussion and Analysis

21

ANNUAL REPORT
companies with significant
trading activity.
♦	Standardized Approach NPR –
would revise and harmonize rules
for calculating risk-weighted assets
to enhance risk sensitivity and
address weaknesses identified
over recent years. The NPR also
proposes alternatives to credit
ratings consistent with section
939A of the Dodd-Frank Act. The
revisions include methods for
determining risk-weighted assets for
residential mortgages, securitization
exposures, and counterparty credit
risk. The NPR also would introduce
disclosure requirements that would
apply to U.S. banking organizations
with $50 billion or more in total
assets. The Standardized Approach
NPR would apply to the same set of
institutions as the Basel III NPR.
The agencies extended the comment
period from September 7, 2012, to
October 22, 2012, to allow interested
parties more time to review and
evaluate the proposals, and prepare
written comments. The agencies
received over 2,300 comment
letters. The majority of the comment
letters addressed the Basel III and
Standardized Approach NPRs, and
most were submitted by community
banks. Final rulemaking on the capital
NPRs is expected in 2013.

Stress Testing Guidance
and Rulemaking
In June 2011, the FDIC along with the
other federal banking agencies, issued
proposed guidance on stress testing
by banking organizations with more
than $10 billion in total consolidated
assets. After consideration of
comments received, the FDIC issued
a final rule in October 2012 that
implements requirements of Section

22

165(i) of the Dodd-Frank Act. The
rule reinforces the need to establish an
effective stress testing framework as
an ongoing risk management practice
that supports a banking organization’s
forward-looking assessment of
its risks. The rule delayed the
implementation of the annual stress
requirements for institutions with
total consolidated assets between
$10 and $50 billion until September
30, 2013, to ensure these institutions
have sufficient time to develop highquality stress testing programs. The
FDIC reserved the authority to allow
covered institutions above $50 billion
to delay implementation of the rule on
a case-by-case basis.
In May 2012, the FDIC, jointly
with the other federal banking
regulators, issued a public statement
to clarify that stress testing
expectations applicable to large
banking organizations do not apply
to institutions with $10 billion or
less in total assets. Instead, the
agencies noted that community
banks are subject to the stress testing
expectations contained in existing
guidance covering interest rate risk
management, commercial real estate
concentrations, and funding and
liquidity management.

Other Rulemaking Under
the Dodd Frank Act
The Dodd Frank Act required and
the Corporation’s 2012 Annual
Performance Plan established goals
for the completion of rules and/or
policy guidance on five topics that
were not successfully completed
during 2012: proprietary trading
and other investment restrictions
(the “Volcker Rule”); restrictions
on Federal assistance to swaps
entities; capital, margin, and other
requirements for OTC derivatives;

Management Discussion and Analysis

2012
credit risk retention requirements
for securitizations; and enhanced
compensation structure and incentive
compensation requirements.  The
bank regulatory agencies and other
financial regulatory agencies were
tasked to issue these rules and policy
guidance on an interagency basis. 
They worked diligently throughout the
year to complete final rules on each of
these topics and made considerable
progress.  In each case, NPRs have
been issued (one in 2011), and
extensive comments were received. 
Working groups have been carefully
reviewing the comments received. 
Completion of final rules was delayed,
however, by the complex issues raised
in the comments and the agencies’
desire to give careful and thorough
consideration to those comments.  The
agencies hope to issue final rules on all
or most of these topics in 2013. More
detail is provided below on the OTC
Derivatives and Volcker Rule NPRs.

OTC Derivatives Margin
and Capital NPR
In April 2011, the FDIC, along with
the other federal banking agencies,
the Farm Credit Administration, and
the Federal Housing Finance Agency
(FHFA), published a proposed rule to
enhance the stability of the financial
system by preventing certain large
financial firms from entering into
uncollateralized derivatives exposure
with each other. This proposed rule
would implement certain requirements
contained in Sections 731 and Section
764 of the Dodd-Frank Act, which
direct the federal banking agencies
to jointly adopt rules requiring
dealers and major participants in
derivatives covered by Title VII to
collect both initial and variation
margin. In October 2012, the agencies
reopened the comment period for

the proposed rule to allow interested
parties additional time to analyze and
comment on the proposed margin
rule, in light of the consultative
document on margin requirements
for non-centrally-cleared derivatives,
recently published for comment
by the BCBS, and the International
Organization of Securities
Commissions. The comment period
closed on November 26, 2012. Final
rulemaking is expected in 2013.

Volcker Rule NPR
On November 7, 2011, the FDIC,
along with the other federal banking
agencies, and the Securities and
Exchange Commission, published a
joint NPR to implement the provisions
of Section 619 of the Dodd-Frank Act,
which restricts the ability of banking
entities to engage in proprietary
trading, and limits investments
in hedge funds and private equity
funds. In January 2012, the agencies
extended the comment period
until February 13, 2012, due to the
complexity of the issues involved
and to facilitate coordination of the
rulemaking. The agencies received
approximately 300 substantive
comment letters, with approximately
16,400 form comment letters in
response to the NPR. In April 2012,
the agencies issued guidance on the
statutory conformance period that will
extend through July 21, 2014. Final
rulemaking is expected in 2013.

Investment Securities Rules
and Guidance
Investments in Corporate
Debt Securities by Savings
Associations
In July 2012, the FDIC issued a
final rule that prohibits any insured
savings associations from acquiring
or retaining a corporate debt security,

when the security’s issuer does not
have adequate capacity to meet all
financial commitments under the
security for the security’s projected
life. The final rule was issued to
comply with Section 939A of the
Dodd-Frank Act. Insured savings
associations must comply with the
rule by January 1, 2013. The rule
was accompanied by guidance that
sets forth due diligence standards for
determining the credit quality of a
corporate debt security.

Guidance on Revised Standards
of Creditworthiness for
Investment Securities
In November 2012, the FDIC issued
a Financial Institution Letter
(FIL) to remind FDIC-supervised
institutions of recent regulatory
changes regarding the permissibility
of certain investment activities.
Under FDIC regulations, insured
state banks generally are prohibited
from engaging in an investment
activity that is not permissible for a
national bank under OCC regulations,
including the requirements of the
OCC final rule titled, Alternatives to
the Use of External Credit Ratings
in the Regulations of the OCC.
The FDIC’s rule on corporate debt
securities investments by federal
and state savings associations is
consistent with the OCC’s final rule
and related guidance on due diligence
considerations and creditworthiness
standards for investment securities.

Depositor and Consumer
Protection Rulemaking and
Guidance
Guidance on Military
Homeowners with Permanent
Change of Station Orders
In June 2012, the FDIC issued
interagency guidance jointly with

the Consumer Financial Protection
Bureau (CFPB), the Board of
Governors of the Federal Reserve
System, the OCC, and the National
Credit Union Administration (NCUA)
to address unique circumstances
involving some military homeowners
who received Permanent Change of
Station (PCS) orders. The guidance
highlights concerns about practices
that have the potential to mislead or
otherwise cause harm to homeowners
with PCS orders, and reminds
mortgage servicers to ensure that
appropriate risk management policies,
procedures, and training are in place.

Deposit Insurance
Assessment Fees
In July 2012, the FDIC issued an
FIL addressing complaints received
that certain IDIs are charging
customers an “FDIC fee” or similarly
described fee for deposit insurance.
The FIL discourages institutions
from specifically designating that a
customer’s fee is for deposit insurance,
or from stating or implying that the
FDIC is charging such a fee, due to
the potential to reveal information
that could be used to determine an
IDI’s confidential supervisory ratings,
mislead customers into believing that
the FDIC charges IDI customers or
requires IDIs to charges customers,
or both.

Examination Procedures
In August 2012, the FDIC published
examination procedures for reviewing
an institution’s compliance with
the Secure and Fair Enforcement
for Mortgage Licensing Act (SAFE
Act) and regulations. The SAFE Act
was enacted on July 30, 2008, and
mandated a nationwide licensing and
registration system for mortgage loan
originators (MLOs). The procedures

Management Discussion and Analysis

23

ANNUAL REPORT
focus on the federal residential MLO
registration requirements, and an
institution’s obligation to implement
appropriate policies and procedures,
and conduct annual independent
compliance testing.

Other Rulemaking and
Guidance Issued
During 2012, the FDIC issued and
participated in the issuance of other
rulemaking and guidance in several
areas as described below.

Appraisal Requirements for
Higher-Risk Mortgages
On August 15, 2012, the FDIC jointly
with the Board of Governors of the
Federal Reserve System, CFPB, FHFA,
NCUA, and the OCC, issued an NPR to
implement the appraisal requirements
for higher-risk mortgages as stated
in Section 1471 of the Dodd-Frank
Act. Section 1471 adds a new
Section 129H to the Truth in Lending
Act. For residential mortgage loans
secured by the consumer’s principal
dwelling, with an annual percentage
rate that exceeds the average prime
offer rate by a specified percentage,
the proposed rule would require
creditors to (1) obtain an appraisal or
appraisals meeting certain specified
standards, (2) provide applicants with
a notification regarding the use of the
appraisals, and (3) give applicants
a copy of the written appraisals
used. The comment period closed on
October 15, 2012, and the agencies
worked to finalize the rule.

Interagency Guidance on
Section 612 of the Dodd-Frank
Act, Restrictions on Conversions
of Troubled Banks
On November 26, 2012, the FDIC
and the other federal and state
banking agencies issued guidance

24

to clarify supervisory expectations
for regulatory conversion subject
to Section 612 of the Dodd-Frank
Act. This section prohibits charter
conversions by certain institutions
that are subject to a formal corrective
program or an MOU with respect
to a significant supervisory matter.
Institutions may request an exception
to the conversion prohibition as
described in the statute. The agencies
expect that exceptions will be rare and
generally would occur only when an
enforcement action’s provisions have
been substantially addressed.

Regulatory Relief
During 2012, the FDIC issued nine
FILs that provide guidance to help
financial institutions and facilitate
recovery in areas damaged by
hurricanes, wildfires, tornadoes,
flooding, and other natural disasters.
In these FILs, the FDIC encouraged
banks to work constructively with
borrowers experiencing financial
difficulties as a result of natural
disasters, and clarified that prudent
extensions or modifications of
loan terms in such circumstances
can contribute to the health of
communities and serve the long-term
interests of lending institutions. In
addition, the FDIC jointly with the
other federal banking agencies, issued
a Statement on Supervisory Practices
Regarding Financial Institutions and
Borrowers Affected by Hurricane Sandy
to provide regulatory assistance
to affected financial institutions.
On October 16, 2012, the FDIC,
through the auspices of the Federal
Financial Institutions Examination
Council (FFIEC) issued a statement
encouraging financial institutions to
work with agricultural customers
impacted by the significant drought

Management Discussion and Analysis

2012
conditions affecting the Midwest
and southern states. The statement
encourages banks to continue making
credit available to agricultural
borrowers and to provide prudent loan
modifications when appropriate.

Other Policy Matters
Interagency Guidance on
Leveraged Lending
On March 26, 2012, the FDIC and
the other federal banking agencies
proposed revisions to the 2001
interagency guidance on leveraged
financing. The proposal’s purpose
is to update the existing guidance
and clarify regulatory expectations
in light of significant growth in
the leveraged lending market, and
incorporate lessons learned from the
recent financial crisis. The proposal
describes expectations for the sound
risk management of leveraged lending
activities, including well-defined
underwriting standards, effective
management information systems, a
prudent credit limit and concentration
framework, and strong pipeline
management policies. The banking
agencies are considering revisions to
the proposal based on the 16 public
comments that were received by the
June 8, 2012, due date.

Banker Teleconferences
In 2012, the FDIC hosted a series of
banker teleconferences to maintain
open lines of communication and
update supervised institutions about
compliance and consumer protection
related rulemakings, guidance, and
emerging issues. Participants included
bank directors, officers, staff, and
other banking industry professionals.
Five teleconferences were held
in 2012. The topics discussed
included: Regulations Z’s Mortgage
Loan Originator Compensation

Rule, Third-Party Compliance Risk
Management, Significant MortgageRelated Proposed Regulations (which
were the subject of two calls), and
Fair Lending.

Promoting Economic Inclusion
The FDIC is strongly committed to
promoting consumer access to a broad
array of banking products to meet
consumer financial needs. To promote
financial access to responsible and
sustainable products offered by IDIs,
the FDIC:
♦	conducts research on the unbanked
and underbanked,
♦	engages in research and
development on models of products
meeting the needs of lower-income
consumers,
♦	supports partnerships to promote
consumer access and use of banking
services,
♦	advances financial education and
literacy, and
♦	facilitates partnerships to support
community and small business
development.

Advisory Committee on
Economic Inclusion
The Advisory Committee on Economic
Inclusion (ComE-IN) was originally
established by former Chairman
Sheila C. Bair and the FDIC Board
of Directors pursuant to the Federal
Advisory Committee Act in November
2006. The ComEIN provides the FDIC
with advice and recommendations
on important initiatives focused on
expanding access to banking services
by underserved populations. This may
include reviewing basic retail financial
services such as check

cashing, money orders, remittances,
stored value cards, short-term loans,
savings accounts, and other services
that promote asset accumulation by
individuals and financial stability.
During 2012, the Committee met on
three occasions and discussed the
FDIC’s research initiatives on the
Banks’ Efforts to Serve the Unbanked
and Underbanked, the FDIC’s National
Survey of Unbanked and Underbanked
Households, mobile financial services,
model SAFE accounts, and prepaid
card products.

Survey of Banks’ Efforts to Serve
the Unbanked and Underbanked
Section 7 of the Federal Deposit
Insurance Reform Conforming
Amendments Act of 2005 (Reform Act)
mandates that the FDIC survey IDIs
every two years to assess their efforts
to bring individuals and families into
the conventional finance system.
In 2011, the FDIC conducted its
second nationwide survey of
FDIC-IDIs to assess efforts to
serve unbanked and underbanked
individuals and families. The 2011
survey focused on banks’ basic
transaction and savings account
programs, auxiliary product and
service offerings, and financial
education and outreach efforts.
Analysis of the survey results was
completed in 2012, and the final
results were released to the public in
December 2012. The findings from
the report, 2011 FDIC Survey of
Banks’ Efforts to Serve Unbanked
and Underbanked, informs financial
institutions, community organizations,
and other stakeholders interested
in expanding financial products
and services, to unbanked and
underbanked consumers.

Partnership to Promote
Consumer Access: Alliance
for Economic Inclusion
The goal of the FDIC’s Alliance for
Economic Inclusion (AEI) initiative
is to collaborate with financial
institutions; community organizations;
local, state, and federal agencies;
and other partners in select markets
to launch broad-based coalitions to
bring unbanked and underbanked
consumers into the financial
mainstream.
During 2012, the FDIC expanded
the geographic reach of the AEI
program. Initially in 14 markets,
the FDIC launched AEI initiatives
in two additional markets: the
Appalachian region of West Virginia
and Northeastern Oklahoma. The
West Virginia effort resulted in 30
organizations joining the AEI as
of year-end; and the Northeastern
Oklahoma effort resulted in
participation from 49 representatives
from 33 organizations.
In addition to the new alliances, FDIC
continued in 2012 to support existing
AEIs. As a result:
♦	More than 110 banks and
organizations joined AEI
nationwide, bringing the total
number of AEI members to 1,360.
♦	At least 133,578 consumers opened
a bank account as a result of AEI
efforts. Combined, more than
536,000 bank accounts have been
opened through the AEI program.
♦	Approximately 116,413 consumers
received financial education through
the AEI, bringing the total number of
consumers educated to 380,000.
The FDIC also provided program
guidance and technical assistance

Management Discussion and Analysis

25

ANNUAL REPORT
in the expansion of 70 Bank On
programs. Bank On initiatives are
designed to reduce barriers to banking
and increase access to the financial
mainstream.

Advancing Financial Education
The FDIC expanded its financial
education efforts during 2012 through
a strategy that included providing
access to timely and high-quality
financial education products, sharing
best practices, and working through
partnerships to reach consumers.

Money Smart for Small Business
The FDIC joined with the Small
Business Administration (SBA) on
April 24, 2012, to launch the new
Money Smart for Small Business
curriculum. The ten modules in this
instructor-led curriculum provide
introductory training for new and
aspiring entrepreneurs on the basics of
organizing and managing a business.
Money Smart for Small Business is a
tool for bank-community partnerships.
The curriculum is intended to be
delivered by stakeholders experienced
with small business lending or
development. Since the release of
the curriculum, more than 10,000
copies have been distributed, and
11 partnerships were developed
with organizations that can use or
otherwise promote the curriculum to
key stakeholders.

Money Smart for Consumers
The FDIC’s award-winning Money
Smart curriculum has reached more
than 3 million consumers since
its launch in 2001. During 2012,
the FDIC reached approximately
250,000 consumers. The existing
suite of Money Smart products for
consumers was enhanced with two
new resources:

26

♦	Money Smart Computer-Based
Instruction (CBI) offers key
elements of the eight modules of
the instructor-led Money Smart
for Young Adults curriculum and
eleven modules of the instructor-led
Money Smart for Adults curriculum.
The CBI features an interactive
game-based design. Approximately
29,000 users accessed the CBI
during the eight months from its
release date through year-end.
♦	Money Smart for Elementary
School Students is designed to
introduce key personal finance
concepts to children ages 5 to
8. Since its release in May 2012,
more than 35,000 copies have been
downloaded.
Through training and technical
assistance, the FDIC emphasizes
the importance of pairing education
with access to appropriate banking
products and services. During 2012,
more than 1,300 practitioners attended
the 52 train-the-trainer sessions.
Approximately 1,200 organizations
are members of the Money Smart
Alliance, and the FDIC worked with
many other organizations to promote
financial education, such as the
Corporate Adopt a School program,
which has reached approximately
2,492 students at underserved schools
with financial education training.

Leading Community
Development
In 2012, the FDIC undertook over 662
community development, technical
assistance, and outreach activities
and events designed to facilitate
understanding and connection
between financial institutions and
other community stakeholders. The
FDIC collaborated with the OCC,
Federal Reserve Banks, and other
stakeholders to conduct 57 CRA

Management Discussion and Analysis

2012
roundtables to provide market-specific
training for bankers on enhancing
CRA performance, thereby building
the capacity of financial institutions
to more effectively meet community
and small business development
needs. The FDIC also conducted 21
workshops for nonprofit stakeholders
on effectively engaging with financial
institutions to promote community
development.

Community Banking Initiatives
As the lead federal regulator for the
majority of community banks, the
FDIC continues to make community
banking a main priority. Though
they tend to be small relative to the
largest U.S. banks, community banks
specialize in activities that are crucial
to the functioning of the economy.
Community banks make many of
the loans to small businesses that,
in turn, create new jobs. They also
provide financial services to business
and household customers that may
not be well served by other financial
providers. The FDIC’s community
banking initiatives completed in 2012
include the following:
♦	Future of Community Banking
Conference – On February 16, 2012,
the FDIC held a community banking
conference that brought together
community bankers, regulators,
academics, and various community
bank stakeholders to examine
the unique role community banks
perform in our nation’s economy
and the challenges and opportunities
they face. Then-Acting FDIC
Chairman Gruenberg opened and
closed the conference, which
also featured keynote remarks
by Shelley Moore Capito, U.S.
Congresswoman for West Virginia’s
2nd District; Ben S. Bernanke,
Chairman, Board of Governors of

the Federal Reserve System; and Thomas
J. Curry, Director, FDIC. The conference
explored the evolution and characteristics
of community banks, current challenges
and opportunities for community
banks, perspectives of community bank
customers, and lessons learned and
successful strategies for the community
bank of the future.
♦	Community Bank Roundtable
Discussions – From March to October
of 2012, the FDIC conducted roundtable
discussions in each of the six FDIC
regions with about 70 to 100 attendees,
including community bankers, state
banking commissioners, state bank trade
association representatives, the FDIC’s
senior executives for supervision, and two
members of the FDIC’s Board of Directors
(including the FDIC’s then-Acting
Chairman). Each meeting addressed
financial and operational challenges and
opportunities facing community banks and
the regulatory interaction process. The
insights provided during the discussions
added to other components of the
community banking initiatives.
♦	Community Banking Study – On
December 17, 2012, the FDIC released
a study of community banking in the
United States. The goal of this study
was to analyze and document what has
happened to community banks since 1985.
The study set out to explore some basic
research questions about community
banks, including trends in consolidation,
overall financial performance, geographic
footprint, business model variations,
efficiency and economies of scale, and
access to capital. The FDIC assembled a
comprehensive database using detailed
financial data from bank Call Reports and
Thrift Financial Reports, standardizing
the data to conduct analysis across the
industry beginning in 1984. Financial data
have also been linked to the Summary
of Deposits data (and Branch Office

Survey data for thrifts) that provide a
detailed record of banking office location
and deposit gathering trends dating
back to 1987. The result is an assembly
of the most complete record of the
history of the financial performance and
structural change in the banking industry
over the past two and a half decades.
This data-driven approach results in
a foundational study that provides a
platform for future analysis by the FDIC
and other researchers with an interest in
community banking.

FDIC thenActing Chairman
Martin J. Gruenberg
opens the Future of
Community Banking
Conference on
February 16, in
Arlington, Virginia.

♦	Targeted Community Banking Research –
The FDIC continues to conduct specialized
studies and research to more deeply
explore certain issues and questions about
community banks. On December 18, 2012,
the FDIC released two targeted research
papers: “Community Bank Efficiency and
Economies of Scale” and “What Factors
Explain Differences in Return on Assets
Among Community Banks?” These papers
delve deeper in explaining community
bank performance, based on efficiency
ratio trends and other bank-specific
factors.
♦	Review of Examination and Rulemaking
Processes – In 2012, the FDIC reviewed the

Management Discussion and Analysis

27

ANNUAL REPORT

Members of the
FDIC Advisory
Committee on
Community Banking.

processes for examining community banks
and releasing rulemakings and guidance.
The FDIC solicited input from community
bankers and incorporated that feedback
into various improvements. Also, the
FDIC’s extensive communication and
technical support efforts for community
bankers included an educational outreach
effort to explain key technical points of
the proposed capital rules that included
six regional banker meetings, a national
teleconference call, educational material
posted to the FDIC’s website, and an
online tool to help bankers measure the
potential impact of the proposed capital
rules.
In addition, the FDIC’s Community Bank
Advisory Committee continued to provide
timely information and input to the FDIC
on a variety of community bank policy and
operational issues throughout 2012. The
Committee held three meetings in 2012
and provided input on a number of key
issues and initiatives, including the FDIC’s
community bank study and research project,
proposed improvements to the FDIC’s
regulatory and supervisory processes, the
status of the Transaction Account Guarantee

28

Management Discussion and Analysis

2012

Program (TAG), the FDIC’s preliminary plan
to review its regulations under the Economic
Growth and Regulatory Paperwork
Reduction Act, as well as the potential
effects of various regulatory and legislative
developments on community banks.
Looking forward, the FDIC will continue
to make the Community Banking Initiative
a high priority by following up on the
Community Banking Study, pursuing
additional research relating to the continued
viability of community banks, and continuing
our review of examination and rulemaking
processes with the goal of identifying
additional ways to make the supervisory
process more efficient, consistent, and
transparent, consistent with safe and sound
banking practices.

Center for Financial Research
The Center for Financial Research (CFR)
was founded by the Corporation in 2004 to
encourage and support innovative research
on topics that are important to the
FDIC’s role as deposit insurer and
bank supervisor. During 2012, the CFR
co-sponsored two major
research conferences.

The CFR organized and sponsored
the 22nd Annual Derivatives
Securities and Risk Management
Conference jointly with Cornell
University’s Johnson Graduate School
of Management and the University
of Houston’s Bauer College of
Business. The conference was held
in March 2012 at the Seidman Center
and attracted over 100 researchers
from around the world. Conference
presentations included systemic risk,
asset price dynamics, asset pricing,
and credit spreads.

technology (IT) security and
combating cyber fraud and other
financial crimes included the
following:

♦ Published the Federal Regulatory
Agencies’ Administrative Guidelines:
Implementation of the Interagency
Programs for the Supervision of
Technology Service Providers.

confidentiality, integrity, and
availability of sensitive, material,
and critical information assets. The
result of an IT examination is a
FFIEC Uniform Rating System for
Information Technology rating. In
2012, the FDIC conducted 2,642 IT and
operations examinations at financial
institutions and TSPs. Further, as part
of its ongoing supervision process, the
FDIC monitors significant events, such
as data breaches and natural disasters
that may affect financial institution
operations or customers.

The CFR also organized and
sponsored the 12th Annual Bank
Research Conference jointly with
the Journal for Financial Services
Research (JFSR), in September 2012.
The conference theme, “Performance
of Financial Services in the Current
Environment,” focused on the financial
services industry and included over
20 presentations attended by over
120 participants. Experts discussed
a range of topics including systemic
risk and bank lending, liquidity, and
capital issues.

♦ Published a Supervisory Insights
Journal article on mobile payments.

Consumer Complaints
and Inquiries

♦ Issued revised guidance describing
potential risks associated with
relationships with third-party
entities that process payments for
telemarketers, online businesses,
and other merchants.

The FDIC investigates consumer
complaints concerning FDICsupervised institutions and answers
inquiries from the public about
consumer protection laws and banking
practices. As of December 31, 2012,
the FDIC received 10,564 written
complaints, of which 5,088 involved
complaints against state nonmember
institutions. The FDIC responded to
over 98 percent of these complaints
within time frames established by
corporate policy, and acknowledged
100 percent of all consumer
complaints and inquiries within
14 days. The FDIC also responded to
1,793 written inquiries, of which 403
involved state nonmember institutions.
In addition, the FDIC responded
to 5,209 telephone calls from the
public and members of the banking
community, of which 2,721 concerned
state nonmember institutions.

In addition to conferences, workshops
and symposia, three CFR working
papers were completed and made
public on topics including bank
bailouts, executive compensation, and
tightening loan contracts.

Information Technology,
Cyber Fraud, and
Financial Crimes
In 2012, the FDIC, jointly with the U.S.
Department of Justice, began planning
a Financial Crimes Conference to be
held in June 2013 that will focus on
all types of financial fraud, and how
the law enforcement community and
regulators can respond effectively to
fraud. Other major accomplishments
during 2012 in promoting information

♦	Issued an updated FFIEC
Technology Service Provider
booklet. This booklet replaces the
March 2003 version.

♦ Hosted the FFIEC IT Conference
that addressed technology and
operational issues facing the
financial federal regulatory agencies.
♦ Assisted financial institutions in
identifying and shutting down
“phishing” websites. The term
“phishing”—as in “fishing” for
confidential information—refers to
scams to fraudulently obtain and use
an individual’s personal or financial
information.
♦ Issued six Consumer Alerts
pertaining to emails and telephone
calls fraudulently claiming to be
from the FDIC.
The FDIC conducts IT and operations
examinations of financial institutions
and technology service providers
(TSP). These examinations
ensure that institutions and TSPs
have implemented adequate risk
management practices for the

Coordination with the
Consumer Financial
Protection Bureau
In 2012 the prudential regulators and
the Consumer Financial Protection
Bureau (CFPB) signed an MOU to
coordinate supervisory matters for

Management Discussion and Analysis

29

ANNUAL REPORT
institutions with assets over $10 billion
and their affiliates. The CFPB was
charged with developing regulations
to implement the mortgage reforms
and other aspects of regulatory reform
in the Dodd-Frank Act. As required
by the statute, the FDIC coordinated
with the CFPB on the regulations for
which it is solely responsible. The
FDIC also worked with the CFPB and
other banking agencies to develop and
implement joint regulations.
As of December 31, 2012, the FDIC
received 1,369 complaints involving
FDIC-supervised banks under the
jurisdiction of the CFPB. Under the
agreement between the FDIC and the
CFPB, the FDIC investigated 497 of
the 1,369 complaints and referred the
remaining 872 to the CFPB.

Public Awareness of Deposit
Insurance Coverage
The FDIC provides a significant
amount of education for consumers
and the banking industry on the rules
for deposit insurance coverage. An
important part of the FDIC’s deposit
insurance mission is ensuring that
bankers and consumers have access
to accurate information about the
FDIC’s rules for deposit insurance
coverage. 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 targeted to
both bankers and consumers.
The FDIC continued its efforts to
educate bankers and consumers about
the rules and requirements for FDIC
insurance coverage. During 2012,
the FDIC conducted 15 telephone
seminars for bankers on deposit
insurance coverage, reaching an
estimated 27,734 bankers participating

30

at approximately 7,924 bank locations
throughout the country. The FDIC
also updated its deposit insurance
coverage publications and educational
tools for consumers and bankers,
including brochures, resource guides,
videos, and the Electronic Deposit
Insurance Estimator (EDIE).
In 2012, the FDIC received and
answered approximately 97,453
telephone deposit insurance-related
inquiries from consumers and bankers.
The FDIC Call Center addressed
50,845 of these inquiries, and deposit
insurance coverage subject-matter
experts handled the other 46,608. In
addition to telephone inquiries about
deposit insurance coverage, the
FDIC received 2,619 written inquiries
from consumers and bankers. Of
these inquiries, 99 percent received
responses within two weeks, as
required by corporate policy.

Resolutions and
Receiverships
The FDIC has the unique mission
of protecting depositors of insured
banks and savings associations. No
depositor has ever experienced a loss
on the insured amount of his or her
deposit in an FDIC-insured institution
due to a failure. Upon closure of an
institution, typically by its chartering
authority—the state for statechartered institutions, and the Office
of the Comptroller of the Currency
(OCC) for national banks and federal
savings associations—the FDIC is
appointed receiver, and the FDIC is
responsible for resolving the failed
institutions.
The FDIC uses a variety of business
practices to resolve a failed institution.
These practices are typically
associated with either the resolution
process or the receivership process.

Management Discussion and Analysis

2012
Depending on the characteristics
of the institution, the FDIC may
recommend several of these methods
to ensure the prompt and smooth
payment of deposit insurance to
insured depositors, to minimize the
impact on the DIF, and to speed
dividend payments to uninsured
depositors and other creditors of the
failed institution.
The resolution process involves
evaluating and marketing a failing
institution, soliciting and accepting
bids for the sale of the institution,
determining which bid is least costly
to the DIF, and working with the
acquiring institution through the
closing process.
To minimize disruption to the local
community, the resolution process
must be performed as quickly and
smoothly as possible. There are three
basic resolution methods used by
the FDIC: purchase and assumption
transactions, deposit payoffs, and
Deposit Insurance National Bank
(DINB) assumptions.
The purchase and assumption (P&A)
transaction is the most common
resolution method. In a P&A
transaction, a healthy institution
purchases certain assets and
assumes certain liabilities of the
failed institution. A variety of P&A
transactions can be used. Since each
failing bank situation is different,
P&A transactions provide flexibility
to structure deals that result in the
highest value for the failed institution.
For each possible P&A transaction,
the acquirer may either acquire all
or only the insured portion of the
deposits. Loss sharing may be offered
by the receiver in connection with
a P&A transaction. In a loss-share
transaction, the FDIC as receiver
agrees to share losses on certain

assets with the acquirer. The FDIC
usually agrees to absorb a significant
portion (for example, 80 percent) of
future losses on assets that have been
designated as “shared loss assets” for
a specific period of time (for example,
five to ten years). The economic
rationale for these transactions is
that keeping shared loss assets in the
banking sector can produce a better
net recovery than would the FDIC’s
immediate liquidation of these assets.
Deposit payoffs are only executed
if a bid for a P&A transaction does
not meet the least-cost test or if no
bids are received, in which case the
FDIC, in its corporate capacity, makes
sure that the customers of the failed
institution receive the full amount of
their insured deposits.
The Banking Act of 1933 authorizes
the FDIC to establish a DINB to
assume the insured deposits of a
failed bank. A DINB is a new national
bank with limited life and powers
that allows failed-bank customers
a brief period of time to move their
deposit account(s) to other insured
institutions. Though infrequently
used, a DINB allows for a failed
bank to be liquidated in an orderly
fashion, minimizing disruption to local
communities and financial markets.
The receivership process involves
performing the closing functions at
the failed institution, liquidating any
remaining failed institution assets,
and distributing any proceeds of the
liquidation to the FDIC and other
creditors of the receivership. In its
role as receiver, the FDIC has used a
wide variety of strategies and tools
to manage and sell retained assets.
These include, but are not limited
to asset sale and/or management
agreements, structured transactions,
and securitizations.

Financial Institution Failures
During 2012, there were 51 institution
failures, compared to 92 failures in
2011. For the institutions that failed,
the FDIC successfully contacted all
known qualified and interested
bidders to market these institutions.
The FDIC also made insured funds
available to all depositors within
one business day of the failure if it
occurred on a Friday and within two

evaluated. For 95 percent of the failed
institutions, at least 90 percent of the
book value of marketable assets is
marketed for sale within 90 days of an
institution’s failure for cash sales and
within 120 days for structured sales.
Structured sales for 2012 totaled
$456 million in unpaid principal
balances from commercial real estate
and residential loans acquired from
various receiverships. Cash sales

Failure Activity 2010–2012
Dollars In Billions
2012
Total Institutions

2011

2010

51

92

157

Total Assets of Failed Institutions1

$11.6

$34.9

$92.1

Total Deposits of Failed Institutions1

$11.0

$31.1

$78.3

$2.7

$8.8

$20.8

Estimated Loss to the DIF
1

Total assets and total deposits data are based on the last Call Report filed by the institution
prior to failure.

business days if the failure occurred
on any other day of the week. There
were no losses on insured deposits,
and no appropriated funds were
required to pay insured deposits.

Asset Management and Sales
As part of its resolution process,
the FDIC makes every effort to sell
as many assets as possible to an
assuming institution. Assets that are
retained by the receivership are

of assets for the year totaled
$1.1 billion in book value. In addition
to structured and cash sales, FDIC
also uses securitizations to dispose of
bank assets. In 2012, securitization
sales totaled $449 million.
As a result of our marketing and
collection efforts, the book value of
assets in inventory decreased by $3.9
billion (19 percent) in 2012.

Assets in Inventory by Asset Type
Dollars in Millions
12/31/12

Asset Type
Securities

12/31/11

$1,179

$1,225

99

31

604

585

Real Estate Mortgages

1,265

2,208

Other Assets/Judgments

1,134

1,396

Owned Assets

417

1,007

Net Investments in Subsidiaries

179

290

Consumer Loans
Commercial Loans

Structured and Securitized Assets
Total

12,120

14,171

$16,997

$20,913

Management Discussion and Analysis

31

2012

ANNUAL REPORT
Receivership Management
Activities
The FDIC, as receiver, manages 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 a failed
institution have been sold and the
final distribution of any proceeds
is made, the FDIC terminates the
receivership. In 2012, the number
of receiverships under management
increased by 8 percent, as a result of
new failures. The chart below shows
overall receivership activity for the
FDIC in 2012.

14 percent of all payments to outside
counsel, compared to 17 percent for
all of 2011.
In 2012, the FDIC exhibited at 23
procurement-specific trade shows to
provide participants with the FDIC’s
general contracting procedures, prime
contractors’ contact information, and
possible upcoming solicitations.

Minority and Women Outreach

Prime contractors were reminded
of the FDIC’s emphasis on MWOB
participation and were encouraged
to subcontract or partner with
MWOBs. The FDIC also exhibited
at 12 non-procurement events where
contracting information was provided.
In addition, the FDIC’s Legal Division
was represented at trade shows where
information was provided to MWOLFs
about outside counsel opportunities
and how to enter into co-counsel
arrangements with majority firms.

The FDIC relies on contractors to help
meet its mission. In 2012, the FDIC

FDIC personnel also met with MWOBs
and MWOLFs in one-on-one meetings

Receivership Activity
Active Receiverships as of 12/31/111

431

New Receiverships

51

Receiverships Terminated

16
1

Active Receiverships as of 12/31/12
1

466

Includes five FSLIC Resolution Fund receiverships at year-end 2011 and three at year-end 2012.

awarded 1,326 contracts. Of these, 388
contracts (29 percent) were awarded
to Minority- and Women-Owned
Businesses (MWOBs). The total
value of contracts awarded was
$1.0 billion, of which $308 million
(30 percent), were awarded to
MWOBs, compared to 29 percent for
all of 2011. In addition, engagements
of Minority- and Women-Owned Law
Firms (MWOLFs) were 18 percent of
all engagements; total payments of
$15.3 million to MWOLFs were

32

to discuss contracting opportunities
at the FDIC. The FDIC continued
to encourage MWOBs to register in
the FDIC’s Contractor Resource List,
which is used to develop source lists
for solicitations. Any firm interested
in doing business with the FDIC can
register for the Contractor Resource
List through the FDIC’s website.
In 2012, the FDIC’s Office of
Minority and Women Inclusion
(OMWI) participated with the other
Dodd-Frank Act agency OMWIs in

Management Discussion and Analysis

seven roundtable meetings nationwide
with financial services industry
groups, trade associations, and other
consumer advocacy groups, to obtain
input, guidance, and recommendations
about strategies to implement
standards for assessing regulated
entities under Section 342 of the
Dodd-Frank Act.
In 2012, the FDIC successfully closed
three structured transaction sales.
These three auctions combined to
attract 19 entities that placed bids.
Eight bidders had an MWOB firm as a
member. The winning bidder for one
of the transactions included an MWOB
firm in the investor group. The FDIC
continued outreach efforts to small
investors and minority-owned and
women-owned investors, and held five
nationwide workshops on FDIC’s loan
and Owned Real Estate (ORE) sales
programs, and the structured loan
sales program. The workshops were
held in Chicago, Dallas, Los Angeles,
Nashville, and New York, with more
than 450 participants.
In 2013, the FDIC will continue to
encourage and foster diversity and
inclusion of MWOBs in procurement
activities and outside counsel
engagements, as well as promote
strong commitment to diversity
inclusion within its workforce, and
with all financial institutions and law
firms that do business with the FDIC.

Protecting Insured Depositors
The FDIC’s ability to attract healthy
institutions to assume deposits and
purchase assets of failed banks and
savings associations at the time of
failure minimizes the disruption
to customers and allows 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 insurance limit. During
2012, the FDIC paid dividends of $8
million to depositors whose accounts
exceeded the insurance limit.

Professional Liability and
Financial Crimes Recoveries
FDIC staff works to identify potential
claims against directors, officers,
fidelity bond insurance carriers,
appraisers, attorneys, accountants,
mortgage loan brokers, title
insurance companies, securities
underwriters, securities issuers,
and other professionals who may
have contributed to the failure of
an IDI. Once a claim is determined
to be meritorious and cost-effective
to pursue, the FDIC initiates legal
action against the appropriate parties.
During 2012, the FDIC recovered
$337 million from professional liability
claims and settlements. The FDIC also
authorized lawsuits related to 48 failed
institutions against 369 individuals
for director and officer liability and
authorized 21 other lawsuits for
fidelity bond, liability insurance,
attorney malpractice, appraiser
malpractice, and securities law
violations for residential mortgagebacked securities. There were 165
residential mortgage malpractice
and fraud lawsuits pending as of
year-end 2012. Also, by year-end
2012, the FDIC’s caseload included 88
professional liability lawsuits (up from
52 at year-end 2011) and 1,343 open
investigations (down from 1,811 at
year-end 2011).
In addition, as part of the sentencing
process for those convicted of criminal
wrongdoing against institutions

that later failed, a court may order
a defendant to pay restitution or
to forfeit funds or property to the
receivership. The FDIC, working
with the U.S. Department of Justice,
collected $4.6 million from criminal
restitution and forfeiture orders
during 2012. As of year-end 2012,
there were 4,860 active restitution and
forfeiture orders (down from 5,192
at year-end 2011). This includes 156
orders held by the FSLIC Resolution
Fund, i.e., orders arising out of failed
financial institutions that were in
receivership or conservatorship by the
Federal Savings and Loan Insurance
Corporation or the Resolution Trust
Corporation.

International
Outreach
Throughout 2012, the FDIC played
a leading role among international
standard-setting, regulatory,
supervisory, and multi-lateral
organizations by supporting the global
development of effective deposit
insurance and bank supervision
systems, maintaining public
confidence and financial stability, and
promoting effective resolution regimes
as integral components of the financial
safety net. Among the key institutions
the FDIC collaborated with were
the Association of Supervisors of
Banks of the Americas (ASBA),
the Basel Committee on Banking
Supervision (BCBS), the European
Forum of Deposit Insurers, the
Financial Stability Board (FSB), the
Financial Stability Institute (FSI), the
International Association of Deposit
Insurers (IADI), the International
Monetary Fund (IMF), the
International Information Technology
Supervisors Group, and the World
Bank.

Key to the international collaboration
was the ongoing dialogue among
then-Acting FDIC Chairman Martin J.
Gruenberg, other senior FDIC leaders,
and a number of senior financial
regulators from the United Kingdom
(U.K.) about the implementation
of the Dodd-Frank Act, Basel III,
and how changes in U.S., U.K., and
European Union financial regulations
affect global information sharing,
crisis management, and recovery
and resolution activities. In light of
the large number of cross-border
operations of large, complex financial
institutions, the primary areas of
discussion and collaboration were the
FDIC’s Orderly Liquidation Authority
under Title II of the Dodd-Frank Act,
and the importance of cross-border
coordination in the event a SIFI begins
to experience financial distress.
During 2012, the FDIC participated
in both Governors and Heads of
Supervision and BCBS meetings. The
FDIC supported work streams, task
forces, and policy development group
meetings to address BCBS work on the
implementation of Basel III. The FDIC
also helped monitor new leverage ratio
and liquidity standards, and determine
surcharges on global systemically
important banks. Additionally, the
FDIC participated in BCBS initiatives
related to standards implementation,
operational risk, accounting, review
of the trading book, and credit ratings
and securitization. The major issues
addressed by these work streams
included the recalibration of risk
weights for securitization exposures,
the comprehensive review of capital
charges for trading positions, and the
review of BCBS members’ domestic
rule-making processes surrounding
Basel II, Basel II.5, and Basel III.

Management Discussion and Analysis

33

ANNUAL REPORT
International Association
of Deposit Insurers
Under the leadership of then-Acting
FDIC Chairman Gruenberg, IADI
celebrated its tenth anniversary in
October 2012. Chairman Gruenberg
served as the President of IADI and
the Chair of its Executive Council
from November 2007 to October 2012.
Worth noting is the remarkable impact
IADI has made during its relatively
short history, contributing not only to
the security of individual depositors
but also to global financial stability.
Since its founding in 2002, IADI has
grown from 26 founding members to
84 participants, including 64 members,
8 associates and 12 partners, and
is strongly represented on every
continent. IADI is now recognized as
the standard-setting body for deposit
insurance by all the major public
international financial institutions,
including the FSB, the Group of 20
(G-20), the BCBS, the IMF, and the
World Bank.
Under the FDIC’s leadership, IADI
has made significant progress in
advancing the 2009 IADI and BCBS
Core Principles for Effective
Deposit Insurance Systems (Core
Principles). In February 2011, the
FSB approved the Core Principles
and the Core Principles Assessment
Methodology for inclusion in its
Compendium of Key Standards for
Sound Financial Systems. The Core
Principles are officially recognized
by both the IMF and World Bank and
are now accepted for use in their
Financial Sector Assessment Program
(FSAP). This represents an important
milestone in the acceptance of the
role of effective systems of deposit
insurance in maintaining financial
stability. The FDIC has also worked
with senior officials at the World

34

Bank and IMF, and formalized IADI
collaboration and support of the
deposit insurance review portion of
the FSAP reviews. Core Principles
working group meetings, regional
workshops, and training sessions
were held in Washington, DC; Kuala
Lumpur, Malaysia; Bogota, Colombia;
and Nairobi, Kenya, during 2012.

2012

In February 2012, the FSB issued
its Thematic Review on Deposit
Insurance Systems Peer Review
Report. The recommendations
included a request for IADI to
update its guidance that pre-dated
the financial crisis and to develop
additional guidance to address areas
where the Core Principles may need
more precision to achieve effective
compliance, or to better reflect
leading practices. The FDIC, in
partnership with the Canadian Deposit
Insurance Corporation, has taken a
leadership role in responding to these
recommendations with a set of six
focused papers. Prepared under the
auspices of the IADI Research and
Guidance Committee Guidance Group,
two of these papers were presented
during the October 2012 IADI
Executive Council meeting in London,
England; the remaining four papers
will be presented to the Executive
Council in 2013. IADI and the BCBS
will use the papers to enhance
the guidance supporting the Core
Principles and the accompanying Core
Principles Assessment Methodology.

regime and includes the ability to
manage the failure of large, complex,
and internationally active financial
institutions in a way that minimizes
systemic disruption and avoids the
exposure of taxpayers to the risk
of loss. During 2012, a number of
initiatives were launched by the FSB
related to operationalizing the Key
Attributes. In January 2012, a special
working group under the auspices
of the Resolutions Steering Group
was formed to draft an assessment
methodology for the Key Attributes.
The FDIC is actively participating in
this effort alongside IADI, a number
of FSB member jurisdictions, and
international organizations such as
the World Bank and the European
Commission, and has participated
extensively in drafting team meetings
in Basel, Switzerland. In the second
half of 2012, the FDIC participated
in the drafting of a consultative
document, entitled “Recovery and
Resolution Planning: Making the Key
Attributes Requirements Operational.”
The document was released for public
comment. The FDIC also hosted
meetings for the Legal Entity Identifier
Working Group, and co-hosted a series
of Crisis Management Group meetings
for the five U.S.-based G-SIFIs at the
Seidman Center in Arlington, Virginia,
and the Federal Reserve Bank of
New York. FDIC representatives also
participated in Crisis Management
Group meetings hosted by foreign
regulatory authorities in a number of
jurisdictions.

In November 2011, the G-20 endorsed
the FSB’s Key Attributes of Effective
Resolution Regimes for Financial
Institutions (Key Attributes). The
Key Attributes set out the core
elements that the FSB considers
necessary for an effective resolution

In mid-2012, then-acting Chairman
Gruenberg was appointed to chair a
Thematic Peer Review on Resolution
Regimes under the auspices of
the FSB’s Standing Committee on
Standards Implementation (SCSI).
This Peer Review was tasked with

Financial Stability Board

Management Discussion and Analysis

conducting a survey of the existing
regulatory and legislative landscape;
identifying gaps in implementation
of the Key Attributes; and providing
guidance to the Key Attributes
assessment methodology drafting
team. A questionnaire was developed
and sent to FSB member jurisdictions
over the summer, with jurisdictions
providing responses to the Peer
Review Team in the fall. The Peer
Review Team, comprising 20 members
from multiple G-20 jurisdictions and
multinational bodies, will develop a
report for the SCSI in early 2013 on its
findings.

Association of Supervisors
of Banks of the Americas
With the goal of contributing to sound
banking supervision and resilient
financial systems in the Americas,
the FDIC has been a member of
ASBA since its founding in 1999. In
recognition of the FDIC’s leadership
in ASBA, the General Assembly
elected the FDIC’s Director of Risk
Management Supervision, Sandra
Thompson, to serve a two-year term
as Vice Chairman. Director Thompson
was named Acting Chairman of
ASBA until November 2012, upon the
resignation of ASBA’s Chairman. In
these capacities, Director Thompson
presided over meetings of the
technical committee, the assembly,
and the board.
The FDIC led three ASBA technical
assistance training missions in 2012,
including a Financial Institution
Analysis training program in Quito,
Ecuador; a Credit Risk Management
training program in Asuncion,
Paraguay; and a Supervision of
Operational Risk training program in
Miami, Florida. The FDIC continued
to provide subject-matter experts as
instructors and speakers to support

ASBA-sponsored training programs,
seminars, and conferences. In
addition, the FDIC participated in
the ASBA working group on the
Liquidity Coverage Ratio and Net
Stable Funding Ratio Overview
and established the FDIC-ASBA
secondment program. Two ASBA
members from the Central Bank of
Barbados and the Superintendencia de
Bancos de Guatemala were hosted by
the FDIC under the inaugural program
for eight weeks during the fall of 2012.
Supporting best practices through
ASBA, the FDIC chaired the Basel
III Liquidity Working Group and
participated in several ASBA Working
Groups concerning enterprise risk
management, effective consumer
protection frameworks, and corporate
governance. The FDIC also led an
internal review of ASBA’s Secretary
General’s office in Mexico City Mexico,
led the development of the 2013–2018
ASBA Strategic and Business Plans,
developed the first handbook for the
Board of Directors, and approved the
external audit program.

Foreign Visitors Program
The FDIC continued its global role
in supporting the development
of effective deposit insurance
and banking supervision systems
through the provision of training,
consultations, and briefings to foreign
bank supervisors, deposit insurance
authorities, international financial
institutions, partner U.S. agencies,
and other governmental officials. In
2012, the FDIC hosted 80 visits with
over 565 visitors from approximately
42 jurisdictions. Many of these visits
were multi-day study tours, enabling
delegations to receive in-depth
consultations on a wide range of
deposit insurance issues. Officials
from the Polish Bank Working Group,

the Deposit Insurance of Vietnam, the
National Bank of Ethiopia, the Deposit
Protection Agency of the Kyrgyz
Republic, and the Central Bank of
Kenya benefited from these extended
visits.
During 2012, the FDIC provided
subject-matter experts to participate
in seven FSI seminars around the
world. The topics included riskfocused supervision, financial stability
and stress testing, liquidity risk, Basel
III, risk management, and regulating
and supervising systemic banks.
Additionally, 199 students from 13
countries attended FDIC examiner
training classes through the FDIC’s
Corporate University.
The FDIC continued its strong
relationship with Chinese public
institutions in 2012. The FDIC
participated in the Fourth U.S.-China
Strategic and Economic Dialogue
on May 3, 2012, in Beijing, China,
along with counterparts from all of
the U.S. financial sector regulatory
agencies, in a delegation led by the
U.S. Treasury Secretary. The U.S.
delegation met with counterparts
from the Chinese regulatory agencies
to discuss regulatory reforms and
progress towards rebalancing their
respective economies. The FDIC
met separately with the People’s
Bank of China (PBoC) concerning
revisions to the current FDIC-PBoC
Technical Assistance Memorandum
of Understanding, and also about
progress toward implementing
a deposit insurance scheme in
China. The FDIC held meetings
with the China Banking Regulatory
Commission (CBRC) to discuss
further cooperation on SIFI-related
matters. The U.S.-CBRC Bank
Supervisors Bilateral Meeting, hosted
by the FDIC, was held on October

Management Discussion and Analysis

35

ANNUAL REPORT
15, 2012. This meeting involved the
three U.S. banking agencies and the
CBRC in discussions on a wide range
of supervisory issues. In addition,
the China delegation met with
representatives from the FDIC’s Legal
Division and Division of Resolutions
and Receiverships to obtain guidance
on drafting rules for bank resolution in
China. The FDIC subsequently hosted
a delegation from the CBRC, providing
an overview of information technology
(IT) examination, supervision and
resolution processes, and the roles
and responsibilities of the FDIC in the
U.S. bank regulatory system.

Financial Services
Volunteer Corps
June 1, 2012, marked the five-year
anniversary of the secondment
program agreed upon by the Financial
Services Volunteer Corps (FSVC) and
the FDIC to place one or more FDIC
employees full-time in the FSVC’s
Washington, DC, office on an annual
basis. The FDIC provided support
to several FSVC projects including
participation in the U.S. Agency for
International Development’s Partners
for Financial Stability project in the
Balkan region. The purpose of this
consultation was to develop strategies
for resolving problem loans in
response to the Eurozone crisis.
FSVC support also included multiple
FDIC-led training sessions with the
Bank of Albania (the central bank).
Follow-up consultations with the
Albanian Deposit Insurance Agency,
Bank of Albania, and the Ministry of
Finance regarding bank liquidation
processes, training sessions for
examiners, an assessment of the
legal framework, operational
capabilities to manage a failure,
and the implementation of an
automated bank reporting and pay-out

36

system were also completed. FDIC
subject-matter experts also advised
Albanian Financial Supervisory
Authority leadership on the effective
use of communications to foster
relationships with foreign regulators
and Albanian institutions, and
public outreach and media relations
strategies.
FDIC secondees also provided a study
tour in New York for members of the
Egyptian Banking Institute; traveled
to Cairo to support the Egyptian
Financial Supervisory Authority’s
Institute for Financial Services in its
assessment and development of a
strategic plan for financial inclusion;
and conducted a one-week training
program on IT risk supervision
for the National Bank of Serbia in
partnership with the World Bank. In
Tunisia, FDIC secondees advised an
association of banking and financial
experts on techniques used by U.S.
regulators for collecting data and best
practices of financial institutions for
improving the quality and timeliness
of data. Finally, the FDIC continued
to lead the research and development
of a strategy for targeting technical
assistance for low-income countries in
Sub-Saharan Africa.

Effective Management
of Strategic Resources
The FDIC recognizes that it must
effectively manage its human,
financial, and technological resources
to successfully carry out its mission
and meet the performance goals
and targets set forth in its annual
performance plan. The FDIC must
align these strategic resources with
its mission and goals and deploy
them where they are most needed to
enhance its operational effectiveness
and minimize potential financial risks
to the DIF. Major accomplishments

Management Discussion and Analysis

2012
in improving the FDIC’s operational
efficiency and effectiveness during
2012 follow.

Human Capital Management
The FDIC’s human capital
management programs are designed
to recruit, develop, reward, and retain
a highly skilled, cross-trained, diverse,
and results-oriented workforce. In
2012, the FDIC stepped up workforce
planning and development initiatives
that emphasized hiring the additional
skill sets needed to address
requirements of the Dodd-Frank Act,
especially as it related to the oversight
of SIFIs. Workforce planning also
addressed the need to start winding
down bank closure activities in the
next few years, based on the decrease
in the number of financial institution
failures and institutions in at-risk
categories. The FDIC also deployed
a number of strategies to more fully
engage all employees in advancing
its mission.

Succession Management
The FDIC provides its employees
with comprehensive learning and
development opportunities, including
technical and general skills training,
and leadership development. In
addition to extensive internally
developed and administered courses,
the FDIC also offers its employees
with funds and/or time to participate
in external offerings in support of
their career development. Through
training and educational programs,
the FDIC provides its employees
with the knowledge and skills to
successfully accomplish their work
and to grow professionally. In 2012,
the FDIC kicked-off several initiatives
related to advanced or specialized
training for mission critical areas.
Such training is a critical part of
workforce and succession planning as

more experienced employees become
eligible for retirement.
The FDIC also continues to expand
leadership development opportunities
to all employees. Its curriculum
takes a holistic approach, aligning
its core and elective curriculum with
key leadership competencies. By
developing employees across the
span of their careers, the FDIC builds
a culture of leadership and further
promotes a leadership succession
strategy. In 2012, the FDIC delivered
19 sessions of core leadership courses
and 22 sessions of electives. It also
supported participation in four
external leadership development
programs.

Strategic Workforce Planning
and Readiness
The FDIC used various employment
strategies in 2012 to meet the need
for additional human resources
resulting from the number of failed
financial institutions and the volume
of additional examinations. Among
these strategies, the FDIC recruited
complex financial institution
specialists who had developed their
skills in other public and private
sector organizations, recruited loan
review specialists and compliance
analysts from the private sector, and
redeployed current FDIC employees
with the requisite skills from other
parts of the Agency.
When the Office of Thrift Supervision
(OTS) closed on July 21, 2011, the
FDIC received 95 of its employees,
all of whom were integrated into
the FDIC with full FDIC benefits as
of the one-year anniversary of the
Dodd-Frank Act. Thirty-eight of
the 95 employees were under the
OTS’s Schedule A hiring authority,
and therefore not in the competitive

service. The FDIC determined that
the equitable treatment provisions
of the Dodd-Frank Act required that
these employees be transferred to the
competitive service; these transfers
were effective May 9, 2012.
During 2012, the orderly closing of
the FDIC’s temporary satellite offices
began based on projections of a
drop in the number of bank failures
expected in 2013 and beyond. These
offices had been established to
bring resources to bear in especially
hard-hit areas in 2009 and 2010,
as the number of failed financial
institutions increased. Almost all of
the employees in these new offices
were hired on a nonpermanent basis
to handle the temporary increase in
bank closing and asset management
activities expected over several
years, beginning in 2009. The use of
nonpermanent appointments allows
the FDIC staff to return to a normal
size once the crisis is over without
the disruptions that reductions in
permanent staff would cause.
The West Coast Temporary Satellite
Office, which opened in Irvine,
California, in early spring of 2009,
closed on January 13, 2012, with
265 employees. The East Coast
Temporary Satellite Office, which
opened in Jacksonville, Florida, in the
fall of 2009, is slated to close in 2014.
As of December 31, 2012, that office
had 391 employees. The third satellite
office, which opened for the Midwest
in 2010 in Schaumburg, Illinois,
closed on September 28, 2012, with
130 employees. During the financial
crisis, the FDIC also increased
resolutions and receiverships staff
in the Dallas Regional Office. For all
offices that closed, the FDIC provided
transition services to the separated
nonpermanent FDIC employees. In

addition, a number of these employees
were hired as permanent staff to
complete the FDIC’s core staffing
requirements.  
The FDIC continued to build
workforce flexibility and readiness
by hiring through the Corporate
Employee Program (CEP). The CEP
is a multi-year development program
designed to cross-train new employees
in the FDIC’s major business lines. In
2012, 121 new business line employees
entered this multi-discipline program
(1,133 hired since program inception
in 2005). The CEP continued to
provide a foundation across the full
spectrum of the FDIC’s business
lines, allowing for greater flexibility
to respond to changes in the financial
services industry and to meet the
FDIC’s human capital needs. As in
years past, the program continued
to provide the FDIC flexibility as
program participants were called upon
to assist with both bank examination
and bank closing activities based
on the skills they obtained through
their program requirements and
experiences. As anticipated,
participants are also successfully
earning their commissioned bank
examiner and resolutions and
receiverships credentials, having
completed their three to four years
of specialized training in field offices
across the country. The FDIC had
approximately 362 commissioned
participants by the end of 2012. These
individuals are well-prepared to lead
examination and resolutions and
receiverships activities on behalf of
the FDIC.
In 2011, the FDIC piloted the
Financial Management Scholars
(FMS) Program, a ten week summer
internship program for college
students between their junior and

Management Discussion and Analysis

37

ANNUAL REPORT
senior years of college. The FMS was
implemented in 2012 and is another
recruiting strategy to bring talent
into the FDIC and the CEP. The FMS
participants completed a one-week
orientation session, worked in the field
in one of the three key business lines
(Depositor and Consumer Protection,
Resolutions and Receiverships, and
Risk Management Supervision),
completed a capstone program, and
participated in mini-recruiting event
assessments. In 2012, there were 50
FMS participants participating in 34
locations. The FDIC extended 36 job
offers and received acceptances from
35 FMS participants. These successful
FMS participants will join CEP
classes in 2013 as Financial Institution
Specialists.

Corporate Risk Management
In 2011, the FDIC Board authorized
the creation of an Office of Corporate
Risk Management (OCRM) and
recruited a Chief Risk Officer (CRO)
for the agency. During 2012, the CRO
recruited a Deputy Director and a
small staff made up of Senior Risk
Officers to work with other Divisions
and Offices to assess, manage, and
mitigate risks to the FDIC in the
following major areas:
♦	Open bank risks associated with the
FDIC’s role as principal regulator of
certain financial institutions and the
provider of deposit insurance to all
insured depository institutions;
♦	Closed bank risks associated
with the FDIC management of
risks associated with assets in
receivership, including loss share
arrangements and limited liability
corporations;
♦	Systemically important financial
institution risks associated with
large complex institutions where

38

the FDIC is not the primary
federal regulator but would have
responsibility in the event of failure;
♦	Economic and financial risks
created for the FDIC and its insured
institutions created by changes in
the macroeconomic and financial
environment;
♦	Policy and regulatory risks arising
through legislative activities and
those created by FDIC’s own policy
initiatives;
♦	Internal structure and process risks
associated with carrying out ongoing
FDIC operations, including human
resource management, internal
controls, and audit work carried out
by both OIG and GAO; and
♦	Reputational risks associated with
all of the activities of the FDIC as
they are perceived by a range of
external factors.
In addition to completing an initial risk
inventory for the FDIC, OCRM worked
with the newly created Enterprise
Risk Committee and Risk Analysis
Committee to discuss external and
internal risks facing the FDIC. These
efforts supported the preparation of
quarterly reports to the Board on the
risk profile of the institution.

Employee Engagement
The FDIC continually evaluates its
human capital programs and strategies
to ensure that it remains an employer
of choice and that all of its employees
are fully engaged and aligned with
the mission. The FDIC uses the
Federal Employee Viewpoint Survey
mandated by Congress to solicit
information from employees and takes
an agency-wide approach to address
key issues identified in the survey. On
December 13, 2012, the FDIC received
an award from the Partnership for

Management Discussion and Analysis

2012
Public Service for being ranked
number one among the mid-sized
federal agencies on the Best Places to
Work in the Federal Government®
list. Effective leadership was the
primary factor driving employee
satisfaction and commitment in the
federal workplace, according to a
report by the Partnership for Public
Service. 
The Culture Change Initiative,
2008–2012, played an important role in
helping the FDIC achieve this ranking.
The new Workplace Excellence (WE)
Program builds upon the success
of the Culture Change Initiative by
institutionalizing a National WE
Steering Committee and separate
Division/Office WE Councils. In
addition to the WE Program, the
new FDIC-NTEU Labor-Management
Forum serves as a mechanism for
the union and employees to have
pre-decisional input on workplace
matters. The WE Program and
Labor Management Forum enhances
communication, provides additional
opportunities for employee input, and
improves employee empowerment. 

Employee Learning and
Development
The FDIC has a strong commitment
to the learning and development of
all employees. Through its learning
and development programs, the
FDIC creates opportunity, enriches
career development, and cultivates
future leaders. New employees can
more quickly and thoroughly assume
their job functions and assist with
examination and resolution activities
through the use of innovative learning
solutions. To prepare new and
existing employees for the challenges
ahead, the FDIC delivered just-intime training to quickly address
new business needs and completed

comprehensive needs assessments to inform
its long-term strategy.
In support of business requirements,
the FDIC delivered various sessions
of resolution-related training based on
new responsibilities acquired under the
Dodd-Frank Act. To prepare for the
resolution of the most complex financial
institutions, the FDIC also used facilitated
discussions, table top exercises, and
simulations with other federal agencies to
share information, identify challenges, and
build interagency relationships.
In addition to conducting just-in-time
training and events to meet immediate
needs, the FDIC is focused on assessing
long-term needs and developing
comprehensive curricula accordingly.
Based on the results of needs assessments
for the Office of Complex Financial
Institutions, the Division of Resolutions
and Receiverships, and the Division
of Risk Management Supervision, the
FDIC developed multi-year frameworks
to supplement existing learning and
development. The FDIC will implement the
priority components of the business line
curricula next year.
In support of knowledge and succession
management, the FDIC is focused on
capturing, maintaining, and documenting
best practices and lessons learned from
bank closing activity over the past two
years. Capturing this information now
is strategically important to ensure
corporate readiness, while at the same time
maintaining effectiveness as experienced
employees retire and the temporary
positions created to support the closing
activity expire.
In 2012, the FDIC provided its employees
with approximately 160 instructor-led
courses and 1,800 web-based courses to
support various mission requirements.
There were approximately 9,292 completions

of instructor-led courses and 36,570
completions of web-based courses.
In 2012, the FDIC was recognized as
a LearningElite organization by Chief
Learning Officer magazine. The
LearningElite program is a robust peerreviewed ranking and benchmarking
program that recognizes those organizations
that employ exemplary workforce
development strategies to deliver significant
business results.

Information Technology Management
The FDIC understands that information
technology (IT) is a critical, transformative
resource for the successful accomplishment
of agency business objectives. The FDIC
relies on the strategic capabilities that IT
provides to ensure and enhance mission
achievement. This year, introduction of
new technologies coupled with changes
to maintenance contracts have allowed
the FDIC to identify $15 million in budget
reductions in IT equipment and services
areas from 2012 to 2013.

Chairman Martin
J. Gruenberg and
Arleas Upton Kea,
Director of
the Division of
Administration,
accepting the award
for the number one
ranking among
mid-sized federal
agencies for Best
Places to Work
in the Federal
Government.

Management Discussion and Analysis

39

2012

ANNUAL REPORT
IT Governance

Cyber Security

The FDIC has strengthened agency
governance of IT investments
and projects by adopting new
guidelines for project scope, cost,
schedule, and reporting. The FDIC
also implemented the Office of
Management and Budget’s Federal
Chief Information Officer’s Tech Stat
concept, a face-to-face, evidencebased review by agency executives of
IT projects, identify issues affecting
progress, and take the necessary
corrective actions. The FDIC has also
improved the risk management and
cost estimation project disciplines,
training project management staff
across the organization. Also, in 2012,
the FDIC worked on an update to the
Business Technology Strategic Plan
that highlights strategic initiatives for
document management, research and
analytics, and mobility.

The FDIC recognizes that cyber
threats are one of the most serious
security challenges facing the
nation, and that collaboration with
other federal agencies is vital to
strengthening the FDIC’s security
position. In 2012, the FDIC was
actively involved with the Federal
Chief Information Officer Council’s
Privacy Committee, including
serving as co-chair of the interagency Best Practices Subcommittee
and as a member of three other
subcommittees: Innovation and
Technology, Development and
Education, and International. In
addition, the FDIC initiated the first
Interagency Data Loss Prevention
(DLP) Working Group, composed of
representatives from 15 agencies, as
a forum for discussions of DLP best
practices, federal requirements, and
lessons learned, as well as a platform
for industry presentations on DLP
techniques and tools.

Support for Regulatory Reform
Business application development
and enhancement continued in 2012
to support implementation of the
requirements of the Dodd-Frank
Act. The FDIC implemented
new applications to deliver full
functionality required to comply with
Section 165(d) of the Dodd-Frank Act.
While not mandated by the statute,
the FDIC has also implemented
an enhanced tool to facilitate the
electronic review of a bank’s loan
portfolio and streamline the loan
review process. The Examination Tool
Suite-Automated Loan Examination
Reporting Tool (ETS-ALERT), will be
used by the FDIC, all 50 states banking
supervision organizations, and the
Federal Reserve.

40

The FDIC has undertaken several
initiatives to augment external
cyber resources. In 2012, the FDIC
participated with the Office of the
National Director of Intelligence in
initiating the new Federal Senior
Intelligence Coordinator Advisory
Board and associated workgroups to
gather additional counter-intelligence
on new threats. The FDIC has
established informal informationsharing relationships with the
Federal Bureau of Investigation’s
(FBI) cybercrime squads in the FBI’s
Washington, DC office, where real-time
cybercrime information is exchanged.
The FDIC also serves as an active
participant in industry information-

Management Discussion and Analysis

sharing organizations, including the
Financial Services - Information
Sharing and Analysis Center, a
financial services-focused association
that gathers reliable and timely
information from financial services
providers; commercial security firms;
federal, state, and local government
agencies; law enforcement; and
other trusted resources; to quickly
disseminate physical and cyber threat
alerts and other critical information to
participating organizations.
Internally, the FDIC continued to
focus on enhancing its security
posture to combat the increased
number and sophistication of cyberattacks. The FDIC established a
Security Operations Center that
provides continuous event-monitoring
and risk analysis to prevent and detect
intrusion through use of an array
of tools.

Privacy Program
The FDIC has a well-established
privacy program that works to
maintain privacy awareness and
promote transparency and public
trust. During the last year, the FDIC
conducted unannounced privacy
assessments of various regional and
field offices to ensure that confidential
and proprietary documents and media
are properly safeguarded, and that
individual and agency privacy data
are protected. These assessments
provide the FDIC with its own internal
mechanism to identify weaknesses and
potential mitigating circumstances,
and to track progress in correcting
vulnerabilities.

II.

In its role as deposit insurer of
financial institutions, the FDIC
promotes the safety and soundness of
insured depository institutions (IDIs).
The following financial highlights
address the performance of the
deposit insurance funds, and discuss
the corporate operating budget and
investment spending.

Deposit Insurance
Fund Performance
The FDIC administers the Deposit
Insurance Fund (DIF) and 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 DIF. (See the
accompanying graphs on FDICInsured Deposits and Insurance Fund
Reserve Ratios on the following page.)
For 2012, the DIF’s comprehensive
income totaled $21.1 billion compared
to comprehensive income of $19.2

Financial
Highlights
billion during 2011. This $1.9 billion
year-over-year increase was primarily
due to a $3.3 billion increase in
revenue from excess Debt Guarantee
Program (DGP) fees previously held
as systemic risk deferred revenue,
partially offset by a $1.1 billion
decrease in assessments and a $191
million increase in the provision for
insurance losses.
As the TLGP expired at year-end, the
DIF recognized revenue of $5.9 billion
in 2012, representing the remaining
deferred revenue not absorbed by
the TLGP for losses. Through the
end of the debt issuance period,
the FDIC collected $10.4 billion
in fees and surcharges under the
DGP. In addition, the FDIC collected
Transaction Account Guarantee
Program (TAG) fees of $1.2 billion for
unlimited coverage for noninterestbearing transaction accounts held
by IDIs on all deposit amounts
exceeding the fully insured limit
of $250,000. Since inception of the
program, the TLGP incurred estimated

losses of $153 million and $2.1 billion
on DGP and TAG Program claims,
respectively. Over the duration of the
TLGP, $8.5 billion in TLGP assets were
transferred to the DIF. In addition,
during 2009, surcharges of $872
million were collected and deposited
into the DIF.
Assessment revenue was $12.4
billion for 2012. The decrease of $1.1
billion, from $13.5 billion in 2011,
was primarily due to lower average
assessment rates in 2012, resulting
from improvement in the financial
condition of the banking industry.
The provision for insurance losses
was negative $4.2 billion for 2012,
compared to negative $4.4 billion for
2011. The negative provision for 2012
primarily resulted from a reduction in
the contingent loss reserve due to the
improvement in the financial condition
of institutions that were previously
identified to fail, and a reduction in
the estimated losses for institutions
that have failed in the current and
prior years.

Financial Highlights

41

2012

ANNUAL REPORT
ESTIMATED DIF INSURED DEPOSITS
8,000
7,000

Dollars in Billions

6,000
5,000
4,000
3,000
2,000
1,000
0
3-09

6-09

9-09 12-09 3-10

6-10

9-10 12-10 3-11

6-11

9-11 12-11 3-12

6-12

9-12

SOURCE: Commercial Bank Call and Thrift Financial Reports
Note: Beginning in the fourth quarter of 2010, estimated insured deposits include the entire balance of noninterest-bearing
transaction accounts.

DEPOSIT INSURANCE FUND RESERVE RATIOS
0.4

Fund Balances as a Percent of Insured Deposits

0.3

0.2

0.1

0.0

-0.1

-0.2

-0.3

-0.4
3-09

42

6-09

Financial Highlights

9-09

12-09 3-10

6-10

9-10

12-10 3-11

6-11

9-11

12-11 3-12

6-12

9-12

Deposit Insurance Fund Selected Statistics
Dollars in Millions
For the years ended December 31

 

2012 

2011 

2010

Financial Results
Revenue

$18,522

Operating Expenses

 

 

$16,342

 

$13,380

 

1,778

 

 

1,625

 

1,593

 

Insurance and Other Expenses (includes provision for loss)

(4,377)

 

 

(4,541)

 

(1,518)

 

Net Income (Loss)

21,121

 

 

19,257

 

13,305

 

Comprehensive Income (Loss)

21,131

Fund as a Percentage of Insured Deposits (reserve ratio)

 

 

19,179

 

13,510

 

$32,958

Insurance Fund Balance

 

 

$11,827

 

$(7,352)

 

0.35 %*  

0.17

%

(0.12)

%

7,357

 

7,657

 

Selected Statistics
Total DIF-Member Institutions1

7,181*
651

Total Assets of Failed Institutions in Year

2

Number of Active Failed Institution Receiverships

813

 

884

 

 

 

$319,432

 

$390,017

 

 

 

92

 

157

 

$11,617

Institution Failures

 

51

Total Assets of Problem Institutions

 

$232,701

Problem Institutions

 

 

 

$34,923

 

$92,085

 

463

 

 

426

 

336

 

* Figures are as of September 30, 2012.
1

	 Includes commercial banks and savings institutions, but does not include U.S. insured branches of foreign banks.

2	

Total asset data are based upon the last Call Report filed by the institution prior to failure.

Corporate
Operating Budget
The FDIC segregates its corporate
operating budget and expenses into
two discrete components: ongoing
operations and receivership funding.
The receivership funding component
represents expenses resulting from
financial institution failures and is,
therefore, largely driven by external
forces, while the ongoing operations
component accounts for all other
operating expenses and tends to be
more controllable and estimable.
Corporate Operating expenses totaled
$2.5 billion in 2012, including $1.6
billion in ongoing operations and
$0.9 billion in receivership funding.

This represented approximately 92
percent of the approved budget for
ongoing operations and 57 percent of
the approved budget for receivership
funding for the year.3
The FDIC Board of Directors approved
a 2013 Corporate Operating Budget of
approximately $2.7 billion, consisting
of $1.8 billion for ongoing operations
and $0.9 billion for receivership
funding. The level of approved
ongoing operations budget for 2013
is approximately $2.0 million (0.1
percent) higher than the actual 2012
ongoing operations budget, while the
approved receivership funding budget
is roughly $600 million (40 percent)
lower than the 2012 receivership
funding budget.

As in prior years, the 2013 budget was
formulated primarily on the basis of
an analysis of projected workload
for each of the Corporation’s three
major business lines and its major
program support functions. The most
significant factor contributing to the
decrease in the Corporate Operating
Budget is the improving health of the
industry and the resultant reduction
in failure related workload. Although
savings in this area are being realized,
the 2013 receivership funding budget
allows for resources for contractor
support as well as nonpermanent
staffing for the Division of Resolutions
and Receiverships, the Legal Division,
and other organizations, should
workload in these areas require
an immediate response.

3

	 The numbers in this paragraph will not agree with the DIF and FRF financial statements due to differences in how items
are classified.

Financial Highlights

43

2012

ANNUAL REPORT
Investment Spending
The FDIC instituted a separate
Investment Budget in 2003. It has
a disciplined process for reviewing
proposed new investment projects
and managing the construction and
implementation of approved projects.
Proposed IT projects are carefully
reviewed to ensure that they are
consistent with the FDIC’s enterprise
architecture. The project approval

and monitoring processes also enable
the FDIC to be aware of risks to the
major capital investment projects
and facilitate appropriate, timely
intervention to address these risks
throughout the development process.
An investment portfolio performance
review is provided to the FDIC’s Board
of Directors quarterly.
The FDIC made significant capital
investments during the 2003–2012

period, the largest of which was the
expansion of its Virginia Square office
facility. Most other projects involved
the development and implementation
of major IT systems. Investment
spending totaled $288 million during
this period, peaking at $108 million
in 2004. Spending for investment
projects in 2012 totaled approximately
$14 million. For 2013, investment
spending is estimated at $28 million.

Investment Spending 2003–2012
Dollars in Millions

$120

$100

$80

$60

$40

$20

$0
2003

44

2004

Financial Highlights

2005

2006

2007

2008

2009

2010

2011

2012

III.
Summary of 2012
Performance
Results by Program
The FDIC successfully achieved
43 of the 45 annual performance
targets established in its 2012 Annual

Performance
Results
Summary

Performance Plan. Two targets
involving capital standards were not
achieved. There were no instances
in which 2012 performance had
a material adverse effect on the
successful achievement

of the FDIC’s mission or its strategic
goals and objectives regarding its
major program responsibilities.
Additional key accomplishments are
noted below.

Program Area

Performance Results

Insurance

♦	 Updated the FDIC Board of Directors on loss, income, and reserve ratio projections for
the Deposit Insurance Fund at the April and October meetings.
♦	 Briefed the FDIC Board of Directors in April and October on progress in meeting the
goals of the Restoration Plan. Based upon current fund projections, no changes to
assessment rate schedules were necessary.
♦	 Completed reviews of the recent accuracy of the contingent loss reserves.
♦	 Provided analysis to the FDIC Chairman in August 2012, with recommendations for
follow-up, of possible refinements to the deposit insurance pricing methodology for
banks with assets under $10 billion.
♦	 Researched and analyzed emerging risks and trends in the banking sector, financial
markets, and the overall economy to identify issues affecting the banking industry and
the Deposit Insurance Fund.
♦	 Provided policy research and analysis to FDIC leadership in support of the
implementation of financial industry regulation, as well as support for testimony and
speeches.
♦	 Published economic and banking information and analyses through the FDIC Quarterly,
FDIC Quarterly Banking Profile (QBP), FDIC State Profiles, and the Center for Financial
Research Working Papers.
♦	 Operated the Electronic Deposit Insurance Estimator (EDIE), which had 435,192 user
sessions in 2012.

Performance Results Summary

45

ANNUAL REPORT

2012

Program Area

Performance Results

Supervision and
Consumer Protection

♦	 Conducted 2,585 Bank Secrecy Act examinations, including required follow-up
examinations and visitations.
♦	 Worked with other federal banking regulators and the Basel Committee on Banking
Supervision to develop proposals to strengthen capital and liquidity requirements.
♦	 Among other releases, issued FILs on effective credit risk management practices for
purchased loan participants and the inappropriate practice of directors and officers
copying and removing financial institution and supervisory records from the institution
in anticipation of litigation or enforcement activity against them.

Receivership
Management

♦	 Completed on-site field work for reviews of 100 percent of the loss share and Limited
Liability Corporation (LLC) agreements active as of December 31, 2011, to ensure
full compliance with the terms and conditions of the agreements. Reviewed the final
review reports and implemented an action plan to address the reports’ findings and
recommendations for 80 percent of the loss-share reviews and 70 percent of the
LLC reviews.
♦	 Terminated at least 75 percent of new receiverships that are not subject to loss-share
agreements, structured sales, or other legal impediments within three years of the date
of failure.
♦	 Made final decisions for 85 percent of all investigated claim areas that were within 18
months of the institution’s failure date.

46

Performance Results Summary

2012 Budget and
Expenditures by
Program
(Excluding Investments)
The FDIC budget for 2012 totaled
$3.3 billion. Budget amounts were
allocated as follows: $227 million, or
7 percent, to Corporate General and
Administrative expenditures; $245

million, or 7 percent, to the Insurance
program; $1.0 billion, or 32 percent,
to the Supervision and Consumer
Protection program; and $1.8 billion,
or 54 percent, to the Receivership
Management program.
Actual expenditures for the year
totaled $2.5 billion, and expenditures
amounts were allocated as follows:

$174 million, or 7 percent, to
Corporate General and Administrative
expenditures; $290 million, or 12
percent, to the Insurance program;
$906 million, or 36 percent, to
the Supervision and Consumer
Protection program; and $1.1 billion,
or 45 percent, to the Receivership
Management program.

2012 budget and Expenditures (support Allocated)
Dollars in Millions
$3,000
Budget

Expenditures

$2,500

$2,000

$1,500

$1,000

$500

$0
Insurance
Program

Supervision and
Consumer Protection
Program

Receivership
Management
Program

General and
Administrative

Performance Results Summary

47

2012

ANNUAL REPORT
Performance Results by Program and Strategic GoaL
2012 Insurance Program Results

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

#

Annual
Performance Goal

2

3

48

Indicator

Target

Results

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

Depositors have access to insured funds
within one business day if the failure
occurs on a Friday.

Achieved.
See pg. 31.

Depositors have access to insured funds
within two business days if the failure
occurs on any other day of the week.

Achieved.
See pg. 31.

Insured depositor
losses resulting from
a financial institution
failure.

1

Depositors do not incur any losses on
insured deposits.

Achieved.
See pg. 31.

No appropriated funds are required to
pay insured depositors.

Achieved.
See pg. 31.

Deepen the FDIC’s
understanding of the
future of community
banking.

Completion and
publication of research.

Conduct a nationwide conference on the
Achieved.
future of community banking during the See pgs. 26-27.
first quarter of 2012.

Disseminate data and
analyses on issues
and risks affecting
the financial services
industry to bankers,
supervisors, the public,
and other stakeholders
on an ongoing basis.

Scope and timeliness
of information
dissemination on
identified or potential
issues and risks.

Respond promptly to
all financial institution
closings and related
emerging issues.

Publish by December 31, 2012,
a research study on the future of
community banks, focusing on their
evolution, characteristics, performance,
challenges, and role in supporting local
communities.

Performance Results Summary

Achieved.
See pg. 27.

Disseminate results of research and
analyses in a timely manner through
regular publications, ad hoc reports, and
other means.

Achieved.
See pg. 45.

Undertake industry outreach activities to
inform bankers and other stakeholders
about current trends, concerns, and
other available FDIC resources.

Achieved.
See pg. 45.

2012 Insurance Program Results (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

#
4

Annual
Performance Goal

Indicator

Target

Results

Recommend changes to deposit insurance
assessment rates to the FDIC Board of
Directors as necessary.

Achieved.
See pg. 45.

Provide progress reports to the FDIC
Board of Directors by June 30, 2012, and
December 31, 2012.

Achieved.
See pg. 45.

Provide to the Chairman by September 1,
2012, an analysis, with recommendations
where appropriate, of refinements to the
deposit insurance pricing methodology for
banks with assets under $10 billion.

Achieved.
See pg. 45.

Scope of information
sharing and assistance
available to international
governmental bank
regulatory and deposit
insurance entities.

Maintain open dialogue with counterparts in
strategically important countries as well as
international financial institutions and partner
U.S. agencies.

Achieved.
See pgs. 35-36.

Foster strong relationships with international
banking regulators and associations that
promote sound banking supervision and
regulation, failure resolutions, and deposit
insurance practices.

Achieved.
See pgs. 33, 35.

Achieved.
See pg. 34.

Lead and support the Association of
Supervisors of Banks of the America’s
efforts to promote sound banking principles
throughout the Western Hemisphere.
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.

Achieved.
See pg. 45.

Target capacity building based on the
assessment methodology of the BCBS and
IADI Core Principles for an Effective Deposit
Insurance System.

6

Provide updated fund balance projections
to the FDIC Board of Directors by June 30,
2012, and December 31, 2012.

Analysis of possible
refinements to the
deposit insurance pricing
methodology.
Expand and strengthen
the FDIC’s participation
and leadership role
in supporting robust
international deposit
insurance and banking
systems.

Updated fund balance
projections and
recommended changes to
assessment rates.

Demonstrated progress in
achieving the goals of the
Restoration Plan.

5

Adjust assessment rates,
as necessary, to achieve a
DIF reserve ratio of at least
1.35 percent of estimated
insured deposits by
September 30, 2020.

Achieved.
See pg. 35.

Timeliness of responses
to deposit insurance
coverage inquiries.

Respond within two weeks to 95 percent of
written inquiries from consumers and bankers
about FDIC deposit insurance coverage.

Achieved.
See pg. 29.

Initiatives to increase
public awareness of
deposit insurance
coverage changes.

Conduct at least 12 telephone or in-person
seminars for bankers on deposit insurance
coverage.

Achieved.
See pg. 30.

Performance Results Summary

49

2012

ANNUAL REPORT
2012 Supervision and Consumer Protection Program Results

Strategic Goal: FDIC-insured institutions are safe and sound.
#

Annual
Performance Goal

Indicator

Target

Results

1

Conduct on-site risk
management examinations
to assess the overall
financial condition,
management practices and
policies, and compliance
with applicable laws and
regulations of FDICsupervised depository
institutions.

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

Conduct all required risk management
examinations within the time frames
prescribed by statute and FDIC policy.

Achieved.
See pg. 19.

2

For all institutions that
are assigned a composite
Uniform Financial
Institutions Rating of 3,
4, or 5, conduct on-site
visits within six months
after implementation of a
corrective program. Ensure
during these visits and
subsequent examinations
that the institution is
fulfilling the requirements
of the corrective program
that has been implemented
and that the actions taken
are effectively addressing
the underlying concerns
identified during the
examination.

Percentage of follow-up
examinations and on-site
visits of 3-, 4-, or 5-rated
institutions conducted
within required time
frames.

Conduct 100 percent of required on-site
visits within six months after implementation
of a corrective program.

Achieved.
See pg. 19.

3

Assist in protecting the
infrastructure of the U.S.
banking system against
terrorist financing, money
laundering, and other
financial crimes.

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

Conduct all Bank Secrecy Act examinations
within the time frames prescribed by statute
and FDIC policy.

Achieved.
See pg. 19.

4

More closely align
regulatory capital standards
with risk and ensure that
capital is maintained at
prudential levels.

Issuance by the federal
banking agencies of
rules implementing
alternative standards of
creditworthiness for credit
rating in risk-based capital
rules.

Complete by December 31, 2012, final
rules addressing alternative standards of
creditworthiness for credit ratings in the riskbased capital rules.

Not Achieved.
See pgs. 21-22.

Issuance by the federal
banking agencies of
rules to implement
internationally agreed
upon enhancements
to regulatory capital
standards.

Complete by December 31, 2012, a final rule
for the Basel III capital standards.

Not Achieved.
See pgs. 21-22.

Complete by July 31, 2012, a final rule on
the Market Risk Amendment, including
finalizing alternatives to the use of credit
ratings in accordance with DFA requirements.

Achieved.
See pg. 21.

50

Performance Results Summary

2012 Supervision and Consumer Protection Program Results (continued)

Strategic Goal: FDIC-insured institutions are safe and sound.
#
5

Annual
Performance Goal
Identify and address risks
in financial institutions
designated as systemically
important.

Indicator
Issuance of rules and
policy guidance (with
other financial regulatory
agencies) to implement
provisions of DFA
applicable to systemically
important institutions and
markets.

Target

Results
Achieved.
See pgs. 22-23.

Take all steps necessary to facilitate timely
issuance of implementing regulations and
related policy guidance on restrictions on
federal assistance to swap entities.

Achieved.
See pg. 22.

Take all steps necessary to facilitate timely
issuance of implementing regulations and
related policy guidance on capital and
margin and other requirements for OTC
derivatives.

Achieved.
See pgs. 22-23.

Take all steps necessary to facilitate timely
issuance of implementing regulations
and related policy guidance on credit risk
retention requirements for securitizations.

Achieved.
See pg. 22.

Take all steps necessary to facilitate timely
issuance of implementing regulations
and related policy guidance on enhanced
compensation structure and incentive
compensation requirements.
Establishment of institution
monitoring and resolution
planning programs for
systemically important
institutions.

Take all steps necessary to facilitate timely
issuance of implementing regulations and
related policy guidance on proprietary
trading and other investment restrictions
(also known as the Volcker Rule).

Achieved.
See pg. 22.

Achieved.
See pgs. 16-17.

Establish by June 30, 2012, with the FRB,
policies and procedures for collecting,
processing, and reviewing for completeness
and sufficiency holding company and insured
depository institution (IDI) resolution plans
submitted under Section 165(d) of DFA.
Completed reviews of
resolution plans.

Monitor risk within and across large, complex
firms to assess the potential need for,
and obtain the information that would be
required to carry out, if necessary, an FDIC
resolution of the institution.

Achieved.
See pgs. 16-17.

Complete, with the FRB and in accordance
with prescribed time frames, the review of
holding company and IDI resolution plans
submitted under Section 165(d) of DFA.

Achieved.
See pgs. 16-17.

Performance Results Summary

51

2012

ANNUAL REPORT

2012 Supervision and Consumer Protection Program Results (continued)

Strategic Goal: Consumers’ rights are protected and
FDIC-supervised institutions invest in their communities.
#

Annual
Performance Goal

Indicator

Target

Results

6

Conduct on-site CRA and
compliance examinations
to assess compliance
with applicable laws and
regulations by FDICsupervised depository
institutions.

Percentage of
examinations conducted in
accordance with the time
frames prescribed by FDIC
policy.

Conduct 100 percent of required
examinations within the time frames
established by FDIC policy.

7

Take prompt and effective
supervisory action
to address problems
identified during
compliance examinations
of FDIC-supervised
institutions that receive
a composite 3, 4, or 5
rating for compliance with
consumer protection and
fair lending laws. Ensure
that each institution is
fulfilling the requirements
of any corrective program
that has been implemented
and that the actions taken
are effectively addressing
the underlying concerns
identified during the
examination.

Percentage of follow-up
examinations or on-site
visits of 3-, 4-, and 5-rated
institutions conducted
within required time
frames.

Conduct follow-up examinations or on-site
visits for any unfavorably rated (3, 4, or 5)
institution within 12 months of completion of
the prior examination.

Achieved.
See pgs. 19-20.

8

Establish an effective
working relationship
with the new Consumer
Financial Protection Bureau
(CFPB).

Transfer of complaint
processing responsibilities.

Complete the transfer of consumer compliant
processing responsibilities within the purview
of the CFPB within approved time frames.

Achieved.
See pgs. 29-30.

9

Effectively investigate
and respond to written
consumer complaints
and inquiries about
FDIC-supervised financial
institutions.

Timely responses to written Respond to 95 percent of written consumer
consumer complaints and
complaints and inquiries within time frames
inquiries.
established by policy, with all complaints
and inquiries receiving at least an initial
acknowledgement within two weeks.

52

Performance Results Summary

Achieved.
See pg. 19.

Achieved.
See pg. 29.

2012 Supervision and Consumer Protection Program Results (continued)

Strategic Goal: Consumers’ rights are protected and
FDIC-supervised institutions invest in their communities.
#

Annual
Performance Goal

10 Promote economic
inclusion and access to
responsible financial
services through
supervisory, research,
policy, and consumer/
community affairs
initiatives.

Indicator
Completion of planned
initiatives.

Target

Results

Complete and publish results of the second
biennial National Survey of Unbanked and
Underbanked Households and Banks’ Efforts
to Serve the Unbanked and Underbanked.

Achieved.
See pg. 25.

Plan and hold meetings of the Advisory
Committee on Economic Inclusion to gain
feedback and advice on FDIC efforts to
promote inclusion.

Achieved.
See pg. 25.

Coordinate 25 CRA community forums
nationwide to facilitate community
development opportunities for financial
institutions.

Achieved.
See pg. 26.

Performance Results Summary

53

2012

ANNUAL REPORT
2012 Receivership Management Program Results

Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
#

Annual Performance Goal

1

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

Scope of qualified and
interested bidders
solicited.

Contact all known qualified and interested
bidders.

Achieved.
See pg. 31.

2

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

Percentage of the assets
marketed for each failed
institution.

For at least 95 percent of insured institution
failures, market at least 90 percent of the
book value of the institution’s marketable
assets within 90 days of the failure date (for
cash sales) or 120 days of the failure date (for
structured sales).

Achieved.
See pg. 31.

3

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

Timely termination of new
receiverships.

Terminate at least 75 percent of new
receiverships that are not subject to lossshare agreements, structured sales, or other
legal impediments, within three years of the
date of failure.

Achieved.
See pg. 46.

4

Complete reviews of all
loss-share and Limited
Liability Corporation (LLC)
agreements to ensure full
compliance with the terms
and conditions of the
agreements.

Percentage of reviews
of loss-share and LLC
agreements completed
and action plans
implemented.

Complete reviews of 100 percent of the
loss-share and LLC agreements active
as of December 31, 2011, to ensure full
compliance with the terms and conditions of
the agreements.

Achieved.
See pg. 46.

Conduct investigations into
all potential professional
liability claim areas for 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.

5

54

Indicator

Target

Review the final report and implement an
action plan to address the report’s finding
and recommendations for 80 percent of the
loss-share reviews and 70 percent of the LLC
reviews.

Performance Results Summary

For 80 percent of all claim areas, make a
decision to close or pursue professional
liability claims within 18 months of the failure
of an insured depository institution.

Results

Achieved.
See pg. 46.

Achieved.
See pg. 46.

Prior Years’ Performance Results
Refer to the respective full Annual Report of prior years for more information on performance results for those years.
Minor wording changes may have been made to reflect current goals and targets. (Shaded areas indicate no such target
existed for that respective year.)
Insurance Program Results

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2011

2010

2009

♦	 Depositors have access to insured funds within one business day if the failure
occurs on a Friday.

Achieved.

Achieved.

Achieved.

♦	 Depositors have access to insured funds within two business days if the
failure occurs on any other day of the week.

Achieved.

Achieved.

Achieved.

♦	 There are no depositor losses on insured deposits.

Achieved.

Achieved.

Achieved.

♦	 No appropriated funds are required to pay insured depositors.

Achieved.

Achieved.

Achieved.

1.	 Respond promptly to all financial institution closings and related emerging
issues.

2.	 Identify and address risks to the Deposit Insurance Fund (DIF).
♦	 Assess the insurance risks in large (all for 2008–2009) insured depository
institutions and adopt appropriate strategies.

Achieved.

♦	 Identify and follow up on all material issues raised through off-site review
and analysis.

Achieved.

♦	 Identify and analyze existing and emerging areas of risk, including nontraditional and subprime mortgage lending, declines in housing market
values, mortgage-related derivatives/collateralized debt obligations (CDOs),
hedge fund ownership of insured institutions, commercial real estate lending,
international risk, and other financial innovations.

Achieved.

3.	 Disseminate data and analyses on issues and risks affecting the financial services
industry to bankers, supervisors, the public, and other stakeholders on an
ongoing basis.
♦	 Disseminate results of research and analyses in a timely manner through
regular publications, ad hoc reports, and other means.

Achieved.

Achieved.

Achieved.

♦	 Industry outreach activities are undertaken to inform bankers and other
stakeholders about current trends, concerns, and other available FDIC
resources.

Achieved.

Achieved.

Achieved.

4.	 Effectively administer temporary financial stability programs.
♦	 Provide liquidity to the banking system by guaranteeing noninterest-bearing
transaction deposit account and new senior unsecured debt issued by
eligible institutions under the TLGP.

Achieved.

♦	 Implement an orderly phase-out of new guarantees under the program when
the period for issuance of new debt expires.

Achieved.

♦	 Substantially complete by September 30, 2009, the review of and
recommendations to the Department of Treasury on CPP applications from
FDIC-supervised institutions.

Achieved.

♦	 Expeditiously implement procedures for the LLP, including the guarantee
to be provided for debt issued by Public Private Investment Funds, and
provide information to financial institutions and private investors potentially
interested in participating.

Achieved.

♦	 Expeditiously implement procedures to review the use of CPP funds, TLGP
guarantees, and other resources made available under financial stability
programs during examinations of participating FDIC-supervised institutions.

Achieved.

Performance Results Summary

55

2012

ANNUAL REPORT
Insurance Program Results (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2011

2010

2009

5.	 Set assessment rates to restore the insurance fund reserve ratio to the statutory
minimum of 1.35 percent of estimated insured deposits by September 30, 2020.
♦	 Provide updated fund projections to the FDIC Board of Directors by June 30,
2011, and December 31, 2011.

Achieved.

♦	 Recommend changes to deposit insurance assessment rates for the DIF to
the FDIC Board as necessary.

Achieved.

♦	 Provide updates to the FDIC Board by June 30, 2011, and December 31,
2011.

Achieved.

6.	 Set assessment rates to restore the insurance fund reserve ratio to the statutory
minimum of at least 1.15% of estimated insured deposits by year-end 2016, in
accordance with the Amended Restoration Plan.
♦	 Provide updated fund projections to the FDIC Board of Directors by June 30,
2010, and December 31, 2010.

Achieved.

♦	 Recommend deposit insurance assessment rates for the DIF to the FDIC
Board, as necessary.

Achieved.

♦	 Provide updates to the FDIC Board by June 30, 2010, and December 31,
2010.

Achieved.

7.	 Maintain and improve the deposit insurance system.
♦	 Adopt and implement revisions to the pricing regulations that provide for
greater risk differentiation among insured depository institutions reflecting
both the probability of default and loss in the event of default.

Achieved.

♦	 Revise the guidelines and enhance the additional risk measures used to
adjust assessment rates for large institutions.

Achieved.

♦	 Ensure/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.

♦	 Set assessment rates to maintain the insurance fund reserve ratio between
1.15 and 1.50 percent of estimated insured deposits. Restore to 1.15
percent by year-end 2015.

Achieved.

♦	 Monitor progress in achieving the restoration plan.

Achieved.

8.	 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.
♦	 Conduct at least three sets of deposit insurance seminars/teleconferences
(per quarter in 2009) for bankers.

Achieved.

♦	 Respond within two weeks to 95 percent of written inquiries from consumers
and bankers about FDIC deposit insurance coverage.

Achieved.

♦	 Conduct at least 12 telephone or in-person seminars for bankers on deposit
insurance coverage.

Achieved.

♦	 Enter into deposit insurance education partnerships with consumer
organizations to educate consumers.

56

Performance Results Summary

Achieved.
Achieved.

Insurance Program Results (continued)

Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2011

2010

♦	 Expand avenues for publicizing deposits insurance rules and resources to
consumers through a variety of media.

2009
Achieved.

9.	 Expand and strengthen the FDIC’s participation and leadership role in
providing technical guidance, training, consulting services, and information to
international governmental banking and deposit insurance organizations; and in
supporting robust international deposit insurance and banking systems.
♦	 Undertake outreach activities to inform and train foreign bank regulators and
deposit insurers.

Achieved.

Achieved.

Achieved.

♦	 Foster strong relationships with international banking regulators and
associations that promote sound banking supervision and regulation, failure
resolutions, and deposit insurance practices.

Achieved.

Achieved.

Achieved.

♦	 Develop methodology and lead the International Association of Deposit
Insurers training on the methodology for assessing compliance with
implementation of the Core Principles for Effective Deposit Insurance
Systems.

Achieved.

Achieved.

Performance Results Summary

57

2012

ANNUAL REPORT
Supervision and Consumer Protection Program Results

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

2011

2010

2009

Achieved.

Achieved.

1.	 Conduct on-site risk management examinations to assess the overall financial
condition, management practices and policies, and compliance with applicable
laws and regulations of FDIC-supervised depository institutions.
♦	 One hundred percent of required risk management examinations are
conducted on schedule.
♦	 Conduct 100 percent of required risk management examinations within the
time frames prescribed by statute and FDIC policy.

Achieved.

2.	 For all institutions that are assigned a composite Uniform Financial Institutions
Rating of 3, 4, or 5, conduct on-site visits within six months after implementation
of a corrective program. Ensure during these visits and subsequent
examinations that the institution is fulfilling the requirements of the corrective
program that has been implemented and that the actions taken are effectively
addressing the underlying concerns identified during the examination.
♦	 Conduct 100 percent of required on-site visits within six months after
implementation of a corrective program.

Achieved.

3.	 Complete the transfer of personnel and supervisory responsibility for statechartered thrifts from the Office of Thrift Supervision to the FDIC in accordance
with approved plans and statutory requirements.
♦	 Complete the transfer of supervisory responsibility for state-chartered thrifts
by July 21, 2011.

Achieved.

♦	 Identify the OTS employees to be transferred and complete the transfer of
those employees to the FDIC no later than 90 days after July 21, 2011.

Achieved.

4.	 Take prompt and effective supervisory action to address unresolved problems
identified during the FDIC examination of FDIC-supervised institutions that
receive a composite Uniform Financial Institutions Rating of “3”, “4”, or “5”
(problem institution). Monitor FDIC-supervised insured depository institutions’
compliance with formal and informal enforcement actions.
♦	 One hundred percent of required on-site visits are conducted within six
months of completion of the prior examination to confirm that the institution
is fulfilling the requirements of the corrective program.

Achieved.

♦	 One hundred percent of follow-up examinations are conducted within 12
months of completion of the prior examination to confirm that identified
problems have been corrected.

Achieved.

Achieved.

Achieved

Achieved.

5.	 Assist in protecting the infrastructure of the U.S. banking system against terrorist
financing, money laundering, and other financial crimes.
♦	 Conduct 100 percent of required Bank Secrecy Act examinations within the
time frames prescribed by statute and FDIC policy.

Achieved.

6.	 More closely align regulatory capital with risks and ensure that capital is
maintained at prudential levels.
♦	 Complete by June 30, 2011, the final rule addressing capital floors for
banking organizations.
♦	 Complete by September 30, 2011, the Basel III Notice of Proposed
Rulemaking (NPR) for the new definition of capital, the July 2009
enhancements to resecuritizations risk weights, and securitization disclosures.

58

Achieved.
Deferred.

Performance Results Summary

Supervision and Consumer Protection Program Results (continued)

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

2011

♦	 Complete by September 30, 2011, the Basel NPR for the new leverage ratio.
♦	 Complete by September 30, 2011 the Basel NPR for the new liquidity
requirements.

Deferred.

♦	 Complete by September 30, 2011, the NPR for the Standardized Framework.

2009

Deferred.

♦	 Complete by December 31, 2011, the final rule on the Market Risk
Amendment (includes finalizing alternatives to the use of credit ratings in
accordance with DFA requirements).

2010

Deferred.

Deferred.

♦	 Conduct analyses of early results of the performance of new capital rules in
light of recent financial turmoil as information becomes available.

Achieved.

♦	 Workings domestically and internationally, develop improvements to
regulatory capital requirements based on the experience of the recent
financial market turmoil.

Achieved.

7.	 More closely align regulatory capital with risk and ensure that capital is
maintained at prudential levels.
♦	 Complete by December 31, 2010, the rulemaking for implementing the
Standardized Approach for an appropriate subset of U.S. banks.

Deferred.

♦	 Complete by December 31, 2010, the rulemaking for amending the floors
for banks that calculate their risk-based capital requirements under the
Advanced Approaches Capital rule to ensure capital requirements meet
safety-and-soundness objectives.

Not
Achieved.

♦	 Complete by December 31, 2010, the rulemaking for implementing revisions
to the Market Risk Amendment of 1996.

Deferred.

♦	 Complete by December 31, 2010, the rulemaking for implementing
revisions to regulatory capital charges for resecuritizations and asset-backed
commercial paper liquidity facilities.

Deferred.

8.	 Identify and address risks in financial institutions designated as systemically
important.
♦	 Establish an ongoing FDIC monitoring program for all covered financial
institutions.

Achieved.

♦	 Complete rulemaking to establish (with the Board of Governors of the
Federal Reserve System) criteria for resolution plans to be submitted by
systemically important institutions.

Achieved.

9.	 Facilitate more effective regulatory compliance so as to reduce regulatory
burden on the banking industry, where appropriate, while maintaining the
independence and integrity of the FDIC’s risk management and consumer
compliance supervisory programs.
♦	 Issue by March 31, 2011, a revised corporate directive on the issuance of
Financial Institution Letters (FILs) that includes a requirement that all FILs
contain an informative section as to their applicability to smaller institutions
(total assets under $1 billion).

Achieved.

♦	 Complete by June 30, 2011, a review of all recurring questionnaires
and information requests to the industry and submit a report to FDIC
management with recommendations on improving efficiency and ease of
use, including a scheduled plan for implementing these revisions. Carry out
approved recommendations in accordance with the plan.

Achieved.

Performance Results Summary

59

2012

ANNUAL REPORT

Supervision and Consumer Protection Program Results (continued)

Strategic Goal: Consumers’ rights are protected and
FDIC-supervised institutions invest in their communities.
Annual Performance Goals and Targets

2011

2010

2009

Achieved.

Achieved.

Achieved.

Not
Achieved.

1.	 Conduct on-site CRA and compliance examinations to assess compliance with
applicable laws and regulations by FDIC-supervised depository institution.
♦	 Conduct 100 percent of required examinations within the time frames
established by FDIC policy.

Achieved.

♦	 One hundred percent of required examinations are conducted on schedule.
2.	 Take prompt and effective supervisory action to monitor and address problems
identified during compliance examinations of FDIC-supervised institutions
that received an overall “3”, “4”, or “5” rating for compliance with consumer
protection and fair lending laws.
♦	 One hundred percent of follow-up examinations or visitations are conducted
within 12 months from the date of a formal enforcement action to confirm
compliance with the prescribed enforcement action.
♦	 For all institutions that are assigned a compliance rating of 3, 4, or 5, conduct
follow-up examinations or on-site visits within 12 months to ensure that each
institution is fulfilling the requirements of any corrective programs that have
been implemented and that the actions taken are effectively addressing the
underlying concerns identified during the examination.

Achieved.

3.	 Complete the transfer of personnel and supervisory responsibility for compliance
examinations of FDIC supervised institutions with more than $10 billion in assets
and their affiliates from the FDIC to the new Consumer Financial Protection
Bureau (CFPB) in accordance with statutory requirements.
♦	 Complete by July 21, 2011, the transfer of supervisory responsibility from the
FDIC to the CFPB.

Achieved.

♦	 Identify the FDIC employees to be transferred to the CFPB and transfer them
in accordance with established time frames.

Achieved.

4.	 Scrutinize evolving consumer products, analyze their current or potential impact
on consumers, and identify potentially harmful or illegal practices. Promptly
institute a supervisory response program across FDIC-supervised institutions
when such practices are identified.
♦	 Proactively identify and respond to harmful or illegal practices associated
with evolving consumer products.

Achieved.

5.	 Provide effective outreach related to the CRA, fair lending, and community
development.
♦	 Conduct 50 technical assistance (examination support) efforts or banker/
community outreach activities related to CRA, fair lending, and community
development.
♦	 Evaluate the Money Smart initiative and curricula for necessary updates
and enhancements, such as games for young people, information on elder
financial abuse, and additional language versions, if needed.

Achieved.

♦	 Initiate the longitudinal survey project to measure the effectiveness of the
Money Smart for Young Adults curriculum.

Achieved.

♦	 Provide technical assistance, support, and consumer outreach activities in all
six FDIC regions to at least eight local NeighborWorks® America affiliates or
local coalitions that are providing foreclosure mitigation counseling in high
need areas.

60

Achieved.

Achieved.

Performance Results Summary

Supervision and Consumer Protection Program Results (continued)

Strategic Goal: Consumers’ rights are protected and
FDIC-supervised institutions invest in their communities.
Annual Performance Goals and Targets

2011

2010

2009

6.	 Continue to expand the FDIC’s national leadership role in development and
implementation of programs and strategies to encourage and promote broader
economic inclusion within the nation’s banking system.
♦	 Expand the number of AEI coalitions by two.

Achieved.

♦	 Analyze quarterly data submitted by participating institutions to identify early
trends and potential best practices.

Achieved.

7.	 Educate consumers about their rights and responsibilities under consumer
protection laws and regulations.
♦	 Expand the use of media, such as the Internet, videos, and MP3 downloads,
to disseminate information to the public on their rights and responsibilities as
consumers.

Achieved.

8.	 Effectively investigate and respond to written consumer complaints and inquiries
about FDIC-supervised financial institutions.
♦	 Responses are provided to 95 percent of written consumer complaints and
inquiries within time frames established by policy, with all complaints and
inquiries receiving at least an initial acknowledgment within two weeks.

Achieved.

Achieved.

Achieved.

9.	 Establish, in consultation with the FDIC’s Advisory Committee on Economic
Inclusion and other regulatory agencies, national objectives and methods for
reducing the number of unbanked and underbanked individuals.
♦	 Launch the FDIC Model Safe Accounts Pilot, begin data collection on the
accounts from banks, and start reporting on results of the pilot.

Achieved.

♦	 Continue to promote the results of the FDIC Small-Dollar Loan Pilot and
research opportunities for bringing small-dollar lending programs to scale,
including exploring a test of employer-based lending using the federal
workforce.

Achieved.

♦	 Engage in efforts to support safe mortgage lending in low- and moderateincome communities.

Achieved.

♦	 Facilitate completion of final recommendation on the initiatives identified in
the Advisory Committee’s strategic plan.

Achieved.

♦	 Implement, or establish plans to implement, Advisory Committee
recommendations approved by the FDIC for further action, including new
research, demonstration and pilot projects, and new and revised supervisory
and public policies.

Achieved.

Performance Results Summary

61

2012

ANNUAL REPORT
Receivership Management Program Results

Strategic Goal: Recovery to creditors of receiverships is achieved.
Annual Performance Goals and Targets

2011

2010

2009

Achieved.

Achieved.

Achieved.

1.	 Market failing institutions to all known qualified and interested potential
bidders.
♦	 Contact all known qualified and interested bidders.
2.	 Value, manage, and market assets of failed institutions and their subsidiaries in
a timely manner to maximize net return.
♦	 Ninety percent of the book value of a failed institution’s marketable assets is
marketed within 90 days of failure.
♦	 For at least 95 percent of insured institution failures, market at least 90
percent of the book value of the institution’s marketable assets within 90
days of the failure date (for cash sales) or 120 days of the failure date (for
structured sales).

Achieved.

Achieved.

Achieved.

♦	 Implement enhanced reporting capabilities from the Automated
Procurement System.

Achieved.

♦	 Ensure that all newly designated oversight managers and technical
monitors receive training in advance of performing contract administration
responsibilities.

Achieved.

♦	 Optimize the effectiveness of oversight managers and technical monitors by
restructuring work assignments, providing enhanced technical support, and
improving supervision.

Achieved.

♦	 Identify and implement program improvements to ensure efficient
and effective management of the contract resources used to perform
receivership management functions.

Achieved.

3.	 Manage the receivership estate and its subsidiaries toward an orderly
termination.
♦	 Terminate within three years of the date of failure, at least 75 percent of
new receiverships that are not subject to loss-share agreements, structured
sales, or other legal impediments.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

4.	 Conduct investigations into all potential professional liability claim areas for
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.
♦	 For 80 percent of all claim areas, a decision is made to close or pursue
professional liability claims within 18 months of the failure date of an insured
depository institution.
5.	 Complete reviews of all loss-share and Limited Liability Corporation (LLC)
agreements to ensure full compliance with the terms and conditions of the
agreements.
♦	 Complete on-site field work for reviews of 100 percent of the loss-share and
LLC agreements active as of December 31, 2010, to ensure full compliance
with the terms and conditions of the agreements.
♦	 Review the final report and implement an action plan to address the report’s
finding and recommendations for 75 percent of the loss-share reviews and
50 percent of the LLC reviews, including all reviews of agreements totaling
more than $1.0 billion (gross book value).

62

Achieved.

Achieved.

Performance Results Summary

IV.

Financial
Statements
and Notes

Financial Statements and Notes

63

2012

ANNUAL REPORT
Deposit Insurance Fund (DIF)
Federal Deposit Insurance Corporation
Deposit Insurance Fund Balance Sheet at December 31
Dollars in Thousands
2012

2011

Assets
Cash and cash equivalents

$3,100,361

$3,277,839

0

4,827,319

34,868,688

33,863,245

Trust preferred securities (Note 5)

2,263,983

2,213,231

Assessments receivable, net (Note 9)

1,006,852

282,247

0

1,948,151

433,592

488,179

23,119,554

28,548,396

Cash and investments - restricted - systemic risk (Note 16)
(Includes cash/cash equivalents of $0 at December 31, 2012
and $1,627,073 at December 31, 2011)
Investment in U.S. Treasury obligations, net (Note 3)

Receivables and other assets - systemic risk (Note 16)
Interest receivable on investments and other assets, net
Receivables from resolutions, net (Note 4)
Property and equipment, net (Note 6)

392,880

401,915

$65,185,910

$75,850,522

Accounts payable and other liabilities

$349,620

$374,164

Unearned revenue - prepaid assessments (Note 9)

1,576,417

17,399,828

Refunds of prepaid assessments (Note 9)

5,675,199

0

Total Assets
Liabilities

Liabilities due to resolutions (Note 7)

21,173,785

32,790,512

Debt Guarantee Program liabilities - systemic risk (Note 16)

0

117,027

Deferred revenue - systemic risk (Note 16)

0

6,639,954

224,225

187,968

3,220,697

6,511,321

0

2,216

Postretirement benefit liability (Note 13)
Contingent liabilities for:
Anticipated failure of insured institutions (Note 8)
Systemic risk (Note 16)
Litigation losses (Note 8)
Total Liabilities

8,200

1,000

32,228,143

64,023,990

32,682,237

11,560,990

Commitments and off-balance-sheet exposure (Note 14)
Fund Balance
Accumulated Net Income
Accumulated Other Comprehensive Income
Unrealized gain on U.S. Treasury investments, net (Note 3)

33,819

47,697

Unrealized postretirement benefit loss (Note 13)

(60,448)

(33,562)

Unrealized gain on trust preferred securities (Note 5)

302,159

251,407

Total Accumulated Other Comprehensive Income
Total Fund Balance
Total Liabilities and Fund Balance
The accompanying notes are an integral part of these financial statements.

64

Financial Statements and Notes

275,530

265,542

32,957,767

11,826,532

$65,185,910

$75,850,522

Deposit Insurance Fund (DIF)
Federal Deposit Insurance Corporation
Deposit Insurance Fund Statement of Income and Fund Balance
for the Years Ended December 31
Dollars in Thousands
2012

2011

$12,397,022

$13,498,587

159,214

127,621

Revenue
Assessments (Note 9)
Interest on U.S. Treasury obligations
Systemic risk revenue (Note 16)

(161,135)

(131,141)

6,127,211

2,846,929

18,522,312

16,341,996

1,777,513

1,625,351

(161,135)

(131,141)

(4,222,595)

(4,413,629)

7,282

3,996

Total Expenses and Losses

(2,598,935)

(2,915,423)

Net Income

21,121,247

Other revenue (Note 10)
Total Revenue
Expenses and Losses
Operating expenses (Note 11)
Systemic risk expenses (Note 16)
Provision for insurance losses (Note 12)
Insurance and other expenses

19,257,419

Other Comprehensive Income
Unrealized (loss) gain on U.S. Treasury investments, net

(13,878)

20,999

Unrealized postretirement benefit loss (Note 13)

(26,886)

(15,059)

50,752

(84,587)

9,988

(78,647)

Comprehensive Income

21,131,235

19,178,772

Fund Balance - Beginning

11,826,532

(7,352,240)

$32,957,767

$11,826,532

Unrealized gain (loss) on trust preferred securities (Note 5)
Total Other Comprehensive Income (Loss)

Fund Balance - Ending
The accompanying notes are an integral part of these financial statements.

Financial Statements and Notes

65

2012

ANNUAL REPORT
Deposit Insurance Fund (DIF)

Federal Deposit Insurance Corporation
Deposit Insurance Fund Statement of Cash Flows for the Years Ended December 31
Dollars in Thousands
2012

2011

$21,121,247

$19,257,419

Amortization of U.S. Treasury obligations

854,195

388,895

Treasury Inflation-Protected Securities inflation adjustment

(98,050)

(25,307)

76,365

77,720

14

1,326

(4,222,595)

(4,413,629)

(26,886)

(15,059)

(724,605)

(64,354)

51,181

(227,962)

Decrease (Increase) in receivables from resolutions

6,371,418

(5,802,003)

Decrease in receivables - systemic risk

1,948,151

321,271

Operating Activities
Net Income:
Adjustments to reconcile net income to net cash (used by)
operating activities:

Depreciation on property and equipment
Loss on retirement of property and equipment
Provision for insurance losses
Unrealized Loss on postretirement benefits
Change in Operating Assets and Liabilities (Net of Provision for Losses):
(Increase) in assessments receivable, net
Decrease (Increase) in interest receivable and other assets

(Decrease) in accounts payable and other liabilities

(24,543)

(140,123)

Increase in postretirement benefit liability

36,258

22,094

(Decrease) in contingent liabilities - systemic risk

(2,216)

(117,777)

0

(276,000)

(11,616,727)

2,278,635

(117,027)

87,693

(15,823,411)

(12,657,206)

(6,513,828)

(2,399,644)

(Decrease) in contingent liabilities - litigation losses
(Decrease) Increase in liabilities due to resolutions
(Decrease) Increase in Debt Guarantee Program liabilities - systemic risk
(Decrease) in unearned revenue - prepaid assessments
(Decrease) in deferred revenue - systemic risk
Increase in refunds of prepaid assessments
Net Cash (Used) by Operating Activities

5,675,199

0

(3,035,860)

(3,704,011)

Investing Activities
Provided by:
	 Maturity of U.S. Treasury obligations

32,132,623

12,976,273

2,554,781

0

	 Purchase of property and equipment

(67,344)

(64,896)

	 Purchase of U.S. Treasury obligations

(33,388,751)

(36,409,429)

1,231,309

(23,498,052)

(1,804,551)

(27,202,063)

4,904,912

32,106,975

3,100,361

3,277,839

0

1,627,073

$3,100,361

$4,904,912

	 Sale of U.S. Treasury obligations
Used by:

Net Cash Provided (Used) by Investing Activities
Net (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Unrestricted Cash and Cash Equivalents - Ending
Restricted Cash and Cash Equivalents - Ending
Cash and Cash Equivalents - Ending
The accompanying notes are an integral part of these financial statements.

66

Financial Statements and Notes

Notes to the Financial Statements
Deposit Insurance Fund
December 31, 2012 and 2011
1.	Operations of
the Deposit
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 (FDI) Act, as
amended (12 U.S.C. 1811, et seq).
In carrying out the purposes of the
FDI Act, the FDIC, as administrator
of the Deposit Insurance Fund
(DIF), insures the deposits of banks
and savings associations (insured
depository institutions) from loss due
to institution failures. In cooperation
with other federal and state agencies,
the FDIC promotes the safety and
soundness of insured depository
institutions by identifying, monitoring
and addressing risks to the DIF.
Commercial banks, savings banks
and savings associations (known as
“thrifts”) are supervised by either the
FDIC, the Office of the Comptroller
of the Currency, or the Federal
Reserve Board.
The FDIC is also the administrator
of the FSLIC Resolution Fund
(FRF). 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 former
Resolution Trust Corporation. The
DIF and the FRF are maintained
separately by the FDIC to support
their respective functions.
Pursuant to the Dodd-Frank Wall
Street Reform and Consumer
Protection Act of 2010 (Dodd-Frank
Act), the FDIC is the manager of the
Orderly Liquidation Fund (OLF).
Established as a separate fund in the
U.S. Treasury (Treasury), the OLF
is inactive and unfunded until the
FDIC is appointed as receiver for a
covered financial company (a failing
financial company, such as a bank
holding company or nonbank financial
company for which a systemic risk
determination has been made as
set forth in section 203 of the
Dodd-Frank Act).
The Dodd-Frank Act granted the
FDIC authority to establish a widely
available program to guarantee
obligations of solvent insured
depository institutions (IDIs) or
solvent depository institution holding
companies (including affiliates)
upon the systemic determination of a
liquidity event during times of severe
economic distress. The program
would not be funded by the DIF but
rather by fees and assessments paid
by all participants in the program.
If fees are insufficient to cover losses
or expenses, the FDIC must impose
a special assessment on participants
as necessary to cover the shortfall.
Any excess funds at the end of the

liquidity event program would be
deposited in the General Fund of the
Treasury. The Dodd-Frank Act limits
the FDIC’s systemic risk determination
authority under section 13 of the FDI
Act to IDIs for which the FDIC has
been appointed receiver. Prior to this
change, the authority permitted open
bank assistance and the creation of
the Temporary Liquidity Guarantee
Program (TLGP) that expired on
December 31, 2012 (see Note 16).
The Dodd-Frank Act also created the
Financial Stability Oversight Council
(FSOC) of which the Chairman of
the FDIC is a member and expanded
the FDIC’s responsibilities to include
supervisory review of resolution plans
(known as living wills) and backup
examination authority for systemically
important bank holding companies
and nonbank financial companies.
The living wills provide for an entity’s
rapid and orderly resolution in the
event of material financial distress
or failure.

Operations of the DIF
The primary purposes of the DIF are
to 1) insure the deposits and protect
the depositors of IDIs and 2) resolve
failed IDIs upon appointment of the
FDIC as receiver, in a manner that
will result in the least possible cost
to the DIF (unless a systemic risk
determination is made).
The DIF is primarily funded from
deposit insurance assessments. Other
available funding sources, if necessary,

Financial Statements and Notes

67

2012

ANNUAL REPORT
are borrowings from the Treasury,
the Federal Financing Bank (FFB),
Federal Home Loan Banks, and IDIs.
The FDIC has borrowing authority
of $100 billion from the Treasury and
a Note Purchase Agreement with
the FFB, not to exceed $100 billion,
to enhance the DIF’s ability to fund
deposit insurance.
A statutory formula, known as the
Maximum Obligation Limitation
(MOL), limits the amount of
obligations the DIF 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 Treasury. The MOL for the
DIF was $132.9 billion and $114.4
billion as of December 31, 2012
and 2011, respectively.

Operations of
Resolution Entities
The FDIC is responsible for
managing and disposing of the
assets of failed institutions in an
orderly and efficient manner. The
assets held by receiverships, passthrough conservatorships, and bridge
institutions (collectively, resolution
entities), and the claims against
them, are accounted for separately
from the DIF assets and liabilities
to ensure that proceeds from these
entities are distributed in accordance
with applicable laws and regulations.
Accordingly, income and expenses
attributable to resolution entities are
accounted for as transactions of those
entities. Resolution entities are billed
by the FDIC for services provided on
their behalf.

68

2.	 Summary of
Significant
Accounting
Policies
General
These financial statements pertain
to the financial position, results of
operations, and cash flows of the DIF
and are presented in accordance with
U.S. generally accepted accounting
principles (GAAP). As permitted by
the Federal Accounting Standards
Advisory Board’s Statement of Federal
Financial Accounting Standards 34,
The Hierarchy of Generally Accepted
Accounting Principles, Including
the Application of Standards
Issued by the Financial Accounting
Standards Board, the FDIC prepares
financial statements in accordance
with standards promulgated by the
Financial Accounting Standards
Board (FASB). These statements
do not include reporting for assets
and liabilities of resolution entities
because these entities are legally
separate and distinct, and the
DIF does not have any ownership
interests in them. Periodic and final
accountability reports of resolution
entities are furnished to courts,
supervisory authorities, and others
upon request.

potential changes in estimates have
been disclosed. The more significant
estimates include the valuation of trust
preferred securities; the assessments
receivable and associated revenue; the
allowance for loss on receivables from
resolutions (including shared-loss
agreements); guarantee obligations
for structured transactions; refunds
of prepaid assessments; the
postretirement benefit obligation; and
the estimated losses for anticipated
failures, litigation, and representations
and indemnifications.

Cash Equivalents
Cash equivalents are short-term,
highly liquid investments consisting
primarily of U.S. Treasury Overnight
Certificates.

Investment in U.S. Treasury
Obligations

Use of Estimates

The DIF 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 Treasury
must approve all such investments in
excess of $100,000 and has granted
the FDIC approval to invest the DIF
funds only in U.S. Treasury obligations
that are purchased or sold exclusively
through the Bureau of the Public
Debt’s Government Account Series
program.

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

The DIF’s investments in U.S. Treasury
obligations are classified as availablefor-sale. Securities designated as
available-for-sale are shown at fair
value. Unrealized gains and losses
are reported as other comprehensive
income. Realized gains and losses are
included in the Statement of Income
and Fund Balance as components of
net income. Income on securities is

Financial Statements and Notes

calculated and recorded on a daily
basis using the effective interest or
straight-line method depending on the
maturity of the security.

Revenue Recognition for
Assessments
Assessment revenue is recognized
for the quarterly period of insurance
coverage based on an estimate.
The estimate is derived from an
institution’s risk-based assessment
rate and assessment base for the
prior quarter adjusted for the current
quarter’s available assessment credits,
certain changes in supervisory
examination ratings for larger
institutions, and a modest assessment
base growth factor. At the subsequent
quarter-end, the estimated revenue
amounts are adjusted when actual
assessments for the covered period
are determined for each institution
(see Note 9).

Capital Assets
and Depreciation
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 useful 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 useful life.

Reporting on Variable
Interest Entities
FDIC receiverships engaged in
structured transactions, some of
which resulted in the issuance of note
obligations that were guaranteed by
the FDIC in its corporate capacity
(see Note 8, Contingent Liabilities for:
FDIC Guaranteed Debt of Structured
Transactions). As the guarantor of
note obligations for several structured
transactions, the FDIC in its corporate
capacity is the holder of a variable
interest in a number of variable
interest entities (VIEs). The FDIC
conducts a qualitative assessment
of its relationship with each VIE as
required by Accounting Standards
Codification (ASC) Topic 810,
Consolidation. These assessments
are conducted to determine if the
FDIC in its corporate capacity has
1) power to direct the activities
that most significantly impact the
economic performance of the VIE
and 2) an obligation to absorb losses
of the VIE or the right to receive
benefits from the VIE that could
potentially be significant to the VIE.
When a variable interest holder has
met both of these characteristics, the
enterprise is considered the primary
beneficiary and must consolidate
the VIE. In accordance with the
provisions of ASC 810, an assessment
of the terms of the legal agreement for
each VIE was conducted to determine
whether any of the terms had been
activated or modified in a manner
which would cause the FDIC in its
corporate capacity to be characterized
as a primary beneficiary. In making
that determination, consideration
was given to which, if any, activities
were significant to each VIE. Often,

the right to service collateral, to
liquidate collateral, or to unilaterally
dissolve the limited liability company
(LLC) or trust was determined to
be the most significant activity. In
other cases, it was determined that
the structured transactions did not
include such significant activities and
that the design of the entity was the
best indicator of which party was the
primary beneficiary. The results of
each analysis identified a party other
than the FDIC in its corporate capacity
as the primary beneficiary.
The conclusion of these analyses
was that the FDIC in its corporate
capacity has not engaged in any
activity that would cause the FDIC
in its corporate capacity to be
characterized as a primary beneficiary
to any VIE with which it was involved
as of December 31, 2012 and 2011.
Therefore, consolidation is not
required for the 2012 and 2011 DIF
financial statements. In the future,
the FDIC in its corporate capacity
may become the primary beneficiary
upon the activation of provisional
contract rights that extend to the
Corporation if payments are made on
guarantee claims. Ongoing analyses
will be required in order to monitor
consolidation implications under
ASC 810.
The FDIC’s involvement with VIEs,
in its corporate capacity, is fully
described in Note 8.

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.

Financial Statements and Notes

69

ANNUAL REPORT
Disclosure about Recent
Relevant Accounting
Pronouncements

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

Recent accounting pronouncements
have been deemed to be not applicable
or material to the financial statements
as presented.

As of December 31, 2012 and
2011, investments in U.S. Treasury
obligations, net, were $34.9 billion
and $33.9 billion, respectively. As
of December 31, 2012 and 2011, the
DIF held $5.3 billion and $5.0 billion,
respectively, of Treasury InflationProtected Securities (TIPS), which
are indexed to increases or decreases
in the Consumer Price Index for All
Urban Consumers (CPI-U). During

70

Financial Statements and Notes

2012
2012, the FDIC sold securities
designated as available-for-sale for
total proceeds of $2.6 billion. The
gross realized gains and losses on
these sales were $878 thousand and
$241 thousand, respectively, which
resulted in a total net gain of $637
thousand. The cost of these securities
sold was determined based on specific
identification. Since these securities
were purchased on behalf of the TLGP,
the realized gain was recognized in the
“Deferred revenue - systemic risk” line
item on the Balance Sheet.

Total Investment in U.S. Treasury Obligations, Net at December 31, 2012
Dollars in Thousands

Maturity

Face
Value

Yield at
Purchase1

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

0.34%

$24,800,000

$25,228,393

$19,871

$0

$25,248,264

After 1 year
through 5 years

0.32%

4,050,000

4,341,814

4,569

0

4,346,383

U.S. Treasury Inflation-Protected Securities
(9,788)2

Within 1 year

-0.86%

1,650,000

1,813,291

0

After 1 year
through 5 years

-0.87%

2,900,000

3,451,371

19,167

0

3,470,538

$33,400,000

$34,834,869

$43,607

$(9,788)

$34,868,688

Total

1,803,503

1

	 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 2.0 percent, based on figures
issued by the Congressional Budget Office and Blue Chip Economic Indicators in early 2012.

2	

The unrealized losses occurred as a result of temporary changes in market interest rates. These unrealized losses occurred over a period of less
than a year. The FDIC does not intend to sell the TIPS and is not likely to be required to sell them before their maturity in 2013, thus, the FDIC
does not consider these securities to be other than temporarily impaired at December 31, 2012.

Total Investment in U.S. Treasury Obligations, Net at December 31, 2011
Dollars in Thousands

	Maturity

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

$24,500,0002

Yield at
Purchase1

Unrealized
Holding
Losses

$24,889,547

$17,842

$(93)

$24,907,296

3,923,428

38,778

0

3,962,206

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

0.27%

After 1 year
through 5 years

0.93%

3,900,000

U.S. Treasury Inflation-Protected Securities
Within 1 year
After 1 year
through 5 years
Total

0.51%

1,200,000

1,537,664

659

(8)

1,538,315

-0.92%

3,050,000

3,464,909

0

(9,481)

3,455,428

$32,650,000

$33,815,548

$57,279

$(9,582)3

$33,863,245

1

	 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 1.8 percent, based on figures
issued by the Congressional Budget Office and Blue Chip Economic Indicators in early 2011.

2	

Includes one Treasury note totaling $1.8 billion which matured on Saturday, December 31, 2011. Settlement occurred on the next business
day, January 3, 2012.

3

	 All unrealized losses occurred as a result of temporary changes in market interest rates. These unrealized losses occurred over a period of less
than a year. Unrealized losses related to the TIPS converted to unrealized gains by January 31, 2012, and unrealized losses related to the U.S.
Treasury notes and bonds existed on just one security that matured with no unrealized loss on January 31, 2012, and thus the FDIC does not
consider these securities to be other than temporarily impaired at December 31, 2011.

Financial Statements and Notes

71

2012

ANNUAL REPORT
4.	Receivables from
Resolutions, Net
Receivables from Resolutions, Net at December 31
Dollars in Thousands
2012
$116,940,999

Total

The receivables from resolutions
result from payments made by the
DIF to cover obligations to insured
depositors (subrogated claims),
advances to resolution entities for
working capital, and administrative
expenses paid on behalf of resolution
entities. Any related allowance
for loss represents the difference
between the funds advanced and/
or obligations incurred and the
expected repayment. Estimated
future payments on losses incurred on
assets sold to an acquiring institution
under a shared-loss agreement (SLA)
are factored into the computation of
the expected repayment. Assets held
by DIF resolution entities (including
structured transaction-related assets;
see Note 8) are the main source of
repayment of the DIF’s receivables
from resolutions.
As of December 31, 2012, there were
463 active receiverships, including 51
established in 2012. As of December
31, 2012 and 2011, DIF resolution
entities held assets with a book value
of $53.5 billion and $71.4 billion,
respectively (including $36.5 billion
and $50.5 billion, respectively, of
cash, investments, receivables due
from the DIF, and other receivables).
Ninety-nine percent of the current
asset book value of $53.5 billion is
held by resolution entities established
since the beginning of 2008.

72

(92,821,032)

$23,119,554

Allowance for losses

$121,369,428

(93,821,445)

Receivables from closed banks

2011

$28,548,396

Estimated cash recoveries from
the management and disposition of
assets that are used to determine
the allowance for losses are based
on asset recovery rates from several
sources including actual or pending
institution-specific asset disposition
data, failed institution-specific asset
valuation data, aggregate asset
valuation data on several recently
failed or troubled institutions, sampled
asset valuation data, and empirical
asset recovery data based on failures
as far back as 1990. Methodologies
for determining the asset recovery
rates incorporate estimating future
cash recoveries, net of applicable
liquidation cost estimates, and
discounting based on market-based
risk factors applicable to a given
asset’s type and quality. The resulting
estimated cash recoveries are then
used to derive the allowance for
loss on the receivables from these
resolutions.
For failed institutions resolved using a
whole bank purchase and assumption
transaction with an accompanying
SLA, the projected future shared-loss
payments and recoveries on the
covered assets sold to the acquiring
institution under the agreement
are considered in determining the
allowance for loss on the receivables
from these resolutions. The
shared-loss cost projections are based
on the covered assets’ intrinsic value

Financial Statements and Notes

which is determined using financial
models that consider the quality,
condition and type of covered assets,
current and future market conditions,
risk factors and estimated asset
holding periods. For year-end 2012
financial reporting, the shared-loss
cost estimates were updated for the
majority (93% or 276) of the 298 active
shared-loss agreements; the remaining
22 were based on recent loss
estimates. The updated shared-loss
cost projections for the larger
agreements were primarily based on
new third-party valuations estimating
the cumulative loss of covered
assets. The remaining agreements
were stratified by receivership age. A
random sample of institutions within
each age stratum was selected for
new third-party loss estimations, and
valuation results from the sample
institutions were aggregated and
extrapolated to institutions within the
like age stratum based on asset type
and performance status.
Note that estimated asset recoveries
are regularly evaluated during
the year, but remain subject to
uncertainties because of potential
changes in economic and market
conditions. Continuing economic
uncertainties could cause the DIF’s
actual recoveries to vary significantly
from current estimates.

Whole Bank Purchase and
Assumption Transactions with
Shared-Loss Agreements
Since the beginning of 2008, the FDIC
resolved 301 failures using whole bank
purchase and assumption resolution
transactions with accompanying
SLAs on total assets of $214.6 billion
purchased by the financial institution
acquirers. The acquirer typically
assumes all of the deposits and

purchases essentially all of the assets
of a failed institution. The majority
of the commercial and residential
loan assets are purchased under
an SLA, where the FDIC agrees to
share in future losses and recoveries
experienced by the acquirer on those
assets covered under the agreement.
SLAs are used by the FDIC to
keep assets in the private sector
and to minimize disruptions to
loan customers.
Losses on the covered assets are
shared between the acquirer and the
FDIC in its receivership capacity of the
failed institution when losses occur
through the sale, foreclosure, loan
modification, or write-down of loans
in accordance with the terms of the
SLA. The majority of the agreements
cover a five- to 10-year period with the
receiver covering 80 percent of the
losses incurred by the acquirer and the
acquiring bank covering 20 percent.
Prior to March 26, 2010, most SLAs
included a threshold amount, above
which the receiver covered 95 percent
of the losses incurred by the acquirer.
As mentioned above, the estimated
shared-loss liability is accounted for
by the receiver and is included in the
calculation of the DIF’s allowance for
loss against the corporate receivable
from the resolution. As shared-loss
claims are asserted and proven, DIF
receiverships satisfy these shared-loss
payments using available liquidation
funds and/or by drawing on amounts
due from the DIF for funding the
deposits assumed by the acquirer
(see Note 7).
As of December 31, 2012, 286
receiverships have made shared-loss
payments totaling $23.3 billion.
In addition, DIF receiverships are
estimated to pay an additional

$18.1 billion over the duration of
these SLAs on $103.7 billion in total
remaining covered assets.

Concentration of Credit Risk
Financial instruments that potentially
subject the DIF to concentrations
of credit risk are receivables from
resolutions. The repayment of the
DIF’s receivables from resolutions
is primarily influenced by recoveries
on assets held by DIF receiverships
and payments on the covered assets
under SLAs. The majority of the
$120.7 billion in remaining assets
in liquidation ($17.0 billion) and
current shared-loss covered assets
($103.7 billion) are concentrated in
commercial loans ($60.0 billion),
residential loans ($43.6 billion),
securities ($3.1 billion), and structured
transaction-related assets as described
in Note 8 ($12.1 billion). Most of the
assets in these asset types originated
from failed institutions located in
California ($34.3 billion), Florida
($14.1 billion), Puerto Rico ($10.9
billion), Illinois ($10.5 billion),
Georgia ($9.8 billion) and Alabama
($9.0 billion).

5.	 Trust Preferred
Securities
Pursuant to a systemic risk
determination, the Treasury, the FDIC,
and the Federal Reserve Bank of New
York executed terms of a guarantee
agreement on January 15, 2009 with
Citigroup to provide loss protection on
a pool of approximately $301.0 billion
of assets that remained on the balance
sheet of Citigroup. In consideration
for its portion of the shared-loss
guarantee at inception, the FDIC
received $3.025 billion of Citigroup’s
preferred stock. All shares of the
preferred stock were subsequently

converted to Citigroup Capital XXXIII
trust preferred securities (TruPs) with
a liquidation amount of $1,000 per
security and a distribution rate of 8
percent per annum payable quarterly.
The principal amount is due in 2039.
On December 23, 2009, Citigroup
terminated the guarantee agreement,
citing improvements in its financial
condition. The FDIC incurred no
loss from the guarantee prior to the
termination of the agreement. In
connection with the early termination
of the agreement, the FDIC agreed to
reduce its portion of the $3.025 billion
in TruPs by $800 million. However,
pursuant to an agreement between the
Treasury and the FDIC, the Treasury
agreed to return $800 million in
TruPs on behalf of the FDIC from its
portion of Citigroup TruPs holdings
received as a result of the shared-loss
agreement. The FDIC retained the
$800 million of Citigroup TruPs as
security in the event payments were
required to be made by the DIF for
guaranteed debt instruments issued
by Citigroup and its affiliates under
the TLGP. Because no payments
were required prior to expiration of
the TLGP on December 31, 2012, the
FDIC transferred the $800 million in
Citigroup TruPs and $183 million
in related dividends and interest to
the Treasury.
The remaining $2.225 billion
(liquidation amount) of TruPs is
classified as available-for-sale debt
securities in accordance with FASB
ASC Topic 320, Investments – Debt
and Equity Securities. At December
31, 2012, the fair value of the TruPs
was $2.264 billion (see Note 15). An
unrealized holding gain of $302 million
is included in accumulated other
comprehensive income.

Financial Statements and Notes

73

2012

ANNUAL REPORT
6.	Property and
Equipment, Net
Property and Equipment, Net at December 31
Dollars in Thousands
2012

2011

Land

$37,352

$37,352

Buildings (including leasehold improvements)

313,221

316,129

Application software (includes work-in-process)

135,059

130,718

Furniture, fixtures, and equipment

152,280

The depreciation expense was
$76 million and $78 million for 2012
and 2011, respectively.

7.	Liabilities Due
to Resolutions
As of December 31, 2012 and 2011, the
DIF recorded liabilities totaling $21.1
billion and $32.7 billion, respectively,
to resolution entities representing
the agreed-upon value of assets
transferred from the receiverships, at
the time of failure, to the acquirers/
bridge institutions for use in funding
the deposits assumed by the acquirers/
bridge institutions. Ninety-one
percent of these liabilities are due to
failures resolved under whole-bank
purchase and assumption transactions,
most with an accompanying SLA.
The DIF satisfies these liabilities
either by directly sending cash to
the receivership to fund shared-loss
and other expenses or by offsetting
receivables from resolutions when the
receivership declares a dividend.
In addition, there was $56 million and
$80 million in unpaid deposit claims
related to multiple receiverships
as of December 31, 2012 and 2011,
respectively. The DIF pays these
liabilities when the claims are
approved.

74

(241,404)

$392,880

Total

159,120

(245,032)

Accumulated depreciation

$401,915

8.	Contingent
Liabilities for:
Anticipated Failure of
Insured Institutions
The DIF records a contingent liability
and a loss provision for DIF-insured
institutions that are likely to fail,
absent some favorable event such
as obtaining additional capital
or merging, when the liability is
probable and reasonably estimable.
The contingent liability is derived by
applying expected failure rates and
loss rates to the institutions based
on supervisory ratings, balance
sheet characteristics, and projected
capital levels.
Banking industry performance
continued to recover in 2012 at a
gradual, steady pace. According to
the quarterly financial data submitted
by IDIs, the industry reported total
net income of $107.4 billion for
the first three quarters of 2012, an
increase of 14.9% over the first three
quarters of 2011. Improving credit
performance, which has led to
lower loan loss provisions, has been
primarily responsible for most of the
improvement in earnings. Losses to
the DIF from failures that occurred in
2012 fell short of the amount reserved

Financial Statements and Notes

at the end of 2011, as the aggregate
number and size of institution failures
in 2012 were less than anticipated.
The removal from the reserve of
institutions that did fail in 2012, as
well as projected favorable trends
in bank supervisory downgrade and
failure rates, all contributed to a
decline by $3.3 billion to $3.2 billion in
the contingent liability for anticipated
failures of insured institutions at
December 31, 2012.
In addition to these recorded
contingent liabilities, the FDIC has
identified risk in the financial services
industry that could result in additional
losses to the DIF should potentially
vulnerable insured institutions
ultimately fail. As a result of these
risks, the FDIC believes that it is
reasonably possible that the DIF could
incur additional estimated losses of
up to $6.3 billion for year-end 2012 as
compared to $10.2 billion for year-end
2011. The actual losses, if any, will
largely depend on future economic
and market conditions and could differ
materially from this estimate.
During 2012, 51 institutions failed with
combined assets at the date of failure
of $11.8 billion. Supervisory and
market data suggest that the financial
performance of the banking industry
should continue to improve over
the coming year.  However, ongoing
asset quality problems and limited
opportunities for earnings growth will
continue to be sources of stress on
the industry. In addition, two key risks
continue to weigh on the economic
outlook. First, uncertain prospects for
the European economy have increased
volatility in the global financial
markets, which could trigger increased
volatility in the U.S. financial markets
and adversely affect the U.S. economy.
Second, the outcome of continued

negotiations on the federal debt limit
and the federal budget in 2013 could
significantly affect the U.S. economy
and, in turn, IDIs. The FDIC continues
to evaluate the ongoing risks to
affected institutions in light of existing
economic and financial conditions,
and the extent to which such risks will
continue to put stress on the resources
of the insurance fund.

Litigation Losses
The DIF records an estimated loss for
unresolved legal cases to the extent
that those losses are considered
probable and reasonably estimable.
The FDIC recorded probable litigation
losses of $8 million and $1 million for
the DIF as of December 31, 2012 and
2011, respectively, and has determined
that there are no reasonably possible
losses from unresolved cases.

Other Contingencies
IndyMac Federal
Bank Representation
and Indemnification
Contingent Liability
On March 19, 2009, the FDIC as
receiver of IndyMac Federal Bank
(IMFB) and certain subsidiaries
(collectively, sellers) sold substantially
all of the assets of IMFB and the
respective subsidiaries, including
mortgage loans and mortgage loan
servicing rights, to OneWest Bank
and its affiliates. To maximize sale
returns, the sellers made certain
representations customarily made
by commercial parties regarding
the assets and agreed to indemnify
the acquirers for losses incurred
as a result of breaches of such
representations, losses incurred
as a result of the failure to obtain
contractual counterparty consents to
the sale, and third party claims arising

from pre-sale acts and omissions
of the sellers or the failed bank.
Although the representations and
indemnifications were made by or are
obligations of the sellers, the FDIC,
in its corporate capacity, guaranteed
the receivership’s indemnification
obligations under the sale agreements.
The representations relate generally
to ownership of and right to sell the
assets; compliance with applicable
law in the origination of the loans;
accuracy of the servicing records;
validity of loan documents; and
servicing of the loans serviced for
others. Until the periods for asserting
claims under these arrangements
have expired and all indemnification
claims quantified and paid, losses
could continue to be incurred by
the receivership and, in turn, the
DIF, either directly, as a result of
the FDIC corporate guaranty of
the receivership’s indemnification
obligations, or indirectly, as a result of
a reduction in the receivership’s assets
available to pay the DIF’s claims as
subrogee for insured accountholders.
The acquirers’ rights to assert
claims to recover losses incurred as
a result of breaches of loan seller
representations extend out to March
19, 2019 for the Fannie Mae and
Ginnie Mae reverse mortgage servicing
portfolios (unpaid principal balance
of $16.2 billion at December 31, 2012
compared to $16.7 billion at December
31, 2011), and March 19, 2014 for the
Fannie Mae, Freddie Mac and Ginnie
Mae mortgage servicing portfolios
(unpaid principal balance of $34.3
billion at December 31, 2012 compared
to $38.5 billion at December 31, 2011).
The acquirers’ rights to assert claims
to recover losses incurred as a result
of other third party claims (including
due to pre-March 19, 2009 acts or
omissions) and breaches of servicer

representations, including liability
with respect to the Fannie Mae, Ginnie
Mae and Freddie Mac portfolios as
well as the private mortgage servicing
portfolio and whole loans (unpaid
principal balance of $53.9 billion
at December 31, 2012 compared to
$62.0 billion at December 31, 2011)
expired on March 19, 2011. As of the
expiration date of this claim period,
notices relating to potential defects
were received, but they require review
to determine whether a valid defect
exists and, if so, the identification
and costing of possible cure actions.
It is highly unlikely that all of these
potential defects will result in losses.
The IndyMac receivership has paid
a cumulative total of $14 million in
approved claims through December
31, 2012 and a cumulative total of $5
million through December 31, 2011.
Additional claims asserted, but under
review, were accrued in the amount
of $1 million as of December 31, 2012
and $2 million as of December 31,
2011. Alleged breaches of origination
and servicing representations exist,
and it is probable that the IndyMac
receivership and its subsidiary
Financial Freedom Senior Funding
Corporation may incur up to $80
million in losses; these estimated
losses have been accrued as of
December 31, 2012. In addition,
review and evaluation is in process
for approximately $32 million in
reasonably possible liabilities with
respect to alleged breaches of
representations and warranties.
Potential losses relating to origination
and servicing representations, which
currently cannot be quantified,
may also be incurred under other
agreements with investors.
The FDIC believes it is likely
that additional losses will be

Financial Statements and Notes

75

ANNUAL REPORT
incurred, however quantifying
the contingent liability associated
with the representations and the
indemnification obligations is subject
to a number of uncertainties, including
(1) borrower prepayment speeds,
(2) the occurrence of borrower
defaults and resulting foreclosures
and losses, (3) the assertion by third
party investors of claims with respect
to loans serviced for them, (4) the
existence and timing of discovery
of breaches and the assertion of
claims for indemnification for losses
by the acquirer, (5) the compliance
by the acquirer with certain loss
mitigation and other conditions
to indemnification, (6) third party
sources of loss recovery (such as
title companies and insurers), (7) the
ability of the acquirer to refute claims
from investors without incurring
reimbursable losses, and (8) the cost
to cure breaches and respond to
third party claims. The difficulty in
assessing losses is exacerbated further
by the inability to use historical
default and loss rates as a metric given
recent economic events. Because
of these and other uncertainties that
surround the liability associated with
indemnifications and the quantification
of possible losses, the FDIC has
determined that while additional
losses are probable, the amount is not
estimable.

liabilities assumed at the time of
failure. The FDIC in its corporate
capacity is a secondary guarantor if a
receivership is unable to pay. These
indemnifications generally extend for
a term of six years after the date of
institution failure. The FDIC is unable
to estimate the maximum potential
liability for these types of guarantees
as the agreements do not specify a
maximum amount and any payments
are dependent upon the outcome of
future contingent events, the nature
and likelihood of which cannot be
determined at this time. During 2012
and 2011, the FDIC in its corporate
capacity made no indemnification
payments under such agreements, and
no amount has been accrued in the
accompanying financial statements
with respect to these indemnification
guarantees.

Purchase and Assumption
Indemnification

LLCs

In connection with purchase
and assumption agreements
for resolutions, the FDIC in its
receivership capacity generally
indemnifies the purchaser of a failed
institution’s assets and liabilities
in the event a third party asserts a
claim against the purchaser unrelated
to the explicit assets purchased or

76

FDIC Guaranteed Debt of
Structured Transactions
The FDIC as receiver uses three
types of structured transactions to
dispose of certain performing and
non-performing residential mortgage
loans, commercial loans, construction
loans, and mortgage-backed securities
held by the receiverships. The three
types of structured transactions are 1)
limited liability companies (LLCs), 2)
securitizations, and 3) structured sale
of guaranteed notes (SSGNs).

Under the LLC structure, the FDIC in
its receivership capacity contributes
a pool of assets to a newly-formed
LLC and offers for sale, through a
competitive bid process, some of the
equity in the LLC. The day-to-day
management of the LLC transfers
to the highest bidder along with the
purchased equity interest. In many
instances, the FDIC in its corporate

Financial Statements and Notes

2012
capacity guarantees notes issued by
the LLCs. In exchange for a guarantee,
the DIF receives a guarantee fee
in either 1) a lump-sum, up-front
payment based on the estimated
duration of the note or 2) a monthly
payment based on a fixed percentage
multiplied by the outstanding note
balance. The terms of these guarantee
agreements generally stipulate that
all cash flows received from the
entity’s collateral be used to pay, in
the following order, 1) operational
expenses of the entity, 2) the FDIC’s
contractual guarantee fee, 3) the
guaranteed notes (or, if applicable,
fund the related defeasance account
for payoff of the notes at maturity),
and 4) the equity investors. If the
FDIC is required to perform under
these guarantees, it acquires an
interest in the cash flows of the LLC
equal to the amount of guarantee
payments made plus accrued interest
thereon. Once all expenses have
been paid, the guaranteed notes have
been satisfied, and the FDIC has
been reimbursed for any guarantee
payments, the equity holders receive
any remaining cash flows.
Since 2009, private investors have
purchased a 40- to 50-percent
ownership interest in the LLC
structures for $1.6 billion in cash and
the LLCs issued notes of $4.4 billion
to the receiverships to partially fund
the purchase of the assets. The
receiverships hold the remaining 50- to
60-percent equity interest in the LLCs
and, in most cases, the guaranteed
notes. The FDIC in its corporate
capacity guarantees the timely
payment of principal and interest due
on the notes. The terms of the note
guarantees extend until the earlier of
1) payment in full of the notes or 2)
two years following the maturity date

of the notes. The note with the longest
term matures in 2020. In the event
of note payment default, the FDIC
as guarantor is entitled to exercise
or cause the exercise of certain
rights and remedies including: 1)
accelerating the payment of the unpaid
principal amount of the notes; 2)
selling the assets held as collateral; or
3) foreclosing on the equity interests
of the debtor.
Securitizations and SSGNs
Securitizations and SSGNs
(collectively, “trusts”) are transactions
in which certain assets or securities
from failed institutions are pooled
and transferred into a trust structure.
The trusts issue 1) senior and/or
subordinated debt instruments and
2) owner trust or residual certificates
collateralized by the underlying
mortgage-backed securities or loans.
Since 2010, private investors
purchased the senior notes issued by
the trusts for $5.7 billion in cash. The
receiverships hold 100 percent of the
subordinated debt instruments and
owner trust or residual certificates.
The FDIC in its corporate capacity
guarantees the timely payment of
principal and interest due on the
senior notes, the latest maturity of
which is 2050. In exchange for the
guarantee, the DIF receives a monthly
payment based on a fixed percentage
multiplied by the outstanding note
balance. These guarantee agreements
generally stipulate that all cash flows
received from the entity’s collateral
be used to pay, in the following
order, 1) operational expenses of
the entity, 2) the FDIC’s contractual
guarantee fee, 3) interest on the
guaranteed notes, 4) principal of the
guaranteed notes, and 5) the holders
of the subordinated notes and owner

trust or residual certificates. If the
FDIC is required to perform under
its guarantees, it acquires an interest
in the cash flows of the trust equal to
the amount of guarantee payments
made plus accrued interest thereon.
Once all expenses have been paid, the
guaranteed notes have been satisfied,
and the FDIC has been reimbursed
for any guarantee payments, the
subordinated note holders and owner
trust or residual certificates holders
receive the remaining cash flows.
All Structured Transactions
with FDIC Guaranteed Debt
Through December 31, 2012, the
receiverships have transferred a
portfolio of loans with an unpaid
principal balance of $16.4 billion
and mortgage-backed securities
with a book value of $8.1 billion
to 14 LLCs and 9 trusts. The LLCs
and trusts subsequently issued
notes guaranteed by the FDIC in an
original principal amount of $10.1
billion. As of December 31, 2012 and
2011, the DIF collected guarantee
fees totaling $218 million and $203
million, respectively, and recorded a
receivable for additional guarantee
fees of $95 million and $106 million,
respectively, included in the “Interest
receivable on investments and other
assets, net” line item on the Balance
Sheet. All guarantee fees are recorded
as deferred revenue, included in
the “Accounts payable and other
liabilities” line item, and recognized
as revenue primarily on a straightline basis over the term of the notes.
At December 31, 2012 and 2011, the
amount of deferred revenue recorded
was $101 million and $134 million,
respectively. The DIF records no
other structured-transaction-related
assets or liabilities on its balance
sheet.

The estimated loss to the DIF from
the guarantees is derived from an
analysis of the net present value (using
a discount rate of 3 percent) of the
expected guarantee payments by the
FDIC, reimbursements to the FDIC for
guarantee payments, and guarantee
fee collections. The FDIC believes
that it is reasonably possible that the
DIF could incur an estimated loss for
one transaction of $5.7 million in 2020,
net of expected guarantee fees of $4.2
million. This estimated loss may vary
over time as conditions change. For
all of the remaining transactions, the
cash flows from the LLC or trust assets
provide sufficient coverage to fully
pay the debts. To date, the FDIC in its
corporate capacity has not provided,
and does not intend to provide, any
form of financial or other type of
support to a trust or LLC that it was
not previously contractually required
to provide.
As of December 31, 2012 and 2011,
the maximum loss exposure was $2.2
billion and $3.7 billion for LLCs and
$3.2 billion and $3.9 billion for trusts,
respectively, representing the sum of
all outstanding debt guaranteed by
the FDIC in its corporate capacity.
Some transactions have established
defeasance accounts to pay off the
notes at maturity. As of December 31,
2012 and 2011, a total of $1.6 billion
and $2.2 billion, respectively, has been
deposited into these accounts.

9. Assessments
The Dodd-Frank Act provided
for significant assessment and
capitalization reforms for the
DIF. In response, the FDIC
implemented several changes to the
assessment system and developed
a comprehensive, long-term fund
management plan. The plan is

Financial Statements and Notes

77

ANNUAL REPORT
designed to restore and maintain a
positive fund balance for the DIF
even during a banking crisis and
achieve moderate, steady assessment
rates throughout any economic
cycle. Summarized below are actions
taken to implement assessment
system changes and provisions of the
comprehensive plan.

Restoration Plan
In October 2010, the FDIC adopted
a Restoration Plan to ensure that
the ratio of the DIF fund balance to
estimated insured deposits (reserve
ratio) reaches 1.35 percent by
September 30, 2020 in lieu of the
previous target of 1.15 percent by
the end of 2016. In addition, the Plan
provides for the FDIC to 1) pursue
rulemaking regarding the method that
will be used to offset the impact of
the increased reserve ratio on small
institutions (less than $10 billion
in assets) and 2) update, at least
semiannually, its loss and income
projections for the fund and, if needed,
increase or decrease assessment
rates, following notice-and-comment
rulemaking, if required.

Designated Reserve Ratio
In December 2012, the FDIC
adopted a final rule maintaining the
designated reserve ratio (DRR) at 2
percent, effective January 1, 2013.
The DRR is an integral part of the
FDIC’s comprehensive, long-term
management plan for the DIF and
is viewed as a long-range, minimum
target for the reserve ratio.

Calculation of Assessment
In February 2011, the FDIC adopted
a final rule, effective on April 1, 2011,
amending part 327 of title 12 of the
Code of Federal Regulations to 1)
redefine the assessment base used

78

for calculating deposit insurance
assessments from adjusted domestic
deposits to average consolidated
total assets minus average tangible
equity (measured as Tier 1 capital);
2) change the assessment rate
adjustments; 3) lower the initial base
rate schedule and the total base
rate schedule for all IDIs to collect
approximately the same revenue for
the DIF as would have been collected
under the old assessment base; 4)
suspend dividends indefinitely, and,
in lieu of dividends, adopt lower
assessment rate schedules when the
reserve ratio reaches 1.15 percent,
2 percent, and 2.5 percent; and 5)
change the risk-based assessment
system for large IDIs (generally, those
institutions with at least $10 billion
in total assets). Specifically, the final
rule eliminates risk categories and the
use of long-term debt issuer ratings
for large institutions and combines
CAMELS ratings and certain forwardlooking financial measures into
two scorecards: one for most large
institutions and another for large
institutions that are structurally and
operationally complex or that pose
unique challenges and risks in case of
failure (highly complex IDIs).
In October 2012, the FDIC adopted a
final rule which amends and clarifies
some definitions of higher-risk assets
as used in the deposit insurance
pricing scorecards for large and
highly complex IDIs by 1) revising
the definitions of certain higher-risk
assets, specifically leveraged loans and
subprime consumer loans, 2) clarifying
when an asset must be identified
as higher risk, and 3) clarifying the
way securitizations are identified
as higher risk. The goal of this final
rule is to ensure that the assessment
system captures the risk inherent in
higher-risk assets without imposing an

Financial Statements and Notes

2012
unnecessary reporting burden. The
final rule will become effective on
April 1, 2013 and provides that, until
then, large and highly complex IDIs
will continue to report higher-risk
assets using existing guidance.

Assessment Revenue
Annual assessment rates averaged
approximately 10.1 cents per $100
and 11.1 cents per $100 of the new
assessment base (as described above)
for all of 2012 and the last three
quarters of 2011, respectively. The
annual assessment rate averaged
approximately 17.6 cents per $100
of the adjusted domestic deposits
assessment base for the first quarter
of 2011.
In December 2009, a majority of IDIs
prepaid $45.7 billion of estimated
quarterly risk-based assessments
to address the DIF’s liquidity need
to pay for projected failures and to
ensure that the deposit insurance
system remained industry-funded.
For the fourth quarter 2009 and each
subsequent quarter, an institution’s
risk-based deposit insurance
assessment was offset by the available
amount of prepaid assessments,
thereby reducing that institution’s
prepaid assessment balance. By
regulation, any remaining prepaid
assessments must be refunded to
the institutions after collection of
the amount due on June 30, 2013.
The final prepaid offset will occur in
June 2013 for the assessment period
ending March 31, 2013. Therefore,
at December 31, 2012, the “Unearned
revenue – prepaid assessments” line
item on the Balance Sheet of $1.6
billion represents the final estimated
prepaid offset and the “Refunds of
prepaid assessments” line item reflects
the estimate of $5.7 billion that will

be returned to the institutions in June
2013. Though the combined total for
both the prepaid offset and refunds
will remain unchanged, the estimated
amount for each component may
vary considerably because of the
uncertainty inherent in projecting
the assessment rate and base for IDIs
beyond the customary 90-day period.
For those institutions that did not
prepay assessments or whose prepaid
assessments have been exhausted,
the “Assessments receivable, net”
line item on the Balance Sheet of
$1.0 billion and $282 million as
of December 31, 2012 and 2011,
respectively, represents the estimated
premiums due from IDIs for the fourth
quarter of 2012 and 2011, respectively.

Reserve Ratio
As of September 30, 2012, the DIF
reserve ratio was 0.35 percent of
estimated insured deposits.

Assessments Related to FICO
Assessments continue to be levied
on institutions for payments of the
interest on obligations issued by the
Financing Corporation (FICO). The
FICO was established as a mixedownership government corporation
to function solely as a financing
vehicle for the former 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 DIF and is separate from
deposit insurance assessments. The
FDIC, as administrator of the DIF,
acts solely as a collection agent for
the FICO. During 2012 and 2011,
approximately $797 million and $795
million, respectively, was collected
and remitted to the FICO.

10.	Other Revenue
Other Revenue for the Years Ended December 31
Dollars in Thousands
2012

2011

$5,885,330

$2,569,579

Dividends and interest on Citigroup trust preferred
securities (Note 5)

177,831

178,000

Guarantee fees for structured transactions (Note 8)

57,206

92,229

6,844

7,121

$6,127,211

$2,846,929

Temporary Liquidity Guarantee Program revenue
(Note 16)

Other
Total

Temporary Liquidity
Guarantee Program Revenue
Pursuant to a systemic risk
determination in October 2008, the
FDIC established the TLGP (see Note
16). In exchange for guarantees issued
under the TLGP, the DIF received
fees that were set aside, as deferred
revenue, for potential TLGP losses. As
losses occurred, the DIF recognized
the losses as systemic risk expenses
and offset the losses by recognizing
an equivalent portion of the deferred
revenue as systemic risk revenue.
This accounting practice isolated
systemic risk activities from the
normal operating activities of the DIF.

In accordance with FDIC policy, the
DIF recognized revenue during the
guarantee period when guarantee
fees held were determined to be in
excess of amounts needed to cover
potential losses, and, for all remaining
TLGP assets held as deferred revenue,
upon expiration of the TLGP on
December 31, 2012. As a result, the
DIF recognized total revenue of $5.9
billion and $2.6 billion in 2012 and
2011, respectively.

11.	Operating Expenses
Operating expenses were $1.8 billion
and $1.6 billion for 2012 and 2011,
respectively. The chart below lists
the major components of operating
expenses.

Operating Expenses for the Years Ended December 31	
Dollars in Thousands
2012

2011

$1,300,697

$1,320,991

Outside services

337,379

342,502

Travel

106,897

115,135

Buildings and leased space

91,631

93,630

Software/Hardware maintenance

63,108

58,981

Depreciation of property and equipment

76,365

77,720

Other

21,137

46,652

1,997,214

2,055,611

Salaries and benefits

Subtotal
Services billed to resolution entities
Total

(219,701)

(430,260)

$1,777,513

$1,625,351

Financial Statements and Notes

79

2012

ANNUAL REPORT
12.	Provision for
Insurance Losses
Provision for insurance losses
was negative $4.2 billion for 2012,
compared to negative $4.4 billion for
2011. The negative provision for 2012
primarily resulted from a reduction
of $1.4 billion in the contingent loss
reserve due to the improvement in
the financial condition of institutions
that were previously identified to fail
and a decrease of $2.8 billion in the
estimated losses for institutions that
failed in the current and prior years.

13.	Employee Benefits
Pension Benefits and
Savings Plans
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 DIF
contributes a portion of pension
benefits for eligible employees, it
does not account for the assets of
either retirement system. The DIF
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
(OPM).
Eligible FDIC employees also may
participate in a FDIC-sponsored
tax-deferred 401(k) savings plan
with matching contributions up to
5 percent. Under the Federal Thrift
Savings Plan (TSP), the FDIC provides
FERS employees with an automatic
contribution of 1 percent of pay and an

80

additional matching contribution up
to 4 percent of pay. CSRS employees
also can contribute to the TSP, but
they do not receive agency matching
contributions.

The FDIC has elected not to fund
the postretirement life and dental
benefit liabilities. As a result, the
DIF recognized the underfunded
status (the difference between the

Pension Benefits and Savings Plans Expenses
for the Years Ended December 31
Dollars in Thousands
2012

2011

Civil Service Retirement System

$5,960

$6,140

Federal Employees Retirement System (Basic Benefit)

97,517

95,846

FDIC Savings Plan

37,700

36,645

Federal Thrift Savings Plan

34,555

33,910

$175,732

$172,541

Total

Postretirement Benefits
other than Pensions
The DIF has no postretirement health
insurance liability since all eligible
retirees are covered by the Federal
Employees Health Benefits (FEHB)
program. The FEHB is administered
and accounted for by the OPM. In
addition, OPM pays the employer
share of the retiree’s health insurance
premiums.
The FDIC provides certain life
and dental insurance coverage for
its eligible retirees, the retirees’
beneficiaries, and covered dependents.
Retirees eligible for life and dental
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 coverage to direct-pay plans.
For the dental coverage, retirees are
responsible for a portion of the dental
premium.

Financial Statements and Notes

accumulated postretirement benefit
obligation and the plan assets at fair
value) as a liability. Since there are
no plan assets, the plan’s benefit
liability is equal to the accumulated
postretirement benefit obligation.
At December 31, 2012 and 2011,
the liability was $224 million and
$188 million, respectively, which is
recognized in the “Postretirement
benefit liability” line item on the
Balance Sheet. The cumulative
actuarial losses (changes in
assumptions and plan experience)
and prior service costs (changes
to plan provisions that increase
benefits) were $60 million and $34
million at December 31, 2012 and
2011, respectively. These amounts
are reported as accumulated other
comprehensive income in the
“Unrealized postretirement benefit
loss” line item on the Balance Sheet.
The DIF’s expenses for postretirement
benefits for 2012 and 2011 were $14
million and $12 million, respectively,
which are included in the current and
prior year’s operating expenses on
the Statement of Income and Fund
Balance. The changes in the actuarial

losses and prior service costs for
2012 and 2011 of $27 million and $15
million, respectively, are reported as
other comprehensive income in the
“Unrealized postretirement benefit
loss” line item on the Statement
of Income and Fund Balance. Key
actuarial assumptions used in the
accounting for the plan include the
discount rate of 3.75 percent, the
rate of compensation increase of 4.0
percent, and the dental coverage trend
rate of 5.6 percent. The discount rate
of 3.75 percent is based upon rates of
return on high-quality fixed income
investments whose cash flows match
the timing and amount of expected
benefit payments.

14. Commitments and
Off-Balance-Sheet
Exposure

Off-Balance-Sheet Exposure:
Deposit Insurance

Commitments:
Leased Space
The FDIC’s lease commitments total
$216 million for future years. The
lease agreements contain escalation
clauses resulting in adjustments,
usually on an annual basis. The DIF
recognized leased space expense of
$54 million and $56 million for the
years ended December 31, 2012 and
2011, respectively.

Leased Space Commitments
Dollars in Thousands
2013

2014

2015

2016

2017

2018/
Thereafter

$52,160

$46,521

$36,496

$33,509

$29,068

$18,511

Estimates of insured deposits are
derived primarily from quarterly
financial data submitted by IDIs to the
FDIC and represent the accounting
loss that would be realized if all
IDIs were to fail and the acquired
assets provided no recoveries. As of
September 30, 2012 and December
31, 2011, estimated insured deposits
for the DIF were $7.3 trillion and $7.0
trillion, respectively, including $1.5
trillion and $1.4 trillion, respectively,
of noninterest-bearing transaction
deposits that exceeded the basic
limit of $250,000 per account. Under
the Dodd-Frank Act, noninterestbearing transaction deposits received
unlimited deposit insurance coverage
from December 31, 2010 through
December 31, 2012. Upon expiration
of this unlimited coverage on
December 31, 2012, these deposits
pose no further exposure to the DIF.

Financial Statements and Notes

81

ANNUAL REPORT
15. Disclosures about
the Fair Value
of Financial
Instruments

and discount rates for default, call,
and liquidity risks that are derived
from traded Citigroup securities and
modeled pricing relationships.

Financial assets recognized
and measured at fair value on a
recurring basis at each reporting
date include cash equivalents (Note
2), the investment in U.S. Treasury
obligations (Note 3) and trust
preferred securities (Note 5). The
following tables present the DIF’s
financial assets measured at fair value
as of December 31, 2012 and 2011.

Some of the DIF’s financial assets and
liabilities are not recognized at fair
value but are recorded at amounts that
approximate fair value due to their
short maturities and/or comparability
with current interest rates. Such
items include interest receivable on
investments, assessments receivable,
other short-term receivables, refunds
of prepaid assessments, accounts
payable, and other liabilities.

In exchange for prior shared-loss
guarantee coverage provided to
Citigroup, the FDIC and the Treasury
received TruPs (see Note 5). At
December 31, 2012, the fair value of
the securities in the amount of $2.264
billion was classified as a Level 2
measurement based on an FDICdeveloped model using observable
market data for traded Citigroup
securities to determine the expected
present value of future cash flows.
Key inputs include market yields
on U.S. dollar interest rate swaps

82

The net receivables from resolutions
primarily include the DIF’s subrogated
claim arising from obligations to
insured depositors. The resolution
entity 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 DIF’s allowance for loss against
the receivables from resolutions.
Therefore, the corporate subrogated
claim indirectly includes the effect of
discounting and should not be viewed

Financial Statements and Notes

2012
as being stated in terms of nominal
cash flows.
Although the value of the corporate
subrogated claim is influenced by
valuation of resolution entity assets
(see Note 4), such 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 a fair 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 resolution
entity payments to the DIF on the
subrogated claim does not necessarily
correspond with the timing of
collections on resolution entity assets.
Therefore, the effect of discounting
used by resolution entities should not
necessarily be viewed as producing
an estimate of fair value for the net
receivables from resolutions.

Assets Measured at Fair Value at December 31, 2012
Dollars in Thousands
Fair Value Measurements Using
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Assets
at Fair Value

Assets
Cash equivalents1

$3,091,778

$3,091,778

34,868,688

34,868,688

Available-for-Sale Debt Securities
Investment in U.S. Treasury obligations2
Trust preferred securities

$2,263,983

Total Assets

$37,960,466

2,263,983

$2,263,983

$0

$40,224,449

1

	 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the
U.S. Bureau of Public Debt.								

2

	 The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.

Assets Measured at Fair Value at December 31, 2011
Dollars in Thousands
Fair Value Measurements Using

					
	

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Assets
at Fair Value

Assets
Cash equivalents1

$3,266,631

$3,266,631

33,863,245

33,863,245

Available-for-Sale Debt Securities
Investment in U.S. Treasury obligations2
Trust preferred securities

$2,213,231

Total Assets

$37,129,876

2,213,231

795,769

Trust preferred securities held for UST (Note 5)

795,769

$3,009,000

$0

$40,138,876

1

	 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the
U.S. Bureau of Public Debt.								

2

	 The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.

Financial Statements and Notes

83

2012

ANNUAL REPORT
16.	Systemic Risk
Transactions
Pursuant to a systemic risk
determination, the FDIC established
the TLGP (codified in part 370 of title
12 of the Code of Federal Regulations)
for IDIs, designated affiliates and
certain holding companies on October
14, 2008, in an effort to counter the
system-wide crisis in the nation’s
financial sector. The DIF received
fees in exchange for guarantees
issued under the TLGP and set aside,
as deferred revenue, all fees for
potential TLGP losses. As systemic
risk expenses were incurred, the
DIF reduced deferred revenue and
recognized an offsetting amount as
systemic risk revenue. Also, DIF
recognized systemic risk revenue
when guarantee fees held were
determined to be in excess of amounts
needed to cover potential losses. As
a result, systemic risk activities were
isolated from the normal operating
activities of the DIF.
At its inception, the TLGP consisted of
two components: 1) the Transaction
Account Guarantee Program (TAG)
and 2) the Debt Guarantee Program
(DGP). The TAG provided unlimited
coverage for noninterest-bearing
transaction accounts held by IDIs
on all deposit amounts exceeding
the fully insured limit of $250,000
through December 31, 2010. During
its existence, the FDIC collected TAG
fees of $1.2 billion. Total subrogated
claims arising from obligations to
depositors with noninterest-bearing
transaction accounts were $8.8 billion,
with estimated losses of $2.1 billion.
The DGP permitted participating
entities to issue FDIC-guaranteed

84

senior unsecured debt through
October 31, 2009. The FDIC’s
guarantee for all such debt expired
no later than December 31, 2012.
Through the end of the debt issuance
period, the DIF collected $8.3 billion of
guarantee fees and received additional
fees of $1.2 billion from participating
entities that elected to issue senior
unsecured non-guaranteed debt.
During the program, guaranteed debt
issued totaled $618.0 billion and the
FDIC paid $153 million in claims for
principal and interest arising from the
default of guaranteed debt obligations
of six debt issuers.
The expiration of the guarantee
period for the DGP on December
31, 2012 marked the conclusion of
the TLGP.  As established under
terms of the TLGP, all excess funds
were transferred to the DIF.  Since
inception, the DIF recognized total
“Other revenue” of $8.5 billion

(see Note 10). In 2012, the DIF
received $5.2 billion of cash and a net
receivable of $693 million included
in “Receivables from resolutions,
net”.  The net receivable represents
estimated recoveries on payments
under the TLGP to cover obligations.
In 2011, the DIF received $2.6 billion
of cash and U.S. Treasury obligations.

17.	Subsequent Events
Subsequent events have been
evaluated through February 14, 2013,
the date the financial statements are
available to be issued.

2013 Failures through
February 14, 2013
Through February 14, 2013, two
insured institutions failed in 2013 with
total losses to the DIF estimated to be
$43 million.

TLGP Summary (Inception through December 31, 2012)
Dollars in Thousands
Collections:
Transaction Account Guarantee Program fees

$1,156,332

Debt Guarantee Program fees

9,490,993

Interest earned on TLGP funds

42,293

Total TLGP Fees and Interest Earned

$10,689,618

Payments:
Transaction Account Guarantee Program claims
Less: Receipts of receivership dividends
Net Transaction Account Guarantee
Program claims
Debt Guarantee Program claims paid
TLGP operating expenses
Total TLGP Claims and Expenses Paid
Cash Transferred to the DIF
Estimated Recovery on TAG Claims Paid
Excess TLGP Assets Transferred to the DIF

Financial Statements and Notes

$(8,769,873)
6,016,597
(2,753,276)
(153,127)
(6,707)
$(2,913,110)
7,776,508
693,248
$8,469,756

FSLIC Resolution Fund (FRF)
Federal Deposit Insurance Corporation
FSLIC Resolution Fund Balance Sheet at December 31
Dollars in Thousands
2012

2011

$3,594,007

$3,533,410

5,456

65,163

356,455

356,455

$3,955,918

$3,955,028

$2,442

$3,544

356,455

356,455

358,897

359,999

Contributed capital

128,056,656

127,875,656

Accumulated deficit

(124,459,635)

(124,280,627)

3,597,021

3,595,029

$3,955,918

$3,955,028

Assets
Cash and cash equivalents
Receivables from thrift resolutions and other assets, net (Note 3)
Receivables from U.S. Treasury for goodwill litigation (Note 4)
Total Assets
Liabilities
Accounts payable and other liabilities
Contingent liabilities for goodwill litigation (Note 4)
Total Liabilities
Resolution Equity (Note 5)

Total Resolution Equity
Total Liabilities and Resolution Equity
The accompanying notes are an integral part of these financial statements.

Financial Statements and Notes

85

2012

ANNUAL REPORT
FSLIC Resolution Fund (FRF)

Federal Deposit Insurance Corporation
FSLIC Resolution Fund Statement of Income and Accumulated Deficit
for the Years Ended December 31
Dollars in Thousands
2012

2011

$2,458

$1,361

2,549

3,257

5,007

4,618

Operating expenses

4,165

4,660

Provision for losses

(1,408)

(8,578)

181,000

82,960

0

(18,373)

258

205

184,015

60,874

(179,008)

(56,256)

(124,280,627)

(124,224,371)

$(124,459,635)

$(124,280,627)

Revenue
Interest on U.S. Treasury obligations
Other revenue
Total Revenue
Expenses and Losses

Goodwill litigation expenses (Note 4)
Recovery of tax benefits
Other expenses
Total Expenses and Losses
Net Loss
Accumulated Deficit - Beginning
Accumulated Deficit - Ending
The accompanying notes are an integral part of these financial statements.

86

Financial Statements and Notes

FSLIC Resolution Fund (FRF)
Federal Deposit Insurance Corporation
FSLIC Resolution Fund Statement of Cash Flows
for the Years Ended December 31
Dollars in Thousands
2012

2011

Operating Activities
Net Loss

$(179,008)

$(56,256)

(1,408)

(8,578)

Decrease (Increase) in receivables from thrift resolutions and other assets

61,115

(33,177)

(Decrease) Increase in accounts payable and other liabilities

(1,102)

554

0

32,960

(120,403)

(64,497)

181,000

50,000

181,000

50,000

60,597

(14,497)

3,533,410

3,547,907

$3,594,007

$3,533,410

Adjustments to reconcile net loss to
net cash (used) by operating activities:
Provision for losses
Change in Operating Assets and Liabilities:

Increase in contingent liabilities for goodwill litigation
Net Cash (Used) by Operating Activities
Financing Activities
Provided by:
	 U.S. Treasury payments for goodwill litigation (Note 4)
Net Cash Provided by Financing Activities
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending
The accompanying notes are an integral part of these financial statements.

Financial Statements and Notes

87

ANNUAL REPORT

2012

Notes to the Financial Statements
FSLIC Resolution Fund
December 31, 2012 and 2011
1.	 Operations/
Dissolution
of the FSLIC
Resolution 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 (FDI) Act, as
amended (12 U.S.C. 1811, et seq). In
carrying out the purposes of the FDI
Act, the FDIC, as administrator of the
Deposit Insurance Fund (DIF), insures
the deposits of banks and savings
associations (insured depository
institutions). In cooperation with
other federal and state agencies,
the FDIC promotes the safety and
soundness of insured depository
institutions by identifying, monitoring
and addressing risks to the DIF.
Commercial banks, savings banks
and savings associations (known as
“thrifts”) are supervised by either the
FDIC, the Office of the Comptroller
of the Currency, or the Federal
Reserve Board. In addition, the FDIC,
through administration of the FSLIC
Resolution Fund (FRF), is responsible
for the sale of remaining assets and
satisfaction of liabilities associated
with the former Federal Savings and
Loan Insurance Corporation (FSLIC)
and the former Resolution Trust
Corporation (RTC). The DIF and the

88

FRF are maintained separately by
the FDIC to support their respective
functions.
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 FRF, and transferred the
assets and liabilities of the FSLIC
to the FRF-except those assets and
liabilities transferred to the newly
created RTC-effective on August 9,
1989. Further, 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.

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

Financial Statements and Notes

satisfied. Any funds remaining in the
FRF-FSLIC will be paid to the U.S.
Treasury. Any remaining funds of
the FRF-RTC will be distributed to
the REFCORP to pay the interest on
the REFCORP bonds. In addition,
the FRF-FSLIC has available
until expended $602 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.
Some of the issues and items that
remain open in FRF are 1) criminal
restitution orders (generally have from
1 to 13 years remaining to enforce);
2) collections of settlements and
judgments obtained against officers
and directors and other professionals
responsible for causing or contributing
to thrift losses (generally have from
2 to 14 years remaining to enforce,
unless the judgments are renewed,
which will result in significantly
longer periods for collection for
some judgments); 3) a few assistance
agreements entered into by the former
FSLIC (FRF could continue to receive
or refund overpayments of tax benefits
sharing through 2014); 4) goodwill
litigation (no final date for resolution
has been established; see Note 4);
and 5) affordable housing program
monitoring (requirements can exceed
25 years). The FRF could potentially
realize recoveries from tax benefits
sharing of up to approximately $40
million; however, any associated
recoveries are not reflected in

FRF’s financial statements given the
significant uncertainties surrounding
the ultimate outcome. The FDIC will
consider returning a portion of the
FRF-FSLIC’s remaining funds of $3.4
billion to the U.S. Treasury in 2013.

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 with 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.	 Summary of
Significant
Accounting
Policies
General
These financial statements pertain
to the financial position, results of
operations, and cash flows of the FRF
and are presented in accordance with
U.S. generally accepted accounting
principles (GAAP). As permitted by
the Federal Accounting Standards
Advisory Board’s Statement of Federal
Financial Accounting Standards 34,
The Hierarchy of Generally Accepted
Accounting Principles, Including
the Application of Standards
Issued by the Financial Accounting
Standards Board, the FDIC prepares
financial statements in accordance
with standards promulgated by the
Financial Accounting Standards

Board (FASB). These statements
do not include reporting for assets
and liabilities of receivership entities
because these entities are legally
separate and distinct, and the
FRF does not have any ownership
interests in them. Periodic and final
accountability reports of receivership
entities are furnished to courts,
supervisory authorities, and others
upon request.

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 the
allowance for losses on receivables
from thrift resolutions and the
estimated losses for litigation.

Cash Equivalents
Cash equivalents are short-term,
highly liquid investments consisting
primarily of U.S. Treasury Overnight
Certificates.

Provision for Losses
The provision for losses represents
the change in the estimation of the
allowance for losses related to the
receivables from thrift resolutions and
other assets.

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

3.	Receivables
from Thrift
Resolutions and
Other Assets, Net
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 RTC are a significant
source of repayment of the FRF’s
receivables from thrift resolutions. As
of December 31, 2012, three of the 850
FRF receiverships remain active until
their liability-related impediments are
resolved.
The FRF receiverships held assets
with a book value of $13 million
and $15 million as of December 31,
2012 and 2011, respectively (which
primarily consist of cash held for
non-FRF, third party creditors).

Other Assets

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.

Other assets decreased by $59 million
to $3 million primarily due to the
collection of a receivable for tax
benefits sharing of $44 million and
the release of the credit enhancement

Financial Statements and Notes

89

2012

ANNUAL REPORT
reserves of $13 million (see Note 4,
Contingent Liabilities for: Guarantees).
The tax benefits sharing collection
represented the FRF’s share of tax
savings by entities that either entered
into assistance agreements with the
former FSLIC, or have subsequently
purchased financial institutions that
had prior agreements with the FSLIC.

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

Receivables from Thrift Resolutions and Other Assets,
Net at December 31
Dollars in Thousands
2012

2011

Receivables from closed thrifts

$869,917

$1,800,417

Allowance for losses

(867,208)

(1,797,154)

Receivables from Thrift Resolutions, Net

2,709

3,263

Other assets

2,747

61,900

$5,456

$ 65,163

Total

4.	Contingent
Liabilities for:
Goodwill Litigation
In United States v. 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.
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

90

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
former FSLIC. The FRF-RTC, which
encompasses the obligations of the
former 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 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 estimated liability for goodwill

Financial Statements and Notes

litigation should have a corresponding
receivable from the U.S. Treasury and
therefore have no net impact on the
financial condition of the FRF.
For the year ended December 31,
2012, the FRF paid $181 million as a
result of a settlement in one goodwill
case compared to $50 million for
one goodwill case in 2011. The FRF
received appropriations from the
U.S. Treasury to fund these payments.
As of December 31, 2012, two
remaining cases are active and
pending against the United States
based on alleged breaches of the
agreements stated above. Of these
two remaining cases, a contingent
liability and an offsetting receivable
of $356 million was recorded for one
case as of December 31, 2012 and
2011. This case is currently before
the lower court pending remand
following appeal. It is reasonably
possible that for this case the FRF
could incur additional estimated
losses of $63 million, representing
additional damages contended by
the plaintiff. For the other remaining
active case, no awards were given to
the plaintiffs by the appellate court.
This case is fully adjudicated but the
Court of Federal Claims is considering
awarding litigation costs to the
United States.
At December 31, 2011, there were five
active cases. For three of the cases
considered active at year end 2011,
one was settled and paid during 2012
and two were fully adjudicated with
no award; in one of these two cases
the Court of Federal Claims awarded
litigation costs of $231 thousand to the
United States, which was paid in 2012.
In addition, the FRF-FSLIC pays the
goodwill litigation expenses incurred

by the DOJ, the entity that defends
these lawsuits against the United
States, based on a Memorandum of
Understanding (MOU) dated October
2, 1998, between the FDIC and the
DOJ. FRF-FSLIC pays in advance the
estimated goodwill litigation expenses.
Any unused funds are carried over and
applied toward the next fiscal year
(FY) charges. In 2012, FRF-FSLIC did
not provide any additional funding to
the DOJ because the unused funds
from prior fiscal years were sufficient
to cover estimated FY 2013 expenses.

Guarini Litigation
Paralleling the goodwill cases
were similar cases alleging that the
government breached agreements
regarding tax benefits associated with
certain FSLIC-assisted 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.
All eight of the original Guarini cases
have been settled. However, a case
settled in 2006 further obligates
the FRF-FSLIC as a guarantor for
all tax liabilities in the event the
settlement amount is determined by
tax authorities to be taxable. The
maximum potential exposure under
this guarantee is approximately $81
million. However, the FDIC believes
that it is very unlikely the settlement
will be subject to taxation. More
definitive information may be available
during 2013, after the Internal Revenue
Service (IRS) completes its Large Case

Program audit on the affected entity’s
2006 returns; this audit remains
ongoing. As of December 31, 2012, no
liability has been recorded. The FRF
does not expect to fund any payment
under this guarantee.

Guarantees
On May 21, 2012, the FDIC, in its
capacity as manager of the FRF,
entered into an agreement with
Fannie Mae for the release of $13
million of credit enhancement
reserves to the FRF in exchange for
indemnifying Fannie Mae for all future
losses incurred on 76 multi-family
mortgage loans.  The former RTC
supplied Fannie Mae with the credit
enhancement reserves in the form of
cash collateral to cover future losses
on these mortgage loans through
2020.  The maximum exposure on this
indemnification is the current unpaid

expected.  As a result, the FRF
has not recorded a contingent liability
for this indemnification as of
December 31, 2012.

5. Resolution Equity
As stated in the Overview section of
Note 1, the FRF is comprised of two
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 two 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.

Resolution Equity at December 31, 2012
Dollars in Thousands
FRF-FSLIC

FRF
Consolidated

FRF-RTC

Contributed capital - beginning

$46,126,319

$81,749,337

$127,875,656

Add: U.S. Treasury payment for
goodwill litigation

181,000

0

181,000

Contributed capital - ending

46,307,319

81,749,337

128,056,656

Accumulated deficit

(42,882,341)

(81,577,294)

(124,459,635)

Total

$3,424,978

$172,043

$3,597,021

principal balance of the remaining
73 multi-family loans totaling
$10 million.  Based on a contingent
liability assessment of this portfolio,
the average loan-to-value ratio is 21%,
the majority of the loans are at least
60% amortized, and all are scheduled
to mature within three to eight years.
Since all of the loans are currently in
performing status and no losses have
occurred since 2001, future payments
on this indemnification are not

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 established to
function solely as a financing vehicle
for the FSLIC) and the RTC issued

Financial Statements and Notes

91

2012

ANNUAL REPORT
$31.3 billion of these instruments to
the REFCORP. FIRREA prohibited the
payment of dividends on any of these
capital certificates.
FRF-FSLIC received $181 million in
U.S. Treasury payments for goodwill
litigation in 2012. Furthermore, $356
million was accrued for as receivables
as of December 31, 2012 and 2011.
Through December 31, 2012, the
FRF has received or established a
receivable for a total of $2.2 billion of
goodwill appropriations, the effect of
which increases contributed capital.
Through December 31, 2012, the
FRF-RTC has returned $4.6 billion to

accumulated deficit has increased by
$13.1 billion, whereas the FRF-RTC
accumulated deficit has decreased
by $6.3 billion, since their dissolution
dates.

the U.S. Treasury and made payments
of $5.0 billion to the REFCORP. These
actions serve to reduce contributed
capital. The most recent payment to
the REFCORP was in January of 2008
for $225 million.

6.	 Disclosures about
the Fair Value
of Financial
Instruments

Accumulated Deficit
The accumulated deficit represents
the cumulative excess of expenses
and losses 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 former FSLIC and the former
RTC on August 9, 1989, and January
1, 1996, respectively. The FRF-FSLIC

The following table presents the FRF’s
financial assets measured at fair value
on a recurring basis as of December
31, 2012 and 2011.

Assets Measured at Fair Value at December 31, 2012
Dollars in Thousands
Fair Value Measurements Using

					
	

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Assets
at Fair Value

Assets
Cash equivalents1

$3,425,097

Total Assets
1

$3,425,097

$3,425,097

$0

$0

$3,425,097

	Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the
U.S. Bureau of Public Debt. Cash equivalents are included in the “Cash and cash equivalents” line item.					
			

Assets Measured at Fair Value at December 31, 2011
Dollars in Thousands
Fair Value Measurements Using

		

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total Assets
at Fair Value

Assets
Cash equivalents1

$3,377,203

Credit enhancement reserves2
Total Assets

$3,377,203
$14,431

$3,377,203

$14,431

14,431
$0

1

$3,391,634

	 Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the
U.S. Bureau of Public Debt. Cash equivalents are included in the “Cash and cash equivalents” line item.	

2

	 Credit enhancement reserves are valued by performing projected cash flow analyses using market-based assumptions.

92

Financial Statements and Notes

Some of the FRF’s financial assets and
liabilities are not recognized at fair
value but are recorded at amounts that
approximate fair value due to their
short maturities and/or comparability
with current interest rates. Such items
include other short-term receivables
and accounts payable and other
liabilities.

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 value.

Financial Statements and Notes

93

ANNUAL REPORT
Government Accountability Office’s Audit Opinion

94

Financial Statements and Notes

2012

Government Accountability Office’s Audit Opinion (continued)

Financial Statements and Notes

95

ANNUAL REPORT
Government Accountability Office’s Audit Opinion (continued)

96

Financial Statements and Notes

2012

Government Accountability Office’s Audit Opinion (continued)

Financial Statements and Notes

97

ANNUAL REPORT
Government Accountability Office’s Audit Opinion (continued)

98

Financial Statements and Notes

2012

Government Accountability Office’s Audit Opinion (continued)

Financial Statements and Notes

99

ANNUAL REPORT
Government Accountability Office’s Audit Opinion (continued)

100

Financial Statements and Notes

2012

Government Accountability Office’s Audit Opinion (continued)

Financial Statements and Notes

101

ANNUAL REPORT
Appendix I
Management’s Response

102

Financial Statements and Notes

2012

Management’s Response (continued)

Financial Statements and Notes

103

ANNUAL REPORT
Overview of
the Industry
The 7,181 FDIC-insured commercial
banks and savings institutions that
filed financial results for the first
nine months of 2012 reported net
income of $106.9 billion, an increase
of 15.0 percent compared to the first
nine months of 2011. This is the
third consecutive year that industry
earnings have registered a year-overyear increase. The improvement in
earnings was attributable to lower
expenses for loan-loss provisions,
increased noninterest income,
higher realized gains on securities
and other assets, and growth in net
interest income. Two out of every
three institutions reported year-overyear increases in net income, and
the percentage of institutions with
negative net income for the first nine
months of the year fell to 10.7 percent,
down from 15.9 percent a year earlier.
The average return on assets (ROA)
for the first nine months was 1.02
percent, up from 0.92 percent for
the same period of 2011. This is the
highest nine-month industry ROA
since 2007. More than half of insured
institutions (57.7 percent) had higher
ROAs in 2012 than in 2011. Insured
institutions set aside $43.3 billion in
provisions for loan and lease losses
during the first nine months of 2012, a
decline of $14.4 billion (25.0 percent)
compared to the same period in
2011. The industry’s total noninterest
income increased by $10.3 billion (5.9
percent), as income from loan sales
rose by $9.3 billion (201.9 percent).
Total noninterest expenses were $9.3
billion (3.0 percent) higher, led by a
$6.6 billion (5.0-percent) increase in
salary and benefit expenses.

104

2012

A challenging environment of low
short-term interest rates combined
with a flat yield curve contributed to
a decline in the industry’s net interest
margin in 2012. The average margin
fell from 3.61 percent in the first three
quarters of 2011 to 3.46 percent for the
first three quarters of 2012. However,
the industry’s interest-earning assets
grew by 4.6 percent from the end of
September 2011 through the end of
September 2012, helping to boost net
interest income by $1.9 billion (0.6
percent).

card NCOs registered the largest yearover-year decline, falling by $9.3 billion
(31.4 percent). Net charge-offs of real
estate construction and development
loans declined by $4.0 billion (56.4
percent), C&I NCOs were $2.8 billion
(32.6 percent) lower than in the first
nine months of 2011, and NCOs in
all other major loan categories also
posted significant declines. At the end
of September 2012, there were 694
institutions on the FDIC’s “Problem
List,” down from 844 “problem”
institutions a year earlier.

Indicators of asset quality continued to
improve in 2012. In the twelve months
ended September 30, total noncurrent
loans and leases -- those that were
90 days or more past due or in
nonaccrual status – declined by $22.2
billion (7.1 percent). Loans secured
by real estate properties accounted for
more than half ($13.0 billion) of the
reduction in noncurrent loans. New
accounting and reporting guidelines
resulted in a $14.9 billion (8.1 percent)
increase in the amount of noncurrent
1-4 family residential real estate loan
balances reported, but this increase
did not represent deterioration
in the underlying performance of
these loans. Noncurrent real estate
construction and development loans
fell by $17.0 billion (45.9 percent), and
noncurrent real estate loans secured
by nonfarm nonresidential properties
declined by $8.2 billion (19.6 percent).
Noncurrent balances in all other major
loan categories declined, led by loans
to commercial and industrial (C&I)
borrowers (down $5.0 billion, or 26.1
percent). Net charge-offs of loans and
leases (NCOs) totaled $64.4 billion
in the first three quarters of 2012, a
decline of $23.5 billion (26.7 percent)
over the same period in 2011. Credit

Asset growth remained modest in
2012, but loan balances increased,
after three consecutive years of
contraction. During the 12 months
ended September 30, total assets
of insured institutions increased by
$411.0 billion (3.0 percent). Loans and
leases accounted for more than half
of the increase in total assets, rising
by $267.8 billion (3.7 percent). C&I
loans increased by $173.6 billion (13.5
percent), residential mortgage loans
rose by $33.2 billion (1.8 percent), auto
loans increased by $19.8 billion (6.7
percent) and real estate loans secured
by multifamily residential properties
were up by $10.9 billion (5.0 percent).
In contrast, real estate construction
and development loans fell by $44.3
billion (17.4 percent), and home equity
loans declined by $41.0 billion (6.7
percent).

Financial Statements and Notes

Growth in deposits outpaced the
increase in total assets. In the 12
months ended September 30, total
deposits of insured institutions
increased by $504.0 billion (5.0
percent). Deposits in domestic
offices rose by $554.9 billion, (6.5
percent), while foreign office
deposits fell by $50.9 billion. Much

of the increase in domestic deposits
occurred in balances in noninterestbearing transaction accounts that
have temporary full FDIC insurance
coverage. These accounts increased
by $301.8 billion (21.7 percent),
with $276.9 billion of the increase
consisting of balances above the
basic FDIC coverage limit of $250,000.
Nondeposit liabilities declined by
$152.3 billion (6.8 percent), while
equity capital rose by $59.2 billion (3.8
percent).

Financial Statements and Notes

105

THIS PAGE INTENTIONALLY LEFT BLANK.

V.
The FDIC uses several means to
maintain comprehensive internal
controls, ensure the overall
effectiveness and efficiency of
operations, and otherwise comply as
necessary with the following federal
standards, among others:
♦	Chief Financial Officers’ Act
(CFO Act)
♦	Federal Managers’ Financial
Integrity Act (FMFIA)
♦	Federal Financial Management
Improvement Act (FFMIA)
♦	Government Performance and
Results Act (GPRA)
♦	Federal Information Security
Management Act (FISMA)
♦	OMB Circular A-123
♦	GAO’s Standards for Internal
Control in the Federal Government
As a foundation for these efforts,
the Corporate Management Control
Branch in DOF [formerly the Office of
Enterprise Risk Management (OERM)]

Corporate
Management
Control
traditionally has overseen a corporatewide program of relevant activities
by establishing policies and working
with management in each division
and office in the FDIC. The FDIC has
made a concerted effort to ensure that
operational risks have been identified
and that corresponding control
needs are being incorporated into
day-to-day operations. The program
also requires that comprehensive
procedures be documented,
employees be thoroughly trained, and
supervisors be held accountable for
performance and results. Compliance
monitoring is carried out through
periodic management reviews and
by the distribution of various activity
reports to all levels of management.
Conscientious attention is also
paid to the implementation of audit
recommendations made by the FDIC
Office of the Inspector General, the
GAO, the Treasury Department’s
Special Inspector General for the
TARP program, and other providers
of external/audit scrutiny. The FDIC
has received unmodified/unqualified

opinions on its financial statement
audits for 21 consecutive years,
and these and other positive results
reflect the effectiveness of the overall
management control program.
Significantly, since the beginning of
the financial crisis, the FDIC expanded
the range of issues receiving close
management scrutiny to encompass
crisis-related challenges. As the
severity of the crisis has subsided
over the past two years, the focus of
controls has shifted, specifically to
encompass downsizing activities and
the transfer of workloads due to the
closing of temporary offices.
We are developing plans for 2013 and
beyond to ensure the continuation
of a smooth transition of operations
as we move toward a post-crisis
operating environment. Among other
things, program evaluation activities
in the coming year will focus not only
on new responsibilities associated
with the Dodd-Frank Act and other
internal organizational changes, but
on the closing of additional temporary

Corporate Management CONTROL

107

2012

ANNUAL REPORT
satellite offices and the downsizing
of staffing in general. Continued
emphasis and management scrutiny
also will be applied to contracting
oversight, the accuracy and integrity
of transactions, the expansion of
performance metrics, and oversight
of systems development efforts in
general.

Management Report
on Final Actions
As required under amended Section 5
of the Inspector General Act of 1978,
the FDIC must report information on
final action taken by management on
certain audit reports. 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,
2011, through September 30, 2012.

Table 1:
Management Report on Final Action on Audits with Disallowed Costs
for Fiscal Year 2012
Dollars in Thousands
Audit Reports

Number of
Reports

Disallowed
Costs

A.

Management decisions – final action not taken at beginning of period

2

$31,476

B.

Management decisions made during the period

6

$30,683

C.

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

8

$62,159

 

 

(a) Collections & offsets

7

$37,971

(b) Other

0

$0

2. Write-offs

3

$23,460

3. Total of 1 & 2

71

$61,4312

Audit reports needing final action at the end of the period

23

$3,794

Final action taken during the period:
1. Recoveries:
D.

E.
1	

Three reports have both collections and write-offs, thus the total of 1(a), 1(b), and 2 is seven.

2	

Amount collected in D3 included excess recoveries of $2.8 million not reflected in line E.

3	

One report had a recovery, however, one recommendation remains open; thus, the number of reports needing final action is two.

108

Corporate Management CONTROL

Table 2:
Management Report on Final Action on Audits with Recommendations
to Put Funds to Better Use for Fiscal Year 2012
Dollars in Thousands
Audit Reports

Number of
Reports

Funds Put To
Better Use

A.

Management decisions – final action not taken at beginning of period

0

$0

B.

Management decisions made during the period

0

$0

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

0

$0

1. Value of recommendations implemented (completed)

0

$0

2. Value of recommendations that management concluded should not
or could not be implemented or completed

0

$0

3. Total of 1 and 2

0

$0

Audit reports needing final action at the end of the period

0

$0

C.

Final action taken during the period:
D.

E.

Table 3:
Audit Reports Without Final Actions but With Management Decisions
Over One Year Old for Fiscal Year 2012
Management Action in Process
Report No.
and Issue Date
EVAL-11-006
09/30/2011

OIG Audit Finding

Management Action

OIG recommends that the FDIC,
FRB, and OCC agency heads
review the matters for consideration
presented in this report and work
through the Financial Stability
Oversight Council to determine
whether the Prompt Regulatory
Action legislation or implementing
regulations should be modified. As
a recap, FDIC should increase the
minimum Prompt Corrective Action
(PCA) capital levels, and continue to
refine the deposit insurance system
for banks with assets under $10
billion to assess greater premiums
commensurate with risk-taking.

A working group is reviewing PGA
and other tools in consultation with
stakeholders to identify non-capital
indicators of potential problems and
opportunities for early supervisory
intervention. The working group’s
analysis will be presented to
Executive Management for review and
consideration.

Disallowed
Costs
$0

Expected completion date:
March 31, 2012
FDIC will evaluate comments on
the agencies notices of proposed
rulemaking that would revise and
replace the agencies’ current
capital rules along with considering
modifications to the PCA capital
triggers as well as other potential
changes designed to strengthen the
PCA framework.
Expected completion date:
June 30, 2013

Corporate Management CONTROL

109

THIS PAGE INTENTIONALLY LEFT BLANK.

VI.

Appendices

A. Key Statistics
FDIC Expenditures 2003–2012
Dollars in Millions

$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2003

2004

2005

The FDIC's Strategic Plan and Annual
Performance Plan provide the basis
for annual planning and budgeting for
needed resources. The 2012 aggregate
budget (for corporate, receivership,
and investment spending) was $3.3
billion, while actual expenditures for

2006

2007

2008

the year were $2.5 billion, about $0.3
billion less than 2011 expenditures.
Over the past decade, the FDIC’s
expenditures have varied in response
to workload. During the last several
years, expenditures have risen,

2009

2010

2011

2012

largely due to increasing resolution
and receivership activity. To a lesser
extent, increased expenses have
resulted from supervision-related
costs associated with the oversight of
more troubled institutions.

Appendices

111

2012

ANNUAL REPORT
FDIC Actions on Financial Institutions Applications 2010–2012
2012
Deposit Insurance

2011

2010

6

	Approved
	Denied

16

6

1

10
10

16

0

0

0

New Branches

570

442

461

	Approved

570

442

459

0

0

2

Mergers

238

206

182

	Approved

238

206

182

0

0

0

674

876

839

	Denied

	Denied
Requests for Consent to Serve

2

	Approved

674

875

839

		Section 19

10

24

10

		Section 32

661

851

829

	Denied

3

1

0

		Section 19

1

0

0

		Section 32

2

1

0

Notices of Change in Control

26

21

33

	 Letters of Intent Not to Disapprove

26

21

33

0

0

0

Brokered Deposit Waivers

97

84

66

	Approved

95

83

65

2

1

1

21

30

31

21

30

31

	Denied

0

0

0

State Bank Activities/Investments4

7

9

3

	Approved

7

9

3

	Denied

0

0

0

Conversion of Mutual Institutions

8

6

2

	Non-Objection

8

6

2

	Objection

0

0

0

	Disapproved

	Denied
Savings Association Activities

3

	Approved

1	

Includes deposit insurance application filed on behalf of (1) newly organized institutions, (2) existing uninsured financial services companies
seeking establishment as an insured institution, and (3) interim institutions established to facilitate merger or conversion transactions, and
applications to facilitate the establishment of thrift holding companies.

2	

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 approve any change of directors or senior executive officers at a
state nonmember bank that is not in compliance with capital requirements or is otherwise in troubled condition.

3	

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.

4	

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 with the FDIC.

112

Appendices

Compliance, Enforcement, and Other Related Legal Actions 2010–2012	
2012
Total Number of Actions Initiated by the FDIC

2011

2010

557

550

758

0

0

0

Sec. 8a By Order Upon Request

0

0

0

Sec. 8p No Deposits

3

7

4

Sec. 8q Deposits Assumed

4

2

1

0

7

3

9

N/A

N/A

120

183

372

Termination of Insurance
Involuntary Termination
Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions
Voluntary Termination

Sec. 8b Cease-and-Desist Actions
Notices of Charges Issued1
Orders to Pay Restitution
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

8

11

10

108

100

111

0

1

0

Civil Money Penalties Issued
Sec. 7a Call Report Penalties

1

0

0

Sec. 8i Civil Money Penalties

164

193

212

5

5

8

16

29

15

119

10

24

0

1

0

0

0

0

0

0

0

Sec. 8i Civil Money Penalty Notices of Assessment
Sec. 10c Orders of Investigation
Sec. 19 Waiver Orders
Approved Section 19 Waiver Orders
Denied Section 19 Waiver Orders
Sec. 32 Notices Disapproving Officer/Director’s Request for Review
Truth-in-Lending Act Reimbursement Actions
Denials of Requests for Relief
Grants of Relief
Banks Making Reimbursement1
Suspicious Activity Reports (Open and closed institutions)1
Other Actions Not Listed

0

0

0

126

84

64

139,102

125,460

126,098

0

8

1

1

	 These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of
actions initiated.

Appendices

113

2012

ANNUAL REPORT
Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through September 30, 2012 1
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Insurance Fund as
a Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Est. Insured
Deposits

2012

$250,000

$9,084,802

$7,250,693

79.8

$25,223.9

0.28

0.35

2011

250,000

8,782,165

6,981,569

79.5

11,826.5

0.13

0.17

2010

250,000

7,887,733

6,307,607

80.0

(7,352.2)

(0.09)

(0.12)

2009

250,000

7,705,353

5,407,773

70.2

(20,861.8)

(0.27)

(0.39)

2008

100,000

7,505,409

4,750,783

63.3

17,276.3

0.23

0.36

2007

100,000

6,921,678

4,292,211

62.0

52,413.0

0.76

1.22

2006

100,000

6,640,097

4,153,808

62.6

50,165.3

0.76

1.21

2005

100,000

6,229,823

3,891,000

62.5

48,596.6

0.78

1.25

2004

100,000

5,724,775

3,622,213

63.3

47,506.8

0.83

1.31

2003

100,000

5,224,030

3,452,606

66.1

46,022.3

0.88

1.33

2002

100,000

4,916,200

3,383,720

68.8

43,797.0

0.89

1.29

2001

100,000

4,565,068

3,216,585

70.5

41,373.8

0.91

1.29

2000

100,000

4,211,895

3,055,108

72.5

41,733.8

0.99

1.37

1999

100,000

3,885,826

2,869,208

73.8

39,694.9

1.02

1.38

1998

100,000

3,817,150

2,850,452

74.7

39,452.1

1.03

1.38

1997

100,000

3,602,189

2,746,477

76.2

37,660.8

1.05

1.37

1996

100,000

3,454,556

2,690,439

77.9

35,742.8

1.03

1.33

1995

100,000

3,318,595

2,663,873

80.3

28,811.5

0.87

1.08

1994

100,000

3,184,410

2,588,619

81.3

23,784.5

0.75

0.92

1993

100,000

3,220,302

2,602,781

80.8

14,277.3

0.44

0.55

1992

100,000

3,275,530

2,677,709

81.7

178.4

0.01

0.01

1991

100,000

3,331,312

2,733,387

82.1

(6,934.0)

(0.21)

(0.25)

1990

100,000

3,415,464

2,784,838

81.5

4,062.7

0.12

0.15

1989

100,000

3,412,503

2,755,471

80.7

13,209.5

0.39

0.48

1988

100,000

2,337,080

1,756,771

75.2

14,061.1

0.60

0.80

1987

100,000

2,198,648

1,657,291

75.4

18,301.8

0.83

1.10

1986

100,000

2,162,687

1,636,915

75.7

18,253.3

0.84

1.12

1985

100,000

1,975,030

1,510,496

76.5

17,956.9

0.91

1.19

1984

100,000

1,805,334

1,393,421

77.2

16,529.4

0.92

1.19

1983

100,000

1,690,576

1,268,332

75.0

15,429.1

0.91

1.22

1982

100,000

1,544,697

1,134,221

73.4

13,770.9

0.89

1.21

1981

100,000

1,409,322

988,898

70.2

12,246.1

0.87

1.24

1980

100,000

1,324,463

948,717

71.6

11,019.5

0.83

1.16

1979

40,000

1,226,943

808,555

65.9

9,792.7

0.80

1.21

1978

40,000

1,145,835

760,706

66.4

8,796.0

0.77

1.16

114

Appendices

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through September 30, 2012 1 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Insurance Fund as
a Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Est. Insured
Deposits

1977

40,000

1,050,435

692,533

65.9

7,992.8

0.76

1.15

1976

40,000

941,923

628,263

66.7

7,268.8

0.77

1.16

1975

40,000

875,985

569,101

65.0

6,716.0

0.77

1.18

1974

40,000

833,277

520,309

62.4

6,124.2

0.73

1.18

1973

20,000

766,509

465,600

60.7

5,615.3

0.73

1.21

1972

20,000

697,480

419,756

60.2

5,158.7

0.74

1.23

1971

20,000

610,685

374,568

61.3

4,739.9

0.78

1.27

1970

20,000

545,198

349,581

64.1

4,379.6

0.80

1.25

1969

20,000

495,858

313,085

63.1

4,051.1

0.82

1.29

1968

15,000

491,513

296,701

60.4

3,749.2

0.76

1.26

1967

15,000

448,709

261,149

58.2

3,485.5

0.78

1.33

1966

15,000

401,096

234,150

58.4

3,252.0

0.81

1.39

1965

10,000

377,400

209,690

55.6

3,036.3

0.80

1.45

1964

10,000

348,981

191,787

55.0

2,844.7

0.82

1.48

1963

10,000

313,304

177,381

56.6

2,667.9

0.85

1.50

1962

10,000

297,548

170,210

57.2

2,502.0

0.84

1.47

1961

10,000

281,304

160,309

57.0

2,353.8

0.84

1.47

1960

10,000

260,495

149,684

57.5

2,222.2

0.85

1.48

1959

10,000

247,589

142,131

57.4

2,089.8

0.84

1.47

1958

10,000

242,445

137,698

56.8

1,965.4

0.81

1.43

1957

10,000

225,507

127,055

56.3

1,850.5

0.82

1.46

1956

10,000

219,393

121,008

55.2

1,742.1

0.79

1.44

1955

10,000

212,226

116,380

54.8

1,639.6

0.77

1.41

1954

10,000

203,195

110,973

54.6

1,542.7

0.76

1.39

1953

10,000

193,466

105,610

54.6

1,450.7

0.75

1.37

1952

10,000

188,142

101,841

54.1

1,363.5

0.72

1.34

1951

10,000

178,540

96,713

54.2

1,282.2

0.72

1.33

1950

10,000

167,818

91,359

54.4

1,243.9

0.74

1.36

1949

5,000

156,786

76,589

48.8

1,203.9

0.77

1.57

1948

5,000

153,454

75,320

49.1

1,065.9

0.69

1.42

1947

5,000

154,096

76,254

49.5

1,006.1

0.65

1.32

1946

5,000

148,458

73,759

49.7

1,058.5

0.71

1.44

1945

5,000

157,174

67,021

42.6

929.2

0.59

1.39

1944

5,000

134,662

56,398

41.9

804.3

0.60

1.43

1943

5,000

111,650

48,440

43.4

703.1

0.63

1.45

Appendices

115

2012

ANNUAL REPORT
Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through September 30, 2012 1 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Insurance Fund as
a Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Est. Insured
Deposits

1942

5,000

89,869

32,837

36.5

616.9

0.69

1.88

1941

5,000

71,209

28,249

39.7

553.5

0.78

1.96

1940

5,000

65,288

26,638

40.8

496.0

0.76

1.86

1939

5,000

57,485

24,650

42.9

452.7

0.79

1.84

1938

5,000

50,791

23,121

45.5

420.5

0.83

1.82

1937

5,000

48,228

22,557

46.8

383.1

0.79

1.70

1936

5,000

50,281

22,330

44.4

343.4

0.68

1.54

1935

5,000

45,125

20,158

44.7

306.0

0.68

1.52

1934

5,000

40,060

18,075

45.1

291.7

0.73

1.61

1

For 2012, figures are as of September 30, all prior years are as of December 31. Prior to 1989, figures are for the Bank Insurance Fund
(BIF) only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent sum of the BIF and Savings Association
Insurance Fund (SAIF) amounts; for 2006 to 2012, figures are for DIF. Amounts for 1989 - 2012 include insured branches of foreign banks.
Prior to year-end 1991, insured deposits were estimated using percentages determined from June Call and Thrift Financial Reports.

2

The year-end 2008 coverage limit and estimated insured deposits do not reflect the temporary increase to $250,000 then in effect under
the Emergency Economic Stabilization Act of 2008. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
made this coverage limit permanent. The year-end 2009 coverage limit and estimated insured deposits reflect the $250,000 coverage
limit. The Dodd-Frank Act also temporarily provided unlimited coverage for non-interest bearing transaction accounts for two years
beginning December 31, 2010. Coverage for certain retirement accounts increased to $250,000 in 2006. Initial coverage limit was $2,500
from January 1 to June 30, 1934.

116

Appendices

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2012
Dollars in Millions
Income

Expenses and Losses

Assessment
Credits

Investment
and Other

Total

Provision
for
Ins. Losses

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

$158,831.1

Effective
Assessment
Rate1

Funding
Transfer
from the
FSLIC
Resolution
Fund

$126,258.4

$23,134.4

$9,438.3

$139.5

$32,536.2

Year

Total

Assessment
Income

Net Income/
(Loss)

Total

$191,227.8

$127,776.5

$11,392.9

$74,844.2

2012

18,522.3

12,397.2

0.2

6,125.3

0.1013%

(2,599.0)

(4,222.6)

1,777.5

(153.9)

0

21,121.3

2011

16,342.0

13,499.5

0.9

2,843.4

0.1110%

(2,915.4)

(4,413.6)

1,625.4

(127.2)

0

19,257.4

2010

13,379.9

13,611.2

0.8

(230.5)

0.1772%

75.0

(847.8)

1,592.6

(669.8)

0

13,304.9

2009

24,706.4

17,865.4

148.0

6,989.0

0.2330%

60,709.0

57,711.8

1,271.1

1,726.1

0

(36,002.6)

2008

7,306.3

4,410.4

1,445.9

4,341.8

0.0418%

44,339.5

41,838.8

1,033.5

1,467.2

0

(37,033.2)

2007

3,196.2

3,730.9

3,088.0

2,553.3

0.0093%

1,090.9

95.0

992.6

3.3

0

2,105.3

2006

2,643.5

31.9

0.0

2,611.6

0.0005%

904.3

(52.1)

950.6

5.8

0

1,739.2

2005

2,420.5

60.9

0.0

2,359.6

0.0010%

809.3

(160.2)

965.7

3.8

0

1,611.2

2004

2,240.3

104.2

0.0

2,136.1

0.0019%

607.6

(353.4)

941.3

19.7

0

1,632.7

2003

2,173.6

94.8

0.0

2,078.8

0.0019%

(67.7)

(1,010.5)

935.5

7.3

0

2,241.3

2002

2,384.7

107.8

0.0

2,276.9

0.0023%

719.6

(243.0)

945.1

17.5

0

1,665.1

2001

2,730.1

83.2

0.0

2,646.9

0.0019%

3,123.4

2,199.3

887.9

36.2

0

(393.3)

2000

2,570.1

64.3

0.0

2,505.8

0.0016%

945.2

28.0

883.9

33.3

0

1,624.9

1999

2,416.7

48.4

0.0

2,368.3

0.0013%

2,047.0

1,199.7

823.4

23.9

0

369.7

1998

2,584.6

37.0

0.0

2,547.6

0.0010%

817.5

(5.7)

782.6

40.6

0

1,767.1

1997

2,165.5

38.6

0.0

2,126.9

0.0011%

247.3

(505.7)

677.2

75.8

0

1,918.2

1996

7,156.8

5,294.2

0.0

1,862.6

0.1622%

353.6

(417.2)

568.3

202.5

0

6,803.2

1995

5,229.2

3,877.0

0.0

1,352.2

0.1238%

202.2

(354.2)

510.6

45.8

0

5,027.0

1994

7,682.1

6,722.7

0.0

959.4

0.2192%

(1,825.1)

(2,459.4)

443.2

191.1

0

9,507.2

1993

7,354.5

6,682.0

0.0

672.5

0.2157%

(6,744.4)

(7,660.4)

418.5

497.5

0

14,098.9

1992

6,479.3

5,758.6

0.0

720.7

0.1815%

(596.8)

(2,274.7)

614.83

1,063.1

35.4

7,111.5

1991

5,886.5

5,254.0

0.0

632.5

0.1613%

16,925.3

15,496.2

326.1

1,103.0

42.4

(10,996.4)

1990

3,855.3

2,872.3

0.0

983.0

0.0868%

13,059.3

12,133.1

275.6

650.6

56.1

(9,147.9)

1989

3,494.8

1,885.0

0.0

1,609.8

0.0816%

4,352.2

3,811.3

219.9

321.0

5.6

(851.8)

1988

3,347.7

1,773.0

0.0

1,574.7

0.0825%

7,588.4

6,298.3

223.9

1,066.2

0

(4,240.7)

1987

3,319.4

1,696.0

0.0

1,623.4

0.0833%

3,270.9

2,996.9

204.9

69.1

0

48.5

1986

3,260.1

1,516.9

0.0

1,743.2

0.0787%

2,963.7

2,827.7

180.3

(44.3)

0

296.4

1985

3,385.5

1,433.5

0.0

1,952.0

0.0815%

1,957.9

1,569.0

179.2

209.7

0

1,427.6

1984

3,099.5

1,321.5

0.0

1,778.0

0.0800%

1,999.2

1,633.4

151.2

214.6

0

1,100.3

1983

2,628.1

1,214.9

164.0

1,577.2

0.0714%

969.9

675.1

135.7

159.1

0

1,658.2

1982

2,524.6

1,108.9

96.2

1,511.9

0.0769%

999.8

126.4

129.9

743.5

0

1,524.8

1981

2,074.7

1,039.0

117.1

1,152.8

0.0714%

848.1

320.4

127.2

400.5

0

1,226.6

1980

1,310.4

951.9

521.1

879.6

0.0370%

83.6

(38.1)

118.2

3.5

0

1,226.8

Appendices

117

2012

ANNUAL REPORT

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2012 (continued)
Dollars in Millions
Income

Year

Total

Expenses and Losses

Assessment
Income

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

Provision
for
Ins. Losses

Total

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution
Fund

Net Income/
(Loss)

1979

1,090.4

881.0

524.6

734.0

0.0333%

93.7

(17.2)

106.8

4.1

0

996.7

1978

952.1

810.1

443.1

585.1

0.0385%

148.9

36.5

103.3

9.1

0

803.2

1977

837.8

731.3

411.9

518.4

0.0370%

113.6

20.8

89.3

3.5

0

724.2

4

1976

764.9

676.1

379.6

468.4

0.0370%

212.3

28.0

180.4

3.9

0

552.6

1975

689.3

641.3

362.4

410.4

0.0357%

97.5

27.6

67.7

2.2

0

591.8

1974

668.1

587.4

285.4

366.1

0.0435%

159.2

97.9

59.2

2.1

0

508.9

1973

561.0

529.4

283.4

315.0

0.0385%

108.2

52.5

54.4

1.3

0

452.8

5

1972

467.0

468.8

280.3

278.5

0.0333%

65.7

10.1

49.6

6.0

0

401.3

1971

415.3

417.2

241.4

239.5

0.0345%

60.3

13.4

46.9

0.0

0

355.0

1970

382.7

369.3

210.0

223.4

0.0357%

46.0

3.8

42.2

0.0

0

336.7

1969

335.8

364.2

220.2

191.8

0.0333%

34.5

1.0

33.5

0.0

0

301.3

1968

295.0

334.5

202.1

162.6

0.0333%

29.1

0.1

29.0

0.0

0

265.9

1967

263.0

303.1

182.4

142.3

0.0333%

27.3

2.9

24.4

0.0

0

235.7

1966

241.0

284.3

172.6

129.3

0.0323%

19.9

0.1

19.8

0.0

0

221.1

1965

214.6

260.5

158.3

112.4

0.0323%

22.9

5.2

17.7

0.0

0

191.7

1964

197.1

238.2

145.2

104.1

0.0323%

18.4

2.9

15.5

0.0

0

178.7

1963

181.9

220.6

136.4

97.7

0.0313%

15.1

0.7

14.4

0.0

0

166.8

1962

161.1

203.4

126.9

84.6

0.0313%

13.8

0.1

13.7

0.0

0

147.3

1961

147.3

188.9

115.5

73.9

0.0323%

14.8

1.6

13.2

0.0

0

132.5

1960

144.6

180.4

100.8

65.0

0.0370%

12.5

0.1

12.4

0.0

0

132.1

1959

136.5

178.2

99.6

57.9

0.0370%

12.1

0.2

11.9

0.0

0

124.4

1958

126.8

166.8

93.0

53.0

0.0370%

11.6

0.0

11.6

0.0

0

115.2

1957

117.3

159.3

90.2

48.2

0.0357%

9.7

0.1

9.6

0.0

0

107.6

1956

111.9

155.5

87.3

43.7

0.0370%

9.4

0.3

9.1

0.0

0

102.5

1955

105.8

151.5

85.4

39.7

0.0370%

9.0

0.3

8.7

0.0

0

96.8

1954

99.7

144.2

81.8

37.3

0.0357%

7.8

0.1

7.7

0.0

0

91.9

1953

94.2

138.7

78.5

34.0

0.0357%

7.3

0.1

7.2

0.0

0

86.9

1952

88.6

131.0

73.7

31.3

0.0370%

7.8

0.8

7.0

0.0

0

80.8

1951

83.5

124.3

70.0

29.2

0.0370%

6.6

0.0

6.6

0.0

0

76.9

1950

84.8

122.9

68.7

30.6

0.0370%

7.8

1.4

6.4

0.0

0

77.0

1949

151.1

122.7

0.0

28.4

0.0833%

6.4

0.3

6.1

0.0

0

144.7

1948

145.6

119.3

0.0

26.3

0.0833%

7.0

0.7

6.36

0.0

0

138.6

1947

157.5

114.4

0.0

43.1

0.0833%

9.9

0.1

9.8

0.0

0

147.6

1946

130.7

107.0

0.0

23.7

0.0833%

10.0

0.1

9.9

0.0

0

120.7

118

Appendices

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2012 (continued)
Dollars in Millions
Income

Year

Expenses and Losses

Assessment
Income

Total

Assessment
Credits

Investment
and Other

Effective
Assessment
Rate1

Provision
for
Ins. Losses

Total

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution
Fund

Net Income/
(Loss)

1945

121.0

93.7

0.0

27.3

0.0833%

9.4

0.1

9.3

0.0

0

111.6

1944

99.3

80.9

0.0

18.4

0.0833%

9.3

0.1

9.2

0.0

0

90.0

1943

86.6

70.0

0.0

16.6

0.0833%

9.8

0.2

9.6

0.0

0

76.8

1942

69.1

56.5

0.0

12.6

0.0833%

10.1

0.5

9.6

0.0

0

59.0

1941

62.0

51.4

0.0

10.6

0.0833%

10.1

0.6

9.5

0.0

0

51.9

1940

55.9

46.2

0.0

9.7

0.0833%

12.9

3.5

9.4

0.0

0

43.0

1939

51.2

40.7

0.0

10.5

0.0833%

16.4

7.2

9.2

0.0

0

34.8

1938

47.7

38.3

0.0

9.4

0.0833%

11.3

2.5

8.8

0.0

0

36.4

1937

48.2

38.8

0.0

9.4

0.0833%

12.2

3.7

8.5

0.0

0

36.0

1936

43.8

35.6

0.0

8.2

0.0833%

10.9

2.6

8.3

0.0

0

32.9

1935

20.8

11.5

0.0

9.3

0.0833%

11.3

2.8

8.5

0.0

0

9.5

1933-34

7.0

0.0

0.0

7.0

N/A

10.0

0.2

9.8

0.0

0

(3.0)

1

	 Figures represent only BIF-insured institutions prior to 1990, BIF- and SAIF-insured institutions from 1990 through 2005, and DIF-insured institutions beginning
in 2006. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment rate is calculated
from annual assessment income (net of assessment credits), excluding transfers to the Financing Corporation (FICO), Resolution Funding Corporation
(REFCORP) and FSLIC Resolution Fund, divided by the four quarter average assessment base. The effective rates from 1950 through 1984 varied 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 minimum
of 0.15 percent in 1991. The effective rates in 1991 and 1992 varied because the FDIC exercised new authority to increase assessments above the statutory
minimum rate when needed. Beginning in 1993, the effective rate was based on a risk-related premium system under which institutions paid 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 percent. As a result, BIF assessment
rates were reduced to a range of 0.04 percent to 0.31 percent of assessable deposits, effective June 1995, and assessments totaling $1.5 billion were refunded
in September 1995. Assessment rates for the BIF were lowered again to a range of 0 to 0.27 percent of assessable deposits, effective the start of 1996. In
1996, the SAIF collected a one-time special assessment of $4.5 billion. Subsequently, assessment rates for the SAIF were lowered to the same range as the
BIF, effective October 1996. This range of rates remained unchanged for both funds through 2006. As part of the implementation of the Federal Deposit
Insurance Reform Act of 2005, assessment rates were increased to a range of 0.05 percent to 0.43 percent of assessable deposits effective at the start of 2007,
but many institutions received a one-time assessment credit ($4.7 billion in total) to offset the new assessments. For the first quarter of 2009, assessment rates
were increased to a range of 0.12 to 0.50 percent of assessable deposits. From the second quarter of 2009 through the first quarter of 2011, initial assessment
rates ranged between 0.12 and 0.45 percent of assessable deposits. Initial rates are subject to further adjustments. Beginning in the second quarter of 2011,
the assessment base changed to average total consolidated assets less average tangible equity (with certain adjustments for banker’s banks and custodial
banks), as required by the Dodd-Frank Act. The FDIC implemented a new assessment rate schedule at the same time to conform to the larger assessment
base. Initial assessment rates were lowered to a range of 0.05 to 0.35 percent of the new base. The annualized assessment rates averaged approximately
17.6 cents per $100 of assessable deposits for the first quarter of 2011 and 11.1 cents per $100 of the new base for the last three quarters of 2011 (which is
the figure shown in the table). The effective assessment rate for 2012 was based on full year accrued assessment income, actual assessment base figures for
the first three quarters of 2012, and an estimate for the assessment base for fourth quarter 2012. On June 30, 2009, a special assessment was imposed on all
insured banks and thrifts, which amounted in aggregate to approximately $5.4 billion. For 8,106 institutions, with $9.3 trillion in assets, the special assessment
was 5 basis points of each institution’s assets minus tier one capital; 89 other institutions, with assets of $4.0 trillion, had their special assessment capped at 10
basis points of their second quarter assessment base.

2

	 These expenses, which are presented as operating expenses in the Statement 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 Resolutions, net” line on the Balance Sheet. The narrative and graph presented in the “Corporate Planning and Budget” section of this
report (page 111) 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 (1992).

4

	 Includes a $106 million net loss on government securities (1976).

5

	 This amount represents interest and other insurance expenses from 1933 to 1972.

6

	 Includes the aggregate amount of $81 million of interest paid on capital stock between 1933 and 1948.

Appendices

119

2012

ANNUAL REPORT

Number, Assets, Deposits, Losses, and Loss to Funds of Insured Thrifts
Taken Over or Closed Because of Financial Difficulties, 1989 through 1995 1
Dollars in Thousands

Year

Total

Assets

Deposits

Estimated
Receivership
Loss2

Total

748

$393,986,574

$317,501,978

$75,977,702

$81,577,294

1995

2

423,819

414,692

28,192

27,750

Loss to
Funds3

1994

2

136,815

127,508

11,472

14,599

1993

10

6,147,962

4,881,461

267,595

65,212

1992

59

44,196,946

34,773,224

3,286,957

3,832,195

1991

144

78,898,904

65,173,122

9,235,906

9,734,202

1990

213

129,662,498

98,963,962

16,062,552

19,257,446

19894

318

134,519,630

113,168,009

47,085,028

48,645,890

1

2

	 The estimated losses represent the projected loss at the fund level from receiverships for unreimbursed subrogated claims of the FRF and
unpaid advances to receiverships from the FRF.							

3

	 The Loss to Funds represents the total resolution cost of the failed thrifts in the FRF-RTC fund, 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.						

4

120

	 Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation (RTC). Since the RTC
was terminated 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. Year is the year of failure, not the year of resolution.	

	 Total for 1989 excludes nine failures of the former FSLIC.

Appendices

FDIC-Insured Institutions Closed During 2012
Dollars in Thousands
Codes for Bank Class:
NM =	 State-chartered bank that is not a member
of the Federal Reserve System
N

=	 National Bank

SB =	 Savings Bank
SI

=	 Stock and Mutual
Savings Bank

SM = 	 State-chartered bank that is a
member of the Federal Reserve
System
SA =	 Savings Association

Name and Location

Bank
Class

Number
of
Deposit
Accounts

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing
or
Acquisition

Receiver/Assuming
Bank and Location

Purchase and Assumption – All Deposits
Fort Lee Federal
Savings Bank, FSB
Fort Lee, NJ

SA

882

$48,861

$47,786

$48,938

$18,311

04/20/12

Alma Bank
Astoria, NY

Montgomery Bank & Trust
Ailey, GA

NM

7,153

$153,208

$164,181

$171,459

$75,228

07/06/12

Ameris Bank
Moultrie, GA

Second Federal SLA
of Chicago
Chicago, IL

SA

13,801

$190,891

$171,627

$195,896

$76,851

07/20/12

Hinsdale Bank
& Trust Company
Hinsdale, IL

Whole Bank Purchase and Assumption – All Deposits
American Eagle
Savings Bank
Boothwyn, PA

SA

1,467

$19,259

$17,548

$18,730

$7,027

01/20/12

Capital Bank, N.A.
Rockville, MD

Central Florida State Bank
Belleview, FL

NM

2,433

$71,485

$71,080

$71,596

$30,740

01/20/12

CenterState Bank
of Florida, N.A.
Winter Haven, FL

The First State Bank
Stockbridge, GA

NM

32,773

$516,760

$509,065

$509,638

$219,086

01/20/12

Hamilton State Bank
Hoschton, GA

BankEast
Knoxville, TN

SM

7,795

$261,947

$259,571

$249,604

$76,798

01/27/12

U.S. Bank National
Association
Cincinnati, OH

First Guaranty Bank &
Trust of Jacksonville
Jacksonville, FL

NM

10,733

$397,082

$378,309

$371,225

$89,662

01/27/12

CenterState Bank
of Florida, N.A.
Winter Haven, FL

Patriot Bank Minnesota
Forest Lake, MN

NM

4,897

$105,029

$102,833

$100,870

$42,651

01/27/12

First Resource Bank
Savage, MN

Tennessee Commerce
Bank
Franklin, TN

NM

12,437

$1,009,154

$1,037,716

$1,056,017

$374,555

01/27/12

Republic Bank
& Trust Company
Louisville, KY

Charter National Bank
& Trust
Hoffman Estates, IL

N

7,053

$93,894

$89,485

$92,749

$25,974

02/10/12

Barrington Bank
& Trust Company, N.A.
Barrington, IL

SCB Bank
Shelbyville, IN

SA

7,848

$182,561

$171,365

$169,673

$41,513

02/10/12

First Merchants Bank, N.A.
Muncie, IN

Central Bank of Georgia
Ellaville, GA

NM

9,991

$278,860

$266,589

$262,985

$69,584

02/24/12

Ameris Bank
Moultrie, GA

Global Commerce Bank
Doraville, GA

NM

5,006

$143,678

$116,813

$118,373

$33,001

03/02/12

Metro City Bank
Doraville, GA

Appendices

121

2012

ANNUAL REPORT
FDIC-Insured Institutions Closed During 2012 (continued)
Dollars in Thousands
Codes for Bank Class:
NM =	 State-chartered bank that is not a member
of the Federal Reserve System
N

=	 National Bank

SB =	 Savings Bank
SI

=	 Stock and Mutual
Savings Bank

SM = 	 State-chartered bank that is a
member of the Federal Reserve
System
SA =	 Savings Association

Bank
Class

Number
of
Deposit
Accounts

Covenant Bank & Trust
Rock Spring, GA

NM

2,340

$95,725

$90,632

$87,210

$38,847

03/23/12

Stearns Bank, N.A.
St. Cloud, MN

Premier Bank
Wilmette, IL

NM

3,097

$268,703

$198,953

$196,298

$64,177

03/23/12

International Bank
of Chicago
Chicago, IL

Fidelity Bank
Dearborn, MI

NM

22,179

$818,237

$747,640

$713,322

$96,013

03/30/12

The Huntington
National Bank
Columbus, OH

Harvest Bank of Maryland
Gaithersburg, MD

NM

3,174

$163,019

$145,534

$141,811

$28,010

04/27/12

Sonabank
McLean, VA

Inter Savings Bank, FSB
D/B/A InterBank, FSB
Maple Grove, MN

SA

13,528

$463,840

$458,053

$456,244

$120,949

04/27/12

Great Southern Bank
Reeds Spring, MO

Palm Desert
National Bank
Palm Desert, CA

N

2,905

$129,253

$129,023

$123,485

$30,892

04/27/12

Pacific Premier Bank
Costa Mesa, CA

Plantation Federal Bank
Pawleys Island, SC

SA

13,816

$433,512

$415,943

$420,208

$87,831

04/27/12

First Federal Bank
Charleston, SC

Security Bank, National
Association
North Lauderdale, FL

N

2,322

$101,026

$99,067

$99,650

$18,472

05/04/12

Banesco USA
Coral Gables, FL

Alabama Trust Bank,
National Association
Sylacauga, AL

N

2,719

$51,553

$45,149

$44,121

$14,065

05/18/12

Southern States Bank
Anniston, AL

Carolina Federal
Savings Bank
Charleston, SC

SA

3,458

$54,373

$53,082

$54,557

$20,566

06/08/12

Bank of North Carolina
Thomasville, NC

Farmers’ and Traders’
State Bank
Shabbona, IL

NM

3,010

$43,077

$42,302

$39,719

$13,403

06/08/12

First State Bank
Mendota, IL

First Capital Bank
Kingfisher, OK

NM

2,422

$44,448

$44,828

$47,726

$9,883

06/08/12

F & M Bank
Edmond, OK

Waccamaw Bank
Whiteville, NC

SM

22,381

$533,114

$472,704

$462,747

$60,442

06/08/12

First Community Bank
Bluefield, VA

Putnam State Bank
Palatka, FL

NM

8,035

$169,489

$160,024

$156,122

$43,255

06/15/12

Harbor Community Bank
Indiantown, FL

Security Exchange Bank
Marietta, GA

NM

2,832

$150,962

$147,896

$148,018

$42,430

06/15/12

Fidelity Bank
Atlanta, GA

Name and Location

122

Appendices

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing
or
Acquisition

Receiver/Assuming
Bank and Location

FDIC-Insured Institutions Closed During 2012 (continued)
Dollars in Thousands
Codes for Bank Class:
NM =	 State-chartered bank that is not a member
of the Federal Reserve System
N

=	 National Bank

SB =	 Savings Bank
SI

=	 Stock and Mutual
Savings Bank

SM = 	 State-chartered bank that is a
member of the Federal Reserve
System
SA =	 Savings Association

Bank
Class

Number
of
Deposit
Accounts

Estimated
Loss to
the DIF2

Date of
Closing
or
Acquisition

Total
Assets1

The Farmers Bank
of Lynchburg
Lynchburg, TN

NM

9,293

$163,859

$156,402

$153,177

$35,720

06/15/12

Clayton Bank and Trust
Knoxville, TN

Glasgow Savings Bank
Glasgow, MO

NM

2,176

$22,341

$21,809

$22,627

$3,081

07/13/12

Regional Missouri Bank
Marceline, MO

First Cherokee State Bank
Woodstock, GA

NM

9,617

$209,021

$182,114

$180,780

$40,998

07/20/12

Community
& Southern Bank
Atlanta, GA

Georgia Trust Bank
Buford, GA

NM

2,404

$116,890

$114,748

$116,810

$24,782

07/20/12

Community
& Southern Bank
Atlanta, GA

Heartland Bank
Leawood, KS

NM

1,965

$96,002

$89,723

$86,811

$7,161

07/20/12

Metcalf Bank
Lees Summit, MO

The Royal Palm Bank
of Florida
Naples, FL

NM

2,303

$78,771

$78,876

$78,836

$16,406

07/20/12

First National Bank
of the Gulf Coast
Naples, FL

Jasper Banking Company
Jasper, GA

NM

10,984

$206,672

$204,238

$198,872

$62,319

07/27/12

Stearns Bank, N.A
St. Cloud, MN

Waukegan Savings Bank
Waukegan, IL

SB

5,737

$83,679

$73,001

$73,716

$22,435

08/03/12

First Midwest Bank
Itasca, IL

First Commerical Bank
Bloomington, MN

NM

3,642

$215,867

$206,809

$198,028

$65,923

09/07/12

Republic Bank
& Trust Company
Louisville, KY

Truman Bank
St. Louis, MO

SM

9,526

$282,338

$245,716

$237,573

$36,710

09/14/12

Simmons First
National Bank
Pine Bluff, AR

First United Bank
Crete, IL

NM

23,002

$328,422

$316,877

$321,680

$50,686

09/28/12

Old Plank Trail
Community Bank, N.A.
New Lenox, IL

Excel Bank
Sedalia, MO

NM

10,023

$186,113

$173,670

$170,087

$44,297

10/19/12

Simmons First
National Bank
Pine Bluff, AR

First East Side
Savings Bank
Tamarac, FL

SA

1,242

$65,686

$64,888

$66,403

$12,348

10/19/12

Stearns Bank, N.A.
St. Cloud, MN

GulfSouth Private Bank
Destin, FL

NM

1,896

$139,391

$131,579

$128,540

$38,932

10/19/12

SmartBank
Pigeon Forge, TN

Name and Location

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Receiver/Assuming
Bank and Location

Appendices

123

2012

ANNUAL REPORT
FDIC-Insured Institutions Closed During 2012 (continued)
Dollars in Thousands
Codes for Bank Class:
NM =	 State-chartered bank that is not a member
of the Federal Reserve System
N

=	 National Bank

SB =	 Savings Bank
SI

=	 Stock and Mutual
Savings Bank

SM = 	 State-chartered bank that is a
member of the Federal Reserve
System
SA =	 Savings Association

Bank
Class

Number
of
Deposit
Accounts

Total
Assets1

N

59,696

$923,959

$869,440

Heritage Bank of Florida
Lutz, FL

NM

6,664

$225,477

Hometown Community
Bank
Braselton, GA

NM

3,158

Community Bank
of the Ozarks
Sunrise Beach, MO

NM

2,864

Name and Location
Citizens First
National Bank
Princeton, IL

Estimated
Loss to
the DIF2

Date of
Closing
or
Acquisition

$840,261

$47,650

11/02/12

Heartland Bank
& Trust Company
Bloomington, IL

$223,309

$220,586

$67,786

11/02/12

Centennial Bank
Conway, AR

$124,561

$108,931

$105,207

$39,125

11/16/12

CertusBank, N.A.
Easley, SC

$42,816

$41,881

$40,247

$12,415

12/14/12

Bank of Sullivan
Sullivan, MO

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Receiver/Assuming
Bank and Location

Insured Deposit Transfer/Purchase & Assumption
Bank of the Eastern Shore
Cambridge, MD

SM

9,691

$162,460

$150,951

$166,270

$52,968

04/27/12

Federal Deposit
Insurance Corporation

Home Savings of America
Little Falls, MN

SA

12,025

$434,111

$432,223

$481,476

$83,646

02/24/12

Federal Deposit
Insurance Corporation

New City Bank
Chicago, IL

NM

850

$71,202

$72,399

$78,269

$20,082

03/09/12

Federal Deposit
Insurance Corporation

Nova Bank
Berwyn, PA

SB

12,390

$444,710

$395,248

$439,261

$91,238

10/26/12

Federal Deposit
Insurance Corporation

Insured Deposit Payoff

1

	 Total Assets and Total Deposits data are based upon the last Call Report filed by the institution prior to failure.

2

	 Estimated losses are as of 12/31/12. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales,
which ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations.
This amount does not include the estimated loss allocable to the Transaction Account Guarantee and Debt Guarantee Program claims.

124

Appendices

Recoveries and Losses by the Deposit Insurance Fund on Disbursements
for the Protection of Depositors, 1934 – 2012
Dollars in Thousands
Bank and Thrift Failures1

Year2

Number
of Banks/
Thrifts

Total
Assets3

Insured Deposit
Funding
and Other
Disbursements

Total
Deposits3

Estimated
Additional
Recoveries

Recoveries

2,560
2011

$925,620,900

$695,536,729

$572,325,121

51

2012

$395,365,464 $54,971,765

Estimated
Losses

11,617,348

11,009,630

11,034,508

499,565

7,788,019

$121,987,892
2,746,924

92

34,922,997

31,071,862

31,686,966

2,230,090

20,693,288

8,763,588

4

157

92,084,987

78,290,185

82,210,860

50,082,606

10,796,927

21,331,327

4

2009

140

169,709,160

137,783,121

135,926,307

86,969,627

12,869,470

36,087,210

20084

25

371,945,480

234,321,715

205,447,245

183,261,881

2,279,073

19,906,291

2007

3

2,614,928

2,424,187

1,917,998

1,369,413

322,914

225,671

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

4

170,099

156,733

138,926

134,978

31

3,917

2003

3

947,317

901,978

883,772

812,933

8,192

62,647

2002

11

2,872,720

2,512,834

2,127,047

1,704,030

7,556

415,461

2001

4

1,821,760

1,661,214

1,605,249

1,128,577

184,367

292,305

2000

7

410,160

342,584

297,313

265,175

0

32,138

1999

8

1,592,189

1,320,573

1,307,260

711,758

5,583

589,919

1998

3

290,238

260,675

292,691

58,248

11,644

222,799

1997

1

27,923

27,511

25,546

20,520

0

5,026

1996

6

232,634

230,390

201,533

140,918

0

60,615

2010

1995

6

802,124

776,387

609,043

524,571

0

84,472

1994

13

1,463,874

1,397,018

1,224,769

1,045,718

0

179,051

1993

41

3,828,939

3,509,341

3,841,658

3,209,012

0

632,646

1992

120

45,357,237

39,921,310

14,541,102

10,866,760

309

3,674,033

1991

124

64,556,512

52,972,034

21,499,326

15,500,130

4,392

5,994,804

1990

168

16,923,462

15,124,454

10,812,484

8,040,995

0

2,771,489

1989

206

28,930,572

24,152,468

11,443,281

5,247,995

0

6,195,286

1988

200

38,402,475

26,524,014

10,432,655

5,055,158

0

5,377,497

1987

184

6,928,889

6,599,180

4,876,994

3,014,502

0

1,862,492

1986

138

7,356,544

6,638,903

4,632,121

2,949,583

0

1,682,538

1985

116

3,090,897

2,889,801

2,154,955

1,506,776

0

648,179

1984

78

2,962,179

2,665,797

2,165,036

1,641,157

0

523,879

1983

44

3,580,132

2,832,184

3,042,392

1,973,037

0

1,069,355

1982

32

1,213,316

1,056,483

545,612

419,825

0

125,787

1981

7

108,749

100,154

114,944

105,956

0

8,988

1980

10

239,316

219,890

152,355

121,675

0

30,680

1934 - 1979

558

8,615,743

5,842,119

5,133,173

4,752,295

0

380,878

Appendices

125

2012

ANNUAL REPORT

Recoveries and Losses by the Deposit Insurance Fund on Disbursements
for the Protection of Depositors, 1934 – 2012 (continued)
Dollars in Thousands
Assistance Transactions

Year2

Number
of Banks/
Thrifts
154

Total
Assets3

Insured Deposit
Funding
and Other
Disbursements

Total
Deposits3

Estimated
Losses

$11,630,356

$6,199,875

$0

$5,430,481

2012

0

0

0

0

0

0

0

2011

0

0

0

0

0

0

0

0

0

0

0

2010

$3,317,099,253 $1,442,173,417

Recoveries

Estimated
Additional
Recoveries

0

0

0

5

8

1,917,482,183

1,090,318,282

0

0

0

0

20085

5

1,306,041,994

280,806,966

0

0

0

0

2007

0

0

0

0

0

0

0

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

0

0

0

0

0

0

0

2003

0

0

0

0

0

0

0

2002

0

0

0

0

0

0

0

2001

0

0

0

0

0

0

0

2000

0

0

0

0

0

0

0

1999

0

0

0

0

0

0

0

1998

0

0

0

0

0

0

0

1997

0

0

0

0

0

0

0

1996

0

0

0

0

0

0

0

1995

0

0

0

0

0

0

0

1994

0

0

0

0

0

0

0

1993

0

0

0

0

0

0

0

2009

1992

2

33,831

33,117

1,486

1,236

0

250

1991

3

78,524

75,720

6,117

3,093

0

3,024

1990

1

14,206

14,628

4,935

2,597

0

2,338

1989

1

4,438

6,396

2,548

252

0

2,296

1988

80

15,493,939

11,793,702

1,730,351

189,709

0

1,540,642

1987

19

2,478,124

2,275,642

160,877

713

0

160,164

1986

7

712,558

585,248

158,848

65,669

0

93,179

1985

5,886,381

5,580,359

765,732

406,676

0

359,056

2

40,470,332

29,088,247

5,531,179

4,414,904

0

1,116,275

1983

126

4

1984

4

3,611,549

3,011,406

764,690

427,007

0

337,683

Appendices

Recoveries and Losses by the Deposit Insurance Fund on Disbursements
for the Protection of Depositors, 1934 – 2012 (continued)
Dollars in Thousands
Assistance Transactions

Year2

Number
of Banks/
Thrifts

Total
Assets3

Total
Deposits3

Insured Deposit
Funding
and Other
Disbursements

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

1982

10

10,509,286

9,118,382

1,729,538

686,754

0

1,042,784

1981

3

4,838,612

3,914,268

774,055

1,265

0

772,790

1980

1

7,953,042

5,001,755

0

0

0

0

1934 - 1979

4

1,490,254

549,299

0

0

0

0

1	

Institutions closed by the FDIC, including deposit payoff, insured deposit transfer, and deposit assumption cases.

2	

For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are only
for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2012, figures
are for the DIF.

3	

Assets and deposit data are based on the last Call Report or TFR filed before failure.

4	

Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of
12/31/10 for TAG accounts in 2010, 2009, and 2008 are $519 million, $1,526 million, and $15 million, respectively.

5	

Includes institutions where assistance was provided under a systemic risk determination. Any costs that exceed the amounts estimated under the
least cost resolution requirement would be recovered through a special assessment on all FDIC-insured institutions.

Appendices

127

ANNUAL REPORT

2012

B. More About the FDIC
FDIC Board of Directors

Martin J. Gruenberg
Martin J. Gruenberg is the 20th Chairman of
the FDIC, receiving Senate confirmation on
November 15, 2012, for a five-year term. Mr.
Gruenberg has served on the FDIC Board of
Directors since August 22, 2005, including
as Acting Chairman from July 9, 2011, to
November 15, 2012, and also from November
16, 2005, to June 26, 2006.
Mr. Gruenberg joined the FDIC Board after
broad congressional experience in the
financial services and regulatory areas.
He served as Senior Counsel to Senator
Paul S. Sarbanes (D-MD) on the staff of the
Senate Committee on Banking, Housing,
and Urban Affairs from 1993 to 2005.
Mr. Gruenberg advised the Senator on issues
of domestic and international financial

128

Appendices

regulation, monetary policy, and trade. He
also served as Staff Director of the Banking
Committee’s Subcommittee on International
Finance and Monetary Policy, from 1987
to 1992. Major legislation in which Mr.
Gruenberg played an active role during
his service on the Committee includes the
Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 (FIRREA);
the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA); the
Gramm-Leach-Bliley Act; and the SarbanesOxley Act of 2002.
Mr. Gruenberg served as Chairman of the
Executive Council and President of the
International Association of Deposit
Insurers (IADI) from November 2007 to
November 2012.

Seated (left to right):
Thomas M. Hoenig,
Martin J. Gruenberg,
Jeremiah O. Norton
Standing (left to
right): Thomas J.
Curry, Richard Cordray

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.

Thomas M. Hoenig
Thomas M. Hoenig was confirmed
by the Senate as Vice Chairman of
the FDIC on November 15, 2012. He
joined the FDIC on April 16, 2012, as
a member of the Board of Directors
of the FDIC for a six-year term. He is
also a member of the Executive Board
of the International Association of
Deposit Insurers.
Prior to serving on the FDIC Board,
Mr. Hoenig was the President of the
Federal Reserve Bank of Kansas City
and a member of the Federal Reserve
System’s Federal Open Market
Committee from 1991 to 2011.
Mr. Hoenig was with the Federal
Reserve for 38 years, beginning as an
economist, and then as a senior officer
in banking supervision during the
U.S. banking crisis of the 1980s. In
1986, he led the Kansas City Federal
Reserve Bank’s Division of Bank
Supervision and Structure, directing
the oversight of more than 1,000 banks
and bank holding companies with
assets ranging from less than $100
million to $20 billion. He became
President of the Kansas City Federal
Reserve Bank on October 1, 1991.
Mr. Hoenig is a native of Fort Madison,
Iowa, and received a doctorate in
economics from Iowa State University.

Jeremiah O. Norton
Jeremiah O. Norton was sworn in
on April 16, 2012, as a member of
the FDIC Board of Directors for
the remainder of a term expiring
July 15, 2013.

Prior to joining the FDIC’s Board, Mr.
Norton was an Executive Director at
J.P. Morgan Securities LLC, in New
York, NY.
Mr. Norton was in government for
a number of years before joining
the FDIC Board, most recently as
the Deputy Assistant Secretary for
Financial Institutions Policy at the
U.S. Treasury Department. Mr. Norton
also was a Legislative Assistant and
professional staff member for U.S.
Representative Edward R. Royce.
Mr. Norton received a J.D. from the
Georgetown University Law Center
and an A.B. in economics from Duke
University.

Thomas J. Curry
Thomas J. Curry was sworn in as the
30th Comptroller of the Currency on
April 9, 2012. The Comptroller of
the Currency is the administrator of
national banks and federal savings
associations, and chief officer of
the Office of the Comptroller of the
Currency (OCC). The OCC supervises
more than 2,000 national banks and
federal savings associations and about
50 federal branches and agencies
of foreign banks in the United
States. These institutions comprise
nearly two-thirds of the assets of the
commercial banking system. The
Comptroller also is a Director of
NeighborWorks® America.
Prior to becoming Comptroller of
the Currency, Mr. Curry served as
a Director of the FDIC Board since
January 2004, and as the Chairman of
the NeighborWorks® America Board of
Directors. 
Prior to joining the FDIC’s Board
of Directors, Mr. Curry served five
Massachusetts Governors as the

Commonwealth’s Commissioner of
Banks from 1990 to 1991 and from
1995 to 2003. He served as Acting
Commissioner from February 1994
to June 1995. He previously served
as First Deputy Commissioner and
Assistant General Counsel within the
Massachusetts Division of Banks. He
entered state government in 1982 as
an attorney with the Massachusetts’
Secretary of State’s Office.
Mr. Curry served as the Chairman
of the Conference of State Bank
Supervisors from 2000 to 2001, and
served two terms on the State Liaison
Committee of the Federal Financial
Institutions Examination Council,
including a term as Committee
Chairman.
He 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.

Richard Cordray
Richard Cordray serves as the first
Director of the Consumer Financial
Protection Bureau. He previously led
the Bureau’s Enforcement Division.
Prior to joining the Bureau, Mr.
Cordray served on the front lines
of consumer protection as Ohio’s
Attorney General. Mr. Cordray
recovered more than $2 billion
for Ohio’s retirees, investors, and
business owners, and took major
steps to help protect its consumers
from fraudulent foreclosures and
financial predators. In 2010, his office
responded to a record number of
consumer complaints, but Mr. Cordray
went further and opened that process
for the first time to small businesses
and nonprofit organizations to ensure
protections for even more Ohioans.

Appendices

129

ANNUAL REPORT
To recognize his work on behalf of
consumers as Attorney General, the
Better Business Bureau presented Mr.
Cordray with an award for promoting
an ethical marketplace.
Mr. Cordray also served as Ohio
Treasurer and Franklin County
Treasurer, two elected positions in
which he led state and county banking,
investment, debt, and financing
activities. As Ohio Treasurer, he
resurrected a defunct economic
development program that provides
low-interest loan assistance to small
businesses to create jobs, re-launched
the original concept as GrowNOW,

130

Appendices

and pumped hundreds of millions
of dollars into access for credit
to small businesses. Mr. Cordray
simultaneously created a Bankers
Advisory Council to share ideas about
the program with community bankers
across Ohio.
Earlier in his career, Mr. Cordray was
an adjunct professor at the Ohio State
University College of Law, served as
a State Representative for the 33rd
Ohio House District, was the first
Solicitor General in Ohio’s history, and
was a sole practitioner and Counsel
to Kirkland & Ellis. Mr. Cordray has
argued seven cases before the United

2012
States Supreme Court, by special
appointment of both the Clinton and
Bush Justice Departments. He is a
graduate of Michigan State University,
Oxford University, and the University
of Chicago Law School. Mr. Cordray
was Editor-in-Chief of the University
of Chicago Law Review and later
clerked for U.S. Supreme Court
Justices Byron White and Anthony
Kennedy.
Mr. Cordray lives in Grove City, Ohio,
with his wife Peggy—a Professor
at Capital University Law School in
Columbus—and twin children Danny
and Holly.

Appendices

131

DIVISION OF DEPOSITOR
AND CONSUMER PROTECTION

OFFICE OF
COMMUNICATIONS

Mark E. Pearce
Director

Doreen R. Eberley
Director

Kymberly K. Copa

CHIEF RISK OFFICER

Andrew S. Gray
SENIOR ADVISOR
INTERNATIONAL RESOLUTION POLICY

Stephen A. Quick

DEPUTY TO THE CHAIRMAN

DEPUTY TO THE CHAIRMAN
FOR COMMUNICATIONS

WRITER-EDITOR

Ellen Lazar
SPECIAL ADVISOR
FOR SUPERVISORY MATTERS

OFFICE OF INSPECTOR GENERAL

Bret D. Edwards
Director

OFFICE OF COMPLEX
FINANCIAL INSTITUTIONS

James R. Wigand
Director

Russell G. Pittman

DIVISION OF RESOLUTIONS
& RECEIVERSHIPS

Robert D. Harris
CHIEF INFORMATION OFFICER AND
CHIEF PRIVACY OFFICER

Jon T. Rymer

INTERNAL OMBUDSMAN

Michele A. Heller

Fred S. Carns

SENIOR ADVISOR

John D. Weier

OFFICE OF INTERNATIONAL AFFAIRS

David S. Hoelscher

Barbara A. Ryan

Steven O. App

CFPB
Board Member

Richard Cordray

Arthur J. Murton
Director

DIVISION OF INSURANCE
AND RESEARCH

Cottrell L. Webster
Director

OFFICE OF THE OMBUDSMAN

Eric J. Spitler
Director

OFFICE OF LEGISLATIVE AFFAIRS

D. Michael Collins
Director

OFFICE OF MINORITY AND
WOMEN INCLUSION

Richard J. Osterman, Jr.
Acting Genral Counsel

LEGAL DIVISION

OCC
Board Member

Thomas J. Curry

CHIEF OF STAFF

FDIC
Chairman

Martin J. Gruenberg

DEPUTY TO THE CHAIRMAN
AND CHIEF FINANCIAL OFFICER

FDIC
Board Member

Jeremiah O. Norton

DIVISION OF RISK
MANAGEMENT SUPERVISION

Thom H. Terwilliger
Director

CORPORATE UNIVERSITY

Russell G. Pittman
Director

DIVISION OF INFORMATION
TECHOLOGY

Arleas Upton Kea
Director

DIVISION OF
ADMINISTRATION

Craig R. Jarvill
Director

DIVISION OF FINANCE

FDIC
Vice Chairman, Board Member

Thomas M. Hoenig

BOARD OF DIRECTORS

FDIC Organization Chart/Officials

2012

ANNUAL REPORT
Corporate Staffing
Staffing Trends 2003–2012
9,000

6,000

3,000

0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

5,311

5,078

4,514

4,476

4,532

4,988

6,557

8,150

7,973

7,476

FDIC Year–End Staffing
Note: 2008-2012 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing totals reflect total emplyees on-board.

132

Appendices

Number of Employees by Division/Office 2011 and 2012 (Year-End) 1
Total
Division or Office:
Division of Risk Management Supervision
Division of Depositor and Consumer Protection
Division of Resolutions and Receiverships

Washington

Regional/Field

2012

2011

2012

2011

2012

2011

2,763

2,900

169

168

2,593

2,732

848

819

119

95

729

724

1,428

1,811

165

139

1,263

1,672

Legal Division

716

774

384

354

332

420

Division of Administration

403

431

248

243

156

188

Division of Information Technology

358

354

280

271

78

83

Corporate University

194

176

176

163

18

13

Division of Insurance and Research

195

185

145

134

51

51

Division of Finance

176

177

174

172

2

5

Office of Inspector General

126

117

81

77

46

40

Office of Complex Financial Institutions

148

115

87

64

61

51

20

20

20

20

0

0

102

94

89

77

13

17

Total
7,476
7,973
 	 	 	 	 	 	 	 	 

2,135

1,977

5,341

5,996

2

3

Executive Offices

Executive Support Offices

4

1

	 The FDIC reports staffing totals using a full-time equivalent (FTE) methodology, which is based on an employee’s scheduled work hours.
Division/Office staffing has been rounded to the nearest whole FTE. Totals may not foot due to rounding.

2

	 On January 1, 2012 the Office of the Enterprise Risk Management was merged into the Division of Finance.

3

	 Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, and
External Affairs.

4

	 Includes the Offices of the Legislative Affairs, Communications, International Affairs, Ombudsman, Minority and Women Inclusion, and
Corporate Risk Management.

Appendices

133

2012

ANNUAL REPORT
Sources of Information
FDIC Website
www.fdic.gov
A wide range of banking, consumer,
and financial information is available
on the FDIC’s website. This includes
the FDIC’s Electronic Deposit
Insurance Estimator (EDIE), which
estimates an individual’s deposit
insurance coverage; the Institution
Directory, which contains financial
profiles of FDIC-insured institutions;
Community Reinvestment Act
evaluations and ratings for institutions
supervised by the FDIC; Call Reports,
which are banks’ reports of condition
and income; and Money 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.

and FDIC employees. The Call
Center directly, or in concert with
other FDIC subject-matter 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 refers callers
to other federal and state agencies
as needed. Hours of operation are
8:00 a.m. to 8:00 p.m., Eastern Time,
Monday – Friday, and 9:00 a.m. to 5:00
p.m., Saturday – Sunday. Recorded
information about deposit insurance
and other topics is available 24 hours a
day at the same telephone number.
As a customer service, the FDIC Call
Center has many bilingual Spanish
agents on staff and has access to a
translation service able to assist with
over 40 different languages.

Public Information Center
3501 Fairfax Drive
Room E-1021
Arlington, VA 22226
Phone:	877-275-3342 (877-ASK-FDIC),
	703-562-2200

FDIC Call Center

Fax:	703-562-2296

Phone:	877-275-3342 (877-ASK-FDIC)
	703-562-2222

FDIC Online Catalog:
https://vcart.velocitypayment.com/
fdic/

Hearing Impaired:	800-925-4618
	703-562-2289 	
The FDIC Call Center in Washington,
DC, is the primary telephone point
of contact for general questions from
the banking community, the public,

134

Appendices

E-mail:	 publicinfo@fdic.gov
Publications such as FDIC Quarterly
and Consumer News, and a
variety of deposit insurance and

consumer pamphlets are available
at www.fdic.gov or may be ordered in
hard copy through the FDIC online
catalog. Other information, press
releases, speeches and congressional
testimony, directives to financial
institutions, policy manuals, and
FDIC documents are available
on request through the Public
Information Center. Hours of
operation are 9:00 a.m. to 4:00 p.m.,
Eastern Time, Monday – Friday.

Office of the Ombudsman
3501 Fairfax Drive
Room E-2022
Arlington, VA 22226
Phone:	877-275-3342 (877-ASK-FDIC)
Fax:	703-562-6057
E-mail:	ombudsman@fdic.gov
The Office of the Ombudsman (OO)
is an independent, neutral, and
confidential resource and liaison for
the banking industry and the general
public. The OO responds to inquiries
about the FDIC in a fair, impartial,
and timely manner. It researches
questions and fields complaints from
bankers and bank customers. OO
representatives are present at all
bank closings to provide accurate
information to bank customers,
the media, bank employees, and
the general public. The OO also
recommends ways to improve FDIC
operations, regulations, and customer
service.

Regional and Area Offices
Atlanta Regional Office

Memphis Area Office

6060 Primacy Parkway
10 Tenth Street, NE
Suite 800				Suite 300
Memphis, Tennessee 38119
Atlanta, Georgia 30309			
(901) 685-1603
(678) 916-2200

Boston Area Office
15 Braintree Hill Office Park
Suite 100
Braintree, Massachusetts 02184
(781) 794-5500

Alabama

Arkansas

Connecticut

Florida

Louisiana

Maine

Georgia	

Mississippi

Massachusetts

North Carolina

Tennessee			

New Hampshire

South Carolina
Virginia
West Virginia

Chicago Regional Office
300 South Riverside Plaza
Suite 1700
Chicago, Illinois 60606
(312) 382-6000

Kansas City Regional Office
1100 Walnut Street
Suite 2100
Kansas City, Missouri 64106
(816) 234-8000

Rhode Island
Vermont

San Francisco Regional Office

Kansas

25 Jessie Street at Ecker Square
Suite 2300
San Francisco, California 94105
(415) 546-0160

Minnesota

Alaska

Iowa

Missouri

Arizona

Illinois

Nebraska

California

Indiana

North Dakota

Guam

Kentucky

South Dakota

Hawaii

Michigan
Ohio

New York Regional Office

Wisconsin

350 Fifth Avenue
Suite 1200
New York, New York 10118
(917) 320-2500

Dallas Regional Office
1601 Bryan Street
Dallas, Texas 75201
(214) 754-0098			

Idaho
Montana
Nevada
Oregon
Utah		

Delaware

Washington

District of Columbia

Wyoming

Colorado

Maryland

New Mexico

New Jersey

Oklahoma

New York

Texas	

Pennsylvania
Puerto Rico
Virgin Islands

Appendices

135

ANNUAL REPORT
C. Office of Inspector
General’s Assessment
of the Management
and Performance
Challenges Facing
the FDIC
Under the Reports Consolidation
Act of 2000, the Office of Inspector
General (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 the FDIC’s annual
performance and accountability
report. The OIG conducts this
assessment annually and identifies
specific areas of challenge facing the
Corporation at the time. In doing so,
we keep in mind the Corporation’s
overall program and operational
responsibilities; financial industry,
economic, and technological
conditions and trends; areas of
congressional interest and concern;
relevant laws and regulations;
the Chairman’s priorities and
corresponding corporate goals; and
ongoing activities to address the issues
involved. In looking at the recent
past and the current environment
and anticipating—to the extent
possible—what the future holds, the
OIG believes that the FDIC faces
challenges in the areas listed below.

Implementing New Systemic
Resolution Responsibilities
The Dodd-Frank Wall Street Reform
and Consumer Protection Act
(Dodd-Frank Act) has given the FDIC
significant new authorities to help
address the risks in systemically
important financial companies or
institutions (SIFIs). The FDIC’s Office
of Complex Financial Institutions
(OCFI) is focusing on three areas to
carry out its new responsibilities:

136

Appendices

monitoring risk within and across
these large, complex firms from the
standpoint of resolution; conducting
resolution planning and developing
strategies to respond to potential
crisis situations; and coordinating
with regulators overseas regarding the
significant challenges associated with
cross-border resolution.
Importantly, under Title I of the
Dodd-Frank Act, bank holding
companies with more than $50 billion
in assets and other firms designated
as systemic must develop their own
resolution plans or “living wills.” The
firms must show how they could
be resolved under the bankruptcy
code without disrupting the financial
system and the economy. The first
resolution plans were submitted in
early July 2012 by the nine largest
companies with nonbank assets of
over $250 billion. The FDIC and the
Federal Reserve Board are reviewing
those plans for completeness and
compliance with related rulemaking
requirements.
OCFI has also been developing its own
resolution plans to be ready to resolve
a failing systemic financial company.
These internal FDIC resolution plans
apply many of the same powers that
the FDIC has long used to manage
failed-bank receiverships to a failing
SIFI. If the FDIC is appointed as
receiver of such an institution, it will
face the challenge of carrying out an
orderly liquidation in a manner that
maximizes the value of the company’s
assets and ensures that creditors
and shareholders appropriately
bear any losses. The goal is to close
the institution without putting the
financial system at risk.
The coming months will continue to
be challenging for the FDIC and all
of the regulatory agencies as they

2012
continue to carry out the mandates
of the Dodd-Frank Act, develop rules
to implement key sections, and fulfill
their responsibilities as members
of the Financial Stability Oversight
Council (FSOC). With respect to
the FDIC’s OCFI, in particular, it will
need to ensure that it has the needed
expertise and resources to build its
capabilities, integrate its operations
and systems within the FDIC’s
infrastructure and established control
environment, and supplement existing
controls, as warranted, to ensure the
success of the FDIC’s activities with
respect to SIFIs. This is especially
important, given the significance of
OCFI’s responsibilities, the sensitivity
of the information it is handling,
and the potential consequences of
any unauthorized disclosure of such
information.

Resolving Failed Institutions
and Managing Receiverships
The Corporation continues to handle a
demanding resolution and receivership
workload. From 2008 through 2012,
465 institutions failed with total assets
(as of their final Call Reports) of $680
billion. Estimated losses resulting
from the failures total approximately
$86.8 billion. As of December 31,
2012, the number of institutions on
the FDIC’s “Problem List” was 651,
indicating the potential of more
failures to come, albeit with far less
frequency, and an increased asset
disposition workload. Total assets of
problem institutions were $233 billion
as of year-end 2012.
The FDIC frequently enters into
shared-loss agreements (SLAs) with
acquiring institutions (AIs) of failed
bank assets. These agreements
guarantee that the FDIC will share in
a portion of future asset losses and
recoveries for a specific time period.

In return, the AI agrees to manage the
failed bank assets consistently with
its legacy assets, pursue residential
loan modifications on qualified loans,
and work to minimize losses. Since
loss sharing began in November 2008,
through June 30, 2012, the Corporation
had entered into more than 290 SLAs
involving $212.7 billion in covered
assets.
The FDIC has established controls
over its SLA monitoring program,
which help protect the FDIC’s
interests and meet the goals of the
program. We have pointed out that
the FDIC should place additional
emphasis on monitoring commercial
loan extension decisions to ensure
that AIs do not inappropriately reject
loan modification requests as SLAs
approach termination. Additionally,
the FDIC needs to formulate a better
strategy for mitigating the impact of
impending portfolio sales and SLA
terminations on the Deposit Insurance
Fund (DIF) so that the FDIC will be
prepared to address a potentially
significant volume of asset sale
requests.
As another resolution strategy, the
FDIC has entered into 34 structured
sales transactions involving 42,900
assets with a total unpaid principal
balance of about $26.0 billion. Under
these arrangements, the FDIC retains
a participation interest in future net
positive cash flows derived from
third-party management of the
assets. Such transactions involve
selling assets to third parties that are
not regulated financial institutions.
Differences in controls in place for
regulated financial institutions, in
contrast to private capital investors
with unregulated systems of internal
control that are not subject to regular
oversight by banking supervisors,

can present challenges. Such
arrangements need to be closely
monitored to ensure compliance
with all terms and conditions of the
agreements. Compliance with the
agreements is important to ensure that
the FDIC receives the cash flows to
which it is entitled.

December 31, 2012. A priority and
ongoing challenge for the FDIC is to
ensure that the DIF remains viable
to protect all insured depositors. To
maintain sufficient DIF balances, the
FDIC collects risk-based insurance
premiums from insured institutions
and invests deposit insurance funds.

Other post-closing asset management
activities will continue to require much
FDIC attention. FDIC receiverships
manage assets from failed institutions,
mostly those that are not purchased
by acquiring institutions through SLAs
or involved in structured sales. As of
December 31, 2012, the Division of
Resolutions and Receiverships (DRR)
was managing 466 active receiverships
(including three FSLIC-related) with
assets totaling about $17.0 billion.
These assets include securities,
delinquent commercial real-estate and
single-family loans, and participation
loans. Post-closing asset managers
are responsible for managing many of
these assets and rely on receivership
assistance contractors to perform
day-to-day asset management
functions. Since these loans are often
sub-performing or nonperforming,
workout and asset disposition efforts
can be intensive and challenging.

In the aftermath of the financial
crisis, FDIC-insured institutions
continue to make gradual but steady
progress. Commercial banks and
savings institutions insured by the
FDIC reported aggregate net income
of $37.6 billion in the third quarter of
2012, a $2.3 billion improvement from
the $35.2 billion in profits the industry
reported in the third quarter of 2011.
This is the 12th consecutive quarter
that earnings have registered a yearover-year increase. Also noteworthy
with respect to the viability of the
fund was the decline in the number
of banks on the FDIC’s “Problem
List” from 813 in the fourth quarter
of 2011 to 651 in the fourth quarter
of 2012. The fourth quarter marked
the seventh consecutive quarter that
the number of problem banks has
fallen. As noted earlier, total assets of
“problem” institutions also declined
year-over-year between 2011 and 2012
from $319.4 billion to $233 billion.
Eight insured institutions failed during
the fourth quarter—the smallest
number of failures in a quarter since
the second quarter of 2008, when there
were two.

Maintaining the
Viability of the Deposit
Insurance Fund
Insuring deposits remains at the heart
of the FDIC’s commitment to maintain
stability and public confidence in
the nation’s financial system. The
Dodd-Frank Act made permanent
the increase in the coverage limit to
$250,000. It also provided deposit
insurance coverage on the entire
balance of noninterest-bearing
transaction accounts at all insured
depository institutions (IDIs) until

In light of such progress, the DIF
balance has continued to increase.
During 2012, the DIF balance
increased by $21.2 billion, from
$11.8 billion to $33.0 billion. Over the
twelve consecutive quarters since the
beginning of 2010, the fund balance
has increased a total of $53.8 billion.

Appendices

137

ANNUAL REPORT
While the fund is considerably
stronger than it has been, the FDIC
must continue to monitor the
emerging risks that can threaten fund
solvency in the interest of continuing
to provide the insurance coverage
that depositors have come to rely
upon. Given the volatility of the global
markets and financial systems, new
risks can emerge without warning and
threaten the safety and soundness
of U.S. financial institutions and the
viability of the DIF. The FDIC must be
prepared for such a possibility.

Ensuring Institution Safety
and Soundness Through an
Effective Examination and
Supervision Program
The Corporation’s supervision
program promotes the safety and
soundness of FDIC-supervised
IDIs. The FDIC is the primary
federal regulator for approximately
4,500 FDIC-insured, state-chartered
institutions that are not members of
the Federal Reserve Board (FRB)—
generally referred to as “state
non-member” institutions. As such,
the FDIC is the lead federal regulator
for the majority of community banks.
The Chairman has made it clear that
one of the FDIC’s most important
priorities is the future of community
banks and the critical role they play
in the financial system and the U.S.
economy as a whole. The Corporation
has undertaken a number of initiatives
to further its understanding of
the challenges and opportunities
facing community banks, including
a conference, a comprehensive
study, and an assessment of both
risk-management and compliance
supervision practices to see if there
are ways to make the supervisory
processes more efficient. It will
continue its efforts in this regard going
forward.

138

Appendices

Through the FDIC’s examination
program, examiners assess the
adequacy of the bank’s management
and internal control systems to
identify, measure, monitor, and
control risks; and bank examiners
judge the safety and soundness of a
bank’s operations. When the FDIC
determines that an institution’s
condition is less than satisfactory,
it may take a variety of supervisory
actions, including informal and
formal enforcement actions against
the institution or its directors and
officers and others associated with
the institution, to address identified
deficiencies and, in some cases,
ultimately ban individuals from
banking. Generally, the FDIC pursues
enforcement actions for violations of
laws, rules, or regulations; unsafe or
unsound banking practices; breaches
of fiduciary duty; and violations of
final orders, conditions imposed in
writing, or written agreements. In
addition, the FDIC has the statutory
authority to terminate the deposit
insurance of any IDI for violation
of a law, rule, regulation, condition
imposed in writing, or written
agreement, or for being in an unsafe
or unsound condition or engaging in
unsafe or unsound banking practices.
Part of the FDIC’s overall
responsibility and authority to
examine banks for safety and
soundness relates to compliance
with the Bank Secrecy Act (BSA),
which requires financial institutions
to develop and implement a BSA
compliance program to monitor
for suspicious activity and mitigate
associated money laundering risks
within the financial institution.
This includes keeping records and
filing reports on certain financial
transactions. An institution’s level of
risk for potential terrorist financing

2012
and money laundering determines the
necessary scope of a Bank Secrecy
Act examination. Maintaining a
strong examination program, vigilant
supervisory activities, and effective
enforcement action processes for
all institutions and applying lessons
learned in light of the recent crisis will
be critical to ensuring stability and
continued confidence in the financial
system going forward.
Another challenging supervisory
issue that concerns the FDIC, and
community banks in particular,
relates to Basel III and recently
proposed changes to the federal
banking agencies’ regulatory capital
requirements. In June 2012, the
federal banking agencies issued
for public comment three separate
Notices of Proposed Rulemaking
(NPR), proposing changes to the
regulatory capital requirements.
The agencies proposed the NPRs to
address deficiencies in bank capital
requirements that became evident
in the recent banking crisis. The
FDIC is reviewing the more than
2,000 comments it has received so
that it can address concerns about
the costs and potential unintended
consequences of various aspects
of the proposals. As the primary
federal supervisor for the majority
of community banks, the FDIC is
particularly focused on ensuring
that community banks are able to
properly analyze the capital proposals
and assess their impact. The basic
purpose of the Basel III framework
is to strengthen the long-term quality
and quantity of the capital base of
the U.S. banking system. The FDIC’s
challenge is to achieve that goal in a
way that is responsive to the concerns
expressed by community banks
about the potential for unintended
consequences, and the FDIC will be

carefully considering such issues in
the coming months.  

Protecting and Educating
Consumers and Ensuring
an Effective Compliance
Program
The FDIC serves a number of key
roles in the financial system and
among the most important is its work
in ensuring that banks serve their
communities and treat consumers
fairly. The FDIC carries out its role
by providing consumers with access
to information about their rights
and disclosures that are required
by federal laws and regulations and
examining the banks where the FDIC
is the primary federal regulator to
determine the institutions’ compliance
with laws and regulations governing
consumer protection, fair lending, and
community investment. During early
2011, in response to the Dodd-Frank
Act and in conjunction with creation
of the Consumer Financial Protection
Bureau (CFPB), the FDIC established
its new Division of Depositor and
Consumer Protection. This Division
is responsible for the Corporation’s
compliance examination and
enforcement program as well as the
depositor protection and consumer
and community affairs activities that
support that program. It has also
adopted a new coordinating role with
CFPB on consumer issues of mutual
interest.
Historically, turmoil in the credit and
mortgage markets has presented
regulators, policymakers, and the
financial services industry with
serious challenges. The FDIC has
been committed to working with
the Congress and others to ensure
that the banking system remains
sound and that the broader financial
system is positioned to meet the

credit needs of consumers and the
economy, especially the needs of
creditworthy households that may
experience distress. A challenging
priority articulated by the Chairman
is to continue to increase access to
financial services for the unbanked
and underbanked in the United States.
Successful activities in pursuit of this
priority will continue to require effort
on the part of the Corporation going
forward.
Consumers today are also concerned
about data security and financial
privacy at their banks, and the
FDIC needs to promote effective
controls within the banks to
protect consumers. Banks are
also increasingly using third-party
servicers to provide support for
core information and transaction
processing functions, and the sensitive
information servicers handle can be
vulnerable. The FDIC must continue
to ensure that financial institutions
protect the privacy and security of
information about customers under
applicable U.S. laws and regulations.
New cyber threats emerge frequently,
and financial institutions and their
servicers face continuing challenges
safeguarding highly sensitive
information from unauthorized
disclosure that can cause financial and
personal distress or ruin.

Effectively Managing the
FDIC Workforce and Other
Corporate Resources
The FDIC must effectively and
economically manage and utilize a
number of critical strategic resources
in order to carry out its mission
successfully, particularly its human,
financial, information technology
(IT), and physical resources. These
resources have been stretched during
the past years of the recent crisis, and

the Corporation will continue to face
challenges as it returns to a steadier
state of operations and carries out
its mission in both headquarters
and regional office locations. New
responsibilities, reorganizations, and
changes in senior leadership and in
the makeup of the FDIC Board have
affected the entire FDIC workforce
over the past few years. Efforts
to promote sound governance and
effective stewardship of its core
business processes and the IT
systems supporting those processes,
along with attention to human and
physical resources, will be key to the
Corporation’s success in the months
ahead.
As the number of financial institution
failures continues to decline, the
Corporation is reshaping its workforce
and adjusting its budget and resources
accordingly. The FDIC closed the
West Coast Office and the Midwest
Office in January 2012 and September
2012, respectively, and plans to close
the East Coast Office in 2014. In
this connection, authorized staffing
for DRR, in particular, has fallen
from a peak of 2,460 in 2010 to 1,463
proposed for 2013, which reflects a
reduction of 393 positions from 2012
and 997 positions over three years.
DRR contractor funding also has fallen
from a peak of $1.34 billion in 2010 to
about $457 million proposed for 2013,
a reduction of about $319 million
from 2012 and nearly $885 million
(66 percent) over three years. Still, the
significant surge in failed-bank assets
and associated contracting activities
will continue to require effective
and efficient contractor oversight
management and technical monitoring
functions.
With the number of troubled FDICsupervised institutions also on

Appendices

139

ANNUAL REPORT
the decline, the FDIC has reduced
authorized nonpermanent examination
staff as well. Risk management
examination staffing has declined
from a peak of 2,237 in 2011 to 1,966
proposed for 2013, a reduction of 271
nonpermanent positions. The number
of compliance examination staff as
well has begun to decline, though not
as much—from a peak of 572 in 2012
to 522 proposed for 2013, a reduction
of 50 nonpermanent positions.
To fund operations, the FDIC Board
of Directors recently approved a
$2.7 billion Corporate Operating
Budget for 2013, about 18 percent
lower than the 2012 budget. In
conjunction with its approval of
the 2013 budget, the Board also
approved an authorized 2013 staffing
level of 8,026 employees, down
from 8,713 previously authorized,
a net reduction of 687 positions,
with further reductions projected in
2014 and future years. The FDIC’s
operating expenses are paid from
the DIF, and consistent with sound
corporate governance principles, the
Corporation’s financial management
efforts must continuously seek to
be efficient and cost-conscious,
particularly in a government-wide
environment that is facing severe
budgetary constraints.
As conditions improve throughout
the industry and the economy, the
Corporation and staff are adjusting
to a new work environment and
workplace. The closing of the two
temporary offices and the plans for
closing the third can disrupt current
workplace conditions.

140

Appendices

These closings can also introduce
risks, as workload, responsibilities,
and files are transferred and
employees depart to take other
positions—sometimes external to
the FDIC. Fewer risk management
and compliance examiners can also
pose challenges to the successful
accomplishment of the FDIC’s
examination responsibilities.
Further, the ramping up of the
new Office of Complex Financial
Institutions, with hiring from both
internal and external sources will
continue to require attention—with
respect to on-boarding, training,
and retaining staff with requisite
skills for the challenging functions
of that office. For all employees, in
light of a transitioning workplace,
the Corporation will seek to sustain
its emphasis on fostering employee
engagement and morale. Its new
Workplace Excellence Program is a
step in that direction.
From an IT perspective, amidst
the heightened activity in the
industry and economy, the FDIC has
engaged in in massive amounts of
information sharing, both internally
and with external partners. This
is also true with respect to sharing
of highly sensitive information
with other members of the FSOC
formed pursuant to the Dodd-Frank
Act. As noted earlier with respect
to OCFI, FDIC systems contain
voluminous amounts of critical
data. The Corporation needs to
ensure the integrity, availability,
and appropriate confidentiality of
bank data, personally identifiable
information, and other sensitive

2012
information in an environment of
increasingly sophisticated security
threats and global connectivity. In
a related vein, continued attention
to ensuring the physical security of
all FDIC resources is also a priority.
The FDIC needs to be sure that its
emergency response plans provide for
the safety and physical security of its
personnel and ensure that its business
continuity planning and disaster
recovery capability keep critical
business functions operational during
any emergency.
Finally, a key component of
corporate governance at the FDIC
is the FDIC Board of Directors.
With the confirmations of the FDIC
Chairman and Vice Chairman, along
with appointments of others to
fill Board positions over the past
year, the Board is now operating
at full strength. The Board will
likely face challenges in leading
the organization, accomplishing
the Chairman’s priorities, and
coordinating with the other regulatory
agencies on issues of mutual
concern and shared responsibility.
Enterprise risk management is a
related aspect of governance at the
FDIC. Notwithstanding a stronger
economy and financial services
industry, the FDIC’s enterprise risk
management activities need to be
attuned to emerging risks, both
internal and external to the FDIC, and
the Corporation as a whole needs to
be ready to take necessary steps to
mitigate those risks as changes occur
and challenging scenarios present
themselves.

2012

Federal Deposit
Insurance Corporation

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 for their contributions:
♦	 Jannie F. Eaddy
♦	 Barbara Glasby
♦	 Financial Reporting Unit
♦	 Division and Offices’ Points-of-Contact

ANNUAL REPORT 2012
F E D E R A L D E P OSIT INSURANC E C ORP ORATION
POSIT
550 17th Street, N.W.
Washington, DC 20429-9990
FDIC-004-2013
WWW.FDIC.GOV


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102