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FEDERAL
DEPOSIT
INSURANCE
CORPORATION

2014
ANNUAL
REPORT

THIS PAGE INTENTIONALLY LEFT BLANK.

FEDERAL
DEPOSIT
INSURANCE
CORPORATION

2014
ANNUAL
REPORT

ANNUAL REPORT 2014

FEDERAL DEPOSIT INSURANCE CORPORATION
550 17th Street NW, Washington, DC 20429 	

OFFICE OF THE CHAIRMAN

March 4, 2015
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 2014 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 2014. We are committed to maintaining effective internal controls corporate-wide in 2015.
	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
Implementation of Key Regulations.................................................................................................................................. 13
Insurance.............................................................................................................................................................................. 18
Activities Related to Systemically Important Financial Institutions............................................................................ 19
Supervision........................................................................................................................................................................... 24
Receivership Management................................................................................................................................................. 38
International Outreach........................................................................................................................................................ 41
Minority and Women Inclusion.......................................................................................................................................... 43
Effective Management of Strategic Resources................................................................................................................ 44

	 II.	 Performance Results Summary............................................................................................49
Summary of 2014 Performance Results by Program............................................................................................................. 49

Performance Results by Program and Strategic Goal........................................................................................................... 51
Prior Years’ Performance Results............................................................................................................................................. 57

	 III.	 Financial Highlights.............................................................................................................65
Deposit Insurance Fund Performance .................................................................................................................................... 65

	 IV.	 FDIC Budget and Spending................................................................................................69
Corporate Operating Budget..................................................................................................................................................... 69

2014 Budget and Expenditures by Program............................................................................................................................ 70
Investment Spending.................................................................................................................................................................. 71

	 V.	 Financial Section.................................................................................................................73
Deposit Insurance Fund (DIF).................................................................................................................................................. 74

FSLIC Resolution Fund (FRF).................................................................................................................................................. 93
Government Accountability Office Auditor’s Report........................................................................................................... 102
Management’s Report on Internal Control Over Financial Reporting............................................................................... 109
Management’s Response to the Auditor’s Report................................................................................................................. 110

	VI.	 Corporate Management Control.......................................................................................111
Management Report on Final Actions................................................................................................................................... 112

	VII.	Appendices.......................................................................................................................113
A. Key Statistics........................................................................................................................................................................ 114

B. More About the FDIC.......................................................................................................................................................... 128
C. Office of Inspector General’s Assessment of the Management and Performance Challenges
Facing the FDIC ................................................................................................................................................................ 137
D. Acronyms.............................................................................................................................................................................. 143

ANNUAL REPORT 2014 3

INSURING DEPOSITS • EXAMINING AND
SUPERVISING 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 and 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
For more than 80 years, the FDIC has carried out its mission
of maintaining public confidence and stability in the nation’s
financial system.
The FDIC does this
by insuring deposits;
supervising and
examining financial
institutions for
safety, soundness,
and consumer
protection;
and managing
receiverships when
banks fail.
At the end of 2014,
the FDIC insured
deposits of $6.2
trillion in more than half a billion accounts at over 6,500
institutions. Further, the FDIC supervised 4,138 institutions,
conducted 8,160 examinations, and managed nearly 500
active receiverships having total assets of $29.7 billion at
year-end 2014.
The U.S. economy and the banking industry saw continued
improvement in 2014. After experiencing the most severe
financial crisis and economic downturn in the United States
since the 1930s, the United States is now well into the
recovery. The economy is expanding, although the pace of
economic growth has been weaker than the long-term trend
and bank profitability remains lower than pre-crisis levels.
Still, the industry has been strengthening balance sheets,
building capital, and enhancing liquidity.
Stronger balance sheets indicate ample capacity for FDICinsured institutions to support the economic recovery.
Last year, loan balances at banks increased by $416 billion,
the largest dollar gain since 2007. Moreover, that growth
was broad-based, with nearly all loan categories posting
increases, and almost three-quarters of all institutions
reporting larger loan balances. Loan growth was
strongest at community banks, which posted an 8.6 percent
gain in 2014 versus 5.3 percent for the industry overall. The
numbers of both failed and problem institutions declined

again in 2014, and the Deposit Insurance Fund (DIF)
balance, which was almost $21 billion in the red during the
financial crisis, was once again positive at nearly $63 billion
at year-end.
Rising loan demand and a recent pickup in the pace
of economic activity are creating favorable conditions
for FDIC-insured institutions. The FDIC is working to
wind down the receiverships of failed institutions and to
address the emerging supervisory challenges of interest
rate risk, credit risk, and cybersecurity threats. This
shift is indicative of the move from a post-crisis recovery
environment to one of expanding economic growth and
financial activity. Following is an overview of the key
strategic challenges facing the FDIC.

REBUILDING THE DIF, RESOLVING
FAILED BANKS, AND FDIC RESOURCES
Under a long-term plan based on the Dodd-Frank Act
requirements to rebuild the DIF, the FDIC has had a steady
increase in the year-end fund balance from 2011 through
2014. Recently, lower than estimated losses for past bank
failures, together with assessment income, have contributed
to the increase in the fund balance to $62.8 billion as of
December 31, 2014. The fund is on track to reach a reserve
ratio — the ratio of the DIF fund balance to estimated
insured deposits — of 1.35 percent by September 2020, as
mandated by statute. The reserve ratio was 1.01 percent as
of year-end 2014.
Bank failures in 2014 totaled 18, down dramatically from
a peak of 157 in 2010, while the number of banks on the
problem bank list (banks rated 4 or 5 on the CAMELS
rating scale) fell to 291 at the end of 2014 from a high of
888 in March 2011. Although these trends are positive,
we still have a way to go before these numbers return to
more normal levels. The FDIC will continue to manage
receiverships, examine problem institutions, and implement
provisions of the Dodd-Frank Act.
As the banking industry continues to recover, the FDIC
will require fewer resources. The agency’s authorized
workforce for 2014 was 7,200 full-time equivalent positions

MESSAGE FROM THE CHAIRMAN 5
ANNUAL REPORT 2012

ANNUAL REPORT 2014
compared with 8,026 the year before. The 2014 Corporate
Operating Budget was $2.4 billion, a decrease of $300
million (11 percent) from 2013.

systemically important financial institutions (SIFIs). The
new leverage ratio goes beyond international standards
agreed to by the Basel Committee on Banking Supervision.

The FDIC reduced its budget for 2015 from the prior year
by 3 percent to $2.32 billion and reduced authorized
staffing by approximately 5 percent to 6,875 positions, in
anticipation of a further drop in bank failure activity in
the years ahead. The three temporary satellite offices that
were set up to handle the crisis-related workload have now
closed. However, contingent resources are included in the
budget to ensure readiness should economic conditions
unexpectedly deteriorate.

The enhanced supplementary leverage ratio currently
applies to eight large organizations designated as Global
Systemically Important Banks, or G-SIBs. Insured banks
within these G-SIB organizations would need to satisfy a 6
percent supplementary leverage ratio to be considered well
capitalized for PCA purposes. The new rule also establishes
an enhanced 5 percent supplementary leverage ratio at the
holding company level. This should reduce the likelihood
of failure, while increasing the ability of these firms to
continue lending during periods of economic adversity.
The introduction of the enhanced supplementary leverage
ratio is one of the most significant step taken thus far to
reduce the systemic risk posed by large, complex banking
organizations.

During 2014, the FDIC continued to successfully use various
resolution strategies to protect insured depositors of failed
institutions at the least cost to the DIF. The FDIC actively
marketed failing institutions and sold a large majority 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
AUTHORITIES UNDER THE
DODD-FRANK ACT AND
OTHER FINANCIAL REFORMS
The FDIC continues to implement its authorities under
the Dodd-Frank Act, as well as important new capital and
liquidity requirements.

Capital and Liquidity Rules Strengthened
In 2014, the FDIC Board of Directors (FDIC Board),
in concert with the other regulators, adopted several
important rules that strengthen the capital and liquidity
standards for banking organizations. In April 2014,
the FDIC Board finalized the Basel III capital rule that
strengthens the quality of regulatory capital and increases
the level of risk-based capital required under the prompt
corrective action (PCA) standards. The FDIC’s Basel III
rule is substantively identical to rules adopted by the Board
of Governors of the Federal Reserve System (FRB) and the
Office of the Comptroller of the Currency (OCC). In April,
the FDIC Board also approved an interagency, enhanced
supplementary leverage ratio requirement for the largest

6 MESSAGE FROM THE CHAIRMAN

In September 2014, the FDIC, the FRB, and the OCC
adopted the first-ever quantitative liquidity standard for
large banking organizations in the United States, the
liquidity coverage ratio (LCR). During the recent financial
crisis, many of the largest banks did not have a sufficient
amount of high-quality liquid assets, such as cash and U.S.
Treasury securities, and could not borrow enough funds
from the marketplace to meet their liquidity needs. This
new ratio will strengthen the liquidity positions of our
largest financial institutions, thereby promoting safety and
soundness, and the stability of the financial system.
The LCR applies to bank holding companies (BHCs) and
depository institutions with $250 billion or more in total
assets or with $10 billion or more in foreign exposures, and
to depository institutions with $10 billion or more in assets
that are consolidated subsidiaries of these covered banking
organizations. Separately, the FRB issued similar rules for
BHCs with at least $50 billion in assets. The new rule will
not apply to community banks.

RESOLUTION PLANNING FOR
SYSTEMICALLY IMPORTANT
FINANCIAL INSTITUTIONS AND
INTERNATIONAL COORDINATION
Under the framework of the Dodd-Frank Act, bankruptcy
is the preferred path in the event of the failure of a SIFI.

To make this objective achievable, Section 165(d) of the
Dodd-Frank Act and the implementing joint rules require
that all BHCs with total consolidated assets of $50 billion or
more, and nonbank financial companies that the Financial
Stability Oversight Council (FSOC) designates for FRB
supervision, prepare resolution plans, or “living wills,” to
demonstrate how the company could be resolved in a rapid
and orderly manner under the Bankruptcy Code in the event
of the company’s material financial distress or failure. The
living will process is an important new tool to enhance
the resolvability of large financial institutions through the
bankruptcy process.
Since 2010, the FRB and FDIC have been working to
implement this new authority and have taken a number of
important steps to do so, including the issuance of a joint
rule in 2011 and joint guidance in 2013. In August 2014,
the FDIC and FRB issued joint letters to the 11 largest,
most complex banking organizations, directing them
to make specific substantive changes to facilitate their
orderly resolution in bankruptcy. The actions the firms
are being directed to take include changes to simplify
their legal structures, actions to ensure the continuation
of critical services throughout the resolution process, and
information system changes to ensure the timely delivery
of information in resolution. The agencies in the letters
directed a set of changes for the firms to implement that
will make a meaningful difference in the ability to resolve
these firms in an orderly manner in bankruptcy, as well as
reduce the risk they pose to the financial system. Since
that time, the agencies have been providing guidance to the
banking organizations on the improvements needed to each
plan, as those plans must demonstrate that the firms are
making significant progress to address all the shortcomings
identified in the letters.
In cases in which resolution under the Bankruptcy Code
may result in serious adverse effects on financial stability
in the United States, the Orderly Liquidation Authority set
out in Title II of the Dodd-Frank Act serves as an important
backstop. Upon recommendations by a two-thirds vote
of the Federal Reserve Board and the FDIC Board and a
determination by the Treasury Secretary in consultation
with the President, a financial company whose failure is
deemed to pose a risk to the financial system may be placed
into an FDIC receivership. Under the Act, key findings

and recommendations must be made before the Orderly
Liquidation Authority can be considered as an option.
These include a determination that the financial company
is in default or danger of default; that failure of the financial
company and its resolution under applicable federal or
state law, including bankruptcy, would have serious adverse
effects on U.S. financial stability; and that no viable private
sector alternative is available to prevent the default of the
financial company.
At the end of 2013, the FDIC Board approved publication
of a Federal Register notice, which provides greater detail
on a Single Point of Entry (SPOE) strategy for resolution
and discusses the key issues that likely will be faced in the
resolution of a SIFI. The notice sought public comment
and views as to how the policy objectives set forth in the
Dodd-Frank Act could better be achieved and a number
of comments were received that will be considered as the
FDIC continues its contingency planning.
Advance planning and cross-border coordination for the
resolution of globally active SIFIs will be essential to
minimize disruptions to global financial markets. Following
up on progress made on international coordination in prior
years, the FDIC continues to foster its relationships with
foreign regulators to establish frameworks for effective
cross-border cooperation.
In October, the FDIC hosted the heads of the Treasuries,
central banks, and leading financial regulatory bodies in the
United States and United Kingdom in an exercise designed
to further understanding, communication, and cooperation
between U.S. and U.K. authorities in the event of the failure
and resolution of a G-SIB. In addition, the FDIC worked
with its major foreign counterparts in significant efforts
to develop cross-border cooperation for resolving failing
global financial firms.

COMMUNITY BANKING INITIATIVE
Community banks are critically important to our economy
and banking system. Community banks account for 13.3
percent of the banking assets in the United States, but also
account for 45.1 percent of the small loans to businesses
and farms made by all banks, making them key partners in
supporting local economic development and job creation.
Since the FDIC is the primary Federal supervisor of

MESSAGE FROM THE CHAIRMAN 7

ANNUAL REPORT 2014
the majority of community banks in the United States,
community banking will continue to be an important focus
of FDIC supervision, technical assistance, and research.
In late 2012, the FDIC published a comprehensive study
on community banking. The study confirmed that the
traditional community bank business model – knowing your
customer, funding from stable core deposits, and locally
focused lending – performed comparatively well during
the recent banking crisis. Of the more than 500 banks that
failed since 2007, the highest failure rates were among
non-community banks and community banks that departed
from this traditional model by investing in risky assets
funded by non-core deposits.
In 2014, FDIC analysts published new papers dealing with
community bank consolidation, the effects of long-term
rural depopulation, and the efforts of Minority Depository
Institutions (MDIs) to provide essential banking services
to customers. The FDIC also added a new community
bank section to the FDIC’s Quarterly Banking Profile
(QBP). It includes new data on the structure, activity, and
performance of community banks that will be useful in
tracking the industry’s performance more closely.
Apart from research, the community bank initiative includes
a robust technical assistance program for bank directors,
officers, and employees. The FDIC’s latest innovation is
a series of videos that are helping community bankers
to understand better their management responsibilities.
The video program grew out of requests by community
bankers for help in a number of areas – from director
responsibilities, to hot button issues in risk management
and compliance supervision. Since 2013, the FDIC has
produced and released more than 20 videos, available on
the FDIC’s website.
Finally, the FDIC’s Advisory Committee on Community
Banking is an ongoing forum for discussing current issues
and receiving valuable feedback from the industry. The
committee, which met three times during 2014, is composed
of 15 community bank CEOs from around the country. It
is a valuable resource for input on a wide variety of topics,
including examination policies and procedures, capital
and other supervisory issues, credit and lending practices,
deposit insurance assessments and coverage, and regulatory
compliance issues.

8 MESSAGE FROM THE CHAIRMAN

CYBERSECURITY
The rapidly evolving nature of cybersecurity risks
reinforces the need for regulators, financial institutions, and
critical technology service providers to have appropriate
procedures to effectively respond to cybersecurity risk.
The FDIC works with other bank regulators to analyze and
respond to emerging cyber threats, bank security breaches,
and other harmful or disruptive technology-related
incidents. The federal banking agencies are currently
reviewing security readiness at banks and technology
service providers. We are also evaluating our supervisory
policies for potential improvements.
The FDIC has taken a number of actions to raise awareness
of cyber risks and to encourage practices to protect against
threats at the banks we supervise, particularly community
banks. For example, in 2014 the FDIC distributed Cyber
Challenge: A Community Bank Cyber Exercise to all FDICsupervised banks. Cyber Challenge provides operational
risk-related scenarios and challenge questions designed to
facilitate discussion and allow community bankers to assess
their preparedness for and response to cyber-related events.
The FDIC monitors cybersecurity issues on a regular basis
through on-site bank examinations, regulatory reports,
and intelligence reports. The FDIC also works with
other federal agencies, law enforcement and a number of
government groups and industry coordinating councils,
such as the Finance and Banking Information Infrastructure
Committee, and the Financial Services Sector Coordinating
Council for Critical Infrastructure Protection and Homeland
Security, to facilitate collaboration and information sharing
across the financial services sector.

PROTECTING CONSUMERS
AND EXPANDING ACCESS
TO BANKING SERVICES
Expanding access to mainstream banking services is part
of the FDIC’s core mission. The FDIC’s National Survey of
Unbanked and Underbanked Households, conducted every
two years with the U.S. Census Bureau, has documented
that a large portion of the population in our country
does not have a relationship with an insured depository
institution or relies on alternative financial service providers

to meet some of their financial services needs. The survey,
which was last released in October 2014, is widely used by
the industry, analysts, government and non-governmental
organizations, the media, and many others to better
understand who lacks access to mainstream banking
services and to gain insights into opportunities to expand
participation.
During 2014, the FDIC continued its efforts to protect
consumers and expand access to mainstream banking
services. For example, the FDIC’s Advisory Committee on
Economic Inclusion — composed of bankers, community
and consumer organizations, and academics — continues
to focus on new ways to expand banking services to all
consumers. During 2014, several banks offered low-cost
transaction accounts that were consistent with the
FDIC’s model SAFE transaction account template that
was developed under guidance from the committee. The
committee also worked on developing ways to tap the
economic inclusion potential of mobile financial services,
expanding financial education programs for young people,
and identifying prudent, feasible approaches to providing
access to small-dollar credit within mainstream, insured
financial institutions.

CONCLUSION
During 2014, the U.S. banking industry continued its
recovery from the recent financial crisis. The industry
benefited from stronger balance sheets, fewer problem
banks and bank closings, increased lending activity, and
a larger balance in the DIF. At the same time, it remains
important for bankers and supervisors to heed the lessons
of the recent crisis by maintaining a steady focus on
risk management.
In 2015, the FDIC will continue to work to fulfill its mission
of maintaining public confidence and stability in the nation’s
financial system.
The workforce of the FDIC remains committed to the
FDIC’s core mission. I am very grateful to the dedicated
professionals of the FDIC for their commitment to public
service and for the high level at which they carry out their
important responsibilities.
Sincerely,

Martin J. Gruenberg

MESSAGE FROM THE CHAIRMAN 9

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Message from the Chief Financial Officer
I am pleased to present
the Federal Deposit
Insurance Corporation’s
(FDIC) 2014 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 23 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 2014, the FDIC continued to rebuild the DIF
following the most recent banking crisis. Since the end
of 2009, when the DIF was negative $20.9 billion, the DIF
increased by $83.7 billion to a record $62.8 billion at the
end of 2014. This increase is primarily due to $57.9 billion
in cumulative assessment revenue and a $23.4 billion
cumulative decrease in the provision for insurance losses.

FINANCIAL RESULTS FOR 2014
For 2014, DIF comprehensive income totaled $15.6 billion,
an increase of $1.4 billion over the 2013 comprehensive
income of $14.2 billion. This increase is primarily due to
a negative $8.3 billion in provision for insurance losses
in 2014 compared to a negative $5.7 billion in 2013.
Assessment revenue was $8.7 billion in 2014 as compared
to $9.7 billion in 2013, a decrease of $1.0 billion. Interest on
U.S. Treasury obligations totaled $282 million as compared
to $103 million in 2013; at the end of 2014, the yield to
maturity on the DIF portfolio was 0.70%.
In April 2014, we closed the last of our three temporary
offices which were originally opened in 2009 and 2010 to
deal with the banking crisis. At the height of the banking
crisis, the FDIC full-time equivalent employees peaked
at 8,241. At the end of 2014, we had 6,631 employees, a
20% reduction in overall staffing. While we have reduced
staffing and project further reductions in 2015, we will
maintain a workforce ready to carry out the mission of the
FDIC and to handle any future bank failures.
In 2014, there were 18 bank failures, down markedly from
the peak of 157 in 2010, and the lowest number since 25
failures occurred at the beginning of the crisis in 2008. As
bank failures decline further, we will continue to manage
risks, especially as they pertain to our goal of rebuilding
the DIF. We will remain focused on sound financial
management techniques, and maintain our enterprise-wide
risk management and internal control program.
Sincerely,

Steven O. App

MESSAGE FROM THE CHIEF FINANCIAL OFFICER 11
ANNUAL REPORT 2012

ANNUAL REPORT 2014
FDIC Senior Leaders

Seated (left to right): Vice Chairman Thomas M. Hoenig, Chairman Martin J. Gruenberg, and
Director Jeremiah O. Norton. Standing 1st Row (left to right): Suzannah L. Susser, Barbara A. Ryan, Arleas Upton
Kea, Craig R. Jarvill, Doreen R. Eberley, and Arthur J. Murton. 2nd Row (left to right): Martin D. Henning, Cottrell
L. Webster, Richard J. Osterman, Jr., Stephen A. Quick, and Andrew S. Gray. 3rd Row (left to right): Diane Ellis,
Mark E. Pearce, Bret D. Edwards, Russell G. Pittman, Eric J. Spitler, and Steven O. App.
Not pictured: Barbara Hagenbaugh, Kymberly K. Copa, Segundo Pereira, Robert D. Harris, Fred W. Gibson,
Barry C. West, Christopher J. Farrow, and C. Richard Miserendino.

12 FEDERAL DEPOSIT INSURANCE CORPORATION

I.

Management’s
Discussion and
Analysis

The Year in Review
OVERVIEW
During 2014, the FDIC continued to fulfill its mission-critical
responsibilities. The FDIC adopted and issued final rules on
key regulations under the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act). The FDIC
also engaged in several community banking and community
development initiatives over the past year. In addition,
cybersecurity remained a high priority for the FDIC as it
worked to strengthen cybersecurity oversight, help financial
institutions mitigate this increasing risk, and respond to
cyber threats. The sections below highlight some of our
accomplishments during the year.

IMPLEMENTATION OF
KEY REGULATIONS
Capital Rulemaking and Guidance
In April 2014, the FDIC adopted as final its 2013 interim
final capital rule implementing the Basel III capital
standards. The Basel III standards strengthen the quality
and required level of regulatory capital and, for advanced
approaches banks, introduce a new supplementary leverage
requirement. The final rule is largely identical to the final
capital rule adopted by the Office of the Comptroller of
the Currency (OCC) and the Board of Governors of the
Federal Reserve System (FRB) in September 2013. Also in
April 2014, the FDIC and the other federal banking agencies
issued a final rule that strengthens the supplementary

leverage capital requirements for the eight largest U.S.
bank holding companies (BHCs) and their insured banks.
The enhanced leverage requirements in this rule, which
are significantly higher than the 3 percent level agreed to
by the Basel Committee, should contribute to the stability
and resilience of these large institutions and the financial
system.

Basel III Final Capital Rule
At its April 2014 meeting, the FDIC Board of Directors
(FDIC Board) approved the Basel III interim final rule as a
final rule with no substantive changes. The FDIC had issued
the July 2013 Basel III rule as an interim final rule in order
to consider comments on the enhanced supplementary
leverage standards. The Basel III rule became effective
January 1, 2015, for banking organizations not subject to
the advanced approaches risk-based capital rule. Banking
organizations that are subject to the advanced approaches
capital requirements have been operating under the
new capital rule since January 1, 2014. For all banking
organizations, the final rule provides a phase-in period for
certain aspects of the rule including the new capital ratios,
the capital conservation buffer, and adjustments to and
deductions from regulatory capital.
The capital conservation buffer framework provides for
gradually increasing limits on capital distributions as
a bank’s risk-based capital ratios approach regulatory
minimums. S-corporation banks have expressed concern
that this framework could increase the frequency with
which their shareholders face a tax liability without having

MANAGEMENT’S DISCUSSION AND ANALYSIS 13

ANNUAL REPORT 2014
received dividends. Under the final rule, banks may make
a dividend exception request to their primary federal
regulator (PFR), and the regulator can approve the request
if warranted based on safety and soundness considerations.
In July 2014, the FDIC released a Financial Institution Letter
(FIL) describing the factors that will be considered for
such requests from S-corporation banks. Absent significant
safety and soundness concerns about the requesting bank,
the FDIC generally would expect to approve exception
requests by well-rated S-corporation banks that are limited
to the payment of dividends to cover shareholders’ taxes on
their portion of an S-corporation’s earnings.

Supplementary Leverage Ratio Final Rule

Regulatory Capital–Proposed Revisions Applicable
to Banking Organizations Subject to the Advanced
Approaches Risk-Based Capital Rule

♦♦ Incorporates in the denominator of the ratio the effective
notional amount of credit derivatives and other similar
instruments under which credit protection is provided.

In November 2014, the federal banking agencies issued a
notice of proposed rulemaking (NPR) regarding certain
technical amendments to the advanced approaches
risk-based capital rule, to enhance consistency of the U.S.
capital rules with international standards for the use of the
advanced approaches framework.

Enhanced Supplementary Leverage Ratio Standards
for Certain Bank Holding Companies and their
Subsidiary Insured Depository Institutions
In April 2014, the federal banking agencies issued a final
rule that increases the supplementary leverage requirements
for the largest, most systemically important banking
organizations and their subsidiary insured depository
institutions (IDIs). The new requirements apply to banking
organizations with at least $700 billion in total consolidated
assets at the top-tier BHC or at least $10 trillion in assets
under custody (covered BHCs) and any IDI subsidiary of
these bank holding companies (covered IDIs). For covered
IDIs, the rule establishes a supplementary leverage ratio
of 6 percent as a “well-capitalized” threshold for prompt
corrective action (PCA). For covered BHCs, the rule
establishes a capital conservation buffer composed of tier
1 capital of 2 percent of total leverage exposure; therefore,
these BHCs need to maintain a supplementary leverage ratio
of 5 percent to avoid restrictions on capital distributions.
These levels are in excess of the Basel III requirement of a
3 percent supplementary leverage ratio, which applies to all
advanced approaches banking organizations.

14 MANAGEMENT’S DISCUSSION AND ANALYSIS

In September 2014, the FDIC approved an interagency
final rule that implements changes to the supplementary
leverage ratio calculation that were proposed in April
2014. The supplementary leverage ratio applies to all
banking organizations subject to the advanced approaches
risk-based capital rules, including the eight entities subject
to the enhanced supplementary leverage requirements.
The rule aligns the agencies’ rules on the calculation of
the denominator of the supplementary leverage ratio with
international leverage ratio standards. Among other things,
the new rule:

♦♦ Modifies the calculation of total leverage exposure for
derivatives and repo-style transactions.
♦♦ Revises the credit conversion factors applied to certain
off-balance sheet exposures.
The rule also establishes public disclosure requirements
that are effective in March 2015. Supplementary leverage
ratio capital requirements incorporating the revised
denominator are effective January 1, 2018.

Regulatory Reporting Under the Final Capital Rule
In March 2014, the FDIC and the other federal banking
agencies implemented the first stage of revisions to the
Consolidated Reports of Condition and Income (Call
Report) to align the regulatory capital components and
ratios portion of the regulatory capital schedule with
the Basel III revised regulatory capital definitions. The
agencies also revised the Federal Financial Institutions
Examination Council (FFIEC) 101 regulatory capital report
for advanced approaches institutions to implement changes
to the advanced approaches regulatory capital rules. These
regulatory capital reporting changes took effect as of the
March 31, 2014, report date for advanced approaches
institutions. The Call Report revisions will be applicable to
all other institutions as of the March 31, 2015, report date.
In June 2014, the FDIC and the other federal banking
agencies issued for comment the second stage of revisions
to the Call Report regulatory capital schedule. These

revisions would update the risk-weighted assets portion
of the schedule to reflect the standardized approach to
risk weighting in the Basel III final rules and would take
effect as of the March 31, 2015, report date. Following
the publication of the proposal, the agencies conducted a
banker teleconference to describe the proposed reporting
changes and respond to questions. The agencies have
modified the report form and instructions in response to
comments and technical questions received on the proposal.
Final drafts of the revised risk-weighted assets report form
and instructions were made available to institutions in
January 2015. Subsequently, the agencies also issued the
final risk-weighted asset reporting changes for comment
and submitted them to the U.S. Office of Management and
Budget (OMB) for approval.
In September 2014, the FDIC and the other federal banking
agencies issued for comment the proposed FFIEC 102
market risk regulatory report. This new quarterly report
would collect key information from the limited number
of institutions subject to the Basel III market risk capital
rules on how they measure and calculate market risk
under these rules. The report would take effect as of the
March 31, 2015, report date. After considering technical
questions received on the proposal, the agencies finalized
the market risk reporting requirements in January 2015,
and subsequently issued a final request for comments and
submitted the new report to OMB for approval.

Stress Testing Guidance
In March 2014, the FDIC, along with the other federal
banking agencies, issued final guidance that outlines
high-level principles for implementing Section 165(i)(2)
of the Dodd-Frank Act, which requires stress tests
for companies with $10 billion to $50 billion in
consolidated assets.
The guidance discusses supervisory expectations for the
Dodd-Frank Act stress test practices and offers additional
details about methodologies that should be employed by
these companies. It also underscores the importance of
stress testing as an ongoing risk management practice that
supports a company’s forward-looking assessment of its
risks and better equips the company to address a range of
macroeconomic and financial outcomes.

Since the publication of the Annual Stress Test rule in
October 2012, the FDIC and other federal banking agencies
have received feedback from the industry regarding
the resource constraints that covered banks face at the
beginning and end of the calendar year arising from
competing regulatory and reporting deadlines. The FDIC
and other banking agencies are aware that conducting
stress testing during the last quarter of a calendar year may
also make it difficult for covered banks to timely modify
strategic and operational plans for the following year that
address any issues identified in the company-run stress
test results.
For these reasons, in November 2014, the FDIC, in
coordination with the FRB and the OCC, issued a final
rule that modifies the dates of the stress test cycle and the
corresponding reporting and publication deadlines. The
shift in testing, reporting, and disclosure dates will take
place for the 2016 company-run stress test cycle and each
annual cycle thereafter.

Other Rulemaking and Guidance
under the Dodd-Frank Act
The Dodd-Frank Act requires various agencies to
publicize regulations in a number of areas. The
following is a summary of significant activity relating to
the Dodd-Frank Act.

Margin and Capital Requirements
for Covered Swap Entities
In September 2014, the FDIC Board approved the
interagency notice of proposed rulemaking (NPR) for
Margin and Capital Requirements for Covered Swap
Entities. This proposed rule would implement certain
requirements contained in Sections 731 and 764 of the
Dodd-Frank Act, which provide that the largest and most
active participants in the over-the-counter derivatives
market must collect initial margin and variation margin.
The NPR is consistent with the international framework
on margin requirements published by the Basel Committee
on Banking Supervision (BCBS) and the International
Organization of Securities Commissions in September 2013.
The proposed rule applies to these large entities supervised
by the agencies and designated by the U.S. Commodity
Futures Trading Commission (CFTC) or the U.S. Securities

MANAGEMENT’S DISCUSSION AND ANALYSIS 15

ANNUAL REPORT 2014
and Exchange Commission (SEC) as swap dealers, major
swap participants, security-based swap dealers, or securitybased major swap participants. The NPR calls these
registered firms “covered swap entities” (CSEs). As of
December 15, 2014, 15 insured depository institutions had
registered with the CFTC as swap dealers, and as of that
date, no IDI had registered with the CFTC as a major swap
participant. The SEC has not yet imposed a registration
requirement for dealers or major participants in swaps that
it regulates.
A CSE would be required to exchange initial margin for
non-cleared swaps that it enters into with other swap
entities and with financial entities that engage in swap
activity above a certain threshold. A CSE would be required
to exchange variation margin for uncleared swaps it enters
into with another swap entity or with any financial entity.
Most community bank swap activities are in amounts
too small to be affected by the proposed rule. Also, the
proposed rule does not require CSEs to collect margin from
commercial end users.
The proposal was published in the Federal Register on
September 24, 2014, and the comment period ended
November 24, 2014. The agencies are reviewing the
comments and plan to issue a final rule in early 2015.

Credit Risk Retention for Securitizations
In October 2014, the FDIC, jointly with the OCC, the FRB,
the Department of Housing and Urban Development, the
SEC, and the Federal Housing Finance Agency (FHFA),
approved a final rule to implement the securitization credit
risk retention provisions of Section 941 of the Dodd-Frank
Act, which added Section 15G to the Securities Exchange
Act of 1934. Section 15G generally requires securitizers
of asset-backed securities (ABS) to retain not less than
5 percent of the credit risk of assets collateralizing ABS
issuances, and generally prohibits a securitizer from
directly or indirectly hedging or otherwise transferring the
credit risk the securitizer is required to retain. The final
rule provides various exemptions from the risk retention
requirements, some of which are required by statute. For
example, as required by the Dodd-Frank Act, the final rule
exempts ABS collateralized solely by “qualified residential
mortgages” (QRM) from risk retention requirements.

16 MANAGEMENT’S DISCUSSION AND ANALYSIS

The final rule aligns the definition of QRM with the
definition of “qualified mortgage” (QM) as prescribed by
the Consumer Financial Protection Bureau (CFPB). This
alignment is consistent with the statutory requirement that
the QRM definition be no broader than the QM definition
and take into consideration underwriting and product
features that historical loan performance data indicate
result in lower risk of default. In addition, the final rule
reduces, in some situations to zero, the risk retention
requirements for ABS collateralized by commercial
mortgages, commercial real estate (CRE) loans, or
automobile loans that meet certain underwriting standards.
The final rule also provides various transaction-specific
risk retention options for revolving pool securitizations,
commercial mortgage-backed securities, open market
collateralized loan obligations, government-sponsored
enterprises, municipal bond repackagings (known as
tender option bonds), and asset-backed commercial paper
conduits. The final rule prohibits hedging, transferring,
or pledging required risk retention until these restrictions
lapse, which varies by asset type.
The final rule was published in the Federal Register on
December 24, 2014. Compliance with respect to residential
mortgage-backed securities is required beginning one year
after the date of publication in the Federal Register. For
all other classes of ABS, compliance with the final rule is
required beginning two years after the date of publication in
the Federal Register.

The Volcker Rule
On December 10, 2013, the FDIC, along with the other
federal banking agencies, and the SEC, approved a joint
final rule to implement the provisions of Section 619 of the
Dodd-Frank Act, also known as the “Volcker Rule.” (On
that same date, for procedural reasons, the CFTC adopted
an identical final rule.) The Volcker Rule, which added
Section 13 to the BHC Act, generally prohibits any banking
entity from engaging in proprietary trading or acquiring
or retaining an interest in, sponsoring, or having certain
relationships with, a hedge fund or private equity fund,
subject to certain exemptions. The final rule became
effective April 1, 2014.

In January 2014, the FDIC, together with the other federal
banking agencies, the SEC, and the CFTC, adopted a joint
interim final rule that permits banking entities subject to the
Volcker Rule to retain investments in certain collateralized
debt obligations backed primarily by trust preferred
securities.
To help ensure consistent implementation of the Volcker
Rule, the agencies have established an interagency Volcker
Rule working group that meets regularly to discuss issues
and the application and enforcement of the rule.
During 2014, the agencies posted various joint Frequently
Asked Questions (FAQs) on their websites to address
certain implementation issues presented by banking entities
subject to the Volcker Rule. These FAQs have addressed
such matters as:
♦♦ Annual CEO Attestation
♦♦ Conformance Period
♦♦ Foreign Public Fund Seeding Vehicles
♦♦ Loan Securitization Servicing Assets
♦♦ Metrics Reporting and Confidentiality
♦♦ Metrics Reporting Date
♦♦ Metrics Reporting During the Conformance Period
♦♦ Mortgage-Backed Securities of Government-Sponsored
Enterprises
♦♦ Name-sharing Prohibition
♦♦ Trading Desks

Minimum Requirements for Appraisal
Management Companies
In April 2014, the FDIC, jointly with the OCC, the FRB,
the National Credit Union Administration (NCUA), the
CFPB, and the FHFA, approved an NPR to implement the
minimum requirements for registration and supervision
of appraisal management companies (AMCs) in the
Dodd-Frank Act. The proposed rule would establish the
minimum requirements in Section 1473 of the Dodd-Frank
Act (Section 1473) for registration and supervision of
AMCs; establish the minimum requirements for AMCs that
register with the State under Section 1473; require federally

regulated AMCs to meet the minimum requirements of
Section 1473 (other than registering with the State); and
require the reporting of certain AMC information to the
Appraisal Subcommittee of the FFIEC. The comment
period closed in June 2014, and the agencies are reviewing
and considering the comments received. The agencies
expect to issue a final rule in 2015.

Joint Standards for Assessing
Diversity Policies and Practices
The FDIC continued to implement the provisions of Section
342 of the Dodd-Frank Act during 2014. Section 342(b)(2)
(C) of the Act requires the Office of Minority and Women
Inclusion (OMWI) Director of each covered agency to
develop standards for assessing the diversity policies
and practices of entities regulated by such agency. To
implement that requirement and develop those standards,
the FDIC’s OMWI continued to work closely in 2014 with
the OMWI Directors of the OCC, the NCUA, the FRB, the
CFPB, and the SEC. In addition, the FDIC developed
standards for increasing the participation of minorityand women-owned businesses (MWOBs) in the agency’s
programs and contracts and standards to evaluate agency
contractors’ good faith efforts to include minorities and
women in their workforce.
In late 2013, proposed standards were published in
the Federal Register as a Proposed Interagency Policy
Statement Establishing Joint Standards for Assessing the
Diversity Policies and Practices of Entities Regulated by
the Agencies. The proposed standards describe leading
diversity practices for the financial services industry in four
key areas: (1) organizational commitment to diversity and
inclusion; (2) workforce profile and employment practices;
(3) procurement and business practices – supplier diversity;
and (4) practices to promote transparency of organizational
diversity and inclusion.
The comment period was initially scheduled to end on
December 24, 2013, but was extended to February 7, 2014,
to facilitate public comment on the policy statement and
questions posed by the agencies. The FDIC in coordination
with the other agencies have reviewed the comments
received and are in the final stages of preparing final joint
standards, which will likely be issued in 2015.

MANAGEMENT’S DISCUSSION AND ANALYSIS 17

ANNUAL REPORT 2014
Liquidity and Funds Management Rulemaking
Liquidity Coverage Ratio
In September 2014, the FDIC, together with the OCC and
the FRB, issued a joint final rule to implement the Liquidity
Coverage Ratio (LCR). The final rule requires certain
banks to hold a minimum level of liquid assets to support
contingent liquidity events that could arise within a 30-day
liquidity stress horizon. It also provides a standard way of
expressing a bank’s on-balance sheet liquidity position to
stakeholders and supervisors.
The requirement applies to large, internationally active
banking organizations and their consolidated subsidiary
depository institutions with $10 billion or more in total
consolidated assets. Covered companies are required to
notify their PFR when the LCR drops below 100 percent
and develop a remediation plan if the shortfall persists. The
rule establishes a shorter phase-in period than the Basel
III standard, as it would require covered companies to
fully meet the minimum LCR by January 1, 2017, two years
earlier than the Basel III requirements. The FRB is also
applying a less stringent LCR requirement to certain smaller
depository institution holding companies with $50 billion to
$250 billion in total assets.

Net Stable Funding Ratio
In October 2014, the BCBS published a final standard to
implement the Net Stable Funding Ratio (NSFR). While the
LCR focuses on having sufficient high-quality liquid asset
buffers to weather a short-term severe stress, the NSFR
considers funding over a longer horizon. The NSFR requires
banks to maintain a stable funding profile in relation to their
on- and off-balance sheet activities, comparing the amount
of an entity’s required stable funding to meet asset and
off-balance sheet obligations against the available stable
funding sources. The FDIC expects that the federal banking
agencies will complete an NSFR proposal by year-end 2015.

INSURANCE
The FDIC insures bank and savings association deposits. As
insurer, the FDIC must continually evaluate and effectively

manage how changes in the economy, the financial markets,
and the banking system affect the adequacy and the viability
of the Deposit Insurance Fund (DIF).

Long-Term Comprehensive
Fund Management Plan
In 2010 and 2011, the FDIC developed a comprehensive,
long-term DIF 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. That plan is combined with
the Restoration Plan, originally adopted in 2008 and
subsequently revised, which is designed to ensure that the
reserve ratio (the ratio of the fund balance to estimated
insured deposits) will reach 1.35 percent by September
30, 2020, as required by the Dodd-Frank Act.1 These plans
include a reduction in assessment rates that the FDIC Board
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—under the long-term DIF management
plan—set the Designated Reserve Ratio (DRR) of the DIF
at 2.0 percent. 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. Under
provisions of the Federal Deposit Insurance Act (FDI Act)
that require the FDIC Board to set the DRR for the DIF
annually, the FDIC Board voted in October 2014 to maintain
the 2.0 percent DRR for 2015—the DRR that has been in
effect every year since 2011.
As part of the long-term DIF management plan, the FDIC
also suspended dividends indefinitely when the fund reserve
ratio exceeds 1.5 percent. Instead, 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 much the
same function as dividends, but provide more stable and
predictable effective assessment rates over time.

	 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 publicize a rulemaking that implements this requirement at a later date
to better take into account prevailing industry conditions at the time of the offset.

1

18 MANAGEMENT’S DISCUSSION AND ANALYSIS

State of the Deposit Insurance Fund
Estimated losses to the DIF were $0.4 billion from failures
occurring in 2014; these losses were lower than losses from
failures in each of the previous six years. The fund balance
continued to grow through 2014, as it has every quarter
starting first quarter 2010, for a total of 20 consecutive
quarters. Lower than estimated losses for past bank
failures together with assessment revenue contributed to
the increase in the fund balance in 2014. The fund reserve
ratio rose to 1.01 percent at December 31, 2014, from 0.79
percent at the previous year-end.

Deposit Insurance Assessment System
In November 2014, the FDIC finalized a rule that revises
the deposit insurance system to be consistent with changes
in the regulatory capital rules that go into effect January
1, 2015, and January 1, 2018. The rule conforms the
capital ratios and ratio thresholds in the deposit insurance
assessment system to the Basel III rule prompt corrective
action capital ratios and thresholds. The rule also conforms
the assessment base calculation for custodial banks
to the new asset risk weights under the Basel III rule’s
standardized approach. In addition, for highly complex
institutions, the rule requires counterparty exposure for
assessment purposes to be measured using the Basel III
rule’s standardized approach, with a modification for certain
cash collateral securing derivative exposures.

ACTIVITIES RELATED TO SYSTEMICALLY
IMPORTANT FINANCIAL INSTITUTIONS
Complex Financial Institutions
The FDIC is committed to addressing the unique challenges
associated with the supervision, insurance, and potential
resolution of large and complex insured institutions. The
FDIC’s ability to analyze and respond to risks in these
institutions is particularly important, as they comprise a
significant share of banking industry assets. The FDIC’s
programs related to complex financial institutions provide
for a consistent approach to large bank supervision
nationwide, allows for the analysis of financial institution
risks on an individual and comparative basis, and enables
a quick response to risks identified at large institutions.
Given the concentration of risk in these institutions, the

FDIC has expanded its activities at the nation’s largest and
most complex institutions through additional and enhanced
on-site and off-site monitoring and supervision.

Risk Monitoring Activities for Systemically
Important Financial Institutions
The Dodd-Frank Act expanded the FDIC’s responsibilities
for overseeing and monitoring the largest, most complex
BHCs and large, nonbank systemically important financial
institutions (SIFIs) designated by the Financial Stability
Oversight Council (FSOC) for supervision by the FRB.
In 2014, the FDIC’s CFI activities included ongoing
risk monitoring of the largest, most complex banking
organizations and backup supervision of their IDIs, as well
as ongoing risk monitoring of certain nonbank financial
companies. The FDIC continues to work closely with
other federal regulators to better understand the risk
measurement and management practices of SIFIs and
assess the potential risks they pose to financial stability.
The FDIC undertakes risk monitoring activities at the
company level to understand each company’s: structure,
business activities, and resolution/recovery capabilities
to inform the FDIC’s resolution planning staff; business
activities and risk profile to gauge both proximity to a
resolution event and the speed at which a company’s
condition could potentially deteriorate to a resolution event;
recovery plans; early warning signals and triggers; and the
range of remedial actions to be taken should a triggering
event occur.
In 2014, the FDIC’s off-site monitoring systems for SIFIs
were expanded to enhance efforts to analyze structured and
unstructured data. The FDIC developed and implemented
the Systemic Monitoring System (SMS), which is an off-site
monitoring tool for SIFIs that will be used to enhance risk
scoping of various activities. This tool will be integrated
into the FDIC’s SIFI on-site monitoring and resolution
planning processes. The SMS synthesizes large amounts
of quantitative data from numerous sources (i.e., data
that pertain to both proximity-to-default and speed-todefault), evaluates the level and change in metrics that
serve as important barometers of overall risk, produces
a preliminary risk assessment and comprehensive risk
profile report for individual SIFIs, and identifies areas

MANAGEMENT’S DISCUSSION AND ANALYSIS 19

ANNUAL REPORT 2014
requiring further follow-up to determine the need for
additional supervisory activities or accelerated resolution
planning efforts. SMS risk assessments will help the FDIC
to identify emerging risks in individual firms, prioritize
supervisory activities, and inform the development of
appropriate supervisory responses and resolution strategies
in deteriorating situations. However, the SMS is not a
predictive or a statistically based model; rather it is a
dynamic tool that assists the FDIC in identifying risk in the
largest firms.
Risk monitoring is enhanced by the FDIC’s backup
supervision activities. In the FDIC’s back-up supervisory
role, as outlined in Sections 8 and 10 of the FDI Act
and Sections 23A and 23B of the Federal Reserve Act,
the FDIC has expanded resources and developed and
implemented policies and procedures to guide back-up
supervisory activities. These activities include participating
in supervisory activities with other regulatory agencies,
performing analyses of industry conditions and trends,
exercising examination authorities, and exercising
enforcement authorities when necessary. At institutions
where the FDIC is not the PFR, staff works closely with
other financial institution regulatory authorities to identify
emerging risk and assess the overall risk profile of large
and complex institutions. The FDIC, the FRB, and the
OCC operate under a Memorandum of Understanding
(MOU) that establishes guidelines for coordination and
cooperation to carry out their respective responsibilities,
including the FDIC’s role as insurer and supervisor. Under
this agreement, the FDIC has assigned dedicated staff to
systemically important and large, complex regional banking
organizations to enhance risk identification capabilities and
facilitate the communication of supervisory information.
These individuals work closely with PFR staff in the
ongoing monitoring of risk at their assigned institutions.
Additionally, the FDIC allocates examination and analytical
resources annually to the FRB’s Comprehensive Capital
Analysis and Review and Comprehensive Liquidity Analysis
and Review programs. Also, in 2014, the FDIC expanded
participation with the FRB’s Supervisory Assessment of
Recovery and Resolution Preparedness program in an effort
to assess firms’ capabilities related to resolvability planning
and preparedness.

20 MANAGEMENT’S DISCUSSION AND ANALYSIS

Title I Resolution Plans
Title I of the Dodd-Frank Act requires that each BHC with
total consolidated assets of $50 billion or more and each
nonbank financial company that the FSOC determines
should be subject to supervision by the FRB, prepare a
resolution plan, or “living will,” and periodically provide
the plan to the FRB and the FDIC. Section 165(d) of the
Dodd-Frank Act requires the company’s resolution plan to
provide for its rapid and orderly resolution under the U.S.
Bankruptcy Code in the event of the company’s material
financial distress or failure. The FDIC and the FRB issued
a joint rule, effective November 30, 2011, to implement the
requirements for resolution plans filed under Section 165(d)
[the 165(d) Rule].
The 165(d) Rule provides for staggered initial submission
dates for the resolution plans of covered companies.
Thereafter, unless otherwise agreed to by the FDIC and the
FRB, each covered company must submit a plan annually,
on or before the anniversary of its initial submission date.
Under the 165(d) Rule, the initial submission date is based
upon nonbank assets (or for a foreign-based covered
company, U.S. nonbank assets) as of November 30, 2011,
and is set by the rule as follows:
♦♦ July 1, 2012: “First Wave Companies” are covered
companies with $250 billion or more in nonbank
assets (or U.S. nonbank assets for foreign-based
covered companies).
♦♦ July 1, 2013: “Second Wave Companies” are covered
companies with $100 billion or more in nonbank
assets (or U.S. nonbank assets for foreign-based
covered companies).
♦♦ December 31, 2013: “Third Wave Companies” are all
other covered companies as of the effective date of the
165(d) Rule.
♦♦ Any company that becomes subject to the 165(d) Rule
after November 30, 2011, (including nonbank financial
companies designated by the FSOC), must submit its
initial resolution plan by the next July 1 that is at least
270 days after the date it became subject to the rule (or
following its designation by FSOC).
In July 2012, 11 First Wave Companies submitted initial
165(d) plans. Based upon review of the initial resolution

plans, the FDIC and the FRB developed guidance for
the First Wave Companies to permit alternate resolution
strategies and to clarify information that should be included
in their 2013 resolution plan submissions.2 The agencies
also extended the second submission filing date to October
1, 2013, giving the First Wave Companies additional time to
develop resolution plans complying with the guidance.
In August 2014, the agencies announced the completion of
reviews of the October 2013 resolution plans submitted by
the First Wave Companies. Based on the review of the 2013
plans, the FDIC Board determined that the plans were not
credible and did not facilitate an orderly resolution under
the U.S. Bankruptcy Code as required by Section 165(d) of
the Dodd-Frank Act. Although this determination was not
made jointly by the FDIC and the FRB, the agencies jointly
identified and communicated to the firms, certain firmspecific shortcomings with the 2013 resolution plans and
agreed that the First Wave Companies must take immediate
action to improve their resolvability and reflect those
improvements in their 2015 plans. The agencies further
agreed that in the event that the First Wave Companies have
not, on or before July 1, 2015, submitted plans responsive
to the identified shortcomings, the agencies expect to use
their authority under Section 165(d) to determine that
a resolution plan does not meet the requirements of the
Dodd-Frank Act.
In August 2014, the agencies issued joint feedback letters to
each of the First Wave Companies. The letters noted some
improvements from the original plans submitted by the
companies, but detailed specific shortcomings of each firm’s
plan and the agencies expectations for the 2015 submission.
While the shortcomings of the plans varied across the First
Wave Companies, the agencies identified several common
features of the plans’ shortcomings. These common
features included: (1) assumptions that the agencies
regard as unrealistic or inadequately supported, such
as assumptions about the likely behavior of customers,
counterparties, investors, central clearing facilities, and
regulators; and (2) the failure to make, or even to identify,
the kinds of changes in firm structure and practices that
would be necessary to enhance the prospects for orderly
resolution.

The agencies will require that the annual plans submitted
by these firms in 2015 demonstrate that the firms are
making significant progress to address all the shortcomings
identified in the letters and are taking actions to improve
their resolvability under the U.S. Bankruptcy Code.
In July 2014, the First Wave Companies and two of the
Second Wave Companies submitted revised resolution
plans, and the three nonbank financial companies
designated by the FSOC (referred to as Fourth Wave
Companies) submitted their initial resolution plans. The
FRB and the FDIC granted requests for extensions to two
Second Wave Companies, which submitted their plans to
the agencies by October 1, 2014. The FDIC and the FRB are
reviewing the plans submitted by the various companies
in July and October 2014, with the exception of one plan
for which the review has been completed. In November
2014, the FDIC and the FRB announced the completion of
their review of this firm’s 2014 resolution plan and issued a
joint letter to the firm. The agencies noted improvements
from the original plan submitted in 2013. The guidance
given to the firm for preparation of its 2015 plan submission
stated that its 2014 plan provided a basis for a resolution
strategy that could facilitate an orderly liquidation under
bankruptcy. If fully developed in the future, the firm’s plan
could reduce the risk that the company’s failure would
pose to the stability of the U.S. financial system. The
agencies also jointly identified specific shortcomings of the
2014 resolution plan that need to be addressed in the 2015
plan. The letter detailed the specific shortcomings and the
expectations of the agencies for the 2015 submission.
By December 31, 2013, 116 Third Wave Companies had
submitted initial resolution plans. In August 2014, after
reviewing the plans, the agencies provided each of the Third
Wave Companies the following guidance for their second
round submissions based on the relative size and scope of
each firm’s U.S. operations:
♦♦ The more complex firms are required to file a full
resolution plan that takes into account and discusses
potential obstacles to resolvability identified by the
agencies. The obstacles include global issues, financial
market utility interconnections, and funding and liquidity.

	 http://www.fdic.gov/regulations/reform/domesticguidance.pdf

2

MANAGEMENT’S DISCUSSION AND ANALYSIS 21

ANNUAL REPORT 2014
♦♦ Firms with less complex U.S. operations are permitted to
file tailored plans and can use a model template issued by
the agencies or follow the guidelines previously released
by the agencies.
♦♦ Firms with limited U.S. operations may focus their plans
on material changes to their initial plans as well as actions
taken to strengthen the effectiveness of their initial plans.
♦♦ In August 2014, the agencies also released a tailored
resolution plan template for the Third Wave Companies’
2014 plans. The optional template, which is intended
to facilitate the preparation of tailored resolution plans,
focuses on the nonbanking operations of the company
and on the interconnections and interdependencies
between its nonbanking and banking operations.
♦♦ By December 31, 2014, 120 Third Wave Companies
submitted plans to the agencies. The FDIC and the FRB
are reviewing those plans.

Insured Depository Institution Resolution Plans
The FDIC has a separate rule that requires all IDIs with
assets greater than $50 billion to submit resolution plans to
the FDIC (IDI Rule). The IDI Rule requires each covered
institution to provide a resolution plan that should allow
the FDIC as receiver to resolve the institution in an orderly
manner that enables prompt access of insured deposits,
maximizes the return from the failed institution’s assets, and
minimizes losses realized by creditors and the DIF. These
plans complement those required under the 165(d) Rule.
Based upon its review of IDI plans submitted prior to
and during 2014, the FDIC issued guidance in December
2014 for resolution plans required by the IDI Rule. Under
the guidance, a covered institution must provide a fully
developed discussion and analysis of a range of realistic
resolution strategies. To assist institutions in writing
their plans, the guidance includes direction regarding the
elements that should be discussed in a fully developed
resolution strategy and the cost analysis, clarification
regarding assumptions made in the plan, and a list
of significant obstacles to an orderly and least costly
resolution that institutions should address. The guidance
applies to the resolution plans of 36 institutions covered

by the IDI Rule, as well as any new institution meeting
the threshold, commencing with the 2015 resolution plan
submissions.

Title II Resolution Strategy Development
Under the Dodd-Frank Act, failed or failing financial
companies are expected to file for reorganization or
liquidation under the U.S. Bankruptcy Code, just as any
failed or failing nonfinancial company would. If resolution
under the Bankruptcy Code would result in serious adverse
effects to the U.S. financial stability, the Orderly Liquidation
Authority (OLA) set out in Title II of the Dodd-Frank Act
provides a back-up authority to the bankruptcy process.
There are strict parameters on its use, however, and
it can only be invoked under a statutorily prescribed
recommendation and determination process, coupled with
an expedited judicial review process.
Prior to the 2008 financial crisis, the FDIC’s receivership
role was limited to IDIs. No regulator had the authority
to resolve a failing financial company, (e.g., a BHC) or any
of the company’s non-IDI affiliates or any other nonbank
financial company through the FDIC’s receivership process,
in order to avoid the systemic consequences that could arise
from bankruptcy or other insolvency regime filing. The OLA
addresses those limitations and gives the FDIC the back-up
powers necessary to potentially resolve a failing BHC or
other SIFI in an orderly manner that imposes accountability
on shareholders, creditors, and management of the failed
company while mitigating systemic risk and without cost to
taxpayers.
The FDIC has largely completed the core rulemakings
necessary to carry out its responsibilities under Title II
of the Dodd-Frank Act. Additionally, the FDIC has been
developing strategies including one approach, referred to
as “Single Point of Entry (SPOE)”, to carry out its orderly
liquidation authorities. In December 2013, the FDIC
published a notice in the Federal Register that provides
greater detail on the SPOE strategy and discusses the key
issues that the FDIC could encounter in the resolution of a
SIFI.3 The notice requested public comment and views as to
whether the SPOE approach can be effective in supporting

	 Notice entitled, “Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy,” 78 Fed. Reg.
76614 (Dec. 18, 2013).

3

22 MANAGEMENT’S DISCUSSION AND ANALYSIS

the policy objectives of minimizing moral hazard and
promoting market discipline while maintaining the stability
of the U.S. financial system as set forth in Title II of the
Dodd-Frank Act. In 2014, the FDIC reviewed all submitted
comments. Firm-specific resolution strategies continue to
be developed and refined.
As part of the FDIC’s efforts to develop and refine strategies
that could be implemented in a Title II resolution, the FDIC
and the Bank of England, in conjunction with the financial
institution regulators in the respective jurisdictions, have
been developing contingency plans for the failure of a
U.S.- or U.K.-based SIFI that has significant operations in
the United Kingdom or the United States, respectively. Of
the 28 global SIFIs (G-SIFIs) identified by the Financial
Stability Board (FSB) of the Group of 20 (G-20) countries,
four are headquartered in the United Kingdom and eight are
headquartered in the United States. Moreover, more than
80 percent of the reported foreign activities of the eight U.S.
G-SIFIs emanates from the United Kingdom. In October
2014, the FDIC was host to the Secretary of the Treasury,
the Chair of the Federal Reserve Board of Governors, the
Chancellor of the Exchequer, and the Governor of the Bank
of England, as well as leading financial regulatory bodies
in the United States and United Kingdom for an exercise
designed to further promote a working relationship between
U.S. and U.K. authorities in the event of the failure and
resolution of a G-SIFI. The exercise’s high-level discussion
furthered understanding among U.S. and U.K. principals
regarding resolution strategies for G-SIFIs under the two
countries’ resolution regimes.

Cross-Border Efforts
Advance planning and cross-border coordination for
the resolution of G-SIFIs will be essential to minimizing
disruptions to global financial markets. Recognizing that
G-SIFIs create complex international legal and operational
concerns, the FDIC continues to reach out to foreign
regulators to establish frameworks for effective crossborder cooperation.
During 2014, the FDIC continued to coordinate with
representatives from European authorities to discuss issues
of mutual interest, including the resolution of European
G-SIFIs and harmonization of receivership actions. The

FDIC and the European Commission (E.C.) established a
joint Working Group composed of FDIC and E.C. senior
executives to focus on both resolution and deposit
insurance issues. The Working Group meets twice a year
with other interim interchanges, including the exchanging
of staff members. Discussions were held concerning
the FDIC’s experience with bank resolutions, systemic
resolution strategies, the European Union (E.U.)-wide
Credit Institution and Investment Firm Recovery and
Resolution Directive, the E.C.’s amendment to harmonize
deposit guarantee schemes across the E.U., and the E.C.’s
Single Resolution Mechanism. In June 2014, the FDIC
conducted a training seminar on resolutions for resolution
authorities and E.C. staff.
The FDIC continues to foster its relationships with other
jurisdictions that regulate G-SIFIs, including Switzerland,
Germany, France, and Japan. In 2014, the FDIC had
significant principal and staff-level engagements with these
countries to discuss cross-border issues and potential
impediments that would affect the resolution of a G-SIFI.
This work will continue in 2015 with plans to host tabletop
exercises with regulatory staff from these jurisdictions.

Systemic Resolution Advisory Committee
In 2011, the FDIC Board approved the creation of the
Systemic Resolution Advisory Committee (SRAC). The
SRAC provides important advice to the FDIC regarding
systemic resolutions, and advises the FDIC on a variety of
issues including the following:
♦♦ 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.
♦♦ The tools needed to assist in cross-border relations with
foreign regulators and governments when a systemic
company has international operations.
Members of the SRAC have a wide range of experience
including managing complex firms; administering
bankruptcies; and working in the legal system, accounting

MANAGEMENT’S DISCUSSION AND ANALYSIS 23

ANNUAL REPORT 2014
♦♦ Monitoring domestic and international financial
regulatory proposals and advising Congress and making
recommendations to enhance the integrity, efficiency,
competiveness, and stability of U.S. financial markets.
♦♦ Producing annual reports describing, among other things,
the Council’s activities and potential emerging threats to
financial stability.

SRAC member and former Chairman of the
Federal Reserve Board of Governors Paul Volcker
(left) and FDIC Chairman Gruenberg discussing
resolution strategy.
field, and academia. A meeting of the SRAC was held in
December 2014. The SRAC discussed, among other topics,
living wills and bankruptcy, resolution plan transparency,
international developments, ISDA protocol, and orderly
liquidation updates.

Financial Stability Oversight Council
The FSOC was created by the Dodd-Frank Act in July 2010
to promote the financial stability of the United States. It is
composed of ten voting members, including the Chairperson
of the FDIC, and five non-voting members.
The FSOC’s responsibilities include the following:
♦♦ Identifying risks to financial stability, responding to
emerging threats in the system, and promoting market
discipline.
♦♦ Identifying and assessing threats that institutions may
pose to financial stability and, if appropriate, designating
a nonbank financial company for supervision by the FRB
subject to heightened prudential standards.
♦♦ Designating financial market utilities and payment,
clearing, or settlement activities that are, or are likely to
become, systemically important.
♦♦ Facilitating regulatory coordination and informationsharing regarding policy development, rulemaking,
supervisory information, and reporting requirements.

24 MANAGEMENT’S DISCUSSION AND ANALYSIS

In 2014, the FSOC issued its fourth annual report.
Generally, at each of its meetings, the FSOC discusses
various risk issues. In 2014, the FSOC meetings addressed,
among other topics, U.S. fiscal issues, market environment
and developments in the Ukraine, an asset management
industry conference hosted by the FSOC, short-term
wholesale funding markets, money market mutual fund
reforms, and nonbank financial company designations.

SUPERVISION
Supervision and consumer protection are cornerstones
of the FDIC’s efforts to ensure the stability of and public
confidence in the nation’s financial system. The FDIC’s
supervision program promotes the safety and soundness
of 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, 2014, the
FDIC was the PFR for 4,138 FDIC-insured, state-chartered
institutions that were not members of the Federal Reserve
System [generally referred to as “state nonmember” (SNM)
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, 2014, the FDIC conducted 2,087
statutorily required risk management examinations,
including a review of Bank Secrecy Act (BSA) compliance,
and all required follow-up examinations for FDICsupervised problem institutions, within prescribed time
frames. The FDIC also conducted 1,406 statutorily required

FDIC EXAMINATIONS 2012 – 2014
2014

2013

2012

1,881

2,077

2,310

206

203

249

0

0

1

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

0

0

1

State Member Banks

0

4

2

2,087

2,284

2,563

1,019

1,201

1,044

376

371

611

11

4

10

1,406

1,576

1,665

428

406

446

Subtotal–Risk Management Examinations
CRA/Compliance Examinations:
Compliance/Community Reinvestment Act
Compliance-only
CRA-only
Subtotal–CRA/Compliance Examinations
Specialty Examinations:
Trust Departments
Information Technology and Operations

2,113

2,323

2,642

Bank Secrecy Act

2,126

2,328

2,585

Subtotal–Specialty Examinations

4,667

5,057

5,673

Total

8,160

8,917

9,901

CRA/compliance examinations (1,019 joint CRA/compliance
examinations, 376 compliance-only examinations, and 11
CRA-only examinations), and 4,667 specialty examinations.
The table above compares the number of examinations, by
type, conducted from 2012 through 2014.

Risk Management
As of December 31, 2014, 291 insured institutions with
total assets of $86.7 billion were designated as problem
institutions for safety and soundness purposes (defined as
those institutions having a composite CAMELS4 rating of
“4” or “5”), compared to the 467 problem institutions with
total assets of $152.7 billion on December 31, 2013. This
constituted a 38 percent decline in the number of problem
institutions and a 43 percent decrease in problem institution
assets. In 2014, 202 institutions with aggregate assets
of $64.4 billion were removed from the list of problem
financial institutions, while 26 institutions with aggregate

assets of $6.3 billion were added to the list. The National
Republic Bank of Chicago, located in Chicago, Illinois, was
the largest failure in 2014, with $843 million in assets. The
FDIC is the PFR for 202 of the 291 problem institutions,
with total assets of $58.7 billion.
During 2014, the FDIC issued the following formal and
informal corrective actions to address safety and soundness
concerns: 41 Consent Orders and 180 MOUs. Of these
actions, 20 Consent Orders and 23 MOUs were issued, based
in whole or in part, on apparent violations of the BSA.
All risk management exams were conducted in accordance
with statutorily-established time frames, and related
enforcement actions for newly-identified 4- and 5- rated
institutions were issued in accordance with the time frames
established by FDIC policy.  The FDIC was slightly
below its performance standard for timeliness in the
issuance of enforcement actions for newly-identified
3-rated institutions.

	 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).

4

MANAGEMENT’S DISCUSSION AND ANALYSIS 25

ANNUAL REPORT 2014
Compliance

Large and Complex Financial Institutions

As of December 31, 2014, 56 insured SNM institutions, about
1 percent of all supervised institutions, with total assets
of $61 billion, were problem institutions for compliance,
CRA, or both. Most of the existing problem institutions
for compliance were rated “4” for compliance purposes,
with only one rated “5.” For CRA purposes, the majority
are rated “Needs to Improve,” and only three are rated
“Substantial Noncompliance.” As of December 31, 2014,
all follow-up examinations for problem institutions were
performed on schedule.

The FDIC established the Complex Financial Institutions
and Large Bank Supervision Groups (Groups) within its
Division of Risk Management Supervision in response to
the growing complexity of large banking organizations.
These Groups are responsible for supervisory oversight
and ongoing monitoring, and support the insurance and
resolutions business lines. For SNM banks over $10 billion,
the FDIC generally applies a continuous examination
program whereby dedicated staff conduct ongoing onsite
supervisory examinations and institution monitoring, as
previously discussed. At institutions where the FDIC is not
the PFR, staff works closely with other financial institution
regulatory authorities to identify emerging risk and assess
the overall risk profile of large and complex institutions.

During 2014, the FDIC conducted all required compliance
and CRA examinations and, when violations were identified,
completed follow-up visits and implemented appropriate
enforcement actions in full accordance with FDIC policy. 
In completing these activities, the FDIC substantially met
its internally-established time standards for the issuance of
final examination reports and enforcement actions.
Overall, banks demonstrated strong consumer compliance
programs. The most significant consumer protection issue
that emerged from the 2014 compliance examinations
involved banks’ failure to adequately monitor third-party
vendors. For example, the FDIC found violations involving
unfair or deceptive acts or practices relating to issues
such as failure to disclose material information about new
product features being offered, deceptive marketing and
sales practices, and misrepresentations about the costs
of products. As a result, the FDIC issued orders requiring
consumer restitution and civil money penalty (CMP)
actions.
During 2014, the FDIC issued the following formal and
informal corrective actions to address compliance
concerns: 14 Consent Orders and 42 MOUs. In certain
cases, the Consent Orders contain requirements for
institutions to pay restitution in the form of consumer
refunds for different violations of laws. During 2014,
institutions subject to Consent Orders refunded over $105
million to consumers. These refunds primarily related to
unfair or deceptive practices by institutions, as discussed
above. Additionally, in 2014, the FDIC issued 24 CMPs
relating to consumer compliance, totaling just over $9.5
million in CMPs.

26 MANAGEMENT’S DISCUSSION AND ANALYSIS

The Large Insured Depository Institution (LIDI) Program
remains the primary instrument for off-site monitoring
of IDIs with $10 billion or more in total assets. The LIDI
Program provides a comprehensive process to standardize
data capture and reporting through nationwide quantitative
and qualitative risk analysis of large and complex
institutions. In 2014, the LIDI Program encompassed
106 institutions with total assets of $12.4 trillion.  The
comprehensive LIDI Program is essential to effective large
bank supervision because it captures information on the
risks and utilizes that information to best deploy resources
to high-risk areas, determine the need for supervisory
action, and support insurance assessments and resolution
planning.
The Shared National Credit (SNC) Program is an
interagency initiative administered jointly by the FDIC, the
FRB, and the OCC to ensure consistency in the regulatory
review of large, syndicated credits, as well as identify
risk in this market, which comprises a large volume of
domestic commercial lending. In 2014, outstanding credit
commitments identified in the SNC Program totaled $3.4
trillion. The FDIC, the FRB, and the OCC issued a joint
release detailing the results of the review in November 2014.
In 2014, the FDIC implemented various initiatives to expand
knowledge and expertise related to large bank supervisory
matters. For example, a long-term program was established
to expand on-the-job training and provide mentoring of

select staff regarding examination processes and risk
analysis at large banks. The FDIC is also focused on hiring
and developing additional staff with quantitative skill sets
to facilitate the evaluation of complex modeling used by the
largest banks. Additionally, several training initiatives were
developed and implemented in 2014 that focused on large
bank supervisory risks, structures, vulnerabilities,
and processes.

Bank Secrecy Act/Anti-Money Laundering
The FDIC pursued a number of BSA, Anti-Money
Laundering (AML), and Counter Financing of Terrorism
(CFT) initiatives in 2014.
In January and June 2014, the FDIC conducted International
AML/CFT training sessions for 61 government officials from
Afghanistan, Algeria, Azerbaijan, Kazakhstan, Mali, Nigeria,
Pakistan, and Yemen. Additionally, in March 2014, the FDIC
conducted an International AML and CFT training session in
Kuala Lumpur, Malaysia, the first such training session held
outside of the United States. The training was coordinated
with Bank Negara Malaysia and included 59 participants
representing financial regulatory agencies from Cambodia,
Indonesia, Laos, Malaysia, Myanmar, the Philippines,
Thailand, and Vietnam. These training sessions assisted
participating jurisdictions in implementing AML/CFT
standards and providing law enforcement with financial
investigative and other skills necessary to combat money
laundering, terrorist financing, and fraud. Specifically, each
of the training sessions focused on AML/CFT controls, the
AML examination process, customer due diligence, and
suspicious activity monitoring. Additionally, in August
2014, the FDIC hosted the Office of Foreign Assets Control
(OFAC) for an interagency teleconference to discuss recent
changes to existing U.S. economic sanctions programs, as
well as OFAC compliance expectations and enforcement
case studies.
In December 2014, the FFIEC released the 2014
Bank Secrecy Act/Anti-Money Laundering (BSA/
AML) Examination Manual (BSA/AML Manual). The
revised BSA/AML Manual provides current guidance on
risk-based policies, procedures, and processes for banking
organizations to comply with the BSA and safeguard
operations from money laundering and terrorist financing.

It also reflects regulatory changes and clarifies supervisory
expectations that have occurred since the BSA/AML Manual
was last updated. The 2014 revisions incorporate feedback
from the banking industry and examination staff.

Information Technology, Cyber Fraud,
and Financial Crimes
To address the specialized nature of technology- and
operations-related supervision, cyber risks, and controls
in the banking industry, the FDIC routinely conducts
information technology (IT) and operations examinations at
FDIC-supervised institutions. The FDIC and other banking
agencies also conduct IT and operations examinations
of technology service providers (TSPs), which support
financial institutions. The result of an IT and operations
examination is a rating under the FFIEC Uniform Rating
System for Information Technology, which is incorporated
into the Management component of the Safety and
Soundness rating and the Safety and Soundness Report of
Examination.
In 2014, the FDIC conducted 2,113 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.
In addition to the FDIC’s operations and technology
examination program, the FDIC regularly monitors
cybersecurity issues in the banking industry through
on-site examinations, regulatory reports, and intelligence
reports. The FDIC works with groups, such as the Financial
and Banking Information Infrastructure Committee, the
Financial Services Sector Coordinating Council for Critical
Infrastructure Protection and Homeland Security, the
Financial Services Information Sharing and Analysis Center
(FS-ISAC), other regulatory agencies, law enforcement,
and others to share information regarding emerging issues
and coordinate responses. Further, the FDIC actively
participates in the FFIEC’s Cybersecurity and Critical
Infrastructure Working Group (CCIWG). The CCIWG was
formed in 2013 and serves as a forum to address policy
related to cybersecurity and critical infrastructure. It
enables members to communicate and collaborate on

MANAGEMENT’S DISCUSSION AND ANALYSIS 27

ANNUAL REPORT 2014
activities to support and strengthen the resilience of the
financial services sector and provides input to FFIEC
principal members regarding cybersecurity matters.

♦♦ Re-issued, as a FIL, three documents that contain
practical ideas for community banks to consider when
they engage in technology outsourcing.

In 2014, the FDIC continued a multi-year effort begun in
2010 to strengthen IT and cyber-related educational and
professional development programs for the examination
workforce. As part of this effort, newly commissioned
examiners must complete four IT-related courses – an
IT examination course as well as courses on payment
systems; risk assessment, IT audit and business continuity
planning; and information security. Once this course work
is completed, these examiners are able to conduct IT
examinations at the FDIC’s least technologically complex
supervised financial institutions and better understand the
risks associated with the FDIC’s more complex financial
institution IT examinations conducted by specialized IT
examiners. The FDIC now has nearly 300 commissioned
examiners who have completed all four post-commission
IT schools and more than 500 who have completed at least
one of these schools. An additional facet of this multi-year
effort is an on-the-job training program to develop
additional examiners with more advanced IT examination
skills. In 2014, 18 examiners received advanced
certifications in IT, bringing the total of examiners with
advanced IT certifications to 116.

♦♦ Hosted the FFIEC IT Examiners Conference that
addressed technology and operational issues facing the
federal financial regulatory agencies.

The FDIC’s major accomplishments during 2014 to
promote IT security, assess risk management practices,
and combat cyber fraud and other financial crimes included
the following:
♦♦ Developed and distributed to all FDIC-supervised banks
the FDIC’s Cyber Challenge simulation exercise to
encourage community banks to discuss operational risk
issues and the potential impact of information technology
disruptions. The exercise contained four videos that
depict various operational disruptions and materials to
facilitate discussion about how the bank would respond
to the disruptions. Lists of reference materials where
banks could obtain additional information were also
included.
♦♦ Published two FDIC Consumer News articles: “More
About How to Protect Yourself From Data Breaches” and
“When People Face Tough Time, Crooks Try to Profit.”

28 MANAGEMENT’S DISCUSSION AND ANALYSIS

♦♦ Commenced planning a Financial Crimes Conference for
staff that will focus on all types of financial fraud, and
how the law enforcement community and regulators can
effectively respond. The conference is co-sponsored by
the U.S. Department of Justice (DOJ) and will be held in
June 2015.
♦♦ Assisted financial institutions in identifying and shutting
down “phishing” websites that attempt to fraudulently
obtain and use an individual’s confidential personal or
financial information.
Major interagency accomplishments as a member of the
FFIEC included the following:
♦♦ Collaborated on the development of an FFIEC
cybersecurity assessment pilot program conducted at
more than 500 community banks and TSPs. The pilot
program was designed to assess how well community
financial institutions manage cybersecurity and their
preparedness to mitigate cyber risks. The results of the
assessment are instructive and will help FFIEC members
make informed decisions about how they prioritize
actions to enhance the effectiveness of cybersecurityrelated supervisory programs, guidance, and examiner
training.
♦♦ Published FFIEC statements on Cyber Attacks on ATM
and Card Authorization Systems, as well as Distributed
Denial of Service (DDoS) Attacks.
♦♦ Published an FFIEC Technology Alert on IT
vulnerabilities.
♦♦ Co-sponsored and conducted an interagency webinar for
community banks addressing senior management’s role in
cybersecurity. Over 5,000 chief executive officers (CEOs)
and senior managers participated in the webinar.
♦♦ Issued a press release and FFIEC statement providing
financial institutions with information on available
resources to mitigate potential cyber threats and

recommending that institutions of all sizes participate
in cyber-related information sharing forums, such as the
FS-ISAC.

Minority Depository Institution Activities
The preservation of minority depository institutions (MDIs)
remains a high priority for the FDIC. In July 2014, the FDIC
released a study specifically on MDIs entitled, Minority
Depository Institutions: Structure, Performance, and
Social Impact. The study explores the role of MDIs in the
U.S. financial system: how the industry has changed over
time, how MDIs have performed financially, and how they
have served their communities. The report notes that MDIs
underperform non-MDIs in terms of standard industry
measures of financial performance, but it concludes that
MDIs often promote the economic viability of minority and
underserved communities. Compared with community
banks, the markets served by MDI offices include a higher
share of the population living in low- or moderate-income
(LMI) census tracts, as well as a higher share of minority
populations. In addition, among institutions that reported
data under the Home Mortgage Disclosure Act, MDIs
originated a larger share of their mortgages to borrowers
who live in LMI census tracts and to minority borrowers
than did non-MDI community banks. These findings
demonstrate the essential role MDIs play in their local
communities and their high level of commitment to the
populations they serve.
In 2014, the FDIC continued to advocate for MDI and
Community Development Financial Institution (CDFI)
industry-led strategies for success, building on the results
of the 2013 Interagency Minority Depository Institution
and CDFI Bank Conference. These strategies include
industry-led solutions; MDI and CDFI bankers working
together to tell their story; collaborative approaches to
partnerships to share costs, raise capital, or pool loans;
technical assistance; and innovative use of federal
programs. The FDIC has begun working with the OCC and
the FRB to plan for the 2015 Interagency Conference for
MDI and CDFI Banks and to build upon these strategies.
The FDIC continually pursued ways to improve
communication and interaction with MDIs and to respond
to the concerns of minority bankers. In addition to active
outreach with MDI trade groups, the FDIC annually offers

to arrange meetings between regional management and
each MDI’s board of directors to discuss issues of interest.
In addition, the FDIC routinely contacts FDIC-supervised
MDIs to offer return visits and technical assistance
following the conclusion of each safety and soundness,
compliance, CRA, and specialty examination to assist
bank management in understanding and implementing
examination recommendations. These return visits,
normally conducted 90 to 120 days after the examination,
are to provide recommendations or feedback for improving
operations, not to identify new problems or issues. MDIs
also may initiate contact with the FDIC to request technical
assistance at any time. In 2014, the FDIC provided 119
individual technical assistance sessions on approximately
80 risk management and compliance topics, including, but
not limited to, the following:
♦♦ Bank Secrecy Act and Anti-Money Laundering.
♦♦ Basel III Capital Rules.
♦♦ Branch Opening and Closing Requirements.
♦♦ CRE Concentrations.
♦♦ Community Reinvestment Act.
♦♦ Information Technology.
♦♦ Interest Rate Risk.
♦♦ Loan Underwriting and Administration.
♦♦ New Mortgage Rules/Ability to Repay.
♦♦ Sensitivity to Market Risk.
♦♦ Third-Party Risk Management.
♦♦ Troubled Debt Restructurings.
The FDIC regional offices also held outreach, training, and
educational programs for MDIs through conference calls
and banker roundtables. In 2014, topics of discussion for
these sessions included many of those listed above, as well
as the FDIC’s Technical Assistance Video Program, Capital
Raising, and PCA.

Other Rulemaking and Guidance Issued
During 2014, the FDIC issued and participated in the
issuance of other rulemaking and guidance in several areas
as described below.

MANAGEMENT’S DISCUSSION AND ANALYSIS 29

ANNUAL REPORT 2014
Registration of Municipal Advisors
In January 2014, the FDIC issued a FIL to advise FDICsupervised financial institutions on the registration
requirements for those institutions that meet the definition
of “municipal advisor.” Section 975 of the Dodd-Frank Act
amended Section 15B(a) of the Securities Exchange Act
of 1934 to make it unlawful for “municipal advisors,” as
defined in the Dodd-Frank Act, to provide certain advice
to or solicit municipal entities or certain other persons
without registering with the SEC. In September 2013, the
SEC issued a final rule establishing a permanent registration
system for municipal advisors.

Paying Agent Notification Requirements
In February 2014, the FDIC issued a FIL to alert bankers to
the SEC’s amendment to the Exchange Act Rule 17Ad-17
to implement the requirements of Section 929W of the
Dodd-Frank Act. The amendments add a requirement
that “paying agents” send a one-time notification to
“unresponsive payees” stating that the agent has sent a
security holder a check that has not yet been negotiated.

Income Tax Allocation in a Holding
Company Structure
In June 2014, the FDIC and the other federal banking
agencies issued an addendum to the 1998 Interagency
Policy Statement on Income Tax Allocation in a Holding
Company Structure. Since the beginning of the 2008
financial crisis, many disputes have occurred between
holding companies in bankruptcy and failed IDIs regarding
the ownership of tax refunds generated by the IDIs. Certain
court decisions have found that holding companies in
bankruptcy own tax refunds created by failed IDIs based
on language in their tax-sharing agreements that the courts
interpreted as creating a debtor-creditor relationship as
opposed to acknowledging an agency relationship. The
addendum seeks to remedy this problem by requiring IDIs
to clarify that their tax-sharing agreements acknowledge
that an agency relationship exists between the holding
company and its subsidiary IDI with respect to tax refunds
attributable to income earned, taxes paid, and losses
incurred by the IDI, and provides a sample paragraph to
accomplish this goal. The addendum also clarifies how
certain requirements of Sections 23A and 23B of the Federal
Reserve Act apply to tax allocation agreements between

30 MANAGEMENT’S DISCUSSION AND ANALYSIS

IDIs and their affiliates. Those IDIs and their holding
companies subject to the 1998 Interagency Policy Statement
were expected to implement the addendum no later than
October 31, 2014. The FDIC will review compliance with
the guidance in upcoming examinations of affected IDIs.

Economic Growth and Regulatory
Paperwork Reduction Act
The FDIC, along with the other banking regulatory agencies,
launched a cooperative, three-year effort to review all
of their regulations. The purpose of the review, which
is mandated by the Economic Growth and Regulatory
Paperwork Reduction Act of 1996 (EGRPRA), is to identify
and eliminate any regulatory requirements that are outdated
or otherwise unnecessary.
For the purpose of this review, the agencies categorized
their regulations into 12 separate groups. Over the next two
years, groups of regulations will be published for comment,
providing industry participants, consumer and community
groups, and other interested parties an opportunity to
identify regulatory requirements they believe are no longer
needed or should be modified. The agencies will then
analyze the comments and propose amendments to their
regulations where appropriate.
In June 2014, the agencies issued the first three groups
of regulations for comment: Applications and Reporting,
Powers and Activities, and International Operations.
During the 90-day comment period, which ended September
2, 2014, 40 letters were received. Staff is reviewing and
analyzing the comments.
One such comment letter resulted in the FDIC’s issuance
of a FIL in November 2014, which eliminates application
requirements for state-chartered banks engaging in
activities or investments permissible for a national bank if
the bank maintains certain documentation, including that
the activity is permissible under relevant state law. The
FIL clarifies that this change applies to unincorporated
subsidiaries of state-chartered banks operating as a
limited liability company (LLC), a limited partnership, or
a similar entity wishing to engage in activities permissible
for a national bank. In addition, in November 2014, the
FDIC issued guidance through a FIL to aid applicants in
developing proposals for deposit insurance and to provide
transparency to the application process.

As a part of the regulatory burden reduction effort, the
agencies hosted a banker outreach meeting in December
2014, in Los Angeles, California, to facilitate awareness of
the EGRPRA project and to listen to stakeholder comments
and suggestions. FDIC Chairman Martin J. Gruenberg,
FRB Governor Lael Brainard, and Comptroller Thomas J.
Curry were featured speakers at the meeting. Staff from
each of the federal banking agencies, as well as regional
representatives of the major industry trade groups and
community advocates, attended the meeting. The agencies
plan to hold additional roundtable discussions with bankers
and interested parties and will publish details about these
sessions at http://www.fdic.gov/EGRPRA/index.html and
http://egrpra.ffiec.gov as they are finalized.

FDIC Clarifying Supervisory Approach to
Institutions Establishing Account Relationships
with Third-Party Payment Processors

refinancing an existing loan due to changes in financial
circumstances, or declines in property values since the
HELOC’s origination date. The HELOC guidance provides a
framework for managing HELOCs nearing their end-of draw
period and communicating and prudently working with
HELOC borrowers experiencing financial difficulties.

Prudent Management of Agricultural
Credits through Economic Cycles
In July 2014, the FDIC issued a FIL reminding institutions
engaged in agricultural lending to maintain sound
underwriting standards, strong credit administration
practices, and effective risk management strategies. The
FIL encourages financial institutions to work constructively
with borrowers to strengthen the credit and mitigate
loss when agricultural borrowers experience financial
difficulties.

In July 2014, the FDIC issued guidance clarifying its
supervisory approach to institutions establishing account
relationships with third-party payment processors (TPPPs).
The focus of the FDIC’s supervisory approach to institutions
establishing account relationships with TPPPs is to ensure
that institutions have adequate procedures for conducting
due diligence, underwriting, and ongoing monitoring of
these relationships. The guidance stressed that insured
institutions that properly manage customer relationships
are neither prohibited nor discouraged from providing
services to any customer operating in compliance with
applicable law.

Regulatory Relief

Interagency Guidance on Home Equity Lines of
Credit Nearing Their End-of-Draw Period

In November 2014, the FDIC, jointly with the FRB and the
OCC, issued Frequently Asked Questions (FAQs) through
a FIL to provide clarification on the implementation and
interpretation of the leveraged lending guidance issued in
March 2013.  The guidance is intended to help institutions
strengthen risk management frameworks to ensure that
leveraged lending activities do not heighten risk in the
banking system through the origination and distribution of
poorly underwritten and low-quality loans. The responses
contained in the FAQs foster industry and examiner
understanding and promote consistent application and
implementation of the guidance.

In July 2014, the FDIC, jointly with the OCC, the FRB, the
NCUA, and the Conference of State Bank Supervisors,
issued home equity lines of credit (HELOC) guidance,
which recognizes that some institutions and borrowers
may face challenges as HELOCs near their end-of-draw
period. Many borrowers will have the financial capacity to
meet their contractual obligations as HELOCs transition
from the draw period to an amortizing or balloon payment.
However, some borrowers may have difficulty meeting
higher payments resulting from principal amortization or
an interest rate reset, while others may encounter problems

During 2014, the FDIC issued six FILs that provide guidance
to help financial institutions and to facilitate recovery in
areas affected by tornadoes, flooding, and other severe
storms. 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.

Frequently Asked Questions for Implementing the
Interagency Guidance on Leveraged Lending

MANAGEMENT’S DISCUSSION AND ANALYSIS 31

ANNUAL REPORT 2014
Depositor and Consumer Protection
Rulemaking and Guidance
Guidance on Increased Maximum Flood Insurance
Coverage for “Other Residential Buildings”
The FDIC, the OCC, the FRB, the NCUA, and the Farm
Credit Administration (collectively, the agencies) issued
an interagency statement in May 2014 regarding the new
National Flood Insurance Program (NFIP) maximum
limit of flood insurance coverage for non-condominium
residential buildings designed for use for five or more
families (classified by the NFIP as “Other Residential
Buildings”). The guidance discusses agency’ expectations
and financial institution responsibilities when, as a result
of the increase in the maximum limit of building coverage
for such properties, a financial institution determines that
a building securing a designated loan is covered by flood
insurance in an amount less than the amount required under
federal flood insurance law.

Guidance on Unfair or Deceptive Credit Practices
In August 2014, the FDIC, the FRB, the CFPB, the NCUA,
and the OCC issued guidance regarding certain consumer
credit practices. This guidance was prompted by the
Dodd-Frank Act’s repeal of the authority to issue credit
practices rules for banks, savings associations, and federal
credit unions. The guidance cautioned institutions not
to construe the repeal of rulemaking authority under the
Federal Trade Commission Act (FTC Act) to indicate
that the unfair or deceptive practices described in these
former regulations are permissible. The guidance made
clear that the credit practices described in these former
regulations remain subject to Section 5 of the FTC Act. As
such, depending on the facts and circumstances, if banks
engage in the unfair or deceptive practices described in
the former credit practices rules, such conduct may violate
the prohibition against unfair or deceptive practices in
Section 5 of the FTC Act, and Sections 1031 and 1036 of the
Dodd-Frank Act.

Proposed Revisions to Interagency Question and
Answers on Community Reinvestment
In September 2014, the FRB, the FDIC, and the OCC
requested public comments on proposed revisions to

32 MANAGEMENT’S DISCUSSION AND ANALYSIS

the “Interagency Questions and Answers Regarding
Community Reinvestment.” The Questions and Answers
provide additional guidance to financial institutions and
the public on agency regulations that implement the
CRA. The proposed new and revised guidance address
questions raised by bankers, community organizations,
and others regarding agency CRA regulations, including
access to banking service, innovative or flexible lending
practices, qualitative assessment factors, and community
development. The new round of CRA Questions and
Answers is a follow-up to final revisions to earlier
Questions and Answers published in the Federal Register
in November 2013. 

Proposed Rulemaking on Flood Insurance Rule
In October 2014, the FDIC, the FRB, the NCUA, the OCC,
and the Farm Credit Administration issued a proposed
rule to amend regulations pertaining to loans secured
by property located in special flood hazard areas. The
proposed rule would implement provisions of the
Homeowner Flood Insurance Affordability Act of 2014
(HFIAA) relating to escrowing flood insurance payments
and the exemption of certain detached structures from the
mandatory flood insurance purchase requirement. HFIAA
amends the escrow provisions of the Biggert-Waters Flood
Insurance Reform Act of 2012 (the Biggert-Waters Act).

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.
♦♦ Facilitates partnerships to support community and small
business development.

Advisory Committee on Economic Inclusion
The Advisory Committee on Economic Inclusion (ComE-IN)
provides the FDIC with advice and recommendations
on important initiatives focused on expanding access to
banking services to underserved populations. This may
include reviewing basic retail financial services such as
check cashing, money orders, remittances, stored value
cards, small-dollar loans, savings accounts, and other
services that promote individual asset accumulation and
financial stability. During 2014, the ComE-IN met in April
and October to discuss safe banking products, mobile
financial services, financial education opportunities for
young people, consumer demand for small dollar credit,
Bank On programs, and the results from the FDIC National
Survey of Unbanked and Underbanked Households.

FDIC National Survey of Unbanked and
Underbanked Households and Survey of Banks’
Efforts to Serve the Unbanked and Underbanked
As part of its ongoing commitment to expanding economic
inclusion in the United States, the FDIC works to fill the
research and data gap regarding household participation
in mainstream banking and the use of nonbank financial
services. In addition, Section 7 of the Federal Deposit
Insurance Reform Conforming Amendments Act of 2005
(Reform Act) mandates that the FDIC regularly report
on bank efforts to bring individuals and families into
the conventional finance system. In response, the FDIC
regularly conducts and reports on surveys of households
and banks to inform the efforts of financial institutions,
policymakers, regulators, researchers, academics, and
others.
During 2014, the FDIC published a report on the 2013
FDIC National Survey of Unbanked and Underbanked
Households, based on data collected in partnership with the
U.S. Census Bureau. The survey focuses on basic checking
and savings account ownership, but it also explores
households’ use of alternative financial services to better
understand the extent to which families are meeting their
financial needs outside of mainstream financial institutions.
In addition, the report identified opportunities to better
include or retain consumers as bank customers, including
opportunities associated with economic transitions such
as gaining or losing a job. The report was presented to

the ComE-IN members in October. Also, to enhance
transparency and utility of the data, the FDIC developed a
web-based resource to allow bankers and other members of
the public to specify and generate reports that reflect their
particular interests.
The FDIC continued planning for new research to learn
about bank efforts to serve unbanked and underbanked
customers. During 2014, the FDIC advanced work to
develop new survey questions and established relationships
with external vendors that may be called upon to assist with
qualitative research efforts, such as in-depth interviews with
a limited number of bankers.

Partnerships to Promote Consumer Access
The FDIC, through work with Alliances for Economic
Inclusion, Bank On initiatives, and in collaboration
with many local and national organizations, supports
consumer financial education and access. 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 and owners
of small businesses into the financial mainstream.
During 2014, the FDIC supported 16 AEI programs across
the nation. Many AEIs formed committees and working
groups to address specific challenges and financial services
needs in their communities. These included retail financial
services for underserved populations, savings initiatives,
affordable remittance products, small-dollar loan programs,
targeted financial education programs, and other credit and
asset-building programs.
The FDIC continued to work with a wide range of banks
and nonprofit organizations in all of the AEI markets. For
example, in March 2014, the FDIC, with the Small Business
Administration’s support, conducted a Small Business
Resource Summit and Entrepreneurial Cafe in Fairmont,
West Virginia. This event brought together an array of
banks, training providers, nonprofit organizations, and
state and federal agencies to connect small businesses
with the resources they need. In January and June 2014,
the Northeast Oklahoma AEI (NEOK AEI) membership
conducted credit building events in Tahlequah and Tulsa.
At these events, consumers reviewed their credit reports

MANAGEMENT’S DISCUSSION AND ANALYSIS 33

ANNUAL REPORT 2014
in one-on-one sessions with credit counselors, lenders, and
underwriters who assisted them in interpreting, correcting
and improving their credit histories. Other events in 2014
that were co-sponsored by the FDIC in four AEI markets
included training sessions on the importance of credit
scores and the potential for enhancing credit profiles.
AEI members collaborated with the Credit Builders
Alliance, a nonprofit organization that works to facilitate
credit reporting for community development lenders,
to train more than 200 representatives of social service
organizations, local governments and banks, in greater Los
Angeles, California; Milwaukee, Wisconsin; and Wilmington,
Delaware, on the role of credit building for low- and
moderate-income consumers.

Reinvestment, (2) Common Questions and Answers
Pertaining to Implementation of the CFPB’s Ability-to-Repay
and Loan Originator Compensation Final Rules, and (3) an
update on flood insurance matters.

The FDIC also provided information and technical
assistance in the development of safe and affordable
transaction and savings accounts and other products and
services designed to meet the needs of low- and moderateincome consumers. In over 50 markets, the FDIC provided
technical assistance to local Bank On initiatives and to
asset building coalition activities designed to reduce
barriers to banking and increase access to the financial
mainstream. The FDIC also supported efforts to link
consumers to financial education and savings through
engagement in activities organized around designated
“Money Smart” or “Financial Fitness” weeks or months that
involved hundreds of consumer outreach events. Moreover,
working with the national, local, state, and targeted (youth,
military, and minority consumer-focused) America Saves
campaigns, FDIC community affairs teams continued to link
banking companies to active efforts for engaging consumers
with setting savings goals at tax time and year round.

The FDIC signed a multi-year MOU with the CFPB in
April 2014, which leverages each agency’s strengths to
improve financial education and decision-making skills
among American youth from pre-kindergarten through age
20. Early results of the new partnership include tailored
financial education resources for teachers, youth, and
parents/caregivers.

Banker Teleconferences
In 2014, the FDIC hosted a series of banker teleconferences
to maintain open lines of communication and update
supervised institutions about related rulemakings,
guidance, and emerging issues in compliance and
consumer protection. Teleconference participants
included bank directors, officers, staff, and other banking
industry professionals.
Three teleconferences were held in 2014. The topics
discussed included (1) revisions to the “Interagency
Questions and Answers Regarding Community

34 MANAGEMENT’S DISCUSSION AND ANALYSIS

Advancing Financial Education
The FDIC expanded its financial education efforts during
2014 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. In particular, the FDIC took steps to
more closely align its financial education activities with the
Starting Early for Financial Success focus of the Financial
Literacy and Education Commission.

As part of the new partnership, the FDIC began to develop
a new instructor-led Money Smart curriculum series
for young people, to be used as a resource for teachers.
Bankers can also use these tools as they work with schools,
non-profit organizations, and other youth-based audiences.
The age-appropriate series, targeted for release in early
2015, will consist of four free standard-aligned curriculums
that empower teachers with engaging activities to integrate
financial education instruction into subjects such as math,
English, and social studies. Each curriculum includes a
new parent resource guide with information about the
topics being covered in class, as well as at-home activities.
The curriculum will be made available through the new
Teacher Online Resource Center (TORC) website. (https://
www.fdic.gov/consumers/education/teachers.html) that
was launched in September 2014. The TORC is a central
location for teachers to access resources from across
the FDIC and CFPB that can support financial literacy
instruction.
Also, as part of the new partnership, in August 2014, the
FDIC and CFPB launched a campaign to encourage parents
and caregivers to help their children build knowledge

on financial matters. More than 13,000 visitors accessed
the website which provides resources that parents and
caregivers can use to talk about money with young people.

FDIC supported local America Saves coalitions in many
communities around the country by conducting financial
education workshops and providing resources.

In August 2014, the FDIC launched a Youth Savings
Pilot Program (Pilot) to identify and highlight promising
approaches to offering financial education tied to the
opening of safe, low-cost savings accounts for K-12
school-aged children. The FDIC selected nine institutions
from a pool of bank applicants. The Pilot’s first phase
covers existing partnerships between institutions and
schools that are in place during the 2014–15 school year. In
2015, the FDIC plans to solicit banks that intend to carry
out new programs and partnerships during the 2015–16
school year to participate in the second phase of the Pilot.
The Pilot will culminate in a report later in 2015 that will
communicate lessons learned about ways banks may work
with schools or other organizations to effectively combine
financial education with access to a savings account.

Community Development

The existing suite of Money Smart products for consumers
was also enhanced with the release of a Spanish language
translation of Money Smart for Older Adults, in partnership
with the CFPB. This stand-alone training module developed
by both agencies was initially released in English in 2013 to
raise awareness among older adults (age 62 and older) and
their caregivers on how to prevent, identify, and respond
to elder financial exploitation, plan for a secure financial
future, and make informed financial decisions.
Through training and technical assistance, the FDIC
emphasizes the importance of pairing education with access
to appropriate banking products and services. The FDIC
conducted more than 150 outreach events to promote the
Money Smart program. More than 38,000 copies of the
Money Smart instructor-led curriculum were distributed
or downloaded, and more than 49,000 people used the
computer-based or podcast curriculum, exemplifying
effective results from the outreach sessions.
An example of FDIC outreach with leading organizations to
achieve shared objectives is the FDIC’s participation in the
2014 America Saves Week, which took place from February
24 to March 1. The FDIC hosted six webinars that reached
more than 300 financial institutions to discuss opportunities
to participate in America Saves Week. In addition, the

In 2014, the FDIC provided professional guidance and
technical assistance to banks and community organizations
through outreach activities and events designed to foster
understanding and practical relationships between financial
institutions and other community development and
economic inclusion stakeholders. As part of this effort, the
FDIC conducted over 135 community development events
linking bank and community partners with opportunities
to address community credit and development needs. A
particular emphasis was on low- and moderate-income
consumers and small businesses.
The FDIC provided support to strategic partnering
between community banks and Community Development
Financial Institutions (CDFIs). In May 2014, the FDIC
released a guide entitled “Strategies for Community Banks
to Develop Partnerships with Community Development
Financial Institutions” in an effort to strengthen outreach
to encourage partnerships with CDFIs to meet community
credit needs.
The FDIC also co-sponsored the 2014 National Interagency
Community Reinvestment Conference in Chicago, Illinois. 
FDIC Chairman Gruenberg, as a plenary speaker, addressed
the importance of economic inclusion and community
development in his remarks. FDIC staff moderated a
number of the sessions covering small business lending,
CRA 101 for Community Based Organizations, financial
capability, affordable housing, and economic inclusion.
More than 900 bankers and community development
practitioners attended the biennial conference.

Community Banking Initiatives
Community banks are those institutions that provide
traditional, relationship-based banking services in their
local communities. They account for about 13.3 percent
of the banking assets in the United States but provide
nearly 45.1 percent of the small loans that FDIC- IDIs make
to businesses and farms. The FDIC is the lead federal
supervisor for the majority of community banks, and the

MANAGEMENT’S DISCUSSION AND ANALYSIS 35

ANNUAL REPORT 2014
insurer of all. The FDIC has a particular responsibility for
the safety and soundness of community banks, and for
understanding and communicating the role they play in the
banking system.
Efforts under the Community Banking Initiative continued
on a number of fronts in 2014. The FDIC continued to
conduct targeted research on key community banking
issues, and published or presented findings related to the
resilience of community banks amid banking industry
consolidation, de novo institutions and their performance
over time, the effects of long-term rural depopulation on
community banks, the performance and social impact of
Minority Depository Institutions (MDIs), and long-term
trends in the physical banking offices operated by FDICinsured institutions
Another important development during the year was
the introduction of a new section in the FDIC Quarterly
Banking Profile (QBP) that focuses specifically on
community banks. This new section of the FDIC’s flagship
statistical report highlights the structure, activities, and
performance of community banks as distinct from the
results for larger institutions, and should provide a useful
barometer by which smaller institutions can compare their
own results. Combined with the FDIC’s special reports on
community banking topics, this enhancement to the QBP
represents an ongoing commitment to an active program of
research and analysis on community banking.
In response to concerns about pre- and post-examination
processes, the FDIC developed a web-based tool in 2013
that generates a pre-examination document and information
request tailored to a specific institution’s operations and
business lines. In 2014, the regional and Washington offices
continued to monitor banker feedback on the enhanced
pre-examination process and adjusted the tool based on
banker and examiner feedback.
The Directors’ Resource Center, a special section of the
FDIC’s website, is dedicated to providing useful information
to bank directors, officers, and employees on areas of
supervisory focus and regulatory changes. One key
element of this resource center is a Technical Assistance
Video Program that provides in-depth, technical training
for bankers to view at their convenience. A new video

36 MANAGEMENT’S DISCUSSION AND ANALYSIS

released during 2014 focused on the new mortgage rules
that became effective in 2013. The video is targeted to bank
compliance officers to facilitate bank implementation of
and compliance with the CFPB’s ability-to-repay/qualified
mortgage regulations. In addition, the FDIC’s Cyber
Challenge: A Community Bank Cyber Exercise was added
to the Technical Assistance Video Program in 2014.
Throughout 2014, the FDIC continued to offer additional
technical training opportunities on subjects of interest
to community bankers. As part of this ongoing effort,
the FDIC hosted Director Colleges in each region. These
Colleges are typically conducted jointly with state trade
associations and address topics of interest to community
bankers. The FDIC hosted a banker call-in on new
mortgage rules and participated in an FFIEC call-in
regarding Call Report changes. The FDIC also offered a
series of Deposit Insurance Coverage seminars for bank
officers and employees. These free seminars, which
were offered nationwide, particularly benefited smaller
institutions that have limited training resources. Further, the
FDIC conducted a series of roundtables with community
bankers in each of its six regions. Community bank
outreach and training initiatives will continue in 2015.
Additionally, in June 2014, the FDIC mailed an information
packet to the chief executive officers (CEOs) of all FDICsupervised banks. In addition to an introductory letter to
the CEOs, the packet contained brochures highlighting the
content of key resources and programs; a copy of the Cyber
Challenge, a technical assistance product designed to assist
with the assessment of operational readiness capabilities;
and other information of interest to community bankers.
The FDIC’s Advisory Committee on Community Banking
is an ongoing forum for discussing critical issues and
receiving valuable feedback and input from the industry.
The advisory committee met three times during 2014. The
Committee, which is composed of 15 senior leaders of
community banks from around the country, is a valuable
resource for input on a wide variety of topics, including
examination policies and procedures, capital and other
supervisory issues, credit and lending practices, deposit
insurance assessments and coverage, and regulatory
compliance issues.

Finally, the FDIC and the OCC co-hosted a Joint Agency
Mutual Forum (Forum) on July 24, 2014, which was the first
conference conducted for all mutual banking institutions,
regardless of charter type.  Mutually-related institutions
represent about 9 percent of all FDIC-insured institutions
and are among the oldest form of depository institution.
Attended by approximately 125 mutual bankers, the Forum
provided an opportunity for the participants to learn about
current trends and engage in a dialogue on the opportunities
and challenges facing mutual institutions. In June 2014,
the FDIC created a new website dedicated to mutual
institutions, with helpful resources, guidance, and the first
ever published comprehensive listing of mutual banks and
institutions owned by mutual holding companies.

Consumer Complaints and Inquiries
The FDIC helps consumers by receiving, investigating, and
responding to consumer complaints about FDIC-supervised
institutions and answering inquiries about banking laws
and regulations, FDIC operations, and other related topics.
In addition, the FDIC provides analytical reports and
information on complaint data for internal and external use,
and conducts outreach activities to educate consumers.
The FDIC recognizes that consumer complaints and
inquiries play an important role in the development of
strong public and supervisory policy. Assessing and
resolving these matters helps to identify trends or problems
affecting consumer rights, understand the public perception
of consumer protection issues, formulate policy that aids
consumers, and foster confidence in the banking system
by educating consumers about the protection they receive
under certain consumer protection laws and regulations.

Consumer Complaints by Product and Issue
The FDIC receives complaints and inquiries by telephone,
fax, U.S. Mail, email, and online through the FDIC’s website.
In 2014, the FDIC handled 17,559 written and telephone
complaints and inquiries. Of this total, 9,358 related to
FDIC-supervised institutions. The FDIC responded to
nearly 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. As part of the complaint and inquiry handling

process, the FDIC works with the other federal financial
regulatory agencies to ensure that complaints and inquiries
are forwarded to the appropriate agencies for response.
The FDIC carefully analyzes the products and issues
involved in complaints about FDIC-supervised institutions.
The number of complaints received about a specific bank
product and issue can serve as a red flag to prompt further
review of practices that may raise consumer protection or
supervisory concerns.
In 2014, the five most frequently identified consumer
product complaints and inquiries about FDIC-supervised
institutions concerned credit cards (18 percent), checking
accounts (14 percent), residential real estate loans (12
percent), consumer loans (13 percent), and prepaid cards
(8 percent). Credit card complaints and inquiries most
frequently described issues with collection practices,
while the issues most commonly cited in correspondence
about checking accounts related to bank overdraft fees
and service charges. The largest share of complaints and
inquiries about residential real estate loans related to loan
modifications and foreclosures. Consumers most often
identified concerns with collection practices regarding
consumer loans, and a large number of complaints also
involved issues related to prepaid cards.
The FDIC also investigated 76 complaints alleging
discrimination during 2014. The number of discrimination
complaints investigated has fluctuated over the past several
years but averaged approximately 121 complaints per year
between 2008 and 2014. Over this period, 36 percent of the
complaints investigated alleged discrimination based on the
race, color, national origin, or ethnicity of the applicant or
borrower; 23 percent related to discrimination allegations
based on age; 8 percent involved the sex of the borrower or
applicant; and 3 percent concerned a handicap or disability.
Consumer refunds generally involve the financial institution
offering a voluntary credit to the consumer’s account that
is often a direct result of complaint investigations and
identification of a banking error or violation of law. In 2014,
consumers received more than $801,000 in refunds from
financial institutions as a result of the assistance provided
by the FDIC’s Consumer Affairs Program.

MANAGEMENT’S DISCUSSION AND ANALYSIS 37

ANNUAL REPORT 2014
Public Awareness of Deposit
Insurance Coverage
An important part of the FDIC’s deposit insurance mission
is to ensure 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 2014. For example, the FDIC
conducted 12 telephone seminars for bankers on deposit
insurance coverage, reaching an estimated 20,108 bankers
participating at approximately 5,745 bank locations
throughout the country. In 2014, the FDIC also completed
a comprehensive update of its deposit insurance coverage
publications and educational tools for consumers and
bankers. This included a complete revision of the FDIC’s
website including brochures, resource guides, and videos.
In addition, new outreach materials were developed to
assist depositors, including infographic diagrams for
revocable and irrevocable trust deposits.
As of December 31, 2014, the FDIC received and answered
approximately 88,315 telephone deposit insurance-related
inquiries from consumers and bankers.  The FDIC Call
Center addressed 40,522 of these inquiries, and deposit
insurance coverage subject-matter experts handled the
other 47,793.  In addition to telephone inquiries about
deposit insurance coverage, the FDIC received 1,879 written
inquiries from consumers and bankers.  Of these inquiries,
99 percent received responses within two weeks, as
required by corporate policy.

Center for Financial Research
The FDIC’s Center for Financial Research (CFR)
encourages and supports innovative research on topics
that are important to the FDIC’s role as deposit insurer
and bank supervisor. During 2014, the FDIC’s CFR
co-sponsored two major conferences. Approximately 60
regulatory staff attended an Interagency Risk Quantification
Forum, co-sponsored by the FDIC, the OCC, and the
Federal Reserve Bank of Philadelphia, which addressed
38 MANAGEMENT’S DISCUSSION AND ANALYSIS

topics including securitization and creditor recovery, loss
given default, and the identification of systemic risk in the
banking industry.
The CFR also organized and sponsored the 14th Annual
Bank Research Conference jointly with the Journal for
Financial Services Research (JFSR), in October 2014. More
than 120 participants attended the conference that included
more than 20 presentations on topics related to global
banking, financial stability, and the financial crisis.

RECEIVERSHIP MANAGEMENT
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 deposits in an FDIC-insured institution due to a failure.
Upon closure of an institution, typically by its chartering
authority—the state for state-chartered institutions and the
OCC for national banks and federal savings associations—
the FDIC is appointed receiver and is responsible for
resolving the failed institution.
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. 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. The FDIC uses two basic resolution
methods: purchase and assumption transactions and
deposit payoffs.
The purchase and assumption (P&A) transaction is the most
commonly used 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 FDIC
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, absorbing 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 assets in the banking sector can produce a better
net recovery than the FDIC’s immediate liquidation of
these assets.
The FDIC monitors compliance with shared-loss
agreements by validating the appropriateness of loss-share
claims; reviewing efforts to maximize recoveries; ensuring
consistent application of policies and procedures across
both shared-loss and legacy portfolios; and confirming
that the acquirer has sufficient internal controls, including
adequate staff, reporting, and recordkeeping systems. At
year-end 2014, there were 281 shared-loss agreements with
$54.6 billion in total covered assets.
Deposit payoffs are only executed if all bids received for a
P&A transaction are more costly to the DIF than liquidation
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. A variation of the deposit payoff is the
establishment of a New Depository Institution (NDI), as
authorized by the FDI Act. An NDI is a new national bank
or federal savings association with limited life and powers
that assumes the insured deposits of a failed bank or
savings association, allowing customers of the failed bank
or savings association a brief period of time to move their
deposit account(s) to other insured institutions. Though
infrequently used, an NDI allows for a failed bank or
savings association 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, uninsured depositors, 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, and
structured transactions.

Financial Institution Failures
During 2014, there were 18 institution failures, compared to
24 failures in 2013. 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. There were no losses on insured
deposits, and no appropriated funds were required to pay
insured deposits.
The following chart provides a comparison of failure
activity over the last three years.
FAILURE ACTIVITY 2012–2014
Dollars in Billions
2014
Total Institutions

2013

2012

24

51

$2.9

$6.0

$11.6

Total Deposits of Failed Institutions1

$2.7

$5.1

$11.0

Estimated Loss to the DIF
1	

18

Total Assets of Failed Institutions1

$0.4

$1.3

$2.7

Total assets and total deposits data are based on the last Call Report
or Thrift Financial Report (TFR) filed by the institution prior to failure.

Asset Management and Sales
As part of its resolution process, the FDIC tries to sell as
many assets as possible to an assuming institution. Assets
that are retained by the receivership are 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.
Cash sales of assets for the year totaled $772 million in book
value. In addition to structured and cash sales, the FDIC
also uses securitizations to dispose of bank assets.

MANAGEMENT’S DISCUSSION AND ANALYSIS 39

ANNUAL REPORT 2014
As a result of the FDIC’s marketing and collection efforts,
the book value of assets in inventory decreased by $3.6
billion (32 percent) in 2014. The following chart shows the
beginning and ending balances of these assets by asset type.
ASSETS IN INVENTORY BY ASSET TYPE
Dollars in Millions
Asset Type

12/31/14

Securities

12/31/13

$470

$893

36

69

Commercial Loans

123

274

Real Estate Mortgages

697

954

Other Assets/Judgments

957

1,145

Owned Assets

120

365

Net Investments in Subsidiaries

123

117

5,150

7,487

$7,676

$11,304

Consumer Loans

Structured and Securitized Assets
Total

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 2014, the
number of receiverships under management increased by
.2 percent, as a result of new failures. The following chart
shows overall receivership activity for the FDIC in 2014.
RECEIVERSHIP ACTIVITY
Active Receiverships as of 12/31/131

480

New Receiverships

18

Receiverships Terminated

17

Active Receiverships as of 12/31/14
1

481

	Includes one FSLIC Resolution Fund receivership at year-end 2013.

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

40 MANAGEMENT’S DISCUSSION AND ANALYSIS

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 2014,
the FDIC paid dividends of $6 million to depositors whose
accounts exceeded the insurance limit.

Professional Liability and
Financial Crimes Recoveries
The 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 is expected to be costeffective to pursue, the FDIC initiates legal action against
the appropriate parties. During 2014, the FDIC recovered
more than $1.1 billion from professional liability claims and
settlements. The FDIC also authorized lawsuits related to
17 failed institutions against 123 individuals for director
and officer liability, and authorized five other lawsuits for
fidelity bond, liability insurance, attorney malpractice,
appraiser malpractice, and securities law violations for
residential mortgage-backed securities. As of the end
of 2014, 75 residential mortgage malpractice and fraud
lawsuits were pending. Also, the FDIC’s caseload included
102 professional liability lawsuits (down from 119 at
year-end 2013) and 511 open investigations (down from 796
at year-end 2013).
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 DOJ, collected $6.4 million from criminal
restitution and forfeiture orders through the end of 2014. At
that time, there were 3,954 active restitution and forfeiture
orders (down from 4,073 at year-end 2013). This includes
130 orders held by the Federal Savings and Loan Insurance
Corporation (FSLIC) Resolution Fund, (i.e., orders arising
out of failed financial institutions that were in receivership
or conservatorship by the FSLIC or the Resolution Trust
Corporation).

INTERNATIONAL OUTREACH
In 2014, the FDIC continued to play a leading role in
supporting and promoting the global development of
effective deposit insurance, bank supervision, and effective
resolution regimes as integral components of the financial
safety net. The FDIC worked with several standard-setting,
regulatory, supervisory, and multi-lateral organizations such
as the Association of Supervisors of Banks of the Americas
(ASBA), the Basel Committee on Banking Supervision
(BCBS), the Financial Services Volunteer Corps (FSVC), the
International Association of Deposit Insurers (IADI), the
International Monetary Fund (IMF), and the World Bank.
FDIC staff also facilitated the training of several hundred
bank supervisors and regulators, technical assistance
missions around the world, and secondment programs to
further the international community’s understanding
and implementation of best practices in bank supervision
and regulation.

International Association of Deposit Insurers
The International Association of Deposit Insurers (IADI)
contributes to global financial stability by promoting
international cooperation in the field of deposit insurance
and providing guidance for establishing new, and enhancing
existing, deposit insurance systems, and by encouraging
wide international contact among deposit insurers and
other interested parties. It is recognized as the standardsetting body for deposit insurance by major international
financial institutions, including the FSB, the G-20, the BCBS,
the E.C., the IMF, and the World Bank. Since its founding
in 2002, IADI has grown from 26 founding members to 79
deposit insurers from 76 jurisdictions. FDIC Chairman
Gruenberg served as the President of IADI and Chair of its
Executive Council from November 2007 to October 2012.
FDIC Vice Chairman Thomas Hoenig currently serves on
IADI’s Executive Council.
In 2009, IADI and the BCBS jointly issued the Core
Principles for Effective Deposit Insurance Systems and
completed the accompanying Compliance Assessment
Methodology for the Core Principles in 2010 (together, the
Core Principles). The FSB included the Core Principles
in its Compendium of Key Standards for Sound Financial
Systems. The IMF and World Bank use the Core Principles
in the context of the Financial Sector Assessment Program

(FSAP) reviews, to assess the effectiveness of jurisdictions’
deposit insurance systems and practices. This represents
an important milestone in the growing global acceptance
of the role of effective deposit insurance systems in
maintaining financial stability. To-date, IADI has trained
more than 280 staff members from over 70 jurisdictions
in conducting self-assessments for compliance with the
Core Principles.
In 2014, a Joint Working Group, comprising key
representatives from the FDIC, the Canada Deposit
Insurance Corporation, the BCBS, the European Forum of
Deposit Insurers, the IMF, the World Bank, the E.C., and the
FSB, revised the Core Principles and presented the revision
to the IADI Executive Council, which approved it in October
2014. Subsequently, IADI submitted the updated Core
Principles to the FSB for inclusion in its Periodic Report
to the Plenary, and acceptance by the IMF and World Bank
is expected in the near term. Complementing FDIC efforts
with IADI and the Core Principles, the FDIC in partnership
with the Financial Stability Institute (FSI), developed an
online tutorial to assist jurisdictions in completing selfassessments of compliance with the Core Principles in
preparation for the IMF/World Bank FSAP review.
FDIC executives and subject-matter experts partnered with
IADI to make significant contributions to the development
and delivery of several key international programs in 2014.
Vice Chairman Hoenig and division executives joined
global bank resolution and deposit insurance leaders
in exploring key issues related to the use of bail-in as a
resolution tool in Warsaw, Poland. The FDIC partnered
with FSI to develop a seminar on bank resolution and
crisis management hosted by the Bank for International
Settlements in Basel, Switzerland. In collaboration with
the Kenya School of Monetary Studies, the FDIC led a
workshop in Nairobi, Kenya, in May 2014 for jurisdictions
interested in establishing new deposit insurance systems.
The FDIC helped modernize IADI’s information technology
infrastructure and its research capabilities and supported
IADI in many leadership capacities. In addition to the
Vice Chairman’s role on the Executive Council, an FDIC
executive chairs the IADI Training and Conference
Committee (TCC), which is responsible for setting IADI’s
training strategy, advancing the Core Principles capacity
building programs, and forging effective partnerships with

MANAGEMENT’S DISCUSSION AND ANALYSIS 41

ANNUAL REPORT 2014
multilateral agencies that contribute to IADI’s training
capabilities. One of the TCC’s marquee programs is its
Executive Training Seminars. In July 2014, the FDIC led a
seminar on Deposit Insurance Funding for 70 participants
from 35 jurisdictions.

Standards Implementation Group, among others.  FDIC staff
contributed to active work streams and quantitative impact
studies for BCBS subgroups, providing substantial support
and in some instances leading the work.

Association of Supervisors of Banks of the Americas

The FDIC’s international efforts supporting the
development of effective deposit insurance systems,
bank supervisory practices, and bank resolution regimes
continued to grow in 2014. FDIC staff contributed
to international capacity building by providing study
tours, secondments, and technical assistance to foreign
counterparts. These engagements resulted in an enhanced
dialogue between the FDIC and foreign bank supervisors,
deposit insurers, and lawmakers on significant areas such
as bank supervision and regulatory development post crisis,
depositor preference and resolution functions of the deposit
insurance system, and optimal funding strategies for deposit
insurers.

The FDIC has been a member of ASBA since its founding
in 1999 and supports ASBA’s mission of promoting sound
bank supervision and regulation throughout the Western
Hemisphere. ASBA represents bank supervisors from 36
jurisdictions. The FDIC strives to lead the development
of strong supervisory policies in this hemisphere through
active engagement with the Association’s Board, chairing
the ASBA’s Training and Technical Committee, and by
providing leadership in many of the Association’s research
and guidance working groups.
Senior FDIC staff chair the ASBA Training and Technical
Committee, which is responsible for designing and
implementing ASBA’s training strategy that advances the
adoption of sound bank supervision policies and practices
among members. In support of ASBA’s Continental Training
Program, the FDIC led two technical assistance training
missions in 2014, including Supervision of Operational
Risk in San Salvador, El Salvador, and Financial Institution
Analysis in Tegucigalpa, Honduras. The FDIC continued to
provide subject-matter experts as instructors and speakers
to support ASBA-sponsored training programs, seminars,
and conferences.

Basel Committee on Banking Supervision
The FDIC supported the development of sound regulatory
policy through effective participation in the BCBS and its
relevant subgroups. FDIC senior managers represented
the FDIC in quarterly meetings of the BCBS and its Policy
Development Group. Throughout the year, the FDIC was
active in a number of BCBS subgroups that developed
proposals for international minimum standards for capital
adequacy, resolution regimes, liquidity and funding,
and trading and derivatives activities for internationally
active banks. These groups include the Task Force on
Simplicity and Comparability, the Leverage Ratio Group,
the Accounting Experts Group, the Working Group on
Liquidity, the Working Group on Margining Requirements,
the Cross-Border Bank Resolution Group, and the

42 MANAGEMENT’S DISCUSSION AND ANALYSIS

International Capacity Building

FDIC management and staff hosted study tours for 288
individuals, representing 26 jurisdictions during the year.
Additionally, the FDIC’s Corporate University provided
training in bank supervision and information technology to
294 foreign delegates from 20 jurisdictions. In support of
the FDIC’s long-term partnership with the U.S. Department
of State, the FDIC hosted training sessions for 111
individuals from 15 jurisdictions on Anti-Money Laundering/
Combating the Financing of Terrorism (AML/CFT) in 2014.
These training sessions assisted participating jurisdictions
in implementing AML/CFT standards, and in providing law
enforcement with financial investigative skills, as well as
a suite of skills necessary to combat money laundering,
terrorist financing, and fraud.
The FDIC contributes to global and domestic initiatives
by providing staff to support long-term projects and
technical assistance missions led by the IMF, U.S. Treasury
Department, the FSVC, and the World Bank. In 2014,
senior FDIC staff served on long-term assignments at
the U.S. Treasury Department’s Office of International
Bank and Securities Markets. The FDIC led six technical
assistance missions sponsored by the U.S. Treasury and
the FSVC. In collaboration with the U.S. Treasury Office of
Technical Assistance, the FDIC advised the Banque de la
République du Burundi on the development of a risk-based

supervision program. In partnership with the FSVC, the
FDIC participated in several technical assistance missions
including assisting the Albania Deposit Insurance Agency
in developing an automated system to verify deposit
insurance premiums and payouts, providing expertise on
the topic of savings mobilization in the financial sector to
the East African Community Financial Services Providers’
Council in Tanzania, and providing senior Bank of Uganda
examiners with an opportunity to strengthen its supervision
framework by observing an FDIC risk-management
examination. The FDIC partnered with the World Bank
to provide technical assistance to the Nigerian Deposit
Insurance Corporation on developing a targeted fund ratio
for their deposit insurance fund. The FDIC also provided
technical assistance and consultation to the Central Bank
of Curaçao on the disposition of larger troubled banks and
strengthening its bank supervision framework.
The FDIC expands and strengthens international
engagement by providing secondment opportunities to
foreign officials to engage in long-term consultation with
FDIC subject-matter experts in areas related to bank
supervision, deposit insurance, and resolutions. In 2014,
two officials from the Deposit Insurance Corporation
of Japan and the Korea Deposit Insurance Corporation
concluded their secondments to the FDIC, and two new
secondees from these agencies joined the FDIC, each for
one-year assignments.

Key International Engagements
In 2014, the FDIC took important steps to strengthen
its relationships with key jurisdictions worldwide. In
February, FDIC executives attended the U.S.-India Financial
Regulatory Dialogue, hosted by the Securities and Exchange
Bureau of India (SEBI) in Mumbai. U.S. representatives
from the Treasury Department, FRB, SEC, Commodity
Futures Exchange Commission, and the Federal Insurance
Office met with the Indian Ministry of Finance, Reserve
Bank of India, the Forward Markets Commission, and the
Insurance Regulatory and Development Authority to discuss
banking sector developments, commodity market and
capital market issues, insurance and pension regulation,
and financial regulatory reform in each country. The
FDIC discussed the U.S. bank resolution regime and new
resolution powers for nonbank resolutions. The Reserve

Bank of India, in turn, explained its proposed banking
reform legislation that would dissolve the current Deposit
Insurance and Credit Guarantee Corporation and create a
new resolution corporation responsible for the resolution of
bank and nonbank financial institutions in India.
In July 2014, Secretary of the Treasury Jacob Lew and
Secretary of State John Kerry led a delegation of senior U.S.
officials to Beijing, China, to participate in the 6th U.S.-China
Strategic and Economic Dialogue. Secretary Lew and Vice
Premier Wang Yang led the Economic Track discussion.
The FDIC was represented at the meetings, alongside a
high-level delegation of Cabinet members, ministers, agency
heads, and senior officials from both countries. Among key
outcomes, such as commitments by China to liberalize its
exchange rate regime, reduce barriers to trade, and further
open its markets, China also committed to accelerate the
establishment of a deposit insurance system and improve
the resolution mechanism for financial institutions through
issuing regulations on bank resolution.

MINORITY AND WOMEN INCLUSION
The FDIC relies on contractors to help meet its mission.
In 2014, the FDIC awarded 288 (26.9 percent) contracts
to minority- and women-owned businesses (MWOBs) out
of a total of 1,072 issued. The FDIC awarded contracts
with a combined value of $686.8 million in 2014, of which,
$239.9 million, or 34.9 percent, were awarded to MWOBs,
compared to 34.7 percent for all of 2013. The FDIC paid
$128.2 million of its total contract payments (26.1 percent)
to MWOBs, under 1,934 active contracts. Referrals
to minority- and women-owned law firms (MWOLFs)
accounted for 16 percent of all legal referrals in 2014,
with total payments of $15.3 million going to MWOLFs,
(13 percent of all payments to outside counsel) compared
to 13 percent for all of 2013.
In 2014, the FDIC participated in a combined total of 21
business expos, one-on-one matchmaking sessions, and
panel presentations. At these events, FDIC staff provided
information and responded to inquiries regarding FDIC
business opportunities for minorities and women. In
addition to targeting MWOBs, these efforts also targeted
veteran-owned and small disadvantaged businesses.
Vendors were provided with the FDIC’s general contracting

MANAGEMENT’S DISCUSSION AND ANALYSIS 43

ANNUAL REPORT 2014
procedures, prime contractors’ contact information, and
forecasts of possible upcoming solicitations. Also, vendors
were encouraged to register through the FDIC’s Contractor
Resource List (a principal database for vendors interested
in doing business with the FDIC). In 2014, a total of 332
MWOBs were added to the FDIC Contractor Resource List.
On December 2, 2014, the FDIC hosted a Technical
Assistance Day. This event provided a venue for various
business owners, including MWOBs and MWOLFs, to
become better acquainted with the FDIC’s contracting
process, receive technical assistance on effective proposal
writing, and learn about the types of technical assistance
offered by the Procurement Technical Assistance Center
and Minority Business Development Agency. The event
also included a panel composed of Office of Minority and
Women Inclusion (OMWI) Directors from the U.S. Treasury
Department, the OCC, the SEC, the FHFA, the CFPB, and
the FDIC, who addressed their respective programs and
opportunities. Eighty-six business representatives attended.  
In addition, the FDIC conducted a series of outreach events
to raise awareness and provide information on how to
purchase other real estate (ORE) through the FDIC’s Owned
Assets Marketplace and Auctions Program. The events also
facilitated interaction between smaller investors and asset
managers, which includes minority- and women-owned
(MWO) firms.
Additionally, the FDIC conducted outreach targeting
prospective asset purchasers and investors, including MWO
investors, in Chicago and New York City in advance of an
auction that occurred later in 2014. Information regarding
the Owned Assets Marketplace and Auctions Program can
be found on the FDIC’s website at www.fdic.gov/mwop.

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

44 MANAGEMENT’S DISCUSSION AND ANALYSIS

and minimize potential financial risks to the DIF. Major
accomplishments in improving the FDIC’s operational
efficiency and effectiveness during 2014 follow.

Human Capital Management
The FDIC’s human capital management programs are
designed to attract, train and develop, reward, and retain
a highly skilled, diverse, and results-oriented workforce.
In 2014, FDIC workforce planning initiatives emphasized
the need to plan for employees to fulfill current and future
requirements and leadership needs. This focus ensures that
the FDIC has a workforce positioned to meet today’s core
responsibilities while preparing to fulfill its mission in the
years ahead.

Strategic Workforce Planning and Readiness
During 2014, the FDIC continued to develop and began
implementation of the Workforce Development initiative.
This effort began with an assessment of the current
talent pipeline for senior leadership positions. Based
on the findings, the FDIC elected to broaden the scope
of the initiative beyond succession planning to include
the development of strategies designed to address
comprehensive workforce development challenges and
opportunities. The initiative is focused on four broad
objectives: attract and develop talented employees
across the agency, enhance the capabilities of employees
through training and diverse work experiences, encourage
employees to engage in active career development planning
and seek leadership roles in the FDIC, and build on
and strengthen the FDIC’s operations to best support
these efforts.
In 2014, the FDIC embarked on planning and developing
the infrastructure, governance, programs, and processes
to help meet its long-term workforce needs. The FDIC is
committed to building and maintaining its talent pipeline
to ensure succession challenges are fully addressed. It
will take several cycles of identifying future workforce and
leadership needs; assessing current workforce capabilities;
supporting aspiration to leadership and management
roles; and developing and sourcing the talent to meet
emerging workforce needs. As such, the FDIC’s Workforce
Development initiative is a dynamic process rather than a
one-time, static event.

Simultaneously, the FDIC continued to focus on ensuring
the availability of a workforce prepared to address today’s
responsibilities, especially related to the oversight of SIFIs
required under the Dodd-Frank Act. As an outgrowth of
strategic workforce planning, the FDIC established a new
employee development program to expand the number
of FDIC employees who have broad, cross-divisional
experience with the largest and most complex FDIC-insured
banks and BHCs. The program provides experience in
supervision, risk analysis and monitoring, risk-based pricing
and deposit insurance fund management, and resolution
planning and resolvability. Twelve employees were selected
for this rotational program in 2014.
Workforce planning efforts also addressed the need to
continue winding down bank closure activities, based on
the decrease in the number of financial institution failures
and institutions in at-risk categories. In 2014, the FDIC
continued to evaluate its staffing needs in a post-crisis
environment and released some of the temporary staff as
their term appointments expired. The FDIC has extended
appointments only for the most critical temporary positions,
where workload continues to exist, to address post-closure
activity, which typically extends for five to seven years after
a bank fails. The bank resolution workload is expected to
slow considerably over the next few years.
The quality and commitment of FDIC employees have
allowed the agency to respond effectively in times of
crisis, while continuing to deliver on its core mission
responsibilities. Through further development of its
human capital strategies, the FDIC will work to ensure that
the future FDIC workforce is as prepared, capable, and
dedicated as the one it has today.

Corporate Employee Program
The FDIC’s Corporate Employee Program (CEP) sponsors
the development of newly hired financial institution
specialists (FISs) in entry-level positions. The CEP
encompasses major FDIC divisions where FISs are trained
to become part of a highly effective workforce. During the
first-year rotation within the program, FISs gain experience
and knowledge in the core business of the FDIC, including
the Division of Depositor and Consumer Protection (DCP),
Division of Risk Management Supervision (RMS), the

Division of Resolutions and Receiverships (DRR), and
the Division of Insurance (DIR). At the conclusion of the
rotation period, FISs are placed within RMS, DCP,
or DRR, where they continue their career path to
become commissioned examiners or resolutions and
receiverships specialists.
The CEP is an essential part of the FDIC’s ability to provide
continual cross-divisional staff mobility. As a result,
the FDIC is capable of responding rapidly to shifting
priorities and changes in workload while achieving its
corporate mission. Since the CEP’s inception in 2005,
1,391 individuals have joined the FDIC through this multidiscipline program and approximately 628 have become
commissioned examiners after successfully completing the
program’s requirements.
The FDIC continues to sponsor the Financial Management
Scholars Program (FMSP), an additional hiring source for
the CEP. Participants in the FMSP complete an internship
with the FDIC the summer following the conclusion of their
junior year. As a result, the FDIC is able to recruit and hire
highly talented and well-qualified students into the CEP
ahead of other prospective employers. The program serves
as an additional venue to recruit talent. For 2015, the FDIC
will continue to augment its workforce by fully utilizing the
capacity of the CEP, including the FMSP.

Employee Learning and Development
The FDIC is committed to the learning and development
of its employees throughout their career to enrich
technical proficiency and leadership capacity, supporting
career progression and succession management. In
2014, the FDIC focused on developing and implementing
comprehensive curricula for its business lines to
incorporate lessons learned from the financial crises and
prepare employees to meet new challenges. Such training,
which includes both classroom and online instruction
for maximum flexibility, is a critical part of workforce
and succession planning as more experienced employees
become eligible for retirement.
The FDIC also offers a comprehensive leadership
development program that combines core courses,
electives, and other enrichment opportunities to develop
employees at all levels. From new employees to new

MANAGEMENT’S DISCUSSION AND ANALYSIS 45

ANNUAL REPORT 2014
managers, the FDIC provides employees with targeted
leadership development opportunities that align with key
leadership competencies. The FDIC is expanding the use
of strategic simulations to support corporate readiness and
preparedness. In addition to a broad array of internally
developed and administered courses, the FDIC also
provides its employees with funds and/or time to participate
in external training to support their career development.

Corporate Risk Management
During 2014, the Office of Corporate Risk Management
(OCRM) worked with divisions and offices to advance
common agency-wide processes for identifying, managing,
and mitigating risks to the FDIC. OCRM assisted the
Enterprise Risk Committee, Executive Management
Committee, External Risk Forum, and Management Risk
Roundtable in reviewing risks across the agency. OCRM
monitors material risks and mitigation activities, including
the following:
♦♦ Risks to the agency’s ability to conduct its mission
essential functions under all threats and conditions,
as described in its Continuity of Operations Plan and
Business Continuity Plan.
♦♦ Risks to the financial system posed by the extended
current low level of interest rates.
♦♦ Risks to the deposit insurance system arising from new
products and services with characteristics very different
from traditional loan and deposit products.
♦♦ Risks posed by the analytical models used by the FDIC in
identifying and managing risk.
♦♦ Risks associated with governance and development of
large-scale IT projects.
♦♦ Risks posed to the agency and to the financial services
industry by concerted attempts to penetrate, compromise,
and disrupt the information systems that are essential to
their effective operation.

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

46 MANAGEMENT’S DISCUSSION AND ANALYSIS

Photo credit: Sam Kittner/Kittner.com

Director of the Division of Administration Arleas
Upton Kea and Deputy to the Chairman and Chief
Operating Officer Barbara A. Ryan accept the award
from Max Stier, President and CEO of Partnership for
Public Service.
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.  In December 2014, the FDIC received an
award from the Partnership for Public Service for being
ranked number one among mid-sized federal agencies on
the Best Places to Work in the Federal Government® list. 
Effective leadership is the primary factor driving employee
satisfaction and commitment in the federal workplace,
according to a report by the Partnership for Public Service. 
The FDIC’s Workplace Excellence (WE) program plays an
important role in helping the FDIC engage employees. The
WE program is composed of a national-level WE Steering
Committee and Division/Office WE Councils that are
focused on maintaining, enhancing, and institutionalizing
a positive workplace environment throughout the agency.
In addition to the WE program, the FDIC-National
Treasury Employees Union 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 engagement, and improves employee
empowerment.

INFORMATION TECHNOLOGY
MANAGEMENT
The FDIC recognizes secure information technology (IT)
solutions are a critical and transformative resource for
the successful accomplishment of the agency’s business
objectives. The FDIC relies on the efficient, innovative, and
secure business capabilities that IT provides to ensure and
enhance mission achievement.

Cybersecurity (internal)
Information resources are subject to serious threats that
can have wide-ranging adverse impacts on the FDIC’s
operations, reputation, and ultimately the ability to
accomplish its mission. The continually changing landscape
of threats poses significant security challenges for the FDIC,
the public, and the nation. Several serious widespread
vulnerabilities, including the Heartbleed, Shellshock, and

POODLE vulnerabilities, were of specific concern for the
FDIC in 2014. The FDIC recognizes that protections
against today’s numerous and sophisticated array of cyber
threats requires constant vigilance and rapidly evolving
security solutions.
As threats continued to intensify from cyber criminals,
hacktivists, and foreign governments, multiple defenses
were necessary to address each of the different motivations,
intents, and capabilities of attacks. The increasing threat
of cyber-attacks required the FDIC to implement improved
strategies for ensuring the security of the FDIC’s data
(including private, personal data) and IT infrastructure.
In addition, the FDIC developed new cybersecurity
capabilities for detecting incidents earlier and incorporated
the capabilities together in a comprehensive framework
to minimize the impact on operations and critical
infrastructure, resulting in reduced risk.

The Information Security and Privacy Staff protects the FDIC’s networks and systems from threats and attacks.

MANAGEMENT’S DISCUSSION AND ANALYSIS 47

THIS PAGE INTENTIONALLY LEFT BLANK.

II.

Performance
Results
Summary

SUMMARY OF 2014 PERFORMANCE
RESULTS BY PROGRAM
The FDIC successfully achieved 36 of the 38 annual
performance targets established in its 2014 Annual
Performance Plan. There were no instances in which 2014

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.
♦♦ Presented a notice of proposed rulemaking to the FDIC Board of Directors in
July and a final rule in November that: conforms capital ratios and thresholds for
deposit insurance assessment purposes to the PCA capital ratios and thresholds in
the Basel III rule; conforms the assessment base deduction for custodial banks to
the asset risk weights in the Basel III rule’s standardized approach; and requires that
highly complex institutions measure their counterparty exposure for assessment
purposes consistent with the standardized approach in the Basel III rule.
♦♦ Completed reviews of the recent accuracy of the contingent loss reserves.
♦♦ 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 360,376
user sessions in 2014.

PERFORMANCE RESULTS SUMMARY 49

ANNUAL REPORT 2014
Program Area

Performance Results

Supervision and
Consumer Protection

♦♦ Participated on the examinations of selected financial institutions, for which the
FDIC is not the primary federal regulator, to assess risk to the DIF and carry out
back-up authorities.
♦♦ Implemented the strategy outlined in the work plan approved by the Advisory
Committee on Economic Inclusion to support the expanded availability of
Safe accounts and the responsible use of technology to expand banking services to
the underbanked.

Receivership
Management

♦♦ Terminated 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.
♦♦ Made final decisions for 86 percent of all investigated claim areas that were within
18 months of the institution’s failure date.

50 PERFORMANCE RESULTS SUMMARY

PERFORMANCE RESULTS BY PROGRAM AND STRATEGIC GOAL
2014 INSURANCE PROGRAM RESULTS
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

1

2

3

Annual
Performance Goal

Indicator

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

Number of business days
after an institution failure
that depositors have
access to insured funds.

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

Achieved.
See pg. 39.

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

Achieved.
See pg. 39.

Insured depositor losses
resulting from a financial
institution failure.

#

Depositors do not incur any losses on
insured deposits.

Achieved.
See pg. 39.

No appropriated funds are required to pay
insured depositors.

Achieved.
See pg. 39.

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.

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

Achieved.
See pg. 49.

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

Achieved.
See pg. 34.

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.

Updated fund balance
projections and
recommended changes
to assessment rates.

Provide updated fund balance projections
to the FDIC Board of Directors by June 30,
2014, and December 31, 2014.

Achieved.
See pg. 49.

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

Achieved.
See pg. 49.

Demonstrated progress in
achieving the goals of the
Restoration Plan.

Provide progress reports to the FDIC
Board of Directors by June 30, 2014, and
December 31, 2014.

Achieved.
See pp. 49.

Target

Results

PERFORMANCE RESULTS SUMMARY 51

ANNUAL REPORT 2014
2014 INSURANCE PROGRAM RESULTS (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.

#
4

Annual
Performance Goal
Expand and strengthen
the FDIC’s participation
and leadership role in
supporting robust and
effective deposit insurance
programs, resolution
strategies, and banking
systems worldwide.

Indicator
Initiatives to advance the
FDIC’s global leadership
and participation.

Target
Maintain open dialogue with counterparts
in strategically important countries as well
as international financial institutions and
partner U.S. agencies.
Maintain a leadership position in the
International Association of Deposit
Insurers (IADI) by conducting workshops
and performing assessments of deposit
insurance systems based on the
methodology for assessment of compliance
with the IADI Core Principles for Effective
Deposit Insurance Systems (Core Principles),
developing and conducting training on
priority topics identified by IADI members,
and actively participating in IADI’s Executive
Council and Standing Committees.

Results
Achieved.
See pg. 41.

Achieved.
See pgs. 41-42.

Engage with authorities responsible for
resolutions and resolutions planning in
priority foreign jurisdictions.
Contribute to the resolution-related agenda
of the Financial Stability Board (FSB) through
active participation in the FSB’s Resolution
Steering Group and its working groups.

Achieved.
See pg. 43.

Provision of technical
assistance to foreign
counterparts.

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. 41.

Actively participate in bilateral interagency
regulatory dialogues.

5

Achieved.
See pg. 41.

Support visits, study tours, and longer-term
technical assistance and training programs
for foreign jurisdictions to strengthen their
deposit insurance organizations, central
banks, bank supervisors, and resolution
authorities.

Achieved.
See pg. 42.

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. 38.

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.

52 PERFORMANCE RESULTS SUMMARY

Achieved.
See pg. 38.

2014 SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS
Strategic Goal: FDIC-insured institutions are safe and sound.
#

Annual
Performance Goal

Indicator

Target

Results

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. When
problems are identified,
promptly implement
appropriate corrective
programs, and follow up
to ensure that identified
problems are corrected.

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. 24.

Implement appropriate
corrective program where
violations are identified.

Implement formal or informal enforcement
actions within 60 days for at least 90 percent
of all institutions that are newly downgraded
to a composite Uniform Financial Institutions
Rating of 3, 4, or 5.

Substantially
Achieved.
See pg. 25.

2

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. 24.

3

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

Issuance of final Basel III
reporting instructions.

Finalize Basel III reporting instructions in
time to ensure that institutions that are using
the advanced approaches can implement
Basel III in the first quarter of 2014 and that
all IDIs can implement the standardized
approach in the first quarter of 2015.

Achieved.
See pgs. 14-15.

Issuance of a final Basel
Liquidity Coverage Ratio
rule.

Publish a final Basel Liquidity Coverage Rule,
in collaboration with other regulators by
December 31, 2014.

Achieved.
See pg. 18.

Issuance of a final rule
implementing the Basel III
capital accord.

Publish a final rule implementing the Basel
III capital accord in collaboration with other
regulators, by December 31, 2014.

Achieved.
See pgs. 13-14.

Issuance of an enhanced
U.S. supplementary
leverage ratio standard.

Finalize, in collaboration with other
regulators, an enhanced U.S. supplementary
leverage ratio standard by December 31,
2014.

Achieved.
See pg. 14.

1

PERFORMANCE RESULTS SUMMARY 53

ANNUAL REPORT 2014
2014 SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (continued)
Strategic Goal: FDIC-insured institutions are safe and sound.
#
4

Annual
Performance Goal

Indicator

Target

Results

Implement strategies
to promote enhanced
cybersecurity within the
banking industry.

Conduct ongoing risk analysis and
monitoring of SIFIs to understand their
structure, business activities and risk
profiles, and their resolution and recovery
capabilities.

Achieved.
See pgs. 19-20.

Complete, in collaboration with the Federal
Reserve Board and in accordance with
statutory and regulatory time frames, all
required actions associated with the review
of resolution plans submitted by financial
companies subject to the requirements of
Section 165 (d) of the Dodd-Frank Act.

Achieved.
See pgs. 20-21.

Meetings of the Systemic
Resolution Advisory
Committee.
5

Risk monitoring of
systemically important
banks, bank holding
companies, and
designated non-banking
firms.
Completion of statutory
and regulatory
requirements under Title I
of the Dodd-Frank Act.

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

Hold at least one meeting of the Systemic
Resolution Advisory Committee to obtain
feedback on resolving SIFIs.

Implementation of an
enhanced information
technology (IT)
supervision program.

In coordination with the FFIEC, implement
recommendations to enhance the FDIC’s
supervision of the IT risks at insured
depository institutions and their technology
service providers.

54 PERFORMANCE RESULTS SUMMARY

Achieved.
See pg. 24.
Achieved.
See pgs. 27-28.

2014 SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
#
1

Annual
Performance Goal

Indicator

Target

Results
Substantially
Achieved.
See pg. 26.

Conduct on-site CRA and
compliance examinations
to assess compliance
with applicable laws and
regulations by FDICsupervised depository
institutions. When
violations are identified,
promptly implement
appropriate corrective
programs and follow up
to ensure that identified
problems are corrected.

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.

Implementation of
corrective programs.

Conduct visits and/or follow-up examinations
in accordance with established FDIC policies
to ensure that the requirements of any
required corrective program have been
implemented and are effectively addressing
identified violations.

Achieved.
See pg. 26.

2

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

Timely responses to
written consumer
complaints and inquiries.

Respond 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
acknowledgement within two weeks.

Achieved.
See pg. 37.

3

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

Completion of planned
initiatives.

Publish the results of the 2013 FDIC National
Survey of Unbanked and Underbanked
Households (conducted jointly with the U.S.
Census Bureau).

Achieved.
See pg. 33.

Implement the strategy outlined in the work
plan approved by the Advisory Committee
on Economic Inclusion to support the
expanded availability of SAFE accounts and
the responsible use of technology, to expand
banking services to the underbanked.

Achieved.
See pg. 33.

Facilitate opportunities for banks and
community stakeholders to address issues
concerning access to financial services,
community development, and financial
education.

Achieved.
See pgs. 35-36.

PERFORMANCE RESULTS SUMMARY 55

ANNUAL REPORT 2014
2014 RECEIVERSHIP MANAGEMENT PROGRAM RESULTS
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
#

Annual
Performance Goal

Indicator

Target

Results

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. 39.

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. 39.

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. 50.

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.

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

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

Achieved.
See pg. 50.

56 PERFORMANCE RESULTS SUMMARY

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

2013

2012

2011

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

♦♦ Depositors do not incur any 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.

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

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

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

♦♦ Conduct a nationwide conference on the future of community banking during

Achieved.

the first quarter of 2012.

♦♦ Publish by December 31, 2012, a research study on the future of community

Achieved.

banks, focusing on their evolution, characteristics, performance, challenges,
and role in supporting local communities.

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.

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

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

4.	 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.

♦♦ Provide updated fund balance projections to the FDIC Board of Directors by
June 30, 2013, 2012, and 2011, and December 31, 2013, 2012, and 2011.

♦♦ Provide progress reports to the FDIC Board of Directors by June 30, 2013,
2012 and 2011, and December 31, 2013, 2012 and 2011.

♦♦ Provide to the Chairman by September 1, 2012, an analysis, with

Achieved.

recommendations where appropriate, of refinements to the deposit insurance
pricing methodology for banks with assets under $10 billion.

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

Achieved.

Achieved.

Achieved.

PERFORMANCE RESULTS SUMMARY 57

ANNUAL REPORT 2014
INSURANCE PROGRAM RESULTS
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2013

2012

2011

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

5.	 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.

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

♦♦ Conduct at least 15 telephone or in-person seminars for bankers on deposit
insurance coverage during 2013 and at least 12 seminars each year during
2012 and 2011.

6.	 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.

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

♦♦ Target capacity building based on the assessment methodology of the BCBS

Achieved.

and IADI Core Principles for an Effective Deposit Insurance System.

♦♦ Lead and support the Association of Supervisors of Banks of the America’s

Achieved.

efforts to promote sound banking principles throughout the Western
Hemisphere.

♦♦ Undertake outreach activities to inform and train foreign bank regulators and

Achieved.

deposit insurers.

♦♦ Foster strong relationships with international banking regulators and

Achieved.

associations that promote sound banking supervision and regulation, failure
resolutions, and deposit insurance practices.

♦♦ Develop methodology and lead the International Association of Deposit

Achieved.

Insurers training on the methodology for assessing compliance with
implementation of the Core Principles for Effective Deposit Insurance Systems.

♦♦ Conduct workshops and assessments of deposit insurance systems based on

the methodology for assessment of compliance with Basel Committee on Bank
Supervision (BCBS) and the International Association of Depositor Insurers
(IADI) Core Principles for Effective Deposit Insurance Systems.

♦♦ Support visits, study tours, and longer-term technical assistance and training
programs for foreign jurisdictions to strengthen their deposit insurance
organizations, central banks, and bank supervisors.

58 PERFORMANCE RESULTS SUMMARY

Achieved.

Achieved.

Achieved.

SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goals and Targets

2013

2012

2011

Achieved.

Achieved.

Achieved.

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. Beginning in
2013, when problems are identified, promptly implement appropriate corrective
programs, and follow up to ensure that identified problems are corrected.

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

♦♦ Implement formal or informal enforcement actions within 60 days for at least
90 percent of all institutions that are newly downgraded to a composite
Uniform Financial Institutions Rating of 3, 4, or 5.

Substantially
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.

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

Achieved.

July 21, 2011.

♦♦ Identify the OTS employees to be transferred and complete the transfer of

Achieved.

those employees to the FDIC no later than 90 days after July 21, 2011.

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

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

Achieved.

Achieved.

Achieved.

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

♦♦ Complete by December 31, 2012, final rules addressing alternative standards

Not
Achieved.

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

Not
Achieved.

of creditworthiness for credit ratings in the risk-based capital rules.

♦♦ 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.

♦♦ Complete by June 30, 2011, the final rule addressing capital floors for banking
organizations.

Achieved.

Achieved.

* Erroneously reported as “Achieved” in the 2013 Annual Report.

PERFORMANCE RESULTS SUMMARY 59

ANNUAL REPORT 2014
SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (continued)
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goals and Targets

2013

2012

♦♦ Complete by September 30, 2011, the Basel III Notice of Proposed

2011

Rulemaking (NPR) for the new definition of capital, the July 2009
enhancements to resecuritizations risk weights, and securitization disclosures.

Deferred.

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

Deferred.

♦♦ Complete by September 30, 2011, the Basel NPR for the new liquidity

Deferred.

requirements.

♦♦ 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).

Deferred.

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

Deferred.

♦♦ Complete by June 30, 2013, the review of comments and impact analysis of
June 2012 proposed interagency changes to regulatory capital rules.

♦♦ Issue by December 31, 2013, final regulatory capital rules.

Achieved.
Achieved.

6.	 Identify and address risks in financial institutions designated as systemically
important.

♦♦ 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).

♦♦ Take all steps necessary to facilitate timely issuance of implementing

regulations and related policy guidance on restrictions on federal assistance to
swap entities.

♦♦ 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.

♦♦ Take all steps necessary to facilitate timely issuance of implementing

regulations and related policy guidance on credit risk retention requirements
for securitizations.

♦♦ Take all steps necessary to facilitate timely issuance of implementing

regulations and related policy guidance on enhanced compensation structure
and incentive compensation requirements.

♦♦ 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.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

♦♦ Establish by June 30, 2012, with the FRB, policies and procedures for

collecting, processing, and reviewing for completeness and sufficiency holding
company and insure depository institution (IDI) resolution plans submitted
under Section 165(d) of DFA.

♦♦ 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.

♦♦ Establish an ongoing FDIC monitoring program for all covered financial
institutions.

60 PERFORMANCE RESULTS SUMMARY

Achieved.

Achieved.

Achieved.

SUPERVISION AND CONSUMER PROTECTION PROGRAM RESULTS (continued)
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goals and Targets

2013

2012

2011
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.

♦♦ Complete, in collaboration with the Federal Reserve board and in accordance

Achieved.

♦♦ Hold at least one meeting of the Systemic Resolution Advisory Committee to

Achieved.

with statutory and regulatory time frames, all required actions associated with
the review of Section 165(d) resolution plans submitted under Title 1 of DFA.
obtain feedback on resolving systemically important financial companies.

7.	 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

Achieved.

♦♦ Complete by June 30, 2011, a review of all recurring questionnaires and

Achieved.

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).
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.

PERFORMANCE RESULTS SUMMARY 61

ANNUAL REPORT 2014
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

2013

2012

2011

1.	 Conduct on-site CRA and compliance examinations to assess compliance with
applicable laws and regulations by FDIC-supervised depository institutions.
Beginning in 2013, when problems are identified, promptly implement
appropriate corrective programs, and follow up to ensure that identified
problems are corrected.

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

Achieved.

Achieved.

♦♦ Conduct visits and/or follow-up examinations in accordance with established
FDIC policies and ensure that the requirements of any required corrective
program have been implemented and are effectively addressing identified
violations.

Achieved.

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. 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.

♦♦ Conduct follow-up examinations or on-site visits for any unfavorably rated (3, 4,

Achieved.

or 5) institution within 12 months of completion of the prior examination.

♦♦ 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

Achieved.

FDIC to the CFPB.

♦♦ Identify the FDIC employees to be transferred to the CFPB and transfer them in

Achieved.

accordance with established time frames.

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

♦♦ Complete the transfer of consumer compliant processing responsibilities within

Achieved.

the purview of the CFPB within approved time frames.

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

♦♦ Respond 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.

6.	 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.

62 PERFORMANCE RESULTS SUMMARY

Achieved.

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

2013

2012

2011

♦♦ 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 moderate-

Achieved.

income communities.

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

♦♦ Complete and publish results of the second biennial National Survey of

Achieved.

Unbanked and Underbanked Households and Banks’ Efforts to Serve the
Unbanked and Underbanked.

♦♦ Plan and hold meetings of the Advisory Committee on Economic Inclusion to

Achieved.

gain feedback and advice on FDIC efforts to promote inclusion.

♦♦ Coordinate 25 CRA community forums nationwide to facilitate community

Achieved.

development opportunities for financial institutions.

♦♦ Conduct the third biennial FDIC National Survey of Unbanked and

Underbanked Households (conducted jointly with the U.S. Census Bureau).

♦♦ Initiate work on the Survey of Banks’ Efforts to Serve the Unbanked and
Underbanked.

♦♦ Implement the strategy outlined in the work plan approved by the Advisory
Committee on Economic Inclusion to support the responsible use of
technology to expand banking services to the unbanked.

Achieved.
Deferred.
Achieved.

PERFORMANCE RESULTS SUMMARY 63

ANNUAL REPORT 2014
RECEIVERSHIP MANAGEMENT PROGRAM RESULTS
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
Annual Performance Goals and Targets

2013

2012

2011

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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.

♦♦ 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).

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.

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 reviews of 100 percent of the loss-share and LLC agreements active
as of December 31, 2011, and 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 80 percent of the loss-share reviews and 70
percent of the LLC reviews.

Achieved.

♦♦ 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).

64 PERFORMANCE RESULTS SUMMARY

Achieved.

III.

Financial
Highlights

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.

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
FDIC-Insured Deposits and Insurance Fund Reserve Ratios
on the following page.)
For 2014, the DIF’s comprehensive income totaled $15.6
billion compared to comprehensive income of $14.2 billion
during 2013. This $1.4 billion year-over-year increase was
primarily due to a $2.6 billion decrease in provision for
insurance losses, partially offset by a $1.0 billion decrease
in assessment revenue.
Assessment revenue was $8.7 billion for 2014. The decrease
of $1.0 billion, from $9.7 billion in 2013, was primarily due to
lower risk-based assessment rates resulting from continued
improvements in banks’ CAMELS ratings and financial
condition.
The provision for insurance losses was negative $8.3
billion for 2014, compared to negative $5.7 billion for
2013. The negative provision for 2014 primarily resulted
from a decrease of $9.1 billion in the estimated losses for
institutions that failed in current and prior years, partially
offset by an increase of $850 million in the contingent
liability for anticipated failures due to the deterioration in
the financial condition of certain troubled institutions.

The $9.1 billion reduction in the estimated losses from
failures was primarily attributable to (1) unanticipated
recoveries of $1.8 billion in litigation settlements,
professional liability claims, and tax refunds by the
receiverships and (2) a $6.7 billion decrease in the
receiverships’ shared-loss liability that resulted from
decreases in covered asset balances, lower future loss rate
estimates, and unanticipated recoveries on shared-loss
agreement losses. Covered asset balances decreased
by $23.6 billion during 2014 with lower than anticipated
losses. These lower than anticipated losses were due to
loan amortizations and pay-downs, resulting from the
improvement in the condition of real estate markets where
shared-loss assets are concentrated, and the expiration of
83 commercial asset shared-loss coverage agreements in
2014, thereby ending the loss claim period. The reduction
in future loss rate estimates resulted from the general
improvement in the real estate markets and the composition
of the remaining covered asset portfolios, which primarily
consist of performing single family assets. These assets
have historically experienced significantly lower losses than
commercial assets. Finally, unanticipated recoveries of
approximately $958 million on previous shared-loss claims,
which are not estimated due to their uncertainty, were
received by the receiverships during 2014.
The DIF’s interest revenue on U.S. Treasury investments for
2014 was $282 million compared to interest revenue of $103
million in 2013. This $179 million year-over-year increase
reflects not only a larger investment portfolio balance,
but also new, higher-yielding investments. The DIF’s cash
and U.S. Treasury investment portfolio balance was $51.7
billion at year-end 2014, an increase of $9.7 billion from the
year-end 2013 balance of $42.0 billion that was primarily
due to assessment collections of $8.9 billion and recoveries
from resolutions of $4.1 billion, less disbursements for
resolutions of $1.9 billion and cash operating expenses of
$1.6 billion.
FINANCIAL HIGHLIGHTS 65

ANNUAL REPORT 2014
ESTIMATED DIF INSURED DEPOSITS
8,000
7,000

Dollars in Billions

6,000
5,000
4,000
3,000
2,000
1,000
0
12-09 3-10 6-10 9-10 12-10 3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14

SOURCE: Commercial Bank Call and Thrift Financial Reports
Note: Beginning in the fourth quarter of 2010 through the fourth quarter of 2012, estimated insured deposits include the entire balance
of noninterest-bearing transaction accounts.

DEPOSIT INSURANCE FUND RESERVE RATIOS

Fund Balances as a Percent of Insured Deposits

1.2

1.0

0.8

0.6

0.4

0.2

0.0

-0.2

-0.4
12-09 3-10 6-10 9-10 12-10 3-11 6-11 9-11 12-11 3-12 6-12 9-12 12-12 3-13 6-13 9-13 12-13 3-14 6-14 9-14 12-14

66 FINANCIAL HIGHLIGHTS

DEPOSIT INSURANCE FUND SELECTED STATISTICS
Dollars in Millions
For the years ended December 31

 

2014 

2013

2012

$8,965

$10,459

$18,522 

1,664 

1,609

1,778 

Insurance and Other Expenses (includes provision for loss)

(8,299) 

(5,655) 

(4,377) 

Net Income

15,600

14,505

21,121 

Financial Results
Revenue
Operating Expenses

Comprehensive Income

15,589 

14,233 

21,131 

Insurance Fund Balance

$62,780 

$47,191 

$32,958 

Fund as a Percentage of Insured Deposits (reserve ratio)

1.01%

0.79%

0.45%

Selected Statistics
6,509

Institution Failures
Total Assets of Failed Institutions in Year

2

Number of Active Failed Institution Receiverships
1
2

467

651 

$152,687

$232,701

18

Total Assets of Problem Institutions

7,083 

$86,712

Problem Institutions

6,812

291

Total DIF-Member Institutions1

24

51 

$2,914

$6,044 

$11,617 

481

479 

463 

	Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.
	Total Assets data are based upon the last Call Report filed by the institution prior to failure.

FINANCIAL HIGHLIGHTS 67

THIS PAGE INTENTIONALLY LEFT BLANK.

IV.

FDIC Budget
and Spending

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. Over the past decade, the
FDIC’s expenditures have varied in response to workload.
From 2008-2010, expenditures rose substantially, largely
due to increasing resolution and receivership activity and
the oversight of more problem institutions. Since 2010
these activities and their associated expenditures have been
gradually declining.
Corporate operating expenses totaled $2.1 billion in 2014,
including $1.6 billion in ongoing operations and $0.5 billion
in receivership funding. This represented approximately 91
percent of the approved budget for ongoing operations and
86 percent of the approved budget for receivership funding
for the year. 5

In December 2014, the Board of Directors approved a 2015
Corporate Operating Budget of approximately $2.3 billion,
consisting of $1.8 billion for ongoing operations and $0.5
billion for receivership funding. The ongoing operations
budget for 2015 is approximately $2 million (0.1 percent)
higher than it was for 2014, while the receivership funding
budget is $75 million (13 percent) lower than it was
for 2014.
As in prior years, the 2015 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
resulting reduction in failure-related workload. Although
savings in this area are being realized, the 2015 receivership
funding budget allows for resources for contractor support
as well as non-permanent staffing for DRR, the Legal
Division, and other organizations, should workload in these
areas require an immediate response.

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

5

BUDGET SECTION 69

ANNUAL REPORT 2014
FDIC EXPENDITURES 2005–2014
Dollars in Millions
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2005

2006

2007

2008

2009

2014 BUDGET AND
EXPENDITURES BY PROGRAM

2010

2011

2012

2013

2014

and $216 million, or 9 percent, to Corporate General and
Administrative expenditures.

(Excluding Investments)
The FDIC operating budget for 2014 totaled $2.4 billion.
Budget amounts were allocated as follows: $264 million,
or 11 percent, to the Insurance program; $1.1 billion, or
44 percent, to the Supervision program; $864 million, or
36 percent, to the Receivership Management program;

Actual expenditures for the year totaled $2.1 billion.
Actual expenditures amounts were allocated as follows:
$273 million, or 13 percent, to the Insurance program;
$924 million, or 44 percent, to the Supervision program;
and $714 million, or 34 percent, to the Receivership
Management program; and $189 million, or 9 percent, to
Corporate General and Administrative expenditures.

2014 BUDGET AND EXPENDITURES BY PROGRAM
(including Allocated Support)
Dollars in Millions
$1,200

Budget

Expenditures

$900

$600

$300

$0
Insurance
Program

70 BUDGET SECTION

Supervision
Program

Receivership
Management
Program

General and
Administrative

INVESTMENT SPENDING
The FDIC instituted a separate Investment Budget in
2003 to provide enhanced governance of major multi-year
development efforts. There is 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 Corporation’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 on
a quarterly basis. From 2005-2014, investment spending
totaled $191 million and is estimated at $30 million
for 2015.

INVESTMENT SPENDING 2005 - 2014
Dollars in Millions
$70
$60
$50
$40
$30
$20
$10
$0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

BUDGET SECTION 71

THIS PAGE INTENTIONALLY LEFT BLANK.

V.

Financial
Section

FINANCIAL SECTION 73

ANNUAL REPORT 2014
DEPOSIT INSURANCE FUND (DIF)
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPOSIT INSURANCE FUND BALANCE SHEET AT DECEMBER 31
Dollars in Thousands
2014

2013

Assets
Cash and cash equivalents

$1,914,520

$3,543,270

Investment in U.S. Treasury obligations (Note 3)

49,805,846

38,510,500

2,003,424

2,227,735

651,894

511,428

18,181,498

16,344,991

Assessments receivable, net (Note 8)
Interest receivable on investments and other assets, net
Receivables from resolutions, net (Note 4)
Property and equipment, net (Note 5)
Total Assets

372,419

377,223

$72,929,601

$61,515,147

Liabilities
Accounts payable and other liabilities

$291,006

$300,575

Liabilities due to resolutions (Note 6)

7,799,279

12,625,982

243,419

193,591

1,814,770

1,198,960

Postretirement benefit liability (Note 13)
Contingent liabilities for:
	

Anticipated failure of insured institutions (Note 7)

	

Litigation losses (Note 7)

Total Liabilities

950

5,200

10,149,424

14,324,308

62,786,786

47,186,974

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)

51,142

20,215

Unrealized postretirement benefit loss (Note 13)

(57,751)

(16,350)

Total Accumulated Other Comprehensive (Loss) Income

(6,609)

3,865

62,780,177

47,190,839

$72,929,601

$61,515,147

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

74 FINANCIAL SECTION

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
2014

2013

Revenue
Assessments (Note 8)
Interest on U.S. Treasury obligations
Other revenue (Note 9)

$8,656,082

$9,734,173

281,924

103,363

27,059

163,154

0

458,176

8,965,065

10,458,866

1,664,344

1,608,717

(8,305,577)

(5,659,388)

6,486

4,799

Total Expenses and Losses

(6,634,747)

(4,045,872)

Net Income

15,599,812

14,504,738

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

30,927

(13,604)

Unrealized postretirement benefit (loss) gain (Note 13)

(41,401)

44,097

0

(302,159)

(10,474)

(271,666)

Comprehensive Income

15,589,338

14,233,072

Fund Balance - Beginning

47,190,839

32,957,767

$62,780,177

$47,190,839

Gain on sale of trust preferred securities (Note 10)
Total Revenue
Expenses and Losses
Operating expenses (Note 11)
Provision for insurance losses (Note 12)
Insurance and other expenses

Other Comprehensive Income

Unrealized loss on trust preferred securities (Note 10)
Total Other Comprehensive Loss

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

FINANCIAL SECTION 75

ANNUAL REPORT 2014
DEPOSIT INSURANCE FUND (DIF)
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPOSIT INSURANCE FUND STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014

2013

Operating Activities
Provided by:
Assessments

$8,873,123

$7,111,902

1,450,939

1,080,157

0

154,393

4,099,804

5,696,453

78,558

79,773

Operating expenses

(1,586,858)

(1,558,229)

Disbursements for financial institution resolutions

(1,860,014)

(3,857,214)

0

(5,850,135)

Interest on U.S. Treasury obligations
Dividends and interest on trust preferred securities
Recoveries from financial institution resolutions
Miscellaneous receipts
Used by:

Refunds of prepaid assessments (Note 8)
Miscellaneous disbursements

(15,385)

(17,228)

11,040,167

2,839,872

17,158,275

27,704,523

0

2,420,000

Purchase of property and equipment

(55,295)

(57,390)

Purchase of U.S. Treasury obligations

(29,771,897)

(32,464,096)

Net Cash (Used) by Investing Activities

(12,668,917)

(2,396,963)

(1,628,750)

442,909

Net Cash Provided by Operating Activities
Investing Activities
Provided by:
Maturity of U.S. Treasury obligations
Sale of trust preferred securities (Note 10)
Used by:

Net (Decrease) Increase 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.

76 FINANCIAL SECTION

3,543,270

3,100,361

$1,914,520

$3,543,270

Notes to the Financial Statements
DEPOSIT INSURANCE FUND
December 31, 2014 and 2013
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 FDIC’s
operations are generally found in the Federal Deposit
Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq).
In accordance with 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 (IDIs) 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 to being the administrator of the DIF, the FDIC
is the administrator of the FSLIC Resolution Fund (FRF).
The FRF is a resolution fund responsible for the sale of
the remaining assets and the satisfaction of the liabilities
associated with the former Federal Savings and Loan
Insurance Corporation (FSLIC) and the former Resolution
Trust Corporation. The FDIC maintains the DIF and the
FRF separately to support their respective functions.
Pursuant to the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank Act),
the FDIC also manages 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 covered financial company is a failing financial company
(for example, 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 (Public Law 111-203) granted the
FDIC authority to establish a widely available program to
guarantee obligations of solvent IDIs or solvent depository
institution holding companies (including affiliates) upon the
systemic risk 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 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.
The DIF is primarily funded from deposit insurance
assessments. Other available funding sources, if necessary,
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

FINANCIAL SECTION 77

ANNUAL REPORT 2014
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
$162.0 billion and $146.0 billion as of December 31, 2014 and
2013, 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, pass-through
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
according to applicable laws and regulations. Therefore,
income and expenses attributable to resolution entities are
accounted for as transactions of those entities. The FDIC
bills resolution entities for services provided on their behalf.

2.	 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
GENERAL
These financial statements include 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). 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 or
beneficial interests in them. Periodic and final accounting
reports of resolution 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 potential changes in estimates have been disclosed.
The more significant estimates include the assessments
receivable and associated revenue; the allowance for loss
on receivables from resolutions (including shared-loss

78 FINANCIAL SECTION

agreements); guarantee obligations for structured
transactions; 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
The FDI Act requires that the DIF funds 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
Fiscal Service’s Government Account Series program.
The DIF’s investments in U.S. Treasury obligations are
classified as available-for-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 calculated and recorded daily 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, as well as modest assessment base growth
and average assessment rate adjustment factors. 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 8).

CAPITAL ASSETS AND DEPRECIATION
The FDIC buildings are depreciated on a straight-line basis
over a 35- to 50-year estimated life. Building improvements
are capitalized and depreciated over the estimated useful

life of the improvements. 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. Computer equipment is depreciated on a straightline basis over a three-year estimated useful life.

REPORTING ON VARIABLE INTEREST ENTITIES
The 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.
As the guarantor of note obligations for several structured
transactions, the FDIC, in its corporate capacity, holds an
interest in many 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 affect 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 that 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 conclusion of these analyses was that the FDIC, in its
corporate capacity, has not engaged in any activity that

would cause the FDIC to be characterized as a primary
beneficiary to any VIE with which it was involved as of
December 31, 2014 and 2013. Therefore, consolidation is
not required for the 2014 and 2013 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 FDIC if
payments are made on guarantee claims. Ongoing analyses
will be required to monitor consolidation implications under
ASC 810.
The FDIC’s involvement with VIEs is fully described in
Note 7.

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.

DISCLOSURE ABOUT RECENT RELEVANT
ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board
issued Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with Customers (Topic 606).
The ASU will require an entity to recognize revenue based
on the amount it expects to be entitled for the transfer of
promised goods or services.  For the DIF, the new standard
is effective for annual periods beginning after December
15, 2017.  The FDIC does not expect this new ASU to have a
material impact on the DIF.
Other recent accounting pronouncements have been
deemed not applicable or material to the financial
statements as presented.

3.	 INVESTMENT IN U.S. TREASURY
OBLIGATIONS
Investments in U.S. Treasury obligations, totaled $49.8
billion as of December 31, 2014, and $38.5 billion as of
December 31, 2013. As of December 31, 2014 and 2013,
the DIF held $2.5 billion and $4.6 billion, respectively, of
Treasury Inflation-Protected Securities (TIPS), which are
indexed to increases or decreases in the Consumer Price
Index for All Urban Consumers (CPI-U).

FINANCIAL SECTION 79

ANNUAL REPORT 2014
INVESTMENT IN U.S. TREASURY OBLIGATIONS AT DECEMBER 31, 2014
Dollars in Thousands
Yield at
Purchase1

Maturity

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

0.28%

$12,450,000

$12,861,127

$2,291

$(4,516)

$12,858,902

After 1 year
through 5 years

0.91%

33,901,209

34,393,283

86,212

(5,759)

34,473,736

U.S. Treasury Inflation-Protected Securities
Within 1 year

-1.03%

1,500,000

1,759,237

0

(17,120)

1,742,117

After 1 year
through 5 years

-0.43%

700,000

741,057

0

(9,966)

731,091

$48,551,209

$49,754,704

$88,503

$(37,361)2

$49,805,846

Total

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 longterm annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, issued by the Congressional
Budget Office and Blue Chip Economic Indicators in early 2014.
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 securities and is not likely to be required to sell them before their maturity date, thus, the FDIC
does not consider these securities to be other than temporarily impaired at December 31, 2014. The aggregate related fair value of securities with
unrealized losses was $19.0 billion as of December 31, 2014.
1

INVESTMENT IN U.S. TREASURY OBLIGATIONS AT DECEMBER 31, 2013
Dollars in Thousands

Maturity

Yield at
Purchase1

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

0.23%

$14,300,000

$14,552,418

$4,167

$(31)

$14,556,554

After 1 year
through 5 years

0.70%

18,351,209

19,382,202

24,408

(14,013)

19,392,597

U.S. Treasury Inflation-Protected Securities
Within 1 year

-0.86%

2,150,000

2,464,330

1,050

(1,130)

2,464,250

After 1 year
through 5 years

-0.99%

1,800,000

2,091,335

5,788

(24)

2,097,099

$36,601,209

$38,490,285

$35,413

$(15,198)2

$38,510,500

Total

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 longterm annual inflation assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.0 percent, issued by the Congressional
Budget Office and Blue Chip Economic Indicators in early 2013.
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 securities and is not likely to be required to sell them before their maturity date, thus, the FDIC
does not consider these securities to be other than temporarily impaired at December 31, 2013. The aggregate related fair value of securities with
unrealized losses was $9.0 billion as of December 31, 2013.
1

80 FINANCIAL SECTION

4.	 RECEIVABLES FROM
RESOLUTIONS, NET
RECEIVABLES FROM RESOLUTIONS,
NET AT DECEMBER 31
Dollars in Thousands
2014

2013

Receivables from
closed banks

$98,360,904

$106,291,226

Allowance for losses

(80,179,406)

(89,946,235)

Total

$18,181,498

$16,344,991

The receivables from resolutions result from DIF payments
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 7) are the main source
of repayment of the DIF’s receivables from resolutions.
As of December 31, 2014, the FDIC had 481 active
receiverships, including 18 established in 2014. The DIF
resolution entities held assets with a book value of $29.7
billion as of December 31, 2014, and $38.4 billion as of
December 31, 2013 (including $22.0 billion and $27.1
billion, respectively, of cash, investments, receivables due
from the DIF, and other receivables). Ninety-nine percent
of the current asset book value of $29.7 billion is held by
resolution entities established since the beginning of 2008.
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 institutionspecific 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 since 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 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, 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 2014, the
shared-loss cost estimates were updated for all 281 active
SLAs. 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 updated shared-loss cost projections on the remaining
agreements were based on a random sample of institutions
selected for new third-party loss estimations, and valuation
results from the sampled institutions were aggregated and
extrapolated to the non-sampled institutions by asset type
and performance status.
Also reflected in the allowance for loss calculation are
end-of-agreement SLA “true-up” recoveries. True-up
recoveries are projected to be received at expiration in
accordance with the terms of the SLA, if actual losses at
expiration are lower than originally estimated.
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,
which may 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 304 failures
using whole bank purchase and assumption resolution
transactions with accompanying SLAs on total assets
of $216.5 billion purchased by the financial institution

FINANCIAL SECTION 81

ANNUAL REPORT 2014
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. The FDIC uses SLAs to keep assets
in the private sector and to minimize disruptions to loan
customers.
Losses on the covered assets of failed institutions
are shared between the acquirer and the FDIC, in its
receivership capacity, when losses occur through the sale,
foreclosure, loan modification, or charge-off of loans under
the terms of the SLA. The majority of the agreements cover
commercial and single-family loans over a five- to ten-year
shared-loss period, respectively, with the receiver covering
80 percent of the losses incurred by the acquirer and the
acquiring institution 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. Recoveries by the acquirer on covered
commercial and single-family SLA losses are also shared
over an eight- to ten-year period, respectively. Note that
future recoveries on SLA losses are not factored into the
DIF allowance for loss calculation because the amount and
timing of such receipts are not determinable.
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 6).
Receiverships with SLAs made cumulative shared-loss
payments totaling $28.2 billion, (comprised of $31.8 billion
in losses, net of $3.6 billion of recoveries) as of year-end
2014 and $26.4 billion (comprised of $29.1 billion in losses,
net of $2.7 billion of recoveries) as of year-end 2013.
Estimates of additional payments, net of true-up recoveries,
by DIF receiverships over the duration of the SLAs were
$3.9 billion on total remaining covered assets of $54.6 billion
at December 31, 2014, and $12.3 billion on total remaining
covered assets of $78.2 billion as of December 31, 2013.

82 FINANCIAL SECTION

CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the DIF
to concentrations of credit risk are receivables from
resolutions. The repayment of these receivables is
primarily influenced by recoveries on assets held by DIF
receiverships and payments on the covered assets under
SLAs. The majority of the remaining assets in liquidation
($7.7 billion) and current shared-loss covered assets ($54.6
billion), which together total $62.3 billion, are concentrated
in commercial loans ($22.0 billion), residential loans
($31.0 billion), and structured transaction-related assets
as described in Note 7 ($5.2 billion). Most of the assets
originated from failed institutions located in California
($20.5 billion), Florida ($7.2 billion), Puerto Rico ($7.2
billion), Alabama ($4.6 billion), Illinois ($3.8 billion), and
Georgia ($3.6 billion).

5.	 PROPERTY AND EQUIPMENT, NET
PROPERTY AND EQUIPMENT,
NET AT DECEMBER 31
Dollars in Thousands
2014

2013

Land

$37,352

$37,352

Buildings (including building and
leasehold improvements)

326,067

314,775

Application software (includes
work-in-process)

142,907

149,115

Furniture, fixtures, and equipment

104,761

142,621

(238,668)

(266,640)

$372,419

$377,223

Accumulated depreciation
Total

The depreciation expense was $60 million and $73 million
for 2014 and 2013, respectively.

6.	 LIABILITIES DUE TO RESOLUTIONS
As of December 31, 2014 and 2013, the DIF recorded
liabilities totaling $7.8 billion and $12.6 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 sending cash directly to
the receivership to fund shared-loss and other expenses
or by offsetting receivables from resolutions when the
receivership declares a dividend.
In addition, as of December 31, 2014 and 2013, the
DIF recorded liabilities of $12 million and $29 million,
respectively, in unpaid deposit claims related to multiple
receiverships, which are offset by receivables included in
the “Receivables from resolutions, net” line item on the
Balance Sheet. The DIF pays these liabilities when the
claims are approved.

7.	 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.
The banking industry’s financial condition and performance
continued to improve in 2014.  According to the quarterly
financial data submitted by DIF-insured institutions, the
industry reported total net income of $116.0 billion for the
first nine months of 2014, an increase of 1.1 percent over
the comparable period one year ago. The industry’s capital
levels also continued to improve, and noncurrent loans
declined, as the industry’s ratio of noncurrent loans-to-total
loans fell to its lowest level since the second quarter of
2008.
Losses to the DIF from failures that occurred in 2014 were
lower than the contingent liability at the end of 2013, as the
aggregate number and size of institution failures in 2014
were less than anticipated. However, the contingent liability
increased from $1.2 billion at December 31, 2013 to $1.8
billion at December 31, 2014, as the effect of an increase
in the failure rates for certain institutions contributing to
the contingent liability more than offset the removal of the
liability for institutions that failed in 2014.

In addition to the recorded contingent liabilities, the
FDIC has identified risks 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 approximately $1.7 billion as of
December 31, 2014, as compared to $3.0 billion as of
year-end 2013. The actual losses, if any, will largely depend
on future economic and market conditions and could differ
materially from this estimate.
During 2014, 18 institutions failed with combined assets
of $2.9 billion at the date of failure. Recent trends in
supervisory ratings and market data suggest that the
financial performance and condition of the banking industry
should continue to improve over the coming year.  However,
exposure to interest rate risk, reliance on short-term
sources of funding, and limited opportunities for revenue
growth will continue to stress the industry.  Additionally,
key risks continue to weigh on the economic outlook as
well, including the impact of rising interest rates as they
return to more normal levels; fiscal challenges at federal,
state, and local levels; and global economic risks.  The FDIC
continues to evaluate ongoing risks to affected institutions
in light of existing economic and financial conditions,
and the extent to which such risks may 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 $950 thousand and $5 million
for the DIF as of December 31, 2014 and 2013, respectively.
In addition, the FDIC has determined that there are no
reasonably possible losses from unresolved cases at
year-end 2014, compared to $125 thousand at year-end 2013.

OTHER CONTINGENCIES
IndyMac Federal Bank Representation and
Indemnification Contingent Liability
On March 19, 2009, the FDIC as receiver for IndyMac
Federal Bank (IMFB) and certain subsidiaries (collectively,
Sellers) sold substantially all of the assets, which

FINANCIAL SECTION 83

ANNUAL REPORT 2014
included mortgage loans and servicing rights, of IMFB
and its respective subsidiaries to OneWest Bank and its
affiliates (the “Acquirers”). The Sellers made certain
representations customarily made by commercial parties in
similar transactions. The FDIC, in its corporate capacity,
guaranteed the receivership’s indemnification obligations
under the sale agreements. Until the periods for asserting
claims under these arrangements have expired and all
indemnification claims are quantified and paid, losses could
continue to be incurred by the receivership and, in turn,
the DIF.
Under the sales agreements, the Acquirers have rights
to assert claims to recover losses incurred as a result of
third-party claims and breaches of representations. Assets
sold subject to representation and warranty indemnification
total $171.6 billion. The IndyMac receivership has paid
cumulative claims totaling $21 million through December
31, 2014, and $15 million through December 31, 2013.
Additional quantified claims asserted and under review have
been accrued in the amount of $6 million and $7 million as
of December 31, 2014 and 2013, respectively. The FDIC is
evaluating the likelihood of additional losses for alleged
breaches as follows:
♦♦ Potential losses could be incurred for failures by the
servicer to initiate foreclosure within a prescribed
timeframe with respect to certain government guaranteed
loans, resulting in the refusal of the guarantor to pay
interest otherwise payable to the investors on such loans.
Review and evaluation is in process for approximately $32
million as of December 31, 2014 and 2013, in reasonably
possible losses.
♦♦ The Acquirers’ rights to assert additional claims as a
result of certain third-party claims and breaches of
representations expired on March 19, 2011 and March 19,
2014.  As of the expiration date of these notice periods,
199 thousand claims relating to potential breaches were
received.  As of December 31, 2014, 40 thousand claims
remain and preserve the Acquirer’s right to claim losses
over the life of the loan.  These remaining claims require
review to determine whether a breach exists and, if so,
if a cure will result in a loss.  As a result, potential losses
cannot be estimated.

84 FINANCIAL SECTION

♦♦ The Acquirers’ rights to assert claims to recover
losses incurred as a result of breaches of loan seller
representations extend to March 19, 2019 for the Fannie
Mae and Ginnie Mae reverse mortgage servicing portfolios
(unpaid principal balance of $14.2 billion at December 31,
2014, compared to $15.2 billion at December 31, 2013).
The likelihood of loss is reasonably possible. However,
while claims filed prior to this date reserve the right to
recover losses over the life of the loan, this exposure is
currently not estimable.
♦♦ Fannie Mae has demanded repurchase of 585 loans with
current principal balances of $93 million.  These claims
are under review to determine their validity. In addition,
during 2014, the IMFB receivership agreed to repurchase
264 loans totaling $44 million in principal balance;
however, a contingent liability has not been established
as the amount and timing of any resulting losses is
currently not determinable. An agreement among the
sellers, the FDIC and Fannie Mae provides for the deferral
of repurchases claimed by Fannie Mae, and that the
parties will negotiate in good faith to attempt to resolve
all outstanding and projected liabilities to Fannie Mae
sometime before March 19, 2015.
In addition to the alleged breaches discussed above,
the FDIC believes it is likely that additional losses
will be incurred. However quantifying the contingent
liability associated with the liabilities to investors
and indemnification for breaches of sale agreement
representations is subject to a number of uncertainties,
including market conditions, the occurrence of borrower
defaults and resulting foreclosures and losses. Because
of these and other uncertainties that surround the liability
associated with the quantification of possible losses, the
FDIC has determined that, while additional losses are
probable, the amount is not currently estimable.

Purchase and Assumption Indemnification
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 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 2014 and 2013,
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.

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).
LLCs
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.
The LLCs issued notes to the receiverships to partially fund
the purchased assets. In many instances, the FDIC, in its
corporate capacity, guaranteed notes issued by the LLCs.
This guarantee covers the timely payment of principal and
interest due on the notes. In exchange for the guarantee,
the DIF receives a guarantee fee from the LLCs. If the FDIC
is required to perform under the guarantee, it acquires an
interest in the cash flows of the LLC equal to the amount
of guarantee payments made plus accrued interest. Equity
holders receive cash flows from the LLCs once all expenses
have been paid, the guaranteed notes have been satisfied,
and the FDIC has been reimbursed for any guarantee
payments.

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.
Since 2009, private investors purchased a 40- to 50percent 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 held the remaining 50- to 60percent equity interest in the LLCs and, in most cases,
the guaranteed notes. At December 31, 2014, only one
guaranteed note with an outstanding balance of $10 million
remained, which matures in 2020. At December 31, 2013,
there were two guaranteed notes with outstanding balances
totaling $99 million.
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 senior and/or subordinated
debt instruments and 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 $6.2 billion in cash and the
receiverships hold the subordinated debt instruments and
owner trust or residual certificates. In exchange for a fee,
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. 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. The subordinated
note holders and owner trust or residual certificates holders
receive cash flows from the entity only after all expenses
have been paid, the guaranteed notes have been satisfied,
and the FDIC has been reimbursed for any guarantee
payments.

FINANCIAL SECTION 85

ANNUAL REPORT 2014
All Structured Transactions
with FDIC Guaranteed Debt
Through December 31, 2014, 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 $8.8 billion to 14 LLCs and 11
trusts. The LLCs and trusts subsequently issued notes
guaranteed by the FDIC in an original principal amount of
$10.6 billion. Since March 2013, there have been no new
guarantee transactions. As of December 31, 2014 and 2013,
the DIF collected guarantee fees totaling $250 million and
$231 million, respectively, and recorded a receivable for
additional guarantee fees of $42 million and $66 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 straight-line
basis over the term of the notes. As of December 31, 2014
and 2013, the amount of deferred revenue recorded was $42
million and $66 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 3.3 percent) of the expected guarantee
payments by the FDIC, reimbursements to the FDIC for
guarantee payments, and guarantee fee collections.  It is
reasonably possible that the DIF could be required to make
a guarantee payment of approximately $29 million for an
SSGN transaction at note maturity in 2020. Any guarantee
payment made would be fully reimbursed from the proceeds
of the liquidation of the SSGN’s underlying collateral. For
all of the remaining transactions, the estimated 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, 2014 and 2013, the maximum loss
exposure was $10 million and $99 million for LLCs and $2.1
billion and $2.8 billion for trusts, respectively, representing
the sum of all outstanding debt guaranteed by the FDIC.

86 FINANCIAL SECTION

8.	ASSESSMENTS
The framework for the FDIC deposit insurance assessment
system is mandated by section 7 of the FDI Act, and the
provisions for implementation are contained in part 327 of
title 12 of the Code of Federal Regulations. The FDI Act
requires a risk-based assessment system and payment of
assessments by all IDIs.
In response to the Dodd-Frank Act, the FDIC implemented
several changes to the assessment system and developed
a comprehensive, long-term fund management plan. The
plan is 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.
♦♦ 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. The FDIC will 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.
♦♦ The FDIC adopted a final rule that suspends dividends
indefinitely, and, in lieu of dividends, adopts lower
assessment rate schedules when the reserve ratio reaches
1.15 percent, 2 percent, and 2.5 percent.
♦♦ The FDIC adopted a final rule that amends and clarifies
some definitions of higher-risk assets as used in deposit
insurance pricing 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 final rule became effective
on April 1, 2013.
♦♦ The Federal Deposit Insurance Act (FDI Act) requires that
the FDIC Board of Directors designate a reserve ratio for
the DIF and publish the designated reserve ratio (DRR)
before the beginning of each calendar year.  Accordingly,
in October 2014, the FDIC adopted a final rule maintaining
the DRR at 2 percent for 2015. 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.

ASSESSMENT REVENUE
Annual assessment rates averaged approximately 6.8 cents
per $100 of the assessment base and 7.8 cents per $100
of the assessment base for 2014 and 2013, respectively.
The assessment base is generally defined as the average
consolidated total assets minus the average tangible
equity (measured as Tier 1 capital) of the IDI during the
assessment period.
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 industryfunded. For each interim quarter, an institution’s risk-based
deposit insurance assessment was offset by the available
amount of prepaid assessments. The final offset of prepaid
assessments occurred for the period ending March 31,
2013, and in June 2013, as required by regulation, the DIF
refunded $5.9 billion of unused prepaid assessments to IDIs.
The “Assessments receivable, net” line item on the Balance
Sheet of $2.0 billion and $2.2 billion represents the
estimated premiums due from IDIs for the fourth quarter of
2014 and 2013, respectively. The actual deposit insurance
assessments for the fourth quarter of 2014 will be billed and
collected at the end of the first quarter of 2015. During 2014
and 2013, $8.7 billion and $9.7 billion, respectively, were
recognized as assessment revenue from institutions.

RESERVE RATIO
As of September 30, 2014 and December 31, 2013, the
DIF reserve ratio was 0.89 percent and 0.79 percent,
respectively, 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 mixed-ownership 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. As of December
31, 2014 and 2013, approximately $793 million and
$792 million, respectively, was collected and remitted to
the FICO.

9.	 OTHER REVENUE
OTHER REVENUE
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014
Dividends and interest on
Citigroup trust preferred
securities (Note 10)
Guarantee fees for structured
transactions (Note 7)
Other
Total

2013

$0

$124,726

19,662

33,051

7,397

5,377

$27,059

$163,154

10.	 GAIN ON SALE OF 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. On December 23, 2009,
Citigroup terminated this guarantee agreement, citing
improvements in its financial condition. The FDIC did not
incur any losses as a result of the guarantee and retained
$2.225 billion (liquidation amount) of the $3.025 billion in
trust preferred securities (TruPS) received as consideration
for the period of guarantee coverage. The DIF recorded the
TruPS at their fair value and recognized revenue of $1.962
billion upon termination of the agreement.
To facilitate a sale of the retained TruPS, the FDIC
exchanged the TruPS on September 9, 2013, for $2.420
billion (principal amount) of Citigroup marketable

FINANCIAL SECTION 87

ANNUAL REPORT 2014
subordinated notes.  The exchange resulted in a realized
gain to the DIF of $458 million, reported in the “Gain on
sale of trust preferred securities” line item on the Statement
of Income and Fund Balance.  FDIC reclassified the $458
million out of accumulated other comprehensive income to
“Gain on sale of trust preferred securities,” representing the
sum of unrealized gains recorded as of December 31, 2012,
($302 million) and holding gains arising during 2013 ($156
million).  The resulting net effect on the DIF Statement of
Income and Fund Balance was a $156 million increase to
the 2013 comprehensive income.
On September 10, 2013, the subordinated notes were sold
to the institutional fixed income market for the principal
amount of $2.420 billion, resulting in the recognition of $1.6
million for one day of accrued interest on the subordinated
notes, which is included in the 2013 “Other revenue” line
item on the Statement of Income and Fund Balance (see
Note 9). Also included in the 2013 “Other revenue” line item
is $123.1 million for dividends and interest earned on the
TruPS in 2013 prior to their disposition (see Note 9).

11. OPERATING EXPENSES
Operating expenses were $1.7 billion and $1.6 billion for
2014 and 2013, respectively. The chart below lists the major
components of operating expenses.
OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014

2013

$1,252,167

$1,292,551

263,649

326,040

Travel

93,720

96,056

Buildings and leased space

96,596

91,469

Software/Hardware
maintenance

58,844

56,297

Depreciation of property
and equipment

59,634

72,828

Other

28,999

29,505

1,853,609

1,964,746

(189,265)

(356,029)

$1,664,344

$1,608,717

Salaries and benefits
Outside services

Subtotal
Less: Services billed to
resolution entities
Total

88 FINANCIAL SECTION

12.	 PROVISION FOR
INSURANCE LOSSES
The provision for insurance losses was a negative $8.3
billion for 2014, compared to negative $5.7 billion for
2013. The negative provision for 2014 primarily resulted
from a decrease of $9.1 billion in the estimated losses for
institutions that failed in current and prior years, partially
offset by an increase of $850 million in the contingent
liability for anticipated failures due to the deterioration in
the financial condition of certain troubled institutions.
As described in Note 4, the estimated recoveries from assets
held by receiverships and estimated payments related to
assets sold by receiverships to acquiring institutions under
shared-loss agreements (SLAs) are used to derive the loss
allowance on the receivables from resolutions. The $9.1
billion reduction in the estimated losses from failures
was primarily attributable to two components. The first
component was unanticipated recoveries of $1.8 billion in
litigation settlements, professional liability claims, and tax
refunds by the receiverships. These are not recognized until
the cash is received since significant uncertainties surround
their recovery.
The second component of the reduction in the estimated
losses from failures was a $6.7 billion decrease in the
receiverships’ shared-loss liability that resulted from
decreases in covered asset balances, lower future loss rate
estimates, and unanticipated recoveries on SLA losses.
Covered asset balances decreased by $23.6 billion during
2014 with lower than anticipated losses. These lower
than anticipated losses were due to loan amortizations
and pay-downs, resulting from the improvement in the
condition of real estate markets where shared-loss assets
are concentrated, and the expiration of 83 commercial asset
shared-loss coverage agreements in 2014, thereby ending
the loss claim period. The reduction in future loss rate
estimates resulted from the improvement in the real estate
markets and the composition of the remaining covered asset
portfolios, which primarily consist of performing single
family assets. These assets have historically experienced
significantly lower losses than commercial assets. Finally,
unanticipated recoveries of approximately $958 million on
previous shared-loss claims, which are not estimated due to
their uncertainty, were received by the receiverships during
2014.

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. The U.S. Office of Personnel Management
(OPM) reports on and accounts for these amounts.
Eligible FDIC employees also may participate in a FDICsponsored 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
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.
PENSION BENEFITS AND
SAVINGS PLANS EXPENSES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014

2013

Civil Service Retirement
System

$4,698

$5,430

Federal Employees Retirement
System (Basic Benefit)

99,954

99,553

FDIC Savings Plan

37,304

37,816

Federal Thrift Savings Plan
Total

35,144

35,686

$177,100

$178,485

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. OPM
administers and accounts for the FEHB. 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 premium.
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
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, 2014
and 2013, the liability was $243 million and $194 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 $58 million and $16
million at December 31, 2014 and 2013, 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 2014
and 2013 were $14 million and $18 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/gains and prior service
costs for 2014 and 2013 of negative $41 million and $44
million, respectively, are reported as other comprehensive
income in the “Unrealized postretirement benefit (loss)
gain” 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 4.0 percent, the
rate of compensation increase of 3.8 percent, and the dental
coverage trend rate of 4.9 percent. The discount rate of 4.0
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.

FINANCIAL SECTION 89

ANNUAL REPORT 2014
14.	 COMMITMENTS AND OFFBALANCE-SHEET EXPOSURE

OFF-BALANCE-SHEET EXPOSURE:

COMMITMENTS:

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, 2014 and December 31,
2013, estimated insured deposits for the DIF were $6.1
trillion and $6.0 trillion, respectively.

Deposit Insurance

Leased Space
The FDIC’s lease commitments total $203 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 $56 million and $52
million for 2014 and 2013, respectively.
LEASED SPACE COMMITMENTS
Dollars in Thousands
2015

2016

2017

2018

$46,502 $45,842 $41,387

2019

$30,900 $26,433

2020/
Thereafter
$12,291

15.	 DISCLOSURES ABOUT THE
FAIR VALUE OF FINANCIAL
INSTRUMENTS
Financial assets recognized and measured at fair value
on a recurring basis at each reporting date include cash
equivalents (see Note 2) and the investment in U.S. Treasury
obligations (see Note 3). The following tables present the
DIF’s financial assets measured at fair value as of December
31, 2014 and 2013.

ASSETS MEASURED AT FAIR VALUE AT DECEMBER 31, 2014
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

$1,900,105

$1,900,105

49,805,846

49,805,846

Available-for-Sale Debt Securities
Investment in U.S. Treasury Obligations2
Total Assets

$51,705,951

$0

$0

$51,705,951

1

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

2

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

90 FINANCIAL SECTION

ASSETS MEASURED AT FAIR VALUE AT DECEMBER 31, 2013
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

$3,534,305

$3,534,305

38,510,500

38,510,500

Available-for-Sale Debt Securities
Investment in U.S. Treasury Obligations2
Total Assets

$42,044,805

$0

$0

$42,044,805

1

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

2

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

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, and accounts
payable and other liabilities.

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 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 as being
stated in terms of nominal cash flows.

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.

FINANCIAL SECTION 91

ANNUAL REPORT 2014
16.	 INFORMATION RELATING TO THE
STATEMENT OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH FROM OPERATING ACTIVITIES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014

2013

$15,599,812

$14,504,738

1,387,067

1,139,456

(37,865)

(35,300)

0

(458,176)

59,634

72,829

465

220

(8,305,577)

(5,659,388)

(41,401)

44,097

224,311

(1,220,883)

Operating Activities
Net Income:
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of U.S. Treasury obligations
Treasury Inflation-Protected Securities inflation adjustment
Gain on sale of trust preferred securities
Depreciation on property and equipment
Loss on retirement of property and equipment
Provision for insurance losses
Unrealized (loss) gain on postretirement benefits
Change in Assets and Liabilities:
Decrease (Increase) in assessments receivable, net
(Increase) in interest receivable and other assets
Decrease in receivables from resolutions
(Decrease) in accounts payable and other liabilities
Increase (Decrease) in postretirement benefit liability

(137,462)

(75,014)

7,077,627

10,406,392

(9,569)

(49,045)

49,828

(30,635)

(4,826,703)

(8,547,803)

(Decrease) in unearned revenue - prepaid assessments

0

(1,576,417)

(Decrease) in refunds of prepaid assessments

0

(5,675,199)

$11,040,167

$2,839,872

(Decrease) in liabilities due to resolutions

Net Cash Provided by Operating Activities

17. SUBSEQUENT EVENTS

2015 FAILURES THROUGH FEBRUARY 5, 2015

Subsequent events have been evaluated through February
5, 2015, the date the financial statements are available to be
issued.

Through February 5, 2015, two insured institutions failed in
2015 with total losses to the DIF estimated to be $10 million.

92 FINANCIAL SECTION

FSLIC RESOLUTION FUND (FRF)
FEDERAL DEPOSIT INSURANCE CORPORATION
FSLIC RESOLUTION FUND BALANCE SHEET AT DECEMBER 31
Dollars in Thousands
2014

2013

$870,943

$871,612

356,455

356,455

904

1,183

$1,228,302

$1,229,250

$370

$790

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

356,455

356,455

356,825

357,245

Resolution Equity (Note 4)
Contributed capital

125,332,156

125,332,156

Accumulated deficit

(124,460,679)

(124,460,151)

Total Resolution Equity

871,477

872,005

$1,228,302

$1,229,250

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

FINANCIAL SECTION 93

ANNUAL REPORT 2014
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
2014

2013

Revenue
Interest on U.S. Treasury obligations

$229

$1,196

948

1,953

1,177

3,149

Operating expenses

2,326

2,350

Provision for losses

(792)

(1,255)

0

500

171

2,070

1,705

3,665

(528)

(516)

(124,460,151)

(124,459,635)

$(124,460,679)

$(124,460,151)

Other revenue
Total Revenue
Expenses and Losses

Goodwill litigation expenses (Note 3)
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.

94 FINANCIAL SECTION

FSLIC RESOLUTION FUND (FRF)
FEDERAL DEPOSIT INSURANCE CORPORATION
FSLIC RESOLUTION FUND STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014

2013

Operating Activities
Provided by:
Interest on U.S. Treasury obligations

$229

$1,196

Recoveries from financial institution resolutions

1,886

5,148

0

130

197

52

(2,981)

(3,921)

0

(500)

(669)

2,105

0

500

0

(2,600,000)

Recovery of tax benefits
Miscellaneous receipts
Used by:
Operating expenses
Payments for goodwill litigation (Note 3)
Net Cash (Used) Provided by Operating Activities
Financing Activities
Provided by:
U.S. Treasury payments for goodwill litigation (Note 3)
Used by:
Return of U.S. Treasury funds (Note 4)
Payment to Resolution Funding Corporation (Note 4)
Net Cash (Used) by Financing Activities
Net (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

0

(125,000)

0

(2,724,500)

(669)

(2,722,395)

871,612

3,594,007

$870,943

$871,612

The accompanying notes are an integral part of these financial statements.

FINANCIAL SECTION 95

ANNUAL REPORT 2014
Notes to the Financial Statements
FSLIC RESOLUTION FUND
December 31, 2014 and 2013
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 FDIC’s
operations are generally found in the Federal Deposit
Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq).
In accordance with 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 (IDIs) by identifying,
monitoring, and addressing risks to the DIF.
In addition to being the administrator of the DIF, the FDIC
is the administrator of the FSLIC Resolution Fund (FRF).
As such, the FDIC 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 FDIC maintains the DIF and the FRF separately
to support their respective functions.
The FSLIC was created 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 and created the FRF. At that
time, the assets and liabilities of the FSLIC were transferred
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 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.

96 FINANCIAL SECTION

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 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 extensively reviewed and cataloged the
FRF’s remaining assets and liabilities. Some of the issues
and items that remain open in the FRF are (1) criminal
restitution orders (generally have from 1 to 17 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 up to 7 years remaining to
enforce, unless the judgments are renewed or are covered
by the Federal Debt Collections Procedures Act, which
will result in significantly longer periods for collection for
some judgments); (3) liquidation/disposition of residual
assets purchased by the FRF from terminated receiverships;
(4) three remaining assistance agreements entered into
by the former FSLIC (FRF could continue to receive or
refund overpayments of tax benefits sharing in future
years); (5) goodwill litigation (no final date for resolution
has been established; see Note 3); and (6) affordable
housing disposition program monitoring (last agreement
expires no later than 2045; see Note 3). The FRF could
potentially realize recoveries from tax benefits sharing,
criminal restitution orders, and professional liability claims;

however, any associated recoveries are not reflected
in the FRF’s financial statements, given the significant
uncertainties surrounding the ultimate outcome.
On April 1, 2014, the FDIC concluded its role as receiver of
FRF receiverships when the last active receivership was
terminated.  In total, 850 receiverships were liquidated
by the FRF and the RTC.  To facilitate receivership
terminations, the FRF, in its corporate capacity, acquired
any remaining receivership assets. These assets are
included in the “Other Assets, net” line item on the Balance
Sheet.
During the years of receivership activity, the assets held
by receivership entities, and the claims against them,
were accounted for separately from the FRF’s assets
and liabilities to ensure that receivership proceeds were
distributed in accordance with applicable laws and
regulations. Also, the income and expenses attributable to
receiverships were accounted for as transactions of those
receiverships. The FDIC billed receiverships for services
provided on their behalf.

2.	 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
GENERAL
These financial statements include 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). During the years of
receivership activity, these statements did not include
reporting for assets and liabilities of receivership entities
because these entities were legally separate and distinct,
and the FRF did not have any ownership or benefical
interest in them.

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 valuation of other assets
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
estimated losses related to 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.

DISCLOSURE ABOUT RECENT RELEVANT
ACCOUNTING PRONOUNCEMENTS
Accounting Standards Update No. 2013-07, Presentation of
Financial Statements - Liquidation Basis of Accounting,
modifies Accounting Standards Codification Topic 205,
Presentation of Financial Statements, to require an entity
to prepare its financial statements using the liquidation
basis of accounting when liquidation is imminent. The
requirements became effective for annual reporting periods
beginning after December 15, 2013.
The FDIC has determined that the FRF does not meet the
requirements for presenting financial statements using the
liquidation basis of accounting. According to the standard,
a limited-life entity should apply the liquidation basis of
accounting only if a change in the entity’s governing plan
has occurred since its inception. By statute, the FRF is a
limited-life entity whose dissolution will occur upon the
satisfaction of all liabilities and the disposition of all assets.
No changes to this statutory plan have occurred since
inception of the FRF.
Other recent accounting pronouncements have been
deemed not applicable or material to the financial
statements as presented.

3.	 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

FINANCIAL SECTION 97

ANNUAL REPORT 2014
goodwill toward regulatory capital, the plaintiffs were
entitled to recover damages from the United States. The
contingent liability associated with the nonperformance of
these agreements was transferred to the FRF on August 9,
1989, upon the dissolution of the FSLIC.
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 litigation should have a corresponding
receivable from the U.S. Treasury and therefore have no net
impact on the financial condition of the FRF.
The FRF paid $500 thousand to the plaintiffs in one
goodwill case in 2013, representing a reimbursement for a
tax liability of the plaintiffs as a result of the settlement they
received in 2012. The FRF received appropriations from the
U.S. Treasury to fund this payment.
As of December 31, 2014 and 2013, one case remains active
and pending against the United States based on alleged
breaches of the agreements stated above. For this case,
a contingent liability and an offsetting receivable of $356
million was recorded as of December 31, 2014 and 2013.
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. Additionally, for a case that was fully
adjudicated in 2012, an estimated loss of $8 million, which
represents estimated tax liabilities, is also reasonably
possible.
In addition, the FRF-FSLIC pays the goodwill litigation
expenses incurred by the Department of Justice (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 2014,

98 FINANCIAL SECTION

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 2015 expenses.

OTHER CONTINGENCIES
Paralleling the goodwill cases were similar cases alleging
that the government breached agreements regarding tax
benefits associated with certain FSLIC-assisted acquisitions.
All eight of those 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.
The entity’s federal income tax return for the 2006 taxable
year has been amended and remains subject to examination
by the Internal Revenue Service (IRS). To date, there
has been no assertion by the IRS of taxation for an issue
covered by the guarantee. As of December 31, 2014, no
liability has been recorded, and the FRF does not expect to
fund any payment under this guarantee.

FANNIE MAE GUARANTEE
On May 21, 2012, the FDIC, in its capacity as administrator
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. 
Based on the most current data available, as of September
30, 2014, the maximum exposure on this indemnification
is the current unpaid principal balance of the remaining
58 multi-family loans totaling $5.8 million.  Based on a
contingent liability assessment of this portfolio as of
September 30, 2014, the majority of the loans are at least 76
percent amortized, and all are scheduled to mature within
one to six years. Since all of the loans are performing and
no losses have occurred since 2001, future payments on this
indemnification are not expected.  As a result, no contingent
liability for this indemnification has been recorded as of
December 31, 2014.

AFFORDABLE HOUSING
DISPOSITION PROGRAM
Required by FIRREA under section 501, the Affordable
Housing Disposition Program (AHDP) was established
in 1989 to ensure the preservation of affordable housing
for low-income households. The FDIC, in its capacity as
administrator of the FRF-RTC, assumed responsibility
for monitoring property owner compliance with land use
restriction agreements (LURAs). To enforce the property
owners’ LURA obligation, the RTC, prior to its dissolution,
entered into Memoranda of Understanding with 28
monitoring agencies to oversee these LURAs. The FDIC,
through the FRF, has agreed to indemnify the monitoring
agencies for all losses related to LURA legal enforcement
proceedings. Since 2006, the FDIC has entered into two
litigations against property owners and has paid $23
thousand in legal expenses, of which $13 thousand has been
reimbursed due to successful litigation. The maximum
potential exposure to the FRF cannot be estimated as it
is contingent upon future legal proceedings. However,
loss mitigation factors include: (1) the indemnification

may become void if the FDIC is not immediately informed
upon receiving notice of any legal proceedings and (2) the
FDIC is entitled to reimbursement of any legal expenses
incurred for successful litigation against a property owner.
AHDP guarantees will continue until the termination of
the last of the LURAs, or 2045 (whichever occurs first).
As of December 31, 2014, no contingent liability for this
indemnification has been recorded.

4.	 RESOLUTION EQUITY
As stated in the Overview section of Note 1, the FRF is
composed 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, 2014
Dollars in Thousands
FRF-FSLIC

FRF
Consolidated

$43,707,819

Contributed capital - beginning

FRF-RTC
$81,624,337

$125,332,156

Contributed capital - ending

43,707,819

81,624,337

125,332,156

Accumulated deficit

(42,879,590)

(81,581,089)

(124,460,679)

$828,229

$43,248

$871,477

Total

RESOLUTION EQUITY AT DECEMBER 31, 2013
Dollars in Thousands
FRF-FSLIC
Contributed capital - beginning
Less: Payment to REFCORP
Less: Return of U.S. Treasury funds
Add: U.S. Treasury payment for goodwill litigation

FRF-RTC

FRF
Consolidated

$46,307,319

$81,749,337

$128,056,656

0

(125,000)

(125,000)

(2,600,000)

0

(2,600,000)

500

0

500

Contributed capital - ending

43,707,819

81,624,337

125,332,156

Accumulated deficit

(42,879,951)

(81,580,200)

(124,460,151)

$827,868

$44,137

$872,005

Total

FINANCIAL SECTION 99

ANNUAL REPORT 2014
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 mixedownership government corporation established to function
solely as a financing vehicle for the FSLIC) and the RTC
issued $31.3 billion of these instruments to the REFCORP.
FIRREA prohibited the payment of dividends on any of
these capital certificates.
FRF-FSLIC received $500 thousand in U.S. Treasury
payments for goodwill litigation in 2013. In addition, $356
million was accrued for as receivables as of December 31,
2014 and 2013. Through December 31, 2014, 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, 2014, the FRF-RTC had returned
$4.6 billion to the U.S. Treasury and made payments of $5.1
billion to the REFCORP. The most recent payment to the
REFCORP was in July of 2013 for $125 million. In addition,
the FDIC returned $2.6 billion to the U.S. Treasury on behalf
of the FRF-FSLIC in 2013. These actions serve to reduce
contributed capital.

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

100 FINANCIAL SECTION

January 1, 1996, respectively. The FRF-FSLIC accumulated
deficit has increased by $13.1 billion, whereas the FRF-RTC
accumulated deficit has decreased by $6.3 billion, since
their dissolution dates.

5.	 DISCLOSURES ABOUT THE FAIR
VALUE OF FINANCIAL INSTRUMENTS
At December 31, 2014 and 2013, the FRF’s financial assets
measured at fair value on a recurring basis are cash
equivalents of $827 million and $826 million, respectively.
Cash equivalents are Special U.S. Treasury Certificates
with overnight maturities valued at prevailing interest
rates established by the Bureau of the Fiscal Service. The
valuation is considered a Level 1 measurement in the
fair value hierarchy, representing quoted prices in active
markets for identical assets.
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 receivables from U.S. Treasury for goodwill
litigation and accounts payable and other liabilities.
Assets purchased by the FRF from terminated receiverships
(see Note 1) and included in the “Other Assets, net” line
item on the Balance Sheet are primarily valued using
projected cash flow analyses; however, these valuations
do not represent an estimate of fair value. These assets
(ranging in age up to 25 years), could not be liquidated
during the life of the receiverships due to restrictive clauses
and other impediments. Because these impediments
remain, there is no market for these assets. Consequently, it
is not practicable to provide an estimate of fair value.

6.	 INFORMATION RELATING TO THE
STATEMENT OF CASH FLOWS
RECONCILIATION OF NET LOSS TO NET CASH FROM OPERATING ACTIVITIES
FOR THE YEARS ENDED DECEMBER 31
Dollars in Thousands
2014

2013

$(528)

$(516)

(792)

(1,255)

1,071

5,528

Operating Activities
Net Loss:
Adjustments to reconcile net loss to net cash (used) provided
by operating activities:
Provision for insurance losses
Change in Assets and Liabilities:
Decrease in other assets
(Decrease) in accounts payable and other liabilities
Net Cash (Used) Provided by Operating Activities

(420)

(1,652)

$(669)

$2,105

7.	 SUBSEQUENT EVENTS
Subsequent events have been evaluated through
February 5, 2015, the date the financial statements are
available to be issued, and management determined that
there are no items to disclose.

FINANCIAL SECTION 101

ANNUAL REPORT 2014
GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT

102 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

FINANCIAL SECTION 103

ANNUAL REPORT 2014
GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

104 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

FINANCIAL SECTION 105

ANNUAL REPORT 2014
GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

106 FINANCIAL SECTION

GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

FINANCIAL SECTION 107

ANNUAL REPORT 2014
GOVERNMENT ACCOUNTABILITY OFFICE AUDITOR’S REPORT (continued)

108 FINANCIAL SECTION

Appendix I

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

FINANCIAL SECTION 109

ANNUAL REPORT 2014
Appendix II

MANAGEMENT’S RESPONSE TO THE AUDITOR’S REPORT

110 FINANCIAL SECTION

VI.

Corporate
Management
Control

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 DOF Corporate
Management Control Branch oversees a corporate-wide
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 financial, reputational, and 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 23 consecutive
years, and these and other positive results reflect the
effectiveness of the overall management control program.
The year 2014 was a continuation of our efforts over
the past few years. Considerable energy was devoted
to ensuring that the FDIC’s processes and systems of
control have kept pace with the workload, and that the
FDIC’s foundation of controls throughout the FDIC
remained strong. Enhanced metrics, process mapping, and
monitoring activities were put in action.
In 2015, among other things, program evaluation activities
will focus on human resources, process mapping, the
continuation of activities associated with the Dodd-Frank
Act, and contract oversight. Continued emphasis and
management scrutiny also will be applied to the accuracy
and integrity of transactions, the expansion of performance
metrics, and oversight of systems development efforts in
general.

CORPORATE MANAGEMENT CONTROL 111

ANNUAL REPORT 2014
MANAGEMENT REPORT ON
FINAL ACTIONS

♦♦ Management Report on Final Action on Audits with
Recommendations to Put Funds to Better Use.

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.
For the federal fiscal year period October 1, 2013, through
September 30, 2014, there were no audit reports in the
following categories:

The table below provides information on final action taken
by management on audit reports for the same fiscal year.

♦♦ Management Report on Final Action on Audits with
Disallowed Costs; and

AUDIT REPORTS WITHOUT FINAL ACTIONS BUT WITH MANAGEMENT DECISIONS
OVER ONE YEAR OLD FOR FISCAL YEAR 2014
MANAGEMENT ACTION IN PROCESS
Report No.
and Issue Date
EVAL-13-003
08/19/2013

AUD-13-007
09/11/2013

OIG Audit Finding

Management Action

The Director of the Division of Administration
should implement a formal sustainability
program to encompass the FDIC’s goals,
processes, policies and procedures, and
overall energy management efforts. The
program should be documented and include
written provisions for ensuring compliance
with the various legislative requirements
pertaining to energy efficiency.

The FDIC’s sustainability program for the
Virginia Square buildings was expanded to
include all headquarters facilities and the San
Francisco Regional Office. The program was
documented and incorporates the various
legislative requirements on energy efficiency
identified in the report.

The Acting Chief Information Officer should
coordinate with the Division of Resolutions
and Receiverships (DRR) and the Division
of Risk Management Supervision (RMS) to
ensure that existing applications developed
under the divisions’ direction comply with
FDIC security policies pertaining to sensitivity
assessments, privacy reviews, security plans,
access control reviews, and separation
of duties.

The Division of Information Technology will
review DRR and RMS’ business-developed
applications for noncompliance with FDIC
security policies pertaining to sensitivity
assessments, privacy reviews, security plans,
access control reviews, and separation of
duties. If an application is found to be
noncompliant with FDIC security policies,
noncompliant issues will be cataloged and
communicated to the divisions. Necessary
remedial actions will be identified during the
review along with specific owners and due
dates commensurate with the severity of the
flaw(s).

$0

Completed: 12/31/2014

Due Date: 04/15/2015

112 CORPORATE MANAGEMENT CONTROL

Disallowed
Costs

$0

VII.

Appendices

APPENDICES 113

ANNUAL REPORT 2014
A. KEY STATISTICS
FDIC ACTIONS ON FINANCIAL INSTITUTIONS APPLICATIONS 2012–2014
2014

2013

2012

Deposit Insurance

2

10

6

Approved

2

10

6

Denied

0

0

0

New Branches

520

499

570

Approved

520

499

570

0

0

0

251

256

238

251

256

238

0

0

0

327

474

674

327

474

671

Section 19

7

4

10

Section 32

320

470

661

1

Denied
Mergers
Approved
Denied
Requests for Consent to Serve

2

Approved
	

Denied

0

0

3

Section 19

0

0

1

Section 32

0

0

2

15

22

26

15

22

26

0

0

0

46

81

97

46

81

95

0

0

2

4

8

21

Notices of Change in Control
Letters of Intent Not to Disapprove
Disapproved
Brokered Deposit Waivers
Approved
Denied
Savings Association Activities

3

Approved

4

8

21

Denied

0

0

0

14

10

7

14

10

7

0

0

0

4

7

8

State Bank Activities/Investments

4

Approved
Denied
Conversion of Mutual Institutions
Non-Objection

4

7

8

Objection

0

0

0

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.
1	

114 APPENDICES

COMBINED RISK AND CONSUMER ENFORCEMENT ACTIONS 2012–2014
2014
Total Number of Actions Initiated by the FDIC

2013

2012

320

414

557

0

0

0

0

0

0

Termination of Insurance
Involuntary Termination
	

Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions

3 	11

7

	

Sec. 8a By Order Upon Request

0

0

0

	

Sec. 8p No Deposits

3

7

3

	

Sec. 8q Deposits Assumed

Voluntary Termination

0

4

4

57

83

129

Notices of Charges Issued

1

2

0

Orders to Pay Restitution

7

11

9

48

70

120

1

0

0

101

113

116

Sec. 8b Cease-and-Desist Actions

Consent Orders
Personal Cease and Desist Orders
Sec. 8e Removal/Prohibition of Director or Officer
Notices of Intention to Remove/Prohibit
Consent Orders
Sec. 8g Suspension/Removal When Charged With Crime
Civil Money Penalties Issued

4

14

8

97

99

108

2

0

0

66

94

170

	

Sec. 7a Call Report Penalties

0

0

1

	

Sec. 8i Civil Money Penalties

62

81

164

	

Sec. 8i Civil Money Penalty Notices of Assessment

4

13

5

Sec. 10c Orders of Investigation

16

16

16

Sec. 19 Waiver Orders

69

88

119

	

Approved Section 19 Waiver Orders

68

86

119

	

Denied Section 19 Waiver Orders

1

2

0

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
1	

0

0

0

69

98

126

0

0

0

0

0

0

69

98

126

164,777

123,134

139,102

6

9

0

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 115

ANNUAL REPORT 2014
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH DECEMBER 31, 2014 1
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2

Insurance Fund as
a Percentage of

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

Percentage
of Domestic
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

2014

$250,000

$10,408,068

$6,203,524

59.6

$62,780.2

0.60

1.01

2013

250,000

9,825,398

6,010,854

61.2

47,190.8

0.48

0.79

2012

250,000

9,474,585

7,405,043

78.2

32,957.8

0.35

0.45

2011

250,000

8,782,134

6,973,468

79.4

11,826.5

0.13

0.17

2010

250,000

7,887,733

6,301,528

79.9

(7,352.2)

(0.09)

(0.12)

Est. Insured
Deposits

2009

250,000

7,705,353

5,407,773

70.2

(20,861.8)

(0.27)

(0.39)

2008

100,000

7,505,408

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

116 APPENDICES

ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH DECEMBER 31, 2014 1 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions2
Est. Insured
Deposits

Insurance Fund as
a Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Total
Domestic
Deposits

Year

Insurance
Coverage2

Total Domestic
Deposits

Est. Insured
Deposits

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

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

APPENDICES 117

ANNUAL REPORT 2014
ESTIMATED INSURED DEPOSITS AND THE DEPOSIT INSURANCE FUND,
DECEMBER 31, 1934, THROUGH DECEMBER 31, 2014 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

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

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

	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
the sum of the BIF and Savings Association Insurance Fund (SAIF) amounts; for 2006 to 2014, figures are for DIF. Amounts for 1989 - 2014 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.
1

118 APPENDICES

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2014
Dollars in Millions
Income

Expenses and Losses

Year

Total

Assessment
Income

Assessment
Credits

Investment
and Other

Total

$210,651.8

$146,166.8

$11,392.9

$75,877.9

2014

8,965.1

8,656.1

0.0

309.0

Effective
Assessment
Rate1

Total

Provision
for
Ins. Losses

$148,150.5 $112,293.5
0.0664%

(6,634.7)

(8,305.5)

Admin.
and
Operating
Expenses2

Interest
& Other Ins.
Expenses

Funding
Transfer
from the
FSLIC
Resolution
Fund

$26,407.4

$9,449.6

$139.5

$62,640.8

1,664.3

6.5

0

15,599.8

Net
Income/
(Loss)

2013

10,458.9

9,734.2

0.0

724.7

0.0776

(4,045.9)

(5,659.4)

1,608.7

4.8

0

14,504.8

2012

18,522.3

12,397.2

0.2

6,125.3

0.1012

(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

0.1115

(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

APPENDICES 119

ANNUAL REPORT 2014
INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2014 (continued)
Dollars in Millions
Income

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)

Year

Total

1980

1,310.4

951.9

521.1

879.6

0.0370

83.6

(38.1)

118.2

3.5

0

1,226.8

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

1976

764.9

676.1

379.6

468.4

0.0370

212.3

28.0

180.44

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

1972

467.0

468.8

280.3

278.5

0.0333

65.7

10.1

49.6

6.0

0

401.3

5

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

6.3

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

120 APPENDICES

6

INCOME AND EXPENSES, DEPOSIT INSURANCE FUND, FROM BEGINNING OF OPERATIONS,
SEPTEMBER 11, 1933, THROUGH DECEMBER 31, 2014 (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)

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 onetime 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. 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. 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).	
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 on pages 69-70 of
this report shows 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.
1

APPENDICES 121

ANNUAL REPORT 2014
FDIC INSURED INSTITUTIONS CLOSED DURING 2014
Dollars in Thousands
Codes for Bank Class:
NM	 =	 State-chartered bank that is not a member
of the Federal Reserve System
N	 =	 National Bank

Name and Location

Bank
Class

Number
of
Deposit
Accounts

SB	 =	 Savings Bank
SI	 =	 Stock and Mutual
Savings Bank

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

SM	 =	 State-chartered bank that is a
member of the Federal Reserve
System
SA	 =	 Savings Association
Estimated
Loss to
the DIF2

Date of
Closing
or
Acquisition

Receiver/Assuming
Bank and Location

Purchase and Assumption - All Deposits
The Bank of Union
El Reno, OK

NM

7,262

$317,172

$315,843

$313,049

$103,089

01/24/14

BancFirst
Oklahoma City, OK

Slavie Federal
Savings Bank
Bel Air, MD

SA

4,202

$140,063

$111,142

$113,264

$6,608

05/30/14

Bay Bank, FSB
Lutherville, MD

Valley Bank
Ft. Lauderdale, FL

NM

1,676

$81,843

$66,541

$65,857

$7,722

06/20/14

Landmark Bank, NA
Ft. Lauderdale, FL

Valley Bank
Moline, IL

NM

25,104

$456,442

$359,953

$371,088

$51,444

06/20/14

Great Southern
Bank
Reeds Spring, MO

The Freedom State
Bank
Freedom, OK

NM

1,262

$22,816

$20,855

$20,253

$5,781

06/27/14

Alva State Bank and
Trust Company
Alva, OK

NBRS Financial
Rising Sun, MD

SM

11,930

$155,353

$151,559

$145,048

$24,289

10/17/14

Howard Bank
Ellicott City, MD

National Republic
Bank of Chicago
Chicago, IL

N

5,666

$843,118

$809,638

$796,600

$111,641

10/24/14

State Bank of Texas
Dallas, TX

Whole Bank Purchase and Assumption - All Deposits
DuPage National
Bank
West Chicago, IL

N

3,609

$53,524

$51,878

$54,223

$2,242

01/17/14

Republic Bank of
Chicago
Oak Brook, IL

Syringa Bank
Boise, ID

NM

7,334

$153,361

$145,813

$142,461

$4,757

01/31/14

Sunwest Bank
Irvine, CA

Millennium Bank,
National Association
Sterling, VA

N

3,038

$130,305

$121,704

$124,004

$10,107

02/28/14

WashingtonFirst
Bank
Reston, VA

Vantage Point Bank
Horsham, PA

NM

1,722

$63,453

$62,472

$60,536

$11,099

02/28/14

First Choice Bank
Mercerville, NJ

Allendale County
Bank
Fairfax, SC

NM

3,061

$49,498

$49,356

$49,992

$18,104

04/25/14

Palmetto State Bank
Hampton, SC

AztecAmerica Bank
Berwyn, IL

NM

1,008

$66,309

$65,031

$65,569

$17,999

05/16/14

Republic Bank of
Chicago
Oak Brook, IL

Columbia Savings
Bank
Cincinnati, OH

SB

1,782

$36,484

$29,538

$25,877

$5,255

05/23/14

United Fidelity
Bank, FSB
Evansville, IN

122 APPENDICES

FDIC INSURED INSTITUTIONS CLOSED DURING 2014 (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

Name and Location

Bank
Class

Number
of
Deposit
Accounts

SB	 =	 Savings Bank
SI	 =	 Stock and Mutual
Savings Bank

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

SM	 =	 State-chartered bank that is a
member of the Federal Reserve
System
SA	 =	 Savings Association
Estimated
Loss to
the DIF2

Date of
Closing
or
Acquisition

Receiver/Assuming
Bank and Location

Eastside Commerical NM
Bank
Conyers, GA

$166,875

$160,301

$33,911

07/18/14

Community and
Southern Bank
Atlanta, GA

SA

2,988

$70,286

$68,722

$67,826

$14,222

07/25/14

Providence Bank,
LLC
South Holland, IL

Frontier Bank, FSB
Palm Desert, CA

SA

3,518

$80,736

$76,344

$75,321

$4,709

11/07/14

Bank of Southern
California, N.A.
San Diego, CA

Northern Star Bank
Mankato, MN

2

$173,946

GreenChoice Bank,
FSB
Chicago, IL

1

3,599

NM

1,157

$18,794

$18,221

$17,860

$5,947

12/19/14

BankVista
Sartell, MN

Total Assets and Total Deposits data are based upon the last Call Report filed by the institution prior to failure.
Estimated losses are as of December 31, 2014. 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.

APPENDICES 123

ANNUAL REPORT 2014
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2014
Dollars in Thousands
Bank and Thrift Failures1

Total
Deposits3

Insured Deposit
Funding
and Other
Disbursements

$934,578,455

$703,412,460

18

2,913,503

24

6,044,051

51

2011
20104
20094

Year2

Number
of Banks/
Thrifts

Total
Assets3

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

Total

2,602

$576,987,772

$403,272,546

$64,093,522

$109,508,794

2014
2013

2,691,485

2,669,129

31,298

2,198,905

438,926

5,132,246

5,010,841

48,542

3,627,828

1,334,471

2012

11,617,348

11,009,630

11,017,896

1,514,509

6,827,536

2,675,851

92

34,922,997

31,071,862

30,675,465

2,598,550

20,888,383

7,075,622

157

92,084,988

78,290,185

82,239,795

52,108,227

12,650,307

17,481,261

140

169,709,160

137,835,121

135,976,290

90,569,874

16,301,294

29,105,122

2008

25

371,945,480

234,321,715

205,519,425

184,056,434

3,156,855

18,306,136

2007

3

2,614,928

2,424,187

1,919,899

1,384,368

373,730

161,801

2006

0

0

0

0

0

0

0

4

2005

0

0

0

0

0

0

0

2004

4

170,099

156,733

139,006

134,978

111

3,917

2003

3

947,317

901,978

883,772

812,933

8,192

62,647

2002

11

2,872,720

2,512,834

1,567,637

1,705,792

(552,072)

413,917

2001

4

1,821,760

1,661,214

21,131

1,138,677

(1,410,011)

292,465

2000

7

410,160

342,584

297,313

265,175

0

32,138

1999

8

1,592,189

1,320,573

1,307,724

711,758

5,649

590,317

1998

3

290,238

260,675

292,731

58,248

11,433

223,050

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

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

14,541,386

10,866,760

613

3,674,013

1991

124

64,556,512

52,972,034

21,499,781

15,496,730

4,769

5,998,282

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

124 APPENDICES

RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2014 (continued)
Dollars in Thousands
Assistance Transactions

Total
Deposits3

Insured Deposit
Funding
and Other
Disbursements

$3,317,099,253

$1,442,173,417

0

0

2013

0

2012

0

2011

0

Year2

Number
of Banks/
Thrifts

Total
Assets3

Total

154

2014

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

$11,630,356

$6,199,875

$0

$5,430,481

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2010

0

0

0

0

0

0

0

20095

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

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

4

5,886,381

5,580,359

765,732

406,676

0

359,056

1984

2

40,470,332

29,088,247

5,531,179

4,414,904

0

1,116,275

1983

4

3,611,549

3,011,406

764,690

427,007

0

337,683

APPENDICES 125

ANNUAL REPORT 2014
RECOVERIES AND LOSSES BY THE DEPOSIT INSURANCE FUND ON DISBURSEMENTS
FOR THE PROTECTION OF DEPOSITORS, 1934 - 2014 (continued)
Dollars in Thousands
Assistance Transactions
Insured Deposit
Funding
and Other
Disbursements

Year2

Number
of Banks/
Thrifts

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

Total
Assets3

Total
Deposits3

Recoveries

Estimated
Additional
Recoveries

Estimated
Losses

1980

1

7,953,042

5,001,755

0

0

0

0

1934 - 1979

4

1,490,254

549,299

0

0

0

0

Institutions for which the FDIC is appointed receiver, including deposit payoff, insured deposit transfer, and deposit assumption cases.
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 2014, 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
December 31, 2014, for TAG accounts in 2010, 2009, and 2008 are $406 million, $1,197 million, and $13 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.
1
2

126 APPENDICES

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

Number
of
Thrifts

Deposits

Estimated
Receivership
Loss2

Assets

Loss to
Funds3

Total

748

$393,986,574

$318,328,770

$75,977,846

$81,581,089

1995

2

423,819

414,692

28,192

27,750

1994

2

136,815

127,508

11,472

14,599

1993

10

6,147,962

5,708,253

267,595

65,212

1992

59

44,196,946

34,773,224

3,286,908

3,832,145

1991

144

78,898,904

65,173,122

9,235,967

9,734,263

1990

213

129,662,498

98,963,962

16,062,685

19,257,578

1989

318

134,519,630

113,168,009

47,085,027

48,649,542

4

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.
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
Total for 1989 excludes nine failures of the former FSLIC.
1

APPENDICES 127

ANNUAL REPORT 2014
B. MORE ABOUT THE FDIC
FDIC BOARD OF DIRECTORS

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

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 served as Vice Chairman
and Member of the FDIC Board of Directors from August
22, 2005, until his confirmation as Chairman. He served 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

128 APPENDICES

1993 to 2005. Mr. Gruenberg advised the Senator on issues
of domestic and international financial 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-LeachBliley Act; and the Sarbanes-Oxley 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.

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.
Prior to joining the FDIC’s Board, Mr. Norton was an
Executive Director at J.P. Morgan Securities LLC, in New
York, New York.
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.

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 approximately 1,700 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.
On April 1, 2013, Mr. Curry was named Chairman of the
Federal Financial Institutions Examination Council (FFIEC)
for a two-year term. Comptroller Curry is the 21st FFIEC
Chairman.
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.

Mr. Norton received a J.D. from the Georgetown University
Law Center and an A.B. in economics from Duke University.

APPENDICES 129

ANNUAL REPORT 2014
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. 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

130 APPENDICES

loan assistance to small businesses to create jobs,
re-launched the original concept as GrowNOW, 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 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

SPECIAL ADVISOR FOR
SUPERVISORY MATTERS

Stephen A. Quick

Arthur J. Murton
Director

OFFICE OF COMPLEX
FINANCIAL INSTITUTIONS

Michele A. Heller

WRITER-EDITOR

Fred W. Gibson
Acting Inspector General

Bret D. Edwards
Director

DIVISION OF RESOLUTION
AND RECEIVERSHIPS

Barry C. West

CHIEF INFORMATION OFFICER
AND CHIEF PRIVACY OFFICER

Robert D. Harris

OFFICE OF INSPECTOR GENERAL

Jason C. Cave

INTERNAL OMBUDSMAN

David S. Hoelscher

CHIEF RISK OFFICER

Richard J. Osterman, Jr.
Acting General Counsel

LEGAL DIVISION

Christopher J. Farrow
Chief Information
Security Officer

INFORMATION SECURITY
AND PRIVACY STAFF

Russell G. Pittman
Director

DIVISION OF INFORMATION
TECHOLOGY

Segundo Pereira
Director

Kymberly K. Copa

Barbara Hagenbaugh
SENIOR ADVISOR
INTERNATIONAL
RESOLUTION POLICY

OFFICE OF MINORITY AND
WOMEN INCLUSION

DEPUTY TO THE CHAIRMAN

DEPUTY TO THE CHAIRMAN
FOR COMMUNICATIONS

Diane Ellis
Director

DIVISION OF INSURANCE
AND RESEARCH

Cottrell L. Webster
Ombudsman

OFFICE OF
THE OMBUDSMAN

Eric J. Spitler
Director

OFFICE OF
LEGISLATIVE AFFAIRS

C. Richard Miserendino
Administrative Law Judge

Barbara A. Ryan

OFFICE OF FINANCIAL
INSTITUTION ADJUDICATION

CFPB
Board Member

Richard Cordray

Steven O. App

OCC
Board Member

Thomas J. Curry

DEPUTY TO THE CHAIRMAN
AND CHIEF OPERATING OFFICER,
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

Suzannah L. Susser
Director

CORPORATE UNIVERSITY

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

ANNUAL REPORT 2014
CORPORATE STAFFING
STAFFING TRENDS 2005-2014
9,000

6,000

3,000

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

4,514

4,476

4,532

4,988

6,557

8,150

7,973

7,476

7,254

6,631

FDIC Year–End Staffing
Note: 2008-2014 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing totals reflect total employees on-board.

132 APPENDICES

NUMBER OF EMPLOYEES BY DIVISION/OFFICE 2013 – 2014 1
Total
Division or Office:

Washington

Regional/Field

2014

2013

2014

2013

2014

2013

2,704

2,814

205

207

2,500

2,608

Division of Depositor and Consumer Protection

853

858

128

126

725

732

Division of Resolutions and Receiverships

884

1,284

159

166

725

1,118

Legal Division

601

678

375

388

226

290

Division of Administration

372

396

245

247

127

149

Division of Information Technology

324

340

254

264

70

76

Corporate University

205

195

196

184

9

11

Division of Insurance and Research

196

187

154

143

42

44

Division of Finance

170

176

168

174

2

2

Office of Inspector General

115

117

73

75

42

42

Office of Complex Financial Institutions

68

74

59

62

9

12

Information Security and Privacy Staff

33

29

33

29

0

0

Executive Offices

23

20

23

20

0

0

Executive Support Offices3

85

88

76

78

9

10

6,631

7,254

2,147

2,161

4,485

5,093

Division of Risk Management Supervision

2

2

Total

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
Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, and Chief Information
Officer.
3
Includes the Offices of Legislative Affairs, Communications, Ombudsman, Minority and Women Inclusion, and Corporate Risk Management.
1

APPENDICES 133

ANNUAL REPORT 2014
SOURCES OF INFORMATION

Public Information Center

FDIC Website

3501 Fairfax Drive
Room E-1021
Arlington, VA 22226

www.fdic.gov
A wide range of banking, consumer, and financial
information is available on the FDICʼs Website. This
includes the FDICʼs 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 banksʼ
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 agencyʼs
activities, as well as corporate databases and customized
reports of FDIC and banking industry information.

FDIC Call Center
Phone:	 877-275-3342 (877-ASK-FDIC)
	703-562-2222
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, and FDIC employees. The
Call Center directly, or 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, which is able to assist with over 40
different languages.

134 APPENDICES

Phone:	 877-275-3342 (877-ASK-FDIC),
	703-562-2200
Fax:	703-562-2296
FDIC Online Catalog: https://vcart.velocitypayment.com/
fdic/
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

Chicago Regional Office

Michael J. Dean, Regional Director
10 Tenth Street, NE
Suite 800
Atlanta, Georgia 30309
(678) 916-2200

M. Anthony Lowe, Regional Director
300 South Riverside Plaza
Suite 1700
Chicago, Illinois 60606
(312) 382-6000

Alabama
Florida
Georgia
North Carolina
South Carolina
Virginia
West Virginia

Illinois
Indiana
Kentucky
Michigan
Ohio
Wisconsin

Dallas Regional Office

Memphis Area Office

Kristie K. Elmquist, Regional Director
1601 Bryan Street
Dallas, Texas 75201
(214) 754-0098
Colorado
New Mexico
Oklahoma
Texas

Kristie K. Elmquist, Director
6060 Primacy Parkway
Suite 300
Memphis, Tennessee 38119
(901) 685-1603
Arkansas
Louisiana
Mississippi
Tennessee

Kansas City Regional Office

New York Regional Office

James D. LaPierre, Regional Director
1100 Walnut Street
Suite 2100
Kansas City, Missouri 64106
(816) 234-8000

John F. Vogel, Regional Director
350 Fifth Avenue
Suite 1200
New York, New York 10118
(917) 320-2500

Iowa
Kansas
Minnesota
Missouri
Nebraska
North Dakota
South Dakota

Delaware
District of Columbia
Maryland
New Jersey
New York
Pennsylvania
Puerto Rico
Virgin Islands

APPENDICES 135

ANNUAL REPORT 2014
Boston Area Office

San Francisco Regional Office

John F. Vogel, Director
15 Braintree Hill Office Park
Suite 100
Braintree, Massachusetts 02184
(781) 794-5500

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

Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont

Alaska
American Samoa
Arizona
California
Federated States of Micronesia
Guam
Hawaii
Idaho
Montana
Nevada
Oregon
Utah
Washington
Wyoming

136 APPENDICES

C. OFFICE OF INSPECTOR GENERAL’S
ASSESSMENT OF THE MANAGEMENT
AND PERFORMANCE CHALLENGES
FACING THE FDIC

Dodd-Frank Act. That office is taking steps to realign
organizational responsibilities for Title I and Title II
tasks in the interest of ensuring the most efficient and
complementary efforts of staff involved in both.

Under the Reports Consolidation Act of 2000, the Office
of Inspector General (OIG) identifies the management
and performance challenges facing the FDIC and provides
its assessment to the Corporation for inclusion in the
FDIC’s Annual Performance and Accountability Report.
In doing so, the OIG keeps in mind the FDIC’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. The OIG believes that the FDIC faces challenges
in the critical areas listed below that will continue to
occupy much of the Corporation’s attention and require its
sustained focus for the foreseeable future.

As discussed more fully below, in the coming year, those
involved in Dodd-Frank Act activities will continue to
evaluate the resolution plans submitted by the largest
bank holding companies and other SIFIs under Title I;
develop strategies for resolving SIFIs under Title II; work
to promote cross-border cooperation for the orderly
resolution of a global SIFI; and coordinate with the other
regulators to develop policy to implement the provisions
of the Dodd-Frank Act.

Carrying Out Dodd-Frank Act Responsibilities
The Dodd-Frank Wall Street Reform and Consumer
Protection Act (the Dodd-Frank Act) created a
comprehensive new regulatory and resolution framework
designed to avoid the severe consequences of financial
instability. Title I of the Dodd-Frank Act provides tools for
regulators to impose enhanced supervision and prudential
standards on systemically important financial institutions
(SIFIs). Title II provides the FDIC with a new orderly
liquidation authority for SIFIs, subject to a systemic risk
determination by statutorily-designated regulators. The
FDIC has made progress toward implementing its systemic
resolution authorities under the Dodd-Frank Act, in
large part due to the efforts of an active cross-divisional
working group composed of senior FDIC officials, but
challenges remain. These challenges involve the FDIC’s
ability to fulfill its insurance, supervisory, receivership
management, and resolution responsibilities as it meets the
requirements of the Dodd-Frank Act. These responsibilities
are cross-cutting and are carried out by staff throughout
the Corporation’s headquarters and regional divisions
and offices, including in the Office of Complex Financial
Institutions, an office established in response to the

In the interest of operational readiness to resolve a SIFI,
the Corporation will need to determine optimum staffing,
needed expertise, and effective organizational structures to
handle current and future responsibilities. In that regard, it
will also need to leverage subject-matter expertise currently
existing in the FDIC’s various divisions and ensure effective
and efficient communication, coordination, and information
sharing as those responsible carry out their respective roles.

Maintaining Strong Information Technology
Security and Governance Practices
Key to achieving the FDIC’s mission of maintaining stability
and public confidence in the nation’s financial system is
safeguarding the sensitive information, including personally
identifiable information that the FDIC collects and manages
in its role as federal deposit insurer and regulator of
state nonmember financial institutions. Further, as an
employer, an acquirer of services, and a receiver for failed
institutions, the FDIC obtains considerable amounts of
sensitive information from its employees, contractors,
and failed institutions. Increasingly sophisticated security
risks and global connectivity have resulted in both internal
and external risks to that sensitive information. Internal
risks include errors and fraudulent or malevolent acts by
employees or contractors working within the organization.
External threats include a growing number of cyber-based
attacks that can come from a variety of sources, such as
hackers, criminals, foreign nations, terrorists, and other
adversarial groups. Such threats underscore the importance
of a strong, enterprise-wide information security program.

APPENDICES 137

ANNUAL REPORT 2014
During 2013, the FDIC Chairman announced significant
changes to the FDIC’s information security governance
structure to address current and emerging risks in the
information technology (IT) and information security
environments. Among these changes, the FDIC established
the IT/Cyber Security Oversight Group to provide a
senior-level forum for assessing cyber security threats
and developments affecting the FDIC and the banking
industry. Subsequently, the FDIC Chairman separated
the roles and responsibilities of the Chief Information
Officer (CIO) and Director of the Division of Information
Technology (DIT). Both positions had previously been held
by the same individual. The CIO now reports directly to
the FDIC Chairman and has broad strategic responsibility
of IT governance, investments, program management, and
information security. The CIO also serves as the FDIC’s
Chief Privacy Officer. Finally, the Chief Information
Security Officer (CISO) and related staff, who had formerly
reported to the Director of DIT, now report to the CIO.
The purpose of this realignment was to ensure that the
CISO has the ability to provide an independent perspective
on security matters to the CIO, and that the CIO has the
authority and primary responsibility to implement an
agency-wide information security program.
Throughout 2014, the benefits of the new IT governance
structure began to be realized. During 2015, a challenging
priority for the FDIC will be to continue to adapt to
these organizational changes and maintain effective
communication and collaboration among all parties
involved in ensuring a robust, secure IT operating
environment that meets the day-to-day and longer-term
needs of the FDIC employees who depend on it. The
Corporation will also need to ensure that its business
continuity and disaster recovery plans are effective in
addressing the impacts of natural disasters or other
events that disrupt its business processes and activities.
A permanent CIO came on board in December 2014 and
will continue to carry out needed information security
initiatives. Among those are strategies to ensure the
security of the FDIC’s systems and infrastructure and efforts
to support communications with other federal agencies if a
widespread emergency occurred.

138 APPENDICES

Maintaining Effective Supervisory Activities
and Preserving Community Banking
The FDIC’s supervision program promotes the safety
and soundness of FDIC-supervised insured depository
institutions. The FDIC is the primary federal regulator for
4,138 FDIC-insured, state-chartered institutions that are not
members of the Board of Governors of the Federal Reserve
System (FRB). As such, the FDIC is the lead federal
regulator for the majority of community banks. As the FDIC
operates in a post-crisis environment, it must continue to
apply lessons learned over the past years of turmoil. One
key lesson is the need for earlier regulatory response when
risks are building. For example, banks may be tempted to
take additional risks, engage in imprudent concentrations,
or loosen underwriting standards. Some banks are also
introducing new products or lines of business or seeking
new sources for non-interest income, all of which can
lead to interest rate risk, credit risk, operational risk,
and reputational risk. Such risks need to be managed
and addressed early on during the “good times” before
a period of downturn. FDIC examiners need to identify
problems, bring them to the attention of bank management,
follow up on problems, recommend enforcement actions
as needed, and be alert to such risks as Bank Secrecy
Act and anti-money laundering issues. With respect to
important international concerns, the FDIC also needs to
support development of sound global regulatory policy
through participation on the Basel Committee on Banking
Supervision and related sub-groups, and to address
such matters as the Basel III capital accord and Basel
liquidity standards.
Importantly, with respect to the FDIC’s involvement with
the Dodd-Frank Act, the Division of Risk Management
Supervision’s (RMS) Complex Financial Institutions Group
is responsible for the monitoring function for SIFIs. This
group is primarily responsible for monitoring risk within
and across large, complex financial companies for back-up
supervisory and resolution readiness purposes. In that
connection, RMS is also playing a key role in reviewing
and providing feedback on resolution plans submitted by
companies covered by Title I of the Dodd-Frank Act, as part
of a shared responsibility with the FRB.

Of critical importance with respect to the FDIC’s
supervisory role, and in light of technological changes,
increased use of technology service providers (TSP),
new delivery channels, and cyber threats, the FDIC’s
IT examination program needs to be proactive. Also,
bankers and Boards of Directors need to ensure a strong
control environment and sound risk management and
governance practices in their institutions. Controls need
to be designed not only to protect sensitive customer
information, but also to guard against intrusions that can
compromise the integrity and availability of operations,
information and transaction processing systems, and data.
Given the complexities of the range of cyber threats, the
FDIC needs to ensure its examination workforce has the
needed expertise to effectively carry out its IT examination
responsibilities.
Of special note, in partnership with the Federal Financial
Institutions Examination Council, the FDIC has developed
a framework for conducting IT examinations that covers a
broad spectrum of technology, operational, and information
security risks to both institutions and TSPs. Importantly,
one TSP can service hundreds or even thousands of
financial institutions, so that the impact of security
incidents in one TSP can have devastating ripple effects on
those institutions. In the coming months, the Corporation
needs to continue efforts, along with the other regulators,
to address these risks and use all available supervisory
and legal authorities to ensure the continued safety and
soundness of financial institutions and affiliated third-party
entities. It also needs to ensure effective informationsharing about security incidents with regulatory parties and
other federal groups established to combat cyber threats in
an increasingly interconnected world.
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. Local communities and small
businesses rely heavily on community banks for credit
and other essential financial services. These banks foster
economic growth and help to ensure that the financial
resources of the local community are put to work on its
behalf. Consolidations and other far-reaching changes
in the U.S. financial sector in recent decades have made
community banks a smaller part of the U.S. financial

system. To ensure the continued strength of the community
banks, the Corporation will need to sustain initiatives such
as ongoing research, technical assistance to the banks
by way of training videos on key risk management and
consumer compliance matters, and continuous dialogue
with community banking groups.
Maintaining a strong examination program, conducting
vigilant supervisory activities for both small and large
banks, applying lessons learned, and being attuned to
harmful cyber threats in financial institutions and TSPs will
be critical to ensuring stability and continued confidence in
the financial system going forward.

Carrying Out Current and Future Resolution
and Receivership Responsibilities
Through purchase and assumption agreements with
acquiring institutions, the Corporation has entered into
shared-loss agreements (SLAs). Since loss sharing began
during the most recent crisis in November 2008, the FDIC
resolved 304 failures with accompanying SLAs; the initial
covered asset balance was $216.5 billion. As of December
31, 2014, 281 receiverships still have active SLAs, with a
current covered asset balance of $54.6 billion.
Under these agreements, the FDIC agrees to absorb a
portion of the loss—generally 80 to 95 percent—which may
be experienced by the acquiring institution with regard
to those assets, for a period of up to 10 years. As another
resolution strategy, the FDIC entered into 35 structured
sales transactions involving 43,315 assets with a total
unpaid principal balance of $26.2 billion. Under these
arrangements, the FDIC retains a participation interest
in future net positive cash flows derived from third-party
management of these assets.
Other post-closing asset management activities continue
to require FDIC attention. FDIC receiverships manage
assets from failed institutions, mostly those that are not
purchased by acquiring institutions through purchase and
assumption agreements or involved in structured sales.
As of December 31, 2014, the Division of Resolutions and
Receiverships (DRR) was managing 481 active receiverships
with assets in liquidation totaling about $7.7 billion. As
receiver, the FDIC seeks to expeditiously wind up the
affairs of the receiverships. Once the assets of a failed

APPENDICES 139

ANNUAL REPORT 2014
institution have been sold and the final distribution of any
proceeds is made, the FDIC terminates the receivership.
As recovery from the crisis continues, some of these
risk-sharing agreements will be winding down and certain
currently active receiverships will be terminated. Given the
substantial dollar value and risks associated with the risk
sharing activities and other receivership operations, the
FDIC needs to ensure continuous monitoring and effective
oversight to protect the FDIC’s financial interests.
The FDIC increased its permanent resolution and
receivership staffing and significantly increased its reliance
on contractor and term employees to fulfill the critical
resolution and receivership responsibilities associated with
the ongoing FDIC interest in the assets of failed financial
institutions. Now, and as discussed later in this document,
as the number of financial institution failures continues
to decline, the Corporation is reshaping its workforce and
adjusting its budget and resources accordingly. Between
January 2012 and April 2014, the FDIC closed three of the
temporary offices it had established to handle the high
volume of bank failures. As a result, authorized staffing
for DRR, in particular, fell from a peak of 2,460 in 2010
to 1,463 proposed for 2013, which reflected a reduction
of 393 positions from 2012 and 997 positions over three
years. Proposed DRR authorized staff for 2014 was 916.
Authorized staffing for 2015 is 756. Of note, DRR will
continue to substantially reduce its nonpermanent staff
each year, based on declining workload.
In the face of these staff reductions and the corresponding
loss of specialized experience and expertise, however, the
Corporation must also continue to review the resolution
plans of large bank holding companies and designated
nonbank holding companies to ensure their resolvability
under the Bankruptcy Code, if necessary, and in cases
where their failure would threaten financial stability,
administer their orderly liquidation. Carrying out such
activities could pose significant challenges to those in
DRR who have historically carried out receivership and
resolution activities. For example, the Complex Financial
Institutions branch of DRR works to identify and mitigate
risks in large insured depository institutions, bank holding
companies, and nonbank SIFIs. One of DRR’s challenges
in these areas will be to enhance the FDIC’s capability
to successfully administer deposit insurance claims

140 APPENDICES

determinations for large or complex resolutions. It will also
need to ensure operational readiness for related accounting
and investigations work streams.

Ensuring the Continued Strength
of the 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. To maintain sufficient
Deposit Insurance Fund (DIF) balances, the FDIC collects
risk-based insurance premiums from insured institutions
and invests the deposit insurance funds.
In the aftermath of the financial crisis, FDIC-insured
institutions continue to make gradual but steady progress.
Continuing to replenish the DIF in a post-crisis environment
is a critical activity for the FDIC. The DIF balance had
dropped below negative $20 billion during the worst time
of the crisis. During the fourth quarter of 2014, the DIF
balance increased by $8.5 billion, from $54.3 billion at
September 30, 2014, to an all-time high of $62.8 billion. The
most recent quarterly increase was primarily due to $2.0
billion of assessment revenue and a negative $6.8 billion
provision for insurance losses, partially offset by $408
million of operating expenses.
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 providing the
insurance coverage that depositors have come to rely upon.
In that regard, the FDIC will need to continue to regularly
disseminate data and analysis on issues and risks affecting
the financial services industry to bankers, supervisors, the
public, and other stakeholders.
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. As part of its efforts,
the FDIC needs to continue its collaboration with other
agencies in helping to ensure financial stability and protect
the DIF. One important means of doing so is through
participation on the Financial Stability Oversight Council
(FSOC), created under the Dodd-Frank Act. This Council
was established to provide comprehensive monitoring
of stability in the U.S. financial system by identifying and

responding to emerging risks to U.S. financial stability and
by promoting market discipline. The FDIC Chairman is a
member of FSOC, which has the authority to designate for
enhanced prudential supervision by the Federal Reserve
System any financial firm whose material financial distress
could pose a threat to U.S. financial stability. The FDIC’s
active involvement on FSOC will be important as the
Council members join forces to confront the many potential
threats to the nation’s financial system and to the FDIC in
its role as insurer.

Promoting Consumer Protections
and Economic Inclusion
The FDIC carries out its consumer protection role by
providing consumers with access to information about
their rights and disclosures that are required by federal
laws and regulations. Importantly, it also examines 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. These activities require
collaboration with other regulatory agencies. The FDIC
also coordinates with the Consumer Financial Protection
Board, created under the Dodd-Frank Act, on consumer
issues of mutual interest and monitors rulemakings related
to mortgage lending and other types of consumer financial
services and products. The FDIC will need to continue
to assess the impact of such rulemakings on supervised
institutions, communicate key changes to stakeholders, and
train examination staff accordingly.
The FDIC continues to work 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. The
Corporation will be continuing its Money Smart program
and planning for its biennial survey conducted jointly with
the U.S. Census Bureau to assess the overall population’s
access to insured institutions. Additionally, the FDIC’s
Advisory Committee on Economic Inclusion, composed
of bankers, community and consumer organizations,
and academics, will continue to explore strategies to

bring the unbanked into the financial mainstream. The
FDIC’s Alliance for Economic Inclusion initiative seeks
to collaborate with financial institutions; community
organizations; local, state, and federal agencies; and other
partners to form broad-based coalitions to bring unbanked
and underbanked consumers and small businesses into the
financial mainstream.
Successful activities in pursuit of this priority will continue
to require effort on the part of the FDIC going forward.
The FDIC will need to sustain ongoing efforts to carry
out required compliance and community reinvestment
examinations, coordinate with the other financial regulators
and CFPB on regulatory matters involving financial
products and services, and pursue and measure the success
of economic inclusion initiatives to the benefit of the
American public.

Implementing Workforce Changes and
Budget Reductions
As referenced earlier, as the number of financial institution
failures continues to decline, the FDIC has been reshaping
its workforce and adjusting its budget and human
resources as it seeks a balanced approach to managing
costs while achieving mission responsibilities. Over the
past several years of recovery, the FDIC closed all three
of the temporary offices charged with managing many
receivership and asset sales activities on the East and West
Coasts and in the Midwest.
During the 2015 planning and budget process, the
Corporation reassessed its current and projected workload
along with trends within the banking industry and the
broader economy. Based on that review, the FDIC expects
a continuation of steady improvements in the global
economy, a small number of insured institution failures,
gradual reductions in post-failure receivership management
workload, and significant further reductions in the number
of 3-, 4-, and 5-rated institutions. While the FDIC will
continue to need some temporary and term employees over
the next several years to complete the residual workload
from the financial crisis, industry trends confirm that the
need for nonpermanent employees over the next several
years will steadily decrease.
Given those circumstances, the FDIC Board of Directors
approved a $2.32 billion Corporate Operating Budget

APPENDICES 141

ANNUAL REPORT 2014
for 2015, 3 percent lower than the 2014 budget. In
conjunction with its approval of the 2015 budget, the Board
also approved an authorized 2015 staffing level of 6,875
positions, down from 7,200 currently authorized, a net
reduction of 325 positions. This is the fifth consecutive
reduction in the FDIC’s annual operating budget.
As conditions improve throughout the industry and the
economy, the FDIC will continue its efforts to achieve the
appropriate level of resources. At the same time, however,
it needs to remain mindful of ever-present risks and other
uncertainties in the economy that may prompt the need for
additional resources and new skill sets and expertise that
may be challenging to obtain.
In that regard, the FDIC is continuing to work toward
integrated workforce development processes as it seeks to
bring on the best people to meet the FDIC’s changing needs
and priorities, and do so in a timely manner. The FDIC
has long promoted diversity and inclusion initiatives in the
workplace. Section 342 of the Dodd-Frank Act reiterates
the importance of standards for assessing diversity policies
and practices and developing procedures to ensure the
fair inclusion and utilization of women and minorities in
the FDIC’s contractor workforce. The Dodd-Frank Act
also points to the Office of Minority and Women Inclusion
as being instrumental in diversity and inclusion initiatives
within the FDIC’s working environment. This office will
be challenged as it works to ensure it has the proper staff,
expertise, and organizational structure to successfully carry
out its advisory responsibilities to ensure diversity and
inclusion.
For all employees, in light of a post-crisis, transitioning
workplace, the FDIC will seek to sustain its emphasis on
fostering employee engagement and morale. Its diversity
and inclusion goals and initiatives, Workplace Excellence
Program, and workforce development efforts are positive

142 APPENDICES

steps in that direction and should continue to create a
working environment that warrants the FDIC’s recognition
as a Best Place to Work.

Ensuring Effective Enterprise Risk
Management Practices
Enterprise risk management is a critical aspect of
governance at the FDIC. Notwithstanding a stronger
economy and financial services industry, the FDIC’s
enterprise risk management framework and related
activities need to be attuned to emerging risks, both internal
and external to the FDIC that can threaten corporate
success. As evidenced in the challenges discussed above,
certain difficult issues may fall within the purview of a
single division or office, while others are cross-cutting
within the FDIC or involve coordination with the other
financial regulators and external parties. The Corporation
needs to adopt controls, mechanisms, and risk models
that can address a wide range of concerns—from specific,
everyday risks such as those posed by personnel security
practices and records management activities, for example,
to the far broader concerns of the ramifications of an
unwanted and harmful cyber-attack or the failure of a large
bank or SIFI.
The Corporation’s stakeholders—including the Congress,
American people, media, and others— expect effective
governance, sound risk management practices, and vigilant
regulatory oversight of the financial services industry
to avoid future crises. Leaders and individuals at every
working level throughout the FDIC need to understand
current and emerging risks to the FDIC mission and be
prepared to take necessary steps to mitigate those risks
as changes occur and challenging scenarios that can
undermine the FDIC’s short- and long-term success present
themselves.

D. ACRONYMS
ABS	

Asset-backed securities

FDIC	

Federal Deposit Insurance Corporation

AEI	

Alliance for Economic Inclusion

FEHB	

Federal Employees Health Benefits

AHDP	

Affordable Housing Disposition Program

FERS	

Federal Employees Retirement System

AMC	

Appraisal management company

FFB	

Federal Financing Bank

AML	

Anti-Money Laundering

FFIEC	
Federal Financial Institutions
			 Examination Council

ASBA	
Association of Supervisors of Banks of
			 the Americas
ASC	

Accounting Standards Codification

FFMIA	
Federal Financial Management
			 Improvement Act

ASU	

Accounting Standards Update

FHFA	

Federal Housing Finance Agency

BCBS	

Basel Committee on Banking Supervision

FICO	

Financial Corporation

BHC 	

Bank holding company

FIL	

Financial Institution Letter

BSA	

Bank Secrecy Act

FIS	

Financial Institution Specialist

CAMELS 	
Capital adequacy; Asset quality; Management
			 quality; Earnings; Liquidity; Sensitivity to
			 market risks

FISMA	

Federal Information Security Management Act

FMFIA	

Federal Managers’ Financial Integrity Act

FMSP	

Financial Management Scholars Program

CCIWG	
Cybersecurity and Critical
			 Infrastructure Working Group

FRB	
Board of Governors of the Federal
			 Reserve System

CDFI	

Community Development Financial Institution

FRF	

FSLIC Resolution Fund

CEO	

Chief Executive Officer

FSAP	

Financial Sector Assessment Program

CEP	

Corporate Employee Program

FSB	

Financial Stability Board

CFO Act	

Chief Financial Officers’ Act

FSI	

Financial Stability Institute

CFPB	

Consumer Financial Protection Bureau

CFR	

Center for Financial Research

FS-ISAC	
Financial Services Information Sharing and
			 Analysis Center

CFT	

Counter Financing of Terrorism

CFTC	

Commodity Futures Trading Commission

FSLIC	
Federal Savings and Loan
			 Insurance Corporation

CIO	

Chief Information Officer

FSOC	

Financial Stability Oversight Council

CISO	

Chief Information Security Officer

FSVC	

Financial Services Volunteer Corps

CMP	

Civil Money Penalty

FTC	

Federal Trade Commission

ComE-IN	

Advisory Committee on Economic Inclusion

GAAP	

Generally accepted accounting principles

CPI-U	

Consumer Price Index for All Urban Consumers

GAO	

U.S. Government Accountability Office

CRA	

Community Reinvestment Act

GPRA	

Government Performance and Results Act

CRE	

Commercial real estate

G-SIBs	

Global Systemically Important Banks

CSE	

Covered swap entity

G-SIFIs	

Global SIFIs

CSRS	

Civil Service Retirement System

HELOC	

Home Equity Line of Credit

DDoS	

Distributed denial of service

DFA	

Dodd-Frank Act

HFIAA	
Homeowner Flood Insurance Affordability
			 Act of 2014

DIF	

Deposit Insurance Fund

DRR	

Designated Reserve Ratio

EDIE	

Electronic Deposit Insurance Estimator

EGRPRA	
Economic Growth and Regulatory Paperwork
			 Reduction Act of 1996
FAQ	

Frequently Asked Questions

FDI Act	

Federal Deposit Insurance Act

IADI	

International Association of Deposit Insurers

IDI	

Insured depository institution

IMF	

International Monetary Fund

IMFB	

IndyMac Federal Bank

ISDA	
International Swaps and Derivatives
			 Association, Inc.
IT		

Information technology

JFSR	

Journal for Financial Services Research

APPENDICES 143

ANNUAL REPORT 2014
LCR	

Liquidity coverage ratio

QBP	

Quarterly Banking Profile

LIDI	

Large Insured Depository Institution

QM	

Qualified mortgage

LLC	

Limited Liability Company

QRM	

Qualified residential mortgage

LMI	

Low- or moderate-income

RTC	

Resolution Trust Corporation

LURA	

Land use restriction agreements

SEC	

Securities and Exchange Commission

MDI	

Minority depository institutions

SIFI	

Systemically important financial institution

MOL	

Maximum Obligation Limitation

SLA	

Shared-loss agreement

MOU	

Memoranda of Understanding

SMS	

Systemic Monitoring System

MWOB	

Minority- and women-owned business

SNC	

Shared National Credit

NCUA	

National Credit Union Administration

SNM	

State Nonmember

NFIP	

National Flood Insurance Program

SPOE	

Single Point of Entry

NPR	

Notice of proposed rulemaking

SRAC	

Systemic Resolution Advisory Committee

NSFR	

Net Stable Funding Ratio

SSGN	

Structured sale of guaranteed note

NTEU	

National Treasury Employees Union

TARP	

Troubled Asset Relief Program

OCC	

Office of the Comptroller of the Currency

TCC	

Training and Conference Committee

OFAC	

Office of Foreign Assets Control

TIPS	

Treasury Inflation-Protected Securities

OLA	

Orderly Liquidation Authority

TORC	

Teacher Online Resource Center

OLF	

Orderly Liquidation Fund

TPPP	

Third-party payment processor

OMB	

U.S. Office of Management and Budget

TruPS	

Trust preferred securities

OPM	

U.S. Office of Personnel Management

TSP	

Federal Thrift Savings Plan

OTC	Over-the-counter

TSP (IT-related)	 Technology service providers

PCA	

Prompt corrective action

VIE	

Variable interest entity

PFR	

Primary federal regulator

WE	

Workplace Excellence

144 APPENDICES

2014

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
♦	 Brian D. Aaron
♦	 Barbara A. Glasby
♦	 Latoja S. Anderson
♦	 Financial Reporting Section
♦	 Division and Offices’ Points-of-Contact

ANNUAL REPORT 2014 3

FE DER A L DEP O S I T I NSURANCE CORPORATI ON
550 17th Street, N.W.
Washington, DC 20429-9990
WWW.FDIC.GOV
FDIC-003-2015

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