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

2 0 0 9

A N N U A L

R E P O R T

Mission

Vision

Values

The Federal Deposit Insurance
Corporation (FDIC) is an
independent agency created by
the Congress to maintain stability
and public confidence in the
nation’s financial system by:
• insuring deposits,
• examining and supervising
financial institutions for safety
and soundness and consumer
protection, and
• managing receiverships.

The FDIC is a recognized leader
in promoting sound public
policies; addressing risks in the
nation’s ­ inancial system; and
f
carrying out its insurance,
supervisory, consumer protection,
and receivership management
responsibilities.

The FDIC and its employees have a tradition of
distinguished public service. Six core values
guide us in accomplishing our mission:
1.	 Integrity
We adhere to the highest ethical and
professional standards.
2.	 Competence
We are a highly skilled, dedicated, and
diverse workforce that is empowered to
achieve outstanding results.
3.	 Teamwork
We communicate and collaborate effectively
with one another and with other regulatory
agencies.
4.	 Effectiveness
We respond quickly and successfully to risks
in insured depository institutions and the
financial system.
5. 	Accountability
We are accountable to each other and to our
stakeholders to operate in a financially
responsible and operationally effective
manner.
6.	 Fairness
We respect individual viewpoints and treat
one another and our stakeholders with
impartiality, ­ ignity, and trust.
d

2009
ANNUAL
REPORT

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

Office of the Chairman

June 30, 2010
Dear Sir/Madam,
•	
•	
•	
•	
•	

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,
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 2009 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
Resolution Fund.
In accordance with the Reports Consolidation Act of 2000, the FDIC completed an assessment of 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, except for a material weakness in internal controls related to estimating
losses to the DIF from resolution transactions involving loss-share agreements, which was identified
by the U.S. Government Accountability Office (GAO). GAO also identified information technology
issues that aggregated to a significant deficiency. During the fourth quarter of 2009 and in early 2010,
we increased resources in these areas and instituted improvements in our control environment which,
in conjunction with additional control enhancements to be completed in the second quarter of 2010, will
significantly reduce the risks outlined in GAO’s audit report. We are committed to maintaining effective
internal controls corporate-wide in 2010.
Sincerely,
Sheila C. Bair
Chairman
The President of the United States
The President of the United States Senate
The Speaker of the United States House of Representatives

2

FDIC 2009 Annual Report

Table of Contents

Message from the Chairman • Sheila C. Bair. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Message from the Chief Financial Officer • Steven O. App. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
In Memoriam • L. William Seidman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
I.	 Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

The Year in Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Supervision and Consumer Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Resolutions and Receiverships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Effective Management of Strategic Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

II.	 Financial Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Deposit Insurance Fund Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Investment Spending. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

III.	 Performance Results Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Summary of 2009 Performance Results by Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 Budget and Expenditures by Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Results by Program and Strategic Goal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior Years’ Performance Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Program Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56
59
60
66
73

IV.	 Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Deposit Insurance Fund (DIF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
FSLIC Resolution Fund (FRF). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Government Accountability Office’s Audit Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  117
Management’s Response. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Overview of the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

V.	 Management Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140

Enterprise Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
Material Weaknesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Management Report on Final Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

VI.	 Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144

A.   Key Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
B.  More About the FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
C.  Office of Inspector General’s Assessment of the Management and
Performance Challenges Facing the FDIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176



Table of Contents

3

Insuring Deposits.  Examining Institutions.
Managing Receiverships.  Educating Consumers.
In its unique role as deposit insurer of banks and savings associations, and in cooperation with the
other state and federal regulatory agencies, the Federal Deposit Insurance Corporation (FDIC) promotes
the safety and soundness of the U.S. financial system and the insured depository institutions by identifying, monitoring, and addressing risks to the Deposit Insurance Fund (DIF).
The FDIC promotes public understanding and the development of sound public policy by providing
timely and accurate financial and economic information and analyses. It minimizes disruptive effects
from the failure of financial institutions. It assures fairness in the sale of financial products and the provision of financial services.
The FDIC’s long and continuing tradition of excellence in public service is supported and sustained
by a highly skilled and diverse workforce that continuously monitors and responds rapidly and successfully to changes in the financial environment.
At the FDIC, we are working together to be the best.
FDIC by the Numbers:

$250,000
699,277
140
0
8,012
560
4,782
2,400,000
72,614
30
6,557

4

Deposit insurance limit
Electronic deposit insurance estimator user sessions
Failed banks resolved
Insured deposit dollars lost
Insured depository institutions
International representatives from 56 emerging and developing markets who received
consultation, training, or assistance from the FDIC
Written deposit insurance inquiries
Money Smart consumers reached since inception
New bank accounts opened through the Alliance for Economic Inclusion
Banks participating in the small-dollar loan pilot program
FDIC full-time-equivalent employees

FDIC 2009 Annual Report

Message from the Chairman • Sheila C. Bair

Daniel Rosenbaum/The New York Times/Redux

As the first decade of the new century came
to a turbulent close, the FDIC continued to meet
the challenge of protecting deposits in over half
a billion insured accounts at over 8,000 FDICinsured institutions. Our guarantee has protected
depositors since 1933 with none ever losing so
much as a penny of insured funds. While the
recent period of historic financial turmoil has
required us to take some extraordinary actions to
carry out our mission, it was precisely for times
like these that the FDIC was established some 76
years ago.
Following the liquidity crisis that struck the
financial system in the fall of 2008, the FDIC
continued to focus its efforts in 2009 on stabilizing the liquidity of the industry through our
temporary support programs, strengthening
bank supervision, ensuring the financial capacity of the Deposit Insurance Fund (DIF), and
promptly resolving failed institutions. During
2009, the number of failed banks rose to 140, up
from 25 the previous year and the highest annual total since 1992. Meanwhile, the number of
problem institutions—those with the two lowest
supervisory ratings—rose to 702, which was the
highest year-end total since 1992. Historically,
the vast majority of problem institutions do not
fail. However, elevated numbers of problem and
failed institutions are expected to remain a nearterm challenge, even as the economy recovers,
and there is substantial residual workload from
the failures that occurred in prior years.
Accordingly, the FDIC has been adding to
the operational resources it needs to deal with
its increased workload. The FDIC workforce
grew to 6,557 full-time equivalent positions at
year-end 2009, up from 4,988 at year-end 2008.
In December 2009, the FDIC Board approved a



Message from the Chairman • Sheila C. Bair

5

2010 operating budget of almost $4 billion, a 56
percent increase from 2009, and authorized the
hiring of some 1,600 additional temporary workers, which will expand the FDIC’s total workforce by nearly 25 percent.

Stabilizing Bank Funding
Through the TLGP

In October 2008, at the height of the financial
crisis, the FDIC introduced a Temporary Liquidity Guarantee Program (TLGP) to help stabilize
the liquidity of the industry through our temporary support programs and promote confidence
across the financial system. During 2009, the
FDIC worked to fully implement the two elements of the TLGP, extended its time frame,
and made plans for an orderly exit as financial
market conditions continued to stabilize. Under
the Debt Guarantee Program, a total of over $618
billion in guaranteed debt was issued, generating
over $10 billion in fees from participating banks.
This program had been instrumental in helping
to reduce risk premiums in the interbank lending
markets until its expiration on October 31, 2009.
The Transaction Account Guarantee Program,
which provides a full guarantee of all deposits
in noninterest-bearing transaction accounts, has
been extended through December 2010.

Balanced Supervision Under
Adverse Banking Conditions

As supervisor for nearly 5,000 community
banks, the FDIC saw its workload rise in 2009
with the increase in the number of FDIC-supervised problem institutions. The FDIC responded
to these challenges by prioritizing examination
activities, increasing staffing levels, and making greater use of off-site monitoring and on-site

6

visitations between examinations. We actively
communicate with bankers through a variety
of outreach activities, including a Community
Bank Advisory Committee that was launched
this year. This Advisory Committee was formed
to provide the FDIC with advice and guidance
on a broad range of important policy issues
impacting small community banks throughout the country, as well as impacting the local
communities they serve. We have also worked
closely with other bank regulatory agencies to
issue a number of Financial Institution Letters
on risk management issues, including a statement encouraging banks to meet the borrowing
needs of creditworthy businesses and consumers. Striking this balanced approach to bank
supervision during a period of adversity for the
industry will be essential to ensuring that credit
is made available to finance the anticipated economic recovery.

Keeping the DIF Strong
While Banks Recover

As part of a plan to replenish the liquidity of
the DIF, insured institutions pre-paid almost $46
billion of deposit insurance premiums at the end
of 2009. This amount represents approximately
what non-exempted institutions were expected to
pay for the 39-month period beginning October
1, 2009. As designed, the assessment prepayment
did not impact the industry’s earnings and capital, allowing the industry to continue rebuilding
its capital base and increasing its capacity to
lend. The prepayments increased the DIF’s total
cash and investments to approximately $66 billion as of year-end. According to current projections, this level of resources will be sufficient
to resolve insured institutions that are projected

FDIC 2009 Annual Report

to fail over the next few years; as such, the DIF
will not have to borrow from the U.S. Treasury
to meet its insurance obligations.

Protecting Depositors and
Resolving Failed Institutions

As the number of failed institutions rose to
its highest level since 1992, the FDIC instituted
strategies to protect the depositors and customers of these institutions at the least possible cost
to the DIF. The FDIC moved to an aggressive
marketing campaign for failing institutions that
successfully led to the sale of the vast majority of
these failed entities to healthier acquirers. These
strategies helped to preserve banking relationships in many communities and provide depositors and customers with uninterrupted access to
essential banking serv­ces. To this end, analyi
sis is performed on every failing institution to
identify branches located in low- and moderatei
­ ncome areas so as to minimize the impact that
any proposed resolution transaction may have on
its customers. Moreover, the FDIC’s use of lossshare arrangements, where failed bank assets
are passed to the acquirer, thus remaining in the
private sector with the FDIC sharing in losses
on the assets, is expected to save the FDIC $30
billion over the cost of liquidation. Finally, in
selling assets, the FDIC developed an innovative structured transaction program that utilizes
private sector asset management expertise while
the FDIC retains an equity interest in all of the
future cash flows. The overarching rationale
behind both the loss-share agreements and the
structured transaction asset sales initiative is
that the long-term intrinsic value of these assets
exceeds their current depressed market value.
Both of these strategies should minimize asset



Message from the Chairman • Sheila C. Bair

losses and maximize recoveries to receivership
creditors, including the DIF.

Preventing Unnecessary
Foreclosures

Throughout the year, the FDIC remained at
the forefront of efforts to stem the sharp rise
in home foreclosures caused by unaffordable
m
­ ortgages and rising unemployment. In addition to advocating wider adoption of streamlined
and sustainable loan modifications, we required
failed-bank acquirers under loss-sharing agreements to modify qualifying at-risk mortgages by
cutting interest rates and, in some cases, deferring
principal. As 2009 ended, the FDIC worked to
expand the availability of principal write-downs
as the erosion of homeowner equity may increase
the likelihood of delinquencies and, in the case of
loss-sharing agreements, losses to the DIF.

Reviving Mortgage
Securitization

Mortgage securitization and the “originate
to distribute” model of mortgage lending played
leading roles in the buildup to the financial crisis.
Since the crisis, private securitization virtually
shut down as investors lost confidence in market practices that were insufficiently transparent
and ineffective in aligning their interests with
those of originators and underwriters. During
2009, the FDIC Board began considering new
standards for its existing “safe harbor” protections for securitizations by banks that are later
placed into receivership. These rules, still pending input from the public and scheduled to take
effect in 2010, will be designed to foster better
risk management by strengthening underwriting, providing better disclosure, and requiring

7

issuers to retain a financial interest in the securities while supporting profitable and sustainable
securitizations by insured banks and thrifts. The
goal is to improve industry standards in these
areas in order to avoid future losses to the DIF
and support a revival of mortgage securitization
on a sounder footing.

Protecting Consumers and
Expanding Access to Banking
Services

The FDIC has traditionally played a leading
role in shielding consumers from predatory practices and promoting access to mainstream financial services for all segments of the population.
We built on that tradition in 2009 by launching
www.economicinclusion.gov, a new information
portal with links to the FDIC’s many sources of
consumer information and our initiatives to reach
underserved communities. The web site provides
easy access to information on the FDIC’s Advisory Committee on Economic Inclusion, our
Alliance for Economic Inclusion, our Money
Smart financial literacy program, and the FDIC
National Survey of Unbanked and Underbanked
Households. This groundbreaking survey, conducted for us in 2009 by the U.S. Bureau of the
Census, revealed that one in four, or 30 million U.S. households, are either unbanked or
underbanked. We are certain that our new Economic Inclusion web site will take us one step
closer to our goal of bringing these unbanked
and underbanked populations into the financial
mainstream.

Reforming the Regulatory
Structure

In the wake of the financial crisis, Congress is
considering major legislation to overhaul financial
regulation. The FDIC testified numerous times
during the year on regulatory reform before committees in both the House and the Senate. Our
broad policy view is that Congress needs to help
restore market discipline by repudiating the doctrine that certain large, complex, and interconnected financial institutions are simply too big to
fail. Regulators need to have a clear mandate and
the necessary statutory authorities to close even
the largest banks and non-bank financial institutions when they get into trouble. We also need to
implement regulatory incentives to limit the size
and complexity of systemically important firms.
We support creating a new consumer protection authority for financial products and services
that sets consistent national standards for banks
and non-banks alike. Such an across-the-board
authority would eliminate regulatory gaps where
risks grew unchecked in the buildup to the current
crisis. We also support more stringent regulation
of derivatives markets and creation of a systemic
risk council to share data among regulators and
focus on macro-prudential risks to our financial
system. Finally, the regulatory community needs
to use the powers it already has to more effectively supervise financial institutions and markets
and limit the risky activities that undermined our
financial system.

Creating a More Effective
International Framework

To meet the challenges of the future and to
protect insured depositors, it is vitally important

8

FDIC 2009 Annual Report

that the FDIC continue to improve its capabilities to resolve internationally active banks and
to strengthen the international framework for
responding to financial crisis in cooperation
with other regulators both within the U.S. and
overseas. During 2009, the FDIC was at the forefront of efforts to learn from the lessons of the
financial turmoil by identifying and addressing
weaknesses in responses to banks that are active
across borders. The FDIC co-chaired the Basel
Committee on Banking Supervision’s Crossb
­ order Bank Resolution Group, which prepared a
report on needed reforms to allow for the orderly
liquidation of large, complex international banks.
These recommendations have formed an integral
part of the international effort by the G20 and
the Financial Stability Board to reform the international framework for regulation and resolution
of the largest financial firms. The FDIC continues to work closely with the Financial Stability
Board on these issues.

ful for the hard-working, dedicated, can-do men
and women of the FDIC for all they have done to
respond to the demands of the crisis and help put
the nation’s economy back on the road to recovery. No matter the pressures, they will never
waver in their commitment to excellence in the
service of the American people.
Sincerely,

Sheila C. Bair

The FDIC: An Enduring Symbol
of Confidence

During 2009, the FDIC was called upon to once
again carry out its unique mission as the nation’s
symbol of confidence in an economic crisis. We
successfully performed this mission by protecting
the insured deposits of the American public and
stabilizing the funding base of the industry during
a period of great economic turmoil.
The effects of the recession are likely to persist for some time, and, as a result, the FDIC
will continue to experience a heavy workload
and some unique policy challenges. But we are
prepared to meet these challenges and committed to seeing that our mission is carried out to
a successful conclusion. I am especially grate-



Message from the Chairman • Sheila C. Bair

9

This page intentionally left blank.

Message from the Chief Financial Officer • Steven O. App

are stewards are fairly presented. I applaud the
hard work and dedication of the FDIC staff.
At the conclusion of 2009 and moving forward
into 2010, the DIF balance remains negative,
although there were indications by the end of
the first quarter of 2010 that the condition of the
banking industry may be stabilizing. The DIF’s
2009 financial statements reflect the impact of
a difficult banking environment, in which 140
banks failed. This total exceeds all bank failures
between 1994 and 2008, and is the highest annual
number since 1992, when 179 failures occurred.

Financial Results for 2009

I am pleased to present the Federal Deposit
Insurance Corporation’s (FDIC) 2009 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 the eighteenth consecutive year, the U.S.
Government Accountability Office (GAO) issued
unqualified audit opinions for the two funds
administered by the Corporation: the Deposit
Insurance Fund (DIF) and the Federal Savings
and Loan Insurance Corporation (FSLIC) Resolution Fund (FRF). These unqualified audit
opinions validate our efforts to ensure that the
financial statements of the funds for which we



Message from the Chief Financial Officer • Steven O. App

The DIF’s comprehensive loss totaled $38.1
billion for 2009 compared to a comprehensive
loss of $35.1 billion for the previous year. As a
result, the DIF balance declined from $17.3 billion to negative $20.9 billion as of December 31,
2009. The year-over-year increase of $3.0 billion in comprehensive loss was primarily due
to a $15.9 billion increase in the provision for
insurance losses, a $4.0 billion increase in the
unrealized loss on U.S. Treasury (UST) investments, and a $1.4 billion decrease in the interest
earned on UST obligations, partially offset by
a $14.8 billion increase in assessment revenue
and a $3.1 billion increase in other revenue
(primarily from guarantee termination fees and
debt guarantee surcharges).
The provision for insurance losses was $57.7 billion in 2009. The total provision consists primarily
of the provision for future failures ($20.0 billion)
and the losses estimated at failure for the 140 resolutions occurring during 2009 ($35.6 billion).
Assessment revenue was $17.7 billion for 2009.
This is a $14.8 billion increase from 2008, and
is due to the collection of a $5.5 billion special

11

assessment in September 2009 and significantly
higher regular assessment revenue. Major factors
contributing to the increase in regular assessment revenue included changes to the risk-based
assessment regulations, ratings downgrades of
many institutions (which pushed them into higher assessment rate categories), the decline of the
one-time assessment credit, and a larger assessment base.
Although the DIF ended the year with a
negative $20.9 billion fund balance, the DIF’s
liquidity was significantly enhanced by prepaid
assessment inflows of $45.7 billion. Cash and
marketable securities stood at $66.0 billion at
year-end, including $6.4 billion in cash and
marketable securities related to the Temporary
Liquidity Guarantee Program (TLGP). Hence,
the DIF is well positioned to fund resolution
activity in 2010 and beyond. The prepaid assessments, while increasing DIF cash upon receipt,
did not initially affect the fund balance, since
the funds collected were initially recorded as an
offsetting liability; they are subsequently recognized quarterly as revenue when earned.  
In accordance with the requirements of the
Federal Managers’ Financial Integrity Act of
1982, the FDIC’s management conducted its
annual assessment and concluded that the system of internal controls, taken as a whole, complies with internal control standards prescribed
by GAO and provides reasonable assurance that
the related objectives are being met, with the
exception of a material weakness in internal
controls related to estimating losses to the DIF
from resolution transactions involving loss-share
agreements, which was identified by GAO during the course of the financial statement audit.
Separately, GAO determined that a significant

12

deficiency existed over information systems.
The FDIC believes that additional resources
added throughout 2009, control improvements
implemented during the fourth quarter of 2009,
and control enhancements to be completed
by the end of the second quarter of 2010, will
largely address GAO’s concerns in these areas.
The FDIC is confident about the comprehensiveness  of these control enhancements and does not
expect GAO to identify repeat findings for 2010.
We will continue to enhance our control environment throughout the year.
During 2010, we will keep working toward
achieving the Corporation’s strategic goals
and objectives. These include identifying and
addressing risks to the insurance funds, continuing work on U.S. government initiatives to
strengthen the financial system, and providing
Con­ ress, other regulatory agencies, insured
g
depository institutions, and the public with critical and timely information and analyses on the
financial condition of both the banking industry
and the FDIC-managed funds.
Sincerely,

Steven O. App

FDIC 2009 Annual Report

In Memoriam • L. William Seidman

We at the FDIC were saddened by the May 13, 2009, passing of L. William (Bill) Seidman, former
FDIC and Resolution Trust Corporation (RTC) Chairman. Mr. Seidman, the 14th Chairman of the
FDIC, had all the attributes of an American hero. He was a dynamic, bigger-than-life figure, yet a
plain-spoken, courageous leader with a sharp intellect.
In a life filled with achievement, Mr. Seidman distinguished himself the most during his years with
the FDIC. From 1985 to 1991, he led the Corporation through its most rigorous challenges since the
Great Depression. As FDIC Chairman, he faced a tidal wave of bank failures—more than 1,100 FDICinsured institutions in total during his tenure. As the crisis grew, Mr. Seidman strengthened the FDIC’s
hand by working with Congress and the press. Under his leadership, the FDIC met this rising tide with
a series of successful innovations.
Mr. Seidman’s skillful management of the banking crisis led Congress to deliver an additional challenge:
managing the savings and loan crisis. Having played an instrumental role in developing the legislation creating the RTC, Mr. Seidman became the RTC’s first Chairman when the agency was launched on August
9, 1989. Faced with two unfolding crises, one in the banking industry and the other in the savings and loan
industry, Mr. Seidman confronted both with courage and candor.
Mr. Seidman put his lifelong interest in education into action at the FDIC. As Chairman, he expanded training and educational programs, and the FDIC Board of Directors recognized his efforts by
dedicating a new building and campus at Virginia Square in his honor. The skills and leadership he
demonstrated during the savings and loan crisis inspire us all as we navigate today’s troubled waters.
The FDIC mourns the loss of a faithful public servant.



In Memoriam • L. William Seidman

13

I.  Management’s Discussion and Analysis

The Year in Review

The year 2009 was another extremely busy
one for the FDIC. In addition to the normal
course of business, the Corporation continued to
manage the Temporary Liquidity Guarantee Program (TLGP). Additional resources were needed
in response to the increased workload resulting
from resolving 140 bank failures. The FDIC continued its work on high-profile policy issues and
published numerous Notices of Proposed Rulemaking (NPRs) throughout the year, seeking
comment from the public. The Corporation also
continued to focus on a strong supervisory program. The FDIC continued expansion of financial
education programs with the release of a portable
audio version and a Hmong language version of
Money Smart. The FDIC also sponsored and cosponsored major conferences and participated in
local and global outreach initiatives.
Highlighted in this section are the Corporation’s 2009 accomplishments in each of its
three major business lines—Insurance, Supervision and Consumer Protection, and Receivership
Management—as well as its program support
areas.

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).

Temporary Liquidity Guarantee Program
On October 14, 2008, the FDIC announced
and implemented the TLGP. The TLGP con-

14

sists of two components: (1) the Debt Guarantee
Program (DGP)—an FDIC guarantee of certain
newly issued senior unsecured debt; and (2)
the Transaction Account Guarantee Program
(TAGP)—an FDIC guarantee in full of noninterest-bearing transaction accounts.
Under the DGP, the FDIC initially guaranteed in full, through maturity or June 30, 2012,
whichever came first, the senior unsecured debt
issued by a participating entity between October
14, 2008, and June 30, 2009. Banks, thrifts, bank
holding companies, and certain thrift holding
companies were eligible to participate. In May
2009, the FDIC Board finalized a rule that extended for four months the period during which participating entities could issue FDIC-guaranteed
debt. All participating insured depository institutions and those other participating entities that
had issued FDIC-guaranteed debt on or before
April 1, 2009, were permitted to participate in
the extension of the DGP without further application to the FDIC. Other participating entities
were permitted to issue debt during the extended
DGP upon receiving approval from the FDIC.
In conjunction with the extension of the DGP
issuance period, the expiration of the guarantee
period was pushed back to December 31, 2012.
As a result, approved participating entities could
issue FDIC-guaranteed debt through October 31,
2009, and the FDIC’s guarantee would expire on
the stated maturity date of the debt or December
31, 2012, whichever came first.
Participating entities could issue up to a maximum of 125 percent of the par value of the entity’s
senior unsecured debt that was outstanding as of
the close of business September 30, 2008, and
that was scheduled to mature on or before June
30, 2009. All debt with a term of 30 days or less

FDIC 2009 Annual Report

was excluded from the definition of senior unsecured debt. The FDIC charged a fee based on the
amount and term of the debt issued. Fees ranged
from 50 basis points on an annualized basis for
debt with a maturity of 180 days or less, increasing to 75 basis points on an annualized basis for
debt with a maturity of 181 to 364 days and 100
basis points on an annualized basis for debt with
maturities of 365 days or greater. In conjunction
with the program extension in 2009, the FDIC
assessed an additional surcharge on debt with a
maturity of one year or greater issued after April
1, 2009. Unlike the other TLGP fees, which were
reserved for possible TLGP losses and not generally available for DIF purposes, the amount
of any surcharge collected in connection with
the extended DGP was to be deposited into the
DIF and used by the FDIC when calculating the
reserve ratio of the Fund. The surcharge varied
depending on the type of institution issuing the
debt with insured depository institutions paying
the lowest fees.
The TAGP initially guaranteed in full all
domestic noninterest-bearing transaction deposits held at participating banks and thrifts through
December 31, 2009. This deadline was later
extended through December 31, 2010. The guarantee also covered negotiable order of withdrawal
(NOW) accounts at participating institutions—
provided the institution committed to maintain
interest rates on the accounts of no more than
0.50 percent for the duration of the program—and
Interest on Lawyers Trust Accounts (IOLTAs)
and functional equivalents. Participating institutions were initially assessed a 10 basis point
surcharge on the portion of covered accounts
that were not otherwise insured. The fees for the
TAGP were increased for the extension to either

I.  Management’s Discussion and Analysis



15 basis points, 20 basis points, or 25 basis points
depending on the institution’s deposit insurance
assessment category.

Program Statistics
Institutions were initially required to elect
whether to participate in one or both of the programs. More than half of the over 14,000 eligible
entities elected to opt-in to the DGP, while over
7,100 banks and thrifts, or 86 percent of FDICinsured institutions, opted into the TAGP. Most
of the institutions that opted out of the DGP had
less than $1 billion in assets and issued no appreciable amount of senior unsecured debt.
During its existence, the DGP guaranteed
over $618 billion in debt issued by 120 entities.
At its peak, the DGP guaranteed almost $350
billion of debt outstanding. The amount of debt
issuance declined as markets improved throughout 2009 and, as the chart shows (see next page),
the amount of debt outstanding correspondingly
decreased as shorter-term debt matured without
being rolled over. Near the program’s end on
October 31, 2009, however, the volume of debt
outstanding increased slightly. As of December
31, 2009, the total amount of FDIC-guaranteed
debt outstanding was $309 billion.
Under the TAGP, the FDIC guaranteed an
estimated $834 billion of deposits in noninterestbearing transaction accounts as of December
31, 2009, that would not have otherwise been
insured. More than 5,800 FDIC-insured institutions reported having noninterest-bearing transaction accounts over $250,000 in value.
The DGP collected approximately $10 billion
in fees under the program. As of December 31,
2009, one participating entity (a holding company) that had issued guaranteed debt had declared

15

Average Outstanding TLGP Debt
Dollars in Billions
$400

350

300

250

200

150

100

50

0
Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

bankruptcy and defaulted on its debt. Subsequently, a claim for payment was filed and approved.
In early 2010, the FDIC paid off the entire principal balance, including two quarterly interest
payments. Very few losses are expected on the
remaining outstanding debt through the end of
the DGP in 2012. As of December 31, 2009, the
FDIC had collected $639 million in fees under the
TAGP.1 Estimated TAGP losses on failures as of

1

16

December 31, 2009, totaled $1.765 billion. Overall, TLGP fees are expected to exceed the losses
from the program. At the conclusion of the program, any remaining TLGP funds will be added
to the DIF balance. Under the conditions of the
systemic risk determination, if fees are insufficient to cover costs of the program, the difference
would be made up through a special assessment.

This figure reflects fees assessed through September 30, 2009, and collected as of December 31, 2009.

FDIC 2009 Annual Report

Debt Guarantee Phase-Out and
Emergency Guarantee Facility
The DGP enabled financial institutions to
meet their financing needs during a period of
system-wide turmoil. The DGP reopened the
short- and medium-term debt markets for banks
and other eligible institutions by allowing them
to issue an array of debt instruments at a time
when banks were unable to roll over this debt
at reasonable rates and terms. By mid-2009, it
appeared that the financial markets were stabilizing. In September, the FDIC Board authorized an
NPR proposing a phase out of the DGP. Specifically, the NPR asked whether the FDIC should
close the basic DGP as scheduled but establish
a limited six-month emergency guarantee facility to address the possibility that a participating
DGP entity may be unable to replace its maturing senior unsecured debt with non-guaranteed
debt as a result of market disruptions or other
circumstances beyond the entity’s control. Few
comments were received on the proposal and
the FDIC Board voted on October 20, 2009, to
approve a final rule ending the DGP as of October 31, 2009, with only the emergency guarantee facility continuing on a case-by-case basis
through April 30, 2010. As its name implies,
the FDIC always intended the TLGP to be
temporary.

Transaction Account Guarantee Program
Phase-Out
The TAGP was designed to eliminate potentially disruptive shifts in deposit funding and
thus preserve bank lending capacity. The program proved effective. However, because bank
failures continued to grow during 2009, the
FDIC remained concerned that terminating the

I.  Management’s Discussion and Analysis



TAGP too quickly could unnerve uninsured
depositors and ultimately reverse the progress
made in restoring credit markets to more normal
conditions. To help transition institutions out of
the TAGP, therefore, the FDIC Board, on August
26, 2009, approved a final rule that extended the
TAGP for an additional six months, through June
30, 2010.
The final rule established higher assessment
fees for institutions participating in the extension
period. As mentioned earlier, fees were revised
from a flat-rate 10 basis points to a risk-based
system with an assessment rate of either 15, 20,
or 25 basis points depending on the institution’s
deposit insurance assessment category. The final
rule also provided an opportunity for participating entities to opt out of the TAGP extension by
November 2, 2009. Over 6,400 institutions (or 93
percent of institutions participating at year-end)
elected to continue in the TAGP.

State of the Deposit Insurance Fund and
Changes in Assessment Rates
Deposit Insurance Fund (DIF) losses increased
significantly during 2009, resulting in a negative
fund balance as of September 30, 2009. For the
year, continued and anticipated bank failures
resulted in a decline in the reserve ratio to negative 0.39 percent as of December 31, 2009, down
from 0.36 percent at the beginning of the year.

Changes in the Assessment Rates
The decline in the reserve ratio occurred
despite an increase in assessment rates overall
and several adjustments made to the risk-based
assessment system during the year. In the first
quarter, assessment rates increased across-theboard by 7 basis points. Rates for the first quarter

17

of 2009 ranged from 12 to 50 basis points. Institutions in the lowest risk category—Risk Category I—paid between 12 and 14 basis points.
On February 27, 2009, the FDIC Board issued
a rule incorporating adjustments to the riskbased assessment system to improve how the
system differentiates for risk. Effective April
1, 2009, the range of rates widened overall and
within Risk Category I. Initial base assessment
rates within Risk Category I now range from 12
to 16 basis points on an annual basis, while the
initial base rates for risk categories II, III, and IV
are 22, 32, and 45 basis points, respectively. An
institution’s total base assessment rate may be less
than or greater than its initial base rate as a result
of additional adjustments for secured liabilities
(increase), brokered deposits (increase), and/or
unsecured debt and Tier I capital (decrease). For
Risk Category I, total base assessment rates may
be as low as 7 basis points or as high as 24 basis
points. A Risk Category IV institution could have
a total base assessment rate as high as 77.5 basis
points. The initial base assessment rates, range
of possible rate adjustments, and minimum and
maximum total base rates, as of year-end, across
all risk categories are as follows:
Risk
Category
I

Setting the Designated Reserve Ratio
At a meeting on December 15, 2009, pursuant
to provisions in the Federal Deposit Insurance
Act that require the FDIC Board to set the Designated Reserve Ratio (DRR) for the DIF annually,
the FDIC Board set the 2010 DRR at 1.25 percent
of estimated insured deposits. The 2010 DRR of
1.25 percent is unchanged from the 2009 DRR.

Amendments to the Restoration Plan
The Federal Deposit Insurance Reform Act of
2005 requires the FDIC Board to adopt a restoration plan when the DIF reserve ratio falls below
1.15 percent or is expected to within six months.
Given the steady decline in the reserve ratio during 2008 and projections for future bank failures, the FDIC Board adopted a Restoration Plan
in October 2008 to restore the reserve ratio to at
least 1.15 percent within five years. The continued decline in the DIF balance throughout 2009,
however, necessitated several amendments to the
Restoration Plan.
On February 27, 2009, the FDIC Board first
amended the Restoration Plan by extending the
time frame for recapitalization of the DIF from
five years to seven years due to extraordinary
Risk
Category
II

Risk
Category
III

Risk
Category
IV

Initial Base Assessment Rate

12 – 16

22

32

45

Unsecured Debt Adjustment

-5 – 0

-5 – 0

-5 – 0

-5 – 0

Secured Liability Adjustment

0–8

0 – 11

0 – 16

0 – 22.5

0 – 10

0 – 10

0 – 10

7 – 24

17 – 43

27 – 58

40 – 77.5

Brokered Deposit Adjustment
Total Base Assessment Rate

18

FDIC 2009 Annual Report

circumstances. To meet this time frame and
help maintain public confidence in the banking system, the FDIC Board adopted an interim
rule with a request for comment that would have
imposed an emergency special assessment on
the industry of 20 basis points on the assessment
base as of June 30, 2009. The interim rule would
also have permitted the FDIC Board to impose
an emergency special assessment after June 30,
2009, of up to 10 basis points on the assessment
base, if necessary to maintain public confidence
in the federal deposit insurance system.
In response to comments, on May 22, 2009,
the FDIC Board voted to levy a special assessment of 5 basis points on each FDIC-insured
depository institution’s assets minus its Tier 1
capital, as of June 30, 2009. The special assessment was collected on September 30, 2009. The
assessment was capped at 10 basis points times
an institution’s assessment base so that no institution paid an amount higher than it would have
paid under the interim rule. The FDIC Board also
voted to allow additional special assessments in
2009 if conditions affecting the DIF warranted.
In May 2009, Congress amended the statutory
provision governing the establishment and implementation of a Restoration Plan giving the FDIC
eight years in which to bring the reserve ratio
back to 1.15 percent, absent extraordinary circumstances. As a result, on September 29, 2009, the
FDIC again adopted amendments to the Amended
R
­ estoration Plan that allowed the DIF to return to
a reserve ratio of 1.15 percent within eight years.
Concurrently, the FDIC adopted a 3 basis point
increase in annual risk-based assessment rates
effective January 1, 2011. The FDIC Board also
voted not to impose any further special assessments on the industry for the remainder of 2009.

I.  Management’s Discussion and Analysis



Actions to Meet Projected Liquidity Needs
While the Amended Restoration Plan and
higher assessment rates addressed the need to
return the reserve ratio to 1.15 percent, the FDIC
also had to consider its need for cash to pay for
projected near-term failures. In June 2008, before
the number of bank and thrift failures began to
rise significantly and the crisis worsened, total
assets held by the DIF were approximately $55
billion, consisting almost entirely of cash and
marketable securities. As the crisis continued
into 2009, the liquid assets of the DIF were used
to protect depositors of failed institutions. As of
September 30, 2009, cash and marketable securities had fallen to approximately $23 billion and
were projected to decline further as the pace of
resolutions continued to put downward pressure
on cash balances. The FDIC faced an immediate need for more liquid assets to fund near-term
failures.
To meet the projected liquidity needs for nearterm failures, the FDIC proposed a rulemaking
requiring insured institutions to prepay their
estimated quarterly risk-based assessments for
the fourth quarter of 2009, and for all of 2010,
2011, and 2012. The prepaid assessment for these
periods would be collected on December 30,
2009, along with each institution’s regular quarterly risk-based deposit insurance assessment for
the third quarter of 2009.
In order to calculate an institution’s assessments for the fourth quarter of 2009, and for all
of 2010, 2011, and 2012, the institution’s total
base assessment rate in effect on September
30, 2009, would be used. That rate would be
increased by an annualized 3 basis points for
2011 and 2012. Again, for purposes of calculating the amount that an institution prepaid on

19

December 30, 2009, an institution’s third quarter
2009 assessment base would be increased quarterly at a 5 percent annual growth rate through
the end of 2012. The proposal for the prepaid
assessment had certain attributes that made it
more attractive than imposing another special
assessment on the industry. Chief among these
was that the prepayment would not affect bank
capital and earnings at a time when these were
already under pressure. By implementing a prepaid assessment, banks would be able to book the
prepayment as an asset with a zero percent risk
weight. This asset would then be drawn down as
the bank’s regular quarterly risk-based assessment was levied. Additionally, those banks that
were likely to be severely adversely affected by
the prepayment could be exempted from the prepayment, although not from the actual quarterly
risk-based assessment.
The comments received by the FDIC were
mostly favorable—generally supporting the
notion that the industry should fund its own
needs to the extent possible. In November, the
Board finalized this rulemaking making one
substantive change. Any prepaid assessment not
exhausted after collection of the amount due on
June 30, 2013—moved up from December 31,
2014—will be returned to the institution at that
time. Moreover, if conditions improve before that
time, the FDIC Board may vote to return funds
to the industry sooner. The FDIC collected $45.7
billion from the prepaid assessments—enough
to fund its projected liquidity needs.

Center for Financial Research
The Center for Financial Research (CFR) was
founded by the Corporation in 2004 to encourage and support innovative research on topics

20

that are important to the FDIC’s role as deposit
insurer and bank supervisor. During 2009, the
CFR co-sponsored two major research conferences, a workshop, and a symposium.
The CFR organized and sponsored the 19th
Annual Derivatives Securities and Risk Management Conference jointly with Cornell University’s Johnson Graduate School of Management
and the University of Houston’s Bauer College
of Business. The conference was held in April
2009 at the Seidman Center and attracted over
100 researchers from around the world. Conference presentations included term structure modeling, price dynamics, fixed income, and options
pricing and credit risk.
The CFR also organized and sponsored the
9th Annual Bank Research Conference jointly with The Journal for Financial Services
Research (JFSR) in September 2009. The conference theme, Governance and Compensation
in the Financial Services Industry, included 16
paper presentations and was attended by over
120 participants. Experts discussed a range of
banking and financial sector issues—including
corporate governance, bank lending behavior,
incentive structures, household finance, and the
subprime credit crisis.
The CFR held a one-day symposium on mortgage default risk which was jointly organized
with the Federal Housing Finance Agency. The
symposium attracted more than 200 industry
experts, academics, and policy makers. Discussion topics included collateral and appraisal
issues, underwriting standards, vendor model
developments, subprime and other alternative
mortgage product default modeling issues, as
well as analysis of various aspects of ongoing
loan modification programs.

FDIC 2009 Annual Report

The CFR hosted its annual Fall Workshop in
December, which included three days of research
paper presentations and discussions by FDIC
staff. The workshop was attended by about 30
external academics and 30 FDIC staff.
In addition to conferences, workshops and
symposia, 11 CFR working papers were completed and made public on topics including the
costs associated with FDIC bank resolutions, the
performance of the Basel II Advanced Internal
Model Approach for setting regulatory capital
requirements, new econometric methods to handle unit roots, executive compensation in bank
holding companies, bank failures and the cost of
systemic risk, the political economy associated
with the recent bailout, and the role of speculation in creating volatility in the oil markets.

International Outreach
The FDIC demonstrated its leadership role
in promoting sound deposit insurance, bank
supervision, and bank resolution practices by
providing technical guidance, training, consulting services, and information to international
governmental banking and deposit insurance
organizations in many areas around the world.
The global crisis that began in the summer of
2007 and intensified in 2008 led many international authorities, including deposit insurers, to take a series of unprecedented actions to
restore public confidence and financial stability. In response to this crisis, the International
Association of Deposit Insurers (IADI), under
the leadership of its President—FDIC’s Vice
Chairman Martin Gruenberg—and the Basel
Committee on Banking Supervision (BCBS)
jointly led an effort to establish an agreed set
of deposit insurance core principles. The col-

I.  Management’s Discussion and Analysis



laborative effort culminated in the issuance of
the Core Principles for Effective Deposit Insurance Systems in June 2009. This is a significant
milestone for improving deposit insurance systems worldwide. The Core Principles were subsequently welcomed by the Financial Stability
Board (FSB) (formerly the Financial Stability
Forum) at its inaugural meeting in June.
The Financial Stability Institute (FSI) and the
BCBS partnered with IADI during IADI’s 8th
Annual Conference on September 23–24, 2009,
at the Bank for International Settlements (BIS)
in Basel, Switzerland, to present the Core Principles. More than 200 individuals representing
over 100 organizations from more than 80 jurisdictions attended the conference. Participants
included, among others, deposit insurers, financial supervisors, and central bankers. The conference was organized to further promote the Core
Principles and contribute to their implementation
and further development. The event featured presentations by internationally recognized experts
Jaime Caruana, General Manager of the BIS;
Nout Wellink, Chairman of the BCBS and President, De Nederlandsche Bank; Josef Tosovsky,
Chairman of the FSI; William White, Chairman
of the Economic and Development Review Committee, Organization for Economic Co-operation
and Development; and David Hoelscher, ­ ssistant
A
Director, Monetary and Capital Markets Department, International Monetary Fund.
The FDIC’s leadership in developing and
implementing training seminars in partnership
with IADI, the European Forum of Deposit
Insurers (EFDI), and the Association of Supervisors of Banks of the Americas (ASBA) continued in 2009. The FDIC hosted and developed the
core curriculum for IADI’s executive training

21

an interim report was prepared in
December 2008. Subsequent to the
interim report, the Basel Committee asked the CBRG to expand its
analysis to review the developments
and processes of crisis management
and resolutions during the financial
crisis with specific reference to case
studies of significant actions by
IADI members and FDIC staff at the executive training conference.
relevant authorities, which included the failures of Lehman Brothseminar on “Claims Management: Reimburseers, Dexia, ­ ortis, and the Icelandic banks. In
F
ment of Insured Depositors.” The FDIC coresponse to this direction and building on this
sponsored with EFDI a conference on “Deposit
initial stock take, the CBRG provided the Basel
Insurance Before and After a Systemic Crisis.”
Committee with a final report and recommenThe FDIC also delivered training in supervising
dations to identify concrete and practical steps
operational risk under ASBA’s training program
to improve cross-border crisis management and
in Latin America.
resolutions. The report and recommendations
The FDIC has also provided leadership
have been coordinated with and seek to complethrough its co-chairing of the BCBS’s Crossment the work of the FSB by providing practicaborder Bank Resolution Group (CBRG), which
ble detailed approaches to implement the FSB’s
published its final report and recommendations
Principles for Cross-­ order Cooperation on
b
in March 2010. The CBRG was established in
Crisis Management of April 2, 2009.
December 2007 under a mandate to analyze
Throughout 2009, the FDIC has provided supexisting resolution policies, allocation of responport to the FSB through its work on the Crosssibilities and legal frameworks of relevant counborder Crisis Management Working Group
tries as a foundation to a better understanding of
chaired by Paul Tucker. This group has sought to
the potential impediments and possible improveimplement the high-level Principles for Crossments to cooperation in the resolution of crossborder Cooperation on Crisis Management of
border banks. During the first half of 2008, the
April 2, 2009. These principles include a comCBRG collected detailed descriptions of national
mitment to cooperate by the relevant authorilaws and policies on the management and resoties, including supervisory agencies, central
lution of cross-border banks using an extensive
banks and finance ministries, both in making
questionnaire completed by countries representadvanced preparations for dealing with financial
ed on the Group. The CBRG used the questioncrises and in managing them. They also commit
naire responses to identify the most significant
national authorities from relevant countries to
potential impediments to the effective managemeet regularly alongside core colleges to conment and resolution of cross-border banks and
sider together the specific issues and barriers

22

FDIC 2009 Annual Report

to coordinate action that may arise in handling
severe stress at specific firms, to share information where necessary and possible, and to ensure
that firms develop adequate contingency plans.
The FSB principles cover practical and strategic
ex ante preparations and set out expectations
for how authorities will relate to one another
in a crisis. They draw upon recent and earlier
experiences of dealing with cross-border firms
in crisis, including the 2001 G10 Joint Taskforce
Report on the Winding Down of Large and Complex Financial Institutions, and the 2008 European Union Memorandum of Understanding on
Financial Stability. Currently this group is preparing detailed analysis of obstacles to recovery
and resolution planning, which will be presented
to the G20 in November 2010.
June marked the two-year anniversary of the
secondment program agreed upon between the
Financial Services Volunteer Corps (FSVC) and
the FDIC to place one or more FDIC staff members full-time in FSVC’s Washington, DC, office.
The projects in 2009 included an in-depth review
of bank supervisory practices at the Bank of Albania; a series of commentaries and consultations
to assist the Central Bank of Egypt in creating
an appropriate and effective approach in the new
area of retail bank supervision; adapting FDIC
courses for the first time to a format streamlined
and relevant for examiners at the Reserve Bank
of Malawi, the Banque d’Algerie, and the Central
Bank of Egypt; and designing and participating in
FSVC’s first-ever training and consultations with
the Central Bank of Libya and the Central Bank
of Iraq on essential bank supervision topics.
The FDIC deepened its key relationship with
China by participating in the fourth annual U.S.China Banking Supervisor’s Bilateral Conference

I.  Management’s Discussion and Analysis



that was held at the Federal Reserve in December. The conference addressed approaches and
policies with respect to macroprudential supervision; cross-border supervisory cooperation;
regulatory reform; and consumer protection. The
FDIC has also strengthened its relationship with
China by signing an Appendix to the Supervisory Memorandum of Understanding between the
FDIC and the China Banking Regulatory Commission on May 26, 2010. The Appendix covers
issues relating cross-border contingency planning and the resolution of troubled institutions
within China and the United States.
Recognizing India’s rising economic role, the
FDIC participated in the U.S.-India Finance and
Economic Forum hosted by the Indian Ministry
of Finance in December in New Delhi, India.
The meeting brought together all financial sector regulators from the two countries to discuss
a variety of topics, including deposit insurance,
banking sector developments, capital and commodities markets, insurance, and financial education. The FDIC shared its responses during
the current economic crisis and its view on the
value of deposit insurance in a crisis, as well as
its efforts in financial education and economic
inclusion.
During 2009, FDIC staff shared its expertise
with a wide range of individuals from developing and emerging economies as well as from
developed economies, with the goal of enhancing
capacity in deposit insurance, supervision, and
resolutions. During the year, the FDIC hosted 67
individual visits with a total of more than 450 foreign visitors from over 30 countries. The FDIC’s
response to the financial crisis, U.S. regulatory
restructuring options, and resolution methods
were frequently discussed during these visits. In

23

addition, two FDIC staff members provided technical assistance through the FSVC on 15 missions
covering 12 countries. In November, FDIC staff
provided training to 32 Latin American bank
supervisors in the supervision of operational risk
in Panama as part of ASBA’s continental training program. Also, through the FDIC’s Corporate University Examiner training program and
the State Department’s Anti-­ oney Laundering/
M
Counter-Financing of Terrorism training program, the FDIC provided training to 146 students
from 20 countries. Additionally, the FDIC was
able to provide deposit insurance claims management training through the IADI Executive Training Program to 128 representatives from over 50
countries. In total, these efforts resulted in the
FDIC’s engagement with over 560 representatives
from 56 emerging or developing markets.

Complex Financial Institution Program
The FDIC’s Complex Financial Institution
(CFI) Program addresses the unique challenges
associated with the supervision, insurance, and
potential resolution of large/complex insured
institutions. The FDIC’s ability to analyze and
respond to risks in these institutions is of particular importance, as they make up a significant
share of the banking industry’s assets. The program provides for a consistent approach to largebank supervision nationwide, allows for analysis
of financial institution risks on an individual and
comparative basis, and enables a quick response
to risks identified at large institutions. The program’s objectives are achieved through extensive
cooperation with the FDIC regional offices, other
FDIC divisions and offices, and the other bank
and thrift regulators. Adverse economic and
market conditions throughout 2009 continued

24

to impact large institutions. Given the increased
risk levels, the FDIC has expanded its presence
at the nation’s largest and most complex institutions through additional and enhanced on-site
and off-site monitoring.
The program increased its on-site presence
at the eight large complex institutions, as designated by the FDIC Board of Directors, to assess
risk, monitor liquidity, and participate in targeted reviews with the primary federal regulators.
Standardized liquidity, and reporting processes
are also in place at select large and problem institutions. Off-site monitoring has intensified with
weekly reporting on high-risk banks with total
assets of $5 billion or greater.
The Large Insured Depository Institution
(LIDI) Program remains the primary instrument for off-site monitoring of insured depository institutions with $10 billion or more in total
assets, or under this threshold at regional discretion. The LIDI Program continues to provide a
comprehensive process to standardize data capture and reporting through nationwide comprehensive quantitative and qualitative risk analysis
of large and complex institutions. As of December 31, 2009, the LIDI Program encompassed
109 institutions with total assets of over $10 trillion. In order to enhance large bank oversight,
the LIDI Program was refined to better quantify
risk to the insurance fund in all large banks. This
was accomplished, in collaboration with other
divisions and offices, through the implementation of the LIDI Scorecard. The LIDI Scorecard
is designed to weigh key risk areas and provide a
risk ranking and measurement system that compares insured institutions on the basis of both
the probability of failure and exposure to loss
at failure. The comprehensive LIDI Program is

FDIC 2009 Annual Report

essential to effective large bank supervision by
capturing information on the risks and utilizing that information to best deploy resources to
high-risk areas, determine the need for supervisory action, and support insurance assessments
and resolution planning.

Supervision and Consumer
Protection

Supervision and consumer protection are
cornerstones of the FDIC’s efforts to ensure the
stability of and public confidence in the nation’s
financial system. The FDIC’s supervision program promotes the safety and soundness of
FDIC-­ upervised insured depository institus

tions, 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, 2009, the Corporation was
the primary federal regulator for 4,943 FDICi
­ nsured, state-chartered institutions that were not
members of the Federal Reserve System (generally referred to as “state non-member” institutions). Through safety and soundness, consumer
compliance and Community Reinvestment Act
(CRA), and other specialty examinations, the
FDIC assesses an institution’s operating con­
dition, management practices and policies, and

FDIC Examinations 2007–2009
2009

2008

2007

2,398

2,225

2,039

203

186

213

Savings Associations

1

1

3

National Banks

0

2

0

Risk Management (Safety and Soundness):
State Non-member Banks
Savings Banks

State Member Banks
Subtotal—Safety and Soundness Examinations

2

2

3

2,604

2,416

2,258

1,435

1,509

1,241

539

313

528

CRA/Compliance Examinations:
Compliance/Community Reinvestment Act
Compliance-only
CRA-only

7

Subtotal—CRA/Compliance Examinations

4

4

1,981

1,826

1,773

Specialty Examinations:
Trust Departments
Data Processing Facilities
Subtotal—Specialty Examinations

451

418

2,577

2,523



3,273

3,028

2,941

7,858

Total

I.  Management’s Discussion and Analysis

493
2,780

7,270

6,972

25

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, 2009, the Corporation
conducted 2,604 statutorily required risk management (safety and soundness) examinations,
including a review of Bank Secrecy Act compliance, and all required follow-up examinations for FDIC-supervised problem institutions
within prescribed time frames. The FDIC also
conducted 1,981 CRA/compliance examinations
(1,435 joint CRA/compliance ­ xaminations, 539
e
compliance-only examinations,2 and 7 CRA-only
examinations) and 3,273 specialty examinations.
All CRA/compliance examinations were also
conducted within the time frames established by
FDIC policy, including required follow-up examinations of problem institutions.3 The accompanying table on page 25 compares the number
of examinations, by type, conducted from 2007
through 2009.

Risk Management
As of December 31, 2009, there were 702
insured institutions with total assets of $402.8
billion designated as problem institutions for
safety and soundness purposes (defined as those
institutions having a composite CAMELS4 rat-

ing of “4” or “5”), compared to the 252 problem
institutions with total assets of $159.4 billion
on December 31, 2008. This constituted a 179
percent increase in the number of problem institutions and a 153 percent increase in problem
institution assets. In 2009, 179 institutions with
aggregate assets of $1.3 trillion were removed
from the list of problem financial institutions,
while 629 institutions with aggregate assets of
$1.6 trillion were added to the list. Eighty-three
institutions are in process of being downgraded
to problem status, reporting total assets of $32.2
billion. Colonial Bank, Montgomery, Alabama,
was the largest failure in 2009, with $25.0 billion
in assets (and was added to the list and resolved
in 2009). The FDIC is the primary federal regulator for 473 of the 702 problem institutions, with
total assets of $242.2 billion and $402.8 billion
respectively.
During 2009, the Corporation issued the following formal and informal corrective actions
to address safety and soundness concerns: 282
Cease and Desist Orders, 3 Temporary Cease and
Desist Orders, and 425 Memoranda of Understanding. Of these actions, 9 Cease and Desist
Orders and 22 Memoranda of Understanding
were issued based, in part, on apparent violations
of the Bank Secrecy Act.

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

2

The 2009 annual performance goal for compliance examinations on “3-, 4-, and 5-rated” institutions was not fully met. This annual
performance goal and the indicator have been revised for 2010 to be consistent with the goal established in years prior to 2009. The 2009
performance target was not achieved because of the inadvertent inclusion of “3-rated” institutions. The FDIC does not typically issue formal
enforcement actions for “3-rated” institutions. The 2009 performance target was fully met with respect to “4- and 5-rated” institutions.

3

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

26

FDIC 2009 Annual Report

As of December 31, 2009, 327 FDIC-supervised institutions were assigned a “4” rating for
safety and soundness, and 146 institutions were
assigned a “5” rating. Of the “4-rated” institutions, 297 were examined or had examinations
in process as of December 31, 2009, and formal
or informal enforcement actions are in process or
had been finalized to address the FDIC’s examination findings. Further, 131 “5-rated” institutions were examined or had examinations in
process as of December 31, 2009.
Compliance
As of December 31, 2009, 34 FDIC-supervised
institutions were assigned or in process of being
assigned a “4” rating and one institution was
assigned a “5” rating for compliance. In total,
18 of the “4-rated” and the one “5-rated” institutions were examined in 2009; the remaining 16
were examined prior to 2009 and involved either
appeals or referrals to other agencies. Of these
35 institutions, 1 is under informal enforcement
action, 21 are under Cease and Desist Orders and
13 are in process of enforcement actions.
During 2009, the Corporation issued the following formal and informal corrective actions to
address Compliance concerns: 18 Cease and Desist
Orders and 50 Memoranda of Understanding.

Restoring and Maintaining Public
Confidence and Stability in the
Financial System
The FDIC is participating with other regulators, Congress, banks, and other stakeholders in
multiple new and changing initiatives, each with
its unique challenges and risks, to address the
current crises. The initiatives are very large in
scale, and the FDIC’s corresponding governance

I.  Management’s Discussion and Analysis



and supervisory controls, in many cases, are still
under development at year-end. Among the initiatives are the following:
•	 Processing applications for those FDICs
­ upervised institutions applying to the
Department of the Treasury’s Troubled Asset
Relief Program (TARP) Capital Purchase
Program (CPP). This program authorizes
the Treasury to purchase up to $250 billion
of senior preferred shares from qualifying
insured depository institutions. As of September 30, 2009, the FDIC had received over
1,700 applications requesting nearly $35 billion in TARP funding.
•	 As of December 31, 2009, the FDIC’s processing of CPP requests was 100 percent
completed. The Department of Treasury
completed the final disbursements under the
CPP program on December 31, 2009.
•	 Issuing a memorandum on February 10,
2009, to provide examiners with guidance
on reviewing compliance with CPP program
requirements. Examiners have incorporated
these procedures into their on-site reviews of
institutions participating in the CPP. Examination procedures for institutions participating in the TLGP were issued on September
24, 2009.

Joint Examination Teams
The FDIC used joint compliance/risk management examination teams (JETs) to assess risks
associated with new, nontraditional, and/or highrisk products being offered by FDIC-supervised
institutions. The JET approach recognizes that
to fully understand the potential risks inherent
in certain products and services, the expertise of
both compliance and risk management ­ xaminers
e

27

is required. The JET approach has three primary
objectives:
•	 To enhance the effectiveness of the FDIC’s
supervisory examinations in unique
situations;
•	 To leverage the skills of examiners who have
experience with emerging and alternative
loan and deposit products; and
•	 To ensure that similar supervisory issues
identified in different areas of the country
are addressed consistently.
In 2009, the FDIC used JETs within institutions involved in significant subprime or nontraditional mortgage activities; institutions
affiliated with or utilizing third parties to conduct significant consumer lending activities,
especially in the credit card area; and institutions
for which the FDIC has received a high volume
of consumer complaints or complaints with serious allegations of improper conduct by banks.

Bank Secrecy Act/Anti-Money Laundering
The FDIC pursued a number of Bank Secrecy Act (BSA), Counter-Financing of Terrorism
(CFT) and Anti-Money Laundering (AML) initiatives in 2009.
The FDIC conducted three training sessions
in 2009 for 57 central bank representatives from
Bangladesh, Egypt, Ghana, Indonesia, Jordan,
Kuwait, Mali, Nigeria, Pakistan, Saudi Arabia,
Thailand, United Arab Emirates, and Yemen.
The training focused on AML/CFT controls, the
AML examination process, customer due diligence, suspicious activity monitoring, and foreign correspondent banking. The sessions also
included presentations from the Federal Bureau
of Investigation on combating terrorist financ-

28

ing, and the Financial Crimes Enforcement Network on the role of financial intelligence units in
detecting and investigating illegal activities.
Additionally, the FDIC hosted 29 representatives from the Central Bank of Russia, sponsored by the Financial Services Volunteer Corps.
Sessions included discussion of AML topics, as
well as supervisory examination processes and
interaction with the financial intelligence unit.
Separately, the FDIC met with five Russian and
three  Kazakhstani foreign officials as a part of
the U.S. Department of State’s International Visitor Leadership Program to discuss the FDIC’s
AML Supervisory Program.

Minority Depository Institution Activities
The preservation of Minority Depository
Institutions (MDIs) remains a high priority for
the FDIC. In 2009, the FDIC continued to seek
ways for improving communication and interaction with MDIs, and responding to their concerns. Technical assistance was provided to 51
MDIs in a variety of different areas including,
but not limited to, the following:
•	 Deposit insurance assessments
•	 Proper use of interest reserves
•	 Filing branch and merger applications
•	 Complying with Part 365—Real Estate
Lending Standards
•	 Preparing Call Reports
•	 Performing due diligence for loan
participations
•	 Monitoring CRE concentrations
•	 Reducing adversely classified assets
•	 Stress testing
•	 Identifying and monitoring reputation risk
•	 Maintaining adequate liquidity
•	 Risks related to the use of brokered deposits

FDIC 2009 Annual Report

•	
•	
•	
•	

Compliance issues
Community Reinvestment Act
Procedures for filing regulatory appeals
Criteria for assigning CAMELS ratings

The FDIC also continued to offer the benefit
of having examiners return to FDIC-supervised
MDIs from 90 to 120 days after examinations, to
assist management in understanding and implementing examination recommendations and to
discuss other issues of interest. Seven MDIs took
advantage of this initiative in 2009. Also, the
FDIC held six regional outreach training efforts
and educational programs to MDIs, three of
which are discussed below.
In February 2009, the FDIC held a conference
call to discuss various facets of the proposed
changes to the insurance assessment criteria,
including (a) the removal of statutory constraints
on the FDIC’s ability to charge institutions for
deposit insurance under the Federal Deposit
Insurance Reform Act of 2005, (b) the temporary
increase in basic deposit insurance coverage from
$100,000 to $250,000 per depositor under the
Emergency Economic Stabilization Act of 2008,
and (c) the insurance assessments for financial
institutions based on their risk category. There
was also a discussion about the criteria for participating in the Troubled Asset Relief Program
(TARP). Seventy-eight bankers participated on
the conference call.
The FDIC hosted the fourth annual MDI
National Conference in Chicago, Illinois, from
July 8-10, 2009. The conference theme was “A
Bridge to Community Stabilization,” and over
220 bankers from MDIs attended. The breakout
sessions focused on topics of interest to bank
management, including commercial real estate

I.  Management’s Discussion and Analysis



lending, liquidity and funding, mortgage foreclosure prevention programs, and accounting issues.
The FDIC held banker roundtables and/or
conference calls with MDIs in their geographic regions. Topics of discussion at roundtables
included the economy, overall banking conditions, agricultural conditions, deposit insurance assessments, accounting, and other bank
examination issues. Also, from December 2-3,
2009, the FDIC, in cooperation with the Puerto
Rico Bankers Association, hosted a compliance
school in Guayabo, PR. The event was attended
by approximately 150 bankers from nine banks.
In addition, the National MDI Coordinator
held conference calls with representatives from
several trade groups, including the Puerto Rico
Bankers Association, the National Bankers Association, the Korean-American Bankers Association, the Asian-American Bankers Association,
the National Association of Chinese-American
Bankers, and the Hispanic Bankers Association,
to discuss the MDI program and FDIC outreach
activities.

Capital Standards
The FDIC continued to be actively involved in
domestic and international discussions intended
to address the deficiencies in regulatory capital
rules that were brought to light as a result of the
recent financial turmoil and to ensure capital
standards adequately support the safe and sound
operation of banks. This included participation
in a number of supervisory working group meetings with foreign regulatory authorities.
Internationally, the FDIC is participating in
the Basel Capital Monitoring Group that tracks
the impact on risk-based capital with the implementation of Basel II. The FDIC will continue

29

to compile and analyze the information on the
international impact of Basel II on regulatory
capital as it becomes available through public
and supervisory sources.
The FDIC continues to participate in international efforts to improve the quality of capital, minimize the procyclicality of risk-based
capital requirements, and ensure the amount of
capital banks hold for risky exposures is commensurate with risk (notably securitization,
re-securitization, and trading book exposures).
The FDIC actively participates in the work of
the Basel Committee on Banking Supervision’s
Policy Development Group and a number of
working groups: AIG Trading Book, Fundamental Review of the Trading Book, Definition of
Capital, Non-Risk Based Supplementary Measure (leverage ratio), Liquidity, External Ratings and Securitizations, Counterparty Credit
Risk, Asset Encumbrance, Procyclicality, and
Macroprudential Supervision. The substantive
work of these groups culminated in the publication in June 2009 of Revisions to the Basel II
market risk framework, Guidelines for computing capital for incremental risk in the trading
book, and Enhancements to the Basel II framework—and two consultative papers in December of 2009—Strengthening the resilience of the
banking sector and International framework for
liquidity risk measurement, standards and monitoring. The FDIC also participated in drafting
the request for data for the impact studies that
the Basel Committee will undertake in early
2010 to calibrate the proposals in the consultative papers. A number of these groups, including

the Fundamental Review of the Trading Book,
Asset Incumbrance, External Ratings and Securitization, and Macroprudential Supervision,
will continue their work into 2010.
Domestically, the FDIC issued a number of
interagency rulemakings to align regulatory
capital more closely with risk. On November 12,
2009, the FDIC made final the interim final rule
regarding the risk weights for Residential Mortgage Loans Modified Pursuant to the Making
Home Affordable Program (MHAP) of the U.S.
Department of the Treasury.5 This rule was jointly issued with the other federal banking agencies’ support to prevent residential real estate
foreclosures and keep Americans in their homes.
The rule allows an institution to continue to risk
weight a prudently-underwritten mortgage loan
at the preferential risk weight even though it has
been restructured under the Treasury’s program.
The final rule clarified that a banking organization may retain the risk weight assigned to
a mortgage loan before the loan was modified
under the MHAP.
On August 27, 2009, in response to the
financial turmoil and the Financial Accounting
Standards Board’s revisions to accounting rules
for consolidation of variable interest entities—
Statement of Financial Accounting Standards
No. 166, Accounting for Transfers of Financial
Assets, an Amendment of FASB Statement No.
140 (FAS 166—now codified as ASC 860), and
Statement of Financial Accounting Standards
No. 167, Amendments to FASB Interpretation No.
46(R) (FAS 167—now codified as ASC 810)—
the federal banking regulators issued a proposed

On March 4, 2009, the Treasury announced guidelines under the Making Home Affordable Program (MHAP) to promote sustainable loan
modifications for homeowners at risk of losing their homes due to foreclosure.

5

30

FDIC 2009 Annual Report

rule for comment titled Impact of Modifications
to Generally Accepted Accounting Principles,
Consolidation of Asset-Backed Commercial
Paper Programs, and Other Related Issues.
The final rule was approved by the FDIC Board
on December 15, 2009. The rule discussed the
impact of the accounting changes on the agencies’ regulatory capital rules. The rule modified
the general risk-based and advanced risk-based
capital adequacy frameworks to eliminate the
exclusion of certain consolidated asset-backed
commercial paper programs from risk-weighted
assets. The rule provided a reservation of authority in the general risk-based and advanced riskbased capital adequacy frameworks to permit the
agencies to require banking organizations to treat
entities that are not consolidated under accounting standards as if they were consolidated for
risk-based capital purposes. The rule included
an optional four-quarter transition period to ease
the impact of the accounting change on a bank’s
risk-based capital requirements but did not delay
the impact of the accounting change on a bank’s
leverage ratio.
The FDIC, with the other federal bank regulators, commenced a number of rulemakings in late
2009, including a revised Standardized Framework notice of proposed rulemaking (NPR)
that proposes to implement the Basel II Accord
standardized risk-based capital framework, an
NPR to revise the Market Risk Amendment that
proposes higher regulatory capital requirements
for significant trading book activities, and an
NPR that proposes implementation of the Basel
changes to risk-based capital requirements that
doubles the capital charge for re-securitizations
and requires additional disclosures for securitizations and re-securitizations.

I.  Management’s Discussion and Analysis



Guidance Issued
During 2009, the FDIC issued and participated in the issuance of guidance in several areas as
described below:

Structured Credit Products
FDIC-supervised institutions continued to
invest in structured credit products, including
private label mortgage-backed securities and
collateralized debt obligations. By early 2009,
a growing number of these institutions experienced deterior­ tion in financial performance as
a
a result of these investments. To reinforce the
federal banking agencies’ existing guidance—
Supervisory Policy Statement on Investment
Securities and End-­ ser Derivatives Activities
U
and Uniform Agreement on the Classification of
Assets and Appraisal of Securities—the agencies
issued new guidance on April 30, 2009, titled Risk
Management of Investments in Structured Credit
Products. The guidance reiterates and clarifies
existing supervisory guidance on the purchase
and holding of complex structured credit products. It focuses on the various supervisory concerns related to these securities: pre-purchase
analysis, suitability determination, risk limits,
credit ratings, valuation, ongoing due diligence,
adverse classification, and capital treatment.

Qualifications for Failed Bank Acquisitions
The FDIC developed guidance for private
investors interested in acquiring the deposit
liabilities, or the deposit liabilities and assets, of
failed insured depository institutions. The FDIC
published for comment on July 9, 2009, a Proposed Statement of Policy on Qualifications for
Failed Bank Acquisitions (Proposed Policy Statement). On August 26, 2009, the FDIC’s Board of

31

Directors voted to adopt the Final Statement of
Policy on Qualifications for Failed Bank Acquisitions (Final Policy Statement), which was published in the Federal Register on September
2, 2009. The Final Policy Statement takes into
account comments received from companies, law
firms, legislators, and other interested parties,
and changed the minimum capital commitment
from 15 percent Tier 1 leverage to 10 percent
Tier 1 common equity. Other key elements of
the Final Policy Statement include cross support
requirements, a prohibition on affiliated lending, a limitation on the sale of acquired shares in
the first three years, a prohibition on bidding by
excessively opaque and complex business structures, and minimum disclosure requirements.
The Final Policy Statement specifies that it does
not apply to investors who hold 5 percent or less
of the total voting power as long as there is no
evidence of concerted action by these investors.
In adopting the Final Policy Statement, the FDIC
sought to strike a balance between the interests
of private investors and the need to provide adequate safeguards for the insured depository institutions involved.

Commercial Real Estate Guidance
In response to deteriorating trends in commercial real estate (CRE) and other commercial
loans, the FDIC, along with the other financial
regulators, issued the Policy Statement on Prudent Commercial Real Estate Loan Workouts (the
CRE Guidance) on October 30, 2009. The CRE
Guidance updates existing guidance to assist
examiners in evaluating institutions’ efforts to
renew or restructure loans to creditworthy borrowers. It promotes supervisory consistency,

32

enhances the transparency of workout transactions, and ensures that supervisory policies and
actions do not inadvertently curtail the availability of credit to sound borrowers.

Liquidity Risk Management
On July 31, 2009, the federal banking agencies and the National Credit Union Administration sought comment on a proposed Interagency
Guidance on Funding and Liquidity Risk Management. The agencies developed the guidance
to provide sound practices for managing funding and liquidity risk and strengthening liquidity
risk management practices. The new guidance
is intended to supplement existing guidance,
including FIL-84-2008, Liquidity Risk Management, issued by the FDIC in 2008, which remains
in effect. Where appropriate, the proposed guidance conforms to the Basel Committee’s Principles for Sound Liquidity Risk Management and
Supervision. The final guidance was published
on April 15, 2010.

Brokered Deposits
The FDIC issued a final rule on May 29,
2009, effective January 1, 2010, changing the
way it administers statutory restrictions on the
deposit interest rates paid by banks that are
less than well-capitalized. Under Part 337.6 of
the FDIC Rules and Regulations, a less than
well-­ apitalized insured depository institution
c
may not pay a rate of interest that significantly
exceeds the prevailing rate in the institution’s
market area or the prevailing rate from which the
deposit is accepted. The final rule is intended to
simplify and strengthen the administration of
this regulation.

FDIC 2009 Annual Report

De Novo Institutions
On August 28, 2009, the FDIC advised the
banking industry of supervisory changes for state
non-member institutions insured seven years
or less (de novo period). Under previous policy,
newly insured institutions were subject to higher
c
­ apital requirements and more frequent examination activities during the first three years of
operation. Based on supervisory experience, the
FDIC extended the de novo period from a threeyear period to seven years for examinations, capital, and other requirements. In addition, material
changes in business plans for newly insured institutions will require prior FDIC approval during
the first seven years of operation.

Regulatory Relief
During 2009, the FDIC issued six Financial
Institution Letters that provided guidance to
help financial institutions and facilitate recovery
in areas damaged by severe storms, tornadoes,
flooding, and other natural disasters. Areas within
American Samoa, Arkansas, Georgia, Kentucky,
Minnesota, and North Dakota were affected.

Other Guidance Issued
On July 8, 2009, in response to the severe
payment situation that the state of California
was experiencing, the federal banking agencies
issued supervisory guidance for institutions
regarding the regulatory capital treatment for
registered warrants issued by the state of California as payment for certain obligations. The
agencies’ risk-based capital standards permit
a banking organization to risk weight general
obligation claims on a state at 20 percent. These
warrants, which are general obligations of the
state, would, therefore, be eligible for the 20 per-

I.  Management’s Discussion and Analysis



cent risk weight for risk-based capital purposes.
The agencies reminded institutions, however,
that they should exercise the same prudent judgment and sound risk management practices with
respect to the registered warrants as they would
with any other obligation of a state.
The FDIC also initiated an interagency interest rate risk advisory to highlight concerns about
banks taking on excessive interest rate risk in
current low interest rate environment. This advisory, which was published in January 2010, clarifies existing guidance and reminds banks not to
lose focus on their management of interest rate
risk. Banks are expected to manage interest rate
risk exposures using policies and procedures
commensurate with their complexity, business
model, risk profile, and scope of operations.

Consumer Protection and Compliance
Guidance
In January 2009, the FDIC approved, and
issued, along with the other federal bank regulators, updated Final Interagency Questions and
Answers on the Community Reinvestment Act
(CRA) and requested comment on new proposed
guidance. In June, the FDIC joined the other
regulators in requesting comment on CRA regulatory changes to implement statutory requirements relating to student loans and activities in
cooperation with minority- and women-owned
financial institutions and low-income credit
unions. The FDIC contributed to the development and June release of guidance and examination procedures on the 2009 Identity Theft
Red Flags regulations. In July, the FDIC joined
other regulators in issuing Revised Interagency
Questions and Answers Regarding Flood Insurance, updating guidance first issued in 1987,

33

and requested comment on additional proposed
guidance. In September, the FDIC alerted banks
to new statutory requirements to protect tenants
occupying foreclosed properties.
In November, the FDIC joined seven other
federal agencies in releasing a model privacy
notice form designed to make it easier for consumers to understand how financial institutions
collect and share their personal information. The
model form resulted from a multi-year consumer testing effort. In December, the FDIC joined
the other Federal Financial Institutions Examination Council (FFIEC) member agencies in
issuing for public comment, supervisory guidance on reverse mortgages, building on FDIC
analysis performed in 2008. In June, August,
and December, the FDIC issued guidance to the
institutions it supervises alerting them to significant changes in the Truth in Lending Act and the
Federal Reserve Board’s Regulation Z (which
implements that Act). In December, the FDIC
reminded institutions of the dramatically revised
Real Estate Settlement Procedures Act regulation issued by the Department of Housing and
Urban Development.

Monitoring Potential Risks from New
Consumer Products
The FDIC relies heavily on on-site supervisory activities to identify existing and emerging risks. In addition to on-site supervisory
activities, the FDIC uses several established
off-site processes, including Statistical CAMELS Off-site Rating (SCOR) and Growth Monitoring System (GMS), as well as more recent
comprehensive reviews (such as the Quarterly
Supervisory Risk Profile) to assess how identified risks are likely to affect insured institu-

34

tions’ risk profiles and ratings. These ongoing
analyses have been augmented with numerous
ad hoc reviews (such as reviews of commercial real estate lending trends, interest rate risk
exposure, allowance-for-loan and lease losses
trends, and dividend payments). Furthermore,
the FDIC replaced its former Underwriting Survey Questionnaire with a Credit and Consumer
Products/Services Survey in October 2009. The
new survey extends beyond underwriting practices and addresses new or evolving products/
strategies and consumer compliance issues and
is now completed by examiners at the conclusion
of each risk management and consumer compliance examination. Supervisory staff monitors
and analyzes this real-time examiner input and
uses the information to help determine the need
for changes in policy guidance or supervisory
strategies as appropriate.
The FDIC continues to work with the FFIEC
to issue supervisory guidance on reverse mortgage products. The FDIC began this effort as
the result of an internal review that highlighted
consumer risks associated with this product. A
2009 GAO report highlighted similar issues. In
addition, the FDIC continues to work with other
agencies to enhance the Truth in Lending examination procedures to assist examiners when
reviewing compliance with reverse mortgage
disclosure requirements.

Regulatory Reporting Revisions
The FDIC, jointly with the Office of the
Comptroller of the Currency and the Federal
Reserve Board, implemented revisions to the
Consolidated Reports of Condition and Income
(Call Reports) on a phased-in basis in March,
June, and December 2009. The revisions

FDIC 2009 Annual Report

focused on areas in which the banking industry
was experiencing heightened risk as a result of
market turmoil and illiquidity and weakening
economic and credit conditions. The reporting
changes included new data on real estate construction loans with interest reserves, structured financial products such as collateralized
debt obligations, commercial mortgage-backed
securities, pledged loans, and fiduciary assets
and income. Selected institutions must report
additional data on recurring fair value measurements, credit derivatives, and over-the-counter
derivative exposures.
In September 2009, the agencies updated
the reporting of data on the amount and number of deposit accounts and estimated uninsured
deposits in the Call Report schedule to reflect
the extension of the temporary increase in the
standard maximum deposit insurance amount
from $100,000 to $250,000 per depositor enacted in the Helping Families Save Their Homes
Act.
In December 2009, the agencies approved
revisions to the Call Report that were implemented in early 2010. The revisions incorporate
modifications made in response to comments
received on the agencies’ August 2009 proposal
and are subject to approval by the U.S. Office of
Management and Budget. The revisions respond
to such recent developments as a temporary
increase in the deposit insurance limit, changes
in accounting standards, and credit availability
concerns. The reporting changes that were effective March 31, 2010, include new data on otherthan-temporary impairments of debt securities,
loans to non-depository financial institutions,
and brokered time deposits; additional data on
certain time deposits and unused commitments;

I.  Management’s Discussion and Analysis



and a change from annual to quarterly reporting
for small business and small farm lending data.
The agencies will collect new data pertaining to
reverse mortgages annually beginning December 31, 2010.

Promoting Economic Inclusion
The FDIC pursued a number of initiatives in
2009 to facilitate underserved populations using
mainstream banking services rather than higher
cost, non-bank alternatives and to ensure protection of consumers in the provision of these
services.

Alliance for Economic Inclusion
The goal of the FDIC’s Alliance for Economic
Inclusion (AEI) initiative is to collaborate with
financial institutions; community organizations;
local, state, and federal agencies; and other partners in select markets to launch broad-based
coalitions to bring unbanked and underserved
consumers into the financial mainstream.
The FDIC expanded its AEI efforts during
2009 to increase measurable results in the areas
of new bank accounts, small-dollar loan products, remittance products, and delivery of financial education to more underserved consumers.
During 2009, over 60 banks and organizations
joined AEI nationwide, bringing the total number of AEI members to 967. More than 72,614
new bank accounts were opened during 2009,
bringing the total number of bank accounts
opened through the AEI to 162,692. During
2009, approximately 68,491 consumers received
financial education through the AEI, bringing the
total number of consumers educated to 142,796.
Also, 35 banks were in the process of offering or
developing small-dollar loans as part of the AEI,

35

and 26 banks were offering remittance products
at the end of 2009.
The FDIC expanded the AEI initiative to two
additional markets during 2009—Detroit/South,
Michigan and Little Rock, Arkansas—bringing
the total number of active AEI markets to 14.
Additionally, the FDIC worked closely during
2009 to provide technical assistance and support
to communities in Milwaukee, Wisconsin and
northwestern Indiana interested in forming AEI
coalitions. The statewide Wisconsin Saves program agreed to lead an initiative in Milwaukee
patterned after the AEI.
The FDIC also worked closely during 2009
with the National League of Cities to provide
technical assistance to facilitate the launch of
Bank On campaigns in Seattle, WA; Savannah,
GA; Houston and San Antonio, TX; and Indianapolis, IN. The FDIC was also invited to serve
as a working committee member and advisor to
facilitate the launch of a Bank On Washington,
DC, campaign launched in April 2010.

FDIC Advisory Committee on
Economic Inclusion
The FDIC’s Advisory Committee on Economic Inclusion was established in 2006 and
provides the FDIC with advice and recommendations on initiatives focused on expanding
access to banking services by underserved populations. This may include reviewing basic retail
financial services such as check cashing, money
orders, remittances, stored value cards, shortterm loans, savings accounts, and other services
that promote asset accumulation and financial
stability. Committee members represent a crosss
­ ection of interests from the banking industry,
state regulatory authorities, government, aca-

36

demia, consumer or public advocacy organizations, and community-based groups.
The Advisory Committee met three times
during 2009. In February 2009, the meeting
topic was Strategies to Increase Access to the
Financial Mainstream. The meeting featured an
overview of the FDIC Survey of Banks’ Efforts
to Serve the Unbanked and Underbanked and
focused on effective and innovative products and
services, policy approaches, and supervisory
and regulatory strategies to improve appropriate
engagement with the mainstream financial system, particularly for low- and moderate-income
(LMI) and underserved households.
The Advisory Committee also met in July
2009 to continue its discussion about issues and
challenges related to improving access to the
financial mainstream and to discuss innovative
ways that banks and others are encouraging savings through “game-based” strategies that make
savings fun or exciting, such as sweepstakes,
milestones, or rewards. After this meeting, a
report of the Committee’s views regarding the
issues and challenges of serving LMI and underserved consumers was posted on the FDIC web
site to spark discussion of how best to serve consumers who may be struggling, particularly in
the current economy.
On December 2, 2009, the Committee met to
discuss results of the FDIC National Unbanked
and Underbanked Household Survey, overdraft
issues, and the strategic focus for the Committee.
As a next step, the Committee will formulate a
strategic plan that will provide a framework for
the Committee’s agenda over the next two years.
Among other things, the Strategic Plan will
include recommendations related to:

FDIC 2009 Annual Report

•	 Determining a desirable “base” level of
household savings, and how much households actually have.
•	 Addressing desirable features of safe,
affordable savings and transaction account
products.
•	 Determining how the FDIC can enhance
efforts to promote youth financial education
programs.
•	 Reviewing CRA to ensure that programs
targeted to LMI communities are receiving
appropriate consideration.
•	 Considering ways to scale small-dollar loans,
including standardizing an affordable smalldollar loan product, providing information
about existing programs, seeking philanthropic or government guarantee funds, and
potentially using government workforces as
a test for employer-based small-dollar loans.

Affordable Small-Dollar Loan Guidelines
and Pilot Program
Many consumers, even those who have bank
accounts, turn to high-cost payday or other
non-bank lenders to quickly obtain small loans
to cover unforeseen circumstances. To help
insured institutions better serve an underserved
and potentially profitable market while enabling
consumers to transition away from reliance on
high-cost debt, the FDIC launched a two-year
small-dollar loan pilot project in February 2008.
The pilot is designed to review affordable and
responsible small-dollar loan programs offered
by insured financial institutions and assist the
banking industry by identifying and disseminating information on replicable business models
and best practices for small-dollar loans, includ-

I.  Management’s Discussion and Analysis



ing ways to offer small-dollar loan customers
other mainstream banking services.
There are currently 30 banks of varied sizes
and diverse locations and settings participating
in the pilot. Banks submitted data on a quarterly
basis, which the FDIC analyzed to determine
trends and best practices. The FDIC encourages innovation in program design, but most
programs generally adhere to the FDIC’s SmallDollar Loan Guidelines, issued in June 2007,
and all feature payment periods beyond a single
paycheck, annual percentage rates below 36 percent, and streamlined underwriting and prompt
loan application processing. During seven quarters of the pilot, banks cumulatively originated
about 29,000 loans with a principal balance of
more than $34 million. Bankers involved in the
pilot cite a number of common factors that contributed to the success of their loan programs,
including strong senior management and board
support; an engaged and empowered “champion”
in charge of the program; proximity to large populations of consumers with demand for smalldollar loans; and, in some rural markets, limited
competition. The delinquency ratio for loans in
the pilot tends to be almost three times higher
than for general unsecured loans to individuals.
However, charge-off rates for loans originated
under the program are the same as general unsecured loans to individuals. These statistics show
that while small-dollar loan borrowers are more
likely to have trouble paying on time, they are no
more likely to default than those in the general
population.
Only a few bankers participating in the pilot
have reported that short-term profitability is the
primary goal for their program. Rather, most
pilot banks are using the small-dollar loan prod-

37

uct as a cornerstone for profitable relationships,
which also creates goodwill in their community.
A few banks’ business models focus exclusively
on the goodwill aspect and generating an opportunity for positive Community Reinvestment
Act consideration. Regardless of the business
model, all of the bankers involved in the pilot
have indicated that small-dollar lending is something they believe they should be doing to serve
their communities.
Through the Advisory Committee on Economic Inclusion, the FDIC is considering pursuing several initiatives to broaden the availability
of small-dollar loans at mainstream financial
institutions, including, but not limited to, the
following:
•	 Conduct a Close-Out Symposium,
Article, and “Branding Effort” for the
Small-­ ollar Loan Pilot. The close-out
D
symposium will highlight final pilot findings, summarize technology and other innovations in small-dollar loans, and address
progress on incentives to scale small-dollar
loans across the financial mainstream. The
features identified in the pilot could also be
“branded” as the ideal for affordable, feasible small-dollar loan
programs.
•	 Consider Creating Pools of
Non-Profit Funds or Government Operating Funds to Serve
as “Guarantees” for Acceptable
Small-Dollar Loan Programs.
Several existing small-dollar loan
programs feature “guarantees” in
the form of loan loss reserves or
linked, low-cost deposits provided

38

by government bodies or philanthropic
groups. These guarantees provide important
assurances to banks interested in providing loan funds and other support to the
programs. To encourage more institutions
to offer small-dollar loan programs, larger
pools could be created.
•	 Consider Conducting a Pilot Using
Federal Workforces to Test Innovative
Small-­ ollar Loan Business Models. The
D
dominant model in the small-dollar loan pilot
is the “high-touch” relationship building
model. Peer-to-peer technology and employer-based lending are promising technologies
to reduce handling costs, and, with employer-based models, potentially credit losses.
To the extent legally permissible, the FDIC
or other federal workforces could explore
serving as pilots for testing innovative smalldollar loan business models.

FDIC Advisory Committee on
Community Banking
On May 29, 2009, the FDIC Board of Directors
approved establishing the FDIC Advisory Committee on Community Banking. This commit-

Members of the Advisory Committee on Community Banking with Chairman Sheila C. Bair.

FDIC 2009 Annual Report

tee was formed to provide the FDIC with advice
and guidance on a broad range of important
policy issues impacting small community banks
throughout the country, as well as the local communities they serve, with a focus on rural areas.
The 14-member committee represents a crosssection of community bankers from around the
nation, as well as a member from academia. The
first meeting, held on October 15, 2009, covered
the impact of the financial crisis on community
banks. Other issues addressed were regulatory
reform proposals under consideration by Congress and their effect on community banks, the
impact of FDIC supervisory proposals on these
banks, and community banks’ perspectives on
funding the FDIC’s Deposit Insurance Fund.

Survey Results of the Unbanked and
Underbanked
In February 2009, the FDIC transmitted to
Congress the results of the first national survey
of banks’ efforts to serve unbanked and underbanked individuals and families in their market
areas. The survey, conducted pursuant to a mandate in Section 7 of the Federal Deposit Insurance Reform Conforming Amendments Act of
2005, found that improvement may be possible
in the areas of institution focus, outreach, and
commitment to unbanked and underbanked
populations. The survey found that a majority
of banks—63 percent—offers basic financial
education materials, but fewer participate in the
types of outreach efforts that are viewed by the
industry as most effective to attract and maintain
unbanked and underbanked individuals as longterm customers.
On December 2, 2009, the FDIC released
the findings of its FDIC National Survey of

I.  Management’s Discussion and Analysis



Unbanked and Underbanked Households,
breaking new ground in gaining understanding
of which Americans remain outside the banking
system. The survey, conducted on behalf of the
FDIC by the U.S. Bureau of the Census, was a
supplement to the Census Bureau’s Current Population Survey during January 2009. The study,
which is the most comprehensive survey to
date of the unbanked and underbanked, reveals
that more than one quarter (25.6 percent) of all
households in the United States are unbanked
or underbanked and that those households are
disproportionately low-income and/or minority. In addition to collecting accurate estimates
of the number of unbanked and underbanked
households in the U.S., the survey was designed
to provide insights into their demographic characteristics and reasons why the households are
unbanked or underbanked. The survey represents the first time that this data has been
collected to produce estimates at the national,
regional, state, and large metropolitan statistical
area (MSA) levels. This effort is being undertaken in response to the Reform Act, which calls
for the FDIC to provide an estimate of the size
of the U.S. unbanked market and to identify
issues that cause individuals and families to be
unbanked.

Information Technology, Cyber Fraud,
and Financial Crimes
The FDIC issued Special Alerts in August and
October 2009 notifying financial institutions of
an alarming increase in reports of fraudulent
electronic funds transfer transactions resulting
from compromised login credentials. During
2009, the FDIC detected an increase in both the
number of such incidents and the losses resulting

39

from them. Other major accomplishments during 2009 in combating identity theft included the
following:
•	 Assisted financial institutions in identifying and shutting down approximately
651 “phishing” web sites. The term
“phishing”—as in fishing for confidential ­ nformation—refers to a scam that
i
encompasses fraudulently obtaining and
using an individual’s personal or financial
information.
•	 Issued 219 Special Alerts to FDICs
­ upervised institutions on reported cases of
counterfeit or fraudulent bank checks.
•	 Issued, in conjunction with the other
FFIEC agencies, frequently asked questions (FAQs) concerning “Identity Theft
Red Flags, Address Discrepancies, and
Change of Address Regulations.” These
FAQs are designed to assist financial institutions in complying with the new regulations
and examiners in assessing institutions’
compliance.
The FDIC conducts information technology
(IT) examinations at each safety and soundness examination to ensure that institutions have
implemented adequate risk management practices for the confidentiality, integrity, and availability of the institution’s sensitive, material, and
critical information assets using the FFIEC Uniform Rating System for Information Technology
(URSIT). The FDIC also participates in interagency examinations of significant technology
service providers. In 2009, the FDIC conducted
2,780 IT examinations at financial institutions
and technology service providers. The FDIC
also monitors significant events, such as data

40

breaches and natural disasters that may impact
financial institution operations or customers.
As an additional element of its leadership role
in promoting effective bank supervision practices, the FDIC provides technical assistance,
training, and consultations to international governmental banking regulators in the area of IT
examinations. In 2009, through our secondment
program with the Financial Services Volunteer
Corps, the FDIC provided assistance in developing IT examination programs to the Central
Bank of Iraq, the Central Bank of Libya, Banque
d’Algerie, and Bank of Albania. The FDIC also
hosted a visit by the China Banking Regulatory
Commission to learn about our IT examination
programs, and the FDIC hosted an international
conference of bank regulators to discuss emerging technology risks and to compare supervisory
approaches.

Consumer Complaints and Inquiries
The FDIC investigates consumer complaints
concerning FDIC-supervised institutions and
answers inquiries from the public about consumer protection laws and banking practices. As of
December 31, 2009, the FDIC had received 17,245
written complaints, of which 8,280 involved
complaints against state non-member institutions. The FDIC responded to over 96 percent of
these complaints within the two-week standard
established by Corporate policy. The FDIC also
responded to 2,797 written inquiries, of which
503 involved state non-member institutions. In
addition, the FDIC responded to 6,491 telephone
calls from the public and members of the banking community, 3,878 of which concerned state
non-member institutions.

FDIC 2009 Annual Report

Deposit Insurance Education
An important part of the FDIC’s deposit insurance mission is ensuring that bankers and consumers have access to accurate information about
the FDIC’s rules for deposit insurance coverage.
The FDIC has an extensive deposit insurance
education program consisting of seminars for
bankers, electronic tools for estimating deposit
insurance coverage, and written and electronic
information targeted for both bankers and consumers. The FDIC also responds to thousands of
telephone and written inquiries each year from
consumers and bankers regarding FDIC deposit
insurance coverage.
Economic conditions in 2008 helped to spur a
significant interest by bank customers in learning more about FDIC deposit insurance coverage. To meet the increased public demand for
deposit insurance information, the FDIC implemented two major initiatives to help raise public awareness of the benefits and limitations of
FDIC deposit insurance coverage.
In 2009, the FDIC continued with its 2008 initiatives aimed at raising the public’s awareness
of the benefits and limitations of federal deposit
insurance. The FDIC continued its campaign
of public service announcements for television,
radio, and print media; these public service
announcements encouraged bank customers to
visit myFDICinsurance.gov to learn about FDIC
insurance coverage. In addition to our efforts
to  raise public awareness, the FDIC expanded
its efforts to educate bankers about the rules and
requirements for FDIC insurance coverage. In the
fall of 2009, after all legislative and regulatory
changes were implemented, the FDIC conducted
a series of six nationwide telephone seminars for
bankers on deposit insurance coverage. These

I.  Management’s Discussion and Analysis



seminars reached an estimated 35,000 bankers participating at approximately 10,000 bank
locations throughout the country. The FDIC also
continued to work with ­ ndustry trade groups to
i
provide training for bank employees.

Deposit Insurance Coverage Inquiries
During 2009, the FDIC received 4,782 written
deposit insurance inquiries from consumers and
bankers. Of these inquiries, 99 percent received
responses from the FDIC within two weeks,
as required by Corporate policy. In addition to
written deposit insurance inquiries, the FDIC
received and answered 41,259 telephone inquiries from consumers and bankers during 2009.
The 46,041 total deposit insurance inquiries received in 2009 is significantly less than
the 100,933 total deposit insurance inquiries
received in 2008, when there was an unprecedented surge in deposit insurance questions following the failure of IndyMac Bank. However,
the 2009 deposit insurance inquiries represent a
130 percent increase compared to 2007, when the
FDIC received a total of 20,024 inquiries about
deposit insurance coverage.

Foreclosure Prevention
In 2009, the FDIC launched an initiative to
help consumers and the banking industry avoid
unnecessary foreclosures and stop foreclosure
“rescue” scams that promise false hope to consumers at risk of losing their homes.
The FDIC focused its foreclosure mitigation
efforts in three areas during 2009:
•	 Direct outreach to consumers with information, education, counseling, and referrals.
During 2009, the FDIC hosted or co-hosted
over 82 consumer outreach events that

41

reached over 17,000 consumers. The FDIC
also released an informational toolkit and
launched a phone referral service to help
homeowners avoid scams and reach their
servicer.
•	 Industry outreach and education targeted
to lenders, loan servicers, local governmental agencies, housing counselors, and first
responders (faith-based organizations, advocacy organizations, social service organizations, etc.). The FDIC worked collaboratively
throughout 2009 with local foreclosure coalitions, AEI partners, and others to co-host
industry-wide events. Approximately 20 such
events were conducted during 2009.
•	 Support for capacity building initiatives to
help expand the quantity and quality of foreclosure counseling assistance that is available within the industry. Working closely
with NeighborWorks® America and other
national and local counselor training and
intermediaries, the FDIC worked to support
industry efforts to build the capacity of housing counseling agencies.
As part of the FDIC’s foreclosure prevention
efforts, the FDIC released two new educational
brochures during 2009 (in both English and
Spanish) to help consumers avoid scams and
turn to legitimate sources of assistance. The Is
Foreclosure Knocking at Your Door? brochure
encourages consumers to seek a loan modification. The Beware of Foreclosure Rescue Scams
brochure alerts homeowners to common scams
and directs them to legitimate sources of assistance. The demand for both brochures was
strong—over 150,000 copies were requested and
distributed.

42

The FDIC also worked collaboratively with
other key partners, both inside and outside federal
government, on post-foreclosure neighborhood
stabilization efforts. These efforts will continue in
2010.

Financial Education and Community
Development
In 2001, the FDIC—recognizing the need
for ­
enhanced financial education across the​
c
­ ountry—inaugurated its award-winning Money
Smart curriculum, which was, until 2009, available in six languages, large print and Braille versions for individuals with visual impairments,
and a computer-based instruction version. Since
its inception, over 2.4 million individuals have
participated in Money Smart classes and selfpaced computer-based instruction. Approximately 300,000 of these participants subsequently
established new banking relationships.
The FDIC significantly expanded its financial
education efforts during 2009 through a multipart strategy that included making available
timely, high-quality financial education products, expanded delivery channels, and the sharing of best practices.
Two new Money Smart products were released
in 2009. First, as part of efforts to reach underserved communities, the FDIC released a Hmong
(an Asian dialect found in Vietnam, Laos, Thailand, and Myanmar) language version of Money
Smart, making it the seventh language in which
the curriculum is offered. Second, the FDIC
released the Money Smart Podcast Network, a
portable audio version of Money Smart suitable
for use with virtually all MP3 players. It was
created as a tool for consumers to use to learn
on their own or for educators seeking an inno-

FDIC 2009 Annual Report

vative way to supplement traditional classroom
instruction. The new MP3 version received more
than 328,716 hits from 11,015 individual visitors
between its release on May 27, 2009, and yearend 2009. Showing its appeal, visitors to the web
site spent an average of 38 minutes on the site.
Additionally, to enhance the quality of existing
products, information on foreclosure prevention scams and legitimate sources of foreclosure
assistance was added to the adult instructor-led
and self-paced versions of Money Smart.
The FDIC also expanded its delivery channels
for financial education. For example, 237 new
organizations joined the FDIC’s Money Smart
Alliance. Finally, best practices were shared
through four editions published of Money Smart
News, which reached over 40,000 subscribers.
During 2009, the FDIC undertook over 200
community development, technical assistance,
financial education, and outreach activities and
events. These activities were designed to promote
awareness of investment opportunities to financial institutions, access to capital within communities, knowledge-sharing among the public
and private sector, and wealth-building opportunities for families. Representatives throughout the financial industry and their stakeholders
collaborated with the FDIC on a broad range of
initiatives structured to meet local and regional
needs for financial products and services, credit,
asset-building, affordable housing, small business and micro-enterprise development and
financial education.
For example, the FDIC participated in 15
local savings campaigns during the 2009 America Saves week to encourage consumers to build
wealth. The FDIC’s leadership of one such local
campaign helped facilitate nearly $10 million in

I.  Management’s Discussion and Analysis



new savings deposits in financial institutions.
Also, recognizing the importance of small business growth and job creation as an essential
component in America’s economic recovery, the
FDIC expanded its emphasis on facilitating small
business development, expansion and recovery
during 2009. This included hosting well-received
events to help small businesses identify supportive programs, including mainstream lending options. The FDIC also helped facilitate the
establishment of two new small business loan
pools during 2009 to originate loans to eligible
entrepreneurs and small businesses unable to
obtain traditional loans because of an elevated
risk profile (e.g., start-up businesses with insufficient cash flow or collateral). These new loan
pools were launched in Alexandria, Virginia,
and Baton Rouge, Louisiana.

Resolutions and Receiverships

The FDIC has the unique mission of protecting depositors of insured banks and savings
associations. No depositor has ever experienced
a loss on the insured amount of his or her deposit
in an FDIC-insured institution due to a failure.
Once an institution is closed by its chartering
a
­ uthority—the state for state-chartered institutions, the Office of the Comptroller of the Currency (OCC) for national banks, and the Office
of Thrift Supervision (OTS) for federal savings
associations—and the FDIC is appointed receiver, the FDIC is responsible for resolving the
failed bank or savings association.
The FDIC employs a variety of business practices to resolve a failed institution. These business practices are typically associated with the
resolution process or the receivership process.
Depending on the characteristics of the institu-

43

tion, the FDIC may recommend several of these
practices to ensure prompt and smooth payment
of deposit insurance to insured depositors, to
minimize impact on the Deposit Insurance Fund,
and to speed dividend payments to creditors of
the failed institution.
The resolution process involves valuing a
failing institution, marketing it, soliciting and
accepting bids for the sale of the institution,
determining which bid is least costly to the
insurance fund, and working with the acquiring
institution through the closing process.
In order to minimize disruption to the local
community, the resolution process must be performed quickly and as smoothly as possible.
There are three basic resolution methods: purchase and assumption transactions, deposit payoffs, and utilizing a Deposit Insurance National
Bank (DINB).
The purchase and assumption (P&A) transaction is the most common resolution method used
for failing institutions. In a P&A transaction, a
healthy institution purchases certain assets and
assumes certain liabilities of the failed institution. There are a variety of P&A transactions that
can be used. Since each failing bank situation is
different, P&A transactions provide flexibility
to structure deals that result in the highest value
for the failed institution. For each possible P&A
transaction, the acquirer may either acquire all
or only the insured portion of the deposits. Loss
sharing may be offered by the receiver in connection with a P&A transaction. In a loss sharing
transaction, the FDIC as receiver agrees to share
losses on certain loans with the acquirer. The
FDIC usually agrees to absorb a significant portion (for example, 80 percent) of future losses on
assets that have been designated as “shared loss

44

assets” for a specific period of time (for example,
five to ten years). The economic rationale for
these transactions is that retention of shared loss
assets in the banking sector can produce a better
net recovery than would the FDIC’s immediate
liquidation of these assets.
Deposit payoffs are only executed if a bid
for a P&A transaction does not meet the leastcost test or if no bids are received, in which case
the FDIC, in its corporate capacity as deposit
insurer, makes sure that the customers of the
failed institution receive the full amount of their
insured deposits.
The Banking Act of 1933 authorized the FDIC
to establish a DINB to assume the insured deposits of a failed bank. A DINB is a new national
bank with limited life and powers that allows
failed bank customers a brief period of time to
move their deposit account(s) to other insured
institutions. A DINB allows for a failed bank to
be liquidated in an orderly fashion, minimizing
disruption to local communities and financial
markets. Another resolution option, open bank
assistance transactions, generally can only be
used in the event the bank’s failure would result
in systemic risk.
The receivership process involves performing the closing functions at the failed institution, liquidating any remaining failed institution
assets, and distributing any proceeds of the liquidation to the FDIC and other creditors of the
receivership. In its role as receiver, the FDIC
has used a wide variety of strategies and tools to
manage and sell retained assets. These include,
but are not limited to asset sale and/or management agreements, partnership agreements, and
securitizations.

FDIC 2009 Annual Report

Financial Institution Failures
The FDIC experienced a significant increase
in the number and size of institution failures as
compared to previous years. During 2009, 140
financial institutions failed. For the institutions
that failed, the FDIC successfully contacted all
known qualified and interested bidders to market
these institutions. Additionally, the FDIC marketed over 80 percent of the marketable assets of
these institutions at the time of failure and 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 2007–2009
Dollars in Billions

2009

Total Institutions

2008

2007

140

25

3

Total Assets of Failed
Institutions*

$169.7

$371.9

$2.6

Total Deposits of Failed
Institutions*

$137.1

$234.3

$2.4

$35.6

$19.8

$0.2

Estimated Loss to the DIF

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

marketed to be sold within 90 days of an institution’s failure.
Structured asset sales in 2009 included
$1.3 billion of residential loans from Franklin
National Bank. This transaction involved FDICguaranteed purchase money debt, and equity
in a Limited Liability Company (LLC) shared
between the receiver and the successful bidder.
The Corus Construction Venture LLC structured asset sale consisted of $4.5 billion of condominium and office construction loans from
Corus Bank. In this transaction, the FDIC structured the purchase money debt at an initial term
leverage of one-to-one to the bidders and structured the notes to be in the form of multiple bullet maturity notes guaranteed by the FDIC.
In 2009, the book value of assets under management increased by $26.2 billion to $41.4 billion. The following chart shows beginning and
ending balances of assets by asset type.

Assets in Inventory by Asset Type
Dollars in Millions

Asset Type

Securities

Assets in
Inventory
12/31/09

$467

$12,425

As part of its resolution process, the FDIC
makes every effort to sell as many assets as
p
­ ossible to an assuming institution and generally is successful in doing this. Assets that are
passed to the receivership are evaluated, and
those that are determined to be marketable are

I.  Management’s Discussion and Analysis



204

475

Commercial Loans

Asset Management and Sales

Consumer Loans

Assets in
Inventory
01/01/09

2,985

4,423

Real Estate Mortgages

9,808

15,613

Other Assets/Judgments

703

4,096

Owned Assets

832

3,257

Net Investments in Subsidiaries
Total

108

1,066

$15,107

$41,355

45

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 estate. In 2009, the number of
receiverships under management increased by
74 percent due to the increase in failure activity.
The following chart shows overall receivership
activity for the FDIC in 2009.

Receivership Activity
Active Receiverships as of 01/01/09*
New Receiverships
Receiverships Inactivated
Active Receiverships as of 12/31/09*

49
140
2
187

*Includes eight FSLIC Resolution Fund receiverships.

Minority and Women Owned Businesses
The significant increase in the number of
financial institution failures over the last two
years has resulted in the FDIC’s increased reliance on contractors to assist in resolving receiverships created from failed financial institutions
and liquidating their assets. In 2009, the FDIC
made 1,212 contract awards totaling $2.66 billon;
376 (31%) of those awards, valued at $862 million
(32%), were to minority and women-owned businesses (MWOBs). The FDIC promotes the inclusion of MWOBs in its procurement program,
which relies on competitive bidding by invita-

46

tion. The FDIC conducts outreach to encourage
and inform MWOBs about the procurement process and opportunities for prime and subcontract
awards. For 2010, the FDIC seeks to increase the
number of awards and dollar value of the awards
made to MWOBs in all racial, gender, and ethnic
categories in the financial services industry.

Protecting Insured Depositors
With the increase in failure activity in 2009,
the FDIC’s focus on protecting deposits in institutions that fail was of critical importance. Confidence in the banking system hinges on deposit
insurance, and no insured deposits went unpaid
in 2009.
The FDIC’s ability to attract healthy institutions to assume deposits and purchase assets
of failed banks and savings associations at the
time of failure minimizes the disruption to customers and allows assets to be returned to the
private sector immediately. Assets remaining
after resolution are liquidated by the FDIC in an
orderly manner, and the proceeds are used to pay
creditors, including depositors whose accounts
exceeded the insurance limit. Effective October
3, 2008, through December 31, 2009, the standard
maximum deposit insurance amount increased
from $100,000 to $250,000, and this increase
was later extended to December 31, 2013. During
2009, the FDIC paid dividends of $21.0 million to
depositors whose accounts exceeded the insured
limit(s).

Professional Liability and Financial
Crimes Recoveries
The FDIC staff works to identify potential
claims against directors, officers, accountants,
appraisers, attorneys, and other professionals

FDIC 2009 Annual Report

who may have contributed to the failure of an
insured financial institution. Once a claim is
deemed meritorious and cost-effective to pursue, the FDIC initiates legal action against the
appropriate parties. During the year, the FDIC
recovered approximately $53.5 million from
these professional liability claims/settlements.
In addition, as part of the sentencing process for
those convicted of criminal wrongdoing against
institutions that later failed, a court may order a
defendant to pay restitution or to forfeit funds or
property to the receivership. The FDIC, working in conjunction with the U.S. Department of
Justice, collected $5.5 million in criminal restitutions and forfeitures during the year. At the
end of 2009, the FDIC’s caseload was composed
of 25 professional liability lawsuits (up from 17
at year-end 2008) and 1,878 open investigations
(up from 284). There also were 3,379 active restitution and forfeiture orders (up from 638 at
year-end 2008). This includes 190 FSLIC Resolution Fund orders—i.e., orders inherited from
the Federal Savings and Loan Insurance Corporation on August 10, 1989, and orders inherited
from the Resolution Trust Corporation on January 1, 1996.

Effective Management of
Strategic Resources

The FDIC recognizes that it must effectively
manage its human, financial, and technological
resources in order to successfully carry out its
mission and meet the performance goals and targets set forth in its annual performance plan. The
Corporation must align these strategic resources
with its mission and goals and deploy them where
they are most needed in order to enhance its

I.  Management’s Discussion and Analysis



operational effectiveness and minimize potential
financial risks to the DIF.

Human Capital Management
The FDIC’s human capital management programs are designed to recruit, develop, reward,
and retain a highly skilled, cross-trained,
diverse, and results-oriented workforce. In 2009,
the FDIC stepped up workforce planning and
development initiatives that emphasized hiring
the additional skill sets needed to address the
greatly increased number of financial institution
failures and institutions in at-risk categories. The
Corporation also deployed a number of strategies
to more fully engage all employees in advancing
the FDIC’s mission.

Succession Management
In 2009, the Corporation significantly expanded its education and training curriculum for
employees in the business lines, support functions, and leadership development. Additionally,
learning and development was supplemented and
supported with the expansion of e-learning, job
aids, and tool kits that were made available to new
and tenured employees to facilitate work processes and overall efficiencies.
A leadership development curriculum was
launched to expand opportunities to all employees, including newly-hired employees. This new
curriculum takes a comprehensive approach,
aligning leadership development with critical
corporate goals and objectives, and promotes
desired culture. By developing employees across
the span of their careers, the Corporation builds
a culture of leadership and further promotes a
leadership succession strategy.

47

human resources resulting
from the increased number
of failed financial institutions and the volume of additional examinations. Among
these strategies, the FDIC
reemployed over 200 retired
FDIC examiners, attorneys,
resolutions and receiverships
specialists, and support personnel; hired employees of
failed institutions in temporary and term positions;
Senior leaders meet with CEDP participants to discuss their first year (l to r): Rich Brown, Rex Taylor,
recruited mid-career examinMaureen Sweeney, Laura Lapin, Kathy Norcross, Mickey Collins, Steve Mosier, Rus Pittman, Erica
ers who had developed their
Bovenzi, Andrew Stirling, Bob Mooney, and Ira Kitmacher. Executive advisors and host supervisors not
shown: Glen Bjorklund, Jim LaPierre, and Lisa Roy.
skills in other organizations;
recruited term loan review
specialists and compliance analysts from the
Also in 2009, the Corporation completed a
private sector; and redeployed current FDIC
pilot Corporate Executive Development Proemployees with the requisite skills from other
gram. This comprehensive 18-month succession
parts of the Corporation.
program provided a formalized process to idenAs the number of failed financial institutions
tify and develop high-performing, high-potential
proliferated in 2009, the FDIC Board authorized
supervisors and senior technical specialists. Pilot
the opening of two temporary satellite officresults are being evaluated and will be leveraged
es on both the west coast and the east coast to
in future succession management strategies and
bring resources in areas hit especially hard. The
decisions.
West Coast Temporary Satellite Office opened
Additionally, the Corporation formalized its
in Irvine, California, in early spring and as of
Master of Business Administration (MBA) proyear-end had over 400 employees with a target
gram for Corporate Managers and Executive
of over 500. The East Coast Temporary Satellite
Managers, in conjunction with a major university.
Office opened in Jacksonville, Florida, in the
The evaluation results of the pilot MBA program
fall. Although the Corporation is still recruiting
were overwhelmingly positive, and participants
for this office, eventually it too will have over
provided explicit examples of direct application
500 employees. The Corporation also increased
to their jobs and improved strategic thinking.
resolutions and receiverships staff in the Dallas
regional office. Almost all of the new employees
Strategic Workforce Planning and Readiness
in these new offices have been hired on a nonThe FDIC utilized a number of employment
permanent basis to handle the temporary increase
strategies in 2009 to meet the need for additional

48

FDIC 2009 Annual Report

in bank closing and asset management activities
expected over the next two to four years. To staff
these offices and meet other needs brought on by
the financial crisis, the Corporation hired nearly
1,800 additional employees in 2009. The use of
term appointments will allow the FDIC staff to
return to an adjusted normal size once the crisis
is over without the disruptions that reductions in
permanent staff would cause.
The FDIC continued its efforts to build workforce flexibility and readiness by increasing its
entry-level hiring into the Corporate Employee
Program (CEP). The CEP is a multi-year development program designed to cross-train new
employees in the FDIC’s major business lines.
In 2009, 206 new business line employees (736
since program inception) entered the multidisciplined program. At its largest participant
capacity since inception, the CEP continues to
provide a foundation across the full spectrum
of the Corporation’s business lines, allowing for
greater flexibility to respond to changes in the
financial services industry and in meeting the
Corporation’s staff needs. As in years past, the
program continues to provide the FDIC those
flexibilities as program participants were called
upon to assist with both bank examination and
bank closing activities based on the skills they
obtained through their program requirements
and experiences.

Employee Engagement
The FDIC continually evaluates its human
capital programs and strategies to ensure that
the Corporation remains an employer of choice
and that all of its employees are fully engaged
and aligned with its mission. The FDIC’s annual
employee survey incorporates and expands on

I.  Management’s Discussion and Analysis



the Federal Human Capital Survey mandated by
Congress. A corporate Culture Change Initiative
was instituted in 2008 to address issues resulting
from the survey.
The Culture Change Initiative has continued
to gain momentum, and progress is occurring
toward completion of goals identified in the Culture Change Strategic Plan. The 2008 employee
survey results showed marked improvement in
the areas of opportunity, while maintaining or
improving on areas of strength. The Corporation
worked with the National Treasury Employees’
Union to develop a new pay-for-performance system that is perceived to be more transparent and
fair to employees. The new system was implemented in 2009. Also in 2009, the Corporation
delivered training to its Corporate Managers on
trust. It offered leadership enrichment activities
that provided continual learning. Culture Change
dialogue sessions were held across the country,
with approximately 5,500 employees participating. Analysis indicates a positive response to these
events and a willingness to engage in the change
process. The question-and-answer mailbox and
quarterly all-employee teleconferences with the
Chairman continued so that employees could provide input, make suggestions, and ask questions.
The next phase of the Initiative was started
in September 2009 with the selection of a new
Program Manager. The Internal Ombudsman
Program, initiated as part of the Culture Change
Initiative, continued, providing another avenue
for following up on employee issues. The Culture Change Council is being reconstituted, with
at least six former Council and Team members
returning to ensure continuity and up to six new
members being selected. Best practices in public
and private sector organizations on sustaining

49

culture and organizational change were studied
in 2009 and will be summarized, with recommendations made on sustaining the FDIC’s Culture Change Initiative.

Employee Learning and Growth
The FDIC offers a range of learning and
growth opportunities to meet the varied needs
of its employees. It uses innovative solutions
to prepare new and existing employees for the
challenges ahead. By streamlining existing
courses, promoting blended learning, and creating online just-in-time toolkits and job aids,
the FDIC has allowed new employees to more
quickly and thoroughly assume their job functions. In order to meet the 2009 learning needs of
new employees, the FDIC responded with flexible course scheduling and additional instructorled and ­ omputer-based courses, including the
c
new Continuing Professional Education Centre,
which allows employees to more easily maintain their Certified Public Accountant accreditation and other certifications, despite increased
workloads.
The Corporation dealt with new challenges in
2009 and supported employees by providing justin-time training to address specific issues, such
as managing and selling an ever increasing number of loans acquired from failed institutions. To
better prepare employees to perform this task,
the FDIC undertook a multi-pronged approach
that consisted of online presentations, online
job aids, online simulations, and instructor-led
courses. The Corporation focused its efforts on
providing multiple points of access to learning
delivered quickly and with the least disruption to
ongoing work activities.

50

To provide additional flexibility in employee
learning and growth, the FDIC assisted in meeting the challenge of increased activity by locating training facilities within satellite offices in
Jacksonville and Irvine. This helped to ensure
that necessary training could be provided locally, reducing the need for employee travel.
In 2009, the Corporation provided its employees with over 100 instructor-led courses and 600
web-based courses in support of varied mission
requirements. There were over 7,000 instances
of completed instructor-led courses and 18,000
instances of completed web-based courses.

Information Technology Management
Information technology (IT) resources are one
of the most valuable assets available to the FDIC
in fulfilling its corporate mission. In today’s rapidly changing business environment, technology
is frequently the foundation for achieving many
FDIC business goals, especially those addressing efficiency and effectiveness in an industry
where timely and accurate communication and
data are paramount for supervising institutions,
resolving institution failures, and monitoring
associated risks in the marketplace.
During 2009, the FDIC was faced with many
challenges stemming from the economic downturn and its historic impact on the financial
indus­ ry. To help meet those challenges, the FDIC
t
continued to leverage innovative, timely, reliable,
and secure IT products and services to meet priority business drivers and adapt to a myriad of
new financial programs.

Enterprise Architecture
The overall vision of the FDIC’s enterprise
architecture is to provide an efficient, agile, flex-

FDIC 2009 Annual Report

ible and cost-effective environment that supports
the corporate strategic goals and objectives for
the FDIC and its customers. During 2009, modernization of the infrastructure continued. Also
a roadmap of the security architecture was developed with functionality based on global industry standards, which will facilitate the sharing
of information and resources, while protecting
access to sensitive and privacy information.

Improving Application Systems
In 2009, the FDIC enhanced several application systems that support the FDIC’s business,
including the:
•	 Assessment Information Management
S
­ ystem—used to calculate, collect, and
account for the quarterly assessment premiums paid by insured financial institutions;
•	 Central Data Repository—used in the collection and management of call report data from
the U.S. financial institutions;
•	 New Financial Environment—state-of-theart financial system; and
•	 Risk Related Premium System—provides
core business functionality related to deposit
insurance risk premium calculations for individual financial institutions.

chosen as recipients of the “Excellence Award for
Open Source Business Use in Government” in
the category of “Safe Computing Environment”
at the 2009 Government Open Source Conference. The award recognized government employees or teams for significant accomplishments in
Open Source ­ echnology that meet government
T
business or mission requirements.

Securing the FDIC Through Strong
Privacy Initiatives
The FDIC continued to strengthen privacy by
providing a risk-based, enterprise-wide Privacy
Program that maintains and builds public trust,
and is based on sound privacy practices in compliance with applicable laws. In 2009, the FDIC
experienced a significant increase in bank closing activities. As a result, the FDIC performed a
number of Corporate-wide initiatives to increase
the identification, protection, and control of personally identifiable information.

Security Outreach, Education,
and Awareness
The FDIC worked collectively with the U.S.
Department of Agriculture and the Department
of Education’s Office of Federal Student Aid on
the OpenFISMA (Federal Information Security
Management Act) Interagency Initiative. This
initiative developed a system to track vulnerabilities that affect the security of systems and applications. The FDIC and these departments were

I.  Management’s Discussion and Analysis



51

II.  Financial Highlights

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.)
The DIF’s comprehensive loss totaled $38.1
billion for 2009 compared to a comprehensive
loss of $35.1 billion for the previous year. As a
result, the DIF balance declined from $17.3 billion to negative $20.9 billion as of December 31,
2009. The year-over-year increase of $3.0 billion
in comprehensive loss was primarily due to a
$15.9 billion increase in the provision for insurance losses, a $4.0 billion increase in the unrealized loss on U.S. Treasury (UST) investments,
and a $1.4 billion decrease in the interest earned
on UST obligations, partially offset by a $14.8
billion increase in assessment revenue and a $3.1
billion increase in other revenue (primarily from
guarantee termination fees and debt guarantee
surcharges).
The provision for insurance losses was $57.7
billion in 2009. The total provision consists primarily of the provision for future failures ($20.0
billion) and the losses estimated at failure for the
140 resolutions occurring during 2009 ($35.6
billion).
Assessment revenue was $17.7 billion for
2009. This is a $14.8 billion increase from
2008, and is due to the collection of a $5.5 billion special assessment in September 2009 and
significantly higher regular assessment revenue.

52

Estimated DIF Insured Deposits
Dollars in Billions
$6,000
5,000
4,000
3,000
2,000
1,000
0

Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09

Source: Commercial Bank Call and Thrift Financial Reports

Deposit Insurance Fund Reserve Ratios
Fund Balances as a Percent of Insured Deposits

1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
–0.10
–0.20
–0.30
–0.40
–0.50

Sep-07 Dec-07 Mar-08 Jun-08

Sep-08

Dec-08

Mar-09

Jun-09 Sep-09 Dec-09

FDIC 2009 Annual Report

Deposit Insurance Fund Selected Statistics
Dollars in Millions

For the years ended December 31
2009

2008

2007

$24,706

$7,306

$3,196

1,271

1,033

993

59,438

43,306

98

Net (Loss) Income

(36,003)

(37,033)

2,105

Comprehensive (Loss) Income

(38,138)

(35,137)

2,248

($20,862)

$17,276

$52,413

Financial Results
Revenue
Operating Expenses
Insurance and Other Expenses (includes provision for loss)

Insurance Fund Balance
Fund as a Percentage of Insured Deposits (reserve ratio)

(0.39)%

0.36%

1.22%

Selected Statistics
Total DIF-Member Institutions*
Problem Institutions
Total Assets of Problem Institutions
Institution Failures
Total Assets of Failed Institutions in Year**
Number of Active Failed Institution Receiverships

8,012

8,305

8,534

702

252

76

$402,782

$159,405

$22,189

140

25

3

$169,709

$371,945

$2,615

179

41

22

*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.

Major factors contributing to the increase in
regular assessment revenue included changes to
the risk-based assessment regulations, ratings
downgrades of many institutions (which pushed
them into higher assessment rate categories), the
decline of the one-time assessment credit, and a
larger assessment base.
Although the DIF ended the year with a
negative $20.9 billion fund balance, the DIF’s
liquidity was significantly enhanced by prepaid assessment inflows of $45.7 billion. Cash
and marketable securities stood at $66.0 billion
at year-end, including $6.4 billion in cash and

II.  Financial Highlights



marketable securities related to the Temporary
Liquidity Guarantee Program (TLGP). Hence,
the DIF is well positioned to fund resolution
activity in 2010 and beyond. The prepaid assessments, while increasing DIF cash upon receipt,
did not initially affect the fund balance, since
the funds collected were initially recorded as an
offsetting liability; they are subsequently recognized quarterly as revenue when earned.

Corporate Operating Budget
The FDIC segregates its corporate operating budget and expenses into two discrete com-

53

ponents: ongoing operations and receivership
funding. The receivership funding component
represents expenses resulting from financial
institution failures and is, therefore, largely driven by external forces, while the ongoing operations component accounts for all other operating
expenses and tends to be more controllable and
estimable. Corporate Operating expenses totaled
$2.33 billion in 2009, including $1.24 billion in
ongoing operations and $1.10 billion for receivership funding (numbers do not sum due to rounding). This represented approximately 98 percent
of the approved budget for ongoing operations
and 84 percent of the approved budget for receivership funding for the year. (The numbers above
will not agree with the DIF and FRF financial
statements due to differences in how items are
classified.)
Given the recent challenges facing the industry, as evidenced in the overall CAMELS deterioration and an up-tick in financial institution
failure activity, the FDIC is determined to ensure
that it is adequately prepared to effectively fulfill
its mission in 2010. Consequently, in December
2009, the Board of Directors approved a 2010
Corporate Operating Budget of approximately
$3.99 billion, consisting of $1.49 billion for
ongoing operations and $2.50 billion for receivership funding. The level of approved ongoing
operations budget is approximately $254 million
(20.5 percent) higher than actual 2009 ongoing
operations expenses, while the approved receivership funding budget is $1.40 billion (127.8 percent) higher than the $1.10 billion of actual 2009
receivership funding expenses.
As in prior years, the 2010 budget was formulated primarily on the basis of an analysis of
projected workload for each of the Corporation’s

54

three major business lines and its major program
support functions. The most significant factor contributing to the proposed increase in the
ongoing operations component is the projected
increase in the Corporation’s supervisory workload in 2010 and the planned staffing increases
in the Division of Supervision and Consumer
Protection (DSC) to address that workload. The
2010 ongoing operations budget also includes
increased funds for additional resolutions staff,
travel, office space, and equipment for these
additional staff. Under this budget, the Corporation will focus largely on its core mission responsibilities in 2010 and will not devote significant
resources to new discretionary activities. In
addition, the 2010 receivership funding budget
allows for substantially increased resources for
contractor support as well as non-permanent
increases in authorized staffing for the Division
of Resolutions and Receiverships, the Legal Division, and other organizations should workload
requirements in these areas require an immediate response.

Investment Spending

The FDIC instituted a separate Investment
Budget in 2003. It has a disciplined process for
reviewing proposed new investment projects and
managing the construction and implementation
of approved projects. All of the projects in the
current investment portfolio are major IT system
initiatives. Proposed IT projects are carefully
reviewed to ensure that they are consistent 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

FDIC 2009 Annual Report

Investment Spending 2003−2009
Dollars in Millions
$120

$108
100

80

$62
60

40

$27

$25

20

0

$26
$12

2003

2004

2005

2006

2007

$6
2008

2009

throughout the development process. An investment portfolio performance review is provided
to the FDIC’s Board of Directors quarterly.
The Corporation undertook significant capital investments during the 2003–2009 period,
the largest of which was the expansion of its
Virginia Square office facility. Other projects
involved the development and implementation of
major IT systems. Investment spending totaled
$266 million during this period, peaking at $108
million in 2004. Spending for investment projects in 2009 totaled approximately $6.1 million.
In 2010, investment spending is estimated to
total $1.1 million.

II.  Financial Highlights



55

III.  Performance Results Summary

Summary of 2009 Performance
Results by Program

The FDIC successfully achieved 45 of the 46
annual performance targets established in its
2009 Annual Performance Plan. The one goal
that was not achieved involved the inadvertent
inclusion of “3-rated” institutions in the requirement for follow-up within 12 months. There were

no instances in which 2009 performance had a
material adverse effect on successful achievement of the FDIC’s mission or its strategic goals
and objectives regarding its major program
responsibilities.
Key accomplishments by program are highlighted in the table below.

Program Area

Insurance

56

Performance Results

•	 Uniformly raised deposit insurance assessment rates effective January 1, 2009, by 7 basis points.
•	 In February 2009, extended the Restoration Plan to 7 years due to the extraordinary circumstances facing the banking industry. In May, Congress revised the law to require the reserve ratio to be restored to 1.15 percent within 8 years
absent extraordinary circumstances. In September, the Board amended the amended Plan to extend the restoration
period to 8 years.
•	 Finalized improvements to the risk-based pricing system, including adding various financial ratios to the large bank
method used to determine premium rates for large institutions and adjusting all institutions’ premium rates for unsecured debt and for significant reliance on brokered deposits or secured liabilities. Also widened the range of rates
paid by institutions in each risk category.
•	 Imposed a special assessment of 5 basis points on each institution’s assets less Tier I capital effective June 30, 2009.
•	 Extended period to issue guaranteed debt through the TLGP to October 31, 2009, extended term of guarantee from
June 30, 2012, to December 31, 2012, and imposed surcharges on any debt issued April 1, 2009, or later.
•	 Issued a final rule extending the Transaction Account Guarantee Program component of the TLGP from December 31,
2009, to December 31, 2010, and gave participating institutions a one-time opportunity to opt out. Raised fees and
made them risk-based depending upon an institution’s deposit insurance risk category.
•	 Conducted semiannual reviews of the Contingent Loss Reserve (CLR) methodology through an analysis of the variance between projected and actual losses. As a result, substantive changes were made during late 2008 and into
2009 to improve the accuracy of the CLR calculation.
•	 Established a Designated Reserve Ratio of 1.25 percent for 2010, in accordance with the provisions of the deposit
insurance reform legislation.
•	 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 in support of legislative efforts to reform 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.
•	 Conducted numerous outreach activities to bankers, trade groups, community groups, other regulators, and foreign
visitors addressing economic and banking risk analysis.
•	 Completed risk assessments and LIDI Scorecards for all large insured depository institutions and followed up on all
identified concerns through off-site review and analysis.
•	 Increased on-site presence at large complex institutions to assess risk, monitor liquidity, and participate in targeted
reviews with the primary federal regulators.
•	 Continued to develop the Legacy Loans Program to be prepared to offer this program to support the credit needs of
the economy.
•	 Answered 99 percent of inquiries from consumers and bankers about FDIC deposit insurance coverage within 14
days.

FDIC 2009 Annual Report

Program Area

Performance Results

Insurance
(continued)

•	 Continued and expanded the FDIC’s public education campaign to increase awareness of FDIC deposit insurance
coverage.
•	 Conducted 25 deposit insurance seminars for bankers, including 6 national teleconferences, on FDIC deposit insurance coverage. These seminars reached more than 35,000 bankers.
•	 Worked with several national consumer organizations to secure commitments to feature FDIC deposit insurance
information on their websites and in newsletters, and to disseminate such information at their conferences and
events.
•	 Electronic Deposit Insurance Estimator user sessions for 2009 totaled 699,277.
•	 Expanded avenues for publicizing deposit insurance rules and resources by:
o	 Enhancing the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to incorporate new functionality that allows
users to (1) confirm whether their bank is FDIC-insured while within the EDIE application, and (2) calculate insurance coverage for deposits held by revocable trusts with more than five beneficiaries/over $1.25 million at one
institution.
o	 Producing updated versions of two videos on deposit insurance coverage: (1) a 30-minute video for consumers
and new bank employees and (2) a 95-minute seminar for bankers who answer coverage questions for depositors.
o	 Producing two consumer brochures on deposit insurance coverage.
These resources are available in multiple languages. The videos are available on the FDIC’s web site and YouTube channel, and are downloadable for multi-media applications.

Supervision
and Consumer
Protection

•	 Conducted 2,604 risk management (safety and soundness) examinations, including required follow-up examinations
of problem institutions, within prescribed time frames.
•	 Conducted 1,981 compliance and Community Reinvestment Act examinations, including required follow-up examinations of problem institutions, within prescribed time frames.
•	 Conducted 2,698 Bank Secrecy Act examinations, including required follow-up examinations and visitations.
•	 Conducted 2,780 IT examinations of financial institutions and technology service providers.
•	 Worked with other federal banking regulators and the Basel Committee on Banking Supervision to develop proposals
to strengthen capital and liquidity requirements.
•	 Published a final rule amending the annual audit, audit committee, and related reporting requirements applicable to
insured depository institutions with $500 million or more in total assets.
•	 Published Notice of Proposed Rulemaking for the Secure and Fair Enforcement for Mortgage Licensing Act of 2008
and posted the draft final guidance to the FDIC web site to implement provisions applicable to mortgage loan originators employed by insured depositories. Staff continued rule writing and other preparatory activities related to
implementing these new regulations.
•	 Published the Supervisory Insights journal to contribute to and promote sound principles and best practices for bank
supervision.
•	 Among other releases, issued Financial Institution Letters (FILs) providing guidance on: (1) managing commercial real
estate concentrations; (2) liquidity risk management; (3) the use of volatile funding sources by financial institutions in
weakened condition; (4) enhanced supervisory procedures for newly insured FDIC-supervised depository institutions;
and (5) reminding institutions that if, for risk management purposes, they decide to reduce or suspend home equity
lines of credit, they must comply with certain legal requirements. In addition, six disaster-related FILs were issued.
•	 Issued industry notification of two interagency releases regarding conducting Cross-Border Funds Transfers and
Examination Procedures for compliance with the Unlawful Internet Gambling Enforcement Act.
•	 Issued updated interagency guidance on the Community Reinvestment Act (CRA), and requested comment on new
proposed guidance. Issued an interagency proposal to amend the CRA regulation to implement statutory requirements relating to student loans and activities in cooperation with minority- and women-owned financial institutions
and low-income credit unions.

III.  Performance Results Summary



57

Program Area

Supervision
and Consumer
Protection
(continued)

•	 Released interagency guidance on the 2009 Identity Theft Red Flags regulations; issued updated guidance on flood
insurance mandatory purchase requirements and requested comment on additional proposed guidance; joined
seven other federal agencies in releasing a model privacy notice form based on extensive consumer testing; requested comment on supervisory guidance on reverse mortgages.
•	 Consumer research function supported supervision activities on fair lending, enforcement actions, the unbanked
and underbanked survey, and supported efforts of the Advisory Committee on Economic Inclusion (ComE-In) policy
initiatives of the Corporation.
•	 Alerted banks to new statutory requirements to protect tenants occupying foreclosed properties; issued three FILs
notifying institutions of significant changes to the Truth in Lending Act and the Federal Reserve Board’s Regulation Z
(which implements that Act); and reminded institutions of the dramatically revised Real Estate Settlement Procedures
Act regulation issued by the Department of Housing and Urban Development.
•	 Expanded the AEI initiative to two additional markets, bringing the total number of active AEI markets to 14. Additionally, FDIC worked closely during 2009 to provide technical assistance and support to several communities in
forming coalitions patterned after the AEI.
•	 Hosted or co-hosted over 104 events to help consumers and the banking industry avoid unnecessary foreclosures
and stop foreclosure “rescue” scams that promise false hope to consumers at risk of losing their homes.
•	 Conducted over 200 outreach and technical assistance events for bankers and community groups to promote awareness of community investment opportunities, access to capital, knowledge-sharing between the public and private
sectors, and wealth-building opportunities for families.
•	 Continued to disseminate the award-winning Money Smart financial education curriculum in seven languages,
including releasing a Hmong language version and the Money Smart Podcast Network, a portable audio version of
Money Smart suitable for use with virtually all MP3 players. Over 200 financial education-related outreach activities
were conducted in 2009 and 50 new Money Smart Alliance added. Financial education best practices were shared
through four published editions of Money Smart News, which reached over 40,000 subscribers.
•	 In 2007, the FDIC released findings from a longitudinal evaluation of the Money Smart curriculum on adults. The
FDIC initiated in the fourth quarter of 2009, a multi-year project that is designed to measure the effectiveness of the
Money Smart for Young Adults curriculum. This survey project is intended to provide research data that will be useful
for educators and others involved in youth financial education, as well as inform the FDIC’s curriculum development
efforts. Progress during 2009 included background research and outreach to external stakeholders who we hope will
participate.
•	 Responded to 96 percent of consumer complaints about FDIC-supervised banks within time frames required by
policy, and acknowledged 100 percent of all consumer complaints and inquiries within 14 days.
•	 Implemented an initiative to make the award-winning FDIC Consumer News available to the public in an audio format
on FDIC.gov and YouTube. Also converted the FDIC’s consumer video on identity theft, Don’t Be An On-line Victim, to a
YouTube-compatible format and placed the video on the FDIC’s YouTube channel. All video and audio files are available for download to multimedia applications in various formats including MP3, WAV, and MP4.

Receivership
Management

58

Performance Results

•	 Successfully closed 140 failed institutions and ensured customers had access to insured deposits within one business
day.
•	 Adopted a final rule requiring the largest insured depository institutions to adopt mechanisms that would, in the
event of the institution’s failure: (1) provide the FDIC with standard deposit account and other customer information;
and (2) allow the placement and release of holds on liability accounts, including deposits.
•	 Achieved a primary goal of the Investigations Unit to make a decision to either close or to pursue professional liability
claims on 80 percent of all investigative claim areas within 18 months of an institution’s failure date.
•	 Identified and implemented program improvements to ensure efficient and effective management of the contract
resources used to perform receivership management functions.
•	 Marketed at least 90 percent of the book value of a failed institution’s marketable assets within 90 days of the institution’s failure.
•	 Terminated at least 75 percent of new receiverships within three years of the date of failure.

FDIC 2009 Annual Report

2009 Budget and Expenditures
by Program
(Excluding Investments)
The FDIC budget for 2009 totaled $2.56 billion. Excluding $185 million, or 7 percent, for
Corporate General and Administrative expenditures, budget amounts were allocated to corporate programs as follows: $178 million, or 7
percent, to the Insurance program; $776 million,
or 30 percent, to the Supervision and Consumer

Protection program; and $1.42 billion, or 56 percent, to the Receivership Management program.
Actual expenditures for the year totaled $2.33
billion. Excluding $140 million, or 6 percent, for
Corporate General and Administrative expenditures, actual expenditures were allocated to programs as follows: $233 million, or 10 percent, to
the Insurance program; $723 million, or 31 percent, to the Supervision and Consumer Protection program; and $1.24 billion, or 53 percent, to
the Receivership Management program.

2009 Budget and Expenditures (Support Allocated)
Dollars in Millions
$1,600
1,400
Budget

1,200

Expenditures

1,000
800
600
400
200
0 

III.  Performance Results Summary

Insurance
Program



Supervision and
Consumer Protection
Program

Receivership
Management
Program

General and
Administrative

59

Performance Results by Program and Strategic Goal
2009 Insurance Program Results

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

Annual Performance Goal

Indicator

Target

Results

1

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

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

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

Achieved.
See pgs. 45, 58.

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

Achieved.
See pg. 45.

Insured depositor losses resulting from a
financial institution failure.

There are no depositor losses on insured
deposits.

Achieved.
See pg. 45.

No appropriated funds are required to pay
insured depositors.

Achieved.
See pg. 45.

Insurance risks posed by insured depository
institutions.

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

Achieved.
See pg. 24.

Concerns referred for examination or other
action.

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

Achieved.
See pg. 24.

Emerging risks to the DIF.

Identify and analyze existing and emerging
areas of risk.

Achieved.
See pgs. 24, 56.

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

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

Achieved.
See pg. 56.

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

Achieved.
See pg. 56.

2

3

Identify and address risks to
the DIF.

Disseminate data and analyses on issues and risks affecting the financial services
industry to bankers, super­
visors, the public, and other
stakeholders.

60

FDIC 2009 Annual Report

#

4

Annual Performance Goal

Indicator

Effectively administer temporary financial stability
programs.

Administration of the Temporary Liquidity
Guarantee Program (TLGP).

Target

Results

Provide liquidity to the banking system by
guaranteeing noninterest-bearing transaction
deposit accounts and new senior unsecured
debt issued by eligible institutions under the
TLGP.

Achieved.
See pgs. 14-17.

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

Achieved.
See pg. 17.

Administration of the Capital Purchase
P
­ rogram (CPP).

Implementation of the Legacy Loans Program
(LLP).

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

Enhance the risk-based pricing system.

Maintain and improve the
deposit insurance system.

Expeditiously implement procedures for the
Achieved.
LLP, including the guarantee to be provided for See pg. 56.
debt issued by Public Private Investment Funds,
and provide information to financial institutions
and private investors potentially interested in
participating.

Oversight of the use of financial stability
resources by FDIC-supervised institutions.

5

Substantially complete by September 30, 2009, Achieved.
the review of and recommendations to the
See pg. 27.
Department of the Treasury on CPP applications
from FDIC-supervised institutions.

Adopt and implement revisions to the pricing
Achieved.
regulations that provide for greater risk differSee pg. 18.
entiation among insured depository institutions
reflecting both the probability of default and
loss in the event of default.
Revise the guidelines and enhance the additional risk measures used to adjust assessment
rates for large institutions.

Achieved.
See pg. 27.

Achieved.
See pg. 56.

Loss reserves.

Fund adequacy.



Set assessment rates to restore the insurance
fund reserve ratio to at least 1.15 percent of
estimated insured deposits by year-end 2015.

Achieved.
See pgs. 18-19.

Monitor progress in achieving the restoration
plan.

III.  Performance Results Summary

Enhance the effectiveness of the reserving
Achieved.
methodology by applying sophisticated analyti- See pg. 56.
cal techniques to review variances between
projected losses and actual losses, and by
adjusting the methodology accordingly.

Achieved.
See pg. 19.

61

#

Annual Performance Goal

6

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.

Indicator

Target

Results

Public education campaign to increase
awareness of deposit insurance changes and
expected 2010 changes.

Conduct at least three sets of Deposit Insurance Seminars/teleconferences per quarter for
bankers.

Achieved.
See pg. 57.
Achieved.
See pg. 57.

Expand avenues for publicizing deposit insurance rules and resources to consumers through
a variety of media.
Expand and strengthen the
FDIC’s leadership role in providing technical guidance,
training, consulting services
and information to international governmental banking and deposit insurance
organizations.

Achieved.
See pg. 40.

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

7

Timeliness of responses to insurance coverage Respond to 90 percent of written inquiries from
inquiries.
consumers and bankers about FDIC deposit
insurance coverage within two weeks.

Achieved.
See pg. 57.

Undertake outreach activities to inform and
train foreign bank regulators and deposit
insurers.

Achieved.
See pg. 21.

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

Achieved.
See pgs. 21-24.

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

2009 Supervision and Consumer Protection Program Results
Strategic Goal: FDIC-supervised institutions are safe and sound.
#

Annual Performance Goal

Indicator

Target

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.

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

One hundred percent of required
risk management examinations
are conducted on schedule.

Achieved.
See pg. 26.

2

Take prompt and effective supervisory action to address
issues identified during the FDIC examination of FDICsupervised institutions that receive a composite Uniform
Financial Institutions Rating of “3”, “4”, or “5” (problem
institution). Monitor FDIC-supervised insured depository
institutions’ compliance with formal and informal enforcement actions.

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

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

Achieved.
See pg. 26.

3

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

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

One hundred percent of required
Bank Secrecy Act examinations
are conducted on schedule.

Achieved.
See pg. 26.

62

Results

FDIC 2009 Annual Report

#

4

Annual Performance Goal

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

Indicator

Target

Results

Preliminary results of new capi- Conduct analyses of early results
Achieved.
tal requirements.
of the performance of new capital See pgs. 29-31.
rules in light of recent financial
turmoil as information becomes
available.
Improvements to capital
requirements.

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

Achieved.
See pgs. 29-31.

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
5

Conduct on-site CRA and compliance examinations to
Percentage of examinations
assess compliance with applicable laws and regulations by conducted in accordance with
FDIC-supervised depository institutions.
statutory requirements and
FDIC policy.

One hundred percent of required
examinations are conducted on
schedule.

Achieved.
See pg. 26.

6

Take prompt and effective supervisory action to monitor
and address problems identified during compliance examinations of FDIC-supervised institutions that receive an
overall “3”, “4”, or “5” rating for compliance with consumer
protection and fair lending laws.

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

One hundred percent of followup examinations or visitations
are conducted within 12 months
from the date of an enforcement
action to confirm compliance
with the prescribed enforcement
action.

Not Achieved.
See pg. 26.

7

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

Establishment of supervisory
response programs to address
potential risks posed by new
consumer products.

Proactively identify and respond
to harmful or illegal practices
associated with evolving consumer products.

Achieved.
See pg. 34.

8

Educate consumers about their rights and responsibilities
under consumer protection laws and regulations.

Communications tools used to
educate consumers.

Expand use of media, such as the
Internet, videos, and MP3 downloads, to disseminate information
to the public on their rights and
responsibilities as consumers.

Achieved.
See pgs. 42-43.

9

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

Timely responses to written
complaints and inquiries.

Responses are provided to 95
percent of written complaints
and inquiries within time frames
established by policy, with all
complaints and inquiries receiving at least an initial acknowledgment within two weeks.

Achieved.
See pg. 40.

III.  Performance Results Summary



63

#

Annual Performance Goal

10 Provide effective outreach related to CRA, fair lending, and
community development.

Indicator

Target

Results

Number of outreach activities
conducted, including technical
assistance activities.

Conduct 50 technical assistance
(examination support) efforts
or banker/community outreach activities related to CRA,
fair lending, and community
development.

Achieved.
See pg. 43.

Expanded access to high quality financial education through
the Money Smart curriculum.

Evaluate the Money Smart initiatives and curricula for necessary
updates and enhancements, such
as games for young people, information on elder financial abuse,
and additional language versions,
if needed.

Achieved.
See pgs. 42-43.

Initiate a longitudinal survey
Achieved.
project to measure the effectiveSee pg. 58.
ness of the Money Smart for Young
Adults curriculum.
Support for expanded foreclosure prevention efforts for consumers at risk of foreclosure
(in partnership with NeighborWorks® America and other
organizations).

64

Achieved.
See pgs. 41-42.

Degree of success achieved in
bringing the unbanked/underserved into the financial mainstream through the Alliance for
Economic Inclusion (AEI).

Expand the number of AEI coalitions by two.

Achieved.
See pg. 36.

Results of pilot small-dollar
lending program conducted
by participating financial
institutions.

11 Continue to expand the FDIC’s national leadership role in
developing and implementing programs and strategies
to encourage and promote broader economic inclusion
within the nation’s banking system.

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

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

Achieved.
See pgs. 37-38.

FDIC 2009 Annual Report

2009 Receivership Management Program Results
Strategic Goal: Recovery to creditors of receiverships is achieved.
#

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. 45.

2

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

Percentage of failed institution’s assets marketed.

Ninety percent of the book value
of a failed institution’s marketable
assets is marketed within 90 days
of failure.

Achieved.
See pgs. 45, 58.

Enhancements to contract
management program.

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

Achieved.
See pg. 58.

3

Manage the receivership estate and its subsidiaries toward Timely termination of new
an orderly termination.
receiverships.

Terminate at least 75 percent of
new receiverships within three
years of the date of failure.

Achieved.
See pg. 58.

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 claims within 18 months of
the failure date.

Achieved.
See pg. 58.

III.  Performance Results Summary



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

65

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

Achieved.

Achieved.

Not Applicable.
No Failures.

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

Achieved.

Achieved.

Not Applicable.
No Failures.

•	 Complete rulemaking/review comments received in response to the Advance Notice of
Proposed Rulemaking on Large-Bank Deposit Insurance Determination Modernization.

Achieved.

Achieved.

Achieved.

•	 There are no depositor losses on insured deposits.

Achieved.

•	 No appropriated funds are required to pay insured depositors.
2.

2007

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

1.

2008

2006

Achieved.

Respond promptly to all financial institution closings and emerging issues.

Identify and address risks to the Deposit Insurance Fund (DIF).
•	 Assess the insurance risks in all insured depository institutions and adopt appropriate
strategies.

Achieved.

Achieved.

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

Achieved.

Achieved.

Achieved.

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

Achieved.

Achieved.

•	 Address potential risks from cross-border banking instability through coordinated review of Achieved.
critical issues and, where appropriate, negotiate agreements with key authorities.
3.

Achieved.

Achieved.

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

Achieved.

Achieved.

Achieved.

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

Achieved.

Achieved.

Achieved.

66

FDIC 2009 Annual Report

Annual Performance Goals and Targets

4.

2008

2006

Maintain and improve the deposit insurance system.
•	 Implement the new deposit insurance pricing system.
•	 Review the effectiveness of the new pricing regulations that were adopted to implement
the reform legislation.
•	 Complete and issue guidance on the pricing of deposit insurance for large banks.
•	 Enhance the additional risk measures used to adjust assessment rates for large institutions.
•	 Publish an ANPR seeking comment on a permanent dividend system.
•	 Develop and implement an assessment credit and dividends system and a new deposit
insurance pricing system.
•	 Develop a final rule on a permanent dividend system.
•	 Implement deposit insurance reform legislation in accordance with statutorily prescribed
time frames.
•	 Ensure/enhance the effectiveness of the reserving methodology by applying sophisticated
analytical techniques to review variances between projected losses and actual losses, and
by adjusting the methodology accordingly.
•	 Set assessment rates to maintain the insurance fund reserve ratio between 1.15 and 1.50
percent of estimated insured deposits.

5.

2007

Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.
Achieved.

Achieved.

Achieved.

Not Achieved.

Achieved.

Achieved.

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.
•	 Publish a comprehensive and authoritative resource guide for bankers, attorneys, financial
advisors and similar professionals on the FDIC’s rules and requirements for deposit insurance coverage of revocable and irrevocable trust accounts.
•	 Conduct at least three sets of Deposit Insurance Seminar Series for bankers.
•	 Conduct a series of national teleconferences for insured financial institutions to address
current questions and issues relating to FDIC insurance coverage of deposit accounts.
•	 Conduct outreach events and activities to support a deposit insurance education program
that features FDIC 75th anniversary theme.
•	 Update Insuring Your Deposits (basic deposit insurance brochure for consumers), Your
Insured Deposit (comprehensive deposit insurance brochure), and EDIE (Electronic Deposit
Insurance Estimator) on the FDIC’s web site to reflect changes resulting from enactment of
deposit insurance legislation.
•	 Assess the feasibility of (and if feasible, define the requirements for) a consolidated Electronic Deposit Insurance Estimator (EDIE) application for bankers and consumers (to be
developed in 2009).
•	 Develop and make available to the public an updated Spanish language version of EDIE
reflecting deposit insurance reform.
•	 Develop and make available to the public a Spanish language version of the FDIC’s
30-minute video on deposit insurance coverage.
•	 Respond to 90 percent of inquiries from consumers and bankers about FDIC deposit
insurance coverage within time frames established by policy.
•	 Respond to 90 percent of written inquiries within time frames established by policy.

III.  Performance Results Summary



Achieved.
Achieved.
Achieved.
Achieved.
Achieved.

Achieved.
Achieved.
Achieved.
Achieved.

Achieved.

Achieved.
Achieved.

67

Annual Performance Goals and Targets

2007

•	 Undertake outreach activities to inform and train foreign bank regulators and deposit
insurers.

Achieved.

Achieved.

•	 Foster strong relationships with international banking regulators and associations that promote sound banking supervision and regulations, failure resolution and deposit insurance
practices.

6.

2008

2006

Achieved.

Achieved.

2008

2007

2006

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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.

Supervision and Consumer Protection Program Results
Strategic Goal: FDIC-supervised institutions are safe and sound.
Annual Performance Goals and Targets

1.

Conduct on-site risk management examinations to assess the overall financial condition, management practices and policies, and compliance with applicable laws and regulations of FDICsupervised depository institutions.
•	 One hundred percent of required risk management examinations are conducted on
schedule.

2.

Take prompt and effective supervisory action to address problems identified during the FDIC
examination of FDIC-supervised institutions that receive a composite Uniform Financial Institutions Rating of “4” or “5” (problem institution). Monitor FDIC-supervised insured depository institutions’ compliance with formal and informal enforcement actions.
•	 One hundred percent of follow-up examinations are conducted within 12 months of
completion of the prior examination.

3.

Assist in protecting the infrastructure of the U.S. banking system against terrorist financing,
money laundering and other financial crimes.
•	 One hundred percent of required Bank Secrecy Act (BSA) examinations are conducted on
schedule.

4.

Achieved.

Increase regulatory knowledge to keep abreast of current issues related to money laundering
and terrorist financing.
•	 An additional 10 percent (at least 10 percent for year 2006) of BSA/AML subject-matter
experts nationwide are certified under the Association of Certified Anti-Money Laundering
Specialists certification program.

68

FDIC 2009 Annual Report

Annual Performance Goals and Targets

5.

2008

Achieved.
Achieved.

Achieved.
Achieved.
Achieved.

•	 Participate in the continuing analysis of the projected results of the new capital regime.

Achieved.

Achieved.
Not
Applicable.

•	 Develop a Notice of Proposed Rulemaking for public issuance.

Achieved.

Ensure that FDIC-supervised institutions that plan to operate under the new Basel II Capital
Accord are well-positioned to respond to the new capital requirements.
•	 Perform on-site examinations or off-site analyses of all FDIC-supervised banks that have
indicated a possible intention to operate under Basel II to ensure that they are effectively
working toward meeting required qualification standards.

8.

Achieved.

More closely align regulatory capital with risk in banks not subject to Basel II capital rules while
maintaining capital at prudential levels.
•	 Finalize a regulatory capital framework based on the Basel II “Standardized Approach” as an
option for U.S. banks not required to use the new advanced approaches.
•	 Complete rulemaking on Basel IA.

7.

2006

More closely align regulatory capital with risk in large or multinational banks while maintaining
capital at prudential levels.
•	 Develop options for refining Basel II that are responsive to lessons learned from the 20072008 market turmoil.
•	 Further develop the Basel II framework to ensure that it does not result in a substantial
reduction in risk-based capital requirements or significant competitive inequities among
different classes of banks. Consider alternative approaches for implementing the Basel
Capital Accord.
•	 Conduct analysis of early results of the new capital regime as information becomes
available.
•	 Promote international cooperation on the adoption of supplemental capital measures in
countries that will be operating under Basel II.
•	 Publish a Notice of Proposed Rulemaking.

6.

2007

Not
Applicable.

Achieved.

Achieved.

Reduce regulatory burden on the banking industry while maintaining appropriate consumer
protection and safety and soundness safeguards.
•	 Complete and evaluate options for refining the current risk-focused approach used in the
conduct of BSA/AML examinations to reduce the burden they impose on FDIC-supervised
institutions.
•	 Applicable provisions of the Financial Services Regulatory Relief Act of 2006 (FSRRA) are
implemented in accordance with statutory requirements.
•	 Support is provided to the Government Accountability Office (GAO), as requested, for studies required under FSRRA.
•	 State AML assessments of Money Service Businesses (MSB) are incorporated into FDIC risk
management examinations in states where MSB AML regulatory programs are consistent
with FDIC risk management standards.

III.  Performance Results Summary



Achieved.
Partially
Achieved.
Achieved.
Partially
Achieved.

69

Annual Performance Goals and Targets

2008

2007

2006

Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in their communities.
1.

Conduct CRA and compliance examinations in accordance with the FDIC’s examination
frequency policy.
•	 One hundred percent of required examinations are conducted within time frames established by FDIC policy.

2.

Achieved.

Achieved.

Achieved.

Achieved.

Determine the need for changes in current FDIC practices for following up on significant violations of consumer compliance laws and regulations identified during examinations of banks for
compliance with consumer protection and fair lending laws.
•	 Complete a review of the effectiveness of the 2007 instructions issued on the handling of
Achieved.
repeat instances of significant violations identified during compliance examinations.
•	 An analysis is completed for all institutions on the prevalence and scope of repeat instances
of significant violations from the previous compliance examination.
•	 A determination is made regarding the need for changes to current FDIC and FFIEC guidance on follow-up supervisory action on significant violations identified during compliance
examinations based on the substance and level of risk posed to consumers by these repeat
violations.

4.

Achieved.

Take prompt and effective supervisory action to monitor and address problems identified during
compliance examinations of FDIC-supervised institutions that received a “4” or “5” rating for com­
pliance with consumer protection and fair lending laws.
•	 One hundred percent of follow-up examinations or related activities are conducted within
12 months from the date of a formal enforcement action to confirm that the institution is in
compliance with the enforcement action.

3.

Achieved.

Achieved.
Achieved.

Scrutinize evolving consumer products, analyze their current or potential impact on consumers
and identify potentially harmful or illegal practices. Promptly institute a supervisory response
program across FDIC-supervised institutions when such practices are identified.
•	 Revise the FDIC’s system for identifying, reviewing, and addressing potentially harmful or
illegal practices associated with evolving consumer products.
•	 Develop and implement new supervisory response programs across all FDIC-supervised
institutions to address potential risks posed by new consumer products.

70

Achieved.
Achieved.

FDIC 2009 Annual Report

Annual Performance Goals and Targets

2007

•	 Conduct 125 technical assistance (examination support) efforts or banker/community outreach activities related to the CRA, fair lending, and community development.
•	 Release a “Young Adult” version of the Money Smart curriculum.

Achieved.

Achieved.

Achieved.

•	 Distribute at least 10,000 copies of the “Young Adult” version of Money Smart.

Achieved.

•	 Analysis of survey results is disseminated within six months of completion of the survey
through regular publications, ad hoc reports and other means.
•	 Provide technical assistance, support and consumer outreach activities in all six FDIC
regions to at least eight local NeighborWorks® America affiliates or local coalitions that are
providing foreclosure mitigation counseling in high need areas.
•	 200,000 additional individuals are taught using the Money Smart curriculum.

5.

2008

Achieved.

Achieved.

Achieved.

Provide effective outreach related to the CRA, fair lending, and community development.

Achieved.

Achieved.

•	 120 school systems and government entities are contacted to make them aware of the
availability of Money Smart as a tool to teach financial education to high school students.
•	 A review of existing risk management and compliance/CRA examination guidelines and
practices is completed to ensure that they encourage and support the efforts of insured
financial institutions to foster economic inclusion, consistent with safe and sound banking
practices.
•	 A pilot project is conducted with banks near military installations to provide small-dollar
loan alternatives to high-cost payday lending.
•	 Strategies are developed and implemented to encourage FDIC-supervised institutions to
offer small-denomination loan programs.
•	 Research is conducted and findings disseminated on programs and strategies to encourage
and promote broader economic inclusion within the nation’s banking system.
6.

Achieved.
Achieved.

Not Achieved.
Achieved.
Achieved.

Continue to expand the FDIC’s national leadership role in development and implementation
of programs and strategies to encourage and promote broader economic inclusion within the
nation’s banking system.
•	 Analyze quarterly data submitted by participating institutions to identify early trends and
potential best practices.
•	 Open 27,000 new bank accounts.

Achieved.

•	 Initiate new small-dollar loan products in 32 financial institutions.

Achieved.

•	 Initiate remittance products in 32 financial institutions.

Achieved.

•	 Reach 18,000 consumers through financial education initiatives.
7.

2006

Achieved.

Achieved.

Effectively investigate and respond to consumer complaints about FDIC-supervised financial institutions.
•	 Responses are provided to 90 percent of written complaints and inquiries within time
frames established by policy.

III.  Performance Results Summary



Achieved.

Achieved.

Achieved.

71

Receivership Management Program Results

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

1.

Achieved.

Achieved.

Not Applicable.
No Failures.

Achieved.

Achieved.

Not Applicable.
No Failures.

Achieved.

Achieved.

Achieved.

Achieved.

Not Applicable. No
claims within
the 18-month
period.

Not Applicable.
No Failures.

Manage the receivership estate and its subsidiaries toward an orderly termination.
•	 Terminate all receiverships within 90 days of the resolution of all impediments.

4.

2006

Value, manage, and market assets of failed institutions and their subsidiaries in a timely manner
to maximize net return.
•	 Ninety percent of the book value of a failed institution’s marketable assets is marketed
within 90 days of failure.

3.

2007

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

2.

2008

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,
c
­ onsidering the size and complexity of the institution.
•	 For 80 percent of all claim areas, a decision is made to close or pursue claims within
18 months of the failure date.

72

FDIC 2009 Annual Report

Program Evaluation

Program evaluations are designed to improve
the operational effectiveness of the FDIC’s
programs and ensure that objectives are met.
These evaluations are often led by the Office
of Enterprise Risk Management and are generally interdivisional, collaborative efforts involving management and staff from the affected
program(s).
The Corporation’s 2009 Annual Performance
Plan contained several objectives aimed at ensuring that the FDIC would continue to address key
corporate issues, including continuing work on
the Temporary Liquidity Guarantee Program,
issues relating to contract oversight management, anticipated increases in bank failures and
continuous improvements to the FDIC’s core
business functions.
During 2009, in direct response to challenges
associated with the financial crisis, the FDIC
created six internal organizations and working groups to address areas of increased risk
to ensure that both the FDIC’s core businesses
and new responsibilities were being managed as
effectively as possible. The six initiatives were
tied to: 1) Legacy Loans; 2) Systemic Resolution
Authority; 3) Temporary Liquidity Guarantee
Program; 4) Loss Sharing Agreements; 5) Contract Management Oversight; and 6) Resource
Management. Each team identified key issues
and risks associated with their area of challenge,
developed action plans and performance metrics

III.  Performance Results Summary



as necessary, and briefed the Chairman on at
least a monthly basis. In many cases, enhancements to operating procedures and automated
systems of support were made as a direct result
of this heightened management attention. Significantly, all identified program needs have been
coordinated with those persons responsible for
planning, budgeting, staffing and ensuring the
adequacy of infrastructure support.
These and other actions were taken in addition to evaluations that are part of the Corporation’s ongoing efforts to seek continuous
improvements in its programs and operations.
Some of these 2009 initiatives included: reviews
of financial management and controls governing
receiverships; scrutiny of our increased volume
of procurement card and convenience check
activity; coordination with the FDIC’s OIG on
Material Loss Reviews to identify any needed
improvements in the Corporation’s bank examination programs; improved monitoring of the
performance and availability of the FDIC’s critical automated systems; and the identification of
operations where backlogs could present problems if not properly monitored.
It is anticipated that program evaluation energies in 2010 will again focus on progress in
the above six initiatives, as well as on controls
associated with financial reporting throughout
the Corporation, systems development efforts,
and key operations supporting the Corporate
response to the financial crisis.

73

IV.  Financial Statements and Notes

Deposit Insurance Fund (DIF)
Deposit Insurance Fund Balance Sheet at December 31
Dollars in Thousands

2009

2008

Assets
Cash and cash equivalents

$ 54,092,423

$ 1,011,430

Cash and cash equivalents—restricted—systemic risk (Note 16)

6,430,589

2,377,387

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

5,486,799

27,859,080

280,510

1,018,486

Receivables and other assets—systemic risk (Note 16)

3,298,819

1,138,132

Trust preferred securities (Note 5)

1,961,824

0

220,588

405,453

38,408,622

15,765,465

Assessments receivable, net (Note 9)

Interest receivable on investments and other assets, net
Receivables from resolutions, net (Note 4)
Property and equipment, net (Note 6)
Total Assets

388,817

368,761

$ 110,568,991

$ 49,944,194

Liabilities
$ 273,338

$ 132,597

Unearned revenue—prepaid assessments (Note 9)

Accounts payable and other liabilities

42,727,101

0

Liabilities due to resolutions (Note 7)

34,711,726

4,724,462

7,847,447

2,077,880

144,952

114,124

44,014,258

23,981,204

1,411,966

1,437,638

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

300,000

200,000

131,430,788

32,667,905

(21,001,312)

15,001,272

142,127

2,250,052

Commitments and off-balance-sheet exposure (Note 14)
Fund Balance
Accumulated Net (Loss) Income
Unrealized Gain on U.S. Treasury investments, net (Note 3)
Unrealized postretirement benefit (Loss) Gain (Note 13)
Total Fund Balance
Total Liabilities and Fund Balance

(2,612)

24,965

(20,861,797)

17,276,289

$ 110,568,991

$ 49,944,194

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

74

FDIC 2009 Annual Report

Deposit Insurance Fund Statement of Income and Fund Balance
for the Years Ended December 31
Dollars in Thousands

2009

2008

Revenue
Interest on U.S. Treasury obligations

$ 704,464

$ 2,072,317

17,717,374

2,964,518

Systemic risk revenue (Note 16)

1,721,626

1,463,537

Realized gain on sale of securities (Note 3)

1,389,285

774,935

Assessments (Note 9)

Other revenue (Note 10)
Total Revenue

3,173,611

31,017

24,706,360

7,306,324

Expenses and Losses
Operating expenses (Note 11)

1,271,099

1,033,490

Systemic risk expenses (Note 16)

1,721,626

1,463,537

57,711,772

41,838,835

4,447

3,693

60,708,944

44,339,555

(36,002,584)

(37,033,231)

(2,107,925)

1,891,144

Provision for insurance losses (Note 12)
Insurance and other expenses
Total Expenses and Losses
Net Loss
Unrealized (Loss) Gain on U.S. Treasury investments, net (Note 3)
Unrealized postretirement benefit (Loss) Gain (Note 13)
Comprehensive Loss
Fund Balance—Beginning
Fund Balance—Ending

(27,577)

5,340

(38,138,086)

(35,136,747)

17,276,289

52,413,036

$ (20,861,797)

$ 17,276,289

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

IV.  Financial Statements and Notes



75

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

2009

2008

Operating Activities
Net Loss

$ (36,002,584)

$ (37,033,231)

Adjustments to reconcile net loss to net cash provided by (used by)
operating activities:
Amortization of U.S. Treasury obligations
Treasury inflation-protected securities inflation adjustment
Gain on sale of U.S. Treasury obligations
Depreciation on property and equipment
Loss on retirement of property and equipment
Provision for insurance losses
Unrealized (Loss) Gain on postretirement benefits
Guarantee termination fee from Citigroup
Systemic risk expenses

210,905

457,289

10,837

(271,623)

(1,389,285)

(774,935)

70,488

55,434

924

447

57,711,772

41,838,835

(27,577)

5,340

(1,961,824)

0

0

(2,352)

737,976

(773,905)

Change in Operating Assets and Liabilities:
Decrease (Increase) in assessments receivable, net
Decrease in interest receivable and other assets
(Increase) in receivables from resolutions
(Increase) in receivable—systemic risk
Increase (Decrease) in accounts payable and other liabilities
Increase (Decrease) in postretirement benefit liability

192,750

402,225

(60,229,760)

(32,955,471)

(2,160,688)

(21,285)

140,740

(18,838)

30,828

(2,034)

(25,672)

0

Increase in liabilities due to resolutions

29,987,265

4,724,462

Increase in unearned revenue—prepaid assessments

42,727,101

0

5,769,567

2,377,387

35,793,763

(21,992,255)

(Decrease) in contingent liabilities—systemic risk

Increase in deferred revenue—systemic risk
Net Cash Provided by (Used by) Operating Activities

76

FDIC 2009 Annual Report

Deposit Insurance Fund Statement of Cash Flows (continued)
Dollars in Thousands

2009

2008

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

0

3,304,350

6,382,027

3,930,226

15,049,873

13,974,732

Used by:
(91,468)

(72,783)

Net Cash Provided by Investing Activities

Purchase of property and equipment

21,340,432

21,136,525

Net Increase (Decrease) in Cash and Cash Equivalents

57,134,195

(855,730)

Cash and Cash Equivalents—Beginning
Unrestricted Cash and Cash Equivalents—Ending
Restricted Cash and Cash Equivalents—Ending
Cash and Cash Equivalents—Ending

3,388,817

4,244,547

54,092,423

1,011,430

6,430,589

2,377,387

$ 60,523,012

$ 3,388,817

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

IV.  Financial Statements and Notes



77

Notes to the Financial Statements
Deposit Insurance Fund
December 31, 2009 and 2008

1. Legislation and Operations of
the Deposit Insurance Fund
Overview
The Federal Deposit Insurance ­ orporation
C
(FDIC) is the independent deposit insurance
agency created by Congress in 1933 to maintain
stability and public confidence in the nation’s
banking system. Provisions that govern the
operations of the FDIC are generally found in the
Federal Deposit Insurance (FDI) Act, as amended (12 U.S.C. 1811, et seq.). In carrying out the
purposes of the FDI Act, as amended, the FDIC
insures the deposits of banks and savings associ­
ations (insured depository institutions), and in
cooperation with other federal and state agencies
promotes the safety and soundness of insured
depository institutions by identifying, monitoring and addressing risks to the Deposit Insurance Fund (DIF). An active institution’s primary
federal supervisor is generally determined by
the institution’s charter type. Commercial and
savings banks are supervised by the FDIC, the
Office of the Comptroller of the Currency, or the
Federal Reserve Board, while savings associations (known as “thrifts”) are supervised by the
Office of Thrift Supervision.
The FDIC is the administrator of the DIF. The
DIF is responsible for protecting insured bank
and thrift depositors from loss due to institution failures. The FDIC is required by 12 U.S.C.
1823(c) to resolve troubled institutions in a manner that will result in the least possible cost to
the deposit insurance fund unless a systemic risk

78

determination is made that compliance with the
least-cost test would have serious adverse effects
on economic conditions or financial stability and
any action or assistance taken under the systemic
risk determination would avoid or mitigate such
adverse effects. A systemic risk determination
can only be invoked by the Secretary of the U.S.
Treasury, in consultation with the President,
and upon the written recommendation of twothirds of both the FDIC Board of Directors and
the Board of Governors of the Federal Reserve
System. The systemic risk provision requires the
FDIC to recover any related losses to the DIF
through one or more special assessments from
all insured depository institutions and, with the
concurrence of the U.S. Treasury (Treasury),
depository institution holding companies (see
Note 16).
The FDIC is also the administrator of the
FSLIC Resolution Fund (FRF). The FRF is
a resolution fund responsible for the sale of
remaining assets and satisfaction of liabilities
associated with the former Federal Savings and
Loan Insurance Corporation (FSLIC) and the
Resolution Trust Corporation. The DIF and the
FRF are maintained separately to carry out their
respective mandates.

Recent Legislation
Helping Families Save Their Homes Act of
2009 (Public Law 111-22) was enacted on May
20, 2009. This legislation provides for: 1) extending the FDIC’s deposit insurance coverage from
$100,000 to $250,000 until 2013, 2) extending
FDIC’s authority to borrow from the Treasury
in amounts necessary to carry out the increased
insurance coverage, notwithstanding the amount
limitations contained in Sections 14(a) and 15(c)

FDIC 2009 Annual Report

of the FDI Act, 3) repealing the prohibition
against the FDIC taking the increased insurance
coverage into account for purposes of setting
assessments, 4) extending the generally applicable time limit from 5 years to 8 years for an FDIC
Restoration Plan to rebuild the reserve ratio of
the DIF, 5) permanently increasing the FDIC’s
authority to borrow from the Treasury from $30
billion to $100 billion and, if necessary, up to
$500 billion through 2010, and 6) allowing FDIC
to charge systemic risk special assessments by
rulemaking on both insured depository institutions and, with Treasury concurrence, depository institution holding companies.
The Emergency Economic Stabilization Act
of 2008 (EESA), legislation to help stabilize
the financial markets, was enacted on October
3, 2008. The legislation requires that Treasury
consult with the FDIC and other federal agencies
in the establishment of the troubled asset relief
program (known as TARP).

Operations of the DIF
The primary purpose of the DIF is to: 1) insure
the deposits and protect the depositors of DIFinsured institutions and 2) resolve DIF-insured
failed institutions upon appointment of FDIC as
receiver in a manner that will result in the least
possible cost to the DIF (unless a systemic risk
determination is made).
The DIF is primarily funded from deposit
insurance assessments and interest earned on
investments in U.S. Treasury obligations. Additional funding sources, if necessary, are borrowings from the Treasury, Federal Financing Bank
(FFB), Federal Home Loan Banks, and insured
depository institutions. The FDIC has borrowing authority of $100 billion from the Treasury,

IV.  Financial Statements and Notes



and if necessary, up to $500 billion through 2010.
Additionally, FDIC has a Note Purchase Agreement with the FFB not to exceed $100 billion to
enhance DIF’s ability to fund deposit insurance
obligations.
A statutory formula, known as the Maximum
Obligation Limitation (MOL), limits the amount
of obligations the DIF can incur to the sum of its
cash, 90 percent of the fair market value of other
assets, and the amount authorized to be borrowed
from the Treasury. The MOL for the DIF was
$118.2 billion and $69.0 billion as of December
31, 2009 and 2008, respectively. In connection
with the temporary increase in the basic deposit insurance coverage limit from $100,000 to
$250,000, the FDIC may borrow from the Treasury to carry out the increase in the maximum
deposit insurance amount without regard to the
MOL or the $100 billion limit.

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 DIF assets and liabilities to
ensure that proceeds from these entities are distributed in accordance with applicable laws and
regulations. Accordingly, income and expenses
attributable to resolution entities are accounted for
as transactions of those entities. All are billed by
the FDIC for services provided on their behalf.

79

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

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 assessments receivable and associ­
ated revenue; the allowance for loss on receiv-

80

ables from resolutions (including loss-share
agreements); the estimated losses for: anticipated
failures, litigation, and representations and warranties; guarantee obligations for: the Temporary
Liquidity Guarantee Program and debt of limited liability companies; valuation of trust preferred securities; and the postretirement benefit
obligation.

Cash Equivalents
Cash equivalents are short-term, highly liquid
investments consisting primarily of U.S. Treasury Overnight Certificates. The majority of
cash equivalents held by the DIF at December
31, 2009, resulted from the collection of $45.7
billion in prepaid assessments on December 30,
2009 for all quarterly assessment periods through
December 31, 2012 (see Note 9).

Investment in U.S. Treasury Obligations
DIF funds are required to be invested in
obligations of the United States or in obligations guaranteed as to principal and interest by
the United States; the Secretary of the Treasury
must approve all such investments in excess of
$100,000. The Secretary has granted approval
to invest DIF funds only in U.S. Treasury obligations that are purchased or sold exclusively
through the Bureau of the Public Debt’s Government Account Series (GAS) program.
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

FDIC 2009 Annual Report

and recorded on a daily basis using the effective
interest method.

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, any changes in supervisory examination and
debt issuer ratings for larger institutions, and a
modest deposit insurance growth factor. At the
subsequent quarter-end, the estimated revenue
amounts are adjusted when actual assessments
for the covered period are determined for each
institution. (See Note 9 for additional information on assessments.)

Capital Assets and Depreciation
The FDIC buildings are depreciated on a
straight-line basis over a 35 to 50 year estimated
life. Leasehold improvements are capitalized
and depreciated over the lesser of the remaining
life of the lease or the estimated useful life of
the improvements, if determined to be material.
Capital assets depreciated on a straight-line basis
over a five-year estimated useful life include
mainframe equipment; furniture, fixtures, and
general equipment; and internal-use software.
Personal computer equipment is depreciated on
a straight-line basis over a three-year estimated
useful life.

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.

IV.  Financial Statements and Notes



Reclassifications
Certain reclassifications have been made in
the 2008 financial statements to conform to the
presentation used in 2009.

Disclosure about Recent Accounting
Pronouncements
•	 FASB Accounting Standards Codification
(ASC) 105, Generally Accepted Accounting Principles (formerly SFAS No. 168, The
FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted
Accounting Principles—a replacement of
FASB Statement No. 162, issued in June
2009), became effective for financial statements covering periods ending after September 15, 2009. On July 1, 2009, the FASB ASC
was launched and became the sole source
of authoritative accounting principles applicable to the FDIC.
	 All existing standards that were used to
create the Codification have become superseded. As a result, references to generally
accepted accounting principles in these
Notes will consist of the numbers used in the
Codification and, if appropriate, the former
pronouncement number. The Codification’s
purpose was not to create new accounting or
reporting guidance, but to organize and simplify authoritative GAAP literature. Consequently, there will be no change to the DIF’s
financial statements due to the implementation of this Codification.
•	 	 tatement of Financial Accounting Standards
S
(SFAS) No. 167, Amendments to FASB Interpretation No. 46(R), was issued by the FASB
in June 2009, and subsequently ­ odified
c

81

upon issuance of Accounting Standards
Update No. 2009-17, Consolidations (ASC
810) - Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities. SFAS 167, effective for reporting
periods beginning after November 15, 2009,
modifies the former quantitative approach
for determining the primary beneficiary of a
variable interest entity (VIE) to a qualitative
assessment. An enterprise must determine
qualitatively whether it has (1) the power
to direct the activities of the VIE that most
significantly impact the entity’s economic
performance and (2) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE. If an enterprise has
both of these characteristics, the enterprise
is considered the primary beneficiary and
must consolidate the VIE. Management is
currently reviewing the possible impact, if
any, of SFAS 167 (now codified in ASC 810)
on DIF’s accounting and financial reporting
requirements for 2010.
•	 SFAS No. 166, Accounting for Transfers of
Financial Assets—an amendment of FASB
Statement No. 140, was issued by the FASB
in June 2009. Subsequently, the FASB issued
Accounting Standards Update No. 2009-16,
Transfers and Servicing (ASC 860) - Accounting for Transfers of Financial Assets, to
formally incorporate the provisions of SFAS
No. 166 into the Codification. SFAS 166
removes the concept of a qualifying specialpurpose entity from GAAP, changes the
requirements for derecognizing financial
assets, and requires additional disclosures

82

about a transferor’s continuing involvement
in transferred financial assets. The FASB’s
objective is to improve the information that a
reporting entity provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position,
financial performance, and cash flows; and a
transferor’s continuing involvement, if any, in
transferred financial assets.
	 The provisions of SFAS 166 (now codified
in ASC 860) become effective for the DIF for
all transfers of financial assets occurring on
or after January 1, 2010.
•	 SFAS No. 165, Subsequent Events, was
issued in May 2009 and subsequently codified in FASB ASC 855, Subsequent Events.
ASC 855 represents the inclusion of guidance
on subsequent events in the accounting literature. Historically, management had relied
on auditing literature for guidance on assessing and disclosing subsequent events. ASC
855 now requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that date—that
is, whether that date represents the date the
financial statements were issued or were
available to be issued. These new provisions,
effective for the DIF as of December 31,
2009, do not have a significant impact on the
financial statements.
•	 FASB Staff Position (FSP) FAS 115-2 and
FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments, was
issued in April 2009 and subsequently codified in FASB ASC 320, Investments-Debt
and Equity Securities. It modifies the other-

FDIC 2009 Annual Report

than-temporary impairment (OTTI) guidance
for debt securities. An OTTI is considered to
have occurred if 1) an entity has the intent to
sell an impaired security, 2) it is more likely
than not that it will be required to sell the
security before its anticipated recovery, or 3)
an entity does not expect to recover the entire
amortized cost basis when there is no intent
or likely requirement to sell the security.
	 In addition, the FSP requires that an OTTI
loss should be recognized in earnings or
other comprehensive income. If the entity
has the intent to sell the security or it is more
likely than not that it will be required to sell
the security, the entire impairment (amortized cost basis over fair value) will be recognized in earnings. However, if an entity’s
management asserts that it does not have the
intent to sell a debt security and it is more
likely than not that it will not have to sell
the security before recovery of its cost basis,
then an entity must separate the impairment
loss into two components: 1) the amount
related to credit loss, which is recorded
in earnings, and 2) the remainder of the
impairment loss, which is recorded in other
comprehensive income. The provisions of
the FSP, now codified in ASC 320, became
effective for the DIF as of June 30, 2009.

IV.  Financial Statements and Notes



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

3. Investment in U.S. Treasury
Obligations, Net
As of December 31, 2009 and 2008, investments in U.S. Treasury obligations, net, were
$5.5 billion and $27.9 billion, respectively. As of
December 31, 2009 and 2008, the DIF held $2.1
billion and $2.7 billion, respectively, of Treas­
ury inflation-protected securities (TIPS). These
securities are indexed to increases or decreases
in the Consumer Price Index for All Urban Consumers (CPI-U).
For the year ended December 31, 2009, available-for-sale securities were sold for total proceeds of $15.2 billion. The gross realized gains
on these sales totaled $1.4 billion. To determine
gross realized gains, the cost of securities sold is
based on specific identification. Net unrealized
holding losses on available-for-sale securities of
$2.1 billion are included in other comprehensive
loss.

83

Total Investment in U.S. Treasury Obligations, Net at December 31, 2009
Dollars in Thousands

Maturity

Yield at
Purchase (a)

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

5.04%

$ 3,058,000

$ 3,062,038

$ 48,602

$0

$ 3,110,640

After 1 year through 5 years

4.15%

300,000

302,755

11,648

0

314,403

U.S. Treasury inflation-protected securities
After 1 year through 5 years

3.14%

1,968,744

1,979,879

81,877

0

2,061,756

$ 5,326,744

Total

$ 5,344,672

$ 142,127

$0

$ 5,486,799

(a) For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation assumption
as measured by the CPI-U. The long-term CPI-U consensus forecast is 1.1 percent, based on figures issued by the Congressional Budget Office and Blue Chip Economic Indicators in
early 2009.

Total Investment in U.S. Treasury Obligations, Net at December 31, 2008
Dollars in Thousands

Maturity (a)

Yield at
Purchase (b)

Face
Value

Net
Carrying
Amount

Unrealized
Holding
Gains

Unrealized
Holding
Losses (c)

Fair
Value

U.S. Treasury notes and bonds
Within 1 year

4.25%

$ 6,192,000

$ 6,350,921

$ 130,365

$0

$ 6,481,286

After 1 year through 5 years

4.72%

9,503,000

9,451,649

1,030,931

0

10,482,580

After 5 years through 10 years

4.79%

6,130,000

7,090,289

1,142,753

0

8,233,042

Within 1 year

3.82%

726,550

726,561

0

(5,627)

720,934

After 1 year through 5 years

3.14%

U.S. Treasury inflation-protected securities

Total

1,973,057

1,989,608

0

(48,370)

1,941,238

$ 24,524,607

$ 25,609,028

$ 2,304,049

$ (53,997)

$ 27,859,080

(a) For purposes of this table, all callable securities are assumed to mature on their first call dates. Their yields at purchase are reported as their yield to first call date. Callable U.S.
Treasury bonds may be called five years prior to the respective bonds’ stated maturity on their semi-annual coupon payment dates upon 120 days notice.
(b) For TIPS, the yields in the above table are stated at their real yields at purchase, not their effective yields. Effective yields on TIPS include a long-term annual inflation
assumption as measured by the CPI-U. The long-term CPI-U consensus forecast is 2.2 percent, based on figures issued by the Congressional Budget Office and Blue Chip Economic
Indicators in early 2008.
(c) The unrealized losses on the U.S. Treasury inflation-protected securities (TIPS) is attributable to the two-month delay in adjusting TIPS’ principal for changes in the November
and December Consumer Price Index for all Urban Consumers. As the losses occurred over a period less than a year and the December 31, 2008, unrealized losses converted to
unrealized gains by February 28, 2009, the FDIC does not consider these securities to be other than temporarily impaired at December 31, 2008.

84

FDIC 2009 Annual Report

4. Receivables From Resolutions,
Net
Receivables From Resolutions, Net
at December 31
Dollars in Thousands

2009

2008

Receivables from
closed banks

$ 98,647,508

$ 27,389,467

Receivables from
operating banks

0

9,406,278

Allowance for losses

(60,238,886)

(21,030,280)

$ 38,408,622

Total

$ 15,765,465

The receivables from resolutions include payments made by the DIF to cover obligations to
insured depositors (subrogated claims), advances
to resolution entities for working capital, and
administrative expenses paid on behalf of resolution entities. Any related allowance for loss represents the difference between the funds advanced
and/or obligations incurred and the expected
repayment. Estimated future payments on losses
incurred on assets sold to an acquiring institution under a loss-sharing agreement are factored
into the computation of the expected repayment.
Assets held by DIF resolution entities are the
main source of repayment of the DIF’s receivables from resolutions.
As of December 31, 2009, there were 179 active
receiverships which includes 140 established in
2009. As of December 31, 2009 and 2008, DIF
resolution entities held assets with a book value
of $49.3 billion and $45.8 billion, respectively
(including cash, investments, and miscellaneous
receivables of $7.7 billion and $5.1 billion, respectively). Ninety-nine percent of the current asset

IV.  Financial Statements and Notes



book value of $49.3 billion is held by resolution
entities established in 2008 and 2009.
Estimated cash recoveries from the management and disposition of assets that are used to
determine the allowance for losses were based on
asset recovery rates from several sources including: actual or pending institution-specific asset
disposition data; failed institution-specific asset
valuation data; aggregate asset valuation data on
several recently failed or troubled institutions; and
empirical asset recovery data based on failures as
far back as 1990. Methodologies for determining
the asset recovery rates incorporate estimating
future cash recoveries, net of applicable liquidation cost estimates, and discounting based on market-based risk factors applicable to a given asset’s
type and quality. The resulting estimated cash
recoveries are then used to derive the allowance
for loss on the receivables from these resolutions.
For failed institutions resolved using a whole
bank purchase and assumption transaction with
an accompanying loss-share agreement, the projected future loss-share payments and monitoring
costs 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 loss-share cost
projections are based on the intrinsic value of the
covered assets. The intrinsic value is determined
using economic models that consider the quality and type of covered assets, current and future
market conditions, risk factors and estimated
asset holding periods.
Estimated asset recoveries are regularly
evaluated during the year, but remain subject
to uncertainties because of potential changes
in economic and market conditions. Continuing
economic uncertainties could cause the DIF’s

85

actual recoveries to vary significantly from current estimates.

Whole Bank Purchase and Assumption
Transactions with Loss-sharing Agreements
The FDIC resolved 90 of the 140 failures in
2009 using a Whole Bank Purchase and Assumption resolution transaction with an accompanying
Loss-Share Agreement on assets purchased by
the acquirer. The acquiring institution assumes
all of the deposits and purchases essentially all
of the assets of a failed institution. The majority
of the commercial and residential assets are purchased under a loss-share agreement, where the
FDIC agrees to share in future losses experienced
by the acquirer on those assets covered under the
agreement. Loss-share agreements are used by
the FDIC to keep assets in the private sector and
minimize disruptions to loan customers.
Losses on the covered assets will be shared
between the acquirer and the FDIC in its capacity as receiver of the failed institution when losses
occur through the sale, foreclosure, loan modification, or the write-down of loans in accordance with
the terms of the loss-share agreement. The agreement typically covers a 5 to 10 year period with the
receiver covering 80 percent of the losses incurred
by the acquirer up to a stated threshold amount
(which varies by agreement) and the acquiring
bank covering 20 percent. Any losses above the
stated threshold amount will be reimbursed by the
receiver at 95 percent of the losses booked by the
acquirer. The estimated liability for loss-sharing is
accounted for by the receiver and is considered in
the determination of the DIF’s allowance for loss
against the corporate receivable from the resolution. As loss-share claims are asserted and proven,
DIF receiverships will satisfy these loss-share

86

payments using available liquidation funds and/or
amounts due from the DIF for funding the deposits
assumed by the acquirer (see Note 7).
Through December 31, 2009, 93 DIF receiverships are estimated to pay approximately $22.2
billion over the length of these loss-share agreements on approximately $126.4 billion in total
covered assets at the inception date of these
agreements. To date, 37 receiverships have made
loss-share payments totaling $892.2 million.
Financial instruments that potentially subject the DIF to concentrations of credit risk are
receivables from resolutions. The repayment of
DIF’s receivables from resolutions is primarily
influenced by recoveries on assets held by DIF
receiverships and payments on the covered assets
under loss-sharing agreements. The majority of
the $165.5 billion in remaining assets in liquidation ($41.4 billion) and current loss-share covered
assets ($124.1 billion) are concentrated in commercial loans ($71.7 billion), residential loans ($70.3
billion), and securities ($14.7 billion). Most of the
assets in these asset types originated from failed
institutions located in California ($55.6 billion),
Florida ($15.7 billion), Alabama ($15.6 billion),
Texas ($11.3 billion), and Illinois ($7.3 billion).

5. Trust Preferred Securities
On January 15, 2009, subject to a systemic
risk determination, the Treasury, the FDIC and
the Federal Reserve Bank of New York executed
terms of a guarantee agreement with Citigroup to
provide protection against the possibility of unusually large losses on an asset pool of approximately
$301.0 billion of loans and securities backed by
residential and commercial real estate and other
such assets that would remain on the balance sheet

FDIC 2009 Annual Report

of Citigroup. The term of the loss-share guarantee
was 10 years for residential assets and 5 years for
non-residential assets. The FDIC exposure from
this guarantee was capped at $10 billion.
In consideration for its portion of the lossshare guarantee at inception, the FDIC received
3,025 shares of Citigroup’s designated cumulative perpetual preferred stock (Series G) with a
liquidation preference at the time of $1,000,000
per share for a total of $3.025 billion paying dividends at a rate of 8 percent annually. On July
30, 2009, all shares of preferred stock initially
received were exchanged for 3,025,000 of Citigroup Capital XXXIII trust preferred securities
(TruPs) with a liquidation amount of $1,000 per
security. The principal amount is due in 2039.
The equivalent exchange of $3.025 billion pays
a quarterly distribution at a rate of 8 percent
annually. The Treasury initially received $4.034
billion in preferred stock for its loss-share protection and received an equivalent, aggregate
amount of $4.034 billion in trust preferred securities at the time of the exchange for TruPs.
On December 23, 2009, Citigroup terminated
the loss-sharing agreement citing improvements
in its financial condition and in financial market stability. The FDIC incurred no loss from
the guarantee prior to termination of the agreement. In connection with the early termination
of the guarantee program, the Treasury and the
FDIC agreed that Citigroup would reduce the
combined $7.1 billion liquidation amount of the
TruPs by $1.8 billion. Pursuant to an agreement
between the Treasury and the FDIC, TruPs held
by the Treasury were reduced by $1.8 billion and
the FDIC initially retained all TruPs holdings of
$3.025 billion. The FDIC will transfer an aggregate liquidation amount of $800 million in TruPs

IV.  Financial Statements and Notes



to the Treasury, plus any related interest, less any
payments made or required to be made by the
FDIC for guaranteed debt instruments issued by
Citigroup or any of its affiliates under the Temporary Liquidity Guarantee Program (TLGP; see
Note 16). This transfer will occur within 5 days
of the date on which no Citigroup debt remains
outstanding under the TLGP. The fair value of
the TruPs and related interest are recorded as
systemic risk assets described in Note 16.
The remaining $2.225 billion (par value) of
TruPs held by the FDIC are classified as available-for-sale debt securities in accordance with
FASB ASC Topic 320, Investments—Debt and
Equity Securities. Upon termination of the guarantee agreement, the DIF recognized revenue of
$1.962 billion for the fair value of the TruPs. (See
Note 10, Other Revenue and Note 15, Disclosures
About the Fair Value of Financial Instruments).

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

2009

2008

Land

$ 37,352

$ 37,352

Buildings (including leasehold improvements)

295,265

281,401

Application software
(including work-in-process)

179,479

173,872

Furniture, fixtures, and
equipment

117,430

84,574

Accumulated depreciation
Total

(240,709)

(208,438)

$ 388,817

$ 368,761

The depreciation expense was $70 million
and $55 million for 2009 and 2008, respectively.

87

7. Liabilities Due to Resolutions
As of December 31, 2009, the DIF recorded
liabilities totaling $34.7 billion 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. Ninetyseven percent of these liabilities are due to failures resolved under a whole bank purchase and
assumption transaction, most with an accompanying loss-share agreement. The DIF satisfies
these liabilities either by directly sending cash
to the receiverships to fund loss-share and other
expenses or by offsetting receivables from resolutions when a receivership declares a dividend.
Inherent in these liabilities are $470 million in
unreimbursed deposit claims subrogated by the
DIF on behalf of the Temporary Liquidity Guarantee Program (see Note 16).
In addition, there were $150 million in unpaid
brokered deposit claims related to multiple
receiverships. The DIF pays these liabilities
when the claims are approved.

8. Contingent Liabilities for:
Anticipated Failure of Insured
Institutions
The DIF records a contingent liability and a
loss provision for DIF-insured institutions that are
likely to fail, absent some favorable event such as
obtaining additional capital or merging, when the
liability is probable and reasonably estimable. The
contingent liability is derived by applying expected failure rates and loss rates to institutions based
on supervisory ratings, balance sheet characteristics, and projected capital levels.

88

During the year, the conditions of the banking industry continued to deteriorate. The difficult economic and credit environment continued
to challenge the soundness of many DIF-insured
institutions. The ongoing weakness in housing and
commercial real estate markets led to asset quality problems and volatility in financial markets,
which hurt the banking industry performance and
weakened many institutions with significant portfolios of residential and commercial mortgages.
The impact of the economic deterioration in the
banking industry caused a significant increase in
the contingent loss reserve. As of December 31,
2009 and 2008, the contingent liabilities for anticipated failure of insured institutions were $44.0
billion and $24.0 billion, respectively.
In addition to these recorded contingent liabilities, the FDIC has identified risk in the financial
services industry that could result in an additional loss 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 up to approximately $24 billion.
The actual losses, if any, will largely depend
on future economic and market conditions and
could differ materially from this estimate.
During 2009, 140 banks with combined assets
of $171.2 billion failed. It is uncertain how long
and how deep the current downturn will be.
Supervisory and market data suggest that the
banking industry will continue to experience
elevated levels of stress over the coming year.
The FDIC continues to evaluate the ongoing
risks to affected institutions in light of the existing economic and financial conditions, and the
extent to which such risks will continue to put
stress on the resources of the insurance fund.

FDIC 2009 Annual Report

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 $300 million and $200 million for the DIF as
of December 31, 2009 and 2008, respectively,
and has determined that there are no reasonably
possible losses from unresolved cases.

Other Contingencies
Representations and Warranties
In an effort to maximize the return from the
sale of assets from bank and thrift resolutions,
FDIC as receiver offered representations and
warranties, and guarantees on certain loan and
servicing rights sales. Although these representations and warranties were offered by the receiver, DIF guaranteed the obligations under these
agreements. In general, the guarantees, representations, and warranties relate to the completeness
and accuracy of loan documentation, the quality
of the underwriting standards used, the accuracy
of the delinquency status, and the conformity
of the loans with characteristics of the pool in
which they were sold at the time of sale.
As a result of loans and servicing rights sold
in connection with the asset disposition of IndyMac Federal Bank, the unpaid principal balance
for loans subject to representations and warranties increased by $184 billion to $195 billion as
of December 31, 2009. Since the receiverships
are the primary guarantors and they have sufficient funds to pay asserted claims, the DIF did
not record contingent liabilities from any of the
outstanding claims asserted in connection with

IV.  Financial Statements and Notes



representations and warranties at December 31,
2009 and 2008.
In addition, until the contracts offering the
representations and warranties and guarantees
have expired, future losses could be incurred,
some as late as 2032. Consequently, the FDIC
believes it is possible that losses may be incurred
by the DIF from the universe of outstanding
contracts with unasserted representation and
warranty claims. However, because of the uncertainties surrounding the timing of when claims
may be asserted, the FDIC is unable to reasonably estimate a range of loss to the DIF from
outstanding contracts with unasserted representation and warranty claims.

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 and when a
receiver 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 2009 and 2008, the FDIC in its Corporate
capacity has not made any indemnification payments under such agreements and no amount

89

has been accrued in the accompanying financial
statements with respect to these indemnification
guarantees.

FDIC Guaranteed Debt of Limited Liability
Companies
During 2009, the FDIC in its corporate capacity offered guarantees on loans issued by newlyformed limited liability companies (LLCs) that
were created to dispose of certain residential
mortgage loans, construction loans, and other
assets of two receiverships. The receiverships
transferred a portfolio of assets with an unpaid
principal balance of $5.8 billion to the LLCs. Private investors purchased a 40–50 percent ownership interest in the LLCs for $615 million in
cash and the LLCs issued notes of $2.1 billion to
the receiverships to partially fund the purchase
of the assets. The receiverships hold the remaining 50–60 percent equity interest in the LLCs.
In exchange for the guarantees, the DIF expects
to receive estimated fees totaling $71.4 million,
which equals one percent per annum over the
estimated life of the notes.
The term of the guarantees extends until the
earliest of 1) payment in full of the notes or 2) two
years following the maturity date of the notes (12
years). In the event of note payment default by
an LLC, the FDIC in its corporate capacity can
take one or more of the following remedies: 1)
accelerate the payment of the unpaid principal
amount of the notes; 2) sell the assets held as collateral; and 3) foreclose on the equity interests of
the debtor.
The DIF has recorded a receivable for the
estimated guarantee fees of $71.4 million and an
offsetting deferred revenue liability, included in
the “Interest receivable on investments and other

90

assets, net” and “Accounts payable and other liabilities” line items, respectively. Guarantee fees
are recognized as revenue on a straight-line basis
over the term of the notes.
The source of payment for the LLC-issued
debt is the collections from the LLC assets. If
cash flow collections from the LLC assets are
insufficient to cover the payments on the notes
in accordance with priority of payments, then the
FDIC as guarantor is required to make a guarantee payment for any shortfall. The estimated
loss of the guarantees to the DIF is based on the
discounted present value of the expected guarantee payments by the FDIC, reimbursements to
the FDIC for guarantee payments, and guarantee fee collections. Under both a base case and a
more stressful modeling scenario, the cash flows
from the LLC assets provide sufficient coverage
to fully pay the debts by their maturity dates.
Therefore, the estimated loss to the DIF from
these guarantees is zero.
As of December 31, 2009, the maximum estimated guarantee exposure equals the total outstanding debt of $2.1 billion.

9. Assessments
The FDI Act, as amended, requires a riskbased assessment system. The Act allows the
FDIC discretion in defining risk and, by regulation, the FDIC has established several assessment risk categories based upon supervisory and
capital evaluations. On March 4, 2009, the Board
issued a final rule on Assessments to: 1) make
it fairer and more sensitive to risk, 2) improve
the way the risk-based assessment system differentiates risk among insured institutions,
and 3) increase deposit insurance assessment

FDIC 2009 Annual Report

rates to raise assessment revenue to help meet
the requirements of the Restoration Plan. The
assessment rate averaged approximately 23.32
cents and 4.18 cents per $100 of the assessment
base, as defined in part 327.5(b) of FDIC Rules
and Regulations, for 2009 and 2008, respectively. (The assessment rate would have been 16.19
cents if the special assessment imposed on June
30, 2009 was excluded from the 2009 assessment
income.)
In compliance with provisions of the FDI Act,
as amended, and implementing regulations, the
FDIC is required to:
•	 annually establish and publish a designated
reserve ratio (DRR) within the statutory
range from 1.15 to 1.50 percent of estimated
insured deposits. As of December 31, 2009,
the DIF reserve ratio was (0.39) percent of
estimated insured deposits and the FDIC has
set the DRR at 1.25 percent for 2010;
•	 adopt a DIF restoration plan to return the
reserve ratio to 1.15 percent generally within
eight years, if the reserve ratio falls below
1.15 percent or is expected to fall below 1.15
percent within six months (see paragraph
titled, Amended Restoration Plan);
•	 annually determine if a dividend should be
paid, based on the statutory requirement generally to declare dividends for one-half of the
amount between 1.35 and 1.50 percent and
all amounts exceeding 1.50 percent.

Assessment Revenue
During 2009, the FDIC implemented actions
to supplement DIF’s revenue through a special
assessment and liquidity through prepaid assessments from insured depository institutions:

IV.  Financial Statements and Notes



•	 On May 22, 2009, the FDIC adopted a final
rule imposing a 5 basis point special assessment on each insured depository institution’s
total assets minus Tier 1 capital as reported
in its report of condition as of June 30, 2009.
The special assessment of $5.5 billion was
collected on September 30, 2009, at the
same time the regular quarterly risk-based
assessment for the second quarter 2009 was
collected.
•	 On November 17, 2009, the FDIC issued a
Final Rule, Prepaid Assessments, to address
the DIF’s liquidity needs to pay for projected
near-term failures and to ensure that the
deposit insurance system remains industryfunded. Pursuant to the Rule, on December
30, 2009, a majority of insured depository
institutions prepaid estimated quarterly
risk-based assessments of $45.7 billion for
the period October 2009 through December
2012. The prepaid amount was based on
maintaining assessment rates at their current
levels through the end of 2010 and adopting a
uniform 3 basis point increase in assessment
rates effective January 1, 2011. An institution’s quarterly risk-based deposit insurance assessments thereafter will be offset
by the amount prepaid until that amount is
exhausted or until June 30, 2013, when any
amount remaining would be returned to the
institution.
	 Prepaid assessments were mandatory
for all institutions, but the FDIC exercised
its discretion as supervisor and insurer to
exempt an institution from the prepayment
requirement if the FDIC determined that
the prepayment would adversely affect the
safety and soundness of the institution. In

91

addition, institutions were allowed to request
exemption from payment under certain
circumstances.
For those institutions that prepaid assessments,
the DIF recognized revenue of $3.0 billion for the
fourth quarter insurance period. The remaining
prepaid amount of $42.7 billion is included in the
“Unearned revenue—prepaid assessments” line
item on the Balance Sheet. For those institutions
that did not prepay assessments, the “Assessments Receivable, net” line item of $281 million represents the estimated gross premiums
due from insured depository institutions for the
fourth quarter of the year. The actual deposit
insurance assessment for the fourth quarter was
billed and collected at the end of the first quarter of 2010. During 2009 and 2008, $17.7 billion
and $3.0 billion, respectively, were recognized as
assessment revenue from institutions.
The FDI Act, as amended, granted a one-time
assessment credit of approximately $4.7 billion
to certain eligible insured depository institutions (or their successors) based on the assessment base of the institution as of December 31,
1996, as compared to the combined aggregate
assessment base of all eligible institutions. Of
the credits granted, $2.7 million remained as of
December 31, 2009.

Amended Restoration Plan

reserve ratio of 1.15 percent of estimated insured
deposits. The Restoration Plan provided for the
following: 1) the period of the Plan was extended
to eight years; 2) current assessment rates will be
maintained through December 31, 2010, with a
uniform increase in risk-based assessment rates
of 3 basis points effective January 1, 2011; and 3)
at least semi-annually hereafter, the FDIC will
update its loss and income projections for the
Fund and, if necessary, will increase assessment
rates prior to the end of the eight-year period, to
return the reserve ratio to 1.15 percent.

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.
During 2009 and 2008, approximately $784 million and $791 million, respectively, was collected
and remitted to the FICO.

A Federal Register notice for Amendment of
FDIC Restoration Plan was issued on October
2, 2009, amending DIF’s Restoration Plan which
was originally adopted on October 7, 2008 and
subsequently amended on February 27, 2009.
The Amended Restoration Plan addresses the
need to return the DIF to its mandated minimum

92

FDIC 2009 Annual Report

the terms of the settlement, the federal parties
received a total of $425 million. Of this amount,
the FDIC received and recognized revenue of
$92 million for the DIF. No losses were borne by
the FDIC prior to the settlement.

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

2009

Guarantee termination
fees

2008

Citigroup

$ 2,053,825

$0

Debt guarantee
surcharges

871,746

0

Dividends and interest on
Citigroup trust preferred
­
securities

231,227

0

Other

16,813

31,017

Total

$ 3,173,611

$ 31,017

In connection with the termination of the lossshare agreement with Citigroup, the DIF recognized revenue of $1.962 billion for the fair value of
the trust preferred securities received as consideration for the guarantee as agreed to in the termination and recorded $231 million in dividends and
interest from Citigroup (see Note 5).

Surcharges on FDIC-Guaranteed Debt
Guarantee Termination Fees
Bank of America
In January 2009, the FDIC, Treasury, and the
Federal Reserve Bank of New York (federal parties) signed a Summary of Terms (Term Sheet)
with Bank of America to guarantee or lend
against a pool of up to $118.0 billion of financial
instruments consisting of securities backed by
residential and commercial real estate loans and
corporate debt and related derivatives. In May
2009, prior to completing definitive documentation, Bank of America notified the federal parties of its desire to terminate negotiations with
respect to the guarantee contemplated in the Term
Sheet. All parties agreed that Bank of America
received value for entering into the Term Sheet
and that the federal parties should be compensated for out-of-pocket expenses and a fee equal to
the amount Bank of America would have paid for
the guarantee from the date of the signing of the
Term Sheet through the termination date. Under

IV.  Financial Statements and Notes



On June 3, 2009, the FDIC published a final
rule in the Federal Register amending the Temporary Liquidity Guarantee Program (TLGP) to
provide a limited extension of the Debt Guarantee Program (DGP) for insured depository institutions and other participating entities (see Note
16). The amendment also imposed surcharges
on FDIC-guaranteed debt issued after March 31,
2009, with a maturity of one year or more. The
DGP extensions, coupled with the surcharges,
were designed to facilitate an orderly transition period for all participants to return to the
non-guaranteed debt market and to reduce the
potential for market disruptions at the end of the
program. Unlike other TLGP fees, which are
reserved for projected TLGP losses, the amount
of surcharges collected were deposited into the
DIF. During 2009, the DIF collected surcharges
in the amount of $872 million.

93

11. Operating Expenses
Operating expenses were $1.3 billion for 2009,
compared to $1 billion for 2008. The chart below
lists the major components of operating expenses.

2008

$ 901,836

$ 702,040

244,479

159,170

Travel

97,744

67,592

Buildings and leased
space

65,286

53,630

Software/Hardware
maintenance

40,678

29,312

Depreciation of property and equipment

70,488

Other

37,563

32,198

Services reimbursed
by TLGP

(3,613)

(2,352)

(183,362)

(63,534)

$ 1,271,099

$ 1,033,490

2008

Valuation Adjustments

Total Valuation
Adjustments

$ 37,586,603 $ 17,974,530
(7,885)

7,377

37,578,718

17,981,907

20,033,054

23,856,928

100,000

0

20,133,054

23,856,928

Contingent Liabilities
Adjustments:

55,434

Outside services

Services billed to resolution entities
Total

12. Provision for Insurance Losses
Provision for insurance losses was $57.7 billion for 2009 and $41.8 billion for 2008. The following chart lists the major components of the
provision for insurance losses.

94

2009

Other assets

Dollars in Thousands
Salaries and benefits

Dollars in Thousands

Closed banks
and thrifts

Operating Expenses
for the Years Ended December 31
2009

Provision for Insurance Losses
for the Years Ended December 31

Anticipated failure of
insured institutions
Litigation
Total Contingent
L
­ iabilities Adjustments
Total

$ 57,711,772 $ 41,838,835

13. Employee Benefits
Pension Benefits and Savings Plans
Eligible FDIC employees (permanent and
term employees with appointments exceeding
one year) are covered by the federal government
retirement plans, either the Civil Service Retirement System (CSRS) or the Federal Employees
Retirement System (FERS). Although the DIF
contributes a portion of pension benefits for
eligible employees, it does not account for the
assets of either retirement system. The DIF also
does not have actuarial data for accumulated
plan benefits or the unfunded liability relative to
eligible employees. These amounts are reported
on and accounted for by the U.S. Office of Personnel Management (OPM).

FDIC 2009 Annual Report

Eligible FDIC employees also may participate
in a FDIC-sponsored tax-deferred 401(k) savings plan with matching contributions up to five
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. However, CSRS employees do not
receive agency matching contributions.

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

2009

2008

Civil Service Retirement System

$ 6,401

$ 6,204

Federal Employees
Retirement System
(Basic Benefit)

56,451

44,073

FDIC Savings Plan

25,449

21,786

Federal Thrift Savings
Plan

20,503

16,659

$ 108,804

Total

$ 88,722

Postretirement Benefits Other Than
Pensions
The DIF has no postretirement health insurance liability, since all eligible retirees are covered by the Federal Employees Health Benefit
(FEHB) program. FEHB is administered and
accounted for by the OPM. In addition, OPM
pays the employer share of the retiree’s health
insurance premiums.
The FDIC provides certain life and dental
insurance coverage for its eligible retirees, the
retirees’ beneficiaries, and covered dependents.

IV.  Financial Statements and Notes



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 coverages to direct-pay plans. For the dental coverage,
retirees are responsible for a portion of the dental
premium.
The FDIC has elected not to fund the postretirement life and dental benefit liabilities. As a
result, the DIF recognized the underfunded status (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, 2009 and 2008, the liability was
$145.0 million and $114.1 million, respectively,
which is recognized in the “Postretirement benefit liability” line item on the Balance Sheet. The
cumulative actuarial gains/losses (changes in
assumptions and plan experience) and prior service costs/credits (changes to plan provisions that
increase or decrease benefits) were ($2.6) million and $25.0 million at December 31, 2009 and
2008, respectively. These amounts are reported
as accumulated other comprehensive income
in the “Unrealized postretirement benefit (loss)
gain” line item on the Balance Sheet.
The DIF’s expenses for postretirement benefits for 2009 and 2008 were $7.7 million each
year, 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 gains/losses and prior service costs/
credits for 2009 and 2008 of ($27.6) million and

95

$5.3 million, respectively, are reported as other
comprehensive income in the “Unrealized postretirement benefit (loss) gain” line item. Key
actuarial assumptions used in the accounting for
the plan include the discount rate of 5.25 percent,
the rate of compensation increase of 4.10 percent,
and the dental coverage trend rate of 7.0 percent.
The discount rate of 5.25 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.

Off-Balance-Sheet Exposure:
Deposit Insurance
As of December 31, 2009, the estimated
insured deposits for DIF were $5.4 trillion. This
estimate is derived primarily from quarterly
financial data submitted by insured depository
institutions to the FDIC. This estimate represents the accounting loss that would be realized
if all insured depository institutions were to fail
and the acquired assets provided no recoveries.

14. Commitments and
Off-Balance-Sheet Exposure
Commitments:
Leased Space
The FDIC’s lease commitments total $158
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 $29 million and
$21 million for the years ended December 31,
2009 and 2008, respectively.

Leased Space Commitments
Dollars in Thousands
2010

2011

2012

2013

2014

$ 37,630 $ 37,553 $ 30,982 $ 21,182 $ 17,995

96

2015/
Thereafter

$ 13,041

FDIC 2009 Annual Report

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 (Note 2), the investment in U.S. Treasury obligations (Note 3) and trust preferred securities (Note 5). The following tables present the DIF’s financial assets measured at fair value
as of December 31, 2009 and 2008.

Assets Measured at Fair Value at December 31, 2009
Dollars in Thousands

Fair Value Measurement 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 and cash equivalents
(Special U.S. Treasuries)1
Investment in U.S. Treasury
Obligations (Available-for-Sale)2

$ 54,092,423

$ 54,092,423

5,486,799

5,486,799

Trust preferred securities
(Available-for-Sale)

$ 1,961,824

Trust preferred securities held for
UST (Note 16)
Total Assets

1,961,824

705,375
$ 59,579,222

$0

705,375

$ 2,667,199

$ 62,246,421

1
Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the
U.S. Bureau of Public Debt.
2
The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.

Assets Measured at Fair Value at December 31, 2008
Dollars in Thousands

Fair Value Measurement 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 and cash equivalents
(Special U.S. Treasuries)1
Investment in U.S. Treasury
O
­ bligations (Available-for-Sale)2
Total Assets

$ 1,011,430

$0

$0

$ 1,011,430

27,859,080

0

0

27,859,080

$ 28,870,510

$0

$0

$ 28,870,510

1
Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the
U.S. Bureau of Public Debt.
2
The investment in U.S. Treasury obligations is measured based on prevailing market yields for federal government entities.

IV.  Financial Statements and Notes



97

In exchange for prior loss-share guarantee
coverage provided to Citigroup as described in
Note 5, the FDIC and the Treasury received trust
preferred securities. The fair value of the trust
preferred securities was derived from a proprietary valuation model developed by the Treasury
to estimate the value of financial instruments
obtained as consideration for actions taken to
stabilize the financial system under the Troubled
Asset Relief Program pursuant to the Emergency
Economic Stabilization Act of 2008. The model
establishes the fair value of the TruPs based on
the discounted present value of expected cash
flows. Key inputs include assumptions about
default probabilities, dividend deferral probabilities and call options. The FDIC independently
performed benchmark procedures to ensure the
reasonableness of the model outputs.
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, assessment receivables, other short-term receivables, accounts payable and other liabilities.
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 net 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.

98

Although the value of the corporate subrogated claim is influenced by valuation of resolution
entity assets (see Note 4), such valuation is not
equivalent to the valuation of the corporate claim.
Since the corporate claim is unique, not intended
for sale to the private sector, and has no established market, it is not practicable to estimate a
fair value.
The FDIC believes that a sale to the private
sector of the corporate claim would require
indeterminate, but substantial, discounts for
an interested party to profit from these assets
because of credit and other risks. In addition,
the timing of resolution entity payments to the
DIF on the subrogated claim does not necessarily correspond with the timing of collections on
resolution entity assets. Therefore, the effect of
discounting used by resolution entities should
not necessarily be viewed as producing an estimate of fair value for the net receivables from
resolutions.
There is no readily available market for guarantees associated with systemic risk (see Note 16).

16. Systemic Risk Transactions
Pursuant to systemic risk determinations,
the FDIC established the Temporary Liquidity
Guarantee Program (TLGP) for insured depository institutions, designated affiliates and certain
holding companies during 2008, and provided
loss-share guarantee assistance to Citigroup
on a pool of covered assets in 2009, which was
subsequently terminated as described in Note 5.
The FDIC received consideration in exchange for
guarantees issued under the TLGP and guarantee assistance provided to Citigroup.

FDIC 2009 Annual Report

At inception of the guarantees, the DIF recognized a liability for the non-contingent fair value
of the obligation the FDIC has undertaken to
stand ready to perform over the term of the guarantees. As required by FASB ASC 460, Guarantees, this non-contingent liability was measured
at the amount of consideration received in
exchange for issuing the guarantee. As systemic
risk expenses are incurred (including contingent
liabilities and valuation allowances), the DIF will
reduce deferred revenue and recognize an offsetting amount as systemic risk revenue. Revenue
recognition will also occur during the term of the
guarantee if a supportable and documented analysis has determined that the consideration and
any related interest/dividend income received
exceeds the projected systemic risk losses. Any
deferred revenue not absorbed by losses during
the guarantee period will be recognized as revenue to the DIF.

Temporary Liquidity Guarantee Program
The FDIC established the TLGP on October
14, 2008 in an effort to counter the system-wide
crisis in the nation’s financial sector. The TLGP
consists of two components: (1) the Debt Guarantee Program (DGP), and (2) the Transaction
Account Guarantee Program (TAG). On November 26, 2008, a final rule for the program was
published in the Federal Register and codified in
part 370 of title 12 of the Code of Federal Regulations (12 CFR Part 370).

Debt Guarantee Program
The Debt Guarantee Program initially permitted participating entities to issue FDIC-guaranteed senior unsecured debt between October
14, 2008 and June 30, 2009, with the FDIC’s

IV.  Financial Statements and Notes



guarantee for such debt to expire on the earlier
of the maturity of the debt (or the conversion
date, for mandatory convertible debt issued on
or after February 27, 2009) or June 30, 2012. To
reduce market disruption at the conclusion of the
DGP and to facilitate the orderly phase-out of the
program, the FDIC issued a final rule on June 3,
2009, that extended the period during which participating entities could issue FDIC-guaranteed
debt, through October 31, 2009. Concurrently,
the FDIC extended the expiration of the guarantee period from June 30, 2012 to December 31,
2012. Upon the expiration of the extended DGP,
the final rule grants existing participating entities access to a limited six-month emergency
FDIC guarantee facility expiring on April 30,
2010. The FDIC’s guarantee for all debt expires
on the earliest of the mandatory convertible
debt, the stated date of maturity, or December
31, 2012.
Fees for participation in the DGP are reserved
for possible TLGP losses. Since inception, the
FDIC has recorded $8.3 billion of guarantee fees
and fees of $1.2 billion from participating entities that elected to issue senior unsecured nonguaranteed debt. During 2009, the total amount
collected under the DGP was $7.1 billion, comprised of $6.1 billion for guaranteed debt and
$1.0 billion for non-guaranteed debt. The fees
are included in the “Cash and cash equivalents—
restricted—systemic risk” line item and recognized as “Deferred revenue-systemic risk” on
the Balance Sheet.
Additionally, as described in Note 5, the FDIC
holds $800 million (par value) of Citigroup trust
preferred securities (and any related interest) as
security in the event payments are required to be
made by the FDIC for guaranteed debt instru-

99

ments issued by Citigroup or any of its affiliates
under the TLGP. At December 31, 2009, the fair
value of these securities totaled $705.4 million,
and was determined using the valuation methodology described in Note 15 for other trust preferred securities held by the DIF. Because these
TruPs are held on behalf of the Treasury, the
decline in value has no impact on the fund balance of the DIF.
The FDIC’s payment obligation under the
DGP will be triggered by a payment default. In
the event of default, the FDIC will continue to
make scheduled principal and interest payments
under the terms of the debt instrument through
its maturity, or in the case of mandatory convertible debt, through the mandatory conversion date. The debtholder or representative must
assign to the FDIC the right to receive any and
all distributions on the guaranteed debt from any
insolvency proceeding, including the proceeds
of any receivership or bankruptcy estate, to the
extent of payments made under the guarantee.
Since inception of the program, $618 billion
in total guaranteed debt has been issued. To
date, one debt issuer has defaulted on guaranteed debt of $2.0 million. Eighty-four financial
entities (54 insured depository institutions and
30 affiliates and holding companies) had $309
billion in guaranteed debt outstanding at yearend 2009. At December 31, 2009, the contingent
liability for this guarantee was $87.9 million and
is included in the “Contingent liability for Systemic Risk” line item. The FDIC believes that it
is reasonably possible that additional estimated
losses of approximately $2.5 billion could occur
under the DGP.

100

Transaction Account Guarantee Program
The Transaction Account Guarantee Program
provides unlimited coverage for non-interest bearing transaction accounts held by insured depository
institutions on all deposit amounts exceeding the
fully insured limit (generally $250,000). In August
2009, the FDIC extended the expiration date of the
TAG program from December 31, 2009 to June 30,
2010. During 2009, the FDIC collected TAG fees of
$639.2 million which are earmarked for TLGP possible losses and payments.
Upon the failure of a participating insured depository institution, payment of guaranteed claims of
depositors with non-interest bearing transaction
accounts are funded with TLGP restricted cash. The
FDIC will be subrogated to these claims of depositors against the failed entity, and dividend payments
by the receivership are deposited back into TLGP
restricted accounts.
At December 31, 2009, the “Receivables and
other assets—systemic risk” line item includes
$187.5 million of estimated TAG fees due from
insured depository institutions. This receivable was
collected at the end of the first quarter of 2010.
The contingent liability resulting from the
anticipated failure of insured institutions participating in the TAG was $1.3 billion at December
31, 2009. For the 2009 failures, estimated losses
of $1.7 billion were recorded for the non-interest
bearing transaction accounts. The provision for
anticipated failures and the loss recorded at resolution are both recorded as “Systemic risk expenses” with a corresponding amount of guarantee
fees recognized as “Systemic risk revenue.” The
FDIC believes that it is reasonably possible that
additional estimated losses of approximately $721
million could occur under the TAG.

FDIC 2009 Annual Report

As of December 31, 2009, the maximum estimated exposure under the TAG is $834 billion.
However, 525 institutions elected to exit the TAG
program after December 31, 2009. The reported
TAG deposits associated with these institutions

at December 31, 2009, totaled $568 billion. Consequently, the maximum exposure under the
TAG as of January 1, 2010, is estimated to be
$266 billion.

Systemic Risk Activity at December 31, 2009
Dollars in Thousands

Cash and cash
equivalents—
restricted—
systemic risk

Balance at 01-01-09

Receivables
and other
assets—
systemic risk

Deferred
revenue—
systemic risk

$ 2,377,387

$ (2,077,880)

(1,026,870)
(89,977)

Revenue/
Expenses—
systemic risk

(6,039,553)
(549,199)

187,541

TAG fees collected

$ 1,138,132

7,066,423
639,176

Guaranteed and non-guaranteed debt fees collected

Contingent
liability—
systemic risk

(187,541)

Receivable for TAG fees
Receivable for TAG accounts at failed institutions

$ (1,437,638)

4,124,849

TruPs and accrued interest held for UST

801,422

(801,422)

Market value adjustment on TruPs held for UST

(94,624)

94,624

(1,741,653)

1,741,653

Estimated losses for TAG accounts at failed institutions
Provision for TLGP losses in future failures
Default of guaranteed debt issued by a failed bank
Overnight investment interest collected

(25,672)
(16)

25,672

16

6,085

$ 1,741,653

(6,085)

TLGP operating expenses

2,033

3,612

Reimbursement to DIF for TLGP operating expenses
incurred
Totals

(25,672)

3,612

(3,658,466)
$ 6,430,589

$ 3,298,820(a)

$ (7,847,447)

$ (1,411,966)

$ 1,721,626

(a) Total may not equal the line item due to rounding

IV.  Financial Statements and Notes



101

17.  Subsequent Events
Subsequent events have been evaluated
through June 14, 2010, the date the financial
statements are available to be issued.

FDIC Guaranteed Debt of Limited
Liability Companies
During 2010, the FDIC in its corporate capacity offered guarantees on $997.4 million in
purchase money notes issued by newly-formed
limited liability companies (LLCs). The terms
of the guarantees expire no later than the final
note maturing in 2020. The LLCs were created
to dispose of $4.6 billion of performing and
non-performing commercial and residential real
estate loans as well as related assets purchased
from multiple receiverships (multibank structured transactions). Private investors purchased
40-50 percent ownership interests in the LLCs,
with the receiverships holding the remaining
50-60 percent equity interest. In exchange for the
guarantees, the DIF expects to receive estimated
fees totaling $29.0 million. Based upon modeling scenarios, the cash flows from the assets of
each LLC provide sufficient coverage to defease
the debts by their maturity dates. Therefore, the
estimated loss to the DIF from these guarantees
is zero.
During 2010, FDIC-guaranteed notes issued by
three LLCs to receiverships during 2009 and 2010
were sold to private investors. The timely payment of principal due on the notes will continue to
be fully guaranteed by the FDIC (see Note 8).

FDIC Guaranteed Debt of Notes
On March 12, 2010, the FDIC issued $1.8 billion of notes backed by approximately $3.6 bil-

102

lion of residential mortgage-backed securities
(RMBS) from seven failed bank receiverships.
The underlying securities were sold to a statutory trust, which subsequently issued two series of
senior notes. The notes mature in 2038 and 2048
and are backed by the RMBS. Investors included banks, investment funds, insurance funds,
and pension funds. The $1.8 billion in proceeds
will go to the seven failed bank receiverships
and eventually be used to pay creditors, including the DIF. This will maximize recoveries for
the receiverships and recover substantial funds
for the DIF. The FDIC, in its corporate capacity, will fully and unconditionally guarantee the
timely payment of principal and interest due and
payable on the senior notes. In exchange for the
guarantees, the DIF expects to receive monthly
payments based on the outstanding principal balance of the senior notes.

Amendment of the TLGP to Extend the
Transaction Account Guarantee Program
(TAG)
An Interim Rule with request for comments,
issued on April 19, 2010, amends the TLGP to
extend the expiration date for the TAG from June
30, 2010 to December 31, 2010, and grants the
FDIC discretion to extend the program to December 31, 2011, without additional rulemaking, if
economic conditions warrant such an extension.
Assessment rates for institutions participating
in the TAG remain unchanged under the interim rule. Additionally, the interim rule would:
1) require TAG assessment reporting based on
average daily account balances; 2)  reduce the
maximum interest rate for qualifying negotiable
order of withdrawal (NOW) accounts guaranteed pursuant to the TAG to 0.25 percent from

FDIC 2009 Annual Report

0.50 percent; 3) provide an irrevocable, one-time
opportunity for institutions currently participating in the TAG to opt-out of the program, effective on July 1, 2010; and 4) establish conforming
disclosure requirements for institutions that optout of and those that continue to participate in
the extended program.

Proposed Revision of the Deposit
Insurance Assessment System
On April 13, 2010, the FDIC Board of Directors approved for issuance a Notice of Proposed
Rulemaking on Assessments (NPR) to revise the
assessment system applicable to large banks. The
NPR would eliminate risk categories and the use
of long-term debt issuer ratings, and replace the
financial ratios currently used with a scorecard
consisting of well-defined financial measures
that are more forward looking and better suited
for large institutions. Additionally, the proposal
would alter the assessment rates applicable to all
insured depository institutions to ensure that the
revenue collected under the proposed assessment
system would approximately equal that under the
existing assessment system.

2010 Failures Through June 14, 2010
Through June 14, 2010, 82 insured institutions failed with total losses to the DIF estimated
to be $16.8 billion.

IV.  Financial Statements and Notes



103

FSLIC Resolution Fund (FRF)
FSLIC Resolution Fund Balance Sheet at December 31
Dollars in Thousands

2009

2008

$ 3,470,125

$ 3,467,227

Assets
Cash and cash equivalents (Note 2)
Receivables from thrift resolutions and other assets, net (Note 3)

32,338

34,952

Receivables from U.S. Treasury for goodwill judgments (Note 4)

405,412

142,305

$ 3,907,875

$ 3,644,484

Total Assets
Liabilities

$ 2,972

$ 8,066

Contingent liabilities for litigation losses and other (Note 4)

Accounts payable and other liabilities

405,412

142,305

Total Liabilities

408,384

150,371

Resolution Equity (Note 5)
Contributed capital

127,847,696

127,442,179

Accumulated deficit

(124,348,205)

(123,948,066)

3,499,491

3,494,113

$ 3,907,875

$ 3,644,484

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

104

FDIC 2009 Annual Report

FSLIC Resolution Fund Statement of Income and Accumulated Deficit
for the Years Ended December 31
Dollars in Thousands

2009

2008

Revenue
Interest on U.S. Treasury obligations

$ 3,167

$ 56,128

Other revenue

5,276

7,040

Total Revenue

8,443

63,168

Operating expenses

4,905

3,188

Provision for losses

2,051

(891)

Goodwill/Guarini litigation expenses (Note 4)

408,997

254,247

Recovery of tax benefits

(10,279)

(26,846)

Expenses and Losses

Other expenses

Net Loss
Accumulated Deficit—Beginning
Accumulated Deficit—Ending

11,623

408,582

241,321

(400,139)

Total Expenses and Losses

2,908

(178,153)

(123,948,066)

(123,769,913)

$ (124,348,205)

$ (123,948,066)

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

IV.  Financial Statements and Notes



105

FSLIC Resolution Fund Statement of Cash Flows for the Years Ended December 31
Dollars in Thousands

2009

2008

$ (400,139)

$ (178,153)

2,051

(891)

563

751

Operating Activities
Net Loss
Adjustments to reconcile net loss to net cash used by operating
activities:
Provision for losses
Change In Operating Assets and Liabilities:
Decrease in receivables from thrift resolutions and other assets
(Decrease)/Increase in accounts payable and other liabilities
Increase in contingent liabilities for litigation losses and other
Net Cash Used by Operating Activities

(5,094)

3,791

263,107

106,954

(139,512)

(67,548)

142,410

142,642

Financing Activities
Provided by:
U.S. Treasury payments for goodwill litigation (Note 4)
Used by:
Payments to Resolution Funding Corporation (Note 5)
Net Cash Provided/(Used) by Financing Activities
Net Increase/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents—Beginning
Cash and Cash Equivalents—Ending

0

(225,000)

142,410

(82,358)

2,898

(149,906)

3,467,227

3,617,133

$ 3,470,125

$ 3,467,227

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

106

FDIC 2009 Annual Report

Notes to the Financial Statements
FSLIC Resolution Fund
December 31, 2009 and 2008

1. Legislative History and
Operations/Dissolution of the
FSLIC Resolution Fund
Legislative History
The Federal Deposit Insurance Corporation (FDIC) is the independent deposit insurance agency created by Congress in 1933 to
maintain stability and public confidence in the
nation’s banking system. Provisions that govern
the operations of the FDIC are generally found
in the Federal Deposit Insurance (FDI) Act, as
amended, (12 U.S.C. 1811, et seq). In carrying
out the purposes of the FDI Act, as amended, the
FDIC insures the deposits of banks and savings
associations, and in cooperation with other federal and state agencies promotes the safety and
soundness of insured depository institutions by
identifying, monitoring and addressing risks to
the deposit insurance fund established in the FDI
Act, as amended. In addition, FDIC is charged
with responsibility for the sale of remaining
assets and satisfaction of liabilities associated
with the former Federal Savings and Loan Insurance Corporation (FSLIC) and the Resolution
Trust Corporation (RTC).
The U.S. Congress created the FSLIC
through the enactment of the National Housing
Act of 1934. The Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (FIRREA) abolished the insolvent FSLIC, created the
FSLIC Resolution Fund (FRF), and transferred
the assets and liabilities of the FSLIC to the FRFexcept those assets and liabilities transferred to

IV.  Financial Statements and Notes



the RTC-effective on August 9, 1989. Further,
the FIRREA established the Resolution Funding Corporation (REFCORP) to provide part
of the initial funds used by the RTC for thrift
resolutions.
The RTC Completion Act of 1993 (RTC Completion Act) terminated the RTC as of December
31, 1995. All remaining assets and liabilities of
the RTC were transferred to the FRF on January
1, 1996. Today, the FRF consists of two distinct
pools of assets and liabilities: one composed of
the assets and liabilities of the FSLIC transferred
to the FRF upon the dissolution of the FSLIC
(FRF-FSLIC), and the other composed of the
RTC assets and liabilities (FRF-RTC). The assets
of one pool are not available to satisfy obligations of the other.
The FDIC is the administrator of the FRF and
the Deposit Insurance Fund. These funds are
maintained separately to carry out their respective mandates.

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
$602.2 million in appropriations to facilitate, if
required, efforts to wind up the resolution activity of the FRF-FSLIC.
The FDIC has conducted an extensive review
and cataloging of FRF’s remaining assets and
liabilities. Some of the issues and items that
remain open in FRF are: 1) criminal ­ estitution
r

107

orders (generally have from 3 to 8 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 10 years remaining to enforce);
3) numerous assistance agreements entered into
by the former FSLIC (FRF could continue to
receive tax benefits sharing through year 2013);
4) goodwill litigation (no final date for resolution
has been established; see Note 4); and 5) affordable housing program monitoring (requirements
can exceed 25 years). The FRF could potentially
realize substantial recoveries from the tax benefits sharing of up to approximately $231 million; however, any associated recoveries are not
reflected in FRF’s financial statements given the
significant uncertainties surrounding the ultimate outcome.

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

108

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

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

FDIC 2009 Annual Report

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 valuation of the receivables from thrift
resolutions and other assets.

Disclosure about Recent Accounting
Pronouncements
•	 Financial Accounting Standards Board
(FASB) Accounting Standards Codification
(ASC) 105, Generally Accepted Accounting Principles (formerly SFAS No. 168, The
FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted
Accounting Principles—a replacement of
FASB Statement No. 162, issued in June
2009) became effective for financial statements covering periods ending after September 15, 2009. The FDIC follows accounting
standards set by the FASB. On July 1, 2009,
the FASB ASC was launched and became the
sole source of authoritative accounting principles applicable to the FDIC.
	 All existing standards that were used to
create the Codification have become superseded. As a result, references to generally
accepted accounting principles in these
Notes will consist of the numbers used in the
Codification and, if applicable, the former
pronouncement number. The Codification’s
purpose was not to create new accounting
or reporting guidance, but to organize and
simplify authoritative GAAP literature. Consequently, there will be no change to FRF’s

IV.  Financial Statements and Notes



financial statements due to the implementation of this Statement.
•	 SFAS No. 167, Amendments to FASB Interpretation No. 46(R), was issued by the FASB
in June 2009, and subsequently codified
upon issuance of Accounting Standards
Update No. 2009-17, Consolidations (ASC
810)—Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities. SFAS 167, effective for reporting
periods beginning after November 15, 2009,
modifies the former quantitative approach
for determining the primary beneficiary of a
variable interest entity (VIE) to a qualitative
assessment. An enterprise must determine
qualitatively whether it has (1) the power
to direct the activities of the VIE that most
significantly impact the entity’s economic
performance and (2) the obligation to absorb
losses of the VIE or the right to receive benefits from the VIE that could potentially be
significant to the VIE. If an enterprise has
both of these characteristics, the enterprise
is considered the primary beneficiary and
must consolidate the VIE. Management is
currently reviewing the possible impact, if
any, of SFAS 167 (now codified in ASC 810)
on FRF’s accounting and financial reporting
requirements for 2010.
•	 SFAS No. 166, Accounting for Transfers of
Financial Assets—an amendment of FASB
Statement No. 140, was issued by the FASB
in June 2009. Subsequently, the FASB issued
Accounting Standards Update No. 2009-16,
Transfers and Servicing (ASC 860)—Accounting for Transfers of Financial Assets, to

109

formally incorporate the provisions of SFAS
No. 166 into the Codification. SFAS 166
removes the concept of a qualifying specialpurpose entity from GAAP, changes the
requirements for derecognizing financial
assets, and requires additional disclosures
about a transferor’s continuing involvement
in transferred financial assets. The FASB’s
objective is to improve the information that a
reporting entity provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position,
financial performance, and cash flows; and a
transferor’s continuing involvement, if any, in
transferred financial assets.
	 The provisions of SFAS 166 (now codified
in ASC 860) become effective for the FRF
for all transfers of financial assets occurring
on or after January 1, 2010.
•	 SFAS No. 165, Subsequent Events, was
issued in May 2009 and subsequently codified in FASB ASC 855, Subsequent Events.
ASC 855 represents the inclusion of guidance
on subsequent events in the accounting literature. Historically, management had relied
on auditing literature for guidance on assessing and disclosing subsequent events. ASC
855 now requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that date—that
is, whether that date represents the date the
financial statements were issued or were
available to be issued. These new provisions,
effective for the FRF as of December 31,
2009, do not have a significant impact on the
financial statements.

110

Other recent accounting pronouncements
have been deemed to be not applicable to the
financial statements as presented.

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

3. Receivables From Thrift
Resolutions and Other Assets,
Net
Receivables From Thrift Resolutions
The receivables from thrift resolutions include
payments made by the FRF to cover obligations
to insured depositors, advances to receiverships
for working capital, and administrative expenses
paid on behalf of receiverships. Any related allowance for loss represents the difference between
the funds advanced and/or obligations incurred
and the expected repayment. Assets held by the
FDIC in its receivership capacity for the former
RTC are a significant source of repayment of the
FRF’s receivables from thrift resolutions. As of
December 31, 2009, 8 of the 850 FRF receiverships remain active primarily due to unresolved
litigation, including goodwill matters.
The FRF receiverships held assets with a
book value of $20 million as of December 31,
2009 and 2008, (which primarily consist of cash,
investments, and miscellaneous receivables).
The estimated cash recoveries from the management and disposition of these assets are used to
derive the allowance for losses. The FRF receivership assets are valued by discounting projected
cash flows, net of liquidation costs using current

FDIC 2009 Annual Report

market-based risk factors applicable to a given
asset’s type and quality. These estimated asset
recoveries are regularly evaluated, but remain
subject to uncertainties because of potential
changes in economic and market conditions.
Such uncertainties could cause the FRF’s actual
recoveries to vary from current estimates.

Other Assets
Other assets primarily include credit enhancement reserves valued at $21.3 million and $21.2
million as of December 31, 2009 and 2008,
respectively. The credit enhancement reserves
resulted from swap transactions where the former RTC received mortgage-backed securities in
exchange for single-family mortgage loans. The
RTC supplied credit enhancement reserves for
the mortgage loans in the form of cash collateral
to cover future credit losses over the remaining
life of the loans. These reserves may cover future
credit losses through 2020.

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

2009

2008

Receivables from
closed thrifts

$ 5,744,509

$ 5,725,450

Allowance for losses

(5,736,737)

(5,717,740)

7,772

7,710

24,566

27,242

$ 32,338

$ 34,952

Receivables from Thrift
Resolutions, Net
Other assets
Total

4. Contingent Liabilities for:
Litigation Losses
The FRF records an estimated loss for unresolved legal cases to the extent those losses are
considered probable and reasonably estimable.
As of December 31, 2009 and 2008, respectively,
$405.4 million and $142.3 million were recorded
as probable losses. Additionally, at December 31,
2009, the FDIC has determined that there are no
losses from unresolved legal cases considered to
be reasonably possible.
In December 2008, FDIC concluded a 13½
year old legal case (FDIC v. Hurwitz) arising from
the December 30, 1988 failure of United Savings
Association of Texas. In August 2005, the District Court ordered sanctions against the FDIC in
the amount of $72 million. However, in August
2008, the Fifth Circuit Court of Appeals reversed
$57 million of the sanctions, but remanded the
remaining $15 million to the District Court to
determine what portion should be paid. Subsequently, in November 2008, an agreement was
reached between the parties, whereby the FDIC
would pay $10 million to settle the case. On
December 17, 2008, the settlement agreement
was fully executed and the settlement funds were
paid. The $10 million payment is recognized in
the “Other expenses” line item.

Additional Contingency
Goodwill Litigation
In United States v. Winstar Corp., 518 U.S.
839 (1996), the Supreme Court held that when
it became impossible following the enactment of
FIRREA in 1989 for the federal government to
perform certain agreements to count goodwill

IV.  Financial Statements and Notes



111

toward regulatory capital, the plaintiffs were
entitled to recover damages from the United
States. Approximately eight remaining cases
are pending against the United States based on
alleged breaches of these agreements.
On July 22, 1998, the Department of Justice’s (DOJ’s) Office of Legal Counsel (OLC)
concluded that the FRF is legally available to
satisfy all judgments and settlements in the
goodwill litigation involving supervisory action
or assistance agreements. OLC determined that
nonperformance of these agreements was a
contingent liability that was transferred to the
FRF on August 9, 1989, upon the dissolution of
the FSLIC. On July 23, 1998, the U.S. Treasury
determined, based on OLC’s opinion, that the
FRF is the appropriate source of funds for payments of any such judgments and settlements.
The FDIC General Counsel concluded that, as
liabilities transferred on August 9, 1989, these
contingent liabilities for future nonperformance
of prior agreements with respect to supervisory
goodwill were transferred to the FRF-FSLIC,
which is that portion of the FRF encompassing
the obligations of the former FSLIC. The FRFRTC, which encompasses the obligations of the
former RTC and was created upon the termination of the RTC on December 31, 1995, is not
available to pay any settlements or judgments
arising out of the goodwill litigation.
The goodwill lawsuits are against the United
States and as such are defended by the DOJ. On
January 26, 2010, the DOJ again informed the
FDIC that it is “unable at this time to provide a
reasonable estimate of the likely aggregate contingent liability resulting from the Winstar-related cases.” This uncertainty arises, in part, from
the existence of significant unresolved issues

112

pending at the appellate or trial court level, as
well as the unique circumstances of each case.
The FDIC believes that it is probable that
additional amounts, possibly substantial, may
be paid from the FRF-FSLIC as a result of judgments and settlements in the goodwill litigation. Based on representations from the DOJ,
the FDIC is unable to estimate a range of loss
to the FRF-FSLIC from the goodwill litigation.
However, the FRF can draw from an appropriation provided by Section 110 of the Department
of Justice Appropriations Act, 2000 (Public Law
106-113, Appendix A, Title I, 113 Stat. 1501A3, 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 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-FSLIC.
The FRF paid $142.4 million as a result of
judgments and settlements in four goodwill cases
for the year ended December 31, 2009, compared
to $142.6 million for four goodwill cases for the
year ended December 31, 2008. As described
above, the FRF received appropriations from the
U.S. Treasury to fund these payments. Based on
recent court decisions, the FRF accrued a $405.4
million contingent liability and offsetting receivable from the U.S. Treasury for judgments in six
cases. During 2009, four of the six cases were
fully adjudicated but not paid as of year end.
In addition, the FRF-FSLIC pays the goodwill
litigation expenses incurred by DOJ based on a
Memorandum of Understanding (MOU) dated

FDIC 2009 Annual Report

October 2, 1998, between the FDIC and DOJ.
Under the terms of the MOU, the FRF-FSLIC
paid $3.5 million and $4.3 million to DOJ for
fiscal years (FY) 2010 and 2009, respectively.
As in prior years, DOJ carried over and applied
all unused funds toward current FY charges.
At December 31, 2009, DOJ had an additional
$3.3 million in unused FY 2009 funds that were
applied against FY 2010 charges of $6.8 million.

Guarini Litigation
Paralleling the goodwill cases are similar
cases alleging that the government breached
agreements regarding tax benefits associated
with certain FSLIC-assisted acquisitions. These
agreements allegedly contained the promise of
tax deductions for losses incurred on the sale of
certain thrift assets purchased by plaintiffs from
the FSLIC, even though the FSLIC provided the
plaintiffs with tax-exempt reimbursement. A
provision in the Omnibus Budget Reconciliation
Act of 1993 (popularly referred to as the “Guarini legislation”) eliminated the tax deductions for
these losses.
All eight of the original Guarini cases have
been settled. However, a case settled in 2006
further obligates the FRF-FSLIC as a guarantor
for all tax liabilities in the event the settlement
amount is determined by tax authorities to be taxable. The maximum potential exposure under this
guarantee is approximately $81 million. However,
the FDIC believes that it is very unlikely the settlement will be subject to taxation. More definitive
information may be available during 2010, after
the IRS completes its Large Case Program audit
on the institution’s 2006 returns. The FRF is not
expected to fund any payment under this guarantee and no liability has been recorded.

IV.  Financial Statements and Notes



Representations and Warranties
As part of the RTC’s efforts to maximize the
return from the sale of assets from thrift resolutions, representations and warranties, and guarantees were offered on certain loan sales. The
majority of loans subject to these agreements
have been paid off, refinanced, or the period for
filing claims has expired. The FDIC’s estimate
of maximum potential exposure to the FRF is
$13.2 million. No claims in connection with representations and warranties have been asserted
since 1998 on the remaining open agreements.
Because of the age of the remaining portfolio and
lack of claim activity, the FDIC does not expect
new claims to be asserted in the future. Consequently, the financial statements at December
31, 2009 and 2008, do not include a liability for
these agreements.

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

113

Resolution Equity at December 31, 2009

Accumulated Deficit

The accumulated deficit represents the cumulative excess of
FRF
expenses over revenue for activFRF-FSLIC
FRF-RTC
Consolidated
ity related to the FRF-FSLIC and
Contributed capital—beginning $ 45,692,842 $ 81,749,337 $ 127,442,179
the FRF-RTC. Approximately
Add: U.S. Treasury payments/
$29.8 billion and $87.9 billion
receivable for goodwill litigation
405,517
0
405,517
were brought forward from the
Less: REFCORP payments
0
0
0
former FSLIC and the former RTC
Contributed capital—ending
46,098,359
81,749,337
127,847,696
on August 9, 1989, and January 1,
Accumulated deficit
(42,764,230) (81,583,975) (124,348,205)
1996, respectively. The FRF-FSLIC
Total
$ 3,334,129
$ 165,362
$ 3,499,491
accumulated deficit has increased
by $13.0 billion, whereas the FRFContributed Capital
RTC accumulated deficit has decreased by $6.3
The FRF-FSLIC and the former RTC received
billion, since their dissolution dates.
$43.5 billion and $60.1 billion from the U.S.
Treasury, respectively, to fund losses from thrift
6. Employee Benefits
resolutions prior to July 1, 1995. Additionally, the
Pension Benefits
FRF-FSLIC issued $670 million in capital cerEligible FDIC employees (permanent and
tificates to the Financing Corporation (a mixedterm employees with appointments exceeding
ownership government corporation established
one year) are covered by the federal government
to function solely as a financing vehicle for the
retirement plans, either the Civil Service RetireFSLIC) and the RTC issued $31.3 billion of these
ment System (CSRS) or the Federal Employees
instruments to the REFCORP. FIRREA prohibRetirement System (FERS). Although the FRF
ited the payment of dividends on any of these
contributes a portion of pension benefits for
capital certificates.
eligible employees, it does not account for the
Through December 31, 2009, the FRF-RTC
assets of either retirement system. The FRF also
has returned $4.556 billion to the U.S. Treasury
does not have actuarial data for accumulated
and made payments of $5.022 billion to the REFplan benefits or the unfunded liability relative to
CORP. These actions serve to reduce contributed
eligible employees. These amounts are reported
capital.
on and accounted for by the U.S. Office of PerFRF-FSLIC received $142.4 million in U.S.
sonnel Management. The FRF’s pension-related
Treasury payments for goodwill litigation in
expenses were $42 thousand and $169 thousand
2009. Furthermore, $405.4 million and $142.3
for 2009 and 2008, respectively.
million were accrued for as receivables at yearend 2009 and 2008, respectively. The effect of
this activity was an increase in contributed capital of $405.5 million in 2009.
Dollars in Thousands

114

FDIC 2009 Annual Report

Postretirement Benefits Other Than Pensions
The FRF no longer records a liability for the
postretirement benefits of life and dental insurance (a long-term liability), due to the expected
dissolution of the FRF. The liability is recorded
by the DIF. However, the FRF does continue to
pay its proportionate share of the yearly claim
expenses associated with these benefits.

7. Disclosures About the Fair Value of Financial Instruments
The financial asset recognized and measured at fair value on a recurring basis at each reporting date
is cash equivalents. The following tables present the FRF’s financial asset measured at fair value as of
December 31, 2009 and 2008.

Assets Measured at Fair Value at December 31, 2009
Dollars in Thousands

Fair Value Measurement 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 equivalents
(Special U.S. Treasuries)1

$ 3,470,125

$0

$0

$ 3,470,125

Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the U.S.
Bureau of Public Debt.
1

Assets Measured at Fair Value at December 31, 2008
Dollars in Thousands

Fair Value Measurement 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 equivalents
(Special U.S. Treasuries)1

$ 3,467,227

$0

$0

$ 3,467,227

Cash equivalents are Special U.S. Treasury Certificates with overnight maturities valued at prevailing interest rates established by the U.S.
Bureau of Public Debt.
1

IV.  Financial Statements and Notes



115

Some of the FRF’s financial assets and liabilities are not recognized at fair value but are
recorded at amounts that approximate fair value
due to their short maturities and/or comparability with current interest rates. Such items include
other short-term receivables and accounts payable and other liabilities.
The net receivable from thrift resolutions is
influenced by the underlying valuation of receivership assets. This corporate receivable is unique
and the estimate presented is not necessarily
indicative of the amount that could be realized
in a sale to the private sector. Such a sale would
require indeterminate, but substantial, discounts
for an interested party to profit from these assets
because of credit and other risks. Consequently,
it is not practicable to estimate its fair value.
Other assets primarily consist of credit
enhancement reserves, which are valued by
performing projected cash flow analyses using
market-based assumptions (see Note 3).

116

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Management’s Response
Appendix I

134

FDIC 2009 Annual Report



135

Management’s Report on Internal Control over Financial Reporting
The Federal Deposit Insurance Corporation’s (FDIC’s) internal control over financial reporting is a
process effected by those charged with governance, management, and other personnel, designed to
provide reasonable assurance regarding the preparation of reliable financial statements in accordance
with U.S. generally accepted accounting principles (GAAP), and compliance with applicable laws
and regulations. The objective of the FDIC’s internal control over financial reporting is to reasonably
assure that (1) transactions are properly recorded, processed and summarized to permit the preparation of financial statements in accordance with GAAP, and assets are safeguarded against loss from
unauthorized acquisition, use, or disposition; and (2) transactions are executed in accordance with the
laws and regulations that could have a direct and material effect on the financial statements.
Management is responsible for establishing and maintaining effective internal control over financial reporting. Management assessed the effectiveness of the FDIC’s internal control over financial
reporting as of December 31, 2009, through its enterprise risk management program that seeks to
comply with the spirit of the following standards, among others: Federal Managers’ Financial Integrity Act (FMFIA); Chief Financial Officers Act (CFO Act); Government Performance and Results
Act (GPRA); Federal Information Security Management Act (FISMA); and OMB Circular A-123. In
addition, other standards that the FDIC considers are the framework set forth by the Committee of
Sponsoring Organizations of the Treadway Commission’s Internal Control-Integrated Framework
and the U.S. Government Accountability Office’s (GAO’s) Standards for Internal Control in the Federal Government.
Based on our evaluation, FDIC management concluded that as of December 31, 2009, the Corporation
generally maintained effective internal controls, with the exception of a material weakness related
to its process for estimating losses on loss-sharing arrangements. Therefore, the Corporation did not
maintain, in all material respects, effective internal control over financial reporting.
Federal Deposit Insurance Corporation
June 14, 2010

136

FDIC 2009 Annual Report

Overview of the Industry

Total net income for the 8,012 FDIC-insured
commercial banks and savings institutions that
reported financial results as of December 31,
2009, was $12.5 billion for the year, up from $4.5
billion in 2008, but well below the $100 billion
that insured institutions earned in 2007. The
average return on assets (ROA), a basic yardstick
of earnings performance, was 0.09 percent, compared to 0.03 percent in 2008. These are the two
lowest annual ROAs for the industry in the past
22 years. Most of the year-over-year improvement in industry profitability occurred at the
largest institutions. Almost two out of every
three insured institutions (63.2 percent) reported
a lower ROA in 2009 than in 2008, and 29.5 percent of all institutions reported a net loss for the
year. This is the highest percentage of unprofitable institutions in the 26 years for which data
are available.
Historically high expenses for credit-quality
problems were the principal cause of earnings
weakness. Insured institutions set aside $247.7
billion in loan-loss provisions during 2009, compared to $177 billion a year earlier. Total loss
provisions in 2009 represented 38 percent of
the industry’s net operating revenue (net interest income plus total noninterest income) for the
year, the largest proportion in any year since the
creation of the FDIC.
Despite the burden of increased loan loss
expenses and the weakness of the U.S. economy,
the industry was considerably resilient in generating revenue during the year. Net operating
revenue totaled $656.3 billion, an increase of
$90.9 billion (16.1 percent) over 2008. Net interest income was $38.1 billion (10.7 percent) high-



er than a year earlier, while noninterest income
increased by $52.8 billion (25.4 percent).
The improvement in net interest income was
attributable to higher net interest margins (NIMs),
as the industry’s total interest-earning assets
declined by $477.2 billion (4.1 percent) in 2009.
The average NIM rose to 3.47 percent in 2009, up
from 3.16 percent a year earlier. This is the highest annual NIM for the industry since 2005 and
the first time in seven years that it has increased.
Much of the year-over-year improvement in NIMs
occurred at larger institutions, which benefitted
from a sharp decline in average funding costs.
More than half of all institutions (53.8 percent)
reported lower NIMs compared to 2008.
Growth in noninterest income was led by
increased trading revenue, which totaled $24.8
billion, compared to trading losses of $1.8 billion
a year earlier. Servicing fees also posted strong
growth, rising to $30.8 billion in 2009 from
$13.6 billion in 2008. Income from securitization activities was a notable area of noninterest
income weakness in 2009. Securitization income
totaled only $4.8 billion, down from $15.3 billion
the previous year.
Higher asset values contributed to a $14 billion reduction in realized losses on securities
and other assets in 2009. In 2008, insured institutions reported $15.4 billion in realized losses;
in 2009, realized losses totaled only $1.4 billion.
Improvement in asset values was also evident in a
$12.6 billion (38.6 percent) decline in charges for
goodwill impairment and other intangible asset
expenses. These charges, which reached $32.7
billion in 2008, fell to $20.1 billion in 2009.
Despite lower goodwill impairment costs,
total noninterest expenses increased by $16.2
billion (4.4 percent) in 2009. Deposit insurance

137

premiums paid by insured institutions totaled
$17.8 billion, an increase of $14.8 billion over
2008. Expenses for salaries and employee benefits were $11.4 billion (7.5 percent) higher than
in 2008.
As was the case in 2008, failures significantly affected earnings reported for the full year
because losses incurred by failed institutions
were not included in the year-to-date income
reported by surviving institutions as of December 31. During 2009, 119 failed institutions filed
financial reports for one or more quarters prior to
their failure. Together, these institutions reported
more than $8.2 billion in net losses that are not
included in full-year earnings for the industry.
Similarly, for institutions that change ownership
or are merged into other institutions, purchase
accounting rules stipulate that the income and
expenses that have been booked by acquired
institutions are to be reset to zero as of the date
of acquisition. Previously accrued income and
expenses become adjustments to assets, equity
capital, and reserves, and are not included in the
subsequent reporting of year-to-date income and
expense. If the 2009 losses reported by failed
institutions had been included, the industry’s net
income for the year would have been less than
$5 billion.
The industry’s troubled loans continued to
increase in 2009. At the end of December, the
amount of loans and leases that were noncurrent (90 days or more past due or in nonaccrual
status) was $391.3 billion, compared to $233.6
billion at the end of 2008. Noncurrent loans and
leases represented 5.37 percent of all loans and
leases, the highest percentage in the 26 years that
insured institutions have reported noncurrent
loan data. Residential mortgage loans account-

138

ed for more than half (51.2 percent) of the total
increase in noncurrent loans in 2009, rising by
$80.7 billion. Noncurrent real estate construction and development (C&D) loans rose by $20.3
billion, noncurrent loans to commercial and
industrial (C&I) borrowers increased by $16.7
billion, and noncurrent real estate loans secured
by nonfarm nonresidential properties increased
by $24.3 billion.
Net charge-offs of loans and leases totaled
$186.8 billion in 2009, compared to $100.4 billion
in 2008. The full-year net charge-off rate of 2.49
percent was the highest annual rate since 1934.
Net charge-offs of credit card loans totaled $37.5
billion for the year, net charge-offs of residential mortgage loans were $33.9 billion, C&I loan
charge-offs totaled $31.8 billion, and net chargeoffs of real estate C&D loans were $27.3 billion.
Total assets of insured institutions registered
a historic decline in 2009, as weak loan demand,
tighter loan underwriting standards, increased
loan charge-offs, and deleveraging by institutions seeking to boost their regulatory capital ratios all contributed to a contraction in the
industry’s balance sheet. Assets fell by $731.7
billion (5.3 percent) during the year, the largest
annual percentage decline since the inception of
the FDIC. The reduction in assets was led by a
$640.9 billion (8.3 percent) decline in net loans
and leases. C&I loan balances declined by $273.2
billion (18.3 percent), residential mortgage loans
fell by $128.5 billion (6.3 percent), and real estate
C&D loans declined by $139.4 billion (23.6 percent). Real estate loans secured by nonfarm non­
residential properties (up $25.2 billion, or 2.4
percent) was the only major loan category that
had meaningful growth in 2009.

FDIC 2009 Annual Report

In contrast to the reduction in industry assets,
deposit balances increased by $191.1 billion (2.1
percent) during the year. Nondeposit liabilities fell
by $1 trillion (31.3 percent). At year-end, deposits
funded 70.4 percent of total industry assets, the
highest proportion since March 31, 1996.
The number of insured institutions on the
FDIC’s “Problem List” rose from 252 institutions with assets of $159 billion to 702 institutions with assets of $402.8 billion in 2009. This
is the largest number and asset total of “problem”
institutions since the middle of 1993. At yearend, more than 95 percent of all insured institutions, representing more than 98 percent of total
industry assets, met or exceeded the regulatory
threshold defining “well-capitalized” for purposes of prompt corrective action.



139

V.  Management Control

Enterprise Risk Management

The Office of Enterprise Risk Management,
under the auspices of the Chief Financial Officer
organization, is responsible for corporate oversight of internal control and enterprise risk management (ERM). This includes ensuring that the
FDIC’s operations and programs are effective and
efficient and that internal controls are sufficient
to minimize exposure to waste and mismanagement. The FDIC recognizes the importance of
a strong risk management and internal control
program and has adopted a more proactive and
enterprise-wide approach to managing risk.
This approach focuses on the identification and
mitigation of risk consistently and effectively
throughout the Corporation, with emphasis on
those areas/issues most directly related to the
FDIC’s overall mission. As an independent government corporation, the FDIC has different
requirements than appropriated federal government agencies; nevertheless, its ERM program
seeks to comply with the spirit of the following
standards, among others:
•	 Federal Managers’ Financial Integrity Act
(FMFIA);
•	 Chief Financial Officers Act (CFO Act);
•	 Government Performance and Results Act
(GPRA);
•	 Federal Information Security Management
Act (FISMA); and
•	 OMB Circular A-123.
The CFO Act extends to the FDIC the FMFIA
requirements for establishing, evaluating and
reporting on internal controls. The FMFIA
requires agencies to annually provide a state-

140

ment of assurance regarding the effectiveness
of management, administrative and accounting
controls, and financial management systems.
The FDIC has developed and implemented
management, administrative, and financial systems controls that reasonably ensure that:
•	 Programs are efficiently and effectively carried out in accordance with applicable laws
and management policies;
•	 Programs and resources are safeguarded
against waste, fraud, and mismanagement;
•	 Obligations and costs comply with applicable
laws; and
•	 Reliable, complete, and timely data are maintained for decision-making and reporting
purposes.
The FDIC’s control standards incorporate
the Government Accountability Office’s (GAO)
Standards for Internal Control in the Federal
Government. Good internal control systems
are essential for ensuring the proper conduct of
FDIC business and the accomplishment of management objectives by serving as checks and balances against undesirable actions or outcomes.
As part of the Corporation’s continued commitment to establish and maintain effective and
efficient internal controls, FDIC management
routinely conducts reviews of internal control
systems. The results of these reviews, as well
as consideration of the results of audits, evaluations, and reviews conducted by the GAO, the
Office of Inspector General (OIG) and other outside entities, are used as a basis for the FDIC’s
reporting on the condition of the Corporation’s
internal control activities.

FDIC 2009 Annual Report

Material Weaknesses

Material weaknesses are control shortcomings in operations or systems that, among other
things, severely impair or threaten the organization’s ability to accomplish its mission or to
prepare timely, accurate financial statements or
reports. The shortcomings are of sufficient magnitude that the Corporation is obliged to report
them to external stakeholders.
To determine the existence of material weaknesses, the FDIC has assessed the results of
management evaluations and external audits of
the Corporation’s risk management and internal control systems conducted in 2009, as well
as management actions taken to address issues
identified in these audits and evaluations. At the
end of the 2009 audit, GAO identified a material
weakness in loss-share estimation processes and
a significant deficiency in the information technology (IT) security area. The FDIC is addressing the control issues raised by GAO, related to
its 2009 financial statement audits.

Description of Material Weakness
GAO identified deficiencies in controls over
FDIC’s process for deriving and reporting estimates of losses to the DIF from resolution transactions involving loss-sharing arrangements.
These deficiencies resulted in errors in the draft
2009 DIF financial statements that went undetected by FDIC and that necessitated adjustments
in finalizing the financial statements. Although
the net effect of these errors, less than 0.4 percent of net receivables, was ultimately not material in relation to the financial statements taken
as a whole, the nature of the control deficiencies
identified that resulted in these errors occurring

V.  Management Control



and going undetected is such that there is a reasonable possibility that they could have led to
material misstatements to DIF’s financial statements that would not have been timely detected
and corrected.

Corrective Actions and Target Completion
Dates
Several corrective actions were in process or
have been completed prior to release of this publication. Remaining actions include:
•	 Implement revised guidance and procedures
over the least cost test analysis, including,
improving the review checklists for peer
review—June 2010
•	 Require a monthly review of a sample of
completed analyses—July 2010.
•	 Implement a process to improve the documentation and approval of the changes to
the least cost test model and loss-share
w
­ orksheet—June 2010
•	 Implement an independent review of the
LLR templates—June 2010
Additionally, FDIC management will continue to focus on high priority areas, including the
six Program Management Office organizations,
IT systems security, resolution of bank failures,
and privacy, among others.

Management Report on
Final Actions

As required under amended Section 5 of the
Inspector General Act of 1978, the FDIC must
report information on final action taken by management on certain audit reports. For the federal fiscal year period October 1, 2008, through

141

S
­ eptember 30, 2009, there were no audit reports
in the following categories:
Table 1: Management Report on Final Action
on Audits with Disallowed Costs

Table 2: Management Report on Final Action
on Audits with Recommendations to Put
Funds to Better Use
The following table provides information on
audit reports over one year old:

Table 3: Audit Reports Without Final Actions But With Management Decisions
Over One Year Old for FY 2009
Report No. and
Issue Date

1.  UD-08-006
A
03-12-2008

2.  M-08-002
E
03-05-2008

OIG Audit Finding

Management Action

The OIG recommended that the FDIC should
update Circular 1380.3, Safeguarding FDIC Information Technology (IT) Hardware, to reflect the
FDIC’s current business environment for managing its laptop computer inventory and to define
policy for the disposal of hard drives.

The FDIC is completing the update and approval
process for Circular 1380.3, Safeguarding FDIC
Information Technology (IT) Hardware.

The OIG recommended that the FDIC should
revise Circular 1610.2, Security Policy and Procedures for FDIC Contractors and Subcontractors, to
enhance the current process for conducting contractor employee background investigations.

The revisions to Circular 1610.2, Security Policy and
Procedures for FDIC Contractors and Subcontractors, have been completed, and DOA has been
asked to delay further review due to work being
done by the Legal Division to develop security
guidelines for contractors.

Disallowed
Costs

$0

Completed: November 2009
$0

Completed: February 2010
3.  VAL-08-002
E
12-06-2007

4.  VAL-08-005
E
09-24-2008

142

The OIG recommended that the FDIC should
revise the FDIC Business Continuity Plans (BCP)
and pandemic preparedness plans to more specifically describe the role telework plays in those
plans. The OIG also recommended that the FDIC
modify FDIC Form 2121.5, Employee/Supervisor Telework Program Agreement, for regular or
recurring telework situations to include identifying any sensitive data that may be used during
telework to assist management in making the
decision to approve or disapprove a telework
request.

The FDIC is in the process of finalizing multiple
changes to the Business Continuity Plan and
coordinating across multiple Divisions and Offices
to effect these changes. Additionally, the FDIC is
completing the changes to Circular 2121.1, Federal Program Circular and Telework Form 2121.5,
Employee/Supervisor Telework Program Agreement. These documents have been circulated for
review and comment.

The OIG recommended that the FDIC should
improve the facilities’ infrastructure for monitoring energy management and sustainability
efforts by: a) Installing or upgrading building
energy management systems, and b) Installing
sub-metering capabilities to monitor specific uses
of energy.

Several of the electrical sub-meters installed in
March 2009 were found to be defective, resulting in
erroneous energy consumption data. The defective
electrical sub-meters are in the process of being
repaired/replaced.

$0

Completed: March 2010
$0

Completed: December 2009

FDIC 2009 Annual Report

This page intentionally left blank.

VI.  Appendices

A. 	Key Statistics
FDIC Expenditures 2000–2009

Dollars in Millions
$2,500

2,000

1,500

1,000

500

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

The FDIC’s Strategic Plan and Annual Performance Plan provide the basis for annual planning and
budgeting for needed resources. The 2009 aggregate budget (for corporate, receivership, and investment spending) was $2.57 billion, while actual expenditures for the year were $2.34 billion, about $1.11
billion more than 2008 expenditures.
Over the past decade, the FDIC’s expenditures have varied in response to workload. During the last
two years, expenditures have risen, largely due to increasing resolution and receivership activity. To
a lesser extent, increased expenses have resulted from supervision-related costs associated with the
oversight of more troubled institutions.

144

FDIC 2009 Annual Report

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through December 31, 20091
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions

Insurance Fund as a
Percentage of

Year



Total
Domestic
Deposits

Est. Insured
Deposits3

Percentage
of Insured
Deposits

2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980

VI.  Appendices

Insurance
Coverage2
$250,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000

7,705,342
7,505,360
6,921,686
6,640,105
6,229,764
5,724,621
5,223,922
4,916,078
4,564,064
4,211,895
3,885,826
3,817,150
3,602,189
3,454,556
3,318,595
3,184,410
3,220,302
3,275,530
3,331,312
3,415,464
3,412,503
2,337,080
2,198,648
2,162,687
1,975,030
1,805,334
1,690,576
1,544,697
1,409,322
1,324,463

5,391,876
4,756,809
4,292,163
4,153,786
3,890,941
3,622,059
3,452,497
3,383,598
3,215,581
3,055,108
2,869,208
2,850,452
2,746,477
2,690,439
2,663,873
2,588,619
2,602,781
2,677,709
2,733,387
2,784,838
2,755,471
1,756,771
1,657,291
1,636,915
1,510,496
1,393,421
1,268,332
1,134,221
988,898
948,717

70.0
63.4
62.0
62.6
62.5
63.3
66.1
68.8
70.5
72.5
73.8
74.7
76.2
77.9
80.3
81.3
80.8
81.7
82.1
81.5
80.7
75.2
75.4
75.7
76.5
77.2
75.0
73.4
70.2
71.6

Deposit
Insurance
Fund
(20,861.8)
17,276.3
52,413.0
50,165.3
48,596.6
47,506.8
46,022.3
43,797.0
41,373.8
41,733.8
39,694.9
39,452.1
37,660.8
35,742.8
28,811.5
23,784.5
14,277.3
178.4
(6,934.0)
4,062.7
13,209.5
14,061.1
18,301.8
18,253.3
17,956.9
16,529.4
15,429.1
13,770.9
12,246.1
11,019.5

Total
Domestic
Deposits
(0.27)
0.23
0.76
0.76
0.78
0.83
0.88
0.89
0.91
0.99
1.02
1.03
1.05
1.03
0.87
0.75
0.44
0.01
(0.21)
0.12
0.39
0.60
0.83
0.84
0.91
0.92
0.91
0.89
0.87
0.83

Est. Insured
Deposits
(0.39)
0.36
1.22
1.21
1.25
1.31
1.33
1.29
1.29
1.37
1.38
1.38
1.37
1.33
1.08
0.92
0.55
0.01
(0.25)
0.15
0.48
0.80
1.10
1.12
1.19
1.19
1.22
1.21
1.24
1.16

145

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through December 31, 20091 (continued)
Dollars in Millions (except Insurance Coverage)

Deposits in Insured
Institutions

Year
1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
1950

146

Insurance
Coverage2
40,000
40,000
40,000
40,000
40,000
40,000
20,000
20,000
20,000
20,000
20,000
15,000
15,000
15,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000
10,000

Insurance Fund as a
Percentage of

Total
Domestic
Deposits

Est. Insured
Deposits3

Percentage
of Insured
Deposits

1,226,943
1,145,835
1,050,435
941,923
875,985
833,277
766,509
697,480
610,685
545,198
495,858
491,513
448,709
401,096
377,400
348,981
313,304
297,548
281,304
260,495
247,589
242,445
225,507
219,393
212,226
203,195
193,466
188,142
178,540
167,818

808,555
760,706
692,533
628,263
569,101
520,309
465,600
419,756
374,568
349,581
313,085
296,701
261,149
234,150
209,690
191,787
177,381
170,210
160,309
149,684
142,131
137,698
127,055
121,008
116,380
110,973
105,610
101,841
96,713
91,359

65.9
66.4
65.9
66.7
65.0
62.4
60.7
60.2
61.3
64.1
63.1
60.4
58.2
58.4
55.6
55.0
56.6
57.2
57.0
57.5
57.4
56.8
56.3
55.2
54.8
54.6
54.6
54.1
54.2
54.4

Deposit
Insurance
Fund
9,792.7
8,796.0
7,992.8
7,268.8
6,716.0
6,124.2
5,615.3
5,158.7
4,739.9
4,379.6
4,051.1
3,749.2
3,485.5
3,252.0
3,036.3
2,844.7
2,667.9
2,502.0
2,353.8
2,222.2
2,089.8
1,965.4
1,850.5
1,742.1
1,639.6
1,542.7
1,450.7
1,363.5
1,282.2
1,243.9

Total
Domestic
Deposits
0.80
0.77
0.76
0.77
0.77
0.73
0.73
0.74
0.78
0.80
0.82
0.76
0.78
0.81
0.80
0.82
0.85
0.84
0.84
0.85
0.84
0.81
0.82
0.79
0.77
0.76
0.75
0.72
0.72
0.74

Est. Insured
Deposits
1.21
1.16
1.15
1.16
1.18
1.18
1.21
1.23
1.27
1.25
1.29
1.26
1.33
1.39
1.45
1.48
1.50
1.47
1.47
1.48
1.47
1.43
1.46
1.44
1.41
1.39
1.37
1.34
1.33
1.36

FDIC 2009 Annual Report

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through December 31, 20091 (continued)
Dollars in Millions (except Insurance Coverage)

Deposits in Insured
Institutions

Year
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
1934

Insurance
Coverage2
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000
5,000

Total
Domestic
Deposits
156,786
153,454
154,096
148,458
157,174
134,662
111,650
89,869
71,209
65,288
57,485
50,791
48,228
50,281
45,125
40,060

Est. Insured
Deposits3
76,589
75,320
76,254
73,759
67,021
56,398
48,440
32,837
28,249
26,638
24,650
23,121
22,557
22,330
20,158
18,075

Insurance Fund as a
Percentage of
Percentage
of Insured
Deposits
48.8
49.1
49.5
49.7
42.6
41.9
43.4
36.5
39.7
40.8
42.9
45.5
46.8
44.4
44.7
45.1

Deposit
Insurance
Fund
1,203.9
1,065.9
1,006.1
1,058.5
929.2
804.3
703.1
616.9
553.5
496.0
452.7
420.5
383.1
343.4
306.0
291.7

Total
Domestic
Deposits
0.77
0.69
0.65
0.71
0.59
0.60
0.63
0.69
0.78
0.76
0.79
0.83
0.79
0.68
0.68
0.73

Est. Insured
Deposits
1.57
1.42
1.32
1.44
1.39
1.43
1.45
1.88
1.96
1.86
1.84
1.82
1.70
1.54
1.52
1.61

1
Prior to 1989, figures are for BIF only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent sum of BIF and SAIF amounts; for
2006 to 2008, figures are for DIF. Amounts from 1989 to 2008 include insured branches of foreign banks.
2
Coverage for certain retirement accounts increased to $250,000 in 2006. Coverage limits do not reflect temporary increases authorized by the Emergency
Economic Stabilization Act of 2008. Initial coverage limit was $2,500 from January 1 to June 30, 1934.
3
Prior to year-end 1991, insured deposits were estimated using percentages determined from June Call and Thrift Financial reports.

VI.  Appendices



147

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2009
Dollars in Millions

Income

Year

Total

Total

$142,396.6

2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980

148

24,706.4
7,306.3
3,196.2
2,643.5
2,420.5
2,240.3
2,173.6
1,795.9
2,730.1
2,570.1
2,416.7
2,584.6
2,165.5
7,156.8
5,229.2
7,682.1
7,354.5
6,479.3
5,886.5
3,855.3
3,496.6
3,347.7
3,319.4
3,260.1
3,385.5
3,099.5
2,628.1
2,524.6
2,074.7
1,310.4

Assessment
Income

Assessment
Credits

Expenses and Losses

Investment
and Other
Sources

$88,268.6

$11,391.0

$66,107.8

$17,865.4
4,410.4
3,730.9
31.9
60.9
104.2
94.8
107.8
83.2
64.3
48.4
37.0
38.6
5,294.2
3,877.0
6,722.7
6,682.0
5,758.6
5,254.0
2,872.3
1,885.0
1,773.0
1,696.0
1,516.9
1,433.5
1,321.5
1,214.9
1,108.9
1,039.0
951.9

$148.0
1,445.9
3,088.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
164.0
96.2
117.1
521.1

6,989.0
4,341.8
2,553.3
2,611.6
2,359.6
2,136.1
2,078.8
2,276.9
2,646.9
2,505.8
2,368.3
2,547.6
2,126.9
1,862.6
1,352.2
959.4
672.5
720.7
632.5
983.0
1,611.6
1,574.7
1,623.4
1,743.2
1,952.0
1,778.0
1,577.2
1,511.9
1,152.8
879.6

Effective
Assessment
Rate1

Total

Provision
for Losses

$164,264.5 $135,742.4
0.2332%
0.0418%
0.0093%
0.0005%
0.0010%
0.0019%
0.0019%
0.0023%
0.0019%
0.0016%
0.0013%
0.0010%
0.0011%
0.1622%
0.1238%
0.2192%
0.2157%
0.1815%
0.1613%
0.0868%
0.0816%
0.0825%
0.0833%
0.0787%
0.0815%
0.0800%
0.0714%
0.0769%
0.0714%
0.0370%

60,709.0
44,339.5
1,090.9
904.3
809.3
607.6
(67.7)
719.6
3,123.4
945.2
2,047.0
817.5
247.3
353.6
202.2
(1,825.1)
(6,744.4)
(596.8)
16,925.3
13,059.3
4,352.2
7,588.4
3,270.9
2,963.7
1,957.9
1,999.2
969.9
999.8
848.1
83.6

$57,711.8
41,838.8
95.0
(52.1)
(160.2)
(353.4)
(1,010.5)
(243.0)
2,199.3
28.0
1,199.7
(5.7)
(505.7)
(417.2)
(354.2)
(2,459.4)
(7,660.4)
(2,274.7)
15,496.2
12,133.1
3,811.3
6,298.3
2,996.9
2,827.7
1,569.0
1,633.4
675.1
126.4
320.4
(38.1)

Admin.
and Oper.
Expenses2

Funding
Transfer
from the
FSLIC
Resolution
Fund

Interest &
Other Ins.
Expenses

$18,138.9

$10,389.2

$1,271.1
1,033.5
992.6
950.6
965.7
941.3
935.5
945.1
887.9
883.9
823.4
782.6
677.2
568.3
510.6
443.2
418.5
614.83
326.1
275.6
219.9
223.9
204.9
180.3
179.2
151.2
135.7
129.9
127.2
118.2

$1,726.1
1,467.2
3.3
5.8
3.8
19.7
7.3
17.5
36.2
33.3
23.9
40.6
75.8
202.5
45.8
191.1
497.5
1,063.1
1,103.0
650.6
321.0
1,066.2
69.1
(44.3)
209.7
214.6
159.1
743.5
400.5
3.5

Net Income
(Loss)

$139.5 ($21,728.4)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
35.4
42.4
56.1
5.6
0
0
0
0
0
0
0
0
0

(36,002.6)
(37,033.2)
2,105.3
1,739.2
1,611.2
1,632.7
2,241.3
1,076.3
(393.3)
1,624.9
369.7
1,767.1
1,918.2
6,803.2
5,027.0
9,507.2
14,098.9
7,111.5
(10,996.4)
(9,147.9)
(850.0)
(4,240.7)
48.5
296.4
1,427.6
1,100.3
1,658.2
1,524.8
1,226.6
1,226.8

FDIC 2009 Annual Report

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2009 (continued)
Dollars in Millions

Income

Year

1979
1978
1977
1976
1975
1974
1973
1972
1971
1970
1969
1968
1967
1966
1965
1964
1963
1962
1961
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
1950

Total

1,090.4
952.1
837.8
764.9
689.3
668.1
561.0
467.0
415.3
382.7
335.8
295.0
263.0
241.0
214.6
197.1
181.9
161.1
147.3
144.6
136.5
126.8
117.3
111.9
105.8
99.7
94.2
88.6
83.5
84.8

VI.  Appendices



Expenses and Losses

Assessment
Income

Assessment
Credits

Investment
and Other
Sources

Effective
Assessment
Rate1

881.0
810.1
731.3
676.1
641.3
587.4
529.4
468.8
417.2
369.3
364.2
334.5
303.1
284.3
260.5
238.2
220.6
203.4
188.9
180.4
178.2
166.8
159.3
155.5
151.5
144.2
138.7
131.0
124.3
122.9

524.6
443.1
411.9
379.6
362.4
285.4
283.4
280.3
241.4
210.0
220.2
202.1
182.4
172.6
158.3
145.2
136.4
126.9
115.5
100.8
99.6
93.0
90.2
87.3
85.4
81.8
78.5
73.7
70.0
68.7

734.0
585.1
518.4
468.4
410.4
366.1
315.0
278.5
239.5
223.4
191.8
162.6
142.3
129.3
112.4
104.1
97.7
84.6
73.9
65.0
57.9
53.0
48.2
43.7
39.7
37.3
34.0
31.3
29.2
30.6

0.0333%
0.0385%
0.0370%
0.0370%
0.0357%
0.0435%
0.0385%
0.0333%
0.0345%
0.0357%
0.0333%
0.0333%
0.0333%
0.0323%
0.0323%
0.0323%
0.0313%
0.0313%
0.0323%
0.0370%
0.0370%
0.0370%
0.0357%
0.0370%
0.0370%
0.0357%
0.0357%
0.0370%
0.0370%
0.0370%

Total

93.7
148.9
113.6
212.3
97.5
159.2
108.2
59.7
60.3
46.0
34.5
29.1
27.3
19.9
22.9
18.4
15.1
13.8
14.8
12.5
12.1
11.6
9.7
9.4
9.0
7.8
7.3
7.8
6.6
7.8

Provision
for Losses

(17.2)
36.5
20.8
28.0
27.6
97.9
52.5
10.1
13.4
3.8
1.0
0.1
2.9
0.1
5.2
2.9
0.7
0.1
1.6
0.1
0.2
0.0
0.1
0.3
0.3
0.1
0.1
0.8
0.0
1.4

Admin.
and Oper.
Expenses2

106.8
103.3
89.3
180.4 4
67.7
59.2
54.4
49.6
46.9
42.2
33.5
29.0
24.4
19.8
17.7
15.5
14.4
13.7
13.2
12.4
11.9
11.6
9.6
9.1
8.7
7.7
7.2
7.0
6.6
6.4

Interest &
Other Ins.
Expenses

4.1
9.1
3.5
3.9
2.2
2.1
1.3
6.0 5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

Funding
Transfer
from the
FSLIC
Resolution
Fund

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Net Income
(Loss)

996.7
803.2
724.2
552.6
591.8
508.9
452.8
407.3
355.0
336.7
301.3
265.9
235.7
221.1
191.7
178.7
166.8
147.3
132.5
132.1
124.4
115.2
107.6
102.5
96.8
91.9
86.9
80.8
76.9
77.0

149

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2009 (continued)
Dollars in Millions

Income

Year

1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1935
1933-34

Total

151.1
145.6
157.5
130.7
121.0
99.3
86.6
69.1
62.0
55.9
51.2
47.7
48.2
43.8
20.8
7.0

Expenses and Losses

Assessment
Income

Assessment
Credits

Investment
and Other
Sources

Effective
Assessment
Rate1

122.7
119.3
114.4
107.0
93.7
80.9
70.0
56.5
51.4
46.2
40.7
38.3
38.8
35.6
11.5
0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

28.4
26.3
43.1
23.7
27.3
18.4
16.6
12.6
10.6
9.7
10.5
9.4
9.4
8.2
9.3
7.0

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

Total

6.4
7.0
9.9
10.0
9.4
9.3
9.8
10.1
10.1
12.9
16.4
11.3
12.2
10.9
11.3
10.0

Provision
for Losses

0.3
0.7
0.1
0.1
0.1
0.1
0.2
0.5
0.6
3.5
7.2
2.5
3.7
2.6
2.8
0.2

Admin.
and Oper.
Expenses2

6.1
6.3 6
9.8
9.9
9.3
9.2
9.6
9.6
9.5
9.4
9.2
8.8
8.5
8.3
8.5
9.8

Funding
Transfer
from the
FSLIC
Resolution
Fund

Interest &
Other Ins.
Expenses

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

Net Income
(Loss)

144.7
138.6
147.6
120.7
111.6
90.0
76.8
59.0
51.9
43.0
34.8
36.4
36.0
32.9
9.5
(3.0)

1
Figures represent only BIF insured institutions prior to 1990, BIF and SAIF insured institutions from 1990 through 2005, and DIF insured institutions beginning in 2006. After 1995, all thrift
closings became the responsibility of the FDIC and amounts are reflected in the SAIF. The effective assessment rate is calculated from annual assessment income (net of assessment credits)
excluding transfers to the Financing Corporation (FICO), Resolution Funding Corporation (REFCORP) and the 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 BIF were lowered again to a range of 0 to 0.27 percent
of assessable deposits, effective the start of 1996. In 1996, the SAIF collected a one-time special assessment of $4.5 billion. Subsequently, assessment rates for SAIF were lowered to the same
range as 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.
2
These expenses, which are presented as operating expenses in the Statements of Income and Fund Balance, pertain to the FDIC in its Corporate capacity only and do not include costs
that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses are presented as part of the “Receivables from Bank Resolutions, net” line on the
Balance Sheets. The narrative and graph presented in the “Corporate Planning and Budget” section of this report (next page) show the aggregate (corporate and receivership) expenditures
of the FDIC.
3
Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits.
4
Includes $105.6 million net loss on government securities.
5
This amount represents interest and other insurance expenses from 1933 to 1972.
6
Includes the aggregate amount of $80.6 million of interest paid on capital stock between 1933 and 1948

150

FDIC 2009 Annual Report

Number, Assets, Deposits, Losses, and Loss To Funds of Insured Thrifts Taken Over or Closed
Because of Financial Difficulties, 1989 Through 19951
Dollars in Thousands

Deposits

Estimated
Receivership Loss2

Loss to Funds3

$393,986,574

$317,501,978

$75,315,686

$81,583,975

2

423,819

414,692

28,192

27,750

2

136,815

127,508

11,472

14,599

10

6,147,962

4,881,461

267,595

65,212

1992

59

44,196,946

34,773,224

3,234,851

3,780,088

1991

144

78,898,904

65,173,122

8,624,734

9,123,030

Year

Total

Total

748

1995
1994
1993

Assets

1990

213

129,662,498

98,963,962

16,063,792

19,258,686

19894

318

134,519,630

113,168,009

47,085,050

49,314,610

1
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.

VI.  Appendices



151

Fdic-Insured Institutions Closed During 2009
Dollars in Thousands

Name and Location

Bank
Class

N
­ umber
of
Deposit
Accounts

Total
Assets2

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

Receiver/Assuming
Bank and Location

Purchase and Assumption—Insured Deposits
Bank of Clark County
Vancouver, WA

NM

5,059

$441,085

$377,506

$389,930

$143,563

01/16/09

Umpqua Bank
Roseburg, OR

1st Centennial Bank
Redlands, CA

NM

8,453

$797,959

$678,570

$629,958

$156,663

01/23/09

First California Bank
Westlake Village, CA

N

1,368

$4,157,246

$3,314,928

$2,579,148

$484,909

05/01/09

Federal Deposit Insurance
Corporation

SM

604

$585,508

$511,473

$143,739

$35,088

12/18/09

Federal Deposit Insurance
Corporation

N

8,723

$979,585

$813,205

$839,583

$341,281

03/27/09

SunTrust Bank
Atlanta, GA

Silverton Bank, NA
Atlanta, GA
Independent Bankers Bank
Springfield, IL

Insured Deposits Transfer
Omni National Bank
Atlanta, GA

Whole Bank Purchase and Assumption—All Deposits
BankUnited, FSB
Coral Gables, FL

SB

246,732

$13,111,463

$8,775,985

$2,698,688

$5,568,945

05/21/09

BankUnited
Coral Gables, FL

N

8,191

$419,741

$395,868

$141,800

$87,638

01/16/09

Republic Bank of Chicago
Oak Brook, IL

Suburban Federal Savings Bank
Crofton, MD

SB

14,900

$347,408

$301,847

$49,000

$109,329

01/30/09

Bank of Essex
Tappahannock, VA

County Bank
Merced, CA

SM

84,185

$1,711,552

$1,324,635

$20,000

$131,778

02/06/09

Westamerica Bank
San Rafael, CA

Alliance Bank
Culver City, CA

NM

9,213

$1,113,361

$951,106

$71,989

$207,769

02/06/09

California Bank & Trust
San Diego, CA

Pinnacle Bank
Beaverton, OR

NM

1,444

$71,921

$64,168

$10,000

$14,336

02/13/09

Washington Trust Bank
Spokane, WA

Heritage Community Bank
Glenwood, IL

NM

11,764

$235,154

$225,735

$23,520

$39,235

02/27/09

MB Financial Bank, N.A.
Glenwood, IL

Freedom Bank of Georgia
Commerce, GA

NM

5,081

$172,454

$159,048

$13,385

$40,057

03/06/09

Northeast Georgia Bank
Lavonia, GA

Colorado National Bank
Colorado Springs, CO

N

4,799

$123,508

$85,150

$6,700

$16,097

03/20/09

Herring Bank
Amarillo, TX

Teambank, N.A.
Paola, KS

N

36,698

$669,830

$532,520

$75,713

$105,699

03/20/09

Great Southern Bank
Springfield, MO

Cape Fear Bank
Wilmington, NC

NM

10,867

$492,418

$402,820

$118,791

$125,365

04/10/09

First FS&LA of Charleston
Charleston, SC

National Bank of Commerce
Berkeley, IL

152

FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continued)
Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

NM

13,178

SB

Strategic Capital Bank
Champaign, IL
Citizens National Bank
Macomb, IL

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$238,940

$220,834

$20,810

$19,592

04/17/09

Nevada State Bank
Las Vegas, NV

10,222

$166,456

$170,946

$21,800

$46,043

04/17/09

Metcalf Bank
Lee’s Summit, MO

NM

1,713

$546,576

$479,384

$61,000

$145,291

05/22/09

Midland States Bank
Effingham, IL

N

13,607

$438,560

$393,635

$201,244

$25,999

05/22/09

Morton Community Bank
Morton, IL

Bank of Lincolnwood
Lincolnwood, IL

NM

8,003

$212,718

$209,285

$87,587

$66,854

06/05/09

Republic Bank of Chicago
Oak Brook, IL

Cooperative Bank
Wilmington, NC

NM

29,001

$966,778

$768,479

$51,699

$270,651

06/19/09

First Bank
Troy, NC

N

9,326

$156,954

$142,551

$12,622

$32,532

06/19/09

Bank of Kansas
South Hutchinson, KS

Southern Community Bank
Fayetteville, GA

NM

13,372

$371,695

$297,962

$99,190

$103,941

06/19/09

United Community Bank
Blairsville, GA

Neighborhood Community
Bank
Newnan, GA

SM

7,067

$212,616

$190,070

$46,720

$70,663

06/26/09

CharterBank
West Point, GA

Horizon Bank
Pine City, MN

NM

4,823

$84,763

$69,254

$10,532

$22,825

06/26/09

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

MetroPacific Bank
Irvine, CA

NM

709

$75,316

$70,078

$38,367

$31,887

06/26/09

Sunwest Bank
Tustin, CA

Mirae Bank
Los Angeles, CA

NM

6,385

$480,619

$409,951

$10,500

$59,962

06/26/09

Wilshire State Bank
Los Angeles, CA

The Elizabeth State Bank
Elizabeth, IL

NM

4,761

$55,027

$48,131

$5,495

$12,274

07/02/09

Galena State Bank and
Trust
Galena, IL

Founders Bank
Worth, IL

NM

48,969

$889,172

$832,160

$77,038

$129,972

07/02/09

The PrivateBank and Trust
Company
Chicago, IL

Rock River Bank
Oregon, IL

NM

4,633

$74,808

$74,893

$12,043

$24,880

07/02/09

The Harvard State Bank
Harvard, IL

The John Warner Bank
Clinton, IL

NM

6,487

$69,609

$65,179

$7,515

$13,180

07/02/09

State Bank of Lincoln
Lincoln, IL

First State Bank of Winchester
Winchester, IL

NM

3,362

$30,073

$30,806

$2,410

$7,492

07/02/09

The First National Bank of
Beardstown
Beardstown, IL

First National Bank of Danville
Danville, IL

N

12,698

$148,218

$140,185

$19,400

$22,233

07/02/09

First Financial Bank, N.A.
Terre Haute, IN

Name and Location
Great Basin Bank of Nevada
Elko, NV
American Sterling Bank
Sugar Creek, MO

The First National Bank of
Anthony
Anthony, KS

VI.  Appendices



Total
Assets2

Receiver/Assuming
Bank and Location

153

Fdic-Insured Institutions Closed During 2009 (continued)
Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

Millennium State Bank of Texas
Dallas, TX

NM

1,646

Temecula Valley Bank
Temecula, CA

NM

Vineyard Bank, N.A.
Corona, CA

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$118,601

$115,478

$54,860

$51,863

07/02/09

State Bank of Texas
Irving, TX

22,684

$1,396,622

$1,276,287

$263,324

$382,418

07/17/09

First-Citizens Bank and
Trust Company
Raleigh, NC

N

37,539

$1,638,378

$1,526,186

$165,552

$572,830

07/17/09

California Bank & Trust
San Diego, CA

First Piedmont Bank
Winder, GA

NM

3,705

$114,113

$108,499

$6,750

$31,994

07/17/09

First American Bank and
Trust Company
Athens, GA

Security Bank of Bibb County
Macon, GA

NM

35,441

$943,744

$831,437

$347,100

$370,351

07/24/09

State Bank and Trust
Company
Pinehurst, GA

Security Bank of Gwinnett
County
Suwanee, GA

NM

3,646

$259,182

$256,578

$71,540

$135,047

07/24/09

State Bank and Trust
Company
Pinehurst, GA

Security Bank of Houston
County
Perry, GA

NM

16,221

$371,624

$313,155

$12,500

$44,695

07/24/09

State Bank and Trust
Company
Pinehurst, GA

Security Bank of Jones County
Gray, GA

NM

12,294

$432,712

$375,238

$11,800

$62,196

07/24/09

State Bank and Trust
Company
Pinehurst, GA

Security Bank of North Fulton
Alpharetta, GA

NM

3,398

$190,564

$179,523

$16,567

$41,321

07/24/09

State Bank and Trust
Company
Pinehurst, GA

Security Bank of North Metro
Woodstock, GA

NM

2,802

$184,184

$182,413

$33,081

$72,116

07/24/09

State Bank and Trust
Company
Pinehurst, GA

Waterford Village Bank
Clarence, NY

NM

1,873

$55,707

$56,145

$6,600

$12.154

07/24/09

Evans Bank, NA
Angola, NY

Community First Bank
Prineville, OR

SM

11,345

$199,508

$180,691

$46,969

$60,410

08/07/09

Home Federal Bank
Nampa, ID

First State Bank of Altus
Altus, OK

NM

7,901

$90,867

$98,161

$36,825

$18,030

07/31/09

Herring Bank
Amarillo, TX

Mutual Bank
Harvey, IL

NM

34,851

$1,595,657

$1,546,525

$348,400

$656,151

07/31/09

United Central Bank
Garland, TX

SB

37,951

$606,153

$538,787

$37,300

$135,480

07/31/09

First Financial Bank, N.A.
Hamilton, OH

NM

7,085

$163,372

$155,463

$16,340

$16,139

07/31/09

Crown Bank
Brick, NJ

Name and Location

Peoples Community Bank
West Chester, OH
First Bankamericano
Elizabeth, NJ

154

Total
Assets2

Receiver/Assuming
Bank and Location

FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continued)
Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

N

5,807

First State Bank of Sarasota
Sarasota, FL

NM

Community Bank of Arizona
Phoenix, AZ
Colonial Bank
Montgomery, AL

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$92,528

$92,352

$15,375

$26,456

08/07/09

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

12,193

$447,667

$394,701

$54,896

$124,608

08/07/09

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

NM

2,022

$158,517

$143,834

$24,566

$27,892

08/14/09

MidFirst Bank
Oklahoma City, OK

NM

756,514

$25,455,112

$20,020,047

$3,983,800

$3,810,331

08/14/09

Branch Banking and Trust
(BB&T)
Winston-Salem, NC

Guaranty Bank
Austin, TX

SB

577,832

$13,464,352

$11,984,112

$2,454,739

$2,737,425

08/21/09

BBVA Compass
Birmingham, AL

Capital South Bank
Birmingham, AL

SM

18,031

$586,586

$539,422

$80,191

$162,355

08/21/09

Iberiabank
Lafeyette, LA

ebank
Atlanta, GA

SB

3,914

$144,688

$131,510

$21,298

$68,164

08/21/09

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

NM

6,015

$163,755

$154,903

$152,856

$50,082

08/21/09

United Bank
Zebulon, GA

SB

18,354

$451,888

$382,159

$37,338

$92,252

08/28/09

Manufacturers and Traders
Trust Company
Buffalo, NY

Affinity Bank
Ventura, CA

NM

19,710

$1,211,431

$905,593

$124,371

$266,609

08/28/09

Pacific Western Bank
San Diego, CA

Mainstreet Bank
Forest Lake, MN

NM

21,832

$458,533

$432,818

$46,414

$97,859

08/28/09

Central Bank
Stillwater, MN

First Bank of Kansas City
Kansas City, MO

NM

701

$15,723

$14,479

$16,489

$7,244

09/04/09

Great American Bank
De Soto, KS

InBank
Oak Forest, IL

NM

9,941

$209,848

$209,211

$58,588

$53,690

09/04/09

MB Financial Bank, N.A.
Chicago, IL

First State Bank—Flagstaff
Flagstaff, AZ

SM

4,516

$107,235

$95,734

$99,504

$47,358

09/04/09

Sunwest Bank
Tustin, CA

Vantus Bank
Sioux City, IA

SB

43,421

$503,643

$394,369

$133,300

$99,458

09/04/09

Great Southern Bank
Springfield, MO

Brickwell Community Bank
Woodbury, MN

NM

1,657

$72,576

$64,981

$4,783

$27,074

09/11/09

CorTrust Bank, NA
Mitchell, SD

Venture Bank
Lacey, WA

NM

37,005

$968,385

$917,729

$188,485

$239,762

09/11/09

First-Citizens Bank & Trust
Raleigh, NC

Irwin Union Bank & Trust Co.
Columbus, IN

SM

62,735

$2,839,747

$2,254,025

$850,000

$608,072

09/18/09

First Financial Bank, NA
Hamilton, OH

Name and Location
Community National Bank of
Sarasota County
Venice, FL

First Coweta Bank
Newnan, GA
Bradford Bank
Baltimore, MD

VI.  Appendices



Total
Assets2

Receiver/Assuming
Bank and Location

155

Fdic-Insured Institutions Closed During 2009 (continued)

Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

SB

9,356

NM

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$518,151

$462,611

$113,200

$125,763

09/18/09

First Financial Bank, NA
Hamilton, OH

12,548

$2,230,230

$1,960,123

$543,754

$804,828

09/25/09

First Citizens Bank & Trust,
Inc.
Columbia, SC

N

1,206

$37,142

$29,568

$4,619

$9,889

10/02/09

Legacy Bank
Wiley, CO

Jennings State Bank
Spring Grove, MN

NM

4,966

$52,347

$50,801

$9,653

$18,159

10/02/09

Central Bank
Stillwater, MN

San Joaquin Bank
Bakersfield, CA

SM

10,068

$766,359

$626,359

$49,252

$94,572

10/16/09

Citizens Business Bank
Ontario, CA

American United Bank
Lawrenceville, GA

NM

1,950

$110,094

$102,386

$17,100

$45,210

10/23/09

Ameris Bank
Moultrie, GA

First DuPage Bank
Westomont, IL

SM

5,851

$262,093

$253,992

$22,423

$63,667

10/23/09

First Midwest Bank
Itasca, IL

N

6,069

$177,563

$170,118

$34,200

$63,623

10/23/09

First Federal Bank of Florida
Lake City, FL

Partners Bank
Naples, FL

SB

1,503

$65,498

$64,798

$34,034

$32,770

10/23/09

Stonegate Bank
Fort Lauderdale, FL

Bank of Elmwood
Racine, WI

SM

15,958

$327,444

$272,782

$112,248

$88,364

10/23/09

Tri City National Bank
Oak Creek, WI

Riverview Community Bank
Ostego, MN

NM

3,398

$99,057

$75,012

$9,148

$23,899

10/23/09

Central Bank
Stillwater, MN

California National Bank
Los Angeles, CA

N

216,381

$7,781,100

$6,145,207

$105,700

$956,535

10/30/09

U.S. Bank, NA
Minneapolis, MN

San Diego National Bank
San Diego, CA

N

74,941

$3,594,544

$2,891,544

$119,813

$353,117

10/30/09

U.S. Bank, NA
Minneapolis, MN

Bank USA, N.A.
Phoenix, AZ

N

1,810

$213,205

$170,685

$3,700

$19,947

10/30/09

U.S. Bank, NA
Minneapolis, MN

Community Bank of Lemont
Lemont, IL

NM

2,871

$81,843

$80,688

$6,096

$24,095

10/30/09

U.S. Bank, NA
Minneapolis, MN

North Houston Bank
Houston, TX

NM

11,645

$325,474

$307,166

$17,500

$42,670

10/30/09

U.S. Bank, NA
Minneapolis, MN

Pacific National Bank
San Francisco, CA

N

48,770

$2,319,263

$1,757,986

$79,000

$223,360

10/30/09

U.S. Bank, NA
Minneapolis, MN

Park National Bank
Chicago, IL

N

174,506

$4,680,881

$3,716,626

$0

$628,737

10/30/09

U.S. Bank, NA
Minneapolis, MN

Name and Location
Irwin Union, FSB
Louisville, KY
Georgian Bank
Atlanta, GA
Southern Colorado National
Bank
Pueblo, CO

Flagship National Bank
Bradenton, FL

156

Total
Assets2

Receiver/Assuming
Bank and Location

FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continued)
Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

N

3,781

Madisonville State Bank
Madisonville, TX

NM

Prosperan Bank
Oakdale, MN

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$118,236

$97,590

$6,300

$24,717

10/30/09

U.S. Bank, NA
Minneapolis, MN

8,410

$256,330

$224,653

$8,215

$27,452

10/30/09

U.S. Bank, NA
Minneapolis, MN

NM

8,204

$197,442

$182,794

$35,106

$53,196

11/06/09

Alerus Financial, N.A.
Grand Forks, ND

SB

2,477

$12,994

$12,730

$6,270

$7,902

11/06/09

Liberty Bank and Trust
Company
New Orleans, LA

United Security Bank
Sparta, GA

NM

4,807

$153,639

$149,616

$31,757

$64,949

11/06/09

Ameris Bank
Moultrie, GA

Gateway Bank of St. Louis
Saint Louis, MO

NM

1,818

$26,882

$27,534

$10,054

$11,729

11/06/09

Central Bank of Kansas City
Kansas City, MO

United Commercial Bank
San Francisco, CA

NM

290,762

$10,895,336

$6,937,677

$849,926

$1,451,767

11/06/09

East West Bank
Pasadena, CA

Century Bank, FSB
Sarasota, FL

SB

27,349

$755,923

$659,742

$106,444

$282,096

11/13/09

Iberiabank
Lafayette, LA

Orion Bank
Naples, FL

SM

30,766

$2,612,515

$2,169,446

$496,404

$630,873

11/13/09

Iberiabank
Lafayette, LA

N

2,338

$131,418

$128,867

$29,096

$30,637

11/13/09

Sunwest Bank
Tustin, CA

Commerce Bank of Southwest
Florida
Fort Myers, FL

NM

2,005

$70,997

$72,821

$2,575

$28,241

11/20/09

Central Bank
Stillwater, MN

The Buckhead Community Bank
Atlanta, GA

NM

17,403

$856,236

$813,668

$63,705

$241,187

12/04/09

State Bank and Trust
Company
Macon, GA

The Tattnall Bank
Reidsville, GA

NM

3,434

$49,612

$47,100

$14,703

$17,184

12/04/09

HeritageBank of the South
Albany, GA

Benchmark Bank
Aurora, IL

NM

5,234

$173,062

$182,760

$42,969

$69,948

12/04/09

MB Financial Bank, N.A.
Chicago, IL

Amtrust Bank
Cleveland, OH

SB

460,174

$11,438,990

$8,558,609

$3,035,000

$2,340,668

12/04/09

New York Community Bank
Westbury, NY

Greater Atlantic Bank
Reston, VA

SB

8,008

$203,262

$179,248

$29,800

$37,602

12/04/09

Sonabank
McLean, VA

N

3,994

$127,455

$121,645

$17,638

$30,125

12/04/09

State Bank and Trust
Company
Macon, GA

Name and Location
Citizens National Bank
Teague, TX

Home Federal Savings Bank
Detroit, MI

Pacific Coast, N.B.
San Clemente, CA

First Security National Bank
Norcross, GA

VI.  Appendices



Total
Assets2

Receiver/Assuming
Bank and Location

157

Fdic-Insured Institutions Closed During 2009 (continued)
Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

Republic Federal Bank, N.A.
Miami, FL

N

7,318

Valley Capital Bank, N.A.
Mesa, AZ

N

SolutionsBank
Overland Park, KS
Imperial Capital Bank
La Jolla, CA

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$433,011

$352,695

$167,564

$109,371

12/11/09

1st United Bank
Boca Raton, FL

758

$40,270

$41,312

$0

$9,844

12/11/09

Enterprise Bank & Trust
Clayton, MO

SM

10,137

$511,103

$421,271

$21,156

$112,521

12/11/09

Arvest Bank
Fayetteville, AR

NM

35,400

$4,046,888

$2,822,300

$726,843

$487,912

12/18/09

City National Bank
Los Angeles, CA

New South Federal Savings
Bank
Irondale, AL

SB

20,968

$1,464,127

$1,163,916

$86,350

$223,592

12/18/09

Beal Bank
Plano, TX

Peoples First Community Bank
Panama City, FL

SB

81,612

$1,795,420

$1,684,443

$294,000

$484,327

12/18/09

Hancock Bank
Gulfport, MS

First Federal Bank of California,
FSB
Santa Monica, CA

SB

135,555

$6,143,903

$4,538,607

$0

$158,115

12/18/09

OneWest Bank, FSB
Pasadena, CA

Name and Location

Total
Assets2

Receiver/Assuming
Bank and Location

Purchase and Assumption—All Deposits
Ocala National Bank
Ocala, FL

N

10,663

$219,424

$204,663

$215,695

$93,239

01/30/09

CenterState Bank of Florida
Winter Haven, FL

FirstBank Financial Services
McDonough, GA

NM

6,245

$317,237

$279,308

$299,078

$126,255

02/06/09

Regions Bank
Birmingham, AL

Corn Belt Bank and Trust
Company
Pittsfield, IL

NM

4,520

$260,201

$233,788

$234,458

$79,498

02/13/09

The Carlinville National
Bank
Carlinville, IL

Riverside Bank of the Gulf Coast
Cape Coral, FL

SM

24,518

$523,673

$422,708

$462,057

$203,865

02/13/09

TIB Bank
Naples, FL

Sherman County Bank
Loup City, NE

NM

5,009

$135,431

$90,647

$114,150

$43,442

02/13/09

Heritage Bank
Wood River, NE

Silver Falls Bank
Silverton, OR

NM

4,476

$134,206

$115,976

$118,660

$52,539

02/20/09

Citizens Bank
Corvallis, OR

Security Savings Bank
Henderson, NV

NM

3,927

$238,307

$174,872

$180,418

$69,679

02/27/09

Bank of Nevada
Las Vegas, NV

American Southern Bank
Kennesaw, GA

NM

1,024

$105,950

$105,940

$108,784

$36,285

04/24/09

Bank of North Georgia
Alpharetta, GA

First Bank of Idaho, FSB
Ketchum, ID

SB

15,195

$490,656

$370,580

$438,920

$171,135

04/24/09

U.S. Bank, NA
Minneapolis, MN

Michigan Heritage Bank
Farmington Hills, MI

SM

3,159

$167,710

$149,065

$144,922

$55,953

04/24/09

Level One Bank
Farmington Hills, MI

158

FDIC 2009 Annual Report

Fdic-Insured Institutions Closed During 2009 (continued)
Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

America West Bank
Layton, UT

NM

1,909

Citizens Community Bank
Ridgewood, NJ

NM

Westsound Bank
Bremerton, WA

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$281,564

$286,040

$300,259

$125,477

05/01/09

Cache Valley Bank
Logan, UT

1,099

$40,657

$40,664

$40,082

$17,931

05/01/09

North Jersey Community
Bank
Englewood Cliffs, NJ

NM

11,814

$334,608

$304,464

$283,655

$107,122

05/08/09

Kitsap Bank
Port Orchard, WA

Bank of Wyoming
Thermopolis, WY

NM

2,866

$70,188

$66,598

$64,882

$30,480

07/10/09

Central Bank & Trust
Lander, WY

BankFirst
Sioux Falls, SD

SM

4,185

$210,844

$232,203

$218,222

$77,943

07/17/09

Alerus Financial, N.A.
Grand Forks, ND

Integrity Bank
Jupiter, FL

NM

2,293

$105,298

$98,511

$93,134

$38,351

07/31/09

Stonegate Bank
Fort Lauderdale, FL

N

2,526

$119,529

$110,362

$110,785

$52,996

08/14/09

MidFirst Bank
Oklahoma City, OK

SB

4,285

$12,947

$12,984

$12,690

$9,722

08/14/09

PNC Bank, N.A.
Pittsburgh, PA

N

154,011

$7,003,321

$7,060,693

$4,047,049

$946,457

09/11/09

MB Financial Bank, NA
Chicago, IL

Warren Bank
Warren, MI

SM

12,104

$504,816

$467,767

$464,729

$240,075

10/02/09

The Huntington National
Bank
Columbus, OH

Hillcrest Bank Florida
Naples, FL

NM

1,535

$82,774

$83,254

$85,334

$31,448

10/23/09

Stonegate Bank
Fort Lauderdale, FL

New Frontier Bank
Greeley, CO

NM

30,791

$1,774,588

$1,496,347

$1,667,720

$860,709

04/10/09

Federal Deposit Insurance
Corporation

Citizens State Bank
New Baltimore, MI

NM

16,262

$168,551

$157,149

$111,826

$30,660

12/18/09

Federal Deposit Insurance
Corporation

Community Bank of Nevada
Las Vegas, NV

SM

$25,906

$1,397,798

$1,372,744

$1,306,797

$742,411

08/14/09

Deposit Insurance Bank
of Las Vegas

Magnetbank
Salt Lake City, UT

NM

25

$300,674

$282,578

$277,788

$155,393

01/30/09

Federal Deposit Insurance
Corporation

FirstCity Bank
Stockbridge, GA

NM

3,621

$285,015

$259,056

$290,553

$122,641

03/20/09

Federal Deposit Insurance
Corporation

First Bank of Beverly Hills
Calabasas, CA

NM

1,203

$1,260,354

$866,492

$1,076,009

$352,190

04/24/09

Federal Deposit Insurance
Corporation

Name and Location

Union Bank, N.A.
Gilbert, AZ
Dwelling House Savings & Loan
Pittsburgh, PA
Corus Bank, NA
Chicago, IL

Total
Assets2

Receiver/Assuming
Bank and Location

Insured Deposit Payoffs

VI.  Appendices



159

Fdic-Insured Institutions Closed During 2009 (continued)

Dollars in Thousands

Bank
Class

N
­ umber
of
Deposit
Accounts

Community Bank of West
Georgia
Villa Rica, GA

SM

4,140

Platinum Community Bank
Rolling Meadows, IL

SB
NM

Name and Location

Rockbridge Commerical Bank
Atlanta, GA

Total
Deposits2

FDIC
Disbursements3

Estimated
Loss¹

Date of
C
­ losing or
Acquisition

$201,222

$189,398

$196,961

$86,224

06/26/09

Federal Deposit Insurance
Corporation

2,946

$147,961

$110,186

$272,361

$95,683

09/04/09

Federal Deposit Insurance
Corporation

2,175

$294,024

$291,707

$259,576

$99,449

12/18/09

Federal Deposit Insurance
Corporation

Total
Assets2

Receiver/Assuming
Bank and Location

Codes for Bank Class:
	 NM  =	 State-chartered bank that is not a member of the Federal Reserve System
	 N  =	 National Bank
	 SB  =	 Savings Bank
	 SM  = 	 State-chartered bank that is a member of the Federal Reserve System
	 SA  =	 Savings Association
1
Estimated losses are as of 12/31/09. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales, which ultimately affect the
asset values and projected recoveries.
2
Total Assets and Total Deposits data is based upon the last Call Report filed by the institution prior to failure.
3
Represents corporate cash disbursements.

160

FDIC 2009 Annual Report

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the
Protection of Depositors, 1934–2009
Bank and Thrift Failures3
Dollars in Thousands

Year1

Number
of Banks/
Thrifts

2,260

Total Assets

Total Deposits

Insured Deposit
Funding
and Other
Disbursements

$786,995,568

$574,449,063

$434,150,618

Estimated
Additional
Recoveries

Recoveries

$309,778,647 $34,030,548

Estimated
Losses

$90,341,423

20094

140

169,709,160

137,067,132

134,805,303

64,484,333

32,946,066

37,374,904

20084

25

371,945,480

234,321,715

194,075,587

173,798,116

445,081

19,832,390

2007

3

2,614,928

2,424,187

1,909,546

1,338,239

360,572

210,735

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

4

170,099

156,733

138,895

134,978

0

3,917

2003

3

947,317

901,978

883,772

812,933

8,192

62,647

2002

11

2,872,720

2,512,834

2,068,519

1,630,631

66,228

371,660

2001

4

1,821,760

1,661,214

1,605,147

1,113,270

181,417

310,460

2000

7

410,160

342,584

297,313

265,175

0

32,138

1999

8

1,592,189

1,320,573

1,307,045

685,154

7,409

614,482

1998

3

290,238

260,675

286,678

52,248

11,799

222,631

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

14,173,886

10,499,860

3

3,674,023

1991

124

64,556,512

52,972,034

21,190,376

15,194,017

3,781

5,992,578

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



6,928,889

6,599,180

4,876,994

3,014,502

0

1,862,492

138

7,356,544

6,638,903

4,632,121

2,949,583

0

1,682,538

1985

VI.  Appendices

184

1986

116

3,090,897

2,889,801

2,154,955

1,506,776

0

648,179

161

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the
Protection of Depositors, 1934–2009 (continued)
Bank and Thrift Failures3 (continued)
Dollars in Thousands

Year1

Number
of Banks/
Thrifts

Total Deposits

Total Assets

Insured Deposit
Funding
and Other
Disbursements

Estimated
Additional
Recoveries

Recoveries

Estimated
Losses

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

154 $3,317,099,253 $1,442,173,417

$11,630,356

$6,199,875

$0

$5,430,481

0

0

0

0

Assistance Transactions
Dollars in Thousands
2009

8

1,917,482,183

1,090,318,282

2008

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
0

0

2005

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
2000
1999

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

1998

0

0

0

0

0

0

0

1997

0

0

0

0

0

0

0

1996
1995
1994

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

2
2

162

FDIC 2009 Annual Report

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the
Protection of Depositors, 1934–2009 (continued)
Assistance Transactions (continued)
Dollars in Thousands

Year

1

Number
of Banks/
Thrifts

Total Assets

Total Deposits

Disbursements

Estimated
Additional
Recoveries

Recoveries

Estimated
Losses

1993

0

0

0

0

0

0

0

1992

2

33,831

33,117

1,486

1,236

0

250

1991
1990
1989

3
1
1

78,524
14,206
4,438

75,720
14,628
6,396

6,117
4,935
2,548

3,093
2,597
252

0
0
0

3,024
2,338
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
1985
1984

7
4
2

712,558
5,886,381
40,470,332

585,248
5,580,359
29,088,247

158,848
765,732
5,531,179

65,669
406,676
4,414,904

0
0
0

93,179
359,056
1,116,275

1983

4

3,611,549

3,011,406

764,690

427,007

0

337,683

1982

10

10,509,286

9,118,382

1,729,538

686,754

0

1,042,784

1981
1980
1934
–1979

3
1

4,838,612
7,953,042

3,914,268
5,001,755

774,055
0

1,265
0

0
0

772,790
0

4

1,490,254

549,299

0

0

0

0

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 BIF.
After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2009, figures are for DIF. Assets and
deposit data are based on the last Call or TFR Report filed before failure.
2
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.
3
Institutions closed by the FDIC, including deposit payoff, insured deposit transfer, and deposit assumption cases.
4
Includes transaction account coverage under the Transaction Account Guarantee Program.
1

VI.  Appendices



163

FDIC Actions on Financial Institutions Applications 2007–2009
2009

2008

2007

Deposit Insurance
Approved*
Denied
New Branches
Approved
Denied
Mergers
Approved
Denied
Requests for Consent to Serve1
Approved
Section 19
Section 32
Denied
Section 19
Section 32
Notices of Change in Control
Letters of Intent Not to Disapprove
Disapproved

19
19
0
521
521
0
190
190
0
503
503
20
483
0
0
0
18
18
0

123
123
0
1,012
1,012
0
275
275
0
283
283
8
275
0
0
0
28
28
0

215
215
0
1,480
1,480
0
306
306
0
177
177
24
153
0
0
0
17
15
2

Broker Deposit Waivers
Approved
Denied
Savings Association Activities2
Approved
Denied
State Bank Activities/Investments3
Approved
Denied
Conversion of Mutual Institutions
Non-Objection
Objection

35
34
1
39
39
0
2

38
38
0
45
45
0
11

22
22
0
54
54
0

2
0
6
6
0

11
0
10
10
0

21
21
0
10
10
0

* Of the 19 reported in 2009, 11 are de novo applications. There were 101 and 191 de novo applications approved in 2008 and 2007, respectively.
1
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 non-member bank that is not in compliance with capital requirements or is otherwise in troubled condition.
2
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.
3
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.

164

FDIC 2009 Annual Report

Compliance, Enforcement, and Other Related Legal Actions 2007–2009
2009

2008

2007

551

273

205

0

0

0

Sec. 8a By Order Upon Request

0

1

0

Sec. 8p No Deposits

4

2

2

Sec. 8q Deposits Assumed

2

1

4

Total Number of Actions Initiated by the FDIC
Termination of Insurance
Involuntary Termination
Sec. 8a For Violations, Unsafe/Unsound Practices or Conditions
Voluntary Termination

Sec. 8b Cease-and-Desist Actions
Notices of Charges Issued1,3

3

1

3

302

Consent Orders

97

48

Sec. 8e Removal/Prohibition of Director or Officer
Notices of Intention to Remove/Prohibit

2

4

1

64

62

40

0

0

0

Sec. 7a Call Report Penalties

1

0

0

Sec. 8i Civil Money Penalties

154

98

96

10

2

7

Sec. 19 Denials of Service After Criminal Conviction

0

0

0

Sec. 32 Notices Disapproving Office/Director’s Request for
Review

0

0

0

Denials of Requests for Relief

0

1

0

Grants of Relief

0

0

0

Consent Orders
Sec. 8g Suspension/Removal When Charged With Crime
Civil Money Penalties Issued

Sec. 10c Orders of Investigation

Truth-in-Lending Act Reimbursement Actions

Banks Making Reimbursement

1

Suspicious Activity Reports (Open and closed institutions)1
Other Actions Not Listed2

94

94

91

128,973

133,153

137,548

12

5

7

These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of actions
initiated.
2
Other Actions Not Listed includes two Section 19 Waiver grants and three Other Formal Actions.
3
Correction for 2008
1

VI.  Appendices



165

B. More About the FDIC
FDIC Board of Directors
Sheila C. Bair
Sheila C. Bair was sworn in as the 19th Chairman of the Federal Deposit Insurance Corporation (FDIC) on June 26, 2006. She was appointed Chairman for a fiveyear term, and as a member of the FDIC Board of Directors through July 2013.
Chairman Bair has an extensive background in banking and finance in a career
that has taken her from Capitol Hill, to academia, to the highest levels of government. Before joining the FDIC in 2006, she was the Dean’s Professor of Financial
Regulatory Policy for the Isenberg School of Management at the University of
Massachusetts-Amherst since 2002. While there, she also served on the FDIC’s
Advisory Committee on Banking Policy.
Other career experience includes serving as Assistant Secretary for Financial
Institutions at the U.S. Department of the Treasury (2001 to 2002), Senior Vice
President for Government Relations of the New York Stock Exchange (1995 to 2000), a Commissioner and Acting Chairman of the Commodity Futures Trading Commission (1991 to 1995), and Research Director, Deputy
Counsel and Counsel to Senate Majority Leader Robert Dole (1981 to 1988).
As FDIC Chairman, Ms. Bair has presided over a tumultuous period in the nation’s financial sector. Her innovations have transformed the agency with programs that provide temporary liquidity guarantees, increases in
deposit insurance limits, and systematic loan modifications to troubled borrowers. Ms. Bair’s work at the FDIC
has also focused on consumer protection and economic inclusion. She has championed the creation of an Advisory Committee on Economic Inclusion, seminal research on small-dollar loan programs, and the formation of
broad-based alliances in nine regional markets to bring underserved populations into the financial mainstream.
Since becoming FDIC Chairman, Ms. Bair has received a number of prestigious honors. Among them, in
2009 she was named one of Time Magazine’s “Time 100” most influential people; awarded the John F. Kennedy
Profile in Courage Award; and received the Hubert H. Humphrey Civil Rights Award. In 2008, Chairman Bair
topped The Wall Street Journal’s annual 50 “Women to Watch List.” That same year, Forbes Magazine named
Ms. Bair as the second most powerful woman in the world after Germany’s Chancellor Angela Merkel.
Chairman Bair has also received several honors for her published work on financial issues, including her
educational writings on money and finance for children, and for professional achievement. Among the honors
she has received are: Distinguished Achievement Award, Association of Education Publishers (2005); Personal
Service Feature of the Year, and Author of the Month Awards, Highlights Magazine for Children (2002, 2003
and 2004); and The Treasury Medal (2002). Her first children’s book, Rock, Brock and the Savings Shock, was
published in 2006 and her second, Isabel’s Car Wash, in 2008.
Chairman Bair received a bachelor’s degree from Kansas University and a J.D. from Kansas University
School of Law. She is married to Scott P. Cooper and has two children.

166

FDIC 2009 Annual Report

Martin J. Gruenberg
Martin J. Gruenberg was sworn in as Vice Chairman of the FDIC Board of
Directors on August 22, 2005. Upon the resignation of Chairman Donald Powell,
he served as Acting Chairman from November 15, 2005, to June 26, 2006. On
November 2, 2007, Mr. Gruenberg was named Chairman of the Executive Council
and President of the International Association of Deposit Insurers (IADI).
Mr. Gruenberg joined the FDIC Board after broad congressional experience in
the financial services and regulatory areas. He served as Senior Counsel to Senator
Paul S. Sarbanes (D-MD) on the staff of the Senate Committee on Banking, Housing, and Urban Affairs from 1993 to 2005. Mr. Gruenberg advised the Senator
on issues of domestic and international financial 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. ­ ruenberg
G
played an active role during his service on the Committee includes the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), the Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA), the Gramm-Leach-Bliley Act, and the Sarbanes-Oxley Act of 2002.
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 J. Curry
Thomas J. Curry took office on January 12, 2004, as a member of the Board of
Directors of the Federal Deposit Insurance Corporation for a six-year term. Mr.
Curry serves as Chairman of the FDIC’s Assessment Appeals Committee and
Case Review Committee.
Mr. Curry also serves as the Chairman of the NeighborWorks® America Board
of Directors. NeighborWorks® America is a national non-profit organization chartered by Congress to provide financial support, technical assistance, and training
for community-based neighborhood revitalization efforts.
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.
Director Curry served as the Chairman of the Conference of State Bank Supervisors from 2000 to 2001. He
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.

VI.  Appendices



167

John C. Dugan
John C. Dugan was sworn in as the 29th Comptroller of the Currency on August
4, 2005. In addition to serving as a director of the FDIC, Comptroller Dugan also
serves as chairman of the Joint Forum, a group of senior financial sector regulators from the United States, Canada, Europe, Japan, and Australia, and as a director of the Federal Financial Institutions Examination Council and NeighborWorks®
America.
Prior to his appointment as Comptroller, Mr. Dugan was a partner at the law
firm of Covington & Burling, where he chaired the firm’s Financial Institutions
Group. He specialized in banking and financial institution regulation. He also
served as outside counsel to the ABA Securities Association.
He served at the Department of Treasury from 1989 to 1993 and was appointed
assistant secretary for domestic finance in 1992. In 1991, he oversaw a comprehensive study of the banking
industry that formed the basis for the financial modernization legislation proposed by the administration of the
first President Bush. From 1985 to 1989, Mr. Dugan was minority counsel and minority general counsel for the
U.S. Senate Committee on Banking, Housing, and Urban Affairs.
Among his professional and volunteer activities before becoming Comptroller, he served as a director of
Minbanc, a charitable organization whose mission is to enhance professional and educational opportunities for
minorities in the banking industry. He was also a member of the American Bar Association’s committee on
banking law, the Federal Bar Association’s section of financial institutions and the economy, and the District
of Columbia Bar Association’s section of corporations, finance, and securities laws.
A graduate of the University of Michigan in 1977 with an A.B. in English literature, Mr. Dugan also earned
his J.D. from Harvard Law School in 1981.

John E. Bowman
John E. Bowman became Acting Director of the Office of Thrift Supervision
(OTS) in March 2009. Mr. Bowman joined the OTS in June of 1999 as Deputy
Chief Counsel for Business Transactions. In May 2004, he was appointed Chief
Counsel and in April 2007, he was appointed Deputy Director and Chief Counsel.
Before joining the OTS, Mr. Bowman was a partner with the law firm of Brown &
Wood LLP in its Washington, DC, office, where he specialized in government and
corporate finance, securities and financial services regulation.
Before entering private practice, Mr. Bowman served for many years as Assistant General Counsel for Banking and Finance at the U.S. Department of the Treasury. While at Treasury, he provided counsel to the Treasury Under Secretary
for Domestic Finance, the Assistant Secretaries for Financial Institutions Policy,
Financial Markets and Economic Policy, and the Fiscal Assistant Secretary on a broad range of issues from
financial services legislation to the financing of the federal debt.
During his government career, Mr. Bowman has been the recipient of numerous awards and honors, including the Presidential Rank Award and the Secretary of the Treasury’s Distinguished Service Award.

168

FDIC 2009 Annual Report

FDIC Organization Chart/Officials
As of December 31, 2009
Board of Directors
Sheila C. Bair
Martin J. Gruenberg
Thomas J. Curry
John C. Dugan
John E. Bowman

Office of the
Chairman

Vice Chairman

Sheila C. Bair
Chairman

Martin J. Gruenberg

Deputy to the  Chairman
for Resolution and Legal Policy

Deputy to the Chairman

Michael H. Krimminger

Jason C. Cave

Chief of Staff

Office of Public Affairs

Jesse O. Villareal, Jr.

Andrew S. Gray
Director

Chief Information Officer/
Chief Privacy Officer

Office of Inspector General

Michael E. Bartell

Jon T. Rymer
Inspector General

Deputy to the Chairman
and
Chief Financial Officer

Division of
Supervision and
Consumer Protection

Division of Insurance
and Research

Division of Resolutions
and Receiverships

Office of
International Affairs

General Counsel

Deputy to the Chairman
for External Affairs

Steven O. App

Sandra L. Thompson
Director

Arthur J. Murton
Director

Mitchell L. Glassman
Director

Fred S. Carns
Director

Michael Bradfield

Paul M. Nash

Legal Division

Division of Finance
Bret D. Edwards
Director

Division of
Administration
Arleas Upton Kea
Director

Division of Information
Technology
Michael E. Bartell
Director

VI.  Appendices



Corporate
University
Thom H. Terwilliger
Chief Learning Officer

Office of Enterprise
Risk Management
James H. Angel, Jr.
Director

Office of
Legislative Affairs

Michael Bradfield
General Counsel

Vacant
Director

Office of the
Ombudsman
Cottrell L. Webster
Ombudsman

Office of Diversity and
Economic Opportunity
D. Michael Collins
Director

169

Corporate Staffing

Staffing Trends 2000–2009

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

6,452

6,167

5,430

5,311

5,078

4,514

4,476

4,532

4,988

6,557

FDIC Year-End Staffing
Note: In 2008, the Corporation adopted the Full-Time Equivalent methodology reflective of an employee’s scheduled work hours.
Prior to 2008, staffing totals reflect total employees on board.

170

FDIC 2009 Annual Report

Number of Employees by Division/Office 2008–2009 (Year-End)1
Total

Washington

Regional/Field

2009

2008

2009

2008

2009

2008

Division of Supervision and Consumer Protection

3,168

2,733

222

207

2,946

2,526

Division of Resolutions and Receiverships

1,158

391

78

60

1,080

331

Legal Division

625

472

302

275

323

197

Division of Administration

373

316

217

209

156

107

Corporate University

350

240

52

47

298

193

Division of Information Technology

298

283

227

221

71

62

Division of Insurance and Research

193

182

150

145

43

36

Division of Finance

155

159

145

148

10

11

Office of Inspector General

120

111

84

81

36

30

Executive Offices2

53

48

53

48

0

0

Office of Diversity and Economic Opportunity

29

31

29

31

0

0

Office of the Ombudsman

22

11

11

8

11

3

Office of Enterprise Risk Management

13

12

13

12

0

0

6,557

Total

4,988

1,584

1,493

4,973

3,496

The FDIC reports staffing totals using a Full-Time Equivalent methodology, which is based on an employee’s scheduled work hours. Totals may not foot due to rounding.
Includes the Offices of the Chairman, Vice Chairman, Director (Appointive), Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Legislative Affairs, Public Affairs,
International Affairs, and External Affairs.
1
2

VI.  Appendices



171

Sources of Information
FDIC Web Site
www.fdic.gov
A wide range of banking, consumer and financial information is available on the FDIC’s web site.
This includes the FDIC’s Electronic Deposit Insurance Estimator (EDIE), which estimates an individual’s deposit insurance coverage; the Institution Directory—financial profiles of FDIC-insured
institutions; Community Reinvestment Act evaluations and ratings for institutions supervised by the
FDIC; Call Reports—banks’ reports of condition and income; and Money Smart, a training program to
help individuals outside the financial mainstream enhance their money management skills and create
positive banking relationships. Readers also can access a variety of consumer pamphlets, FDIC press
releases, speeches, and other updates on the agency’s activities, as well as corporate databases and
customized reports of FDIC and banking industry information.

FDIC Call Center
Phone: 	 877-275-3342 (877-ASK-FDIC)
703-562-2222
Hearing Impaired: 
800-925-4618 (Toll Free),
703-562-2289 (Local)
The FDIC Call Center in Washington, DC, is the primary telephone point of contact for general questions from the banking community, the public, and FDIC employees. The Call Center directly, or in
concert 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 makes referrals to other federal and state agencies as needed. Hours of operation are
8:00 a.m. to 8:00 p.m. Eastern Time, Monday–Friday, and 9:00 a.m. to 5:00 p.m. Saturday–Sunday.  
Recorded information about deposit insurance and other topics is available 24 hours a day at the same
telephone number.
As a customer service, the FDIC Call Center has many bilingual Spanish agents on staff and has
access to a translation service able to assist with over 40 different languages.

172

FDIC 2009 Annual Report

Public Information Center
3501 Fairfax Drive
Room E-1021
Arlington, VA 22226
Phone:	 877-275-3342 (877-ASK-FDIC),
or 703-562-2200
Fax: 	
703-562-2296
E-mail:	 publicinfo@fdic.gov
FDIC publications, press releases, speeches and congressional testimony, directives to financial institutions, policy manuals, and other documents are available on request or by subscription through the
Public Information Center. These documents include the Quarterly Banking Profile, FDIC Consumer
News, and a variety of deposit insurance and consumer pamphlets.

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 complaints primarily from bankers. The OO
also recommends ways to improve FDIC operations, regulations, and customer service.

VI.  Appendices



173

Regional and Area Offices
Atlanta Regional Office

10 Tenth Street, NE
Suite 800
Atlanta, Georgia  30309
(678) 916-2200

Kansas City Regional Office

2345 Grand Boulevard
Suite 1200
Kansas City, Missouri 64108
(816) 234-8000

Alabama

Iowa

Florida

Kansas

Georgia

Minnesota

North Carolina

Missouri

South Carolina

Nebraska

Virginia

North Dakota

West Virginia

South Dakota

Chicago Regional Office

Dallas Regional Office

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

300 South Riverdale Plaza
Chicago, Illinois 60606
(312) 382-6000

Colorado

Illinois

New Mexico

Indiana

Oklahoma

Kentucky

Texas

Michigan
Memphis Area Office

5100 Poplar Avenue
Suite 1900
Memphis, Tennessee 38137
(901) 685-1603

Ohio
Wisconsin

Arkansas
Louisiana
Mississippi
Tennessee

174

FDIC 2009 Annual Report

New York Regional Office

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

San Francisco Regional Office

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

Delaware

Alaska

District of Columbia

Arizona

Maryland

California

New Jersey

Guam

New York

Hawaii

Pennsylvania

Idaho

Puerto Rico

Montana

Virgin Islands

Nevada
Boston Area Office

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

Oregon
Utah
Washington
Wyoming

Connecticut
Maine
Massachusetts
New Hampshire
Rhode Island
Vermont

VI.  Appendices



175

C. Office of Inspector General’s
Assessment of the Management
and Performance Challenges
Facing the FDIC
2009 Management and Performance
Challenges
Under the Reports Consolidation Act, the
OIG is required to identify the most significant
management and performance challenges facing
the Corporation and provide its assessment to
the Corporation for inclusion in its annual performance and accountability report. The OIG
conducts this assessment yearly and identifies
a number of specific areas of challenge facing
the Corporation at the time. In identifying the
challenges, we consider the Corporation’s overall program and operational responsibilities;
financial industry, economic, and technological
conditions and trends; areas of congressional
interest and concern; relevant laws and regulations; the Chairman’s priorities and corresponding corporate goals; and the ongoing activities to
address the issues involved. Taking time annually to reexamine the corporate mission and priorities as the OIG identifies the challenges helps in
planning our work and directing OIG resources
to key areas of risk.
Unprecedented events and turmoil in the economy and financial services industry over the past
year and a half have impacted every facet of the
FDIC’s mission and operations and continue to
pose challenges. In looking at the recent past and
the current environment and anticipating to the
extent possible what the future holds, the Office
of Inspector General (OIG) believes the FDIC
faces challenges in the areas listed below. While
the Corporation’s most pressing priority has been

176

its continuing efforts to restore and maintain
public confidence and stability, challenges have
persisted in other areas as well. We would note
in particular that the Corporation is devoting
significant attention to carrying out its massive
resolution and receivership workload, brought on
by 140 financial institution failures over the past
year, in contrast to 25 failures during 2008 and
3 in 2007. Further, the Chairman has indicated
that the FDIC anticipates failures during 2010 to
exceed the level in 2009. At the same time, as
we pointed out last year, the FDIC faces challenges in maintaining the viability of the Deposit
Insurance Fund (DIF), enhancing its supervision
of financial institutions, protecting consumers,
and managing its growing internal and contractor workforce and other corporate resources. The
Corporation will continue to face daunting challenges as it carries out its longstanding mission,
responds to emerging issues, and plays a key part
in shaping the future of bank regulation.

Restoring and Maintaining Public Confidence
and Stability in the Financial System
Importantly, and integral to maintaining confidence and stability in the financial system, notwithstanding the 140 failures of 2009, the FDIC
stood behind its deposit insurance commitment,
and no depositor lost a single penny of insured
deposits. Additionally, over the past year, the
FDIC played a key role, along with other regulators, the Congress, the Department of the Treas­
ury, financial institutions, and other stakeholders
in a number of temporary financial stability programs that were formed to address crisis conditions. These included the Temporary Liquidity
Guarantee Program, Troubled Asset Relief Program, and loan modification programs, to name a

FDIC 2009 Annual Report

few. Some of these have wound down, others are
ongoing. The fulfillment of the FDIC’s insurance
commitment and the successful implementation
of programs designed to ensure the flow of credit,
strengthen the financial system, and provide aid
to homeowners and small businesses have gone
a long way in helping to restore confidence and
stability in the financial system. Going forward,
the Corporation will need to continue to remain
poised to address new challenges. For example,
emerging problems in the commercial real estate
(CRE) sector will likely require attention. While
residential real estate markets suffered first during the recent crisis, problems on the commercial
side came about later. Sales of commercial real
estate slowed dramatically in 2008 and 2009, as
vacancy rates and rental rates declined significantly. CRE price declines have also been larger
on average than declines in home values, with
CRE price indices down by over 40 percent from
their fall 2007 high point. The sharp decline is
attributable in part to higher required rates of
return on the part of investors and deterioration
in the availability of credit for commercial real
estate financing. Banks will likely increasingly
feel the repercussions of stress in the CRE sector
in the months ahead, and the FDIC will need to
closely monitor the impact of such problems on
the institutions it regulates and insures.
Over the past year, the FDIC has also been a
proponent of certain changes to the financial regulatory system to further stabilize and shore up
confidence in the financial services industry. In
that connection, the FDIC Chairman believes we
need to move away from the concept of “too big
to fail” and create a system of macro-­ rudential
p
supervision for systemically important financial firms and other large/complex institutions

VI.  Appendices



to address the fundamental causes of the recent
crisis. These entities make up a significant share
of the banking industry’s assets. Although the
FDIC is not the primary federal regulator for
these institutions, it holds significant responsibility as deposit insurer for all. The FDIC has
expanded its own presence at such institutions
through additional and enhanced on-site and
off-site monitoring and oversight. As of the end
of December 2009, its Large Insured Depository Institution program covered 109 institutions
with total assets of more than $10 trillion. Early
identification and remediation of issues that pose
risks to the overall financial system will continue to be a challenging task.
In a related vein, the FDIC has also endorsed
a resolution mechanism that can effectively
address failed financial firms regardless of their
size and complexity and assure that shareholders
and creditors absorb losses without cost to the
taxpayers. Such a mechanism would maintain
financial market stability and minimize systemic
consequences for the national and international
economy. The Corporation may face challenges
as it advocates for changes to the supervision
and resolution of systemically important financial firms.
As the debate continues over these and other
aspects of regulatory reform in the months
ahead, the FDIC’s continuous coordination and
cooperation with the other federal regulators and
parties throughout the banking and financial services industries will be critical. The FDIC, along
with other regulators, will continue to be subject
to increased scrutiny and possible corresponding
regulatory reform proposals that may have a substantial impact on the regulatory entities and the
programs and activities they currently operate.

177

Resolving Failed Institutions and
Managing Receiverships
A fundamental part of the FDIC mission
and perhaps the Corporation’s most significant
current challenge is efficiently handling the
resolutions of failing FDIC-insured institutions
and providing prompt, responsive, and effective administration of failing and failed financial institutions in its receivership capacity. The
resolution process involves the complex process
of valuing a failing federally insured depository
institution, marketing it, soliciting and accepting
bids for the sale of the institution, considering
the least costly resolution method, determining which bid to accept, and working with the
acquiring institution through the closing process. The receivership process, also demanding,
involves performing the closing function at the
failed bank; liquidating any remaining assets;
and distributing any proceeds to the FDIC, the
bank customers, general creditors, and those
with approved claims.
The Corporation is now facing a resolution
and receivership workload of huge proportion.
One hundred forty institutions failed during
2009, with total assets at failure of $171.2 billion and total estimated losses to the Deposit
Insurance Fund of approximately $35.6 billion.
During 2009, the number of institutions on the
FDIC’s “Problem List” also rose to its highest level in 16 years. As of December 31, 2009,
there were 702 insured institutions on the “Problem List,” indicating a probability of more failures to come and an increased asset disposition
workload. Total assets of problem institutions
increased to $402.8 billion as of year-end 2009.
As of the end of December 2009, the Division
of Resolutions and Receiverships was manag-

178

ing 187 active receiverships, with assets totaling
about $41 billion.
Of special note, the FDIC is retaining large volumes of assets as part of purchase and assumption
agreements with institutions that are assuming
the insured deposits of failed institutions. A number of the purchase and assumption agreements
include shared-loss arrangements with other parties that involve pools of assets worth billions of
dollars and that can extend up to 10 years. From
a dollar standpoint, the FDIC’s exposure is staggering: as of December 31, 2009, the Corporation
was party to 93 shared loss agreements related to
closed institutions, with initial covered assets of
$126.4 billion. Because the assuming institutions
are servicing the assets and the FDIC is reimbursing a substantial portion of the related losses and
expenses, there is significant risk to the Corporation. Additionally, the FDIC is increasingly using
structured sales transactions to sell assets to third
parties that are not required to be regulated financial institutions. Such arrangements need to be
closely monitored to ensure compliance with all
terms and conditions of the agreements at a time
when the FDIC’s control environment is continuing to evolve.
It takes a substantial level of human resources
to handle the mounting resolution and receivership workload, and effectively administering such
a complex workforce will be challenging. DRR
staffing grew from approximately 400 employees
at the start of 2009 to the year-end staffing level
of 1,158 full-time equivalents. The FDIC Board of
Directors approved a further increase in the Division’s staffing to 2,310 for 2010. Most of these new
employees have been hired on non-­ ermanent
p
appointments with terms of up to 5 years. Additionally, over $1.8 billion will be available for

FDIC 2009 Annual Report

contracting for receivership-related services during 2010, and by the end of 2009, DRR already
employed over 1,500 contractor personnel. The
significant surge in failed-bank assets and associated contracting activities will require effective
and efficient contractor oversight management
and technical monitoring functions. Bringing on
so many contractors and new employees in a short
period of time can strain personnel and administrative resources in such areas as employee background checks, which, if not timely and properly
executed can compromise the integrity of FDIC
programs and operations.
As the Corporation’s workforce responds to
institution failures and carries out its resolution
and receivership responsibilities, it will face
a number of challenges. It needs to ensure that
related processes, negotiations, and decisions
regarding the future status of the failed or failing institutions are marked by fairness, transparency, and integrity. It will be challenged in
timely marketing failing institutions to qualified
and interested potential bidders, selling assets,
and maximizing potential values of failed bank
franchises. Over time, these tasks may be even
more difficult, given concentrations of assets
in the same geographic area, a decreasing pool
of interested buyers, and an inventory of less
attractive or hard-to-sell assets. It is also possible
that individuals or entities that may have been
involved in previous institution failures could try
to reenter the FDIC’s asset purchase and management arena. Appropriate safeguards must be
in place to ensure the Corporation knows the
backgrounds of its bidders and acquirers to prevent those parties from profiting at the expense
of the Corporation. Finally, in order to minimize
costs, it will be important to terminate in a time-

VI.  Appendices



ly manner those receiverships not subject to lossshare agreements, structured sales, or other legal
impediments.

Ensuring the Viability of the Deposit
Insurance Fund (DIF)
A critical priority for the FDIC is to ensure that
the DIF remains viable to protect insured depositors in the event of an institution’s failure. The
basic maximum insurance amount under current
law is $250,000 through year-end 2013. Estimated
insured deposits based on the current limit rose to
$5.4 trillion as of December 31, 2009.
The DIF has suffered from the failures of the
past. Estimated losses from failures in 2008 totaled
$19.8 billion and from failures in 2009 totaled
$35.6 billion. To maintain sufficient DIF balances, the FDIC collects risk-based insurance premiums from insured institutions and invests deposit
insurance funds. In September 2009, the FDIC’s
DIF balance—or the net worth of the fund—fell
below zero for the first time since the third quarter
of 1992. The fund balance of negative $20.9 billion as of December 31, 2009, reflects a $44 billion contingent loss reserve that has been set aside
to cover estimated losses over the next year. Just
as banks reserve for loan losses, the FDIC has to
set aside reserves for anticipated closings over the
next year. Combining the fund balance with this
contingent loss reserve showed total DIF reserves
with a positive balance of $23.1 billion.
The FDIC Board of Directors closely monitors the viability of the DIF. In February 2009,
the FDIC Board took action to ensure the continued strength of the fund by imposing a one-time
emergency special assessment on institutions as
of June 30, 2009. On two occasions, the Board
also set assessment rates that generally increase

179

the amount that institutions pay each quarter
for insurance and also made adjustments that
expand the range of assessment rates. The Corporation had adopted a restoration plan in October 2008 to increase the reserve ratio to the 1.15
percent designated threshold within five years.
In February 2009, the Board voted to extend the
restoration plan horizon to seven years and in
September 2009 extended the time frame to eight
years. As of December 31, 2009, the reserve ratio
was negative 0.39 percent.
To further bolster the DIF’s cash position,
the FDIC Board approved a measure on November 12, 2009, to require insured institutions to
prepay 13 quarters’ worth of deposit insurance
premiums—about $45.7 billion—at the end of
2009. The intent of this measure was to provide
the FDIC with the funds needed to carry on with
the task of resolving failed institutions in 2010,
but without accelerating the impact of assessments on the industry’s earnings and capital. The
Corporation will face challenges going forward
in its ongoing efforts to replenish the DIF and
implement a deposit insurance premium system
that differentiates based on risk to the fund.
The Corporation will also be continuing to
play a leadership role in its work with global partners on such matters as Basel II to ensure strong
regulatory capital standards to protect the international financial system from problems that might
arise when a major bank or series of banks fail.

Ensuring Institution Safety and Soundness
Through an Effective Examination and
Supervision Program
The Corporation’s bank supervision program
promotes the safety and soundness of FDIC-supervised insured depository institutions. As of

180

December 31, 2009, the FDIC was the primary
federal regulator for about 5,000 FDIC-insured,
state-chartered institutions that were not members of the Federal Reserve System (generally
referred to as “state non-member” institutions).
The examination of the banks that it regulates is
a core FDIC supervisory function. The Corporation also has back-up examination authority to
protect the interests of the deposit insurance fund
for about 3,000 national banks, state-chartered
banks that are members of the Federal Reserve
System, and savings associations.
In the current environment, efforts to continue to ensure safety and soundness and carry out
the examination function will be challenging in
a number of ways. Of particular importance for
2010 is that the Corporation needs to continue
to assess the implications of the recent financial
and economic crisis and integrate lessons learned
and any needed changes to the examination program into the supervisory process. At the same
time, it needs to continue to carry out scheduled
examinations to ensure the safety and soundness
of the thousands of institutions that it regulates.
The Corporation has developed a comprehensive
“forward-looking supervision” training program
for its examiners designed to build on lessons
learned over the past year or so and will need to
put that training into practice going forward.
As in the past, the Corporation needs to ensure
it has sufficient resources to keep pace with its
rigorous examination schedule and the needed
expertise to address complex transactions and
new financial instruments that may affect an
institution’s safety and soundness. In light of the
many changes in financial institution operations
over the past year or so, the FDIC’s examination
workforce may need to review and comment

FDIC 2009 Annual Report

on a number of new issues when they assign
examination ratings. With respect to risk management examinations, senior DSC management
and examiners will need to continue to adopt the
“forward-looking” supervisory approach, carefully assess the institution’s overall risks, and
base ratings not on current financial condition
alone, but rather on consideration of possible
future risks. These risks should be identified by
rigorous and effective on-site and off-site review
mechanisms and accurate metrics that identify
risks embedded in the balance sheets and operations of the insured depository institutions so
that steps can be taken to mitigate their impact
on the institutions.
The Corporation’s supervision workload is
further compounded by the increased number
of problem institutions that exist, as referenced
earlier—that is, institutions assigned a composite rating of 4 or 5 under the Uniform Financial
Institutions Rating System by its primary federal
regulator or by the FDIC if it disagrees with the
primary federal regulator’s rating. Problem institutions are subject to close supervision with more
frequent examinations, visitations, and off-site
reviews. They are also subject to enforcement
actions requiring corrective actions designed
to resolve the bank’s deteriorating condition. In
light of recent failures, such scrutiny is of paramount importance.
In all cases, examiners need to continue to
bring any identified problems to the bank’s Board
and management’s attention, assign appropriate
ratings, and make actionable recommendations
to address areas of concern. In doing so they
will continue to need the full support of senior
FDIC management. Subsequently, the FDIC’s
corrective action and follow-up processes must

VI.  Appendices



be effective to ensure institutions are promptly
complying with any supervisory enforcement
actions—informal or formal—resulting from the
FDIC’s risk-management examination process.
In some cases, to maintain the integrity of the
banking system, the Corporation will also need
to aggressively pursue prompt actions against
bank boards or senior officers who may have
contributed to an institution’s failure.
The rapid changes in the banking industry, increase in electronic and on-line banking,
growing sophistication of fraud schemes, and the
mere complexity of financial transactions and
financial instruments all create potential risks
at FDIC-insured institutions and their service
providers. These risks could negatively impact
the FDIC and the integrity of the U.S. financial system and contribute to institution failures if existing checks and balances falter or are
intentionally bypassed. The FDIC must seek to
minimize the extent to which the institutions it
supervises are involved in or victims of financial
crimes and other abuse. It needs to continue to
focus on Bank Secrecy Act examinations to prevent banks and other financial service providers
from being used as intermediaries for, or to hide
the transfer or deposit of money derived from,
criminal activity. FDIC examiners need to be
alert to the possibility of other fraudulent activity in financial institutions, and make full use of
reports, information, and other resources available to them to help detect such fraud.

Protecting and Educating Consumers and
Ensuring an Effective Compliance Program
The FDIC’s efforts to ensure that banks serve
their communities and treat consumers fairly
continue to be a priority. The FDIC carries out its

181

consumer protection role by educating consumers, providing them with access to information
about their rights and disclosures that are required
by federal laws and regulations, and examining the banks where the FDIC is the primary
federal regulator to determine the institutions’
compliance with laws and regulations governing consumer protection, unfair or deceptive
acts and practices, fair lending, and community
investment. The FDIC’s compliance program,
including examinations, visitations, and followup supervisory attention on violations and other
program deficiencies, is critical to ensuring that
consumers and businesses obtain the benefits
and protections afforded them by law. Proactively identifying and assessing potential risks associated with new and existing consumer products
will continue to challenge the FDIC.
The FDIC will continue to conduct Community Reinvestment Act (CRA) examinations in
accordance with the CRA, a 1977 law intended
to encourage insured banks and thrifts to help
meet the credit needs of the communities in
which they are chartered to do business, including low- and moderate-income neighborhoods,
consistent with safe and sound operations. The
Corporation needs to maximize the benefits of
the interactions between its compliance and risk
management functions in the interest of maintaining healthy, viable institutions that serve
their communities well.
The FDIC will continue to address its mounting workload of responding to public inquiries
from consumers regarding deposit insurance
coverage and other concerns stemming from the
financial distress they have experienced. Also,
the Corporation will continue to emphasize
financial literacy to promote the importance of

182

personal savings, responsible financial management, and the benefits and limitations of deposit
insurance. It will continue educational and outreach endeavors to disseminate updated information to all consumers, including the unbanked
and underbanked, going forward so that taxpayers have the needed knowledge for responsible
financial management and informed decisionmaking.
With respect to consumer protections in the
context of possible regulatory reform, the FDIC
supports the establishment of a single primary
federal consumer-products regulator. In the
FDIC’s view, such an entity should regulate providers of consumer credit, savings, payment, and
other financial products and services. It should
have sole rulemaking authority for consumer
financial protection statutes and should have
supervisory and enforcement authority over all
non-bank providers of consumer credit and backup supervisory authority over insured depository institutions. As with other regulatory reform
initiatives, the FDIC may face challenges as it
seeks to make this concept a reality in the coming months.

Effectively Managing the FDIC Workforce
and Other Corporate Resources
The FDIC’s human, financial, IT, and physical resources have been stretched over the past
year and the Corporation will continue to face
challenges during 2010 in promoting sound governance and effective stewardship of its core business processes and resources. Of particular note,
FDIC staffing levels are increasing dramatically.
The Board approved a 2010 FDIC staffing level
of 8,653, reflecting an increase from 7,010 positions in 2009. These staff—mostly temporary,

FDIC 2009 Annual Report

and including a number of rehired ­
annuitants
—will perform bank examinations and other
supervisory activities to address bank failures,
and, as mentioned previously, an increasing
number will be devoted to managing and selling
assets retained by the FDIC when a failed bank is
sold. The FDIC has opened two new temporary
Satellite Offices (East Coast and West Coast)
and will open a third in the Midwest for resolving failed financial institutions and managing the
resulting receiverships. As referenced earlier, the
Corporation’s contracting level has also grown
significantly, especially with respect to resolution and receivership work.
Opening new offices, rapidly hiring and
training many new staff, expanding contracting activity, and training those with contract
oversight responsibilities are all placing heavy
demands on the Corporation’s personnel and
administrative staff and operations. When conditions improve throughout the industry and the
economy, a number of employees will need to
be released and staffing levels will return to a
pre-crisis level, which may cause additional disruption to ongoing operations and the working
environment. Among other challenges, pre- and
post-employment checks for new employees and
contractors will need to ensure the highest standards of ethical conduct, and for all employees,
the Corporation will seek to sustain its emphasis
on fostering employee engagement and morale.
To support these increases in FDIC and contractor resources, the Board approved a nearly
$4.0 billion 2010 Corporate Operating Budget,
approximately $1.4 billion higher than for 2009.
The FDIC’s operating expenses are largely paid
from the insurance fund, and consistent with
sound corporate governance principles, the Cor-

VI.  Appendices



poration’s financial management efforts must continuously seek to be efficient and cost-conscious.
Amidst the turmoil in the industry and economy, the FDIC is engaging in massive amounts
of information sharing—both internally and
with external partners. Its information technology resources need to ensure the integrity, availability, and appropriate confidentiality of bank
data, personally identifiable information, and
other sensitive information in an environment
of increasingly sophisticated security threats
and global connectivity. Continued attention
to ensuring the physical security of all FDIC
resources is also critical.
The FDIC’s numerous enterprise risk management activities need to consistently identify,
analyze, and mitigate operational risks on an
integrated, corporate-wide basis. Such risks need
to be communicated throughout the Corporation
and the relationship between internal and external risks and related risk mitigation activities
should be understood by all involved. To further
enhance risk monitoring efforts, the Corporation
has established six new Program Management
Offices to address risks associated with such
activities as shared loss agreements, contracting
oversight for new programs and resolution activities, the systemic resolution authority program,
and human resource management concerns.
These new offices and the contractors engaged
to assist them will require additional oversight
mechanisms to help ensure their success.
**********
The FDIC OIG is committed to its mission of
assisting and augmenting the FDIC’s contribution
to stability and public confidence in the nation’s
financial system. Now more than ever, we have a

183

crucial role to play to help ensure economy, efficiency, effectiveness, integrity, and transparency
of programs and associated activities, and to
protect against fraud, waste, and abuse that can
undermine the FDIC’s success. Our management
and performance challenges evaluation is based
primarily on the FDIC’s operating environment
and available information as of the end of 2009,
unless otherwise noted. We will continue to
com­ unicate and coordinate closely with the
m
Corporation, the Congress, and other financial
regulatory OIGs as we address these issues and
challenges. Results of OIG work will be posted
at www.fdicig.gov.

184

FDIC 2009 Annual Report

2009

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 individuals for their contributions.
•	 Jannie F. Eaddy

•	 Mia Jordan

•	 Barbara Glasby

•	 Robert Nolan

•	 David Kornreich

•	 Patricia Hughes

F E D E R A L
D E P O S I T
I N S U R A N C E
C O R P O R AT I O N
5 5 0 1 7 t h S t r e e t , N W
Wa s h i n g t o n , D C 2 0 4 2 9 - 9 9 9 0
FD I C - 0 0 3 - 2 0 1 0