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2O1O
ANNUAL REPORT

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

Mission
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.

Vision
The FDIC is a recognized leader in promoting sound public policies, addressing risks in the nation’s
financial system, and carrying out its insurance, supervisory, consumer protection, and receivership
management responsibilities.
Values
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,
dignity, and trust.

2O1O
ANNUAL REPORT

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

Office of the Chairman

March 31, 2011
Dear Sir,
In accordance with:
the provisions of section 17(a) of the Federal Deposit Insurance Act,
the Chief Financial Officers Act of 1990, Public Law 101-576,
the Government Performance and Results Act of 1993,
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 2010 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, and that the FDIC has no material weaknesses. Additionally, the U.S.
Government Accountability Office did not identify any significant deficiencies in the FDIC’s internal
controls for 2010. We are committed to maintaining effective internal controls corporate-wide in 2011.
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 2010 ANNUAL REPORT

Table of Contents
Message from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Message from the Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . 10
Dodd-Frank Wall Street Reform and Consumer Protection Act . . . . . . . . . . . . . 13
1. Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . 17
The Year in Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Supervision and Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Resolutions and Receiverships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Effective Management of Strategic Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2. Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Deposit Insurance Fund Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Investment Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
3. Performance Results Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Summary of 2010 Performance Results by Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
2010 Budget and Expenditures by Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Performance Results by Program and Strategic Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Prior Years’ Performance Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Program Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
4. Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Deposit Insurance Fund (DIF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
FSLIC Resolution Fund (FRF) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Government Accountability Office’s Audit Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Management’s Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
Overview of the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
5. Management Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Enterprise Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Material Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Management Report on Final Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
6. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
A. Key Statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
B. More About the FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
C. Office of Inspector General’s Assessment of the Management and
Performance Challenges Facing the FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

FDIC 2010 ANNUAL REPORT

3

INSURING DEPOSITS.
EXAMINING INSTITUTIONS.
MANAGING RECEIVERSHIPS.
EDUCATING CONSUMERS.
In its unique role as deposit insurer of banks and savings associations, and in cooperation with the
other state and federal regulatory agencies, the FDIC promotes the safety and soundness of the U.S.
financial system and 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.

0 28
157

FDIC by the Numbers
INSURED
DEPOSIT
DOLLARS
LOST

$250,000

7,657
FAILED BANKS
RESOLVED

DEPOSIT INSURANCE LIMIT

4

CONSUMER COMPLAINTS
BANKS
AND INQUIRIES ANSWERED
PARTICIPATING IN THE
SMALL-DOLLAR LOAN
PILOT PROGRAM

FDIC FULL-TIMEEQUIVALENT
EMPLOYEES

fdic 2010 annual report

NEW BANK ACCOUNTS
OPENED THROUGH THE
ALLIANCE FOR ECONOMIC
INCLUSION

27,372 7

INSURED DEPOSITORY INSTITUTIONS

442,557
8,150

45,776

LANGUAGES
FOR MONEY
SMART
CURRICULUM

146,000

ELECTRONIC DEPOSIT
INSURANCE ESTIMATOR DEPOSIT INSURANCE COVERAGE
INQUIRIES ANSWERED
USER SESSIONS

87
580

INTERNATIONAL VISITS TO THE FDIC WITH OVER
VISITORs representing

60

countries

Message from
the Chairman

D

uring 2010, the FDIC met the
challenge of protecting a record $6.2
trillion of insured deposits in over
half a billion accounts held by approximately
7,700 FDIC-insured institutions. Our guarantee
has protected depositors since 1933, with none
ever losing so much as a penny of insured
funds. The FDIC’s mission remains one of the
most important and compelling across all of
government, especially as we continue working
through the fallout from the recent financial
crisis. Our mission—promoting and maintaining
the public’s confidence in our nation’s financial
system by protecting insured depositors—
motivates each of us on a daily basis to engage
meaningfully in our work for the betterment of
the American public.
Our commitment to the FDIC’s mission and the
pride and ownership displayed by our employees,
resulted in our being recognized as the third best
place to work among large federal agencies in the
Partnership for Public Service’s 2010 Best Places to
Work in the Federal Government. These rankings
are the most comprehensive and authoritative
rating and analysis of federal employee
satisfaction. The rankings reflect the sentiments
of more than 263,000 federal employees who
completed the survey, and were driven by
responses to questions about whether employees
would recommend their agency as a good place
to work, how satisfied they are with their jobs,
and how satisfied they are with their agency on an
overall basis.

Daniel Rosenbaum/The New York Times/Redux

FDIC 2010 ANNUAL REPORT

5

The year 2010 was a year of transition in
dealing with the aftermath of the financial
crisis that began in 2008 and of major change
in the financial regulatory system. The FDIC
continued to focus on cleaning up failed banks,
strengthening bank supervision, ensuring the
financial capacity of the Deposit Insurance
Fund (DIF), and beginning the huge task of
implementing regulatory reforms passed by the
Congress that are intended to prevent another
financial meltdown.
During 2010, 157 banks failed, up from 140
the previous year and the highest number since
1992. However, fewer banks failed than we had
projected, and failures likely peaked in 2010,
although the number of problem institutions—
those with the two lowest supervisory ratings—
rose to 884, which was the highest year-end total
since 1992. Historically, the vast majority of
problem institutions do not fail.
While we expect 2010 to have been the peak
year for problem and failed institutions, as the
economy recovers, substantial residual workload
remains from the failures that occurred in prior
years. Accordingly, we have been adding to our
operational resources. The FDIC workforce grew
to 8,150 full-time equivalent positions at yearend 2010, up from 6,557 at year-end 2009, and
is authorized to increase by another 13 percent
during 2011 as we move some contracting work
in-house to achieve cost savings. In recognition
of anticipated lower projected bank failure
resolution costs, the FDIC Board approved a 2011
Corporate Operating Budget of $3.9 billion, a
slight decrease from 2010.

Reforming the
Regulatory Structure
Congress passed and President Obama signed the
Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) in late July. The
new law includes far-reaching changes to restore

6

FDIC 2010 ANNUAL REPORT

market discipline, internalize the costs of risktaking, and make our regulatory process more
attuned to systemic risks. It greatly expands the
FDIC’s regulatory responsibilities. It also made
permanent the $250,000 standard maximum
deposit insurance limit that had been raised
temporarily from $100,000 during the crisis.
One of the objectives of the Dodd-Frank Act
is to restore market discipline by repudiating
the doctrine that certain large, complex,
interconnected financial institutions are simply
too big to fail; hence, the law gave the FDIC the
power to resolve these institutions when they
get into trouble. The new law also created the
Financial Stability Oversight Council (FSOC)—
of which the FDIC was made one of the 10
voting members—to identify and respond to
the threat of systemic risks, such as the housing
bubble that triggered the recent financial crisis.
The new law also created an independent
consumer watchdog, the Consumer Financial
Protection Bureau (CFPB).
In carrying out our many new responsibilities,
we were authorized to write 44 rulemakings,
some of which are discretionary, including 18
independent and 26 joint rulemakings. We
were also granted new or enhanced enforcement
authorities. In addition, we are subject to
new reporting requirements and are required
to undertake numerous studies and other
actions. Implementation will require extensive
coordination among the regulatory agencies and
will fundamentally change the way we regulate
larger complex financial institutions. Work began
on a number of these rules in 2010.
The most significant rulemakings include
implementation of:
the new resolution plan requirement;
the new capital floor requirement;

the new orderly liquidation authority;
the change to the deposit insurance
assessment base;
the so-called Volcker Rule that imposes
trading restrictions on financial institutions;
source of strength requirements for bank and
thrift holding companies; and
credit risk retention requirements for
securitizations.

Reorganization of the
Supervision Function
In addition to issuing rulemakings, we reorganized
our banking supervisory function to help
carry out our new responsibilities under the
Dodd-Frank Act. We created the new Office of
Complex Financial Institutions to focus on the
FDIC’s expanded responsibilities to implement
a comprehensive risk analysis and assessment
program for the largest, systemically important
financial institutions. This office will perform
continuous review and oversight of bank holding
companies with more than $100 billion in assets
as well as nonbank financial companies designated
as systemically important by the new FSOC and
will be responsible for establishing relationships
and agreements with the relevant foreign
jurisdictions involved in the supervision of these
large firms. The new office will also be responsible
for ensuring that the resolution plans developed
by these firms are credible.
We also split our Division of Supervision and
Consumer Protection into two separate divisions:
the Division of Risk Management Supervision
and the Division of Depositor and Consumer
Protection. The new consumer division will
allocate our resources more effectively while
maintaining the cooperation and information
sharing between consumer protection and safety
and soundness examiners that are critical to an

integrated supervisory approach. It will also
complement, and work closely with, the
new CFPB.

Keeping the DIF Strong
as Banks Recover
The Dodd-Frank Act requires that the DIF reserve
ratio reach 1.35 percent by September 30, 2020.
It also removed the upper limit on the designated
reserve ratio (DRR) and therefore, on the size
of the fund. The law also changed the insurance
premium assessment base from domestic deposits
to assets minus tangible equity.
In carrying out these changes, the FDIC Board
proposed a comprehensive, long-term plan for
fund management based on the new law and
an FDIC historical analysis of DIF losses. This
analysis demonstrates that to maintain a positive
fund balance and steady, predictable assessment
rates, the reserve ratio must be at least 2 percent
before a period of large fund losses and average
assessment rates over time must be approximately
8.5 basis points of domestic deposits to achieve
this ratio.

Protecting Depositors and
Resolving Failed Institutions
As the number of failed institutions rose during
the year, the FDIC continued using strategies
instituted in 2009 to protect the depositors
and customers of these institutions at the least
possible cost to the DIF. The FDIC continued
aggressively marketing failing institutions leading
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 provided depositors
and customers with uninterrupted access to
essential banking services. To this end, analysis
is performed on every failing institution to
identify branches located in low- and moderateincome areas to minimize the effect that any

FDIC 2010 ANNUAL REPORT

7

proposed resolution transaction may have on these
customers. Moreover, the FDIC’s use of loss-share
agreements, where failed bank assets are passed
to the acquirer—thus remaining in the private
sector—with the FDIC sharing in any potential
losses on the assets, is expected to save the FDIC
$39.0 billion over the cost of liquidation.

Balanced Supervision under
Adverse Conditions
As supervisor for approximately 4,700 community
banks, the FDIC saw its workload rise in 2010
with the increase in the number of FDICsupervised 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 visitations between examinations.
We actively communicated with bankers through
a variety of outreach activities, including a
Community Bank Advisory Committee, now
in its second year. This Advisory Committee
provides real-time advice and guidance on a broad
range of small community bank issues, as well as
local conditions in communities throughout the
country. We have also worked closely with other
bank regulatory agencies to issue a number of
Financial Institution Letters on risk management
and compliance issues, including the Secure and
Fair Enforcement for Mortgage Licensing Act of
2008. Striking a balanced approach to bank
supervision during a period of adversity for the
industry remains essential to ensuring that credit is
made available to finance the economic recovery.

Preventing Unnecessary
Foreclosures
Once again, the FDIC was at the forefront of
efforts to stem the sharp rise in home foreclosures
caused by unaffordable mortgages and high
unemployment. In addition to advocating wider
adoption of streamlined and sustainable loan
modifications, we required failed-bank acquirers

8

FDIC 2010 ANNUAL REPORT

under loss-share agreements to modify qualifying
at-risk mortgages by cutting interest rates and, in
some cases, deferring principal. The FDIC also
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-share 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.
After 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. After seeking
and reviewing public comment, the FDIC Board
approved new standards for its existing “safe
harbor” protections for securitizations by banks
that are later placed into receivership. These rules
are designed to foster better risk management
by strengthening underwriting, providing better
disclosure, and requiring 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 to 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 accomplish this through a special website
(www.economicinclusion.gov), our Advisory
Committee on Economic Inclusion, our Alliance

for Economic Inclusion, our Money Smart
financial literacy program, and our National
Survey of Unbanked and Underbanked Households.
A new initiative under way to improve access
to mainstream banking services for low-income
families is the Model Safe Accounts Pilot program
approved by the FDIC Board in August. This
program is designed to evaluate the feasibility of
insured depository institutions offering basic, “no
frills” transactional and savings accounts. The
accounts will be FDIC-insured, have low rates and
fees, and be subject to consumer protection laws,
regulations, and guidance.
We are also committed to ensuring that banks
monitor their overdraft programs to protect
consumers from excessive fees as well as protect
their own reputations as stewards of customer
trust. In late November, we issued final guidance
on how to reduce problems and avoid hefty fees
associated with automatic overdraft programs.
A 2008 FDIC study found that some people
were chronically using overdraft programs as a
way to obtain short-term—and very expensive—
loans. While many community banks already
prudently manage their overdraft programs, some
banks operate automated programs that lead to
inappropriate use of these high-cost, short-term
credit products. The new guidelines provide
consumers with better information about the cost
of automatic overdraft programs and require banks
to intervene when customers use the backstop too
frequently.

Basel Committee on
Banking Supervision:
Capital and Liquidity
To meet the challenges of the future and to
protect insured depositors, the FDIC actively
participated in the Basel Committee’s efforts to
raise global capital standards and institute new

liquidity requirements. In December 2010, the
Basel Committee released Basel III: A global
regulatory framework for more resilient banks and
banking systems, which increases the quality of
capital, introduces a Tier 1 common equity ratio,
requires banks to hold capital conservation and
countercyclical buffers, increases the minimum
Tier 1 capital ratio from 4 to 6 percent, and
increases risk weights for certain bank exposures
such as counterparty credit risk. The Basel
Committee also agreed for the first time to
institute an international leverage ratio and
new quantitative liquidity thresholds, including
both a short-term threshold and a longer-term
structural metric. These capital standards and
liquidity requirements will improve the ability of
internationally active banks to meet funding needs
and lend during periods of stress.

The FDIC: An Enduring Symbol
of Confidence
The year 2010 was another very busy and
challenging year for the FDIC, and hopefully
the peak year for bank failures. These are
unprecedented times for our economy and the
FDIC, but we are prepared to meet the demands
of our times and committed to carrying out our
mission of maintaining confidence and stability
in the American financial system. I am especially
grateful 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 financial system back on the
road to recovery.
Sincerely,

Sheila C. Bair

FDIC 2010 ANNUAL REPORT

9

Message from the Chief
Financial Officer

I

am pleased
to present
the Federal
Deposit Insurance
Corporation’s (FDIC)
2010 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 nineteenth 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 are stewards
are fairly presented. I applaud the hard work and
dedication of the FDIC staff.
At the conclusion of 2010 and moving forward
into 2011, the DIF balance remains negative. The
DIF’s 2010 financial statements reflect the effect
of a difficult banking environment, in which 157
banks failed. This total exceeds all bank failures
between 1993 and 2008, and is the highest annual
number since 1992, when 179 failures occurred.

10

FDIC 2010 ANNUAL REPORT

Financial Results for 2010
For 2010, the DIF’s comprehensive income was
$13.5 billion compared to a comprehensive loss
of $38.1 billion during 2009. This year-overyear change of $51.6 billion was primarily due
to a $58.6 billion decline in the provision for
insurance losses, partially offset by a $4.1 billion
decrease in assessments earned (largely attributable
to the 2009 special assessment).
The provision for insurance losses was negative
$848 million for 2010, compared to positive
$57.7 billion for 2009. The 2009 provision
reflected the significant losses estimated to be
incurred by the DIF from the 2009 and future
failures. In contrast, the 2010 negative provision
is primarily impacted by a reduction in the
contingent loss reserve due to the improvement
in the financial condition of institutions that were
previously identified to fail and adjustments to the
estimated losses for banks that have failed.
The DIF’s total liquidity declined by $19.9
billion, or 30 percent, to $46.2 billion during
2010. The decrease was primarily the result
of disbursing $28.8 billion to fund 157 bank
failures during 2010, although it should be noted
that 130 of these failures were resolved as cashconserving loss-share transactions (in which the
acquirers purchased substantially all of the failed
institutions’ assets and the FDIC and the acquirers
entered into loss-share agreements) requiring
lower initial resolution funding. Moreover, during
2010, the DIF received $13.6 billion in dividends
and other payments from its receiverships, which
helped to mitigate the DIF liquidity’s decline.

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. In 2009, GAO identified
a material weakness in internal controls related
to estimating losses to the DIF from resolution
transactions involving loss-share agreements, in
addition to a significant deficiency existing over
information systems. The FDIC worked hard
during 2010, implementing control improvements
and comprehensive control enhancements to
address these issues. I am proud to report that
these are not repeat findings for 2010.

Our performance in 2010 gives us confidence
that we can meet the challenges of an everchanging banking industry. In 2011, we will
continue to focus on effective cost management,
and maintaining a strong enterprise-wide risk
management and internal control program. These
include identifying and addressing risks to the
insurance fund; implementing the Dodd-Frank
Wall Street Reform and Consumer Protection Act;
and providing Congress, other regulatory agencies,
insured 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 2010 ANNUAL REPORT

11

FDIC Senior Leaders

Front row (left to right): Director Thomas Curry, Chairman Sheila Bair, Vice Chairman Martin Gruenberg. Middle row (left to right): Jason Cave,
Mitchell Glassman (retired), Sandra Thompson, James Angel, Cottrell Webster, Arthur Murton, Arleas Upton Kea, Thom Terwilliger. Back row (left
to right): Jesse Villarreal, Bret Edwards, D. Michael Collins, Russell Pittman, Steven App, and Andrew Gray.
Not pictured: Michael Krimminger, Paul Nash, and Fred Cams.

12

FDIC 2010 ANNUAL REPORT

Dodd-Frank Wall Street
Reform and Consumer
Protection Act

E

nacted on July 21, 2010, the DoddFrank Wall Street Reform and Consumer
Protection Act (“the Dodd-Frank Act”
or “the Act”) provides the most comprehensive
legislative reform of the U.S. financial sector
since the 1930s. Aimed at addressing the causes
of the financial crisis of the last few years, the
Act, among other things, provides for a more
comprehensive, macro perspective for identifying
and taking action in response to emerging risks
in financial sectors and closing regulatory gaps;
heightened prudential supervision of systemically
important nonbank financial companies and large,
interconnected bank holding companies; orderly
liquidation of systemically important nonbank
financial companies and bank holding companies;
elimination of open assistance to preserve a
failing insured depository institution; improved
consumer financial protections and mortgage
lending practices; and enhanced transparency
and supervision of over-the-counter derivatives,
swaps, and securities activities; and other investor
protections. The Act significantly impacts the
FDIC in its roles as supervisor, receiver, and
deposit insurer, as well as making changes to the
FDIC’s corporate structure.

Supervision
The Dodd-Frank Act creates a new risk oversight
umbrella group, the Financial Stability Oversight
Council (FSOC). In an effort to mitigate potential
systemic risks, the FSOC is empowered to
designate certain nonbank financial companies
for supervision by the Board of Governors of

the Federal Reserve System (Federal Reserve)
and to make recommendations for heightened
prudential supervision of those nonbank financial
companies and bank holding companies with total
consolidated assets of $50 billion or more. The
FSOC also may designate systemically important
financial market utilities or payment, clearing
or settlement activities. The FDIC is one of ten
voting members of the FSOC.
The FSOC’s recommendations may include,
for example, leverage limits, risk-based capital
requirements, liquidity requirements, and
concentration limits. The Federal Reserve will
be responsible for implementing heightened
prudential standards and supervising such firms.
These firms also may be subject to orderly
liquidation under Title II of the Act, in which
the FDIC will act as receiver to resolve the firm
through a process similar to that used to resolve
failed insured depository institutions. The Act
requires the FDIC and the Federal Reserve to issue
joint regulations implementing the requirement
that these systemically important financial
companies develop plans for their rapid and
orderly resolution in the event of material financial
distress or failure. It also gives the FDIC backup
examination authority over these systemically
important financial companies.
The Dodd-Frank Act abolishes the Office
of Thrift Supervision (OTS) and transfers
responsibility for thrift supervision to the Office
of the Comptroller of the Currency (OCC) and

FDIC 2010 ANNUAL REPORT

13

the FDIC, as of the statutory “transfer date” (i.e.,
July 21, 2011). The FDIC will be responsible for
the supervision of state chartered thrifts, while the
OCC will supervise federal thrifts. The Federal
Reserve will supervise thrift holding companies
and their non-depository institution subsidiaries.
The Dodd-Frank Act also creates a new Consumer
Financial Protection Bureau (CFPB) within the
Federal Reserve System. The CFPB will have
exclusive rulemaking authority for specified federal
consumer protection laws and will also have
examination and primary enforcement authority
for many nonbank financial service providers and
insured depository institutions (IDIs) and credit
unions with total assets of over $10 billion (and
any affiliated IDIs). With regard to IDIs over $10
billion otherwise in its jurisdiction, the FDIC
will have backup enforcement authority for laws
over which the CFPB has primary authority. The
FDIC retains its current authority and programs
under the Community Reinvestment Act and
other consumer related laws not specified for
all IDIs within its jurisdiction. It also retains all
examination and enforcement authorities over
IDIs with total assets of $10 billion or less within
its jurisdiction. Examination coordination and
information sharing with the new CFPB
is required.

Receivership
As noted, the FDIC may be appointed as receiver
for a failed systemically significant nonbank
financial company or large, interconnected
bank holding company. The orderly liquidation
authority is similar to the resolution authority for
IDIs under the Federal Deposit Insurance Act.
However, no monies from the DIF may be used in
connection with an orderly liquidation under Title
II of the Act. Those resolutions will be funded

14

FDIC 2010 ANNUAL REPORT

initially by borrowing against the assets of the
failed financial company, with the borrowings to
be repaid from asset sales and, if necessary, from
“clawbacks” of certain additional payments and
from additional risk-based assessments against
large financial companies. The Act expressly
prohibits the use of taxpayer funds to prevent the
liquidation of any financial company under Title
II, and taxpayers shall bear no losses from the
exercise of any authority under Title II.

Deposit Insurance
The Dodd-Frank Act permanently increases
the standard maximum deposit insurance
amount to $250,000, and made the increase
retroactive to January 1, 2008. The Act also
provides temporary unlimited deposit insurance
coverage for noninterest-bearing transaction
accounts for two years from December 31, 2010,
through December 31, 2012. During this time,
all noninterest-bearing transaction accounts
are fully insured, regardless of the balance in
the account and the ownership capacity of the
funds. This coverage is available to all depositors,
including consumers, businesses, and government
entities. The unlimited coverage is separate
from, and in addition to, the standard insurance
coverage provided for a depositor’s other accounts
held at an FDIC-insured bank.
The Act directs the FDIC to amend its regulations
to define “assessment base” as average consolidated
total assets minus average tangible equity. For
custodial banks and banker’s banks, the FDIC
may subtract an additional amount as necessary to
ensure that the assessment appropriately reflects
the risk posed by such institutions.
The Act eliminates the maximum limitation
on the designated reserve ratio (DRR) and
raises the minimum DRR from 1.15 percent to

1.35 percent of estimated insured deposits. It
requires the FDIC to take such steps as may be
necessary for the reserve ratio of the DIF to reach
1.35 percent of estimated insured deposits by
September 30, 2020. The FDIC must offset the
effect on IDIs with total consolidated assets of
less than $10 billion of this one-time requirement
to reach 1.35 percent by that date rather than
1.15 percent by the end of 2016. The Act also
eliminates the payment of dividends from the DIF
when the reserve ratio is between 1.35 percent
and 1.50 percent and provides the FDIC sole
discretion to limit or suspend dividends when the
reserve ratio exceeds 1.50 percent.

FDIC Corporate Structure
The Dodd-Frank Act places the Director of the
CFPB on the FDIC Board in lieu of the Director
of the OTS. In addition, the Act requires the
FDIC to establish by January 21, 2011, an Office
of Minority and Women Inclusion (OMWI)
to develop standards for equal employment
opportunity and the racial, ethnic, and gender
diversity of the agency’s workforce and senior
management; increase participation of minorityand women-owned businesses in agency programs
and contracts; and assess the diversity policies and
practices of entities regulated by the agency. The
OMWI is also to advise the agency on the impact
of policies and regulations on minority- and
women-owned businesses. The FDIC transferred
the responsibilities of the Office of Diversity and
Economic Opportunity to OMWI, effective
January 21, 2011.

Other Financial
Regulatory Reforms
The Act also makes a number of other
reforms, including:
Requiring that minimum leverage and
risk-based capital requirements for IDIs,
depository institution holding companies and
nonbank financial companies supervised by
the Federal Reserve can be no lower than the
generally applicable requirements in effect on
July 21, 2010 (the “Collins Amendment”);
Prohibiting bank holding companies and
their affiliates from engaging in proprietary
trading or sponsoring or investing in a hedge
fund or private equity fund (the so-called
“Volcker Rule”);
Requiring greater transparency and regulation
of over-the-counter derivatives, assetbacked securities (including risk retention
requirements), hedge funds, mortgage brokers
and payday lenders;
Requiring the financial regulators to
prohibit incentive compensation at financial
institutions that encourages excessive
risk taking;
Providing new rules for transparency and
accountability for credit rating agencies and
requiring regulators to eliminate regulatory
reliance on credit ratings; and
Establishing a Federal Insurance Office to,
among other things, participate in the FSOC
and monitor issues in the insurance industry.

FDIC 2010 ANNUAL REPORT

15

Management’s Discussion
and Analysis
The Year in Review

Insurance

The year 2010 was relatively challenging for
the FDIC. In addition to the normal course of
business, the Corporation continued to resolve
failed insured depository institutions (IDIs),
increasing resources as needed. The FDIC also
started initial steps in the implementation of the
Dodd-Frank Act, continued its work on highprofile 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 made
enhancements to several versions of the Money
Smart education curriculum. The FDIC also
sponsored and co-sponsored major conferences
and participated in local and global outreach
initiatives.

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).

Highlighted in this section are the Corporation’s
2010 accomplishments in each of its three
major business lines—Insurance, Supervision
and Consumer Protection, and Receivership
Management—as well as its program
support areas.

Long-Term Comprehensive Fund
Management Plan
As a result of the Dodd-Frank Act revisions,
the FDIC developed a comprehensive, longterm management plan for the DIF designed to

State of the Deposit Insurance Fund
During 2009 and 2010, losses to the DIF were
high. As of December 31, 2010, both the fund
balance and the reserve ratio were negative after
reserving for probable losses for anticipated bank
failures. For the year, assessment revenue and
lower-than-anticipated bank failures resulted
in an increase in the reserve ratio to negative
0.12 percent as of December 31, 2010, up from
negative 0.39 percent at the beginning of the year.

MANAGEMENT’SSECTION TITLE AND ANALYSIS
DISCUSSION WILL GO HERE

17

reduce the pro-cyclicality in the existing system
and achieve moderate, steady assessment rates
throughout economic and credit cycles while
also maintaining a positive fund balance even
during a banking crisis, by setting an appropriate
target fund size and a strategy for assessment rates
and dividends. The FDIC set out the plan in a
proposed rulemaking adopted in October 2010.
The plan was finalized in rulemakings adopted in
December 2010 and February 2011.
New Restoration Plan
Pursuant to the comprehensive plan, in October
2010, the FDIC adopted a new Restoration
Plan to ensure that the reserve ratio reaches 1.35
percent by September 30, 2020. Because of
lower expected losses over the next five years than
previously anticipated, and the additional time
provided by the Dodd-Frank Act to meet the
minimum (albeit higher) required reserve ratio,
the new Restoration Plan elected to forego the
uniform 3 basis point increase in assessment rates
scheduled to go into effect on January 1, 2011.
Setting the Designated Reserve Ratio
Using historical fund loss and simulated income
data from 1950 to the present, the FDIC
undertook an analysis to determine how high the
reserve ratio would have had to have been before
the onset of the two crises that occurred since the
late 1980s to have maintained both a positive fund
balance and stable assessment rates throughout
the period. The analysis concluded that a
moderate, long-term average industry assessment
rate, combined with an appropriate dividend
or assessment rate reduction policy, would have
been sufficient to have prevented the fund from
becoming negative during the crises, though the
fund reserve ratio would have had to exceed 2.0
percent before the onset of the crises.
Therefore, pursuant to provisions in the Federal
Deposit Insurance Act that require the FDIC
Board to set the DRR for the DIF annually, the
FDIC Board proposed in October 2010 to set
the 2011 Designated Reserve Ratio (DRR) at
2.0 percent of estimated insured deposits. The
Board approved a final rule adopting this DRR
on December 14, 2010. The FDIC views the

18

2.0 percent DRR as a long-term goal and the
minimum level needed to withstand future crises
of the magnitude of past crises. However, the
FDIC’s analysis shows that a reserve ratio higher
than 2.0 percent would increase the chance that
the fund will remain positive during a future
economic and banking downturn similar to or
more severe than past crises. Thus, the 2.0 percent
DRR should not be viewed as a cap on the fund.
Long-Term Assessment Rate Schedules and
Dividend Policies
Once the reserve ratio reaches 1.15 percent,
the FDIC believes that assessment rates can be
reduced to a moderate level. Therefore, pursuant
to its statutory authority to set assessments, in
October 2010, the FDIC Board proposed a lower
assessment rate schedule to take effect when
the fund reserve ratio exceeds 1.15 percent. To
increase the probability that the fund reserve
ratio will reach a level sufficient to withstand a
future crisis, the FDIC also proposed suspending
dividends permanently when the fund reserve
ratio exceeds 1.5 percent. In lieu of dividends,
the FDIC Board proposed to adopt progressively
lower assessment rate schedules when the reserve
ratio exceeds 2.0 percent and 2.5 percent.
These lower assessment rate schedules will serve
much the same function as dividends, but will
provide more stable and predictable effective
assessment rates. The FDIC finalized these longterm assessment rate and dividend changes in
February 2011 in concert with the changes to the
assessment base and large-bank pricing system
described below.

Change in the Deposit Insurance
Assessment Base
Change in the Assessment Base
The Dodd-Frank Act requires the FDIC to amend
its regulations to define the assessment base as
average consolidated total assets minus average
tangible equity, rather than total domestic deposits
(which, with minor adjustments, it has been since
1935). The Act allows the FDIC to modify the
assessment base for banker’s banks and custodial
banks. In November 2010, the FDIC approved

MANAGEMENT’S DISCUSSION AND ANALYSIS

a proposed rulemaking that would implement
these changes to the assessment base. The FDIC
finalized this rulemaking in February 2011.
The Dodd-Frank Act also requires that, for at
least five years, the FDIC must make available
to the public the reserve ratio and the DRR
using both estimated insured deposits and the
new assessment base. As of December 31, 2010,
the FDIC estimates that the reserve ratio would
have been negative 0.06 percent using the new
assessment base (as opposed to negative 0.12
percent using estimated insured deposits) and
that the 2.0 percent DRR using estimated insured
deposits would have been 1.0 percent using the
new assessment base.
Conforming Changes to Risk-Based Premium
Rate Adjustments
The changes to the assessment base necessitated
changes to existing risk-based assessment rate
adjustments. The current assessment rate schedule
incorporates adjustments for types of funding that
either pose heightened risk to the DIF or that help
to offset risk to the DIF. Because the magnitude of
these adjustments and the cap on the adjustments
have been calibrated to a domestic deposit assessment base, the rule changing the assessment base
also recalibrates the unsecured debt and brokered
deposit adjustments. Since secured liabilities
will be included in the assessment base, the rule
eliminates the secured liability adjustment.

lessens the potential loss to the DIF in the event of
the institution’s failure; however, when the debt is
held by other IDIs, the overall risk in the system is
not reduced.
Conforming Changes to Assessment Rates
The new assessment base under the Dodd-Frank
Act will be larger than the current assessment
base. Applying the current rate schedule to
the new assessment base would result in larger
total assessments than are currently collected.
Accordingly, the rule changing the assessment
base also established new rates to take effect in
the second quarter of 2011 that will result in
collecting approximately the same amount of
assessment revenue under the new base as under
the current rate schedule using the existing
(domestic deposit) base. These schedules also
incorporate the changes from the proposed large
bank pricing rule that was finalized in February
2011 along with the change in the assessment
base. The initial base rates for all institutions will
range from 5 to 35 basis points.
The initial base assessment rates, range of possible
rate adjustments, and minimum and maximum
total base rates are shown in the table below.
Changes to the assessment base, assessment
rate adjustments, and assessment rates will take
effect April 1, 2011. As explained above, the rate
schedules will decrease when the reserve ratio
reaches 1.15, 2.0, and 2.5 percent.

The assessment rate of an institution would also
increase if it holds unsecured debt issued by other
IDIs. The issuance of unsecured debt by an IDI

Proposed Initial and Total Base Assessment Rates1
Risk
Category I

Risk
Category II

Risk
Category III

Risk
Category IV

Large and Highly
Complex Institutions

Initial base assessment rate

5–9

14

23

35

5–35

Unsecured debt adjustment

(4.5)–0

(5)–0

(5)–0

(5)–0

(5)–0

Brokered deposit adjustment

……

0–10

0–10

0–10

0–10

Total Base Assessment Rate

2.5–9

9–24

18–33

30–45

2.5–45

2

1

Total base assessment rates do not include the proposed depository institution debt adjustment.

2

The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an IDI’s initial base assessment rate; thus,
for example, an IDI with an initial base assessment rate of 5 basis points would have a maximum unsecured debt adjustment of 2.5
basis points and could not have a total base assessment rate lower than 2.5 basis points.

MANAGEMENT’S DISCUSSION AND ANALYSIS

19

Changes to the Large Bank Assessment System
The FDIC continued its efforts to reduce the
pro-cyclicality of the deposit insurance assessment
system by issuing a proposed rule in November
2010, that was finalized in February 2011, and
revises the assessment system applicable to large
IDIs to better reflect risk at the time a large
institution assumes the risk, to better differentiate
large institutions during periods of good economic
conditions, and to better take into account
the losses that the FDIC may incur if such an
institution fails.
The rule eliminates risk categories for large
institutions. As required by the Dodd-Frank Act,
under the rule, the FDIC will no longer use longterm debt issuer ratings to calculate assessment
rates for large institutions. The rule combines
CAMELS1 ratings and financial measures into two
scorecards—one for most large institutions and
another for the remaining very large institutions
that are structurally and operationally complex or
that pose unique challenges and risks in case of
failure (highly complex institutions). In general, a
highly complex institution is an institution (other
than a credit card bank) with more than $50
billion in total assets that is controlled by a parent
or intermediate parent company with more than
$500 billion in total assets, or a processing bank
or trust company with at least $10 billion in
total assets.
Both scorecards use quantitative measures that
are readily available and useful in predicting an
institution’s long-term performance to produce
two scores—a performance score and a loss
severity score—that will be combined and
converted to an initial assessment rate. The
performance score measures an institution’s
financial performance and its ability to withstand
stress. The loss severity score quantifies the relative
magnitude of potential losses to the FDIC in the
event of the institution’s failure. The rule will take
effect in the second quarter of 2011.

1

20

Temporary Liquidity Guarantee Program
On October 14, 2008, the FDIC announced
and implemented the Temporary Liquidity
Guarantee Program (TLGP). The TLGP consists
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, although in 2009
the issuance period was extended through October
31, 2009. The FDIC’s guarantee on each debt
instrument also was extended in 2009 to the
earlier of the stated maturity date of the debt or
December 31, 2012.
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 surcharge was
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 IDIs paying the
lower 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 extended twice

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

and expired on December 31, 2010. The
guarantee also covered negotiable order of
withdrawal (NOW) accounts at participating
institutions—provided the institution initially
committed to maintain interest rates on the
accounts of no more than 0.50 percent (later
reduced to 0.25 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 at the first extension
to either 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 FDIC-insured

institutions, initially opted in to 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.
Over the course of the DGP’s existence, 121
entities issued TLGP debt. At its peak, the
DGP guaranteed almost $350 billion of debt
outstanding (see chart below). As of December
31, 2010, the total amount of remaining FDICguaranteed debt outstanding was $267 billion.
The FDIC collected $10.4 billion in fees and
surcharges under the DGP. As of December 31,
2010, the FDIC paid $8 million on seven claims
that were filed when four participating entities
(all holding companies) defaulted on debt issued
under the DGP. Further claims on notes issued by
one entity are expected, since some of the notes
issued by this entity have not yet matured. Losses
through the end of the DGP guarantee period in
2012 are expected to be limited.

OUTSTANDING TLGP DEBT BY MONTH
$400

350

Dollars in Billions

300

250

200

150

100

50

0
OCT-08

DEC-08

FEB-09

APR-09

JUN-09

AUG-09

OCT-09

DEC-09

FEB-10

APR-10

JUN-10

AUG-10

OCT-10

DEC-10

MANAGEMENT’S DISCUSSION AND ANALYSIS

21

Under the TAGP, the FDIC guaranteed an average
of $114 billion of deposits during the fourth
quarter of 2010. As of December 31, 2010, the
last day of the program, over 5,100 FDIC-insured
institutions reported having guaranteed deposits.
As of December 31, 2010, the FDIC has collected
$1.1 billion in fees under the TAGP.2 Cumulative
estimated TAGP losses on failures as of December
31, 2010, totaled $2.3 billion.
Overall, TLGP fees are expected to exceed the
losses from the program. Remaining TLGP fees
will be added to the DIF balance at the conclusion
of the program. If fees are insufficient to cover the
costs of the program, the difference will be made
up through a systemic risk special assessment.
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 and 2010, the
FDIC remained concerned that terminating the
TAGP too quickly could reverse the progress made
in restoring financial 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, with higher assessment fees for
institutions participating in the extension period.
The final rule also provided an opportunity for
participating entities to opt out of the TAGP
extension. Over 6,400 institutions (or 93 percent
of institutions participating at year-end) elected to
continue in the TAGP.
In June 2010, the FDIC remained concerned that,
because of the lingering effects of the financial
crisis and recession, terminating the TAGP too
quickly could lead to liquidity problems for a
number of community banks. The Board therefore
approved a final rule authorizing another sixmonth extension, until December 31, 2010, of

2

22

the TAGP. The FDIC did not increase assessment
fees with the second extension, but the final rule
reduced the permissible interest rate for the NOW
accounts covered by the guarantee to no higher
than 0.25 percent in order to better align the
program with prevailing market rates. The FDIC
provided institutions still participating in the
TAGP in the second quarter of 2010 with a onetime opportunity to opt out of the second TAGP
extension, effective July 1, 2010. Almost 6,000
institutions (or 93 percent of those institutions
that were participating at the time) remained in
the TAGP. The final rule authorizing the second
extension also gave the FDIC Board the authority
to further extend the TAGP, without further
rulemaking, should economic conditions warrant
an additional extension, for a period of time not
to extend beyond December 31, 2011. However,
the passage of the Dodd-Frank Act eliminated the
need for such an extension of the TAGP.

Temporary Unlimited Coverage for
Noninterest-Bearing Transaction Accounts
under the Dodd-Frank Act
The Dodd-Frank Act provides temporary
unlimited deposit insurance coverage for
noninterest-bearing transaction accounts from
December 31, 2010 through December 31, 2012,
regardless of the balance in the account and the
ownership capacity of the funds. The unlimited
coverage is available to all depositors, including
consumers, businesses, and government entities.
The coverage is separate from, and in addition
to, the standard insurance coverage provided for
a depositor’s other accounts held at an FDICinsured bank.
A noninterest-bearing transaction account is a
deposit account where:
Interest is neither accrued nor paid;
Depositors are permitted to make transfers
and withdrawals; and
The bank does not reserve the right to require
advance notice of an intended withdrawal.

This figure reflects fees assessed through September 30, 2010, and collected as of December 30, 2010.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Act’s temporary unlimited coverage also
includes trust accounts established by an attorney
or law firm on behalf of clients, commonly known
as IOLTAs, or functionally equivalent accounts.
Money market deposit accounts (MMDAs) and
NOW accounts are not eligible for this temporary
unlimited insurance coverage, regardless of the
interest rate, even if no interest is paid.

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 and 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 large-bank supervision nationwide, allows
for the analysis of financial institution risks
on an individual and comparative basis, and
enables a quick response to risks identified at
large institutions. The Program’s objectives are
achieved through extensive cooperation with the
FDIC’s regional offices, other FDIC divisions and
offices, and the other bank and thrift regulators.
Given the heightened risk levels stemming
from continued adverse economic and market
conditions, the FDIC has expanded its presence at
the nation’s largest and most complex institutions
through additional and enhanced on-site and offsite monitoring.
The Program expanded coverage at large and
complex institutions from eight to ten in 2010
and increased its on-site presence, as designated
by the FDIC Board, to assess risk, monitor
liquidity, and participate in targeted reviews with
the primary federal regulators. In July 2010, the
FDIC entered into an interagency memorandum
of understanding (MOU) which allows FDIC
examiners to conduct special examinations of
certain institutions covered by the MOU. The
MOU should enhance the FDIC’s access to those
institutions and encourage ongoing effective
communication among the federal regulators.

The Large Insured Depository Institution (LIDI)
Program remains the primary instrument for
off-site monitoring of IDIs with $10 billion or
more in total assets, or under this threshold at
regional discretion. The LIDI Program provides a
comprehensive process to standardize data capture
and reporting through nationwide quantitative
and qualitative risk analysis of large and complex
institutions. As of June 30, 2010, the LIDI
Program encompassed 110 institutions with
total assets of $10.3 trillion. The LIDI Program
was refined again in 2010 to better quantify risk
to the insurance fund in all large banks. This
was accomplished, in collaboration with other
divisions and offices, through a revision to the
LIDI Scorecard, which better aligns with and
supports the FDIC’s large-bank deposit insurance
pricing responsibilities. The LIDI Scorecard is
designed to weigh key risk areas and provide a risk
ranking and measurement system that compares
IDIs on the basis of both the probability of failure
and exposure to loss at failure. The comprehensive
LIDI Program is 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.

Office of Complex Financial Institutions
The Office of Complex Financial Institutions
(OCFI) was created in 2010 to focus on the
expanded responsibilities of the FDIC by the
Dodd-Frank Act for the assessment of risk in
the largest, systemically important financial
institutions. The OCFI is responsible for oversight
and monitoring of large, systemically important
financial institutions (SIFIs). Specifically, through
both on-site and off-site monitoring, OCFI
will develop an in-depth understanding of the
operations and risk profiles of all IDIs and bank
holding companies with assets over $100 billion
and other companies designated as systemically
important by the Financial Stability Oversight
Council (FSOC).
Additionally, in conjunction with the Federal
Reserve, OCFI will develop regulations governing
the preparation, approval, and monitoring of

MANAGEMENT’S DISCUSSION AND ANALYSIS

23

resolution and recovery plans developed by SIFIs
commonly referred to as “living wills.” OCFI will
be responsible for developing detailed resolutions
plans and strategies for assigned institutions.
OCFI will also identify and manage international
and cross-border issues that might complicate the
resolution process, and, accordingly, will build
and maintain relationships with key international
stakeholders.
In 2010, OCFI focused on creating and staffing
senior management positions. Work also began
on developing resolution strategies for specific
SIFIs and more broadly scoping a process,
strategies, and data needs for ongoing risk
assessment at SIFIs.

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
important to the FDIC’s role as deposit insurer
and bank supervisor. During 2010, the CFR cosponsored three major conferences.
The 20th Annual Derivatives Securities and Risk
Management Conference, which the FDIC
co-sponsored with Cornell University’s Johnson
Graduate School of Management and the
University of Houston’s Bauer College of Business,
was held in April 2010 at the Seidman Center.
The two-day conference attracted over 100
researchers from around the world. Conference
presentations focused on issues such as credit risk
measurement, equity option pricing, commodity
market speculation, and risk management.
In October 2010, the FDIC and the Federal
Reserve hosted a two-day symposium on
mortgages and the future of housing finance.
Over 300 experts from the public, private, and
academic sectors participated in discussions of
mortgage finance, foreclosures, loan modifications,
and securitizations. Federal Reserve Chairman Ben
Bernanke and FDIC Chairman Sheila Bair spoke
at the symposium regarding the need for reform
to restore stability to the housing finance system
and to aggressively examine the incentives of the

24

U.S. system of mortgage finance to ensure that the
problems that contributed to the financial crisis
are addressed.
The CFR and the Journal for Financial Services
Research (JFSR) hosted the 10th Annual Bank
Research Conference: Finance and Sustainable
Growth in October. The two-day conference
included the presentation of 17 papers and
was attended by over 100 participants. Experts
discussed a range of topics, including the global
financial crisis, credit derivatives and the default
risk of large complex financial institutions, and
bank capital adequacy.

International Outreach
The past year has been defined by broad
international efforts to respond effectively to the
causes of the global financial crisis. One of the
important lessons of the crisis is that effective
systems of deposit insurance are important not
only for the protection of individual depositors
but also for overall financial stability. Inadequate
systems of deposit insurance place individual
depositors at risk and can have a significant
negative impact on public confidence in the
financial system as a whole. The FDIC has
provided leadership and support to international
standard-setting organizations and international
financial institutions, and has established bilateral
agreements with other bank supervisory and
deposit insurance governmental organizations,
resulting in significant advancements in
promoting sound financial systems.
In 2009, the International Association of Deposit
Insurers (IADI) and the Basel Committee on
Banking Supervision (BCBS) jointly published
Core Principles for Effective Deposit Insurance
Systems (Core Principles). The Core Principles were
later adopted by the Financial Stability Board
(FSB), which added them to its Compendium of
Standards. Under the FDIC’s leadership, IADI,
BCBS, the International Monetary Fund (IMF),
the European Forum of Deposit Insurers (EFDI),
the World Bank, and the European Commission
collaborated in developing a methodology for
assessing compliance with the Core Principles.
The methodology was submitted for approval

MANAGEMENT’S DISCUSSION AND ANALYSIS

by the executive governing boards of IADI,
EFDI, and BCBS and presented to the FSB in
December 2010. Together, the Core Principles
and the methodology will be considered for
inclusion among the FSB’s 12 Key Standards
for Sound Financial Systems. Once adopted,
the Core Principles methodology is expected
to be used to assess deposit insurance systems
by the IMF in its Financial Sector Assessment
Program, and by the FSB in its peer review of
deposit insurance systems, which is scheduled for
2011. The leadership of IADI under Martin J.
Gruenberg, the Vice Chairman of the FDIC, has
been instrumental in advancing the establishment
of the Core Principles as the standards for deposit
insurance. Vice Chairman Gruenberg was reelected to serve as President of IADI and Chair
of the Executive Council in November 2010.
During his tenure as President, the membership
of IADI has grown from 48 to 62 deposit
insurance members, including new members from
Germany, Italy, Poland, Belgium, Switzerland,
Australia, and Paraguay.
The FDIC is integrally involved with the FSB’s
Cross Border Crisis Management Working
Group (CBCM). The group has been tasked with
evaluating options and making recommendations
on how to address issues related with the too-bigto-fail issue. In particular, the CBCM has been
focused on recovery and resolution (R&R) for
SIFIs. FSB member countries have been working
on preparing R&R plans for SIFIs domiciled in
their jurisdictions. The FDIC has been involved
in R&R planning for the top five U.S. firms and
has participated in Crisis Management Group
meetings hosted by foreign regulators. The
FDIC has also provided input and leadership
to the CBCM’s development of technical work
streams related to obstacles encountered in a
SIFI resolution. These work streams are focused
on booking practices, intragroup guarantees,
payments and settlement systems and legal
entities/management information systems.
Since January 2009, international regulators have
been meeting periodically to exchange views and
share information on developments related to
central counterparties (CCPs) for over-the-counter

(OTC) credit derivatives. Based on the success of
this cooperation, the OTC Derivatives Regulators’
Forum was formed to provide regulators with a
means to cooperate, exchange views, and share
information related to OTC derivatives, CCPs,
and trade repositories. FDIC staff has an active
role in the OTC Derivatives Regulators’ Forum
and the OTC Derivative Supervisors’ Group.
Work streams of particular interest include
collateral safekeeping practices, dispute resolution,
and the build out of the central clearing platforms.
Additionally, staff is completing a data access/user
agreement MOU to assure ready access to data in
trade repositories.
Throughout 2010, the FDIC participated in
Governors and Heads of Supervision and BCBS
meetings and contributed to the work streams,
task forces, and the Policy Development Group
that developed and refined regulatory forms to
address a new definition of capital, treatment of
counterparty credit risk, an international leverage
ratio, capital conservation and countercyclical
buffers, liquidity requirements, and surcharges
on SIFIs. The BCBS published the final capital
and liquidity reforms in December 2010,
along with the results of the comprehensive
quantitative impact study and an assessment of
the macroeconomic impact of the transition to
stronger capital and liquidity requirements. In
addition to these capital and liquidity reforms,
the FDIC also participated in BCBS initiatives
related to surveillance standards, remuneration,
supervisory colleges, operational risk, accounting
issues for consistency, and corporate governance.
The FDIC finalized a resolution and crisis
management MOU with the China Banking
Regulatory Commission (CBRC) in 2010. The
FDIC is currently in the process of negotiating
a similar MOU with the Swiss Financial Market
Supervisory Authority (FINMA). The MOU
with FINMA is expected to be finalized by the
end of 2011. The FDIC has reached out to other
strategic countries including India, and has been
met with enthusiasm by Indian officials. In 2011,
the FDIC will review its resolution MOU with
the Bank of England to determine what, if any,

MANAGEMENT’S DISCUSSION AND ANALYSIS

25

changes need to be made in light of regulatory
developments both in the U.S. and the United
Kingdom.
The 2010 Strategic and Economic Dialogue
(S&ED) was held in Beijing, China, in May and
was the second such event held under President
Obama’s administration. President Barack Obama
and Chinese President Hu Jintao agreed to the
S&ED in April 2009 to deepen and promote
mutually beneficial cooperation between the U.S.
and China in key economic and strategic areas.
Chairman Bair and staff participated in this year’s
S&ED and also met with leaders of the People’s
Bank of China and the CBRC in side meetings to
further strengthen the FDIC’s relationship with
these bank regulatory agencies. During the
meeting with the CBRC, CBRC Chairman Liu
and Chairman Bair signed an MOU enhancing
cooperation in times of financial instability and in
cases of cross-border resolution.
Chairman Bair and staff visited New Delhi and
Mumbai, India, in June to meet with senior
representatives of public and private sector
organizations, including the Ministry of Finance,
the Reserve Bank of India (RBI), the Deposit
Insurance and Credit Guarantee Corporation,
and the National Bank for Agriculture and Rural
Development to discuss financial inclusion efforts
in the U.S. and India and to explore possible areas
of future cooperation between the two countries.
Chairman Bair was the keynote speaker at an
event hosted by the RBI, which was attended
by senior RBI officials, bankers, and financial
industry representatives. The Chairman’s speech
addressed U.S. financial regulatory reform, the
importance of promoting financial inclusion and
education, and the efforts made by both the U.S.
and India to reach their unbanked population.
Chairman Bair also announced plans to translate
the FDIC’s Money Smart program into Hindi for
use in India.
The FDIC continued to provide technical
assistance through training, consultations, and
briefings to foreign bank supervisors, deposit
insurance authorities, and other governmental
officials.

26

MANAGEMENT’S DISCUSSION AND ANALYSIS

The FDIC, on behalf of IADI, provided the
content and technical subject matter expertise
in the development of four tutorials released
through the Financial Stability Institute’s FSI
Connect: Premiums and Fund Management,
Deposit Insurance – Reimbursing Depositors
– Parts I and II, and Liquidation of Failed
Bank Assets. FDIC hosted two IADI executive
training seminars: Resolution of Problem
Banks (April) and Claims Management:
Reimbursement to Insured Depositors
(July). Over 125 deposit insurance and
bank regulatory officials from more than 35
countries attended the training programs. The
FDIC developed the IADI Capacity Building
Program website for organizations to use
for identifying available technical expertise
resources from IADI members. The website
was released in the fall of 2010.
The FDIC hosted 87 visits with 580 visitors
from approximately 60 countries in 2010.
In July, Chairman Bair met with members
of the European Parliament’s Committee on
Economic and Monetary Affairs to discuss
U.S. financial regulatory reform and the
FDIC’s new authorities, SIFIs, and Basel II
reform. FDIC staff met with representatives
of Chinese authorities and banks on multiple
occasions throughout the year. Topics of
these meetings included discussions about
the health of the U.S. banking industry,
financial reform, FDIC supervision of banks,
the bank resolution process, and the FDIC’s
management of the distressed assets of failed
banks. The FDIC hosted a multi-day study
tour for the Board of Directors of the Nigeria
Deposit Insurance Corporation (NDIC) in
October. NDIC guests also traveled to the
New York Regional Office to learn about
the role of the regional offices and their
relationship with headquarters. The FDIC
hosted secondees, one from each of the
following organizations during 2010: the
Korea Deposit Insurance Corporation, the
Financial Services Commission in Korea, and
the Savings Deposit Insurance Fund of Turkey.

June marked the three-year anniversary of the
secondment program agreed upon between the
Financial Services Volunteer Corps (FSVC)
and the FDIC to place one or more FDIC
employees full-time in FSVC’s Washington,
DC, office. Between September 2009 and
August 2010, FSVC hosted four secondees
who participated in 20 projects that took place
in Albania, Algeria, Egypt, Jordan, Malawi,
and Morocco. Additionally, the secondees
provided services for their counterparts in
Albania, Egypt, Libya, and Malawi from
Washington, DC, and completed a project
for the Central Bank of Iraq in Jordan. The
secondees worked directly with eight overseas
regulatory counterparts and trained almost
440 individuals. In these efforts, they spent
over 1,850 hours providing direct technical
assistance.
The FDIC continues to support the work and
mission of the Association of Supervisors of
Banks of the Americas (ASBA). In furtherance
of the FDIC’s commitment to ASBA
leadership and strategic development, in July
2010, FDIC staff participated in ASBA’s
board of directors and technical committee
meetings. To facilitate ASBA’s research and
guidance initiatives, a senior bank examiner
will participate in ASBA’s Stress Testing
Working Group, and FDIC staff is responding
to ASBA’s review of the implementation of
International Financial Reporting Standards.
These research and guidance efforts are
intended to promote sound bank supervisory
practices among ASBA members.

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

3

promotes the safety and soundness of FDICsupervised IDIs, protects consumers’ rights, and
promotes community investment initiatives.

Examination Program
The FDIC’s strong bank examination program
is the core of its supervisory program. As of
December 31, 2010, the Corporation was the
primary federal regulator for 4,386 FDICinsured, state-chartered institutions that were not
members of the Federal Reserve System (generally
referred to as “state non-member” institutions).
Through risk management (safety and soundness),
consumer compliance and Community
Reinvestment Act (CRA), and other specialty
examinations, the FDIC assesses an institution’s
operating condition, management practices and
policies, and compliance with applicable laws and
regulations. The FDIC also educates bankers and
consumers on matters of interest and addresses
consumer questions and concerns.
As of December 31, 2010, the Corporation
conducted 2,720 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 1,780 CRA/
compliance examinations (914 joint CRA/
compliance examinations, 854 compliance-only
examinations,3 and 12 CRA-only examinations)
and 3,276 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. The following table
compares the number of examinations, by type,
conducted from 2008 through 2010.

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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

27

FDIC Examinations 2008 – 2010
2010

2009

2008

2,488

2,398

2,225

225

203

186

Savings Associations

0

1

1

National Banks

3

0

2

State Member Banks

4

2

2

2,720

2,604

2,416

Compliance/Community Reinvestment Act

914

1,435

1,509

Compliance-only

854

539

313

12

7

4

1,780

1,981

1,826

465

493

451

Data Processing Facilities

2,811

2,780

2,577

Subtotal – Specialty Examinations

3,276

3,273

3,028

7,776

7,858

7,270

Risk Management (Safety and Soundness):

State Non-member Banks
Savings Banks

Subtotal – Risk Management Examinations
CRA/Compliance Examinations:

CRA-only
Subtotal – CRA/Compliance Examinations
Specialty Examinations:
Trust Departments

Total

Risk Management
As of December 31, 2010, there were 884 insured
institutions with total assets of $390.0 billion
designated as problem institutions for safety and
soundness purposes (defined as those institutions
having a composite CAMELS4 rating of “4” or
“5”), compared to the 702 problem institutions
with total assets of $402.8 billion on December
31, 2009. This constituted a 26 percent increase
in the number of problem institutions and a 3
percent decrease in problem institution assets.
In 2010, 267 institutions with aggregate assets
of $157 billion were removed from the list
of problem financial institutions, while 449
institutions with aggregate assets of $198 billion

4

28

were added to the list. Westernbank Puerto Rico,
Mayaguez, Puerto Rico, which was the largest
failure in 2010, with $11.9 billion in assets, was
added to the problem institution list in 2008 and
resolved in 2010. The FDIC is the primary federal
regulator for 583 of the 884 problem institutions,
with total assets of $202.5 billion and $390.0
billion, respectively.
During 2010, the Corporation issued the
following formal and informal corrective actions
to address safety and soundness concerns:
300 Consent Orders and 424 Memoranda of
Understanding. Of these actions, 9 Consent

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

MANAGEMENT’S DISCUSSION AND ANALYSIS

Chairman Sheila C. Bair meets with Puerto Rico Financial Institutions Commissioner Alfredo Padilla, left, and Puerto Rico Governor
Luis Fortuño, center.

Orders and 16 Memoranda of Understanding
were issued based, in part, on apparent violations
of the Bank Secrecy Act.
The FDIC is required to conduct follow-up
examinations of all state non-member institutions
designated as problem institutions within 12
months of the last examination. As of December
31, 2010, all follow-up examinations for problem
institutions were performed on schedule.
Compliance
As of December 31, 2010, there were 54 insured
state non-member institutions with total assets
of $36.4 billion, rated “4” or “5” for consumer
compliance purposes. All follow-up examinations
for these institutions were performed on schedule.
During 2010, the Corporation issued the
following formal and informal corrective actions
to address compliance concerns: 23 Consent
Orders and 122 Memoranda of Understanding.

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 2010.
The FDIC conducted three training sessions in
2010 for 65 central bank representatives from
Afghanistan, Argentina, Ghana, Iraq, Jordan,
Kuwait, Mali, Mauritania, Morocco, Nigeria,
Pakistan, Paraguay, Qatar, Senegal, and Turkey.
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 (FBI) on combating terrorist
financing, and the Financial Crimes Enforcement
Network (FinCEN) on the role of financial
intelligence units in detecting and investigating
illegal activities.

MANAGEMENT’S DISCUSSION AND ANALYSIS

29

This year, the inaugural Advanced International
AML/CFT School was offered. The goal of this
course is to provide seasoned government staff
with an appropriate understanding of high-risk
areas and transactions, their potential effect on a
financial institution, and how to identify potential
red flags. Expert instructors were provided by
the United States Attorney’s Office, the Drug
Enforcement Administration, U.S. Immigration
and Customs Enforcement, the FBI, FinCEN,
and the FDIC’s Legal Division.

requesting technical assistance on a number of
bank supervision issues, including but not limited
to, the following:
Troubled Asset Relief Program (TARP)
Deposit insurance assessments
Proper use of interest reserves
Filing branch and merger applications
Complying with Part 365 – Real Estate
Lending Standards

Additionally, the FDIC met with eight Namibian
and Zambian foreign officials and 14 European
representatives as a part of the U.S. Department of
State’s International Visitor Leadership Program to
discuss the FDIC’s AML Supervisory Program.

FFIEC BSA/AML Examination Manual
The FDIC participated in the revision and
issuance of the 2010 FFIEC BSA/AML
Examination Manual. The manual was released
by the Federal Financial Institutions Examination
Council (FFIEC) for publication and distribution
on April 29, 2010. It reflects the ongoing
commitment of the federal banking agencies
to provide current and consistent guidance on
risk-based policies, procedures, and processes
for banking organizations to comply with the
BSA and to safeguard operations from money
laundering and terrorist financing. The manual
was updated to further clarify supervisory
expectations and to incorporate regulatory
changes since the 2007 release. The revisions also
reflect feedback from the banking industry and
examination staff. The FDIC has also translated
the manual into Spanish.
Minority Depository Institution Activities
The preservation of Minority Depository
Institutions (MDIs) remains a high priority for the
FDIC. In 2010, the FDIC continued to seek ways
to improve communication and interaction with
MDIs and to respond to the concerns of minority
bankers. Many of the MDIs took advantage of
the technical assistance offered by the FDIC,

30

Preparing Call Reports
Performing due diligence for loan
participations
Monitoring CRE concentrations
Reducing adversely classified assets
Identifying and monitoring reputation risk
Maintaining adequate liquidity
Compliance issues
Community Reinvestment Act (CRA)
Procedures for filing regulatory appeals
Criteria for assigning CAMELS ratings
The FDIC continued to offer the benefit of
having an examiner or a member of regional office
management return to FDIC-supervised MDIs
from 90 to 120 days after examinations to assist
management in understanding and implementing
examination recommendations or to discuss other
issues of interest. Ten MDIs took advantage of this
initiative in 2010. Also, the FDIC regional offices
held outreach training efforts and educational
programs for MDIs.
The FDIC hosted a series of Asset Purchaser,
Investor, and Minority Depository Institutions
Outreach seminars throughout the country, where
investors, and minority- and women-owned
firms received information on purchasing assets

MANAGEMENT’S DISCUSSION AND ANALYSIS

from the FDIC and opportunities for investors
to invest in or establish an MDI. Seminars were
held in Atlanta, GA; New York, NY; Houston,
TX; Miami, FL; Los Angeles, CA; San Francisco,
CA; and Washington, DC. The seminars were well
received, with over 650 participants in attendance.
The FDIC held quarterly conference calls and
banker roundtables with MDIs in the geographic
regions. Topics of discussion for the quarterly calls
included both compliance and risk management
topics, and topics at the roundtables included
the economy, overall banking conditions, deposit
insurance assessments, accounting, and other bank
examination issues.
The FDIC partnered with the Federal Reserve’s
Partnership for Progress to provide technical
assistance and training to MDIs interested
in applying for the New Markets Tax Credit
(NMTC). The training consisted of a series
of webinars to educate MDIs about becoming
Community Development Entities, completing
NMTC applications, and best practices on
NMTC projects.

Capital and Liquidity Rulemaking
and Guidance
Credit Ratings ANPR
In August 2010, the FDIC, along with the
other federal banking agencies, published
an Advance Notice of Proposed Rulemaking
(ANPR) regarding alternatives to the use of credit
ratings in the risk-based capital rules for banking
organizations. The ANPR was issued in response
to section 939(A) of the Dodd-Frank Act, which
requires the agencies to review regulations that
(1) require an assessment of the creditworthiness
of a security or money market instrument,
and (2) contain references to or requirements
regarding credit ratings. In addition, the agencies
are required to remove such references and
requirements and substitute in their place uniform
standards of creditworthiness, where feasible.
Market Risk NPR
In December 2010, the FDIC Board of Directors
approved the publication of a joint Notice
of Proposed Rulemaking (NPR) designed to

enhance the market risk capital framework by
addressing default and credit risk migration,
innovations in trading book exposures, and other
deficiencies revealed during the recent financial
crisis. Enhancements to the framework include
requirements to compute capital for stressed valueat-risk, and incremental default risk, standardized
capital requirements for certain securitization
positions, a capital floor for correlation trading
exposures, and increased transparency through
enhanced disclosures.
Advanced Approaches Floor NPR
In December 2010, the FDIC Board of Directors
approved a joint NPR to implement certain
requirements of Section 171 of the DoddFrank Act. Section 171 requires, among other
things, that the agencies’ generally applicable
capital requirements serve as a floor for other
capital requirements the agencies may establish
and, specifically, as a permanent floor for the
advanced approaches risk-based capital rule. Final
rulemaking will be completed in 2011.
FAS 166 and 167 Final Rule
In January 2010, the agencies finalized the
amendment to the risk-based capital rules to
reflect the issuance of FAS 166 and 167, which
required certain off-balance-sheet assets to be
moved back onto a bank’s balance sheet. The
final rule provided an optional transition period
that allowed a bank to phase in over one year
the impact on risk-weighted assets of the change
in the U.S. generally accepted accounting rules.
The rule also eliminated the exclusion of certain
consolidated asset-backed commercial paper
programs from risk-weighted assets.
Interest Rate Risk
Economic conditions in 2010 presented
significant risk management challenges to
depository institutions. For a number of
institutions, increased loan losses and sharp
declines in the value of certain securities portfolios
placed downward pressure on capital and earnings.
In the prevailing interest rate environment, taking
advantage of a steeply upward sloping yield curve
by funding longer-term assets with shorter-term

MANAGEMENT’S DISCUSSION AND ANALYSIS

31

liabilities may have provided short-term gains
to earnings helping offset losses, but could pose
risks to an institution’s capital and future earnings
should short-term interest rates rise. To reinforce
the federal banking agencies’ existing guidance
—The Joint Agency Policy Statement on Interest
Rate Risk—and to remind institutions to not lose
focus on their management of interest rate risk,
the agencies issued new guidance on January 6,
2010—Advisory on Interest Rate Risk Management.
The guidance updated and clarified existing
supervisory guidance on the sound practices
for managing interest rate risk, noting that
institutions should assess the likely effects
of meaningful stress scenarios, including interest
rate shocks of at least 300 to 400 basis points
and that institutions are expected to conduct
independent reviews of their interest rate risk
models and management processes.
Liquidity Guidance
Recent turmoil in the financial markets
emphasized the importance of effective liquidity
risk management for the safety and soundness
of financial institutions. To emphasize the
importance of cash flow projections, diversified
funding sources, stress testing, a cushion of
liquid assets, and a formal, well-developed
contingency funding plan as primary tools for
measuring and managing liquidity risk, the
federal banking agencies issued new guidance on
March 22, 2010—Funding and Liquidity Risk
Management. This policy statement summarizes
the principles of sound liquidity risk management
issued in the past and, when appropriate,
supplements them with the ‘‘Principles for Sound
Liquidity Risk Management and Supervision’’
issued by the BCBS in September 2008.

Other Guidance Issued
During 2010, the FDIC issued and participated
in the issuance of other guidance in several areas as
described below.
Bargain Purchases and Assisted Acquisitions
Market conditions in the banking industry,
including the significant number of FDIC-assisted
acquisitions of failed depository institutions, have

32

contributed to an increase in bargain purchase
transactions. A bargain purchase occurs when
the fair value of the net assets acquired in a
business combination exceeds the fair value of
any consideration transferred by the acquiring
institution. Bargain purchase gains are reported
in earnings and included in the computation
of regulatory capital under the agencies’ capital
standards. To address the supervisory issues arising
from business combinations that result in bargain
purchase gains, the FDIC, along with the other
financial regulators, issued Interagency Supervisory
Guidance on Bargain Purchases and FDIC- and
NCUA-Assisted Acquisitions on June 7, 2010. The
guidance addresses the agencies’ concerns about
the quality and composition of capital when a
bargain purchase gain is expected to result from
a business combination and describes the capital
preservation and other conditions the agencies
may impose in their approval of acquisitions. The
guidance also discusses the agencies’ expectations
with respect to the appropriate application of
accounting standards to business combinations.
Examinations of Institutions with FDIC
Loss-Share Agreements
Beginning in 2009, the FDIC increasingly entered
into loss-share agreements with institutions
acquiring failed IDIs. Under such an agreement,
the FDIC and an acquiring institution share in the
losses on a specified pool of a failed institution’s
assets, which maximizes asset recoveries and
minimizes losses to the DIF. In May 2010, the
FDIC issued guidance to its examination staff
on how examiners should take into account
the implications and benefits of loss-share in
their supervision of banks that have acquired
assets of failed institutions covered by loss-share
agreements. Examiners are expected to consider
the impact of these agreements when performing
asset reviews, assessing accounting entries,
assigning adverse classifications, and determining
CAMELS ratings and examination conclusions.
The FDIC has made this examination guidance
available to bankers, the other banking agencies,
and other parties to promote their understanding
of the FDIC’s approach to the examination of
banks with loss-share agreements. To provide

MANAGEMENT’S DISCUSSION AND ANALYSIS

greater visibility to the effect of loss-share
agreements on the examination process, the
Summer 2010 issue of the FDIC’s Supervisory
Insights, published in June, included “FDIC
Loss-Sharing Agreements: A Primer”. This article
provides an overview of the loss-share process,
addresses the regulatory treatment of assets subject
to these agreements, and discusses the accounting
rules and capital implications for the acquisition
of failed bank assets.
Troubled Asset Relief Program’s Community
Development Capital Initiative
In 2010, the FDIC actively engaged with the
U.S. Department of the Treasury (Treasury) and
the other federal bank regulatory agencies in
considering applications to the Troubled Asset
Relief Program’s (TARP) Community Development
Capital Initiative (CDCI). The TARP CDCI
invested lower-cost capital in Community
Development Financial Institutions (CDFIs),
which are financial institutions that target at least
60 percent of their lending and other economic
development activities in areas underserved by
traditional financial services providers. In its
role as primary federal supervisor for state nonmember institutions, the FDIC reviewed 64
TARP CDCI applications and forwarded approval
recommendations to Treasury for 12 institutions
that met Treasury’s Program standards. Treasury
approved ten institutions for participation in
the Program.
The FDIC desired to reach a favorable
recommendation for all TARP CDCI applications
and worked closely with bank managements that
were striving to achieve Treasury’s standards for
approval. CDFIs can provide critically needed
loan and depository services to underserved
communities.
Meeting the Credit Needs of Creditworthy
Small Business Borrowers
In response to difficulties some small business
owners are experiencing in obtaining or renewing
credit to support their operations, the FDIC,
along with other financial regulators, issued
Interagency Statement on Meeting the Credit
Needs of Creditworthy Small Business Borrowers

on February 12, 2010. The statement builds
on principles of existing guidance and strives
to ensure that supervisory policies do not
inadvertently curtail the availability of credit to
sound small business borrowers. The statement
reiterates regulatory expectations for institutions
to effectively monitor and manage credit
concentrations but notes that institutions should
not automatically refuse credit to sound borrowers
because of their particular industry or
geographic location.
The statement also explains that examiners will
not criticize prudent underwriting practices, that
examiners will take a balanced approach when
assessing small business lending activities, and that
examiners will not adversely classify loans solely
due to declining collateral values, provided that a
borrower has the willingness and ability to repay
loans according to reasonable terms.
Correspondent Concentration Risks
On April 30, 2010, the FDIC, along with the
other financial regulators, issued guidance on
Correspondent Concentration Risks to outline the
agencies’ expectations for identifying, monitoring,
and managing correspondent concentration risks.
The guidance addresses the agencies’ expectations
relative to performing due diligence on credit
exposures to, and funding transactions with,
other financial institutions. The guidance notes
that a financial institution’s relationship with a
correspondent may result in credit and funding
concentrations and acknowledges that, while some
correspondent concentrations meet legitimate
business needs, the concentrations represent
a lack of diversification management should
address when formulating strategic plans and risk
management policies and procedures.
Appraisal and Evaluation Guidelines
On December 2, 2010, the FDIC, along with
the other federal banking agencies, issued final
Interagency Appraisal and Evaluation Guidelines
to provide further clarification of the agencies’
appraisal regulations and supervisory guidance
to institutions and examiners about prudent
appraisal and evaluation programs. The guidelines
reflect changes in appraisal standards and

MANAGEMENT’S DISCUSSION AND ANALYSIS

33

advancements in regulated institutions’ collateral
valuation methods and clarify longstanding
supervisory expectations for an institution’s
appraisal and evaluation program to conduct
real estate lending in a safe and sound manner.
Further, the guidelines promote consistency in
the application and enforcement of the agencies’
appraisal regulations and safe and sound
banking practices.
Incentive Compensation
On June 21, 2010, the FDIC joined the other
federal banking agencies in issuing interagency
Guidance on Sound Incentive Compensation Policies.
This guidance was issued to address incentive
compensation practices in the financial services
industry that contributed to the recent financial
crisis. The guidance uses a “principles-based”
approach and describes the agencies’ expectations
for banking organizations to maintain incentive
compensation practices consistent with safetyand-soundness standards. One main goal of
the guidance is to align employee rewards with
longer-term organizational objectives, including
consideration of potential risks and risk outcomes.
Golden Parachute
As part of supervisory efforts to address executive
compensation in the financial services industry,
the FDIC issued Guidance on Golden Parachute
Applications on October 14, 2010, to clarify
the golden parachute application process
for troubled institutions, specify the type of
information necessary to satisfy the certification
requirements, and highlight factors considered by
supervisory staff when determining whether to
approve a golden parachute payment. A golden
parachute payment refers to amounts paid by
troubled entities to an institution-affiliated
party (IAP) that are contingent on the IAP’s
termination. Applications made on behalf of
senior management will be subject to heightened
scrutiny that will include an evaluation of the
individual’s performance and involvement in
corporate initiatives and policymaking. For
lower-level employees, a de minimis golden
parachute payment of up to $5,000 per individual

34

is permissible without a supervisory application
in most cases. The bank is required to maintain a
record of the individuals receiving the payments,
together with signed and dated certifications of
the amounts received.
Concerns with Energy Lending Programs
The FDIC, along with other financial regulators,
issued an alert on July 6, 2010, notifying financial
institutions about a Federal Housing Finance
Authority (FHFA) Statement Relative to Concerns
with Certain Energy Lending Programs. The
statement relates to FHFA and FDIC concerns
with certain energy retrofit lending programs
and indicates institutions should be aware of
such programs, as deficiencies within the
programs, such as weak underwriting and
consumer-protection standards, could affect an
institution’s residential mortgage lending activities
and its ability to sell loans to Fannie Mae and
Freddie Mac.
Secure and Fair Enforcement for Mortgage
Licensing Act of 2008
On July 28, 2010, the FDIC along with the other
federal banking agencies, published the final rule
implementing the requirements of the Secure
and Fair Enforcement for Mortgage Licensing
Act of 2008 (SAFE Act). The SAFE Act requires
residential mortgage loan originators who are
employees of national and state banks, savings
associations, Farm Credit System institutions,
credit unions, and certain of their subsidiaries
(agency-regulated institutions) to be registered
in the Nationwide Mortgage Licensing System
and Registry, an online database. The FIL
highlights the rule’s requirements for appropriate
policies, procedures, and management systems
to ensure compliance with the SAFE Act.
The SAFE Act is intended to improve the
accountability and tracking of residential mortgage
loan originators (MLOs), enhance consumer
protection, reduce fraud, and provide consumers
with easily accessible information regarding an
MLO’s professional background.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Municipal Advisor Rule
On October 1, 2010, the FDIC issued a FIL
announcing the Securities and Exchange
Commission’s (SEC) issuance of an interim final
temporary rule requiring all municipal advisors to
register with the SEC by October 1, 2010. The
FIL highlights definitions of municipal advisors
and municipal financial products, and notified
financial institutions that they should review their
dealings with municipal entities to determine
if such dealings will require registration as a
municipal advisor.
Regulatory Relief
During 2010, the FDIC issued 23 Financial
Institution Letters (FILs) that provided guidance
to help financial institutions and facilitate recovery
in areas damaged by severe storms, tornadoes,
flooding, and other natural disasters.
Consumer Protection and Compliance Rules
and Guidance
In March 2010, the FDIC approved and issued,
along with the other federal bank regulators,
updated Interagency Questions and Answers
Regarding Community Reinvestment. These Q&As
consolidate and supersede all previously published
versions of this guidance. A new Q&A provides
examples of how to demonstrate that community
development services meet the criteria of serving
low- and moderate-income areas and people. The
revised Q&As enable consideration of a pro rata
share of mixed income affordable housing projects
as community development projects.
In September 2010, the FDIC, along with the
other federal bank regulators, issued a final CRA
rule to implement a provision of the Higher
Education Opportunity Act. The rule provides for
consideration of low-cost higher education loans
to low-income borrowers as a positive factor when
assessing a financial institution’s record of meeting
community credit needs under the CRA. The
rule also incorporates a CRA statutory provision
that allows the agencies to consider a financial
institution’s capital investment, loan participation,
and other ventures with minority-owned financial

institutions, women-owned institutions, and lowincome credit unions as factors in assessing the
institution’s CRA record.
In December 2010, the agencies published
a final CRA rule that revises the definition
of “community development” in the CRA
regulations to provide favorable CRA
consideration for loans, investments, and
services by financial institutions that directly
support, enable or facilitate eligible projects
and activities in designated target areas of the
Neighborhood Stabilization Program (NSP)
approved by the Department of Housing and
Urban Development. The expanded definition
of “community development” in the CRA
regulations will help leverage NSP funds in areas
experiencing high foreclosure and vacancy rates
and neighborhood blight.
In May 2010, the FDIC issued guidance to assist
lenders in meeting their compliance obligations
under the National Flood Insurance Program
(NFIP) during periods when the statutory
authority of the Federal Emergency Management
Agency (FEMA) to issue flood insurance contracts
under the NFIP lapses. In December 2010, the
FDIC issued a notice to its supervised financial
institutions that FEMA announced that Preferred
Risk Policy eligibility will be extended two years
beginning January 1, 2011.
In August 2010, the FDIC, in cooperation
with the other FFIEC member agencies, issued
supervisory guidance on reverse mortgage
products. The guidance emphasizes the consumer
protection concerns raised by reverse mortgages
and the importance of financial institutions
mitigating the compliance and reputation risks
associated with these products.
In September 2010, the FDIC issued a
compliance guide for state non-member banks
wishing to use the model privacy form to comply
with disclosure requirements under the GrammLeach-Bliley Act.
In November 2010, the FDIC issued final
supervisory guidance on overdraft payment
programs. The final guidance reaffirms existing

MANAGEMENT’S DISCUSSION AND ANALYSIS

35

supervisory expectations described in the February
2005 Joint Guidance on Overdraft Protection
Programs, and provides specific guidance with
respect to automated overdraft payment programs.
In particular, the FDIC guidance states that
financial institution management should be
especially vigilant with respect to product overuse,
which may harm consumers.

Monitoring Emerging Risks
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 the Statistical CAMELS
Off-site Rating (SCOR) system and the 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 institutions’ 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 loss trends, and dividend
payments. Furthermore, the FDIC replaced its
former Underwriting Survey with a Credit and
Consumer Products/Services Survey. 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.
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) that took effect in March and
December 2010. The revisions responded to such
developments as the temporary increase in the
deposit insurance limit, changes in accounting

36

standards, and credit availability concerns. The
reporting changes that took effect on March
31, 2010, included new data on other than
temporary impairments of debt securities, loans
to non-depository financial institutions, and assets
acquired from failed institutions covered by FDIC
loss-share agreements; additional data on certain
time deposits and unused commitments; and a
change from annual to quarterly reporting for
small-business and small-farm lending data.
The agencies began to collect new data
pertaining to reverse mortgages annually
effective December 31, 2010.
As a result of a change in the basis for calculating
assessments for banks participating in the FDIC’s
TAGP in the third quarter of 2010, the agencies
revised the Call Report items used to collect
data on TAGP-eligible accounts in September
2010. For the final two quarters of the TAGP,
participating banks were required to report the
total dollar amount and number of TAGP-eligible
accounts as average daily balances rather than
quarter-end balances.
With the enactment of temporary unlimited
insurance coverage for noninterest-bearing
transaction accounts by the Dodd-Frank Act
effective December 31, 2010, the agencies added
two new items to the Call Report as of that date
for the reporting of the quarter-end dollar amount
and number of noninterest-bearing transaction
accounts as defined in the Act. These new items
must be completed by all banks, not only those
that participated in the TAGP.
In September 2010, the agencies proposed several
revisions to the Call Report, primarily to assist
the agencies in gaining a better understanding
of banks’ credit and liquidity risk exposures. The
proposed revisions, which took effect on March
31, 2011, include additional data on troubled
debt restructurings, commercial mortgage-backed
securities, private sector deposits, loans and other
real estate covered by FDIC loss-share agreements,
bank-owned life insurance, and trust department
collective investment funds; new data on auto
loans, deposits obtained through deposit listing
services, and assets and liabilities of consolidated

MANAGEMENT’S DISCUSSION AND ANALYSIS

variable interest entities and captive insurance
subsidiaries; and instructional revisions relating to
construction loans and repricing data.

northwestern Indiana interested in forming AEI
coalitions, and provided a loaned executive to lead
the Bank On California campaign.

Promoting Economic Inclusion
The FDIC undertook a number of initiatives in
2010 to promote financial access to IDIs for lowand moderate-income communities.

The FDIC also worked closely during 2010 with
the National League of Cities to provide technical
assistance to facilitate the implementation of Bank
On campaigns in: Seattle, WA; Savannah, GA;
Houston and San Antonio, TX; Indianapolis, IN;
Aurora, IL; Gaithersburg, MD; and Jacksonville,
FL. 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.

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 2010
to increase measurable results in the areas of
new bank accounts, small-dollar loan products,
remittance products, and the delivery of financial
education to more underserved consumers.
During 2010, over 152 banks and organizations
joined AEI nationwide, bringing the total number
of AEI members to 1,119. There were 45,776 new
bank accounts opened during 2010, bringing the
total number of bank accounts opened through
the AEI to 208,458. During 2010, approximately
56,556 consumers received financial education
through the AEI, bringing the total number of
consumers educated to 199,392. Also, 48 banks
were in the process of offering or developing
small-dollar loans, 27 banks were offering
remittance products, and 26 banks were providing
innovative savings products through the AEI at
the end of 2010.
During 2010, the FDIC expanded its efforts
to address additional markets with high
concentrations of unbanked and underbanked
households and aligned its targeted efforts with
the results of its 2009 unbanked survey. Presently
in 14 markets, the FDIC began the initial
organization and planning for AEI initiatives in
two additional markets: Milwaukee, WI, and
St. Louis, MO. Additionally, the FDIC worked
closely during 2010 to provide technical assistance
and support to communities in Ohio and

Advancing Financial Education
The FDIC’s award-winning Money Smart
curriculum is available in seven languages, largeprint and Braille versions, as computer-based
instruction, and as podcast audio instruction.
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 2010 through a multipart strategy that included making available
timely, high-quality financial education
products, expanding delivery channels, and
sharing best practices.
In 2010, the FDIC released an enhanced version
of its instructor-led Money Smart financial
education curriculum for adults. The enhanced
curriculum incorporates changes in the law and
industry practices that have occurred since Money
Smart was last revised in 2006. For instance, the
curriculum reflects recent amendments to the
rules pertaining to credit cards as well as the new
overdraft opt-in rule. A new module, Financial
Recovery, provides an overview of the steps
consumers can take to rebuild their finances after a
financial setback. Similar enhancements were also
made to Money Smart for Young Adults.
The FDIC also released a Spanish language
version of the Money Smart Podcast Network, a
portable audio version of Money Smart suitable

MANAGEMENT’S DISCUSSION AND ANALYSIS

37

for use with virtually all MP3 players. Showing
the appeal of a portable audio version, the MP3
English version received more than 522,000 hits
during more than 23,000 individual sessions
(individual visitors) during 2010, and the Spanish
version received nearly 1,000 hits between its
release on October 14, 2010, and year-end.
The FDIC’s delivery channels for financial
education were expanded, in particular, through
a historic partnership agreement signed on
November 15, 2010, with the National Credit
Union Administration and the U.S. Department
of Education, to promote financial education
and access for low- and moderate-income
students. The agreement will promote educators
and IDIs working together to help students
receive financial education and use mainstream
banking products.
Financial education best practices were shared
through four editions of Money Smart News,
which reached over 40,000 subscribers. Success
stories were shared on topics including reaching
households struggling to survive a job loss and
providing financial education to
college students.
As a member of the Financial Literacy and
Education Commission, the FDIC continued
to actively support the Commission’s efforts to
improve financial literacy in America. During
2010, the FDIC was significantly involved in
the work of the National Strategy Working
Group, which was charged with drafting a new
national strategy to promote financial literacy
and education. In addition, the FDIC chairs the
Commission’s Core Competencies Subcommittee,
which worked closely with the Department
of the Treasury and a group of experts in the
financial education field, including researchers
and practitioners, to help draft the various core
principles that individuals should know and the
basic concepts program providers should cover.
The FDIC also took a leadership role among
federal agencies to promote the 2010 America
Saves Week to encourage consumers to establish

38

a basic savings account or boost existing savings.
Chairman Bair authored the nationally distributed
Your Savings – Good for You, Your Family, and Your
Peace of Mind op-ed. In addition, a video featuring
Chairman Bair encouraging consumers to save
and participate in America Saves Week received
over 6,000 views on YouTube and was featured on
the homepage of America Saves. The FDIC also
provided technical assistance or other involvement
to at least 15 America Saves coalitions.

Leading Community Development
FDIC community affairs staff are located in
each of the FDIC’s regions and lead a range of
community development activities. In 2010,
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. Staff also provided technical assistance
and training to financial institutions on
community development and other CRA-related
topics. 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, assetbuilding, affordable housing, small business and
micro-enterprise development, and financial
education.
During 2010, the FDIC launched a pilot initiative
to build awareness of the FDIC’s asset purchase
opportunities among nonprofit affordable
housing developers, NSP grantees, and local
municipalities. The pilot was designed to increase
their access and ability to successfully bid on
and acquire FDIC-owned real estate from failed
banks for redevelopment for affordable housing
and other community development purposes.
As a result, 30 properties were purchased from
the FDIC by NSP grantees and redeployed as
affordable housing in the southeast region.

MANAGEMENT’S DISCUSSION AND ANALYSIS

Recognizing the importance of small business
growth and job creation as an essential
component in America’s economic recovery, the
FDIC continued its emphasis on facilitating
small-business development, expansion, and
recovery during 2010. The FDIC entered into
a strategic alliance with the U.S. Small Business
Administration (SBA) on September 8, 2010,
to facilitate the development and expansion, of
small businesses. As part of the agreement, the
FDIC and the SBA collaborated in co-sponsoring
small-business information, resource, and
capacity-building seminars in New York, NY;
Los Angeles, CA; Memphis, TN; Greensboro,
AL; Jackson, MS; New Orleans, LA; Tampa, FL;
Richmond, VA; and Raleigh, NC. The events
provided information and resources to over 1,500
small business owners, entrepreneurs, banking
professionals and others.
The FDIC continued its 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 2010:
Direct outreach to consumers with
information, education, counseling, and
referrals. During 2010, in collaboration
with NeighborWorks® America, the FDIC
sponsored four counselor-driven homeowner
outreach events in high-need markets to
provide face-to-face assistance for borrowers
at risk of foreclosure. More than 4,000
homeowners attended these events.
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.). During
2010, the FDIC hosted or co-hosted five
major loan modification scam outreach
events in collaboration with NeighborWorks®
America. These events were targeted to local
agencies and nonprofits that have the capacity

to educate stakeholders. These events resulted
in more than 40,000 pieces of FDIC-branded
outreach materials provided to partners for
distribution, and led to more than 200 scams
being reported to authorities.
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 counselors and
intermediaries, the FDIC worked to support
industry efforts to build the capacity of
housing counseling agencies. For example, the
FDIC facilitated two community stabilization
place trainings, which led to more than 69
homeownership professionals being trained
in best practices and strategies to promote
community recovery.
Gulf Coast Oil Spill Response
The FDIC strongly supported efforts to expedite
a recovery from the April 22, 2010, Deepwater
Horizon oil spill in the Gulf Coast region. At
the onset of this spill of national significance, the
FDIC recognized that some borrowers’ cash flow
and repayment capacity would be unexpectedly
impaired, and that banks should consider assisting
borrowers that would be severely impacted.
Accordingly, on May 7, 2010, the FDIC issued
FIL 24-2010, Guidance for Financial Institutions
Working with Borrowers in the Gulf Coast Region
Affected by a “Spill of National Significance”. This
guidance encourages banks to work constructively
with borrowers experiencing difficulties beyond
their control because of damage caused by the
spill. It also encourages banks to extend repayment
terms, restructure existing loans, or ease terms
for new loans in a manner consistent with sound
banking practices. The guidance recognizes that
efforts to work with borrowers in communities
under stress can be consistent with safe and
sound banking practices as well as in the public
interest. The FDIC also joined the other banking
agencies in issuing a similar directive on July 14,
2010, titled Interagency Statement on Financial
Institutions Affected by the Deepwater Horizon
Oil Spill.

MANAGEMENT’S DISCUSSION AND ANALYSIS

39

Through field offices in Florida, Alabama,
Mississippi, and Louisiana, and frequent
interaction with state regulators and bank
trade organizations, the FDIC worked hard
to understand the spill’s impact on banking,
commerce, and tourism. FDIC executives from
Washington and the Dallas and Atlanta regional
offices conducted outreach and communicated
with various constituencies to enhance knowledge
of the spill’s scope and effects. In addition, the
FDIC engaged in a concerted dialogue with trade
associations, community and business leaders,
and congressional staff from the Gulf Coast
region to gain an “on the ground” perspective on
the spill’s short- and long-term implications. The
FDIC will strive to maintain this dialogue with
bankers and community leaders to ensure its
supervisory approach prudently accommodates
recovery efforts.
Affordable Small-Dollar Loan Guidelines
and Pilot Program
The FDIC’s two-year Small-Dollar Loan Pilot
Program concluded in the fourth quarter of 2009,
with final data reported to the FDIC in midMay 2010. The pilot was a case study designed
to illustrate how banks can profitably offer
affordable small-dollar loans as an alternative to
high-cost credit products such as payday loans
and fee-based overdraft programs. At the end of
the pilot, 28 banks were participating with total
assets ranging from $28 million to $10 billion
and operations in 28 states. Over the course of the
pilot, participating banks originated more than
34,400 small-dollar loans with a principal balance
of $40.2 million.

strategies that could prove useful in expanding the
supply of small-dollar loans. Among other things,
these strategies include:
Highlighting the facts about the pilot and
other successful small-dollar loan models.
Studying creation of pools of nonprofit or
government funds to serve as “guarantees” for
small-dollar loans.
Encouraging broad-based partnerships among
banks, nonprofit, and community groups to
work together in designing and delivering
small-dollar loans.
Studying the feasibility of safe and innovative
emerging small-dollar loan technologies and
business models.
Considering ways that regulators can
encourage banks to offer safe and affordable
small-dollar products, and that these products
can receive favorable CRA consideration.

Information Technology, Cyber Fraud, and
Financial Crimes
The FDIC sponsored a Combating Commercial
Payments Fraud Symposium in March 2010
that focused on the nature of this increasingly
sophisticated form of financial fraud and how the
industry and regulators can effectively respond.
Other major accomplishments during 2010 in
promoting information technology (IT) security
and combating cyber fraud and other financial
crimes included the following:

The pilot demonstrated that banks can offer
alternatives to costly forms of emergency
credit, and resulted in a template of essential
product design and delivery elements for safe,
affordable, and feasible small-dollar loans that
can be replicated by other banks. (See www.fdic.
gov/smalldollarloans/ for the template). Going
forward, the FDIC is working with the banking
industry, consumer and community groups,
nonprofit organizations, other government
agencies, and others to research and pursue

40

MANAGEMENT’S DISCUSSION AND ANALYSIS

Published, in conjunction with the other
FFIEC agencies, a Retail Payment Systems
Handbook. The booklet discusses various
technologies and products used in payment
systems and the risk management techniques
that institutions should use.
Issued, in conjunction with the other FFIEC
agencies, an updated and expanded program
to review specialized software used by financial
institutions.

Published, in conjunction with the other
FFIEC agencies, a white paper entitled “The
Detection and Deterrence of Mortgage Fraud
Against Financial Institutions”.
Issued Guidance on Mitigating Risk Posed
by Information Stored on Photocopiers, Fax
Machines and Printers.
Assisted financial institutions in identifying
and shutting down approximately 47
“phishing” websites. The term “phishing”—as
in fishing for confidential information—refers
to a scam that encompasses fraudulently
obtaining and using an individual’s personal or
financial information.
Issued 130 Special Alerts to FDIC-supervised
institutions on reported cases of counterfeit or
fraudulent bank checks.
Issued 3 Consumer Alerts pertaining to
e-mails and telephone calls fraudulently
claiming to be from the FDIC.
The FDIC conducts IT examinations at each
risk management 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 2010, the FDIC conducted 2,121
IT examinations at financial institutions and
technology service providers. Further, as part
of its ongoing supervision process, the FDIC
monitors significant events, such as data 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 2010, the FDIC provided foreign technical
assistance training to the Central Bank of Iraq and

the Bank of Albania to train examiners and develop
examination policies for managing IT and other
operational risks.

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, 2010, the FDIC received 13,756
written complaints, of which 6,862 involved
complaints against state non-member institutions.
The FDIC responded to over 97 percent of these
complaints within time frames established by
corporate policy, and acknowledged 100 percent
of all consumer complaints and inquiries within
14 days. The FDIC also responded to 1,960
written inquiries, of which 388 involved state
non-member institutions. In addition, the FDIC
responded to 6,666 telephone calls from the
public and members of the banking community,
4,375 of which concerned state non-member
institutions.
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.
In 2010, the FDIC continued its efforts to
educate bankers and consumers about the rules
and requirements for FDIC insurance coverage.
The FDIC conducted a series of eight nationwide
telephone seminars for bankers on deposit
insurance coverage. These seminars reached an
estimated 60,000 bankers participating at over
16,000 bank locations throughout the country.
The FDIC also updated its deposit insurance
coverage publications and educational tools for
consumers and bankers, including brochures,
resource guides, videos, and the Electronic
Deposit Insurance Estimator (EDIE).

MANAGEMENT’S DISCUSSION AND ANALYSIS

41

Deposit Insurance Coverage Inquiries
During 2010, the FDIC received and answered
approximately 143,000 telephone deposit
insurance-related inquiries from consumers
and bankers. Of these inquiries, 119,000 were
addressed by the FDIC Call Center and 24,000
were handled by deposit insurance coverage
subject matter experts. In addition to telephone
deposit insurance inquiries, the FDIC received
3,000 written deposit insurance coverage inquiries
from consumers and bankers. Of these inquiries,
99 percent received responses within two weeks, as
required by corporate policy.

Resolutions and Receiverships
The FDIC has the unique mission of protecting
depositors of insured banks and savings
associations. No depositor has ever experienced
a loss on the insured amount of his or her
deposit in an FDIC-insured institution due to
a failure. Once an institution is closed by its
chartering authority—the state for state-chartered
institutions, the OCC for national banks, and
the 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
either the resolution process or the receivership
process. Depending on the characteristics of the
institution, the FDIC may recommend several
of these practices to ensure the prompt and
smooth payment of deposit insurance to insured
depositors, to minimize the impact on the DIF,
and to speed dividend payments to 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.

42

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 lossshare 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
assets” for a specific period of time (for example,
five to ten years). The economic rationale for
these transactions is that keeping shared loss
assets in the banking sector can produce a better
net recovery than would the FDIC’s immediate
liquidation of these assets.
Deposit payoffs are only executed if a bid for a
P&A transaction does not meet the least-cost test
or if no bids are received, in which case the FDIC,
in its corporate capacity 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 which 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

MANAGEMENT’S DISCUSSION AND ANALYSIS

be liquidated in an orderly fashion, minimizing
disruption to local communities and
financial markets.
The receivership process involves performing
the closing functions at the failed institution,
liquidating any remaining failed institution assets,
and distributing any proceeds of the liquidation to
the FDIC and other creditors of the receivership.
In its role as receiver, the FDIC has used a wide
variety of strategies and tools to manage and sell
retained assets. These include, but are not limited
to: asset sale and/or management agreements,
structured transactions, and securitizations.

Financial Institution Failures
During 2010, the FDIC experienced a significant
increase in the number of institution failures, 157,
as compared to previous years. For the institutions
that failed, the FDIC successfully contacted
all known qualified and interested bidders to
market these institutions. The FDIC also made
insured funds available to all depositors within
one business day of the failure if it occurred on a
Friday and within two business days if the failure
occurred on any other day of the week. There were
no losses on insured deposits, and no appropriated
funds were required to pay insured deposits.
The following chart provides a comparison of
failure activity over the last three years.

Failure Activity 2008 –
Dollars in Billions
2010
Total Institutions
157
Total Assets of
$92.1
Failed Institutions1
Total Deposits of
Failed Institutions1
$79.5
Estimated Loss to the DIF
$24.2
1

2010
2009

2008

140

25

$169.7

$371.9

$137.1

$234.3

$37.1

$19.6

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

Asset Management and Sales
As part of its resolution process, the FDIC makes
every effort to sell as many assets as possible to an
assuming institution. Assets that are retained by
the receivership are evaluated, and for 95 percent
of the failed institutions, at least 90 percent of the
book value of marketable assets are marketed for
sale within 90 days of an institution’s failure for
cash sales and 120 days for structured sales.
Structured sales for 2010 totaled $8.8 billion in
unpaid principal balances from commercial real
estate and residential loans acquired from various
receiverships. These transactions oftentimes
involved FDIC guaranteed purchase money
debt and equity in a limited liability company
shared between the respective receivership which
contributed the assets to the sale and the successful
purchaser. Cash sales of assets for the year totaled
$773 million in book value.
As a result of our marketing and collection efforts,
the book value of assets in inventory decreased by
$14.4 billion in 2010. The chart below shows the
beginning and ending balances of these assets by
asset type.

Assets in Inventory by Asset Type
Dollars in Millions
Assets in
Assets in
Inventory
Inventory
Asset Type
01/01/10
12/31/10
Securities
$12,425
$12,820
Consumer Loans
475
56
Commercial Loans
4,423
3,369
Real Estate Mortgages
15,613
5,683
Other Assets/Judgments
4,096
2,103
Owned Assets
3,257
2,086
Net Investments in
Subsidiaries
1,066
881
Total
$41,355
$26,998

MANAGEMENT’S DISCUSSION AND ANALYSIS

43

The FDIC makes extensive use of contractors
in managing and selling the assets of failed
institutions. In order to ensure that contractor
resources are effectively managed, a substantial
number of dedicated contract oversight and
management positions were added during 2010
and extensive training was conducted for new
employees before assigning them to contractor
oversight duties. All newly designated oversight
managers and technical monitors receive training
in advance of performing contract administration
responsibilities. Further, new reporting capabilities
were implemented to the procurement system.
The contracting department was reorganized, and
the ratio of task orders to oversight managers was
significantly reduced.

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 2010, the
number of receiverships under management
increased by 84 percent, due to the increase in
failure activity. The following chart shows overall
receivership activity for the FDIC in 2010.
Receivership Activity
Active Receiverships as of 01/01/101

187

New Receiverships

157

Receiverships Inactivated

0

Active Receiverships as of 12/31/10

1

1

344

Includes eight FSLIC Resolution Fund receiverships.

Minority and Women Outreach
The FDIC relies on contractors to help meet
its mission to maintain stability and public
confidence in the U.S. financial system. In 2010,
the FDIC continued to host “Doing Business
with the FDIC” and “Representing the FDIC”

44

seminars. The FDIC conducted four seminars
nationwide and reached out to Minority and
Women Owned Businesses (MWOBs) and
Minority and Women Owned Law Firms
(MWOLFs) to inform them about the FDIC’s
procurement and legal opportunities. In addition,
FDIC staff served as panel members, exhibitors,
and active participants in numerous events
sponsored by trade and community organizations,
and provided valuable information to attendees
regarding the FDIC’s procurement process.
As a result of this additional outreach, the FDIC
has registered approximately 2,200 MWOBs in
an internal database. This database was used in
addition to the newly developed ARON Database
System (ARON) for generating source lists.
ARON was developed exclusively for the FDIC
in an effort to retrieve comprehensive lists of
competitive MWOBs for potential solicitations.
The system retrieves contractors’ information
directly from the Central Contractor Registration
(CCR) System. Firms that want to do business
with the government must be registered in the
CCR System.
In 2010, the FDIC awarded 2,573 contracts, of
which 522 contracts, or 20 percent, were awarded
to MWOBs. The total value of contracts awarded
was $2.6 billion, of which $641 million, or 24
percent, was awarded to MWOBs, compared to
32 percent for all of 2009. Lower award values in
areas where there was strong MWOB participation
in conjunction with increases in award dollars in
areas where there was no MWOB participation
resulted in an overall decrease in dollars awarded
to MWOBs in 2010. In addition, the FDIC paid
outside counsel $87 million for legal services,
of which $8 million, or 10 percent, was paid to
MWOLFs, compared to 3 percent for all of 2009.
As a result of the number of bank failures for
2010, the FDIC took a proactive effort to target
minority and women investors to create awareness,
promote synergy, and provide information
regarding purchasing failed bank assets and
acquiring and/or creating minority depository
institutions. As previously stated, the FDIC

MANAGEMENT’S DISCUSSION AND ANALYSIS

developed and jointly sponsored eight Asset
Purchaser, Investor, and Minority Depository
Institution (AIM) seminars.
In 2011, the FDIC will continue to encourage and
foster diversity and the inclusion of minorities and
women in its asset sales program as it continues to
liquidate assets from failed financial institutions.
The FDIC will explore an investor match program
to connect large and small investors interested
in bidding on the FDIC’s structured sales. In
addition, the FDIC will conduct workshops to
provide technical assistance to small investors
and asset managers on how to participate in
structured sales.

Protecting Insured Depositors
With the increase in failure activity in 2010, the
FDIC’s focus on protecting insured depositors
of failed institutions was of critical importance.
Confidence in the banking system hinges on
deposit insurance, and no insured deposits went
unpaid in 2010.

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
$6 million in criminal restitutions and forfeitures
during the year. At the end of 2010, the FDIC’s
caseload was composed of 153 professional
liability lawsuits (up from 89 at year-end 2009)
and 2,750 open investigations (up from 1,878)
at year-end 2009. There also were 4,895 active
restitution and forfeiture orders (up from 3,379
at year-end 2009). This includes 247 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’s ability to attract healthy institutions
to assume deposits and purchase assets of failed
banks and savings associations at the time of
failure minimizes the disruption to customers and
allows assets to be returned to the private sector
immediately. Assets remaining after resolution are
liquidated by the FDIC in an orderly manner, and
the proceeds are used to pay creditors, including
depositors whose accounts exceeded the insurance
limit. During 2010, the FDIC paid dividends of
$5 million to depositors whose accounts exceeded
the insured limit(s).

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 operational effectiveness,
and minimize potential financial risks to the
DIF. Major accomplishments in improving
the Corporation’s operational efficiency and
effectiveness during 2010 follow.

Professional Liability and Financial
Crimes Recoveries
FDIC staff works to identify potential claims
against directors, officers, accountants, fidelity
bond carriers, appraisers, attorneys, and other
professionals who may have contributed to
the failure of an IDI. 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 $78 million from these professional
liability claims/settlements. In addition, as part

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 resultsoriented workforce. In 2010, the FDIC stepped
up workforce planning and development initiatives
that emphasized hiring individuals with the skill
sets needed to address the greatly increased number
of bank failures and problem institutions. The
Corporation also deployed a number of strategies
to more fully engage all employees in advancing
the FDIC’s mission.

MANAGEMENT’S DISCUSSION AND ANALYSIS

45

Succession Management
In 2010, the Corporation significantly expanded its
education and training curriculum for employees
in the business lines, support functions, and for
leadership development. Additionally, classroom
learning and development opportunities were
supplemented and supported with the expansion
of e-learning, simulations, electronic performance
support systems, job aids, and tool kits that were
made available to new and tenured employees
to quickly facilitate work processes and overall
efficiencies. The FDIC is also engaged in a number
of knowledge management approaches as it moves
through the current financial crisis.
In 2010, the FDIC built on the transformed
leadership development curriculum launched in
2009 and continues to expand opportunities to all
employees, including new hires. This curriculum
takes a holistic approach, aligning leadership
development with critical corporate goals and
objectives, and promotes the desired corporate
culture. By developing employees across the span
of their careers, the Corporation builds a culture
of leadership and further promotes a leadership
succession strategy.
Additionally, the Corporation formalized its
Master of Business Administration (MBA)
program for Corporate Managers and Executive
Managers, in conjunction with a major university.
The evaluation results of the pilot MBA program
were overwhelmingly positive, and participants
provided explicit examples of direct application to
their jobs and improved strategic thinking. Five
candidates were selected for the 2010-2013 class.
Strategic Workforce Planning and Readiness
The FDIC utilized a number of employment
strategies in 2010 to meet the need for additional
human resources resulting from the increased
number of failed financial institutions and the
volume of additional examinations. Among
these strategies, the FDIC reemployed over 240
retired FDIC examiners, attorneys, resolutions
and receiverships specialists, and support
personnel; hired employees of failed institutions
in temporary and term positions; recruited
mid-career examiners who had developed their

46

skills in other organizations; recruited term loan
review specialists and compliance analysts from
the private sector; and redeployed current FDIC
employees with the requisite skills from other
parts of the Corporation.
As the number of failed financial institutions
continued to grow in 2010, the FDIC fully staffed
two temporary satellite offices on both the west
coast and the east coast to bring resources to
bear in areas especially hard hit. The West Coast
Temporary Satellite Office opened in Irvine, CA,
in spring 2009, and as of year-end 2010 had
nearly 500 employees. The East Coast Temporary
Satellite Office opened in Jacksonville, FL, in
fall 2009, and as of year-end 2010 had over 460
employees, most of whom were hired in 2010.
In January 2010, the FDIC Board authorized
opening a third satellite office in Schaumburg,
IL. During 2010, the Midwest Temporary
Satellite Office was established and now has over
300 employees on board. The Corporation also
increased resolutions and receiverships staff in the
Dallas Regional Office.
Almost all of the new employees in these new
offices were hired on a non-permanent basis to
handle the temporary increase in bank-closing
and asset management activities expected over
the next two to four years. To fully staff these
offices and meet other needs brought on by the
financial crisis, including increased examination
activities, the Corporation hired approximately
2,000 additional employees in 2010. 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 entrylevel 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 2010, 148
new business line employees (883 hired since
program inception) entered this multi-discipline
program. The CEP continued to provide a
foundation across the full spectrum of the

MANAGEMENT’S DISCUSSION AND ANALYSIS

Corporation’s business lines, allowing for greater
flexibility to respond to changes in the financial
services industry and in meeting the Corporation’s
human capital needs. As in years past, the program
continued to provide the FDIC 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.
As anticipated, participants are also successfully
earning their commissioned bank examiner
credentials, having completed their three to four
years of specialized training in field offices across
the country. The FDIC had 163 commissioned
participants by the end of 2010. These individuals
are well-prepared to lead examinations on behalf
of the Corporation.
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 the Corporation’s mission. The
FDIC’s annual employee survey incorporates
and expands on the Federal Employee Viewpoint
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 and
2009 employee survey results showed marked
improvement in the areas of opportunity, while
maintaining or improving on areas of strength.
In 2010, the Corporation was honored with an
award from the Partnership for Public Service as
third best large agency in the Best Places to Work
in the Federal Government rankings, based on the
results of the 2009 All-Employee Survey. Much
of this improvement is attributable to the Culture
Change Program.
A new Culture Change Initiative was launched in
September 2010 with an emphasis on individual
as well as corporate responsibility for culture
improvement. The Culture Change Council was

reconstituted with new members, focus groups
were conducted to determine where efforts should
be made, training was conducted, and a number
of other programs were begun as a result. Analysis
indicates a positive response to these events and
a willingness to continue 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.
Employee Learning and Development
The FDIC offers a range of learning and
development 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, new employees
can more quickly and thoroughly assume their
job functions and assist with examination and
resolution activities. In order to meet the 2010
learning needs of employees, the FDIC responded
with flexible course scheduling, additional
instructor-led and online courses, electronic
performance support systems, and greater access to
online resources via a newly redesigned
intranet website.
In support of business requirements, the
Corporation developed two new precommissioning courses for compliance examiners,
a revised certificate program focused on the
receivership and resolution function, and online
toolkits for mid-career examiners. In addition to
technical training, the Corporation also continued
to focus on the development of all employees and
future leaders by launching additional leadership
development courses and electives. The FDIC’s
leadership development curriculum supports
the regulations issued by the Office of Personnel
Management in December 2009 on succession
planning and development for managers and
supervisors. Additionally in 2010, the capabilities
of the learning management system were
expanded to allow the Corporation to track its
employees’ certificates and continuing education
requirements.

MANAGEMENT’S DISCUSSION AND ANALYSIS

47

“All of us share the credit for improving the corporate culture,” said Chairman Sheila C. Bair, shown here displaying the FDIC’s Best
Places to Work award with (from left) Arleas Upton Kea, Benita Swann, Jesse Villarreal, Ira Kitmacher, and Brenda Hardnett.

To meet the challenges of a growing workforce
and provide additional flexibility in employee
learning and development, the Corporation
located training facilities within the temporary
satellite offices. The Corporation quickly assessed
the specific needs of employees in these locations
and delivered training on-site, thereby reducing
the need for and expense associated with employee
travel. The Corporation also undertook several
knowledge management initiatives, capturing
lessons learned from the current financial crisis so
that future generations of FDIC employees and
managers can benefit from the experience.
In 2010, the Corporation provided its employees
with 172 instructor-led courses and 1,950 online
courses to support various mission requirements.
There were 16,010 instances of completed
instructor-led courses and 32,850 instances of
completed online courses.

Information Technology Management
IT resources are among the most valuable assets
available to the FDIC in fulfilling its corporate
mission. In today’s rapidly changing business
environment, technology is frequently the

48

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.
IT Support for Resolutions
During 2010, the FDIC provided prompt and
effective IT support for all bank closings. This
was accomplished by ensuring that application
systems, technologies, and staff were available
to support the FDIC’s closing operations. In
particular, the FDIC modernized its automated
insured deposit claims process and increased the
FDIC’s capacity to process very large failed banks
and multiple failed banks’ information. The
application supporting this process was critical to
the FDIC’s successful closing operations during
2010. Additionally, the non-deposit claims
feature of this application increased efficiency of
the overall closing process. This new subsystem
introduced significant new technical capabilities to
the FDIC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

IT Support for Asset Marketing
The FDIC’s marketing of failed financial
institution assets is a critical resolution and
post-closing function to ensure the minimal
loss possible from the closed institution. As
the number of resolutions increased, so did IT
operations and support for asset management. To
ensure that the best possible application systems
were available to support this critical function, the
FDIC made a number of key enhancements to the
Corporation’s primary asset management system.
During 2010, significant improvements were
made in the stability, scalability, and performance
of this application, which enabled the Corporation
to keep pace with the large increase of assets
resulting from 157 bank closings. The enhanced
application now accommodates, with room for
expansion, thousands of online users and tens of
billions of dollars of assets for sale.
Strengthening the FDIC’s Privacy Program
The FDIC has a well-established privacy program
that works to maintain privacy awareness and
promote transparency and public trust. Privacy,
the protection of sensitive information, including
personally identifiable information (PII), is
integral to accomplishing the mission of the
FDIC in both the banking industry and among
U.S. consumers. The privacy program is a critical
part of the Corporation’s business operations.
Education and awareness are key components of
the FDIC’s privacy program. During 2010, the
FDIC held its second Privacy Awareness Week
event to raise employee awareness about identity
theft and fraud prevention. In addition, the FDIC
conducted a corporate wide campaign called
“Sensitive Data: Handle with Care” to increase
employee and contractor awareness about their
responsibilities to safeguard sensitive data and
PII. More recently, the FDIC also implemented
a new “Think Privacy” awareness campaign that
includes privacy tips on each employee’s hardcopy
earnings and leave statements and the nationwide
distribution of lobby posters.

In response to the FDIC’s increased reliance
on third-party vendors that support bank postclosing activities, the FDIC performed privacy
assessments of the five vendors that process
significant amounts of sensitive bank-customer
data during the loan sale and asset valuation
process subsequent to a bank closing. To
complete these assessments, the FDIC developed
and implemented a privacy risk assessment
questionnaire and tool in order to determine
the maturity of the vendors’ privacy program. In
addition, the FDIC performed Privacy Impact
Assessments, which collected information
regarding the adequacy of their processes for
handling and protecting the privacy and security
of sensitive bank-customer data.
The FDIC has seen a sharp increase in the volume
of needed information from failing institutions. To
ensure that this increased data requirement does
not increase its PII risk, the FDIC completed the
second of three in-depth assessments of the bank
closing process to identify and address risks to the
privacy and security of bank-customer PII. A key
outcome of this effort was the creation of a new
Privacy Compliance Officer (PCO) role for each
bank closing weekend. In this role, the PCO is
the designated official responsible for monitoring
privacy protection requirements during the bank
closing weekend. In addition, during 2010, the
FDIC improved the agency’s monitoring of the
enterprise network to identify at-risk privacy
data and prevent the loss of that information,
particularly social security numbers. The FDIC
was proactive in conducting unannounced
privacy walkthroughs of its headquarters offices
in order to check for unsecured sensitive data and
PII and to increase employee and management
awareness about protecting such data. Further,
the FDIC also conducts an annual review of the
Corporation’s digital library to identify, monitor,
reduce, and secure documents containing PII.

MANAGEMENT’S DISCUSSION AND ANALYSIS

49

2

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 on the following page.)
For 2010, the DIF’s comprehensive income was
$13.5 billion compared to a comprehensive loss
of $38.1 billion during 2009. This year-overyear change of $51.6 billion was primarily due
to a $58.6 billion decline in the provision for
insurance losses, partially offset by a $4.1 billion
decrease in assessments earned (largely attributable
to the 2009 special assessment).
The provision for insurance losses was negative
$848 million for 2010, compared to positive
$57.7 billion for 2009. The 2009 provision

reflected the significant losses estimated to be
incurred by the DIF from the 2009 and future
failures. In contrast, the 2010 negative provision
is primarily impacted by a reduction in the
contingent loss reserve due to the improvement
in the financial condition of institutions that were
previously identified to fail and adjustments to the
estimated losses for banks that have failed.

The DIF’s total liquidity declined by $19.9
billion, or 30 percent, to $46.2 billion during
2010. The decrease was primarily the result
of disbursing $28.8 billion to fund 157 bank
failures during 2010, although it should be noted
that 130 of these failures were resolved as cashconserving loss-share transactions (in which the
acquirers purchased substantially all of the failed
institutions’ assets and the FDIC and the acquirers
entered into loss-share agreements) requiring
lower initial resolution funding. Moreover, during
2010, the DIF received $13.6 billion in dividends
and other payments from its receiverships, which
helped to mitigate the DIF liquidity’s decline.

FINANCIAL HIGHLIGHTS

51

ESTIMATED DIF INSURED DEPOSITS

$7,000

6,000

Dollars in Billions

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

MAR-10

JUN-10

SEP-10

DEC-10

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

DEPOSIT INSURANCE FUND RESERVE RATIOS

1.5

Fund Balances as a Percent of Insured Deposits

1.2

0.9

0.6

0.3

0.0

–0.3

–0.6
SEP-07

52

DEC-07

MAR-08

FINANCIAL HIGHLIGHTS

JUN-08

SEP-08

DEC-08

MAR-09

JUN-09 SEP-09

DEC-09

MAR-10 JUN-10

SEP-10

DEC-10

Deposit Insurance Fund Selected Statistics
For the years ended December 31
Dollars in Millions
2010

2009

2008

$13,380

$24,706

$7,306

1,593

1,271

1,033

Insurance and Other Expenses (includes provision for loss)

(1,518)

59,438

43,306

Net Income (Loss)

13,305

(36,003)

(37,033)

Comprehensive Income (Loss)

13,510

(38,138)

(35,137)

Fund Balance

$(7,352)

$(20,862)

$17,276

Reserve Ratio

(0.12) %

(0.39) %

0.36 %

7,657

8,012

8,305

884

702

252

$390,017

$402,782

$159,405

157

140

25

$92,085

$169,709

$371,945

336

179

41

Financial Results
Revenue
Operating Expenses

Selected Statistics
Total DIF-Member Institutions1
Problem Institutions
Total Assets of Problem Institutions
Institution Failures
Total Assets of Failed Institutions in Year

2

Number of Active Failed Institution Receiverships
1

Commercial banks and savings institutions. Does not include U.S. insured branches of foreign banks.

2

Based upon the last Call Report filed by the institution prior to failure.

Corporate Operating Budget
The FDIC segregates its corporate operating
budget and expenses into two discrete
components: ongoing operations and receivership
funding. The receivership funding component
represents expenses resulting from financial
institution failures and is, therefore, largely driven
by external forces, while the ongoing operations
component accounts for all other operating
expenses and tends to be more controllable
and estimable. Corporate Operating expenses
totaled $3.4 billion in 2010, including $1.4
billion in ongoing operations and $2.0 billion
in receivership funding. This represented
approximately 96 percent of the approved budget
for ongoing operations and 80 percent of the
approved budget for receivership funding for
the year. (The numbers above in this paragraph
will not agree with the DIF and FRF financial
statements due to differences in how items
are classified.)

The Board of Directors approved a 2011
Corporate Operating Budget of approximately
$3.9 billion, consisting of $1.7 billion for
ongoing operations and $2.2 billion for
receivership funding. The level of approved
ongoing operations budget is approximately
$251 million (18 percent) higher than actual
2010 ongoing operations expenses, while the
approved receivership funding budget is roughly
$205 million (10 percent) higher than actual
2010 receivership funding expenses.
As in prior years, the 2011 budget was formulated
primarily on the basis of an analysis of projected
workload for each of the Corporation’s three
major business lines and its major program
support functions. The most significant factors
contributing to the proposed increase in the
ongoing operations component of the budget are
further staffing increases for the Corporation’s risk
management and consumer protection supervisory
programs in 2011; the implementation of a larger

FINANCIAL HIGHLIGHTS

53

permanent staffing platform in the Division of
Resolutions and Receiverships (DRR) to ensure
the Corporation’s future readiness to resolve
failed banks; and the addition of a number of
new positions to fulfill the Corporation’s new
responsibilities under the Dodd-Frank Act. In
addition, the 2011 receivership funding budget
allows for resources for contractor support as well
as non-permanent staffing for DRR, the Legal
Division, and other organizations should workload
in these areas require an immediate response.

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 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 2003-2010 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 $266.4
million during this period, peaking at $108.2
million in 2004. Spending for investment projects
in 2010 totaled approximately $0.4 million.
In 2011, investment spending is estimated at
$7 million.

INVESTMENT SPENDING 2003 – 2010

$120

Dollars in Millions

100

80

60

40

20

0
2003

54

FINANCIAL HIGHLIGHTS

2004

2005

2006

2007

2008

2009

2010

3

Performance
Results Summary
Summary of 2010
Performance Results
by Program
The FDIC successfully achieved 30 of the 34
annual performance targets established in its 2010
Annual Performance Plan. Three targets were
deferred due to specific legislation in the Dodd-

PROGRAM AREA:

Frank Act. One target will be met in 2011. There
were no instances in which 2010 performance
had a material adverse effect on the successful
achievement of the FDIC’s mission or its strategic
goals and objectives regarding its major program
responsibilities.
Additional key accomplishments are noted below.

Insurance

Performance Results
Presented updated deposit insurance fund
projections to the FDIC Board twice, in
June and October 2010. No changes were
recommended for assessment rates in June.
In October, based on updated projections
and changes to the Restoration Plan target
required by the Dodd-Frank Act, staff
recommended that the Board forgo the three
basis point increase that was scheduled to
take effect on January 1, 2011.

In October, based on updated projections,
staff estimated that the reserve ratio will
become positive by year-end 2011 and will
reach 1.15 percent by the fourth quarter
of 2018. The FDIC intends to pursue
rulemaking next year to implement the
Dodd-Frank Act requirement that the FDIC
offset the effect of requiring the reserve ratio
reach 1.35 percent by September 30, 2020
rather than 1.15 percent by year-end 2016
on smaller banks.

PERFORMANCE RESULTS SUMMARY

55

PROGRAM AREA:

Insurance

(continued)

Performance Results
Completed reviews of the recent accuracy of
the contingent loss reserves.
Researched and analyzed emerging risks
and trends in the banking sector, financial
markets, and the overall economy to identify
issues affecting the banking industry and the
deposit insurance fund.
Supported supervision activities related to
fair lending, enforcement actions, and the
unbanked and underbanked survey, and
supported efforts of the Advisory Committee
on Economic Inclusion (ComE-In).

Electronic Deposit Insurance Estimator
(EDIE) user sessions for 2010 totaled
442,557.
Expanded avenues for publicizing deposit
insurance rules and resources by:
Enhancing EDIE to (1) incorporate new
functionality that allows users to calculate
coverage for irrevocable trust accounts
and government accounts and (2) provide
each FDIC-insured bank the opportunity
to integrate the EDIE application into
the bank’s website.

Began a comprehensive study of the trends
and events that contributed to the recent
financial crisis.

Producing an updated version of the
FDIC Overview Video on Deposit
Insurance Coverage for consumers and
new bank employees.

Provided senior/executive management
policy research and analysis in support of
legislative efforts to reform financial industry
regulation, as well as support for testimonies
and speeches.

Updating the FDIC’s consumer and
banker brochures on deposit insurance
coverage.

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 over 40 outreach events for
bankers and community groups to discuss
risks affecting the financial services industry.
Answered 99 percent of written inquiries
from consumers and bankers about FDIC
deposit insurance coverage within 14 days.

56

PERFORMANCE RESULTS SUMMARY

These resources are available on the FDIC’s
website with the video also available on the
FDIC’s YouTube channel and downloadable
for multimedia applications.
Developed computer-based training for
all FDIC examiners on FDIC deposit
insurance coverage. The training provides an
opportunity for all examiners to strengthen
and enhance their knowledge of deposit
insurance and the risks associated with
insured institutions engaging in deposit
placement activities.

PROGRAM AREA:

Supervision and Consumer Protection

Performance Results
Conducted 2,813 Bank Secrecy Act
examinations, including required follow-up
examinations and visitations.
Conducted 2,121 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 Final Rulemaking for the Secure
and Fair Enforcement for Mortgage
Licensing Act of 2008 and posted the final
guidance to the FDIC website to implement
provisions applicable to mortgage loan
originators employed by insured depositories.
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) meeting the needs of
creditworthy small business borrowers; (2)
identifying, monitoring, and managing
correspondent concentration risks; (3)
prudent appraisal and evaluation programs;
(4) incentive compensation practices; (5)
golden parachute payments; (6) deposit
collection and placement activities in FDICsupervised institutions; and (7) registering
as a municipal advisor under the Securities
and Exchange Commission’s new rule. In
addition, 23 disaster relief 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 joint final Community Reinvestment
Act (CRA) rule change corresponding to
statutory requirements relating to student
loans and activities in cooperation with
minority- and women-owned financial
institutions and low-income credit unions. In
addition, issued final CRA rule that revised
the definition of “community development”
in the CRA regulations, to provide favorable
CRA consideration for loans, investments,
and services by financial institutions that
directly support, enable or facilitate eligible
projects and activities in designated target
areas of the Neighborhood Stabilization
Program (NSP) that are approved by
the Department of Housing and Urban
Development (HUD).
Announced annual adjustment to the asset
size thresholds used to define small bank,
small savings associations, intermediate
small bank and intermediate small savings
associations under the CRA regulations.
Updated interagency guidance on the CRA.
Jointly issued, with other Federal Financial
Institutions Examination Council member
agencies, supervisory guidance on reverse
mortgage products.
Issued final supervisory guidance on overdraft
payment programs, which reaffirms existing
supervisory expectations and provides specific
guidance with respect to automated overdraft
payment programs.
Issued guidance to assist lenders in meeting
their compliance obligations under the
National Flood Insurance Program (NFIP)
during periods when the statutory authority
of the Federal Emergency Management
Agency (FEMA) to issue flood insurance
contracts under the NFIP lapses; released
compliance guide for state non-member
banks wishing to use the model privacy form
to comply with disclosure requirements

PERFORMANCE RESULTS SUMMARY

57

PROGRAM AREA:

Supervision and Consumer Protection

(continued)

Performance Results
under the Gramm-Leach-Bliley Act; issued
financial institutions notice on FEMA
announcement that Preferred Risk Policy
eligibility will be extended two years
beginning January 1, 2011.

of 2009; Regulation DD (Truth in Savings);
Regulation E (Electronic Fund Transfers); the
Fair Credit Reporting Act (FCRA) Furnisher
Rule; and the FCRA Risk-Based Pricing
Rule.

Issued examination procedures corresponding
to amendments to Regulation CC
(Expedited Funds Availability); Regulation
Z (Truth in Lending) under the Credit
Card Accountability Responsibility and
Disclosure Act of 2009, the Higher
Education Opportunity Act of 2008, and
the Helping Families Save Their Homes Act

Issued examination procedures for identifying
Unfair or Deceptive Acts or Practices that are
violations of Section 5 of the Federal Trade
Commission Act as well as for reviewing
third-party relationships and identifying
associated risks.

PROGRAM AREA:

Receivership Management

Performance Results
Adopted a final rule requiring the largest
IDIs 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.
Identified and implemented program
improvements to ensure efficient and
effective management of the contract
resources used to perform receivership
management functions. Implemented
enhanced reporting capabilities from the
Automated Procurement System.

58

PERFORMANCE RESULTS SUMMARY

Optimized the effectiveness of oversight
managers and technical monitors by
restructuring work assignments, providing
enhanced technical support, and improving
supervision.
Terminated at least 75 percent of new
receiverships that are not subject to loss-share
agreements, structured sales, or other legal
impediments within three years of the date of
failure.
Made final decisions for 82 percent of all
investigated claim areas that were within 18
months of the institution’s failure date.

2010 Budget and
Expenditures by Program
(Excluding Investments)
The FDIC budget for 2010 totaled
$4.0 billion. Excluding $198 million, or
5 percent, for Corporate General and
Administrative expenditures, budget amounts
were allocated to corporate programs as follows:
$205 million, or 5 percent, to the Insurance
program; $927 million, or 23 percent, to the
Supervision and Consumer Protection
program; and $2.7 billion, or 67 percent, to
the Receivership Management program.

Actual expenditures for the year totaled $3.4
billion. Excluding $157 million, or 5 percent,
for Corporate General and Administrative
expenditures, actual expenditures were allocated
to programs as follows: $274 million, or 8
percent, to the Insurance program; $787
million, or 23 percent, to the Supervision and
Consumer Protection program; and $2.2
billion, or 64 percent, to the Receivership
Management program.

2010 BUDGET AND EXPENDITURES (SUPPORT ALLOCATED)
$3,000
BUDGET

EXPENDITURES

2,500

Dollars in Millions

2,000

1,500

1,000

500

0
INSURANCE PROGRAM

SUPERVISION AND CONSUMER
PROTECTION PROGRAM

RECEIVERSHIP
MANAGEMENT PROGRAM

GENERAL
AND ADMINISTRATIVE

PERFORMANCE RESULTS SUMMARY

59

Performance Results by Program and Strategic Goal
2010 Insurance Program Results
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual
#
Performance Goal
1 Respond promptly

Indicator

Target

Results

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 Achieved.
within one business day if the failure
See pg. 43.
occurs on a Friday.

Insured depositor losses
resulting from a financial
institution failure.

to all financial
institution closings
and related emerging
issues.

There are no depositor losses on
insured deposits.

Achieved.
See pg. 43.

No appropriated funds are required to
pay insured depositors.

Achieved.
See pg. 43.

Depositors have access to insured funds Achieved.
within two business days if the failure See pg. 43
occurs on any other day of the week.

2 Disseminate data and Scope and timeliness of
analyses on issues
and risks affecting
the financial services
industry to bankers,
supervisors, the
public, and other
stakeholders.

3 Set assessment

rates to restore the
insurance fund
reserve ratio to the
statutory minimum
of at least 1.15% of
estimated insured
deposits by year-end
2016, in accordance
with the Amended
Restoration Plan.

4

Expand and
strengthen the
FDIC’s participation
and leadership role
in supporting robust
international deposit
insurance systems.

Disseminate results of research and
information dissemination on analyses in a timely manner through
regular publications, ad hoc reports,
identified or potential issues
and other means.
and risks.

Achieved.
See pg. 56.

Undertake industry outreach
activities to inform bankers and other
stakeholders about current trends,
concerns, and other available FDIC
resources.
Provide updated fund projections to
the FDIC Board of Directors by June
30, 2010, and December 31, 2010.

Achieved.

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

Update projections and
recommend changes for
assessments, as necessary.

Achieved.

Achieved.

Monitor progress in achieving Provide updates to the FDIC
the Amended Restoration
Board by June 30, 2010, and
Plan.
December 31, 2010.
Scope of information sharing
and assistance available to
international governmental
bank regulatory and deposit
insurance entities.

See pg. 56.

See pgs. 18, 55.

See pgs. 18, 55.
Achieved.
See pgs. 18, 55.

Undertake outreach activities to inform Achieved.
and train foreign bank regulators and
See pgs. 25-27.
deposit insurers.

PERFORMANCE RESULTS SUMMARY

Achieved.

Develop methodology for assessing
compliance with implementation of
the Core Principles for Effective Deposit
Insurance Systems.

60

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

Achieved.

See pgs. 24-27.

See pgs. 24-25.

2010 Supervision and Consumer Protection Program Results
Strategic Goal: FDIC-insured institutions are safe and sound.
#
1

2

3

Annual
Performance Goal

Indicator

Target

Results

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

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.

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

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

Achieved.
One hundred percent of required
on-site visits are conducted within six
See pgs. 27-29.
months of completion of the prior
examination to confirm that the
institution is fulfilling the requirements
of the corrective program.

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

Achieved.
See pgs. 27-28.

Achieved.
See pgs. 27-29.

One hundred percent of required Bank Achieved.
Secrecy Act examinations are conducted See pg. 27.
on schedule.

PERFORMANCE RESULTS SUMMARY

61

2010 Supervision and Consumer Protection Program Results (continued)
Strategic Goal: FDIC-insured institutions are safe and sound.
#

Annual
Performance Goal

Indicator

Target

Results
Deferred.

Complete by December 31, 2010,
the rulemaking for implementing
the Standardized Approach for an
appropriate subset of U.S. banks.

Controls on banks’ use of
internal or external ratings.

Complete by December 31, 2010, the Not Achieved.
rulemaking for amending the floors
See pg. 31.
for banks that calculate their riskbased capital requirements under the
Advanced Approaches Capital rule to
ensure capital requirements meet safetyand-soundness objectives.
Complete by December 31, 2010, the
rulemaking for implementing revisions
to the Market Risk Amendment of
1996.

Deferred.

Revisions to regulatory capital
charges for resecuritizations
and asset-backed commercial
paper liquidity facilities.

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

Final Basel II Standardized
Approach.

Revisions to the Market Risk
Amendment of 1996.

4

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

Deferred.

See pg. 55.

See pg. 55.

See pg. 55.

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

6

62

Annual
Performance Goal

Indicator

Target

Results

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

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

One hundred percent of required
examinations are conducted on
schedule.

Achieved.

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 of
completion of the prior examination to
confirm that the institution is fulfilling
the requirements of the corrective
program and that the identified
problems have been corrected.

Achieved.

PERFORMANCE RESULTS SUMMARY

See pgs. 27-28.

See pgs. 27, 29.

2010 Supervision and Consumer Protection Program Results (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in
their communities.
#

Annual
Performance Goal

Indicator

7

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

8

Establish, in
consultation with
the FDIC’s Advisory
Committee on
Economic Inclusion
and other regulatory
agencies, national
objectives and methods
for reducing the
number of unbanked
and underbanked
individuals.

Completion of initiatives to
facilitate progress in improving
the engagement of low- and
moderate-income individuals
with mainstream financial
institutions.

Target

Results

Achieved.
Responses are provided to 95 percent
of written consumer complaints and
See pg. 41.
inquiries within time frames established
by policy, with all complaints and
inquiries receiving at least an initial
acknowledgement within two weeks.
Facilitate completion of final
recommendation on the initiatives
identified in the Advisory Committee’s
strategic plan.

Achieved.

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

Achieved.

See pg. 37.

See pgs. 37-40.

2010 Receivership Management Program Results
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
#
1

2

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

Indicator
Scope of qualified and
interested bidders solicited.

Value, manage, and Percentage of failed
institution’s assets marketed.
market assets of
failed institutions
and their subsidiaries
in a timely manner
to maximize net
return.
Enhancements to contract
management program.

Target
Contact all known qualified and
interested bidders.

Results
Achieved.
See pg. 43.

Achieved.
For at least 95 percent of insured
institution failures, market at least
See pg. 43.
90 percent of the book value of the
institution’s marketable assets within 90
days of the failure date (for cash sales)
or 120 days of the failure date (for
structured sales).
Implement enhanced reporting
capabilities from the Automated
Procurement System.

Achieved.

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

Achieved.

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

Achieved.

See pg. 44.

See pg. 44.

See pg. 58.

PERFORMANCE RESULTS SUMMARY

63

2010 Receivership Management Program Results (continued)
Strategic Goal: Resolutions are orderly and receiverships are managed effectively.
#
3

4

Annual
Performance Goal

Indicator

Target

Results

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

Timely termination of new
receiverships.

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

Achieved.

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

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

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

Achieved.

See pg. 58.

See pg. 58.

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

2009

2008

2007

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

Achieved.

Achieved.

Achieved.

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

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

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

Complete rulemaking/review comments received in response to the
Advance Notice of Proposed Rulemaking on Large-Bank Deposit Insurance
Determination Modernization.
There are no depositor losses on insured deposits.

Achieved.

Achieved.

No appropriated funds are required to pay insured depositors.

Achieved.

Achieved.

Assess the insurance risks in large (all for 2008-2009) insured depository
institutions and adopt appropriate strategies.

Achieved.

Achieved.

Achieved.

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

Achieved.

Achieved.

Achieved.

2. Identify and address risks to the Deposit Insurance Fund (DIF).

64

PERFORMANCE RESULTS SUMMARY

2010 Insurance Program Results (continued)
Strategic Goal: Insured depositors are protected from loss without recourse to taxpayer funding.
Annual Performance Goals and Targets

2009

2008

2007

Achieved.

Achieved.

Achieved.

Achieved.

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

Achieved.

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

3. 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.

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

Achieved.

Achieved.

Achieved.

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

Achieved.

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

Achieved.

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

Achieved.

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

Achieved.

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

Achieved.

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

Achieved.

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

Achieved.

Implement the new deposit insurance pricing system.

Achieved.

Review the effectiveness of the new pricing regulations that were adopted to
implement the reform legislation.

Achieved.

Complete and issue guidance on the pricing of deposit insurance for
large banks.

Achieved.

Enhance the additional risk measures used to adjust assessment rates for
large institutions.

Achieved.

Publish an ANPR seeking comment on a permanent dividend system.
Develop a final rule on a permanent dividend system.

Achieved.
Achieved.

PERFORMANCE RESULTS SUMMARY

65

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

2009

2008

2007

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

Achieved.

Achieved.

Achieved.

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

Achieved.

Not
Achieved.

Achieved.

Monitor progress in achieving the restoration plan.

Achieved.

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.
Achieved.

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/teleconferences (per
quarter in 2009) for bankers.

Achieved.

Achieved.

Conduct a series of national teleconferences for insured financial institutions
to address current questions and issues relating to FDIC insurance coverage of
deposit accounts.

Achieved.

Conduct outreach events and activities to support a deposit insurance education
program that features the FDIC 75th anniversary theme.

Achieved.

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).

Achieved.

Respond to 90 percent of inquiries from consumers and bankers about FDIC
deposit insurance coverage within time frames established by policy.

Achieved.

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

Achieved.

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

Achieved.

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

Achieved.

Achieved.

7. 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.
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.

66

Achieved.
Achieved.

Achieved.

Achieved.

PERFORMANCE RESULTS SUMMARY

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

2009

2008

2007

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

Achieved.

Achieved.

2. Take prompt and effective supervisory action to address problems identified during the FDIC examination of FDICsupervised institutions that receive a composite Uniform Financial Institutions Rating of “4” or “5” (problem
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.

Achieved.

Achieved.

Achieved.

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.

Achieved.

Achieved.

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

Achieved.

5. 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 2007-2008 market turmoil.

Achieved.
Achieved.

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

Achieved.

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

Achieved.

Achieved.

Promote international cooperation on the adoption of supplemental capital
measures in countries that will be operating under Basel II.

Achieved.

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

Achieved.

6. 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.

Achieved.

Not
Applicable.

PERFORMANCE RESULTS SUMMARY

67

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

2009

2008

2007

7. 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.
Not
Applicable.

Performed 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.

Achieved.

8. 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.

Achieved.

Applicable provisions of the Financial Services Regulatory Relief Act of 2006
(FSRRA) are implemented in accordance with statutory requirements.

Partially
Achieved.

Support is provided to the Government Accountability Office (GAO), as
requested, for studies required under FSRRA.

Achieved.

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.

Partially
Achieved.

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 on schedule.

Achieved.

Achieved.

Achieved.

2. 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 compliance with consumer
protection and fair lending laws.
One hundred percent of follow-up examinations or visitations are conducted
within 12 months from the date of a formal enforcement action to confirm
compliance with the prescribed enforcement action.

Not
Achieved.

Achieved.

Achieved.

3. 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 repeat instances of significant violations identified during
compliance examinations.

Achieved.

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.

68

Achieved.

Achieved.

PERFORMANCE RESULTS SUMMARY

Supervision and Consumer Protection Program Results (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in
their communities.
Annual Performance Goals and Targets

2009

2008

2007

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

Achieved.

Develop and implement new supervisory response programs across all
FDIC-supervised institutions to address potential risks posed by new
consumer products.

Achieved.
Achieved.

5. Provide effective outreach related to the CRA, fair lending, and community development.
Conduct 50 in 2009 (125 in prior years) technical assistance (examination
support) efforts or banker/community outreach activities related to CRA, fair
lending, and community development.

Achieved.

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

Achieved.

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

Achieved.

Achieved.

Release a “Young Adult” version of the Money Smart curriculum.

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.

Achieved.

Achieved.

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

Achieved.

Achieved.

200,000 additional individuals are taught using the Money Smart curriculum.

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.

Achieved.

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.

Achieved.

A pilot project is conducted with banks near military installations to provide
small-dollar loan alternatives to high-cost payday lending.

Not
Achieved.

Strategies are developed and implemented to encourage FDIC-supervised
institutions to offer small-denomination loan programs.

Achieved.

Research is conducted and findings disseminated on programs and strategies
to encourage and promote broader economic inclusion within the nation’s
banking system.

Achieved.

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

Achieved.

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

Achieved.

Achieved.

PERFORMANCE RESULTS SUMMARY

69

Supervision and Consumer Protection Program Results (continued)
Strategic Goal: Consumers’ rights are protected and FDIC-supervised institutions invest in
their communities.
Annual Performance Goals and Targets
2009
2008
2007
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.

Achieved.

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

Achieved.

8. Effectively investigate and respond to consumer complaints about FDIC-supervised financial institutions.
Responses are provided to 95 percent (90 percent for 2007-08) 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.

Achieved.

Achieved.

2009

2008

2007

Achieved.

Achieved.

Achieved.

Receivership Management Program Results
Strategic Goal: Recovery to creditors of receiverships is achieved.
Annual Performance Goals and Targets
1. Market failing institutions to all known qualified and interested potential bidders.
Contact all known qualified and interested bidders.

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

Achieved.

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

Achieved.

Achieved.

Achieved.

Achieved.

Achieved.

3. Manage the receivership estate and its subsidiaries toward an orderly termination.
Terminate all receiverships within 90 days of the resolution of all impediments.
Terminate at least 75 percent of new receiverships within three years of the date
of failure.

Achieved.

4. Conduct investigations into all potential professional liability claim areas for all failed insured depository institutions
and decide as promptly as possible to close or pursue each claim, considering the size and complexity of the institution.
For 80 percent of all claim areas, a decision is made to close or pursue claims
within 18 months of the failure date.

70

PERFORMANCE RESULTS SUMMARY

Achieved.

Achieved.

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

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 (OERM) and are
generally interdivisional, collaborative efforts
involving management and staff from the
affected program(s).
The Corporation’s 2010 Annual Performance Plan
contained several objectives aimed at ensuring
that the FDIC would continue to address key
corporate issues, including continuing work on
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. During 2010, OERM and other areas
of the Corporation continued this work. The six
initiatives are tied to: 1) Legacy Loans; 2) Systemic
Resolution Authority; 3) Temporary Liquidity
Guarantee Program; 4) Loss-Share Agreements; 5)
Contract Management Oversight; and 6) Resource
Management. For each initiative, key issues and

risks were identified, action plans and performance
metrics were developed as necessary, and the
Chairman was briefed 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
2010 initiatives included: reviews of financial
management and controls governing contract
operations; the sampling and testing of transaction
accuracy and controls; improved communication
between our examination and receivership
activities; and continued scrutiny of systems
development efforts to support our new and/or
expanded business activities.
Program evaluation activities in 2011 will
focus on key corporate issues, including
implementation of the Dodd-Frank Act,
corporate reorganization, control testing, and
continuous improvements to the FDIC’s core
business functions.

PERFORMANCE RESULTS SUMMARY

71

4

Financial Statements
and Notes

FINANCIAL STATEMENTS AND NOTES

73

Deposit Insurance Fund
Federal Deposit Insurance Corporation
Deposit Insurance Fund Balance Sheet at December 31
Dollars in Thousands
2010
Assets
Cash and cash equivalents

2009

$27,076,606

$54,092,423

6,646,968

6,430,589

12,371,268

5,486,799

217,893

280,510

Receivables and other assets - systemic risk (Note 16)

2,269,422

3,298,819

Trust preferred securities (Note 5)

2,297,818

1,961,824

259,683

220,588

29,532,545

38,408,622

416,065

388,817

$81,088,268

$110,568,991

$514,287

$273,338

Unearned revenue - prepaid assessments (Note 9)

30,057,033

42,727,101

Liabilities due to resolutions (Note 7)

30,511,877

34,711,726

9,054,541

7,847,447

165,874

144,952

17,687,569

44,014,258

149,327

1,411,966

Cash and investments - restricted - systemic risk (Note 16)
(Includes cash/cash equivalents of $5,030,369 at December 31, 2010
and $6,430,589 at December 31, 2009)
Investment in U.S. Treasury obligations, net (Note 3)
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
Liabilities
Accounts payable and other liabilities

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
Commitments and off-balance-sheet exposure (Note 14)
Fund Balance
Accumulated Net Loss

300,000

300,000

88,440,508

131,430,788

(7,696,428)

(21,001,312)

26,698

142,127

Unrealized postretirement benefit Loss (Note 13)

(18,503)

(2,612)

Unrealized Gain on trust preferred securities (Note 5)

335,993

0

(7,352,240)

(20,861,797)

Unrealized Gain on U.S. Treasury investments, net (Note 3)

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

74

FINANCIAL STATEMENTS AND NOTES

$81,088,268

$110,568,991

Deposit Insurance Fund
Federal Deposit Insurance Corporation
Deposit Insurance Fund Statement of Income and Fund Balance for the Years Ended December 31
Dollars in Thousands
2010
Revenue
Interest on U.S. Treasury obligations

2009

$204,871

$704,464

13,610,436

17,717,374

(672,818)

1,721,626

0

1,389,285

237,425

3,173,611

13,379,914

24,706,360

1,592,641

1,271,099

Systemic risk expenses (Note 16)

(672,818)

1,721,626

Provision for insurance losses (Note 12)

(847,843)

57,711,772

3,050

4,447

75,030

60,708,944

Assessments (Note 9)
Systemic risk revenue (Note 16)
Realized gain on sale of securities
Other revenue (Note 10)
Total Revenue
Expenses and Losses
Operating expenses (Note 11)

Insurance and other expenses
Total Expenses and Losses
Net Income (Loss)
Unrealized Loss on U.S. Treasury investments, net

13,304,884

(36,002,584)

(115,429)

(2,107,925)

Unrealized postretirement benefit Loss (Note 13)

(15,891)

(27,577)

Unrealized Gain on trust preferred securities (Note 5)

335,993

0

Comprehensive Income (Loss)

13,509,557

(38,138,086)

Fund Balance - Beginning

(20,861,797)

17,276,289

Fund Balance - Ending

$(7,352,240)

$(20,861,797)

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

FINANCIAL STATEMENTS AND NOTES

75

Deposit Insurance Fund
Federal Deposit Insurance Corporation
Deposit Insurance Fund Statement of Cash Flows for the Years Ended December 31
Dollars in Thousands
2010
Operating Activities
$13,304,884
Net Income (Loss):
Adjustments to reconcile net income to net cash (used by)
provided by operating activities:
Amortization of U.S. Treasury obligations
(5,149)
Treasury inflation-protected securities inflation adjustment
(23,051)
Gain on sale of U.S. Treasury obligations
0
Depreciation on property and equipment
68,790
Loss on retirement of property and equipment
620
Provision for insurance losses
(847,843)
Unrealized Loss on postretirement benefits
(15,891)
Guarantee termination fee from Citigroup
0
Change In Operating Assets and Liabilities:
Decrease in assessments receivable, net
(Increase) Decrease in interest receivable and other assets
(Increase) in receivables from resolutions
Decrease (Increase) in receivable - systemic risk
Increase in accounts payable and other liabilities
Increase in postretirement benefit liability
(Decrease) in contingent liabilities - systemic risk
(Decrease) Increase in liabilities due to resolutions
(Decrease) Increase in unearned revenue - prepaid assessments
Increase in deferred revenue - systemic risk
Net Cash (Used by) Provided by Operating Activities
Investing Activities Provided by:
Maturity of U.S. Treasury obligations
Sale of U.S. Treasury obligations
Investing Activities Used by:
Purchase of property and equipment
Purchase of U.S. Treasury obligations
Net Cash (Used by) Provided by Investing Activities
Net (Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
Unrestricted Cash and Cash Equivalents - Ending
Restricted Cash and Cash Equivalents - Ending
Cash and Cash Equivalents - Ending
The accompanying notes are an integral part of these financial statements.

76

FINANCIAL STATEMENTS AND NOTES

2009
$(36,002,584)

210,905
10,837
(1,389,285)
70,488
924
57,711,772
(27,577)
(1,961,824)

62,617
(34,194)
(16,607,671)
1,029,397
240,949
20,922
(1,262,639)
(4,199,849)
(12,670,068)
1,203,936
(19,734,240)

737,976
192,750
(60,229,760)
(2,160,688)
140,740
30,828
(25,672)
29,987,265
42,727,101
5,769,567
35,793,763

21,558,000
0

6,382,027
15,049,873

(96,659)
(30,143,138)
(8,681,797)

(91,468)
0
21,340,432

(28,416,037)
60,523,012
27,076,606
5,030,369
$32,106,975

57,134,195
3,388,817
54,092,423
6,430,589
$60,523,012

Notes to the Financial Statements
Deposit Insurance Fund
December 31, 2010 and 2009

1. Legislation and
Operations of the
Deposit Insurance Fund
Overview
The Federal Deposit Insurance Corporation
(FDIC) is the independent deposit insurance
agency created by Congress in 1933 to maintain
stability and public confidence in the nation’s
banking system. Provisions that govern the
operations of the FDIC are generally found in
the Federal Deposit Insurance (FDI) Act, as
amended (12 U.S.C. 1811, et seq). In carrying
out the purposes of the FDI Act, as amended, the
FDIC insures the deposits of banks and savings
associations (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 either 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 (OTS). (See
“Recent Legislation” below for certain OTS
functional responsibilities to be transferred to the
FDIC in the future.)
The FDIC is the administrator of the DIF and 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 DIF
unless a systemic risk 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 under this statutory
provision can only be invoked by the Secretary of
the 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. Until passage of recent legislation (see
“Recent Legislation” below), a systemic risk
determination could permit open bank assistance.
As explained below, such open bank assistance is
no longer available. 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 Secretary of the 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 former Resolution
Trust Corporation. The DIF and the FRF are
maintained separately to fund their respective
mandates of the FDIC.
Pursuant to the enactment of the Dodd-Frank
Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) on July 21, 2010 (see “Recent
Legislation” below), the FDIC is the manager of
the Orderly Liquidation Fund (OLF). Established
as a separate fund in the U.S. Treasury (Treasury),
the OLF is inactive and unfunded until the FDIC
is appointed as receiver for a covered financial
company (a failing financial company, such as
a bank holding company or nonbank financial
company for which a systemic risk determination
has been made as set forth in section 203 of
the Dodd-Frank Act). At the commencement
of an orderly liquidation of a covered financial
company, the FDIC may borrow funds required
by the receivership from the Treasury, up to
the Maximum Obligation Limitation for each
covered financial company and in accordance
with an Orderly Liquidation and Repayment
Plan. Borrowings will be deposited in the OLF
and repaid to the Treasury with the proceeds

FINANCIAL STATEMENTS AND NOTES

77

of asset sales. If such proceeds are insufficient,
any remaining shortfall must be recovered from
assessments imposed on financial companies as
specified in the Dodd-Frank Act.

Recent Legislation
The Dodd-Frank Act (Public Law 111-203)
provides comprehensive reform of the supervision
and regulation of the financial services industry.
Under this legislation, the FDIC’s new
responsibilities include: 1) broad authority to
liquidate failing systemic financial firms in an
orderly manner as manager of the newly created
OLF; 2) issuing regulations, jointly with the
Federal Reserve Board (FRB), requiring that
nonbank financial companies supervised by the
FRB and bank holding companies with assets
equal to or exceeding $50 billion provide the FRB,
the FDIC, and the Financial Stability Oversight
Council (FSOC) a plan for their rapid and orderly
resolution in the event of material financial
distress or failure; 3) serving as a voting member
of the FSOC; 4) back-up examination authority
for nonbank financial companies supervised by
the FRB and bank holding companies with at
least $50 billion in assets; 5) back-up enforcement
actions against depository institution holding
companies if their conduct or threatened conduct
poses a risk of loss to the DIF; and 6) federal
oversight of state-chartered thrifts upon the
transfer of such authority from OTS (between
12 and 18 months after enactment of the DoddFrank Act, currently set for July 21, 2011).
The Dodd-Frank Act limits the systemic risk
determination authority under 12 U.S.C.
1823(c) to DIF-insured depository institutions
for which the FDIC has been appointed receiver
and requires that any action taken or assistance
provided under this authority must be for the
purpose of winding up the insured depository
institution in receivership. Under Title XI of
the Act, the FDIC is granted new authority to
establish a widely available program to guarantee
obligations of solvent insured depository

78

FINANCIAL STATEMENTS AND NOTES

institutions or solvent depository institution
holding companies (including affiliates) upon
systemic determination of a liquidity event during
times of severe economic distress. This program
would not be DIF-funded; it would be funded
by fees and assessments paid by all participants in
the program. If fees are insufficient to cover losses
or expenses, the FDIC must impose a special
assessment on participants as necessary to cover
the insufficiency. Any excess funds at the end of
the liquidity event program would be deposited in
the General Fund of the Treasury.
The new law also makes changes related
to the FDIC’s deposit insurance mandate.
These changes include a permanent increase
in the standard deposit insurance amount to
$250,000 (retroactive to January 1, 2008) and
unlimited deposit insurance coverage for noninterest bearing transaction accounts for two
years, from December 31, 2010 to the end of
2012. Additionally, the legislation changes the
assessment base (from a deposits-based formula to
one based on assets) and establishes new reserve
ratio requirements (see Note 9).

Operations of the DIF
The primary purposes of the DIF are to: 1)
insure the deposits and protect the depositors
of DIF-insured institutions and 2) resolve failed
DIF-insured institutions upon appointment of
the FDIC as receiver, in a manner that will result
in the least possible cost to the DIF (unless a
systemic risk determination is made).
The DIF is primarily funded from deposit
insurance assessments. Other available funding
sources, if necessary, are borrowings from the
Treasury, the Federal Financing Bank (FFB),
Federal Home Loan Banks, and insured
depository institutions. The FDIC has borrowing
authority of $100 billion from the Treasury and
a Note Purchase Agreement with the FFB not to
exceed $100 billion to enhance the DIF’s ability to
fund deposit insurance 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
$106.3 billion and $118.2 billion as of December
31, 2010 and 2009, respectively.

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

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 conformity 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 associated revenue; the
allowance for loss on receivables from resolutions
(including loss-share agreements); liabilities
due to resolutions; the estimated losses for
anticipated failures, litigation, and representations
and warranties; guarantee obligations for the
Temporary Liquidity Guarantee Program and
structured transactions; the 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.
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
and has granted the FDIC 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.

FINANCIAL STATEMENTS AND NOTES

79

The DIF’s investments in U.S. Treasury
obligations are classified as available-for-sale.
Securities designated as available-for-sale are
shown at fair value. Unrealized gains and losses are
reported as other comprehensive income. Realized
gains and losses are included in the Statement
of Income and Fund Balance as components of
net income. Income on securities is calculated
and recorded on a daily basis using the effective
interest or straight-line method depending on the
maturity of the security.

Revenue Recognition for
Assessments
Assessment revenue is recognized for the
quarterly period of insurance coverage based
on an estimate. The estimate is derived from
an institution’s risk-based assessment rate and
assessment base for the prior quarter adjusted for
the current quarter’s available assessment credits,
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 straightline 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.

80

FINANCIAL STATEMENTS AND NOTES

Related Parties
The nature of related parties and a description of
related-party transactions are discussed in Note 1
and disclosed throughout the financial statements
and footnotes.
Disclosure about Recent Relevant
Accounting Pronouncements
Accounting Standards Update (ASU) No.
2009-17, Improvements to Financial Reporting
by Enterprises Involved with Variable Interest
Entities, modified Accounting Standards
Codification (ASC) Topic 810, Consolidation,
to incorporate the provisions of former
Statement of Financial Accounting Standards
(SFAS) No. 167, Amendments to FASB
Interpretation No. 46(R), effective for reporting
periods beginning after November 15, 2009.
The provisions of ASC 810 require that an
enterprise make qualitative assessments of
its relationship with a variable interest entity
(VIE) based on the enterprise’s 1) power to
direct the activities that most significantly
impact the economic performance of the
VIE and 2) 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 the relationship
causes the variable interest holder to have
both of these characteristics, the enterprise is
considered the primary beneficiary and must
consolidate the VIE. During 2010, selected
FDIC receiverships engaged in structured
transactions, some of which resulted in
the issuance of note obligations that were
guaranteed by the FDIC in its corporate
capacity (see Note 8). In accordance with
the provisions of ASC 810, an analysis of
each structured transaction was performed
to determine whether the terms of the legal
agreements extended rights that would cause
the FDIC in its corporate capacity to be
characterized as the primary beneficiary. The
conclusion of these analyses was that the

FDIC in its corporate capacity did not have
the power to direct the significant activities
of any entity with which it was involved at
December 31, 2010 and therefore, there is
no current consolidation requirement for the
DIF 2010 financial statements. In making
that determination, consideration was given to
which, if any, activities were significant to each
VIE. Often, the right to service collateral, to
liquidate collateral or to unilaterally dissolve
the LLC or trust was determined to be the
most significant activity. In other cases, it
was determined that there were no significant
ongoing activities and that the design of the
entity was the best indicator of which party
was the primary beneficiary. The results of
each analysis identified a party other than the
FDIC in its corporate capacity as the primary
beneficiary. In the future, the FDIC in its
corporate capacity may become the primary
beneficiary upon the activation of provisional
contract rights that extend to the corporation
if payments are made on guarantee claims.
Ongoing analyses will be required in order to
monitor implications for ASC 810 provisions.
ASU No. 2009-16, Accounting for Transfers
of Financial Assets modified ASC Topic
860, Transfers and Servicing, to incorporate
the provisions of former SFAS No. 166,
Accounting for Transfers of Financial Assets,
an amendment of FASB Statement No. 140,
effective for reporting periods beginning after
November 15, 2009. The provisions of ASC
860 remove the concept of a qualifying special
purpose entity, change the requirements for
derecognizing financial assets and require
additional disclosures about a transferor’s
continuing involvement with transferred
assets. The DIF has not engaged in any

transfers of financial assets or financial
liabilities; thus, there is no current impact to
these financial statements for 2010.
ASU No. 2010-06, Fair Value Measurements
and Disclosures (Topic 820) – Improving
Disclosures about Fair Value Measurements,
requires enhanced disclosures for significant
transfers into and out of Level 1 (measured
using quoted prices in active markets) and
Level 2 (measured using other observable
inputs) of the fair value measurement
hierarchy. These disclosures are effective
for interim and annual reporting periods
beginning after December 15, 2009. The
required disclosures are included in Note 15.
Separate disclosure of the gross purchases,
sales, issuances, and settlements activity for
Level 3 (measured using unobservable inputs)
fair value measurements will become effective
for fiscal years beginning after December 15,
2010. Currently, the additional disclosures are
not expected to impact the DIF.
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, 2010 and 2009, investments
in U.S. Treasury obligations, net, were $12.4
billion and $5.5 billion, respectively. As of
December 31, 2010 and 2009, the DIF held $2.0
billion and $2.1 billion, respectively, of Treasury
Inflation-Protected Securities (TIPS). These
securities are indexed to increases or decreases
in the Consumer Price Index for All Urban
Consumers (CPI-U).

FINANCIAL STATEMENTS AND NOTES

81

Total Investment in U.S. Treasury Obligations, Net at December 31, 2010
Dollars in Thousands
Maturity

Yield at
Purchase (a)

U.S. Treasury notes and bonds
Within 1 year
0.73%

Face Value

Net Carrying
Amount

Unrealized
Holding Gains

Unrealized
Holding
Losses

Fair Value

$3,000,000

$3,052,503

$2,048

$(31)

$3,054,520

U.S. Treasury Inflation-Protected Securities
Within 1 year
3.47%
1,375,955

1,375,967

1,391

0

1,377,358

After 1 year
through 5 years

2.41%

615,840

621,412

22,381

0

643,793

U.S. Treasury bills
Within 1 year

0.19%

7,300,000

7,294,688

909

0

7,295,597

$12,291,795

$12,344,570

$26,729

Total

$(31)

$12,371,268

(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 1.8 percent, based on figures issued by the Congressional Budget Office and Blue Chip Economic
Indicators in early 2010.

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

Maturity

Yield at
Purchase (a)

U.S. Treasury notes and bonds
Within 1 year
5.04%

Face Value

Net Carrying
Amount

Unrealized
Holding Gains

Unrealized
Holding
Losses

Fair Value

$3,058,000

$3,062,038

$48,602

$0

$3,110,640

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

$5,344,672

$142,127

$0

$5,486,799

After 1 year
through 5 years

Total

4.15%

$5,326,744

(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.

82

FINANCIAL STATEMENTS AND NOTES

4. Receivables from
Resolutions, Net
Receivables from Resolutions, Net at December 31
Dollars in Thousands
2010

2009

Receivables
from closed
banks
Allowance
for losses

$115,896,763

$98,647,508

(86,364,218)

(60,238,886)

Total

$29,532,545

$38,408,622

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-share agreement are
factored into the computation of the expected
repayment. Assets held by DIF resolution entities
(including structured transaction-related assets; see
Note 8) are the main source of repayment of the
DIF’s receivables from resolutions.
As of December 31, 2010, there were 336 active
receiverships which include 157 established in
2010. As of December 31, 2010 and 2009, DIF
resolution entities held assets with a book value
of $49.9 billion and $49.3 billion, respectively
(including cash, investments, and miscellaneous
receivables of $22.9 billion and $7.7 billion,
respectively). Ninety-nine percent of the current
asset book value of $49.9 billion are held by
resolution entities established since 2008.
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,
sampled asset valuation data, and empirical asset
recovery data based on failures as far back as 1990.
Methodologies for determining the asset recovery
rates incorporate estimating future cash recoveries,
net of applicable liquidation cost estimates, and
discounting based on market-based risk factors
applicable to a given asset’s type and quality. The
resulting estimated cash recoveries are then used
to derive the allowance for loss on the receivables
from these resolutions.
For failed institutions resolved using a whole
bank purchase and assumption transaction with
an accompanying loss-share agreement, the
projected future loss-share payments, recoveries,
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
covered assets’ intrinsic value which is determined
using financial models that consider the quality
and type of covered assets, current and future
market conditions, risk factors and estimated
asset holding periods. For year-end 2010 financial
reporting, the loss-share cost estimates were
updated for the majority (62% or 137) of the 222
active loss-share agreements; the remaining 85
were already based on recent loss estimates. The
updated loss projections for the larger loss-share
agreements were primarily based on new thirdparty valuations estimating the cumulative loss of
loss-share covered assets. For the smaller loss-share
agreements, the loss projections were based on a
financial model that applies recent aggregate asset
valuation recovery rates against current loss-share
covered asset balances.
Note that estimated asset recoveries are regularly
evaluated during the year, but remain subject
to uncertainties because of potential changes in
economic and market conditions. Continuing
economic uncertainties could cause the DIF’s
actual recoveries to vary significantly from current
estimates.

FINANCIAL STATEMENTS AND NOTES

83

Whole Bank Purchase and
Assumption Transactions with
Loss-Share Agreements
Since the beginning of 2008, the FDIC resolved
223 failures using a Whole Bank Purchase and
Assumption resolution transaction with an
accompanying loss-share agreement on assets
purchased by the financial institution acquirer.
The acquirer typically assumes all of the deposits
and purchases essentially all of the assets of a
failed institution. The majority of the commercial
and residential loan assets are purchased under a
loss-share agreement, where the FDIC agrees to
share in future losses and recoveries 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 are 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 write-down of loans in accordance with the
terms of the loss-share agreement. The majority
of the agreements cover a five- to 10-year period
with the receiver covering 80 percent of the losses
incurred by the acquirer up to a stated threshold
amount (which varies by agreement) and the
acquiring bank covering 20 percent. Typically, any
losses above the stated threshold amount will be
reimbursed by the receiver at 95 percent of the
losses booked by the acquirer. (For agreements
executed after March 26, 2010, the threshold
was eliminated and generally 80% of all losses are
covered by the receiver.) As mentioned above, the
estimated loss-share liability is accounted for by
the receiver and is included in the calculation of
the DIF’s allowance for loss against the corporate
receivable from the resolution. As loss-share claims
are asserted and proven, DIF receiverships will
satisfy these loss-share payments using available
liquidation funds and/or by drawing on amounts
due from the DIF for funding the deposits
assumed by the acquirer (see Note 7).

84

FINANCIAL STATEMENTS AND NOTES

Through December 31, 2010, DIF receiverships
are estimated to pay approximately $38.8 billion
over the duration of these loss-share agreements
on approximately $193.0 billion in total covered
assets at the inception date of these agreements.
To date, 158 receiverships have made loss-share
payments totaling $8.3 billion.

Concentration of Credit Risk
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 losssharing agreements. The majority of the $184.4
billion in remaining assets in liquidation ($27.0
billion) and current loss-share covered assets
($157.4 billion) are concentrated in commercial
loans ($104.4 billion), residential loans ($56.3
billion), and structured transaction-related assets
as described in Note 8 ($12.8 billion). Most of the
assets in these asset types originated from failed
institutions located in California ($53.4 billion),
Florida ($20.8 billion), Illinois ($15.7 billion),
Puerto Rico ($15.3 billion), and Alabama
($14.6 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 loss protection on a pool of approximately
$301.0 billion of assets that remained on the
balance sheet of Citigroup.
In consideration for its portion of the loss-share
guarantee at inception, the FDIC received $3.025
billion of Citigroup’s preferred stock (Series G).
On July 30, 2009, all shares of preferred stock
initially received were exchanged for 3,025,000
Citigroup Capital XXXIII trust preferred securities
(TruPs) with a liquidation amount of $1,000 per
security and a distribution rate of 8 percent per
annum payable quarterly. The principal amount

is due in 2039. 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-share 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 of its TruPs holdings
of $3.025 billion. The FDIC will transfer an
aggregate liquidation amount of $800 million in
TruPs 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 five days of the date on which no Citigroup
debt remains outstanding under the TLGP. The
fair value of these TruPs and related interest are
recorded as systemic risk assets as described in
Note 16.
The remaining $2.225 billion (liquidation
amount) of TruPs held by the FDIC is 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 in 2009 of $1.962 billion for the fair
value of the TruPs (see Note 10). At December
31, 2010, the fair value of the TruPs was $2.298
billion (see Note 15). An unrealized holding gain
of $336 million in 2010 is included in other
comprehensive income.

6. Property and
Equipment, Net
Property and Equipment, Net at December 31
Dollars in Thousands
2010
Land
Buildings
(including leasehold
improvements)
Application software
(includes work-inprocess)
Furniture, fixtures,
and equipment
Accumulated
depreciation
Total

2009

$37,352

$37,352

312,173

295,265

122,736

179,479

144,661

117,430

(200,857)

(240,709)

$416,065

$388,817

The depreciation expense was $69 million and
$70 million for 2010 and 2009, respectively.

7. Liabilities Due to
Resolutions
As of December 31, 2010 and 2009, the DIF
recorded liabilities totaling $30.4 billion and
$34.5 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. Eighty-nine 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.
In addition, there was $80 million and $150
million in unpaid deposit claims related to
multiple receiverships as of December 31, 2010
and 2009, respectively. The DIF pays these
liabilities when the claims are approved.

FINANCIAL STATEMENTS AND NOTES

85

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.
The banking industry continued to face significant
problems in 2010. The slowly recovering
economic and credit environment challenged the
soundness of many DIF-insured institutions. The
ongoing weakness in housing and commercial
real estate markets led to continuing asset
quality problems, which hurt banking industry
performance and weakened many institutions
with significant portfolios of residential and
commercial mortgages. Despite the challenging
conditions evident in certain business lines and
markets, the losses to the DIF from failures that
occurred in 2010 fell short of the amount reserved
at the end of 2009, as the aggregate number and
size of institution failures in 2010 were less than
anticipated. The removal from the reserve of
banks that did fail in 2010, as well as projected
favorable trends in bank supervisory downgrade
and failure rates and the smaller size of institutions
that remain troubled, all contribute to a decline
by $26.3 billion to $17.7 billion in the contingent
liability for anticipated failures of insured
institutions at the end of 2010.
In addition to these recorded contingent
liabilities, the FDIC has identified risk in the
financial services industry that could result in
additional losses to the DIF should potentially
vulnerable insured institutions ultimately fail. As
a result of these risks, the FDIC believes that it
is reasonably possible that the DIF could incur
additional estimated losses of up to approximately
$24.5 billion. The actual losses, if any, will

86

FINANCIAL STATEMENTS AND NOTES

largely depend on future economic and market
conditions and could differ materially from this
estimate.
During 2010, 157 banks with combined assets of
$93.2 billion failed. 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.

Litigation Losses
The DIF records an estimated loss for unresolved
legal cases to the extent that those losses are
considered probable and reasonably estimable.
Probable litigation losses of $300 million were
recorded for both December 31, 2010 and 2009,
and the FDIC has determined that there are no
reasonably possible losses from unresolved cases.
Other Contingencies
IndyMac Federal Bank Representation and
Indemnification Contingent Liability
On March 19, 2009, the FDIC as receiver of
IndyMac Federal Bank (IMFB) and certain
subsidiaries (collectively, sellers) sold substantially
all of the assets of IMFB and the respective
subsidiaries, including mortgage loans and
mortgage loan servicing rights, to OneWest Bank
and its affiliates. To maximize sale returns, the
sellers made certain customary representations
regarding the assets and have certain obligations
to indemnify the acquirers for losses incurred
as a result of breaches of such representations,
losses incurred as a result of the failure to obtain
contractual counterparty consents to the sale,
and third party claims arising from pre-sale acts
and omissions of the sellers or the failed bank.
Although the representations and indemnifications
were made by or are obligations of the sellers,
the FDIC, in its corporate capacity, guaranteed
the receivership’s indemnification obligations
under the sale agreements. The representations
relate generally to ownership of and right to

sell the assets; compliance with applicable law
in the origination of the loans; accuracy of the
servicing records; validity of loan documents;
and servicing of the loans serviced for others.
Until the period for asserting claims under these
arrangements have expired and all indemnification
claims quantified and paid, losses could continue
to be incurred by the receivership and, in
turn, the DIF either directly, as a result of the
FDIC corporate guaranty of the receivership’s
indemnification obligations, or indirectly, as a
result of a reduction in the receivership’s assets
available to pay the DIF’s claims as subrogee for
insured accountholders. The acquirers’ rights to
assert actual and potential breaches extend out to
March 19, 2019 for the Fannie Mae and Ginnie
Mae reverse mortgage servicing portfolios (unpaid
principal balance of $21.7 billion at December 31,
2010 and 2009), March 19, 2014 for the Fannie
Mae, Freddie Mac and Ginnie Mae mortgage
servicing portfolios (unpaid principal balance of
$45.3 billion at December 31, 2010 compared to
$62.1 billion at December 31, 2009), and March
19, 2011 for the remaining (private) mortgage
servicing portfolio and whole loans (unpaid
principal balance of $74.2 billion at December
31, 2010 compared to $104.4 billion at
December 31, 2009).
As of December 31, 2010, the IndyMac
receivership has paid $2.8 million in approved
claims and has accrued an additional $2.6 million
liability for claims asserted but unpaid. The FDIC
believes it is likely that additional losses will be
incurred, however quantifying the contingent
liability associated with the representations and
the indemnification obligations is subject to a
number of uncertainties, including 1) borrower
prepayment speeds, 2) the occurrence of borrower
defaults and resulting foreclosures and losses, 3)
the assertion by third party investors of claims
with respect to loans serviced for them, 4) the
existence and timing of discovery of breaches
and the assertion of claims for indemnification
for losses by the acquirer, 5) the compliance by
the acquirer with certain loss mitigation and
other conditions to indemnification, 6) third
party sources of loss recovery (such as title

companies and insurers), 7) the ability of the
acquirer to refute claims from investors without
incurring reimbursable losses, and 8) the cost
to cure breaches and respond to third party
claims. Because of these and other uncertainties
that surround the liability associated with
indemnifications and the quantification of
possible losses, the FDIC has determined that
while additional losses are probable, the amount is
not estimable.
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 receivership is
unable to pay. These indemnifications generally
extend for a term of six years after the date of
institution failure. The FDIC is unable to estimate
the maximum potential liability for these types
of guarantees as the agreements do not specify
a maximum amount and any payments are
dependent upon the outcome of future contingent
events, the nature and likelihood of which cannot
be determined at this time. During 2010 and
2009, the FDIC in its corporate capacity made no
indemnification payments under such agreements
and no amount has been accrued in the
accompanying financial statements with respect to
these indemnification guarantees.
FDIC Guaranteed Debt of
Structured Transactions
During 2009 and 2010, the FDIC as receiver used
three types of structured transactions to dispose of
certain performing and non-performing residential
mortgage loans, commercial loans, construction
loans, and mortgage backed securities held by
the receiverships. The three types of structured
transactions are: 1) limited liability companies
(LLCs), 2) securitizations, and 3) structured sale
guaranteed notes (SSGNs).

FINANCIAL STATEMENTS AND NOTES

87

LLCs
Under the LLC structure, the FDIC, as receiver,
contributes a pool of assets to a newly-formed
LLC and offers for sale, through a competitive bid
process, some of the equity in the LLC. The dayto-day management of the LLC is transferred to
the highest bidder along with the purchased equity
interest. The FDIC, in its corporate capacity,
guarantees notes issued by the LLCs. In exchange
for the guarantee, the DIF receives a guarantee fee
in either a lump-sum, up-front payment based on
the estimated duration of the note or a monthly
payment based on a fixed percentage multiplied by
the outstanding note balance. The terms of these
guarantees generally stipulate that all cash flows
received from the entity’s collateral be used in the
following order to: 1) pay operational expenses of
the entity, 2) pay FDIC its contractual guarantee
fee, 3) pay down the guaranteed notes (or, if
applicable, fund the related defeasance account
for payoff of the notes at maturity), and 4) pay
the equity investors. If the FDIC is required to
perform under these guarantees, it acquires an
interest in the cash flows of the LLC equal to
the amount of guarantee payments made plus
accrued interest thereon. As mentioned above,
this interest is senior to all equity interests and
thus will be reimbursed, in full, prior to equity
holders receiving a return on investment. Once
all expenses have been paid, the guaranteed
notes have been satisfied, and FDIC has been
reimbursed for any guarantee payments, the equity
holders receive any remaining cash flows.
Private investors purchased a 40 or 50 percent
ownership interest in the LLC structures for $1.6
billion in cash and the LLCs issued notes of $4.4
billion to the receiverships to partially fund the
purchase of the assets. The receiverships hold the
remaining 50 or 60 percent equity interest in the
LLCs and, in most cases, the guaranteed notes.
The FDIC in its corporate capacity guarantees the
timely payment of principal and interest for the
notes. The terms of the note guarantees extend
until the earliest of 1) payment in full of the notes
or 2) two years following the maturity date of the

88

FINANCIAL STATEMENTS AND NOTES

notes. The note with the longest term matures
in 2020. In the event of note payment default by
a 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; or 3) foreclose on the equity interests of
the debtor.
Securitizations and SSGNs
Securitizations and SSGNs (collectively, “Trusts”)
are transactions in which certain assets or
securities from failed institutions are pooled into
a trust structure. The Trusts issued senior notes,
subordinate notes, and owner trust certificates
collateralized by the mortgage-backed securities or
loans that are transferred to the Trusts.
Private investors purchased the senior notes
issued by the Trusts for $4.6 billion in cash. The
receiverships hold 100 percent of the subordinate
notes and owner trust certificates (“OTCs”).
The FDIC in its corporate capacity guarantees
the timely payment of principal and interest for
the senior notes. The terms of these guarantees
generally stipulate that all cash flows received from
the entity’s collateral be used in the following
order to: 1) pay operational expenses of the
entity, 2) pay FDIC its contractual guarantee
fee, 3) pay interest on the guaranteed notes, 4)
pay down the guaranteed notes, and 5) pay the
holders of the subordinate notes and owner trust
certificates. If the FDIC is required to perform
under its guarantees, it acquires an interest in the
cash flows of the trust equal to the amount of
guarantee payments made plus accrued interest
thereon. As mentioned above, this interest is
senior to all interests of subordinate note holders
and OTC holders and thus will be reimbursed,
in full, prior to these holders receiving a return
on any remaining investment. Once all expenses
have been paid, the guaranteed notes have been
satisfied, and FDIC has been reimbursed for any
guarantee payments, the subordinate note holders
and OTC holders receive the remaining cash flows.

All Structured Transactions
Through December 31, 2010, the receiverships
have transferred a portfolio of loans with an
unpaid principal balance of $16.4 billion and
mortgage-backed securities with a book value of
$6.8 billion to the LLCs and Trusts which have
issued notes guaranteed by the FDIC. To date,
the DIF has collected guarantee fees totaling $128
million and recorded a receivable for additional
guarantee fees of $170 million, included in the
“Interest receivable on investments and other
assets, net” line item. All guarantee fees are
recorded as deferred revenue, included in the
“Accounts payable and other liabilities” line item,
and recognized as revenue primarily on a straightline basis over the term of the notes. At December
31, 2010, the amount of deferred revenue
recognized on the balance sheet was $249 million.
The DIF records no other structured transaction
related assets or liabilities on its balance sheet.
The estimated loss on 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/Trust
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. To date, FDIC in its corporate capacity
has not provided, and does not intend to provide,
any form of financial or other support to a Trust
or LLC that it was not previously contractually
required to provide.
As of December 31, 2010, the maximum exposure
to loss is $8.3 billion, the sum of all outstanding
debt issued by LLCs and Trusts that is guaranteed
by the FDIC in its corporate capacity. The
$8.3 billion is comprised of $4.2 billion issued
by LLCs, $3.8 billion issued by SSGNs, and
$.3 billion issued by the securitization. Some
transactions have established defeasance accounts
to pay off the notes at maturity. A total of $756
million has been deposited into these accounts.

9. Assessments
The Dodd-Frank Act, enacted on July 21, 2010,
provides for significant DIF assessment and
capitalization reforms. As a result, the FDIC
issued proposed regulations and adopted a new
Restoration Plan. The following presents the
required DIF reforms and the related FDIC
actions taken to:
define the assessment base generally as average
consolidated total assets minus average
tangible equity (the new assessment base).
To amend its regulations, the FDIC issued
a proposed rulemaking to redefine the
assessment base used for calculating deposit
insurance assessments from adjusted
domestic deposits to average consolidated
total assets minus average tangible equity
(measured as Tier 1 capital).
annually establish and publish a designated
reserve ratio (DRR) at the statutory minimum
percentage of not less than 1.35 percent of
estimated insured deposits or the comparable
percentage of the new assessment base. In
addition, the FDIC must annually determine
if a dividend should be paid, based on the
statutory requirement generally to declare
dividends if the DIF reserve ratio exceeds 1.50
percent of estimated insured deposits. The
Board of Directors is given sole discretion to
suspend or limit dividends and must prescribe
relevant regulations.
In order to implement these requirements,
the FDIC proposed a comprehensive
long-range plan for deposit insurance
fund management with the intent of
maintaining a positive fund balance and
moderate, steady assessment rates. The
proposed rulemaking would set the DRR
at 2 percent as a long-term minimum goal
and adopt a lower assessment rate schedule
when the reserve ratio reaches 1.15. To
increase the probability that the fund
reserve ratio will reach a level sufficient
to withstand a future crisis, the proposed
rulemaking would suspend dividends

FINANCIAL STATEMENTS AND NOTES

89

permanently when the fund reserve
ratio exceeds 1.5 percent and, in lieu of
dividends, adopt lower assessment rate
schedules when the reserve ratio reaches
2 percent and 2.5 percent so that average
rates would decline about 25 percent and
50 percent, respectively. In December
2010, the FDIC issued a final rule related
to the DRR portion of the proposed
rulemaking, setting the DRR at 2 percent
effective on January 1, 2011.
return the reserve ratio to 1.35 percent
of estimated insured deposits by September
30, 2020.
To comply with this mandate, the FDIC
adopted a new Restoration Plan that
provides for the following: 1) the period
of the Restoration Plan is extended from
the end of 2016 to September 30, 2020;
2) the FDIC will maintain the current
schedule of assessment rates, foregoing the
uniform 3 basis point increase previously
scheduled to take effect on January 1,
2011; 3) institutions may continue to
use assessment credits without additional
restriction during the term of the
Restoration Plan; 4) the FDIC will pursue
rulemaking in 2011 regarding the method
that will be used to offset the effect on
small institutions (less than $10 billion in
assets) of the statutory requirement that
the fund reserve ratio increase from 1.15
percent to 1.35 percent by September
30, 2020; and 5) at least semiannually,
the FDIC will update its loss and income
projections for the fund and, if needed,
will increase or decrease rates, following
notice-and-comment rulemaking,
if required.
In addition, the FDIC issued a proposed
rulemaking to revise the assessment system
applicable to large insured depository institutions
(IDIs) to better capture risk at the time an IDI
assumes the risk, to better differentiate IDIs
during periods of good economic and banking
conditions based on how they would fare during

90

FINANCIAL STATEMENTS AND NOTES

periods of stress or economic downturns, and
to better take into account the losses that the
FDIC may incur if such an IDI fails. Specifically,
proposed changes include eliminating risk
categories and the use of long-term debt issuer
ratings for large IDIs and combining CAMELS
ratings and forward-looking financial measures
into two scorecards: one for most large IDIs
and another for large IDIs that are structurally
and operationally complex or that pose unique
challenges and risks in case of failure (highly
complex IDIs).
Assessment Revenue
The assessment rate averaged approximately 17.72
cents per $100 and 23.32 cents per $100 of the
assessment base, as defined in part 327.5(b) of
FDIC Rules and Regulations, for 2010 and 2009,
respectively. During 2010 and 2009, $13.6 billion
and $17.7 billion were recognized as assessment
revenue from institutions. For those institutions
that did not prepay assessments as described
below, the “Assessments receivable, net” line
item of $218 million represents the estimated
premiums due from IDIs for the fourth quarter of
2010. The actual deposit insurance assessments for
the fourth quarter will be billed and collected at
the end of the first quarter of 2011.
During 2009, the FDIC implemented actions
to supplement DIF’s revenue through a special
assessment and its liquidity through prepaid
assessments from IDIs:
On May 22, 2009, the FDIC adopted a
final rule imposing a 5 basis point special
assessment on each IDI’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.
On November 12, 2009, the FDIC adopted a
final rule to address the DIF’s liquidity needs
to pay for projected near-term failures and
to ensure that the deposit insurance system
remained industry-funded. Pursuant to the
final rule, on December 30, 2009, a majority
of IDIs prepaid estimated quarterly risk-based

assessments of $45.7 billion for the period
October 2009 through December 2012.
An institution’s quarterly risk-based deposit
insurance assessment thereafter is 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. At December 31, 2010, the
remaining prepaid amount of $30.1 billion is
included in the “Unearned revenue – prepaid
assessments” line item on the Balance Sheet.
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.
Reserve Ratio
As of December 31, 2010, the DIF reserve ratio
was -0.12 percent of estimated insured deposits.
Assessments Related to FICO
Assessments continue to be levied on institutions
for payments of the interest on obligations issued
by the Financing Corporation (FICO). The FICO
was established as a 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 2010 and 2009, approximately
$796 million and $784 million, respectively, was
collected and remitted to the FICO.

10. Other Revenue
Other Revenue for the Years Ended December 31
Dollars in Thousands
2010
Guarantee
termination fees
Dividends
and interest
on Citigroup
trust preferred
securities
Guarantee fees
for structured
transactions
Debt guarantee
surcharges

$0

$2,053,825

177,675

231,227

44,557

3,465

0

871,746

15,193

13,348

$237,425

Other
Total

2009

$3,173,611

Guarantee Termination Fees and
Dividends and Interest on TruPs
Bank of America
In January 2009, the FDIC, the 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 owned by Bank of America.
In May 2009, prior to completing definitive
documentation, Bank of America announced
its intention to terminate negotiations with
respect to the loss-share guarantee arrangement
contemplated in the Term Sheet. Bank of
America paid a termination fee of $425 million to
compensate the federal parties for the guarantee
from the date of the signing of the Term Sheet
through the termination date. Of this amount,

FINANCIAL STATEMENTS AND NOTES

91

the FDIC received and recognized revenue of $92
million for the DIF in 2009. No losses were borne
by the FDIC prior to the termination.
Citigroup
In connection with the termination of a lossshare agreement with Citigroup on December 23,
2009 (see Note 5), the DIF recognized revenue
of $1.962 billion for the fair value of the trust
preferred securities received as consideration for
the guarantee. The DIF recognized $178 million
and $231 million of dividends and interest on the
securities for 2010 and 2009, respectively.
Guarantee Fees for Structured Transactions
The FDIC in its corporate capacity participated
in structured transactions as guarantor of the
principal and interest due on certain notes
issued by related limited liability companies and
Trusts (see Note 8). The transactions were formed
to maximize recoveries on assets purchased by
these entities from receiverships. In exchange for
the guarantees, the DIF receives guarantee fees
that are recognized as revenue over the
term of each guarantee on a straight line basis.
The DIF recognized revenue in the amount of
$45 million and $3 million during 2010 and
2009, respectively.
Surcharges on FDIC-Guaranteed Debt
The DIF collected a surcharge on all debt issued
under the Temporary Liquidity Guarantee
Program (TLGP) after March 31, 2009 in an
effort to provide an incentive for all participants to
return to the non-guaranteed debt market. Unlike
other TLGP fees (see Note 16), which are reserved
for projected TLGP losses, the surcharges collected
were deposited into the DIF. During 2009, the
DIF collected surcharges in the amount of $872
million. No surcharges were collected in 2010.

92

FINANCIAL STATEMENTS AND NOTES

11. Operating Expenses
Operating expenses were $1.6 billion for 2010,
compared to $1.3 billion for 2009. The chart below
lists the major components of operating expenses.
Operating Expenses for the Years Ended December 31
Dollars in Thousands
2010
Salaries and
benefits
Outside services
Travel
Buildings and
leased space
Software/Hardware
maintenance
Depreciation
of property and
equipment
Other
Services
reimbursed by
TLGP
Services billed to
resolution entities
Total

2009

$1,184,523

$901,836

360,880

244,479

111,110

97,744

85,137

65,286

50,575

40,678

68,790

70,488

35,384

37,563

(242)

(3,613)

(303,516)

(183,362)

$1,592,641

$1,271,099

12. Provision for
Insurance Losses

13. Employee Benefits

Provision for insurance losses was a negative $848
million for 2010, compared to a positive $57.7
billion for 2009. The 2010 negative provision
is primarily due to lower-than-anticipated loss
estimates at time of failure for banks that have
failed and leveling off of estimated losses to the
DIF from banks expected to fail. The following
chart lists the major components of the provision
for insurance losses.
Provision for Insurance Losses for the Years Ended
December 31
Dollars in Thousands
2010
Valuation Adjustments
Closed banks
and thrifts
$25,483,252
Other assets
(4,406)
Total Valuation
Adjustments

25,478,846

Contingent Liabilities Adjustments
Anticipated
failure of
insured
institutions
(26,326,689)
Litigation
0
Total Contingent
Liabilities
Adjustments
Total

2009

$37,586,603
(7,885)
37,578,718

20,033,054
100,000

Pension Benefits and Savings Plans
Eligible FDIC employees (permanent and term
employees with appointments exceeding one year)
are covered by the federal government retirement
plans, either the Civil Service Retirement System
(CSRS) or the Federal Employees Retirement
System (FERS). Although the DIF contributes a
portion of pension benefits for eligible employees,
it does not account for the assets of either
retirement system. The DIF also does not have
actuarial data for accumulated plan benefits or the
unfunded liability relative to eligible employees.
These amounts are reported on and accounted for
by the U.S. Office of Personnel
Management (OPM).
Eligible FDIC employees also may participate in a
FDIC-sponsored tax-deferred 401(k) savings plan
with matching contributions up to 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, they do not receive agency
matching contributions.
Pension Benefits and Savings Plans Expenses for
the Years Ended December 31
Dollars in Thousands
2010

(26,326,689)

20,133,054

$(847,843)

$57,711,772

Civil Service Retirement
System
Federal Employees
Retirement System
(Basic Benefit)
FDIC Savings Plan
Federal Thrift
Savings Plan
Total

2009

$6,387

$6,401

78,666

56,451

30,825

25,449

28,679

20,503

$144,557

$108,804

FINANCIAL STATEMENTS AND NOTES

93

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.
Retirees eligible for life and dental insurance
coverage are those who have qualified due to: 1)
immediate enrollment upon appointment or five
years of participation in the plan and 2) eligibility
for an immediate annuity. The life insurance
program provides basic coverage at no cost to
retirees and allows converting optional coverage to
direct-pay plans. For the dental coverage, retirees
are responsible for a portion of the dental premium.
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, 2010 and
2009, the liability was $166 million and $145
million, respectively, which is recognized in the
“Postretirement benefit liability” line item on the
Balance Sheet. The cumulative actuarial losses
(changes in assumptions and plan experience) and
prior service costs (changes to plan provisions that
increase benefits) were $19 million and $3 million
at December 31, 2010 and 2009, respectively.
These amounts are reported as accumulated
other comprehensive income in the “Unrealized
postretirement benefit loss” line item on the
Balance Sheet.
The DIF’s expenses for postretirement benefits for
2010 and 2009 were $9 million and $8 million,
respectively, which are included in the current and
prior year’s operating expenses on the Statement

94

FINANCIAL STATEMENTS AND NOTES

of Income and Fund Balance. The changes in
the actuarial losses and prior service costs for
2010 and 2009 of $16 million and $28 million,
respectively, are reported as other comprehensive
income in the “Unrealized postretirement benefit
loss” line item. Key actuarial assumptions used in
the accounting for the plan include the discount
rate of 5.0 percent, the rate of compensation
increase of 4.1 percent, and the dental coverage
trend rate of 7.0 percent. The discount rate of
5.0 percent is based upon rates of return on
high-quality fixed income investments whose cash
flows match the timing and amount of expected
benefit payments.

14. Commitments and OffBalance-Sheet Exposure
Commitments:
Leased Space
The FDIC’s lease commitments total $204 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 $45 million and $29 million for
the years ended December 31, 2010 and 2009,
respectively.
Leased Space Commitments
Dollars in Thousands
2011

2012

2013

$54,086

$48,047

$37,005

2014

2015

2016/Thereafter

$28,035

$19,731

$17,229

Off-Balance-Sheet Exposure:
Deposit Insurance
As of December 31, 2010, the estimated insured
deposits for DIF were $6.2 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. The amount of $6.2
trillion includes noninterest-bearing transaction
accounts that received coverage under the DoddFrank Act beginning on December 31, 2010 to
the end of 2012.

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, 2010 and 2009.
Assets Measured at Fair Value at December 31, 2010
Dollars in Thousands
Fair Value Measurements Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Assets
Cash and cash equivalents
(Special U.S. Treasuries)1
Available for Sale Debt Securities
Investment in U.S.
Treasury Obligations2
Trust preferred securities

Significant
Unobservable
Inputs (Level 3)

Total Assets
at Fair Value

$27,076,606

$27,076,606

12,371,268

12,371,268
$2,297,818

$39,447,874

2,297,818

826,182

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

Significant Other
Observable Inputs
(Level 2)

826,182

$3,124,000

$0

$42,571,874

(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.

In exchange for prior loss-share guarantee coverage
provided to Citigroup as described in Note 5,
the FDIC and the Treasury received TruPs. At
December 31, 2010, the fair value of the securities
in the amount of $3.124 billion was classified
as a Level 2 measurement based on an FDIC
developed model using observable market data
for traded Citigroup securities to determine the

expected present value of future cash flows. Key
inputs include market yields on U.S. Dollar
interest rate swaps and discount rates for default,
call and liquidity risks that are derived from
traded Citigroup securities and modeled pricing
relationships.

FINANCIAL STATEMENTS AND NOTES

95

Assets Measured at Fair Value at December 31, 2009
Dollars in Thousands
Fair Value Measurements Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Assets
Cash and cash equivalents
(Special U.S. Treasuries)1
Available for Sale Debt Securities
Investment in U.S. Treasury
Obligations2
Trust preferred securities

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs (Level 3)

$54,092,423

$54,092,423

5,486,799

5,486,799
$1,961,824

1,961,824

705,375

705,375

$2,667,199

$62,246,421

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

Total Assets at Fair
Value

$59,579,222

$0

(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.

At December 31, 2009 the fair value of the TruPs
in the amount of $2.667 billion was classified
as a Level 3 measurement and 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. The change in
fair value classification from Level 3 to Level 2
between 2009 and 2010 was due to a greater
reliance on observable inputs. The table below
reconciles the beginning and ending Level 3
balances for 2010.

Fair Value Measurements Using Unobservable Inputs (Level 3) - Trust Preferred Securities
at December 31
Dollars in Thousands
2010

2009

Beginning balance
Total gains or losses

$2,667,199

$0

0

0

Transfers in and/or out of Level 3

(2,667,199)

2,667,199

Total

$0

$2,667,199

(a) The Corporation’s policy is to recognize Level 3 transfers as of the beginning of the reporting period.
(b) The transfer from Level 3 to Level 2 was due to adoption of observable market data for these securities.

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

96

FINANCIAL STATEMENTS AND NOTES

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 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.
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.
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). The program is
codified in part 370 of title 12 of the Code of
Federal Regulations (12 CFR Part 370).
Debt Guarantee Program
The DGP permitted participating entities to issue
FDIC-guaranteed senior unsecured debt through
October 31, 2009. The FDIC’s guarantee for all
such debt expires on the earliest of the conversion
date for mandatory convertible debt, the stated
date of maturity, or December 31, 2012.
All fees for participation in the DGP are reserved
for possible TLGP losses. Through the end of
the debt issuance period, the DIF collected $8.3
billion of guarantee fees and fees of $1.2 billion
from participating entities that elected to issue

FINANCIAL STATEMENTS AND NOTES

97

senior unsecured non-guaranteed debt. The
fees are included in the “Cash and investments –
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 (liquidation amount) of
Citigroup TruPs (and any related interest) as
security in the event payments are required to be
made by the DIF for guaranteed debt instruments
issued by Citigroup or any of its affiliates under
the TLGP. At December 31, 2010, the fair value
of these securities totaled $826 million, and was
determined using the valuation methodology
described in Note 15 for other Citigroup TruPs
held by the DIF. There is an offsetting liability in
“Deferred Revenue- Systemic Risk”, representing
amounts to be transferred to the Treasury or, if
necessary, paid for guaranteed debt instruments
issued by Citigroup or its affiliates under the
TLGP. Consequently, there is no impact on the
fund balance to the DIF.
The FDIC’s payment obligation under the DGP
is 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. Through
December 31, 2010, the FDIC has paid $8
million in claims for principal and interest arising
from guaranteed debt default by three debt issuers.
Sixty-six financial entities (39 insured depository
institutions and 27 affiliates and holding
companies) had $267.1 billion in guaranteed
debt outstanding at year end. This reported
outstanding debt at year end is derived from data
submitted by debtholders. At December 31, 2010,

98

FINANCIAL STATEMENTS AND NOTES

the contingent liability for this guarantee of $149
million 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 $545 million could
occur under the DGP. Given the magnitude of
outstanding debt and the uncertainty surrounding
future possible losses, the FDIC believes it is
appropriate to continue its current practice of
deferring income recognition for the remaining
$9.1 billion of “Deferred Revenue-Systemic Risk.”
Transaction Account Guarantee Program
The Transaction Account Guarantee Program,
implemented under the TLGP, provided unlimited
coverage through December 31, 2010 for noninterest bearing transaction accounts held by
insured depository institutions on all deposit
amounts exceeding the fully insured limit of
$250,000. During 2010 and 2009, the FDIC
collected TAG fees of $481 million and $639
million, respectively, which are earmarked for
TLGP possible losses and payments. At December
31, 2010, the “Receivables and other assets –
systemic risk” line item includes $50 million of
estimated TAG fees due from insured depository
institutions on March 31, 2011.
Upon the failure of a participating insured
depository institution, payment of guaranteed
claims of depositors with non-interest bearing
transaction accounts were funded with TLGP
restricted cash. The FDIC is subrogated to these
claims of depositors against the failed entity,
and dividend payments by the receivership are
deposited back into TLGP restricted accounts.
Since inception of the TAG, covered claims were
estimated to be $8.8 billion with estimated losses
of $2.3 billion as of December 31, 2010.

Systemic Risk Activity at December 31, 2010
Dollars in Thousands
Cash and
investments restricted - systemic
risk (1)
Balance at 01-01-10
TAG fees collected
DGP assessments collected

Unrealized gain on U.S.
Treasury obligations
TLGP operating expenses
Reimbursement to DIF
for TAG claims and TLGP
operating expenses incurred
Totals

Deferred revenue systemic risk

$6,430,589

$3,298,819

$(7,847,447)

480,781

(187,541)

Contingent liability systemic risk

Revenue/Expenses systemic risk

(293,240)

3

$(1,411,966)

(3)
50,235

Receivable for TAG fees
Receivable for TAG
accounts at failed
institutions
Dividends and overnight
interest on TruPs held
for UST
Market value adjustment
on TruPs held for UST
Estimated losses for
TAG accounts at failed
institutions
Provision for TLGP losses
in future failures
Guaranteed debt
obligations paid
U.S. investment
interest collected
Interest receivable on U.S.
Treasury obligations
Amortization of U.S.
Treasury obligations
Accrued interest purchased

Receivables and
other assets systemic risk

(50,235)

(493,128)

63,856

(63,856)

120,807

(120,807)

(583,626)

583,626
(1,262,639)

(7,970)

(720)

2,191

(2,191)

(6,822)

6,822

247

(1,262,639)

(12,063)

720

1,262,639

7,970

12,063

$583,626

5,953

(247)
489

242

(264,834)
$6,646,968

$2,269,422

$(9,054,541)

$(149,327)

$(672,818)

(1) As of December 31, 2010, the fair value of investments in U.S. Treasury obligations held by TLGP was $1.6 billion. An unrealized gain of $247 thousand is
reported in the “Deferred revenue - systemic risk” line item.

FINANCIAL STATEMENTS AND NOTES

99

17. Subsequent Events
Subsequent events have been evaluated through
March 14, 2011, the date the financial statements
are available to be issued.
2011 Failures through March 14, 2011
Through March 14, 2011, 25 insured institutions
failed in 2011 with total losses to the DIF
estimated to be $1.8 billion.
Assessments
On February 7, 2011, the FDIC adopted a Final
Rule, Assessments, Large Bank Pricing, which
becomes effective on April 1, 2011. The Rule
amends 12 CFR 327 to implement revisions
to the FDI Act made by the Dodd-Frank Act
to: 1) redefine the assessment base used for
calculating deposit insurance assessments; 2)
change the assessment rate adjustments; 3)
lower the initial base rate schedule and the total
base rate schedule for all insured depository
institutions to collect approximately the same
revenue for the DIF under the new assessment
base as would have been collected under the
former assessment base; 4) provide progressively
lower assessment rate schedules when the reserve
ratio of the DIF reaches certain enumerated
levels and suspend dividends indefinitely; and 5)
change the risk-based assessment system for large
insured depository institutions (generally, those
institutions with at least $10 billion in
total assets).
During the last quarter of 2010, FDIC issued
three Notices of Proposed Rulings (NPRs)
in order to propose revisions to the FDI Act,
as amended (see Note 9). This Final Rule
encompasses all of the proposals contained in the
NPRs, except the proposal setting the Designated
Reserve Ratio (DRR), which was covered in the
DRR Final Rule issued in December 2010.

100

FINANCIAL STATEMENTS AND NOTES

FSLIC Resolution Fund
Federal Deposit Insurance Corporation
FSLIC Resolution Fund Balance Sheet at December 31
Dollars in Thousands
2010
Assets
Cash and cash equivalents

2009

$3,547,907

$3,470,125

23,408

32,338

323,495

405,412

$3,894,810

$3,907,875

$2,990

$2,972

323,495

405,412

326,485

408,384

127,792,696

127,847,696

Accumulated deficit

(124,224,371)

(124,348,205)

Total Resolution Equity

3,568,325

3,499,491

$3,894,810

$3,907,875

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

Total Liabilities and Resolution Equity

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

FINANCIAL STATEMENTS AND NOTES

101

FSLIC Resolution Fund
Federal Deposit Insurance Corporation
FSLIC Resolution Fund Statement of Income and Accumulated Deficit for the Years Ended December 31
Dollars in Thousands
2010

2009

Revenue
Interest on U.S. Treasury obligations

$3,876

$3,167

9,393

5,276

13,269

8,443

Expenses and Losses
Operating expenses

3,832

4,905

Provision for losses

(945)

2,051

Goodwill litigation expenses (Note 4)

(53,266)

408,997

Recovery of tax benefits

(63,256)

(10,279)

Other revenue
Total Revenue

3,070

2,908

Total Expenses and Losses

(110,565)

408,582

Net Income (Loss)

123,834

(400,139)

Other expenses

Accumulated Deficit - Beginning
Accumulated Deficit - Ending

(124,348,205)

(123,948,066)

$(124,224,371)

$(124,348,205)

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

102

FINANCIAL STATEMENTS AND NOTES

FSLIC Resolution Fund
Federal Deposit Insurance Corporation
FSLIC Resolution Fund Statement of Cash Flows for the Years Ended December 31
Dollars in Thousands
2010

2009

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

$123,834

$(400,139)

(945)

2,051

9,875

563

Change in Operating Assets and Liabilities:
Decrease in receivables from thrift resolutions and
other assets
Increase (Decrease) in accounts payable and
other liabilities
(Decrease) Increase in contingent liabilities for
goodwill litigation

18

(5,094)

(81,917)

263,107

Net Cash Provided (Used) by Operating Activities

50,865

(139,512)

Provided by:
U.S. Treasury payments for goodwill litigation
(Note 4)

26,917

142,410

Net Cash Provided by Financing Activities

26,917

142,410

Net Increase in Cash and Cash Equivalents

77,782

2,898

3,470,125

3,467,227

$3,547,907

$3,470,125

Financing Activities

Cash and Cash Equivalents - Beginning
Cash and Cash Equivalents - Ending

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

FINANCIAL STATEMENTS AND NOTES

103

Notes to the Financial Statements
FSLIC Resolution Fund
December 31, 2010 and 2009

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 former Resolution
Trust Corporation (RTC).
The U.S. Congress created the FSLIC through the
enactment of the National Housing Act of 1934.
The Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) abolished the
insolvent FSLIC, created the FSLIC Resolution
Fund (FRF), and transferred the assets and
liabilities of the FSLIC to the FRF-except those
assets and liabilities transferred to the RTCeffective 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

104

FINANCIAL STATEMENTS AND NOTES

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
million in appropriations to facilitate, if required,
efforts to wind up the resolution activity of the
FRF-FSLIC.
The FDIC has conducted an extensive review and
cataloging of FRF’s remaining assets and liabilities.
Some of the issues and items that remain open in
FRF are: 1) criminal restitution orders (generally
have from 3 to 13 years remaining to enforce);
2) collections of settlements and judgments
obtained against officers and directors and
other professionals responsible for causing or
contributing to thrift losses (generally have from
one to 10 years remaining to enforce, unless
the judgments are renewed, which will result in
significantly longer periods for collection for some
judgments); 3) numerous assistance agreements
entered into by the former FSLIC (FRF could
continue to receive tax benefits sharing through
the year 2012); 4) goodwill litigation (no final
date for resolution has been established; see
Note 4); and 5) affordable housing program
monitoring (requirements can exceed 25 years).
The FRF could potentially realize recoveries from
tax benefits sharing of up to approximately $52
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.

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 receivership entities because these
entities are legally separate and distinct, and the
FRF does not have any ownership interests in
them. Periodic and final accountability reports
of receivership entities are furnished to courts,
supervisory authorities, and others upon request.
Use of Estimates
Management makes estimates and assumptions
that affect the amounts reported in the financial
statements and accompanying notes. Actual results
could differ from these estimates. Where it is

reasonably possible that changes in estimates will
cause a material change in the financial statements
in the near term, the nature and extent of such
changes in estimates have been disclosed. The
more significant estimates include allowance for
losses on receivables from thrift resolutions and
the estimated losses for litigation.

Cash Equivalents
Cash equivalents are short-term, highly liquid
investments consisting primarily of U.S. Treasury
Overnight Certificates.
Provision for Losses
The provision for losses represents the change
in the valuation of the receivables from thrift
resolutions and other assets.
Disclosure about Recent Relevant
Accounting Pronouncements
ASU No. 2010-06, Fair Value Measurements
and Disclosures (Topic 820) – Improving
Disclosures about Fair Value Measurements,
requires enhanced disclosures for significant
transfers into and out of Level 1 (measured
using quoted prices in active markets) and
Level 2 (measured using other observable
inputs) of the fair value measurement
hierarchy. These disclosures are effective
for interim and annual reporting periods
beginning after December 15, 2009, but
did not impact the FRF in 2010. Separate
disclosure of the gross purchases, sales,
issuances, and settlements activity for Level
3 (measured using unobservable inputs) fair
value measurements will become effective
for fiscal years beginning after December 15,
2010. Currently, the additional disclosures are
not expected to impact the FRF.
Other recent accounting pronouncements have
been deemed to be not applicable or material to
the financial statements as presented.

FINANCIAL STATEMENTS AND NOTES

105

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, 2010, eight of the 850 FRF receiverships
remain active. Half of these receiverships are
expected to complete their liquidation efforts
during 2011. The remaining four receiverships
will remain active until their goodwill litigation or
liability-related impediments are resolved.
The FRF receiverships held assets with a book
value of $18 million and $20 million as of
December 31, 2010 and 2009, respectively
(which primarily consist of cash, investments,
and miscellaneous receivables). At December 31,
2010, $13 million of the $18 million in assets in
the FRF receiverships was cash held for non-FRF,
third party creditors.

Other Assets
Other assets primarily include credit enhancement
reserves valued at $17 million and $21 million
as of December 31, 2010 and 2009, respectively.
The credit enhancement reserves resulted from
swap transactions where the former RTC received
mortgage-backed securities in exchange for single-

106

FINANCIAL STATEMENTS AND NOTES

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
cash reserves, which may cover future credit losses
through 2020, are valued by estimating credit
losses on the underlying loan portfolio and then
discounting cash flow projections using marketbased rates.
Receivables From Thrift Resolutions and Other
Assets, Net at December 31
Dollars in Thousands
2010

2009

Receivables from
closed thrifts

$5,763,949

$5,744,509

Allowance for losses

(5,762,186)

(5,736,737)

Receivables from Thrift
Resolutions, Net

1,763

7,772

Other assets

21,645

24,566

$23,408

$32,338

Total

4. Contingent Liabilities for:
Goodwill Litigation
In United States v. Winstar Corp., 518 U.S. 839
(1996), the Supreme Court held that when it
became impossible following the enactment of
FIRREA in 1989 for the federal government to
perform certain agreements to count goodwill
toward regulatory capital, the plaintiffs were
entitled to recover damages from the United
States. Six 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.

2009. No new cases were accrued during 2010.
The one case comprising the contingent liability
and offsetting receivable at December 31, 2010
was accrued prior to 2010 following an appellate
decision for a specific monetary amount.
This case is currently before the lower court
pending on remand following appeal and is still
considered active.

The FRF can draw from an appropriation
provided by Section 110 of the Department
of Justice Appropriations Act, 2000 (Public
Law 106-113, Appendix A, Title I, 113 Stat.
1501A-3, 1501A-20) such sums as may be
necessary for the payment of judgments and
compromise settlements in the goodwill litigation.
This appropriation is to remain available until
expended. Because an appropriation is available
to pay such judgments and settlements, any
estimated liability for goodwill litigation should
have a corresponding receivable from the U.S.
Treasury and therefore have no net impact on the
financial condition of the FRF-FSLIC.

Six goodwill cases were active as of December
31, 2010 compared with eight active cases as of
December 31, 2009. Of the cases considered
active at year end 2009, one was fully adjudicated
with no award and one was settled and paid
during 2010.

For the year ended December 31, 2010, the FRF
paid $27 million as a result of judgments and
settlements in four goodwill cases compared to
$142 million for four goodwill cases for the year
ended December 31, 2009. Of the four goodwill
cases paid during 2010, only one was active at
December 31, 2009 due to ongoing litigation.
The FRF received appropriations from the U.S.
Treasury to fund these payments.
The contingent liability and offsetting receivable
from the U.S. Treasury as of December 31, 2010
was $323 million for one case compared with
$405 million for six cases as of December 31,

Based on representations from the DOJ, the entity
that defends these lawsuits against the United
States, the FDIC is unable to estimate a range
of loss to the FRF-FSLIC for the remaining five
goodwill cases considered active as of December
31, 2010. Three of these cases were not accrued
because court decisions are still pending. In the
other two cases the appellate courts decided to
award nothing, but the cases are still active due to
continued legal proceedings.

In addition, the FRF-FSLIC pays the goodwill
litigation expenses incurred by the DOJ based on
a Memorandum of Understanding (MOU) dated
October 2, 1998, between the FDIC and the DOJ.
Under the terms of the MOU, the FRF-FSLIC
paid $2 million and $4 million to the DOJ for
fiscal years (FY) 2011 and 2010, respectively. As
in prior years, the DOJ carried over and applied
all unused funds toward current FY charges. At
December 31, 2010, the DOJ had an additional
$3 million in unused FY 2010 funds that were
applied against FY 2011 charges of $5 million.

Guarini Litigation
Paralleling the goodwill cases were similar cases
alleging that the government breached agreements
regarding tax benefits associated with certain
FSLIC-assisted acquisitions. These agreements
allegedly contained the promise of tax deductions
for losses incurred on the sale of certain thrift
assets purchased by plaintiffs from the FSLIC,
even though the FSLIC provided the plaintiffs

FINANCIAL STATEMENTS AND NOTES

107

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 2011, after the Internal
Revenue Service (IRS) completes its Large Case
Program audit on the affected Corporation’s 2006
returns; this audit is currently underway. The FRF
is not expected to fund any payment under this
guarantee and no liability has been recorded.

108

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 zero.
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, 2010 and 2009, 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.
Resolution Equity at December 31, 2010
Dollars in Thousands
FRF-FSLIC
Contributed capital –
beginning

FRF-RTC

FRF Consolidated

$46,098,359

$81,749,337

$127,847,696

Contributed capital –
ending
Accumulated deficit

46,043,359

81,749,337

127,792,696

(42,643,726)

(81,580,645)

(124,224,371)

Total

$3,399,633

$168,692

$3,568,325

Contributed Capital
The FRF-FSLIC and the former RTC received
$43.5 billion and $60.1 billion from the U.S.
Treasury, respectively, to fund losses from thrift
resolutions prior to July 1, 1995. Additionally,
the FRF-FSLIC issued $670 million in capital
certificates to the Financing Corporation (a
mixed-ownership government corporation
established to function solely as a financing vehicle
for the FSLIC) and the RTC issued $31.3 billion
of these instruments to the REFCORP. FIRREA
prohibited the payment of dividends on any of
these capital certificates.
Through December 31, 2010, the FRF-RTC has
returned $4.6 billion to the U.S. Treasury and
made payments of $5.0 billion to the REFCORP.
These actions serve to reduce contributed capital.
The most recent payment to the REFCORP was
in January of 2008 for $225 million.

FRF-FSLIC received $27 million in U.S. Treasury
payments for goodwill litigation in 2010.
Furthermore, $323 million and $405 million were
accrued for as receivables at December 31, 2010
and 2009, respectively.

Accumulated Deficit
The accumulated deficit represents the cumulative
excess of expenses and losses over revenue for
activity related to the FRF-FSLIC and the FRFRTC. Approximately $29.8 billion and $87.9
billion were brought forward from the former
FSLIC and the former RTC on August 9, 1989,
and January 1, 1996, respectively. The FRFFSLIC accumulated deficit has increased by $12.8
billion, whereas the FRF-RTC accumulated
deficit has decreased by $6.3 billion, since their
dissolution dates.

FINANCIAL STATEMENTS AND NOTES

109

6. Disclosures About
the Fair Value of
Financial Instruments

date are cash equivalents and credit enhancement
reserves. The following table presents the FRF’s
financial assets measured at fair value as of
December 31, 2010 and 2009.

The financial assets recognized and measured at
fair value on a recurring basis at each reporting
Assets Measured at Fair Value at December 31, 2010
Dollars in Thousands

Fair Value Measurements Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Assets
Cash and cash
equivalents (Special
U.S. Treasuries)1
Credit enhancement
reserves2
Total Assets

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

$3,547,907

Total Assets at
Fair Value

$3,547,907
$17,378
$17,378

$3,547,907

17,378
$3,565,285

(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) Credit enhancement reserves are valued by performing projected cash flow analyses using market-based assumptions (see Note 3).

Assets Measured at Fair Value at December 31, 2009
Dollars in Thousands
Fair Value Measurements Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Assets
Cash equivalents
(Special U.S. Treasuries)1
Credit enhancements
reserves2
Total Assets

Significant Other
Observable Inputs
(Level 2)

$3,470,125

Significant
Unobservable Inputs
(Level 3)

Total Assets at Fair
Value

$3,470,125
$21,278

$3,470,125

21,278

$21,278

$3,491,403

(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) Credit enhancement reserves are valued by performing projected cash flow analyses using market-based assumptions (see Note 3).

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
110

FINANCIAL STATEMENTS AND NOTES

receivership assets. This corporate receivable
is unique and the estimate presented is not
necessarily indicative of the amount that could
be realized in a sale to the private sector. Such a
sale would require indeterminate, but substantial,
discounts for an interested party to profit from
these assets because of credit and other risks.
Consequently, it is not practicable to estimate its
fair value.

FINANCIAL STATEMENTS AND NOTES

111

112

FINANCIAL STATEMENTS AND NOTES

FINANCIAL STATEMENTS AND NOTES

113

114

FINANCIAL STATEMENTS AND NOTES

FINANCIAL STATEMENTS AND NOTES

115

116

FINANCIAL STATEMENTS AND NOTES

FINANCIAL STATEMENTS AND NOTES

117

118

FINANCIAL STATEMENTS AND NOTES

FINANCIAL STATEMENTS AND NOTES

119

120

FINANCIAL STATEMENTS AND NOTES

FINANCIAL STATEMENTS AND NOTES

121

Appendix I
MANAGEMENT’S RESPONSE

Federal Deposit Insurance Corporation
550 17th Street NW, Washington, DC 20429-9990
Deputy to the Chairman and CFO
______________________________________________________________________________________________

March 14, 2011
Mr. Steven J. Sebastian
Director, Financial Management and Assurance
U.S. Government Accountability Office
441 G Street, NW
Washington, DC 20548
Re: FDIC Management Response on the GAO 2010 Financial Statements Audit Report
Dear Mr. Sebastian:
Thank you for the opportunity to review and comment on the U.S. Government Accountability Office’s
(GAO’s) draft report titled, Financial Audit: Federal Deposit Insurance Corporation Funds’ 2010
and 2009 Financial Statements, GAO-11-412. We are pleased that the Federal Deposit Insurance
Corporation (FDIC) received an unqualified opinion for the nineteenth consecutive year on the
financial statements of its funds: the Deposit Insurance Fund (DIF) and the FSLIC Resolution Fund
(FRF). Also, GAO reported that the FDIC had effective internal control over financial reporting and
compliance with laws and regulations for each fund, and there was no reportable noncompliance with
the laws and regulations that were tested.
During the audit year, the FDIC management and staff worked diligently to resolve the material
weakness and significant deficiency internal control issues that were reported in the 2009 audit. We
took significant steps to strengthen controls over the loss share estimation process and the information
systems security and will continue to make improvements in these areas in the coming audit year. Our
dedication to sound financial management remains a top priority.
In complying with audit standards that require management to provide a written assertion about the
effectiveness of its internal control over financial reporting, the FDIC has prepared Management’s
Report on Internal Control over Financial Reporting (see attachment). The report acknowledges
management’s responsibility for establishing and maintaining internal control over financial reporting
and provides the FDIC’s conclusion regarding the effectiveness of its internal control.
We want to thank the GAO staff for their professionalism and dedication during the audit and look
forward to a productive and successful relationship during the 2011 audit. If you have any questions or
concerns, please do not hesitate to contact me.
Sincerely,

Steven O. App
Deputy to the Chairman
And Chief Financial Officer

122

FINANCIAL STATEMENTS AND NOTES

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 conformity 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, 2010, through its enterprise risk management program
that seeks to comply with the spirit of the following standards, among others: Federal Managers’
Financial Integrity Act of 1982 (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 the above assessment, management concluded that, as of December 31, 2010, FDIC’s
internal control over financial reporting is effective based upon the criteria established in FMFIA.
Federal Deposit Insurance Corporation
March 14, 2011

FINANCIAL STATEMENTS AND NOTES

123

Overview of the Industry
The 7,657 FDIC-insured commercial banks and
savings institutions that filed financial reports as
of December 31 reported $87.5 billion in net
income for the full year 2010. This represented a
considerable improvement over the $10.6 billion
aggregate net loss posted in 2009.1 But it is well
below the record annual earnings of $145.2
billion registered in 2006. The average return on
assets (ROA) was 0.66 percent, up compared to a
negative 0.08 percent in 2009. The year-over-year
improvement in earnings was broad-based. More
than two out of every three institutions (67.5
percent) reported higher net income in 2010
compared to a year earlier. More than one in five
institutions (21 percent) reported a net loss for the
year, but this was a significantly smaller percentage
than in 2009, when 30.8 percent
were unprofitable.
Lower expenses for asset-quality problems and
reduced charges for goodwill impairment were the
principal sources of the improvement in industry
net income. Provisions for loan and lease losses
totaled $156.9 billion, which was $92.6 billion
(37.1 percent) less than insured institutions
set aside in 2009. Slightly more than half of
all institutions (51 percent) reported reduced
loss provisions in 2010. Charges for goodwill
impairment totaled $1.7 billion in 2010, a decline
of $28.7 billion compared to 2009. Additional
support for the improvement in industry net
income was limited by a $32.2 billion increase in
income taxes.
Year-over-year comparisons of revenues
are complicated by the application of new
accounting rules to financial reporting in
2010.2 Implementation of the new rules led to
the consolidation of a significant amount of
securitized assets (primarily credit card balances)
back onto the originating banks’ balance sheets
in 2010. Along with the resulting increase in
reported loan balances, there was also an impact

from the cash flows associated with these balances.
At institutions affected by the reporting changes,
reported levels of interest income and expense, net
interest income, and net charge-offs were elevated,
while noninterest income items such as income
from securitization activities, servicing fees, and
trading revenues were reduced. The effects were
evident in industry totals. Net interest income was
$34.4 billion (8.7 percent) higher than in 2009,
while noninterest income was $23.6 billion (9.1
percent) lower. The change in reporting rules had
little or no effect on net revenues. Net operating
revenue (the sum of net interest income and total
noninterest income) was only $10.8 billion (1.6
percent) higher than in 2009.
The average net interest margin (NIM) improved
to 3.76 percent from 3.47 percent in 2009, as
average funding costs fell more rapidly than
average asset yields. This is the highest annual
NIM since 2002, when it reached 3.96 percent.
A majority of institutions (57.1 percent) reported
higher NIMs in 2010, with the largest increases
occurring at institutions that had securitized credit
card receivables and were affected by the new
accounting rules.
The decline in noninterest income reflected
reduced servicing fees (down $13.2 billion, or
44 percent), lower securitization income (down
$4.3 billion, or 89.9 percent), and lower trading
revenue (down $1.4 billion, or 5.6 percent). The
application of new reporting rules contributed
to these declines. Among the noninterest income
categories that were not affected by the new rules,
service charges on deposit accounts were $5.5
billion (13.1 percent) lower than in 2009, gain
on sales of loans and other assets was $3.2 billion
(29.4 percent) lower, and investment banking
income was $2.1 billion (17.8 percent) lower.
Noninterest expenses fell by $12.6 billion in 2010,
as a result of the $28.7 billion reduction in charges
for goodwill impairment. Salaries and employee

1

2

124

Amendments to prior financial reports produced a $23.1 billion net reduction in industry earnings for 2009, from an
originally reported $12.5 billion aggregate profit to a $10.6 billion net loss. Most of the revision resulted from a $20.3
billion increase in charges for goodwill impairment at one large institution.
FASB Statements 166 and 167.

FINANCIAL STATEMENTS AND NOTES

benefits expenses increased by $5.8 billion (3.5
percent), as the number of employees at insured
institutions rose by 23,407 (1.1 percent). Expenses
for premises and fixed assets were $1.0 billion (2.3
percent) lower than in 2009.
Insured institutions charged-off $187.1 billion
(net) in troubled loans in 2010, a $1.7 billion
(0.9 percent) decline from 2009. This is the first
year-over-year decline in charge-offs in four years,
and it occurred despite a $26.6 billion (69.8
percent) increase in reported credit card chargeoffs caused by the new reporting rules that took
effect in 2010. Most major loan categories had
lower charge-offs in 2010. Charge-offs of loans to
commercial and industrial (C&I) borrowers were
$11.2 billion (35.1 percent) lower, charge-offs of
real estate construction and development loans
fell by $6.8 billion (24.8 percent), and chargeoffs of non-credit card consumer loans declined
by $6.1 billion (31.9 percent). Apart from credit
cards, the only other major loan category that had
increased charge-offs was real estate loans secured
by nonfarm nonresidential properties. Net chargeoffs of these loans were $4.6 billion (54.5 percent)
higher than in 2009.
In the twelve months ended December 31, the
amount of loans and leases that were noncurrent
(90 days or more past due or in nonaccrual
status) declined by $36.4 billion (9.2 percent).
This is the first 12-month decline in noncurrent
loans and leases since 2005. As was the case with
charge-offs, most major loan categories registered
improvement in noncurrent levels. Noncurrent
real estate construction and development loans
declined by $20.4 billion (28.4 percent) in
2010, while noncurrent C&I loans fell by $12.5
billion (30.2 percent). Noncurrent residential
mortgage loans declined by $3.4 billion (1.9
percent). The two major loan categories where
noncurrent balances increased in 2010 were real
estate loans secured by nonfarm nonresidential
properties (where noncurrent balances were up
by $3.9 billion, or 9.2 percent) and credit cards
(where noncurrent balances rose by $968 million,
or 6.7 percent). The latter increase reflected the
application of new reporting rules in 2010.

Total assets of insured institutions increased
by $234.2 billion (1.8 percent), in 2010. The
increase was attributable to new reporting rules
that caused more than $300 billion in securitized
loan balances to be consolidated into banks’
balance sheets at the beginning of the year. Credit
card balances at year end 2010 were $280.5
billion (66.6 percent) higher than a year earlier.
In contrast, balances in all other major loan
categories declined during 2010. The largest
decline occurred in real estate construction and
development loans, where balances fell by $129.2
billion (28.7 percent). Other large declines
occurred in C&I loans (down $36.0 billion, or 2.9
percent), home equity lines of credit (down $24.7
billion, or 3.7 percent), real estate loans secured by
nonfarm nonresidential properties (down $20.5
billion, or 1.9 percent), and 1-4 family residential
mortgages (down $18.2 billion, or 1 percent).
Insured institutions’ securities holdings increased
by $167.3 billion (6.7 percent) during the year,
as their U.S. Treasury securities rose by $85.1
billion (83.0 percent) and their mortgage-backed
securities increased by $87.4 billion (6.3 percent).
Total deposits increased by $196.2 billion (2.1
percent), as deposits in domestic offices rose by
$176.3 billion (2.3 percent). Most of the increase
in domestic deposits occurred in noninterestbearing accounts, which grew by $136.9 billion
(8.8 percent). Nondeposit liabilities declined by
$30.7 billion (1.3 percent) during the year, as
advances from Federal Home Loan Banks fell
by $146.7 billion (27.5 percent). Other secured
borrowings increased by $205.6 billion, as part
of the consolidation of securitized loan balances
back into balance sheets at the beginning of 2010.
Total equity capital, including minority interests
in consolidated subsidiaries, increased by $68.8
billion (4.8 percent) in 2010.
The number of institutions on the FDIC’s
“Problem List” increased from 702 to 884 during
2010. This is the largest number of “Problem”
institutions since March 31, 1993, when there were
928. Total assets of “Problem” institutions declined
from $402.8 billion to $390.0 billion. During
2010, 157 insured institutions with $92.1 billion in
assets failed and were resolved by the FDIC.

FINANCIAL STATEMENTS AND NOTES

125

5

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 enterprisewide 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:

the Federal Managers’ Financial Integrity
Act (FMFIA);

the Chief Financial Officers Act (CFO Act);
the Government Performance and Results
Act (GPRA);

the Federal Information Security Management
Act (FISMA); and
the 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 statement
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:

MANAGEMENT CONTROL

127

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

implementation of enhanced controls has
eliminated the material weakness and the
significant deficiency.

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

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 2010, as well as
management actions taken to address issues
identified in these audits and evaluations. Based
on this assessment and application of other
criteria, the FDIC concludes that no material
weaknesses existed within the Corporation’s
operations for 2010.

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 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.

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.
At the end of the 2009 audit, GAO identified
a material weakness in the loss-share estimation
processes and a significant deficiency in the
information technology security area. Subsequent

128

MANAGEMENT CONTROL

Additionally, FDIC management will continue
to focus on high priority areas, including
implementation of Dodd-Frank Act, the 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. The tables
on the following pages provide information on
final action taken by management on audit reports
for the federal fiscal year period October 1, 2009,
through September 30, 2010.

TABLE 1: Management Report on Final Action on Audits with Disallowed Costs for Fiscal Year 2010

Number
of Reports

Audit Reports

Disallowed Costs

Dollars in Thousands
A.

Management decisions – final action not taken at beginning of period

0

$0

B.

Management decisions made during the period

4

$34,037

C.

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

4

$34,037

D.

Final action taken during the period:
(a) Collections & offsets

2

$8,127

(b) Other

0

$0

2. Write-offs

2

$837

3. Total of 1(a), 1(b), & 2

2

$8,964

1. Recoveries:

E.

Audit reports needing final action at the end of the period

1

2

$25,1482

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

1

Amount collected in D3 included excess recoveries of $75,000, not reflected in line E.

2

TABLE 2: Management Report on Final Action on Audits with Recommendations to Put Funds to Better

Use for Fiscal Year 2010

Number
of Reports

Audit Reports

Funds Put to
Better Use

Dollars in Thousands
A.

Management decisions – final action not taken at beginning of period

0

$0

B.

Management decisions made during the period

2

$410

C.

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

2

$410

D.

Final action taken during the period:
1. Value of recommendations implemented (completed)

1

$151

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

2

$259

3. Total of 1 and 2

23

$410

0

$0

E.

Audit reports needing final action at the end of the period

One report had both implemented and unimplemented values.

3

TABLE 3: Audit Reports without Final Actions But with Management Decisions over One Year Old for Fiscal

Year 2010
Management Action in Process

Report No.
and Issue Date
AUD-10-002
12/11/09

OIG Audit Finding
The OIG recommended that the FDIC should
review and revise (where appropriate) its risk
assessment methodology, to ensure adequate
consideration of the risks associated with
electronic transactions involving the Internet.

Management Action
The FDIC will formally document and further integrate its existing
e-authentication risk assessments into the overall risk assessment
methodology. Also, the FDIC will reassess the e-authentication risk
assessment process for FDICconnect.

Disallowed
Costs
$0

Completed: February 2011

MANAGEMENT CONTROL

129

6

Appendices

APPENDICES

131

A. Key Statistics
FDIC EXPENDITURES 2001 – 2010

$3,500

3,000

Dollars in Millions

2,500

2,000

1,500

1,000

500

0
2001

2002

2003

2004

2005

The FDIC’s Strategic Plan and Annual
Performance Plan provide the basis for annual
planning and budgeting for needed resources. The
2010 aggregate budget (for corporate, receivership,
and investment spending) was $4.0 billion, while
actual expenditures for the year were $3.4 billion,
about $1.1 billion more than 2009 expenditures.

132

APPENDICES

2006

2007

2008

2009

2010

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.

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through December 31, 2010
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions

Insurance Fund as a
Percentage of

Year

Insurance
Coverage1

Total Domestic
Deposits

Est. Insured
Deposits2

Percentage
of Insured
Deposits

Deposit
Insurance
Fund

2010

$250,000

$7,887,730

$6,221,127

78.9

$(7,352.2)

(0.09)

(0.12)

2009

250,000

7,705,329

5,407,733

70.2

(20,861.8)

(0.27)

(0.39)

2008

100,000

7,505,409

4,750,783

63.3

17,276.3

0.23

0.36

2007

100,000

6,921,678

4,292,211

62.0

52,413.0

0.76

1.22

2006

100,000

6,640,097

4,153,808

62.6

50,165.3

0.76

1.21

2005

100,000

6,229,823

3,891,000

62.5

48,596.6

0.78

1.25

2004

100,000

5,724,775

3,622,213

63.3

47,506.8

0.83

1.31

2003

100,000

5,224,030

3,452,606

66.1

46,022.3

0.88

1.33

2002

100,000

4,916,200

3,383,720

68.8

43,797.0

0.89

1.29

2001

100,000

4,565,068

3,216,585

70.5

41,373.8

0.91

1.29

2000

100,000

4,211,895

3,055,108

72.5

41,733.8

0.99

1.37

1999

100,000

3,885,826

2,869,208

73.8

39,694.9

1.02

1.38

1998

100,000

3,817,150

2,850,452

74.7

39,452.1

1.03

1.38

1997

100,000

3,602,189

2,746,477

76.2

37,660.8

1.05

1.37

1996

100,000

3,454,556

2,690,439

77.9

35,742.8

1.03

1.33

1995

100,000

3,318,595

2,663,873

80.3

28,811.5

0.87

1.08

1994

100,000

3,184,410

2,588,619

81.3

23,784.5

0.75

0.92

1993

100,000

3,220,302

2,602,781

80.8

14,277.3

0.44

0.55

1992

100,000

3,275,530

2,677,709

81.7

178.4

0.01

0.01

1991

100,000

3,331,312

2,733,387

82.1

(6,934.0)

(0.21)

(0.25)

1990

100,000

3,415,464

2,784,838

81.5

4,062.7

0.12

0.15

1989

100,000

3,412,503

2,755,471

80.7

13,209.5

0.39

0.48

1988

100,000

2,337,080

1,756,771

75.2

14,061.1

0.60

0.80

1987

100,000

2,198,648

1,657,291

75.4

18,301.8

0.83

1.10

1986

100,000

2,162,687

1,636,915

75.7

18,253.3

0.84

1.12

1985

100,000

1,975,030

1,510,496

76.5

17,956.9

0.91

1.19

1984

100,000

1,805,334

1,393,421

77.2

16,529.4

0.92

1.19

1983

100,000

1,690,576

1,268,332

75.0

15,429.1

0.91

1.22

1982

100,000

1,544,697

1,134,221

73.4

13,770.9

0.89

1.21

1981

100,000

1,409,322

988,898

70.2

12,246.1

0.87

1.24

1980

100,000

1,324,463

948,717

71.6

11,019.5

0.83

1.16

Total Domestic
Deposits

Est. Insured
Deposits

APPENDICES

133

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through December 31, 2010 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions

Insurance Fund as a
Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Year
1979

40,000

$1,226,943

$808,555

65.9

$9,792.7

0.80

1.21

1978

40,000

1,145,835

760,706

66.4

8,796.0

0.77

1.16

1977

40,000

1,050,435

692,533

65.9

7,992.8

0.76

1.15

1976

40,000

941,923

628,263

66.7

7,268.8

0.77

1.16

1975

40,000

875,985

569,101

65.0

6,716.0

0.77

1.18

1974

40,000

833,277

520,309

62.4

6,124.2

0.73

1.18

1973

20,000

766,509

465,600

60.7

5,615.3

0.73

1.21

1972

20,000

697,480

419,756

60.2

5,158.7

0.74

1.23

1971

20,000

610,685

374,568

61.3

4,739.9

0.78

1.27

1970

20,000

545,198

349,581

64.1

4,379.6

0.80

1.25

1969

20,000

495,858

313,085

63.1

4,051.1

0.82

1.29

1968

15,000

491,513

296,701

60.4

3,749.2

0.76

1.26

1967

15,000

448,709

261,149

58.2

3,485.5

0.78

1.33

1966

15,000

401,096

234,150

58.4

3,252.0

0.81

1.39

1965

10,000

377,400

209,690

55.6

3,036.3

0.80

1.45

1964

10,000

348,981

191,787

55.0

2,844.7

0.82

1.48

1963

10,000

313,304

177,381

56.6

2,667.9

0.85

1.50

1962

10,000

297,548

170,210

57.2

2,502.0

0.84

1.47

1961

10,000

281,304

160,309

57.0

2,353.8

0.84

1.47

1960

10,000

260,495

149,684

57.5

2,222.2

0.85

1.48

1959

10,000

247,589

142,131

57.4

2,089.8

0.84

1.47

1958

10,000

242,445

137,698

56.8

1,965.4

0.81

1.43

1957

10,000

225,507

127,055

56.3

1,850.5

0.82

1.46

1956

10,000

219,393

121,008

55.2

1,742.1

0.79

1.44

1955

10,000

212,226

116,380

54.8

1,639.6

0.77

1.41

1954

10,000

203,195

110,973

54.6

1,542.7

0.76

1.39

1953

10,000

193,466

105,610

54.6

1,450.7

0.75

1.37

1952

10,000

188,142

101,841

54.1

1,363.5

0.72

1.34

1951

10,000

178,540

96,713

54.2

1,282.2

0.72

1.33

1950

134

Insurance
Coverage1

10,000

167,818

91,359

54.4

1,243.9

0.74

1.36

APPENDICES

Total Domestic
Deposits

Est. Insured
Deposits2

Total Domestic
Deposits

Est. Insured
Deposits

Estimated Insured Deposits and the Deposit Insurance Fund,
December 31, 1934, through December 31, 2010 (continued)
Dollars in Millions (except Insurance Coverage)
Deposits in Insured
Institutions

Insurance Fund as a
Percentage of
Percentage
of Insured
Deposits

Deposit
Insurance
Fund

Year
1949

156,786

76,589

48.8

1,203.9

0.77

1.57

5,000

153,454

75,320

49.1

1,065.9

0.69

1.42

1947

5,000

154,096

76,254

49.5

1,006.1

0.65

1.32

1946

5,000

148,458

73,759

49.7

1,058.5

0.71

1.44

1945

5,000

157,174

67,021

42.6

929.2

0.59

1.39

1944

5,000

134,662

56,398

41.9

804.3

0.60

1.43

1943

5,000

111,650

48,440

43.4

703.1

0.63

1.45

1942

5,000

89,869

32,837

36.5

616.9

0.69

1.88

1941

5,000

71,209

28,249

39.7

553.5

0.78

1.96

1940

5,000

65,288

26,638

40.8

496.0

0.76

1.86

1939

5,000

57,485

24,650

42.9

452.7

0.79

1.84

1938

5,000

50,791

23,121

45.5

420.5

0.83

1.82

1937

5,000

48,228

22,557

46.8

383.1

0.79

1.70

1936

5,000

50,281

22,330

44.4

343.4

0.68

1.54

1935

5,000

45,125

20,158

44.7

306.0

0.68

1.52

1934

2

5,000

1948

1

Insurance
Coverage1

5,000

40,060

18,075

45.1

291.7

0.73

1.61

Total Domestic
Deposits

Est. Insured
Deposits2

Total Domestic
Deposits

Est. Insured
Deposits

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) temporarily provides unlimited
coverage for noninterest-bearing transaction accounts for two years beginning December 31, 2010. Coverage limits do
not reflect temporary increases authorized by the Emergency Economic Stabilization Act of 2008. Coverage for certain
retirement accounts increased to $250,000 in 2006. Initial coverage limit was $2,500 from January 1 to June 30, 1934.
Beginning in the fourth quarter of 2010, estimates of insured deposits include the Dodd-Frank Act temporary
unlimited coverage for noninterest-bearing transaction accounts. Prior to 1989, figures are for the Bank Insurance Fund
(BIF) only and exclude insured branches of foreign banks. For 1989 to 2005, figures represent sum of the BIF and
Savings Association Insurance Fund (SAIF) amounts; for 2006 to 2010, figures are for DIF. Amounts for 1989 - 2010
include insured branches of foreign banks. Prior to year-end 1991, insured deposits were estimated using percentages
determined from June Call and Thrift Financial Reports.

APPENDICES

135

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2010
Dollars in Millions
Income

Year

Total

Total

Assessment
Income

Assessment
Credits

Expenses and Losses

Investment
and Other

Effective
Assessment
Rate1

$155,776.5 $101,879.8 $11,391.8 $65,877.3

2010

13,379.9

13,611.2

0.8

2009

24,706.4

17,865.4

148.0

(230.5)
6,989.0

Total

Provision for
Ins. Losses

Administrative
and Operating
Expenses2

Interest &
Other Ins.
Expenses

$164,345.5 $134,894.6 $19,731.5 $9,719.4

0.1772%

75.0

(847.8)

1,592.6

(669.8)

0.2330%

60,709.0

57,711.8

1,271.1

1,726.1

Funding
Transfer from
the FSLIC
Resolution
Fund

Net Income/
(Loss)

$139.5 $(8,429.5)

0

13,304.9

0

(36,002.6)

2008

7,306.3

4,410.4

1,445.9

4,341.8

0.0418%

44,339.5

41,838.8

1,033.5

1,467.2

0

(37,033.2)

2007

3,196.2

3,730.9

3,088.0

2,553.3

0.0093%

1,090.9

95.0

992.6

3.3

0

2,105.3

2006

2,643.5

31.9

0.0

2,611.6

0.0005%

904.3

(52.1)

950.6

5.8

0

1,739.2

2005

2,420.5

60.9

0.0

2,359.6

0.0010%

809.3

(160.2)

965.7

3.8

0

1,611.2

2004

2,240.3

104.2

0.0

2,136.1

0.0019%

607.6

(353.4)

941.3

19.7

0

1,632.7

2003

2,173.6

94.8

0.0

2,078.8

0.0019%

(67.7)

(1,010.5)

935.5

7.3

0

2,241.3

2002

1,795.9

107.8

0.0

2,276.9

0.0023%

719.6

(243.0)

945.1

17.5

0

1,076.3

2001

2,730.1

83.2

0.0

2,646.9

0.0019%

3,123.4

887.9

36.2

0

(393.3)

2,199.3

2000

2,570.1

64.3

0.0

2,505.8

0.0016%

945.2

28.0

883.9

33.3

0

1,624.9

1999

2,416.7

48.4

0.0

2,368.3

0.0013%

2,047.0

1,199.7

823.4

23.9

0

369.7

1998

2,584.6

37.0

0.0

2,547.6

0.0010%

817.5

(5.7)

782.6

40.6

0

1,767.1

1997

2,165.5

38.6

0.0

2,126.9

0.0011%

247.3

(505.7)

677.2

75.8

0

1,918.2

1996

7,156.8

5,294.2

0.0

1,862.6

0.1622%

353.6

(417.2)

568.3

202.5

0

6,803.2

1995

5,229.2

3,877.0

0.0

1,352.2

0.1238%

202.2

(354.2)

510.6

45.8

0

5,027.0

1994

7,682.1

6,722.7

0.0

959.4

0.2192%

(1,825.1)

(2,459.4)

443.2

191.1

0

9,507.2

1993

7,354.5

6,682.0

0.0

672.5

0.2157%

(6,744.4)

(7,660.4)

418.5

497.5

0

14,098.9

1992

6,479.3

5,758.6

0.0

720.7

0.1815%

(596.8)

(2,274.7)

614.83

1,063.1

35.4

7,111.5

1991

5,886.5

5,254.0

0.0

632.5

0.1613%

16,925.3

15,496.2

326.1

1,103.0

42.4

(10,996.4)

1990

3,855.3

2,872.3

0.0

983.0

0.0868%

13,059.3

12,133.1

275.6

650.6

56.1

(9,147.9)

1989

3,496.6

1,885.0

0.0

1,611.6

0.0816%

4,352.2

3,811.3

219.9

321.0

5.6

(850.0)

1988

3,347.7

1,773.0

0.0

1,574.7

0.0825%

7,588.4

6,298.3

223.9

1,066.2

0

(4,240.7)

1987

3,319.4

1,696.0

0.0

1,623.4

0.0833%

3,270.9

2,996.9

204.9

69.1

0

48.5

1986

1,516.9

0.0

1,743.2

0.0787%

2,963.7

2,827.7

180.3

(44.3)

0

296.4

3,385.5

1,433.5

0.0

1,952.0

0.0815%

1,957.9

1,569.0

179.2

209.7

0

1,427.6

1984

3,099.5

1,321.5

0.0

1,778.0

0.0800%

1,999.2

1,633.4

151.2

214.6

0

1,100.3

1983

2,628.1

1,214.9

164.0

1,577.2

0.0714%

969.9

675.1

135.7

159.1

0

1,658.2

1982

2,524.6

1,108.9

96.2

1,511.9

0.0769%

999.8

126.4

129.9

743.5

0

1,524.8

1981

2,074.7

1,039.0

117.1

1,152.8

0.0714%

848.1

320.4

127.2

400.5

0

1,226.6

1980

136

3,260.1

1985

1,310.4

951.9

521.1

879.6

0.0370%

83.6

(38.1)

118.2

3.5

0

1,226.8

APPENDICES

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2010 (continued)
Dollars in Millions
Income

Assessment
Income

Assessment
Credits

Expenses and Losses

Investment
and Other

Effective
Assessment
Rate1

Total

Provision for
Ins. Losses

Administrative
and Operating
Expenses2

Interest &
Other Ins.
Expenses

Funding
Transfer from
the FSLIC
Resolution
Fund

Net Income/
(Loss)

Year

Total

1979

1,090.4

881.0

524.6

734.0

0.0333%

93.7

(17.2)

106.8

4.1

0

996.7

1978

952.1

810.1

443.1

585.1

0.0385%

148.9

36.5

103.3

9.1

0

803.2

1977

837.8

731.3

411.9

518.4

0.0370%

113.6

20.8

89.3

3.5

0

724.2

1976

764.9

676.1

379.6

468.4

0.0370%

212.3

28.0

180.44

3.9

0

552.6

1975

689.3

641.3

362.4

410.4

0.0357%

97.5

27.6

67.7

2.2

0

591.8

1974

668.1

587.4

285.4

366.1

0.0435%

159.2

97.9

59.2

2.1

0

508.9

1973

561.0

529.4

283.4

315.0

0.0385%

108.2

52.5

54.4

1.3

0

452.8

1972

467.0

468.8

280.3

278.5

0.0333%

65.7

10.1

49.6

6.0

5

0

401.3

1971

415.3

417.2

241.4

239.5

0.0345%

60.3

13.4

46.9

0.0

0

355.0

1970

382.7

369.3

210.0

223.4

0.0357%

46.0

3.8

42.2

0.0

0

336.7

1969

335.8

364.2

220.2

191.8

0.0333%

34.5

1.0

33.5

0.0

0

301.3

1968

295.0

334.5

202.1

162.6

0.0333%

29.1

0.1

29.0

0.0

0

265.9

1967

263.0

303.1

182.4

142.3

0.0333%

27.3

2.9

24.4

0.0

0

235.7

1966

241.0

284.3

172.6

129.3

0.0323%

19.9

0.1

19.8

0.0

0

221.1

1965

214.6

260.5

158.3

112.4

0.0323%

22.9

5.2

17.7

0.0

0

191.7

1964

197.1

238.2

145.2

104.1

0.0323%

18.4

2.9

15.5

0.0

0

178.7

1963

181.9

220.6

136.4

97.7

0.0313%

15.1

0.7

14.4

0.0

0

166.8

1962

161.1

203.4

126.9

84.6

0.0313%

13.8

0.1

13.7

0.0

0

147.3

1961

147.3

188.9

115.5

73.9

0.0323%

14.8

1.6

13.2

0.0

0

132.5

1960

144.6

180.4

100.8

65.0

0.0370%

12.5

0.1

12.4

0.0

0

132.1

1959

136.5

178.2

99.6

57.9

0.0370%

12.1

0.2

11.9

0.0

0

124.4

1958

126.8

166.8

93.0

53.0

0.0370%

11.6

0.0

11.6

0.0

0

115.2

1957

117.3

159.3

90.2

48.2

0.0357%

9.7

0.1

9.6

0.0

0

107.6

1956

111.9

155.5

87.3

43.7

0.0370%

9.4

0.3

9.1

0.0

0

102.5

1955

105.8

151.5

85.4

39.7

0.0370%

9.0

0.3

8.7

0.0

0

96.8

1954

99.7

144.2

81.8

37.3

0.0357%

7.8

0.1

7.7

0.0

0

91.9

1953

94.2

138.7

78.5

34.0

0.0357%

7.3

0.1

7.2

0.0

0

86.9

1952

88.6

131.0

73.7

31.3

0.0370%

7.8

0.8

7.0

0.0

0

80.8

1951

83.5

124.3

70.0

29.2

0.0370%

6.6

0.0

6.6

0.0

0

76.9

1950

84.8

122.9

68.7

30.6

0.0370%

7.8

1.4

6.4

0.0

0

77.0

APPENDICES

137

Income and Expenses, Deposit Insurance Fund, from Beginning of Operations,
September 11, 1933, through December 31, 2010 (continued)
Dollars in Millions
Income

Year

Total

Assessment
Income

Assessment
Credits

Expenses and Losses

Investment
and Other

Effective
Assessment
Rate1

Total

Provision for
Ins. Losses

Administrative
and Operating
Expenses2

Interest &
Other Ins.
Expenses

Funding
Transfer from
the FSLIC
Resolution
Fund

Net Income/
(Loss)

1949

151.1

122.7

0.0

28.4

0.0833%

6.4

0.3

6.1

0.0

0

144.7

1948

145.6

119.3

0.0

26.3

0.0833%

7.0

0.7

6.3

6

0.0

0

138.6

1947

157.5

114.4

0.0

43.1

0.0833%

9.9

0.1

9.8

0.0

0

147.6

1946

130.7

107.0

0.0

23.7

0.0833%

10.0

0.1

9.9

0.0

0

120.7

1945

121.0

93.7

0.0

27.3

0.0833%

9.4

0.1

9.3

0.0

0

111.6

1944

99.3

80.9

0.0

18.4

0.0833%

9.3

0.1

9.2

0.0

0

90.0

1943

86.6

70.0

0.0

16.6

0.0833%

9.8

0.2

9.6

0.0

0

76.8

1942

69.1

56.5

0.0

12.6

0.0833%

10.1

0.5

9.6

0.0

0

59.0

1941

62.0

51.4

0.0

10.6

0.0833%

10.1

0.6

9.5

0.0

0

51.9

1940

55.9

46.2

0.0

9.7

0.0833%

12.9

3.5

9.4

0.0

0

43.0

1939

5
6

138

0.0833%

16.4

7.2

9.2

0.0

0

34.8

9.4

0.0833%

11.3

2.5

8.8

0.0

0

36.4

48.2

38.8

0.0

9.4

0.0833%

12.2

3.7

8.5

0.0

0

36.0

43.8

35.6

0.0

8.2

0.0833%

10.9

2.6

8.3

0.0

0

32.9

20.8

11.5

0.0

9.3

0.0833%

11.3

2.8

8.5

0.0

0

9.5

1933-34

4

10.5

0.0

1935

3

0.0

38.3

1936

2

40.7

47.7

1937

1

51.2

1938

7.0

0.0

0.0

7.0

N/A

10.0

0.2

9.8

0.0

0

(3.0)

Figures represent only BIF-insured institutions prior to 1990, BIF- and SAIF-insured institutions from 1990 through 2005, and DIF-insured
institutions beginning in 2006. After 1995, all thrift closings became the reponsibility of the FDIC and amounts are reflected in the SAIF.
The effective assessment rate is calculated from annual assessment income (net of assessment credits), excluding transfers to the Financing
Corporation (FICO), Resolution Funding Corporation (REFCORP) and FSLIC Resolution Fund, divided by the four quarter average
assessment base. The effective rates from 1950 through 1984 varied from the statutory rate of 0.0833 percent due to assessment credits provided
in those years. The statutory rate increased to 0.12 percent in 1990 and to a minimum of 0.15 percent in 1991. The effective rates in 1991 and
1992 varied because the FDIC exercised new authority to increase assessments above the statutory minimum rate when needed. Beginning in
1993, the effective rate was based on a risk-related premium system under which institutions paid assessments in the range of 0.23 percent to
0.31 percent. In May 1995, the BIF reached the mandatory recapitalization level of 1.25 percent. As a result, BIF assessment rates were reduced
to a range of 0.04 percent to 0.31 percent of assessable deposits, effective June 1995, and assessments totaling $1.5 billion were refunded in
September 1995. Assessment rates for the BIF were lowered again to a range of 0 to 0.27 percent of assessable deposits, effective the start of
1996. In 1996, the SAIF collected a one-time special assessment of $4.5 billion. Subsequently, assessment rates for the SAIF were lowered
to the same range as the BIF, effective October 1996. This range of rates remained unchanged for both funds through 2006. As part of the
implementation of the Federal Deposit Insurance Reform Act of 2005, assessment rates were increased to a range of 0.05 percent to 0.43 percent
of assessable deposits effective at the start of 2007, but many institutions received a one-time assessment credit ($4.7 billion in total) to offset the
new assessments. On December 16, 2008, the FDIC Board of Directors (the “Board”) adopted a final rule to temporarily increase assessment
rates for the first quarter of 2009 to a range of 0.12 percent to 0.50 percent of assessable deposits. On February 27, 2009, the Board adopted a
final rule effective April 1, 2009, setting initial base assessment rates to a range of 0.12 percent to 0.45 percent of assessable deposits. On June
30, 2009, a special assessment was imposed on all insured banks and thrifts, which amounted in aggregate to approximately $5.4 billion. For
8,106 institutions, with $9.3 trillion in assets, the special assessment was 5 basis points of each institution’s assets minus tier one capital; 89 other
institutions, with assets of $4.0 trillion, had their special asssessment capped at 10 basis points of their second quarter assessment base.
These expenses, which are presented as operating expenses in the Statement of Income and Fund Balance, pertain to the FDIC in its corporate
capacity only and do not include costs that are charged to the failed bank receiverships that are managed by the FDIC. The receivership expenses
are presented as part of the “Receivables from Resolutions, net” line on the Balance Sheet. The narrative and graph presented in the “Corporate
Planning and Budget” section of this report (page 132) show the aggregate (corporate and receivership) expenditures of the FDIC.
Includes $210 million for the cumulative effect of an accounting change for certain postretirement benefits.
Includes a $106 million net loss on government securities.
This amount represents interest and other insurance expenses from 1933 to 1972.
Includes the aggregate amount of $81 million of interest paid on capital stock between 1933 and 1948.

APPENDICES

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
Year

Total

Assets

Deposits

Estimated
Receivership
Loss2

Loss to Funds3

Total

748

$393,986,574

$317,501,978

$75,318,843

$81,580,645

1995

2

423,819

414,692

28,192

27,750

1994

2

136,815

127,508

11,472

14,599

1993

10

6,147,962

4,881,461

267,595

65,212

1992

59

44,196,946

34,773,224

3,234,883

3,780,121

1991

144

78,898,904

65,173,122

8,627,894

9,126,190

1990

213

129,662,498

98,963,962

16,063,762

19,258,655

1989

318

134,519,630

113,168,009

47,085,045

49,308,118

4

Beginning in 1989 through July 1, 1995, all thrift closings were the responsibility of the Resolution Trust Corporation
(RTC). Since the RTC was terminated on December 31, 1995, and all assets and liabilities transferred to the FSLIC
Resolution Fund (FRF), all the results of the thrift closing activity from 1989 through 1995 are now reflected on FRF’s
books. Year is the year of failure, not the year of resolution.
2
The estimated losses represent the projected loss at the fund level from receiverships for unreimbursed subrogated claims
of the FRF and unpaid advances to receiverships from the FRF.
3
The Loss to Funds represents the total resolution cost of the failed thrifts in the FRF-RTC fund, which includes
corporate revenue and expense items such as interest expense on Federal Financing Bank debt, interest expense on
escrowed funds, and interest revenue on advances to receiverships, in addition to the estimated losses for receiverships.
4
Total for 1989 excludes nine failures of the former FSLIC.
1

APPENDICES

139

FDIC-Insured Institutions Closed During 2010
Dollars in Thousands

Name and Location

Bank
Class

Number
of Deposit
Accounts

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

Receiver/Assuming Bank
and Location

Purchase and Assumption - All Deposits
Bank of Leeton
Leeton, MO

NM

1,662

$20,128

$20,335

$20,091

$9,046

01/22/10

Sunflower Bank, N.A.
Salina, KS

Citizens Bank Trust Company of Chicago
Chicago, IL

NM

2,259

$73,490

$74,519

$71,552

$42,861

04/23/10

Republic Bank of Chicago
Oak Brook, IL

The Bank of Bonifay
Bonifay, FL

NM

10,577

$242,871

$230,190

$225,391

$78,605

05/07/10

First Federal Bank of Florida
Lake City, FL

Towne Bank of Arizona
Mesa, AZ

NM

1,018

$120,246

$113,243

$98,547

$44,096

05/07/10

Commerce Bank of Arizona
Tucson, AZ

First National Bank
Savannah, GA

N

3,856

$252,520

$231,857

$211,261

$93,989

06/25/10

The Savannah Bank, N.A.
Savannah, GA

The Gordon Bank
Gordon, GA

NM

2,548

$29,259

$26,867

$29,273

$8,882

10/22/10

Morris Bank
Dublin, GA

Whole Bank Purchase and Assumption - All Deposits
Horizon Bank
Bellingham, WA

NM

39,716

$1,188,956

$1,049,063

$1,040,135

$383,684

01/08/10

Washington FS&LA
Seattle, WA

St. Stephen State Bank
St. Stephen, MN

NM

2,347

$22,895

$23,912

$23,371

$12,197

01/15/10

First State Bank of St. Joseph
St. Joseph, MN

Town Community Bank & Trust
Antioch, IL

NM

1,717

$70,758

$68,323

$69,557

$26,642

01/15/10

First American Bank
Elk Grove Village, IL

Evergreen Bank
Seattle, WA

NM

11,116

$395,980

$340,378

$315,121

$109,168

01/22/10

Umpqua Bank
Roseburg, OR

Premier American Bank
Miami, FL

NM

4,865

$299,225

$285,554

$268,053

$112,344

01/22/10

Premier American Bank, N.A.
Miami, FL

Charter Bank
Santa Fe, NM

SB

19,945

$1,201,922

$859,933

$821,503

$246,120

01/22/10

Charter Bank
Albuquerque, NM

Columbia River Bank
The Dalles, OR

NM

49,744

$955,112

$908,132

$891,998

$167,875

01/22/10

Columbia State Bank
Tacoma, WA

First Regional Bank
Los Angeles, CA

NM

17,633

$2,082,684

$1,664,450

$1,540,091

$545,163

01/29/10

First-Citizens Bank & Trust
Company
Raleigh, NC

American Marine Bank
Bainbridge Island, WA

NM

22,622

$329,246

$287,443

$269,735

$81,369

01/29/10

Columbia State Bank
Tacoma, WA

N

49,467

$840,633

$780,196

$751,253

$197,132

01/29/10

Community & Southern Bank
Carrollton, GA

Community Bank and Trust
Cornelia, GA

NM

99,016

$1,181,717

$1,067,957

$1,020,389

$363,060

01/29/10

SCBT, N.A.
Orangeburg, SC

Florida Community Bank
Immokalee, FL

NM

25,340

$835,701

$776,556

$794,414

$331,055

01/29/10

Premier American Bank, N.A.
Miami, FL

N

3,837

$58,566

$55,662

$49,297

$14,524

01/29/10

United Valley Bank
Cavalier, ND

NM

1,375

$18,155

$16,327

$14,452

$5,042

02/05/10

Community Development
Bank, FSB
Ogema, MN

SI

15,015

$413,673

$395,310

$398,398

$91,528

02/19/10

FirstMerit Bank, N.A.
Akron, OH

First National Bank of Georgia
Carrollton, GA

Marshall Bank National Association
Hallock, MN
1st American State Bank of Minnesota
Hancock, MN
George Washington Savings Bank
Orland Park, IL

140

APPENDICES

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands
Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

$3,646,071

$2,799,362

$2,879,761

$1,035,182

02/19/10

OneWest Bank, FSB
Pasadena, CA

3,052

$53,936

$49,275

$49,068

$3,684

02/19/10

Community National Bank
Hondo, TX

SM

4,326

$119,578

$117,097

$120,435

$33,844

02/19/10

Mutual of Omaha Bank
Omaha, NE

NM

937

$51,095

$50,024

$51,024

$19,057

02/26/10

Heritage Bank of Nevada
Reno, NV

SI

38,259

$717,806

$446,192

$429,154

$184,644

02/26/10

Umpqua Bank
Roseburg, OR

Bank of Illinois
Normal, IL

SM

8,050

$211,711

$198,487

$185,977

$41,856

03/05/10

Heartland Bank and Trust
Company
Bloomington, IL

Sun American Bank
Boca Raton, FL

SM

9,845

$535,724

$443,481

$438,042

$149,588

03/05/10

First-Citizens Bank & Trust
Company
Raleigh, NC

LibertyPointe Bank
New York, NY

NM

4,809

$216,500

$209,477

$198,442

$39,489

03/11/10

Valley National Bank
Wayne, NJ

The Park Avenue Bank
New York, NY

NM

8,771

$520,146

$494,505

$477,584

$107,539

03/12/10

Valley National Bank
Wayne, NJ

Statewide Bank
Covington, LA

NM

9,696

$243,215

$207,821

$206,074

$59,955

03/12/10

Home Bank
Lafayette, LA

Old Southern Bank
Orlando, FL

SM

6,110

$336,390

$319,746

$328,893

$87,984

03/12/10

Centennial Bank
Conway, AR

Century Security Bank
Duluth, GA

NM

1,256

$96,535

$93,967

$95,230

$39,269

03/19/10

Bank of Upson
Thomaston, GA

Appalachian Community Bank
Ellijay, GA

NM

40,289

$1,010,075

$917,575

$924,510

$309,652

03/19/10

Community & Southern Bank
Carrollton, GA

N

1,173

$70,318

$66,752

$67,496

$26,511

03/19/10

The National Bank & Trust
Company
Wilmington, OH

Bank of Hiawassee
Hiawassee, GA

NM

17,119

$377,779

$339,597

$329,792

$116,484

03/19/10

Citizens South Bank
Gastonia, NC

State Bank of Aurora
Aurora, MN

NM

2,641

$28,159

$27,801

$26,502

$8,693

03/19/10

Northern State Bank
Ashland, WI

First Lowndes Bank
Fort Deposit, AL

NM

8,621

$137,175

$131,117

$122,594

$35,314

03/19/10

First Citizens Bank
Luverne, AL

Desert Hills Bank
Phoenix, AZ

NM

9,393

$496,552

$426,473

$410,763

$108,310

03/26/10

New York Community Bank
Westbury, NY

Key West Bank
Key West, FL

SB

1,477

$88,031

$67,662

$76,254

$25,370

03/26/10

Centennial Bank
Conway, AR

McIntosh Commercial Bank
Carrollton, GA

NM

7,785

$363,405

$343,339

$315,912

$141,844

03/26/10

CharterBank
West Point, GA

Unity National Bank
Cartersville, GA

N

13,028

$300,590

$264,286

$244,923

$70,961

03/26/10

Bank of the Ozarks
Little Rock, AR

Beach First National Bank
Myrtle Beach, SC

N

12,329

$590,024

$516,026

$518,344

$119,396

04/09/10

Bank of North Carolina
Thomasville, NC

NM

2,684

$104,034

$81,887

$92,563

$19,084

04/16/10

TD Bank, N.A.
Wilmington, DE

Bank
Class

Number
of Deposit
Accounts

Total
Assets1

SB

43,243

N

Marco Community Bank
Marco Island, FL
Carson River Community Bank
Carson City, NV

Name and Location

La Jolla Bank, FSB
La Jolla, CA
The La Coste National Bank
La Coste, TX

Rainier Pacific Bank
Tacoma, WA

American National Bank
Parma, OH

AmericanFirst Bank
Clermont, FL

Receiver/Assuming Bank
and Location

APPENDICES

141

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands

Name and Location

Butler Bank
Lowell, MA

Bank
Class

Number
of Deposit
Accounts

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

Receiver/Assuming Bank
and Location

SI

8,010

$245,534

$233,222

$225,408

$27,738

04/16/10

People’s United Bank
Bridgeport, CT

City Bank
Lynwood, WA

NM

26,952

$981,913

$1,020,494

$903,819

$264,329

04/16/10

Whidbey Island Bank
Coupeville, WA

First Federal Bank of North Florida
Palatka, FL

SB

16,768

$440,122

$324,198

$371,552

$13,095

04/16/10

TD Bank, N.A.
Wilmington, DE

Innovative Bank
Oakland, CA

NM

4,349

$266,816

$225,241

$211,111

$44,817

04/16/10

Center Bank
Los Angeles, CA

N

235,048

$3,393,818

$2,724,623

$2,861,518

$605,501

04/16/10

TD Bank, N.A.
Wilmington, DE

NM

12,006

$611,504

$487,582

$462,814

$76,525

04/16/10

Union Bank, N.A.
San Francisco, CA

N

154,667

$3,066,240

$3,421,194

$2,774,842

$320,947

04/23/10

Harris National Association
Chicago, IL

NM

8,086

$1,059,194

$1,113,959

$1,021,203

$391,357

04/23/10

MB Financial Bank, N.A.
Chicago, IL

SI

11,153

$194,618

$162,627

$162,662

$52,020

04/23/10

Northbrook Bank and Trust
Company
Northbrook, IL

New Century Bank
Chicago, IL

NM

6,612

$447,239

$492,046

$427,045

$125,868

04/23/10

MB Financial Bank, N.A.
Chicago, IL

Peotone Bank and Trust Company
Peotone, IL

NM

8,405

$130,165

$124,676

$124,317

$46,514

04/23/10

First Midwest Bank
Itasca, IL

Wheatland Bank
Naperville, IL

NM

8,011

$441,694

$438,502

$445,153

$136,915

04/23/10

Wheaton Bank and Trust
Wheaton, IL

BC National Bank
Butler, MO

N

3,382

$52,204

$43,635

$40,180

$15,798

04/30/10

Community First Bank
Butler, MO

CF Bancorp
Port Huron, MI

SI

73,727

$1,599,122

$1,418,445

$1,732,557

$487,779

04/30/10

First Michigan Bank
Troy, MI

Champion Bank
Creve Coeur, MO

NM

4,242

$195,510

$153,763

$160,292

$68,999

04/30/10

BankLiberty
Liberty, MO

Frontier Bank
Everett, WA

NM

96,539

$3,250,734

$2,846,886

$2,759,290

$1,096,211

04/30/10

Union Bank, N.A.
San Francisco, CA

Eurobank
San Juan, PR

NM

23,521

$2,453,138

$1,970,724

$2,313,651

$1,187,775

04/30/10

Oriental Bank and Trust
San Juan, PR

R-G Premier Bank of Puerto Rico
Hato Rey, PR

NM

325,495

$5,681,177

$4,220,108

$5,496,730

$1,455,166

04/30/10

Scotiabank de Puerto Rico
San Juan, PR

Westernbank Puerto Rico
Mayaguez, PR

NM

302,338

$10,797,345

$8,619,969

$10,274,407

$4,249,644

04/30/10

Banco Popular de Puerto Rico
San Juan, PR

1st Pacific Bank of California
San Diego, CA

SM

4,299

$335,798

$291,173

$267,981

$80,457

05/07/10

City National Bank
Los Angeles, CA

Access Bank
Champlin, MN

NM

1,602

$31,996

$31,969

$29,681

$8,644

05/07/10

Prinsbank
Prinsburg, MN

Midwest Bank and Trust Company
Elmwood Park, IL

SM

78,283

$3,172,915

$2,420,738

$2,265,630

$221,301

05/14/10

FirstMerit Bank, N.A.
Akron, OH

New Liberty Bank
Plymouth, MI

NM

3,125

$111,239

$101,884

$99,290

$28,640

05/14/10

Bank of Ann Arbor
Ann Arbor, MI

Riverside National Bank of Florida
Fort Pierce, FL
Tamalpais Bank
San Rafael, CA
Amcore Bank, N.A.
Rockford, IL
Broadway Bank
Chicago, IL
Lincoln Park Savings Bank
Chicago, IL

142

APPENDICES

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands
Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

Bank
Class

Number
of Deposit
Accounts

Satilla Community Bank
Saint Marys, GA

NM

2,348

$135,688

$134,005

$122,425

$32,822

05/14/10

Ameris Bank
Moultrie, GA

Southwest Community Bank
Springfield, MO

NM

1,505

$100,659

$102,463

$97,449

$32,114

05/14/10

Simmons First National Bank
Pine Bluff, AR

Pinehurst Bank
St. Paul, MN

NM

1,597

$61,215

$58,288

$54,630

$11,474

05/21/10

Coulee Bank
La Crosse, WI

Bank of Florida–Southeast
Ft. Lauderdale, FL

NM

7,333

$595,318

$531,752

$477,614

$77,586

05/28/10

Everbank
Jacksonville, FL

Bank of Florida–Southwest
Naples, FL

NM

11,061

$640,894

$559,897

$567,536

$106,905

05/28/10

Everbank
Jacksonville, FL

Bank of Florida–Tampa Bay
Tampa, FL

NM

2,628

$240,513

$224,024

$244,489

$40,273

05/28/10

Everbank
Jacksonville, FL

N

2,920

$102,913

$94,252

$94,825

$21,447

05/28/10

Tri Counties Bank
Chico, CA

NM

6,753

$360,662

$353,943

$331,949

$96,693

05/28/10

City National Bank
Los Angeles, CA

N

2,122

$60,449

$63,483

$72,828

$25,123

06/04/10

The Jefferson Bank
Fayette, MS

TierOne Bank
Lincoln, NE

SB

176,888

$2,824,737

$2,185,817

$1,897,433

$313,755

06/04/10

Great Western Bank
Sioux Falls, SD

Washington First International Bank
Seattle, WA

NM

10,035

$520,887

$441,362

$396,237

$136,118

06/11/10

East West Bank
Pasadena, CA

Nevada Security Bank
Reno, NV

NM

9,846

$492,491

$479,759

$475,638

$87,810

06/18/10

Umpqua Bank
Roseburg, OR

High Desert State Bank
Albuquerque, NM

NM

2,026

$80,343

$80,985

$73,025

$24,829

06/25/10

First American Bank
Artesia, NM

Peninsula Bank
Englewood, FL

NM

13,339

$630,179

$580,140

$605,285

$226,929

06/25/10

Premier American Bank
Miami, FL

USA Bank
Port Chester, NY

NM

2,985

$190,678

$188,644

$190,006

$65,243

07/09/10

New Century Bank
Phoenixville, PA

Bay National Bank
Lutherville, MD

N

2,661

$217,743

$212,612

$205,167

$23,368

07/09/10

Bay Bank, FSB
Lutherville, MD

Home National Bank
Blackwell, OK

N

25,726

$585,445

$514,038

$512,769

$83,213

07/09/10

RCB Bank
Claremore, OK

Mainstreet Savings Bank, FSB
Hastings, MI

SB

8,132

$96,584

$63,291

$62,759

$15,690

07/16/10

Commercial Bank
Alma, MI

Metro Bank of Dade County
Miami, FL

SM

8,766

$399,441

$375,522

$369,253

$75,556

07/16/10

NAFH National Bank
Miami, FL

Olde Cypress Community Bank
Clewiston, FL

SB

8,110

$161,355

$157,997

$160,183

$38,643

07/16/10

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

Turnberry Bank
Aventura, FL

SB

3,888

$240,250

$179,169

$177,459

$40,535

07/16/10

NAFH National Bank
Miami, FL

Woodlands Bank
Bluffton, SC

SB

6,554

$382,803

$364,808

$360,454

$120,068

07/16/10

Bank of the Ozarks
Little Rock, AR

N

20,097

$619,374

$550,891

$540,575

$83,037

07/16/10

NAFH National Bank
Miami, FL

Name and Location

Granite Community Bank
Granite Bay, CA
Sun West Bank
Las Vegas, NV
First National Bank
Rosedale, MS

First National Bank of the South
Spartanburg, SC

Total
Assets1

Total
Deposits1

Receiver/Assuming Bank
and Location

APPENDICES

143

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands
Bank
Class

Number
of Deposit
Accounts

Community Security Bank
New Prague, MN

NM

4,984

$100,649

$95,100

Crescent Bank & Trust Company
Jasper, GA

NM

28,701

$970,235

Home Valley Bank
Cave Junction, OR

SM

13,230

Southwest USA Bank
Las Vegas, NV

NM

Sterling Bank
Lantana, FL
Thunder Bank
Sylvan Grove, KS

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

$94,987

$21,438

07/23/10

Roundbank
Waseca, MN

$932,809

$918,107

$279,759

07/23/10

Renasant Bank
Tupelo, MS

$250,488

$227,935

$227,449

$44,651

07/23/10

South Valley Bank & Trust
Klamath Falls, OR

2,068

$203,690

$183,985

$178,885

$79,904

07/23/10

Plaza Bank
Irvine, CA

SM

7,533

$354,966

$329,541

$317,657

$54,119

07/23/10

IBERIABANK
Lafayette, LA

SM

1,454

$28,248

$27,048

$25,813

$8,007

07/23/10

The Bennington State Bank
Salina, KS

N

8,801

$130,411

$126,993

$117,906

$10,103

07/23/10

First Citizens Bank and Trust
Company, Inc.
Columbia, SC

Bayside Savings Bank
Port Saint Joe, FL

SB

2,191

$64,344

$52,720

$49,891

$19,966

07/30/10

Centennial Bank
Conway, AR

Coastal Community Bank
Panama City Beach, FL

NM

12,152

$377,469

$370,016

$372,707

$106,767

07/30/10

Centennial Bank
Conway, AR

Liberty Bank
Eugene, OR

NM

30,465

$714,574

$692,670

$679,600

$200,197

07/30/10

Home Federal Bank
Nampa, ID

NorthWest Bank and Trust
Acworth, GA

NM

3,861

$160,763

$155,531

$152,916

$39,380

07/30/10

State Bank and Trust Company
Macon, GA

The Cowlitz Bank
Longview, WA

NM

10,709

$489,019

$474,742

$448,186

$82,180

07/30/10

Heritage Bank
Olympia, WA

Ravenswood Bank
Chicago, IL

NM

4,472

$264,628

$269,448

$265,043

$104,994

08/06/10

Northbrook Bank and
Trust Company
Northbrook, IL

Palos Bank and Trust Company
Palos Heights, IL

NM

26,165

$493,391

$467,784

$462,086

$86,611

08/13/10

First Midwest Bank
Itasca, IL

Butte Community Bank
Chico, CA

NM

45,195

$498,751

$471,256

$461,309

$34,729

08/20/10

Rabobank, N.A.
El Centro, CA

Community National Bank at Bartow
Bartow, FL

N

2,804

$67,918

$63,708

$60,308

$15,429

08/20/10

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

Imperial Savings & Loan Association
Martinsville, VA

SB

1,363

$9,448

$10,090

$9,374

$5,062

08/20/10

River Community Bank, N.A.
Martinsville, VA

N

10,146

$156,218

$141,877

$143,569

$32,403

08/20/10

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

Los Padres Bank
Solvang, CA

SB

22,198

$866,459

$770,899

$754,140

$120,143

08/20/10

Pacific Western Bank
San Diego, CA

Pacific State Bank
Stockton, CA

SM

9,957

$312,077

$278,832

$254,769

$38,909

08/20/10

Rabobank, N.A.
El Centro, CA

ShoreBank
Chicago, IL

NM

39,039

$2,166,431

$1,547,403

$2,147,161

$570,625

08/20/10

Urban Partnership Bank
Chicago, IL

Sonoma Valley Bank
Sonoma, CA

NM

12,728

$337,113

$255,501

$251,413

$19,076

08/20/10

Westamerica Bank
San Rafael, CA

Horizon Bank
Bradenton, FL

SM

6,284

$187,819

$164,594

$162,893

$68,863

09/10/10

Bank of the Ozarks
Little Rock, AR

Name and Location

Williamsburg First National Bank
Kingstree, SC

Independent National Bank
Ocala, FL

144

APPENDICES

Total
Assets1

Total
Deposits1

Receiver/Assuming Bank
and Location

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands
Bank
Class

Number
of Deposit
Accounts

NM

4,524

$168,820

$160,718

SI

1,936

$47,523

First Commerce Community Bank
Douglasville, GA

NM

4,173

ISN Bank
Cherry Hill, NJ

NM

Maritime Savings Bank
West Allis, WI

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

$172,102

$60,270

09/17/10

Community & Southern Bank
Carrollton, GA

$41,551

$41,548

$17,588

09/17/10

Foundation Bank
Cincinnati, OH

$248,151

$242,831

$228,416

$77,233

09/17/10

Community & Southern Bank
Carrollton, GA

1,106

$81,564

$79,652

$76,930

$27,799

09/17/10

New Century Bank
Phoenixville, PA

SB

12,973

$350,488

$248,134

$344,476

$105,372

09/17/10

North Shore Bank, FSB
Brookfield, WI

The Peoples Bank
Winder, GA

NM

24,437

$447,185

$398,181

$373,755

$100,169

09/17/10

Community & Southern Bank
Carrollton, GA

Haven Trust Bank Florida
Ponte Vedra Beach, FL

NM

2,223

$148,575

$133,561

$130,909

$36,793

09/24/10

First Southern Bank
Boca Raton, FL

North County Bank
Arlington, WA

NM

7,602

$288,776

$276,081

$258,513

$80,531

09/24/10

Whidbey Island Bank
Coupeville, WA

Shoreline Bank
Shoreline, WA

NM

4,649

$92,980

$90,644

$90,930

$40,381

10/01/10

GBC International Bank
Los Angeles, CA

Wakulla Bank
Crawfordville, FL

NM

26,383

$402,205

$367,228

$394,803

$109,487

10/01/10

Centennial Bank
Conway, AR

Premier Bank
Jefferson City, MO

NM

28,804

$989,382

$869,367

$965,935

$404,596

10/15/10

Providence Bank
Columbia, MO

Security Savings Bank
Olathe, KS

SA

18,336

$453,349

$347,080

$339,787

$80,362

10/15/10

Simmons First National Bank
Pine Bluff, AR

Westbridge Bank and Trust
Chesterfield, MO

NM

1,261

$87,782

$70,131

$67,242

$18,588

10/15/10

Midland States Bank
Effingham, IL

First Bank of Jacksonville
Jacksonville, FL

NM

1,814

$73,922

$72,198

$72,037

$16,098

10/22/10

Ameris Bank
Moultrie, GA

N

6,482

$143,451

$135,475

$137,665

$28,974

10/22/10

Seaway Bank and Trust
Company
Chicago, IL

Hillcrest Bank
Overland Park, KS

NM

38,922

$1,583,611

$1,488,785

$1,476,695

$318,195

10/22/10

Hillcrest Bank, N.A.
Overland Park, KS

Progress Bank of Florida
Tampa, FL

SM

1,882

$94,823

$86,861

$85,294

$24,996

10/22/10

Bay Cities Bank
Tampa, FL

N

6,835

$126,622

$122,880

$123,943

$32,885

10/22/10

United Bank
Zebulon, GA

First Vietnamese American Bank
Westminster, CA

NM

721

$48,000

$47,012

$38,028

$9,635

11/05/10

Grandpoint Bank
Los Angeles, CA

K Bank
Randallstown, MD

NM

23,944

$538,258

$500,056

$498,567

$196,706

11/05/10

Manufacturers & Traders Trust
Co. (M&T Bank)
Buffalo, NY

Pierce Commercial Bank
Tacoma, WA

SM

3,356

$221,082

$193,473

$181,310

$19,814

11/05/10

Heritage Bank
Olympia, WA

Western Commercial Bank
Woodland Hills, CA

NM

1,241

$98,635

$101,127

$105,176

$24,310

11/05/10

First California Bank
Westlake Village, CA

Cooper Star Bank
Scottsdale, AZ

NM

3,321

$203,955

$190,182

$194,655

$43,169

11/12/10

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

Name and Location

Bank of Ellijay
Ellijay, GA
Bramble Savings Bank
Milford, OH

First Suburban National Bank
Maywood, IL

The First National Bank of Barnesville
Barnesville, GA

Total
Assets1

Total
Deposits1

Receiver/Assuming Bank
and Location

APPENDICES

145

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands
Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

Bank
Class

Number
of Deposit
Accounts

Darby Bank & Trust Co.
Vidalia, GA

NM

19,886

$654,714

$587,626

$582,144

$129,590

11/12/10

Ameris Bank
Moultrie, GA

Tifton Banking Company
Tifton, GA

NM

2,685

$143,729

$141,573

$132,992

$24,576

11/12/10

Ameris Bank
Moultrie, GA

Allegiance Bank of America
Bala Cynwyd, PA

NM

2,765

$106,595

$91,996

$96,741

$14,235

11/19/10

VIST Bank
Wyomissing, PA

First Banking Center
Burlington, WI

SM

44,356

$750,724

$664,752

$676,743

$139,746

11/19/10

First Michigan Bank
Troy, MI

Gulf State Community Bank
Carrabelle, FL

NM

7,338

$112,144

$112,193

$108,568

$42,279

11/19/10

Centennial Bank
Conway, AR

Earthstar Bank
Southhampton, PA

NM

4,313

$112,643

$104,505

$98,170

$22,926

12/10/10

Polonia Bank
Huntingdon Valley, PA

Paramount Bank
Farmington Hills, MI

SM

4,725

$252,744

$213,550

$187,403

$89,354

12/10/10

Level One Bank
Farmington Hills, MI

Appalachian Community Bank, F.S.B.
McCaysville, GA

SA

2,639

$68,201

$76,360

$68,552

$25,876

12/17/10

Peoples Bank of
East Tennessee
Madisonville, TN

Chestatee State Bank
Dawsonville, GA

NM

10,740

$244,376

$244,476

$234,908

$75,136

12/17/10

Bank of the Ozarks
Little Rock, AR

N

2,604

$31,569

$28,916

$27,269

$3,717

12/17/10

Farmers & Merchants
Savings Bank
Manchester, IA

NM

3,746

$191,764

$172,514

$141,827

$22,751

12/17/10

Southern Bank
Poplar Bluff, MO

United Americas Bank, N.A.
Atlanta, GA

N

3,851

$242,339

$244,172

$198,466

$75,294

12/17/10

State Bank and Trust Company
Macon, GA

The Bank of Miami
Coral Gables, FL

N

3,595

$448,150

$374,218

$344,755

$59,267

12/17/10

1st United Bank
Boca Raton, FL

SM

31,597

$709,171

$697,109

$660,026

$207,813

01/15/10

Deposit Insurance National Bank
of Kaysville
Kaysville, UT

Centennial Bank
Ogden, UT

NM

3,809

$212,839

$205,076

$222,567

$78,843

03/05/10

Federal Deposit Insurance
Corporation

Advanta Bank Corp.
Draper, UT

NM

12,975

$1,525,931

$1,519,471

$1,335,574

$606,732

03/19/10

Federal Deposit Insurance
Corporation

Lakeside Community Bank
Sterling Heights, MI

NM

1,920

$49,173

$52,290

$58,990

$21,471

04/16/10

Federal Deposit Insurance
Corporation

Arcola Homestead Savings Bank
Arcola, IL

SI

613

$17,028

$18,092

$17,115

$10,829

06/04/10

Federal Deposit Insurance
Corporation

Ideal Federal Savings Bank
Baltimore, MD

SB

807

$6,177

$5,803

$5,378

$5,370

07/09/10

Federal Deposit Insurance
Corporation

Name and Location

Community National Bank
Lino Lakes, MN
First Southern Bank
Batesville, AR

Total
Assets1

Total
Deposits1

Receiver/Assuming Bank
and Location

Insured Deposit Transfer
Barnes Banking Company
Kaysville, UT
Insured Deposit Payoff

146

APPENDICES

FDIC-Insured Institutions Closed During 2010 (continued)
Dollars in Thousands

Name and Location

First Arizona Savings, FSB
Scottsdale, AZ

Bank
Class

Number
of Deposit
Accounts

SA

11,574

Total
Assets1

Total
Deposits1

Insured
Deposit Funding
and Other
Disbursements

Estimated
Loss to
the DIF2

Date of
Closing or
Acquisition

Receiver/Assuming Bank
and Location

$255,920

$190,615

$265,711

$32,316

10/22/10

Federal Deposit Insurance
Corporation

$155,566

$156,188

$562,273

$41,733

03/05/10

Federal Deposit Insurance
Corporation

Insured Deposit Transfer/Purchase & Assumption
Waterfield Bank
Germantown, MD

SB

5,987

Codes for Bank Class:
NM = State-chartered bank that is not a member of the Federal Reserve System
N
= National Bank
SB
= Savings Bank
SI
= Stock and Mutual Savings Bank
SM = State-chartered bank that is a member of the Federal Reserve System
SA
= Savings Association
1
2

Total Assets and Total Deposits data is based upon the last Call Report filed by the institution prior to failure.
Estimated losses are as of 12/31/10. Estimated losses are routinely adjusted with updated information from new appraisals and asset sales, which
ultimately affect the asset values and projected recoveries. Represents the estimated loss to the DIF from deposit insurance obligations. This
amount does not include the estimated loss allocable to the Transaction Account Guarantee claim.

APPENDICES

147

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the
Protection of Depositors, 1934 – 2010
Dollars in Thousands
Bank and Thrift Failures1
Year2

Number
of Banks/
Thrifts

Total Assets3

Total Deposits3

Insured Deposit
Funding and Other
Disbursements

Recoveries

Estimated
Additional
Recoveries

Estimated Losses

2,417

$653,997,204

$529,207,216

$381,767,253

$31,024,200

$116,415,763

2010

157

92,084,987

79,548,141

82,015,397

45,848,906

11,342,867

24,823,624

2009

4

140

169,709,160

137,067,132

135,769,886

82,055,693

14,902,675

38,811,518

2008

4

25

371,945,480

234,321,715

205,407,426

181,587,856

4,199,157

19,620,413

2007

3

2,614,928

2,424,187

1,914,177

1,364,131

365,827

184,219

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

2,126,922

1,689,034

14,415

423,473

2001

4

1,821,760

1,661,214

1,605,147

1,128,577

166,110

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

7,557

614,334

1998

3

290,238

260,675

292,678

58,248

11,600

222,830

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

14,540,771

10,866,745

14

3,674,012

1991

124

64,556,512

52,972,034

21,499,236

15,500,130

5,786

5,993,320

1990

168

16,923,462

15,124,454

10,812,484

8,040,995

0

2,771,489

1989

206

28,930,572

24,152,468

11,443,281

5,247,995

0

6,195,286

1988

200

38,402,475

26,524,014

10,432,655

5,055,158

0

5,377,497

1987

184

6,928,889

6,599,180

4,876,994

3,014,502

0

1,862,492

1986

138

7,356,544

6,638,903

4,632,121

2,949,583

0

1,682,538

1985

116

3,090,897

2,889,801

2,154,955

1,506,776

0

648,179

1984

78

2,962,179

2,665,797

2,165,036

1,641,157

0

523,879

1983

44

3,580,132

2,832,184

3,042,392

1,973,037

0

1,069,355

1982

32

1,213,316

1,056,483

545,612

419,825

0

125,787

1981

7

108,749

100,154

114,944

105,956

0

8,988

1980

10

239,316

219,890

152,355

121,675

0

30,680

1934-1979

148

$879,080,555

4

558

8,615,743

5,842,119

5,133,173

4,752,295

0

380,878

APPENDICES

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the
Protection of Depositors, 1934 – 2010 (continued)
Dollars in Thousands
Assistance Transactions
Year2

Number
of Banks/
Thrifts

Insured Deposit
Funding and Other
Disbursements

Total Deposits3

Total Assets3

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

Estimated
Additional
Recoveries

Recoveries

Estimated Losses

$11,630,356

$6,199,875

$0

$5,430,481

0

0

0

0

0

1,917,482,183

1,090,318,282

0

0

0

0

5

1,306,041,994

280,806,966

0

0

0

0

2007

0

0

0

0

0

0

0

2006

0

0

0

0

0

0

0

2005

0

0

0

0

0

0

0

2004

0

0

0

0

0

0

0

2003

0

0

0

0

0

0

0

2002

0

0

0

0

0

0

0

2001

0

0

0

0

0

0

0

2000

0

0

0

0

0

0

0

1999

0

0

0

0

0

0

0

1998

0

0

0

0

0

0

0

1997

0

0

0

0

0

0

0

1996

0

0

0

0

0

0

0

1995

0

0

0

0

0

0

0

1994

0

0

0

0

0

0

0

1993

0

0

0

0

0

0

0

1992

2

33,831

33,117

1,486

1,236

0

250

1991

3

78,524

75,720

6,117

3,093

0

3,024

1990

1

14,206

14,628

4,935

2,597

0

2,338

1989

1

4,438

6,396

2,548

252

0

2,296

1988

80

15,493,939

11,793,702

1,730,351

189,709

0

1,540,642

1987

19

2,478,124

2,275,642

160,877

713

0

160,164

1986

7

712,558

585,248

158,848

65,669

0

93,179

1985

4

5,886,381

5,580,359

765,732

406,676

0

359,056

5

2010

0

0

2009

5

8

2008

5

APPENDICES

149

Recoveries and Losses by the Deposit Insurance Fund on Disbursements for the
Protection of Depositors, 1934 – 2010 (continued)
Dollars in Thousands
Assistance Transactions (continued)
Year2

Number
of Banks/
Thrifts

Insured Deposit
Funding and Other
Disbursements

Estimated
Additional
Recoveries

Total Assets3

Total Deposits3

154

$3,317,099,253

$1,442,173,417

$11,630,356

$6,199,875

$0

$5,430,481

1984

2

40,470,332

29,088,247

5,531,179

4,414,904

0

1,116,275

1983

4

3,611,549

3,011,406

764,690

427,007

0

337,683

1982

10

10,509,286

9,118,382

1,729,538

686,754

0

1,042,784

1981

3

4,838,612

3,914,268

774,055

1,265

0

772,790

1980

1

7,953,042

5,001,755

0

0

0

0

1934-1979

4

1,490,254

549,299

0

0

0

0

1
2

3
4

5

150

Recoveries

Estimated Losses

Institutions closed by the FDIC, including deposit payoff, insured deposit transfer, and deposit assumption cases.
For 1990 through 2005, amounts represent the sum of BIF and SAIF failures (excluding those handled by the RTC); prior to 1990, figures are
only for the BIF. After 1995, all thrift closings became the responsibility of the FDIC and amounts are reflected in the SAIF. For 2006 to 2010,
figures are for the DIF.
Assets and deposit data are based on the last Call Report or TFR filed before failure.
Includes amounts related to transaction account coverage under the Transaction Account Guarantee Program (TAG). The estimated losses as of
12/31/10 for TAG accounts in 2010, 2009, and 2008 are $643 million, $1,689 million, and $16 million, respectively.
Includes institutions where assistance was provided under a systemic risk determination. Any costs that exceed the amounts estimated under
the least cost resolution requirement would be recovered through a special assessment on all FDIC-insured institutions.

APPENDICES

FDIC Actions on Financial Institutions Applications 2008 – 2010
2010

2009

2008

16

19

123

16

19

123

0

0

0

New Branches

461

521

1,012

Approved

459

521

1,012

Deposit Insurance
Approved

1

Denied

Denied

2

0

0

Mergers

182

190

275

182

190

275

0

0

0

Approved
Denied
Requests for Consent to Serve

840

503

283

840

503

283

Section 19

10

20

8

Section 32

830

483

275

2

Approved

Denied

0

0

0

Section 19

0

0

0

Section 32

0

0

0

33

18

28

33

18

28

0

0

0

67

35

38

66

34

38

1

1

0

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

31

39

45

31

39

45

0

0

0

3

2

11

Approved

3

2

11

Denied

0

0

0

2

6

10

Non-Objection

2

6

10

Objection

0

0

0

3

Approved
Denied
State Bank Activities/Investments

4

Conversion of Mutual Institutions

1

2

3

4

Includes deposit insurance applications filed on behalf of: (1) newly organized institutions, (2) existing uninsured
financial services companies seeking establishment as an insured institution, and (3) interim institutions established to
facilitate merger or conversion transactions, and applications to facilitate the establishment of thrift holding companies.
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.
Amendments to Part 303 of the FDIC Rules and Regulations changed FDIC oversight responsibility in October 1998.
In 1998, Part 303 changed the Delegations of Authority to act upon applications.
Section 24 of the FDI Act, in general, precludes a federally-insured state bank from engaging in an activity not
permissible for a national bank and requires notices to be filed with the FDIC.

APPENDICES

151

Compliance, Enforcement, and Other Related Legal Actions 2008 – 2010
2010
Total Number of Actions Initiated by the FDIC

2009

2008

758

551

273

0

0

0

Sec. 8a By Order Upon Request

0

0

1

Sec. 8p No Deposits

4

4

2

Sec. 8q Deposits Assumed

1

2

1

1

3

1

372

302

97

10

2

4

111

64

62

0

0

0

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 Issued1,2
Consent Orders
Sec. 8e Removal/Prohibition of Director or Officer
Notices of Intention to Remove/Prohibit
Consent Orders
Sec. 8g Suspension/Removal When Charged With Crime
Civil Money Penalties Issued
Sec. 7a Call Report Penalties

0

1

0

Sec. 8i Civil Money Penalties

212

154

98

8

0

0

15

10

2

24

12

2

0

0

0

0

0

0

0

0

1

0

0

0

Sec. 8i Civil Money Penalty Notices of Assessment
Sec. 10c Orders of Investigation
Sec. 19 Waiver Orders
Approved Section 19 Waiver Orders
Denied Section 19 Waiver Orders
Sec. 32 Notices Disapproving Officer/Director’s
Request for Review
Truth-in-Lending Act Reimbursement Actions
Denials of Requests for Relief
Grants of Relief
Banks Making Reimbursement

1

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

64

94

94

126,098

128,973

133,153

1

0

3

1

2

152

These actions do not constitute the initiation of a formal enforcement action and, therefore, are not included in the total number of
actions initiated.
Correction for 2008.

APPENDICES

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 five-year 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 MassachusettsAmherst 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 first survey of
the unbanked by the U.S. Census, 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.
Ms. Bair has served as a member of several
professional and nonprofit organizations,
including the Insurance Marketplace Standards
Association, Women in Housing and Finance,
Center for Responsible Lending, NASD Aheadof-the-Curve Advisory Committee, Massachusetts
Savings Makes Cents, American Bar Association,
Exchequer Club, and Society of Children’s Book
Writers and Illustrators.
Chairman Bair topped The Wall Street Journal’s
annual 50 “Women to Watch List” for 2008. In
2008 and 2009, Forbes Magazine named Ms. Bair
as the world’s second most powerful woman 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
the University of Kansas and a J.D. from the
University of Kansas School of Law. She is married
to Scott P. Cooper and has two children.

APPENDICES

153

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. Gruenberg
played an active role during his service on the
Committee includes the Financial Institutions
Reform, Recovery, and Enforcement Act of
1989 (FIRREA), the Federal Deposit Insurance
Corporation Improvement Act of 1991
(FDICIA), the Gramm-Leach-Bliley Act, and the
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.

154

APPENDICES

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 nonprofit 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.

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.

John Walsh
John Walsh became Acting
Comptroller of the Office
of the Comptroller of the
Currency (OCC) on August
15, 2010, succeeding John
C. Dugan. He also serves
on the FDIC Board of Directors and as a board
member of NeighborWorks® America. Mr. Walsh
joined the OCC in October 2005 and previously
served as Chief of Staff and Public Affairs.
Prior to joining the OCC, Mr. Walsh was the
Executive Director of the Group of Thirty, a
consultative group that focuses on international
economic and monetary affairs. He joined the
Group in 1992, and became Executive Director
in 1995. Mr. Walsh served on the Senate Banking
Committee from 1986 to 1992 and as an
international economist for the U.S. Department
of the Treasury from 1984 to 1986. Mr. Walsh
also served with the Office of Management and
Budget as an international program analyst, with
the Mutual Broadcasting System, and in the U.S.
Peace Corps in Ghana.
Mr. Walsh holds a masters’ degree in public
policy from the Kennedy School of Government,
Harvard University (1978), and graduated magna
cum laude from the University of Notre Dame in
1973. He lives in Catonsville, Maryland, and is
married with four children.

APPENDICES

155

FDIC Organization Chart/Officials
As of December 31, 2010

BOARD OF DIRECTORS

Sheila C. Bair
Martin J. Gruenberg
Thomas J. Curry
John E. Bowman
John Walsh

OFFICE OF THE CHAIRMAN

VICE CHAIRMAN

Sheila C. Bair
Chairman

Martin J. Gruenberg

DEPUTY TO THE CHAIRMAN
FOR RESOLUTION AND LEGAL POLICY

Michael H. Krimminger

OFFICE OF INSPECTOR GENERAL

Russell G. Pittman

James Wigand
Director

Andrew S. Gray
Director

CHIEF INFORMATION OFFICER/
CHIEF PRIVACY OFFICER

Steven O. App

OFFICE OF PUBLIC AFFAIRS

Jesse O. Villarreal, Jr.

OFFICE OF
COMPLEX FINANCIAL
INSTITUTIONS

Jason C. Cave

CHIEF OF STAFF

DEPUTY TO THE
CHAIRMAN AND
CHIEF FINANCIAL OFFICER

DEPUTY TO THE CHAIRMAN

Jon T. Rymer
Inspector General

DIVISION OF
DIVISION OF DEPOSITOR
SUPERVISION AND
AND CONSUMER
CONSUMER PROTECTION
PROTECTION

Mark Pearce
Director

Sandra L. Thompson
Director

DIVISION OF
INSURANCE AND
RESEARCH

DIVISION OF
RESOLUTIONS AND
RECEIVERSHIPS

OFFICE OF
INTERNATIONAL
AFFAIRS

ACTING
GENERAL COUNSEL

DEPUTY TO THE
CHAIRMAN
FOR EXTERNAL AFFAIRS

Arthur J. Murton
Director

Bret D. Edwards
Acting Director

Fred S. Carns
Director

Michael H. Krimminger

Paul M. Nash

DIVISION OF FINANCE

DIVISION
OF ADMINISTRATION

LEGAL DIVISION

OFFICE OF
LEGISLATIVE AFFAIRS

Craig R. Jarvill
Acting Director

Arleas Upton Kea
Director

Michael H. Krimminger
Acting General Counsel

Vacant
Director

DIVISION OF
INFORMATION
TECHNOLOGY

CORPORATE
UNIVERSITY

OFFICE OF THE
OMBUDSMAN

Russell G. Pittman
Director

Thom H. Terwilliger
Chief Learning Officer

Cottrell L. Webster
Ombudsman

OFFICE OF ENTERPRISE
RISK MANAGEMENT

OFFICE OF DIVERSITY
AND ECONOMIC
OPPORTUNITY

James H. Angel, Jr.
Director

D. Michael Collins
Director

156

APPENDICES

Corporate Staffing
STAFFING TRENDS 2001 – 2010

9,000

6,000

3,000

0
FDIC YearEnd Staffing

2001

2002

2003

2004

2005

2006

2007

2008

6,167

5,430

5,311

5,078

4,514

4,476

4,532

4,988

2009
6,557

2010
8,150

Note: 2008-2010 staffing totals reflect year-end full time equivalent staff. Prior to 2008, staffing
totals reflect total employees on board.

APPENDICES

157

Number of Employees by Division/Office 2009 – 2010
(Year-End)1
Total

Washington

Regional/Field

2010

2009

2010

2009

2010

2009

Division of Supervision and Consumer Protection2

3,649

3,168

379

222

3,270

2,946

Division of Resolutions and Receiverships3

2,110

1,158

155

78

1,955

1,080

Legal Division

805

625

352

302

453

323

Division of Administration

430

373

265

217

165

156

Division of Information Technology

328

298

245

227

83

71

Corporate University

207

350

199

52

8

298

Division of Insurance and Research

203

193

173

150

30

43

Division of Finance

165

155

165

145

0

10

Office of Inspector General

128

120

92

84

36

36

Executive Offices4

55

53

55

53

0

0

Office of the Ombudsman

31

22

12

11

19

11

Office of Diversity and Economic Opportunity

26

29

26

29

0

0

Office of Enterprise Risk Management

13

13

13

13

0

0

8,150

6,557

2,131

1,584

6,019

4,973

Total
1

2

The Division of Supervision and Consumer Protection staffing count includes one staff member hired to lead the newly created Division of
Depositor and Consumer Protection (DCP). DCP was not fully recognized as a separate division until January 1, 2011.

3

The Division of Resolutions and Receiverships staffing count includes one staff member hired to lead the newly created Office of Complex
Financial Institutions (OCFI). OCFI was not fully recognized as a separate division until January 1, 2011.

4

158

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.

APPENDICES

Sources of Information
FDIC Website
www.fdic.gov
A wide range of banking, consumer and financial
information is available on the FDIC’s website. This
includes the FDIC’s Electronic Deposit Insurance
Estimator (EDIE), which estimates an individual’s
deposit insurance coverage; the Institution Directory
– 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

703-562-2289
The FDIC Call Center in Washington, DC, is
the primary telephone point of contact for general
questions from the banking community, the public
and FDIC employees. The Call Center directly, or
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.

Public Information Center
3501 Fairfax Drive
Room E-1021
Arlington, VA 22226
PHONE:
FAX:

877-275-3342 (877-ASK-FDIC),
703-562-2200
703-562-2296

FDIC ONLINE CATALOG:

E-MAIL:

https://vcart.velocitypayment.com/
fdic/
publicinfo@fdic.gov

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

Office of the Ombudsman
3501 Fairfax Drive
Room E-2022
Arlington, VA 22226
PHONE:

877-275-3342 (877-ASK-FDIC)

FAX:

703-562-6057

E-MAIL:

ombudsman@fdic.gov

The Office of the Ombudsman (OO) is an
independent, neutral, and confidential resource
and liaison for the banking industry and the
general public. The OO responds to inquiries
about the FDIC in a fair, impartial, and timely
manner. It researches questions and fields
complaints from bankers and bank customers.
OO representatives are present at all bank
closings to provide accurate information to bank
customers, the media, bank employees, and the
general public. The OO also recommends ways
to improve FDIC operations, regulations, and
customer service.

APPENDICES

159

Regional and Area Offices
ATLANTA REGIONAL OFFICE
10 Tenth Street, NE
Suite 800
Atlanta, Georgia 30309
(678) 916-2200

DALLAS REGIONAL OFFICE
1601 Bryan Street
Dallas, Texas 75201
(214) 754-0098
Colorado
New Mexico

Alabama

Oklahoma

Florida

Texas

Georgia
North Carolina
South Carolina
Virginia
West Virginia
CHICAGO REGIONAL OFFICE
300 South Riverside Plaza
Suite 1700
Chicago, Illinois 60606
(312) 382-6000
Illinois
Indiana
Kentucky
Michigan

MEMPHIS AREA OFFICE
5100 Poplar Avenue
Suite 1900
Memphis, Tennessee 38137
(901) 685-1603
Arkansas
Louisiana
Mississippi
Tennessee
KANSAS CITY REGIONAL OFFICE
1100 Walnut Street
Suite 2100
Kansas City, Missouri 64106
(816) 234-8000

Ohio

Iowa

Wisconsin

Kansas
Minnesota
Missouri
Nebraska
North Dakota
South Dakota

160

APPENDICES

NEW YORK REGIONAL OFFICE
350 Fifth Avenue
Suite 1200
New York, New York 10118
(917) 320-2500

SAN FRANCISCO REGIONAL OFFICE
25 Jessie Street at Ecker Square
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

APPENDICES

161

C. Office of Inspector General’s Assessment of the
Management and Performance Challenges Facing the FDIC
Under the Reports Consolidation Act of 2000,
the Office of Inspector General (OIG) is required
to identify the most significant management and
performance challenges facing the Corporation
and provide its assessment to the Corporation
for inclusion in its annual performance and
accountability report. The OIG conducts this
assessment annually and identifies specific areas
of challenge facing the Corporation at the time.
In identifying the challenges, we keep in mind
the Corporation’s overall program and operational
responsibilities; financial industry, economic,
and technological conditions and trends; areas of
congressional interest and concern; relevant laws
and regulations; the Chairman’s priorities and
corresponding corporate goals; and the ongoing
activities to address the issues involved. Taking
time to reexamine the corporate mission and
priorities as the OIG identifies the challenges
helps in planning assignments and directing OIG
resources to key areas of risk.
A significant milestone that will impact multiple
facets of the FDIC’s programs and operations
was the enactment of the Dodd-Frank Wall
Street Reform and Consumer Protection Act
(Dodd-Frank Act) on July 21, 2010. The stated
aim of the Dodd-Frank Act is “To promote
the financial stability of the United States by
improving accountability and transparency in the
financial system, to end ‘too big to fail,’ to protect
the American taxpayer by ending bailouts, to
protect consumers from abusive financial services
practices, and for other purposes”.
In looking at the recent past and the current
environment and anticipating—to the extent
possible—what the future holds, the OIG believes
that the FDIC faces challenges in the areas listed
below. While the Corporation will sustain its
efforts to restore and maintain public confidence
and stability, particularly as it implements key
provisions of the Dodd-Frank Act, challenges will
persist in other areas as well. We note in particular
that the Corporation is devoting significant
additional resources to carrying out its massive

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APPENDICES

resolution and receivership workload, brought on
by 140 financial institution failures during 2009
and an additional 157 during 2010. At the same
time, the FDIC will face continuing challenges
in meeting its deposit insurance responsibilities,
enhancing its supervision of financial institutions,
protecting consumers, and managing its expanded
internal workforce and other corporate resources.
The Corporation can take pride in having
made great efforts to maintain stability and
confidence in the nation’s banking system:
completing or sustaining a number of new
initiatives, responding to new demands, and
playing a key part in shaping the future of bank
regulation over the past year. Passage of the
Dodd-Frank Act presents new opportunities and
challenges for the FDIC to continue its efforts in
restoring the vitality and stability of the financial
system over the coming months.

Restoring and Maintaining Public
Confidence and Stability in the
Financial System
With signs of recovery in the economy and the
financial services industry, the FDIC and other
regulators have turned a corner, but much work
remains. Institutions continue to fail, and the
economy is still stressed. Public confidence has
been shaken and still needs to be bolstered.
Reforms under the Dodd-Frank Act involve
far-reaching changes designed to restore market
discipline, internalize the costs of risk-taking,
protect consumers, and make the regulatory
process more attuned to systemic risks. The FDIC
will have significant involvement in this regard
during the upcoming year.
The Dodd-Frank Act created the Financial
Stability Oversight Council (FSOC), of which
the FDIC is a voting member. The FSOC
will monitor sources of systemic risk and
promulgate rules that will be implemented by
the various financial regulators represented on
the FSOC. In most instances, the FSOC will
reach decisions based on a simple majority of

the FSOC’s 10 voting members. In certain
circumstances, however, a supermajority of seven
votes will be required, one of which must be cast
by the Secretary of the Treasury. The Dodd-Frank
Act also establishes an independent Consumer
Financial Protection Bureau (CFPB) within the
Federal Reserve System; abolishes the Office
of Thrift Supervision (OTS) and transfers its
supervisory responsibilities for federal and statechartered thrift institutions and thrift holding
companies to the Office of the Comptroller of
the Currency (OCC), the FDIC, and the Federal
Reserve System, respectively; and gives the FDIC
new authorities to help address the risks in
systemically important financial companies.
So that the FDIC can best carry out its
responsibilities under the Dodd-Frank Act,
the Board of Directors approved a number of
internal organizational changes, establishing a
new Office of Complex Financial Institutions
(OCFI) and a new Division of Depositor and
Consumer Protection (DCP). In connection
with these changes, the Division of Supervision
and Consumer Protection (DSC) has been
renamed the Division of Risk Management
Supervision (RMS). New leadership impacting
these organizations was announced, effective
December 31, 2010, and those named to
lead them will face challenges in establishing
policies, procedures, and practices to guide their
new efforts.
Taken together, and along with lessons learned
from the past several years, these changes to
the FDIC’s responsibilities and organizational
structure should go a long way toward restoring
confidence and public trust in the nation’s
financial system. The coming months will be
challenging for the FDIC and all of the regulatory
agencies as they work collaboratively to reposition
themselves to carry out the mandates of the DoddFrank Act, writing rules to implement key sections
and undertaking their new responsibilities.

Assuming New Resolution Authority,
Resolving Failed Institutions, and
Managing Receiverships
Perhaps the most fundamental reform under the
Dodd-Frank Act is the new resolution authority
for large bank holding companies and systemically
important nonbank financial companies. The
FDIC has historically carried out a prompt and
orderly resolution process under its receivership
authority for insured banks and thrifts. The
Dodd-Frank Act now gives the FDIC a similar
set of receivership powers to liquidate failed
systemically important financial firms.
A new challenge associated with this responsibility
includes determining how to handle the claims
process under this new authority. The FDIC has
proposed a rule to ensure that all creditors—
shareholders and holders of subordinated,
unsecured, and secured debt—know they are at
risk of loss in a failure. This proposed rule is an
important step in implementing the resolution
authority under the Dodd-Frank Act and ending
“Too Big to Fail.”
Another challenging key step will be to develop
requirements for the resolution plans that all
systemically important financial companies now
have to establish. These resolution plans are
essentially blueprints for the orderly unwinding
of these companies should they run into serious
problems. Under the Dodd-Frank Act, the FDIC
and the Federal Reserve can exercise considerable
authority to shape the content of these plans in
the interest of ensuring that they are an effective
means to guide the resolution of these companies.
In addition to the future challenges associated
with exercising this new resolution authority, the
Corporation is currently dealing with a daunting
resolution and receivership workload. Onehundred-forty institutions failed during 2009,
with total assets, based upon last call reports filed,
of $171.2 billion and total estimated losses to the
Deposit Insurance Fund (DIF) of approximately
$37.1 billion. By year-end 2009, the number
of institutions on the FDIC’s “Problem List”
also rose to its highest level in 16 years. During
2010, an additional 157 institutions failed,

APPENDICES

163

and there were 884 insured institutions on the
“Problem List” at the end of the year, indicating
a probability of more failures to come and an
increased asset disposition workload. Total assets
of problem institutions decreased to $390.0
billion as of year-end 2010.
Franchise marketing activities are at the heart
of the FDIC’s resolution and receivership work.
The FDIC pursues the least costly resolution to
the DIF for each failing institution. Each failing
institution is subject to the FDIC’s franchise
marketing process, which includes valuation,
marketing, bidding and bid evaluation, and
sale components. The FDIC is often able to
market institutions such that all deposits, not
just insured deposits, are purchased by the
acquiring institution, thus avoiding losses to
uninsured depositors.
Of special note, through purchase and assumption
(P&A) agreements with acquiring institutions,
the Corporation has entered into 223 loss-share
agreements covering $193 billion in assets (at
inception). Under these agreements, the FDIC
agrees to absorb a portion of the loss—generally
80-95 percent—which may be experienced by
the acquiring institution with regard to those
assets, for a period of up to 10 years. In addition,
the FDIC has entered into a series of structured
asset sales to dispose of assets with an unpaid
principal balance of $22.5 billion (at inception).
Under these arrangements, the FDIC retains a
participation interest in future net positive cash
flows derived from third-party management of
these assets.
Other post-closing asset management activities
will continue to require much FDIC attention.
FDIC receiverships manage assets from failed
institutions, mostly those that are not purchased
by acquiring institutions through P&A
agreements or involved in structured sales. The
FDIC is managing 344 receiverships holding
about $27.0 billion in assets, mostly securities,
delinquent commercial real-estate and singlefamily loans, and participation loans. Post-closing
asset managers are responsible for managing
many of these assets and rely on receivership

164

APPENDICES

assistance contractors to perform day-to-day asset
management functions. Since these loans are often
sub-performing or nonperforming, workout and
asset disposition efforts are more intensive.
The FDIC has increased its permanent
resolution and receivership staffing and has
significantly increased its reliance on contractor
and term employees to fulfill the critical
resolution and receivership responsibilities
associated with the ongoing FDIC interest in the
assets of failed financial institutions. At the end
of 2008, on-board resolution and receivership
staff totaled 491, while on-board staffing at the
end of 2010 was 2,118. As of year-end 2010,
the FDIC also had about 1,900 active contracts
valued at $4.5 billion; approximately 1,700 of
these were related to the receivership function and
accounted for approximately $3.5 billion of the
total value.
The significant surge in failed-bank assets and
associated contracting activities requires 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 all of the
resolution and receivership responsibilities
outlined above, it will face a number of challenges.
To summarize, first and foremost, it needs to
ensure that it develops and implements strong and
effective controls to mitigate the risks involved
in all of its business dealings with acquirers,
contractors, and other third parties. It also 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. Marketing failing
institutions to qualified and interested potential
bidders, selling assets, and maximizing potential
values of failed bank franchises will continue to
challenge FDIC staff. 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, hard-to-sell assets. It is also possible that
individuals or entities that may have been involved
in previous institution failures or activities
contributing to losses to the insurance fund
could try to reenter the FDIC’s asset purchase
and management arena. Appropriate safeguards
must be in place to ensure that the Corporation
knows the backgrounds of its bidders to prevent
those parties from profiting at the expense of
the Corporation. Finally, in order to minimize
costs, it is important to terminate in a timely
manner those receiverships not subject to lossshare agreements, structured sales, or other legal
impediments.

Ensuring and Maintaining the Viability of
the Deposit Insurance Fund
As of December 31, 2010, there were 7,657
FDIC-insured banking institutions with FDICestimated insured deposits of $6.2 trillion. 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 DIF has
suffered from the failures of the past several years.
Losses from failures in 2008 and 2009 totaled
$19.6 billion and $37.1 billion, respectively.
As of year-end, 2010, failures during 2010 had
caused losses of approximately $24.2 billion. In
September 2009, the DIF’s fund balance—or net
worth—fell below zero for the first time since the
third quarter of 1992. Although the balance of the
DIF declined by $38.1 billion during 2009 and
totaled negative $7.4 billion as of December 31,
2010, the DIF’s liquidity was enhanced during
the fourth quarter of 2009 by 3 years of prepaid
assessments and the DIF has been well positioned
to fund resolution activity in 2010 and beyond.
To maintain a sufficient fund balance, the FDIC
collects risk-based insurance premiums from
insured institutions and invests DIF funds.
The FDIC Board of Directors recently voted
in December 2010 to set the DIF’s designated
reserve ratio at 2 percent of estimated insured
deposits. The Dodd-Frank Act set a minimum
designated reserve ratio of 1.35 percent, and

left unchanged the requirement that the FDIC
Board set a designated reserve ratio annually. The
Board sets the reserve ratio according to risk of
loss to the DIF, economic conditions affecting the
banking industry, preventing sharp swings in the
assessment rates, and any other factors it deems
important. The decision to set the designated
reserve ratio at 2 percent was based on a historical
analysis of losses to the DIF. The analysis showed
that in order to maintain a positive fund balance
and steady, predictable assessment rates, the
reserve ratio should be at least 2 percent as a longterm, minimum goal.
The final rule for the reserve ratio is part of
a comprehensive fund management plan
proposed by the Board in October 2010. The
plan is intended to provide insured institutions
with moderate, steady assessment rates
throughout economic cycles, and to maintain a
positive fund balance even during severe economic
times. The Board acted on other aspects of the
comprehensive plan—assessments, dividends,
assessment base, and large bank pricing—during
the first quarter of 2011.
Importantly, with respect to the largest institutions
and any potential negative impact of their
failure on the fund, Title II of the Dodd-Frank
Act helps to address the notion of “Too Big to
Fail.” The largest institutions will be subjected
to the same type of market discipline facing
smaller institutions. Title II provides the FDIC
authority to wind down systemically important
bank holding companies and nonbank financial
companies as a companion to the FDIC’s
existing authority to resolve insured depository
institutions. As noted earlier, the FDIC’s new
Office of Complex Financial Institutions will play
a key role in overseeing these new functions.

Ensuring Institution Safety and Soundness
Through an Effective Examination and
Supervision Program
The Corporation’s supervision program promotes
the safety and soundness of FDIC-supervised
insured depository institutions. The FDIC is
the primary federal regulator for approximately
4,700 FDIC-insured, state-chartered institutions

APPENDICES

165

that are not members of the Federal Reserve
System—often referred to as “state non-member”
institutions. The OCC, OTS, and Federal Reserve
supervise other banks and thrifts, depending on
the institution’s charter. (Note that the institutions
under the OTS’s purview will be transferred to
the other regulators when the OTS is abolished
pursuant to the Dodd-Frank Act, as referenced
previously.) As insurer, the Corporation also has
backup examination authority to protect the
interests of the DIF for about 2,800 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 to carry out
the examination function will be challenging in
a number of ways. Of particular importance for
2011 is that the Corporation needs to continue to
assess the implications of the recent financial and
economic crisis and to integrate lessons learned
and any needed changes to the examination
program into the supervisory process. At the same
time, it needs to continue to conduct 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
and will need to continue to put that training
into practice going forward. This approach
involves carefully assessing the institution’s overall
risks, and basing 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 offsite 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.
In all cases, examiners need to continue to bring
any identified problems to the bank’s board’s
and management’s attention, assign appropriate
ratings, and make actionable recommendations
to address areas of concern. Subsequently, the
FDIC’s corrective action and follow-up processes

166

APPENDICES

must be effective to ensure that institutions
are acting on recommendations and 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 of directors or senior officers who may have
contributed to an institution’s failure.
The rapid changes in the banking industry,
increase in electronic and online banking, growing
sophistication of fraud schemes, and the mere
complexity of financial transactions and financial
instruments all create potential risks at FDICinsured institutions and their service providers.
These risks can 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 abuses. 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.
With the passage of the Dodd-Frank Act,
the coming months will bring significant
organizational changes to the FDIC’s current
supervision program, as well as corresponding
challenges. As referenced earlier, the FDIC
Board of Directors approved the establishment
of the OCFI and DCP. In conjunction with
these changes, DSC has been renamed RMS,
and its mandate will be focused on supervision
rather than consumer protection, the function
of which is being transferred to DCP. OCFI has
begun operations and will focus on overseeing
bank holding companies with more than
$100 billion in assets and their corresponding

insured depository institutions. OCFI will also
be responsible for nonbank financial companies
designated as systemically important by the
FSOC. OCFI and RMS will coordinate closely
on all supervisory activities for state non-member
institutions that exceed $100 billion in assets;
RMS will be responsible for the overall Large
Insured Depository Institution program.

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
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. As a further
means of remaining responsive to consumers, the
FDIC’s Consumer Response Center investigates
consumer complaints about FDIC-supervised
institutions and responds to inquiries from the
public about consumer laws and regulations,
consumer products, and banking practices.
Going forward, the FDIC will be experiencing
and implementing changes related to the DoddFrank Act that have direct bearing on consumer
protection. The Dodd-Frank Act establishes
a new Consumer Financial Protection Bureau
within the Federal Reserve and transfers to this
bureau the FDIC’s examination and enforcement
responsibilities over most federal consumer
financial laws for insured depository institutions
with over $10 billion in assets and their insured

depository institution affiliates. However, even
for these large organizations, the FDIC will have
backup authority to enforce federal consumer
laws and address violations. Under the DoddFrank Act, the FDIC will maintain compliance,
examination, and enforcement responsibility for
over 4,700 insured institutions with $10 billion or
less in assets. As previously discussed, during early
2011, the FDIC established DCP, responsible for
the Corporation’s compliance examination and
enforcement program, as well as the depositor
protection and consumer and community affairs
activities that support that program.

Effectively Managing the FDIC Workforce
and Other Corporate Resources
The FDIC must effectively manage and utilize a
number of critical strategic resources in order to
carry out its mission successfully, particularly its
human, financial, information technology, and
physical resources. These resources have been
stretched over the past year, and the Corporation
will continue to face challenges during 2011.
Importantly, and as referenced earlier, in the
coming months, as the Corporation responds to
Dodd-Frank Act requirements and continues to
pursue its long-standing mission in the face of
lingering financial and economic turmoil, the
resources of the entire FDIC will be challenged.
For example, as required by the Dodd-Frank
Act, the Corporation established an Office of
Minority and Women Inclusion responsible
for all agency matters relating to diversity in
management, employment, and business activities.
The Corporation has transferred its former Office
of Diversity and Economic Opportunity staff
to this new office. Other new responsibilities,
reorganizations, and changes in senior leadership
and in the makeup of the FDIC Board will
greatly impact the FDIC workforce in the months
ahead. Promoting sound governance and effective
stewardship of its core business processes and
human and physical resources will be key to the
Corporation’s success.
Of particular note, FDIC staffing levels have
increased dramatically. The Board approved an
authorized 2011 staffing level of 9,252 employees,

APPENDICES

167

up about 2.5 percent from the 2010 authorization
of 9,029. Thirty-nine percent of the total 9,252
authorized positions for 2011 are temporary
positions. Temporary employees have been
hired by the FDIC to assist with bank closings,
management and sale of failed bank assets, and
other activities that are expected to diminish
substantially as the industry returns to more
stable conditions. To that end, the FDIC opened
three temporary satellite offices (East Coast,
West Coast, and Midwest) for resolving failed
financial institutions and managing the resulting
receiverships.
The Corporation’s contracting level has also grown
significantly, especially with respect to resolution
and receivership work. Over $1.6 billion was
available for contracting for receivership-related
services during 2010. To support the increases in
FDIC staff and contractor resources, the Board
of Directors approved a $3.9 billion Corporate
Operating Budget for 2011, down slightly
from the 2010 budget the Board approved in
December 2009. The FDIC’s operating expenses
are paid from the DIF, and consistent with sound
corporate governance principles, the Corporation’s
financial management efforts must continuously
seek to be efficient and cost-conscious.
Opening new offices, rapidly hiring and training
many new employees, 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 move closer to a pre-crisis
level, which may cause additional disruption
to ongoing operations and current workplaces
and working environments. Among other
challenges, pre- and post-employment checks for
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.

168

APPENDICES

From an information technology perspective,
amidst the heightened activity in the industry
and economy, the FDIC is engaging in massive
amounts of information sharing, both internally
and with external partners. FDIC systems
contain voluminous amounts of critical data.
The Corporation needs to ensure the integrity,
availability, and appropriate confidentiality of
bank data, personally identifiable information,
and other sensitive 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 a priority. The FDIC needs
to be sure that its emergency response plans
provide for the safety and physical security of its
personnel and ensure that its business continuity
planning and disaster recovery capability keep
critical business functions operational during any
emergency.
The FDIC is led by a five-member Board of
Directors, all of whom are appointed by the
President and confirmed by the Senate, with no
more than three being from the same political
party. The FDIC has three internal directors—the
Chairman, Vice Chairman, and one independent
Director—and two ex officio directors, the
Comptroller of the Currency and the Director of
OTS. With the passage of the Dodd-Frank Act,
the OTS will no longer exist and the Director of
OTS will be replaced on the FDIC Board by the
Director of the CFPB in mid-2011. The FDIC
Chairman has announced her intention to leave
the Corporation when her term expires—by the
end of June 2011. Given the relatively frequent
turnover on the Board, it is essential that strong
and sustainable governance and communication
processes be in place throughout the FDIC
and that Board members possess and share the
information needed at all times to understand
existing and emerging risks and to make sound
policy and management decisions.
Enterprise risk management is a key component of
governance at the FDIC. The FDIC’s numerous
enterprise risk management activities need to
consistently identify, analyze, and mitigate
operational risks on an integrated, corporate-

wide basis. Additionally, 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
established six Program Management Offices to
address risks associated with such activities as lossshare agreements, contracting oversight for new
programs and resolution activities, the systemic
resolution authority program, and human
resource management concerns. Lessons from
these areas need to be integrated into corporate

thinking and decision-making. Additionally,
the FDIC Chairman charged members of her
senior staff with planning for and presenting
a case to the Board for the establishment of a
Chief Risk Officer at the FDIC to better ensure
that risks to the Corporation are identified and
mitigated to the fullest extent. In 2011, the
Chairman announced creation of a new Office of
Corporate Risk Management to be led by a Chief
Risk Officer. The addition of such a function is
another important organizational change that
will require carefully thought-out and effective
implementation in order to be successful.

APPENDICES

169

2010

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
Barbara Glasby
David Kornreich
Robert Nolan
Patricia Hughes
Meredith Robinson

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